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What Is an Organizational Structure?

An organizational structure is a system that outlines how certain activities are directed in order to achieve the goals of an organization. These activities can include rules, roles, and responsibilities.

The organizational structure also determines how information flows between levels within the company. For example, in a centralized structure, decisions flow from the top down, while in a decentralized structure, decision-making power is distributed among various levels of the organization. Having an organizational structure in place allows companies to remain efficient and focused.

Understanding an Organizational Structure

Businesses of all shapes and sizes use organizational structures heavily. They define a specific hierarchy within an organization. A successful organizational structure defines each employee's job and how it fits within the overall system. Put simply, the organizational structure lays out who does what so the company can meet its objectives.

This structuring provides a company with a visual representation of how it is shaped and how it can best move forward in achieving its goals. Organizational structures are normally illustrated in some sort of chart or diagram like a pyramid, where the most powerful members of the organization sit at the top, while those with the least amount of power are at the bottom.

Not having a formal structure in place may prove difficult for certain organizations. For instance, employees may have difficulty knowing to whom they should report. That can lead to uncertainty as to who is responsible for what in the organization.

Having a structure in place can help with efficiency and provide clarity for everyone at every level. That also means each and every department can be more productive, as they are likely to be more focused on energy and time.

Centralized vs. Decentralized Organizational Structures

An organizational structure is either centralized or decentralized. Traditionally, organizations have been structured with centralized leadership and a defined chain of command. The military is an organization famous for its highly centralized structure, with a long and specific hierarchy of superiors and subordinates. In a centralized organizational system, there are very clear responsibilities for each role, with subordinate roles defaulting to the guidance of their superiors.

There has been a rise in decentralized organizations, as is the case with many technology startups. This allows companies to remain fast, agile, and adaptable, with almost every employee receiving a high level of personal agency. For example, Johnson & Johnson is a company that's known for its decentralized structure.

As a large company with over 200 business units and brands that function in sometimes very different industries, each operates autonomously. Even in decentralized companies, there are still usually built-in hierarchies (such as the chief operating officer operating at a higher level than an entry-level associate). However, teams are empowered to make their own decisions and come to the best conclusion without necessarily getting "approval" from up top.

Types of Organizational Structures

Functional Structure

Four types of common organizational structures are implemented in the real world. The first and most common is a functional structure. This is also referred to as a bureaucratic organizational structure and breaks up a company based on the specialization of its workforce. Most small-to-medium-sized businesses implement a functional structure. Dividing the firm into departments consisting of marketing, sales, and operations is the act of using a bureaucratic organizational structure.

Divisional or Multidivisional Structure

The second type is common among large companies with many business units. Called the divisional or multidivisional (M-Form) structure, a company that uses this method structures its leadership team based on the products, projects, or subsidiaries they operate. A good example of this structure is Johnson & Johnson. With thousands of products and lines of business, the company structures itself so each business unit operates as its own company with its own president.

Divisions may also be designated geographically in addition to specialization. For instance, a global corporation may have a North American Division and a European Division.

Similar to divisional or functional structures, team-based organizations segregate into close-knit teams of employees that serve particular goals and functions, but where each team is a unit that contains both leaders and workers.

Flat (Flatarchy) Structure

Flatarchy, also known as a horizontal structure, is relatively newer, and is used among many startups. As the name alludes, it flattens the hierarchy and chain of command and gives its employees a lot of autonomy. Companies that use this type of structure have a high speed of implementation.

Matrix Structure

Firms can also have a matrix structure. It is also the most confusing and the least used. This structure matrixes employees across different superiors, divisions, or departments. An employee working for a matrixed company, for example, may have duties in both sales and customer service.

Circular Structure

Circular structures are hierarchical, but they are said to be circular as it places higher-level employees and managers at the center of the organization with concentric rings expanding outward, which contain lower-level employees and staff. This way of organizing is intended to encourage open communication and collaboration among the different ranks.

Network Structure

The network structure organizes contractors and third-party vendors to carry out certain key functions. It features a relatively small headquarters with geographically-dispersed satellite offices, along with key functions outsourced to other firms and consultants.

Benefits of Organizational Structures

Putting an organizational structure in place can be very beneficial to a company. The structure not only defines a company's hierarchy but also allows the firm to lay out the pay structure for its employees. By putting the organizational structure in place, the firm can decide salary grades and ranges for each position.

The structure also makes operations more efficient and much more effective. By separating employees and functions into different departments, the company can perform different operations at once seamlessly.

In addition, a very clear organizational structure informs employees on how best to get their jobs done. For example, in a hierarchical organization, employees will have to work harder at buying favor or courting those with decision-making power. In a decentralized organization, employees must take on more initiative and bring creative problem solving to the table. This can also help set expectations for how employees can track their own growth within a company and emphasize a certain set of skills-as well as for potential employees to gauge if such a company would be a good fit with their own interests and work styles.

What Are Some Types of Organizational Structures?

What Are the Key Elements of an Organizational Structure?

What Is an Organizational Structure Example?

What Is an Organizational Structure Chart?

What Is the Best Organizational Structure?

The Bottom Line

There are entire fields of study based on how to optimize and best structure organizations to be the most effective and productive. Senior leaders should consider a variety of factors before deciding which type of organization is best for their business, including the business goals, industry, and culture of the company.

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Organizational Structure for Companies With Examples and Benefits

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An organizational structure organizes a company's activities. Explore four types of organizational structures: functional, divisional, flatarchy, and matrix.

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"The difference between successful people and very successful people is that very successful people say "no" to almost everything."

In which group do you belong - successful people of very successful people? If you're like the most of us, the answer is neither. Luckily, there are many interesting pieces of research that yield amazing discoveries on how our productivity works.

Up next, we'll look into 5 scientific studies on productivity with results that have surprised many time management and business coaches. Are you ready to find out what science has to say about your productivity?

Study 1: Rewards work magic on our motivation

Want to motivate yourself to stay at work for longer hours, hit the gym more often, or finish all tasks on time? Then you need to hear about this study.

Researchers Katherine L. Milkman, Julia A. Minson, and Kevin G. M. Volpp wanted to see whether the right motivation would make college students visit the gym more often. So they gathered together 226 students who were having trouble going to the gym as often as they would have liked to.

Next, they broke the students into 3 groups:

Group One got an iPod loaded with popular audiobooks. They got it as a 10-week loan and were allowed to only listen to it in the gym

Group Two got the audiobooks for free, and they could load these to their personal iPods. They were encouraged to listen to the tracks in the gym but could also do it anywhere else.

Group Three was the control group. They got a gift certificate and were encouraged to hit the gym more often.

The audio novels included cool books such as The Hunger Games trilogy, the Da Vinci Code trilogy, the Twilight series, etc. - highly addictive books that are hard to put down.
Guess which group worked out the most?
It was Group One, the students that got the iPod as a loan and could only listen to it in the gym. They were a lot more motivated to work out as they had a reward accessible only while being physically in the gym. This led the first group to outperform the second one by 29% and the third one by 51%.
By physically restricting access to the tempting desire, the students got a 22% boost compared to their average productivity.
The rewarding system worked so well that when being asked whether they'd like to keep paying to use iPods, 61% of the group members said yes.
How to apply the findings to your personal daily routine:

Find something you love doing (e.g. listening to a new album, reading online articles, eating chocolate)

Tie the reward with action - you'll get the good stuff whenever you finish a task or work on one.

Don't let yourself have the reward before you've completed the task.

Read on: 12 Best Browser Extensions for Higher Productivity
Study 2: A planned life equals a happy life

Daniel Gilbert, the author of Stumbling on Happiness, has said: a wandering mind is not a happy mind. We spend over 45% of our waking hours thinking about multiple tasks at once. Moreover, we're unable to focus on the thing we're doing at the moment. This kind of mind-wandering can lead to increased unhappiness in the long term.
So what are the best ways to get the most out of your time?
In order to live a happier and more fulfilling life, we need to plan our time accordingly. A study from the Journal of Happiness Studies discovered that people who manage their free time have a better quality of life.

In her book What the Most Successful People Do at Work, author Laura Vanderkam wrote:

"Preliminary analysis from CEOs in India found that a firm's sales increased as the CEO worked more hours. But more intriguingly, the correlation between CEO time use and output was driven entirely by hours spent in planned activities. Planning doesn't have to mean that the hours are spent in meetings; it's just that CEO time is a limited and valuable resource, and planning how it should be allocated increases the chances that it's spent in productive ways."

Laura has also said that "successful people know that hours, like capital, can be consciously allocated with the goal of creating riches-in the form of a changed world, life's work-overtime."

According to Cal Newport, author of Deep Work and the guy behind the Study Hacks Blog, scheduling every hour of the day is one of the biggest factors of success. The best way to set up your day for success is to schedule EVERY SINGLE MINUTE of it.

Every Friday after work or every Monday before starting your week, take the time to review your to-do list and assign a time period to each. Planning your days hour-by-hour is beneficial in many ways:

You have a clear task list and know what to do after finishing the previous task

Limited time brackets help to finish tasks faster, avoiding overthinking some little details

You'll get so much more work done as you know exactly what tasks needs to be completed

Source: Free Time Management Contributes to Better Quality of Life: A Study of Undergraduate Students in Taiwan, see the link here

Read more: Time-tracking Tips and Best Practices for Teams and Individuals

Study 3: You can achieve ANY goal by NOT doing these things

Are job-seekers more likely to find work if they visualize themselves as future CEOs, or question whether they really will attain the ideal position? A popular guess is that visualizing one's future success will lead to higher achievements. In fact, the opposite is true.

Research shows that positive fantasies about future success yield poor results as they do not generate the energy needed to pursue the desired goals. Instead, positive dreams have a negative psychological effect on people, making them indulge in their fantasies and not focusing on achieving them.

So here's the verdict: Do not waste time thinking about your future success and daydreaming of positive fantasies. You also shouldn't tell about your goals to other people.
How to set attainable goals and achieve them:
A study conducted by Peter M. Gollwitzer indicated that individuals feel closer to having achieved their identity goals when their identity-relevant activities (e.g., getting a promotion) are noticed by others. As you tell other people about your goals, you'll feel like you've already accomplished them. This leads to poor work performance and unfinished goals.
Sources:

Avoid fantasizing about your future success and create an actionable plan to get to where you want to be

Keep your goals to yourself. Telling others about your goals decreases the likelihood of achieving them

Break a big goal into smaller objectives that are easily completed and attainable shortly

Positive fantasies about idealized futures sap energy from Journal of Experimental Social Psychology, see link here

Striving for Specific Identities: The Social Reality of Self-Symbolizing, see link here

Study 4: Find your "signature strengths" (and do it fast!)

Want to know how to be more motivated, happy, and productive at work? Research that examined Americans' happiness and energy levels found that when people work on something that they're good at, they feel happier and more energetic.

There are many studies showing that "signature strengths" make people happier. And why wouldn't they? - Being good at something boosts confidence and makes the tasks more enjoyable.
The more signature strengths were applied at the workplace, the more positive experiences the subjects had at work.
According to the research, the more hours per day Americans get to use their strengths; the less likely they are to report experiencing worry, stress, anger, sadness, or physical pain. Working on something that you're good at raises energy levels and self.confidence, leading to a happier mood.

The easiest way to feel happier and more driven at work is to find a job you love. Using your strengths helps to create a flow of work, and you won't even notice as the hours pass by while working on tasks.
How to make the "signature strengths" work for you:
This study also showed that character strengths matter in vocational environments irrespective of their content. This means that we should apply as many of our strengths as possible, regardless of their nature (strong communication skills, advanced technical knowledge, etc.)

Find your "signature strengths." These might be related to your job or simply things you're good at, such as communicating with other people

Create new "signature strengths" by learning a new skill

Be creative about your work tasks and think of new ways to apply your best skills to every activity at work (make the tasks more like you)

Source: When Americans Use Their Strengths More, They Stress Less, see link here

Study 5: If you can't eliminate bad habits, replace them

Studies show that as we decide to quit a bad habit, we're likely to indulge in it even more often. Resolving what you would not do in the future (as opposed to what you would) can lead to a "behavioral ironic rebound effect."

A study found that "negation implementation intentions" did, ironically, strengthen the habit one aimed to break. So simply quitting a bad habit is not a good choice if you want to get rid of it.
Here's what you should do instead:
Additionally, the research found that negation implementation intentions are most likely to result in rebound effects when the habit to be negated are strong.

First, we need to recognize the problem. Up next, we need to find the source of the bad habit. In many cases, your bad habit is a simple way to cope with stress. For example, eating chocolate, biting your nails, etc.

Sometimes, we think a habit is productive while in reality, it's making us less energetic and shortening our attention span. Think about reading emails - it makes us feel connected but distracts us from serious work.

To break a bad habit, we need to find a substitute for it. You need an alternative action for the time when boredom or stress kicks in. For example, instead of eating a bar of chocolate, you could brew yourself a cup of tea.
More ideas for quitting a bad habit:
Whatever your substitute might be, you need a plan of what to do when feeling like indulging in a bad habit.

Cut out all the triggers. Usually, bad habits are triggered by another action. Learn to avoid these or replace the second act with something new instead of the old habitual action

Find a partner in crime. It is easier to quit a bad habit if someone stands beside you and tackles with the same issues

Visualize yourself succeeding - think how great it would feel to have quit the bad habit. You can do it!

Get inspired: 20 TOP Productivity Blogs 2018 (Only The Best)

There are so many different possibilities of how to make your life and work more successful and productive. Taking small steps in the right direction will lead to long-term achievements and fulfilling life.

If you'd like to read more on productivity, see this article: 5 Easy Steps to Be More Productive (And Work Smarter Instead of Harder)

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5 Studies on Productivity That'll Change Your Life | Scoro

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"The difference between successful people and very successful people is that very successful people say "no" to almost everything." In which group do you belong - successful people of very successful people? If you're like the most of us, the answer is neither.

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New to business essentials | business.gov.au

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The purpose of an employee evaluation is to measure job performance. Many evaluations provide quantitative measurements essential for a production-oriented work environment. Other employee evaluations provide employers with metrics regarding the quality of employees' work. The importance of an employee evaluation is that it's instrumental in determining whether an employee's skill set is appropriately matched to the employee's job.

Organizations must continually assess their employees' strengths and weaknesses. By doing so, employers are better able to match employee qualification to job assignments. Employee evaluations provide an assessment of the strengths and weaknesses for individual employees as well as the collective talents of employees by department or team.

For example, an employee evaluation can reveal whether your employees have strong proficiency in computer software applications for finance use, yet weaknesses in applications used for presenting finance-related information in multimedia format. The importance of employee valuations to assess workers' skills is particularly significant in work force planning processes.

Employee training and development needs are other reasons employee evaluations are important. Assessing employee strengths and weaknesses is the first step in determining the type of training employees need. Training usually supports employees acquiring new skills; development helps build upon employee aptitude and current performance.

Upon learning employee strengths and weaknesses, an employee evaluation decides what type of training employees need to perform their job tasks. An evaluation also sheds light on development programs, which benefit employee and employer. An example would be professional development workshops for finance managers to enhance their business communication skills.

Evaluations contain performance standards - the level at which employees must perform their job duties to meet their employer's expectations. A performance standard might be delivering quarterly presentations to the executive leadership team. An employee who fails to provide company executives with timely financial reports four times each year falls below the company's expectations. Without an evaluation to communicate performance standards, the employer is neglectful in providing its employees with the tools necessary to achieve their job responsibilities.

