Lecture 1 27/7 – Introduction to Organisations and Management

What is an organisation?

- A deliberate arrangement of people to accomplish some specific purpose or goal

- Characteristics:
o Distinct purpose or goal
o Deliberate structure
o Size
o Industry
o Ownership type
o Location
o Physical environment
o Future orientated
o Exists independently of the people within them (‘go on’ when members change)

Organisations and management today

- Technological change – new products, new ways of doing things

- International division of labour
- Changing conception of time and space
- Changing demographics
- Increasing globalisation

Traditional Organisation New Contemporary Organisation

- Stable, inflexible - Dynamic, flexible
- Job focused - Skills focused
- Work defined by job positions - Work defined in terms of tasks to be
- Individual oriented done
- Permanent jobs - Team oriented
- Command and rule oriented - Temporary jobs
- Managers always make decisions - Involvement and customer oriented
- Relatively homogenous workplace - Employees participate in decision
- Workdays defined as 9 to 5 making
- Hierarchical relationships - Diverse workforce
- Work at organisational facility during - Workdays have no time boundaries
specific hours - Lateral and networked relationships
- Work anywhere and anytime, including
at suppliers and customers

Why managers are important

- Deal with changing expectations, new ways of organising work to achieve higher
performance
- 3 reasons:
o Key role in identifying critical issues, guiding organisation
o Critical to getting things done
o At the heart of the organisation (manager-employee relationship, manager-
customer relationship)
Managers

- Someone who coordinates and oversees the work of other people so that organisational
goals can be accomplished

- Managerial structure
o Not all organisations follow this structure:
o Top managers
 Responsible for making organisation-wide decisions
 Establish the goals and plans that affect entire organisation
o Middle managers
 Manage the work of first line managers
o First line managers
 Manage the work of non-managerial employees
o Non-managerial employees
 Involved directly with producing the organisation’s products
 Servicing the organisation’s customers
- Manager’s roles
o Coordinating/overseeing the other’s work activities so that they are completed
efficiently/effectively
o Efficiency: doing things right or getting the most output from the least amount of
inputs
o Effectiveness: doing the right things or completing activities so that the
organisational goals are attained
o Efficiency + effectiveness related
 Management strives for:
 High efficiency (low resource waste)
 High effectiveness (high goal attainment)
Functions, roles and skills of managers

- Management functions:
o Planning – set goals, develop plans
o Organising – determine what tasks are done, who does them
o Leading – lead groups, influence teams/individuals as they work
o Controlling – evaluation of performance
- Management roles: specific categories of managerial behaviour expected of an exhibited by
a manager
o Importance of roles is different at different levels of organisations
o Henry Mintzberg’s managerial roles
o Managers in these roles also use reflection (thoughtful thinking) and action (practical
doing)

Role Description Examples

Interpersonal: roles that involve people and other duties that are ceremonial and symbolic in
nature
Figurehead -Symbolic head -Greeting visitors
-Perform routine duties of -Signing legal documents
legal/social nature
Leader -responsible for motivation of -performing all activities that
subordinates involve subordinates
-responsible for staffing,
training
Liaison -maintains network of outside -external board work
contacts -performing other activities
that involve outsiders
Informational: roles that involve receiving, collecting and disseminating information
Monitor -seeks/receives internal and -reading reports, periodicals
external info to develop -maintaining personal contacts
thorough understanding of
organisation
Disseminator -transmits info received from -phone calls to relay info
outsiders to members of -holding informational
organisation meetings
Spokesperson -transmits info to outsiders on -holding board meetings
organisation’s plans, policies -giving info to media
Decisional: roles that revolve around making decisions
Entrepreneur -searches for opportunities for -organising strategy and
improvement review sessions to develop
new programs
Disturbance handler -responsible for corrective -organising strategy and
action when organisation faces review sessions that involve
unexpected disturbances disturbances and crises
Resource allocator -responsible for allocation of -requesting authorisation
resources, making or -budgeting
approving all significant
decisions
Negotiator -representing organisation at -participating in negotiation
major negotiations contracts
- Management skills
o Technical skills: knowledge/proficiency in specialised field
 More important for lower level managers – they manage employees who
are using the tools/techniques to produce the organisation’s products
 Robert L Katz – proposes that these skills become less important as a
manager moves into higher levels of management
o Human skills: ability to work well with other people individual and in groups
 Important for managers of all levels
 Need to be aware of own attitudes, assumptions, beliefs as well as being
sensitive to subordinate’s
 Good human skills = getting best out of others through motivation,
leadership, enthusiasm, trust
o Conceptual skills: ability to think/conceptualise about abstract and complex
situations
 Essential to effective decision making
 More important for top managers

o Other important managerial skills

Is the Manager’s job universal?

- Organisational level
o All managers make decisions
o Content of managerial functions changes with managers level
o As managers move up in organisation, they do more planning, less supervising
- Organisational area
o Roles different depending on organisation
o Some roles universally needed by managers (roles of leader, liaison, disturbance
handler)
- Organisational type
o Managers in non-profit organisations don’t face market test for financial performance
- Organisational size
o Small business – independently owned/operated, fewer than 20 employees
 Large impact on society
 96% of business market
 Manager’s role is spokesperson
 Meets customers, arranges finances with bankers
 Searching for new opportunities
 Structure – less complex and structured
o Large business
 1% of economy employing more than 200 people
 Manager’s role – resource allocator
 Entrepreneurial role less important

How is the manager’s job changing?

- Dealing with:
o Global economic and political uncertainties
o Changing workplaces
o Environmental concerns
o Security threats
o Corporate ethics
o Scandals
o Technological advancements
- Increased pressure to adhere to new regulations
- Need to balance work life and personal life of employees
- Becoming complex and demanding
- 4 significant changes to manager’s job:
o Importance of customers
 Employees attitudes/behaviour play big role
 Majority of employees work in service job
 High quality service is essential for success
o Importance of social media
 Businesses use social media to connect with customers, manage HR
 Check for incoming stock, communicating with head office
o Importance of innovation
 Need to innovate, take risks
  New ideas
o Importance of sustainability
 Corporate sustainability: widening corporate responsibility not only to
managing but to responding strategically to environmental and societal
challenges
 Meeting needs of people today without harming future generations

Value of studying management

- Universality of management: reality that management is needed in all types of organisations

- Managing yourself
o Increased emphasis on individual control and responsibility
- Reality of work
o You will either manage or be managed – need to build management skills
Lecture 2 3/8 – Foundations of Management Theory
Early examples of management practice

- Egyptian pyramids and Great Wall of China, employing tens of thousands of people
- 1776 – Adam Smith published classic economics doctrine “The Wealth of Nations”
o Argued the economic advantages that organisations and society would gain from the
division of labour (job specialisation)
- Industrial revolution – machine power was substituted for human power
o More economical to manufacture goods in factories than at home

Management theories

- 4 main approaches:
o Classical
o Quantitative
o Behavioural
o Contemporary

1) Classical approach - emphasised rationality, organisations and workers as efficient as possible

- Scientific management theory

o Rise of factory system of production
 Growth in number of employees
 Increased use of technology
 Rise of ‘corporations’ meaning owners didn’t work in the organisation
o Key features
 Specialisation of labour and production line
 Scientific methods to define ‘one best way for a job to be done’
o Frederick W. Taylor
 Concerned with only first line managers
 4 principles of scientific management
 Develop a science for each element of the job, with standardised
work implements and efficient methods for all to follow
 Scientifically select and train workers with skills and abilities that
match each job
 Ensure cooperation through incentives, and provide work
environment that reinforces optimal work results in scientific
manner
 Divide responsibility for managing and working, while supporting
individuals in work groups doing what they do best
 o Frank and Lillian Gilbreth
 Time and motion studies
 experimented with the design and use of the proper tools and equipment
for optimising work performance
 Therbligs- devised a classification scheme which allowed them to analyse a
worker’s exact hand movement
- General administrative theory
o Focused on what managers do and what constituted good management practice
o Henry Fayol
 Focused on all managers
 14 principles he believed were essential to increasing efficiency in
management process
 Articulated the 5 (now 4) managerial functions (what managers must do to
create high performing organisation)
 Planning – choosing appropriate goals
 Organising – designing processes/systems to achieve goals
 Command – selecting right employees for the job
 Co-coordinating – putting together work teams to ensure
production runs smoothly
 Controlling – measuring/monitoring to evaluate system

o Max Weber
 Bureaucracy – organisation formed by division of labour, a hierarchy, rules
and regulations and impersonal relationships
 Characteristics:
 Specialisation of labour
 Formal rules/procedures
 Impersonality
 Well-designed hierarchy
 Career advancement based on merit
 Structure for today’s large organisations
o General administrative theories use today
 Functional view of manager’s job – Fayol
 14 principles serve as a frame
 Bureaucracy – ideal prototype for organisations, but not as popular today
 Takes away creativity, and ability to respond quickly to increasingly
dynamic environments
2) Quantitative approach – use of quantitative techniques to improve decision making

