Exhibit 6.1 (Credit: Urs Rüegsegger / flickr / Public Domain Mark 1.

0)

Introduction
Learning Outcomes
After reading this chapter, you should be able to answer these questions:

1. What is the role of management?

2. What are the four types of planning?
3. What are the primary functions of managers in organizing activities?
4. How do leadership styles influence a corporate culture?
5. How do organizations control activities?
6. What roles do managers take on in different organizational settings?
7. What set of managerial skills is necessary for managerial success?
8. What trends will affect management in the future?

EXPLORINGBUSINESSCAREERS

BuyCostumes.com/Wantable, Inc.
Chapter 6 Management and Leadership in Today's Organizations 210

As with most businesses, BuyCostumes.com and Wantable, Inc., are the result of careful planning.
BuyCostumes.com was a response to what Getz saw as inherent flaws of resource allocation with the
business model of brick-and-mortar costume retailers. “As a brick-and-mortar business, we were the
gypsies of retail, which caused scale problems since we started over every year. Because we only were in
a mall four or five months a year, locations we had one year often were rented the next. So we had to
find new stores to rent each year. Then we had to find management to run the stores, and train
employees to staff them. We also had to shuffle the inventory around each year to stock them. It’s
almost impossible to grow a business like that.” By turning to the internet, however, Getz was able to
bypass all of those issues. The virtual “space” was available year-round, and inventory and staff were
centralized in a single warehouse location.

Getz grew BuyCostumes.com to a multimillion-dollar business before selling it, with a staff of about 600
employees during its peak season. Before Getz sold the business, it carried over 10,000 Halloween items
and had upwards of 20 million visitors each holiday season. In one year, it shipped over 1 million
costumes across the world, including 45 countries outside the United States. “We say that our goal is to
ensure that anytime anyone buys a costume anywhere in the world, it will be from BuyCostumes.com.
And, although to some extent we’re kidding, we’re also very serious.”

To keep track of all this action, Getz mixed ideals of a strong work ethic, a willingness to take risks, and
an interest in having fun while making a profit. Given the size of the company, BuyCostumes.com
organized its management to help keep the company focused on the corporate goal of continued
growth. For Getz, his role in the management hierarchy was to “hire excellent people who have similar
goals and who are motivated the same way I am and then put them in a position where they can
succeed.” Beyond that? “Inspect what you expect.” This maxim is a concise way to say that, although he
does not believe in constantly watching over his employees’ shoulders, he does believe in periodically
checking in with them to ensure that both he and they are on the same page. By considering the process
of management a conversation between himself and his employees, he exhibits a strong participative
leadership style.

Getz will joke that he wishes he could say that he spent his childhood dreaming of the day he could work
with costumes. The truth, though, is that he saw an opportunity, grabbed it, and hasn’t let go since. And
sometimes, especially during Halloween, truth can be even more satisfying than fiction.

After selling BuyCostumes.com, Getz experimented with other digital start-ups but quickly realized he
worked best with retail. In 2012, he launched Wantable, Inc., an online personal shopping service. In its
first four years, Getz led the company to exceed 28,000% annual revenue growth and to hire more than
100 employees. It became profitable in 2016 and looked to double its income the following year.

Sources: “About Wantable,” http://blog.wantable.com, accessed October 27, 2017; “Wantable Surpasses
100 Employees,” http://www.prweb.com, April 3, 2017; Jeff Engel, “Jalem Getz’s Latest Retail Startup
Wantable Targets Women, Fast Growth,” https://www.xconomy.com, April 21, 2014.

Today’s companies rely on managers to guide daily operations using human, technological, financial, and
other resources to create a competitive advantage. For many beginning business students, being in
“management” is an attractive but somewhat vague future goal. This vagueness is due in part to an
incomplete understanding of what managers do and how they contribute to organizational success or failure.
This chapter introduces the basic functions of management and the skills managers need to drive an
organization toward its goals. We will also discuss how leadership styles influence a corporate culture and
Chapter 6 Management and Leadership in Today's Organizations 211

highlight the trends that are shaping the future role of managers.

6.1 The Role of Management

1. What is the role of management?

Management is the process of guiding the development, maintenance, and allocation of resources to attain
organizational goals. Managers are the people in the organization responsible for developing and carrying out
this management process. Management is dynamic by nature and evolves to meet needs and constraints in
the organization’s internal and external environments. In a global marketplace where the rate of change is
rapidly increasing, flexibility and adaptability are crucial to the managerial process. This process is based in
four key functional areas of the organization: planning, organizing, leading, and controlling. Although these
activities are discussed separately in the chapter, they actually form a tightly integrated cycle of thoughts and
actions.

From this perspective, the managerial process can be described as (1) anticipating potential problems or
opportunities and designing plans to deal with them, (2) coordinating and allocating the resources needed to
implement plans, (3) guiding personnel through the implementation process, and (4) reviewing results and
making any necessary changes. This last stage provides information to be used in ongoing planning efforts,
and thus the cycle starts over again. The four functions are highly interdependent, with managers often
performing more than one of them at a time and each of them many times over the course of a normal
workday.

Exhibit 6.2 To encourage greater collaboration between employees, Apple is investing $5 billion in the construction of its new Cupertino, CA,
headquarters, which is replacing several buildings the company had outgrown. Most headquarters-based employees of Apple now share not
only the same office space, but also the same technology tools and corporate culture. How do Apple’s planning and organizing decisions increase
organizational efficiency and effectiveness? (Credit: Tom Pavel / flickr/ Attribution 2.0 Generic (CC BY 2.0))

The four management functions can help managers increase organizational efficiency and effectiveness.
Chapter 6 Management and Leadership in Today's Organizations 212

Efficiency is using the least possible amount of resources to get work done, whereas effectiveness is the
ability to produce a desired result. Managers need to be both efficient and effective in order to achieve
organizational goals. For example in 2016, Delta, one of the most efficient network U.S. airlines, operated at
revenue of 12.15 cents per seat-mile, which is the revenue the company makes on one seat (occupied or not)
the distance of one mile. No other airline came close to operating this efficiently except Southwest, which flew
seats that produced 12.51 cents a mile, the best performance of all U.S. airlines.1 There are many ways that
airlines can manage to produce higher revenue per seat-mile. For instance, they can raise ticket prices, fill
more of their seats, operate more efficient aircraft that utilize less fuel, or negotiate favorable salaries with
their employees. While efficiency and effectiveness are sometimes lauded by investors, airlines also need to
account for customer satisfaction, which can mean extra costs.2

To meet the demands of rapid growth, Skechers hired a new chief financial officer, John Vandemore, which
allowed their existing CFO (David Weinberg) to concentrate on international expansion. Skechers CEO Robert
Greenberg commented: “As international now represents more than 50 percent of our total business, we must
continue to ramp up operations and infrastructure to meet the demand. David (Weinberg) understands how
to do it the right way at the right speed to maintain our forward momentum. With John (Vandemore) handling
CFO responsibilities, David will now have the bandwidth to travel and find opportunities to maximize our
efficiencies around the globe.”3

As these examples and Table 6.1 show, good management uses the four management functions to increase a
company’s efficiency and effectiveness, which leads to the accomplishment of organizational goals and
objectives. Let’s look more closely at what each of the management functions entails.

