Management Study Review Exam 1

Chapters 1-5
Chapter 1 The Management Process Today
All managers work in organizations and are responsible for supervising the use of organizations
human and other resources to achieve its goals.
Organization collections of people who work together and coordinate their actions to achieve a
wide variety of goals.
Resources include assets such as people and their skills, know-how, and knowledge;
machinery; raw materials; computers and information technology; and financial capital.
Management the planning, organizing, leading, and controlling of human and other resources
to achieve organizational goals efficiently and effectively.

One of the most important goals that organizations and their members try to achieve is to
provide some kind of good or services that customers desire.
Ex: Hospitaltaking care of patients, McDonalds.producing burgers

Organizational performance a measure of how efficiently and effectively managers use

resources to satisfy customers and achieve organizational goals.
Efficiency a measure of how well or productively resources are used to achieve a goal.
Effectiveness a measure of the appropriateness of the goals that managers have selected for the
organization to pursue and of the degree to which the organization achieves those goals.

Four essential managerial functions:

1. Planning identifying and selecting appropriate goals and courses of action. There are three
steps to planning(1) deciding which goals the organization will pursue (2) deciding which
course of action to adopt to attain those goals (3) deciding how to allocate organizational
resources to attain those goals.
- the outcome of planning is strategy which is defined as; a cluster of decisions about what goals
to pursue, what actions to take, and how to use resources to achieve goals.
2. Organizing structuring working relationships in a way that allows organizational member to
work together to achieve organizational goals.
- the outcome of organizing is the creation of an organizational structure, which is a formal
system of task and reporting relationships that coordinated and motivates members so that they
work together to achieve organizational goals.

3. Leading articulating a clear vision and energizing and enabling organizational members so
that they understand the part they plan in achieving organizational goals.
- The outcome of leadership is a high level of motivation and commitment among organizational
members.
4. Controlling evaluating how well an organization is achieving its goals and taking action to
maintain or improve performance.
- the outcome of the control process is the ability to measure performance accurately and
regulate organizational efficiency and effectiveness.
*how well managers perform these functions determines how efficient and effective their
organizations are.
Department- a group of people who work together and possess similar skills or use the same
knowledge, tools, or techniques to perform their jobs.

Types of Managers
To perform efficiently, organizations employ 3 types of managers
(1) First line managers often called supervisors, is a manager who is responsible for the daily
supervision of non-managerial employees who perform many of the specific activities necessary
to produce goods and services.
(2) Middle managers a manager who supervises first line managers and is responsible for
finding the best way to use resources to achieve organizational goals. They help to increase
efficiency, better utilize resources, reduce manufacturing costs, and improve customer services.
A major part of the middle managers job is to develop and fine tune skills.
(3) Top managers a manager who is responsible for the performance of all departments. They
establish organizational goals, decide how departments should interact, and monitor the
performance of middle managers. They are ultimately responsible for the success or failure of an
organization and devote most of their time to planning and organizing.
Top management team a group composed of the CEO, the COO, and the heads of the most
important departments.
CEO chief executive officer, most senior and important manager
COO chief operating officer, second in command

10 Managerial roles by Henry Mintzberg

Managerial role the set of specific tasks that a manager is expected to perform because of the
position he or she holds in an organization.

The 10 roles he developed are grouped into 3 broad categories:

Decisional - closely associated with the methods managers use to plan strategy and utilize
resources.
1. Entrepreneur provides more and better info to use in deciding which projects or
programs to initiate and in investing resources to increase organizational performance.
2. Disturbance handler a manager can get real-time info through IT to manage the
unexpected event or crisis that threatens the organization and to implement solutions
quickly.
3. Resource allocator a manager using human resource software systems from
companys can have easy access to the detailed info needed to decide how best to use
people and other resources to increase an organizations performance.
4. Negotiator a manager must be able to reach agreements with other managers or
groups claiming the first right to resources or with the organization and outside groups
such as suppliers or customers.
Informational - closely associated with the tasks necessary to obtain and transmit information
and so have obviously been dramatically impacted by IT.
5. Monitor evaluate the performance of mangers in diff. functions and take corrective
action to improve their performance
6. Disseminator a manager can use IT to quickly and effectively transmit information to
employees to influence their work attitudes and behavior.
7. Spokesperson to promote the organization so that people inside and outside the
organization respond positively to it.
Interpersonal mangers assume interpersonal roles to provide direction and supervision for both
employees and the organization as a whole.
8. Figurehead the person who symbolizes an organization or department.
9. Leader provide an example for employees to follow; give direct commands and
orders to subordinates; make decisions concerning the use of human and technical
resources.
10. Liaison coordinating the work of managers in different departments; establish
alliances between diff. organizations to share resources to produce new goods and
services.

