Richard L. Daft - Management. 9th ed., 2010
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620 Appendix A
3. Why would small business ownership have great
appeal to immigrants, women, and minorities?
4. Consider the six personality characteristics of
entrepreneurs. Which two traits do you think are
most like those of managers in large companies?
Which two are least like those of managers in large
companies?
5. How would you go about deciding whether you
wanted to start a business from scratch, buy an
existing business, or buy into a franchise? What
information would you collect and analyze?
6. Many entrepreneurs say they did little planning,
perhaps scratching notes on a legal pad. How is it
possible for them to succeed?
7. What personal skills do you need to keep your
nancial backers feeling con dent in your new
business? Which skills are most useful when you’re
dealing with more informal sources such as family
and friends versus receiving funds from stockhold-
ers, a bank, or a venture capital rm? Would these
considerations affect your nancing strategy?
8. Many people who are successful at the start-up
stage of a business are not the right people to carry
the venture forward. How do you decide whether
you’re better suited to be a serial entrepreneur (start
the business and then move on to start another) or
whether you can guide the venture as it grows and
matures?
9. How does starting an online business differ from
starting a small business such as a local auto repair
shop or delicatessen? Is it really possible for busi-
nesses that operate totally in cyberspace to build
close customer relationships? Discuss.
10. Do you think entrepreneurs who launched a new
business after deciding to leave a job on their own
versus those who have been forced to leave a job as
a result of downsizing are likely to have different
traits? Which group is more likely to succeed? Why?
MANAGEMENT IN PRACTICE: EXPERIENTIAL EXERCISE
What’s Your Entrepreneurial IQ?
Rate yourself on the following 15 behaviors and char-
acteristics, according to the following scale.
1 Strongly disagree
2 Disagree
3 Agree
4 Strongly agree
1. I am able to translate ideas into concrete tasks and
outcomes.
1 2 3 4
2. When I am interested in a project, I tend to need
less sleep.
1 2 3 4
3. I am willing to make sacri ces to gain long-term
rewards.
1 2 3 4
4. Growing up, I was more of a risk-taker than a cau-
tious child.
1 2 3 4
5. I often see trends, connections, and patterns that
are not obvious to others.
1 2 3 4
6. I have always enjoyed spending much of my time
alone.
1 2 3 4
7. I have a reputation for being stubborn.
1 2 3 4
8. I prefer working with a dif cult but highly com-
petent person to working with someone who is
congenial but less competent.
1 2 3 4
9. As a child, I had a paper route, lemonade stand, or
other small enterprise.
1 2 3 4
10. I usually keep New Year’s resolutions.
1 2 3 4
11. I’m not easily discouraged, and I persist when
faced with major obstacles.
1 2 3 4
12. I recover quickly from emotional setbacks.
1 2 3 4
13. I would be willing to dip deeply into my “nest
egg”—and possibly lose all I had saved—to go it
alone.
1 2 3 4
14. I get tired of the same routine day in and day out.
1 2 3 4
15. When I want something, I keep the goal clearly in
mind.
1 2 3 4
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621Managing Small Business Start-Ups
Scoring and Interpretation
Total your score for the 15 items. If you tallied 50–60
points, you have a strong entrepreneurial IQ. A score
of 30–50 indicates good entrepreneurial possibili-
ties. Your chances of starting a successful entrepre-
neurial business are good if you have the desire and
motivation. If you scored below 30, you probably do
not have much entrepreneurial potential.
Go back over each question, thinking about
changes you might make to become more or less
entrepreneurial, depending on your career interests.
MANAGEMENT IN PRACTICE: ETHICAL DILEMMA
Closing the Deal
As the new, heavily recruited CEO of a high-
technology start-up backed by several of Silicon
Valley’s leading venture capitalists, Chuck Campbell
is ying high—great job, good salary, stock options,
and a chance to be in on the ground oor and build
one of the truly great twenty- rst–century organiza-
tions. Just a few days into the job, Chuck participated
in a presentation to a new group of potential inves-
tors for funding that could help the company expand
marketing, improve its services, and invest in growth.
By the end of the meeting, the investors had verbally
committed $16 million in funding.
But things turned sour pretty fast. As Chuck was
leaving about 9 p.m., the corporate controller, Betty
Mars, who just returned from an extended leave, cor-
nered him. He was surprised to nd her working so
late, but before he could even open his mouth, Betty
blurted out her problem: The numbers Chuck had
presented to the venture capitalists were awed. “The
assumptions behind the revenue growth plan are
absolutely untenable,” she said. “Not a chance of ever
happening.” Chuck was stunned. He told Betty to get
on home and he’d stay and take a look at the gures.
At 11 p.m., Chuck was still sitting in his of ce
wondering what to do. His research showed that the
numbers were indeed grossly exaggerated, but most
of them were at least statistically possible (however
remote that possibility was!). However, what really
troubled him was that the renewal income gure was
just at-out false—and it was clear that one member
of the management team who participated in the
presentation knew it was incorrect all along. To make
matters worse, it was the renewal income gure
that ultimately made the investment so attractive to
the venture capital rm. Chuck knew what was at
stake—no less than the life or death of the company
itself. If he told the truth about the deceptive num-
bers, the company’s valuation would almost certainly
be slashed and the $16 million possibly canceled.
What Would You Do?
1. Say nothing about the false numbers. Of course,
the company will miss the projections and have
to come up with a good explanation, but, after all,
isn’t that par for the course among edgling high-
tech companies? Chances are the whole thing will
blow over without a problem.
2. Go ahead and close the deal, but come clean
later. Explain that the controller had been on an
extended leave of absence and, because you had
been on the job only a few days, you had not had
time to personally do an analysis of the numbers.
3. Take swift action to notify the venture capitalists of
the truth of the situation—and start cleaning house
to get rid of people who would knowingly lie to
close a deal.
