Foundations of Planning: Local job cuts and outsourcing by Fairfax Media

Back to bit more of a sober tone this week after last time’s gaming excitement.

To begin this time…

…refresh your understanding of the principles of strategic management that are explore on pages 84-100 of the text. Once you’ve done that, read this article, consider the summary below, and then answer the questions at the bottom of this post.

In summary…

…company planning is usually done in the secrecy of boardroom meetings: strategies are not usually announced openly, but can be inferred based on a company’s actions. The actions described in this article are well known: local job cuts and outsourcing.

The article covers a recent decision by the troubled Fairfax Media, to cut a third of their editorial positions in regional NSW (Newcastle and the Illawarra) and move them offshore to New Zealand. This decision was met by great disappointment and anger of the local communities.

Cutting jobs is a result of planning activities, which may not always be revealed to the public. In this case, the article identifies some motivators for these cuts: a reduction in the classified and display advertising across the printed media. This means that one of the major sources of income for the company has been seriously reduced. Fairfax is trying to address this decline in income by reducing its costs.

Yes, less money is coming through the traditional channels of the print media. This is a trend that would be identified during an external analysis (p. 89). The job cuts are clearly made in response to this threat, but, don’t forget, managers must keep their eyes open to spot opportunities. The future of print media may not be so gloomy, particularly in regional communities, as can be seen in this study published by Columbia University.

Some issues to notice and pay particular attention to here are…

• Types of planning approaches evident in the article
• Company goals that can be inferred from the article
• Elements of strategic planning – strengths, weaknesses, opportunities, and threats
• Types of strategies

Consider the following questions for discussion…

1. From the article, what types of planning has Fairfax undertaken prior to the elimination of the regional editorial positions?
2. From the article, what company goals can you identify? Which are the stated goals and which are the real goals? Based on what, can you tell them apart?
3. What elements of strategic planning are evident in the article? What elements are missing? How would you, as a top manager in Fairfax, use these missing elements?
4. The job cuts are part of what type of strategy (Table 4.2, p. 91)?
5. Based on the additional information on the future of print media, what do you think of the job cuts? Are they justified? Would you support them? How would you address this decline in income?

Foundations of Decision Making: Backgammon!

Third time’s a charm! Ready to flex those managerial synapses? This time it’s all about games of chance!

Let’s get cracking…

…by reading back over the content on decision making in Chapter 3 of the textbook. Once you’ve done that, get ready to apply some lateral decision-making skills in this game.

For this one, it’s best to read this summary first…

…unless you just want to chillax with a quick game of backgammon! The real purpose here is about developing your decision-making skills.

Decision making is one of the most important and commonly performed functions of a manager. In other words, that is why you get the big bucks! However, with the big bucks comes big responsibility.

As you have seen in the textbook, the conditions in which managers make decisions (and also other people in this day and age) are saturated with risk, uncertainty, and inability to foresee important future events. These conditions make classic rational decision making, where all conditions are pre-analysed and all possible options are pre-generated and ranked, impossible and ineffective.

Managers are now expected to draw on their intuition in their decision making, since their logic and reason can no longer be relied upon alone. Intuition is developed over time, through practice, and through the integration of experiences into our brain.

A good way to practise, and experience some intuitive decision making, is by playing Backgammon. The game requires some rational calculation skills, but it also includes responding to unexpected events. The web link provides you access to a game of Backgammon, where you can play as an unregistered guest. The website also offers a tutorial if you are not familiar with the game.

Try to play the game in two different ways:

(1)    put thought into your next move

(2)    empty your thoughts, and act quickly, on impulse, based on your intuition only

Keep a record your wins and losses when using each strategy.  Also, keep in mind that most managers are not operating as solo pilots.  They have to report back to their own superiors and explain their actions and their results.

