Management, Leadership, and the Internal Organization

What Is Management?

Management is the process of achieving organizational objectives through people and other resources. The manager's job is to combine human and technical resources in the best way possible to achieve the company's goals. Management principles and concepts apply to not-for-profit organizations as well as profit-seeking firms. A city mayor, the president of the Appalachian Mountain Club, and a superintendent of schools all perform the managerial functions described later in this chapter. Management happens at many levels, from that of the manager of a family-owned restaurant to a national sales vice president for a major manufacturer.

THE MANAGEMENT HIERARCHY

A firm's management usually has three levels: top, middle, and supervisory. These levels of management form a management hierarchy, as shown in FIGURE 7.1. The hierarchy is the traditional structure found in most organizations. Managers at each level perform different activities. This hierarchy is often shown as a pyramid to illustrate that, at the top of the pyramid, the company president is supported by many other managers, with the numbers increasing as the job titles go from top to middle to supervisor.

The highest level of management is top management. Top managers include such positions as chief executive officer (CEO), chief financial officer (CFO), and executive vice president. Top managers devote most of their time to developing long-range plans for their organizations. They make decisions such as whether to introduce new products, purchase other companies, or enter new geographical markets. Top managers set a direction for their organization and inspire the company's executives and employees to achieve their vision for the company's future.

Middle management, the second tier in the executive hierarchy, includes positions such as general managers, plant managers, division managers, and unit managers. A middle manager's attention focuses on specific operations, products, or customer groups within an organization. They are responsible for developing detailed plans and procedures to implement the firm's strategic plans. If top management decided to broaden the distribution of a product, a sales manager would be responsible for determining the number of sales personnel required. Middle managers are responsible for targeting the products and customers who are the source of the sales and profit growth expected by their CEOs. To achieve these goals, middle managers might budget money for product development, identify new uses for existing products, and improve the ways they train and motivate salespeople. Because they are more familiar with day-to-day operations than CEOs, middle managers often come up with new ways to increase sales or solve company problems.

Supervisory management, or first-line management, includes positions such as supervisor, section chief, and team leader. These managers are directly responsible for assigning nonmanagerial employees to specific jobs and evaluating their performance. Managers at this first level of the hierarchy work directly with the employees who produce and sell the firm's goods and services. They are responsible for implementing middle managers' plans by motivating workers to accomplish daily, weekly, and monthly goals. A recent survey by the marketing research firm Temkin Group rated customer service at U.S. companies. All of the top-ranked firms have first-line managers who implement the firms' strategies to provide superior customer service. Amazon.com, Kohl's Department Stores, and Costco all have in common first-line managers who see that customer service is a top priority among their employees.²

SKILLS NEEDED FOR MANAGERIAL SUCCESS

Managers at every level in the management hierarchy must exercise three basic types of skills: technical, human, and conceptual. All managers must acquire these skills in varying proportions, although the importance of each skill changes at different management levels.

Technical skills are the manager's ability to understand and use the techniques, knowledge, and tools and equipment of a specific discipline or department. Technical skills are especially important for first-line managers and become less important at higher levels of the management hierarchy. But most top executives started out as technical experts. The résumé of a vice president for information systems probably lists experience as a computer analyst, and that of a vice president for marketing usually shows a background in sales. Many firms, including Home Depot and Dell, have increased training programs for first-line managers to boost technical skills and worker productivity.

Human skills are interpersonal skills that enable managers to work effectively with and through people. Human skills include the ability to communicate with, motivate, and lead employees to complete assigned activities. Managers need human skills to interact with people both inside and outside the organization. It would be tough for a manager to succeed without such skills, even though they must be adapted to different forms—for instance, mastering and communicating effectively with staff through e-mail, cell phones, videoconferencing, and text messaging, all of which are widely used in today's offices.

Conceptual skills determine a manager's ability to see the organization as a unified whole and to understand how each part of the overall organization interacts with other parts. These skills involve an ability to see the big picture by acquiring, analyzing, and interpreting information. Conceptual skills are especially important for top-level managers, who must develop long-range plans for the future direction of their organization.

