What helped spur inroads against workplace gender discrimination in the 1970s? quizlet

18. A statement of purpose, describing who the company is and what it does.
Figure 8.13 Visual Elements of Culture
Mission Statement
A mission statement18 is a statement of purpose, describing who the company is and what it does. It serves an important function for organizations as part of the first facet of the planning P-O-L-C function. But, while many companies have mission statements, they do not always reflect the company's values and its purpose. An effective mission statement is well known by employees, is transmitted to all employees starting from their first day at work, and influences employee behavior.
Some mission statements reflect who the company wants to be as opposed to who they actually are. If the mission statement does not affect employee behavior on a day-to-day basis, it has little usefulness as a tool for understanding the company's culture. Enron provided an often-cited example of a disconnect between a company's mission statement and how the company actually operated. Their missions and values statement started with "As a partner in the communities in which we operate, Enron believes it has a responsibility to conduct itself according to certain basic principles." Their values statement included such ironic declarations as "We do not tolerate abusive or disrespectful treatment.
Ruthlessness, callousness and arrogance don't belong here."Kunen, J. S. (2002, January 19). Enron's vision (and values) thing. The New York Times, 19.
A mission statement that is taken seriously and widely communicated may provide insights into the corporate culture. For example, the Mayo Clinic's mission statement is "The needs of the patient come first." This mission statement evolved from the founders who are quoted as saying, "The best interest of the patient is the only interest to be considered." Mayo Clinics have a corporate culture that puts patients first. For example, no incentives are given to physicians based on the number of patients they see. Because doctors are salaried, they have no interest in retaining a patient for themselves, and they refer the patient to other doctors when needed.Jarnagin, C., & Slocum, J. W., Jr. (2007). Creating corporate cultures through mythopoetic leadership. Organizational Dynamics, 36, 288-302. Wal-Mart may be another example of a company that lives its mission statement and therefore its mission statement may give hints about its culture: "Saving people money so they can live better."Wal-Mart Stores, Inc. (2008). Investor frequently asked questions. Retrieved November 20, 2008, from http://walmartstores.com/Investors/7614.aspx
Rituals
Rituals19 refer to repetitive activities within an
organization that have symbolic meaning.Anand, N.
(2005). Blackwell Encyclopedic Dictionary of Management.
Cambridge: Wiley. Usually rituals have their roots in the
history of a company's culture. They create camaraderie
and a sense of belonging among employees. They also
serve to teach employees corporate values and create
identification with the organization. For example, at the
cosmetics firm Mary Kay Inc., employees attend
ceremonies recognizing their top salespeople with an
award of a new car—traditionally a pink Cadillac. These
ceremonies are conducted in large auditoriums where
participants wear elaborate evening gowns and sing
company songs that create emotional excitement.
During this ritual, employees feel a connection to the
company culture and its values such as self-
determination, willpower, and enthusiasm.Jarnagin, C., & Slocum, J. W., Jr. (2007). Creating corporate cultures through mythopoetic leadership. Organizational Dynamics, 36, 288-302. Another example of rituals is the Saturday morning meetings of Wal-Mart. This ritual was first created by the company founder Sam Walton, who used these meetings to discuss which products and practices were doing well and which required adjustment. He was able to use this information to make changes in Wal-Mart's stores before the start of the week, which gave him a competitive
advantage over rival stores who would make their adjustments based on weekly sales figures during the middle of the following week. Today, hundreds of Wal-Mart associates attend the Saturday morning meetings in the Bentonville, Arkansas, headquarters. The meetings, which run from 7:00 a.m. to 9:30 a.m., start and end with the Wal-Mart cheer; the agenda includes a discussion of weekly sales figures and merchandising tactics. As a ritual, the meetings help maintain a small-company atmosphere, ensure employee involvement and accountability, communicate a performance orientation, and demonstrate taking quick action.Schlender, B. (2005, April 18). Wal-Mart's $288 billion meeting. Fortune, 151, 90-106; Wal around the world. (2001, December 8). Economist, 361, 55-57.
Rules and Policies
Another way in which an observer may find out about a company's culture is to examine its rules and policies. Companies create rules to determine acceptable and unacceptable behavior and, thus, the rules that exist in a company will signal the type of values it has. Policies about issues such as decision making, human resources, and employee privacy reveal what the company values and emphasizes. For example, a company that has a policy such as "all pricing decisions of merchandise will be made at corporate headquarters" is likely to have a centralized culture that is hierarchical, as opposed to decentralized and empowering. The presence or absence of policies on sensitive issues such as English-only rules, bullying and unfair treatment of others, workplace surveillance, open-door policies, sexual harassment, workplace romances, and corporate social responsibility all provide pieces of the puzzle that make up a company's culture. This highlights how interrelated the P-O-L-C functions are in practice. Through rules and policies, the controlling function affects the organization's culture, a facet of organizing.

Physical Layout
A company's building, layout of employee offices, and other workspaces communicate important messages about a company's culture. For example, visitors walking into the Nike campus in Beaverton, Oregon, can witness firsthand some
the distinguishing characteristics of the company's culture. The campus is set on 74 acres and boasts an artificial lake, walking trails, soccer fields, and cutting-edge fitness centers. The campus functions as a symbol of Nike's values such as energy, physical fitness, an emphasis on quality, and a competitive orientation. In addition, at fitness centers on the Nike headquarters, only those using Nike shoes and apparel are allowed in. This sends a strong signal that loyalty is expected. The company's devotion to athletes and their winning spirit are manifested in campus buildings named after famous athletes, photos of athletes hanging on the walls, and their statues dotting the campus.Capowski, G. S. (1993, June) Designing a corporate identity. Management Review, 82, 37-41; Collins, J., & Porras, J. I. (1996). Building your company's vision. Harvard Business Review, 74, 65-77; Labich, K., & Carvell, T. (1995, September 18). Nike vs. Reebok. Fortune, 132, 90-114; Mitchell, C. (2002). Selling the brand inside. Harvard Business Review, 80, 99-105.
The layout of the office space also is a strong indicator of a company's culture. A company that has an open layout where high-level managers interact with employees may have a culture of team orientation and egalitarianism, whereas a company where most high-level managers have their own floor may indicate a higher level of hierarchy. Microsoft employees tend to have offices with walls and a door because the culture emphasizes solitude, concentration, and privacy. In contrast, Intel is famous for its standard cubicles, which reflect its egalitarian culture. The same value can also be observed in its avoidance of private and reserved parking spots.Clark, D. (2007, October 15). Why Silicon Valley is rethinking the cubicle office. Wall Street Journal, 250, B9. The degree to which playfulness, humor, and fun are part of a company's culture may be indicated in the office environment. For example, Jive Software boasts a colorful, modern, and comfortable office design. Their break room is equipped with a keg of beer, free snacks and sodas, an Xbox 360, and Nintendo Wii. A casual observation of their work environment sends the message that employees who work there see their work as fun.Jive Software. (2008). Careers. Retrieved November 20, 2008, from http://www.jivesoftware.com/company.
Stories and Language
Perhaps the most colorful and effective way in which organizations communicate their culture to new employees and organizational members is through the skillful use of stories. A story can highlight a critical event an organization faced and the organization's response to it, or a heroic effort of a single employee illustrating the company's values. The stories usually engage employee emotions and generate employee identification with the company or the heroes of the tale. A compelling story may be a key mechanism through which managers motivate employees by giving their behavior direction and by energizing them toward a certain goal.Beslin, R. (2007). Story building: A new tool for engaging employees in setting direction.

How Do Cultures Change?
As emphasized throughout this chapter, culture is a product of its founder's values, its history, and collective experiences. Hence, culture is part of a company's DNA and is resistant to change efforts. Unfortunately, many organizations realize that their current culture constitutes a barrier against organizational productivity and performance. Particularly when there is a mismatch between an organization's values and the demands of its environment, changing the culture becomes the key to the company turnaround.
Achieving culture change is challenging, and there are many companies that ultimately fail in this mission. Research and case studies of companies that successfully changed their culture indicate that the following six steps increase the chances of success.Schein, E. H. (1990). Organizational culture. American Psychologist, 45, 109-119.

Creating a Sense of Urgency
For the change effort to be successful, it is important to communicate the need for change to employees. One way of doing this is to create a sense of urgency on the part of employees, explaining to them why changing the fundamental way in which business is done is so important. In successful culture change efforts, leaders communicate with employees and present a case for culture change as the essential element that will lead the company to eventual success. As an example, consider the situation at IBM in 1993 when Lou Gerstner was brought in as CEO and chairman. After decades of dominating the market for mainframe computers, IBM was rapidly losing market share to competitors, and its efforts to sell personal computers—the original PC—were seriously undercut by cheaper "clones." In the public's estimation, the name IBM had become associated with obsolescence. Gerstner recalls that the crisis IBM was facing became his ally in changing the organization's culture. Instead of spreading optimism about the company's future, he used the crisis at every opportunity to get buy-in from employees.Gerstner, L. V. (2002). Who says elephants can't dance? New York: HarperCollins.
Changing Leaders and Other Key Players
A leader's vision is an important factor that influences how things are done in an organization. Thus, culture change often follows changes at the highest levels of the organization. Moreover, to implement the change effort quickly and efficiently, a company may find it helpful to remove managers and other powerful employees who are acting as a barrier to change. Because of political reasons, self-interest, or habits, managers may create powerful resistance to change efforts. In such cases, replacing these positions with employees and managers giving visible support to the change effort may increase the likelihood that the change effort succeeds. For example, when Robert Iger replaced Michael Eisner as CEO of the Walt Disney Company, one of the first things he did was to abolish the central planning unit, which was staffed by people close to ex-CEO Eisner. This department was viewed as a barrier to creativity at Disney and its removal from the company was helpful in ensuring the innovativeness of the company culture.McGregor, J., McConnon, A., Weintraub, A., Holmes, S., & Grover, R. (2007, May 14). The 25 Most Innovative Companies. Business Week, 4034, 52-60.
Role Modeling
Role modeling is the process by which employees modify their own beliefs and behaviors to reflect those of the leader.Kark, R., & Van Dijk, D. (2007). Motivation to lead, motivation to follow: The role of the self-regulatory focus in leadership processes. Academy of Management Review, 32, 500-528. CEOs can model the behaviors that are expected of employees to change the culture because these behaviors will trickle down to lower-level employees. For example, when Robert Iger took over Disney, to show his commitment to innovation, he personally became involved in the process of game creation, attended summits of developers, and gave feedback to programmers about the games. Thus, he modeled his engagement in the idea creation process. In contrast, the modeling of inappropriate behavior from the top will lead to the same behavior trickling down to lower levels. A recent example to this type of role modeling is the scandal involving Hewlett-Packard board members. In 2006, when board members were suspected of leaking confidential company information to the press, the company's top-level executives hired a team of security experts to find the source of the leak. The investigators sought the phone records of board members, looking for links to journalists. For this purpose, they posed as board members and called phone companies to obtain itemized home phone records of board members and journalists. When the investigators' methods came to light, HP's chairman and four other top executives faced criminal and civil charges. When such behavior is modeled at top levels, it is likely to have an adverse effect on the company culture.Barron, J. (2007, January). The HP way: Fostering an ethical culture in the wake of scandal. Business Credit, 109, 8-10.
Training
Well-crafted training programs may be instrumental in bringing about culture change by teaching employees the new norms and behavioral styles. For example, after the space shuttle Columbia disintegrated on reentry from a February 2003 mission, NASA decided to change its culture to become more safety sensitive and minimize decision-making errors that lead to unsafe behaviors. The change effort included training programs in team processes and cognitive bias awareness. Similarly, when auto repairer Midas felt the need to change its culture to be more committed to customers, they developed a program to train employees to be more familiar with customer emotions and connect better with them. Customer reports have been overwhelmingly positive in stores that underwent this training.BST to guide culture change effort at NASA. (2004 June). Professional Safety, 49, 16; J. B. (2001, June). The Midas touch. Training, 38, 26.
Changing the Reward System
The criteria with which employees are rewarded and punished have a powerful role in determining the cultural values of an organization. Switching from a commission-based incentive structure to a straight salary system may be instrumental in bringing about customer focus among sales employees. Moreover, by rewarding and promoting employees who embrace the company's new values and promoting these employees, organizations can make sure that changes in culture have a lasting effect. If the company wants to develop a team-oriented culture where employees collaborate with one another, then using individual-based incentives may backfire. Instead, distributing bonuses to intact teams might be more successful in bringing about culture change.
Creating New Symbols and Stories
Finally, the success of the culture change effort may be increased by developing new rituals, symbols, and stories. Continental Airlines is a company that successfully changed its culture to be less bureaucratic and more team-oriented in 1990s. One of the first things management did to show employees that they really meant to abolish many of the company's detailed procedures and create a culture of empowerment was to burn the heavy 800-page company policy manual in their parking lot. The new manual was only 80 pages. This action symbolized the upcoming changes in the culture and served as a powerful story that circulated among employees. Another early action was redecorating waiting areas and repainting all their planes, again symbolizing the new order of things.Higgins, J., & McAllester, C. (2004). If you want strategic change, don't forget to change your cultural artifacts. Journal of Change Management, 4, 63-73. By replacing the old
symbols and stories, the new symbols and stories will help enable the culture change and ensure that the new values are communicated.

Before You Join
How do you find out about a company's culture before you join? Here are several tips that will allow you to more accurately gauge the culture of a company you are interviewing with.
First, do your research. Talking to friends and family members who are familiar with the company, doing an online search for news articles about the company, browsing the company's Web site, and reading its mission statement would be a good start.
Second, observe the physical environment. Do people work in cubicles or in offices? What is the dress code? What is the building structure? Do employees look happy, tired, or stressed? The answers to these questions are all pieces of the puzzle.
Third, read between the lines. For example, the absence of a lengthy employee handbook or detailed procedures might mean that the company is more flexible and less bureaucratic.
Fourth, reflect on how you are treated. The recruitment process is your first connection to the company. Were you treated with respect? Do they maintain contact with you or are you being ignored for long stretches at a time?
Fifth, ask questions. What happened to the previous incumbent of this job? What does it take to be successful in this firm? What would their ideal candidate for the job look like? The answers to these questions will reveal a lot about the way they do business.
Finally, listen to your gut. Your feelings about the place in general, and your future manager and coworkers in particular, are important signs that you should not

You've Got a New Job! Now How Do You Get on Board?
• Gather information. Try to find as much about the company and the job as you can before your first day. After you start working, be a good observer, gather information, and read as much as you can to understand your job and the company. Examine how people are interacting, how they dress, and how they act, in order to avoid behaviors that might indicate to others that you are a misfit.
• Manage your first impression. First impressions may endure, so make sure that you dress properly, are friendly, and communicate your excitement to be a part of the team. Be on your best behavior!
• Invest in relationship development. The relationships you develop with your manager and with coworkers will be essential for you to adjust to your new job. Take the time to strike up conversations with them. If there are work functions during your early days, make sure not to miss them!
• Seek feedback. Ask your manager or coworkers how well you are doing and whether you are meeting expectations. Listen to what they are telling you and listen to what they are not saying. Then, make sure to act on any suggestions for improvement—you may create a negative impression if you consistently ignore the feedback you receive.
• Show success early on. To gain the trust of your new manager and colleagues, you may want to establish a history of success early. Volunteer for high-profile projects where you will be able to demonstrate your skills. Alternatively, volunteer for projects that may serve as learning opportunities or that may put you in touch with the key people in the company.

The Innovation Network
Strategy consultant McKinsey & Company points to recent academic research that finds differences in individual creativity and intelligence matter far less for organizational innovation than connections and networks. That is, networked employees can realize their innovations and make them catch on more quickly than nonnetworked employees can.Fleming, L., & Marx, M. (2006). Managing creativity in small worlds. California Management Review, 48(4), 6-27.
On the basis of what was found by Cross and colleagues across many large firms, within P&G in particular, and in their own research, McKinsey has observed four important steps in the innovation network process.How companies approach innovation: A McKinsey global survey. (2007). McKinsey Quarterly. These four critical steps in designing, implementing, and managing an innovation network are summarized in the following figure. MThe first step, connect, involves the identification of key people in the organization with an innovation mind-set. Such individuals are not wed to the status quo and are comfortable with change and uncertainty. It is important to involve individuals with different backgrounds and approaches to innovation. For instance, some individuals are great at generating ideas while others may be better at researching and validating them. This group of individuals would then be defined as a network. The second step, set boundaries and engage, is where the network's goals and objectives are defined. It is important to make it clear how the network's goals and objectives will contribute to the organization's goals and larger strategy, mission, and vision. Time frames and desired target outcomes are stated as well.
Figure 9.10 Managing the Innovation Network
Adapted from
http://www.mckinseyquarterly.c
om (retrieved June 4, 2008).
In the third step, support and govern, the leadership
structure for the network is decided on, along with any protocols for meeting, sharing ideas, and decision making. With these process guidelines in place, the network members can then make sure that they have identified the resources necessary to conduct their work. This includes gaining sponsorship and buy-in from other parts of the organization, including upper management. Finally, the fourth step involves managing and tracking. This last step covers a spectrum of needs, ranging from how network members will be recognized and rewarded for their contributions, the agreement about process-tracking criteria, and some guidelines on how new members join the network and others leave.
As mentioned in the connect stage of developing an innovation network, you can fine-tune the network's goals by identifying the appropriate mix and balance of employees. Innovation networks, like cross-functional teams, require different skills and attitudes. In McKinsey's experience, they include combinations of several archetypes. Which one are you?
• Idea generators prefer to come up with ideas, believe that asking the right questions is more important than having the right answers, and are willing to take risks on high-profile experiments.
• Researchers mine data to find patterns, which they use as a source of new ideas. They are the most likely members of the network to seek consumer insights and to regard such insights as a primary input.
• Experts value proficiency in a single domain and relish opportunities to get things done.
Producers orchestrate the activities of the network. Others come to them for new ideas or to get things done. They are also the most likely members of the network to be making connections across teams and groups.

This section draws heavily on recent research by Herminia Ibarra, Brian Uzzi, and others, to help you understand the different forms that social networks can take. Ibarra and Uzzi have been studying the social networks and social networking tactics and strategies of managers for more than 20 years and are considered thought-leaders in the field.Ibarra, H., & Hunter, M. (2007, January). How leaders build and use networks. Harvard Business Review, 40-47. Ibarra, H. (2006). Career Change. In J. H. Greenhaus & G. A. Callanan (Eds.), The encyclopedia of career development, 7782. Beverly Hills, CA; Sage. Their most recent work suggests that strong, useful networks don't just happen at the watercooler. They have to be carefully constructed.
What separates successful managers from the rest of the pack? Networking: creating a fabric of personal contacts to provide the support, feedback, and resources needed to get things done. Yet many managers avoid networking. Some think they don't have time for it. Others disdain it as manipulative. To succeed as a manager, Ibarra recommends building three types of networks:
• Personal—kindred spirits outside your organization who can help you with personal advancement.
• Operational—people you need to accomplish your assigned, routine tasks.
• Strategic—people outside your control who will enable you to reach key organizational objectives.
These networks, their purpose, and how to build network membership, are summarized in "Personal, Operational, and Strategic Networks." Most importantly, Ibarra's work suggests that leaders need to possess all three types of networks, and not just one or two. Let's take a look at each one of these networks.

1. The act of influencing others toward a goal.
2. Those who hold a position of authority and may utilize the power that comes from their position, as well as their personal power to influence others.
3. Those without a formal position of authority within the organization but demonstrate leadership by influencing those around them through personal forms of power.
Figure 10.2 The P-O-L-C Framework
Perhaps this is obvious, but leadership is the first of five facets constituting a manager's leading function in the P-O-L-C framework. Leadership1 may be defined as the act of influencing others to work toward a goal. Leaders exist at all levels of an organization. Some leaders hold a position of authority and may use the power that comes from their position, as well as their personal power, to influence others; they are called formal leaders2. In contrast, informal leaders3 are without a formal position of authority within the organization but demonstrate leadership by influencing others through personal forms of power. One caveat is important here: Leaders do not rely on the use of force to influence people. Instead, people willingly adopt the leader's goal as their own goal. If a person is relying on force and punishment, the person is a dictator, not a leader.
What makes leaders effective? What distinguishes people who are perceived as leaders from those who are not perceived as leaders? More importantly, how do we train future leaders and improve their leadership ability? These are important questions that have attracted scholarly attention in the past several decades. In this chapter, we will review the history of leadership studies and summarize the major findings relating to these important questions. Around the world, we view leaders as at least partly responsible for their team's or company's success and failure.
Company chief executive officers (CEOs) are paid millions of dollars in salaries and stock options with the assumption that they hold their company's future in their hands. In politics, education, sports, and profit and nonprofit sectors, influence of leaders over the behaviors of individuals and organizations is rarely questioned. When people and organizations fail, managers and CEOs are often viewed as responsible. Some people criticize the assumption that leadership always matters and call this belief "the romance of leadership." However, research evidence pointing to the importance of leaders for organizational success is accumulating.Hogan, R., Curphy, G. J., & Hogan, J. (1994). What we know about leadership: Effectiveness and personality. American Psychologist, 49, 493-504.

She is among the top 100 most influential people according to Time magazine's 2008 list. She has also ranked number 4 in Forbes's "Most Influential Women in the World" (2010), number 1 in Fortune's "50 Most Powerful Women" (2006 through 2009), and number 22 in Fortune's "25 Most Powerful People in Business" (2007). The lists go on and on. To those familiar with her work and style, this should come as no surprise: Even before she became the CEO of PepsiCo Inc. (NYSE: PEP) in 2006, she was one of the most powerful executives at PepsiCo and one of the two candidates being groomed for the coveted CEO position. Born in Chennai, India, Nooyi graduated from Yale's School of Management and worked in companies such as the Boston Consulting Group Inc., Motorola Inc., and ABB Inc. She also led an all-girls rock band in high school, but that is a different story.
What makes her one of the top leaders in the business world today? To start with, she has a clear vision for PepsiCo, which seems to be the right vision for the company at this point in time. Her vision is framed under the term "performance with purpose," which is based on two key ideas: tackling the obesity epidemic by improving the nutritional status of PepsiCo products and making PepsiCo an environmentally sustainable company. She is an inspirational speaker and rallies people around her vision for the company. She has the track record to show that she means what she says. She was instrumental in PepsiCo's acquisition of the food conglomerate Quaker Oats Company and the juice maker Tropicana Products Inc., both of which have healthy product lines. She is bent on reducing PepsiCo's reliance on high-sugar, high-calorie beverages, and she made sure that PepsiCo removed trans fats from all its products before its competitors. On the environmental side, she is striving for a net zero impact on the environment. Among her priorities are plans to reduce the plastic used in beverage bottles and find biodegradable packaging solutions for PepsiCo products. Her vision is long term and could be risky for short-term earnings, but it is also timely and important.
Those who work with her feel challenged by her high-performance standards and expectation of excellence. She is not afraid to give people negative feedback—and with humor, too. She pushes people until they come up with a solution to a problem and does not take "I don't know" for an answer. For example, she insisted that her team find an alternative to the expensive palm oil and did not stop urging them forward until the alternative arrived: rice bran oil.
Nooyi is well liked and respected because she listens to those around her, even when they disagree with her. Her background cuts across national boundaries, which gives her a true appreciation for diversity, and she expects those around her to bring their values to work. In fact, when she graduated from college, she wore a sari to a job interview at Boston Consulting, where she got the job. She is an unusually collaborative person in the top suite of a Fortune 500 company, and she seeks help and information when she needs it. She has friendships with three ex-CEOs of PepsiCo who serve as her informal advisors, and when she was selected to the top position at PepsiCo, she made sure that her rival for the position got a pay raise and was given influence in the company so she did not lose him. She says that the best advice she received was from her father, who taught her to assume that people have good intentions. Nooyi notes that expecting people to have good intentions helps her prevent misunderstandings and show empathy for them. It seems that she is a role model to other business leaders around the world, and PepsiCo is well positioned to tackle the challenges the future may bring.

The earliest approach to the study of leadership sought to identify a set of traits that distinguished leaders from nonleaders. What were the personality characteristics and physical and psychological attributes of people who are viewed as leaders? Because of the problems in measurement of personality traits at the time, different studies used different measures. By 1940, researchers concluded that the search for leadership-defining traits was futile. In recent years, though, after advances in personality literature such as the development of the Big Five personality framework, researchers have had more success in identifying traits that predict leadership.House, R. J., & Aditya, R. N. (1997). The social scientific study of leadership: Quo Vadis? Journal of Management, 23, 409-473. Most importantly, charismatic leadership, which is among the contemporary approaches to leadership, may be viewed as an example of a trait approach.
The traits that show relatively strong relations with leadership are as follows:Judge, T. A., Bono, J. E., Ilies, R., & Gerhardt, M. W. (2002). Personality and leadership: A qualitative and quantitative review. Journal of Applied Psychology, 87, 765-780.
Intelligence
General mental ability, which psychologists refer to as "g" and which is often called IQ in everyday language, has been related to a person's emerging as a leader within a group. Specifically, people who have high mental abilities are more likely to be viewed as leaders in their environment.House, R. J., & Aditya, R. N. (1997). The social scientific study of leadership: Quo Vadis? Journal of Management, 23, 409-473; Ilies, R., Gerhardt, M. W., & Huy, L. (2004). Individual differences in leadership emergence: Integrating meta-analytic findings and behavioral genetics estimates. International Journal of Selection and Assessment, 12, 207-219; Lord, R. G., De Vader, C. L., & Alliger, G. M. (1986). A meta-analysis of the relation between personality traits and leadership perceptions: An application of validity generalization procedures. Journal of Applied Psychology, 71, 402-410; Taggar, S., Hackett, R., & Saha, S. (1999

Leadership emergence in autonomous work teams: Antecedents and outcomes. Personnel Psychology, 52, 899-926. We should caution, though, that intelligence is a positive but modest predictor of leadership. In addition to having high IQ, effective leaders tend to have high emotional intelligence (EQ). People with high EQ demonstrate a high level of self-awareness, motivation, empathy, and social skills. The psychologist who coined the term emotional intelligence, Daniel Goleman, believes that IQ is a threshold quality: it matters for entry- to high-level management jobs, but once you get there, it no longer helps leaders because most leaders already have high IQ. According to Goleman, what differentiates effective leaders from ineffective ones becomes their ability to control their own emotions and understand other people's emotions, their internal motivation, and their social skills.Goleman, D. (2004, January). What makes a leader? Harvard Business Review, 82(1), 82-91. Many observers believe that Carly Fiorina, the ousted CEO of HP, demonstrated high levels of intelligence but low levels of empathy for the people around her, which led to an overreliance on numbers while ignoring the human cost of her decisions.Karlgaard, R. (2/18/2002). Vote Carly, Forbes, 169(4), 37.

Psychologists have proposed various systems for categorizing the characteristics that make up an individual's unique personality; one of the most widely accepted is
the Big Five model, which rates an individual according to openness to experience, conscientiousness, extraversion, agreeableness, and Neuroticism. Several of the Big Five personality traits have been related to leadership emergence (whether someone is viewed as a leader by others) and leadership effectiveness.
For example, extraversion is related to leadership. extraverts are sociable, assertive, and energetic people. They enjoy interacting with others in their environment and demonstrate self-confidence. Because they are both dominant and sociable in their environment, they emerge as leaders in a wide variety of situations. Out of all personality traits, extraversion has the strongest relationship to both leader emergence and leader effectiveness. Research shows that conscientious people are also more likely to be leaders. This is not to say that all effective leaders are extraverts, but you are more likely to find extraverts in leadership positions. An example of an introverted leader is Jim Buckmaster, the CEO of Craigslist. He is known as an introvert, and he admits to not having meetings because he does not like them.Buckmaster, Jim. (2008, May). How does he manage? Classified Web site boss. Management Today, 15.
Another personality trait related to leadership is conscientiousness. Conscientious people are organized, take initiative, and demonstrate persistence in their endeavors. Conscientious people are more likely to emerge as leaders and be effective as leaders. Finally, people who have openness to experience—those who demonstrate originality, creativity, and are open to trying new things—tend to emerge as leaders and tend to be effective as leaders.
Self-Esteem
Figure 10.5
Steve Ballmer, CEO of Microsoft, is an extraverted leader. For example, to celebrate Microsoft's 25th anniversary, Ballmer enthusiastically popped out of the anniversary cake to surprise the audience.
Source: http://en.wikipedia.org/ wiki/ Image:Steve_ballmer_2007_outdo ors2.jpg
Self-esteem is not one of the Big Five personality traits, but it is an important aspect of one's personality. The degree to which people are at peace with themselves and have an overall positive assessment of their self-worth and capabilities seems to be relevant to whether they will be viewed as a leader. Leaders with high self-esteem support their subordinates more, and when punishment needs to be administered, they punish more effectively.Atwater, L. E., Dionne, S. D., Camobreco, J. F., Avolio, B. J., & Lau, A. (1998). Individual attributes and leadership style: Predicting the use of punishment and its effects. Journal of Organizational Behavior, 19, 559-576; Niebuhr, R.
& Davis, K. R. (1984). Self-esteem: Relationship with leader behavior perceptions as moderated by the duration of the superior-subordinate dyad association, Personality and Social Psychology Buletin, 10, 51-59. It is possible that those with high self-esteem have greater levels of self-confidence and this affects their image in the eyes of their followers. Self-esteem may also explain the relationship between some physical attributes and emerging as a leader. For example, research shows a strong relationship between height and being viewed as a leader (as well as one's career success over life). It is proposed that self-esteem may be the key to the connection of height with leadership, because people who are taller are also found to have higher self-esteem and therefore may project greater levels of charisma as well as confidence to their followers.Judge, T. A., & Cable, D. M. (2004). The effect of physical height on workplace success and income: Preliminary test of a theoretical model. Journal of Applied Psychology, 89, 428-441.

Leaders whose integrity is questioned lose their trustworthiness, and they hurt their company's business along the way. For example, when it was revealed that Whole Foods CEO John Mackey was using a pseudonym to make negative comments online about the company's rival Wild Oats, his actions were heavily criticized, his leadership was questioned, and the company's reputation was affected.Farrell, G., & Davidson, P. (2007, July 13). Whole Foods' CEO was busy guy online. USA Today, Section: Money, 04B.
There are also some traits that are negatively related to
emerging as a leader and being successful as a leader.
For example, agreeable people who are modest, good
natured, and avoid conflict are less likely to be perceived
as leaders.Judge, T. A., Bono, J. E., Ilies, R., & Gerhardt,
M. W. (2002). Personality and leadership: A qualitative
and quantitative review. Journal of Applied Psychology, 87,
765-780. The key to benefiting from the findings of trait
researchers is to be aware that not all traits are equally
effective in predicting leadership potential across all
circumstances. Some organizational situations allow
leader traits to make a greater difference.House, R. J., &
Aditya, R. N. (1997). The social scientific study of
leadership: Quo Vadis? Journal of Management, 23,
409-473. For example, in small, entrepreneurial
organizations where leaders have a lot of leeway to
determine their own behavior, the type of traits leaders
have may make a difference in leadership potential. In
large, bureaucratic, and rule-bound organizations, such
as the government and the military, a leader's traits
may have less to do with how the person behaves and
whether the person is a successful leader.Judge, T. A.,
Bono, J. E., Ilies, R., & Gerhardt, M. W. (2002). Personality
and leadership: A qualitative and quantitative review.
Journal of Applied Psychology, 87, 765-780. Moreover, some
traits become relevant in specific circumstances. For
example, bravery is likely to be a key characteristic in
military leaders but not necessarily in business leaders.
Scholars now conclude that instead of trying to identify a few traits that distinguish leaders from nonleaders, it is important to identify the conditions under which different traits affect a leader's performance, as well as whether a person emerges as a leader.Hackman, J. R., & Wageman, R. (2007). Asking the right questions about leadership: Discussion and conclusions. American Psychologist, 62, 43-47

Leader Behaviors
In order to understand behaviors of effective leaders, researchers at Ohio State University and University of Michigan used many different techniques such as observing leaders in laboratory settings as well as surveying them. This research stream led to the discovery of two broad categories of behaviors: task-oriented behaviors (sometimes called initiating structure) and people-oriented behaviors (also called consideration). Task-oriented leader behaviors4 involve structuring the roles of subordinates, providing them with instructions, and behaving in ways that will increase the performance of the group. Task-oriented behaviors are directives given to employees to get things done and to ensure that organizational goals are met. People-oriented leader behaviors5 include showing concern for employee feelings and treating employees with respect. People-oriented leaders genuinely care about the well-being of their employees and they demonstrate their concern in their actions and decisions. At the time, researchers thought that these two categories of behaviors were the keys to the puzzle of leadership.See House, R. J., & Aditya, R. N. (1997). The social scientific study of leadership: Quo Vadis? Journal of Management, 23, 409-473. However, research did not support the argument that demonstrating both of these behaviors would necessarily make leaders effective.Nystrom, P. C. (1978). Managers and the hi-hi leader myth. Academy of Management Journal, 21, 325-331.

Situational Leadership
Another contingency approach to leadership is Kenneth Blanchard and Paul Hersey's Situational Leadership Theory (SLT) which argues that leaders must use different leadership styles depending on their followers' development level.Hersey, P.H., Blanchard, K.H., ' Johnson, D.E. (2007). Management of Organizational Behavior: Leadership human resources. Upper Saddle River, NJ: Prentice Hall. According to this model, employee readiness (defined as a combination of their competence and commitment levels) is the key factor determining the proper leadership style. This approach has been highly popular with 14 million managers across 42 countries undergoing SLT training and 70% of Fortune 500 companies employing its use.http://www.situational.com/Views/SituationalLeadership/ RightHereRightNow.aspx
The model summarizes the level of directive and supportive behaviors that leaders may exhibit. The model argues that to be effective, leaders must use the right style of behaviors at the right time in each employee's development. It is recognized that followers are key to a leader's success. Employees who are at the earliest stages of developing are seen as being highly committed but with low competence for the tasks. Thus, leaders should be highly directive and less supportive. As the employee becomes more competent, the leader should engage in more coaching behaviors. Supportive behaviors are recommended once the employee is at moderate to high levels of competence. And finally, delegating is the recommended approach for
leaders dealing with employees who are both highly committed and highly competent. While the SLT is popular with managers, relatively easy to understand and use, and has endured for decades, research has been mixed in its support of the basic assumptions of the model.Blank, W., Green, S.G., ' Weitzel, J.R. (1990). A test of the situational leadership theory. Personnel Psychology, 43, 579-597; Graeff, C. L. (1983). The situational leadership theory: A critical review. Academy of Management Review, 8, 285-291; Fernandez, C.F., ' Vecchio, R.P. (2002). Situational leadership theory revisited: A test of an across-jobs perspective. Leadership Quarterly, 8, 67-84. Therefore, while it can be a useful way to think about matching behaviors to situations, overreliance on this model, at the exclusion of other models, is premature.

Path-Goal Theory of Leadership
Robert House's path-goal theory of leadership is based on the expectancy theory of motivation.House, R. J. (1971). A path goal theory of leader effectiveness. Administrative Science Quarterly, 16(3), 321-338. Expectancy theory of motivation suggests that employees are motivated when they believe—or expect—that (1) their effort will lead to high performance, (2) their high performance will be rewarded, and (3) the rewards they will receive are valuable to them. According to the path- goal theory of leadership, the leader's main job is to make sure that all three of these conditions exist. Thus, leaders will create satisfied and high-performing employees by making sure that employee effort leads to performance, and their performance is rewarded. The leader removes roadblocks along the way and creates an environment that subordinates find motivational.
The theory also makes specific predictions about what type of leader behavior will be effective under which circumstances.House, R. J. (1996). Path-goal theory of leadership: Lessons, legacy, and a reformulated theory. Leadership Quarterly, 7,m
The theory identifies four leadership styles. Each of these styles can be effective, depending on the characteristics of employees (such as their ability level, preferences, locus of control, achievement motivation) and characteristics of the work environment (such as the level of role ambiguity, the degree of stress present in the environment, the degree to which the tasks are unpleasant).
Four Leadership Styles
Path-goal theory of leadership9 identifies four styles leaders may adopt. Directive leaders10 provide specific directions to their employees. They lead employees by clarifying role expectations, setting schedules, and making sure that employees know what to do on a given workday. The theory predicts that the directive style will work well when employees are experiencing role ambiguity on the job. If people are unclear about how to go about doing their jobs, giving them specific directions will motivate them. However, if employees already have role clarity, and if they are performing boring, routine, and highly structured jobs, giving them direction does not help. In fact, it may hurt them by creating an even more restricting atmosphere. Directive leadership is also thought to be less effective when employees have high levels of ability. When managing professional employees with high levels of expertise and job-specific knowledge, telling them what to do may create a low empowerment environment, which impairs motivation.
Supportive leaders11 provide emotional support to employees. They treat employees well, care about them on a personal level, and are encouraging. Supportive leadership is predicted to be effective when employees are under a lot of stress or when they are performing boring and repetitive jobs. When employees know exactly how to perform their jobs but their jobs are unpleasant, supportive leadership may also be effective.
Participative leaders12 make sure that employees are involved in making important decisions. Participative leadership may be more effective when employees have high levels of ability and when the decisions to be made are personally relevant to them. For employees who have a high internal locus of control, or the belief that they can control their own destinies, participative leadership gives employees a way of indirectly controlling organizational decisions, which will be appreciated.
Achievement-oriented leaders13 set goals for employees and encourage them to reach their goals. Their style challenges employees and focuses their attention on work-related goals. This style is likely to be effective when employees have both high levels of ability and high levels of achievement motivation.

The path-goal theory of leadership has received partial but encouraging levels of support from researchers. Because the theory is highly complicated, it has not been fully and adequately tested.House, R. J., & Aditya, R. N. (1997). The social scientific study of leadership: Quo Vadis? Journal of Management, 23, 409-473; Stinson, J. E., & Johnson, T. W. (1975). The path-goal theory of leadership: A partial test and suggested refinement. Academy of Management Journal, 18, 242-252; Wofford, J. C., & Liska, L. Z. (1993). Path-goal theories of leadership: A meta-analysis. Journal of Management, 19, 857-876. The theory's biggest contribution may be that it highlights the importance of a leader's ability to change styles, depending on the circumstances. Unlike Fiedler's contingency theory, in which the leader's style is assumed to be fixed and only the environment can be changed, House's path-goal theory underlines the importance of varying one's style, depending on the situation.

Let's try it. Imagine that you want to help your employees lower their stress so that you can minimize employee absenteeism. There are a number of approaches you could take to reduce employee stress, such as offering gym memberships, providing employee assistance programs, establishing a nap room, and so forth. Let's refer to the model and start with the first question. As you answer each question as high (H) or low (L), follow the corresponding path down the funnel.
1. Decision significance. The decision has high significance because the approach chosen needs to be effective at reducing employee stress for the insurance premiums to be lowered. In other words, there is a quality requirement to the decision. Follow the path through H.
2. Importance of commitment. Does the leader need employee cooperation to implement the decision? In our example, the answer is high, because employees may simply ignore the resources if they do not like them. Follow the path through H.
3. Leader expertise. Does the leader have all the information needed to make a high-quality decision? In our example, leader expertise is low. You do not have information regarding what your employees need or what kinds of stress reduction resources they would prefer. Follow the path through L.
4. Likelihood of commitment. If the leader makes the decision alone, what is the likelihood that the employees would accept it? Let's assume that the answer is Low. Based on the leader's experience with this group, they would likely ignore the decision if the leader makes it alone. Follow the path from L.
5. Goal alignment. Are the employee goals aligned with organizational goals? In this instance, employee and organizational goals may be aligned because you both want to ensure that employees are healthier. So let's say the alignment is high, and follow H.
6. Group expertise. Does the group have expertise in this decision-making area? The group in question has little information about which alternatives are costlier or more user friendly. We'll say group expertise is low. Follow the path from L.
7. Team competence. What is the ability of this particular team to solve the problem? Let's imagine that this is a new team that just got together

Transformational Leadership
Transformational leadership theory is a recent addition to the literature, but more research has been conducted on this theory than all the contingency theories combined. The theory distinguishes between transformational and transactional leaders. Transformational leaders14 lead employees by aligning employee goals with the leader's goals. Thus, employees working for transformational leaders start focusing on the company's well-being rather than on what is best for them as individual employees. However, transactional leaders15 ensure that employees demonstrate the right behaviors because the leader provides resources in exchange.Bass, B. M. (1985). Leadership and performance beyond expectations. New York: Free Press; Burns, J. M. (1978). Leadership. New York: Harper & Row.
Transformational leaders have four tools in their possession, which they use to influence employees and create commitment to the company goals.Bass, B. M. (1985). Leadership and performance beyond expectations. New York: Free Press; Burns, J. M. (1978). Leadership. New York: Harper & Row; Bycio, P., Hackett, R. D., & Allen, J. S. (1995). Further assessment of Bass's (1985) conceptualization of transactional and transformational leadership. Journal of Applied Psychology, 80, 468-478; Judge, T. A., & Piccolo, R. F. (2004). Transformational and transactional leadership: A meta-analytic test of their relative validity. Journal of Applied Psychology, 89, 755-768. First,

16. Behaviors leaders demonstrate that create confidence, commitment, and admiration to the leader.
17. When leaders come up with a vision that is inspiring to others.
18. When leaders challenge organizational norms and status quo and encourage employees to think creatively and work harder.
19. When leaders show personal care and concern for the well- being of their followers.
20. Rewarding employees for their accomplishments.
21. Leaving employees alone but at the same time proactively predicting potential problems and preventing them from occurring.
22. Leaving employees alone but then coming to the rescue if anything goes wrong.
transformational leaders are charismatic. Charisma16 refers to behaviors leaders demonstrate that inspire confidence, commitment, and admiration toward the leader.Shamir, B., House, R. J., & Arthur, M. B. (1993). The motivational effects of charismatic leadership: A self-concept based theory. Organization Science, 4, 577-594. Charismatic individuals have a "magnetic" personality that is appealing to followers. Leaders such as Barack Obama, John F. Kennedy, Ronald Reagan, Mahatma Gandhi, Mustafa Kemal Ataturk (founder of the Republic of Turkey), and Winston Churchill are viewed as charismatic. Second, transformational leaders use inspirational motivation17 or come up with a vision that is inspiring to others. Third is the use of intellectual stimulation18, which means that they challenge organizational norms and status quo, and they encourage employees to think creatively and work harder. Finally, they use individualized consideration19, which means that they show personal care and concern for the well-being of their followers. Examples of transformational business leaders include Steve Jobs of Apple; Lee Iacocca, who transformed Chrysler in the 1980s; and Jack Welch, who was the CEO of General Electric for 20 years. Each of these leaders is charismatic and is held responsible for the turnarounds of their companies.
While transformational leaders rely on their charisma, persuasiveness, and personal appeal to change and inspire their companies, transactional leaders use three other methods. Contingent rewards20 mean rewarding employees for their accomplishments. Active management by exception21 involves leaving employees to do their jobs without interference, but at the same time proactively predicting potential problems and preventing them from occurring. Passive management by exception22 is similar in that it involves leaving employees alone, but in this method, the manager waits until something goes wrong before coming to the rescue.
Which leadership style do you think is more effective, transformational or transactional? Research shows that transformational leadership is a powerful influence over leader effectiveness as well as employee satisfaction.Judge, T. A., & Piccolo, R. F. (2004). Transformational and transactional leadership: A meta-analytic test of their relative validity. Journal of Applied Psychology, 89, 755-768. In fact, transformational leaders increase the intrinsic motivation of their followers, build more effective relationships with employees, increase performance and creativity of their followers, increase team performance, and create higher levels of commitment to organizational change efforts.Herold, D. M., Fedor, D. B., Caldwell, S., Liu, Y. (2008). The effects of transformational and change leadership on employees' commitment to a change: A multilevel study. Journal of Applied Psychology, 93, 346-357; Piccolo, R. F., & Colquitt, J. A. (2006). Transformational leadership and job behaviors: The mediating role of core job characteristics. Academy of Management Journal, 49, 327-340; Schaubroeck, J., Lam, S. K., & Cha, S. E. (2007). Embracing transformational leadership: Team values and the impact of

leader behavior on team performance. Journal of Applied Psychology, 92, 1020-1030; Shin, S. J., & Zhou, J. (2003). Transformational leadership, conservation, and creativity: Evidence from Korea. Academy of Management Journal, 46, 703-714; Wang, H., Law, K. S., Hackett, R. D., Duanxu, W., Zhen, X. C. (2005). Leader-member exchange as a mediator of the relationship between transformational leadership and followers' performance and organizational citizenship behavior. Academy of Management Journal, 48, 420-432. However, except for passive management by exception, the transactional leadership styles are also effective, and they also have positive influences over leader performance as well as employee attitudes.Judge, T. A., & Piccolo, R. F. (2004). Transformational and transactional leadership: A meta- analytic test of their relative validity. Journal of Applied Psychology, 89, 755-768. To maximize their effectiveness, leaders are encouraged to demonstrate both transformational and transactional styles. They should also monitor themselves to avoid demonstrating passive management by exception or leaving employees to their own devices until problems arise.
Why is transformational leadership more effective? The key factor may be trust23. Trust is the belief that the leader will show integrity, fairness, and predictability in his or her dealings with others. Research shows that when leaders demonstrate transformational leadership behaviors, followers are more likely to trust the leader. The tendency to trust in transactional leaders is substantially lower. Because transformational leaders express greater levels of concern for people's well-being, and appeal to people's values, followers are more likely to believe that the leader has a trustworthy character.Dirks, K. T., & Ferrin, D. L. (2002). Trust in leadership: Meta-analytic findings and implications for research and practice. Journal of Applied Psychology, 87, 611-628.
Is transformational leadership genetic? Some people assume that charisma is something people are born with. You either have charisma or you don't. However, research does not support this idea. We must acknowledge that there is a connection between some personality traits and charisma. Specifically, people who have a neurotic personality tend to demonstrate lower levels of charisma, and people who are extraverted tend to have higher levels of charisma. However, personality explains only around 10% of the variance in charisma.Bono, J. E., & Judge, T. A. (2004). Personality and transformational and transactional leadership: A meta-analysis. Journal of Applied Psychology, 89, 901-910. A large body of research has shown that it is possible to train people to increase their charisma and increase their transformational leadership.Barling, J., Weber, T., & Kelloway, E. K. (1996). Effects of transformational leadership training on attitudinal and financial outcomes: A field experiment. Journal of Applied Psychology, 81, 827-832; Dvir, T., Eden, D., Avolio, B. J., & Shamir, B. (2002). Impact of transformational leadership on follower development and performance: A field experiment. Academy of Management Journal, 45, 735-744; Frese, M., Beimel, S., & Schoenborg, S. (2003). Action training

for charismatic leadership: Two evaluations of studies of a commercial training module on inspirational communication of a vision. Personnel Psychology, 56, 671-697.
Even if charisma may be teachable, a more fundamental question remains: is it really needed? Charisma is only one element of transformational leadership and leaders can be effective without charisma. In fact, charisma has a dark side. For every charismatic hero such as Lee Iacocca, Steve Jobs, and Virgin's Sir Richard Branson, there are charismatic personalities who harmed their organizations or nations, such as Adolph Hitler of Germany and Jeff Skilling of Enron. Leadership experts warn that when organizations are in a crisis, a board of directors or hiring manager may turn to heroes who they hope will save the organization and sometimes hire people who have no other particular qualifications outside of perceived charisma.Khurana, R. (September 2002). The curse of the superstar CEO. Harvard Business Review, 80(9), 60-66.
An interesting study shows that when companies have
performed well, their CEOs are perceived as charismatic,
but CEO charisma has no relation to the future
performance of a company.Agle, B. R., Nagarajan, N. J.,
Sonnenfeld, J. A., & Srinivasan, D. (2006). Does CEO
charisma matter? An empirical analysis of the
relationships among organizational performance,
environmental uncertainty, and top management team
perceptions of CEO charisma. Academy of Management
Journal, 49, 161-174. So, what we view as someone's
charisma may be largely because of their association
with a successful company, and the success of a
company depends on a large set of factors, including
industry effects and historical performance. While it is
true that charismatic leaders may sometimes achieve great results, the search for charismatic leaders under all circumstances may be irrational.

