Transcript Slide 1

Tuesday Morning
Management, (Planning, Leading,
Organizing, Controlling),
Motivation, Balanced Scorecard
Name Game!
Management
• Management -- The process used to
accomplish organizational goals through
planning, organizing, leading and
controlling people and other organizational
resources.
Four Functions of Management
– Planning - Includes defining goals, establishing strategy,
and developing plans to coordinate activities
– Organizing - Includes determining what tasks to be done, who is
to do them, how the tasks are to be grouped, who reports to
whom, and where decisions are to be made
– Leading - Includes motivating employees, directing the activities of
others, selecting the most effective communication channel, and
resolving conflicts
– Controlling - The process of monitoring performance, comparing it
with goals, and correcting any significant deviations
Planning – Sharing the Vision
• Vision -- More than a goal, it’s a broad explanation of
why the organization exists and where it’s trying to go.
• John Kennedy - “We choose to go to the moon.”
• Google - Google's mission (to me this is closer to a vision) is to
organize the world's information and make it universally
accessible and useful. (Motto – (“Do no evil”)
Planning – Defining the Mission
• Mission Statement -- Outlines the organization’s
fundamental purposes. It includes:
- The organization’s self–concept.
- Its philosophy.
- Long–term survival needs.
- Customer needs.
- Social responsibility.
- Nature of the product or service.
- Fast Company magazine – November 2009
Creating a Vision/Mission Statement
•
•
BHAG – Big Hairy Audacious Goal (Built to Last)
– "A computer on every desk and in every home, all running Microsoft
software.“
– "Every book ever printed, in any language, all available in less than 60
seconds.“ Amazon’s Kindle
– To improve lives by mobilizing the caring power of communities. United Way
– Respect, integrity, communication, and excellence. Enron!!
– Google’s 10 Things We Know to be True
“Write a mission statement with a goal that's an action, not a sentiment; that is
quantifiable, not nebulous. If you're trying to sell a product, how and how many? If
you're trying to change lives, how and whose? Take your wonky mission statement
and rip it to shreds. Then ponder your ambitions, and write and rewrite the thing
until it reflects -- in real, printable words and figures -- the difference that you
want to make.” – Fast Company, November 2009
Strategic, Tactical, and Operational Planning
• Strategic Planning -- Done by top management and
determines the major goals of the organization and the
policies, procedures, strategies and resources it will
need to achieve them. (long range, >1 year)
• Tactical Planning -- The process of developing
detailed, short-term statements about what is to be
done, who is to do it and how. (typically about 1 year)
• Operational Planning -- The process of setting work
standards and schedules necessary to implement the
company’s tactical objectives. (daily, weekly, monthly)
SWOT Analysis
• Analyzes a company’s internal strengths and weaknesses and
their external opportunities and threats
SWOT Analysis for AE
•
•
Strengths - American Eagle has maintained a cash position of $470 million in cash and Treasury
securities which management believes is an extraordinary accomplishment in a difficult market.
Stand alone “Aerie” stores comped slightly positive for the fiscal year. The collection offers Dorm
wear and Intimates for AE girl, and has been generally well received among women. AEO
management is well knowledgeable that they must focus on AE women’s business in order to
further grow the company. AEO management has been able to reach targeted inventory levels as a
result of heavy discounting which should help them going forward. Direct businesses improved
tremendously over the year with sales reaching $307 million which was a 26% increase.
Weaknesses – The fourth quarter was a dismal conclusion for AEO. EPS declined 71% as a result of
heavy discounting and weak traffic through malls. Margins were sacrificed as a result to move
inventory thus hindering profitability and potentially causing a negative effect on the AEO brand
name. AEO’s operations of Martin + OSA have been unsuccessful. Although the division seemed to
be doing well this revenue growth was driven by promotions. Martin + OSA targets customers in the
28 – 40 year old range which is an extremely difficult target to reach with proposed product lines.
Numerous analysts expect the division to be scrapped if profitability does not improve this year.
Overall AEO saw customers increase the level of purchases but overall profit was down due to
discounting the majority of items at buy one get one 50% off. The overall increase in stores did not
cover the decline in revenues.
