Determining what the organization needs to do and how best to get it done requires planning. Planning has three main components. It begins when managers determine the firm’s goals. Next, they develop a comprehensive strategy for achieving those goals. After a strategy is developed, they design tactical and operational plans for implementing the strategy. We discuss these three components in more detail later in this chapter. Howard Schultz is the President and CEO of Starbucks. He is responsible for developing strategies and strategic plans to keep Starbucks growing while simultaneously maintaining quality. He must also ensure that the firm’s strategic, tactical, and operational planning efforts are all integrated and consistent with one another.

Managers must also organize people and resources. For example, some businesses prepare charts that diagram the various jobs within the company and how those jobs relate to one another. These organization charts help everyone understand roles and reporting relationships, key parts of the organizing function. Some businesses go so far as to post their organization chart on an office wall. But in most larger businesses, roles and reporting relationships, although important, may be too complex to draw as a simple box-and-line diagram. Starbucks has over 18,000 coffee shops in more than 60 countries. In addition, the firm also owns 250 Teavana retail stores and the Evolution Fresh fruit and vegetable juice company, and has myriad licensing and joint venture agreements with PepsiCo, Dreyer’s, Beam, and other companies. Schultz is responsible for creating and managing an organization structure for Starbucks to facilitate coordination across these various products and divisions and promote faster decision making. We explore organizing in more detail in Chapter 6.

Managers have the power to give orders and demand results. Leading, however, involves more complex activities. When leading, a manager works to guide and motivate employees to meet the firm’s objectives. Legendary management figures such as Walt Disney, Sam Walton (of Walmart), and Herb Kelleher (of Southwest Airlines) had the capacity to unite their employees in a clear and targeted manner and motivate them to work in the best interests of their employer. Their employees respected them, trusted them, and believed that by working together, both the firm and themselves as individuals would benefit. Howard Schultz has been a very effective leader at Starbucks. Starbucks was the first privately owned business to offer stock options to its employees, and among the first to provide benefits to part-time employees. The company has an excellent reputation for communicating with all of its employees, and those employees, in turn, generally hold Schultz in high regard. Leading involves a number of different processes and activities, which are discussed in Chapter 9.

Controlling is the process of monitoring a firm’s performance to make sure that it is meeting its goals. All CEOs must pay close attention to costs and performance. Managers at United Airlines, for example, focus almost relentlessly on numerous indicators of performance that they can constantly measure and adjust. Everything from on-time arrivals to baggage-handling errors to the number of empty seats on an airplane to surveys of employee and customer satisfaction are regularly and routinely monitored. If on-time arrivals start to slip, managers focus on the problem and get it fixed. If customers complain too much about the food, catering managers figure out how to improve it. As a result, no single element of the firm’s performance can slip too far before it’s noticed and fixed. At Starbucks, new products are generally tested in a limited number of coffee shops before they are rolled out on a large scale. But if products don’t meet expectation and forecasts, the company is also willing to drop them.

Figure 5.2 illustrates the control process that begins when management establishes standards, often for financial performance. If, for example, a company sets a goal of increasing its sales by 20 percent over the next 10 years, an appropriate standard to assess progress toward the 20-percent goal might be an increase of about 2 percent a year.

Figure 5.2

The Control Process

Managers then measure actual performance each year against standards. If the two amounts agree, the organization continues along its present course. If they vary significantly, however, one or the other needs adjustment. If sales have increased 2.1 percent by the end of the first year, things are probably fine. If sales have dropped 1 percent, some revision in plans may be needed. For example, managers can decide to lower the original goal or spend more money on advertising.

Many management problems and issues can be approached in ways that are rational, logical, objective, and systematic. Managers can gather data, facts, and objective information. They can use quantitative models and decision-making techniques to arrive at “correct” decisions. They need to take such a scientific approach to solving problems whenever possible, especially when they are dealing with relatively routine and straightforward issues. When Starbucks considers entering a new market, its managers look closely at a wide variety of objective details as they formulate their plans. Technical, diagnostic, and decision-making skills (which we will discuss later in the chapter) are especially important when approaching a management task or problem from a scientific perspective.