Leader-member exchange (LMX) theory proposes that the type of relationship leaders have with their followers (members of the organization) is the key to understanding how leaders influence employees. Leaders form different types of
relationships with their employees. In high-quality LMX relationships24, the leader forms a trust-based relationship with the member. The leader and member like each other, help each other when needed, and respect one another. In these relationships, the leader and the member are both ready to go above and beyond their job descriptions to promote the other's ability to succeed. In contrast, in low- quality LMX relationships25, the leader and the member have lower levels of trust, liking, and respect toward each other. These relationships do not have to involve actively disliking each other, but the leader and member do not go beyond their formal job descriptions in their exchanges. In other words, the member does his or her job, the leader provides rewards and punishments, and the relationship does not involve high levels of loyalty or obligation toward each other.Dansereau, F., Jr., Graen, G., & Haga, W. J. (1975). A vertical dyad linkage approach to leadership within formal organizations: A longitudinal investigation of the role making process. Organizational Behavior & Human Performance, 13(1), 46-78; Erdogan, B., & Liden, R. C. (2002). Social exchanges in the workplace: A review of recent developments and future research directions in leader-member exchange theory. In L. L. Neider & C. A. Schriesheim (Eds.), Leadership (pp. 65-114). Greenwich, CT: Information Age Press; Gerstner, C. R., & Day, D. V. (1997). Meta-analytic review of leader-member exchange theory: Correlates and construct issues. Journal of Applied Psychology, 82, 827-844; Graen, G. B., & Uhl-Bien, M. (1995). Relationship-based approach to leadership: Development of leader-member exchange (LMX) theory over 25 years: Applying a multi-level multi-domain perspective. Leadership Quarterly, 6(2), 219-247; Liden, R. C., & Maslyn, J. M. (1998). Multidimensionality of leader- member exchange: An empirical assessment through scale development. Journal of Management, 24, 43-72.

and perform at a higher level.Gerstner, C. R., & Day, D. V. (1997). Meta-analytic review of leader-member exchange theory: Correlates and construct issues. Journal of Applied Psychology, 82, 827-844; Hui, C., Law, K. S., & Chen, Z. X. (1999). A structural equation model of the effects of negative affectivity, leader-member exchange, and perceived job mobility on in-role and extra-role performance: A Chinese case. Organizational Behavior and Human Decision Processes, 77, 3-21; Kraimer, M. L., Wayne, S. J., & Jaworski, R. A. (2001). Sources of support and expatriate performance: The mediating role of expatriate adjustment. Personnel Psychology, 54, 71-99; Liden, R. C., Wayne, S. J., & Sparrowe, R. T. (2000). An examination of the mediating role of psychological empowerment on the relations between the job, interpersonal relationships, and work outcomes. Journal of Applied Psychology, 85, 407-416; Settoon, R. P., Bennett, N., & Liden, R. C. (1996). Social exchange in organizations: Perceived organizational support, leader-member exchange, and employee reciprocity. Journal of Applied Psychology, 81, 219-227; Tierney, P., Farmer, S. M., & Graen, G. B. (1999). An examination of leadership and employee creativity: The relevance of traits and relationships. Personnel Psychology, 52, 591-620; Wayne, S. J., Shore, L. M., & Liden. R. C. (1997). Perceived organizational support and leader-member exchange: A social exchange perspective. Academy of Management Journal, 40, 82-111. Their high levels of performance may not be a surprise because they may receive higher levels of resources and help from their managers as well as more information and guidance. If they have questions, these employees feel more comfortable seeking feedback or information.Chen, Z., Lam, W., & Zhong, J. A. (2007). Leader-member exchange and member performance: A new look at individual-level negative feedback seeking behavior and team-level empowerment climate. Journal of Applied Psychology, 92, 202-212. Because of all the help, support, and guidance they receive, those employees who have a good relationship with the manager are in a better position to perform well. Given all they receive, these employees are motivated to reciprocate to the manager, and therefore they demonstrate higher levels of citizenship behaviors such as helping the leader and coworkers.Ilies, R., Nahrgang, J. D., & Morgeson, F. P. (2007). Leader-member exchange and citizenship behaviors: A meta-analysis. Journal of Applied Psychology, 92, 269-277. Being in a high-quality LMX relationship is also advantageous because a high-quality relationship is a buffer against many stressors, such as being a misfit in a company, having personality traits that do not match job demands, and having unmet expectations.Bauer, T. N., Erdogan, B., Liden, R. C., & Wayne, S. J. (2006). A longitudinal study of the moderating role of extraversion: Leader-member exchange, performance, and turnover during new executive development. Journal of Applied Psychology, 91, 298-310; Erdogan, B., Kraimer, M. L., & Liden, R. C. (2004). Work value congruence and intrinsic career success. Personnel Psychology, 57, 305-332; Major, D. A., Kozlowski, S. W., Chao, G. T., Gardner, P. D. (1995). A longitudinal investigation of newcomer expectations, early socialization outcomes, and the moderating effects of role development factors. Journal of Applied Psychology, 80, 418-431. The list of benefits high-quality LMX employees receive is long, and it is not surprising that these employees are less likely to leave their jobs.Ferris, G. R.
1985). Role of leadership in the employee withdrawal process: A constructive replication. Journal of Applied Psychology, 70, 777-781; Graen, G. B., Liden, R. C., & Hoel, W. (1982). Role of leadership in the employee withdrawal process. Journal of Applied Psychology, 67, 868-872.
The problem, of course, is that not all employees have a high-quality relationship, and those who are in the leader's out-group may suffer as a result. But how do you end up developing such a high-quality relationship with the leader? That seems to depend on many factors. Managers can help develop such a high-quality and trust- based relationship by treating their employees in a fair and dignified manner.Masterson, S. S., Lewis, K., Goldman, B. M., & Taylor, M. S. (2000). Integrating justice and social exchange: The differing effects of fair procedures and treatment on work relationships. Academy of Management Journal, 43, 738-748. They can also test to see whether the employee is trustworthy by delegating certain tasks when the employee first starts working with the manager.Bauer, T. N., & Green, S. G. (1996). Development of a leader-member exchange: A longitudinal test. Academy of Management Journal, 39, 1538-1567. Employees also have an active role in developing the relationship. Employees can seek feedback to improve their performance, be open to learning new things on the job, and engage in political behaviors such as flattery.Colella, A., & Varma, A. (2001). The impact of subordinate disability on leader-member exchange relationships. Academy of Management Journal, 44, 304-315; Maslyn, J. M., & Uhl-Bien, M. (2001). Leader-member exchange and its dimensions: Effects of self-effort and other's effort on relationship quality, Journal of Applied Psychology, 86, 697-708; Janssen, O., & Van Yperen, N. W. (2004). Employees' goal orientations, the quality of leader-member exchange, and the outcomes of job performance and job satisfaction. Academy of Management Journal, 47, 368-384; Wing, L., Xu, H., & Snape, E. (2007). Feedback-seeking behavior and leader-member exchange: Do supervisor-attributed motives matter? Academy of Management Journal, 50, 348-363.
Interestingly, high performance on the employee's part does not seem to be enough to develop a high-quality exchange with the leader. Instead, interpersonal factors such as personality similarity and liking are more powerful influences over how the relationship develops.Engle, E. M., & Lord, R. G. (1997). Implicit theories, self- schemas, and leader-member exchange. Academy of Management Journal, 40, 988-1010; Liden, R. C., Wayne, S. J., & Stilwell, D. (1993). A longitudinal study on the early development of leader-member exchanges. Journal of Applied Psychology, 78, 662-674; Wayne, S. J., Shore, L. M., & Liden. R. C. (1997). Perceived organizational support and leader-member exchange: A social exchange perspective. Academy of Management Journal, 40, 82-111. Finally, the relationship development occurs in a slightly different manner in different types of companies; corporate culture matters in how leaders develop these relationships. In performance-oriented cultures, how the leader distributes rewards seem to be the relevant factor, whereas in people-

oriented cultures, whether the leader treats people with dignity is more relevant.Erdogan, B., Liden, R. C., & Kraimer, M. L. (2006). Justice and leader- member exchange: The moderating role of organizational culture. Academy of Management Journal, 49, 395-406.
Should you worry if you do not have a high-quality relationship with your manager? One problem in a low-quality exchange is that you may not have access to the positive work environment available to the high-quality LMX members. Second, low LMX employees may feel that their situation is unfair. Even when their objective performance does not warrant it, those who have a good relationship with the leader tend to receive positive performance appraisals.Duarte, N. T., Goodson, J. R., & Klich, N. R. (1994). Effects of dyadic quality and duration on performance appraisal. Academy of Management Journal, 37, 499-521. Moreover, they are more likely to be given the benefit of the doubt. For example, when they succeed, the manager is more likely to think that they succeeded because they put forth a lot of effort and they had high abilities, whereas for low LMX members who perform objectively well, the manager is less likely to think so.Heneman, R. L., Greenberger, D. B., & Anonyuo, C. (1989). Attributions and exchanges: The effects of interpersonal factors on the diagnosis of employee performance. Academy of Management Journal, 32, 466-476. In other words, the leader may interpret the same situation differently, depending on which employee is involved and may reward low LMX employees less even when they are performing well. In short, those with a low-quality relationship with the leader may experience a work environment that may not be very supportive or fair.
Despite its negative consequences, we cannot say that all employees want to have a high-quality relationship with the leader. Some employees may genuinely dislike the leader and may not value the rewards in the leader's possession. If the leader is not well liked in the company and is known as abusive or unethical, being close to such a person may imply guilt by association. For employees who have no interest in advancing their careers in the current company (such as a student employee who is working in retail but has no interest in retail as a career), having a low-quality exchange may afford the opportunity to just do one's job without having to go above and beyond these job requirements. Finally, not all leaders are equally capable of influencing their employees by having a good relationship with their employees: It also depends on the power and influence of the leader in the overall company and how the leader himself or herself is treated within the company. Leaders who are more powerful will have more to share with employees who are close to them.Erdogan, B., & Enders, J. (2007). Support from the top: Supervisors' perceived organizational support as a moderator of leader-member exchange to satisfaction and performance relationships. Journal of Applied Psychology, 92, 321-330; Sparrowe, R. T., & Liden, R. C. (2005). Two routes to influence: Integrating leader-

Even though servant leadership has some overlap with other leadership approaches such as transformational leadership, its explicit focus on ethics, community development, and self-sacrifice are distinct characteristics of this leadership style. Research shows that servant leadership has a positive effect on employee commitment, employee citizenship behaviors toward the community (such as participating in community volunteering), and job performance.Liden, R. C., Wayne, S., J., Zhao, H., & Henderson, D. (2008). Servant leadership: Development of a multidimensional measure and multi-level assessment. Leadership Quarterly, 19, 161-177. Leaders who follow the servant leadership approach create a climate of fairness in their departments, which leads to higher levels of interpersonal helping behavior.Ehrhart, M. G. (2004). Leadership and procedural justice climate as antecedents of unit-level organizational citizenship behavior. Personnel Psychology, 57, 61-94.
Servant leadership is a tough transition for many managers who are socialized to put their own needs first, be driven by success, and tell people what to do. In fact, many of today's corporate leaders are not known for their humility! However, leaders who have adopted this approach attest to its effectiveness. David Wolfskehl, of Action Fast Print in New Jersey, founded his printing company when he was 24. He marks the day he started asking employees what he can do for them as the beginning of his company's new culture. In the next two years, his company increased its productivity by 30%.Buchanan, L. (May, 2007). In praise of selflessness: Why the best leaders are servants. Inc, 29(5), 33-35.
Authentic Leadership
Leaders have to be a lot of things to a lot of people. They operate within different structures, work with different types of people, and they have to be adaptable. At times, it may seem that a leader's smartest strategy would be to act as a social chameleon, changing his or her style whenever doing so seems advantageous. But this would lose sight of the fact that effective leaders have to stay true to themselves. The authentic leadership approach27 embraces this value: its key advice is "be yourself." Think about it: We all have different backgrounds, different
life experiences, and different role models. These trigger events over the course of our lifetime that shape our values, preferences, and priorities. Instead of trying to fit into societal expectations about what a leader should be like, act like, or look like, authentic leaders derive their strength from their own past experiences. Thus, one key characteristic of authentic leaders is that they are self-aware. They are introspective, understand where they are coming from, and have a thorough understanding of their own values and priorities. Second, they are not afraid to act the way they are. In other words, they have high levels of personal integrity. They say what they think. They behave in a way consistent with their values—they practice what they preach. Instead of trying to imitate other great leaders, they find their style in their own personality and life experiences.Avolio, B. J., & Gardner, W. L. (2005). Authentic leadership development: Getting to the root of positive forms of leadership. Leadership Quarterly, 16, 315-338; Gardner, W. L., Avolio, B. J., Luthans, F., May, D. R., & Walumbwa, F. (2005). "Can you see the real me?" A self-based model of authentic leader and follower development. Leadership Quarterly, 16, 343-372; George, B. (2007). Authentic leaders: They inspire and empower others. Leadership Excellence, 24(9), 16-17; Ilies, R., Morgeson, F. P., & Nahrgang, J. D. (2005). Authentic leadership and eudaemonic well-being: Understanding leader-follower outcomes. Leadership Quarterly, 16, 373-394; Sparrowe, R. T. (2005). Authentic leadership and the narrative self. Leadership Quarterly, 16, 419-439.
One example of an authentic leader is Howard Schultz, the founder of Starbucks coffeehouses. As a child, Schultz witnessed the job-related difficulties his father experienced because of medical problems. Even though he had no idea he would have his own business one day, the desire to protect people was shaped in those years and became one of his foremost values. When he founded Starbucks, he became an industry pioneer in providing health insurance and retirement coverage to part-time as well as full-time employees.Shamir, B., & Eilam, G. (2005). What's your story? A life-stories approach to authentic leadership development. Leadership Quarterly, 16, 395-417.

Authentic leadership requires understanding oneself. Therefore, in addition to self-reflection, feedback from others is needed to gain a true understanding of one's behavior and effect on others. Authentic leadership is viewed as a potentially influential style because employees are more likely to trust such a leader. Moreover, working for authentic leaders is likely to lead to greater levels of satisfaction, performance, and overall well-being on the part of employees.Walumbwa, F. O., Avolio, B. J., Gardner, W. L., Wernsing, T. S., & Peterson, S. J. (2008). Authentic leadership: Development and validation of a theory-based measure. Journal of Management, 34, 89-126. Best-selling author Jim Collins studied companies that had, in his opinion, gone from good to great, and he found they had one thing in common.Collins, J. (2001). Good to great: Why some companies make the leap...and others don't. London: Random House Business Books. All of these companies had what he calls Level 5 leaders who build organizations through their personal humility and professional will. He notes that Level 5 leaders are modest and understated. In many ways, they can be seen as truly authentic leaders.

Develop Your Charismatic Leadership Skills
Charismatic individuals have a "magnetic" personality that is appealing to followers. While many people assume that charisma is inborn, it is possible to improve your charisma by following these suggestions:Frese, M., Beimel, S., & Schoenborg, S. (2003). Action training for charismatic leadership: Two evaluations of studies of a commercial training module on inspirational communication of a vision. Personnel Psychology, 56, 671-697; Shamir, B., House, R. J., & Arthur, M. B. (1993). The motivational effects of charismatic leadership: A self-concept based theory. Organization Science, 4, 577-594.
Figure 10.17
The CEO of PepsiCo, Indra Nooyi, is a leader who demonstrates passion for her vision and energizes those around her toward her vision for the company and causes she believes in.
Source: http://en.wikipedia.org/ wiki/Image:Indra_Nooyi _- _World_Economic_Forum_Annua l _Meeting_Davos_2008.jpg
Have a vision around which people can gather. When
framing requests or addressing to others, instead of emphasizing short-term goals, stress the importance of the long-term vision. When giving a message, think about the overarching purpose. What is the ultimate goal? Why should people care? What are you trying to achieve?
Tie the vision to history. In addition to stressing the ideal future, charismatic leaders bring up the history and how the shared history ties to the future.
Watch your body language. Charismatic leaders are energetic and passionate about their ideas. This involves truly believing in your own ideas. When talking to others, you may want to look confident, look them in the eye, and express your belief in your ideas.
Make sure that employees have confidence in themselves. You can achieve this by showing that you believe in them and trust their abilities. If they have real reason to doubt their abilities, make sure that you help them address the underlying issue, such as through training and mentoring.
Challenge the status quo. Charismatic leaders solve current problems by radically rethinking the way things are done and suggesting alternatives that are risky, novel, and unconventional.
Develop Your Servant Leadership Skills
One of the influential leadership paradigms involves leaders putting others first. This could be a hard transition for an achievement-oriented and success- driven manager who rises to high levels. Here are some tips to achieve servant leadership.Buchanan, L. (May, 2007). In praise of selflessness: Why the best leaders are servants. Inc, 29(5), 33-35; Douglas, M. E. (2005, March). Service to others. Supervision, 66(3), 6-9; Ramsey, R. D. (2005, October). The new buzz word. Supervision, 66(10), 3-5.
Don't ask what your employees can do for you. Think of what you can do for them. Your job as a leader is to be of service to them. How can you relieve their stress? Protect them from undue pressure? Pitch in to help them? Think about creative ways of helping ease their lives.
Figure 10.18
The various theories of leadership covered in this chapter highlight the interrelationships among the facets of the leading functions. In particular, leadership, decision making, and motivation are very closely linked. Leadership skills span the other P-O-L-C functions as well.
© 2010 Jupiterimages Corporation
One of your key priorities should be to help employees reach their goals. This involves getting to know them. Learn about who they are and what their values and priorities are.
Be humble. You are not supposed to have all the answers and dictate to others. One way of achieving this humbleness may be to do volunteer work.

You could argue that Bernard Ebbers, of the now defunct WorldCom, created a culture of poor decision making. As CEO, Ebbers avoided internal company conflict at all costs, and he ultimately avoided the reality that WorldCom, once the dominant company in the telecommunications industry, was in serious economic trouble. Notorious for his temper, employees were reluctant to present Ebbers with company information that he didn't like. A 2002 Economist article describes Ebbers as "parochial, stubborn, preoccupied with penny-pinching....Mr. Ebbers was a difficult man to work for." Under Ebbers, WorldCom's $9 billion accounting fraud grew in order to avoid facing its worsening economic reality.
WorldCom's roots stem from a Mississippi telecom company called LDDS where Ebbers was CEO. Growing to over 80,000 employees through multiple acquisitions of other telecom businesses, WorldCom became the overwhelming industry leader. However, many of WorldCom's executives had worked with Ebbers since his start as CEO 2 decades before. Ebbers, who was regularly seen in cowboy boots and a 10-gallon hat, led his close-knit staff in a "shoot from the hip" style. He was resistant to new technology and famously refused to use e-mail to communicate with his employees. A well-known company mantra was "That's the way we did it at LDDS." Ebbers lead WorldCom through over 60 acquisitions over a period of 15 years. He grew annual revenues from $1 million in 1984 to over $17 billion in 1998. However, Ebbers had little regard for long-term plans and avoided making larger strategic decisions as his company accumulated increasing debt.
As WorldCom acquired new companies, its accounting procedures, computer systems, and customer service issues became increasingly more complex, and industry experts note that WorldCom struggled to keep up with the growth. Company employees who tried to bring initial problems to Ebbers's attention were discoura
made it clear he only wanted to hear good news and then based decisions on this good news. This avoidance of factoring in potential problems during decision making created a company culture that demanded success at all costs. That ultimately included falsifying financial reports. For example, former employees admitted to registering "rolling revenue" to inflate earnings, recording a single sale multiple times. Another 2002 Economist article reports that this and other dishonest techniques were "endemic in the sales hierarchy of WorldCom....Increasing reported revenues came above all else."
Despite efforts to inflate the books, WorldCom's stock prices dramatically declined, and Ebbers left the company in 2002 after pressure from WorldCom's board of directors. What came to light after his departure, however, highlighted the significant problems he avoided confronting. Under new CEO John Sidgmore, internal auditor Cynthia Cooper uncovered multiple instances of financial dishonesty and illegal activity overseen by CFO Scott Sullivan, a close confidant of Ebbers. A 2002 Wall Street Journal article reports, "As she pursued the trail of fraud, Ms. Cooper time and again was obstructed by fellow employees, some of whom disapproved of WorldCom's accounting methods but were unwilling to contradict their bosses or thwart the company's goals."
Ultimately Cooper's investigation revealed the fraud that took place under Sullivan and Ebbers. Sullivan later admitted to having booked $3.8 billion of costs as capital expenditures and that five quarters' worth of profits should have been recorded as losses. Ebbers's refusal to honestly face the harsh economic truth for WorldCom was ultimately highlighted to be a source of WorldCom's financial problems. In 2005, he was found guilty of fraud, conspiracy, and filing false documentation. WorldCom was purchased for $7.6 billion and subsequently integrated into Verizon (NYSE: VE) in 2006, and Ebbers began serving a 25-year jail sentence in 2005.

What Is Decision Making?
Decision making1 refers to making choices among alternative courses of action—which may also include inaction. While it can be argued that management is decision making, half of the decisions made by managers within organizations fail.Ireland, R. D., & Miller, C. C. (2004). Decision making and firm success. Academy of Management Executive, 18, 8-12; Nutt, P. C. (2002). Why decisions fail. San Francisco: Berrett-Koehler; Nutt, P. C. (1999). Surprising but true: Half the decisions in organizations fail. Academy of Management Executive, 13, 75-90. Therefore, increasing effectiveness in decision making is an important part of maximizing your effectiveness at work. This chapter will help you understand how to make decisions alone or in a group while avoiding common decision-making traps.
Individuals throughout organizations use the information they gather to make a wide range of decisions. These decisions may affect the lives of others and change the course of an organization. For example, the decisions made by executives and consulting firms for Enron ultimately resulted in a $60 billion loss for investors, thousands of employees without jobs, and the loss of all employee retirement funds. But Sherron Watkins, a former Enron employee and now-famous whistleblower, uncovered the accounting problems and tried to enact change. Similarly, the decisions made by firms to trade in mortgage-backed securities is having negative consequences for the entire U.S. economy. Each of these people made a decision, and each person, as well as others, is now living with the consequences of his or her decisions.
Because many decisions involve an ethical component, one of the most important considerations in management is whether the decisions you are making as an employee or manager are ethical. Here are some basic questions you can ask yourself to assess the ethics of a decision.Adapted from ideas contained in Blanchard, K., & Peale, N. V. (1988). The power of ethical management. New York: William Morrow.
Is this decision fair?
• Will I feel better or worse about myself after I make this decision?
• Does this decision break any organizational rules?
• Does this decision break any laws?
• How would I feel if this decision was broadcast on the news?
Types of Decisions
Despite the far-reaching nature of the decisions in the previous example, not all decisions have major consequences or even require a lot of thought. For example, before you come to class, you make simple and habitual decisions such as what to wear, what to eat, and which route to take as you go to and from home and school. You probably do not spend much time on these mundane decisions. These types of straightforward decisions are termed programmed decisions;2 these are decisions that occur frequently enough that we develop an automated response to them. The automated response we use to make these decisions is called the decision rule3. For example, many restaurants face customer complaints as a routine part of doing business. Because this is a recurring problem for restaurants, it may be regarded as a programmed decision. To deal with this problem, the restaurant might have a policy stating that every time they receive a valid customer complaint, the customer should receive a free dessert, which represents a decision rule. Making strategic, tactical, and operational decisions is an integral part of the planning function in the P-O-L-C (planning-organizing-leading-controlling) model.

However, decisions that are unique and important require conscious thinking, information gathering, and careful consideration of alternatives. These are called nonprogrammed decisions4. For example, in 2005, McDonald's became aware of a need to respond to growing customer concerns regarding foods high in fat and calories. This is a nonprogrammed decision because for several decades, customers of fast-food restaurants were more concerned with the taste and price of the food, rather than the healthiness. In response, McDonald's decided to offer healthier alternatives, such as substituting apple slices in Happy Meals for French fries and discontinuing the use of trans fats. A crisis situation also constitutes a nonprogrammed decision for companies. For example, the leadership of Nutrorim was facing a tough decision. They had recently introduced a new product, ChargeUp with Lipitrene, an improved version of their popular sports drink powder, ChargeUp. But a phone call came from a state health department to inform them that several cases of gastrointestinal distress had been reported after people consumed the new product. Nutrorim decided to recall ChargeUp with Lipitrene immediately. Two weeks later, it became clear that the gastrointestinal problems were unrelated to ChargeUp with Lipitrene. However, the damage to the brand and
to the balance sheets was already done. This unfortunate decision caused Nutrorim to rethink the way decisions were made under pressure so that they now gather information to make informed choices even when time is of the essence.Garvin, D. A. (2006, January). All the wrong moves. Harvard Business Review, 18-23.
Decision making can also be classified into three categories based on the level at which they occur. Strategic decisions set the course of organization. Tactical decisions are decisions about how things will get done. Finally, operational decisions are decisions that employees make each day to run the organization. For example, remember the restaurant that routinely offers a free dessert when a customer complaint is received. The owner of the restaurant made a strategic decision to have great customer service. The manager of the restaurant implemented the free dessert policy as a way to handle customer complaints, which is a tactical decision. And, the servers at the restaurant are making individual decisions each day evaluating whether each customer complaint received is legitimate to warrant a free dessert.

four decision-making approaches starting with the rational decision-making model, moving to the bounded rationality decision-making model, the intuitive decision-making model, and ending with the creative decision-making model.
Making Rational Decisions
The rational decision-making model5 describes a series of steps that decision makers should consider if their goal is to maximize the quality of their outcomes. In other words, if you want to make sure you make the best choice, going through the formal steps of the rational decision-making model may make sense.
Let's imagine that your old, clunky car has broken down and you have enough money saved for a substantial down payment on a new car. It is the first major purchase of your life, and you want to make the right choice. The first step, therefore, has already been completed—we know that you want to buy a new car. Next, in step 2, you'll need to decide which factors are important to you. How many passengers do you want to accommodate? How important is fuel economy to you
safety a major concern? You only have a certain amount of money saved, and you don't want to take on too much debt, so price range is an important factor as well. If you know you want to have room for at least five adults, get at least 20 miles per gallon, drive a car with a strong safety rating, not spend more than $22,000 on the purchase, and like how it looks, you've identified the decision criteria. All of the potential options for purchasing your car will be evaluated against these criteria.
Before we can move too much further, you need to decide how important each factor is to your decision in step 3. If each is equally important, then there is no need to weight them, but if you know that price and gas mileage are key factors, you might weight them heavily and keep the other criteria with medium importance. Step 4 requires you to generate all alternatives about your options. Then, in step 5, you need to use this information to evaluate each alternative against the criteria you have established. You choose the best alternative (step 6) and you go out and buy your new car (step 7).
Of course, the outcome of this decision will be related to the next decision made; that is where the evaluation in step 8 comes in. For example, if you purchase a car but have nothing but problems with it, you are unlikely to consider the same make and model in purchasing another car the next time!

most important criteria. After purchasing it, you may realize that the car is too small for all of your friends to ride in the back seat when you and your brother are sitting in front, which was something you should have thought about! Setting criteria before you search for alternatives may prevent you from making such mistakes. Another advantage of the rational model is that it urges decision makers to generate all alternatives instead of only a few. By generating a large number of alternatives that cover a wide range of possibilities, you are likely to make a more effective decision in which you do not need to sacrifice one criterion for the sake of another.
Despite all its benefits, you may have noticed that this decision-making model involves a number of unrealistic assumptions. It assumes that people understand what decision is to be made, that they know all their available choices, that they have no perceptual biases, and that they want to make optimal decisions. Nobel Prize-winning economist Herbert Simon observed that while the rational decision- making model may be a helpful tool for working through problems, it doesn't represent how decisions are frequently made within organizations. In fact, Simon argued that it didn't even come close!
Think about how you make important decisions in your life. Our guess is that you rarely sit down and complete all eight steps in the rational decision-making model. For example, this model proposed that we should search for all possible alternatives before making a decision, but this can be time consuming and individuals are often under time pressure to make decisions. Moreover, even if we had access to all the information, it could be challenging to compare the pros and cons of each alternative and rank them according to our preferences. Anyone who has recently purchased a new laptop computer or cell phone can attest to the challenge of sorting through the different strengths and limitations of each brand, model, and plans offered for support and arriving at the solution that best meets their needs.
In fact, the availability of too much information can lead to analysis paralysis6, where more and more time is spent on gathering information and thinking about it, but no decisions actually get made. A senior executive at Hewlett-Packard admits that his company suffered from this spiral of analyzing things for too long to the point where data gathering led to "not making decisions, instead of us making decisions."Zell, D. M., Glassman, A. M., & Duron, S. A. (2007). Strategic management in turbulent times: The short and glorious history of accelerated decision making at Hewlett-Packard. Organizational Dynamics, 36, 93-104. Moreover, you may not always be interested in reaching an optimal decision. For example, if you are looking to purchase a house, you may be willing and able to invest a great deal of time and energy to find your dream house, but if you are looking for an apartment to rent for the academic year, you may be willing to take the first one that meets your criteria of being clean, close to campus, and within your price range.

Making "Good Enough" Decisions
The bounded rationality model7 of decision making recognizes the limitations of our decision-making processes. According to this model, individuals knowingly limit their options to a manageable set and choose the best alternative without conducting an exhaustive search for alternatives. An important part of the bounded rationality approach is the tendency to satisfice8, which refers to accepting the first alternative that meets your minimum criteria. For example, many college graduates do not conduct a national or international search for potential job openings; instead, they focus their search on a limited geographic area and tend to accept the first offer in their chosen area, even if it may not be the ideal job situation. Satisficing is similar to rational decision making, but it differs in that rather than choosing the best choice and maximizing the potential outcome, the decision maker saves time and effort by accepting the first alternative that meets the minimum threshold.
Making Intuitive Decisions
The intuitive decision-making model9 has emerged as an important decision- making model. It refers to arriving at decisions without conscious reasoning. Eighty-nine percent of managers surveyed admitted to using intuition to make decisions at least sometimes, and 59% said they used intuition often.Burke, L. A., & Miller, M. K. (1999). Taking the mystery out of intuitive decision making. Academy of Management Executive, 13, 91-98. When we recognize that managers often need to make decisions under challenging circumstances with time pressures, constraints, a great deal of uncertainty, highly visible and high-stakes outcomes, and within changing conditions, it makes sense that they would not have the time to formally work through all the steps of the rational decision-making model. Yet when CEOs, financial analysts, and healthcare workers are asked about the critical decisions they make, seldom do they attribute success to luck. To an outside observer, it may seem like they are making guesses as to the course of action to take, but it turns out that they are systematically making decisions using a different model than was earlier suspected. Research on life-or-death decisions made by fire chiefs, pilots, and nurses finds that these experts do not choose among a list of well-thought-out alternatives. They don't decide between two or three options and choose the best one. Instead, they consider only one option at a time. The intuitive decision-making model argues that, in a given situation, experts making decisions scan the environment for cues to recognize patterns.Breen, B. (2000, August), "What's your intuition?" Fast Company, 290; Klein, G. (2003). Intuition at work. New York: Doubleday; Salas, E., & Klein, G. (2001). Linking expertise and naturalistic decision making. Mahwah, NJ: Lawrence Erlbaum. Once a pattern is recognized, they can play a potential course of action through to its outcome based on their prior experience. Due to training, experience, and knowledge, these decision makers have an idea of how well a given solution may work. If they run through the mental model and find

10. The generation of new ideas.
11. The step in which the need for problem solving becomes apparent.
12. The step where the decision maker thinks about the problem consciously and gathers information.
13. The step when the decision maker sets the problem aside and does not think about it for a while.
14. The insight moment, when the solution to the problem becomes apparent.
15. The stage when the decision maker consciously verifies the feasibility of the solution and implements the decision.
that the solution will not work, they alter the solution and retest it before setting it into action. If it still is not deemed a workable solution, it is discarded as an option and a new idea is tested until a workable solution is found. Once a viable course of action is identified, the decision maker puts the solution into motion. The key point is that only one choice is considered at a time. Novices are not able to make effective decisions this way because they do not have enough prior experience to draw upon.
Making Creative Decisions
In addition to the rational decision making, bounded rationality models, and intuitive decision making, creative decision making is a vital part of being an effective decision maker. Creativity10 is the generation of new, imaginative ideas. With the flattening of organizations and intense competition among organizations, individuals and organizations are driven to be creative in decisions ranging from cutting costs to creating new ways of doing business. Please note that, while creativity is the first step in the innovation process, creativity and innovation are not the same thing. Innovation begins with creative ideas, but it also involves realistic planning and follow-through.
The five steps to creative decision making are similar to the previous decision- making models in some keys ways. All of the models include problem identification11, which is the step in which the need for problem solving becomes apparent. If you do not recognize that you have a problem, it is impossible to solve it. Immersion12 is the step in which the decision maker thinks about the problem consciously and gathers information. A key to success in creative decision making is having or acquiring expertise in the area being studied. Then, incubation13 occurs. During incubation, the individual sets the problem aside and does not think about it for a while. At this time, the brain is actually working on the problem unconsciously. Then comes illumination14 or the insight moment, when the solution to the problem becomes apparent to the person, usually when it is least expected. This is the "eureka" moment similar to what happened to the ancient Greek inventor Archimedes, who found a solution to the problem he was working on while he was taking a bath. Finally, the verification and application15 stage happens when the decision maker consciously verifies the feasibility of the solution and implements the decision.
A NASA scientist describes his decision-making process leading to a creative outcome as follows: He had been trying to figure out a better way to de-ice planes to make the process faster and safer. After recognizing the problem, he had immersed himself in the literature to understand all the options, and he worked on the problem for months trying to figure out a solution. It was not until he was sitting outside of a McDonald's restaurant with his grandchildren that it dawned on him.
The golden arches of the "M" of the McDonald's logo inspired his solution: he would design the de-icer as a series of M's!Interview by author Talya Bauer at Ames Research Center, Mountain View, CA, 1990. This represented the illumination stage. After he tested and verified his creative solution, he was done with that problem except to reflect on the outcome and process.

How Do You Know If Your Decision-Making Process Is Creative?
Researchers focus on three factors to evaluate the level of creativity in the decision- making process. Fluency16 refers to the number of ideas a person is able to generate. Flexibility17 refers to how different the ideas are from one another. If you are able to generate several distinct solutions to a problem, your decision-making process is high on flexibility. Originality18 refers to an idea's uniqueness. You might say that Reed Hastings, founder and CEO of Netflix, is a pretty creative person. His decision-making process shows at least two elements of creativity. We do not exactly know how many ideas he had over the course of his career, but his ideas are fairly different from one another. After teaching math in Africa with the Peace Corps, Hastings was accepted at Stanford University, where he earned a master's degree in computer science. Soon after starting work at a software company, he invented a successful debugging tool, which led to his founding the computer troubleshooting company Pure Software in 1991. After a merger and the subsequent sale of the resulting company in 1997, Hastings founded Netflix, which revolutionized the DVD rental business through online rentals with no late fees. In 2007, Hastings was elected to Microsoft's board of directors. As you can see, his ideas are high in originality and flexibility. Conlin, M. (2007, September 14). Netflix: Recruiting and retaining the best talent. Business Week Online. Retrieved March 1, 2008, from http://www.businessweek.com/managing/content/sep2007/ ca20070913_564868.htm?campaign_id=rss_null.

Some experts have proposed that creativity occurs as an interaction among three factors: (1) people's personality traits (openness to experience, risk taking), (2) their attributes (expertise, imagination, motivation), and (3) the context (encouragement from others, time pressure, and physical structures).Amabile, T. M. (1988). A model of creativity and innovation in organizations. In B. M. Staw & L. L. Cummings (Eds.), Research in Organizational Behavior, 10 123-167 Greenwich, CT: JAI Press; Amabile, T. M., Conti, R., Coon, H., Lazenby, J., & Herron, M. (1996). Assessing the work environment for creativity. Academy of Management Journal, 39, 1154-1184; Ford, C. M., & Gioia, D. A. (2000). Factors influencing creativity in the domain of managerial decision making. Journal of Management, 26, 705-732; Tierney, P., Farmer, S. M., & Graen, G. B. (1999). An examination of leadership and employee creativity: The relevance of traits and relationships. Personnel Psychology, 52, 591-620; Woodman, R. W., Sawyer, J. E., & Griffin, R. W. (1993). Toward a theory of organizational creativity. Academy of Management Review, 18, 293-321. For example, research shows that individuals who are open to experience, are less conscientious, more self- accepting, and more impulsive, tend to be more creative.Feist, G. J. (1998). A meta- analysis of personality in scientific and artistic creativity. Personality and Social Psychology Review, 2, 290-309.
There are many techniques available that enhance and improve creativity. Linus Pauling, the Nobel prize winner who popularized the idea that vitamin C could help build the immunity system, said, "The best way to have a good idea is to have a lot of ideas." One popular way to generate ideas is to use brainstorming.
19
is a group process of generated ideas that follows a set of guidelines that include no criticism of ideas during the brainstorming process, the idea that no suggestion is too crazy, and building on other ideas (piggybacking). Research shows that the quantity of ideas actually leads to better idea quality in the end, so setting high idea quotas20 where the group must reach a set number of ideas before they are done, is recommended to avoid process loss and to maximize

21. A variation of brainstorming where the group focuses on ideas that are impossible and then imagines what would need to happen to make them possible.
the effectiveness of brainstorming. Another unique aspect of brainstorming is that the more people are included in brainstorming, the better the decision outcome will be because the variety of backgrounds and approaches give the group more to draw from. A variation of brainstorming is wildstorming21 where the group focuses on ideas that are impossible and then imagines what would need to happen to make them possible.Scott, G., Leritz, L. E., & Mumford, M. D. (2004). The effectiveness of creativity training: A quantitative review. Creativity Research Journal, 16, 361-388.
Ideas for Enhancing Organizational Creativity
We have seen that organizational creativity is vital to organizations. Here are some guidelines for enhancing organizational creativity within teams.Adapted from ideas in Amabile, T. M. (1998). How to kill creativity. Harvard Business Review, 76, 76-87; Gundry, L. K., Kickul, J. R., & Prather, C. W. (1994). Building the creative organization. Organizational Dynamics, 22, 22-37; Keith, N., & Frese, M. (2008). Effectiveness of error management training: A meta-analysis. Journal of Applied Psychology, 93, 59-69; Pearsall, M. J., Ellis, A. P. J., & Evans, J. M. (2008). Unlocking the effects of gender faultlines on team creativity: Is activation the key? Journal of Applied Psychology, 93, 225-234; Thompson, L. (2003). Improving the creativity of organizational work groups. Academy of Management Executive, 17, 96-109.
Team Composition (Organizing/Leading)
• Diversify your team to give them more inputs to build on and more opportunities to create functional conflict while avoiding personal conflict.
• Change group membership to stimulate new ideas and new interaction patterns.
• Leaderless teams can allow teams freedom to create without trying to please anyone up front.
Team Process (Leading)
• Engage in brainstorming to generate ideas—remember to set a high goal for the number of ideas the group should come up with, encourage wild ideas, and take brainwriting breaks.
• Use the nominal group technique in person or electronically to avoid some common group process pitfalls. Consider anonymous feedback as well.
• Use analogies to envision problems and solutions.
Leadership (Leading)
• Challenge teams so that they are engaged but not overwhelmed.
• Let people decide how to achieve goals, rather than telling them what goals
to achieve.
• Support and celebrate creativity even when it leads to a mistake. But set
up processes to learn from mistakes as well.
• Model creative behavior.
Culture (Organizing)
• Institute organizational memory so that individuals do not spend time on routine tasks.
• Build a physical space conducive to creativity that is playful and humorous—this is a place where ideas can thrive.
• Incorporate creative behavior into the performance appraisal process.
And finally, avoiding groupthink can be an important skill to learn.Adapted and expanded from "Six recommendations for avoiding Groupthink" in Janis, I. L. (1972). Victims of groupthink. New York: Houghton Mifflin; Whyte, G. (1991). Decision failures: Why they occur and how to prevent them. Academy of Management Executive, 5, 23-31.
The four different decision-making models—rational, bounded rationality, intuitive, and creative—vary in terms of how experienced or motivated a decision maker is to make a choice. Choosing the right approach will make you more effective at work and improve your ability to carry out all the P-O-L-C functions.

28. A group pressure phenomenon that increases the risk of the group making flawed decisions by allowing reductions in mental efficiency, reality testing, and moral judgment.
When It Comes to Decision Making, Are Two Heads Better Than One?
When it comes to decision making, are two heads better than one? The answer to this question depends on several factors. Group decision making has the advantages of drawing from the experiences and perspectives of a larger number of individuals. Hence, they have the potential to be more creative and lead to a more effective decision. In fact, groups may sometimes achieve results beyond what they could have done as individuals. Groups also make the task more enjoyable for members in question. Finally, when the decision is made by a group rather than a single individual, implementation of the decision will be easier because group members will be invested in the decision. If the group is diverse, better decisions may be made because different group members may have different ideas based on their background and experiences. Research shows that for top management teams, groups that debate issues and that are diverse make decisions that are more comprehensive and better for the bottom line in terms of profitability and sales.Simons, T., Pelled, L. H., & Smith, K. A. (1999). Making use of difference: Diversity, debate, decision comprehensiveness in top management teams. Academy of Management Journal, 42, 662-673.
Despite its popularity within organizations, group decision making suffers from a number of disadvantages. We know that groups rarely outperform their best member.Miner, F. C. (1984). Group versus individual decision making: An investigation of performance measures, decision strategies, and process losses/ gains. Organizational Behavior and Human Performance, 33, 112-124. While groups have the potential to arrive at an effective decision, they often suffer from process losses. For example, groups may suffer from coordination problems. Anyone who has worked with a team of individuals on a project can attest to the difficulty of coordinating members' work or even coordinating everyone's presence in a team meeting. Furthermore, groups can suffer from social loafing27, or the tendency of
some members to put forth less effort while working within a group. Groups may
28
also suffer from groupthink
, the tendency to avoid critical evaluation of ideas t
group favors. Finally, group decision making takes a longer time compared with individual decision making, given that all members need to discuss their thoughts regarding different alternatives.
Thus, whether an individual or a group decision is preferable will depend on the specifics of the situation. For example, if there is an emergency and a decision needs to be made quickly, individual decision making might be preferred. Individual decision making may also be appropriate if the individual in question has all the information needed to make the decision and if implementation problems are not expected. However, if one person does not have all the information and skills needed to make the decision, if implementing the decision will be difficult without the involvement of those who will be affected by the decision, and if time urgency is more modest, then decision making by a group may be more effective.

Groupthink
Have you ever been in a decision-making group that you felt was heading in the wrong direction, but you didn't speak up and say so? If so, you have already been a victim of groupthink. Groupthink is a group pressure phenomenon that increases the risk of the group making flawed decisions by leading to reduced mental efficiency, reality testing, and moral judgment. Groupthink is characterized by eight symptoms that include:Janis, I. L. (1972). Victims of groupthink. New York: Houghton Mifflin.
Illusion of invulnerability shared by most or all of the group members that creates excessive optimism and encourages them to take extreme risks.
2. Collective rationalizations where members downplay negative information or warnings that might cause them to reconsider their assumptions.
3. An unquestioned belief in the group's inherent morality that may incline members to ignore ethical or moral consequences of their actions.
4. Stereotyped views of out-groups are seen when groups discount rivals' abilities to make effective responses.
5. Direct pressure on any member who expresses strong arguments against any of the group's stereotypes, illusions, or commitments.
6. Self-censorship when members of the group minimize their own doubts and counterarguments.
7. Illusions of unanimity based on self-censorship and direct pressure on the group; the lack of dissent is viewed as unanimity.
8. The emergence of self-appointed mindguards where one or more members protect the group from information that runs counter to the group's assumptions and course of action.
While research on groupthink has not confirmed all of the theory, groups do tend to suffer from symptoms of groupthink when they are large and when the group is cohesive because the members like each other.Esser, J. K. (1998). Alive and well after 25 years: A review of groupthink research. Organizational Behavior and Human Decision Processes, 73, 116-141; Mullen, B., Anthony, T., Salas, E., & Driskell, J. E. (1994). Group cohesiveness and quality of decision making: An integration of tests of the groupthink hypothesis. Small Group Research, 25, 189-204. The assumption is that the more frequently a group displays one or more of the eight symptoms, the worse the quality of their decisions will be.
However, if your group is cohesive, it is not necessarily doomed to engage in groupthink.
Recommendations for Avoiding Groupthink Groups Should:
• Discuss the symptoms of groupthink and how to avoid them.
Assign a rotating devil's advocate to every meeting.
• Invite experts or qualified colleagues who are not part of the core decision-making group to attend meetings, and get reactions from outsiders on a regular basis and share these with the group.
• Encourage a culture of difference where different ideas are valued.
Source: http://en.wikipedia.org/ wiki/ Image:Challenger_flight_51-l_cre w.jpg
29. A technique designed to help with group decision making by ensuring that all members participate fully.
• Debate the ethical implications of the decisions and potential solutions being considered.
Individuals Should:
• Monitor their own behavior for signs of groupthink and modify behavior if needed.
• Check themselves for self-censorship.
• Carefully avoid mindguard behaviors.
• Avoid putting pressure on other group members to conform.
• Remind members of the ground rules for avoiding groupthink if they
get off track.
Group Leaders Should:
• Break the group into two subgroups from time to time.
• Have more than one group work on the same problem if time and
resources allow it. This makes sense for highly critical decisions.
• Remain impartial and refrain from stating preferences at the outset of
decisions.
• Set a tone of encouraging critical evaluations throughout
deliberations.
• Create an anonymous feedback channel where all group members can
contribute to if desired.
Tools and Techniques for Making Better Decisions
Nominal Group Technique29 (NGT) was developed to help with group decision making by ensuring that all members participate fully. NGT is not a technique to be used at all meetings routinely. Rather, it is used to structure group meetings when members are grappling with problem solving or idea generation. It follows four steps.Delbecq, A. L., Van de Ven, A. H., & Gustafson, D. H. (1975). Group techniques for program planning: A guide to nominal group and Delphi processes. Glenview, IL: Scott, Foresman. First, each member of the group engages in a period of independently
30. A group process that uses written responses to a series of questionnaires instead of physically bringing individuals together to make a decision.
31. A decision-making rule where each member of the group is given a single vote and the option that receives the greatest number of votes is selected.
32. A decision-making rule that groups may use when the goal is to gain support for an idea or plan of action. This decision- making rule is inclusive, participatory, cooperative, and democratic.
and silently writing down ideas. Second, the group goes in order around the room to gather all the ideas that were generated. This goes on until all the ideas are shared. Third, a discussion takes place around each idea and members ask for and give clarification and make evaluative statements. Finally, individuals vote for their favorite ideas by using either ranking or rating techniques. Following the four-step NGT helps to ensure that all members participate fully and avoids group decision- making problems such as groupthink.
Delphi Technique30 is unique because it is a group process using written responses to a series of questionnaires instead of physically bringing individuals together to make a decision. The first questionnaire asks individuals to respond to a broad question, such as stating the problem, outlining objectives, or proposing solutions. Each subsequent questionnaire is built from the information gathered in the previous one. The process ends when the group reaches a consensus. Facilitators can decide whether to keep responses anonymous. This process is often used to generate best practices from experts. For example, Purdue University professor Michael Campion used this process when he was editor of the research journal Personnel Psychology and wanted to determine the qualities that distinguished a good research article. Using the Delphi Technique, he was able to gather responses from hundreds of top researchers from around the world without ever having to leave his office and distill them into a checklist of criteria that he could use to evaluate articles submitted to the journal.Campion, M. A. (1993). Article review checklist: A criterion checklist for reviewing research articles in applied psychology. Personnel Psychology, 46, 705-718.
Majority rule31 refers to a decision-making rule where each member of the group is given a single vote, and the option that receives the greatest number of votes is selected. This technique has remained popular, perhaps because of its simplicity, speed, ease of use, and representational fairness. Research also supports majority rule as an effective decision-making technique.Hastie, R., & Kameda, T. (2005). The robust beauty of majority rules in group decisions. Psychological Review, 112, 494-508. However, those who did not vote in favor of the decision will be less likely to support it.
Consensus32 is another decision-making rule that groups may use when the goal is to gain support for an idea or plan of action. While consensus tends to take longer in the first place, it may make sense when support is needed to enact the plan. The process works by discussing the issues, generating a proposal, calling for consensus, and discussing any concerns. If concerns still exist, the proposal is modified to accommodate them. These steps are repeated until consensus is reached. Thus, this decision-making rule is inclusive, participatory, cooperative, and democratic. Research shows that consensus can lead to better accuracy,Roch, S. G. (2007). Why convene rater teams: An investigation of the benfits of anticipated discussion,

Group decision support systems33 (GDSS) are interactive computer-based systems that are able to combine communication and decision technologies to help groups make better decisions. Organizations know that having effective knowledge management systems34 to share information is important. Research shows that a GDSS can actually improve the output of group collaborative work through higher information sharing.Lam, S. S. K., & Schaubroeck, J. (2000). Improving group decisions by better pooling information: A comparative advantage of group decision support systems. Journal of Applied Psychology, 85, 565-573. Organizations know that having effective knowledge management systems to share information is important, and their spending reflects this reality. According to a 2002 article, businesses invested $2.7 billion into new systems in 2002 and projections were for this number to double every five years. As the popularity of these systems grows, they risk becoming counterproductive. Humans can only process so many ideas and information at one time. As virtual meetings grow larger, it is reasonable to assume that information overload can occur and good ideas will fall through the cracks, essentially recreating a problem that the GDSS was intended to solve that is to make sure every idea is heard. Another problem is the system possibly becoming too complicated. If the systems evolve to a point of uncomfortable complexity, it has recreated the problem of the bully pulpit and shyness. Those who understand the interface will control the narrative of the discussion, while those who are less savvy will only be along for the ride.Nunamaker, J. F., Jr., Dennis, A. R., Valacich, J. S., Vogel, D. R., George, J. F. (1991, July). Electronic meetings to support group work. Communications of the ACM, 34(7), 40-61. Lastly, many of these programs fail to take into account the factor of human psychology. These systems could make employees more reluctant to share information due to lack of control, lack of immediate feedback, the fear of "flaming" or harsher than normal criticism, and the desire to have original information hence more power.Babock, P. (2004, May). Shedding light on knowledge management. HR Magazine, pp. 47-50.

