Twelfth Edition

MODERN MANAGEMENT
CONCEPTS

Samuel C. Certo
Steinmetz Professor of Management
Roy E. Crummer Graduate School of Business
Rollins College

AND

SKILLS

S. Trevis Certo
Dean’s Council of 100 Scholars
W. P. Carey School of Business
Arizona State University

PRENTICE HALL
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Samuel C. Certo
To Mimi: My compass for right living

S. Trevis Certo
To the Certos in the desert: Melissa, Skylar,

Lexie, and Landon

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Library of Congress Cataloging-in-Publication Data
Certo, Samuel C.
Modern management: concepts and skills/Samuel C. Certo, S.Trevis Certo.—12th ed.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-13-217631-6
1. Management. 2. Industrial management. 3. Social responsibility of business.
4.Technological innovations. I. Certo, S.Trevis. II.Title.
HD31.C4125 2012
658—dc22
2010034070
10 9 8 7 6 5 4 3 2 1

ISBN 10:
0-13-217631-9
ISBN 13: 978-0-13-217631-6



Contents
Preface x
About the Authors xxi

Comprehensive Analysis of Management 32
Limitations of the Classical Approach 33

The Behavioral Approach

PART 1 Introduction to Modern
Management

2

Chapter 1 Introducing Modern Management:
Concepts and Skills 2
CHALLENGE CASE: Universal Opens Harry Potter
Theme Park

3

Exploring Your Management Skill 4
The Importance of Management 4
The Management Task 5

The Management Science Approach

᭿ How Managers Do It: Did Home Depot Overpay its
CEO? 6

The Role of Management 6
Defining Management 7
The Management Process: Management Functions 7
Management Process and Goal Attainment 8
Management and Organizational Resources 9
᭿ How Managers Do It: Achieving Effectiveness at
Telstra Corporation 10

The Universality of Management
The Theory of Characteristics

11

11

Management Skill: The Key to Management
Success 11

16

CHALLENGE CASE SUMMARY 20

Management Skill Activities

21

Chapter 2 Managing: History and Current
Thinking 26
CHALLENGE CASE: Handling Competitors at
Burger King


27

Exploring Your Management Skill
The Classical Approach 28

The Contingency Approach
The System Approach 38

38

Types of Systems 38
Systems and “Wholeness” 39
The Management System 39
᭿ How Managers Do It: Tracking Customer Opinion
with ReviewPro 40
Information for Management System Analysis 40

41

CHALLENGE CASE SUMMARY 42

15

A Definition of Career 15
Career Stages, Life Stages, and Performance
Promoting Your Own Career 17
Special Career Issues 18

36


The Beginning of the Management Science
Approach 36
Management Science Today 37
Characteristics of Management Science
Applications 37

Learning Organization: A New Approach?

Defining Management Skill 11
Management Skill: A Classic View 11
᭿ How Managers Do It: Honing Cultural Skills at
Dean Foster Associates 12
Management Skill: A Contemporary View 12
Management Skill: A Focus of This Book 13
᭿ Class Discussion Highlight: Modern Research and
Management Skill 15

Management Careers

34

The Hawthorne Studies 34
Recognizing the Human Variable 35
The Human Relations Movement 35
᭿ How Managers Do It: Building a “People”
Environment at SAS 35
᭿ Class Discussion Highlight: Modern Research and
Comprehensive Management Skill 36


28

Lower-Level Management Analysis 28
᭿ How Managers Do It: Getting Efficient at Pace
Productivity 30

Management Skill Activities

43

PART 2 Modern Management Challenges 50
Chapter 3

Corporate Social Responsibility, Ethics,
and Sustainability 50

CHALLENGE CASE: Verizon’s Commitment to Social
Responsibility

51

Exploring Your Management Skill 52
Fundamentals of Social Responsibility 52
᭿ How Managers Do It: Managing Responsibility at Arch
Chemicals 52
The Davis Model of Corporate Social
Responsibility 53
Areas of Corporate Social Responsibility: Going
Green 54
Varying Opinions on Social Responsibility 54

᭿ Research Highlight: Does Social Responsibility Help
a Company’s Bottom Line? 55
Conclusions About the Performance of Social
Responsibility Activities by Business 56

Social Responsiveness

57

Determining Whether a Social Responsibility Exists 58
Social Responsiveness and Decision Making 58
Approaches to Meeting Social Responsibilities 58

iii


iv

Contents

Social Responsibility Activities and Management
Functions 60

᭿ Class Discussion Highlight: Modern Research and
Diversity Skill 94

Planning Social Responsibility Activities 60
Organizing Social Responsibility Activities 60
Influencing Individuals Performing Social Responsibility
Activities 61

Controlling Social Responsibility Activities 61
᭿ How Managers Do It: Responding Responsibly to
Stakeholders at Volcom, Inc. 62

Business Ethics 62
A Definition of Ethics 63
Why Ethics Is a Vital Part of Management Practices
A Code of Ethics 64
Creating an Ethical Workplace 66
Following the Law: Sarbanes–Oxley Reform
Standards 67

Sustainability

63

68

CHALLENGE CASE SUMMARY 72

Chapter 4

74

Management and Diversity

80

CHALLENGE CASE: Siemens Focuses on Global
Diversity


81

Exploring Your Management Skill
Defining Diversity 82
The Social Implications of Diversity

82
82

Advantages of Diversity in Organizations

83

Gaining and Keeping Market Share 83
᭿ How Managers Do It: Profiting Through Diversity at
Safeway 83
Cost Savings 83
Increased Productivity and Innovation 84
Better-Quality Management 84

Challenges That Managers Face in Working with
Diverse Populations 85
Changing Demographics 85
Ethnocentrism and Other Negative Dynamics 86
᭿ How Managers Do It: Legal Outreach Feeds the
Diversity Pipeline 87
Negative Dynamics and Specific Groups 87
᭿ How Managers Do It: Minorities and Diversity at
Morgan Stanley 88


Strategies For Promoting Diversity in
Organizations 90
Promoting Diversity Through Hudson Institute
Strategies 90
Promoting Diversity Through Equal Employment and
Affirmative Action 91
Promoting Diversity Through Organizational
Commitment 92
Promoting Diversity Through Pluralism 93

96

Planning 96
Organizing 96
Influencing 96
Controlling 97
Management Development and Diversity Training

97

CHALLENGE CASE SUMMARY 100

Management Skill Activities

Defining Sustainability 68
Defining a Sustainable Organization 69
᭿ How Managers Do It: Building a Sustainable
Organization at PepsiCo 69
Why Sustainability? 69

Steps for Achieving Sustainability 70

Management Skill Activities

The Role of the Manager

Chapter 5

101

Managing in the Global Arena

108

CHALLENGE CASE: Wal-Mart Facing Global Problems in
Japan

109

Exploring Your Management Skill 110
Managing Across the Globe: Why? 110
Fundamentals of International Management 110
᭿ How Managers Do It: Going Global at JP Morgan
Chase 111

Categorizing Organizations by International
Involvement 112
Domestic Organizations 112
International Organizations 113
Multinational Organizations: The Multinational

Corporation 113
Defining the Multinational Corporation 113
᭿ How Managers Do It: Building Global Market
Share at BRK Electronics 114
Complexities of Managing the Multinational
Corporation 114
Risk and the Multinational Corporation 116
The Workforce of Multinational Corporations 116
᭿ Class Discussion Highlight: Modern Research and
Global Management Skill 118

Management Functions and Multinational
Corporations 118
Planning in Multinational Corporations 119
Organizing Multinational Corporations 122
Influencing People in Multinational Corporations
Controlling Multinational Corporations 126
᭿ How Managers Do It: Controlling Costs
at Kimberly-Clark 126
Transnational Organizations 127

124

International Management: Special Issues 127
Maintaining Ethics in International Management 127
Preparing Expatriates for Foreign Assignments 128
CHALLENGE CASE SUMMARY 129

Management Skill Activities


Chapter 6

130

Management and
Entrepreneurship 138

CHALLENGE CASE: Google Entrepreneurs Win Big 139

Exploring Your Management Skill 140
Fundamentals of Entrepreneurship 140
᭿ Class Discussion Highlight: Modern Research and
Entrepreneurship Skill 141


Contents

Opportunities

142

The Planner

Types of Opportunities 142
Opportunity Identification 143
᭿ How Managers Do It: Identifying Opportunities at
Miller Farm 143
Opportunity Evaluation 144
Opportunity Exploitation 145
᭿ How Managers Do It: Exploiting Opportunities at

