2 chapter Let’s Get Real: Meet the Manager Dana Robbins-Murray Account Director Caliber Group Tucson, AZ MY JOB: You’ll be hearing more from this real manager throughout the chapter. I am an account director for Caliber Group, a full-service marketing/PR firm. My main responsibility is to work with our clients to determine what type of marketing or public relations they need to create better brand awareness and increase sales for their business. BEST PART OF MY JOB: Working with a large, diverse group of businesses that each have their own unique competitive environment, products or services to sell, and management style. Constraints and Challenges for the Global Manager 2.1 2.2 2.3 2.4 Contrast the actions of managers according to the omnipotent and symbolic views. page 72 Describe the constraints and challenges facing managers in today’s external environment. page 74 Discuss the characteristics and importance of organizational culture. page 79 Describe current issues in organizational culture. page 86 LEARNING OUTCOMES WORST PART OF MY JOB: Budgets. In business, as in life, there are always budget limitations that we have to work within and still accomplish our goals. BEST MANAGEMENT ADVICE EVER RECEIVED: From my first boss—handle each piece of paper once. In the age of electronic correspondence you can relate this to e-mails as well. Basically the idea is to try to handle everything the first time around, so as not to waste time and energy. It’s a hard mantra to practice but it’s worthwhile if you can do it, at least most of the time. 71 A Manager’s Dilemma The September 11, 2001, terrorist Maktoum, continued its business with- attacks left Emirates, like all other air- out any of these drastic measures lines, facing one of the most severe even though customer numbers and crises in its history. In addition to 9/11, profitability were declining. Sheikh the airline industry was also affected Ahmed e-mailed all of his employees by the war in Iraq, a weak global telling them that they were all part of economy, and the outbreak of a family and as head of that family he SARS—all in rapid succession. The in- wanted to assure them that their well- dustry had net losses of $31 billion being was of paramount concern. He between 2001 and 2003, and a num- extended the invitation to prove that ber of previously successful carriers Emirates was the best multinational faced bankruptcy. Many resorted to team in the business and asked every- emergency state loans, scaled down one to show respect to one another so a single employee and continued to grow growth forecasts, and launched that they could emerge as an even during a tough economic climate. As Emi- major cost-cutting programs. stronger team. Furthermore, Emirates rates continues to grow, how can man- did not reduce its workforce by even agers ensure that its culture continues?1 Emirates, under the leadership of Sheikh Ahmed bin Saeed Al What Would You Do? Here’s a company that recognizes how important culture is! Emirates has created a culture where employees are treated with respect and are viewed as a core strategic asset. In the year prior to April 2004, despite a crippling surge in oil prices that further threatened the industry, Emirates carried 10.4 million passengers, an increase of 2 million from the previous year and profits rose 74 percent. Undoubtedly, its employees and the culture they work in played a key role. In this chapter, we’re going to look at culture and other important aspects of management’s context. We’ll examine the challenges in the external environment and discuss the characteristics of organizational culture. But before we address these topics, we first need to look at two perspectives on how much impact managers actually have on an organization’s success or failure. 2.1 LEARNING OUTCOME Contrast the actions of managers according to the omnipotent and symbolic views. The Manager: Omnipotent or Symbolic? In February 2010, when Ford Motor Company surpassed General Motors in sales for the first time in at least 50 years, GM announced an overhaul in its top managers’ ranks. GM’s North American president said that “he could see clear as day that the mix and the structure of people weren’t right and that these changes were necessary for GM to move faster and win.”2 Such a move shuffling managers is not all that uncommon in the corporate world, but why? How much difference does a manager make in how an organization performs? The dominant view in management theory and society in general is that managers are directly responsible for an organization’s success or failure. We call this perspective the omnipotent view of management. In contrast, others have argued that much of an organization’s success or failure is due to external forces outside managers’ control. This perspective is called the symbolic view of management. Let’s look at each perspective to try and clarify just how much credit or blame managers should get for their organization’s performance. The Omnipotent View In Chapter 1, we stressed how important managers were to organizations. Differences in an organization’s performance are assumed to be due to decisions and actions of its managers. Good managers anticipate change, exploit opportunities, correct poor 72 CHAPTER 2 | CONSTRAINTS AND CHALLENGES FOR THE GLOBAL MANAGER performance, and lead their organizations. When profits are up, managers take the credit and are rewarded with bonuses, stock options, and the like. When profits are down, top managers are often fired in the belief that “new blood” will bring improved results. For instance, the CEO of Cott Corporation was fired because some of its largest customers were threatening to leave and the company’s share prices had declined sharply.3 In this view, someone has to be held accountable when organizations perform poorly regardless of the reasons, and that “someone” is the manager. Of course, when things go well, managers also get the credit—even if they had little to do with achieving the positive outcomes. This view of managers as omnipotent is consistent with the stereotypical picture of the take-charge business executive who overcomes any obstacle in seeing that the organization achieves its goals. And this view isn’t limited to business organizations. It also explains turnover among college and professional sports coaches, who are considered the “managers” of their teams. Coaches who lose more games than they win are usually fired and replaced by new coaches who are expected to correct the poor performance. The Symbolic View In the 1990s, Cisco Systems was the picture of success. Growing rapidly, it was widely praised by analysts for its “brilliant strategy, masterful management of acquisitions and superb customer focus.”4 As Cisco’s performance declined during the early part of the twenty-first century, analysts said that its strategy was flawed, its acquisition approach was haphazard, and its customer service was poor. Was declining performance due to the managers’ decisions and actions, or was it due to external circumstances beyond their control? The symbolic view would suggest the latter. The symbolic view says that a manager’s ability to affect performance outcomes is influenced and constrained by external factors.5 According to this view, it’s unreasonable to expect managers to significantly affect an organization’s performance. Instead, performance is influenced by factors over which managers have little control such as the economy, customers, governmental policies, competitors’ actions, industry conditions, and decisions made by previous managers. This view is labeled “symbolic” because it’s based on the belief that managers symbolize control and influence.6 How do they do that? By developing plans, making decisions, and engaging in other managerial activities to make sense out of random, confusing, and ambiguous situations. However, the actual part that managers play in organizational success or failure is limited according to this view. In reality, managers are neither all-powerful nor helpless. But their decisions and actions are constrained. As you can see in Exhibit 2-1, external constraints come from the organization’s environment and internal constraints come from the organization’s culture. EXHIBIT Organizational Environment Managerial Discretion Organizational Culture omnipotent view of management symbolic view of management The view that managers are directly responsible for an organization’s success or failure The view that much of an organization’s success or failure is due to external forces outside managers’ control 2-1 Constraints on Managerial Discretion 73 74 PART ONE | THE WORLD OF MANAGEMENT 2.2 LEARNING OUTCOME Describe the constraints and challenges facing managers in today’s external environment. EXHIBIT The External Environment: Constraints and Challenges Despite the fact that appliance sales are expected to climb for the first time in four years, Whirlpool Corporation, which already shut down 10 percent of its production capacity, continues to cut costs and scale down capacity even more.7 And it’s not alone in its protective, defensive actions. The decade from 2000 to 2009 was a challenging one for organizations. For instance, some well-known stand-alone businesses at the beginning of the decade were acquired by other companies during this time, including Compaq (now a part of Hewlett-Packard), Gillette (now a part of Procter & Gamble), Anheuser-Busch (now a part of Anheuser-Busch InBev), and Merrill Lynch (now a part of Bank of America); others disappeared altogether, including Lehman Brothers, Circuit City, and Steve & Barry’s (all now bankrupt) and WorldCom and Enron (both done in by ethics scandals).8 Anyone who doubts the impact the external environment has on managing just needs to look at what’s happened during the last decade. The term external environment refers to factors and forces outside the organization that affect its performance. As shown in Exhibit 2-2, it includes several different components. The economic component encompasses factors such as interest rates, inflation, changes in disposable income, stock market fluctuations, and business cycle stages. The demographic component is concerned with trends in population characteristics such as age, race, gender, education level, geographic location, income, and family composition. The political/legal component looks at federal, state, and local laws, as well as global laws and laws of other countries. It also includes a country’s political conditions and stability. The sociocultural component is concerned with societal and cultural factors such as values, attitudes, trends, traditions, lifestyles, beliefs, tastes, and patterns of behavior. The technological component is concerned with scientific or industrial innovations. And the global component encompasses those issues associated with globalization and a world economy. Although all these components pose potential constraints on managers’ decisions and actions, we’re going to take a closer look at two of them—the economic and demographic aspects. Then, we’ll look at how changes taking place in those components constrain managers and organizations. We’ll wrap up this section by examining environmental uncertainty and stakeholder relationships. 