Because of the economic turmoil that most financial institutions find themselves in today, it might come as a surprise that an individual investment company came in at number 2 on Fortune magazine's "100 Best Companies to Work For" list in 2010, behind software giant SAS Institute Inc. Edward Jones Investments (a limited partnership company) was originally founded in St. Louis, Missouri, where its headquarters remain today. With more than 10,000 offices across the United States and Canada, they are able to serve nearly 7 million investors. This is the 10th year Edward Jones has made the Best Companies list. In addition, Edward Jones ranked highest with client satisfaction among full-service investment firms, according to an annual survey released by J. D. Power and Associates in 2009. How has Edward Jones maintained this favorable reputation in the eyes of both its employees and its customers?
It begins with the perks offered, including profit sharing and telecommuting. But if you ask the company's CEO, Tim Kirley, he will likely tell you that it goes beyond the financial incentives, and at the heart of it is the culture of honest communication that he adamantly promotes. Kirley works with senior managers and team members in what makes up an open floor plan and always tries to maintain his approachability. Examples of this include direct communication, letters to staff and video, and Internet-posted talks. In addition, regular meetings are held to celebrate achievements and reinforce the firm's ethos. Staff surveys are frequently administered and feedback is widely taken into consideration so that the 10,000 employees feel heard and respected.
According to Fortune's managing editor, Hank Gilman, "The most important considerations for this year's list were hiring and the ways in which companies are helping their employees weather the recession." Edward Jones was able to persevere through the trauma of the recent financial crisis with no layoffs and an 8% one-year job growth. While a salary freeze was enacted, profit sharing continued. Kirley insists that the best approach to the recent economic downturn is to remain honest with his employees even when the news he is delivering is not what they want to hear.
Edward Jones was established in 1922 by Edward D. Jones Sr., and long ago, the company recognized the importance of a satisfied workforce and how that has the ability to translate into customer satisfaction and long-term growth. The company's internal policy of open communication seems to carry over to how advisors
value their relationship with individual customers. Investors are most likely to contact their advisor by directly visiting them at a local branch or by picking up the phone and calling them. Edward Jones's managing partner, Jim Weddle, explains it best himself: "We are able to stay focused on the long-term because we are a partnership and we know who we are and what we do. When you respect the people who work here, you take care of them—not just in the good times, but in the difficult times as well."

Communication supports each of a manager's P-O-L-C functions. The ability to effectively communicate is a necessary condition for successfully planning, organizing, leading, and controlling. Communication is vital to organizations—it's how we coordinate actions and achieve goals. It is defined in the Merriam-Webster's dictionary as "a process by which information is exchanged between individuals through a common system of symbols, signs, or behavior."Merriam-Webster online dictionary. (2008). Retrieved December 1, 2008, from http://www.merriam- webster.com/dictionary/communication. We know that 50%-90% of a manager's time is spent communicatingSchnake, M. E., Dumler, M. P., Cochran, D. S., & Barnett, T. R. (1990). Effects of differences in subordinate perceptions of superiors' communication practices. The Journal of Business Communication, 27, 37-50. and that communication ability is related to a manager's performance.Penley, L. E., Alexander, E. R., Jernigan, I. E., & Henwood, C. I. (1991). Communication abilities of managers: The relationship of performance. Journal of Management, 17, 57-76. In most work environments, a miscommunication is an annoyance—it can interrupt workflow by causing delays and interpersonal strife. And in some work arenas, like operating rooms and airplane cockpits, communication can be a matter of life and death.
So, just how prevalent is the problem of miscommunication in the workplace? You may be surprised to learn that the relationship between miscommunication and negative outcomes is strong. A recent NASA study suggests that deficient interpersonal communication was a causal factor in approximately 70%-80% of aviation accidents over a 20-year period.Baron, R. (2004). Barriers to effective communication: Implications for the cockpit. Retrieved July 3, 2008, from AirlineSafety.com: http://www.airlinesafety.com/editorials/ BarriersToCommunication.htm.
Poor communication can also lead to lawsuits. For example, you might think that malpractice suits are filed against doctors based on the outcome of their treatments alone. But a 1997 study of malpractice suits found that a primary influence on whether a doctor is sued is that doctor's communication style. While the
combination of a bad outcome and patient unhappiness can quickly lead to litigation, a warm, personal communication style leads to greater patient satisfaction. And satisfied patients are less likely to sue.Communications skills cut malpractice risk—study reveals most important reason that patients decide to file malpractice suits is because of poor communication by physicians and not medical errors. (1997, October). USA Today.
For leaders and organizations, poor communication costs money and wastes time. One study found that 14% of each workweek is wasted on poor communication.Armour, S. (1998, September 30). Failure to Communicate Costly for Companies. USA Today, 1A. In contrast, effective communication is an asset for organizations and individuals alike. Effective communication skills, for example, are an asset for job seekers. A recent study of recruiters at 85 business schools ranked communication and interpersonal skills as the highest skills they were looking for, with 89% of the recruiters saying they were important.Alsop, R. (2006, September 20). The top business schools: Recruiters' M.B.A. picks. Wall Street Journal
Online. Retrieved September 20, 2006 from http://online.wsj.com/article/ SB115860376846766495.html?mod=2_1245_1. Good communication can also help a company retain its star employees. Surveys find that when employees think their organizations do a good job of keeping them informed about matters that affect them and they have ready access to the information they need to do their jobs, they are more satisfied with their employers.What are the bottom line results of communicating? (2003, June). Pay for Performance Report, p. 1. Retrieved July 1, 2008, from http://www.mercerHR.com. So, can good communication increase a company's market value? The answer seems to be yes. "When you foster ongoing communications internally, you will have more satisfied employees who will be better equipped to effectively communicate with your customers," says Susan Meisinger, President/CEO of the Society for Human Resource Management, citing research findings that for organizations that are able to improve their communication integrity, their market value increases by as much as 7.1%.Meisinger, S. (2003, February). Enhancing communications—ours and yours. HR Magazine. Retrieved July 1, 2008, from http://www.shrm.org/hrmagazine/ archive/0203toc.asp. We will explore the definition and benefits of effective communication in our next section.
The Communication Process
Communication fulfills three main functions within an organization: (1) transmitting information, (2) coordinating effort, and (3) sharing emotions and feelings. All these functions are vital to a successful organization. Transmitting information is vital to an organization's ability to function. Coordinating effort within the organization helps people work toward the same goals. Sharing emotions and feelings bonds teams and unites people in times of celebration and crisis. Effective communication helps people grasp issues, build rapport with coworkers, and achieve consensus. So, how can we communicate effectively? The first step is to understand the communication process.
We all exchange information with others countless times a day, by phone, e-mail, printed word, and of course, in person. Let's take a moment to see how a typical communication works using the Process Model of Communication as a guide.

When we look at the overall findings regarding these leader behaviors, it seems that both types of behaviors, in the aggregate, are beneficial to organizations but for different purposes. For example, when leaders demonstrate people-oriented behaviors, employees tend to be more satisfied and react more positively. However, when leaders are task-oriented, productivity tends to be a bit higher.Judge, T. A., Piccolo, R. F., & Ilies, R. (2004). The forgotten ones? The validity of consideration and initiating structure in leadership research. Journal of Applied Psychology, 89, 36-51. Moreover, the situation in which these behaviors are demonstrated seems to matter. In small companies, task-oriented behaviors were found to be more effective than in large companies.Miles, R. H., & Petty, M. M. (1977). Leader effectiveness in small bureaucracies. Academy of Management Journal, 20, 238-250. There is also some evidence that working under a leader with very high levels of task-oriented behaviors may cause burnout on the part of employees.Seltzer, J., & Numerof, R. E. (1988). Supervisory leadership and subordinate burnout. Academy of Management Journal, 31, 439-446.
Leader Decision Making
Another question behavioral researchers focused on was how leaders actually make decisions, and the influence of decision-making styles on leader effectiveness and employee reactions. Three types of decision-making styles were studied. In authoritarian decision making6, leaders make the decision alone without necessarily involving employees in the decision-making process. When leaders use democratic decision making7, employees participate in the making of the decision. Finally, leaders using laissez-faire decision making8 leave employees alone to make the decision; the leader provides minimum guidance and involvement in the decision.
As with other lines of research on leadership, research did not identify one decision-making style as the best one. It seems that the effectiveness of the style the leader is using depends on the circumstances. A review of the literature shows that when leaders use more democratic decision-making styles, employees tend to be more satisfied, but the effects on decision quality or employee productivity are weaker. Moreover, instead of expecting to be involved in every single decision, employees seem to care more about the overall participativeness of the organizational climate.Miller, K. I., & Monge, P. R. (1986). Participation, satisfaction, and productivity: A meta-analytic review. Academy of Management Journal, 29, 727-753. Different types of employees may also expect different levels of involvement. In a study conducted in a research organization, scientists viewed democratic leadership most favorably and authoritarian leadership least favorably,Baumgartel, H. (1957). Leadership style as a variable in research administration. Administrative Science Quarterly, 2, 344-360. but employees working in large groups where opportunities for member interaction was limited preferred authoritarian leader decision making.Vroom, V. H., & Mann, F. C. (1960). Leader authoritarianism and employee attitudes. Personnel Psychology, 13, 125-140.
Finally, the effectiveness of each style seems to depend on who is using it. There are examples of effective leaders using both authoritarian and democratic styles. For example, Larry Page and Sergey Brin at Google are known for their democratic decision-making styles. At Hyundai USA, high-level managers use authoritarian decision-making styles, and the company is performing well.Deutschman, A. (2004, September). Googling for courage. Fast Company, 86, 58-59; Welch, D., Kiley, D., &
The track record of the laissez-faire decision-making style is more problematic. Research shows that this style is negatively related to employee satisfaction with leaders and leader effectiveness.Judge, T. A., & Piccolo, R. F. (2004). Transformational and transactional leadership: A meta-analytic test of their relative validity. Journal of Applied Psychology, 89, 755-768. Laissez-faire leaders create high levels of ambiguity about job expectations on the part of employees, and employees also engage in higher levels of conflict when leaders are using the laissez-faire style.Skogstad, A., Einarsen, S., Torsheim, T., Aasland, M. S., & Hetland, H. (2007). The destructiveness of laissez-faire leadership behavior. Journal of Occupational Health Psychology, 12, 80-92.
Limitations of Behavioral Approaches
Figure 10.9
Google cofounders Larry Page and Sergey Brin (shown here) are known for their democratic decision-making styles.
Source:
http://commons.wikimedia.org/
wiki/ Image:Sergey_Brin,_Web_2.0_Co nference.jpg
Behavioral approaches, similar to trait approaches, fell
out of favor because they neglected the environment in
which behaviors are demonstrated. The hope of the
researchers was that the identified behaviors would predict leadership under all circumstances, but it may be unrealistic to expect that a given set of behaviors would work under all circumstances. What makes a high school principal effective on the job may be very different from what makes a military leader, which would be different from behaviors creating success in small or large business enterprises. It turns out that specifying the conditions under which these behaviors are more effective may be a better approach.

6. The distortion or withholding of information to manage a person's reactions.
Barriers to Effective Communication
Communicating can be more of a challenge than you think, when you realize the many things that can stand in the way of effective communication. These include filtering, selective perception, information overload, emotional disconnects, lack of source familiarity or credibility, workplace gossip, semantics, gender differences, differences in meaning between Sender and Receiver, and biased language. Let's examine each of these barriers.
Filtering
Filtering6 is the distortion or withholding of information to manage a person's reactions. Some examples of filtering include a manager who keeps her division's poor sales figures from her boss, the vice president, fearing that the bad news will make him angry. The old saying, "Don't shoot the messenger!" illustrates the tendency of Receivers (in this case, the vice president) to vent their negative response to unwanted Messages on the Sender. A gatekeeper (the vice president's assistant, perhaps) who doesn't pass along a complete Message is also filtering. The vice president may delete the e-mail announcing the quarter's sales figures before reading it, blocking the Message before it arrives.
As you can see, filtering prevents members of an organization from getting a complete picture of the way things are. To maximize your chances of sending and receiving effective communications, it's helpful to deliver a Message in multiple ways and to seek information from multiple sources. In this way, the effect of any one person's filtering the Message will be diminished.
Since people tend to filter bad news more during upward communication, it is also helpful to remember that those below you in an organization may be wary of sharing bad news. One way to defuse the tendency to filter is to reward employees
ho clearly convey information upward, regardless of whether the news is good and bad.
Here are some of the criteria that individuals may use when deciding whether to filter a Message or pass it on:
• Past experience: Was the Sender rewarded for passing along news of this kind in the past, or was she criticized?
• Knowledge, perception of the speaker: Has the Receiver's direct superior made it clear that "no news is good news?"
• Emotional state, involvement with the topic, level of attention: Does the Sender's fear of failure or criticism prevent him from conveying the Message? Is the topic within his realm of expertise, increasing his confidence in his ability to decode it, or is he out of his comfort zone when it comes to evaluating the Message's significance? Are personal concerns impacting his ability to judge the Message's value?
Once again, filtering can lead to miscommunications in business. Each listener translates the Message into his or her own words, creating his or her own version of what was said.Alessandra, T. (1993). Communicating at work. New York: Fireside.
Selective Perception
Selective perception7 refers to filtering what we see and hear to suit our own needs. This process is often unconscious. Small things can command our attention when we're visiting a new place—a new city or a new company. Over time, however, we begin to make assumptions about the way things are on the basis of our past experience. Often, much of this process is unconscious. "We simply are bombarded with too much stimuli every day to pay equal attention to everything so we pick and choose according to our own needs."Pope, R. R. Selective perception. Illinois State University. Retrieved December 1, 2008, from http://lilt.ilstu.edu/rrpope/ rrpopepwd/articles/perception3.html. Selective perception is a time-saver, a necessary tool in a complex culture. But it can also lead to mistakes.
Think back to the earlier example conversation between Bill, who was asked to order more toner cartridges, and his boss. Since Bill found his boss's to-do list to be unreasonably demanding, he assumed the request could wait. (How else could he do everything else on the list?) The boss, assuming that Bill had heard the urgency in her request, assumed that Bill would place the order before returning to the other tasks on her list.
Both members of this organization were using selective perception to evaluate the communication. Bill's perception was that the task of ordering could wait. The boss's perception was that her time frame was clear, though unstated. When two selective perceptions collide, a misunderstanding occurs.
Information Overload
Information overload8 can be defined as "occurring when the information processing demands on an individual's time to perform interactions and internal calculations exceed the supply or capacity of time available for such processing."Schick, A. G., Gordon, L. A., & Haka, S. (1990). Information overload: A temporal approach. Accounting, Organizations, and Society, 15, 199-220. Messages reach us in countless ways every day. Some are societal—advertisements that we may hear or see in the course of our day. Others are professional—e- mails, and memos, voice mails, and conversations from our colleagues. Others are personal—messages and conversations from our loved ones and friends.
Figure 12.7
A field study found that managers can expect, on average, to do only three minutes of uninterrupted work on any one task before being interrupted by an incoming e-mail, instant message, phone call, coworker, or other distraction.
Add these together and it's easy to see how we may be
receiving more information than we can take in. This
state of imbalance is known as information overload.
Experts note that information overload is "A symptom
of the high-tech age, which is too much information for
one human being to absorb in an expanding world of
people and technology. It comes from all sources including TV, newspapers, and magazines as well as wanted and unwanted regular mail, e-mail and faxes. It has been exacerbated enormously because of the formidable number of results obtained from Web search engines."Retrieved July 1, 2008, from PC Magazine encyclopedia Web site, http://www.pcmag.com/encyclopedia_term/ 0,2542,t=information+overload&i=44950,00.asp, and reinforced by information in Dawley, D. D., & Anthony, W. P. (2003). User perceptions of e-mail at work. Journal of Business and Technical Communication, 17, 170-200. Other research shows that working in such fragmented fashion has a significant negative effect on efficiency, creativity, and mental acuity.Based on Overholt, A. (2001, February). Intel's got (too much) mail. Fast Company. Retrieved July 2, 2008, from http://www.fastcompany.com/online/44/intel.html and http://blogs.intel.com/it/ 2006/10/information_overload.php.
Going back to our example of Bill. Let's say he's in his cubicle on the phone with a supplier. While he's talking, he hears the chime of e-mail alerting him to an
important message from his boss. He's scanning through it quickly, while still on the phone, when a coworker pokes his head around the cubicle corner to remind Bill that he's late for a staff meeting. The supplier on the other end of the phone line has just given Bill a choice among the products and delivery dates he requested. Bill realizes he missed hearing the first two options, but he doesn't have time to ask the supplier to repeat them all or to try reconnecting to place the order at a later time. He chooses the third option—at least he heard that one, he reasons, and it seemed fair. How good was Bill's decision amid all the information he was processing at the same time?

Emotional disconnects
Emotional disconnects happen when the Sender or the Receiver is upset, whether about the subject at hand or about some unrelated incident that may have happened earlier. An effective communication requires a Sender and a Receiver who are open to speaking and listening to one another, despite possible differences in opinion or personality. One or both parties may have to put their emotions aside to achieve the goal of communicating clearly. A Receiver who is emotionally upset tends to ignore or distort what the Sender is saying. A Sender who is emotionally upset may be unable to present ideas or feelings effectively.
Lack of Source Credibility
Lack of source familiarity or credibility can derail communications, especially when humor is involved. Have you ever told a joke that fell flat? You and the Receiver lacked the common context that could have made it funny. (Or yes, it could have just been a lousy joke.) Sarcasm and irony are subtle, and potentially hurtful, commodities in business. It's best to keep these types of communications out of the workplace as their benefits are limited, and their potential dangers are great. Lack of familiarity with the Sender can lead to misinterpreting humor, especially in less-rich information channels like e-mail. For example, an e-mail from Jill that ends with, "Men, like hens, should boil in vats of oil," could be interpreted as antimale if the Receiver didn't know that Jill has a penchant for rhyme and likes to entertain coworkers by making up amusing sayings.
Similarly, if the Sender lacks credibility or is untrustworthy, the Message will not get through. Receivers may be suspicious of the Sender's motivations ("Why am I being told this?"). Likewise, if the Sender has communicated erroneous information in the past, or has created false emergencies, his current Message may be filtered.
Workplace gossip, also known as the grapevine9, is a lifeline for many employees seeking information about their company.Kurland, N. B., & Pelled, L. H. (2000
Passing the word: Toward a model of gossip and power in the workplace. Academy of Management Review, 25, 428-438. Researchers agree that the grapevine is an inevitable part of organizational life. Research finds that 70% of all organizational communication occurs at the grapevine level.Crampton, S. M. (1998). The informal communication network: factors influencing grapevine activity. Public Personnel Management. Retrieved July 2, 2008, from http://www.allbusiness.com/ management/735210-1.html.
Employees trust their peers as a source of Messages, but the grapevine's informal structure can be a barrier to effective communication from the managerial point of view. Its grassroots structure gives it greater credibility in the minds of employees than information delivered through official channels, even when that information is false.
Some downsides of the office grapevine are that gossip offers politically minded insiders a powerful tool for disseminating communication (and self-promoting miscommunications) within an organization. In addition, the grapevine lacks a specific Sender, which can create a sense of distrust among employees—who is at the root of the gossip network? When the news is volatile, suspicions may arise as to the person or persons behind the Message. Managers who understand the grapevine's power can use it to send and receive Messages of their own. They also decrease the grapevine's power by sending official Messages quickly and accurately, should big news arise.
Semantics
Semantics10 is the study of meaning in communication. Words can mean different things to different people, or they might not mean anything to another person. For example, companies often have their own acronyms and buzzwords (called business jargon) that are clear to them but impenetrable to outsiders. For example, at IBM, GBS is focusing on BPTS, using expertise acquired from the PwC purchase (which had to be sold to avoid conflicts of interest in light of SOX) to fend other BPO providers and inroads by the Bangalore tiger. Does this make sense to you? If not, here's the translation: IBM's Global Business Services (GBS) division is focusing on offering companies Business Process Transformation Services (BPTS), using the expertise it acquired from purchasing the management consulting and technology services arm of PricewaterhouseCoopers (PwC), which had to sell the division because of the Sarbanes-Oxley Act (SOX, enacted in response to the major accounting scandals like the Enron). The added management expertise puts it above business process outsourcing (BPO) vendors who focus more on automating processes rather than transforming and improving them. Chief among these BPO competitors is Wipro, often called the "Bangalore tiger" because of its geographic origin and aggressive growth.

Given the amount of Messages we send and receive every day, it makes sense that humans try to find shortcuts—a way to communicate things in code. In business, this code is known as jargon11. Jargon is the language of specialized terms used by a group or profession. It is common shorthand among experts and if used sensibly can be a quick and efficient way of communicating. Most jargon consists of unfamiliar terms, abstract words, nonexistent words, acronyms, and abbreviations, with an occasional euphemism thrown in for good measure. Every profession, trade, and organization has its own specialized terms.Wright, N. Keep it jargon-free. Retrieved July 2, 2008, from http://www.plainlanguage.gov/howto/ wordsuggestions/jargonfree.cfm. At first glance, jargon seems like a good thing—a quicker way to send an effective communication, the way text message abbreviations can send common messages in a shorter, yet understandable way. But that's not always how things happen. Jargon can be an obstacle to effective communication, causing listeners to tune out or fostering ill-feeling between partners in a conversation. When jargon rules the day, the Message can get obscured.
A key question to ask before using jargon is, "Who is the Receiver of my Message?" If you are a specialist speaking to another specialist in your area, jargon may be the best way to send a message while forging a professional bond—similar to the way best friends can communicate in code. For example, an information technology (IT) systems analyst communicating with another IT employee may use jargon as a way of sharing information in a way that reinforces the pair's shared knowledge. But that same conversation should be held in standard English, free of jargon, when communicating with staff members outside the IT group.

Gender Differences
Gender differences in communication have been documented by a number of experts, including linguistics professor Deborah Tannen in her best-selling book You Just Don't Understand: Women and Men in Conversation.Tannen, D. (1991). You just don't understand: Women and men in conversation. New York: Ballantine. Men and women work together every day. But their different styles of communication can sometimes work against them. Generally speaking, women like to ask questions before starting a project, while men tend to "jump right in." A male manager who's unaware of how many women communicate their readiness to work may misperceive a ready employee as not ready.
Another difference that has been noticed is that men often speak in sports metaphors, while many women use their home as a starting place for analogies. Women who believe men are "only talking about the game" may be missing out on a chance to participate in a division's strategy and opportunities for teamwork and "rallying the troops" for success.Krotz, J. L. (n.d.). 6 tips for bridging the communication gap. Retrieved July 2, 2008, from Microsoft Small Business Center Web site, http://www.microsoft.com/smallbusiness/resources/management/ leadership-training/women-vs-men-6-tips-for-bridging-the-communication- gap.aspx.
"It is important to promote the best possible communication between men and women in the workplace," notes gender policy adviser Dee Norton, who provided the above example. "As we move between the male and female cultures, we sometimes have to change how we behave (speak the language of the other gender) to gain the best results from the situation. Clearly, successful organizations of the future are going to have leaders and team members who understand, respect and apply the rules of gender culture appropriately."Norton, D. Gender and communication—finding common ground. Retrieved July 2, 2008, from http://www.uscg.mil/leadership/gender.htm.
Being aware of these gender differences can be the first step in learning to work with them, as opposed to around them. For example, keep in mind that men tend to focus more on competition, data, and orders in their communications, while women tend to focus more on cooperation, intuition, and requests. Both styles can be effective in the right situations, but understanding the differences is a first step in avoiding misunderstandings based on them.
Differences in meaning often exist between the Sender and Receiver. "Mean what you say, and say what you mean." It's an easy thing to say. But in business, what do those words mean? Different words mean different things to different people. Age,
education, and cultural background are all factors that influence how a person interprets words. The less we consider our audience, the greater our chances of miscommunication will be. When communication occurs in the cross-cultural context, extra caution is needed given that different words will be interpreted differently across cultures and different cultures have different norms regarding nonverbal communication. Eliminating jargon is one way of ensuring that our words will convey real-world concepts to others. Speaking to our audience, as opposed to about ourselves, is another. Nonverbal Messages can also have different meanings.

Managers who speak about "long-term goals and profits" to a staff that has received scant raises may find their core Message ("You're doing a great job—and that benefits the folks in charge!") has infuriated the group they hoped to inspire. Instead, managers who recognize the "contributions" of their staff and confirm that this work is contributing to company goals in ways "that will benefit the source of our success—our employees as well as executives," will find their core Message ("You're doing a great job—we really value your work") is received as opposed to being misinterpreted.
Biased language can offend or stereotype others on the basis of their personal or group affiliation. The figure below provides a list of words that have the potential to be offensive in the left-hand column. The right-hand column provides more neutral words that you can use instead.Adapted from information in Ashcraft, K., & Mumby, D. K. (2003). Reworking gender. Thousand Oaks, CA, Sage; Miller, C., & Swift, K. (1980). The handbook of nonsexist writing. New York: Lippincott & Crowell; Procter, M. (2007, September 11). Unbiased language. Retrieved July 2, 2008, from http://www.utoronto.ca/writing/unbias.html.
Effective communication is clear, factual, and goal-oriented. It is also respectful. Referring to a person by one adjective (a brain, a diabetic, an invalid) reduces that person to that one characteristic. Language that belittles or stereotypes a person poisons the communication process. Language that insults an individual or group based on age, ethnicity, sexual preference, or political beliefs violates public and private standards of decency, ranging from civil rights to corporate regulations.
The effort to create a neutral set of terms to refer to heritage and preferences has resulted in a debate over the nature of "political correctness." Proponents of political correctness see it as a way to defuse the volatile nature of words that stereotyped groups and individuals in the past. Critics of political correctness see its vocabulary as stilted and needlessly cautious.
Many companies offer new employees written guides on standards of speech and conduct. These guides, augmented by common sense and courtesy, are solid starting points for effective, respectful workplace communication. Tips for appropriate workplace speech include but are not limited to
• Alternating the use of "he" and "she" when referring to people in general.
• Relying on human resources-generated guidelines.
• Remembering that terms that feel respectful or comfortable to us may
not be comfortable or respectful to others.

Poor Listening and Active Listening
Former Chrysler CEO Lee Iacocca lamented, "I only wish I could find an institute that teaches people how to listen. After all, a good manager needs to listen at least as much as he needs to talk."Iacocca, L., & Novak, W. (1984). Iacocca: An autobiography. New York: Bantam Press. Research shows that listening skills are related to promotions.Sypher, B. D., Bostrom, R. N., & Seibert, J. H. (1989). Listening, communication abilities, and success at work. Journal of Business Communication, 26, 293-303. A Sender may strive to deliver a Message clearly. But the Receiver's ability to listen effectively is equally vital to effective communication. The average worker spends 55% of her workdays listening. Managers listen up to 70% each day. But listening doesn't lead to understanding in every case. Listening takes practice, skill, and concentration.
According to University of San Diego professor Phillip Hunsaker, "The consequences of poor listening are lower employee productivity, missed sales, unhappy customers, and billions of dollars of increased cost and lost profits. Poor listening is a factor in low employee morale and increased turnover because employees do not feel their managers listen to their needs, suggestions, or complaints."Alessandra, T., Garner, H., & Hunsaker, P. L. (1993). Communicating at work. New York: Simon & Schuster. Clearly, if you hope to have a successful career in management, it behooves you to learn to be a good listener.
Alan Gulick, a Starbucks spokesperson, puts better listening to work in pursuit of better profits. If every Starbucks employee misheard one $10 order each day, he calculates, their errors would cost the company a billion dollars annually. To teach its employees to listen, Starbucks created a code that helps employees taking orders hear the size, flavor, and use of milk or decaf coffee. The person making the drink echoes the order aloud.
How can you improve your listening skills? The Roman philosopher Cicero said, "Silence is one of the great arts of conversation." How often have we been in conversation with someone else where we are not really listening but itching to convey our portion? This behavior is known as "rehearsing." It suggests the Receiver has no intention of considering the Sender's Message and intends to respond to an earlier point instead. Clearly, rehearsing is an impediment to the communication process. Effective communication relies on another kind of listening: active listening.
Active listening12 can be defined as giving full attention to what other people are saying, taking time to understand the points being made, asking questions as appropriate, and not interrupting at inappropriate times.O*NET Resource Center,
the nation's primary source of occupational information. Retrieved July 2, 2008, from http://online.onetcenter.org/skills.Active listening creates a real-time relationship between the Sender and the Receiver by acknowledging the content and receipt of a Message. As we've seen in the Starbucks example, repeating and confirming a Message's content offers a way to confirm that the correct content is flowing between colleagues. The process creates a bond between coworkers while increasing the flow and accuracy of messaging.
Carl Rogers, founder of the "person-centered" approach to psychology, formulated five rules for active listening:
1. Listen for message content
2. Listen for feelings
3. Respond to feelings
4. Note all cues
5. Paraphrase and restate
The good news is that listening is a skill that can be learned.Brownell, J. (1990). Perceptions of effective listeners: A management study. Journal of Business Communications, 27, 401-415. The first step is to decide that we want to listen. Casting aside distractions, such as by reducing background or internal noise, is critical. The Receiver takes in the Sender's Message silently, without speaking. Second, throughout the conversation, show the speaker that you're listening. You can do this nonverbally by nodding your head and keeping your attention focused on the speaker. You can also do it verbally, by saying things like, "Yes," "That's interesting," or other such verbal cues. As you're listening, pay attention to the Sender's body language for additional cues about how they're feeling. Interestingly, silence plays a major role in active listening. During active listening, we are trying to understand what has been said, and in silence, we can consider the implications. We can't consider information and reply to it at the same time. That's where the power of silence comes into play. Finally, if anything is not clear to you, ask questions. Confirm that you've heard the message accurately, by repeating back a crucial piece like, "Great, I'll see you at 2 p.m. in my office." At the end of the conversation, a "thank you" from both parties is an optional but highly effective way of acknowledging each other's teamwork.
In summary, active listening creates a more dynamic relationship between a Receiver and a Sender. It strengthens personal investment in the information being shared. It also forges healthy working relationships among colleagues by making Speakers and Listeners equally valued members of the communication process.

Communication can be categorized into three basic types: (1) verbal communication, in which you listen to a person to understand their meaning; (2) written communication, in which you read their meaning; and (3) nonverbal communication, in which you observe a person and infer meaning. Each has its own advantages, disadvantages, and even pitfalls.
Verbal Communication
Verbal communications in business take place over the phone or in person. The medium of the Message is oral. Let's return to our printer cartridge example. This time, the Message is being conveyed from the Sender (the Manager) to the Receiver (an employee named Bill) by telephone. We've already seen how the Manager's request to Bill ("We need to buy more printer toner cartridges") can go awry. Now let's look at how the same Message can travel successfully from Sender to Receiver.
Manager (speaking on the phone): "Good morning, Bill!"
(By using the employee's name, the manager is establishing a clear, personal link to the Receiver.)
Manager: "Your division's numbers are looking great."
(The Manager's recognition of Bill's role in a winning team further personalizes and emotionalizes the conversation.)
Manager: "Our next step is to order more printer toner cartridges. Could you place an order for 1,000 printer toner cartridges with Jones Computer Supplies? Our
budget for this purchase is $30,000, and the cartridges need to be here by Wednesday afternoon."
(The Manager breaks down the task into several steps. Each step consists of a specific task, time frame, quantity, or goal.)
Bill: "Sure thing! I'll call Jones Computer Supplies and order 1,000 more printer toner cartridges, not exceeding a total of $30,000, to be here by Wednesday afternoon."
(Bill, who is good at active listening, repeats what he has heard. This is the Feedback portion of the communication, and verbal communication has the advantage of offering opportunities for immediate feedback. Feedback helps Bill to recognize any confusion he may have had hearing the manager's Message. Feedback also helps the manager to tell whether she has communicated the Message correctly.)
Storytelling
Storytelling has been shown to be an effective form of verbal communication; it serves an important organizational function by helping to construct common meanings for individuals within the organization. Stories can help clarify key values and help demonstrate how things are done within an organization, and story frequency, strength, and tone are related to higher organizational commitment.McCarthy, J. F. (2008). Short stories at work: Storytelling as an indicator of organizational commitment. Group & Organization Management, 33, 163-193. The quality of the stories entrepreneurs tell is related to their ability to secure capital for their firms.Martens, M. L., Jennings, J. E., & Devereaux, J. P. (2007). Do the stories they tell get them the money they need? The role of entrepreneurial narratives in resource acquisition. Academy of Management Journal, 50, 1107-1132. Stories can serve to reinforce and perpetuate an organization's culture, part of the organizing P-O-L-C function.
Crucial Conversations
While the process may be the same, high-stakes communications require more planning, reflection, and skill than normal day-to-day interactions at work. Examples of high-stakes communication events include asking for a raise or presenting a business plan to a venture capitalist. In addition to these events, there are also many times in our professional lives when we have crucial conversations13—discussions where not only the stakes are high but also where opinions vary and emotions run strong.Patterson, K., Grenny, J., McMillan, R., & Switzler, A. (2002). Crucial conversations: Tools for talking when stakes are high. Ne

York: McGraw-Hill. One of the most consistent recommendations from communications experts is to work toward using "and" instead of "but" as you communicate under these circumstances. In addition, be aware of your communication style and practice flexibility; it is under stressful situations that communication styles can become the most rigid.
Written Communication
In contrast to verbal communications, written business communications are printed messages. Examples of written communications include memos, proposals, e-mails, letters, training manuals, and operating policies. They may be printed on paper, handwritten, or appear on the screen. Normally, a verbal communication takes place in real time. Written communication, by contrast, can be constructed over a longer period of time. Written communication is often asynchronous (occurring at different times). That is, the Sender can write a Message that the Receiver can read at any time, unlike a conversation that is carried on in real time. A written communication can also be read by many people (such as all employees in a department or all customers). It's a "one-to-many" communication, as opposed to a one-to-one verbal conversation. There are exceptions, of course: a voicemail is an oral Message that is asynchronous. Conference calls and speeches are oral one-to- many communications, and e-mails may have only one recipient or many.
Most jobs involve some degree of writing. According to the National Commission on Writing, 67% of salaried employees in large American companies and professional state employees have some writing responsibility. Half of responding companies reported that they take writing into consideration when hiring professional employees, and 91% always take writing into account when hiring (for any position, not just professional-level ones).Flink, H. (2007, March). Tell it like it is: Essential communication skills for engineers. Industrial Engineer, 39, 44-49.
Luckily, it is possible to learn to write clearly. Here are some tips on writing well. Thomas Jefferson summed up the rules of writing well with this idea "Don't use two words when one will do." One of the oldest myths in business is that writing more will make us sound more important; in fact, the opposite is true. Leaders who can communicate simply and clearly project a stronger image than those who write a lot but say nothing.

Nonverbal Communication
What you say is a vital part of any communication. But what you don't say can be even more important. Research also shows that 55% of in-person communication comes from nonverbal cues like facial expressions, body stance, and tone of voice. According to one study, only 7% of a Receiver's comprehension of a Message is based on the Sender's actual words; 38% is based on paralanguage (the tone, pace, and volume of speech), and 55% is based on nonverbal cues (body language).Mehrabian, A. (1981). Silent messages. New York: Wadsworth.
Research shows that nonverbal cues can also affect whether you get a job offer. Judges examining videotapes of actual applicants were able to assess the social skills of job candidates with the sound turned off. They watched the rate of gesturing, time spent talking, and formality of dress to determine which candidates would be the most successful socially on the job.Gifford, R., Ng, C. F., & Wilkinson, M. (1985). Nonverbal cues in the employment interview: Links between applicant qualities and interviewer judgments. Journal of Applied Psychology, 70, 729-736. For this reason, it is important to consider how we appear in business as well as what we say. The muscles of our faces convey our emotions. We can send a silent message without saying a word. A change in facial expression can change our emotional state. Before an interview, for example, if we focus on feeling confident, our face will convey that confidence to an interviewer. Adopting a smile (even if we're feeling stressed) can reduce the body's stress levels.
To be effective communicators, we need to align our body language, appearance, and tone with the words we're trying to convey. Research shows that when individuals are lying, they are more likely to blink more frequently, shift their weight, and shrug.Siegman, A. W. (1985). Multichannel integrations of nonverbal behavior. Hillsdale, NJ: Lawrence Erlbaum.

Body Language
A simple rule of thumb is that simplicity, directness, and warmth convey sincerity. And sincerity is key to effective communication. A firm handshake, given with a warm, dry hand, is a great way to establish trust. A weak, clammy handshake conveys a lack of trustworthiness. Gnawing one's lip conveys uncertainty. A direct smile conveys confidence.
Eye Contact
In business, the style and duration of eye contact considered appropriate vary greatly across cultures. In the United States, looking someone in the eye (for about a second) is considered a sign of trustworthiness.
Facial Expressions
The human face can produce thousands of different expressions. These expressions have been decoded by experts as corresponding to hundreds of different emotional states.Ekman, P., Friesen, W. V., & Hager, J. C. The facial action coding system (FACS). Retrieved July 2, 2008, from http://face-and-emotion.com/dataface/facs/ manual. Our faces convey basic information to the outside world. Happiness is associated with an upturned mouth and slightly closed eyes; fear with an open mouth and wide-eyed stare. Flitting ("shifty") eyes and pursed lips convey a lack of trustworthiness. The effect of facial expressions in conversation is instantaneous. Our brains may register them as "a feeling" about someone's character.
Posture
The position of our body relative to a chair or another person is another powerful silent messenger that conveys interest, aloofness, professionalism—or lack thereof. Head up, back straight (but not rigid) implies an upright character. In interview situations, experts advise mirroring an interviewer's tendency to lean in and settle back in her seat. The subtle repetition of the other person's posture conveys that we are listening and responding.

Touch
The meaning of a simple touch differs between individuals, genders, and cultures. In Mexico, when doing business, men may find themselves being grasped on the arm by another man. To pull away is seen as rude. In Indonesia, to touch anyone on the head or touch anything with one's foot is considered highly offensive. In the Far East, according to business etiquette writer Nazir Daud, "it is considered impolite for a woman to shake a man's hand."Daud, N. (n.d.). Business etiquette. Retrieved July 2, 2008, from http://ezinearticles.com/?Business-Etiquette---Shaking-Hands- around-the-World&id=746227. Americans, as we have noted, place great value in a firm handshake. But handshaking as a competitive sport ("the bone-crusher") can come off as needlessly aggressive, at home and abroad.
Space
Anthropologist Edward T. Hall coined the term proxemics to denote the different kinds of distance that occur between people. These distances vary between cultures. The figure below outlines the basic proxemics of everyday life and their meaning:Hall, E. T. (1966). The hidden dimension. New York: Doubleday.

Like face-to-face and telephone conversation, videoconferencing has high information richness because Receivers and Senders can see or hear beyond just the words—they can see the Sender's body language or hear the tone of their voice. Handheld devices, blogs, and written letters and memos offer medium-rich channels because they convey words and pictures/photos. Formal written documents, such as legal documents, and spreadsheets, such as the division's budget, convey the least richness because the format is often rigid and standardized. As a result, nuance is lost.
In business, the decision to communicate verbally or in written form can be powerful. In addition, a smart manager is aware of the nonverbal messages conveyed by either type of communication—as noted earlier, only 7% of a verbal communication comes from the words themselves.
When determining whether to communicate verbally or in writing, ask yourself: Do I want to convey facts or feelings? Verbal communications are a better way to convey feelings. Written communications do a better job of conveying facts.

Picture a manager making a speech to a team of 20 employees. The manager is speaking at a normal pace. The employees appear interested. But how much information is being transmitted? Not as much as the speaker believes! Humans listen much faster than they speak. The average public speaker communicates at a speed of about 125 words a minute. And that pace sounds fine to the audience. (In fact, anything faster than that probably would sound weird. To put that figure in perspective, someone having an excited conversation speaks at about 150 words a minute.) On the basis of these numbers, we could assume that the employees have more than enough time to take in each word the manager delivers. And that's the problem. The average person in the audience can hear 400-500 words a minute.Lee, D., & Hatesohl, D. Listening: Our most used communication skill. University of Missouri. Retrieved July 2, 2008, from http://extension.missouri.edu/explore/ comm/cm0150.htm. The audience has more than enough time to hear. As a result, they will each be processing many thoughts of their own, on totally different subjects, while the manager is speaking. As this example demonstrates, oral communication is an inherently flawed medium for conveying specific facts. Listeners' minds wander! It's nothing personal—in fact, it's totally physical. In business, once we understand this fact, we can make more intelligent communication choices based on the kind of information we want to convey.
The key to effective communication is to match the communication channel with the goal of the communication.Barry, B., & Fulmer, I. S. (2004). The medium and the Message: The adaptive use of communication media in dyadic influence. Academy of Management Review, 29, 272-292. For example, written media may be a better choice when the Sender wants a record of the content, has less urgency for a response, is physically separated from the Receiver, doesn't require a lot of feedback from the Receiver, or the Message is complicated and may take some time to understand. Oral communication, however, makes more sense when the Sender is conveying a sensitive or emotional Message, needs feedback immediately, and does not need a permanent record of the conversation. Use the guide provided for deciding when to use written versus verbal communication.

Business Use of E-Mail
The growth of e-mail has been spectacular, but it has also created challenges in managing information and an ever-increasing speed of doing business. Over 100 million adults in the United States use e-mail regularly (at least once a day).Taylor, C. (2002, June 10). 12 steps for email addicts. Time.com. Retrieved July 2, 2008, from http://www.time.com/time/magazine/article/0,9171,1002621,00.html.Internet users around the world send an estimated 60 billion e-mails every day, and many of those are spam or scam attempts.60 Billion emails sent daily worldwide. (2006, April 26). Retrieved July 2, 2008, from CNET.UK: That makes e-mail the second most popular medium of communication worldwide, second only to voice. A 2005 study estimated that less than 1% of all written human communications even reached paper—and we can imagine that this percentage has gone down even further since then.http://www.sims.berkeley.edu/research/projects/how-much-info/index.htm, as cited in David K. Isom. (2005, October 19). Electronic discovery: New power, new risks. Retrieved July 2, 2008, from http://utahbar.org/barjournal2000/html/ november_2003_2.html. To combat the overuse of e-mail, companies such as Intel have even instituted "no e-mail Fridays" where all communication is done via other communication channels. Learning to be more effective in your e-mail communications is an important skill. To learn more, check out the business e-mail do's and don'ts.

An important, although often ignored, rule when communicating emotional information is that e-mail's lack of richness can be your loss. As we saw in the chart above, e-mail is a medium-rich channel. It can convey facts quickly. But when it comes to emotion, e-mail's flaws make it far less desirable a choice than oral communication—the 55% of nonverbal cues that make a conversation comprehensible to a listener are missing. E-mail readers don't pick up on sarcasm and other tonal aspects of writing as much as the writer believes they will, researchers note in a recent study.Kruger, J. (2005). Egocentrism over email: Can we communicate as well as we think? Journal of Personality and Social Psychology, 89, 925-936.
The Sender may believe she has included these emotional signifiers in her Message. But, with words alone, those signifiers are not there. This gap between the form and content of e-mail inspired the rise of emoticons—symbols that offer clues to the emotional side of the words in each Message. Generally speaking, however, emoticons are not considered professional in business communication.
You might feel uncomfortable conveying an emotionally laden message verbally, especially when the message contains unwanted news. Sending an e-mail to your staff that there will be no bonuses this year may seem easier than breaking the bad news face-to-face, but that doesn't mean that e-mail is an effective or appropriate way to deliver this kind of news. When the Message is emotional, the Sender should use verbal communication. Indeed, a good rule of thumb is that the more emotionally laden messages require more thought in the choice of channel and how they are communicated.
Direction of Communication Within Organizations
Information can move horizontally, from a Sender to a Receiver, as we've seen. It can also move vertically, down from top management or up from the front line. Information can also move diagonally between and among levels of an organization, such as a Message from a customer service representative up to a manager in the manufacturing department, or a Message from the chief financial officer sent down to all department heads.

There is a chance for these arrows to go awry, of course. As Mihaly Csikszentmihalyi, author of best-selling books such as Flow, has noted, "In large organizations the dilution of information as it passes up and down the hierarchy, and horizontally across departments, can undermine the effort to focus on common goals." Managers need to keep this in mind when they make organization design decisions as part of the organizing function.
The organizational status of the Sender can affect the Receiver's attentiveness to the Message. For example, consider: A senior manager sends a memo to a production supervisor. The supervisor, who has a lower status within the organization, is likely to pay close attention to the Message. The same information, conveyed in the opposite direction, however, might not get the attention it deserves. The Message would be filtered by the senior manager's perception of priorities and urgencies.

External Communications
External communications deliver specific business messages to individuals outside an organization. They may announce changes in staff or strategy, earnings, and more. The goal of an external communication is to create a specific Message that the Receiver will understand and share with others. Examples of external communications include the following:
Press Releases
Public relations professionals create external communications about a client's product, services or practices for specific Receivers. These Receivers, it is hoped, will share the Message with others. In time, as the Message is passed along, it should appear to be independent of The Sender, creating the illusion of an independently generated consumer trend, public opinion, and so on.
The Message of a public relations effort may be b2b (business to business), b2c (business to consumer), or media related. The Message can take different forms. Press releases try to convey a newsworthy message, real or manufactured. It may be constructed like a news item, inviting editors or reporters to reprint the Message in part, or as a whole, with or without acknowledgment of the Sender's identity. Public relations campaigns create Messages over time, through contests, special events, trade shows, and media interviews in addition to press releases.
Ads
Advertising places external business Messages before target Receivers through media buys. A media buy is a fee that is paid to a television network, Web site, or magazine by an advertiser for an on-air, site, or publication ad. The fee is based on the perceived value of the audience who watches, reads, or frequents the space where the ad will appear.
In recent years, Receivers have begun to filter advertiser's Messages, a phenomenon that is perceived to be the result of the large amount of ads the average person sees each day and a growing level of consumer wariness of paid Messaging. Advertisers, in turn, are trying to create alternative forms of advertising that Receivers won't filter. The advertorial is one example of an external communication that combines the look of an article with the focused Message of an ad. Product placements in videos, movies, and games are other ways that advertisers strive to reach Receivers with commercial Messages.
Web Pages
A Web page's external communication can combine elements of public relations, advertising, and editorial content, reaching Receivers on multiple levels and in multiple ways. Banner ads, blogs, and advertiser-driven "click-through" areas are just a few of the elements that allow a business to deliver a Message to a Receiver online. The perceived flexibility of online communications can impart a less formal (and, therefore, more believable) quality to an external communication. A Message relayed in a daily blog post will reach a Receiver differently than if it is delivered i
an annual report, for example. The popularity and power of blogs is growing, with 11% of Fortune 500 companies having official blogs (up from 4% in 2005). In fact, blogs have become so important to some companies as Coca-Cola, Kodak, and Marriott that they have created official positions within their organizations titled "Chief Blogging Officer."Chief blogging officer title catching on with corporations. (2008, May 1). Workforce Management News in Brief. Retrieved July 2, 2008, from http://www.workforce.com/section/00/article/25/50/77.html.
The "real-time" quality of Web communications may appeal to Receivers who might filter out a traditional ad and public relations message because of its "prefab" quality. Despite their "spontaneous" feel, many online pages can be revisited in perpetuity. For this reason, clear and accurate external communications are as vital for online use as they are in traditional media.
Customer Communications
Customer communications can include letters, catalogs, direct mail, e-mails, text messages, and telemarketing messages. Some Receivers automatically filter bulk messages like these. Others will be receptive. The key to a successful external communication to customers is to convey a business message in a personally compelling way—dramatic news, a money-saving coupon, and so forth.

