CHAPTER 2 - the Management Environment

Chapter 2 - The Management Environment

CHAPTER 2 – THE MANAGEMENT ENVIRONMENT

LEARNING OUTCOMES

After reading this chapter students should be able to:

1. Describethe new economy and how it’s affecting the way organizations are managed.
2. Explain globalization and its impact on organizations.
3. Discusshow society’s expectations are influencing managers and organizations.
4. Describe how the workforce is changing and its impact on the way organizations aremanaged.
5. Explainthe role that managers play in creating outstanding customer service.

Opening Vignette—Extreme Customer Service
SUMMARY
Managers at a Florida resort hotel felt that the instructional videos they used to train housekeepers on how to quickly and effectively clean guest rooms didn’t seem to have a lasting impact. So they began doing surprise inspections evaluating room cleanliness based on the video information. The $10.00 tests could either reward or detract from the employee's pay dependent upon the inspection. Hilton Hotels Corporation, its global workforce is undergoing intensive customer service training. Hilton’s director of brand education says that the company is “zeroing in on employee behaviors that provide guests with hassle-free, personalized, and informational service.” Although Hilton’s managers can’t control the external environmental changes, they can control how the company is responding to those changes. One of the biggest problems managers make today is failing to adapt to the changing world.
Teaching Notes

1. What will happen to traditional companies that don't react to the changing environment?
2. What else can companies do to thrive?

I.WHAT’S THE NEW ECONOMY LIKE?

A.Introduction

1.Organizations that are stagnant and bound by tradition are increasingly fading from the limelight.

a)Computers often took up considerable space, quite unlike the 4-pound laptop today.

B.How has the Economy Changed?

1.In the early 1980s - the U.S. economy was growing and tax rates were low.

2.Individualshad money to spend and took risks by investing in the stock market, buying homes, andstarting their own businesses.

3.The economy expanded with low inflation and interest rates.

4.This “healthy” economy encouraged aggressive spending.

5.In 2008, the economy changed dramatically with adjustable mortgages raising, the credit markets crashing and gasoline at record highs.

C.What Will the New Normal be Like?

1.U.S. economic system - based mostly oncapitalistic principles

2.Trade and industry are controlled privately, not by the government.

3.The U.S. system included a corporatemodel of ownership and organization,large-scale operations, open markets, formal organization structures withhierarchies and multiplebusiness divisions, and collective bargaining.

4.The new normal after the economy emerges from recession will includean expanded government role.

5.Regulations will also likely increase as government spending increases.

6.The public is more concerned about the budget expenditures and the overall debt.

D.How Is the New Economy Affecting Organizations?

1.“Business as usual” is a concept of the past.

2.The new economy has changed the management environment.

3.The changes will affect the management and organizational experience.

Technology and the Manager's Job
Changing and Improving the Way Managers Manage
Technology are the equipment, tools or operating processes to make work more efficient. Human labor has been replaced by electronic and computer equipment. Technology has also impacted information enabling work to be done anywhere and anytime. Management is impacted by technology while attempting to manage virtual employees and in the way they plan, organize, lead and control.

Teaching Notes

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II.WHAT IS GLOBALIZATION AND HOW DOES IT AFFECT ORGANIZATIONS?

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.

c)Exxon, a so-called American company, receives more than three fourths of its revenues from sales outside the U.S.

d)The world has become a global village.

2.To be effective in this boundaryless world, managers need to adapt.

B.What Are the Different Types of Global Organizations?

1.Multinational companies or MNCs are any type of internationalcompany that maintains operations in multiple countries.

a)Companies such as Procter &Gamble, Wal-Mart, Exxon, Coca-Cola, and Aflac areexamples.

2.Types of MNC's:

a)a multidomestic corporation - decentralizes managementand other decisions to the local country where it’s doing business.

b)global corporation - centralizes its management andother decisions in the home country.

c)transnational or borderless organization - companies that use an arrangement that eliminates artificial geographical barriers.IBM reorganized intoindustry groups.

C.How Do Organizations Go Global?

1.An organization going global typically proceeds through stages as shown in Exhibit 2-1.

2.The first step toward going international may start withglobal sourcing(also called global outsourcing),which is purchasing materials or labor from around the worldwherever it is cheapest.

3.The next step may involve exporting -making products domestically andselling them abroad.

4.An organization might do importing, or acquiring products made abroadand selling them domestically.

a)Both usually entail minimal investment and risk

5.Licensing or franchising, involve one organization giving another organization the right to use its brand name,technology, or product specifications in return for a lump sum payment or a fee.

a)This approach is used widely by pharmaceutical companies and fast-food chains.

6.Direct investments may include:

a)Aglobal strategic alliance - a partnershipbetween an organization and a foreign companypartner or partners.

b)Joint ventures are a specific type of strategic alliance in which the partners form a separate,independentorganization for some business purpose.

