Leadership, governance, and management
4-7 sources• critical resources—2 to 3 pages; see Step 7• leadership, governance, and management—2 to 3 pages; see Step 8Step 7: Analyze Critical ResourcesNow that you’ve examined your organization’s big picture—MVGOs, size, and structure—you’re going to analyze the critical resources of your organization for inclusion in your report.Critical ResourcesAs you analyze your organization’s critical resources, follow the guidelines below:• Consider whether your organization has the critical resources needed to accomplish its MVGOs, whether these are being used effectively, and whether they are being leveraged for competitive advantage.• Read about resource-based theory and resource dependency theory to learn more about how and why certain resources may serve as a source of strength for an organization.• Consider whether your organization has valuable, rare, inimitable, and nonsubstitutable (VRIN) resources (characteristics of resources) that it can use toward a competitive advantage, and whether these are sufficient given the market or markets in which your organization is operating.Types of Critical ResourcesBriefly explain the relevance of resource-based theory and resource dependency theory to an organization’s critical resources; then analyze and discuss two or three highlights that pertain to your organization’s human, financial, technological, and physical resources. Integrate, as appropriate, the VRIN characteristics (valuable, rare, inimitable, and non-substitutable) in your discussion of the four critical resources listed below. Each critical resource should be discussed separately.• human resources• financial resources• technology resources• (physical resources)When Step 7 is complete, prepare your findings for inclusion in the final report. Then proceed to Step 8.Step 8: Examine Leadership, Governance, and ManagementNow it’s time to shift your focus to the organization’s leadership. Management styles, leadership styles, and governance structures can have an immense impact on the daily experience of employees at all levels. Leadership can also positively or negatively affect the execution of all the elements you’ve studied thus far: strategy, resource allocation, competitive advantage, etc.Read the resources below and prepare a summary and analysis of how each principle applies to your organization. (If you believe one of these topics is not relevant for your organization, you may be able to skip it. Before making this decision, consult with your professor):• management and leadership styles and effectiveness• management control systems• organizational leadership• governanceCommunity Support Services (css-md.org)Sources to be used for step 7Physical ResourcesPrintWhen performing resource-based analysis of an organization, resources are typically differentiated into several groups: physical, human, technological, financial, and, increasingly, information. Each category can be evaluated, quantified, and managed to effectively enhance organizational performance.The term physical resources refers to the physical property of the organization—its property, buildings and improvements, and capital equipment used in the process of producing and selling its product or service, as well as the on-hand inventory of inputs and outputs. In other words, physical resources comprise all of the nonhuman, tangible, physical property the organization owns or has at its disposal.Consider the following resources for a fictitious pizza chain, and how they would be categorized according to resource allocation theory:Resource ClassificationRestaurant & Property PhysicalPizza Ovens PhysicalDelivery Vehicles PhysicalCash FinancialBank Account FinancialStaff HumanOffice Team HumanRecipes TechnologicalDatabase of clientele InformationWebsite InformationalOrder-taking phone systems TechnologicalDifferent resources contribute differently to the organization’s performance, depending on the type of goods being produced, or the service being provided. For example, what is Amazon’s most crucial asset? The physical inventory in its warehouses? No—it could be argued that it has two incredibly important assets—its cash holdings and its prime customer database. The future value of its sales to customers who happen to be Prime members far exceeds the actual value of its inventory and physical plants at any given time. Strategically, its cash holdings allow the company to do nearly anything it wants to do at any given time.On the other hand, consider Intel and its chip plants. While the plant building the i7 processor chip cost around $4 billion to build, the knowledge of its team of research and development scientists and engineers far exceeds the value of any plant. Its human resources, in other words, are its most important resource. You’ll find that individuals who work in research and development at Intel earn outstanding salaries. Intel has assessed the value of these resources to the organization—and pays its employees accordingly.Contribution MarginA contribution margin framework can be useful to quanitfy the amount of each resource necessary to complete a single unit of output, the cost assigned for each unit, and therefore, the return each unit contributes to operating results.Consider the following example, in which an organization has calculated the number of units required to sell a single unit of a particular good that brings in $500 of revenue.Resource Units