Intro to Management - Hamilton - Rutgers
Terms in this set (88)
Principles of Scientific Management, 1911
Mary Parker Follett (1924)
Power with rather than power over employees
Hawthorne Studies (1924 - 1932)
Hawthrone Studies Findings
Engaged because management listened to them, group dynamics: worked as a team to encourage each other
Corporation as a social institution in which the capacity and potential of everyone involved were to be respected
Theory X (people are inherently lazy),
Theory Y (people want to find meaning in their work and will contribute in positive ways if the work is well designed)
Bruce Henderson (1963)
Proposed analytical approach for developing business strategy
Results Driven Management, Businesses exist to produce results
John Kenneth Galbraith (1967)
raises concern about the fact that the top 200 US firms controlled 67% of assets, and 60% of sales, employment, and income
Consolidation of Industrial Power!
Forces of Change
Deregulation (airlines, railroads, trucking, telecomm., finance)
Globalization (New entrants - Japan, Russia, China, India)
Technology (computers, software changed productivity)
Mergers & Acquisitions (25% of the firms on the Fortune 500 in 1980 were acquired by 1989)
Michael Porter (Strategy Guru)
(1980) Competitive Strategy (the five forces, generic strategies)
(1985) Competitive Advantage (value chain)
Peters & Waterman (1982)
"In Search of Excellence"
Trend in job satisfaction
Down, despite work conditions improving, this is especially bad among young workers
What is strategy?
A company's strategy is its action plan for outperforming its competitors and achieving superior profitability
What is our present situation?
Business environment and industry conditions
Firm's financial and competitive capabilities
Where do we want to go from here?
Creating a vision for the firm's future direction
How are we going to get there?
Crafting an action plan that will get us there
Hows of strategy
How to outcompete rivals.
How to respond to economic and market conditions and growth opportunities.
How to manage functional pieces of the business.
How to improve the firm's financial and market performance.
Be different, know what you should or should not do, be more effective and/or more efficient, give customers lasting reasons to buy
Why a Firm's Strategy Evolves over Time
Managers modify strategy in response to:
Changing market conditions
Fresh moves of competitors
Shifting buyer needs
Emerging market opportunities
New ideas for improving the strategy
Customer Value Proposition
Satisfying buyer wants and needs at a price customers will consider a good value.
The Profit Formula
Creating a cost structure that allows for acceptable profits, given that pricing is tied to the customer value proposition.
Strategic Fit Test
Dynamic fit with firm's external and internal situation
The Competitive Advantage Test
Help firm attain a significant and sustainable competitive advantage
The Performance Test
Can it produce good performance:
Performance Test Relates to
Revenue generation, cost structure, profit margin
Steps of creating strategy:
1. Develop a strategic vision/mission statement/vision statement
2. Set objectives
3. Craft your strategy to achieve objectives
5. Monitor and Adjust
How to craft strategy
Strategic hows, choose generic strategy, do something different, team process with CEO/senior execs/managers of each unit
How to execute strategy
Need the right resources and skills, must organize and delegate, create systems and procedures, create culture that motivates from top down
The macro-environment encompasses the broad
environmental context in which a company's industry is
situated that includes strategically relevant components over which the firm has no direct control.
Economic conditions (local to worldwide)
Environmental factors (the natural environment)
competitive forces in industry
Driving forces in industry
Where are rivals positioned
What moves will rivals make next
What are key success factors in industry
Industry outlook conductive to profit?
The Five Competitive Forces (Porter):
Competition from rival sellers
Competition from potential new entrants
Competition from producers of substitute products
Supplier bargaining power
Customer bargaining power
Change in industry growth rate
Technology in company, manufacturing
Change in who buys and why or change in marketing ideas
Entry or exit of major firms
Changes in cost and efficiency
Reductions in uncertainty
Government policy change
Changing societal attitudes or lifestyle
Strategic Group Maps
combine companies with similar products, positions, approaches, will be close on map of price/quality vs market scope
Key Success Factors (KSFs)
Are the strategy elements, product and service attributes,
operational approaches, resources, and
that are necessary for any company in this industry to succeed
Is current strategy working?
What are the firm's competitively important resources and capabilities?
Can the company take advantage of opps and overcome external threats
Are prices and costs competitive
Is there a good consumer value prop
Competitively stronger or weaker than key rivals?
What are biggest problems?
