Principles of Management

528 Pages·2007·21.919 MB·English

by  Charles W. L. Hill, Steven Mcshane

PRINCIPLES OF MANAGEMENT
Charles W.L. Hill
UNIVERSITY OF WASHINGTON
Steven L. McShane
UNIVERSITY OF WESTERN AUSTRALIA
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PRINCIPLES OF MANAGEMENT
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ISBN 978-0-07-353012-3 (student edition)
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ISBN 978-0-07-331626-0 (instructor’s edition)
MHID 0-07-331626-1 (instructor’s edition)
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Library of Congress Cataloging-in-Publication Data
Hill, Charles W. L.
Principles of management / Charles W.L. Hill, Steven L. McShane.
p. cm.
Includes index.
ISBN-13: 978-0-07-353012-3 (student edition : alk. paper)
ISBN-10: 0-07-353012-3 (student edition : alk. paper)
ISBN-13: 978-0-07-331626-0 (instructor’s edition : alk. paper)
ISBN-10: 0-07-331626-1 (instructor’s edition : alk. paper)
1. Management. I. McShane, Steven Lattimore. II. Title.
HD31.H4885 2008
658--dc22
2006033368
www.mhhe.com
For Lane
—C.W.L.H.
Dedicated with Love
and devotion to Donna,
and to our wonderful
daughters, Bryton and
Madison
—S.L.M.
about the // AUTHORS
Charles W. L. Hill Steven L. McShane
Charles W. L. Hill is the Steven L. McShane is Pro-
Hughes M. Blake Professor fessor of Management in
of International Business at the Graduate School of
the School of Business, Management at the Univer-
University of Washington. sity of Western Australia,
Professor Hill received his where he receives high
PhD from the University of teaching ratings from stu-
Manchester’s Institute dents in Perth, Singapore,
of Science and Technology and other cities in Asia where
(UMIST) in Britain. In addition UWA offers its programs. He is
to the University of Washington, also an Honorary Professor at Uni-
he has served on the faculties of UMIST, Texas A&M versiti Tunku Abdul Rahman (UTAR) in Malaysia and pre-
University, and Michigan State University. viously taught in the business faculties at Simon Fraser
Professor Hill has published over 40 articles in peer- University and Queen’s University in Canada. Steve has
reviewed academic journals, including the A cademy of conducted executive seminars with Nokia, Wesfarmers
Management Journal, Academy of Management Review, Group, ALCOA World Alumia Australia, and many other
Strategic Management Journal, and Organization Science . organizations. He is also a popular visiting speaker, having
He has also published two college texts: one on strategic given four dozen talks to faculty and students in almost a
management and the other on international business. Pro- dozen countries over the past three years.
fessor Hill has served on the editorial boards of several aca- Steve earned his PhD from Michigan State University in
demic journals, including the S trategic M anagement Jour- organizational behavior, human resource management,
nal and Organization Science. Between 1993 and 1996 he and labor relations. He also holds a Master of Industrial
was consulting editor at the Academy of Management Relations from the University of Toronto, and an under-
Review . graduate degree from Queen’s University in Canada. Steve
Professor Hill teaches in the MBA, Executive MBA, has served as President of the Administrative Sciences As-
Management, and PhD programs at the University of sociation of Canada (the Canadian equivalent of the Acad-
W ashington. He has received awards for teaching excel- emy of Management) and Director of Graduate Programs
lence in the MBA, Executive MBA, and Management pro- in the business faculty at Simon Fraser University.
grams. He has also taught customized executive programs. Along with co-authoring Organizational Behavior, 4e,
Professor Hill works on a consulting basis with a num- Steve is the author of Canadian Organizational Behaviour,
ber of organizations. His clients have included ATL, B oeing, 6th ed. (2006), co-author (with Tony Travaglione) of
BF Goodrich, Hexcel, House of Fraser, Microsoft, Seattle Organisational Behaviour on the Pacific Rim, 2e (2007),
City Light, Tacoma City Light, Thompson Financial and co-author (with Mary Ann von Glinow) of Organiza-
Services, and Wizards of the Coast. tional Behaviour: Essentials (2007). He has also published
several dozen articles, book chapters, and conference
p apers on diverse topics, including managerial decision
making, organizational learning, socialization of new
employees, gender bias in job evaluation, wrongful dis-
missal, media bias in business magazines, and labor union
participation.
Steve enjoys spending his leisure time swimming, body
board surfing, canoeing, skiing, and traveling with his wife
and two daughters.