Performance measurement through employee evaluations is a component of many organizations' compensation structures. The ratings employees receive as a result of supervisors observing and evaluating their performance can directly impact the amount of the employee's salary or wage increase. Employee evaluations give supervisors and managers an opportunity to recognize employees' hard work, dedication and commitment. In lieu of monetary rewards, evaluations also are used to identify highly proficient workers to whom the employer can assign additional duties and responsibilities, or even promote to a leadership role.

About the Author

Ruth Mayhew has been writing since the mid-1980s, and she has been an HR subject matter expert since 1995. Her work appears in "The Multi-Generational Workforce in the Health Care Industry," and she has been cited in numerous publications, including journals and textbooks that focus on human resources management practices. She holds a Master of Arts in sociology from the University of Missouri-Kansas City. Ruth resides in the nation's capital, Washington, D.C.

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The Importance of an Employee Evaluation

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The Importance of an Employee Evaluation. The purpose of an employee evaluation is to measure job performance. Many evaluations provide quantitative measurements essential for a production-oriented work environment. Other employee evaluations provide employers with metrics regarding the quality of employees' work. ...

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But which hotel brands have adapted best? Which have offered the most customer-friendly policies and been willing to sacrifice bottom-line concerns for the sake of guest safety?

To find out, we performed a comprehensive "grading" of eight major hotel brands, looking at the policies they currently have in place as well as the evolution of these policies throughout the early stages of the pandemic.

These hotel brands have introduced new cleaning and sterilization policies, often in partnership with health care providers. Since we are not experts in this area, we did not attempt to compare these policies. We instead focused on policies such as mask enforcement that can be compared directly.

Runners-up: Radisson, Hilton and Marriott (Grade: A-)

To determine the final grade, we compared two major categories:

We gave each brand a grade in each category (see below for more details), then averaged these two grades.

As you can see, the disparity between the "flexibility" and "health" grades from some programs was huge. Best Western, for example, scored a B+ for its health policies, but an abysmal D for its flexible booking policies.

Hyatt took top overall marks thanks to its consistent customer-first policies across many categories and dates. Hilton, Marriott, and Radisson also performed consistently, but not uniformly.

On the other end of the spectrum, Choice and Wyndham disappointed across all criteria we considered.

These rankings are current as of July 24, 2020, and do not reflect any changes since.

Health and social distancing

Runners-up: Best Western, IHG and Marriott (Grade: B+)

We compared each program across six criteria, based on the official policies stated on the hotel websites:

Despite a rocky rollout of its health policy, Hyatt's last-minute face mask requirement and staff training procedures set it apart.

Best Western, Hilton and Marriott also performed well, thanks to a new mask requirement policy from Marriott, room-blocking from Hilton, and a comprehensive health plan from Best Western introduced soon after the pandemic started.

Flexible booking policies

Winners: Hilton (grade: A+) and Radisson (grade: A+)

Runner-up: Marriott (grade: A)

When travel plans were first disrupted, some hotels outlined flexible policies for existing reservations, letting guests change or cancel these bookings without fees. Then came policies allowing free changes and cancellations on new bookings, in an attempt to entice some travelers back into making new plans. Then came rollbacks of both policies in the summer as the virus seemingly abated.

To grade these ever-evolving policies, we looked at two types of change/cancellation fee waivers (new and existing bookings) over two time periods in April and July 2020. So each hotel brand received four individual grades, summarized in one overall flexibility grade below.

We also graded these policies on a curve, as with the health policies above.

Radisson has consistently offered top-tier flexibility for guests throughout the crisis. And although Hilton's generosity has waned in the summer, it led the charge earlier in the spring with highly flexible policies for both new and existing bookings. On the other end of the spectrum, Best Western and Choice Hotels have failed to consistently provide meaningfully flexible choices for both new and existing bookings, earning them the bottom spots.

Similar to our analysis of how airlines have been handling the pandemic , we have done our best to boil this extraordinarily complex topic into a simple grading system and provide help for travelers in choosing which hotel to trust with bookings for the remainder of 2020 and beyond. It is important, in my opinion, that we hold hotels and other businesses accountable for the actions they take at times like these. So if you're on the fence about a hotel booking, maybe you lean toward a brand like Hyatt that scored well across the board.

If ensuring health and proper social distancing are your primary concerns, consider brands like Hyatt, Best Western, IHG or Marriott, which scored best in these areas. If, on the other hand, maintaining flexibility amid coronavirus uncertainty is paramount, check out the brands like Radisson, Hilton, Marriott and Hyatt, which rated the highest.

In either case, make sure to check the most current policies of a given hotel before booking.

How to Maximize Your Rewards

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Which Hotels Have Handled COVID-19 the Best? - NerdWallet

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But which hotel brands have adapted best? Which have offered the most customer-friendly policies and been willing to sacrifice bottom-line concerns for the sake of guest safety? To find out, we performed a comprehensive "grading" of eight major hotel brands, looking at the policies they currently have in place as well as the evolution of these policies throughout the early stages of the pandemic.

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6 min read

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

When we talk about aspects of what makes an organization a good place to work, the primary factors most of us take into account are brand value of the organization and compensation paid to employees.

Most managers and senior professionals intend to believe that these two elements are sufficient to attract talent to their organizations. However, one of the most important things that we often fail to give due importance is the work culture, which often plays a deciding role in retaining and binding people to an organization.

Work culture is an intangible ecosystem that makes some places great to work and other places toxic. In a nutshell, the ideology of an organization is what constitutes its work culture.

It affects or defines the ability of the leadership and employees to relate to each other for the common good of the organization and operate within a mutually agreed and acceptable boundary of cultural values and emotional interface.

It is widely understood that a positive ambience can make or mar your performance, be it school, college or workplace. No matter how talented and smart you are, you can work to the best of your capabilities and creative skills when you are surrounded by an encouraging environment that values human resource.

This is why work culture is so important in bringing out the best from your employees even in adverse circumstances. Negativity not only kills creativity and will to perform but also does not allow an employee to develop a sense of affection and ownership with the organization.

Human beings are fundamentally simple and a positive work environment impacts the way they think, act and reflect.
Here are some to the reason which will answer the above query Increase loyalists at your workplace :
Workplace is where you spend more than one-third of your lives. Naturally, if your employee is happy and content at work, it will reflect in his overall personality and growth as a human being. The collective impact of a good work environment is much more than increased productivity and employee satisfaction. The impact is on the overall personality of people who work for the organization.

Do your employees wake up every day and look forward to a day of work or do they drag themselves to the workplace counting days to the weekend? Do they feel the same ownership and dedication towards the organization as you do? Only a place that values human resource, treats employees with trust and instills a sense of confidence and cohesion among the workers can achieve the former.

Employee incentives and appraisals might not always be enough to motivate an employee to work for the best outcome for an organization. Sometimes in extremely challenging circumstances when a collective endeavor is required to save the day for the organization, it is the love and affection employees feel towards their workplace that turns out to be a decisive factor.

An organization whose employees have a deep sense of loyalty and ownership towards their workplace is an organization that has a long way to go. . An employee who loves his/her organization will spread the goodwill and will be instrumental in attracting good human resource to the organization.

A study conducted by Dale Carnegie Training a few years back concluded that an alarming 54 percent of Indian employees were somewhat dissatisfied with their jobs, sending out a strong signal that organizations need to initiate proactive measures to sustain engagement and improve satisfaction.

Contrary to common belief, compensation and appraisals are not the only factors that bind employees to an organization for a longer duration. Whether the employee feels happy and satisfied in his/her work space is another crucial determinant.

A dissatisfied employee who feels haggled by the daily questioning and accusations by seniors, and backbiting by colleagues will be the first one to look out for another job opportunity, even if he/she is being compensated well.

Apart from encouraging seniors and supportive colleagues, other factors that make an organization a good place to work include respect for employees' private space (that is displayed by a policy of not disturbing them on off days unless absolutely urgent), respecting their right to avail leaves, and encouraging them to take up new challenges and opportunities at work.
Prompt employees to watch each others' back
Work culture is important for the organization as it directly impacts the ability to attract and retain talent. A positive workplace is reflected in the positive work relationships which exist at the workplace; the concern and genuine care for each other.

A positive workplace will have a higher degree of employee engagement - as employees respond positively and actively to organizational initiatives. A negative work place will be reflected in low energy and detached work environment with employees operating in insulated silos.

Much like a compatible spouse makes your family life happy or dissatisfied, good colleagues make your work life endearing or difficult. While to some extent, the behavior of employees towards each other depends upon their individual nature and characteristics, a lot of it is defined by how the organization shapes them up.

A new employee who enters an organization and watches a culture of cohesion among workers, where all employees helps each other, will automatically imbibe these values in his/her daily life. On the contrary, an organization where back-stabbing and squabbling is the norm, any new employee will adapt to these traits.

A good work culture is one which encourages employees to behave like a family and watch each others' back. This culture can only be built by pursuing ethical role modeling values and walking the talk.

The onus lies on the leadership as their behavior gets magnified and replicated many times over. Showcasing and rewarding positive behavior reinforces the intended behavior and directly influences the workplace culture.

A good work culture not only helps retain organization's human resource, it also helps attract new talent. In today's connected industry space, it is not difficult to know the internal working environment of any organization - the most vocal and credible ambassadors of the same are current and ex-employees.

A happy employee will spread around the word very effectively and be instrumental in attracting talent to the organization. People today are constantly looking for change and new opportunities in search of a happy, satisfied and balanced work life.

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Why it's Important to Build a Good Work Culture

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6 min read Opinions expressed by Entrepreneur contributors are their own. You're reading Entrepreneur India, an international franchise of Entrepreneur Media. When we talk about aspects of what makes an organization a good place to work, the primary factors most of us take into account are brand value of the organization and compensation paid to employees.

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Just Curious in case I ever come up with a good idea 

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Just Curious in case I ever come up with a good idea 

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The Shark Tank: Before You Dive in...

Before you start on this voyage (and, make no mistake, it's a long one), you need to realize that the odds are not in your favor. True, many get on the show, and you could be one of them. More do not get on.
It's a long and arduous process on purpose.
They want to weed out those who apply simply as a lark and those not fully committed to their businesses. They have tens of thousands of applicants each year who are determined to succeed, tenacious, patient, persistent-all the qualities it takes to establish and operate a successful business. They can't waste their time and effort on those who are not.
Make sure that you are not prohibited from applying.
Full eligibility requirements appear on the Shark Tank website, Page 1 of the Initial Application Package. In brief,

You need to be a U.S. citizen or legal resident.

You cannot be a convicted felon or have criminal charges pending.

You, your immediate family members or anyone living in your home may not be an employee of any company with a connection to the show, including but not limited to, Finnmax LLC; UAMG Content, LLC; Sony Pictures Television Inc.; American Broadcasting Companies, Inc.; and any company owned by a shark.

You cannot be running for public office or run within a year after the season your segment appears.

Even if you are selected to appear on the show, there are no guarantees.
Suppose you have gone through all the auditions and have been selected to give your pitch to the sharks. First thing you need to know is that just because you were filmed giving your pitch, it doesn't mean your segment will be televised. They film more pitches than they need.

You know from watching the show that not everyone who appears leaves with a deal. What you may not know is that, even if you make a deal, the shark who made you the offer is not obligated to follow through with it. After the filming, the sharks and their staffs do their due diligence and check out your company thoroughly. If there are discrepancies in the information you provided, the offer will be rescinded. You lose out on a golden opportunity simply because you (even if inadvertently) misled the sharks.

However, even if you do not get a deal or the deal does not close, all is not lost. You have introduced your product to more than 8 million viewers. Not only are those viewers potential customers, they are also investors who watch the show with the express purpose of grabbing up the businesses that the sharks passed on-often with great success.
The sharks do more than hand over money and check in once in a while.
If you get a deal, you need to be prepared for the shark(s) who invested in your business to be absolutely hands-on. They are not going to hand over, say, $250,000 and let you sink or swim. So you will have their expertise, which is invaluable, but you will give up some control of your business. If you have the attitude it's your business, you are the one who spent years of sweat and tears building it, and you know what is best for it, you should float right on by the shark tank.
The Application and Audition Process
Method 1: Apply Online

The one-page preliminary application is the easiest way to apply for the show. Fill in all the blanks following the instructions and click on "Submit." Later, if the producers want to pursue your application, you will fill out the Initial Application Packet.

If you are contacted by producers after they have reviewed your preliminary application, you will download the 17-page Initial Application Packet. The packet includes the Short Application, Audition Release and Submitted Materials Release. Read all of it carefully. Fill out the application fully, honestly and legibly.

Remember that the person reading your application knows nothing about you or your business. Be detailed in the information you provide. Have another person, or two, go over the application to make sure it's clear. The casting producers are not going to struggle through an application that's difficult to understand.

The producers look for compelling stories on these applications. You may have or have had an interesting or incongruent occupation; or the way you thought up your business was unusual, altruistic and/or amusing; or the hurdles you have overcome are impressive and/or inspiring. Look for opportunities to stand out by including appropriate information about yourself that will make the producers want to meet you and learn more about you.

Method 2: Attend an Open Call

The open call may be your best chance to get onto the show. The show accepts applications all year, but there is the danger that your application will get lost in the shuffle when the staff's focus is on finalizing contestants and filming the episodes.

Shark Tank schedules open calls in at least five cities around the country. The locations change year to year. Go to the Open Call Schedule on the Shark Tank website for the locations, dates, times and instructions.
Be prepared for the open call.
Practice, practice, practice-your one-minute pitch. Then practice some more. Practice in front of your family, who love you. Then in front of, say, coworkers, who like you. Then in front of strangers.

Complete the Initial Application Packet prior to the day of the open call and take it with you. Hand it to the member of the casting team accepting applications when you arrive or to the producer interviewing you.
Arrive on time.
Arrive during the "Numbered Wristbands Distributed" time-usually 9 a.m. to 11 a.m. (There's no need to camp out at the location the night before.) You will receive a wristband with what number you are and the time of your audition. You will have time to kill, possibly loads of time. You can go back to the car to get any demonstration materials you brought with you. (Don't count on electricity, WiFi or audio/visual aids being available.) You can practice. You can nap or meditate. Whatever works for you.

Be on time (i.e., early) for your audition. The auditions will almost certainly be running behind time, so more waiting. Sure, you can practice some more, but do you really need to? It's a good time to get to know the other entrepreneurs. They, like yourself, are very interesting people, and you should grab any chance that comes along to network.
The first audition: Sell yourself and your business.
Finally, your number is called and you go to the pitch booth. Enter with your head up, shoulders back, a big smile, enthusiastic and immediately establish eye contact with the casting producer. Now here's the thing: The producers do not have money to invest in your business. They are not interested in revenue and profits. Besides, all that financial information is on your initial application. They are casting for a reality TV show; they want great products, yes, but more they want interesting, exciting personalities. Focus half of the minute on your product, half on what a swell person you are. The producer wants to know if you are passionate about your business; and if you will be able to withstand possibly withering comments from the sharks with equanimity and without becoming ugly about it? This is the time to get in your story again, what makes you special. Above all else, be authentic!

When you finish your one-minute pitch, the producer will ask you a few questions. And then you are done. If possible, leave something behind for the producer to remember you. A sample of your product is perfect when that's possible.

