General Management - organisation, leadership and theories.

Authors Avatar

Guga Lucian



Edituversitatii Transilvania din Brasov

ISBN (10) 973-635-852-6; ISBN(13) 978-973-635-852-4


1. Introduction to management         3

  1. The definition of management.         3

1.1.1. The four management functions         4

1.1.2. Management types        11

1.1.3. Management skills        14

1.2. Scientific management        22

1.3. The organizational environment        37

1.3.1. The international environment        37

1.3.2. The external environment        39

1.3.3. Internal environment         40

1.4. Managerial ethics        45

1.4.1. Managerial culture influence        45

1.4.2. Ethic codes        46

1.4.3. Managerial responsibility        47

1.4.4. Rules of managerial ethics        50

1.4.5. Types of companies according to managerial ethics        51

2. Managerial goals setting and planning        53

2.1. Overview of goals and plans        53

2.2. Goal characteristics        58

2.3. Develop a career plan        64

2.4. Managerial decision making        67

2.4.1. Management problem        67

2.4.2. Types of decisions and problems        69

2.4.3. Decisions making models        73

3. Organizing        85

3.1. Fundamentals of organizing        85

3.2. Achive strategic objectives        90

3.3. Departmentalization        98

3.4. Innovation and change        108

3.5. The management of investments        120

4. Leadership in organizations         134

4.1. Leading        134

4.1.1. The nature of leadership        134

4.1.2. Concepts of leadership        136

4.1.3. Principles of leadership        137

4.2. How to create leaders        159

4.2.1. Leadership defined        159

4.2.2. Orienting new members        168

4.2.3. Team organization        172

4.3. Motivation        187

4.3.1. The will to work        187

4.3.2. Payment by results, productivity bargaining

and profit sharing        189

4.3.3. The struggle for independence and a good life        196

4.3.4. People work willingly for what they need and want        198

4.3.5. Payout policy in the 21st century        202

4.4. Communication in organization        213

4.4.1. Communication and the manager’s job        213

4.4.2. The communication process        214

4.4.3. Communicating among people        216

4.4.4. Communications channels        217

4.4.5. Organizational communication        219

4.4.6. Formal communication channels        219

4.4.7. Downward communication        220

4.4.8. Upward communication.        222

4.4.9. Horizontal communication.          223

Home work I          226

Home work II          227

Bibliography           233

  1. Introduction to management

  1. The definition of management.

Management mines the attainment of organizational goals in an effective and efficient manner through planning, organizing, leading, and controlling organizational resources.


        The definition of management

        What do managers like Lee Iacocca. General Creech, and Kelly Johnson have in common? They get things done through their organizations. One early management scholar, Mary Parker Follett, described management as "the art of getting things done through people." Peter Drucker, a noted management theorist, says that managers give direction to their organizations, provide leadership, and decide how to use organizational resources to accomplish goals. Getting things done through people and other resources and providing direction and leadership are what managers do. These activities apply not only to top executives such as Lee Iacocca or General Creech, but also to a new lieutenant in charge of a TAG maintenance squadron, a supervisor in the Ontario plant that makes Plymouth minivans, and ReBecca Roloff as manager of Pillsbury's distribution department. Moreover, management often is considered universal because it uses organizational resources to accomplish goals and attain high performance in all types of profit and not-for-profit organizations. Thus, our definition of management is as follows:

        Management is the attainment of organizational goals in an effective and efficient manner through planning, organizing, leading, and controlling organizational resources.

        There are two important ideas in this definition: (1) the four functions of planning, organizing, leading, and controlling and (2) the attainment of organizational goals in an effective and efficient manner. The management process of using resources to attain goals is illustrated in Exhibit 1.1. Although some management theorists identify additional management functions, such as staffing, communicating, or decision making, those additional functions will be discussed as Subsets of the four primary functions in Exhibit 1. Chapters of the book are devoted to the multiple activities and skills associated with each function, as well as to the environment, global competitiveness, and ethics, which influence how managers perform these functions. The next section begins with a brief overview of the four functions.


Exhibit 1.1. The Process of Management.


1.1.1. The four management functions


Planning is the management function concerned with defining goals for future organizational performance and deciding on the tasks and resource use needed to attain them.

        Planning defines where the organization wants to be in the future and how to get there. Planning means defining goals for future organizational performance and deciding on the tasks and use of resources needed to attain them. Senior managers at Bausch & Lomb defined a specific plan: to capture at least 50 percent of every segment of the contact lens market even if prices had to be cut and profits reduced to maintain market share. Senior managers at Chase Manhattan Bank decided to make it the number one service-quality bank in the world and, through extensive planning, to develop a worldwide network of branch banks, implement a sophisticated foreign exchange system, and offer a state-of-the-art electronic funds transfer system. General Creech successfully turned around the Tactical Air Command because he had a specific plan including targets for improved sortie rates and techniques for achieving the new rates.

        A lack of planning—or poor planning—can hurt an organization's performance. For example, Tom Clausen was accused of poor planning when he insisted that BankAmerica increase loans 10 percent a year and that profits increase as well. To get new loans, BankAmerica’s offices gradually reduced loan quality. To keep boosting profit, Clausen delayed investing in computers, scrimped on bank control systems, failed to modernize the branches, and kept salaries low. The absence of a detailed plan for achieving growth and efficiency in several areas led to loan failures and huge losses in subsequent years.



        Organizing is the management function concerned with assigning tasks, grouping tasks into departments, and allocating resources to departments.


        Organizing typically follows planning and reflects how the organization tries to accomplish the plan. Organizing involves the assignment of tasks, the grouping of tasks into departments, and the allocation of resources to departments. For example, Hewlett-Packard, Sears, Roebuck, Xerox, and Digital Equipment have all undergone recent structural reorganizations to accommodate their changing plans. General Creech accomplished his plan for TAG's improved sortie rate largely through decentralization and the development of small, independent maintenance units — a drastic departure from the traditional structure that had encouraged centralization and consolidation of Air Force resources. Kelly Johnson of Lockheed used organizing wizardry to reduce the number of subcontractor inspectors from 1,271 to 35 and still achieve the objective of improved launch effectiveness. Indeed, his organizing was so good that the Air Force insisted that a competitor be allowed to visit Johnson's team. The competitor used 3,750 people to perform a similar task and was years behind and way over budget. Johnson's organization was on schedule and under budget — and with only 126 people. Honeywell managers reorganized new product development into "tiger teams" consisting of marketing, design, and engineering employees. The new structural design reduced the time to produce a new thermostat from 4 years to 12 months.

        Likewise, weak organizing facilitated the destruction of Braniff Airlines under Harding Lawrence. Braniff did not have enough departments and offices to handle passengers and airplanes for the new national and international routes Lawrence grabbed during deregulation of the airline industry. Braniff needed an enormous amount of money to set up a structure to fit its strategy. Even before its expansion Braniff lacked a strong internal structure with clearly defined roles for accomplishing tasks. The structure produced a group of  "yes men" who deferred to Lawrence's every decision.