Managers as Leaders

Above all else, business executives must demonstrate leadership, directing or inspiring people to attain certain goals. Great leaders do not all share the same qualities, but three traits are often mentioned: empathy (the ability to imagine yourself in someone else's position), self-awareness, and objectivity. Although it might seem as if empathy and objectivity are opposite traits, they do balance each other. Many leaders share other traits—courage, passion, commitment, innovation, and flexibility, to name a few.

Leadership involves the use of influence or power. This influence may come from one or more sources. One source of power is the leader's position in the company. A national sales manager has the authority to direct the activities of the sales force. Another source of power is a leader's expertise and experience. A first-line supervisor with expert machinist skills will most likely be respected by employees in the machining department.

Some leaders derive power from their personalities. Employees may admire a leader because they recognize an exceptionally kind, fair, humorous, energetic, or enthusiastic person. Admiration, inspiration, and motivation are especially important during difficult economic times or when a leader has to make tough decisions for the company.

When Jim Skinner took over as CEO of McDonald's, the company had just lost two previous CEOs in a very short time, and same-store sales were stagnant. Replacing CEOs who died unexpectedly was a delicate situation, and the company's board looked to Skinner to provide stability. His ability to lead the company to record revenues and sales can be attributed to his confident, no-nonsense approach to management. Known as an operations whiz, he focused on the performance of the 33,000 restaurants worldwide and the company infrastructure that supports them. Skinner's approach to leadership recently led the company to an annual 5 percent growth with revenues of more than $24 billion. Same-store sales have increased every year since he took over the top job. Skinner requires McDonald's executives to train at least two potential successors—one for now and one for the future. This policy came in handy in 2012, when longtime McDonald's USA president Don Thompson took over Skinner's CEO duties.³

LEADERSHIP STYLES

The way a person uses power to lead others determines his or her leadership style. Leadership styles range along a continuum with autocratic leadership at one end and free-rein leadership at the other. Autocratic leadership is centered on the boss. Autocratic leaders make decisions on their own without consulting employees. They reach decisions, communicate them to subordinates, and expect automatic implementation.

Democratic leadership includes subordinates in the decision-making process. This leadership style centers on employees' contributions. Democratic leaders delegate assignments, ask employees for suggestions, and encourage participation. An important outgrowth of democratic leadership in business is empowerment, employees' sharing of authority, responsibility, and decision making with their managers.

At the other end of the continuum is free-rein leadership. Free-rein leaders believe in minimal supervision and allow subordinates to make most of their own decisions. Free-rein leaders communicate with employees frequently, as the situation warrants. For the first decade of its existence, Google was proud of its free-rein leadership style. Engineers were encouraged to pursue any and all ideas; teams formed or disbanded on their own; employees spent as much or as little time as they wanted to on any given project. But as the firm entered its second decade, it became apparent that not every innovation was worth pursuing—and some valuable ideas were not getting the attention they deserved. Chief Executive Larry Page has spent time trying to bring a renewed sense of urgency and focus to the search company, in what he calls putting, “more wood behind fewer arrows.”⁴

WHICH LEADERSHIP STYLE IS BEST?

No single leadership style is best for every firm in every situation. Sometimes leadership styles require change in order for a company to grow, as has been the case for Google. In a crisis, an autocratic leadership style might save the company—and sometimes the lives of customers and employees. This was the case when US Airways flight 1549 was forced to ditch into the Hudson River after hitting a wayward flock of Canadian geese. Quick, autocratic decisions made by the pilot, Captain Chesley Sullen-berger, resulted in the survival of everyone on board the flight. Yet, on the ground US Airways practiced a democratic style of leadership in which managers at many levels were empowered to take actions to help passengers and their families. For example, one executive arrived on the scene with a bag of emergency cash for passengers and credit cards for employees so they could purchase medicines, food, or anything else survivors needed.⁵ A company that recognizes which leadership style works best for its employees, customers, and business conditions is most likely to choose the best leaders for its particular needs.

