Unit 4: Management and Strategy

21 terms. Say what each one means, then open the card to check.

• Planning

  The management function of setting goals and deciding the steps, people and money needed to reach them.

  Example. The manager of a fictional bakery sets a goal of opening on Sundays by June and lists the hiring and budget steps needed to get there.

• Organizing

  The management function of arranging people, tasks and resources, such as deciding who does what and who reports to whom.

  Example. A fictional moving company splits its crew into packing and driving teams and names one lead for each team.

• Leading

  The management function of guiding, motivating and communicating with people so they work toward the organization's goals.

  Example. Before a busy holiday weekend, the head of a fictional ski rental shop explains the plan to her staff and thanks them for the long shifts ahead.

• Controlling

  The management function of measuring results against goals and taking action to correct gaps.

  Example. Each Friday a fictional print shop manager compares jobs finished with jobs scheduled, and moves a worker to the slow station when it falls behind.

• Autocratic leadership

  A style in which the leader makes decisions alone and gives clear orders. It is fast, so it fits emergencies and inexperienced teams, but it can lower motivation over time.

  Example. On the first day of a fictional summer camp, the head counselor tells each brand-new counselor exactly which group to lead and when, without asking for input.

• Democratic leadership

  A style in which the leader asks the team for ideas and involves them in decisions. It builds buy-in and uses the team's knowledge but takes more time.

  Example. The owner of a fictional bookshop asks her staff to vote on which of three new store layouts to try.

• Laissez-faire leadership

  A hands-off style in which the leader gives the team broad goals and lets members decide how to reach them. It suits skilled, self-motivated teams.

  Example. At a fictional design studio, the director sets the deadline for a logo project and lets the experienced designers plan the work.

• Key performance indicator (KPI)

  A number a business tracks over time to see whether it is reaching a specific goal, such as customer retention, delivery time or sales per employee.

  Example. A fictional hotel with a goal of cleaner rooms tracks the number of housekeeping complaints per 100 guest stays each month.

• SMART goal

  A goal that is specific, measurable, achievable, relevant and time-bound, so progress can be checked with a number by a set date.

  Example. A fictional gym changes the goal "get more members" to "add 150 members by December 31," which it can measure and check.

• Benchmark

  A standard used to judge a KPI, such as a target, the business's own past results or the results of similar businesses.

  Example. A fictional coffee chain compares its average wait time with its own target of 3 minutes and with last year's average.

• Conversion rate

  The share of people who take a wanted action, such as buying, out of everyone who had the chance. It equals actions divided by chances, as a percent.

  Example. A fictional online shoe store had 12,000 site visits and 300 orders in a week, a conversion rate of 2.5 percent.

• Employee turnover rate

  The share of a business's workers who leave during a period. It equals the number who left divided by the average number of employees, as a percent.

  Example. A fictional call center that averaged 60 agents during the year and saw 9 of them quit had a turnover rate of 15 percent.

• Strategy

  A long-term plan for how a business will reach its goals and compete, such as competing on low cost or standing out with a different product.

  Example. A fictional mattress company decides to compete by selling only online, which keeps its costs and prices below those of mattress stores.

• Decision-making process

  A set of steps for choosing well: define the problem, gather information, list options, weigh each against criteria, choose and act, then review the result.

  Example. A fictional clinic with long waits gathers data on its busiest hours, weighs three fixes, adds evening hours and checks wait times a month later.

• Weighted decision matrix

  A table that scores each option on several criteria, multiplies each score by the criterion's weight and adds the results, so the option with the highest total wins.

  Example. A fictional school club rates three fundraising ideas on expected money raised, volunteer hours needed and fun, weighting money raised most heavily, and picks the idea with the highest weighted total.

• Opportunity cost

  The value of the best option a business gives up when it makes a choice.

  Example. A fictional tailor who spends Saturday mornings on one large wedding order gives up the alterations he could have done in that time.

• SWOT analysis

  A tool that lists a business's internal strengths and weaknesses and the external opportunities and threats it faces, to guide strategy.

  Example. A fictional pizzeria lists its wood-fired oven as a strength, slow delivery as a weakness, a new office park as an opportunity and a rising price of cheese as a threat.

• Porter's Five Forces

  A framework that judges how attractive an industry is from five pressures: rivalry among competitors, the threat of new entrants, the threat of substitutes, and the bargaining power of buyers and of suppliers.

  Example. Before opening, the founder of a fictional drone-repair shop rates each of the five pressures in her city and finds most of them low.

• Barriers to entry

  Things that make it hard for new firms to enter an industry, such as high start-up costs, licenses, patents or strong brand loyalty. High barriers lower the threat of new entrants.

  Example. Building a new cement plant costs hundreds of millions of dollars, so few new firms enter the cement industry.

• Threat of substitutes

  The pressure on an industry from different products that meet the same customer need. Close, cheap substitutes limit how much the industry can charge.

  Example. Video calls are a substitute for business air travel, so they limit the fares airlines can charge some business travelers.

• Supplier bargaining power

  How much suppliers can push up prices or set terms. It is high when there are few suppliers or when switching to another supplier is costly.

  Example. A fictional bakery that can buy a special heritage flour from only one mill must accept that mill's price increases.