Management Fundamentals: Strategy, Leadership & HR Concepts

Environmental Analysis and Corporate Culture

Many managers are surprised by environmental changes because those changes happen gradually. Managers often fail to take the time to analyze the external environment, so changes that have been occurring do not register until they are significant and already having an impact on the business. By this point, the adaptation process becomes far more difficult. There will always be some changes that are too difficult to anticipate — the terrorist attacks of September 11, 2001 being one example. The possibility of such an attack was very remote, so a manager would not have had cause to prepare for it. Moreover, it is less the attack itself than its downstream impact on business that can be anticipated. Airlines may have contingency plans for a slowdown in business, but not a slowdown as severe as what occurred in the wake of those attacks.

The most important forces in the external environment are the state of the economy, the pace of technological change, shifts occurring in global trade patterns, and pending resource constraints. Most of these forces arise in the general environment. One force that arises in the task environment is the pace of technological change. Although there is a general dimension to this, the pace of change will vary depending on the industry, the product, and the economy in question.

Symbols help to reinforce corporate culture (Rafaeli & Worline, 1999). They provide a common framework that helps define what the company is, how it conducts its business, and what it represents. Stories, ceremonies, and heroes all carry strong cultural value. FedEx reinforces its culture with stories of company heroes from the 1970s in order to teach new employees the values expected of them. These stories and heroes provide a powerful framework for new workers to understand their expectations within the organization.

Each foreign market entry strategy carries certain advantages and disadvantages. Exporting allows a company to utilize local distribution channels but gives the company little control and modest market presence, though it permits easy exit. Licensing allows for greater market penetration and local production but has lower profit potential and removes a significant degree of control. Wholly-owned subsidiaries are costly to establish and do not allow the company to maximize local knowledge; however, they give the company the greatest degree of control over the market entry. Subsidiaries also carry the highest exit costs and are less scalable than other forms of market entry.

The cultural value of individualism refers to the degree to which the individual is valued in a culture versus the collective. Power distance is the "degree to which the less powerful members of organizations accept that power is distributed unequally" (Geert-Hofstede.com, 2009). A high power distance culture features strong divisions between leaders and followers, while a low power distance culture places more decision-making authority in the hands of junior members.

These Hofstede cultural dimensions can significantly impact organizations. In highly individualistic cultures, it may be more difficult to build successful teams because members are less inclined to sacrifice personal interests for the group. In teams with high power distance, junior members may be unwilling to make decisions, concentrating authority at the top. When organizations holding different cultural values come together, significant cultural misunderstandings can arise.

Market Entry Strategies and Cultural Dimensions

When resistance to a cost-cutting initiative is anticipated, senior management should communicate the strategy clearly at the leadership level first. Resistance in these situations is inevitable, but it is more manageable when workers understand the rationale for cost-cutting and the consequences of inaction. It then falls to the middle manager to communicate the necessity of these changes to workers while seeking visible backing from senior managers. Resistance directed at the middle manager may not be eliminated, but strong upper management visibility on the issue can temper outright hostility.

There are four components in a SWOT analysis — strengths, weaknesses, opportunities, and threats (QuickMBA.com, 2007). Strengths and weaknesses are internal variables identified through internal analysis of the company. An analysis of the external environment helps identify the opportunities and threats that exist.

Porter's Five Forces are the power of buyers, the power of suppliers, the intensity of rivalry within the industry, the threat of new entrants, and the threat of substitutes. These are the forces that determine the profitability potential of an industry (Porter, 2008). The power of buyers can be derived from buyer volume or from the importance of the company to the buyer. The power of suppliers can stem from the presence of substitute inputs or the differentiation of inputs. The intensity of rivalry is determined by industry concentration and exit barriers. The threat of new entrants is shaped by government policy and capital requirements. The threat of substitutes is influenced by buyer inclination to substitute and by switching costs (QuickMBA, 2007).

Internal forces for change are those forces that originate within the firm, while external forces are those that act on the firm from the outside. For example, an internal force would be a new CEO; an external force would be the entry of a new competitor. The main forces for change in a university would be external, since universities are internally conservative institutions in which the pace of change is relatively slow. In a pharmaceutical firm, external forces are also dominant, though internal forces such as technological developments, new product directions, and leadership changes carry more weight. However, external forces such as the regulatory environment, competitive pressure, and outside research are probably stronger overall.