Leading by Setting a Vision for the Firm

All businesses begin with a vision, its founder's perception of what the organization wants to be or how it wants the world to be in an idealized way. Typically, a vision is a long-term view of the future. A vision statement is often emotive and inspirational.⁶ The best vision statements serve as the target for a firm's actions, helping direct the company toward opportunities and differentiating it from its competitors. In articulating his vision for Apple Computer, founder Steve Jobs is reported to have said “An Apple on every desk.”

Whether they are the president of a Fortune 500 company or a small business, a key part of a leader's vision for their firm is the corporate culture, an organization's system of principles, beliefs, and values. A corporate culture is typically shaped by the leaders who founded and developed the company and by those who succeed them. Although Google grew by leaps and bounds after its launch, the firm still tries to maintain the culture of innovation, creativity, and flexibility that co-founders Larry Page and Sergey Brin promoted from the beginning. Google now has offices around the world, staffed by thousands of workers who speak a multitude of languages. “We are aggressively inclusive in our hiring, and we favor ability over experience,” states the Web site. “The result is a team that reflects the global audience Google serves. When not at work, Googlers pursue interests from cross-country cycling to wine tasting, from flying to Frisbee.”⁷

Managers use symbols, rituals, ceremonies, and stories to reinforce corporate culture. The corporate culture at the Walt Disney Company is almost as famous as the original Disney characters themselves. In fact, Disney employees are known as cast members. All new employees attend training seminars in which they learn the language, customs, traditions, stories, product lines—everything there is to know about the Disney culture and its original founder, Walt Disney.⁸

Corporate culture can be strong and enduring, but sometimes it is forced to change to meet new demands in the business environment. A firm steeped in tradition and bureaucracy might have to shift to a leaner, more flexible culture in order to respond to shifts in technology or customer preferences. A firm that grows quickly—like Google—generally has to make some adjustments in its culture to accommodate more customers and employees.

Managers as Decision Makers

Managers make decisions every day, whether they involve shutting down a manufacturing plant or adding grilled cheese sandwiches to a lunch menu. Decision making is the process of recognizing a problem or opportunity, evaluating alternative solutions, selecting and implementing an alternative, and assessing the results.

DELEGATING WORK ASSIGNMENTS

One decision managers make involves assigning work to employees, a process called delegation. Employees might be responsible for answering customer calls, scooping ice cream, processing returns, making deliveries, opening or closing a store, cooking or serving food, contributing to new-product design, calculating a return on investment, or any of thousands of other tasks. Just as important, employees are given a certain amount of authority to make decisions.

Companies like Zappos, the online shoe retailer, empower their workers to make decisions that could better serve their customers. As a result, such firms generally have happier employees and more satisfied customers.⁹ As employees receive greater authority, they also must be accountable for their actions and decisions—they receive credit when things go well and must accept responsibility when they don't. Managers also must figure out the best way to delegate responsibilities to employees from different age groups, who may have very different interests and motivation.

SPAN OF MANAGEMENT

The span of management, or span of control, is the number of employees a manager supervises. These employees are often referred to as direct reports. First-line managers have a wider span of management, monitoring the work of many employees. The span of management depends on many factors, including employees' training and the type of work performed. In recent years, a growing trend has brought wider spans of control as companies have reduced their layers of management to flatten their organizational structures, in the process increasing the decision-making responsibility they give employees.

CENTRALIZATION AND DECENTRALIZATION

How widely should managers disperse decision-making authority throughout an organization? A company that emphasizes centralization retains decision making at the top of the management hierarchy. A company that emphasizes decentralization locates decision making at lower levels. A trend toward decentralization has pushed decision making down to operating employees in many cases. Firms that have decentralized believe that the change can improve their ability to serve customers. For example, the front-desk clerk at a hotel is much better equipped to fulfill a guest's request for a crib or a wake-up call than the hotel's general manager.

MANAGERS AS PLANNERS

Planning is the process of anticipating future events and conditions and determining courses of actions for achieving organizational objectives. Effective planning helps a business focus its vision, avoid costly mistakes, and seize opportunities. Planning should be flexible and responsive to changes in the business environment and should involve managers from all levels of the organization. As global competition intensifies, technology expands, and the speed at which firms bring new innovations to market increases, planning for the future becomes even more critical. For example, a CEO and other top-level managers need to plan for succession—those who will follow in their footsteps.

