Fundamentals of Management: Decision Making and Organizational Structure - Prof. K. Sauley, Study notes of Introduction to Business Management

Download Fundamentals of Management: Decision Making and Organizational Structure - Prof. K. Sauley and more Study notes Introduction to Business Management in PDF only on Docsity! EXAM 2 OBJECTIVES FROM THE TEXTBOOK (Fundamentals of Management) Chapter 3: Decision-Making 1. What is the sunk costs error? (p. 63)  When decision makers forget that current choices can’t correct the past. They incorrectly fixate on past expenditures of time, money, or effort in assessing choices rather than on future expenditures. Instead of ignoring sunk costs, they can’t forget them. 2. What is the randomness bias? (p. 63 )  Describes when decision makers try to create meaning out of random events. They do this because most decision makers have difficulty dealing with chance even though random events happen to everyone and there’s nothing that can be done to predict them. 3. What is the hindsight bias? (p. 63)  Hindsight bias is the tendency for decision makers to falsely believe that they would have accurately predicted the outcome of an event once that outcome is actually known 4. What is the difference between a procedure, a rule and a policy? (p. 68-69)  A procedure is a series of interrelated sequential steps that a manager uses when responding to a well-structured problem. The only real difficulty is identifying the problem. Once the problem is clear, so is the procedure. For instance, a purchasing manager receives a request from computing services for licensing arrangements to install 250 copies of Norton Antivirus Software. The purchasing manager knows that a definite procedure is in place for handling this decision. Has the requisition been properly filled out and approved? If not, one can send the requisition back with a note explaining what is deficient. If the request is complete, the approximate costs are estimated. If the total exceeds $8,500, three bids must be obtained. If the total is $8,500 or less, only one vendor need be identified and the order placed. The decision making process is merely the execution of a simple series of sequential steps.  A rule is an explicit statement that tells a manager what he or she ought- or ought not – to do. Rules are frequently used by managers who confront a structured problem because they’re simple to follow and ensure consistency. In the preceding example, the $8,500 cutoff rule simplifies the purchasing manager’s decision about when to use multiple bids.  A policy provides guidelines to channel a manager’s thinking in a specific direction. The statement that “we promote from within, whenever possible” is an example of a policy. In contrast to a rule, a policy establishes parameters for the decision maker rather than specifically stating what should or should not be done. It’s at this point that one’s ethical standard will come into play. As an analogy, think of the Ten Commandments as rules and the US Constitution as policy. The latter requires judgement and interpretation; the former does not. Chapter 5: Organizational Structure and Culture 5. What is the customer departmentalization? (p. 126)  The particular type of customer an organization seeks to reach can also dictate employee grouping. The sale activities is an office supply firm, for instance, can be divided into three departments that serve retail, wholesale, and government customers. A large law office can segment its staff on the basis of whether it serves corporate or individual clients. The assumption underlying customer departmentalization is that customers in each departments have a common set of problems and needs that can best be met by a specialists. 6. What is the geographic departmentalization? (p. 126)  Another way to departmentalize is on the basis of geography or territoru – geographic departmentalization. The sales function might have western, southern, Midwestern, and eastern regions. If an organization’s customers are scattered over a large geographic area, this form of departmentalization can be valuable. For instance, the organization structure of Coca-Cola reflects the company’s operation in two broad geographic areas – the North American sector and the international sector (which includes the Pacific Rim, the European Community, Northeast Europe and Africa, and Latin America) 7. What is process departmentalization? (p. 126-127)  The final form of departmentalization is called process departmentalization, which groups activities on the basis of work or customer flow – like that found in many states motor vehicle offices or in health care clinics. Units are organized around common skills needed to complete a certain process. If you’ve ever been to a state motor vehicle office to get a driver’s license, you’ve probably experiences process departmentalization. With separate departments to handle applications, testing, information and photo processing, and payment collection, customer “flow” through the various departments in sequence to get their licenses. 8. What is a cross-functional team? (p. 127)  Cross-functional teams which are teams made up of individuals from various departments and that cross traditional departmental lines. 9. What is a mechanistic organization? (p. 134)  The mechanistic organization (or bureaucracy) was the natural result of combining the six elements of structure. Adhering to the chain-of-command principle ensured the existence of a formal hierarchy of authority, with each person controlled and supervised by one superior. Keeping the span of control small at increasingly impose rules and regulations. Because top managers couldn’t control lower-level activites through direct observation and ensure the