Method 3: Accept an Invitation to Audition

The casting producers monitor crowdfunding websites (e.g., Kickstarter, Indiegogo) and trade shows to find entrepreneurs/young companies to recruit. You will receive a phone call inviting you to audition in person or send in a video pitch. As special as it may feel to be invited, you have no better chance of being selected for the show than any other applicant.
Wait for the Phone Call, No Matter How You've Applied.
Regardless of how you applied, after the audition (and after what might be a long wait), you will receive a phone call if you have been picked to continue the selection process. If you have not been selected, you may receive a letter in the mail. Or you may never hear from them.

After the phone call, you will receive material (mainly additional forms) in the mail. Fill out the forms and send them back as instructed.
What's going on while you wait to hear from the producers?
It may help you to be patient once you realize the producers are super busy. It takes months for them to prepare for a new season. Back at the office, they run background checks. They search your product to see that it is, indeed, new. They run patent checks. They confirm that what you have told them is accurate. They do everything possible to avoid misleading the sharks and the television audience.

As part of their "due diligence," they are going to check out your website. You need for it to be a high-quality, professional-looking reflection of you and your business.
Show them that you are on the ball and that nothing is more important to you.
You can stand out by going above and beyond. Any time you have to mail something back, do it immediately and FedEx it. If they need a digital file, send it in several formats or mediums so the producer has no trouble opening it.
The next interview is over the telephone.
The phone interview may be several weeks after you received your confirmation letter. A casting producer will ask you for more details about your business, what motivated you to start it, what you have done to make it a success, your general background, noteworthy experiences. You are a semi-finalist at this point. You're chances of being on the show are getting better all the time.
Connect with the producers.
You will speak with several producers throughout the process. Their basic job is to weed out companies or entrepreneurs who just don't fit the reality show aspect of Shark Tank. Keep in mind that the producers are just regular people like the rest of us. Relate to them on that level. You may have interests in common. Or you may simply be especially easy to talk with. It matters. It's more difficult for the producers to eliminate someone they feel they know and like than it is to eliminate a random applicant.
Submit a professional-caliber audition video.
If you are still in the running, you will next be asked to submit an audition video. The video producer will tell you what is expected and how to submit the video through email. If you need to submit it on a CD through the mail, you may be allowed to do that. But email is preferred, and it's always best to be as accommodating as possible. Remember our mantra of "above and beyond."

Film a 5- to 10-minute pitch for your product as professionally as possible. It's come down to that video at this point. The better the video, the better your chances of getting booked. Include in your pitch how great your product is, why your business deserves to be funded, how you will give back, and any financial info that reflects well on your company. Show them how entertaining you are. Don't forget the personal story that sets you apart.

So, let's suppose you get that precious call: You are going to be on Shark Tank! Can't sit back and bask in the glory. You will probably have a few months to prepare. But you haven't a minute to spare-so get started right away!

So, you didn't make it this time. Don't be discouraged. You can try again. There are entrepreneurs who had to try out four times before they made it into the tank.

You will soon be under the bright lights of show biz with multiple cameras aimed at you, giving the pitch of your life to famous millionaires and billionaires who are there solely to learn about you and your business. It's the chance of a lifetime. You survived the daunting selection process and convinced the casting producers that your business, your story of perseverance, your enthusiasm, charisma and confidence are ready for prime time.

Typically, entrepreneurs are notified a few months in advance that they have been selected to appear on Shark Tank. That time will fly by. Don't waste a minute preparing for the tank. You actually have more to do than for the audition. Here we have some heads-up, advice, suggestions and more than a couple "must dos." (You'll know them when you see them.)
A producer guides you through the whole preparation process.
When you receive the call, you will be assigned a producer to help you prepare for the show. He or she is very experienced with the show and is totally on your side, so pay attention and gratefully accept the feedback.

The first thing the producer will do is give you a "crib sheet" of sorts-a list of questions that you will likely be asked by the sharks. Make sure the answers to all of them roll off your tongue.

The producer is your go-to gal or guy for all things Shark Tank. Don't hesitate to call with questions or concerns.
Prepare and rehearse your start-off pitch.
You can elaborate on your one-minute pitch from the original audition. There isn't a set amount of time for your opening spiel, but two minutes is a good average. You don't want to drone on too long and let them drift off. You want to get the sharks' attention and get them interested in you and your business. Then they will ask questions.

In your opening, include condensed information about your business, your background, what compelled you to start the business and how the business is doing. If you can add humor naturally, don't miss the chance.

Know it inside out and upside down, so that you can provide the information without sounding robotic.

Film yourself.

Don't try to bamboozle the sharks.
The sharks are as savvy as they come. You are not going to impress them with big words, insider jargon or complicated technological explanations. Remember that your pitch is going out to millions of average Americans, people who want straightforward information: who you are, what your product is, status of the business, how much of an investment you want from the sharks, how much equity you are willing to give them. The exact same things that the sharks want to know.

Now is the time to talk about the numbers. Hire a CPA if you must, so that you can answer the financial questions as though you are a CPA. Know the cost of goods, profit margin, customer acquisition cost, current inventory, projected sales for current year, gross sales to date by year (last 3 years) and your net profit for each of those years.

Stand in front of the sharks befuddled by the numbers, and you will suck the air right out of the room. The sharks' loss of interest will be palpable, and you will be going home empty-handed.

Do not say, "This is a $40 billion industry." It really annoys the sharks.
Be realistic with the ask.
Another guaranteed way to leave without a deal is too ask for too high an investment from the sharks. For instance, if your business is barely off the ground or if you are losing money, asking for $1,000,000 is not going to win you a deal. The sharks have regretfully passed on offering a deal for that reason alone. Had the ask been lower, they would have been all over it.

In that same vein, if you are unwilling to give up a reasonable amount of equity in your company, the sharks will pass. More than once, a shark has said, "I don't get out of bed for [say] 10%." There may be exceptions, but not enough for you to expect that your deal will be one.

The sharks are not only giving you money (a lot of money), their expertise and the expertise of their staffs, they are lending you their name and reputation. It's impossible to quantify how much value that brings to a business. But do the best you can so that it factors in to the equity you offer.

Entrepreneurs who ask for too much money for too little equity are sometimes accused of being "gold diggers," people who want the 10 minutes of free advertising, but don't really want a deal. Don't be a suspected gold digger. More important, don't be a gold digger.
Watch past episodes of Shark Tank.
Do more than watch-study! Take notes on the successful entrepreneurs. Why were they successful? Study the entrepreneurs who failed to get a deal. What went wrong?

Note any questions that need to be added to the list the producer gave you.

Learn as much as you can about the sharks. You want to know their companies and who they have invested in. Whose interests and expertise best match your business?

Learn their personal background also. If you find similarities between you and a shark, mention them: "I sold products door to door like you did, Mark." "I was raised by a very supportive single mother who told me I could do anything" (like Daymond).

Be certain that you have the correct information. One entrepreneur lost Robert right off the bat, because he referred to him as being Polish. Robert is Croatian. It would have been better had the entrepreneur said nothing.)

As you learn more about the sharks, think of various scenarios for offers you might get. As in, "if Kevin offers me . . ., then I will . . ." Know which shark you would prefer; know which one(s) you do not want to work with. Know what your absolute limits are. It's too easy to get caught up in the excitement when you are in the tank. You have to keep your wits about you-as difficult as that is for most.
Be prepared to explain products similar to yours.
There is nothing new under the sun. If there are products very similar to yours, be prepared to explain why yours is different and better.
Have a patent or have applied for one.
It will impress the sharks if you have applied for a patent, even better if you already have one. A patent prevents other people from stealing your idea and relieves the sharks of concerns about knock offs and lawsuits over theft of intellectual property. They also want to be assured that you have not knocked off someone else's ideas.

On average, it costs $200 to $500 to submit an online patent application on the U.S. Patent Office website, if you, or someone you know, can correctly complete the application. If it's done incorrectly, the Patent Office will return it to you, and your money and time were wasted.

A patent attorney can take care of the application for a fee of $5,000 to $10,000.

Complete market research on your intended clientele.
The sharks award uber points to people who are business savvy enough to have taken care of this.
You will be in the tank for three-quarters of an hour to an hour and a half.
That may feel like 10 minutes or 8 hours depending on how things are going for you. The record in 2 ½ hours, which was a good thing. The shark were very interested. If you are done in, say, half an hour, you flubbed it.
You need to clear your schedule for when the producers want to film.

The producers need you to set aside 35 potential days to film the show in Los Angeles.

You will have five days' notice for when you need to be in Los Angeles.

You will be there for five days.

Inside the Tank: Lights, Camera, Action!

Okay, this is it! The doors slide open and you walk down a corridor (that you will be relieved is not nearly as long as it looks on TV). Stop at the "X" on the carpet. Then stand silently while the camera crew gets set up. It will likely be the longest, most awkward 30-ish seconds of your lie.

For those afflicted with selachophobia (fear of sharks), the sharks that you see swimming around as you walk down the hallway are real. It's just that they are in Reno, Nevada.

You may be surprised how crowded the tank is. In addition to you and the sharks, there are 10 or more camera people. In addition to filming your segment from every angle, each shark has his or her own camera person.

Starting off, the sharks know only your name and what your product is. It adds that element of reality TV drama to see their reactions as they learn about you and your business. Then they need to decide quickly if they want to invest.

The sharks wear concealed earpieces so that the producers can communicate with them, but not to tell them what to do or relay any secret information. The producers may tell them to ask for clarification on a point, so it's clearer for the TV audience. Or they may suggest the sharks ask about a certain area of an entrepreneur's life that the producers already know is unusual or emotional (i.e., "good reality TV").
Communicate Non-verbally.
The first thing you do in the tank is to nod and smile. I wouldn't be surprised if this has been code for "I'm a friend, not a foe" for tens of thousands of years. It is a warm greeting and very courteous, and people like to work with friendly, pleasant people.

Standing upright but relaxed is a posture of confidence. Do not slouch. Do not, your whole time in there, cross your arms!

The sharks shy away from the wishy-washy. They have even withdrawn offers when an entrepreneur waffled. Project an image of decisiveness, respectfulness, but not submissiveness. You need to be able to stand up for yourself-in a nice way.
Involve the sharks in your presentation.
The best way to engage the sharks is to give them samples of your product. Even better if you can personalize your product for each shark. For example, Mark usually gets a version of a product in blue for the Dallas Mavericks, Kevin green for money. If there is not product, let them try out the exercise equipment or do yoga with goats or learn how to play a guitar.

Even if you leave the tank with a deal, nothing is definite. That hug or handshake doesn't seal the deal. After shooting wraps, the sharks and their staffs do their due diligence to make sure that all of the entrepreneur's claims are substantiated. If they are not, the offers will be rescinded. Or you may reconsider the deal and pass on it.

More entrepreneurs decline the deal after the show than sharks do.
Go directly to the psychiatrist's office. Do not pass Go.
Do not underestimate the stress level of being in the tank. Your first stop after you leave the tank is to talk with an on-set psychiatrist-whether you got a deal or not. The producers want to make sure you are feeling well. Getting in front of a panel of millionaires and billionaires to give a presentation that millions of people will see is no small feat.
Wait some more, but for the last time.
A producer will notify you about two weeks before your segment airs. It would be wise to use the time to prepare your website and/or your staff for the greatly increased traffic, email, phone calls. Some companies have received hundreds of thousands of website hits and thousands of emails.

Usually, it's all over between you and Shark Tank, but there have been a few entrepreneurs who were allowed a second chance in the tank. Besides, it's very possible that an investor has seen you and your product and will contact you. And your business can soar!

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How To Get On Shark Tank - Everything You Need To Know

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Before you start on this voyage (and, make no mistake, it's a long one), you need to realize that the odds are not in your favor. True, many get on the show, and you could be one of them. More do not get on. It's a long and arduous process on purpose.

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In a team-based organizational structure, company executives group employees performing similar job functions into lateral teams. Team members support each other, make their own decisions and rely on their own expertise to make changes in processes, policies and procedures. In theory, this approach requires minimal overhead and less management for experienced personnel. In practice, this strategy presents many challenges for inexperienced teams. While this model makes it possible for teams to respond quickly to customer demands without layers of management approval, without sufficient expertise, teams falter.

Increased Need for Effective Leadership

Because team-based organizational structures lack management structure by design, team members need to recognize the need for good communication, effective project management and efficient resource allocation. These teams need competent, highly trained team leaders. Additionally, teams need policies and procedures that define how work gets done. This helps balance the lack of traditional hierarchical structure with the ability to respond quickly to team needs without consulting layers of ineffective management.

Less Contact With Other Functions

Team-based organizations group employees based on function. Self-contained teams stay focus on their tasks. This limits contact and exposure to other functions. Individual teams may develop ideas and products in isolation without realizing the impact on other company employees, customers, products or services. This leads to less organizational collaboration and sharing best practices, which could result in higher costs, increased waste and decreased customer satisfaction. For example, teams may not be able to negotiate the best deals with suppliers if they work separately.

More Change and Instability

Because a team-based organization enables teams to make decisions quickly, teams undergo constant change. This instability may result in confusion and chaos if team leadership does not step in to communicate effectively with team members, sponsors and stakeholders. Decisions made by team consensus tend to take longer to reach. Teams may experience increased conflict, tension and stress as a result.

Less Organizational Consistency

Disadvantages associated with team-based organizational structure result in less organizational consistency. Each team functions independently without ensuring alignment with each other. While teams can act in an entrepreneurial spirit that fosters innovation and creativity, the lack of bureaucracy does not ensure a more-cooperative workforce. Lateral team-based organizations need to establish liaison roles, task forces and other project management structures to increase the company's ability to process information in an interdependent, complex environment. Without these mechanisms, miscommunication, stress, absenteeism and poor performance tend to result.

Photo Credits

female boss and employee image by jimcox40 from Fotolia.com

About the Author

Tara Duggan is a Project Management Professional (PMP) specializing in knowledge management and instructional design. For over 25 years she has developed quality training materials for a variety of products and services supporting such companies as Digital Equipment Corporation, Compaq and HP. Her freelance work is published on various websites.

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The Disadvantages of Team-Based Organizational Structure

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The Disadvantages of Team-Based Organizational Structure. In a team-based organizational structure, company executives group employees performing similar job functions into lateral teams. Team members support each other, make their own decisions and rely on their own expertise to make changes in processes, policies ...

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Chief Executive Officer (CEO): What They Do vs. Other Chief Roles

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A chief executive officer (CEO) is the highest-ranking executive of a firm. CEOs act as the company’s public face and make major corporate decisions.

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Since when is McDonald's luxury?

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Globalization is a worldwide scale of growth, an ongoing process where economies, cultures and societies are being increasingly integrated. Today, it has become a very controversial issue. Globalization has both positive and negative effects on the world. Positive effects include the reality that large scale companies that once only outsourced to western countries are now trading their goods all over the world. People can also now be connected to any part of the world due to instant internet connections, making communication faster and easier with webcams and instant chat as oppose to paper mail. Increased media coverage is also drawing attention to human rights and violation issues all over the world, which ultimately leads to a larger scale of improvement of these concerns. Negative effects of globalization show third world countries losing their local culture because of western style clothing becoming more easily and cheaply accessible. Globalization has also led to the exploitation of labour, meaning that child workers and prisoners may be working in inhumane conditions as the safety standards are ignored to produce cheap goods. The internet has its negative impacts because terrorists can communicate amongst themselves and take faster actions. There is one large issue, however, that relates to an aspect of globalization that also is the cause of many negative effects on a society. This is the growth of the western fast-food economy, especially in China. The spread of these fast-food chains is having an adverse impact on the Chinese economy and the health of the Chinese population. The number and diversity of fast-food restaurants across China has expanded at an increasingly fast rate, and if it continues then the negative trends we are seeing now will only get worse. (Pillai, 2010).

