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An organization's budget is its financial plan outlining how funds in a given period will be obtained and spent.

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The basic purpose of the Information System is to assist management in making decisions. This illustration is an example for financial planning process using this technique of IS.

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Operational control decisions relate to ensuring that specific organizational tasks are carried out effectively and efficiently. Here's a video illustration:

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Motivation is an inner state that causes individuals to act in certain ways that ensure the accomplishment of a goal. These are two types of ways to get employees motivated.

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Differences Between Monetary and Non-Monetary Incentives

Money doesn't grow on trees, but you're thinking about extending a branch from your desk. It could "grow" from there, in the form of monetary and non-monetary incentives to your employees. As a small-business owner, you well know: No matter how driven an employee is, there's nothing like an incentive to light the fire of motivation. Incentives can improve employee morale and bolster productivity, leading to improved customer service, efficiency, sales and profits.

If you're new to the concept of incentives, what you may not know is that there's a difference between monetary and non-monetary incentives. They obviously differ in form, but they also differ in how they're perceived by employees. These differences are worth considering before you put a pair of hedge clippers next to your desk.

Learn About Monetary Incentives

If you want to get technical about it, as human resource professionals are prone to do, monetary incentives are designed to reward employees for outstanding job performance or longevity.

As its name implies, a monetary incentive has an explicit monetary value; an employee knows exactly what one is worth. In addition to cold, hard cash, monetary rewards can take the form of:

Learn About Non-Monetary Incentives

Non-monetary incentives are designed to recognize a special achievement or the completion of something that enhances an employee's job performance or value to a company. Such a meritorious category might include the attainment of a sales goal, the culmination of a special research project or graduation from a training program that leads to a desirable certification.

A non-monetary incentive does not take the form of cold, hard cash, but this doesn't mean an employee cannot discern its monetary value. Some traditional favorites among employers include:

Expand Upon Traditional Non-Monetary Incentives

If you're considering using non-monetary incentives as a motivational tool, it's fair to say that they're limited only by your imagination, and maybe the needs or wants of your employees.

If you're looking for ideas, employers are known to turn to non-cash incentives such as:

Charitable donations made in an employee's name.* Concert tickets.

Gift cards.

Luxury gifts, such as designer clothing, watches and laptops.* Vacation packages, including airfare and accommodations.

Study Reveals Strong Preference

Despite the differences, there are no hard-and-fast rules governing the use of monetary and non-monetary incentives. In other words, who's to say that you can't write a bonus check to an employee who just finished an intensive training program? Or that you shouldn't surprise an employee celebrating his 10 th anniversary with your company by gifting him a weekend getaway package?

You're the boss, so it's up to you to decide how best to incentivize your employees. However, if you're interested in knowing how other business owners are lining up on the topic, then you might cast your lot with non-cash incentives. Between 1996 and 2016, the number of businesses that rely on non-cash rewards increased from 26 percent to 84 percent, according to The Incentive Research Foundation.

How does the foundation explain such a dramatic increase? Two possible influences in the world of work may account for it:

CEOs play a more hands-on role in the day-to-day operation of businesses, putting them in the same realm as employees more frequently than in the past. This greater insight compels CEOs to reward employees more often.* Many employees' roles have expanded well beyond their basic job description, and CEOs feel duty-bound to acknowledge employee contributions, beyond their usual paycheck.

Assess the Advantages of Monetary Incentives

Before you officially cast your vote, you may wish to assess the advantages and disadvantages of monetary and non-monetary incentives. Some of them may surprise you, especially if you think nothing "talks" more persuasively than money. Monetary incentives:

Are instantly recognizable and simple for employees to comprehend. Hold universal appeal. Are favored by employees who prefer to add them to their annual salary. Do not require personalization in the way that a non-monetary incentive requires forethought. Can solve a financial dilemma for a small-business owner who may want to give an employee a pay raise but cannot afford to do so.

Assess the Disadvantages of Monetary Incentives

You would be hard-pressed to find an employee who would say, "No thanks, boss; I don't care much for money." Remember that in this context, as an incentive, money might talk, alright. It just might speak a different language. It's wise to consider that maybe - just maybe - the monetary benefits you hope to reap could backfire if:

Employees don't see a clear and direct correlation between the benchmark and the incentive. These employees could undercut even the most lucrative incentive program unless they view it as worthwhile.

They create a sense of inequality. Since "top" employees often get monetary rewards, those who are left out may become a drag on employee morale and teamwork. They lead to a sense of entitlement among top employees, who may even turn up their noses to the non-monetary incentives you offer. They "supercharge" cut-throat, competitive employees to sabotage the work of their colleagues to attain the incentive.* They are unfairly distributed among a group. This is why many business owners get ahead of this approaching storm cloud and either establish individual incentives or distribute incentives to all team members.

You include them as an addendum to an employee's paycheck. In this case, the incentive doesn't stand out; it's simply absorbed in an employee's earnings and probably goes to pay the rent or mortgage and other monthly bills - and is quickly forgotten.

Assess the Top Advantages of Non-Monetary Incentives

The businesses that The Incentive Research Foundation found are turning to non-monetary incentives may be on to something: Employees seem to ascribe a greater value to gifts, even if they can place a dollar value on them. As an employer, you may see little difference between, say, writing a $1,000 bonus check and bestowing a $1,000 laptop on a deserving employee.

But the employee? Multiple research studies show that employees show greater enthusiasm and appreciation for tangible things they can use (like a laptop), enjoy (like a vacation) or show off and brag about to others (like jewelry and clothing). And the more they can use or show off these incentives, the more likely they are to think of the employer in a favorable light.

