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EXIT EXAM REVIEW: MANAGEMENT
LAYOUTS
FIXED-POSITION LAYOUT
A fixed-position layout is appropriate for a product that is too large or too heavy to move. For
example, battleships are not produced on an assembly line. For services, other reasons may
dictate the fixed position (e.g., a hospital operating room where doctors, nurses, and medical
equipment are brought to the patient). Other fixed-position layout examples include construction
(e.g., buildings, dams, and electric or nuclear power plants), shipbuilding, aircraft, aerospace,
farming, drilling for oil, home repair, and automated car washes. In order to make this work,
required resources must be portable so that they can be taken to the job for "on the spot"
performance.
PROCESS LAYOUT
Process layouts are found primarily in job shops, or firms that produce customized, low-volume
products that may require different processing requirements and sequences of operations. Process
layouts are facility configurations in which operations of a similar nature or function are grouped
together. As such, they occasionally are referred to as functional layouts. Their purpose is to
process goods or provide services that involve a variety of processing requirements. A
manufacturing example would be a machine shop. A machine shop generally has separate
departments where general-purpose machines are grouped together by function (e.g., milling,
grinding, drilling, hydraulic presses, and lathes). Therefore, facilities that are configured
according to individual functions or processes have a process layout. This type of layout gives
the firm the flexibility needed to handle a variety of routes and process requirements. Services
that utilize process layouts include hospitals, banks, auto repair, libraries, and universities.
PRODUCT LAYOUT
Product layouts are found in flow shops (repetitive assembly and process or continuous flow
industries). Flow shops produce high-volume, highly standardized products that require highly
standardized, repetitive processes. In a product layout, resources are arranged sequentially, based
on the routing of the products. In theory, this sequential layout allows the entire process to be
laid out in a straight line, which at times may be totally dedicated to the production of only one
product or product version. The flow of the line can then be subdivided so that labor and
equipment are utilized smoothly throughout the operation.
BATCH PROCESSING
Executing a series of noninteractive jobs all at one time. The term originated in the days when
users entered programs on punch cards. They would give a batch of these programmed cards to
the system operator, who would feed them into the computer.
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Batch jobs can be stored up during working hours and then executed during the evening or
whenever the computer is idle. Batch processing is particularly useful for operations that require
the computer or a peripheral device for an extended period of time. Once a batch job begins, it
continues until it is done or until an error occurs. Note that batch processing implies that there is
no interaction with the user while the program is being executed.
An example of batch processing is the way that credit card companies process billing. The
customer does not receive a bill for each separate credit card purchase but one monthly bill for
all of that month’s purchases. The bill is created through batch processing, where all of the data
are collected and held until the bill is processed as a batch at the end of the billing cycle.
Another example would be printing a company’s payroll.
The opposite of batch processing is transaction processing or interactive processing. In
interactive processing, the application responds to commands as soon as you enter them.
JOBS
JOB SPECIFICATION: A statement of the minimum acceptable qualifications that an
incumbent must possess to perform a given job successfully. Frequently found in the job
description.
JOB DESCRIPTION: A written statement listing the elements of a particular job or occupation,
e.g., purpose, duties, equipment used, qualifications, training, physical and mental demands,
working conditions, etc.
FLAT ORGANIZATIONAL STRUCTURE
A Flat Organizational Structure is an organizational structure that features relatively few layers
of managers between the top of the corporation and the normal employees.
Applying this organizational concept has a number of benefits:
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More effective and simpler communication processes. Minimal bureaucracy.
Increased flexibility to cope with changing circumstances through more decentralized
authority to take decisions.
Matches the needs of the modern knowledge worker to have more responsibility,
autonomy and authority.
Smaller resource commitments to the task of employee supervision.
Improved customer relation management through more personal contacts and quicker
decision-making.
VERTICAL INTEGRATION
Vertical Integration: form of business organization in which one company controls all stages of
production of a good, from the acquisition of raw materials to the retailing of the final product. A
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current example is the oil industry, in which a single firm commonly owns the oil wells, refines
the oil, and sells gasoline at roadside stations.
HORIZONTAL INTEGRATION
In horizontal integration, by contrast, a company attempts to control a single stage of production
or a single industry completely, which lets it take advantage of economies of scale but results in
reduced competition.