Resources and capabilities
Competitive power of assets
Does it help you compete, is it rare, is it hard to copy, is it vulnerable or not to threat of substitution
Internal strengths (the basis for strategy)
Internal weaknesses (deficient capabilities)
Market opportunities (strategic objectives)
External threats (strategic defenses)
Is an activity that a firm has learned to perform with proficiency—a capability.
A Core Competence
Is a proficiently performed internal activity that is central to a firm's strategy and competitiveness.
A Distinctive Competence
Is a competitively valuable activity that a firm performs better than its rivals.
A Weakness (Competitive Deficiency)
Is something a firm lacks or does poorly (in comparison to others) or a condition that puts it at a competitive disadvantage in the marketplace.
Signs of A Firm's Competitive Strength:
Its prices and costs are in line with rivals.
Its customer-value proposition is competitive and cost effective.
Its bundled capabilities are yielding a sustainable competitive advantage.
The Value Chain
Identifies the primary internal activities that create and deliver customer value and the requisite related support activities.
Permits a deep look at the firm's cost structure and ability to offer low prices.
Reveals the emphasis that a firm places on activities that enhance differentiation and support higher prices.
LOW-COST PROVIDER STRATEGIES
Effective Low-Cost Approaches:
Pursue cost-savings that are difficult to imitate.
Avoid reducing product quality to unacceptable levels.
Competitive Advantages and Risks:
Greater total profits and increased market share gained from underpricing competitors.
Larger profit margins when selling products at prices comparable to and competitive with rivals.
Low pricing does not attract enough new buyers.
Rival's retaliatory price cutting set off a price war.
MAJOR AVENUES FOR ACHIEVING A COST ADVANTAGE
How to Gain a Low-cost Advantage:
Perform value chain activities more cost-effectively than rivals.
Revamp the firm's overall value chain to eliminate or bypass cost-producing activities.
COST-EFFICIENT MANAGEMENT OF VALUE CHAIN ACTIVITIES
Is a factor with a strong influence on a firm's costs.
Can be asset- or activity-based.
Securing a Cost Advantage:
Use lower-cost inputs and hold minimal assets
Offer only "essential" product features or services
Offer only limited product lines
Use low-cost distribution channels
Use the most economical delivery methods
Capture economies of scale.
Capture experience and learning-curve effects.
Operate facilities at full capacity.
Improve supply chain efficiency.
Use lower cost inputs without sacrificing quality
Use the firm's bargaining power with suppliers
Use technology/statistical methods to achieve operating efficiencies.
Use outsourcing or vertical integration where cost effective
Motivate employees through incentives and company culture to increase productivity and reduce costs.
WHEN A LOW-COST PROVIDER STRATEGY WORKS BEST
Vigorous price competition among rival sellers
Identical products are available from many sellers.
There are few ways to differentiate industry products.
Buyers use the product in the same ways.
Buyers incur low switching costs
Industry sales mostly to a few, large volume buyers.
New entrants/others use low prices to attract buyers
BROAD DIFFERENTIATION STRATEGIES
Effective Differentiation Approaches:
Carefully study buyer needs and behaviors, values and willingness to pay for a unique product or service.
Incorporate features that both appeal to buyers and create a sustainably distinctive product offering.
Use higher prices to recoup differentiation costs.
Advantages of Differentiation:
Command premium prices for the firm's products
Increased unit sales due to attractive differentiation
Brand loyalty that bonds buyers to the firm's products
How to offer something better
Features that lower buyer's overall cost of use
Tangible or intangible features to increase satisfaction
Signal value (price, ads, packaging)
ENHANCING DIFFERENTIATION BASED ON UNIQUENESS DRIVERS
Create superior product features, design, and performance.
Improving customer service
Investing in R&D activities.
Pursue innovation and technological advances.
Pursue continuous quality improvement.
Increase emphasis on marketing and brand-building activities.
Seek high-quality inputs.
Emphasize human resource management activities that improve skills, expertise, and knowledge
SUCCESSFUL APPROACHES TO SUSTAINABLE DIFFERENTIATION
Differentiation that is difficult for rivals to duplicate or imitate:
Long-standing relationships with buyers
Unique product or service image
Differentiation that creates switching costs that lock in buyers
Patent-protected product innovation
Relationship-based customer service
WHEN A FOCUSED LOW-COST OR FOCUSED DIFFERENTIATION STRATEGY IS ATTRACTIVE
The target market niche is big enough to be profitable and offers good growth potential.
Industry leaders chose not to compete in the niche—focusers avoid competing against strong competitors
It is costly or difficult for multi-segment competitors to meet the specialized needs of niche buyers.
