Principles of Management. ©2019. Rice University

Principles of
Management
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TABLE OF CONTENTS
Preface 1
1
Managing and Performing 7
1.1 What Do Managers Do? 8

1.2 The Roles Managers Play 9
1.3 Major Characteristics of the Manager's Job 12
2
Managerial Decision-Making 21
2.1 Overview of Managerial Decision-Making 23

2.2 How the Brain Processes Information to Make Decisions: Reflective and Reactive
Systems 26
2.3 Programmed and Nonprogrammed Decisions 28
2.4 Barriers to Effective Decision-Making 31
2.5 Improving the Quality of Decision-Making 35
2.6 Group Decision-Making 45
3
The History of Management 55
3.1 The Early Origins of Management 58

3.2 The Italian Renaissance 61
3.3 The Industrial Revolution 61
3.4 Taylor-Made Management 63
3.5 Administrative and Bureaucratic Management 68
3.6 Human Relations Movement 71
3.7 Contingency and System Management 75
4
External and Internal Organizational Environments and
81
Corporate Culture
4.1 The Organization's External Environment 84
4.2 External Environments and Industries 88
4.3 Organizational Designs and Structures 91
4.4 The Internal Organization and External Environments 103
4.5 Corporate Cultures 109
4.6 Organizing for Change in the 21st Century 111
5
Ethics, Corporate Responsibility, and Sustainability 119
5.1 Ethics and Business Ethics Defined 121

5.2 Dimensions of Ethics: The Individual Level 122
5.3 Ethical Principles and Responsible Decision-Making 125
5.4 Leadership: Ethics at the Organizational Level 129
5.5 Ethics, Corporate Culture, and Compliance 136
5.6 Corporate Social Responsibility (CSR) 139
5.7 Ethics around the Globe 143
5.8 Emerging Trends in Ethics, CSR, and Compliance 147
6
International Management 157
6.1 Importance of International Management 159

6.2 Hofstede's Cultural Framework 164
6.3 The GLOBE Framework 172
6.4 Cultural Stereotyping and Social Institutions 177
6.5 Cross-Cultural Assignments 183
6.6 Strategies for Expanding Globally 186
6.7 The Necessity of Global Markets 189
7
Entrepreneurship 207
7.1 Entrepreneurship 209

7.2 Characteristics of Successful Entrepreneurs 215
7.3 Small Business 219
7.4 Start Your Own Business 222
7.5 Managing a Small Business 231
7.6 The Large Impact of Small Business 234
7.7 The Small Business Administration 235
7.8 Trends in Entrepreneurship and Small-Business Ownership 237
8
Strategic Analysis: Understanding a Firm’s Competitive
247
Environment
8.1 Gaining Advantages by Understanding the Competitive Environment 249 8.2
Using SWOT for Strategic Analysis 250
8.3 A Firm's External Macro Environment: PESTEL 252
8.4 A Firm's Micro Environment: Porter's Five Forces 257
8.5 The Internal Environment 261
8.6 Competition, Strategy, and Competitive Advantage 266
8.7 Strategic Positioning 269
9
The Strategic Management Process: Achieving and Sustaining
279
Competitive Advantage
9.1 Strategic Management 281
9.2 Firm Vision and Mission 281
9.3 The Role of Strategic Analysis in Formulating a Strategy 283
9.4 Strategic Objectives and Levels of Strategy 284
9.5 Planning Firm Actions to Implement Strategies 288
9.6 Measuring and Evaluating Strategic Performance 297
This OpenStax book is available for free at http://cnx.org/content/col28330/1.8

10
Organizational Structure and Change 305
10.1 Organizational Structures and Design 306

10.2 Organizational Change 313
10.3 Managing Change 318
11
Human Resource Management 339
11.1 An Introduction to Human Resource Management 340 11.2

Human Resource Management and Compliance 343 11.3
Performance Management 345
11.4 Influencing Employee Performance and Motivation 349 11.5
Building an Organization for the Future 354
11.6 Talent Development and Succession Planning 356
12
Diversity in Organizations 369
12.1 An Introduction to Workplace Diversity 370

12.2 Diversity and the Workforce 371
12.3 Diversity and Its Impact on Companies 382
12.4 Challenges of Diversity 386
12.5 Key Diversity Theories 391
12.6 Benefits and Challenges of Workplace Diversity 394
12.7 Recommendations for Managing Diversity 396
13
Leadership 407
13.1 The Nature of Leadership 408

13.2 The Leadership Process 410
13.3 Types of Leaders and Leader Emergence 415
13.4 The Trait Approach to Leadership 421
13.5 Behavioral Approaches to Leadership 424
13.6 Situational (Contingency) Approaches to Leadership 428 13.7
Substitutes for and Neutralizers of Leadership 433 13.8
Transformational, Visionary, and Charismatic Leadership 436 13.9
Leadership Needs in the 21st Century 440
14
Work Motivation for Performance 449
14.1 Motivation: Direction and Intensity 451

14.2 Content Theories of Motivation 454
14.3 Process Theories of Motivation 469
14.4 Recent Research on Motivation Theories 486
15
Managing Teams 497
15.1 Teamwork in the Workplace 498
15.2 Team Development Over Time 500
15.3 Things to Consider When Managing Teams 504
15.4 Opportunities and Challenges to Team Building 508
15.5 Team Diversity 510
15.6 Multicultural Teams 512
16
Managerial Communication 523
16.1 The Process of Managerial Communication 524

16.2 Types of Communications in Organizations 526
16.3 Factors Affecting Communications and the Roles of Managers 530
16.4 Managerial Communication and Corporate Reputation 533
16.5 The Major Channels of Management Communication Are Talking, Listening, Reading, and
Writing 534
17
Organizational Planning and Controlling 549
17.1 Is Planning Important 550

17.2 The Planning Process 553
17.3 Types of Plans 559
17.4 Goals or Outcome Statements 563
17.5 Formal Organizational Planning in Practice 565
17.6 Employees' Responses to Planning 569
17.7 Management by Objectives: A Planning and Control Technique 583
17.8 The Control- and Involvement-Oriented Approaches to Planning and Controlling 586
18
Management of Technology and Innovation 597
18.1 MTI—Its Importance Now and In the Future 600
18.2 Developing Technology and Innovation 606
18.3 External Sources of Technology and Innovation 608
18.4 Internal Sources of Technology and Innovation 610
18.5 Management Entrepreneurship Skills for Technology and Innovation 611 18.6
Skills Needed for MTI 612
18.7 Managing Now for Future Technology and Innovation 615
Index 659
Preface 1 Preface
Welcome to Principles of Management, an OpenStax resource. This textbook was written to increase student
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2 Preface
About Principles of Management

Principles of Management is designed to meet the scope and sequence requirements of the introductory course on
management. This is a traditional approach to management using the leading, planning, organizing, and controlling
approach. The table of contents of this book was designed to address two main themes. What are the variables that
affect how, when, where, and why managers perform their jobs? What theories and techniques are used by
successful managers at a variety of organizational levels to achieve and exceed objectives effectively and efficiently
throughout their careers? Management is a broad business discipline, and the Principles of Management course
covers many management areas such as human resource management and strategic management, as well
behavioral areas such as motivation. No one individual can be an expert in all areas of management, so an additional
benefit of this text is that specialists in a variety of areas have authored individual chapters. Finally, we all made an
effort to present a balanced approach to gender and diversity throughout the text in the examples used, the
photographs selected, and the use of both male (odd numbered chapters) and female (even-numbered chapters)
when referring to generic managers or employees.
Pedagogical Foundation
We have taken a structured approach in the writing of the chapters that reduces inconsistencies throughout and
makes selecting topics to match the course syllabus easier for faculty.
Exploring Managerial Careers. Each chapter starts with a profile that describes a manager and illustrates how
the content of the chapter is vital for a successful managerial career.
Consistent, integrated learning. Targeted learning outcomes are listed at the beginning of each chapter and then
repeated throughout the chapter. The learning outcomes connect to the text and the additional resources that
accompany Principles of Management. After reading each section, students can test their retention by answering the
questions in the Concept Checks. Every learning goal is further reinforced by a summary at the end of the chapter.
Hundreds of business examples to bring concepts to life. This book is designed to speak to the typical student.
We have done a lot of research about student needs, abilities, experiences, and interests, and then we have shaped
the text around them. We have used experiences both inside and outside the classroom to create a book that is both
readable and enjoyable. We believe that the real applications found throughout every chapter set the standard for
readability and understanding of key concepts.
Learning business terminology, made easy. As students begin to study management, they will explore new
words and concepts. To help them learn this language, we define each new term in the chapter, display the terms in
bold, and offer a complete glossary at the end of the book.
Applied Features
Rather than provide a dry recitation of facts, we illustrate concepts with contemporary examples. In addition to the
in-text examples, we have several boxed features that provide more extensive examples in areas of importance in
today’s business environment. Each of the boxed features described below includes a series of critical thinking
questions to prompt the student to consider the implications of each business strategy.
Ethics in Practice. Ethics in Practice features demonstrate how businesses are responsible not only to the
bottom line, but to providing goods and services in a responsible manner.
Managing Change. The turbulent business climate requires companies to adapt their business strategies in
response to a variety of economic, social, competitive, and technological forces. The Managing Change feature

Preface 3
highlights how businesses have altered their business strategies in response to these forces.
Catching the Entrepreneurial Spirit. This feature highlights the challenges and opportunities available in small
businesses and other entrepreneurial ventures.
Managerial Leadership. It is generally agreed that in a turbulent business climate leadership is an important function
of management that helps to maximize efficiency and to achieve organizational goals. Leaders initiate action,
motivate organizations, provide guidance, build morale, and create a sense of confidence within the organization and
to outside stakeholders.
Sustainability and Responsible Management. This feature highlights the knowledge, skills, tools, and self
awareness that are needed to become responsible managers. While the area of corporate social responsibility and
sustainability has gained wide general support and commentary, these featured boxed items should provide the
reader with insights of how managers can embed responsible practices in their careers.
Activities and Cases That Put Knowledge to Work

Principles of Management helps students develop a solid grounding in the skills that they can apply throughout their
managerial careers. These skill-building activities and resources help build and polish competencies that future
employers will value.
Chapter Review Questions. These questions provide a broad set of challenging questions that students can use
to assure themselves that they have mastered the chapter concepts.
Management Skills Application Exercises. These activities at the end of each chapter present real-world
challenges and provide assignment material for students to hone their business skills.
Managerial Decision Exercises. These activities provide assignment material that challenge students’
decision-making processes. There are a variety of exercises for individual or team assignments.
Critical Thinking Case. The Critical Thinking case in each chapter invites students to explore business
strategies of various companies, analyze business decisions, and prepare comments.
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instructors to build their lectures.
4 Preface
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Contributing Authors
David S. Bright, Wright State University
Anastasia H. Cortes, Virginia Tech University
Donald G. Gardner, University of Colorado-Colorado Springs
Eva Hartmann, University of Richmond
Jason Lambert, Texas Woman’s University
Laura M. Leduc, James Madison University
Joy Leopold, Webster University
Jeffrey Muldoon, Emporia State University
James S. O’Rourke, University of Notre Dame
K. Praveen Parboteeah, University of Wisconsin-Whitewater
Jon L. Pierce, University of Minnesota-Duluth
Monique Reece
Amit Shah, Frostburg State University
Siri Terjesen, American University
Joseph Weiss, Bentley University
Margaret A. White, Oklahoma State University
Reviewers
Susan Adams, Bentley University
Shane Bowyer, Minnesota State University
Kim S. Cameron, University of Michigan
Linda Davenport, Klamath Community College
Allyson Foster
John Goldberg, University of California-Davis
Regina Greenwood, Nova University
Gina Hagler
Nai H. Lamb, University of Tennessee at Chattanooga
Kristie J. Loescher, University of Texas

Preface5
Marcia Marriott, Monroe Community College

Therese Madden, Notre Dame de Namur University
Eleonor Moore, Kirtland Community College
Robert McNulty, Bentley University
Jeffrey Muldoon, Emporia State University
John Parnell, University of North Carolina-Pembroke
Jim Pennypacker
Karli Peterson, Colorado State University
Raymond Pfang, Tarrant Community College
Jodell Raymond, Monroe Community College
Richard Savior, SUNY Empire State
Carolyn Stevenson, Kaplan University
Amit Shah, Frostburg State University
Linda Tancs
Maria Vitale, Chaffey College
Valerie Wallingford, Bemidji State University
Preface
1
Managing and Performing
Exhibit 1.1 (Credit: Steve Bowbrick/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
Introduction
Learning Outcomes
After reading this chapter, you should be able to answer these questions:
What do managers do to help organizations achieve top performance?

1.
What are the roles that managers play in organizations?
2.
What are the characteristics that effective managers display? 3.
EXPLORING MANAGERIAL CAREERS
You
So, you’re in this course and you may have pondered, or discussed with others, what this course will be about.
You probably have some preconceptions of what management is all about. You must manage your time,
deciding on how much study time you will devote to your management and accounting classes, for instance.
You may have had a summer or part-time job where you had a manager whom you had to report to. You may
have followed news reports on successful managers like Jeff Bezos of Amazon or Sheryl Sandberg of
Facebook and want to learn what made them successful so you can emulate their practices in your business
career. You may have the impression (not an accurate one) that management is basically just common sense
and that you really don’t need to take this course except that you must meet your degree requirement.
You may be an accounting or marketing major who is taking this class because it is required for completion of
your degree requirements, but you don’t think that you will ever require what you learn in
8 Chapter 1 Managing and Performing
this class during your career since you don’t plan on applying for HR jobs upon graduation. If you’re believing
this, you could not be more mistaken. Regardless of where you are in your career, be it as an individual
contributor, project leader, or middle or senior manager, what you will get out of this course will be valuable. If
your first job out of college is as an accountant, sales representative, or another entry level position, you will
appreciate the roles that your managers, both direct and senior level, play in an organization and the behaviors
and actions that will get you recognized and appreciated. Best of luck!
Most management textbooks would say, as does this one, that managers spend their time engaged in planning,
organizing, staffing, directing, coordinating, reporting, and controlling. These activities, as Hannaway found in her
study of managers at work, “do not, in fact, describe what managers do.”1 At best they seem to describe vague
objectives that managers are continually trying to accomplish. The real world, however, is far from being that simple.
The world in which most managers work is a “messy and hectic stream of ongoing activity.”2
1.1 What Do Managers Do?

1. What do managers do to help organizations achieve top performance?
Managers are in constant action. Virtually every study of managers in action has found that they “switch frequently
from task to task, changing their focus of attention to respond to issues as they arise, and engaging in a large volume
of tasks of short duration.”3 Mintzberg observed CEOs on the job to get some idea of what they do and how they
spend their time. He found, for instance, that they averaged 36 written and 16 verbal contacts per day, almost every
one of them dealing with a distinct or different issue. Most of these activities were brief, lasting less than nine
minutes.4
Kotter studied a number of successful general managers over a five-year period and found that they spend most
of their time with others, including subordinates, their bosses, and numerous people from outside the
organization. Kotter’s study found that the average manager spent just 25% of his time working alone, and
that time was spent largely at home, on airplanes, or commuting. Few of them spent less than 70% of their time
with others, and some spent up to 90% of their working time this way.5
Kotter also found that the breadth of topics in their discussions with others was extremely wide, with unimportant
issues taking time alongside important business matters. His study revealed that managers rarely make “big
decisions” during these conversations and rarely give orders in a traditional sense. They often react to others’
initiatives and spend substantial amounts of time in unplanned activities that aren’t on their calendars. He found that
managers will spend most of their time with others in short, disjointed conversations. “Discussions of a single
question or issue rarely last more than ten minutes,” he notes. “It is not at all unusual for a general manager to cover
ten unrelated topics in a five-minute conversation.”6 More recently, managers studied by Sproull showed similar
patterns. During the course of a day, they engaged in 58 different activities with an average duration of just nine
minutes.7
Interruptions also appear to be a natural part of the job. Stewart found that the managers she studied could work
uninterrupted for half an hour only nine times during the four weeks she studied them.8 Managers, in fact, spend
very little time by themselves. Contrary to the image offered by management textbooks, they are rarely alone
drawing up plans or worrying about important decisions. Instead, they spend most of their time
interacting with others—both inside and outside the organization. If casual interactions in hallways, phone
conversations, one-on-one meetings, and larger group meetings are included, managers spend about two thirds
of their time with other people.9 As Mintzberg has pointed out, “Unlike other workers, the manager

Chapter 1 Managing and Performing 9
does not leave the telephone or the meeting to get back to work. Rather, these contacts are his work.”10 The
interactive nature of management means that most management work is conversational.11 When managers are in
action, they are talking and listening. Studies on the nature of managerial work indicate that managers spend about
two-thirds to three-quarters of their time in verbal activity.12 These verbal conversations, according to Eccles and
Nohria, are the means by which managers gather information, stay on top of things, identify problems, negotiate
shared meanings, develop plans, put things in motion, give orders, assert authority, develop relationships, and
spread gossip. In short, they are what the manager’s daily practice is all about. “Through other forms of talk, such as
speeches and presentations,” they write, “managers establish definitions and meanings for their own actions and
give others a sense of what the organization is about, where it is at, and what it is up to.”13
CONCEPT CHECK