Importance of Planning

Although some firms manage to launch without a clear strategic plan, they won't last long if they don't map out a future. Facebook founder Mark Zuckerberg claims he didn't have a major plan for the site at the beginning. But Facebook's nearly global reach—and membership of more than 800 million—means that Zuckerberg must plan the firm's next moves in order to outrun competitors and avoid major stumbles.

TYPES OF PLANNING

Planning can be categorized by scope and breadth. Some plans are very broad and long range, whereas others are short range and very narrow, affecting selected parts of the organization rather than the company as a whole. Planning can be divided into the following categories: strategic, tactical, operational, and contingency, with each step including more specific information than the last. From the mission statement (described in the next section) to objectives to specific plans, each phase must fit into a comprehensive planning framework. The framework also must include narrow, functional plans aimed at individual employees and work areas relevant to individual tasks. These plans must fit within the firm's overall planning framework and help it reach objectives and achieve its mission.

• Strategic planning is the most far-reaching level of planning—the process of determining the primary objectives of an organization and then acting and allocating resources to achieve those objectives. Generally, a company's top executives have responsibility for strategic planning. As part of its strategy to use company resources to help lessen their impact on the environment, Whole Foods has created sustainability programs in many areas of their business. From their Reduce, Recycle and Reuse programs, to special labeling for wild-caught seafood, the company is fulfilling its environment objectives while accomplishing its mission of bringing the highest quality natural and organic food to market. The company recently documented the results of these and other strategic initiatives at its first ever “Green Mission Report” report.¹⁰

  

  Helping consumers make more environmentally conscious purchases is a key part of Whole Foods sustainability strategy.

• Tactical planning involves implementing the activities specified by strategic plans. Tactical plans guide the current and near-term activities required to implement overall strategies. As part of a strategy to increase profitability, a firm may develop tactical plans around building sales revenue, reducing expense, or developing new products. Business executives often look at tactical plans as blueprints for the organization they want to create and the performance they want to achieve.
• Operational planning creates the detailed standards that guide implementation of tactical plans. This activity involves choosing specific work targets and assigning employees and teams to carry out plans. Unlike strategic planning, which focuses on the organization as a whole, operational planning deals with developing and implementing tactics in specific functional areas. The operation plan for Whole Foods new seafood-labeling program included partnering with the Blue Ocean Institute and Monterey Bay Aquarium and developing a color-coded rating system with sustainability status information for all wild-caught seafood not certified by the Marine Stewardship Council.¹¹
• Contingency planning takes into account all the possibilities that actual planning cannot foresee. Major accidents, natural disasters, and rapid economic downturns can throw even the best-laid plans into chaos. Many firms use contingency planning to address the possibility of business disruption from such events, allowing them to resume operations as quickly and as smoothly as possible while communicating with the public about what happened.

The Strategic Planning Process

Strategic planning often makes the difference between an organization's success and failure. Strategic planning has formed the basis of many fundamental management decisions. Successful strategic planners typically follow the six steps shown in FIGURE 7.2: defining a mission, assessing the organization's competitive position, setting organizational objectives, creating strategies for competitive differentiation, implementing the strategy, and evaluating the results and refining the plan.

DEFINING THE ORGANIZATION'S MISSION

The first step in strategic planning is to translate the firm's vision into a mission statement—a written description of an organization's business intentions and aims. It is an enduring statement of a firm's purpose, possibly highlighting the scope of operations, the market it seeks to serve, and the ways it will attempt to set itself apart from competitors. A mission statement guides the actions of employees and publicizes the company's reasons for existence.

ASSESSING YOUR COMPETITIVE POSITION

Once a mission statement has been created, the next step in the planning process is to determine the firm's current—or potential—position in the marketplace. The company's founder or top managers evaluate the factors that could help it grow or cause it to fail. A frequently used tool in this phase of strategic planning is the SWOT analysis. SWOT is an acronym for strengths, weaknesses, opportunities, and threats. By systematically evaluating all four of these factors, a firm can then develop the best strategies for gaining a competitive advantage. The framework for a SWOT analysis appears in FIGURE 7.3.

