Best-known for suggesting that psychological techniques and social in- teraction hold the key to managing the relationships within social sys- tems and to improve employee morale and productivity.
Roethlisberger and Mayo insisted that behavior of employees was influenced as much by their role in a work group and their relationship to their colleagues as by the promise of economic gain. They were among the first to draw attention to the power of the informal organiza- tion.
Mayo traced the root of many problems in the work place to the shift from the skilled trades of the nineteenth century with their strong com- munity ties, to the rise of unskilled, migrant laborers. Industry had effec- tively destroyed the self-esteem of skilled tradesmen and was ill- equipped to deal with the alienation and disaffection of blue-collar workers, most of whom had been uprooted from their communities.
Together, Mayo and Roethlisberger conducted the famous Haw- thorne experiments to study human motivation. The experiments ex- posed the inadequacy of the piecework system and challenged the as- sumption that there was a neat correlation between pay levels and productivity. The experiments also exposed the complex way in which the relationships between supervisors and workers could affect output.
In the first set of tests, known as the ―illustration experiments‖, workers were divided into two groups — a test group in which the workers were submitted to increasing amounts of light and a control group, which worked under a constant light intensity. Contrary to expec- tations, productivity increased in both groups. The workers seemed to be responding more to the attention they were receiving from management than to any actual change in working conditions. This response of the workers was called ―the Hawthorne Effect‖.
In the last set of investigations, known as the Bank Wiring Observa- tion Room experiments, the room was staffed with 14 workmen, paid according to a group piecework system. The more components they turned out, the more money they made. So it was logical to expect that the most efficient workers would put pressure on the slower workers to
*
From the book The Essence of Competitive Strategy by David Faulkner and Cliff Bowman, Prentice Hall of India, 2002.
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maintain a high level of output. This did not prove to be the case. In- stead, the group established an unofficial output norm based on what was considered a ―fair‖ production quota. Workers who violated the norm, by producing either too much or too little, were looked down up- on by their coworkers. The informal organization dictated the output of each worker based on its own standards of fairness and the position each worker occupied within the work group.
In many smaller organizations, many of the rules of the work place remained implicit, not only the operating rules and standards of perfor- mance, but also the rules of communication, that is, to whom one was supposed to go for help. People were bound together by relations that had nothing to do with what they were supposed to be doing. These rela- tions seemed to be important, not only for achieving the objectives of the organization but also for obtaining the cooperation of people.
(See also: MOTIVATION)
McGregor, Douglas
An American psychologist whose book The Human Side of Enterprise categorized managers into two types: Theory X and Theory Y. Many managers assume people to be work-shy and motivated primarily by money. These are Theory X managers. In contrast, Theory Y managers assume that workers look to gain satisfaction from employment. If achievement levels are low, managers must ask whether they are provid- ing the right work environment. In other words, the Theory Y manager assumes that the blame for poor workforce performance lies with the management rather than the workers themselves.
The Theory X manager assumes the following:
Workers are motivated by money.
Unless supervised closely, workers will under-perform. Workers will only respect a tough, decisive boss. Workers have no wish or ability to help make decisions.
The Theory Y manager assumes the following:
Workers seek job satisfaction no less than managers. If trusted, workers will behave responsibly.
Low performance is due to dull work or poor management. People have the desire and right to take part in decision making.
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McGegor was also against the traditional pay-for-performance con- cept. He was convinced that money could not substitute an environment that was conducive to motivation. McGregor recognized the tremendous improvements in working conditions since the turn of the century at all levels of the corporation. Drawing on Maslow‘s hierarchy of needs, he argued that by satisfying the safety and security needs of its employees, companies had created higher-order needs. The focus had to shift to sat- isfying those higher needs.
McGregor‘s work is not completely original. Theory X is derived from the work of F. W. Taylor and from Adam Smith‘s notion of ―eco- nomic man‖. Theory Y stems clearly from Mayo‘s human relations ap- proach and Maslow‘s work on human needs.
(See also: MOTIVATION, MAYO, ELTON AND ROETHLISBERGER, FRITZ)
McKinsey 7-S Framework
*An analytical framework developed by Mckinsey consultants, Richard Tanner Pascale and Anthony G Athos based on their study of well man- aged Japanese companies, which looks at seven key aspects of an organ- ization:
1. Strategy: The path chosen by a company to achieve its goals. How the organization allocates its resources to achieve its aims.
2. Structure: Describes the hierarchy of authority and accountability in an organization. These relationships are frequently indicated in or- ganizational charts and include organization structure, level of cen- tralization, authority and responsibility arrangements.
3. Skills: The core competences and capabilities of the firms that allow them to compete in the market.
4. Systems: Processes used to manage the organization, such as cus- tomer satisfaction monitoring system, management information sys- tems, budgetary and other control mechanisms.
5. Staff: The quality of a firm‘s human resources. It refers to how peo- ple are developed, trained and motivated.
*
Tanner Pascale, Richard; and Athos, Anthony G., The Art of Japanese Man-
1 4 8 McNamar a, R O B E R T S .
