see attachments

Prior to beginning this discussion, read Chapter 1 of the course text and complete the following SWOT Analysis activity. After completing the activity, attach it to your 1stpost by Day 3.

Select one of the companies you would like to research below:

· British Petroleum (BP)

· Facebook

· Hyundai

· Dunkin’ Donuts

· Netflix

Conduct research using 

Scholarly, Peer Reviewed, and Other Credible Sources (Links to an external site.)

 to address the following required elements:

· State what you believe is the distinctive competence and core competence of your selected company.

· Give an example of how the values and mission statement help to shape planning. Additionally, discuss some internal and external factors that may influence the business in the future.

· Complete the 

SWOT Analysis

 template for your selected organization; applying each of the categories in evaluating the company.

Support your claims with examples from required materials and/or other scholarly or credible resources, and properly cite any references. Attach your SWOT Analysis to your discussion post. Your initial post should be a minimum of 200 words.

Guided Response: Review several of your classmates’ posts, and respond to at least two of your peers by 11:59 p.m. on Day 7 of the week. Provide any additional information or examples that you are aware of that may contribute to your classmates’ SWOT analysis of their chosen company. Challenge your peers by asking a question that may cause them to add additional information about their responses in the initial response. Support your claims with examples from required materials and/or other scholarly resources, and properly cite any references. You are encouraged to post your required replies early during the week to promote more meaningful interactive discourse in the discussion. Continue to monitor the discussion forum until 5:00 p.m. (Mountain Time) on Day 7

Scholarly, Peer Reviewed, and Other Credible Sources

Source type

What is it?

Examples

Best used for

Scholarly

A source written by scholars or academics in a field. The purpose of many scholarly sources is to report on original research or experimentation in order to make such information available to the rest of the scholarly community. The audience for scholarly sources is other scholars or experts in a field. Scholarly sources include references and usually use language that is technical or at a high reading level.

*Note: Different databases may define “scholarly” in slightly different ways, and thus a source that is considered “scholarly” in one database may not be considered “scholarly” in another database. The final decision about the appropriateness of a given source for a particular assignment is left to the instructor.

Scholarly Journals
· Journal of Management Information Systems
· American Journal of Public Health
· Early Childhood Research Quarterly

Scholarly Books (published by a university press or other high-quality publisher)
· Shari’a Politics: Islamic Law and Society in the Modern World
· The Grand Design: Strategy and the U.S. Civil War
· The Hidden Mechanics of Exercise: Molecules That Move Us

Journal articles:
· Recent research on a topic
· Very specific topics or narrow fields of research
· NOT good for an introduction to or broad overview of a topic
Books:
· In-depth information and research on a topic
· Putting a topic into context
· Historical information on a topic

Peer Reviewed

A publication that has gone through an official editorial process that involves review and approval by the author’s peers (experts in the same subject area). Many (but not all) scholarly publications are peer reviewed.

*Note: even though a journal is peer reviewed, some types of articles within that journal may not be peer reviewed. These might include editorials or book reviews.

**Note: some publications (such as some trade journals) can be peer reviewed but not scholarly. This is not common.

See “Scholarly Journals” above
Books go through a different editorial process and are not usually considered to be “peer reviewed”. However, they can still be excellent scholarly sources.

See above

Credible

A source that can be trusted to contain accurate information that is backed up by evidence or can be verified in other trusted sources. Many types of sources can fall into this category.

*Note: The final decision about the appropriateness of a given source for a particular assignment is left to the instructor.

See above. Also:
· Newspapers
· Magazines
· Books
· Trade journals or publications
· Government websites
· Websites from educational institutions (like universities)
· Websites or other publications from reputable organizations (like the Mayo Clinic)
· Encyclopedias (general or subject)
Many websites could be considered credible. The more information provided about the source, the more likely they are to be credible. Look for information about the author and/or the organization, how recently it was published, the intended audience, the intended purpose, and whether there is evidence of bias.

· Basic/general/background information about a topic
· Current events
· Local news
· Statistical data
· Information about specific organizations or companies (look at the organization’s or company’s website, or look for articles in newspapers or trade journals)
· Government information
· Information about popular culture
· Opinions or commentaries
· Topics of general interest

Ashford University Library, June 2015, CR 0130415

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SWOT Analysis

Environment

Opportunity

Threat

Company

Strength

What are the company’s advantages? What does the company do well? What relevant resources does the company have access to? What do other people see as the company’s strengths?

What could the company improve on? What does the company do badly? What should the company avoid?

Weakness

Where are the good opportunities in front of the company? What are the interesting trends the company is aware of? Examples: *Changes in technology and markets *Changes in government policy related to the company’s field *Changes in social patterns, population profiles, lifestyles, etc. *Local events

Does the company face obstacles? What is the company’s competition doing? Are the required specifications for the company’s job, products or services changing? Is changing technology threatening the company’s position? Does the company have bad debt or cash-flow problems? Could the company’s weaknesses seriously threaten the business?

 

SWOT Analysis

 

 

 

 

 

Environment

 

 

 

Opportunity

 

Threat

 

Company

Strength

 

 

 

 

 

 

 

 

Weakness

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Introduction to Management:
Achieving Form through
Function

Learning Objectives

After reading this chapter, you should be able to:
Describe an organization.
Define the concept of management and describe various management roles.
Explain the five management functions.
Recognize key historical figures and their contributions to management theory.

1

Fuse/Thinkstock

Introduction Chapter 1

1.1 Introduction
Many people think management is primarily concerned with supervising employees, or that
it constitutes an obscure set of practices invented by corporate experts in high-level positions
within an organization. Some might associate management with certain entrepreneurs, such as
Andrew Carnegie, founder of U.S. Steel; John D. Rockefeller, founder of Standard Oil; Ray Kroc,
the driving force behind McDonald’s; Sam Walton, who created the Walmart empire; or others
such as Meg Whitman, former CEO of eBay and current executives in other well-known corpo-
rate giants.

Instead, a more fundamental view suggests that the management discipline consists of a set of five
specific functions: planning, organizing, staffing, leading, and controlling. These five functions
are part of a body of practices and theories carried out by successful managers. You will learn
more about these five functions in this book. We want you to understand that although research
and theory form the basis of management, a more comprehensive view includes the other prac-
tices that managers use to implement these theories. Typically, managers direct their organiza-
tions while researchers evaluate how they operate and apply various theoretical perspectives.

The analysis of individual management practices and theories can be used to create innovative
new methods, theories, and approaches. As theorists try to bring some meaning to how manage-
ment affects overall organizations, the purpose and practical applications for the various man-
agement theories are contained in the five functions. Understanding these five functions and the
underlying support theory behind them is the starting point for becoming a successful manager.

Chapter 1 introduces several important concepts of effective management and leadership. Each
concept serves as a building block to help you understand and apply the five functions of man-
agement. In this chapter, we define management and explain the nature of an organization. We
explore the nature of various types of organizations and examine historical figures along with
their contributions to management theory. The following “Management in Practice” box might
help you begin to understand the role of management in an organization’s success through the
application of the five functions.

M A N A G E M E N T I N P R A C T I C E

Costco: Successful Management of the Five Functions

The world of retailing includes an endless number of small stores, chains of units offering specific
product lines, and “big box” outlets that dominate many markets. Within this mix, Costco has
located and maintained a unique niche over the past several decades. Even as the past decade pre-
sented several major challenges to the retail industry, Costco has grown and thrived. What is the
secret to this success? Part of the answer can be found in the application of the five functions of
management.