If this still doesn't compute to you, try relating non-monetary incentives to the burgeoning gift card industry. Give someone $50 in cash and they will surely appreciate it - before putting it promptly in their wallet and probably forgetting about it. But give them a $50 gift card and they will regard it for what it is: and something they can redeem for something pleasurable. Gift cards are stamped with a dollar amount, just like cash. But somehow, they signal greater thought and consideration on the part of the giver.

Assess the Other Advantages of Non-Monetary Incentives

Research also shows that the psychology of offering non-monetary incentives intensifies when employees are given a choice - _or are at least asked about their preference_s. This is no small insight for any small-business owner who hopes to incentivize her staff.

In addition to being tangible items that hold bragging rights, non-monetary incentives:

Serve as a lasting reminder of an employee's accomplishment.* Can serve as an in-house marketing tool, especially if you photograph the employee with the incentive and post it on your business website.

Can be used as a recruiting tool if you "advertise" the incentive in the same way.* Can be deducted as a business expense.

Assess the Disadvantages of Non-Monetary Incentives

It would be wrong to say that non-monetary incentives have no drawbacks. They exist, but they seem to be mostly self-inflicted by the business owner who neglects to:

Ensure that the incentives are _appealing t_o employees. A weekend ski package or a Las Vegas getaway may be up your alley but not necessarily so for an employee who has never snapped on ski boots or who doesn't like to gamble.

Do his homework when selecting employee incentives.

Like many business owners, you might need to experiment with monetary and non-monetary incentives, until you find the right offering for your employees. But compared to the other dilemmas you face, this task might be one of the most fun - with or without the hedge clippers.

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Differences Between Monetary and Non-Monetary Incentives

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You may be tempted to move full speed ahead to launch an incentive program for your employees, whether you want to recognize their performance or reward a special achievement. Your instincts are good, but it's smart to consider the differences between monetary and non-monetary incentives first.

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Likert concluded that management styles in organizations can be categorized into systems:

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Many executives fail to grasp the difference between the two and therefore labor under misapprehension about how to carry out their organizational duties.

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It is tough to manage people. You have to manage up and down at the same time. Often managing your relationship with your boss is harder than managing the team you were hired to supervise!

To make things even more complicated, we have done the managers of our corporations and institutions a huge disservice. We've done something even worse to the people who work for them!

We've told millions of supervisors, team leaders and managers the lie that being a manager means being in charge.

We've taught them that being a manager means telling other people what to do.

We haven't taught them that anybody can have a title and boss people around. Just having a manager, supervisor or team leader title doesn't make anyone a leader!

A leader is someone who looks inward. Leaders don't assume they have all the answers. They know that they can't be successful without being humble enough to listen to the people around them.

Back when I was a baby HR person, they were still teaching managers that their job was to forecast, budget, plan and control. These days we know that none of those four tasks has anything to do with management, much less with leadership!

We can hire forecasters to forecast, and budget managers to look after the budget. We can hire planners and controllers. Leaders don't need to do any of that stuff, although they can certainly can. Their principal responsibility is to lead!

What does it mean to lead a team? It means working with your teammates to set a vision for the group. It means involving everyone in that process. No one will get excited about your vision if it's shoved down their throat, but people will get excited if the team's vision aligns with their own goals.

It isn't hard to involve your teammates in the planning process and to listen to their input, but it requires a leader to do something many of us don't associate with a manager's role.

It requires a leader to ask "What's important to you?" and "What changes do you think would make this plan better than it is?"

A leader doesn't become a leader because someone higher up the chain confers a title on him or her. You can only become a leader when people trust you to lead them, and that requires you to trust them back.

You have to trust yourself even more, because to be a leader, you have to give up the hammer. You have to give up the idea that you can force people to do what you want them to do, just because you have a title and the petty bureaucratic power to reward and punish.

Those things don't make you a leader, but your belief in yourself and the power of your team's combined energy and brilliance will!

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What's The Difference Between A Manager And A Leader?

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It is tough to manage people. You have to manage up and down at the same time. Often managing your relationship with your boss is harder than managing the team you were hired to supervise! To make things even more complicated, we have done the managers of our corporations and institutions a huge disservice.

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Here's some helpful tips to successfully lead:

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To deal with groups appropriately, managers must have a thorough understanding of the nature of groups organizations.

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Ten Commandments for Being a Good Listener

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Ten Commandments for Being a Good Listener

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One strategy for promoting formal organizational communication is to listen attentively to messages that come through formal channels. Here are a list of helpful tips:

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Chapter ten speaks about being knowledgeable of your rights within a workplace. This is valuable information for personal use within your own workplace!

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"This model was quickly adopted by the military as a way to show a chain of command and of course we have all seen and experienced this within our organizations." The article speaks about organization culture that ties to Chapter 16.

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This is going to be a five part post that explores various types of organizational structures that either already exist in today's business landscape or are starting to emerge as viable options for the future of work. Each post will explore one of these structures and then I'll provide a final summary post on all five. These concepts and ideas are taken from my book, The Future of Work: Attract New Talent, Build Better Leaders, and Create a Competitive Organization. The five types of organizational structures that I will explore are:

1. The traditional hierarchy (part 1 is already available)

2. Flatter organizations (part 2 is already available)

3. Flat organizations (part 3 is already available)

4. Flatarchies (part 4 is already available)

5. Holacratic organizations (part 5 is already available)

Let's start with the structure we have all come to know and love...the hierarchy.

I've talked about several workplace practices and approaches that are quite out-dated and the hierarchy is one of them. According to Wikipedia, "possibly the first use of the English word "hierarchy" cited by the Oxford English Dictionary was in 1880, when it was used in reference to the three orders of three angels as depicted by Pseudo-Dionysius the Areopagite (5th-6th centuries)." This model was quickly adopted by the military as a way to show a chain of command and of course we have all seen and experienced this within our organizations (and most still do).

