Introduction to the Field of Organizational Behavior McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Practicing OB at Brasilata Brasilata has become one of Brazil’s most innovative and productive companies by applying organizational behavior knowledge, including employee involvement, creativity, motivation, leadership, teamwork, and organizational culture. Brasilata has become one of Brazil’s most innovative and productive companies by applying organizational behavior knowledge, including employee involvement, creativity, motivation, leadership, teamwork, and organizational culture

Organizational Behavior and Organizations The study of what people think, feel, and do in and around organizations Organizations Groups of people who work interdependently toward some purpose Collective entities Collective sense of purpose Organizational behavior (OB) -- study of what people think, feel, and do in and around organizations Organizations -- groups of people who work interdependently toward some purpose • Collective entities – people interact with each other in an organized way • Organizations have a collective sense of purpose -- e.g. brewing premium pilsner or processing mail

Why Study OB? Satisfy the need to understand and predict Helps us to test personal theories Influence behavior – get things done OB improves an organization’s financial health OB is for everyone Satisfy the need to understand and predict • Helps us figure out why organizational events happen Helps us to test personal theories • Helps to question and rebuild personal theories Influence behavior • Helps people to get things done—provides knowledge and tools for working with and through others OB knowledge improves an organization’s financial health • Effective application of OB practices contributes to the organization’s bottom line • Steam Whistle Brewing Co. has flourished because it leverages human capital Organizational Behavior is for everyone • Application of OB knowledge benefits everyone no matter what profession they are in, or what position they hold in an organization.

Organizational Effectiveness The ultimate dependent variable in OB Old approach -- achievement of stated goals Problem with goal attainment Could set easy goals Company might achieve wrong goals Organizational effectiveness is considered the ultimate dependent variable in OB • OB theories and practices ultimately try to improve the organization’s effectiveness. Old and now discredited definition of organizational effectiveness • Goal attainment • Leadership could set easy goals • Goals might aim the organization in the wrong direction

Four Perspectives of Organizational Effectiveness Open Systems Perspective Organizational Learning Perspective High-Performance WP Perspective Composite of four perspectives • Open systems: they have a good fit with their external environment • Organizational learning: they are learning organizations • High-performance work practices: have efficient and adaptive internal subsystems • Stakeholder: they satisfy the needs of key stakeholders NOTE: Need to consider all four perspectives when assessing a company’s effectiveness Stakeholder Perspective NOTE: Need to consider all four perspectives when assessing a company’s effectiveness

Open Systems Perspective Organizations are complex systems that “live” within (and depend upon) the external environment Effective organizations Maintain a close “fit” with changing conditions Transform inputs to outputs efficiently and flexibly Foundation for the other three organizational effectiveness perspectives Organizations are complex systems that “live” within (and depend upon) the external environment Effective organizations • Maintain a close “fit” with those changing conditions • Transform inputs to outputs efficiently and flexibly Open systems perspective is the foundation on which the other three effectiveness perspectives are built

Open Systems Perspective External Environment subsystem Technological subsystem Accounting subsystem Raw materials Human resources Information Finances Equipment Products/services Shareholder dividends Community support Waste/pollution subsystem subsystem subsystem Engineering subsystem Marketing /Sales subsystem Transforming inputs to outputs subsystem Managerial subsystem Purchasing subsystem subsystem Production subsystem External environment – organizations depend on the external environment for resources e.g. raw materials, job applicants, financial resources, etc. • Affect the environment through their outputs • Place demands on how the organization should operate e.g. laws Internal subsystems – transform outputs into inputs e.g. departments, teams, work processes, etc. Organization – Environment Fit – organizations are effective when they maintain a good “fit” with their external environment • Anticipating change in the environment and fluidly configuring subsystems to adapt • Actively managing their external environment • Move into different environments Internal Subsystems Effectiveness – defines effectiveness on how well the organization transforms inputs to outputs • Organizational efficiency (productivity) • Coordination is vital in the relationship among internal subsystems subsystem Cultural subsystem Socialization subsystem Feedback Feedback

Organizational Learning Perspective An organization’s capacity to acquire, share, use, and store valuable knowledge Need to consider both stock and flow of knowledge Stock: intellectual capital Flow: org learning processes of acquisition, sharing, use, and storage An organization’s effectiveness depends on capacity to acquire, share, use, and store valuable knowledge Need to consider both stock and flow of knowledge • Stock of knowledge: intellectual capital • Flow: org learning processes of acquisition, sharing, and use Chapter 1: Introduction to the Field of Organizational Behavior

Intellectual Capital Human Capital Structural Capital Knowledge that people possess and generate Structural Capital Knowledge captured in systems and structures Human capital • Knowledge, skills, and abilities that employees carry around in their heads Structural capital • Knowledge captured and retained in an organization’s systems and structures e.g. documentation, finished products Relationship capital • Value derived from an organization’s relationships with customers, suppliers, and others who provide added mutual value for the organization Relationship Capital Value derived from satisfied customers, reliable suppliers, etc.