Required (in hours) Cost Per Unit Extended Cost MarginHuman 4 33 $132.00 3.79Physical 0.5 27 $13.50 37.03Technological 0.001 30,000 $15.00 33.3Notice in this calculation that, when each contribution margin is calculated, the other resources are ignored. It gives you a quick analysis of which resource is contributing the most, relative to its price and the amount needed in production. (Assume for ease of example that revenue is the right unit of analysis; other approaches may calculate using per-unit profit instead of revenue.)As you can see, physical resources had the greatest contribution. It would be natural for this organization to try to replace its most costly resources—human resource—with capital, to take advantage of this greater contribution.Depreciation of Physical ResourcesPhysical resources are subject to depreciation and replacement, as their value to organizations tend in general to decline over time with greater usage. For instance, a delivery truck used in the pizza restaurant described above wears down more every time it is used, and therefore must be replaced over time.Human and financial resources are often managed so that their value to the organization increases over time. Little can be done to increase the value of physical resources except replacement or spending on enhancement. Property, which generally increases in value over time, may be the exception, but its value is a function of market conditions and not necessarily anything the organization does to the property.08:55Technology ResourcesPrintAcquisition, use, and effective management of advanced information and computing technologies have the potential to serve as strategic differentiators in an increasingly competitive global marketplace. This principle applies across sectors, industries, organizational sizes, and markets. A report of an organization’s technology resources would endeavor to answer the following questions:How would you describe your organization’s capacity to manage and leverage information, computing, and other technologies to achieve its mission, vision, goals, and objectives and its strategy?To what extent does your organization leverage the Internet as a source of competitive advantage? This includes use for marketing, customer relations, and services.Does your organization use an Intranet and, if so, what evidence is there that it contributes to improved internal communications, collaboration, and performance? Are there related issues that merit special attention?Does your organization have a strategic technology plan? If so, what was the process used to develop it, what positions were involved, and what evidence is there that it is being used to guide decision making? Is there evidence the technology plan aligns with and supports the organization’s strategic plan and objectives?What evidence is there of sound technology governance and security practices within your organization?Is your organization behind the curve, bleeding edge/leading edge, or somewhere in between where technology use is concerned? (You may want to consult with the IT department on this question.)Review the two articles in the Resources section below, Technology Management and Management Information Systems for an overview of these areas.ResourcesManagement Information SystemsTechnology ManagementFinancial ResourcesPrintAn organization’s financial situation and the system used to managage its financial resources will vary depending on the type of organization. Organizations need to acquire and manage the financial resource it needs to support its mission, vision, goals, and objectives and implement its strategy. When examining a business’s financial resources, it may be possible to draw conclusions about how well those resources and supporting systems and processes are being managed.New managers entering an organization would need to know where and how to find information about an organization’s current and past financial situation and key information about budgets and budgeting.ResourcesFinancial StatementsFinance and Financial ManagementBudgets and BudgetingProject SpecificsYour goal for this project report is to present a high-level discussion of your organization’s financial situation and the system used to manage financial resources. Remembering that the target audience for this report is both new employees and new board members should help you determine what to include in this two-to-three page summary. What you will be able to find and share will depend upon the type of organization you work for and your ability to access information. Be sure to talk with your professor should you have questions.Put very simply, your report should explain how your organization acquires and manages the financial resources it needs to support its MVGOs and implement its strategy. While your target audience for this report will be interested in an assessment of the relative financial health of the organization and its future prospects for growth, your ability to include this information will vary depending upon your organization and professional situation. The same will be true for your ability to offer any conclusions about how well your financial resources and supporting systems and processes are being managed. In the next course (MBA 620) you will have an opportunity to learn more about finance, accounting, and economics and to think more about these topics.While this may be a focus of interest and expertise for some