1.2 The Roles Managers Play
2. What are the roles that managers play in organizations?
In Mintzberg’s seminal study of managers and their jobs, he found the majority of them clustered around three
core management roles.
Interpersonal roles. Managers are required to interact with a substantial number of people in the course of a
workweek. They host receptions; take clients and customers to dinner; meet with business prospects and partners;
conduct hiring and performance interviews; and form alliances, friendships, and personal relationships with many
others. Numerous studies have shown that such relationships are the richest source of information for managers
because of their immediate and personal nature.14
Three of a manager’s roles arise directly from formal authority and involve basic interpersonal relationships. First is
the figurehead role. As the head of an organizational unit, every manager must perform some ceremonial duties. In
Mintzberg’s study, chief executives spent 12% of their contact time on ceremonial duties; 17% of their incoming mail
dealt with acknowledgments and requests related to their status. One example is a company president who
requested free merchandise for a handicapped schoolchild.15
Managers are also responsible for the work of the people in their unit, and their actions in this regard are directly
related to their role as a leader. The influence of managers is most clearly seen, according to Mintzberg, in the
leader role. Formal authority vests them with great potential power. Leadership determines, in large part, how much
power they will realize.16
Does the leader’s role matter? Ask the employees of Chrysler Corporation (now DaimlerChrysler). When Lee
Iacocca took over the company in the 1980s, the once-great auto manufacturer was in bankruptcy, teetering on the
verge of extinction. He formed new relationships with the United Auto Workers, reorganized the senior management
of the company, and—perhaps most importantly—convinced the U.S. federal government to guarantee a series of
bank loans that would make the company solvent again. The loan guarantees, the union response, and the reaction
of the marketplace were due in large measure to Iacocca’s leadership style and personal charisma. More recent
examples include the return of Starbucks founder Howard Schultz to re energize and steer his company, and
Amazon CEO Jeff Bezos and his ability to innovate during a downturn in
the economy.17
Exhibit 1.2 Howard Schultz Howard Schultz, executive chairman of Starbucks Corporation, speaks after receiving the Distinguished Business
Leadership Award during the Atlantic Council’s Distinguished Leadership Awards dinner in Washington, D.C. The awards recognize pillars of the
transatlantic relationship for their achievement in the fields of politics, military, business, humanitarian, and artistic leadership. (Credit: Chairman of the
Joint Chief of Staff/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
Popular management literature has had little to say about the liaison role until recently. This role, in which
managers establish and maintain contacts outside the vertical chain of command, becomes especially important in
view of the finding of virtually every study of managerial work that managers spend as much time with peers and
other people outside of their units as they do with their own subordinates. Surprisingly, they spend little time with
their own superiors. In Rosemary Stewart’s study, 160 British middle and top managers spent 47% of their time
with peers, 41% of their time with people inside their unit, and only 12% of their time with superiors. Guest’s (1956)
study of U.S. manufacturing supervisors revealed similar findings.18
Informational roles. Managers are required to gather, collate, analyze, store, and disseminate many kinds of
information. In doing so, they become information resource centers, often storing huge amounts of information in
their own heads, moving quickly from the role of gatherer to the role of disseminator in minutes. Although many
business organizations install large, expensive management information systems to perform many of those
functions, nothing can match the speed and intuitive power of a well-trained manager’s brain for information
processing. Not surprisingly, most managers prefer it that way.
As monitors, managers are constantly scanning the environment for information, talking with liaison contacts and
subordinates, and receiving unsolicited information, much of it as a result of their network of personal contacts. A
good portion of this information arrives in verbal form, often as gossip, hearsay, and speculation.
In the disseminator role, managers pass privileged information directly to subordinates, who might otherwise have no
access to it. Managers must not only decide who should receive such information, but how much of it, how often,
and in what form. Increasingly, managers are being asked to decide whether subordinates, peers, customers,
business partners, and others should have direct access to information 24 hours a day without having to contact the
manager directly.
In the spokesperson role, managers send information to people outside of their organizations: an executive makes
a speech to lobby for an organizational cause, or a supervisor suggests a product modification to a supplier.
Increasingly, managers are also being asked to deal with representatives of the news media,

providing both factual and opinion-based responses that will be printed or broadcast to vast unseen audiences, often
directly or with little editing. The risks in such circumstances are enormous, but so too are the potential rewards in
terms of brand recognition, public image, and organizational visibility.
Decisional roles. Ultimately, managers are charged with the responsibility of making decisions on behalf of both the
organization and the stakeholders with an interest in it. Such decisions are often made under circumstances of high
ambiguity and with inadequate information. Often, the other two managerial roles—interpersonal and
informational—will assist a manager in making difficult decisions in which outcomes are not clear and interests are
often conflicting.
In the role of entrepreneur, managers seek to improve their businesses, adapt to changing market conditions, and
react to opportunities as they present themselves. Managers who take a longer-term view of their responsibilities
are among the first to realize that they will need to reinvent themselves, their product and service lines, their
marketing strategies, and their ways of doing business as older methods become obsolete and competitors gain
advantage.
While the entrepreneur role describes managers who initiate change, the disturbance or crisis handler role depicts
managers who must involuntarily react to conditions. Crises can arise because bad managers let circumstances
deteriorate or spin out of control, but just as often good managers find themselves in the midst of a crisis that they
could not have anticipated but must react to just the same.
The third decisional role of resource allocator involves managers making decisions about who gets what, how much,
when, and why. Resources, including funding, equipment, human labor, office or production space, and even the
boss’s time are all limited, and demand inevitably outstrips supply. Managers must make sensible decisions about
such matters while still retaining, motivating, and developing the best of their employees.
Exhibit 1.3 Thomas Pendergast Thomas F. Prendergast, the president of the Metropolitan Transit Authority of New York State, updates media
on today’s labor negotiations with the LIRR unions. In his role negotiating a new contract with the union, he must take on several managerial roles.
(Credit: Metropolitan Transit Authority of New York State/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
The final decisional role is that of negotiator. Managers spend considerable amounts of time in negotiations: over
budget allocations, labor and collective bargaining agreements, and other formal dispute resolutions. In the course
of a week, managers will often make dozens of decisions that are the result of brief but important negotiations
between and among employees, customers and clients, suppliers, and others with whom managers must deal.19 A
visual interpretation of the roles managers play is illustrated in Exhibit 1.4.
Exhibit 1.4 The Roles Managers Play (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
CONCEPT CHECK
1. Describe and explain how Mintzberg defines the manager’s job.
1.3 Major Characteristics of the Manager's Job

3. What are the characteristics that effective managers display?
Time is fragmented. Managers have acknowledged from antiquity that they never seem to have enough time to get
all those things done that need to be done. In the latter years of the twentieth century, however, a new phenomenon
arose: demand for time from those in leadership roles increased, while the number of hours in a day remained
constant. Increased work hours was one reaction to such demand, but managers quickly discovered that the day had
just 24 hours and that working more of them produced diminishing marginal returns. According to one researcher,
“Managers are overburdened with obligations yet cannot easily delegate their tasks. As a result, they are driven to
overwork and forced to do many tasks superficially. Brevity,

fragmentation, and verbal communication characterize their work.”20
Values compete and the various roles are in tension. Managers clearly cannot satisfy everyone. Employees want
more time to do their jobs; customers want products and services delivered quickly and at high quality levels.
Supervisors want more money to spend on equipment, training, and product development; shareholders want
returns on investment maximized. A manager caught in the middle cannot deliver to each of these people what
each most wants; decisions are often based on the urgency of the need and the proximity of the problem.
The job is overloaded. In recent years, many North American and global businesses were reorganized to make them
more efficient, nimble, and competitive. For the most part, this reorganization meant decentralizing many processes
along with the wholesale elimination of middle management layers. Many managers who survived such downsizing
found that their number of direct reports had doubled. Classical management theory suggests that seven is the
maximum number of direct reports a manager can reasonably handle. Today, high-speed information technology and
remarkably efficient telecommunication systems mean that many managers have as many as 20 or 30 people
reporting to them directly.
Efficiency is a core skill. With less time than they need, with time fragmented into increasingly smaller units
during the workday, with the workplace following many managers out the door and even on vacation, and with
many more responsibilities loaded onto managers in downsized, flatter organizations, efficiency has become the
core management skill of the twenty-first century.
What Varies in a Manager’s Job? The Emphasis

The entrepreneur role is gaining importance. Managers must increasingly be aware of threats and opportunities in
their environment. Threats include technological breakthroughs on the part of competitors, obsolescence in a
manager’s organization, and dramatically shortened product cycles. Opportunities might include product or service
niches that are underserved, out-of-cycle hiring opportunities, mergers, purchases, or upgrades in equipment, space,
or other assets. Managers who are carefully attuned to the marketplace and competitive environment will look for
opportunities to gain an advantage.
So is the leader role gaining importance. Managers must be more sophisticated as strategists and mentors. A
manager’s job involves much more than simple caretaking in a division of a large organization. Unless organizations
are able to attract, train, motivate, retain, and promote good people, they cannot possibly hope to gain advantage
over the competition. Thus, as leaders, managers must constantly act as mentors to those in the organization with
promise and potential. When organizations lose a highly capable worker, all else in their world will come to a halt
until they can replace that worker. Even if they find someone ideally suited and superbly qualified for a vacant
position, they must still train, motivate, and inspire that new recruit, and live with the knowledge that productivity
levels will be lower for a while than they were with their previous employee.
Managerial Responsibilities
An important question often raised about managers is: What responsibilities do managers have in organizations?
According to our definition, managers are involved in planning, organizing, directing, and controlling. Managers
have described their responsibilities that can be aggregated into nine major types of activity. These include:
1. Long-range planning. Managers occupying executive positions are frequently involved in strategic
planning and development.

2. Controlling. Managers evaluate and take corrective action concerning the allocation and use of human,
financial, and material resources.
3. Environmental scanning. Managers must continually watch for changes in the business environment and
monitor business indicators such as returns on equity or investment, economic indicators, business cycles,
and so forth.
4. Supervision. Managers continually oversee the work of their subordinates.
5. Coordinating. Managers often must coordinate the work of others both inside the work unit and out. 6.
Customer relations and marketing. Certain managers are involved in direct contact with customers and
potential customers.
7. Community relations. Contact must be maintained and nurtured with representatives from various
constituencies outside the company, including state and federal agencies, local civic groups, and
suppliers.
8. Internal consulting. Some managers make use of their technical expertise to solve internal problems,
acting as inside consultants for organizational change and development.
9. Monitoring products and services. Managers get involved in planning, scheduling, and monitoring the
design, development, production, and delivery of the organization’s products and services.
As we shall see, not every manager engages in all of these activities. Rather, different managers serve different roles
and carry different responsibilities, depending upon where they are in the organizational hierarchy. We will begin by
looking at several of the variations in managerial work.
Variations in Managerial Work

Although each manager may have a diverse set of responsibilities, including those mentioned above, the amount of
time spent on each activity and the importance of that activity will vary considerably. The two most salient
perceptions of a manager are (1) the manager’s level in the organizational hierarchy and (2) the type of department
or function for which he is responsible. Let us briefly consider each of these.
Management by Level. We can distinguish three general levels of management: executives, middle management,
and first-line management (see Exhibit 1.3). Executive managers are at the top of the hierarchy and are
responsible for the entire organization, especially its strategic direction. Middle managers, who are at the middle of
the hierarchy, are responsible for major departments and may supervise other lower level managers. Finally, first-line
managers supervise rank-and-file employees and carry out day-to-day activities within departments.21
Exhibit 1.5 Levels in the Management Hierarchy (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Exhibit 1.5 shows differences in managerial activities by hierarchical level. Senior executives will devote more of
their time to conceptual issues, while front-line managers will concentrate their efforts on technical issues. For
example, top managers rate high on such activities as long-range planning, monitoring business indicators,
coordinating, and internal consulting. Lower-level managers, by contrast, rate high on supervising because their
responsibility is to accomplish tasks through rank-and-file employees. Middle managers rate near the middle for all
activities. We can distinguish three types of managerial skills:
1. Technical skills. Managers must have the ability to use the tools, procedures, and techniques of their
special areas. An accountant must have expertise in accounting principles, whereas a production
manager must know operations management. These skills are the mechanics of the job.
2. Human relations skills. Human relations skills involve the ability to work with people and understand employee
motivation and group processes. These skills allow the manager to become involved with and lead his group.
3. Conceptual skills. These skills represent a manager’s ability to organize and analyze information in order to
improve organizational performance. They include the ability to see the organization as a whole and to understand
how various parts fit together to work as an integrated unit. These skills are required to coordinate the departments
and divisions successfully so that the entire organization can pull together.
As shown in Exhibit 1.6, different levels of these skills are required at different stages of the managerial
hierarchy. That is, success in executive positions requires far more conceptual skill and less use of technical skills
in most (but not all) situations, whereas first-line managers generally require more technical skills and fewer
conceptual skills. Note, however, that human relations skills, or people skills, remain important for success at all
three levels in the hierarchy.
Exhibit 1.6 Difference in Skills Required for Successful Management According to Level in the Hierarchy (Attribution: Copyright Rice
University, OpenStax, under CC-BY 4.0 license)
Management by Department or Function. In addition to level in the hierarchy, managerial responsibilities also
differ with respect to the type of department or function. There are differences found for quality assurance,
manufacturing, marketing, accounting and finance, and human resource management departments. For instance,
manufacturing department managers will concentrate their efforts on products and services, controlling, and
supervising. Marketing managers, in comparison, focus less on planning, coordinating, and consulting and more on
customer relations and external contact. Managers in both accounting and human resource management
departments rate high on long-range planning, but will spend less time on the organization’s products and service
offerings. Managers in accounting and finance are also concerned with controlling and with monitoring performance
indicators, while human resource managers provide consulting expertise, coordination, and external contacts. The
emphasis on and intensity of managerial activities varies considerably by the department the manager is assigned
to.
At a personal level, knowing that the mix of conceptual, human, and technical skills changes over time and that
different functional areas require different levels of specific management activities can serve at least two important
functions. First, if you choose to become a manager, knowing that the mix of skills changes over time can help you
avoid a common complaint that often young employees want to think and act like a CEO before they have mastered
being a first-line supervisor. Second, knowing the different mix of management activities by functional area can
facilitate your selection of an area or areas that best match your skills and interests.
In many firms managers are rotated through departments as they move up in the hierarchy. In this way they obtain a
well-rounded perspective on the responsibilities of the various departments. In their day-to-day tasks they must
emphasize the right activities for their departments and their managerial levels. Knowing what types of activity to
emphasize is the core of the manager’s job. In any event, we shall return to this issue when

Chapter 1 Managing and Performing 17we address the nature of individual differences in the next chapter.
CONCEPT CHECK
1. Describe and explain the different levels of management.

2. Describe and explain the three types of managerial skills and how they relate to each level of
management.
18 Chapter 1 Managing and Performing Key Terms
Decisional role assumes in the organization.

One of the three major roles that a manager
executive managers One of the three major roles that a manager assumes in
Generally, a team of individuals at the highest level of the organization. One of the three major roles that a
management of an organization. manager assumes in the organization.
first-line management middle management
The level of management directly managing The managers in an organization at a level just below
nonmanagerial employees. that of senior executives.
Informational role Interpersonal role
Summary of Learning Outcomes

1.1 What Do Managers Do?
Managers perform a variety of functions in organizations, but amongst one of the most important functions they
perform is communicating with direct reports to help their organizations achieve and exceed goals.
1.2 The Roles Managers Play

Managers perform a variety of roles in organizations, but amongst one of the most important functions they perform
is communicating with direct reports to help their organizations achieve and exceed goals. Managers perform three
major types of roles within organizations, interpersonal roles, informational roles, and decisional roles. the extent of
each of these roles depends on the manager’s position within the organizational hierarchy.
1.3 Major Characteristics of the Manager's Job

3. What are the characteristics that effective managers display?
Management is the process of planning, organizing, directing, and controlling the activities of employees in
combination with other resources to accomplish organizational goals. Managerial responsibilities include long range
planning, controlling, environmental scanning, supervision, coordination, customer relations, community relations,
internal consulting, and monitoring of products and services. These responsibilities differ by level in the
organizational hierarchy and by department or function. The twenty-first-century manager will differ from most current
managers in four ways. In essence, he will be a global strategist, a master of technology, a good politician, and a
premier leader-motivator.
Chapter Review Questions
1. What are the characteristics and traits that you possess that are common to all successful managers? 2.
Why should management be considered an occupation rather than a profession? 3. How do managers learn
how to perform the job?
4. Explain the manager’s job according to Henry Mintzberg.
5. What responsibilities do managers have towards people within the organization? How do they express these
responsibilities?
6. How do managers perform their job according to John Kotter?
7. How do managers make rational decisions?

8. How does the nature of management change according to one’s level and function in the organization? 9.
Discuss the role of management in the larger societal context. What do you think the managers of the future will
be like?
10. Identify what you think are the critical issues facing contemporary management. Explain.
Management Skills Application Exercises

1. During this and your other courses, there will likely be products of your and team-based assignments that can
illustrate specific competencies such as the ability to prepare a spreadsheet application, write programming
code, or show your communication abilities that demonstrate your skills in a video. It is a good practice to
catalog and save these artifacts in a portfolio that will be a useful in demonstrating your skills in future job
interviews.
2. Time management is an important skill that will impact your future as a manager. You can categorize the time that
you spend as either required or discretionary. You can assess your time management skills by keeping track of
your time using a schedule calendar and breaking down the time devoted to each activity over a week. After a
week of logging the activity, note whether each activity was required or discretionary and whether the time was
used productively or unproductively using a 10-point scale in which 10 is very productive and 1 is completely
unproductive. Now write up a plan on how to manage your time by coming up with a list of what to start doing
and stop doing and what you can do to manage your discretionary time more productively.
Managerial Decision Exercises

1. You are a manager at a local convenience store that has been the victim of graffiti. Identify the roles you will
undertake with both internal employees and others.
2. Here are three job titles. Rank which job would devote the most of its time to conceptual, human, and
technical skills.
a. Vice president of finance at a Fortune 100 company
b. Coding for a video game producer
c. General manager at a local McDonald’s franchise
Critical Thinking Case

New Management Challenges for the New Age
Today’s news is littered with scandals, new allegations of sexual assault, and tragedy. Since 2017 and the #metoo
Movement, stemming from the Harvey Weinstein scandal, more and more public figures have been put into the
spotlight to defend themselves against allegations from women around the globe.
Not only publically, but privately in companies around the world, there have been firings, and investigations into
misconduct from co-workers, managers, and CEOs. It is a relevant topic that is getting long overdue publicity and
encouraging more men and women to come forward to discuss openly rather than hide the events and injustices of
the past. Other events showcase the tumultuous and on-edge society we are living in, such as the Charlottesville,
VA attack, that left 1 dead and 19 injured when a person drove a car through a
crowd of protestors during a white nationalist gathering.
With events on a daily business, it is important for companies to take a stand against racial hatred, harassment of
any kind, and have firm policies when such events occur. Take Netflix for example, who in July of 2018 fired chief
communications officer for saying the “N-word” in full form. This event occurred during an internal meeting, not
directing the slur at anyone specific, but claimed it was being made as an emphatic point about offensive words in
comedy programming. The “Netflix way”, the culture that is built around radical candor and transparency was put to
the test during this occurrence.
The offender, Jonathan Friedland attempted to apologize for his misdeed, hoping it would fade away and his
apology would be accepted. However, it didn’t work that way, instead the anger was palpable between co workers,
and eventually led to the firing of Friedland after a few months of inaction.
Netflixers are given a high level of freedom and responsibility within their “Netflix way” culture. Blunt feedback is
encouraged, trust and discretion is the ultimate gate keeper, as employees have access to sensitive information, and
are ultimately trusted for how they expense items and take vacation time.
Between the insanely fast-paced streaming services industry, it is hard to keep this culture at a premium, but it is
imperative for the success of the company overall. “As you scale a company to become bigger and bigger how do
you scale that kind of culture?” said Colin Estep, a former senior engineer who left voluntarily in 2016. “I don’t know
that we ever had a good answer.”
In order to keep up, sometimes the company is seen as harsh in their tactics to keep the best of the best. “I think
we’re transparent to a fault in our culture and that can come across as cutthroat,” said Walta Nemariam, an
employee in talent acquisition at Netflix, in the video.
Netflix has stayed true to their cultural values despite the pressures and sometimes negative connotations
associated with this “cutthroat” environment. Their ability to remain agile, while displaying no tolerances for societal
injustices makes them at the forefront of new age companies. It is a difficult pace to stay in line with, but it seems
that they are keeping in stride and remaining true to who they are, for now.
Questions:
1. How have the current cultural environment of our country shaped the way that companies are looking at their
own corporate cultural standards?
2. What are the potential downfalls and positive influences of the “Netflix way”?
3. How does Netflix’s internal culture negatively or positively affect their ability to stay competitive and deliver
cutting edge content?
Sources: B. Stelter, "The Weinstein Effect: Harvey Weinstein scandal sparks movements in Hollywood and beyond,"
CNN Business, October 20, 2017, https://money.cnn.com/2017/10/20/media/weinstein-effect-harvey weinstein/;
https://www.washingtonpost.com/; L. Hertzler, " Talking #MeToo, one year after bombshell Weinstein allegations,"
Penn Today, October 30, 2018, https://penntoday.upenn.edu/news/talking-me-too one-year-later; S. Ramachandaran
and J. Flint, " At Netflix, Radical Transparency and Blunt Firings Unsettle the Ranks," Wall Street Journal, October
25, 2018, https://www.wsj.com/articles/at-netflix-radical-transparency
and-blunt-firings-unsettle-the-ranks-1540497174
2
Managerial Decision-Making
Exhibit 2.1 (i_yudai/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
Introduction
Learning Outcomes
What are the basic characteristics of managerial decision-making?