The industry has many different niches and segments.
THE RISKS OF A FOCUSED LOW-COST OR FOCUSED DIFFERENTIATION STRATEGY
Competitors match the focused firm's capabilities in serving the target niche.
The specialized preferences of niche members' needs shift over time toward the product attributes desired by the majority of buyers.
As attractiveness of the segment increases, it draws in more competitors, intensifying rivalry and splintering segment profits.
WHEN A BEST-COST (HYBRID) PROVIDER STRATEGY WORKS BEST
Product differentiation is the market norm.
There are a large number of value-conscious buyers who prefer midrange products.
There is competitive space near the middle of the market
Economic conditions have caused more buyers to become value-conscious.
THE CONTRASTING FEATURES OF THE FIVE GENERIC COMPETITIVE STRATEGIES: A SUMMARY
Each Generic Strategy:
Positions the firm differently in its market.
Establishes a central theme for how the firm intends to outcompete rivals.
Creates boundaries or guidelines for strategic change as market circumstances unfold.
Entails different ways and means of maintaining the basic strategy.
Organization Design helps to smoothly connect inputs (e.g., human resources, financing, strategy, other resources) to create outputs (performance outcomes).
What is Organizational Design? - Key Elements
Organization design determines HOW employees will work together with other resources by:
Laying out the flows of information, knowledge, and sensemaking,
Specifying necessary interactions and collaborations (collaborative work roles),
Defining authority and responsibility.
Providing everyone with knowledge of his/her role in the value creation process, what s/he is expected to do, with whom s/he works with, to whom s/he goes for resources and support
Experts in a discipline PLUS intimately acquainted with the potential systemic impact of their tasks in interaction with
Five characteristics that make jobs more motivating:
Task identity: job requires employee to perform all tasks from beginning to end
How to Make Job Designs more Effective and Adaptive
Assign responsibilities, not just tasks
Create accountability for outcomes (value creation), not effort
Empower, engage, coach vs supervise and direct
Focus is T-shaped: deep expertise combined with a clear understanding of the links across the organization and the ability/willingness to collaborate
The job responsibility is not only to do the job well but also to figure out how to do the job better (process improvement, skill development)
Create an enjoyable work environment in order to create more enjoyable jobs!
Strategic considerations for Effective Structure
Who needs to talk to whom everyday?
Who needs to work closely together?
Who needs to build up skills and new learning?
Some structures are more suitable for a given strategy:
If innovation, then by multi functional product teams
if optimizing steps then by function;
if building product categories (like Google is trying to do - in book at end), then by product.
Key Considerations in Designing Structures
Critical flows of information/knowledge are enabled/supported
Key individuals (groups) are able to effectively interact routinely and spontaneously with each other to create value
There is clarity of responsibility and authority
Each individual's role is clear in the context of the overall organization's vision, mission, and goals
Each individual's connection to the organization is meaningful
An organizational structure composed of all the departments that an organization requires to produce its goods or services
Traditional approach, gotta make sure each function works with others for overall value creation
Divisional Structure -
Product, Market, or Geographic:
An organizational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer
An organizational structure that simultaneously groups people and resources by function and by product
When customer needs or technology is changing rapidly this structure provides more flexibility to respond quickly
Product Team Structure:
An organizational structure in which employees are permanently assigned to a cross-functional team and report only to the product team manager or to
one of his/her direct subordinates
Usually small and temp, do something new, problem-based
A theoretical, informal structure in which employees are initiating self-directed interactions with each other,
and with the formal structures of the Organization, and with the organization's information systems in order to access
critical information, knowledge, skills, and capabilities essential to their work
Multiple layers for more fluid and spontaneous work
allows the individuals in the organization to tap into and build upon the collective knowledge of the organization to create new knowledge and expertise which gets recycled for future interaction and exploitation
When might you need an adaptive structure?
Most of these various organizational structures focus attention on one thing, which is all right IF the strategy, environment, technology, and human resources stay the same over time.
Strategy: to differentiate and increase the value customers perceive, must value innovation, which requires adaptability in organization design; low cost might push for more controls through structure
Environment: greater uncertainty, more change - need speedy decisions, lots of communication, adaptable entrepreneurial structures; so will decentralize authority, empower lover level employees, encourage norms for innovation; more stability, then more control, standard operating procedures
Technology: more complexity (e.g., digital systems, B- 787, new kinds of autos), must be adaptable to come up with new solutions fast; if technology is more routine, structure can be more formal
Human resources: more highly skilled professionals working in teams need an adaptable, decentralized structure
Why Integration and Coordination are Important:
Need unity of effort - everyone pulling in the same direction and that does not happen unless managers continually work at it;
Many business processes involve activities of multiple individuals and work groups working cohesively in order to deliver results
As competition, technologies, customers change, can learn across work units and leverage different ideas and insights and experiences to make the sum greater than the parts
Avoid silo mentality that works as barrier to getting work done!
