Cpter 1 Management 11th Edn by Stephenbins Mary Coulter PDF Qwerty80 22

PART ONE
DEFINING THE MANAGERS TERRAIN
CHA PT E R
Introduction to Management
and Organizations
In this chapter, well introduce you to who managers are and what
they do. One thing youll discover is that the work managers do
is vitally important to organizations. But youll also see that being
a managera good managerisnt easy. The best companies
and organizations are more flexible, more efficient, and more
adaptable. After reading and studying this chapter, you will achieve
the following learning outcomes.
The celebration in 1984 of the 450th anniversary of

explorer Jacques Cartiers arrival in Canada saw a small
troupe of street performers put together a circus.1 Who could
have imagined at the time that this ragtag bunch of FrenchCanadian hippies would become the Cirque du Soleil (circus of
the sun) that we know today? Thirty years later, Cirque du Soleils
big-budget, animal-free circuses are Canadas largest cultural
export, pulling in an estimated $1 billion a year in revenue. The
Learning Outcomes
Explain why managers are important

to an organization.
Tell who managers are and where

they work.
Describe the characteristics of an

organization.
Describe the factors that are

reshaping and redefining the
managers job.
Explain the value of studying

management.
dynamic between CEO Daniel Lamarre and company founder

Guy Lalibert is an interesting one as the pragmatic (Lamarre)
meets the creative (Lalibert). As Lamarre puts it, Im very lucky
because we are so complementary. What Guy likes to do, I dont
and what I like to do, he doesnt. Lalibert rather likes people
with stratospheric ambitions. At a time when most businesses
have reasonably modest expectations, Carmen Ruest, one of
the original Cirque pioneers and now the companys director of
creation, has been known to say, The word impossible does
not exist here.
Guy Lalibert created the ONE DROP Foundation in 2007
to fight global poverty by providing sustainable access to safe
water. The ideals of the foundation reflect the values that have
always been at the heart of Cirque du Soleil: the belief that life
gives back what you have given and even the smallest gesture
will make a difference. When Guy Lalibert became the first
Canadian private space explorer, he dedicated his mission to
raising awareness of water issues on Earth. As part of the first
Poetic Social Mission in space, Lalibert hosted Moving Stars
and Earth for Water from the International Space Station, a webcast concert featuring various artistic performances unfolding in
14 cities around the world.
NASA Images
Part 1 DEFINING THE MANAGERS TERRAIN
Think About It
What kinds of skills do managers need? Put yourself in Guy Laliberts shoes. What kinds of
leadership skills would you need to manage 4000 employees in 40 countries? Is managing in a
creative and artistic organization different from managing in any other organization? Do other
organizations share Laliberts belief that life gives back what you have given?
This text is about the important managerial work that managers do. The reality facing
todays managersand that might include you in the near futureis that the world is
changing. In workplaces of all typesoffices, retail stores, restaurants, factories, and the
likemanagers deal with changing expectations and new ways of managing employees
and organizing work.
In this chapter, we explain why managers are important to organizations, who managers are, where they work, and what managers do. Finally, we wrap up the chapter by
looking at the factors redefining the managers job and discussing why its important to
study management.
Who Are Managers and Why Are

They Important?
Explain why managers
are important to an
organization.
. . . A great boss can change your life, inspiring you to new heights both professionally
and personally, and energizing you and your team to together overcome new challenges
bigger than any one of you could tackle alone.2 If youve worked with a manager like this,
consider yourself lucky. Such a manager can make a job a lot more enjoyable and productive. However, even managers who dont live up to such lofty ideals and expectations are
important to organizations. Lets look at three reasons why.
The first reason managers are important is because organizations need their managerial skills and abilities more than ever in uncertain, complex, and chaotic times. As
organizations deal with todays challengesthe worldwide economic climate, changing
technology, ever-increasing globalization, and so forthmanagers play an important
role in identifying critical issues and crafting responses. For example, John Zapp, general
manager of several car dealerships in Oklahoma City, struggled to keep his businesses
afloat and profitable in the difficult economic environment, just as many other car dealers
did. However, after four decades in the car business, Zapp understands that hes the one
calling the shots and his call was to focus on selling more used cars. How? By keeping
inventory moving and by keeping his salespeople engaged through small cash payment
rewards for hitting sales goals. His skills and abilities as a manager have been crucial in
guiding his organization.
Secondly, managers do matter to organizations! How do we know that? The Gallup Organization, which has polled millions of employees and tens of thousands of
managers, has found that the single most important variable in employee productivity
and loyalty isnt pay or benefits or workplace environmentits the quality of the relationship between employees and their direct supervisors.3 In addition, a KPMG/Ipsos
Reid study of Canadian companies found that those that made the top 10 list for great
human resource practices also scored high on financial performance and investment
value. Six of the Most Respected Corporations for Human Resources Management
placed in the top 10 on both financial measures, and nine scored in the top 10 of at
least one of the financial measures.4 So, as you can see, managers can and do have an
impactpositive and negative. Finally, one more study of organizational performance
recently found that managerial ability was important in creating organizational value.5
Heres what we can conclude from such reports: Managers are importantand they
do matter!
Chapter 1 Introduction to Management and Organizations
Finally, Guy Lalibert is a good example of what todays successful managers are like
and the skills they must have to deal with the problems and challenges of managing
in the twenty-first century. These managers may not be who or what you might expect.
They range in age from under 18 to over 80. They run large corporations, as well as
entrepreneurial start-ups. They are found in government departments, hospitals, small
businesses, not-for-profit agencies, museums, schools, and even such nontraditional
organizations as political campaigns and consumer cooperativesin every country
on the globe.
Who Is a Manager?
It used to be fairly simple to define who managers were: They were the organizational
members who told others what to do and how to do it. It was easy to differentiate managers
from nonmanagerial employees. But it isnt quite so simple anymore. In many organizations, the changing nature of work has blurred the distinction between managers and
nonmanagerial employees. Many nonmanagerial jobs now include managerial activities.6 At General Cable Corporations facility in Moose Jaw, Saskatchewan, for example,
managerial responsibilities are shared by managers and team members. Most of the
employees are cross-trained and multiskilled. Within a single shift, an employee may
be a team leader, an equipment operator, a maintenance technician, a quality inspector,
and an improvement planner.7 Or consider an organization like Morning Star Company,
the worlds largest tomato processor, where no employees are called managersjust 400
full-time employees who do what needs to be done and who manage issues such as job
responsibilities, compensation decisions, and budget decisions.8 Sounds crazy, doesnt it?
But it worksfor this organization.
Today, how do we define who managers are? A manager is someone who works with
and through other people by coordinating their work activities in order to accomplish
organizational goals. A managers job is not about personal achievementits about helping others do their work and achieve. That may mean coordinating the work of a departmental group, or it might mean supervising a single person. It could involve coordinating
the work activities of a team composed of people from several different departments or
even people outside the organization, such as temporary employees or employees who
work for the organizations suppliers. Keep in mind, also, that managers may have other
work duties not related to coordinating and integrating the work of others. For example,
an insurance claims supervisor may process claims in addition to coordinating the work
activities of other claims clerks.
Types of Managers
Is there some way to classify managers in organizations? In traditionally structured organizations (often pictured as being shaped like a pyramid where the number of employees
is greater at the bottom than at the top), managers are often described as first-line, middle,
or top (see Exhibit 1-1). Identifying exactly who the managers are in these organizations
isnt difficult, although they may have a variety of titles. First-line managers are at the
lowest level of management and manage the work of nonmanagerial employees who
are directly or indirectly involved with the production or creation of the organizations
products. They are often called supervisors but may also be called shift managers, district
managers, department managers, office managers, or even foremen. Middle managers
include all levels of management between the first-line level and the top level of the organization. These managers manage the work of first-line managers and may have titles such
as regional manager, project leader, plant manager, or division manager. At or near the top
of the organization are the top managers who are responsible for making organizationwide decisions and establishing the plans and goals that affect the entire organization.
These individuals typically have titles such as executive vice-president, president, managing director, chief operating officer, chief executive officer, or chair of the board. In the
chapter-opening case, Guy Lalibert is the founder and driving creative force of Cirque du
datapoints9
28
percent of workers
surveyed said they could
do a better job than their boss.
76
percent of workers
surveyed said they
would not like to have their
managers job.
27
percent of adults
surveyed said working
part time in a management position is possible.
45
percent of workers
surveyed said their boss
had taken credit for their work.
34
percent of workers
surveyed said their boss
had thrown them under the bus
to save himself or herself.
27
percent of employees
surveyed said their horrible boss was a know-it-all.
25
surveyed said their horrible boss was a micromanager.
12
surveyed said their
employer genuinely listens to
and cares about its employees.
manager Someone who

coordinates and oversees the work
of other people so organizational
goals can be accomplished
first-line managers Managers at
the lowest level of the organization
who manage the work of
nonmanagerial employees who are
directly or indirectly involved with
the production or creation of the
organizations products.
middle managers Managers
between the first-line level and
the top level of the organization
who manage the work of first-line
managers.
top managers Managers
at or near the top level of the
organization who are responsible
for making organization-wide
decisions and establishing the
plans and goals that affect the
entire organization.
Exhibit 1-1
Managerial Levels
Top
Managers
Middle Managers
First-Line Managers
Nonmanagerial Employees
Soleil. He is involved in creating and implementing broad and comprehensive changes

that affect the entire organization.
Not all organizations get work done using this traditional pyramidal form, however.
Some organizations are more flexible and loosely structured with work being done by everchanging teams of employees who move from one project to another as work demands
arise. Although its not as easy to tell who the managers are in these organizations, we
do know that someone must fulfill that rolethat is, there must be someone who works
with and through other people by coordinating their work to accomplish organizational
goals. This holds true even if that someone changes as work tasks or projects change or
that someone doesnt necessarily have the title of manager.
What Is Management and What

Do Managers Do?
Tell who managers are
and where they work.
Managers plan, lead, organize, and control, and Daniel Lamarre, as chief executive officer
of Cirque du Soleil, certainly carries out all these tasks. He has to coordinate the work activities of
the entire company efficiently and effectively. But just as important to Lamarre is the creative side
of Cirquein fact, he sees his mission as finding work for artists. With operations in 40 countries,
it might be tempting for Lamarre to try to arrive at consensus on issues, but at Cirque it is all about
the power of the idea. Lamarre feels that the best ideas are lost if everyone has to compromise. So
although it can be uncomfortable for some, debating ideas has become embedded in the company
culture. That is what we do, says Lamarre, we are debating all of the time.10
Think About It
As a manager, Daniel Lamarre needs to plan, lead, organize, and control, and he needs to be
efficient and effective. How might Lamarre balance the needs of efficiency and effectiveness
with the creative and artistic mandate of his role as CEO of Cirque du Soleil? What skills are
needed for him to plan, lead, organize, and control effectively? What challenges does he face
performing these functions while running an international business?
Simply speaking, management is what managers do. But that simple statement does
not tell us much, does it? A more thorough explanation is that management is coordinating work activities with and through other people so that the activities are completed
efficiently and effectively. Management researchers have developed three specific categorization schemes to describe what managers do: functions, roles, and skills. In this section, we
consider the challenges of balancing efficiency and effectiveness, and then examine the
approaches that look at what managers do. In reviewing these categorizations, it might be
helpful to understand that management is something that is a learned talent, rather than
something that comes naturally. Many people do not know how to be a manager when
they first are appointed to that role.
management Coordinating
work activities with and through
other people so the activities
are completed efficiently and
effectively.
Efficiency and Effectiveness

Efficiency refers to getting the most output from the least amount of inputs, or as management expert Peter Drucker explained, doing things right.11 Because managers deal
with scarce inputsincluding resources such as people, money, and equipmentthey
are concerned with the efficient use of those resources by getting things done at the
least cost.
Its not enough just to be efficient, however. Management is also concerned with being
effective, completing activities so that organizational goals are achieved. Effectiveness is
often described as doing the right thingsthat is, those work activities that will help
the organization reach its goals. For instance, hospitals may try to be efficient by reducing
the number of days that patients stay in hospital. This may not be effective, however, if
patients get sick at home shortly after being released from hospital.
Whereas efficiency is concerned with the means of getting things done, effectiveness is
concerned with the ends, or attainment of organizational goals (see Exhibit 1-2). Management is concerned, then, not only with getting activities completed and meeting organizational goals (effectiveness) but also with doing so as efficiently as possible. In successful
organizations, high efficiency and high effectiveness typically go hand in hand. Poor
management is most often due to both inefficiency and ineffectiveness or to effectiveness
achieved despite inefficiency.
Management Functions
According to the functions approach, managers perform certain activities or duties as
they efficiently and effectively coordinate the work of others. What are these activities
or functions? In the early part of the twentieth century, a French industrialist named
Henri Fayol first proposed that all managers perform five functions: planning, organizing, commanding, coordinating, and controlling.12 Today, most management textbooks
Exhibit 1-2
Efficiency and Effectiveness in Management
Efficiency (Means)
Effectiveness (Ends)
Resource
Usage
Goal
Attainment
Low Waste
High Attainment
Management Strives for:

Low Resource Waste (high efficiency)
High Goal Attainment (high effectiveness)
Simulate on MyManagementLab
Improving a Business
efficiency Getting the most output

from the least amount of inputs;
referred to as doing things right.
effectiveness Completing
activities so that organizational
goals are achieved; referred to as
doing the right things.
Exhibit 1-3
Management Functions
Planning
Organizing
Leading
Controlling
Defining goals,
establishing
strategy, and
developing
subplans to
coordinate
activities
Determining
what needs
to be done,
how it will
be done, and
who is to do it
Directing and
motivating all
involved parties
and resolving
conflicts
Monitoring
activities
to ensure
that they are
accomplished
as planned
Lead to
management functions Planning,

organizing, leading, and controlling.
Achieving the
organizations
stated
purpose
(including this one) are organized around the management functions: planning, organizing, leading, and controlling (see Exhibit 1-3). But you do not have to be a manager
in order to have a need to plan, organize, lead, and control, so understanding these
processes is important for everyone. Lets briefly define what each of these functions
encompasses.
Planning
planning A management
function that involves defining
goals, establishing a strategy
for achieving those goals, and
developing plans to integrate and
coordinate activities.
If you have no particular destination in mind, then you can take any road. However, if
you have some place in particular you want to go, you have to plan the best way to get
there. Because organizations exist to achieve some particular purpose, someone must
clearly define that purpose and the means for its achievement. Managers performing the
planning function define goals, establish an overall strategy for achieving those goals,
and develop plans to integrate and coordinate activities. This can be done by the CEO and
senior management team for the overall organization. Middle-level managers often have a
planning role within their units. First-line managers have a more limited role in the planning process, but may need to use planning to adequately schedule work and employees.
Planning, by the way, is not just for managers. For instance, as a student, you need to plan
for exams and your financial needs.
Organizing
organizing A management
function that involves determining
what tasks are to be done, who
is to do them, how the tasks are
to be grouped, who reports to
whom, and where decisions are to
be made.
Managers are also responsible for arranging work to accomplish the organizations goals.
We call this function organizing. When managers organize, they determine what tasks
are to be done, who is to do them, how the tasks are to be grouped, who reports to whom
(that is, they define authority relationships), and where decisions are to be made. When
you work in a student group, you engage in some of these same organizing activities
deciding on a division of labour and what tasks will be carried out to get an assignment
completed.
Leading
leading A management
function that involves motivating
subordinates, directing the work
of individuals or teams, selecting
the most effective communication
channels, and resolving employee
behaviour issues.
Every organization includes people, and a managers job is to work with and through
people to accomplish organizational goals. This is the leading function. When managers
motivate subordinates, direct the work of individuals or teams, select the most effective
communication channel, or resolve employee behaviour issues, they are leading. Knowing
how to manage and lead effectively is an important, and sometimes difficult, skill as it
requires the ability to successfully communicate. Leading is not just for managers, however.
As a student, you might want to practise leadership skills when working in groups or club
activities. You might also want to evaluate whether you need to improve your leadership
skills in anticipation of the needs of future jobs.
Controlling
The final management function is controlling. After the goals are set (planning); the
plans formulated (planning); the structural arrangements determined (organizing); and
the people hired, trained, and motivated (leading); there has to be some evaluation of
whether things are going as planned (controlling). To ensure that work is going as it
should, managers must monitor and evaluate the performance of employees, technology,
and systems. Actual performance must be compared with the previously set goals. If performance of individuals or units does not match the goals set, its managements job to
get performance back on track. This process of monitoring, comparing, and correcting is
what we mean by the controlling function. Students, whether working in groups or alone,
also face the responsibility of controlling; that is, they make sure the goals and actions are
achieved and take corrective action when necessary.
Just how well does the functions approach describe what managers do? Do managers
always plan, organize, lead, and then control? In reality, what a manager does may not
always happen in this logical and sequential order. But that does not negate the importance of the basic functions that managers perform. Regardless of the order in which the
functions are performed, the fact is that managers do plan, organize, lead, and control as
they manage.
The continued popularity of the functions approach to describe what managers do is a
tribute to its clarity and simplicity. But some have argued that this approach isnt appropriate or relevant.13 So lets look at another perspective.
controlling A management
function that involves monitoring
actual performance, comparing
actual performance to a standard,
and taking corrective action when
necessary.
Management Roles
Henry Mintzberg, a prominent management researcher at McGill University in Montreal,
studied actual managers at work. He says that what managers do can best be described
by looking at the roles they play at work. His studies allowed him to conclude that
managers perform 10 different but highly interrelated management roles.14 The term
management roles refers to specific categories of managerial behaviour. (Think of the
different roles you play and the different behaviours you are expected to perform in these
roles as a student, a sibling, an employee, a volunteer, and so forth.) As shown in Exhibit 1-4,
Mintzbergs 10 management roles are grouped around interpersonal relationships, the
transfer of information, and decision making. Note that, since first proposed in 1973,
email and social media have enriched the way in which communication takes place.
The interpersonal roles involve working with people (subordinates and persons
outside the organization) or performing duties that are ceremonial and symbolic in
nature. The three interpersonal roles include being a figurehead, leader, and liaison. The
informational roles involve receiving, collecting, and disseminating information. The
three informational roles include monitor, disseminator, and spokesperson. Finally,
the decisional roles involve making significant choices that affect the organization. The
four decisional roles include entrepreneur, disturbance handler, resource allocator, and
negotiator.
A number of follow-up studies have tested the validity of Mintzbergs role categories
among different types of organizations and at different levels within given organizations.15 The evidence generally supports the idea that managersregardless of the type of
organization or level in the organizationperform similar roles. However, the emphasis
that managers give to the various roles seems to change with their organizational level.16
Specifically, the roles of disseminator, figurehead, negotiator, liaison, and spokesperson
are more important at the higher levels of the organization, while the leader role (as Mintzberg defined it) is more important for lower-level managers than it is for either middle- or
top-level managers.
Functions vs. Roles

