MBA MCO101 Unit 10 Lecture 11 200806 Xx

MCO 101 • MANAGEMENTUnit 10: Operations Management.

Entrepreneurship. Innovation. Ethics

MANAGEMENT 2MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Managing Expectations

LEARNING OUTCOMES:

At the end of the course, students will be able to:

• Explain fundamental concepts and principles of management including the basic roles, skills, and functions of management

• Discuss the knowledgeable of historical development, theoretical aspects and practice application of managerial process

• Examine the environment, technology, human resources, and organisations in order to achieve high performance

• Discuss the ethical dilemmas faced by managers and the social responsibilities of businesses.

MANAGEMENT 3MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Managing Expectations

SUBJECTS DISCUSSED:

1. Management, Managers and evolution of Management theory

2. Personality traits and diversity3. Organisation, Globalisation and the resulting

environments4. Decision-making and Planning5. Structure and Strategy6. Executing and Controlling7. Human Resources Management as a function8. Motivation, Leadership, Groups and Teams9. Communication10. Operations Management. Entrepreneurship. Innovation

MANAGEMENT 4MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Managing Expectations

TOPIC DETAILS:

After going through UNIT 10, you should be able to:

1. explain the functions that exists within a business environment

2. describe how various units interact to achieve the organizational goals.

3. explain why innovation matters to companies. 4. discuss the different methods that managers can use to

effectively manage innovation in their organizations. 5. explain the ethical dilemma faced by today’s managers in

performing their duties.

MANAGEMENT 5MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Managing Service & Operations Management

Operations Management : Managing the daily production of goods and services.

Key issue faced by Managers - Productivity

HigherProductivity

LowerCosts

LowerPrices

HigherMarketShare

HigherProfits

HigherStandard

of Living

Increased wages and new jobs

More donations to charities

More affordable and better products

MANAGEMENT 6MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Kinds of Productivity

Partial productivity = OutputsSingle Kind of Input

Multifactor productivity =Outputs

Labor + Capital + Materials + Energy

MANAGEMENT 7MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Quality

BaldrigeNational

Quality Award

TotalQuality

Management

ISO 9000 & 14000

Quality-RelatedProduct

Characteristics

Quality-RelatedService

Characteristics

MANAGEMENT 8MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Meaning of Quality

…A product or service free of deficiencies

…The characteristics of a product orservice that satisfy customer needs

Quality

MANAGEMENT 9MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Quality- Product & ServicesR

elia

bili

ty

ServiceabilityDurability

Product

MANAGEMENT 10MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Total Quality Management

Principles of TQM

Continuous improvement

Teamwork

Customer focus and satisfaction

MANAGEMENT 11MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Service Operations

Services…

• are performed• are intangible• are unstorable

Goods…

• are made• are tangible• are storable

MANAGEMENT 12MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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ServiceRecovery

andEmpowerment

Service Operations

Service-ProfitChain

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The Service-Profit Chain

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Components of Internal Service Quality

Both vertical and horizontal communication?

Do service employees have tools needed?

Are good performers rewarded/recognized?

Does management aid or hinder employees?

Is there teamwork among individuals and departments?

Do they facilitate serving customers?

Is job-specific training available?

Are goals of senior management and frontline service employees aligned?

Policies and Procedures

Tools

Effective Training

Rewards and Recognition

Communication

Management Support

Goal Alignment

Teamwork

MANAGEMENT 15MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Service Recovery and Empowerment

• Service recovery is restoring customer satisfaction to strongly dissatisfied customers– Fixing the mistakes that were made– Performing “heroic” service that delights customers

• Empowering workers can help solve customerdissatisfaction – The goal is zero customer defections

MANAGEMENT 16MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Doing the Right Thing

Protect Your Front-Line Staff:The Customer Isn’t Always Right

Fire customers who use foul language, make threatsagainst employees or other customers, lie, demandunethical or illegal service, bully, or are belligerent

Otherwise, you are saying you care more aboutmoney than the safety of people in the business

MANAGEMENT 17MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Empowering Service Employees

1. Finding service workers capable of solving problems

2. Training service workers

3. Higher wages

4. Less emphasis on service reliability

5. Eagerness to provide “giveaways”

6. Unintentional unfair customer treatment

1. Quicker response to customer complaints

2. Employees feel better

3. Enthusiastic employee interaction with customers

4. Employees offer ideas for improvement and prevention

5. Great word-of-mouth advertising and customer retention

6. Satisfied employees more likely to stay with company

COST BENEFITS

MANAGEMENT 18MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Manufacturing Operations

• Make-to-order operations– manufacturing doesn’t begin

until an order is placed

• Assemble-to-order operations– used to create semi-

customized products

• Make-to-stock operations– manufacture standardized

products

Amount ofProcessing

Flexibilityof Manufacturing

Continuous-flow production

Produces products continuously, like oil drilling

Line-flow production

Uses predetermined, linear steps, like beverage bottling

Batch production

Produces specific quantities of different items, like a bakery or commissary

Job shops Handle small, specialty batches

Project manufacturing

Is for large, expensive, specialized products like aircraft carriers

MANAGEMENT 19MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Why Innovation Matters

