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Business > Unit 2 - Managers, Leadership, and Decision Making > Flashcards

Unit 2 - Managers, Leadership, and Decision Making Flashcards

1
Q

What do managers do?

A
  • set objectives
  • analyse objectives
  • lead
  • make decisions
  • review decisions
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2
Q

What are the differences between managers and leaders?

A

Managers
- focus on the present
- implement things
- maintain status quo
- have subordinates
Leaders
- look to the future
- have a vision
- willing to innovate
- have followers

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3
Q

What are the four leadership styles?

A
  • autocratic/authoritarian
  • democratic
  • paternalistic
  • laissez-faire
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4
Q

What are the characteristics of an authoritarian leader?

A
  • hold onto as much power as possible
  • focus of power is with the manager
  • communication is top-down and one way
  • formal systems of command and control
  • minimal consultation
  • use of rewards and penalties
  • very little delegation
  • McGregor Theory X approach
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5
Q

When is an autocratic approach used?

A

Most likely used when subordinates are unskilled, not trusted and their ideas aren’t valued

Can also be useful in a crisis when decisions need to be made quickly

Could be used when an organisation has many constantly changing or part time workers

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6
Q

Give an example of when an autocratic approach is used

A
  • supermarket store manager
  • bar/restaurant manager
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7
Q

What are the characteristics of a paternalistic leader?

A
  • leader decides what is best for employees
  • similar to a parent-child relationship
  • little delegation
  • softer form of authoritarian leadership
    • often results in better employee motivation and lower staff turnover
  • typically explains the specific reasoning behind certain actions taken
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8
Q

Give an example of when a paternalistic approach is used

A
  • football manager
  • headteacher
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9
Q

What are the characteristics of a democratic leader?

A
  • focus of power is more with the group as a whole
  • leadership functions are shared within the group
  • McGregor Theory Y approach
  • employees have greater involvement in decision making
    • but potentially slows decision making
  • emphasis on delegation and consultation
    • leader still has final say
  • positive connotation of acting democratically
  • potential trade off between quick decision making and better motivations and morale?
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10
Q

When is a democratic approach used?

A

used with skilled, free-thinking and experienced subordinates

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11
Q

Give an example of when a democratic approach is used

A
  • Prime Minister
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12
Q

What are the characteristics of a laissez-faire leader?

A
  • leader has little input into day-to-day decision making
  • delegation of power
  • managers/employees have freedom to do what they think is best
  • often criticised for resulting in poor role definition for managers
  • not the same as abdication
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13
Q

When is a laissez-faire approach used?

A

Most effective when staff are motivated, ready and willing to take on responsibility and can be trusted to do their jobs

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14
Q

Give an example of when a laissez-faire approach is used

A
  • self-employed
  • sole trader
  • franchise
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15
Q

What is McGregor’s Theory X approach?

A

Workers:
- are lazy
- dislike work
- are motivated by money
- need to be supervised and controlled otherwise they will under perform
- have no wish to make decisions or take on responsibility
- are not interested in the needs of the organisation
- lack ambition

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16
Q

What approach is needed for Theory X employees?

A

Authoritarian

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17
Q

What is McGregor’s Theory Y approach?

A

Workers:
- have many different needs
- enjoy work
- seek job satisfaction
- will organise themselves
- will take responsibility if trusted to do so
- poor performance likely due to boring or monotonous work or poor management
- wish to and should contribute to decisions

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18
Q

What approach is needed for Theory Y employees?

A

Democratic
- where the manager delegates

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19
Q

What are the four main styles of leadership on Tannenbaum and Schmidt’s Continuum of Leadership?

A
  • tells
  • sells
  • consults
  • joins
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20
Q

What is the tells part of Tannenbaum and Schmidt?

A

leader identifies problems, makes decision, and announces to subordinates
- expects implementation

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21
Q

What is the sells part of Tannenbaum and Schmidt?

A

leader makes decision but attempts to overcome resistance through discussion and persuasion

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22
Q

What is the consults part of Tannenbaum and Schmidt?

A
  • leader identifies problem and presents it to the group
  • listens to advice and suggestions before making the decision
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23
Q

What is the joins part of Tannenbaum and Schmidt?

A

leader defines the problem and passes on the solving and decision making to the group (which the manager is part of)

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24
Q

Link McGregor’s Theory X and Theory Y approaches, the four leadership styles, and Tannenbaum and Schmidt’s Continuum of Leadership

A

Theory X
- Tells = Autocratic
- Sells = Paternalistic
- Consults = Move to democratic
- Joins = Democratic
Theory Y

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25
Q

If productivity decreases what style of leadership should be adopted?

A

Autocratic

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26
Q

What are the influences on management and leadership styles?