So which approach to describing what managers do is betterfunctions or roles? Each has
merit. However, the functions approach still represents the most useful way of conceptualizing the managers job. The classical functions provide clear and discrete methods of
management roles Specific

categories of managerial behaviour.
interpersonal roles Management

roles that involve working with
people or performing duties that
are ceremonial and symbolic in
nature.
informational roles Management
roles that involve receiving,
collecting, and disseminating
information.
decisional roles Management
roles that involve making
significant choices that affect the
organization.
Exhibit 1-4
Mintzbergs Management Roles
Interpersonal Roles
Figurehead
Leader
Liaison
Informational Roles
Monitor
Disseminator
Spokesperson
Decisional Roles
Entrepreneur
Disturbance handler
Resource allocator
Negotiator
classifying the thousands of activities that managers carry out and the techniques they use
in terms of the functions they perform for the achievement of goals.17 Many of Mintzbergs roles align well with one or more of the functions. For instance, resource allocation
is part of planning, as is the entrepreneurial role, and all three of the interpersonal roles
are part of the leading function. Although most of the other roles fit into one or more of
the four functions, not all of them do. The difference can be explained by the fact that all
managers do some work that isnt purely managerial.18
Management Skills
technical skills Knowledge of

and expertise in a specialized field.
Dell Inc. is one company that understands the importance of management skills.19 It
started an intensive five-day offsite skills-training program for first-line managers augmented by online tools from Harvard as well as in-house tools such as MentorConnect,
as a way to improve its operations. One of Dells directors of learning and development
thought this was the best way to develop leaders who can build that strong relationship
with their front-line employees. What did the supervisors learn from the skills training?
Some things they mentioned were how to communicate more effectively and how to
refrain from jumping to conclusions when discussing a problem with a worker.
Managers need certain skills to perform the duties and activities associated with
being a manager. What types of skills does a manager need? Research by Robert L. Katz
found that managers needed three essential skills: technical skills, human skills, and
conceptual skills.20
Technical skills include knowledge of and expertise in a certain specialized field, such
as engineering, computers, accounting, or manufacturing. These skills are more important
Exhibit 1-5
Skills Needed at Different Management Levels
Top
Managers
Conceptual
Skills
Middle
Managers
Human
Skills
Technical
Skills
Lower-Level
Managers
Importance
at lower levels of management since these managers are dealing directly with employees
doing the organizations work.
Human skills involve the ability to work well with other people, both individually and
in a group. Because managers deal directly with people, this skill is crucial for managers
at all levels! Managers with good human skills are able to get the best out of their people.
They know how to communicate, motivate, lead, and inspire enthusiasm and trust. These
skills are equally important at all levels of management. Management professor Jin Nam
Choi, of McGill University, reports that research shows that 40 percent of managers either
leave or stop performing within 18 months of starting at an organization because they
have failed to develop relationships with bosses, colleagues or subordinates.21 Chois
comment underscores the importance of developing human skills.
Finally, conceptual skills involve the mental ability to analyze and generate ideas
about abstract and complex situations. These skills help managers see the organization
as a whole, understand the relationships among various subunits, and visualize how the
organization fits into its broader environment. These skills are most important at the top
management levels.
Exhibit 1-5 shows the relationship of the three skills to each level of management.
Note that the three skills are important to more than one function. Additionally, in very
flat organizations with little hierarchy, human, technical, and conceptual skills would be
needed throughout the organization.
As you study the management functions in more depth, the skills exercises found at the
end of most chapters will give you the opportunity to practise some of the key skills that
are part of doing what a manager does. We feel that understanding and developing management skills is so important that weve included a skills feature in MyManagementLab.
There, youll find material on skill building as well as several interactive skills exercises. As
you study the four management functions throughout the rest of the book, youll be able
to practise some key management skills. Although a simple skill-building exercise wont
make you an instant expert, it can provide an introductory understanding of some of the
skills youll need to master in order to be an effective manager.
human skills The ability to work

well with other people, both
individually and in a group.
conceptual skills The mental

ability to analyze and generate
ideas about abstract and complex
situations.
What Is an Organization?
Cirque du Soleil has grown from 73 employees in 1984 to more than 5000 employees
worldwide with almost 2000 working at the international headquarters in Montreal. Today there are
more than 1000 different occupations at Cirque du Soleil! In the process of expanding the reach of
the company internationally, Cirque has dealt with many different kinds of organizations including
government, quasi-government, large corporations, and independent contractors. Cirque has also
established a number of charitable initiatives that required the formation of independent foundations
as well as soliciting support from other foundations.
Describe the
characteristics of an
organization.
10
Think About It
Guy Lalibert started as a street performer and over time transitioned to a large international
creative force. What was the purpose of the original organization? Has this purpose changed
over time? What additional kinds of organizations did Cirque employ to achieve its mission?
What is Management
organization A deliberate
arrangement of people who act
together to accomplish some
specific purpose.
Managers work in organizations. But what is an organization? An organization is a

deliberate arrangement of people who act together to accomplish some specific purpose.
Your college or university is an organization; so are fraternities and sororities, government
departments, churches, Amazon.ca, your neighbourhood video store, the United Way, the
Toronto Raptors basketball team, your local co-op, and Canadian Tire. These are all organizations because they have three common characteristics, as shown in Exhibit 1-6:
1. Distinct purpose. This purpose is typically expressed in terms of a goal or a set of goals
that the organization hopes to accomplish.
2. Composed of people. One person working alone is not an organization, and it takes
people to perform the work that is necessary for the organization to achieve its goals.
3. Deliberate structure. Whether that structure is open and flexible or traditional and
clearly defined, the structure defines members work relationships.
In summary, the term organization refers to an entity that has a distinct purpose, includes
people or members, and has some type of deliberate structure.
Although these three characteristics are important to our definition of what an organization is, the concept of an organization is changing. Its no longer appropriate to assume
that all organizations are going to be structured like Air Canada, Suncor Energy, or General
Motors, with clearly identifiable divisions, departments, and work units. Just how is the
concept of an organization changing? Exhibit 1-7 lists some differences between traditional
organizations and new organizations. As these lists show, todays organizations are becoming more open, flexible, and responsive to changes.22
Why are organizations changing? Because the world around them has changed and
continues to change. Societal, economic, political, global, and technological changes have
created an environment in which successful organizations (those that consistently attain
their goals) must embrace new ways of getting work done. As we stated earlier, even though
the concept of organizations may be changing, managers and management continue to be
important to organizations.
Exhibit 1-6
Characteristics of Organizations
Distinct
Purpose
Deliberate
Structure
People
11
Exhibit 1-7
The Changing Organization
Traditional Organization
New Organization
Stable
Dynamic
Inflexible
Flexible
Job-focused
Skills-focused
Work is defined by job positions
Work is defined in terms of tasks to be done
Individual-oriented
Team-oriented
Permanent jobs
Temporary jobs
Command-oriented
Involvement-oriented
Managers always make decisions
Employees participate in decision making
Rule-oriented
Customer-oriented
Relatively homogeneous workforce
Diverse workforce
Workdays defined as 9 to 5
Workdays have no time boundaries
Hierarchical relationships
Lateral and networked relationships
Work at organizational facility during specific hours
Work anywhere, anytime
The Size of Organizations

Managers dont just manage in large organizations, which represent only about 2 percent of
organizations in Canada. Small businesses (those that employ fewer than 100 individuals)
represent 98 percent of all Canadian companies. These businesses employ almost half
of all Canadian workers. Small businesses also contribute significantly to the economy.
Businesses employing 50 or fewer individuals generated about 29 percent of total GDP
in 2008.23 Organizations of every size need managers. Moreover, in 2010, about 16 percent of the labour force was self-employed, meaning that these people were managing
themselves.24
Managers are also not confined to manufacturing work, as only 12 percent of Canadians work in manufacturing organizations. Twenty-one percent work in public sector jobs
(those in the local, provincial, or federal government), while most Canadians (around 78
percent) work in the service sector of the economy.25 The government is a large employer
in Canada. For instance, Public Service Canada employs 263 000 while Canada Post, a
Crown corporation employs 68 000. 26
The Types of Organizations

Managers work in a variety of situations, and thus the people to whom they are held
accountable vary considerably. Large organizations in the private sector are often
publicly held, which means that their shares are available on the stock exchange for
public trading. Managers of these companies report to a board of directors that is
responsible to shareholders (also known as stockholders). There are also numerous
privately held organizations (whose shares are not available on the stock market),
both large and small. Privately held organizations can be individually owned, family
owned, or owned by some other group of individuals. A number of managers work in the
not-for-profit sector (or nonprofit sector), where the emphasis is on providing charity
or services rather than on making a profit. Examples of such organizations include the
SPCA (Society for the Prevention of Cruelty to Animals), the Royal Ontario Museum,
and Vancouvers Bard on the Beach Festival. Other organizational forms such as NGOs
(nongovernmental organizations), partnerships, and cooperatives also require managers.
private sector The part of the

economy run by organizations that
are free from direct government
control; organizations in this sector
operate to make a profit.
publicly held organization A
company whose shares are
available on the stock exchange for
public trading.
privately held organization A
company whose shares are not
available on the stock exchange
but are privately held.
not-for-profit sector The part of
the economy run by organizations
that operate for purposes other
than making a profit (that is,
providing charity or services).
NGO An organization that is
independent from government
control and whose primary focus
is on humanitarian, development,
and environmental sustainability
activities.
12
public sector The part of the

economy that is controlled by
government.
civil servant A person who works
in a local, provincial, or federal
government department.
Crown corporation A
commercial company owned by
the government but independently
managed.
Many managers work in the public sector as civil servants for the provincial, federal,
and local governments. The challenges of managing within government departments can
be quite different from the challenges of managing in publicly held organizations. Critics
argue that it is less demanding to work for governments because there are few measurable
performance objectives, allowing employees to feel less accountable for their actions.
Some managers and employees work for Crown corporations such as Canada Post, the
CBC, and the Business Development Bank of Canada. Crown corporations are structured
like private sector corporations and have boards of directors, CEOs, and so on, but are
owned by governments rather than shareholders. Employees in Crown corporations are
not civil servants, and managers in Crown corporations are more independent than the
senior bureaucrats who manage government departments.
Many of Canadas larger organizations are actually subsidiaries of American parent organizations (for example, Sears, Safeway, General Motors, and Ford Motor Company). These
managers often report to American top managers and are not always free to set their own
goals and targets. Conflicts can arise between how Canadian managers and the American
managers to whom they report think things should be done.
How Is the Managers Job Changing?

Describe the factors
that are reshaping and
redefining the managers
job.
As CEO of Cirque du Soleil, Daniel Lamarre manages 4000 employees in 40 countries

and also must manage his relationship with company founder Guy Lalibert, who is quite the
character. The reality is that Guy understands business and he understands that that is what he
wants to do in life. . . . The first thing that you have to do when you work with someone like that,
you have to like and love artists because Guy is an artist. If you are not able to work with an artist,
you are in the wrong place.27
Think About It
Managing is far more complicated today than it ever was. Daniel Lamarre, like many managers,
must deal with multicultural challenges, technological challenges, and the demand for more
accountability from customers and clients. In the fall of 2008, Cirque and organizations around
the world also had to deal with the global economic crisis. But unlike many other businesses,
Cirque expected to maintain its profitability. How might managers in other organizations mimic
the success of Cirque du Soleil in facing these challenges and create an adaptive organization
that can react to the unexpected?
Managers have always had to deal with changes taking place inside and outside their
organizations. In todays world, where managers everywhere are dealing with corporate
ethics scandals, demands to be more socially responsible, challenges of managing a diverse
workforce, and globalization, change is constant. We briefly describe these challenges
below, and then throughout this textbook we discuss their impact on the way managers
plan, organize, lead, and control.
Importance of Customers to the Managers Job

John Chambers, CEO of Cisco Systems, likes to listen to voice mails forwarded to him from
dissatisfied customers. He says, E-mail would be more efficient, but I want to hear the
emotion, I want to hear the frustration, I want to hear the callers level of comfort with the
strategy were employing. I cant get that through e-mail.28 This manager understands the
importance of customers. You need customers. Without them, most organizations would
cease to exist. Yet, focusing on the customer has long been thought to be the responsibility
of marketing types. Let the marketers worry about the customers is how many managers
felt. Were discovering, however, that employee attitudes and behaviours play a big role in
customer satisfaction. For instance, passengers of Qantas Airways were asked to rate their
13
essential needs in air travel. Almost every factor listed was one directly influenced by the
actions of company employeesfrom prompt baggage delivery, to courteous and efficient
cabin crews, to assistance with connections, to quick and friendly check-ins.29
Today, the majority of employees in developed countries work in service jobs. For
instance, almost 72 percent of the Canadian labour force is employed in service industries,
in the USA 77%, in Australia, 70 percent, and in the United Kingdom, Germany, and Japan,
the percentages are 78, 74, and 75, respectively. Even in developing countries like India,
Russia, and China, we find 56 percent, 59 percent, and 43 percent of the labour force
employed in service jobs.30 Examples of service jobs include technical support representatives, food servers or fast-food counter workers, sales clerks, teachers, nurses, computer
repair technicians, front desk clerks, consultants, purchasing agents, credit representatives,
financial planners, and bank tellers. The odds are pretty good that when you graduate, youll
go to work for a company thats in a service industry, not in manufacturing or agriculture.
Managers are recognizing that delivering consistent, high-quality customer service is
essential for survival and success in todays competitive environment and that employees
are an important part of that equation.31 The implication is clearmanagers must create
a customer-responsive organization where employees are friendly and courteous, accessible, knowledgeable, prompt in responding to customer needs and willing to do whats
necessary to please the customer.32 Well look at customer service management in several
chapters. Before we leave this topic, though, we want to share one more story that illustrates why its important for todays managers (all managers, not just those in marketing)
to understand what it takes to serve customers. During a broadcasted Stanley Cup playoff
game, Comcast subscribers suddenly found themselves staring at a blank screen. Many of
those customers got on Twitter to find out why. And it was there, not on a phone system,
that they discovered a lightning strike in Atlanta had caused the power outage and that
transmission would be restored as quickly as possible. Managers at Comcast understood
how to exploit popular communications technology, and the companys smart use of
Twitter underscores what is becoming a staple in modern-day customer service . . . beefing
up communications with customers through social-media tools.33
Importance of Social Media to the Managers Job

You probably cant imagine a time when employees did their work without e-mail or
internet access. Yet, 15 years ago, as these communication tools were becoming more
common in workplaces, managers struggled with the challenges of providing guidelines
for using the internet and e-mail in their organizations. Today, the new frontier is social
media, forms of electronic communication through which users create online communities to share ideas, information, personal messages, and other content. More than a
billion people use social platforms such as Facebook, Twitter, YouTube, LinkedIn, and
others.34 Employees dont just use these on their personal time, but also for work purposes. Thats why managers need to understand and manage the power and peril of social
media. For instance, at grocery chain SuperValu, managers realized that keeping
135 000 plus employees connected and engaged was imperative to continued success.35
They decided to adopt an internal social media tool to foster cooperation and collaboration among its 10 distinct store brands operating in 44 states. And theyre not alone.
More and more businesses are turning to social media not just as a way to connect with
customers but also as a way to manage their human resources and tap into their innovation
and talent. Thats the potential power of social media. But the potential peril is in how
its used. When the social media platform becomes a way for boastful employees to brag
about their accomplishments, for managers to publish one-way messages to employees,
or for employees to argue or gripe about something or someone they dont like at work,
then its lost its usefulness. To avoid this, managers need to remember that social media is
a tool that needs to be managed to be beneficial. At SuperValu, about 9000 store managers
and assistant managers use the social media system. Although sources say its too early to
draw any conclusions, it appears that managers who actively make use of the system are
having better store sales revenues than those who dont. In the remainder of the book,
social media Forms of electronic

communication through which
users create online communities to
share ideas, information, personal
messages, and other content.
14
This young woman in Switzerland

competing in a worldwide paper
airplane event created by Red Bull
Media House illustrates the importance of innovation for Red Bull,
the Austrian-based energy-drink
firm. Rather than just sponsoring an event or developing an ad
campaign to promote its brand,
Red Bull launched its own global
media company that produces,
publishes, and distributes print,
multimedia, and audiovisual material in the fields of sports, culture,
and entertainment. The innovative marketing approach with
its core message of Gives You
Wings has created a strong bond
between Red Bull and its young
target audience and has helped
the company capture close to half
of the energy-drink market.
Maurin Bisig/ZUMA Press/Newscom
well look at how social media is impacting how managers manage, especially in the areas
of human resource management, communication, teams, and strategy.
Importance of Innovation to the Managers Job

Nothing is more risky than not innovating.36 Innovation means doing things differently,
exploring new territory, and taking risks. And innovation isnt just for high-tech or other
technologically sophisticated organizations. Innovative efforts can be found in all types
of organizations. For instance, the manager of the Best Buy store in Manchester, Connecticut, clearly understood the importance of getting employees to be innovative, a task
made particularly challenging because the average Best Buy store is often staffed by young
adults in their first or second jobs. The complexity of the products demands a high level
of training, but the many distractions that tempt college-aged employees keep the turnover
potential high. However, the store manager tackled the problem by getting employees to
suggest new ideas. One ideaa team close, in which employees scheduled to work at the
stores closing time, closed the store together and walked out together as a teamhas had a
remarkable impact on employee attitudes and commitment.37 As youll see throughout the
book, innovation is critical throughout all levels and parts of an organization. For example,
the top manager of Indias Tata Group, chairman Ratan Tata, told his employees during the
global economic downturn to Cut costs. Think out of the box. Even if the world around
you is collapsing, be bold, be daring, think big.38 And his employees obviously got the
message. The companys $2000 minicar, the Nano, was the talk of the global automotive
industry. As these stories illustrate, innovation is critical. Its so critical to todays organizations and managers that we also address this topic in several later chapters.
Importance of Adaptability to the Managers Job

Earlier in the chapter, we distinguished between effectiveness and efficiency, but there is
another point of view worthy of discussion. As early as 1972 it was suggested that the best
companies in any field outshine their competitors in three areas: They are more flexible,
more efficient, and more adaptable (see Exhibit 1-8).39 Being flexible means reacting to
events, while being adaptable means being proactive. An adaptable organization creates a
set of skills, processes, and a culture that enable it to continuously look for new problems
and offer solutions before the clients even realize they have a need.40
Importance of Sustainability to the Managers Job

Its the worlds largest retailer with nearly $447 billion in annual sales, 2.2 million
employees, and 8,00 stores. Yes, were talking about Walmart. And Walmart is probably
the last company that youd think about in a section describing sustainability. However,
15
Exhibit 1-8
Characteristics of Effective Organizations
Flexibility
Efficiency
Reactive
Flexibility = Organizing to
cope with the unexpected
Routine
Adaptability
Efficiency = Organizing for

the expected
Proactive
Adaptability = Organizing to
anticipate new problems,
trends, and opportunities
Source: Basadur Applied Creativity, Presentation March 18 and 19, 2010, Halifax, Nova Scotia.
Walmart announced at the beginning of this decade that it would cut some 20 million
metric tons of greenhouse gas emissions from its supply chain by the end of 2015the
equivalent of removing more than 3.8 million cars from the road for a year.41 Walmart
achieved this goal in 2011 and, among other things, have moved 21 percent of their energy
consumption to renewables, have improved fleet energy by 80 percent, and now reuses or
recycles more than 80 percent of the waste produced in its domestic stores and in other
U.S. operations.42 This corporate action affirms that sustainability and green management
have become mainstream issues for managers.
Whats emerging in the twenty-first century is the concept of managing in a sustainable way, which has had the effect of widening corporate responsibility not only to managing in an efficient and effective way, but also to responding strategically to a wide range
of environmental and societal challenges.43 Although sustainability means different
things to different people, in essence, according to the World Business Council for Sustainable Development (2005), it is concerned with meeting the needs of people today
without compromising the ability of future generations to meet their own needs. From
a business perspective, sustainability has been defined as a companys ability to achieve
its business goals and increase long-term shareholder value by integrating economic,
environmental, and social opportunities into its business strategies.44 Sustainability
issues are now moving up the agenda of business leaders and the boards of thousands
of companies. Like the managers at Walmart are discovering, running an organization
in a more sustainable way will mean that managers have to make informed business
decisions based on thorough communication with various stakeholders; understanding
their requirements; and starting to factor economic, environmental, and social aspects
into how they pursue their business goals. Well examine managing for sustainability
and its importance to planning, organizing, leading, and controlling in other places
throughout the book.
sustainability A companys ability

to achieve its business goals and
increase long-term shareholder
value by integrating economic,
environmental, and social
opportunities into its business
strategies.
Why Study Management?