learners, the emphasis here is on basic information any manager or potential manager might need or want to know about an organization’s finances. Every manager should know, for example, how and where to find information about an organization’s current and past financial situation. Most managers will also need to know something about budgets and budgeting. The Resources section contains some learning resources that should prove helpful as you complete this section of your report.Human ResourcesPrintAmong all the resources available to your organization, it is probably safe to say that people are the most complex and challenging resource to organize and manage for strategic advantage. When managed effectively, people and the work they are able to accomplish together are also most likely to serve as valuable, rare, inimitable and nonsubstitutable (VRIN) strategic resources for organizations.Effective human resource management (HRM) will influence your organization’s ability to execute several main tasks:acquire the people (sometimes referred to as talent) needed to accomplish its mission, goals, and objectivesplace people where their knowledge, skills, and abilities (KSAs) can be leveraged for maximum competitive advantageevaluate, train, coach, mentor, and continuously develop its human resourcesThe article Human Resource Management (2007), located in the Resources section below, offers a brief overview of HRM.A useful description of HRM for a new employee or board member should include the following details:a description of the organization’s current human resource assets and talents (see Human Resource Assets in the Resources section)your assessment of the relative importance of the organization’s current human resources for accomplishing the mission, vision, goals, and objectivesan explanation of the extent to which the organization’s human resource talents now serve (or might serve) as a source of competitive advantagea very brief summary of the organization’s performance management (PM) and performance appraisal systems (see Performance Management in the Resources section)Human Resource Assets (People and Unique Talents)As you can imagine, this topic has been the focus of many discussions among practitioners, consultants, and scholars. If you search UMGC’s library for journal literature—something you should take a little time to do—you will find many rich and useful discussions. Aguinis and O’Boyle (2014, see Resources section below) examine and find support for an important role played by star performers in achieving and maintaining success. Another interesting example is a paper by Tung (2016, in Resources section below), a recent past-president of the Academy of Management, and a leading contributor to research on expatriates and global HRM. In this particular paper Tung addresses, among other things, the increasing attention to the global war for talent, introducing practices such as “talent poaching and acqui-hiring” (p.142), the latter being acquisitions specifically intended to capture desired talent. There is also a brief discussion of what talent management is in Galagan (2008; see Resources section).Performance Management and Performance Appraisal SystemsWhat is a Performance Management (PM) System?Simply put, a performance management (PM) system encompasses everything organizations do to recruit, select, place, orient, train, develop, evaluate, and retain their employees (i.e., manage human resources).You are not expected to provide detailed explanations of all these processes in your report. Given the target audience for this report, you will likely just want to include a sentence explaining what performance management is and should be, and an additional sentence or two summarizing whether and how the organization currently handles these processes.What is a Performance Appraisal (PA) System and what is its relationship to performance management?Performance appraisal/evaluation is best viewed as one component of an organization’s performance management system. Performance appraisal systems vary in design, purpose, and implementation. Some are quite formal and well-institutionalized and some are very informal. In start-up enterprises or small businesses, for example, the system may simply be discussions between a boss and employee about whether work is being completed as expected. In contrast, in some organizations you might find a performance appraisal system that includes all employees and incorporates feedback from multiple stakeholders (for example, a 360 degree system). Given that employees will be evaluated and receive feedback on their performance (or this should be the case) and that most supervisors and managers will need to evaluate and provide this feedback, addressing the questions below in this section of your report is important. As with the earlier sections, however, your description must be succinct.Read Wosnick Lee (2007, see Resources section below) for an overview on performance appraisal.Note that sometimes you will find that authors (and practitioners) equate performance evaluations/appraisals with performance management. Those who are recognized experts on this topic would take issue with such a narrow view of what performance management is or should be about.Sources for step 8LeadershipPrintLeadership—and factors impacting the effectiveness of leadership—are arguably among the most researched subjects students of business and management