PRINCIPLES OF MANGEMENT

ORGANIZATION An organization can be defined as a group of people working together to create a surplus.

MANAGEMENT Management is the practice of consciously and continually shaping organizations.

 Management is the process of working with and through others to achieve organizational objectives in a changing environment. Working with and through others Achieving organizational objectives (Goodyear Tire and Rubber)* Balancing effectiveness & efficiency Making the most of limited resources** Coping with a changing environment-globalization, product quality, environmentalism, ethical reawakening***

**U.S. with less than 5% of the worlds population is currently consuming about 25% of the worlds annual oil production and generating 17% of the green house gases linked to global warming. (Source: Robert P.Hey, ``White House, Congress Spar Over Energy Policy, The Christian Science Monitor, Sep 14, 1990)
*** A recruiter at AT&T said, ``We are seeking out people who have learned how to learn and can adapt to changing situationswe are not only looking for people who have a dogmatic approach. That might have been attractive in the days when AT&T was a regulated monopoly, but todays market and technology are changing rapidly, if you are hiring people who dont like surprises, you are probably not hiring the right people.

Productivity

Output/Input (within a time period, quality considered)

Effectiveness

Entails promptly achieving objectives. It involves choosing the right goals.

Efficiency

It is an input-output ratio. An efficient manger is one who achieves outputs, or results, that measure up to the inputs used to achieve them. The more favorable the ratio of benefits to costs, the greater the efficiency.

*Goodyear Tire and Rubber

Founded in 1898 by Frank Seiberling. Today it is the third largest tire company in the world after Bridgestone and Michelin. Goodyear manufactures tires for automobiles, commercial trucks, race cars, airplanes, and heavy earth-mover machinery.

Although the company was not connected with him, it was named in honor of Charles Goodyear. Goodyear invented vulcanized rubber in 1839. The first Goodyear Tires became popular because they were easily detachable and low maintenance.

Stanley Gault, the newly appointed CEO in 1991turned around the company and the central role was of the new objectives and effective communication of the same.

He wrote ``The 12 Objectives for managing Goodyear Successfully in the 90s.

They include to have a leadership position in costs, quality, customer service, and innovation.

In 1991, the Goodyear Tire and Rubber Co. was in a severely damaged position. The company had experienced its first financial loss in 58 years.

Companys million-a-day debt service charges had placed Goodyear to the verge of bankruptcy.
Newly appointed CEO Stanley Gault, charged with the responsibility of turning the company around, recognized that Goodyear also had to increase its selling prices wherever possible. Moving forward, Goodyears strategy moving would be to find and seize the industrys fastest-growing, highestmargin markets.

Most marketers say if youre going to increase share, you have to cut prices. Were not going to do it that way. In the tire industry, the automakers who buy about half of the industrys tires are sophisticated engineers who specify precisely what they want in a tire. On the replacement side of the market. However, Goodyears marketing team believed that consumers who bought replacement tires could be influenced by features created by a marketing-focused organization.

CEO Gault was quoted as saying, Most marketers say if youre going to increase share, you have to cut prices. Were not going to do it that way. In turnaround strategies, cost cutting is rarely sufficient and price increase often plays a major role. Sustained premium pricing for a product, however, only works when customers place premium value on product attributes. Identifying the optimum bundle of product attributes requires a strong understanding of the market. He presented and explained the objectives to all the people and wanted everybody in the organization to know why these objectives were important and what they meant to each individual position, and how everyone would fit into the picture.

Under Gaults direction, Goodyear began the process of transforming itself from a manufacturing-based company to a customer value-based company.

One of Goodyears earliest successes with executing customer value-based pricing came with the introduction of the Aquatred tire. The first step was to conduct consumer research to identify and prioritize the attributes that would motivate consumers to purchase a new type of replacement tire.

The research revealed some not-so-surprising information: namely, that consumers wanted a tire that was all-season, had a good ride characteristic, a low noise level, and provided good mileage. Consumers also placed a very high importance on wet stopping ability. But, in addition, what Goodyears marketing team also discovered was that consumers were also willing to pay more for a tire that looked like it provided wet traction. Armed with this information, Goodyear launched the Aquatred, a tire with a distinctive-looking groove placed down the center for wet traction.