- Involves statistics, information models, optimisation, computer simulations

- Total quality management (TQM) – philosophy of management driven by continual
improvement and responding to customer needs and expectations
o Focus on customer
o Focus on continual improvement
o Focus on process – quality of goods/services continually improved
- Uses today:
o Computer software programs – development of models, equations, formulas
o Contributes to planning (budgeting, scheduling, quality control)

3) Behavioural approach – focus on behaviour as mechanism to improve organisational performance

- Developed in response to scientific approaches

- Early advocates – all had belief that people were most important asset
o Robert Owen
o Hugo Munsterberg
o Mary Parker Follett
o Chester Barnard
- Hawthorne studies
o Provided insight into individual and group behaviour
o Examined effect of various illumination levels in the factory on worker productivity
o Conclusion:
 illumination intensity not directly related to group productivity
 social norms/group standards key determinants of individual work
behaviour
- Human relations movement
o Belief that satisfied worker will be productive
o Abraham Maslow and Douglas McGregor – these two were shaped more by
personal philosophies than research evidence
o Maslow’s Hierarchy of needs – people are motivated to achieve certain needs
(pyramid)
o McGregor’s Theory X and Theory Y
 - Behavioural science theorists
o psychologists and sociologists who relied on scientific method for the study of
Organisational behaviour
o developed research designs that could be replicated by other behavioural scientists
o kept personal beliefs out of their work
- Behavioural approach uses today
o Shapes how managers design motivating jobs
o Shapes how managers work with employee teams, how they communicate

4) Contemporary approach – looking at what is happening in external environment

- Emphasis on motivation, leadership, relationships

- Systems theory
o 2 systems:
 Closed system – system not influenced by and does not interact with its
environment
 Open system – interacts with the environment
o Managers coordinate the work activities of the various parts of the organisation,
they ensure that all these parts are working together
o Decisions and actions taken in one organisational area affects other
o Organisations rely on their environment for essential inputs and as outlets to absorb
their outputs
- Contingency theory – organisations are different, face different situations, need different
ways of managing
o No universal rule for managers to follow
o Popular contingency variables
 Organisation size (size increase, so does problems of coordination)
 Routineness of task technology (technology requires control systems,
structures leadership that differ from non-routine technologies)
 Environmental uncertainty (degree of uncertainty caused by environmental
changes influences management process)
 Individual differences (individuals differ in terms of their desire for growth,
autonomy, expectations etc)

Current trends and issues

- Globalisation
o Managers no longer constrained to national borders
o Work others who were born or raised in diverse cultures
 To work effectively – need to understand how their culture, geography and
religion have shaped their values, attitudes and beliefs  adjust
management styles
 Management practices should be modified to reflect values of different
countries
o Businesses can hire, source and sell whatever they want
- Ethics
o Organisations – active role in creating/using codes of ethics
 Providing ethics training programs, hiring ethics officers
o Ethical behaviour is not always carried out
- Workforce diversity
o Can be an asset – different perspectives and problem-solving methods
o Ageing population – creates challenges in workforce
o Challenge
 People don’t put aside their cultural values and lifestyle preferences when
they come to work
 So, managers need to make workplace accommodate diversity
- Entrepreneurship – individual or group uses organized efforts to pursue opportunities to
create value
o 3 themes:
 Pursuing opportunities
 Pursuing environmental trends and changes that no one else has
 Innovation
 Changing, revolutionising, transforming and introducing new
approaches
 Growth
 New and innovative product
 Innovative business systems or methods
- Learning organisations and knowledge management
o Learning organisations – organisations that have capacity to learn, adapt and change
o Knowledge management – cultivating learning culture where members gather
knowledge and share with others to achieve better performance
- Sustainability
o Increasing concern about the availability of water
o Need to have sustainable management practices put in place
o Sustainable management: organisations ensure their operations won’t harm the
future generations needs
o Sustainability assessed against:
 Environmental
 Social
 Economic
Lecture 3 10/8 – Communication
Communication

- The transfer of understanding and meaning

- No information/ideas conveyed = no communication taken place
- Meaning must be understood
- Managerial communication encompasses both:
o Interpersonal communication – communication between 2 or more people
o Organisational communication – networks/systems of communication within an
organisation

Functions of communication

- 4 functions:
1) Control – acts to control member behaviour
2) Motivation – encourages motivation by clarifying what needs to be done, how well it
is done and what can be improved
3) Emotional expression – provides release for emotional expression, fulfillment of
social needs
4) Information – provides information needed in organisation

Interpersonal communication

- 7 elements of communication process

1) Communication source
2) Message – purpose to be conveyed
o Can be symbols, written, oral, facial expressions
3) Encoding – converting message into symbols
o 4 conditions influence effectiveness of the encoded message
1. Skills
2. Attitude
3. Knowledge of sender (can’t communicate what we don’t understand)
4. Sociocultural system (beliefs and values)
4) Channel – medium
5) Decoding – retranslating a sender’s message
6) Receiver
7) Feedback
- Entire process susceptible to noise
o Disturbances that interfere with transmission, receipt of feedback of message
 Aural noise – can’t hear
 Visual distractions – colour presented differently
  Physiological noise – physical
 Psychological noise – attributions, stereotyping
 Stereotyping:
 Semantic noise – different interpretations of the same words

Linear vs transaction model

- Linear
o Linear model – noise along the channel
- Transaction
o Sender and receiver in constant engagement through the message, channels and
feedback
o Surrounded by noise
- Comparing the 2 models
o Transaction model extends what we know
 Participants overlapping fields of experience
 Acknowledge that communication occurs in both directions, simultaneously
 Recognises relationships
 Recognises context
 Communication channels include all our senses
 Extends definition of noise (barriers) e.g. aural, visual, physical,
physiological, semantic and overcoming them

Methods of interpersonal communication

o Face to face o Facebook o Presentations

o Meetings o Telephone o Fax machines
o Email o Memos
o Letter o Bulletin board

- 12 questions to help evaluate the various communication methods

1) Feedback – how quickly can receiver respond?
2) Complexity capacity – can method effectively process complex messages?
3) Breadth potential – how many different messages can be transmitted?
4) Confidentiality – are messages received only by those intended?
5) Encoding ease – easy/quick to use?
6) Decoding ease – easy/quick to decode?
7) Time-space constraint – do senders/receivers need to communicate at same time
and space?
8) Cost – how much does it cost?
9) Interpersonal warmth – is interpersonal warmth conveyed well?
10) Formality – does method have needed amount of formality?
11) Scanability – is message easily scanned or browsed for relevant information?
 12) Time of consumption – does sender/receiver exercise greater control over when to
deal with message?
- Non-verbal communication: communication transmitted without words
- Body language: gestures, facial expressions, other movements of body that convey meaning
- Verbal intonation: emphasis given to words or phrases that conveys meaning

Barriers to effective interpersonal communication

- Filtering – manipulation of information to make it appear better to the receiver

o Use of email reduces filtering
- Emotions – how receiver feels when receiving message influences how they interpret it
- Information overload – too much information, exceeding processing capacity
o Individual tends to selectively choose info, or stop communicating
o Results in lost info, less effective communication
- Defensiveness
- Language
o Age, education, cultural background influences language and definitions they give to
words
o Jargon
- National culture
o Interpersonal communication is not conducted the same way around the world

Overcoming barriers

- Feedback
o Good feedback – more than a yes/no answer
o Watch for non-verbal cues that convey that receiver does not understand
- Simplify language
o Written communication (sentence construction, flow, logic)
- Listen actively
o Active listening: listening without making premature judgements/interpretations
 Do not over talk
 Show empathy
 Show interest by making eye contact
 Ask questions
 Avoid distracting actions/gestures
 Avoid interrupting
- Constrain emotions
o Don’t communicate until they have calmed down
Organisational communication

- Formal vs informal communication

o Formal: communication that follows a chain of command (manager asks employee
to complete a task)
o Informal: communication not defined by structural hierarchy (employees talk to
each other as they pass in hallways)
 2 purposes of informal communication:
 Social interaction
 Improve performance by creating alternative/faster and more
efficient channels of communication
- Direction of communication flow
o Downward – communication that flows downwards from a manager to employees
 Town hall meeting – informal public meetings where information is
replayed, issues are discussed
 Used to inform, direct, evaluate employees
o Upward – communication that flows upward from employees to managers
 Managers are kept aware of how employees feel about their jobs
 Through surveys, suggestion boxes, discussions
o Lateral – takes place between any employees on the same organisational level
 Can create conflict if employees don’t keep managers informed about the
decisions they have made
o Diagonal – communication that cuts across both work areas and organisational
levels
 Problems if employees don’t keep their managers informed
- Communication networks
o Chain network – communication flows to the formal chain of command, downwards
and upwards
o Wheel network – represents communication flowing between a clearly identifiable
leader and others in a work group/team
o All channel network – communication flows freely among members
o Network chosen depends on the goal of the team

o Grapevine: informal organisational communication network

 Identifies issues employees consider important
 Acts as filter and feedback mechanism
Workplace design and communication

- Should successfully support 4 types of employee work:

o Focused work – an employee needs to concentrate on completing a task
o Collaboration – work together to complete a task
o Learning – employees are engaged in training involving both focused work and
collaboration
o Socialisation – informal gathering of employees to chat or exchange ideas
- Design elements
o Open workplaces – few physical barriers and enclosures
 More communication, visibility, high density, but less privacy
o Adjustable work arrangements, equipment, furnishings

How IT affects managerial communication

- Improved managers ability to monitor individual/team performance

- Faster decisions
- Access to information anywhere
- Networked systems
o Organisation’s computers are linked
- Wireless capabilities
o To collaborate and share information

How IT affects organisations

- Communications/exchange of information is no longer constrained by geography or time

- Increase organisational effectiveness through collaborative works, sharing info
- Setbacks:
o What is the psychological cost of an employee being constantly accessible?
o Will there be increased pressure for employees to check in even during their off
hours?
o How important is it for employees to separate work lives and personal lives?