What Managers Do and Why

Good management consists of these four Which results And leads to

activities: in

Planning Leading
• Set objectives • Lead and
and state motivate
mission employees to
• Examine accomplish
alternatives organizational
• Determine goals
needed • Communicate
resources with employees
• Create • Resolve
strategies to conflicts
reach • Manage
objectives change

Table 6.1
Chapter 6 Management and Leadership in Today's Organizations 213

What Managers Do and Why

Good management consists of these four Which results And leads to

activities: in

Organizing Controlling Leads Organizational Leads Achievement

• Design jobs • Measure to efficiency and to of
and specify performance effectiveness organizational
tasks • Compare mission and
• Create performance to objectives
organizational standards
structure • Take necessary
• Staff positions action to
• Coordinate improve
work activities performance
• Set policies
and
procedures
• Allocate
resources

Table 6.1

CONCEPT CHECK

1. Define the term management.

2. What are the four key functions of managers?
3. What is the difference between efficiency and effectiveness?

6.2 Planning
2. What are the four types of planning?

Planning begins by anticipating potential problems or opportunities the organization may encounter.
Managers then design strategies to solve current problems, prevent future problems, or take advantage of
opportunities. These strategies serve as the foundation for goals, objectives, policies, and procedures. Put
simply, planning is deciding what needs to be done to achieve organizational objectives, identifying when and
how it will be done, and determining who should do it. Effective planning requires extensive information about
the external business environment in which the firm competes, as well as its internal environment.

There are four basic types of planning: strategic, tactical, operational, and contingency. Most of us use these
different types of planning in our own lives. Some plans are very broad and long term (more strategic in
nature), such as planning to attend graduate school after earning a bachelor’s degree. Some plans are much
more specific and short term (more operational in nature), such as planning to spend a few hours in the
library this weekend. Your short-term plans support your long-term plans. If you study now, you have a better
Chapter 6 Management and Leadership in Today's Organizations 214

chance of achieving some future goal, such as getting a job interview or attending graduate school. Like you,
organizations tailor their plans to meet the requirements of future situations or events. A summary of the four
types of planning appears in Table 6.2.

Strategic planning involves creating long-range (one to five years), broad goals for the organization and
determining what resources will be needed to accomplish those goals. An evaluation of external
environmental factors such as economic, technological, and social issues is critical to successful strategic
planning. Strategic plans, such as the organization’s long-term mission, are formulated by top-level managers
and put into action at lower levels in the organization. For example, when Mickey Drexler took over as CEO of
J.Crew, the company was floundering and had been recently purchased by a private equity group. One of
Drexler’s first moves was to change the strategic direction of the company by moving it out of the crowded
trend-following retail segment, where it was competing with stores such as Gap, American Eagle, and
Abercrombie and back into the preppie, luxury segment where it began. Rather than trying to sell abundant
inventory to a mass market, J.Crew cultivated scarcity, making sure items sold out early rather than hit the sale
rack later in the season. The company also limited the number of new stores it opened during a two-year span
but planned to double the number of stores in the next five to six years. Drexler led the company through
public offerings and back to private ownership before bringing on a new CEO in 2017. He remained chairman
with ownership in the company.4

Types of Planning

Type of Time Level of Extent of Purpose and Breadth Accuracy

Planning Frame Management coverage Goal of and
Content Predictability

Strategic 1–5 Top External Establish Broad High degree

years management environment mission and and of
(CEO, vice and entire long-term goals general uncertainty
presidents, organization
directors,
division
heads)

Tactical Less Middle Strategic Establish mid- More Moderate

than 1 management business range goals for specific degree of
year units implementation certainty

Operational Current Supervisory Geographic Implement and Specific Reasonable

management and activate specific and degree of
functional objectives concrete certainty
divisions

Table 6.2
Chapter 6 Management and Leadership in Today's Organizations 215

Types of Planning

Type of Time Level of Extent of Purpose and Breadth Accuracy

Planning Frame Management coverage Goal of and
Content Predictability

Contingency When an Top and External Meet Both Reasonable

event middle environment unforeseen broad degree of
occurs or management and entire challenges and and certainty
a organization opportunities detailed once event
situation or situation
demands occurs

Table 6.2

CA T C H I N G T H E EN T R E P R E N E U R I AL S P I R I T

Changing Strategy Can Change Your Opportunities

Since 1949, Gordon Bernard, a printing company in Milford, Ohio, focused exclusively on printing
fundraising calendars for a variety of clients, such as cities, schools, scout troops, and fire departments.
The company’s approximately 4,000 clients nationwide, 10 percent of which have been with the company
for over 50 years, generated $4 million in revenue in 2006. In order to better serve customers, company
president Bob Sherman invested $650,000 in the purchase of a Xerox iGEN3 digital color press so that the
company could produce in-house a part of its calendar product that had been outsourced. The high-tech
press did more for the company than simply reduce costs, however.

The new press gave the company four-color printing capability for the first time in its history, and that
led the management of Gordon Bernard to rethink the company’s strategy. The machine excels at short
runs, which means that small batches of an item can be printed at a much lower cost than on a
traditional press. The press also has the capability to customize every piece that rolls off the machine. For
example, if a pet store wants to print 3,000 direct mail pieces, every single postcard can have a
personalized greeting and text. Pieces targeted to bird owners can feature pictures of birds, whereas the
dog owners’ brochure will contain dog pictures. Text and pictures can be personalized for owners of
show dogs or overweight cats or iguanas.

Bob Sherman created a new division to oversee the implementation, training, marketing, and creative
aspects of the new production process. The company even changed how it thinks of itself. No longer
does Gordon Bernard consider itself a printing firm, but as a marketing services company with printing
capabilities. That change in strategy prompted the company to seek more commercial work. For
example, Gordon Bernard will help clients of its new services develop customer databases from their
existing information and identify additional customer information they might want to collect. Even
though calendar sales accounted for 97 percent of the firm’s revenues, that business is seasonal and
leaves large amounts of unused capacity in the off-peak periods. Managers’ goals for the new division
were to contribute 10 percent of total revenue within a couple years of purchase.
Critical Thinking Questions
Chapter 6 Management and Leadership in Today's Organizations 216

1. What type of planning do you think Gordon Bernard is doing?

2. Because Gordon Bernard’s strategy changed only after it purchased the iGEN3, does the shift
constitute strategic planning? Why or why not?

Sources: GBC Fundraising Calendars, http://www.gordonbernard.com/, accessed September 15, 2017;

Gordon Bernard Co Inc., https://www.manta.com, accessed September 15, 2017; Karen Bells, “Hot Off
the Press; Milford Printer Spends Big to Fill New Niche,” Cincinnati Business Courier, July 15, 2005, pp.
17–18.

An organization’s mission is formalized in its mission statement, a document that states the purpose of the
organization and its reason for existing. For example, Twitter’s mission statement formalizes both concepts
while staying within its self-imposed character limit; see Table 6.3.

Twitter’s Mission, Values, and Strategy

Mission: Give everyone the power to create and share ideas and information instantly, without
barriers.

Values: We believe in free expression and think every voice has the power to impact the world.

Strategy: Reach the largest daily audience in the world by connecting everyone to their world via
our information sharing and distribution platform products and be one of the top revenue
generating Internet companies in the world.

Twitter combines its mission and values to bring together a diverse workforce worldwide to fulfill
its strategy.

