MANAGING IN A MARKET ECONOMY

MANAGEMENT & LEADERSHIP

Management maximizes the potential of their people and coordinate their efforts to attain a predetermined goal,
for example, a Business Plan. The managers job is to achieve organizational goals through the combined efforts
of people. In other words, a manager gets work done through other people. A manager puts together the factors
of production - including land, labor and capital - to produce goods and/or services. A manager makes business
decisions and takes risks for which the reward is profit. And finally, a manager acts as an innovator by
introducing new products, new technology, and new ways of organizing business.
In todays market place, business organizations are dynamic and complex, and the marketplace is competitive. To
be successful, firms need to hire skilled people to be managers. The skills managers need can be classified as
technical, human relation and conceptual.
Technical skills are the specialized knowledge and abilities that can be aplied to specific task. These skills are
important at the lower level of management because supervisors must be able to train their employees in the
proper use of work related tools, machines and equipment. Human relation skills are important at all the
different levels of management. Human relation skills involve the managers ability to resolve conflict, motivate,
lead, and communicate effectively with other workers. Conceptual skills are important for developing long range
plans for the firm. Conceptual skills are most important for top level managers because they have to plan for and
give direction to the firms future.
Handout #1 - Groups With Which a Manager Interacts
Business managers must be responsible to everyone who is either involved in a business operation or affected by
its activities. The managers effectiveness depends on whether he/she can fulfill responsibilities to all these
groups. Why is it important for the manager to have good relationships with these groups?
Handout #2 - Management Roles & Management Functions
Certain roles and functions go with the position of a manager. Interpersonal roles are ways in which a manager
interacts with others. They include:
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Figurehead - signing documents/presiding at a ceremonial event - image a manager wants to present;

involves decision making
Leader role - relationship between manager and employees - hire, trains, evaluates, motivates, promotes
employees
Liaison - between firm and community - through community service, conferences, social events
Informational roles is how the manager gathers and distributes information
Monitor - keeps informed about what is happening in the firms enviroment. The manager gathers
information from news reports, trade publications, magazines, clients and associates.
Distributor - keeps the firm informed on what is happening outside the firm. Also keeps the employees
informed about what is happening inside the organization.
Spokesperson - represents the company or the company's position to other groups - press, customers,
trade organizations.

Decisional Roles is how the manager makes decisions

1)

Entrepreneur - recognizes problems and opportunities and initiates actions that will move the organization in
the desired direction. The manager creates new projects, changes the organizational structure and institutes
programs for improving company's performance.

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2)
3)
4)

Disturbance Handler - handles situations which he/she has little control over. Conflicts between workers
and unexpected events that may affect the firms operations. Must rearrange schedule to take care of
emergencies that need immediate attention and make quick and fair decision.
Resource Allocator - assigning work to employees. As resource allocator the manager schedules meetings,
approves budgets and make decisions related to the firms' human, financial and material resources.
Negotiator - represents the firm in financial matters

The functions of the manager are just as important as the roles of the manager. The functions of the manager
involve decisions that are internal to the business. The five most important management functions are planning,
organizing, staffing, controlling and leading.
The function of planning is when management establishes specific objectives and how to accomplish them. Top
level managers produce plans for the entire company. Lower level managers prepare plans for their immediate
areas of responsibility. When preparing a plan, whether top level or lower level management, budgetary
constraints, personnel requirements, competition, and other factors need to be considered.
The function of organizing is important after the firms objectives have been established. It is through
organization that a manager creates a system in which people can perform task that lead to the desired goal.
Because the firm is constantly changing, the organizational strategy may need to be periodically updated. The
manager has to be constantly aware of the external and internal environment. External forces of change can be
social, political, economic and technological. Internal forces of change result from the interaction of an
organizations technology, structure and people.
The function of staffing is one of the managers most important duties. After the manager creates a system in
which people can perform task that lead to a desired goal, the manager needs to hire employees with appropriate
qualification to fill these positions. Throughout the recruitment, selection, development process, the manager
needs to be careful in selecting the proper person for the job because the caliber of the employee can reflect on
the success of the firm.
The function of controlling is when the manager compares the performance of the firm with the goals that were
established in the planning phase. The three areas that are of concern to the manager are product quality, worker
performance and cost control.
Product quality may suffer because of substandard raw materials or malfunctions with the firms machinery.
Criteria for employees to follow must be developed to reduce the chance of producing inferior products. The
manager also has to have guidelines for weekly or monthly machine maintenance to prevent malfunctions.
Managers need to control worker performance when employees fail to meet the desired performance standard.
By establishing work standards, managers develop a procedure to measure workers performance. Worker output
is then compared to these work standards and corrective action is then taken to fix substandard performances.
Once standards are established some method must be created to evaluate workers performance. In an appraisal
interview the employee is told which areas need improvement and how to improve performance. Sometimes
additional training or instructions are necessary and other times disciplinary action is required.
Managers control cost by comparing expenditures with budgeted funds. Actual cost are compared with
standards set before production for such items as materials, labor and overhead. Variations from the standards
help managers find problem areas and can lead to cost-reduction programs.
Leadership is the most important function for a manager and is the core for effective managing. Leading is when
the manager influences others to accomplish specific objectives. Leading also includes managing personal
conflict, assisting employees to deal with changing conditions and disciplining employees. An effective leader
understands individual and group behavior, knows various ways to motivate employees, and different styles of
leadership.