The western fast-food industry in China was nonexistent just a few decades ago, leaving China limited to only a few fast-food choices. These choices were those amongst traditional Chinese restaurants, street side wonton, pulled noodle and tea egg merchants, and small fast food vendors in five-star hotels. The two largest fast-food industries; McDonalds and Kentucky Fried Chicken (KFC), have been heavily introduced into the Chinese society and continue to move into as many regions in China as possible. The first KFC opened in Beijing in 1982 to a 50-meter long line of customers. Even though KFC foods were not affordable to most of the Chinese population at that time, sales on opening day still managed to exceed the company's expectations due to the major attraction that this Western chain had on the Chinese (PseudoPoetic, 2010). The success of this first store laid the foundations to the expansion of KFC and the penetration of the Chinese market due to expansion of well-known Western fast food chains. Three years after KFC's grand opening in China, the first McDonalds opened, also with the constraint of overly high prices for the average Chinese person. However, the expensive price worked in McDonalds' favour because it was considered a luxury. Chinese people made an event out of eating at McDonalds, to the extent that some families even held wedding banquets in these fast food chains. This image was depicted to the Chinese population as being desirable and unique. China currently has 326 McDonald locations; ranking 9 th in countries with the most McDonalds, and KFC has 3,400 locations in China, meaning that 20% of the world's KFC restaurants are located in China alone (Goodman, 2004).

The escalating western fast-food industry in China is linked to changing aspects of the Chinese society, including shifting eating habits, large impacts on the Chinese economy, as well as how Chinese engage with the globalization of the western fast-food industry shaping China into a more modernized country. The dominance of the western fast-food industry interrelates with the Chinese culture in a way that is even making fast food viewed as more a product of China rather than the west.

Obesity is a medical condition that is currently becoming a bigger issue in China due to the expansion of easy accessibility to fast-food restaurants. The Chinese population is becoming progressively more overweight and the largest blame is being put on the intake of western style fast-foods and the adoption of the "simple and fast" middle-class western lifestyle. Chinese culinary traditions and cultural food has always been recognized as a rice and vegetable diet, along with various sauces, spices and flavourings. To the Chinese, food is a symbol of health, luck and prosperity. A Chinese quote states that "heaven loves the man who eats well"; meaning that sticking to the healthy diet of rice and vegetables is very important to the Chinese culture (Chinese Cuisine, 2006). However, with the plan to increase the number of fast-food joints such as KFC and McDonalds in China, so will come the increase of the amount of times the Chinese population consumes these foods. Eating out more often has begun to take away from the healthier alternative like home cooked meals, and will also ultimately contribute to mass weight gain. Obesity in China is not only resulting in the country to have a 'fatter' reputation, but is also having a huge negative impact on the Chinese economy. With the increased number of overweight people comes the greater demand for treatment and health care. Citizens may not understand the salient point that unlike communicable diseases such as tuberculosis, which can effectively be cured within six months, diabetes mellitus, which is caused by over-consumption of fast foods, requires lifelong treatment, and can ultimately lead to death (Hannily, 2009).

Chinese people are already eating less vegetables and more meat in their diet. The China National Nutrition and Health Survey compared data between 1982 and 2002 to show that the intake of fruits and vegetables in China has decreased drastically from 276.2g to 45g. In that same time frame, the intake of meat and dairy has more than doubled. Fast-food was found to be the main reason for this, because prior to 1982 the market for cheese in China was non-existent. The Chinese population did not like the taste of it and did not use it in their Chinese cultural diet. (China National Nutrition and Health Survey, n.d). However, with the globalization of fast-food in China, and franchises containing cheese-burgers, pizza, chicken burgers with cheese, and poutine, the cheese market is now growing and stocked in Chinese grocery stores.

The most affected demographic of the obesity epidemic in China are rich, young, and educated consumer groups living in urban settings. This market has the highest chance of being attracted to the westernized lifestyle because they can afford this so called 'luxury'. Another major factor that contributes to the more obese generation is the 'one-child policy' in China. Since Chinese families are only allowed to have one child due to overpopulation, the immediate parents, grandparents, and great grandparents will be more obligated to spoil and pamper that child with the fast-food luxury. Food that would normally be divided amongst siblings is now enjoyed by just one child. Instead of taking a larger family with more children out for fast-food on just special occasions, they can afford to take their only child out for fast-food on a more regular basis. Chinese consumers need to be aware of excessive consumption and the negative effects it has on the future generation as well as the Chinese society as a whole.

Another major concern that is caused by this globalization of fast-food is the decrease of its' opposite: slow-food. Slow-food is the movement that describes the traditional and cultural cuisine, and encourages farming of plants, seeds, and livestock to supply a society with food. It is the idea that sustainable food production and consumption enhances the economic, environmental and social health of a certain region. However, it is clear that this epidemic is having the opposite effect on China. China's cuisine is progressively being altered by the increase of the consumption of fast-food. According to a survey conducted in 2004 by ACNeilson, a marketing firm, China is now even more likely to order fast-food meals than Americans. The results show that 97% of the Chinese population are eating fast-food, 41% of them consume it at least once a week in comparison to 35% in America. By comparison, the survey also showed that only 11% of people in Europe order fast-food weekly (Psudopoetic, 2010).

Fast-food corporations (such as Pepsico Restaurants International) are studying globalization and how they can most effectively make the Chinese population adapt to it. This includes aggressive marketing campaigns and studies on their target market to better meet the consumer's needs and wants. For example, KFC is highly popular in China because of its featured fried chicken, all flavoured either spicy or mild. This is because Chinese local tastes heavily include fried chicken items and spicy food items. KFC just provides a more modern atmosphere and edge to the Chinese cultural menu. McDonalds on the other hand, is popular in China for the unique western taste of fast-food French fries, with more specialized ingredients such as ketchup and sweet and sour sauce. The western lifestyle is admired by the majority of the Chinese population. They are eager to learn the advanced western technologies, such as internet, and the media also depicts the western lifestyle as having many opportunities, including professional athletes and high education. Fast-food industries such as McDonalds use the globalization of western lifestyles through the media to their advantage. For example, the Chinese basketball icon, Yao Ming, is used on many advertisements for McDonalds', showing the image of a westernized Chinese man who is eating McDonalds (Zeng, 2004).

Fast-food advertising in China can be classified into four groups in regards to how the Chinese population adapts to this globalization: social status, romance, traditional customs/values, and the happiness of children and youth. The social status type of advertising promotes fast-food restaurants as a lifestyle for the middle-class society, for modern people and workers who can enjoy the luxury of relaxing in a clean fast-food environment. Examples of these advertisements in China include the image of a Chinese man in a business suit starting off his day with a McDonald's meal and a smile, along with the slogan: "a relaxing morning starts with McDonalds." Fast-food restaurants also ensure that they can be seen as an ideal place for couples, with double-seat tables. The latest advertisement in Hong Kong also represents this image with a married couple, where the wife is surprised by her husband with a box of McDonalds fries, and the couple enjoys them happily. Fast-food corporations also include the traditional Chinese customs and values to appeal to the population and make their business more acceptable to their cultures. For example, advertisements as well as the decor of the restaurants will resemble China with the Spring Festival celebration, good wishes at the beginning of the New Year, the art of Chinese calligraphy, as well as the moral to respect elders (Zeng, 2004).

In China, the only-children become the center of the family whose wishes are always first to be fulfilled and parents will try every way to satisfy them. Children are the largest market for fast-food restaurants because they are exposed to many fast-food advertisements such as McDonalds with lively colors, cartoon characters, and recognizable symbols such as the big "M". Children and youth are also attached to brand names because they are in the stage of trying to 'fit in' with popular trends. With children and youth being the largest market for the fast-food industry, the businesses are placing more and more locations near schools giving them more control over the decisions of youth than adults. In China, fast-food businesses also employ mostly youth, attracting them with under-the-counter means (Goodman, 2004). This gives them the opportunity to eat there more often and thus this large market will have a big impact on the overall health of youth in China. The Chinese society is attracted to these western fast-food restaurants because they bring a new and different, more modern eating experience in midst of some of the most unhygienic and frenetic countries in the world for fast-food restaurants.

The booming trend of western fast-food in China is related to the economy. With western fast-food eateries considered a luxury in China, citizens will resort to something cheaper in the event of a bad economy. With a weakening economy, Chinese fast-food operators will gain the business of the western customers because western franchises will become unaffordable to them. Overall sales numbers will fluctuate in different economic times and the more western fast-food restaurants that China is expecting; the more they will have an impact on the overall Chinese economy.

The lives of Chinese people are shaping due to the globalization of western fast-food restaurants because they are experiencing the issue in American to be a foretaste of what is happening to them. Obesity and health related issues are becoming a serious problem due to this expansion, but the issue is occurring so fast and to such a large extent that the Chinese have no choice but to engage with the western lifestyle. The changes that are can be blamed on the globalization of western fast-food industries in China. With open communication to the country, the Chinese government allows for this globalization to occur, and by purchasing western products, the population are allowing the changes to their cultural identity. Together, the western and Chinese cultures are interacting more and more every day to create a modern and globalized China.
References
Cheng, T. "Fast Food and Obesity in China ." Journal of the American College of Cardiology. 2003. <http://content.onlinejacc.org/cgi/content/full/42/4/773>.

"China Health and Nutrition Survey - UNC Carolina Population Center." UNC Carolina Population Center. <http://www.cpc.unc.edu/projects/china>.

"Chinese Cuisine: Chinese Cuisine Restaurants in Mumbai at Hotel Regal Enclave." Mumbai Hotels: Hotels in Mumbai India at Discount by Hotel Regal Enclave. March 31, 3006. <http://www.regalenclave.com/chinese.htm>.

Goodman, P. "Fast Food Takes a Bite Out of Chinese Culture (washingtonpost.com)." Washington Post - Politics, National, World & D.C. Area News and Headlines - Washingtonpost.com. December 26, 2004. <http://www.washingtonpost.com/wp-dyn/articles/A25868-2004Dec25_2.html>.

Hannily, Harvey. "SBMJ | Obesity in the Developing World." SBMJ | The International Resource for Students on the Medical World. 2009. <http://archive.student.bmj.com/issues/09/01/life/14.php>.

Pillai, Prabhakar. "Negative Effects of Globalization." Buzzle Web Portal: Intelligent Life on the Web 2010. <http://www.buzzle.com/articles/negative-effects-of-globalization.html>.

PseudoPoetic . "Fast Food in China: Modernization Through Western Fast Food Chains." Anime and Manga Portal - TheOtaku.com. February 18, 2010. <http://www.theotaku.com/worlds/thewritingpad/view/151060/fast_food_in_china:_modernization_through_western_fast_food_chains/>.

Zeng, L. "OPEN TIMES." 3 rd Issue. 2004. <http://www.opentimes.cn/eng/Selected/2009/10-19.htm>.

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Globalization is a worldwide scale of growth, an ongoing process where economies, cultures and societies are being increasingly integrated. Today, it has become a very controversial issue. Globalization has both positive and negative effects on the world. Positive effects include the reality that large scale companies that once only outsourced to western countries are now...

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Future of trade

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The North American Free Trade Agreement (NAFTA) was a three-country accord negotiated by the governments of Canada, Mexico, and the United States that entered into force in January 1994. NAFTA eliminated most tariffs on products traded between the three countries, with a major focus on liberalizing trade in agriculture, textiles, and automobile manufacturing. The deal also sought to protect intellectual property, establish dispute resolution mechanisms, and, through side agreements, implement labor and environmental safeguards.

NAFTA fundamentally reshaped North American economic relations, driving unprecedented integration between the developed economies of Canada and the United States and Mexico's developing one. In the United States, NAFTA originally enjoyed bipartisan backing; it was negotiated by Republican President George H.W. Bush, passed by a Democratic-controlled Congress, and was implemented under Democratic President Bill Clinton. Regional trade tripled under the agreement, and cross-border investment among the three countries also grew significantly.

Yet NAFTA was a perennial target in the broader debate over free trade. President Donald J. Trump says it undermined U.S. jobs and manufacturing, and in December 2019, his administration completed an updated version of the pact with Canada and Mexico, now known as the U.S.-Mexico-Canada Agreement (USMCA). The USMCA won broad bipartisan support on Capitol Hill and entered into force on July 1, 2020.

How did NAFTA fit into the broader debate over trade policy?

When negotiations for NAFTA began in 1991, the goal for all three countries was the integration of Mexico with the developed, high-wage economies of the United States and Canada. The hope was that freer trade would bring stronger and steadier economic growth to Mexico, by providing new jobs and opportunities for its growing workforce and discouraging illegal migration. For the United States and Canada, Mexico was seen both as a promising market for exports and as a lower-cost investment location that could enhance the competitiveness of U.S. and Canadian companies.

The United States had already completed a free trade agreement (FTA) with Canada in 1988, but the addition of a less-developed country such as Mexico was unprecedented. Opponents of NAFTA seized on the wage differentials with Mexico, which had a per capita income just 30 percent [PDF] that of the United States. U.S. presidential candidate Ross Perot argued in 1992 that trade liberalization would lead to a "giant sucking sound" of U.S. jobs fleeing across the border. Supporters such as Presidents Bush and Clinton countered that the agreement would create hundreds of thousands of new jobs a year, while Mexican President Carlos Salinas de Gortari saw it as an opportunity to modernize the Mexican economy so that it would " export goods, not people."

NAFTA's goal was the integration of Mexico with the developed economies of the United States and Canada.

NAFTA also ushered in a new era of FTAs, which proliferated as the World Trade Organization's (WTO) global trade talks stagnated, and it pioneered the incorporation of labor and environmental provisions, which have become progressively more comprehensive [PDF] in subsequent FTAs. The USMCA achieved stronger enforcement mechanisms for labor provisions than the original deal, leading the AFL-CIO, the largest collection of U.S. labor unions, to support the pact-a rare endorsement from a group that heavily criticized NAFTA.

Economists largely agree that NAFTA benefited North America's economies. Regional trade increased sharply [PDF] over the treaty's first two decades, from roughly $290 billion in 1993 to more than $1.1 trillion in 2016. Cross-border investment also surged, with U.S. foreign direct investment (FDI) stock in Mexico increasing in that period from $15 billion to more than $100 billion. But experts also say that it has proven difficult to tease out the deal's direct effects from other factors, including rapid technological change and expanded trade with countries such as China. Meanwhile, debate persists regarding NAFTA's effect on employment and wages. Some workers and industries faced painful disruptions as they lost market share due to increased competition, while others gained from the new market opportunities that were created.

How did NAFTA affect the U.S. economy?

In the years since NAFTA, trade between the United States and its North American neighbors more than tripled, growing more rapidly than U.S. trade with the rest of the world. Canada and Mexico are the two largest destinations for U.S. exports, accounting for more than one-third of the total. Most estimates conclude [PDF] that the deal increased U.S. gross domestic product (GDP) by less than 0.5 percent, an addition of up to $80 billion to the U.S. economy upon full implementation, or several billion dollars of added growth per year.

Such upsides of trade often escape notice, because although the costs are highly concentrated in specific industries such as auto manufacturing, the benefits of a deal such as NAFTA are distributed widely across society. NAFTA supporters estimate that some fourteen million U.S. jobs rely on trade with Canada or Mexico, and that the nearly two hundred thousand export-related jobs created annually by the pact pay 15 to 20 percent more on average than the jobs that were lost.