The 3 Parts of a Company Mission Statement:

• Purpose
• Value
• Action

Table 6.3 Sources: “About” and “Our Values,” https://about.twitter.com, accessed October 30, 2017; Justin Fox, “Why Twitter’s
Mission Statement Matters,” Harvard Business Review, https://hbr.org, accessed October 30, 2017; Jeff Bercovici, “Mission Critical:
Twitter’s New ‘Strategy Statement’ Reflects Shifting Priorities,” Inc., https://www.inc.com, accessed October 30, 2017.

In all organizations, plans and goals at the tactical and operational levels should clearly support the
organization’s mission statement.

Tactical planning begins the implementation of strategic plans. Tactical plans have a shorter (less than one
year) time frame than strategic plans and more specific objectives designed to support the broader strategic
goals. Tactical plans begin to address issues of coordinating and allocating resources to different parts of the
organization.

Under Mickey Drexler, many new tactical plans were implemented to support J.Crew’s new strategic direction.
For example, he severely limited the number of stores opened each year, with only nine new openings in the
first two years of his tenure (he closed seven). Instead, he invested the company’s resources in developing a
product line that communicated J.Crew’s new strategic direction. Drexler dumped trend-driven apparel
because it did not meet the company’s new image. He even cut some million-dollar volume items. In their
Chapter 6 Management and Leadership in Today's Organizations 217

place, he created limited editions of a handful of garments that he thought would be popular, many of which
fell into his new luxury strategy. For example, J.Crew now buys shoes directly from the same shoe
manufacturers that produce footwear for designers such as Prada and Gucci. In general, J.Crew drastically
tightened inventories, a move designed to keep reams of clothes from ending up on sale racks and to break its
shoppers’ habit of waiting for discounts.

This part of the plan generated great results. Prior to Drexler’s change in strategy, half of J.Crew’s clothing
sold at a discount. After implementing tactical plans aimed to change that situation, only a small percentage
does. The shift to limited editions and tighter inventory controls has not reduced the amount of new
merchandise, however. On the contrary, Drexler created a J.Crew bridal collection, a jewelry line, and Crew
Cuts, a line of kids’ clothing. The results of Drexler’s tactical plans were impressive. J.Crew saw same-store
sales rise 17 percent in one year. 5

Operational planning creates specific standards, methods, policies, and procedures that are used in specific
functional areas of the organization. Operational objectives are current, narrow, and resource focused. They
are designed to help guide and control the implementation of tactical plans. In an industry where new
versions of software have widely varying development cycles, Autodesk, maker of software tools for designers
and engineers, implemented new operational plans that dramatically increased profits. Former CEO Carol
Bartz shifted the company away from the erratic release schedule it had been keeping to regular, annual
software releases. By releasing upgrades on a defined and predictable schedule, the company is able to use
annual subscription pricing, which is more affordable for small and midsize companies. The new schedule
keeps Autodesk customers on the most recent versions of popular software and has resulted in an overall
increase in profitability.6

The key to effective planning is anticipating future situations and events. Yet even the best-prepared
organization must sometimes cope with unforeseen circumstances, such as a natural disaster, an act of
terrorism, or a radical new technology. Therefore, many companies have developed contingency plans that
identify alternative courses of action for very unusual or crisis situations. The contingency plan typically
stipulates the chain of command, standard operating procedures, and communication channels the
organization will use during an emergency.

An effective contingency plan can make or break a company. Consider the example of Marriott Hotels in
Puerto Rico. Anticipating Hurricane Maria in 2017, workers at the San Juan Marriott had to shift from their
regular duties to handling the needs of not only customers, but everyone who needed assistance in the wake
of the hurricane that devastated the island. A contingency plan and training for events such as this were a key
part of managing this crisis.7 The company achieved its goal of being able to cater to guest and general needs
due to planning and training while having a contingency plan in place. One guest commented on TripAdvisor,
“Could not believe how friendly, helpful & responsive staff were even during height of hurricane. Special
thanks to Eydie, Juan, Jock, Ashley and security Luis. They kept us safe & were exemplary. Will always stay at
Marriott from now on.”8 Within one month after Hurricane Maria hit, operations were back to normal at the
San Juan Marriott.9

M AN A GING CH ANGE
Chapter 6 Management and Leadership in Today's Organizations 218

its development in the 1970s, Boeing revamped its pioneering B747 numerous times and at one time
boasted over 1,300 of the jumbo jets in operation around the world. As part of this head-to-head
competition for bragging rights to the largest jet in the air, Boeing was working on a 747X, a super-
jumbo jet designed to hold 525 passengers. In what seemed to be an abrupt change of strategy, Boeing
conceded the super-jumbo segment of the market to its rival and killed plans for the 747X. Instead of
trying to create a plane with more seats, Boeing engineers began developing planes to fly fewer people
at higher speeds. Then, as the rising price of jet fuel surpassed the airlines’ ability to easily absorb its
increasing cost, Boeing again changed its strategy, this time focusing on developing jets that use less
fuel. In the end, Boeing’s strategy changed from plane capacity to jet efficiency.

The new strategy required new plans. Boeing managers identified gaps in Airbus’s product line and
immediately set out to develop planes to fill them. Boeing announced a new 787 “Dreamliner,” which
boasted better fuel efficiency thanks to lightweight composite materials and next-generation engine
design. Even though the 787 has less than half the seating of the Airbus A380, Boeing’s Dreamliner is a
hit in the market. Orders for the new plane have been stronger than anticipated, forcing Boeing to
change its production plans to meet demand. The company decided to accelerate its planned 787
production rate buildup, rolling out a new jet every two days or so.

Airbus was not so lucky. The company spent so much time and energy on its super-jumbo that its A350
(the plane designed to compete with Boeing’s 787) suffered. The 787 uses 15 percent less fuel than the
A350, can fly nonstop from Beijing to New York, and is one of the fastest-selling commercial planes ever.

The battle for airline supremacy continues to switch between the two global giants. In 2017, Boeing beat
Airbus on commercial jet orders at the Paris Air Show and continues to push forward. A spok esperson
has hinted at a hybrid fuselage for midrange planes, which could carry passengers farther at lower costs.
If successful, Boeing will regain market share lost to the Airbus A321.
Critical Thinking Questions
1. What seems to be the difference in how Boeing and Airbus have approached planning?
2. Do you think Airbus should change its strategic plans to meet Boeing’s or stick with its current
plans? Explain.

Sources: Gillian Rich, “Why Boeing's Paris Air Show Orders Are ‘Staggering’,” http://www.investors.com,
June 22, 2017; Jon Ostrower, “Boeing vs. Airbus: A New Winner Emerges at the Paris Air Show,” CNN,
http://money.cnn.com, June 22, 2017; Gillian Rich, “’Hybrid’ Design for New Boeing Midrange Jet Could
Hit This Sweet Spot,” http://www.investors.com, June 20, 2017; Alex Taylor, III, “Boeing Finally Has a
Flight Plan,” Fortune, June 13, 2005, pp. 27–28; J. Lynn Lundsford and Rod Stone, “Boeing Net Falls, but
Outlook Is Rosy,” The Wall Street Journal, July 28, 2005, p. A3; Carol Matlack and Stanley Holmes, “Why
Airbus Is Losing Altitude,” Business Week, June 20, 2005, p. 20; J. Lynn Lunsford, “UPS to Buy 8 Boeing
747s, Lifting Jet’s Prospects,” The Wall Street Journal, September 18, 2005, p. A2; “Airbus to Launch A350
Jet in October,” Xinhua News Agency, September 14, 2005, online; “Boeing Plans Major Change,”
Performance Materials, April 30, 2001, p. 5.

