Chapter 2 - Managing in Todays World

CHAPTER 2 - MANAGING IN TODAY'S WORLD LEARNING OUTCOMES

After reading this chapter, students should be able to: 1. Describe the three waves in modern social history and their implications for organizations. 2. Explain the importance of viewing management from a global perspective. Identify how technology is changing the manager's job. 3. Define social responsibility and ethics. 4. Explain what is meant by the term entrepreneurial spirit. 5. Describe the management implications of a diversified workforce. 6. Explain why companies focus on quality and continuous improvement. 7. Describe why many corporations have downsized.

Opening Vignette SUMMARY

Doing business today is radically different than it was just twenty years ago. Increased global competition, the advent of electronic business over the Internet, economic crises, and the like, are all requiring organizations to rethink how they do business. One such organization, Amazon.com--founded by Jeff Bezos--is a good example of how an organization can successfully compete in a global marketplace. In 1994, Bezos was a successful computer programmer on Wall Street, he decided to quit his job and began looking for business opportunities on the Internet. Jeff drew up a list of 20 products that he figured could be sold on-line. He settled on the notion that books would offer the best opportunity. He headed for Seattle because the area offered a talented pool of computer professionals, and it was near two major book wholesalers. In 1995, Jeff sold his first book. When customers log onto the company's Web page, they can pursue their book search by title, author, or subject or browse through the database of over 2.5 million books to find something of interest. Customers use on-line forms to specify hardcover or paperback, gift wrapping, and mode of shipment. Payment is by credit card. The order is then packed and shipped to the customer-usually within 3 days. Jeff Bezos began with a vision--to create the Earth's Biggest Bookstore. What he developed was an organization that today not only sells books, but CDs, etc. As a result, Amazon.com has become one of the leaders in web-based commerce. Teaching notes 1. This case provides an interesting opportunity to trace an Internet company from birth to stagnation. 2. Break students into teams, and have them research Amazon.com by time frame (or any other categorization you deem appropriate). 1995-1996 1997-1998 1999-2000 3. Students should prepare to turn in a short written report, offer a 10 minute presentation, and then discuss their findings and the future of Amazon.com. 4. This year there have been numerous articles criticizing Amazon.com and, as this goes to press, serious questioning of Bezos" continuing choice to not make a profit due to continually expanding the business. Some basic questions: Is Bezos still true to his original vision? Is Amazon.com still a virtual company; how does it differ from a bricks-and-mortar retailer?

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What are the criticisms of Amazon.com, and do you think they are valid? I. THE CHANGING ECONOMY A. Introduction 1. The 1960s show stagnant organizations and locked-in tradition fade from the limelight. a) See Exhibit 2-1 2. One of the biggest problems in managing an organization is failing to adapt to change. a) Just 25 years ago, no one had a fax machine, a cellular phone, or a laptop. b) E-mail and modems were known to maybe, at best, a few hundred people. c) Computers often took up expansive space, quite unlike the 4-pound laptop today. d) The silicon chip and other advances in technology have permanently altered the economies of the world and the way people work. 3. Alvin Toffler studied these changes and predicted some of their implications. 4. He argued that modern civilization has evolved over three "waves." a) The first wave was driven by agriculture. (1) Until the late nineteenth century, all economies were agrarian. (2) Individuals were typically their own boss and performed a variety of tasks. (3) Their success--or failure--was contingent on how well they produced. b) The second wave was industrialization. (1) From the late 1800s until the 1960s, most developed countries moved to machines. (2) Work left the fields and moved into formal organizations. (3) The industrial wave forever changed the lives of skilled craftsmen. (4) Workers were hired into tightly structured and formal workplaces. (5) Mass production, specialized jobs, and authority relationships became common. (6) By the 1950s, industrial workers were the largest group in every developed country. (7) The shift since World War II has been from manufacturing and toward service jobs. 5. By the start of the 1970s, a new age was gaining momentum. This is based on information. a) Technological advancements were eliminating many low-skilled, blue-collar jobs. b) The information wave was transforming society from manufacturing to service. c) Job growth in the past 20 years has been in low-skilled service and knowledge work. (1) Knowledge workers as a group make up about a third of the U.S. workforce. d) Knowledge workers are at the cutting edge of the third wave. (1) Their jobs are designed around the acquisition and application of information. e) The number of blue-collar workers shrank dramatically. f) Some of the blue-collar workers don't have the education and flexibility necessary to exploit the new job opportunities in the information revolution. 6. These waves also affect how we do business. a) See Exhibit 2-2. Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ II. A GLOBAL MARKET PLACE A. The Globalization of Business 1. Management is no longer constrained by national borders. a) BMW, a German-owned firm, builds cars in South Carolina. b) McDonald's sells hamburgers in China.

