SUMMARY

CHAPTER 1: INTRODUCTION TO MANAGEMENT

 An organization is a social entity that is goal-directed and deliberately
structured.
 Management is defined as the attainment of organizational goals in an
effective and efficient manner through planning, organizing, leading, and
controlling organizational resources => Good management is important
because organizations contribute so much to society.
 Managers perform a wide variety of activities that fall within four primary
management functions.
o Planning is the management function concerned with defining goals
for future performance and how to attain them.
o Organizing involves assigning tasks, grouping tasks into departments,
and allocating resources.
o Leading means using influence to motivate employees to achieve the
organization’s goals.
o Controlling is concerned with monitoring employees’ activities,
keeping the organization on track toward meeting its goals and
making corrections as necessary.
 Efficiency pertains to the amount of resources—raw materials, money, and
people—used to produce a desired volume of output.
 Effectiveness refers to the degree to which the organization achieves a
stated goal.
 Some managers are using mobile apps to increase efficiency; one example is
Square, used to process credit and debit card payments with a smartphone.
 Performance is defined as the organization’s ability to attain its goals by
using resources in an efficient and effective manner.
 Turbulent environmental forces have caused a significant shift in the
competencies required for effective managers.
 Traditional management competencies could include a command-and-
control leadership style, a focus on individual tasks, and standardizing
procedures to maintain stability.
 New management competencies include the ability to be an enabler rather
than a controller, using an empowering leadership style, encouraging
collaboration, leading teams, and mobilizing for change and innovation.
 Managers at Illumination Entertainment are concerned both with keeping
costs low (efficiency) and producing animated films that are critically and
financially successful (effectiveness).
 Managers have complex jobs that require a range of abilities and skills.
o Technical skills include the understanding of and proficiency in the
performance of specific tasks.
o Human skills refer to a manager’s ability to work with and through
other people and to work effectively as part of a group.
o Conceptual skills are the cognitive abilities to see the organization as
a whole and the relationship among its parts.
 The two major reasons that managers fail are poor communication and poor
interpersonal skills.
 A manager’s weaknesses become more apparent during stressful times of
uncertainty, change, or crisis.
 There are many types of managers, based on their pur pose and location in
an organization.
 A top manager is one who is at the apex of the organizational hierarchy and
is responsible for the entire organization.
 Middle managers work at the middle level of the organization and are
responsible for major divisions or departments.
 A project manager is a manager who is responsible for a temporary work
project that involves people from various functions and levels of the
organization.
 Most new managers are first-line managers - those who are at the first or
second level of the hierarchy and are directly responsible for overseeing
groups of production employees.
 A functional manager is responsible for a department that performs a single
functional task, such as finance or marketing.
 General managers are responsible for several departments that perform
different functions,
 CHAPTER 3: CORPORATE ENVIRONMENT
 The organizational environment, consisting of both task and general
environments, includes all elements existing outside the boundary of the
organization that have the potential to affect the organization.
 An organizational ecosystem includes organizations in all the sectors of the
task and general environments that provide the resource and information
transactions, flows, and linkages necessary for an organization to thrive.
 The general environment indirectly influences all organizations within an
industry and includes five dimensions.
 The task environment includes the sectors that conduct day-to-day
transactions with the organization and directly influence its basic operations
and performance.
 The internal environment includes elements within the organization’s
boundaries, such as employees, management, and corporate culture.
 Customers are part of the task environment and include people and
organizations that acquire goods or services from the organization.
 Competitors are organizations within the same industry or type of business
that vie for the same set of customers.
 Suppliers provide the raw materials the organization uses to produce its
output.
 The labor market represents the people available for hire by the
organization.
 When external factors change rapidly, the organization experiences high
uncertainty.
 Strategic issues are events and forces that alter an organization’s ability to
achieve its goals as environmental turbulence increases, strategic issues
emerge more frequently.
 Boundary spanning links to and coordinates the organization with key
elements in the external environment.
 Big data analytics uses powerful computer technology to search and
examine massive, complex sets of data to uncover hidden patterns and
correlations so managers can make better decisions.
 Interorganizational partnerships reduce boundaries and increase
collaboration with other organizations.
 A merger occurs when two or more organizations combine to become one.
 A joint venture is a strategic alliance or program by two or more
organizations.
 Organizational culture is the set of key values, beliefs, understandings, and
norms shared by members of an organization.
E.g: Steve Jobs is a hero at Apple, representing the creativity, risk taking,
and striving for excellence that define the company’s culture.
 A symbol is an object, act, or event that conveys meaning to others.
 A story is a narrative based on true events and is repeated frequently and
shared among organizational employees.
 A hero is a figure who exemplifies the deeds, character, and attributes of a
strong culture.
 A slogan, such as Disney’s “The happiest place on Earth,” succinctly
expresses a key corporate value. • Managers hold ceremonies, planned
activities at special events, to reinforce company values.
 For an organization to be effective, corporate culture should be aligned with
organizational strategy and the needs of the external environment.
 Organizations within the same industry often reveal similar cultural
characteristics because they are operating in similar environments.
 The adaptability culture is characterized by values that support the
company’s ability to interpret and translate signals from the environment
into new behavior responses.
 An achievement culture is a results-oriented culture that values
competitiveness, personal initiative, and achievement.
 A culture that places high value on meeting the needs of employees and
values cooperation and equality is an involvement culture.
 A consistency culture values and rewards a methodical, rational, orderly
way of doing things.
 CHAPTER 4.1: PLANNING
 Planning is the act of determining goals and defining the means of achieving
them => the most fundamental of the four management functions => helps
managers think about the future rather than thinking merely in terms of
day-to-day activities
 A goal is a desired future circumstance or condition that the organization
wants to realize.
 A plan is a blueprint specifying the resource allocations, schedules, and other
actions necessary for attaining goals.
 Managers formulate goals that are specific and measurable, cover key
result areas, are challenging but realistic, have a defined time period, and
are linked to rewards.
Key result areas include:
o Profit and economic gain.
o Customer satisfaction.
o Employee happiness.
o Product quality.
o Organizational management.
o Innovation

