Chapter 1 INTRODUCTION TO MANAGEMENT Management and leadership are uses very interchangeably when referring to the operation of a business Leadership The ability to drive change and innovation through inspiration and motivation Set a direction for a firm Motivate and inspire people Align people to focus on the organizational goals and vision Management Generally defined as the act of working with and through a group of people to accomplish a desired goal or objective in an efficient and effective manner Focus of their efforts on planning and budgeting Organizing and staffing resources Controlling problem solving Bureaucratic Organization Structure A clear differentiation of task and responsibilities among individuals coordination through a strict hierarchy of authority and decision rights standardized procedures and the vertical separation of planning and execution that plans are made in the upper ranks of an organization and executed in the lower ranks Max Weber 1900s Scientific Management A focus on how jobs work and incentive schemes could be designed to improve productivity using industrial engineering methods Frederick Taylor 1910s Human Relations Movement 1930s The belief that organizations must be understood as systems of interdependent human beings who share a common interest in the survival and effective functioning of the firm Contingent view A view of the firm where effective organizational structure is based on fit or alignment between the organization and various aspects in its environment Business environment Combination of all contextual forces and elements in the external and internal environment of a firm 1 1 CHANGING PERCEPTIONS OF THE BUSINESS ENVIRONMENT Managerial View 1960s Key Focus Production Shareholder View 1960 80s Key Focus Financial Performance Stakeholder View 1990s Key Focus Serving multiple constituencies Contextual Intelligence The ability to understand the impact of environmental factors on a firm and the ability to understand how to influence those same factors Contingency Planning The systematic assessment of the external environment to prepare for a possible range of alternative futures for the organization Environmental Scanning A tool that managers use to scan the business horizon for key events and trends that will affect the business in the future Managerial View a business framework where the firm is seen as a mechanism for converting raw materials into products to sell to customers Scenario building Forecasting the likely result that might occur when several events and stakeholders are linked together Strategic Review Process The process by which senior leaders of a corporation meet with business unit managers to review progress toward specific goals Trend Analysis A tool where key variables are monitored and modeled to help predict a change that may occur in the environment SUMMARY 1 6A There are three important pillars of management strategic positioning organizational design and individual leadership Success in business requires the ability to devise and nurture a defensible strategic position The execution of this strategy in turn is dependent on a variety of organizational design decisions including the allocation of resources the structure of the organization and the incorporation of key performance metrics Ultimately strategy and organizational design are the result of individual leadership actions As such it is critically important to understand how leaders identify and develop relevant skills Success in the global business environment requires effective management and leadership Management is the act of working with and through others to accomplish a desired goal or objective and leadership is the ability to drive change and innovation through inspiration and motivation Management and leadership skills are complementary Effective leaders develop and deploy technical interpersonal and conceptual skills The relative importance of each of these skills is based on an individual s level in the firm At the entry level technical skills are vitally important These technical skills often open the door for new employees Interpersonal skills are also important for new employees as they join working teams but new employees must rely on their technical skills to demonstrate competence in the organization At the managerial level the technical skills are still important but are less relevant than interpersonal and cognitive skills The work of managers involves many aspects of team management which require strong interpersonal skills Managers also provide support for innovative efforts and engage in scenario planning both of which rely on conceptual abilities At the senior level in a firm leaders must focus on cognitive abilities to create the strategic positioning that will enable the firm to effectively compete in the marketplace They do not do so in a vacuum They must work with others and motivate the organization through effective communication which is a central element of strong interpersonal skills The view of effective management has evolved over the last 100 years from a focus on the bureaucratic organization structure to scientific management to human relations to alignment or contingency theories The contingent view of management states that there should be a fit or an alignment between an organization s structure the business environment and the leadership of the firm The business environment has grown more complex and the perspective on the purpose of business has changed in tandem BHP and Walmart illustrate some of the immense challenges that managers may face A manager can no longer evaluate his or her firm or its industry through a narrow managerial or shareholder viewpoint Rather the manager must consider the numerous stakeholders with which the firm interacts and how those stakeholders impact or are impacted by the actions of the firm In addition the manager must be aware of all of the different dimensions in the company s external and internal environments Mapping out all of these stakeholders and environments is the first step in the stakeholder approach Managers also use various stakeholder management processes such as strategic reviews environmental scanning and scenario planning to ensure that they are satisfying the important stakeholders of the firm These processes help managers prepare for uncertainty and risk