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Effective leadership is built on a foundation of mutual trust and respect. To be an effective leader, managers must
make certain that all employees know what is expected of them. All objectives must be identifiable, measurable
and individually attainable. An effective leader recognizes and rewards outstanding performance and does not
reward mediocrity. An effective leader also hires competent employees and ask for their advice when making
decisions that affect them. A leader uses all the resources that are available, especially people.
Handout # 3 - Your Attitude Toward Being A Supervisor
An effective leader has a positive attitude about supervising. The attitude the manager communicates reflects
positively or negatively on employees. The managers attitude establishes the pace and tone for the entire
department. Employees will respond positively and productivity may increase when the manager is upbeat.
When the manager is negative, productivity and employees attitudes will be down. Everything a manager does
and every position a manager takes will be reflected in the attitudes of employees.
Managers can develop respect and trust by their actions, by the way they discipline employees and how they
interact with employees and with higher level management. Employees watch how the manager response to
unexpected problems and expect quick and fair decisions which will lead the department into the direction that is
best for the firm. Managers are responsible for creating a disciplined environment where employees will not
violate the firms and departmental standards. As a manager you act as a liaison between your employees and
your supervisor. As a liaison the manager must appease top level management and at the same time keep
employees happy. At times this very difficult to do. There will be times when managers will have to absorb the
heat from above instead of passing it on to employees.
Leaders are in charge people and they utilize their managerial authority in efficient ways. As managers you have
three sources of power from which to draw upon. First, you have knowledge power. In most cases you know
more than than your employees. When you teach them what you know, you make the best use of your
knowledge power. As a manager you gain power from the role you occupy. Just being a manager gives you
authority which you must use gently and wisely. Thirdly you have personality power. Managers can persuade or
motivate their employees by having a positive attitude, a friendly manner and with patience. As a manager you
have to learn how to effectively use these three sources of power so you can become successful in leading your
employees.
A leader knows it is impossible to do all the work. A leader learns how to delegate certain task to others, tap the
special creativity of each individual and rotate responsibilities among various employees. Delegating is the
assignment of tasks and responsibility to help employees make their best contribution to the overall productivity
of the department. When a manager delegates task and responsibilities to others, the manager becomes a teacher.
The manager is a teacher by telling an employee how to perform a new task effectively, showing the employee
how it is done, and then asking the employee to demostrate the task that has been learned. The process of
delegation takes time, patience and follow-up to insure the task are done right. The benefits of delegating task
and responsibility to others is tremendous. Proper delegation keeps employees motivated, increases productivity,
and frees the manager to perform more important task. When a manager learns how to delegate effectively the
manager acheives two goals at the same time. Delegating task and responsibility gives the manager more time to
plan, organize and maintain relationships with other employees and co-workers. Also, employees become more
versatile and valuable as they learn new task.
There is a big difference between managing and leadership. Managing is the protection of what is already in
place. Managers keep things the way they are to avoid trouble. Leadership means stepping out in front of others
with new, workable ideas that save time and increases productivity. Leaders take prudent risk to gain better
productivity. In summary, to become both a good manager and a leader consider the following.
First, become a good manager. Make sure your department is up to the firms standards. Make sure you are
organized and have everything under control. Be a leader by example.

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Be a positive influence for your employees. Establish new goals and motivate your employees to attain them.
Dont allow your employees to become bored. Delegate task and responsibility evenly among your employees.
Help your employees to reach their goals. Encourage open and honest communication between you and your
employees. Provide the rewards and recognition they deserve. The better employees feel about their jobs and
themselves the more productive they will be.
To dont be afraid to establish your authority. Employees occasionally need to be disciplined. Demostrate your
authority by making difficult and decisive decisions. Counsel disruptive employees and expect continued
improvements in productivity.
Dont take all the credit for improvements. Share the credit among all the department. Look for positive thing
to talk about, including individual and group achievements. Make everybody feel that they are on a winning
team.
A person cannot become a manager or a leader overnight. But through experience and patience a person can
develop leadership skills. The following three handouts are basic guidelines of what and what not to do to
beome a manager and an effective leader.
Handout # 4 - Six Unforgiveable Mistakes
Handout # 5 - Make Yopur Choice Now
Handout # 6- A Realistic Description Of What Managers Do
ORGANIZATIONAL STRUCTURE
An organization can be defined as a group of people working together in a coordinated effort to accomplish
known goals. Coordination is people doing the right things at the right time. Cooperation is the degree to which
people help each other achieve the organization's goals.
Organizations have different primary purposes. Product organizations are concerned mainly with converting raw
materials into usable forms. Lumber companies, basic chemical producers, toy manufacturers, automobile
manufacturers and food processors are examples of product organizations. Service organizations are concerned
with assisting, helping, and providing means for more enjoyable or secure living. Stock brokerages, airline
companies and beauty salons are examples of service organizations. Some companies provide both products and
services through the production of items that they sell, maintain, and train people to use, for example IBM and
Xerox.
Imagine you want to buy and open a small shop. You will handle sales and the financing of the business. You
will have one part-time employee to keep records and do bookkeeping. With just this, you will have the
beginnings of an organizational structure. Which means the arrangement of work in such a way that the
objectives of the organization can be effectively accomplished. Structure defines who reports to whom, as well
as the major areas of responsibility
Handout # 7 - Your Organization in Bulgaria - Figure 1
Even at this early stage, several important features of organizational structure are identifiable:
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Work has been divided in such a way that both you and your employee know your primary duties and the
duties of each other
Both you and your employee know what kinds of decisions each of you are primarily concerned with
A reporting relationship has been established. Each of you knows what kind of information the other person
must have to function effectively
From a psychological point of view, both of you realize that the organization cannot function smoothly
unless you both do your jobs well

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Now, time passes and business is going well. You realize that if there were more people in the organization, you
could expand, increase sales, earn greater profits, and provide broader services to customers. Your organization
now has three different kinds of objectives:
1.
2.
3.

