Evolution of Management Theories & Practices in Today's World

1. Due dates for the three case summaries • September 24 (Markham Stouffville Hospital) • October 15 (Child Health Network) • November 19 (Health Care Equipment Corporation –Managing in Korea)

2. Group project • 3-4 students form a group by yourself • For students who are left out, tell me by October 10

3. New Group presentation - bonus • I will assign groups.

4. Managing in Today’s world Objectives: • Describes three waves in modern social history and their implications for organizations • Understand the current challenges faced by managers

5. Three views of management • The process approach (e.g.Henri Fayol) • The system approach (e.g. Chester Barnard) • The contingent approach

6. Process approach to management • Management activities include planning, organizing, leading, and controlling • These activities are circular and continuous • Not explicitly focus on the environment • Organizations like a close system

7. System approach to management • An organizations is an open system • Organizations are affected by internal factors as well as external factors (i.e., environment)

8. An example (NY World trade center attack) • Airline industry • Continental Airlines lay off 12, 000 workers • Insurance industry • Sports industry • Entertainment • Stock market • World economy • More …

9. Contingent approach to management • More complicated view of management activities • Intervening factors (i.e., contingency variables) affect management performance • Some contingency factors include size of the company, personal factors, economic factors, etc.

10. Questions raised • Are there any universal best management practices? • How to evaluate management performance?

11. How the economic development affects management practices • Alvin Tofflier’s three waves • Agriculture • Industrialization • New Economy

12. First wave • Most people engaged in agriculture-related jobs • Low productivity (productivity constrained by the natural environment, handwork using simple tools) • Family management (small scale with the aim to meet the basic living needs)

13. Second wave • Advent of machines, mass production, and efficient transportation • New group of workers: blue-collar workers • Labor and capital are two forces for the economic growth • Management theories emerged (effectiveness and efficiency)

15. What is new economy? The term New Economy refers to a set of qualitative and quantitative changes that have transformed the structure, functioning, and rules of the economy. The New Economy is a knowledge and idea-based economy where the keys to job creation and higher standards of living are innovative ideas and technology embedded in services and manufactured products. It is an economy where risk, uncertainty, and constant change are the rule, rather than the exception.

16. More people work in offices and provide services • 93 million workers (80% workforce in the U.S.) process or generate information, or provide services to people • Since 1969, virtually all jobs lost in goods production and distribution sectors have been replaced by office jobs.

19. High-wage, high-skill Jobs have grown, but so have low-wage, low-skill jobs • While there were fewer than 5,000 computer programmers in America in 1960, there are over 1.3 million today. • While the share of jobs requiring moderate-term training is expected to decline by 1.1 percent, the share of jobs requiring only short-term training (e.g., cashiers, janitors, and waiters) is expected to decline only 0.3 percent.

21. Trade is an increasing share of the New Economy • The dramatic expansion of trade means more robust competition, which makes constant innovation more critical to success. • World economy is transforming from a series of local industries locked in closed national economies to a system of integrated global markets contested by global players.

23. Foreign Direct Investment (FDI) is on the rise around the world • FDI includes corporate activities such as business building plants or subsidiaries in foreign countries, and buying controlling stakes or shares in foreign companies. • FDI describes the extent to which businesses invest all the over the globe to access markets, technology, and talent.

25. The Economy is spawning new, fast-growing entrepreneurial companies • The degree to which the economy is composed of new rapidly growing firms is indicative of innovative capacity. • Not just small firms, but also “Gazelles” (companies with sales growth for at least 20 percent per year for four straight years)

28. Fierce business competition • Increased competition is being driven by many factors, including the emergence of a global market, the increased number of firms, new technology that makes it easier for firms to enter a new market, and pressures to raise shareholder value. • In 1965, IBM faced 2,500 competitors for all its markets. By 1992, it faced 50,000.

31. “Coopetition”: collaboration among competitors • Collaborative dynamic of networks, partnerships, and joint ventures is a main organizing principle in the New Economy. • Social capital (network, shared norms, and trust) is as important as physical capital (plant, equipment)) and human capital (intellect and training) in driving innovation and growth.

33. The New Economy is constantly churning • As the number of firms being born and dying every year, there is a constant churning of job creation and destruction. • Turbulent environment is a major driver of economic innovation and growth.

35. Consumer choices are exploding • “You can have a Model T in any color as long as it’s black.” – not in the New Economy • Flexible and agile (constantly developing new products and services to gain a new market). An example is Dell’s make-to-order

37. Speed is becoming the standard • The ability to innovation and get to market faster is becoming a more important determinant of competitive advantage.

39. Autos: 6 years in 1990, now 2 years • 77% of Hewlett Packard’s revenues are from products less than 2 years old • IBM had over 30% of its 1995 patents incorporated into products by 1995.

40. Microchips are everywhere • Cars, phones, kitchen appliances, medical services, etc. • Impacts: convenient, comfortable, speedy, accurate, and efficient.

42. Computing costs are plummeting • Moore's Law (named after Gordon Moore, a founder of Intel), which says that the processing power of microchips doubles every 18 months, has a corollary: the cost of computing is dropping by nearly 25 percent per year. • By 1985, the 386 cost 0.11 cents per transistor and $50 per million instruction per second (MIPS). Ten years later, the Pentium Pro's introductory price amounted to 0.02 cents per transistor, and $4 per MIPS. And the prices are expected to continue to fall.

44. Data transmission costs are plummeting • The dropping cost of data transmission enables the instantaneous global communications. • Technologies for transmitting data are also getting more and more powerful. For example, technology recently developed by Lucent transmits 3.2 terabits -which is approximately equal to 90,000 volumes of an encyclopedia- per second.

45. Managerial challenges • Managing diversity • Managing change • Customer-centered • Social responsibility

46. Managing diversity • Cultural differences • Geert Hofstede’s culture dimensions: individualism, power distance, uncertainty avoidance, and quantity versus quality of life • Does culture change?

47. How to make people from different culture background work together? • Policies and regulations (no discrimination toward minority) • Flexible work arrangements (flexible working hours, telecommuting, parent leave, etc.) • Various training programs (language and skills) • Managers’ attitudes and behaviors (respect culture and religious differences)

48. Managing change • Why change: • Increased competition (e.g., new entrants) • Globalization • Technological change • Policy change

49. How to manage change • Continuous change • Quantum change (work process engineering) • Retain core employees • Create a flexible and responsive system (part-time workers, contract workers, etc.) • Creating innovative working environment (encourage intrapreneurs, continuous training and education, etc.)

50. Customer-oriented • Retain customers and enhance customer loyalty • Increase product quality (TQM) • Produce unique products