Contemporary Business

Third Canadian Edition

Boone, Kurtz, Khan, Canzer

Chapter 7

Management, Leadership, and the Internal

Organization
Copyright ©2020 John Wiley & Sons, Inc.
Learning Objectives

• LO 7.1 Describe management.

• LO 7.2 Explain the role of vision and ethical standards in business success.
• LO 7.3 Summarize the importance of planning and the three types of planning.
• LO 7.4 Describe the strategic planning process.
• LO 7.5 Contrast the two major types of business decisions, and list the steps in
the decision-making process.
• LO 7.6 Define leadership, and compare different leadership styles.
• LO 7.7 Discuss the meaning and importance of corporate culture.
• LO 7.8 Identify the five major forms of departmentalization and the four main
types of organization structures.

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What is Management?
Management: The process of achieving organizational goals through people
and other resources

FIGURE 7.1
The Management
Hierarchy

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Top Management
• Develop long-range strategic
plans for the organization
• Inspire executives and
employees to achieve their
vision for the company’s future

FIGURE 7.1 The Management

Hierarchy

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Middle Management
• Focus on specific operations,
products, or customer groups
within an organization
• Responsible for developing
detailed plans and procedures to
implement the firm’s strategic
plans

FIGURE 7.1 The Management

Hierarchy

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Supervisory Management
• Implement the plans developed
by middle managers
• Responsible for non-manager
employees
• Motivate workers to accomplish
daily, weekly, and monthly goals

FIGURE 7.1 The Management Hierarchy

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Skills Needed for Managerial Success

• Technical skills
o Manager’s ability to understand and use the techniques, knowledge,
tools, and equipment of a specific department or area of study
• Human skills
o Interpersonal skills that enable a manager to work effectively with
and through people
• Conceptual skills
o Ability to see the organization as a unified whole and to understand
how each part of the overall organization interacts with other parts

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Managerial Functions

Planning Directing
• The process of looking forward to • Guiding and motivating employees to
future events and conditions and accomplish organizational goals
deciding on the courses of action for Controlling
achieving organizational goals
• The function of assessing an
Organizing organization’s performance against its
• The process of blending human and goals.
material resources through a formal • Involves four basic steps:
structure of tasks and authority
1. Setting performance standards
2. Monitor actual performance
3. Compare actual performance
with the standards
4. Making corrections if needed
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Setting a Vision and Ethical Standards for the Firm

• Vision: The ability to perceive marketplace needs and what an

organization must do to satisfy them
o Must be focused yet adaptable to changes in the business
environment
• Long-term success is also tied to the ethical standards that
the top management team sets
o High ethical standard can also encourage, motivate, and inspire
employees to achieve goals
o World’s Most Ethical Companies

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Importance of Planning

• There are different types and levels of plans

• Organizations should have a comprehensive planning framework
o Each step should fit into overall plan
o Broad/long-range: mission statement, objectives and goals
o Narrow/short-range: functional plans for specific employees/areas
• Plans outline the steps the company will take to meet goals and
objectives

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Planning at Different Management Levels
PRIMARY TYPR OF PLANNING MANGERIAL LEVEL EXAMPLES
Strategic Top management Organizational objectives,
fundamental strategies, long-
term plans
Tactical Middle management Quarterly and semi-annual plans,
departmental policies and
procedures
Operational Supervisory management Daily and weekly plans, rules, and
procedures for each department
Contingency Primarily top management, Ongoing plans for actions and
but all levels contribute communications in an emergency

Table 7.1 Planning at Different Management Levels

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The Strategic Planning Process

FIGURE 7.2 Steps in the Strategic Planning Process

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Elements of SWOT Analysis

• SWOT stands for strengths, weaknesses, opportunities, and

threats
o By assessing all four factors one by one, a firm can then develop
the best strategies for gaining a competitive advantage

FIGURE 7.3
Elements of a
SWOT Analysis

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Managers as Decision Makers

• Decision making: The process of seeing a problem or

opportunity, assessing possible solutions, selecting and
carrying out the best-suited plan, and assessing the results
• A programmed decision involves simple, common, and
frequently-occurring problems that already have solutions
• A nonprogrammed decision involves a complex and unique
problem or opportunity with important results for the
organization