On the other hand, critics of the deal argue that it was to blame for job losses and wage stagnation in the United States, driven by low-wage competition, companies moving production to Mexico to lower costs, and a widening trade deficit. The Center for Economic and Policy Research's (CEPR) Dean Baker and the Economic Policy Institute's Robert Scott argue that the surge of imports after NAFTA caused a loss of up to six hundred thousand U.S. jobs over two decades, though they admit that some of this import growth would likely have happened even without NAFTA.

Many workers and labor leaders blame trade agreements such as NAFTA for the decline in U.S. manufacturing jobs. The U.S. auto sector lost some 350,000 jobs since 1994-a third of the industry-while Mexican auto sector employment spiked from 120,000 to 550,000 workers.

But other economists, including Gary Clyde Hufbauer and Cathleen Cimino-Isaacs of the Peterson Institute for International Economics (PIIE), have emphasized that increased trade produces overall gains for the U.S. economy. Some jobs are lost due to imports, but others are created, and consumers benefit significantly from falling prices and often improved quality of goods. Their 2014 PIIE study of NAFTA's effects found a net loss of about fifteen thousand jobs per year due to the pact-but gains of roughly $450,000 for each job lost, in the form of higher productivity and lower consumer prices.

Additionally, many economists assert that the recent troubles of U.S. manufacturing have little to do with NAFTA, arguing that domestic manufacturing was under stress decades before the treaty. Research by David Autor, David Dorn, and Gordon Hanson published in 2016 [PDF] found that competition with China has had a much bigger negative impact on U.S. jobs since 2001, when China joined the WTO. Hanson, an economist and trade expert at the University of California, San Diego (UCSD), says that the steepest decline in manufacturing jobs-seventeen million to eleven million between 2000 and 2010-is mostly attributable to trade with China and underlying technological changes. "China is at the top of the list in terms of the employment impacts that we found since 2000, with technology second, and NAFTA far less important," he says.

In fact, NAFTA helped the U.S. auto sector compete with China, says Hanson. By contributing to the development of cross-border supply chains, NAFTA lowered costs, increased productivity, and improved U.S. competitiveness. This meant shedding some jobs in the United States as positions moved to Mexico, he says, but without the pact, even more could have been lost. "Because Mexico is so close, you can have a regional industry cluster where goods can go back and forth. The manufacturing industries in the three countries can be very integrated," Hanson says. These linkages, which have given U.S. automakers an advantage over China, would be much more difficult to achieve without NAFTA's tariff reductions and protections for intellectual property.

CFR's Edward Alden says that anxiety over trade deals has grown because wages haven't kept pace with labor productivity while income inequality has risen. To some extent, he says, trade deals have hastened the pace of these changes in that they have "reinforced the globalization of the American economy."

How did it affect the Mexican economy?

NAFTA boosted Mexican farm exports to the United States, which have tripled since the pact's implementation. Hundreds of thousands of auto manufacturing jobs have also been created in the country, and most studies have found [PDF] that the agreement increased productivity and lowered consumer prices in Mexico.

The pact catalyzed Mexico's transition from one of the world's most protectionist economies to one of the most open to trade. Mexico had reduced many of its trade barriers upon joining the General Agreement on Tariffs and Trade (GATT), the precursor to the WTO, in 1986, but still had a pre-NAFTA average tariff level [PDF] of 10 percent.

Mexican policymakers saw NAFTA as an opportunity to both accelerate and lock in these hard-won reforms of the Mexican economy. In addition to liberalizing trade, Mexico's leaders reduced public debt, introduced a balanced-budget rule, stabilized inflation, and built up the country's foreign reserves. So although Mexico was hard hit [PDF] by the 2008 financial crisis due to its dependence on exports to the U.S. market-the next year, Mexican exports to the United States fell 17 percent and its economy contracted by over 6 percent-its economy bounced back relatively quickly, returning to growth in 2010.

But Mexico's NAFTA experience suffered from disparities between the promises of some of its supporters-that the pact would deliver rapid growth, raise wages, and reduce emigration-and the deal's outcomes. Between 1993 and 2013, a period when Latin America was undergoing a major economic expansion, Mexico's economy grew at an average rate of just 1.3 percent yearly. Poverty remains at the same levels as in 1994. And the expected convergence of U.S. and Mexican wages didn't happen, with Mexico's per capita income rising at an average of just 1.2 percent annually in that period-far slower than Latin American countries such as Brazil, Chile, and Peru.

Unemployment also rose, which some economists have blamed on NAFTA for exposing Mexican farmers, especially corn producers, to competition from heavily subsidized U.S. agriculture. A study led by CEPR economist Mark Weisbrot estimated that NAFTA put almost two million small-scale Mexican farmers [PDF] out of work, in turn driving illegal migration to the United States. (Migration to the United States, both legal and illegal, more than doubled after 1994, peaking in 2007. The flow reversed after 2008, as more Mexican-born immigrants began leaving the United States than arriving.)

Many analysts explain these divergent outcomes by pointing to the " two-speed" nature of Mexico's economy, in which NAFTA drove the growth of foreign investment, high-tech manufacturing, and rising wages in the industrial north, while the largely agrarian south remained detached from this new economy. University of Pennsylvania economist Mauro Guillen has argued that Mexico's rising inequality stemmed from NAFTA-oriented workers in the north gaining much higher wages from trade-related activity.

Ultimately, many experts say, Mexico's recent economic performance has been affected by non-NAFTA factors. The 1994 devaluation of the peso drove Mexican exports, while competition with China's low-cost manufacturing sector [PDF] likely depressed growth. Unrelated public policies, such as land reform, made it easier for farmers to sell their land and emigrate. UCSD's Hanson has argued [PDF] that Mexico's struggles have largely domestic causes: poorly developed credit markets, a large and low-productivity informal sector, and dysfunctional regulation.

What was the impact on Canada?

Canada saw strong gains in cross-border investment in the NAFTA era: Since 1993, U.S. and Mexican investments in Canada have tripled. U.S. investment, which accounts for more than half of Canada's FDI stock, grew from [PDF] $70 billion in 1993 to more than $368 billion in 2013.

However, the most consequential aspect for Canada-opening its economy to the United States, by far Canada's largest trading partner-predated NAFTA, with 1989 entry into force of the Canada-U.S. Free Trade Agreement (CUSFTA). Overall Canada-U.S. trade increased rapidly in the wake of Canada's trade liberalization. Post-NAFTA, Canadian exports to the United States grew from [PDF] $110 billion to $346 billion; imports from the United States grew by almost the same amount.

Agriculture, in particular, saw a boost. Canada is the leading importer of U.S. agricultural products, and Canadian agricultural trade with the United States has more than tripled since 1994, as did Canada's total agriculture exports to NAFTA partners.

Neither the worst fears of Canada's trade opponents-that opening to trade would gut the country's manufacturing sector-nor the highest hopes of NAFTA's advocates-that it would spark a rapid increase in productivity-came to pass. Canadian manufacturing employment held steady, but the productivity gap between the Canadian and U.S. economies wasn't closed: by 2017, Canada's labor productivity remained at 72 percent [PDF] of U.S. levels.

Overall, Canada became more dependent on trade with the United States, relying on its southern neighbor for 75 percent of its exports. Other high-income countries tend to be much more diversified, rarely relying on a single partner for more than 20 percent. U.S. presidents have long shared warm relationships with Canadian prime ministers, but Trump has not hesitated to use this dependence as leverage. In the course of USMCA talks, he threatened new tariffs on Canadian auto parts if Ottawa did not agree to trade concessions.

What's next for North American trade?

NAFTA was long a political target. In 2008, then presidential candidate Barack Obama responded to widespread trade skepticism among the Democratic base by promising to renegotiate NAFTA to include tougher labor and environmental standards. The Obama administration sought to address the issues with NAFTA in negotiations for the Trans-Pacific Partnership, a massive trade deal with eleven other countries including Canada and Mexico. The TPP was deeply unpopular-Hillary Clinton ultimately came out against the deal during her 2016 presidential run-and President Trump withdrew the United States from the TPP in one of his first acts in office.

During the 2016 presidential campaign, both Trump and Senator Bernie Sanders, an independent, criticized NAFTA for bringing U.S. job losses. After entering office, Trump opened renegotiations to get a "better deal" for the United States. Trade remains a hot-button issue, with candidates in the 2020 race divided over whether to support the USMCA.

Much of the debate among policy experts has centered on how to mitigate the negative effects of deals such as NAFTA, including whether to compensate workers who lose their jobs or provide retraining programs to help them transition to new industries. Experts say programs such as the U.S. Trade Adjustment Assistance (TAA), which helps workers pay for education or training to find new jobs, could help quell anger directed at trade liberalization.

Many economists argue that current TAA funding levels are far from sufficient to address the increase in trade-related job losses. "There are pockets that have felt lots of pain," says Hanson. "The existence of those pockets highlights our policy failures in helping regions and individuals adjust to the impact of globalization."

There are pockets that have felt lots of pain. The existence of those pockets highlights our policy failures.

Professor Gordon Hanson,

Eschewing these policy proposals, Trump instead made good on his campaign promise to renegotiate NAFTA. He used tariffs as bargaining leverage throughout the process, applying import tariffs on steel and aluminum in early 2018 and threatening to do the same with automobiles. Trump's demands included more access to Canada's highly protected dairy market, better labor protections, dispute resolution reform, and new rules for digital commerce.

In late 2019, the Trump administration won support from congressional Democrats for the USMCA after agreeing to incorporate stronger labor enforcement. In the updated pact, the parties settled on a number of changes: Rules of origin for the auto industry were tightened, requiring 75 percent of each vehicle to originate in the member countries, up from 62.5 percent; and new labor stipulations were added, requiring 40 percent of each vehicle to come from factories paying at least $16 per hour. A proposed expansion of intellectual property protections for U.S. pharmaceuticals-long a red line for U.S. trade negotiators-was sacrificed. The USMCA also significantly scales back the controversial investor-state dispute settlement mechanism, eliminating it entirely with Canada and limiting it to certain sectors with Mexico, including oil and gas and telecommunications.

As part of the deal, Canada agreed to allow more access to its dairy market and won several concessions in return. The USMCA will keep the Chapter 19 dispute panel, which Canada relies on to shield it from U.S. trade remedies. It also avoided a proposed five-year sunset clause, instead using a sixteen-year time frame with a review after six years.

In early 2020, the U.S. Congress approved the USMCA with large bipartisan majorities in both chambers, and the deal entered into force on July 1. Yet some critics have complained that the new rules of origin and minimum wage requirements are onerous and amount to government-managed trade. CFR's Alden was more sanguine, saying the administration can take credit for restoring bipartisanship to U.S. trade policy. He warns, however, that "if this new hybrid of Trumpian nationalism and Democratic progressivism is what it now takes to do trade deals with the United States, there may be very few takers."

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NAFTA and the USMCA: Weighing the Impact of North American Trade

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The North American Free Trade Agreement (NAFTA) was a three-country accord negotiated by the governments of Canada, Mexico, and the United States that entered into force in January 1994. NAFTA eliminated most tariffs on products traded between the three countries, with a major focus on liberalizing trade in agriculture, textiles, and automobile manufacturing.

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Ongoing uncertainty in the hospitality industry

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More and More people are watching

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Scandals. Fines. Show trials. These days, just doing business can appear almost criminal. While government-imposed regulation can soothe the public's ire, it can also create burdensome costs and competitive disadvantages. To survive, businesses must perform reputational due diligence and create self-policing organizational cultures.

he increased incidence of and reporting on global fraud and corruption in business has given rise to two dangerous myths about the cause and cure of business amorality.

The first is the growing public perception that greed is the foundation of all business. In the quest for profit, so the argument goes, companies inevitably will make unethical decisions that serve the bottom line at the expense of society. The proof for this proposition includes everything from layoffs to financial fraud. These, among other unpopular business actions, fuel the public's belief that the phrase business integrity is an oxymoron.

Herein lies the first misunderstanding. The public doesn't differentiate between business practices that clearly are unethical and those that are simply unpopular. For example, although layoffs can have a significant and often negative impact on people's lives, such actions aren't unscrupulous. Closing a factory or cutting back on unprofitable activities often is necessary for a business to survive or thrive. Fraud and corruption, on the other hand, undeniably are wrong. If companies fail to stamp out these practices, the public will clamor for - and likely get - more stringent levels of regulation that ultimately can constrain a business' ability to compete.

The second myth is expressed in an idealized vision of globalization - increasing global connectedness eventually will foster a pervasive global standard of business conduct. For example, the immense complexity of efforts such as harmonizing U.S. Generally Accepted Accounting Principles with International Financial Reporting Standards is considered an unavoidable step along the way toward a global standard. In addition, emerging markets are grappling with stronger local anti-corruption legislation and are conducting aggressive enforcement actions.

However, arriving at a universal standard likely is wishful thinking. All the world's cultures may never want to or even be able to adopt a universal business ethic. For instance, the giving of an expensive gift to an executive of a company to win its business may be forbidden in New York but is considered a de rigueur gesture of civility and commitment in Shanghai. The roots of this difference go further than regulations and legalities. This business practice reaches deep into culture, and, while laws can be altered easily, long-held cultural norms are famously resistant to change.

But a more potent force for improving business conduct lies in the fact that fraud and corruption can permanently damage a company's reputation - or even destroy it. And the harm affects all related businesses, tarring them with the same brush. Wall Street, for instance, has become almost synonymous with unfettered greed, and although the damage that that perception has wrought may be hard to quantify, it would be willfully blind to deny the existence of such defamation. Customer trust is important to businesses, especially to those in the financial sector. Without trust, doubt surely enters the minds of potential clients and investors. To increase public confidence in business integrity, companies need to identify and eradicate the fruits of greed: fraud and corruption.

To enhance confidence, businesses should rely less on the hard power of investigations and punishments and boost soft power initiatives that foster transparent self-policing that can lead to the restoration of public trust. If this is not done, companies may face the untenable combination of public disapprobation and potentially profit- choking regulatory demands.

Regulation: an Answer with a Burden

Capital and regulations are allergic to each other. Financial capital will flow more readily to markets that provide the greatest security with the least amount of regulation. The more a country controls its markets, the greater the odds it will lose business to countries that impose fewer regulatory demands.

This is not to say that regulations aren't needed. They set the standards and define the rules of the game for all players. However, regulations become burdensome when they go beyond defining rules to monitoring how businesses play by the rules. Publicly traded companies in the United States, for example, must spend millions to comply with regulations. Those millions don't come easily to small- and mid- cap companies. Similarly sized firms in less regulated markets have a distinct competitive advantage.

But regulations keep coming. Starting in 2014, for example, the Foreign Account Tax Compliance Act in the United States will go into effect. An attempt to curb tax evasion, the act shifts the burden of proof from regulators to foreign financial institutions. These organizations will have to provide the U.S. Internal Revenue Service (IRS) with information about their U.S. customers. If financial institutions fail to do so, the IRS will withhold 30 percent of customer wire transfers. Small and mid- size banks that can't meet the regulatory demand could lose many of their customers - which could spell the demise of some of these banks.

Businesses should take heed. The costs of regulatory compliance eventually may far exceed the costs of self-policing.

Social Media - the New Regulator

Even the most stringent regulations don't stop people from finding ways around the rules. Social media, on the other hand, is becoming a powerful policeman. In effect, social media is democratizing the regulatory role by disseminating reports of corruption, graft and other unethical practices almost instantaneously around the globe. With 24/7 interconnectedness, news of an esoteric issue in Kazakhstan, for instance, can spread as quickly as a public indictment in Chicago.