Being a Manger/ Managerial skills

** The range of problems that managers face is enormous and they often have to make snap
decisions and deal with problems simultaneously. Being a manager often involves acting
emotionally and relying on gut feelings; however, both education and experience enable
managers to recognize and develop the personal skills they need to put organizational resources
to their best use.
Research has shown that education and experience help managers acquire three principal types
of skills: (1) conceptual (2) human (3) technical.

Conceptual skills the ability to analyze and diagnose a situation and to distinguish between
cause and effect.
Human skills the ability to understand, alter, lead, and control the behavior of other individuals
and groups.
Technical skills the job-specific knowledge and techniques requires to perform an
organizational role. Examples include a managers specific skills such as manufacturing,
accounting, marketing, and increasingly, IT skills.
Competencies the specific set of skills, abilities, and experiences that allows one manager to
perform at a higher level than another manager in a particular setting.

Global Organizations
Global organization organizations that operate and compete in more than one country.
** Managers who make no attempt to learn and adapt to changes in the global environment find
themselves reacting rather than innovating. Four major challenges stand out for managers in
todays world:
(1) building a competitive advantage
- competitive advantage the ability of one organization to outperform other organization
because it produces desired goods or services more efficiency and effectively than its
competitors. There are four building blocks of competitive advantage:
1. increase efficiency
2. increase quality
3. increasing speed, flexibility, and innovation
4. increasing responsiveness to customers
(2) Maintaining ethical standards managers at all levels perform under pressure to increase the
level at which their organizations perform. Pressure to increase performance can be healthy for
an organization because it causes managers to think outside the box; however, too much pressure
can be harmful. It can lead to unethical behavior to get ahead.
(3) Managing a diverse workforce managers must establish employment procedures and
practices that are legal, fair, and do not discriminate against any organizational members.
(4) Utilizing new information systems and technologies new technologies such as computer
controlled manufacturing and information systems that link and enable employees in new ways
are continually being developed.

Chapter 2 Values, Attitudes, Emotions, and Culture: The Manager

as a Person
Personality traits enduring tendencies to feel, think, and act in certain ways.

** it is important to understand the personalities of managers because their personalities

influence their behavior and their approach to managing people and resources.
The Big five personality traits
(1) Extraversion the tendency to experience positive emotions and moods and to feel good
about oneself and the rest of the world.
* Managers who are high on extraversion are called extraverts and tend to be sociable,
affectionate, outgoing, and friendly.
* Managers who are low on extraversion are called introverts and tend to be less inclined toward
social interactions and have a less positive outlook.
(2) Negative affectivity the tendency to experience negative emotions and moods, to feel
distressed, and to be critical of oneself and others.
* Managers high on this trait may often feel angry and dissatisfied and complan about their own
and others lack of progress.
* Sometimes the critical approach of this can improve others performance.
(3) Agreeableness the tendency to get along well with other people.
* Managers high on agreeableness are likeable, tend to be affectionate, and care about other
people.
* Managers low on this can be distrustful, unsympathetic, incorporative, etc.
(4) Conscientiousness the tendency to be careful, scrupulous, and persevering.
* Managers high on this are organized and self disciplined.
* Managers low on this might sometimes seems lack direction.
(5) Openness to new experiences the tendency to be original, have broad interest, be open to
wide range of stimuli, be daring, and take risks.
* Managers who are high on this may be especially likely to take risks and be innovative in their
planning and decision making. Vice versa.
Other personality trains that affect managerial behavior
Internal locus of control the tendency to locate responsibility for ones fate within oneself.
They see their own actions and behaviors as being major decisive determinants of important
outcomes.
External locus of control the tendency to locate responsibility for ones fate in outside forces
and to believe that ones own behavior has little impact on outcomes.
Self esteem the degree to which individuals feel good about themselves and their capabilities.
Please with high self esteem believe that they are competent, deserving, and capable of handling
most situations. Low self esteem is associated with poor opinions of themselves, unsure about
their capabilities, and questions their ability to succeed.