/// BRIEF
CONTENTS
PART 1 Managers and the Environment
Chapter 1 M anagement 2
Chapter 2 T he External and Internal Environments 26
Chapter 3 G lobalization and the Manager 54
Chapter 4 S takeholders, Ethics, and Corporate Social Responsibility 80
PART 2 Strategizing
Chapter 5 P lanning and Decision Making 104
Chapter 6 S trategy 132
Chapter 7 M anaging Operations 156
PART 3 Organization Architecture
Chapter 8 O rganizing 180
Chapter 9 C ontrol Systems 206
Chapter 10 O rganizational Culture 230
Chapter 11 D eveloping High-Performance Teams 254
PART 4 Leading
Chapter 12 S taffing and Developing a Diverse Workforce 284
Chapter 13 M otivating and Rewarding Employee Performance 314
Chapter 14 Managing Employee Attitudes and Well-Being 346
Chapter 15 M anaging through Power, Influence, and Negotiation 376
Chapter 16 E ffective Leadership 402
Chapter 17 C ommunication 426
PART 5 Change
Chapter 18 M anaging Innovation and Change 452
Glossary 478
Index 487
// TABLE OF
CONTENTS
PART 1
The General Environment 38
Managers and the Environment Political and Legal Forces 39
Macroeconomic Forces 39
Demographic Forces 40
Chapter 1
Sociocultural Forces 41
Management 2 Technological Forces 41
International Forces 41
The Functions of Management 4
Planning and Strategizing 4 Dynamic Changes in the External Environment 42
Organizing 5 Incremental versus Discontinuous Change 42
Controlling 6 Environmental Uncertainty 43
Leading and Developing Employees 6
The Internal Environment 44
Types of Managers 7 Internal Organization 44
Corporate-Level General Managers 8 Employees (Human Capital) 45
Business-Level General Managers 9 Resources 46
Functional Managers 9
In Conclusion: Why Does It Matter? 48
Frontline Managers 10
Management Challenges 49
Becoming a Manager 10
From Specialist to Manager 10 Management Portfolio 50
Mastering the Job 11
CLOSING CASE
Managerial Roles 12 The Pharmaceutical Industry 50
Interpersonal Roles 13
Informational Roles 14 Chapter 3
Decisional Roles 15 Globalization and the Manager 54
Some Qualifications 15
The Process of Globalization 56
Management Competencies:
The Spread of Market-Based Systems 56
Do You Have What It Takes? 16
Falling Barriers to Trade and Investment 58
Managerial Skills 16
Tumbling Communication and Transportation Costs 58
Managerial Values 19
Managerial Motivation 20 Implications of Globalization 59
The Globalization of Production 60
In Conclusion: Why Does It Matter? 21
The Globalization of Markets 61
Management Challenges 21 Technology: The Great Facilitator 61
Management Portfolio 22 Constraints on Globalization 62
Protectionist Countertrends 63
CLOSING CASE
National Differences in Consumer Behavior 64
George David 22
National Differences in Business Systems 64
Differences in Social Culture 65
Chapter 2
The Benefits of Going Global 66
The External and Internal
Expanding the Market 67
Environments 26 Realizing Scale Economies 67
Realizing Location Economies 67
The Task Environment 29
Global Learning 68
The Threat of Entry 30
Bargaining Power of Buyers 31 Management Challenges in the Global
Bargaining Power of Suppliers 32 Enterprise 69
The Threat of Substitutes 32 Global Standardization or Local Customization 69
The Intensity of Rivalry 33 Entry Mode 70
A Sixth Force: Complementors 37 Locating Activities 71
Synthesis 37 Managing People in the Multinational Firm 72
Contents vii
In Conclusion: Why Does It Matter? 74 The Benefits and Pitfalls of Planning 118
The Pitfalls of Planning 119
Management Challenges 75
Improving Planning 120
Management Portfolio 75
Decision Making 121
CLOSING CASE The Rational Decision-Making Model 122
Planet Starbucks 75 Bounded Rationality and Satisficing 122
Decision-Making Heuristics and Cognitive Biases 123
Prospect Theory 125
Chapter 4
Groupthink 126
Stakeholders, Ethics, and Corporate
Improving Decision Making 127
Social Responsibility 80
In Conclusion: Why Does It Matter? 127
Stakeholders and Stakeholder Management 82
Management Challenges 128
Stakeholders and the Organization 83
Taking Stakeholders into Account 83 Management Portfolio 128
Business Ethics 86 CLOSING CASE
Ethical Issues in Management 86 Boom and Bust in Telecommunications 129
The Roots of Unethical Behavior 90
Philosophical Approaches to Ethics 92
Chapter 6
Behaving Ethically 94
Strategy 132
Social Responsibility 97
Arguments for Social Responsibility 98 Superior Performance and Competitive
The Friedman Doctrine 99 Advantage 134
In Conclusion: Why Does It Matter? 100 Business-Level Strategy 137
Competitive Theme: Differentiation or Low Cost? 137