A
  • company structure
    • tall = more layers = autocratic
  • situation
    • crisis = autocratic
  • culture and tradition
    • top down and autocratic
      • difficult to be any other type of leader
  • nature of the tasks
    • repetitive and unskilled needs close supervision = autocratic
  • employees
    • highly skilled don’t need close supervision
  • group size
    • large = more to lead = autocratic
    • not as many = democratic
  • time frame
    • if quick decisions are needed, autocratic is best
  • personalities of leaders
    • difficult to change their leadership style
      • if they like to dictate, then it will be difficult for them to be a democratic leader
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27
Q

What is style versatility?

A

The ability to change leadership style when necessary
- adopt a style that is suitable to the circumstances
- use all four styles of leadership

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28
Q

What are the two types of decision making?

A
  • scientific decision making
  • decision making based on intuition
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29
Q

What is the definition of scientific decision making?

A

Decision making based on data and uses a logical rather than rational approach

30
Q

What is the definition of intuition?

A

Decision making based on gut feeling rather than data and rational analysis

31
Q

What is the scientific decision making process?

A
  1. Setting objectives
    • determine what you want to achieve
    • ensure objectives are SMART
  2. Gathering data
    • market research
    • break-even analysis, ratio analysis, etc
  3. Analyse data
    • filter and analyse data
    • ensure quality of data
  4. Select a strategy/make decision
    • develop corporate plan from information gathered
    • select most appropriate strategy
  5. Implement and review the decision
    • designate resource and people to plan
    • implement plan
    • ensure plan is being implemented correctly
    • ensure the plan is within budgets and timescales
32
Q

What are the advantages of scientific decision making?

A
  • clear direction by emphasis on objectives and by getting people involved in the process
  • based on logic
  • ensures decisions are monitored and reviewed to prevent mistakes
  • more people involved reduces possibility of bias
  • flexible
  • success more probable as based on rational thinking
  • easier to defend as based on logic
33
Q

What are the disadvantages of scientific decision making?

A
  • very time consuming
  • potentially expensive to collect data
  • data could be flawed, unreliable or invalid
34
Q

What is decision making based on intuition?

A

Intuition and experience:
- used by small business owners
- the more experienced the individual, the greater the use
- can lead to creative solutions

Hunches or gut feeling:
- used because of problems with scientific method

35
Q

What are the benefits of using intuition?

A
  • quicker and easier
    • good if in a crisis
  • may be better to rely on manager’s instinct
    • knows the market well
36
Q

What are the disadvantages of using intuition?

A
  • decisions aren’t always evidence based
  • could be biased or subjective
37
Q

What influences the choice of approach?

A
  • speed of decision
    • quick = intuitive
  • information available
  • size of business
    • smaller business more likely to base decisions on intuition
  • predictability of situation
  • culture of the company/the character of the individual
38
Q

What are strategic/corporate decisions?

A
  • long term (5-10 years)
  • involves large commitment of resources
  • difficult to reverse
  • usually taken by senior managers
  • higher risk
39
Q

What are tactical/functional decisions?

A
  • short term
  • fewer resources involved
  • easier to reverse
  • usually taken by more junior managers
  • lower risk
40
Q

What is decision making all about?

A

Minimising risk, maximising reward

41
Q

What is the first mover advantage?

A
  • the advantages gained if the first to enter a market
    • customer loyalty
    • brand recognition
    • control of key resources
42
Q

Give an example of a business with the first mover advantage

A
  • Apple
  • Amazon (books)
  • CocaCola
  • Google
43
Q

What are risks?

A
  • finances
    • could lose money
  • reputation
    • could damage that of manager/business
  • people
    • could lose good staff if unsuccessful
    • demotivate staff
  • future
    • could influence future decisions
  • resources
    • not used effectively (either over- or under-utilised)
44
Q

What are rewards?

A
  • finances
    • could make more money than expected
  • reputation
    • could enhance that of manager/business
  • people
    • could attract good staff in future
    • motivate staff
  • future
    • could get future business from potential customers
45
Q

What is uncertainty?

A

an event or outcome that a business is unable to predict or directly influence, potentially with a negative outcome

46
Q

What is opportunity cost?

A

measures the cost in terms of the ‘next best alternative forgone’
- what a business lost out on by choosing an alternative option

47
Q

What is a decision tree?

A
  • a mathematical and graphical model to aid managers in making decisions
  • shows different outcomes and their options
    • numerical data is then added to make it more useful
  • includes a probability which can range from 0 to 1
48
Q

What are the benefits of decision trees?

A
  • aids scientific decision making
  • takes into account risk and uncertainty
  • analysis of data makes decisions easier
  • easier to understand as it is a visual model
  • makes managers think about the different options and their consequences
  • forces managers to quantify the impact
49
Q

What are the limitations of decision trees?

A
  • only an estimate of the probability
  • ignores PESTLE (external environment)
  • figures could be biased or manipulated
  • only includes financial and quantifiable data
  • value only depends on how accurate the data is
  • should not be used exclusively
    • qualitative info should also be used
50
Q

What is the formula for expected value?

A

expected value = expected monetary value x probability

51
Q

What is the formula for net gain?