In the planning process, a simple mission drives the entire company. Costco seeks to keep prices
low, sales volumes high, and ensure that employees are satisfied with their jobs and happy to be
part of the organization. Several key company policies serve to support this mission. For example,

(continued)

Introduction Chapter 1

the retailer, while large in scope, offers a more limited line of products on shelves when compared
to other big-box stores such as Walmart or Target. Each item can therefore be priced at only 14%
or less above its wholesale cost. This approach limits the amount of profit made on actual sales, but
the company offsets these discounts through its membership fee program, in which customers pay
an annual fee of $55 to shop in the store. Also, company managers constantly examine changing
conditions in the industry to make sure the organization is ready to respond.

The organizing function in Costco consists of a simple, straightforward approach. Individual jobs
are clearly defined for individual employees. Departmental activities are well spelled out and com-
municated, leading to no overlap in activities or functions. Clearly established lines of authority and
responsibility have existed for many years, giving every member of the company a sense of direction
with a solid understanding of his or her role in the company.

Costco takes a unique approach in the area of staffing. Rather than hiring business school gradu-
ates directly out of college, the organization’s human resources department selects and promotes
employees who have worked in stores and warehouses and sponsors them to take graduate-level
business courses. Also, the executive team recently acknowledged that managers in the top tier of
the Costco organization were all aging. In response, the organization has begun an active program
of “succession planning,” designed to ensure a smooth transition into the next generation of lead-
ers (Stone, 2013).

As you will learn in the section of this book dedicated to leading, several key activities are involved.
Among them, motivational programs constitute a primary factor. Costco’s management team, led
by its cofounder Jim Sinegal, constantly emphasizes employee satisfaction. According to Brad Stone
from Bloomberg Business Week (2013), Costco pays its hourly workers an average of $20.89 per
hour, which does not include overtime. Remember, in the United States the minimum wage is $7.25
per hour. By comparison, Walmart reports its average wage for full-time employees in the United
States to be $12.67 per hour. Further, Costco offers an extensive health insurance program that cov-
ers nearly 90% of its employees and a 401(k) retirement plan. These benefit programs are superior
to those the competition offers.

In turn, the management team at Costco expects that customer satisfaction will be a high priority.
The basic philosophy suggests that happy employees will treat customers well; in competitor stores,
less well-paid employees are more likely to be surly and disinterested. Newly designated CEO Craig
Jelinek, who assumed his position in 2012, has been observed to practice the same no-nonsense
approach to leadership. To the relief of employees at every level of the company, this includes a
strong level of empathy and concern for the rank and file that had been established by Jim Sinegal.

Costco continues to refine the company’s control system. Store managers continually monitor sales
of individual items, removing those that do not fly off the shelves. When an innovation fails, it is
removed. For example, an experiment with self-checkout lanes similar to those offered by other
retailers was deemed ineffective. As a result, the machines were taken out. Activities are assessed
at every level of the company and corrections are made as needed.

What does the future hold for Costco? The challenge of Internet shopping continues to grow,
because the coming generation of shoppers appears to be more comfortable with—and actu-
ally prefers the web to brick-and-mortar stores. In response, Costco has tried to improve its online
shopping system. Also, tense relationships with some manufacturers, including Apple, Sony, and
Panasonic, will require additional consideration. Future growth may be tied to international expan-
sion. The company’s plans include building new stores in France, Spain, Japan, Taiwan, and South
Korea. At the least, you can expect Costco to continue applying its unique approach to the five

(continued)

Introduction Chapter 1

Organizations

Every day, you encounter numerous organizations. Now you are taking a class from an educa-
tional organization; later you may visit a grocery store. Those who stop to pay parking tickets
encounter a local government organization. In a modern, postindustrial society, interactions with
organizations shape the nature of daily living, including maintaining your home, being part of
social and religious groups, and making a living.

An organization is a collection of people who work together and coordinate their actions to
achieve a wide variety of goals or desired future outcomes. The purpose of any organization is to
serve a social need. Organizations take the forms of profit-seeking (or business) organizations,
nonprofits, and government agencies. Organizations are driven by a mission to accomplish a set
of agreed-upon goals:

an economic goal (a profit-seeking entity)
a social good (nonprofit entity)
the general public’s welfare (government entity)

deliver
goods and services that offer value to consumers in exchange for money, normally expressed as
sales and other revenues. Profit-seeking companies offer products and services to consumers,
other companies, and to governmental organizations.

Other organizations have different concepts regarding their purposes. –
are created because there is an expressed social need. Typically, donations are solicited

to maintain nonprofit organizations. Sometimes society doesn’t need what an organization
produces, and the organization fails. serve different purposes,
including maintaining order, providing universal services such as roads and fire protection,
and regulating commerce. Governmental organizations generate revenues through taxes
and fees.

In this book we examine primarily business organizations, how they operate, why they were
established, and the reasons some fail while others thrive. The feature box “Organizational
Characteristics” discusses other characteristics of organizations.

management functions in order to deal successfully with a fast-paced, demanding retail environ-
ment (Stone, 2013).

Discussion Questions

1. Have you ever shopped at Costco? How was the experience different from that at other big-box
stores?

2. Do you think other retail chains would be wise to offer higher wages to employees? Why or
why not?

3. Can you think of another company that manages its operations in the same way as Costco?

Introduction Chapter 1

Organizational Origins

Consider how a for-profit business organization might get started. A lone farmer purchases a plot
of land and is now ready to start planting on it, hoping to make a profit and providing healthy,
farm-fresh produce for the surrounding community. At this stage he has not yet established an
organization; he is just one man with a plot of land and some seeds. For his farm to become an
organization, he will need to decide how much produce he wants to sell and the nature of the
market—which consumers in the community will buy the produce. He also needs to know who
his competitors might be, because a farm down the road could be selling the identical assortment
of vegetables that he’s planning to market. The farmer will also need to assess how much capital,
or money, he has, and how much he will need to sustain the business. When thinking about the
financial cost, he must take into account how many resources he will need to operate the farm—
human resources and general resources such as tractors, planting materials, and water. After
hiring the needed human resources, including a manager to oversee the employees, the farmer’s
goal becomes to make a profit on the produce that he sells.

This is a simple example of a for-profit business organization in an early stage of development.
With the right management—and with good planning, organizing, staffing, leading, and control-
ling—it could become an even greater success than the farmer initially imagined. If that turns
out to be the case, he will need to focus on how to progress with the changes that occur as his
organization grows. You will learn more in this chapter and throughout this book about how to
keep an organization profitable and relevant. The following facts apply to organizations. Think
about them as you study the topics in this book.

Organizational Characteristics

Organizations display six distinct characteristics. Each of them must be found within a group of
people in order for that collective to be considered an organization. The elements found in organi-
zations include the following:

Membership consists of more than two people. One-person organizations do not exist.
People in the organization routinely interact. In today’s society, interactions take place in a
variety of ways: face-to-face contact, in group and team meetings, and via the use of numer-
ous technologies. These interactions can be as basic as written memos and notes but also can
include recent innovations such as the Internet, websites, email, social media posts, and others.
Tasks are divided among members (division of labor). In the coming chapters, we will look at
the ways jobs are designed and how the tasks of individual members are coordinated to achieve
various goals. At the least, an organization includes dividing up jobs and then combining them
to accomplish specific outcomes.
Someone is in charge (a hierarchy of authority). Even the most basic, rudimentary organization
has a leader. As organizations grow in size, the hierarchy of authority becomes more complex.
In the coming chapters, you will be exposed to the ways in which organizations are designed to
develop lines of authority and responsibility.
Activities are coordinated among members. Through the use of devices such as planning pro-
grams, motivational systems, and the efforts of leaders, members are encouraged and taught to
work together to achieve larger objectives.
Members share a common purpose or goal. Every type of organization has an overarching goal
that all members seek to achieve. This characteristic is seen in business or for-profit organiza-
tions, nonprofits, and governments.