SOURCE: Adapted from Kent Weber, “The Truth Could Cost You
$16 Million,” Business Ethics (March–April 2001): 18.
CASE FOR CRITICAL ANALYSIS
Emma’s Parlor
Emma Lathbury’s shoulders sagged as she ipped
the cardboard sign hanging in the window of her
tearoom’s front door from “Open” to “Closed.” The
normally indefatigable 52-year-old owner of Emma’s
Parlor was bone-tired. Any doubts she’d harbored
about the wisdom of seriously considering some
major changes in her business were fast disappearing.
She hadn’t felt this weary since she’d left nurs-
ing in the early 1990s. After years of working as an
intensive care nurse—with its grueling hours, emo-
tionally draining work, and lack of both respect and
622 Appendix A
autonomy—she’d developed a bad case of burnout.
At the time, she was convinced she could walk away
from a secure, if dif cult, profession and gure out a
way of making a living that suited her high-energy,
outgoing personality. Then one day, she noticed an
1870s-vintage Gothic Revival cottage for sale in the
small Illinois farming community near where she’d
grown up, and the answer to her dilemma came to
her with a startling clarity. She’d get the nancing,
buy the house, and open up a cozy Victorian tearoom.
Emma was certain she could make it work.
And she had. Her success was due in part to her
unintentionally perfect timing. Specialty teas had
taken off during the 1990s, with no end in sight to
its current double-digit annual growth rate. But of
course the solid performance of Emma’s Parlor owed
a good deal to its owner’s hard work and all those
60- and 70-hour weeks she’d put in, which was more
fun when she worked for herself. She’d personally
chosen the precise shades of purple and plum for the
cottage’s exterior, hung the lace curtains, selected
the fresh owers that graced the small circular
tables, hired the staff, and tracked down and tested
recipes for the nger sandwiches, scones, jams, and
Battenburg cake that earned her glowing reviews
in numerous guidebooks and a national reputation.
Quickly realizing that special events were key to
attracting customers, she organized and publicized
fanciful gatherings that drew everyone from children
toting their favorite stuffed animals to an Alice-in-
Wonderland affair to women dressed in their best
out ts, complete with big oppy hats, to a Midwest
version of a royal garden party. The tearoom, which
now employed about 20 people, was nearly always
completely booked.
Most of all, the former nurse developed a real
expertise when it came to teas, becoming particu-
larly fascinated by the medicinal bene ts of herbal
teas. She started by conducting evening workshops
on the ef cacy of organic teas in treating everything
from a simple upset stomach to menopausal distress.
Eventually, she began blending her own Emma’s
Parlor Organic Teas and selling them to retail stores,
restaurants, and individuals over the Web. As more
and more publicity pointed to the bene ts of tea, her
Web-based business ourished, generating slightly
less revenue than she was realizing from the tearoom.
The pro t margins were higher.
Despite the ful llment she found in running her
own business, it was getting too big for her to handle.
Emma was beginning to experience the all-too-
familiar symptoms of burnout. After she locked the
front door, she made herself a soothing cup of rose-
bud tea, kicked off her sensible shoes, and sat down
to review her options. Maybe she could drop the tea-
room and focus on the Internet business, or vice versa.
She could try to master the ne art of delegation and
turn Emma’s Parlor over to an experienced restaurant
manager, or she could take herself out of the picture
by selling the tearoom outright. Then again, she could
simply close the restaurant or the Internet business.
Questions
1. At what business stage is Emma’s Parlor? At what
stage is her W
eb-based organic tea business? What
synergies exist between the two businesses? How
critical do you think those synergies are to the suc-
cess of each business?
2. How does Emma Lathbury t the pro le of the typ-
ical entrepreneur? Which of those traits are likely
to continue to serve her well, and which might be
counterproductive at this stage of her business?
3. After listing the pros and cons for each of Emma’s
options and considering her personality, which
course of action would you recommend?
SOURCES: Based on Alison Stein Wellner, “Business Was Booming
But the Richardsons Were Seriously Burned Out,” Inc. Magazine (April
2006): 52–54; Mark Blumenthal, “Total Tea Sales in U.S. Forecast for
$10 Billion in 2010,” HerbalGram (2004): 61–62; and TeaMap Tearoom
Directory, http://www.teamap.com.
ENDNOTES
1. Based on Keith M. Hmieleski and
Andrew C. Corbett, “Proclivity for
Improvisation as a Predictor of
Entrepreneurial Intentions,” Journal
of Small Business Management 44,
no. 1 (January 2006): 45–63; and
“Do You Have an Entrepreneurial
Mind?” Inc.com (October 19, 2005).
2. Elizabeth Olson, “They May Be
Mundane, But Low-Tech Businesses
Are Booming,” The New York Times,
April 28, 2005, http://www.nytimes
.com/2005/04/28/business/28sbiz
.html?_r=1&scp=1&sq=They%20
May%20Be%20Mundane,%20
But%20Low-Tech%20
Businesses%20Are%20
Booming&st=cse&oref=slogin; and
“CIBC Report Predicts Canada Will
Be Home to One Million Women
Entrepreneurs By 2010,” Canada
NewsWire (June 28, 2005): 1.
3. U.S. Small Business Administration,
http://www.sba.gov.
Appendix
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623Managing Small Business Start-Ups
4. John Case, “Where We Are Now,”
Inc. (May 29, 2001): 18–19.
5. Amy E. Knaup, “Survival and Lon-
gevity in the Business Employment
Dynamics Database,” Monthly Labor
Review, vol. 128, no. 5 (May 2005):
50–56; Brian Headd, “Redefining
Business Success: Distinguishing
Between Closure and Failure,” Small
Business Economics, vol. 21, no. 1
(August 2003): 51–61.