Walmart discovered this the hard way when, in 2012, The New York Times broke the story of Walmart's alleged efforts to cover up bribery in Mexico . What may have disappeared quickly if the company had addressed the problem head on became fodder for millions of blog posts and tweets. Social media gave Walmart a black eye.

Facing the pressures from social media, some companies are boosting the transparency of their compliance efforts and are publicly sharing what has been learned from stumbles. Compare the collapse of Arthur Andersen with the survival of Siemens.

Long before the Enron scandal emerged, Arthur Andersen was defending its accounting practices. Practically to the end, Andersen swore that it had looked but had discovered no wrongdoing. At the same time, the firm was hiring lawyers to prepare its defense. In 2002, Andersen was charged with criminal conduct. The firm lost the trust of its clients and folded in just a few months.

In 2006, 30 offices of the German conglomerate Siemens were raided on suspicion of bribery, embezzlement and tax evasion. Unlike Andersen, however, Siemens admitted its guilt and acknowledged the failure of its internal controls. By so doing, the company has managed to survive and continues to be on a path to regaining the trust of its stakeholders and the public. Just as important, Siemens publicized the idea that it learned from its mistakes and shared its considerable efforts to improve the company's control systems.

Soft Power on the Front Line of Defense

As a consultant for more than 20 years, I have been the hard power line of defense - going to companies to conduct audits and investigations. It may seem surprising that I'm advocating soft power as the stronger deterrent. Hard power tactics serve their purpose but only after an act of fraud or corruption has been committed. To implement effective front lines of defense, companies need to build soft power techniques that foster a self-policing culture. Entities can build that atmosphere by focusing on talent, conducting reputational due diligence and establishing a whistleblower program.
The Talent Dimension
When hiring, companies usually concentrate solely on the technical skills needed. But every executive currently behind bars presumably possessed those skills. Businesses would be wise to add another dimension to the talent equation and the hiring process: knowledge and acceptance of the laws, cultural norms and ethical standards of the regions in which candidates will be working.

For example, if a company is based in the United States and conducts business in Mexico, the company still is responsible for following the U.S. Foreign Corrupt Practices Act. When hiring to staff Mexican offices, a company should make sure those employees are thoroughly familiar with the laws in the United States. By the same token, Americans engaged to work in Mexico must understand its standards and know how to manage and reconcile those regulations with U.S. expectations.

Companies also should rethink the allocation of their compliance talent. Most assign the vast majority of compliance resources to regions where regulatory demands are the highest - usually the United States and Europe. But due to cultural norms and the transparency of the rules governing business, the risks in these regions actually are much lower than in other parts of the world. One U.S. bank, for example, has some 500 compliance officers based in the United States and five in Mexico. With this vast disparity in the division of labor, the chance of uncovering money laundering, frauds and/or bribes where the risks are highest is unlikely.
Reputational Due Diligence
The 1970 Bank Secrecy Act and 2001 USA Patriot Act require that companies know who their customers are and what they are doing. Businesses are held accountable for their customers' actions in addition to a company's own activities. To protect a reputation, companies should conduct due diligence across their value chain, vetting everyone to whom they are connected - from suppliers to clients - in all the markets in which the company operates.

Reputational due diligence should be a central corporate process that goes far beyond examining legal structures and financial statements. The process should investigate every aspect of potential partners and acquisition targets in order to assess the risk of doing business with these parties.

In many cases, companies investigate more than the financials. However, organizations often fail to ask why an ethical issue occurred or if corrective measures have been put in place to make sure the incident doesn't happen again. For instance, reputational due diligence would look at the source of funding for a new company. It also would scrutinize the company's client base and examine how the firm acquires its customers. Does the company rely heavily on a few government customers? Does it thoroughly account for petty cash? Ultimately, a reputational due diligence assesses the culture. Does the company have documented standards of ethics and compliance? Do employees know and understand these standards?
Blowing the Whistle
According to a 2010 report by the Association of Certified Fraud Examiners, most frauds are discovered through insider tips. A whistleblower program is a critical part of any internal control effort. Even the best compliance program can't prevent every attempt at fraud and misconduct. Companies must provide a means for employees to safely report - anonymously or otherwise - any unethical behavior to which they are privy. Companies cannot be a fig leaf behind which whistleblowers are ostracized or otherwise punished.

The goal is not to create a company culture of snitching. A strong whistleblower program is essential to a culture of compliance and ethical behavior. To protect that culture, whistleblowers must be held accountable for misinformation as well. Incorrectly reporting fraud can harm a company. To be effective, a whistleblower program requires employee support, proper management, oversight and training.

When a business scandal erupts, the public will clamor for more government oversight. Although regulations may help calm the waters of public opinion, as was the case after the 2008 financial crisis, there is scant evidence of real long-term effectiveness. The stakes are high. Regulatory compliance is costly and can erode a company's ability to compete. To protect a company's own reputation and the reputation of business in general, companies must assume responsibility for stamping out corruption in their own organization. The efforts taken will be far more rewarding than the alternative.

Published February 2014

© Copyright 2014. The views expressed herein are those of the author and do not necessarily represent the views of FTI Consulting, Inc. or its other professionals.

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Scandals. Fines. Show trials. These days, just doing business can appear almost criminal. While government-imposed regulation can soothe the public's ire, it can also create burdensome costs and competitive disadvantages. To survive, businesses must perform reputational due diligence and create self-policing organizational cultures.

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Wish corporations would be ethical. Especially in today's society

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Guilty As Charged. I've hired someone because of this.

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The halo effect is a type of cognitive bias in which our overall impression of a person influences how we feel and think about their character. Essentially, your overall impression of a person ("He is nice!") impacts your evaluations of that person's specific traits ("He is also smart!"). Perceptions of a single trait can carry over to how people perceive other aspects of that person.

One great example of the halo effect in action is our overall impression of celebrities. People perceive them as attractive, successful, and often likable, so people also tend to see them as intelligent, kind, and funny.

What Is the Halo Effect?

The halo effect is also sometimes referred to as the "physical attractiveness stereotype" and the "what is beautiful is also good" principle.

Physical appearance is often a major part of the halo effect. People who are considered attractive tend to be rated higher on other positive traits as well.

However, this effect doesn't just affect our perceptions of people based on their attractiveness. It can also encompass other traits as well. People who are sociable or kind, for example, may also be seen as more likable and intelligent. The halo effect makes it so that perceptions of one quality lead to biased judgments of other qualities.

The term itself uses the analogy of a halo to describe how it can affect perceptions.

When you see someone through the lens of the halo effect, you are seeing them cast in a similar light. That "halo" created by your perception of one characteristic covers them in the same way.

In religious art, a halo is often portrayed over a saint's head, bathing the individual in a heavenly light to show that that person is good.

The History of the Halo Effect

Psychologist Edward Thorndike first coined the term in a 1920 paper titled "The Constant Error in Psychological Ratings." In the experiment described in the paper, Thorndike asked commanding officers in the military to evaluate a variety of qualities in their subordinate soldiers. These characteristics included such things as leadership, physical appearance, intelligence, loyalty, and dependability.

Thorndike's goal was to determine how ratings of one quality bled over to assessments of other characteristics. He found that high ratings of a particular quality correlated to high ratings of other characteristics, while negative ratings of a specific quality also led to lower ratings of other characteristics.

"The correlations were too high and too even," Thorndike wrote. "For example, for the three raters next studied the average correlation for physique with intelligence is .31; for physique with leadership, .39; and for physique with character, .28."

So why do our overall impressions of a person create this halo that influences our evaluations of specific traits? Researchers have found that attractiveness is one factor that can play a role.﻿﻿

Several different studies have found that when we rate people as good-looking, we also tend to believe that they have positive personality traits and that they are more intelligent. One study even found that jurors were less likely to believe that attractive people were guilty of criminal behavior.

However, this attractiveness stereotype can also be a double-edged sword. Other studies have found that while people are more likely to ascribe a host of positive qualities to attractive people, they are also more likely to believe that good-looking individuals are vain, dishonest, and likely to use their attractiveness to manipulate others.

Impact of the Halo Effect

The halo effect may have an impact on a number of real-world settings.

In Education

Research has found that the halo effect may play a role in educational settings. Teachers may interact with students differently based on perceptions of attractiveness. Older research, for example, found that teachers had better expectations of kids that they rated as being more attractive.﻿﻿

Another study that looked at academic records of more than 4,500 students. A group of 28 people then rated the attractiveness of the students (based on a student ID photo) on a scale of 1 (very unattractive) to 10 (very attractive).﻿﻿ Students were then divided into three groups based on these attractiveness assessments: below-average, average, and above-average.

Researchers then compared students' grades between classes taken in a traditional face-to-face classroom setting and those taken online. Researchers found that students who were rated as above-average in appearance earned significantly lower grades in online courses than they did in their traditional classes.

The halo effect can influence how teachers treat students, but it can also impact how students perceive teachers. In one study, researchers found that when an instructor was viewed as warm and friendly, students also rated them as more attractive, appealing, and likable.

In the Workplace

There are a number of ways that the halo effect can influence perceptions of others in work settings. For example, experts suggest that the halo effect is one of the most common biases affecting performance appraisals and reviews. Supervisors may rate subordinates based on the perception of a single characteristic rather than the whole of their performance and contribution. For example, a worker's enthusiasm or positive attitude may overshadow their lack of knowledge or skill, causing co-workers to rate them more highly than their actual performance justifies.

The halo effect can also have an impact on income. A study published in the Journal of Economic Psychology found that, on average, attractive food servers earned approximately $1,200 more per year in tips than their unattractive counterparts.﻿﻿

Another study found that physical attractiveness has a positive effect not only on a person's self-confidence but also on their overall income and financial well-being.﻿﻿

Job applicants are also likely to feel the impact of the halo effect. If a prospective employer views the applicant as attractive or likable, they are more likely to also rate the individual as intelligent, competent, and qualified.

In Marketing

Marketers take advantage of the halo effect to sell products and services. When a celebrity spokesperson endorses a particular item, our positive evaluations of that individual can spread to our perceptions of the product itself.

The Reverse Halo (or Horn) Effect

As the name implies, the reverse halo effect occurs when a person judges another negatively based on only one known characteristic. That single trait colors all of the others for someone experiencing the reverse halo effect. For example, a person might assume that someone they view as unattractive is also unkind.

A Word From Verywell

So, the next time you trying to evaluate another person, whether it is deciding which political candidate to vote for or which movie to see on a Friday night, consider how your overall impressions of them might influence your evaluations of other characteristics.

Does your impression of a candidate being a good public speaker lead you to feel that they are also smart, kind, and hard-working? Does thinking that a particular actor is good-looking also lead you to think that they are a compelling actor?

Of course, being aware of the halo effect still doesn't make it easy to avoid its influence on our perceptions and decisions. The halo effect is just one of many biases that allow people to make snap decisions but also contributes to errors in judgment.

Additional Reading

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How the Halo Effect Influences the Way We Perceive Attractive People

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Learn about the halo effect, a cognitive bias that can have a powerful influence on the impressions we form of others.

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"Most of what we call management consists of making it difficult for people to get their work done."

That's a quote from Peter Drucker (1909-2005), a management consultant, educator, and author who has been called the founder of modern management.

If you're a manager, you might take offense to Drucker's comment. After all, your purpose as a manager - your mission - is to make it easier for your direct reports to get their work done. You clear obstacles out of their way. You fight political battles so they can focus on their work. You lead them.

Alternatively, as a manager, you might find Drucker's assessment of management disturbingly accurate.

Many managers are plagued by the feeling that they're aren't actually doing anything, or that they're doing less than they were doing before as individual contributors. In an effort to overcome this feeling, and to justify their existence within an organization, managers often resort to micro-managing.

They try to get their fingers in every pie their direct reports are baking.

Of course, we all know what happens when managers becomes too overbearing: Otherwise creative and diligent workers become stifled. Productivity and team morale take a nosedive. And people within the organization - from the lowest ranks to the highest - begin to wonder ...

Do we really need managers?

Prior to the Industrial Revolution, "manager" was not a job title you'd see printed on the tops of résumés.

Instead, all of the managerial duties we're familiar with today (coordinating, strategizing, allocating resources, etc.) typically fell to the owner of the enterprise in question.

Blacksmith? In addition to forging, bending, and welding metal, you also had to source the raw materials. And figure out how much to charge for your metalwares. And then you had to sell those metalwares ... all while keeping an eye on your bottom-line.

Post-Industrial Revolution, things begin to change. Mass production puts most blacksmiths (and other artisans) out of business, and a new managerial class emerges that takes over the tasks that once fell to owner/operators.

As Harvard Business School professor of leadership development, Rakesh Khurana, notes in his book From Higher Aims to Hired Hands:

"Neither owner nor worker, this new economic actor, the manager, performed work that, while not as visible and tangible as the factories built by financial capital or the tasks performed by those who labored in them, was nonetheless critical to the development of the large-scale business enterprise."

Managers would go on to absorb much of the authority that once belonged to the entrepreneurs who created businesses, and to the shareholders who funded businesses. However, gaining this authority didn't happen overnight.

As Khurana tells it:

"When salaried managers first appeared in the large corporations of the late nineteenth century, then began to proliferate, it was not obvious who they were, what they did, or why they should be entrusted with the task of running corporations."

So, how did society's view of managers go from "Eh?" all the way to "Yes, we definitely need them, and we need to pay them a boatload!"

Two words: Business. School.

In an effort to prove their worth and legitimize their authority, managers started getting buddy-buddy with academics, and together they worked on standardizing and codifying managerial practices. Soon after, "business schools" - a novel concept at the time - began popping up at colleges and universities.

Tying the new institution of management to the existing institution of higher eduction was exactly the type of social proof managers needed to ensure not only their continued existence, but also their future prosperity.

Flash forward to today, and it's easy to see how intertwined management and business school have become; or more specifically, how intertwined management and earning an MBA from a prestigious business school have become.

As Khurana notes:

"The MBA has become ... a virtual requirement for entry into the upper echelons of management in large, established corporations ... As a result, publications including BusinessWeek and the Wall Street Journal regularly trumpet their rankings of the top business schools in the country."

For the past 100+ years, society has accepted management as an integral part of business, due in large part to the legitimizing effect business school has had on the whole enterprise.

Every once in a while, however, events occur (stock market crashes, corporate scandals, etc.) that bring society's acceptance of managers into question.

Back in 2001, Peter Drucker wrote a piece for The Economist titled, " Will the corporation survive? " In it, Drucker noted that since corporations started appearing around 1870, five basic principles have applied:

1. "The corporation is the 'master', the employee is the 'servant'. Because the corporation owns the means of production ..."

2. "The great majority of employees work full-time for the corporation."

3. "The most efficient way to produce anything is to bring together under one management as many as possible of the activities needed to turn out the product."

4. "Suppliers and especially manufacturers have market power because they have information about a product or a service that the customer does not and cannot have ..."

5. "To any one particular technology pertains one and only one industry, and conversely, to any one particular industry pertains one and only one technology ..."

However, since the 1970s - a decade marked by falling profits and, as a result, a reassessment of the role of management - all five of these principles have undergone major transformations.

For starters, the corporation no longer owns the means of production. As Drucker wrote ...

"The means of production is knowledge, which is owned by knowledge workers and is highly portable ... Knowledge workers provide 'capital' just as much as does the provider of money. The two are dependent on each other. This makes the knowledge worker an equal - an associate or a partner."

