Principles of Management, v. 1.0. Chapter 3. History, Globalization, and Values-Based Leadership.

 by Mason Carpenter, Talya Bauer, and Berrin Erdogan

Planet Earth is pretty big, but many changes taking place seem to make it a smaller place. © 2010 Jupiterimages Corporation

WHAT’S IN IT FOR ME?

Reading this chapter will help you do the following:

1.       Learn about the history of principles of management.

2.       Know the context for contemporary principles of management.

3.       Understand key global trends.

4.       See how globalization is affecting management principles and practices.

5.       Appreciate the importance of value-based leadership (ethics) in management.

The planning-organizing-leading-controlling (P-O-L-C) framework is summarized in the following figure. In this chapter, you’ll learn that some principles of management are enduring, but you’ll also see that managers need to be continually adapting to changing times. Each facet of the framework—from planning, to organizing, to leading, to controlling—has to be adapted to take advantage of, and to manage in, our changing world. Global trends affect both the style and the substance of management. As the world becomes more global, managers find themselves leading workforces that may be distributed across the country—and the world. Workers are more educated, but more is expected of them.

The P-O-L-C Framework

The realm of managers is expanding. As a leader, you’ll be a role model in the organization, setting the tone not just for what gets done buthow it gets done. Increasingly, good business practice extends to stewardship, not just of the organization but of the environment and community at large. Ethics and values-based leadership aren’t just good ideas—they’re vital to attracting talent and retaining loyal customers and business partners.

 

3.1 Ancient History: Management Through the 1990s

LEARNING OBJECTIVES

1.       Early motivation for development of principles.

2.       What problems did these principles solve?

3.       What were the limitations of these early views?

Early Management Principles

Early management principles were born of necessity. The most influential of these early principles were set forth by Henri Fayol a French mining engineer. In 1888, Fayol became director of a mining company. The company was in difficulty, but Fayol was able to turn it around and make the company profitable again. When he retired, Fayol wrote down what he’d done to save the company. He helped develop an “administrative science” and developed principles that he thought all organizations should follow if they were to run properly.

Fayol’s 14 Principles of Management

1.       Specialization/Division of Labor

By specializing in a limited set of activities, workers become more efficient and increase their output.

2.       Authority/Responsibility

Managers must have the authority to issue commands, but with that authority comes the responsibility to ensure that the work gets done.

3.       Discipline

Workers must obey orders if the business is to run smoothly. But good discipline is the result of effective leadership: workers must understand the rules and management should use penalties judiciously if workers violate the rules.

4.       Unity of Command

An employee should receive orders only from one boss to avoid conflicting instructions.

5.       Unity of Direction

Each unit or group has only one boss and follows one plan so that work is coordinated.

6.       Subordination of Individual Interest

The interests of one person should never take precedence over what is best for the company as a whole.

7.       Remuneration

Workers must be fairly paid for their services.

8.      Centralization

Centralization refers to decision making: specifically, whether decisions are centralized (made by management) or decentralized (made by employees). Fayol believed that whether a company should centralize or decentralize its decision making depended on the company’s situation and the quality of its workers.

9.       Line of Authority

The line of authority moves from top management down to the lowest ranks. This hierarchy is necessary for unity of command, but communication can also occur laterally if the bosses are kept aware of it. The line should not be overextended or have too many levels.

10.   Order

Orderliness refers both to the environment and materials as well as to the policies and rules. People and materials should be in the right place at the right time.

11.    Equity

Fairness (equity), dignity, and respect should pervade the organization. Bosses must treat employees well, with a “combination of kindliness and justice.”

12.    Stability of Tenure

Organizations do best when tenure is high (i.e., turnover is low). People need time to learn their jobs, and stability promotes loyalty. High employee turnover is inefficient.

13.    Initiative

Allowing everyone in the organization the right to create plans and carry them out will make them more enthusiastic and will encourage them to work harder.

14.    Esprit de Corps

Harmony and team spirit across the organization builds morale and unity.

Time and Motion

Today, coal is mined and moved by heavy machinery like this coal lift. In Taylor’s time, it was moved by shovel to rail cars or trucks. © 2010 Jupiterimages Corporation

Frederick Winslow Taylor, a contemporary of Fayol’s, formalized the principles of scientific management in his 1911 book, The Principles of Scientific Management. Taylor described how productivity could be greatly improved by applying the scientific method to management; for this reason, the scientific approach is sometimes referred to as Taylorism.

Taylor is most famous for his “time studies,” in which he used a stopwatch to time how long it took a worker to perform a task, such as shoveling coal or moving heavy loads. Then he experimented with different ways to do the tasks to save time. Sometimes the improvement came from better tools. For example, Taylor devised the “science of shoveling,” in which he conducted time studies to determine how much weight a worker could lift with a shovel without tiring. He determined that 21 pounds was the optimal weight. But since the employer expected each worker to bring his own shovel, and there were different materials to be shoveled on the job, it was hard to ensure that 21-pound optimum. So, Taylor provided workers with the optimal shovel for each density of materials, like coal, dirt, snow, and so on. With these optimal shovels, workers became three or four times more productive, and they were rewarded with pay increases.

Frank Gilbreth and his wife, Lillian Moller Gilbreth (who outlived Frank by 48 years!), were associates of Taylor and were likewise interested in standardization of work to improve productivity. ^[1] They went one better on Taylor’s time studies, devising “motion studies” by photographing the individual movements of each worker (they attached lights to workers’ hands and photographed their motions at slow speeds). The Gilbreths then carefully analyzed the motions and removed unnecessary ones. These motion studies were preceded by timing each task, so the studies were called “time and motion studies.”

Applying time and motion studies to bricklaying, for example, the Gilbreths devised a way for workers to lay bricks that eliminated wasted motion and raised their productivity from 1,000 bricks per day to 2,700 bricks per day. Frank Gilbreth applied the same technique to personal tasks, like coming up with “the best way to get dressed in the morning.” He suggested the best way to button the waistcoat, for example, was from bottom up rather than top down. Why? Because then a man could straighten his tie in the same motion, rather than having to raise his hands back up from the bottom of the waistcoat.

Limitations of the Early Views

Fayol, Taylor, and the Gilbreths all addressed productivity improvement and how to run an organization smoothly. But those views presumed that managers were overseeing manual labor tasks. As work began to require less manual labor and more knowledge work, the principles they had developed became less effective. Worse, the principles of Taylorism tended to dehumanize workers. The writer Upton Sinclair who raised awareness of deplorable working conditions in the meatpacking industry in his 1906 book, The Jungle, was one of Taylor’s vocal critics. Sinclair pointed out the relatively small increase in pay (61%) that workers received compared with their increased productivity (362%). Frederick Taylor answered Sinclair’s criticism, saying that workers should not get the full benefit because it was management that devised and taught the workers to produce more. But Taylor’s own words compare workers to beasts of burden: The worker is “not an extraordinary man difficult to find; he is merely a man more or less the type of an ox, heavy both mentally and physically.” ^[2]

When work was manual, it made sense for a manager to observe workers doing a task and to devise the most efficient motions and tools to do that task. As we moved from a manufacturing society to a service-based one, that kind of analysis had less relevance. Managers can’t see inside the head of a software engineer to devise the fastest way to write code. Effective software programming depends on knowledge work, not typing speed.

Likewise, a services-based economy requires interactions between employees and customers. Employees have to be able to improvise, and they have to be motivated and happy if they are to serve the customer in a friendly way. Therefore, new management theories were developed to address the new world of management and overcome the shortcomings of the early views.

Finally, early views of management were heavily oriented toward efficiency, at the expense of attention to the manager-as-leader. That is, a manager basically directs resources to complete predetermined goals or projects. For example, a manager may engage in hiring, training, and scheduling employees to accomplish work in the most efficient and cost-effective manner possible. A manager is considered a failure if he or she is not able to complete the project or goals with efficiency or when the cost becomes too high. However, a leader within a company develops individuals to complete predetermined goals and projects. A leader develops relationships with his or her employees by building communication, by evoking images of success, and by eliciting loyalty. Thus, later views of management evoke notions of leaders and leadership in discussing the challenges and opportunities for modern managers.

Management Ideas of the 1990s

Peter Drucker was the first scholar to write about how to manage knowledge workers, with his earliest work appearing in 1969. Drucker addressed topics like management of professionals, the discipline of entrepreneurship and innovation, and how people make decisions. In 1982,Tom Peters and Robert Waterman wrote In Search of Excellence, which became an international best seller and ushered a business revolution by changing the way managers viewed their relationships with employees and customers. On the basis of the authors’ research focusing on 43 of America’s most successful companies in six major industries, the book introduced nine principles of management that are embodied in excellent organizations:

1.       Managing Ambiguity and Paradox

The ability of managers to hold two opposing ideas in mind at the same time and still be able to function effectively.

2.       A Bias for Action

A culture of impatience with lethargy and inertia that otherwise leaves organizations unresponsive.

3.       Close to the Customer

Staying close to the customer to understand and anticipate customer needs and wants.

4.       Autonomy and Entrepreneurship

Actions that foster innovation and nurture customer and product champions.

5.       Productivity through People

Treating rank-and-file employees as a source of quality.

6.       Hands-On, Value-Driven

A management philosophy that guides everyday practice and shows management’s commitment.

7.       Stick to the Knitting

Stay with what you do well and the businesses you know best.