Communication issues in today’s organisations

- Legal and security issues

o Need to ensure information is kept confidential
o Computers should be protected against hackers and spam
o Potential legal problems from inappropriate usage
o Harassment through emails
- Personal interaction
o Lack of personal interaction – hard to understand meaning on internet
o Cyberbullying

Managing organisation’s knowledge sources

- Build online information databases – employees can access and share knowledge
- Create communities of practice – groups of people who share a concern or passion about a
topic who can deepen their knowledge/expertise in that area by interacting
Communication in customer service

- 3 components in customer delivery process

o Customer
 Values taking care of customer
 Personalisation
 Service provision
o Service organisation
o Individual service provider
 Must listen actively and communicate appropriately
 Make sure they have the information to deal with customers
efficiently/effectively

Employee input

- Employees may have new ideas and ways of reducing costs, improving methods
- Suggestion box

Communicating ethically

- Ethical communication: communication that includes all relevant information, that is not
deceptive
- Unethical communication – distorts truth, manipulates information
- Unethical behaviour
o Omitting essential information
o Plagiarism
o Selective misquoting, misrepresenting numbers, distorting visuals
o Failing to respect privacy
- Encouraging ethical communication
o Establish clear guidelines
 Has the situation been define fairly and accurately?
 Why is the message being communicated?
 How will people who may be affected by the message or who will receive
the message be impacted?
 Does the message help receive the greatest possible good while minimising
possible harm?
 Will this decision that appears to be ethical no seem so in the future?
 How comfortable are you with your communication effort? What would a
person you admire think of it?
Lecture 4 17/8 – Personality, Perception and Attitudes
Personality

- The unique combination of psychological characteristics (measurable traits) that affect how
a person reacts and interacts with others
- Many ways to identify/ classify personality: The Big 5 Model, Myers-Briggs Type Indicator
(MBTI)

MBTI

Big 5 personality measures

Extroversion Sociable
Gregarious (fond of company)
Assertive
Talkative
Expressive
Adjustment Emotionally stable
Non-depressed
Secure
content
Agreeableness Courteous
Trusting
Good-natured
Tolerant
Cooperative
Forgiving
Conscientiousness Dependable
Organised
Persevering
Thorough
Achievement orientated
Inquisitiveness Curious
Imaginative
Artistically sensitive
Broad-minded
Playful
5 dimensions of personality

1) Locus of control (external/internal)

o External locus: persons who believe that what happens to them is due to luck or
chance (the uncontrollable)
o Internal locus: persons who believe that they control their own destiny
2) Machiavellianism (high/low)
o The degree to which an individual is pragmatic, maintains emotional distance, and
seeks to gain and manipulate power – “the ends justify the means”
3) Self-esteem (high/low)
o The degree to which people like or dislike themselves
4) Self-monitoring (high/low)
o An individual’s ability to adjust his or her behaviour to external, situational factors
o High
 Are sensitive to external cues an behave differently in different situations
 Can present contradictory public personal and private selves
o Low
 Do not adjust their behaviour to the situation
 Are behaviourally consistent in public and private
5) Risk-taking (high/low)
o The willingness to take risks

Perception

- A process by which individuals give meaning (reality) to their environment by organising and
interpreting their sensory impressions
- Factors influencing perception:
o Perceiver’s personal characteristics (interests, biases and expectations)
o Target’s characteristics (distinctiveness, contrast, and similarity)
o Situation factors (context) i.e. place, time, location draw attention or distract from
the target

Attribution theory

- How the actions of individuals are perceived by others depends on what meaning we
attribute to a given behaviour
o Internally caused behaviour: under the individual’s control
o Externally caused behaviour: due to outside factors
- Determining the source of behaviours
o Distinctiveness: different behaviours in different situations
o Consensus: behaviours similar to others in same situation
o Consistency: regularity of the same behaviour
- Research finds that there are errors or biases that distort attributions:
1) Fundamental attribution error:
Tendency to underestimate the influence of external factors and overestimating the
influence of internal factors when judging others
2) Self-serving bias:
Tendency to attribute own successes to internal factors (good exam result – IQ) while
putting the blame for failures on external factors (bad exam result – marker)
Important employee behaviours

- Employee productivity: A performance measure of both efficiency and effectiveness

- Job satisfaction: The individual’s general attitude toward his or her job
- Reduced absenteeism: The failure to report to work when expected
- Reduced turnover: The voluntary and involuntary permanent withdrawal from an
organisation
- Organisational citizenship behaviour (OCB): Discretionary behaviour that is not a part of an
employee’s formal job requirements, but which promotes the effective functioning of the
organisation

Attitudes

- Evaluate statements – either favourable or unfavourable – concerning objects, people or

events
- Components of an attitude
o Cognitive component: the beliefs, opinions, knowledge, or information held by a
person
o Affective component: the emotional or feeling part of an attitude
o Behavioural component: the intention to behave in a certain way

Job Satisfaction

- The individual’s general attitude towards his or her job

- Affected by level of income earning and by the type of job a worker does
- Job satisfaction and productivity (2 perspectives – employee and employer)
- Job satisfaction and absenteeism (2 perspectives – employee and employer)
o Satisfied employees tend to have lower levels of absenteeism
- Job satisfaction and turnover (2 perspectives – employee and employer)
o Satisfied employees have lower levels of turnover: dissatisfied employees have
higher levels of turnover (and also affect other employees’ attitude)
o Turnover is affected by the level of employee performance
o The preferential treatment afforded superior employees makes satisfaction less
important in predicting their turnover decisions
- Job satisfaction and customer satisfaction (3 perspectives – employee, employer and
customer)
o Level of job satisfaction for frontline employees is related to increased customer
satisfaction and loyalty
o Actions to increase job satisfaction for customer service workers:
 Hire upbeat and friendly employees
 Reward superior customer service
 Provide positive work climate
 Use attitude surveys to track employee satisfaction
 Interaction with dissatisfied customers can increase an employee’s job
dissatisfaction
More job-related attitudes

- Job involvement
o The degree to which an employee identifies with his or her job, actively participates
in it, and considers his or her performance to be important to his or her self-worth
- Organisational commitment (3)
o The degree to which an employee identifies with a organisation and its goals and
wishes to maintain membership in the organisation
 Affective commitment: defined as the employee's positive emotional
attachment to the organization
 Continuance commitment: degree that you stay with the organization
because you believe you must stay (fear of loss when leaving)
 Normative commitment: refers to employees' perceptions of their
obligation to their organization
- Cognitive dissonance
o Any incompatibility or inconsistency between attitudes or between behaviour and
attitudes
o Any form of inconsistency is uncomfortable and individuals will try to reduce the
dissonance
o Intensity of the desire to reduce the dissonance is influenced by:
 The importance of the factors creating the dissonance
 The degree to which an individual believes that the factors causing the
dissonance are controllable
 Rewards available to compensate for the dissonance
Lecture 5 24/8 – Groups and Teams
Groups and teams – why we use them in the workplace

- Individuals: behave differently in groups than they do alone

- Teams: have been linked to increased employee motivation and employee control resulting
in higher job satisfaction
- Managers: important for them to understand group behaviour for them to be effective
managers

Group

- two or more interdependent individuals interacting and who come together to achieve a
specific goal

Teams

- members who have complementary skills, have commitment to a common purpose,

perform interdependent tasks, and hold one another mutually accountable for the team’s
performance.

The level of interdependence is the critical difference between a group and a team

How do groups develop?

