CSUN Nazarian|College of Business & Economics
Chapter 1
MGT 360 · Chapter One
Managers
and Managing
What is a manager for?
When do managers create value, and when do they merely add cost?
Prof. Deone Zell
Department of Management
David Nazarian College of Business and Economics
Department of Management
David Nazarian College of Business and Economics
California State University
Northridge
Northridge
Managers and Managing
Hello! Let’s begin this journey looking at what managers actually do? After all that is half of the title of this course..
But first, let’s look at the two companies featured in chapter 1 – Bayer and Walmart – to see why knowing what a manager does is actually important.These two companies seemingly disagree on the role of managers.
But first, let’s look at the two companies featured in chapter 1 – Bayer and Walmart – to see why knowing what a manager does is actually important.These two companies seemingly disagree on the role of managers.
CSUN Nazarian|College of Business & Economics
Chapter 1
The hook · January 2024
Two bets, one month
Two of the world’s largest employers, the same job, opposite conclusions.
Bayer · Leverkusen
Managers are overhead
- Twelve to thirteen layers between CEO and customer
- Cut layers roughly in half, two thirds of management roles
- About 12,000 positions gone, mostly managers
Walmart · Houston
Managers are the asset
- Store manager average pay $117,000 to $128,000
- Bonuses to 200 percent, $20,000 in stock
- Top packages past $400,000; market managers $620,000
Same job, same month, two companies bet opposite ways.
Two bets, one month
Bayer’s new chief executive looked at a company in crisis – debt and lawsuits and patents running out, and decided the problem was the management itself. There were twelve to thirteen layers between him and the customer. So he decided to halve the layers, remove about two thirds of the management positions, and hand ninety-five percent of the daily decisions to teams. Walmart, on the other hand, went the other way entirely. At Walmart, the average store manager pay went from one hundred seventeen thousand to one hundred twenty-eight thousand. Bonuses went up to two hundred percent of salary, twenty thousand a year in stock.
Neither company is careless, right? Yet they made two very different bets on how to deal with managers. That is what makes it interesting.
Neither company is careless, right? Yet they made two very different bets on how to deal with managers. That is what makes it interesting.
CSUN Nazarian|College of Business & Economics
Chapter 1
The unresolved question
When do managers
create value, and when
do they merely add cost?
The unresolved question
Which brings us to the real question. When do managers create value, and when do they just add cost?
CSUN Nazarian|College of Business & Economics
Chapter 1
Chapter roadmap
The road through the chapter
Tools, not slogans. Every stop carries a name, a date and a limit.
- 01Fayol 1916What management is
- 02Mintzberg 1973What managers do all day
- 03Katz 1974How the job changes by level
- 04Luthans 1988Who gets promoted, and why
- 05Lazear and GallupWhether managers measurably matter
- 06Span and AIWhat technology is taking
The road through the chapter
Here’s where we are going in the chapter. On the left are important people who came up with important ideas. We’re turning what they created into tools that we can use to analyze organizations.
Briefly: Fayol tells you what management is.
Mintzberg tells you what managers actually do all day, which turns out to look nothing like Fayol’s description.
Katz tells you how the job changes as you climb.
Luthans asks the uncomfortable question, whether the people who get promoted are the people whose teams do well.
Then we look at the evidence on whether managers measurably matter at all. We’ll also look at something called the span of control, and how AI is affecting it.
Briefly: Fayol tells you what management is.
Mintzberg tells you what managers actually do all day, which turns out to look nothing like Fayol’s description.
Katz tells you how the job changes as you climb.
Luthans asks the uncomfortable question, whether the people who get promoted are the people whose teams do well.
Then we look at the evidence on whether managers measurably matter at all. We’ll also look at something called the span of control, and how AI is affecting it.
CSUN Nazarian|College of Business & Economics
Chapter 1
Henri Fayol 1916
What management is
01
Planning
Set goals, decide how to reach them
02
Organizing
Who does what, who reports to whom
03
Leading
Direct, motivate, resolve conflict
04
Controlling
Measure against goals, correct course
POLCFAYOL 1916
Four functions any organization must accomplish, with or without managers.