To evaluate their firm's strengths and weaknesses, managers may examine the functional areas—such as finance, marketing, information technology, and human resources—or each office, plant, or store. Entrepreneurs may focus on the individual skills and experience they bring to a new business.

For Starbucks, a key strength is consumers' positive image of the company's brand, which gets them to stand in line to pay premium prices for coffee. That positive image comes from Starbucks' socially responsible corporate policies and its stature on the Fortune list of the 100 best companies to work for in the United States. The company's strategic plans have included various ways to build on Starbucks' strong brand loyalty by attaching it to new products and expanding into new markets. The expansion efforts have included creating a Music WiFi Community on its Web site; offering bottled Frappuccino drinks in grocery stores; and opening thousands of Starbucks outlets in Europe, Asia, and the Middle East. Weaknesses include saturating some markets with too many stores and not paying attention to store design. Starbucks eventually addressed these weaknesses by closing some stores and redesigning others.¹²

SWOT analysis defines a firm's opportunities and threats. Threats might include an economic recession—during which consumers are not willing to pay a premium for products—or a change in federal regulations. Starbucks addressed the threat of an economic downturn by beginning to offer less-expensive instant coffee in stores like Costco and Target. Opportunities like the growth of social media encouraged Starbucks to add Facebook and Twitter links to its Web site.¹³

A SWOT analysis isn't carved in stone. Strengths, weaknesses, opportunities, and threats may shift over time. A strength may eventually become a weakness, and a threat may turn into an opportunity. But the analysis gives managers a place to start.

SETTING OBJECTIVES FOR THE ORGANIZATION

In the next step in planning, a firm's leadership develops objectives. Objectives set guideposts by which managers define the organization's desired performance in such areas as new-product development, sales, customer service, growth, environmental and social responsibility, and employee satisfaction. Though the mission statement identifies a company's overall goals, objectives are more concrete and usually involve measurable (quantitative) outcomes.

CREATING STRATEGIES FOR COMPETITIVE DIFFERENTIATION

Developing a mission statement and setting objectives point a business in a specific direction. But the firm needs to identify the strategies it will use to reach its destination ahead of the competition. The underlying goal of strategy development is competitive differentiation—the unique combination of a company's abilities and resources that set it apart from its competitors. A firm might differentiate itself by being the first to introduce a product such as the iPad to a widespread market; or by offering exceptional customer service, as Nordstrom does; or by offering bargains, as Costco does. After using mobile text messaging to tutor his sister in organic chemistry, Breanden Beneschott founded smsPREP while he was still a college student. The company sends its subscribers text messages with practice test questions for the SAT and ACT.¹⁴

IMPLEMENTING THE STRATEGY

Once the first four phases of the strategic planning process are complete, managers are ready to put those plans into action. Often, it's the middle managers or supervisors who actually implement a strategy. However, top company officials in some companies may still be reluctant to empower managers and employees with the authority to make decisions that could benefit the company. Companies that are willing to empower all employees generally reap the benefits. “The greatest power on earth is human potential,” said Mark Lamoncha, CEO of Humtown Products, “It has been enslaved and exploited, but never truly empowered.”¹⁵

MONITORING AND ADAPTING STRATEGIC PLANS

The final step in the strategic planning process is to monitor and adapt plans when the actual performance fails to meet goals. Monitoring involves securing feedback about performance. Managers might compare actual sales against forecasts; compile information from surveys; listen to complaints from the customer hotline; interview employees who are involved; and review reports prepared by production, finance, marketing, or other company units. If Internet advertisement doesn't result in enough response or sales, managers might evaluate whether to continue the advertisement, change it, or discontinue it. If a retailer observes customers buying more jeans when they are displayed near the front door, likely the display area will stay near the door—and perhaps be enlarged. Ongoing use of such tools as SWOT analysis and forecasting can help managers adapt their objectives and functional plans as changes occur.