8.      Simple Form, Lean Staff

The best companies have very minimal, lean headquarters staff.

9.       Simultaneous Loose-Tight Properties ^[3]

Autonomy in shop-floor activities plus centralized values.

Following up, Peters wrote a Passion for Excellence, which placed further emphasis on leadership, innovation, and valuing people. His bookThriving on Chaos, published the day of the biggest stock market crash of the time (“Black Monday,” October 19, 1987), addressed the uncertainty of the times; and Liberation Management, published in 1992, laid out 45 prescriptions for how to lead companies in a rapidly changing world. The book called for empowering people by involving everyone in decision making and eliminating bureaucratic rules and humiliating conditions. Peters urged organizational leaders (i.e., managers) to celebrate and recognize employees for their contributions. His advice to leaders was to “master paradox” (i.e., develop a level of comfort with complexity and ambiguity) and establish direction for the company by developing an inspiring vision and leading by example.

Beginning in the 1970s, Warren Bennis pioneered a new theory of leadership that addressed the need for leaders to have vision and to communicate that vision. More than just a manager, an effective leader was defined as someone with the ability to influence and motivate others not only to perform work tasks but also to support the organization’s values and meet the organization’s goals. Different views of leadership through the ages are shown next.

Views of Leadership Through the Ages

A leader is a dealer in hope.

—Napoleon

I suppose that leadership at one time meant muscle; but today it means getting along with people.

—Mahatma Gandhi

What leaders really do: set direction, align people, and motivate people.

—John Kotter ^[4]

KEY TAKEAWAY

Early management theorists developed principles for managing organizations that suited the times. A century ago, few workers were highly educated; most work was manual, tasks were repetitive, and rates of change were slow. Hierarchy brought unity and control, and principles of management in which managers defined tasks and coordinated workers to move in a unified direction made sense. As the economy moved from manufacturing to services, the need for engaging workers’ minds and hearts became more important. Drucker, Peters, and Waterman presented ideas on how managers could achieve excellence in a continually changing business environment, while Bennis encouraged managers to become inspiring leaders who empowered people.

EXERCISES

1.       What goals seem to dominate early management principles?

2.       Do you see any commonalities between Fayol’s principles of management from 1911 and those of Tom Peters in the 1990s?

3.       Are there any jobs today for which time and motion studies would make sense to do? Would any other skills need to be taught as well?

4.       What do early management principles leave out?

5.       How would you put some of the ideas of the 1990s into practice?

6.       What aspects of P-O-L-C would be most likely to change based on what you have learned in this section?

 

3.2 Contemporary Principles of Management

LEARNING OBJECTIVES

1.       Recognize organizations as social movements.

2.       Understand the benefits of social networking.

3.       Recognize learning organizations.

4.       Understand virtual organizations.

Corporations as Social Movements

Traditionally, we’ve thought of corporations as organizations that had clear boundaries, formal procedures, and well-defined authority structures. In contrast, social movements are seen as more spontaneous and fluid. The term social movement refers to a type of group action that is focused on specific political or social issues; examples include the civil rights movement, the feminist movement, and the gay rights movement. Leaders of social movements depend on charisma rather than authority to motivate participants to action. Contemporary management theory, however, is showing that the lines between the two are blurring: corporations are becoming more like social movements, and social movements are taking on more permanence. Just as companies are outsourcing specific jobs, so social movements can contract out tasks like lobbying and fundraising.

We are more connected, at least virtually, than ever before. © 2010 Jupiterimages Corporation

Corporations can implement initiatives that mimic a social movement. Consider how the CEO of one bank described a program he introduced: “The hierarchical management structure will give way to some collective activities that will improve our effectiveness in the marketplace. Decisions won’t flow from a management level to people on the line who are expected to implement those decisions.…We’re telling everyone, choose a process, figure out what and where the problems are, work together to come up with solutions, and then put your solutions to work.” ^[1] Thus, more and more leading businesses are harnessing the mechanics of social movements to improve how they will manage their businesses in the future.

Social Networking

Social networking refers to systems that allow members of a specific site to learn about other members’ skills, talents, knowledge, or preferences. Companies use these systems internally to help identify experts.

In the world, at large, social networks are groups of individuals who share a common interest or passion. Poker players, dog lovers, and high school alumni are a few examples of social networks in action. In the corporate world, a social network is made up of individuals who share an employer and, potentially, other interests as well. But in the pre-Internet age, managers lacked the tools to recognize or tap the business value of in-house social networks. The company softball team was a social network, sure. But what did that have to do with the bottom line?

Today, social networks are starting points for corporate innovation: potentially limitless arrangements of individuals inspired by opportunities, affinities, or tasks. People feel better and work better when they belong to a group of other people like themselves. ^[2] This new attitude toward social networks in the workplace has been fueled by the growth of social networking sites like Facebook.

Facebook was started by then-college student Mark Zuckerberg in 2004 as a way of connecting a social network—specifically, university students. Since then, Facebook has changed the way organizations connect as well. Some companies maintain a physical presence on Facebook that allows consumers to chime in about their passions (or lack of them) for corporate offerings, news, and products. Starbucks has adopted this model, asking consumers to help them revive their product lines and image.

As Zuckerberg told the Wall Street Journal, “We just want to share information more efficiently.” ^[3] And, in the information age, that’s what social networks do best. Companies are applying the online social networking model of open and closed groups to their corporate intranets, creating secure sites for employees in different locations to collaborate on projects based on common interests, management directives, and incentives. For example, IBM’s pilot virtual world will let Big Blue employees use chat, instant messaging, and voice communication programs while also connecting to user-generated content in the public spaces of Second Life, another large social networking site. IBM also opened a virtual sales center in Second Life and, separately from the Second Life partnership, is building an internal virtual world where work groups can have meetings.

The use of online social networking principles can open the door to outside collaborations. For example, Netflix offered a million-dollar reward to anyone in the company’s social network of interested inventors who could improve the algorithm that matches movie lovers to new titles they might enjoy. Companies like Procter & Gamble and InnoCentive are tapping social networks of scientists to improve their products.

Social networks fueled by passion can help managers retain, motivate, and educate staff. They might even help Facebook’s Mark Zuckerberg with an in-house dilemma as his company grows. According to the Wall Street Journal, the world’s most dynamic social networking site has “little management experience.”

Learning Organizations

In a 1993 article, Harvard Business School professor David Garvin defined a learning organization as “an organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights.” ^[4] The five building blocks of learning organizations are

1.       Systematic problem solving: The company must have a consistent method for solving problems, using data and statistical tools rather than assumptions.

2.       Experimentation: Experiments are a way to test ideas in small steps. Experiments let companies hunt for and test new knowledge, such as new ways of recycling waste or of structuring an incentive program.

3.       Learning from past experience: It’s essential for companies to review projects and products to learn what worked and what didn’t. Boeing, for example, systematically gathered hundreds of “lessons learned” from previous airplane models, such as the 737 and 747, which it applied to the 757s and 767s, making those the most successful, error-free launches in Boeing’s history.

4.       Learning from others: Recognizing that good ideas come from anywhere, not just inside the company, learning organizations network with other companies in a continual search for good ideas to adapt and adopt.

5.       Transferring knowledge: Sharing knowledge quickly throughout the organization is the way to make everyone a smart, contributing member.

Virtual Organizations

A virtual organization is one in which employees work remotely—sometimes within the same city, but more often across a country and across national borders. The company relies on computer and telecommunications technologies instead of physical presence for communication between employees. E-mail, wikis, Web meetings (i.e., like Webex or GoToMeeting), phone, and Internet relay chat (IRC) are used extensively to keep everyone in touch. Virtual companies present special leadership challenges because it’s essential for leaders to keep people informed of what they are supposed to be doing and what other arms of the organization are doing. Communication in a commons area is preferable to one-on-one communication because it keeps everyone up to speed and promotes learning across the organization.

The Value of Wikis

Wikis provide companies with a number of benefits: ^[5]

·         Wikis pool the talent of experts as well as everyone from across the company and beyond it—in all time zones and geographic locations.

·         Input from unanticipated people brings fresh ideas and unexpected connections.

·         Wikis let people contribute to a project any time, giving them flexibility in managing their time.

·         It’s easy to see the evolution of an idea, and new people can get up to speed quickly by seeing the history of the project.

·         Co-creation of solutions eliminates the need to “sell” those solutions to get buy-in.

·         Wikis cut the need for e-mail by 75% and the need for meetings by 50%.

With more and more companies outsourcing work to other countries, managers are turning to tools like wikis to structure project work globally. A wiki is a way for many people to collaborate and contribute to an online document or discussion (see “The Value of Wikis”). The document remains available for people to access anytime. The most famous example is Wikipedia. A wikified organization puts information into everyone’s hands. Managers don’t just talk about empowering workers—the access to information and communication empowers workers directly. People who are passionate about an idea can tap into the network to make the idea happen. Customers, too, can rally around an issue and contribute their opinions.