Fayol: the four functions
In nineteen sixteen, a French mining executive named Henri Fayol made the first serious argument that management is a learnable activity, rather than a personality you are born with. That was not obvious then, but it had tremendous staying power, and to this day explains everything that has to happen within an organization for it to run successfully. This is how all management textbooks are organized, to this day. However, it did not really describe what managers actually do. That analysis came from Henry Mintzberg. We’ll talk about him in a minute.
CSUN Nazarian|College of Business & Economics
Chapter 1
Fayol, and the question Bayer asks of him
The functions survived
the managers.
The functions survived
But first let’s take note of the fact that in both of the two cases, Bayer and Walmart, planning, organizing, leading and controlling survive. It’s just that who carried them out differed. Whether they are performed by dedicated managers or someone else, they have to be performed.
CSUN Nazarian|College of Business & Economics
Chapter 1
Henry Mintzberg 1973
What managers actually do
Five chief executives, shadowed one week each, minute by minute.
Interpersonal
connective tissue
Figurehead
Leader
Liaison
Informational
nerve center
Monitor
Disseminator
Spokesperson
Decisional
commitments made
Entrepreneur
Disturbance handler
Resource allocator
Negotiator
Ten roles, three families, and the chapter ranks none of them.
Mintzberg: ten roles, three families
Now on to Mintzberg. In Nineteen seventy-three, Mintzberg did what almost no one had ever bothered to do. He followed five chief executives around for an entire week, watching and writing down what they did minute by minute.
What he discovered is that they actually fulfill ten different roles, which fall into three families.
In the first family is acting like a figurehead – being the visible leader of the organization, leading, and serving as a liaison between it and other important organizations. Then, the second family is informational. Doing things like monitoring production, inventory, sales, etc. And sharing the information to where it needs to go. Also acting as the spokesperson, sharing this information with people who need it.
Finally, the last family was decisional. Perhaps one of the most important because it guides where an organization is going. Acting entrepreneurial, managing disturbances and disputes, allocating resources, and negotiating.
The most important one to watch right now is the middle family, because that’s where AI and the ability to create one’s own software is changing things.
What he discovered is that they actually fulfill ten different roles, which fall into three families.
In the first family is acting like a figurehead – being the visible leader of the organization, leading, and serving as a liaison between it and other important organizations. Then, the second family is informational. Doing things like monitoring production, inventory, sales, etc. And sharing the information to where it needs to go. Also acting as the spokesperson, sharing this information with people who need it.
Finally, the last family was decisional. Perhaps one of the most important because it guides where an organization is going. Acting entrepreneurial, managing disturbances and disputes, allocating resources, and negotiating.
The most important one to watch right now is the middle family, because that’s where AI and the ability to create one’s own software is changing things.
CSUN Nazarian|College of Business & Economics
Chapter 1
Mintzberg 1975 · folklore and fact
The stopwatch
Mintzberg’s own data demolished the reflective planner.
The eight durations are illustrative; the primer supplies only the nine-minute figure, and describes the work as fragmented, verbal and interrupt-driven.
Half his executives’ activities ended in under nine minutes.
The stopwatch
So remember Fayol had said what managers do falls into those four major categories – planning, organizing, leading and controlling. But when Mintzberg followed the managers around he discovered that it was far more messy. He actually called the four functions “folklore” because it was so different than what people currently thought managers did at that time.
He found that managers were interrupted once every nine minutes – by someone asking for someone, or needing to share some information, or putting out a fire, or talking to an angry customer – whatever. It was a critically important discovery at the time.
He found that managers were interrupted once every nine minutes – by someone asking for someone, or needing to share some information, or putting out a fire, or talking to an angry customer – whatever. It was a critically important discovery at the time.
CSUN Nazarian|College of Business & Economics
Chapter 1
Robert Katz 1974
Three skills, three levels
A shifting mix of three learnable skills.