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c) The world has become a global village. 2. To be effective in this boundaryless world, managers need to adapt. 3. In the 1960s, Canada's prime minister described his country's proximity to the United States as analogous to sleeping with an elephant. a) In the 2000s, we can generalize this analogy to the entire world. 4. International businesses have been with us for a long time. a) Siemens, Remington, and Singer were selling their products in many countries in the nineteenth century. b) By the 1920s, some companies, including Fiat, Ford, Unilever, and Royal Dutch/Shell, had gone multinational. c) Not until the mid-1960s were multinational corporations (MNCs) commonplace. 5. The generic global organization, the transnational corporation (TNC). a) Decisions in TNCs are made at the local level. b) Nationals are typically hired to run operations in each country. c) The products and marketing strategies for each country are tailored to that country's culture. d) Nestles, for example, is a transnational. 6. The borderless organization effectively by breaking down artificial geographic barriers. a) IBM reorganized into 14 industry groups. b) Ford merged its culturally distinct European and North American auto operations. Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ A. How Does Globalization Affect Organizations? 7. An organization going global typically proceeds through three stages as shown in Exhibit 2-3. 8. In stage I, the first step toward going international, exporting the organization's products. a) This is a passive step involving minimal risk. b) The organization fills foreign orders only when it gets them. 9. In Stage II, managers make an overt commitment to sell products or make products abroad. a) Still no physical presence of company employees outside the company's home country. b) Sales through sending domestic employees on regular business trips to meet foreign customers or by hiring foreign agents or brokers. c) To manufacture, managers contract with a foreign firm to produce their products. 10. Stage III, a strong commitment to pursue international markets aggressively. a) As shown in Exhibit 2-3, managers can do this in different ways. b) License or franchise the right to use the brand name, technology, or product. (1) This approach is used widely by pharmaceutical companies and fast-food chains. c) Joint ventures involve larger commitments; a domestic and a foreign firm share the cost of developing new products or building production facilities in a foreign country. (1) These are called strategic alliances. (2) These partnerships provide a fast and less expensive way for companies to compete globally than would doing it on their own. d) The greatest commitment (and risk), the organization sets up a foreign subsidiary.

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(1) Such subsidiaries can be managed as an MNC (with domestic control), a TNC (with foreign control), or a borderless organization (with global control). Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ B. What Effect Does Globalization Have on Managers? 11. Whirlpool is the top manufacturer and distributor of appliances in Europe and Asia. 12. In the changing global environment, the spread of capitalism makes the world smaller. a) Business has new markets to conquer. b) The implementation of free markets in Eastern Europe further underscores the growing interdependence between countries of the world. 13. A boundaryless world introduces new challenges for managers. 14. One specific challenge, one of the first issues to deal with, is the perception of "foreigners." 15. U.S. managers in the past held a rather parochial view of the world of business. a) Parochialism is a narrow focus. b) Seeing things solely through their own eyes and perspectives is an ethnocentric view. c) They believed that their business practices were the best in the world. d) They did not recognize different ways of doing things or living. 16. Countries have different values, morals, customs, political and economic systems, and laws. 17. Traditional approaches to international business sought to advance general principles. a) Organizational success can come from a variety of managerial practices. b) Example--Status is perceived differently in different countries. (1) In France, status is the result of factors important to the organization, ascribed status. (2) In the United States, status is more a function of what individuals have personally accomplished, achieved status. c) Countries also have differences in their laws. (1) In the United States, laws guard against employers' taking action against employees solely on the basis of an employee's age. (2) Similar laws do not exist in all other countries. 18. Viewing the global environment from any single perspective may be potentially problematic. 19. An appropriate approach is recognizing the cultural dimensions of a country's environment. Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ 20. A study of the differences of cultural environments was conducted by Geert Hofstede. a) He surveyed over 116,000 employees in forty countries-all of whom worked for IBM. b) Hofstedes data indicated that, in general, national culture has a major impact on employees' work-related values and attitudes. c) He classified those values and attitudes into four specific dimensions of national culture.

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(1) Individualism versus collectivism. (2) Power distance. (3) Uncertainty avoidance. (4) Quantity versus quality of life. d) See Exhibit 2-4. 21. Implications of Hofstede's research for American managers. a) To place U.S. managers where they fit best, identify those countries that are most and least like the United States on the four dimensions. b) Hofstede's results allow us to identify countries in which "culture shock" is likely to be the greatest, and where managers would be most likely to significantly change their style. 22. Most cross-cultural encounters are likely to involve interactions between managers in the United States and individuals who come to work here. a) A manager must understand that individuals informally learn about their cultures and that most such learning is unconscious. (1) The Mars company (the candy maker), example. b) Managers need to be flexible in their dealings with their foreign-born employees. Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ III. EMPHASIS ON TECHNOLOGY A. Introduction 1. Suppose you need information on how well your unit is meeting its production standards. a) Thirty years ago, you would have submitted a requisition to the operations-control department. b) Today, a few keystrokes on your computer gets that information almost instantaneously. 2. Since the 1970s, U.S. companies such as General Electric, CitiGroup Technologies, WalMart, and 3M have been using automated offices, robotics, computer-assisted design, etc. a) These technologies make organizations more productive and help them create and maintain a competitive advantage. 3. Technology includes any equipment, tools, or operating methods that are designed to make work more efficient. a) Technological advances reflect integrating any technology into any process for changing inputs into outputs. b) Technology made it possible to enhance production processes by replacing human labor with electronic and computer equipment. c) Technology is making it possible to better serve customers. 4. Technological advancements are also used to provide better, more useful information. a) Most cars built today have an on-board computer circuit that a technician can use to determine problems with the automobile--saving countless diagnostic hours. b) And at Frito-Lay, technology has meant getting better and more timely information.

Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

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C. How Does an Organization Benefit from Information Technology? 5. Technological changes, especially IT changes, have a significant effect on organizational management. 6. IT has created the ability to circumvent the physical confines of doing work only in a specified organizational location. 7. One important implication is that employees' job skill requirements will increase. 8. Another implication is that IT tends to level the competitive playing field. 9. E-commerce, any computer transaction that occurs where data is processed and transmitted over the Internet. a) Organizations are using the Internet to enhance business-to-business transactions. 10. E-commerce is "changing our society and how we conduct our business." a) In 1998, more than 10 million people made purchases over the Internet. b) 16 percent of all car buyers in 1998 made their purchase through e-commerce. c) The fastest growing stocks on Wall Street have been the Internet stocks-companies. d) One of the greatest effects is the realization that customers will be empowered. (1) Customers will have access to information unlike they've had at any time in history. (2) "Customers' expectations about convenience, speed, comparability, price, and service" will be greatly changed. Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ D. In What Ways Does Technology Alter a Manager's Job? 11. Technology changed the manager's job. 12. Organizations today have become integrative communication centers. 13. Managers can get complete information quickly, better formulate plans, make faster decisions, more clearly define the jobs that workers need to perform, and monitor work. a) Information technology enhanced a manager's ability to more effectively and efficiently perform the four primary activities of management. 14. Technology is also changing how a manager's work is performed. a) Historically, the work site was located close to a source of skilled labor. b) Management could observe what work was being done and communicate face to face. c) Managers are able to supervise employees in remote locations, and the need for face-toface interaction has decreased dramatically. d) Many employers no longer have to consider locating a business near its workforce. (1) Example, Aetna Insurance in Idaho claims-processing jobs. 15. Managements two biggest challenges, effectively communicating with individuals in remote locations, as well as ensuring that performance objectives are being met. a) Addressing these challenges will focus on training managers in establishing performance standards and, ensuring appropriate work quality and on-time completion. b) The emphasis will be on the final output, not the means by which it is accomplished. Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

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Chapter 2 - Managing in Todays World

_____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ I. WHAT DOES SOCIETY EXPECT FROM ORGANIZATIONS AND ITS MANAGERS? E. Introduction 16. The importance of corporate social responsibility surfaced in the 1960s when the activist movement began questioning the singular economic objective of business. 17. Before the 1960s, few people asked such questions. Good arguments can be made for both sides of the social responsibility issue. a) See Exhibit 2-5. 18. Managers are now confronted with decisions that have a dimension of social responsibility. 19. In a globally competitive world, few organizations can afford the bad press or potential economic ramifications associated with being seen as socially irresponsible. 20. Few terms have been defined in as many different ways as social responsibility. 21. Some of the more popular meanings. a) Profit making only. b) Going beyond profit making. c) Voluntary activities. d) Concern for the broader social system. e) Social responsiveness. 22. The debate has focused at the extremes. a) The classical--or purely economic--view that management's only social responsibility is to maximize profits. b) The socioeconomic position, which holds that management's responsibility goes well beyond making profits to include protecting and improving society's welfare. Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ F. How Can Organizations Demonstrate Socially Responsible Actions? 23. The text--social responsibility is a business firm's obligation, beyond that required by the law and economics, to pursue long-term goals that are good for society. a) This definition assumes that business obeys the law and pursues economic interests. b) This definition views business as a moral agent. 24. Comparison with two similar concepts: social obligation and social responsiveness. a) Social obligation is the foundation of a business's social involvement. A business has fulfilled its social obligation when it meets its economic and legal responsibilities. A firm pursues social goals only to the extent that they contribute to its economic goals. b) Social responsiveness goes beyond meeting basic economic and legal standards. It might mean respecting the community in which the company operates, treating all employees fairly, being friendly to the environment, supporting women and minorities, etc. 25. Social responsibility also adds an ethical imperative. 26. Social responsiveness refers to the capacity of a firm to adapt to changing societal conditions. 27. Social responsibility requires business to determine what is right or wrong and thus seek fundamental ethical truths. 28. Social responsiveness is guided by social norms.

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G. How Do Managers Become More Socially Responsible? 29. Ethics commonly refers to the rules or principles that define right and wrong conduct. a) Exhibit 2-6 presents three views of ethical standards. 30. Whether a manager acts ethically or unethically will depend on several factors, including: a) the individual's morality. b) values. c) personality and experiences, d) the organization's culture. e) the issue that is being called into question. 31. People who lack a strong moral sense are much less likely to do the wrong things if they are constrained by rules, policies, job descriptions, or strong cultural norms. 32. Codes of ethics are an increasingly popular tool for reducing that ambiguity. a) A formal document that states an organization's primary values and the ethical rules it expects managers and operative employees to follow. b) Nearly 90 percent of Fortune 1000 companies have a stated code of ethics. 33. The effectiveness of ethical codes depends heavily on whether management supports them and how employees who break the codes are treated. Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ IV. WHY THE EMPHASIS ON THE ENTREPRENEURIAL SPIRIT? A. Introduction 1. As the environment surrounding business continues to change, one trend becomes evident: more people are starting their own businesses--about 2 million of them annually in the United States. 2. It's also happening in North America, in Latin America, and in places countries like Russia, Hungary, and China. H. Its Origins 3. Entrepreneurship is the process of initiating a business venture, organizing the necessary resources, and assuming the risks and rewards. a) Because they usually start small, most fall within the definition of a "small business"-one that has fewer than 500 employees. 4. Why the increased popularity? a) There has always been a segment of the population that wanted to control its own destiny. b) Recent changes in the economy have stimulated interest in being one's own boss. (1) Corporate downsizing. (2) Self-employment opportunity financed in part by their severance pay or early retirement bonus. (3) Others see colleagues and friends lose their jobs and voluntarily cut their corporate ties and choose self-employment. (4) Growing options in franchising. (a) Less risk. (b) Lower failure rate. I. Intrapreneurship 5. The entrepreneurial spirit is not limited solely to the small business.