CONCEPT CHECK
Chapter 6 Management and Leadership in Today's Organizations 219

6.3 Organizing
3. What are the primary functions of managers in organizing activities?

A second key function of managers is organizing, which is the process of coordinating and allocating a firm’s
resources in order to carry out its plans. Organizing includes developing a structure for the people, positions,
departments, and activities within the firm. Managers can arrange the structural elements of the firm to
maximize the flow of information and the efficiency of work processes. They accomplish this by doing the
following:

• Dividing up tasks (division of labor)

• Grouping jobs and employees (departmentalization)
• Assigning authority and responsibilities (delegation)

These and other elements of organizational structure are discussed in detail elsewhere. In this chapter,
however, you should understand the three levels of a managerial hierarchy. This hierarchy is often depicted as
a pyramid, as in Exhibit 6.3. The fewest managers are found at the highest level of the pyramid. Called top
management, they are the small group of people at the head of the organization (such as the CEO, president,
and vice president). Top-level managers develop strategic plans and address long-range issues such as which
industries to compete in, how to capture market share, and what to do with profits. These managers design
and approve the firm’s basic policies and represent the firm to other organizations. They also define the
company’s values and ethics and thus set the tone for employee standards of behavior. For example, Jack
Welch, the former CEO of General Electric, was a role model for his managers and executives. Admirers say
that he had an extraordinary capacity to inspire hundreds of thousands of people in many countries and he
could change the direction of a huge organization like General Electric as if it were a small firm. Following his
leadership, General Electric’s executives turned in impressive results. During his tenure, General Electric’s
average annual shareholder return was 25 percent.10
220 Chapter 6 Management and Leadership in Today's Organizations

Exhibit 6.3 The Managerial Pyramid (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

The second and third tiers of the hierarchy are called middle management and supervisory (first-line)
management, respectively. Middle managers (such as division heads, departmental managers, and regional
sales managers) are responsible for beginning the implementation of strategic plans. They design and carry
out tactical plans in specific areas of the company. They begin the process of allocating resources to meet
organizational goals, and they oversee supervisory managers throughout the firm. Supervisors, the most
numerous of the managers, are at the bottom of the managerial pyramid. These managers design and carry
out operational plans for the ongoing daily activities of the firm. They spend a great deal of their time guiding
and motivating the employees who actually produce the goods and services.

CONCEPT CHECK

1. Explain the managerial function of organizing.

2. What is the managerial pyramid?

6.4 Leading, Guiding, and Motivating Others

4. How do leadership styles influence a corporate culture?

Leadership, the third key management function, is the process of guiding and motivating others toward the
achievement of organizational goals. A leader can be anyone in an organization, regardless of position, able to
influence others to act or follow, often by their own choice. Managers are designated leaders according to the

This OpenStax book is available for free at http://cnx.org/content/col25734/1.7

220 Chapter 6 Management and Leadership in Today's Organizations

organizational structure but may need to use negative consequences or coercion to achieve change. In the
organization structure, top managers use leadership skills to set, share, and gain support for the company’s
direction and strategy—mission, vision, and values, such as Jeff Bezos does at Amazon. Middle and supervisory
management use leadership skills in the process of directing employees on a daily basis as the employees
carry out the plans and work within the structure created by management. Top-level leadership demonstrated
by Bezos was also exhibited by Jack Welch while leading General Electric and led to many studies of his
approach to leadership. Organizations, however, need strong effective leadership at all levels in order to meet
goals and remain competitive.

To be effective leaders, managers must be able to influence others’ behaviors. This ability to influence others
to behave in a particular way is called power. Researchers have identified five primary sources, or bases, of
power:

• Legitimate power, which is derived from an individual’s position in an organization

• Reward power, which is derived from an individual’s control over rewards
• Coercive power, which is derived from an individual’s ability to threaten negative outcomes
• Expert power, which is derived from an individual’s extensive knowledge in one or more areas
• Referent power, which is derived from an individual’s personal charisma and the respect and/or
admiration the individual inspires

Many leaders use a combination of all of these sources of power to influence individuals toward goal
achievement. While CEO of Procter & Gamble, A. G. Lafley got his legitimate power from his position. His
reward power came from reviving the company and making the stock more valuable. Also, raises and bonus
for managers who met their goals was another form of reward power. Lafley also was not hesitant to use his
coercive power. He eliminated thousands of jobs, sold underperforming brands, and killed weak product lines.
With nearly 40 years of service to the company, Lafley had a unique authority when it came to P&G’s products,
markets, innovations, and customers. The company’s sales doubled during his nine years as CEO, and its
portfolio of brands increased from 10 to 23. He captained the purchase of Clairol, Wella AG, and IAMS, as well
as the multibillion-dollar merger with Gillette. As a result, Lafley had a substantial amount of referent power.
Lafley is also widely respected, not only by people at P&G, but by the general business community as well. Ann
Gillin Lefever, a managing director at Lehman Brothers, said, “Lafley is a leader who is liked. His directives are
very simple. He sets a strategy that everybody understands, and that is more difficult than he gets credit
for.”11

Leadership Styles
Individuals in leadership positions tend to be relatively consistent in the way they attempt to influence the
behavior of others, meaning that each individual has a tendency to react to people and situations in a
particular way. This pattern of behavior is referred to as leadership style. As Table 6.4 shows, leadership
styles can be placed on a continuum that encompasses three distinct styles: autocratic, participative, and free
rein.

Autocratic leaders are directive leaders, allowing for very little input from subordinates. These leaders prefer
to make decisions and solve problems on their own and expect subordinates to implement solutions according
to very specific and detailed instructions. In this leadership style, information typically flows in one direction,
from manager to subordinate. The military, by necessity, is generally autocratic. When autocratic leaders treat
employees with fairness and respect, they may be considered knowledgeable and decisive. But often autocrats
are perceived as narrow-minded and heavy-handed in their unwillingness to share power, information, and

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Chapter 6 Management and Leadership in Today's Organizations 222

decision-making in the organization. The trend in organizations today is away from the directive, controlling
style of the autocratic leader.

Exhibit 6.4 Recently ranking near the top of the Forbes list of the world’s most powerful women was Sheryl Sandberg, the COO at Facebook.
As Facebook’s chief operating officer since 2008, Sandberg has helped dramatically boost revenues at the social network. Sand berg also
founded Lean In, a nonprofit named after her bestselling book, to support women’s empowerment. What are Sheryl Sandberg’s primary sources
of power? (Credit: JD Lasica/ Flickr/ Attribution 2.0 Generic (CC BY 2.0))

Instead, U.S. businesses are looking more and more for participative leaders, meaning leaders who share
decision-making with group members and encourage discussion of issues and alternatives. Participative
leaders use a democratic, consensual, consultative style. One CEO known for her participative leadership style
is Meg Whitman, former CEO at Hewlett Packard. When Whitman worked at eBay, a team in the German-based
operation began a promotional “treasure hunt,” launching registration pages, clues, and an hourly countdown
clock. Trouble was, the launch violated eBay’s well-established corporate project-development processes.
When the treasure hunt began, 10 million contestants logged on, crashing the local servers. Rather than shut
the project down, the VP in charge of the German operation allowed the promotion to be fixed and fly under
the radar of corporate headquarters. Successful innovations emerged, such as an Easy Lister feature and
separate registration processes for private and business sellers. When the VP shared this experience with Meg
Whitman, she fostered the idea of rapid prototyping throughout the organization, which “breaks rules to get
something done,” and modeled such behavior for the entire organization.12

Leadership Styles of Managers

Table 6.4

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Chapter 6 Management and Leadership in Today's Organizations 223

Leadership Styles of Managers

Amount of authority held by the leader

Autocratic Style Participative Style Free-Rein (Laissez-Faire)

(Democratic, Consensual, Style
Consultative)

Manager makes most Manager shares decision- Manager turns over

decisions and acts in making with group virtually all authority and
authoritative manner. members and encourages control to group.
Manager is usually teamwork. Members of group are
unconcerned about Manager encourages presented with task and
subordinates’ attitudes discussion of issues and given freedom to
toward decisions. alternatives. accomplish it.
Emphasis is on getting Manager is concerned Approach works well
task accomplished. about subordinates’ ideas with highly motivated,
Approach is used mostly and attitudes. experienced, educated
by military officers and Manager coaches personnel.
some production line subordinates and helps Approach is found in
supervisors. coordinate efforts. high-tech firms, labs,
Approach is found in and colleges.
many successful
organizations.