At the time of Aquatreds launch, the average price paid by consumers for the most popular-sized replacement tire was in the $50 range . As Goodyears customer research indicated that consumers would be willing to pay much more for a tire possessing the Aquatreds features, Goodyear introduced the Aquatred at a price of $95/ tire.

Goodyears marketers realized that if the premium-priced Aquatred was as successful as their forecasts indicated, Goodyears competitors would be enticed to enter the wet traction market with me too products at price points below the Aquatred.

Moreover, Goodyears consumer research indicated that the Aquatred brand name alone would not be sufficient to stem potential share losses from lower priced entrants, and that a large portion of consumers would switch to another brand for price alone. So Goodyear preempted this competitive threat by introducing the Intrepid, another wet traction tire, but priced below the Aquatred. Shortly after its launch, Aquatred was accounting for 6% of Goodyears volume and 8.5% of profits.

Today, the Aquatred still dominates the wet traction tire market, and continues to command a significant price premium over regular tires.

MANAGEMENT A SPECIALITY IN TIME AND HUMAN RELATIONSHIPS

Management is an attempt to create a desirable future. Management is practiced in and is a reflection of a particular historical era. Managers are in relationships that are two way streets. Managers act in relationships that have spillover effects for other people. Managers juggle multiple simultaneous relationships.

Management is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims. As manager, people carry out the managerial functions of planning, organizing, staffing, leading, and controlling. Management applies to any kind of organization. It applies to managers at all organizational levels. The aim of all managers is to create a surplus. Managing is concerned with productivity, which implies effectiveness and efficiency.

THE MANEGEMT PROCESS/ MANAGERIAL FUNCTIONS

Planning & Strategizing Organizing Leading & Developing controlling

PLANNING

Planning is the primary management function of formulating the future courses of action. Plans and the objectives on which they are based, give purpose and direction to the organization, its subunits, and contributing individuals. Plans set up the best procedures for reaching the objectives.

ORGANIZING

Process of arranging and allocating work, authority and resources among an organization's members to facilitate them achieve the organizational goals. Organizational design which encompasses matching of organization's structure to its goals and resources. Relationships and time are central to organizing activities. Careful organizing helps ensure efficient use of resources.

LEADING & DEVLOPING

Leading involves directing, influencing, and motivating employees to perform to the best of their abilities. Leaders/managers should change their management style according to the need of the situation. People perspective

CONTROLLING

To control is to ensure that the actions of an organization's members move the organization towards the desired and stated goals. TQM (Total Quality Management)

Establish standards of performance Measure current performance Compare performance with established standards Take corrective actions if deviations are detected

Total Quality Management

``TQM is a management approach for an organization centred on quality, based on the participation of all its members and aiming at long term success through customer satisfaction, and benefits to all members of the organization and to society. -International Organization for Standardization

What Managers Do

Wal-Marts founder Sam Walton said about managers, they can motivate ``ordinary people to do extraordinary things. Sam Walton built Wal-Mart from scratch into the largest retailer in the world. Lou Gerstner repositioned IBM from a troubled manufacturer of mainframe computers into the dominant provider of computer software services in the world. Jack Welch reenergized General Electric, transforming a tired engineering conglomerate into an efficient, vibrant, entrepreneurial enterprise that set the standard for excellence in many industries in which it competed.

In the late 1970s Steve Jobs of Apple Computer gave the world the first mass marketed, easy to use personal computers; today Apple under Jobs management is still driving innovation with its iPod music player. Meg Whitman provided the leadership that helped eBay become the world's first and most successful online auction house, revolutionizing the auction industry. Rose Marie Bravo, Burberry case*

*When Rose Marie Bravo, the highly regarded president of Saks Fifth Avenue, announced in 1997 that she was leaving to become CEO of ailing British fashion house Burberry, people thought she was crazy. Burberry, best known as designer of raincoats with trademark tartan linings, had been described as ``an outdated business with a fashion cachet of almost zero. Seven years later Bravo was being heralded as one of the best managers. In her tenure at Burberry he engineered a remarkable turnaround, leading a transformation of Burberry into what one commentator called and ``achingly hip high end fashion brand whose raincoats, clothes, handbags, and other accessories were must have items for well heeled, fashion conscious consumers.

