(Solution Manual) MGMT (MindTap Course List)

Williams, 11

Business

Solution Manual

11th Edition

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MGMT, 11th Edition SOLUTION MANUAL FOR MGMT (MindTap Course List) 11th Edition by Chuck Williams Chapter 1 Management Pedagogy Map This chapter begins with the learning outcome summaries and key terms, followed by a set of lesson plans that the instru ctors can use while explaining the concepts . • Lesson Plan for Lecture (for large sections) • Lesson Plan for Group Work (for smaller classes) • Assignments with Teaching Tips and Solutions  What Would You Do? Case Assignment ––Netflix Headquarters  Self-Assessment ––Is Management for You?  Management Decision ––Should We Try to Make More Money ?  Group Activity ––Saying No to an Investor  Practice Being a Manager ––Finding a Management Job  Develop Your Career Potential ––Interview Two Managers  Management Workplace ––Profile on Camp Bow Wow  Review Questions  Assignmen t  Additional Resources Highlighted Assignments Key Points What Would You Do? Case Assignment After a period of phenomenal growth, Netflix faces several challenges as it strives to develop new ways to deliver movies. Self-Assessment Students get a glimpse of whether their skills overlap those required by managers. Management Decision Students must consider whether an airline should follow its competitors in cha rging fees for checked baggage. Managem ent Team Decision Students consider what a company should do when its philosophy conflicts with that of its biggest investor. Practice Being a Manager Students explore the hiring process by role -playing interviews for management positions they research in the newspaper and online. Develop Your Career Potential Students interview two managers and compare the managers’ responses to the information in the chapter. Reel to Real Video Assignment: Management Workplace Candace Stathis, a general manager at Camp Bow Wow, faces several challenges to keep the camp running as efficientl y as possible. Supplemental Resources 4LTR Press supplements and online assets include PowerPoint Lectures, Test Banks, Executive Profiles, What Would You Do Cases (WWYD) , and Self-Assessment Activities. Within the exposition (narrative), students will experience interactive problems that include matching and fill-in-the-blank problems. They will also encounter the second half of the WWYD Case a nd the Self-Assessment content. Learning Outcomes LO1-1 Describe what management is. Good management is basic to starting a business, growing a business, and maintaining a business after it has achieved some measure of success . LO 1-2 Explain the four functions of management. Henri Fa yol, who was a managing director (CEO) of a large steel company in the early 1900s , was one of the founders of the field of management. According to Fayol, m anage rs need to perform five managerial functions in order to be successful: planning, organizing, coordinating , commanding , and controlling. Most management textbooks today have updated this list by dropping the coordinating function and referring to Fayol’s commanding function as “leading.” Fayol’s management functions are thus known today in this upd ated form as planning, organizing, leading, and controlling. Planning involves determining organizational goals and a means for achieving them. Organizing is deciding where decisions will be made, who will do what jobs and tasks, and who will work for whom in the company . The third management function, l eading , involves inspiring and motivating workers to work hard to achieve organizational goals. The last function of management, c ontrolling , is monitoring progress toward goal achievement and taking correct ive action when progress isn’t being made . LO 1-3 Describe different kinds of managers. There are four kinds of managers , each with different jobs and responsibilities: top managers, middle managers, first -line managers, and team leaders . Top managers have three major responsib ilities. First, they are responsible for creating a context for change . After that vision or mission is set, the second responsibility of top managers is to develop employees’ commitment to and ownership of the company’s performance . Third, top managers must creat e a positive organizational culture through language and action . Finally, top managers are responsible for monitoring their business environments. Middle managers hold positions such as plant manager, regional manager, or di visional manager. They are responsible for setting objectives consistent with top management’s goals and for planning and implementing subunit strategies for achieving those objectives. A third responsibility of middle management is to monitor and manag e the performance of the subunits and individual managers who report to them. Finally, m iddle managers are also responsible for implementing the changes or strategies generated by top managers. The primary responsibility of f irst-line managers is to manage th e performance of entry -level employees who are directly responsible for producing a company’s goods and services. They also make detailed schedules and operating plans based on middle management’s intermediate -range plans. Team leaders are primarily respon sible for facilitating team activities toward accomplishing a goal . LO1-4 Explain the major roles and subroles that managers perform in their jobs. Professor Henry Mintzberg followed five American CEOs, shadowing each for a week and analyzing their mail, their conversations, and their actions. He concluded that managers fulfill three major roles while performing their jobs —interpersonal, informational, and decisional. In fulfilling the interpersonal role of management , managers perform three subroles: fig urehead, leader, and liaison . In the figurehead role, managers perform ceremonial duties such as greeting company visitors, speaking at the opening of a new facility, or representing the company at a community luncheon to support local charities. In the le ader role, managers motivat e and encourag e workers to accomplish organizational objectives. In the liaison role, managers deal with people outside their units. Mintzberg described three informational subroles: monitor, disseminator, and spokesperson. In the monitor role, managers scan their environment for information, actively contact others for information, and, because of their personal contacts, receive a great deal of unsolicited information. In the disseminator role , managers share the information th ey have collected with their subordinates and others in the company. In contrast to the disseminator role, in which managers distribute information to employees inside the company, managers in the spokesperson role share information with people outside the ir departments or companies. According to Mintzberg, managers engage in four decisional subroles: entrepreneur, disturbance handler, resource allocator, and negotiator. In the entrepreneur role , managers adapt themselves, their subordinates, and their uni ts to change. In the disturbance handler role, managers respond to pressures and problems so severe that they demand immediate attention and action . In the resource allocator role, managers decid e who will get what resource s and how many resources