6. Reported in “Did You Know?” in
J. Neil Weintraut, “Told Any Good
Stories Lately?” Business 2.0 (March
2000): 139–140.
7. U.S. Small Business Administration,
www.sba.gov.
8. John Case, “Who’s Looking at Start-
Ups?” Inc. (May 29, 2001): 60.
9. Donald F. Kuratko and Richard M.
Hodgetts, Entrepreneurship: A Con-
temporary Approach, 4th ed. (Fort
Worth, TX: The Dryden Press, 1998),
p. 30.
10. Steve Stecklow, “StubHub’s Ticket to
Ride,” The Wall Street Journal, Janu-
ary, 17, 2006.
11. Study conducted by Yankelovich
Partners, reported in Mark Henricks,
“Type-Cast,” Entrepreneur (March
2000): 14–16.
12. Olson, “Low-Tech Businesses Are
Booming.”
13. Norm Brodsky, “Street Smarts:
Opportunity Knocks,” Inc. (Febru-
ary 2002): 44–46; and Hilary Stout,
“Start Low,” The Wall Street Journal,
May 14, 2001.
14. U.S. Small Business Administration,
http://www.sba.gov.
15. Global Entrepreneurship Monitor,
“Table 2: Prevalence Rates of Entre-
preneurial Activity Across Countries,
2007,” 2007 GEM Tables and Figures,
Babson College and the London
Business School, March 14, 2008,
http://www.gemconsortium.org/
about.aspx?page=pub_gem_global_
reports.
16. U.S. Small Business Administration,
www. sba.gov.
17. Thuy-Doan Le Bee, “How Small
Is Small? SBA Holds Hearings to
Decide,” The Sacramento Bee, June
29, 2005.
18. U.S. Small Business Administration,
http://www.sba.gov.
19. Barbara Benham, “Big Government,
Small Business,” Working Woman
(February 2001): 24.
20. Research and statistics reported in
“The Job Factory,” Inc. (May 29,
2001): 40–43.
21. Ian Mount, “The Return of the Lone
Inventor,” FSB (March 2005): 18;
Offi ce of Advocacy, U.S. Small Busi-
ness Administration, www.sba.gov/
advo.
22. John Case, “The Origins of En-
trepreneurship,” Inc. (June 1989):
51–53.
23. Jeanette Borzo, “Taking on the
Recruiting Monster,” Business 2.0
(January/February 2007): 44.
24. Kauffman Foundation, http://www
.kauffman.org.
25. “Small Business Ambassador,” FSB
(February 2007): 28.
26. U.S. Small Business Administration,
www.sba.gov; “CIBC Report Predicts
Canada Will Be Home to One Mil-
lion Women Entrepreneurs by 2010,”
Canada NewsWire (June 28, 2005): 1.
27. U.S. Small Business Administration,
www.sba.gov.
28. Statistics reported in Cora Daniels,
“Minority Rule,” FSB (December
2003–January 2004): 65–66; Elizabeth
Olson, “New Help for the Black
Entrepreneur,” The New York Times,
December 23, 2004; and David J.
Dent, “The Next Black Power Move-
ment,” FSB (May 2003): 10–13.
29. Ellyn Spragins, “Pat Winans” profi le,
and Cora Daniels, “Ed Chin” profi le,
in “The New Color of Money,” FSB
(December 2003–January 2004):
74–87.
30. This discussion is based on Charles
R. Kuehl and Peggy A. Lambing,
Small Business: Planning and Man-
agement, 3rd ed. (Ft. Worth, TX: The
Dryden Press, 1994).
31. David C. McClelland, The Achieving
Society (New York: Van Nostrand,
1961).
32. Paulette Thomas, “Entrepreneurs’
Biggest Problems—and How They
Solve Them,” The Wall Street Journal
(March 17, 2003).
33. Defi nition based on Albert R. Hunt,
“Social Entrepreneurs: Compas-
sionate and Tough-Minded,”
The Wall Street Journal (July 13,
2000); David Puttnam, “Hearts
Before Pockets,” The New States-
man (February 9, 2004): 26; and
Christian Seelos and Johanna Mair,
“Social Entrepreneurship: Creating
New Business Models to Serve the
Poor,” Business Horizons 48 (2005):
241–246.
34. Cheryl Dahle, “Filling the Void:
The 2006 Social Capitalist Award
Winners,” Fast Company (January–
February 2006): 50–61.
35. Putnam, “Hearts Before Pockets.”
36. Jessica Harris, “Ethics in a Bottle,”
FSB (November 2007): 44.
37. Cheryl Dahle, “The Change Mas-
ters,” Fast Company (January 2005):
47–58; David Bornstein, How to
Change the World: Social Entrepre-
neurs and the Power of New Ideas
(Oxford: Oxford University Press,
2004).
38. James Flanigan, “Small Businesses
Offer Alternatives to Gang
Life,” The New York Times,
March 20, 2008, http://www
.nytimes.com/2008/03/20/business/
smallbusiness/20edge.html
(accessed June 23, 2008).
39. Leslie Brokaw, “How to Start an
Inc. 500 Company,” Inc. 500 (1994):
51–65.
40. Interview with Phaedra Hise, “A
Chance to Prove My Worth,” FSB
(February 2007): 26.
41. Paul Reynolds, “The Truth about
Start-Ups,” Inc. (February 1995): 23;
Brian O’Reilly, “The New Face of
Small Businesses,” Fortune (May 2,
1994): 82–88.