ORGANIZATIONAL STRUCTURES
MATRIX STRUCTURE
In a matrix structure, managers group people and resources in two ways simultaneously: by
function and by product. Employees are grouped by functions to allow them to learn from one
another and become more skilled and productive. In addition, employees are grouped into
product teams in which members of different functions work together to develop a specific
product. The result is a complex network of reporting relationships among product teams and
functions that makes the matrix structure very flexible.
DIVISIONAL STRUCTURE
Most managers of large organizations choose a divisional structure and create a series of
business units to produce a specific kind of product for a specific kind of customer. Each
division is a collection of functions or departments that work together to produce the product.
The goal behind the change to a divisional structure is to create smaller, more manageable units
within the organization.
FUNCTIONAL STRUCTURE
A function is a group of people, working together, who possess similar skills or use the same
kind of knowledge, tools, or techniques to perform their jobs. Manufacturing, sales, and research
and development are often organized into functional departments. A functional structure is an
organizational structure composed of all the departments that an organization requires to produce
its goods or services.
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MOTIVATION
INTRINSIC MOTIVATION: The motivation or desire to do something based on the
enjoyment of the behavior itself rather than relying on or requiring external reinforcement.
EXTRINSIC MOTIVATION: The desire or push to perform a certain behavior based on the
potential external rewards that may be received as a result. (Examples: Grades, money, candy)
GROUPTHINK
Groupthink is a mode of thinking that people engage in when they are deeply involved in a
cohesive in-group, when the members’ striving for unanimity overrides their motivation to
realistically appraise alternative courses of action.
GROUP COHESIVENESS
Group Cohesiveness is the extent to which group members are attracted to and identify with the
group.
CONFORMITY & COMPLIANCE
Two aspects that are important in group behavior are conformity and compliance. Both
conformity and compliance are prevalent in all types of groups, but first is important to point out
the differences between these two types of behavior. Conformity within a group entails members
changing their attitudes and beliefs in order to match those of others within the group. Those that
conform tend to be obedient and compliant. In order to conform, the group member must
attribute someone as having the legitimacy and credibility to lead or influence the group’s
behavior. Without this “leader”, conformity toward the group’s goals will be less prevalent. If a
member of the group fails to conform to the groups needs, he/she would lose credibility with the
rest of the group.
The concept of compliance is similar to conformity, yet slightly different. For compliance to
occur within groups, one must adapt his/her actions to another’s wishes or rules. A person that
conforms must have a disposition that allows him/her to yield to others. Requests for and acts of
compliance occur in everyone’s lives. Simply asking someone to perform a task is a request for
compliance. The most effective method to gain compliance is through rational persuasion and
inspiration. Although this person is asking another to perform a task, he/she is not asking the
person to agree or disagree with the task in question. The person requesting the performance of
the task is not necessarily attempting to change the other’s beliefs, but simply needs or wants the
task to be performed. This notion is what sets conformity and compliance apart. The central
aspect of conformity is that the person being influenced by the group changes his/her attitudes
and/or beliefs while the main point of compliance is the achievement of some specified task.
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SYNERGY
1. The interaction of two or more agents or forces so that their combined effect is greater
than the sum of their individual effects.
2. Cooperative interaction among groups, especially among the acquired subsidiaries or
merged parts of a corporation, which creates and enhanced combined effect.
MANAGEMENT THEORIES
EXPECTANCY THEORY
According to expectancy theory, managers can promote high levels of motivation in their
organizations by taking steps to ensure that expectancy is high (people think that if they try, they
can perform at a high level), instrumentality is high (people think that if they perform at a high
level, they will receive certain outcomes), and valence is high (people desire these outcomes).
EQUITY THEORY
According to equity theory, managers can promote high levels of motivation by ensuring that
people perceive that there is equity in the organization or that outcomes are distributed in
proportion to inputs. Equity exists when a person perceives that his or her own outcome-input
ratio equals the outcome-input ratio of a referent. Inequity motivates people to try to restore
equity.
THEORY X
According to the assumptions of Theory X, the average worker is lazy, dislikes work, and will
try to do as little as possible. Moreover, workers have little ambition and wish to avoid
responsibility. Thus, the manager’s task is to counteract workers’ natural tendencies to avoid
work. To keep the workers’ performance at a high level, the manager must supervise workers
closely and control their behavior by means of “the carrot and stick” – rewards and punishments.
THEORY Y
In contrast, Theory Y assumes that workers are not inherently lazy, do not naturally dislike work,
and, if given the opportunity, will do what is good for the organization. According to Theory Y,
the characteristics of the work setting determine whether workers consider work to be a source of
satisfaction or punishment, and mangers do not need to closely control workers’ behavior to
make them perform at a high level because workers exercise self-control when they are
committed to organizational goals.