Many companies that are not solely virtual use the principles of a virtual organization as a way to structure the work of globally distributed teams. VeriFone, one of the largest providers of electronic payment systems worldwide, has development teams working on software projects around the world. In what the company calls a “relay race,” developers in Dallas working on a rush project send unfinished work at quitting time to another development center in Laupahoehoe, Hawaii. When the sun sets there, the project is handed off to programmers in Bangalore, India, for further work, and by morning, it’s back in Dallas, 16 hours closer to completion. Similarly, midwestern Paper Converting Machine Co. (PCMC) outsourced some design work to Chennai, India. Having U.S. and Indian designers collaborate 24/7 has helped PCMC slash development costs and time, enabling the company to stay in business, according to CEO Robert Chapman. Chapman said, ““We can compete and create great American jobs, but not without offshoring.” ^[6]

Virtual organizations also pose management challenges. In practical terms, if everyone is empowered to be a decision maker but various people disagree, how can decisions be made? If all workers can work at the times they choose, how can management be sure that workers are doing their work—as opposed to reading Web sites for fun, shopping, or networking with friends—and that they are taking appropriate breaks from work to avoid burnout? There are also challenges related to the virtual environment’s dependence on computers and Web security.

KEY TAKEAWAY

In today’s fast-changing world, organizations are becoming more like social movements, with more fluid boundaries and more participation in leadership across all levels. Social networks within corporations let employees find out about one another and access the people who have the skills, knowledge, or connections to get the job done. Continuous learning is important, not just for individuals but for organizations as a whole, to transfer knowledge and try out new ideas as the pace of change increases. Virtual organizations can speed up cycle time, but they pose new challenges for managers on how to manage remote workers. Communications technologies and the Web let employees work from anywhere—around the corner or around the world—and require special attention to managing communication.

EXERCISES

1.       What commonalities do you see between organizations and social movements?

2.       How would you use a social network to solve a work-related task?

3.       Why do social networks inspire employees?

4.       How do social networks help managers plan, organize, lead, and control?

5.       What steps would you take to help your organization become a learning organization?

6.       What are the advantages of a virtual organization?

7.       What aspects of P-O-L-C would be most likely to change based on what you have learned in this section?

[1] Davis, G. F., McAdam, D., Scott, W. R., & Zald, M. N. (Eds.). (2005). Social Movements and Organization Theory. Cambridge Studies in Contentious Politics. Cambridge, UK: Cambridge University Press, 283.

[2] Rummler, L. (2007, July). Corporate social networking updates definition of women’s groups. Retrieved January 28, 2009, fromhttp://www.talentmgt.com/newsletters/recruitment_perspectives/2007/July/380/index.php.

[3] Vara, V. (2007, May 21). Facebook opens its pages as a way to fuel growth. Wall Street Journal. Retrieved January 28, 2009, fromhttp://online.wsj.com/public/article/SB117971397890009177-wjdKPmjAqS_9ZZbwiRp_CoSqvwQ_20070620.html.

[4] Garvin, D. (1993, July–August). Building a learning organization. Harvard Business Review, 78–91.

[5] Tapscott, A., & A. D. Williams. (2006). Wikinomics: How Mass Collaboration Changes Everything. New York: Portfolio.

[6] Engardio, P. (2006, January 30). The future of outsourcing. BusinessWeek.

 

3.3 Global Trends

LEARNING OBJECTIVES

1.       What are the top 10 ways that the world is changing?

2.       What is the pace of these changes?

As the summary “Top Trends” suggests, we are living in exciting times, and you’re at the forefront of it. The world is changing in dramatic ways, and as a manager, you’re in the best position to take advantage of these changes. Let’s look at 10 major ways in which the world is changing; we’ll characterize the first five as challenges and the next five as solutions.

Top Trends

Top 5 Challenge Trends

1.       Increasing Concern for the Environment

2.       Greater Personalization and Customization

3.       Faster Pace of Innovation

4.       Increasing Complexity

5.       Increasing Competition for Talent

Top 5 Solution Trends

6.       Becoming More Connected

7.       Becoming More Global

8.       Becoming More Mobile

9.       Rise of the Creative Class

10.    Increasing Collaboration

Top 5 Challenge Trends

Increasing Concern for the Environment

We all seem to believe that the weather has been getting weirder in recent decades, and analysis by the National Oceanic and Atmospheric Administration (NOAA) suggests that there have been more catastrophic weather events in recent years than 10–20 years ago. ^[1] People are seeing the growing threat of global warming, which is leading to failing crops, rising sea levels, shortages of drinking water, and increasing death tolls from disease outbreaks such as malaria and dengue fever. Currently, 175 nations have signed the Kyoto Protocol on climate change and pledged to begin the long process of reducing greenhouse gas emissions. According to McKinsey’s Global Survey of Business Executives, executives across the world believe that business plays a wider role in society and has responsibility to address issues such as environmental concerns beyond just following the letter of the law to minimize pollution. More and more companies now watch the “triple bottom line”—the benchmark of how they benefit, not just (1) profits but also (2) employees and (3) the environment as a whole. Companies realize they have to take bold steps to minimize their carbon footprint, create environmentally friendly products, and manage the company for more than just the next quarter’s profits. Managers can’t simply “greenwash” (pretend to be green through tiny steps and heavy advertising).

Wind power is a high-growth business that takes advantage of increasing interest in sustainable energy sources. © 2010 Jupiterimages Corporation

Greater Personalization and Customization

We’re no longer happy with cookie-cutter products. Consumers are demanding more say in products and services. One size no longer fits all, and that means tailoring products and services to meet specific customer preferences. And as companies sell their products globally, that tailoring has to meet vastly different needs, cultural sensitivities, and income levels. Even something simple such as Tide laundry detergent can come in hundreds of potential variants in terms of formulations (powders, liquids, tablets), additives (whiteners, softeners, enzymes), fragrances (unscented, mountain fresh, floral), and package sizes (from single-load laundromat sizes to massive family/economy sizes). Customization and the growing numbers of products mean managing more services and more products. For example, for just $4.99 plus shipping, you can create your own Kleenex oval tissue box! ^[2] Managing for mass production won’t suffice in the future.

Faster Pace of Innovation

We all want the next new thing, and we want it now. New models, new products, and new variations—companies are speeding new products to market in response to customer demands. The Finland-based mobile phone maker Nokia sells 150 different devices, of which 50–60 are newly introduced each year. The new variations are tailored to local languages, case colors, carriers, add-ons, and content. David Glazer, engineering director at Google, explained how his company adapts to this fast pace: “Google has a high tolerance for chaos and ambiguity. When we started OpenSocial [a universal platform for social-network applications], we didn’t know what the outcome was going to be.” So Google started running a bunch of experiments. “We set an operational tempo: when in doubt, do something,” Glazer said, “If you have two paths and you’re not sure which is right, take the fastest path.” ^[3]

Increasing Complexity

Because we want more sustainability, more customization, and more innovation, companies face growing complexity. Nokia’s 50–60 new phone models a year all have 300–400 components, some of which contain millions or hundreds of millions of transistors. Those components have to arrive at the right manufacturing location (Nokia has 10 worldwide) from whichever country they originated and arrive just in time to be manufactured.

Increasing Competition for Talent

We need people who can solve all these tough problems, and that’s a challenge all by itself. According to McKinsey’s global survey of trends, business executives think that this trend, among all trends, will have the greatest effect on their companies in the next five years. Jobs are also getting more complex. Consider people who work in warehouses doing shipping and receiving. At Intel, these workers were jokingly called “knuckle-dragging box pushers” and known for using their brawn to move boxes. Now, the field of transportation and shipping has become known as “supply chain management” and employees need brains as well as brawn—they need to know science and advanced math. They’re called on to do mathematical models of transportation networks to find the most efficient trucking routes (to minimize environmental impact) and to load the truck for balance (to minimize fuel use) and for speed of unloading at each destination. Intel now acknowledges the skills that supply chain people need. The company created a career ladder leading to “supply chain master” that recognizes employees for developing expertise in supply chain modeling, statistics, risk management, and transportation planning. Overall, demand will grow for new types of talent such as in the green energy industry. At the same time, companies face a shrinking supply of seasoned managers as baby boomers retire in droves. Companies will have to deal with shortages of specific skills.

Top 5 Solution Trends

Becoming More Connected

We can now use the Internet and World Wide Web to connect people with people as never before. By mid-2008, more than 1.4 billion people were online, and that number continues to increase each year as the developing world catches up with the developed world on Internet usage.^[4] Through over a 100 million Web sites, we can access information, words, sounds, pictures, and video with an ease previously unimaginable.

Becoming More Global

We can now tap into more global suppliers and global talent. Whatever problem a manager faces, someone in the world probably has the innovative products, the knowledge, or the talent to address the problem. And the Internet gives managers to the tools to help problems find solutions, customers find suppliers, and innovators find markets. The global problems we face will require people to work together to solve them. Ideas need to be shaped and implemented. Moving ideas around the world is a lot less costly and generates less greenhouse gases than moving people and products around the world. Organizations and social movements alike are using social networking to help people find others with the skills and talents to solve pressing problems.

Becoming More Mobile

We can now reach employees, suppliers, and customers wherever they are. By the end of 2008, 60% of the world’s population—4 billion people—were using mobile phones. ^[5] And, like Internet use, mobile phone adoption continues to grow. The penetration of mobile phones is changing the way we do business because people are more connected and able to share more information. Two-way, real-time dialogue and collaboration are available to people anytime, anywhere. The low cost of phones compared with computers puts them in the hands of more people around the world, and the increasing sophistication of software and services for the phone expands its use in business settings. Phones are not just a voice communication device—they can send text as well as be a connective device to send data. The fastest mobile phone growth is in developing countries, bringing connectivity to the remotest regions. Fisherman off the coast of southern India can now call around to prospective buyers of their catch before they go ashore, which is increasing their profits by 8% while actually lowering the overall price consumers have to pay for fish by 4%. ^[6] In South Africa, 85% of small black-owned businesses rely solely on mobile phones. Nokia has 120,000 outlets selling phones in India, where half the population lives in rural areas, not cities.