Operational - defined by the intent to increase sales

Profit - defined by the desire to increase revenue from sales
Service - defined by the desire to provide greater services to customers

These objectives will have a major influence on the type of organizational structure you develop. The core of
your business is sales. Therefore, your organizational structure must support sales activities. Your part-time
person decides to leave the firm. You hire a trained office management specialist and three new sales personnel.
You now have a new structure.
Handout # 7 - Organizational Structure - Part Two - Figure 2
Now work has been divided in two ways: by sales area, to preclude the salespeople from trying to serve the
same customers, and by function. The functions, or activities, performed by the salespeople are distinctly
different from those performed by you and your office manager.
Handout # 8 - Factors That Influence the Organizational Structure
There are many factors affecting the structure of organizations and the people in them. Whether an organization
is small like yours or highly complex like IBM, it affects the people within it in a number of ways. Research has
indicated that the type of organization and skills required to perform a task have strong effects on behavior.
Low-skilled jobs where workers are closely supervised and perform repetitive work tend to be less satisfying and
may result in high employee turnover. Likewise, many other types of jobs offer little opportunity for personal
development of transferable skills and knowledge. In such cases, economic incentives and association with coworkers may be the only attractions of the job. The work itself has little meaning.
In contrast, jobs that require substantial training, developed skills, and a large degree of control over assigned
work are usually more satisfying. Employees can be strongly attached to their work even if they do not like the
organization that employs them. Workers in this category often include computer programmers, nurses,
policemen and accountants. In all of these fields, the work is controlled to a large extent by the person
performing the task rather than by external direction (supervision) or by machines.
In addition to the type of assigned work, organizational size is another important factor affecting people on the
job. If we look again at your imaginary organization, we see that your relationship to the people reporting to you
changes as the organization grows. Small organizations usually differ from large companies in several ways:
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Everyone knows everyone else in the organization

Usually, work assignments are highly flexible; tasks are not greatly specialized
Relationships between managers and employees are more informal
Managers often perform the same types of activities as employees
Although there is greater diversity, there is also less opportunity for promotion or the development of
highly specialized skills
Small organizations frequently pay less and have fewer employee benefits than do large organizations

After 5 years of operation, your organization now has 139 full-time employees. The numbers in parenthesis
show the number of employee's in each unit
Handout # 9 - Final Organizational Structure

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By usual standards, your organization is still relatively small. Because of its increase in size, however, it has
developed some characteristics of a larger company:
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Increased specialization has occurred

Reporting relationships are more rigidly defined
You no longer know everyone in the organization as well as you could in the beginning
Several of the functions in the organization are ones in which you have no expertise
Employees have no need to know and have little interest in functions performed by people outside their
immediate work group
Each employee is relatively anonymous outside his or her assigned department or section

There are, however, some positive aspects to larger organizations:

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There is greater opportunity for promotion by virtue of increased organizational subdivisions

Specialization can lead to increased efficiency within the specialized area as long as employees believe their
full potential is being used. However, too much specialization leads to dissatisfaction and inefficiency
Employees usually have more complete resources for accomplishing their tasks

As figure 4 shows, the types of activities performed by members of an organization change as the organization
grows. When an organization is small, there tends to be greater flexibility in what an individual person does and
much less formality than in large organizations. Satisfactions are derived from knowing everyone in the total
work group on a first-name basis, and from understanding the functions of other people.
If we look at your structure in figure 4, we see that your tasks have changed dramatically. Even though you may
still sell on occasion, you are no longer a salesperson: rather, you are the President. As such, you are primarily
concerned with assisting your employees in accomplishing their goals and with resolving unusual problems,
approving transactions, planning future activities, evaluating and correcting where necessary the performance of
your organization as a whole, and projecting your company's image through personal contacts.
MANAGING CHANGE
Many political and economic changes have occurred in Bulgaria over the last few years. Change has had a
significant impact on each of your businesses and lives. Change creates tremendous pressure, personally and
professionally. Especially true when one has little experience dealing with such change. The effect change has on
organizations effects all who are involved. Top management has tough time understanding direct implications of
the change. Top management tend to isolate themselves, are not in touch with employees and blame middle
managers when things don't go well. Middle management is caught in the middle. They are expected to
implement changes usually without leadership from top management. And because they do not have enough
information from top management employees blame them for change. Employees often feel betrayed by
management because they do not understand changes or reasons for them and/or do not have enough
information from managers. During change, managers at all levels must take responsibility to lead their groups.
They must learn to manage change, even if top management is not leading or if there is not enough information.
Going through major change challenges our view of ourselves. Major changes can be like the death and rebirth
of a company. Living through the process is similar to major remodeling of a kitchen. To obtain final result
desired, must first rip out old kitchen, leaving a lot of basic structure and emptiness. Then you bring in new
cabinets and appliances so they fit together. Once you add final touches, you move back in and feel comfortable
and productive again. The entire process takes longer than you thought and costs more than you estimated.
Organizational transition is slow, expensive and difficult. There is a tendency to believe that change can be
instant, painless and quick. Managers think changes they make will not be disruptive, not cost much and will be
quick to implement and will solve previous organizational problems.

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These myths may help you understand why many organizations do a poor job managing change. The process of
making a major change requires people to let go of 'how it was'. They must move through a period of doubt and
uncertainty. When you are managing this process you are really attempting to change the corporate culture and
it becomes all-consuming and must be managed sensitively. The challenge behind a change is often to increase
productivity while moving an organization in a new direction. Listed below are eight guidelines for changing a
corporate or work unit culture.
1.

Have a good reason for making the change. Culture changes are usually not fun. Take them seriously.
Make sure you understand why you are making the change and that it is necessary.

2.

Involve people in the change. People who are involved are less likely to resist. Being a part of the planning
and transition process gives people a sense of control. Ask for opinions about how they would do it.

3.

Put a respected person in charge of the process. Every change needs a leader. Select someone who is seen
positively by the group.

4.

Create transition management teams. Need a cross-section of entire group.

5.

Provide training in new values and behavior. People need to understand the 'new way' and why its desirable.
Training brings groups together

6.

Bring in outsider help. More power in what an outsider says. Use this power to reinforce the direction you
want to go

7.