Needs for affiliation the extend to which an individual is concerned about establishing and
maintaining good interpersonal relations, being liked, and having other people get along.
Needs for achievement the extent to which an individual has a strong desire to perform
challenging tasks well and to meet personal standards for excellence.
Needs for power the extent to which an individual desires to control or influence others.
Values
- What managers are trying to achieve through work and how they think they should behave.
Terminal value a lifelong goal or objective that an individual seeks to achieve
Examples a comfortable life, equality, inner harmony, true friendship
Instrumental value a mode of conduct that an individual seeks to follow.
Examples honest, ambitious, polite, intellectual, forgiving
Norms informal rules of conduct for behaviors considered important by most members of a
group or organization.
Attitudes
- a collection of feelings and believes.
Job satisfaction the collection of feelings and beliefs that managers have about their current
jobs.
managers who have high levels of job satisfaction believe that their jobs have many
desirable features, feel that they are being treated fairly
Levels of job satisfaction tend to increase as one moves up the hierarchy in an
organization.
In general, it is desirable for managers to be satisfied with their jobs, for at least two reasons.
1. They will be more likely to go the extra mile.above and beyond the call of duty
organizational citizenship behaviors (OCB) behaviors that are not required of organizational
members but that contribute to and are necessary for organizational efficiency, effectiveness, and
gaining a competitive advantage.
2. They will be less likely to quit.
Organizational commitment the collection of feelings and beliefs that managers have about
their organization as a whole.
Managers who are committed to their organizations believe in what their organizations
are doing, are proud of what they stand for, and feel a high degree of loyalty to their
company.
Mood a feeling or state of mind.

When people are in a positive mind they feel excited, enthusiastic, active, or elated.
When people are in a negative mood they feel distressed, fearful, hostile

Emotions intense, relatively short-lived feelings.

**research has found that moods and emotions affect the behavior of managers and all members
of an organization.
Emotional intelligence the ability to understand and manage ones own moods and emotions
and the moods and emotions of other people.
Managers with high emotional intelligence are most likely to understand how they are
feeling and why.
Helps managers relate to other people and understand how/why they are feeling a certain
way.
Organizational Culture
- the shared set of beliefs, expectations, values, norms, and work routines that influence the
ways in which individuals, groups, and teams interact with one another and cooperate to
achieve organizational goals.
Attraction-selection-attrition (ASA) framework a model that explains how personality may
influence organizational culture.
Values of the founder founders set the scene for the way culture values and norms develop
because their own values guide the building of the company and they hire other managers and
employees who the founder believes will share these values and help the organization to attain
them.
Organizational socialization the process by which newcomers learn an organizations values
and norms and acquire the work behaviors necessary to perform jobs effectively.
Most organizations have some kind of socialization program to help new employees learn
the ropes the values, norms, and culture of the organization. EX orientation, Military
Boot camp.
Ceremonies and rites formal events that recognize incidence of importance to the organization
as a while and to specific employees.
rites of passage determine how individuals enter, advance within, or leave
Rites of integration such as shared announcements of organizational successes, office
parties, and company cookoutscan build common bonds among members.
Rites of enhancement such as awards diners, newspaper releases, and employee
promotions, let organizations publicly recognize and reward employees.
Stories and language stories about organizational heroes and villains and their actions
provide clues about values and norms.

Chapter 3 Managing Ethics and Diversity

Ethical dilemma the quandary people find themselves in when they have to decide if they
should act in a way that might help another person or group even though doing so might go
against their own self-interest.
Ethics the inner guiding moral principles, values, and beliefs that other people use to analyze or
interpret a situation and then decide what is the right or appropriate way to behave.
** the essential problem dealing with ethical issues, and thus solving moral dilemmas, is that
there is no absolute or indisputable rules or principles that can be developed to decide if an
action is ethical or unethical.
It is important to realize that ethics/laws change over passing time as peoples opinions and
outlooks alter.
Stakeholders and Ethics
Stakeholders the people and groups that supply a company with its productive resources and so
have a claim on and stake in the company.
*The stakeholders can directly benefit or be harmed; therefore, the ethics of the company ands its
managers are important to them.
Stockholders have a claim in the company because when they buy stock or shares they become
its owners. They are interested in the way a company operates because they want to maximize
the return on their investment. They also want to watch managers to ensure they are behaving
ethically and not risking the investors capital.
Managers managers are a vital stakeholder group because they are responsible for using a
companys financial capital and human resources to increase its performance and thus its sock
price.
The problem has been that in many companies corrupt managers focus not on building
the companys capital and stockholders wealth bus on maximizing their own personal
capital and wealth.
Employees a companys employees are the hundreds of thousands of people who work in its
various departments and functions, such as research, sales, and manufacturing. Employees
expect that they will receive rewards consistent with their performance.
Suppliers and distributors no company operates alone. Every company is a network of
relationships with other companies that supply it with the inputs (raw materials, labor, etc.) that it
needs to operate.
Important issues arise in the way companys contract and interact with their suppliers and
distributors. There are concerns how and when payments are made or product quality
specifications are governed by the terms of legal contracts.

