Unit 2 - Managers, Leadership, and Decision Making Flashcards
What do managers do?
- set objectives
- analyse objectives
- lead
- make decisions
- review decisions
What are the differences between managers and leaders?
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
What are the four leadership styles?
- autocratic/authoritarian
- democratic
- paternalistic
- laissez-faire
What are the characteristics of an authoritarian leader?
- 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
When is an autocratic approach used?
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
Give an example of when an autocratic approach is used
- supermarket store manager
- bar/restaurant manager
What are the characteristics of a paternalistic leader?
- 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
Give an example of when a paternalistic approach is used
- football manager
- headteacher
What are the characteristics of a democratic leader?
- 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?
When is a democratic approach used?
used with skilled, free-thinking and experienced subordinates
Give an example of when a democratic approach is used
- Prime Minister
What are the characteristics of a laissez-faire leader?
- 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
When is a laissez-faire approach used?
Most effective when staff are motivated, ready and willing to take on responsibility and can be trusted to do their jobs
Give an example of when a laissez-faire approach is used
- self-employed
- sole trader
- franchise
What is McGregor’s Theory X approach?
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
What approach is needed for Theory X employees?
Authoritarian
What is McGregor’s Theory Y approach?
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
What approach is needed for Theory Y employees?
Democratic
- where the manager delegates
What are the four main styles of leadership on Tannenbaum and Schmidt’s Continuum of Leadership?
- tells
- sells
- consults
- joins
What is the tells part of Tannenbaum and Schmidt?
leader identifies problems, makes decision, and announces to subordinates
- expects implementation
What is the sells part of Tannenbaum and Schmidt?
leader makes decision but attempts to overcome resistance through discussion and persuasion
What is the consults part of Tannenbaum and Schmidt?
- leader identifies problem and presents it to the group
- listens to advice and suggestions before making the decision
What is the joins part of Tannenbaum and Schmidt?
leader defines the problem and passes on the solving and decision making to the group (which the manager is part of)
Link McGregor’s Theory X and Theory Y approaches, the four leadership styles, and Tannenbaum and Schmidt’s Continuum of Leadership
Theory X
- Tells = Autocratic
- Sells = Paternalistic
- Consults = Move to democratic
- Joins = Democratic
Theory Y
If productivity decreases what style of leadership should be adopted?
Autocratic
What are the influences on management and leadership styles?
- company structure
- tall = more layers = autocratic
- situation
- crisis = autocratic
- culture and tradition
- top down and autocratic
- difficult to be any other type of leader
- top down and autocratic
- 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
- difficult to change their leadership style
What is style versatility?
The ability to change leadership style when necessary
- adopt a style that is suitable to the circumstances
- use all four styles of leadership
What are the two types of decision making?
- scientific decision making
- decision making based on intuition
What is the definition of scientific decision making?
Decision making based on data and uses a logical rather than rational approach
What is the definition of intuition?
Decision making based on gut feeling rather than data and rational analysis
What is the scientific decision making process?
- Setting objectives
- determine what you want to achieve
- ensure objectives are SMART
- Gathering data
- market research
- break-even analysis, ratio analysis, etc
- Analyse data
- filter and analyse data
- ensure quality of data
- Select a strategy/make decision
- develop corporate plan from information gathered
- select most appropriate strategy
- 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
What are the advantages of scientific decision making?
- 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
What are the disadvantages of scientific decision making?
- very time consuming
- potentially expensive to collect data
- data could be flawed, unreliable or invalid
What is decision making based on intuition?
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
What are the benefits of using intuition?
- quicker and easier
- good if in a crisis
- may be better to rely on manager’s instinct
- knows the market well
What are the disadvantages of using intuition?
- decisions aren’t always evidence based
- could be biased or subjective
What influences the choice of approach?
- 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
What are strategic/corporate decisions?
- long term (5-10 years)
- involves large commitment of resources
- difficult to reverse
- usually taken by senior managers
- higher risk
What are tactical/functional decisions?
- short term
- fewer resources involved
- easier to reverse
- usually taken by more junior managers
- lower risk
What is decision making all about?
Minimising risk, maximising reward
What is the first mover advantage?
- the advantages gained if the first to enter a market
- customer loyalty
- brand recognition
- control of key resources
Give an example of a business with the first mover advantage
- Apple
- Amazon (books)
- CocaCola
What are risks?
- 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)
What are rewards?
- 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
What is uncertainty?
an event or outcome that a business is unable to predict or directly influence, potentially with a negative outcome
What is opportunity cost?
measures the cost in terms of the ‘next best alternative forgone’
- what a business lost out on by choosing an alternative option
What is a decision tree?
- 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
What are the benefits of decision trees?
- 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
What are the limitations of decision trees?
- 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
What is the formula for expected value?
expected value = expected monetary value x probability
What is the formula for net gain?
net gain = expected value - costs
What must you do before calculating net gain?
Add the expected values before working out the net gain
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.
- 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.
What are the influences on decision making?
- mission
- objectives
- ethics
- PESTLE
- resource constraints
- financial, human, physical
- power of the stakeholder
- culture of organisation
How do mission and objectives influence decision making?
- 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
How do ethics influence decision making?
- 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)
How does PESTLE (external environment) influence decision making?
- 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
How do resource constraints influence decision making?
- 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
How does competition influence decision making?
- response to actions of competitors
- actions of first mover advantage
- e.e Aldi and Lidl
What is a stakeholder?
- stakeholders have a stake in an organisation
- can have a positive or negative impact on an organisation and its activities
What is a primary stakeholder?
- those directly involved and affected by an organisation’s actions
- customers, employees, creditors
What is a secondary stakeholder?
- those indirectly involved and affected by an organisation’s actions
- ‘intermediaries’
- general public, local community, media, activist group
Draw the stakeholder map.
Refer to image.
Include:
- power
- level of interest
- A
- B
- C
- D
What are the needs of stakeholders?
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
Give an example of how stakeholder needs overlap
both government and local communities need employment
Give an example of how stakeholder needs conflict each other
shareholders need capital growth and dividends, but government needs payment of taxes, resulting in less annual profit to give dividends from
Draw the communication and consultation pyramid
OR
Write the components out in order from top to bottom
- 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
What are the communication and consultation channels?
- 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
What is corporate social responsibility (CSR)?
commitment by business to contribute to the community and environment
How is CSR done through?
- reducing waste pollution
- contributing to educational and social programmes
- improving quality of life for the workforce and their families
What is the benefit of CSR?
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