1.
What are the two systems of decision-making in the brain?
2.
What is the difference between programmed and nonprogrammed decisions?
3.
What barriers exist that make effective decision-making difficult?
4.
How can a manager improve the quality of her individual decision-making?
5.
What are the advantages and disadvantages of group decision-making, and how can a manager improve
6.
the quality of group decision-making?
Up, Up, and Away: How Stephanie Korey and Jen Rubio founded their luggage company
Jen Rubio and Stephanie Korey faced a number of important decisions in starting their luggage company,
Away—beginning with the decision to start a business! That decision came about after Rubio’s luggage broke
on a trip. She found it frustrating that all the luggage options were either inexpensive ($100 or less) but low
quality, or high quality but incredibly expensive ($400 and above). There was no midrange option. So in 2015
Rubio and her friend Stephanie Korey began researching the luggage industry. They found that much of the
reason for the high prices on quality luggage was because of how it was distributed and sold, through specialty
retail shops and department stores. If they opted instead
22 Chapter 2 Managerial Decision-Making
for a model in which they sold directly to consumers, they could provide high-quality luggage at more of a
midrange ($200-$300) price. After considerable research, the two were convinced that they had an idea worth
pursuing. Rubio and Korey settled on the company name “Away,” which is intended to invoke the pleasure that
comes from travelling.
Both of the founders had prior experience working for a start-up in the e-commerce space (Warby Parker),
which helped them with making sound choices. Rubio’s background was more in branding and marketing,
while Korey’s was in operations and supply chain management—so each was able to bring great expertise to
various aspects of the business. They raised money initially from friends and family, but within a few months
they sought venture capital funding to ensure that they had enough money to get off to a successful start.
A big decision that Rubio and Korey had to make fairly early in the process of establishing their business was
to settle on an initial design for the product. This decision required extensive marketing and consumer
research to understand customer needs and wants. They asked hundreds of people what they liked about their
existing luggage, and what they found most irritating about their existing luggage. They also contracted with a
two-person design team to help create the first prototype. This research and development ultimately led to the
design of an attractive hard case that is surprisingly lightweight. It also boasts extremely high-quality wheels
(four of them, not two) and high-quality zippers. As a bonus, the carry-on includes a built-in battery for charging
phones and other devices.
The two founders also had to choose a partner to manufacture their product. Because their product had a hard,
polycarbonate shell, Rubio and Korey discovered that manufacturing in the United States was not a viable
option—the vast majority of luggage manufacturers using a polycarbonate shell were based in Asia. They
researched a number of possible business partners and asked lots of questions. In addition, they eventually
visited all of the factories on their list of options to see what they were actually like. This was an important piece
of research, because the companies that looked best on paper didn’t always turn out to be the best when they
visited in person. Rubio and Korey ended up working with a manufacturing partner in China that also produces
luggage for many high-end brands, and they have been extremely pleased with the partnership. They continue
to devote time to building and maintaining that relationship, which helps to avoid issues and problems that
might otherwise come up.
By the end of 2015, Rubio and Korey had developed their first product. Because the luggage was not going to
be available in time for the holiday shopping season, they decided to allow customers to preorder the luggage.
To drum up interest, the duo engaged in a unique storytelling effort. They interviewed 40 well-respected
members of the creative community about their travel experiences and created a hardcover book of travel
memoirs called The Places We Return To. Not only was the book interesting and engaging, it also made lots of
people in the creative community aware of Away luggage. Starting in November 2015, the travel memoir book
was available for free with the purchase of a gift card that could be redeemed in February 2016 for luggage.
The book project generated tremendous advance interest in the product, and the 1,200 printed copies sold out.
Away generated $12 million in first-year sales.
Stephanie Corey and Jen Rubio faced many important and novel decisions in initially developing and building
their business. They have been successful in part because they made those decisions wisely—by relying on
shared knowledge, expertise, and lots of research before reaching a decision. They will continue to face many
decisions, big and small. They have expanded their product line from one piece of luggage to four, with more
luggage—and other travel accessories—in the works for the future. Their company, which is based in New
York, has grown to over 60 employees in the first two years. These

Chapter 2 Managerial Decision-Making 23
employees include the two design-team members who were contracted to help create their first prototype;
Rubio and Korey appreciated working with them so much, they offered them full-time positions with Away.
Each new hire represents new decisions—decisions about what additional work needs to be done and who
they should hire to do it. Each new product also brings additional decisions—but it seems Rubio and Korey
have positioned themselves (and their business) well for future successes.
Sources: Kendall Baker, “An Interview With the Co-Founder of Away,” The Hustle, December 5, 2016,
https://thehustle.co/episodes; Bond Street Blog, “Up and Away,” Bond Street, https://bondstreet.com/
blog/jen-rubio-interview/; Josh Constine, “Away nears 100k stylish suitcases sold as it raises $20M,”
TechCrunch, May 19, 2017, https://techcrunch.com/; Adeline Duff, “ The T&L Carry-On: Away Travel Co
Founders Jen Rubio and Stephanie Korey,” Travel & Leisure, March 9, 2017,
http://www.travelandleisure.com/; Burt Helm, “How This Company Launched With Zero Products –and Hit
$12 Million in First-Year Sales,” Inc.com, July/August 2017, https://www.inc.com/; Veronique Hyland, “The
Duo Trying to Make Travel More Glamorous,” The Cut, December 22, 2015,
https://www.thecut.com/.
Managers and business owners—like Jen Rubio and Stephanie Korey—make decisions on a daily basis. Some are
big, like the decision to start a new business, but most are smaller decisions that go into the regular running of the
company and are crucial to its long-term success. Some decisions are predictable, and some are unexpected. In this
chapter we look at important information about decision-making that can help you make better decisions and,
ultimately, be a better manager.
2.1 Overview of Managerial Decision-Making

1. What are the basic characteristics of managerial decision-making?
Decision-making is the action or process of thinking through possible options and selecting one.
It is important to recognize that managers are continually making decisions, and that the quality of their
decision-making has an impact—sometimes quite significant—on the effectiveness of the organization and its
stakeholders. Stakeholders are all the individuals or groups that are affected by an organization (such as
customers, employees, shareholders, etc.).
Members of the top management team regularly make decisions that affect the future of the organization and all its
stakeholders, such as deciding whether to pursue a new technology or product line. A good decision can enable the
organization to thrive and survive long-term, while a poor decision can lead a business into bankruptcy. Managers at
lower levels of the organization generally have a smaller impact on the organization’s survival, but can still have a
tremendous impact on their department and its workers. Consider, for example, a first-line supervisor who is charged
with scheduling workers and ordering raw materials for her department. Poor decision-making by lower-level
managers is unlikely to drive the entire firm out of existence, but it can lead to many adverse outcomes such as:
• reduced productivity if there are too few workers or insufficient supplies,

• increased expenses if there are too many workers or too many supplies, particularly if the supplies have a limited
shelf life or are costly to store, and
• frustration among employees, reduced morale, and increased turnover (which can be costly for the
organization) if the decisions involve managing and training workers.
Deciding When to Decide

While some decisions are simple, a manager’s decisions are often complex ones that involve a range of options and
uncertain outcomes. When deciding among various options and uncertain outcomes, managers need to gather
information, which leads them to another necessary decision: how much information is needed to make a good
decision? Managers frequently make decisions without complete information; indeed, one of the hallmarks of an
effective leader is the ability to determine when to hold off on a decision and gather more information, and when to
make a decision with the information at hand. Waiting too long to make a decision can be as harmful for the
organization as reaching a decision too quickly. Failing to react quickly enough can lead to missed opportunities, yet
acting too quickly can lead to organizational resources being poorly allocated to projects with no chance of success.
Effective managers must decide when they have gathered enough information and must be prepared to change
course if additional information becomes available that makes it clear that the original decision was a poor one. For
individuals with fragile egos, changing course can be challenging because admitting to a mistake can be harder than
forging ahead with a bad plan. Effective managers recognize that given the complexity of many tasks, some failures
are inevitable. They also realize that it’s better to minimize a bad decision’s impact on the organization and its
stakeholders by recognizing it quickly and correcting it.
What’s the Right (Correct) Answer?

It’s also worth noting that making decisions as a manager is not at all like taking a multiple-choice test: with a
multiple-choice test there is always one right answer. This is rarely the case with management decisions. Sometimes
a manager is choosing between multiple good options, and it’s not clear which will be the best. Other times there are
multiple bad options, and the task is to minimize harm. Often there are individuals in the organization with competing
interests, and the manager must make decisions knowing that someone will be upset no matter what decision is
reached.
What’s the Right (Ethical) Answer?

Sometimes managers are asked to make decisions that go beyond just upsetting someone—they may be asked to
make decisions in which harm could be caused to others. These decisions have ethical or moral implications. Ethics
and morals refer to our beliefs about what is right vs. wrong, good vs. evil, virtuous vs. corrupt. Implicitly, ethics and
morals relate to our interactions with and impact on others—if we never had to interact with another creature, we
would not have to think about how our behaviors affected other individuals or groups. All managers, however, make
decisions that impact others. It is therefore important to be mindful about whether our decisions have a positive or a
negative impact. “Maximizing shareholder wealth” is often used as a rationalization for placing the importance of
short-term profits over the needs of others who will be affected by a decision—such as employees, customers, or
local citizens (who might be affected, for example, by environmental decisions). Maximizing shareholder wealth is
often a short-sighted decision, however, because it can harm the organization’s financial viability in the future.1 Bad
publicity, customers boycotting the organization, and government fines are all possible long-term outcomes when
managers make choices that cause harm in order to maximize shareholder wealth. More importantly, increasing the
wealth of shareholders is not an acceptable reason for causing harm to others.
As you can see from these brief examples, management is not for the faint of heart! It can, however, be incredibly
rewarding to be in a position to make decisions that have a positive impact on an organization and its stakeholders.
We see a great example of this in the Sustainability and Responsible Management box.

SUSTAINABILITY AND RESPONSIBLE MANAGEMENT
Brewing Sustainable Success

The focus of a manager or a business owner is often primarily on doing well (making a profit). Sometimes,
though, organizational leaders choose to pursue two big goals at once: doing well, and simultaneously doing
good (benefiting society in some way). Why? Generally because they think it’s an important thing to do. The
business provides an opportunity to pursue another goal that the founders, owners, or managers are also
passionate about. In the case of New Belgium Brewing, the company’s cofounders, Jeff Lebesch and Kim
Jordan, were passionate about two things: making great beer and environmental stewardship. So it should
come as no surprise that their brewery is dedicated to reducing its environmental footprint. The brewery has
created a culture that fosters sustainability in a wide range of ways, such as by giving employees a bicycle on
their one-year anniversary as a way to encourage them to ride bicycles to work. The organization is also active
in advocacy efforts, such as the “Save the Colorado” (river) campaign, and it works hard to promote
responsible decision-making when it comes to environmental issues. In fact, in 1999, following an employee
vote, the brewery began to purchase all of its electricity from wind power, even though it was more expensive
than electricity from coal-burning power plants (which meant reduced profitability and less money for employee
bonuses).
While the brewery still relies primarily on wind power, it also now generates a portion of its electricity
onsite—some from rooftop solar panels, and even more from biogas, the methane gas byproduct that is
created by microbes in the brewery’s water treatment plant. The company cleans the wastewater generated
from beer production, and in doing so it generates the biogas, which is captured and used for energy to help
run the brewery.
Brewing is water intensive, so New Belgium works hard to reduce water consumption and to recycle the water
that it does use. The company also reduces other types of waste by selling used grain, hops, and yeast to
local ranchers for cattle feed. The company, which has been employee owned since 2013, also works with the
local utility through a Smart Meter program to reduce their energy consumption at peak times.
All of these efforts at doing good must come at a cost, right? Actually, research shows that companies that are
committed to sustainability have superior financial performance, on average, relative to those that are not. In
coming up with creative ways to reduce, reuse, and recycle, employees often also find ways to save money
(like using biogas). In addition, organizations that strive to do good are often considered attractive and
desirable places to work (especially by people who have similar values) and are also valued by the surrounding
communities. As a result, employees in those organizations tend to be extremely committed to them, with high
levels of engagement, motivation, and productivity. Indeed, it seems clear that the employees at the New
Belgium Brewery are passionate about where they work and what they do. This passion generates value for
the organization and proves that it is, in fact, possible to do well while having also made the decision to do
good. And in the case of New Belgium Brewery, that means working to protect the environment while also
making delicious beer.
Discussion Questions
1. What challenges does New Belgium Brewery face in pursuing environmental goals? 2. Can you think
of any other examples of companies that try to “do good” while also doing well? 3. Would you like to
work for an organization that is committed to something more than just
profitability, even if it meant your salary or bonus would be smaller?
Sources: Karen Crofton, “How New Belgium Brewery leads Colorado’s craft brewers in energy,” GreenBiz,
August 1, 2014, https://www.greenbiz.com/. Darren Dahl, “How New Belgium Brewing Has Found Sustainable
Success,” Forbes, February 8, 2016, https://www.forbes.com/. Jenny Foust, “New Belgium Brewing Once
Again Named Platinum-Level Bicycle Friendly Business by the League of American Bicyclists,” Craft Beer.com,
February 18, 2016. Robert G. Eccles, Ioannis Ioannou, & George Serafeim, “The Impact of Corporate
Sustainability on Organizational Processes and Performance,” Management Science, 60, 2014,
https://doi.org/10.1287/mnsc.2014.1984. New Belgium Brewery Sustainability web page,
http://www.newbelgium.com/sustainability, accessed September 18, 2017.
CONCEPT CHECK
1. What are some positive outcomes of decision-making for an organization? What are some possible
negative outcomes?
2. How is managerial decision-making different from a multiple-choice test?
3. In addition to the owners of a business, who are some of the other stakeholders that managers should
consider when making decisions?
2.2 How the Brain Processes Information to Make Decisions: Reflective and
Reactive Systems
2. What are the two systems of decision-making in the brain?
The human brain processes information for decision-making using one of two routes: a reflective system and a
reactive (or reflexive) system.2,3 The reflective system is logical, analytical, deliberate, and methodical, while the
reactive system is quick, impulsive, and intuitive, relying on emotions or habits to provide cues for what to do next.
Research in neuropsychology suggests that the brain can only use one system at a time for processing information
[Darlow & Sloman] and that the two systems are directed by different parts of the brain. The prefrontal cortex is more
involved in the reflective system, and the basal ganglia and amygdala (more primitive parts of the brain, from an
evolutionary perspective) are more involved in the reactive system.4
Reactive Decision-Making
We tend to assume that the logical, analytical route leads to superior decisions, but whether this is accurate
depends on the situation. The quick, intuitive route can be lifesaving; when we suddenly feel intense fear, a
fight-or-flight response kicks in that leads to immediate action without methodically weighing all possible options
and their consequences. Additionally, experienced managers can often make decisions very quickly because
experience or expertise has taught them what to do in a given situation. These managers might not be able to
explain the logic behind their decision, and will instead say they just went with their “gut,” or did what “felt” right.
Because the manager has faced a similar situation in the past and has figured out how to

deal with it, the brain shifts immediately to the quick, intuitive decision-making system.5
Reflective Decision-Making
The quick route is not always the best decision-making path to take, however. When faced with novel and complex
situations, it is better to process available information logically, analytically, and methodically. As a manager, you
need to think about whether a situation requires not a fast, “gut” reaction, but some serious thought prior to making
a decision. It is especially important to pay attention to your emotions, because strong emotions can make it difficult
to process information rationally. Successful managers recognize the effects of emotions and know to wait and
address a volatile situation after their emotions have calmed down. Intense emotions—whether positive or
negative—tend to pull us toward the quick, reactive route of decision making. Have you ever made a large
“impulse” purchase that you were excited about, only to regret it later? This speaks to the power our emotions exert
on our decision-making. Big decisions should generally not be made impulsively, but reflectively.
The Role of Emotions

Being aware of the role emotions play in decision-making does not mean that we should ignore them. Emotions can
serve as powerful signals about what we should do, especially in situations with ethical implications. You can read
more about this particular type of decision-making in the Ethics in Practice box later in this chapter. Thinking through
how we feel about the possible options, and why we feel that way, can greatly enhance our decision-making.6
Effective decision-making, then, relies on both logic and emotions. For this reason, the concept of emotional
intelligence has become popular as a characteristic of effective managers. Emotional intelligence is the ability to
recognize, understand, pay attention to, and manage one’s own emotions and the emotions of others. It involves
self-awareness and self-regulation—essentially, this is a toggling back and forth between emotions and logic so that
we analyze and understand our own emotions and then exert the necessary control to manage them as appropriate
for the situation. Emotional intelligence also involves empathy—the ability to understand other peoples’ emotions
(and an interest in doing so). Finally, emotional intelligence involves social skills to manage the emotional aspects of
relationships with others. Managers who are aware of their own emotions can think through what their emotions
mean in a given situation and use that information to guide their decision-making. Managers who are aware of the
emotions of others can also utilize that information to help groups function more effectively and engage in better
group decision-making. While emotional intelligence seems to come easily to some people, it is something that we
can develop and improve on with practice. A model of emotional intelligence is presented in Exhibit 2.2.
Exhibit 2.2 Emotional Intelligence (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
CONCEPT CHECK
1. Explain the two systems used by the brain in decision-making.