Customers often regarded as the most critical stakeholder group since if a company cannot
attract them to buy its products, it cannot stay in business.
Community, society, and nation the effects of the decisions made by companies and their
managers permeate all aspects of the communities, societies, and nations in which people
operate.
* Community refers to the physical locations like towns or cities or to social milieus like ethnic
neighborhoods
* Company affects the prosperity of a society and a nation and, to a degree that a company is
involved in global trade, all the countries it operates in and thus prosperity of the global
economy.
Rules for ethical decision making
To help themselves and employees make ethical decisions and behave in ways that benefit
stakeholders, managers can use four ethical rules or principles to analyze the effects of their
business decisions on stakeholder.
The four rules for ethical decision making
(1) Utilitarian rule an ethical decision is a decision that produces the greatest good for the
greatest number of people.
(2) Moral rights rule an ethical decision is one that best maintains and protects the fundamental
or inalienable rights and privileges of the people affected by it.
- Example ethical decisions that protect peoples rights to freedom, life, and safety.
(3) Justice rule an ethical decision is a decision that distributes benefits and harms among
people and groups in a fair, equitable, or impartial way.
- Example employees with same skill level should receive same pay.
(4) Practical rule an ethical decision is one that a manager has no reluctance about
communicating to people outside the company because the typical person in a society would
think it is acceptable.
Why should managers behave ethically?
The relentless pursuit of self-interest can lead to a collective disaster when one or more people
start to profit from being unethical because it encourages other people to behave the same way.
Trust a persons confidence and faith in another persons goodwill.
Reputation the esteem or high repute that individuals or organizations gain when they behave
ethically.
Codes of Ethics

formal standards and rules, based on beliefs about right and wrong, that managers use to
help themselves make appropriate decisions with regard to the interest of stakeholders.

An organizations code of ethics derives from three principal sources in the organizational
environment:
(1) Societal ethics standards that govern how member of a society are to deal with each other
on issues such as fairness, justice, poverty, and the rights of the individual.
(2) Professional ethics standards that govern how members of a profession are to make
decisions when the way they should behave is not clear-cut.
(3) Individual ethics personal values and attitudes that govern how individuals interact with
other people.
Ethical organizational culture
Managers role in developing ethical values and standards in other employees is very important.
Employees naturally look to those in authority to provide leadership
Ethics ombudsman an ethics officer who monitors an organizations practices and procedures to
be sure they are ethical.
The increasing diversity of the workforce and the environment
Diversity differences among people in age, gender, race, ethnicity, religion, sexual orientation,
socioeconomic background, and capabilities/disabilities.
There are several reasons why diversity is such a pressing concern and issue both in the popular
press and for managers and organizations
Ethically imperative that diverse people receive equal opportunities and be treated fairly.
Effectively managing diversity can improve organizational effectiveness.
Research shows that diverse individuals continue to be discriminated against in the
workforce.
Age, gender, race/ethnicity, religion, capabilities/disabilities, socioeconomic background, sexual
orientation.these are all main reasons for discrimination.
Sexual Harassment
Quid pro quo sexual harassment asking for or forcing an employee to perform sexual favors in
exchange for some reward or to avoid negative consequences.
Hostile work environment sexual harassment telling lewd jokes, displaying pornography,
making sexually oriented remarks about someones personal appearance, and other sex-related
actions that make the work environment unpleasant.
Steps managers can take to eradicate sexual harassment

Develop and clearly communicate a sexual harassment policy endorsed by top

management.
Use a fair complaint procedure to investigate charges of sexual harassment.
When it has been determined that sexual harassment has taken place, take corrective
actions as soon as possible.
Provide sexual harassment education and training to all organizational members,
including managers.