 Key performance indicators (KPIs) are measures that reflect how well
lower-level goals are helping the organization progress toward attaining its
strategic goal.
 Types of operational planning include management-by objectives, single-use
plans, and standing plans.
 Management-by-objectives (MBO) is a method whereby managers and
employees define goals for every department, project, and person and use
them to monitor subsequent performance.
 MBO includes the steps of setting goals, developing action plans, reviewing
progress, and appraising performance.
 A recent approach that focuses people on the methods and processes used to
attain results, rather than on the results themselves, is called management
by means (MBM).
 Single-use plans are plans that are developed to achieve a set of goals that
are unlikely to be repeated in the future.
 Standing plans are ongoing plans that are used to provide guidance for
tasks that occur repeatedly in the organization (e.g: a social media policy)
 Managers use innovative planning approaches to cope with today’s turbulent
environment.
o Contingency planning identifies important factors in the
environment and defines a range of alternative responses to be taken
in the case of emergencies, setbacks, or unexpected conditions.
o With scenario building, managers look at trends and discontinuities
and imagine possible alternative futures to build a framework within
which unexpected future events can be managed.
 Scenarios are alternative vivid pictures of what the future might be like.
 Many companies increased their use contingency and scenario planning
because of the global financial crisis and volatile economic conditions.
 Crisis planning involves the two major stages of prevention and preparation.
 Approaches to planning change with the times. In many companies today,
planning is decentralized.
 Decentralized planning means that top executives or planning experts work
with managers in major divisions or departments to develop their own goals
and plans.
 Stretch goals are reasonable yet highly ambitious and compelling goals
that energize people and inspire excellence.
 Business performance dashboards can help managers oversee plans and
measure progress toward goals.
 An intelligence team is a cross-functional group of people who work
together to gain a deep understanding of a specific competitive issue and
offer insight and recommendations for planning.