Management Roles Chapter 1

Most organizations are small, consisting of fewer than 200 members.
Most organizations are short lived. Only 15% of business organizations survive more than
two years.
Organizations go through life cycles: They are born, grow, mature, decline, and many
then die.
Organizations are social systems. The people within them determine the eventual
outcomes.

1.2 Management Roles
is the study of the overall management process. The term management has

a variety of definitions. Our approach suggests that management consists of all the techniques
that are used to lead the human resources in an organization to become productive. To do so, an
organization’s manager must efficiently and effectively carry out the primary management func-
tions. A manager is responsible for helping to achieve an organization’s goals and desired future
outcomes. Managers also supervise employees and seek to make the most of an organization’s
other resources.

Management specialist Peter Drucker (1909–2005), one of the
most influential theorists on the subject of management and prac-
tice, wrote articles and books exploring how humans are orga-
nized across society with regard to business, government, and the
nonprofit sectors—the main sectors that organizations encom-
pass. Drucker once said, “Management in turn, is the organ of
the institution. It has no function in itself, indeed, no existence
in itself ” (Drucker, 1985). In essence, management cannot exist
without an organization.

One of Drucker’s most famous books, The Concept of the
Corporation (1946), analyzes General Motors as a large social
institution involved with business activities. He describes the
nature of management, how organizations select managers, how
managers act, and how an organization is structured into units of
management such as divisions or sections.

Drucker has also examined and explained the role and position
of large organizations in a modern society in his writings. Even
though these important and influential works were written over a
half century ago, many of the management theories and methods
continue to be practiced today. His ideas greatly influenced the
business world, because at the time, management was not consid-

ered the most significant part of an organization. The theory during Drucker’s time was that the
president or the chief executive of an organization would give orders, and others would simply
follow.

Drucker shifted the focus of management to include the study of human interactions within an
organization, the flow of information, the decision-making process, and managerial autonomy,
because he believed these factors could greatly influence an organization’s success. In today’s

Claremont Graduate University/Associated Press

▲ Management consultant Peter
Drucker (1909–2005).

Management Roles Chapter 1

world of organizational practices, Drucker helped us understand the central importance of the
manager’s role; in essence, managers are absolutely crucial to the success of any organization.

Managerial Levels

Even though managers function in similar ways, each of them performs different tasks and oper-
ates on different levels within the organization. Organizations typically have three levels of man-
agement: front-line managers (supervisors), middle managers, and top managers (executives).
Let’s take a closer look at these three different types of managers.

Front-Line Managers or Supervisors
, or supervisors,

carry out and direct the daily activities of
the organization. Front-line managers work
in the various divisions, operating units, or
departments to assure the short-term goals
of the organization are achieved. Front-line
managers may have varying titles, including

office manager
department manager in a retail store
production line leader or foreman in a
manufacturing plant
head server in a restaurant
director of accounts payable/
receivable
crew chief on an airline flight

These managers deal with short-term operating decisions and oversee the daily tasks of non-
managerial employees.

An example of a front-line manager is the supervisor in an automotive parts company. Suppose
this supervisor is responsible for overseeing the employees who work within the distribution
division of the organization. She is responsible for making sure the parts are distributed to the
correct locations and to the customers who ordered them. More specifically, if a large shipment of
5,000 parts were to be sent to one of the organization’s best clients, the front-line manager would
be the person responsible for making sure the order was correctly filled.

Serving as a front-line manager often becomes the first step of a managerial career. If a supervi-
sor does well and is successful, then he or she has demonstrated the potential to move to higher
ranks in the organization as a middle manager, and some day as an executive manager. Front-line
managers provide direction, technical support, and training of personnel. They are charged with
carrying out the plans developed by middle and executive managers.

Middle Managers

supervise front-line managers. Middle managers interpret and seek to achieve

the general, long-range objectives set down by the executive management team (Steers, Ungson,
& Mowday, 1985). Middle managers also try to find ways to increase efficiencies within the

Moodboard/Thinkstock

▲ As a front-line manager a construction site foreman would
provide direction to on-site workers and be responsible for
implementing building plans.

Management Roles Chapter 1

organization. For example, they determine ways to help front-line managers and nonmanagerial
employees use resources to reduce manufacturing costs or improve customer service.

Middle managers may also be asked to evaluate whether the goals of the organization are
appropriate and make suggestions to executive managers regarding the functionality of certain
divisions. The suggestions that middle managers make to executive managers can sometimes
increase organizational performance. An effective middle manager has the ear of the executive
manager when it comes to suggesting improvements. A significant part of the middle manager’s
job includes developing and fine-tuning skills and knowledge around areas such as manufactur-
ing or marketing expertise, which in turn allows the organization to remain effective. Front-line
supervisors occasionally are promoted to become middle managers, but many middle managers
are professionals with academic credentials and additional corporate-level training. Due to their
respective levels of learning and experience, some may have skipped past front-line management
altogether.

Executive Managers
We now know that front-line managers report to middle managers, and that middle managers
report to executive managers. But what is an executive manager? estab-
lish organizational goals, decide how departments should interact, and monitor the performance
of middle managers. Executive managers are tasked with planning and implementing strategic
goals. The executive holds the responsibility of defining the long-term direction of the orga-
nization, including the overall mission or goals, product or service, operating policy, and the
specific organizational objectives. They are held accountable to the various stakeholders—includ-
ing the board of directors and any stockholders—for the fiscal and operational success of the
organization.

Managers at this level tend to be highly experienced, hold professional degrees such as a mas-
ter of business administration (MBA), and have documented histories of managerial successes.
Executive managers have a tremendous amount of responsibility. In contrast to middle managers,
executives have responsibilities across the various departments and divisions within the organi-
zation. In many cases these managers are responsible for the success or failure of an organiza-
tion, and they are constantly monitored and checked by internal and external forces around the
organization.

A , or , is an organization’s most senior manager. The other execu-
tive managers report to the CEO. Sometimes within an organization, the executive managers are
part of a top-management team. For example, a top-management team could be made up of the
CEO; the chief operating officer (or COO); the president of the organization; and the top-level
executives, or heads, of the most important departments within the organization. At the core of
the executive manager’s job is the task of planning and organizing to determine the organization’s
long-term success. This is how an executive manager spends most of his or her time.

In summary, many organizations exhibit multiple management levels. The levels can be viewed
as a pyramid: executive managers are shown at the top, various levels of middle management are
next, and front-line supervisors are at the bottom (Figure 1.1).

Distributions of the five management functions are not equally divided among the levels shown
in Figure 1.1. The importance of the five functions—planning, organizing, leading, controlling,
and staffing—differs from manager to manager depending on his or her role within the organiza-
tion. At the same time, managers for each level become actively involved in these functions on a
regular basis. Executive managers are more likely to engage in planning and controlling activities.

Management Roles Chapter 1

Middle managers have more general function responsibility depending on reporting obligations.
Front-line managers engage less in planning and more in leading of entry-level workers.

Managerial Types

Another way to think of management is by division or type. Some managers direct the produc-
tion or delivery of individual products or services, while other managers serve in supporting
roles. Each management type plays an important part in the organization and is essential to a
firm’s success. Two types of managers operate in business organizations: line managers and staff
managers.

Line Managers
have the authority to make decisions and usually have people reporting to them.

They are directly responsible for a product line or delivery of a service by the organization. This type
of manager is often a product manager, marketing manager, production manager, service manager,
or division manager. Line managers are often charged with sales, production, and delivery budgets.