Career-Friendly Communications
Communication can occur without your even realizing it. Consider the following: Is your e-mail name professional? The typical convention for business e-mail contains some form of your name. While an e-mail name like "LazyGirl" or "DeathMonkey" may be fine for chatting online with your friends, they may send the wrong signal to individuals you e-mail such as professors and prospective employers.
• Is your outgoing voice mail greeting professional? If not, change it. Faculty and prospective recruiters will draw certain conclusions if, upon calling you, they hear a message that screams, "Party, party, party!"
• Do you have a "private" social networking Web site on MySpace.com, Facebook.com, or Xanga.com? If so, consider what it says about you to employers or clients. If it is information you wouldn't share at work, it probably shouldn't be there.
• Googled yourself lately? If not, you probably should. Potential employers have begun searching the Web as part of background checking and you should be aware of what's out there about you.
Communication Freezers
Communication freezers put an end to effective communication by making the Receiver feel judged or defensive. Typical communication stoppers include critizing, blaming, ordering, judging, or shaming the other person. The following are some examples of things to avoid saying:Source: Adapted from information in Tramel, M., & Reynolds, H. (1981). Executive leadership. Englewood Cliffs, NJ: Prentice Hall; Saltman, D., & O'Dea, N. (n.d.). Conflict management workshop powerpoint presentation. Retrieved July 1, 2008, from http://www.nswrdn.com.au/ client_images/6806.PDF; Communication stoppers. Retrieved July 1

2. Threatening with "or else" implied:
◦ "You had better..."
◦ "If you don't..."
3. Making suggestions or telling other people what they ought to do:
◦ "You should..."
◦ "It's your responsibility to..."
4. Attempting to educate the other person:
◦ "Let me give you the facts."
◦ "Experience tells us that..."
5. Judging the other person negatively:
◦ "You're not thinking straight."
◦ "You're wrong."
6. Giving insincere praise:
◦ "You have so much potential."
◦ "I know you can do better than this."
7. Psychoanalyzing the other person:
◦ "You're jealous."
◦ "You have problems with authority."
8. Making light of the other person's problems by generalizing:
◦ "Things will get better."
◦ "Behind every cloud is a silver lining."
9. Asking excessive or inappropriate questions:
◦ "Why did you do that?"
◦ "Who has influenced you?"
10. Making light of the problem by kidding:
◦ "Think about the positive side."
◦ "You think you've got problems!"

Stages of Group Development
American organizational psychologist Bruce Tuckman presented a robust model in 1965 that is still widely used today. On the basis of his observations of group behavior in a variety of settings, he proposed a four-stage map of group evolution, known as the Forming-Storming-Norming-Performing Model4.Tuckman, B. (1965). Developmental sequence in small groups. Psychological Bulletin, 63, 384-399. Later he enhanced the model by adding a fifth and final stage, adjourning5. The phases are illustrated in the Stages of the Group Development Model. Interestingly enough, just as an individual moves through developmental stages such as childhood, adolescence, and adulthood, so does a group, although in a much shorter period of time.
According to this theory, to facilitate a group successfully, the leader needs to move through various leadership styles over time. Generally, this is accomplished by first being more direct, eventually serving as a coach, and later, once the group is able to assume more power and responsibility for itself, shifting to delegator.
While research has not confirmed that this is descriptive of how groups progress, knowing and following these steps can help groups be more effective. For example, groups that do not go through the storming phase early on will often return to this stage toward the end of the group process to address unresolved issues. Another example of the validity of the group development model involves groups that take the time to get to know each other socially in the forming stage. When this socialization occurs, groups tend to handle future challenges better because the individuals have an understanding of each other's needs.

Forming
In the Forming6 stage, the group comes together for the first time. The members may already know each other or they may be total strangers. In either case, there is a level of formality, some anxiety, and a degree of guardedness as group members are not sure what is going to happen next. "Will I be accepted? What will my role be? Who has the power here?" These are some of the questions participants think about during this stage of group formation. Because of the large amount of uncertainty, members tend to be polite, conflict avoidant, and observant. They are
trying to figure out the "rules of the game" without being too vulnerable. At this point, they may also be quite excited and optimistic about the task, perhaps experiencing a level of pride at being chosen to join a particular group.
Group members are trying to achieve several goals at this stage, although this may not necessarily be done consciously. First, they are trying to get to know one another. Often this can be accomplished by finding some common ground. Members also begin to explore group boundaries to determine what will be considered acceptable behavior. "Can I interrupt? Can I leave when I feel like it?" This trial phase may also involve testing the appointed leader or seeing whether a leader emerges from the group. At this point, group members are also discovering how the group will work in terms of what needs to be done and who will be responsible for each task. This stage is often characterized by abstract discussions about issues to be addressed by the group; those who like to get moving can become impatient with this part of the process. This phase is usually short in duration, perhaps a meeting or two.
Storming
Once group members feel sufficiently safe and included, they tend to enter the Storming7 phase. Participants focus less on keeping their guard up as they shed social facades, becoming more authentic and more argumentative. Group members begin to explore their power and influence, and they often stake out their territory by differentiating themselves from the other group members rather than seeking common ground. Discussions can become heated as participants raise conflicting points of view and values, or disagree over how tasks should be done and who is assigned to them. It is not unusual for group members to become defensive, competitive, or jealous. They may take sides or begin to form cliques within the group. Questioning and resisting direction from the leader is also quite common. "Why should I have to do this? Who designed this project in the first place? What gives you the authority to tell me what to do?"
Although little seems to get accomplished at this stage, it actually serves an important purpose: group members are becoming more authentic as they express their deeper thoughts and feelings. What they are really exploring is "Can I truly be me, have power, and be accepted?" During this chaotic stage, a great deal of creative energy that was previously buried is released and available for use, but it takes skill to move the group from Storming to Norming. In many cases, the group gets stuck in the Storming phase.
8. The stage in which participants find it easy to establish their own ground rules (or norms) and define their operating procedures and goals.
9. The stage in which participants are not only getting the work done, but they also pay greater attention to how they are doing it.
Once group members discover that they can be authentic and that the group is capable of handling differences without dissolving, they are ready to enter the next stage, Norming8.
Norming
"We survived!" is the common sentiment as this stage. Group members often feel elated at this point, and they are much more committed to each other and the group's goal. Feeling energized by knowing they can handle the "tough stuff," group members are now ready to get to work. Finding themselves more cohesive and cooperative, participants find it easy to establish their own ground rules (or norms) and define their operating procedures and goals. The group tends to make big decisions, while subgroups or individuals handle the smaller decisions. It is hoped at this point the group members are more open and respectful toward each other and willing to ask one another for both help and feedback. They may even begin to form friendships and share more personal information.
At this point, the leader should become more of a facilitator by stepping back and letting the group assume more responsibility for its goal. Since the group's energy is running high, this is an ideal time to host a social or team-building event.
Performing
Galvanized by a sense of shared vision and a feeling of unity, the group is ready to go into high gear. Members are more interdependent, individuality and differences are respected, and group members feel themselves to be part of a greater entity. At the Performing9 stage, participants are not only getting the work done, but they also pay greater attention to how they are doing it. They ask such questions as, "Do our operating procedures best support productivity and quality assurance? Do we have suitable means for addressing differences that arise so we can preempt destructive conflicts? Are we relating to and communicating with each other in ways that enhance group dynamics and help us achieve our goals? How can I further develop as a person to become more effective?" By now, the group has matured, becoming more competent, autonomous, and insightful.
Group leaders can finally move into coaching roles and help members grow in skill and leadership. These leadership shifts are essential for managers enacting the Leadership function to keep in mind. In fact, a manager who leads multiple teams may find it necessary to shift leadership styles not only over time but between teams at different stages. Adjourning
Just as groups form, so do they end. For example, many groups or teams formed in a business context are project-oriented and therefore are temporary. Alternatively, a working group may dissolve because of an organizational restructuring. As with graduating from school or leaving home for the first time, these endings can be bittersweet, with group members feeling a combination of victory, grief, and insecurity about what is coming next. For those who like routine and bond closely with fellow group members, this transition can be particularly challenging. Group leaders and members alike should be sensitive to handling these endings respectfully and compassionately. An ideal way to close a group is to set aside time to debrief ("How did it all go? What did we learn?"), acknowledge one another, and celebrate a job well done.

Cohesion11 can be thought of as a kind of social glue. It refers to the degree of camaraderie within the group. Cohesive groups are those in which members are attached to each other and act as one unit. The more cohesive a group, the more productive it will be and the more rewarding the experience will be for the group's members.Beal, D. J., Cohen, R. R., Burke, M. J., & McLendon, C. L. (2003). Cohesion and performance in groups: A meta-analytic clarification of construct relations. Journal of Applied Psychology, 88, 989-1004; Evans, C. R., & Dion, K. L. (1991). Group cohesion and performance: A meta-analysis. Small Group Research, 22, 175-186. Cohesive groups tend to have the following characteristics: they have a collective identity; they experience a moral bond and a desire to remain part of the group; they share a sense of purpose, working together on a meaningful task or cause; and they establish a structured pattern of communication.
11. The degree of camaraderie within the group.
13.2 Group Dynamics
601
Chapter 13 Managing Groups and Teams
The fundamental factors affecting group cohesion include the following:
• Similarity. The more similar group members are in terms of age, sex, education, skills, attitudes, values, and beliefs, the more likely the group will bond.
• Stability. The longer a group stays together, the more cohesive it becomes.
• Size. Smaller groups tend to have higher levels of cohesion.
• Support. When group members receive coaching and are encouraged to
support their fellow team members, group identity strengthens.
• Satisfaction. Cohesion is correlated with how pleased group members
are with one another's performance, behavior, and conformity to group norms.
As you might imagine, there are many benefits in creating a cohesive group. Members are generally more personally satisfied and feel greater self-confidence and self-esteem in a group where they feel they belong. For many, membership in such a group can be a buffer against stress, which can improve mental and physical well-being. Because members are invested in the group and its work, they are more likely to regularly attend and actively participate in the group, taking more responsibility for the group's functioning. In addition, members can draw on the strength of the group to persevere through challenging situations that might otherwise be too hard to tackle alone.

Can a Group Have Too Much Cohesion?
Despite the advantages of cohesion, too much cohesion can be detrimental to a group. Because members can come to value belonging over all else, an internal pressure to conform may arise where some members modify their behavior to adhere to group norms. Members may become conflict avoidant, focusing on trying to please one another so as not to be ostracized. In some cases, members might censor themselves to maintain the party line. As such, the group is dominated by a superficial sense of harmony and discourages diversity of thought. Having less tolerance for deviants, who threaten the group's static identity, cohesive groups will often disapprove of members who dare to disagree. Members attempting to make a change may be criticized, undermined, or even ostracized by other members, who perceive their attempts as a threat to the status quo. The painful possibility of being marginalized can keep many members in line with the majority.
The more strongly members identify with the group, the easier it is to see outsiders as inferior or, in extreme cases, as enemies. It is easy to see how this can lead to increased insularity. This form of prejudice can have a downward spiral effect. The
group is not getting corrective feedback from within its own confines, and it is closing itself off from input and a cross-fertilization of ideas from the outside. In such an environment, groups can easily adopt extreme ideas that will not be challenged. Denial increases as problems are ignored and failures are blamed on external factors. With limited, often biased, information and no internal or external opposition, groups like these can make disastrous decisions.
Groupthink12 is a group pressure phenomenon that increases the risk of the group making flawed decisions by allowing reductions in mental efficiency, reality testing, and moral judgment. A famous example of groupthink is the decision to invade Cuba made by President John F. Kennedy and his cabinet in 1961. In a matter of days, Cuban forces repelled the invaders, whose objective was to overthrow the entire Cuban government, resulting in many casualties and captured troops. In retrospect, there were many reasons why the Bay of Pigs invasion was doomed from the start, but the planning and approval were characterized by a belief that the insiders knew best and did not need to consider "devil's advocate" points of view. As this example illustrates, groupthink is a serious risk in highly cohesive groups.Janis, I. L. (1972). Victims of groupthink. New York: Houghton Mifflin.
Cohesive groups can go awry in much milder ways. For example, group members can value their social interactions so much that they have fun together but spend little time on accomplishing their assigned task. Or a group's goal may begin to diverge from the larger organization's goal and those trying to uphold the organization's goal may be criticized (for example, students may tease the class "brain" for doing well in school).
In addition, research shows that cohesion leads to acceptance of group norms.Goodman, P. S., Ravlin, E., & Schminke, M. (1987). Understanding groups in organizations. Research in Organizational Behavior, 9, 121-173. Groups with high task commitment tend to do well, but suppose you belong to a group in which the norms are to work as little as possible! As you might imagine, these groups accomplish little and can actually work together against the organization's goals.

Differences Between Groups and Teams
Organizations consist of groups of people. What exactly is the difference between a group and a team? A group is a collection of individuals. Within an organization, groups might consist of project-related groups such as a product group or division or they can encompass an entire store or branch of a company. The performance of a group consists of the inputs of the group minus any process losses such as the quality of a product, ramp-up time to production, or the sales for a given month. Process loss15 is any aspect of group interaction that inhibits group functioning.
Why do we say group instead of team? A collection of people is not a team, though they may learn to function in that way. A team16 is a particular type of group: a cohesive coalition of people working together to achieve mutual goals. Being on a team does not equate to a total suppression of personal agendas, but it does require a commitment to the vision and involves each individual working toward accomplishing the team's objective. Teams differ from other types of groups in that members are focused on a joint goal or product, such as a presentation, discussing a topic, writing a report, creating a new design or prototype, or winning a team Olympic medal. Moreover, teams also tend to be defined by their relatively smaller size. For instance, according to one definition, "A team is a small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they are mutually accountable."Katzenbach, J. R., &
The purpose of assembling a team is to accomplish larger, more complex goals than what would be possible for an individual working alone or even the simple sum of several individuals working independently. Teamwork is also needed in cases where multiple skills are tapped or where buy-in is required from several individuals. Teams can, but do not always, provide improved performance. Working together to further a team agenda seems to increase mutual cooperation between what are often competing factions. The aim and purpose of a team is to perform, get results, and achieve victory in the workplace. The best managers are those who can gather together a group of individuals and mold them into an effective team.
The key properties of a true team include collaborative action where, along with a common goal, teams have collaborative tasks. Conversely, in a group, individuals are responsible only for their own area. They also share the rewards of strong team performance with their compensation based on shared outcomes. Compensation of individuals must be based primarily on a shared outcome, not individual performance. Members are also willing to sacrifice for the common good in which individuals give up scarce resources for the common good instead of competing for those resources. For example, teams occur in sports such as soccer and basketball, in which the individuals actively help each other, forgo their own chance to score by passing the ball, and win or lose collectively as a team.
Teams in Organizations
Figure 13.7
Teams are only as good as their weakest link. While Michael Phelps has been dubbed "the world's greatest swimmer" and received a great deal of personal attention, such as meeting President George W. Bush, he could not have achieved his record eight gold medals in one Olympic games without the help of his teammates Aaron Peirsol, Brendan Hansen, and Jason Lezak.
Source:
http://simple.wikipedia.org/
wiki/ Image:Michael_Phelps_with_Pres ident _Bush_-_20080811.jpeg
The early 1990s saw a dramatic rise in the use of teams
within organizations, along with dramatic results such as the Miller Brewing Company increasing productivity 30% in the plants that used self-directed teams compared with those that used the traditional organization. This same method allowed Texas Instruments in Malaysia to reduce defects from 100 parts per million to 20 parts per million. In addition, Westinghouse reduced its cycle time from 12 weeks to 2 weeks, and Harris Electronics was able to achieve an 18% reduction i

costs.Welins, R., Byham, W., & Dixon, G. (1994). Inside Teams. San Francisco: Jossey- Bass. The team method has served countless companies over the years through both quantifiable improvements and more subtle individual worker-related benefits.
Companies such as Square D, a maker of circuit breakers, switched to self-directed teams and found that overtime on machines like the punch press dropped 70% under teams. Productivity increased because the setup operators were able to manipulate the work in much more effective ways than a supervisor could dictate.Moskal, B. (1988, June 20). Supervisors, begone! Industry Week, p. 32. In 2001, clothing retailer Chico's FAS was looking to grow its business. The company hired Scott Edmonds as president, and two years later revenues had almost doubled from $378 million to $760 million. By 2006, revenues were $1.6 billion, and Chico's had nine years of double-digit same-store sales growth. What did Edmonds do to get these results? He created a horizontal organization "ruled by high-performance teams with real decision-making clout and accountability for results, rather than by committees that pass decisions up to the next level or toss them over the wall into the nearest silo."
The use of teams also began to increase because advances in technology have resulted in more complex systems that require contributions from multiple people across the organization. Overall, team-based organizations have more motivation and involvement, and teams can often accomplish more than individuals.Cannon- Bowers, J. A. and Salas, E. (2001, February). Team effectiveness and competencies. In W. Karwowski (Ed.), International encyclopedia of ergonomics and human factors (1383). London: CRC Press. It is no wonder organizations are relying on teams more and more.

We Need a Team?
Teams are not a cure-all for organizations. To determine whether a team is needed, organizations should consider whether a variety of knowledge, skills, and abilities are needed, whether ideas and feedback are needed from different groups within the organization, how interdependent the tasks are, if wide cooperation is needed to get things done, and whether the organization would benefit from shared goals.Rees, F. (1997). Teamwork from start to finish. San Francisco: Jossey-Bass. If the answer to these questions is "yes," then a team or teams might make sense. For example, research shows that the more team members perceive that outcomes are interdependent, the better they share information and the better they perform.De Dreu, C. K. W. (2007). Cooperative outcome interdependence, task reflexivity, and team effectiveness: A motivated information processing perspective. Journal of Applied Psychology, 92, 628-638.

As early as the 1970s, J. R. Hackman identified three major classes of tasks: (1) production tasks, (2) idea generation tasks, and (3) problem-solving tasks.Hackman, J. R. (1976). Group influences on individuals. In M. D. Dunnette (Ed.), Handbook of industrial and organizational psychology. Chicago: Rand-McNally. Production tasks17 include actually making something, such as a building, a product, or a marketing plan. Idea generation tasks18 deal with creative tasks, such as brainstorming a new direction or creating a new process. Problem-solving tasks19 refer to coming up with plans for actions and making decisions, both facets of managerial P-O-L-C
functions (planning and leading). For example, a team may be charged with coming up with a new marketing slogan, which is an idea generation task, while another team might be asked to manage an entire line of products, including making decisions about products to produce, managing the production of the product lines, marketing them, and staffing their division. The second team has all three types of tasks to accomplish at different points in time.
Task Interdependence
Another key to understanding how tasks are related to teams is to understand their level of task interdependence. Task interdependence20 refers to the degree that team members depend on one another to get information, support, or materials from other team members to be effective. Research shows that self-managing teams are most effective when their tasks are highly interdependent.Langfred, C. W. (2005). Autonomy and performance in teams: The multilevel moderating effect of task interdependence. Journal of Management, 31, 513-529; Liden, R. C., Wayne, S. J., & Bradway, L. K. (1997). Task interdependence as a moderator of the relation between group control and performance. Human Relations, 50, 169-181.
There are three types of task interdependence. Pooled interdependence21 exists when team members may work independently and simply combine their efforts to create the team's output. For example, when students meet to divide the sections of a research paper and one person simply puts all the sections together to create one paper, the team is using the pooled interdependence model. However, they might decide that it makes more sense to start with one person writing the introduction of their research paper, then the second person reads what was written by the first person and, drawing from this section, writes about the findings within the paper. Using the findings section, the third person writes the conclusions. If one person's output becomes another person's input, the team would be experiencing sequential interdependence22. And finally, if the student team decided that in order to create a top notch research paper they should work together on each phase of the research paper so that their best ideas would be captured at each stage, they would be undertaking reciprocal interdependence23. Another important type of interdependence that is not specific to the task itself is outcome interdependence24, where the rewards that an individual receives depend on the performance of others.
Team Roles
While relatively little research has been conducted on team roles, recent studies show that individuals who are more aware of team roles and the behavior required for each role perform better than individuals that do not. This fact remains true for both student project teams as well as work teams, even after accounting for
intelligence and personality.Mumford, T. V., Van Iddekinge, C. H., Morgeson, F. P., & Campion, M. A. (2008). The team role test: Development and validation of a team role knowledge situational judgment test. Journal of Applied Psychology, 93, 250-267. Early research found that teams tend to have two categories of roles: those related to the tasks at hand and those related to the team's functioning. For example, teams that only focus on production at all costs may be successful in the short run, but if they pay no attention to how team members feel about working 70 hours a week, they are likely to experience high turnover.
On the basis of decades of research on teams, 10 key roles have been identified.Bales, R. F. (1950). Interaction process analysis: A method for the study of small groups. Cambridge, MA: Addison-Wesley; Benne, K. D., & Sheats, P. (1948). Functional roles of group members. Journal of Social Issues, 4, 41-49; Belbin, R. M. (1993). Management teams: Why they succeed or fail. Oxford: Butterworth-Heinemann. Team leadership is effective when leaders are able to adapt the roles they are contributing to or asking others to contribute to fit what the team needs, given its stage and the tasks at hand.Kozlowski, S. W. J., Gully, S. M., McHugh, P. P., Salas, E., & Cannon-Bowers, J. A. (1996). A dynamic theory of leadership and team effectiveness: Developmental and task contingent roles. In G. Ferris (Ed.), Research in personnel and human resource management (Vol. 14, pp. 253-305). Greenwich, CT: JAI Press; Kozlowski, S. W. J., Gully, S. M., Salas, E., & Cannon-Bowers, J. A. (1996). Team leadership and development: Theory, principles, and guidelines for training leaders and teams. In M. M. Beyerlein, D. A. Johnson, & S. T. Beyerlein (Eds.), Advances in interdisciplinary studies of work teams (Vol. 3, pp. 253-291). Greenwich, CT: JAI Press. Ineffective leaders might always engage in the same task role behaviors when what they really need to do is focus on social roles, put disagreements aside, and get back to work. While these behaviors can be effective from time to time, if the team doesn't modify its role behaviors as things change, they most likely will not be effective.

Task Roles
Five roles make up the task portion of the role typology. The contractor role includes behaviors that serve to organize the team's work, including creating team time lines, production schedules, and task sequencing. The creator role deals more with changes in the team's task process structure. For example, reframing the team goals and looking at the context of goals would fall under this role. The contributor role is important because it brings information and expertise to the team. This role is characterized by sharing knowledge and training those who have less expertise to strengthen the team. Research shows that teams with highly intelligent members and evenly distributed workloads are more effective than those with uneven workloads.Ellis, A. P. J., Hollenbeck, J. R., Ilgen, D. R., Porter, C. O. L. H., West, B. J., & The completer role is also important as it is often where ideas are transformed into action. Behaviors associated with this role include following up on tasks such as gathering needed background information or summarizing the team's ideas into reports. Finally, the critic role includes "devil's advocate" behaviors which go against the assumptions being made by the team.
Social Roles
Social roles serve to keep the team operating effectively. When the social roles are filled, team members feel more cohesive and the group is less prone to suffer process losses or biases, such as social loafing, groupthink, or a lack of participation from all members. Three roles fall under the umbrella of social roles. The cooperator role includes supporting those with expertise toward the team's goals. This is a proactive role. The communicator role includes behaviors that are targeted at collaboration such as practicing good listening skills and appropriately using humor to diffuse tense situations. Having a good communicator helps the team to feel more open to sharing ideas. And the calibrator role is an important one and serves to keep the team on track in terms of suggesting any needed changes to the team's process. This role includes initiating discussions about potential team problems such as power struggles or other tensions. Similarly, this role may involve settling disagreements or pointing out what is working and what is not in terms of team process.
Boundary-Spanning Roles
The final two roles are related to activities outside of the team that help to connect the team to the larger organization.Anacona, D. G. (1990). Outward bound: Strategies for team survival in an organization. Academy of Management Journal, 33, 334-365; Anacona, D. G. (1992). Bridging the boundary: External activity and performance in organizational teams. Administrative Science Quarterly, 37, 634-665; Druskat, V. U., & Wheeler, J. V. (2003). Managing from the boundary: The effective leadership of self-managing work teams. Academy of Management Journal, 46, 435-457. Teams that engage in a greater level of boundary-spanning behaviors increase their team effectiveness.Marrone, J. A., Tesluk, P. E., & Carson, J. B. (2007). A multi-level investigation of antecedents and consequences of team member boundary-spanning behavior. Academy of Management Journal, 50, 1423-1439. The consul role includes gathering information from the larger organization and informing those within the organization about team activities, goals, and successes. Often the consul role is filled by team managers or leaders. The coordinator role includes interfacing with others within the organization so that the team's efforts are in line with other individuals and teams within the organization.

Types of Teams
There are many different types of teams, and a given team may be described according to multiple types. For example, a team of scientists writing a research article for publication may be temporary, virtual, and cross-functional.
Teams may be permanent or long term, but more typically, a team exists for a limited time. In fact, one-third of all teams in the United States are temporary.Gordon, J. (1992). Work teams: How far have they come? Training, 29, 59-62. An example of a temporary team is a task force25 that addresses a specific issue or problem until it is resolved. Other teams may be temporary or ongoing such as product development teams26. In addition, matrix organizations have cross-functional teams27 where individuals from different parts of the organization staff the team, which may be temporary or long-standing.
Virtual Teams
Virtual teams28 are teams in which members are not located in the same physical place. They may be in different cities, states, or even different countries. Some virtual teams are formed by necessity, such as to take advantage of lower labor costs in different countries; one study found that upward of 8.4 million individuals worldwide work virtually in at least one team.Ahuja, M., & Galvin, J. (2003). Socialization in virtual group. Journal of Management, 29, 161-185. Often, virtual teams are formed to take advantage of distributed expertise or time—the needed experts may be living in different cities. A company that sells products around the world, for example, may need technologists who can solve customer problems at any hour of the day or night. It may be difficult to find the caliber of people needed who would be willing to work at 2 a.m. on a Saturday, for example. So companies organize virtual technical support teams. BakBone Software, for instance, has a 13-member technical support team. Each member has a degree in computer science and is divided among offices in California, Maryland, England, and Tokyo. BakBone believes it has been able to hire stronger candidates by drawing from a diverse talent pool and hiring in different geographic regions rather than limiting hiring to one region or time zone.Alexander, S. (2000, November 10). Virtual teams going global. Infoworld. Retrieved February 12, 2009, from http://www.infoworld.com/ articles/ca/xml/00/11/13/001113cavirtual.html.
Despite potential benefits, virtual teams present special management challenges, particularly to the controlling function. Managers often think that they have to see team members working to believe that work is being done. Because this kind of oversight is impossible in virtual team situations, it is important to devise evaluation schemes that focus on deliverables. Are team members delivering what
they said they would? In self-managed teams, are team members producing the results the team decided to measure itself on?
Another special challenge of virtual teams is building trust29. Will team members deliver results just as they would in face-to-face teams? Can members trust one another to do what they said they would do? Companies often invest in bringing a virtual team together at least once so members can get to know one another and build trust.Kirkman, B. L., Rosen, B., Gibson, C. B., Tesluk, P. E., & McPherson, S. O. (2002). Five challenges to virtual team success: Lessons from Sabre, Inc. Academy of Management Executive, 16, 67-79. In manager-led virtual teams, managers should be held accountable for their team's results and evaluated on their ability as a team leader.
Finally, communication is especially important in virtual teams, through e-mail, phone calls, conference calls, or project management tools that help organize work. If individuals in a virtual team are not fully engaged and tend to avoid conflict, team performance can suffer.Montoya-Weiss, M. M., Massey, A. P., & Song, M. (2001). Getting it together: Temporal coordination and conflict management in global virtual teams. Academy of Management Journal, 44, 1251-1262. A wiki30 is an Internet-based method for many people to collaborate and contribute to a document or discussion. Essentially, the document remains available for team members to access and amend at any time. The most famous example is Wikipedia, which is gaining traction as a way to structure project work globally and get information into the hands of those that need it. Empowered organizations put information into everyone's hands.Kirkman, B. L., & Rosen, B. (2000). Powering up teams. Organizational Dynamics, 28(3), 48-66. Research shows that empowered teams are more effective than those that are not empowered.Mathieu, J. E., Gilson, L. L., & Ruddy, T. M. (2006). Empowerment and team effectiveness: An empirical test of an integrated model. Journal of Applied Psychology, 91, 97-108.
Top Management Teams
Top management teams31 are appointed by the chief executive officer (CEO) and, ideally, reflect the skills and areas that the CEO considers vital for the company. There are no formal rules about top management team design or structure. The top management team often includes representatives from functional areas, such as finance, human resources, and marketing or key geographic areas, such as Europe, Asia, and North America. Depending on the company, other areas may be represented such as legal counsel or the company's chief technologist. Typical top management team member titles include chief operating officer (COO), chief financial officer (CFO), chief marketing officer (CMO), or chief technology officer
Because CEOs spend an increasing amount of time outside their companies (i.e., with suppliers, customers, regulators, and so on), the role of the COO has taken

on a much higher level of internal operating responsibilities. In most American companies, the CEO also serves as chairman of the board and can have the additional title of president. Companies have top management teams to help set the company's vision and strategic direction, key tasks within the planning P-O-L-C function. Top teams make decisions on new markets, expansions, acquisitions, or divestitures. The top team is also important for its symbolic role: how the top team behaves dictates the organization's culture and priorities by allocating resources and by modeling behaviors that will likely be emulated lower down in the organization. Importantly, the top team is most effective when team composition is functionally and demographically diverse and when it can truly operate as a team, not just as group of individual executives.Carpenter, M. A., Geletkanycz, M. A., & Sanders, W. G. (2004). The upper echelons revisited: The antecedents, elements, and consequences of TMT composition. Journal of Management, 30, 749-778.
That "the people make the place" holds especially true for members of the top management team. In a study of 15 firms that demonstrated excellence, defined as sustained performance over a 15-year period, leadership researcher Jim Collins noted that those firms attended to people first and strategy second. "They got the right people on the bus, moved the wrong people off the bus, ushered the right people to the right seats—then they figured out where to drive it."Collins, J. (2001, July-August). Level leadership. Harvard Business Review, 66-76. The best teams plan for turnover. Succession planning is the process of identifying future members of the top management team. Effective succession planning allows the best top teams to achieve high performance today and create a legacy of high performance for the future.
Team Leadership and Autonomy
Teams also vary in terms of how they are led. Traditional or manager-led teams32 are teams in which the manager serves as the team leader. The manager assigns work to other team members. These types of teams are the most natural to form, wherein managers have the power to hire and fire team members and are held accountable for the team's results.
Self-managed teams33 are a new form of team that rose in popularity with the Total Quality Movement in the 1980s. Unlike manager-led teams, these teams manage themselves and do not report directly to a supervisor. Instead, team members select their own leader, and they may even take turns in the leadership role. Self-managed teams also have the power to select new team members. As a whole, the team shares responsibility for a significant task, such as assembly of an entire car. The task is ongoing rather than temporary such as a charity fund drive for a given year.

Organizations began to use self-managed teams as a way to reduce hierarchy by allowing team members to complete tasks and solve problems on their own. The benefits of self-managed teams extend much further. Research has shown that employees in self-managed teams have higher job satisfaction, increased self- esteem, and grow more on the job. The benefits to the organization include increased productivity, increased flexibility, and lower turnover. Self-managed teams can be found at all levels of the organization, and they bring particular benefits to lower-level employees by giving them a sense of ownership of their jobs that they may not otherwise have. The increased satisfaction can also reduce absenteeism because employees do not want to let their team members down.
Typical team goals are improving quality, reducing costs, and meeting deadlines. Teams also have a "stretch" goal, which is difficult to reach but important to the business unit. Many teams also have special project goals. Texas Instruments (TI), a company that makes semiconductors, used self-directed teams to make improvements in work processes.Welins, R., Byham, W., & Dixon, G. (1994). Inside teams. San Francisco: Jossey-Bass. Teams were allowed to set their own goals in conjunction with managers and other teams. TI also added an individual component to the typical team compensation system. This individual component rewarded team members for learning new skills that added to their knowledge. These "knowledge blocks" include topics such as leadership, administration, and problem solving. The team decides what additional skills people might need to help the team meet its objectives. Team members would then take classes or otherwise demonstrate their proficiency in that new skill on the job to be certified for mastering the skill. Individuals could then be evaluated based on their contribution to the team and how they are building skills to support the team.
Self-managed teams are empowered34, which means that they have the responsibility as well as the authority to achieve their goals. Team members have the power to control tasks and processes and to make decisions. Research shows that self-managed teams may be at a higher risk of suffering from negative outcomes due to conflict, so it is important that they are supported with training to help them deal with conflict effectively.Alper, S., Tjosvold, D., & Law, K. S. (2000). Conflict management, efficacy, and performance in organizational teams. Personnel Psychology, 53, 625-642; Langfred, C. W. (2007). The downside of self-management: A longitudinal study of the effects of conflict on trust, autonomy, and task interdependence in self-managing teams. Academy of Management Journal, 50, 885-900. Self-managed teams may still have a leader who helps them coordinate with the larger organization.Morgeson, F. P. (2005). The external leadership of self- managing teams: Intervening in the context of novel and disruptive events. Journal of Applied Psychology, 90, 497-508. For a product team composed of engineering, production, and marketing employees, empowerment means that the team can decide everything about a product's appearance, production, and cost without

Designing Effective Teams
Designing an effective team means making decisions about team composition (who should be on the team), team size (the optimal number of people on the team), and team diversity (should team members be of similar background, such as all engineers, or of different backgrounds). Answering these questions will depend, to a large extent, on the type of task that the team will be performing. Teams can be charged with a variety of tasks, from problem solving to generating creative and innovative ideas to managing the daily operations of a manufacturing plant.
Who Are the Best Individuals for the Team?
A key consideration when forming a team is to ensure that all the team members are qualified for the roles they will fill for the team. This process often entails understanding the knowledge, skills, and abilities (KSAs) of team members as well as the personality traits needed before starting the selection process.Humphrey, S. E., Hollenbeck, J. R., Meyer, C. J., & Ilgen, D. R. (2007). Trait configurations in self- managed teams: A conceptual examination of the use of seeding for maximizing and
minimizing trait variance in teams. Journal of Applied Psychology, 92, 885-892. When talking to potential team members, be sure to communicate the job requirements and norms of the team. To the degree that this is not possible, such as when already existing groups are used, think of ways to train the team members as much as possible to help ensure success. In addition to task knowledge, research has shown that individuals who understand the concepts covered in this chapter and in this book such as conflict resolution, motivation, planning, and leadership actually perform better on their jobs. This finding holds for a variety of jobs, including officer in the United States Air Force, an employee at a pulp mill, or a team member at a box manufacturing plant.Hirschfeld, R. R., Jordan, M. H., Field, H. S., Giles, W. F., & Armenakis, A. A. (2006). Becoming team players: Team members' mastery of teamwork knowledge as a predictor of team task proficiency and observed teamwork effectiveness. Journal of Applied Psychology, 91, 467-474; Stevens, M. J., & Campion, M. A. (1999). Staffing work teams: Development and validation of a selection test for teamwork settings. Journal of Management, 25, 207-228.
How Large Should My Team Be?
Interestingly, research has shown that regardless of team size, the most active team member speaks 43% of the time. The difference is that the team member who participates the least in a three-person team is still active 23% of the time versus only 3% in a 10-person team.McGrath, J. E. (1984). Groups: Interaction and performance. Englewood Cliffs, NJ: Prentice Hall; Solomon, H. (1960). Mathematical thinking in the measurement of behavior. Glencoe, IL: Free Press. When deciding team size, a good rule of thumb is a size of 2 to 20 members. The majority of teams have 10 members or less because the larger the team, the harder it is to coordinate and interact as a team. With fewer individuals, team members are more able to work through differences and agree on a common plan of action. They have a clearer understanding of others' roles and greater accountability to fulfill their roles (remember social loafing?). Some tasks, however, require larger team sizes because of the need for diverse skills or because of the complexity of the task. In those cases, the best solution is to create subteams where one member from each subteam is a member of a larger coordinating team. The relationship between team size and performance seems to greatly depend on the level of task interdependence, with some studies finding larger teams outproducing smaller teams and other studies finding just the opposite.Campion, M. A., Medsker, G. J., & Higgs, A. C. (1993). Relations between work group characteristics and effectiveness: Implications for designing effective work groups. Personnel Psychology, 46, 823-850; Magjuka, R. J., & Baldwin, T. T. (1991). Team-based employee involvement programs: Effects of design and administration. Personnel Psychology, 44, 793-812; Vinokur-Kaplan, D. (1995). Treatment teams that work (and those that don't): An application of Hackman's group effectiveness model to interdisciplinary teams in psychiatric hospitals. Journal of Applied Behavioral Science, 31, 303-327. The bottom line is that team size should be matched to the goals of the team.

How Diverse Should My Team Be?
Team composition and team diversity often go hand in
hand. Teams whose members have complementary
skills are often more successful because members can
see each other's blind spots. One team member's
strengths can compensate for another's
weaknesses.Jackson, S. E., Joshi, A., & Erhardt, N. L.
(2003). Recent research on team and organizational
diversity: SWOT analysis and implications. Journal of
Management, 29, 801-830; van Knippenberg, D., De Dreu,
C. K. W., & Homan, A. C. (2004). Work group diversity
and group performance: An integrative model and
research agenda. Journal of Applied Psychology, 89,
1008-1022. For example, consider the challenge that
companies face when trying to forecast future sales of a
given product. Workers who are educated as forecasters
have the analytic skills needed for forecasting, but these
workers often lack critical information about
customers. Salespeople, in contrast, regularly
communicate with customers, which means they're in
the know about upcoming customer decisions. But salespeople often lack the analytic skills, discipline, or desire to enter this knowledge into spreadsheets and software that will help a company forecast future sales. Putting forecasters and salespeople together on a team tasked with determining the most accurate product forecast each quarter makes the best use of each member's skills and expertise.
Diversity in team composition can help teams come up with more creative and effective solutions. Research shows that teams that believe in the value of diversity performed better than teams that do not.Homan, A. C., van Knippenberg, D., Van Kleef, G. A., & De Dreu, C. K. W. (2007). Bridging faultlines by valuing diversity: Diversity beliefs, information elaboration, and performance in diverse work groups. Journal of Applied Psychology, 92, 1189-1199. The more diverse a team is in terms of expertise, gender, age, and background, the more ability the group has to avoid the problems of groupthink.Surowiecki. J. (2005). The wisdom of crowds. New York: Anchor Books. For example, different educational levels for team members were related to more creativity in research and development teams and faster time to market for new products.Eisenhardt, K. M., & Tabrizi, B. N. (1995). Accelerating adaptive processes: Product innovation in the global computer industry. Administrative Science Quarterly, 4, 84-110; Shin, S. J., & Zhou, J. (2007). When is educational specialization heterogeneity related to creativity in research and development teams? Transformational leadership as a moderator. Journal of Applied Psychology, 92, 1709-1721. Members will be more inclined to make different kinds of mistakes, which means that they'll be able to catch and correct those mistakes.

Establishing Team Norms and Contracts
A key to successful team design is to have clear norms, roles, and expectations among team members. Problems such as social loafing or groupthink can be avoided by paying careful attention to team member differences and providing clear definitions for roles, expectancy, measurement, and rewards.
Team Norms
Norms36 are shared expectations about how things operate within a group or team. Just as new employees learn to understand and share the assumptions, norms, and values that are part of an organization's culture, they also must learn the norms of their immediate team. This understanding helps teams be more cohesive and perform better. Norms are a powerful way of ensuring coordination within a team. For example, is it acceptable to be late to meetings? How prepared are you supposed to be at the meetings? Is it acceptable to criticize someone else's work? These norms are shaped early during the life of a team and affect whether the team is productive, cohesive, and successful.

37. A contract that includes agreements on established ground rules, goals, and roles.
Square Wheels Exercise and Group Discussion
Sometimes it can be challenging to start a conversation around team ground rules and performance. The following exercise can be used to get a team talking about what works and what doesn't in teams they've worked in and how your team can be designed most effectively.
Figure 13.12
This picture of a cart with square wheels is an illustration of how many organizations seem to operate. Print out the illustration and have everyone in your team write on the paper, identifying as many of the key issues and opportunities for improvement as you can. Following this, have a conversation around what this illustration might mean for your own team.
Used with permission. © Performance Management Company, 1992-2004 Square Wheels® is a registered servicemark of PMC. http://www.SquareWheels.com email: 864-292-8700
Team Contracts
Scientific research as well as experience working with thousands of teams show that teams that are able to articulate and agree on established ground rules, goals, and roles and develop a team contract37 around these standards are better
equipped to face challenges that may arise within the team.Katzenback, J. R., & Smith, D. K. (1993). The wisdom of teams. Boston: Harvard Business School Press; Porter, T. W., & Lilly, B. S. (1996). The effects of conflict, trust, and task commitment on project team performance. International Journal of Conflict Management, 7, 361-376. Having a team contract does not necessarily mean that the team will be successful, but it can serve as a road map when the team veers off course. Questions that can help to create a meaningful team contract include:
• Team Values and Goals: What are our shared team values? What is our team goal?
• Team Roles and Leadership: Who does what within this team? (Who takes notes at the meeting? Who sets the agenda? Who assigns tasks? Who runs the meetings?) Does the team have a formal leader? If so, what are his or her roles?
• Team Decision Making: How are minor decisions made? How are major decisions made?
• Team Communication: Who do you contact if you cannot make a meeting? Who communicates with whom? How often will the team meet?
• Team Performance: What constitutes good team performance? What if a team member tries hard but does not seem to be producing quality work? How will poor attendance/work quality be dealt with?
Team Meetings
Anyone who has been involved in a team knows it involves team meetings. While few individuals relish meetings, they serve an important function in terms of information sharing and decision making. They also serve an important social function and can help to build team cohesion and a task function in terms of coordination. Unfortunately, we've all attended lengthy meetings that were a waste of time and where little happened that couldn't have been accomplished by reading an e-mail in five minutes. To run effective meetings, it helps to think of meetings in terms of three sequential steps.Haynes, M. E. (1997). Effective meeting skills. Menlo Park, C Crisp.
Before the Meeting
Much of the effectiveness of a meeting is determined before the team gathers. There are three key things you can do to ensure the team members get the most out of their meeting.
First, ask yourself: Is a meeting needed? Leaders should do a number of things before the meeting to help make it effective. The first thing is to be sure a meeting is even needed. If the meeting is primarily informational, ask yourself whether it is imperative that the group fully understands the information and whether future decisions will be built on this information. If so, a meeting may be needed. If not, perhaps simply communicating with everyone in a written format will save valuable time. Similarly, decision-making meetings make the most sense when the problem is complex and important, there are questions of fairness to be resolved, and commitment is needed moving forward.
Second, create and distribute an agenda. An agenda is important in helping to inform those invited about the purpose of the meeting. It also helps organize the flow of the meeting and keep the team on track.
Third, send a reminder before the meeting. Reminding everyone of the purpose, time, and location of the meeting helps everyone prepare themselves. Anyone who has attended a team meeting only to find there is no reason to meet because members haven't completed their agreed-upon tasks knows that, as a result, team performance or morale can be negatively affected. Follow up to make sure everyone is prepared. As a team member, inform others immediately if you will not be ready with your tasks so they can determine whether the meeting should be postponed.
During the Meeting
During the meeting, there are several things you can do to make sure the team starts and keeps on track.
Start the meeting on time. Waiting for members who are running late only punishes those who are on time and reinforces the idea that it's OK to be late. Starting the meeting promptly sends an important signal that you are respectful of everyone's time.
Follow the meeting agenda. Veering off agenda communicates to members that it is not important. It also makes it difficult for others to keep track of where you are in the meeting and can facilitate important points not being addressed.
Manage group dynamics for full participation. As you've seen in this chapter, there are a number of group dynamics that can limit a team's functioning. Be on the lookout for full participation and engagement from all team members as well as any potential problems such as social loafing, group conflict, or groupthink.

Common Barriers to Effective Teams Challenges of Knowing Where to Begin
At the start of a project, team members may be at a loss as to how to begin. Also, they may have reached the end of a task but are unable to move on to the next step or put the task to rest.
Floundering often results from a lack of clear goals, so the remedy is to go back to the team's mission or plan and make sure that it is clear to everyone. Team leaders can help move the team past floundering by asking, "What is holding us up? Do we need more data? Do we need assurances or support? Does anyone feel that we've missed something important?"
Dominating Team Members
Some team members may have a dominating personality that encroaches on the participation or airtime of others. This overbearing behavior may hurt the team morale or the momentum of the team.
A good way to overcome this barrier is to design a team evaluation to include a "balance of participation" in meetings. Knowing that fair and equitable participation by all will affect the team's performance evaluation will help team members limit domination by one member and encourage participation from all members, even shy or reluctant ones. Team members can say, "We've heard from Mary on this issue, so let's hear from others about their ideas."
Poor Performance of Some Team Members
Research shows that teams deal with poor performers in different ways, depending on members' perceptions of the reasons for poor performance.Jackson, C. L., & LePine, J. A. (2003). Peer responses to a team's weakest link: A test and extension of LePine and Van Dyne's model. Journal of Applied Psychology, 88, 459-475. In situations in which the poor performer is perceived as lacking in ability, teams are more likely to train the member. In situations in which members perceive the individual as simply being low on motivation, they are more likely to try to motivate or reject the poor performer.
Keep in mind that justice is an important part of keeping individuals working hard for the team.Colquitt, J. A. (2004). Does the justice of the one interact with the justice of the many? Reactions to procedural justice in teams. Journal of Applied Psychology, 89, 633-646. Be sure that poor performers are dealt with in a way that is deemed fair by all the team members.
Poorly Managed Team Conflict
Disagreements among team members are normal and should be expected. Healthy teams raise issues and discuss differing points of view because that will ultimately help the team reach stronger, more well-reasoned decisions. Unfortunately, sometimes disagreements arise because of personality issues or feuds that predated the teams' formation.
Ideally, teams should be designed to avoid bringing adversaries together on the same team. If that is not possible, the next best solution is to have adversaries discuss their issues privately, so the team's progress is not disrupted. The team leader or other team member can offer to facilitate the discussion. One way to make a discussion between conflicting parties meaningful is to form a behavioral contract between the two parties. That is, if one party agrees to do X, the other will agree to do Y.Scholtes, P. (1988). The team handbook. Madison, WI: Joiner Associates.

The earliest answer to motivation involved understanding individual needs. Specifically, early researchers thought that employees try hard and demonstrate goal-driven behavior to satisfy needs. For example, an employee who is always walking around the office talking to people may have a need for companionship and his behavior may be a way of satisfying this need. There are four major theories in the need-based category: Maslow's hierarchy of needs, ERG theory, Herzberg's dual factor theory, and McClelland's acquired needs theory.
Maslow's Hierarchy of Needs
Abraham Maslow is among the most prominent psychologists of the 20th century and the hierarchy of needs, accompanied by the pyramid representing how human needs are ranked, is an image familiar to most business students and managers. Maslow's theory is based on a simple premise: Human beings have needs that are hierarchically ranked.Maslow, A. H. (1943). A theory of human motivation. Psychological Review, 50, 370-396; Maslow, A. H. (1954). Motivation and personality. New York: Harper. There are some needs that are basic to all human beings, and in their absence, nothing else matters. As we satisfy these basic needs, we start looking to satisfy higher-order needs. Once a lower-level need is satisfied, it no longer serves as a motivator.
The most basic of Maslow's needs are physiological needs3. Physiological needs refer to the need for air, food, and water. Imagine being very hungry. At that point, all your behavior may be directed at finding food. Once you eat, though, the search for food ceases and the promise of food no longer serves as a motivator. Once physiological needs are satisfied, people tend to become concerned about safety4.
Are they safe from danger, pain, or an uncertain future? One level up, social needs5 refer to the need to bond with other human beings, to be loved, and to form lasting attachments. In fact, having no attachments can negatively affect health and well- being.Baumeister, R. F., & Leary, M. R. (1995). The need to belong: Desire for interpersonal attachments as a fundamental human motivation. Psychological Bulletin, 117, 497-529. The satisfaction of social needs makes esteem needs6 more salient. Esteem needs refer to the desire to be respected by one's peers, feeling important, and being appreciated. Finally, at the highest level of the hierarchy, the need for self-actualization7 refers to "becoming all you are capable of becoming." This need manifests itself by acquiring new skills, taking on new challenges, and behaving in a way that will lead to the satisfaction of one's life goals.