 CHAPTER 4.2: STRATEGY

 A strategy is the plan of action that describes resource allocation and

activities for dealing with the environment, achieving a competitive
advantage and attaining goals => The heart of strategy is to deliver value to
customers.
 Strategic management refers to the set of decisions and actions used to
formulate and implement strategies that will provide a competitively
superior fit between the organization and its environment so as to achieve
organizational goals.
 Competitive advantage refers to what sets the organization apart from
others and provides it with a distinctive edge in the marketplace.
 Four elements of competitive advantage are the company’s target customer,
core competencies, synergy, and value.
 A core competence is something that the organization does particularly well
in comparison to others. (e.g: Amazon has core competencies of operational
efficiency and a superb distribution system)
 Synergy exists when the organization’s parts interact to produce a joint
effect that is greater than the sum of the parts acting alone (e.g: Kraft bought
Cadbury to gain synergy by being able to sell products through Cadbury’s
established distribution network in emerging markets)
 Corporate-level strategy pertains to the organization as a whole and the
combination of business units and products that make it up.
 Business-level strategy pertains to each business unit or product line within
the organization.
 Functional-level strategy pertains to the major functional departments
within each business unit, such as manufacturing, marketing, and R&D.
 Frameworks for corporate-level strategy include portfolio strategy, the BCG
matrix, and diversification strategy.
 Portfolio strategy pertains to the mix of SBUs and product lines that fit
together in a logical way to provide synergy and competitive advantage.
 A strategic business unit (SBU) is a division of the organization that has a
unique business, mission, product or service line, competitors, and markets
relative to other units of the same organization.
 The BCG matrix is a concept developed by the Boston Consulting Group
that evaluates SBUs with respect to two dimensions—business growth rate
and market share—and classifies them as cash cows, stars, question marks,
or dogs.
 Diversification is the strategy of moving into new lines of business (e.g:
Microsoft diversified when it purchased Nokia’s mobile phone business, and
Nestlé diversified by purchasing the Ralston pet food business)
 Related diversification means moving into a new business that is related to
the corporation’s existing business activities.
 Unrelated diversification refers to expanding into totally new lines of
business.
 Some managers pursue diversification through a strategy of vertical
integration, which means expanding into businesses that either provide the
supplies needed to make products or distribute and sell the company’s
products.
 A popular model for formulating business-level strategy is Porter’s
competitive strategies.
 Managers analyze the competitive environment and adopt one of three types
of strategy: differentiation, cost leadership, or focus.
o A differentiation strategy is a strategy with which managers seek to
distinguish the organization’s products and services from those of
others in the industry.
o A cost leadership strategy is a strategy with which managers
aggressively seek efficient facilities, cut costs, and use tight cost
controls to be more efficient than others in the industry
o A focus strategy is a strategy with which managers use either a
differentiation or a cost leadership approach, but they concentrate on a
specific regional market or buyer group.
 E.g: Managers at Allegiant Travel Company use a focused cost
leadership strategy by using older planes and bare bones service to fly
people to holiday destinations out of small cities that other carriers
have abandoned or never served. • Once business-level strategies are
formulated, managers in functional departments devise functional-
level strategies to support them.

 When formulating a strategy as the focus for global operations, managers

face a dilemma between the need for global standardization and the need for
local responsiveness.
o With a globalization strategy, product design and advertising are
standardized throughout the world.
o A multidomestic strategy means that competition in each country is
handled independently; product design and advertising are modified to
suit the specific needs of individual countries. (e.g: Kraft has
reformulated its cookie and cracker recipes and redesigned its
packaging to suit tastes in China)
o A transnational strategy is a strategy that combines global
coordination to attain efficiency with local flexibility to meet needs in
different countries.
 Most large companies use a combination of global strategies to achieve
global standardization and efficiency, as well as respond to local needs and
preferences in various countries.