Figure 1.1 Managerial levels

Most organizations are managed through the activities of executive, middle, and front-line
managers.

Front-Line Managers

Middle Managers

Executive
Managers

Management Roles Chapter 1

Staff Managers
lead departments that serve in supporting roles, including accounting, human

resources, procurement, and logistics. Although critical to the success of the organization, these
functions are not involved in production and typically do not directly produce revenue.

One of the easiest ways to see the distinctions among the varieties, levels, and types of manage-
ment is through an organization chart. An provides box-and-line illustra-
tions representing the formal relationships of positions of authority and the organization’s official
divisions of labor. Figure 1.2 is a typical organization chart. Line management is an extension of
the executive office (in a corporate structure, this is usually the president) down through the vice
president of manufacturing, manager of production, and finally to the shop floor supervisor. The
vice president of human resources and vice president of finance are shown as the left and right
branches of the chart because they represent the organization’s staff management.

Managerial Knowledge, Skills, and Abilities

You now understand the roles, responsibilities, and types of management in an organization.
Next, we can address some important characteristics of managers in the daily exercise of their
duties. What do managers need to know to be successful? Generally, they need a range of knowl-
edge, skills, and abilities.

Figure 1.2 An organization chart

An organization chart displays the relationships between line and staff activities, designates
the various departments in an organization, and indicates the lines of authority and
responsibility among employees and their supervisors.

President

Vice President
Human Resources

Vice President
Manufacturing

Vice President
Financing

Recruitment Manager Production Accounts Payable

Staff Development Shop Floor Supervisor Accounts Receivable

The Five Management Functions Chapter 1

Technical Knowledge
Technical knowledge is having the job-specific knowledge and techniques required to per-
form an organizational role. Managers need knowledge appropriate to the areas they over-
see. For example, the accounting manager should have high-level accounting expertise with
a significant background in the field sufficient to manage the accounts of the organization.
Likewise, the production manager should have sufficient experience and education (likely in
engineering, management, or both) to lead a production team to manufacture the product of
the organization.

Human Relations Skills
Human relations skills are the ability to understand, alter, lead, and influence the behaviors of
other individuals and groups. Managers need to exhibit the ability to lead and motivate others,
not just to complete the ordinary operations of the department but to energize the team to high
levels of activity when business demands it. Building trust is an important component of human
relations. Human relations skills include empathy, consideration, and the willingness to listen to
the concerns of those at every rank in the organizational hierarchy.

Conceptual Skills
Conceptual skills, or critical thinking abilities, are the skills a manager needs to analyze and diag-
nose a situation and to distinguish between cause and effect. Managers must be problem solvers
and have a variety of skills (operational, technical, mathematical, etc.) to draw on as problems
present themselves in the business.

Technical, human relations, and critical thinking knowledge, skills, and abilities are essential to
managers as they engage the five functions of management during the workday. Table 1.1 suggests
the relative emphasis on each aspect at various organizational ranks.

Table 1.1 Managerial focus

Manager rank

Level of conceptual and
technical skills required

Level of human relations
skills required

Executive High conceptual,

low technical

High human relations

Middle Moderate conceptual, moderate
technical

High human relations

Front-line Low conceptual,

high technical

High human relations

1.3 The Five Management Functions
The five include planning, organizing, staffing, leading, and control-
ling human and other resources to achieve organizational goals. All organizations, regardless of
their performance levels or profit motives, have a management structure and management staff.
Although the organization exists for a particular purpose, such as producing a product or service,
the responsibility for mission achievement requires a central figure, and in some cases figures, to
coordinate these five primary activities.

The Five Management Functions Chapter 1

Planning

Managers use to choose appropriate organizational goals and identify courses of action
to best reach those goals. Managers will engage in a variety of planning activities in the course
of their work to achieve organizational or departmental goals. The following steps are involved
in planning:
1. Examining the company’s internal and external environments to discover company strengths

and weaknesses and emerging opportunities and threats
2. Determining which goals the organization will pursue
3. Choosing strategies, tactics, and operational plans to achieve company goals
4. Allocating organizational resources to pursue the company’s goals

Assessing the Environment
Planning begins when managers understand the contexts in which they operate. The manage-
ment team starts the planning process by examining the company’s operations. In terms of inter-
nal factors, the overall assessment of the firm’s internal environment begins with a focus on the
company strengths and weaknesses. Strengths might include holding a large share of the market,
a patent on a key piece of technology, a vital work force, or governmental protection in the form
of a licensed monopoly or other limits to new competition. Managers may discover that the orga-
nization has a powerful sales force or a creative research and development department (R&D).
Weaknesses include any poorly managed company operations, including production, quality
control, sales, accounting, or information technology efforts. For example, a website that is dif-
ficult to navigate and that turns away potential customers represents a company weakness. A
company with a reputation for selling defective products experiences a weakness.

Next, every firm, no matter how large or small, is part of a larger external environment.
Opportunities and threats are present in that environment. The management team researches a
series of forces that can affect a company’s operations, including

political and legal forces
social trends
economic conditions
technological changes
competitive forces

Opportunities may arise from any of these factors. When the government shifted television pro-
gramming from analog signals to high definition, an array of companies were able to take advan-
tage by creating new television sets, antenna adapters, and other products. Social trends affect
fads and fashions, which result in new opportunities to sell products. Economic conditions shift
purchasing habits. A growing or healthy economy often leads to increased sales by individual
companies. Technologies create new products and improved products. Competitors may seek
to merge to build a more powerful alliance against a dominant company. Threats may result
from poor economic conditions, new competitors, bad publicity, or products nearing the ends of
their life cycles, such as traditional photography products (film), landline telephones, and walk-
in movie rental stores. New tax laws can create advantages for some and threats to other firms.

This combination of internal and external forces creates the need for what is referred to as a
(SWOT stands for strengths, weaknesses, opportunities, and threats). The

“Management in Practice” box provides an example of a SWOT analysis performed on a newspa-
per in a Midwestern city.

The Five Management Functions Chapter 1

In any case, the SWOT analysis guides managers as they develop new plans and direct other
organizational activities. Additional information about environmental analyses will be provided
in the planning chapter of this book.

Determining Organizational Goals
Company leaders establish goals and objectives on at least three levels: strategic, tactical, and
operational. are the long-term, sweeping targets a company seeks to pursue. Peter
Drucker (1972) identified a set of strategic goals that would apply to a variety of organizations:

market share
innovation
productivity
physical and financial resources
profitability
manager performance and development
employee performance and attitudes
social responsibility (Drucker, 1972)

M A N A G E M E N T I N P R A C T I C E

The Joplin Globe: A SWOT Analysis

The city of Joplin, Missouri, is home to one newspaper: The Joplin Globe. The newspaper holds a
near monopoly in town (with only very slight competition from USA Today and papers from nearby
cities), which accounts for its first strength. A second strength comes from a quality staff of writers
and editors, including one individual who writes a popular daily personal interest column. A third
strength is the ability to cover local events in greater detail than any other medium, such as radio
or television, can provide. The newspaper’s weakness might take the form of a weak financial posi-
tion, due to limited capital to expand or alter delivery of the paper. Another weakness might result
from a low-quality circulation department that fails to maintain good records of individual custom-
ers and paper carriers.

The newspaper experiences opportunities because the city of Joplin is growing in size. Higher popu-
lation could result in additional new customers. A strong local economy could further bolster the
paper’s sales and financial well-being. Unfortunately, the paper also encounters major threats. In
the area of technology, the Internet poses a major concern for newspapers locally and around the
country. Readers can now access media reports free of charge by going to various websites. An
innovative entrepreneur might be able to take advantage of the Internet to compete with The Joplin
Globe. A growing social trend also threatens the paper: Fewer young people are interested in read-
ing an actual newspaper, preferring instead to rely on social media and other devices.