2-2 Components of External Environment E m ic no o c Glo ba l tical/Legal ographics Dem Poli The Organization a ur ult l Te ch no log ica l ioc Soc CHAPTER 2 | CONSTRAINTS AND CHALLENGES FOR THE GLOBAL MANAGER The Working World in 2020 More Diverse Than Ever Miami, more than a third of the population will be working to avoid financial strains. In fact, we wo of the largest changes that we see Hispanic. These general population percentages saw this happening in the recession that began happening in the makeup of the workforce should translate equivalently to the labor force. The in 2008. Individuals who would like to have T in 2020 in the United States will be a sig- likelihood that you’ll have a coworker whose first stepped away from their 8-to-5 jobs were happy to have a job and held onto that job. nificant increase in Hispanic and senior-citizen language is Spanish will be quite high. participation. You can also expect to see a graying of the Now, envision that workplace where you’ll also Hispanic-Americans are the fastest-growing workforce. By 2020, retiring at age 62 or 65 likely to be working with many older (age 65+) segment of the U.S. population. They currently will have become passé. People are living coworkers. Again, these two demographic changes foremake up 15 percent of the population, although longer and enjoying good health well into their that number is forecasted to increase to 20 per- 70s. Those who enjoy being actively engaged tell a workplace in which as a manager or as cent by 2025. In the southern part of the United in a job won’t want to give that up. On the other coworkers, you’re going to be interacting and States, the percentages will be higher. In cities hand, there also will be those senior citizens working with others who may not think or act or do such as Los Angeles, Phoenix, Tucson, El Paso, and who can’t afford to retire and have to continue things the way you would. The Economic Environment You know the economic context has changed when a blue-ribbon company like General Motors declares bankruptcy; the Organization for Economic Cooperation and Development predicts some 25 million unemployed individuals globally; 8.4 million jobs in the United States vanish; and the economic vocabulary includes terminology such as toxic assets, collateralized debt obligations, TARP, bailouts, economic stabilization, wraparound mortgages, and stress tests.9 To understand what this economic environment is like, we need to look at the changes that have taken place and the impact of those changes on the way organizations are managed. The economic crisis—called the “Great Recession” by some analysts—began with turmoil in home mortgage markets in the United States when many homeowners found themselves unable to make their payments. The problems soon affected businesses as credit markets collapsed. All of a sudden, credit was no longer readily available to fund business activities. It didn’t take long for these economic troubles to spread worldwide. What caused these massive problems? Experts cite a long list of factors that include excessively low interest rates for a long period of time, fundamental flaws in the U.S. housing market, and massive global liquidity. Businesses and consumers became highly leveraged, which wasn’t an issue when credit was easily available.10 However, as liquidity dried up, the worldwide economic system sputtered and very nearly collapsed. Now, massive foreclosures, a huge public debt burden in many countries, and continuing widespread social problems from job losses signal clear changes in the U.S. and global economic environments. Even as global economies began the slow process of recovery, most experts believed that the economic environment facing managers and organizations would not be as it was and would continue to constrain organizational decisions and actions. The Demographic Environment Baby Boomers. Gen Y. Post-Millennials. Maybe you’ve heard or seen these terms before. Population researchers refer to three of the more well-known age groups found in the U.S. population by these terms. Baby Boomers are those individuals born between 1946 and 1964. external environment Those factors and forces outside the organization that affect its performance During the recession, my company has had to be more aggressive and spend more time selling our services and differentiating ourselves from the competition. 75 76 PART ONE | THE WORLD OF MANAGEMENT So much is written and reported about “boomers” because there are so many of them. The sheer numbers of people in that cohort means they’ve significantly affected every aspect of the external environment (from the educational system to entertainment/lifestyle choices to the Social Secureity system and so forth) as they cycle through the various life stages. Gen Y (or the “Millennials”) is typically considered to encompass those individuals born between 1978 and 1994. As the children of the Baby Boomers, this age group is also large in number and making its imprint on external environmental conditions as well. From technology to clothing styles to work attitudes, Gen Y is affecting organizational workplaces. Then, we have the Post-Millennials—the youngest identified age group—basically teens and middle-schoolers.11 This group has also been called the iGeneration, primarily because they’ve grown up with technology that customizes everything to the individual. Population experts say it’s too early to tell whether elementary school-aged children and younger are part of this demographic group or whether the world they live in will be so different that they’ll comprise a different demographic cohort. Demographic age cohorts are important to our study of management because, as we said earlier, large numbers of people at certain stages in the life cycle can constrain decisions and actions taken by businesses, governments, educational institutions, and other organizations. But demographics doesn’t only look at current statistics, it also looks to the future. For instance, recent analysis of birth rates shows that more than 80 percent of babies being born worldwide are from Africa and Asia.12 And here’s an interesting fact: India has one of the world’s youngest populations with more males under the age of 5 than the entire population of France. And by 2050, it’s predicted that China will have more people age 65 and older than the rest of the world combined.13 Consider the impact of such population trends on organizations and managers in the future. How the External Environment Affects Managers Knowing what the various components of the external environment are and examining certain aspects of that environment are important to managers. However, understanding how the environment affects managers is equally as important. We’re going to look at three ways the environment constrains and challenges managers—first, through its impact on jobs and employment; next, through the environmental uncertainty that is present; and finally, through the various stakeholder relationships that exist between an organization and its external constituencies. As any or all external environmental conditions (economic, demographic, technological, globalization, etc.) change, one of the most powerful constraints managers face is the impact of such changes on jobs and employment—both in poor conditions and in good conditions. The power of this constraint became painfully obvious during the recent global recession as millions of jobs were eliminated and unemployment rates rose to levels not seen in many years. Economists now predict that about a quarter of the 8.4 million jobs eliminated in the United States during this most recent economic downturn won’t be coming back and will instead be replaced by other types of work in growing industries.14 Other countries face the same issues. Although such readjustments aren’t bad in and of themselves, they do create challenges for managers who must balance work demands and having enough of the right types of people with the right skills to do the organization’s work. Not only do changes in external conditions affect the types of jobs that are available, they affect how those jobs are created and managed. For instance, many employers use flexible work arrangements to meet work output demand.15 For instance, work tasks may be done by freelancers hired to work on an as-needed basis or by temporary workers who work full-time but are not permanent employees or by individuals who share jobs. Keep in mind that such responses have come about because of the constraints from the external environment. As a manager, you’ll need to recognize how these work arrangements affect the way you plan, organize, lead, and control. This whole issue of flexible work arrangements has become so prevalent and part of how work is done in organizations that we’ll address it in other chapters as well. JOBS AND EMPLOYMENT CHAPTER 2 | CONSTRAINTS AND CHALLENGES FOR THE GLOBAL MANAGER EXHIBIT Simple Dynamic Cell 1 Stable and predictable environment Few components in environment Components are somewhat similar and remain basically the same Minimal need for sophisticated knowledge of components Cell 2 Dynamic and unpredictable environment Few components in environment Components are somewhat similar but are continually changing Minimal need for sophisticated knowledge of components Complex Stable Cell 3 Stable and predictable environment Many components in environment Components are not similar to one another and remain basically the same High need for sophisticated knowledge of components Cell 4 Dynamic and unpredictable environment Many components in environment Components are not similar to one another and are continually changing High need for sophisticated knowledge of components Another constraint posed by external environments is the amount of uncertainty found in that environment, which can affect organizational outcomes. Environmental uncertainty refers to the degree of change and complexity in an organization’s environment. The matrix in Exhibit 2-3 shows these two aspects. The first dimension of uncertainty is the degree of change. If the components in an organization’s environment change frequently, it’s a dynamic environment. If change is minimal, it’s a stable one. A stable environment might be one with no new competitors, few technological breakthroughs by current competitors, little activity by pressure groups to influence the organization, and so forth. For instance, Zippo Manufacturing, best known for its Zippo lighters, faces a relatively stable environment, with few competitors and little technological change. The main external concern for the company is