        Leading is the management function that involves the use of influence to motivate employees to achieve the organization's goals.

        The third management function is to provide leadership for employees. Leading is the use of influence to motivate employees to achieve organizational goals. Leading means communicating goals to employees throughout the organization and infusing them with the desire to perform at a high level. Leading involves motivating entire departments and divisions as well as those individuals working immediately with the manager.

Managers such as Lee Iacocca are exceptional leaders. They are able to communicate their vision throughout the organization and energize employees into action. General Creech was a leader when he improved the motivation of aircraft maintenance technicians in hundreds of maintenance squadrons. Maintenance people previously had been neglected in favor of pilots. Creech set up highly visible bulletin boards displaying pictures of the maintenance crew chiefs, improved their living quarters, and established decent maintenance facilities, complete with paintings and wall murals. He introduced competition among the newly independent maintenance squadrons. He created trophy rooms to hold plaques and other prizes won in maintenance competitions. This prominent display of concern for maintenance specialists greatly increased their motivation to keep the planes flying.

When William Schaefer was mayor of Baltimore, he used a number of techniques to motivate city employees. He sent them action memos that were blunt and direct: "Get the trash off East Lombard Street," "Broken pavement at 1700 Carey," "Abandoned car at 2900 Remington." One action memo said, “There is an abandoned car . . . but I'm not telling you where it is." City crews ran around for a week and towed several hundred cars.

Leadership has a negative side, too. Again consider Harding Lawrence. His leadership of Braniff was said to contribute to employees’ demotivations. Lawrence won notoriety on Braniff Flight 6, which he took weekly to visit his wife, who worked in New York City:

His tantrums on Flight 6 are legend. On one flight a stewardess served him an entire selection of condiments with his meal instead of asking him which one he preferred. He slammed his fist into the plate, splattering food on the surrounding seats of the first-class cabin. "Don't you ever assume what I want!" he screamed

"On several occasions flight attendants came to me in tears, fearful of losing their jobs," says Ed Clements, former director of flight attendant services at Braniff. "I was sickened by what he was doing to the employees."

Lawrence's appearance on an aircraft was likely to arouse two emotions in the crew: fear and hatred.

Inevitably, dissatisfied employees led to get dissatisfied customers. Marketing surveys indicated that Braniff was unpopular with many of its passengers. Without a loyal customer base, successful expansion and high performance proved impossible. The Manager's Shoptalk box highlights several leadership problems and possible solutions.


        Controlling is the management function concerned with monitoring employees’ activities, keeping the organization on track toward its goals, and making corrections as needed.

        Controlling is the fourth function in the management process. Controlling means to manager to monitoring employees' activities, determining whether the organization is on target toward its goals, and making corrections as necessary. Managers must ensure that the organization is moving toward its goals. Controlling often involves using an information system to advise managers on performance and a reward system for recognizing employees who make progress toward goals. For example, at Domino’s Pizza Distribution Company over 1,200 franchises are measured weekly. A phone survey of customers determines the quality of service at each franchise, which is reported to management. Compensation for all employees is based on the results. Expected performance levels are reviewed every six months and set slightly higher for the next six months. The control system then monitors whether employees achieve the higher targets.

One reason for organization failure is that managers are not serious about control or lack control information. Robert Fomon, longtime autocratic chief executive of E. F. Hutton, refused to set up control systems because he wanted to personally supervise senior management. At one time he reviewed the salaries and bonuses of more than 1,000 employees, but eventually Hutton grew too big for his personal supervision. To achieve profit goals managers got involved in an undetected check-kiting scheme and the firm pleaded guilty to 2,000 counts of mail and wire fraud. Other undetected behaviors were the $900,000 in travel and entertainment expenses for one executive in one year and the listing of party girls from escort services as temporary secretarial help. The lack of control led to Fomon's demise, E. F. Hutton has never fully recovered.

Organizational performance

Organization is a social entity that is goal directed and deliberately structured.

The other part of our definition of management is the attainment of organizational goals in an efficient and effective manner. One reason management is sc important is that organizations are so important. In an industrialized society where complex technologies dominate, organizations bring together knowledge, people, and raw materials to perform tasks no individual could do alone Without organizations how could 15,000 flights a day be accomplished without an accident, electricity produced from large dams or nuclear power generators, millions of automobiles manufactured, or hundreds of films, videos, and records made available for our entertainment? Organizations pervade our society. Most college students will work in an organization—perhaps Hospital Corporation of America, Federated Department Stores, Boise Cascade, or Standard Oil. College students already are members of several organizations, such as a university, junior college, YMCA, church, fraternity, or sorority. College students also deal with organizations every day: to renew a driver's license, be treated in a hospital emergency room, buy food from a supermarket, eat in a restaurant, or buy new clothes. Managers are responsible for these organizations and for seeing that resources are used wisely to attain organizational goals.

Our formal definition of an organization is a social entity that is goal directed and deliberately structured. Social entity means being made up of two or more people. Coal directed means designed to achieve some outcome, such as make a profit (Boeing, Mack Trucks), win pay increases for members (AFL-CIO), meet spiritual needs (Methodist church), or provide social satisfaction (college sorority). Deliberately structured means that tasks are divided and responsibility for their performance assigned to organization members. This definition applies to all organizations, including both profit and not-for-profit. Vickery Stoughton runs Toronto General Hospital and manages a $200 million budget. He endures intense public scrutiny, heavy government regulation, and daily crises of life and death. Hamilton Jordan, formerly President Carter's chief of staff, created a new organization called the Association of Tennis Professionals that will take control of the professional tennis circuit. John and Marie Bouchard launched a small business called Wild Things that sells goods for outdoor activities. Small, offbeat, and not-for-profit organizations are more numerous than large, visible corporations — and just as important to society.

Based on our definition of management, the manager's responsibility is to coordinate resources in an effective and efficient manner to accomplish the organization's goals. Organizational effectiveness is the degree to which the organization achieves a stated objective. It means that the organization succeeds in accomplishing what it tries to do. Organizational effectiveness means providing a product or services that customer’s value. Organizational efficiency refers to the amount of resources used to achieve an organizational goal. It is based on how much raw materials, money, and people are necessary for producing a given volume of output. Efficiency can be calculated as the amount of resources used to produce a product or service.

Efficiency and effectiveness can both be high in the same organization. Consider the impact of Dick Dauch, vice-president of manufacturing at Chrysler. His leadership has allowed a startling increase in efficiency. Chrysler now ion build 8,000 cars and trucks a day compared with 4,500 a few years ago. The number of worker-hours per vehicle has shrunk from 175 to 102. Resources are more efficiently: Worker absenteeism is down sharply. New technology has transformed the assembly line. The manufacturing improvements have also boosted effectiveness. Chrysler cars are now first quality, rated nearer the top in reliability, durability, and fit-and-finish.