1)These partnerships provide a fast and less expensive way for companies to compete globally than would doing it on their own.

c)Aforeign subsidiary isa separate and independent facility or office.The greatest commitment (and risk), occurs when the organization sets up a foreign subsidiary.

D.What Do Managers Need to Know About Managingin a Global Organization?

1.Business has new markets to conquer.

a)U.S. managers in the past held a rather parochial view of the world of business.

b)Parochialism is a narrow focus.

c)Seeing things solely through their own eyes and perspectives is an ethnocentric view.

d)They believed that their business practices were the best in the world.

e)Organizational success can come from a variety of managerial practices.

f)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.

g)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.

2.Viewing the global environment from any single perspective may be potentially problematic.

3.An appropriate approach is recognizing the cultural dimensions of a country’s environment.

4.A study of the differences of cultural environments was conducted by Geert Hofstede.

From the Past to the Present
Hofstede in the 1970'2 and 1980's surveyed over 116,000 employees in forty countries—all of whom worked for IBM.
Found that managers and employees vary on five value dimensions of national culture.
1.Power distance.
2.Individualism versus collectivism.
3.Quantity of life versus quality of life.
4.Uncertainty avoidance.
5.Long-term versus short-term orientation.

5.Highlights of conclusions from Hofstede’s research.

a)China and West Africa scored high on power distance; the United States and the Netherlandsscored low.

b)Most Asian countries were more collectivist than individualistic.

c)The United States ranked highest among all countries on individualism.

d)Germany and Hong Kong rated high on quantity of life.

e)Russia and the Netherlands rated low on quantity of life.

f)On uncertainty avoidance, France and Russia were high; Hong Kong and the United States were low.

6.China and Hong Kong rated high on Long-Term Orientation while France and the U.S. rated low.

7.The Global Leadership and Organizational Behavior Effectiveness (GLOBE) researchprogram has updated Hofstede’s research.

a)Using data from 825 organizations in 62 countries, GLOBE identified 9 dimensions on which

1)national culture differ:

2)Assertiveness

3)Future orientation

4)Gender differentiation

5)Uncertainty avoidance

6)Power distance

7)Individualism/collectivism

8)In-group collectivism

9)Performance orientation

10)Humane orientation

b)See Exhibit 2-2

c)The GLOBE study confirms that Hofstede’s original dimensions are still valid, and has added some additional dimensions.

d)It also provides us with an update measure of where countries rate on each dimension.

1)For example, the United States led the world in individualism in the 1970s but today scores in the mid-ranks of countries.

e)We can expect future cross-cultural studies of human behavior to increasingly use the GLOBE dimensions to assess differences between countries.

Right or Wrong?
“Apple’s chief takes a medical leave after months of denial that hishealth is declining.
1.Should Steve Jobs be required to release more medical information.
2.What do you think? Do the heads of publicly traded firms have a right to medical privacy?
3.What ethical issues might arise in such a situation?

Teaching Notes

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III.WHAT DOES SOCIETY EXPECT FROM ORGANIZATIONS AND MANAGERS?

A.Introduction

1.The importance of corporate social responsibility (CSR) surfaced in the 1960s when the activist movement began questioning the singular economic objective of business.

2.Before the 1960s, few people asked such questions. Good arguments can be made for both sides of the social responsibility issue.

3.Managers are now regularly confronted with decisions that have a dimension of social responsibility.

4.In a globally competitive world, few organizations can afford the bad press or potential economic ramifications associated with being seen as socially irresponsible.

5.Few terms have been defined in as many different ways as social responsibility. Social responsibility can include: philanthropy, pricing, employee relations, resourceconversation, product quality, and doing business in countries with oppressive governments, etc.

6.Greenmanagement - when managers recognize and consider the impactof theirorganization and its practices on the natural environment.

a)Whole Foods Market uses wind energy for all its electricity needs.

b)Marriott International’s uses real plates and compostable potato-based containerscalled SpudWare.

7.Exhibit 2-3 shows arguments for and against CSR.

B.How Can Organizations DemonstrateSocially Responsible Actions?

1.According to 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.

2.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 responsibility and social responsiveness go beyond meeting basic economic and legal standards. This might mean respecting the community in which the company operates, treating all employees fairly, respecting the environment, supporting women and minorities, not doing business in countries where there are human rights violations, etc.

3.Social responsibility also adds an ethical imperative.

4.Social responsiveness refers to the capacity of a firm to adapt to changing societal conditions.

5.Social responsibility requires businesses to determine what is right or wrong and thus seek fundamental ethical troths.

6.Social responsiveness is guided by social norms.

C.How Can Managers Become More Ethical?

1.Ethics commonly refers to a set of rules or principles that defines right and wrongconduct.

2.Exhibit 2-4 presents three views of ethical standards.

a)Utilitarian view of ethics

b)Rights view of ethics

c)Theory of justice

3.Code of Ethics -a formal document that states an organization’s primaryvalues and the ethical rules for managers and non-managerial employees.

a)Nearly 90 percent of Fortune 1000 companies have a stated code of ethics.