Chapter 4 Managing in the Global Environment

Managers of companies large and small have concluded that in order to survive the 21st century
most organizations must become global organizations.
Global organizations an organization that operates and competes in more than one country.
if orgs are to adapt to this changing environment, their managers must learn to understand
the forces to operate in it and how these forces give rise to opportunities and threats.
Organizational environment the set of forces and conditions that operate beyond an
organization boundaries but affect a managers ability to acquire and utilize resources.
Task environment the set of courses and conditions that originate with suppliers, distributors,
customers, and competitors and affect an organizations ability to obtain inputs and dispose of its
outputs because they influence managers on a daily basis.
General environment the wide-ranging economic, technological, sociocultural, demographic,
political/legal, and global forces that affect an organization and its task environment.
Forces in the task environment result from the actions of suppliers, distributors, customers and
competitors.
Suppliers
Individuals and organizations that provide an organization with the input resources and it needs
to produce goods and services.
In return the supplier receives compensation for those goods.
When an organization has many suppliers for a particular input, it is a relatively strong
bargaining position with those suppliers and can demand low-cost, high-quality inputs
from them. (VICEVERSA)
Global outsourcing the purchase of inputs from foreign suppliers or the production of inputs
abroad to lower production costs and to improve product quality or design.
Distributors
Organizations that help other organizations sell their goods or services to customers.
The changing nature of distributors and distribution methods can bring opportunities and
threats for managers.

If distributors become so large and powerful that they can control customers access to a
particular organizations goods and services, they can threaten the organization by
demanding that it reduce the price of its goods and services.
In contrast, the power of the distributor may be weakened if there are may options.

Customers
Individuals and groups that buy the goods and services that an organization produces.
An organizations success depends on customers
The most obvious opportunity associated with expanding into the global environment is
the prospect of selling goods and services to new customers; however, it is important not
to place too much emphasis on this development.
National cultures differ in many ways, significant differences often require managers to
customize goods and services to suit the preference of local customers.
Example.Mattel making an Asian Barbie doll to distribute in Japan.
Competitors
Organizations that produce goods and services that are similar to a particular organizations
goods and services.
Rivalry between competitors is potentially the most threatening force that managers must
deal with.
The potential to new competitors is also a huge threat. When new competitors enter an
industry, competition increases and price decreases.
Potential competitors organizations that presently are not in a task environment but could enter
if they so choose.
Barriers to entry factors that make it difficult and costly for an organization to enter a particular
task environment or industry.
The more difficult and costly it is to enter the task environment, the higher the barriers to
entry.
The higher the barriers to entry, the fewer the competitors.
Barriers to entry result from three sources:
(1) Economies of scale cost advantages associated with large operations.
(2) Brand loyalty customers preference for the products of organizations currently existing in
the task environment
(3) Government regulations that impede entry examples.air transport, telecommunications,
utilities.
Economic forces
Interest rates, inflation, unemployment, economic growth, and other factors that affect the
general health and well being of a nation or the regional economy of an organization.
Technological forces

Outcomes of changes in the technology that managers use to design, produce, or distribute goods
and services
Technology the combination of skills and equipment that managers use in the design,
production, and distribution of goods and services.
Sociocultural forces
Pressures emanating from the social structure of a country or society or from the national culture.
Social structure the arrangement of relationships between individuals and groups in a society.
National culture the set of values that a society considers important and the norms of behavior
that are approved or sanctioned in that society.
Social structure and national culture not only differ across societies but also change
within societies over time.
Demographic forces
Outcomes of changes in, or changing attitudes toward the characteristics of a population, such as
age, gender, ethnic origin, race, sexual orientation, and social class.
Political and legal forces
Outcomes of changes in laws and regulations, such as the deregulation of industries, the
privatization of organizations, and the increased emphasis on environmental protection.
Global forces
Outcomes of changes in international relationships, changes in nations economic, political, and
legal systems, and changes in technology, such as falling trade barriers, the growth of
representative democracies, and reliable and instantaneous communication.

The changing global environment

Managers now recognize that companies exist and compete in a truly global market.
Why has the global environment become more open and competitive? Lowering barriers to trade
and investment and the decline in barriers of distance and culture.
Declining barriers to trade and invest
During the 1920/30s many countries erected forminable barriers to international trade in the
belief that this was the best way to promote their economic well being.
Tariff a tax that a government imposes on imported or occasionally, exported goods.
The reason for removing tariffs is that, very often, when one country imposes an import tariff,
others follow suit and the result is a series of retaliatory moves as countries progressively raise
tariff barriers against each other.