This type of a model makes sense for linear work where no brain power is required and where the people who work there are treated like expendable cogs. However, as the war for talent continues to become more fierce, organizations around the world are quickly trying to figure out alternatives to the hierarchy. In fact, every single organization I speak with, work with, and research, is looking to flatten out their structure. Nobody ever tells me they want more bureaucracy and more layers.

There are many challenges with this model but to name a few. Communication typically flows from the top to the bottom which means innovation stagnates, engagement suffers, and collaboration is virtually non-existent. This type of environment is riddled with bureaucracy and is extremely sluggish. This is why the hierarchy is perhaps the biggest vulnerability for any organization still employing it. It opens up the doors for competitors and new incumbents to quickly take over. There is also no focus on the employee experience in this type of a structure and as organizations around the world are exploring alternative organizational models, those still stuck with the hierarchy are going to have one heck of a time trying to attract and retain top talent.

The hierarchy has permeated virtually every company around the world regardless of size, industry, or location. The greatest strength of the hierarchy used to be that it was so reliable at maintain the status quo, which was exactly what companies wanted decades ago. However what was once it's strength is now it's greatest weakness. The hierarchy is a very resilient management structure that has been so embedded in how we work that most organizations around the world are having a tedious time getting rid of it.

Today one thing is certain, the hierarchy belongs in a management museum locked up for people to see, but not touch.

In part 2 of this post I'll explore what is perhaps the most practical and scalable organizational model, the "flatter" organization.
Jacob Morgan is a keynote speaker, author (most recently of The Future of Work), and futurist. To have Jacob speak at your event, to get access to his videos, podcasts and articles, or to subscribe to his newsletter you can visit TheFutureOrganization.

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The 5 Types Of Organizational Structures: Part 1, The Hierarchy

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This is going to be a five part post that explores various types of organizational structures that either already exist in today's business landscape or are starting to emerge as viable options for the future of work. Each post will explore one of these structures and then I'll provide a final [...]

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Here's a fun illustration of the general idea of delegation. There's many obstacles that may occur during a simple task however keep in mind you can't do everything on your own!

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A quick simple vid on Delegation in the workplace. A new approach to building capability, proudly produced by Golder Associates - Human Development.

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Chapter Eight speaks about the importance of Organizing. The organizing function is important to the management system because it is the primary mechanism managers use to activate plans.

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Among all the thousands of comments, tweets and other social media brouhaha on my article, " What Killed Michael Porter's Monitor Group? " we also learned something truly astonishing: the Monitor Group itself didn't believe in the Five Forces analysis and hadn't used it for years.

If only we had known! If only Monitor had told the world that! What a relief that would have been to all the MBA students who continue to be tortured by it! And all the consulting firms that continue to use the Five Forces thinking in recruitment and consulting cases! And the business journals like HBR that continue to promulgate it as embodying some kind of timeless truth!

Maybe Monitor should have marketed itself as the anti-Porter consulting firm? Maybe that could have saved it? It would certainly have been a differentiator.

Unfortunately the recognition of the lack of utility of the Five Force analysis has not yet reached business schools, many of which continue to teach it as the unquestionable gospel. Moreover, if one looks as the thousands of business cases that consulting firms use to recruit new staff from business schools, one can also observe precisely the same mindset: it is the Five Forces mindset that determines "the right answer" to the problem at hand. Harvard Business Review republished Porter's 1979 article in 2008 with only slight modifications, with the insinuation that it reflected eternal wisdom.

Hence my article responds to the urgent need to reexamine the worth of this kind of thinking, which remains pervasive, even if its provenance in Michael Porter's work is not always explicitly acknowledged.

Too much faith in gurus?

The massive outpouring in response to my article suggests that I had managed to articulate concerns that were deeply felt.

Edna Pasher wrote: "Maybe in the Monitor Group the team followed Porter with too much respect for the leader, and this did not allow for new ideas and tools to emerge... Porter has been a Guru for a long time and maybe this success blinded him and his team from openness to different emerging perspectives. This is often the danger with success - that we might lose humility and willingness to constantly check our beliefs and assumptions."

It is good to remind ourselves of Taiichi Ohno's dictum that even a wise man is wrong 30 percent of the time. And 50 percent of the things that we normal people firmly believe are just plain dead wrong. The trouble is figuring out: which of the things that I now firmly believe is false?

I believe that although the main thrust of my article that Monitor was killed by the customer, not the Five Forces, is correct, the article could be taken to imply that Monitor's main or only business was strategy. In this respect, it was incorrect. Readers have pointed out that in addition to helping Ghadafi's son with background research for his PhD thesis as part of a multi-million dollar deal to establish Ghadafi himself as a genuine intellectual, and promising on its website to generate the chimera of "sustainable competitive advantage", Monitor also had interesting things going on in innovation (Doblin) and scenario planning (GBN).

As Edna Pasher writes: "We need to co-create the future of organizations with humility. This leads to another insight emerging in this conversation - the age of management gurus seems to be over. Porter has been a Guru and many have followed him blindly and have not dared to ask what needs to change in his well branded toolbox."

Nevertheless, a brilliant PR achievement?