SWOT Analysis for AE
•
•
•
Opportunities - The economy is expected to come out of the recession in the second half of
2009 and begin recovery next year. This means that the overall sector should begin to
perform well thus giving AEO and its competitors a reason to rally. AEO has also done a good
job of hiring Roger Markfield in order to “reinvigorate” the AEO brand. Management has
shifted focus to truly important areas such as increase in intimate apparel to resonate better
with the AE girl. This includes increasing the availability of sizes, fits, colors, and patters. A
potential opportunity also exists from the fact that inventories are now at proper levels. This
should give American Eagle better position going forward as inventory per square foot
declines causing an increase in profit margins. AEO also plans to shift sourcing and
production to Cambodia and Vietnam. Management has also initiated some other cost
cutting measures such as a $50 million dollar reduction in headcount and supply chain
management. Opportunities also exist in managements plans to open 17 new aerie stand
alone stores and 11 new AE locations including a flagship location in the Times sq, area in
NYC.
Threats - As the rest of the retail industry, a lasting recession can negatively affect future cash
flows of AEO and its competitors. A lasting threat also exists from the lack of predictability of
teen fashions. The industry itself is highly competitive with substitutes arising quickly. AEO’s
brand Martin + OSA dragged EPS down $ 0.21 as the brand has not been well received with
the targeted consumer. AEO also carries a carrying value of various Auction Rate Securities of
$261.56 million. (Refer to following chart). Furthermore it seems that American Eagle is
opening to many stores too quickly, and is trying to expand at a rate that is unsustainable,
which will cause significant issues in the near future.
Source:
http://www.siena.edu/uploadedfiles/home/academics/schools_and_departments/school_of
_business/Umansky AEO_Report_V2.pdf
Generic Decision Making Model
1. Define the situation.
2. Describe and collect needed information.
3. Develop alternatives.
4. Develop agreement among those involved.
5. Decide which alternative is best.
6. ****Do what is indicated.****
7. Determine whether the decision was a good one and
follow up.
Decision Making Example
Criteria and Weights in Car-Buying Decision
(Scale of 1 to 10)
Assessment of Car Alternatives
Weighting of Vehicles
(Assessment Criteria × CriteriaWeight)
Organizational Chart
Organization Chart -- A visual device that
shows relationships among people and
divides the organization’s work; it shows
who reports to whom.
LEVELS of MANAGEMENT
– also corresponds to planning
Top Management
• Chief Executive Officer (CEO)
- Introduces change into an organization.
• Chief Operating Officer (COO)
- Implements CEO’s changes.
• Chief Financial Officer (CFO)
- Obtains funds, plans budgets, collects funds, etc.
• Chief Information Officer (CIO)
- Gets the right information to the right people so
decisions can be made.
Managerial Skills
• Technical Skills -- The ability to perform tasks in a
specific discipline or department.
• Human Relations Skills -- Skills that involve
communication and motivation; they enable managers to
work through and with people.
• Conceptual Skills -- Skills that involve the ability to
picture the organization as a whole and the relationship
among its various parts.
Best and Worst CEOs
• From the April 2009 issue of Portfolio
magazine
• CEO of the decade – Fortune Magazine
• Future CEOs May Need to Have Broad LiberalArts Foundation
SKILLS NEEDED at VARIOUS
LEVELS of MANAGEMENT
Leadership
• Leaders must:
- Communicate a vision and rally others around that vision.
- Establish corporate values.
- Promote corporate ethics.
- Embrace change.
- Stress accountability and responsibility
-
Transparency -- The presentation of the company’s facts and
figures in a way that is clear and apparent to all stakeholders
• Managers carry out a leader’s vision
Leadership Examples
• Jim Collins – Good to Great
• George Steinbrenner - “Some guys can lead through
real, genuine respect,” he told Cleveland magazine in
1974. “There are some guys who people would walk
through a wall for, O.K., but I’m not that kind of a
leader.” He likened himself to George Patton: “He was a
gruff son of a bitch and he led through fear. I hope I
don’t lead through fear, and I would hope it was more
love and respect, but maybe it isn’t.”