You may be wondering why you need to study management. If you are an accounting
major, marketing major, or any major other than management, you may not understand
how studying management is going to help you in your career. We can explain the value of
studying management by looking at the universality of management, the reality of work,
and how management applies to anyone wanting to be self-employed.
Explain the value of

studying management.
16
Exhibit 1-9
Universal Need for Management
All Sizes of Organizations

Small
All Organizational Areas

ManufacturingMarketing
Human ResourcesAccounting
Information Systemsetc.
Large
All Types of Organizations
Management
Is Needed
in . . .
Profit
Not for Profit
All Organizational Levels

Bottom
Top
The Universality of Management
universality of management The

reality that management is
needed in all types and sizes of
organizations, at all organizational
levels, in all organizational work
areas, and in organizations in all
countries around the globe.
Just how universal is the need for management in organizations? We can say with absolute certainty that management is needed in all types and sizes of organizations, at all
organizational levels, in all organizational work areas, and in all organizations, no matter
what countries they are located in. This is known as the universality of management
(see Exhibit 1-9). Managers in all these settings will plan, organize, lead, and control.
However, this is not to say that management is done the same way in all settings. The differences in what a supervisor in a software applications testing facility at Microsoft does
compared with what the CEO of Microsoft does are a matter of degree and emphasis, not
of function. Because both are managers, both will plan, organize, lead, and control, but
how they do so will differ.
Since management is universally needed in all organizations, we have a vested interest in improving the way organizations are managed. Why? We interact with organizations every single day of our lives. Are you irritated when none of the salespeople in a
department store seems interested in helping you? Do you get annoyed when you call a
technical help desk because your software application is no longer working, go through
seven voice menus, and then get put on hold for 15 minutes? These are all examples
of problems created by poor management. Organizations that are well managedand
we share many examples of these throughout the textdevelop a loyal customer base,
grow, and prosper. Those that are poorly managed find themselves with a declining
customer base and reduced revenues. By studying management, you will be able to
recognize poor management and work to get it corrected. In addition, you will be able
to recognize good management and encourage it, whether its in an organization with
which you are simply interacting or whether its in an organization in which you are
employed.
The Reality of Work

Another reason for studying management is the reality that most of you, once you graduate
and begin your career, will either manage or be managed. For those who plan on management careers, an understanding of the management process forms the foundation upon
which to build your management skills. For those of you who dont see yourselves in
management positions, you are still likely to have to work with managers. Also, assuming
that you will have to work for a living and recognizing that you are very likely to work in
an organization, you will probably have some managerial responsibilities even if you are
not managers. Our experience tells us that you can gain a great deal of insight into the
way your manager behaves and the internal workings of organizations by studying management. Our point is that you dont have to aspire to be a manager to gain something
valuable from a course in management.
Self-Employment
You may decide that you want to run your own business rather than work for someone
else. This will require that you manage yourself, and may involve managing other people
as well. Thus, an understanding of management is equally important whether you are a
manager in someone elses business or running your own business.
CHAPTER 1
SUMMARY AND IMPLICATIONS

1. Explain why managers are important to an organization. Managers are important to organizations for three reasons. First, organizations need their managerial skills and
abilities in uncertain, complex, and chaotic times. Second, managers are critical to getting
things done in organizations. Finally, managers contribute to employee productivity and
loyalty; the way employees are managed can affect the organizations financial performance; and managerial ability has been shown to be important in creating organizational
value. Management is not about personal achievementits about helping others to achieve
for the benefit of the organization as a whole.
We saw that Guy Lalibert is both a visionary who guides the company and,
together with Daniel Lamarre, a cheerleader who helps everyone in the organization do
a better job.
2. Tell who managers are and where they work. Managers coordinate and oversee
the work of other people so that organizational goals can be accomplished. Nonmanagerial employees work directly on a job or task and have no one reporting to them. In
traditionally structured organizations, managers can be first-line, middle, or top. In other
more loosely configured organizations, the managers may not be as readily identifiable,
although someone must fulfill that role.
Management is coordinating work activities so that they are done efficiently and
effectively. Efficiency means doing things right and getting things done at the least cost.
17
18
Effectiveness means doing the right things and refers to completing activities that will
help achieve the organizations goals. To do their jobs, managers plan, organize, lead, and
control. This means they set goals and plan how to achieve those goals; they figure out
what tasks need to be done, and who should do them; they motivate individuals to achieve
goals, and communicate effectively with others; and they put accountability measures into
place to make sure that goals are achieved efficiently and effectively.
Mintzbergs managerial roles include interpersonal, which involve people and other
ceremonial/symbolic duties (figurehead, leader, and liaison); informational, which
involve collecting, receiving, and disseminating information (monitor, disseminator,
and spokesperson); and decisional, which involve making choices (entrepreneur, disturbance handler, resource allocator, and negotiator). Mintzbergs newest description
proposes that managing is about influencing action by managing actions directly, by
managing people who take action, and by managing information that impels people
to take action. Katzs managerial skills include technical (job-specific knowledge and
techniques), human (ability to work well with people), and conceptual (ability to
think and express ideas). Technical skills are most important for lower-level managers
while conceptual skills are most important for top managers. Human skills are equally
important for all managers.
In Daniel Lamarres role as CEO of Cirque du Soleil, he manages the relationship
with founder Guy Lalibert and, with managers in the rest of Cirque du Soleil, and sets
the goals for the overall organization.
3. Describe the characteristics of an organization. Managers work in an organization, which is a deliberate arrangement of people to accomplish some specific purpose.
Organizations have three characteristics: a distinctive purpose, composed of people, and
a deliberate structure. Many of todays organizations are structured to be more open,
flexible, and responsive to changes. Managers work in a variety of organizations, both
large and small, in a variety of industries including manufacturing and the service sector.
The organizations they work for can be publicly held, privately held, public sector, or
not-for-profit.
As Cirque du Soleil has grown since its founding in 1984, the purpose of the
organization has changed and the forms of organization employed to achieve this purpose
have grown in number.
4. Describe the factors that are reshaping and redefining the managers
job. The changes impacting managers jobs include global economic and political
uncertainties, changing workplaces, ethical issues, security threats, and changing technology. Managers must be concerned with customer service because employee attitudes and
behaviours play a big role in customer satisfaction. Managers must be concerned with
social media because these forms of communication are becoming important and valuable tools in managing. Managers must also be concerned with innovation because it is
important for organizations to be competitive. And finally, managers must be concerned
with sustainability as business goals are developed.
With the establishment of the ONE DROP Foundation, Guy Lalibert, like many
others, expanded his sense of responsibility beyond the company and its employees to
the global community. The foundation works to fight poverty around the world by providing
sustainable access to safe water.
5. Explain the value of studying management. There are many reasons students
end up in management courses. Some of you are already managers, and are hoping to
learn more about the subject. Some of you hope to be managers someday. And some of
you might not have ever thought about being managers. Career aspirations are only one
reason to study management, however. Any organization you encounter will have managers, and it is often useful to understand their responsibilities, challenges, and experience.
Understanding management also helps us improve organizations.
When Guy Lalibert launched Cirque du Soleil, management style could be best
described as management by clowning around but this swiftly changed as the company
grew. Management and the principles discussed in this chapter provided the underpinnings
that allowed Cirque du Soleil to thrive and grow, illustrating that management principles
can be applied successfully in diverse settings.
MyManagementLab
Study, practise, and explore real management situations with these helpful resources:
Interactive Lesson Presentations: Work through interactive presentations and
assessments to test your knowledge of management concepts.
I
PIA (Personal Inventory Assessments): Enhance your ability to connect P
with key concepts through these engaging, self-reflection assessments.
Study Plan: Check your understanding of chapter concepts with self-study quizzes.
Simulations: Practise decision-making in simulated management environments.
PERSONAL
INVENTORY
ASSESSMENT
R E VIEW A ND DIS CU SSI ON QUE STI ONS

1. How do managers differ from nonmanagerial employees?
Is your course instructor a manager? Discuss in terms of
managerial functions, managerial roles, and skills.
2. In todays economic environment, which is more important to organizationsefficiency, effectiveness, or adaptability? Explain your choice.
3. What are the four functions of management? Briefly
describe each of them.
4. What are the three categories of management roles proposed by Mintzberg? Provide an example of each.
5. The managers most basic responsibility is to

focus people toward performance of work activities
to achieve desired outcomes. What is your interpretation of this statement? Do you agree with it? Why or
why not?
6. What is an organization? Why are managers important
to an organizations success?
7. Why is an understanding of management important
even if you dont plan to be a manager?
8. How could an organization build an adaptive culture?
ET HICS D ILEMMA
Moving to a management position isnt easy and organizations often provide little help in making the transition. Would
it surprise you to learn that 26 percent of new managers feel
they are unprepared to transition into management roles,
58 percent of new managers dont receive any training to
help them make the transition, and 50 percent of first-time
managers fail in that transition?45
Does an organization have an ethical responsibility

to assist its new managers in their new positions? Why
or why not? What could organizations do to make this
transition easier? Suppose you were a new manager; what
support would you expect from your organization? From
your manager?
19
20
SK I LLS EX ER CIS E
MentoringAbout the Skill

A mentor is someone in the organization, usually older, more
experienced, and in a higher-level position, who sponsors
or supports another employee (a protg) who is in a lowerlevel position in the organization. A mentor can teach, guide,
and encourage. Some organizations have formal mentoring
programs, but even if your organization does not, mentoring
should be an important skill for you to develop.
Steps in Developing the Skill

You can be more effective at mentoring if you use the following six suggestions as you mentor another person:46
1. Communicate honestly and openly with your
protg. If your protg is going to learn from you and
benefit from your experience and knowledge, you are
going to have to be open and honest as you talk about
what you have done. Bring up the failures as well as
the successes. Remember that mentoring is a learning
process, and in order for learning to take place you are
going to have to be open and honest in telling it like
it is.
2. Encourage honest and open communication from
your protg. You need to know as the mentor what
your protg hopes to gain from this relationship. You
should encourage the protg to ask for information
and be specific about what he or she wants to gain.
3. Treat the relationship with the protg as a learning
opportunity. Dont pretend to have all the answers and
all the knowledge, but do share what you have learned
through your experiences. In your conversations and
interactions with your protg, you may be able to learn
as much from that person as he or she does from you. So
be open to listening to what your protg is saying.
4. Take the time to get to know your protg. As a
mentor, you should be willing to take the time to get to
know your protg and his or her interests. If you are not
willing to spend that extra time, you should probably not
embark on a mentoring relationship.
you never have contact with your protg. It just means

that the relationship becomes one of equals, not one of
teacher and student.
Practising the Skill

Read the following scenario. Write some notes about how
you would handle the situation described. Be sure to refer
to the six suggestions for mentoring.
Scenario
Lora Slovinsky has worked for your department in a software
design firm longer than any other of your employees. You
value her skills and commitment, and you frequently ask for
her judgment on difficult issues. Very often, her ideas have
been better than yours and you have let her know through
both praise and pay increases how much you appreciate
her contributions. Recently, though, you have begun to
question Loras judgment. The fundamental problem is in
the distinct difference in the ways you both approach your
work. Your strengths lie in getting things done on time and
under budget.
Although Lora is aware of these constraints, her creativity and perfectionism sometimes make her prolong projects, continually looking for the best approaches. On her
most recent assignment, Lora seemed more intent than ever
on doing things her way. Despite what you felt were clear
guidelines, she was two weeks late in meeting an important
customer deadline. While her product quality was high, as
always, the software design was far more elaborate than what
was needed at this stage of development. Looking over her
work in your office, you feel more than a little frustrated and
certain that you need to address matters with Lora. What
will you say?
Reinforcing the Skill

The following activities will help you practise and reinforce
the skills associated with mentoring:
5. Remind your protg that there is no substitute for

effective work performance. In any job, effective work
performance is absolutely essential for success. It does
not matter how much information you provide as a mentor if the protg is not willing to strive for effective work
performance.
1. If there are individuals on your campus who act as mentors

(or advisers) to first-time students, make an appointment to
talk to one of these mentors. They may be upper-division
students, professors, or staff employees. Ask them about
their roles as mentors and the skills they think it takes to be
an effective mentor. How do the skills they mention relate
to the behaviours described here?
6. Know when its time to let go. Successful mentors know

when its time to let the protg begin standing on his or
her own. If the mentoring relationship has been effective,
the protg will be comfortable and confident in handling
new and increasing work responsibilities. Just because
the mentoring relationship is over does not mean that
2. Athletic coaches often act as mentors to their younger

assistant coaches. Interview a coach about her or his
role as a mentor. What types of things do coaches do
to instruct, teach, advise, and encourage their assistant
coaches? Could any of these activities be transferred to
an organizational setting? Explain.
W O R KING T O GET HER: TE AM E XE RCI SE
A New Beginning
By this time in your life, all of you have had to work with
individuals in managerial positions (or maybe you were
the manager), either through work experiences or through
other organizational experiences (social, hobby/interest,
religious, and so forth). What do you think makes some
managers better than others? Are there certain characteristics that distinguish good managers? Form groups
of three or four individuals. Discuss your experiences with
managersgood and bad. Draw up a list of the
characteristics of those individuals you felt were good

managers. For each characteristic, indicate which management function (planning, organizing, leading, and
controlling) you think it falls under. Also identify which of
Mintzbergs 10 roles the good managers seemed to fill.
Were any of the roles missing from your list of characteristics? What explanation can you give for this? As a group,
be prepared to explain the functions and roles that good
managers are most likely to fill.
L E A R NING T O B E A M ANAGE R
Think about where you hope to be in your life five years

from now (that is, your major goal). What is your competitive advantage for achieving your goal? What do you
need to plan, organize, lead, and control to make sure
that you reach your goal?
Looking over Mintzbergs management roles (see
Exhibit 1-4, on page 8), which roles seem comfortable
for you? What areas need improvement?
Keep up with the current business news.
Read books about good and bad examples of managing.
Observe managers and how they handle people and

situations.
Talk to actual managers about their experiencesgood

and bad.
In other classes you take, see what ideas and concepts

potentially relate to being a good manager.
Get experience in managing by taking on leadership

roles in student organizations.
Start thinking about whether or not you would enjoy

being a manager.
Stay informed about the current trends and issues facing

managers.
Have technical skills so you can advise the team
Be a good communicator and listen to your team
Be a good coach
Be productive and results-oriented
Empower your team and dont micromanage
CA S E A PPLICAT IO N 1
Building a Better Boss

Google doesnt do anything halfway. So when it decided
to build a better boss, it did what it does bestlook at
data.47 Using data from performance reviews, feedback surveys, and supporting papers turned in for individuals nominated for top-manager awards, Google correlated phrases,
words, praise, and complaints trying to find what makes for
a great boss. The project, dubbed Project Oxygen, examined some 100 variables and ultimately identified eight characteristics or habits of Googles most effective managers.
Here are the big eight:
Have a clear vision and strategy for the team
Help your employees with career development
Express interest in your team members success and

well-being
At first glance, youre probably thinking these eight attributes seem pretty simplistic and obvious, and you may be
wondering why Google spent all this time and effort to uncover
these. Even Googles vice president for people operations,
Laszlo Bock, said, My first reaction was, thats it? Another
writer described it as reading like a whiteboard gag from an
episode of The Office. But, as the old saying goes, there was
more to this list than meets the eye.
21
22
When Bock and his team began looking closer and rank
ordering the eight items by importance, Project Oxygen got
interestinga lot more interesting! And to understand this,
you have to understand something about Googles approach
to management since its founding in 1999. Plain and simple,
managers were encouraged to leave people alone. Let the
engineers do their stuff. If they become stuck, theyll ask
their bosses, whose deep technical expertise propelled them
to management in the first place. Its not hard to see what
Google wanted its managers to beoutstanding technical
specialists. Mr. Bock explains, In the Google context, wed
always believed that to be a manager, particularly on the engineering side, you need to be as deep or deeper a technical
expert than the people who work for you. However, Project
Oxygen revealed that technical expertise was ranked number
eight (very last) on the list. So, heres the complete list from
most important to least important, along with what each
characteristic entails:
Be a good coach (provide specific feedback and have

regular one-on-one meetings with employees; offer
solutions tailored to each employees strengths)
Empower your team and dont micromanage (give

employees space to tackle problems themselves, but be
available to offer advice)
Be interested in your team members successes and

well-being (make new team members feel welcome and
get to know your employees as people)
Be productive and results-oriented (focus on helping the

team achieve its goals by prioritizing work and getting rid
of obstacles)
Be a good communicator and listen to your team (learn to

listen and to share information; encourage open dialogue
and pay attention to the teams concerns)
Help your employees with career development (notice

employees efforts so they can see how their hard work
is furthering their careers; appreciate employees efforts
and make that appreciation known)
Have a clear vision and strategy for the team (lead the
team, but keep everyone involved in developing and
working toward the teams vision)
Have technical skills so you can advise the team (understand the challenges facing the team and be able to help
team members solve problems)
Now, managers at Google arent just encouraged to be

great managersthey know what being a great manager
involves. And the company is doing its part, as well. Using the
list, Google started training managers as well as providing individual coaching and performance review sessions. You can say
that Project Oxygen breathed new life into Googles managers.
Bock says the companys efforts paid off quickly. We were
able to have a statistically significant improvement in manager
quality for 75 percent of our worst-performing managers.
DISCUSSION QUESTIONS
1. Describe the findings of Project Oxygen using the functions approach, Mintzbergs roles approach, and the skills
approach.
2. Are you surprised at what Google found out about building a better boss? Explain your answer.
3. Whats the difference between encouraging managers
to be great managers and knowing what being a great
manager involves?
4. What could other companies learn from Googles experiences?
5. Would you want to work for a company like Google? Why
or why not?
Lipschultz Levin & Gray

You might be surprised to find a passionate emphasis placed
on people at an accounting firm. Yet at Lipschultz Levin &
Gray (www.thethinkers.com), self-described head bean
counter Steven P. Siegel recognizes that his people make
the organization. He describes his primary responsibility
as ensuring that LLGs clients have the best professionals
working for them. And the best way to do this, Siegel feels,
is by developing the creativity, talent, and diversity of its staff
so that new knowledge can be acquired and shared without
getting hung up on formal organizational relationships or
having employees shut away in corner offices.
Siegels commitment to his people starts with the
companys mission:
LLGs goal is to be the pre-eminent provider of the

highest quality accounting, tax and consulting services.
We seek to accomplish this goal by leaving no stone
unturned in exploring new and superior alternatives of
supplying our services, and developing such methods
on a global basis. Our environment promotes creativity,
individual development, group interchange, diversity,
good humour, family and community, all for the purpose of assisting in our clients growth.
To further demonstrate that commitment, Siegel has
implemented several significant changes at LLG. Because
he is convinced that people do their best intellectual work in
nontraditional settings, every telltale sign of what most people

consider boring, dull accounting work has been eliminated.
None of the firms employees or partners has an office or
desk to call his or her own. Instead, everyone is part of a
nomadic arrangement where stuff (files, phones, laptops) is
wheeled to a new spot every day. Everywhere you look in the
companys office, you see versatility, comfort, and individuality.
For instance, a miniature golf course is located in the middle
of everything. The motivation behind this open office design
is to create opportunities for professionals to gatheron
purpose or by accidentwithout walls, cubicles, or offices
to get in the way.
Visitors to LLG realize that the firm is different as soon
as they walk in the door. A giant, wall-mounted abacus
(remember the image of bean counters) decorates the
interior. And visitors are greeted by a Welcome Wall with a
big-screen television that flashes a continuous slide show of
one-liners about business, life, and innovation. The setting
may be fun and lighthearted, but the LLG team is seriously
committed to serving its clients. So serious, in fact that
they state:
We have one goal. To Delight you. Good, even
great, is not enough anymore. We will Dazzle you
and we will guarantee it; We will deliver our service
with integrity, honesty and openness in everything we

do for you and with you; We will absolutely respect
the confidentiality of our working relationship; We will
return your phone calls, facsimiles and e-mails within
24 hours; We will always provide exceptional service,
designed to help you add significant value to your
business; We will meet the deadlines we set together
with you; We will communicate with you frequently,
building a win-win relationship with you; and You will
always know in advance our fee arrangement for any
service.
Yesterday, one of Siegels new employees complained
in an email to him that the work environment is too informal,
and that employees need their own desks. This employee has
done well in her first few months on the job. Siegel is meeting
with her in an hour. What should he say to her?
1. Describe the culture at the Lipshultz firm.
2. What is your sense of how committed Siegel is to the
culture?
3. How comfortable/uncomfortable would you be working
in this environment?
4. Would should Siegel say to the employees? Why?
23
MO D U LE
Management History
Henry Ford once said, History is more or less bunk. Well, he was wrong! History
is important because it can put current activities in perspective. In this module, were going
to take a trip back in time to see how the field of study called management has evolved.
What youre going to see is that todays managers still use many elements of the historical
approaches to management.
3000 BC1776
19111947
Late 1700s1950s
1940s1950s
1960spresent
Early Management
Classical Approach
Behavioural Approach
Quantitative Approach
Contemporary Approaches
Early Management
division of labour
(job specialization) The
breakdown of jobs into narrow and
repetitive tasks.
industrial revolution A period