Charles van der Hoog wrote: "The demise of Porter Group and your article came as a welcome relief to me. It confirms my own experience with them decades ago. The two mainstay books were, frankly, wanting in depth, in my view, (I used to be an econometrist) and not being based in any real experience in markets like I was having then. But, as literally everybody considered them the highest godgiven gospel, I had to study them and try to make sense of it. I have also known the company in Amsterdam itself from very close quarters, even getting inside info. My conclusion was, then, that they were confidence tricksters. And, now, events have corroborated that. However, the history and runaway success of Porter and his group form a very interesting study as a Public Relations and self-promotion case. It was brilliantly done, in every aspect. I have the deepest respect for that. Obviously, there is much to be learned from that."

I agree that in one sense Monitor was a brilliant PR accomplishment-making so much money from something that "lacked any basis in fact or logic." In an ethical sense, that is hardly something to be emulated: it has not been good for society.

Nor do I think that such a PR triumph can be emulated. In 1979, Michael Porter just happened to be the right person with the right message at the right time. Pursuit of shareholder value ("the dumbest idea in the world") was just getting going with a vengeance. The C-suite was starting to realize that they could cash in, big time. Along comes Michael Porter with a rain dance that justifies their cashing in. Porter arrived at just the right time. Hopefully that era is now coming to an end. People are starting to see the rain dance for what it is.

Too much emphasis on innovation?

Kevin Horne also wished that I "hadn't used the word "innovation" so generally. Either it or 'Big Data' is going to win the award for 'Most Overwrought Meme of 2012.' It leads everyone to believe they too 'can just do it.' And it has already led to dozens too many 'strategy consultants hanging out 'Innovate or Die' shingles of their own..."

I agree that there is a risk of over-use of the term, "innovation". I have in other articles suggested alternative terminologies, such as "continuously providing additional value to customers or delivering it sooner" or "delighting customers" or "more perfectly performing the job that customers want done" (Christensen). Other writers have suggested still other terms, such as "enchantment" (Guy Kawasaki), "joy" (Chip Conley) and "raving fans" (Ken Blanchard).

But let's not get hung up on words. What is more important than the particular term employed is understanding the substance: that there has been an epic shift in the balance of power in the marketplace and that the customer is now the boss. Firms will only survive if they respond to customers' wants and needs in a world in which customers have choices and accurate information as to what those choices are.

It was Monitor's failure to do this that led to their bankruptcy. In some lines of business, (GBN, Doblin) Monitor appears to have been successful, but overall, it didn't generate enough customer delight to fund its various activities. We can discuss the various things that Monitor might have done differently to avoid the debacle. Deploying the Five Forces analysis isn't one of them.

Strategy a zero-sum game?

Paul Ward asked: "Nowhere do I see that Porter views a market as a fixed size and that the game is zero-sum. Reference?"

Porter wrote in his landmark HBR article in 1979, "The state of competition in an industry depends on five basic forces... The collective strength of these forces determines the ultimate profit potential of an industry." The article goes on to explain how to get a bigger slice of this profit potential by positioning the firm in part of the market where there is little competition.

One can see the consequences of this type of thinking in thousands of business cases taught in business school, which generally begin by requiring the student to establish the size of the market and the resultant "ultimate profit potential" of the relevant industry as part of the basic framework for solving the problem. The customer is usually mentioned almost as an afterthought. Details on what the customer might really want are rarely given. Discussion of how shifts in the interaction with customers might have an impact on the size of the market is not encouraged. Changing the interaction with the customer and hence the size of the market are thus rarely part of "the right answer" which is generally about getting a bigger slice of the given profit potential of the existing market, often but not always as compared to rivals.

While not all of this blinkered thinking can be blamed on Michael Porter, as the blame must be shared with the case writers, Porter's writings have certainly been influential. As Joan Magretta says that "Porter's ideas are the most widely used in practice by business and government leaders around the world. His frameworks have become the foundation of the strategy field."

Strategies that people can understand?

Richard Yeager wrote: "As we all know, there are no secret or perfect strategies and the definition of a 'good one' changes over time. Therefore, it seems that it is the organization's on-going ability to create shared clarity across and throughout the entire organizations about its formula for success that will ultimately determine the winners and losers. In other words, an average formula for success that is clearly understood and is able to be 'translated' by everyone to what they do and how they do it has a high probability of being well executed and will beat a great strategy that is unclear to the organization every time."

While I am all for clarity, I am not sure that there are many "average formulae for success" these days. As Tom Friedman pithily argues in his interesting book, That Used to Be Us, "average is over".

Monitor's demise wasn't caused by the Five Forces?

Marissa Campise wrote: "The reason monitor failed is unrelated to Porter's Five Forces."

Precisely. The Five Forces were as usual irrelevant. What killed Monitor had nothing to do with competition among rivals, or risk of new entrants or threat of substitute products or bargaining power of customers or bargaining power of customers. What killed Monitor was the fact that customers were not willing to pay sufficient for what Monitor was offering.

Monitor's main problem was operations?

A number readers wrote that Monitor was killed by poor operations. For instance: "No matter how good the strategy, a business that doesn't operate efficiently and has costs that exceed its revenue is going to die, and that's what happened."

While it is obvious that there were operational problems (e.g. do PR for the Ghadafi regime for millions), the implication of this tack is worrying: as usual, despite the debacle, the strategists in the C-suite are blameless. It's those poor benighted lower-level munchkins-the operations managers-who should be held accountable. The more cerebral, talented strategic thinkers in the C-suite who don't dirty their hands with operational matters such as making better products and services can now move on to their next triumph. Sadly, in this case, without an outsized bonus, unless of course they managed to extract it before the current troubles.

Mike Sandman agreed: "Perhaps the root of the problem was that the cerebral, talented strategic thinkers...didn't dirty their hands with operational matters." He points out: "When a consulting firm the size of Monitor gets itself into a $51 million cash hole, it has fatal issues, both operational and strategic."