they wil l get. In the negotiator role, managers negotiate schedules, projects, goals, outcomes, resources , and employee raises . LO 1 -5 Explain what companies look for in managers. When companies look for employees who would be good managers, they look for indivi duals who have technical skills, human skills, conceptual skills, and the motivation to manage. Technical skills are the specialized procedures , techniques, and knowledge required to get the job done . Human skills can be summarized as the ability to work w ell with others . Conceptual skills are the ability to see the organization as a whole , to understand how the different parts of the company affect each other , and to recognize how the company fits into or is affected by its external environment such as the local community, social and economic forces, customers, and the competition . Motivation to manage is an assessment of how motivated employees are to interact with superiors, participate in competitive situations, behave assertively toward others , tell oth ers what to do, reward good behavior and punish poor behavior, perform actions that are highly visible to others, and handle and organize administrative tasks . LO 1 -6 Discuss the top mistakes that managers make in their jobs. Another way to understand wh at it takes to be a manager is to look at the mistakes managers make. Five of the top ten mistakes managers make are being insensitive to others ; being cold, aloof, and/or arrogant; betraying trust; being overly ambitious; and failing to address specific performance problems with the business. LO 1 -7 Describe the transition that employees go through when they are promoted to management. In her book Becoming a Manager: Mastery of a New Identity , Harvard Business School professor Linda Hill followed the dev elopment of nineteen people in their first year as managers. Initially, the m anagers in Hill’s study believed that their job was to exercise formal authority and to manage tasks —basically being the boss , telling others what to do, making decisions, and getting things done . In fact , most of the new managers were attracted to management positions because they wanted to be in charge . Surprisingly, the new managers did not believe that their job was to manage people. After six months , most of the new managers had concluded that their initial expectations about managerial work were wrong. The first surprise was the fast pace and heavy workload involved. The other major surprise after six months on the job was that the managers’ expectations about what they should do as managers were very different from their subordinates’ expectations. After a year on the job, most of the managers thought of themselves as managers and no longer as doers. In making the transition, they finally realized that people management was th e most important part of their job. LO 1 -8 Explain how and why companies can create competitive advantage through people. One thing that hasn’t changed is the importance of good people and good management: companies can’t succeed for long without them. In his books Competitive Advantage through People: Unleashing the Power of the Work Force and The Human Equation: Building Profits by Putting People First , Stanford University business professor Jeffrey Pfeffer contends that what separates top -performing co mpanies from their competitors is the way they treat their workforces —in other words, their management style. Pfeffer found that managers in top - performing companies used ideas such as employment security, selective hiring, self -managed teams and decentral ization, high pay contingent on company performance, extensive training, reduced status distinctions (between managers and employees), and extensive sharing of financial information to achieve financial performance that, on average, was 40 percent higher than that of other companies. These ideas helped organizations develop workforces that are smarter, better trained, more motivated, and more committed than their competitors’ workforces . According to Pfeffer , companies that invest in their people will creat e long -lasting competitive advantages that are difficult for other companies to duplicate. Other studies also clearly demonstrate that sound management practice s can produce substantial advantages in four critical areas of organizational performance: sales revenues, profits, stock market returns, and customer satisfaction . Finally, research also indicates that managers have an important effect on customer satisfaction. Key Terms Conceptual skills Management Controlling Middle managers Disseminator role Monitor role Disturbance handler role Motivation to manage Effectiveness Negotiator role Efficiency Organizing Entrepreneur role Planning Figurehead role Resource allocator role First-line managers Spokesperson role Human skills Team leaders Leader role Technical skills Leading Top managers Liaison role Lesson Plan for Lecture (for large sections) Pre-Class Prep for Instructors : Pre-Class Prep for Students: • Prepare the syllabus. • Bring the PPT slides. • Buy the book. Warm Up Introduce oneself. Hand out the syllabus , and go over the details. Begin Chapter 1 by asking students “What is management?” (If a blackboard is available, the instructor could begin to write their ideas on it so that a cumulative definition can be derived.) Content Delivery Lecture slides: The instructor should m ake a note of where he or she stops so that he or she can pick up from th at topic at the next class meeting. Slides have teaching notes on them to help the instructor as he or she lecture s. Topics Activitie s 1-1 Management Is 1-2 Management Ask students who have been or are currently managers to tell the class what managers do. Write their comments on the board (organize by mana gement function). Use the above discussion Functions 1-2a Planning 1-2b Organizing 1-2c Leading 1-2d Controlling to lead into the four management functions. 1-3 Kinds of Managers 1-3a Top Managers 1-3b Middle Managers 1-3c First -Line Managers 1-3d Team Leaders Ask the class to give specific examples of each of these types (using titles). 1-4 Managerial Roles 1-4a Interpersonal Roles 1-4b Informational Roles 1-4c Decisional Roles 1-5 What Companies Look for in Managers 1-6 Mistakes Managers Make 1-7 The Transition to Management: The First Year 1-8 Competitive Advantage through People Key Terms Summary Adjust the lecture to include the activities in the right column. Some activities should be done before introducing the concept, and some should be done after . Special Item s Spark a quick discussion by asking students to respond to the following statement: “The only way to lea rn how to manage is to manage.” Make sure students provide answers with relevant examples . Conclusion and Preview Assignments: 1. Tell students to be r eady at the next class meeting to discuss or answer questions from Management Decision ––Should We Try to Make More Money ? 