during the late eighteenth century
when machine power was
substituted for human power,
making it more economical to
manufacture goods in factories
than at home.
Management has been practised a long time. Organized endeavours directed by people
responsible for planning, organizing, leading, and controlling activities have existed for
thousands of years. Lets look at some of the most interesting examples.
The Egyptian pyramids and the Great Wall of China are proof that projects of tremendous scope, employing tens of thousands of people, were completed in ancient times.1 It
took more than 100 000 workers some 20 years to construct a single pyramid. Who told
each worker what to do? Who ensured there would be enough stones at the site to keep
workers busy? The answer is managers. Someone had to plan what was to be done, organize
people and materials to do it, make sure those workers got the work done, and impose
some controls to ensure that everything was done as planned.
Another example of early management can be found in the city of Venice, which was a
major economic and trade centre in the 1400s. The Venetians developed an early form of
business enterprise and engaged in many activities common to todays organizations. For
instance, at the arsenal of Venice, warships were floated along the canals, and at each stop,
materials and riggings were added to the ship.2 Sounds a lot like a car floating along
an assembly line, doesnt it? In addition, the Venetians used warehouse and inventory
systems to keep track of materials, human resource management functions to manage the
labour force (including wine breaks), and an accounting system to keep track of revenues
and costs.
In 1776, Adam Smith published The Wealth of Nations, in which he argued the economic
advantages that organizations and society would gain from the division of labour
(or job specialization)that is, breaking down jobs into narrow and repetitive tasks.
Using the pin industry as an example, Smith claimed that 10 individuals, each doing a
specialized task, could produce about 48,000 pins a day among them. However, if each
person worked alone performing each task separately, it would be quite an accomplishment to produce even 10 pins a day! Smith concluded that division of labour increased
productivity by increasing each workers skill and dexterity, saving time lost in changing
tasks, and creating labour-saving inventions and machinery. Job specialization continues
to be popular. For example, think of the specialized tasks performed by members of a
hospital surgery team, meal preparation tasks done by workers in restaurant kitchens, or
positions played by players on a football team.
Starting in the late eighteenth century when machine power was substituted for human
power, a point in history known as the industrial revolution, it became more economical to manufacture goods in factories rather than at home. These large efficient factories
needed someone to forecast demand, ensure that enough material was on hand to make
products, assign tasks to people, direct daily activities, and so forth. That someone was
Module 1 Management History
25
Exhibit MH-1
Major Approaches to Management
Historical
Background
Classical
Approaches
Early Examples
of Management
Adam Smith
Quantitative
Approach
Behavioural
Approach
Contemporary
Approaches
Scientific
Management
Early
Advocates
Systems
Approach
General
Administrative
Hawthorne
Studies
Contingency
Approach
Organizational
Behaviour
Industrial
Revolution
a manager: These managers would need formal theories to guide them in running these
large organizations. It wasnt until the early 1900s, however, that the first steps toward
developing such theories were taken.
In this module, well look at four major approaches to management theory: classical,
behavioural, quantitative, and contemporary. (See Exhibit MH-1.) Keep in mind that each
approach is concerned with trying to explain management from the perspective of what
was important at that time in history and the backgrounds and interests of the researchers.
Each of the four approaches contributes to our overall understanding of management, but
each is also a limited view of what it is and how to best practise it.
3000 BC1776
19111947
Late 1700s1950s
1940s1950s
1960spresent
Early Management
Classical Approach
Classical Approach
Although weve seen how management has been used in organized efforts since early history, the formal study of management didnt begin until early in the twentieth century.
These first studies of management, often called the classical approach, emphasized rationality and making organizations and workers as efficient as possible. Two major theories
make up the classical approach: scientific management and general administrative theory.
The two most important contributors to scientific management theory were Frederick W.
Taylor and the husband-wife team of Frank and Lillian Gilbreth. The two most important
contributors to general administrative theory were Henri Fayol and Max Weber. Lets take
a look at each of these important figures in management history.
Scientific Management
If you had to pinpoint when modern management theory was born, 1911 might be a good
choice. That was when Frederick Winslow Taylors Principles of Scientific Management was
published. Its contents were widely embraced by managers around the world. Taylors book
classical approach First

studies of management, which
emphasized rationality and making
organizations and workers as
efficient as possible.
26
Exhibit MH-2
Taylors Scientific Management Principles
1. Develop a science for each element of an individuals work to replace the old rule-of-thumb
method.
2. Scientifically select and then train, teach, and develop the worker.
3. Heartily cooperate with the workers to ensure that all work is done in accordance with
the principles of the science that has been developed.
4. Divide work and responsibility almost equally between management and workers.
Management does all work for which it is better suited than the workers.
Source: The Principles of Scientific Management by Frederick Winslow Taylor. Published 1911.
scientific management An
approach that involves using the
scientific method to find the one
best way for a job to be done.
described the theory of scientific management: the use of scientific methods to define
the one best way for a job to be done.
Taylor worked at the Midvale and Bethlehem Steel Companies in Pennsylvania. As a
mechanical engineer with a Quaker and Puritan background, he was continually appalled
by workers inefficiencies. Employees used vastly different techniques to do the same job.
They often took it easy on the job, and Taylor believed that worker output was only
about one-third of what was possible. Virtually no work standards existed, and workers
were placed in jobs with little or no concern for matching their abilities and aptitudes with
the tasks they were required to do. Taylor set out to remedy that by applying the scientific
method to shop-floor jobs. He spent more than two decades passionately pursuing the
one best way for such jobs to be done.
Taylors experiences at Midvale led him to define clear guidelines for improving production efficiency. He argued that these four principles of management (Exhibit MH-2) would
result in prosperity for both workers and managers.3 How did these scientific principles really
work? Lets look at an example.
Probably the best known example of Taylors scientific management efforts was the pig iron
experiment. Workers loaded pigs of iron (each weighing 92 lbs.) onto rail cars. Their daily
average output was 12.5 tons. However, Taylor believed that by scientifically analyzing the job
to determine the one best way to load pig iron, output could be increased to 47 or 48 tons
per day. After scientifically applying different combinations of procedures, techniques, and
tools, Taylor succeeded in getting that level of productivity. How? By putting the right person
on the job with the correct tools and equipment, having the worker follow his instructions
exactly, and motivating the worker with an economic incentive of a significantly higher daily
wage. Using similar approaches for other jobs, Taylor was able to define the one best way for
doing each job. Overall, Taylor achieved consistent productivity improvements in the range
of 200 percent or more. Based on his groundbreaking studies of manual work using scientific
principles, Taylor became known as the father of scientific management. His ideas spread
in the United States and to other countries and inspired others to study and develop methods
of scientific management. His most prominent followers were Frank and Lillian Gilbreth.
A construction contractor by trade, Frank Gilbreth gave up that career to study scientific
management after hearing Taylor speak at a professional meeting. Frank and his wife, Lillian,
a psychologist, studied work to eliminate inefficient hand-and-body motions. The Gilbreths
also experimented with the design and use of the proper tools and equipment for optimizing work performance.4 Also, as parents of 12 children, the Gilbreths ran their household
using scientific management principles and techniques. In fact, two of their children wrote
a book, Cheaper by the Dozen, which described life with the two masters of efficiency.
Frank is probably best known for his bricklaying experiments. By carefully analyzing
the bricklayers job, he reduced the number of motions in laying exterior brick from 18 to
about 5, and in laying interior brick from 18 to 2. Using Gilbreths techniques, a bricklayer
was more productive and less fatigued at the end of the day.
The Gilbreths invented a device called a microchronometer that recorded a workers

hand-and-body motions and the amount of time spent doing each motion. Wasted motions
missed by the naked eye could be identified and eliminated. The Gilbreths also devised a
classification scheme to label 17 basic hand motions (such as search, grasp, hold), which
they called therbligs (Gilbreth spelled backward with the th transposed). This scheme gave
the Gilbreths a more precise way of analyzing a workers exact hand movements.
therbligs A classification scheme

for labelling basic hand motions.
How todays managers use scientific management

Many of the guidelines and techniques Taylor and the Gilbreths devised for improving
production efficiency are still used in organizations today. When managers analyze the
basic work tasks that must be performed, use time-and-motion study to eliminate wasted
motions, hire the best-qualified workers for a job, or design incentive systems based on
output, theyre using the principles of scientific management.
General Administrative Theory

General administrative theory focused more on what managers do and what constituted good management practice. We introduced Henri Fayol in Chapter 1 because he
first identified five functions that managers perform: planning, organizing, commanding,
coordinating, and controlling.5
Fayol wrote during the same time period as Taylor. While Taylor was concerned with
first-line managers and the scientific method, Fayols attention was directed at the activities of all managers. He wrote from his personal experience as the managing director of a
large French coal-mining firm.
Fayol described the practice of management as something distinct from accounting,
finance, production, distribution, and other typical business functions. His belief that
management was an activity common to all business endeavours, government, and even
the home led him to develop 14 principles of managementfundamental rules of
management that could be applied to all organizational situations and taught in schools.
These principles are shown in Exhibit MH-3.
general administrative
theory An approach to
management that focuses on
describing what managers do
and what constitutes good
management practice.
principles of
management Fundamental
rules of management that could
be applied in all organizational
situations and taught in schools.
Exhibit MH-3
Fayols 14 Principles of Management
1. Division of work. Specialization increases output by making employees more efficient.
2. Authority. Managers must be able to give orders, and authority gives them this right.
3. Discipline. Employees must obey and respect the rules that govern the organization.
4. Unity of command. Every employee should receive orders from only one superior.
5. Unity of direction. The organization should have a single plan of action to guide managers and workers.
6. Subordination of individual interests to the general interest. The interests of any one employee or group of employees
should not take precedence over the interests of the organization as a whole.
7. Remuneration. Workers must be paid a fair wage for their services.
8. Centralization. This term refers to the degree to which subordinates are involved in decision making.
9. Scalar chain. The line of authority from top management to the lowest ranks is the scalar chain.
10. Order. People and materials should be in the right place at the right time.
11. Equity. Managers should be kind and fair to their subordinates.
12. Stability of tenure of personnel. Management should provide orderly personnel planning and ensure that replacements
are available to fill vacancies.
13. Initiative. Employees allowed to originate and carry out plans will exert high levels of effort.
14. Esprit de corps. Promoting team spirit will build harmony and unity within the organization.
27
28
Exhibit MH-4
Characteristics of Webers Bureaucracy
Management Theories
Scientific
Management
General
Administrative
Theory
Quantitative
Approach
Organizational
Behaviour
Systems
Approach
Contingency
Approach
Early
Advocates
Hawthorne
Studies
bureaucracy A form of
organization characterized
by division of labour, a clearly
defined hierarchy, detailed rules
and regulations, and impersonal
relationships.
Weber (pronounced VAY-ber) was a German sociologist who studied organizations.6

Writing in the early 1900s, he developed a theory of authority structures and relations
based on an ideal type of organization he called a bureaucracya form of organization
characterized by division of labour, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships. (See Exhibit MH-4.) Weber recognized that this ideal
bureaucracy didnt exist in reality. Instead, he intended it as a basis for theorizing about
how work could be done in large groups. His theory became the structural design for many
of todays large organizations.
Bureaucracy, as described by Weber, is a lot like scientific management in its ideology. Both emphasized rationality, predictability, impersonality, technical competence,
and authoritarianism. Although Webers ideas were less practical than Taylors, the fact
that his ideal type still describes many contemporary organizations attests to their
importance.
How todays managers use general administrative theory

Several of our current management ideas and practices can be directly traced to the
contributions of general administrative theory. For instance, the functional view of the
managers job can be attributed to Fayol. In addition, his 14 principles serve as a frame
of reference from which many current management conceptssuch as managerial
authority, centralized decision making, reporting to only one boss, and so forthhave
evolved.
Webers bureaucracy was an attempt to formulate an ideal prototype for organizations.
Although many characteristics of Webers bureaucracy are still evident in large organizations, his model isnt as popular today as it was in the twentieth century. Many managers
feel that a bureaucratic structure hinders individual employees creativity and limits an
organizations ability to respond quickly to an increasingly dynamic environment. However, even in flexible organizations of creative professionalssuch as Google, Samsung,
General Electric, or Cisco Systemsbureaucratic mechanisms are necessary to ensure that
resources are used efficiently and effectively.
3000 BC1776
19111947
Late 1700s1950s
1940s1950s
1960spresent
Early Management
Classical Approach
29
As we know, managers get things done by working with people. This explains why some
writers have chosen to look at management by focusing on the organizations people.
The field of study that researches the actions (behaviour) of people at work is called
organizational behaviour (OB). Much of what managers do today when managing
peoplemotivating, leading, building trust, working with a team, managing conflict, and
so forthhas come out of OB research.
Although a number of individuals in the early twentieth century recognized the importance of people to an organizations success, four stand out as early advocates of the OB
approach: Robert Owen, Hugo Munsterberg, Mary Parker Follett, and Chester Barnard.
Their contributions were varied and distinct, yet all believed that people were the most
important asset of the organization and should be managed accordingly. Their ideas provided the foundation for such management practices as employee selection procedures,
motivation programs, and work teams. Exhibit MH-5 summarizes each individuals most
important ideas.
Without question, the most important contribution to the OB field came out of the
Hawthorne Studies, a series of studies conducted at the Western Electric Company Works
in Cicero, Illinois. These studies, which started in 1924, were initially designed by Western Electric industrial engineers as a scientific management experiment. They wanted to
examine the effect of various lighting levels on worker productivity. Like any good scientific
experiment, control and experimental groups were set up with the experimental group
exposed to various lighting intensities, and the control group working under a constant
intensity. If you were the industrial engineers in charge of this experiment, what would
organizational behaviour
(OB) The study of the actions of
people at work.
Hawthorne Studies A series

of studies during the 1920s and
1930s that provided new insights
into individual and group behaviour.
Exhibit MH-5
Early Advocates of Organizational Behaviour
Actual manager who thought

organizations were social systems
that required cooperation
Believed managers job was to
communicate and stimulate employees
high levels of effort
First to argue that organizations were
open systems
Chester Barnard
1930s
Concerned about deplorable

working conditions
Proposed idealistic workplace
Argued that money spent
improving labour was smart
investment
Robert Owen
Late 1700s
Early Advocates
of OB
Mary Parker Follett

Early 1900s
One of the first to recognize that

organizations could be viewed from
perspective of individual and group
behaviour
Proposed more people-oriented ideas
than scientific management followers
Thought organizations should be based
on group ethic
Created field of industrial psychology

scientific study of people at work
Suggested using psychological tests
for employee selection, learning theory
concepts for employee training, and
study of human behaviour for
employee motivation
..
Hugo Munsterberg
Early 1900s
30
you have expected to happen? Its logical to think that individual output in the experimental group would be directly related to the intensity of the light. However, they found
that as the level of light was increased in the experimental group, output for both groups
increased. Then, much to the surprise of the engineers, as the light level was decreased
in the experimental group, productivity continued to increase in both groups. In fact, a
productivity decrease was observed in the experimental group only when the level of light
was reduced to that of a moonlit night. What would explain these unexpected results?
The engineers werent sure, but concluded that lighting intensity was not directly related
to group productivity and that something else must have contributed to the results. They
werent able to pinpoint what that something else was, though.
In 1927, the Western Electric engineers asked Harvard professor Elton Mayo and his
associates to join the study as consultants. Thus began a relationship that would last
through 1932 and encompass numerous experiments in the redesign of jobs, changes in
workday and workweek length, introduction of rest periods, and individual versus group
wage plans.7 For example, one experiment was designed to evaluate the effect of a group
piecework incentive pay system on group productivity. The results indicated that the incentive plan had less effect on a workers output than group pressure, acceptance, and security.
The researchers concluded that social norms or group standards were the key determinants
of individual work behaviour.
Scholars generally agree that the Hawthorne Studies had a game-changing impact
on management beliefs about the role of people in organizations. Mayo concluded that
peoples behaviour and attitudes are closely related, that group factors significantly affect
individual behaviour, that group standards establish individual worker output, and that
money is less a factor in determining output than group standards, group attitudes, and
security. These conclusions led to a new emphasis on the human behaviour factor in the
management of organizations.
Although critics attacked the research procedures, analyses of findings, and conclusions,
its of little importance from a historical perspective whether the Hawthorne Studies were
academically sound or their conclusions justified.8 What is important is that they stimulated an interest in human behaviour in organizations.
How todays managers use the behavioural approach

The behavioural approach has largely shaped how todays organizations are managed.
From the way managers design jobs to the way they work with employee teams to the way
they communicate, we see elements of the behavioural approach. Much of what the early
OB advocates proposed and the conclusions from the Hawthorne studies have provided
the foundation for our current theories of motivation, leadership, group behaviour and
development, and numerous other behavioural approaches.
3000 BC1776
19111947
Late 1700s1950s
1940s1950s
1960spresent
Early Management
Classical Approach
quantitative approach The

use of quantitative techniques to
improve decision making.
Although passengers bumping into each other when trying to find their seats on an airplane can be a mild annoyance for them, its a bigger problem for airlines because lines get
backed up, slowing down how quickly the plane can get back in the air. Based on research
in space-time geometry, one airline innovated a unique boarding process called reverse
pyramid that has saved at least two minutes in boarding time.9 This is an example of the
quantitative approach, which is the use of quantitative techniques to improve decision
making. This approach also is known as management science.
The quantitative approach evolved from mathematical and statistical solutions developed for military problems during World War II. After the war was over, many of these
techniques used for military problems were applied to businesses. For example, one
group of military officers, nicknamed the Whiz Kids, joined Ford Motor Company in the
mid-1940s and immediately began using statistical methods and quantitative models to
improve decision making.
What exactly does the quantitative approach do? It involves applying statistics, optimization models, information models, computer simulations, and other quantitative
techniques to management activities. Linear programming, for instance, is a technique
that managers use to improve resource allocation decisions. Work scheduling can be
more efficient as a result of critical-path scheduling analysis. The economic order quantity
model helps managers determine optimum inventory levels. Each of these is an example
of quantitative techniques being applied to improve managerial decision making. Another
area where quantitative techniques are used frequently is in total quality management.
A quality revolution swept through both the business and public sectors in the 1980s
and 1990s.10 It was inspired by a small group of quality experts; the most famous was W.
Edwards Deming and Joseph M. Juran. The ideas and techniques they advocated in the
1950s had few supporters in the United States but were enthusiastically embraced by Japanese
organizations. As Japanese manufacturers began beating U.S. competitors in quality
comparisons, however, Western managers soon took a more serious look at Demings and
Jurans ideas, which became the basis for todays quality management programs.
Total quality management, or TQM, is a management philosophy devoted to continual
improvement and responding to customer needs and expectations. (See Exhibit MH-6.)
The term customer includes anyone who interacts with the organizations product or services,
internally or externally. It encompasses employees and suppliers as well as the people who
purchase the organizations goods or services. Continual improvement isnt possible without
accurate measurements, which require statistical techniques that measure every critical
variable in the organizations work processes. These measurements are compared against
standards to identify and correct problems.
How todays managers use the quantitative approach

No one likes long lines, especially people waiting in line to do their banking. Customers
are often guided into serpentine single lines that feed into numerous teller stations resulting in wait times that are shorter than expected.11 The science of keeping lines moving is
known as queue management. For Canadian banks, this quantitative technique translated
into less frustration and better customer service.
Exhibit MH-6
What Is Quality Management?
1. Intense focus on the customer. The customer includes outsiders who buy the
organizations products or services and internal customers who interact with and serve
others in the organization.
2. Concern for continual improvement. Quality management is a commitment to never
being satisfied. Very good is not good enough. Quality can always be improved.
3. Process focused. Quality management focuses on work processes as the quality of
goods and services is continually improved.
4. Improvement in the quality of everything the organization does. This relates to
the final product, how the organization handles deliveries, how rapidly it responds to
complaints, how politely the phones are answered, and the like.
5. Accurate measurement. Quality management uses statistical techniques to measure
every critical variable in the organizations operations. These are compared against
standards to identify problems, trace them to their roots, and eliminate their causes.
6. Empowerment of employees. Quality management involves the people on the line in
the improvement process. Teams are widely used in quality management programs as
empowerment vehicles for finding and solving problems.
total quality management