Free-trade doctrine the idea that if each country specializes in the production of the goods and
services that it can produce most efficiently, this will make the best use of global resources.
Declining barriers of distance and culture
Barriers of distance and culture also closed the global environment and kept managers looking
inward.
** The shift toward a more open global economy has created not only more opportunities to sell
goods and services in markets abroad but also the opportunity to buy more from other countries.
NAFTA North American Free Trade Agreement
Effective Jan. 1, 1994, and had the aim of abolishing the tariffs on 99% of the goods traded
between Mexico, Canada, US by 2004.
The role of national culture
Although evidence shows that countries are becoming more and more similar to one another, the
cultures of different countries still vary widely because of critical differences in their values,
norms, attitudes.
Values ideas about what a society believes to be good, right, desirable, or beautiful
Norms unwritten rules and codes of conduct that prescribe how people should act in particular
situations
Folkways the routine social conventions of everyday life.
Mores norms that are considered to be central to the functioning of society and to social life.
Holfstedes model of National Culture
Developed five dimensions along which national cultures can be placed.
(1) Individualism vs. Collectivism
Individualism a worldview that values individual freedom and self expression and adherence to
the principle that people should be judged by their individual achievements rather than by their
social background. Example valued in US
Collectivism a worldview that values subordination of the individual to the goals of the group
and the adherence to the principle that people should be judged by their contribution to the
group. Example highly valued in Japan.
(2) Power distance
Power distance the degree to which societies accept the idea that inequalities in the power and
well being of their citizens are due to differences in individuals physical and intellectual
capabilities and heritage.

(3) Achievement vs. Nurturing Orientation

Achievement orientation a worldview that values assertiveness, performatnce, success, and
competition. Example Japan and US
Nurturing orientation a worldview that values the quality of life, warm personal friendships,
and services that care for the weak. Example Netherlands, Sweden.
(4) Uncertainty avoidance
Uncertainty avoidance the degree to which societies are willing to tolerate uncertainty and risk.
low uncertainty avoidance Hong Kong and US
high uncertainty avoidance France and Japan
(5) Long-term vs. Short-term orientation
Long-term orientation a worldview that values thrift and persistence in achieving goals.
Example Hong Kong and Taiwan
Short-term orientation a worldview that values personal stability or happiness and living for the
present. Example US and France.

Chapter 5 Decision Making, Learning, Creativity, and Innovation

Decision making- the process by which managers respond to opportunities and threats by
analyzing options and making determinations about specific organizational goals and courses of
action.

Decision making in central to being a managers

Programmed decision making routine, virtually automatic decision making that follows
established rules or guidelines.
Example a principal asks the school board to hire a new teacher because there are 40 student
per classroom.
They are called programmed because office managers do not need to repeatedly make
new judgments about what they should do
Non-programmed decision making non-routine decision making that occurs in response to the
unusual, unpredictable opportunities and threats.
Intuition feelings, beliefs, and hunches that come readily to mind, require little effort and
information gathering, and result in on-the-spot decisions.
Reasoned judgment a decision that takes time and effort to make and results from careful
information gathering, generation of alternatives, and evaluation of alternatives.

Classical Model
- one of the earliest models of decision making
Classical decision making model a prescriptive approach to devision making based on the
assumption that the decision maker can identify and evaluate all possible alternatives and their
consequences and rationally choose the most appropriate course of action.
Optimum decision the most appropriate decision in light of what managers believe to be the
most desirable future consequences for the organization.
Administative model
- in contract it was proposed that managers do not have access to all the info they need to
make a decision.
Administrative model an approach to decision making that explains why decision making is
inherently uncertain and risky and why managers usually make satisfactory rather than optimum
decisions.
Bounded rationality cognitive limitations that constrain ones ability to interpret, process, and
act on information
Risk the degree of probability that the possible outcomes of a particular court of action will
occur
Uncertainty unpredictability
Ambiguous information info that can be interpreted in multiple and often conflicting ways.
Satisficing searching for and choosing an acceptable, or satisfactory, response to problems and
opportunities, rather than trying to make the best decision.
Steps in the decision making process
(1) Recognizing the need for a decision
(2) Generate alternatives
(3) Evaluate alternatives
(4) Choose among alternatives
(5) Implement the chosen alternative
(6) Learn from feedback

Group decision making

- Group decision making is superior to individual decision making in several respects.
Examples: combined skills, less bias, good decisions, correct one another.
- Group decision making can also have downfalls.
Examples: groupthink, difficulty agreeing, longer to make decisions
Groupthink a pattern of faulty and biased decision making that occurs in groups whose
members strive for agreement among themselves at the expense of accurately assessing
information relevant to a decision.
Example: Bay of Pigs.
Devils advocacy critical analysis of a preferred alternative, made in response to challenges
raised by a group member who, playing the role of devils advocate, defends unpopular or
opposing alternatives for the sake of argument.