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6. Some companies are attempting to model the activities of the entrepreneur. a) Entrepreneurs are better able to respond to a changing environment. b) The owner-manager is usually close to the customer. c) The owner-manager is the main decision maker; the result is a flatter organization. 7. Intrapreneurs--people who demonstrate entrepreneurial characteristics in large organizations. a) Can entrepreneurs exist in every large, established organization? b) The answer depends on one's definition of entrepreneur. 8. Peter Drucker argues that they can. a) An entrepreneurial manager is someone confident in his/her abilities, who seizes opportunities for change, and who not only expects surprises but capitalizes on them. b) Contrasted with the traditional manager, who feels threatened by change, is bothered by uncertainty, prefers predictability, and is inclined to maintain the status quo. c) Drucker's use of the term entrepreneurial is misleading. (1) By any definition, his entrepreneurial type would be preferred to the traditional type. (2) Intrapreneurship can never capture the autonomy and riskiness inherent in true entrepreneurship. 9. We will come back to entrepreneurs in the next chapter. Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ V. WHAT WILL THE WORKFORCE OF 2010 LOOK LIKE? A. The Melting Pot 1. Until very recently, managers took a "melting-pot" approach to differences in organizations. 2. They assumed that people who were different would somehow automatically want to assimilate. 3. Managers found that employees do not set aside their cultural values and lifestyle preferences when they come to work. 4. The melting-pot assumption is being replaced by the recognition and celebration of differences. J. How Does Diversity Affect Organizations? 5. More diverse--diversity leads to adapting human resource practices to reflect those changes. 6. Many organizations today, like BankAmerica, have workforce diversity programs. a) Hire, promote, and retain minorities. b) Focus on training employees. 7. Some, like Motorola, actually conduct cultural audits to ensure that diversity is persuasive. 8. Other organizations are making their benefit programs more "family-friendly." 9. Some organizations, such as AT&T, the Merck, Qualcomm, and Marriott are also offering family-friendly benefits. a) These include a wide range of work and family programs such as on-site day care, child and elder care, flexible work hours, job sharing, telecommuting, temporary part-time employment, unpaid leaves of absences, etc. 10. With more women working and more two-career couples, family-friendly benefits are seen as a means of helping employees better balance their work and family lives. a) Studies indicate that helping employees resolve work and family conflicts boosts morale, increases productivity, reduces absenteeism, and makes it easier for employers to recruit and retain skilled workers.

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K. How Do We Make Managers More Sensitive to Differences? 11. The diversity that exists in the workforce requires managers to be more sensitive. 12. Managers need to recognize individual differences and respond to those differences. 13. Of course, they must not illegally discriminate against any of their employees. 14. Such organizations as Levi-Strauss, Hewlett-Packard, Lotus Development, and U.S. West are providing sophisticated diversity training programs for their managers. a) These programs are designed to raise diversity consciousness among current employees. I. HOW DO ORGANIZATIONS MAKE THE CUSTOMER KING? L. Introduction 15. Henry Ford said his customers could have any color car they wanted--as long as it was black. 16. Stew Leonard, the world's largest dairy store in southern Connecticut, says it has only two rules in his business. a) Rule 1--the customer is always right. b) Rule 2--If the customer is ever wrong, reread Rule 1 17. Managers are being influenced by the Stew Leonards of the world. a) Long-term success can be achieved only by satisfying the customer. b) Customers have more choices than ever before, and are, therefore more difficult to please. c) Customers are demanding quicker service, high quality, and value for their money. 18. Mass customization, toll-free service hotlines, the growth of e-commerce and mail order, discount superstores, and managers who have become obsessed with quality are all responses. B. How Have Organizations Shown an Increased Concern with Quality? 1. There is a quality revolution. a) The generic term that has evolved to describe TQM or continuous improvement. b) Inspired by quality experts like Joseph Juran and the late W. Edwards Deming. 2. An American, Deming found few managers in the United States interested in his ideas. a) In 1950, he went to Japan and began advising many top Japanese managers. b) Central to his methods, the use of statistics to analyze variability in production processes. c) A well-managed organization was one in which statistical control reduced variability and resulted in uniform quality and predictable quantity of output. 3. Deming developed a fourteen-point program for transforming organizations. 4. Today, Deming's original program has been expanded into a philosophy of management that is driven by customer needs and expectations. a) See Exhibit 2-7. 5. TQM expands the term customer to include everyone involved with the organization, either internally or externally-encompassing employees and suppliers as well as the people who buy the organization's products or services. a) The objective is to create an organization committed to continuous improvement or, as the Japanese call it, kaizen. 6. Criticized by some for over-promising and underperforming, its overall record is impressive. a) Example of Varian Associates, Inc., a maker of scientific equipment. b) Example of Globe Metallurgical Inc., a small Ohio metal producer. c) Example, the significant improvements in the quality of cars produced by GM, Ford, and DaimlerChrysler can be directly traced to the implementation of total quality methods. Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