Amount of authority held by group members

Table 6.4

E THICS IN PRA C TICE

Scott Stephenson: Balancing the Duality of Ethics

Whether it’s Bernie Madoff defrauding investors, Wells Fargo having to respond to creating fake
accounts in the names of real customers, or Mylan N.V. imposing huge price increases on its life-saving
EpiPen, it seems like there is never a shortage of ethical issues being an important aspect of business. As
shown by these examples, unethical decisions permeate different parts of the business and occur for
different reasons.

In the case of Bernie Madoff, it was the greed of one person using a Ponzi scheme to defraud thousands
of customers. In the case of Wells Fargo, the culprits were managers putting excessive pressure on

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Chapter 6 Management and Leadership in Today's Organizations 224

workers to meet new account quotas. The case of Mylan included the dramatic rise in the price of the
EpiPen in a short time span and reports that CEO Heather Bresch and other executives received
compensation that increased over 700 percent during the same time frame. Adding to the Mylan case
was the fact that Bresch is the daughter of West Virginia Senator Joseph Manchin, and prior to being
appointed CEO at Mylan, Bresch served as Mylan’s chief lobbyist and helped craft the Generic Drug User
Fee Amendments and the School Access to Emergency Epinephrine Act.

Where does the responsibility of managing ethical behavior in organizations reside? The answer is
everyone in the organization is responsible to act in an ethical manner. The primary responsibility resides,
however, with the CEO and also with the chief financial officer, who has the responsibility to oversee
financial compliance with laws and regulations. Scott Stephenson, the CEO of Verisk Analytics, recently
commented on how he approaches the duality of what he terms a “loose–tight” approach to leadership
where he provides his employees with the discretion and responsibility to make critical decisions in crisis
situations where ethics might be involved. That’s the loose part. He also works on communicating and
building trust in his employees so that he has the confidence they will act responsibly and make the
correct decisions in crisis situations. That’s the tight part of his leadership duality.
Critical Thinking Questions
1. Do you think Verisk Analytics, a technology company that needs innovation breakthroughs, benefits
from Stephenson’s “loose–tight” approach? What if Stepheson had been an autocratic leader?
Explain your reasoning.
2. What kind of participative leader (described below) does Stephenson seem to be? Explain your
choice.

Sources: Scott Stephenson, “The Duality of Balanced Leadership,” Forbes, https://www.forbes.com,

November 29, 2017; Matt Egan, “Wells Fargo Uncovers Up to 1.4 Million More Fake Accounts,” CNN
Money, http://money.cnn.com, August 31, 2017; Jesse Heitz, “The EpiPen Scandal and the Perception of
the Washington Establishment,” The Hill, http://thehill.com, September 1, 2016; “Decade’s Top 10 Ethics
Scandals,” The Wall Street Journal, https://www.wsj.com, August 9, 2010.

Participative leadership has three types: democratic, consensual, and consultative. Democratic leaders solicit
input from all members of the group and then allow the group members to make the final decision through a
voting process. This approach works well with highly trained professionals. The president of a physicians’ clinic
might use the democratic approach. Consensual leaders encourage discussion about issues and then require
that all parties involved agree to the final decision. This is the general style used by labor mediators.
Consultative leaders confer with subordinates before making a decision but retain the final decision-making
authority. This technique has been used to dramatically increase the productivity of assembly-line workers.

The third leadership style, at the opposite end of the continuum from the autocratic style, is free-rein or
laissez-faire (French for “leave it alone”) leadership. Managers who use this style turn over all authority and
control to subordinates. Employees are assigned a task and then given free rein to figure out the best way to
accomplish it. The manager doesn’t get involved unless asked. Under this approach, subordinates have
unlimited freedom as long as they do not violate existing company policies. This approach is also sometimes
used with highly trained professionals as in a research laboratory.

Although one might at first assume that subordinates would prefer the free-rein style, this approach can have

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Chapter 6 Management and Leadership in Today's Organizations 225

several drawbacks. If free-rein leadership is accompanied by unclear expectations and lack of feedback from
the manager, the experience can be frustrating for an employee. Employees may perceive the manager as
being uninvolved and indifferent to what is happening or as unwilling or unable to provide the necessary
structure, information, and expertise.

No leadership style is effective all the time. Effective leaders recognize employee growth and use situational
leadership, selecting a leadership style that matches the maturity and competency levels of those completing
the tasks. Newly hired employees may respond well to authoritative leadership until they understand the job
requirements and show the ability to handle routine decisions. Once established, however, those same
employees may start to feel undervalued and perform better under a participative or free-rein leadership
style. Using situational leadership empowers employees as discussed next.

Employee Empowerment
Participative and free-rein leaders use a technique called empowerment to share decision-making authority
with subordinates. Empowerment means giving employees increased autonomy and discretion to make their
own decisions, as well as control over the resources needed to implement those decisions. When decision-
making power is shared at all levels of the organization, employees feel a greater sense of ownership in, and
responsibility for, organizational outcomes.

Management use of employee empowerment is on the rise. This increased level of involvement comes from
the realization that people at all levels in the organization possess unique knowledge, skills, and abilities that
can be of great value to the company. For example, when Hurricane Katrina hit the Gulf Coast, five miles of
railroad tracks were ripped off a bridge connecting New Orleans to Slidell, Louisiana. Without the tracks, which
fell into Lake Pontchartrain, Norfolk Southern Railroad couldn’t transport products between the East and West
Coasts. Before the storm hit, however, Jeff McCracken, a chief engineer at the company, traveled to
Birmingham with equipment he thought he might need and then to Slidell with 100 employees. After
conferring with dozens of company engineers and three bridge companies, McCracken decided to try to
rescue the miles of track from the lake. (Building new tracks would have taken several weeks at the least.) To
do so, he gathered 365 engineers, machine operators, and other workers, who lined up eight huge cranes and,
over the course of several hours, lifted the five miles of sunken tracks in one piece out of the lake and bolted it
back on the bridge.13 By giving employees the autonomy to make decisions and access to required resources,
Norfolk Southern was able to avoid serious interruptions in its nationwide service.