2. After covering Chapter 1, assign students to read the chapter and the following one on the syl labus. Remind students about any upcoming events. Lesson Plan for Group Work (for smaller classes) Pre-Class Prep for Instructors : Pre-Class Prep for Students: • Prepare the syllabus. • Set up the classroom so that small groups of four to five students can sit together. • Buy the book. Warm Up Introduce yourself . Hand out the syllabus , and go over details. Begin Chapter 1 by asking students “What is management?” (If a blackboard is available, begin to write their ideas on it so that a cumulative defin ition can be derived.) Content Delivery Lecture on What Is Management (Sections 1-1 and 1-2). Break for the following group activity: “Management Functions” • Divide the class into small groups. • Have each group describe how they would use the four funct ions of management to plan a big party on campus: (1) making things happen; (2) meeting the competition; (3) organizing people, projects, and processes; and (4) leading. • Have groups share their work with the whole class. Before lecturing on the next sect ion, conduct the following activity: “Management Levels” • Put th e class back into small groups. • Give each group a sample organizational chart of a real or fictional company. (Chapter 9 has numerous examples of organizational charts.) Try to use a company in an industry familiar to your students. • Have each group identify which level is considered top management, which is considered middle management, and which is considered first - level management. • Have groups share their work with the class. Lecture on Wh at Do Managers Do? (Sections 1-3 and 1-4). Ask students, “What does it take to be a manager?” Write responses on the board or overhead. Lecture on What Does It Take to Be a Manager (Sections 1-5 to 1-7). Review the list on the board in light of the chapt er content. Ask students, “Does management matter?” If they say no, suggest that they consider that management does matter. Lecture on Why Management Matters (Section 1-8). Depending on the amount of time left, give students a chance to “pull it all together” with the activity in the Special Items section. Special Items Spark a quick discussion by asking students to respond to the following statement: “The only way to learn how to manage is to manage.” Make sure students back their answers with relevan t examples . Conclusion and Preview Assignments: 1. Have students research job listings for managers to determine what companies look for in managers. Suggest for them to consult online sources like Linkedin and Indeed .com (or the Wall Street Journal ) and print publications like Fortune and Inc. magazines. Have them make a list of descriptors that seem to indicate the kind of qualities companies look for in applicants for management positions. 2. After covering Chapter 1, assign students to read the same chapter and the following one on the syllabus. Remind students about any upcoming events. Assignments with Teaching Tips and Solutions What Would You Do? Case Assignment Please note: This chapter’s What Would You Do? case has been updated in the student -facin g MGMT Online materials. The new case is available in the Manage Docs section, the highlight box section, and in-line. The legacy case is provided below. Netflix Headquarters Los Gatos, California CEO Reed Hastings started Netflix in 1997 after becoming angry about paying Blockbuster Video $40 for a late return of Apollo 13 . Hastings and Netflix struck back with flat monthly fees for unlimited DVDs rentals, easy home delivery and returns via prepaid postage envelopes, and no late fees, which let customer s keep DVDs as long as they wanted. Blockbuster, which earned up to $800 million annually from late returns, was slow to respond and lost customers in droves. When Blockbuster, Amazon, and Walmart started their own mail -delivery video rentals, Hastings re cognized that Netflix was in competition with “the biggest rental company, the biggest e -commerce company, and the biggest company, period.” With investors expecting it to fail, Netflix’s stock price dropped precipitously to $2.50 a share. But with an aver age subscriber cost of just $4 a month compared to an average subscriber fee of $15, Netflix, unlike its competitors, made money from each customer. Three years later, Walmart abandoned the business, asking Netflix to handle DVD rentals on Walmart.com. Ama zon, by contrast, entered the DVD rental business in Great Britain, expecting that experience to prepare it to beat Netflix in the United States . But, like Walmart, Amazon quit after four years of losses. Finally, 13 years after Netflix’s founding, Blockbu ster declared bankruptcy. With DVDs mailed to 17 million monthly subscribers from 50 distribution centers nationwide, Netflix is now the industry leader in DVD rentals. However, its expertise in shipping and distributing DVDs won’t provide a competitive a dvantage when streaming files over the Internet. Indeed, Netflix’s Watch Instantly download service is in competition with Amazon’s Video on Demand, Apple’s iTunes, HuluPlus at Hulu.com, Time - Warner Cable’s TV Everywhere, and DirectTV Cinema, all of which offer movie and TV downloads. Moreover, unlike DVDs, which can be rented without studio approval, U.S. copyright laws require streaming rights to be purchased from TV and movie studios before downloading content into people’s homes. And that creates two ne w issues. First, does Netflix have deep enough pockets to outbid its rivals for broad access to the studios’ TV and movie content? Second, can it convince the studios that it is not a direct competitor? HBO, for instance, won’t license any of its original shows, like The Sopranos , for Netflix streaming. It also has exclusive rights for up to eight years for content from Twentieth Century Fox and Universal Pictures. HBO co -president Eric Kessler says, “There is value in exclusivity. Consumers are willing to pay a premium for high -quality, exclusive content.” If other studio executives think this, Netflix will not acquire the video content it needs to satisfy its customers. Planning involves determining organizational goals and a means for achieving them. So, how can Netflix generate the cash it needs to pay the studios? How can it convince them it’s not a competitor so they will agree to license their content? Netflix must also address the significant organizational challenges accompanying accelerated growth. Hastings experienced the same problem in his first company, Pure Software, where he admitted, “Management was my biggest challenge; every year there were twice as many people and it was trial by fire. I was underprepared for the complexities and personali ties.” With blazing growth on one hand and the strategic challenge of obtaining studio content on the other, how much time should he and his executive team devote directly to hiring? Deciding where decisions will be made is a key part of the management fun ction of organizing. So, should he and his executive team be directly involved, or is this something that he should delegate? Finally, what can Netflix, which is located near Silicon Valley, home to Google, eBay, Apple, Hewlett - Packard, and Facebook, some of the most attractive employers in the world, provide in the way of pay, perks, and company culture that will attract, inspire, and motivate top talent to achieve organizational goals? If you were in charge of Netflix, what would you do? Sources: M. And erson & M. Liedtke (Associated Press), “Hubris —and late fees —doomed Blockbuster,” MSNBC , September 23, 2010, http://www.nbcnews.com/id/39332696/ns/business -retail/ [accessed September 30, 2016] ; M. Copeland, “Reed Hastings: Leader of the Pack,” Fortune , 6 December 2010, 120 –130; J. Heilemann, “Showtime for Netflix,” Business 2.0 , March 2005, 36; R. Grover, “Netflix: Premium Cable’s Worst Nightmare,” Bloomberg Businessweek , 20 September 20 10, 21.22; and J. Surowiecki, “The Financial Page: The Next Level,” The New Yorker , October 18, 2010, 28. What Really Happened? Solution In the case given above , students learned that just a decade and a half after start ing up, Netflix had pushed Wal mart, Amazon, and Blockbuster Video, who once dominated the industry, out of the DVD rental business. Netflix’s expertise in shipping and distributing DVDs, however, provides no competitive advantage when streaming files over the Internet. And, with competitio n from Amazon’s Video on Demand , Apple’s iTunes , HuluPlus at Hulu.com, Time -Warner Cable’s TV Everywhere , and DirectTV Cinema , there’s no guarantee that Netflix’s success will continue. Let’s find out what really happened by seeing what steps Netflix and i ts founder, Reed Hastings, took to be competitive under different circumstances and to successfully manage the company’s growth. Planning involves determining organizational goals and a means for achieving them. So, how can Netflix generate the cash it ne eds to pay the studios? How can it convince them that it’s not a competitor so they will agree to license its content? Planning, which is one of the functions of the management, involves determining organizational goals and a means for achieving them. As students will learn in Chapter 5, planning is one of the best ways to improve performance. It encourages people to work harder, to work hard for extended periods, to engage in behaviors directly related to goal accomplishment, and to think of better ways t o do their jobs. But most importantly, companies that plan have larger profits and faster growth than companies that don’t plan. Likewise, the question “What business are we in?” is at the heart of strategic planning , which students will learn about in Cha pter 6. If one can answer the question “What business are you in?” in two sentences or less, chances are one has a very clear plan for their business. But getting a clear plan is not so easy. Sometimes even very successful companies, like Netflix, have dif ficulty answering this question. Netflix had been spending about $240 million a year to buy the DVDs that it rented to its subscribers. But, unlike DVDs which can be bought and then rented without studio approval, U.S. copyright laws require streaming rig hts to be purchased from TV and movie studios before downloading content into people’s homes. This means that Netflix not only has to come up with more money to stream video content, it also has to come up with more money than its competitors, such as Appl e, Amazon, Hulu, Time -Warner Cable, and DirecTV. So, where can Netflix come up with the extra money without cutting into its profits? Well, consider that it costs roughly $1 dollar to ship and return a DVD to a customer. The first time Netflix tried stream ing video s in 2000, it took 16 hours and cost $10 to download videos for customers. However, CEO Reed Hastings said, “We started investing 1 to 2 percent of revenue every year in downloading, and I think it’ s tremendously exciting because it will fundament ally lower our mailing costs.” Because of that investment and newer advances in technology, today it only costs Netflix 5 cents to stream the video content of a full -length film. And since Netflix spends $600 million a year mailing DVDs back and forth from its distribution centers to its customers, it can take the money it puts toward mailing c osts and put nearly all of it —remember it only cos ts a nickel to stream a movie —toward buying streaming rights from the studios. And, the more movies that customers stream, the more money Netflix will have on hand. And with double the revenues, profits, and subscriber base since starting video streaming in 2007, cash certainly won’t be an issue , as it works with the studios to obtain streaming rights. The key question , however, is whether Netflix can convince the studios that it’s not a competitor. And that may depend on the strategy Netflix uses and the kind of business it wants to be. Netflix’s strategy hasn’t changed. It’s still all about growth. According to CEO Re ed Hastings, “Our focus is on getting to five million, 10 million, 20 million subscribers and becoming a company like HBO that transforms the entertainment industry.” Before streaming, Netflix was a DVD rental and distribution company. But that’s no longer the case. Ted Sarandos, Netflix’s chief content officer, says that its “destiny” is to become a streaming company, but, for now, “You could say we are in DVD maintenance mode at this time.” How is Netflix enticing studios to give it streaming rights? Well, besides huge payouts, nearly every deal includes delayed access to movie content. Typically, Netflix can’t stream video content until it’s been available for consumer purchase for at least 28 days ; sometimes for as long as 3 months. That way, the studio s can still harvest consumer DVD sales, which are the most profitable part of movie sales, and then pick up additional revenue through Netflix. How persuasive has Netflix been? Well, Warner Brothers movie studio, which is owned by Time - Warner Cable, wanted to force Netflix to take the same deal that it gives to cable - and satellite - TV providers, namely, charg ing consumers $4 for each movie download and then giv ing 65 to 70 percent of that $4 to the studio. But, since 75 percent of DVD sales come in the firs t month that the movie’s DVD is released, Warner Brothers was willing to agree to Netflix’s 28 -day delay for new releases. Furthermore, it agreed to give Netflix the streaming rights to most of the DVD and Blu -ray movies in its catalog. Netflix’s Ted Saran dos said, “We’re able to help an important business partner [i.e., Warner Brothers] meet its objectives while improving service levels for our members by acquiring substantially more units than in the past after a relatively short sell -through window. At t he same time, we’re able to extend the range of choices available to be streamed to our members.” Netflix has signed similar deals with all of the major film studios, TV studios (NBC, CBS, Fox, ABC), and cable television studios (Showtime, Starz, and HBO). In the end, says chief content officer Ted Sarandos, “We see ourselves as complementary [to the studios]. If someone loves [the cable TV show] Weeds on Showtime, they’ll watch it on Showtime and go find the older episodes from us.” With blazing growth o n one hand and the strategic challenge of obtaining studio content on the other, how much time should he and his executive team devote directly to hiring? Deciding where decisions will be made is a key part of the management function of organizing. So, sho uld he and his executive team be directly involved, or is this something that he should delegate? Management, at its essence, is getting work done through others. When one is promoted from employee to manager, one stops being a doer and start s helping doe rs succeed at their jobs. Indeed, as learned in the chapter, most “derailed” managers are