Even though managers may try to be scientific as often as possible, they must frequently make decisions and solve problems on the basis of intuition, experience, instinct, and personal insights. Relying heavily on conceptual, communication, interpersonal, and time-management skills, for example, a manager may have to decide among multiple courses of action that look equally attractive. And even “objective facts” may prove to be wrong. When Starbucks was planning its first store in New York City, market research clearly showed that New Yorkers preferred drip coffee to more exotic espresso-style coffees. After first installing more drip coffeemakers and fewer espresso makers than in their other stores, managers had to backtrack when New Yorkers lined up, clamoring for espresso. Starbucks now introduces a standard menu and layout in all its stores, regardless of presumed market differences, and then makes necessary adjustments later. Thus, managers must blend an element of intuition and personal insight with hard data and objective facts.⁴

Many of you reading this book right now are doing so because you are enrolled in a management course at a college or university. You are already acquiring management skills in an educational setting. When you complete the course (and this book), you will have a foundation for developing your management skills in more advanced courses. A college degree has become almost a requirement for career advancement in business, and virtually all CEOs in the United States have a college degree. MBA degrees are also common among successful executives today. Most foreign universities also offer academic programs in management.

Even after obtaining a degree, most prospective managers have not seen the end of their management education. Many middle and top managers periodically return to campus to participate in executive or management development programs, ranging in duration from a few days to several weeks. First-line managers also take advantage of extension and continuing education programs offered by institutions of higher education or through online media. A recent innovation in extended management education is the executive MBA program offered by many top business schools, in which middle and top managers with several years of experience complete an accelerated program of study on weekends.⁶ Finally, many large companies have in-house training programs for furthering managers’ education. Indeed, some firms have even created what are essentially corporate universities to provide the specialized education they feel is required for their managers for them to remain successful.⁷ McDonald’s, General Electric, and Shell Oil are among the leaders in in-house courses. Alongside formal education routes, there is also a distinct trend toward online educational development for managers.⁸

The primary advantage of education as a source of management skills is that, as a student, a person can follow a well-developed program of study, becoming familiar with current research and thinking on management. Many college students can devote full-time energy and attention to learning. On the negative side, management education is often general and meets the needs of a wide variety of students; specific know-how may be hard to obtain. Further, although many aspects of the manager’s job can be discussed in a book, it is hard to appreciate and understand them until you have experienced them.

This book will help provide you a solid foundation for enhancing your management skills. Even if you were to memorize every word in every management book ever written, however, you could not then step into a top management position and immediately be effective. Why not? Management skills must also be learned through experience. Most managers advanced to their present positions from other jobs. Only by experiencing the day-to-day pressures a manager faces and by meeting a variety of managerial challenges can an individual develop insights into the real nature and character of managerial work.

For this reason, most large companies, and many smaller ones as well, have developed management-training programs for their prospective managers. People are hired from college campuses, from other organizations, or from the ranks of the organization’s first-line managers and operating employees. These people are systematically assigned to a variety of jobs. Over time, the individual is exposed to most, if not all, of the major aspects of the organization. In this way, the manager learns by experience. The training programs at some companies, such as Procter & Gamble, General Mills, and Shell Oil, are so good that other companies try to hire people who have graduated from them.⁹ Even without formal training programs, managers can achieve success as they profit from varied experiences. For example, Herb Kelleher was a practicing attorney before he took over at Southwest Airlines and led it to become one of the most successful and admired businesses in the United States. Of course, natural ability, drive, and self-motivation also play roles in acquiring experience and developing management skills.

The majority of effective managers learn their skills through a combination of education and experience. Some type of college degree, even if it is not in business administration, usually provides a foundation for a management career. The individual then gets his or her first job and subsequently progresses through a variety of management situations. During the manager’s rise in the organization, occasional education “updates,” such as management-development programs, may supplement on-the-job experience. Increasingly, managers also need to acquire international expertise as part of their personal development. As with general managerial skills, international expertise can be acquired through a combination of education and experience.¹⁰