(TQM) A philosophy of
management that is driven by
continuous improvement and
responsiveness to customer
needs and expectations.
31
32
The quantitative approach contributes directly to management decision making in

the areas of planning and control. For instance, when managers make budgeting, queuing, scheduling, quality control, and similar decisions, they typically rely on quantitative
techniques. Specialized software has made the use of these techniques less intimidating
for managers, although many still feel anxious about using them.
3000 BC1776
19111947
Late 1700s1950s
1940s1950s
1960spresent
Early Management
Classical Approach
system A set of interrelated and

interdependent parts arranged in
a manner that produces a unified
whole.
closed systems Systems that
are not influenced by and do not
interact with their environment.
open systems Systems that
interact with their environment.
As weve seen, many elements of the earlier approaches to management theory continue to
influence how managers manage. Most of these earlier approaches focused on managers
concerns inside the organization. Starting in the 1960s, management researchers began to
look at what was happening in the external environment outside the boundaries of the organization. Two contemporary management perspectivessystems and contingencyare part
of this approach. Systems theory is a basic theory in the physical sciences, but had never been
applied to organized human efforts. In 1938, Chester Barnard, a telephone company executive, first wrote in his book, The Functions of an Executive, that an organization functioned as
a cooperative system. However, it wasnt until the 1960s that management researchers began
to look more carefully at systems theory and how it related to organizations.
A system is a set of interrelated and interdependent parts arranged in a manner
that produces a unified whole. The two basic types of systems are closed and open.
Closed systems are not influenced by and do not interact with their environment. In
contrast, open systems are influenced by and do interact with their environment. Today,
when we describe organizations as systems, we mean open systems. Exhibit MH-7 shows
a diagram of an organization from an open systems perspective. As you can see, an organization takes in inputs (resources) from the environment and transforms or processes
these resources into outputs that are distributed into the environment. The organization
is open to and interacts with its environment.
Exhibit MH-7
The Organization as an Open System
Environment
System
Inputs
Raw Materials
Human Resources
Capital
Technology
Information
Transformation
Process
Employees Work
Activities
Management Activities
Technology and
Operations Methods
Feedback
Environment
Outputs
Products and Services
Financial Results
Information
Human Results
33
How does the systems approach contribute

to our understanding of management?
Researchers envisioned an organization as made up of interdependent factors, including individuals, groups, attitudes, motives, formal structure, interactions, goals, status,
and authority.12 What this means is that as managers coordinate work activities in the
various parts of the organization, they ensure that all these parts are working together so
the organizations goals can be achieved. For example, the systems approach recognizes
that, no matter how efficient the production department, the marketing department must
anticipate changes in customer tastes and work with the product development department
in creating products customers wantor the organizations overall performance will suffer.
In addition, the systems approach implies that decisions and actions in one organizational
area will affect other areas. For example, if the purchasing department doesnt acquire the
right quantity and quality of inputs, the production department wont be able to do its job.
Finally, the systems approach recognizes that organizations are not self-contained. They
rely on their environment for essential inputs and as outlets to absorb their outputs. No
organization can survive for long if it ignores government regulations, supplier relations,
or the varied external constituencies on which it depends.
How relevant is the systems approach to management? Quite relevant. Consider, for example, a shift manager at a Starbucks restaurant who must coordinate the work of employees
filling customer orders at the front counter and the drive-through windows, direct the delivery and unloading of food supplies, and address any customer concerns that come up. This
manager manages all parts of the system so that the restaurant meets its daily sales goals.
The early management theorists came up with management principles they generally
assumed to be universally applicable. Later research found exceptions to many of these
principles. For example, division of labour is valuable and widely used, but jobs can become
too specialized. Bureaucracy is desirable in many situations, but in other circumstances,
other structural designs are more effective. Management is not (and should not be) based
on simplistic principles to be applied in all situations. Different and changing situations
require managers to use different approaches and techniques. The contingency approach
(sometimes called the situational approach) says that organizations are different, face different situations (contingencies), and require different ways of managing.
A good way to describe contingency is if, then. If this is the way my situation is, then
this is the best way for me to manage in this situation. It is intuitively logical because
organizations and even units within the same organization differin size, goals, work
activities, and the like. It would be surprising to find universally applicable management
rules that would work in all situations. But, of course, its one thing to say that the way to
manage depends on the situation and another to say what the situation is. Management
researchers continue working to identify these situational variables. Exhibit MH-8 describes
Exhibit MH-8
Popular Contingency Variables
Organization Size. As size increases, so do the problems of coordination. For instance, the
type of organization structure appropriate for an organization of 50 000 employees is likely
to be inefficient for an organization of 50 employees.
Routineness of Task Technology. To achieve its purpose, an organization uses
technology. Routine technologies require organizational structures, leadership styles, and
control systems that differ from those required by customized or nonroutine technologies.
Environmental Uncertainty. The degree of uncertainty caused by environmental changes
influences the management process. What works best in a stable and predictable environment
may be totally inappropriate in a rapidly changing and unpredictable environment.
Individual Differences. Individuals differ in terms of their desire for growth, autonomy,
tolerance of ambiguity, and expectations. These and other individual differences are particularly
important when managers select motivation techniques, leadership styles, and job designs.
contingency approach A
management approach that
recognizes organizations as
different, which means they face
different situations (contingencies)
and require different ways of
managing.
34
four popular contingency variables. Although the list is by no means comprehensive

more than 100 different variables have been identifiedit represents those most widely
used and gives you an idea of what we mean by the term contingency variable. The primary
value of the contingency approach is that it stresses there are no simplistic or universal
rules for managers to follow.
So what do managers face today when managing? Although the dawn of the information age is said to have begun with Samuel Morses telegraph in 1837, dramatic changes
in information technology that occurred in the latter part of the twentieth century and
continue through today directly affect the managers job. Managers now may manage
employees who are working from home or working halfway around the world. An organizations computing resources used to be mainframe computers locked away in temperature-controlled rooms and accessed only by the experts. Now, practically everyone in an
organization is connectedwired or wirelesswith devices no larger than the palm of the
hand. Just like the impact of the Industrial Revolution in the 1700s on the emergence of
management, the information age has brought dramatic changes that continue to influence the way organizations are managed.
R E V IEW A ND DIS CUS SI ON QUE STI ONS

1. Explain why studying management history is important.
2. What early evidence of management practice can you
describe?
3. Describe the important contributions made by the
classical theorists.
4. What did the early advocates of OB contribute to our
understanding of management?
5. Why were the Hawthorne Studies so critical to management history?
6. What kind of workplace would Henri Fayol create? How
about Mary Parker Follett? How about Frederick W. Taylor?
7. Explain what the quantitative approach has contributed

to the field of management.
8. Describe total quality management.
9. How do systems theory and the contingency approach
make managers better at what they do?
10. How do societal trends influence the practice of
management? What are the implications for someone
studying management?
CHA PT E R
Organizational Culture and the

Organizational Environment
Are managers free to do whatever they want? In this chapter,
well look at the factors that define the discretion managers
have in doing their jobs. These factors are both internal
(the organizations culture) and external (the organizational
environment). After reading and studying this chapter, you
will achieve the following learning outcomes.
Technical workers at 3M spend up to 15 percent of

their time working on projects of their own choosing.1
This is openly encouraged by 3M as long as the project has the
potential to become an important breakthrough for the company.
The 15 percent rule has been a central part of 3Ms overall
culture of innovation since being introduced by company president William McKnight in 1948. The innovative culture is further
encouraged by the 30 percent rule that requires each division
Learning Outcomes
Compare and contrast the actions

of managers according to the
omnipotent and symbolic views.
Discuss the characteristics and

importance of organizational
culture.
Describe what kinds of cultures

managers can create.
Describe the features of the specific

and general organizational environments.
to produce 30 percent of its annual revenue from products that

did not exist five years ago.
3M clearly prizes delegation and initiative, and has a strong
tolerance for failure. Managers are directed to hire the right
people, and then get out of the way. The company culture
emphasizes that a failure can turn into a success; there is no
punishment for a product failing in the market. The human
resources team also plays a pivotal role in reinforcing a stronger,
customer-oriented culture through regular training programs
that focus on the acronym E = MC 2 (Engagement = More
Customer Connect).
Implementation of these practices has built a company with
over 76 000 employees and annual revenue of $23 billion, and
has placed 3M at the forefront of innovative companies globally.
After the bursting of the dot-com bubble in 2001, however, there
was a shift in thinking at the company. James McNerney was
hired from General Electric as president to deal with what was felt
to be too great a focus on innovation and creativity. He was asked
to make the company more efficient using the Six Sigma discipline (a quality control philosophy) and to whip the company into
shape. McNerney left in 2005 to run Boeing, and the new CEO
and president, George Buckley, was left with the task of rebuilding
3Ms traditional innovative culture, which many felt had suffered as
a result of the emphasis on process improvement. Buckley was
succeeded as president of 3M by Inge Thulin in 2012.
ZUMA Press/Alamy
36
Think About It
What would it be like to work at 3M? How would you feel about having 15 percent of your time to
work on projects that meet your personal agenda? What kinds of resistance might James McNerney
have encountered when he tried to establish a new culture of efficiency in the face of the established
culture of innovation? What challenges might George Buckley have encountered when he became
CEO in 2005? How does the 3M culture differ from the work cultures you have experienced?
The Manager: Omnipotent or Symbolic?

Compare and contrast
the actions of managers
according to the omnipotent and symbolic
views.
omnipotent view of
management The view that
managers are directly responsible
for an organizations success or
failure.
symbolic view of
management The view that much
of an organizations success or
failure is due to external forces
outside managers control.
How much difference does a manager make in how an organization performs? The
dominant view in management theory and society in general is that managers are directly
responsible for an organizations success or failure. We will call this perspective the
omnipotent view of management. In contrast, some observers have argued that much
of an organizations success or failure is due to external forces outside managers control.
This perspective has been labelled the symbolic view of management. Lets look more
closely at each of these perspectives so that we can try to clarify just how much credit or
blame managers should receive for their organizations performance.
The Omnipotent View

In Chapter 1 we discussed the importance of managers to organizations. This view reflects
a dominant assumption in management theory: The quality of an organizations managers
determines the quality of the organization itself. Its assumed that differences in an organizations effectiveness or efficiency are due to the decisions and actions of its managers.
Good managers anticipate change, exploit opportunities, correct poor performance, and lead
their organizations toward their goals, which may be changed if necessary. When profits are
up, managers take the credit and reward themselves with bonuses, stock options, and the
likeeven if they had little to do with the positive outcomes. When profits are down, top
managers are often fired in the belief that new blood will bring improved results. The buck
stops here! Following the oil spill in the Gulf of Mexico in April 2010, people were enraged
when BP CEO Tony Hayward attended a weekend sailing event in which his yacht Bob was
competing. The following Monday, Hayward was removed from direct responsibility for
the cleanup. By early July 2010, there was speculation that the leadership at BP would be
cleared out, including Hayward as well as Carl-Henric Svanberg, the Swedish chairman who
in his apology to those affected by the spill referred to the small people.2 Though Svanberg
ultimately remained chairman, BP later agreed to a $4.5 billion settlement with the U.S.
Department of Justice, while three BP employees were later indicted with criminal charges.
The view of managers as omnipotent is consistent with the stereotypical picture of the
take-charge business executive who can overcome any obstacle in carrying out the organizations goals. This omnipotent view, of course, is not limited to business organizations.
We can also use it to help explain the high turnover among college and professional sports
coaches, who can be considered the managers of their teams. Coaches who lose more
games than they win are seen as ineffective. They are fired and replaced by new coaches
who, it is hoped, will correct the inadequate performance.
In the omnipotent view, when organizations perform poorly, someone has to be held
accountable regardless of the reasons, and in our society, that someone is the manager.
Of course, when things go well, we need someone to praise. So managers also get the
crediteven if they had little to do with achieving positive outcomes.
The Symbolic View

When tunnelling for the Canada Line transit system started tearing up Vancouvers Cambie
Street, a busy shopping area, customers stopped coming to the stores and restaurants.
The street was noisy, there was no parking, and the area was a traffic nightmare. Facing a
Chapter 2 Organizational Culture and the Organizational Environment
37
When both Home Hardware

and Army and Navy closed their
stores in downtown Regina, Blue
Mantle, a thrift store in the same
area, faced a loss of customer
traffic and sales. As a result, Dave
Barrett, the stores manager at
the time, closed Blue Mantle soon
after. He explained his decision:
When Home Hardware closed,
and department store Army and
Navy closed, that cut away a
lot of our traffic to the store. We
used to have lots of seniors that
would swing over to our place.
He also noted that the state of the
economy was a factor in the store
closing.3 The Roman Catholic
Archdiocese of Regina eventually re-opened Blue Mantle after
receiving numerous requests from
customers, and now runs the
store with volunteers.
Don Healy/Leader Post
significant drop in customers, Christian Gaudreault, owner of Tomato Fresh Food Caf,
moved his restaurant elsewhere. Giriaj Gautam, who runs the Cambie General Store,
found his sales down 25 percent and hoped he could hang on until construction finished
up in the area, more than a year after it started. Was the declining revenue the result of
decisions and actions by Gaudreault and Gautam, or was it the result of factors beyond
their control? Similarly, when a massive power outage hit Ontario, mad cow disease struck
in Alberta, and the avian flu killed chickens in British Columbia, were these the result of
managerial actions or circumstances outside managers control? The symbolic view would
suggest the latter.
The symbolic view says that a managers ability to affect outcomes is influenced and
constrained by external factors.4 According to this view, its unreasonable to expect managers to significantly affect an organizations performance. Instead, an organizations results
are influenced by factors managers do not control, such as the economy, customers,
government policies, competitors actions, industry conditions, control over proprietary
technology, and decisions made by previous managers.
According to the symbolic view, managers merely symbolize control and influence.5 How? They create meaning out of randomness, confusion, and ambiguity or
try to innovate and adapt. Because managers have a limited effect on organizational
outcomes, their actions involve developing plans, making decisions, and engaging in
other managerial activities for the benefit of shareholders, customers, employees, and
the public. However, the part that managers actually play in organizational success or
failure is minimal.
Reality Suggests a Synthesis

In reality, managers are neither helpless nor all powerful. Internal and external constraints
that restrict a managers decision options exist within every organization. Internal constraints arise from the organizations culture, and external constraints come from the
organizations environment.
As Exhibit 2-1 shows, managers operate within the limits imposed by the organizations culture and environment. Yet, despite these constraints, managers are not powerless.
They can still influence an organizations performance. In the remainder of this chapter,
we discuss how an organizations culture and environment impose limits on managers.
However, as we will see in other chapters, these constraints dont mean that a managers
hands are tied. As George Buckley of 3M recognized, managers can and do influence their
culture and environment.
38
Exhibit 2-1
Parameters of Managerial Discretion
Organizational Environment
Watch on MyManagementLab
Organizational Culture (TWZ Role Play)
Discuss the
characteristics
and importance of
organizational culture.
Managerial
Discretion
Organizational Culture
The Organizations Culture

Every organization has a culture, a way that those in the organization interact with each
other and with their clients or customers. When George Buckley was appointed president and CEO
of 3M following the departure of James McNerney, he faced a crisis of confidence in what really
mattered at 3Meither innovation or efficiency. McNerney had brought a passion for efficiency with
him from GE, and the remnants of this new culture were still in place even as 3M declared a return
to the focus on innovation.6
Think About It
What is organizational culture, and how did it affect both James McNerneys and George Buckleys
ability to manage? Is the impact of culture different if the organization is a not-for-profit rather than
a business organization?
We know that every person has a unique personalitya set of relatively permanent
and stable traits that influence the way we act and interact with others. When we describe
someone as warm, open, relaxed, shy, or aggressive, we are describing personality traits. An
organization, too, has a personality, which we call its culture. It is that culture that influences the way employees act and interact with others.
What Is Organizational Culture?
organizational culture The

shared values, principles,
traditions, and ways of doing
things that influence the way
organizational members act and
that distinguish the organization
from other organizations.
In September 2013, Hudsons Bay Company announced the appointment of Marigay

McKee as the new president for the recently acquired Saks Fifth Avenue. 7 As chief
merchant of Harrods, McKee had overseen the planning and implementation of the
merchandising and creative strategies since 2011. HBC, founded in 1670, is North
Americas longest continually operated company. In Canada, HBC operates Hudsons
Bay, Canadas largest department store with 90 locations, Home Outfitters with 69
locations and in the United States, HBC operates Lord & Taylor, a department store
with 48 full-line store locations throughout the northeastern United States. Hudsons
Bay Company operating units provide stylish, quality merchandise at great value, with
a dedicated focus on service excellence. Saks Fifth Avenue, one of the worlds preeminent specialty retailers, is renowned for its superlative American and international
designer collections. Saks operates 41 full-line stores in 20 states, and five international
licensed stores. Given the long-established traditions in place at HBC and Saks and
the different targeted markets, what challenges are likely to arise as the two company
cultures are merged?
What is organizational culture? Its a system of shared meaning and beliefs held by
organizational members that determines, in large degree, how they act toward each other
and outsiders. It represents a common perception held by an organizations members
that influences how they behave. In every organization, there are values, symbols, rituals,
myths, and practices that have evolved over time.8 These shared values and experiences
determine, in large degree, what employees perceive and how they respond to their world.9
When faced with problems or issues, the organizational culturethe way we do things
around hereinfluences what employees can do and how they conceptualize, define,
analyze, and resolve issues. When considering different job offers, it makes sense to evaluate whether you can fit into the organizations culture.
Our definition of organizational culture implies three things:
Culture is a perception. Its not something that can be physically touched or

seen, but employees perceive it on the basis of what they experience within the
organization.
Culture is a descriptive term. Its concerned with how members perceive the organization, not with whether they like it.
Culture is shared. Even though individuals may have different backgrounds or

work at different organizational levels, they tend to describe the organizations
culture in similar terms. Thats the shared aspect of culture.
Research suggests that seven dimensions capture the essence of an organizations

culture.10 These dimensions are described in Exhibit 2-2. Each dimension ranges from
low (its not very typical of the culture) to high (its very typical of the culture). Describing an organization using these seven dimensions gives a composite picture of the
organizations culture. In many organizations, one of these cultural dimensions often is
emphasized more than the others and essentially shapes the organizations personality
and the way organizational members work. For instance, at Sony Corporation the focus
Exhibit 2-2
Dimensions of Organizational Culture
Degree to which
employees are expected
to exhibit precision,
analysis, and attention
to detail
Degree to which
employees are
encouraged to be
innovative and
to take risks
Attention to
Detail
Innovation and
Risk-Taking
Outcome
Orientation
Organizational
Culture
Stability
Degree to which
organizational
decisions and actions
emphasize maintaining
the status quo
Degree to which
managers focus on results
or outcomes rather than
on how these outcomes
are achieved
Aggressiveness
Degree to which
employees are aggressive
and competitive rather
than cooperative
People
Orientation
Degree to which
management decisions
take into account the
effects on people in
the organization
Team
Orientation
Degree to which
work is organized
around teams rather
than individuals
39
40
is on product innovation. The company lives and breathes new-product development

(outcome orientation), and employees work decisions, behaviours, and actions support
that goal. In contrast, WestJet Airlines has made its employees a central part of its culture
(people orientation). Exhibit 2-3 describes how the dimensions can be combined to
create significantly different organizations.
Exhibit 2-3
Contrasting Organizational Cultures
Organization A
les
Ru
This organization is a manufacturing firm. Managers are expected to fully document all
decisions, and good managers are those who can provide detailed data to support
their recommendations. Creative decisions that incur significant change or risk are not
encouraged. Because managers of failed projects are openly criticized and penalized,
managers try not to implement ideas that deviate much from the status quo. One lowerlevel manager quoted an often-used phrase in the company: If it aint broke, dont fix it.
Employees are required to follow extensive rules and regulations in this firm. Managers
supervise employees closely to ensure there are no deviations. Management is concerned
with high productivity, regardless of the impact on employee morale or turnover.
Work activities are designed around individuals. There are distinct departments and
lines of authority, and employees are expected to minimize formal contact with other
employees outside their functional area or line of command. Performance evaluations and
rewards emphasize individual effort, although seniority tends to be the primary factor in the
determination of pay raises and promotions.
Organization B
This organization is also a manufacturing firm. Here, however, management encourages

and rewards risk taking and change. Decisions based on intuition are valued as much as
those that are well rationalized. Management prides itself on its history of experimenting
with new technologies and its success in regularly introducing innovative products.
Managers or employees who have a good idea are encouraged to run with it, and failures
are treated as learning experiences. The company prides itself on being market driven
and rapidly responsive to the changing needs of its customers.
There are few rules and regulations for employees to follow, and supervision is
loose because management believes its employees are hardworking and trustworthy.
Management is concerned with high productivity but believes this comes through treating
its people right. The company is proud of its reputation as a good place to work.
Job activities are designed around work teams, and team members are encouraged to
interact with people across functions and authority levels. Employees talk positively about
the competition between teams. Individuals and teams have goals, and bonuses are based
on achievement of outcomes. Employees are given considerable autonomy in choosing the
means by which the goals are attained.
41
Exhibit 2-4
Organizational Structure
Strong versus Weak Cultures