Some issues to notice and pay particular attention to here are…

• Your own comfort with the decisions that you make
• Your ability to justify or explain your decision
• The results of each way of decision making

Consider the following questions for discussion…

1. How easy was it for you to use each decision-making strategy?
2. If you had to explain to someone how and why you got the results that you got in the game, which strategy would be easier for that? Which strategy would you expect someone to report back to you?
3. Have you noticed a difference in the results you got using each decision-making method?
4. Considering the effort involved in thinking out the next move, were the results worth it?
5. Managers would need to make decisions in similar conditions of uncertainty (not knowing how many orders will come next week, not knowing which employee will resign or retire, not knowing how the market will react…) but much more complex ones: how many products to order, how many staff members to call onto a shift, who to appoint to a task, etc. How do you think you would feel if you had to put cognitive effort into such complex and uncertain decisions?

The External Management Environment: Carbon Tax and Businesses

Welcome back for another round of exciting management case studies!

To begin this time…

…refresh your knowledge of the various factors in the external environment that managers should be aware of as part of their job. Figures 2.1 (p. 27) and 2.2 (p. 33) in your textbook describe these in detail, so you should definitely have a closer look at them before sinking your teeth into this case. Once you’ve done that, explore the information presented in this article, consider the following summary, and then answer the questions below.

So, to summarise…

…one of the most controversial recent changes in the Australian business environment is the introduction of the carbon tax. The tax was introduced with the intention of reducing human impact on the natural and ecological environment; however, many business groups claim that the tax will have a negative impact their operations.

Many industries are affected by this tax, and the article describes some of them: retail, food manufacturing, paper and packaging, and renewable energy. Each of these industry sectors will experience an increase in costs. This increase can be passed on to their customers, but some industries, such as the retail industry, refuse to do that. They insist on their suppliers justifying price increases.

In contrast to this demonstration of social responsibility, some renewable energy companies are now under investigation for inflating their prices (or “duping”) with no justification. The companies are investigated by the Australian Competition & Consumer Commission, which is an independent authority seeking to promote competition and fair trade in the market place to benefit consumers, business, and the community.

The article ends with further comments on the tax itself and its complex structure. The implications of the tax, as well as its implementation, are very complex, which makes it difficult for managers to foresee and prepare for its effects.

So as a manager, you will often realise that you cannot dedicate your time to a thorough investigation, and you have to work out what to do even if you do not have an optimal solution. We will talk a bit more about this when we discuss “satisficing” in Chapter 3, Foundations of Decision Making.

Some issues to notice and pay particular attention to here are…

• Businesses that will be affected by the carbon tax, according to this article
• Stakeholders in their environment
• Social responsibility, social responsiveness, and customer responsiveness
• Managerial responses

Consider the following questions for discussion…

1. List the organisations that the article identifies as ones that will be affected by the carbon tax.
2. Figures 2.1 (p. 27) and 2.2 (p. 33) in your textbook describe various factors in the external environment that managers should be aware of as part of their job. Refresh your memory on what these factors are. For each of the organisations that you have listed in Question 1, which factors of the environment can you identify in the article?
3. How do the various organisations in the article respond to the changes introduced by the carbon tax? If you were a manager in these organisations, how would you respond?
4. Your textbook lists a few actions that managers can take to make their organisation customer responsive (p. 48-19). Which of the managerial actions are described in the article?
5. How do these managerial actions (and others) described in the article compare with the principles of social responsibility?

Managers and Management: Long-term threats to small businesses in Qld

Thanks for checking in to the second-semester’s blog posts for 2012 for Management: The Essentials. Want to broaden your understanding of Chapter 1: Managers and Management? You’ve come to the right place.

To start with…

…refresh your knowledge of managerial roles on pages 8 to 9 of the text, then check out this article on the bid by large operators to extend Queensland trading hours and the threat this poses to small retail businesses.

So, to summarise…

…small retailers have been struggling to survive their competition against large operators for a while. Small businesses are very important to a country’s economy because they provide the highest growth in employment, but they also face great challenges. To learn more about it, read this article.

Recently, large retailers have introduced a new threat to their small competitors: advocating for longer trading hours. The article presented to you is very short, so this summary is not very long either. If you read the questions first, and then the article, you will find it easier to address the questions.

The article presents the recent push for longer trading hours of large retail chains. At the moment, large retailers can only operate until 9pm on weekdays and 5pm on weekends. The article explains that corner shops survive by opening at 6.30am and closing at 7pm every day so that people can access them easily to get only few items.