Top managers
Middle managers
First-line managers
Human
Technical
Conceptual
Katz published no percentages. The widths show his ordering only, with human skill held constant.
Human skill holds constant while the other two trade places.
Katz: three skills, three levels
Around the same time, a guy named Robert Katz came up with the idea that managers actually have to have skills, and he figured that there were three main kinds of skills: Technical skills, which is where the work actually happens – the hands on work, whether it is serving as a bank teller or pumping gas. Then there are conceptual skills, which matter most at the top; seeing how the banking industry is changing as new technology arrives, or wondering whether we still need employees to help customers pump gas at all. Then in the middle, human skills. Which turn out to be critical across every single level.
What levels are we talking about? Generally there are three levels of management: first-line managers, who are supervising the people who are actually doing the work. They may do hands on work themselves – they may help pump gas – but that’s not all they do. They also supervise the people who pump gas.
Then the middle managers are the managers who manage the front-line managers. These might be known department managers, branch or regional managers, operations managers, or project managers.
Then there are the top managers – the big cheeses. Often these managers have titles like CEO, or COO, or CIO, or CKO, or CTO – always Chief SOMETHING officer.
So what Katz found is that, as you move up the ladder, you generally need less technical skills, more conceptual skills, and – look, the same amount of interpersonal, or human skills. Which makes sense because managers are unique from other jobs in that they have to get their work done through other people. Which typically means they need to be good with people.
What levels are we talking about? Generally there are three levels of management: first-line managers, who are supervising the people who are actually doing the work. They may do hands on work themselves – they may help pump gas – but that’s not all they do. They also supervise the people who pump gas.
Then the middle managers are the managers who manage the front-line managers. These might be known department managers, branch or regional managers, operations managers, or project managers.
Then there are the top managers – the big cheeses. Often these managers have titles like CEO, or COO, or CIO, or CKO, or CTO – always Chief SOMETHING officer.
So what Katz found is that, as you move up the ladder, you generally need less technical skills, more conceptual skills, and – look, the same amount of interpersonal, or human skills. Which makes sense because managers are unique from other jobs in that they have to get their work done through other people. Which typically means they need to be good with people.
CSUN Nazarian|College of Business & Economics
Chapter 1
The promoted engineer
The star engineer, promoted
Katz explains a pattern you will meet repeatedly in this course.
What it explains
The floundering star
- The promotion changed which skills the job rewards
- Nothing in engineering built human skill
- Walmart’s manager fuses first-line and middle
Where it breaks
Comfortable vagueness
- Human skill spans listening and political maneuvering
- No evidence on how much each skill contributes
- Katz offers a pattern, not a measurement
Three quarters of Walmart’s salaried managers began as hourly associates.
The promoted engineer
Let’s stop and look at how promotion usually works and what happens. Typically someone gets promoted because they are excellent at the work. But then they struggle because after they are promoted, they are no longer rewarded for doing technical work; suddenly they are also being held accountable for other peoples’ work, and to get other people to want to do work they may not otherwise want to do typically requires good human skills!
CSUN Nazarian|College of Business & Economics
Chapter 1
Fred Luthans 1988
Successful versus effective
Are the fastest-promoted managers the ones whose units perform best?
Effectiveness lowunit and people
Effectiveness highunit and people
Success highpromoted fastest
Not measured
no figure given
<10%
ranked high on both
Success lowpromoted slowest
Not measured
no figure given
Not measured
no figure given
Fewer than one in ten managers ranked high on both.
Luthans: successful versus effective
Fast forward to Nineteen eighty-eight, and guy named Fred Luthans came up with – and posed – a radical question. Are the managers who rise the fastest also the ones whose units perform best, and whose people are the most satisfied and committed? Typically, no. Fewer than one in ten managers scored high on both.
What does that mean?
What does that mean?
CSUN Nazarian|College of Business & Economics
Chapter 1
The mechanism, and the caution
Promoted for visibility
Luthans supplies the mechanism behind the bad-manager story.