42. Based on Ellyn E. Spragins, “How
to Write a Business Plan That Will
Get You in the Door,” Small Business
Success (November 1990); Linda
Elkins, “Tips for Preparing a Business
Plan,” Nation’s Business (June 1996):
60R–61R; Carolyn M. Brown, “The
Do’s and Don’ts of Writing a Win-
ning Business Plan,” Black Enterprise
(April 1996): 114–116; and Kuratko
and Hodgetts, Entrepreneurship,
295–397. For a clear, thorough, step-
by-step guide to writing an effective
business plan, see Linda Pinson and
Jerry Jinnett, Anatomy of a Business
Plan, 5th ed. (Virginia Beach, VA:
Dearborn, 2001).
43. The INC. FAXPOLL, Inc. (February
1992): 24.
44. Duncan MacVicar, “Ten Steps to a
High-Tech Start-Up,” The Industrial
Physicist (October 1999): 27–31.
45. “Venture Capitalists’ Criteria” Man-
agement Review (November 1985):
7–8.
46. “Staples Makes Big Business
from Helping Small Businesses,”
SBA Success Stories, www.
sba.gov/successstories.html
(accessed on March 12, 2004);
624 Appendix A
http://www.staples.com/sbd/
content/about/media/o
verview.html
(accessed July 16, 2008).
47. Elizabeth Olson, “From One Busi-
ness to 23 Million,” The New York
Times, March 7, 2004, http://query.
nytimes.com/gst/fullpage.html?r
es=9C03E6D6113FF934A35750C0A
9629C8B63 (accessed July 16, 2008).
48. “Where the Venture Money Is Go-
ing,” Business 2.0 (January–February
2004): 98.
49. Gary Rivlin, “Does the Kid Stay in
the Picture?” The New York Times,
February 22, 2005.
50. Dent, “The Next Black Power
Movement.”
51. Kristen Hampshire, “Roll With It,”
FSB (November 2005): 108–112;
Jennifer Maxwell profi le in Betsy
Wiesendanger, “Labors of Love,”
Working Woman (May 1999): 43–56;
Jena McGregor, Taryn Rose profi le in
“25 Top Women Business Builders,”
Fast Company (May 2005): 67–75.
52. Wendy Lea, “Dancing with a Part-
ner,” Fast Company (March 2000):
159–161.
53. Matt Richtel, “Outsourced All the
Way,” The New York Times, June 21,
2005, www.nytimes.com.
54. International Franchise Association,
http://www.franchise.org/ (accessed
June 23, 2008).
55. Quinne Bryant, “Who Owns 20+
Subway Franchises?” The Business
Journal of Tri-Cities Tennessee/
Virginia (August 2003): 42–43.
56. For a current discussion of the risks
and disadvantages of owning a
franchise, see Anne Fisher, “Risk
Reward,” FSB (December 2005–
January 2006): 44.
57. Anne Field, “Your Ticket to a New
Career? Franchising Can Put Your
Skills to Work in Your Own Busi-
ness,” in Business Week Investor:
Small Business section, Business-
Week (May 12, 2003): 100+; and
Roberta Maynard, “Choosing a
Franchise,” Nation’s Business
(October 1996): 56–63.
58. Darren Dahl, “Getting Started:
Percolating Profi ts.” Inc. (February
2005): 38.
59. 2006 fi gures from the National Busi-
ness Incubation Association http://
www.nbia.org/resource_center/
bus_inc_facts/index.php/ (accessed
July 16, 2008).
60. Oringel, “Sowing Success.”
61. Laura Novak, “For Women, a
Recipe to Create a Successful
Business,” The New York Times,
June 23, 2007, http://www.nytimes
.com/2007/06/23/business/
smallbusiness/23cocina.html?_
r=1&sq=Laura%20Novak,%20
“For%20Women,%20a%20
Recipe%20to%20Create%20a%20
Successful%20Business&st=
cse&adxnnl=1&oref=slogin&scp=
1&adxnnlx=1225894278-
APkyZ4kswGDrm3QtejIg6A
(accessed June 23, 2008).
62. Sue Shellenbarger, “The Job That
Follows You Wherever You May
Roam,” The Wall Street Journal On-
line, http://online.wsj.com/public/us
(accessed July 10, 2008).
63. Chuck Salter, “Girl Power,” Fast
Company (September, 2007): 104.
64. Ellen Simon, “Starting Simple,” The
Miami Herald, November 13, 2007.
65. Jason R. Rich, Unof cial Guide to
Starting a Business Online, 2nd ed.
(New York: Wiley Publishing, 2006),
p. 116.
66. Ellen Reid Smith, “e-loyalty: How
to Keep Customers Coming Back to
Your Website,” HarperBusiness,
p. 19.
67. Ibid, p. 127.
68. Susan G. Hauser, “Nagging for Dol-
lars,” FSB (September 2007): 76.
69. Carrie Dolan, “Entrepreneurs Often
Fail as Managers,” The Wall Street
Journal, May 15, 1989.
70. George Mannes, “Don’t Give Up on
the Web,” Fortune (March 5, 2001):
184[B]–184[L].
71. Bridgett Finn, “Selling Cool in a
Bottle,” Business 2.0 (December
1, 2003), http://money.cnn.com/
magazines/business2/business2_ar-
chive/2003/12/01/354202/index.htm
(accessed November 5, 2008).
72. Amanda Walmac, “Full of Beans,”
Working Woman (February 1999):
38–40.
73. Udayan Gupta and Jeffery A.
Tannenbaum, “Labor Shortages
Force Changes at Small Firms,” The
Wall Street Journal, May 22, 1989; “
Harnessing Employee Productivity,”
Small Business Report (November
1987): 46–49; and Molly Kilmas,
“How to Recruit a Smart Team,”
Nation’s Business (May 1995): 26–27.
74. Saul Hansell, “Listen Up! It’s Time
for a Profi t: A Front Row Seat as
Amazon Gets Serious,” The New
York Times, May 20, 2001.
625
Glossary
360-Degree Feedback A process that
uses multiple raters, including self-
rating, to appraise employee perfor-
mance and guide development.