Rise of the Creative Class

With blogs, Flickr, and YouTube, anyone can post their creative efforts. And with open source and wikis, anyone can contribute ideas and insights. We have ubiquitous opportunities for creativity that are nurturing a new creative class. For example, OhmyNews, a popular newspaper, is written by 60,000 contributing “citizen reporters.” It has become one of South Korea’s most influential news sources, with more than 750,000 unique users a day. ^[7] The demand for workers and ability for workers to work from anywhere may lead to an “e-lance economy.” Workers may become free agents, working temporarily on one project and then moving to another when that project is done. Mobile connectivity means these new workers can live anywhere in the world and can work from anywhere in their community. For you as a manager, this means managing workers who might be in a cubicle in Columbus, Ohio, an apartment in Amsterdam, or an Internet café in Bangalore.

Increasing Collaboration

These solution trends combine to foster a rise in collaboration across space and time. We can now bring more people together to solve more problems more quickly. To design new products quickly—and make sure they meet consumer needs—companies are now looking beyond their four walls for innovation. Google, for example, identifies itself as an organization that believes in open, decentralized innovation. “Google can’t do everything. And we shouldn’t,” said Andy Rubin, senior director of Mobile Platforms. “That’s why we formed the Open Handset Alliance with more than 34 partners.” ^[8] While the handset alliance is about open cell phones (i.e., phones that aren’t tied to any particular phone company and can be programmed by users just like Apple or Palm’s “apps”), collaboration means much more than communications. People can now not just communicate but actually collaborate, building coalitions, projects, and products. ^[9] Groups self-organize on the Web. For example, the MIT-based Vehicle Design Summit is virtual, so students from around the world can participate. The goal is to make a low-cost, 200-mpg four-seater for the Indian market; in 2008, about 200 students participated in this international open-source project. ^[10] A cross section of more trend predictions follows.

Trends, Trends, Trends

It seems that trend-tracking has become somewhat of a business. Glance over these top trends from the editors of Wired, McKinsey Quarterly, and USA Today.

Wired 2008 Business Trends

1.       Open Source Tycoons

2.       Social Networks Grow Up

3.       Green on the Outside

4.       Invisible Internet

5.       Rise of the Instapreneur

6.       Building a Better Banner

7.       Invented in China

8.       VCs Look for a New Life

9.       The Human Touch ^[11]

Top business trends likely to have the greatest effect on business over the next five years

1.       Competition for talent will intensify, become more global.

2.       Centers of economic activity will shift globally, regionally.

3.       Technological connectivity will increase.

4.       Ubiquitous access to information will change economics of knowledge.

5.       Demand for natural resources will grow, as will strain on environment.

6.       Population in developed economies will age.

7.       Consumer landscape will change, expand significantly.

8.       Role, behavior of business will come under increasing scrutiny.

9.       Organizations will become larger, more complex.

10.    New global industry structures will emerge (e.g., private equity, networked). ^[12]

Countdown of the biggest trends in small business

1.       Web 2.0

2.       Rise of e-marketing

3.       Little is the new big

4.       The new consumer

5.       Fragmentation

6.       The world is getting flatter

7.       Personalization

8.       Work anywhere, any place

9.       Global warming may put you out of business ^[13]

KEY TAKEAWAY

Today’s world faces many challenges, from the need to protect the natural environment to the rapid pace of innovation and change. Technological connectivity is bringing the world closer together and enabling people to work from anywhere. Demand for talent and low-cost workers gives rise to outsourcing and employees working remotely, whether from home or from remote different countries. At the same time, information is now available to more and more people. This drives demand for personalization. It increases complexity but at the same time gives us the collaboration tools needed to solve tough problems.

EXERCISES

1.       How do you manage innovation if ideas can come from anywhere, including people who aren’t your direct employees—or aren’t even part of the company?

2.       If, according to some trends, you can work anytime and anywhere, how do you decide when to work? When do you stop working?

3.       What advantages do you see from a global workforce?

4.       What commonalities do you see across the trends presented in “Trends, Trends, Trends”?

5.       Which of the trends depend on technology?

6.       What aspects of P-O-L-C would be most likely to change based on what you have learned in this section?

[1] Retrieved October 7, 2008, from http://www.ncdc.noaa.gov/oa/climate/severeweather/extremes.html.

[2] Retrieved October 13, 2008, from http://www.mykleenextissue.com/?WT.srch=1&WT.mc_id=5659768&iq_id=5659768.

[3] Fast company. (2008, March). Retrieved January 28, 2009, from http://www.fastcompany.com/magazine/123/google.html.

[4] Retrieved October 7, 2000, from http://www.internetworldstats.com/stats.htm.

[5] Retrieved October 13, 2008, from http://www.itu.int/newsroom/press_releases/2008/29.html.

[6] Corbett, S. (2008, April 13). Can the cellphone help end global poverty? New York Times.

[7] Hua, V. (2007, March 27). South Korea: Everyone’s a Journalist. http://www.pbs.org/frontlineworld/rough/2007/03/south_korea.html; Schonfeld, & Yi-Wyn Yen. It’s a Web, Web, Web 2.0 world. Business 2.0 Magazinehttp://money.cnn.com/galleries/2007/biz2/0707/gallery.web_world.biz2/14.html.

[8] Fast company. (2008, March). Retrieved January 28, 2009, from http://www.fastcompany.com/magazine/123/google.html.

[9] Friedman, T. (2005). The World Is Flat: A Brief History of the Twenty-first Century. New York: Farrar, Straus & Giroux, 81.

[10] Retrieved April 2008 from http://www.fastcompany.com/magazine/124/the-amazing-race.html.

[11] Wired. (2008, March). http://www.wired.com/techbiz/it/magazine/16–04/bz_opensource.

[12] The organizational challenges of global trends: A McKinsey Global Survey. (2007, November). McKinsey Quarterly. http://www.mckinseyquarterly.com/

[13] Retrieved January 28, 2009, from http://www.usatoday.com/money/smallbusiness/columnist/strauss/2007-01-07-trends-2_x.htm.

 

3.4 Globalization and Principles of Management

LEARNING OBJECTIVES

1.       Why might global trends influence management principles?

2.       What is the GLOBE project, and why is it relevant to management?

3.       What is a cultural dimension, and how do cultural dimensions affect business dealings and management decisions?

Globalization and Cross-Cultural Lessons

Despite the growing importance of global business, Fortune 500 companies have reported a shortage of global managers with the necessary skills. ^[1] Some experts have argued that most U.S. companies are not positioned to implement global strategies due to a lack of global leadership capabilities. ^[2]

It’s easy to understand the problem: communicating and working with people from different countries can be a challenge—not just because of language issues but also because of different cultural norms. For example, in the United States, we tend to be direct in our communication. If you ask a U.S. manager a question, you’ll tend to get a direct answer. In other cultures, particularly in southern Europe and Japan, the answer to a question begins with background and context—not the bottom line—so that the listener will understand how the person arrived at the conclusion. Similarly, in some cultures, it is considered rude to deliver bad news or say “no” to a request—instead, the speaker would give a noncommittal answer like “we’ll see” or “we’ll try.”

Our places of work are more diverse than ever before. © 2010 Jupiterimages Corporation

Country-by-country differences are so prevalent that a worldwide team of scholars proposed to create and validate a theory of the relationship between culture and societal, organizational, and leadership effectiveness. Called the GLOBE Project, it included 170 researchers working together for ten years to collect and analyze data on cultural values and practices and leadership attributes from more than 17,000 managers in 62 societal cultures. In its 2006 report, GLOBE identified the following nine dimensions of culture. ^[3]

Performance Orientation

Should you reward people for performance improvement and excellence? In countries like the United States and Singapore, the answer is yes. Organizations in these countries use employee training and development to help people improve their skills and performance. In countries like Russia and Greece, however, family and background count for more than performance.

Uncertainty Avoidance

Life often brings unpredictable events, and with them anxiety. Uncertainty avoidance reflects the extent to which members of a society attempt to cope with anxiety by minimizing uncertainty. Should you establish rules, procedures, and social norms to help your employees deal with uncertainty? In countries where uncertainty avoidance is high, like Brazil and Switzerland, the answer is yes. People in such societies want strict rules, laws, and policies to eliminate or control the unexpected. Employees in these countries tend to seek order, consistency, and structure. Countries with low uncertainty avoidance, in contrast, are less rule-oriented. They tolerate a variety of opinions and are open to change and taking risks. Countries with low uncertainty avoidance include Hong Kong and Malaysia.

Assertiveness

How assertive, confrontational, or aggressive should you be in relationships with others? In highly assertive countries like the United States and Austria, competition between individuals and groups is encouraged. Managers may set up incentives that reward the best idea, even it it’s contrary to established practices. People in less assertive countries, like Sweden and New Zealand, prefer harmony in relationships and emphasize loyalty and solidarity.