- Various stages of development: group effectiveness changes as they progress through the
stages
- Not always progressing through the stages sequentially (can skip stages or regress)
- The general framework for dynamic entities has 5 stages:
o Forming: people join group, get acquainted, and define its purpose
o Storming: Promotion of self begins. Conflicts may emerge and battles for power and
influence may arise. Stage characterised by intragroup conflict
o Norming: Codes of behaviour merge (what is and not acceptable), roles are clarified,
and task-related behaviours evolve
o Performing: Group is fully functional shares honest communication and trust
o Adjourning: Wrapping-up, dissolution or break-up of team
Why are some groups more successful than others?

Group performance/ satisfaction model – determines whether groups perform well and are satisfied

External conditions imposed on the group

(deadlines, political position)

Group member resources Group Structure

(what characteristics each team member have
that benefit the team)
Roles: Behaviour pattern expected of someone
who occupies a given position in a social unit
- Task related role
- Maintenance related role
- Self-orientated role
Norms
Conformity and Groupthink
Status systems
Group size:
- Between 5-6 members usually best size
for taking effective action
- Social loafing: tendency for individuals
to expend less effort when working
collectively than when working
individually

Group processes
(processes that go on within group (communication, decision-making, conflict-management)
Group decision-making: most decisions in organisations are made by groups
- Advantages: more complete information, diverse alternatives, increases acceptance of
solution and legitimacy
- Disadvantages: more time consuming, risk minority domination, ambitious responsibility
Conflict Management: Different views on conflict in general – tradition view, human relations
view, and interactionist view
Different types of conflict (3): task conflict, relationship conflict, process conflict
- Relationship conflict almost always bad, but low to moderate levels of process and task
conflict can be functional
Conflict management options: avoidance, accommodation, forcing, compromise, collaboration

Group Tasks
Task vary based on how complex and interdependent they are

Performance and Satisfaction

Designing/managing more effective teams

Type of work teams

- Problem solving team: designed to improve work activities or solve specific problem
- Self-managed work team: operates without a manager and responsible for complete work
process
- Cross-functional team: composed of individuals from various specialities
- Virtual team: team that is physically dispersed and used technology to achieve goals

Turning groups into effective teams

- Creating effective work teams:

o Clear goals
o Relevant skills
o Mutual trust
o Unified commitment
o Good communication
o Negotiation skills
o Appropriate leadership
o Internal and external support
- Managing work teams:
o Planning
o Organising
o Leading
o Controlling

Current challenges in managing work teams

- Challenges of managing global work teams

- Building team skills
- Understanding social networks:
o Pattern of informal connections among individuals within group (or organisation)
Lecture 6 31/8 – Decision Making
How do we make decisions?

8 steps:

- Identifying the Problem: Need to pinpoint problems that require a decision

- Identification of Decision: Making Criteria: Determine criteria relevant in decision-making
- Allocation of Weights to Criteria: Weight decision criteria to give correct priority to decision
- Development of Alternatives: List viable alternatives that could resolve the problem
- Analysis of Alternatives: Critically analyse each decision alternative
- Selection of Alternatives: Choose best alternative among those considered
- Implementation of Alternatives: Put decision into action
- Evaluating Decision Effectiveness: Evaluate outcome to see if problem has been resolved

Factors which influence managerial decision-making (4)

- No two decisions are alike (types of decisions and decision-making style of managers vary
widely)  most managers try to make rational decisions but efforts are hampered by
bounded rationality and incomplete information
- 4 factors:
o Decision Rationality
 Rationality, but managers are limited by bounded rationality, a simplified
decision-making process due to limited processing capacity
 Satisficing: a decision-making strategy that is not exhaustive but produces a
result that is ‘good enough’
 Escalation of commitment: increased commitment to previous decision
despite evidence that decision may be wrong
o Types of Decisions
 Well- structured, programmed decisions: familiar and easily define problems
 Unstructured, non-programmed decisions: New or unusual problems with
incomplete data
o Decision-Making styles
 Linear thinking style
 Non-linear thinking style: preference for internal sources of information and
using internal insights and feelings
o Decision-Making Biases and Errors (12)
 Overconfidence bias: when tend to think they know more than they do or
hold unrealistically positive views of themselves and their performance
 Immediate gratification bias: make decisions that are not necessarily in the
best interest for yourself or other people, but for an immediate benefit.
Decision choices that provide quick payoffs are more appealing than those
in the future
 Anchoring effect: cognitive bias that describes the common human
tendency to rely too heavily on the first piece of information offered when
making decisions. Individuals use an initial piece of information to make
subsequent judgments.
 Selective perception bias: when people selectively organise, and interpret
events based on their biased perceptions. This influences the information
they pay attention to.
  Confirmation bias: the tendency to seek out information that reaffirms their
existing beliefs or theories and discount information that contradicts the
past judgments
 Framing bias: when people select certain aspects or a situation while
excluding others, distorting what they see
 Availability bias: when people tend to remember events that are the most
recent and vivid in their memory
 Representation bias: when people assess the likelihood of an event based on
how closely it resembles other events
 Randomness bias: when people try to create meaning out of random events
 Sunk cost error: when people forget that current choices cannot correct the
past. They focus incorrectly on past choices rather than future consequences
 Self-serving bias: people who are quick to take credit for their successes and
to blame failure on outside factors
 Hindsight bias: tendency for people to falsely believe that they would have
accurately predicted the outcome of an event once that outcome is known

How can we make more effective decisions?

5 strategies:

- Awareness of decision biases

- Understand cultural differences: Best decision depends on the values, beliefs, attitudes and
behavioural patterns of the people involved
- Create standards for good decision-making: Good decisions are forward-looking, use
available information, consider all available and viable options and do not create conflicts of
interest
- Know when it is time to call it quits: Decision makers can block or distort negative
information because they do not want to believe that their decision was bad
- Use effect decision-making processes: an effect decision-making process has these six
characteristics:
1) Focuses on what is important
2) Is logical and consistent
3) Acknowledges both subjective and objective thinking an blends analytical with
intuitive thinking
4) Requires only as much information and analysis as is necessary to resolve a
dilemma
5) Encourages and guides the gathering of relevant information an informed
opinion
6) Is straightforward, reliable, easy to use and flexible
Lecture 7 7/9 – Leadership
Leader: someone who can influence others and has managerial authority

- Many definitions of leaderships, many ways to lead – no ‘one best’ leadership style
- 3 major themes/theories of leadership:
o Personal characteristics and traits
o Leader behaviours
o Leadership in organisational context (environment)

Personal characteristics and traits

Trait theories assume that ‘leaders are born’

- Search for universal set of traits that differentiate good leaders has been mostly
unsuccessful
- Traits associated:
o Drive
o Desire to lead
o Honesty & integrity
o Self-confidence
o Intelligence
o Job-relevant knowledge
o Extraversion
- Charismatic-visionary leadership
o Charismatic leadership: enthusiastic, self-confident leader whose personality and
actions influence people to perform
o Visionary leadership: leader who creates and articulates a realistic, credible and
attractive vision for the future

Leader behaviours

Behavioural theories assume that ‘leaders are made, not born’

- Search for universal behaviours that differentiate good leaders has also been largely
unsuccessful
- Traits associated: same as above
- Iowa studies – 3 styles of leadership:
o Autocratic style: leader who centralises authority, dictates work methods and makes
decisions unilaterally
o Democratic style: leader who involves employees in decision-making, delegates
authority, encourages participation, and elicits feedback
o Laissez-faire style: leader who gives employees complete freedom to make decisions
and complete work
- Michigan studies:
o Production orientation: emphasis on task aspects of the job
o People orientation: emphasis on interpersonal relationships and need of followers
- Ohio studies:
o Initiating structure: extent to which leader define and structure everyone’s role in
search of goal attainment
 o Consideration: extent to which leader has job relationships characteristics by mutual
trusted respect
o High-high leader: leader high in both initiating structure and consideration
behaviours

Leadership in organisational context (environment)

3 contingency theories of leadership suggest that certain leadership styles are most effective
depending on specific situations and should be adopted to context

- Fiedler contingency model:

o Relationship-oriented or task-orientated styles – the match of these styles to
followers determines whether group is effective or not
- Hersey situational leadership model:
o Leadership style needs to be matched to follower readiness
 Telling: high task – low relationship; followers are unable and unwilling
 Selling: high task – high relationship; followers are unable but willing
 Participating: low task – high relationship; followers are able but unwilling
 Delegating: low task – low relationship; followers are able and willing
- Path-goal theory (by Robert House):
o Leader assists followers in attaining their goals and provides direction and support
during goal-setting and goal attainment process – can display any/all of styles
 Directive leader: clarifies expectations and gives specific guidance about
accomplishing tasks
 Supportive leader: shows concern for needs of followers
 Participative leader: consults with group members and uses their
suggestions before making a decision
 Achievement-oriented leader: sets challenging goals and expects followers
to perform at their highest level
o Directive = initiating structure, other 3 = consideration

Transformational-Transactional leadership

- Transformational leaders: stimulate and inspire followers to achieve extraordinary outcomes