 CHAPTER 5: DECISION MAKING
 Good decision making is a vital part of good management.
 Decision making is the process of identifying problems and opportunities
and then resolving them.
 A decision is a choice made from available alternatives.
o A programmed decision is one made in response to a situation that
has occurred often enough to enable managers to develop decision
rules that can be applied in the future.
o A nonprogrammed decision is one made in response to a situation
that is unique, is poorly defined and largely unstructured, and has
important consequences for the organization.

 Decisions differ according to the amount of certainty, risk, uncertainty, or

ambiguity in the situation.
o Certainty is a situation in which all the information the decision
maker needs is fully available.
o Risk means that a decision has clear-cut goals and good information is
available, but the future outcomes associated with each alternative are
subject to chance.
o Uncertainty occurs when managers know which goals they want to
achieve, but information about alternatives and future events is
incomplete.
o Ambiguity (the most difficult situation) is a condition in which the
goals to be achieved or the problem to be solved is unclear,
alternatives are difficult to define, and information about outcomes is
unavailable. => Highly ambiguous circumstances can create a wicked
decision problem.

 The classical model is normative and based on the assumption => it

provides guidelines for reaching an ideal outcome and defines how a
manager should make logical decisions that are economically sensible and
economically sensible and in the organization’s best economic interest => an
ideal, rational approach.
 Software programs based on the classical model are being applied to
programmed decisions, such as how to schedule airline crews or how to
process insurance claims most efficiently.
 The administrative model is an approach that describes how managers
actually make decisions includes the concepts of bounded rationality and
satisficing and describes how managers make decisions in situations that
are characterized by uncertainty and ambiguity => a descriptive
approach.
o Bounded rationality means that people have the time and cognitive
ability to process only a limited amount of information on which to
base decisions.
o Satisficing means choosing the first alternative that satisfies minimal
decision criteria

 A new trend in decision making, quasirationality, combines intuitive and

analytical thought.
o Intuition is an aspect of administrative decision making that refers to a
quick comprehension of a decision situation based on past experience
but without conscious thought.

 The political model takes into consideration that many decisions require
debate, discussion, and coalition building (an informal alliance among
managers who support a specific goal or solution).
 Four major decision styles are directive, analytical, conceptual, and
behavioral.
 Most experienced managers use a variety of styles depending on the decision
situation.

 CHAPTER 6: ORGANIZING
 The chain of command is an unbroken line of authority that links all
individuals in the organization and specifies who reports to whom.
 Authority is the formal and legitimate right of a manager to make decisions,
issue orders, and allocate resources to achieve outcomes desired by the
organization.
 Responsibility is the flip side of the authority coin; it refers to the duty to
perform the task or activity that one has been assigned. advise, counsel, and
recommend in the manager’s area of expertise.
 Accountability means that people with authority and responsibility are
subject to reporting and justifying task outcomes to those above them in the
chain of command.
 When managers transfer authority and responsibility to positions below
them in the hierarchy, it is called delegation.
 Managers may have line authority, which refers to the formal power to
direct and control immediate subordinates, or staff authority, which refers
to the right to advise, counsel, and recommend in the manager’s area of
expertise.
 Span of management, sometimes called span of control, refers to the
number of employees reporting to a supervisor.
 A tall structure is characterized by an overall narrow span of management
and a relatively large number of hierarchical levels.
 A flat structure is characterized by an overall broad span of management
and relatively few hierarchical levels.
 The trend is toward broader spans of management and greater
decentralization.
 Decentralization means that decision authority is pushed down to lower
organization levels.
 Centralization means that decision authority is located near top
organization levels.
 Departmentalization is the basis for grouping individual positions into
departments and departments into the total organization.
o Three traditional approaches to departmentalization are functional,
divisional, and matrix.
 o A functional structure groups employees into departments based on
similar skills, tasks, and use of resources.
o The divisional structure groups employees and departments based on
similar organizational outputs (products or services), such that each
division has a mix of functional skills and tasks => an alternative
approach is to group employees and departments based on geographic
region or customer group.
o The matrix approach uses both functional and divisional chains of
command simultaneously, in the same part of the organization.
In a matrix structure, some employees, called two-boss employees,
report to two supervisors simultaneously.