Consequently, the executive team directing the efforts of The Joplin Globe must find ways to effec-
tively respond to the conditions pointed out by the SWOT analysis. One strategic response might be
to spend additional resources building up the newspaper’s Internet presence, perhaps by making
the system more interactive with social media outlets such as Facebook or Twitter. A second plan
might include increased attention on local news and events rather than national stories. An opera-
tional plan might be to expand the classified advertising section by linking it to other websites.

The Five Management Functions Chapter 1

These more general performance outcomes are then subdivided into , which have a
more immediate impact. Tactical goals are set in the following functional areas:

production
quality control
marketing
sales
accounting
finance
information technology
research and development
human resources

Tactical goals guide managers in the various areas. The top-management team makes sure that
tactical goals mesh with strategic goals. Finally, the company identifies . These
are the performance targets for everyday activities such as sales quotas, production quotas, com-
pleting daily reports and paperwork, and processing the flow of raw materials into the company
and finished goods to customers.

At each of these levels, two concepts are common denominators: efficiency and effectiveness.
measures how productively resources are used to achieve a goal. An organization’s

efficiency, or performance level, is based on how well managers plan and develop strategies to
meet those goals. Efficiency has been described as “doing things right” with little wasted motion
or resources. , in contrast, is “doing the right things.” Effectiveness means that
company efforts help achieve the goals that will allow the company to survive, grow, and thrive
over time (Drucker, 1985).

Creating Plans
The development of goals at the three basic levels leads to the creation of plans to achieve those
outcomes. A is a cluster of decisions about what goals to pursue, what actions to take,
and how to use resources to achieve goals. An example of a strategy is to implement a plan that
would sell directly to consumers rather than going through an already existing company that
acts as an intermediary seller, such as Esurance before its merger with Allstate. In this way, the
profits remain with the producing company. Various forms of strategies designed to achieve rapid
or slow growth, to maintain stability, or to respond to decline are presented in the section of
this course regarding planning. Additional examples of strategies include creating new products
(such as the Kindle developed by Amazon.com), merging with other companies (Esurance and
Allstate), creating joint ventures (the combination of Venus razors for women with Oil of Olay),
expanding into new geographic areas, and creating international operations.

are the plans that support strategies. An example of a tactic would be to increase adver-
tising so the company can reach customers without using an intermediary. Another tactic in
the same strategic program would be to create a more efficient shipping system, which entices
customers to make purchases more quickly and more often. Tactics are often implemented at the
functional level, in various departments such as production, accounting, human resources, and
research and development.

direct daily activities. They include functions such as creating work sched-
ules, ordering inventory, and routinely updating a website. Operational plans help ensure that

The Five Management Functions Chapter 1

front-line supervisors and company employees are clear about their everyday responsibilities. At
the same time, operational plans become part of the tactics and strategies the company execu-
tives seek to implement.

Allocating Resources
The final part of the planning process is deciding how to obtain the necessary labor (human
resources) and parts (general resources) to build the product or service to be sold, and deciding
how many of these resources will be needed to meet company goals. It is also necessary in the
planning stage to assess the cost of purchasing resources as well as paying employee salaries.
Assessing any competition and determining the product’s place in the market represents another
important planning component.

Remember that planning programs are complex and can be challenging because managers oper-
ate under an umbrella of uncertainty; the results are unknown. Such uncertainty means that
managers must sometimes take risks when they pledge organizational resources to execute a
particular strategy. At the same time, the fundamental elements of planning apply to any organi-
zation—no matter how large or small—and to the nature of that organization’s goals.

Organizing

is the process of establishing task and authority relationships that allow people to
work together to achieve the organization’s goals. A function of the manager’s role in organizing
is determining the best way to organize all resources. Organizing consists of three primary tasks,
which we will explore in greater detail in subsequent chapters: job design, departmentalization,
and creating an organizational structure.

Job design occurs when managers determine the tasks needed to be done, who will do these,
and what selection criteria will be used to choose employees and place them on the job.
Departmentalization involves organizing people into different departments or divisions in which
collections of tasks are placed together, such as accounting, marketing, and production. Creating
an organizational structure occurs as managers identify the amount of influence and respon-
sibility each of these different individuals and groups should have. Drucker pointed out that
“Organizing often requires designing and evaluating organizational processes and systems to
initiate work and to determine if any changes need be made” (Drucker, 1985).

The intended outcome of organizing is to create an , which is a formal
system of task and reporting relationships that coordinates the activities of members so that they
work together to achieve organizational goals. The organizational structure determines how an
organization’s resources can be best used to create goods and services. Organizational design is
the process by which managers make specific organizing choices that result in the particular kind
of organizational structure they will use.

Staffing

includes the recruiting, selecting, training, evaluating, compensating, and disciplining of
employees within the organization. Staffing has become a preeminent function of contemporary
managers. In today’s organizations a manager is sometimes more responsible for recruiting, select-
ing, evaluating, and hiring employees than is an organization’s human resources department. This
was not the case until recently and has made the manager more responsible and accountable for
hiring effective and successful employees. Managers are responsible for bringing together the team

The Five Management Functions Chapter 1

of employees and assigning tasks to make the best use of available resources for realizing the orga-
nization’s goals and activities. Part of the success of Costco, as noted earlier in this chapter, is the
direct result of human resource staffing tactics that are unique in the retailing industry.

Leading

Leading means motivating, coordinating, and energizing individuals and groups to work
together to achieve organizational goals. Managers lead by explaining a clear organizational plan
for employees to accomplish, and then energizing and enabling those employees so that each per-
son understands the part he or she needs to play in helping to achieve the organization’s intended
goals. Managers use their authority, personality, influence, persuasion skills, and communica-
tion skills to coordinate people and groups to create harmony between all employees within
the organization or among its divisions. Encouraging, supporting, and mentoring employees can

also be beneficial in helping the organiza-
tion achieve its goals.

An effective leader will be able to maintain
a motivated and committed work force.
An example of effective leading would be
a manager who stays calm, cool, and col-
lected. A leader remains open to sugges-
tions from colleagues and takes the time to
listen to and mentor employees. This type
of leading can only strengthen an employ-
ee’s commitment to meeting the overall
goals and strategies of the organization
he or she works for. Theorist Mary Parker
Follett (1868–1933), who was a trailblazer
in researching theories of organizational
behavior, wrote, “Managers often influence
others to get things done” (Parker Follett,
1949). Effective leaders prepare employees
for change and provide a guide to the future

by setting goals, motivating employees, and determining employee growth. Leading is often the
most critical function in the success of the organization.

As an example, consider the fate of Starbucks, a retail coffee vendor established by Howard
Schultz. The chain of stores had experienced considerable success over many years. In 2008,
Schultz stepped down as CEO and moved to a less prominent role. During the two years that fol-
lowed, Starbucks experienced difficult times, largely due to overexpansion (too many units) and
a decline in service quality. In 2010, Schultz returned as CEO with a revised vision. Starbucks
closed nearly 1,000 stores and ceased operations in every unit for a day in order to retrain and
refocus employees on what had been called the Starbucks “experience.” Not long after, the change
in leadership reinvigorated the organization and it returned to previous levels of success. Schultz’s
leadership made the difference (Teather, 2010).

Control

Controlling establishes accurate measuring and uses monitoring systems to evaluate how well
the organization has achieved its goals. Control systems provide standards for assessing and

Sakchai Lalit/Associated Press

▲ After experiencing difficulties for two years, Starbucks
returned to previous levels of success in 2010 thanks to the
leadership of Howard Schultz.