When the large retailers are closed, like on ANZAC Day, small retailers can really experience the size of their potential clientele; they are busy all the time! But this customer traffic is not sustained when the large operators are open.

The article also points out that the loss of business to small stores impacts the rest of the community. It illustrates the extent of employment generated by small business: local accountants, local solicitors, etc.

It may seem like managers of small retail businesses have no direct control over legislation, what their customers do, or the actions of their competitors; but in fact, being a manager is all about being proactive and seeking for things that YOU CAN DO in order to make a difference. So this is your first exercise in responding to some not uncommon challenges.

Some issues to notice and pay particular attention to here are…

• External pressures/changes
• Managerial roles
• Managerial responses

Consider the following questions for discussion…

1. Refresh your knowledge of managerial roles: what do managers do (p. 8-9 in your textbook)?
2. The article on long-term threats to small businesses describes several pressures that are experienced by small and family businesses. What are they?
3. Now that you have identified the pressures, how do they affect the working environment of employees?
4. What are the challenges that managers now face due to these pressures?
5. Which managerial role (planning, organising, leading, or controlling) is relevant to the addressing of each challenge that you have listed?

Foundations of control: Holidays of Australia

Controlling your business is very important, and if you start your own business – don’t feel bad if you don’t get it right the first time.  Bigger and better than you have tried, and didn’t get it quite right either.  For example, South Australia’s tourism centre was privatised and operated by a company called Holidays of Australia, in July 2011.  Less than six months afterwards, Holidays of Australia wants out.

Holidays of Australia won a tender – a contract between the government and a private company.  In the tender process, the government provides information about its side of the business – in this case, performance measure of the tourism centre – and different candidates make an offer.  Usually, the highest offer is chosen, but not always.

The private company in this case claims that it has been operating at a loss from the beginning.  This is not uncommon for new businesses, but since the business did not pick up – Holidays of Australia has had enough.  They have lost a total of $150,000, and went seeking legal advice.

Turns out that the information provided to Holidays of Australia prior to the tender process may have not been accurate.  Also, Holidays of Australia claim that the government of South Australia promised to launch a campaign that will direct business to the travel centre, but it was not run.  These are sufficient reasons to revoke the tender, and return the tourism centre back to the government.

For a business owner, having to take back a business that you have sold, is very bad news.  For the government, this means that every month of operating the centre will cost $30,000.  This looks very bad, if you are running for elections.  It may also make it hard to hand the centre over to another private company, now that it has the reputation of a failing business.

So if you find yourself in a problematic business situation, take a deep breath.  Then remember: others have been through it too.  It may be a good indication that you need to revise your control process and goals.

 

Some issues to notice and pay particular attention to here are…

• What managers measure
• How to measure and compare actual performance with planned goals?
• Keeping track of finances

Consider the following questions for discussion…

1. What were the measures mentioned in this article, and what other measures can you think of, to indicate the success of the business?
2. The article does not mention any planned goals, but what would you have set them to be?
3. How was Holidays of Australia keeping track of its finances?  What do you think of their timeline?
4. If you wanted to buy a small business, what have you learned from this article?  What would you look for in the details of the business for sale?

Communication and interpersonal skills: QANTAS disputes

As a manager, things may not always go very smoothly for you.  In fact, you can probably count on having some difficulties, disagreements, and conflicts.  It’s just the way things are.

There are many ways to deal with conflicts.  You may already have one or two specific styles you’d like to use.  Just keep in mind, conflict management is not a “one-size-fits-all” thing:  there are many strategies, and they all may come in handy in different situations.

The QANTAS industrial dispute at the end of 2011 was history in the making, at least in the world of management.  CEO Alan Joyce decided to ground the entire QANTAS domestic and international fleets, in response to employees’ threats to continue their industrial campaign into the new year.

It is quite unusual for a CEO to just shut down operations.  The costs were very high for QANTAS: $15 million for every week of the dispute, and the workers’ actions had cost QANTAS more than $70 million dollars up to that point.  So what did the employees want so badly?

Employees across the company (engineers, catering, and baggage works) asked for higher salaries, better job security, and most importantly – they objected to the company’s intention to move some of its business to South East Asia, which will lead to the loss of 1,000 Australian jobs.