Strong Cultures
Weak Cultures
Values widely shared
Values limited to a few peopleusually

top management
Culture conveys consistent messages

about whats important
Culture sends contradictory messages

about whats important
Most employees can tell stories about

company history or heroes
Employees have little knowledge of

company history or heroes
Employees strongly identify with culture
Employees have little identification

with culture
Strong connection between shared

values and behaviours
Little connection between shared values

and behaviours
Strong Cultures
All organizations have cultures, but not all cultures equally influence employees behaviours and actions. Strong culturesthose in which the key values are deeply held and
widely sharedhave a greater influence on employees than weaker cultures. (Exhibit 2-4
contrasts strong and weak cultures.) At 3M, the 15 percent rule and the 30 percent rule
make the cultural commitment to innovation crystal clear. Yet some organizations do not
make clear what is important and what is not, and this lack of clarity is a characteristic
of weak cultures. In such organizations, culture is unlikely to greatly influence managers.
Most organizations, however, have moderate to strong cultures. There is relatively high
agreement on what is important, what defines good employee behaviour, what it takes
to get ahead, and so forth.
The more employees accept the organizations key values and the greater their commitment to those values, the stronger the culture. Most organizations have moderate to
strong cultures, that is, there is relatively high agreement on whats important, what defines
good employee behaviour, what it takes to get ahead, and so forth. The stronger a culture
becomes, the more it affects the way managers plan, organize, lead, and control.11
Why is having a strong culture important? For one thing, in organizations with strong
cultures, employees are more loyal than employees in organizations with weak cultures.12
Research also suggests that strong cultures are associated with high organizational performance, and its easy to understand why.13 After all, if values are clear and widely accepted,
employees know what theyre supposed to do and whats expected of them, so they can act
quickly to take care of problems. However, the drawback is that a strong culture also might
prevent employees from trying new approaches, especially when conditions change rapidly.14
strong cultures Organizational

cultures in which the key values are
intensely held and widely shared.
Subcultures
Organizations do not necessarily have one uniform culture. In fact, most large organizations have a dominant culture and numerous sets of subcultures.15
When we talk about an organizations culture, we are referring to its dominant culture.
A dominant culture expresses the core values that are shared by the majority of an organizations members. Its this macro view of culture that gives an organization its distinct
personality.16 Subcultures tend to develop in large organizations to reflect the common
problems, situations, or experiences that members face. The existence of subcultures in an
organization suggests that individual managers play a role in moulding a common culture
in their own units. By conveying and then reinforcing core values, managers can influence
the common culture of the employees in their unit.
Subcultures are likely to be defined by department designations and geographical
separation. An organizations marketing department, for example, can have a subculture
dominant culture A system of

shared meanings that expresses
the core values of a majority of
the organizations members; it
gives the organization its distinct
personality.
subcultures Minicultures within
an organization, typically defined
by department designations and
geographical separation.
42
Exhibit 2-5
How an Organizations Culture Is Established and Maintained
Top Management
Philosophy of
Organization's
Founders
Selection
Criteria
Organization's
Culture
Socialization
core values The primary, or

dominant, values that are accepted
throughout the organization.
that is uniquely shared by members of that department. It will include the core values of
the dominant culture, plus additional values unique to members of the marketing department. Similarly, offices or units of the organization that are physically separated from the
organizations main operations may take on a different personality. Again, the core values
are essentially retained but modified to reflect the separated units distinct situation.
Where Culture Comes From and How It Continues
socialization The process that

helps employees adapt to the
organizations culture.
Exhibit 2-5 illustrates how an organizations culture is established and maintained. The
original source of an organizations culture usually reflects the vision or mission of the
organizations founders. They are not constrained by previous customs or approaches. And
the small size of most new organizations helps the founders instill their vision in all organizational members. Frank Stronach had a strong impact on the culture of the organization
he founded, Magna International. Stronach still has a profound effect on Magnas culture,
even though he is no longer CEO.17 Magnas Corporate Constitution and the Employees
Charter provide the roadmap for the companys Fair Enterprise culture, first introduced by
Stronach. Stronachs policies of profit-sharing and empowerment have created a workforce
that has made Magna one of the largest and most profitable companies in the country.
Once the culture is in place, however, certain organizational practices help maintain
it. For instance, during the employee selection process, managers typically judge job candidates not only on the job requirements, but also on how well they might fit into the
organization. At the same time, job candidates find out information about the organization and determine whether they are comfortable with what they see.
The actions of top managers also have a major impact on the organizations culture. For
instance, at Best Buy, the companys chief marketing officer would take groups of employees
for regular tours of what the company called its retail hospital. Wearing white lab coats,
employees would walk into a room with a row of real hospital beds and patient charts
describing the ills affecting each of the companys major competitors. As each of those competitors succumbed to terminal illness and was no longer in business, the room would
be darkened. Just think of the powerful message such a display would have on employees
and their work.18 Through what they say and how they behave, top managers establish
norms that filter down through the organization and can have a positive effect on employees behaviours. For instance, former IBM CEO Sam Palmisano wanted employees to value
teamwork, so he chose to take several million dollars from his yearly bonus and give it to
his top executives based on their teamwork. He said, If you say youre about a team, you
have to be a team. Youve got to walk the talk, right?19 However, as weve seen in numerous
corporate ethics scandals, the actions of top managers also can lead to undesirable outcomes.
Finally, organizations help employees adapt to the culture through socialization, a process that helps new employees learn the organizations way of doing things. For instance,
new employees at Starbucks stores go through 24 hours of intensive training that helps
turn them into brewing consultants (baristas). They learn company philosophy, company
43
jargon, and even how to assist customers with decisions about beans, grind, and espresso
machines. One benefit of socialization is that employees understand the culture and are
enthusiastic and knowledgeable with customers.20 Another benefit is that it minimizes
the chance that new employees who are unfamiliar with the organizations culture might
disrupt current beliefs and customs.
How Employees Learn Culture

Employees learn an organizations culture in a number of ways. The most common are
stories, rituals, material symbols, and language.
Stories
Organizational stories typically contain a narrative of significant events or people, including such things as the organizations founders, rule breaking, reactions to past mistakes, and
so forth.21 Managers at Southwest Airlines tell stories celebrating employees who perform
heroically for customers.22 Such stories help convey whats important and provide examples
that people can learn from. At 3M Company, the product innovation stories are legendary.
Theres the story about the 3M scientist who spilled chemicals on her tennis shoe and came
up with Scotchgard. Then, theres the story about Art Fry, a 3M researcher, who wanted a
better way to mark the pages of his church hymnal and invented the Post-It Note. These stories
reflect what made 3M great and what it will take
to continue that success.23 To help employees
learn the culture, organizational stories anchor
the present in the past, provide explanations and
legitimacy for current practices, exemplify what
is important to the organization, and provide
compelling pictures of an organizations goals.24
Rituals
In the early days of Facebook, founder Mark
Zuckerberg had an artist paint a mural at company headquarters showing children taking
over the world with laptops. Also, he would
end employee meetings by pumping his fist
in the air and leading employees in a chant of
domination. Although the cheering ritual was
intended to be something simply fun, other
company executives suggested he drop it because it made him seem silly, and they feared
that competitors might cite it as evidence of monopolistic goals.25 Thats the power that
rituals can have in shaping what employees believe is important. Corporate rituals are
repetitive sequences of activities that express and reinforce the important values and goals
of the organization. One of the best-known corporate rituals is Mary Kay Cosmetics annual
awards ceremony for its sales representatives. The company spends more than $50 million
annually on rewards and prize incentives. Looking like a cross between a circus and a Miss
America pageant, the ceremony takes place in a large auditorium, on a stage in front of a
large, cheering audience, with all the participants dressed in glamorous evening clothes.
Salespeople are rewarded for sales goal achievements with an array of expensive gifts,
including big-screen televisions, diamond rings, trips, and pink Cadillacs. This show acts
as a motivator by publicly acknowledging outstanding sales performance. In addition, the
ritual aspect reinforces late founder Mary Kays determination and optimism, which enabled
her to overcome personal hardships, start her own company, and achieve material success.
It conveys to her salespeople that reaching their sales goals is important and through hard
work and encouragement, they too can achieve success. The contagious enthusiasm and
excitement of Mary Kay sales representatives make it obvious that this annual ritual plays
a significant role in establishing desired levels of motivation and behavioural expectations,
which is, after all, what management hopes an organizations culture does.
German automaker BMW helps

employees learn its companys
culture by repeating the story of
1959. New employees learn that
1959 was a pivotal year for BMW
because it almost went bankrupt
after badly misjudging the market
by producing a large expensive
car few people could afford and a
tiny two-seater that was too small
to be practical. Management
devised a turnaround plan for
BMW that focused on producing a new class of sporty sedans
and made a pact with employees that would help keep the
company afloat. The story of
1959 reflects the importance
of employees in turning around
BMW and steering it on the road
to success. This photo shows
BMW employees signing a new
car model they helped produce,
signifying the powerful role they
continue to play in the companys
performance.
Andreas Gebert/EPA/Newscom
44
One area where organizational

culture influences employee
behaviour is how employees
dress for work. Look at what each
of these four individuals is wearing. At what kinds of organizations do you think each of these
styles is appropriate work wear?
What do you think the cultures
might be like at the organizations
where each person works?
Ken Hurst/Shutterstock
Lisa F. Young/Shutterstock
markos86/Shutterstock
Brian Mueller/Shutterstock
Material Artifacts and Symbols

When you walk into different businesses, do you get a feel for what type of work environment it isformal, casual, fun, serious, and so forth? These reactions demonstrate the power
of material symbols or artifacts in creating an organizations personality.26 The layout of an
organizations facilities, how employees dress, the types of automobiles provided to top
executives, and the availability of corporate aircraft are examples of material symbols. Others include the size of offices, the elegance of furnishings, executive perks (extra benefits
provided to managers such as health club memberships, use of company-owned facilities,
and so forth), employee fitness centres or on-site dining facilities, and reserved parking spaces
for certain employees. At WorldNow, a business that helps local media companies develop
new online distribution channels and revenue streams, an important material symbol is an
old dented drill that the founders purchased for $2 at a thrift store. The drill symbolizes the
companys culture of drilling down to solve problems. When an employee is presented
with the drill in recognition of outstanding work, he or she is expected to personalize the
drill in some way and devise a new rule for caring for it. One employee installed a Bart Simpson trigger; another made the drill wireless by adding an antenna. The companys icon
carries on the culture even as the organization evolves and changes.27
Material symbols convey to employees who is important and the kinds of behaviour
(for example, risk taking, conservative, authoritarian, participative, individualistic, and so
forth) that are expected and appropriate.
Language
Many organizations and units within organizations use language as a way to identify and
unite members of a culture. By learning this language, members attest to their acceptance
of the culture and their willingness to help preserve it. For instance, at Cranium, a Seattle
board game company, chiff is used to remind employees of the need to be incessantly
innovative in everything they do. Chiff stands for clever, high-quality, innovative,
friendly, fun.28 At Build-A-Bear Workshop stores, employees are encouraged to use a sales
technique called Strive for Five, in which they work to sell each customer five items. The
simple rhyming slogan is a powerful tool to drive sales.29
Over time, organizations often develop unique terms to describe equipment, key personnel, suppliers, customers, processes, or products related to its business. New employees
are frequently overwhelmed with acronyms and jargon that, after a short period of time,
become a natural part of their language. Once learned, this language acts as a common
denominator that bonds members.
How Culture Affects Managers

Because an organizations cultural norms define what its employees can and cannot do, they
are particularly relevant to managers even though they are rarely explicitly stated or written down. Its unlikely that they will even be spoken. But they are there, and all managers
quickly learn what to do and what not to do in their organization. For instance, you will not
find the following values written down anywhere, but each comes from a real organization.
Look busy even if you are not.
If you take risks and fail around here, you will pay dearly for it.
Before you make a decision, run it by your manager so that he or she is never surprised.
We make our product only as good as the competition forces us to.
What made us successful in the past will make us successful in the future.
If you want to get to the top here, you have to be a team player.
The link between values such as these and managerial behaviour is fairly straightforward.
If an organizations culture supports the belief that profits can be increased by cost cutting
and that the companys best interests are served by achieving slow but steady increases in
quarterly earnings, managers are unlikely to pursue programs that are innovative, risky,
long term, or expansionary. For organizations that value and encourage workforce diversity,
the organizational culture, and thus managers decisions and actions, will be supportive of
diversity efforts. In an organization whose culture conveys a basic distrust of employees,
managers are more likely to use an authoritarian leadership style than a democratic one.
Why? The culture establishes for managers what is appropriate behaviour.
Current Organizational Culture Issues

Facing Managers
3M has consistently ranked in the top five of the Global Innovation 1000 survey yet does
not rank in the top 20 R&D spenders. How is this possible? The explanation is in the way 3M uses
culture to support a winning overall business strategy, deep customer insight, great talent and
the right set of capabilities to achieve successful execution. In the study, culture was defined as
the organizations self-sustaining patterns of behaving, feeling, thinking and believing. The study
pointed out that organizations with unsupportive cultures and poor strategic alignment significantly
underperform their competitors.
Think About It
3M has been strategic in building a sustaining innovative culture over the long term. What
were some of the steps they took? Could similar steps be taken to support an ethical culture?
A customer responsive culture? A culture that supports diversity? An inclusive workplace
culture?
Calgary-based WestJet Airlines is renowned for its attention to customers. Nikes innovations in running-shoe technology are legendary. Royal Bank (RBC Financial Group)
consistently takes top honours for corporate responsibility and citizenship. How have
these organizations achieved such reputations? Their organizational cultures have played
a crucial role. Lets look at four current cultural issues managers should consider: creating
an ethical culture, creating an innovative culture, creating a customer-responsive culture,
and creating a culture that supports diversity.
datapoints30
43
percent of workers
surveyed would not
recommend a job at their
workplace to a friend or family
member.
70
percent of large
companies are likely to
begin using digital-gamelike
reward and competitive tactics
to motivate employee performance and encourage friendly
competition.
61
surveyed in Great
Britain felt their boss was
unapproachable.
percent of executives
surveyed said fostering a
shared understanding of values
was an important capability.
32
percent of workers
surveyed said acclimating to a different corporate
culture could pose the greatest
challenge when reentering the
workforce.
67
45
percent of men surveyed

never wear a tie to work.
surveyed said their
companies ability to innovate
was below average when it
came to moving quickly from
generating ideas to selling
products.
45
percent of senior
managers surveyed said
their companys culture is clear
about what motivates employees.
Creating an Ethical Culture

The content and strength of an organizations culture influences its ethical climate and
the ethical behaviour of its members.31 A strong organizational culture will exert more
influence on employees than a weak one. If the culture is strong and supports high ethical
standards, it should have a very powerful and positive influence on employee behaviour.
Likewise, a strong culture that encourages unethical behaviour will have a powerful influence on employees, as the following Management Reflection shows.
45
Describe what kinds of

cultures managers can
create.
46
MANAGEMENT REFLECTION
FOCUS ON E T HICS
Let My People Go Surfing

Can a manager encourage individuals to act responsibly? Canadian-born Yvon
Chouinard founded the clothing company Patagonia forty years ago. He and his wife are
sole owners of Patagonia, a privately held company that brought in $414 million in sales
in fiscal 2011 and projected a 30 percent increase in sales for this year. His flex-time policies allow workers to come and go whenever they wantsay, when waves are high at the
nearby surf pointas long as deadlines are met. Theres a yoga room available any time
of day (I walked in on the head menswear designer meditating there at around 11 a.m.
on a Tuesday.) At the prodding of Chouinards wife, Malinda, Patagonia was one of the
first companies in California to provide on-site, subsidized day care. Even the chief bean
counter, COO and CFO Rose Marcario, seems ethcially fulfilled. In previous jobs at other
companies, she says, I might have looked for ways to defer taxes in the Cayman Islands.
Here, we are proud to pay our fair share of taxes. Its a different philosophy. My life is more
integrated with my work because Im trying to stay true to the same values in both.32
An organizational culture most likely to shape high ethical standards is one that is
high in risk tolerance, low to moderate in aggressiveness, and focused on means as well
as outcomes. Managers in such a culture are supported for taking risks and innovating,
are discouraged from engaging in uncontrolled competition, and will pay attention to
how goals are achieved as well as to what goals are achieved (as in the Patagonia example).
Creating an Innovative Culture

You may not recognize IDEOs name, but youve probably used a number of its products.
As a product design firm, it takes the ideas that corporations bring to it and turns them into
reality. Some of its creations range from the first commercial mouse (for Apple Computer)
to the first stand-up toothpaste tube (for Procter & Gamble) to the handheld personal
organizer (for Palm). Its critical that IDEOs culture support creativity and innovation.33
IDEO has won more BusinessWeek/DSA Industrial Design Excellence awards than any other
firm. It also has been ranked by BusinessWeek in the top 25 most innovative companies and
does consulting work for the other 24.34 The companys emphasis is on simplicity, function, and meeting user needs. IDEO believes that the best ideas for creating or improving
products or processes come from keen observation of how users work and play on a daily
As we saw in Chapter 1,
organizational culture is what
makes Cirque du Soleil so
special. Employees focus on
solutions rather than blame.
Consensus is not a virtue
because CEO Daniel Lamarre
feels that the best ideas get lost
if everyone has to compromise.
Lamarre encourages dissent, and
tempers fly during discussions,
but the results are the creative,
dynamic shows that the Cirque
produces.
Ian Rutherford/ZUMA Press/Newscom
47
basis.35 Another innovative organization is Cirque du Soleil, the Montreal-based creator

of circus theatre. Its managers state that the culture is based on involvement, communication, creativity, and diversity, which they see as keys to innovation.36
Although these two companies are in industries in which innovation is important
(product design and entertainment), the fact is that any successful organization needs
a culture that supports innovation. How important is culture to innovation? In a recent
survey of senior executives, more than half said that the most important driver of innovation for companies was a supportive corporate culture.37
What does an innovative culture look like? According to Swedish researcher Goran
Ekvall, it is characterized by the following:
Challenge and involvementAre employees involved in, motivated by, and

committed to long-term goals and success of the organization?
FreedomCan employees independently define their work, exercise discretion,

and take initiative in their day-to-day activities?
Trust and opennessAre employees supportive and respectful to each other?
Idea timeDo individuals have time to elaborate on new ideas before taking action?
Playfulness/humourIs the workplace spontaneous and fun?
Conflict resolutionDo individuals make decisions and resolve issues

based on the good of the organization rather than personal interest?
DebatesAre employees allowed to express opinions and put forth ideas

for consideration and review?
Risk takingDo managers tolerate uncertainty and ambiguity, and are

employees rewarded for taking risks?38
Creating a Customer-Responsive Culture

Isadore Sharp, chair and CEO of Toronto-based Four Seasons Hotels and
Resorts, believes keenly in customer service. Creating a customer-responsive
culture starts with employee selection: every candidate faces four or five interviews to ensure they have the right attitude. As part of employee training, all
new employees spend one night in the hotel as a guest to help them understand
the perspective of the customer. Sharp notes that the hotel chain has 30 000
employees who are always thinking of new ways to make our guest experience
more rewarding.39
Harrahs Entertainment, the Las Vegasbased national gaming company, is
also devoted to customer service, and for good reason. Company research showed
that customers who were satisfied with the service they received at a Harrahs
casino increased their gaming expenditures by 10 percent, and those who were
extremely satisfied increased their gaming expenditures by 24 percent. When
customer service translates into these types of results, of course managers would want to
create a customer-responsive culture!40
But what does a customer-responsive culture look like? Research shows that six characteristics are routinely present in successful service-oriented organizations:
Outgoing and friendly employees. Successful service-oriented organizations hire

employees who are outgoing and friendly.
Few rigid rules, procedures, and regulations. Service employees need to have the
freedom to meet changing customer service requirements.
Widespread use of empowerment. Employees are empowered to decide what is

necessary to please the customer.
Good listening skills. Employees in customer-responsive cultures have the ability to

listen to and understand messages sent by the customer.
This jubilant customer jumps for

joy to celebrate his purchase of
an iPad tablet on the first day of
its release at an Apple retail store
in London. By creating an innovative and customer-responsive
culture, Apple has achieved
financial success and earned
high customer satisfaction ratings
and brand loyalty for its products
and services. This culture fosters
employee creativity, commitment to company goals, trust
and openness, and risk taking. It
involves hiring friendly and helpful
employees and empowering them
to make decisions about their
jobs and what they can do to
satisfy and delight customers.
Carl Court/AFP/Getty Images/Newscom
48
Role clarity. Service employees act as links between the organization and its
customers, which can create considerable ambiguity and conflict. Successful
customer-responsive cultures reduce employees uncertainty about their roles
and the best way to perform their jobs.
Employees attentive to customer needs. They are willing to take the initiative, even
when its outside their normal job requirements, to satisfy a customers needs.41
In general, to create any type of culture (and to reinforce the culture), managers need
to communicate the elements of the culture, model the appropriate behaviours, train
employees to carry out the new actions, and reward desired behaviours while creating
negative incentives for straying from the desired behaviour.42
Creating a Culture That Supports Diversity

workforce diversity The mix of
people in organizations in terms of
gender, race, ethnicity, age, and
other characteristics that reflect
differences.
Todays organizations are characterized by workforce diversity, the mix of people in

organizations in terms of gender, race, ethnicity, age, and other characteristics that reflect
differences. Managers must look long and hard at their culture to see whether the shared
meaning and beliefs that were appropriate for a more homogeneous workforce will accept
and promote diverse views. Although organizations in the past may have supported
diversity to meet federal hiring requirements, organizations today recognize that diversitysupportive cultures are good for business. Among other things, diversity contributes to
more creative solutions and enhances employee morale. But how can such a culture be
encouraged? The following Management Reflection discusses what managers can do.
MANAGEMENT REFLECTION
Creating an Inclusive Workplace Culture

