Management Final Study Flashcards
Management (definition)
the planning, organizing, leading, and controlling of human and other resources to achieve organizational goals effectively and efficiently
Controlling (definition)
process where managers monitor and regulate how efficiently and effectively an organization and its members are performing the activities necessary to achieve organizational goals
Good control systems should…
-Be flexible so managers can respond as needed
-Provide accurate information about the organization
-Provide information in a timely manner
3 Types of Control
Input Stage
Conversion Stage
Output Stage
Input stage (definition)
feedforward control (anticipate problems before they occur)
Conversion stage (definition)
concurrent control (manage problems as they occur)
Output Stage (definition)
feedback control (manage problems after they have arisen)
Step 1 in Organizational Control
Establish the standards of performance, goals, or targets against which performance is to be evaluated
Step 2 in Organizational Control
Measure actual performance
Step 3 in Organizational Control
Compare actual performance against chosen standards
Step 4 in Organizational Control
Evaluate the result and initiate corrective action if the goal is not being achieved
- Must be consistent with your strategy
Step 1 In Organizational control
- Managers can measure outputs resulting from worker behavior or they can measure the behavior themselves
Step 2 in organizational control
- Productivity reports, profit/loss statements, sales reports, etc
Step 2 in organizational control
- Decide if performance actually deviates
Step 3 in organizational control
- Often, several problems combine creating low performance
Step 3 in organizational control
- Often beneficial to find out why you succeeded as well
Step 3 in organizational control
- Derived from strategic plans
Step 1 In Organizational control
- Standards may be set too high or too low
Step 4 in organizational control
3 Organizational Control Systems
Output Control
Behavior Control
Organizational Culture/Clan Control
Output Control: (definition)
financial measures of performance, organizational goals, operating budgets
Behavior Control: (definition)
direct supervision, management by objectives, rules and standard operating procedures
Organizational Culture/Clan Control: (definition)
values, norms, socialization
4 Financial Measures of Performance
Profit Ratios
Liquidity Ratios
Leverage Ratios
Activity Ratios
What are the 2 Profit Ratios?
Return on investment
Gross profit margin (Operating margin)
Return on Investment (formula)
= net profit before taxes / total assets
Gross profit margin (formula)
= sales revenue - COGS / sales revenue
Profit Ratios: (definition)
measures how efficiently managers convert resources into profits
What “measures how well managers are using the organization’s resources to generate profits”?
Return on Investment
What “measures how much percentage of profit a company is earning on sales; the higher the percentage, the better a company is using its resources to make and sell products”?
Gross Profit Margin (Operating Margin)
What are the 2 Liquidity Ratios?
Current Ratio
Quick Ratio
Liquidity Ratios: (definition)
measures how well managers protect resources to meet short-term debt
Current Ratio (formula)
= current assets / current liabilities
Quick Ratio (formula)
= current assets - inventory / current liabilities
What “measures the availability of resources to meet claims of short-term creditors”?
Current Ratio
What “measures the ability to pay off claims of short-term creditors without selling inventory”?
Quick Ratio
Leverage Ratios: (definition)
measures how much debt or equity is used to finance operations
What are the 2 Leverage Ratios?
Debt-to-asset Ratio
Times-Covered Ratio
Debt-to-asset Ratio (formula)
= total debt / total assets
Times-Covered Ratio (formula)
= profit before interest and taxes / total interest charges
What “measures the extent to which managers have used borrowed funds to finance investments”?
Debt-to-asset Ratio
What “measures how far profits can decline before managers cannot meet interest charges. If this ratio declines to less than 1, the organization is technically insolvent”?
Times-Covered Ratio
What are the 2 Activity Ratios?
Inventory Turnover
Days Sales Outstanding
Activity Ratios: (definition)
measures how efficiently managers are creating value from assets
Inventory Turnover (formula)
= COGS / inventory
Days Sales Outstanding (formula)
= current AR / sales for period divided by days in period
What “measures how effectively managers are turning over inventory so that excess inventory is not carried”?
Inventory Turnover
What “measure how efficiently managers are collecting revenues from customers to pay expenses”?