- Transactional leaders: guide by using mostly social exchanges

Leadership and Power

- Sources of Leader power:

o Legitimate power (from authority)
o Coercive power (from ability to punish or control)
o Reward power (from ability to give rewards)
o Expert power (from influence based on expertise/knowledge)
o Referent power (power that arises b/c of a person’s desirable traits)

Becoming a more effective leader

- Leadership training:
o On-the-job experience
o Self-reflection
o Experimentation and practice
 o Coaching
- Cross-cultural leadership
o Culture can be an important variable in leadership, although some leadership
behaviours seem to be universal
- Gender differences in leadership
o Males and females tend to engage in different leadership styles, although
effectiveness may not differ greatly
Lecture 8 14/9 – Human Resources Management
Importance of Human Resources Management

- Success of companies relies on recruiting, developing and retaining competent employees

- Source of competitive advantage
- Important part of organisational strategy
- High-performing work practices impact organisational performance
o Self-managed teams
o Decentralised decision-making
o Training
o Flexible job assignments and job autonomy
o Open communication and access to information
o Performance-based compensation
o Staffing based on person-job and person-organisation fit
o Employee involvement

Identifying and selecting competent employees

- Human resource planning

o Job analysis: process of gathering information related to the specific job
o Job description: statement of what job holder does and how job is done
o Job specification: statement of what minimum qualifications person must possess to
perform job
- Recruitment
o Internal searches (if in a large company), advertisements, employee referrals,
employment agencies, university recruitment, temporary help, intern
- Decruitment
o Resignation, dismissal, redundancy (job no longer needed), redeployment
(assignment to a new place/task), lay-off (dismissal, but not permanent), attrition
(not filling opening created by voluntary resignations or normal retirements),
reduced work-week, early retirement, job sharing
- Selection
o Application forms
o Written tests
o Performance-simulation tests
o Interviews
o Background investigations
o Physical examinations
- Realistic job preview
o Preview of the job that provides both positive and negative information about
job/company – employee knows what they are signing up for
Employee skills

- Need to equip new employee with necessary skills and knowledge to ensure a high-
performance workplace
o Orientation/ onboarding
o Employee training:
 On-the-job
 Job rotation (effective for training employees in various areas, stops them
from being bored)
 Mentoring and coaching
 Experiential exercises
 Workbooks/manuals
 Classroom lectures
 Multimedia/eLearning

How to retain high-performing employees

- Performance management
o Written essays
 + simple to use
 - may be better measure of evaluator’s writing ability than employee’s
actual performance
o Critical incidents: evaluator focuses on critical behaviours that separate effective
and ineffective performance
 + rich examples, behaviourally based
 - time consuming, lacks quantification
o Rating scales
 + provides quantitative data, not time consuming
 - does not provide in-depth information on job behaviour
o Management by objectives (MBO): evaluated on how well they accomplish specific
goals
 + focuses on specific and measurable job behaviours
 - time consuming, difficult to develop
o 360° appraisal: utilises feedback from supervisors, employees and co-workers
 + thorough
 - time consuming
- Feedback
o Developmental feedback
 Establish goals and objectives
 Clarify roles
 Celebrate achievements
 Focus on specific, controllable behaviours
 Separate behaviours from person
o Appraisal feedback
 Documents performance
 Pay, promotion, demotion, dismissal, bonus decisions
 Succession planning
 Grievances
 - Compensation and benefits
o Skill-based pay: rewards employees for job skills
o Variable pay: rewards employees for performance
- Career development

Human resource challenges that are important moving forward

- Managing diversity
- Managing sexual harassment
- Managing work-life balance
- Economic effects and industrial regulations
- Demographic trends
Lecture 9 21/9 – Strategic Management
STRATEGIC MANAGEMENT IMPORTANCE

- Strategy: direction in which an organisation intends to move and creation of a path by which
it intends to get there
- Strategic management
o The set of managerial decisions and actions that determines the long-run
performance of an organisation
o A process or approach to addressing the competitive challenges faced by an
organisation
o Can be thought of as managing the ‘pattern or plan that integrates an organisation’s
major goals, policies and action sequences into a cohesive whole’ (Quinn, 1980)

Planning Organising Leading Controlling

- Defining goals - Determining - Directing and - Monitoring
- Establishing what needs to motivating all activities to Leads to:
strategy be done involved ensure that they Achieving the
- Developing - How it will be parties are accomplished organisation’s
subplans to done - Resolving as planned stated purpose
coordinate - Who is to do it conflicts
activities

Importance:

- Strategy may lead to higher organisational performance

- Strategy helps coordinate diverse organisational units, helping them focus on organisational
goals
- Strategy development requires an examination of internal organisational characteristics and
external environment changes

Strategy – decisions about competition

- Where to compete?
o In what market(s) (industries, products etc) will we compete?
- How to compete?
o On what criterion or differentiating characteristic(s) will we compete?
o Cost? Quality? Innovation?
- With what will we compete?
o What resources will allow us to beat our competition?
o How will we acquire, develop and deploy those resources to compete?
Levels of organisational strategy

- Corporate-level strategies
o Top management’s overall plan for the entire organisation and its strategic business
units
- Business-level strategy
o A strategy that seeks to determine how an organisation should compete in each of
its strategic business units (SBUs)
- Functional-level strategy
o A strategy that seeks to determine how to support the business-level strategy

Corporate-level strategies

a) Growth strategy
- Seeking to increase the organisation’s business by expansion into new products and
markets
o Internal growth strategies
o External growth strategies
- Types of growth strategies
o Concentration
o Vertical integration
o Horizontal integration
o Related diversification
o Unrelated diversification
b) Stability strategy
- Strategy seeks to maintain the status quo to deal with the uncertainty of a dynamic
environment or when the industry is experiencing little growth
c) Renewal strategies
- Developing strategies to counter organisational weaknesses that are leading to
performance declines
o Retrenchment: focusing of eliminating non-critical weaknesses and restoring
strengths to overcome current performance problems
o Turnaround: addressing critical long-term performance problems through
the use of strong cost elimination measures and large-scale organisational
restructuring solutions
STRATEGIC MANAGEMENT PROCESS (6 steps)

1) Identifying the organisation’s current mission, goals and strategies

- Mission: a statement of the organisation’s purpose
o The scope of its products and services

- Goals: the foundation for further planning

o What an organisation hopes to achieve in medium/long-term future
o Measurable performance targets
2) External analysis (SWOT analysis – strengths, weaknesses, opportunities, threats)
- Analysis of the industry environment
o E.g. resource suppliers, competitors, customers
- Examining organisation’s operating external environment to identify:
o Opportunities
o Threats
- E.g. what the competition is doing, what pending legislation might affect the
organisation, what the labour supply is like in locations where it operates
- Components of the external environment
o Specific environment: external forces that have a direct and immediate
impact on the organisation
o General environment: broad economic, socio-cultural, legal, political,
demographic, technological, and global conditions that may affect the
organisation

- Environmental uncertainty: degree of change and complexity in an organisation’s

environment
o The extent to which managers have knowledge of and can predict change in
the external environment affected by:
 Change: how dynamic vs. stable the external environment is
 Complexity: simple vs. complex - refers to the number of
components in an organisation’s external environment and
knowledge about them
 A highly uncertain environment is not necessarily a bad
thing (can be hard to adapt), but if company is able to adapt
and change in response, the company can be able to build a
level of flexibility
3) Internal analysis (SWOT analysis – strengths, weaknesses, opportunities, threats)
- Examining organisation’s strengths and weaknesses
o Strengths: creates value for the customer, strengthens competitive position
of the firm
o Weaknesses: place the firm at competitive disadvantage
- Provides valuable information about specific
o resources that are used to develop, manufacture and deliver
products/services to customers
 tangible resources: easy to quantify (has financial value), can view
them
 intangible resources: non-financial e.g. brand name, patents,
trademarks, expertise
o capabilities (skills, abilities)
- Core competencies: are the major value-creating capabilities and skills of the
organisation
- Competitive advantage: an organisation’s distinctive competitive edge that is
sourced and sustained in its core competencies
- Sustainable competitive advantage: an ongoing ability to exploit resources and
develop core competencies that allows an organisation to maintain a continual edge
over its competitors
o Valuable
o Rare
o Imperfectly imitable
o Non-substitutable
- Analysis of industry environment
o E.g. resource suppliers, competitors, customers
o Incrementalism – managers learn from experience and make incremental
adjustments
o Emergent strategies – develops over time where managers make decisions
as they learn from and respond to work situations

4) Formulating Strategies
- Match organisational strengths to environmental opportunities
- Correct weaknesses and guard against threats
- 3 main types of strategies:
o Corporate – determines what business a company wants to be in
o Competitive – how will it compete in its businesses
o Functional – how to support the competitive strategy
5) Implementing strategies

Cost reduction

Workforce needs: HR implications:

- Repetitive and predicable behaviour
- Short term, results orientated focus
- Individual activity
- Primary concern for quantity
- Low-risk taking
- Tolerance of stability
- Low wage levels, use of part time/casual
employees
- Work simplification- explicit job
descriptions
- Less investment in people
- Labour mobility
- Encourage specialisation
- Minimal training

Innovation

Workforce needs: HR implications:

- Creativity
- Longer team group based focus
- Cooperative, interdependent behaviour
- Greater degree of risk taking
- Higher tolerance for ambiguity and
uncertainty
- Selecting high skill employees
- Employee autonomy
- Investment in people
- Resources to experiment
- Allowing failure
- Rewarding for longer-term results
- Broader career paths
- Low pay, incentive extra
- Expenditure on training and development

Quality enhancement

Workforce needs: HR implications:

- Reliable behaviour - Fewer employees (but high commitment)
- Long term focus - High skilled and broadly skilled
- Cooperative - Employee involvement
- High concern for quality, moderate for - Job security
quantity - Communication processes
- High concern for process - Individual and group criteria for
- Minimal risk taking performance management
- Commitment to organisational goals
 6) Evaluating results
- Take steps to adjust strategies if needed
- Influence of managers
o Omnipotent view of management
 Managers are responsible for success/failure
 Quality of organisation = quality of managers
 Managers held accountable for organisation’s performance
o Symbolic view of management
 Success or failure is because of external forces outside of managers
control
 Ability of managers to affect outcomes is influenced and constrained
by external factors – economy, customers, competitors, technology,
industry conditions, actions of previous managers
 Managers symbolise control and influence through their action

Corporate strategies

- Top managements plan for the entire organisation and its strategic business units (SBU’s)
- Based on mission and goals
- 3 main types:
o Growth strategy
o Stability strategy
o Renewal strategy

Growth

- Expanding to new products and markets

o Internal growth strategies
o External growth strategies
- Types of growth strategies (5):
o Concentration – e.g. company making vegemite the same without innovation
(keeping the same recipe)
o Vertical integration:
 Backwards vertical integration: moving away from the customer and
purchasing the suppliers
 Forwards vertical integration: moving forwards towards the customer e.g.
purchasing retail dealerships
o Horizontal integration – move horizontally across the industry e.g. purchasing
competitors
o Related diversification – servicing the same customer need
o Unrelated diversification – not in the same industry – only do this if the industry is
dying and another industry is booming

Stability

- Maintaining the status quo to deal with the uncertainty of a dynamic environment or when
the industry is experiencing little growth
- Industry may be facing slow or no growth opportunities
Renewal

- Developing strategies that look at weaknesses that are leading to declines

o Retrenchment: focusing on eliminating weakness and restoring strengths to
overcome current performance problems
o Turnaround: looking at long-term performance problems using strong cost
elimination measures and large scale organisational restructuring solutions
 Managers can do 2 things:
 Cut costs
 Restructure organisational operations

Management of corporate strategies

BCG matrix – corporate portfolio analysis

- Classifies firms as:

o Cash cows: low growth rate, high market share
 Dominate position; low growth industry
 Stability or modest growth strategy
o Stars: high growth rate, high market share
 Dominate position; growing industry
 Growth strategy
o Question marks: high growth rate, low market share
 Poor position; growing industry
 Growth or retrenchment strategy
o Dogs: low growth rate, low market share
 Poor position; low-growth industry
 Retrenchment strategy
Competitive strategies

- Competitive strategy: strategy for how an organisation will compete in it’s business
- Strategic business units (SBU’s) – single businesses of an organisation that have their own
strategies

Role of competitive advantage

- Comes from core competencies

- Qualities of a competitive advantaged organisation
o Apply quality management concepts
o Focuses on customers and continuous improvements
o Helps differentiate businesses
o Need to have a sustaining competitive advantage to maintain edge over its
competitors

Porter’s Five Forces model

- Explains how managers can create/sustain a competitive advantage

- 5 factors are:
o Threat to new entrants
o Threat of substitutes
o Bargaining power of buyers
o Bargaining powers of suppliers
o Existing rivalry

Porter’s 3 competitive strategies

- Cost leadership strategy:

o Competing based on having the lowest costs in the industry
- Differentiation strategy:
o Competing based on having unique products that are widely valued buy customers
- Focus strategy
o Competing in a narrow segment with either a cost advantage of a differentiation
advantage
 Focused differentiation strategy
 Focused cost leadership strategy

Miles and Snow

- Prospector:
o Continually search for market opportunities
o Experiment with responses to emerging environmental trends
- Defender:
o Focus on narrow product-market domains
o Need to be experts in the limited area
- Analyser:
o Operate in 2 types of product-market domains, one stable, other changing
- Reactor:
o Managers see change and uncertainty occurring but are unable to respond
effectively
Current strategic management issues

- Economic uncertainty
- Intense competition
- Global competition
- High performance expectation by investors and customers
- Extent to which managers have knowledge of and can predict change is affected by:
o Change
o Complexity
- Managers face 3 current strategic management issues
1) Strategic leadership
 Ability to anticipate, envision, maintain flexibility, think strategically and
work with others to initiate changes that will create a viable/valuable future
2) Strategic flexibility
 Ability to recognise major external environmental changes, to recognise
when a strategic decision is not working
3) Important types of strategies for today’s environment
External factors can affect performance (specific and general environment)
 Sustainability strategies
 Can use sustainability strategies to develop competitive advantage
 Can open up new avenues for new markets
 Innovation strategies
 Can include already existing technologies
 Managers need to decide where the emphasis of their innovation
efforts will be
 Many organisations take existing technologies and improve it
 First mover – organisation that first brings a product innovation to
the market to use a new process innovation
 Customer service strategies
 Companies that emphasis customer service = top to bottom
 Important to give the customer what they want
 E-business strategies
 Helps competitive advantage
 Cost leader = uses e-business techniques to reduce costs
 Differentiator = use internet based knowledge systems
 Focuser = targets narrow market segment
Lecture 10 5/10 – International Business
Globalisation of business

- Drivers of globalisation
o Infrastructure developed
o Trade barriers reduced
o Global windows have opened
- Competition intensified

Views of international business (3)

Ethnocentricism

- Ethnocentric attitude – a narrow view of the world with an inability to recognise differences
between people
- Parochialism – belief that the best work approaches and practices are those of the home
country

Polycentricism

- Polycentric attitude – view that managers in host country know the best work approaches
and practices for running their business
o Home country: country in which the firm was established
o Host country: country that the firm has expanded into

Geocentrism

- Geocentric attitude – world-oriented view that focuses on using the best approaches and
people from around the globe

Risks of cross-cultural blunders

- Need to be sensitive to differences in national customs

- Need to understand the foreign customs and market differences
- Managers will need skills to operate in a changing environment to work with people from
many backgrounds and respond to global opportunities and threats

The global environment

- When countries can trade freely, economic growth and productivity increases because they
are making goods that they are best at
- Shaped by 2 forces:

Trade agreements

- Bilateral free trading agreements

o Australian bilateral free trade agreements
 Aust-NZ Closer Economic Relations Agreement (CER)
 Coordinate business regulation, competition policy and remove
trade barriers
 Free trade agreement between the 2 countries
 Also with USA, Singapore, Thailand, China
- Multilateral trading agreements
o Regional trading agreements
 Americas:
 North America Free Trade Agreement (NAFTA) – US, Canada, Mexico
o Largest trade bloc
o Helped strengthen economic power of the 3 countries
 Southern Common Market (Mercosur) – Argentina, Brazil, Paraguay,
Uruguay, Venezuela; with Bolivia
 European Union (EU)
 Unified economic trade entity
 Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain, the UK, Germany, Austria, Finland and
Sweden
 Economic and monetary union (Euro)
 Primary purpose= reassert regions economic position against the US
and Japan
 GDP bigger than the US
 Africa – African Union
 Asia – Association of Southeast Asian Nations (ASEAN)
 Initial members: Indonesia, Malaysia, Philippines, Singapore and
Thailand
 Member expanded to include Brunei, Burma, Cambodia, Laos and
Vietnam
 600 million people
 9% of the world’s population
 Aim= increase economic progress stability in the region
 , SAFTA
o World trading agreements
 World Trade Organisation (WTO)
 159 countries
 Global organisation dealing with rules of trade among nations
 Promotes/monitors world trade
 Evolved from the 1995 General Agreement on Tariffs and Trade
(GATT)
 Conducts efficient and effective trading relationships
Global Trade Mechanisms

- Countries are interdependent – what happens in one country can affect another
- Systems/mechanisms needed so efficient and effective trading relationships can develop
- WTO
- IMF (International Monetary Fund) and World Bank Group
o IMF – promotes international monetary cooperation and member countries with
policy advice, temporary loans, and technical assistance to establish/maintain
financial stability and strengthen economies
o World Bank Group
 Group of 5 closely associated institutions all owned by its member countries
 Provides vital financial/technical assistance to developing counties around
the world
 Goal: to promote long-term economic development and poverty reduction
by providing members
- OECD (Organisation for Economic co=operation and development
o Mission – help countries achieve economic growth and employment, raise the
standard of living in member countries while maintaining financial stability

Types of international Organisations

- Multinational corporation (MNC)

o All types of international companies that maintain operations in multiple countries
- Multidomestic corporation
o An MNC that decentralises management and other decisions to the local country –
polycentric approach e.g. Nestle
- Global
o An MNC that centralises management and other decisions in the home country –
ethnocentric approach e.g. Sony
- Transnational or borderless corporation
o Reflects geocentric approach e.g. Ford Motor Company
- Born global
o International new ventures committing resources to doing business in several
countries

How do organisations expand internationally?