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_____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ C. Why Must Managers Think in Terms of Quantum Changes Rather Than Continuous Improvement? 1. Continuous improvement methods is a positive start; it focuses on incremental change. 2. Such action--a constant and permanent search to make things better--is intuitively appealing. 3. Many organizations, however, operate in an environment of rapid and dynamic change, and a continuous improvement process may keep them behind the times. a) A focus on continuous improvements may provide a false sense of security. b) Incremental change may avoid facing up to the possibility that what the organization may really need is radical or quantum change, referred to as work process engineering. c) Continuous change may also make managers feel as if they are taking progressive action while avoiding quantum changes that will threaten organizational members. 4. Aren't these contradictory statements? a) Continuous improvement can lead to organizational improvements, but it may not be the right thing initially. b) That's the case if you are producing a new improved version of an outdated product when a complete overhaul might be required. c) Then, continuous improvement can have its rightful place. 5. Roller skate business example, continuous improvement approach. a) Frame of reference, a high-toe leather shoe on top of a steel carriage with four wooden wheels. b) Your focus--using a different grade of cowhide for the shoe, adding speed laces to the uppers, or using a different type of ball bearing in the wheels. 6. A competitor reengineers the design process. a) Your competitor asks, How can we design a skate that is safe, fun, fast, and provides greater mobility? b) Starting from scratch, your competitor completes a redesign with "inline skates." c) You are now competing against a molded boot, no laces to tie, and four to six highdurability plastic wheels, which are placed in line for greater speed and mobility. 7. In this contrived example, both companies made progress. a) But who made the most progress, given the dynamic environment they face? 8. Our example demonstrates why companies such as Thermos, Ryder Trucks, and Casio Computer are opting for work process engineering rather than incremental change. Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ D. Why Do Organizations Lay Off Workers? 1. Corporate America used to follow a simple rule: in good times you hire employees; in bad times, you fire them. 2. Since the late 1980s, that "rule" no longer holds true, most Fortune 500 companies made significant cuts in their overall staff.

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3.

4. 5. 6. 7.

a) IBM cut staff by 122,000 workers, and at AT&T, 83,000 employees were let go. b) Boeing reduced its staff by 61,000, Sears cut 50,000 jobs, and Eastman Kodak reduced its workforce by more than 34,000 positions. Jobs are being eliminated in almost all industrialized nations. a) For example, Peugeot (France) cut nearly 10 percent of its work force over a five-year period; Renault (France) eliminated 17 percent of its jobs; and Volkswagen (Germany) eliminated about 30,000 jobs and cut the remaining employees' pay by 16 percent. In Japan, Sony is eliminated 17,000 workers, NEC cut 15,000 jobs, etc. Organizations are attempting to increase their flexibility to better respond to change. Continuous improvement and work process engineering are creating flatter structures and redesigning work to increase efficiency. a) The result is a need for fewer employees. Downsizing as a strategy is here to stay. a) It's part of a larger goal of balancing staff to meet changing needs. A better term might be rightsizing. Rightsizing involves linking staffing levels to organizational goals. a) AT&T cut 8000 jobs--mostly operators being replaced by voice-recognition technology-while at the same time, adding staff in marketing and network systems.

Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ E. How Do Organizations Create Flexible and Rapid Response Systems? 1. Lou Capolzzola example. 2. Thousands of organizations are converting many jobs into temporary or part-time positions-giving rise to what is commonly referred to as the contingent workforce. a) See Exhibit 2-8. 3. Many large companies are converting some permanent jobs into temporary ones. 4. Organizations facing a rapidly changing environment must be in a position to adjust rapidly to those changes. a) Having a large number of permanent full-time employees limits the ability to react. b) Organizations that rely heavily on contingent workers will have greater flexibility because workers can be easily added or taken off as needed. 5. Opportunities to capitalize on new markets, obtaining someone who possesses a special skill for a particular project, point to a need to be able to rapidly adjust staffing levels. a) Nearly 2 decades ago there were 619,000 temporary jobs in the United States. b) Today, that number is over 2.6 million. 6. In Europe, companies have shifted overwhelmingly to hiring temporary workers. a) About 11 percent of all jobs in France, and more than 33 percent of those in Spain. 7. Many employees have indicated a preference to their contingent status. a) Yet, the prime reason United Parcel Service's 185,000 workers went on strike in August 1997 was in protest over UPS filling the majority of its new positions with temporaries. Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