How can managers create a culture that allows diversity to flourish? Creating a
workplace culture that supports and encourages the inclusion of diverse individuals and
views is a major organizational effort.43 There are two things managers can do. First,
managers must show that they value diversity through their decisions and actions. As they
plan, organize, lead, and control, they need to recognize and embrace diverse perspectives.
For instance, at the Marriott Marquis Hotel in New Yorks Times Square, managers take
required diversity-training classes, where they learn that the best way to cope with diversity-related conflict is by focusing on performance and not defining problems in terms
of gender, culture, race, or disability. At Prudential, the annual planning process includes
key diversity performance goals that are measured and tied to managers compensation.
The second thing managers can do is look for ways to reinforce employee behaviours that
exemplify inclusiveness. Some suggestions include encouraging individuals to value and
defend diverse views, creating traditions and ceremonies that celebrate diversity, rewarding heroes and heroines who accept and promote inclusiveness, and communicating
formally and informally about employees who champion diversity issues.
The Organizational Environment

Describe the features
of the specific and
general organizational
environments.
During the American stock market crash of 1929, the Dow Jones average fell by
54.7 percent.44 Between October 11, 2007, and March 2, 2009, the market declined 50.2 percent!
In the midst of the widespread market chaos during the recent market downturn, 3M reacted by
aggressively managing costs and cash, as well as putting in place tighter operational discipline. In
the fourth quarter of 2008, more than 2400 jobs were eliminated. Factory workers were temporarily
laid off until production volumes returned to normal levels, pay raises were deferred in 2009, the
policy of banking vacations was eliminated, and capital expenditures were cut back by 30 percent.45
49
Think About It
The financial collapse fuelled by the subprime mortgage crisis evolved quickly and soon became
global. If you were a manager at 3M, could you have prepared for this eventuality?
In the Management History module, our discussion of an organization as an open system

explained that an organization interacts with its environment as it takes in inputs and distributes outputs. Digital technology has disrupted all types of industriesfrom financial
services to recorded music. One industry in particular, the publishing industry, has been
impacted significantly. As e-book sales skyrocketed, competition among e-book reader
devices intensified. Amazon introduced the first device, the Kindle, in November 2007. As
with any new product, customers had to adjust to the new technology, but once they did,
the Kindles were on fire! Two years later, retailer Barnes & Noble introduced the Nook, a
cheaper e-book device. Amazon responded by cutting the price of its cheapest Kindle. Three
months later in January 2010, Apple introduced its iPad tablet. It was more expensive, but
its functionality and options (and the Apple name) made it an instant hit with customers.
In response, Barnes & Noble cut the price of its Nook, and Amazon again lowered the price
of the Kindle. By September 2011, the basic Kindles starting price had dropped to $79,
and Amazon launched Kindle Fire. Then in November 2011, Barnes & Noble joined the
tablet battle with its $249 Nook Tablet. And now Microsoft has invested $300 million in
Barnes & Noble (which had been struggling) in an attempt to be more competitive with
Amazon. In addition, Toronto-based Kobo Inc has recently gained international attention
for doubling its readership in 2013 and capturing 3% of the American e-reader market.
Since 2009, Kobo has managed to capture dominant positions in Canada and Japan, and
has expanded its selection to include attractive low-cost alternatives. As the popularity of
e-books accelerates, the reader wars are likely to continue.46 Anyone who doubts the
impact the external environment has on managing just needs to look at whats happened
in both the publishing industry and the e-book reader industry during the last few years.
Defining the External Environment

The term external environment refers to forces and institutions outside the organization that potentially can affect the organizations performance. The external environment
is made up of three components, as shown in Exhibit 2-6: the specific environment, the
general environment, and the global environment. We discuss the first two types of external environment in this chapter. Today, globalization is one of the major factors affecting
managers of both large and small organizations. We address the global environment in
Chapter 3.
external environment Outside

forces and institutions that
potentially can affect the
organizations performance.
The Specific Environment

The specific environment includes those external forces that have a direct and immediate
impact on managers decisions and actions and are directly relevant to the achievement of
the organizations goals. Each organizations specific environment is unique and changes
with conditions. For instance, Timex and Rolex both make watches, but their specific
environments differ because they operate in distinctly different market niches. What forces
make up the specific environment? The main ones are customers, suppliers, competitors,
and pressure groups.
Customers Organizations exist to meet the needs of customers. Its the customer or
client who consumes or uses the organizations output. This is true even for government
organizations and other not-for-profits.
Customers obviously represent potential uncertainty to an organization. Their tastes
can change or they can become dissatisfied with the organizations products or service.
Of course, some organizations face considerably more uncertainty as a result of their
specific environment The part

of the external environment that is
directly relevant to the achievement
of an organizations goals.
50
Exhibit 2-6
The External Environment
L ENVIRON
LOBA
ME
EG
NT
H
T
L ENVIR
A
R
E
N
ON
E
ME
EG
CIFIC EN
TH HE SPE
VIR NT
T
ON
Econ
om
ic
lo
Tec
ba
hnological
l Tr
ade
tu
ra
l
Customers
-c
ul
ic
ph
ra
og
Dem
Competitors
lPolitical
Lega
THE
ORGANIZATION
litical
alPo
Leg
Suppliers
T
EN
Economic
Public
Pressure
Groups
o
ci
So
l
ra
ltu
u
C
customers than do others. For example, what comes to mind when you think of Club
Med? Club Meds image was traditionally one of carefree singles having fun in the sun
at exotic locales. Club Med found, however, that as its target customers married and had
children, these same individuals were looking for family-oriented vacation resorts where
they could bring the kids. Although Club Med responded to the changing demands of its
customers by offering different types of vacation experiences, including family-oriented
ones, the company found it hard to change its image.
Suppliers When you think of an organizations suppliers, you typically think in terms of
organizations that provide materials and equipment. For Canadas Wonderland, just outside of Toronto, that includes organizations that sell soft drinks, computers, food, flowers
and other nursery stock, concrete, and paper products. But the term suppliers also includes
When the internet search engine

Google decided to accept heavy
censorship of its Chinese site
in compliance with Communist
Party requirements, its founders said the widely criticized
compromise was made to allow
internet access to a fifth of the
worlds population. Among those
who disagreed with Googles
compromise were these members
of Students for a Free Tibet. In
March of 2010 Google reconsidered its decision and withdrew
its services from mainland China
in protest of the self-censorship
required as the price of doing
business in China. 47
Dino Vournas/AP Photos
51
providers of financial and labour inputs. Shareholders, banks, insurance companies, pension funds, and other similar organizations are needed to ensure a continuous supply of
money. Labour unions, colleges and universities, occupational associations, trade schools,
and local labour markets are sources of employees. When the sources of employees dry
up, it can impact managers decisions and actions. For example, a lack of qualified nurses,
a serious problem plaguing the health care industry, is making it difficult for health care
providers to meet demand and keep service levels high.
Competitors All organizations have one or more competitors. Even though it is a
monopoly, Canada Post competes with FedEx, UPS, and other forms of communication
such as the telephone, email, and fax. Nike competes with Reebok, Adidas, and Fila, among
others. Coca-Cola competes with Pepsi and other soft drink companies. Not-for-profit
organizations such as the Royal Ontario Museum and Girl Guides also compete for dollars,
volunteers, and customers. One competitor that many managers ignore when launching
new products or services is the status quocustomers tend to keep doing what they have
always done unless there is a compelling reason to try something new. With this in mind,
some would suggest that entering a new market with a new product is infinitely more risky
than entering an established market where you find a compelling way to fulfill a need not
served by your competitors.
Public Pressure Groups Managers must recognize the special-interest groups that attempt
to influence the actions of organizations. For instance, both Walmart and Home Depot
have had difficulty getting approval to build stores in Vancouver. Neighbourhood activists
worry about traffic density brought about by big-box stores, and in the case of both stores
there is concern that local businesses will fail if the stores move in. Home Depots director of real estate called Vancouver City Halls review process confusing and unfair and
unlike anything in [his] experience.48 Local hardware store owners and resident groups
have lobbied against the store to city planners, hoping to keep big-box stores out of the
Kitsilano neighbourhood. Though Walmart eventually succeeded in entering the Vancouver
market, in nearby Richmond, public pressure delayed Walmarts entry by almost 10 years.
As social and political attitudes change, so too does the power of public pressure groups.
For example, through their persistent efforts, groups such as MADD (Mothers Against
Drunk Driving) and SADD (Students Against Destructive Decisions) have managed to
make changes in the alcoholic beverage and restaurant and bar industries, and have raised
public awareness about the problem of drunk drivers.
The General Environment

The general environment includes the broad economic, legalpolitical, socio-cultural,
demographic, and technological conditions that may affect the organization. Changes in
any of these areas usually do not have as large an impact as changes in the specific environment do, but managers must consider them as they plan, organize, lead, and control.
Economic Conditions Interest rates, inflation, changes in disposable income, stock
market fluctuations, and the stage of the general business cycle are some of the economic
factors that can affect management practices in an organization. For example, many specialty retailers such as IKEA, Roots, Birks, and Williams-Sonoma are acutely aware of the
impact consumer disposable income has on their sales. When consumers incomes fall or
when their confidence about job security declines, as happened following the subprime
mortgage crisis in 2008, they will postpone purchasing anything that isnt a necessity. Even
charitable organizations such as the United Way or the Heart and Stroke Foundation feel
the impact of economic factors. During economic downturns, not only does the demand
for their services increase, but also their contributions typically decrease.
LegalPolitical Conditions Federal, provincial, and local governments influence what
organizations can and cannot do. Some federal legislation has significant implications. For
example, the Canadian Human Rights Act makes it illegal for any employer or provider of
general environment Broad

external conditions that may affect
the organization.
52
service that falls within federal jurisdiction to discriminate on the following grounds: race,
national or ethnic origin, colour, religion, age, sex (including pregnancy and childbirth),
marital status, family status, mental or physical disability (including previous or present
drug or alcohol dependence), pardoned conviction, or sexual orientation. The act covers
federal departments and agencies; Crown corporations; chartered banks; national airlines;
interprovincial communications and telephone companies; interprovincial transportation
companies; and other federally regulated industries, including certain mining operations.
Canadas Employment Equity Act of 1995 protects several categories of employees with
employment barriers: Aboriginal peoples (whether First Nation, Inuit, or Mtis); persons
with disabilities; members of visible minorities (non-Caucasian in race or non-white in
colour); and women. This legislation aims to ensure that members of these four groups are
treated equitably. Employers covered by the Canadian Human Rights Act are also covered
by the Employment Equity Act.
Many provinces have their own legislation, including employment equity acts, to cover
employers in their provinces. Companies sometimes have difficulty complying with equity
acts, as recent audits conducted by the Canadian Human Rights Commission show. In an
audit of 180 companies, only Status of Women Canada; Elliot Lake, Ontario-based AJ Bus
Lines; the National Parole Board; Canadian Transportation Agency; Les Mchins, Quebecbased Verreault Navigation; and Nortel Networks were compliant on their first try.49
The Competition Act of 1986 created the Bureau of Competition Policy (now called the
Competition Bureau) to maintain and encourage competition in Canada. For example,
if two major competing companies consider merging, they come under scrutiny from the
bureau.
To protect farmers, the Canadian government has created marketing boards that regulate
the pricing and production of such things as milk and eggs. Those who decide that they
want to manufacture small amounts of cheese in Canada would have great difficulty doing
so because the Canadian government does not open production quotas to new producers
very often. Marketing boards restrict imports of some products, but the unintended result
is that foreign governments oppose exports from Canada.
Organizations spend a great deal of time and money meeting government regulations,
but the effects of these regulations go beyond time and money.50 They also reduce managerial discretion by limiting the choices available to managers. In a 2004 COMPAS survey
of business leaders, most respondents cited interprovincial trade barriers as a significant
hurdle to doing business in this country, calling the barriers bad economics.51 An article
published in May 2007 backed up the views of these Canadian business leaders, arguing
that nearly half of the productivity advantage that the United States has over Canada could
be accounted for by interprovincial trade barriers.52
Other aspects of the legalpolitical conditions are the political climate, the general
stability of a country where an organization operates, and the attitudes that elected government officials hold toward business. This is discussed in more detail in Chapter 3.
Socio-Cultural Conditions
A recent Harris Interactive Poll found that only 10 percent of adults think economic
inequality is not a problem at all. Most survey respondents believed it is either a major
problem (57 percent) or a minor problem (23 percent).53 Perhaps you saw news stories
during late 2011 about a grassroots movement of protesters (Occupy) that started on Wall
Street and soon spread to other cities in United States, Canada, and around the world.
These protests focused on social and economic inequality, greed, corruption, and the
undue influence of corporations on government. The protestors slogan, We are the 99%,
referred to the growing income and wealth gap between the wealthiest 1 percent and the
rest of the population. Why has this issue become so sensitive? After all, those who worked
hard and were rewarded because of their hard work or innovativeness have long been
admired. And an income gap has always existed. In the North America, that gap between
the rich and the rest has been much wider than in other developed nations for decades and
is now becoming part of the dialogue that politicians and policy makers are speaking to as
exemplified by the Occupy Wall Street movement.54 As economic growth has languished
53
and sputtered, and as peoples belief that anyone could

grab hold of an opportunity and have a decent shot at prosperity has wavered, social discontent over growing income
gaps has increased. The bottom line is that business leaders
need to recognize how societal attitudes in the economic
context also may create constraints as they make decisions
and manage their businesses.55
Demographic Conditions You cant understand the
future without demographics. The composition of a society
shapes every aspect of civic life, from politics, economics, and culture to the kinds of products, services, and businesses that are likely to succeed or fail. Demographics isnt
destiny, but its close.56 This quote should make it obvious
why its important to examine demographics.
Baby Boomers. Gen Y. Post-Millennials. Maybe youve heard or seen these terms
before. Population researchers use these terms to refer to three of the more well-known
age groups found in the North American population. Baby Boomers are those individuals
born between 1946 and 1964. Much is written and reported about boomers because
there are so many of them. The sheer number of people in that cohort means theyve significantly affected every aspect of the external environment (from the educational system
to entertainment/lifestyle choices to the Social Security system and so forth) as they cycle
through the various life stages.
Gen Y (or the Millennials) is typically considered to encompass those individuals
born between 1978 and 1994. As the children of the Baby Boomers, this age group is
also large in number and making its imprint on external environmental conditions as
well. From technology to clothing styles to work attitudes, Gen Y is making its imprint
on workplaces.
Then, we have the Post-Millennialsthe youngest identified age group those born
between the late 1990s and 2005.57 This group has also been called the iGeneration,
primarily because theyve grown up with technology that customizes everything to the
individual. Population experts say its too early to tell whether elementary school-aged
children and younger are part of this demographic group or whether the world they live
in will be so different that theyll comprise a different demographic cohort.58
Demographic age cohorts are important to our study of management because, as we
said earlier, large numbers of people at certain stages in the life cycle can constrain decisions and actions taken by businesses, governments, educational institutions, and other
organizations. In Canada the proportion of the population older than 65 was 13.7 percent
in the latest census59 and is expected to increase to 26.5 percent by 2051.60 This aging of
the population will result in a labour shortage, and creative ways will need to be found to
keep seniors working beyond the age of 65, along with pressure to increase immigration.
Another effect will be a mounting fiscal burden, with fewer taxpayers to support each
retired person (3.6 in Canada in 1995 and projected to be only 1.6 by 2050). We as a society and our politicians as our voice will be forced to make difficult choices to balance the
needs of the aging population (for health care, in particular) and the needs of the general
population (for education and social benefits such as welfare and employment insurance)
with our capacity to pay for them. The aged will also face significant cultural challenges
as they will have fewer children and grandchildren to care for them in family settings.61
Technological Conditions In terms of the general environment, the most rapid changes
have occurred in technology. We live in a time of continuous technological change. For
instance, advances in genomics and bioinformatics has made it such that and individuals
genetic information can be used to create personalized medicines that meet their unique
medical needs.62 Information gadgets are getting smaller and more powerful. We have
automated offices, electronic meetings, robotic manufacturing, lasers, integrated circuits,
faster and more powerful microprocessors, cloud computing, synthetic fuels, and entirely
From technology to work

attitudes, the Gen Y age group
is making its imprint in the
workplace. Gen Y is an important
demographic at Facebook,
where most employees are
under 40. The company values
the passion and pioneering spirit
of its young employees who enjoy
taking on the challenge of building ground-breaking technology
and the excitement of working in
a fast-paced environment with
considerable change and ambiguity. Facebook has created a
casual and fun-loving work environment where its young cohorts
interact in a creative climate that
encourages experimentation and
tolerates conflict and risk.
Paul Sakuma/AP Photos
54
new models of doing business in an electronic age. It is possible that nano sensors may
someday be able to smell cancer, allowing physicians to employ a nano device rather
than having to do a biopsy.63 Companies that capitalize on technology, such as Blackberry, eBay, and Google, prosper, and again struggle or change to meet the realities of
newer disruptive technologies. In addition, many successful retailers such as Walmart
use sophisticated information systems to keep on top of current sales trends. Similarly,
hospitals, universities, airports, police departments, and even military organizations that
adapt to major technological advances have a competitive edge over those that do not. The
whole area of technology is radically changing the fundamental ways that organizations
are structured and the way that managers manage.
How the Organizational Environment Affects Managers

Knowing what the various components of the organizational environment are is important
to managers. However, understanding how the organizational environment affects managers is equally important. The organizational environment affects managers through the
degree of uncertainty that is present and through the various stakeholder relationships
that exist between the organization and its external constituencies.
Assessing Environmental Uncertainty