Initial stages managers look for ways to get into global market

1) Global sourcing – purchasing materials or labour from around the world wherever it is
cheapest
o Goal: take advantage of lower costs to become more competitive
2) Exporting – making products domestically and selling them overseas

Importing – getting products made from overseas and selling them domestically

o Exporting/importing are steps towards becoming an international business, and

involve minimal investment and risk
3) International licensing/franchising
o Licensing: organisation gives another organisation the right to make or sell its
products using its technology/ product specifications
o Franchising: organisation givers another organisation the right to use its name and
operating methods
4) Strategic alliance
o Partnerships between organisations and a foreign company where they share
resources and knowledge to develop new products
o Disadvantages:
 Loss of control of information
 Agency costs
o Joint venture (specific type of strategic alliance) - Business agreement in which the
parties agree to develop a new entity and new asset by contributing equity
o Reasons:
 Risk sharing
 Economies of scale
 Market access
 Geographical constraints
 Funding constraints
 Acquisition barriers
5) Foreign subsidiary
o Investing in a foreign country by setting up a separate and independent production
facility or office
o Involves the greatest commitment of resources and poses the greatest amount of
risk
How Australian and NZ companies go global

- Approach somewhat different to the conventional model

- Why?
o Small domestic markets
o Geographically distant foreign markets
o Less tradeable products (food, building materials) compared to highly tradeable
products (consumer electronics and computers)
- Thus, use slightly different strategies
- Advances in technology, increasing interconnectivity between international markets and
development of free trade agreements, some AU and NZ companies now engage more with
the international markets by entering/competing on a global level

Managing in a global environment

Legal/Political environment

- Stability/instability of legal and political systems

o Legal procedures are established and followed
o Fair and honest elections held on regular basis
- Differences in the laws of various nations
o Effects on business activities
o Effects on delivery of products and services
- Managers must stay informed about the specific laws of the countries
- Some countries have risky political climate e.g. Russia
- Managers must also be aware that laws on issues such as spying, restraint of trade, working
conditions, payment of bribes, the right of privacy and the rights of workers differ between
nations

Economic environment

- Need to understand type of economic system

o Free market economy – resources owned and controlled by the private sector
o Planned economy – all economic decisions are planned by the government
- Monetary and financial factors:
o Currency exchange rates
o Inflation rates
o Diverse tax policies

Cultural environment

- Psychological dimensions, or value constructs which can be used to describe a culture

- National culture – values and attitudes shared by individuals from specific country that
shape their behaviour/beliefs
- National culture has a greater effect on employees that their organisation’s culture
Hofstede’s framework for assessing cultures

- 5 dimensions of national culture:

o Individualism-collectivism
 Individualistic – people look after their own and family interests (USA, AUS)
 Collectivistic – people expect group to look after and protect them (China,
Mexico)
o Power distance
 High power distance – accepts wide differences in power, respect for those
in authority (Mexico, France)
 Low power distance – plays down inequalities: employees are not afraid to
approach nor are in awe of their boss (USA, AUS)
o Uncertainty avoidance
 High uncertainty avoidance – threatened with ambiguity and experienced
high levels of anxiety (Japan, Italy, France)
 Low uncertainty avoidance – comfortable with risks; tolerant of different
behaviours and opinions (Singapore, USA, Canada)
o Quantity vs quality of life
 Achievement – values such as assertiveness, acquiring money and goods,
and competition prevail (USA, Japan, AUS, Mexico)
 Nurturing – values such as relationships and concern for others prevail
(France, Sweden)
o Time orientation
 Long-term orientation – people look to future and value thrift and
persistence (China, Japan)
 Short-term orientation – people value tradition and the past (Germany, AUS,
USA)
 Culture shock: feelings of confusion, disorientation and emotional
upheaval caused by being immersed in a new culture

GLOBE framework for assessing culture

- Global Leadership and Organisational Behaviour Effectiveness

- Gives managers extra information to help them identify and manage cultural differences
Identified 9 dimensions:
o Assertiveness – society encourages people to be tough, confrontational, assertive
and competitive
o Future orientation – society encourages and reward future-oriented behaviour such
as planning, investing in the future and delaying gratification
o Gender differentiation – society maximises gender role differences as measured by
how much status and decision-making responsibilities women have
o Uncertainty avoidance – reliance on social norms and procedures to alleviate the
unpredictability of future events
o Power distance – social accepts that power in institutions and organisations is
distributed unequally
o Institutional collectivism – individuals are encouraged by societal institutions to be
integrated into groups with organisations and society
o In group collectivism – members in society take pride in membership in small groups
 o Performance orientation – degree to which society encourages and rewards group
members for performance improvement and excellence
o Humane orientation – society encourages and rewards individuals for being fair,
generous, caring and kind to others

Other famous cultural theorists

- Fond Trompenaars (7 cultural dimensions frameworks)

- Stuart Hall (cultural factors e.g. high context vs low context)

Global management in today’s world

- 2 important aspects:
o Challenge to openness
 Increase threat of terrorism and a terror network
 Economic interdependence of trading countries – domino effect
 WTO and IMF established because of this
 Cultural differences
o Challenges of managing a global workforce
 Cross cultural partnerships highlight tensions that expose differences in
work experience, pay levels and communication
 Cultural intelligence – cultural awareness and sensitivity skills (3 dimensions)
 Knowledge of the culture
 Mindfulness – paying attention to signals and reactions
 Behavioural skills – using one’s knowledge and mindfulness to
choose appropriate behaviour in those situations
 Global mind set – attitudes that allow a leader to be effective in cross-
cultural environments (3 components)
 Intellectual capital – knowledge of international business and
capacity to understand how business works on global scale
 Psychological capital – openness to new ideas and experiences
 Social capital – ability to form connection
International adjustment for employees

- Pre-assignment
o Individual
 Training (getting to know the culture etc.)
 Prior experience
o Organisational
 Selection criteria
 Support systems
- In-country adjustment
o Individual factors
o Organisational factors
 Job
 Organisational socialisation
 Organisational culture
o Non-work factors e.g. family/spouse support
o Contribute to adjustment
 Work adjustment
 Interaction adjustment
 General adjustment

Sustainability on a global scale

- Difficult issue – reducing global emissions

- China and India need to set targets for emissions otherwise no reductions will not be
achieved
- Strategies in relation to emission trading schemes and carbon taxes will be necessary in
targeting the issue
- Expensive

LEARNING OVERVIEW OF INTERNATIONAL BUSINESS

1) How do managers think about international business?

o Opportunities and threats of the global economy
o Ethnocentric, polycentric, and geocentric attitudes.
2) How do businesses expand globally?
o 3 stages organisations go through as they go global.
 Exporting, importing, licensing, and franchising.
 Global strategic alliances, joint ventures, and foreign subsidiaries.
o MNCs, TNCs, and borderless organisations.
3) What are the rules governing the global trading environment?
o Explain why countries become part of regional trading alliances.
o WTO, ASEAN, EU, NAFTA and other regional trade alliances.
4) How do firms choose between investment destinations?
o The global legal-political environment affects managers.
o Hofstede’s five dimensions, 9 GLOBE dimensions for assessing cultures.
o Adjustment challenges faced by global managers.
Lecture 11 12/10 – Social Responsibility and Ethics
Social responsibility

- 2 opposing views
- Classical/conventional view
o Social responsibility = to maximise profits (create a financial return) by operating the
business in the best interests of the stockholders
o Argues that expending the firm’s resources on doing ‘social good’ unjustifiability
increases costs that lower profits to the owners and raises prices to consumers
- Socioeconomic view
o Goes beyond making profits to include protecting and improving society’s welfare
o Corporations are not independent entities responsible only to stockholders
o Firms have moral responsibility to larger society to become involved in social, legal
and political issues
- Comparing the 2 views
o Differences:
 Classical: shareholders/owners are the only concern
 Other view: managers are responsible to any group affected by the
organisation’s decisions and actions
 Only concerned for stakeholders