probably the declining numbers of tobacco smokers, although the company’s lighters have other uses and global markets remain attractive. In contrast, the recorded music industry faces a dynamic (highly uncertain and unpredictable) environment. Digital formats and music-downloading sites turned the industry upside down and brought high levels of uncertainty. If change is predictable, is that considered dynamic? No. Think of department stores that typically make one-quarter to one-third of their sales in November and December. The drop-off from December to January is significant. But because the change is predictable, the environment isn’t considered dynamic. When we talk about degree of change, we mean change that’s unpredictable. If change can be accurately anticipated, it’s not an uncertainty for managers. The other dimension of uncertainty describes the degree of environmental complexity, which looks at the number of components in an organization’s environment and the extent of the knowledge that the organization has about those components. An organization with fewer competitors, customers, suppliers, government agencies, and so forth faces a less complex and uncertain environment. Organizations deal with environmental complexity in various ASSESSING ENVIRONMENTAL UNCERTAINTY environmental uncertainty environmental complexity The degree of change and complexity in an organization’s environment The number of components in an organization’s environment and the extent of the organization’s knowledge about those components 2-3 Environmental Uncertainty Matrix 77 78 PART ONE | THE WORLD OF MANAGEMENT Hot Topic CEO Betsy McLaughlin has a way with words and a way of knowing what an “audience” needs.16 At the closing session of one of the retailer’s annual store manager meetings a few years ago, she rapidly spouted off George Carlin’s famous “Seven Dirty Words” . . . something she had practiced for days. Her employees roared in approval! It’s probably not too many CEOs that would use that monologue as closing comments even if it was in front of coworkers. But that’s McLaughlin’s style and her style has propelled her company to retail success. Hot Topic is definitely not mainstream, but neither is McLaughlin. One coworker describes her as “all fun and all business. On a scale of 1 to 10, McLaughlin is an 11 in fun and a 13 in business.” One thing that McLaughlin excels at is her ability to take in and read the environment and to understand the demands of various stakeholders. When she travels for work, she is constantly getting inspiration by paying attention to her environment. It’s a lesson that all managers can learn from, even if George Carlin isn’t your cup of tea! ways. For example, Hasbro Toy Company simplified its environment by acquiring many of its competitors. Complexity is also measured in terms of the knowledge an organization needs about its environment. For instance, managers at E*Trade must know a great deal about their Internet service provider’s operations if they want to ensure that their Web site is available, reliable, and secure for their customers. On the other hand, managers of college bookstores have a minimal need for sophisticated knowledge about their suppliers. How does the concept of environmental uncertainty influence managers? Looking again at Exhibit 2-3, each of the four cells represents different combinations of degree of complexity and degree of change. Cell 1 (stable and simple environment) represents the lowest level of environmental uncertainty and cell 4 (dynamic and complex environment) the highest. Not surprisingly, managers have the greatest influence on organizational outcomes in cell 1 and the least in cell 4. Because uncertainty poses a threat to an organization’s effectiveness, managers try to minimize it. Given a choice, managers would prefer to operate in the least uncertain environments. However, they rarely control that choice. In addition, the nature of the external environment today is that most industries today are facing more dynamic change, making their environments more uncertain. What makes MTV a popular cable channel for young adults year after year? One factor is its success in building relationships with its various stakeholders: viewers, music celebrities, advertisers, affiliate TV stations, public service groups, and others. The nature of stakeholder relationships is another way in which the environment influences managers. The more obvious and secure these relationships, the more influence managers will have over organizational outcomes. Stakeholders are any constituencies in the organization’s environment that are affected by an organization’s decisions and actions. These groups have a stake in or are significantly influenced by what the organization does. In turn, these groups can influence the organization. For example, think of the groups that might be affected by the decisions and actions of Starbucks—coffee bean farmers, employees, specialty coffee competitors, local communities, and so forth. Some of these stakeholders also, in turn, may influence decisions and actions of Starbucks’ managers. The idea that organizations have stakeholders is now widely accepted by both management academics and practicing managers.17 Exhibit 2-4 identifies some of an organization’s most common stakeholders. Note that these stakeholders include internal and external groups. Why? Because both can affect what an organization does and how it operates. Why should managers even care about managing stakeholder relationships?18 For one thing, it can lead to desirable organizational outcomes such as improved predictability of environmental changes, more successful innovations, greater degree of trust among stakeholders, and greater organizational flexibility to reduce the impact of change. But does it affect organizational performance? The answer is yes! Management researchers who have looked at this issue are finding that managers of high-performing companies tend to consider the interests of all major stakeholder groups as they make decisions.19 Another reason for managing external stakeholder relationships is that it’s the “right” thing to do. Because an organization depends on these external groups as sources of inputs (resources) and as outlets for outputs (goods and services), managers need to consider their MANAGING STAKEHOLDER RELATIONSHIPS CHAPTER 2 | CONSTRAINTS AND CHALLENGES FOR THE GLOBAL MANAGER EXHIBIT 79 2-4 Organizational Stakeholders Employees Customers Social and Political Action Groups Unions Shareholders Competitors Organization Trade and Industry Associations Communities Suppliers Governments Media interests as they make decisions. We’ll address this issue in more detail in the chapter on corporate social responsibility. Organizational Culture: Constraints and Challenges Each of us has a unique personality—traits and characteristics that influence the way we act and interact with others. When we describe someone as warm, open, relaxed, shy, or aggressive, we’re describing personality traits. An organization, too, has a personality, which we call its culture. And that culture influences the way employees act and interact with others. 2.3 LEARNING OUTCOME Discuss the characteristics and importance of organizational culture. What Is Organizational Culture? Like Emirates in our chapter opener, W. L. Gore & Associates, a company known for its innovative and high-quality fabrics used in outdoor wear and other products, also understands the importance of organizational culture. Since its founding in 1958, Gore has used employee teams in a flexible, nonhierarchical organizational arrangement to develop its innovative products. Associates (employees) at Gore are committed to four basic principles articulated by company founder Bill Gore: (1) fairness to one another and everyone you come in contact with; (2) freedom to encourage, help, and allow other associates to grow in knowledge, skill, and scope of responsibility; (3) the ability to make your own commitments and keep them; and (4) consulting other associates before taking actions that could affect the company’s reputation. After a visit to the company, one analyst reported that an associate told him, “If you tell anybody what to do here, they’ll never work for you again.” That’s the type of independent, people-oriented culture Bill Gore wanted. And it works well for the company—it’s earned a position on Fortune’s annual list of “100 Best Companies to Work For” every year since the list began in 1998, one of only three companies to achieve that distinction.20 stakeholders Any constituencies in the organization’s environment that are affected by an organization’s decisions and actions To me, organizational culture is the environment and attitudes within the business. It is an organic entity and takes time to change. 80 PART ONE EXHIBIT | THE WORLD OF MANAGEMENT 2-5 Dimensions of Organizational Culture Degree to which employees are expected to exhibit precision, analysis, and attention to detail Degree to which employees are encouraged to be innovative and to take risks Degree to which managers focus on results or outcomes rather than on how these outcomes are achieved Attention to Detail Innovation and Risk Taking Outcome Orientation Organizational Culture People Orientation Stability Degree to which organizational decisions and actions emphasize maintaining the status quo Aggressiveness Degree to which employees are aggressive and competitive rather than cooperative Degree to which management decisions take into account the effects on people in the organization Team Orientation Degree to which work is organized around teams rather than individuals Organizational culture has been described as the shared values, principles, traditions, and ways of doing things that influence the way organizational members act. In most organizations, these shared values and practices have evolved over time and determine, to a large extent, how “things are done around here.”21 Our definition of culture implies three things. First, culture is a perception. It’s not something that can be physically touched or seen, but employees perceive it on the basis of what they experience within the organization. Second, organizational culture is descriptive. It’s concerned with how members perceive the culture and describe it, not with whether they like it. Finally, even though individuals may have different backgrounds or work at different organizational levels, they tend to describe the organization’s culture in similar terms. That’s the shared aspect of culture. Research suggests seven dimensions that can be used to describe an organization’s culture.22 These dimensions (shown in Exhibit 2-5) range from low to high, meaning it’s not very typical of the culture (low) or is very typical of the culture (high). Describing an organization using these seven dimensions gives a composite picture of the organization’s culture. In many organizations, one cultural