Knowledge of competitors is important

Divya Dweep Kaur wrote: "Though I agree that dependency on one single product and lack of innovation will ultimately destroy a company. But, I don't feel that Porter's five forces is a redundant theory. in order to succeed, one important criteria is the knowledge of competitors. Knowing what they are up to, incorporating the best practices and making a strong defense. There is a lot one can learn from its competitors, the strategy lies behind the correct use of this information..."

I agree that knowledge of competitors is an important component of strategy. What is wrong is to turn it into the whole ballgame.

Thus Albi Beqiraj also wrote that the Five Forces framework was useful if used as one option among others.

Yes, it's tempting to say, well, there are many frameworks and they all have their merit, let's use them all. We might decide to do that, but if so, we should keep in mind that Porter's thinking rests on a foundation of fundamental conceptual errors. The essence of strategy, business and business education is not coping with competition. The purpose of a firm is not to make money for its shareholders. There are grains of truth in Porter's work, but the conceptual foundations on which it rests are rotten. So we should extract the grains of truth with care.

"The Five Forces helped me"

Some readers complained that in criticizing the Five Forces analysis I was trashing something that they had found useful. I am glad to hear that some people have found help from Porter's five-forces model.

It is however a bit like saying that we had success for over a thousand years in predicting the movements of the planets with the geocentric model of the universe, so why should we accept that the earth revolves around the sun?

There are ways to reinterpret Porter's theories, so that they can appear to make sense, as Joan Magretta does in her interesting book, Understanding Michael Porterr. However redefining the true meaning of "competition" as "adding value to customers" is to flout the standard definition of "competition" in any dictionary. It is also not exactly what Porter actually wrote or what is taught in his name in business schools around the world and apparently practiced by leading consulting firms.

There are much simpler and more direct and more fruitful ways of understanding what is going on, without such intellectual contortions, particularly because the world has changed so much since Porter started putting forward this theories. In astronomy, we decided to move on. I believe that it is time to do so in business strategy.

Balance of power shift isn't universal

Brad Focht wondered whether "the balance has shifted to seller or buyer specifically - this is more industry specific and cannot be generalized."

The following phenomena affecting the shift in power from seller to buyer are universally applicable: (1) globalization (2) the internet, giving all customers immediate access to generally reliable information as to what is available and its quality and (2) social media that enables customers to communicate with each other.

The impact of these phenomena is happening at different speeds in different industries. But all industries will receive the impact in due course.

At the same time, the internet and social media are huge opportunities for businesses to connect and interact with customers. Inward-looking firms focused on tweaking their own value chain are going to have a tough time of it.

Building moats vs maintaining moats

Tren Griffen made the interesting point "You confuse the ability to identify a moat or the ability to understand the importance of a moat, with the ability to actually create a moat or maintain one. These skills are very different things. People like Ray Kroc and not Michael Porter create moats. To be an investor or professor you need not be able to create or maintain a moat. People like Warren Buffett and Charlie Munger buy barriers. Building them is tough. That an academic consultant would be unable to create or maintain a business with a sustainable competitive or manage that business is not surprising at all."

The distinction between building moats and maintaining moats is a useful one. "People like Ray Kroc and not Michael Porter create moats." Exactly. Charlie Munger and Warren Buffett understand that they are unable to create moats: so they buy them, ready-made and then seek to maintain them. The implication that durable moats can be inferred by studying the structure of the industry has turned out to be false. It may have had some plausibility in the 1950s when business was dominated by large oligopolies. It is certainly not true now that power has shifted from the seller to the buyer.

More balanced accounts of Monitor's demise?

Dee Shukla suggested that readers should seek out more balanced account of Monitor's demise, such as Nov 14 issue of The Economist.

I agree that The Economist piece is a lively read, but in the end, are we any wiser as to why Monitor died or why it did so little in the last five years to avert the obvious impending debacle? The lack of a clear diagnosis is partly because the author appears to share the very assumptions that led to Monitor's demise. To figure out what went wrong, we need to reexamine fundamental assumptions.

To work, strategists!

And read also:
What killed Michael Porter's Monitor Group? The one force that really matters. The single best management idea in the world Is delighting customers profitable? The dumbest idea in the world: maximizing shareholder value The five big surprises of radical management
________________________

Steve Denning's most recent book is: The Leader's Guide to Radical Management (Jossey-Bass, 2010).

Follow Steve Denning on Twitter @stevedenning

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Even Monitor Didn't Believe In Five-Forces Analysis!

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Among all the thousands of comments, tweets and other social media brouhaha on my article, "What Killed Michael Porter's Monitor Group?" we also learned something truly astonishing: the Monitor Group itself didn't believe in the Five Forces analysis and hadn't used it for years. If only we had known! If [...]

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Cute illustration of MBO from Chapter five!

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Management by objectives (MBO) is a process of defining objectives within an organization so that management and employees agree to the objectives and understand what they need to do in the organization in order to achieve them. The term "management by objectives" was first popularized by Peter Drucker in his 1954 book The Practice of Management.

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Some managers regard organizational objectives as such an important and fundamental part of management that they use a management approach base
exclusively on objectives.

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Planning is the foundation to full-filling a goal.

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According to this article there are four challenges that are commonly faced when being in a international corporation.

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BY JULIA HANNA

In the new book International Strategy: Context, Concepts, and Implications, Harvard Business School Adjunct Professor David J. Collis presents a comprehensive guide to a topic of ever-increasing relevance for managers across all sectors and industries.

By first offering a context for the "why" of multinational firms, then a framework for how to craft an international strategy that creates shareholder value, Collis provides students and new managers with an integrated perspective on international strategy, drawing on earlier work by scholars who include HBS colleagues Christopher Bartlett (with Sumantra Ghoshal), Michael Porter, and Pankaj Ghemawat.

