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waste time sleeping. In addition to his role in Primerica, Tsai is a director of numerous other companies. He also invests time in cultivating a large network of influential business executives.

The financial deals engineered by Tsai since he joined Primerica reflect a high success loss. Only one of his deals has resulted in a financial loss, and it appears to be a temporary loss. Tsai has promised not to meddle (вмешиваться) in the operations of the companies acquired by Primerica. All of these subsidiaries function as quasi (полу)-autonomous units. Tsai freely admits that he is not an operations person. His real preferences are for making financial deals. He monitors the performance of business units through data fed into his New York City office. Tsai relies heavily on his chief financial officer, Kenneth A. Yarnell, for the financial and administrative controls he has established.

Questions for discussion

1.To what extent is Primerica decentralized?

2.How would you describe Gerald Tsai as a delegator?

3.What evidence do you have that Tsai is a workaholic?

4.If Tsai is a workaholic, how can he also practice delegation and decentralization?

5.What are Tsai’s strong and weak points as a business leader?

6.Would you hire a workaholic for a key position within your firm? Why or why not?

VIII. Staffing in Organization

Staffing is the process of ensuring that the organization has qualified human resources to meet its objectives. Staffing consists of human resources planning, compensation and benefits, recruitment, selection, placement and orientation, training and development, and performance appraisal.

Human resources planning, or anticipation of future human resources needs, should be linked closely with a firm’s strategies and plans. Compensation and benefits are a key aspect of staffing. Compensation levels are determined internally by job evaluation, and by a variety of external factors such as supply and demand, wage surveys, and cost-of-living rates. Current trends in compensation include an emphasis on pay for performance, team incentives, comparable worth (equal pay for equal

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worth), and gain-sharing. The fastest-growing trend in employee benefits is flexible benefit packages.

Personnel selection includes the preliminary interviews, completion of application form, personnel (or psychological) tests, background investigation, and sometimes the physical examination. Honesty testing is often included in personnel testing, while drug testing is included in physical examination.

Job specifications (the personal characteristics required for a practical job) need to be drawn before selection methods are put into use with applicants. It is legally necessary to validate personnel tests and other selection techniques to help minimize bias. Validation involves proving that persons who score well on the tests will perform well in the job.

Placement and orientation help get the employee on the right track of performing well in appropriate job. Training and development programs help sharpen job skills and prevent obsolescence, but must be planned carefully and linked to needs for improvement.

Performance appraisal systems can be used for a variety of purposes including productivity improvement, salary administration, measurement of promotability, and career development. Three representative types of performance appraisal are measurement of results (such as MBO), evaluation of traits and personal characteristics, and global essays. Appraisal systems need to be scientifically designed to satisfy equal employment opportunity requirements.

Questions for discussion and review

1.What are the components of organizational staffing model? How does performance appraisal relate to other aspects of the organizational staffing model?

2.Why do you think human resources planning should be closely linked with a firm’s strategic plans?

3.Why do you think compensation and benefits are a key aspect of staffing? What is the modern approach to paying a compensation?

4.List the methods of personnel selection. Which of them do you think every firm should use? Why?

5.Why are placement, orientation, and training considered to be part of organizational staffing?

6.What is the purpose of using performance appraisal systems? How can their use be beneficial to an organization?

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Problems for action

1.Assume that you are assigned to a six-month assignment in organizational staffing. Which aspect of staffing would appeal to you? Explain your reasoning.

2.What problems might a company have which could be solved by a training program? What are the general benefits to a company and employees of a good training program?

3.You work in the Personnel Department of a large supermarket chain. Many of your employees, mainly the check-out operators and shelf-stackers are young people under 20, who work part-time in the evenings and on Saturdays for

comparatively low wages. With the birth-rate falling, the supply of potential employees is declining.

What should you do?

Case Study: Performance-Based Pay

Highview Stores sells grocery products in 14 small retail outlets in one Eastern state. Each unit is operated by a store manager (SM) during the day and a night manager (NM) during the night. Almost all of the operating decisions are made by the store manager. Each store is staffed by one or two clerks hired by the SM with company approval. An additional clerk is brought in once a week to stock shelves when new merchandise is delivered. The Highview top management team consists of the president, a vice president and a general manager (GM), a day regional manager (DRM), and a night regional manager (NRM).

Originally, the SMs were paid a flat salary with no regular provisions for salary increases. To obtain an increase, SMs had to demonstrate to headquarters that they had improved store operations substantially. SMs could also get an annual bonus based on the allocation judgments of the GM. The allocation decision was base on three criteria: seniority, store inventory shrinkage (the difference between a store’s actual inventory and that indicated by sales receipts), and personal judgment about SM’s contribution to the company.

At one point, management concluded that the company had several serious problems: declining sales; high inventory shrinkage (3.4 percent); poor store appearance; poor employee attitudes toward compliance with rules and regulations; SM dissatisfaction with pay and the subjectivity of bonus allocation; and inadequate

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SM concern about vital matters such as declining sales and decreasing inventory shrinkage.