Under the leadership of Bravo, London fashion house underwent a renaissance. Between 1997 and 2003 profits increased almost fivefold as Burberry was repositioned as a hip, high end global brand.

She hired Christopher Bailey in 2001, who was working for Gucci at that time.
Ads now featured Kate Moss to help reposition the brand. Burberrys stores were redesigned, Burberrys global manufacturing system had to adhere to Burberrys exacting quality standards. Bravo explained that hidden value in the brand was unleashed by constant creativity and innovation.

She noted creativity doesnt only come from good designers that she had hired, but ideas can come from sales floor, the marketing department, even from accountants. Bravo also emphasized that its not one person and its not two people, its a group of people that works cohesively towards a goal.

She also noted that keeping the team motivated and to direct them to follow the vision was imperative.

By all accounts Rose Marie Bravo has been a remarkable manager. Her story illustrates the importance and powerful role that managers can play in an organization. Functions: planning, organizing, motivating, leading, hiring, control. Pushed for a new hip vision, repositioned the brand, built and managed the teams that transformed Burberry, invited ideas from all spheres. Rose Marie Bravo embodies what great managers do: they make things happen, they develop strategy, they organize people, projects, and processes: they reenergize others in the organization: and they lead.

Management Competencies
Managerial skills Fayol identified basic three kinds of skills:technical, human and conceptual. Conceptual skills-the ability to see the bigger picture, understand how the various parts of an organization affect each other, and conceptualize how those parts can be organized to improve the performance of the overall organization. Conceptual skill is the ability to coordinate and integrate all of an organization's interests and activities. Managers must be able to creatively figure out the real problem (or opportunity), and choose from among the various alternatives. Top Management

Technical skill is the ability to use the procedures, techniques, and knowledge of a specialized field. Surgeons, engineers, accountants, guitarists all need to have technical knowledge in their respective areas. Front line management Human skill is the ability to work with, understand, empathize, and motivate others as individuals and in groups. Across a wide range of levels. Managerial values Values are stable, evaluative beliefs that guide our preferences for outcomes or courses for action in a variety of actions. They are perceptions about what is good or bad, or right or wrong. They act as a moral compass that directs our decisions an actions.

Enacted values-the values that actually guide behavior. Espoused values- the values that people say are important to them. Shared values-core values identified by the companies that they believe employees should embrace at the work place.

Values of Home Depot: Excellent customer service Taking care of our people Giving back Doing the "right" thing Creating shareholder value Respect for all people Entrepreneurial spirit

Managerial motivation

Desire to compete for higher level jobs Desire to exercise power-personalized power & socialized power Desire to be distinct Desire to take action

MANGERS ABILITIES PACKAGED BY AACSB (AMERICAN ASSEMBLY OF COLLEGIATE SCHOOLS OF BUSINESS)

Leadership Oral presentation and presentation skills Written communication Planning and organizing Information gathering & problem analysis Decision making Delegation & control Objectivity Disposition to a willingness & desire to lead others in new directions

MANAGERIAL ROLES (Henry Mintzberg)

INTERPERSONAL ROLES
Leader Liaison

Figurehead

Nerve Centre

INFORMATIONAL ROLES

Disseminator spokesperson Entrepreneur

DECISION ROLES

Disturbance handler Resource Allocator

CHALLENGES TO MANAGEMENT
Globalization

Refers to economic, social, and cultural connectivity with people in other parts of the world. National economies and business systems are increasingly becoming interlinked with each other. Outsourcing of U.S. tax return preparation to India. Boeing Companys 777 jet airliner. Eight Japanese suppliers make parts for the fuselage, doors, and wings; a supplier in Singapore makes the door for the nose landing gear; three suppliers in Italy manufacture wing flaps; and so on. In total, some 30% of the 777, by value, is built by foreign companies.

McDonald sells hamburgers in India, new employees at Finland based phone maker Nokia are increasingly being recruited from India, China, and other developing countries. Nasscom-McKinsey have estimated that Indian BPO industry will gross over $21-24 billion by 2008. India can hire 25% of global BPO offshore market.