Day sales outstanding
Organizational Goals…
should be specific, difficult, but not impossible
S.M.A.R.T Goals
Specific, Measurable, Attainable, Relevant, Timely
Operating Budgets (definition)
A blueprint that states how managers intend to allocate and use the resources they control to attain organizational goals effectively and efficiently
Problems with Output Control
Managers must create output standards that motivate at all levels
Each division is evaluated on its own budgets for cost, revenue, or profit
Operating Budgets
Considerations for Output Control
-Within the boundaries of biblical ethics
-managing people, not numbers
-cutting can hurt operations
Managers who…
- Actively monitor and observe the behavior of their subordinates
- Teach subordinates the behaviors that are appropriate and inappropriate
- Intervene to take corrective action as needed
Management by Objectives (MBO): (definition)
a goal-setting process in which managers and subordinates negotiate specific goals and objectives for the subordinate to achieve and then periodically evaluate their attainment of those goals
Bureaucratic Control: (definition)
control through a system of rules and standard operating procedures that shapes the behavior of divisions, functions, and individuals
Problems with Bureaucratic Control
- rules are easier to make than discard
(slows organizational reaction time) - Firms lose flexibility, new ideas, and ability to solve new problems
Organizational Culture: (definition)
the shared set of beliefs, expectations, values, norms, and work routines that influence how members of an organization interact with one another and work together to achieve organizational goals
Clan Control: (definition)
control exerted on individuals and groups in an organization by shared values, norms, standards of behavior, and expectations
Organization Change: (definition)
movement of an organization away from its present state and toward some desired future state to increase its efficiency and effectiveness
4 Steps in the Organizational Change Process
- Assess the need for change
- Decide on the change to make
- Implement the change
- Evaluate the change
Benchmarking: (definition)
process of comparing one company’s performance on specific dimensions with the performance of other high-performance organizations
Motivation: (defintion)
Psychological forces that determine the direction of a person’s behavior in an organization, a person’s level of effort, and a person’s level of persistence
Direction: (definition)
possible behaviors the individual could engage in
Effort: (definition)
how hard the individual will work
Persistence: (definition)
whether the individual will keep trying or give up
Motivational Factors
Feeling “in” on things, good working conditions, good wages, job security, promotion/growth opportunities, interesting work, personal loyalty to workers, sympathetic help with personal problems, tactful discipline, full appreciation for work done
Extrinsically Motivated Behavior
Behavior that is performed to acquire material or social rewards or to avoid punishment
Intrinsically Motivated Behavior
Behavior the tis reformed for its own sake
Outcome
Anything a person gets from a job or an organization
Pay, job security, autonomy, accomplishment
Input
Anything a person contributes to his or her job or organization
Time, effort, skills, knowledge, work behaviors
Expectancy Theory: motivation will be high when workers believe that…
High levels of effort will lead to high performance
High performance will lead to the attainment of desired outcomes
Effort (expectancy):
a person’s perception about the extent to which his or her effort will result in a certain level of performance
Performance (instrumentality):
a person’s perception about the extent to which performance at a certain level will result in the attainment of outcomes
Outcomes (valence):
how desirable each of the outcomes available from a job or organization is to a person
Need Theories
Theories of motivation that focus on what needs people are trying to satisfy at work and what outcomes will satisfy those needs
Basic premise is that people are motivated to…
obtain outcomes at work to satisfy their needs
Maslow’s Hierarchy of Needs (High to Low)
Self-Actualization Needs
Esteem needs
Belongingness Needs
Safety Needs
Physiological Needs
Herzberg’s Motivation-Hygiene Theory:
focuses on outcomes that lead to higher motivation and job satisfaction and those outcomes that can prevent dissatisfaction
Motivator needs relate to the nature of the work itself and how challenging it is…
These needs motivate workers to greater performance
Hygiene needs are related to the physical and psychological context in which the work is performed…
These needs do not motivate to better performance, but their absence demotivates
Mclellan’s Need for Achievement:
a strong desire to perform challenging tasks well and meet personal standards for excellence
Mclellan’s Need for Affiliation:
extent to which an individual is concerned about establishing and maintaining good interpersonal relations, being liked, and having the people around him get along with each other
Mclellan’s Need for Power:
extent to which an individual desires to control or influence others
Equity Theory:
focuses on people’s perceptions of the fairness of their work outcomes in proportion to their work inputs
Equity:
justice, impartiality, and fairness to which all organizational members are entitled
Inequity:
lack of fairness
Restoring Equity
- In underpayment, workers may reduce input levels to correct the ratio or seek a raise
- In overpayment, workers may change the referent person and readjust their ratio perception
- If inequity persists, workers will often choose to leave the organization
Goal Setting Theory:
focuses on identifying the types of goals that are effective in producing high levels of motivation and explaining why goals have these effects
Learning Theories:
theories that focus on increasing employee motivation and performance by linking outcomes that employees receive to the performance of desired behaviors and the attainment of skills
Learning:
a relatively permanent change in a person’s knowledge or behavior that results from practice or experience
Operant Conditioning:
people learn to perform behaviors that lead to desired consequences and learn not to perform behaviors that lead to undesired consequences
Positive Reinforcement:
giving people outcomes they desire when they perform organizationally functional behaviors
Negative Reinforcement:
eliminating undesired outcomes when people perform organizationally functional behaviors
Extinction:
curtailing the performance of dysfunctional behavior by eliminating whatever is reinforcing them
Punishment:
administering an undesired or negative consequence when dysfunctional behavior occurs
Social Learning Theory:
a theory that takes into account how learning and motivation are influenced by people’s thoughts and beliefs and their observations of other people’s behavior
Vicarious Learning (Observational Learning):
learning that occurs when a learner is motivated to perform a behavior by watching another person perform and be reinforced for doing so
Merit Pay Plan:
a compensation plan that bases pay on based on individual, group, and/or organization performance
Piece-Rate Pay:
employee’s pay is based on the number of units that the employee produces
Commission Pay:
employee’s pay is based on a percentage of sales that the employee makes
Scanlon Plan:
focuses on reducing expenses or cutting costs
Profit Sharing:
employees receive a share of an organization’s profits
Employee Stock Option:
a financial instrument that entitles the bearer to buy shares of an organization’s stock at a certain price during a certain period of time or under certain conditions
Leadership:
the process by which a person exerts influence over other people and inspires, motivates, and directs their activities to help achieve group or organizational goals
Biblical examples of Leadership:
(Nehemiah 4:6) (1 Samual 17:29)
John C. Maxwell -
“Everything rises and falls on leadership.”
Leader:
an individual who is able to exert influence over other people to help achieve group or organizational goals
Personal Leadership Style:
-The specific ways in which a manager chooses to influence others shape the way that manager approaches the other tasks of management
-The challenge is for managers at all levels to develop an effective personal management style
Leadership styles may vary among different countries or cultures:
European managers tend to be more people-oriented than American or Japanese managers
Japanese managers are group-oriented, while US managers focus more on profitability
Time horizons are also affected by cultures
Sources of Managerial Power
Legitimate Power
Reward Power
Coercive Power
Expert Power
Referent Power
Empowerment
Legitimate Power:
the authority that a manager has by virtue of his or her position in an organizational hierarchy
Reward Power:
the ability of a manager to give or withhold tangible and intangible rewards
Coercive Power:
the ability of a manager to punish others
Expert Power:
power that is based on special knowledge, skills, and expertise that a leader possesses
Referent Power:
power that comes from subordinates’ and coworkers’ respect for the personal characteristics of a leader which earns their loyalty and admiration (David illustration)
Empowerment:
the process of giving workers at all levels more authority to make decisions and the responsibility for their outcomes
Increases a manager’s ability to get things done
Empowerment
Increases workers’ involvement, motivation, and commitment
Empowerment
Gives managers more time to concentrate on their pressing concerns
Empowerment
Activity Classification
Important
Urgent
Important:
an activity it important if you personally find it valuable, and if it contributes to your mission, values, and high-priority goals
Urgent:
an activity is urgent if you or others feel that it requires immediate attention
Leadership Models
Trait Model
Behavioral Model
Contingency Models
Trait Model
Focused on identifying personal characteristics that cause effective leadership
Many “traits” are the result of skills and knowledge, and effective leaders do not necessarily possess all of these traits
Behavioral Model:
identifies the two basic types of behavior that many leaders engage in to influence their subordinates
Consideration:
behavior indicating that a manager trusts, respects, and cares about subordinates
Initiating Structure:
behavior that managers engage in to ensure that work gets done, subordinates perform their jobs acceptably, and the organization is efficient and effective
Contingency Models:
whether or not a manager is an effective leader is the result of the interplay between what the manager is like, what he does, and the situation in which leadership takes place
Personal characteristics can influence leader effectiveness
Fiedler’s Model
Leader style is the manager’s characteristic approach to leadership
Fiedler’s Model
Situation Characteristics
-How favorable a situation is for leading to occur
-Leader-member relations–determines how much workers like and trust their leader
Task Structure:
the extent to which workers’ tasks are clear-cut so that a leader’s subordinates know what needs to be accomplished and how to go about doing it
Position Power
The amount of legitimate, reward, and coercive power leaders have by virtue of their position
When positional power is strong, leadership opportunities become more favorable
Relationship-Oriented Style:
leaders are concerned with developing good relations with their subordinates and to be liked by them
Task-Oriented Style:
leaders whose primary concern is to ensure that subordinates perform at a high level and focus on task accomplishment
A contingency model of leadership proposing that effective leaders can motivate subordinates by…
Clearly identifying the outcomes workers are trying to obtain from their jobs
Rewarding workers for high performance and goal attainment with outcomes they desire
Clarifying the paths to the attainment of the goals, remove obstacles to performance, and express confidence in worker’s ability
House’s Path-Goal Theory
A contingency model of leadership proposing that effective leaders can motivate subordinates by…
Directive Behaviors:
set goals, assign tasks, show how to do things
Supportive Behavior:
look out for the workers’ best interest
Participative Behavior:
give subordinates a say in matters that affect them
Achievement-Oriented Behavior:
setting very challenging goals believing in workers’s abilities
Leadership Substitute Model
A characteristic of a subordinate or characteristic of a situation or context that acts in place of the influence of a leader and marks leadership unnecessary
Possible substitutes can be found in…
-Characteristics of the subordinates: their skills, experience, motivation
-Characteristics of context: the extent to which work is interesting and fun
Leadership that…
Makes subordinates aware of the importance of their jobs and performance to the organization by providing feedback to the worker
Makes subordinates aware of their own needs for personal growth and development
Motivates workers to work for the good of the organization, not just themselves
Charismatic Leader
An enthusiastic, self-confident transformational leader who is able to clearly communicate his or her vision of how good things could be
Daniel Burnham
“Make no little plans; they have no magic to stir men’s blood.”
Transactional Leader:
leaders that motivate subordinates by rewarding them for high performance and reprimanding them for low performance
The Moods of Leaders
-Groups whose leaders experienced positive moods had better coordination
-Groups whose leaders experienced negative moods exerted more effort
Emotional Intelligence
Helps leaders develop a vision for their firm
Helps motivate subordinates to commit to the vision
Energizes subordinates to work to achieve the vision
Servant Leaders (biblical application)
(Matt. 20:20-28(Jesus))
Servant Leaders
Leader who has a strong desire to serve and work for the benefit of others
Shares power with followers
Strives to ensure that followers’ most important needs are met
Group
Two or more people who interact with each other to accomplish certain goals or meet certain needs
Team
A group whose members work intensely with each other to achieve a specific, common goal or objective
Two characteristics that distinguish teams from groups
intensity with which team members work together
presence of specific overriding team goal or objective
(Luke 10:1)
Groups and teams can help an organization gain a competitive advantage because they can…
-Enhance its performance
-Increase its responsiveness to customers
-Increase innovation
-Increase employees’ motivation and satisfaction
Synergy:
performance gains that result when individuals and departments coordinate their actions
Performance Enhancement:
making use of the synergy from employees in a group producing more or better output than employees working separately
Factors that contribute to synergy
-Ability to bounce ideas off one another
-Correct each other’s errors
-Bring more new ideas to bear on problems
-Accomplish projects beyond the scope of individuals
5 Dysfunctions of a Team
-Absence of trust
-Fear of conflict
-Lack of commitment
-Avoidance of accountability
-Inattention to results
Absence of Trust:
the fear of being vulnerable with team members prevents the building of trust within the team
Fear of Conflict:
the desire to preserve artificial harmony stifles the occurrence of productive ideological conflict
Lack of Commitment:
the lack of charity or buy-in prevents team members from making decisions they will stick to
Avoidance of Accountability:
the need to avoid interpersonal discomfort prevents team members from holding one another accountable