Organizational Structures

Once plans have been developed, the next step in the management process typically is organizing—the process of blending human and material resources through a formal structure of tasks and authority: arranging work, dividing tasks among employees, and coordinating them to ensure implementation of plans and accomplishment of objectives. Organizing involves classifying and dividing work into manageable units with a logical structure. Managers staff the organization with the best possible employees for each job. Sometimes the organizing function requires studying a company's existing structure and determining whether to restructure it in order to operate more efficiently, cost effectively, or sustainably.

An organization is a structured group of people working together to achieve common goals. An organization features three key elements: human interaction, goal-directed activities, and structure. The organizing process, much of which is led by managers, should result in an overall structure that permits interactions among individuals and departments needed to achieve company goals.

The steps involved in the organizing process are shown in FIGURE 7.4. Managers first determine the specific activities needed to implement plans and achieve goals. Next, they group these work activities into a logical structure. Then they assign work to specific employees and give the people the resources they need to complete it. Managers coordinate the work of different groups and employees within the firm. Finally, they evaluate the results of the organizing process to ensure effective and efficient progress toward planned goals. Evaluation sometimes results in changes to the way work is organized.

Many factors influence the results of organizing. The list includes a firm's goals and competitive strategy, the type of product it offers, the way it uses technology to accomplish work, and its size. Small firms typically use very simple structures. The owner of a dry-cleaning business generally is the top manager who hires several employees to process orders, clean the clothing, and make deliveries. The owner handles the functions of purchasing supplies such as detergents and hangers, hiring and training employees and coordinating their work, preparing advertisements for the local newspaper, and keeping accounting records.

As a company grows, its structure increases in complexity. With increased size comes specialization and growing numbers of employees. A larger firm may employ many salespeople, along with a sales manager to direct and coordinate their work or organize an accounting department.

An effective structure is one that is clear and easy to understand: employees know what is expected of them and to whom they report. They also know how their jobs contribute to the company's mission and overall strategic plan. An organization chart can help clarify the structure of a firm. FIGURE 7.5 illustrates a sample organization chart.

Not-for-profit organizations also organize through formal structures so they can function efficiently and carry out their goals. These organizations, such as the Salvation Army and the American Society for Prevention of Cruelty to Animals (ASPCA), sometimes have a blend of paid staff and volunteers in their organizational structure.

DEPARTMENTALIZATION

Departmentalization is the process of dividing work activities into units within the organization. In this arrangement, employees specialize in certain jobs—such as marketing, finance, or design. Depending on the size of the firm, usually an executive runs the department, followed by middle-level managers and supervisors. The five major forms of departmentalization subdivide work by product, geographical area, customer, function, and process.

• Product departmentalization organizes work units based on the goods and services a company offers. Video game publisher Activision Blizzard has three operating segments: Activision Publishing, Inc., developer of interactive entertainment software products such as Call of Duty; Blizzard Entertainment, Inc., maker of the online game World of Warcraft; and Activision Blizzard Distribution, a subsidiary set up to manage Activision European businesses.¹⁶
• Geographical departmentalization organizes units by geographical regions within a country or, for a multinational firm, by region throughout the world. The Web site Petswelcome.com makes it easy for traveling pet owners to locate hotel chains, rentals, amusement parks, and other recreational locations around the country that welcome pets. Users can search by type of lodging, route planned, and destination.¹⁷

  These familiar office products represent only one of 3M Corporation's many product lines. Because 3M serves such a broad spectrum of customers, it is organized on the basis of customer departmentalization.

  

• Customer departmentalization targets its goods and services at different types of customers. Procter & Gamble divides its management across two major business units: Beauty and Grooming and Household Care.¹⁸
• Functional departmentalization organizes work units according to business functions such as finance, marketing, human resources, and production. An advertising agency may create departments for creative personnel (say, copywriters), media buyers, and account executives.
• Process departmentalization organizes a firm by steps in a production process. For example, a manufacturer may set up separate departments for cutting material, heat-treating it, forming it into its final shape, and painting it.