More seasoned managers seeking pragmatic guidance on day-to-day decision making can turn to the book's extensive analysis of cases drawn from real-world companies grappling with the familiar (yet complex) questions that confront any organization trying to do business across borders.

According to Collis, every strategic choice that multinationals face falls into one of the following four buckets:

What product do we offer? "There's always a choice and a tradeoff here, in terms of how similar a product will be around the world and what sort of product range a company will offer," Collis says. Will a company allow for local variation and differences in taste, and what will its differences be, if any, when it comes to how it brands and positions the product? In Europe, consumers in 13 different countries have 13 different preferences for the texture and taste of tomato soup. In addition, a company may decide to offer a product completely outside its "known" product line: In Japan, Coca-Cola's portfolio of products includes "Georgia," a hot coffee drink sold from a vending machine.

Where do we compete? "What should a company's global footprint look like? How should it allocate resources across countries?" Collis asks. In the eternal battle between Coke and Pepsi, should Pepsi allocate its resources to being a first mover in a less developed market, or battle for consumers in a bigger, more established market?

Where do you locate your activities? "People rushed into China, and now wage rates are going through the roof," Collis says. Building a manufacturing plant is a long-term investment requiring more consideration than setting up shop in the current low-cost location.

How to organize? What are the structures, systems, and processes that need to be in place to manage a company's international strategy? Should authority be delegated to many organizational units or centralized in one? Collis points to Procter & Gamble, a multinational that started out with a generic "international department," then set up country bases before trying to layer in global business units that placed the country managers in subordinate roles. The company then evolved to a matrix organization, with executives reporting to a country manager and a global business unit head, and has recently returned to a straight-ahead global business unit reporting structure. "There are never-ending tradeoffs between creating global efficiencies through a more centralized structure and establishing a local environment that allows for innovation and flexibility," Collis says. "These are the cycles and choices that companies go through."

The answers to these four questions, Collis says, flow out of an understanding of a firm's international advantage.

"We talk about competitive advantage...in other words, how do you add value over and above individual businesses? In determining your firm's global advantage, the question is simply what advantage you seek to create or exploit by virtue of being an international player."

For example, if it's easy for an organization to sell an identical product all over the world (Collis cites Boeing and Intel), then scale economies have the potential to be an obvious global advantage.

Down to cases

The book's case examples and detailed decision-making maps offer a practical guide to some of the complex issues that emerge from doing business across borders.

If a manager is trying to decide where to build a new manufacturing plant, the quick and easy decision would be to choose the current low-cost location-but since that can change within a relatively short time span (as it did with China), it's also important to factor in longer-term country competitiveness and how the plant fits into an existing portfolio of locations. Collis drills down into the many factors that can affect location and observes how companies typically assign each a weighted percentage: employee availability, sourcing, quality, and cost (40 percent); infrastructure availability (30 percent); a country's security, receptivity, and judicial environment (15 percent); "cluster" factors and so on. (A sense of an incumbent company's presence in the location should also be taken into consideration.)

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A Manager's Guide To International Strategy

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BY JULIA HANNA In the new book International Strategy: Context, Concepts, and Implications , Harvard Business School Adjunct Professor David J. Collis presents a comprehensive guide to a topic of ever-increasing relevance for managers across all sectors and industries.

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Types of Organization members found in Multinational Coporations

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Types of Organization members found in Multinational Coporations

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This article clearly articulates the differences in expatriate, Host-country national, and Third-country national. These are the basic three types of workers in a multinational corporation.

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Published on

Phillip P. Woodard [LION] BSM, MBA, MA, AFSP

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Experienced Tax Professional

Organizing multinational corporations requires a substantial investment in foreign operations. Managers making foreign investments expect to accomplish the following: Reduce or eliminate high transportation costs; allow participation in the rapid expansion of a market abroad; provide foreign technical, design, and marketing skills; and earn higher profits. Many American companies are shifting manufacturing operations overseas for various reasons; the most attractive is the latter, to increase profitability in a globally competitive marketplace. As organizations become multinational their members tend to become more diverse, facing a myriad of challenges in building a successful business team from a diverse population speaking different languages and coming from different parts of the world. Building a strong network of global human resources is paramount to success in this economy. The three types of organization members found in multinational corporations are addressed in this paper.

The expatriate is an organization member who lives and works in a country where he or she does not have citizenship. Example of expatriates are American citizens who relocate to Germany for instance as an employee of a parent pharmaceutical conglomerate headquartered in Chicago Illinois. Selecting managers in a multinational corporation from within the domestic workforce can benefit a company. These individuals will require a working knowledge of the language, understand the attitudes of people, and understand the needs that motivate people in the host country. Managerial attitudes toward foreign operations should drive the training and development programs for those employees selected for this type of assignment abroad.

Host-country nationals are organization members who are citizens of the country in which the facility of a foreign-based organization is located. These employees are valuable assets to any multinational organization because of their understanding of the above-mentioned areas an expatriate may not be familiar without training and experience. The United States Army employs thousands of host-country nationals wherever soldiers are deployed to assist the smooth transition of forces and support the Service Members. This resource can assist in improving communication between the parent company and the community in which it operates. The cultural barriers, attitudes, and linguistic difficulties may be mitigated by a strong core of host-country nationals on staff.

Third-country national is an organization member who is a citizen of one country and works in another country for an organization headquartered in still another country. Take the United States Army example above with Soldiers stationed in a Middle East country and hiring many employees temporarily from the Philippines to haul heavy equipment from the ports to the bases established throughout the country. Organizations rely on the host country or parent country contractors to recruit and select employees in this category.

