Page 61 - Fundamentals of Management Myths Debunked (2017)_Flat

60 Part 1 • Introduction
After several years in crisis mode, the U.S. economy and other global economies seem
to have turned the corner. However, it’s not now, nor will it ever be, smooth sailing in the
economic arena for managers. After all, when you’re dealing with important factors such
as jobs, incomes, prices of natural resources and consumer goods, stock market valuations,
and business cycle stages, managers have to pay attention to those that could constrain
organizational decisions and actions. Here’s a quick overview of some of the more interesting
characteristics of today’s economy that have the potential to influence a manager’s planning,
organizing, leading, and controlling:
• The slowdown in productivity has moderated globally although it continues to lag in the
United States. Productivity (how much a worker produces in a hour) is an important mea-
sure of how well an economy is doing. Factors that affect productivity include types and
pace of innovation, changes in work practices, technology, levels of workforce education/
training/skill, etc. 3
• Global trade, which grew strongly from the late 1970s through 2008, collapsed during the
last global recession and has continued to be sluggish. Some analysts are wondering if this
is an indicator of a potentially major macroeconomic change where the world economy is
becoming less connected. 4
• Total U.S. employment is up. The 5.5 percent unemployment rate was the lowest level in
over seven years. However, the downside is that the strongest employment growth has been
in low-wage jobs. 5
• Many U.S. workers (nearly seven million) are trapped in part-time jobs, unable to find full-
time work. 6
• Many businesses in low-wage industries (restaurants, retail, warehousing, and other
services) are using part-time workers to soften the impact of health-care law mandates. 7
• According to a New York Times poll, only 64 percent of Americans state that they still
believe in the American dream—work hard and you can achieve success and riches. This is
the lowest number in two decades. 8
These low poll numbers possibly reflect a significant risk identified by the World Economic
Forum facing business leaders and policy makers over the next decade: “severe income
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disparity.” Let’s briefly look at this issue to show that managers are constrained not just by
the actual economic numbers, but also by societal attitudes about the economy.

Economic inEquality and thE Economic contExt. A Harris Interactive Poll
found that only 10 percent of adults think that economic inequality is “not a problem at all.”
Most survey respondents believed that it is either a major problem (57 percent) or a minor
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problem (23 percent). Why has this issue become so sensitive? After all, individuals who
worked hard, took risks, and were rewarded because of their hard work or creativity have
long been admired. And yes, an income gap has always existed. In the United States, that
gap between the rich and the rest has been much wider than in other developed nations for
decades and was accepted as part of our country’s values and way of doing things. However,
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our acceptance of an ever-increasing income gap may be diminishing. As economic
growth languished and sputtered, and as people’s belief that anyone could grab hold of an
opportunity and have a decent shot at prosperity wavered, social discontent over growing
income gaps increased. The bottom line is that business leaders need to recognize how soci-
etal attitudes in the economic context also may create constraints as they make decisions and
manage their businesses.
Lastly, in this section on the economy, we want to take a look at an interesting phenom-
enon taking place in the United States and around the globe—the sharing economy.

thE Sharing Economy. Have you heard of Airbnb, Uber, Zipcar, SnapGoods?
sharing economy These are just a few of the companies—maybe you’ve used one—that are part of a fast-
An economic environment in which asset owners
share with other individuals through a peer-to-peer growing phenomenon called the “sharing economy.” What is the sharing economy? It’s
service, for a set fee, their underutilized physical an economic environment in which asset owners share with other individuals through
assets or their knowledge, expertise, skills, or time
a peer-to-peer service, for a fee, their underutilized physical assets (such as a home,