Establish symbols of change. Encourage development of new logos, slogans, etc. Helps to celebrate and
reflect the change

8.

Acknowledge and reward people. As change begins to work, recognize and recall achievements of the
people who made it happen. Acknowledge the struggle and sacrifices people have made.

It is important to be prepared for change. Do not expect your people to be happy and embrace the changes.
A lesson in leadership. You cannot move through a change and keep previous levels of tight control over your
people. The lesson is that you gain control over change by giving it up. In effective organizations, people share
basic goals and communicate clearly, directly and regularly about what they are doing. You must be do less
controlling and more leading. Only you and the group together can make things happen.
Most of the major organizational changes you will experience in your career will not be initiated by you. You
may be able to anticipate change or see it coming, however, most of the time you will be handed change as a fact.
When this happens, the common reaction is one of helplessness. Your task as a change agent is to shift energy
away from feeling of helplessness and sense of security to the past - toward seeing the opportunities of the
future. You can do this by calling attention to the ways your team can make a difference. The following steps
will help you successfully introduce and implement a change in your group. You and your team will need to do
your homework to complete each stage. Depending on circumstances, you may not go through each stage in
perfect order, but at least you should be aware of them. Otherwise, you risk having you and your group not
being adequately prepared for implementing the change successfully.
I. Preparation: Anticipating key elements
II. Planning: Getting people together to plan the response
III. Transition Structures: Establishing special ways of working together, and temporary organizational
structures
IV. Implementation: Activating a flexible response and learning cycle
V. Reward: Acknowledging the people who made it work

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Handout # 10 - Planning the Process of Change
I.

Preparation - Before the change, whenever possible, follow these five steps:

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Prepare your employees. Let them know what is happening ahead of time. Telling them too far ahead of
time is not always better.
Describe the change as completely as you can. Tell how you see the change affecting individual employees
and the work group as a whole. Identify who will be most affected and approach them first.
Research what happened during the last change. Consider whether your group has a positive history of
their ability to manage change or if the last change was traumatic.
Learn from past experience and let this background influence your current actions.
Assess the organizational readiness of your team. Are they ready to undertake a change? An
organization or group that isn't mentally and emotionally prepared will tend to stay in denial rather than
accept the change and move on.
Don't make additional changes that aren't critical. People need all the stability they can get during change.
Don't change the little things when you are making organizational changes. Change the most important
things, one at a time.

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II. Planning - Think it through; during this stage:

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Make contingency plans. Think of options to the proposed change -- if things go one way, what will you
do? what about the other way? Anticipate the unforeseen, the unexpected and any setbacks.
Allow for the impact of change on personal performance and productivity. Don't expect people to get
up to speed in an instant. It will frustrate whatever sense of achievement they are experiencing.
Encourage employee input. Discuss each stage of the way and ask for suggestions
Anticipate the skills and knowledge that will be needed to master the change. Do your people have them?
Have you prepared training plans?
Set a time table and objectives so you can measure your progress.

III. Transition structures - Special activities for a special time; after Step II:
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Create a transition management group to oversee the change. Develop temporary lines of authority.
This group is responsible for taking the pulse of the group and helping identify possible roadblocks.
Develop temporary policies and procedures during the change. Demonstrate flexibility to try new things.
Loosen control and procedures
Create new communication channels. Remind people why the change makes sense. The cost of gossip
is high, forestall it through clear, accurate communication.
Meet frequently to monitor the unforeseen, to give feedback, or to check on what is happening. Make
feedback a daily event.

IV. Implementation - Take clear, flexible action to accomplish this:

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Provide appropriate training in new skills and coaching in new values and behaviors.
Encourage self-management. Inform each person he or she is accountable for some aspect of the change.
Give more feedback than usual to insure people always know where they stand.
Allow for resistance. Help people let go of the 'old'. Prepare to help those having special difficulty making
the adjustment.
Give people a chance to step back and take a look at what is going on. Keep asking whether the change is
working the way you want it to be.
Encourage people to think and act creatively.
Look for any 'opportunity' created by the change.
Allow for withdrawal and return of people who are temporarily resistant. Don't cross off people as
irretrievable.

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Collaborate. Build bridges from your work group to other work groups. Look for opportunities to
interface your activities.
Monitor the change process. Conduct surveys to find out how employees are responding to the change.

V. Reward - Sharing the gains

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Create incentives for special effort. Celebrate those who lead the change. Give one-time bonuses to groups
who have come through the change smoothly.
Celebrate by creating public displays that acknowledge groups and individuals who have helped make things
happen.

It is important to understand loss. Change occurs when something ends and something new or different starts.
The period between these two points is transition. This is where people have to learn to let go of the old and
embrace the new. Usually it means moving from the familiar to the unknown. Even when the change is positive,
this psychological process affects us. Most of us have a strong response to any change. One of the strongest can
be a feeling of loss, along with the struggle to accept a new direction. Change can produce physical symptoms
such as sweating, sleep loss, and/or emotional distress which will affect the quality of work.
The most common error in managing change is underestimating the effect it has on people. Many managers think
that if they just tell their employees to change, they will. They do not realize how upsetting it is to give up work
patterns that are familiar. Always remember how much will be disrupted and understand that people need time to
adjust. Even when change is positive, like promotion, expansion, etc., it is not uncommon for a person to feel an
ending or loss associated with it. Managers often have a hard time understanding the loss associated with
change. If you don't manage loss, you can't lead people in a new direction. When a major shift or change occurs
within an organization, employees normally experience several types of loss including the loss of:
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Security - employees no longer feel in control or know what the future holds, or where they stand in the
organization.
Competence - workers no longer feel like they know what to do or how to manage. People sometimes
become embarrasses when they are faced with new tasks because they don't know how to do them. It
hard to admit you don't know how to do something.
Relationships - here the familiar contact with people like old customers, co-workers or managers can
disappear. People often lose their sense of belonging to a team, a group, or an org.
Sense of Direction - employees lose an understanding of where they are going and why they are going there.
Meaning and mission often become unclear.
Territory - there is an uncertain feeling about the area that used to belong to them. This can be work space
or job assignments. Territory includes psychological space as well as physical space.