The mechanism
The system selects
- Fastest risers spent most time networking
- Most effective spent theirs communicating and developing
- Firms promote best performers, not best managers
The caution
Do not overdraw it
- Networking is not waste
- Mintzberg’s liaison role is real work
- A manager who never manages upward gets nothing
The promotion system itself selects for the wrong activities.
Promoted for visibility
Let’s see what’s going on underneath. Turns out the fastest risers spent their time networking. Socializing, politicking, working the outside. The most effective spent theirs on communication and on their people: exchanging information, motivating, handling conflict, developing somebody. So the promotion system is selecting for visibility rather than for results, and that is the mechanism sitting under every bad-manager story you have ever heard.
It’s not that networking is a waste – it’s critical, because often it’s how you get resources, or “manage up”. A manager who doesn’t manage up cannot get their team a single thing that they need.
It’s not that networking is a waste – it’s critical, because often it’s how you get resources, or “manage up”. A manager who doesn’t manage up cannot get their team a single thing that they need.
CSUN Nazarian|College of Business & Economics
Chapter 1
Lazear, Shaw and Stanton 2015
Do managers matter?
Every number here arrives with the caveat that limits it.
1.75×
The average boss contributes about 1.75 times the average worker’s productivity.
Lazear, Shaw & Stanton 2015, one firm
> one worker
A bottom-decile to top-decile swap beats adding a tenth worker.
Nine-person teams, daily output data
70%
The manager accounts for at least 70 percent of variance in team engagement.
Gallup 2015, correlational, upper bound
21%
Global engagement in 2024; an estimated $438 billion lost.
Gallup 2025, self-reported
Do managers matter?
Here is where the research can be really helpful. If we ask the question, do managers really matter, studies by these authors indicate that bosses do matter, enormously. If you replace one lousy boss with a great boss, the team under that boss can become dramatically more productive!
CSUN Nazarian|College of Business & Economics
Chapter 1
The hinge of the whole chapter
Who manages matters.
More management
does not.
The hinge of the whole chapter
So what can we conclude at this point? That who manages matters the most, not how much management there actually is. Bayer is betting that reducing the number of managers will do the trick, while Walmart is investing in its current managers.
CSUN Nazarian|College of Business & Economics
Chapter 1
Span of control and delayering
What removing a layer does
Delayering removes levels, which mechanically widens spans.
Before
Two managers, seven reports each
After
One manager, fourteen reports
Bayer’s arithmetic: twelve to thirteen layers down to six or seven, average spans from single digits to past fourteen.
Removing a layer does not delete its reports; it widens the span above.
Span of control and delayering
Let’s take a look at what happens when you reduce a layer of management. In the before and after images here, in the before, you have two managers, each supervising seven people. In the after, you have one person managing fourteen people. The span of control has increased dramatically. This can work, but it’s very hard because suddenly that one manager is in charge not just of more people, but also coaching them, motivating them, etc. So if you don’t do it right, just removing a layer of management can backfire royally.
CSUN Nazarian|College of Business & Economics
Chapter 1
The AI question
What the evidence cannot yet prove
AI absorbs the tasks that justified narrow spans.
What the study says
Flatter, deliberately
- Firms must choose which managerial tasks to automate
- And which human-centric ones to reinvest in
- Coaching, development, judgment under ambiguity
What to distrust
Both headlines
- Delayering evidence is often consultant-generated or self-reported
- By the companies doing the delayering
- Both slogans run ahead of peer-reviewed evidence
Treat both headlines with equal suspicion.
The AI question
Basically, a recent study from Harvard looked at how AI is changing work for software developers. Here is the simple version of what that means for companies and their managers:
First, AI is taking over some tasks: It is proving to be very good at handling the routine, repetitive parts of a manager's job, like reporting and coordinating. Because of this, some companies are flattening their management structures.
Second, Companies have a big choice to make: Leaders need to be intentional about what they hand over to AI versus what they keep human. Tasks that require empathy and human touch, like coaching, developing employees, and making judgment calls when things are unclear, should stay with people.