The History of Management Theory Chapter 1

monitoring the use of resources and the quality and quantity of productivity. Control systems
assess effectiveness at the strategic, tactical, and operational levels. These systems, found through-
out the organization, include financial controls, budgets, authority structures, production plan-
ning, and quality control. The standard control process consists of four steps:
1. Establish and review standards set in the planning process.
2. Measure performance at the strategic, tactical, and operational levels.
3. Compare performance outcomes with the standards that were set.
4. Make a decision:

Successful performance should be rewarded.
Unsuccessful performance should be corrected.

Monitoring is an essential aspect of control. Often, management’s best-laid plans do not work
out the way they were intended. The controlling function allows managers to ensure that goals
are met through monitoring. If standards are not being met, managers seek out ways to improve
performance and meet those standards.

The ability to measure performance accurately and regulate organizational effectiveness repre-
sents a key component of the control process. To exercise control, managers must decide which
goals to monitor. Goals pertaining to productivity, quality control, or customer service require
control systems that deliver the information necessary to determine performance and ascertain
whether the goals have been met. An effective control system also allows managers to evaluate
how well they themselves are performing.

1.4 The History of Management Theory
In the eyes of most management historians, the field of management began when Henry R. Towne,
a manufacturer, presented a paper entitled “The Engineer as Economist” to the American Society
of Mechanical Engineers in 1886 (Towne, 1886). In the paper, Towne argued that the study of
management was equal in importance to the study of engineering and should have its own body
of research and its own professional organizations. What emerged has often been called the –

in management literature, due to the original writings and innovations created during
the period from the 1880s to the 1920s.

Soon after, Frederick W. Taylor merged scientific theory with management theory. This innova-
tion led to the approach labeled , which is based on four principles:
1. Development of a true science of managing with clearly stated laws, rules, and principles that

replace rule-of-thumb methods
2. Scientific selection, training, and development of workers for specific jobs
3. Cooperation with workers to make sure work is completed using scientific principles
4. Equal division of tasks and responsibilities between workers and management (Bedeian, 1986)

Taylor’s program produced dramatic increases in the productivity levels of individual workers.
His approach led to both positive and negative outcomes. Though workers did indeed become
more productive and companies more profitable, there were also complaints. The union labor
movement achieved dramatic legislative gains during the scientific management era due to
complaints that such programs created sweatshop-like conditions. The U.S. government and

The History of Management Theory Chapter 1

individual unions fought to protect workers from unfair management tactics (Vaughan, 1912).
Despite these concerns, Frank B. and Lillian M. Gilbreth (1915) applied many principles of scien-
tific management to create a program known as the time and motion study. By using both film
and a stopwatch to observe work being performed, it was possible to devise the most efficient
method to complete a task. During the same time period, Henri Fayol (1916) wrote in his native
French about the importance of the classic management functions of planning, organizing, staff-
ing, directing, and controlling. The ideas paralleled the principles of scientific management in the
United States and became widely implemented throughout Europe.

The Human Relations Movement

Mary Parker Follett questioned the wisdom of scientific management, arguing that the program
ignored the human element in the organizational equation. She believed that managers should
serve as coaches and facilitators rather than as monitors and supervisors (Parker Follett, 1949).
The , which focuses on people as the primary driving force in any
organization, including for-profit businesses, gained momentum in the late 1920s. Researchers
Elton Mayo and Fritz Roethlisberger conducted the Hawthorne studies, which primarily focused
on the people involved in the studies, rather than solely on productivity. The subjects responded
to positive and pleasant interactions with researchers by increasing productivity rates on the job.
Later in the seven-year study, some of the tasks performed by supervisors were taken over by
entry-level employees. This move also increased production. Some workers found the experience
to be “fun” and remained free of anxiety about being disciplined for poor performance.

Mayo and Roethlisberger found that employees formed informal groups that were cohesive and
loyal to one another. These groups established information norms or rules about levels of pro-
ductivity. Anyone who overproduced became a “slave” or “speed king.” These individuals were
derided and even physically punched in the arm (aka binging) by other employees. Those who
failed to do their fair share of work were labeled “chiselers” and told to keep up with the group.
Over time, it became clear that more than money motivated workers. Social interactions were
a key part of the organizational experience. Individual attitudes and collective employee morale

are significant determinants of productivity lev-
els. Mayo and Roethlisberger suggested that to
achieve the highest levels of success, company
managers should consider human emotions and
interactions (Urwick, 1960; Bedeian, 1986, pp.
50–52).

Abraham Maslow and Humanism
Clinical psychologist Abraham Maslow was
among the first to shift views on the nature of
human beings. Maslow argued for , a
perspective that suggests the basic inner nature
of a person is inherently good. In the

theory, the argument expands to sug-
gest that the process of life is, in essence, a pro-
cess of “getting better.” The ultimate expression
of life, self-actualization, is performing work
that is helpful and meaningful to others while
at the same time staying true to one’s own sense
of self.

© Corbis

▲ Psychologist Abraham Maslow posited that the aim of
human growth is to achieve a state of self-actualization.

The History of Management Theory Chapter 1

Maslow’s work influenced the fields of psychology, social psychology, sociology, and management.
Much of the research and theory building that took place in the years following the publication of
the hierarchy of needs is based on humanist assumptions. As a result, the scientific management
method, which relied on money and fear as primary motives, was replaced with newer, more
positive views of employees (Gomez-Mejia, Balkin, & Cardy, 2006, p. 29).

Douglas McGregor’s Theory X and Theory Y
In The Human Side of Enterprise, Douglas McGregor (1960) proposed two companion theories
that summarize the differences between scientific management and the human relations move-
ment (See Table 1.2). , expresses the scientific management view of workers. Note that
the assumptions and conclusions associated with Theory X leaders in the table portray workers
in a less than positive light. A Theory X leader assumes his or her followers lack ambition, prefer
direction, and inherently dislike work, so the leader concludes that only external motives (e.g.,
money and fear) will work. He or she should focus on production as dictated by scientific man-
agement theory.

In contrast, a leader represents a much different perspective on the nature of employees,
both in terms of assumptions that they are self-motivated and the conclusions made by leaders
as a result of these assumptions. A Theory Y leader assumes employees want to work, are natu-
rally motivated, and have underutilized talents. This leader concludes that motivation is innate,
and instead focuses on leading employees as a facilitator or coach. In fact, McGregor argued that
Theory Y leaders unleash human potential and will succeed in the long term.

Table 1.2 McGregor’s Theory X and Theory Y

Assumptions of Theory X Assumptions of Theory Y

People dislike work. Wanting to work is natural.

People avoid responsibility. People seek responsibility.

People prefer direction. People enjoy autonomy.

Most people have little ambition. Most employees’ talents and abilities are only partially
utilized.

Given the opportunity, employees will generate ideas
to help themselves and the company.

Conclusions of Theory X Conclusions of Theory Y

Leaders should be production oriented. Leaders should be people oriented.

Employee motivation is derived from money and fear. Motivation comes from within the individual.

In the 1980s, a new theory regarding managerial style and motivation emerged. argues
that managers should try to build a workplace environment that meets a series of employee needs.
The Theory Z management style offers employees a secure employment and seeks to create high
levels of trust and responsibility. To do so, team-based decision making at work is combined with
the concept that the leader or manager should regard an employee as a complete entity, which
means the employee has a life beyond the workplace. A person’s family unit and personal aspira-
tions become part of the formula.