1900-1910• airplane, plastic, air

conditioner1911-1920• mammogram, zipper, sonar1921-1930• talking movies, penicillin, jet

engine1931-1940• radar, helicopter, computer1941-1950• atomic bomb, bikini,

transistor1951-1960• DNA, oral contraceptive,

Tylenol

1961-1970• video recorder, handheld

calculator, computer mouse1971-1980• compact disc, gene splicing,

laser printer1981-1990• MS-DOS, space shuttle,

CD-ROM1991-2000• taxol, Pentium processor,

Java2001-Today• mapping of human genome,

first cloning of human embryo

MANAGEMENT 20MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Technology Cycles

Technology Cycle

A cycle that begins with the “birth” of a new technology and ends when that technology reaches its limits and is replaced by a newer, better technology.

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S-Curves and Technological Innovation

Effort

Perf

orm

an

ce

Discontinuity

NewTechnology

A

B

C

Innovation Streams

Patterns of innovation over time that can create sustainable competitive advantage.

Technological Discontinuity

A scientific advance or unique combination of existing technologies that creates a significant breakthrough in performance or function.

MANAGEMENT 22MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Technological Innovation

Discontinuous Change

Dominant Design

Technological Discontinuities

TechnologicalSubstitution

DesignCompetition

MANAGEMENT 23MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Managing Innovation

CreativeWork

Environments

ChallengingWork

Work GroupEncouragement

Lack of Organiz.Impediments

SupervisoryEncouragement

OrganizationalEncouragement

FreedomFlow

MANAGEMENT 24MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Managing Innovation

Steps

Environment

Goals

Approach

Experimental Approach

CompressionApproach

Uncertain discontinuouschange: technological substitution and design competition

Certain incremental changeestablished technology(i.e., dominant design)

Compress time/steps neededto bring about small improvements

PlanningSupplier involvementShorten time of stepsOverlapping stepsMultifunctional teams

Build something new,different, and better

Design iterationsTestingMilestonesMultifunctional teamsPowerful leaders

SpeedLower costsIncremental improvements in performance of dominantdesign

SpeedPerformance ImprovementsNew dominant design

MANAGEMENT 25MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Managing Expectations

TOPIC DETAILS:

After going through this part, you should be able to:

1. Discuss how the nature of management jobs creates the possibility for ethical abuses.

2. Identity common kinds of workplace deviance.3. Describe the U.S. Sentencing Commission Guidelines for

Organisations and explain how they both encourage ethical behaviour and punish unethical behaviour by businesses.

4. Describe what influences ethical decision making.5. Explain what practical steps managers can take to improve ethical

decision making. 6. Explain to whom organisations are socially responsible.7. Explain for what organisations are socially responsible. 8. Explain how organisations can choose to respond to societal demands

for social responsibility.9. Explain whether social responsibility hurts or helps an organisation’s

economic performance.

MANAGEMENT 26MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Ethical and Unethical Workplace Behavior

Ethics

The set of moral principles or values that defines right and wrong for a person or group.

MANAGEMENT 27MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Ethics and the Nature of Management Jobs

Unethical Managerial Behaviour

Authority and Power

Handling Information

Influencing the Behavior of Others

Setting Goals

MANAGEMENT 28MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Ethics and the Nature of Management Jobs

Managers can encourage ethical behaviours by…

• using resources for company business only

• handling information confidentially

• not influencing others to engage in unethical behaviour

• not creating policies that reward employees for unethical behaviour

• setting reasonable goals

MANAGEMENT 29MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Workplace Deviance

Workplace Deviance

Unethical behaviour that violates organisational norms about right and wrong

Two dimensions:• Degree of deviance• Target of deviant behaviour

MANAGEMENT 30MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Types of Workplace Deviance

Production Deviance

Property Deviance

Political Deviance

Personal Aggression

Minor Serious

Organisational

Interpersonal

MANAGEMENT 31MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Production Deviance

• Leaving early

• Taking excessive breaks

• Intentionally working slow

• Wasting resources

MANAGEMENT 32MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Property Deviance

• Sabotaging equipment

• Accepting kickbacks

• Lying about hours worked

• Stealing from company

MANAGEMENT 33MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Political Deviance

• Showing favouritism

• Gossiping about co-workers

• Blaming co-workers

• Competing non-beneficially

MANAGEMENT 34MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Personal Aggression

Sexual harassment Verbal abuse Stealing from co-workers Endangering co-workers

MANAGEMENT 35MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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U.S. Sentencing Commission GuidelinesCompanies can be prosecuted and punished even if management didn’t know about the unethical behaviour.

Who, What, and Why?