Third, Don't believe all the hype: You will hear two extreme claims: that AI will eventually replace all middle managers, or that managers are more important than ever. The researchers warn that we don't have enough solid proof yet to support either claim. It is better to treat both of those slogans with a healthy amount of skepticism.
First, AI is taking over some tasks: It is proving to be very good at handling the routine, repetitive parts of a manager's job, like reporting and coordinating. Because of this, some companies are flattening their management structures.
Second, Companies have a big choice to make: Leaders need to be intentional about what they hand over to AI versus what they keep human. Tasks that require empathy and human touch, like coaching, developing employees, and making judgment calls when things are unclear, should stay with people.
Third, Don't believe all the hype: You will hear two extreme claims: that AI will eventually replace all middle managers, or that managers are more important than ever. The researchers warn that we don't have enough solid proof yet to support either claim. It is better to treat both of those slogans with a healthy amount of skepticism.
CSUN Nazarian|College of Business & Economics
Chapter 1
Case A · Bayer, Leverkusen
Bayer removes the managers
01
Planning
Ninety-day cycles
02
Organizing
Twelve layers to six, two thousand self-directed teams
03
Leading
Coaches, not controllers
04
Controlling
Team-owned metrics, 95% of decisions
DSOBAYER 2024
Bayer kept all four functions and handed every one to somebody else.
Case A: Bayer
Now let's take the framework from earlier and put Bayer inside it. Planning went to ninety-day cycles. Organizing went to the redesign itself: twelve or thirteen layers down to six or seven, and roughly two thousand self-directed teams. Controlling went to metrics those teams own, with ninety-five percent of daily decisions pushed down to them. Leading went to coaches. Bayer’s own phrase for the shift is from a span of control to a span of coaching, which is a nice line and also a genuine change in the job. So all four functions have a destination. But notice that organizing is the odd one out. It was not handed to the teams to perform day by day. It was performed once, at the top, as the redesign, and then frozen. Hold onto that the next time somebody proposes deleting a layer.
CSUN Nazarian|College of Business & Economics
Chapter 1
Case B · Walmart · paying like owners
Walmart pays the managers
$117,000 to $128,000, bonuses to 200 percent, $20,000 in stock.
Effectiveness lowunit and people
Effectiveness highunit and people
Success highpromoted fastest
Not measured
no figure given
Salary, bonus and stock all keyed to the manager’s own store
Success lowpromoted slowest
Not measured
no figure given
Not measured
no figure given
Walmart is paying to fill the cell Luthans found nearly empty.
Case B: Walmart
Same grid as before, one thing changed inside it. Luthans found that cell close to empty. Almost nobody was both promoted fast and running a genuinely effective unit. Walmart’s compensation design is an attempt to fill that cell on purpose. Tie salary, bonus and stock to the manager’s own store, and success and effectiveness stop being two different things. That is Luthans applied strictly. A year later they extended the same logic upward, to market managers overseeing about a dozen stores each, with packages reaching six hundred twenty thousand. Whether it works is a separate question, and the risk sits in the last row of the next slide. They are adding cost to a fixed structure, and paying executive money for a role whose informational core may be shrinking underneath them.
CSUN Nazarian|College of Business & Economics
Chapter 1
The comparison
Two bets, five rows
Each case is a test, not an illustration.
Bayer
Walmart
The bet
Hierarchy is a cost
Manager quality is the asset
Core move
Cut layers, cut two thirds of management roles
Pay $128K to $620K, with stock
Theory relied on
Mintzberg; POLC distributed to teams
Lazear, Gallup, Luthans
Early evidence
Faster cycles; morale strain, crisis unresolved
Pipeline strengthened; costly, untested against AI
Fails if…
Coaching cannot survive wide spans
AI eats the informational core
Same theories, opposite predictions, on the primer’s own five rows.
The two bets, side by side
Here is a comparison table showing both companies – what they tried to do, whether it worked based on the early evidence, and what will happen in the future.