In return, managers hope to achieve improved on-the-job performance by building levels of com-
mitment to the organization. Theory Z was initially developed by William Ouchi in 1981. Its basis

The History of Management Theory Chapter 1

comes from the Japanese approach to management that gained prominence in the 1980s, due
to the work of W. Edwards Deming and others. The Deming philosophy emphasizes quality in
every aspect of an organization’s operations, based on employee involvement in the management
process. Those principles are blended with American management practices and the humanist
philosophy, most notably exemplified by the work of Abraham Maslow, that emphasized the
essential goodness and positive attributes found in humanity (Clegg & Bailey, 2007).

The human relations movement greatly influenced management theory during the period from
approximately 1930 to 1960. At that point, influenced by improvements in technology and com-
puters, globalization, and other trends, the world began to change. Consequently, neither the
scientific management approach nor the humanistic vantage point is a complete perspective, and
new ideas and concepts about the most effective ways to manage employees continue to emerge
in the modern era.

Modern Management

Another key historical figure in the study of management theory is Chester I. Barnard (1886–
1961), an American business executive and a public administrator. He authored Functions of the
Executive (1938), a pivotal book on management theory and organizational studies. In this book,
Barnard explains the functions of executives within an organization by focusing on the theory of
organization, also known as organizational science. The theory of organization or organizational
science includes the systematic study and application of knowledge about how people act within
organizations. Barnard defined an organization as “a system of consciously coordinated personal
activities or forces” (1938).

Consider Barnard’s conceptualization of an organization as a starting point. Based on Barnard’s
definition, we can envision a potential organization with a purpose or goal, coordinating systems,
people to carry out the necessary tasks for success, and managers who guide the entire process
toward the expected outcomes. This simple form is often the way organizations work today.

Typically, in an operating unit, otherwise known as a part of a larger division or company, the
leader of the unit, division, or company is a trained and experienced manager. An operating unit,
division, or department consists of a group of people who work together and possess similar skills
or use the same knowledge, tools, or techniques to perform their jobs. In each case, the manag-
ers and other members of the organization accept the mission to achieve the stated purpose and
work to those ends. Typically, it will fall on management to plan, organize, and strategize how to
carry out the organization’s mission.

Systems Theory
Barnard introduced systems concepts to the business world. Later, general systems theory con-
ceptualized an organization as a set of interrelated parts working together in a holistic fashion.

In a business system, inputs include raw materials, financial resources, and human resources. The
transformation process is the company’s production function, including the assembly of physical
products and the development of intangible services. Outputs are the finished, final goods and
services sold to the public. The feedback mechanism provides correction and adjustment, keeping
the organization in tune with its environment. See Figure 1.3 for an example.

As an example, consider the Starbucks company mentioned earlier in this chapter. Its inputs
would include raw materials such as coffee, cream, food materials, people, finances, and any
other items needed to operate the company. The transformation process would be making and
selling coffee products and other beverages and food items. The outputs would be the products

The History of Management Theory Chapter 1

themselves. The feedback mechanisms include public comments about the company, financial
information (including company profitability), managerial observations, and any other source of
information about the organization’s well-being.

The Starbucks example indicates another key element in systems theory: To survive and continue
to succeed, an organization must adapt to its environment. When the company received negative
information about sales and profitability, it was clear to Howard Schultz that changes needed
to be made so that the company could once again survive in its environment. Think about how
many companies have had to change or adapt to remain in business. Systems theory suggests
that only those companies with the ability to thrive in a competitive environment will continue
to exist. Others will die out.

Contingency Theory
If one phrase could be used to summarize contingency theory, it might be, “There is no one best
way to manage.” In organizational behavior, there is no one best motivational system, no one best
leadership style, and no one best form of organizational structure and design. Instead, flexible
approaches to management are required. Flexibility suggests an if-then approach to management.
Managers are expected to understand the demands of the environment—the constraints placed
on them by various political, social, and economic forces—and then adapt to help the organiza-
tion achieve the most favorable outcomes. Many recently developed management theories reflect
contingency thinking, where management adapts to the situation, company employees, and other
circumstances that are present.

One important concept that emerged from the modern era, as found in the work of Barnard and
others, is that organizations constantly change. Thinking of a company as a still photo or snapshot
is not accurate. A business organization runs much more like a motion picture. Again, successful
managers adapt to changing circumstances, often using contingency approaches to adjust to a
changing world.

Figure 1.3 An organizational system

This model applies to biological, mechanical, and social systems, including for-profit business
organizations, nonprofits, and government agencies.

Inputs Transformation
Process

Outputs

Feedback
Mechanism

Inputs: raw materials, people, money
Transformation Process: the actual work performed, including methods used
Outputs: goods and services
Feedback Mechanisms: organizational control systems, community feedback, stock price

Summary Chapter 1

Summary
An organization consists of two or more people in a social setting, with division of labor, a hier-
archy of authority, coordination of activities, and a common purpose or goal. Profit-seeking
organizations try to make money. Nonprofit organizations serve various organizational needs.
Governmental organizations oversee the well-being of a population of citizens.

Management plays a critical role in the success of the organization. An organization’s manage-
ment team is charged with the effective use of the resources available to them to achieve planned
outcomes. Drucker (1985) made the distinction between efficient and effective management skills
in regard to the organization’s performance: “Performing an activity swiftly and economically is
efficient, while doing the right thing well is effective. The wrong thing, however, is ineffective by
definition.” The five management functions include planning, organizing, staffing, leading, and
control. Managers coordinate these functions at the strategic, tactical, and operational levels. To
do so requires technical, human relations, and conceptual skills.

The history of management theory began with the scientific approach. Later, the human rela-
tions movement shifted the focus from sheer productivity to a greater emphasis on employees
and their well-being. Modern management theory incorporates elements of systems theory and
contingency theory to describe and manage the complex organizations present in today’s busi-
ness environment.

Possessing strong management abilities and skills such as the ones discussed in this chapter will
guide potential or new managers toward achieving organizational goals. These characteristics
also will help them to be highly effective. This chapter is your first step in improving and fine-
tuning the set of managerial skills you will employ during the course of a career.

C A S E S T U D Y

The Insurance Agency

José Morales graduated from college and entered the work force as an insurance salesperson for
a large agency in metropolitan Albuquerque, New Mexico. He was excited about taking a position
that he believed genuinely helped people by protecting them and aiding them when difficult situa-
tions arose.

The agency had begun actively seeking out the local Hispanic market. The number of potential
customers had grown, and an increasing number of them had moved into the category of lower
middle class. At the least, these individuals might become interested in basic insurance such as term
life insurance and other moderately priced policies. José knew he would be asked to seek out and
reach this target market because he spoke both English and Spanish fluently.

At first, José was able to achieve modest success. Using carefully designed research methods, he
was able to identify households that were most likely to purchase insurance. The prospects were
all dual-income families who had children and were purchasing rather than renting their homes. All
potential clients owned more than one car. Just when José believed he was getting established in
the market, two events occurred. The first was a major economic recession, fueled largely by a col-
lapsing housing market in which homes began to lose value. Many individuals in José’s area were
losing jobs, especially in the service sector. Continuing to make sales under those circumstances
was unlikely. The second event was a sales contest that the regional manager, Michael Dunn,

(continued)

Key Terms Chapter 1

Key Terms
An organization’s most senior manager.

A period in management literature between the 1880s and 1920s, when original
writings and innovations were created.

Measures the company’s efforts to achieve the goals that will allow it to survive,
grow, and thrive over time.

announced would take place over a three-month period. The agencies were assigned to com-
pete with 10 others in the region, including agencies in Taos, New Mexico, and Phoenix, Arizona.
Individual salespeople who exceeded their quotas would receive bonuses and other prizes; however,
the biggest rewards were set aside for the agency-versus-agency level of competition.