Managers in other organizations, especially service firms, are improving efficiency, too. Labor shortages in the Midwest and northeastern United States have prompted managers to find labor-saving tricks. Burger King and Kentucky Fried Chicken restaurants let customers serve themselves drinks. Sleep Inn hotels have a washer and dryer installed behind the desk so that clerks can launder sheets and towels while waiting on customers. McDonald's is experimenting with a grill that cooks hamburgers on both sides at once, eliminating the need for an employee to flip them.

The ultimate responsibility of managers, then, is to achieve high performance, which is the attainment of organizational goals by using resources in an efficient and effective manner. Whether managers are responsible for the organization as a whole, such as Robert Stempel at General Motors, or for a single department, such as ReBecca Roloff at Pillsbury, their ultimate responsibility is performance. Harold Geneen, a legendary manager who transformed ITT into one of the world's largest and best-run corporations, explained it this way: “I think it is an immutable law in business…..”

1.1.2. Management types

“I think it is an immutable law in business that words are words, explanations are explanations, promises are promises—but only performance is reality. Performance alone is the best measure of your confidence, competence, and courage. Only performance gives you the freedom to grow as yourself. Just remember that: performance is your reality. Forget everything else. That is why my definition of a manager is what it is: one who turns in the performance. No alibis to others or to one's self will change that. And when you have performed well, the world will remember it, when everything else is forgotten. And most importantly, so will you.”

The four management functions must be performed in all organizations. B' not all managers' jobs are the same. Managers are responsible for different departments, work at different levels in the hierarchy, and meet different requirements for achieving high performance. For example, Gary Smith, age 21 runs a team of 13 assemblers at Honda's Marysville, Ohio, plant. Charles Strang is chief executive officer for Outboard Marine, a manufacturer of outboard motors. Both are managers, and both must contribute to planning, organizing, leading, and controlling their organizations — but in different amounts and ways.

Exhibit 2. Management Levels in the Organizational Hierarchy.

Vertical differences

Top manager is a manager who is at the top of the organizational hierarchy and responsible for the entire organization.

An important determinant of the manager's job is hierarchical level. Three levels in the hierarchy are illustrated in Exhibit 2. Top managers are at the top of the hierarchy and are responsible for the entire organization. They have such titles as president, chairperson, executive director, chief executive officer (CEO), and executive vice-president. Top managers are responsible for setting organizational goals, defining strategies for achieving them, monitoring and interpreting the external environment, and making decisions that affect the entire organization. They look to the long-term future and concern themselves with general environmental trends and the organization’s overall success. They also influence internal corporate culture.

Middle manager is a manager who works at the middle levels of the organization and is responsible for major departments.

Middle managers work at middle levels of the organization and are responsible for business units and major departments. Examples of middle managers are department head, division head, manager of quality control, and director of the research lab. Middle managers typically have two or more management levels beneath them. They are responsible for implementing the overall strategies and policies defined by top managers. Middle managers are concerned with the near future, are expected to establish good relationships with peers around the organization, encourage teamwork, and resolve conflicts.

Recent trends in corporate restructuring and downsizing have made the middle manager's job difficult. Companies that become lean and efficient often do so by lying off middle managers, both line and staff. New electronic technologies have reduced the need for middle level supervision. Middle managers have been cut by 17 percent at Mobil, 15 percent at DuPont, and 35 percent in the Medical Systems Group at General Electric. One estimate is that over one million middle management positions have been removed in the last few years. These cutbacks make organizations efficient, but a recent survey found middle managers restless and dissatisfied.

Exhibit 3. The time spent functional activities by organizational level.

They seem to be at the mercy of top management, and their loyalty to the organization is not always reciprocated. One disgruntled middle manager proclaimed, "The way things are going my company will consist of the CEO at the top, a computer in the middle, and a bunch of workers at the bottom."

First-line manager is a manager who is at the first or second management level and directly responsible for the production of goods and services.

First-line managers are directly responsible for the production of goods and services. They are the first or second level of management and have such titles as supervisor, line manager, section chief, and office manager. They are responsible for groups of no management employees. Their primary concern is the application of rules and procedures to achieve efficient production, provide technical assistance, and motivate subordinates. The time horizon at this level is short, with the emphasis on accomplishing day-to-day objectives.

1.1.3. Management skills

A manager's job is diverse and complex and, as we shall see throughout this book, requires a range of skills. Although some management theorists propose a long list of skills, the necessary skills for planning, organizing, leading, and controlling can be summarized in three categories that are especially important: conceptual, human, and technical.21 As illustrated in Exhibit 1.4, all managers need each skill, but the amounts differ by hierarchical level.

Exhibit 4. The relationship of conceptual, human and technical skills.

Conceptual skills

Conceptual skill is the cognitive ability to see the organization as a whole and the relationship among its parts.

Conceptual skill is the cognitive ability to see the organization as a whole and the relationship among its parts. Conceptual skill involves the manager's thinking and planning abilities. It involves knowing where one's department fits into the total organization and how the organization fits into the industry and the community. It means the ability to think "strategically"—to take the broad, long-term view.

Conceptual skills are needed by all managers, but are especially important for managers at the top. They must perceive significant elements in a situation and broad, conceptual patterns. For example, Robert Lutz, a senior operating executive at Chrysler, is spearheading development of the Dodge Viper, a sports car with neck-snapping acceleration. He has to conceptualize development of a car that can be produced quickly with costs low enough to make a profit on fewer than 10,000 cars a year sold at less than $30,000 apiece. Lutz helps conceptualize design, supply, and manufacturing problems because he understands how these significant elements fit together.

As managers move up the hierarchy, they must develop conceptual skills or their promotion ability will be limited. A senior engineering manager who is mired in technical matters rather than thinking strategically will not perform well at the top of the organization. Many of the responsibilities of top managers, such as decision making, resource allocation, and innovation, require a broad view.

Human skills

The human skills are the ability to work with and through other people and to work effectively as a group member.

Human skill is the manager's ability to work with and through other people and to work effectively as a group member. This skill is demonstrated in the way a manager relates to other people, including the ability to motivate, facilitate, coordinate, lead, communicate, and resolve conflicts. A manager with human skills allows subordinates to express themselves without fear of ridicule and encourages participation. A manager with human skills likes other people and is liked by them. Barry Merkin, chairman of Dresher Inc., the largest U.S. manufacturer of brass beds, is a cheerleader for his employees. He visits the plant floor and uses humor and hoopla to motivate them. Employees may have buckets of fried chicken served to them by supervisors wearing chef's hats.

Managers who lack human skills often are abrupt, critical, and unsympathetic toward others. Harding Lawrence of Braniff, described earlier, did not excel in human skills. Another example is the executive who walked into a subordinate's office and insisted on talking to him. When the subordinate tried to explain that he was occupied, the manager snarled, "I don't give a damn. I said I wanted to see you now."23 Managers without human skills are insensitive and arrogant. They often make other people feel stupid and resentful.