Advantage Fitness Products 145
Financing Exploitation 146

Corporate Entrepreneurship 147
Social Entrepreneurship 148
᭿ How Managers Do It: Helping Third-World
Entrepreneurs at Grameen Bank 148
How Do Commercial and Social Entrepreneurship
Differ? 149
Success Factors in Social Entrepreneurship 150
CHALLENGE CASE SUMMARY 150

Management Skill Activities

151

PART 3 Planning 158
Chapter 7

Principles of Planning

158

CHALLENGE CASE: Quality Bicycle Products Plans for the
Future 159

Exploring Your Management Skill 160
General Characteristics of Planning 160
Defining Planning 160
Purposes of Planning 160

᭿ How Managers Do It: Affirmative Planning at
Whole Foods Market 161
Planning: Advantages and Potential
Disadvantages 161
Primacy of Planning 161
᭿ Class Discussion Highlight: Modern Research and
Planning Skill 162

Steps in the Planning Process

162

165

MBO Programs: Advantages and Disadvantages
Final Responsibility

171

Planning Assistance

171

171

CHALLENGE CASE SUMMARY 173

Management Skill Activities

Chapter 8


174

Making Decisions

180

CHALLENGE CASE: Making Difficult Decisions at NBC
Universal

181

Exploring Your Management Skill 182
Fundamentals of Decisions 182
Definition of a Decision 182
Types of Decisions 182
The Responsibility for Making Organizational
Decisions 183
᭿ How Managers Do It: Making Business Decisions at
Green Queens 184
Elements of the Decision Situation 185
᭿ How Managers Do It: Trusting Employees to Make
Decisions at ShopRite 186
The Rational Decision-Making Process 186
Identifying an Existing Problem 187
᭿ How Managers Do It: Addressing—and
Eliminating—Barriers at Molson 187
Listing Alternative Solutions 188
Selecting the Most Beneficial Alternative 188
᭿ Class Discussion Highlight: Modern Research and

Decision-Making Skill 189
Implementing the Chosen Alternative 189
Gathering Problem-Related Feedback 190

Bounded Rationality 190
Decision Making and Intuition

190

Decision-Making Heuristics and Biases
Decision-Making Conditions: Risk and
Uncertainty 190

Decision-Making Tools

190

191

193

Management Skill Activities

Chapter 9

197

Strategic Planning: Strategies, Tactics,
and Competitive Dynamics 202


CHALLENGE CASE: Samsung Plans for the Future 203

169

Factors Necessary for a Successful MBO Program

Planning and the Chief Executive

172

172

CHALLENGE CASE SUMMARY 196

167

᭿ How Managers Do It: “Going Back to the Basics”
at MySpace 168
Guidelines for Establishing Quality Objectives 169

Management by Objectives (MBO)

Evaluation of Planners

Advantages and Disadvantages of Using Groups to
Make Decisions 193
Processes for Making Group Decisions 194
Evaluating Group Decision-Making Processes 195

167


Working with Organizational Objectives

Qualifications of Planners

Group Decision Making

The Planning Subsystem 164
Organizational Objectives: Planning’s
Foundation 165
Areas for Organizational Objectives

171

Probability Theory 192
Decision Trees 192

᭿ How Managers Do It: Planning to Give Back to
Communities at Target Corporation 164

Definition of Organizational Objectives

v

170
170

Exploring Your Management Skill 204
Strategic Planning 204
Fundamentals of Strategic Planning 204

Strategic Management 205
᭿ How Managers Do It: Achieving Global Efficiencies
at Kraft 208


vi

Contents

᭿ Class Discussion Highlight: Modern Research and
Planning Skill 210
᭿ How Managers Do It: Pursuing Growth by
Acquisition at Black & Decker 215

Tactical Planning

Competitive Dynamics

217

᭿ How Managers Do It: Competing for Smartphone
“Bandwidth” at HP 217
CHALLENGE CASE SUMMARY 219

Management Skill Activities

220

Plans and Planning Tools 226


CHALLENGE CASE: Microsoft Plans for Small
Businesses

CHALLENGE CASE SUMMARY 265

Management Skill Activities

266

216

Comparing and Coordinating Strategic and Tactical
Planning 216

Chapter 10

᭿ Class Discussion Highlight: Research for
Developing Organizing Skill 263

227

Exploring Your Management Skill
Plans: A Definition 228

Chapter 12

Responsibility, Authority, and
Delegation 272

CHALLENGE CASE: Toyota to Delegate Authority 273


Exploring Your Management Skill 274
Responsibility 274
᭿ How Managers Do It: Accepting Responsibility for
Actions at Goldman Sachs 274
The Job Description 274
Dividing Job Activities 275
Clarifying Job Activities of Managers 276

Authority

228

Dimensions of Plans 228
᭿ How Managers Do It: Planning for Expansion at
Nationwide Children’s Hospital 228
Types of Plans 229
᭿ How Managers Do It: Creating Sustainability Policy
at H&M 230
᭿ Class Discussion Highlight: Modern Research and
Planning Skill 231
Why Plans Fail 232
Planning Areas: Input Planning 232
᭿ How Managers Do It: Overcoming Cultural
Obstacles in HR Planning at Raba 234

277

Authority on the Job 277
Acceptance of Authority 278

Types of Authority 278
᭿ How Managers Do It: Exercising Functional
Authority at Kroger Company 280
Accountability 281

Delegation

281

Forecasting

235

Steps in the Delegation Process 281
Obstacles to the Delegation Process 282
Eliminating Obstacles to the Delegation
Process 282
Centralization and Decentralization 283
᭿ Class Discussion Highlight: Modern Research and
Responsibility and Delegation Skill 283
᭿ How Managers Do It: Reaping the Benefits of
Decentralization at Johnson & Johnson 284

Scheduling

239

CHALLENGE CASE SUMMARY 286

Planning Tools 235


Management Skill Activities

CHALLENGE CASE SUMMARY 242

Management Skill Activities

243

Chapter 13
in China

Fundamentals of Organizing

248

CHALLENGE CASE: Sony Organizes for Success 249

Exploring Your Management Skill 250
Definitions of Organizing and Organizing
Skill 250
The Importance of Organizing 250
᭿ How Managers Do It: Developing Managers at
General Electric 251
The Organizing Process 251

Classical Organizing Theory

Human Resource Management 294


CHALLENGE CASE: Cisco Recruits the Best Minds

PART 4 Organizing 248
Chapter 11

288

252

Weber’s Bureaucratic Model 253
᭿ How Managers Do It: Eliminating Bureaucracy at
General Motors 253
Division of Labor 253
Structure 254
᭿ How Managers Do It: Restructuring at
EnergySolutions 261

295

Exploring Your Management Skill 296
Defining Appropriate Human Resources 296
Steps in Providing Human Resources 296
Recruitment 296
᭿ How Managers Do It: Recruiting at the “Invest in
America” Alliance 301
Selection 302
Training 304
᭿ How Managers Do It: Investing in Training
Programs at South Coast Health System 305
Performance Appraisal 307

᭿ Class Discussion Highlight: Modern Research and
Human Resources Skill 308
᭿ How Managers Do It: Using a New Performance
Appraisal System at Aetna 309
CHALLENGE CASE SUMMARY 310

Management Skill Activities

311


Contents

Chapter 14

Organizational Change: Stress,
Conflict, and Virtuality 318

᭿ How Managers Do It: Increasing Listening at
McDonald’s 360

CHALLENGE CASE: Wrigley Continues to Change 319

Exploring Your Management Skill 320
Fundamentals of Changing an Organization
Defining Changing an Organization
Change Versus Stability 321

320


Nintendo

328

Defining Stress 329
The Importance of Studying Stress 329
Managing Stress in Organizations 329

331

Defining Conflict 331
Strategies for Settling Conflict

Virtuality

332

333

Defining a Virtual Organization 334
Degrees of Virtuality 334
The Virtual Office 334
᭿ How Managers Do It: Managing a Virtual Office at
OnSite Consulting 335
CHALLENGE CASE SUMMARY 336

Management Skill Activities

337


Influencing and Communication

344

345

Exploring Your Management Skill
Fundamentals of Influencing 346

346

Defining Influencing 346
The Influencing Subsystem 346
Emotional Intelligence 348

Communication

368

369

Exploring Your Management Skill 370
Defining Leadership 370
Leader Versus Manager

370

The Trait Approach to Leadership 371
The Situational Approach to Leadership: A Focus on
Leader Behavior 372

Leadership Situations and Decisions 372
᭿ Class Discussion Highlight: Modern Research and
Leadership Skill 377
Leadership Behaviors 377