2. What is emotional intelligence, and why is it important for decision-making?
2.3 Programmed and Nonprogrammed Decisions

3. What is the difference between programmed and nonprogrammed decisions?
Because managers have limited time and must use that time wisely to be effective, it is important for them to
distinguish between decisions that can have structure and routine applied to them (called programmed decisions)
and decisions that are novel and require thought and attention (nonprogrammed decisions).
Programmed Decisions
Programmed decisions are those that are repeated over time and for which an existing set of rules can be
developed to guide the process. These decisions might simple, or they could be fairly complex, but the criteria that
go into making the decision are all known or can at least be estimated with a reasonable degree of accuracy. For
example, deciding how many raw materials to order should be a programmed decision based on anticipated
production, existing stock, and anticipated length of time for the delivery of the final product. As another example,
consider a retail store manager developing the weekly work schedule for part-time employees. The manager must
consider how busy the store is likely to be, taking into account seasonal fluctuations in business. Then, she must
consider the availability of the workers by taking into account

requests for vacation and for other obligations that employees might have (such as school). Establishing the
schedule might be complex, but it is still a programmed decision: it is made on a regular basis based on well
understood criteria, so structure can be applied to the process. For programmed decisions, managers often
develop heuristics, or mental shortcuts, to help reach a decision. For example, the retail store manager may
not know how busy the store will be the week of a big sale, but might routinely increase staff by 30% every time there
is a big sale (because this has been fairly effective in the past). Heuristics are efficient—they save time for the
decision maker by generating an adequate solution quickly. Heuristics don’t necessarily yield the optimal
solution—deeper cognitive processing may be required for that. However, they generally yield a good solution.
Heuristics are often used for programmed decisions, because experience in making the decision over and over helps
the decision maker know what to expect and how to react. Programmed decision-making can also be taught fairly
easily to another person. The rules and criteria, and how they relate to outcomes, can be clearly laid out so that a
good decision can be reached by the new decision maker. Programmed decisions are also sometimes referred to as
routine or low-involvement decisions because they don’t require in-depth mental processing to reach a decision.
High- and low-involvement decisions are illustrated in Exhibit 2.3.
Exhibit 2.3 High-Involvement and Low-Involvement Decisions. (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Nonprogrammed Decisions
In contrast, nonprogrammed decisions are novel, unstructured decisions that are generally based on criteria that
are not well-defined. With nonprogrammed decisions, information is more likely to be ambiguous or incomplete, and
the decision maker may need to exercise some thoughtful judgment and creative thinking to reach a good solution.
These are also sometimes referred to as nonroutine decisions or as high-involvement decisions because they
require greater involvement and thought on the part of the decision maker. For example, consider a manager trying
to decide whether or not to adopt a new technology. There will always be unknowns in situations of this nature. Will
the new technology really be better than the existing technology? Will it become widely accepted over time, or will
some other technology become the standard? The best the manager can do in this situation is to gather as much
relevant information as possible and make an educated guess as to whether the new technology will be worthwhile.
Clearly, nonprogrammed decisions present the greater challenge.
The Decision-Making Process
While decisions makers can use mental shortcuts with programmed decisions, they should use a systematic
process with nonprogrammed decisions. The decision-making process is illustrated in Exhibit 2.4 and can be
broken down into a series of six steps, as follows:
1. Recognize that a decision needs to be made.

2. Generate multiple alternatives.
3. Analyze the alternatives.
4. Select an alternative.
5. Implement the selected alternative.
6. Evaluate its effectiveness.
While these steps may seem straightforward, individuals often skip steps or spend too little time on some steps. In
fact, sometimes people will refuse to acknowledge a problem (Step 1) because they aren’t sure how to address it.
We’ll discuss the steps more later in the chapter, when we review ways to improve the quality of decision-making.
Exhibit 2.4 The Decision-Making Process. (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
You may notice similarities between the two systems of decision-making in our brains and the two types of
decisions (programmed and nonprogrammed). Nonprogrammed decisions will generally need to be processed via
the reflective system in our brains in order for us to reach a good decision. But with programmed decisions,
heuristics can allow decision makers to switch to the quick, reactive system and then move along quickly to other
issues.

CONCEPT CHECK
1. Give an example of a programmed decision that a manager might face.

2. Give an example of a nonprogrammed decision.
3. What are heuristics, and when are they helpful?
4. How are programmed and nonprogrammed decisions connected to the reflective and reactive
systems in the brain?
2.4 Barriers to Effective Decision-Making

4. What barriers exist that make effective decision-making difficult?
There are a number of barriers to effective decision-making. Effective managers are aware of these potential
barriers and try to overcome them as much as possible.
Bounded Rationality
While we might like to think that we can make completely rational decisions, this is often unrealistic given the complex
issues faced by managers. Nonrational decision-making is common, especially with nonprogrammed decisions.
Since we haven’t faced a particular situation previously, we don’t always know what questions to ask or what
information to gather. Even when we have gathered all the possible information, we may not be able to make rational
sense of all of it, or to accurately forecast or predict the outcomes of our choice. Bounded rationality is the idea that
for complex issues we cannot be completely rational because we cannot fully grasp all the possible alternatives, nor
can we understand all the implications of every possible alternative. Our brains have limitations in terms of the
amount of information they can process. Similarly, as was alluded to earlier in the chapter, even when managers have
the cognitive ability to process all the relevant information, they often must make decisions without first having time to
collect all the relevant data—their information is incomplete.
Escalation of Commitment
Given the lack of complete information, managers don’t always make the right decision initially, and it may not be
clear that a decision was a bad one until after some time has passed. For example, consider a manager who had to
choose between two competing software packages that her organization will use on a daily basis to enhance
efficiency. She initially chooses the product that was developed by the larger, more well-established company,
reasoning that they will have greater financial resources to invest in ensuring that the technology is good. However,
after some time it becomes clear that the competing software package is going to be far superior. While the smaller
company’s product could be integrated into the organization’s existing systems at little additional expense, the larger
company’s product will require a much greater initial investment, as well as substantial ongoing costs for maintaining
it. At this point, however, let’s assume that the manager has already paid for the larger company’s (inferior) software.
Will she abandon the path that she’s on, accept the loss on the money that’s been invested so far, and switch to the
better software? Or will she continue to invest time and money into trying to make the first product work? Escalation
of commitment is the tendency of decision
makers to remain committed to poor decision, even when doing so leads to increasingly negative outcomes. Once
we commit to a decision, we may find it difficult to reevaluate that decision rationally. It can seem easier to “stay the
course” than to admit (or to recognize) that a decision was poor. It’s important to acknowledge that not all decisions
are going to be good ones, in spite of our best efforts. Effective managers recognize that progress down the wrong
path isn’t really progress, and they are willing to reevaluate decisions and change direction when appropriate.
Time Constraints
Managers often face time constraints that can make effective decision-making a challenge. When there is little time
available to collect information and to rationally process it, we are much less likely to make a good nonprogrammed
decision. Time pressures can cause us to rely on heuristics rather than engage in deep processing. While heuristics
save time, however, they don’t necessarily lead to the best possible solution. The best managers are constantly
assessing the risks associated with acting too quickly against those associated with not acting quickly enough.
Uncertainty
In addition, managers frequently make decisions under conditions of uncertainty—they cannot know the outcome of
each alternative until they’ve actually chosen that alternative. Consider, for example, a manager who is trying to
decide between one of two possible marketing campaigns. The first is more conservative but is consistent with what
the organization has done in the past. The second is more modern and edgier, and might bring much better results .
. . or it might be a spectacular failure. The manager making the decision will ultimately have to choose one
campaign and see what happens, without ever knowing what the results would have been with the alternate
campaign. That uncertainty can make it difficult for some managers to make decisions, because committing to one
option means forgoing other options.
Personal Biases
Our decision-making is also limited by our own biases. We tend to be more comfortable with ideas, concepts,
things, and people that are familiar to us or similar to us. We tend to be less comfortable with that which is
unfamiliar, new, and different. One of the most common biases that we have, as humans, is the tendency to like
other people who we think are similar to us (because we like ourselves).7 While these similarities can be observable
(based on demographic characteristics such as race, gender, and age), they can also be a result of shared
experiences (such as attending the same university) or shared interests (such as being in a book club together).
This “similar to me” bias and preference for the familiar can lead to a variety of problems for managers: hiring
less-qualified applicants because they are similar to the manager in some way, paying more attention to some
employees’ opinions and ignoring or discounting others, choosing a familiar technology over a new one that is
superior, sticking with a supplier that is known over one that has better quality, and so on.
It can be incredibly difficult to overcome our biases because of the way our brains work. The brain excels at
organizing information into categories, and it doesn’t like to expend the effort to re-arrange once the categories are
established. As a result, we tend to pay more attention to information that confirms our existing beliefs and less
attention to information that is contrary to our beliefs, a shortcoming that is referred to as confirmation bias.8

In fact, we don’t like our existing beliefs to be challenged. Such challenges feel like a threat, which tends to push our
brains towards the reactive system and prevent us from being able to logically process the new information via the
reflective system. It is hard to change people’s minds about something if they are already confident in their
convictions. So, for example, when a manager hires a new employee who she really likes and is convinced is going
to be excellent, she will tend to pay attention to examples of excellent performance and ignore examples of poor
performance (or attribute those events to things outside the employee’s control). The manager will also tend to trust
that employee and therefore accept their explanations for poor performance without verifying the truth or accuracy of
those statements. The opposite is also true; if we dislike someone, we will pay attention to their negatives and ignore
or discount their positives. We are less likely to trust them or believe what they say at face value. This is why politics
tend to become very polarized and antagonistic within a two-party system. It can be very difficult to have accurate
perceptions of those we like and those we dislike. The effective manager will try to evaluate situations from multiple
perspectives and gather multiple opinions to offset this bias when making decisions.
Conflict
Finally, effective decision-making can be difficult because of conflict. Most individuals dislike conflict and will avoid it
when possible. However, the best decision might be one that is going to involve some conflict. Consider a manager
who has a subordinate who is often late to work, causing others to have to step away from their responsibilities in
order to cover for the late employee. The manager needs to have a conversation with that employee to correct the
behavior, but the employee is not going to like the conversation and may react in a negative way. Both of them are
going to be uncomfortable. The situation is likely to involve conflict, which most people find stressful. Yet, the correct
decision is still to have the conversation even if (or especially if) the employee otherwise is an asset to the
department.
Exhibit 2.5
Dante Disparte Dante Disparte is the founder and CEO of Risk Cooperative and also coauthor of Global Risk Agility and Decision Making. He suggests
that unforeseen and unanticipated risks are becoming more frequent and less predictable and are having a greater impact on more people at one time.
Credit (New America/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
If the bad behavior is not corrected, it will continue, which is going to cause more problems in the workplace in
the long run. Other employees may recognize that this behavior is allowed, and they may also start coming to work
late or engaging in other negative behaviors. Eventually, some employees may become sufficiently frustrated that
they look for another place to work. It’s worth noting that in this situation, the best employees will find new jobs the
most quickly. It’s important for managers to recognize that while conflict can be uncomfortable (especially in the
short-term), there are times when it is necessary for the group, department, or organization to function effectively in
the long run.
It is also helpful to think about conflict in terms of process conflict or relationship conflict.9 Process conflict, conflict
about the best way to do something, can actually lead to improved performance, as individuals explore various
options together in order to identify superior solutions. Relationship conflict is conflict between individuals that is
more personal and involves attacks on a person rather than an idea. This kind of conflict is generally harmful and
should be quelled when possible. The harm from relationship conflict arises at least in part because feeling
personally attacked will cause an individual to revert to the reactive system of the brain.
Effective managers should be particularly aware of the possibility of relationship conflict when giving feedback and
should keep feedback focused on behaviors and activities (how things are done) rather than on the individual. Being
aware of and dealing with relationship conflict points to why emotional intelligence and empathy are beneficial in
organizational leaders. Such leaders are more likely to be attentive to the harmful consequences of relationship
conflict. The “Managerial Leadership” segment shows how one CEO encourages empathetic collaboration and how
that effort is proving beneficial.
MANAGERIAL LEADERSHIP
Satya Nadella’s Transformation of Microsoft

When Satya Nadella became the CEO of Microsoft in 2014, he set in motion a major transformation of the
organization’s culture. He wanted it to shift from a culture that valued “know-it-alls” to one that values
“learn-it-all.” Instead of employees feeling the need to prove that they were the smartest person in the room, he
wanted them to become curious and effective listeners, learners, and communicators. Only through continual
learning and collaboration with one another, and with customers, would Microsoft remain able to develop and
provide great technology solutions.
One of Nadella’s first mandates as CEO was to ask all the members of the top management team to read the
book Nonviolent Communication by Marshall Rosenberg. The primary focus of the book is on empathetic
communication—a kinder, gentler approach than Microsoft employees were accustomed to. Nadella believes
that developing empathy leads to a heightened understanding of consumer needs and wants and an enhanced
ability to develop better products and services through collaboration.
Nadella has also embraced diversity and inclusion initiatives, though he readily acknowledges that there is
more to be done. This is, in part, an extension of his focus on empathy. However, it’s also good business,
because increasing the diversity of perspectives can help to drive innovation.
This cultural shift is reflected in Microsoft’s new mission statement: “To empower every person and every
organization on the planet to achieve more.” Empowering every person includes Microsoft’s own employees.
Achieving diversity is particularly a challenge in an industry that is male dominated, and Nadella admits that he
has made mistakes based on his own biases. At a Women in Computing conference early in his tenure as
CEO, Nadella suggested that women did not need to ask for raises

when they deserved them; the system, he said, would work it out. He later admitted that he was wrong and
used the mistake as a platform for making greater strides in this arena.
Senior management team meetings at Microsoft have apparently changed dramatically as a result of the
culture change driven by Nadella. Previously, members felt the need to constantly prove that they knew all the
right answers at team meetings. Nadella has established different norms; he seeks out honest opinions from
team members and gives positive feedback on a regular basis. By moving the focus away from always being
right and toward a focus of continual learning, the culture at Microsoft has become more collaborative, and
employees are more willing to take risks to create something amazing. The culture shift seems to be paying
off: Microsoft’s products are being described as “cool” and “exciting,” its cloud-computing platform is
outperforming the competition, and its financial performance has improved dramatically. Transforming the
culture of an organization is a massive undertaking, but Nadella’s leadership of Microsoft clearly shows that it’s
a decision that can pay off.
1. Do you think a culture focused on learning makes sense for Microsoft? Why or why not? 2. What are the
advantages of a culture that emphasizes empathetic communication? Can you think of any disadvantages?
3. The job of CEO means making big decisions that impact the entire organization—like deciding to
change the culture. How do you think you prepare for that job?
Sources: Kendall Baker, “Confirmed: Microsoft is a legit threat to Apple,” The Hustle, March 16, 2017. Bob
Evans, “10 Powerful examples of Microsoft CEO Satya Nadella’s Transformative Vision,” Forbes, July 26,
2017. Harry McCraken, “Satya Nadella Rewrites Microsoft’s Code,” Fast Company, September 18, 2017,
https://www.fastcompany.com/40457458/satya-nadella-rewrites-microsofts-code. Annie Palmer, “Microsoft has
been reborn under CEO Satya Nadella,” The Street, September 20, 2017.
CONCEPT CHECK
1. Explain the concept of confirmation bias.

2. List and describe at least three barriers to effective decision-making.
3. When is conflict beneficial, and when is it harmful? Why?
2.5 Improving the Quality of Decision-Making

5. How can a manager improve the quality of her individual decision-making?
Managers can use a variety of techniques to improve their decision-making by making better-quality decisions or
making decisions more quickly. Table 2.1 summarizes some of these tactics.
Summary of Techniques That May Improve Individual Decision-Making
Type of Decision Technique Benefit

Programmed Heuristics (mental shortcuts) Saves time
decisions
Satisficing (choosing first acceptable solution) Saves time
Nonprogramme Systematically go through the six steps of the Improves quality

d decisions decision-making process.
Talk to other people. Improves quality: generates

more options, reduces bias
Be creative. Improves quality: generates

more options
Conduct research; engage in Improves quality

evidence-based decision-making.
Engage in critical thinking. Improves quality
Think about the long-term implications. Improves quality
Consider the ethical implications. Improves quality

Table 2.1 (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
The Importance of Experience

An often overlooked factor in effective decision-making is experience. Managers with more experience have
generally learned more and developed greater expertise that they can draw on when making decisions.
Experience helps managers develop methods and heuristics to quickly deal with programmed decisions and helps
them know what additional information to seek out before making a nonprogrammed decision.
Techniques for Making Better Programmed Decisions

In addition, experience enables managers to recognize when to minimize the time spent making decisions on issues
that are not particularly important but must still be addressed. As discussed previously, heuristics are mental
shortcuts that managers take when making programmed (routine, low-involvement) decisions. Another technique that
managers use with these types of decisions is satisficing. When satisficing, a decision maker selects the first
acceptable solution without engaging in additional effort to identify the best solution. We all engage in satisficing
every day. For example, suppose you are shopping for groceries and you don’t want to overspend. If you have plenty
of time, you might compare prices and figure out the price by weight (or volume) to ensure that every item you select
is the cheapest option. But if you are in a hurry, you might just select generic products, knowing that they are cheap
enough. This allows you to finish the task quickly at a reasonably low cost.

Techniques for Making Better Nonprogrammed Decisions

For situations in which the quality of the decision is more critical than the time spent on the decision, decision
makers can use several tactics. As stated previously, nonprogrammed decisions should be addressed using a
systematic process. We therefore discuss these tactics within the context of the decision-making steps. To review,
the steps include the following:
1. Recognize that a decision needs to be made.