unable to make the most basic transition to managerial work: to quit being hands -on doers and get work done through others. Two things go wrong when managers make the se mistakes. First, when managers meddle in decisions that their subordinates should be making —when they can’t stop being doers —they alienate the people who work for them. Second, because they are trying to do their subordinates’ jobs in addition to their own, managers who fail to delegate will not have enough time to do much of anything well. With this knowledge, it’s no triviality to ask whether CEO Reed Hastings and his top executive team should be directly involved in hiring, or whether he should deleg ate this task to others. Because of its blazing growth, hiring top talent is a top priority at Netflix. But, it doesn’t hire the same people that other leading -edge Silicon Valley companies do. Patricia McCord, Netflix’s chief talent officer, says, “Googl e, for example , wants to reorganize the world’ s information. You do that by hiring as many smart, young people as fast as you can, put them in a petri dish, feed and water them, make it a place like home where they can live and collaborate all hours of the day.” By contrast, Netflix hires people with 7 to 15 years of experience. McCord says, “They’ re accomplished deliverers. You need to know your craft so you can make a contribution when you walk in. You need to be mature, with enough experience to be able to make independent decisions.” So, should Netflix’s top executives spend significant direct time hiring employees or should they delegate that responsibility ? From the perspective of managers not being “doers,” it seems that except for the people who rep ort directly to top managers, hiring should be done by managers at lower levels in the company. And, for a more mature company that’s been in business for much longer, that makes perfect sense. Netflix, however, despite being the industry leader, is only a decade and a half old, so its culture, that is, the beliefs and attitudes held by those in the company, is still malleable and changeable. Moreover, rapid growth is one of the best ways to destroy a culture. With so many new people coming into the compan y at the same time, it becomes even more difficult to pass on the informal rules and norms that guide everyday behavior. Likewise, top managers are responsible for developing attitudes of commitment and ownership and for creating a positive organizational culture through words and actions. For th ese critical reasons, Netflix’s top executives devote two to three hours a day to making sure that they hire the right people who fit into its “mature adults” culture ( for more information , see the description give n below). Allison Hopkins, vice president for human resources, said, “Most people at our levels don’t do it, but for us it’ s a priority; we have absolute veto. For example, a guy I interviewed recently expressed surprise at our open approac h to vacation ti me. He said, ‘I’ m a workaholic and never take time off; I need someone to ma ke sure I take my time or I won’ t use it.’ I told him, ‘We hire adults, and if you don’ t know how t o manage your vacation, you won’ t fit in.’” Finally, located near Silicon Valley which is home to Google, EBay, A pple, Hewlett -Packard, and Faceb ook, some of the most attractive employers in the world, what can Netflix provide in the way of pay, perks, and company culture that will attract, inspire, and motivate top talent to achieve organizational goals? Leading, which is the third management function, involves inspiring and motivating workers to work hard to achieve organizational goals. Since Netflix is in a phase of rapid growth and its top executives devote two to three hours a d ay to hiring, leading at Netflix also includes attracting and hiring top talent. The challenge for Netflix is to figure out how to do that with some of the most attractive employers of the world in its backyard. Their solution has three parts : aggressive market -based pay, development of a “mature adults” culture, and an incredible amount of freedom combined with strict accountability. In terms of pay, unlike the rest of Silicon Valley, Netflix does not pay bonuses ; but its salaries, which are adjusted each year, are pegged to the top of the market. Each year, Netflix’s human resource department adjusts salaries by asking the following three questions: • What could this person get elsewhere? • What would we pay for a replacement? • What would we pay to keep this p erson if they had a more lucrative offer elsewhere? Then, once the salary is determined, the person can take it in salary, or in salary plus stock options. While its aggressive salaries help attract top talent, Netflix believes that its “mature adults” culture helps retain them at the company. There’s no dress code, no security badges or checkpoints, no required hours, and no tracking of vacation time, save for anything beyond 30 days which requires approval. Patricia McCord, Netflix’s chief talent office r, says: “We focus on what people get done, not how many hours or days they worked. Have I ever fired a $100,000 employee for being tardy or late? Creative people come up with ideas outside of work.” Allison Hopkins, vice president for human resources, sai d, “[company] policies are written for the lowest common denominator. Here, we don’t have to do that. You don’ t have to write things down. When someone does something wrong, we tell them it was wrong. After that, either they g et it or they’ re out.” Finall y, Netflix gives its employees a tremendous amount of freedom. For example, the travel and entertainment spending policy has five words, “Act in Netflix’s best interests.” There are no lengthy rules. What the company will and won’t pay for is also not spel t out. Just, “act in Netflix’s best interests.” CEO Reed Hastings says that the “creative employee we compete for thrives on freedom. We’re more focused on the absence of procedure —managing through talented people rather than a rule book.” But, the aggres sive pay, the “mature adult” culture, and the freedom come with strict accountability. CEO Hastings summarizes the company attitude this way, “We are a performance culture based on intellectual prowess. We try to be fair, but [th e length of an employee’ s Netflix career] is not our primary concern. If someone is not extraordinary, we let them go.” It sounds harsh, but Allison Hopkins, vice president for human resources, believes that, “Keeping the house clean is essential to who we are. Too often, really goo d workers are frustrated at having to work with others who they perceive as average or worse performers. When we ask people why they chose us, they tel l us it’s not for the money. It’s the other stuff. [It’ s] ‘the places we wor ked didn’ t fire people they s hould have fired.’” Patricia McCord, Netflix’s chief talent officer, says Netflix managers use the “keeper test” when conducting annual performance reviews. Managers, she says, are expected to ask themselves, “Which of my people, if they told me they were leaving in two months for a similar job at a peer company, would I fight hard to keep at Netflix?” If you’re not a keeper, and typically three to five percent are not, you’re asked to leave. But McCord says, “We want them