Leadership Today

384

Transformational Leadership 384
᭿ How Managers Do It: Ben & Jerry’s as
Transformational Leaders 384
Coaching 385
Superleadership 385
Servant Leadership 387
᭿ How Managers Do It: Servant Leadership at
Zappos.com 387
Entrepreneurial Leadership 388
᭿ How Managers Do It: Developing Entrepreneurial
Leaders at Disney 388
CHALLENGE CASE SUMMARY 389

Management Skill Activities

Chapter 17

Motivation

391


398

Bristol-Myers Squibb Ensures Cutting-Edge Internet
Presence 399

CHALLENGE CASE: Jetstar Airways Soars on
Communication

Leadership

CHALLENGE CASE: Motivation Savvy Management at

PART 5 Influencing 344
Chapter 15

Chapter 16

362

CHALLENGE CASE: Iwata Faces Many Different Issues at

The Change Agent 322
Determining What Should Be Changed 322
᭿ How Managers Do It: Making Technological
Change at University Health System 323
The Kind of Change to Make 323
᭿ How Managers Do It: Implementing People
Change at Caterpillar, Inc. 324
Individuals Affected By the Change 326
᭿ Class Discussion Highlight: Modern Research and

Organizational Change Skill 327
Evaluation of the Change 328

Change and Conflict

CHALLENGE CASE SUMMARY 361

Management Skill Activities
320

Factors to Consider When Changing an
Organization 321

Change and Stress

vii

350

Interpersonal Communication 350
᭿ How Managers Do It: Dealing with Increasing
Needs For Information at the White House 351
Interpersonal Communication in Organizations 356
᭿ How Managers Do It: Podcasts Enhance
Downward Communication at Ericsson 356
᭿ Class Discussion Highlight: Modern Research and
Communication Skill 358

Exploring Your Management Skill 400
The Motivation Process 400

Defining Motivation 400
Process Theories of Motivation 400
᭿ Class Discussion Highlight: Modern Research and
Motivation Skill 401
᭿ How Managers Do It: Addressing Pay Inequity at
American Airlines 403
Content Theories of Motivation: Human Needs 404
᭿ How Managers Do It: Achievement Motivation at
C. Crane 406

Motivating Organization Members

407

The Importance of Motivating Organization
Members 407
Strategies for Motivating Organization Members 407
᭿ How Managers Do It: Distributing Incentives at
Comarco 414
CHALLENGE CASE SUMMARY 415

Management Skill Activities

416


viii

Contents


Chapter 18

Groups and Teams

424

Chapter 20

CHALLENGE CASE: Teamwork Spreads at Xerox 425

Exploring Your Management Skill 426
Groups 426
Kinds of Groups in Organizations 426

CHALLENGE CASE: Fostering Creativity and Innovation at
Hormel Foods

Formal Groups 426
᭿ How Managers Do It: Committee for Recruitment
at Red Robin Gourmet Burgers 428
Informal Groups 431

Managing Work Groups

432

Determining Group Existence 432
Understanding the Evolution of Informal Groups

433


Teams 435

437

Team Effectiveness 438
᭿ Class Discussion Highlight: Modern Research and
Team Skill 440
Trust and Effective Teams 440
᭿ How Managers Do It: Building Trust at
Burberry 440
CHALLENGE CASE SUMMARY 441

Management Skill Activities

Chapter 19

443

477

Exploring Your Management Skill 478
Creativity 478
Defining Creativity 478
Importance of Creativity in Organizations 478
Creativity in Individuals 478
᭿ How Managers Do It: Promoting Creativity at
Activision 479
Increasing Creativity in Organizations 480
᭿ How Managers Do It: Supporting Employee

Creativity at Coca-Cola Company 482

Innovation

Groups Versus Teams 435
᭿ How Managers Do It: Buidling a Team at
Renaissance Executive Forums 435
Types of Teams in Organizations 436

Stages of Team Development

Encouraging Creativity and
Innovation 476

483

Defining Innovation 483
᭿ How Managers Do It: Innovating for Success at
Amazon 483
Linking Innovation and Creativity 484
᭿ Class Discussion Highlight: Modern Research and
Creativity and Innovation Skill 485
The Innovation Process 485

Catalyst for Creativity and Innovation: Total Quality
Management 487
Essentials of Total Quality Management
(TQM) 488
Creative Ideas Based on TQM Expertise


493

CHALLENGE CASE SUMMARY 494

Managing Organization Culture 450

Management Skill Activities

495

CHALLENGE CASE: BP’s Attempt to Establish a Safety

PART 6 Controlling 500

Culture Failed 451

Exploring Your Management Skill 452
Fundamentals of Organization Culture 452

Chapter 21

Defining Organization Culture 452
The Importance of Organization Culture 453

CHALLENGE CASE: Sperry Van Ness: Harnessing Technology
for Business Success 501

Functions of Organization Culture 453

Exploring Your Management Skill 502

The Fundamentals of Controlling 502

᭿ How Managers Do It: Amending the Code of
Conduct at Tocquigny 453

Types of Organization Culture 454
Building a High-Performance Organization
Culture 456
᭿ Class Discussion Highlight: Modern Research and
Organization Culture Skill 459

Keeping Organization Culture Alive and Well

459

Establishing a Vision of Organization Culture 459
᭿ How Managers Do It: Modifying Innovative
Cultural at 3M 461
Building and Maintaining Organization Culture
Through Artifacts 462
Integrating New Employees into the Organization
Culture 464
᭿ How Managers Do It: Recruiting for the Best Fit at
Jones Day 466
Maintaining the Health of Organization Culture 466
CHALLENGE CASE SUMMARY 467

Management Skill Activities

468


Controlling, Information, and
Technology 500

Defining Control 502
Defining Controlling 502
᭿ How Managers Do It: Establishing Standards at
General Electric 505
᭿ How Managers Do It: Using Technology to Support
Planning at Stein Mart 507

Power and Control

507

A Definition of Power 507
Total Power of a Manager 508
Steps for Increasing Total Power 508
Making Controlling Successful 509

Essentials of Information

509

Factors Influencing the Value of Information
Evaluating Information 512

Information Technology 513
The Information System (IS) 513
Describing the IS 514

Managing Information Systems

516

510


Contents

᭿ How Managers Do It: Scaling Data Systems for
New Users at Sage 516
᭿ Class Discussion Highlight: Modern Research and
Controlling Skill 518
CHALLENGE CASE SUMMARY 519

Management Skill Activities

Chapter 22

520

Production and Control

526

CHALLENGE CASE: Delta Attempts to Boost
Productivity

527


538

Just-in-Time Inventory Control 539
Maintenance Control 540
Cost Control 540
Budgetary Control 540
Ratio Analysis 542
Materials Control 542
᭿ Class Discussion Highlight: Does Quality Control
Matter? 543

Selected Operations Control Tools

Exploring Your Management Skill
Production 528

528

Defining Production 528
Productivity 528
᭿ How Managers Do It: Boosting Productivity
Through Smart Grid Technology at Duke
Energy 529
Quality and Productivity 529
᭿ How Managers Do It: Balancing Quality and Low
Prices at Wal-Mart 531
Automation 532
Strategies, Systems, and Processes 533

Operations Management


Operations Control

533

Defining Operations Management 533
Operations Management Considerations 534
᭿ How Managers Do It: Filling the Pipeline at
Chrysler 538

544

Using Control Tools to Control Organizations
Inspection 544
Management by Exception 544
Management by Objectives 545
Break-Even Analysis 545
Other Broad Operations Control Tools 548
CHALLENGE CASE SUMMARY 549

Management Skill Activities

550

Exploring Your Management Skill Answers 556
Glossary 557
Photo Credits 568
Name Index 569
Subject Index 573


544

ix


Preface
Managers of today continue to face new opportunities and challenges. These opportunities include much
publicized tasks like Florida’s Universal Studios opening a new Harry Potter attraction and Apple encouraging technology innovation beyond the iPad and the iPhone. At the same time, other companies face
intense challenges, such as BP’s task of cleaning up an oil well leak in the Gulf of Mexico. Perhaps because
these opportunities and challenges are so daunting, managers today arguably have the ability to earn higher
financial rewards than at any other time in history.
This 12th edition of the Modern Management Learning Package, this text plus its ancillaries, continues a
recognized and distinctive tradition in management education that has extended more than 30 years. As in
all previous editions, this current edition of the Modern Management Learning Package has focused on a single
objective: maximizing student learning of critical management concepts.All revisions reflect instructor and
student feedback regarding ways to refashion the package to further enhance student learning. Starting with
the text, the following sections explain each major component of this revision.