 A cross-functional team is a group of employees from various functional

departments that meet as a team to resolve mutual problems.
 A team-based structure is one in which the entire organization is made up
of horizontal teams that coordinate their activities and work directly with
customers to accomplish organizational goals (e.g: Whole Foods Market)
 With a virtual network structure, the organization subcontracts most of its
major functions to separate companies and coordinates their activities from a
small headquarters organization.
 Both the team and the network approach have distinct advantages and
disadvantages.

 A project manager is a person responsible for coordinating the activities of

several departments for the completion of a specific project.
 Companies often shift to a more horizontal approach after going through
reengineering - refers to the radical redesign of business processes to
achieve dramatic improvements in cost, quality, service, and speed.
 Relational coordination refers to frequent horizontal coordination and
communication carried out through ongoing relationships of shared goals,
shared knowledge, and mutual respect.
 In addition to the vertical structure, every organization needs mechanisms
for horizontal integration and coordination.
 Coordination refers to the managerial task of adjusting and synchronizing
the diverse activities among different individuals and departments.
 Collaboration means a joint effort between people from two or more
departments to produce outcomes that meet a common goal or shared
purpose.
 Ways to increase horizontal coordination include task forces, teams,
project managers, and relational coordination.
o A task force is a temporary team or committee formed to solve a
specific short-term problem involving several departments.

 Knowledge, tools, techniques, and activities should match production

activities used to transform organizational inputs into outputs.
 Technology can flatten the structure of an organization by developing
functional connections that replace those vertical reporting relationships.

 CHAPTER 7: LEADERSHIP
 Leadership is the ability to influence people toward the attainment of
organizational goals.
 The attitudes and behaviors of leaders shape the conditions that determine
how well employees can do their jobs => Leaders play a tremendous role in
the organization’s success.
 A significant influence on leadership styles in recent years is the turbulence
and uncertainty of the environment.
 Leadership and management reflect two different sets of qualities and skills
that provide different benefits for the organization.
o Management promotes stability and efficient organizing to meet
current commitments, whereas leadership often inspires engagement
and organizational change to meet new conditions.
 Both of them are important and people can learn to be good leaders as well
as good managers.
 Good managers must be leaders.

 Two basic leadership behaviors identified as important for leadership are

attention to tasks (initiating structure – task behavior/job-centered) and
attention to people (consideration – people-oriented/employee-centered)
o Initiating structure is the term that describes the extent to which a
leader is task-oriented and directs subordinates’ work activities toward
goal accomplishment => ineffective
o Consideration refers to describe the extent to which a leader is
sensitive to subordinates, respects their ideas and feelings, and
establishes mutual trust => most effective

 A contingency approach is a model of leadership that describes the

relationship between leadership styles and specific situations.
o One contingency approach is the situational model, which links the
leader’s behavioral style with the readiness level of followers.
o In general, a task-oriented leader style fits a low readiness follower,
and a relationship leader style fits a higher-readiness follower.
 o In Fiedler’s contingency theory, the suitability of a leader’s style is
determined by whether the situation is considered favorable or
unfavorable to the leader.
o Task-oriented leaders are considered to perform better in either highly
favorable or highly unfavorable situations.
o Relationship-oriented leaders are considered to perform better in
situations of intermediate favorability.
o A substitute for leadership is a situational variable that makes a
leadership style redundant or unnecessary.
o A neutralizer is a situational variable that counteracts a leadership
style and prevents the leader from displaying certain behaviors.

 One effective approach in today’s environment is Level 5 leadership, which

is characterized by an almost complete lack of ego (humility), coupled
with a fierce resolve to do what is best for the organization (will).
o Humility means being unpretentious and modest rather than arrogant
and prideful.
o A servant leader is a leader who serves others by working to fulfill
followers’ needs and goals, as well as to achieve the organization’s
larger mission.
o Authentic leadership refers to leadership by individuals who know
and understand themselves, who espouse and act consistent with
higher-order ethical values, and who empower and inspire others with
their openness and authenticity.
o Interactive leadership is a leadership style characterized by values
such as inclusion, collaboration, relationship building, and caring.