Second, while many corporate employees still work full-time, the number of "part-timers, temporaries, consultants [and] contractors" is growing.

Third, the notion that integrating all of your business activities under one management is the most efficient setup "has become almost entirely invalidated."

Today, knowledge of particular business activities has become so specialized that trying to manage everything under one roof is increasingly difficult and expensive.

What's more, the rise of email and other online communication technologies has made outsourcing the management of certain business activities (e.g., manufacturing, IT, data processing, etc.) considerably easier and less expensive.

Next, while information about products and services was once kept secret from customers, customers can now easily find such information on the web.

"Whoever has the information has the power," Drucker noted. "Power is thus shifting to the customer, be it another business or the ultimate consumer."

Finally, technologies and industries have become jumbled together. There's no longer one industry for one technology, and vice versa. Instead, "the knowledge needed in a given industry [increasingly] comes out of some totally different technology with which, very often, the people in the industry are unfamiliar."

When we take into account all of these changes that Drucker has outlined, it becomes clear that workers, through their acquisition of specialized knowledge, are no longer servants to their corporate, managerial masters.

Today's workers have more mobility. They know that if a company doesn't suit them, they can take their knowledge - a portable means of production - and seek employment elsewhere.

As a result, Drucker argued the following:

"The management of knowledge workers should be based on the assumption that the corporation needs them more than they need the corporation ... they have moved several steps beyond traditional workers, who used to expect to be told what to do ... Knowledge workers, by contrast, expect to make the decisions in their own area."

And if modern workers are now capable of making their own decisions, without the need for constant managerial prompting and prodding, it begs the question ... where do managers fit in?

"Management is the least efficient activity in your organization."

That quote above is from management consultant/author Gary Hamel, who wrote an illuminating piece for the Harvard Business Review back in 2011 titled, " First, Let's Fire All the Managers."

Hamel clarifies right off the bat that the people - the human beings in management roles - aren't (usually) the problem. The problem, instead, is the "top-heavy management model" that many companies adhere to.

According to Hamel, there are four major flaws with this traditional model.

First: Managers are expensive. Really expensive.

"A small organization may have one manager and 10 employees; one with 100,000 employees and the same 1:10 span of control will have 11,111 managers. That's because an additional 1,111 managers will be needed to manage the managers ... Assuming that each manager earns three times the average salary of a first-level employee, direct management costs would account for 33% of the payroll."

Second: Managers have too much decision making power.

"As decisions get bigger, the ranks of those able to challenge the decision maker get smaller ... Give someone monarchlike authority, and sooner or later there will be a royal screwup."

A related decision making issue that Hamel mentions: top-level managers are usually the furthest from what's actually happening on the front lines (e.g., they're not the ones interacting with customers). And that means many managers don't have the nuanced insights they need to make good decisions.

"All too often, decisions made on an Olympian peak prove to be unworkable on the ground."

Third: More approval layers = slower responses.

"In their eagerness to exercise authority, managers often impede, rather than expedite, decision making."

Fourth (and finally): The hierarchal structure empowers managers, but disempowers workers. Hamel calls this the "cost of tyranny."

"Narrow an individual's scope of authority, and you shrink the incentive to dream, imagine, and contribute."

One other issue that Hamel mentions is the concept of "managing up," which asserts that workers should actively manage their managers in order to help them do a better job.

If this sounds sort of ... hmmm, how do I phrase this ... wicked stupid (yep, that works), that's because it is.

Think about it for a second: managers get paid to manage people. Many of them even go to expensive business schools so they can learn how to manage people. So why should direct reports be on the hook for making sure their managers - their superiors - do a good job?

To be fair, it is a direct report's responsibility to communicate with management and to voice concerns if and when they arise. But there's a difference between helping managers do their jobs and doing their jobs for them.

Remember: the traditional, hierarchal org structure is inherently top-down. If we really want to give people at the bottom of the totem pole the ability to "manage up," we need to give them more authority.

And that's exactly what Holacracy proposes we do.

While it was officially codified by developer/entrepreneur Brian Robertson back in 2007, the underlying principles of Holacracy have been around for decades. Those principles are:

There is no management hierarchy. Instead, the authority within an organization is distributed across teams and roles.

Teams are self-organizing and make decisions based on consensus.

Roles are based on the work that needs to be done and can be updated regularly.

Employees can have multiple roles, and aren't tied to single jobs with rigid job descriptions.

At this point, a lot of you are probably rolling your eyes and thinking, "Yeah, yeah, yeah ... this sounds nice in theory, but it would never work in the real world. Without managers, everything would fall into chaos."

And, in some cases, that's definitely happened.

Buffer is perhaps the most infamous example. In the fall of 2014, Buffer switched over to a "fully self-managed, self-organized team" that boasted no managers or bosses.

A year later, that structure has been abandoned.

As Buffer co-founder and COO Leo Widrich wrote in an article for Fast Company, under their managerless model ...

"People were easily lost, especially those that had just joined Buffer. More experienced people often didn't quite see a place to help out and share ideas around which direction a project could take ... the amount of freedom people had, with absolutely no guidance, expectations, or accountability, was pretty overwhelming."

Of course, we can easily counter this negative example with a positive one.

Take the California-based agency Phelps, which has been successfully using a flat, managerless org structure for more than 30 years.

Here's what the agency's founder and CEO, Joe Phelps, told my colleague in a recent interview:

"The problem has been that organizations stay organized like they are in the military or in the Industrial Revolution. All these top-down, commandment-control, assembly-line type processes don't work with knowledge workers nowadays."

A more high-profile example of a company deciding to go managerless: Zappos.

In March of 2015, Zappos CEO Tony Hsieh sent a company-wide email that gave employees two choices: adopt Holacracy, or get out.

Ultimately, 210 employees - about 14% of the Zappos workforce - opted to leave the company. Only 20 of them were managers, according to a story in The New Republic.

Post-exodus, it's hard to know for sure if the managerless model is working at Zappos. Although most early reports, including the New Republic story I cited above, indicate that many employees are still confused (if not outright angry) about the recent changes.

Holacracy, while Utopian in theory, undoubtedly comes with its own set of disadvantages.

The absence of management, for example, means that workers need to hold each other accountable. When faced with underperforming colleagues or asshole teammates, it's on the workers to confront those folks and get them in line.

As Hamel notes, "If employees shirk that duty and fail to deliver tough love when needed, self-management can quickly become a conspiracy of mediocrity."

According to Gallup research, only 1 in 10 people possess the talent required to manage other people.

Gallup's report clarifies that while lots of people have some of the traits required for being good managers, "few have the unique combination of talent needed to help a team achieve the kind of excellence that significantly improves a company's performance."

So, if your organization is suffering from stifled innovation, lagging productivity, or a workforce that seems more like a herd of corporate drones than a team of free-thinking individuals, the solution might not be a re-org. The solution might be investing in some better managers.

The best managers, after all, are already doing what Holacracy seeks to accomplish: They're giving their direct reports more decision-making power, they're finding roles and projects for their direct reports that they know those reports will find interesting and rewarding, and they're being more transparent about what's happening at the highest levels of the organization.

If you're a manager who is not currently embracing those philosophies ... you might want to reconsider your approach to management.

Your job - and your entire profession - could be at stake.

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"Most of what we call management consists of making it difficult for people to get their work done." That's a quote from Peter Drucker (1909-2005), a management consultant, educator, and author who has been called the founder of modern management. If you're a manager, you might take offense to Drucker's comment.

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Knowing where it came from can help us in the future

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The industrial revolution sparked great debate about management theory. It's a key turning point in the history of management. These are six of the leading theories that appeared after this event.
Why is this relevant to modern management?

Frederick Winslow Taylor - Scientific Management Theory

Frederick Winslow Taylor was one of the earliest proponents of management theory. A mechanical engineer, he authored The Principles of Scientific Management in 1909.

This was especially the case in the factories that rose out of the industrial revolution. Managers had almost no contact with employees. Instead, they issued orders and expected employees to get on with the work. There was no standardisation or science behind it. This, Taylor argued, led to unproductive workers.

He espoused fair pay for a fair day's work. This mantra focused on employee productivity. If one worker produced less than another, they did not deserve equal pay. Taylor argued for the creation of scientific methods. These would make production as efficient as possible. This gave more responsibility to employees. They all had the same methods available, so the less productive had nothing to hide behind.

Taylor also created four principles of management as part of his work. These are:

1. Use scientific methods to determine the most efficient way to complete a task.

2. Monitor employees to determine performance. This involves offering guidance to those that aren't as efficient as needed.

3. Assign employees to work that suits their skills and motivation levels. Then, coach them to reach maximum efficiency.

4. Managers must focus on planning and professional improvement. Employees must focus on the tasks given to them.

Henri Fayol - Administrative Management Theory

Also active during the same time as Taylor was Henri Fayol. Having started his career at a French mining company at the age of 19, Fayol rose up the ranks. In time, he became the company's director, managing over 1,000 people.

Henri Fayol went 10 better than Taylor when he published Administration Industrielle et Générale . He created 14 principles of management . However, most of these focused on the administrative side of management. We've covered his principles in depth .

Fayol developed his 14 principles while working in his directorship. As a result, they came from the direct experience of a man who had been there and done it all.

He argued that many managers didn't interact well with their employees. In this, he agreed with Taylor. But Fayol's principles focused less on science. Instead, he looked at how to create an efficient company structure.

He argued for employee specialisation and a focus on organisational interests. Fayol also believed that all employees should only have one direct manager.

Fayol's book became one of the key leadership tools in the history of management . Even today, his 14 principles of management agree with most modern organisation's aims.

Max Weber - Bureaucratic Management Theory

Weber and Taylor differed in a key area. Weber realised that Taylor's scientific theory did not account for emotions. He argued that the rise of technology could lead to a toxic workplace culture. He differs from many management theorists because of this focus on the negatives. Too much change can affect morale.

Weber's bureaucratic theory argues for the following:

Detailed record-keeping at all levels of an organisation.

Employees must have clear job roles so they maintain their focus.

All organisations should have clear hierarchies.

The standardisation of common procedures.

Organisations must only hire employees who are fit for the job in question.

With this last point, Weber touched on an important aspect of modern business. Hiring for fit, he believed, involved searching for employees with the correct skills.

We now know much more about hiring practices. Hiring based on skill alone does not account for a company's culture. If a new employee's personality does not fit your culture, they rarely succeed.

As such, modern management theory has taken Weber's ideas a step further. Still, his work created another important stepping stone to today's management principles.

Professor Elton Mayo - Human Relations Management Theory

Elton Mayo's Studies added a new wrinkle. For five years, Mayo studied employees at Chicago's Western Electric Hawthorne Works. He placed his focus on workplace conditions, and how they affected productivity.

His study found that relationships work as a key motivator for employees. When working as part of a team, people become more productive. The improvement was so marked that it became known as "The Hawthorne Effect".

Mayo's work laid the foundations for the focus on teamwork that today's management theories have. He was the first to prove that the right people in the right teams leads to higher productivity.

Ludwig von Bertalanffy - General System Theory

A biologist, Ludwig von Bertalanffy wasn't a management theorist. In fact, his general theory related more to biology than management. Even so, his work in the 1940s proved instrumental in the history of management .

He argued that all systems are the sums of their parts. In biology, you can look at your own body for an example of this. Your organs, muscles, and bones all combine, along with everything else in your body, to make a whole. One organ or muscle on its own is not productive. But the right combination leads to an efficient body.

You may already see how this applies to management theory. Ludwig von Bertalanffy's General System has relevance in the workplace too. Most organisations contain several departments. Each of these departments has people, all of whom have their own jobs. If one department doesn't carry its weight, the organisation suffers. In some cases, even one person failing to do their job properly can have widespread ramifications.

Beyond this, he also argued that each element in a system reacts to its environment. Outside influences can affect how a system operates. You could argue that this relates to toxicity in the workplace. It also places an emphasis on how personal issues can affect an employee's motivation levels.

Though a biological theory at first, general system theory applies to so much more. In fact, it's at the root of many modern managerial theories.

Douglas McGregor - X & Y Management Theory

In 1960, Douglas McGregor built on the teamwork-related ideas in the Hawthorne Studies. He published The Human Side of Enterprise to make his points. In that book, McGregor presents two types of management: Theory X and Theory Y.

Theory X relates to authoritarianism. Such managers take a negative view of their employers. They assume their people have no motivation and won't work well unless pushed. This leads to the leader taking too much control, often micromanaging projects. In such an organisation, productivity plays a huge role. If an employee doesn't reach a certain "quota", they don't receive their rewards. It also assumes that employees have no ambition of their own. Theory X managers believe they must drag employees along to get results.

Theory Y built more directly from Mayo's studies. Such managers take a much more positive approach to their people. They believe that teamwork leads to better results. Furthermore, Theory Y managers encourage professional development and give employees more responsibilities. They want to see initiative, which builds a positive workplace culture.

McGregor argued that Theory Y is the better choice of the two. Modern management bears his claims out as well. Though authoritarianism still exists, most don't see it as the way to develop a healthy organisation. Theory Y forms the basis of most modern management theories.

The Final Word

Here are the key takeaways:

Modern management involves looking for more efficient processes.

Teamwork plays a crucial role in employee motivation.

All parts of an organisation must work in harmony to achieve the collective goal.

Remember that a great manager can DOUBLE the capacity of their people.

Register for our next webinar to learn more about engaging your employees.

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Where it All Began: The Origin of Management Theory | Great Managers

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The industrial revolution sparked great debate about management theory. It's a key turning point in the history of management. Though these concepts evolve, they're still relevant in the modern age. Here are 6 theories that form the basis of modern management today.

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I've had bad managers and really great. I'm striving to be the best manager I can.

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All it takes to be a leader, in name at least, is to hold the However, this is a very simplified definition for a what a leader should be, let alone what a dominant position in a group, organization or location. great leader is. Because the measure of a great leader has much less to do with how you define their role and more about their actual impact on others.

Our data shows that leaders, through supportive management, make a huge difference in the overall experience people have within an organization. In fact, the companies that ranked best on kununu (by their own employees) tend to have significantly better management scores than those that performed worse - in other words, companies that fared well had much better leaders:

Among highest rated companies on kununu (4 stars or higher), the average rating for "support from management" is 4.52 stars.

Among lowest rated companies on kununu (2 stars or less), the average rating for "support from management" is 1.22 stars.

What Great Leaders Have In Common

I could spend forever discussing what does and doesn't make up a great leader and why that matters for business success, but for now I want to focus on the biggest commonalities among great leaders. More specifically - what qualities must a leader possess to be great?

The first ones that immediately come to my own mind are transparency, empathy, and open-mindedness, mainly because they happen to be a few of the cornerstones of kununu's own values. These qualities have not only driven our company's success as a global brand over the past decade, but also our individual leaders' abilities to continuously inspire us as a team.

To go beyond my own bubble though and get deeper into this topic, I researched a handful of CEOs and business leaders to tell me in their own words and experiences (in about 3 sentences or less) what they consider to be the top quality of a great leader. Below is what I found out.