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Test Your Knowledge (1 of 3)

_______are internal to a firm; _______are external factors.

a) Strengths; weaknesses
b) Threats; strengths
c) Opportunities; threats
d) Weaknesses; opportunities
Answer: d

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How Managers Make Decisions

FIGURE 7.4 Steps in the Decision-Making Process

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Managers as Leaders

• Leadership: The ability to direct or inspire people to reach goals

• Involves the use of influence or power
• Three traits are common among many leaders:
o Empathy
o Self-awareness
o Objectivity in dealing with others

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Leadership Styles

• Autocratic leadership
o Leader-centred; make decisions on own without consulting
employees
• Democratic leadership
o Involves employees in decisions, delegate assignments, and ask
them for suggestions
• Free-rein leadership
o Involves minimal supervision; leave most decisions to employees

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Test Your Knowledge (2 of 3)

______ is directing or inspiring people to attain certain goals.

a) Leadership
b) Mentoring
c) Monitoring
d) Managing
Answer: a

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Corporate Culture

• Corporate culture: An organization’s collection of principles,

beliefs, and values
• Managers use symbols, rituals, ceremonies, and stories to
strengthen corporate culture

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Organizational Structures
• Organization: A structured group of people working together to achieve
common goals
• Three key elements:
o Human interaction
o Goal-directed activities
o Structure

FIGURE 7.5 Steps in the Organizing Process

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Sample Organizational Chart

FIGURE 7.6 Sample Organization Chart

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Departmentalization

The process of dividing work activities into units within the organization
• Product departmentalization: Organized based on the goods and services a
company offers
• Geographical departmentalization: Organized by geographical regions within a
country or, for a multinational firm, by region throughout the world
• Customer departmentalization: Organized by the different types of customers
the organization serves
• Functional departmentalization: Organized by business functions such as
finance, marketing, human resources, and production
• Process departmentalization: Organized by work processes necessary to
complete production of goods or services

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Different Forms of Departmentalization

FIGURE 7.7 Different Forms of Departmentalization within One Company

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Delegating Work Assignments
• Delegation: The managerial process of assigning work to employees
o Providing employees with the responsibility and necessary authority for
completing tasks
o Employees have accountability, or responsibility, for their actions and
decisions
• Span of management is the number of employees a supervisor
manages
• Centralization means that decision-making is retained at the top of the
management hierarchy
• Decentralization means that decision-making is shifted to the lower
levels. Many firms believe it enhances their flexibility and
responsiveness to customer needs
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Types of Organizational Structures

Line organizations
• Oldest and simplest form; direct flow of authority from CEO to
employees
• Chain of command indicates who directs which activities and who
reports to whom
Line-and-staff organizations
• Combines line departments and staff departments
• Line departments participate directly in decisions that affect the
core operations of the organization
• Staff departments lend specialized technical support
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Line-and-Staff Organizations

FIGURE 7.8
Line-and-Staff
Organization

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Committee Organizations

• Authority and responsibility are in the hands of a group of

individuals
• Often part of a line-and-staff structure
• Often develop new products
• Tend to act slowly and conservatively
• Often make decisions by compromising conflicting interests
rather than choosing best alternative

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Matrix Organizations (1 of 2)

• Project management structure that links employees from different parts

of the organization to work together on specific projects
• Employees report to both a line manager and a project manager

Advantages: Disadvantages:
• Flexibility in adapting to changes • Integrating skills of many
• Focus on major problems or specialists into a coordinated
products team
• Outlet for employees’ creativity • Team members’ permanent
and initiative functional managers must
adjust the employees’ regular
workloads
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Matrix Organizations (2 of 2)

FIGURE 7.9 Matrix

Organizations

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Test Your Knowledge (3 of 3)

In a matrix structure, each employee reports to two managers: one line

manager and one ______ manager.
a) staff
b) administrative
c) group
d) project
Answer: d

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Copyright

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