New to This Edition
Professors and students need and deserve textbooks that are modern. In this context, modern involves
adding the latest concepts and empirical research as well as including the most recent examples of management in the business world. Modern also refers to how the text material is presented—the pedagogy used
to help students learn the concepts.This edition of the Modern Management Learning Package, this text and its
ancillaries, is undoubtedly modern in terms of both management concepts and pedagogy. Overall, this
package includes:
᭹

᭹

᭹
᭹

᭹
᭹
᭹
᭹

᭹

Substantial revision of Chapter 3 “Social Responsibility, Ethics, and Sustainability.” We have added new
coverage on sustainability.
Substantial revision of Chapter 9 “Strategic Planning: Strategies,Tactics, and Competitive Dynamics.”
New coverage of competitive dynamics has been added.
Half of the chapter-introductory Challenge Cases are new to this edition.
Half of the chapter-ending Concluding Cases are new to this edition.
We have added a new How Managers Do It feature. Each chapter includes at least three such features.
Approximately half of the Research Highlights are new to this edition.
A new Key Terms section has been added at the end of each chapter.
Sequencing of pedagogical features like Target Skill, Learning Objectives, and Exploring Your
Management Skill has been improved in all chapters to enhance student learning.
Half of the VideoNet Exercises are new to this edition.

More detail on each of these new features is integrated within the following discussion.

Text: Theory Overview
Decisions about which concepts to include in this revision were difficult. Such decisions were heavily influenced not only by colleague and student feedback, but also by information from accrediting agencies such
as The Association to Advance Collegiate Schools of Business (AACSB), professional manager associations
such as the American Management Association (AMA), and academic organizations like the Academy of
Management.
Overall, management theory in this edition is divided into the following six main sections:
Introduction to Management, Modern Management Challenges, Planning, Organizing, Influencing, and
Controlling.The following sections discuss the changes we made in this edition to continue the tradition of

stressing the modern in Modern Management.

Part One: Introduction to Modern Management
This section contains the foundation concepts necessary to obtain a worthwhile understanding of management.
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x

Chapter 1, “Introducing Modern Management: Concepts and Skills” This chapter exposes students to
what management is and gives insights about how to build their careers.This chapter also pinpoints


Preface

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management skills emphasized throughout the book and sets the stage for learning management
concepts and developing related skills. Given high student interest, the chapter-opening case on Harry
Potter and Universal Studios has been extensively revised. Also, new management compensation data
has been added to give students a realistic view of recent management pay levels. A new extended
example of achieving efficiency and effectiveness at Telstra, Australia’s largest telecommunications
company, was added to help students see the relevance of chapter concepts. A new experiential exercise was added at the end of the chapter to help students gain insight on gauging the progress of a
career. A new VideoNet Exercise exploring management roles at azTeen Magazine was also added.
Chapter 2, “Managing: History and Current Thinking” This chapter presents several fundamental,
but different, ways managers can perceive their jobs.The work of management pioneers like
Frederick W.Taylor, Frank and Lillian Gilbreth, and Henry L. Gantt is highlighted. Students are
given insights into how to combine the work of management pioneers into a more comprehensive
view of management. New discussion on the impact of Taylor’s work on unions and product quality
has been added. More depth on the work of the Gilbreths has also been added. A new extended
illustration of how to build human relations into an organization is based on events at SAS, the

world’s largest privately held software company. Another illustration of how to track customer
opinions focuses on ReviewPro, software that allows management to track and organize opinions of
hotel customers. A new experiential exercise was added to help students better understand the
impact of a time study job on career development. A new concluding case on present-day challenges at the New York Times has been added. A new VideoNet Exercise exploring the rewards and
challenges of being a manager at Campus MovieFest was also added.

Part Two: Modern Management Challenges
This section helps students focus on understanding major challenges that modern managers face. Detail on
each chapter in this section follows.
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Chapter 3, “Corporate Social Responsibility, Ethics, and Sustainability” This chapter discusses the
responsibilities managers have to society and how business ethics applies to modern management.
Major revision to this chapter is the addition of a new topic: sustainability. This chapter defines sustainability and a sustainable organization and discusses the triple bottom line, reasons why organizations
should become sustainable, and steps to follow for building sustainable organizations. A new introductory Challenge Case on Verizon, a new Research Highlight on the impact of social responsibility on
the organization’s bottom line, and a new example of how PepsiCo builds sustainability have all been
added to maximize chapter newness and freshness. A new career experiential exercise encourages
students to explore how communicating about social responsibility activities can impact careers.
Chapter 4, “Management and Diversity” This chapter defines diversity, explains the advantages of
promoting diversity in organizations, outlines ways in which managers can promote it, and discusses
some key challenges and dilemmas managers face in attempting to build a diverse workforce. A new
Challenge Case on Siemens and global diversity has been added. Other new additions for this edition
include coverage of Muslims in American society, an extended example of diversity in the legal profession, discussion of how Morgan Stanley highlights diversity information, and about how Walgreens
Company actively hires workers with disabilities. A new experiential exercise focuses on gender bias

and a woman’s career. A new VideoNet Exercise on diversity in organizations was also added.
Chapter 5, “Managing in the Global Arena” This chapter covers domestic versus international,
multinational, and transnational organizations. The chapter also emphasizes expatriates, repatriation, and international market agreements. The introductory Challenge Case on Wal-Mart and
Japan has been updated. New discussion regarding JP Morgan’s attempts to target business in
Brazil, China, and India has also been added. A new illustration of Kimberly-Clark controlling
global operational costs also appears. Students will also see newly updated information regarding
U.S. investment abroad—where investment in the United States has been originating and where
U.S. investment in foreign countries has been focused. A new experiential exercise focuses
on raising students’ sensitivity to the types of topics they must study to build a global career. A
new chapter-ending case on Jarden’s global reach has also been added.
Chapter 6, “Management and Entrepreneurship” This chapter focuses on the discovery, evaluation,
and exploitation of business opportunities.We have added extensive examples describing entrepreneurial efforts in the agricultural, financial, and health and fitness industries.The Challenge Case on

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Google has been updated to reflect some of the company’s latest efforts.We have also included a
new Research Highlight reviewing the primary reasons why entrepreneurs start new businesses.The
chapter includes a new chapter-ending case on Heritage Auction Galleries, an entrepreneurial firm
that sells collectibles all over the world. Finally, the chapter includes a new VideoNet exercise based
on Boston Boxing and Fitness.

Part Three: Planning
This section elaborates on planning as a primary management function.
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Chapter 7, “Principles of Planning” This chapter details the primary concepts involved with planning.
The chapter includes a new Challenge Case detailing the planning efforts at Quality Bicycle Products.
The chapter also includes new examples illustrating the role of planning in a diverse set of companies
including Target, ConocoPhillips, and MySpace.The chapter concludes with a new VideoNet exercise
illustrating how managers plan at Kaneva.
Chapter 8, “Making Decisions” This chapter details the primary concepts involved with decision
making.The chapter begins with a new Challenge Case summarizing the decision that NBC executives made to replace Conan O’Brien with Jay Leno as host of “The Tonight Show.”We also included
a new Research Highlight examining how timely information improves decision making.We incorporate new content discussing the role of hubris and overconfidence in understanding executive decision making. Finally, the chapter includes new examples illustrating the role of decision making in
the recycling and retailing industries.
Chapter 9, “Strategic Planning: Strategies,Tactics, and Competitive Dynamics” This chapter was extensively revised to include the latest research on strategic planning. In addition to the chapter’s existing
coverage of strategies and tactics, this chapter now includes an in-depth discussion of competitive
dynamics.This new section on competitive dynamics helps students understand how and why firms act
and react when competing with their rivals. Specifically, we introduce the framework suggesting that a
firm’s awareness, motivation, and capabilities influence its competitive actions.We introduce an example of the rivalry between Amazon.com and Barnes & Noble to illustrate how these concepts influence
competitive actions.The chapter includes a new Challenge Case detailing the role of strategic planning
in understanding the success of Samsung Electronics.The chapter concludes with a new VideoNet
Exercise on Nom Nom.
Chapter 10, “Plans and Planning Tools” This chapter details the fundamental tools that help improve
planning success.This chapter includes a new Challenge Case on Microsoft to help students better
understand how planning tools can improve organizational effectiveness.We also included a diverse
set of examples to illustrate how planning tools assist both non-profit organizations (e.g., Nationwide
Children’s Hospital) as well as more prominent companies such as H&M and Apple.The chapter
concludes with a new VideoNet Exercise that describes how employees at Triple Rock Brewing
employ planning tools.