The restructure and change of location was necessary, claims the company, because the international operations have lost $200 million last financial year.  You can’t afford to keep running a company with this kind of balance…

But then, the CEO Alan Joyce had received a 71% pay-rise: from $2.92 million in 2009-10 to $5.01 million in 2010-11.  This escalated a lot of the dispute activities.  Alan Joyce received some death threats by mail.

The article provides an overview on the dispute, as well as a summary of the major events in it.  When you read it, keep in mind the issues pointed out to you below.

Some issues to notice and pay particular attention to here are…

• Barriers to communication
• Ways to overcome barriers to effective communication
• Negotiations and bargaining strategies
• Conflict management

Consider the following questions for discussion…

1. What barriers to effective communication may have existed between the senior management of QANTAS and the disputing workers?
2. How would you address and attempt to overcome these barriers, if you were a senior manager in QANTAS in this case?  What if you were a union leader?
3. What sort of negotiation strategies seem to have been used in this case?  What other strategies could have been used?  How do your answers compare with the textbook’s recommendation to use integrative bargaining as much as possible?  To what extent to do you think this was possible in this case?
4. What sort of conflict do you think the company faced?  And why?
5. What conflict management strategies were used in this case?  How effective were they, in your opinion?  Which strategies would you have chosen as a senior manager?  And as a union leader?

Understanding groups and managing work teams: A Big Bang

Australia is gearing up for an election!  Leadership does not get any higher than this – leading a whole country.  Two leaders of the two large political parties are battling to get the top leadership position.

It is hard to assess leaders when you have so little direct input on their behaviour or personality.  Media biases a lot of what they say and do, and provides a very filtered view of them.  However, in organisational context, things are not so different. How many times have you had a heart-to-heart with the company’s CEO?  How many employees do you think get to have that talk?  The truth is, in corporate life, you are usually even less exposed to your company leaders than you are to the politicians of the country.

As the first female Prime Minister of Australia, Julia Gillard has attracted a lot of media attention, and her personality has been examined several times.  One article analyses her body language, and the other examines her actions during campaign and political life.  They point out Ms Gillard’s polished public presentation, sense of humour, and realistic expectation.

Tony Abbot has generated a lot of media coverage as well.  He is perceived by the public as a person with two different faces: one is the face of a man who is highly educated and good potential leader, and the other a rather impulsive and undisciplined man.  His years as a minister under the Howard government provide an image of a leader who sought advice widely, and built relationships with key leaders and experts.  But he has also had some unfortunate incidents and character traits that have come to light in public.

Many stakeholders have to be taken into account by country leaders: party members, opposition, media, and public.  But this is not so different to what CEOs have to deal with: board members, share holders, competitors, customers, and employees.

Some issues to notice and pay particular attention to here are…

• University of Iowa – leadership style
• Charismatic leadership and visionary leadership
• Transactional and transformational leadership
• Trust

Consider the following questions for discussion…

1. What evidence can you find for the two leaders’ leadership styles, according to the categories defined in the studies of the University of Iowa (p. 297)?  What evidence can you find for autocratic or a democratic style?
2. How much transactional and how much transformational leadership do you think a leader of Australia needs to have?  What elements of the two leadership styles can you identify in the two leaders?
3. What elements of charismatic and visionary leadership can you identify in the two leaders?  If you were their image consultant, what elements would you recommend to them to adopt, on order to develop their charismatic image?
4. Try to identify how each leader would score on each of the concepts of trust listed on p. 313 in you textbook.
   

Motivating and rewarding employees: Holden’s generous incentive

In February 2012, Holden has announced an extraordinary wage deal that will lift the income of 4000 employees by up to 22 per cent over three years.  This is a very high wage increase in this industry, and overall in collective agreements. Read the full story here.

The salary increase will be gradual, over three years, and some increases are not certain: they are potential increases in two and three years’ time.  Employees are also guaranteed “hardship recognition payment” of $1750 in the first year and $1000 in the second and third years.  This is in compensation for a pay cut that the workers have accepted during the Global Financial Crisis.