• Nearly all businesses are covered

• Punishes a number of offences

• Encourages businesses to be proactive

Partial List of Offences

•Invasion of privacy

•Price fixing

•Fraud

•Customs violations

•Antitrust violations

•Civil rights violations

•Theft

•Money laundering

•Conflicts of interest

•Embezzlement

•Dealing in stolen goods

•Copyright infringements

•Extortion ……and more!!!

Partial List of Offences

•Invasion of privacy

•Price fixing

•Fraud

•Customs violations

•Antitrust violations

•Civil rights violations

•Theft

•Money laundering

•Conflicts of interest

•Embezzlement

•Dealing in stolen goods

•Copyright infringements

•Extortion ……and more!!!

MANAGEMENT 36MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Compliance Program Steps

1. Establish standards and procedures.

7. Improve program after violations.

6. Enforce standards consistently and fairly.

5. Train employees on standards and procedures.

3. Delegate decision-making authority only to ethical employees.

4. Encourage employees to report violations.

2. Assign upper-level managers to be in charge. Revise

if req

uire

d

MANAGEMENT 37MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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How Do You Make Ethical Decisions?

Influences on Ethical Decision Making

EthicalEthicalAnswersAnswersDepend Depend

on…on…

Ethical Intensity of Decision

Moral Development of Manager

Ethical Principles Used

MANAGEMENT 38MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Ethical Intensity Depends on…

Concentration of effect

Magnitude of consequences

Social consensus

Probability of effect

Proximity of effect

Temporal immediacy

MANAGEMENT 39MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Moral Development

Societal ExpectationsSelfish

InternalisedPrinciples

Pre conventional Conventional Post conventional

Kohlberg’s Stages of Moral Development

1. Punishment andObedience

2. InstrumentalExchange

3. Good boy, nice girl

4. Law and order

5. Social contract

6. Universalprinciple

MANAGEMENT 40MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Principles of Ethical Decision Making

Long-term self-interest

Personal virtue

Religious injunctions

Government requirements

Utilitarian benefits

Individual rights

Distributive justice

Never take any action not in your organisation’s long-term self-interest.

Never do anything that is not honest, open, and truthful and that you would not be glad to see reported in the newspapers or on TV.

Never take any action that is not kind and that does not build a sense of community.

Never take any action that violates the law, for the law represents the minimal moral standard.

Never take any action that does not result ingreater good for society.

Never take any action that infringes on others’ agreed-upon rights.

Never take any action that harms the least among us: the poor, the uneducated, the unemployed.

MANAGEMENT 41MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Practical Steps to Ethical Decision Making

Select and hire ethical employees

Establish a Code of Ethics

Train employees to make ethical decisions

Create an ethical climate

Studies show that Integrity Tests…• Help reduce workplace deviance• Help hire workers who are better

performers

• Communicate code of ethics to both inside and outside the company

• Develop ethical standards and proceduresspecific to business

• Develops employee awareness of ethics

• Achieves credibility with employees• Teaches a practical model of ethical

decision making

Managers must:• Act ethically• Are active in company ethics

programs• Report potential ethics violations• Punish those who violate the code

of ethics

MANAGEMENT 42MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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A Basic Model of Ethical Decision Making

1. Identify the problem

2. Identify the constituents

3. Diagnose the situation

4. Analyse your options

5. Make your choice

6. Act

MANAGEMENT 43MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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What Is Social Responsibility?

Social Responsibility: A business’s obligation to…

•pursue policies

•make decisions

•take actions that benefit society

MANAGEMENT 44MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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To Whom Are Organisations Socially Responsible?

StakeholderModel

Satisfy Interests of Multiple

Stakeholders

ShareholderModel

Maximize Profits

PRO• Firm maximises shareholder wealth and

satisfaction• The company stock increases in value

CON• Organisations cannot act effectively as

moral agents for shareholders• Time, money, and attention diverted to

social causes undermine market efficiency

Primary Stakeholders:

ShareholdersEmployeesCustomersSuppliers

GovernmentsLocal Communities

Secondary Stakeholders:

MediaSpecial Interest Groups

Trade Associations

MANAGEMENT 45MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Organisation’s Social Responsibilities

Abide by principlesAbide by principlesof right and wrongof right and wrong

Obey laws andObey laws andregulationsregulations

EthicalEthical

LegalLegal

EconomicEconomic

DiscretionaryDiscretionary

Be profitableBe profitable

Serve a social roleServe a social role

$

?

MANAGEMENT 46MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Responses to Demands for Social Responsibility

Reactive DefensiveAccommo-

dativeProactive

Fight all the way

DO NOTHING

DO MUCH

Withdrawal

Do only what is required

Legal Approach

BargainingProblemSolving

PublicRelationsApproach

Beprogressive

Lead theindustry

MANAGEMENT 47MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights

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Social Responsibility and Economic Performance

Realities ofSocial

Responsibility

Can cost a company

Sometimes it does pay

Does not guarantee profitability