The traditional model of integration, via hierarchy and direct oversight, is no longer adequate because?
hierarchy assumes that parts are nested (like a Russian doll), one-to-one links;
In fact, the parts are heterarchical, many-to-many links.
In an adaptive organization, a variety of integrating mechanisms are needed to pull things together.
Structure, culture, strategy, incentives, and monitoring provide a collective fabric that support the flow of information and collaboration across the organization necessary for effective integration
Culture is the shared set of beliefs, expectations, values, and norms that influence how members of an organization relate to one another and cooperate to achieve organizational goals
Establish and Reinforce Social Rules:
Take responsibility for the whole task (not just your part)
Value knowledge, and make what you know accessible to others (share expertise)
Explore potential by experimenting, looking for alternatives and options (don't just reach for a quick solution to eliminate the problem)
A good performance evaluation and reward system energizes maximum employee performance. Its key elements are:
Define performance: Establish clear goals tied to strategy; turn the mission, values, and strategy into actionable goals
Measure performance: Create metrics to track progress toward goals; conduct performance evaluations of progress
Reward performance: establish a system that recognizes and rewards results in achieving goals using: monetary rewards, non-monetary rewards, and punishment (when necessary)
How to define performance
Create Milestones for Key Steps
Assign Accountability for Goals and Milestones
How to measure performance
Create Measures of Performance vs. Goals
Conduct Performance Evaluation using Measures (NOT soft skills) (each individual and group)
Tangible or more judgemental
Characteristics of Effective Reward Systems
Promotes good strategy execution - make measures of good business performance and good strategy execution the dominating basis for designing incentives
Sets stretch performance goals that are difficult but achievable
Links the performance goals of each individual in an organizational unit to the unit's goals.
Rewards and recognizes superior performance in accomplishing the goals.
Rewards results, not efforts - Create a results-oriented work environment that focuses on what to achieve (results of work), not what to do (show up and stay late)
Good Reward Systems do the following:
Strengthens the resolve of employees to succeed
Focuses people's attention on accomplishing specific strategic objectives
Coordinates activities of people throughout the organization by aligning personal motives with organizational goals
Reduces the need for costly direct supervision and oversight
Amabile and Kramer - Inner Work Life
The Inner Work Life argues that engaged people are more:
Collegial (meaning that they contribute actively to team cohesiveness, even though doing so takes time and effort).
What is the inner work life?
Inputs - Workday Events
Dynamic interplay among:
Emotions - tied into cognition: specific reactions like elation, joy, anger to general feeling states
Perceptions - sense making of events, from immediate impressions to full theories of what is happening
Motivation - grasp of what needs to be done and drive to do it
Outputs (or outcomes) - Work Performance
An employee's "state of mind in, and behavior in relation to, the performance of their formal work role"
Disconnected from organizational priorities
Feel underutilized, skeptical, indulge in contagious negativity
Focus on complaints and the perceived failure of procedural justice in the organization
Have Lower productivity
Contribute limited to no discretionary effort
Have lower creativity
Why is Employee Engagement Important?
Engaged employees are not just committed, they are passionate and proud.
They have a line of sight on their own future and on their organization's mission and goals.
They are enthused, using their talents and discretionary effort to make a difference in their employer's quest for sustainable business success.
Employees are the front line and work closely with customers, and in most of their interactions managers cannot directly supervise them
Direct supervision is very expensive and at times ineffective so delegation and autonomy are important to firm level success
In most work environments employees managing many parts of the overall value creation or production (e.g. on the factory floor, and more generally as part of business processes like supply chain, analysis, IT, etc.) therefore it is crucial to engage them in the value creation process effectively.
Recommended Manager Actions with Employees:
Educate them on their role in engagement (disengagement and cynicism is toxic, dampens others' motivations)
Provide tools to help young millennials especially to clarify their personal definition of success and take more control of their engagement;
Redefine career success to include lateral moves, skill development, stretch assignments, special projects so can find satisfying opportunities with current employer
Provide development and growth opportunities