to keep their dignity. In many co mpanies, once I want you t o leave, my job is to prove you’ re incompetent. I have to give you all the documentation and fire you for poor performance. It can take months. Here, I write a check. We exchange severance for a release. To make Netflix a great co mpany, people have to be able to leverage it when they leave by subsequently getting good jobs.” She says, “Usually, people find new jobs quickly.” No one has sued. How well is this approach working? Well, the latest report as of this writing showed Netfl ix with a 52 percent increase in quarterly profit, a 34 percent increase in quarterly revenue, 3.1 million more subscribers, and for a total membership of over 20 million subscribers, 7.7 million who signed on in the last year. Those totals now exceed the number of subscribers held by subscription movie channels Showtime and Starz but are still below HBO, which has 28.3 million subscribers. Where did the growth come from? Internet video. CEO Hastings said, “the growth and acceptance of on -demand, click -and-watch Internet video as embodied by Netflix, Hulu and YouTube has been phenomenal.” Self-Assessment Is Management for You? Many managers begin their careers in management with specific ideas about what it means to be the boss. Although you may want to be a manager because of excitement, status, power, or rewards, knowing how to manage is not automatic : it requires specific skills and competencies, as well as a desire to manage. This assessment is meant to establish your baseline ability in the skills co vered in the chapter. It will not tell you whether you should or should not be a manager, or whether you have “what it takes” to be a manager. It will, however, give you feedback on general skills that influence your overall managerial style. Be candid as you complete the assessment by recording your answers to the following prompts . ML = Most like me SL = Somewhat like me NS = Not sure SU = Somewhat unlike me MU = Most unlike me 1. I can get others to do what I want them to do. ML SL NS SU MU 2. I frequently evaluate my job performance. ML SL NS SU MU 3. I prefer not to get involved in office politics. ML SL NS SU MU 4. I like the freedom that open -ended goals give me. ML SL NS SU MU 5. I work best when things are orderly and calm. ML SL NS SU MU 6. I enjoy making oral presentations to groups of people. ML SL NS SU MU 7. I am confident in my abilities to accomplish difficult tasks. ML SL NS SU MU 8. I do not like to write. ML SL NS SU MU 9. I like solving difficult puzzles. ML SL NS SU MU 10. I am an organized person. ML SL NS SU MU 11. I have difficulty telling others they made a mistake. ML SL NS SU MU 12. I like to work set hours each day. ML SL NS SU MU 13. I view paperwork as a trivial task. ML SL NS SU MU 14. I like to help others learn new things. ML SL NS SU MU 15. I prefer to work alone. ML SL NS SU MU 16. I believe it is who you know, not what you know, that counts. ML SL NS SU MU 17. I enjoy doing several things at o nce. ML SL NS SU MU 18. I am good at managing money. ML SL NS SU MU 19. I would rather back down from an argument than let it get out of hand. ML SL NS SU MU 20. I am computer literate. ML SL NS SU MU Scoring Start by reversing your sc ores for items 5, 8, 11, 15, and 16. For example, if you used ML, change it to MU, and vice versa; if you used SL, change it to SU, and vice versa. Now assign each answer a point value. Number of ML answers ____ times 5 points each = ____ Number of SL ans wers ____ times 4 points each = ____ Number of NS answers ____ times 3 points each = ____ Number of SU answers ____ times 2 points each = ____ Number of MU answers ____ times 1 point each = ____ TOTAL = ____ Interpreting the Score Here is what your score means. Scores range from 20 to 100. Higher scores indicate a better match between your current behaviors and tendencies and those needed for a career in management. If your score is low, it does not necessarily mean that you will have an unsuccessful ma nagement career. Examine your results more closely. Which items did you mark as most unlike you? Now think about how those items relate to the management functions and roles in the chapter. In order to be effective in areas you considered unlike yourself, you will most likely need to develop compensatory skills or behaviors to overcome those deficiencies. For example, one of the functions of management is organizing, so if you marked “I am an organized person” as “most unlike me,” you will definitely need t o begin developing your organizational skills. Source: P. Hunsaker, Management; A Skills Approach 2nd ed., p 24 –25. Copyright © 2005. Used by permission Pearson Education, Inc., Upper Saddle River, NJ. Management Decision Purpose Making decisions is part of every manager’s job. To give students practice at managerial decision making, each chapter contains a “Management Decision” and a “Management Team Decision” assignment, each focused on a particular decision. The students will need to decide what t o do in the given situation and then answer several questions to explain their choices. Setting It Up The instructor can introduce this case by asking students: “Should a company take steps that could anger consumers to maximize profits?” Should We Try to Make More Money? To say that the airline industry has experienced some struggles would be a huge understatement. Faced with fears over terrorist attacks and sharp rises in the price of oil, airlines have been losing money at historic rates. In 2009, on ly four domestic airlines were able to turn a profit, while the five largest carriers lost more than $3 billion combined. In the midst of these struggles, the industry found an unexpected, but highly lucrative, source of revenue —baggage. For many years, p assengers were allowed to travel with up to three pieces of luggage —one item to carry on the plane, and two larger items that could be checked into the storage area. In 2008, American Airlines became the first major airline to charge passengers who wanted to check their baggage. Though this additional fee was much reviled, other airlines quickly followed suit, charging $15 –35 per bag for each portion of a round -trip flight. The net effects of baggage fees have been incredible. In 2009, the airlines combine d to collect nearly $2 billion in baggage fees alone; Delta Airlines led the entire industry with $550 million. The baggage fees have also led passengers to check fewer bags. This has allowed airlines to dedicate more space to cargo, which commands a premi um price. What is more, there has been a reduction in the number of mishandled bags, which led to an additional $94 million in savings. Best of all, all of this was essentially “free money” —the airlines did not lower their fares after charging for checked baggage, and they have not had to increase other expenses (such as labor) to collect the fees. All told, the checked bag fees have been such a success that Spirit Airlines now charges $45 for carry -on baggage that is stored in overhead bins. You are a man ager of the lone holdout, Southwest Airlines, which allows passengers to check two bags with no charge. While Southwest has remained profitable during the industry’s struggles, it is difficult to see competitors rake in millions of dollars in