6. Style: The leadership and operational approach adopted by the man- agement. It also refers to the way in which a company projects itself to the outside world.
7. Shared Values: Also known as super-ordinate goals. The fundamental ideas around which a business is built and the things that influence a group to work together towards a common goal.
(See also: PURPOSE-PROCESS-PRINCIPLE DOCTRINE)
McNamara, Robert S.
Presided over the restructuring of Ford, the US defense department, and World Bank, and championed a new approach to management that em- phasized sophisticated quantitative skills and financial controls. McNamara did more to advocate a rationalist, quantitative approach to management than perhaps any single individual since Taylor.
McNamara‘s vision encompassed both the need for financial disci- pline and a belief in the corporate social contract. He was an earnest ad- vocate of safety, environmental responsibility, utility, function, coopera- tion with government, and accountability to labor.
Thanks to McNamara, systems analysis became a popular late- twentieth century tool of scientific management. It aimed at providing transparency by making both the analysis, and the underlying assump- tions and calculations, available to all interested parties. Yet, as applied by McNamara, it concentrated power in the hands of a few analytical experts. McNamara‘s bean counters wrested control of planning from operating executives in both auto manufacturing and the armed forces.
As time passed, it became clear that tools and techniques could not make up for poor human judgment. Long after the Vietnam War had ended, McNamara admitted: ―We failed to recognize that in internation- al affairs, as in other aspects of life, there may be problems for which there are no immediate solutions.‖
Merger
Refers to the combination of two companies into one larger company. Some mergers involve a cash deal while others involve exchange of shares. A combination of the two is also possible. In many instances a merger resembles a takeover but results in a new company name
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(often combining the names of the original companies) and in new branding.
There can be various types of mergers:
Horizontal Mergers take place where the two merging companies
both produce similar products in the same industry.
Vertical Mergers occur when two firms, each working at different
stages in the production of the same product, combine together. This is some kind of a vertical integration.
Conglomerate Mergers take place when the two firms operate in dif-
ferent industries.
Mergers must be carefully planned and implemented. Many mergers fail to create value for shareholders because synergies identified before the merger fail to materialize.
(See also: ANTI-TAKEOVER STRATEGY, VALUATION)
Mintzberg, Henry
A leading researcher in the area of strategy, Mintzberg is a professor of stra- tegic management at McGill University, Canada, and also holds a chair at INSEAD. His philosophy is based on how managers actually create and implement strategy, rather than how they should supposedly do so.
Mintzberg‘s first major input came from studying managers at an everyday level. He found that whilst the theory was that managers should be reflective thinkers, the reality was that they were caught up in action most of the time.
Mintzberg has been a prolific writer with more than 140 articles and 13 books to his name. His seminal book, The Rise and Fall of Strategic Planning, criticized some contemporary practices of strategic planning and is recommended reading for anyone who seriously wants to consider taking on a strategy-making role within an organization. Mintzberg ar- gues that conventional planning processes are inappropriate to the more fluid decision-making processes characteristic of most organizations.
Along with Joseph Lampel and Bruce Ahlstrand, Mintzberg co- authored Strategy Safari, which likens the various schools of strategy to the different kinds of animals which one would literally see, if one were on a safari.
1 5 0 Missio n
Mintzberg‘s recently published book, Managers Not MBAs, outlines what he believes to be wrong with management education today and how obsession with numbers and viewing management as a science ac- tually can damage the discipline of management.
Mission
The fundamental purpose that sets a firm apart from other firms of its type and identifies the scope of its operations in product and market terms. Mission embodies the business philosophy of the firm, conveys its corporate image, indicates the firm‘s principal product or service are- as, and the primary customer needs the firm will attempt to satisfy. In short, the mission statement describes the firm‘s business in product, market, and technological terms.
According to King & Cleland*, a well-designed company mission must accomplish the following:
1. Ensure unanimity of purpose within the organization. 2. Provide a basis for using the organization‘s resources. 3. Establish a general tone or organizational climate.
4. Serve as a focal point for those who can identify with the organiza- tion‘s purpose and direction and weed out people who cannot do so. 5. Facilitate the translation of objectives and goals into a work structure
involving the assignment of tasks to responsible people within the organization.
6. Specify the organizational purpose, and the translation of this pur- pose into goals in such a way that cost, time and performance param- eters can be assessed and controlled.
A mission statement ensures that all employees are working towards a common purpose, enables employees to identify better with the organ- ization, and serves to state explicitly or implicitly the organization‘s be- liefs, values and aspirations.
In contrast, a VISION is a broad indication of the organization‘s inten- tions. The ideas and ideals embodied in the vision are often too lofty.
*
See John A. Pearce and Richard Robinson Jr., Strategic Management — For-
mulation, Implementation and Control, McGraw-Hill International Edition,
Mo t iv at io n 1 5 1
Vision is also often unwritten. A vision becomes tangible when it is ex- pressed in the form of a mission statement.