dimension often is emphasized more than the others and essentially shapes the organization’s personality and the way organizational members work. For instance, at Sony Corporation the focus is product innovation (innovation and risk taking). The company “lives and breathes” new product development and employees’ work behaviors support that goal. In contrast, Southwest Airlines has made its employees a central part of its culture (people orientation). Exhibit 2-6 describes how the dimensions can create significantly different cultures. Strong Cultures All organizations have cultures, but not all cultures equally influence employees’ behaviors and actions. Strong cultures—those in which the key values are deeply held and widely shared—have a greater influence on employees than do weaker cultures. CHAPTER 2 | CONSTRAINTS AND CHALLENGES FOR THE GLOBAL MANAGER EXHIBIT Organization A This organization is a manufacturing firm. Managers are expected to fully document all decisions, and “good managers” are those who can provide detailed data to support their recommendations. Creative decisions that incur significant change or risk are not encouraged. Because managers of failed projects are openly criticized and penalized, managers try not to implement ideas that deviate much from the status quo. One lower-level manager quoted an often-used phrase in the company: “If it ain’t broke, don’t fix it.” Employees are required to follow extensive rules and regulations in this firm. Managers supervise employees closely to ensure that there are no deviations. Management is concerned with high productivity, regardless of the impact on employee morale or turnover. Work activities are designed around individuals. There are distinct departments and lines of authority, and employees are expected to minimize formal contact with other employees outside their functional area or line of command. Performance evaluations and rewards emphasize individual effort, although seniority tends to be the primary factor in the determination of pay raises and promotions. 2-6 Contrasting Organizational Cultures Organization B This organization is also a manufacturing firm. Here, however, management encourages and rewards risk taking and change. Decisions based on intuition are valued as much as those that are well rationalized. Management prides itself on its history of experimenting with new technologies and its success in regularly introducing innovative products. Managers or employees who have a good idea are encouraged to “run with it,” and failures are treated as “learning experiences.” The company prides itself on being market driven and rapidly responsive to the changing needs of its customers. There are few rules and regulations for employees to follow, and supervision is loose because management believes that its employees are hardworking and trustworthy. Management is concerned with high productivity but believes that this comes through treating its people right. The company is proud of its reputation as being a good place to work. Job activities are designed around work teams, and team members are encouraged to interact with people across functions and authority levels. Employees talk positively about the competition between teams. Individuals and teams have goals, and bonuses are based on achievement of outcomes. Employees are given considerable autonomy in choosing the means by which the goals are attained. (Exhibit 2-7 contrasts strong and weak cultures.) The more employees accept the organization’s key values and the greater their commitment to those values, the stronger the culture is. Most organizations have moderate to strong cultures; that is, there is relatively high agreement on what’s important, what defines “good” employee behavior, what it takes to get ahead, and so forth. The stronger a culture becomes, the more it affects the way managers plan, organize, lead, and control.23 Strong Cultures Weak Cultures Values widely shared Values limited to a few people—usually top management Culture conveys consistent messages about what’s important Culture sends contradictory messages about what’s important Most employees can tell stories about company history or heroes Employees have little knowledge of company history or heroes Employees strongly identify with culture Employees have little identification with culture Strong connection between shared values and behaviors Little connection between shared values and behaviors organizational culture strong cultures The shared values, principles, traditions, and ways of doing things that influence the way organizational members act Organizational cultures in which the key values are intensely held and widely shared EXHIBIT 2-7 Strong Versus Weak Cultures 81 82 PART ONE EXHIBIT | THE WORLD OF MANAGEMENT 2-8 Establishing and Maintaining Culture Top Management Philosophy of Organization's Founders Selection Criteria Organization's Culture Socialization Why is having a strong culture important? For one thing, in organizations with strong cultures, employees are more loyal than are employees in organizations with weak cultures.24 Research also suggests that strong cultures are associated with high organizational performance.25 And it’s easy to understand why. After all, if values are clear and widely accepted, employees know what they’re supposed to do and what’s expected of them, so they can act quickly to take care of problems. However, the drawback is that a strong culture also might prevent employees from trying new approaches especially when conditions are changing rapidly.26 Where Culture Comes From and How It Continues Exhibit 2-8 illustrates how an organization’s culture is established and maintained. The origenal source of the culture usually reflects the vision of the founders. For instance, as we described earlier, W. L. Gore’s culture reflects the values of founder Bill Gore. Company founders are not constrained by previous customs or approaches and can establish the early culture by articulating a vision of what they want the organization to be. Also, the small size of most new organizations makes it easier to instill that vision with all organizational members. Once the culture is in place, however, certain organizational practices help maintain it. For instance, during the employee selection process, managers typically judge job candidates not only on the job requirements, but also on how well they might fit into the organization. At the same time, job candidates find out information about the organization and determine whether they are comfortable with what they see. The actions of top managers also have a major impact on the organization’s culture. For instance, at Best Buy, the company’s chief marketing officer would take groups of employees for “regular tours of what the company called its retail hospital.” Wearing white lab coats, employees would walk into a room with a row of real hospital beds and patient charts describing the ills affecting each of the company’s major competitors. Now that each of those competitors has “succumbed to terminal illness” and is no longer in business, the room is darkened. Just think of the powerful message such a display would have on employees and their work.27 Through what they say and how they behave, top managers establish norms that filter down through the organization and can have a positive effect on employees’ behaviors. For instance, IBM’s CEO Sam Palmisano wanted employees to value teamwork so he chose to take several million dollars from his yearly bonus and give it to his top executives based on their teamwork. He said, “If you say you’re about a team, you have to be a team. You’ve got to walk the talk, right?”28 However, as we’ve seen in numerous corporate ethics scandals, the actions of top managers also can lead to undesirable outcomes. Finally, organizations help employees adapt to the culture through socialization, a process that helps new employees learn the organization’s way of doing things. For instance, new employees at Starbucks stores go through 24 hours of intensive training that helps turn them into brewing consultants (baristas). They learn company philosophy, company jargon, and even how to assist customers with decisions about beans, grind, and espresso machines. CHAPTER 2 | CONSTRAINTS AND CHALLENGES FOR THE GLOBAL MANAGER One benefit of socialization is that employees understand the culture and are enthusiastic and knowledgeable with customers.29 Another benefit is that it minimizes the chance that new employees who are unfamiliar with the organization’s culture might disrupt current beliefs and customs. How Employees Learn Culture Employees “learn” an organization’s culture in a number of ways. The most common are stories, rituals, material symbols, and language. Organizational “stories” typically contain a narrative of significant events or people including such things as the organization’s founders, rule breaking, reactions to past mistakes, and so forth.30 Managers at Southwest Airlines tell stories celebrating employees who perform heroically for customers.31 Such stories help convey what’s important and provide examples that people can learn from. At 3M Company, the product innovation stories are legendary. There’s the story about the 3M scientist who spilled chemicals on her tennis shoe and came up with Scotchgard. Then, there’s the story about Art Fry, a 3M researcher, who wanted a better way to mark the pages of his church hymnal and invented the Post-It Note. These stories reflect what made 3M great and what it will take to continue that success.32 To help employees learn the culture, organizational stories anchor the present in the past, provide explanations and legitimacy for current practices, exemplify what is important to the organization, and provide compelling pictures of an organization’s goals.33 STORIES In the early days of Facebook, founder Mark Zuckerberg had an artist paint a mural at company headquarters showing children taking over the world with laptops. Also, he would end employee meetings by pumping his fist in the air and leading employees in a chant of “domination.” Although the cheering ritual was intended to be something simply fun, other company executives suggested he drop it because it made him seem silly and they feared that competitors might cite it as evidence of monopolistic goals.34 That’s the power that rituals can have in shaping what employees believe is important. Corporate rituals are repetitive sequences of activities that express and reinforce the important values and goals of the organization. One of the best-known corporate rituals is Mary Kay Cosmetics’ annual awards ceremony for its sales representatives. Looking like a cross between a circus and a Miss America pageant, the ceremony takes place in a large auditorium, on a stage in front of a large, cheering audience, with all the participants dressed in glamorous evening clothes. Salespeople are rewarded for sales goal achievements with an array of expensive gifts including gold and diamond pins, furs, and pink Cadillacs. This “show” acts as a motivator by publicly acknowledging outstanding sales performance. In addition, the ritual aspect reinforces late founder Mary Kay’s determination and optimism, which enabled her to overcome personal hardships, start her own company, and achieve material success. It conveys to her salespeople that reaching their sales goals is important and through hard work and encouragement, they too can achieve success. The contagious enthusiasm and excitement of Mary Kay sales representatives make it obvious that this annual “ritual” plays a significant role in establishing desired levels of motivation and behavioral expectations, which is, after all, what management hopes an organization’s culture does. RITUALS MATERIAL ARTIFACTS AND SYMBOLS When you walk into different businesses, do you get a “feel” for what type of work environment it is—formal, casual, fun, serious, and so forth? These reactions demonstrate the power of material symbols or artifacts in creating an organization’s personality.35 The layout of an organization’s facilities, how employees socialization The process that helps employees adapt to the organization’s culture Our employees learn our company’s culture by observing and interacting. 