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Management Techniques

Part 1

1. Imagine you are sales manager of a company that sells medical supplies to hospitals nationwide. You have 10 salespeople reporting to you. You are responsible for your department achieving a certain level of sales each year. In general terms, how might you go about taking each step in the control cycle?

A typical control cycle includes four steps: setting performance standards, measuring performance, comparing this performance against established standards and establishing deviations from standards, and taking corrective or reinforcement actions.

In order to establish performance standards, it is necessary to set the level of sales to be achieved every year, and the dynamics of expected changes. It might also be useful to set required sales volume for every salesperson, and to determine other characteristics describing sales volumes such as customer base expansion, sales dynamics of key clients, sales effectiveness and coverage. These standards should be set taking into account the required sales level for the department and the dynamics of competitors. Then it is necessary to measure existing level of sales (and its previous dynamics), and to evaluate the performance of the whole department and of every salesperson in particular according to the previously set measures. The majority of these measurements could be done using written reports and analysis of sales data. However, personal observation should also be used to perform qualitative analysis of the situation.

After measuring current performance, the third step would be to evaluate this performance to the set standards. The attention of the salespeople should be focused on significant deviations from the set standards, or at specific factors reducing performance (if such factors are identified). At the fourth step, exceptional situations and significant deviations from the set standards should be corrected, and successful fulfillment should be reinforced. Deviations from standards and successes should be communicated to the salespeople (if there are individual failures, these should be discussed in person). If major corrections are needed in the working process, teamworking should be used. For successful performance, manager should provide incentives to the salespeople, and if they manage to surpass performance levels for all criteria (sales volume, expansion of customer base, sales structure), special bonuses should be offered. In the next period, the whole process should be reviewed again to further improve performance.

2. Besides sales and expenses, identify five other important control measures for a business. Include at least one non-financial measure.

In many companies, production control can be used, where such measures as availability of materials, capacity of equipment and types of machines, and quantities which should be produced are measured. Commonly the measurement for production control takes place in physical units.

Control of financial ratios is used to determine financial stability and perspectives of the company; financial ratio control relates to three categories of ratios: liquidity ratios, leverage ratios and profitability ratios.

Activity-based costing is a modern method of controlling costs and outcomes in a more precise way compared to traditional accounting. Using the evaluation of the value-added activities and their contribution to the added product value, it is possible to have a very accurate measurement of the company’s position and effectiveness.

Another approach to controlling is market control: in this approach, units inside the company act as profit centers and compete with one another. In this system, profit and loss measures are used to establish control.

Clan control (peer norms control) is the system which works in the conditions of empowerment, and allows to build trust and confidence at the workplace. Human resource development, the motivation of employees and their loyalty can be used to measure the effectiveness of empowerment and clan control.

3. Does empowerment imply loss of control? Why or why not ? Thoroughly explain your position.

Empowerment in no case means the loss of control. Such opinion can only exist in highly bureaucratic and rigid systems. In modern business environment, it is necessary to create a flexible environment where employees are empowered to make own decisions and where managers trust in the employees. This trust would not result in the loss of control if corporate culture is based on integrity, high standards and excellence. The managers should strongly encourage correct behaviors, clearly communicate the values and goals of the company, and motivate the employees to participate in the process of reaching the goals of the company. In such conditions, employees are unlikely to act against the company’s interests, and empowering them to make decisions and to participate in strategic processes will result in high flexibility and creativity for the company (and perhaps in a higher level of control compared to bureaucratic system lacking empowerment).

Part 2

1. What examples of technological innovations can you identify ? What forces led to the commercialization of the science behind those technologies ? Did the capability exist before the market demand, or was the demand there before the technology was available ?

It is possible to identify two types of technological innovations: product and process innovation. The examples of process innovations are Walmart RFID tracking system, which allows to optimize logistics, and UPS route optimization system; music recording processes are another great example of process innovation. Numerous examples of product innovation include iPhone and iPod as revolutionary representatives of the telecommunications industry, new electric machines, different consumer products are innovative in their design, content, taste etc.

The forces shaping to the commercialization of science are initially based on the existing needs of people (unsatisfied demand). If the knowledge which could be used to implement this technology is available, then this knowledge is converted into practice, appropriate resources to develop the technology are activated, and if there’s a proper entrepreneurial initiative, the innovation gets commercialized. This is what Apple was successfully using, having excellent entrepreneurial initiative and access to technology which allowed to produce such functional and portable device as iPod. Another example of commercialization of technology was the creation of tablet PCs. It is possible to see that first of all there should be a market demand (perhaps, unmet and unrealized), and then the technology can respond to this demand. However, creating something that does not meet a demand will not be commercially effective, because the demand should be there in the first place.

2. Why would a company choose to follow rather than lead technological innovations ? Is the potential advantage of technological leadership greater when innovations are occurring rapidly, or is it better in this case to follow ?

Being the leader in technological innovation provides a large number of benefits for the company, such as the ability to create new market niches and to shape the demand, the possibility to set a high price premium on the new products (and have a large gain because of early adopters of the technology), and reputation of a successful innovator. Innovations can completely change competitive rules of play in the industry, and technology leaders can be the ones shaping these rules. However, there also are disadvantages of being a technological leader. First of all, the costs of innovation are high, as well as the requirements for the company’s effectiveness, and there always is a high risk of failure. Moreover, to develop the market and to communicate the new product to the customers also is an expensive process, and not all companies can afford this.