A
Accountability The fact that the peo-
ple with authority and responsibility
are subject to reporting and justifying
task outcomes to those above them in
the chain of command.
Achievement Culture A results-
oriented cultur
e that values com-
petitiveness, personal initiative, and
achievement.
Activity-Based Costing (ABC) A con-
tr
ol system that identi es the various
activities needed to provide a product
and allocates costs accordingly.
Activity Ratio A
nancial ratio that
measures the organization’s internal
performance with respect to key activ-
ities de ned by management.
Adaptability Culture A culture char-
acterized by values that support the
company’s ability to interpr
et and
translate signals from the environment
into new behavior responses.
Adjourning The stage of team devel-
opment in which members pr
epare for
the team’s disbandment.
Administrative Model A decision-
making model that describes how
managers actually make decisions in
situations characterized by nonpr
o-
grammed decisions, uncertainty, and
ambiguity.
Administrative Principles A sub eld
of the classical management perspec-
tive that focuses on the total or
ganiza-
tion rather than the individual worker,
delineating the management functions
of planning, organizing, commanding,
coordinating, and controlling.
Af rmative
Action
A policy requiring
employers to take positive steps to
guarantee equal employment oppor-
tunities for people within protected
groups.
Alienated Follower A person who is
an independent, critical thinker but is
passive in the or
ganization.
Ambidextrous Change Incorporat-
ing str
uctures and processes that
are appropriate for both the creative
impulse and for the systematic imple-
mentation of innovations.
Ambiguity A condition in which the
goals to be achieved or the pr
oblem to
be solved is unclear, alternatives are
dif cult to de ne, and information
about outcomes is unavailable.
Application Form A device for collect-
ing information about an applicant’s
education, pr
evious job experience,
and other background characteristics.
Assessment Center A technique
for selecting individuals with high
managerial potential based on their
performance on a series of simulated
managerial tasks.
Attitude A cognitive and affective
evaluation that pr
edisposes a person
to act in a certain way.
Attributions Judgments about what
caused a person’s behavior—either
characteristics of the person or of the
situation.
Authoritarianism The belief that
power and status dif
ferences should
exist within the organization.
Authority The formal and legitimate
right of a manager to make decisions,
issue or
ders, and allocate resources
to achieve organizationally desired
outcomes.
Avoidance Learning The removal of
an unpleasant consequence when an
undesirable behavior is corr
ected.
B
Balanced Scorecard A comprehensive
management control system that bal-
ances traditional nancial measures
with measures of customer service,
internal business processes, and the
organization’s capacity for learning
and growth.
Balance Sheet A nancial
statement
that shows the rm’s nancial posi-
tion with respect to assets and liabili-
ties at a speci c point in time.
BCG Matrix A concept developed
by the Boston Consulting Gr
oup that
evaluates strategic business units with
respect to the dimensions of business
growth rate and market share.
Behaviorally Anchored Rating Scale
(BARS) A rating technique that relates
an employee’s performance to speci c
job-r
elated incidents.
Behavioral Sciences Approach A sub-
eld of the humanistic management
perspective that applies social science
in an organizational context, drawing
from economics, psychology, sociol-
ogy, and other disciplines.
Behavior Modi cation The set of
techniques by which r
einforcement
theory is used to modify human
behavior.
Benchmarking The continuous pro-
cess of measuring pr
oducts, services,
and practices against major competi-
tors or industry leaders.
Big Five Personality Factors Dimen-
sions that describe an individual’s
extr
oversion, agreeableness, consci-
entiousness, emotional stability, and
openness to experience.
Blog Web log that allows individuals
to post opinions and ideas.
Bottom of the Pyramid Concept The
idea that lar
ge corporations can both
alleviate social problems and make a
pro t by selling goods and services to
the world’s poorest people.
Bottom-Up Budgeting A budgeting
pr
ocess in which lower-level manag-
ers budget their departments’ resource
needs and pass them up to top man-
agement for approval.
Boundary-Spanning Roles Roles
assumed by people and/or depart-
ments that link and coor
dinate the
organization with key elements in the
external environment.
GLOSSARY626
Coercive Power Power that stems
fr
om the authority to punish or recom-
mend punishment.
Cognitive Dissonance A condition in
which two attitudes or a behavior and
an attitude con ict.
Collectivism A preference for a tightly
knit social framework in which indi-
viduals look after one another and
or
ganizations protect their members’
interests.
Committee A long-lasting, sometimes
permanent team in the or
ganization
structure created to deal with tasks
that recur regularly.
Communication The process by
which information is exchanged and
understood by two or mor
e people,
usually with the intent to motivate or
in uence behavior.
Communication Apprehension An
individual’s level of fear or anxi-
ety associated with interpersonal
communications.
Compensation Monetary payments
(wages, salaries) and nonmonetary
goods/commodities (bene ts,
vaca-
tions) used to reward employees.
Compensatory Justice The concept
that individuals should be compen-
sated for the cost of their injuries
by the party r
esponsible and also
that individuals should not be held
responsible for matters over which
they have no control.
Competitive Advantage What sets the
or
ganization apart from others and
provides it with a distinctive edge in
the marketplace.
Competitors Other organizations in
the same industry or type of business
that pr
ovide goods or services to the
same set of customers.
Conceptual Skill The cognitive
ability to see the or
ganization as a
whole and the relationships among
its parts.
Con ict Antagonistic interaction in
which one party attempts to thwart
the intentions or goals of another
.
Conformist A follower who partici-
pates actively in the organization
but does not use critical thinking
skills.
Consideration A type of behavior
that describes the extent to which the
leader is sensitive to subor
dinates,
respects their ideas and feelings, and
establishes mutual trust.
Central Planning Department A
gr
oup of planning specialists who
develop plans for the organization
as a whole and its major divisions
and departments and typically report
directly to the president or CEO.