• Steve Jobs – three of three (2/6) – 1:20-3:03
• Dominic Barton – Managing Director at McKinsey
Motivation
• You Get the Behavior You Reward!!!
Motivation, part 2
• The idea that competition and reward are effective motivators
forms the bedrock of our educational, economic, and
managerial systems. Kohn, though, has strongly attacked the
belief that competition is healthy and has documented its
negative effects in No Contest: The Case against Competition
(1986). Now he challenges the widely held assumption that
incentives lead to improved quality and increased output in
the workplace and in schools. He notes that the system of
rewards and punishment is based on Pavlovian and Skinnerian
behavioral theories, which are supported largely by
experiments with laboratory animals. Kohn derides rewards as
bribes and offers instead the proposition that collaboration
(teamwork), content (meaningfulness), and choice
(autonomy) will serve to motivate both students and workers.
Maslow’s Theory of Motivation
 Based on a hierarchy of needs:
 Physiological – food, clothing, shelter
 Security – protection, safety
 Social – love, affection, part of something
bigger
 Esteem – need to be recognized for your
skills and contributions
 Self-actualization – personal self-fulfillment,
desire to be the best you can be
Maslow’s Heirarchy
Herzberg’s Motivators and
Hygiene Factors
Motivators
Work itself
Achievement
Recognition
Responsibility
Growth and
advancement
Hygiene Factors
Company policy and
administration
Supervision
Working conditions
Interpersonal relations
Salary, status and job
security
Goal Setting Theory
• Goal-Setting Theory -- Setting ambitious but
attainable goals can motivate workers and improve
performance if the goals are accepted, accompanied
by feedback, and facilitated.
• SMART Goals
• Specific, Measureable, Attainable, Relevant, Time-based
Applying Goal Setting Theory
• Management by Objectives (MBO) -Involves a cycle of discussion, review and
evaluation of objectives among top and
middle-level managers, supervisors and
employees.
• Managers formulate goals in cooperation with
everyone.
• Need to monitor results and reward
achievement.
Contrarian View
• The End of Management
Using Empowerment as a Competitive
Advantage
• Empowerment -- Giving frontline workers the responsibility,
authority, and freedom to respond quickly to customer requests.
e.g., restaurants, hotels, credit card companies
•
Progressive leaders give employees the authority to make
decisions on their own without consulting a manager.
• Companies need to share information with its employees
• Employees feel a greater sense of ownership, responsibility,
satisfaction, fulfillment, and productivity
• Customer needs are handled more quickly.
• Manager’s role becomes less of a boss and more of a coach.
Organizing
• Create a division of labor
• Set up teams or departments
• Allocate resources
• Assign tasks
• Establish procedures
• Adjust to new realities
Some Basic Organizational Concepts
• Chain of Command
– The continuous line of authority that extends from upper organizational
levels to the lowest levels and clarifies who reports to whom.
• Unity of Command
– The management principle that no person should report to more than one
boss.
• Span of Control
– The number of subordinates a manager can direct efficiently and
effectively.
– Has increased over the years as a way to reduce costs and speed decision
making (technology helps!); also with better training, employees need less
supervision; at higher levels, hard to have large span of control
• Tall versus Flat Structure
Organizational Culture
• Organizational or Corporate Culture -- The
widely shared values within an organization that
foster unity and cooperation to achieve common
goals
• Some of the best organizational cultures
emphasize service.
• Culture is shown in stories, traditions and myths.
• American Eagle statement on culture
Organizational Culture, part 2
• Organization Culture
– Is a system of shared meanings within an organization that determine
how employees act.
– Has shared values in its cultural elements:
• Stories, rituals (graduation), material symbols (Nike swoosh), and language
unique to the organization
• Google’s TGIF (page 6) – follow-up
– Results from the interaction between:
• The founders’ biases and assumptions
• What the first employees learn subsequently from their own experiences.
– Influences structure:
• Strong culture substitutes for rules and regulations. Employees learn such
things via the culture, not via rules and regs
– A strong culture may be difficult to change
• Could act as a barrier to acceptance of change in corporate strategies
• Will Apple’s Culture Hurt the iPhone?
Five Steps of Controlling
Evaluating Performance
• Traditional forms of measuring success are
financial.