Maintaining R&D infrastructure can also be very costly, and as new products will have to be updated and improved, these costs also are absorbed by the technology leader. The costs of innovation may not let the company to produce and sell the product at acceptable prices. Thus, companies which cannot afford to take all these risks, might rather choose to be technology followers. Moreover, they can be successful in their market niche. A vivid example is the strategy of Samsung: they chose to follow Apple’s innovations and to accompany them with similar products, which can be purchased at lower prices. Both low-cost and differentiation strategy have appeared to be successful for Samsung and aligned with their follower strategy.

In the industries which are rapidly changing and where the innovations can easily be copied (this is happening in consumer electronics now, for example), it might be more effective to follow the innovations rather than to pursue them. Thus, the advantage of technological leadership is greater in the situations where innovations are not rapid.

3. If you were in the grocery business whom would you benchmark for technological innovations? Would the companies be inside or outside the industry ?

In the grocery business, the permanent worldwide leader is Walmart, which manages to improve competitiveness and cost-effectiveness even in the times of world financial recession, when consumption decreased and many competitors have experienced significant differences. Thus, if I were in the grocery business, I would choose Walmart for benchmarking, and it would be definitely useful to adopt some techniques allowing Walmart to reach such economy of scale and become cost-effective. If the grocery store were to be small in size, it might be more useful to benchmark against comparable competitors in the first time (however, striving for Walmart-like excellence should still be supposed in future).

It is best to perform benchmarking against the competitors, similar companies operating in the same industry locally and overseas. Most likely, the companies inside the industry should be analyzed; however, in some cases the experience of outside companies can also be adopted for benchmarking, if the standards are comparable. However, these cases are not very widespread, while benchmarking in the same industry is quite an acceptable business practice.

Part 3

Read “Barbara’s World of Windows, Fabrics and Accessories – Home consultant Division” on page 654.

1. You have inherited a company that must make several internal changes to survive and thrive. How would you plan for and manage each of the changes that must occur? Be sure to address both strategic and tactical aspects of your plan.

From the strategic point of view, the company needs to experience significant changes in order to survive and stay competitive. In the case of “Barbara’s world”, it is necessary to develop strategic solutions to existing problems – the lack of good installers, ineffective and exhaustive timing of sales representatives, and the need to expand and meet new market needs. Some of this solutions include hiring more part-time sales representatives located in different areas (and responsible for them), and hiring a separate person to process orders and to make the calculations upon receiving the order. For installers, it might be useful to establish standards of performance and corporate code of behaviour (and appearance). Finally, technology can be used to address the existing problem from strategic point of view; for example, selection of materials and even measurements could be performed online using video conferencing, and typical solutions can be offered for less demanding customers (thus making the purchase process faster). Order collection and optimization of logistics for sales representatives can also be done automatically, thus making the company more cost-efficient.

With regard to tactical steps, the change process should pass the stages of unfreezing-moving-refreezing. It is necessary to communicate the existing problems to the employees and to discuss potential methods of solving existing issues to them. Furthermore, it seems that the installers are not properly motivated, and they should be offered bonuses based on customer feedback. Training programs for installers should also be considered. The process of movement should address the existing issues in parallel, and effectiveness should be improved during a comparatively short period of time. At the stage of refreezing, the new duties and responsibilities should be clearly established, as well as corporate goals and performance incentives.

2. The text lists and describes a number of operational aspects and components; select each of those that are relevant to this case and provide a specific example of a technique that you would incorporate into the new operation.

In the case of “Barbara’s world”, such approaches to stimulating change as education and communication, negotiation and rewards, as well as participation and involvement. Since the employees are not aware of strategic goals, it will be effective to persuade them to move forward and to be proactive in the company’s growth and expansion. Once the employees realize the future of the company and get involved into the change process, they will become very helpful during the transition times. The employees also need participation and involvement in this case: little exchange of information takes place between sales representatives and installers, and most installers are likely to resist the standard promoted by the company. Including employees in the process of designing change will help to generate new ideas for the company.

Finally, the requirements set for installers are not likely to receive their immediate support (since adhering to certain appearance code and ethical standards requires additional effort, and will not directly change their compensation). Here it is necessary to provide specific motivating incentives to them. A particularly effective technique will be to offer additional incentives based on customer feedback, which is likely to motivate installers to be more attentive to the customers.

3.In general, what interpersonal skills and management techniques will you use to successfully effect change ?

The skills needed for change agents include listening and inquiry, visioning and goal-setting, problem-solving, ability to learn on mistakes, etc. Such personal qualities as courage, ability to step out of own comfort zone, honest reflection and lifelong learning are very common for effective change agents. From managerial point of view, change agents should possess leadership skills, coaching and training skills, facilitation skills and should be able to deal with complexity. Change agents should be able to act as catalysts within the organization, and certainly they should master technical skills related to their industry, Such managerial techniques as quality management, time management, six sigma, the unfreeze-refreeze method for implementing changes, and the tools for changing large systems should be mastered if there is a need to effect change (to act as a change agent).