2. Generate multiple alternatives.
3. Analyze the alternatives.
4. Select an alternative.
5. Implement the selected alternative.
6. Evaluate its effectiveness.
Step 1: Recognizing That a Decision Needs to Be Made

Ineffective managers will sometimes ignore problems because they aren’t sure how to address them. However,
this tends to lead to more and bigger problems over time. Effective managers will be attentive to problems and to
opportunities and will not shy away from making decisions that could make their team, department, or
organization more effective and more successful.
Step 2: Generating Multiple Alternatives

Often a manager only spends enough time on Step 2 to generate two alternatives and then quickly moves to Step
3 in order to make a quick decision. A better solution may have been available, but it wasn’t even considered. It’s
important to remember that for nonprogrammed decisions, you don’t want to rush the process. Generating many
possible options will increase the likelihood of reaching a good decision. Some tactics to help with generating more
options include talking to other people (to get their ideas) and thinking creatively about the problem.
Talk to other people

Managers can often improve the quality of their decision-making by involving others in the process, especially when
generating alternatives. Other people tend to view problems from different perspectives because they have had
different life experiences. This can help generate alternatives that you might not otherwise have considered. Talking
through big decisions with a mentor can also be beneficial, especially for new managers who are still learning and
developing their expertise; someone with more experience will often be able to suggest more options.
Be creative
We don’t always associate management with creativity, but creativity can be quite beneficial in some situations. In
decision-making, creativity can be particularly helpful when generating alternatives. Creativity is the generation of
new or original ideas; it requires the use of imagination and the ability to step back from traditional ways of doing
things and seeing the world. While some people seem to be naturally creative, it is a skill that you can develop. Being
creative requires letting your mind wander and combining existing knowledge from past experiences in novel ways.
Creative inspiration may come when we least expect it (in the shower, for example) because we aren’t intensely
focused on the problem—we’ve allowed our minds to wander. Managers who strive to be creative will take the time
to view a problem from multiple perspectives,
try to combine information in news ways, search for overarching patterns, and use their imaginations to
generate new solutions to existing problems. We’ll review creativity in more detail in Chapter 18.
Step 3: Analyzing Alternatives

When implementing Step 3, it is important to take many factors into consideration. Some alternatives might be more
expensive than others, for example, and that information is often essential when analyzing options. Effective
managers will ensure that they have collected sufficient information to assess the quality of the various options. They
will also utilize the tactics described below: engaging in evidence-based decision making, thinking critically, talking to
other people, and considering long-term and ethical implications.
Do you have the best-quality data and evidence?
Evidence-based decision-making is an approach to decision-making that states that managers should

systematically collect the best evidence available to help them make effective decisions. The evidence that is
collected might include the decision maker’s own expertise, but it is also likely to include external evidence, such as
a consideration of other stakeholders, contextual factors relevant to the organization, potential costs and benefits,
and other relevant information. With evidence-based decision-making, managers are encouraged to rely on data
and information rather than their intuition. This can be particularly beneficial for new managers or for experienced
managers who are starting something new. (Consider all the research that Rubio and Korey conducted while
starting Away).
As mentioned previously, it can be worthwhile to get help from others when generating options. Another good time to
talk to other people is while analyzing those options; other individuals in the organization may help you assess the
quality of your choices. Seeking out the opinions and preferences of others is also a great way to maintain
perspective, so getting others involved can help you to be less biased in your decision-making (provided you talk to
people whose biases are different from your own).
Are you thinking critically about the options?
Our skill at assessing alternatives can also be improved by a focus on critical thinking. Critical thinking is a
disciplined process of evaluating the quality of information, especially data collected from other sources and
arguments made by other people, to determine whether the source should be trusted or whether the argument is
valid.
An important factor in critical thinking is the recognition that a person’s analysis of the available information may be
flawed by a number of logical fallacies that they may use when they are arguing their point or defending their
perspective. Learning what those fallacies are and being able to recognize them when they occur can help improve
decision-making quality. See Table 2.2 for several examples of common logical fallacies.

Common Logical Fallacies
Name Description Examples Ways to Combat This Logical Fallacy

Non The conclusion Our biggest • Examine all the arguments. Are they
sequitur that is competitor is reasonable?
(does not presented isn’t spending more on • Look for any assumptions that are
follow) a logical marketing than we are. being made in the argument
conclusion or They have a larger sequence. Are they reasonable?
isn’t the only share of the market. • Try to gather evidence that
logical Therefore, we should supports or refutes the
conclusion spend more on arguments and/or assumptions.
based on the marketing.
In this example, you should ask: Are
argument(s). The unspoken there any other reasons, besides their
assumption: They have spending on marketing, why our
a larger share of the competitor has a larger share of
market BECAUSE they the market?
spend more on
marketing.
False cause Assuming that because This is similar to non sequitur; it something else may be the cause.
two makes an assumption in the
In this case, most holidays for which
things are related, argument sequence.
businesses close are in the late fall
one caused the and winter (Thanksgiving,
other Christmas), and there are more
“Our employees get sick more when
illnesses at this time of year because
we close for holidays. So we should
• Ask yourself whether the first thing of the weather, not because of the
stop closing for
really causes the second, or if business being closed.
holidays.”

Ad Redirects from “You aren’t really • Does the second person have
hominem the argument going to take John something to gain, a hidden
(attack the itself to attack seriously, are you? I agenda, in trying to make you
man) the person heard his distrust the first person?
making biggest client just • If the first person’s argument came
the argument dropped him for from someone else, would it be
another vendor persuasive?
because he’s all talk
and no substance.”
The goal: if you stop

trusting the person,
you’ll discount their
argument.
Genetic You can’t trust “This was made in This fallacy is based on stereotypes.
fallacy something China, so it must be Stereotypes are generalizations; some
because of its low are grossly inaccurate, and even those
origins. quality.” that are accurate in SOME cases are
never accurate in ALL cases.
“He is a lawyer, so
Recognize this for what it is—an
you can’t trust
attempt to prey on existing biases.
anything he says.”
Appeal to tradition • Consider whether the information suggests that

“We’ve always done it this
If we have always done it way.” situation has changed, the traditional
one calling for a change in the viewpoint is incorrect.
“We shouldn’t change this; it way things are being done.
particular way, that must be Remember, we used to
works fine the way it is.”
the right or best way. • Consider whether new think that the earth was flat.
Table 2.2 (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license) This OpenStax book is available for free at
http://cnx.org/content/col28330/1.8

Redirects the “We should do it for •D
Bandwagon approach argument from [recently deceased]
logic to emotion Steve; it’s what he
would have wanted.”
•
Appeal to emotion
If the majority “Everybody does

of people are
“Our customers
doing it, it must don’t want to be
be served by
good. people like that.”
Have you considered the long-term implications?

A focus on immediate, short-term outcomes—with little consideration for the future—can cause problems. For
example, imagine that a manager must decide whether to issue dividends to investors or put that money into
research and development to maintain a pipeline of innovative products. It’s tempting to just focus on the short-term:
providing dividends to investors tends to be good for stock prices. But failing to invest in research and development
might mean that in five years the company is unable to compete effectively in the marketplace, and as a result the
business closes. Paying attention to the possible long-term outcomes is a crucial part of analyzing alternatives.
Are there ethical implications?
It’s important to think about whether the various alternatives available to you are better or worse from an ethical
perspective, as well. Sometimes managers make unethical choices because they haven’t considered the ethical
implications of their actions. In the 1970s, Ford manufactured the Pinto, which had an unfortunate flaw: the car would
easily burst into flames when rear-ended. The company did not initially recall the vehicle because they viewed the
problem from a financial perspective, without considering the ethical implications.10 People died as a result of the
company’s inaction. Unfortunately, these unethical decisions continue to occur—and cause harm—on a regular basis
in our society. Effective managers strive to avoid these situations by thinking through the possible ethical implications
of their decisions. The decision tree in Exhibit 2.6 is a
great example of a way to make managerial decisions while also taking ethical issues into account.
Exhibit 2.6 Ethical Decision Tree (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Thinking through the steps of ethical decision-making may also be helpful as you strive to make good
decisions. James Rest’s ethical decision-making model11 identifies four components to ethical decision
making:
1. Moral sensitivity—recognizing that the issue has a moral component;

2. Moral judgment—determining which actions are right vs. wrong;
3. Moral motivation/intention—deciding to do the right thing; and
4. Moral character/action—actually doing what is right.
Note that a failure at any point in the chain can lead to unethical actions! Taking the time to identify possible ethical
implications will help you develop moral sensitivity, which is a critical first step to ensuring that you are making
ethical decisions.
Once you have determined that a decision has ethical implications, you must consider whether your various
alternatives are right or wrong—whether or not they will cause harm, and if so, how much and to whom. This is the
moral judgment component. If you aren’t sure about whether something is right or wrong, think about how you
would feel if that decision ended up on the front page of a major newspaper. If you would feel guilty or ashamed,
don’t do it! Pay attention to those emotional cues—they are providing important information about the option that
you are contemplating.
The third step in the ethical decision-making model involves making a decision to do what is right, and the fourth step
involves following through on that decision. These may sound, but consider a situation in which your boss tells you to
do something that you know to be wrong. When you push back, your boss makes it clear that you will lose your job if
you don’t do what you’ve been told to do. Now, consider that you have family at home who rely on your income.
Making the decision to do what you know is right could come at a substantial cost to you personally. In these
situations, your best course of action is to find a way to persuade your boss that the unethical action will cause
greater harm to the organization in the long-term.

Step 4: Selecting an Alternative

Once alternative options have been generated and analyzed, the decision maker must select one of the options.
Sometimes this is easy—one option is clearly superior to the others. Often, however, this is a challenge because
there is not a clear “winner” in terms of the best alternative. As mentioned earlier in the chapter, there may be
multiple good options, and which one will be best is unclear even after gathering all available evidence. There may
not be a single option that doesn’t upset some stakeholder group, so you will make someone unhappy no matter
what you choose. A weak decision maker may become paralyzed in this situation, unable to select among the
various alternatives for lack of a clearly “best” option. They may decide to keep gathering additional information in
hopes of making their decision easier. As a manager, it’s important to think about whether the benefit of gathering
additional information will outweigh the cost of waiting. If there are time pressures, waiting may not be possible.
Recognize that perfection is unattainable
Effective managers recognize that they will not always make optimal (best possible) decisions because they don’t
have complete information and/or don’t have the time or resources to gather and process all the possible
information. They accept that their decision-making will not be perfect and strive to make good decisions overall.
Recognizing that perfection is impossible will also help managers to adjust and change if they realize later on that
the selected alternative was not the best option.
This is another point in the process at which talking to others can be helpful. Selecting one of the alternatives will
ultimately be your responsibility, but when faced with a difficult decision, talking through your choice with someone
else may help you clarify that you are indeed making the best possible decision from among the available options.
Sharing information verbally also causes our brains to process that information differently, which can provide new
insights and bring greater clarity to our decision-making.
Step 5: Implementing the Selected Alternative

After selecting an alternative, you must implement it. This may seem too obvious to even mention, but
implementation can sometimes be a challenge, particularly if the decision is going to create conflict or dissatisfaction
among some stakeholders. Sometimes we know what we need to do but still try to avoid actually doing it because we
know others in the organization will be upset—even if it’s the best solution. Follow-through is a necessity, however, to
be effective as a manager. If you are not willing to implement a decision, it’s a good idea to engage in some
self-reflection to understand why. If you know that the decision is going to create conflict, try to think about how you’ll
address that conflict in a productive way. It’s also possible that we feel that there is no good alternative, or we are
feeling pressured to make a decision that we know deep down is not right from an ethical perspective. These can be
among the most difficult of decisions. You should always strive to make decisions that you feel good about—which
means doing the right thing, even in the face of pressures to do wrong.
Step 6: Evaluating the Effectiveness of Your Decision

Managers sometimes skip the last step in the decision-making process because evaluating the effectiveness of a
decision takes time, and managers, who are generally busy, may have already moved on to other projects. Yet
evaluating effectiveness is important. When we fail to evaluate our own performance and the outcomes of our
decisions, we cannot learn from the experience in a way that enables us to improve the quality of our
future decisions.
Attending fully to each step in the decision-making process improves the quality of decision-making and, as we’ve
seen, managers can engage in a number of tactics to help them make good decisions. Take a look at the Ethics in
Practice box to see an example of how one particular manager puts these techniques into practice to make good
decisions.
ETHICS IN PRACTICE
Rob Ault, Project Manager, Bayside Community Church

Bradenton, Florida
When it comes to decision-making, ethical dilemmas require particular care. Because managers make many
decisions, it should not be surprising that some of those decisions will have ethical implications. With multiple
stakeholders to consider, sometimes what is best for one group of stakeholders is not what is best for others. I
talked to Rob Ault about his experiences with ethical dilemmas over the course of his career. Rob has been in
managerial roles for over 25 years, since he was 19 years old. He told me that he had experienced a number of
ethical dilemmas in that time.
Rob has spent most of his career working for for-profit organizations, and for about half of that time he has
worked in a union environment. What he has found most frustrating, regardless of environment, was when it
was clear to him what was right, but what was right conflicted with what his boss was telling him to do. This
included a situation in which he felt an employee should be fired for misbehavior (but wasn’t), as well as
situation in which he was asked to fire someone undeservedly. What we mostly talked about, though, was his
process. How did he go about making decisions in these challenging situations?
Rob clearly stated that his approach to these situations has changed with experience. What he did early in his
career is not necessarily what he would do now. He said that it takes experience and some maturity to
recognize that, as a leader, the decisions you make affect other people’s lives. He also explained that a starting
point for the decision-making process is always a recognition of the fact that you have been hired to generate a
benefit for your company. So a manager’s decisions need to come from the perspective of what is going to be
in the best long-term interest of the organization (in addition to what is morally right). This isn’t always easy,
because short-term consequences are much easier to observe and predict.
I asked Rob who he talked to prior to making decisions in situations with an ethical component. Rob told me
that he felt one of the most important things you should do as a leader is to intentionally create and build
relationships with people you trust in the organization. That way you have people you know you can talk to
when difficult situations come up. He was very clear that you should always talk to your boss, who will tend to
have a broader understanding of what is going on in the context of the larger organization. He also told me that
he liked to talk to his father, who happened to work in human resource management for a large Fortune 500
organization. His father was always helpful in providing the perspective of how things were likely to play out
long-term if one person was allowed to bend the rules. Rob realized eventually that the long-term
consequences of this were almost always negative: once one person is allowed to misbehave, others find out
about it and realize that they can do the same thing
without repercussions. Rob also seeks out the opinions of other individuals in the organization before reaching
decisions with an ethical component; he told me that when he worked in a union environment, he tried to
make sure he had a good relationship with the union steward, because it was helpful to get the perspective of
someone who was committed to the side of the employee.
The biggest ethical dilemma Rob faced was one that he actually couldn’t talk to me about. He disagreed with
what he was being asked to do, and when it was clear that he had no other choice in the matter, he quit his job
rather than do something he felt wasn’t right. He accepted a severance package in exchange
for signing a nondisclosure agreement, which is why he can’t share any details . . . but it was clear from our
conversation that he feels he made the right choice. That particular ethical dilemma makes it clear how
challenging managerial decision-making can sometimes be.
1. If you were faced with an ethical dilemma, from whom would you seek advice?
2. Describe some decisions that might be good for an organization’s profitability in the short-term, but bad for
the organization in the long-term.
3. What factors would you take into consideration if you were thinking about leaving your job rather than do
something unethical?
CONCEPT CHECK
1. Explain what satisficing is and when it may be a good strategy.

2. What are the six steps in the decision-making process?
3. What are the four steps involved in ethical decision-making?
2.6 Group Decision-Making

6. What are the advantages and disadvantages of group decision-making, and how can a manager improve the
quality of group decision-making?
Involving more people in the decision-making process can greatly improve the quality of a manager's
decisions and outcomes. However, involving more people can also increase conflict and generate other
challenges. We turn now to the advantages and disadvantages of group decision-making.
Advantages of Group Decisions

An advantage to involving groups in decision-making is that you can incorporate different perspectives and ideas.
For this advantage to be realized, however, you need a diverse group. In a diverse group, the different group
members will each tend to have different preferences, opinions, biases, and stereotypes. Because a variety of
viewpoints must be negotiated and worked through, group decision-making creates additional work for a manager,
but (provided the group members reflect different perspectives) it also tends to reduce the effects of bias on the
outcome. For example, a hiring committee made up of all men might end up hiring a larger proportion of male
applicants (simply because they tend to prefer people who are more similar to
themselves). But with a hiring committee made up of an equal number of men and women, the bias should be
cancelled out, resulting in more applicants being hired based on their qualifications rather than their physical
attributes.
Having more people involved in decision-making is also beneficial because each individual brings unique information
or knowledge to the group, as well as different perspectives on the problem. Additionally, having the participation of
multiple people will often lead to more options being generated and to greater intellectual stimulation as group
members discuss the available options. Brainstorming is a process of generating as many solutions or options as
possible and is a popular technique associated with group decision-making.
All of these factors can lead to superior outcomes when groups are involved in decision-making. Furthermore,
involving people who will be affected by a decision in the decision-making process will allow those individuals to
have a greater understanding of the issues or problems and a greater commitment to the solutions.
Disadvantages of Group Decisions

Group decision-making is not without challenges. Some groups get bogged down by conflict, while others go to the
opposite extreme and push for agreement at the expense of quality discussions. Groupthink occurs when group
members choose not to voice their concerns or objections because they would rather keep the peace and not annoy
or antagonize others. Sometimes groupthink occurs because the group has a positive team spirit and camaraderie,
and individual group members don’t want that to change by introducing conflict. It can also occur because past
successes have made the team complacent.
Often, one individual in the group has more power or exerts more influence than others and discourages those with
differing opinions from speaking up (suppression of dissent) to ensure that only their own ideas are implemented.
If members of the group are not really contributing their ideas and perspectives, however, then the group is not
getting the benefits of group decision-making.
How to Form a Quality Group

Effective managers will try to ensure quality group decision-making by forming groups with diverse members so that
a variety of perspectives will contribute to the process. They will also encourage everyone to speak up and voice
their opinions and thoughts prior to the group reaching a decision. Sometimes groups will also assign a member to
play the devil’s advocate in order to reduce groupthink. The devil’s advocate intentionally takes on the role of critic.
Their job is to point out flawed logic, to challenge the group’s evaluations of various alternatives, and to identify
weaknesses in proposed solutions. This pushes the other group members to think more deeply about the
advantages and disadvantages of proposed solutions before reaching a decision and implementing it.