4.The effectiveness of ethical codes depends heavily on whether management supports them, ingrains them into the corporate culture, and how employees who break the codes are treated.

Teaching Notes

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Developing Your Ethics Skills
About the Skill
Making ethical choices often can be difficult for managers.
Acting responsibly in gray areas, where right and wrong arenot easily defined can be difficult.
Steps in Practicing the Skill
1. Know your organization’s policy on ethics.
2. Understand the ethics policy.
3. Think before you act.
4. Ask yourself what-if questions.
5. Seek opinions from others.
6. Do what you truly believe is right.
Practicing the Skill
Find a copy of your school’s code of conduct or the codeof ethics of any organization to which you belong. Orobtain a copy of the code of ethics for a professionalorganization you hope to join after graduating. Evaluatethe code’s provisions and policies.
Are you uncomfortablewith any of the code’s provisions? Why?
Is any part of thecode routinely violated?
Why do you think these violationsoccur?
What are the usual consequences of such violations?
Do you think these consequences are appropriate?
If you had trouble obtaining the code of conduct, findout why. Under what circumstances is it normally distributed,posted, or otherwise made available to members?
Teaching Notes:
1.Why is this area so important?
2.Is it a future concern?

IV.WHAT IS TODAY’S WORKFORCE LIKE AND HOW DOES IT IMPACT THE WAY ORGANIZATIONS ARE MANAGED?

A.Introduction

1.Workforce diversityrefers to ways in which people in a workforceare similar and different from one another in terms of gender, age, race, sexualorientation, ethnicity, cultural background, and physical abilities and disabilities

2.Until very recently, managers took a “melting-pot” approach to differences in organizations.

3.They assumed that people who were different would somehow automatically want to assimilate.

4.Managers found that employees do not set aside their cultural values and lifestyle preferences when they come to work.

5.The melting-pot assumption is being replaced by the recognition and celebration of differences.

B.What Does the Work Force Look Like Today?

1.Much of the change that has occurred in the work force is attributed to the passage of U.S.

a)federal legislation in the 1960s prohibiting employment discrimination.

2.Avenues began to open up for minority and female applicants and they have become

a)the fastest growing segment in the work force.

3.Workforce trends in the first half of the twenty-first century will be notable forthree reasons:

a)changes in racial and ethnic composition,

b)an aging baby boomgeneration, and

c)an expanding cohort of Gen Y workers.

4.By 2050;

a)Hispanics willgrow from today’s 13 percent of the workforce to 24 percent;

b)Blacks will increase from12 percent to 14 percent,

c)Asians will increase from 5 percent to 11 percent.

5.The labor force is aging; Baby Boom population is also having a significant impact on the work force.

6.Referred to as the “graying of the work force,” our work force is increasingly witnessing those individuals who desire to work past “retirement” age.

a)Need to have a greater income to sustain current living standards, and

b)Desire to remain active.

7.More than 80 percent of the Baby Boom generation indicates they expect to work past 65.

8.Four generations working side-by-side:

a)The oldest, most experienced workers (those born before 1946); they make up 6 percentof the workforce.

b)The baby boomers (those born between 1946 and 1964); they make up 41.5 percentofthe workforce.

c)Generation X (those born 1965 to 1977); they make up almost 29 percent of theworkforce.

d)Gen Y (those born 1978 to 1994); they make up almost 24 percent of the workforce.

MANAGING DIVERSITY| The Paradox of Diversity
When organizations bring in diverse individuals and socialize them into the culture, a paradox is created. Managers want the new employees to accept the organization’s core cultural values and openly acknowledge, embrace, and support the diverse perspectives and ideas that the new employees bring to the workplace.
Strong organizational cultures pressure employees to conform. A manager’s challenge is to balance two conflicting goals: to encourage employees to accept the organization’s dominant values and to encourage employees to accept differences.
1.What challenges will this present?

C.How Are Organizations and Managers Adapting to a Changing Workforce?

1.Work/Life Balance Programs - Employees in the 1960s and 1970s showed up at the workplace Monday through Friday and did their job in eight- or nine-hour chunks time.

2.Today’s employees are increasingly complaining that the line between work and non-work time has become blurred, creating personal conflicts and stress.

a)The creation of global organizations means their world never sleeps.

b)Communication technology allows employees to do their work at home, in their car, or on the beach in Tahiti.

c)Organizations are asking employees to put in longer hours.

d)Fewer families have only a single breadwinner.

3.Employees are increasingly recognizing that work is squeezing out their personal lives and they want jobs that give them flexibility in their work schedules so they can bettermanage work/life conflicts.

4.Organizations are offering family friendlybenefits, with a wide range of schedulingoptions that allowemployees more flexibility at work.

5.Many large companies are converting some permanent jobs into temporary ones.

6.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 away as needed.

7.Contingent Jobs -part-time, temporary, and contractworkers who are availablefor hire on an as-needed basis.