A new compensation plan was established to help encourage the SMs toward higher levels of performance. Each SM was paid a percentage of weekly sales. Based on negotiation with the GM, this figure averaged about 7 percent. Store managers were required to pay expenses under their control (such as employee payroll) out of their gross commissions). The only direct operational authority retained by headquarters was over the acquisition or removal of product lines, and over final hiring decisions concerning new store personnel. Extensive security checks were conducted on all new employees.

The annual bonus was also closely tied to years of service and inventory shrinkage. The first criterion (0 - 9 years of service – no$; 10 – 19 years - $550; 20 years and longer - $1,100) was based on the assumption that experience improved SM ability and performance. The second criterion was related to shrinkage (0% to .49% = $2,200; 50% to .99% = $1,650; 1% to 1.49% = $1,100; 1,50% to 1.99% = $550; 2% or more =0). A $550 store appearance bonus was also available semiannually.

The company reasoned that the shrinkage bonus had important financial consequences. For example, if a store with annual sales of $500,000 had 4 percent shrinkage for the year, the company lost $20,000 in revenue. Under the new system, if the SM cut this rate to zero, the company would save $20,000 at a cost of only $2,000.

Highview officials closely studied all sales and payroll data shortly after implementing their new pay plan. Following are the comparisons they made between two consecutive July-November periods.

1.SM’s mean weekly income rose from $340 to $369 (mean – statistics the average)

2.The mean weekly payroll for other store employees decreased from $495 to $479

3.The firm now had to spend $4,400 more than it had under the old bonus formula ($17,600 versus $22,000).

4.Company payroll expenses rose from $199,289 to $208,446

5.Sales increased $201,278 for an average of $20,128 per store.

6.The estimated inventory shrinkage dropped from $98,760 to $19,030

In addition to implementing a new reward system, Highview management also installed new security systems. One aspect was an audiovisual system in three stores that was connected directly to corporate headquarters. Also, a position of night regional manager (NRM) was created to help with the shrinkage problem that occurred

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at night when SMs were not present. If any problems occurred at night that required managerial action (such as robbery or refrigerator breakdowns), employees would now call the NRM for assistance.

In the NRM’s first nights on the job, that person fired about one-half of all night employees. Some were accused of theft, while others were let go for repeated failure to comply with company policies regarding employee conduct, operating procedures, and cash management.

Questions for discussion

1.To what extent did Highview experience improved financial results after implementing the new compensation system for store managers?

2.How could managers determine if the changed results were attributable to the new compensation system, the new security system, or a combination of both?

3.What other staffing issues in addition to compensation are addressed in this case?

4.What impact do you think the new compensation system probably had on morale of managers and employees?

IX. Leadership of Organizational Members

Leadership is the process of influencing others to achieve objectives in specific situations without the use of coercive methods or techniques. Leaders generally influence others in a relatively consistent pattern of behavior referred to as leadership style. The classical method of classifying leadership styles arranges leadership behavior along a continuum of authority exerted by the leaders. The tree major styles are autocratic, participative (including consultative, consensual, and democratic), and free-rein.

A manager’s leadership style is described along the dimensions of concern for production and concern for people. Theory X and theory Y can be interpreted as styles of leadership based upon the leader’s assumptions about people. The transformational style of leader is a charismatic person who helps bring about profound changes in people and the organization. In the process this style of leader gives a new and better organizational culture.

Certain traits, characteristics, and behaviors such as: self-confidence, power need, achievement need, sense of humor, enthusiasm, assertiveness, vision, sensitivity and

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tact, supportiveness, maintaining high expectations contribute to leadership effectiveness in a wide variety of situations and fall into cognitive skills, personality traits and characteristics, and relationships with subordinates.

According to Fielder’s Contingency Theory of Leadership Effectiveness, the best style of leadership depends on factors relating to group members and the environment in which leadership occurs. Similarly, managerial effectiveness depends on a match between the leadership style and the situation. Fielder considers three factors:

1.Leader-Member Relations – the extent to which group members accept and support their leader.

2.Task Structure – the extent to which the leader knows exactly what to do and how well the tasks to be completed are defined in detail.

3.Position Power – the extent to which the organization provides the leader with the means of rewarding and punishing group members and with appropriate

formal authority (rank) to get the job done.

Besides, under certain conditions leaders need to use task-motivated and relationship-motivated styles. A leader has the most control when leader-member relationships are good, the task is well-structured, and his or her position power is strong.

The theory of leadership effectiveness, called path-goal theory, focuses on helping employees find the correct path to attaining goals. This theory contains three essential ideas: key propositions, the leadership styles used, and the key contingency factors (personal characteristics of group members and demands of the task). The theory indicates that the leader chooses the right leadership style to match the contingency factors in order to achieve results.

The theory of leadership effectiveness focuses on what the leader can do to increase employee motivation. Leaders can enhance motivation by increasing personal pay-offs to group members for achieving work objectives. The effective leader chooses among different leadership styles – directive, supportive, participative, or achievement oriented – according to the demands of the situation.

Although leadership is important, in certain situations other factors may function as substitutes for leadership. These factors can be found within subordinates, the task, or the organization.

Questions for discussion and review

1. What is the difference between power and leadership?