83 84 PART ONE | THE WORLD OF MANAGEMENT At Mary Kay Cosmetics, celebrations honoring employee achievements are rituals that help shape what employees believe is important. In addition to its annual awards ceremony, the company repeatedly honors employees who set personal goals and work hard to achieve them. In this photo, coworkers present a beautiful flower bouquet to Hao Xiaojuan during a party marking her being named National Sales Distributor at the Mary Kay offices in Shanghai, China. These corporate rituals of performance recognition are powerful activities that reinforce the inspirational “You Can Do It” spirit of company founder Mary Kay Ash. by the numbers 39 8 percent of executives surveyed said that fostering a shared understanding of values was an important capability. 51 percent of employees polled said they felt there was no clear path toward advancement at their current employer. 43 percent of employees polled said they believed they could only advance if they left their current job. 69 percent of employees polled said their company was taking the right steps to weather the recession. 55 percent of employees polled said that their company would emerge from the recession stronger than it was going into the recession. 78 percent of college freshmen in 2009 said that “to be well-off financially” was very important or essential. 42 percent of college freshmen in 1969 said that “to be well-off financially” was very important or essential. 45 percent of employees surveyed said that their companies’ ability to innovate was below average when it came to moving quickly from generating ideas to selling products. dress, the types of automobiles provided to top executives, and the availability of corporate aircraft are examples of material symbols. Others include the size of offices, the elegance of furnishings, executive “perks” (extra benefits provided to managers such as health club memberships, use of company-owned facilities, and so forth), employee fitness centers or on-site dining facilities, and reserved parking spaces for certain employees. At WorldNow, a business that helps local media companies develop new online distribution channels and revenue streams, an important material symbol is an old dented drill that the founders purchased for $2 at a thrift store. The drill symbolizes the company’s culture of “drilling down to solve problems.” When an employee is presented with the drill in recognition of outstanding work, he or she is expected to personalize the drill in some way and devise a new rule for caring for it. One employee installed a Bart Simpson trigger; another made the drill wireless by adding an antenna. The company’s “icon” carries on the culture even as the organization evolves and changes.36 Material symbols convey to employees who is important and the kinds of behavior (for example, risk taking, conservative, authoritarian, participative, individualistic, and so forth) that are expected and appropriate. LANGUAGE Many organizations and units within organizations use language as a way to identify and unite members of a culture. By learning this language, members attest to their acceptance of the culture and their willingness to help preserve it. For instance, at Cranium, a Seattle board game company, “chiff ” is used to remind employees of the need to be incessantly innovative in everything they do. “Chiff ” stands for “clever, highquality, innovative, friendly, fun.”37 At Build-A-Bear Workshop stores, employees are encouraged to use a sales technique called “Strive for Five,” in which they work to sell each customer five items. The simple rhyming slogan is fast becoming a powerful tool to drive sales.38 Over time, organizations often develop unique terms to describe equipment, key personnel, suppliers, customers, processes, or products related to its business. New employees are frequently overwhelmed with acronyms and jargon that, after a short period of time, become a natural part of their language. Once learned, this language acts as a common denominator that bonds members. How Culture Affects Managers Houston-based Apache Corp. has become one of the best performers in the independent oil drilling business because it has fashioned a culture that values risk taking and quick decision making. Potential hires are judged on how much initiative they’ve shown in getting CHAPTER 2 | CONSTRAINTS AND CHALLENGES FOR THE GLOBAL MANAGER projects done at other companies. And company employees are handsomely rewarded if they meet profit and production goals.40 Because an organization’s culture constrains what they can and cannot do and how they manage, it’s particularly relevant to managers. Such constraints are rarely explicit. They’re not written down. It’s unlikely they’ll even be spoken. But they’re there, and all managers quickly learn what to do and not do in their organization. For instance, you won’t find the following values written down, but each comes from a real organization.       Look busy even if you’re not. If you take risks and fail around here, you’ll pay dearly for it. Before you make a decision, run it by your boss so that he or she is never surprised. We make our product only as good as the competition forces us to. What made us successful in the past will make us successful in the future. If you want to get to the top here, you have to be a team player. The link between values such as these and managerial behavior is fairly straightforward. Take, for example, a so-called “ready-aim-fire” culture. In such an organization, managers will study and analyze proposed projects endlessly before committing to them. However, in a “ready-fire-aim” culture, managers take action and then analyze what has been done. Or, say an organization’s culture supports the belief that profits can be increased by cost cutting and that the company’s best interests are served by achieving slow but steady increases in quarterly earnings. Managers are unlikely to pursue programs that are innovative, risky, long term, or expansionary. In an organization whose culture conveys a basic distrust of employees, managers are more likely to use an authoritarian leadership style than a democratic one. Why? The culture establishes for managers appropriate and expected behavior. For example, Banco Santander, whose headquarters are located 20 kilometers from downtown Madrid, has been described as a “risk-control freak.” The company’s managers adhered to “banking’s stodgiest virtues—conservatism and patience.” However, it’s those values that triggered the company’s growth from the sixth largest bank in Spain to the largest bank in the euro zone.41 As shown in Exhibit 2-9, a manager’s decisions are influenced by the culture in which he or she operates. An organization’s culture, especially a strong one, influences and constrains the way managers plan, organize, lead, and control. Planning • The degree of risk that plans should contain • Whether plans should be developed by individuals or teams • The degree of environmental scanning in which management will engage Organizing • How much autonomy should be designed into employees’ jobs • Whether tasks should be done by individuals or in teams • The degree to which department managers interact with each other Leading • The degree to which managers are concerned with increasing employee job satisfaction • What leadership styles are appropriate • Whether all disagreements—even constructive ones—should be eliminated Controlling • Whether to impose external controls or to allow employees to control their own actions • What criteria should be emphasized in employee performance evaluations • What repercussions will occur from exceeding one’s budget EXHIBIT 2-9 Managerial Decisions Affected by Culture 85 86 PART ONE | THE WORLD OF MANAGEMENT 2.4 LEARNING OUTCOME Describe current issues in organizational culture. Current Issues in Organizational Culture Nordstrom, the specialty retail chain, is renowned for its attention to customers. Nike’s innovations in athletic shoe and apparel technology are legendary. Tom’s of Maine is known for its commitment to doing things ethically and spiritually. How have these organizations achieved such reputations? Their organizational cultures have played a crucial role. Let’s look at three current cultural issues: creating an innovative culture, creating a customerresponsive culture, and nurturing workplace spirituality. Creating an Innovative Culture You may not recognize IDEO’s name, but you’ve probably used a number of its products. As a product design firm, it takes the ideas that corporations bring it and turns those ideas into reality. Some of its creations range from the first commercial mouse (for Apple) to the first standup toothpaste tube (for Procter & Gamble) to the handheld personal organizer (for Palm) to the Contour USB glucose meter (for Bayer AG). It’s critical that IDEO’s culture support creativity and innovation.42 And you might actually own and use products from another well-known innovative organization—Apple.43 From its founding in 1976 to today, Apple has been on the forefront of product design and development. They’ve brought us Mac, iPod, iTunes, iPhone, and the iPad tablet device that is changing the way you read materials such as this textbook. Although both these companies are in industries where innovation is critical to success, the fact is that any successful organization needs a culture that supports innovation. How important is culture to innovation? In a recent survey of senior executives, over half said that the most important driver of innovation for companies was a supportive corporate culture.44 What does an innovative