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Chapter 6 Management and Leadership in Today's Organizations 226

Exhibit 6.5 Management thought leader Peter Drucker (1909–2005) was the author of more than three dozen books, translated into almost
as many languages. Most management scholars have remarked that although he was firmly associated with the human relations sch ool of
management—along with Douglas McGregor and Warren Bennis, for example—the thought leader Drucker most admired was Frederick
Winslow Taylor, the father of “scientific” management. Should any one “school” of management predominate thinking, or should all approaches be
considered? (Credit: IsaacMao/ Flickr/ Attribution 2.0 Generic (CC BY 2.0))

Corporate Culture
The leadership style of managers in an organization is usually indicative of the underlying philosophy, or
values, of the organization. The set of attitudes, values, and standards of behavior that distinguishes one
organization from another is called corporate culture. A corporate culture evolves over time and is based on
the accumulated history of the organization, including the vision of the founders. It is also influenced by the
dominant leadership style within the organization. Evidence of a company’s culture is seen in its heroes (e.g.,
the late Andy Grove of Intel 14, myths (stories about the company passed from employee to employee),
symbols (e.g., the Nike swoosh), and ceremonies. The culture at Google, working in teams and fostering
innovation, sometimes is overlooked while its employee perks are drooled over. But both are important to the
company’s corporate culture. Since 2007 Google has been at or near the top of Fortune’s list of the “100 Best
Companies to Work For,” an annual list based on employee survey results tabulated by an independent
company: Great Place to Work®. 15 “We have never forgotten since our startup days that great things happen
more frequently within the right culture and environment,” a company spokesperson said in response to the
company first taking over the top spot.16

Culture may be intangible, but it has a tremendous impact on employee morale and a company’s success.
Google approaches morale analytically. When it found that mothers were leaving the company in higher rates
than other employee groups, the company improved its parental-leave policies. The result was a 50 percent
reduction in attrition for working moms. An analytical approach along with culture-building activities such as
town halls led by black employees and allies, support for transgender employees, and unconscious-bias
workshops are why employees say Google is a safe and inclusive place to work. 17 Clearly Google leaders
recognize culture is critical to the company’s overall success.

CONCEPT CHECK

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Chapter 6 Management and Leadership in Today's Organizations 227

3. What is corporate culture?

6.5 Controlling
5. How do organizations control activities?

The fourth key function that managers perform is controlling. Controlling is the process of assessing the
organization’s progress toward accomplishing its goals. It includes monitoring the implementation of a plan
and correcting deviations from that plan. As Exhibit 6.6 shows, controlling can be visualized as a cyclical
process made up of five stages:

Exhibit 6.6 The Control Process (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

Performance standards are the levels of performance the company wants to attain. These goals are based on
its strategic, tactical, and operational plans. The most effective performance standards state a measurable
behavioral objective that can be achieved in a specified time frame. For example, the performance objective
for the sales division of a company could be stated as “$200,000 in gross sales for the month of January.” Each
individual employee in that division would also have a specified performance goal. Actual firm, division, or
individual performance can be measured against desired performance standards to see if a gap exists
between the desired level of performance and the actual level of performance. If a performance gap does
exist, the reason for it must be determined and corrective action taken.

Feedback is essential to the process of control. Most companies have a reporting system that identifies areas
where performance standards are not being met. A feedback system helps managers detect problems before

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Chapter 6 Management and Leadership in Today's Organizations 228

they get out of hand. If a problem exists, the managers take corrective action. Toyota uses a simple but
effective control system on its automobile assembly lines. Each worker serves as the customer for the process
just before his or hers. Each worker is empowered to act as a quality control inspector. If a part is defective or
not installed properly, the next worker won’t accept it. Any worker can alert the supervisor to a problem by
tugging on a rope that turns on a warning light (i.e., feedback). If the problem isn’t corrected, the worker can
stop the entire assembly line.

Why is controlling such an important part of a manager’s job? First, it helps managers to determine the
success of the other three functions: planning, organizing, and leading. Second, control systems direct
employee behavior toward achieving organizational goals. Third, control systems provide a means of
coordinating employee activities and integrating resources throughout the organization.

CONCEPT CHECK

6.6 Managerial Roles

6. What roles do managers take on in different organizational settings?

In carrying out the responsibilities of planning, organizing, leading, and controlling, managers take on many
different roles. A role is a set of behavioral expectations, or a set of activities that a person is expected to
perform. Managers’ roles fall into three basic categories: informational roles, interpersonal roles, and decisional
roles. These roles are summarized in Table 6.5. In an informational role, the manager may act as an
information gatherer, an information distributor, or a spokesperson for the company. A manager’s
interpersonal roles are based on various interactions with other people. Depending on the situation, a
manager may need to act as a figurehead, a company leader, or a liaison. When acting in a decisional role, a
manager may have to think like an entrepreneur, make decisions about resource allocation, help resolve
conflicts, or negotiate compromises.

Managerial Decision Making

In every function performed, role taken on, and set of skills applied, a manager is a decision maker. Decisi on-
making means choosing among alternatives. Decision-making occurs in response to the identification of a
problem or an opportunity. The decisions managers make fall into two basic categories: programmed and
nonprogrammed. Programmed decisions are made in response to routine situations that occur frequently in
a variety of settings throughout an organization. For example, the need to hire new personnel is a common
situation for most organizations. Therefore, standard procedures for recruitment and selection are developed
and followed in most companies.

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Chapter 6 Management and Leadership in Today's Organizations 229

The Many Roles Managers Play in an Organization

Role Description Example

Information Roles

Monitor • Seeks out and gathers • Finding out about legal restrictions
information relevant to the on new product technology
organization

Disseminator • Provides information where it is • Providing current production

needed in the organization figures to workers on the assembly
line

Spokesperson • Transmits information to • Representing the company at a

people outside the organization shareholders’ meeting

Interpersonal Roles

Figurehead • Represents the company in a • Cutting the ribbon at ceremony for

symbolic way the opening of a new building

Leader • Guides and motivates • Helping subordinates to set

employees to achieve monthly performance goals
organizational goals

Liaison • Acts as a go-between among • Representing the retail sales

individuals inside and outside division of the company at a
the organization regional sales meeting

Decisional Roles

Entrepreneur • Searches out new opportunities • Implementing a new production

and initiates change process using new technology

Disturbance • Handles unexpected events and • Handling a crisis situation such as a

handler crises fire

Resource • Designates the use of financial, • Approving the funds necessary to

allocator human, and other purchase computer equipment and
organizational resources hire personnel

Table 6.5

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230 Chapter 6 Management and Leadership in Today's Organizations

The Many Roles Managers Play in an Organization

Role Description Example

Negotiator • Represents the company at • Participating in salary negotiations

negotiating processes with union representatives

Table 6.5

Infrequent, unforeseen, or very unusual problems and opportunities require nonprogrammed decisions by
managers. Because these situations are unique and complex, the manager rarely has a precedent to follow.
The earlier example of the Norfolk Southern employee, who had to decide the best way to salvage a five -mile-
long piece of railroad track from the bottom of Lake Pontchartrain, is an example of a nonprogrammed
decision. Likewise, when Hurricane Katrina was forecast to make landfall, Thomas Oreck, then CEO of the
vacuum manufacturer that bears his name, had to make a series of nonprogrammed decisions. Oreck’s
corporate headquarters were in New Orleans, and its primary manufacturing facility was in Long Beach,
Mississippi. Before the storm hit, Oreck transferred its computer systems and call-center operations to backup
locations in Colorado and planned to move headquarters to Long Beach. The storm, however, brutally hit both
locations. Oreck executives began searching for lost employees, tracking down generators, assembling
temporary housing for workers, and making deals with UPS to begin distributing its product (UPS brought
food and water to Oreck from Atlanta and took vacuums back to the company’s distribution center there). All
of these decisions were made in the middle of a very challenging crisis environment.