• Pleasing employees, stakeholders and customers
(both internal and external) are important.
• In response to this need to evaluate performance
across multiple dimensions, the Balanced
Scorecard was developed
The Balanced Scorecard
• The balanced scorecard attempts to show in one report
the various aspects of performance that are critical to the
short and long-term success of the organization
• The firm first needs to articulate its goals, and then
translate those goals into specific measures
• There are four parts to the balanced scorecard:
 financial measures
 customer measures
 internal processes
 innovation and improvement
© 2008 Prentice Hall, Inc. All
rights reserved.
13–40
Financial Measures
• Focus is on how does the company look to shareholders
• The report should recognize the shortcomings of financial
measures (particularly their emphasis on short-term
performance)
• The report should also recognize the need for a financial
perspective: improvements in any of the other 3 parts of
the report need to eventually be reflected in the bottom
line
• Examples: Profit margin, return on assets, ROI
Customer Measures
• This part of the report takes an external focus and looks at
what measures of performance are critical for satisfying the
firm’s customers
• These measures include time (time to market, waiting times),
quality, and service (satisfaction levels, response rates)
• Use of standard measures such as JD Powers surveys or
benchmarking studies is appropriate here
• Such a focus is necessary since customers demand it
Internal Perspective
• This part of the report focuses in on what
areas the firm must excel at in order to
succeed
• This section emphasizes business processes
(manufacturing lead time, distribution
methods)
• The firm’s information system is critical in
order to both assist and monitor the internal
business processes
Innovation and Improvement
• This section attempts to measure whether or
not the firm is continuing to improve and add
value
• For many firms, employee development is a
critical factor, and is measured as part of this
area
• Other examples of measures here would be
the percentage of sales from new products,
R&D expenditures, employee turnover
Balanced Scorecard Example
• Apple Computer
– financial: shareholder value
– customer: market share and customer satisfaction
surveys
– internal processes: core competencies (time to
market with new product idea, effective
distribution systems (backorder time)
– innovation: percent of sales from new products
The Balanced Scorecard:
Non-financial Measures
The balanced scorecard relies on non-financial measures in addition to financial
measures for two reasons:
 Financial measures are lag indicators that summarize the results of past
actions. Non-financial measures are leading indicators of future financial
performance.
 Top
managers are ordinarily responsible for financial performance measures
– not lower level managers. Non-financial measures are more likely to be
understood and controlled by lower level managers.
The Balanced Scorecard
A balanced scorecard should have measures
that are linked together on a cause-and-effect basis.
If we improve
one performance
measure . . .
Then
Another desired
performance measure
will improve.
The balanced scorecard lays out concrete actions to attain
desired outcomes.
The Balanced Scorecard
Jaguar Example
Profit
Financial
Contribution per car
Number of cars sold
Customer
Customer satisfaction
with options
Internal Business
Processes
Learning
and Growth
Number of
options available
Time to
install option
Employee skills in
installing options
The Balanced Scorecard
Jaguar Example
Profit
Contribution per car
Number of cars sold
Customer satisfaction
with options
Results
Satisfaction
Increases
Strategies
Increase
Options
Increase
Skills
Number of
options available
Time to
install option
Employee skills in
installing options
Time
Decreases
The Balanced Scorecard
Jaguar Example
Profit
Contribution per car
Results
Number of cars sold
Customer satisfaction
with options
Strategies
Increase
Options
Number of
options available
Time to
install option
Employee skills in
installing options
Cars sold
Increase
Satisfaction
Increases
The Balanced Scorecard
Jaguar Example
Results
Profit
Contribution per car
Contribution
Increases
Number of cars sold
Customer satisfaction
with options
Number of
options available
Time to
install option
Strategies
Increase
Skills
Employee skills in
installing options
Time
Decreases
The Balanced Scorecard
Jaguar Example
If number
of cars sold
and contribution
per car increase,
profits
increase.
Results
Profit
Profits
Increase
Contribution per car
Contribution
Increases
Number of cars sold
Customer satisfaction
with options
Satisfaction
Increases
Strategies
Increase
Options
Increase
Skills
Number of
options available
Time to
install option
Employee skills in
installing options
Time
Decreases