The Human Capital Advantage Employee knowledge, skills, and abilities Competitive advantage because: Helps discover opportunities and minimize threats in the external environment Rare and difficult to imitate Nonsubstitutable: Not easily replaced by technology Employee knowledge, skills, and abilities Competitive advantage because: • Helps discover opportunities and minimize threats in the external environment • Rare and difficult to imitate • Nonsubstitutable: Not easily replaced by technology

Organizational Learning Processes Knowledge Acquisition Knowledge Sharing Knowledge Use Knowledge Storage Learning Scanning Grafting Experimenting Communication Training Info systems Observation Awareness Sensemaking Autonomy Empowerment Human memory Documentation Practices/habits Databases Knowledge acquisition • Extracting information and ideas from the external environment as well as through insight e.g. hiring people, acquiring companies, when employees learn from external sources, experimentation Knowledge sharing • Distributing knowledge to others across the organization e.g. structured and informal communication, various forms of learning, intranets Knowledge use • Applying knowledge in ways that add value • Requires awareness that knowledge is available, autonomy to apply knowledge, and a culture that supports learning

Organizational Memory The storage and preservation of intellectual capital Retain intellectual capital by: Keeping knowledgeable employees Transferring knowledge to others Transferring human capital to structural capital Successful companies also unlearn The storage and preservation of intellectual capital Retain intellectual capital by: 1. Keeping knowledgeable employees 2. Systematically transferring knowledge to other employees 3. Transferring human capital to structural capital Organizational unlearning – successful companies also unlearn • Unlearn routines and patterns of behavior • Removes knowledge that no longer adds value

High-Performance Practices at American Express American Express encourages employees to go “off script,” meaning that they are empowered to customize their conversations rather than rely on memorized statements. This autonomy is one of several high performance work practices. American Express encourages employees to go “off script,” meaning that they are empowered to customize their conversations rather than rely on memorized statements. This autonomy is one of several high performance work practices.

High-Performance Work Practices Workplace practices that leverage the potential of human capital Four HPWPs (likely others) Employee involvement Job autonomy Employee competence (training, selection) Performance-based rewards Need to “bundle” them – work best together Effective organizations incorporate several workplace practices that leverage the potential of human capital Four HPWPs recognized in most studies: 1. Employee involvement 2. Job autonomy • Both of these strengthen employee motivation, improve decision making, organizational responsiveness, and commitment to change – together often take the form of selfdirected teams 3. Employee competence • Recruit and select people with relevant skills, knowledge, values and other personal characteristics • Invest in employee training and development 4. Performance/skill-based rewards • Link performance and skill development to financial and nonfinancial rewards valued by employees Note: Organizations excel by introducing a bundle of systems and structures that leverage the potential of their workforce HPWP Limitations • Provides an incomplete picture of organizational effectiveness • Gaps are mostly filled by the stakeholder perspective

Corporate Social Responsibility at MTN Group in Africa At MTN Group, Africa’s largest mobile (cell) phone company, employees help the community and environment through the company’s award-winning “21 Days of Y’ello Care” program. This photo shows MTN employees in Uganda planting trees during a Y’ello Care event. At MTN Group, Africa’s largest mobile (cell) phone company, employees help the community and environment through the company’s award-winning “21 Days of Y’ello Care” program. This photo shows MTN employees in Uganda planting trees during a Y’ello Care event

Stakeholder Perspective Stakeholders: entities who affect or are affected by the firm’s objectives and actions Personalizes the open systems perspective Challenges with stakeholder perspective: Stakeholders have conflicting interests Firms have limited resources to satisfy all stakeholder needs Stakeholders: any entity who affects or is affected by the organization’s objectives and actions e.g. employees, shareholders, suppliers, unions, government, etc. Personalizes the open-systems perspective • Identifies specific people and social entities in the environment • Stakeholder relations are dynamic i.e. can be managed Challenges with stakeholder perspective: • Stakeholders have conflicting interests • Firms have limited resources to satisfy stakeholders