examine. The thirst to discover the secrets to success and best practices seems endless. The sheer volume of ideas you will discover in the literature on leadership, both scholarly and popular, can prove overwhelming.Because of the sensitive nature of this particular area of inquiry, you should consult your professor before conducting any interviews or using any other method to collect information about leadership effectiveness. Unless specifically agreed upon between you and your professor, you should not share the results of your review and analysis with anyone in the organization you are examining.This section of a report intended for new employees and new board members would be restricted to a simple profile of the organization’s leadership, with an emphasis on particular strengths and competencies that are or might be a source of strategic advantage. Its focus may be on the CEO, or may extend a summary to the senior leadership team.The following points serve as a guide to completing the leadership section of a situation audit report:leader’s professional and educational background and current role and responsibilitiesleader’s recognized competenciesways in which the leader’s behaviors, decisions, and actions contribute positively to the organization’s MGVOs and to its reputationYou may need wish to conduct additional journal research to help you understand how to best describe your leader’s approaches and explain your conclusions about his or her effectiveness. If so, consult with your faculty on useful sources to help you with this task.GovernancePrintTo be effective, organizations need some means of establishing who has authority and responsibility for key decisions and associated actions. In some organizations, this is clarified in formal statements or documents. Others may not have such structured documentation. Mechanisms for oversight and review that are independent of the organization’s leadership and management are also important, especially when legal or ethical accountability to external stakeholders (including stockholders) is involved. Such organizations need a corporate governance system and structure. The article Corporate Governance, located in the Resources section, provides an overview of this topic.The following questions serve as guides to analyzing an organization’s governance:How would you describe the current approach to governance and the structure within the organization?Is the governance structure formally documented? Does it offer assurance of independent and expert oversight and review of major organizational policies and decisions?If the organization does not have a formal governance structure, is there appropriate protection against arbitrary, capricious, or unethical behavior on the part of leaders and managers?Consider any recent changes in the management, leadership, and governance within your organization. Have these changes had a positive, measurable effect on the organization? If there have been no changes, are the current management, leadership, and governance effective?Is governance handled in such a way that it supports the organization’s mission, vision, goals, objectives, and strategy?Is it possible to conclude that the organization’s approach to governance is a potential or actual source of competitive advantage?NEW MESSAGES08:58Leadership Style and EffectivenessPrintThose who have studied the history of modern management have helped us identify and understand some key elements for managerial success. This resource, which presents a brief summary of management thought (see Management Thought  in the Resources section), describes how perceptions of the roles and responsibilities of managers and what constitutes best managerial practices have evolved over time. An analysis of leadership styles should answer the following questions:Is there evidence of a dominant or common managerial style (see Management Styles  in the Resources section) in your organization? If so, consider the possible causes and likely consequences for achievement of missions, goals, values, and objectives and for optimal employee performance and commitment.What support does your organization provide to help its managers develop the knowledge, skills, and abilities needed for effective performance?Are there concerns related to managerial effectiveness? If so, are there specific ideas for improvement (gleaned from research) that the organization’s leadership should consider?What are the likely costs and benefits associated with the ideas you might wish to recommend, and what are the likely costs of deciding not to act?Management Control SystemsPrintMerchant and Van der Stede (2012) define management as “the processes of organizing resources and directing activities for the purpose of achieving organizational objectives” (p. 6), which the authors explain may be broken down to smaller elements, described in the following tableWithin the management framework, management control systems (MCSs) gather and use information to evaluate how well organizational resources and functions are performing within the context of an organization’s objectives and strategies (Anthony & Govindarajan, 2007). Management controls focus on an “organization’s critical success factors, such as developing new products, keeping costs down, or growing market share, rather than aiming more generally at improving profitability in otherwise largely unspecified ways” (Merchant & Van der Stede, 2012, p.