Each of these types of losses has a cost. Any type of loss, even of a work space or familiar technology, can
trigger an emotional response that resembles grief. You must help your employees move past their loss, to
accept and move forward in the new direction. It is important to understand that people are not weak or oldfashioned if they experience loss caused by change. This is a normal part of transition. In fact, people who do
not display any feeling of loss often save it up and become overcome by a seemingly small transition. It is
healthier to express and acknowledge loss when it occurs, so those involved can move through the transition
process more quickly. One job of the manager is to acknowledge that a loss has occurred, not pretend it is
business as usual. Unacknowledged loss will usually lead to resistance and disruption down the road.
So, how do people change? People change from being led; not from being told. A common fantasy is that is you
order people to change, they will. This belief often leads managers to order employees around. The normal
response to this approach will be resistance, defensiveness and/or withdrawal. People normally do not change
their behavior simply from information. The more involved you are with your team and the more involved they
are with each other, the easier change will be. Creating trusting relationships requires skill and can put a manager
in a more exposed situation. However, managers who can create supportive relationships are more successful

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during periods of change because their team will trust and follow them. Because most change is resisted it is
important to create incentives for those who adapt to change professionally and thoroughly.
To become a change agent you might create public recognition of those involved in the change. Reward those
who remove roadblocks to change. Give a special one-time bonus to those acquiring the new skills and/or
behaviors that make the change work. Incorporate good ideas and new suggestions from team members as a
regular part of your meetings. Change often involves elements of both danger and opportunity. When people
approach a change, their first response might be to see it as a threat or a danger. When this happens, they fear
and resist the change.
Once the change occurs, it is not uncommon for those effected to begin getting used to it. Often, during this
period, people begin to see that the change may lead to new opportunities. Some see that the new way may
indeed be more effective and offer the potential for new freedom and power. Once people accept that a change
can provide new opportunities and possibilities, the change is well on the way to successful implementation.
Danger and opportunity can be further subdivided into a model of four phases people commonly go through
when facing change. Danger can be subdivided into denial and resistance. Opportunity can be subdivided into
exploration and commitment. Most people move through these four phases in every transition. However, some
may go quickly or get bogged down in different phases. Effective leadership can help a group, and each of its
members, move through the phases from denial to commitment.
Handout # 11 - Transitional Grid and the Four Different Phases of Change
Changes in your organization will transport your team through the four phases of the transition process in front
of you. Think of this process as descending into a valley and then climbing back out. The transition leads from
the way things were done in the past toward the future. During change, people focus on the past, and deny the
change. Next, everyone goes through a period of preoccupation, wondering where they stand and how they will
be affected. This is normally where resistance occurs. As they enter the exploration and commitment phases they
start to look toward the future and the opportunities it can bring. We will talk about each of these four phases in
more detail:
Denial is the first reaction to change. When a big change is announced, the first response is often numbness. The
announcement does not seem to sink in. Nothing happens. People continue to work as usual. It appears that
productivity will continue and nothing will be affected. The stage of denial can be prolonged if employees are
not encouraged to register their reaction, or if management acts like employees should just move directly into the
new ways. Denial is harmful because it impedes the natural progression of healing from a loss (that is, the old
way of doing things) to moving forward. Employees stay focuses on the way things were, not exploring how
they can or need to change.
Because people are often blind to problems during the denial phase, a manager can mistakenly think he or she has
jumped directly to the final phase of commitment. Top management often does not seen why people should have
trouble with change so they ignore it. They seem to believe that people are being paid to put aside their feelings,
or they may feel that the company simply does not have time to move through the other stages. But, wishing
doesn't change the sequence, it just drives is underground.
Phase two in the transition process is resistance. Resistance occurs when people have moved through the
numbness of denial and begin to experience self-doubt, anger, depression, anxiety, frustration, fear or uncertainty
because of the change.
Some types of organizational change are similar to a death experience. If a company is sold, merged or there are
layoffs, the expectations, hopes, promises and actual work goes through something close to a death for certain
employees. People focus on the personal impact of the change on them. In the resistance phase, productivity
dips drastically and people are often upset and negative. Managers hear a lot of complaining. Accidents,
sickness and work related absences multiply.