Exhibit 2.7 The Devils Advocate At a meeting of McDonald’s franchise owners, attorney Brian Schnell was placed in the audience as a devil’s advocate
and often would strongly disagree with franchisee attorney Bob Zarco that the National Labor Relations Board (NLRB)’s joint
employer ruling on McDonald’s is a boon for franchisees. He would raise his hand often and vehemently, which Zarco had asked him to do before
the meeting. In that way, the franchisors’ articulate arguments could be heard by all franchisee leaders in attendance, and rebutted. Credit (Mr. Blue
MauMau/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
The methods we’ve just described can all help ensure that groups reach good decisions, but what can a manager
do when there is too much conflict within a group? In this situation, managers need to help group members reduce
conflict by finding some common ground—areas in which they can agree, such as common interests, values,
beliefs, experiences, or goals. Keeping a group focused on a common goal can be a very worthwhile tactic to keep
group members working with rather than against one another. Table 2.3 summarizes the techniques to improve
group decision-making.
Summary of Techniques That May Improve Group Decision-Making

Technique Benefit
Type of Decision
Group Have diverse members in Improves quality: generates more options, reduces
decisions the group. bias
Assign a devil’s advocate. Improves quality: reduces groupthink
48 Chapter 2 Managerial Decision-Making Summary of Techniques That May Improve Group Decision-Making
Type of Decision
Help group members find Improves quality: re
Technique Benefit
common ground.
Encourage everyone to speak Im
up and contribute. s
Conclusion
Decision-making is a crucial daily activity for managers. Decisions range from small and simple, with straightforward
answers, to big and complex, with little clarity about what the best choice will be. Being an effective manager requires
learning how to successfully navigate all kinds of decisions. Expertise, which develops gradually through learning and
experience, generally improves managerial decision-making, but managers rarely rely solely on their own expertise.
They also conduct research and collect information from others; they pay attention to their own biases and to ethical
implications; and they think critically about the information that they have received to make decisions that will benefit
the organization and its stakeholders.
CONCEPT CHECK
1. Explain why group decision-making can be more effective than individual decision-making. 2. What are some
things that can prevent groups from making good decisions?
3. As a manager, what can you do to enhance the quality of group decision-making? This OpenStax book is available for free
at http://cnx.org/content/col28330/1.8
Key Terms
Bounded rationality be fully rational because we

The concept that when we make decisions, we cannot
don’t have all the possible information or the cognitive processing ability to make fully informed,
completely rational decisions.
Brainstorming The tendency to pay attention to information that
A process of generating as many ideas or confirms our existing beliefs and to
alternatives as possible, often in groups.
Confirmation bias
ignore or discount information that conflicts with our existing beliefs.
Creativity original ideas.
The generation of new or
Critical thinking information, especially by identifying
A disciplined process of evaluating the quality of
logical fallacies in arguments.
Decision-making Devil’s advocate and selecting one. A group member who intentionally
The action or process of thinking through possible options takes on the role of being critical of the group’s ideas in
order to discourage groupthink and encourage deep thought and discussion about issues prior to making
decisions.
Emotional intelligence The tendency of decision makers to remain
The ability to understand and manage emotions in committed to poor decision, even
oneself and in others.
Escalation of commitment
when doing so leads to increasingly negative outcomes.
Evidence-based decision-making decision. The tendency of a group to reach agreement very
quickly and without substantive discussion.
A process of collecting the best available evidence
prior to making a Heuristics
Mental shortcuts that allow a decision maker to reach
a good decision quickly. They are strategies
Groupthink
that develop based on prior experience.
Nonprogrammed decisions Process conflict
Decisions that are novel and not based on Conflict about the best way to do something; conflict
well-defined or known criteria. that is task-oriented and constructive,
and not focused on the individuals involved.
Programmed decisions developed. existing set of rules can be
Decisions that are repeated over time and for which an
System of decision-making in the brain that
is quick and intuitive.
Reactive system
Reflective system Relationship conflict
System of decision-making in the brain that is logical, Conflict between individuals that is based on
analytical, and methodical. personal (or personality) differences; this
type of conflict tends to be destructive rather than constructive.
Satisficing Stakeholders
Choosing the first acceptable solution to Individuals or groups who are impacted by the
minimize time spent on a decision. organization. These include owners,
employees, customers, suppliers, and members of the community in which the organization is located.
Suppression of dissent others from voicing their
When a group member exerts his or her power to prevent
thoughts or opinions.
Summary of Learning Outcomes
2.1 Overview of Managerial Decision-Making
1. What are the basic characteristics of managerial decision-making?
Managers are constantly making decisions, and those decisions often have significant impacts and implications for
both the organization and its stakeholders. Managerial decision-making is often characterized by complexity,
incomplete information, and time constraints, and there is rarely one right answer. Sometimes
there are multiple good options (or multiple bad options), and the manager must try to decide which will generate the
most positive outcomes (or the fewest negative outcomes). Managers must weigh the possible consequences of
each decision and recognize that there are often multiple stakeholders with conflicting needs and preferences so that
it often will be impossible to satisfy everyone. Finally, managerial decision-making can sometimes have ethical
implications, and these should be contemplated before reaching a final decision.
2.2 How the Brain Processes Information to Make Decisions: Reflective and Reactive Systems 2.
What are the two systems of decision-making in the brain?
The brain processes information to make decisions using one of two systems: either the logical, rational (reflective)
system or the quick, reactive system. The reflective system is better for significant and important decisions; these
generally should not be rushed. However, the reactive system can be lifesaving when time is of the essence, and it
can be much more efficient when based on developed experience and expertise.
2.3 Programmed and Nonprogrammed Decisions

3. What is the difference between programmed and nonprogrammed decisions?
Programmed decisions are those that are based on criteria that are well understood, while nonprogrammed
decisions are novel and lack clear guidelines for reaching a solution. Managers can establish rules and guidelines
for programmed decisions based on known fact, which enables them to reach decisions quickly. Nonprogrammed
decisions require more time to resolve; the decision maker may need to conduct research, collect additional
information, gather opinions and ideas from other people, and so on.
2.4 Barriers to Effective Decision-Making

4. What barriers exist that make effective decision-making difficult?
There are numerous barriers to effective decision-making. Managers are limited in their ability to collect
comprehensive information, and they are limited in their ability to cognitively process all the information that is
available. Managers cannot always know all the possible outcomes of all the possible options, and they often face
time constraints that limit their ability to collect all the information that they would like to have. In addition, managers,
like all humans, have biases that influence their decision-making, and that can make it difficult for them to make good
decisions. One of the most common biases that can confound decision-making is confirmation bias, the tendency for
a person to pay attention to information that confirms her existing beliefs and ignore information that conflicts with
these existing beliefs. Finally, conflict between individuals in organizations can make it challenging to reach a good
decision.
2.5 Improving the Quality of Decision-Making

5. How can a manager improve the quality of her individual decision-making?
Managers tend to get better at decision-making with time and experience, which helps them build expertise.
Heuristics and satisficing can also be useful techniques for making programmed decisions quickly. For
nonprogrammed decisions, a manager can improve the quality of her decision-making by utilizing a variety of other
techniques. Managers should also be careful to not skip steps in the decision-making process, to involve others in
the process at various points, and to be creative in generating alternatives. They should also engage in
evidence-based decision-making: doing research and collecting data and information on which to base the decision.
Effective managers also think critically about the quality of the evidence that they collect, and they carefully consider
long-term outcomes and ethical implications prior to making a decision.
2.6 Group Decision-Making

6. What are the advantages and disadvantages of group decision-making, and how can a manager improve the
quality of group decision-making?

Groups can make better decisions than individuals because group members can contribute more knowledge and a
diversity of perspectives. Groups will tend to generate more options as well, which can lead to better solutions.
Also, having people involved in making decisions that will affect them can improve their attitudes about the
decision that is made. However, groups sometimes fail to generate added value in the decision making process as
a result of groupthink, conflict, or suppression of dissent.
Managers can improve the quality of group decision-making in a number of ways. First, when forming the group, the
manager should ensure that the individual group members are diverse in terms of knowledge and perspectives. The
manager may also want to assign a devil’s advocate to discourage groupthink. Managers should also encourage all
group members to contribute their ideas and opinions, and they should not allow a single voice to dominate. Finally,
they should not allow personality conflicts to derail group processes.
Chapter Review Questions

1. What are some of the factors that enabled to Jen Rubio and Stephanie Korey to make good decisions when
they established their luggage company, Away?
2. What are the two systems that the brain uses in decision-making? How are they related to programmed and
nonprogrammed decisions?
3. What is a heuristic, and when would it be appropriate to use a heuristic for decision-making? 4.
What is confirmation bias? Explain how it can be a barrier to effective decision-making. 5. What is a
logical fallacy?
6. What are the two types of conflict? Which one is constructive, and which is destructive? 7. What are
the steps in the decision-making process? Which ones do people tend to skip or spend insufficient time
on?
8. What can individuals do to improve the quality of their decision-making?
9. What can groups or group leaders do to improve the quality of group decision-making? 10.
What are the benefits of decision-making in a group, instead of individually?
Management Skills Application Exercises

1. If you wanted to buy a new car, what research would you do first to increase the likelihood of making a good
decision? As a manager, do you think you would engage in more research or less research than that prior to
making big decisions for the organization?
2. Think about a big decision that you have made. What impact did your emotions have on that decision? Did
they help or hinder your decision-making? Would you make the same decision again? 3. If you were faced with
an ethical dilemma at work, who would you want to talk to for advice prior to reaching a decision?
4. Which would be better to involve a group with, a programmed or a nonprogrammed decision? Why? 5. If
you were manager of a group with a lot of personality conflict, what would you do?
Managerial Decision Exercises
1. Imagine that you are a manager and that two of your employees are blaming one another for a recent project not
going well. What factors would you consider in deciding whom to believe? Who else would you
talk to before making a decision? What would you do to try to reduce the likelihood of this happening
again?
2. You have been asked whether your organization should expand from selling its products only in North America to
selling its products in Europe as well. What information would you want to collect? Who would you want to
discuss the idea with before making a decision?
3. You have a colleague who decided the organization should pursue a new technology. Nine months into the
project of transitioning to the new technology, based on new information you are convinced that the new
technology is not going to work out as anticipated. In fact, you expect it to be a colossal failure. However, when
you try to talk to your colleague about the issue, she won’t listen to your arguments. She is adamant that this
new technology is the correct direction for your organization. Why do you think she is so resistant to seeing
reason? Given what you learned in this chapter, what could you do to persuade her?
4. Your manager has asked you to take the lead on a new and creative project. She has encouraged you to create
your own team (from existing employees) to work with you on the project. What factors would you want to
consider in deciding who should join your project team? What would you want to do as the team leader to
increase the likelihood that the group will be successful?
5. Identify the logical flaw(s) in this argument:
◦ We want to have effective leaders in this organization.
◦ Taller individuals tend to be perceived as more leader-like.
◦ Men are usually taller than women.
◦ So, we should only hire men to be managers in our organization.
Critical Thinking Case

Vinyl Records Make a Comeback
The music industry has seen a series of innovations that have improved audio quality—vinyl records sales were
eventually surpassed by compact discs in the 1980s, which were then eclipsed by digital music in the early 2000s.
Both of the newer technologies boast superior sound quality to vinyl records. Vinyl should be dead . . . yet it’s not.
Some say this is simply a result of nostalgia—people love to harken back to older times. However, some audiophiles
say that vinyl records produce a “warm” sound that can’t be reproduced in any other format. In addition, a vinyl record
is a tangible product (you can feel it, touch it, and see it when you own the physical record) and is more attractive,
from an aesthetic perspective, than a CD. It is also a format that encourages listening to an entire album at once,
rather than just listening to individual tracks, which can change the listening experience.
Whatever the reasons, vinyl is making an impressive comeback. Sales growth has been in the double digits for the
last several years (over 50% in 2015 and again in 2016) and is expected to exceed $5 billion in 2017. Sony, which
hasn’t produced a vinyl record since 1989, recently announced that it is back in the vinyl business.
One of the biggest challenges to making vinyl records is that most of the presses are 40+ years old. In the
record-making process, vinyl bits are heated to 170 degrees, and then a specialized machine exerts 150 tons of
pressure to press the vinyl into the shape of the record. About a dozen new vinyl record manufacturers have sprung
up in the last decade in the United States. Independent Record Pressing, a company based in New Jersey, began
producing vinyl records in 2015 using old, existing presses. Their goal upon starting up was to produce over a million
records a year. Even at that level of production, though, demand far outstrips the company’s capacity to produce
because of the limited number of presses available. They could run their
machines nonstop, 24 hours a day, and not catch up with demand.
The big question is what the future holds for this industry. Will this just be a passing fad? Will the vinyl record
industry remain a small niche market? Or is this the renaissance, the rebirth of a product that can withstand the test
of time and alternative technologies? If it’s a rebirth, then we should see demand continue to grow at its recent rapid
pace . . . and if demand remains strong, then investing in new presses may well be worthwhile. If this is just a
short-lived nostalgic return to an outdated media, however, then the large capital investment required to purchase
new presses will never be recouped. Even with the recent growth, vinyl records still accounted for only 7% of overall
music industry sales in 2015. That may be enough to get old presses running again, but so far it hasn’t been enough
to promote a lot of investment in new machines. The cost of a new press? Almost half a million dollars.
At least one manufacturer is optimistic about the future of vinyl. GZ Media, based in Czechoslovakia, is currently the
world’s largest producer of vinyl records. President and owner Zdenek Pelc kept his record factory going during the
lean years when vinyl sales bottomed out. He admits that the decision was not wholly logical; he continued in part
because of an emotional attachment to the media. After demand for vinyl records practically disappeared, Pelc kept
just a few of the presses running to meet the demand that remained. His intention was to be the last remaining
manufacturer of vinyl records. Pelc’s emotional attachment to vinyl records seems to have served him well, and it’s a
great example of why basing decisions on pure logic doesn’t always lead to the best results. Consumers make
purchasing decisions in part based on the emotional appeal of the product, so it shouldn’t be surprising that
consumers also feel an emotional attachment to vinyl records, as Pelc did.
When demand for vinyl records was low, Pelc stored the company’s presses that were no longer in use so that they
could be cannibalized for parts as needed. When sales began to grow again in 2005, he started pulling old machines
out of storage and even invested in a few new ones. This has made GZ Media not only the largest vinyl record
producer in the world, but also one of the only ones with new factory equipment. GZ Media produces over 20 million
vinyl records a year, and Pelc is excited to continue that trend and to remain a major manufacturer in what is
currently still considered a niche market.
Critical Thinking Questions

1. Why do you think vinyl records are appealing to customers?
2. Do you think the sales growth will continue to be strong for vinyl sales? Why or why not? 3. What
research would you want to conduct prior to making a decision to invest in new presses?
Sources: Lee Barron, “Back on record – the reasons behind vinyl’s unlikely comeback,” The Conversation, April 17,
2015, https://theconversation.com/back-on-record-the-reasons-behind-vinyls-unlikely-comeback-39964. Hannah
Ellis-Peterson, “Record sales: vinyl hits 25-year high,” The Guardian, January 3, 2017,
https://www.theguardian.com/music/2017/jan/03/record-sales-vinyl-hits-25-year-high-and-outstrips streaming. Allan
Kozinn, “Weaned on CDs, They’re Reaching for Vinyl,” The New York Times, June 9, 2013. Rick Lyman, “Czech
company, pressing hits for years on vinyl, finds it has become one,” The New York Times, August 6, 2015. Alec
Macfarlane and Chie Kobayashi, “Vinyl comeback: Sony to produce records again after 28-year break,” CNN Money,
June 30, 2017, http://money.cnn.com/2017/06/30/news/sony-music-brings-back vinyl-records/index.html. Kate
Rogers, “Why millennials are buying more vinyl records,” CNBC.com, November 6, 2015.
https://www.cnbc.com/2015/11/06/why-millennials-are-buying-more-vinyl-records.html. Robert Tait, “In the groove:
Czech firm tops list of world’s vinyl record producers,” The Guardian, August 18, 2016.
54 Chapter 2 Managerial Decision-Making This OpenStax book is available for free at http://cnx.org/content/col28330/1.8
3
The History of Management
Exhibit 3.1 (Gawler History/ Attribution 2.0 Generic (CC BY 2.0))
Introduction
Learning Outcomes
Describe management in the ancient world.

1.
How did the Italian Renaissance affect the progression of management theory?
2.
How did the Industrial Revolution affect the progression of management theory?
3.
How did Frederick Winslow Taylor influence management theory, and how did efficiency in management
4.
affect current management theory?
How do bureaucratic and administrative management complement scientific management?
5.
How did Elton Mayo influence management theory, and how did the human relations movement affect
6.
current management theory?
How did contingency and systems management transform management thought? 7.
Michael Porter: Harvard Professor and Management Consultant, The Monitor Group
Michael Porter is the Bishop William Lawrence University Professor at Harvard Business School and one of
the foremost scholars and consultants in business strategy. Dubbed the first “Lord of Strategy,” he is one of
the most influential management thinkers of all time. Porter’s primary contribution is in the field of competition,
specifically the question of why some companies profit while others do not. Porter first
became interested in competition due to his enthusiasm competing in youth sports (baseball, football,
56 Chapter 3 The History of Management
and basketball).
Porter was born in 1947 and graduated from Princeton in 1969 with a degree in aerospace and mechanical
engineering. He went on to receive his MBA from Harvard Business School in 1971 and his PhD in business
economics from Harvard University in 1973. His book Competitive Strategy: Techniques for Analyzing
Industries and Competitors (published in 1980) was deemed the ninth most influential work of the 20th century
by the Fellows of the Academy of Management. Porter, writing during a period of great economic competition
between the United States and Japan, was able to gain a wide and vast audience for his work.
Exhibit 3.2 Michael Porter Michael E. Porter leads a conversation with three leading public and private investors, Jin-Yong Cai, Tony O. Elumelu,
and Arif Naqvi, on the panel “Investing in Prosperity: A Conversation with Global Leaders” at the Shared Value Leadership Summit. (Shared Value
Initiative/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
In his 1979 Harvard Business Review article “How Competitive Forces Shape Strategy,” Porter presented his
game management idea that five forces help determine the level of profitability. The five forces are competition
in the industry, potential of new entrants into the industry, power of suppliers, power of customers, and threat
of substitute products. An unattractive industry is one in which the five forces align themselves to produce a
purely competitive industry. In this type of industry, normal profit levels are the highest a firm can expect, which
means that the firm can cover its costs and make the owner a profit but cannot make excess profits. Once a
firm identifies the five forces in its industry, it can choose between one of three generic strategies for success
focus, differentiation, or cost leadership. Depending on where a firm is positioned within the market, the
marketplace will determine what strategy it can take. This “five forces, three strategies” framework explains
how McDonald’s, Morton’s Steakhouse, Subway, Wendy’s, and TGIF can all be in the same industry and still
be profitable. They offer different types of products to different types of customers. These products compete
on price, differentiation,

Chapter 3 The History of Management 57
focus, or a combination of these. In addition to the five forces model, Porter developed the value-chain
model, which describes the unique activities that a corporation performs to make its products valuable to its
customers. Porter has also contributed to health-care management, environmental regulation, international
competition, and industry-level profits.
Porter’s five forces framework is intuitive and has provided managers with an approach to develop actual
strategies. His ideas became popular because business leaders wanted to know how their companies
could compete. Prior to Porter, management scholars stressed the idiosyncratic nature of business,
stressing how each situation faced by each business was different. Other scholars offered business
strategy models, but they were not as useful or practical as Porter’s. Through his use of
industrial-organizational economics and his training in the case method, Porter bridged the gap between
theoretical frameworks and the reality of the competitive business world and became one of the most
important thinkers on business in the world.
Sources: Bedeian, Arthur G and Wren, Daniel A. (Winter 2001). "Most Influential Management Books of the
20th Century" (PDF). Organizational Dynamics. 29 (3): 221–225; Kiechel, Walter (2010). The Lords of
Strategy: The Secret Intellectual History of the New Corporate World. Harvard Business Review Press;
Magretta, Joan (2011). Understanding Michael Porter: The Essential Guide to Competition and Strategy.
Harvard Business Review Press; and Mathews, J.(2013-02-01). The Competitive Advantage of Michael
Porter. In The Oxford Handbook of Management Theorists: Oxford University Press.
While you may think that management is a relatively new field, it actually has its roots in the ancient world. In fact,
whenever and wherever there has been commerce, there has been management and those thinking about how to
do it better. For example, the Seven Wonders of the Ancient World, including the Colossus of Rhodes, the Hanging
Gardens of Babylon, and the Great Pyramid, could only have been constructed through the work of a great many
people. The size and complexity of these structures suggest that there must have been people (managers) who
coordinated the labor and resources needed to execute the construction plans. Similarly, the Romans and the
ancient Chinese could not have managed their vast empires without management, nor could the Phoenicians and
the Greeks have dominated oceangoing trade without management.
Because management has been around for a while, it makes sense that the study of management is old. This idea is
supported by the many managerial insights we can find in political, diplomatic, and military history and in philosophy,
poetry, economics, and literature. Anyone familiar with Shakespeare’s King Lear would recognize the present-day
management problem of succession planning! Modern managers have been influenced by the works of Chinese
military strategist and philosopher Sun Tzu, Roman general and politician Julius Caesar, and even Genghis Kahn,
Mongolian conqueror and ruler of what became the largest land empire in all of history.1 Mark Zuckerberg2 of
Facebook is a modern admirer of the Caesars and has said that he bases some of his management style on his
classical education.
Despite its ancient roots, modern management is less than 150 years old. In fact, a comparison of management
before and after the Industrial Revolution shows that the former is only a shadowy comparison to the latter. Prior to
the Industrial Revolution, work was performed, with exceptions, mostly in home and on farms by forced labor (slaves
or indentured servants) or family members, and the output they produced was often for employers’, local, or family
consumption. Over the centuries, economics and morality shifted, and laborers could choose where and for whom to
work. These changes, in turn, would bring about many changes in how labor and other resources were employed in
production.
The two developments that transformed management were the revolutions in how and where goods were sold and
the Industrial Revolution. The events combined led to the selling of a wider variety of goods to a wider variety of
customers in more distant locations. These events also led to the establishment of vast companies. Competition
required the development of economies of scale (i.e., increased production lowering costs) and required
coordination and specialization in the use of resources. The combination of coordination and specialization
problems encouraged the development of management study as a distinct field.
In this chapter, we trace the evaluation of management from its origins in the ancient world to its form as a
modern profession. Understanding how management came to be helps us to understand its principles in a richer,
more thorough context and to understand how each concept we discuss is based on evidence produced by a
wide range of scholars over many years in the fields of engineering, economics, psychology, sociology, and
anthropology.
3.1 The Early Origins of Management