Globalization adds more diversity to the workforce, which affects the organizations culture and introduces new forms of values-based conflict among employees. Firms need to adjust their organizational structures and forms of communication to assist their global reach. Globalization is identified as one of the main sources of increased competitive pressures, mergers, and market volatility. These environmental conditions reduce job security, increase work intensification, and demand more flexibility from employees.

An Ethical Reawakening

Ethics as defined in Websters Ninth New Collegiate Dictionary is, ``the discipline dealing with what is good and bad and with moral duty and obligation. Personal ethics has been referred to as ``the rules by which an individual lives his or her personal life. Business ethics is concerned with truth and justice and has a variety of aspects such as the expectations of society, autonomy, fair competition, advertising, social responsibilities, and corporate behavior in home country as well as abroad.

Deviant workplace behavior

More and more OB researchers are studying absenteeism and turnover (behavioral aspect) as indicators or markers of deviant behavior. DWB is also called antisocial behavior or workplace incivility. It can be defined as voluntary behavior that violates significant organizational norm, and might threaten the well being of an organization or its members.

Organizational norms can be company policies that prohibit certain behaviors. These norms can also be unspoken rules that are widely shared. Examples of deviant behavior can be stealing, insulting a colleague, gossiping excessively, or engaging in sabotage. It is important to study and understand deviant behavior because its a response to dissatisfaction.

Transfer Pricing and International Corporate Deviance

Workplace deviance is not limited to the harmful behaviors of employees within one location. There are cases of corporate deviance that extend across country borders. Transfer pricing: the price that one company charges another part of the same company for a product or service. Tax rates on company profits differ from country to country. Transfer pricing, when used to shift income from high tax countries to low tax countries is a deviant corporate policy if abused.

A multinational firm's headquarters' sold toothbrushes to a subsidiary for $5,000 each. The subsidiary, with the higher tax of the two, claimed a loss . The multinational firm, with the lowest tax of the two took the profit and paid the tax on it. According to a survey by the international auditing firm Ernst & Young, transfer pricing, has become a heated issue among multinational companies. The U.S. Multistate Commission estimated that states were losing almost a third of their corporate tax income because of tax sheltering practices by MNCs. Source: Based on ``Case of the U.S. $5,000 Toothbrush, Finance Week, April 27, 2005, pp.45-46.

The Evolution of Product Quality Environmentalism The Need for Vision Cultural Diversity

EVOLUTION OF MANAGEMENT THEORY

Early Strategies Machiavelli & Sun Tzu Principles set forth by Machiavelli as evident in Discourses, a book he wrote in 1953 are: An organization is more stable if members have the right to express their differences and solve their conflicts within it. While one person can begin an organization, it is lasting when it is left in the care of many and when many desire to maintain it. A weak manager can follow a strong one, but not another weak one, and maintain authority. A manager seeking to change an established organization should retain at least a shadow of the ancient customs.

Four Well Established Schools of Thoughts

The Scientific Management School The Classical Organization Theory School The Behavioral School The Management Science School

Three Recent Integrative Approaches

The Systems Approach The Contingency Approach

The Scientific Management Approach

The theory arose from one of the needs to increase productivity. Since labor in U.S. at that time was in short supply, the only way to increase productivity was to increase the efficiency of workers. Fredrick W. Taylor(1856-1915) Four principles: The development of true science of management, so that the best method for performing each task could be determined. The scientific selection of workers, so that each worker would be given responsibility for the task for which s/he is best suited.

The scientific education and development of workers. Intimate, friendly cooperation between management and labor.

Production line time studies Differential rate system

Henry L. Gantt (1861-1919) Each worker who finished a days assigned workload would win a 50 cent bonus. The supervisor would earn a bonus for each worker who reached the daily standard, plus an extra bonus if all the workers reached it. Every workers performance was to be rated publicly and recorded on individual bar charts-black if reached the standards and red when fell below it.

Gantt Chart It formed the basis for Critical Path Method (CPM) and Program Evaluation and Review Technique (PERT).

The Gilbreths (1868-1934 & 1878-1972) Frank B. and Lillian Gilbreth were a husband and wife team. They worked on fatigue and motion studies and worked on ways to improve labor welfare. Each motion that was eliminated reduced fatigue. They used motion picture cameras. They argued that motion study would raise worker morale by providing physical benefits and demonstrating managements concern for workers.