Two-Factor Theory
Frederick Herzberg approached the question of motivation in a different way. By asking individuals what satisfies them on the job and what dissatisfies them, Herzberg came to the conclusion that aspects of the work environment that satisfy employees are very different from aspects that dissatisfy them.Herzberg, F., Mausner, B., & Snyderman, B. (1959). The motivation to work. New York: Wiley; Herzberg, F. (1965). The motivation to work among Finnish supervisors. Personnel Psychology, 18, 393-402. Herzberg labeled factors causing dissatisfaction of workers as "hygiene" factors because these factors were part of the context in which the job was performed, as opposed to the job itself. Hygiene factors11 included company policies, supervision, working conditions, salary, safety, and security on the job. To illustrate, imagine that you are working in an unpleasant work environment. Your office is too hot in the summer and too cold in the winter. You are being harassed and mistreated. You would certainly be miserable in such a work environment. However, if these problems were solved (your office temperature is just right and you are not harassed at all), would you be motivated? Most likely, you would take the situation for granted. In fact, many factors in our work environment are things that we miss when they are absent, but take for granted if they are present.
In contrast, motivators12 are factors that are intrinsic to the job, such as achievement, recognition, interesting work, increased responsibilities, advancement, and growth opportunities. According to Herzberg's research, motivators are the conditions that truly encourage employees to try harder.

Herzberg's dual-factor theory of job satisfaction and motivation: A review of the evidence and a criticism. Personnel Psychology, 20, 369-389. One criticism relates to the classification of the factors as hygiene or motivator. For example, pay is viewed as a hygiene factor. However, pay is not necessarily a contextual factor and may have symbolic value by showing employees that they are being recognized for their contributions as well as communicating to them that they are advancing within the company. Similarly, quality of supervision or relationships employees form with their supervisors may determine whether they are assigned interesting work, whether they are recognized for their potential, and whether they take on more responsibilities. Despite its limitations, the two- factor theory can be a valuable aid to managers because it points out that improving the environment in which the job is performed goes only so far in motivating employees.
Acquired Needs Theory
Among the need-based approaches to motivation, Douglas McClelland's acquired needs theory is the one that has received the greatest amount of support. According to this theory, individuals acquire three types of needs as a result of their life experiences. These needs are need for achievement, need for affiliation, and need for power. All individuals possess a combination of these needs.
Figure 14.9
Those who have high need for achievement13 have a
strong need to be successful. A worker who derives
great satisfaction from meeting deadlines, coming up
with brilliant ideas, and planning his or her next career
move may be high in need for achievement. Individuals
high on need for achievement are well suited to
positions such as sales where there are explicit goals,
feedback is immediately available, and their effort often
leads to success.Harrell, A. M., & Stahl, M. J. (1981). A
behavioral decision theory approach for measuring McClelland's trichotomy of needs. Journal of Applied Psychology, 66, 242-247; Trevis, C. S., & Certo, S. C. (2005). Spotlight on entrepreneurship. Business Horizons, 48, 271-274; Turban, D. B., & Keon, T. L. (1993). Organizational attractiveness: An interactionist perspective. Journal of Applied Psychology, 78, 184-193. Because of their success in lower-level jobs, those in high need for achievement are often promoted to higher-level positions.McClelland, D. C., & Boyatzis, R. E. (1982). Leadership motive pattern and long-term success in management. Journal of Applied Psychology, 67, 737-743. However, a high need for achievement has important disadvantages in

management. Management involves getting work done by motivating others. When a salesperson is promoted to be a sales manager, the job description changes from actively selling to recruiting, motivating, and training salespeople. Those who are high in need for achievement may view managerial activities such as coaching, communicating, and meeting with subordinates as a waste of time. Moreover, they enjoy doing things themselves and may find it difficult to delegate authority. They may become overbearing or micromanaging bosses, expecting everyone to be as dedicated to work as they are, and expecting subordinates to do things exactly the way they are used to doing.McClelland, D. C., & Burnham, D. H. (1976). Power is the great motivator. Harvard Business Review, 25, 159-166.
Individuals who have a high need for affiliation14 want to be liked and accepted by others. When given a choice, they prefer to interact with others and be with friends.Wong, M. M., & Csikszentmihalyi, M. (1991). Affiliation motivation and daily experience: Some issues on gender differences. Journal of Personality and Social Psychology, 60, 154-164. Their emphasis on harmonious interpersonal relationships may be an advantage in jobs and occupations requiring frequent interpersonal interaction, such as social worker or teacher. In managerial positions, a high need for affiliation may again serve as a disadvantage because these individuals tend to be overly concerned about how they are perceived by others. Thus, they may find it difficult to perform some aspects of a manager's job such as giving employees critical feedback or disciplining poor performers.
Finally, those with high need for power15 want to influence others and control their environment. Need for power may be destructive of one's relationships if it takes the form of seeking and using power for one's own good and prestige. However, when it manifests itself in more altruistic forms, such as changing the way things are done so that the work environment is more positive or negotiating more resources for one's department, it tends to lead to positive outcomes. In fact, need for power is viewed as important for effectiveness in managerial and leadership positions.McClelland, D. C., & Burnham, D. H. (1976). Power is the great motivator. Harvard Business Review, 25, 159-166; Spangler, W. D., & House, R. J. (1991). Presidential effectiveness and the leadership motive profile. Journal of Personality and Social Psychology, 60, 439-455; Spreier, S. W. (2006). Leadership run amok. Harvard Business Review, 84, 72-82.
McClelland's theory of acquired needs has important implications for motivating employees. While someone who has high need for achievement may respond to goals, those with high need for affiliation may be motivated to gain the approval of their peers and supervisors, whereas those who have high need for power may value gaining influence over the supervisor or acquiring a position that has decision-making authority. And, when it comes to succeeding in managerial

What Are Inputs and Outputs?
Inputs are the contributions the person feels he or she is making to the environment. In the previous example, the hard work Marie was providing, loyalty to the organization, the number of months she has worked there, level of education, training, and her skills may have been relevant inputs. Outputs are the rewards the person feels he or she is receiving from the situation. The $10 an hour Marie is receiving was a salient output. There may be other outputs, such as the benefits received or the treatment one gets from the boss. In the prior example, Marie may reason as follows: "I have been working here for six months. I am loyal and I perform well (inputs). I am paid $10 an hour for this (outputs). The new guy, Spencer, does not have any experience here (referent's inputs) but will be paid $14 (referent's outcomes). This situation is unfair."
Figure 14.10
Formula
The Equity
Source: Based on Adams, J. S. (1965). Inequity in social exchange. In L. Berkowitz (Ed.), Advances in Experimental Social Psychology (Vol. 2, pp. 267-299). New York: Academic Press.
16. A person we compare ourselves to in equity theory.
We should emphasize that equity perceptions develop as a result of a subjective process. Different people may look at exactly the same situation and perceive different levels of equity. For example, another person may look at the same scenario and decide that the situation is fair because Spencer has computer skills and the company is paying extra for these skills.
Who Is the Referent?
The referent other may be a specific person or an entire category of people. For example, Marie might look at want ads for entry-level clerical workers and see whether the pay offered is in the $10 per hour range; in this case, the referent other is the category of entry-level clerical workers, including office assistants, in Marie's local area. Referents should be comparable to us—otherwise the comparison is not meaningful. It would be illogical for Marie to compare herself to the CEO of the company, given the differences in the nature of inputs and outcomes. Instead, she would logically compare herself to those performing similar tasks within the same organization or a different organization.

Another way of addressing perceived inequity is to reduce one's own inputs or increase one's own outputs. If Marie works less hard, perceived inequity would be reduced. And, indeed, research shows that people who perceive inequity tend to reduce their work performance or reduce the quality of their inputs.Carrell, M. R., & Dittrich, J. E. (1978). Equity theory: The recent literature, methodological considerations, and new directions. Academy of Management Review, 3, 202-210; Goodman, P. S., & Friedman, A. (1971). An examination of Adams' theory of inequity. Administrative Science Quarterly, 16, 271-288. Increasing one's outputs can be achieved through legitimate means such as negotiating a pay raise. At the same time, research shows that those feeling inequity sometimes resort to stealing to balance the scales.Greenberg, J. (1993). Stealing in the name of justice: Informational and interpersonal moderators of theft reactions to underpayment inequity. Organizational Behavior and Human Decision Processes, 54, 81-103. Other options include changing the comparison person (for example, Marie may learn that others doing similar work in different organizations are paid only minimum wage) and leaving the situation by quitting one's job.Schmidt, D. R., & Marwell, G. (1972). Withdrawal and reward reallocation as responses to inequity. Journal of Experimental Social Psychology, 8, 207-211. We might even consider taking legal action as a potential outcome of perceived inequity. For example, if Marie finds out that the main reason behind the pay gap is gender, she may react to the situation by taking legal action because sex discrimination in pay is illegal in the United States.
Overpayment Inequity
What would you do if you felt you were overrewarded? In other words, how would you feel if you were the new employee, Spencer (and you knew that your coworker Marie was being paid $4 per hour less than you)? Originally, equity theory proposed that overrewarded individuals would experience guilt and would increase their effort to restore perceptions of equity. However, research does not provide support for this argument. Instead, it seems that individuals experience less distress as a result of being overrewarded.Austin, W., & Walster, E. (1974). Reactions to confirmations and disconfirmations of expectancies of equity and inequity. Journal of Personality and Social Psychology, 30, 208-216. It is not hard to imagine that individuals find perceptual ways to deal with a situation like this, such as believing that they have more skills and bring more to the situation compared with the referent person. Therefore, research does not support equity theory's predictions with respect to people who are overpaid.Evan, W. M., & Simmons, R. G. (1969). Organizational effects of inequitable rewards: Two experiments in status inconsistency. IEEE Engineering Management Review, 1, 95-108.

Employers would benefit from paying attention to all three types of justice perceptions. In addition to being the right thing to do, justice perceptions lead to outcomes companies care about. Injustice is directly harmful to employee psychological health and well-being and contributes to stress.Greenberg, J. (2004). Managing workplace stress by promoting organizational justice. Organizational Dynamics, 33, 352-365; Tepper, B. J. (2001). Health consequences of organizational injustice: tests of main and interactive effects. Organizational Behavior and Human Decision Processes, 86, 197-215. High levels of justice create higher levels of employee commitment to organizations, are related to higher job performance, higher levels of organizational citizenship (behaviors that are not part of one's job description but help the organization in other ways such as speaking positively about the company and helping others), and higher levels of customer satisfaction, whereas low levels of justice lead to retaliation and supporting union certification movements.Blader, S. L. (2007). What leads organizational members to collectivize? Injustice and identification as precursors of union certification. Organization Science, 18, 108-126; Cohen-Charash Y., & Spector P. E. (2001). The role of justice in organizations: A meta-analysis. Organizational Behavior and Human Decision Processes, 86, 278-321; Colquitt, J. A., Conlon, D. E., Wesson, M. J., Porter, C. O. L. H., & Ng, K. Y. (2001). Justice at the millennium: A meta-analytic review of 25 years of organizational justice research. Journal of Applied Psychology, 86, 425-445; Cropanzano, R., Bowen, D. E., & Gilliland, S. W. (2007). The management of organizational justice. Academy of Management Perspectives, 21, 34-48; Masterson, S. S. (2001). A trickle-down model of organizational justice: Relating employees' and customers' perceptions of and reactions to fairness. Journal of Applied Psychology, 86, 594-604; Masterson, S. S., Lewis, K., Goldman, B. M., & Taylor, S. M. (2000). Integrating justice and social exchange: The differing effects of fair procedures and treatment on work relationships. Academy of Management Journal, 43, 738-748; Moorman, R. H. (1991). Relationship between organizational justice and organizational citizenship behaviors: Do fairness perceptions influence employee citizenship? Journal of Applied Psychology, 76, 845-855; Skarlicki, D. P., & Folger, R. (1997). Retaliation in the workplace: The roles of distributive, procedural, and interactional justice. Journal of Applied Psychology, 82, 434-443.

Maslow's hierarchy is a systematic way of thinking about the different needs employees may have at any given point and explains different reactions they may have to similar treatment. An employee who is trying to satisfy her esteem needs may feel gratified when her supervisor praises her. However, another employee who is trying to satisfy his social needs may resent being praised by upper
management in front of peers if the praise sets him apart from the rest of the group.
So, how can organizations satisfy their employees' various needs? By leveraging the various facets of the planning-organizing-leading-controlling (P-O-L-C) functions. In the long run, physiological needs may be satisfied by the person's paycheck, but it is important to remember that pay may satisfy other needs such as safety and esteem as well. Providing generous benefits, including health insurance and company-sponsored retirement plans, as well as offering a measure of job security, will help satisfy safety needs. Social needs may be satisfied by having a friendly environment, providing a workplace conducive to collaboration and communication with others. Company picnics and other social get-togethers may also be helpful if the majority of employees are motivated primarily by social needs (but may cause resentment if they are not and if they have to sacrifice a Sunday afternoon for a company picnic). Providing promotion opportunities at work, recognizing a person's accomplishments verbally or through more formal reward systems, job titles that communicate to the employee that one has achieved high status within the organization are among the ways of satisfying esteem needs. Finally, self-actualization needs may be satisfied by providing development and growth opportunities on or off the job, as well as by assigning interesting and challenging work. By making the effort to satisfy the different needs each employee may have at a given time, organizations may ensure a more highly motivated workforce.

23. The extent to which a person believes that high levels of effort will lead to outcomes of interest such as performance or success.
24. The degree to which the person believes that performance is related to secondary outcomes such as rewards.
25. The value of the rewards awaiting the person as a result of performance.
Figure 14.11 Summary of Expectancy Theory
Source: Based on Porter, L. W., & Lawler, E. E. (1968). Managerial attitudes and performance. Homewood, IL: Irwin; Vroom, V. H. (1964). Work and motivation. New York: Wiley.
The first question is whether the person believes that high levels of effort will lead to desired outcomes. This perception is labeled as expectancy23. For example, do you believe that the effort you put forth in a class is related to learning worthwhile material and receiving a good grade? If you do, you are more likely to put forth effort.
The second question is the degree to which the person believes that performance is related to secondary outcomes such as rewards. This perception is labeled as instrumentality24. For example, do you believe that passing the class is related to rewards such as getting a better job, or gaining approval from your instructor, from your friends, or parents? If you do, you are more likely to put forth effort.
Finally, individuals are also concerned about the value of the rewards awaiting them as a result of performance. The anticipated satisfaction that will result from an outcome is labeled as valence25. For example, do you value getting a better job or gaining approval from your instructor, friends, or parents? If these outcomes are desirable to you, you are more likely to put forth effort.
As a manager, how can you influence these perceptions to motivate employees? In fact, managers can influence all three perceptions.Cook, C. W. (1980). Guidelines for managing motivation. Business Horizons, 23, 61-69. To influence their expectancy perceptions, managers may train their employees, or hire people who are qualified for the jobs in question. Low expectancy may also be due to employees feeling that something other than effort predicts performance, such as political behaviors on the part of employees. In this case, clearing the way to performance and creating an environment in which employees do not feel blocked will be helpful. The first step in influencing instrumentality is to connect pay and other rewards to performance using bonuses, award systems, and merit pay. Publicizing any contests or award programs is helpful in bringing rewards to the awareness of employees. It is also

Rotation, Job Enlargement, and Enrichment
Figure 14.15
One of the early alternatives to job specialization was
job rotation36, which involves moving employees from
job to job at regular intervals, thereby relieving the
monotony and boredom typical in repetitive jobs. For
example, Maids International, a company that provides
cleaning services to households and businesses, uses job
rotation such that maids cleaning the kitchen in one
house would clean the bedroom in another
house.Denton, D. K. (1994). ...I hate this job. Business
Horizons, 37, 46-52. Using this technique, among others,
the company was able to reduce its turnover level. In a
study conducted in a supermarket, cashiers were
rotated to work in different departments. As a result of
the rotation, employee stress level was reduced as
measured by their blood pressure. Moreover, they
reported fewer pain symptoms in their neck and
shoulders.Rissen, D., Melin, B., Sandsjo, L., Dohns, I., &
Lundberg, U. (2002). Psychophysiological stress reactions, trapezius muscle activity, and neck and shoulder pain among female cashiers before and after introduction of job rotation. Work & Stress, 16, 127-137.
Job rotation has a number of advantages for organizations. It is an effective way for employees to acquire new skills, as the rotation involves cross-training to new tasks; this means that organizations increase the overall skill level of their employees.Campion, M. A., Cheraskin, L., & Stevens, M. J. (1994). Career-related antecedents and outcomes of job rotation. Academy of Management Journal, 37, 1518-1542. In addition, job rotation is a means of knowledge transfer between departments.Kane, A. A., Argote, L., & Levine, J. M. (2005). Knowledge transfer between groups via personnel rotation: Effects of social identity and knowledge quality. Organizational Behavior and Human Decision Processes, 96, 56-71. For the employees, rotation is a benefit because they acquire new skills, which keeps them marketable in the long run.
Anecdotal evidence suggests that companies successfully rotate high-level employees to train their managers and increase innovativeness in the company. For example, Nokia uses rotation at all levels, such as assigning lawyers to act as country managers or moving network engineers to handset design. These
This Ford panel assembly line in Berlin, Germany, is an example of specialization. Each person on the line has a different job.
© 2010 Jupiterimages Corporation

approaches are thought to bring a fresh perspective to old problems.Wylie, I. (May 2003). Calling for a renewable future. Fast Company, 70, 46-48. India's information technology giant Wipro, which employs about 80,000 employees, uses a 3-year plan to groom future leaders of the company by rotating them through different jobs.Ramamurti, R. (2001). Wipro's Chairman Azim Premji on Building a world-class Indian company. Academy of Management Executive, 15, 13-19.
Job enlargement37 refers to expanding the tasks performed by employees to add more variety. Like job rotation, job enlargement can reduce boredom and monotony as well as use human resources more effectively. When jobs are enlarged, employees view themselves as being capable of performing a broader set of tasks.Parker, S. K. (1998). Enhancing role breadth self-efficacy: The roles of job enrichment and other organizational interventions. Journal of Applied Psychology, 83, 835-852. Job enlargement is positively related to employee satisfaction and higher- quality customer services, and it increases the chances of catching mistakes.Campion, M. A., & McClelland, C. L. (1991). Interdisciplinary examination of the costs and benefits of enlarged jobs: A job design quasi-experiment. Journal of Applied Psychology, 76, 186-198. At the same time, the effects of job enlargement may depend on the type of enlargement. For example, exclusively giving employees simpler tasks had negative consequences on employee satisfaction with the job of catching errors, whereas giving employees more tasks that require them to be knowledgeable in different areas seemed to have more positive effects.Campion, M. A., & McClelland, C. L. (1993). Follow-up and extension of the interdisciplinary costs and benefits of enlarged jobs. Journal of Applied Psychology, 78, 339-351.
Job enrichment38 is a job redesign technique that allows workers more control over how they perform their own tasks, giving them more responsibility. As an alternative to job specialization, companies using job enrichment may experience positive outcomes such as reduced turnover, increased productivity, and reduced absences.McEvoy, G. M., & Cascio, W. F. (1985). Strategies for reducing employee turnover. Journal of Applied Psychology, 70, 342-353; Locke, E. A., Sirota, D., & Wolfson, A. D. (1976). An experimental case study of the successes and failures of job enrichment in a government agency. Journal of Applied Psychology, 61, 701-711. This may be because employees who have the authority and responsibility over their own work can be more efficient, eliminate unnecessary tasks, take shortcuts, and overall increase their own performance. At the same time, there is some evidence that job enrichment may sometimes cause employees to be dissatisfied.Locke, E. A., Sirota, D., & Wolfson, A. D. (1976). An experimental case study of the successes and failures of job enrichment in a government agency. Journal of Applied Pscyhology, 61, 701-711. The reason may be that employees who are given additional autonomy and responsibility may expect greater levels of pay or other types of compensation, and if this expectation is not met, they may feel frustrated. One more thing to remember is that job enrichment may not be suitabl

for all employees.Cherrington, D. J., & Lynn, E. J. (1980). The desire for an enriched job as a moderator of the enrichment-satisfaction relationship. Organizational Behavior and Human performance, 25, 139-159; Hulin, C. L., & Blood, M. R. (1968). Job enlargement, individual differences, and worker responses. Psychological Bulletin, 69, 41-55. Not all employees desire to have control over how they work, and if they do not have this desire, they may feel dissatisfied in an enriched job.
Job Characteristics Model
The job characteristics model39 is one of the most influential attempts to design jobs to increase their motivational properties.Hackman, J. R., & Oldham, G. R. (1975). Development of the job diagnostic survey. Journal of Applied Psychology, 60, 159-170. Proposed in the 1970s by Hackman and Oldham, the model describes five core job dimensions, leading to three critical psychological states, which lead to work-related outcomes. In this model, shown in the following figure, there are five core job dimensions.

Task significance42 refers to whether the person's job substantially affects other people's work, health, or well-being. A janitor who cleans the floor at an office building may find the job low in significance, thinking it is not an important job. However, janitors cleaning the floors at a hospital may see their role as essential in helping patients recover in a healthy environment. When they see their tasks as significant, employees tend to feel that they are making an impact on their environment and their feelings of self worth are boosted. Grant, A. M. (2008). The significance of task significance: Job performance effects, relational mechanisms, and boundary conditions. Journal of Applied Psychology, 93, 108-124.
Autonomy43 is the degree to which the person has the freedom to decide how to perform tasks. As an example, a teacher who is required to follow a predetermined textbook, cover a given list of topics, and use a specified list of classroom activities has low autonomy, whereas a teacher who is free to choose the textbook, design the course content, and use any materials she sees fit has higher levels of autonomy. Autonomy increases motivation at work, but it also has other benefits. Autonomous workers are less likely to adopt a "this is not my job" attitude and instead be proactive and creative.Morgeson, F. P., Delaney-Klinger, K., & Hemingway, M. A. (2005). The importance of job autonomy, cognitive ability, and job-related skill for predicting role breadth and job performance. Journal of Applied Psychology, 90, 399-406; Parker, S. K., Wall, T. D., & Jackson, P. R. (1997). "That's not my job": Developing flexible employee work orientations. Academy of Management Journal, 40, 899-929; Parker, S. K., Williams, H. M., & Turner, N. (2006). Modeling the antecedents of proactive behavior at work. Journal of Applied Psychology, 91, 636-652; Zhou, J. (1998). Feedback valence, feedback style, task autonomy, and achievement orientation: Interactive effects on creative performance. Journal of Applied Psychology, 83, 261-276. Giving employees autonomy is also a great way to train them on the job. For example, Gucci's CEO Robert Polet describes autonomy he received while working at Unilever as the key to his development of leadership talents.Gumbel, P. (2008, January 21). Galvanizing Gucci. Fortune, 157(1), 80-88.
Feedback44 refers to the degree to which the person learns how effective he or she is at work. Feedback may come from other people such as supervisors, peers, subordinates, customers, or from the job. A salesperson who makes informational presentations to potential clients but is not informed whether they sign up has low feedback. If this salesperson receives a notification whenever someone who has heard his presentation becomes a client, feedback will be high.
The mere presence of feedback is not sufficient for employees to feel motivated to perform better, however. In fact, in about one-third of the cases, feedback was detrimental to performance.Kluger, A. N., & DeNisi, A. (1996). The effects of feedback interventions on performance: A historical review, a meta-analysis, and a preliminary feedback intervention theory. Psychological Bulletin, 119, 25

addition to whether feedback is present, the character of the feedback (positive or negative), whether the person is ready to receive the feedback, and the manner in which feedback was given will all determine whether employees feel motivated or demotivated as a result of feedback.
Goal Setting Theory
Goal setting theory Locke, E. A., & Latham, G. P. (1990). A theory of goal setting and task performance. Englewood Cliffs, NJ: Prentice-Hall. is one of the most influential and practical theories of motivation. It has been supported in over 1,000 studies with employees, ranging from blue-collar workers to research and development employees, and there is strong evidence that setting goals is related to performance improvements.Ivancevich, J. M., & McMahon, J. T. (1982). The effects of goal setting, external feedback, and self-generated feedback on outcome variables: A field experiment. Academy of Management Journal, 25, 359-372; Latham, G. P., & Locke, E. A. (2006). Enhancing the benefits and overcoming the pitfalls of goal setting. Organizational Dynamics, 35, 332-340; Umstot, D. D., Bell, C. H., & Mitchell, T. R. (1976). Effects of job enrichment and task goals on satisfaction and productivity: Implications for job design. Journal of Applied Psychology, 61, 379-394. In fact, according to one estimate, goal setting improves performance between 10% and 25% or more.Pritchard, R. D., Roth, P. L., Jones, S. D., Galgay, P. J., & Watson, M. D. (1988). Designing a goal-setting system to enhance performance: A practical guide. Organizational Dynamics, 17, 69-78. On the basis of evidence such as this, thousands of companies around the world are using goal setting in some form, including companies such as Coca-Cola, PricewaterhouseCoopers, Nike, Intel, and Microsoft to name a few.
Setting SMART Goals
The mere presence of a goal does not motivate individuals. Think about New Year's resolutions that you may have made and failed to keep. Maybe you decided that you should lose some weight but then never put a concrete plan in action. Maybe you decided that you would read more but didn't. Why did you, like 97% of those who set New Year's resolutions, fail to meet your goal?
Accumulating research evidence indicates that effective goals are SMART45. SMART goals are specific, measurable, achievable, realistic, and timely. Here is a sample SMART goal: Wal-Mart recently set a goal to eliminate 25% of the solid waste from its U.S. stores by the year 2009. This goal meets all the conditions of being SMART if we assume that it is an achievable goal.Heath, D., & Heath, C. (2008, February). Make goals not resolutions. Fast Company, 122, 58-59. Even though it seems like a simple concept, in reality many goals that are set within organizations may not be SMART. For example, Microsoft recently conducted an audit of its goal-setting a

performance review system and found that only about 40% of the goals were specific and measurable.Shaw, K. N. (2004). Changing the goal-setting process at Microsoft. Academy of Management Executive, 18, 139-142.
Why Do SMART Goals Motivate?
There are at least four reasons why goals
motivate.Latham, G. P. (2004). The motivational benefits
of goal-setting. Academy of Management Executive, 18,
126-129; Seijts, G. H., & Latham, G. P. (2005). Learning
versus performance goals: When should each be used?
Academy of Management Executive, 19, 124-131; Shaw, K.
N. (2004). Changing the goal-setting process at
Microsoft. Academy of Management Executive, 18, 139-142.
First, goals give us direction; therefore, goals should be
set carefully. Giving employees goals that are not
aligned with company goals will be a problem because
goals will direct employee's energy to a certain end.
Second, goals energize people and tell them not to stop
until they reach that point. Third, having a goal
provides a challenge. When people have goals and when
they reach them, they feel a sense of accomplishment.
Finally, SMART goals urge people to think outside the
box and rethink how they are working. If a goal is
substantially difficult, merely working harder will not
get you the results. Instead, you will need to rethink the
way you usually work and devise a creative way of
working. It has been argued that this is how designers
and engineers in Japan came up with the bullet train.
Having a goal that went way beyond the current speed
of trains prevented engineers from making minor
improvements and urged them to come up with a
radically different concept.Kerr, S., & Landauer, S.
(2004). Using stretch goals to promote organizational
effectiveness and personal growth: General Electric and Goldman Sachs. Academy of Management Executive, 18, 134-138.
Are There Downsides to Goal Setting?
As with any management technique, there may be some downsides to goal setting.Locke, E. A. (2004). Linking goals to monetary incentives. Academy of Management Executive, 18, 130-133; Pritchard, R. D., Roth, P. L., Jones, S. D., Galgay, P. J., & Watson, M. D. (1988). Designing a goal-setting system to enhance performance:

practical guide. Organizational Dynamics, 17, 69-78; Seijts, G. H., & Latham, G. P. (2005). Learning versus performance goals: When should each be used? Academy of Management Executive, 19, 124-131. First, setting goals for specific outcomes may hamper employee performance if employees lack skills and abilities to reach the goals. In these situations, setting goals for behaviors and for learning may be more effective than setting goals for outcomes. Second, goal setting may motivate employees to focus on a goal and ignore the need to respond to new challenges. For example, one study found that when teams had difficult goals and when employees within the team had high levels of performance orientation, teams had difficulty adapting to unforeseen circumstances.Lepine, J. A. (2005). Adaptation of teams in response to unforeseen change: Effects of goal difficulty and team composition in terms of cognitive ability and goal orientation. Journal of Applied Psychology, 90, 1153-1167. Third, goals focus employee attention on the activities that are measured, which may lead to sacrificing other important elements of performance. When goals are set for production numbers, quality may suffer. As a result, it is important to set goals touching on all critical aspects of performance. Finally, aggressive pursuit of goals may lead to unethical behaviors. Particularly when employees are rewarded for goal accomplishment but there are no rewards whatsoever for coming very close to reaching the goal, employees may be tempted to cheat.
None of these theories are complete by themselves, but each theory provides us with a framework we can use to analyze, interpret, and manage employee behaviors in the workplace, which are important skills managers use when conducting their leading function. In fact, motivation is important throughout the entire P-O-L-C framework because most managerial functions involve accomplishing tasks and goals through others.

Two Levels of Control: Strategic and Operational
Figure 15.4
Imagine that you are the captain of a ship. The strategic
controls make sure that your ship is going in the right
direction; management and operating controls make
sure that the ship is in good condition before, during,
and after the voyage. With that analogy in mind,
strategic control2 is concerned with tracking the
strategy as it is being implemented, detecting any
problem areas or potential problem areas suggesting
that the strategy is incorrect, and making any necessary adjustments.Venkataraman, S., & Sarasvathy, S. D.
(2001). Strategy and entrepreneurship: Outlines of an
untold story. In M. A. Hitt, R. E. Freeman, & J. S.
Harrison (Eds.), Handbook of strategic management (650-668). Oxford: Blackwell. Strategic controls allow you to step back and look at the big picture and make sure all the pieces of the picture are correctly aligned.
Ordinarily, a significant time span occurs between initial implementation of a strategy and achievement of its intended results. For instance, if you wanted to captain your ship from San Diego to Seattle you might need a crew, supplies, fuel, and so on. You might also need to wait until the weather lets you make the trip
Controls allow you to align the pieces with the big picture.
© 2010 Jupiterimages Corporation

safely! Similarly, in larger organizations, during the time you are putting the strategy into place, numerous projects are undertaken, investments are made, and actions are undertaken to implement the new strategy. Meanwhile, the environmental situation and the firm's internal situation are developing and evolving. The economy could be booming or perhaps falling into recession. Strategic controls are necessary to steer the firm through these events. They must provide some means of correcting direction on the basis of intermediate performance and new information.
Operational control3, in contrast to strategic control, is concerned with executing the strategy. Where operational controls are imposed, they function within the framework established by the strategy. Normally these goals, objectives, and standards are established for major subsystems within the organization, such as business units, projects, products, functions, and responsibility centers.Matthews, J. (1999). Strategic moves. Supply Management, 4(4), 36-37. Typical operational control measures include return on investment, net profit, cost, and product quality. These control measures are essentially summations of finer-grained control measures. Corrective action based on operating controls may have implications for strategic controls when they involve changes in the strategy.
Types of Control
It is also valuable to understand that, within the strategic and operational levels of control, there are several types of control. The first two types can be mapped across two dimensions: level of proactivity and outcome versus behavioral. The following table summarizes these along with examples of what such controls might look like.
Proactivity
Proactivity can be defined as the monitoring of problems in a way that provides their timely prevention, rather than after the fact reaction. In management, this is known as feedforward control4; it addresses what can we do ahead of time to help our plan succeed. The essence of feedforward control is to see the problems coming in time to do something about them. For instance, feedforward controls include preventive maintenance on machinery and equipment and due diligence on investments.

Why might it be helpful for you to think of controls as part of a feedback loop in the P-O-L-C process? Well, if you are the entrepreneur who is writing the business plan for a completely new business, then you would likely start with the planning component and work your way to controlling—that is, spell out how you are going to tell whether the new venture is on track. However, more often, you will be stepping into an organization that is already operating, and this means that a plan is already in place. With the plan in place, it may be then up to you to figure out the organizing, leading, or control challenges facing the organization.
Outcome and Behavioral Controls
Figure 15.5 Controls as Part of a Feedback Loop
7. Processes that are generally preferable when just one or two performance measures (say, return on investment or return on assets) are good gauges of a business's health.
8. The direct evaluation of managerial and employee decision making, not of the results of managerial decisions.
9. The management of a firm's costs and expenses to control them in relation to budgeted amounts.
Controls also differ depending on what is monitored, outcomes or behaviors. Outcome controls7 are generally preferable when just one or two performance measures (say, return on investment or return on assets) are good gauges of a business's health. Outcome controls are effective when there's little external interference between managerial decision making on the one hand and business performance on the other. It also helps if little or no coordination with other business units exists.
Behavioral controls8 involve the direct evaluation of managerial and employee decision making, not of the results of managerial decisions. Behavioral controls tie rewards to a broader range of criteria, such as those identified in the Balanced Scorecard. Behavioral controls and commensurate rewards are typically more appropriate when there are many external and internal factors that can affect the relationship between a manager's decisions and organizational performance. They're also appropriate when managers must coordinate resources and capabilities across different business units.
Financial and Nonfinancial Controls
Finally, across the different types of controls in terms of level of proactivity and outcome versus behavioral, it is important to recognize that controls can take on one of two predominant forms: financial and nonfinancial controls. Financial control9 involves the management of a firm's costs and expenses to control them in relation to budgeted amounts. Thus, management determines which aspects of its financial condition, such as assets, sales, or profitability, are most important, tries to forecast them through budgets, and then compares actual performance to budgeted performance. At a strategic level, total sales and indicators of profitability would be relevant strategic controls.

The Nature of Financial Controls
Imagine that you are on the board of Success-R-Us, an organization whose financial controls are managed in an excellent manner. Each year, after the organization has outlined strategies to reach its goals and objectives, funds are budgeted for the necessary resources and labor. As money is spent, statements are updated to reflect how much was spent, how it was spent, and what it obtained. Managers, who report to the board, use these financial statements, such as an income statement or balance sheet, to monitor the progress of programs and plans. Financial statements provide management with information to monitor financial resources and activities. The income statement shows the results of the organization's operations, such as revenues, expenses, and profit or loss. The balance sheet shows what the organization is worth (assets) at a single point in time, and the extent to which those assets were financed through debt (liabilities) or owner's investment (equity).
Success-R-Us conducts financial audits, or formal investigations, to ensure that financial management practices follow generally accepted procedures, policies, laws, and ethical guidelines. In Success-R-Us, audits are conducted both internally—by members of the company's accounting department—and externally by Green Eyeshade Inc., an accounting firm hired for this purpose.
Financial ratio analysis examines the relationship between specific figures on the financial statements and helps explain the significance of those figures: By analyzing financial reports, the managers at Success-R-Us are able to determine how well the business is doing and what may need to be done to improve its financial viability.
While actual financial performance is always historical, Success-R-Us's proactive managers plan ahead for the problems the business is likely to encounter and the opportunities that may arise. To do this, they use pro forma financials, which are projections; usually these are projected for three fiscal years. Being proactive requires reading and analyzing the financial statements on a regular basis. Monthly, and sometimes daily or weekly, financial analysis is preferred. (In the business world as a whole, quarterly is more common, and some organizations do this only once a year, which is not often enough.) The proactive manager has financial data available based on actual results and compares them to the budget. This process points out weaknesses in the business before they reach crisis proportion and allows the manager to make the necessary changes and adjustments before major problems develop.
Years ago, Success-R-Us experienced problems because its management style was insufficiently proactive. A reactive manager waits to react to problems and then

solves them by crisis management. This type of manager goes from crisis to crisis with little time in between to notice opportunities that may become available. The reactive manager's business is seldom prepared to take advantage of new opportunities quickly. Businesses that are managed proactively are more likely to be successful, and this is the result that Success-R-Us is experiencing since it instituted a company-wide initiative to promote proactive controls.
Like most organizations, Success-R-Us uses computer software programs to do record keeping and develop financials. These programs provide a chart of accounts that can be individualized to the business and the templates for each account ledger, the general ledgers, and the financial reports. These programs are menu driven and user-friendly, but knowing how to input the data correctly is not enough. A manager must also know where to input each piece of data and how to analyze the reports compiled from the data. Widely accepted accounting guidelines dictate that if you have not learned a manual record-keeping system, you need to do this before attempting to use a computerized system.
The Balance Sheet
The balance sheet is a snapshot of the business's financial position at a certain point in time. This can be any day of the year, but balance sheets are usually done at the end of each month. With a budget in hand, you project forward and develop pro forma statements to monitor actual progress against expectations.
As shown in the following table, this financial statement is a listing of total assets (what the business owns—items of value) and total liabilities (what the business owes). The total assets are broken down into subcategories of current assets, fixed assets, and other assets. The total liabilities are broken down into subcategories of current liabilities, long-term liabilities/debt, and owner's equity.
Assets
Current assets12 are those assets that are cash or can be readily converted to cash in the short term, such as accounts receivable or inventory. In the balance sheet shown for Success-R-Us, the current assets are cash, petty cash, accounts receivable, inventory, and supplies.

Sales or Revenue
The sales or revenue portion of the income statement is where the retail price of the product is expressed in terms of dollars times the number of units sold. This can be product units or service units. Sales can be expressed in one category as total sales or can be broken out into more than one type of sales category: car sales, part sales, and service sales, for instance. In our Success-R-Us example, the company sold 20,000 books at a retail price of $25 each, for total revenues of $500,000. Because Success-R-Us sells all of its books on credit (i.e., you can charge them on your credit card), the company does not collect cash for these sales until the end of the month, or whenever the credit card company settles up with Success-R-Us.
Cost of Goods Sold/Cost of Sales
The cost of goods sold/sales portion of the income statement shows the cost of products purchased for resale, or the direct labor cost (service person wages) for service businesses. Cost of goods sold/sales also may include additional categories, such as freight charges cost or subcontract labor costs. These costs also may be expressed in one category as total cost of goods sold/sales or can be broken out to match the sales categories: car purchases, parts, purchases, and service salaries, for example.
Breaking out sales and cost of goods sold/sales into separate categories can have an advantage over combining all sales and costs into one category. When you break out sales, you can see how much each product you have sold costs and the gross profit
15.4 Financial Controls
703
for each product. This type of analysis enables you to make inventory and sales decisions about each product individually.
Gross Profit
The gross profit portion of the income/P&L statement tells the difference between what you sold the product or service for and what the product or service cost you. The goal of any business is to sell enough units of product or service to be able to subtract the cost and have a high enough gross profit to cover operating expenses, plus yield a net income that is a reasonable return on investment. The key to operating a profitable business is to maximize gross profit.
If you increase the retail price of your product too much above the competition, you might lose units of sales to the competition and not yield a high enough gross profit to cover your expenses. However, if you decrease the retail price of your product too much below the competition, you might gain additional units of sales but not make enough gross profit per unit sold to cover your expenses.
While this may sound obvious, a carefully thought out pricing strategy maximizes gross profit to cover expenses and yield a positive net income. At a very basic level, this means that prices are set at a level where marginal and operating costs are covered. Beyond this, pricing should carefully be set to reflect the image you want portrayed and, if desired, promote repeat business.
Operating Expenses
The operating expense section of the income/P&L statement is a measurement of all the operating expenses of the business. There are two types of expenses, fixed and variable. Fixed expenses are those expenses that do not vary with the level of sales; thus, you will have to cover these expenses even if your sales are less than the expenses. The entrepreneur has little control over these expenses once they are set. Some examples of fixed expenses are rent (contractual agreement), interest expense (note agreement), an accounting or law firm retainer for legal services of X amount per month for 12 months, and monthly charges for electricity, phone, and Internet connections.
Variable expenses are those expenses that vary with the level of sales. Examples of variable expenses include bonuses, employee wages (hours per week worked), travel and entertainment expenses, and purchases of supplies. (Note: categorization of these may differ from business to business.) Expense control is an area where the entrepreneur can maximize net income by holding expenses to a minimum.
Net Income
The net income portion of the income/P&L statement is the bottom line. This is the measure of a firm's ability to operate at a profit. Many factors affect the outcome of the bottom line. Level of sales, pricing strategy, inventory control, accounts receivable control, ordering procedures, marketing of the business and product, expense control, customer service, and productivity of employees are just a few of these factors. The net income should be enough to allow growth in the business through reinvestment of profits and to give the owner a reasonable return on investment.
The Cash Flow Statement

You are interviewing a candidate for a position as a cashier in a supermarket. You need someone polite, courteous, patient, and dependable. The candidate you are talking to seems nice. But how do you know who is the right person for the job? Will the job candidate like the job or get bored? Will they have a lot of accidents on the job or be fired for misconduct? Don't you wish you knew before hiring? One company approaches this problem scientifically, saving companies time and money on hiring hourly wage employees.
Retail employers do a lot of hiring, given their growth and high turnover rate. According to one estimate, replacing an employee who leaves in retail costs companies around $4,000. High turnover also endangers customer service. Therefore, retail employers have an incentive to screen people carefully so that they hire people with the best chance of being successful and happy on the job. Unicru, an employee selection company, developed software that quickly became a market leader in screening hourly workers. The company was acquired by Massachusetts-based Kronos Inc. (NASDAQ: KRON) in 2006 and is currently owned by a private equity firm.
The idea behind the software is simple: If you have a lot of employees and keep track of your data over time, you have access to an enormous resource. By analyzing this data, you can specify the profile of the "ideal" employee. The software captures the profile of the potential high performers, and applicants are screened to assess their fit with this particular profile. More important, the profile is continually updated as studies that compare employee profiles to job performance are conducted. As the number of studies gets larger, the software does a better job of identifying the right people for the job.
If you applied for a job in retail, you may have already been a part of this database: the users of this system include giants such as Universal Studios, Costco Wholesale Corporation, Burger King, and other retailers and chain restaurants. In companies such as Albertsons or Blockbuster, applicants can either use a kiosk in the store to answer a list of questions and to enter their background, salary history, and other information or apply online from their home computers. The software screens people on basic criteria such as availability in scheduling as well as personality traits
s are asked to agree or disagree with statements such as "I often make last-minute plans" or "I work best when I am on a team." Additionally, questions about how an applicant would react in specific job-related situations and about person-job fit are included. After the candidates complete the questions, hiring managers are sent a report complete with a color-coded suggested course of action. Red means the candidate does not fit the job, yellow indicates the hiring manager should proceed with caution, and green means the candidate is likely a good fit. Because of the use of different question formats and complex scoring methods, the company contends that faking answers to the questions of the software is not easy because it is difficult for candidates to predict the desired profile.
Matching candidates to jobs has long been viewed as a key way of ensuring high performance and low turnover in the workplace, and advances in computer technology are making it easier and more efficient to assess candidate-job fit. Companies using such technology are cutting down the time it takes to hire people, and it is estimated that using such technologies lowers their turnover by 10%-30%.
Case written by [citation redacted per publisher request]. Based on information from Berta, D. (2002, February 25). Industry increases applicant screening amid labor surplus, security concerns. Nation's Restaurant News, 36(8), 4; Frauenheim, E. (2006, March 13). Unicru beefs up data in latest screening tool. Workforce Management, 85(5), 9-10; Frazier, M. (2005, April). Help wanted. Chain Store Age, 81(4), 37-39; Haaland, D. E. (2006, April 17). Safety first: Hire conscientious employees to cut down on costly workplace accidents. Nation's Restaurant News, 40(16), 22-24; Overholt, A. (2002, February). True or false? You're hiring the right people. Fast Company, 55, 108-109; Rafter, M. V. (2005, May). Unicru breaks through in the science of "smart hiring." W

management with a concern for the effects of HRM practices on firm performance.
The role of HR is changing. Previously considered a support function, HR is now becoming a strategic partner in helping a company achieve its goals. A strategic approach to HR means going beyond the administrative tasks like payroll processing. Instead, managers need to think more broadly and deeply about how employees will contribute to the company's success.
HR as a Strategic Partner
Strategic human resource management (SHRM)1 is not just a function of the HR department—all managers and executives need to be involved because the role of people is so vital to a company's competitive advantage.Becker, B. E., & Huselid, M. A. (2006). Strategic human resources management: Where do we go from here? Journal of Management, 32(6): 898-925. In addition, organizations that value their employees are more profitable than those that do not.Huselid, M. A. (1995). The impact of human resource management practices on turnover, productivity, and corporate financial performance. Academy of Management Journal, 38, 635-672; Pfeffer, J. (1998). The human equation: Building profits by putting people first. Boston: Harvard Business School Press; Pfeffer, J., & Veiga, J. F. (1999). Putting people first for organizational success. Academy of Management Executive, 13, 37-48; Welbourne, T., & Andrews, A. (1996). Predicting performance of initial public offering firms: Should HRM be in the equation? Academy of Management Journal, 39, 910-911. Research shows that successful organizations have several things in common, such as providing employment security, engaging in selective hiring, using self-managed teams, being decentralized, paying well, training employees, reducing status differences, and sharing information.Pfeffer, J., & Veiga, J. F. 1999. Putting people first for organizational success. Academy of Management Executive, 13, 37-48. When organizations enable, develop, and motivate human capital, they improve accounting profits as well as shareholder value in the process.Brian E., Becker, B. E., Huselid, M. A., & Ulrich, D. (2002). Six key principles for measuring human c
performance in your organization. University of Maryland Working Paper. The most successful organizations manage HR as a strategic asset and measure HR performance in terms of its strategic impact.
Here are some questions that HR should be prepared to answer in this new world.Ulrich, D. (1998). Delivering results. Boston: Harvard Business School Press.
• Competence: To what extent does our company have the required knowledge, skills, and abilities to implement its strategy?
• Consequence: To what extent does our company have the right measures, rewards, and incentives in place to align people's efforts with the company strategy?
• Governance: To what extent does our company have the right structures, communications systems and policies to create a high- performing organization?
• Learning and Leadership: To what extent can our company respond to uncertainty and learn and adapt to change quickly?
The Importance of Human Capital
Employees provide an organization's human capital2. Your human capital is the set of skills that you have acquired on the job, through training and experience, and which increase your value in the marketplace. The Society of Human Resource Management's Research Quarterly defined an organization's human capital as follows: "A company's human capital asset is the collective sum of the attributes, life experience, knowledge, inventiveness, energy and enthusiasm that its people choose to invest in their work."Weatherly, L. (2003, March). Human capital—the elusive asset; measuring and managing human capital: A strategic imperative for HR. Research Quarterly, Society for Human Resource Management. Retrieved June 1, 2003, from http://www.shrm.org/research/quarterly/0301capital.pdf.
Focus on Outcomes
Unfortunately, many HR managers are more effective in the technical or operational aspects of HR than they are in the strategic, even though the strategic aspects have a much larger effect on the company's success.Huselid, M. A., Jackson, S. E., & Schuler, R. S. (1997). Technical and strategic human resource management effectiveness as determinants of firm performance. Academy of Management Journal, 40(1), 171-188. In the past, HR professionals focused on compliance to rules, such as those set by the federal government, and they tracked simple metrics like the number of employees hired or the number of hours of training delivered. The new principles of management, however, require a focus on outcomes and results, no
just numbers and compliance. Just as lawyers count how many cases they've won—not just how many words they used—so, too must HR professionals track how employees are using the skills they've learned to attain goals, not just how many hours they've spent in training.Ulrich, D. (1998.) Delivering results. Boston: Harvard Business School Press.
John Murabito, executive vice president and head of HR and Services at Cigna, says that HR executives need to understand the company's goals and strategy and then provide employees with the skills needed. Too often, HR execs get wrapped up in their own initiatives without understanding how their role contributes to the business. That is dangerous, because when it comes to the HR department, "anything that is administrative or transactional is going to get outsourced," Murabito says. Marquez, J. (2007, September 10). On the front line: A quintet of 2006's highest-paid HR leaders discuss how they are confronting myriad talent management challenges as well as obstacles to being viewed by their organizations as strategic business partners. Workforce Management, 86(5), 22. Indeed, the number of HR outsourcing contracts over $25 million has been increasing, with 2,708 active contracts under way in 2007.TPI Counts 2700+ Outsourcing Contracts. (2007, December). Retrieved January 30, 2009, from http://www.sharedxpertise.org/file/ 230/trends--research.html. For example, the Bank of America outsourced its HR administration to Arinso. Arinso will provide timekeeping, payroll processing, and payroll services for 10,000 Bank of America employees outside the U.S.HRO Europe, August 23, 2006. Retrieved January 30, 2009, from http://www.hroeurope.com. To avoid outsourcing, HR needs to stay relevant and accept accountability for its business results. In short, the people strategy needs to be fully aligned with the company's business strategy and keep the focus on outcomes.
Key Elements of HR
Beyond the basic need for compliance with HR rules and regulations, the four key elements of HR are summarized in the following figure. In high-performing companies, each element of the HR system is designed to reflect best practice and to maximize employee performance. The different parts of the HR system are strongly aligned with company goals.