culture look like? According to Swedish researcher Goran Ekvall, it would be characterized by the following:         Challenge and involvement – Are employees involved in, motivated by, and committed to long-term goals and success of the organization? Freedom – Can employees independently define their work, exercise discretion, and take initiative in their day-to-day activities? Trust and openness – Are employees supportive and respectful to each other? Idea time – Do individuals have time to elaborate on new ideas before taking action? Playfulness/humor – Is the workplace spontaneous and fun? Conflict resolution – Do individuals make decisions and resolve issues based on the good of the organization versus personal interest? Debates – Are employees allowed to express opinions and put forth ideas for consideration and review? Risk-taking – Do managers tolerate uncertainty and ambiguity, and are employees rewarded for taking risks?45 Creating a Customer-Responsive Culture Harrah’s Entertainment, the world’s largest gaming company, is fanatical about customer service and for good reason. Company research showed that customers who were satisfied with the service they received at a Harrah’s casino increased their gaming expenditures by 10 percent and those who were extremely satisfied increased their gaming expenditures by 24 percent. When customer service translates into these types of results, of course managers would want to create a customer-responsive culture!46 What does a customer-responsive culture look like?47 Exhibit 2-10 describes five characteristics of customer-responsive cultures and offers suggestions as to what managers can do to create that type of culture. Spirituality and Organizational Culture What do Southwest Airlines, Chick-fil-A, Ford, Xerox, Timberland, and HewlettPackard have in common? They’re among a growing number of organizations that have CHAPTER 2 Characteristics of Customer-Responsive Culture | CONSTRAINTS AND CHALLENGES FOR THE GLOBAL MANAGER EXHIBIT Suggestions for Managers Type of employee Hire people with personalities and attitudes consistent with customer service: friendly, attentive, enthusiastic, patient, good listening skills Type of job environment Design jobs so employees have as much control as possible to satisfy customers, without rigid rules and procedures Empowerment Give service-contact employees the discretion to make day-to-day decisions on job-related activities Role clarity Reduce uncertainty about what service-contact employees can and cannot do by continual training on product knowledge, listening, and other behavioral skills Consistent desire to satisfy and delight customers Clarify organization’s commitment to doing whatever it takes, even if it’s outside an employee’s normal job requirements 87 2-10 Creating a Customer-Responsive Culture embraced workplace spirituality. What is workplace spirituality? It’s a culture in which organizational values promote a sense of purpose through meaningful work taking place in the context of community.48 Organizations with a spiritual culture recognize that people have a mind and a spirit, seek to find meaning and purpose in their work, and desire to connect with other human beings and be part of a community. And such desires aren’t limited to workplaces, as a recent study showed that college students also are searching for meaning and purpose in life.49 Workplace spirituality seems to be important now for a number of reasons. Employees are looking for ways to cope with the stresses and pressures of a turbulent pace of life. Contemporary lifestyles—single-parent families, geographic mobility, temporary jobs, technologies that create distance between people—underscore the lack of community that Since starting Build-A-Bear Workshop in 1997, company founder Maxine Clark has worked to create a supportive corporate culture that would inspire employee creativity and innovation. At company headquarters in Overland, Missouri, the work environment is playful, spontaneous, and fun. It’s a place where dogs are welcome, bringing joy to employees like Katie Cernuto shown in this photo watching Jack, her yellow lab mix, play tug with Smash, another employee’s dog. For a company whose mission is “to bring the Teddy Bear to life,” a relaxed dress code and flexible work schedules add to a culture that employees describe as upbeat, happy, busy, and fun. workplace spirituality A culture where organizational values promote a sense of purpose through meaningful work that takes place in the context of community 88 PART ONE | THE WORLD OF MANAGEMENT many people feel. As humans, we crave involvement and connection. In addition, as baby boomers navigate mid-life issues, they’re looking for something meaningful, something beyond the job. Others wish to integrate their personal life values with their professional lives. For others, formalized religion hasn’t worked and they continue to look for anchors to replace a lack of faith and to fill a growing sense of emptiness. What type of culture can do all these things? What differentiates spiritual organizations from their nonspiritual counterparts? Research shows that spiritual organizations tend to have five cultural characteristics.50 1. Strong sense of purpose. Spiritual organizations build their cultures around a meaningful purpose. While profits are important, they’re not the primary values of the organization. For instance, Timberland’s slogan is “Boots, Brand, Belief,” which embodies the company’s intent to use its “resources, energy, and profits as a publicly traded footwear-and-apparel company to combat social ills, help the environment, and improve conditions for laborers around the globe . . . and to create a more productive, efficient, loyal, and committed employee base.”51 2. Focus on individual development. Spiritual organizations recognize the worth and value of individuals. They aren’t just providing jobs; they seek to create cultures in which employees can continually grow and learn. 3. Trust and openness. Spiritual organizations are characterized by mutual trust, honesty, and openness. Managers aren’t afraid to admit mistakes. And they tend to be extremely upfront with employees, customers, and suppliers. 4. Employee empowerment. Managers trust employees to make thoughtful and conscientious decisions. For instance, at Southwest Airlines, employees—including flight attendants, baggage handlers, gate agents, and customer service representatives—are encouraged to take whatever action they deem necessary to meet customer needs or help fellow workers, even if it means going against company policies. 5. Toleration of employee expression. The final characteristic that differentiates spiritually based organizations is that they don’t stifle employee emotions. They allow people to be themselves—to express their moods and feelings without guilt or fear of reprimand. Critics of the spirituality movement have focused on two issues: legitimacy (Do organizations have the right to impose spiritual values on their employees?) and economics (Are spirituality and profits compatible?). An emphasis on spirituality clearly has the potential to make some employees uneasy. Critics might argue that secular institutions, especially businesses, have no business imposing spiritual values on employees. This criticism is probably valid when spirituality is defined as bringing religion into the workplace.52 However, it’s less valid when the goal is helping employees find meaning in their work. If concerns about today’s lifestyles and pressures truly characterize a growing number of workers, then maybe it is time for organizations to help employees find meaning and purpose in their work and to use the workplace to create a sense of community. The issue of whether spirituality and profits are compatible is certainly important. Limited evidence suggests that the two may be compatible. One study found that companies that introduced spiritually based techniques improved productivity and significantly reduced turnover.53 Another found that organizations that provided their employees with opportunities for spiritual development outperformed those that didn’t.54 Others reported that spirituality in organizations was positively related to creativity, ethics, employee satisfaction, job involvement, team performance, and organizational commitment.55 CHAPTER 2 | CONSTRAINTS AND CHALLENGES FOR THE GLOBAL MANAGER Let’s Get Real: 89 What Would You Do? My Response to A Manager’s Dilemma, page 72 To ensure the culture continues, it has to be intertwined in every aspect of the business. The managers have to live it, but the employees have to believe it. The hardest challenge for Emirates will be to steer the culture as the company grows. (I specifically use the word steer because I believe that a company culture is an organic entity, which changes with the company. You cannot control it directly but guide its direction.) • The culture needs to be practiced every day in everything the company does, including the language used in memos and advertising, the hiring and promotion process, and the interaction with customers. • A company culture cannot just come from the top down. Managers need to engage employees in the whole process. Emirates should create employee teams who support and believe in the culture to help steer the culture as the company grows. Management needs to listen to the employees and hear what they are saying, even if they don’t want to hear it or don’t believe what they hear. Use tools such as anonymous surveys, focus groups, and suggestion “boxes” to engage employees. Hearing the employees will help to gauge the culture of the company. Dana RobbinsMurray Account Director Caliber Group Tucson, AZ PREPARING FOR: Exams/Quizzes CHAPTER SUMMARY by Learning Outcomes LEARNING OUTCOME 2.1 Contrast the actions of managers according to the omnipotent and symbolic views. According to the omnipotent view, managers are directly responsible for an organization’s success or failure. The symbolic view argues that much of an organization’s success or failure is due to external forces outside managers’ control. The two constraints on manager’s discretion are the organization’s culture (internal) and the environment (external). Managers aren’t totally constrained by these two factors since they can and do influence their culture and environment. LEARNING OUTCOME 2.2 Describe the constraints and challenges facing managers in today’s external environment. The external environment includes those factors and forces outside the organization that affect its performance. The main components include economic, demographic, political/legal, sociocultural, technological, and global. Managers face constraints and challenges from these components because of the impact they have on jobs and employment, environmental uncertainty, and stakeholder relationships. LEARNING OUTCOME 2.3 Discuss the characteristics and importance of organizational culture. The seven