Inattention to Results:
the pursuit of individual goals and personal status erodes the focus on collective success
Individuals rarely possess the wide variety of skills needed for successful innovation
Teams and Innovation
Team members can uncover each other’s flaws and balance each other’s strengths and weaknesses
Teams and Innovation
One team member’s ideas can be a catalyst for others’ ideas
Teams and Innovation
Team members are more motivated and satisfied than if they were working alone
Teams and Innovation
Team members can see the effect of their contribution to achieving team and organizational goals
Teams and Innovation
Teams provide needed social interaction and help employees cope with work-related stressers
Teams and Innovation
The Types of Groups and Teams
Formal Group
Informal Group
Top-Management Team
Research and Development Team
Command Groups
Task Forces
Self-Managed Work Team
Formal Group:
a group that managers establish to achieve organizational goals
Informal Group:
a group that managers or non-managerial employees form to help achieve their own goals or to meet their own needs
Top-Management Team:
a group composed of the CEO, the president, and the heads of the most important departments
Research and Development Team:
a team whose members have the expertise and experience needed to develop new products
Command Groups:
subordinates who report to the same supervisor, also called a department or unit
Task Forces:
a committee of managers or non-managerial employees from various departments or divisions who meet to solve a specific, mutual problem; also called an “ad hoc” committee
Self-Managed Work Team:
a group of employees who supervise their own activities and monitor the quality of the goods and services they provide
Keys to Effective Self-Managed Teams
-Give the team enough responsibility and autonomy to be self-managing
-The team’s tasks should be complex enough to include many different steps
-Select members carefully for their diversity, skills, and enthusiasm
-Managers should guide and coach, not supervise
-Determine training needs and be sure it is provided
Virtual Team
-A team whose members rarely meet face-to-face
-Interact using email, computer networks, telephone, fax, and videoconferences
-Reduces travel expenses; increase global coordination
Friendship Groups:
an informal group composed of employees who enjoy one another’s company and socialize with one another
Interest Groups:
an informal group of employees seeking to achieve a common goal related to their membership in an organization
Group Dynamics
The characteristics and processes that affect how a group or team functions
Group size affects how a group performs
-Normally, small groups (2 to 9 members) interact better and tend to be more motivated
-Larger groups can be used when more resources are needed and division of labor is possible
The Stages of Group Development
-Forming
-Storming
-Norming
-Performing
-Adjourning
Forming:
group members get to know each other and reach common goals
Storming:
group members disagree on direction and leadership. Managers need to be sure the conflict stays focused
Norming
close ties and consensus begin to develop between group members
Performing:
the group begins to do its real work and group dynamics create a high level of productivity
Adjourning:
usually for task forces that are temporary; sometimes for major transitions; can be formal or informal
Group Norms
-Shared guidelines or rules for behavior that most group members follow
-Developed during the norming stage
-May be formal or informal
Conformity and Deviation
members conform to norms or obtain rewards, imitate respected members, and because they feel the behavior is right
Moderate conformity/moderate deviance
= high performance
Low conformity/high deviance and high conformity/low deviance
= low performance
High group cohesiveness may result in three major consequences
-Higher level of participation
-Willingness to conform to group norms
-Stronger emphasis on group goal accomplishment
Group Size:
smaller groups allow for high cohesiveness; low cohesiveness groups with many members can benefit from splitting into two groups
Effectively Managed Diversity:
diverse groups often come up with better solutions
Group Identity:
encouraging a group to adopt a unique identity and engage in competition with others can increase cohesiveness
Cohesiveness increases with success;
finding ways for a group to have some small successes increases cohesiveness
Factors Leading to Group Cohesiveness
Group Size
Effectively Managed Diversity
Group Identity
Motivating group members to achieve organizational goals
-Members should benefit when the group performs well–rewards can be monetary or in other forms such as special recognition
-Individual compensation is a combination of both individual and group performance
Social Loafing
-the human tendency to put forth less effort in a group than when they work alone
-More dedicated employees assume the extra load
-Resentment of loafers reduces group cohesiveness
Factors that Reduce Social Loafing
-Making individual contributions to a group identifiable when possible
-Emphasizing the valuable contributions of individual members
-Keeping group size at an appropriate level