A

net gain = expected value - costs

52
Q

What must you do before calculating net gain?

A

Add the expected values before working out the net gain

53
Q

Example Question:
(draw decision tree where necessary)

A coffee shop is looking to increase revenue across its 5 coffee shops.
The cost of launching a new loyalty card is £500,000 with a probability of low sales being 0.4, and revenue from high sales as £1,000,000 and low sales as £750,000.
The cost of cutting prices is £300,000 with a probability of high sales as 0.8, and revenue from low sales as £500,000 and high sales as £800,000.

Calculate the expected value and net gain of both options and state which option should be chosen.

A
  • Draw decision tree with all the given information.
  • Fill in the missing information on the decision tree.
  • Do the below calculations
  • State which should be chosen

Loyalty card:
High sales EV = £1,000,000 x 0.6 = £600,000
Low sales EV = £750,000 x 0.4 = £300,000
Total EV = £600,000 + £300,000 = £900,000
Net gain = £900,000 - £500,000 = £400,000

Cutting costs:
High sales EV = £800,000 x 0.8 = £640,000
Low sales EV = £500,000 x 0.2 = £100,000
Total EV = £640,000 + £100,000 = £740,000
Net gain = £740,000 - £300,000 - £440,000

The coffee shop should choose to cut costs.

54
Q

What are the influences on decision making?

A
  • mission
  • objectives
  • ethics
  • PESTLE
  • resource constraints
    • financial, human, physical
  • power of the stakeholder
  • culture of organisation
55
Q

How do mission and objectives influence decision making?

A
  • a business will be guided by its mission and therefore objectives when decision making
  • e.g. decision making at Poundland will be influenced by its pricing policy
56
Q

How do ethics influence decision making?

A
  • making decisions that are morally correct
    • if this doesn’t happen, may receive negative publicity
    • could be used to stand out in the market ( e.g. Lush never testing on animals)
57
Q

How does PESTLE (external environment) influence decision making?

A
  • external environment has a big impact
    • downturn in economy or rise in interest rates could result in decisions being postponed or abandoned
    • expanding economy or fall in interest rates might see decisions being brought forward
58
Q

How do resource constraints influence decision making?

A
  • a business is only able to do what it is physically possible to do
  • short term not really possible to overcome restraints
  • long term may be possible
59
Q

How does competition influence decision making?

A
  • response to actions of competitors
  • actions of first mover advantage
  • e.e Aldi and Lidl
60
Q

What is a stakeholder?

A
  • stakeholders have a stake in an organisation
    • can have a positive or negative impact on an organisation and its activities
61
Q

What is a primary stakeholder?

A
  • those directly involved and affected by an organisation’s actions
    • customers, employees, creditors
62
Q

What is a secondary stakeholder?

A
  • those indirectly involved and affected by an organisation’s actions
    • ‘intermediaries’
    • general public, local community, media, activist group
63
Q

Draw the stakeholder map.

A

Refer to image.
Include:
- power
- level of interest
- A
- B
- C
- D

64
Q

What are the needs of stakeholders?

A

Employees
- job security, good working conditions and pay
Customers
- good customer service and value for money
Shareholders
- capital growth and dividends
Suppliers
- regular orders and on-time payment
Local communities
- avoidance of pollution and congestion, and employment
Government
- employment and payment of taxes

65
Q

Give an example of how stakeholder needs overlap

A

both government and local communities need employment

66
Q

Give an example of how stakeholder needs conflict each other

A

shareholders need capital growth and dividends, but government needs payment of taxes, resulting in less annual profit to give dividends from

67
Q

Draw the communication and consultation pyramid

OR

Write the components out in order from top to bottom

A
  • Partnership at the top
    • key players / high power high interest
  • Participation
    • keep satisfied / high power low interest
  • Consultation
    • keep informed / low power high interest
  • ‘Push’ communications
    • minimal effort / low power low interest
    • one way communications to stakeholders
  • ‘Pull’ communications at the bottom
    • lower interest
    • wait for the stakeholder to communicate
68
Q

What are the communication and consultation channels?

A
  • formal communications with internal and external stakeholders
  • formal meetings with powerful stakeholders
  • informal meetings with interested groups of stakeholders
  • newsletters
  • website information including regular updates
  • individual briefing for stakeholders with high interest and power
  • tours and demonstrations for interested stakeholders
  • public forums for community stakeholders
  • media releases
  • adverts in public places
69
Q

What is corporate social responsibility (CSR)?

A

commitment by business to contribute to the community and environment

70
Q

How is CSR done through?

A
  • reducing waste pollution
  • contributing to educational and social programmes
  • improving quality of life for the workforce and their families
71
Q

What is the benefit of CSR?

A

It is a way in which businesses can meet their responsibilities to their stakeholders.
This should bring about:
- more efficient use of resources (human and physical)
- positive publicity (esp PR)
- increased interest by potential stakeholders

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