 Women leaders typically score significantly higher than men on abilities

such as motivating others, building relationships, and developing others -
skills that are based on humility and authenticity and are particularly suited
to today’s organizations.
 Although interactive leadership is associated with women’s style of leading,
both men and women can be effective interactive leaders.
 A charismatic leader is a leader who has the abil ity to inspire and motivate
people to transcend their expected performance, even to the point of
personal sacrifice.
 A transformational leader is distinguished by a special ability to bring
about innovation and change by creating an inspiring vision, shaping values,
building relationships, and providing meaning for followers.
 A transactional leader clarifies subordinates’ roles and task requirements,
initiates structure, provides rewards, and displays consideration for
followers.
 Both charismatic and transformational leaders provide followers with an
inspiring vision, an attractive, ideal future that is credible, yet not readily
attainable.
 Leaders can accomplish nothing without effective followers.
o Critical thinking means thinking independently and being mindful of
the effect of one’s behavior on achieving goals.
o Uncritical thinking means failing to consider the possibilities beyond
what one is told and accepting others’ ideas without thinking.
o An effective follower is a critical, independent thinker who actively
participates in the organization.
o An alienated follower is a person who is an independent, critical
thinker but is passive in the organization.
o A conformist is a follower who participates actively in the
organization but does not use critical thinking skills.
o A passive follower is one who exhibits neither critical independent
thinking nor active participation.
o A pragmatic survivor is a follower who has qualities of all four
follower styles, depending on which fits the prevalent situation.

 Power is the potential ability to influence the behavior of others. • All

leaders use power to influence people and accomplish organizational goals. •
Influence is the effect that a person’s actions have on the attitudes, values,
beliefs, or behavior of others.
o Legitimate power is power that stems from a manager’s formal
position in an organization and the authority granted by that position.
 o Reward power results from the authority to bestow rewards.
o Coercive power stems from the authority to punish or recommend
punishment.
o Expert power is power that results from a leader’s special knowledge
or skill in the tasks performed by subordinates.
o Referent power results from characteristics that command
subordinates’ identification with, respect and admiration for, and
desire to emulate the leader.
 Both leaders and followers can tap into other sources of power, including
personal effort, networks of relationships, and access to or control over
information.
 Leaders use a wide range of interpersonal influence tactics, and people who
use a wider variety of tactics are typically perceived as having greater power.


 CHAPTER 8: MOTIVATION
 Motivation is the arousal of enthusiasm and persistence to pursue a certain
course of action.
 All behaviors are motivated by something, such as the desire to fulfill needs
for money, recognition, friendship, or a sense of accomplishment.
o Intrinsic rewards are the satisfactions that a person receives in the
process of performing a particular action.
o Extrinsic rewards are given by another person, such as a manager,
and include pay increases, promotions, and praise.
 People can be driven to act by fear, but good managers avoid the use of fear
tactics to motivate people because this approach damages employee
commitment and performance in the long run.
 In addition to providing appropriate extrinsic rewards, effective managers
try to help people achieve intrinsic rewards from their work.

 Content theories emphasize the needs that motivate people.

o The most well-known content theory is Maslow’s hierarchy of needs
theory, which proposes that people are motivated by five categories of
needs - physiological, safety, belongingness, esteem, and self-
actualization - that exist in a hierarchical order.
o ERG theory is a modification of the needs hierarchy and proposes
three categories of needs: existence, relatedness, and growth.
o The frustration-regression principle is the idea that failure to meet a
high-order need may cause a regression to an already satisfied lower-
order need; thus, people may move down as well as up the needs
hierarchy.
o Giving people more control over their work schedules and
opportunities to contribute ideas are two ways that managers meet
people’s higher-level needs (e.g: Johnson Storage & Moving lets
hourly administrative personnel work remotely or work hours of their
own choosing and gives movers and warehouse workers control over
their start and end times).
 o One element of Herzberg’s two-factor theory, hygiene factors,
focuses on lower-level needs and involves the presence or absence of
job dissatisfiers, including working conditions, pay, and company
policies.
o Herzberg’s second factor, motivators, influences job satisfaction
based on fulfilling higher-level needs such as achievement,
recognition, responsibility, and opportunities for personal growth.
o The acquired needs theory proposes that certain types of needs,
including the need for achievement, need for affiliation, and need for
power, are acquired during an individual’s lifetime of experiences.