OPERANT CONDITIONING THEORY OR REINFORCEMENT THEORY
According to operant conditioning theory, developed by psychologist B. F. Skinner, people learn
to perform behaviors that lead to desired consequences and learn not to perform behaviors that
lead to undesired consequences. Translated into motivation terms, Skinner’s theory means that
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people will be motivated to perform at a high level and attain their work goals to the extent that
high performance and goal attainment allow them to obtain outcomes they desire. Similarly,
people avoid performing behaviors that lead to outcomes they do not desire.
SCIENTIFIC MANAGEMENT
Frederic Winslow Taylor (1856-1915) is the most important of those who began to create a
science of management. Taylor was one of the first to attempt to systematically analyze human
behavior at work. Taylor attempted to do to complex organizations what engineers had done to
machines and this involved making individuals into the equivalent of machine parts. Just as
machine parts were easily interchangeable, cheap, and passive, so too should the human parts be
the same in the Machine model of organizations. This involved breaking down each task to its
smallest unit and to figure out the one best way to do each job. The results were profound.
Productivity under Taylorism went up dramatically.
THE HUMAN RELATIONS MOVEMENT
The Human Relations Movement pushed managers toward gaining participative support of lower
levels of the organization in solving organization problems. The Movement also fostered a more
open and trusting environment and a greater emphasis on groups rather than just individuals.
WEBER’S MODEL OF BUREAUCRACY
The Basic Elements of the Bureaucratic Structure:
 Formal rules and behavior bounded by rules
 Uniformity of operations continuity despite changes in personnel
 Functional division of labor based on functional specialization
 Rational allocation of tasks
 Impersonal orientation
 Membership constitutes a career
 Promotion based on technical competence
 Employment based on merit-no ascribed status
 Qualifications tested
 Proscribed authority-legally defined
 Limited discretion of officers
 Specific sphere of competence
 Legally based tenure
These factors were supposed to ideally result in the ideal bureaucratic organization:
 Authority is rational and legal; authority should be based on position, not on the person in
the position
 Authority stems from the office and this authority has limits as defined by the office
 Positions are organized in a hierarchy of authority
 Organizations are governed by rules and regulations
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HAWTHORNE STUDIES
Elton Mayo was the founder of the Human Relations Movement and of Industrial Sociology. He
carried out research at the Hawthorne Works of the Western Electric Company in Chicago.
He and his team of researchers took a group of six women and segregated them. They then
altered their conditions of work in a number of ways, over a five year period, and observed the
effects on production and the morale of the group. Over the period, changes such as new
payment systems, rest breaks of different sorts and lengths, varying the length of the working
day, and offering food and refreshments were tried. In almost all cases, productivity improved.
At the end of the experiment, Mayo felt that he had proven his point and closed it down,
returning the women to their original conditions, a six day week, with long hours and no rest
breaks or refreshments. Surprisingly, productivity in the group rose to the highest levels yet and
Mayo had to re-think his conclusions.
In the end, he realized that firstly, the women had felt important because they had been singled
out. Secondly, the women had developed good relationships amongst each other and had been
allowed to set their own work patterns. Thirdly, the case of relationship had made for a much
more pleasant working environment.
Mayo decided that work satisfaction must depend, to a large extent, upon the informal social
relationships between workers in a group and upon the social relationships between workers and
their bosses. The effects of the group should never be underestimated.
MANAGEMENT SCIENCE THEORY
Quantitative management utilizes mathematical techniques – such as linear and nonlinear
programming, modeling, simulation, queuing theory, and chaos theory – to help managers
decide, for example, how much inventory to hold at different times of the year, where to locate a
new factory, and how best to invest an organization’s financial capital. IT offers managers new
and improved ways of handling information so that they can make more accurate assessments of
the situation and better decisions.
DECISION MAKING
STRATEGIC DECISION MAKING
Strategic Decision Making is making a long-term plan of action designed to achieve a particular
goal, as differentiated from tactical decision-making.
TACTICAL DECISION MAKING
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Tactical Decision Making depends heavily on real-time information and includes immediate
actions with resources at hand.