Part Four: Organizing
This section discusses organizing activities as a major management function.
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Chapter 11, “Fundamentals of Organizing” This chapter details the key concepts involved with organization.The chapter includes new examples illustrating the importance of organization for companies
such as General Electric, General Motors, and EnergySolutions.We also included in this chapter a new
Research Highlight examining how organizational structure influences the ability of companies to
mass customize their products for customers.This example also provides a discussion of the distinctions between organic versus mechanistic organizational structures.The chapter concludes with a new
chapter-ending case describing the challenges involved with 3M’s organizational structure.
Chapter 12, “Responsibility,Authority, and Delegation” This chapter details the importance of responsibility, authority, and delegation in managerial effectiveness.The chapter begins with a new Challenge
Case summarizing the roles of responsibility, authority, and delegation in understanding the quality
challenges that recently troubled Toyota.The chapter also includes new examples illustrating how these
important concepts influenced managerial effectiveness at Goldman Sachs and Johnson & Johnson.
Chapter 13, “Human Resource Management” This chapter covers the primary concepts involved in
understanding effective human resource management. New examples have been added to illustrate
a variety of issues in human resource management. For instance, new examples highlight the


Preface

᭹

practices Intel uses to recruit new employees as well as the tactics used by Health South when laying off employees.We also included a new Research Highlight illustrating how the timing of a job
offer (i.e., how soon after an interview a job offer was made to a candidate) influences the likelihood that a candidate accepts the offer.This chapter concludes with a new chapter-ending case
describing how Raising Cane’s employed social media to attract and hire new employees.

Chapter 14, “Organizational Change: Stress, Conflict, and Virtuality” This chapter emphasizes ways
in which managers change organizations and the stress-related issues that can accompany such action.
Coverage also emphasizes building alternative work situations, communicating successfully in virtual
offices, and handling change-related conflict. New extended examples of organizational change focus
on changing a data technology system at University Health Systems, people change at Caterpillar, and
identifying workplace bullying. New coverage has also been added on “storytelling” as a technique for
initiating change. A new experiential exercise allows students to explore the role of change in career
management. A new chapter-ending case focuses on change at P&G. A new VideoNet Exercise
exploring change at homestarrunner.com was also added.

Part Five: Influencing
This section discusses ways managers should deal with people. Reflecting the spirit of AACSB guidelines,
encouraging thorough coverage of human factors in business curriculum, the influencing section is quite
comprehensive.
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Chapter 15, “Influencing and Communication” This chapter introduces the topic of managing people,
defines interpersonal communication, and presents organizational communication as the primary
vehicle managers use to interact with people. A new introductory Challenge Case was added. In
addition, more coverage of emotional intelligence has been added. New extended examples on communication strategy at the White House and the use of podcasts for communication at Ericsson have
also been newly added. New emphasis in this chapter explores informal communication during an
economic downturn and the relationship between trust in a manager and the manager’s credibility as
a communicator.The new experiential exercise for this chapter focuses on the relationship between a
manager’s personal communication philosophy and his or her career.The end-of-chapter VideoNet

Exercise focuses on communication at Zifty.com.
Chapter 16, “Leadership” This chapter highlights more traditional concepts, such as the Vroom-YettonJago leadership model, the path–goal theory of leadership, and the life-cycle theory of leadership.
Coverage also includes more recently developed and evolving concepts such as servant leadership, transformational leadership, coaching, super-leadership, and entrepreneurial leadership.The new introductory
Challenge Case for this chapter is on Sotoru Iwata, the president of Nintendo. New research coverage
focuses on the relationship between leader traits and charismatic leadership, and leader flexibility and
“quick wins.” New extended examples feature transformational leadership at Ben & Jerry’s and servant
leadership at Zappos.com.We also added a new Research Highlight examining the role of transformational leadership in understanding group performance.The new career experiential exercise for this
chapter helps students explore the role of leadership opportunities within an organization and choosing
to take a job within that organization.The newly designed concluding case is “Oprah Leads an Empire.”
Chapter 17, “Motivation” This chapter defines motivation, describes the motivation process, and provides
useful strategies managers can use in attempting to motivate organization members. Both content and
process theories of motivation are discussed in detail. New extended examples of how American Airlines
addresses pay inequity, how entrepreneur Bob Crane handles achievement motivation, and distributing
incentives at Comarco are all included to help students see how chapter concepts can impact real managers. Research findings related to Theory X–Theory Y, the relationship between job satisfaction and
economic recession, the findings of others that are seemingly consistent with Herzberg’s ideas, job rotation, and communicating about incentive programs have been added to enrich chapter content.This chapter includes a new Research Highlight examining how goal-setting may influence the motivation—and
performance—of individuals.The new career experiential exercise helps students explore the relationship
between punishment and career development.The new case for this chapter is “Motivation at United Way.”
Chapter 18, “Groups and Teams” This chapter emphasizes managing clusters of people as a means of
accomplishing organizational goals. Coverage focuses on managing teams. Coverage also focuses on
groups versus teams, virtual teams, problem solving, self-managed and cross-functional teams, stages of
team development, empowerment, the effectiveness of self-managed teams, and factors contributing to
team effectiveness. An extended example of how committees function focuses on the committee for

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recruitment at Red Robin Gourmet Burgers. Another such example focuses on building teams at
Renaissance Executive Forums. New coverage discusses groupthink, the relationship between trust and
team effectiveness, and integrating informal groups within formal organization structure.We also added
a new Research Highlight that discusses how personality type may influence the extent to which an
individual is able to influence group decision making.The new career-oriented experiential exercise for
this chapter helps students explore the location of a first job and its impact on their careers.The newly
designed concluding case for this chapter focuses on team building at Best Buy.
Chapter 19, “Managing Organization Culture” The chapter opens with an extensively revised case on
BP that focuses on an oil leak in the Gulf of Mexico and the company’s attempt to establish an organization culture emphasizing safety. Major topics include defining organization culture, the importance of
culture, and building a high-performance organization culture. Special discussion focuses on cultural artifacts: organizational values, myths, sagas, language, symbols, ceremonies, and rewards. New content
includes comments on the difficulty in defining a particular culture, what beekeeping can teach us about
building values within an organization, and the impact of economic turbulence on organizational socialization. New extended examples illustrate issues related to changing a code of conduct at Tocquigny and
recruiting within a law firm to provide new employees who fit the organization culture.We also included
a new Research Highlight discussing how aspects of organizational culture influence employee turnover.
The new career experiential exercise for this chapter emphasizes the impact of organization culture on
job choice.The new concluding case designed for this chapter explores organization culture and Cintas.
Chapter 20, “Encouraging Creativity and Innovation” The chapter details new research on creativity
and innovation and updates the efforts of the most innovative companies in America.The chapter
also includes a new example illustrating the importance of creativity for Activision, a video game
developer.We also added a new example illustrating how Amazon.com continues to innovate and
change its overall business model. A new Research Highlight in this chapter highlights the important
link between creativity and innovation in entrepreneurial firms.The chapter concludes with a new
case describing the importance of innovation for Inventables.

Part Six: Controlling
This section presents control as a major management function. Major topics include fundamentals of control, controlling production, and information technology.

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Chapter 21, “Controlling, Information, and Technology” The chapter opens with a new Challenge Case
discussing how Sperry Van Ness, a commercial real estate brokerage, employs controlling, information,
and technology to improve operational efficiency and effectiveness.To better understand these concepts, we also include new examples illustrating how companies like Stein Mart and Sage use the latest
information technologies to improve operations.We also include the most recent research available to
expand our discussion of power in the organizational context.The chapter concludes with a new
VideoNet Exercise demonstrating how Platinum Autobody uses information technology.
Chapter 22, “Production and Control” We updated the Challenge Case in this chapter to reflect the
control issues that surround Delta’s recent merger with Northwest.We also included examples
illustrating how Duke Energy, Chrysler, and Domino’s implement controls to improve operational
effectiveness.The chapter concludes with a new VideoNet Exercise illustrating the roles of production and control at Sound in Motion.We also included a new chapter-ending case to highlight how
Michael’s on East uses various controls to reduce costs.

Modern Management 12th edition: The Skills
From a pedagogy standpoint, the 12th edition of Modern Management continues its unique focus in the
marketplace of developing students’ management skills across all of the primary management functions. Each
chapter opens by identifying a specific management skill on which the chapter focuses. The remainder of
the chapter contains a number of purposefully placed features designed to help students develop that skill.
This focus on skill development is consistent with the Association to Advance Collegiate Schools of
Business (AACSB), which provides higher education professionals with sound standards for maintaining excellence in management education. AACSB standards indicate that excellence in modern management education
is achieved when students acquire both knowledge about management concepts and skill in applying that
knowledge. According to these standards, management educators must help students understand and appreciate both the “why” of management as well as the “how” of management.