Classical Organization Theory School

The theory grew of the need to find guidelines for managing complex organizations as factories. Henri Fayol (1841-1925)

Hailed to be the founder of classical management school. Before Fayol, it was generally believed that `mangers are born, not made. However, he insisted that like any other skill, management was also a skill, which could be taught.

14 Principles of Management 1. Division of Labor 2. Authority 3. Discipline 4. Unity of Command 5. Unity of Direction 6. Subordination of Individual Interest to the Common Good 7. Remuneration 8. Centralization 9. The Hierarchy 10. Order 11. Equity 12. Stability of Staff 13. Initiative 14. Esprit de Corps

Max Weber (1864-1920)

The German sociologist developed a theory of bureaucratic management. The theory stressed the need for a strictly defined hierarchy governed by clearly defined regulations and lines of authority. Division of labor should be clearly spelled out. Technical competence should be spelled out. Performance evaluation should be done the basis of merit.

Mary Parlker Follett (1868-1933)

She called management ``the art of getting things done through others. She believed that the artificial distinction between managers(order givers) and subordinates(order takers) obscured the natural partnership between the two. Follett not only took into account individuals and groups but also the effects of environmental factors such as politics, economics, and biology. By explicitly adding the organizational environment to her theory, she paved the way for management theory to include both internal and external environment.

Chester Barnard (1886-1961)

According to him, people came together in formal organizations to achieve ends they cant accomplish working alone. But people also have individual and personal needs which need to be satisfied. A balance of both organizational and personal goals had to be maintained and respected. Informal groups Zone of indifference-what the employee would do without questioning the managers authority. He also believed that executives had a duty to instill in their employees a sense of moral duty.

The Behavioral School The Human Relations Movement & The Hawthorne Experiments

To manager's frustration, people did not always follow predicted or expected patterns of behavior. People side of the organization. The Hawthorne Experiments (Elton Mayo) Illumination Studies (1924-1927) Relay Assembly Test Room Experiments (1927-1929) Mica Splitting Test Group (1928-1930) Plant Wide Interview Program (1928-1931) Bank Wiring Observation Group (1931-1932)

From Human Relations to the Behavioral Science Approach

Abraham Maslow and Douglas McGregor The behavioral scientists applied the methods of scientific investigation to the study of how people behaved in organizations as whole entities.

The Management Science School

At the beginning of World War II, with survival at stake, the British formed the first operational research (OR) teams. A pool of mathematicians, physicists, and other scientists in OR teams, the British were able to achieve many technological and tactical breakthroughs. Americans also formed OR teams based on the British model. When the war ended, the application of OR became apparent in the industry.

Operations Research

In a nutshell, operations research (O.R.) is the discipline of applying advanced analytical methods to help make better decisions. By using techniques such as mathematical modeling to analyze complex situations, operations research gives executives the power to make more effective decisions and build more productive systems. Simulation Optimization Probability and Statistics

Systems Approach

A system is a collection of parts operating interdependently to achieve a common purpose. The systems approach to management views the organization as a unified, purposeful system composed of interrelated parts. Scientific management and human relations theorists assumed that the whole is equal to sum of its parts and can be explained likewise. System theorists study management by putting things together and assume that the whole is better than the sum of its parts. They believe that managers affect, and are in turn affected by many organizational and environmental variables. The activity of any segment of an organization affects, in varying degrees, the activity of every other segment.

Subsystem Synergy (whole is greater than sum of its parts) Open vs. closed systems Flow Feedback

The Contingency Approach

Also known as the situational approach. According to this approach, managers task is to identify which technique will in a particular situation, under particular circumstances, and at a particular time, best contribute to attainment of management goals.

Generally the term contingency refers to the choice of an alternative course of action. The theory was developed by managers, consultants, and researchers who tried applying concepts of major schools to real life situations.

Trimester Project

Pick an organization that you can track throughout the course. At the end of each topic you need to look into an aspect of the organization that matches the content of the topic and collect as much information as possible on that topic. Describe the firm. How old is it? What industry it belongs to? What products or services does it sell? Who are its principal competitors? Strength of employees? Sales and profits. Does it have international presence? Has the company been impacted by globalization and how (challenges & opportunities)? How has the firm performed in comparison of its rivals?