Diversity among groups can improve decision making and are sometimes less prone to
groupthink.

Organizational learning and creativity

Organizational learning the process through which managers seek to improve employees
desire and ability to understand and manage the organization and its task environment
Learning organization an org in which managers try to maximize the ability of individuals and
groups to think and behave creatively and thus maximize the potential to organizational learning
to take place.
Creativity a decision makers ability to discover original and novel ideas that lead to feasible
alternative courses of action.
Innovation the implementation of creative ideas in an organization.
5 principles for creating a learning organizations
- Created by Senge
(1) Top managers must allow every person in the org to develop a senese of personal mastery.
Mangers must empower employees and allow them to experiment and create what they want.
(2) Need to encourage employees to develop ways of thinking to better explore creativity.
(3) Mangers must do everything they can to promote group creativity. Team learning is more
important and individual learning.
(4) Mangers must emphasize the importance of building a shared vision.

(5) Mangers must encourage systems thinking.

Promoting group creativity
Brainstorming a group problem solving technique which managers meet together to generate
and debate a wide variety of ideas/alternatives to make a decision.
Production blocking a loss of productivity in brainstorming sessions due to the unstructured
nature of brainstorming.
Chapter 6 Planning, Strategy and Competitive Advantage
Managerial planning process includes 3 steps
1) determining an organizations mission and major goals
2) choosing strategies to realize the mission and goals
3) selecting the appropriate way of organizing resources to implement the strategies
The Nature of the Planning Process
Strategy the cluster of decisions and actions that managers take to help an organization attain
its goals.
*In most organizations planning is a three step activity.
1. The first step is determining the organizations mission and goals
Mission statement a broad declaration of an organizations purpose that identifies the
organizations products and customers and distinguishes the organization from its competitors
2. The second step is formulating strategy. Managers analyze the organizations current situation
and then conceive and develop the strategies necessary to attain the organizations mission and
goals.
3. The third step is implementing strategy. Managers decide how to allocate the reosources and
responsibilities requires to implement the strategies between people and groups within the
organization.
Levels of Planning
*In large organizations planning usually takes place at three levels of management: corporate,
business, or division, and department or functional.
Division a business unit that has its own set of managers and functions or departments and
competes in a distinct industry.
Divisional managers managers who control the various divisions of an organization.

*In turn, each division has its own set of functions or departments manufacturing,
marketing, human resource management, R&D. Example GE has many different branches of
its company (GE Aircraft, GE Lighting, GE motors) and each have their own functions.
Corporate-level plan top managements decisions pertaining to the organizations mission,
overall strategy, and structure.
Corporate-level strategy a plan that indiviates in which industries and national markets an
organization intends to compete.
Business-level plan divisional managers decisions pertaining to divisions long-term goals,
overall strategy and structure.
Business-level strategy a plan that indicates how a division intends to compete against its rivals
in an industry.
Function a unit or department in which people have the same skills or use the same resources
to perform their jobs.
Functional managers managers who supervise the various functions, such as manufacturing,
accounting, and sales, within a division.
Functional-level plan functional managers decisions pertaining to the goals that they propose
to pursue to help the division attain its business-level goals.
Who Plans?
In general, corporate-level planning is the primary responsibility of top managers; however,
lower level managers can and usually are given the opportunity to become involved in the
process.
Time Horizons of Plans
Time horizon the intended duration of a plan
Long term plans horizon of five years or more
Intermediate term plans horizon between one and five years
Short term plans - one year or less
**Typically on the corporate and business level rolling plans are used, which is a plan that is
updates and amended every year to take account the changing conditions in the external
environment.
Standing plans and single-use plans
Standing plans are used in situations in which programmed decision making is appropriate.
When the same situations occur repeatedly, managers develop policies, rules, and standard
operating procedures.

Single-use plans are developed to handle non-programmed division making in unusual or one- of
a kind situations.