As FIGURE 7.6 illustrates, a single company may implement several different departmentalization schemes. In deciding on a form of departmentalization, managers take into account the type of product they produce, the size of their company, their customer base, and the locations of their customers.

TYPES OF ORGANIZATION STRUCTURES

The four basic types of organization structures are line, line-and-staff, committee, and matrix. While some companies do follow one type of structure, most use a combination.

• Line organization, the oldest and simplest organization structure, establishes a direct flow of authority from the chief executive to employees. The line organization defines a simple, clear chain of command, or hierarchy of managers and workers. With a clear chain of command, everyone knows who is in charge and decisions can be made quickly. While line organization is particularly effective in a crisis, it has its drawbacks. Each manager has complete responsibility for a range of activities; in a midsize or large organization, however, this person can't possibly be expert in all of them. In a small organization such as a local hair salon or dentist's office, a line organization is probably the most efficient way to run the business.

  

  FIGURE 7.6 Different Forms of Departmentalization within One Company

• Line-and-staff organization combines the direct flow of authority of a line organization with staff departments that support the line departments. Line departments participate directly in decisions that affect the core operations of the organization. Staff departments lend specialized technical support. FIGURE 7.7 illustrates a line-and-staff organization. Accounting, legal, engineering, and human resources are typical staff departments that support the line authority extending from the plant manager to the production manager and supervisors.

A line manager and a staff manager differ significantly in their authority relationships. A line manager forms part of the primary line of authority that flows throughout the organization. Line managers interact directly with the functions of production, financing, or marketing—the functions needed to produce and sell goods and services. A staff manager provides information, advice, or technical assistance to aid line managers. Staff managers do not have authority to give orders outside their own departments or to compel line managers to take action.

The line-and-staff organization is common in midsize and large organizations. It is an effective structure because it combines the line organization's capabilities for rapid decision making and direct communication with the expert knowledge of staff specialists.

• Committee organization places authority and responsibility jointly in the hands of a group of individuals rather than a single manager. This model typically appears as part of a regular line-and-staff structure.

  Committees also work in areas such as new-product development. A new-product committee may include managers from such areas as accounting, engineering, finance, manufacturing, marketing, and technical research. By including representatives from all areas involved in creating and marketing products, such a committee generally improves planning and employee morale because decisions reflect diverse perspectives.

  Committees tend to act slowly and conservatively, however, and may make decisions by compromising conflicting interests rather than by choosing the best alternative. The definition of a camel as “a racehorse designed by committee” provides an apt description of some limitations of committee decisions.

• Matrix organization links employees from different parts of the firm to work together on specific projects. In a matrix structure, each employee reports to two managers: one line manager and one project manager. Employees chosen to work on a special project receive instructions from the project manager (horizontal authority), but they continue as employees in their permanent functional departments (vertical authority). The term matrix comes from the intersecting grid of horizontal and vertical lines of authority.

  FIGURE 7.8 depicts a matrix structure in which a project manager assembles a group of employees from different functional areas. The employees keep their ties to the line-and-staff structure, as shown in the vertical white lines. As the horizontal gold lines show, employees are also members of project teams. When the project is completed, employees return to their regular jobs.

  

  FIGURE 7.8 Matrix Organization

The matrix structure is popular at high-technology and multinational corporations, as well as hospitals and consulting firms. Both Dow Chemical and Procter & Gamble have used matrix structures. The major benefits of the matrix structure come from its flexibility in adapting quickly to rapid changes in the environment and its capability of focusing resources on major problems or products. It also provides an outlet for employees' creativity and initiative. However, it challenges project managers to integrate the skills of specialists from many departments into a coordinated team. It also means that team members' permanent functional managers must adjust their employees' regular workloads.

The matrix structure is most effective when company leaders empower project managers to use whatever resources are available to achieve the project's objectives. Good project managers know how to make the project goals clear and keep team members focused. A firm that truly embraces the matrix structure also nurtures a project culture by making sure staffing is adequate, the workload is reasonable, and other company resources are available to project managers.