In recent years, the awareness of human skills has increased. Books such as In Search of Excellence and A Passion for Excellence stress the need for managers to take care of the human side of the organization. Excellent companies and excellent managers do not take people for granted. When Robert Carlson took over United Technologies, he used human skills to induce teamwork among senior executives. His willingness to listen to problems and suggestions and to inspire cooperation helped United Technologies rebound after the stewardship of Harry Gray, who did not use people skills as a part of his management style. Effective managers are cheerleaders, facilitators, coaches, and nurturers. They build through people. Effective human skills enable managers to unleash subordinates' energy and help them grow as future managers.

Technical skills

Technical skill mines the understanding of and proficiency in the performance of specific tasks.

Technical skill is the understanding of and proficiency in the performance of specific tasks. Technical skill includes mastery of the methods, techniques, and equipment involved in specific functions such as engineering, manufacturing, or finance. Technical skill also includes specialized knowledge, analytical ability and the competent use of tools and techniques to solve problems in that specific discipline. One reason ReBecca Roloff, described at the beginning of his chapter, was promoted to department manager at Pillsbury was her technical understanding of freight and distribution.

Technical skills are most important at lower organizational levels. Many managers get promoted into their first management jobs by having excellent technical skills. However, technical skills are less important than human and conceptual skills as managers’ move up the hierarchy.

Making the transition

 As illustrated in Exhibit 4, the major difference between nonmanagers and managers is the shift from reliance on technical skills to focus on human skills. This is a difficult transition, because high achievement in the technical area may have been the basis for promotion to a supervisory position. New manages often mistakenly continue to rely on technical skills rather than concentrate on working with others, motivating employees, and building a team. Indeed, some people fail to become managers at all because they let technical skills take precedence over human skills.

Consider Pete Martin, who has a bachelor's degree and has worked for five years as a computer programmer for an oil company. In four short years, he has more new software programs to his credit than anyone else in the department. He is highly creative and widely respected. However, Pete is impulsive and has little tolerance for those whose work is less creative. Pete does not offer to help coworkers, and they are reluctant to ask because he often "puts them down." Pete is also slow to cooperate with other departments in meeting their needs, because he works primarily to enhance his own software writing ability. He spends evenings and weekends working on his programs. Pete is a hardworking technical employee, but he sees little need to worry about other people.

Pete received high merit raises but was passed over for promotion and does not understand why. His lack of interpersonal skills, inconsideration for coworkers, and failure to cooperate with other departments severely limit his potential as a supervisor. Pete has great technical skills, but his human skills simply are inadequate for making the transition from worker to supervisor. Until Pete is ready to work on human skills, he has little chance of being promoted.

What is it like to be a manager?

So far we have described how managers perform four basic functions that help ensure that organizational resources are used to attain high levels of performance. These tasks require conceptual, human, and technical skills. Unless someone has actually performed managerial work, it is hard to under exactly what managers do on an hour-by-hour, day-by-day basis. The manager’s job is so diverse that a number of studies have been undertaken in an attempt to describe exactly what happens. The question of what managers actually don plan, organize, lead, and control was answered by Henry Mintzberg, who followed managers around and recorded all of their activities. He developed description of managerial work that included three general characteristics and ten roles. These characteristics and roles have been supported in subsequent research.

Exhibit 5. Ten Manager Roles.

Manager roles

Role mines a set of expectations for one's behavior.

Mintzberg's observations and subsequent research indicate that diverse manager activities can be organized into ten roles. A role is a set of expectations for a manager's behavior. The ten roles are divided into three categories: interpersonal, informational, and decisional. Each role represents activities that managers undertake to ultimately accomplish the functions of planning, organizing, leading, and controlling. The ten roles and brief examples are provided in Exhibit 5.

Interpersonal roles 

Interpersonal roles pertain to relationships with others and are related to the human skills described earlier. The figurehead role involves handling ceremonial and symbolic activities for the department organization. The manager represents the organization in his or her formal managerial capacity as the head of the unit. The presentation of employ awards by a division manager at Taco Bell is an example of the figurehead role. The leader role encompasses relationships with subordinates, including motivation, communication, and influence. The liaison role pertains to the development of information sources both inside and outside the organization. An example is a face-to-face discussion between a controller and plant supervisor to resolve a misunderstanding about the budget.

Informational ROLES  

Informational roles describe the activities used to maintain and develop an information network. The monitor role involves seeking current information from many sources. The manager acquires information from others and scans written materials to stay well informed. The disseminator is just the opposite: The manager transmits current information to others, both inside and outside the organization, who can use it. Managers do not hoard information; they pass it around to others. The spokesperson role pertains to official statements to people outside the organization about company polices, actions, or plans. For example, Robert Krandall, CEO of American Airlines, recently testified before Congress three times; delivered keynote speeches to groups in Washington, D.C., Dallas, and Chicago; and appeared on television’s "Meet the Press" to champion changes in the airline system.

Decisional ROLES

         Decisional roles pertain to those events about which manager must make a choice. These roles often require conceptual as well as human skills. The entrepreneur role involves the initiation of change. Manager become aware of problems and search for improvement projects that will correct them. One manager studied by Mintzberg had 50 improvement projects going simultaneously. The disturbance handler role involves resolving conflicts among subordinates or between the manager's department and other departments. For example, the division manager for a large furniture manufacturer got involved in a personal dispute between two section heads. One section head was let go because he did not fit the team. The resource allocator role pertains to decisions about how to allocate people, time, equipment, budget, and other resources to attain desired outcomes.

The manager must decide which projects receive budget allocations, which of several customer complaints receive priority, and even how to spend his or her own time. The negotiator role involves formal negotiations and bargaining to attain outcomes for the manager's unit of responsibility. For example, the manager meets and formally negotiates with others — a supplier about a late delivery, the controller about the need for additional budget resources, or the union about a worker grievance during the normal workday.

        Small business

One interesting finding is that managers in small businesses tend to emphasize different roles than managers in large corporations. In small firms, the most important role is spokesperson, because managers must promote the small growing company to the outside world. The entrepreneur role is also very important in small businesses, because managers must be creative and help their organizations develop new ideas to be competitive. Small-business managers tend to rate lower on the leader role and on information processing roles compared with counterparts in large corporations. In large firms, the most important role is resource allocator and the least important is entrepreneur.

1.2. Scientific management

Classical perspective

A management perspective that emerged during the nineteenth and early twentieth centuries, which emphasized a rational, scientific approach to the study of management and sought to make organizations efficient operating machines.

Scientific management

A subfield of the classical management perspective that emphasized scientifically determined changes in management practices as the solution to improving labor productivity.

Organizations' somewhat limited success in achieving improvements in labor productivity led a young engineer to suggest that the problem lay more in poor management practices than in labor. Frederick Winslow Taylor (1856-1915) insisted that management itself would have to change and, further, that the manner of change could be determined only by scientific study; hence, the label scientific management emerged.