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F. What Issues Do Contingent Workers Create for Managers? 1. Each contingent worker may need to be treated differently in terms of practices and policies. 2. Managers must also make sure that contingent workers do not perceive themselves as secondclass workers. 3. They may not be as loyal, as committed to the organization, or as motivated on the job as permanent workers are. 4. Today's managers need to motivate their entire workforce--full-time and temporary employees--and to build their commitment to doing good work! Dilemma in Management The Contingent Workforce SUMMARY Hiring contingent workers can be a blessing for both organizations and individuals. A rich set of diverse skills on an as-needed basis. Hired precisely when the specific work is to begin is very cost-effective. Individuals who desire part-time work can keep their skills sharp. Contingent workers can balance their commitment to personal matters and their careers. The blessings for individuals depend on the individual choosing to be a contingent worker. Being part of the contingent workforce might not be so bad if employees received benefits typically offered to full-time core employees. Although hourly rates sometimes are higher for the contingent workers, these individuals have to pay themselves for the benefits that organizations typically provide. Another added expense to the contingent worker is having to pay for one's office supplies and equipment. As for time off with pay benefits, forget about it. When you don't work, you don't get paid! Do you believe organizations that hire contingent workers who would rather have permanent employment are being exploited by management? Should organizations be legally required to provide some basic level of benefits--such as health insurance, vacation, sick leave, and retirement--to contingent workers? What's your opinion? Teaching notes 1. This issue is really a philosophical question. Help students see this by beginning with a discussion of questions such as these. What is the purpose of a business? Does an employer or owner, "owe" employees a job? If forced to choose between layoffs or shutting down, which choice should a company make? If students choose laying off workers, then how close to failure must a company be to justify layoffs? 2. Next, brainstorm with students what an employer would have to do to treat contingency workers fairly, in their opinion. 3. Then discuss what this would cost the business or organization. 4. These questions and discussion should help students see the difficulty of this choice. Movies and TV created an image of managers laying off workers without any feelings about it. When in reality, layoffs are the hardest thing a manager can do. I. SOME CONCLUDING REMARKS 5. Both organizations and managers need to be more flexible and respond to change. 6. Frederick Taylor, the "father of scientific management" argued nearly a century ago for the division of work and responsibility between management and workers. 7. Workers today are far better educated and trained than they were in Taylor's day.

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8.

9. 10.

11.

12.

a) Today's workers may be considerably more knowledgeable than those who manage them about how best to do their jobs. Managers are transforming themselves from bosses into team leaders. a) Managers are finding that they become more effective when they focus on motivating, coaching, and cheerleading. b) Managers also recognize that they can often improve quality, productivity, and employee commitment by redesigning jobs to increase the decision-making discretion of workers. We call this process empowering employees. The empowerment movement is being driven by two forces. a) First is the need for quick decisions by those people who are most knowledgeable about the issues. b) Second is the reality that the large layoffs in the middle-management ranks that began in the late 1980s have left many managers with considerably more people to supervise than they had in the past. Letting go and stretching can be likened to the role of a sports team coach. a) Consider the job of head coach of a college basketball team. b) He/she establishes the game plan and readies the players for the task. c) The players execute the game plan. d) During the game, what the coach does depends on how well the plan is working. e) Thus, the coach deals with the exceptions. This coaching role is increasingly becoming an accurate description of today's managers!

Teaching Notes _______________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

SUMMARY REVIEW AND APPLICATION QUESTIONS Reading for Comprehension

1. Describe the shifts in the types of jobs in the workforce during the past 100 years. Answer The 1960s show stagnant organizations and locked-in tradition fade from the limelight. One of the biggest problems in managing an organization is failing to adapt to change. By the start of the 1970s, a new age was gaining momentum. This is based on information. Technological advancements were eliminating many low-skilled, blue-collar jobs. The information wave was transforming society from manufacturing to service. Knowledge workers are at the cutting edge of the third wave. Their jobs are designed around the acquisition and application of information. The number of blue-collar workers shrank dramatically. See Exhibit 2-2. 2. Explain the managerial implications of a global village. Answer In the changing global environment, the spread of capitalism makes the world smaller. A boundaryless world introduces new challenges for managers. U.S. managers in the past held a rather parochial view of the world of business. They did not recognize that people from other countries had different ways of doing things or that they lived differently from Americans. Traditional approaches to international business sought to advance general principles. Viewing the global environment from any single perspective may be too narrow and potentially problematic. A more appropriate approach is to recognize the cultural dimensions of a country's environment.