Ceremony A planned activity at a
special event that is conducted for the
bene
t of an audience.
Certainty The situation in which all
the information the decision maker
needs is fully available.
Chain of Command An unbroken line
of authority that links all individuals
in the or
ganization and speci es who
reports to whom.
Change Agent An OD specialist who
contracts with an or
ganization to
facilitate change.
Changing The intervention stage of
or
ganization development in which
individuals experiment with new
workplace behavior.
Channel The carrier of a
communication.
Channel Richness The amount of
information that can be transmitted
during a communication episode.
Charismatic Leader A leader who has
the ability to motivate subor
dinates to
transcend their expected performance.
Chief Ethics Of cer A company exec-
utive who oversees ethics and legal
compliance.
Classical Model A decision-making
model based on the assumption that
managers should make logical deci-
sions that will be in the or
ganization’s
best economic interests.
Classical Perspective A management
perspective that emerged during
the nineteenth and early twentieth
centuries that emphasized a rational,
scienti c approach to the study of
management and sought to make
organizations ef cient operating
machines.
Closed System A system that
does not interact with the external
envir
onment.
Coaching A method of directing,
instr
ucting and training a person with
the goal to develop speci c manage-
ment skills.
Coalition An informal alliance among
managers who support a speci c
goal.
Code of Ethics A formal statement of
the or
ganization’s values regarding
ethics and social issues.
Bounded Rationality The concept
that people have the time and cogni-
tive ability to pr
ocess only a limited
amount of information on which to
base decisions.
Brainstorming A technique that uses
a face-to-face gr
oup to spontaneously
suggest a broad range of alternatives
for decision making.
Bureaucratic Organizations A sub-
eld of the classical management
perspective that emphasized man-
agement on an impersonal, rational
basis through such elements as clearly
de ned authority and responsibility,
formal record-keeping, and separation
of management and ownership.
Business Intelligence Software Soft-
war
e that analyzes data from multiple
sources and extracts useful insights,
patterns, and relationships that might
be signi cant.
Business-Level Strategy The level
of strategy concerned with the ques-
tion “How do we compete?” Pertains
to each business unit or pr
oduct line
within the organization.
Business Performance Dashboard A
system that pulls data fr
om a variety
of organizational systems and data-
bases; gauges the data against key
performance metrics; pulls out the
right nuggets of information; and
delivers information to managers in a
graphical, easy-to-interpret format.
C
Capital Budget A budget that plans
and reports investments in major
assets to be depreciated over several
years.
Cash Budget A budget that estimates
and r
eports cash ows on a daily or
weekly basis to ensure that the com-
pany has suf cient cash to meet its
obligations.
Cellular Layout A facilities layout
in which machines dedicated to
sequences of pr
oduction are grouped
into cells in accordance with group-
technology principles.
Centralization The location of deci-
sion authority near top or
ganizational
levels.
Centralized Network A team com-
munication structure in which team
members communicate through a
single individual to solve problems or
make decisions.
GLOSSARY 627
D
Data Raw, unsummarized, and unana-
lyzed facts and gures.
Decentralization The location of deci-
sion authority near lower or
ganiza-
tional levels.
Decentralized Control The use of
organizational culture, group norms,
and a focus on goals, rather than rules
and procedures, to foster compliance
with organizational goals.
Decentralized Network A team com-
munication str
ucture in which team
members freely communicate with one
another and arrive at decisions together.
Decentralized Planning Manag-
ers work with planning experts to
develop their own goals and plans.
Decision A choice made from avail-
able alternatives.
Decision Making The process of iden-
tifying problems and opportunities
and then resolving them.
Decision Styles Differences among
people with respect to how they per-
ceive problems and make decisions.
Decision Support System (DSS) An
interactive, computer-based system
that uses decision models and special-
ized databases to support organiza-
tion decision makers.
Decode To translate the symbols used
in a message for the purpose of inter
-
preting its meaning.
Delegation The process managers use
to transfer authority and responsibil-
ity to positions below them in the
hierarchy.
Departmentalization The basis on
which individuals ar
e grouped into
departments and departments into the
total organization.
Descriptive An approach that
describes how managers actually
make decisions rather than how they
should make decisions accor
ding to a
theoretical ideal.
Devil’s Advocate A decision-making
technique in which an individual is
assigned the r
ole of challenging the
assumptions and assertions made
by the group to prevent premature
consensus.
Diagnosis The step in the decision-
making pr
ocess in which managers
analyze underlying causal factors
associated with the decision situation.
offers broad-based learning opportu-
nities for employees.
Cost Leadership A type of competi-
tive strategy with which the or
gani-
zation aggressively seeks ef cient
facilities, cuts costs, and employs tight
cost controls to be more ef cient than
competitors.
Countertrade The barter of products
for other pr
oducts rather than their
sale for currency.
Courage The ability to step forward
through fear and act on one’s values
and conscience.
Creativity The generation of novel
ideas that might meet perceived
needs or offer opportunities for the
organization.
Critical Thinking Thinking indepen-
dently and being mindful of the ef
fect
of one’s behavior on achieving goals.
Cross-Functional Teams A group of
employees from various functional
departments that meet as a team to
resolve mutual problems.
Cultural Competence The ability to
interact ef
fectively with people of dif-
ferent cultures.
Cultural Intelligence (CQ) A person’s
ability to use reasoning and obser-
vation skills to interpret unfamiliar
gestures and situations and devise
appropriate behavioral responses.
Cultural Leader A manager who uses
signals and symbols to in uence
cor-
porate culture.
Culture The set of key values, beliefs,
understandings, and norms that mem-
bers of an organization share.
Culture Change A major shift in the
norms, values, attitudes, and mind-set
of the entire organization.