Taylor suggested that decisions based on rules of thumb and tradition be replaced with precise procedures developed after careful study of individual situations.

While working at the Midvale Steel Company in Philadelphia, Taylor began experimenting with management methods, procedures, and practices. Taylor wrote frequently, had others write under his name, and consulted with businesses to encourage utilization of his ideas. However; it was after the Eastern Railroad Rate Case hearings before the House of Representatives that his work really caught on. The attorney for the shippers, Louis D. Brandeis, used the term scientific management and successfully argued the shippers' side of the issue for using these techniques. The popular press picked up the term, and Taylor and his ideas became heralded as the way to prosperity for the United States.

Taylor's approach is illustrated by the unloading of iron from rail cars and reloading finished steel for the Bethlehem Steel plant in 1898. Taylor calculated that with correct movements, tools, and sequencing, each man was capable of loading 47.5 tons per day instead of the typical 12.5 tons. He also worked out an incentive system that paid each man $1.85 a day for meeting the new standard, an increase from the previous rate of $1.15. Productivity at Bethlehem Steel shot up overnight.

Although known as the "father of scientific management," Taylor was not alone in this area.

General Approach

• Developed standard method for performing each job.

• Selected workers with appropriate abilities for each job.

• Trained workers in standard method.

• Supported workers by planning their work and eliminating interruptions.

• Provided wage incentives to workers for increased output.


• Demonstrated the importance of compensation for performance.

• Initiated the careful study of tasks and jobs.

• Demonstrated the importance of personnel selection and training.


• Did not appreciate the social context of work and higher needs of workers.

• Did not acknowledge variance among individuals.

• Tended to regard workers as uninformed and ignored their ideas and suggestions.

Exhibit 2.1. The characteristics of Scientific Management.

Two other important pioneers in this area were the husband-and-wife team of Frank B. and Lillian M. Gilbreth. Frank B. Gilbreth (1868-1924) pioneered time and motion study and arrived at many of his management techniques independently of Taylor. He stressed efficiency and was known for his quest for the "one best way" to do work.

Although he is known for his early work with bricklayers, his work had great impact on medical surgery by drastically reducing the time patients spent on the operating table. Surgeons were able to save countless lives through the application of time and motion study. Lillian M. Gilbreth (1878-1972) was more interested in the human aspect of work.

When her husband died at the age of 46, she had 12 children ages 2 to 19. The undaunted "first lady of management" went right on with her work. She presented a paper in place of her late husband, continued their seminars and consulting, lectured, and eventually became a professor at Purdue University. She pioneered in the field of industrial psychology and made substantial contributions to personnel management.

The basic ideas of scientific management are shown in Exhibit 2.1. To use this approach, managers should develop standard methods for doing each job, select workers with the appropriate abilities, train workers in the standard methods, support the workers, and provide wage incentives.

Although scientific management improved productivity, its failure to deal with the social context and workers' needs led to increased conflict between managers and employees. Under this system, workers often felt exploited. This was in sharp contrast to the harmony and cooperation that Taylor and his followers had envisioned.

In his work, General and Industrial Management, Fayol discussed 14 general principles of management, several of which are part of management philosophy today. For example:

• Unity of command. Each subordinate receives orders from one — and only one — superior.

• Division of work. Managerial and technical works are amenable to specialization to produce more and better work with the same amount of effort.

•   Unity of direction. Similar activities in an organization should be grouped together under one manager.

•   Scalar chain. A chain of authority extends from the top to the bottom of the organization and should include every employee.

Fayol felt that these principles could be applied in any organizational setting. He also identified five basic functions or elements of management: planning, organizing, commanding, coordinating, and controlling.

This lunch underlie much of the general approach to today's management theory. Mary Parker Follett (1868-1933) was trained in philosophy and political science at what today is Radcliffe College. She applied herself in many fields, including social psychology and management. She wrote of the importance of common superordinate goals for reducing conflict in organizations. Her \v was popular with businesspeople of her day but was often overlooked by management scholars.

Chester I. Barnard (1886—1961) studied economics at Harvard but failfl to receive a degree because he lacked a course in laboratory science. He went to work in the statistical department of AT&T and in 1927 became president « New Jersey Bell. One of Barnard's significant contributions was the concept of the informal organization. The informal organization occurs in all formal organizations and includes cliques and naturally occurring social groupings. Barnard argued that organizations are not machines and informal relationships are powerful forces that can help the organization if properly managed. Another significant contribution was the acceptance theory of authority, which states that people have free will and can choose whether to follow management orders. People typically follow orders because they perceive positive benefit to themselves, but they do have a choice, and their acceptance of authority may be critical to organization success in important situations.

Bureaucratic Organizations

The final subfield within the classical perspective is that of bureaucratic organizations. Max Weber (1864-1920), a German theorist, introduced most of the concepts on bureaucratic organizations.

During the late 1800s, many European organizations were managed on a personal," family-like basis. Employees were loyal to a single individual rather than to the organization or its mission. The dysfunctional consequence of this management practice was that resources were used to realize individual desires rather than organizational goals. Employees in effect owned the organization and used resources for their own gain rather than to serve clients. Weber envisioned organization that would be managed on an impersonal, rations basis. This form of organization was called a bureaucracy. Exhibit 2.2 summarizes the six characteristics of bureaucracy as specified by Weber.

Elements of Bureaucracy:

1, Labor is divided with clear definitions of authority and responsibility that are legitimized as official duties.

2. Positions are organized in a hierarchy of authority, with each position under the authority of a higher one.

3. All personnel are selected and promoted based on technical qualifications, which are assessed by examination or according to training and experience.

4. Administrative acts and decisions are recorded in writing. Recordkeeping provides organizational memory and continuity over time.

5. Management is separate from the ownership of the organization.

6. Managers are subject to rules and procedures that will insure reliable, predictable behavior. Rules are impersonal and uniformly applied to all employees.

Exhibit 2.2.  The characteristics of Weberian Bureaucracy.

Weber believed that an organization based on rational authority would be more efficient and adaptable to change because continuity is related to formal structure and positions rather than to a particular person, who may leave or die To Weber, rationality in organizations meant employee selection and advancement based on competence rather than on "whom you know." The organization relies on rules and written records for continuity. The manager depends not on his or her personality for successfully giving orders but on the legal power invested in the managerial position.

The term bureaucracy has taken on a negative meaning in today's organizations and is associated with endless rules and red tape. We have all been frustrated by waiting in long lines or following seemingly silly procedures. On the other hand, rules and other bureaucratic procedures provide a standard way of dealing with employees. Everyone gets equal treatment and everyone knows what the rules are. This has enabled many organizations to become extremely efficient. Consider United Parcel Service, also called the "Brown Giant for the color of the packages it delivers.

Behavioral sciences approach

A subfield of the human resource management perspective that applied social science in an organizational context, drawing from economics, psychology, sociology, and other disciplines.