Organizations that operate globally may employ all three types of workers to fulfill its needs. The use of host-country nationals is increasing due to the economic advantages and the ease of adapting management functions such as organizing, influencing people, and controlling multinational corporations. Host-country nationals are becoming more culturally aware of American business practices, especially if they are educated within the United States, which is usually the norm in most global organizations. Success in today's marketplace requires maintaining ethics in international management such as core human rights, local traditions, and determining right from wrong by examining context. Host-country nationals can provide an advantage in these areas and position an organization for success.

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Phillip P. Woodard [LION] BSM, MBA, MA, AFSP

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Published on Organizing multinational corporations requires a substantial investment in foreign operations. Managers making foreign investments expect to accomplish the following: Reduce or eliminate high transportation costs; allow participation in the rapid expansion of a market abroad; provide foreign technical, design, and marketing skills; and earn higher profits.

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There is most definitely a risk in going multinational and this articles shows one of them, TAXES!

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While the media has been feasting on Lux Leaks and other stories of " multinational tax dodging ", academic accountants have determined that U.S. multinational corporations (MNCs) have no particular tax advantage over U.S. domestic firms.

In fact, a new study finds the average effective tax rate for U.S. MNCs is slightly higher than that of U.S. domestic firms: 28 percent versus 24 percent. The study calls into question policymakers' emphasis on international "profit shifting," including the elaborate efforts by the OECD and rich-country governments to crack down on MNCs exclusively.

The authors of the study, Scott Dyreng of Duke University and three other academic accountants, looked at the financial statements of more than 4,000 U.S. firms over the last 25 years. They found that overall there has been a decline in effective tax rates but the decline has been about the same for MNCs and domestic firms. The effective tax rate for MNCs declined from 34 percent in 1988 to 28 percent in 2012, while the effective tax rate for domestic firms declined from 32 percent in 1988 to 24 percent in 2012.

Other studies have shown a similar decline in effective tax rates across the developed world, which is attributable to the decline in statutory corporate tax rates everywhere except the U.S. The mystery is that effective tax rates have dropped in the U.S. despite no significant change in the corporate tax rate over the last 25 years. Nonetheless, the U.S. continues to have one of the highest effective tax rates in the world.

The authors of the new study explored many possible explanations for the decline in U.S. effective tax rates, including tax breaks targeting domestic firms, such as the manufacturing deduction and bonus depreciation, and the increased opportunities for profit shifting among MNCs. However, these factors do not appear to explain the trends. As they note:

Overall, we conclude that corporate effective tax rates have indeed declined over time, and that the decline is not concentrated in multinational firms. Most of the other conventional explanations, such as the rising prevalence of intangible assets or the presence of more loss firms are equally unable to explain the decline. The decline in statutory tax rates around the world (other than the U.S.) explains part of the decline in effective tax rates, but only for multinational firms.

It appears policymakers should go back to the drawing board on profit shifting. We simply don't have a handle on how big it is or what the causes are. Rather than passing intricate laws aimed at MNCs and their intangible assets, interest deductions, etc., Congress should focus on making the U.S. corporate tax system simpler and more competitive. That requires cutting the corporate tax rate and switching to a territorial system that does not double-tax foreign earnings.

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New Research Shows Multinational Corporations Have No Tax Advantage Over Domestics

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While the media has been feasting on Lux Leaks and other stories of "multinational tax dodging", academic accountants have determined that U.S. multinational corporations (MNCs) have no particular tax advantage over U.S. domestic firms. In fact, a new study finds the average effective tax rate for U.S. MNCs is slightly higher [...]

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I found this chart helpful in finding the key differences between multinational corporations and international corporations.

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Chapter 3 focuses on diversity within a workplace. Diversity helps pull from a variety of skill sets. I thought this video was pretty cool.

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3 Major Challenges of Diverse Workplace and What to do About Them

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Please Visit www.pinkbossblueboss.com for more information Due to government initiatives, multi national companies all around the world are encouraged to hire a diverse workforce. But that comes with challenges...

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Although generation X is among the youngest they have a lot to offer as well!

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The most sustainable companies of 2017!

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The World's Most Sustainable Companies 2017

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Sustainability is the next step in being a successful manager. Even if you were born with leadership traits you still have to be consistent.

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When I was in the corporate world, we had a saying about a certain kind of manager. "He got results, but he left a trail of bodies in his wake."

In other words, he (or she), as we would have said when I was growing up in Boston, was wicked hahd to work for. By delivering results he may have pleased those above, but generally on the backs of those below. His methods - his treatment of subordinates - were unsound. He could succeed in the short term but likely not the long term. And business of course is a long-term enterprise. Which is why I say the best managers practice "sustainable" management.

What are some of the characteristics of sustainable management? Here are three.

Respect for resources: In all their various forms. Financial resources. Environmental resources. And of course human resources. It's like the old military saying, " Take care of your people and they'll take care of you." It's only natural: People want to work for, and do their best for, people who treat them with respect. It's a little like NBA players wanting to play with LeBron James. Overall, he makes the people around him better. It's a better experience. There's a higher probability of success.

Approach to risk: The best managers have keen consciousness of risk. They're not overly risk averse, just aware of it. How quickly we forget 2008, when by a kind of collective managerial amnesia, excessive financial risk nearly brought the global economy to its knees. And risk of course exists every day at the micro, not just macro, level. A tasteless ad can damage a brand. Lack of quality control can damage a product. Inattention to safety detail can create a consumer hazard. Good managers at all levels understand that sustaining a company's strength tomorrow depends on being well aware of risk today.