Preface

The following sections discuss pedagogical features in this text that help students learn management

theory and how to apply it.
1. Chapter Target Skill: Each chapter opens by identifying and defining the target management skill
emphasized in that chapter. By focusing on this target skill early in the chapter, students immediately
have a context for learning chapter concepts.As an example of a chapter target skill, see the definition of
corporate social responsibility skill on page 50.
2. Learning Objectives: For each chapter, a list of learning objectives follows the Chapter Target Skill.These
objectives flow from the chapter target skills to help students further focus on learning critical chapter concepts. See page 2 for an example of how a chapter target skill and learning objectives work together to help
students focus their learning on how to make decisions.
3. Challenge Case: Each chapter opens with an introductory Challenge Case.The purpose of a Challenge
Case is to introduce students to real challenges faced by real managers and to demonstrate the usefulness
of chapter concepts and related management skills in meeting those challenges. Each case summarizes a
set of issues for a manager within a company and asks students how they would resolve the issues. Over
half the cases in this edition are new or updated. New cases in this edition focus on companies such as
Best Buy, United Way, and Harpo Productions.Turn to page 451 to see this edition’s new introductory
Challenge Case on BP.
4. How Managers Do It: New to this edition, each chapter contains two or three features called
How Managers Do It. This feature shows students concrete steps practicing managers have actually
taken that are consistent with chapter concepts.This feature focuses on companies such as 3M,
Zappos, and Caterpillar. For a sample of this feature, see “Committee for Recruitment at Red Robin
Gourmet Burgers” on page 428.
5. Research and Class Discussion Highlights: Each chapter includes a “Research Highlight” or
“Class Discussion Highlight” that focuses on recent research related to chapter content.These highlights include specific questions to help students better understand the implications of recent management research on chapter content and management skills.These questions are designed primarily
for in-class discussion but could be used for out-of-class study. Half of the highlights are new to this
edition. New highlights cover such topics as organizational culture, recruiting tactics, and team decision making. For a sample of this feature, see “Modern Research and Human Resources Skill:The
Timing of Job Offers” on page 308.
6. You and Your Career: Each chapter contains an Experiential Exercise that helps students understand
the relationship between the targeted skill of the chapter and the development of their own careers.
This feature includes a number of questions designed to help students appreciate the importance of
managing their own careers.To see a sample You and Your Career exercise turn to page 23.
7. Challenge Case Summary: Each chapter ends with a Challenge Case Summary.This section

provides extensive narrative on how chapter concepts relate to issues in the chapter-opening
Challenge Case.To better understand this pedagogical feature, see the Challenge Case Summary for
the BP introductory case on page 467.
8. Management Skill Activities: Each chapter ends with a rich array of learning activities that helps
students better understand management concepts and develop skills in applying those concepts.
Specific activities are listed and explained below.
A. Understanding Management Concepts: This section helps students review and understand
chapter concepts.
1. Know Key Terms is a section in which key terms in a chapter are listed along with page
numbers on which they are discussed. For an example Know Key Terms section, see key
terms in the Strategic Planning chapter on page 220.
2. Know How Management Concepts Relate is a section containing essay questions related
to chapter material.These questions help students focus on the interrelationships of chapter
concepts and how they relate to the management process. For the Influencing and
Communication chapter, see a sample Know How Management Concepts Relate on page 362.
B. Developing Management Skills: This chapter-ending section contains many activities that
focus on helping students develop skills related to chapter content.
1. Exploring Your Management Skill: Part 1. This exercise starts the Developing
Management Skill section of each chapter.Taken before studying the chapter, Part 1 is a
true-false, multiple-choice test (self-scored or electronically-scored) that helps students to
assess their level of expertise in a chapter target skill before studying the chapter.The questions
focus on how a manager in a Challenge Case might apply chapter content to organizational

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2.

3.

4.

5.

6.

issues. For an example of Exploring Your Management Skill: Part 1, check out page 266 in
the Fundamentals of Organizing chapter.
Exploring Your Management Skill: Part 2. This exercise is actually repeating the same
Exploring Your Management Skill: Part 1 test after studying the chapter. Students retake the
test in Part 2 to see the impact of studying and to assess their learning as encouraged in
AACSB guidelines on assurance of learning. For an example of Exploring Your Management
Skill: Part 2, check out page 267 in the Fundamentals of Organizing chapter.
Your Management Skills Portfolio. An activity at the end of each chapter is specially
designed to allow students to demonstrate management skill learned in that chapter.
Instructors may choose to have students turn in hard or electronic copies of this
assignment. In addition, instructors may ask students to present their completed
portfolios in class. If completed online, a student can accumulate this evidence and
print a portfolio covering as many chapters as desired, to help win a job during an
employment interview. See “Delegating Basketball Duties at Texas A&M” on page 289
as an example of a Your Management Skills Portfolio.
Experiential Exercises. Each chapter concludes with two types of experiential exercises.
Type one is specially designed to help students develop knowledge and skill related to chapter
content. For an example of this type of experiential exercise, see Analyzing Study Results on
page 419 of the Motivation chapter.
Type two is an exercise that focuses on helping students use chapter content to better

manage their own careers.These exercises are called You and Your Career. A sample of this
type of experiential exercise, can be found on page 154 of the Management and
Entrepreneurship chapter.
Cases. Each chapter concludes with two cases.The first concluding case is based on the
chapter’s introductory Challenge Case. Students are given a series of discussion questions
that stimulate further discussion of the Challenge Case. Page 448 contains an example of
such questions related to “Teamwork Spreads at Xerox,” the Challenge Case for the Groups
and Teams chapter.
The second concluding case is specifically designed to illustrate real-life management issues
and the steps necessary to face those issues. Half of these specially designed cases are new to this
edition. An example of this type of case, new to this edition, is “Best Buy’s Extreme Team
Building” on page 448 of the Groups and Teams chapter.
VideoNet Exercises. Each chapter ends with a unique learning tool called a VideoNet Exercise.
This exercise begins with students watching a video of an actual company and discussing chapter
content as it relates to the company featured in the video. Next, students enrich what they’ve
learned by completing an Internet activity—an online exploration of the company featured in the
video. Half of the VideoNet Exercises are new to this edition. For a sample VideoNet exercise, see
“Production and Control: Sound in Motion” on page 553 of the Production and Control chapter.

Modern Management: The Student Learning Process
Students often ask professors to suggest the best way to study to maximize learning. By using the components
of Modern Management in a conscientious and systematic fashion, students can build their knowledge about
management concepts and their skill to apply it. Although the components of Modern Management are flexible
and can be used for many different study processes, one suggested study process is discussed below.
As shown in Figure 1, students can start chapter study by experiencing Exploring Your Management
Skill: Part 1.This activity will introduce students to concepts and skills emphasized in the chapter and help
them assess how much they know in these areas before studying the chapter.
Once students have been introduced via Exploring Your Management Skill: Part 1, they can start
learning management concepts.They learn concepts by reading and studying the chapter and checking their
progress in meeting the learning objectives stated at the beginning of the chapter as well as being able to

answer essay questions at the end of the chapter. By checking their learning progress, students can pinpoint
areas in which further study is needed before moving forward.
Once students are satisfied that they have learned chapter content, they can experience Exploring Your
Management Skill: Part 2. This exercise will reemphasize the knowledge and skills focus in the chapter and
give students feedback about how much they’ve learned in the chapter. If students are not satisfied with
their feedback, they can restudy material to improve.


Preface

REFLECT ON
KNOWLEDGE
AND
SKILLS

FIGURE 1
A systematic method for
maximizing learning when studying
Modern Management

Exploring Your
Management Skill:
Part 1

Read a chapter

Have you met
chapter learning
objectives?


LEARN
CONCEPTS

No

Yes
Can you answer
the essay questions
at end of chapter?

No

Yes

REFLECT ON
KNOWLEDGE
AND
SKILLS

Exploring Your
Management Skill:
Part 2

Review:
1. Target management skill
2. Challenge Case Summary

LEARN SKILLS

Perform assigned

skills activities

Management
Skills
Portfolio

Experiential
Exercises

Cases

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VideoNet
Exercises


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Preface

When students are satisfied with this feedback, they can focus more on learning management skills
related to chapter content. Students focus on learning how to apply management concepts by performing
application exercises assigned by professors and referring to chapter content as often as necessary to further clarify concepts and how to apply them. Students might also work on exercises independently and do
work not assigned by the professor. Application exercises can include the Management Skills Portfolio,
Experiential Exercises, Cases, and VideoNet Exercises.