GOAL SETTING
Goal Setting involves setting a clear objective and ensuring that every participant is clearly
aware of what is expected from him or her, if this objective is to be achieved. This has a couple
of advantages in that, assuming that the goal is reasonably challenging, all participants will have
to put a substantial effort to achieve that goal. Second, because every member is aware of what is
expected of him or her (high role perception), inadequate effort is likely not to go unnoticed.
COMMUNICATIONS CHANNEL
Channel, in communications (sometimes called communications channel), refers to the medium
used to convey information from a sender (or transmitter) to a receiver.
MISSION STATEMENT
A Mission Statement sums up your organization’s reason for being. It explains your intentions,
priorities, and values to people both inside and outside the group. It can guide you and help you
stay focused on the things that are most important to you. If you ever question whether to take on
a project or choose a particular course of action, you can look back on your mission statement
and see if the proposal is consistent with it.
SWOT ANALYSIS
SWOT Analysis is a simple framework for generating strategic alternatives from a situation
analysis. It is applicable to either the corporate level or the business unit level and frequently
appears in marketing plans. SWOT stands for Strengths, Weaknesses, Opportunities, and
Threats.
INTERNAL ANALYSIS
The internal analysis is a comprehensive evaluation of the internal environment’s potential
strengths and weaknesses. Factors should be evaluated across the organization in areas such as:
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Company culture
Company image
Organizational structure
Key staff
Access to natural resources
Position on the experience curve
Operational efficiency
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Operational capacity
Brand awareness
Market share
Financial resources
Exclusive contracts
Patents and trade secrets
The SWOT Analysis summarizes the internal factors of the firm as a list of strengths and
weaknesses.
EXTERNAL ANALYSIS
An opportunity is the chance to introduce a new product or service that can generate superior
returns. Opportunities can arise when changes occur in the external environment. Many of these
changes can be perceived as threats to the market position of existing products and may
necessitate a change in product specifications or the development of new products in order for
the firm to remain competitive. Changes in the external environment may be related to:
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Customers
Competitors
Market trends
Suppliers
Partners
Social changes
New technology
Economic environment
Political and regulatory environment
The last four items in the above list are macro-environmental variables, and are addressed in a
PEST analysis.
The SWOT analysis summarizes the external environmental factors as a list of opportunities and
threats.
TYPES OF GROUPS AND TEAMS
FORMAL GROUP is a group that managers establish to achieve organizational goals.
INFORMAL GROUP is a group that managers or nonmanagerial employees form to help
achieve their own goals or meet their own needs.
TOP MANAGEMENT TEAM is a group composed of the CEO, the president, and the heads
of the most important departments.
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PLANS
TIME HORIZONS OF PLANS
Plans differ in their time horizons, or intended durations. Managers usually distinguish among
long-term plans, with a horizon of five years or more; intermediate-term plans, with a horizon
between one and five years; and short-term plans, with a horizon of one year or less. Typically,
corporate- and business-level goals and strategies require long- and intermediate-term plans, and
functional-level goals and strategies require intermediate- and short-term plans.
STANDING PLANS
Standing plans are used in situations in which programmed decision making is appropriate.
When the same situations occur repeatedly, managers develop policies, rules, and standard
operating procedures (SOPs) to control the way employees perform their tasks. A policy is a
general guide to action; a rule is a formal, written guide to action; and a standing operating
procedure is a written instruction describing the exact series of actions that should be followed in
a specific situations.
SINGLE-USE PLANS
Single-use plans are developed to handle nonprogrammed decision making in unusual or one-ofa-kind situations.
OPERATING BUDGETS
Operating budget is a budget that states how managers intend to use organizational resources to
achieve organizational goals.
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STRATEGIES
LIQUIDATION
Selling all of a company’s assets, in parts, for their tangible worth is called liquidation.
Liquidation is a recognition of defeat and consequently can be an emotionally difficult strategy.
However, it may be better to cease operating than to continue losing large sums of money.
DIVERSIFICATION
Diversification is the strategy of expanding operations into a new business or industry and
producing new goods or services. Examples of diversification include PepsiCo’s diversification
into the snack-food business with the purchase of Frito Lay, tobacco giant Philip Morris’s
diversification into the brewing industry with the acquisition of Miller Beer, and General
Electric’s move into broadcasting with its acquisition of NBC.
RETRENCHMENT
A corporate-level strategy that seeks to reduce the size or diversity of an organization’s
operations.
TURNAROUND
Turnaround strategies are needed when a business worth rescuing goes into crisis. The objective
is to arrest and reverse the sources of competitive and financial weakness as quickly as possible.
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