Culture Shock Feelings of confusion,
disorientation, and anxiety that result
from being immersed in a foreign
culture.
Customer Relationship Management
(CRM) Systems that help companies
keep in close touch with customers,
collect and manage customer data,
and collaborate with customers to pr
o-
vide the most valuable products and
services.
Customers People and organizations
in the envir
onment that acquire goods
or services from the organization.
Cycle Time The steps taken to com-
plete a company process.
Consistency Culture A culture that
values and r
ewards a methodical,
rational, orderly way of doing things.
Content Theories A group of theories
that emphasize the needs that moti-
vate people.
Contingency Approach A model of
leadership that describes the r
elation-
ship between leadership styles and
speci c organizational situations.
Contingency Plans Plans that de ne
company r
esponses to speci c situa-
tions, such as emergencies, setbacks,
or unexpected conditions.
Contingency View An extension of
the humanistic perspective in which
the successful r
esolution of organiza-
tional problems is thought to depend
on managers’ identi cation of key
variations in the situation at hand.
Contingent Workers People who
work for an or
ganization, but not on a
permanent or full-time basis, includ-
ing temporary placements, contracted
professionals, or leased employees.
Continuous Improvement The imple-
mentation of a lar
ge number of small,
incremental improvements in all areas
of the organization on an ongoing
basis.
Controlling The management func-
tion concerned with monitoring
employees’ activities, keeping the
or
ganization on track toward its goals,
and making corrections as needed.
Coordination The quality of collabo-
ration across departments.
Core Competence A business activity
that an or
ganization does particularly
well in comparison to competitors.
Corporate Governance The system
of governing an or
ganization so the
interests of corporate owners are
protected.
Corporate-Level Strategy The level of
strategy concerned with the question
“What business ar
e we in?” Pertains
to the organization as a whole and
the combination of business units and
product lines that make it up.
Corporate Social Responsibility The
obligation of or
ganization manage-
ment to make decisions and take
actions that will enhance the welfare
and interests of society as well as the
organization.
Corporate University An in-house
training and education facility that
GLOSSARY628
organization’s entire enterprise, from
identi
cation of customer needs and
receipt of orders to distribution of
products and receipt of payments.
E → P Expectancy Expectancy that
putting ef
fort into a given task will
lead to high performance.
Equity A situation that exists when
the ratio of one person’s outcomes to
inputs equals that of another
’s.
Equity Theory A process theory that
focuses on individuals’ per
ceptions of
how fairly they are treated relative to
others.
ERG Theory A modi
cation of the
needs hierarchy theory that proposes
three categories of needs: existence,
relatedness, and growth.
Escalating Commitment Continuing
to invest time and r
esources in a fail-
ing decision.
Ethical Dilemma A situation that
arises when all alternative choices or
behaviors ar
e deemed undesirable
because of potentially negative conse-
quences, making it dif cult to distin-
guish right from wrong.
Ethics The code of moral principles
and values that governs the behaviors
of a person or gr
oup with respect to
what is right or wrong.
Ethics Committee A group of execu-
tives assigned to oversee the or
ganiza-
tion’s ethics by ruling on questionable
issues and disciplining violators.
Ethics Training Training programs
to help employees deal with ethical
questions and values.
Ethnocentrism The belief that one’s
own gr
oup or subculture is inherently
superior to other groups or cultures.
Ethnorelativism The belief that
gr
oups and subcultures are inherently
equal.
Euro A single European currency that
r
eplaced the currencies of 12 European
nations.
Executive Information System
(EIS) A management information
system designed to facilitate strategic
decision making at the highest levels
of management by pr
oviding execu-
tives with easy access to timely and
relevant information.
Exit Interview An interview con-
ducted with departing employees
to determine the r
easons for their
termination.
E
e-Business Any business that takes
place by digital processes over a com-
puter network rather than in physical
space.
e-Commerce Business exchanges or
transactions that occur electr
onically.
Economic Dimension The dimension
of the general environment represent-
ing the overall economic health of the
country or region in which the organi-
zation operates.
Economic Forces Forces that affect the
availability
, production, and distribu-
tion of a society’s resources among
competing users.
Economic Value-Added (EVA) A
contr
ol system that measures perfor-
mance in terms of after-tax pro ts
minus the cost of capital invested in
tangible assets.
Effective Follower A critical, indepen-
dent thinker who actively participates
in the or
ganization.
Effectiveness The degree to which the
or
ganization achieves a stated goal.
Ef ciency The use of minimal
resources—raw materials, money, and
people—to produce a desired volume
of output.
Electronic Brainstorming Bring-
ing people together in an interactive
gr
oup over a computer network to
suggest alternatives; sometimes called
brainwriting.
Employee Network Groups Groups
based on social identity
, such as gen-
der or race, and organized by employ-
ees to focus on concerns of employees
from that group.
Employment Test A written or com-
puter
-based test designed to measure
a particular attribute such as intelli-
gence or aptitude.
Empowerment The delegation of
power and authority to subor
dinates.
Encode To select symbols with which
to compose a message.
Engagement A situation in which
employees enjoy their work, contrib-
ute enthusiastically to meeting goals,
and feel a sense of belonging and com-
mitment to the or
ganization.
Enterprise Resource Planning
(ERP) System A networked informa-
tion system that collects, pr
ocesses,
and provides information about an
Dialogue A group communication
pr
ocess aimed at creating a culture
based on collaboration, uidity,
trust, and commitment to shared
goals.
Differentiation A type of competitive
strategy with which the or
ganization
seeks to distinguish its products or
services from that of competitors.
Direct Investing An entry strategy in
which the or
ganization is involved in
managing its production facilities in a
foreign country.
Discretionary Responsibility Orga-
nizational r
esponsibility that is volun-
tary and guided by the organization’s
desire to make social contributions
not mandated by economics, law, or
ethics.