In addition to the increase in wages, workers will have more flexible working arrangements, better education conditions, and better leave provisions.  The union representatives point out that this deal is the best yet negotiated in the industry, and that it is a good balance between wages and other benefits.

Some issues to notice and pay particular attention to here are…

• The hierarchy of needs of the workers
• Herzberg’s two-factor theory
• Equity theory and equity perceptions
• Employee recognition

Consider the following questions for discussion…

1. Which needs of the workers are addressed by this deal, according to the hierarchy of needs theory?
2. How would you categorise the negotiated conditions in terms of Herzberg’s two-factor theory?  Which factors do you think are normally the subjects of such negotiations?  How do motivators normally get negotiated?
3. How does this article relate to equity theory and equity perceptions?  Who are the referents mentioned in the article, and what other referents do you think are influential for Holden’s workers?
4. How do you think this agreement affects employee motivation, and why?  What theory would explain that?

Understanding groups and managing work teams: A Big Bang

You have probably been a part of many groups: formal or informal.  You have probably experienced many of the stages of group development, and have not even been aware of it.  You probably sensed, intuitively, the status of different members, the degree of group cohesiveness, and the roles played by different members.

You could go back in your mind and identify all these concepts in the group setting that you have been a part of – that would be a nice exercise.  But for the sake of consistency, have a look at the group that was formed by a few scientists in California, in a certain popular TV show.

The video starts with two group members getting together as roommates.  Their initial interaction provides background on their personalities and early understandings that they have achieved.  The other two group members join later, and the norms in the group begin to emerge.

The group is not free of conflict (since one member has a particularly difficult personality), and various ways to address these conflicts are shown.  Finally, an acceptance of the group’s norms and rules is reached.

If you need further information on this TV episode, or you would just like to get some clarifications on its content, this website describes the full episode in more detail.

Some issues to notice and pay particular attention to here are…

• Stages of group development
• Establishing norms in the group
• Status
• Group cohesiveness
• Team member roles

Consider the following questions for discussion…

1. Identify the stages of group development illustrated in this episode.  Can you relate to similar experiences in your life?
2. How were the norms established in this group?  Do you think it is an effective way to establish them?  What are the benefits and the risks of this strategy for establishing group norms this way?
3. Can you identify different types of status among the different group members?  What contributes to this non-uniform status?
4. What is the degree of the group’s cohesiveness?  What evidence support your answer?
5. What roles to the different members play in this group?  If you can assume what the group’s goals have been, how effective would you say this group is, in achieving its goals?

Foundations of Individual Behaviour: Personality tests

Are you a man, or a mouse? Until you know yourself, it’s tricky to understand how to interact with others. What kind of person are you?

To begin your journey of self-discovery…

…read the summary below, and then visit Human Metrics and have a look around.

What’s the verdict?

…Personality tests have received a LOT of criticism.  People can fake their answers, shape them to what the employer may like, score inconsistently over time – and so on.  But how bad are they, really?  This is a chance for you to find out, if you haven’t already tried before.

There are two tests you can take today.  One scores your personality according to the Myers-Briggs Type Indicator (MBTI®), and the other one scores according to the Big Five model.  They take a little time to do, particularly if you are doing them insincerely…

Once you have completed the tests and the scores and descriptions are available to you, have a read through them to see to what extent you feel like they have captured your personality.

You can also explore Jung Career Indicator^TM and see what types of career they suggest you choose, based on your personality type.  How do you feel about them?

Some issues to notice and pay particular attention to here are…

• Participants’ experience during personality testing
• Participant’s concurrence with the results of personality tests
• Participant’s concurrence with suggested careers
• Difference and similarities between the different personality testing tools

Consider the following questions for discussion…

1. How did you feel during personality testing?  How would you feel if had to take one of these tests as part of a job recruitment process?  Would you keep your answers genuine?
2. How did you feel about the results of the tests?  Did you agree with them?  Could you have achieved a different result if your answers were slightly different?  What do you think of the accuracy of these tests?
3. How do you feel about the careers suggested to you?  Can you relate to any of these suggestions?
4. How the two test results compare?  Which one would you prefer to use if you needed to recruit people to work with you?  Why?