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3. What are the managerial implications of Hofstede's research on cultural environments? In what countries do you believe managers from the United States are likely to have to make the fewest adjustments? In what countries do you believe they'd have to make the most adjustments? Answer Geert Hofstede surveyed over 116,000 employees in forty countries-all of whom worked for IBM. Hofstedes data indicated that, in general, national culture has a major impact on employees' work-related values and attitudes. He classified those values and attitudes into four specific dimensions of national culture. See Exhibit 2-4. To place U.S. managers where they fit best, identify those countries that are most and least like the United States on the four dimensions. In terms of individualism, power distance, uncertainty avoidance and quantity of life: Ireland, England, Canada, New Zealand, etc. 4. Describe the managerial implications of growing organizational diversity. Answer More diverse--diversity leads to adapting human resource practices to reflect those changes. Many organizations today, like BankAmerica, have workforce diversity programs. Some, like Motorola, actually conduct cultural audits to ensure that diversity is persuasive. Other organizations are making their benefit programs more "family-friendly." These include a wide range of work and family programs such as on-site day care, child and elder care, flexible work hours, job sharing, telecommuting, temporary part-time employment, unpaid leaves of absences, etc. With more women working and more two-career couples, family friendly benefits are seen as a means of helping employees better balance their work and family lives. 5. Identify the characteristics and behaviors of what you would consider an ethical manager. Answer Ethics commonly refers to the rules or principles that define right and wrong conduct. Exhibit 2-6 presents three views of ethical standards. Whether a manager acts ethically or unethically will depend on several factors, including: the individual's morality. values. personality and experiences, the organization's culture. the issue that is being called into question. 6. Explain the increased popularity of entrepreneurial spirit in the past 20 years. Answer As the environment surrounding business continues to change, one trend becomes evident: more people are starting their own businesses--about 2 million of them annually in the United States. It's also happening in North America, in Latin America, and in countries like Russia, Hungary, and China. It is increasing in popularity for several reasons. There has always been a segment of the population that wanted to control its own destiny. Recent changes in the economy have stimulated interest in being one's own boss. Self-employment opportunity financed in part by their severance pay or early retirement bonus. Others see colleagues and friends lose their jobs and voluntarily cut their corporate ties and choose self-employment. The entrepreneurial spirit is not limited solely to the small business. Some companies are attempting to model the activities of the entrepreneur. Intrapreneurs--people who demonstrate entrepreneurial characteristics in large organizations.

Linking Concepts to Practice

1. "Entrepreneurs are born, not made." Do you agree or disagree with the statement? Explain. Answer Entrepreneurship is the process of initiating a business venture, organizing the necessary resources, and assuming the risks and rewards. Because they usually start small, most fall within the definition of a "small business"--one that has fewer than 500 employees. Entrepreneurs both have a

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desire to be their own bosses and are sometimes forced into it due to changes in the economy that stimulated interest in being one's own boss. Corporate downsizing. Self-employment opportunity financed in part by their severance pay or early retirement bonus. Others see colleagues and friends lose their jobs and voluntarily cut their corporate ties and choose self-employment. Growing options in franchising. 2. "Continuous improvement programs include contributions from all historical management contributors." Do you agree or disagree with this statement? Discuss. Answer Continuous improvement methods is a positive start; it focuses on incremental change. Such action--a constant and permanent search to make things better--is intuitively appealing. Students may agree or disagree. If they agree, they should note things like doing this the right way, the use of empowerment, etc. 3. "Work process engineering is just a fad for organizations to reduce their payrolls and increase their profits." Do you agree or disagree with this statement? Explain. Answer Continuous improvement methods is a positive start; it focuses on incremental change. Many organizations, however, operate in an environment of rapid and dynamic change and a continuous improvement process may keep them behind the times. Incremental change may avoid facing up to the possibility that what the organization may really need is radical or quantum change, referred to as work process engineering. 4. "Coaching and empowering employees will replace the traditional management functions of planning, organizing, leading, and controlling." Do you agree or disagree with this statement? Explain. Answer Workers today are far better educated and trained than they were in Taylor's day. Managers are transforming themselves from bosses into team leaders. Managers also recognize that they can often improve quality, productivity, and employee commitment by redesigning jobs to increase the decision-making discretion of workers. We call this process empowering employees. The empowerment movement is being driven by two forces; first is the need for quick decisions by those people who are most knowledgeable about the issues; second is the reality that the large layoffs in the middle-management ranks that began in the late 1980s have left many managers with considerably more people to supervise than they had in the past. Letting go and stretching can be likened to the role of a sports team coach. 5. Discuss the implications of hiring contingent workers from both the organizational and contingent worker perspective. Answer Thousands of organizations are converting many jobs into temporary or part-time positions--giving rise to what is commonly referred to as the contingent workforce. See Exhibit 2-8. Organizations facing a rapidly changing environment must be in a position to adjust rapidly to those changes. Organizations that rely heavily on contingent workers will have greater flexibility because workers can be easily added or taken off as needed. Opportunities to capitalize on new markets, obtaining someone who possesses a special skill for a particular project, point to a need to be able to rapidly adjust staffing levels. Many employees have indicated a preference to their contingent status.

MANAGEMENT WORKSHOP TEAM SKILL-BUILDING EXERCISE: Understanding Cultural Differences

Purpose: To increase student awareness of diversity and the challenge to cooperation and understanding it may pose: Time: 1 hour outside of class, 45 minutes in class Instructions:

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1. Consider having students conduct this exercise in small groups of three to reduce the number of international students needed as subjects. 2. Contact Student Affairs or the International Students Association and discuss the exercise for making the assignment to enhance its accomplishment. 3. Identify and contact 3-5 people from a different country. The international student association or Student Affairs office should be able to help students identify the interviewees. 4. Sample questions: What country do you come from? What is your first language? Describe your country's culture in terms of, for example, form of government, emphasis on individual versus group, role of women in the workforce, benefits provided to employees, and how managers treat their employees. What were the greatest difficulties in adapting to your new culture? What advice would you give me if I had a management position in your country? 5. In groups of three to five class members, discuss your findings. Are there similarities in what each of you found? If so, what are they? Are there differences? Describe them. What implications for managing in the global village has this exercise generated for you and your group?