Stakeholders: Values and Ethics Values and ethics prioritize stakeholder interests Values Stable, evaluative beliefs, guide preferences for outcomes or courses of action in various situations Ethics Moral principles/values, determine whether actions are right/wrong and outcomes are good or bad We rely on values and ethics to prioritize stakeholder interests Values • Relatively stable, evaluative beliefs that guide our preferences for outcomes or courses of action in various situations • Shared values – similar values held by groups of people Ethics • Study of moral principles/values, determine whether actions are right/wrong and outcomes are good or bad • Rely on ethical values to determine “the right thing to do”

Stakeholders and CSR Stakeholder perspective includes corporate social responsibility (CSR) Benefit society and environment beyond the firm’s immediate financial interests or legal obligations Organization’s contract with society Triple bottom line Economy, society, environment Stakeholder perspective includes corporate social responsibility (CSR) • Benefit society and the environment beyond the firm’s immediate financial interests or legal obligations • Organization’s contract with society—serve stakeholders beyond shareholders and customers Triple-bottom-line philosophy • Economic – survive and be profitable • Society – maintain or improve conditions • Environment – becoming “greener”

Globalization Economic, social, and cultural connectivity with people in other parts of the world Improved communication and transportation systems have increased globalization Effects of globalization on organizations Cost efficiencies, innovation, knowledge Increasing diversity Increasing competitive pressures, intensification Economic, social, and cultural connectivity with people in other parts of the world • Actively participate in other countries and cultures • Increased globalization due to improved information technology and transportation systems Effects of Globalization on Organizations • Benefits – larger markets, lower costs, greater access to knowledge and innovation • Effects on teamwork, diversity, cultural values, leadership, etc. • Increases competitive pressures, work intensification and requires additional knowledge and skills e.g. global mindset

Increasing Workforce Diversity Surface-level vs deep-level diversity Implications Better knowledge, decisions, representation, financial returns Manage challenges of diversity (e.g. teams, conflict) Ethical imperative of diversity Surface-level diversity • Observable demographic or physiological differences in people (e.g. race, ethnicity, gender, age, physical capabilities) • Increasing surface-level diversity in many countries Deep-level diversity • Differences in the psychological characteristics of employees (e.g. personalities, beliefs, values, and attitudes) • Example: Differences across age cohorts (e.g. Gen-X, Gen-Y) Consequences of diversity – opportunities and challenges • Diverse knowledge, make better decisions on complex problems, higher financial returns • Challenges of diversity (e.g. team development, conflict) • Surface-level diversity is a moral and legal imperative

Emerging Employment Relationships Work/life balance Minimizing conflict between work and nonwork demands number one indicator of career success Virtual work Using information technology to perform one’s job away from the traditional physical workplace Telecommuting – issues of social isolation, emphasis on face time, employee self-leadership Work-life balance • Degree to which a person minimizes conflict between work and nonwork demands Virtual Work • Use of information technology to perform one’s job away from the traditional physical workplace • Telecommuting (teleworking) – working at home rather than commuting to the office improves work-life balance and reduces stress • Telecommuting issues include social isolation, reduced promotion opportunities, emphasis on face time • Telecommuting better suited to people who are self-motivated, organized, work effectively with technology and fulfill social needs elsewhere • Virtual work more successful when employees are evaluated by their performance outcomes rather than face time

Organizational Behavior Anchors Systematic research anchor OB knowledge is built on systematic research Evidence-based management – decisions and actions based on research evidence rather than fads, hype, and untested assumptions Multidisciplinary anchor Many OB concepts adopted from other disciplines OB develops its own theories, but scans other fields Multidisciplinary anchor • Many OB concepts adopted from other disciplines e.g. psychology (individual and interpersonal behavior); sociology (team dynamics, organizational power); communications; marketing; information systems, etc. • OB develops its own theories, but also scans other fields Systematic research anchor • OB knowledge should be based on systematic research involving forming research questions, collecting data, and testing hypotheses • Produces evidence-based management – making decisions and taking actions on research evidence i.e. researchers rely on scientific method (rather than accepting fads and other knowledge that lacks sufficient evidence)

Organizational Behavior Anchors (con’t) Contingency anchor A particular action may have different consequences in different situations Need to diagnose the situation and select best strategy under those conditions Multiple levels of analysis anchor Individual, team, organizational level of analysis OB topics usually relevant at all three levels of analysis Contingency anchor • A particular action may have different consequences in different situations – no single solution is best all the time • Need to understand and diagnose the situation and select the strategy most appropriate under those conditions Multiple levels of analysis anchor • Individual – includes characteristics and behaviors as well as thought processes e.g. motivation, perception, and values • Team (including interpersonal) – looks at the way people interact e.g. team dynamics, decisions, power • Organizational – how people structure their working relationships and how organizations interact with their environment • OB topics usually relevant at all three levels of analysis

Introduction to the Field of Organizational Behavior