Instructor/Student Supplements
The Modern Management Web Site—New to This Edition
The Modern Management author Web site (www.twocertos.com) is new to this edition and a unique feature

for principles of management textbooks.This site provides professors using Modern Management with a rich
array of content aimed at making the text as close to real-time as possible. Content on the site includes features like experiential exercises, videos, podcasts, and research updates. By integrating this content with
the text, professors can deliver courses that are content appropriate and current. The Modern Management
Web site is maintained by the authors of the text, who personally choose and include the content that best
complements and continuously updates text content.
Because instructors around the world teach courses and concepts at different times, the authors designed
this site so instructors can quickly identify and use relevant content when they need it.The site allows instructors to search the entries by either chapter or content type. This design allows instructors to access content
available for each teaching topic quickly and easily as needs arise.

Instructor Resource Center
At the Instructor Resource Center, www.pearsonhighered.com/irc, instructors can access a variety of print,
digital, and presentation resources available with this text in downloadable format. Registration is simple and
gives you immediate access to new titles and new editions. As a registered faculty member, you can download resource files and receive immediate access to and instructions for installing course management content on your campus server. In case you ever need assistance, our dedicated technical support team is ready
to help with the media supplements that accompany this text.Visit for answers
to frequently asked questions and toll-free user support phone numbers.
The following supplements are available for download to adopting instructors:
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Instructor’s Manual
Test Item File
TestGen (test-generating program)
PowerPoint Slides

Videos on DVD—Video segments that illustrate the most pertinent topics in management today and
highlight relevant issues that, demonstrate how people lead, manage, and work effectively. Contact your
Pearson representative for the DVD.
CourseSmart eTextbook—CourseSmart is an exciting new choice for students looking to save

money. As an alternative to purchasing the printed textbook, students can purchase an electronic version of the same content. With a CourseSmart eTextbook, students can search the text, make notes
online, print out reading assignments that incorporate lecture notes, and bookmark important passages for later review. For more information, or to purchase access to the CourseSmart eTextbook,
visit www.coursesmart.com.
MyManagementLab (www.mymanagementlab.com) is an
easy-to-use online tool that personalizes course content
and provides robust assessment and reporting to measure individual and class performance. All of the
resources that students need for course success are in one place—flexible and easily adapted for your students’ course experience. Some of the resources include an eText version of all chapters, quizzes, video
clips, simulations, assessments, and PowerPoint presentations that engage your students while helping them
study independently.


Preface

Acknowledgments
The overwhelming success of Modern Management has now continued for three decades. The Modern
Management Learning Package, this book and its ancillaries, has become a generally accepted academic standard for high-quality learning materials in colleges and universities throughout the world. These materials
have been published in special “country editions,” serving the special needs of management students in
countries like Canada and India. Modern Management has also been published in foreign languages including
Portuguese and Spanish and is commonly used in professional management training programs.
Obviously, we have received much personal satisfaction and professional recognition for the success of
this text over the years. In truth, however, much of the credit for this success continues to rightfully belong
to many of our respected colleagues. Many key ideas for text development and improvement have come
from others. We’re grateful for the opportunity to recognize the contributions of these individuals and
extend to them our warmest personal gratitude for their professional insights and encouragement throughout the life of this project.
For this edition, several colleagues made valuable contributions through numerous activities like
reviewing manuscript and providing unsolicited ideas for improvement.These individuals offered different
viewpoints that required us to constructively question our work. Thoughtful comments, concern for student learning, and insights regarding instructional implications of the written word characterized the highquality feedback we received.These individuals are:
Helen Davis, Jefferson Community
College–Downtown Louisville


Robert Morris, Florida State College of
Jacksonville

E. Gordon DeMeritt, Shepherd University

Paul Robillard, Bristol Community College

Theresa Freihoefer, Central Oregon
Community College

Gisela Salas,Webster University, Barry
University, St. Leo University, University of
the Rockies

George Gannage,West Central Technical
College
Wayne Gawlik, Joliet Jr. College

Duanne Schecter, Muskegon Community
College

Ashley Geisewite, Southwest Tennessee
Community College

M. Smas, Kent State University

Jon Matthews, Central Carolina Community
College

Bob Waris, University of Missouri Kansas City


Paul Thacker, Macomb Community College

Many colleagues have made significant contributions to previous editions of this project that are still
impacting this 12th edition. A list of such respected colleagues includes:
Don Aleksy, Illinois Valley College

Heidi Helgren, Delta College

Karen Barr, Penn State University

Jo Ann Hunter, Community College of
Allegheny County

Dan Baugher, Pace University
Wayne Blue, Allegany College of Maryland
Elise A. Brazier, Northeast Texas Community
College
Michael Carrell, Morehead State University
Lon Doty, San Jose State University

Steven E. Huntley, Florida Community
College at Jacksonville
Robert E. Kemper, Northern Arizona
University
Toni Carol Kind, Binghamton University

Megan Endres, Eastern Michigan University

Dennis L. Kovach, Community College of

Allegheny County

Joyce Ezrow, Anne Arundel Community
College

Loren Kuzuhara, University of Wisconsin

William Brent Felstead, College of the Desert
Robert Freeland, Columbia Southern
University

Gosia Langa, University of Maryland
Theresa Lant, New York University
Maurice Manner, Marymount College

Adelina Gnanlet, California State University

Michelle Meyer, Joliet Junior College

Joseph Goldman, University of Minnesota

Marcia Miller, George Mason University

xix


xx

Preface


Jennifer Morton, Ivy Tech Community College
Rhonda Palladi, Georgia State University

Gregory Sinclair, San Francisco State
University

Donald Petkus, Indiana University

L. Allen Slade, Covenant College

James I. Phillips, Northeastern State
University

Charles I. Stubbart, Southern Illinois
University Carbondale

Richard Ratliff, Shari Tarnutzer, and their
colleagues, Utah State University

Dr. Peter Szende, Boston University

Johnny Shull, Central Carolina Community
College

Don Tobias, Cornell University

Denise M. Simmons, Northern Virginia
Community College

Gloria Walker, Florida Community College at

Jacksonville

Joe Simon, Casper College

Cindy W.Walter, Antelope Valley College

Tom Tao, Lehigh University
Larry Waldorf, Boise State University

Randi L. Sims, Nova Southern University
In addition, several colleagues have worked diligently on developing text ancillaries of only the highest quality. Such colleagues worked tirelessly to provide instructional aids to all of us and we thank them for
their time and efforts. For this edition, we also thank Steve Stovall for his work on the end of chapter cases
and Patricia Lanier for her work on the VideoNet exercises.
We will always owe Professor Lee A. Graf, Professor Emeritus, Illinois State University, a huge debt
of gratitude for helping to build the success of Modern Management throughout the early years of this project. Dr. Graf’s countless significant contributions in many different areas have certainly been instrumental
in building the reputation and widespread acceptance of the Modern Management Learning Package. More
important than our professional relationship, Dr. Graf is our friend.
Members of our Prentice Hall family deserve personal and sincere recognition. Our book team has
been nothing but the best: Sally Yagan, Editorial Director; Kim Norbuta, Acquisitions Editor; Claudia
Fernandes, Editorial Project Manager; Carter Anderson, Editorial Assistant; Lynn Savino, Production
Project Manager; Judy Leale, Senior Managing Editor; and Nikki Jones, Marketing Manager. Needless to
say, without our Prentice Hall colleagues, there would be no Modern Management.
Sam Certo would like to give special recognition to Craig McAllaster, Dean of the Crummer Graduate
School of Business at Rollins College and Charles “Chuck” Steinmetz, entrepreneur extraordinaire. Personal
and professional support demonstrated by these individuals over the years has helped to ensure the intensity, growth, and excitement necessary to maintain a vigorous, long-term writing schedule. Probably
unknown to them, McAllaster and Steinmetz have been invaluable in the completion of this text.
Last and arguably most importantly, Sam Certo would like to thank his wife, Mimi, for her continual support throughout this revision. She constantly made personal sacrifices “beyond the call of duty” in support of
the completion of this project. Thank you! Brian, Sarah and Andrew, Matthew and Lizzie, and Trevis and
Melissa, continually but unknowingly help to build my confidence and focus.Thank you! To Skylar, Lexie, and
Landon, a very special thanks.You guys always help “Pop” to remember that “adult things” aren’t always as

important as adults make them out to be.
Trevis Certo: I would like to thank my colleagues at Arizona State University for their continued support. I would also like to thank my wife Melissa for her patience with my writing schedule. I would also
like to thank Skylar, Lexie, and Landon for humbling me every day. Finally, and most importantly, I would
like to thank God for blessing me with a beautiful and healthy family.