Power Distance

Power distance reflects the extent to which the less powerful members of institutions and organizations expect and accept that power is distributed unequally. Should you distribute decision-making power equally among the group? In high-power-distance countries like Thailand, Brazil, and France, the answer is no. People in these societies expect unequal power distribution and greater stratification, whether that stratification is economic, social, or political. People in positions of authority in these countries expect (and receive) obedience. Decision making is hierarchical with limited participation and communication. Australia, in contrast, has a power distance rating that is much lower than the world average. The Australian view reinforces cooperative interaction across power levels and stresses equality and opportunity for everyone.

Gender Egalitarianism

Should you promote men rather than women? Counties with low gender egalitarianism are male dominated. Men hold positions of power to a much greater extent in low-gender-egalitarianism countries like Egypt and South Korea. Companies operating in more gender-egalitarian countries such as the Nordic countries, Germany, and the Netherlands encourage tolerance for diversity of ideas and roles regardless of gender.

Institutional Collectivism

Institutional collectivism refers to the extent to which people act predominantly as a member of a lifelong group or organization. Should you reward groups rather than individuals? In countries with high institutional collectivism such as Sweden, the answer is yes. Countries with low institutional collectivism, such as in the United States, emphasize individual achievement and rewards.

Humane Orientation

Should you reward people for being fair, altruistic, generous, and kind to others? In countries such as Malaysia, this practice is more prevalent and encouraged than in low-humane-orientation countries such as Germany.

Future Orientation

Will your employees favor activities that involve planning and investing in the future for long-term payoff? Or do they want to see short-term results? Future orientation is defined as one’s expectations and the degree to which one is thoughtful about the future. It is a multifaceted concept that includes planning, realism, and a sense of control. Companies in countries with high future orientation, such as China and Singapore, will have a longer-term planning horizon, and they will be more systematic about planning. Corporations in countries that are the least future-oriented, such as Argentina and Russia, will be more opportunistic and less systematic. At the same time, they’ll be less risk averse.

Global Ventures Gone Awry

When Corning proposed a joint venture with a Mexican glass manufacturer, Vitro, the match seemed made in heaven. But just two years later, the venture was terminated. What happened? Cultural clashes eroded what could have been a lucrative partnership. To start, American managers were continually frustrated with what they perceived to be slow decision making by Mexican managers. Mexico ranks higher on the power distance dimension than the United States—company structures are hierarchical, and decisions are made only by top managers. Loyalty to these managers is a high priority in Mexico, and trying to work around them is a big taboo. Mexicans also have a less urgent approach to time. They see time as more abundant than their U.S. counterparts. As a result, Mexicans thought that Americans wanted to move too fast on decisions, and they perceived American directness in communication as aggressive. ^[4] Additional vignettes on managing across borders are shared next.

Managing Across Borders

Lines on the Map Miss the Real Story

Diversity is deeper than variations between countries. Sometimes those differences appear in different regions of the same country. For example, some parts of Mexico don’t use Spanish as the primary language. Wal-Mart’s Mexico’s Juchitan store, therefore, conducts business in the local Zapotec tongue, encourages female employees to wear traditional Zapotec skirts, and does the morning company cheer in Zapotec.

Talent Abroad

With so much variation across countries, it’s no surprise that countries vary in level of talent and the supply of managerial, skilled, and unskilled labor. Companies shouldn’t assume that emerging market countries offer inferior labor pools. GM, for instance, found that 50% of its assembly-line workers in India have college degrees—a ratio much higher than in other countries.

Local Solutions by People Who Understand Local Needs

Nokia uses local designers to create country-specific handset models. The models designed in India for Indians are dust resistant and have a built-in flashlight. The models designed in China for the Chinese have a touch screen, stylus, and Chinese character recognition. Local designers are more likely to understand the needs of the local population than headquarters-located designers do.

Strategies in emerging markets conference, held by the MIT Center for Transportation and Logistics (CTL) on March 7, 2007, Cambridge, MA.

KEY TAKEAWAY

Because the business environment increasingly depends on collaboration across regional and national borders, a successful global manager needs to be culturally sensitive and have an understanding for how business is done in different cultures. In some countries, loyalty to the group is key. Other countries celebrate mavericks and rule breakers if they can get things done. Knowing how best to communicate with your coworkers and employees—whether to be direct or indirect, whether to follow strict protocol or be more causal, whom to involve in decisions—are all important considerations.

EXERCISES

1.       You’ve just been made a manager in Sweden, known for its institutional collectivism. What incentives and reward structures would you use to motivate your employees?

2.       How would you prepare workers for an overseas assignment?

3.       Your company has twelve branches in the United States and will be opening its first branch in Brazil. Your company prides itself on its self-managed teams. Will you keep this policy in the new country? Why or why not?

4.       You’re a manager in Japan, and you’ve just discovered that a team leader under your supervision has made a mistake that will result in a quality problem. How will you handle this mistake?

5.       You work in Hong Kong for a Swiss-owned firm. The Swiss are known for their high uncertainty avoidance. What differences might you expect to see from your Swiss bosses compared with your Hong Kong employees?

6.       What aspects of P-O-L-C would be most likely to change based on what you have learned in this section?

 

[1] 2008 Global Relocation Trends Survey report. Retrieved October 13, 2008, from http://www.gmacglobalrelocation.com; Gregersen, H. B., Morrison, A. J., & Black, J. S. (1998, Fall). Developing leaders for the global frontier. Sloan Management Review, 21–32.

[2] Hollenbeck, G. P., & McCall, M. W. 2003. Competence, not competencies: Making global executive development work. In W. Mobley & P. Dorfman (Eds.), Advances in Global Leadership (Vol. 3). Oxford: JAI Press.

[3] Javidan, M., Dorfman, P. W., de Luque, M. S., & House R. J. (2006, February). In the eye of the beholder: Cross cultural lessons in leadership from Project GLOBE. Academy of Management Perspectives, 20, 67–90.

[4] Brake, T. (1996). The Global Leader (p. 203). New York: McGraw-Hill.

 

3.5 Developing Your Values-Based Leadership Skills

LEARNING OBJECTIVES

1.       What ethical challenges do managers likely face?

2.       Why are ethics relevant to principles of management?

3.       What decision-making framework can you use to help integrate ethics into your own principles of management?

Ethical Challenges Managers Face

It’s late at night and the office is quiet—except that you’ve got a nagging voice in your head. Your product is already two weeks behind schedule. You’ve got to get it out this week or lose the deal. But you’ve discovered a problem. To correct the problem would mean another three-week delay—and you know the client won’t go for that. It’s a small error—it’ll probably never become an issue. What do you do?

Managers face these kinds of issues all the time. Ethical dilemmas can arise from a variety of areas, such as:

·         Advertising (desire to present your product or service in the best light)

·         Sourcing of raw materials (does the company buy from a supplier who may be underpaying their people or damaging the environment?)

·         Privacy (should the company have access to private e-mails that employees write on company time? or the Web sites they visit during work hours?)

·         Safety (employee and community)

·         Pay scales (relation of the pay of top executives to the rest of the company)

·         Product pricing policies (variable pricing, discounts)

·         Communication (with stockholders, announcements of plant closings, etc.)

It’s easy to think that people who behave unethically are simply bad apples or have a character flaw. But in fact, it’s often the situation or circumstances that create the ethical pressures. A global study of business ethics, published by the American Management Association, found that the main reasons for a lapse of ethics are:

1.       Pressure to meet unrealistic business objectives/deadlines.

2.       A desire to further one’s career.

3.       A desire to protect one’s livelihood. ^[1]

You may have developed your own personal code of ethics, but the social environment of the organization can be a barrier to fulfilling that code if management is behaving unethically. At Enron, vice president Sherron Watkins pointed out the accounting misdeeds, but she didn’t take action beyond sending a memo to the company’s chairman. Although she was hailed as a hero and whistleblower, she in fact did not disclose the issue to the public. Similarly, auditors at Arthur Andersen saw the questionable practices that Enron was pursuing, but when the auditors reported these facts to management, Arthur Andersen’s managers pointed to the $100 million of business they were getting from the Enron account. Those managers put profits ahead of ethics. In the end, both companies were ruined, not to mention the countless employees and shareholders left shattered and financially bankrupt.

Since 2002, when the Sarbanes-Oxley Act was passed, companies have been required to write a code of ethics. The act sought to reform corporate governance practices in large U.S. public companies. The purpose of the rules is to “define a code of ethics as a codification of standards that is reasonably necessary to deter wrongdoing and to promote honest and ethical conduct,” including the ethical handling of actual or apparent conflicts of interest, compliance with laws, and accountability to adhere to the code. ^[2] The U.S. financial crisis of late 2008 pointed out that other areas, particularly in the financial services industry, needed stiffer regulations and regulatory scrutiny as well, and those moves will begin to take effect in early 2009. Some companies go a step further and articulate a set of values that drives their code of conduct, as “Procter & Gamble’s Values and Code of Ethics” shows.

Procter & Gamble’s Values and Code of Ethics

Procter & Gamble Company lives by a set of five values that drive its code of business conduct. These values are:

1.       Integrity

We always try to do the right thing.

We are honest and straightforward with each other.

We operate within the letter and spirit of the law.

We uphold the values and principles of P&G in every action and decision.

We are data-based and intellectually honest in advocating proposals, including recognizing risks.