1. Describe management in the ancient world.
Table 3.1 traces the development of management thought from the ancient world until the 19th century’s
Industrial Revolution.
Sumer, located in what is today southern Iraq and the first urban-based civilization, contained the genesis of
management. Sumer had a flourishing merchant culture in which goods such as grains, livestock, perfumes, and
pottery were sold to customers. Rather than bartering (using one good or service, not money, to pay for another
good or service), the ancient Sumerians used ancient clay coins to pay. The sizes and shapes of coins
represented different amounts of currency and signaled the types of goods for which they could be
exchanged.3
What made this level of trade and economic activity possible? The introduction of writing made it possible for
merchants to keep track of various trades. And the development of a basic form of coins allowed for increased trade
because a person wanting to obtain a good or service no longer had to find another person who wanted exactly the
good or service he produced. Coordinating the activities of those who provided goods and those who wanted to
purchase them often required coordination, one of the main functions of a manager.
Early Contributor Outcome

Sumerians Writing and trade
Hammurabi Written commands and controls
Nebuchadnezzar Incentives
Ancient Egyptians Division of labor, coordination and span of control
Sun Tzu Division of labor, communication and coordination
Han dynasty (206 BC–220 AD) Development of bureaucracy
Ancient Greeks Division of labor

Early Contributor Outcome

Romans Standardization
Italians Accounting, corporations, multinational corporations
John Florio Management to English language
Source: Adapted from George (1972) and Wren & Bedeian (2009)
Two additional contributions to the early development of management came from the Middle East. The idea of written
laws and commands comes from the Babylonian king Hammurabi (1810 BC–1750 BC).4 The Code of Hammurabi
was a listing of 282 laws that regulated a wide variety of behaviors, including business dealings, personal behavior,
interpersonal relations, and punishments. Law 104 was one of the first instances of accounting and of the need for
formal rules for managers and owners. The code also set wages for doctors, bricklayers, stonemasons, boatmen,
herdsmen, and other labors. The code did not, however, include the concept of incentive wages because it set wages
at a fixed amount. The idea of incentives would come from another, much later, Babylonian king, Nebuchadnezzar
(605 BC–c. 562 BC),5 who gave incentives to cloth weavers for production. Weavers were paid in food, and the more
cloth they produced, the more food they were given.
Exhibit 3.3
Hammurabi The Code of Hammurabi is a well-preserved ancient law code, created between 1810 BC and 1750 BC in ancient Babylon. It's a listing
of 282 laws that regulated conduct on a wide variety of behaviors, including business dealings, personal behavior, interpersonal relations, and
punishments. Law 104 was one of the first instances of accounting and the need for formal rules for owners and
managers. (Gabrielle Barni / flickr/ Attribution 2.0 Generic (CC BY 2.0))
The ancient Egyptians made great strides in the building of the great pyramids. The ancient Egyptians were
exceptional builders of canals, irrigation projects, and the pyramids, royal tombs whose size and complexity
exceeded what the Greeks and Romans6 were able to build in later centuries. Although we are still uncertain about
exactly how the pyramids were constructed, we have some idea that the process required a great number and wide
range of slave laborers to construct them. Each laborer would have a different task. Some of the laborers were
stonecutters; others were required to push and pull gigantic blocks of stone; still others were required to grease the
stones to reduce friction. In this process, we see the management principals of division of labor, coordination, and
specialization. These groups of workers were supervised by one individual. In figuring out how best to handle the
huge numbers of workers engaged in pyramid building, the ancient Egyptians also pioneered the concept of span of
control, that is, the number of workers that a manager controls directly. Anticipating research on this issue in the far,
far distant future, Egyptians found the ideal number of workers per supervisor to be ten. In addition, there were
various overseers, who had the responsibility to compel workers to produce.
In Asia, the Chinese began to develop the idea of bureaucracy. Bureaucracy has roots in the early dynasties but
only became fully developed during the Han dynasty (206 BC–220 AD). 7 The idea was to train scholars in
Confucian teachings and use those teachings to make decisions. Unlike modern bureaucracies, this system
was not formal but relied upon the discretion of the scholars themselves. Another important development was the
idea of meritocracy because selection for and then promotion within a bureaucracy was based on a test of Confucian
teaching.
The Greeks (800 BC–400 BC) and Romans (500 BC–476 AD) added a number of important steps in the
development of management. Although neither empire was commercially oriented, both Greeks and the Romans
undertook a wide range of industrial projects, such as roads and aqueducts, and established various guilds and
societies that encouraged trade. The Greeks continued to develop the idea of division of labor based on Plato’s
recognition of human diversity. The great Greek philosopher Socrates stressed the development of managerial skills
such as creating an atmosphere of information sharing and analysis. The Romans’ contribution to management was
standardization. Because the Romans needed to administer a vast empire, they needed standardization of
measures, weights, and coins. Romans also saw the birth of the corporation, in that many Roman companies sold
stocks to the public.
Both Greece and Rome saw the continued pestilence of slavery, but due to economic changes that made slavery
financially unfeasible, workers were gaining some degree of freedom. They still had masters who determined at
what jobs they could work and how those jobs should be done. After the collapse of the Roman Empire, there was a
decline in European trade. Scholars refer to this time as the Dark or Middle Ages (500 AD–1000 AD), due its
location between the classical world of the Greeks and Romans and the world of the Renaissance. While there was
little trade or economic development in Europe during this period, trade flourished in the Muslim and Chinese
worlds. Various travelers, such as 13th-century Italian merchant and explorer Marco Polo, provided readers with
tales and goods from those booming societies.
CONCEPT CHECK
1. What were the contributions of the following groups to modern management: Sumerians,
Babylonians, Egyptians, Chinese, Greeks, and Romans?

3.2 The Italian Renaissance

2. How did the Italian Renaissance affect the progression of management theory?
In the 11th, 12th, and 13th centuries, Europeans went on a series of military expeditions to recover the Holy Land
from the Muslims. These expeditions, called the Crusades, brought wealth and technological advances into
Europe from the Muslim world.8
In the 14th century, a movement of cultural change and astounding achievements in all spheres of life began in
northern Italy. The Italian Renaissance saw the reintroduction of classical knowledge and the emergence of new
knowledge and learning, much of which had economic and business implications. The emergence of the basic
printing press allowed for these ideas and knowledge to spread throughout Europe. The combination of these
factors led to the creation of new wealth as a new emphasis on trade and wealth creation developed. In Italy, we
see the emergence of modern enterprise and the emergence of the need for people to run these new enterprises.
As Muldoon and Marin9 write:
Their industrious countrymen were improving mining operations and developing the shipping and
banking industries, which created the underlying conditions for the migration of the Italian
Renaissance’s commercial and intellectual culture from its native Italian soil (Haynes, 1991). The
increasing scope and complexity of these commercial activities may well have prompted such inventions
as double-entry bookkeeping and motivated companies to hire business managers to coordinate and
direct their operations (Witzel, 2002).
Organizations called corporations developed to carry out these commercial activities, not only within a country,
but among many countries. The first multinational corporations were located in Italy but had branches across
Europe. The Florence Company of Bardi was a multinational bank that provided loans to various kings,
including Edward III of England.10 As their commercial enterprises flourished, the Italians provided manuals for
merchants, which spread the ideas of commerce throughout Europe.
CONCEPT CHECK
1. What was the Italian Renaissance?

2. What managerial legacy did it leave?
3.3 The Industrial Revolution

3. How did the Industrial Revolution affect the progression of management theory?
The Renaissance and its ideals came to England, a backwater power at the time, during the reign of the Tudors
(1485–1603).11 It was during this time that the word management came into the English language from Italy through
translations by John Florio,12 an Anglo-Italian member of Queen Elizabeth’s court.
The emergence of British power would spawn the third major advance in management, the Industrial Revolution.
As the British Empire’s power grew, so did opportunities for trade. The 18th century saw the emergence of various
international corporations, such as the Hudson’s Bay Company13 and the East India Company,14 which conducted
business globally. The Hudson’s Bay Company orchestrated fur trade in Canada where pelts were produced and
then shipped to England for trade in any part of the globe.
This further development of trade led to the establishment of the marketplace as a dominant means of organizing the
exchange of goods. The market would coordinate the actions and activities of various participants, thus allowing
resources to flow to their most efficient uses. One of the major intellectual leaders of this period was the economist
and moral philosopher Adam Smith.15 In his masterpiece, The Wealth of Nations,16 Smith proposed the idea of
specialization and coordination within corporations as a source of economic growth. Specialization and division of
labor were Smith’s major contributions to management thought. The division of labor meant that a worker specialized
in performing one task that was part of a larger series of tasks, at the end of which a product would be produced. The
idea of specialization of labor had several important outcomes. Firstly, specialization drastically reduced the cost of
goods. Secondly, it drastically reduced the need for training. Instead of learning every aspect of a task, workers
needed to learn one portion of it. Thirdly, the need to coordinate all these different tasks required a greater emphasis
on management.
Another significant part of the Industrial Revolution involved the development of the steam engine, which played a
major role in improving the transportation of goods and raw materials. The steam engine lowered production and
transportation costs, thus lowering prices and allowing products to reach more distant markets.17 All of these
factors played a role in the Industrial Revolution, which occurred between 1760 and 1900.18 The Industrial
Revolution saw the emergence of the modern corporation, in which work, usually in a factory setting, was
specialized and coordinated by managers.
Prior to the Industrial Revolution, goods and services lacked standardization and were produced at home in small
batches.19 The Industrial Revolution saw work shift from family-led home production to factory production. These
factories could employ hundreds and even thousands of workers who produced mass batches of standardized
goods more cheaply than they could be produced in homes.
Factory sizes ranged from sections of cities and towns to whole cities, such as Lowell, Massachusetts, which
consisted primarily of textile mills. As the Industrial Revolution progressed, small factories transformed into larger
ones. In 1849, Harvester in Chicago employed 123 workers and was the largest factory in the United States.
McCormick plant by the mid-1850s had 250 workers who made 2,500 reapers per year. After the Great Chicago Fire,
McCormick built a new plant with 800 workers and sales well above $1 million. In 1913, Henry Ford’s plant in
Dearborn employed up to 12,000 workers.20 As factories grew in size, they provided chances for personnel
fulfillment. Not only was the Hawthorne plant in Cicero, Illinois, a place of business, but it also featured sports teams
and other social outlets.21
The Industrial Revolution shifted from England across the globe and eventually found its way into the United States.
The United States starting seeing several notable industrial revolutions from the 1820s until the 1860s. The
transportation revolution included the construction of canals and, later, railroads that connected the different parts of
the continent. The emergence of a telegraph system allowed for faster communication between various parts of the
United States. Previously, it would take weeks to get information from New York to Boston; with the telegraph, it
took minutes.22 The United States also saw the emergence of the Market Revolution. Previously to the Market
Revolution, the U.S. economy had been based on small, self-subsistent yeoman farmers who would produce mostly
homemade batches. Around 1830, the existence of easy credit and improved transportation established a broad
Market Revolution. This spawned a wide variety of corporations that needed managers to coordinate various
company offices.23
After the period of the American Civil War, which ended in 1865, society witnessed the emergence of gigantic
corporations that spanned the continent and factories that were like small cities.24 Various problems emerged due to
the change of production (similar to some of the issues we face today with the change from a manufacturing
economy to an information economy). For example, how do you motivate workers? When families controlled labor, it
was very easy to motivate workers due to the fact that if family members did not produce, the family may not
survive.25 Yet in the factory, it was possible for workers to avoid work or even

destroy machines if they disliked management’s ideas. Each worker did the job in a different fashion, workers
seemed to be selected without regard to whether they were suited for a particular job, management seemed to be
whimsical, and there was little standardization of equipment.
Because production quantity remained an unknown to both management and the worker, management did not
explain how they determined what should be produced. Workers believed that management determined what should
be produced in haphazard ways.26 Workers believed that if too much were produced, management would eliminate
workers because they believed that there was a finite amount of work in the world. Workers would control production
by punishing those workers who produced too much. For example, if a worker produced too much, his equipment
would be damaged, or he would be brutalized by his coworkers. Methods of production were similarly haphazard. For
example, if you learned how to shovel coal or cut iron, you learned multiple ways to perform the job, which did little
for efficiency. Due to managerial inefficiency, various reformers in engineering urged for the establishment of
management as a distinct field of study so that some order and logic could be brought to bear on how work was
performed. Although this period witnessed enormous changes in technology, management was still lagging behind. 27
CONCEPT CHECK
1. Why was Adam Smith’s specialization of labor so important?

2. What was the economic and managerial legacy of the Industrial Revolution? What were the
challenges?
3.4 Taylor-Made Management
4. How did Frederick Winslow Taylor influence management theory, and how did efficiency in management affect
current management theory?
The economic upheaval of the Industrial Revolution also witnessed tremendous social upheavals. The U.S.
professional classes (lawyers, administrators, doctors) had numerous concerns.28 Because more and more people
were now working in factories, there was the potential for creating a permanent underclass of poorly educated
workers struggling to make a living. Many reformers felt that workers could be radicalized and actively try to better
their working conditions, pay, and so on, thus disrupting the status quo of the labor markets, leading to strikes, riots,
violence. There were also concerns that money, influence, and pressure from big business were corrupting politics
and overriding the will of the people.
The working class had many concerns about their work life. As mentioned earlier, there was a deep fear that work
would disappear because of overproduction. There were also concerns over wages, job tenure, and workplace
justice. And there was little in the way of standardization when it came to how tasks were to be accomplished. 29
When Frank Gilbreth, a pioneer in scientific management, was apprenticed as a bricklayer in 1885, he noted that he
was taught three ways to lay bricks even though there was no need for more than one method.
In the factories, there was little concern for the workers’ physical or mental health, and there were no breaks. 30
Management and the workforce were in vicious contention with each other. Management would set the rate of work
expected for the day, and in response, workers would band together to limit production. This action, called
“soldiering,” was a deliberate reduction of productivity on the part of the worker. Those workers who either over- or
underproduced could expect that their equipment would be destroyed or that they
themselves would be physically harmed. There were very few, if any, incentives provided by management. When
managers sought to motivate workers, they did so through physical beatings and other punishments.31 Neither side
had a reason to trust or cooperate with the other.
Compounding management problems, there was now a demand for managers, but there were very few of them to
fill this demand, as there was little training provided. Prior to the Industrial Revolution, companies were largely in the
hands of a family or a single owner/manager. As companies were getting larger and more complex and the
exchange of goods was taking place across more and more regions, most business owners no longer had the
expertise to run such vast geographic and financial enterprises.32 Yet there was little in the way of management
training or education. There were no established scholarly journals, such as the Academy of Management Journal,
or practitioner journals, such as the Harvard Business Review. Nor were there business schools until 1881, when the
Wharton School of Business at the University of Pennsylvania was established. Business education at this time
consisted mostly of classes that taught secretarial work. Allied fields, such as psychology and sociology, were in
their infancy. Any management education that did exist was mostly learned from lessons of history and literature.
Although there were numerous examples of both excellent and terrible management, this education was anecdotal
and not systematic.
The second phase of the Industrial Revolution commenced with the establishment of management as a distinct
discipline of knowledge. Management’s birth was not in Great Britain, but in the United States.33 According to
management consultant and educator Peter Drucker, the development of management was one of the United States’
primary contributions to the world, along with the Declaration of Independence.34 At the same time management was
getting established, sociology and psychology were developing, and the studies of history and economics were
becoming more scientific and formal. Management also became formalized as a field of study using the scientific
method. Drucker stated that the development of management was one of the factors that held off the development of
radicalism in the United States because it increased productivity, lowered prices, and increased wages for workers.
The success of scientific management lifted workers into the middle class. This crucial development has been
attributed to one person in particular: Frederick Winslow Taylor.
Frederick Winslow Taylor (1856–1915) is known as the father of scientific management. He was born to the Quaker
aristocracy of Pennsylvania, and initially he planned to go to Harvard and become a lawyer or an executive until he
suffered an eye injury that prevented him from reading,35 With Harvard no longer an option, Taylor went to work at a
family friend’s factory, the Midvale Steel Company. Taylor took to the work and was promoted quickly from pattern
maker to foreman and then to chief engineer. During this time, he witnessed many acts aimed at limiting or reducing
production—including having his tools destroyed—and it was he who coined the term soldiering to describe this
deliberate act.36 Rather than stand by and see such senseless acts affect the business he worked for, Taylor decided
to take action. First, he went to Stevens Institute of Technology to gain a background in engineering. Then he took
this knowledge and applied it to his work.
It is important to note that Taylor was not an original thinker. Many of his ideas came from other thinkers, especially
the Englishman Charles Babbage (1791–1871).37 Taylor’s contribution was that he advanced a total system of
management by uniting the ideas and philosophies of many others. While he may not have invented the scientific
study of management, Taylor contributed to the use and synthesis of management by pioneering the use of time
studies, division of labor based on function, cost-control systems, written instruction for workers, planning, and
standardized equipment. Taylorism is still the basis of modern management, including the use of incentives. For
example, Taylor stressed piecework production, meaning that workers were paid for how much they produced. Taylor
also stressed the idea of differential piecework, meaning that if workers produced more than a certain amount, they
would be paid more. Some compensation systems, such as sales commissions (i.e., being paid for how much you
sell), have their bases in Taylor’s work.