DEVELOPING YOUR ETHICS SKILL: Guidelines for Acting Ethically

Summary Making ethical choices can often be difficult for managers. This exercise will help students realize the difficulty in and practice making ethical decisions. Steps in Practicing the Skill 1. Study the following guidelines for enhancing your managerial abilities in acting ethically. Know your organization's policy on ethics. Understand the ethics policy. Think before you act. Ask yourself what-if questions. Seek opinions from others. Do what you truly believe is right. Practicing the Skill 1. Find a copy of your school's code of conduct or the code of ethics of any organization to which you belong. Or, obtain a copy of the code of ethics for a professional organization you hope to join after graduating. 2. Evaluate the code's provisions and policies. Are there any that you are uncomfortable with? Why? Are there any that are routinely violated? Why do you think this is happening? What are the usual consequences of such violations? Do you think they are appropriate? 3. If you had trouble obtaining the code of conduct, find out why. Under what circumstances is it normally distributed, posted, or otherwise made available to members? Teaching tips

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1. Consider providing students with a copy of the code of ethics. 2. Normally there is some form of a Honesty in Learning statement in the college catalog. 3. Place the students into small groups in class and have them evaluate and discuss the code in their group. They should pick a recorder/reporter who will offer brief responses to each question under #2 above to the class. 4. Using small groups and a reporter will help students be more honest about their concerns with the code and the reasonableness of consequences. 5. Help students understand the need for strong consequences for violations. 6. Close with a discussion of how a code should be enforced so that it is meaningful but it doesnt turn the organization (college) into Big Brother.

A CASE APPLICATION: Developing Your Diagnostic and Analytical Skills

SUMMARY Zane's Cycles, an independent bicycle shop run by its thirty-something founder, Chris Zane sells the most bikes in the New Haven, Connecticut, area. To many people, Chris Zane is the epitome of today's manager. Zane had a lot of faith in his ability to be successful. He learned all he could in college about running a business--particularly focusing on satisfying customers and implementing new and creative techniques to achieve his goals. When those two competitors went out of business, he negotiated a deal with the phone company. He agreed to pay the remainder of the two companies' Yellow Page advertising. Callers to either of those numbers heard not only, "The number you are calling is no longer in service," but also, "If you are in need of a bicycle dealer, Zane's Cycles will be happy to serve you." By pressing zero, the caller is automatically transferred to Chris! Chris recognized that he had to give the appearance of being a larger business--especially if he wanted to expand nationwide and possibly abroad. He contracted with a marketing co-op firm to develop a thirtytwo-page mail-order catalog. Although his creativity had boosted sales, Zane recognized that most of his business came from customers who visited the shop. He hired sales representatives and gave them the freedom to make whatever decisions they needed to please the customer and make a sale. But ringing up an "immediate" sale is not the primary focus. If customers need a bike part--a tire valve cap or a chain link--salespeople simply give it to them. The store also gives away cellular phones so bike riders can keep in touch with others or be prepared to make a call for assistance if needed. Zane also believes that any successful business owes its success to the community that supports it. It's a relationship that must be nurtured. Questions: 1. Identify and describe the entrepreneurial spirit exhibited by Chris Zane. How has this affected his business? Answer He exceeded customer expectations and competitors' offers. Taking over the phone numbers of defunct competitors was an act of genius. Giving salespeople the power to make decisions to make the sales. Focusing on customer needs, etc. Refer to Chapter 3 where the profile of the entrepreneur is discussed in greater detail. 2. Do you believe that Chris Zane endorses the concept that the "customer is king"? Support your position with examples. Answer Letting customers browse, giving away items under $1 to meet customer needs, hiring knowledgeable sales people who help and advise, etc.

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3. Is Chris Zane a socially responsible employer? Does you opinion change when you consider some of the socially responsible actions he takes has helped him achieve a 700 percent return on investment? Discuss. Answer Yes, hes heavily involved with the community and places the customer first. The fact he has a positive business/profit outcome does not diminish the social responsibility of his actions.

DEVELOPING YOUR INVESTIGATIVE SKILLS: Using the Internet

Visit www.prenhall.com/robbins for updated Internet exercises.

ENHANCING YOUR WRITING SKILLS: Communicating Effectively

(For ideas regarding the use of these exercises in your course, please refer to the Teaching Tips in the Preface of this Manual.) 1. Select an industrialized country. Research information about a particular business practice in that country. For instance, you might compare U.S. employment discrimination laws with laws in your selected country and the differences that may exist. Or you may want to explore the ethics of "giftgiving" to political leaders. 2. Provide a 2 to 3-page write-up on an e-commerce business (e.g., Amazon.corn; Dell, IBM) and the effect e-commerce is having on the operation of business. Emphasize the way the business has had to change to become an e-commerce business and the benefits that have accrued or are anticipated. 3. Family-friendly benefits have a tendency to be perceived as benefits that axe primarily offered to female employees. But fathers have rights, too. Research what organizations are doing to provide male employees with family-friendly benefits. In presenting your results, include a discussion on the benefits and the costs accruing to organizations from offering these benefits.

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