2.       Passion for Winning

We are determined to be the best at doing what matters most.

We have a healthy dissatisfaction with the status quo.

We have a compelling desire to improve and to win in the marketplace.

3.       Leadership

We are all leaders in our area of responsibility, with a deep commitment to delivering leadership results.

We have a clear vision of where we are going.

We focus our resources to achieve leadership objectives and strategies.

We develop the capability to deliver our strategies and eliminate organizational barriers.

4.       Trust

We respect our P&G colleagues, customers and consumers, and treat them as we want to be treated.

We have confidence in each other’s capabilities and intentions.

We believe that people work best when there is a foundation of trust.

5.       Ownership

We accept personal accountability to meet our business needs, improve our systems, and help others improve their effectiveness.

We all act like owners, treating the Company’s assets as our own and behaving with the Company’s long-term success in mind. ^[3]

Importance of Ethics in Management

Trust is the cornerstone of ethical leadership. © 2010 Jupiterimages Corporation

Ethical behavior among managers is even more important in organizations because leaders set the moral tone of the organization and serve as role models. Ethical leaders build trust in organizations. If employees see leaders behaving unethically, chances are the employees may be less inclined to behave ethically themselves. Companies may have printed codes of ethics, but the key standard is whether leaders uphold those values and standards. We tend to watch leaders for cues on appropriate actions and behavior that the company expects. Decisions that managers make are an indicator of their ethics. If the company says it cares about the safety of employees but then does not buy enough protective gear for them, it is not behaving in line with its code. Likewise, if managers exhibit unsafe behavior or look the other way when employees act unsafely, their behavior is not aligned with their stated code.

Without integrity, there can be no trust. Leadership is based on trust. Ethics drive effectiveness because employees know they can do the right thing decisively and with confidence. Ethical behavior earns the trust of customers and suppliers as well. It earns the public’s good will. Ethical managers and ethical businesses tend to be more trusted and better treated. They suffer less resentment, inefficiency, litigation, and government interference. If top management cuts corners, however, or if they make shady decisions, then no matter how good the code of ethics sounds, people will emulate the questionable behavior, not the code.

As a manager, you can make it clear to employees that you expect them to conduct business in an ethical manner by offering seminars on ethics, having an ethics hotline via which employees can anonymously raise issues, and having an ombudsman office or ethics committee to investigate issues.

Integrating Ethics into Managerial Decision Making

Ethics implies making a choice between decision-making rules. For instance, when choosing between two suppliers, do you choose the cheapest (decision rule 1) or the highest quality (decision rule 2). Ethics also implies deciding on a course of action when no clear decision rule is available. Dilemmas occur when the choices are incompatible and when one course of action seems to better serve your self-interest but appears to violate a moral principle. One way to tackle ethical dilemmas is to follow an ethical decision-making process, like the one described below.

Steps in an Ethical Decision-Making Process

1.       Assess the situation: What are you being asked to do? Is it illegal? Is it unethical? Who might be harmed?

2.       Identify the stakeholders and consider the situation from their point of view. For example, consider the point of view of the company’s employees, top management, stockholders, customers, suppliers, and community.

3.       Consider the alternatives you have available to you and how they affect the stakeholders:

o    consequences

o    duties, rights, and principles

o    implications for personal integrity and character

4.       How does the action make you feel about yourself? How would you feel if your actions were reported tomorrow in the Wall Street Journal (or your daily newspaper)? How would you explain your actions to your mother or to your 10-year-old child?

5.       Make a decision. This might involve going to your boss or to a neutral third party (such as an ombudsman or ethics committee). Know your values and your limits. If the company does nothing to rectify the situation, do you want to continue working for the company?

6.       Monitor outcomes. How did the decision work out? How did it turn out for all concerned? If you had it to do over again, what would you do differently? ^[4]

If you see unethical behavior in others, confronting it early is better. Early on, you have more of an opportunity to talk with the person in a fact-finding (rather than an accusatory) way. The discussion may nip the problem in the bud and prevent it from escalating. Keeping silent because you want to avoid offending the person may lead to much greater problems later on. As French playwright Jean-Baptiste Moliere wrote, “It’s not only for what we do that we are held responsible, but for what we do not do.”

KEY TAKEAWAY

Management involves decision making, and decisions often have an ethical component. Beyond personal ethics or a moral code, managers face making decisions that reflect the company as a whole, affecting its future success and vitality. Ethics doesn’t just mean following the law but acting in accordance with basic values.

EXERCISES

1.       What are the consequences of unethical behavior?

2.       If you were writing a code of ethics for your company, what would you include?

3.       In times of economic downturn, is ethical behavior a luxury?

4.       How would you handle an ethical violation committed by one of your employees?

5.       Nobel laureate economist Milton Friedman said that companies should focus on maximizing profits, not social responsibilities or purposes. Do you agree with this view? Why or why not?

6.       What aspects of P-O-L-C would be most likely to change based on what you have learned in this section?

[1] The Ethical Enterprise: A Global Study of Business Ethics. (2005). New York: American Management Association.

[2] Retrieved January 28, 2009, from http://www.sec.gov/news/press/2002-150.htm.

[3] Retrieved January 28, 2009, from http://www.pg.com/company/who_we_are/ppv.jhtml;jsessionid=MCSCEC20KZGJTQFIASJXKZOAVACJG3MK.

[4] Hartman, L., and DesJardins, J. (2008). Business Ethics: Decision-Making for Personal Integrity and Social Responsibility. New York: McGraw-Hill.

  

13.2 Understanding Team Design Characteristics

LEARNING OBJECTIVES

1.        Understand the difference between groups and teams.

2.        Understand the factors leading to the rise in the use of teams.

3.        Understand how tasks and roles affect teams.

4.        Identify different types of teams.

5.        Identify team design considerations.

Effective teams give companies a significant competitive advantage. In a high-functioning team, the sum is truly greater than the parts. Team members not only benefit from one another’s diverse experiences and perspectives but also stimulate each other’s creativity. Plus, for many people, working in a team can be more fun than working alone. Let’s take a closer look at what a team is, the different team characteristics, types of teams companies use, and how to design effective teams.

Differences Between Groups and Teams

Organizations consist of groups of people. What exactly is the difference between a group and a team? A group is a collection of individuals. Within an organization, groups might consist of project-related groups such as a product group or division or they can encompass an entire store or branch of a company. The performance of a group consists of the inputs of the group minus any process losses such as the quality of a product, ramp-up time to production, or the sales for a given month. Process loss is any aspect of group interaction that inhibits group functioning.

Why do we say group instead of team? A collection of people is not a team, though they may learn to function in that way. A team is a particular type of group: a cohesive coalition of people working together to achieve mutual goals. Being on a team does not equate to a total suppression of personal agendas, but it does require a commitment to the vision and involves each individual working toward accomplishing the team’s objective. Teams differ from other types of groups in that members are focused on a joint goal or product, such as a presentation, discussing a topic, writing a report, creating a new design or prototype, or winning a team Olympic medal. Moreover, teams also tend to be defined by their relatively smaller size. For instance, according to one definition, “A team is a small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they are mutually accountable.” ^[1]

Teams are only as good as their weakest link. While Michael Phelps has been dubbed “the world’s greatest swimmer” and received a great deal of personal attention, such as meeting President George W. Bush, he could not have achieved his record eight gold medals in one Olympic games without the help of his teammates Aaron Peirsol, Brendan Hansen, and Jason Lezak.

Source:http://simple.wikipedia.org/wiki/Image:Michael_Phelps_with_President _Bush_-_20080811.jpeg

The purpose of assembling a team is to accomplish larger, more complex goals than what would be possible for an individual working alone or even the simple sum of several individuals working independently. Teamwork is also needed in cases where multiple skills are tapped or where buy-in is required from several individuals. Teams can, but do not always, provide improved performance. Working together to further a team agenda seems to increase mutual cooperation between what are often competing factions. The aim and purpose of a team is to perform, get results, and achieve victory in the workplace. The best managers are those who can gather together a group of individuals and mold them into an effective team.

The key properties of a true team include collaborative action where, along with a common goal, teams have collaborative tasks. Conversely, in a group, individuals are responsible only for their own area. They also share the rewards of strong team performance with their compensation based on shared outcomes. Compensation of individuals must be based primarily on a shared outcome, not individual performance. Members are also willing to sacrifice for the common good in which individuals give up scarce resources for the common good instead of competing for those resources. For example, teams occur in sports such as soccer and basketball, in which the individuals actively help each other, forgo their own chance to score by passing the ball, and win or lose collectively as a team.

Teams in Organizations

The early 1990s saw a dramatic rise in the use of teams within organizations, along with dramatic results such as the Miller Brewing Company increasing productivity 30% in the plants that used self-directed teams compared with those that used the traditional organization. This same method allowed Texas Instruments in Malaysia to reduce defects from 100 parts per million to 20 parts per million. In addition, Westinghouse reduced its cycle time from 12 weeks to 2 weeks, and Harris Electronics was able to achieve an 18% reduction in costs. ^[2] The team method has served countless companies over the years through both quantifiable improvements and more subtle individual worker-related benefits.

