Principles of Management

Question 1

What is an organization?

Answer 1

an arrangement of people brought together to accomplish a specific purpose

Question 2

What are the 3 characteristics that identify an organization?

Answer 2

1. Goals (express the purpose)
2. People (make decisions & engage in activities to reach goals)
3. Structure (systematically defines and limits member’s behavior)

Question 3

What are the 4 levels of Managers?

Answer 3

• Top managers (board, managing director, etc) - make decisions about direction
• Middle managers (senior managers, SVPs) - responsible for translating goals to lower-level managers
• First-Line managers (Head of’s) - direct operative activities for non-managerial employees
• Team leaders - manage activities of a work team

Question 4

How do you define management?

Answer 4

the process of getting things done effectively (doing the right things; aims for high attainment of goals) and efficiently (doing things right; aims for productivity)

Question 5

The amount of time a manager gives to each activity is not necessarily constant. Also, the content of the managerial activities changes with the manager’s level. How do they differ between First-Level Managers, Middle Managers and Top Managers?

Answer 5

First-Level: 50% Leading, 25% Organizing, 25% Planning & Controlling

Middle Managers: 35% Leading, 35% Organizing, 30% Planning & Controlling

Top Managers: 35% Organizing, 30% Planning, 20% Leading, 15% Controlling

Change from Top-Down:
- Leading increases
- Organizing decreases
- Planning decreases
- Controlling slightly decreases

Question 6

What are the 4 management functions?

Answer 6

Planning –> define goals, establish strategies, develop activity plans

Organizing –> determine what needs to be done, how and by whom

Leading –> directing and coordinating the work activities of employees

Controlling –> monitoring activities to ensure they get accomplished as planned

Question 7

What three roles does the management roles approach differ?

Answer 7

Interpersonal roles –> Figurehead, Leader, Liaison (Bindeglied)

Informational roles –> Spokesperson, Monitor, Disseminator (Verbreiter)

Decisional roles –> Entrepreneur, Negotiator, Resource Allocator

Question 8

What are 4 critical skills that managers need?

Answer 8

• Conceptual skills –> analyzing complex situations to see how things fit together
• Interpersonal skills –> communicating, motivating, mentoring & delegating
• Technical skills –> expertise in the industry as well as the firm’s products
• Political skills –> building a power base & establishing the right connections

Question 9

What does Total Quality Management stand for?

Answer 9

= philosophy devoted to continual improvement and response to customer needs and expectations

Question 10

What does the system approach stand for?

Answer 10

views systems as a set of interrelated and interdependent parts arranged in a manner that produces a unified whole

–> organizations function as open systems which means they are influenced by and interact with their environment –> a manager must efficiently and effectively manage all parts of the system to achieve their goals

Question 11

What is the core message of the contingency approach?

Answer 11

there is no one universally applicable set of management rules –> organizations, employees & situations are different and require different ways of managing/leading

Question 12

What is the immediate gratification bias?

Answer 12

choosing alternatives that offer immediate rewards and avoid immediate costs

Question 13

What does the framing bias refer to?

Answer 13

selecting & highlighting certain aspects of a situation while ignoring other aspects (e.g. getting a free pen in a political promotion)

Question 14

What does the representation bias refer to?

Answer 14

drawing analogies and seeing identical situations when none exist (e.g. Bill Gates and I went to the same high school, so we both are equally successful

Question 15

What are sunk costs errors?

Answer 15

forgetting that current action cannot impact past events and relate only to future consequences (e.g. R&D costs)

Question 16

What is the concept of Heuristics?

Answer 16

simple/practical strategies to make quick decisions and find solutions for complex problems (not guaranteed to be optimal or rational, but sufficient)

Question 17

What is the difference between rational decision-making, bounded rationality and intuition?

Answer 17

Rational decision-making = considering all information and then making the most logical decision (not always possible as you do not always have the full set of information)

Bounded rationality = reducing the available information to an amount that we can handle in order to satisfice (= accepting solutions that are “good enough”)

Intuition = making decisions with gut feeling

Question 18

What is the difference between structured and unstructured problems?

Answer 18

structured –> problems that happened before, are straightforward and easily defined

unstructured –> problems that never happened before and for which information is incomplete

Question 19

What is the difference between programmed and non-programmed decisions?

Answer 19

Programmed –> repetitive decisions that can be handled through routine (90%) –> procedures, rules, policies –> have a structure to be followed

Non-programmed –> unique and nonrecurring decisions that require intuition

Question 20

What do the decision making conditions “certainty”, “risk” and “uncertainty” tell us?

Answer 20

Certainty –> the more certainty we have, the more programmed decisions we will make

Risk –> the more risk we have, the more uncertain we are about the decision

Uncertainty –> the more uncertainty we have, the more non-programmed decisions we have to make

Question 21

What does “Groupthink” refer to?

Answer 21

pressure within a group to go with the majority decision because you don’t want to create a conflict (ppl often think a good harmony is more important than finding the best solution)

Question 22

When are groups decisions more effective & when are decisions by an individual more effective?

Answer 22

Group decisions:
- when a bigger set of information is of value
- when decisions requires people who stand behind it (greater acceptance)
- when you need more creativity

Individual decisions:
- when decision needs to be made quickly with little information
- when problem is structured and decision is programmed

Question 23

What is the nominal group technique in decision making?

Answer 23

Every member writes down their own ideas on paper, ideas are then written anonymously on whiteboard and people can give points for the best ideas

Question 24

What is the difference between formal and informal planning?