Management Challenges 100
Segmenting the Market 139
Management Portfolio 101 Choosing Segments to Serve 140
Segmentation and Strategy 140
CLOSING CASE
The Low Cost–Differentiation Frontier 141
Working Conditions at Wal-Mart 101
Implementing Business-Level Strategy 143
Configuring the Value Chain 144
Competitive Advantage and Strategic Fit 146
PART 2 Competitive Tactics 147
Tactical Pricing Decisions 147
Strategizing
Tactical Product Decisions 148
Corporate-Level Strategy 148
Chapter 5
Focus on a Single Business 149
Planning and Decision Making 104 Vertical Integration 149
Diversification 150
Planning within Organizations 106
International Expansion 151
Levels of Planning 107
Planning Horizons 108 In Conclusion: Why Does It Matter? 152
Single-Use Plans and Standing Plans 109
Management Challenges 152
Contingency Planning 110
Management Portfolio 153
Strategic Planning: A Closer Look 112
Setting the Context: Mission, Vision, CLOSING CASE
Values, and Goals 113 Google’s Quest for Competitive Advantage 153
External and Internal Analysis 116
SWOT Analysis: Formulating Strategies 116 Chapter 7
Action Plans 117
Managing Operations 156
Implementation 117
Review and Adjustments 117 Productivity and Efficiency 158
viii Contents
Configuring the Production System 159 Management Challenges 203
Traditional Production Systems 159
Management Portfolio 203
Production Systems, Flexibility, and Costs 160

N ew Production Technologies: Mass CLOSING CASE
Customization 162 Dow Chemical 203
Optimizing Work Flow: Process Reengineering and
Process Innovation 164 Chapter 9
Asset Utilization 165 Control Systems 206
Quality Management 167 Control Systems 208
Establishing Goals and Standards 208
Managing Inventory 169
Measuring Performance 210
Economic Order Quantity and Setup Time 170
Comparing Performance against
Just-in-Time Inventory Systems 171
Goals and Standards 210
Build to Order and Inventory 172
Taking Corrective Action 211
Supply Chain Management and Providing Reinforcement 211
Information Systems 174
Methods of Control 212
Product Development and Productivity 175 Personal Controls 212
Bureaucratic Controls 213
In Conclusion: Why Does It Matter? 176
Output Controls 214
Management Challenges 176 Cultural Control 216
Control through Incentives 217
Management Portfolio 177
Market Controls 218
CLOSING CASE Summary 219
Improving Productivity in the Auto Industry 177
Matching Controls to Strategy
and Structure 220
Controls in the Single Business 220
Controls in Diversified Firms 221
PART 3
Choosing Control Metrics:
Organization Architecture
The Balanced Scorecard 223
Backchannel Control Methods 225
Chapter 8
In Conclusion: Why Does It Matter? 226
Organizing 180
Management Challenges 226
Organization Architecture 182
Management Portfolio 226
Designing Structure: Vertical Differentiation 184
Centralization and Decentralization 184 CLOSING CASE
Tall versus Flat Hierarchies 188 Lincoln Electric 227
Designing Structure: Horizontal
Chapter 10
Differentiation 191
Functional Structure 192 Organizational Culture 230
Multidivisional Structure 193
What Is Organizational Culture? 232
Geographic Structure 194
Shared Values 233
Matrix Structure 196
Shared Assumptions 234
Designing Structure: Integrating Mechanisms 198 Content of Organizational Culture 234
Formal Integrating Mechanisms 198 Organizational Subcultures 235
Informal Integrating Mechanisms: Knowledge
Deciphering an Organization’s Culture 236
Networks 199
Organizational Stories and Legends 237
Strategy, Coordination, and Integrating
Rituals and Ceremonies 237
Mechanisms 201
Organizational Language 238
In Conclusion: Why Does It Matter? 202 Physical Structures and Décor 238
Contents ix
Is Organizational Culture Important? 239 Management Challenges 278
Organizational Culture Strength and Fit 239
Management Portfolio 278
Corporate Cults and Suppressing Dissent 240
Adaptive Cultures 241 CLOSING CASE
Organizational Culture and Business Ethics 241 The Shipping Industry Accounting Team 279
How to Change and Strengthen
Organizational Culture 242
Actions of Founders and Leaders 243 PART 4
Aligning Artifacts 245
Leading
Introducing Culturally Consistent Rewards 245
Selecting and Socializing Employees 246
Managing Organizational Culture Chapter 12
during Mergers 246 Staffing and Developing a Diverse
Strategies to Merge Different Workforce 284
Organizational Cultures 247
Human Resource Planning: Translating Strategy
In Conclusion: Why Does It Matter? 249
into Staffing Requirements 286
Management Challenges 250 Step 1: Conduct Job Analysis 287
Step 2: Estimate Human Resource Demand 287