Companies such as Square D, a maker of circuit breakers, switched to self-directed teams and found that overtime on machines like the punch press dropped 70% under teams. Productivity increased because the setup operators were able to manipulate the work in much more effective ways than a supervisor could dictate. ^[3] In 2001, clothing retailer Chico’s FAS was looking to grow its business. The company hired Scott Edmonds as president, and two years later revenues had almost doubled from $378 million to $760 million. By 2006, revenues were $1.6 billion, and Chico’s had nine years of double-digit same-store sales growth. What did Edmonds do to get these results? He created a horizontal organization “ruled by high-performance teams with real decision-making clout and accountability for results, rather than by committees that pass decisions up to the next level or toss them over the wall into the nearest silo.”

The use of teams also began to increase because advances in technology have resulted in more complex systems that require contributions from multiple people across the organization. Overall, team-based organizations have more motivation and involvement, and teams can often accomplish more than individuals. ^[4] It is no wonder organizations are relying on teams more and more.

Do We Need a Team?

Teams are not a cure-all for organizations. To determine whether a team is needed, organizations should consider whether a variety of knowledge, skills, and abilities are needed, whether ideas and feedback are needed from different groups within the organization, how interdependent the tasks are, if wide cooperation is needed to get things done, and whether the organization would benefit from shared goals. ^[5]If the answer to these questions is “yes,” then a team or teams might make sense. For example, research shows that the more team members perceive that outcomes are interdependent, the better they share information and the better they perform. ^[6]

Team Tasks and Roles

Teams differ in terms of the tasks they are trying to accomplish and the roles team members play.

Production tasks include actually making something such as a team of construction workers creating a new building. © 2010 Jupiterimages Corporation

As early as the 1970s, J. R. Hackman identified three major classes of tasks: (1) production tasks, (2) idea generation tasks, and (3) problem-solving tasks. ^[7] Production tasks include actually making something, such as a building, a product, or a marketing plan. Idea generation tasks deal with creative tasks, such as brainstorming a new direction or creating a new process. Problem-solving tasks refer to coming up with plans for actions and making decisions, both facets of managerial P-O-L-C functions (planning and leading). For example, a team may be charged with coming up with a new marketing slogan, which is an idea generation task, while another team might be asked to manage an entire line of products, including making decisions about products to produce, managing the production of the product lines, marketing them, and staffing their division. The second team has all three types of tasks to accomplish at different points in time.

Task Interdependence

Another key to understanding how tasks are related to teams is to understand their level of task interdependence. Task interdependence refers to the degree that team members depend on one another to get information, support, or materials from other team members to be effective. Research shows that self-managing teams are most effective when their tasks are highly interdependent. ^[8]

There are three types of task interdependence. Pooled interdependence exists when team members may work independently and simply combine their efforts to create the team’s output. For example, when students meet to divide the sections of a research paper and one person simply puts all the sections together to create one paper, the team is using the pooled interdependence model. However, they might decide that it makes more sense to start with one person writing the introduction of their research paper, then the second person reads what was written by the first person and, drawing from this section, writes about the findings within the paper. Using the findings section, the third person writes the conclusions. If one person’s output becomes another person’s input, the team would be experiencing sequential interdependence. And finally, if the student team decided that in order to create a top notch research paper they should work together on each phase of the research paper so that their best ideas would be captured at each stage, they would be undertaking reciprocal interdependence. Another important type of interdependence that is not specific to the task itself is outcome interdependence, where the rewards that an individual receives depend on the performance of others.

Team Roles

While relatively little research has been conducted on team roles, recent studies show that individuals who are more aware of team roles and the behavior required for each role perform better than individuals that do not. This fact remains true for both student project teams as well as work teams, even after accounting for intelligence and personality. ^[9] Early research found that teams tend to have two categories of roles: those related to the tasks at hand and those related to the team’s functioning. For example, teams that only focus on production at all costs may be successful in the short run, but if they pay no attention to how team members feel about working 70 hours a week, they are likely to experience high turnover.

On the basis of decades of research on teams, 10 key roles have been identified. ^[10] Team leadership is effective when leaders are able to adapt the roles they are contributing to or asking others to contribute to fit what the team needs, given its stage and the tasks at hand. ^[11] Ineffective leaders might always engage in the same task role behaviors when what they really need to do is focus on social roles, put disagreements aside, and get back to work. While these behaviors can be effective from time to time, if the team doesn’t modify its role behaviors as things change, they most likely will not be effective.

Teams are based on many roles being carried out as summarized by the Team Role Typology. These 10 roles include task roles (green), social roles (yellow), and boundary spanning roles (orange).

Source: Mumford, T. V., Van Iddekinge, C. H., Morgeson, F. P., & Campion, M. A. (2008). The team role test: Development and validation of a team role knowledge situational judgment test. Journal of Applied Psychology, 93, 250–267; Mumford, T. V., Campion, M. A., & Morgeson, F. P. (2006). Situational judgments in work teams: A team role typology. In J. A. Weekley & R. E. Ployhart (Eds.), Situational judgment tests: Theory, measurement (pp. 319–343). Mahwah, NJ: Lawrence Erlbaum.

Task Roles

Five roles make up the task portion of the role typology. The contractor role includes behaviors that serve to organize the team’s work, including creating team time lines, production schedules, and task sequencing. The creator role deals more with changes in the team’s task process structure. For example, reframing the team goals and looking at the context of goals would fall under this role. The contributor roleis important because it brings information and expertise to the team. This role is characterized by sharing knowledge and training those who have less expertise to strengthen the team. Research shows that teams with highly intelligent members and evenly distributed workloads are more effective than those with uneven workloads. ^[12] The completer role is also important as it is often where ideas are transformed into action. Behaviors associated with this role include following up on tasks such as gathering needed background information or summarizing the team’s ideas into reports. Finally, the critic role includes “devil’s advocate” behaviors which go against the assumptions being made by the team.

Social Roles

Social roles serve to keep the team operating effectively. When the social roles are filled, team members feel more cohesive and the group is less prone to suffer process losses or biases, such as social loafing, groupthink, or a lack of participation from all members. Three roles fall under the umbrella of social roles. The cooperator role includes supporting those with expertise toward the team’s goals. This is a proactive role. Thecommunicator role includes behaviors that are targeted at collaboration such as practicing good listening skills and appropriately using humor to diffuse tense situations. Having a good communicator helps the team to feel more open to sharing ideas. And the calibrator role is an important one and serves to keep the team on track in terms of suggesting any needed changes to the team’s process. This role includes initiating discussions about potential team problems such as power struggles or other tensions. Similarly, this role may involve settling disagreements or pointing out what is working and what is not in terms of team process.

Boundary-Spanning Roles

The final two roles are related to activities outside of the team that help to connect the team to the larger organization. ^[13] Teams that engage in a greater level of boundary-spanning behaviors increase their team effectiveness. ^[14] The consul role includes gathering information from the larger organization and informing those within the organization about team activities, goals, and successes. Often the consul role is filled by team managers or leaders. The coordinator role includes interfacing with others within the organization so that the team’s efforts are in line with other individuals and teams within the organization.

Types of Teams

There are many different types of teams, and a given team may be described according to multiple types. For example, a team of scientists writing a research article for publication may be temporary, virtual, and cross-functional.

Teams may be permanent or long term, but more typically, a team exists for a limited time. In fact, one-third of all teams in the United States are temporary. ^[15] An example of a temporary team is a task force that addresses a specific issue or problem until it is resolved. Other teams may be temporary or ongoing such as product development teams. In addition, matrix organizations have cross-functional teamswhere individuals from different parts of the organization staff the team, which may be temporary or long-standing.

Virtual Teams

Virtual teams are teams in which members are not located in the same physical place. They may be in different cities, states, or even different countries. Some virtual teams are formed by necessity, such as to take advantage of lower labor costs in different countries; one study found that upward of 8.4 million individuals worldwide work virtually in at least one team. ^[16] Often, virtual teams are formed to take advantage of distributed expertise or time—the needed experts may be living in different cities. A company that sells products around the world, for example, may need technologists who can solve customer problems at any hour of the day or night. It may be difficult to find the caliber of people needed who would be willing to work at 2 a.m. on a Saturday, for example. So companies organize virtual technical support teams. BakBone Software, for instance, has a 13-member technical support team. Each member has a degree in computer science and is divided among offices in California, Maryland, England, and Tokyo. BakBone believes it has been able to hire stronger candidates by drawing from a diverse talent pool and hiring in different geographic regions rather than limiting hiring to one region or time zone. ^[17]

Despite potential benefits, virtual teams present special management challenges, particularly to the controlling function. Managers often think that they have to see team members working to believe that work is being done. Because this kind of oversight is impossible in virtual team situations, it is important to devise evaluation schemes that focus on deliverables. Are team members delivering what they said they would? In self-managed teams, are team members producing the results the team decided to measure itself on?

Another special challenge of virtual teams is building trust. Will team members deliver results just as they would in face-to-face teams? Can members trust one another to do what they said they would do? Companies often invest in bringing a virtual team together at least once so members can get to know one another and build trust. ^[18] In manager-led virtual teams, managers should be held accountable for their team’s results and evaluated on their ability as a team leader.