Selection and Placement
When hiring, acquaint prospective new hires with the nature of the jobs they will be expected to fulfill. This includes explaining the technical competencies needed (for example, collecting statistical data) and defining behavioral competencies. Behavioral competencies may have a customer focus, such as the ability to show empathy and support of customers' feelings and points of view, or a work management focus, such as the ability to complete tasks efficiently or to know when to seek guidance.
In addition, make the organization's culture clear by discussing the values that underpin the organization—describe your organization's "heroes." For example, are the heroes of your company the people who go the extra mile to get customers to smile? Are they the people who toil through the night to develop new code? Are they the ones who can network and reach a company president to make the sale? By sharing such stories of company heroes with your potential hires, you'll help reinforce what makes your company unique. This, in turn, will help the job candidates determine whether they'll fit into your organization's culture.
Job Design
Design jobs that involve doing a whole piece of work and are challenging but doable. Job design3 refers to the process of putting together various elements to form a job, bearing in mind organizational and individual worker requirements, as well as considerations of health, safety, and ergonomics. Train employees to have the knowledge and skills to perform all parts of their job and give them the authority and accountability to do so.Lawler, E. (1992). The ultimate advantage. San Francisco: Jossey-Bass. Job enrichment is important for retaining your employees.
One company that does training right is Motorola. As a global company, Motorola operates in many countries, including China. Operating in China presents particular challenges in terms of finding and hiring skilled employees. In a recent survey conducted by the American Chamber of Commerce in Shanghai, 37% of U.S.-owned enterprises operating in China said that recruiting skilled employees was their biggest operational problem.Lane K., & Pollner, F. (2008, August 15). How to address China's growing talent shortage. McKinsey Quarterly, 17-25. Indeed, more companies cited HR as a problem than cited regulatory concerns, bureaucracy, or infringement on intellectual property rights. The reason is that Chinese universities do not turn out candidates with the skills that multinational companies need. As a result, Motorola has created its own training and development programs to bridge the gap. For example, Motorola's China Accelerated Management Program is designed for local managers. Another program, Motorola's Management Foundation program, helps train managers in areas such as communication and problem solving. Finally, Motorola offers a high-tech MBA program in partnership with Arizona State University and Tsinghua University so that top employees can earn an MBA in- house.Lane K., & Pollner, F. (2008, August 15). How to address China's growing talent shortage. McKinsey Quarterly, 36-41. Such programs are tailor-made to the low-skilled but highly motivated Chinese employees.
Compensation and Rewards
Evaluate and pay people based on their performance, not simply for showing up on the job. Offer rewards for skill development and organizational performance, emphasizing teamwork, collaboration, and responsibility for performance. Help employees identify new skills to develop so that they can advance and achieve higher pay and rewards. Compensation systems that include incentives, gainsharing, profit-sharing, and skill-based pay reward employees who learn new skills and put those skills to work for the organization. Employees who are trained in a broad range of skills and problem solving are more likely to grow on the job and feel more satisfaction. Their training enables them to make more valuable contributions to the company, which, in turn, gains them higher rewards and greater commitment to the company.Barnes, W. F. (2001). The challenge of

implementing and sustaining high performance work systems in the United States: An evolutionary analysis of I/N Tek and Kote. PhD dissertation, University of Notre Dame. The company likewise benefits from employees' increased flexibility, productivity, and commitment.
When employees have access to information and the authority to act on that information, they're more involved in their jobs and more likely to make the right decision and take the necessary actions to further the organization's goals. Similarly, rewards need to be linked to performance, so that employees are naturally inclined to pursue outcomes that will gain them rewards and further the organization's success at the same time.
Diversity Management
Another key to successful SHRM in today's business environment is embracing diversity. In past decades, "diversity" meant avoiding discrimination against women and minorities in hiring. Today, diversity goes far beyond this limited definition; diversity management involves actively appreciating and using the differing perspectives and ideas that individuals bring to the workplace. Diversity is an invaluable contributor to innovation and problem-solving success. As James Surowiecki shows in The Wisdom of Crowds, the more diverse the group in terms of expertise, gender, age, and background, the more ability the group has to avoid the problems of groupthink.Surowiecki. J. (2005). The wisdom of crowds. New York: Anchor Books. Diversity helps company teams to come up with more creative and effective solutions. Teams whose members have complementary skills are often more successful because members can see one another's blind spots. Members will be more inclined to make different kinds of mistakes, which means that they'll be able to catch and correct those mistakes.

Interestingly, however, techniques that were developed
to achieve productivity breakthroughs in
manufacturing can be applied to talent management.
For example, it is expensive to develop all talent
internally; training people takes a long time and
requires accurate predictions about which skill will be
needed. Such predictions are increasingly difficult to
make in our uncertain world. Therefore, rather than
developing everyone internally, companies can hire
from the outside when they need to tap specific skills. In
manufacturing, this principle is known as "make or
buy." In HR, the solution is to make and buy; that is, to train some people and to hire others from the external marketplace. In this case, "making" an employee means hiring a person who doesn't yet have all the needed skills to fulfill the role, but who can be trained ("made") to develop them. The key to a successful "make" decision is to distinguish between the high-potential employees who don't yet have the skills but who can learn them from the mediocre employees who merely lack the skills. The "buy" decision means hiring an employee who has all the necessary skills and experience to fulfill the role from day one. The "buy" decision is useful when it's too difficult to predict exactly which skills will be needed in the future.Buhler, Patricia M. (2008, March). Managing in the new millennium; succession planning: Not just for the c suite. Supervision, 69(3), 19-23.
Another principle from manufacturing that works well in talent management is to run smaller batch sizes. That is, rather than sending employees to 3-year-long training programs, send them to shorter programs more frequently. With this approach, managers don't have to make the training decision so far in advance. They can wait to decide exactly which skills employees will learn closer to the time the skill is needed, thus ensuring that employees are trained on the skills they'll actually use.
Attracting the Right Workers to the Organization
Winning the war for talent means more than simply attracting workers to your company. It means attracting the right workers—the ones who will be enthusiastic about their work. Enthusiasm for the job requires more than having a good attitude about receiving good pay and benefits—it means that an employee's goals and aspirations also match those of the company. Therefore, it's important to identify employees' preferences and mutually assess how well they align with the company's strategy. To do this, the organization must first be clear about the type of employee it wants. Companies already do this with customers: marketing executives identify specific segments of the universe of buyers to target for selling products. Red Bull, for example, targets college-age consumers, whereas SlimFast goes for adults of all
ages who are overweight. Both companies are selling beverages but to completely different consumer segments. Similarly, companies need to develop a profile of the type of workers they want to attract. Do you want entrepreneurial types who seek autonomy and continual learning, or do you want team players who enjoy collaboration, stability, and structure? Neither employee type is inherently "better" than another, but an employee who craves autonomy may feel constrained within the very same structure in which a team player would thrive.
Earlier, we said that it was important to "mutually assess" how well employees' preferences aligned with the company's strategy. One-half of "mutual" refers to the company, but the other half refers to the job candidates. They also need to know whether they'll fit well into the company. One way to help prospective hires make this determination is to describe to them the "signature experience" that sets your company apart. As Tamara Erickson and Lynda Gratton define it, your company's signature experience is the distinctive practice that shows what it's really like to work at your company.Erickson, T., & Gratton, L. (2007, March). What it means to work here. Harvard Business Review, 23-29.
For example, here are the signature experiences of two companies, Whole Foods and Goldman Sachs: At Whole Foods, team-based hiring is a signature experience—employees in each department vote on whether a new employee will be retained after a 4-week trial period. This demonstrates to potential hires that Whole Foods is all about collaboration. In contrast, Goldman Sachs's signature experience is multiple one-on-one interviews. The story often told to prospective hires is of the MBA student who went through 60 interviews before being hired. This story signals to new hires that they need to be comfortable meeting endless new people and building networks across the company. Those who enjoy meeting and being interviewed by so many diverse people are exactly the ones who will fit into Goldman's culture.
The added benefit of hiring workers who match your organizational culture and are engaged in their work is that they will be less likely to leave your company just to get a higher salary.
Keeping Star Employees
The war for talent stems from the approaching shortage of workers. As we mentioned earlier in this chapter, the millions of baby boomers reaching retirement age are leaving a gaping hole in the U.S. workforce. What's more, workers are job-hopping more frequently than in the past. According to the U.S. Bureau of Labor Statistics, the average job tenure has dropped from 15 years in 1980 to 4 years in 2007. As a manager, therefore, you need to give your employees
reasons to stay with your company. One way to do that is to spend time talking with employees about their career goals. Listen to their likes and dislikes so that you can help them use the skills they like using or develop new ones they wish to acquire.Kaye, B. (2008). Love 'em or lose 'em. San Francisco: Barrett-Koehler.
Don't be afraid to "grow" your employees. Some managers want to keep their employees in their department. They fear that helping employees grow on the job will mean that employees will outgrow their job and leave it.Field, A. (2008, June). Do your stars see a reason to stay? Harvard Management Update,. But, keeping your employees down is a sure way to lose them. What's more, if you help your employees advance, it'll be easier for you to move up because your employees will be better able to take on the role you leave behind.
In some cases, your employees may not be sure what career path they want. As a manager, you can help them identify their goals by asking questions such as:
• What assignments have you found most engaging?
• Which of your accomplishments in the last six months made you
proudest?
• What makes for a great day at work?Butler, T. (2007). Getting unstuck.
Boston: Harvard Business School Press.
What Employees Want
Employees want to grow and develop, stretching their capabilities. They want projects that engage their heads as well as their hearts, and they want to connect with the people and things that will help them achieve their professional goals.Deloitte Research. (2007). It's Do you know where your talent is? why acquisition and retention strategies don't work. Geneva, Switzerland: Deloitte- Touch Research Report. Here are two ways to provide this to your employees: First, connect people with mentors and help them build their networks. Research suggests that successful managers dedicate 70% more time to networking activities and 10% more time to communication than their less successful counterparts.Luthans, F., Yodgetts, R., & Rosenkrantz, S. (1988). Real managers. Cambridge: Ballinger. What makes networks special? Through networks, people energize one another, learn, create, and find new opportunities for growth. Second, help connect people with a sense of purpose. Focusing on the need for purpose is especially important for younger workers, who rank meaningful work and challenging experiences at the top of their job search lists.Sheahan, P. (2006). Generation Y: Thriving (and surviving) with generation Y at work. Victoria, Australia: Hardie Grant Book

Benefits of Good Talent Management
Global consulting firm McKinsey & Company conducted a study to identify a possible link between a company's financial performance and its success in managing talent. The survey results, reported in May 2008, show that there was indeed a relationship between a firm's financial performance and its global talent management practices. Three talent management practices in particular correlated highly with exceptional financial performance:
• Creating globally consistent talent evaluation processes.
• Achieving cultural diversity in a global setting.
• Developing and managing global leaders.McKinsey global-talent-
management survey of over 450 executives. (2007, December). Retrieved January 30, 2009, from http://www.mckinseyquarterly.com/ article_print.aspx?L2=18&L3=31&ar=2140.
The McKinsey survey found that companies achieving scores in the top third in any of these three areas had a 70% chance of achieving financial performance in the top third of all companies.Guthridge, M., & Komm, A. B. (1988, May). Why multinationals struggle to manage talent. McKinsey Quarterly, 19-25.
Let's take a closer look at what each of these three best practices entail. First, having consistent talent evaluation means that employees around the world are evaluated on the same standards. This is important because it means that if an employee from one country transfers to another, his or her manager can be assured that the employee has been held to the same level of skills and standards. Second, having cultural diversity means having employees who learn something about the culture of different countries, not just acquire language skills. This helps bring about open-mindedness across cultures. Finally, developing global leaders means rotating employees across different cultures and giving them international experience. Companies who do this best also have policies of giving managers incentives to share their employees with other units.

International Staffing and Placement
In our increasingly global economy, managers need to decide between using expatriates or hiring locals when staffing international locations. On the surface, this seems a simple choice between the firm-specific expertise of the expatriate and the cultural knowledge of the local hire. In reality, companies often fail to consider the high probability and high cost of expatriates failing to adapt and perform in their international assignments.
For example, cultural issues can easily create misunderstandings between expatriate managers and employees, suppliers, customers, and local government officials. At an estimated cost of $200,000 per failed expatriate, international assignment decisions are often made too lightly in many companies. The challenge is to overcome the natural tendency to hire a well-known, corporate insider over an unknown local at the international site. Here are some indications to use to determine whether an expatriate or a local hire would be best.
Managers may want to choose an expatriate when:
• Company-specific technology or knowledge is important.
• Confidentiality in the staff position is an issue.
Figure 16.7
Living and working in another place, such as São Paulo, Brazil, can be exciting, rewarding, and challenging.
© 2010 Jupiterimages Corporation
• There is a need for speed (assigning an expatriate is usually faster than hiring a local).
• Work rules regarding local workers are restrictive.
• The corporate strategy is focused on global integration/
Managers may want to staff the position with a local hire when:
• The need to interact with local customers, suppliers, employees, or officials is paramount.
• The corporate strategy is focused on multidomestic/market-oriented operations.
• Cost is an issue (expatriates often bring high relocation/travel costs).
• Immigration rules regarding foreign workers are restrictive.
• There are large cultural distances between the host country and
candidate expatriates.Weems, Rebecca E. (1998). Ethnocentric staffing and international assignments: a transaction cost theory approach. Presentation at the Academy of Management Conference, August 9-12
.

Setting Pay Levels
When setting pay levels for positions, managers should make sure that the pay level is fair relative to what other employees in the position are being paid. Part of the pay level is determined by the pay level at other companies. If your company pays substantially less than others, it's going to be the last choice of employment unless it offers something overwhelmingly positive to offset the low pay, such as flexible hours or a fun, congenial work atmosphere. Besides these external factors, companies conduct a job evaluation10 to determine the internal value of the job—the more vital the job to the company's success, the higher the pay level. Jobs are often ranked alphabetically—"A" positions are those on which the company's value depends, "B" positions are somewhat less important in that they don't deliver as much upside to the company, and "C" positions are those of least importance—in some cases, these are outsourced.
The most vital jobs to one company's success may not be the same as in other companies. For example, information technology companies may put top priority on their software developers and programmers, whereas for retailers such as Nordstrom, the "A" positions are those frontline employees who provide
personalized service. For an airline, pilots would be a "B" job because, although they need to be well trained, investing further in their training is unlikely to increase the airline's profits. "C" positions for a retailer might include back office bill processing, while an information technology company might classify customer service as a "C" job.
When setting reward systems, it's important to pay for what the company actually hopes to achieve. Steve Kerr, vice president of corporate management at General Electric, talks about the common mistakes that companies make with their reward systems, such as saying they value teamwork but only rewarding individual effort. Similarly, companies say they want innovative thinking or risk taking, but they reward people who "make the numbers."Kerr, S. (1995). On the folly of rewarding for A, while hoping for B. Academy of Management Executive, 9(1), 25-37. If companies truly want to achieve what they hope for, they need payment systems aligned with their goals. For example, if retention of star employees is important to your company, reward managers who retain top talent. At Pepsico, for instance, one- third of a manager's bonus is tied directly to how well the manager did at developing and retaining employees. Tying compensation to retention makes managers accountable.Field, A. (2008, June). Do your starts see a reason to stay? Harvard Management Update, 5-6.
Pay for Performance
As its name implies, pay for performance11 ties pay directly to an individual's performance in meeting specific business goals or objectives. Managers (often together with the employees themselves) design performance targets to which the employee will be held accountable. The targets have accompanying metrics that enable employees and managers to track performance. The metrics can be financial indicators, or they can be indirect indicators such as customer satisfaction or speed of development. Pay-for- performance schemes often combine a fixed base salary with a variable pay component (such as bonuses or stock options) that vary with the individual's performance.
Innovative Employee Recognition Programs
Figure 16.8
Regardless of country, pay is a critical managerial control.
© 2010 Jupiterimages Corporation
11. When pay is tied directly to an individual's performance in meeting specific business goals or objectives.
In addition to regular pay structures and systems, companies often create special programs that reward exceptional employee performance. For example, the financial software company Intuit, Inc., instituted a program called Spotlight. The
Pay Structures for Groups and Teams
So far, we have discussed pay in terms of individual compensation, but many employers also use compensation systems that reward all of the organization's employees as a group or various groups and teams within the organization. Let's examine some of these less traditional pay structures.
Gainsharing
Sometimes called profit sharing, gainsharing12 is a form of pay for performance. In gainsharing, the organization shares the financial gains with employees. Employees receive a portion of the profit achieved from their efforts. How much they receive is determined by their performance against the plan. Here's how gainsharing works: First, the organization must measure the historical (baseline) performance. Then, if employees help improve the organization's performance on those measures, they share in the financial rewards achieved. This sharing is typically determined by a formula.
The effectiveness of a gainsharing plan depends on employees seeing a relationship between what they do and how well the organization performs. The larger the size of the organization, the harder it is for employees to see the effect of their work. Therefore, gainsharing plans are more effective in companies with fewer than 1,000 people.Lawler, E. (1992). The ultimate advantage. San Francisco: Jossey-Bass. Gainsharing success also requires the company to have good performance metrics in place so that employees can track their process. The gainsharing plan can only be successful if employees believe and see that if they perform better, they will be paid
more. The pay should be given as soon as possible after the performance so that the tie between the two is established.
When designing systems to measure performance, realize that performance appraisals need to focus on quantifiable measures. Designing these measures with input from the employees helps make the measures clear and understandable to employees and increases their buy-in that the measures are reasonable.
Team-Based Pay
Many managers seek to build teams, but face the question of how to motivate all the members to achieve the team's goals. As a result, team-based pay is becoming increasingly accepted. In 1992, only 3% of companies had team-based pay. By 1996, 9% did, and another 39% were planning such systems.Flannery, T. (1996). People, performance, and pay (p. 117). New York: Free Press. With increasing acceptance and adoption come different choices and options of how to structure team-based pay. One way to structure the pay is to first identify the type of team you have—parallel, work, project, or partnership—and then choose the pay option that is most appropriate to that team type. Let's look at each team type in turn and the pay structures best suited for each.
Parallel teams are teams that exist alongside (parallel to) an individual's daily job. For example, a person may be working in the accounting department but also be asked to join a team on productivity. Parallel teams are often interdepartmental, meet part time, and are formed to deal with a specific issue. The reward for performance on this team would typically be a merit increase or a recognition award (cash or noncash) for performance on the team.
A project team is likewise a temporary team, but it meets full time for the life of the project. For example, a team may be formed to develop a new project and then disband when the new product is completed. The pay schemes appropriate for this type of team include profit sharing, recognition rewards, and stock options. Team members evaluate each other's performance.
A partnership team is formed around a joint venture or strategic alliance. Here, profit sharing in the venture is the most common pay structure. Finally, with the work team, all individuals work together daily to accomplish their jobs. Here, skill-based pay and gainsharing are the payment schemes of choice, with team members evaluating one another's performance.

more. The pay should be given as soon as possible after the performance so that the tie between the two is established.
When designing systems to measure performance, realize that performance appraisals need to focus on quantifiable measures. Designing these measures with input from the employees helps make the measures clear and understandable to employees and increases their buy-in that the measures are reasonable.
Team-Based Pay
Many managers seek to build teams, but face the question of how to motivate all the members to achieve the team's goals. As a result, team-based pay is becoming increasingly accepted. In 1992, only 3% of companies had team-based pay. By 1996, 9% did, and another 39% were planning such systems.Flannery, T. (1996). People, performance, and pay (p. 117). New York: Free Press. With increasing acceptance and adoption come different choices and options of how to structure team-based pay. One way to structure the pay is to first identify the type of team you have—parallel, work, project, or partnership—and then choose the pay option that is most appropriate to that team type. Let's look at each team type in turn and the pay structures best suited for each.
Parallel teams are teams that exist alongside (parallel to) an individual's daily job. For example, a person may be working in the accounting department but also be asked to join a team on productivity. Parallel teams are often interdepartmental, meet part time, and are formed to deal with a specific issue. The reward for performance on this team would typically be a merit increase or a recognition award (cash or noncash) for performance on the team.
A project team is likewise a temporary team, but it meets full time for the life of the project. For example, a team may be formed to develop a new project and then disband when the new product is completed. The pay schemes appropriate for this type of team include profit sharing, recognition rewards, and stock options. Team members evaluate each other's performance.
A partnership team is formed around a joint venture or strategic alliance. Here, profit sharing in the venture is the most common pay structure. Finally, with the work team, all individuals work together daily to accomplish their jobs. Here, skill-based pay and gainsharing are the payment schemes of choice, with team members evaluating one another's performance.
Pay Systems That Reward Both Team and Individual Performance
There are two main theories of how to reward employees. Nancy KatzKatz, N. R. (1998). Promoting a healthy balance between individual achievement and team success: The impact of hybrid reward systems. Presented at the Do Rewards Make a Difference? session at the Academy of Management Conference, August 9-12. characterized the theories as two opposing camps. The first camp advocates rewarding individual performance, through plans such as commissions-sales schemes and merit-based-pay. The claim is that this will increase employees' energy, drive, risk taking, and task identification. The disadvantages of rewarding individual performance are that employees will cooperate less, that high performers may be resented by others in the corporation, and that low performers may try to undermine top performers.
The second camp believes that organizations should reward team performance, without regard for individual accomplishment. This reward system is thought to bring the advantages of increased helping and cooperation, sharing of information and resources, and mutual-respect among employees. The disadvantages of team- based reward schemes are that they create a lack of drive, that low performers are "free riders," and that high performers may withdraw or become tough cops.
Katz sought to identify reward schemes that achieve the best of both worlds. These hybrid pay systems would reward individual and team performance, promoting excellence at both levels. Katz suggested two possible hybrid reward systems. The first system features a base rate of pay for individual performance that increases when the group reaches a target level of performance. In this reward system, individuals have a clear pay-for-performance incentive, and their rate of pay increases when the group as a whole does well. In the second hybrid, the pay-for- performance rate also increases when a target is reached. Under this reward system, however, every team member must reach a target level of performance before the higher pay rate kicks in. In contrast with the first hybrid, this reward system clearly incentivizes the better performers to aid poorer performers. Only when the poorest performer reaches the target does the higher pay rate kick in.

The direct relationships with people in the interpersonal roles place the manager in a unique position to get information. Thus, the three informational roles are primarily concerned with the information aspects of managerial work. In the monitor role, the manager receives and collects information. In the role of disseminator, the manager transmits special information into the organization. The top-level manager receives and transmits more information from people outside the organization than the supervisor. In the role of spokesperson, the manager disseminates the organization's information into its environment. Thus, the top-level manager is seen as an industry expert, while the supervisor is seen as a unit or departmental expert.

The unique access to information places the manager at the center of organizational decision making. There are four decisional roles managers play. In the entrepreneur role, the manager initiates change. In the disturbance handler role, the manager deals with threats to the organization. In the resource allocator role, the manager chooses where the organization will expend its efforts. In the negotiator role, the manager negotiates on behalf of the organization. The top-level manager makes the decisions about the organization as a whole, while the supervisor makes decisions about his or her particular work unit.

The supervisor performs these managerial roles but with different emphasis than higher managers. Supervisory management is more focused and short-term in outlook. Thus, the figurehead role becomes less significant and the disturbance handler and negotiator roles increase in importance for the supervisor. Since leadership permeates all activities, the leader role is among the most important of all roles at all levels of management.

So what do Mintzberg's conclusions about the nature of managerial work mean for you? On the one hand, managerial work is the lifeblood of most organizations because it serves to choreograph and motivate individuals to do amazing things. Managerial work is exciting, and it is hard to imagine that there will ever be a shortage of demand for capable, energetic managers. On the other hand, managerial work is necessarily fast-paced and fragmented, where managers at all levels express the opinion that they must process much more information and make more decisions than they could have ever possibly imagined. So, just as the most successful organizations seem to have well-formed and well-executed strategies, there is also a strong need for managers to have good strategies about the way they will approach their work. This is exactly what you will learn through principles of management.

The principles of management are drawn from a number of academic fields, principally, the fields of leadership, entrepreneurship, and strategy.

Leadership
If management is defined as getting things done through others, then leadership should be defined as the social and informal sources of influence that you use to inspire action taken by others. It means mobilizing others to want to struggle toward a common goal. Great leaders help build an organization's human capital, then motivate individuals to take concerted action. Leadership also includes an understanding of when, where, and how to use more formal sources of authority and power, such as position or ownership. Increasingly, we live in a world where good management requires good leaders and leadership. While these views about the importance of leadership are not new (see "Views on Managers Versus Leaders"), competition among employers and countries for the best and brightest, increased labor mobility (think "war for talent" here), and hypercompetition puts pressure on firms to invest in present and future leadership capabilities.

P&G provides a very current example of this shift in emphasis to leadership as a key principle of management. For example, P&G recruits and promotes those individuals who demonstrate success through influence rather than direct or coercive authority. Internally, there has been a change from managers being outspoken and needing to direct their staff, to being individuals who electrify and inspire those around them. Good leaders and leadership at P&G used to imply having followers, whereas in today's society, good leadership means followership and bringing out the best in your peers. This is one of the key reasons that P&G has been consistently ranked among the top 10 most admired companies in the United States for the last three years, according to Fortune magazine.Ranking of Most Admired Firms for 2006, 2007, 2008. http://www.fortune.com (accessed October 15, 2008).

Whereas P&G has been around for some 170 years, another winning firm in terms of leadership is Google, which has only been around for little more than a decade. Both firms emphasize leadership in terms of being exceptional at developing people. Google has topped Fortune's 100 Best Companies to Work for the past two years. Google's founders, Sergey Brin and Larry Page, built a company around the idea that work should be challenging and the challenge should be fun.http://www.google.com/intl/en/corporate/tenthings.html (accessed October 15, 2008). Google's culture is probably unlike any in corporate America, and it's not because of the ubiquitous lava lamps throughout the company's headquarters or that the company's chef used to cook for the Grateful Dead. In the same way Google puts users first when it comes to online service, Google espouses that it puts employees first when it comes to daily life in all of its offices. There is an emphasis on team achievements and pride in individual accomplishments that contribute to the company's overall success. Ideas are traded, tested, and put into practice with a swiftness that can be dizzying. Observers and employees note that meetings that would take hours elsewhere are frequently little more than a conversation in line for lunch and few walls separate those who write the code from those who write the checks. This highly communicative environment fosters a productivity and camaraderie fueled by the realization that millions of people rely on Google results. Leadership at Google amounts to a deep belief that if you give the proper tools to a group of people who like to make a difference, they will.

Entrepreneurship
It's fitting that this section on entrepreneurship follows the discussion of Google. Entrepreneurship is defined as the recognition of opportunities (needs, wants, problems, and challenges) and the use or creation of resources to implement innovative ideas for new, thoughtfully planned ventures. Perhaps this is obvious, but an entrepreneur is a person who engages in the process of entrepreneurship. We describe entrepreneurship as a process because it often involves more than simply coming up with a good idea—someone also has to convert that idea into action. As an example of both, Google's leaders suggest that its point of distinction "is anticipating needs not yet articulated by our global audience, then meeting them with products and services that set new standards. This constant dissatisfaction with the way things are is ultimately the driving force behind the world's best search engine." http://www.google.com/intl/en/corporate/tenthings.html (accessed October 15, 2008).

Entrepreneurs and entrepreneurship are the catalysts for value creation. They identify and create new markets, as well as foster change in existing ones. However, such value creation first requires an opportunity. Indeed, the opportunity-driven nature of entrepreneurship is critical. Opportunities are typically characterized as problems in search of solutions, and the best opportunities are big problems in search of big solutions. "The greater the inconsistencies in existing service and quality, in lead times and in lag times, the greater the vacuums and gaps in information and knowledge, the greater the opportunities." J. Timmons, The Entrepreneurial Process (New York: McGraw-Hill, 1999), 39. In other words, bigger problems will often mean there will be a bigger market for the product or service that the entrepreneur creates. We hope you can see why the problem-solving, opportunity-seeking nature of entrepreneurship is a fundamental building block for effective principles of management.

Strategy
When an organization has a long-term purpose, articulated in clear goals and objectives, and these goals and objectives can be rolled up into a coherent plan of action, then we would say that the organization has a strategy. It has a good or even great strategy when this plan also takes advantage of unique resources and capabilities to exploit a big and growing external opportunity. Strategy then, is the central, integrated, externally-oriented concept of how an organization will achieve its objectives.D. Hambrick and J. Fredrickson, "Are You Sure You Have a Strategy?" Academy of Management Executive 15, no. 4 (2001): 2. Strategic management is the body of knowledge that answers questions about the development and implementation of good strategies.

Strategic management is important to all organizations because, when correctly formulated and communicated, strategy provides leaders and employees with a clear set of guidelines for their daily actions. This is why strategy is so critical to the principles of management you are learning about. Simply put, strategy is about making choices: What do I do today? What shouldn't I be doing? What should my organization be doing? What should it stop doing?

Synchronizing Leadership, Entrepreneurship, and Strategy
You know that leadership, entrepreneurship, and strategy are the inspiration for important, valuable, and useful principles of management. Now you will want to understand how they might relate to one another. In terms of principles of management, you can think of leadership, entrepreneurship, and strategic management as answering questions about "who," "what," and "how." Leadership helps you understand who helps lead the organization forward and what the critical characteristics of good leadership might be. Entrepreneurial firms and entrepreneurs in general are fanatical about identifying opportunities and solving problems—for any organization, entrepreneurship answers big questions about "what" an organization's purpose might be. Finally, strategic management aims to make sure that the right choices are made—specifically, that a good strategy is in place—to exploit those big opportunities.

One way to see how leadership, entrepreneurship, and strategy come together for an organization—and for you—is through a recent (disguised) job posting from Craigslist. Look at the ideal candidate characteristics identified in the Help Wanted ad—you don't have to look very closely to see that if you happen to be a recent business undergrad, then the organization depicted in the ad is looking for you. The posting identifies a number of areas of functional expertise for the target candidate. You can imagine that this new position is pretty critical for the success of the business. For that reason, we hope you are not surprised to see that, beyond functional expertise, this business seeks someone with leadership, entrepreneurial, and strategic orientation and skills. Now you have a better idea of what those key principles of management involve.

Planning
Planning is the function of management that involves setting objectives and determining a course of action for achieving those objectives. Planning requires that managers be aware of environmental conditions facing their organization and forecast future conditions. It also requires that managers be good decision makers.

Planning is a process consisting of several steps. The process begins with environmental scanning which simply means that planners must be aware of the critical contingencies facing their organization in terms of economic conditions, their competitors, and their customers. Planners must then attempt to forecast future conditions. These forecasts form the basis for planning.

Planners must establish objectives, which are statements of what needs to be achieved and when. Planners must then identify alternative courses of action for achieving objectives. After evaluating the various alternatives, planners must make decisions about the best courses of action for achieving objectives. They must then formulate necessary steps and ensure effective implementation of plans. Finally, planners must constantly evaluate the success of their plans and take corrective action when necessary.

There are many different types of plans and planning.

Strategic planning involves analyzing competitive opportunities and threats, as well as the strengths and weaknesses of the organization, and then determining how to position the organization to compete effectively in their environment. Strategic planning has a long time frame, often three years or more. Strategic planning generally includes the entire organization and includes formulation of objectives. Strategic planning is often based on the organization's mission, which is its fundamental reason for existence. An organization's top management most often conducts strategic planning.

Tactical planning is intermediate-range (one to three years) planning that is designed to develop relatively concrete and specific means to implement the strategic plan. Middle-level managers often engage in tactical planning.

Operational planning generally assumes the existence of organization-wide or subunit goals and objectives and specifies ways to achieve them. Operational planning is short-range (less than a year) planning that is designed to develop specific action steps that support the strategic and tactical plans.

Organizing
Organizing is the function of management that involves developing an organizational structure and allocating human resources to ensure the accomplishment of objectives. The structure of the organization is the framework within which effort is coordinated. The structure is usually represented by an organization chart, which provides a graphic representation of the chain of command within an organization. Decisions made about the structure of an organization are generally referred to as organizational design decisions.

Organizing also involves the design of individual jobs within the organization. Decisions must be made about the duties and responsibilities of individual jobs, as well as the manner in which the duties should be carried out. Decisions made about the nature of jobs within the organization are generally called "job design" decisions.

Organizing at the level of the organization involves deciding how best to departmentalize, or cluster, jobs into departments to coordinate effort effectively. There are many different ways to departmentalize, including organizing by function, product, geography, or customer. Many larger organizations use multiple methods of departmentalization.

Organizing at the level of a particular job involves how best to design individual jobs to most effectively use human resources. Traditionally, job design was based on principles of division of labor and specialization, which assumed that the more narrow the job content, the more proficient the individual performing the job could become. However, experience has shown that it is possible for jobs to become too narrow and specialized. For example, how would you like to screw lids on jars one day after another, as you might have done many decades ago if you worked in company that made and sold jellies and jams? When this happens, negative outcomes result, including decreased job satisfaction and organizational commitment, increased absenteeism, and turnover.

Recently, many organizations have attempted to strike a balance between the need for worker specialization and the need for workers to have jobs that entail variety and autonomy. Many jobs are now designed based on such principles as empowerment, job enrichment and teamwork. For example, HUI Manufacturing, a custom sheet metal fabricator, has done away with traditional "departments" to focus on listening and responding to customer needs. From company-wide meetings to team huddles, HUI employees know and understand their customers and how HUI might service them best.http://www.huimfg.com/abouthui-yourteams.aspx (accessed October 15, 2008).

Leading
Leading involves the social and informal sources of influence that you use to inspire action taken by others. If managers are effective leaders, their subordinates will be enthusiastic about exerting effort to attain organizational objectives.

The behavioral sciences have made many contributions to understanding this function of management. Personality research and studies of job attitudes provide important information as to how managers can most effectively lead subordinates. For example, this research tells us that to become effective at leading, managers must first understand their subordinates' personalities, values, attitudes, and emotions.

Studies of motivation and motivation theory provide important information about the ways in which workers can be energized to put forth productive effort. Studies of communication provide direction as to how managers can effectively and persuasively communicate. Studies of leadership and leadership style provide information regarding questions, such as, "What makes a manager a good leader?" and "In what situations are certain leadership styles most appropriate and effective?"

Controlling
Controlling involves ensuring that performance does not deviate from standards. Controlling consists of three steps, which include (1) establishing performance standards, (2) comparing actual performance against standards, and (3) taking corrective action when necessary. Performance standards are often stated in monetary terms such as revenue, costs, or profits but may also be stated in other terms, such as units produced, number of defective products, or levels of quality or customer service.

The measurement of performance can be done in several ways, depending on the performance standards, including financial statements, sales reports, production results, customer satisfaction, and formal performance appraisals. Managers at all levels engage in the managerial function of controlling to some degree.

The managerial function of controlling should not be confused with control in the behavioral or manipulative sense. This function does not imply that managers should attempt to control or to manipulate the personalities, values, attitudes, or emotions of their subordinates. Instead, this function of management concerns the manager's role in taking necessary actions to ensure that the work-related activities of subordinates are consistent with and contributing toward the accomplishment of organizational and departmental objectives.

Effective controlling requires the existence of plans, since planning provides the necessary performance standards or objectives. Controlling also requires a clear understanding of where responsibility for deviations from standards lies. Two traditional control techniques are budget and performance audits. An audit involves an examination and verification of records and supporting documents. A budget audit provides information about where the organization is with respect to what was planned or budgeted for, whereas a performance audit might try to determine whether the figures reported are a reflection of actual performance. Although controlling is often thought of in terms of financial criteria, managers must also control production and operations processes, procedures for delivery of services, compliance with company policies, and many other activities within the organization.

The management functions of planning, organizing, leading, and controlling are widely considered to be the best means of describing the manager's job, as well as the best way to classify accumulated knowledge about the study of management. Although there have been tremendous changes in the environment faced by managers and the tools used by managers to perform their roles, managers still perform these essential functions.

Introduction
When comparing management with leadership, it is important to recognize that they are not one and the same. While the basic outcomes of the two at times seem to overlap, the process by which they are achieved is actually quite different - management and leadership are in fact two very distinct functions in any organization.
The Manager
The key focus of a manager is to control and direct systems, structures, and resources. Managers use formal, rational methods for establishing control over their subordinates. Employees follow a manager's direction in exchange for being paid a salary, which is known as a transactional relationship. They establish direction by upholding the status quo and reinforcing the rules that have already been established. Often, a manager focuses on short term goals and looks for ways to avoid or mitigate risks. The ultimate goal of a manager is to establish standardization, resulting in improved efficiency.
The Leader
The fundamental focus of a leader is to motivate people. They use inspiration to stir the hearts of their followers and create passion for their vision. People will voluntarily follow a leader due to their charismatic personality. A leader typically spearheads a new direction for a group, which often has long-range goals and targeted outcomes. Concerned with doing the right thing, they will challenge the current status quo and take risks to accomplish their goals. Using a transformational style, a leader promises extrinsic benefits to a follower, such as becoming a better person or being a better teammate.
The Differences
The most important distinction between management and leadership is in their approach. As discussed earlier, managers and leaders share many similar functions, but the ways in which they achieve a goal is very different. To improve your
Saylor URL: www.saylor.org/bus208 Sub-subunit 1.2.4 The Saylor Foundation

Managers
We tend to think about managers based on their position in an organization. This tells us a bit about their role and the nature of their responsibilities. The following figure summarizes the historic and contemporary views of organizations with respect to managerial roles.S. Ghoshal and C. Bartlett, The Individualized Corporation: A Fundamentally New Approach to Management (New York: Collins Business, 1999). In contrast to the traditional, hierarchical relationship among layers of management and managers and employees, in the contemporary view, top managers support and serve other managers and employees (through a process called empowerment), just as the organization ultimately exists to serve its customers and clients. Empowerment is the process of enabling or authorizing an individual to think, behave, take action, and control work and decision making in autonomous ways.

In both the traditional and contemporary views of management, however, there remains the need for different types of managers. Top managers are responsible for developing the organization's strategy and being a steward for its vision and mission. A second set of managers includes functional, team, and general managers. Functional managers are responsible for the efficiency and effectiveness of an area, such as accounting or marketing. Supervisory or team managers are responsible for coordinating a subgroup of a particular function or a team composed of members from different parts of the organization. Sometimes you will hear distinctions made between line and staff managers.

A line manager leads a function that contributes directly to the products or services the organization creates. For example, a line manager (often called a product, or service manager) at Procter & Gamble (P&G) is responsible for the production, marketing, and profitability of the Tide detergent product line. A staff manager, in contrast, leads a function that creates indirect inputs. For example, finance and accounting are critical organizational functions but do not typically provide an input into the final product or service a customer buys, such as a box of Tide detergent. Instead, they serve a supporting role. A project manager has the responsibility for the planning, execution, and closing of any project. Project managers are often found in construction, architecture, consulting, computer networking, telecommunications, or software development.

A general manager is someone who is responsible for managing a clearly identifiable revenue-producing unit, such as a store, business unit, or product line. General managers typically must make decisions across different functions and have rewards tied to the performance of the entire unit (i.e., store, business unit, product line, etc.). General managers take direction from their top executives. They must first understand the executives' overall plan for the company. Then they set specific goals for their own departments to fit in with the plan. The general manager of production, for example, might have to increase certain product lines and phase out others. General managers must describe their goals clearly to their support staff. The supervisory managers see that the goals are met.
The Nature of Managerial Work
Managers are responsible for the processes of getting activities completed efficiently with and through other people and setting and achieving the firm's goals through the execution of four basic management functions: planning, organizing, leading, and controlling. Both sets of processes utilize human, financial, and material resources.

Of course, some managers are better than others at accomplishing this! There have been a number of studies on what managers actually do, the most famous of those conducted by Professor Henry Mintzberg in the early 1970s.H. Mintzberg, The Nature of Managerial Work (New York: Harper & Row, 1973). One explanation for Mintzberg's enduring influence is perhaps that the nature of managerial work has changed very little since that time, aside from the shift to an empowered relationship between top managers and other managers and employees, and obvious changes in technology, and the exponential increase in information overload.

After following managers around for several weeks, Mintzberg concluded that, to meet the many demands of performing their functions, managers assume multiple roles. A role is an organized set of behaviors, and Mintzberg identified 10 roles common to the work of all managers. As summarized in the following figure, the 10 roles are divided into three groups: interpersonal, informational, and decisional. The informational roles link all managerial work together. The interpersonal roles ensure that information is provided. The decisional roles make significant use of the information. The performance of managerial roles and the requirements of these roles can be played at different times by the same manager and to different degrees, depending on the level and function of management. The 10 roles are described individually, but they form an integrated whole.

The three interpersonal roles are primarily concerned with interpersonal relationships. In the figurehead role, the manager represents the organization in all matters of formality. The top-level manager represents the company legally and socially to those outside of the organization. The supervisor represents the work group to higher management and higher management to the work group. In the liaison role, the manager interacts with peers and people outside the organization. The top-level manager uses the liaison role to gain favors and information, while the supervisor uses it to maintain the routine flow of work. The leader role defines the relationships between the manager and employees.

The requirements of managers

Since management is task-oriented, managers need to be able to focus on details. The four core qualities of great managers are:

Rational - A good manager is able to look at things rationally and apply logical thinking when it comes to solving problems and setting goals. Since the objective is to focus on the effective accomplishment of goals, the manager has to understand the realities he or she is facing. Rational thinking is essential for allocating the resources and setting the objectives for the team.
Analytical - Ability to analyze details and find the connections between processes can boost the way a manager operates. Analytical thinking can help identify objectives and the proper use of resources.
Ability to solve problems - A manager must also be good at solving problems. If the team encounters a problem, the management must be at the core of finding a solution. This requires a cool head, an intelligent mind and quick thinking.
Perseverance - The task of supervising, directing and managing resources is not an easy feat and efficient management puts a lot of pressure on the manager. Therefore, a manager must be able to stand tall under pressure and keep calm even when things go wrong.
A position of management requires a lot of skill from the person. It's a position where intelligence and persistency are rewarded.

The requirements of leaders

On the other hand, leadership is more people-oriented and this means a leader must possess plenty of emotional intelligence. The core characteristics of a leader are:

Charisma-Since a leader needs to inspire the subordinates to follow his or her cause, charisma is an important characteristic. Charisma helps the leader to create a positive environment inspiring others to take action. Since a leader is not supposed to force or intimidate people to perform the required tasks, charismatic skills can enhance the leader's chances of getting followers involved.
Innovative - A leader must also show plenty of innovative skills. Leadership is about transformation at its essence and change always requires the ability to think outside of the box. A leader needs to be able to look at problems, but also at existing situations, and find out different ways to change things around.
Visionary - Similar to being innovative, a leader must be a visionary. A strong and realistic vision guarantees followers listen to the leader and work hard towards the goal. A leader won't be able to inspire the subordinates by laying out plans that aren't challenging, transforming and inspiring. A true leader must have the ability to see beyond the future.
Flexible - Leadership requires plenty of flexibility because you are dealing with people not tasks. Since people are at the core of the approach, the leader must be able to accommodate and respond to situations that might not have been expected. Since persuasion should be part of the leader's skill set, the leader also needs to be flexible in his or her approach to solving conflict situations.
The position of leadership is a position that requires a lot of technical, but also personal skill. The leader's ability to influence and empower people is at the core of the position. Nonetheless, a leader also needs to be able to come up with transformative ideas to guarantee followers look up to him or her.

Management will be in charge of planning and researching objectives and processes; ensuring the right people are in the right positions; measuring and supervising the performance; and finding solutions when things go wrong. Management is also in charge of allocating the resources for completing the tasks between subordinates. The sources can range from financial to technological, for example. Management is a position of authority, in which the authority typically comes from the position. This could be due to the hierarchy or the seniority of the organizational structure. In essence, the management has subordinates who work for them and are expected to follow the management when it comes to completing the tasks.

Management could also be viewed as a human action - a process of accomplishing a specific goal using any available resources. If thought in this way, management could also be about self-management. Overall, management is perfectly described by the graph below, which details the core aspects of management: planning, organizing, directing, and controlling.
What about leadership? The Oxford Dictionary defines leadership as, "the action of leading a group of people or an organization, or the ability to do this". The definition already shows the major difference between management and leadership. While management talked about directing the process to achieve a goal, leadership is more interested in how to move a group of people towards a goal. In its essence, leadership is about influencing and motivating the specific group of people. The leader is concerned about supporting the team during the process and empowering the team, rather than simply supervising that everything is done as previously planned.
John Kotter said in the Guardian interview that leadership is "about aligning people to the vision, that means buy-in and communication, motivation and inspiration". Therefore, instead of focusing on the effectiveness of the processes used, leadership wants to focus on the personnel and to ensure they are giving their best to boost the efficiency of the processes.

In short, the focus is on the people and not the handling of the work or the processes. The emphasis can be on creating the right environment to achieve objectives, such as empowering employees and enhancing innovative thinking, rather than the concrete provision of resources, such as providing enough equipment to do the work efficiently.

Furthermore, authority in leadership is not at the heart of the process. Leadership doesn't have subordinates in the sense that leading is always a voluntary decision and action. Leadership needs followers; subordinates who have bought-in on the vision laid out by the leadership and subordinates who are motivated by the leader and therefore, want to help him or her work towards this vision. Although leadership requires authority, it doesn't get the authority from a title or a specific position, but because the subordinates and other stakeholders hand it out voluntarily.

Leadership can be defined in a number of different ways, depending on the leadership style. The YouTube video below by Doug Lennick is an example of defining leadership:

As we've discussed, management is task-oriented and therefore, the focus tends to be on achieving the objectives as efficiently as possible. Management focuses on running the existing operations and doing it as smoothly as possible. In essence, the focus is on maintaining the status quo. There is no desire to switch processes or look beyond the processes and goals that are currently working.

Management generally has a set mission, which often deals with increasing profitability or productivity. These guide the management's decision-making and task setting - processes are used based on their effectiveness. When it comes to changing a process or switching roles around, the key consideration is always on the impact the change will have on the efficiency of the mission. For example, management hires people based on their ability to fulfill a specific role. Subordinates and processes are always geared towards ultimate efficiency, which moves the team or the organization towards profitability or productivity.

Since management's role is to find the most effective processes in order to achieve the mission, the focus is not on trialing new approaches or experimenting with different things. Once management finds a process that works, then it will stick to it as long as the process can be proven more effective than another method. Management is not about revolutionizing things around, but continuing on the safe path towards the objectives. Management sees that it is the processes what make the system work, not the people.

The traditional approach to management shows it to be machine-like. Management is in charge of a machine, with the processes and subordinates each representing a function or a part of the machine. Therefore, the ultimate mission for management is to ensure each part is working well; as the management knows that if one part fails, the whole mission can fail. But this also creates the worldview that the machine is the most important part, not any individual part. When a part fails, management will replace it or fix it as soon as possible.

The manager can't risk keeping the machine from running and therefore the focus is on ensuring it's back running quickly, not whether the part itself is fixed. Consider a subordinate is not performing the role as efficiently as possible. The manager notices it's causing problems and therefore will take the person aside to check what's the issue. The manager's focus is on getting the work done, whether by providing the person with more resources or by getting someone else to perform the role.

On the other hand, leadership's ultimate mission is about transformation. The objective is to adapt to changing circumstances and to change the organization around. Leadership isn't interested about status quo, but achieving something new - working towards greater success and recognition. The emphasis is not on profit or productivity, but empowerment and innovation. It's not to say, profit isn't important, but it's more of a by-product following success. The vision itself is more about specific values and approaches to work and the industry. The vision is laid out with the leader's personal values in mind, with the values resonating with the organization's values.

As leadership is people-oriented in its approach, the mission is more people-focused as well. The focus is on helping people to adjust to changing circumstances and empower them to perform better. In leadership, the machine - or the processes - is not the key to success, but the people making the machine work. Therefore, leadership sees that the functions of the machine can always be changed according to the abilities of the people. In terms of hiring subordinates, a leader is not necessarily as focused on the technical skills and the ability to perform the tasks, but the person's approach to work and whether they are willing to work towards the mission.

Leadership is interested in the ideas and values the subordinates can provide for the team, not just their effectiveness in getting things done. Since the mission is focused on transforming and changing things around, leadership is always on the lookout for new ideas.

Management's approach is driven by the emphasis on results. As mentioned earlier, the whole objective is to achieve results (profitability, productivity) as efficiently as possible. Therefore, the management emphasizes achieving the objectives in everything the team does. The focus in on creating a framework consisting of strategies, policies and processes, which will help the team get close to the objectives fast and without encountering problems. The management spends a lot of time concerned with the framework and honing it to its perfection. Once the objectives are set, management will spend time figuring out the best people and the most efficient methods for achieving these goals.

During the process, the management team will ensure the procedures are followed and problems in the framework are solved swiftly. As we've discussed above, the manager's job is often to ensure the right people are placed in positions, which suit their skills the best. Management is in a sense about empowering people through the soliciting of employees in their most suitable position. The management team wants people to achieve results efficiently and therefore, a level of consultation with the employees is always part of creating the framework. The important thing to note about it is that the manager doesn't have to facilitate all the different views.