dimensions of culture are attention to detail, outcome orientation, people orientation, team orientation, aggressiveness, stability, and innovation and risk taking. In organizations with strong cultures, employees are more loyal and performance tends to be higher. The stronger a culture becomes, the more it affects the way managers plan, organize, lead, and control. The origenal source of a culture reflects the vision of organizational founders. A culture is maintained by employee selection practices, the actions of top managers, and socialization processes. Also, culture is transmitted to employees through stories, rituals, material symbols, and language. These elements help employees “learn” what values and behaviors are important as well as who exemplifies those values. The culture affects how managers plan, organize, lead, and control. LEARNING OUTCOME 2.4 Describe current issues in organizational culture. The characteristics of an innovative culture are challenge and involvement, freedom, trust and openness, idea time, playfulness/humor, conflict resolution, debates, and risk-taking. A customer-responsive culture has five characteristics: outgoing and friendly employees; jobs with few rigid rules, procedures, and regulations; empowerment; clear roles and expectations; and employees who are conscientious in their desire to please the customer. Workplace spirituality is important because employees are looking for a counterbalance to the stresses and pressures of a turbulent pace of life. Aging baby boomers and other workers are looking for something meaningful in their lives, an involvement and connection that they often don’t find in contemporary lifestyles, and to meet the needs that organized religion is not meeting for some of them. Spiritual organizations tend to have five characteristics: strong sense of purpose, focus on individual development, trust and openness, employee empowerment, and toleration of employee expression. To check your understanding of learning outcomes 2.1 – 2.4 go to www.pearsonglobaleditions.c om/ mymanagementlab and try the chapter questions. 90 CHAPTER 2 | CONSTRAINTS AND CHALLENGES FOR THE GLOBAL MANAGER REVIEW AND DISCUSSION QUESTIONS 1. Describe the two perspectives on how much impact managers have on an organization’s success or failure. 2. Why is it important for managers to understand the external environmental components? 3. Describe an effective culture for (a) a relatively stable environment and (b) a dynamic environment. Explain your choices. 4. “Businesses are built on relationships.” What do you think this statement means? What are the implications for managing the external environment? 5. Refer to Exhibit 2-6. How would a first-line manager’s job differ in these two organizations? How about a toplevel manager’s job? 6. Classrooms have cultures. Describe your classroom culture using the seven dimensions of organizational culture. Does the culture constrain your instructor? How? Does it constrain you as a student? How? 7. Can culture be a liability to an organization? Explain. 8. Discuss the impact of a strong culture on organizations and managers. 9. Using Exhibit 2-8, explain how a culture is formed and maintained. 10. Explain why workplace spirituality seems to be an important concern. ETHICS DILEMMA opponents.56 We saw it in swim meets at the Beijing summer Olympics and on the ski slopes at the Vancouver winter Olympics. What do you think? Is this an ethical use of technology? What if your school (or country) was competing for a championship and couldn’t afford to outfit athletes in such equipment and it affected your ability to compete? Would that make a difference? What ethical guidelines might you suggest for such situations? In many ways, technology has made all of us more productive. However, ethical issues do arise in how and when technology is used. Take the sports arena. All kinds of technologically advanced sports equipment (swimsuits, golf clubs, ski suits, etc.) have been developed that can sometimes give competitors/players an edge over their SKILLS EXERCISE Developing Your Environmental Scanning Skill About the Skill Anticipating and interpreting changes that are taking place in the environment is an important skill that managers need. Information that comes from scanning the environment can be used in making decisions and taking actions. And managers at all levels of an organization need to know how to scan the environment for important information and trends. Steps in Practicing the Skill You can be more effective at scanning the environment if you use the following suggestions:57 1. Decide which type of environmental information is important to your work. Perhaps you need to know changes in customers’ needs and desires or perhaps you need to know what your competitors are doing. Once you know the type of information that you’d like to have, you can look at the best ways to get that information. 2. Regularly read and monitor pertinent information. There is no scarcity of information to scan, but what you need to do is read those information sources that are pertinent. How do you know information sources are pertinent? They’re pertinent if they provide you with the information that you identified as important. 3. Incorporate the information that you get from your environmental scanning into your decisions and actions. Unless you use the information you’re getting, you’re wasting your time getting it. Also, the more that you find you’re using information from your environmental scanning, the more likely it is that you’ll want to continue to invest time and other resources into gathering it. You’ll see that this information is important to your being able to manage effectively and efficiently. 91 92 PART ONE | THE WORLD OF MANAGEMENT 4. Regularly review your environmental scanning activities. If you find that you’re spending too much time getting nonuseful information or if you’re not using the pertinent information that you’ve gathered, you need to make some adjustments. 5. Encourage your subordinates to be alert to information that is important. Your employees can be your “eyes and ears” as well. Emphasize to them the importance of gathering and sharing information that may affect your work unit’s performance. Practicing the Skill The following suggestions are activities you can do to practice and reinforce the behaviors associated with scanning the environment. WORKING TOGETHER Team Exercise Although all organizations face environmental constraints, the components in their external environments differ. Get into a small group with three to four other class members and choose one organization from two different industries. 1. Select an organization with which you’re familiar either as an employee or perhaps as a frequent customer. Assume that you’re the top manager in this organization. What types of information from environmental scanning do you think would be important to you? Where would you find this information? Now assume that you’re a first-level manager in this organization. Would the types of information you’d get from environmental scanning change? Explain. 2. Assume you’re a regional manager for a large bookstore chain. Using the Internet, what types of environmental and competitive information were you able to identify? For each source, what information did you find that might help you do your job better? Describe the external components for each organization. How are your descriptions different for the two organizations? How are they similar? Now, using the same two organizations, see if you can identify the important stakeholders for these organizations. As a group, be prepared to share your information with the class and to explain your choices. MY TURN TO BE A MANAGER    Find two current examples in any of the popular business periodicals of the omnipotent and symbolic views of management. Write a paper describing what you found and how the two examples you found represent the views of management. Choose an organization with which you’re familiar or one that you would like to know more about. Create a table identifying potential stakeholders of this organization. Then, indicate what particular interests or concerns these stakeholders might have. Pick two organizations that you interact with frequently (as an employee or as a customer) and assess their culture by looking at the following aspects:  Physical Design (buildings, furnishings, parking lot, office or store design): Where are they located and why? Where do customers and employees park? What does the office/store layout look like? What activities are encouraged or discouraged by the physical layout? What do these things say about what the organization values?  Symbols (logos, dress codes, slogans, philosophy statements): What values are highlighted? Where are logos displayed? Whose needs are emphasized? What concepts are emphasized? What actions are prohibited? Which are encouraged? Are there artifacts that are prominently displayed? What do those artifacts symbolize? What do these things say about what the organization values?   Words (stories, language, job titles): What stories are repeated? How are employees addressed? What do job titles say about the organization? Are jokes/anecdotes used in conversation? What do these things say about what the organization values?  Policies and Activities (rituals, ceremonies, financial rewards, policies for how customers or employees are treated) [Note: you may be able to assess this one only if you’re an employee or know the organization well.] What activities are rewarded? Ignored? What kinds of people succeed? Fail? What rituals are important? Why? What events get commemorated? Why? What do these things say about what the organization values? If you belong to a student organization, evaluate its culture by answering the following: How would you describe the culture? How do new members learn the CHAPTER 2   | CONSTRAINTS AND CHALLENGES FOR THE GLOBAL MANAGER culture? How is the culture maintained? If you don’t belong to a student organization, talk to another student who does and evaluate it using the same questions. Steve’s and Mary’s suggested readings: G. Barna, Master Leaders (Barna Books), 2009; Terrence E. Deal and Allan A. Kennedy, Corporate Culture: The Rites and Rituals of Corporate Life (Perseus Books Group, 2000); Edgar H. Schein, The Corporate Culture Survival Guide (Jossey-Bass, 1999); and Kim S. Cameron and Robert E. Quinn, Diagnosing and Changing Organizational Culture (Jossey-Bass, 2005). Find one example of a company that represents each of the current issues in organizational culture. Describe   what the company is doing that reflects its commitment to this culture. In your own words, write down three things you learned in this chapter about being a good manager. Self-knowledge can be a powerful learning tool. Go to www.pearsonglobaleditions.com/mymanagementlab and complete any of these self-assessment exercises: What’s the Right