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While it is difficult for a company to openly experience negative expressions, that is exactly what helps minimize
its impact. Allowing people to express their feelings and share their experience makes this phase pass faster.
People who believe they are the only one who feels a certain way or think their reactions are more intense than
their colleagues feel better when they learn that other people feel the same way.
During the resistance period organizations can make effective use of parties, lunches, etc. to address these normal
responses and let people express themselves. People need a way to say good-bye to the old and begin to
welcome the new. Eventually everyone reaches a low point and begins to move up the other side of the change
curve. This shift, clearly felt, but different for everyone, indicates things are getting better. Work groups
suddenly notice a renewed interest in work and fee creativity coming back. This signals that phase two is passing
The final phases are exploration and commitment.
During the exploration phase, energy is released, as people focus their attention on the future and toward the
external environment once again. Another word for this phase is chaos. As people try to figure out new
responsibilities, search for new ways to relate to each other, learn more about their future and wonder how the
new company organization will work, many things are in question. There is uncertainty during this phase,
including stress among those who need a lot of structure. During exploration people tend to draw on their
internal creative energy to figure out ways to capitalize on the future. This phase can be exciting and
exhilarating. It can create powerful new bonds in a work group.
After searching, testing, experimenting, and exploring a new form begins to emerge. When this happens, the
individual or group is ready for commitment. During this phase employees are ready to focus on a plan. They
are willing to recreate their mission and build action plans to make it work. They are prepared to learn new ways
to work together, and have re-negotiated roles and expectations. The values and actions needed to commit to a
new phase of productivity are in place.
This phase will last until a new cycle of transition begins with another major change. Since change is inevitable,
transition will always be with us. Without change, we and our organizations would become stage and
unresponsive. The challenge is learning to move through the transition as easily and creatively as possible.
At any point during the change process, your team will probably not be in one phase but shifting back and forth
between phases. As a manager, you need to know what phase your general group is in. When employees are in
the denial phase, it is common to observe withdrawal, an attitude of 'business as usual', and a focus on the past.
There is some activity but not much actually gets done. When employees are in the resistance phase, you will see
anger, blame, anxiety, depression and an attitude of 'what's the difference, this company doesn't care any more'.
When employees are in the exploration phase, you will recognize over preparation, confusion, chaos and energy.
There will be an attitude of wanting to try many new things with a lot of energy but a lack of focus. You will
know when employees finally reach the commitment phase because they will begin working together. There is
cooperation and more focus.
So, what do you as a manager do with your employees during each of the four phases? On the handout, a
number of suggested actions are listed for dealing with each phase. During denial, it is important to
communicate with your employees as much as possible. During resistance, it is important to listen to your
employees. During exploration, it is good to begin setting priorities for the new organization and providing
training, if needed. Finally, during commitment, it is time to set long-term goals and begin looking to the future.
In conclusion, it is important to recognize that change is inevitable in both our private and professional lives. As
a manager, it is your responsibility to help your employees and thus, your organization deal with change as
effectively and efficiently as possible. Hopefully, this discussion gave you some new ways of thinking about
change and how to deal with it.
QUALITY MANAGEMENT

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In our previous seminars, we have talked about how to help your companies attract new clients by writing
effective business plans and developing sound marketing strategies. Now, we will focus on ways in which your
company can retain valuable clients and grow your business. The concept is quality management.
In companies where quality is a strategic objective, quality is defined as a customer-focused, strategic approach
to continuous improvement in product quality, customer service, and innovation. Quality improvement in
extremely important in today's economy.
Bulgarian companies are concerned about quality and are looking for ways to improve the quality in their
products and services. As more foreign companies enter the Bulgarian market, the Bulgarian companies will face
increased competition, and Bulgarian consumers will have more choices. Most likely, a consumer will purchase a
product or service that is of superior quality. With the loss of the ex-Soviet Union export market, Bulgarian
companies are searching for replacement markets in Western Europe, the Middle East, and the United States.
These markets have much higher quality standards than the former Soviet Union. Consumers quality
expectations differ from country to country.
The traditional definition of quality is no longer applicable. In the past, quality was defined as meeting product
specifications, or conforming to some pre-established product standards. Service was viewed as being distinct
from quality. Service referred to how customers were treated during the business transaction. Now, successful
companies realize that traditional product quality or service is not enough. Customers' expectations are
changing. A company has good reason to improve both product and service quality. Consider the following:
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Poor quality drives up operating costs for most companies. The cost of poor quality from increased
warranty usage, rework, inspection, and testing is estimated to be 10 to 20 percent of sales dollars in the
average U.S. company.
Poor quality holds down the price companies can charge for their goods and services. Research has shown
that consumers want better quality and are willing to pay for it.
Poor service is the major reason why companies lose customers. In fact, customers are five times more
likely to leave a company for poor service than poor product quality or high cost.

How a customer is treated and how promptly a customer's complaint is resolved is one of the most powerful
factors shaping the customer's perception of the company's overall quality. There is now a new approach to
quality. To address quality and service problems, successful companies have adopted a new approach to running
their businesses called total quality management.
Handout # 12 - Approaches and Principles of Quality Management
For this process to work, the following assumptions apply:
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Everyone in the organization is responsible for continuous improvement

Quality is defined by the customer
Significant excess costs are caused by poor quality
The change process must be driven and supported by top management
Real change will occur only when employees work in teams and are trained in quality improvement
techniques

So, how do you implement total quality management in your organization? Improving your company's level of
quality requires uprooting old habits and looking a familiar production processes in a different way. Neither of
which is easy to do. A strategic quality improvement plan requires significant time commitments from all levels
of the organization. There are five principles that can be implemented to create a total quality management
environment.
(Refer to handout)

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1. Measure your performance from the client's perspective. Don't rely solely on internal measures of operating
efficiencies or financial performance. Determine what aspect of the product or service offering is most important
to your clients. You can obtain this information by asking a representative group of your clients, through surveys
or focus group settings.
2. Move from management to leadership. In traditional management, the underlying objective is total control
of the employees actions and work. In this type of environment, employees are taught to react to the decisions
made by their superiors. Typically, employees do not take the initiative to solve problems. In a "leadership"
style of management, employees are encouraged to take the initiative to solve work-related problems, to take
responsibility for making decisions that affect their performance, and to respond rapidly to changing
circumstances and situations. Managers lead improvement activities by creating a climate of support and respect
for all people in the organization. The leaders of today's workplace seek to gain employee commitment to high
performance, quality and client satisfaction.
3. Increase the flow of information to employees. The newest and lowest level of employees should be
knowledgeable about the company's performance, whether it's good or bad news. Also, all employees should
understand the following basic information about their company:
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What is the company's business strategy?

What are the key objectives for the firm each year?
What is the role of each employee in helping the company to achieve its business objectives?
How is the company performing in terms of sales and profits?
Who are your company's main competitors?
How does your company differentiate itself from the competition?
Who are the company's major target markets?