Due to the emphasis being on results, the management framework is also risk-averse. Management is not about testing out new processes or taking a risk with the strategy - the emphasis is on frameworks that are proven and effective. The framework is not experimental and subordinates are not allowed to step outside of the established processes, especially without consulting with the management. The risk-averse nature stems also from the kind of authority management uses.

Under the managerial system, authority is always in the hands of the manager and the management team. Therefore, the subordinates are not able to make decisions or adjust the framework even slightly without consulting the management first. Since the authority and control are placed in the hands of the management, the system decreases risk even further. The probability of risk goes down because the management is in control of every aspect of the framework.

eadership tries to achieve objectives through a different framework. The focus is not on established, rigid processes, strategies and policies, but rather on discovery and accomplishment. Instead of focusing on the result, the objectives are about achieving something new (discovering a new technique, empowering subordinates, achieving new sales records).

In effect, leadership looks at everything as a challenge to innovate. Even when something is not a major problem for the organization, leadership is still interested in checking whether it could be done differently or improved in some way. The framework for leaders is not about establishing a set of policies to guide work, but to create a system where ideas are examined and re-evaluated to find out innovations. As mentioned earlier, the framework is built on constant transformation.

Furthermore, leadership emphasizes motivation and commitment, with the employees picked according to how involved they are with the project. The emphasis is not necessarily on the current skillset, but rather on providing personal growth opportunities to each employee. A leader wouldn't simply ask, "What can you do now?" but focuses on "What could you do if given these tools?"

Since change and innovation are at the hearth of leadership and its approach to achieving objectives, the system is more risk-taking. Leadership doesn't steer away from risk, but instead embraces it - without some risk-taking, change is harder to achieve successfully. There is an element of conscious risk-taking, as leaders will understand new ideas and innovations can occasionally turn out wrong. But not all risk is purposely sought after. Leadership doesn't mean taking unnecessary risks or gambling away the sustainability of the organization. Nonetheless, the transformative nature will inherently leave the system with higher risk than management. In a way, leadership also requires more risk taking on the part of the employee.

A leader's authority is always based on how trustworthy the subordinates find the vision
. Whilst management enjoys authority based on the title or the position, leadership is built on mutual trust in the leader's vision. Subordinates who choose to follow a leader and participate in the new approach are also taking a risk.

To conclude the main differences of the two systems in terms of achieving objectives and taking risks:

Management is...
... Focused on results
... Looking answers to how and when

... Short-term

... Risk-averse

Leadership is... ... Focused on achievements and change
... Looking answers to what and why

... Long-term

... Risk-taking

The final major area of difference between management and leadership relates to their specific approaches to dealing with subordinates. The major divergence in communication is based on how the manager and the leader view the subordinate. Whereas a leader will consider the subordinates as followers and equal members of the team, the manager subscribes to a hierarchy of power. Subordinates under management are employees under the manager; there to perform the tasks as the management tells them, following the guidelines. Management has a strict authority and power structure, with the management on top and the subordinates below. Naturally, the management can, depending on their position in the organization, be beneath a senior management team. Nonetheless, management is always in a position of power over its subordinates.

Having the power and authority concentrated in the hands of the manager influences the approach to communication. Management doesn't generally involve subordinates in the decision-making or planning process, especially in terms of guaranteeing the subordinates any real effective way to influence the process.
Feedback channels are established, but these tend not to focus on things such as ideas on changing the existing framework. If feedback is sought, it focuses on improvements of the existing frameworks or ensuring the subordinates are aware of the tasks, which they must perform. In essence, the management is about communicating instructions, making it a rather one-sided discussion.

On the other hand, under a leadership system, the authority is much more open, with different leadership styles delegating authority among the subordinates to a varying degree. Since subordinates are viewed more equally, the leader doesn't shy away from feedback or input. In fact, leadership is eager to identify the subordinates who are motivated to put themselves out there and learn while working towards the set objective. The communication structure is a two-way process, where the leader listens to the subordinates and their ideas into account. This doesn't mean the subordinates necessarily have actual decision-making power or that all the ideas are implemented, but at least leadership provides them more opportunities to voice their opinion. Management is about telling the subordinate "This is what you have to do"; while leadership is about showing the subordinate, "This is what we should do".

Another essential part of the interaction is the methodology the approaches use in order to motivate the subordinates. Both styles can be understood in the context of Abraham Maslow's Hierarchy of Needs. The motivational theory presents an idea in which human needs are depicted as layers within a pyramid, with each stage creating a new layer for motivation.
The pyramid has three layers: basic needs, psychological needs, and self-fulfillment needs.

The lower levels of the pyramid drive management's approach to motivation. The idea is that subordinates are looking for job security to fulfil their most basic needs and therefore, fear of rejection keeps them motivated. Management keeps employees involved through the fear of punishment, with the security of a job providing enough motivation to keep working. Subordinates are thought to be rather disengaged from the rewards of the work, but put crudely: only show up to get the paycheck.

On the other hand, leadership feels people are using careers as a way to meet the higher-level needs. By providing the subordinate the chance to self-actualization, leaders can motivate and inspire the subordinate. Therefore, challenging the subordinate to enhance their own skills and understanding, and providing them with opportunities for personal growth, the leader can help them fulfill the higher-level needs and keep them motivated to work towards the common vision.

Furthermore, as previously discussed, the emphasis is on finding the best people to perform the pre-determined roles. Since the framework is the key to success, the processes are set and the management needs to fill these specific roles, not add something new to the team. Therefore, the ability to perform the tasks and the character fit to the role at hand is at the core of the hiring process.

On the other hand, leadership is looking more towards the characteristics of the person and whether he or she is a value-based fit, instead of a specific set of skills.
For the leader, the person's motivation and willingness to follow the vision are keys in determining whether the person should fit the team.

Management...
... Views subordinates as employees
... Communicates in a telling style

.... Delegates tasks with authority

... Motivates with punishment and intimidation

... Emphasizes skills and fit for the role

Leadership... ... Views subordinates as followers
... Communicates through discussion

... Delegates authority

... Motivates with empowerment and personal development

... Emphasizes value and business culture match

An important step in the MBO approach is the monitoring and evaluation of the performance and progress of each employee against the established objectives. Ideally, if the employees themselves are involved in setting goals and deciding their course of action, they are more likely to fulfill their obligations.

Steps in Management by Objectives Process

1. Define organization goals

Setting objectives is not only critical to the success of any company, but it also serves a variety of purposes. It needs to include several different types of managers in setting goals. The objectives set by the supervisors are provisional, based on an interpretation and evaluation of what the company can and should achieve within a specified time.

2. Define employee objectives

Once the employees are briefed about the general objectives, plan, and the strategies to follow, the managers can start working with their subordinates on establishing their personal objectives. This will be a one-on-one discussion where the subordinates will let the managers know about their targets and which goals they can accomplish within a specific time and with what resources. They can then share some tentative thoughts about which goals the organization or department can find feasible.

3. Continuous monitoring performance and progress

Though the management by objectives approach is necessary for increasing the effectiveness of managers, it is equally essential for monitoring the performance and progress of each employee in the organization.

4. Performance evaluation

Within the MBO framework, the performance review is achieved by the participation of the managers concerned.

5. Providing feedback

In the management by objectives approach, the most essential step is the continuous feedback on the results and objectives, as it enables the employees to track and make corrections to their actions. The ongoing feedback is complemented by frequent formal evaluation meetings in which superiors and subordinates may discuss progress towards objectives, leading to more feedback.

6. Performance appraisal

Performance reviews are a routine review of the success of employees within MBO organizations.

Benefits of Management by Objectives

Management by objectives helps employees appreciate their on-the-job roles and responsibilities.
The Key Result Areas (KRAs) planned are specific to each employee, depending on their interest, educational qualification, and specialization.
The MBO approach usually results in better teamwork and communication.
It provides the employees with a clear understanding of what is expected of them. The supervisors set goals for every member of the team, and every employee is provided with a list of unique tasks.
Every employee is assigned unique goals. Hence, each employee feels indispensable to the organization and eventually develops a sense of loyalty to the organization.
Managers help ensure that subordinates' goals are related to the objectives of the organization.

Limitations of Management by Objectives

Management by objectives often ignores the organization's existing ethos and working conditions.
More emphasis is given on goals and targets. The managers put constant pressure on the employees to accomplish their goals and forget about the use of MBO for involvement, willingness to contribute, and growth of management.
The managers sometimes over-emphasize the target setting, as compared to operational issues, as a generator of success.
The MBO approach does not emphasize the significance of the context wherein the goals are set. The context encompasses everything from resource availability and efficiency to relative buy-in from the leadership and stakeholders.
Finally, there is a tendency for many managers to see management by objectives as a total system that can handle all management issues once installed. The overdependence may impose problems on the MBO system that it is not prepared to tackle, and that frustrates any potentially positive effects on the issues it is supposed to deal with.

Key Takeaways

Management by Objectives (MBO) is an approach adopted by managers to control their employees by implementing a series of concrete goals that both the employee and the organization aim to accomplish in the immediate future and work accordingly to achieve.
The MBO approach is implemented to ensure that the employees get a clear understanding of their roles and responsibilities, along with expectations, so that they can understand the relation of their activities to the overall success of the organization.
If the management by objectives strategy is not adequately set, decided upon, and controlled by organizations, self-centered workers can be likely to misinterpret results, wrongly portraying the achievement of short-term, narrow-minded goals.

Benefits of Management by Objectives

In addition to the fact that goal-orientation of management promotes a sense of motivation among the people within the organization, MBO has certain other benefits which are narrated as under:

Improves Management
Objectives cannot be established without planning, and results-oriented planning is the only kind that makes sense. MBO forces managers to think about planning for results, rather than merely planning work or activities.

In order to make objectives realistic, Management by Objectives also requires that managers think of the way they will accomplish results and the resources and assistance they will require.

Encourages Personal Commitment
MBO encourages employees to commit themselves to their goals because they have before them clearly defined objectives.

Moreover, the fact that they often participate in goal- setting, improves their commitment to work. As a matter of fact, people become enthusiastic when they control their own fate.

Clarifies Organization
MBO forces management to clarify organizational roles and structures. So far as possible, organizational positions are built around the key results expected of the people occupying them.

Moreover, the companies that embark on MBO programs can easily discover deficiencies in their organization and take the necessary steps to rectify.

Device for Organizational Control and Systematic Evaluation
It serves as a device for organizational control integration. MBO helps in making a more systematic evaluation of performance.

Develops Effective Control
There is no better incentive for self- control and no better way to know the standards for control than having a set of clear goals.

When each and every employee knows what to achieve, control becomes very easy and automatic.

Improving Productivity
Management by Objectives helps in improving productivity as the management team concentrates on the important task of reducing costs.

Motivating the Subordinates
It stimulates the subordinates' motivation.

Personal Satisfaction
It provides a greater opportunity to managers for personal satisfaction on account of participation in objective setting and rational performance appraisal.

Locating Weak and Problem Areas
It helps in locating weak and problem areas because of improved communication and organization structure.

Weaknesses of Management by Objectives

With all its advantages, a system of MBO may also have a number of weaknesses, arising out of the inability in applying the MBO concepts judiciously.

The weaknesses are;

Failure to teach the philosophy of MBO which is built on concepts of self-control and self-direction that are aimed at making managers as professionals.
Failure to give proper guidelines to goal setters by making them well aware of the corporate goals in advance.
Difficulty in setting verifiable goals that help in the process of control.
Emphasis on short-run goals often jeopardizes the achievement of the long-term objectives.
The danger of inflexibility also causes a serious problem since managers may strive for goals that have been made obsolete by revised corporate objectives, changed premises, or modified policies.
Limitations of MBO

Although MBO is generally taken as the panacea for all the problems of an organization, it is not without weaknesses or limitations. The following are the limitations of Management by Objectives;

MBO cannot be implemented effectively on account of the difficulty in setting verifiable objectives.
The open atmosphere for appropriate objective-setting is absent because of differences in the status of subordinates.
Managers may not get time to do even their normal work as MBO involves much paperwork and holding many meetings.
There is a tendency on the part of the managers to emphasize short-term objectives and to become more precise in objective setting and accomplishment.
MBO is a philosophy of managing an organization in a new way. However, many managers fail to understand and appreciate this new approach.
MBO represents the danger of inflexibility in the organization, particularly when the objectives need to be altered. In a dynamic environment, a particular objective may not be valid forever.
The essence of MBO is participative goal setting, choosing the course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employee's actual performance with the standards set.

The MBO should be defined that Management By Objectives is a management system in which specific performance goals are jointly determined by employees and their managers, progress toward accomplishing those goals is periodically reviewed and rewards are allocated on the basis of this progress.

Managerial Responsibilities: The Task
Identify aims and vision for the group, purpose, and direction - define the activity (the task)
Identify resources, people, processes, systems and tools (inc. financials, communications, IT)
Create the plan to achieve the task - deliverables, measures, timescales, strategy and tactics
Establish responsibilities, objectives, accountabilities and measures, by agreement and delegation
Set standards, quality, time and reporting parameters
Control and maintain activities against parameters
Monitor and maintain overall performance against plan
Report on progress towards the group's aim
Review, re-assess, adjust plan, methods and targets as necessary
Managerial Responsibilities: The Group
Establish, agree and communicate standards of performance and behaviour
Establish a style, culture and approach of the group - soft skill elements
Monitor and maintain discipline, ethics, integrity and focus on objectives
Anticipate and resolve group conflict, struggles or disagreements
Assess and change as necessary the balance and composition of the group
Develop team-working, cooperation, morale and team spirit
Develop the collective maturity and capability of the group - progressively increase group freedom and authority
Encourage the team towards objectives and aims - motivate the group and provide a collective sense of purpose
Identify, develop and agree on the team- and project-leadership roles within the group
Enable, facilitate and ensure effective internal and external group communications
Identify and meet group training needs
Give feedback to the group on overall progress; consult with, and seek feedback and input from the group
Managerial Responsibilities: The Individuals
Understand the team members as individuals - personality, skills, strengths, needs, aims and fears
Assist and support individuals - plans, problems, challenges, highs and lows
Identify and agree on appropriate individual responsibilities and objectives
Give recognition and praise to individuals - acknowledge effort and good work
Where appropriate reward individuals with extra responsibility, advancement and status
Identify, develop and utilise each individual's capabilities and strengths
Train and develop individual team members
Develop individual freedom and authority

Core Functions of Action Centered Leadership
Importantly as well, Adair set out these core functions of leadership and says they are vital to the Action Centered Leadership model:

Planning - seeking information, defining tasks, setting aims
Initiating - briefing, task allocation, setting standards
Controlling - maintaining standards, ensuring progress, ongoing decision-making
Supporting - individuals' contributions, encouraging, team spirit, reconciling, morale
Informing - clarifying tasks and plans, updating, receiving feedback and interpreting
Evaluating - feasibility of ideas, performance, enabling self-assessment
The Action Centred Leadership model, therefore, does not stand alone, it must be part of an integrated approach to managing and leading, and also which should include a strong emphasis on applying these principles through training.

Action Centered Leadership™
The Three Circles Model: Balancing Task, Team and Individual Focus

As a team leader, you likely tackle many competing demands. Sometimes, though, the task, problem or person that "shouts loudest" grabs your attention, while other important areas are sidelined or ignored.

It can be hard to step back and think about your full range of responsibilties, and to consider the specific actions that you need to take to achieve your goals.

The Action Centered Leadership™ model can make this difficult juggling act a little easier. It identifies three key areas that leaders need to focus on, and offers a framework for keeping them in balance. And it may even help you to avoid dropping any balls along the way!

In this article, we look at Action Centered Leadership in more detail, and explore how you can apply it to your own situation.

What Is Action Centered Leadership (ACL)?

Action Centered Leadership (ACL, or the "Three Circles Model") is a popular and influential tool that was first published in 1973 by leadership expert, John Adair.

It highlights the core actions that you must take to lead your team effectively, rather than the leadership style that you choose. These actions are grouped into three areas:

Task: the actions that you take to achieve a goal.
Team: your actions at the group level, to encourage effective teamwork and group cohesion.
Individual: actions that address each team member's unique needs.

Develop Your Core Leadership Skills

Action Centered Leadership can be applied to every level of an organization, not just to the top tier. However, Adair and his colleague David Faraday state that, for the model to be effective, leaders at different levels need to develop particular leadership skills.

Team leaders need planning and briefing skills. They must define tasks and exert control. They should support and motivate their team members, and evaluate their performance effectively. Team leaders should lead by example .

Operational leaders need to influence and inform their teams, interpret goals and results, and initiate plans and projects. They must have the skills necessary to implement decisions, to network, and to plan successions .

Strategic leaders need all of the above skills, and more. They "make things happen," and provide direction and inspiration. Ideally, they work toward Transformational Leadership . This means that they understand - and articulate - the organization's mission , and how the work of each team and individual feeds into the organization's wider goals. They must build partnerships and develop potential leaders in order to be successful.

Achieve the Task

As a leader, your role is to direct a team toward achieving its goal. Here are some of the actions you can take to do this:

Identify and define your team's tasks, priorities and purpose, and communicate them clearly.
Create plans - including timescales, measures, strategies, and deliverables, as appropriate.
Define "success."
Allocate resources, tools and processes, and ensure that everyone understands them.
Set and explain quality, timeliness and reporting standards.
Control the pace of work.
Monitor and evaluate performance.
Review and report on progress.
Build the Team

These actions can enable your team to work more effectively as a unit:

Set group behavior and performance standards.
Make sure that everyone has the necessary skills, training and ability.
Monitor team relationships, and manage conflict .
Facilitate and encourage effective communication.
Motivate the group.
Encourage team building, and foster team spirit.
Give feedback on the team's performance.
Identify the team's culture, and its working style.
Alter group composition.
Develop Individuals

It's essential to understand the unique needs, fears and motivations of each of your team members. Here are some strategies for doing so:

Clearly define each person's role and tasks.
Support individuals to plan their own development.
Allocate time with each team member for assessment, and identify their personality and behavioral styles, their strengths and weaknesses, their aims and needs, and any special skills or experience they can bring to the team.
Encourage quieter team members to contribute, and control more enthusiastic individuals.
Offer coaching and support.
Give regular, constructive feedback .
Praise and reward individuals for their contribution.

Adapt the Model to Your Situation

The real-world demands of leadership mean that you won't always be able to balance your efforts across the three areas equally. In fact, the most appropriate balance varies according to the situation, and over time.

You might, for example, have a new team member who requires more coaching. You may lead a completely new group, and need to focus on team formation . Or, you might have a crucial deadline that gives you no choice but to focus solely on the task.

When all three areas of responsibility compete for your attention, you'll have to prioritize . Start by considering your organization's goals. But remember that there may be times when the needs of the team or an individual can take precedence - for example, when a team member suffers ill health or a bereavement, or when the team experiences a major setback, such as a catastrophic data loss.

Use your judgment to decide what balance of responsibilities works best at that point in time, and adjust your focus accordingly. The key is to limit your change in focus to the short term, and to restore the balance when the matter is resolved.

Adair noted the following 8 key functions for which team leaders are responsible. (Examples are given in brackets)

Defining the task, (by setting clear objectives through SMART goals)
Planning, (by looking at alternative ways to achieve the task and having contingency plans in case of problems)
Briefing the team, (by creating the right team climate, fostering synergy, and making the most of each individual through knowing them well)
Controlling what happens, (by being efficient in terms of getting maximum results from minimum resources)
Evaluating results, (by assessing consequences and identifying how to improve performance)
Motivating individuals, (by using both external motivators such as rewards and incentives as well as eliciting internal motivators on the part of each team player)
Organising people, (by organising self and others through good time management, personal development, and delegation)
Setting an example, (by the recognition that people observe their leaders and copy what they do).

Action-Centred Leadership

This simple and practical model is figuratively based on three overlapping circles. These represent the task, the team and the individual. The model seems to endure well, probably because it is the fundamental model for describing what leaders have to do, the actions they must take whatever their working environment, in order to be effective:

Achieve the task
Build and maintain the team
Develop the individual
Task, team and individual: Adair's concept asserts that the three needs of task, team and individual are the watchwords of leadership, as people expect their leaders to help them achieve the common task, build the synergy of teamwork, and respond to individuals' needs.

The task needs work groups or organisations to come into effect because one person alone cannot accomplish it.
The team needs constant promotion and retention of group cohesiveness to ensure that it functions efficiently. The team functions on the 'united we stand, divided we fall' principle.
The individual's needs are the physical ones (salary) and the psychological ones of recognition; sense of purpose and achievement; status; and the need to give and receive from others in a work environment.
For Adair, the task, team and individual needs overlap as follows:

Achieving the task builds the team and satisfies the individuals
If the team needs are not met - if the team lacks cohesiveness - then performance of the task is impaired and individual satisfaction is reduced
If individual needs are not met the team will lack cohesiveness and performance of the task will be impaired
Adair's view is that leadership exists at three different levels:

Team leadership of teams of 5 to 20 people
Operational leadership, where a number of team leaders report to one leader
Strategic leadership of a whole business or organisation, with overall accountability for all levels of leadership
At whatever level leadership is being exercised, Adair's model takes the view that task, team and individual needs must be constantly considered.

The strengths of the concept are that it is timeless and is independent of situation or organisational culture. A further strength of the concept is that it can help a leader to identify where he or she may be losing touch with the real needs of the group or situation.

Leadership functions: in order to fulfil the three aspects of leadership (task, team and individual) and achieve success, Adair believes that there are eight functions that must be performed and developed by the leader:

Defining the task: Individuals and teams need to have the task distilled into a clear objective that is SMART (Specific, Measurable, Achievable, Realistic and Time Constrained).
Planning: Planning requires a search for alternatives and this is best done with others in an open-minded, positive and creative way. Contingencies should be planned for and plans should be tested.
Briefing: Team briefing is viewed as a basic leadership function that is essential in order to create the right atmosphere, promote teamwork, and motivate each individual.
Controlling: Adair wrote in The Skills of Leadership that excellent leaders get maximum results with the minimum of resources. To achieve this leaders need self-control, good control systems in place and effective delegation and monitoring skills.
Evaluating: Leaders need to be good at assessing consequences, evaluating team performance, appraising and training individuals, and judging people.
Motivating: Adair distinguishes six principles for motivating others in his book Effective motivation: be motivated yourself; select people who are highly motivated; set realistic and challenging targets; remember that progress motivates; provide fair rewards; and give recognition.
Organising: Good leaders have to be able to organise themselves, their team and the organisation (including structures and processes). Leading change requires a clear purpose and effective organisation to achieve results.
Setting an example: Leaders need to set an example both to individuals and to the team as a whole. Since a bad example is noticed more than a good one, setting a good example is something that must be worked at constantly.
Adair considers that these leadership functions need to be developed and honed to constantly improve the leader's ability.

Motivating people

In many ways, Adair's ideas in the area of motivating people are in line with those of the classic motivational theorists, such as Maslow, McGregor and Herzberg.

The 50:50 rule: just as the Pareto principle (or 80:20 rule) is the ratio of the vital few and the trivial many, the Adair 50:50 rule (from his book Effective motivation) states that '50% of motivation comes from within a person, and 50% from his or her environment, especially from the leadership encountered therein'.

Adair's view is that people are motivated by a complex and varied number of different factors. So, for example, the carrot and stick approach is not dismissed by Adair, but is seen as one of the stimulus-response approaches that can be one factor among many others in motivating or influencing people's actions. For Adair, an individual's strength of motivation is affected by the expectations of outcomes from certain actions, but it is also strengthened by other factors such as the individual's preferred outcome (as demonstrated by Victor Vroom in the 1960s); conditions in the working environment; and the individual's own perceptions and fears.

Adair's 8 rules in motivating people: Adair proposes that understanding what motivates individuals to act is fundamental to engaging their interest and focusing their efforts. The will that leads to action is governed by motives, and motives are inner needs or desires that can be conscious, semi-conscious or unconscious. In The John Adair handbook of management and leadership the point is made that 'motives can also be mixed, with several clustered around a primary motive'.

Adair emphasises the importance of a motivating environment and a motivated individual. The third, crucial factor is the role of the leader who must, he believes, be completely self-motivated. In Effective motivation, eight basic rules are outlined to guide leaders in motivating people to act:

Be motivated yourself.
Select people who are highly motivated.
Treat each person as an individual.
Set realistic and challenging targets.
Remember that progress motivates.
Create a motivating environment.
Provide fair rewards.
Give recognition.
Developing a personal sense of time

Adair's view of time management accords closely with Peter Drucker's, in that he argues for the prior need to manage time in order to manage anything else. Adair was one of the first management thinkers to emphasise the critical importance of time management and its central role in focusing action and helping leaders to achieve goals. For Adair, time management is not simply about being organised or efficient, or completing certain tasks: it is about managing time with a focus on achievement. Time management should be goal-driven and results-oriented.

Success in time management should be measured by the quantity of productive work achieved, and the quality of both the work and the person's private life. Ten principles of time management given in How to manage your time are:

Develop a personal sense of time.
Identify long-term goals.
Make medium-term plans.
Plan the day.
Make the best use of your best time.
Organise office work.
Manage meetings.
Delegate effectively.
Make use of committed time.
Manage your health
Of these ten principles, developing a personal sense of time is central to Adair, again highlighting his emphasis on individual characteristics.

In perspective

It is perhaps unsurprising that there has been something of a backlash against Adair's thinking, given the pace and scale of changes in the work environment during the last twenty years. Adair's ideas were very new when they first appeared, and for many people their main value lay in the successful challenge they offered to the then-dominant Great Man theories. These theories, because they insisted that leaders were born and not made, completely undermined the possibility of training or developing people in leadership skills. Since Adair's views have been successfully established, however, he has become more of a target, with critics claiming that his approach (developed in the 1960s) has become outdated.

One major criticism of Action-Centred Leadership is that it takes little account of the flat structures that are now generally advocated as the best organisational form. Action-Centred Leadership is also criticised for being too authoritarian, applicable in a rigid, formal, military-type environment, but less relevant to the modern workplace where the leadership emphasis is on leading change, empowering, enabling, managing knowledge and fostering innovation.

Other criticisms levelled at Adair's approach include the view that his approaches are too simple, are not academically rigorous and lack real substance in that he is merely stating the obvious, common sense view. For many others, however, it is exactly this practical simplicity and clarity about what a leader should do that is so valuable - and timeless. For this reason many organisations and business schools worldwide continue teaching the Adair approach to developing leadership. For over 40 years his overlapping, three-circle model of Action-Centred Leadership has been integrated into company cultures and individuals' leadership styles, and is an established hallmark of management training for many organisations.

The continued relevance of Adair's concepts for organisations is reinforced by the re-publication of some of his key works: Leadership and motivation (2006), which was originally published in 1990 as Understanding motivation, and the The art of creative thinking (2007) first published in 1990. In addition, Leadership for innovation (2007) is a revision of his original work The challenge of innovation, which was again first published in 1990. Several more books have followed, strongly indicating the appetite for and continued importance and influence of his ideas for inspiring leaders today.

Managers Responsibilities for Achieving Tasks
Define the task - determine the vision and direction of the group.
Identify the resources (people, process, and tools) to achieve the task.
Create a plan - measurements, timescales, deadlines, tactics etc..
Establish roles and responsibilities within the team.
Delegate work to team members.
Set the standards the team must meet: reporting deadlines, quality expected etc.
Monitor, control, and maintain the overall performance against the plan.
Report on the progress the team is making towards it's objective.
Assess and then recalibrate the plan and targets as necessary.
Managers Responsibilities for Managing the Group
Establish and communicate the standards for both behaviour and performance.
Establish key soft area aspirations for the group: style, culture, ethics, etc.
Maintain discipline and the focus on objectives.
Watch for and then facilitate resolution of conflicts within the group. Additionally, you will need to watch for conflicts between the group and external parties.
Monitor the overall balance of the group. Fix gaps in the mix where appropriate.
Develop morale, team working, cooperation, and the team's spirit. Build a common sense of purpose.
Provide training to the group as appropriate.
Build the maturity and capability of the group by slowly but steadily increasing authority and freedom. Discuss and communicate with the group as this happens.
Identify and develop roles within the group.
Develop communications both within the group and externally to be appropriate, timely, and effective.
Engage with the group to give feedback to them and receive feedback from them.
Managers Responsibilities for Managing Individuals
Aim to understand the people who make up your team. Understand their personal situations, ambitions, strengths, weaknesses. You may want to use a Myers-Briggs Type Indicator or Belbin Team Roles to speed this up.
Be sensitive to personal issues.
Provide support to individuals.
Agree and communicate an individuals level of responsibility, what they are accountable for, and their targets.
Give recognition and praise to individuals. Do this liberally.
Reward individuals: a financial reward, increased status, or increased responsibility.
Work with individuals to plan how to develop their maturity and capability, through training, increased authority, increased responsibility etc.
Summary
Managers and leaders have many demands on their time. You can think of Action Centred Leadership as being a compass to help you determine where and how to spend your time so you can build a high-performance team, which delivers the right things in with the right behaviours. The Action Centred Leadership model can be applied at all levels, from CEO through program managers and project managers, and on to team lea

Adair's theory claims that leaders are responsible for three functions that are represented by three overlapping circles:

1. Achieve the task

2. Build and maintain the team

3. Develop the individual

The three circles of the theory overlap because they are reliant on each other. An individual needs the task to have a goal and something to challenge them. The task requires an entire team, not just one person and the team can only achieve each task if every individual is fully capable and performing well. Considering this from a different perspective; a poorly performing individual will have an adverse effect on team performance and an underperforming team will not complete a task effectively.

Leaders have responsibilities under each of the three functions mentioned above to ensure completion of the task that will inevitably result in a positive atmosphere and satisfied team members.

Adair suggests the following actions under each of the management activities:

Leadership responsibilities to 'achieve the task'
· Identify the aims and vision of the group as well as overall direction and purpose

· Define the objectives

· Identify resources - people, processes and/or physical tools

· Create a plan to achieve the task

· Set standards

· Monitor team and individual performance

· Report on progress - reviewing and adjusting as required

Leadership responsibilities for 'managing the team'
· Establish standards of performance and behaviour

· Establish the culture of the group early on

· Monitor and maintain integrity and focus

· Anticipate inter-group conflicts and disagreements and resolve these

· Facilitate effective internal and external communication

· Provide regular feedback

Leadership responsibilities for 'managing the individual'
· Appreciate the personality, skills, strengths, needs, aims and concerns of individual team members

· Assist individuals in their own development

· Provide recognition and praise as well as constructive criticism

· Reward superior performance

· Develop capabilities and strengths

Adair identifies eight leadership functions all leaders need to be able to perform, each of these must be constantly refined and developed:

1. Defining the task - this should be done using SMART goals (Specific, Measurable, Achievable, Realistic, Time-bound)

2. Planning - leaders should be open-minded, positive and creatively searching for alternatives

3. Briefing - team briefings by the leader are a basic and essential function to foster teamwork and motivate individuals

4. Controlling - leaders need self-control, good control systems in place and effective delegation and monitoring skills

5. Evaluating - leaders must constantly assess the consequences of actions taken, evaluate performance and appraise and train individuals

6. Motivating - Adair identifies 8 basic rules for motivating people that include setting realistic but challenging targets, creating a motivating environment and treating each person as an individual

7. Organising - good leaders must be able to organise themselves, their team and their company

8. Setting an example - the best leaders naturally set a good example for their teams, if this is forced, leaders will become complacent.

Some criticise the hierarchical approach that Adair's theory takes, claiming it does not allow for modern organisational structures that tend to be more linear. Current thinking suggests that leadership should focus on empowerment, enabling and encouraging innovation, whereas Adair takes a more traditional approach which could be seen as authoritarian.

However, others claim that the simplicity of Adair's model makes it 'timeless' and the simple, practical framework provides clarity to the role of a leader. The simplicity of Adair's ideas results in this model being relevant to leaders, irrespective of the sector they work in and the task being completed.

Successful implementation of Adair's model will enable leaders to

- Build morale

- Achieve strong results

- Improve work quality

- Develop strong teams

- Improve productivity

The main difference between contingency and situational leadership is that contingency leadership theory considers that a leader's leadership style should match the right situation, whereas situational leadership theory considers that a leader should adapt his style to the situation at hand.

Contingency approach, also known as situational approach, is a concept in management stating that there is no one universally applicable set of management principles (rules) to organizations.

Similarly, what is the situational leadership model? Situational leadership is a leadership style that has been developed and studied by Kenneth Blanchard and Paul Hersey. Situational leadership refers to when the leader or manager of an organization must adjust his style to fit the development level of the followers he is trying to influence.

Similarly, it is asked, what is the opposite of situational leadership?

Contingency and Situational approaches are the same yet opposite. They are the same because both of them stress the importance of situations; they are opposite because they hold different expectations on leaders. Situational approach believes a leader should adapt to the situation at hand.

Who is a contingency leader?

The Contingency Theory of Leadership states that a leader's effectiveness is contingent upon with how his or her leadership style matches to the situation (Leadership Theories, n.d). That is, the leader must find out what kind of leadership style and situation he or she thrives in.
Motivation and leadership are just two examples of many independent variables of the contingency theory, while productivity, turnover and absenteeism are some examples of dependent variables. Let's take a look at a real corporate example of how the contingency theory is significant to organizational behavior.
What are examples of contingencies?
noun. Contingency means something that could happen or come up depending on other occurrences. An example of a contingency is the unexpected need for a bandage on a hike. The definition of a contingency is something that depends on something else in order to happen.
Contingency Approach definition
The contingency approach is a management theory that suggests the most appropriate style of management is dependent on the context of the situation and that adopting a single, rigid style is inefficient in the long term.
How do you use contingency theory?
One can make use of the contingency theory to determine the best candidate for a given set of job requirements for effectiveness of a person in that role as by measuring a leader's LPC score and the three situational variables, one can predict whether the leader is going to be effective in a particular setting.
What is contingency management style?
A contingency approach to management is based on the theory that management effectiveness is contingent, or dependent, upon the interplay between the application of management behaviors and specific situations. In other words, the way you manage should change depending on the circumstances. One size does not fit all.
What are the three major contingency theories of leadership?
There are a number of different sub-theories that fall under the general contingency umbrella. They include: Fiedler's Contingency Theory, the Situational Leadership Theory, the Path-Goal Theory and the Decision-Making Theory. While all similar on the surface, they each offer their own distinct views on leadership.

hat are the benefits of situational leadership?
It is a more flexible approach to leadership.
It encourages successful collaboration among team members.
Adaptability is encouraged to fit past, present & future situations.
It assesses maturity levels of people within the organization.
It encourages socio-emotional support for subordinates.
What are the stages of situational leadership?
The Hershey-Blanchard model outlines four basic styles, though some discussions of leadership look at even more types. Telling or directing, selling or coaching, participating or supporting, and delegating are the four situational theory styles. Directing is a more hands-on approach.
Is situational leadership effective?
Situational leadership is an effective model of management in the modern business world. To be a top leader in the industry, you must learn to adapt your leadership style. The trick to succeeding as a leader is to find a balance between directing and delegating and supporting and enhancing the team.
How do you practice situational leadership?
How to Develop Situational Leadership Skills
Learn to assess emotional states and maturity levels of those you lead.
Have a sense of what team members have to do to complete the job.
Develop your skills of persuasion.
Learn to be fluid in your leadership style based on your business needs and who you're working with.
Gain the trust of those you work with.
What makes a good leader?
"A great leader posses a clear vision, is courageous, has integrity, honesty, humility and clear focus. Great leaders help people reach their goals, are not afraid to hire people that might be better than them and take pride in the accomplishments of those they help along the way."

Bass argued that there are four keys to successful transformational leadership:

Trust - building a high degree of trust between leaders and followers by setting a high moral and ethical example. He called this idealised influence.
Inspiration - providing a vision or goals that inspire and motivate followers to act because they feel the direction they are going in is significant and worthwhile. This he called inspirational motivation.
Creativity - giving people the big picture and a way of working that allows them to question conventional wisdom and come up with fresh solutions to old problems. He called this intellectual stimulation.
Personal growth - paying attention to followers as individuals with their own needs and ambitions, offering them coaching and mentoring, enabling them to grow and feel fulfilled. This he called individual consideration.
Can Both Leadership Styles be Combined?
Although we are referring to two different styles of leadership, it wouldn't be correct to say that someone must be either a transformational leader or a transactional leader. It is possible to combine both styles.

It is also reasonable to suggest that no leader need be confined to one or other of these two styles because as we shall see, other styles certainly exist, and this is before we consider the potential influence of philosophies and models upon any leader's chosen methods and development.
That said, while we are presently concerned with transformational and transactional styles, consider this example of 'style switching':

While leaders in transformational mode would normally try to attain the backing of followers by appealing to their values and offering an inspirational vision, the leader may meet resistance.
At times like this, a leader may adopt the transactional style to create more of a traditional exchange by trading something that the leadership can offer (desired by followers) in return for something the leadership seeks from the followers.
The transactional leadership style often works well - provided everyone knows and agrees on the goals, priorities and methods. However, the transactional style may not work when the situation calls for a big change in direction, or circumstances demand creative problem-solving. In such a climate, a transformational style is often required and tends to be more successful.

Overlaps with Other Leadership Philosophies
You will notice that the transformational leadership style overlaps with the leadership philosophies:

Authentic leadership - in its appeal to values
Ethical leadership - in its insistence on morality, and as already mentioned
Servant leadership - in helping followers to achieve bigger aims and personal potential

Transactional leadership works within set established goals and organizational boundaries, while a transformational approach challenges the status quo and is more future-oriented.
Transactional leadership emphasizes organization, performance evaluation and rewards, and is task- and outcome-oriented.
Transformational leadership focuses on motivating and engaging followers with a vision of the future.
Key Terms

Buy-in: In management and decision making, the commitment of interested or affected parties (often called stakeholders) to agree to support a decision, often by having been involved in its formulation.
Leadership can be described as transactional or transformational. Transactional leaders focuses on the role of supervision, organization, and group performance. They are concerned about the status quo and day-to-day progress toward goals. Transformational leaders work to enhance the motivation and engagement of followers by directing their behavior toward a shared vision. While transactional leadership operates within existing boundaries of processes, structures, and goals, transformational leadership challenges the current state and is change-oriented.

Transactional Leadership

Transactional leadership promotes compliance with existing organizational goals and performance expectations through supervision and the use of rewards and punishments. Transactional leaders are task- and outcome-oriented. Especially effective under strict time and resource constraints and in highly-specified projects, this approach adheres to the status quo and employs a form of management that pays close attention to how employees perform their tasks.

Transformational Leadership

Transformational leadership focuses on increasing employee motivation and engagement and attempts to link employees' sense of self with organizational values. This leadership style emphasizes leading by example, so followers can identify with the leader's vision and values. A transformational approach focuses on individual strengths and weaknesses of employees and on enhancing their capabilities and their commitment to organizational goals, often by seeking their buy-in for decisions.

Comparing Leadership Types

Transactional and transformational leadership exhibit five key differences:

Transactional leadership reacts to problems as they arise, whereas transformational leadership is more likely to address issues before they become problematic.
Transactional leaders work within existing an organizational culture, while transformational leaders emphasize new ideas and thereby "transform" organizational culture.
Transactional leaders reward and punish in traditional ways according to organizational standards; transformational leaders attempt to achieve positive results from employees by keeping them invested in projects, leading to an internal, high-order reward system.
Transactional leaders appeal to the self-interest of employees who seek out rewards for themselves, in contrast to transformational leaders, who appeal to group interests and notions of organizational success.
Transactional leadership is more akin to the common notions of management, whereas transformational leadership adheres more closely to what is colloquially referred to as leadership.
Key Behaviors of Transactional Leaders

Transactional leaders focus on performance, promote success with rewards and punishments, and maintain compliance with organizational norms.

LEARNING OBJECTIVES

Identify the different behaviors attributed to transactional leaders and how they can motivate an organization

KEY TAKEAWAYS

Key Points

Transactional leaders focus on managing and supervising their employees and on group performance. They monitor their employees' work carefully to assess any deviation from expected standards.
Transactional leaders promote success by doling out both rewards and punishments contingent on performance.
Transactional leaders work within existing organizational structures and shape their work according to the current organizational culture.
Key Terms

Maslow's Hierarchy of Needs: A psychological theory, proposed by Abraham Maslow in the 1943 paper "A Theory of Human Motivation," which depicts lower- and higher-level human needs in the form of a pyramid.
Transactional leaders focus on managing and supervising their employees and on facilitating group performance. The role of a transactional leader is primarily passive, in that it sets policy and assessment criteria and then intervenes only in the event of performance problems or needs for exceptions. Transactional leaders seek to maintain compliance within existing goals and expectations and the current organizational culture. They are extrinsic motivators who encourage success through the use of rewards and punishment.

Transactional leaders are expected to do the following:

Set goals and provide explicit guidance regarding what they expect from organizational members and how they will be rewarded for their efforts and commitment
Provide constructive feedback on performance
Focus on increasing the efficiency of established routines and procedures and show concern for following existing rules rather than making changes
Establish and standardize practices that will help the organization become efficient and productive
Respond to deviations from expected outcomes and identify corrective actions to improve performance
Psychologist Abraham Maslow characterized people's motivating factors in terms of needs. Maslow's Hierarchy of Needs describes levels of needs ranging from the most essential, such as physiological (e.g., food and sleep) and safety, to higher levels of esteem and self-actualization. Transactional leadership satisfies lower-level needs but addresses those at a high level only to a limited degree. As such, transactional leaders' behavior appeals to only a portion of followers' motivating factors.

Transactional leadership can be very effective in the right settings. Coaches of sports teams are a good example of appropriate transactional leadership. The rules for a sports team allow for little flexibility, and adherence to organizational norms is key; even so, effective coaches can motivate their team members to play and win, even at risk to themselves.

Key Behaviors of Transformational Leaders

Transformational leaders exhibit individualized consideration, intellectual stimulation, inspirational motivation, and idealized influence.

LEARNING OBJECTIVES

Explain the varying approaches and behaviors that define transformational leadership

KEY TAKEAWAYS

Key Points

Transformational leaders show individualized consideration to followers by paying attention to and meeting the needs of followers.
Transformational leaders stimulate ideas and creativity from followers by creating a safe environment to challenge the status quo.
Transformational leaders have a vision that inspires and motivates followers to achieve important goals.
Transformational leaders serve as role models for their followers, allow them to identify with a shared organizational vision, and provide a sense of meaning and achievement.
Key Terms

Transformational Leadership: An approach to leading that enhances the motivation, morale, and performance of followers through a variety of mechanisms.
Transformational leaders challenge followers with an attractive vision and tie that vision to a strategy for its achievement. They engage and motivate followers to identify with the organization 's goals and values. Transformational leadership comprises four types of behavior:

Individualized consideration or compassionate leadership
Intellectual stimulation
Inspirational motivation
Idealized influence or charismatic leadership
Individualized Consideration

Individualized consideration is the degree to which the leader attends to each follower's needs, acts as a mentor or coach to the follower, and listens to the follower's concerns. This behavior can include the following actions:

Discussing and empathizing with the needs of individual employees
Making interpersonal connections with employees
Showing genuine compassion
Encouraging ongoing professional development and personal growth of employees
Intellectual Stimulation

Transformational leaders encourage followers to be innovative and creative. Intellectual stimulation springs from leaders who establish safe conditions for experimentation and sharing ideas. They tackle old problems in a novel fashion and inspire employees to think about their conventional methods critically and share new ideas. This type of behavior includes:

Encouraging employees' creativity
Challenging the status quo
Aiming for consistent innovation
Empowering employees to disagree with leadership
Risk-taking when appropriate to achieve goals
Inspirational Motivation

Leaders with an inspiring vision challenge followers to leave their comfort zones, communicate optimism about future goals, and provide meaning for the task at hand. Purpose and meaning provide the energy that drives a group forward. The visionary aspects of leadership are supported by communication skills that make the vision understandable, precise, powerful, and engaging. Followers are willing to invest more effort in their tasks; they are encouraged and optimistic about the future and believe in their abilities. Behaviors that demonstrate inspirational motivation include:

Inspiring employees to improve their outcomes
Explaining how the organization will change over time
Fostering a strong sense of purpose among employees
Linking individual employee and organizational goals
Aiding employees to succeed to an even greater extent than they expect
Idealized Influence

Transformational leaders act as role models for their followers. Transformational leaders must embody the values that the followers should be learning and internalizing. The foundation of transformational leadership is the promotion of consistent vision and values. Transformational leaders guide followers by providing them with a sense of meaning and challenge. They foster the spirit of teamwork and commitment in the following ways:

Promoting a broad, inclusive vision
Leading by example
Showing strong commitment to goals
Creating trust and confidence in employees
Representing organizational goals, culture, and mission
A Blended Approach to Leadership

The full-range leadership theory blends the features of transactional and transformational leadership into one comprehensive approach.

A manager is characterized according to degree of control that is maintained by him. According to this approach, four main styles of leadership have been identified:

Tells: The manager identifies a problem, chooses a decision, and announces this to subordinates. The subordinates are not a party to the decision making process and the manager expects them to implement his decisions as soon as possible.
Sells: The decision is chosen by the manager only but he understands that there will be some amount of resistance from those faced with the decision and therefore makes efforts to persuade them to accept it.
Consults: Though the problem is identified by the manager, he does not take a final decision. The problem is presented to the subordinates and the solutions are suggested by the subordinates.
Joins: The manager defines the limits within which the decision can be taken by the subordinates and then makes the final decision along with the subordinates.
According to Tannenbaum and Schmidt, if one has to make a choice of the leadership style which is practicable and desirable, then his answer will depend upon the following three factors:

Forces in the Manager: The behavior of the leader is influenced by his personality, background, knowledge, and experience. These forces include:
Value systems
Confidence in subordinates
Leadership inclinations
Feelings of security in an uncertain situation
Forces in the subordinate: The personality of the subordinates and their expectations from the leader influences their behavior. The factors include:
Readiness to assume responsibility in decision-making
Degree of tolerance for ambiguity
Interest in the problem and feelings as to its importance
Strength of the needs for independence
Knowledge and experience to deal with the problem
Understanding and identification with the goals of the organization
If these factors are on a positive side, then more freedom can be allowed to the subordinate by the leader.
Forces in the situation: The environmental and general situations also affect the leader's behavior. These include factors like:
Type of organization
Group effectiveness
Nature of the problem
Time pressure
When the authors updated their work in1973, they suggested a new continuum of patterns of leadership behavior. In this, the total area of freedom shared between managers and non-managers is redefined constantly by interactions between them and the environmental forces. This pattern was, however, more complex in comparison to the previous one

The Tannenbaum and Schmidt continuum demonstrates the relationship between the level of freedom that a manager chooses to give a team, and the level of authority used by the manager. As the team's freedom is increased, so to should the manger's authority decrease. This is a positive way for both teams and mangers to develop.

This model explains the choices facing leaders when it comes to decision-making. Tannenaum and Schmidt demonstrated that a leader has seven decision-making options.

As you move from left to right on the following diagram, the leader gives up his, or her, power to make solo decisions and increases group involvement.
This model shows the seven ways of approaching decisions, outlining that the leader must have the self-awareness, presence of mind and wisdom to consider the three sets of pressures before making a decision.

It should be noted that delegating freedom and decision-making responsibility to a team absolutely does not absolve the manager of accountability.

Tannenbaum and Schmidt further explained that there are three sets of pressures that influence a leader's decision making approach.

Situational pressures

The complexity of the problem, the importance of the decision and the time pressure.

Leader's inner pressures

The leader's preferences around decision-making (beliefs, behaviours etc), confidence in their/the team's experience and importance or risk the decision is to the leader personally.

Pressures coming from subordinates

A colleague's desire to have a say in the decision, the willingness to take responsibility for the outcome, ability to reach decisions together and their readiness/ability in accepting orders.

Planning means looking ahead and chalking out future courses of action to be followed. It is a preparatory step. It is a systematic activity which determines when, how and who is going to perform a specific job. Planning is a detailed programme regarding future courses of action.

It is rightly said "Well plan is half done". Therefore planning takes into consideration available & prospective human and physical resources of the organization so as to get effective co-ordination, contribution & perfect adjustment. It is the basic management function which includes formulation of one or more detailed plans to achieve optimum balance of needs or demands with the available resources.

According to Urwick, "Planning is a mental predisposition to do things in orderly way, to think before acting and to act in the light of facts rather than guesses". Planning is deciding best alternative among others to perform different managerial functions in order to achieve predetermined goals.

According to Koontz & O'Donell, "Planning is deciding in advance what to do, how to do and who is to do it. Planning bridges the gap between where we are to, where we want to go. It makes possible things to occur which would not otherwise occur".