The word science is the keyword in the behavioral sciences approach (see Exhibit 2.4). Systematic research is the basis for theory development and testing, and its results form the basis for practical applications. The behavioral sciences approach can be seen in practically every organization. When General Electric conducts research to determine the best set of tests, interviews, and employee profiles to use when selecting new employees, it is employing behavioral science techniques. Emery Air Freight has utilized reinforcement theory to improve the incentives given to workers and increase the performance of many of its operations. When Westinghouse trains new managers in the techniques of empoyee motivation, most of the theories and findings are rooted in behavioral science research.

In the behavioral sciences, economics and sociology have significantly influenced the way today’s managers approach organizational strategy and structure. Psychology has influenced management approaches to motivation, communication, leadership, and the overall field of personnel management. The conclusions from the tremendous body of behavioral science research are much like those derived from the natural sciences. Although we understand more, that understanding is not simple. Scholars have learned much about the behavior of people at work, but they have also learned that organizational processes are astonishingly complex.

General Approach

• Social science applied in an organizational context.

• Drew from an interdisciplinary" research base, including anthropology, economics, psychology, and sociology.


• Improved our understanding of and practical applications for organizational processes such as motivation, communication, leadership, and group processes.

• Regards members of organizations as full human beings, not as tools.


• Because findings are increasingly complex, practical applications often are tried incorrectly or not at all.

• some concepts run counter to common sense, thus inviting managers' rejection.

Exhibit 2.3.  The Behavioral Science Approach.

Management science perspective

A management perspective that emerged after World War II and applied mathematics, statistics, and other quantitative techniques to managerial problems.

World War II caused many management changes. The massive and complicated problems associated with modem global warfare presented managerial decision makers with the need for more sophisticated tools than ever before. The management science perspective emerged to treat those problems. This view is distinguished for its application of mathematics, statistics, and other quantitative techniques to management decision making and problem solving. During World War II groups of mathematicians, physicists, and other scientists were formed to solve military problems. Because those problems frequently involved moving massive amounts of materials and large numbers of people quickly and efficiently, the techniques had obvious applications to large-scale business firms.

Management information systems, a subfield of management science, uses computers to assist managerial and technical decision making. WestMarc Communications, Inc., a subsidiary of Tele-Communications, Inc., the nation's largest cable company, serves communities in the Midwest and eastern United States. Here Marv Altman uses an in-house computer-aided design technology to precisely calculate each facet of cable installation. The computer illustrates community layout and can calculate relevant variables to predict the actual signal level that will enter each home, thereby providing the most efficient cable layout while minimizing signal leakage.

Operations research grew directly out of the World War II groups (called operational research teams in Great Britain and operations research teams in the United States). It consists of mathematical model building and other applications of quantitative techniques to managerial problems.

Operations management refers to the field of management that specializes in the physical production of goods or services. Operations management specialists use quantitative techniques to solve manufacturing problems. Some of the commonly used methods are forecasting, inventory modeling, linear and nonlinear programming, queuing theory, scheduling, simulation, and breakeven analysis.

Management information systems (MIS) is the most recent subfield of the management science perspective. These systems are designed to provide relevant information to managers in a timely and cost-efficient manner. The advent of the high-speed digital computer opened up the full potential of this area for management.

Many of today's organizations have departments of management science specialists to help solve quantitatively based problems. When Sears used computer models to minimize its inventory costs, it was applying a quantitative approach to management. When AT&T performed network analysis to speed up and control the construction of new facilities and switching systems, it was employing another management science tool.

One specific technique used in many organizations is queuing theory. Queuing theory uses mathematics to calculate how to provide services that will minimize the waiting time of customers. Queuing theory has been used to analyze the traffic flow through the Lincoln Tunnel and to determine the number of toll booths and traffic officers for a toll road. Queuing theory was used to develop the single waiting line for tellers used in many banks. Wesley Long Community Hospital in Greensboro, North Carolina, used queuing theory to analyze the telemetry system used in wireless cardiac monitors. The analysis helped the hospital acquire the precise number of telemetry units needed to safely monitor all patients without overspending scarce resources.

Contemporary Extensions

Each of the three major management perspectives is still in use today. The most prevalent is the human resource perspective, but even it has been undergoing change in recent years. Two major contemporary extensions of this perspective are systems theory' and the contingency view. Examination of each will allow a fuller appreciation of the state of management thinking today.

Systems Theory

System: A set of interrelated parts that function as a whole to achieve a common purpose.

Systems Theory: An extension of the human resources perspective that describes organizations as open systems that are characterized by entropy, synergy, and subsystem interdependence.

A system is a set of interrelated parts that function as a whole to achieve a common purpose. A system functions by acquiring inputs from the external environment, transforming them in some way, and discharging outputs back to the environment. Exhibit 2.5 shows the basic systems theory of organizations.

Exhibit 2.5 The System View of Organization.

Here there are five components: inputs, a transformation process, outputs, feedback, and the environment. Inputs are the material, human, financial, or information resources used to produce goods or services.

The transformation process is management's use of production technology to change the inputs into outputs. Outputs include the organization's products and services. Feedback is knowledge of the results that influence the selection of inputs during the next cycle of the process. The environment surrounding the organization includes the social, political, and economic forces noted earlier in this chapter.

Some ideas in systems theory have had substantial impact on management thinking. These include open and closed systems, entropy, synergy, and subsystem interdependencies .

Open systems must interact with the environment to survive; closed systems need not. In the classical and management science perspectives, organizations were frequently thought of as closed systems. In the management science perspective, closed system assumptions — the absence of external disturbances—are sometimes used to simplify problems. In reality, however, all organizations are open systems and the cost of ignoring the environment may be failure. A prison tries to seal itself off from its environment, yet it must receive prisoners from the environment, obtain supplies from the environment, recruit employees from the environment, and ultimately release prisoners back to the environment.

Entropy is a universal property of systems and refers to their tendency to run down and die. If a system does not receive fresh inputs and energy from its environment, it will eventually cease to exist. Organizations must monitor their environments, adjust to changes, and continuously bring in new inputs in order to survive and prosper. Managers try to design the organization/environment interfaces to reduce entropy.

Synergy means that the whole is greater than the sum of its parts. When in organization is formed, something new comes into the world. Management, coordination, and production that did not exist before are now present. Organizational units working together can accomplish more than those same units working alone. The sales department depends on production, and vice versa.

Subsystems are parts of a system that depend on one another. Changes in one part of the organization affect other parts. The organization must be managed as a coordinated whole. Managers who understand subsystem interdependence are reluctant to make changes that do not recognize subsystem impact on the organization as a whole. Consider the management decision to remove time clocks from the Alcan Plant in Canada.

Open system: A system that interacts with the external environment.

Closed system: A system that does not interacts with the external environment.

Entropy: The tendency for a system to run down and die.

Synergy: The concept that the whole is greater than the sum of its parts.

Subsystems: Parts of a system that depend on one another for their functioning.