additional re venue with virtually no labor. You begin to wonder if your company shouldn’t also charge for bags so that it can maintain a competitive edge. After all, as you well know, the airline industry is unpredictable, and your company could find itself in deep str uggles very q uickly. Sources: Christopher Elliott “Airlines make a bundle by ‘unbundling’ flight fees .” The Seattle Times. April 7, 2010 . Accessed at: http:// seattletimes.nwsource.com/html/travel/2011539200_webtroubleshooter06.html/ [accessed September 30, 2016] ; Hugo Martin “Spirit Airlines launches $45 carry -on fee.” Los Angeles Times. April 07, 2010 . Accessed at: http://articles.latimes.com/2010/apr/07/business/la -fi-spirit7 -2010apr07 [accessed September 30, 2016] ; Christine Negroni “Less Baggage, Big Savings to Airlines” New York Times. April 6, 2010 . Accessed at: http://www.nytimes.com/2010/04/ 07/business/07bags.html?src=me [accessed September 30, 2016] . Questions 1. How is this decision emblematic of your job as a manager? In the broadest s ense, management is about getting work done through others. Managers do not do the work of a company themselves but oversee and supervise those who do to ensure that it is done with efficiency and effectiveness. Efficiency refers to the performance of work with minimum effort, expense, and waste, while effectiveness is the performance of work that helps fulfill the organization’s objectives, which can range from customer service and employee satisfaction to maximizing profits. In this broad sense, the quest ion of whether to charge for baggage is directly relevant to the issue of effectiveness. As described in the case, baggage fees provide an easy source of revenue for airlines since they involve virtually no additional cost or labor. At the same time, custo mer reaction against baggage fees has been negative, and your company is in the unique position of being able to say that it does not try to squeeze every dollar out of its passengers. While charging for bags may boost the company’s bottom line in the shor t-term, in the long run, the additional fees may lead passengers to turn to the company’s competitors, leading to decreased sales and revenues. Therefore, the question of whether to charge for bags lies at the heart of the concept of manage ment ––to achieve effectiveness. The decision of whether to charge for bags is also representati ve of the choices that middle managers face. While top managers are responsible for creating the culture of a company and first -line managers are responsible for teaching, midd le managers are responsible for setting objectives consistent with top management’s goals and implementing strategies for achieving those objectives. Therefore, middle managers are responsible for planning and allocating resources to meet objectives; coord inating and linking groups, departments, and divisions within a company; monitoring and managing the performance of company subunits and individuals who report to them; and implementing the changes and strategies generated by top managers. The decision to charge for bags involves determining the best method for achieving the organization’s goal , which is to maximize profits. The manager must also function in the monitor role to decide whether the organization should charge its passengers for their baggage. In the monitor role, managers scan their environment for information, actively contact others for information, and, because of their personal contacts, receive a great deal of unsolicited information. Before deciding whether to charge for bags or not, man agers should study how baggage charges have affected competing airlines. They should find out how the se charges have benefited the airlines . They should also identify how they have harmed the airlines . By doing so, they can have a reasonable idea of how th eir company will be affected. The manager in this case will also fulfill the role of the entrepreneur, in which managers will adapt themselves, their subordinates, and their units to change. The decision to charge for baggage will involve new procedures an d new policies, and it is the manager’s duty to help company personnel adapt to the necessary changes. 2. What are the advantages and disadvantages of following competitors by charging for checked baggage? The primary advantage of the company is that it wou ld gain access to an easy source of revenue, which is critically important in an industry that is as unstable as the airline industry. By charging for bags, which may lead to the discovery of other sources of revenue, the airline in this case would be able to keep up with competitors that are making hundreds of millions of dollars by doing nothing more than what they were already doing. The primary disadvantage of charging for bags is that the company w ould lose out on its distinctiveness. It would, in othe r words, be just another airline, and consumers may feel that there is little incentive for them to purchase travel from the airline. Group Activity Purpose In this case study, student groups are asked to consider how they would resolve a significant conflict between a co mpany and its largest investor. Setting It Up The instructor could a sk the students: “How far should a company go to make its investors happy? What if the investor wanted the company to go in a com pletely new direction?” Saying No to an Investor You have never though t much about soft drinks before, but ever since your kids started going to junior high school and ordering their own lunches, you’ve become more and more concerned about how much of the sugary, calorie -loaded drinks they c onsume every day. And not just with your own kids, you wanted to do something to help kids and parents find delicious alternatives to unhealthy carbonated drinks. So it seemed quite fortunate when you got a management position at Honest Tea, a beverage com pany that is dedicated to providing wholesome, healthy teas and juices that use all -natural, organic, unprocessed ingredients. The company proudly displays its commitment to natural, wholesome ingredients by including a label on all of its products that says “No High Fructose Corn Syrup,” a sweetener that has been heavily criticized for increasing obesity, symptoms of diabetes, liver disease, and even conta ining trace amounts of mercury. While the label is a small, but very public, part of the company’s ov erall strategy of highlighting the company’s commitment to quality ingredients, it has caused a serious conflict with a huge investor. When Seth Goldman and Barry Nalebuff started Honest Tea, they had a great time inventing new flavor combinations. What wa s hard for them was finding stores that would sell their products. They went from store to store with their teas in insulated containers or sample bottles m ade from empty Snapple bottles. A few years ago, however, Coca -Cola bought a 40 percent stake in Ho nest Tea for $43 million. And while the cash infusion was great for the company, what was even better was that Coca - Cola was able to give a huge boost in distribution. Honest Tea was able to take advantage of Coca -Cola’s nationwide network of distributors, so that it could find a place for its products in stores, restaurants, and cafes all over the country. But the investment from Coca -Cola