 Process theories, including goal-setting theory, equity theory, and

expectancy theory, explain how people select behaviors with which to meet
their needs and determine whether their choices were successful.
o Goal-setting theory proposes that specific, challenging goals increase
motivation and performance when the goals are accepted by
subordinates and these subordinates receive feedback to indicate their
progress toward goal achievement.
o Equity theory focuses on individuals’ perceptions of how fairly they
are treated relative to others (e.g: Managers at SumAll use an open-
pay model so that people know what everyone else makes, arguing
that it reduces stress over potential inequity).
o Expectancy theory proposes that motivation depends on individuals’
expectations about their ability to per form tasks and receive desired
rewards.
+ A person’s E → P expectancy is the expectancy that putting effort
into a given task will lead to high performance.
+ A person’s P → O expectancy is the expectancy that high
performance of a task will lead to the desired outcome.
+ Valence is the value of outcomes (rewards) to the individual.
 Reinforcement theory is based on the relationship between a given
behavior and its consequences.
o Behavior modification refers to the set of techniques by which
reinforcement theory is used to modify human behavior.
o The law of effect asserts that positively reinforced behavior tends to
be repeated, and unreinforced or negatively reinforced behavior tends
to be inhibited.
o Reinforcement is anything that causes a certain behavior to be
repeated or inhibited (4 reinforcement tools).
+ Positive reinforcement is the administration of a pleas ant and
rewarding consequence following a desired behavior.
+ Managers apply avoidance learning - negative reinforcement,
when they remove an unpleasant consequence once a behavior is
improved.
+ Punishment refers to the imposition of an unpleasant outcome
following an undesirable behavior.
+ Extinction refers to withholding positive rewards and essentially
ignoring undesirable behavior.

 Social learning theory proposes that an individual’s motivation can result

not just from direct experience of re wards and punishments, but also from
thoughts, beliefs, and observations of other people’s behavior.
o Vicarious learning occurs when an individual sees others perform
certain behaviors and get rewarded for them.

 Jobs are an important consideration for motivation because performing their

components may provide intrinsic rewards that meet employees’ needs.
 Job design refers to applying motivational theories to the structure of work
to improve motivation, productivity, and satisfaction.
 Most companies are moving away from simplified jobs and are using job
rotation, job enlargement, and job enrichment to provide employees with
greater variety, stimulation, and satisfaction.
o Job enrichment refers to incorporating high-level motivators, such as
achievement, recognition, and opportunities for growth, into the work.
 o Work redesign means altering jobs to increase both the quality of
employees’ work experience and their productivity.
o The job characteristics model is a model of job design that considers
core job dimensions, individuals’ critical psychological states, and
employee growth-need strength.

 Variable compensation and “at risk” pay have become key motivational
tools, although these practices have been criticized in recent years for
rewarding the wrong types of behavior.
 Employee empowerment and engagement are recent motivational trends
that focus less on extrinsic rewards and more on creating a work
environment that enables people to achieve intrinsic rewards and meet
higher-level needs.
o Empowerment is the delegation of power and authority to
subordinates in an organization (e.g: giving them information,
knowledge, power, and rewards)
o Engagement is an emotional and mental state in which employees
enjoy their work, contribute enthusiastically to meeting goals, and feel
a sense of belonging and commitment to the organization (e.g:
providing employees with a sense of meaning, a sense of connection,
and a sense of competence and growth).