Discrimination When someone acts
out their pr
ejudicial attitudes toward
people who are the targets of their
prejudice.
Distributive Justice The concept that
dif
ferent treatment of people should
not be based on arbitrary character-
istics. In the case of substantive dif-
ferences, people should be treated
differently in proportion to the differ-
ences among them.
Distributive Negotiation A com-
petitive and adversarial negotiation
appr
oach in which each party strives
to get as much as it can, usually at the
expense of the other party.
Diversi cation A strategy of moving
into new lines of business.
Diversity All the ways in which
employees dif
fer.
Diversity training Special train-
ing designed to educate employees
about the importance of diversity,
make people aware of their own
biases, and teach them skills for
communicating and working in a
diverse workplace.
Divisional Structure An organization
str
ucture in which departments are
grouped based on similar organiza-
tional outputs.
Downward Communication Mes-
sages sent fr
om top management
down to subordinates.
Dynamic Capabilities Leverag-
ing and developing more from the
rm’s existing assets, capabilities,
and core competencies in a way that
will provide a sustained competitive
advantage.
GLOSSARY 629
Glass Ceiling Invisible barrier that
separates women and minorities fr
om
top management positions.
Globalization The standardization of
product design and advertising strate-
gies throughout the world.
Global Outsourcing Engaging in the
international division of labor so as to
obtain the cheapest sources of labor
and supplies regardless of country;
also called global sourcing.
Global Team A work team made up
of members of dif
ferent nationalities
whose activities span multiple coun-
tries; may operate as a virtual team or
meet face-to-face.
Goal A desired future state that the
or
ganization attempts to realize.
Goal-Setting Theory A motivation
theory in which speci c,
challenging
goals increase motivation and perfor-
mance when the goals are accepted by
subordinates and these subordinates
receive feedback to indicate their
progress toward goal achievement.
Grapevine An informal, person-to-
person communication network of
employees that is not of
cially sanc-
tioned by the organization.
Green eld
Venture
The most risky
type of direct investment, whereby
a company builds a subsidiary from
scratch in a foreign country.
Groupthink The tendency for people
to be so committed to a cohesive team
that they ar
e reluctant to express con-
trary opinions.
Groupware Software that works on a
computer network or the Internet to
facilitate information sharing, collabor-
ative work, and group decision making.
H
Halo Effect An overall impression of a
person or situation based on one char-
acteristic, either favorable or unfavor-
able; a type of rating error that occurs
when an employee receives the same
rating on all dimensions regardless of
his or her performance on individual
ones.
Hawthorne Studies A series of experi-
ments on worker pr
oductivity begun
in 1924 at the Hawthorne plant of
Western Electric Company in Illinois;
attributed employees’ increased out-
put to managers’ better treatment of
them during the study.
Focus A type of competitive strategy
that emphasizes concentration on
a speci
c regional market or buyer
group.
Force-Field Analysis The process of
determining which for
ces drive and
which resist a proposed change.
Formal Communication Channel A
communication channel that ows
within the chain of command or
task r
esponsibility de ned by the
organization.
Formal Team A team created by the
or
ganization as part of the formal
organization structure.
Forming The stage of team develop-
ment characterized by orientation and
acquaintance.
Franchising A form of licensing in
which an organization provides its
foreign franchisees with a complete
package of materials and services.
Free Rider A person who bene ts
fr
om team membership but does not
make a proportionate contribution to
the team’s work.
Frustration-Regression Principle The
idea that failur
e to meet a high-order
need may cause a regression to an
already satis ed lower-order need.
Functional-Level Strategy The
level of strategy concerned with the
question “How do we support the
business-level strategy?” Pertains
to all of the organization’s major
departments.
Functional Manager A manager who
is r
esponsible for a department that
performs a single functional task and
has employees with similar training
and skills.
Functional Structure The grouping of
positions into departments based on
similar skills, expertise, and r
esource
use.
Fundamental Attribution Error The
tendency to under
estimate the in u-
ence of external factors on another’s
behavior and to overestimate the
in uence of internal factors.
G
General Environment The layer of the
external environment that affects the
organization indirectly.
General Manager A manager who is
responsible for several departments
that perform different functions.
Expatriates Employees who live and
work in a country other than their own.
Expectancy Theory A process theory
that pr
oposes that motivation depends
on individuals’ expectations about
their ability to perform tasks and
receive desired rewards.
Expense Budget A budget that
outlines the anticipated and actual
expenses for a r
esponsibility center.
Expert Power Power that stems from
special knowledge of or skill in the
tasks performed by subordinates.
Exporting An entry strategy in which
the organization maintains its produc-
tion facilities within its home country
and transfers its products for sale in
foreign countries.
Extinction The withdrawal of a posi-
tive r
eward.
Extranet An external communications
system that uses the Internet and is
shar
ed by two or more organizations.
Extrinsic Reward A reward given by
another person.
F
Fast-Cycle Team A multifunctional
team that is provided with high levels
of resources and empowerment to
accomplish an accelerated product
development project.
Feedback A response by the receiver
to the sender
’s communication.
Femininity A cultural preference for
r
elationships, cooperation, group deci-
sion making, and quality of life.
Finished-Goods Inventory Inventory
consisting of items that have passed
through the complete production pro-
cess but have yet to be sold.
First-Line Manager A manager who
is at the
rst or second management
level and is directly responsible for the
production of goods and services.
Fixed-Position Layout A facilities
layout in which the pr
oduct remains
in one location and the required tasks
and equipment are brought to it.
Flat Structure A management struc-
tur
e characterized by an overall broad
span of control and relatively few
hierarchical levels.
Flexible Manufacturing System A
small or medium sized automated
pr
oduction line that can be adapted to
produce more than one product line.