Not all environments are the same. They differ by what we call their degree of environmental
uncertainty, which is the degree of change and the degree of complexity in an organizations environment (see Exhibit 2-7).
The first of these dimensions is the degree of change. If the components in an organizations environment change frequently, we call it a dynamic environment. If change is
minimal, we call it a stable one. A stable environment might be one in which there are no
new competitors, few technological breakthroughs by current competitors, little activity by
pressure groups to influence the organization, and so forth. For instance, Zippo Canada,
best known for its Zippo lighters, faces a relatively stable environment. There are few competitors and there is little technological change. Probably the main environmental concern
for the company is the declining trend in tobacco smokers, although the companys lighters
have other uses and global markets remain attractive.
Exhibit 2-7
Environmental Uncertainty Matrix
Degree of Change
Dynamic
Simple
Degree of Complexity
Stable
Cell 1
Stable and predictable environment
Few components in environment
Components are somewhat similar
and remain basically the same
Minimal need for sophisticated
knowledge of components
Cell 2
Dynamic and unpredictable environment
Few components in environment
Components are somewhat similar but
are in continual process of change
Minimal need for sophisticated
Complex
environmental uncertainty The

degree of change and the degree
of complexity in an organizations
environment.
Cell 3
Stable and predictable environment
Many components in environment
Components are not similar to one
another and remain basically the same
High need for sophisticated
Cell 4
Dynamic and unpredictable environment
Many components in environment
Components are not similar to one another
and are in continual process of change
High need for sophisticated
In contrast, the recorded music industry faces a dynamic (highly uncertain and unpredictable) environment. Digital formats and music-downloading sites have turned the
industry upside down, while YouTube and streaming services make new internet celebrities
every month.. If change is predictable, is that considered dynamic? No. Think of department stores that typically make one-quarter to one-third of their sales in December. The
drop-off from December to January is significant. But because the change is predictable,
we dont consider the environment to be dynamic. When we talk about degree of change,
we mean change that is unpredictable. If change can be accurately anticipated, its not an
uncertainty that managers must confront.
The other dimension of uncertainty describes the degree of environmental complexity.
The degree of complexity refers to the number of components in an organizations environment and the extent of the knowledge that the organization has about those components.
For example, Hasbro, the second-largest toy manufacturer (behind Mattel), has simplified
its environment by acquiring many of its competitors, such as Tiger Electronics, Wizards of
the Coast, Kenner Toys, Parker Brothers, and Tonka Toys. The fewer competitors, customers,
suppliers, government agencies, and so forth that an organization must deal with, the less
complexity and therefore the less uncertainty there is in its environment.
Complexity is also measured in terms of the knowledge an organization needs to have
about its environment. For instance, managers at the online brokerage E*TRADE must
know a great deal about their internet service providers operations if they want to ensure
that their website is available, reliable, and secure for their stock-trading customers. On the
other hand, managers of grocery stores have a minimal need for sophisticated knowledge
about their suppliers.
How does the concept of environmental uncertainty influence managers? Looking again
at Exhibit 2-7, each of the four cells represents different combinations of the degree of
complexity and the degree of change. Cell 1 (an environment that is stable and simple)
represents the lowest level of environmental uncertainty. Cell 4 (an environment that is
dynamic and complex) represents the highest. Not surprisingly, managers influence on
organizational outcomes is greatest in cell 1 and least in cell 4.
Because uncertainty is a threat to an organizations effectiveness, managers try to minimize it. Given a choice, managers would prefer to operate in environments such as those in
cell 1. However, they rarely have full control over that choice. In addition, most industries
today are facing more dynamic changes, making their environments more uncertain. The
discipline of managing uncertainty is known as risk management and is deployed by
managers in both for-profit and not-for-profit organizations.
55
environmental complexity The

number of components in an
organizations environment and
the extent of the organizations
knowledge about those
components.
Managing Stakeholder Relationships

Managers are also affected by the nature of the relationships they have with external stakeholders. The more obvious and secure these relationships become, the more influence
managers will have over organizational outcomes.
Who are stakeholders? We define them as groups in the organizations external environment that are affected by and/or have an effect on the organizations decisions and
actions. These groups have a stake in or are significantly influenced by what the organization does. In turn, these groups can influence the organization. For example, think of
the groups that might be affected by the decisions and actions of Starbuckscoffee bean
farmers, employees, specialty coffee competitors, local communities, and so forth. Some
of these stakeholders also may impact decisions and actions of Starbucks managers. The
idea that organizations have stakeholders is now widely accepted by both management
academics and practising managers.64
Who are an organizations stakeholders? Exhibit 2-8 identifies some of the most common. Note that these stakeholders include internal and external groups. Why? Because
both can affect what an organization does and how it operates. However, we are primarily
interested in the external groups and their impact on managers discretion in planning,
organizing, leading, and controlling. This does not mean that the internal stakeholders are
not important, but we explain these relationships, primarily with employees, throughout
the rest of the book.
stakeholders Any constituencies

in the organizations external
environment that are affected by
the organizations decisions and
actions.
56
Exhibit 2-8
Organizational Stakeholders
Employees
Customers
Social and Political

Action Groups
Unions
Shareholders
Competitors
Organization
Trade and Industry
Associations
Communities
Suppliers
Governments
Media
Why is stakeholder relationship management important? Why should managers care

about managing stakeholder relationships? 65 It can lead to improved predictability of
environmental changes, more successful innovations, a greater degree of trust among
stakeholders, and greater organizational flexibility to reduce the impact of change. But
does it affect organizational performance? The answer is yes! Management researchers
who have looked at this issue are finding that managers of high-performing companies
tend to consider the interests of all major stakeholder groups as they make decisions.66
The more critical the stakeholder and the more uncertain the environment, the more
managers need to rely on establishing explicit stakeholder partnerships rather than just
acknowledging their existence. An organization depends on these external groups as
sources of inputs (resources) and as outlets for outputs (goods and services), and managers should consider the interests of these external groups as they make decisions and take
actions. We address this issue in more detail in Chapter 5 as we look at the concepts of
managerial ethics and corporate social responsibility.
57
CHAPTER 2
SUMMARY AND IMPLICATIONS

1. Compare and contrast the actions of managers according to the omnipotent and symbolic views. The omnipotent view of management suggests that man-
agers are directly responsible for an organizations success or failure. While this is the
dominant view of managers, there is another perspective. The symbolic view of management argues that much of an organizations success or failure is due to external forces
outside managers control. The reality is probably somewhere in between these two views,
with managers often able to exert control, but also facing situations over which they have
no control.
At 3M, the 15 percent rule allows technical employees to work on projects to
which they feel a personal commitment (the omnipotent view). However, when markets
collapsed in 2001 (after 9/11 and the dot-com bust) and again in late 2008 (as a result
of the subprime mortgage crisis), the company found itself at the mercy of market forces
beyond its managers control (symbolic view).
2. Discuss the characteristics and importance of organizational culture.
Culture influences how people act within an organization. A strong culture in which
everyone supports the goals of the organization makes it easier for managers to achieve
goals. A weak culture, in which people do not feel connected to the organization, can
make things more difficult for managers. Managers can also influence culture through
how it is conveyed to employees, which employees are hired, and how rewards occur in
organizations.
The innovation culture at 3M changed when James McNerney moved the cultural
pendulum toward efficiency of operation and away from innovation. The pendulum swung
back toward innovation with the appointment of George Buckley in 2005.
3. Describe what kinds of cultures managers can create. Managers can create a
variety of cultures. In this chapter, we discussed ethical, innovative, customer-responsive,
and diversity supportive cultures. By having a culture that is consistent with organizational
goals and values, managers can more easily encourage employees to achieve organizational
goals and values.
At 3M managers not only talk the talk, they also walk the talk in their approach
to collaboration and the incentives that support the stated cultural objectives.
4. Describe the features of the specific and general organizational environments. The organizational environment plays a major role in shaping managers
decisions and actions. Managers have to be responsive to customers and suppliers while
being aware of competitors and public pressure groups. As well, economic, legalpolitical, socio-cultural, demographic, and technological conditions affect the issues managers
face in doing their job.
The 30 percent rule at 3M requiring that 30 percent of the current years sales
must come from products not in existence five years ago forces the company to proactively stay in touch with customers, competitors, and changes in the marketplace.
58
MyManagementLab
Study, practise, and explore real management situations with these helpful resources:
Interactive Lesson Presentations: Work through interactive presentations and
assessments to test your knowledge of management concepts.
PIA (Personal Inventory Assessments): Enhance your ability to connect P
I
with key concepts through these engaging, self-reflection assessments.
Study Plan: Check your understanding of chapter concepts with self-study quizzes.
Simulations: Practise decision-making in simulated management environments.
PERSONAL
INVENTORY
ASSESSMENT
R E V IEW A ND DIS CUS SI ON QUE STI ONS

1. Contrast the actions of managers according to the
omnipotent and symbolic views.
2. Classrooms have cultures. Describe your classroom
culture using the seven dimensions of organizational culture. Does the culture constrain your instructor? How?
3. What is the impact of a strong culture on organizations
and managers? Can a strong culture be a liability to an
organization? Explain.
4. What is the source of an organizations culture? How
does organizational culture continue?
5. How do employees learn an organizations culture?
6. What are the characteristics of an ethical culture,

an innovative culture, an adaptable culture, a
customer-responsive culture, and a diversity-supportive
culture?
7. What forces influence the specific and the general organizational environments? Describe an effective culture
for (a) a relatively stable environment and (b) a dynamic
environment. Justify your choices.
8. Businesses are built on relationships. What do you
think this statement means? What are the implications
for managing the external organizational environment?
ET HICS D ILEMMA
In many ways, technology has made all of us more productive. However, ethical issues do arise in how and when
technology is used. Take the sports arena. All kinds of technologically advanced sports equipment (swimsuits, golf
clubs, ski suits, etc.) have been developed that can sometimes give competitors/players an edge over their opponents.67 We saw it in swim meets at the summer Olympics
and on the ski slopes at the winter Olympics. What do you

think? Is this an ethical use of technology? What if your
school (or country) were competing for a championship and
couldnt afford to outfit athletes in such equipment and it
affected your ability to compete? Would that make a difference? What ethical guidelines might you suggest for such
situations?
SK I LLS EX ER CIS E
Developing Your Environmental Scanning SkillAbout the Skill

Anticipating and interpreting changes that take place in
the environment are important skills that managers need.
Information that comes from scanning the environment can
be used in making decisions and taking actions. And managers at all levels of an organization need to know how to
scan the environment for important information and trends.
Steps in Practising the Skill

You can be more effective at scanning the environment if you
use the following suggestions:68
1. Decide which type of environmental information is important to your work. Perhaps you need to know changes in
customers needs and desires, or perhaps you need to
know what your competitors are doing. Once you know

the type of information youd like to have, you can look at
the best ways to get that information.
2. Regularly read and monitor pertinent information. There
is no scarcity of information to scan, but what you need
to do is read pertinent information sources. How do you
know information sources are pertinent? Theyre pertinent if they provide you with the information you identified as important.
3. Incorporate the information you get from your environmental scanning into your decisions and actions. Unless
you use the information youre getting, youre wasting
your time getting it. Also, the more you use information
from your environmental scanning, the more likely it is that

youll want to continue to invest time and other resources
into gathering it. Youll see that this information is important to your ability to manage effectively and efficiently.
4. Regularly review your environmental scanning activities.
If youre spending too much time getting nonuseful information, or if youre not using the pertinent information
youve gathered, you need to make some adjustments.
5. Encourage your subordinates to be alert to information
that is important. Your employees can be your eyes
and ears as well. Emphasize to them the importance of
gathering and sharing information that may affect your
work units performance.
1. Select an organization with which youre familiar either

as an employee or perhaps as a frequent customer.
Assume youre the top manager in this organization.
What types of information from environmental scanning
do you think would be important to you? Where would
you find this information? Now assume youre a firstlevel manager in this organization. Would the types of
information you would get from environmental scanning
change? Explain.
2. Assume youre a regional manager for a large bookstore
chain. Using the internet, what types of environmental
and competitive information are you able to identify? For
each source, what information did you find that might
help you do your job better?
Practising the Skill

The following suggestions are activities you can do to practise and reinforce the behaviours associated with scanning
the environment.
W O R KING T O GET HER: TE AM E XE RCI SE
Assessing the Organizations Environment

All organizations are informed by the realities of their internal
and external environments, yet the forces in their specific
and general environments differ. Form a small group with
three or four other class members and choose two organizations in different industries. Describe the specific and general
environmental forces that affect each organization. How are
your descriptions different for the two organizations? How are

they similar? Now, using the same two organizations, see if
you can identify their important stakeholders. Also, indicate
whether these stakeholders are critical for the organization
and why they are or are not. As a group, be prepared to share
your information with the class and to explain your choices.
L E A R NING T O B E A M ANAGE R
Pick two organizations you interact with frequently (as an
employee or as a customer) and assess their cultures by
looking at the following aspects:
Physical Design (buildings, furnishings, parking lot,

office or store design): Where are they located and
why? Where do customers and employees park? What
does the office/store layout look like? What activities
are encouraged or discouraged by the physical layout?
What do these things say about what the organization
values?
Symbols (logos, dress codes, slogans, philosophy
statements): What values are highlighted? Where are
logos displayed? Whose needs are emphasized? What
concepts are emphasized? What actions are prohibited?
Which are encouraged? Are any artifacts prominently
displayed? What do those artifacts symbolize? What do

these things say about what the organization values?
Words (stories, language, job titles): What stories are

repeated? How are employees addressed? What do job
titles say about the organization? Are jokes/anecdotes
used in conversation? What do these things say about
what the organization values?
Policies and Activities (rituals, ceremonies, financial
rewards, policies for how customers or employees are
treated; note that you may be able to assess these only
if youre an employee or know the organization well):
What activities are rewarded? Ignored? What kinds of
people succeed? Fail? What rituals are important? Why?
What events get commemorated? Why? What do these
things say about what the organization values?
59
60
C A S E A PPLICAT IO N 1
Making You Say Wow

When you hear the name Ritz-Carlton Hotels, what words
come to mind? Luxurious? Elegant? Formal, or maybe even
stodgy? Way beyond my budget constraints? Three words
that the company hopes comes to mind are exemplary customer service. Ritz-Carlton is committed to treating its guests
like royalty. It has one of the most distinctive corporate cultures in the lodging industry, and employees are referred to as
our ladies and gentlemen. Its motto is printed on a card that
employees carry with them: We are Ladies and Gentlemen
serving Ladies and Gentlemen. And these ladies and gentlemen of the Ritz have been trained in very precise standards
and specifications for treating customers. These standards
were established more than a century ago by founders Caesar
Ritz and August Escoffier. Ritz employees are continually
schooled in company lore and company values. Every day at
15-minute line-up sessions at each hotel property, managers reinforce company values and review service techniques.
And these values are the basis for all employee training and
rewards. Nothing is left to chance when it comes to providing
exemplary customer service. Potential hires are tested both
for cultural fit and for traits associated with an innate passion
to serve. A company executive says, The smile has to come
naturally. Although staff members are expected to be warm
and caring, their behaviour toward guests had been extremely
detailed and scripted. Thats why a new customer service
philosophy implemented in mid-2006 was such a radical
departure from what the Ritz had been doing.
The companys new approach is to not tell employees

how to make guests happy. Employees are now expected
to figure it out. This is almost the opposite from what the
company had been doing, Says Diana Oreck, vice-president,
We moved away from that heavily prescriptive, scripted
approach and toward managing to outcomes. The outcome didnt change, though. The goal is still a happy guest
whos wowed by the service received. However, under the
new approach, staff member interactions with guests are
more natural, relaxed, and authentic rather than sounding like
theyre recited lines from a manual.69
1. What is the culture like at Ritz-Carlton Hotels? Why do
you think this type of culture might be important to a
luxury hotel? What might be the drawbacks of such a
culture?
2. What challenges do you think the company faced in
changing the culture? What is Ritz-Carlton doing to maintain this new culture?
3. What kind of person do you think would be happiest and
most successful in this culture? How do you think new
employees learn the culture?
4. What could other organizations learn from Ritz-Carlton
about the importance of organizational culture?
A Perfect Response to an Imperfect Storm

Twelve days. 70 That is how long it took for Mississippi
Power to restore electrical power to the heavily damaged areas of southern Mississippi after Hurricane Katrina
slammed into the Mississippi Gulf Coast on August 29,
2005, with 233 kilometre-per-hour winds and pounding
rain. That is remarkable, given the devastation that news
photos and television newscasts so graphically displayed.
Its something that even the federal and state governments could not accomplish. How bad was the damage
company employees dealt with? One hundred percent of
the companys customers were without power. Sixty-five
percent of its transmission and distribution facilities were
destroyed. And yet, this organization of 1250 employees
did what it had to do, despite the horrible circumstances
and despite the fact that more than half of its employees
suffered substantial damage to their own homes. It speaks
volumes about the cultural climate that the managers of
Mississippi Power had created.
As a corporate subsidiary of utility holding company
Southern Company, Mississippi Power provides electrical
services to more than 190 000 customers in the Magnolia
State. When Hurricane Katrina turned toward Mississippi,
managers at Mississippi Power swung into action with a swift
and ambitious disaster plan. After Katrinas landfall, Mississippi
Powers management team responded with a style designed
for speed and flexibility, for getting things done amid confusion and chaos. David Ratcliffe, senior executive of Southern
Company, said, I could not be prouder of our response.
What factors led to the companys ability to respond as efficiently and effectively as it did?
One key element is the companys can-do organizational
culture, which is evidenced by the important values inscribed
on employees identification tags: Unquestionable Trust,
Superior Performance, Total Commitment. Because the
values were visible daily, employees knew their importance.
They knew what was expected of them in a disaster response
or in just doing their everyday work. In addition, through
employee training and managerial example, the organization had steeped its culture in Stephen Coveys book The
7 Habits of Highly Effective People. (The companys training
buildingthe Covey Centerflooded during the storm.) These
ingrained habitsbe proactive; begin with the end in mind;
put first things first; think winwin; seek first to understand,
then to be understood; synergize; and sharpen the sawalso
guided employee decisions and actions.
Another important element in the companys successful
post-storm response was the clear lines of responsibility of the
20 storm directors, who had clear responsibility and authority for whatever task they had been assigned. These directors
had the power to do what needed to be done, backed by
unquestionable trust from their bosses. Said one, I dont have
to ask permission.
Finally, the companys decentralized decision-making
approach contributed to the way in which employees were
able to accomplish what they did. The old approach of
responding to a disaster with top-down decision making had
been replaced by decision making being pushed further down
to the electrical substation level, a distribution point that serves
some 5000 people. Crews working to restore power reported
to these substations and had a simple missionget the power
back on. Even out-of-state line crews, hired on contract and

working unsupervised, were empowered to engineer their own
solutions. What the crews often did to get the power back
on was quite innovative and entrepreneurial. For instance,
one crew stripped a generator off an ice machine to get a
substation working. Mississippi Powers president, Anthony
Topazi, said, This structure made things happen faster than
we expected. People were getting more done.
All in all, employees at Mississippi Power, working in difficult, treacherous, and often dangerous situations, did what
they had to do. They got the job done. In recognition of the
companys outstanding efforts to restore power in the wake
of Hurricane Katrina, Mississippi Power was honoured with an
Emergency Response Award by the Edison Electric Institute
in January 2006. Its an award that all the companys employees can be proud of.
1. Using Exhibit 2-2 on page 39, describe the culture at
Mississippi Power. Why do you think this type of culture
might be important to an electric power company? On
the other hand, what might be the drawbacks of such a
culture?
2. Describe how you think new employees at Mississippi
Power learn the companys culture.
3. What stakeholders might be important to Mississippi
Power? What concerns might each of these stakeholders
have? Would these stakeholders change if there was a
disaster to which the company had to respond?
4. What could other organizations learn from Mississippi
Power about the importance of organizational culture?
61

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PART ONE

DEFINING THE MANAGERS TERRAIN

The celebration in 1984 of the 450th anniversary of

Explain why managers are important

Tell who managers are and where

Describe the characteristics of an

Describe the factors that are

Explain the value of studying

dynamic between CEO Daniel Lamarre and company founder

Part 1 DEFINING THE MANAGERS TERRAIN

Who Are Managers and Why Are

Chapter 1 Introduction to Management and Organizations

manager Someone who

Part 1 DEFINING THE MANAGERS TERRAIN

Soleil. He is involved in creating and implementing broad and comprehensive changes

What Is Management and What

Chapter 1 Introduction to Management and Organizations

Efficiency and Effectiveness

Management Strives for:

efficiency Getting the most output

Part 1 DEFINING THE MANAGERS TERRAIN

management functions Planning,

Chapter 1 Introduction to Management and Organizations

Functions vs. Roles

management roles Specific

interpersonal roles Management

Part 1 DEFINING THE MANAGERS TERRAIN

technical skills Knowledge of

Chapter 1 Introduction to Management and Organizations

human skills The ability to work

conceptual skills The mental

Part 1 DEFINING THE MANAGERS TERRAIN

Managers work in organizations. But what is an organization? An organization is a

Chapter 1 Introduction to Management and Organizations

Work is defined by job positions

Work is defined in terms of tasks to be done

Managers always make decisions

Employees participate in decision making

Relatively homogeneous workforce

Workdays have no time boundaries

Lateral and networked relationships

Work at organizational facility during specific hours

Work anywhere, anytime

The Size of Organizations

The Types of Organizations

private sector The part of the

Part 1 DEFINING THE MANAGERS TERRAIN

public sector The part of the

How Is the Managers Job Changing?

As CEO of Cirque du Soleil, Daniel Lamarre manages 4000 employees in 40 countries

Importance of Customers to the Managers Job

Chapter 1 Introduction to Management and Organizations

Importance of Social Media to the Managers Job

social media Forms of electronic

Part 1 DEFINING THE MANAGERS TERRAIN

This young woman in Switzerland

Importance of Innovation to the Managers Job

Importance of Adaptability to the Managers Job

Importance of Sustainability to the Managers Job

Chapter 1 Introduction to Management and Organizations

Efficiency = Organizing for

sustainability A companys ability

Why Study Management?

Explain the value of