By sharing this information with employees, the company reaps the following benefits:
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When employees have access to the same information as their managers, they are much more likely to
understand decisions about needed workplace changes and to work cooperatively to implement these
changes
The more employees know about their performance, the better they perform
Feedback, which doesn't have to be positive, usually leads to improved performance
Feedback provides direction and confirmation
Employees cannot participate in a meaningful way to problem-solving efforts without access to
information about the company's performance

Significant improvements in quality, customer service, costs, etc. are not possible without employee involvement.
Not only are employees closer to the processes and problems, but often they have the best ideas.
4. Tie salaries to performance. If you want your employees to produce a quality product or deliver a high level
of service, you must provide the incentive to them. Rather than pay your employees for producing a high
number of goods in a given period, reward them for the quality of the goods they produce or for the quality of
service they offer. Many companies in the US are moving away from a base salary or hourly wage system.
Instead, companies are tying a large portion of a person's salary to pay incentive methods such as annual bonuses
or profit-sharing programs.
5. Empower employees. The final step involved in creating a work environment where high quality and
customer needs are top priority is to empower your employees. This term refers to giving your employees the
power and responsibility to improve production processes and service delivery.
Total quality companies recognize that quality, innovation, service to customers and competitive performance in
general are enhanced when employees are given increased authority, responsibility, and accountability. Employee
involvement in quality activities leads to improved trust between management and labor, better organizational

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procedures, improved decision making and less resistance from workers to the introduction of new ideas and
technology.
Many American companies have adopted an employee work-group concept that was developed by the Japanese.
These work groups are referred to as quality circles. They are defined as a regularly scheduled meeting of five to
fifteen employees who usually work in the same area, to identify and solve quality, safety and production
problems. Generally, these workers discuss ways in which to perform their work more efficiently. To ensure that
quality circles are successful, quality circle members receive special training for their roles and management
listens seriously to their recommendations.
In conclusion, it is important to understand that companies in the US did not plan to implement total quality
management programs. Instead, they were forced to make changes in response to increased competition and
higher customer expectations. They realized that they had to improve their product and service quality in order
to survive in today's global marketplace. By implementing total quality management in your companies, you will
realize three significant advantages - improved quality, enhanced customer satisfaction and faster innovation. All
of which are critical for survival in Bulgaria's free market economy.
COMPENSATION
All aspects of a company must be involved in marketing, including compensation - the way people are paid for
their work. Karl Marx: "From each according to their ability, to each according to their need." This was a
problem of old command economy. Employees were rewarded for production, not quality. The result was
warehouses full of inferior products that no one wanted. This philosophy does not work in a free market
economy.
Need to develop a new philosophy - "From each according to their ability, to each according to their
contribution." A basic law of human nature is people will perform their jobs better if they believe they will be
rewarded, respected, acknowledged for a job well done.
The goals of individual are money, prestige, status and security. The goals of organization are profit, revenue,
market share, quality and skills development. The goals of the manager are to motivate employees to do the
best job possible and to unify goals of individual employee with goals of the whole organization.
The different types of compensation are pay, incentives and benefits. Pay is the basic compensation employees
receive, usually wage or salary. Incentives are rewards designed to encourage and reimburse employees for
efforts beyond normal performance expectations. Benefits are rewards available to an employee in being
employed with a firm. Also there are different types of compensation bases an employee can be paid. Piece rate,
hourly wage, salary, bonuses, commission, public recognition and professional development are the most
common forms of compensation bases.
Hourly pay is where an employee receive wage based on amount of time worked. Piece-rate system is where an
employee is paid for each unit of production. Combination is where an employee may have a minimum hourly
wage, but can receive higher pay for units produced above a predetermined quota.
For production workers the types of compensation bases used are hourly pay, piece-rate or a combination of
both. The advantages of hourly pay are security for the employee and the expenses are fixed for the firm. The
disadvantage of hourly pay is it can lead to poor productivity and poor employee motivation. The advantages of
piece-rate are the employees can earn more, increases motivation and increase productivity. The disadvantages
of piece-rate are quality may decrease and productivity compensation rate must be determined for each specific
job. Expenses are not fixed for the firm. For production workers, manager must develop a compensation
package using an incentive system based on both production quotas, quality and security.
For manufacturing and clerical personnel the types of compensation base are hourly pay and straight salary. The
advantages and disadvantages of hourly pay same as production workers. Straight salary is a payment that is

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consistent from period to period and is not related to the number of hours an individual works. The advantages
of straight salary are employee status and loyalty and commitment by organization to employee. The
disadvantage of straight salary is it may lead to employee complacency.
For the salesman there are three types of compensation bases. Straight salary which gives the salesman security,
straight commission which gives the salesman incentive and a combination of salary and commission.
The advantages of straight salary are it gives income security for salespeople and salesperson expenses are fixed
(unchanging). The selling and non-selling tasks are controlled. The disadvantages of straight salary can be low
incentive to sell the firms product. Salespeople get paid all though they don't sell. Expenses are not tied to
productivity. There are fixed costs even if sales are low.
The advantages of commission are high incentive to sell the companys product. There are no fixed cost because
expenses are related to productivity. The disadvantages of commission are a lack of control over non-selling
tasks. Selling expenses are unstable and there is employee risk. Need a balance between the two extremes security and incentive.
The firm needs to know the difference between "Order taking" vs "Order getting". Order taking is where there
is no selling necessary, there are established accounts and the orders keeps coming. Order getting is where
selling necessary, there are no established accounts and the salesman needs to develop new business. Sales
people need to be compensated for what and how much they sell - especially if the salesman can successfully sell
a new product that is important to the future growth of the firm.
For managers there are two types of compensation bases - straight salary and straight salary and bonuses. The
advantages of straight salary are income security for manger and manager expenses are fixed. The disadvantage
of straight salary is no incentive for manager. Incorporating a compensation package that includes a straight
salary and a bonus if the manager performs above and beyond the firms objectives will give the manager more
incentive and motivation. Managers will work harder and make better decisions if they are paid on a scale that
measures the profitability of the firm.
Economic incentives form the basis for a free market economy. Managers need to develop compensation
package to pay employees according to what they contribute to the goals of the firm. The new compensation
method needs to be introduced in a spirit of participation and cooperation between management and the
employees. A successful compensation plan, if properly introduced and implemented, can increase the quality of
the firms product, can increase productivity, and more importantly increase employee moral, motivation and job
security.
EMPLOYEE MOTIVATION
Regardless of the size of an organization or its activities, managers are concerned about the level of motivation in
the organization. Every relationship a manager has with employees affects their motivation. Management's
behavior must be analyzed according to the direction and degree of motivation. Motivating employees to
achieve organizational objectives is a continual management responsibility. Employee motivation depends on the
perceived degree of need satisfaction. When workers perceive that performance will be personally rewarding,
they are usually motivated to achieve high levels of productivity. It is important to match the objectives of the
organization to the objectives of the individual. The process of relating employee need satisfaction to the
achievement of organizational objectives involves the following steps:
1.