Levels of social involvement

- Social obstruction: pushing back on their societal consensus (e.g. cigarette companies didn’t
want to believe that smoking was linked to cancer)
- Social obligation: obligation of business to meet economic and legal responsibilities
o Organisation does only what it is obliged to do (classical view)
- Social responsiveness: capacity of firm to adapt to changing societal conditions
o Guided by social norms to satisfy the popular needs of the community
- Social responsibility: an organisation’s intention, beyond that required by law or economics
to pursue long-term goals that are good for society
o Improve society because it is the right thing to do
- 4 stage model:
 Stage 1: Owners/managers – follow classical view (interests of shareholders)
 Stage 2: Employees – managers want to keep/motivate good employees
 Stage 3: Stakeholders – managers expand responsibilities to customers
 Stage 4: Broader society – managers feel responsibility to society as whole
Arguments for and against social responsibility

FOR social responsibility AGAINST social responsibility

o Public expectations o Violation of profit maximisation
o Long-run profits o Dilution of purpose
o Ethical obligation o Costs
o Public image o Too much power
o Better environment o Lack of skills
o Discouragement of further governmental o Lack of accountability
regulation
o Balance of responsibility and power
o Stockholder interests
o Possession of resources
o Superiority of prevention over cure

Social responsibility and economic performance

- Studies show + relationship between the two

o Difficulties in defining and measuring ‘social responsibility’ and ‘economic
performance’ raises issues of validity
o Mutual funds using social screening in investment decisions slightly outperformed
other mutual funds
 Social screening: applying social criteria to investment decisions
 Firms usually will not invest in companies involved in alcohol,
gambling, tobacco, weapons or companies that have poor product
safety, employee relations and environmental track records
o Relationship affected by:
 Firm size
 Industry
 Economic conditions
 Regulatory environment
 Causation (if evidence showed that they were positively related, this would
not necessarily mean they were)
- Conclusions:
o Company’s social actions does not hurt economic performance
o Given societal and political pressures on businesses to be socially involved –
managers should take social goals into consideration as they plan, organise, lead and
control

Ecologically sustainable management

- The close link between an organisation’s decisions and activities and its impact on the
natural environment

Global environment problems

- Serious:
o natural resource depletion
o global warming
o pollution
 o industrial accidents
o toxic wastes
- Organisations create most of the industrial, toxic and consumer waste
- Can be expected to worsen as world population continues to grow

Adopting more ecologically sustainable approach

- Some organisations do no more than what is required by law

- Others make radical changes to make products/production processes cleaner and more
sustainable
- Shades of green: term used to describe different approaches that organisations may take

o Legal approach – doing what is required legally

 Social obligation
o Market approach – becomes more sensitive to environmental issues and responds
to preferences of customers
 Social responsiveness
o Stakeholder approach – works to meet environmental demands of multiple
stakeholders
 Social responsiveness
o Activist approach – look for ways to preserve and respect natural resources
 Social responsiveness

Evaluating ecological sustainability

- Sustainability report: reports organisation’s performance encompassing the “triple bottom

line” of economic, environmental and social issues
o Can find their reports on environmental performance through Global Reporting
Initiative (GRI)
- Adopting ISO14001 standards
o Way that business can show commitment to operate in more sustainable matter is
through adopting these standards
o Must minimise effect of its activities on the environment and continually improve its
environmental performance

Managerial ethics

- Ethics: rules and principles that define right and wrong conduct
- 3 views
o Utilitarianism
 Decisions made on basis of their outcomes/consequences
 Always right to do the greatest good for the greatest number
 Difficult to determine against time frame
 Difficult to compare utility among different people
o Rights view
 Decisions concerned with respecting and protecting individual liberties and
privileges
  Positive rights – helping others
 Negative rights – duty to interfere
o Theory of justice view
 Seeking to impose/enforce rules fairly and impartially by following legal
rules and regulations
 Types of justice:
 Procedural: focusing on methods used to determine the outcomes
received
 Outcome/distributive: perception that rewards are distributed in
relation to contribution
 Interactional/interpersonal: quality of interpersonal treatment in
processes

Factors that determine ethical/unethical behaviour

- Stages of moral development:

o at each successive stage an individual’s moral judgement becomes less and less
dependent on outside influences and more internalised
1) Preconventional – person’s choice or right/wrong based on personal
consequences involved
2) Conventional – moral values reside in maintaining expected standards and
living up to expectations of others
3) Principled – individuals make clear effort to define moral principles
regardless of the authority of the groups to which they belong or society
o No guarantee of continued development – can stop at any stage
- Individual characteristics:
o Values/personality plays role in determining whether person behaves ethically
o Values: basic conviction about what is right and wrong
o Personality:
 2 variables found to influence actions according to their beliefs
 Ego strength: personality measure of strength of a person’s
convictions
o High ego strength: do what they think is right, more
consistent with moral judgements
 Locus of control: personality attribute that reflects degree to which
people believe they control their own fate
o Internal locus: believe they control own destinies, more
likely to take responsibility for consequences
 o External locus: what happens is due to chance, less likely to
take personal responsibility for consequences, rely on own
internal standards of right/wrong
o Internals – more consistent in moral judgments than
externals
- Structural variables:
o Organisation’s structure influences whether employees behave ethically
o Designs that minimise ambiguity through formal rules/regulations, reminding of
what is ethical are more likely to encourage ethical behaviour
 Employee selection
 Job descriptions
 Ethics training
 Performance appraisal
 Rewards
 Written codes of conduct
o More pressure put on employees to meet these ethical goals
o Behaviour of managers influences individual’s decision to act
- Organisational culture:
o Values-based management: the organisation’s values guide employees in the way
they do their jobs
o Organisational culture – shared values which reflect what organisation stands for,
what it believes in as well as creating an environment that influences employee
behaviour ethically or unethically
 Strong culture = exert more influence
 For high ethical standards, organisational culture has:
 High risk tolerance, control and conflict tolerance
 Employees encouraged to be aware that unethical practices will be
discovered
o Issue intensity – 6 characteristics relevant in determining issue intensity to an
individual
 Concentration of effect:
 How many people are affected?
 Consensus of wrong:
 Belief that this is good or bad
 Probability of harm:
 Will it affect people?
 Immediacy of consequences:
 Immediate or much later?
 Proximity to victim:
 Not in my backyard so I don’t care…
 Magnitude of consequences
 Degree of harm – When an ethical issue is important, employees are
more likely to behave ethically
Ethics in a global context

- Ethical standards are not universal

- Social and cultural differences determine acceptable behaviours
- Foreign Corrupt Practices Act
o Makes it illegal to corrupt a foreign official yet “token” payments to officials are
permissible when doing so is an accepted practices in that country
- Australia’s Foreign Corrupt Practices Act
o Makes it illegal to corrupt a foreign official yet “token” payments to officials are
permissible when doing so is an accepted practices in that country
- OCED Guidelines for Multinational Enterprises provides the scope to take businesses for CSR
and unethical behaviour
- Goal = build a more sustainable and inclusive global economy

Improving ethical behaviour

- Employee selection
o Interviews, tests and background tests = eliminated ethically questionable applicants
o Opportunity to learn about an individual’s level of moral development, personal
values
- Code of ethics and decision rules
o Code of ethics – statement of an organisation’s values and ethical rules it expects its
employees to follow
- Top managements leadership
o Should uphold the shared values and set the cultural tone
- Job goals and performance appraisal
o Ends and means should be evaluated
o Don’t just focus on economic benefits
- Ethics training
o Programs to train people in ethics
o Increases awareness of ethical issues
o Benefits:
 Reinforces standard of conduct
 Want employees to consider ethical issues in making decisions
 Clarify what practices are acceptable and what are not
- Independent social audits
o Evaluate management practices in terms of the organisations code of ethics
 Routine evaluations, performed on a regular basis and could be random-
effective ethical program should include both
Social responsibility and ethics issues in today’s world

- Current issues:
o How to manage ethical lapses and social responsibility
o Social entrepreneurship
o Promoting positive social change

Managing ethical lapses and social responsibility

- Men are more likely to act unethically

- Two actions are needed:
o Ethical leadership:
 Managers can provide a good role model:
 Being ethical and honest at all times
 Telling the truth; don’t hide or manipulate information
 Admitting failure
 Communicating shared ethical values
 Rewarding employees who behave ethically and punish those who do not
 Protecting employees who bring to light unethical behaviours or raise
ethical issues
o Protection for those who report wrongdoing
 Whistle-blowers – individual raises concerns or issues to others
inside/outside the organisation
 Many companies have an ethics hotline (anonymous)

Social entrepreneurship

- Social entrepreneur – individual/organisation seeks out opportunities to improve society

- Creativity and social integrity to solve problems
- Businesses work with public groups or not-for-profit organisations

Businesses promoting positive social change

- Promote positive social change

- Corporate philanthropy
o Effective way to address societal problems
o Donate to charities and causes that employees and customers care about
- Employee volunteering improves social change
o This enhances employee’s work efforts and motivation