A long-term rather than short-term perspective: The most thoughtful managers have long time-horizons. They know that in the big picture the best successes aren't just minute-to-minute wins, but something replicable. An example comes from the life insurance business, where I worked for many years. Life insurance companies can always sell more product and increase revenue by relaxing underwriting standards and undercutting competitors with cheaper, actuarially unsound products. But what happens down the road when a bad book of business deteriorates and an excessive number of claims result? Will the company still be strong enough to pay all of them? Whatever the industry, management practices have to be sustainable - not just for a day or a month or a year, but far into the future.

The best managers will often do their jobs for a long time. Not by leaving bodies in their wake but by ensuring the people in those bodies want to come back and do their best tomorrow. And the day after that.

* * *
Victor is author of The Type B Manager: Leading Successfully in a Type A World (Prentice Hall Press).

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The Best Managers Practice 'Sustainable' Management

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The best managers will do their jobs for a long time. Not by leaving bodies in their wake but by ensuring the people in those bodies want to come back and do their best tomorrow. And the day after that.

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This article shows the progression in entrepreneurship as it relates to job seekers. This directly correlates to a solid manager, without good leadership this could not be possible!

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Why It's a Good Time to Start Your Own Company

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2017 is shaping up to be a great year to start a business, according to Challenger, Gray, & Christmas

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Many people struggle when it comes to making a decision on starting your own company, or using that same skill set under an established company. Positive thinking is always the way!

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Lessons I Learned From Leaving A Six-Figure Job

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This article really helps show that management is not always easy there will always be people that will be difficult to manage.

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Management would be easy if everyone you managed were hard working, collaborative, and had a great attitude and exceptional talent. But then it wouldn't be management. It would be sitting around doing little while legions of highly motivated people worked happily and diligently. The reality of course is far different. Simply put, some people are easy to manage and others are hard. And "hard" takes many forms. Some are talented but not collaborative. Some are collaborative but not too talented. Some are too aggressive and others not aggressive enough. Some are well-intentioned but high maintenance, moody or easily distracted. Some are just plain difficult. And so on. You get the idea.

So how do you manage this challenging subset of the broader employee population? Personalities being variable, individuals need to be managed individually, but there's still general guidance that can be provided. In that spirit, here are six tips for managing people who are hard to manage.

Accept that management is an inherently complex and difficult job - Don't fight it. Don't waste time and valuable mental energy wishing it weren't so. Recognize that frustrations and difficult situations go with the territory of management. That's why you're being compensated more than if you weren't in management. Approach delicate employee "issues" positively, like an intriguing puzzle to solve.

Don't avoid or bulldoze conflict, but deal with it directly and evenhandedly - Conflict is the currency of management. If you abhor conflict, management likely isn't the right job for you. The best managers aren't "conflict avoiders," but neither do they pull rank and roll right over others when conflicts occurs. Remember, you're going to have to continue work with these same people in the future. Best to look for fair constructive resolutions, not simply "getting your way."

Try to see things through the eyes of others - Easier said than done, I know. But there may be reasons why a certain person is hard to manage. Has he or she always been this way, or may new external factors be contributing? Is there anything in your own management style (hard to imagine, I know!) that could be triggering an oppositional response? There were times, for example, I was unnecessarily micromanaging people and was completely unaware I was doing it... until it was (entirely accurately) pointed out to me. If you can look at a problematic situation holistically and gain insights into why someone is acting the way he or she is, that can lead you to a constructive solution.

Get help when you need to - This is an easy step, but often neglected. If you work in an organization of any size, help is everywhere. Get perspective on a difficult employee from someone whose judgment you trust. This could be anyone: a Human Resources contact, a mentor, your own manager, a colleague. During my years in management I went to all of these people at different times to seek opinions when employee issues arose. It isn't a sign of weakness. It's sensible judgment. I found Human Resources especially helpful and made a point of establishing close working relationships with individuals - regardless of rank - who I felt were especially capable. I never for a moment regretted it.

Set clear measurable job objectives so it's a matter of fact, not debate, whether or not your employees have reached their performance targets - I often write about the importance of objectives in the management process, but that's only because I feel well-conceived targets are so valuable and so neglected. Why would you not want to have crystal-clear goals that you and your employees could refer to often to make sure they're on track? It makes evaluating performance more concrete and less nebulous. When a problematic employee isn't achieving goals, you have something totally tangible to discuss. I'd always rather argue data than opinion.

Think in terms of assets and liabilities - An old friend of mine used to say this about her relationships with men: At the end of the day, is he an asset or a liability? If he's an asset, keep him. If he's a liability, let him go. While perhaps a tad oversimplified, this approach has applicability for management. Does a problematic employee still add real value to the organization? Some of the most brilliant people I managed were very difficult - uneven collaborators who liked to do things their own way. But the benefits they brought to the company far outweighed the problems they caused. So they were clearly assets. If on the other hand they became so disruptive that their accomplishments were far outweighed by the problems they caused, then they'd be liabilities, and it would be time to let them go. (Always working closely with Human Resources, of course, to be sure terminations were handled in the right way.) Is this a perfect, nuanced lens through which to view employee performance? Hardly. But can it help bring some clarity to the "fog of business"? I'd say yes.

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6 Tips For Managing People Who Are Hard To Manage

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Management would be easy if everyone you managed were hard working, collaborative, and had a great attitude and exceptional talent. But then it wouldn't be management. It would be sitting around doing little while legions of highly motivated people worked happily and diligently. The reality of course is far different.

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Management could not be achieved without a solid foundation. This video i found helpful with understanding the basics.

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What is Management, Functions of Management: Plannnig, organizing,leading and controlling