Whether a decision is programmed or nonprogrammed, managers typically follow five steps in the decision-
making process, as illustrated in Exhibit 6.7:

1. Recognize or define the problem or opportunity. Although it is more common to focus on problems
because of their obvious negative effects, managers who do not take advantage of new opportunities
may lose competitive advantage to other firms.
2. Gather information so as to identify alternative solutions or actions.
3. Select one or more alternatives after evaluating the strengths and weaknesses of each possibility.
4. Put the chosen alternative into action.
5. Gather information to obtain feedback on the effectiveness of the chosen plan.

It can be easy (and dangerous) for managers to get stuck at any stage of the decision-making process. For
example, entrepreneurs can become paralyzed evaluating the options. For the Gabby Slome, the cofounder of
natural pet food maker Ollie, the idea for starting the company came after her rescue dog began having
trouble digesting store-bought pet food after living on scraps. Slome decided that the pet food industry, a $30
billion a year business, was ripe for a natural food alternative. She laments, however, that she let perfect be
the enemy of the very good by indulging in “analysis paralysis.”18

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230 Chapter 6 Management and Leadership in Today's Organizations

Exhibit 6.7 The Decision-Making Process (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

CONCEPT CHECK

1. What are the three types of managerial roles?

2. Give examples of things managers might do when acting in each of the different types of roles.
3. List the five steps in the decision-making process.

6.7 Managerial Skills

7. What set of managerial skills is necessary for managerial success?

In order to be successful in planning, organizing, leading, and controlling, managers must use a wide variety
of skills. A skill is the ability to do something proficiently. Managerial skills fall into three basic categories:
technical, human relations, and conceptual skills. The degree to which each type of skill is used depends upon
the level of the manager’s position as seen in Exhibit 6.8. Additionally, in an increasingly global marketplace, it
pays for managers to develop a special set of skills to deal with global management issues.

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Chapter 6 Management and Leadership in Today's Organizations 232

Exhibit 6.8 The Importance of Managerial Skills at Different Management Levels (Attribution: Copyright Rice University, OpenStax, under
CC BY 4.0 license.)

Technical Skills
Specialized areas of knowledge and expertise and the ability to apply that knowledge make up a manager’s
technical skills. Preparing a financial statement, programming a computer, designing an office building, and
analyzing market research are all examples of technical skills. These types of skills are especially important for
supervisory managers because they work closely with employees who are producing the goods and/or
services of the firm.

Human Relations Skills

Human relations skills are the interpersonal skills managers use to accomplish goals through the use of
human resources. This set of skills includes the ability to understand human behavior, to communicate
effectively with others, and to motivate individuals to accomplish their objectives. Giving positive feedback to
employees, being sensitive to their individual needs, and showing a willingness to empower subordinates are
all examples of good human relations skills. Identifying and promoting managers with human relations skills
are important for companies. A manager with little or no people skills can end up using an authoritarian
leadership style and alienating employees.

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Chapter 6 Management and Leadership in Today's Organizations 233

Conceptual Skills
Conceptual skills include the ability to view the organization as a whole, understand how the various parts
are interdependent, and assess how the organization relates to its external environment. These skills allow
managers to evaluate situations and develop alternative courses of action. Good conceptual skills are
especially necessary for managers at the top of the management pyramid, where strategic planning takes
place.

CONCEPT CHECK

6.8 Trends in Management and Leadership

8. What trends will affect management in the future?

Four important trends in management today are crisis management, outside directors, the growing use of
information technology, and the increasing need for global management skills.

Crisis Management
Crises, both internal and external, can hit even the best-managed organization. Sometimes organizations can
anticipate crises, in which case managers develop contingency plans, and sometimes they can’t. Take, for
example, the sudden death of McDonald’s CEO Jim Cantalupo. The company had a solid succession plan in
place and immediately named Charlie Bell as new CEO. Only a few months later, Bell announced that he had
terminal cancer. Even though the company had prepared for the event of its leader’s untimely death, surely it
couldn’t have anticipated that his successor would also be stricken by a terminal illness at almost the same
time. Likewise, consider the devastation caused by Hurricanes Harvey, Irma, Maria, and Nate in 2017. Part of
Marriott Hotels’ crisis management plan included relaxing its “no pets” policy and allowing patrons fleeing the
storm to check in with their pets because it was the right thing to do.19

Crises cannot be fully anticipated, but managers can develop contingency plans to help navigate through the
aftermath of a disaster. For example, consider the challenges that faced Rajiv Joseph, the author of several
plays including Bengal Tiger at the Baghdad Zoo, who was in Houston preparing to open his new play, Describe
the Night, at the Alley Theater when Hurricane Harvey hit and flooded the theater a few weeks prior to opening
night. The six New York–based actors, the director, the stage manager, and Joseph decided to help in the relief
efforts and made their way to the George Brown Convention Center, which had become the central location
for relief efforts. When they arrived and the staffers discovered they were theater artists, they were deployed
to handle the writing and deployment of public address announcements and manage the incoming crowds.
What made the relief efforts successful was planning—matching the skill sets of volunteers with tasks they are
best able to perform.20 Even though those in charge of the relief efforts had contingency plans, they still
needed to make dozens of nonprogrammed decisions to effectively manage the ever-changing situation.21

No manager or executive can be completely prepared for these types of unexpected crises. However, how a

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Chapter 6 Management and Leadership in Today's Organizations 234

manager handles the situation could mean the difference between disaster, survival, and even financial gain.
No matter the crisis, there are some basic guidelines managers should follow to minimize negative outcomes.
Managers should not become immobilized by the problem or ignore it. Managers should face the problem
head on. Managers should always tell the truth about the situation and then put the best people on the job to
correct the problem. Managers should ask for help if they need it, and finally, managers mus t learn from the
experience to avoid the same problem in the future. 22 Table 6.6 describes what CEOs and other leaders
learned about crisis management.

Managers and Information Technology

The second trend having a major impact on managers is the proliferation of data and analytics in information
technology. An increasing number of organizations are selling technology, and an increasing number are
looking for cutting-edge technology to make and market the products and services they sell. One particularly
useful type of technology is dashboard software. Much like the dashboard in a car, dashboard software gives
managers a quick look into the relevant information they need to manage their companies. Most large
companies are organized in divisions, and often each division relies on a particular type of application or
database software. Dashboard software allows employees to access information from software they don’t
routinely use, for example, from an application used by a different division from their own. More important,
however, is the ability of a dashboard to show up-to-the-minute information and to allow employees to see all
the information they need—such as financial and performance data—on a single screen.

Lessons Leaders Learned about Managing Crises

Howard Learn from one crisis at a time. After the Seattle earthquake of 2001, the company
Schultz invested in a notification system that could handle text messaging. The night
Chairman, before Hurricane Katrina hit, Starbucks sent out 2,300 phone calls to associates in
Starbucks the region, telling them about available resources.

Gary Make life easier for your employees. Before the storm hit, management
Loveman announced that in the event of total entertainment disaster, employees would be
CEO, paid for at least 90 days. The decision was meant to provide employees with some
Harrah’s certainty during a very uncertain time.