José knew he was in a difficult situation. He was expected to compete by trying to make sales to
a group of individuals without the resources to buy. He was in a rotation for referrals, but with the
large number of agents, referrals amounted to only two prospects per week. The only other poten-
tial customers he would meet were walk-ins, who were much less likely to make a purchase on the
first visit. It was not long before José was receiving dirty looks from other agents. His agency was
in fourth place in the contest, and he was nearly last in individual sales. At one point he believed he
heard an ethnic slur in the break room related to his being unreliable and incompetent. José was
angry, frustrated, and ready to quit his job.

Michael Dunn traveled to the Albuquerque location after the first month of the contest. He took
José into a conference room. Michael asked José how he felt about his job. José responded that
he enjoyed the challenge and serving people, but that the contest was putting him in a bad situa-
tion, especially given current circumstances. He did not mention the racial comment. José did note
that a pleasant work environment would benefit the entire agency. Michael responded that if José
couldn’t do the job, he would look around for someone who could. José left the meeting feeling
angry and frustrated. By the end of the contest, José had moved into 15th place out of the 60 indi-
vidual competitors. His agency finished third in the contest. José believed he was the scapegoat for
the agency not placing higher.

José had begun to develop a positive relationship with his agency’s manager, Marty. He was able to
complain about how the contest had put him at a disadvantage and damaged his interactions with
coworkers. Marty commented that Michael Dunn was just a “suit” with no real understanding of
front-line salespeople. Marty said that he had formulated a plan to more efficiently identify poten-
tial customers and another to more quickly settle claims. He also developed an organization chart
that more clearly assigned salespeople to teams that would better serve customer needs. Michael’s
response to Marty’s efforts was that these activities “are not your job.”

Within one year, José had left the agency and joined a company that sold wireless phone service,
specializing in connections to the Hispanic community. Marty moved into another agency with
the same insurance company so he would have a different regional supervisor. Soon after, his new
supervisor implemented many of his ideas.

Discussion Questions

1. Explain how the sales contest was a planning failure.
2. Of the five management functions, which area did Michael Dunn fail to understand?
3. Of the three primary management skills, which did Michael Dunn fail to exhibit?
4. If you were Michael Dunn’s manager, what steps would you take with him?
5. How should the insurance agency change to become a more effective operation in the future?

Key Terms Chapter 1

Measures of how productively resources are used to achieve a goal.

Top-level managers in charge of the operation of the entire organization.

Managers who supervise entry-level employees.

Organizations dedicated to providing the public services not
offered by for-profit and nonprofit organizations.

Model created by Abraham Maslow that depicts human needs advancing
from basic needs to complex, higher order needs.

Perspective supported by Abraham Maslow that suggests the basic inner nature of
a person is inherently good.

A movement in management literature that gained momentum
in the late 1920s; its primary focus was on people rather than solely on productivity.

Motivating, coordinating, and energizing individuals and groups to work together to
achieve organizational goals.

Managers who are directly responsible for a product line or delivery of a service
by the organization.

All the techniques used to lead the human resources in an organization to
become productive.

Planning, organizing, staffing, leading, and controlling human and
other resources to achieve organizational goals.

The study of the overall management process.

The person responsible for helping to achieve an organization’s goals and desired
future outcomes.

Managers charged with directing organizational functions while imple-
menting top-level plans and supervising front-line managers.

Organizations created in response to an expressed social need.

Specific performance targets in short-term time frames.

The plans that direct daily activities.

A collection of people who work together and coordinate their actions to achieve
a wide variety of goals or desired future outcomes.

A chart that provides box-and-line illustrations representing the formal
relationships of positions of authority and the organization’s official divisions of labor.

A formal system of task and reporting relationships that coordinates
the activities of members so that they work together to achieve organizational goals.

The process of establishing task and authority relationships that allow people to
work together to achieve the organization’s goals.

Critical Thinking Chapter 1

The process by which managers choose appropriate organizational goals and identify
courses of action to best reach those goals.

Organizations that deliver goods and services that offer value to consumers in exchange for
money, normally expressed as sales and other revenues.

A management approach based on analyzing work scientifically,
selecting workers scientifically, creating cooperation between workers and managers, and shar-
ing responsibility for organizational outcomes.

The process of recruiting, selecting, training, evaluating, compensating, and disciplin-
ing of employees within the organization.

The managers who lead departments that serve in supporting roles, including
accounting, human resources, procurement, and logistics.

The long-term, sweeping targets a company seeks to pursue.

A cluster of decisions about what goals to pursue, what actions to take, and how to
use resources to achieve goals.

A method of assessing company strengths and weaknesses plus opportunities
and threats in the external environment.

Goals that guide managers in the various areas and that should mesh with stra-
tegic goals.

The plans that support strategies.

Theory of human motivation proposed by Douglas McGregor that assumes people
lack ambition, prefer direction, inherently dislike work, and are motivated only by external fac-
tors such as money and fear.

Theory of human motivation proposed by Douglas McGregor that assumes people
want to work, prefer autonomy, have underutilized talents, and have innate motivation.

Theory of human motivation and management style initially developed by William
Ouchi that proposes a workplace environment that meets employee needs, offers secure
employment, and seeks to create high levels of trust and responsibility.

Critical Thinking
Review Questions

1. Define the term organization and list the main forms of organizations.
2. Define the terms management theory, management, and manager.
3. What are the three most basic managerial levels in organizations?
4. What are the primary activities of front-line managers and staff managers?
5. What three managerial skills and abilities help an individual achieve success?
6. What are the five management functions?
7. What four steps are associated with planning?

Critical Thinking Chapter 1

8. Explain the natures of efficiency and effectiveness in organizational management.
9. Name and define three levels of plans created in business organizations.

10. What three tasks are associated with organizing?
11. What are the four steps of the control process?
12. What is scientific management?
13. Explain humanism and the human relations movement in management.
14. Briefly describe Theory Z.
15. Explain the four parts of a system and how they relate to a business enterprise.

Analytical Exercises

1. Access the Costco website (http://www.costco.com). Can you find elements of planning, orga-
nizing, staffing, leading, and controlling at the website, especially in the “About Us” section?
Provide specific examples.

2. In three columns labeled (a) profit-seeking, (b) nonprofit, and (c) governmental, make a list of
the differences for each type of organization in the following areas. Compare your answers
with others in the class.

sources of revenue
types of expenses
organizational goals
measures of organizational success
differences in management styles

3. Make a list and provide answers in three columns for (a) front-line supervisors, (b) middle
managers, and (c) executive managers. Give an example for each answer.

types of duties (specific, general, or both)
basic orientation (technical, conceptual, or both)
time spent planning (least, moderate, most)
time horizon for planning (short-term, medium-range, long-term)

4. Table 1.1 suggests that the managerial focus for each level includes a high human relations
element. Explain how human relations activities would be different for front-line supervisors,
middle managers, and executive managers. Explain the common elements in each.

5. Perform a SWOT analysis for each of the following companies:
Walmart
a local dry cleaner in your hometown
Netflix
General Motors
Facebook

Critical Thinking Chapter 1

6. Using the list of strategic goals provided in Section 1.3, give specific examples of how each goal
would be related to the following companies:

Coca-Cola
Allstate Insurance
a local radio station
United Way

7. Explain how each of the following activities at McDonald’s is an example of a strategy, tactic,
or operational plan.

merging with Papa John’s Pizza to create a wider customer base
adding heart-healthy menu items
expanding into a new country
creating new methods for serving customers at the drive-through window
releasing a new advertising campaign for holiday seasons
improving the purchasing system to keep food fresher

8. Explain how the following sets of functions are interrelated:
planning and organizing
planning and staffing
organizing and staffing
staffing and leading
planning and control