Finally, communication is especially important in virtual teams, through e-mail, phone calls, conference calls, or project management tools that help organize work. If individuals in a virtual team are not fully engaged and tend to avoid conflict, team performance can suffer. ^[19] Awiki is an Internet-based method for many people to collaborate and contribute to a document or discussion. Essentially, the document remains available for team members to access and amend at any time. The most famous example is Wikipedia, which is gaining traction as a way to structure project work globally and get information into the hands of those that need it. Empowered organizations put information into everyone’s hands. ^[20] Research shows that empowered teams are more effective than those that are not empowered. ^[21]

Top Management Teams

Top management teams are appointed by the chief executive officer (CEO) and, ideally, reflect the skills and areas that the CEO considers vital for the company. There are no formal rules about top management team design or structure. The top management team often includes representatives from functional areas, such as finance, human resources, and marketing or key geographic areas, such as Europe, Asia, and North America. Depending on the company, other areas may be represented such as legal counsel or the company’s chief technologist. Typical top management team member titles include chief operating officer (COO), chief financial officer (CFO), chief marketing officer (CMO), or chief technology officer (CTO). Because CEOs spend an increasing amount of time outside their companies (i.e., with suppliers, customers, regulators, and so on), the role of the COO has taken on a much higher level of internal operating responsibilities. In most American companies, the CEO also serves as chairman of the board and can have the additional title of president. Companies have top management teams to help set the company’s vision and strategic direction, key tasks within the planning P-O-L-C function. Top teams make decisions on new markets, expansions, acquisitions, or divestitures. The top team is also important for its symbolic role: how the top team behaves dictates the organization’s culture and priorities by allocating resources and by modeling behaviors that will likely be emulated lower down in the organization. Importantly, the top team is most effective when team composition is functionally and demographically diverse and when it can truly operate as a team, not just as group of individual executives. ^[22]

That “the people make the place” holds especially true for members of the top management team. In a study of 15 firms that demonstrated excellence, defined as sustained performance over a 15-year period, leadership researcher Jim Collins noted that those firms attended to people first and strategy second. “They got the right people on the bus, moved the wrong people off the bus, ushered the right people to the right seats—then they figured out where to drive it.” ^[23] The best teams plan for turnover. Succession planning is the process of identifying future members of the top management team. Effective succession planning allows the best top teams to achieve high performance today and create a legacy of high performance for the future.

Team Leadership and Autonomy

Teams also vary in terms of how they are led. Traditional or manager-led teams are teams in which the manager serves as the team leader. The manager assigns work to other team members. These types of teams are the most natural to form, wherein managers have the power to hire and fire team members and are held accountable for the team’s results.

Self-managed teams are a new form of team that rose in popularity with the Total Quality Movement in the 1980s. Unlike manager-led teams, these teams manage themselves and do not report directly to a supervisor. Instead, team members select their own leader, and they may even take turns in the leadership role. Self-managed teams also have the power to select new team members. As a whole, the team shares responsibility for a significant task, such as assembly of an entire car. The task is ongoing rather than temporary such as a charity fund drive for a given year.

Organizations began to use self-managed teams as a way to reduce hierarchy by allowing team members to complete tasks and solve problems on their own. The benefits of self-managed teams extend much further. Research has shown that employees in self-managed teams have higher job satisfaction, increased self-esteem, and grow more on the job. The benefits to the organization include increased productivity, increased flexibility, and lower turnover. Self-managed teams can be found at all levels of the organization, and they bring particular benefits to lower-level employees by giving them a sense of ownership of their jobs that they may not otherwise have. The increased satisfaction can also reduce absenteeism because employees do not want to let their team members down.

Typical team goals are improving quality, reducing costs, and meeting deadlines. Teams also have a “stretch” goal, which is difficult to reach but important to the business unit. Many teams also have special project goals. Texas Instruments (TI), a company that makes semiconductors, used self-directed teams to make improvements in work processes. ^[24] Teams were allowed to set their own goals in conjunction with managers and other teams. TI also added an individual component to the typical team compensation system. This individual component rewarded team members for learning new skills that added to their knowledge. These “knowledge blocks” include topics such as leadership, administration, and problem solving. The team decides what additional skills people might need to help the team meet its objectives. Team members would then take classes or otherwise demonstrate their proficiency in that new skill on the job to be certified for mastering the skill. Individuals could then be evaluated based on their contribution to the team and how they are building skills to support the team.

Self-managed teams are empowered, which means that they have the responsibility as well as the authority to achieve their goals. Team members have the power to control tasks and processes and to make decisions. Research shows that self-managed teams may be at a higher risk of suffering from negative outcomes due to conflict, so it is important that they are supported with training to help them deal with conflict effectively. ^[25] Self-managed teams may still have a leader who helps them coordinate with the larger organization. ^[26] For a product team composed of engineering, production, and marketing employees, empowerment means that the team can decide everything about a product’s appearance, production, and cost without having to get permission or sign-off from higher management. As a result, empowered teams can more effectively meet tighter deadlines. At AT&T, for example, the model-4200 phone team cut development time in half while lowering costs and improving quality by using the empowered team approach. ^[27] A special form of self-managed teams are self-directed teams in which they also determine who will lead them with no external oversight.

Team leadership is a major determinant of how autonomous a team can be.

Designing Effective Teams

Designing an effective team means making decisions about team composition (who should be on the team), team size (the optimal number of people on the team), and team diversity (should team members be of similar background, such as all engineers, or of different backgrounds). Answering these questions will depend, to a large extent, on the type of task that the team will be performing. Teams can be charged with a variety of tasks, from problem solving to generating creative and innovative ideas to managing the daily operations of a manufacturing plant.

Who Are the Best Individuals for the Team?

A key consideration when forming a team is to ensure that all the team members are qualified for the roles they will fill for the team. This process often entails understanding the knowledge, skills, and abilities (KSAs) of team members as well as the personality traits needed before starting the selection process. ^[28] When talking to potential team members, be sure to communicate the job requirements and norms of the team. To the degree that this is not possible, such as when already existing groups are used, think of ways to train the team members as much as possible to help ensure success. In addition to task knowledge, research has shown that individuals who understand the concepts covered in this chapter and in this book such as conflict resolution, motivation, planning, and leadership actually perform better on their jobs. This finding holds for a variety of jobs, including officer in the United States Air Force, an employee at a pulp mill, or a team member at a box manufacturing plant. ^[29]

How Large Should My Team Be?

Interestingly, research has shown that regardless of team size, the most active team member speaks 43% of the time. The difference is that the team member who participates the least in a three-person team is still active 23% of the time versus only 3% in a 10-person team. ^[30]When deciding team size, a good rule of thumb is a size of 2 to 20 members. The majority of teams have 10 members or less because the larger the team, the harder it is to coordinate and interact as a team. With fewer individuals, team members are more able to work through differences and agree on a common plan of action. They have a clearer understanding of others’ roles and greater accountability to fulfill their roles (remember social loafing?). Some tasks, however, require larger team sizes because of the need for diverse skills or because of the complexity of the task. In those cases, the best solution is to create subteams where one member from each subteam is a member of a larger coordinating team. The relationship between team size and performance seems to greatly depend on the level of task interdependence, with some studies finding larger teams outproducing smaller teams and other studies finding just the opposite. ^[31] The bottom line is that team size should be matched to the goals of the team.

How Diverse Should My Team Be?

Team composition and team diversity often go hand in hand. Teams whose members have complementary skills are often more successful because members can see each other’s blind spots. One team member’s strengths can compensate for another’s weaknesses. ^[32] For example, consider the challenge that companies face when trying to forecast future sales of a given product. Workers who are educated as forecasters have the analytic skills needed for forecasting, but these workers often lack critical information about customers. Salespeople, in contrast, regularly communicate with customers, which means they’re in the know about upcoming customer decisions. But salespeople often lack the analytic skills, discipline, or desire to enter this knowledge into spreadsheets and software that will help a company forecast future sales. Putting forecasters and salespeople together on a team tasked with determining the most accurate product forecast each quarter makes the best use of each member’s skills and expertise.

Diversity in team composition can help teams come up with more creative and effective solutions. Research shows that teams that believe in the value of diversity performed better than teams that do not. ^[33] The more diverse a team is in terms of expertise, gender, age, and background, the more ability the group has to avoid the problems of groupthink. ^[34] For example, different educational levels for team members were related to more creativity in research and development teams and faster time to market for new products. ^[35] Members will be more inclined to make different kinds of mistakes, which means that they’ll be able to catch and correct those mistakes.

KEY TAKEAWAY

Teams, though similar to groups, are different in both scope and composition. A team is a particular type of group: a cohesive coalition of people working together to achieve mutual goals. In the 21st century, many companies have moved toward the extensive use of teams. The task a team is charged with accomplishing affects how they perform. In general, task interdependence works well for self-managing teams. Team roles consist of task, social, and boundary-spanning roles. Different types of teams include task forces, product development teams, cross-functional teams, and top management teams. Team leadership and autonomy varies depending on whether the team is traditionally managed, self-managed, or self-directed. Teams are most effective when teams consist of members with the right KSAs for the tasks, are not too large, contain diversity across team members. Decisions about where and how to use teams, the leadership of teams, and the structure of teams illustrate the overlap in the design and leading P-O-L-C functions.

EXERCISES

1.        Think of the last team you were in. Did the task you were asked to do affect the team? Why or why not?

2.        Which of the 10 work roles do you normally take in a team? How difficult or easy do you think it would be for you to take on a different role?

3.        Have you ever worked in a virtual team? If so, what were the challenges and advantages of working virtually?

4.        How large do you think teams should be and why?

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