Organizations experience resistance to change for a number of reasons, including cultural inertia, entrenched interests, and a poor understanding of the proposed change. Employees are often particularly concerned with how a change will affect them personally (Gehrke, 2010). Managers can use several techniques to overcome this resistance: communicating the rationale for the change clearly, being specific about its impacts, establishing a common vision for the company, and involving the organization in the change discussion (Gehrke, 2010).

Strategic Analysis: SWOT and Porter's Five Forces

Lewin's force field analysis examines a change initiative from the perspective of the forces driving the change and those resisting it. Forces are rated as weak, moderate, or strong, and it is the balance of these forces that will determine whether the change effort succeeds (Lewin, 2010). For example, corporate leadership driven by poor firm performance may be a driving force, while entrenched internal interests may resist it. External forces can also resist change — if a firm is failing because competitors have superior technology, that technological disadvantage is simultaneously driving the need for change and presenting a barrier to achieving it.

The first point to emphasize regarding equal employment is that it is subject to a number of laws that must be upheld throughout the hiring process. Understanding equal employment law is critical to ensuring the company does not face lawsuits in the future. The second point is that equal employment delivers tangible benefits to the company through the value of diversity. The law provides the "stick" for companies, while the benefits of increasing diversity provide the "carrot" for equal employment programs.

In determining a compensation plan for a textile factory, the focus should be on how the plan motivates employees and what is permissible under law. If maximizing worker output is the priority, a pay-for-performance scheme would be appropriate. If safety and quality are the primary concerns, a job-based plan might work better. In a restaurant, a job-based plan would be most suitable because different jobs make different contributions to the operation. For salespeople at an insurance company, the choice depends on what the program is designed to motivate. If pure sales numbers are the only consideration, pay for performance works best; if customer service is important, a skill-based system would compensate representatives based on the attributes they bring to the role.

Exit interviews help HR management understand why an employee is leaving and assist the employee through the departure process. The exit interview should address the employee's reasons for leaving, areas of satisfaction and dissatisfaction, how well the company fulfilled their career goals, the quality of supervision received, and other areas where the conversation can help the company improve its processes, policies, and working environment (Niznik, 2010).

To change employee behavior, a manager should seek to change the employee's cognitions first, since cognitions underlie both affect and behavior. It is important for managers to understand organizational behavior because they are responsible for guiding that behavior in directions that support the organization's objectives. Knowledge of organizational behavior is especially important at lower management levels, where managers deal directly with the organization's rank and file. Higher-level managers dedicate more time to strategy formulation and environmental analysis, while lower-level managers are responsible for implementing those strategies — a task that requires direct engagement with the human elements of the organization.

Change Management and Organizational Resistance

Of the four components of emotional intelligence, motivation is arguably the most important for managers today. Managers must constantly motivate employees to perform, to subscribe to organizational culture, and to support organizational change. The ability to get results from others is the single most important task in modern management.

Understanding one's own learning style has practical value. A hands-on learner, for example, learns best through physical engagement and doing. Knowing this allows a person to focus learning on their strongest style while also working to develop proficiency in other styles, thereby increasing overall flexibility as a learner.

The elements of the communication process are the message, the messenger, the receiver, the encoding, the decoding, and the channel. A teacher is the messenger, sending a message about leadership theory; students are the receivers. The message is encoded in English using the channel of spoken words, and students must hear the arrangement of words and understand them as the speaker intended. Barriers to upward communication include power distance, lack of channels, insufficient willingness on the part of superiors to invite communication, a perceived lack of need, and physical barriers. Managers who are off-site are particularly difficult to reach; even on-site, organizational culture may inhibit upward communication and adequate channels may not exist.

A program to make managers better communicators should address channels and potential barriers, how to foster upward communication — when to ask for it and how — and how to view issues from the employee's perspective. Managers must ensure that they can receive the messages employees are sending, while also verifying that employees are correctly receiving management's messages. An assessment of the organization's overall communication capabilities should be included as well.

Trait theories of leadership hold that good leaders possess certain innate personality traits — essentially, that leaders are born. Behavioral theories of leadership, by contrast, hold that good leaders demonstrate certain behaviors that can be learned — that leaders can be made (ChangingMinds.org, n.d.).