Contingency View

Contingency view: An extension of the human resource perspective in which the successful resolution of organizational problems is thought to depend on managers' identification of key variables in the situation at hand.

The second contemporary extension to management thinking is the contingency view. The classical perspective assumed a universals view. Management concepts were thought to be universal, that is, whatever worked — leader style, bureaucratic structure — in one organization would work in another. It proposed the discovery of "one-best-way" management principles that applied the same techniques to every organization. In business education, however, an alternative view exists. This is the case view, in which each situation is believed to be unique.

Exhibit 2.6. The Contingency of Management.

There are no universal principles to be found and one learns about management by experiencing a large number of case problem situations. Managers face the task of determining what will work in every new situation.

To integrate these views the contingency view has emerged, as illustrated in Exhibit 2.6.[30]. Here neither of the above views is seen as entirely correct. Instead, certain contingencies, or variables, exist for helping management identify and understand situations. The contingency view means that a manager's response depends on identifying key contingencies in an organizational situation. For example, a consultant may mistakenly recommend the same management-by-objectives (MBO) system for a manufacturing firm that was successful in a school system. A central government agency may impose the same rules on a welfare agency that it did in a worker's compensation office. A large corporation may take over a chain of restaurants and impose the same organizational charts and financial systems that are used in a banking division. The contingency view tells us that what works in one setting may not work in another. Management's job is to search for important contingencies. When managers learn to identify important patterns and characteristics of their organizations, they can then fit solutions to those characteristics.

Industry is one important contingency. Management practice in a rapidly changing industry will be very different from that in a stable one. Other important contingencies that managers must understand are manufacturing technology and international cultures. For example, Citicorp and Manufacturers Hanover Corporation both misunderstood the nature of making loans to developing countries. As these big banks raised loan-loss reserves to cope with the prospect of bad international loans, their balance sheet was weakened to the extent that they had to stop expansion into new regions and new business activities. Having been through this experience, managers in the future will know how to handle this contingency in the international financial environment.

Recent Historical Trends

The historical forces that influence management perspectives continue to change and influence the practice of management. The most striking change now affecting management is international competition. This important trend has social, political, and economic consequences for organizations.

Industrial Globalization

The domain of business now covers the entire planet, where Reebok's, stock markets, fax machines, television, and T-shirts intermingle across national boundaries. The world of commerce is becoming wired like an integrated circuit, with no nation left out of the loop.

The impact on firms in the United States and Canada has been severe. International competition has raised the standard of performance in quality, cost, productivity, and response times. As a result; the United States and Canada have seen a decline in worldwide market share in traditional products. Moreover, as recently as 1975, the U.S. balance of payments was close to zero. In recent years it has been hundreds of billions of dollars in the red. On the horizon is Europe 1992, when the common market will drop internal economic boundaries to become one large market. This means a new set of opportunities and upheavals for companies that strive to meet global competitive standards.

Globalization causes the need for innovation and new levels of customer service. Companies must shorten the time for developing new products, and new products must account for a larger percentage of total income because international competitors are relentless innovators.34 Winning companies in the 1990s must provide extraordinary service. The CEO of one home electronics retailer is gearing up to provide international service through computerized files. If someone has a problem, he or she just calls the company and a computer screen shows the products serial number, warranty information, whether parts are in stock, and when it can be repaired.

Although managers have tried many techniques and ideas in recent years, two management trends that seem significant in response to international competition are the adoption of Japanese management practices and the renewed efforts to achieve excellence in product and service quality.

Japanese Management Practices

In recent years Japanese management practices have been thought to create more efficient and more effective companies. Japanese products—whether motorcycles, automobiles, or VCRs — have been low priced and of high quality. The problem was dramatized by the reaction of executives of General Motors' Buick division who had visited Japan and a Buick car dealership:

The operation appeared to be a massive repair facility, so they asked how he had built up such a large service business. He explained with some embarrassment that this was not a repair facility at all but rather a reassembly operation where newly delivered cars were disassembled and rebuilt to Japanese standards. While many Japanese admire the American automobile, they would never accept the low quality with which they are put together.

Exhibit 2.7 Differences in the management approaches used in America and Japan.

How was American management expected to compete with NEC, Nissan, Sanyo, Sony, Toyota, and Kawasaki? Answers have been suggested in William Ouchi’s Theory Z and Richard Pascale and Anthony Athos' The Art of Japanese Management.

The success of Japanese firms is often attributed to their group orientation. The Japanese culture focuses on trust and intimacy within the group and family. In North America, in contrast, the basic cultural orientation is toward individual rights and achievements. These differences in the two societies are reflected in how companies are managed.

Exhibit 2.7 illustrates differences in the management approaches used in America and Japan. American organizations are called Type A and Japanese organizations Type J. However, it is impractical to take a management approach based on the culture of one country and apply it directly to that of another country.

Theory Z proposes a hybrid form of management that incorporates techniques from both Japanese and North American management practices. Type Z is a blend of American and Japanese characteristics that can be used to revitalize and strengthen corporate cultures in North America.

As illustrated in Exhibit 2.7, the Type Z organization uses the Japanese characteristic of long-term employment, which means that employees become familiar with the organization and are committed to and fully integrated into it. The Theory Z hybrid also adopts the Japanese approach of slow evaluation and promotion for employees. Likewise, the highly specialized American convention of a narrow career path is modified to reflect career training in multiple departments and functions.

In the Theory Z approach, control over employees combines the preference for explicit and precise performance measures and the Japanese approach to control based on social values.

1.3. The organizational environment

1.3. 1. The international environment

The most startling environmental change affecting American managers is the intrusion of global competition. The world of business is changing dramatically because suddenly national boundaries are meaningless constraints. One study identified 136 E.U. industries that have to compete on a global basis or disappear. The industries include automobiles, accounting services, entertainment, publishing, pharmaceuticals, travel services, consumer electronics, banking, and washing machines. Even the largest companies in the biggest countries cannot survive on domestic markets alone. For example, developing a drug costs about 250 million Eu and only a world market can generate enough sales to earn a profit.3 Small companies also must expand their niche globally because foreign competitors will try to best them in E.U. markets.

On another front, foreign firms are spending over $300 billion a year to purchase U.S. companies, many of which are rejuvenated under foreign ownership. Japan alone purchased 174 American firms in 1989. When Japan's Kao Corporation acquired Andrew Jergens Company, maker of soaps and hand lotions, it immediately increased the marketing and research budgets and added new facilities. Those investments have made Jergens more competitive, but the foreign owner gets the profits. The leverage of foreign companies spills over into government affairs. Japan alone spends $50 million dollars lobbying in Washington and another $45 million on public relations and image making. Lawmakers at the state level have been persuaded to change many laws in the hope of obtaining Japanese investment.

toyo toki* Toyo Toki (translated as Orient Ceramic) is Japan's leading maker of toilets and bathtubs. Toto as the company is often called, also produces modular kitchens, prefab bathrooms, and microcomputer-controlled hot water heaters.