Make an evaluation of the needs that employees are trying to satisfy. Managers must determine employee's
strongest needs. Since needs are internal and cannot be directly observed, managers must infer the strength
of needs from behaviors. Determining these needs accurately is often difficult.

2.

Determine the goals and activities that employees believe will satisfy their needs. Different employees have
different needs and will develop desires for different goals. The goals of individuals change over time.
Some employees will simply tell their goals to managers when asked. Other employees may not be able to

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specify goals or may not be willing to tell management. By observing the enthusiasm with which employees
engage in activities, a manager should be able to distinguish the rewarding from the unrewarding
activities.
3.

Determine the employee needs that can be satisfied in the process of achievingorganizational objectives.
The ability of an organization to provide need satisfaction for employees is never unlimited. The means
available for employee need satisfaction should be evaluated through their contribution to achieving
organizational objectives. For most organizations, the purpose of satisfying employee needs is to achieve
productivity.

4.

Inform employees of the opportunities available for need satisfaction. Managers often 'overlook' informing
employees of opportunities that are available within an organization. In some cases, informing employees
may involve making them aware of the possible rewards for desired behaviors. To integrate organizational
and individual needs, managers must communicate to employees how achievement of organizational
objectives can result in satisfaction of their own needs.

5.

Reinforce employee satisfaction of needs that contribute to organizational productivity. The reinforcement
of desired employee behavior can result in additional needs being satisfied and increase the chances of the
behaviors being continued. At the most basic level, this involves giving people credit for doing a good job
One of the strongest reinforcements for an employee is recognition for contributions to the organization.

When employees feel good about their jobs, it is primarily because of the nature of the work itself. Factors that
lead to positive feelings and motivation include achievement, recognition for accomplishment, responsibility, and
personal growth. The presence of these factors leads to job satisfaction and employee commitment to higher
levels of performance. Motivation factors lead to high levels of satisfaction and increased productivity when they
are present, but their absence does not lead to significant dissatisfaction. For example, responsibility leads to
feelings of satisfaction about a job, but the lack of responsibility seldom causes dissatisfaction and 'bad' feelings.
When motivation factors are present, they serve not only to increase productivity but also to develop greater
employee effectiveness. We will discuss each of the four factors in more detail.
As a motivational factor, achievement is present when employees have feelings of personal accomplishment or
the need to accomplish. For achievement motivation to be present, the job must be challenging. Two factors are
important in analyzing on-the-job achievement motivation and they are the level of achievement motivation and
the ability to perform a specific job.
For achievement to occur on the job, the individual must be able to succeed, which requires the ability to solve
job-related problems and perform effectively. If a person is to be successful in writing a book, he or she must
know how to write. For achievement to be a motivator, a person must have opportunity, ability and desire.
Factors that can increase the opportunity for on-the-job achievement include delegation of authority and
responsibility, involvement in planning and goal setting, availability of information concerning performance, and
individual control of the quality of job performance.
To function as a motivator, recognition must be the result of accomplishment. Recognition can come from the
organization, managers, fellow employees, customers, or the public. For many employees, their jobs form only a
small part of an organization's total activity, and recognition is the only way they can evaluate their achievement
and contribution to organizational objectives. Recognition may take many forms, from verbal or written
recognition to pay increases and bonuses. Regardless of the form, the motivational value of recognition does
not last very long. Frequent reinforcement is necessary for it to be of continuing motivational value.
When individuals accept responsibility for decisions affecting their work, they develop a commitment to the job.
If responsibility is to be a motivational factor, individuals must have the opportunity to accept responsibility. As
responsibility is accepted, external control can be reduced. Individuals who work under close supervision seldom
develop the desire to accept responsibility. In other words, increased job freedom and responsibility go hand in
hand.

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Individual growth takes place through development of new skills and abilities and acquisition of additional
knowledge. Growth is motivational for employees and advantageous for the organization, since it increase the
effectiveness of its human resources. Opportunities for individual growth can involve formal or on-the-job
training made available by an organization. The involvement of employees in problem solving and decision
making is a highly effective way of providing opportunities for growth, and, at the same time, increasing the
effective use of human resources. For growth to take place on the job, employees must receive timely, accurate,
and specific feedback on the quality of their performances. The most visible opportunities for growth are
through promotion, transfers, and job rotation.
Handout # 13 - How to Treat People to Improve Productivity
Basic guidelines for motivation:
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Treat people as individuals

Skills vs motivation
Use person's abilities. Match abilities to needs of organization. Adjust job if possible
Tell people how they are doing. Communicate. Praise good performance individually and publicly
Counsel poor performance. Privately and quickly
Advise about changes.
Keep promises. Don't make promises you can't keep
Use authority with good reason. Use it sparingly

In conclusion a managers job is complex. A manager needs to be a leader and a liaison for employees and for
top management. The manager must know the roles and functions of the job and know how to use them
properly. A manager must learn how to treat employees as individuals and learn how to motivate the employees
to get the most out the employees skills. Furthermore in this changing business climate the manager needs to
learn how to deal with change and make a negative situation into a positive one.