J. W. Communicate for safety. Marriott moved its email system out of New Orleans
Marriott before Katrina hit. As a result, employees were able to communicate with each
CEO, other and vendors to get food and water to affected areas. A massive publicity
Marriott campaign (Dial 1-800-Marriott) helped the company find 2,500 of its 2,800 people in
the region.

Table 6.6 Sources: Danny Gavin, “Customer Service Lessons Learned in the Wake of Hurricane Harvey,” Forbes, September 26, 2017;
Jay Steinfeld, “5 Lessons Learned from Hurricane Harvey,” Inc., September 21, 2017; Susan Burns and David Hackett, “Business
Lessons from Hurricane Irma,” 941CEO, November-December 2017; “New Lessons to Learn,” Fortune, October 3, 2005, pp. 87–88;
AZQuotes, Accessed February 25, 2018, http://www.azquotes.com/quote/863856.

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Chapter 6 Management and Leadership in Today's Organizations 235

Lessons Leaders Learned about Managing Crises

Geno It's about doing it in a way that it can't be done any better. That is the goal every
Auriemma day.
University
of
Connecticut
Basketball
Coach

Danny “Create an unforgettable customer experience” may sound like a cliché, but this is
Gavin our golden rule. Despite waist-high water and treacherous conditions, we had
VP, Brian several international orders that needed to be shipped the Wednesday after
Gavin Hurricane Harvey hit. FedEx and UPS had ceased operations around the Houston
Diamonds area during the storm, but our CEO Brian Gavin was determined to deliver an
outstanding customer service experience. That’s why he drove with the packages
in hand to the nearest FedEx store that was open: College Station. The standard
three-hour round trip ended up taking five hours.

Bob Prepare for the next big one. After each catastrophic event, Home Depot does a
Nardelli postmortem on its response efforts so that employees and managers can become
CEO, Home more experienced and better prepared. Before Katrina hit, the company prestaged
Depot extra supplies and generators, sent 1,000 relief associates to work in the stores in
the Gulf Region, and made sure that area stores were overstocked with first-
response items such as insecticides, water, and home generators.

Scott Ford Take care of everybody. When Katrina hit, Alltel was missing 35 employees. When
CEO, Alltel the company had found all but one, managers used the company’s network
infrastructure to track her phone activity, contact the last person she had called,
and work with the army to find her.

Paul Empower the workforce. Gap had 1,300 employees affected by Katrina, and one of
Pressler the biggest problems the company faced was getting people their paychecks. The
CEO, Gap company, which had extended payroll by 30 days to affected employees, now
encourages all employees to use direct deposit as a means to ensure access to
their pay.

Jim Skinner Be flexible with company assets. McDonald’s had 280 restaurants close in the
CEO, immediate aftermath of the storm, but shortly afterward, 201 were already open.
McDonald’s During the crisis, McDonald’s converted its human resource service center into a
crisis command center. The quickly formed help center fielded 3,800 calls.

Table 6.6 Sources: Danny Gavin, “Customer Service Lessons Learned in the Wake of Hurricane Harvey,” Forbes, September 26, 2017;
Jay Steinfeld, “5 Lessons Learned from Hurricane Harvey,” Inc., September 21, 2017; Susan Burns and David Hackett, “Business
Lessons from Hurricane Irma,” 941CEO, November-December 2017; “New Lessons to Learn,” Fortune, October 3, 2005, pp. 87–88;
AZQuotes, Accessed February 25, 2018, http://www.azquotes.com/quote/863856.

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Chapter 6 Management and Leadership in Today's Organizations 236

Lessons Leaders Learned about Managing Crises

Robert With Hurricane Irma approaching, Baugh communicated with staff for several days
Baugh before the storm to prepare and to find out which employees would be evacuating,
COO, Chiles which would be staying, and which had special needs. The Chiles Group used Hot
Restaurants Schedules, a platform all employees log into, to create a timeline to secure all three
restaurants (since these restaurants have lots of outdoor seating and outdoor
bars, it was a huge chore) and to broadcast when the restaurants would reopen.
Team leaders were responsible for communicating with their members. Vendors
and chefs were told earlier in the week to reduce food orders to minimize loss.
Freezers and refrigerators were packed with hundreds of bags of ice.

Table 6.6 Sources: Danny Gavin, “Customer Service Lessons Learned in the Wake of Hurricane Harvey,” Forbes, September 26, 2017;
Jay Steinfeld, “5 Lessons Learned from Hurricane Harvey,” Inc., September 21, 2017; Susan Burns and David Hackett, “Business
Lessons from Hurricane Irma,” 941CEO, November-December 2017; “New Lessons to Learn,” Fortune, October 3, 2005, pp. 87–88;
AZQuotes, Accessed February 25, 2018, http://www.azquotes.com/quote/863856.

Such integrated functionality made dashboards extremely popular. A Gartner commentary suggests that
companies put data and analytics at the heart of every company business decision.23 Despite the increasing
popularity of dashboard technology, the control tool has some drawbacks, such as focusing too intently on
short-term results and ignoring the overall progress toward long-term goals. And some employees might
bristle at being monitored as closely as dashboard tools allow.

Nonetheless, companies are seeing real results from implementing dashboard software. Robert Romanoff, a
partner at the law firm of Levenfeld Romanoff in Chicago, uses dashboards that aggregate data from clients,
strategic partners, and internal staff from the mailroom to the boardroom to improve what he calls the 3 Ps. The
3 Ps are process efficiency, project management, and strategic pricing. 24

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Chapter 6 Management and Leadership in Today's Organizations 237

Exhibit 6.9 Marketing and sales professionals are increasingly turning to advanced software programs called
“dashboards” to monitor business and evaluate performance. These computer tools use analytics and big data to help
managers identify valuable customers, track sales, and align plans with company objectives—all in real time. A typical
dashboard might include sales and bookings forecasts, monthly close data, customer satisfaction data, and employee training
schedules. This example tracks customers attending the Consumer Electronics Show so that the buzz created by influencers
can be measured. How does information technology affect managerial decision-making? (Credit: Intel Free Press/ flickr/ Attribution
2.0 Generic (CC BY 2.0))

Managing Multinational Cultures

The increasing globalization of the world market has created a need for managers who have
global management skills, that is, the ability to operate in diverse cultural environments.
With more and more companies choosing to do business in multiple locations around the world,
employees are often required to learn the geography, language, and social customs of other
cultures. It is expensive to train employees for foreign assignments and pay their relocation
costs; therefore, choosing the right person for the job is especially important. Individuals who
are open minded, flexible, willing to try new things, and comfortable in a multicultural setting are
good candidates for international management positions.

As companies expand around the globe, managers will continue to face the challenges of
directing the behavior of employees around the world. They must recognize that because of
cultural differences, people respond to similar situations in very different ways. The burden,
therefore, falls on the manager to produce results while adapting to the differences among the
employees he or she manages.

How a manager gets results, wins respect, and leads employees varies greatly among countries,
cultures, and individuals. For example, different cultures have different approaches to time.
American, German, and Swiss cultures, among others, take a linear view of time, whereas

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Chapter 6 Management and Leadership in Today's Organizations 238

southern European counties such as Italy take a multi-active time approach, and many Eastern
cultures, such as China, take a cyclic approach. An American manager with a linear view of time
will approach scheduling planning with a different approach than colleagues with a multi-active
or cyclic approach.25 Despite differences such as these (examples of which can be cited for
every country in the world), managing within a different culture is only an extension of what
managers do every day: working with differences in employees, processes, and projects.

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