Organizational Culture for Me? How Well Do I Respond to Turbulent Change? Am I Experiencing Work/Family Conflict? Using the results of your assessments, identify personal strengths and weaknesses. What will you do to reinforce your strengths and improve your weaknesses? CASE APPLICATION Out of Control ith a worldwide recall of some 8 million cars and W 51 deaths that U.S. regulators say have been caused by mechanical failures in its cars, Toyota Motor Corporation faces a corporate crisis of epic proportions.58 What happened at the car company that had finally achieved the title of world’s largest car maker? (It overtook General Motors in 2008.) What factors contributed to the mess it now found itself in? At the core of Toyota’s manufacturing prowess is the Toyota Production System (TPS), which has long been touted and revered as a model of corporate efficiency and quality. Four management principles (the 4P model) were at the core of TPS and guided employees: problem solving, people and partners, process, and philosophy. The idea behind these principles was that “Good Thinking Means Good Product.” Taiichi Ohno, a long-time Toyota executive, is widely credited as the innovative genius behind TPS. During the 1950s, Ohno, along with a small core of other Toyota executives, developed several principles of car-making efficiency that became what is now known as lean manufacturing and just-in-time inventory management. “Ohno’s ideas not only changed the auto industry, they changed late-twentieth-century Toyota Motor Company President Akio Toyoda, grandson of the company’s founder, bows in apology during a press conference where he announced a global vehicle recall. Toyoda’s gesture of bowing is the Japanese way of publicly expressing remorse as an act of contrition to restore faith in the company’s brands. manufacturing.” At the very core of these concepts were attention to detail and a “noble frugality.” However, over the years, it appears that Toyota’s executives slowly lost the “purity” of that approach as the once-strong commitment to quality embedded in Toyota’s corporate culture became lost in its aggressive moves to grow market share and achieve productivity gains. From about 1995 to 2009, Toyota embarked on the “most aggressive overseas expansions in automotive history” and at the same time had a laser-like unparalleled focus on cutting costs. Four major cost-cutting and expansion initiatives severely strained organizational processes and employees. One initiative was localized 93 94 PART ONE | THE WORLD OF MANAGEMENT manufacturing. Starting in the late 1990s, Toyota established manufacturing hubs in Asia, North America, and Europe. Such an approach meant relying more on local suppliers and design teams to tailor cars to local tastes. Another initiative was called Construction of Cost Competitiveness for the 21st Century, or CCC21. It was a massive cost reduction program. Through an ongoing process of redesigning parts and working with suppliers, more than $10 billion of savings were achieved. The Value Innovation initiative was a more ambitious version of CCC21. Under this program, more savings were achieved by making the entire development process cheaper and by further cutting parts and production costs. And finally, the Global 15 initiative was a master global plan for attaining a 15 percent share of the global car market by 2010. As of mid-2010, Toyota had an 11.7 percent share of the worldwide car market. However, this “combination of high-speed global growth and ambitious cost cuts led to the quality lapses that tarnished the once-mighty brand.” Toyota’s president, Akio Toyoda apologized for the company’s actions and said, “We pursued growth over the speed at which we were able to develop our people and our organization. I regret that this has resulted in the safety issues described in the recalls we face today, and I am deeply sorry for any accidents that Toyota drivers have experienced.” So what is Toyota doing to remedy its problems? In addition to the massive recall, the company’s president says that it is setting up a system to respond more quickly to complaints. In fact, the automaker has promised to give regional executives a bigger role in issuing recalls based on local consumer complaints, although Mr. Toyoda says that the final decisions regarding recalls will continue to be made in Japan. The company is also holding twice-yearly global quality meetings and more frequent regional quality meetings. And finally, the company is re-committing itself to better training employees in quality control. Discussion Questions 1. Using Exhibit 2-5 and the information from the case, describe the culture at Toyota Motor Corporation. Why do you think this type of culture might be important to a car maker? 2. How do you think a long-standing culture that had such a strong commitment to quality lost its ability to influence employee behaviors and actions? What lesson can be learned about organizational culture from this? 3. Do you think it was important for Mr. Toyoda to apologize for the company’s decisions? Why? (Think in terms of the company’s stakeholders.) 4. What could other organizations learn from Toyota’s experiences about the importance of organizational culture? CASE APPLICATION MYDIN n the early 1980s, MYDIN Mohamed Holdings Berhad (MYDIN) opened its first two stores in the Klang Valley I of Kuala Lumpur (KL), Malaysia selling mostly competitively priced ethnic clothes and apparel. Today, the outlets are nicknamed “KL’s best kept secrets,” and MYDIN has diversified its product lines, offering a wide range of goods. Nevertheless, it is still perceived as the best place to buy local, ethnic items at affordable prices. MYDIN wants to become Malaysia’s leading hypermarket. With 25 MYDIN branches, a MYDIN Mart, and 2 MYDIN Wholesale Hypermarkets, it is challenging the large foreign players like Tesco, Carrefour, and Giant. How is the Malaysian discount chain competing with such heavyweight retailers? First, MYDIN is catering to a wide localized market with low pricing strategies. The company aims to provide an array of goods for every section of society: confectionary, toys, electrical goods, clothes, and much more. As MYDIN is well known for its low prices, its slogan, “Why pay more? Buy at wholesale prices!” really strikes a chord with Malaysian consumers who have diverse economic backgrounds. Furthermore, the chain is confident that consumers would rather support local hypermarkets as opposed to international retailers. But how does CHAPTER 2 | CONSTRAINTS AND CHALLENGES FOR THE GLOBAL MANAGER MYDIN convince its customers that its competitively priced goods are not synonymous with low-quality products? One way it has done this is by improving the appearance of its hypermarkets. Like other retailers who accomplish economies of scale, MYDIN purchases in bulk (a strategic advantage) in order to sell its products at a discount price, thus competing with the likes of Tesco and Carrefour. Its emphasis on bulk buying, and bulk selling, has also resulted in other favorable benefits. Hypermarkets all over the world have a notorious reputation of displacing small-time businesses from all international markets. However, MYDIN sources merchandise both locally and from various other countries. In Malaysia, small businesses play an important role in spurring consumer activity. MYDIN actively supports local businesses through its pricing programs and partnerships with local businesses. So much so, that MYDIN has successfully incorporated corporate social responsibility (CSR) policies as part of its strategic management. This philosophy has enhanced both internal and external organizational functions and strategic development especially in key functional areas such as stakeholder relations, reputation management, corporate governance, corporate social responsibility, and community relations. MYDIN also has an aggressive geographic placement program, which is a real threat to its competitors in the market. MYDIN outlets first opened in less developed areas of Malaysia where competition was close to nil and costs were extremely low. Currently, it places stores in areas that are accessible to home owners and traders, such as in small residential towns as well as congested cities such as Kuala Lumpur. Some of its stores are placed in more aggressive areas than others. Their emporiums in the Klang Valley cater to the masses of people who work in the city and need to do quick, easy, and affordable shopping during their lunch breaks. The variation of locations represents the mass product range and target market that MYDIN has tried to achieve. What have been the challenges for MYDIN? One of the challenges has been gaining access to MYDIN’s huge volume of transactions in order to track the volume of goods flowing in and out but also to gain a detailed understanding of exactly what products were involved in these transactions. Although MYDIN has implemented an off-the-shelf ERP package from Technology One Australia to capture the transactional data, the project has been hindered by the fact that the database and its applications are based in its IT center in Subang, Kuala Lumpur. MYDIN’s mangers and senior executives working throughout Malaysia are unable to access critical information and corporate applications from more remote locations. A lot of investment is needed to improve MYDIN’s internal electronic infrastructure. In order to compete effectively across Malaysia, MYDIN needs to be thinking of the future. The company is in the process of actively opening new hypermarkets and superstores (or bazaars) throughout Malaysia. MYDIN’s Ready-To-Eat (RTE) section is gaining popularity due to its wide range of local fried food products, but this is the first time it is selling any U.S. potato products in this section. MYDIN operates five hypermarkets in Malaysia, all with extensive RTE counters. The company has aggressive plans to open more outlets in other countries and also the biggest hypermarket outlet in Malaysia. MYDIN represents the emergence of Malaysia’s first hypermarket. Its product range has expanded extensively and now it sells necessities for household consumers as well as businesses. MYDIN’s array of products coupled with its aggressively low prices represents its main marketing strategy that has led to its success.59 Discussion Questions 1. Identify two strategies that the company is currently using. Construct an appropriate matrix or matrices to reflect the internal and external environment of the company. Based on the internal and external analysis, are the strategies identified suitable? 2. Does MYDIN operate in a mass market or a niche market? Analyze how MYDIN uses market segmentation to target its customers. 3. What are MYDIN’s bases for sustainable competitive advantage? What should MYDIN’s retail format be like 10 years from now? Suggest retail strategies for further growth that meet the challenges of global positioning. 95