Taylor’s major contribution was that he prized knowledge and science over tradition and rules of thumb. He broke
down each act of production into its smallest parts and watched the best workers perform their jobs. Using a
stopwatch to time the workers’ actions, Taylor determined the most effective and efficient way to accomplish a
given task. After breaking down each job into its component parts, Taylor then reconstructed them as they should
be done. Taylor also developed time management studies to break down a person’s workday into a series of
activities. He then timed the execution of each activity to see which way was the quickest. He would rebuild the
job using only the most efficient ways possible and then train workers to perform the task. And by allowing
workers to have rest periods throughout the day, he was able to get workers to work faster and better without
making them tired.38
Another one of Taylor’s significant contributions to the practice and profession of management was the concept of
first-class work. When Taylor developed the notion of first-class work, he did so with the idea that workers should do
as much work as they are physically and mentally capable of doing. Those who were not physically or mentally
capable of keeping up with production and job demands were sent to different areas in the plant where they could
work most effectively. First-class work was based not on physical strain or bursts of activity, but on what a worker
could realistically be expected to do.
Taylor also developed a task management system that allowed work to occur more efficiently and allowed for
breaking up a supervisor’s work so that he could function within a discrete area of activities. This focus allowed
supervisors to better plan and control the activities for which their workers were responsible. Taylor believed that
managers would become better at and more suited to analyzing their specific area of expertise, with authority that
came from knowledge and skill and not simply from position or power. He also developed a cost-accounting method
that became an integral part of daily planning and control, not something that was applied only to long-term analysis.
Taylorism was based on four principles of management illustrated in Table 3.2.
Principle 1: A manager should develop a rule of science for each aspect of a job. Following this principal ensures that
work is based on objective data gathered through research rather than rules of thumb. For example, many people
believed that allowing workers to take breaks would limit how much work could be done. After all, how could a worker
produce if he was not working? Taylor changed this attitude through research that demonstrated the benefits of
breaks during the workday. Due to Taylor’s research, we now enjoy coffee breaks.
Principle 2. Scientifically select and train each worker. When you get to the chapter on human resource
management, you will see that Taylor’s ideas still hold. Prior to Taylor’s work, the selection of workers was made
based on favoritism, nepotism, or random choice. Taylor got his job at Midvale because the owner was his father’s
friend. Likewise, workers were usually selected for a particular job with little consideration of whether they were
physically or mentally fit to perform it. Taylor changed this viewpoint by using research to find the best worker for
the job.
Principle 3. Management and the workforce should work together to ensure that work is performed according to the
principles of management. Taylor’s observation went against the long-established principles of both management
and the worker who believed that each was the other’s enemy. Rather than enmity, Taylor stressed cooperation and
the need for the work relationship to be mutually beneficial.
Principle 4. Work and responsibility should be equally divided between management and workers. Previously,
management set the directives, and workers obeyed or blocked them. Taylor believed that management and
workers had joint responsibilities to each other. Management’s responsibility was to scientifically select the quantity
of output for the day and provide a fair wage. In return, workers were to provide a fair day’s work.
Principles of Scientific Management

First. They develop a science for each element of a man’s work, which replaces the old rule-of-thumb
method.
Second. They scientifically select and then train, teach, and develop the workman, whereas in the past he
chose his own work and trained himself as best he could.
Third. They heartily cooperate with the men so as to ensure all of the work being done in accordance with the
principles of the science which has been developed.
Fourth. There is an almost equal division of the work and the responsibility between the management and the
workmen. The management take over all work for which they are better fitted than the workmen, while in the past
almost all of the work and the greater part of the responsibility were thrown upon the men.
Taylor’s Acolytes
In addition to his groundbreaking work on scientific management, Taylor attracted a wide variety of talented
individuals who aided him in his research. The first important individual was the mathematician Carl G. Barth
(1860–1939). Barth made two notable contributions. The first was his work on employee fatigue. He attempted to find
what aspects made a worker tired. The second was his use of the slide rule for calculating how much steel to cut. A
slide rule is a ruler with a sliding central strip. It makes it possible to perform calculations rapidly and accurately. Barth
developed one for cutting steel. Before Barth’s work, workers were required to make difficult calculations to determine
how much steel to cut. Usually, they guessed, which led to a lot of errors and waste. With the slide rule, however, the
number of errors decreased, as did the costs associated with them.
Another notable contributor to Taylor’s methods was Henry Gantt (1861–1919), who developed the Gantt chart,
which allowed for greater and more precise control over the production process. The Gantt chart, illustrated in
Exhibit 3.4, tracked what was supposed to be done versus what was actually done. Gantt gives two principles for
his charts: First, measure the amount of time needed to complete an activity. Second, use the space on the chart to
visually represent how much of an activity should have been completed in that given time. Today, the closest thing to
a Gantt chart is a scheduling system. These charts allowed management to see how projects were progressing,
take steps to see if they were on schedule, and monitor budget concerns.39 Gantt also pioneered the employee
bonus system, in which employees were given a bonus if they completed the task they were assigned.

Exhibit 3.4 Gantt Chart Attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license
The next key contributors to Taylor’s system of scientific management were Frank (1868–1924) and Lillian Gilbreth
(1878–1972),40 a couple that sometimes competed with and sometimes worked with Taylor. Frank Gilbreth was a
bricklayer who, before who he heard of Taylor, began to find ways to limit his fatigue and more efficiently lay down
more bricks. Unlike Taylor, Gilbreth was concerned with motion studies, in which he would film various motions
while someone worked on the job. To determine the most efficient way to perform a task, for example, Gilbreth
reduced all motions of the hand into some combination of 17 basic motions. Gilbreth would then calculate the most
efficient way of carrying out a job. Gilbreth filmed workers performing a wide variety of jobs, including bricklaying,
secretarial duties, and even a baseball game.
When working in construction, Gilbreth developed a management system that included rules about no smoking on
the job, a ten-dollar prize for the best suggestion in how to improve labor, and a new system of training so that
workers were taught only the best way to perform a task. He developed a rule that all accident sites be
photographed for use in future lawsuits. Gilbreth also prepared employees for their present and future positions by
introducing a plan for promotion, training, and development. This system required charting promotion paths and
record keeping for performance appraisals. He wanted to impress upon both workers and managers an
understanding of fatigue and of how to improve pay. In his research, Gilbreth realized that monotony came not from
the job itself, but from a worker’s lack of interest in the job.
Lillian Gilbreth may not have been the originator of the industrial psychology movement, but she brought a human
element into the study and practice of management with her training and insight. She stated that to understand how
to work better, we must understand the worker. Under scientific management, for example, understanding the
worker became a fundamental principle in selecting workers for particular tasks and providing workers with
incentives. The object was to develop each person to his fullest potential by strengthening his personal traits,
special abilities, and skills. After Frank Gilbreth died, Lillian Gilbreth shifted her focus to increasing domestic
efficiency and, in the process, designed the modern kitchen.
Taylor’s Shortcomings
Taylor was a monomaniac on a mission to convert as many people to scientific management as possible. Yet despite
his conviction and zealousness, Taylor’s ideas were poorly understood, and he attracted more enemies than
followers.41 Taylor attracted enmity from unions because he was against them; he believed that unions separated
workers from management. Taylor attracted enmity from the workers because he compared them to apes and other
beasts of burden. And Taylor gained the distrust and enmity of management because he
criticized them for their previous management failures. Taylor had a difficult personality and angered just about
everyone.
Additionally, Taylor made several mistakes. Taylorism, despite its claims, was not an overall theory of management,
but a management system designed for frontline managers, those immediately supervising. He generally ignored
strategy and implementation and thought of workers as machine tools to be manipulated rather than as human
beings. Although he was aware of group pressures, he believed that monetary incentives could overcome group
pressures. This oversight made him ignore the human aspects of handling workers, those that involved emotions,
personality, and attitudes.
While Taylor was certainly a flawed individual, these criticisms do not diminish his great contributions. Taylor
dramatically changed management practices and created the modern management world. Future researchers did not
replace Taylor, but complemented him. What is remarkable about Taylor was not that he was right in his time and
place, but that his vision continues to have meaning and consequence even today.42 Management was truly
Taylor-made.
CONCEPT CHECK
1. List the contributions from Taylor and his associates.

2. How did Taylor change management?
3.5 Administrative and Bureaucratic Management

5. How do bureaucratic and administrative management complement scientific management?
Writing at the same time as Taylor, Henri Fayol (1841–1925) and Max Weber (1864–1920) wrote complementary
contributions to Taylor’s four principles of scientific management framework. Whereas Taylor focused on frontline
managers, those who handle workers, Fayol focused on top managers, who set strategy, and Weber focused on
middle managers, who implement strategy. Although Taylor, Fayol, and Weber viewed management from different
perspectives, each stressed the need for logical, rational systems to coordinate and control various types of
enterprises.
Henri Fayol was a French mining executive who did the majority of his scholarly work after the Franco-Prussian War
of 1870–1871.43 Fayol sought to develop a theory of administrative theory in order to increase efficiency in order to
make the French economy stronger. Like Taylor, Fayol prized knowledge and experience over tradition. Unlike Taylor,
however, Fayol focused on overall management of the corporation rather than on individual tasks involved in carrying
out a firm’s business. Fayol focused on the overall social interactions [between or within what? a company and
between companies? or just within a company?] the company. An explanation for this difference is that Taylor was
concerned with worker behavior and performance, the domain of the frontline manager. Fayol’s focus was on the
direction and coordination of the whole organization, which is the domain of the top manager.44 Another notable
difference between the two men was that Taylor emphasized monetary compensation while Fayol recognized that
people work for things other than money. Fayol’s greatest contribution was that he sought to develop an approach
that would aid top managers in setting the direction of their company.
Fayol presented three principal ideas about management.45 First, Fayol stressed the need for unity of This OpenStax
book is available for free at http://cnx.org/content/col28330/1.8
command, that is, that a company’s management should speak with only voice. Too often under the Taylor system,
a worker could have up to eight managers telling him how to perform a single task. Fayol stressed flexibility and
recognized that authority must have responsibility attached to it. Accordingly, he stressed that management should
maintain a unity of command, which ensured that each supervisor would explain to each of the employees in his
group or division what aspect of his job to focus on. Each supervisor receives direction and information from the
managers above him and passes that information down the chain of command.
Fayol’s second notable contribution was his recognition that workers focused on the social aspects of their jobs as
well as on the monetary compensation they received for doing the job. Taylor was well aware of the social aspects
and pressures of work, but he sought to limit them. Fayol sought to use them for the business’s benefit by stressing
the development of an esprit de corps among workers. Esprit de corps refers to the cohesion of workers in a given
unit or department, to their commitment to their individual goals and to their coworkers even in the face of adversity,
and to the pride that one feels by being a member of the organization. Fayol stressed communication as a means of
creating esprit de corps and building commitment between personal goals and organizational goals.
A third important aspect of Fayol’s work was his emphasis on the notion of justice within an organization and on the
idea that an organization must decide issues fairly and equitably. In this way, managers could limit the ways in
which their biases and personal feelings could influence their decisions.
Taken as a whole, Fayol's ideas became what we call today Fayolism, or administrative theory. Fayolism consists
of the 14 principles of management. The 14 principles articulate the types of tasks that managers are supposed
to do. These 14 principles are still used today, but how they are used varies with a firm’s use of technology and its
culture. For example, a society that stresses individual outcomes will have different compensation systems than
those that are focused on collective or group outcomes.
Fayol’s 14 Principles of Management are:
1. Division of Work
2. Authority
3. Discipline
4. Unity of Command
5. Unity of Direction
6. Subordination of Individual Interest
7. Remuneration
8. Centralization
9. Scalar Chain
10. Order
11. Equity
12. Stability of Tenure of Personnel
13. Initiative—Employees should be given the necessary level of freedom to create and carry out plans. 14.
Esprit de Corps
In addition to the 14 principles, Fayol identified the five functions of management:
1. Planning
2. Organizing
3. Staffing
4. Controlling
5. Directing
Each of these functions describes what managers should do on a day-to-day basis. The functions of
management have changed over the years but have built upon Fayol’s structure. Fayol fully described what a
manager does and how each activity builds off of the others.
Max Weber was a German sociologist who made significant complementary contributions to Taylor’s
management system as well as to the disciplines of economics and sociology. Weber did the majority of his work
in the early 1890s and then after 1904 when he started writing again. Sociologists hold Weber in such esteem
that they regard him as a father of the field.
Weber46 stressed that social scientists could only understand collectives by understanding the actions of
individuals. One of the individual behaviors that Weber did research was the types of leadership, identifying three
types of leadership: charismatic domination (familial and religious) traditional domination (patriarchs,
patrimonialism, and feudalism) and legal domination (modern law, state, and bureaucracy). Weber’s contribution
to management is the development and understanding of the legal rationalism model of leadership, which
stressed the idea that leaders should make decisions based on law, precedent, and rule, rather than whim. Weber
went further than previous scholars and described why we saw the emergence of bureaucracies and other
responses to industrialization.
According to Weber, both the industrialization and transportation revolutions allowed for the expanse of territories to
be managed. The demands placed on managing larger and larger amounts of territory as well as people facilitated
the need for bureaucracy, which is a system of fixed rules that are impartially administered. The expanding market
economy required administration that is more efficient. At the same time, the emergence of communication and
transportation improvements made improved administration possible.
The most notable contribution Weber provided to modern management was the creation of the modern
bureaucracy. Weber’s principles of the ideal bureaucracy are shown. Although the ancient Chinese had the first
bureaucracy, the notable difference of Weber’s bureaucracy is that decisions were made on a formal basis, rather
than what a manager felt was correct. Weber stressed that knowledge, not birth circumstances, should be the basis
of hiring and promotion within a bureaucracy. This attitude stood in sharp contrast to the policies and practices of
the time in both Europe and the United States, which stressed birth circumstances. Weber also stressed that
bureaucrats need to make decisions based on rules rather than whims. The word bureaucracy has negative
connotations in the mind of the modern reader, but it was a vast improvement over what had occurred previously.
Prior to Weber, management did not have to provide justification for why they made particular decisions, nor did
they have to make decisions based on rules. Hiring and promotion were based on nepotism, very different from the
modern meritocracy of today.
Principles of the Ideal Bureaucracy:
• Specialized roles
• Recruitment based on merit
• Uniform principles of placement, promotion, and transfer
• Careerism with systematic salary structure
• Hierarchy, responsibility, and accountability
• Subjection of official conduct to strict rules of discipline and control
• Supremacy of abstract rules
• Impersonal authority (i.e., office bearer does not bring the office with him)
There was, however, a downside to this new managerial approach. A bureaucracy could shield bureaucrats from
personal responsibility and initiative. Even worse, it could make them willing participants in criminal activities.
American sociologist Robert K. Merton noted that in a bureaucracy, rules could become more important than
actual goals. Merton wrote:
An effective bureaucracy demands reliability of response and strict devotion to regulations. (2) Such This
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devotion to the rules leads to their transformation into absolutes; they are no longer conceived as relative
to a set of purposes. (3) This interferes with ready adaptation under special conditions not clearly
envisaged by those who drew up the general rules. (4) Thus, the very elements which conduce toward
efficiency in general produce inefficiency in specific instances. Full realization of the inadequacy is seldom
attained by members of the group who have not divorced themselves from the meanings which the rules
have for them. These rules in time become symbolic in cast, rather than strictly utilitarian.47
Another particular issue was that bureaucracy placed so much emphasis on legal authority that it ignored several
important factors. The first factor is that bureaucratic laws are often incomplete due to problems in communication
and understanding. Contracts tend to be abandoned rather than completed. No contract or law can consider every
outcome or event. The second issue is that bureaucratic organizations ignored interpersonal authority and often
relied only on reason and logic for decision-making. Often people followed their managers because they personally
liked them rather than the legal aspect of authority. Managers that only use legal authority to gain performance are
going to be really limited in the performance they will be able to garner (please see the chapter on leadership).
Both Fayol and Weber made significant contributions to management. Fayol’s ideas are the basis of modern
strategy, as he attempted to understand what activities managers should do. His ideas inform management thoughts
in terms of the various roles that managers need to undertake to ensure the cooperation of workers. Likewise,
Weber’s ideas can be seen very clearly in human resource management in that managers should make decisions
based on policy rather than whim. We can see that both men’s ideas about structure and the line of authority
continue to have great influence in management today.
CONCEPT CHECK
1. What were the contributions of Fayol and Weber?

2. How did their work compare to Taylor’s?
3. What is the idea of line of authority and structure?
3.6 Human Relations Movement

6. How did Elton Mayo influence management theory, and how did the human relations movement affect current
management theory?
The human relations movement was a natural response to some of the issues related to scientific management and
the under-socialized view of the worker that ignored social aspects of work. The key uniting characteristics of Taylor,
Weber, and Fayol were the ideas of efficiency produced through either operational, legal, or administrative
improvements. One of the principal assumptions was an emphasis on rationality.48 According to scientific
management, there was a logic to actions, and formal and knowledge authority were the principal catalysts of
workplace motivation. Scientific management tended to downplay the effects of social pressures on human
interactions.49 The human relations movement enhanced scientific management because it acknowledged that
peoples’ attitudes, perceptions, and desires play a role in their workplace performance. With this acknowledgement,
for example, managers began to realize that settling disputes was more difficult than the scientific management
approach described.
The major difference between scientific management and human relations theory was that human relations

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Access. The future of education.

1.1 What Do Managers Do? 8

2.1 Overview of Managerial Decision-Making 23

3.1 The Early Origins of Management 58

5.1 Ethics and Business Ethics Defined 121

6.1 Importance of International Management 159

7.1 Entrepreneurship 209

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10.1 Organizational Structures and Design 306

11.1 An Introduction to Human Resource Management 340 11.2

12.1 An Introduction to Workplace Diversity 370

13.1 The Nature of Leadership 408

14.1 Motivation: Direction and Intensity 451

16.1 The Process of Managerial Communication 524

17.1 Is Planning Important 550

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About OpenStax Resources

About Principles of Management

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Activities and Cases That Put Knowledge to Work

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Marcia Marriott, Monroe Community College

What do managers do to help organizations achieve top performance?

EXPLORING MANAGERIAL CAREERS

1.1 What Do Managers Do?

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1. What do managers do to help organizations achieve top performance?

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1. Describe and explain how Mintzberg defines the manager’s job.

1.3 Major Characteristics of the Manager's Job

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fragmentation, and verbal communication characterize their work.”20

What Varies in a Manager’s Job? The Emphasis

planning and development.

Variations in Managerial Work

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1. Describe and explain the different levels of management.

18 Chapter 1 Managing and Performing Key Terms

Decisional role assumes in the organization.

Summary of Learning Outcomes

1.2 The Roles Managers Play

1.3 Major Characteristics of the Manager's Job

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Management Skills Application Exercises

Managerial Decision Exercises

Critical Thinking Case

crowd of protestors during a white nationalist gathering.

Exhibit 2.1 (i_yudai/ flickr/ Attribution 2.0 Generic (CC BY 2.0))