 CHAPTER 9: CONTROLLING
 Organizational control is the systematic process through which managers
regulate organizational activities to meet planned goals and standards of
performance.
 Most organizations measure and control performance using quantitative
financial measures.
 The feedback control model involves using feedback to determine whether
performance meets established standards.
 Well-designed control systems include four key steps: establish standards,
measure performance, compare performance to standards, and make
corrections as necessary.
 A balanced scorecard is a comprehensive management control system that
balances traditional financial measures with measures of customer service,
internal business processes, and the organization’s capacity for learning and
growth.
 The philosophy of control has shifted to reflect changes in leadership
methods.
o Hierarchical control involves monitoring and influencing employee
behavior through extensive use of rules, policies, hierarchy of
authority, written documentation, reward systems, and other formal
mechanisms.
o With decentralized control, the organization fosters compliance with
organizational goals through the use.
 Open-book management allows employees to see for themselves the
financial condition of the organization and encourages them to think and act
like business owners.
 Total quality management (TQM) is an organization wide effort to infuse
quality into every activity in a company through continuous improvement
=> focuses on teamwork, increasing customer satisfaction, and lowering
costs.
 Quality circles offer one technique for implementing TQM and include
groups of 6 to 12 volunteer employ ees who meet regularly to discuss and
solve problems affecting the quality of their work.
 Another option for tracking quality is benchmarking, the continuous
process of measuring products, services, and practices against major
competitors or industry leaders.
 Six Sigma is a quality control approach that emphasizes a relentless pursuit
of higher quality and lower costs.
 Quality partnering involves assigning dedicated personnel within a
particular functional area of the business to identify opportunities for
improvement throughout the work process.
 Continuous improvement, or kaizen, is the implementation of a large
number of small, incremental improvements in all areas of the organization
on an ongoing basis.
 All employees are expected to contribute by initiating changes in their own
job activities. There is no end to the process. Innovations can start simply,
and employees can build on their success.

 Budgetary control, one of the most commonly used forms of managerial

control, is the process of setting targets for an organization’s expenditures,
monitoring results and comparing them to the budget, and making changes
as needed.
o A responsibility center is any organizational department or unit
under the supervision of a single person who is responsible for its
activity.
o An expense budget outlines the anticipated and actual expenses for a
responsibility center.
 o A revenue budget lists forecasted and actual revenues of the
organization.
o The cash budget estimates receipts and expenditures of money on a
daily or weekly basis to ensure that an organization has sufficient cash
to meet its obligations.
o A budget that plans and reports investments in major assets to be
depreciated over several years is called a capital budget.
+ Many companies use top-down budgeting, which means that the
budgeted amounts for the coming year are liter ally imposed on
middle- and lower-level managers.
+ On the other hand, bottom-up budgeting involves lower-level
managers anticipating their department’s budget needs and passing
them up to top management for approval.
o Zero-based budgeting is an approach to planning and decision
making that starts at zero and requires a complete justification for
every line item in a budget, instead of carrying forward a prior budget
and applying a percentage change.

 Financial statements provide the basic information used for financial

control of an organization.
o The balance sheet shows the firm’s financial position with respect to
assets and liabilities at a specific point in time.
o The income statement summarizes the firm’s financial performance
for a given time interval.

 The most common financial analysis focuses on the use of ratios—statistics

that express the relationships between performance indicators such as profits
and assets, sales, and inventory.
o The liquidity ratio indicates the organization’s ability to meet its
current debt obligations.
o The activity ratio measures the organization’s internal performance
with respect to key activities defined by management.
o The profitability ratio describes the firm’s profits relative to a source
of profits, such as sales or assets.
 As global business expands, many companies have adopted a universal
benchmark for quality management practices, including ISO 9000
standards, which represent an international consensus of what constitutes
effective quality management as outlined by the International Organization
for Standardization (ISO).
 Many organizations are moving toward increased control from the top in
terms of corporate governance, which refers to the framework of systems,
rules, and practices by which an organization ensures accountability,
fairness, and transparency in the firm’s relationships with stakeholders.