Having won 95 percent of the Japanese market, Toto is searching for global opportunities for growth. It already has joint ventures in Indonesia, Korea, Thailand, Taiwan, France, and West Germany. Now Toto has targeted the U.S. market, aiming first at the Japanese communities on the West Coast.

Toto plans to offer products not produced by American manufacturers. The Washlet is an electronically controlled toilet and bidet combined into one unit.

 Another product is a low-flow toilet that uses 1.6 gallons of water compared to the American standard of 3.5 gallons and is in demand in U.S. cities with water shortages. Even more competitive is a line of battery-powered hands-free toilet fixtures designed for public lavatories. These products save water, are more sanitary than American-made fixtures, and use cheap infrared sensors instead of the electric wiring used in U.S. products.

1.3.2. The External Environment

The environment is important to managers because it creates uncertainty. Uncertainty will be discussed in detail, but for our purposes uncertainty means that managers lack accurate information about external events and thus cannot predict environment changes that will affect attainment of organizational goals. When uncertainty is low, managers know what to expect. Disruptions in the environment make it difficult for managers to achieve the goals of growth and profitability.

Organizational Environment

Organizational Environment means all elements existing outside the organization's boundaries that have the potential to affect the organization.

The organizational environment includes all elements existing outside the boundary of the organization that have the potential to affect the organization. The environment includes competitors, resources, technology, and economic conditions that influence the organization. It does not include those events so far removed from the organization that their impact is not perceived.

 The organizational environment can be further conceptualized as having two layers: task and general environments.

Task Environment 

It is the layer of the external environment that directly influences the organization's operations and performance.

The task environment is closer to the organization and includes the sectors that conduct day-to-day transactions with the organization and directly influence its basic operations and performance. It is generally considered to include competitors, suppliers, and customers.

General Environment 

It is the layer of the external environment that affects the organization indirectly.

The general environment is the outer layer that is more widely dispersed and affects organizations indirectly. It includes social, demographic, and economic factors that influence all organizations about equally. Increases in the inflation rate or the percentage of dual-career couples in the work force are part of the organization's general environment. These events do not directly change day-to-day operations, but they do affect all organizations eventually.

1.3.3. Internal Environment

It is the environment within the organization's boundaries.

Exhibit 3.1. Location of the General, Task and Internal Environments.

The organization also has an internal environment, which includes the elements within the organization's boundaries. The internal environment is composed of current employees, production technology, organization structure, physical facilities, and especially corporate culture.

Exhibit 3.1 illustrates the relationship among the task, general, and internal environments. As an open system, the organization draws resources from the external environment and releases goods and service back to it. Other aspects of the internal environment such as employees, structure, and technology will be covered in Parts 3 and 4 of this book.


Those people and organizations in the environment that acquire goods or services from the organization are customers. As a recipient of the organization’s output, customers are important because they determine the organization's success. Patients are the customers of hospitals, students the customers of schools, and travelers the customers of airlines. Companies, such as AT&T, General Foods, and Beecham Products, have all designed special programs and advertising campaigns to court their older customers, who are becoming a larger percentage of their market.

Overbuilding in the hotel industry forced companies such as Hyatt and Marriott to spend additional money on advertising, direct mail, giveaways, and expansion into new markets to improve customer demand.


Other organizations in the same industry or type of business that provide goods or services to the same set of customers are referred to as competitors. Specific competitive issues characterize each industry. The recording industry differs from the steel industry and the pharmaceutical industry. Competition in the steel industry, especially from international producers, has caused some companies to go bankrupt. Companies in the pharmaceutical industry are highly profitable because it is difficult for new firms to enter it. Apple, IBM, and Compaq are locked in a titanic power struggle in the personal computer industry. Sometimes industry actions can stir up hot competition in a sleepy industry, such as disposable diapers. The aggressive campaign of Kimberly-Clark increased market share for its Huggies brand disposable diapers but drew a strong response from Procter & Gamble's Pampers. The resulting price war drove Johnson & Johnson and Scott Paper Company out of the business and reduced profits for both P&G and Kimberly-Clark.


Suppliers provide the raw materials the organization uses to produce its output. A steel mill requires iron ore, machines, and financial resources. A small, private university may utilize hundreds of suppliers for paper, pencils, cafeteria food, computers, trucks, fuel, electricity, and textbooks. Large companies such as General Motors, Westinghouse, and Exxon depend on as many as 5,000 suppliers. The Big Three automakers have decided to acquire a larger share of parts from fewer suppliers by the early 1990s. They are trying to build a good relationship with these suppliers so that they will receive high-quality parts as well as low prices. Organizations also depend on banks for capital with which to finance new equipment and buildings.

Labor Supply

The labor supply represents the people who can be hired to work for the organization. Every organization needs a supply of trained, qualified personnel. Unions, employee associations, and the availability of certain classes of employees can influence the organization's labor supply. Mary Kay Cosmetics stopped growing when fewer homemakers became available for selling cosmetics door to door due to their entry into the work force as full-time employees. Two current labor supply trends having an impact on organizations are first, the increasing shortage of workers, especially skilled workers, and second, the desire by unionized employees to have larger wage settlements than in the past. The strong economy in North America has outstripped the supply of labor. More jobs require education and technical skills, and there are not sufficient people to handle unskilled jobs either. The strength of the economy during the 1980s has prompted union members to want bigger pay increases, and more strikes may occur in the next few years.

General Environment

The general environment represents the outer layer of the environment. These dimensions influence the organization over time but often are not involved in day-to-day transactions with it. The dimensions of the general environment include technological, sociocultural, economic, legal-political, and international.


The technological dimension includes scientific and technological advancements in a specific industry as well as in society at large. In recent years, the most striking advances have been in the computer industry. Supercomputers have astonishing power, and many companies are incorporating computerized systems such as automated offices, robotics, and computer-controlled machines. High-definition television promises to revolutionize the worldwide electronics industry. Smart composite materials that think for them may revolutionize the aircraft and defense industries. Fiber-optic sensors can be imbedded in aircraft surface materials that can feel the weight of ice or the "touch" of enemy radar. A technological development that may affect companies associated with beverage consumption is the self-chilling can. Opening the can releases a carbon dioxide capsule, and the beverage is chilled to 30°F within 90 seconds. These and other technological advances can change the rules of the game; thus, every organization must be ready to respond.

Join now!


The sociocultural dimension of the general environment represents the demographic characteristics as well as the norms, customs, and values of the general population. Important sociocultural characteristics are geographical distribution and population density, age, and educational levels. Also important are the society's norms and values.

Other recent sociocultural trends that are affecting many companies include the trend toward no smoking, the anti-cholesterol fever, the greater purchasing power of young children, and the increased diversity of consumers, with specialized markets for groups such as Hispanics and women over 30.


The economic dimension represents the general economic health of the country or region ...

This is a preview of the whole essay