had its downside, as well. Coca -Cola executives were quite disturbed by the “No High Fructose Corn Syrup” label. Whil e it was meant to tout the healthiness of Honest Tea’s products, the Coca -Cola people saw it as an implicit criticism of its own products, most of which use high fructose corn syrup. So senior managers from Coca -Cola approached Honest Tea w ith a request —change the label so that it says “sweetened with organic cane sugar” or “no fake stuff,” or better yet, just g et rid of the label altogether. While you and the other managers at Honest Tea want to maintain a good relationship with Coca -Cola, you’re worried that any changes to the label will violate the company’s philosophical commitments. Some worry that removing the label altogether will go against the company’ s commitment of letting people know that the products contain no hidden ingredients. Others argue that changing the label at all will be misleading, since it wouldn’t be crystal clear to consumers that the ingredients are not artificial or highly processed. But at the same time, you and the other managers don’t want to anger Coca -Cola, who not only own s 40 percent of your company, but has an option to pu rchase all of it in the future. You and other senior managers have been assigned to a team that will engage in negotiations with Coca -Cola. How will you respond to your biggest investor? Will you give i n to Coca -Cola’s wishes ; and if yes, how? Or, will you decide just to stick to your guns and do nothing? For this exercise, assemble a team of five students to act as the management team. Source: Elizabeth Olson , “Can Honest Tea Say No t o Coke, Its Bigges t Investor?” The New York Times , 8 July 2010 available online at http://www.nytimes.com/2010/07/08/business/smallbusiness/08sbiz.html?dbk (accessed October 30, 2017). Questions 1. How is this decision emblematic of a manger’s role as a liaison? In the liaison role, managers must deal with people outside of their units or companies. In this case, the managers at Honest Tea are fulfilling the liaison role when they nego tiate with Coca -Cola’s demands. 2. How would your team choose to respond to Coca -Cola’s request? Students’ r esponses will vary. Practice Being a Manager Finding a Management Job Management is a wide -ranging and exciting area of work. One way to gain a sens e of the possibilities is to study the advertisements for management job openings. Companies advertise their management openings in a variety of ways, including print advertisements in such newspapers as the Wall Street Journal (especially its Friday caree r section) and online ads at job sites such as Indeed .com and Linkedin . Step 1: Find a job that you’d like to have. Search through the newspaper and online ads and try to locate several detailed job descriptions for management positions. Select the one th at you find most appealing —a job that you could picture yourself interviewing for either in the near future or later in your career. Do not be too concerned about your current qualifications in making your selection ; but you should see realistic prospects of meeting the qualifications over time (if the job requires an MBA, for example, you should see yourself completing this degree sometime in the future). Print your selected detailed job description , and bring it to your next class session. Step 2: Share your job description. In class, your professor will divide everyone into pairs or group s of three members . Write your name on your selected management job description, and exchange your job description with your partner(s). Each member of the pair or triad should now have a job description other than their own. Step 3: Think like a hiring manager. Read the job description you received from your partner. Imagine that you are the manager responsible for hiring someone to fill this position. A human resources specialist in your company has already screened all the applicants’ resume s and background s. Thus, you may assume that your partner has met all the basic qualifications for the job. Your job as a senior manager is to ask the person questions that might g o beyond the resume ––what might you ask to learn if someone is well suited to thrive in this job and in your company? Step 4: Take turns interviewing each other . Each member of the group should be briefly interviewed (5 -10 minutes) for the job that he or s he selected. Step 5: Debrief. Discuss your experiences with your partner(s). What was it like to be interviewed for your selected position? What was it like to role -play interviewing someone for a management position? Now imagine the real thing. Brainstor m about how you might prepare yourself over time to be the top candidate for an attractive management position and a senior manager responsible for hiring the best -qualified managers for your company. Step 6: Discuss with the class. Share your interview e xperiences and brainstorming ideas with the class. Do you hear any similarities across the pairs or triads? What ideas or questions are most significant to you as you consider management job interviews? Develop Your Career Potential Interview Two Manager s Welcome to the first “Develop Your Career Potential” activity! These assignments have one purpose: to help you develop your present and future capabilities as a manager. What you will learn through these assignments is not traditional “book learning” ba sed on memorization and regurgitation, but practical knowledge and skills that help managers perform their jobs better. Lessons from some of the assignments —for example, goal setting —can be used for immediate benefit. Other lessons will obviously take time to accomplish, but you can still benefit now by making specific plans for future improvement. Step 1: Interview two practicing managers. In her book Becoming a Manager: Mastery of a New Identity , Harvard Business School professor Linda Hill conducted ex tensive interviews with 19 people in their first year as managers. To learn firsthand what it’s like to be a manager, interview two managers whom you know, asking them some of the same questions, listed below, that Hill asked her managers. Be sure to inter view managers with different levels of experience. Interview one person with at least 5 years’ experience as a manager and then interview another person with no more than 2 years’ experience as a manager. Ask the managers these questions: 1. Briefly describe your current position and responsibilities. 2. What do your subordinates expect from you on the job? 3. What are the major stresses and challenges you face on the job? 4. What, if anything, do you dislike about the job? 5. What do you like best about your job? 6. What a re the critical differences between average managers and top -performing managers? 7. Think about the skills and knowledge that you need to be effective in your job. What are they, and how did you acquire them? 8. What have been your biggest mistakes thus far? Co uld you have avoided them? If so, how? Step 2: Prepare to discuss your findings. Prepare to discuss your findings in class or write a report (if assigned by your instructor). What conclusions can you draw from your interview data? Source: L. A. Hill, Becoming a Manager: Mastery of a New Identity (Boston: Harvard Business School Press, 1992).