Answer 24

Informal –> little is verbalized or written down, planning is quite general and lacks continuity (usually done by small businesses)

Formal –> specific goals are defined/written down that need to be met in a specific period. Moreover, managers develop specific plans that clearly defines how these goals will be achieved

Question 25

What are 4 strategic ways of growth?

Answer 25

• Concentration –> producing more/entering new markets
• Vertical integration –> either backwards (acquire/merge with supplier) or forward (acquire/merge with retailer)
• Horizontal integration –> acquire/merge with a competitor
• Diversification –> launching new/different products

Question 26

What are two possible renewal strategies (address declining organizational performance)?

Answer 26

1. Retrenchment strategy = short run strategy for minor performance problems that involve reducing size, cutting costs & focusing on core business activities –> helps to stabilize operations, revitalize resources and prepares to compete again
2. Turnaround strategy = for more serious problems, designed to rescue a failing business

Question 27

What are 4 strategies to gain a competitive advantage?

Answer 27

1. Cost leadership strategy –> being the cheapest in the market (mass products)
2. Differentiation strategy –> competing on quality, focus on unique characteristics (brand/luxury items)
3. Focus strategy –> focusing on a very narrow segment (e.g. only on young people in Vienna)
4. Stuck in the middle –> strategy without any focus (soon to be out of market bc others will be better)

Question 28

What are strategic tools that can help to be more competitive?

Answer 28

• Customer service
• Skilled & loyal employees
• Innovation
• Quality
• Marketing
• Big data

Question 29

What is Organizational Design?

Answer 29

the process of making decisions about how specialized jobs should be, the rules to guide employee’s behavior, and the level at which decisions will be made

Question 30

What does the term “over-specialized” refer to?

Answer 30

when first introduced, specialization almost always generated higher productivity, but at some point, boredom, stress, etc. exceed the economic advantages (when tasks get too repetitive)

Question 31

Explain the 5 different types of departmentalization!

Answer 31

• Functional –> grouped by function, such as HR, Marketing, etc. –> does not show what firm actually does –> good coordination within functional area, but poor communication across functional areas (limited view of goals)
• Product –> like Procter & Gamble, J&J –> managers become experts in industry & closer to customers, but creates duplication of functions
• Customer –> makes sense when characteristics of customers are very different (e.g. travel agency) –> customer needs can be met by specialists, but creates duplication of function
• Geographic –> makes sense if regions of divisions are very different –> more effective in handling regional issues, but duplication of functions & isolation from other areas
• Process –> when different products need to go through same sequence of processes (e.g. in manufacturing company, where ALL products need to be painted, commissioned, etc) –> most efficient workflow, but can only be used with certain product types

Question 32

What is a Chain of Command?

Answer 32

reporting line that clarifies who reports to whom

Question 33

What is the difference between line authority & staff authority?

Answer 33

Line authority –> manager directs work to an employee according to chain of command

Staff authority –> functions to support, assist, advice managers

Question 34

What is the difference between authority and power?

Answer 34

Authority = you have the legitimate right to do something based on your position

Power = an individual’s ability to influence decisions (not necessarily based on position)

Question 35

What are the 5 types of power?

Answer 35

Coercive power = power based on fear (having the right to punish someone)

Reward power = power based on the ability to reward (opposite of coercive)

Legitimate power = power that comes from your position (being the boss)

Expert power = power based on expertise/knowledge (e.g. if you are the only IT expert)

Referent power = power based on your personality (e.g. excellent interpersonal skills)

Question 36

What does Span of Control mean and how can you decide on its appropriate size?

Answer 36

= number of employees a manager supervises

–> decision on appropriate size depends on multiple factors, but generally it can be said that the more training & experience employees have, the less direct supervision they need & the larger the span of control can be

Question 37

What are characteristics of a) Mechanistic and b) organic organizational structures?

Answer 37

Mechanistic (e.g. Army)
- hierarchical relationships
- many rules
- formalized communication channels
- centralized decision authority
- makes sense for large companies in a stable environment

Organic (e.g. start-ups)
- adaptable duties
- less rules, more freedom
- informal communication
- decentralized decision authority
- flat relationships
- makes sense for small companies in a dynamic environment

Question 38

What is the difference between recruiting and selecting?

Answer 38

While recruitment is the process of creating a pool of applicants, selecting means picking the right candidate among this pool

Question 39

What does affirmative action mean?

Answer 39

positive discrimination, where organization takes proactive steps to also include disadvantaged/underrepresented groups in the recruiting process

Question 40

When do we know that a decision in the selection process of a new employee was correct?

Answer 40

1. If the applicant who was hired proved to be successful on the job (if that is not the case, an “accept error” has occurred)
2. If the applicant who was not hired would not have been able to do the job (if that is not the case, a “reject error” has occurred)

–> The major intent of any selection activity is to reduce the probability of making reject errors and accept errors while increasing the probability of making correct decisions

Question 41

What is the difference between validity and reliability?

Answer 41

Validity = when instruments in an experiment measure what you want them to measure

Reliability = when the outcomes are consistent if you would repeat the experiment

e.g. final oral exam could be a valid measure to proof knowledge of BCi studies. A pass would be reliable if you would be able to pass multiple times

Question 42

What is the difference between on-the-job training and off-the-job training?

Answer 42

on-the-job = training that you do while you are doing your regular job (added on)

off-the-job = training where you leave your workday/building and go somewhere else because the training is so important