Samuel C. Certo
S. Trevis Certo


About the Authors
Dr. Samuel C. Certo is presently the Steinmetz Professor of Management at the Roy E.
Crummer Graduate School of Business at Rollins College. Over his career, Dr. Certo has received
many prestigious awards including the Award for Innovative Teaching from the Southern Business
Association, the Instructional Innovation Award granted by the Decision Sciences Institute, and the
Charles A.Welsh Memorial Award for outstanding teaching.
Dr. Certo has written several successful textbooks including Modern Management, Strategic
Management: Concepts and Applications, and Supervision: Concepts and Applications. His textbooks have
been translated into several foreign languages for distribution throughout the world. Having received
six different teaching awards in the last four years alone, Dr. Certo constantly focuses on crafting all
of his books to facilitate both the instructional and student learning processes. Dr. Certo’s numerous
publications include articles in such journals as Academy of Management Review,The Journal of Change
Management, Business Horizons,The Journal of Experiential Learning and Simulation, and Training.
A past chairperson of the Management Education and Development Division of the Academy of
Management, he has been honored by that group’s Excellence of Leadership Award. Dr. Certo has
also served as president of the Association for Business Simulation and Experiential Learning, as associate editor for Simulation & Games, and as a review board member of the Academy of Management
Review. His consulting experience has been extensive with notable experience on boards of directors
in both private and public companies.
Dr. S. Trevis Certo is an associate professor and a Dean’s Council of 100 Scholar in the W. P.
Carey School of Business at Arizona State University. Dr. Certo holds a Ph.D. in strategic management from the Kelley School of Business at Indiana University. His research focuses on corporate
governance, top management teams, initial public offerings (IPOs), and research methodology. Dr.

Certo’s research has appeared in the Academy of Management Journal, Academy of Management Review,
Strategic Management Journal, Journal of Management, California Management Review, Journal of Business
Venturing, Entrepreneurship Theory and Practice, Business Ethics Quarterly, Journal of Business Ethics, Business
Horizons, Journal of Developmental Entrepreneurship, and Across the Board. Dr. Certo’s research has also
been featured in publications such as BusinessWeek, New York Times,Wall Street Journal,Washington Post,
and Money magazine.
Dr. Certo is a member of the Academy of Management and the Strategic Management Society
and serves on the editorial review boards of the Academy of Management Journal, Journal of Management,
Entrepreneurship Theory and Practice, Journal of Management and Governance, and Business Horizons. Prior
to joining the faculty at Arizona State, he taught undergraduate, MBA, EMBA, and Ph.D. courses in
strategic management, research methodology, and international business at Indiana University,Texas
A&M University,Tulane University, and Wuhan University (China).


PART 1:
INTRODUCTION
TO MODERN
MANAGEMENT

Introducing Modern
Management

chapter

1

CONCEPTS

AND


SKILLS

Target Skill
management skill: the ability to work with people
and other organizational resources to accomplish
organizational goals

objectives
TO HELP BUILD MY MANAGEMENT SKILL, WHEN STUDUDYING
THIS CHAPTER, I WILL ATTEMPT TO ACQUIRE:
To help build my management skill,
5. Working definitions of managerial

when studying this chapter, I will
attempt to acquire:
1. An understanding of the

importance of management to
society and individuals
2. An understanding of the role

of management
3. An ability to define management

in several different ways
4. An ability to list and define the

basic functions of management
2


effectiveness and managerial
efficiency
6. An understanding of basic

management skills and their
relative importance to managers
7. An understanding of the

universality of management
8. Knowledge of skills that help

managers become successful
9. Insights concerning what

management careers are and how
they evolve


CHALLENGE CASE
UNIVERSAL OPENS HARRY POTTER
THEME PARK

A

and then
additional months in development, Universal
Studios debuted its latest theme park, “The
Wizarding World of Harry Potter.” The park opened
in June 2010 at the Universal Orlando Resort in
Florida, in what Universal calls “a theme park within

a theme park.”1
The new park, developed as a partnership
between Warner Bros. Entertainment Inc. and
Universal Orlando Resort, creates the world’s first
fully immersive Harry Potter–themed environment
based on the best-selling books by J. K. Rowling
and wildly successful feature films from Warner Bros.
The author worked with a creative team to make
sure the park resembles her work.2
Pressure to build an attraction that is
true to the Harry Potter brand was intense,
as Universal’s chairperson, Tom Williams,
noted. However, early visitors to the park
claim it has successfully captured the smells,
sounds, and texture of Hogwarts Castle and
the Forbidden Forest. Universal reportedly
worked closely with Warner Bros. to ensure
that marketing for the new park (launched in
the form of advertising during the 2010 Super
Bowl) aligned closely with the global Harry
Potter brand. The 20-acre facility includes
“meticulously re-created” versions of Hogwarts
Castle and other settings from the series, along
with amusements, dining, and shopping. Rides
include Harry Potter and the Forbidden Journey,
Flight of the Hippogriff, and a pair of high-speed
roller coasters known as Dragon Challenge.3
The power of the Harry Potter brand is impressive. Rowling has sold more than 400 million Harry
Potter books in more than 63 languages, and the
movies have generated billions of dollars in revenues.4 An estimated 8 out of 10 people already

recognize the Harry Potter name, which is also an
important draw for park visitors.5
FTER MONTHS OF MEDIA SPECULATION

Industry observers say the Harry Potter theme
park is an attempt by Universal to better compete
with Walt Disney World, the leading attraction in
Orlando with more than 45 million visitors in a recent
year—as compared with Universal’s Orlando park figures of just over 11 million during the same period.6
Going from concept to the reality of operating a
profitable enterprise, however, is a formidable challenge that rests squarely in the hands of management. Management must avoid classic mistakes
such as recruiting the wrong employees, not creating a motivating work environment, and failing to
keep the park’s many systems operating properly.
Competent managers will meet the challenge,
whereas incompetent management will not. Only
time will tell.

■ Bringing a massive project like a new Harry
Potter theme park to life requires many types of
management skills at all levels of the organization.
3


4

P A R T 1 • Introduction to Modern Management

EXPLORING YOUR MANAGEMENT SKILL
You can explore your level of management skill before studying the chapter by completing the exercise “Exploring Your
Management Skill: Part 1” on page 21 and after studying this


chapter by completing the exercise “Exploring Your
Management Skill: Part 2” on page 22.

THE MODERN MANAGEMENT CHALLENGE
The Challenge Case illustrates just a few of the challenges that
face Universal Orlando management at its new Harry Potter
theme park. The remaining material in this chapter explains the
basic concepts of modern management and helps to develop
the corresponding management skill you will need to meet

such challenges throughout your career. After studying chapter
concepts, read the Challenge Case Summary at the end of the
chapter to help you to relate chapter content to meeting the
management challenges at “The Wizarding World of Harry
Potter.”

THE IMPORTANCE OF MANAGEMENT
Managers influence all phases of modern organizations. Plant managers run manufacturing operations that produce the clothes we wear, the food we eat, and the automobiles we drive. Sales
managers maintain a salesforce that markets goods. Personnel managers provide organizations
with a competent and productive workforce. The “jobs available” section in the classified advertisements of any major newspaper describes many different types of management activities and
confirms the importance of management (see Figure 1.1).

FIGURE 1.1
The variety of management
positions available

SR. MANAGEMENT
DEVELOPMENT
SPECIALIST

We are a major metropolitan service
employer of over 5,000 employees seeking a person to join our management
development staff. Prospective candidates will be degreed with 5 to 8 years
experience in the design, implementation, and evaluation of developmental
programs for first-line and mid-level
management personnel. Additionally,
candidates must demonstrate exceptional oral and written communications
ability and be skilled in performance
analysis, programmed instruction, and
the design and implementation of reinforcement systems.
If you meet these qualifications, please
send your résumé, including salary
history and requirements to:
Box RS-653
An Equal Opportunity Employer
BRANCH MGR
$30,500. Perceptive pro with track
record in administration and lending has
high visibility with respected firm.
Box PH-165

AVIATION FBO
MANAGER NEEDED
Southeast Florida operation catering to
corporate aviation. No maintenance or
aircraft sales—just fuel and the best
service. Must be experienced. Salary plus
benefits commensurate with qualifications.
Submit complete résumé to:
Box LJO688

DIVISION CREDIT MANAGER
Major mfg. corporation seeks an
experienced credit manager to handle
the credit and collection function of its
Midwest division (Chicago area).
Interpersonal skills are important, as is
the ability to communicate effectively
with senior management. Send résumé
with current compensation to:
Box NM-43
ACCOUNTING MANAGER
Growth opportunity. Michigan Ave.
location. Acctg. degree, capable of
supervision. Responsibilities include G/L,
financial statements, inventory control,
knowledge of systems design for
computer applications. Send résumé,
incl. salary history to:
Box RJM-999
An Equal Opportunity Employer