(See also: CORPORATE PURPOSE)
Motivation
Defined variously as the will to work due to enjoyment of the work itself or anything that leads people to achieve more than they would otherwise do. Motivation theories hold that a motivated workforce is the key to any organization‘s success. Probably the best known theory of motivation is the one developed byAbraham MASLOW, a behavioral scientist who pro- posed the Hierarchy of Needs theory in 1954. According to Maslow, human beings are motivated by unsatisfied needs. Lower needs need to be satisfied before the higher ones become important. When ―deficiency needs‖ are met, other higher needs emerge and when these in turn are satisfied, new (and still higher) needs emerge, and so on.
Physiological Needs: Physiological needs are basic needs such as air,
water, food, and sex. When these are not satisfied, we feel pain and discomfort.
Safety Needs: Comfort and security come next. After the basic re-
quirements of survival are met, we naturally want to preserve and en- hance what we have. We think of the security of home and family.
Social Needs: Love and belongingness follow. All of us have a desire
to belong to groups; clubs, work groups, religious groups, family, etc. We want to be loved and accepted by others.
Esteem Needs: There are two types of esteem needs. First is self-
esteem, which results from competence or mastery of a task. Second is the need for attention and recognition from others. Holding senior posts in organizations and an opportunity to lead initiatives are some sources of self-esteem for most people.
Self Actualization: In this stage, people seek knowledge, peace, self-
fulfillment and salvation.
The basic problem with Maslow‘s model is that people may simulta- neously have different kinds of needs, instead of moving sequentially from one to the next. Moreover for many people caught in poverty, es- pecially in third world countries, lower order needs may not be satisfied during an entire lifetime. So the question of self-actualization simp-
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lydoes not arise. Then there are people who are always greedy for more money, despite being very wealthy!
In 1969, Clayton Alderfer improvised on Maslow‘s hierarchy of needs, with his ERG theory (Existence, Relatedness and Growth). Alder- fer put the lower order needs, physiological and safety, into the existence category. He fit Maslow‘s interpersonal love and esteem needs into the relatedness category. The growth category contained the self actualiza- tion and self esteem needs. According to the ERG theory, more than one need may be operational at the same time. People can move on to a higher order need even without substantially satisfying their lower order needs. For instance, an artist may want to satisfy his basic needs like hunger and shelter, but may be simultaneously interested in his growth as an artist. If a higher-order need is frustrated, an individual may re- gress towards a lower-order need which appears easier to satisfy. This is known as the frustration-regression principle. Thus if social needs are not satisfied, an employee might start concentrating on making more money. This might happen, for example, if a deserving middle manager is denied a promotion for a long time.
Another landmark in the body of knowledge about motivation is Her- zberg‘s two-factor theory of job satisfaction. Every organization has a set of HYGIENE FACTORS like working conditions, salary, etc. The absence of hygiene factors creates employee dissatisfaction but their presence does not improve satisfaction. HERZBERG found five factors in particular that were strong determinants of job satisfaction: achievement, recognition, the work itself, responsibility, and advancement. Motivators have a long-term positive impact on job performance. In contrast, hygiene factors produce only short-term changes in job attitudes and performance.
Another theory proposed by Vroom is that motivation depends on employee expectations about the outcome of their efforts. If people know what they want from an outcome, and believe they can achieve it, they will be highly motivated to work towards the goal. This theory con- trasts with Maslow and Herzberg‘s emphasis on people‘s needs.
Multi Domestic Industry
An industry in which the competition within the industry is essentially segmented from country to country. Competitive strategies in one coun- try are largely independent of those in other countries. Typically, these
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are industries where economies of scale are less important and the need for local customization is more critical, or where freight costs are signif- icant. The cement industry is a good example.
(See also: GLOBAL INDUSTRY)
Murphy’s Law
A popular maxim most commonly formulated as ―Anything that can go wrong will go wrong‖. The law is named after Major Edward A. Mur- phy, Jr., a development engineer who worked for a brief period of time on rocket sled experiments conducted by the United States Air Force in 1949.
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Nearshoring
The practice of outsourcing activities to locations which may not be the cheapest but are reasonably close so that coordination is easier. Eastern Europe is a nearshoring destination for many companies in the US.
(See also: OFFSHORING, OUTSOURCING)
Net Present Value (NPV)
A standard tool used in capital budgeting. According to the NPV meth- od, a potential investment project should be undertaken if the present value of all cash inflows minus the present value of all cash outflows (which equals the net present value) is greater than zero. The discount rate used is the shareholder‘s required rate of return. Managers should undertake only those projects that have an NPV greater than zero. If two projects are mutually exclusive, they should choose the one with the higher NPV.
(See also: ADJUSTED PRESENT VALUE)
Nine-Cell Planning Grid
A planning framework developed by General Electric (GE), the nine- cell planning grid to some extent, overcomes the limitations of the BCG GROWTH-SHARE MATRIX. In the GE grid, each business is rated low, me- dium or high on two major dimensions — market attractiveness and business strength. There are nine cells into which businesses can be grouped based on these two dimensions.
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