1. Resilience

"People are afraid, and when people are afraid, when their pie is shrinking, they look for somebody to hate. They look for somebody to blame. And a real leader speaks to anxiety and to fear and allays those fears, assuages anxiety."
-Henry Louis Gates, former leader of the African and American Research Institute at Harvard University
"There's so much change afoot in the workplace today and when change occurs, individuals who have resilience generally are also resourceful and agile. They have the ability to take on change and adapt to what's happening around them and to them as the workplace changes. Individuals who have resilience/grit are able to take good risks and are open to change."
-Kimberly Rath, Chairman & Co-Founder of Talent Plus, Inc
2. Transparency

"To be a good leader, you have to be a good communicator. As a leader, you have to communicate your intent every chance you get, and if you fail to do that, you will pay the consequences."
-William McRaven, former Admiral of the United States Navy
"Great leaders have the uncanny ability of not letting rumors spread by being open and transparent and embracing solutions not problems. If an employee is frustrated with customer, they make you put that negative energy into coming up with a solution. If coworkers have a rift, rather than nurturing the gossip the leader makes you get over it and fix the issue."

-Kevin Sides, CMO of ShipMonk

"Great leaders know that one of the quickest ways to get employee feedback and earn the trust of your employees is by being transparent. I'm a firm believer of open information sharing and as a CEO you must lead by example. It lets your staff find applicable solutions and it builds solid relationships that increase the overall motivation."
-Hendrik Klindworth, Co-Founder & CEO of InnoGames
"Being transparent is the most important trait of an effective leader. Especially when it comes to working with millennials and the younger workforce, it is important for them to understand the big picture. That is, you shouldn't just ask (or tell) them to do something without explaining how this task or function integrates within the larger business initiative. When they are able to see the connection, they often feel much more empowered and motivated to do a better job."
-Matt Edstrom, Head of Marketing of BioClarity
3. Emotional Intelligence (EQ)

"There's two parts of leadership. You've got to be a good leader - you've got to be somebody that people want to emulate and care about the other people. But the other guys that you have have to accept their leadership. They have to respond to it. That's the chemistry that you never know how that is going to happen."
-Football-Trainer at the University of Alabama
"I'm often asked if this is a quality that can be taught and the answer is Yes, and like any new or underdeveloped habit, it takes consistent practice.. The challenge with this leadership trait is the WHAT to practice isn't as straightforward as with other competencies. I'm a fan of simple and practical, so I created the ABCs of The Better Boss Project(tm) to help leaders show up in a more connected, empathetic, and judgment-free way: ASK curious questions, BE human, CHECK assumptions."
-Shani Magosky, Founder of The Better Boss Project
"Good leaders improve their emotional intelligence by making a concerted effort to understand the reasons behind an employee's behavior. It could be a lack of trust, a bad past experience or a fear behind a bad decision. When you understand this, it's easier to react with dignity to any type of situation."

- Vladimir Gendelman, Founder & CEO of CompanyFolders

"If a leader doesn't convey passion and intensity then there will be no passion and intensity within the organization and they'll start to fall down and get depressed."
-Colin Powell, 4-Star-General of the U.S. Army
"Engagement is the secret sauce to people based businesses. With engagement you gain huge amounts of discretionary work effort/product which goes well above and beyond what is merely required for any given role. Like it or not, the CEO is the Cultural icon of the company and passion for the work, passion for the product, passion for the goals, passion for the successes and passion for the inevitable twist and turns is the key to widespread engagement. And the opposite is even more true - the lack of passion leads to tragic disengagement."
-Mike Zani, CEO of The Predictive Index
"Today, no leader can afford to be indifferent to the challenge of engaging employees in the work of creating the future. Engagement may have been optional in the past, but it's pretty much the whole game today."

-Gary Hamel, CEO of Strategos

"Empathy not only allows great leaders to understand their employees and their customers better, but it also is known to enhance prosocial (aka helping) behaviors. Because of this, empathy enables leaders to address issues faster and with more precision, and it makes them more flexible to respond to an ever-changing business environment. "
-Jeff Kear, Founder of Planning Pod
"You need to have the ability to relate to your employees and be able to put yourself in the soul of your people. Without the empathetic trait, it's very hard to rally your troupes around your vision."
-Gene Caballero - Co-Founder of GreenPal
"While we often are focused on profitability and growth, and rightfully so, there are times that we need to remember that our teams are people often have things going on outside of work. By having empathy and understanding what else is happening in their lives, we can better lead them through the good and bad times."
-Antonella Pisani, Founder of Official Coupon Code
6. Empowerment

"My job as a leader is to make sure everybody in the company has great opportunities, and that they feel they're having a meaningful impact and are contributing to the good of society. As a world, we're doing a better job of that. My goal is for Google to lead, not follow that."
-Larry Page, CEO at Alphabet Inc.
"A leader should empower their subordinates by delegating tasks appropriately, providing proper guidance and limits, and supporting the decisions of the subordinates. When the subordinate leaders are empowered, their intelligence and talents can be unleashed to help the organization grow. When they are stifled, only the minimum gets accomplished because few are motivated to help an organization that is overbearing."

7. Open-minded

"Leaders cannot work in a vacuum. They may take on larger, seemingly more important roles in an organization, but this does not exclude them from asking for and using feedback. In fact, a leader arguably needs feedback more so than anyone else. It's what helps a leader respond appropriately to events in pursuit of successful outcomes."
-Jack Canfield, World Record Holder for having seven books on the New York Times best-seller list at the same time
"The ability to not be closed off to new ideas or challenges to established norms is what sets apart an open-minded leader. A person who can look at the best lessons of the past and current while being open to the ideas of the future has the best opportunity to create success in themselves, their business and employees. Being able to change with the times, flexible when needed and decisive when required is a rare thing today."
-Kyle Golding, CEO & Chief Strategic Idealist of The Golding Group
"Great leaders are inquisitive and use strong, open-ended questions to learn about their staff, identify opportunities and threats to their business, and challenge their top employees to take risks, think critically, and increase engagement. Of course it probably also goes without saying that asking a great question isn't enough... great leaders also know how to listen and leverage the answers they receive to make good decisions."
-Jamie Newman, Founder of Your Best Manager and Host of "Your Best Manager" podcast
"Patience and perseverance have a magical effect before which difficulties disappear and obstacles vanish."
-John Quincy Adams, former US President and Member of the United States Government
"Patience is a defining characteristic of great leaders and successful business founders. Patiently wait for the right opportunity and don't swing at every pitch. More so, understanding that success doesn't happen overnight, and obsessing over the process- not the result- will cultivate a culture of patience and ensure long-term success."

9. Diplomacy

"I think a leader has many roles to play. So, you know, one role is that of incubating talent; the other is that of being a strategist. It's a very interesting job I've got."
-Kumar Mangalam Birla, Chancellor of the Birla Institute for Technology & Science
"One of the most important jobs a leader has is ensuring that everybody is absolutely on the same page, and that the team works together towards a common goal despite any cultural or political differences."
-Jan Bednar, CEO of ShipMonk
10. Initiative for action

"It is, after all, the responsibility of the expert to operate the familiar and that of the leader to transcend it."
-Henry Kissinger, National Security Advisor at the United States Government
"No task is beneath you (even menial tasks). Just because you are a high up executive does not mean that you are above cleaning the extra dishes in the sink, or clearing off the table after lunch. Take the initiative to do small tasks around the office- lead by example."
-Zvi Band, Co-Founder and CEO of Contactually
11. Humility

"Some persons are always ready to level those above them down to themselves, while they are never willing to level those below them up to their own position. But he that is under the influence of true humility will avoid both these extremes. On the the one hand, he will be willing that all should rise just so far as their diligence and worth of character entitle them to; and on the other hand, he will be willing that his superiors should be known and acknowledged in their place, and have rendered to them all the honors that are their due."
-Jonathan Edwards, former president of the Princeton University
"An organization's ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage."
-Jack Welch, Ex-CEO of General Electric
"A great leader has to be able to say, I'm sorry. If you want your organization to be constantly innovating and improving, your team members must be reflective and self-aware. You need them to know when they've made mistakes and correct them so they can get better. This is only a realistic expectation if the leader of the organization is willing to do the same thing. A good leader will say, I made a mistake, I'm sorry, and here's what I'm doing to get better. If the leader can do this, it will set the right tone for the rest of the organization."
-Jacob Dayan, Partner & Co-Founder of Community Tax
12. Influence

"Leadership is not about titles, positions or flowcharts. It is about one life influencing another."
-John C. Maxwell, founder of EQUIP
"The ability to lead through influence, rather than authority, is the most important quality of a great leader. Influence requires strong coaching, emotional intelligence, effective communication, negotiation and consensus building skills. Leaders who employ these skills to influence teams and stakeholders produce greater employee and customer engagement, increased collaboration and innovation, and ultimately drive greater excellence for the organizations they lead compared to those who attempt to use their position and authority to demand it."
-Tammy Berberick, CEO of Crestcom International, Inc.
"A leader is the one who can outline the broad vision and the direction, and say here's where we are going to go, here's why we need to go there, and here's how we are going to get there. A manager is the one who actually gets up under the hood and tunes the carburetor."
-Mike Huckabee, host of the Fox News Channel talk show Huckabee
"They have to have in their mind a clear reason the company exists beyond profit and be able to articulate that clearly and consistently to all audiences - internal and external. Doing so will motivate staff, attract customers and create differentiation and separation from competitors. And it will drive both the external brand and internal culture to create a healthier and more valuable enterprise."
-JP Laqueur, Brand Foundations
"Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion."
-Jack Welch, Ex-CEO of General Electric

"Great leaders are able to help their team members understand the big picture so they can connect their success back to the success of the business. The vision should be big enough to inspire and broad enough to be inclusive. Doing so allows everyone in the organization to understand the importance of the role they play in bringing that vision to reality."
-Steven Benson, Founder & CEO of Badger Maps
"You can get knocked down, and it hurts and it leaves scars. But if you're a leader, the people you've counted on will help you up. And if you're a leader, the people who count on you need you on your feet."
-Stanley A. McChrystal, former General of the U.S. Army
"A CEO can't do it all - in order for the company to be successful, a CEO must delegate. With that delegation must come a trust that the employee, at whatever level, will achieve success. A great leader has the ability to trust in the potential of his or her employees and the ability to achieve success through others."
-Evan Harris, CEO & Co-Founder of SD Equity Partners
16. Integrity

"No man will make a great leader who wants to do it all himself or get all the credit for doing it."
-Andrew Carnegie, Founder of the U.S. Steel Cooperation
"An great leader is someone who does the right thing, even when it's unpopular or extremely tough to do so. You have to find something to care deeply about in your business and in each individual that touches your business. Do what you love in the service of people who love what you do."

-Steve Farber, President of Extreme Leadership, Inc., Author and one of Inc's Top 50 Leadership Management Experts.

"Integrity matters in three ways: leaders with great integrity foster critical trust amongst colleagues and direct deports, and demonstrate a commitment to moral and ethical behaviors. Leaders who do NOT value integrity will not gain the trust and buy-in of their teams and colleagues, which will negatively impact engagement and performance. And leading with integrity doesn't mean never making mistakes, but recognizing and owning them, which leads to continual self-development, and demonstrates humility to others "
-Jenna M. Rosenberg, Assistant Vice President, Human Resources at Vision Federal Credit Union
17. Problem Solving

"The bottom line is that if you become a master at handling problems and overcoming obstacles, what can stop you from success? The answer is nothing! And if nothing can stop you, you become unstoppable!"
-T. Hary Eker, founder of Success Resources
"One leadership quality of a great leader is the ability to solve problems. Leaders face challenges all of the time so they must be able to assess the challenge, find possible solutions (and consequences associated with those solutions), and select the best possible solution."
-Ashley Hill, CEO of College Prep Ready
18. Perspective

"The manager has a short-range view, the leader has a long-range perspective."
-Warren Bennis, University Professor at the University of Southern California
"What separates great leaders from the rest of the crowd is their ability to see the bigger picture instead of becoming lost in the details. The best leaders understand how each member of their team works to contribute to the overall goals of their business, and ensures that everybody understands which tasks they're responsible for. By keeping the end objective in sight, they can push their company towards their long-term goals, rather than becoming stuck at the short-term goals."

19. Listening

"Being a good listener is absolutely critical to being a good leader; you have to listen to the people who are on the front line."
-Richard Branson, founder of the Virgin Group
"For great leaders, the secret to success is attentive listening to the people your work with. Great leaders l isten and respond to employee suggestions for continuous improvement and use those ideas to grow the business. They also openly l isten and respond to messages coming from other metrics like employee turnover, as well as do proactive listening through organizational surveys and a liberal open door policy."
-Brad Nierenberg, President & Founder of RedPeg Marketing
" Effective leaders take the time to listen deeply to every person related to the business, group or organization. Often overlooked, creating and modeling a culture of listening in one's company is the key to connecting with customers and employees, making each person feel valued as a person as well as a member of the team. I've seen listening grow businesses, make money, and build relationships and it's the key ingredient to being an effective leader."

-Marilyn Shannon, Founder of Women's Empower Networking, LLC.

"A leader needs to listen to what customers want and also to feedback from staff and clients. Sometimes, we do not hear what we would like to hear, but actively listening to comments will allow an effective leader to make changes, which in turn earns respect."
-Michelle Zaharin, Co-Owner of Regents Review, LLC
20. Ownership / Accountability

"When a team, and especially a leader, takes ownership of its problems, the problem gets solved. It is true on the battlefield, it is true in business, and it is true in life."

-Jocko Willink, former member of the United States Navy

"Leaders who take ownership and are accountable for their work can quickly implement any successes, as well as learn from any failures. Beyond making or saving a company hundreds of thousands, these leaders also typically develop their employees to do the same."
-Micah Pratt, Director of Medicare Health Plans
21. Motivation

"To be a leader, you have to make people want to follow you, and nobody wants to follow someone who doesn't know where he is going."
-Joe Namath, former professional player in the National Football League
"Great leaders are motivators. This leadership quality can be spotted as early on as the job interview, where indicators of these qualities include asking great questions and showing a positive, can-do attitude. They demonstrate a willingness to roll up their sleeves and get things done and understand the importance of working with others as well as working hard on their own. They genuinely want to be engaged and involved in a business's growth and have a great attitude and approach to helping the business grow and expand in the long run."
-Deborah Sweeney, CEO of MyCorporation
"The ability to praise is one of the most underrated leadership qualities out there. Recognition and appreciation serve to not only motivate and boost employee morale but also make employees continue to strive to impress you. It creates a mutual respect; I work for them just as much as they work for me."
-Lena Requist, President of ONTRAPORT
Do you agree with these leadership qualities? Is there one that we missed but you think is worth mentioning? Let us know @kununu_US!

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Linda Le Phan is the Content Marketing Manager at kununu US, a place where job seekers can get an authentic view of life at a company and where employers have a trusted platform to better engage talent. That means that everything on the editorial calendar goes through her (want to write for us? learn more here). When she's not creating content about the modern workplace, company culture, and life & work hacks, she is probably going out to get an iced coffee (even in Boston winter), raiding the snack drawer, or jamming to kununu's Spotify playlist.

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21 Most Compelling Qualities of Great Leaders

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Hello all, My name is Jenn. I currently split my time between two job and the vast amounts of projects my house seems to need. In the little spare time I have I decided to go back to school and get my Bachelor’s degree in Business Administration. I set the bar pretty high for myself and I hope I always put my best shoe forward. I try not to roll more than I can handle, although the weight of it seems to be a lot now that I think about it. I’m hoping to strike this class out quickly in the seven weeks instead of the regular time frames.  To get the ball rolling, I’m excited to learn what I can out of the class. I’m always open to pointers to keep me from falling in the gutter. The lane is a clear though and I’m ready to receive all the information my brain can handle.