Management Portfolio 250
Step 3: Document Current Human Resource Supply 288
CLOSING CASE Step 4: Estimate Future Internal Human Resource
Schwab Acquires U.S. Trust 250 Supply 288
Step 5: Estimate Future External Human Resource
Supply 289
Chapter 11
Relying on the Contingent Workforce 289
Developing High-Performance
Staffing a Diverse Workforce 290
Teams 254
Surface-Level and Deep-Level Diversity 290
Why Rely on Teams? 256 Is Diversity Important? 291
Why People Belong to Informal Groups 257
Recruiting Job Applicants 294
The Trouble with Teams 258 Nurturing the Employer Brand 295
Social Loafing 258 Internal versus External Recruitment 296
Choosing Recruiting Channels 297
Types of Teams 258
Recruitment and Diversity 299
Self-Directed Teams 260
Virtual Teams 261 Selecting Job Applicants 299
Reliability and Validity of Selection Methods 299
A Model of Team Effectiveness 262
Application Forms, Résumés, and Reference Checks 301
Team Design Features 264 Work Sample Tests 301
Task Characteristics 264 Employment Interviews 302
Team Size 264 Ability and Personality Tests 303
Team Composition 265 Selection and Diversity 303
Team Roles 265
Orienting and Developing Employees 304
Team Processes 266 Employee Orientation 304
Team Development 267 Training Needs Analysis 305
Team Norms 269 Training Methods 305
Team Cohesiveness 271 Supporting the Training Process 307
Team Trust 272
In Conclusion: Why Does It Matter? 308
Managing Team Conflict 274
Management Challenges 308
Task versus Relationship Conflict 274
Interpersonal Conflict Management Styles 275 Management Portfolio 309
Structural Solutions to Team Conflict 277
CLOSING CASE
In Conclusion: Why Does It Matter? 277 Rebranding McJobs 309
x Contents
Chapter 13 Job Satisfaction 351
Job Satisfaction and Work Behavior 352
Motivating and Rewarding Employee
Job Satisfaction and Performance 354
P erformance 314
Job Satisfaction and Customer Satisfaction 354
MARS Model of Individual Behavior and Results 316
Organizational Commitment 355
Motivation 316
Watch Out for Continuance Commitment! 356
Ability 317
Building Organizational Commitment 356
Role Perceptions 317
Work-Related Stress and Its Management 357
Situational Factors 318
Using MARS to Diagnose Employee Disengagement 318 General Adaptation Syndrome 358
Consequences of Distress 358
Motivating Employees: A Three-Part Process 318
Stressors: The Sources of Stress 359
Part 1: Managing Motivation through Managing Work-Related Stress 361
Drives and Needs 319 Work–Life Balance 364
Maslow’s Needs Hierarchy Theory 319 Personality Effects on Attitudes and Well-Being 365
Learned Needs Theory 322 The Big Five Personality Dimensions 365
Four-Drive Theory 322 Effects of Personality on Emotions and Attitudes 366
Effects of Personality on Stress and Well-Being 366
Part 2: Managing Motivation through Goals,
Effects of Personality on Performance 367
Expectations, and Feedback 325
Effects of Personality on Career Satisfaction 367
Goal Setting and Feedback 325
Expectancy Theory of Motivation 327 In Conclusion: Why Does It Matter? 369
Part 3: Managing Motivation through Extrinsic and Management Challenges 369
Intrinsic Rewards 329
Management Portfolio 370
Motivating Employees through Extrinsic
CLOSING CASE
Rewards 329
Rough Seas on the LINK650 370
Membership- and Seniority-Based Rewards 329
Job Status–Based Rewards 330
Chapter 15
Competency-Based Rewards 330
Performance-Based Rewards 330 Managing through Power, Influence,
Nonfinancial Rewards 332 and Negotiation 376
Improving Performance Appraisals 332
Power in Organizations 378
Rewarding Employees Equitably 333
Sources of Power 379
Motivating Employees through Intrinsic
Formal Hierarchical Position 379
Rewards 335
Expertise 381
Job Characteristics Model 336
Control over Information 381
Motivating Employees through Job Enrichment 337
Networks of Allies 383
Motivating Employees through Empowerment 337
Individual Attributes 383
In Conclusion: Why Does It Matter? 338
Contingencies of Power 385
Management Challenges 339
Influence 386
Management Portfolio 340 Influence Tactics 386
Consequences and Contingencies 391
CLOSING CASE
Buddy’s Snack Company 340 Negotiation: The Art of Conflict Resolution 392
Bargaining Zone Model of Negotiations 393
Negotiating Effectively 394
Chapter 14
In Conclusion: Why Does It Matter? 396
Managing Employee Attitudes and
Well-Being 346 Management Challenges 396
Management Portfolio 396
Emotions in the Workplace 348
Emotions, Attitudes, and Behavior 349 CLOSING CASE
Cognitive Dissonance 351 The Rise and Fall of Mike Sears 397