One way to think about it is that Bayer is relying on Mintzberg: if the informational work is now automatable, the layer is overhead, so it eliminated it.
Walmart is relying on Lazear and Gallup and Luthans: if boss quality is a multiplier, buy the best ones you can and pay them like it.
Will the strategies work? Bayer’s might, if what the work that the managers were doing is successfully embedded into the people who are left, but this might be a tall order because now you have one manager with much wider spans of control, and coaching – using those human skills – will get a lot harder. In Walmart’s situation – remember, Walmart is investing MORE in it’s managers, it might work UNLESS AI comes along and automates a lot of the information work that managers are doing. Which is very possible.
We’ll need to check back in a few years to find out what happened.
One way to think about it is that Bayer is relying on Mintzberg: if the informational work is now automatable, the layer is overhead, so it eliminated it.
Walmart is relying on Lazear and Gallup and Luthans: if boss quality is a multiplier, buy the best ones you can and pay them like it.
Will the strategies work? Bayer’s might, if what the work that the managers were doing is successfully embedded into the people who are left, but this might be a tall order because now you have one manager with much wider spans of control, and coaching – using those human skills – will get a lot harder. In Walmart’s situation – remember, Walmart is investing MORE in it’s managers, it might work UNLESS AI comes along and automates a lot of the information work that managers are doing. Which is very possible.
We’ll need to check back in a few years to find out what happened.
CSUN Nazarian|College of Business & Economics
Chapter 1
Analytical interpretation
What the cases do not show
Many things at once
Both changed a great deal simultaneously, in different industries, from different starting points.
Bayer’s hierarchy was extreme
Twelve layers to six may prove the evils of excess hierarchy, not hierarchy.
Walmart is unusually measurable
Results-based pay works best where results are attributable — Lazear’s own setting.
The synthesis is conditional
Value where work is variable and measurable; cost where layers only relay information.
Both companies may be right — about themselves.
What the cases do not show
Some caveats about what we just discussed. Neither the Bayer or Walmart situations are controlled experiments. Bayer’s hierarchy was extreme to begin with, so going from twelve layers to six may demonstrate the evils of far too much hierarchy rather than the evils of hierarchy as such. And Walmart’s stores are unusually measurable, which is exactly the condition that makes results-based pay work, and exactly the setting Lazear was studying. So the honest synthesis has to be conditional. Managers create value where the frontline work is variable and human and measurable at the unit. They destroy it where a layer exists mainly to relay what a system can now relay.
CSUN Nazarian|College of Business & Economics
Chapter 1
Part four · synthesis
What is a manager for?
The chapter’s tools assemble into an answer with four parts.
- 01Separate the functions from the roleAsk where each function goes
- 02Expect the informational core to shrinkSoftware takes monitoring first
- 03Quality beats quantityNothing argues for more bosses
- 04Hold your conclusion looselyBoth experiments are still running
Organizations that merely cut, or merely pay, are following fashion.
The chapter's four answers
Time to wrap it up. What are some takeaways? First, be sure to separate the function, that is, planning, organizing, leading and controlling, from the role. If you’re in an organization and somebody proposes deleting a manager, ask where each function that that manager was fulfilling is going, because it has to go somewhere.
Second, in a future where people can create their own software, one of Mintzberg’s three families of roles, the informational one, as opposed to the interpersonal or decisional, might go away or at least be reduced.
Third, quality beats quantity. The best evidence we have says that the gap between a good boss and a bad one is enormous. That’s what gave rise to the saying that people leave bad bosses, not bad jobs.
And fourth, especially since things are changing so fast, we have to look at everything conditionally and critically – so stay tuned!
Second, in a future where people can create their own software, one of Mintzberg’s three families of roles, the informational one, as opposed to the interpersonal or decisional, might go away or at least be reduced.
Third, quality beats quantity. The best evidence we have says that the gap between a good boss and a bad one is enormous. That’s what gave rise to the saying that people leave bad bosses, not bad jobs.
And fourth, especially since things are changing so fast, we have to look at everything conditionally and critically – so stay tuned!