MANAGERIAL FUNCTIONS

In addition to planning and organizing, managers need to be able to perform a multitude of other functions. These include hard skills such as technical analysis, operating computer software, and reading financial statements. Managers must also perfect soft skills such as public speaking, networking, and writing. Of the additional skills a manager requires, two stand out as critical to a managers success: directing and controlling.

Directing: Once an organization has been established, managers focus on directing, or guiding and motivating employees to accomplish organizational objectives. Directing might include training (or retraining), setting up schedules, delegating certain tasks, and monitoring progress. To fulfill the objective of reducing the office electricity bill, an office manager might have incandescent light bulbs replaced by compact fluorescents, ask employees to turn off the lights when they leave a room or use occupancy sensors, and direct the IT staff to program all the office computer screens to turn off after 10 or 15 minutes of inactivity.

Often when managers take time to listen to their employees, the manager gains insight and the employee gets a motivational boost. Fashion designer Eileen Fisher says, “Share information and your own ideas. Be present. Be accessible. Listen.”¹⁹

Controlling: The controlling function evaluates an organization's performance against its objectives. Controlling assesses the success of the planning function and provides feedback for future rounds of planning.

The four basic steps in controlling are to establish performance standards, monitor actual performance, compare actual performance with established standards, and make corrections if necessary. Under the provisions of the Sarbanes-Oxley Act, for example, CEOs and CFOs must monitor the performance of the firm's accounting staff more closely than has typically been done in the past. They must personally attest to the truth of financial reports filed with the Securities and Exchange Commission.

NOTES

1. Fortune's “100 Best Companies to Work For” 2013, CNNMoney, http://money.cnn.com, accessed April 16, 2013; Emma Sapong “Wegmans Ranked among Best Places to Work for 16th Straight Year,” The Buffalo News, January 16, 2013, http://www.buffalonews.com; “FMI Presents Robert B. Wegman Award to Danny Wegman,” Progressive Grocer, January 30, 2012, http://www.progressivegrocer.com.

2. Brad Tuttle, “Apple, L.L. Bean—and Especially, Amazon—Score Big in Online Shopping Satisfaction,” Time, May 14, 2012, http://business.time.com.

3. Company Web site, “Leadership,” http://www.aboutmcdonalds.com, accessed May 3, 2013; Shaila Dewan, “McDonald's Says Its Chief Will Retire This Summer,” New York Times, March 21, 2012, http://www.nytimes.com.

4. Company Web site, http://www.google.com, accessed May 3, 2013; Joseph Walker, “School's in Session at Google,” The Wall Street Journal, July 5, 2012, http://onlinw.wsj.com.

5. Katie Couric, “The Man behind the Miracle on the Hudson: Captain Sully Sullenberger,” The Katie Show, aired January 15, 2013, http://www.katiecouric.com.

6. Craig Chappelow, “5 Rules for Making Your Vision Stick,” Fast Company, September 5, 2012, http://www.fastcompany.com/3000998/5-rules-making-your-vision-stick.

7. Company Web site, “Corporate Information,” http://www.google.com, accessed March 13, 2013.

8. Bruce I. Jones, “People Management Lessons from Disney,” http://www.trainingindustry.com, accessed April 16, 2013.

9. Gwen Moran, “Zappos' Secrets to Building an Empowering Company Culture,” Entrepreneur, March 6, 2013, http://www.entrepreneur.com.

10. Company Web site, “Whole Foods Market's: Green Mission Report” http://www.wholefoodsmarket.com, accessed April 30, 2013.

11. Ibid.

12. Company Web site, http://www.starbucks.com, accessed April 16, 2013.

13. Ibid.

14. “Coolest College Startups 2013,” Inc., http://www.inc.com, accessed April 30, 2013.

15. Brandon Lamoncha, “Company Thrives on Empowering Employees,” Interise, February 4, 2013, http://interise.org.

16. Company Web site, http://investor.activision.com, accessed April 16, 2013.

17. Company Web site, http://www.petswelcome.com, accessed April 16, 2013.

18. Company Web site, http://www.pg.com, accessed April 16, 2013.

19. Susan Schor, “10 Leadership Tips from Eileen Fisher,” Inc., http://www.inc.com, accessed April 16, 2013.