Steps in Planning Function
Planning function of management involves following steps:-

Establishment of objectives
Planning requires a systematic approach.
Planning starts with the setting of goals and objectives to be achieved.
Objectives provide a rationale for undertaking various activities as well as indicate direction of efforts.
Moreover objectives focus the attention of managers on the end results to be achieved.
As a matter of fact, objectives provide nucleus to the planning process. Therefore, objectives should be stated in a clear, precise and unambiguous language. Otherwise the activities undertaken are bound to be ineffective.
As far as possible, objectives should be stated in quantitative terms. For example, Number of men working, wages given, units produced, etc. But such an objective cannot be stated in quantitative terms like performance of quality control manager, effectiveness of personnel manager.
Such goals should be specified in qualitative terms.
Hence objectives should be practical, acceptable, workable and achievable.
Establishment of Planning Premises
Planning premises are the assumptions about the lively shape of events in future.
They serve as a basis of planning.
Establishment of planning premises is concerned with determining where one tends to deviate from the actual plans and causes of such deviations.
It is to find out what obstacles are there in the way of business during the course of operations.
Establishment of planning premises is concerned to take such steps that avoids these obstacles to a great extent.
Planning premises may be internal or external. Internal includes capital investment policy, management labour relations, philosophy of management, etc. Whereas external includes socio- economic, political and economical changes.
Internal premises are controllable whereas external are non- controllable.
Choice of alternative course of action
When forecast are available and premises are established, a number of alternative course of actions have to be considered.
For this purpose, each and every alternative will be evaluated by weighing its pros and cons in the light of resources available and requirements of the organization.
The merits, demerits as well as the consequences of each alternative must be examined before the choice is being made.
After objective and scientific evaluation, the best alternative is chosen.
The planners should take help of various quantitative techniques to judge the stability of an alternative.
Formulation of derivative plans
Derivative plans are the sub plans or secondary plans which help in the achievement of main plan.
Secondary plans will flow from the basic plan. These are meant to support and expediate the achievement of basic plans.
These detail plans include policies, procedures, rules, programmes, budgets, schedules, etc. For example, if profit maximization is the main aim of the enterprise, derivative plans will include sales maximization, production maximization, and cost minimization.
Derivative plans indicate time schedule and sequence of accomplishing various tasks.
Securing Co-operation
After the plans have been determined, it is necessary rather advisable to take subordinates or those who have to implement these plans into confidence.
The purposes behind taking them into confidence are :-
Subordinates may feel motivated since they are involved in decision making process.
The organization may be able to get valuable suggestions and improvement in formulation as well as implementation of plans.
Also the employees will be more interested in the execution of these plans.
Follow up/Appraisal of plans
After choosing a particular course of action, it is put into action.
After the selected plan is implemented, it is important to appraise its effectiveness.
This is done on the basis of feedback or information received from departments or persons concerned.
This enables the management to correct deviations or modify the plan.
This step establishes a link between planning and controlling function.
The follow up must go side by side the implementation of plans so that in the light of observations made, future plans can be made more realistic.

Organizing is the function of management which follows planning. It is a function in which the synchronization and combination of human, physical and financial resources takes place. All the three resources are important to get results. Therefore, organizational function helps in achievement of results which in fact is important for the functioning of a concern. According to Chester Barnard, "Organizing is a function by which the concern is able to define the role positions, the jobs related and the co-ordination between authority and responsibility. Hence, a manager always has to organize in order to get results.

A manager performs organizing function with the help of following steps:-

Identification of activities - All the activities which have to be performed in a concern have to be identified first. For example, preparation of accounts, making sales, record keeping, quality control, inventory control, etc. All these activities have to be grouped and classified into units.
Departmentally organizing the activities - In this step, the manager tries to combine and group similar and related activities into units or departments. This organization of dividing the whole concern into independent units and departments is called departmentation.
Classifying the authority - Once the departments are made, the manager likes to classify the powers and its extent to the managers. This activity of giving a rank in order to the managerial positions is called hierarchy. The top management is into formulation of policies, the middle level management into departmental supervision and lower level management into supervision of foremen. The clarification of authority help in bringing efficiency in the running of a concern. This helps in achieving efficiency in the running of a concern. This helps in avoiding wastage of time, money, effort, in avoidance of duplication or overlapping of efforts and this helps in bringing smoothness in a concern's working.
Co-ordination between authority and responsibility - Relationships are established among various groups to enable smooth interaction toward the achievment of the organizational goal. Each individual is made aware of his authority and he/she knows whom they have to take orders from and to whom they are accountable and to whom they have to report. A clear organizational structure is drawn and all the employees are made aware of it.

The managerial function of staffing involves manning the organization structure through proper and effective selection, appraisal and development of the personnels to fill the roles assigned to the employers/workforce.

According to Theo Haimann, "Staffing pertains to recruitment, selection, development and compensation of subordinates."

Nature of Staffing Function
Staffing is an important managerial function- Staffing function is the most important mangerial act along with planning, organizing, directing and controlling. The operations of these four functions depend upon the manpower which is available through staffing function.
Staffing is a pervasive activity- As staffing function is carried out by all mangers and in all types of concerns where business activities are carried out.
Staffing is a continuous activity- This is because staffing function continues throughout the life of an organization due to the transfers and promotions that take place.
The basis of staffing function is efficient management of personnels- Human resources can be efficiently managed by a system or proper procedure, that is, recruitment, selection, placement, training and development, providing remuneration, etc.
Staffing helps in placing right men at the right job. It can be done effectively through proper recruitment procedures and then finally selecting the most suitable candidate as per the job requirements.
Staffing is performed by all managers depending upon the nature of business, size of the company, qualifications and skills of managers,etc. In small companies, the top management generally performs this function. In medium and small scale enterprise, it is performed especially by the personnel department of that concern.

Directing
It is that part of managerial function which actuates the organizational methods to work efficiently for achievement of organizational purposes. It is considered life-spark of the enterprise which sets it in motion the action of people because planning, organizing and staffing are the mere preparations for doing the work. Direction is that inert-personnel aspect of management which deals directly with influencing, guiding, supervising, motivating sub-ordinate for the achievement of organizational goals. Direction has following elements:

Supervision
Motivation
Leadership
Communication
Supervision- implies overseeing the work of subordinates by their superiors. It is the act of watching & directing work & workers.

Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work. Positive, negative, monetary, non-monetary incentives may be used for this purpose.

Leadership- may be defined as a process by which manager guides and influences the work of subordinates in desired direction.

Communications- is the process of passing information, experience, opinion etc from one person to another. It is a bridge of understanding.

DIRECTING is said to be a process in which the managers instruct, guide and oversee the performance of the workers to achieve predetermined goals. Directing is said to be the heart of management process. Planning, organizing, staffing have got no importance if direction function does not take place.

Directing initiates action and it is from here actual work starts. Direction is said to be consisting of human factors. In simple words, it can be described as providing guidance to workers is doing work. In field of management, direction is said to be all those activities which are designed to encourage the subordinates to work effectively and efficiently. According to Human, "Directing consists of process or technique by which instruction can be issued and operations can be carried out as originally planned" Therefore, Directing is the function of guiding, inspiring, overseeing and instructing people towards accomplishment of organizational goals.

Direction has got following characteristics:

Pervasive Function - Directing is required at all levels of organization. Every manager provides guidance and inspiration to his subordinates.
Continuous Activity - Direction is a continuous activity as it continuous throughout the life of organization.
Human Factor - Directing function is related to subordinates and therefore it is related to human factor. Since human factor is complex and behaviour is unpredictable, direction function becomes important.
Creative Activity - Direction function helps in converting plans into performance. Without this function, people become inactive and physical resources are meaningless.
Executive Function - Direction function is carried out by all managers and executives at all levels throughout the working of an enterprise, a subordinate receives instructions from his superior only.
Delegate Function - Direction is supposed to be a function dealing with human beings. Human behaviour is unpredictable by nature and conditioning the people's behaviour towards the goals of the enterprise is what the executive does in this function. Therefore, it is termed as having delicacy in it to tackle human behaviour.

Organizations abound in today's society. Groups of individuals constantly join forces to accomplish common goals. Sometimes the goals of these organizations are for profit, such as franchise restaurant chains or clothing retailers. Other times, the goals are more altruistic, such as nonprofit churches or public schools. But no matter what their aims, all these organizations share two things in common: They're made up of people, and certain individuals are in charge of these people.

Enter managers. Managers appear in every organization — at least in organizations that want to succeed. These individuals have the sometimes‐unenviable task of making decisions, solving difficult problems, setting goals, planning strategies, and rallying individuals. And those are just a few of their responsibilities!

To be exact, managers administer and coordinate resources effectively and efficiently to achieve the goals of an organization. In essence, managers get the job done through other people.

No matter what type of organization they work in, managers are generally responsible for a group of individuals' performance. As leaders, managers must encourage this group to reach common business goals, such as bringing a new product to market in a timely fashion. To accomplish these goals, managers not only use their human resources, but they also take advantage of various material resources as well, such as technology.

Think of a team, for example. A manager may be in charge of a certain department whose task it is to develop a new product. The manager needs to coordinate the efforts of his department's team members, as well as give them the material tools they need to accomplish the job well. If the team fails, ultimately it is the manager who shoulders the responsibility.

Two leaders may serve as managers within the same company but have very different titles and purposes. Large organizations, in particular, may break down management into different levels because so many more people need to be managed. Typical management levels fall into the following categories:

Top level: Managers at this level ensure that major performance objectives are established and accomplished. Common job titles for top managers include chief executive officer (CEO), chief operating officer (COO), president, and vice president. These senior managers are considered executives, responsible for the performance of an organization as a whole or for one of its significant parts. When you think of a top‐level manager, think of someone like Dave Thomas of the fast‐food franchise Wendy's. Although John T. Schuessler was elected CEO in 2000, Dave Thomas was the founder and served as the chairman of the board. He was the well‐known spokesperson for the chain, until his death in 2002.
Middle level: Middle managers report to top managers and are in charge of relatively large departments or divisions consisting of several smaller units. Examples of middle managers include clinic directors in hospitals; deans in universities; and division managers, plant managers, and branch sales managers in businesses. Middle managers develop and implement action plans consistent with company objectives, such as increasing market presence.
Low level: The initial management job that most people attain is typically a first‐line management position, such as a team leader or supervisor — a person in charge of smaller work units composed of hands‐on workers. Job titles for these first‐line managers vary greatly, but include such designations as department head, group leader, and unit leader. First‐line managers ensure that their work teams or units meet performance objectives, such as producing a set number of items at a given quality, that are consistent with the plans of middle and top management.

The behavioral management theory is often called the human relations movement because it addresses the human dimension of work. Behavioral theorists believed that a better understanding of human behavior at work, such as motivation, conflict, expectations, and group dynamics, improved productivity.

The theorists who contributed to this school viewed employees as individuals, resources, and assets to be developed and worked with — not as machines, as in the past. Several individuals and experiments contributed to this theory.

Elton Mayo's contributions came as part of the Hawthorne studies, a series of experiments that rigorously applied classical management theory only to reveal its shortcomings. The Hawthorne experiments consisted of two studies conducted at the Hawthorne Works of the Western Electric Company in Chicago from 1924 to 1932. The first study was conducted by a group of engineers seeking to determine the relationship of lighting levels to worker productivity. Surprisingly enough, they discovered that worker productivity increased as the lighting levels decreased — that is, until the employees were unable to see what they were doing, after which performance naturally declined.

A few years later, a second group of experiments began. Harvard researchers Mayo and F. J. Roethlisberger supervised a group of five women in a bank wiring room. They gave the women special privileges, such as the right to leave their workstations without permission, take rest periods, enjoy free lunches, and have variations in pay levels and workdays. This experiment also resulted in significantly increased rates of productivity.

In this case, Mayo and Roethlisberger concluded that the increase in productivity resulted from the supervisory arrangement rather than the changes in lighting or other associated worker benefits. Because the experimenters became the primary supervisors of the employees, the intense interest they displayed for the workers was the basis for the increased motivation and resulting productivity. Essentially, the experimenters became a part of the study and influenced its outcome. This is the origin of the term Hawthorne effect, which describes the special attention researchers give to a study's subjects and the impact that attention has on the study's findings.

The general conclusion from the Hawthorne studies was that human relations and the social needs of workers are crucial aspects of business management. This principle of human motivation helped revolutionize theories and practices of management.

Abraham Maslow, a practicing psychologist, developed one of the most widely recognized need theories, a theory of motivation based upon a consideration of human needs . His theory of human needs had three assumptions:

Human needs are never completely satisfied.
Human behavior is purposeful and is motivated by the need for satisfaction.
Needs can be classified according to a hierarchical structure of importance, from the lowest to highest.
Maslow broke down the needs hierarchy into five specific areas:
Physiological needs. Maslow grouped all physical needs necessary for maintaining basic human well‐being, such as food and drink, into this category. After the need is satisfied, however, it is no longer is a motivator.
Safety needs. These needs include the need for basic security, stability, protection, and freedom from fear. A normal state exists for an individual to have all these needs generally satisfied. Otherwise, they become primary motivators.
Belonging and love needs. After the physical and safety needs are satisfied and are no longer motivators, the need for belonging and love emerges as a primary motivator. The individual strives to establish meaningful relationships with significant others.
Esteem needs. An individual must develop self‐confidence and wants to achieve status, reputation, fame, and glory.
Self‐actualization needs. Assuming that all the previous needs in the hierarchy are satisfied, an individual feels a need to find himself.
Maslow's hierarchy of needs theory helped managers visualize employee motivation.

Douglas McGregor was heavily influenced by both the Hawthorne studies and Maslow. He believed that two basic kinds of managers exist. One type, the Theory X manager, has a negative view of employees and assumes that they are lazy, untrustworthy, and incapable of assuming responsibility. On the other hand, the Theory Y manager assumes that employees are not only trustworthy and capable of assuming responsibility, but also have high levels of motivation.

An important aspect of McGregor's idea was his belief that managers who hold either set of assumptions can create self‐fulfilling prophecies — that through their behavior, these managers create situations where subordinates act in ways that confirm the manager's original expectations.

As a group, these theorists discovered that people worked for inner satisfaction and not materialistic rewards, shifting the focus to the role of individuals in an organization's performance

Not everyone can be a manager. Certain skills, or abilities to translate knowledge into action that results in desired performance, are required to help other employees become more productive. These skills fall under the following categories:

Technical: This skill requires the ability to use a special proficiency or expertise to perform particular tasks. Accountants, engineers, market researchers, and computer scientists, as examples, possess technical skills. Managers acquire these skills initially through formal education and then further develop them through training and job experience. Technical skills are most important at lower levels of management.
Human: This skill demonstrates the ability to work well in cooperation with others. Human skills emerge in the workplace as a spirit of trust, enthusiasm, and genuine involvement in interpersonal relationships. A manager with good human skills has a high degree of self‐awareness and a capacity to understand or empathize with the feelings of others. Some managers are naturally born with great human skills, while others improve their skills through classes or experience. No matter how human skills are acquired, they're critical for all managers because of the highly interpersonal nature of managerial work.
Conceptual: This skill calls for the ability to think analytically. Analytical skills enable managers to break down problems into smaller parts, to see the relations among the parts, and to recognize the implications of any one problem for others. As managers assume ever‐higher responsibilities in organizations, they must deal with more ambiguous problems that have long‐term consequences. Again, managers may acquire these skills initially through formal education and then further develop them by training and job experience. The higher the management level, the more important conceptual skills become.
Although all three categories contain skills essential for managers, their relative importance tends to vary by level of managerial responsibility.

Business and management educators are increasingly interested in helping people acquire technical, human, and conceptual skills, and develop specific competencies, or specialized skills, that contribute to high performance in a management job. Following are some of the skills and personal characteristics that the American Assembly of Collegiate Schools of Business (AACSB) is urging business schools to help their students develop.

Leadership — ability to influence others to perform tasks
Self‐objectivity — ability to evaluate yourself realistically
Analytic thinking — ability to interpret and explain patterns in information
Behavioral flexibility — ability to modify personal behavior to react objectively rather than subjectively to accomplish organizational goals
Oral communication — ability to express ideas clearly in words
Written communication — ability to express ideas clearly in writing
Personal impact — ability to create a good impression and instill confidence
Resistance to stress — ability to perform under stressful conditions
Tolerance for uncertainty — ability to perform in ambiguous situations

done by controlling, managing and directing different types of resources. The resources can be people or finances and equipment you can use to achieve your objectives. All of it also indicates to another essential element of management: power or authority. Management involves a position of authority, in which the person in charge or the manager has the power to make the decisions of controlling, planning and directing. Management is about hierarchy and a framework of authority and control.

What about delegation then? The Business Dictionary defines the concept of delegation in terms of management as, "sharing or transfer of authority and the associated responsibility, from an employer or superior to an employee or subordinate".

So, you need to have a specific position of power and due to this, you are able to share or transfer parts of your authority to someone else. In effect, you are taking your managerial position and distributing it to another person or persons. In this sense, delegation is usually a one-way street, flowing from a superior to a subordinate. You can't really delegate a task or process to someone above you in the hierarchy and terms of power, since you most likely won't have the authority to do this.

Management by delegation is therefore the act of managing by emphasizing delegating. You use the functions of management and instead of doing it all and holding all the power to yourself, you distribute and share the managerial burden and power with your subordinates.

For example, instead of planning the tasks to get a new product developed on your own, you might delegate some of the decision-making power to your subordinate. Instead of you setting the deadline for the tasks you've established, you tell the team to do this.

It's crucial to understand that management by delegation is by no means just the transfer of doing the tasks to others. Management is about telling Person A to perform Task B, while delegating is telling Person A to be in charge of Task B, including any decisions it might involve. Delegating always requires a transfer of power and the responsibilities that come with it.

Nonetheless, there are different levels of delegation. The freedom and responsibility you transfer can differ from the low levels to the highest levels. You might expect the person to perform A by using specific methods or by delegating full decision-making. Here are some of the examples of different levels of delegation and the distribution of freedom:

'Follow the instructions' - Delegation style where you transfer the responsibility to perform a task, but provide clear instructions on how to perform it.
'Provide input' - You transfer the responsibility of performing the tasks and the decision-making involved with it, but provide input on methods, ideas and so on to guide in the process.
'Let's decide together' - You share the responsibility of decision-making involved with the tasks, although the performance is on the other person's shoulders. Both have equal say in how things are done.
'I'll provide support' - You transfer all of the responsibility and power to the person, but you are providing any kind of support and guidance the person might want in order to perform the task.

'You decide on methods, but I'll have final say' - Under this delegation style, you provide the person the ability to present you with ideas and suggestions, but the final decision-making authority remains in your hands. The person can suggest you to use a method A, but if you feel B is better, you can go with it.
'You have full power' - The transfer of completely power and responsibility to the other person.

Leadership Functions: Develops Team Work, Manages the Time Well, Strive for Effectiveness, Interpreting and a Few Others

Functions of Leadership - Important Functions the Leader Performs (With Common Leadership Activities)

Leader is not a lay-figure. He has much to do. The functions may be relatively straight-forward. In the wake of vast and rapid technological changes leader has to perform multifarious functions.

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Some of the important functions the leader performs are giving under:

1. Leader Develops Team Work:

The three vital determinates of team work are the leader, sub-ordinates and the environment. These factors are interdependent. It is the leader's responsibility to make the environment conductive to work. He inculcates the sense of collectivism in employees to work as a team.

2. Leader is a Representative of Sub-Ordinates:

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He is an intermediary between the work groups and top management. They are called linking pins by Rensis Likert.

3. Leader is an Appropriate Counsellor:

Quite often people in the work place need counselling to eliminate the emotional disequilibrium that is created sometimes in them. He removes barriers and stumbling blocks to effective performance.

4. Uses Power Properly:

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If a leader is to effectively achieve the goals expected of him, he must have power and authority to act in a way that will stimulate a positive response from the workers. A leader depending on the situation exercise different types of power viz., reward power, conceive power, legitimate power, represents power and expert power. Besides the formal basis the informal basis of power also has a more powerful impact on organizational effectiveness. No leader is effective unless the subordinates obey his order.

5. Leader Manages the Time Well:

Time is precious and vital but often overlooked in management. There are three dimensions of time, boss-imposed time, system-imposed time and self- imposed time that is prominent in literature. Because the leader has through knowledge of the principles of time management such as time preparing charts, scheduling techniques etc., he is in a position to utilize the time productivity in the organizations.

6. Strive for Effectiveness:

Quite frequently the managers are workaholic and too busy with petty things to address to major details of effectiveness. To fill the gap, sometimes leader throws his concerted effort to bring effectiveness by encouraging and nurturing team work, by better time management and by the proper use of power.

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Leadership is rather examined in personal characteristics than in terms of activities.

Herbert G. Hicks refers the following as common leadership activities:

1. Arbitrating:

Often members disagree on the best decision for an organizational matter. An effective leader often will resolve such disagreement by arbitrating on making the decision on the course of action to be taken.

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2. Suggesting:

Suggestions are often employed by an adroit leader for a long-term. Suggestions are likely to be a powerful tool in the manager's kit.

3. Supplying Objectives:

A manager often personally supplies the objectives for the organization. The manager must see that the organization is always supplied with suitable objectives.

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4. Catalyzing:

In organization some force is required to start or accelerate movement. A leader is expected to provide such a force.

5. Providing Security:

In organizations personal security is often a significant factor. A leader can provide a large measure of security by maintaining a positive and optimistic attitude even the face of adversities.

6. Representing:

A leader usually treated as the representative of the organization.

Functions of Leadership - 8 Important Functions of Leadership

Leadership requires better understanding of human psychology so that those who are leading and those who are being led may be in a position to learn all about each other as far as possible. This is also required to attain the objectives of the enterprise with - (i) smoothness, (ii) efficiency, (iii) sound judgement, and (iv) fairness. A business leader does not represent himself only but his enterprise as well as his staff. That is why he has to work in unionism and with utmost co-operation.

The important functions of leadership are as follows:

(1) The Main Function of a Leader is to Make the Environment Conducive to Work:

He studies the followers individually. He instills in them the interest to work. He creates proper environment encouraging the inquisitive employees and by prohibiting insidious elements. He inculcates a sense of collectivity in employees to work as a team.

(2) Leadership Integrates the Efforts of the Followers and the Organisational Objectives:

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Leadership directs the efforts of the group towards the attainment of objectives of the organisation of which he is a part. As each individual performs a part of the total work, an interaction of these parts of the whole is of paramount importance towards the attainment of goals.

(3) Leadership Performs the Functions of an Intermediary between the Top Management and the Work Group:

Renis Likert has called them as "Linking Pins." As linking pins, leaders integrate the whole organisation. They represent the work group before the top executives and also represent management before the work group. The effectiveness of an organisation depends upon the strength of these linking pins.

(4) Leaders Work as an Appropriate Counselor:

The leader provides the workers counseling to eliminate the disequilibrium created in the organisation. He removes all barriers and stumbling blocks for effective performance. He releases the emotional tension of the sub-ordinates and thus restores equilibrium.

(5) Domination or Use of Power:

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A leader must use power and authority in a manner that will stimulates a positive response from the subordinates. Depending upon the situation a leader uses different types of power, i.e., reward power, coercive power, legitimate power and expert power. A leader may be effective only when his subordinates obey him winningly. So, he must use the power in the best interest of the group he leads.

(6) The Leader Must Have a Thorough Knowledge of the Principles of the Time Management:

He may monitor the time in the interest of the organisation.

(7) Leader Should Develop a Climate of Co-Operation among Workers:

Leader's style and its approaches play a very important role in developing industrial harmony. Leader should develop co-operation among the sub-ordinates to achieve a common goal.

(8) A Leader Must Communicate the Organisational Policies, Procedures and Programmes to the Members of the Organisation Group:

He must communicate authority and responsibility of each individual in the group so that the workers may know what he has to do and what not and how to do it. He must also communicate the results of his performance, good or bad so that he may improve his effectiveness.

Functions of Leadership - Taking the Initiative, Representing the Enterprise, Interpreting, Guiding and Directing the Organisation and Encouraging Team Work

The functions of a leader can be detailed as follows:

Function # 1. Taking the Initiative:

The first and foremost job of a leader is to take the lead in all activities. He should not depend upon others for guidance and direction to do any work. He himself should be present in the field, lay down the goals, commence its implementation and see that the goals are achieved as per the predetermined targets.

Function # 2. Representing the Enterprise:

Since a leader is the true representative of the entire organisation, he should represent the enterprise and its objectives not only to those serving in it but also to the others in the outside world.

Function # 3. Interpreting:

A leader is expected to give reasons for his every order. It is a delicate task of the leader. He has to give instructions in such a way that they are clear to all concerned. If the instructions are irrational, they are bound to be ineffective.

Function # 4. Guiding and Directing the Organisation:

It is the primary function of the leader to guide and direct the organisation. He has to issue the necessary orders and instructions and see that they are communicated properly. He should guide and advice people and direct their behaviour for the achievement of organizational goals.

Function # 5. Encouraging Team Work:

Without team work, a leader cannot succeed-in his task of accomplishing organizational goals. Thus, a leader must try to win the confidence of his sub-ordinates.

Functions of Leadership - With Three Basic Types of Leadership

Managerial leadership has usually some delegated power to support his position. But it should be clearly understood that managerial leadership must be based on Influence and not merely on power and authority. Influence, i.e., voluntary acceptance of guidance and direction by subordinates, should be the primary motivating force in most situations.

A managerial leader has to rely rather heavily on man-to-man relationships that are normal with an informal leader. Use of power and authority stifles self-expression. It induces a subordinate to please his boss rather than achieve objectives. It cannot generate initiative, enthusiasm and voluntary cooperation. Hence, influence (the voluntary acceptance of guidance and direction) should be the main motivator in management. Let the power play only a supporting role.

A leader leads by personally and actively working with his subordinates in order (a) to guide and motivate their behaviour to fit the plan and jobs that have been established and (b) to understand their feelings and problems which they come across when they implement the plans. The word personally suggests that leadership must be based on close interpersonal man-to-man relationships.

The word actively implies that leadership is a dynamic and never-ending process as we live in a dynamic environment involving ever-changing plans and problems, ever- changing feelings and attitudes of subordinates. A managerial leader performs two vital functions.

1. Guidance and Motivation:

Plans are to be implemented. We have to convert blue prints into action. This requires continuous guidance, direction and motivation. The manager guides, directs and motivates his subordinates who work with and for him to accomplish the results as per plans and policies. Guidance and motivation reflects the impact of a leader on his subordinates. It also represents downward communication.

2. Understanding Problems and Feelings of Subordinates:

Empathy is defined as the ability to place oneself in the position (mind) of another, simulating that person's feelings values, problems and prejudices and such an understanding of the feelings and attitudes of the subordinates is the second vital function to be performed by a leader.

It is many a time ignored by people who over-emphasize the one-way flow of communication, i.e. downward flow of orders and instructions from a higher to a lower executive or operator.

In leadership, upward flow of information la the form of feedback is equally vital and very useful to management. It helps in making managerial decisions. It enables a continuous reappraisal of the management structure. Similarly, personal two-way communication has a positive influence on the feelings of subordinates.

It helps to build good morale. A manager should try to understand the feelings and operating problems subordinates face as they translate plans into completed action.

In fact, subordinates are permitted and encouraged to adopt feedback device giving information from highly subjective personal responses to day-to-day information on operating conditions. Such a returned flow of information is necessary for the manager's subsequent decisions and actions. Operating facts as well as problems and feelings of subordinates are important elements in many managerial decisions.

In short, for effective co-operative action we want two-way traffic of communication, viz:

i. Downward communication in the form of guidance, direction and motivation; and

ii. Upward communication in the form of feedback of information through face-to-face contacts.

There are three essentials of sound leadership action:

1. Use of Persuasion- A leader must talk in the language which his subordinates can understand. Then only persuasion can deliver the goods.

2. Calculated Risks- A leader must take calculated risks.

3. Voluntary Co-operation and Discipline- He must develop voluntary co-operation and voluntary discipline. Self-imposed discipline is most effective in practice.

When employee wants are reasonably satisfied and they have full confidence in their leader, voluntary co-operation and voluntary discipline can be easily developed.

Leadership style is the way a managerial leader applies his influence in getting work done through his subordinates in order to achieve the organisational objectives. The main attitude or belief that influences leadership style is the perceived role of the manager versus the role of the employees.

He may to adopt conservative style if he sees attitudes and beliefs under Theory X are apparent. If the manager perceives his role more as a colleague, and decision, leader (not maker), and if the workers show the readiness to participate in problem-solving and willingness to shoulder extra responsibilities, the managerial leadership style is bound to be liberal as per Theory Y.

Broadly speaking, there are three basic types of leadership:

i. Autocratic or Dictatorial Leadership:

The leader assumes full responsibility for all actions. Mainly he relies on implicit obedience from the group in following his orders. He determines plans and policies. He regards decision-making to be one-man show, he is himself the sole decision maker. He maintains highly critical and negative attitude in his relations with subordinates.

He freely uses threats of punishment and penalty for motivation, and obedience. It may work in the short run e.g. in emergency or war. When we have untrained, undisciplined, illiterate and unorganised labour, it may also be effective. But it does not provide a solid foundation for continued performance. Subordinates have no scope to influence the decisions of the leader.

It demoralises them, retards their growth, lowers the quality of performance. Morale is low. There is no scope to create and develop managers; it only creates messengers. Benevolent dictatorship assumes paternal role and stresses fatherly influence. Instead of threats, the leader uses bribery. Otherwise it is just like autocratic leadership.

ii. Democratic Leadership:

A leader draws Ideas and suggestions from his group by discussion, consultation and participation. Group members are duly encouraged to demonstrate initiative and creativity and take intelligent interest in setting plans and policies and in decision-making. The leader's job is largely that of a moderator.

Though the leader has veto power, we have maximum participation in decision-making process. Participation in decision-making assures better labour management relations, higher morale, greater job satisfaction and reduced dependence on the leader. The leader encourage delegation of authority. We have two-way flow of communication.

Democratic leadership offers a number of benefits:

i. Greater employee and group co-operation.

ii. Greater employee and group satisfaction.

iii. Higher employee morale.

iv. Improved decision-making, planning and organisation.

v. Recognition of human relations.

vi. Highest personal growth and development of employees.

Democratic leadership can win easily confidence, co-operation and loyalty as well as initiative of the group. Active participation in the management by labour
assures rising productivity and satisfaction. However, democratic leadership needs favourable conditions.

Labour must be literate, informed, organised. Trained personnel can develop self-discipline and can take sound and independent action. Labour must develop higher level egoistic wants such as demand for status, prestige, recognition, appreciation, etc. Democratic leadership relies heavily on non-financial incentives.

iii. Laissez-faire or Free Rein Leadership:

The leader depends entirely on his subordinates to establish their own goals and to make their own decisions. He lets them plan, organise and proceed. He takes minimum initiative in administration or information.

He becomes just another member of the group. He becomes merely information booth. He is on hand mainly to provide materials, information, etc., with minimum control. Free rein leadership is suitable for highly trained and professional staff. They are creative, self-motivated, require minimum guidance and control.

An autocratic, non-participative leadership is apparently most effective (especially if benevolent) when decisions are routine, there are standard procedures and rules, and subordinates do not feel an urge to participate.

Supportive, participative leadership is apparently most effective when decisions are not routine, information and rules for decision-making are not standardised, and subordinates feel the need and urge for independence, initiative and self-expression, and their participation is legitimate. When supportive leadership is combined with efficient managerial functions, we have both high productivity and high satisfaction.

Functions of Leadership - Accessory Functions and Primary Functions of a Leader

Whenever we talk of leadership, it is assumed that this leadership has so many functions inherent in it. Since leadership is an abstract quality and function, it can be identified only by its use through functions. In other words leadership as one of the functions of management process is performed by taking up and doing some certain functions.

Same way if an individual is entrusted with some job which he willingly accepts, its performance now becomes his responsibility. A manager when acts as a leader he, willingly and by virtue of his status, accepts leadership as a function. He, for leadership, performs these functions. Naturally, performance of leadership functions, now, becomes his responsibility.

A leader i.e. a manager has to accept the responsibility of successfully putting his efforts, though related to the group which he leads, for accomplishment of organisational goals. Thus functions to be performed and responsibility go hand in hand. Because of this fact many management experts have described leadership functions as responsibility and vice-versa.

Krench and Cruchfield has classified leadership functions in two categories - (1) Primary and (2) Accessory.

The first category belongs to the functions which a leader has himself to perform whereas the second category functions are incidental functions under "Primary" category - (1) Executive, (2) Planner (3) Policy maker (4) Expert (5) External representative (6) controller of internal relations (7) Purveyor of rewards and punishment and (8) Arbitrator and mediator.

All these functions represent leadership functions right from the top boss to the lower level manager. As seen above accessory functions are incidental to the status of a leader. A leader has to lead his followers that means the followers follow the same path which is chosen by the leader and through which he marches ahead. If a manager has to work for the final accomplishment of organisational goals, he has to choose a correct path.

Accessory functions of a leader, therefore, are as follows:

1. He has to set an example because the followers have to follow it.

2. The leader leads a group. Integrity, loyalty, morale etc. of the group is, generally assessed through the leaders. Thus he becomes a symbol of the group.

3. Being a leader and symbol of the group the responsibility of the group becomes his own responsibility. In others words he has to act as Substitute for individual responsibility.

4. The leader leads a group. Thus the ideology of the leader is accepted by the group members. It, therefore, becomes the duty of a leader to be a good ideologist.

5. Being higher in the rank and status than the follower (members) he has to adopt paternal attitude towards his group members. Thus he becomes a Father figure.

6. A leader is held responsible for the success or failure of the group led by him. Naturally he is taken to task in case of failure of the group, though the work is not actually performed by him. In other words he is made a Scapegoat.

Mr. Bennis has enumerated leadership functions on the basis of problems which a leader has to face. To lead means to resolve the problems of the followers and to guide them in right direction. Mr. Bennis has stated the ways i.e. what a leader should do? to solve the problems.

All other experts have enumerated the leadership functions on the same lines, they are - (i) Milius, (ii) Dennis, (iii) Killion, (iv) Peter Drucker.

"An effective leader is one who can make ordinary men do extra ordinary things, common people uncommon things. Leadership is lifting of man's sight to higher vision, raising of man's standard to higher performance, building of man's personality beyond normal limitations." - Peter Drucker

What Peter Drucker has stated in above lines is a crux of leadership function.

In order to achieve this a leader has to resort to following functions in addition to the primary functions:

1. Determination of realistic, factual performance objectives in terms of quantity, quality and safety.

2. A leader should make the resources that are required by the workers for proper performance of the task, available in time and in quantity as well as quality.

3. He has to keep proper and effective communication with his workers and supervisors in order to know and convey instructions.

4. A leader should prepare a plan and structure for the rewards and identify the areas where workers avoid work in order to punish them, if required.

5. He should delegate a part of his authority to his subordinates, wherever and whenever possible He should look forward for the participation of workers in decision making.

6. He should arrange to remove barriers and stumbling blocks.

7. Performance appraisal of the workers and its communication to higher level is an important function also.

8. He should render service to beneficiary individuals.

9. He should take decisions only after observing the facts and circumstances.

10. He should respond to the workers and should ensure same response from them.

11. He should achieve co-operation and help of the workers towards accomplishment of goals.

12. He should be one of the group members but even then he should keep himself different from them.

13. He should integrate individual needs with organisational goals.

14. A leader should ensure industrial integrity.

15. He should resolve internal conflicts.

Functions of Leadership - 8 Important Functions

Following are the important functions of a leader:

1. Setting Organisation Goals - A leader is expected to perform creative function of laying out goals and policies to persuade the subordinates to work with zeal and confidence.

2. Creating Organisation Structure - The second function of a leader is to create and shape the organisation on scientific lines by assigning roles appropriate to individual abilities with the view to make its various components to operate sensitively towards the achievement of enter-prise goals.

3. Initiating action - The next function of a leader is to take the initiative in all matters of interest to the group. He should not depend upon others for decision and judgment. He should float new ideas and his decisions should reflect original thinking.

4. Co-ordination - A leader has to reconcile the interests of the individual members of the group with that of the organisation. He has to ensure voluntary cooperation from the group in realising the common objectives.

5. Direction and Motivation - It is the primary function of a leader to guide and direct his group and motivate people to do their best in the achievement of desired goals, he should build up confidence and zeal in the work group.

6. Link between Management and Workers - A leader works as a necessary link between the management and the workers. He interprets the policies and programmes of the management to his subordinates and represents the subordinates interests before the management. He can prove effective only when he can act as the true guardian of the interests of his subordinates.

7. Create Effective Communication - A leader is required to create effective communication system in the organisation. It is essential to convey messages, policies, and plans to various levels and also to get feedback on regular basis. Proper communication helps in achieving organisational goals.

8. Secure Co-operation - It will be with the co-operation of employees that organisational goals will be achieved. A leader has to involve people in various consultations and decision making process. The employees will happily cooperate when they are consulted on various issues. The willing co-operation of employees will help in achieving various goals.

Functions of Leadership - 10 Functions

1. Taking initiative - A leader has to take all initiatives to lead the business activities. He should not expect others to induce him to take initiative. He himself should come in the field and take all steps to achieve pre-determined targets.

2. Representation - A leader is a representative of an organisation. The leader represents the purpose of organisation to workers and outsiders.

3. Guide - The leader has the primary duty of guiding others. Proper direction should be given by a leader. If he does not do so, the organisation will not succeed. The leader should issue instructions and orders whenever needed. These instructions and orders should be properly communicated.

4. Encouraging others - The leader is the captain of a team. The leader must win the confidence of his colleagues before winning in a competition. The leader cannot succeed without teamwork. Encouragement is necessary to build up teamwork.

5. Arbitrator and Mediator - The leader can settle the disputes arising among the workers. Besides, he can create a smooth relationship among the workers. He performs these duties in a friendly manner. Generally, people accept friendly advice. Sometimes, the leader can act as a friend.

6. Planner - The type of activities or type of work is to be decided by the leader. The leader can decide when a work is to be done, where it should be done and by whom it should be done. This planning work is completed by the leader.

7. Rewards and Punishments - There is a standard for some set of work. Some workers perform their work within a standard time and properly. The leader can give rewards to those who have completed the work as per the standard. The leader can punish the worker who does not complete the work as per the requirements of job.

8. Integration - Each individual does a part of a whole work. They perform the work according to their specialisation. Here, there is a need for integration. So the leader integrates the efforts of all workers. In this way, integration is one of the functions of the leader.

9. Communication - Communication is necessary to every organisation. Nothing will succeed without effective communication. An effective communication system conveys the authority and responsibility to each individual so that he may come to know what he is to do and what not. An individual understands his authority and responsibility from organisational policies, procedures and programmes. The leader should arrange for an effective communication system in an organisation.

10. Production - A leader is expected to show high production figures. A production oriented style is followed by the leader. He should take all necessary steps to increase production.

Functions of Leadership

Leaders provide support and motivation to improve the performance of employees in an organization. They provide imagination, foresight, enthusiasm, and initiative to group members to have a uniqueness of interests, outlook, and action.

The functions of a leader are mentioned in the following points:

1. Delegating some part of authority to subordinates

2. Planning and organizing the tasks of organizations

3. Guiding, teaching, and inspiring the subordinates

4. Motivating the subordinates to improve the level of performance

5. Influencing the subordinates through rewards and punishments

6. Creating good climate to achieve maximum employee efficiency

7. Promoting and protecting the creativity and innovativeness

8. Developing and maintaining the skills of subordinates

9. Interacting with subordinates and solving their problems

10. Building and sustaining the effective organizational culture

11. Understanding the expectations and aspirations of subordinates

12. Managing the organizational resources

Functions of Leadership - According to D. Krech, R Crutchfield and E. Ballachey

Performance of Primary and Accessory Functions:

According to D. Krech, R. Crutchfield and E. Ballachey, a leader performs a variety of functions, which may be classified as primary and accessory.

Performance of primary functions is linked to the position held by leader vis-a-vis his followers who, for various reasons, look up to him for decisions on work-related matters.

The reasons why followers seek decisions from the leader may be described as follows:

(a) It is leader's responsibility and function to make decisions as regards tasks assigned to followers;

(b) Leader has formal authority to make decisions;

(d) Members of the team have duty to consult the leader about performance of jobs and work methods to be employed. Rules and procedures also require them to do so. Besides, there is long-standing tradition to consult the leader;

(e) The leader has freedom to modify, alter, and even cancel his decisions.

(f) He commands well-deserved reputation for his expertise and for making right decisions;

(g) He is personally linked by followers.

Functions of Leadership - According to David Bowers, Stanley Seashore and Killian

A leader, whether formal or informal, is required to undertake several functions in relation to his group. He has to knit the groups into a cohesive, disciplined and working unit. He has to give a sense of direction to his group members to develop, mobilize and utilize their efforts towards meaningful ends. He has to interact with, inspire and arouse group members to perform well.

He has to create the required environment and design and needed facilities and reward structure in which group members can effectively work towards group goals and derive satisfaction. He has to provide support to his group by understanding their value, needs and expectations and helping them to achieve them within the work setting as far as possible. He has to resolve conflict in the group, and make the group adjust to changes and cope with crisis so as to survive and achieve group goals.

David Bowers and Stanley Seashore classify the above functions into four categories for conceptual purposes:

(a) Support - Behaviour which enhances the members' feelings of personal worth and importance.

(b) Emphasis on goals - Behaviour which stimulates enthusiasm for meeting the group goals with excellence.

(c) Facilitation of work - Behaviour which manifests itself in such activities as planning, scheduling, coordinating and providing resources, information and other infrastructure facilities.

(d) Facilitation of interaction - Behaviour which encourages group members to develop close and mutually satisfying relationship.

According to Krech, David and Cutch Field Richard S., "the functions of a leader are those of an executive, planner, policy maker, expert, external group representative, and controller of external relationships, purveyor of rewards and punishment, arbitrator and mediator, symbol of group surrogate for individual responsibility, ideologist, father figure and scapegoat".

In the words of Peter Drucker, "an effective leader is one who can make ordinary man do extraordinary things, make common people do uncommon things. Leadership is a lifting of a man's sights to a higher vision, the raising of a man's standard to a higher performance, the building of a man's personality beyond its normal limitations".

In a study published by die American Management Association, New York, a leader's functions, according to Killian are as under:

(i) To render service (by multiplying the contribution of every individual who is its beneficiary);

(ii) To take decisions (leading others to sufficient understanding, not a reckless shooting from the hip but a calculated searching for, and weighing of facts);

(iii) To elicit response (leading others to sufficient understanding of the need accomplishing the job in hand);

(iv) To achieve results (by guiding the energy of others in a definite direction for a specific purpose); and

(v) To be willing to be different (to have a discipline and a standard of performance which are higher than those of the non-leader).

Functions of Leadership - According to Krech and Grutchfield

Krech and Grutchfield give a list of 14 functions performed by leaders in general. A brief explanation of them is given here.

1. Goal Setter - A leader either establishes organisational goals and objectives himself or he may participate with his superiors or subordinates in establishing them.

2. Planner - This function is intermediate between the determination of goals and their execution. In this connection, the leader makes decisions concerning the ways and means with which the organisational goals can be achieved.

3. Executive - In his role as executive, a leader is responsible for seeing that the appropriate activities of the organisation are carried out.

4. Expert - The technical information and skills the supervisors possess are useful in aiding and instructing their subordinates in effective work procedure.

5. Surrogate for individual responsibility - The leader relieves other members of the group of certain responsibilities and they in turn place their trust in his decisions. For example, in an informal group of workers, one individual may be given the responsibility of passing on of complaints to the superior.

6. Controller of internal relationship within the organisation - It is the responsibility of a leader to see the various departments in his purview to coordinate their activities.

7. Administrator of rewards and punishments - As leaders, the supervisors encourage, upgrade and promote workers who deserve, and remove, transfer or dismiss workers who violate rules or regulations of the organisation.

8. Arbitrator and Mediator - The leader tries to maintain harmony among the members of the organisation. For example, the president of an organisation makes efforts to maintain harmony among competitive and ambitious Vice-Presidents.

9. Exemplar - Leader serves as an exemplar, a model for others to emulate. For example, the office manager who is invariably 15 minutes early at his desk in the morning is seeking to influence the members of his group by being a good example.

10. Symbol of the group - In this role, the leader provides a kind of continuity and stability to the group, standing for it despite changes in circumstances and membership.

11. Ideologist - The leader functions as an ideologist. By presenting his ideas concerning the group, he is a source of moral strength to them.

12. Father Figure - The leader, by functioning as a father figure, fulfils an emotional role for the members of the group. By identifying themselves with their leader, the members of a group draw strength and feeling of security.

13. Scapegoat - The leader functions as a scapegoat. He provides a ready target for the aggressions of the members of the group. Failure can be projected upon him. For example, the foreman in a production section may be blamed for any shortfall in production in his department and for insufficient co-operation on the part of the departmental manager.

Functions of Leadership - Develops Teamwork, Representative of Subordinates, Appropriate Counselor, Uses Power Properly and Manages Time Well

Leadership transforms potential into reality. In the process of transforming the potential of subordinates, a leader is required to carry out many functions.

1. Leader Develops Teamwork:

He inculcates a sense of collectivism in the employees and forces them to work as a team. Individuals, within the groups may possess varied interests and multiple goals. A leader has to reconcile these conflicting goals and restore equilibrium. On the best leaders, when their task is accomplished, their work done, the people remark, 'we done it ourselves'. Dynamic leaders provide a satisfying work climate where the individual and organizational goals are well integrated and find meaningful expression.

2. Leader is a Representative of Subordinates:

He is the linking-pin between the work groups and top-management. As a representative of the subordinates, he carries the voice of the workers to top management. He forces the followers to have an identity of interest, outlook and action.

3. Leader is an Appropriate Counselor:

Employees often suffer from emotional disequilibrium in organizations. For instance, an employee may be frustrated over his inability to climb up the organizational ladder and subsequently gets derailed off the work track. Leader comes here, renders wise counsel and tries to remove barriers, real or imaginary, and instills confidence in the employee. Leadership creates a co-operative and wholesome attitude among employees for successful work accomplishment

4. Leader uses Power Properly:

Leadership is the ability of a person to arouse a group's compliance and co-operation to his initiative beyond the normal call of duty. Leader holds power over his followers and this helps him in guiding, inspiring and directing group members achieve a unity of purpose and efforts. He exercises the power in such a fashion that the subordinates obey the orders of the leader willingly and come forward with commitment.

5. Leader Manages Time Well:

Unsatisfactory human performance in any organization can be primarily attributed to poor utilization of time. Mobilization and utilization of people in the service of organization demands judicious use of time and money. A good leader manages his time well by proper planning based on information and facts, and by arriving at decisions at an appropriate moment. He visualizes problems before they turn into emergencies.

Functions of Leadership - According to Ohio University, Selznick, Robert C. Miljas and Mintzberg

An Ohio University research study says that a leader has three functions:

1. Maintenance of Membership - The closeness of a leader to the group, the frequency of his reactions, and his acceptability to the group;

2. Objective Attainment - He should ensure that work patterns are stable and understandable, and that the objectives are achieved, and

3. Group Interaction Facilitation - He should facilitate effective interaction among the members of an organisation by means of a better communication system.

According to Selznick, the main functions of a leader are:

(i) To set an organisation's goals with reference to its internal needs and external pressure;

(ii) To integrate the needs of the individuals with those of the group so that the goals are easily reached;

(iii) To maintain industrial integrity; that is, a leader should maintain institutional integrity and his organisation's distinctive identity; and

(iv) To resolve internal conflicts; that is, a leader should bring about a balance between conflicting interests and resolve conflicts with the voluntary cooperation of all concerned.

There are many views on the functions of leaders determined by the level of management and the type of organization.

The main functions of a leader are:

1. To gain the commitment and cooperation of his team;

2. To get the group into action to achieve the agreed upon objectives; and

3. To make the best use of the skills, energies and talents of the team.

Apart from these functions, the leaders are also responsible for certain activities in the organisation.

Robert C. Miljas spells out leadership responsibilities in this fashion:

1. Determining realistic performance objectives in terms of quantity, quality, and safety.

2. Providing workers with necessary resources to perform their tasks.

3. Communicating with workers what is specially expected of them.

4. Providing an adequate reward structure to encourage performance.

5. Delegating authority where needed and inviting participation where possible.

6. Removing barriers and stumbling blocks to effective performance.

7. Appraising performance and communicating the results of evaluators.

8. Showing personal considerations for the employee.

Warren G. Bennis maintains that "the roles and functions of leader should be flexible. They should have the ability to adapt themselves rapidly to changing situations and learn to view their roles as temporary."

Mintzberg suspected arrangement of group roles that leader may adopt:

1. Figure-head role;

2. Group leader role;

3. Information role;

4. Spokesman role;

5. Entrepreneurial role;

6. Resource allocator;

7. Disturbance handler;

8. Negotiator and conciliator; and

9. Liaison role.

According to Ken Blanchard, "What is important as a leader is not what happens when you are there, it's what happens when you are not there". A successful leader may not be either a strong leader or a permissive one rather, he is who/maintain a high batting average in accurately assessing the forces.