A Strategic Approach To Organizational Behavior Chapter 1 A Strategic Approach To Organizational Behavior Michael A. Hitt C. Chet Miller Adrienne Colella

Knowledge Objectives Define organizational behavior and explain the strategic approach to OB. Provide a formal definition of organization. Describe the nature of human capital. Discuss the conditions under which human capital is a source of competitive advantage for an organization. Explain the five characteristics of high-involvement management and the importance of this approach to management.

Basic Elements of Strategic Organizational Behavior The actions of individuals and groups in an organizational context. Managing organizational behavior Actions focused on acquiring, developing, and applying the knowledge and skills of people. Strategic approach to OB An approach that involves organizing and managing the people’s knowledge and skills effectively to implement the organization’s strategy and gain a competitive advantage.

Factors and Outcomes of Strategic Approach Organizational Factors (culture, work environments, adaptability Organizational Success Satisfaction of Individuals and Groups Productivity of Individuals and Groups Individual Factors (learning ability, personality, values, motivation, stress) Interpersonal Factors (leadership, communication, decision-making skill, intra- and inter-group dynamics, communication) Adapted from: Exhibit 1.1 Factors and Outcomes of a Strategic Approach to Organizational Behavior

Strategic OB Lens Organization Level Activities Required Skills Senior Managers Talk with insiders and outsiders about Vision Strategy Other major issues Conceptualizing Communicating Understanding the perspectives of others Help middle managers Define and redefine their roles Manage conflict Listening Conflict management Negotiating Motivating Create and maintain the organization’s culture Interpersonal influence

Strategic OB Lens Organization Level Activities Required Skills Middle Managers Champion strategic ideas Help firm to remain adaptive Networking Communicating Influencing Process data and information for use by other individuals Analyzing Communicating Deliver strategic initiatives to lower-level managers Communicating Motivating Understanding values Managing stress

Strategic OB Lens Organization Level Activities Required Skills Lower-level Managers Coaching firm’s associates (workers) Teaching Listening Understanding personalities Managing stress Removing obstacles for associates Deal with personal problems of associates Negotiating Influencing others Counseling Understanding personalities Design jobs, team structures, and reward systems Negotiating Group dynamics

Foundations of Strategic OB Behavioral science disciplines Psychology Social psychology Sociology Economics Cultural anthropology Strategic approach integrates knowledge from all these disciplines Strategic approach focuses on behaviors and processes that help to create competitive advantages and financial success (goal is to improve the outcomes of organizations)

Common Features of Organizations Network of individuals System Coordinated activities Division of labor Goal orientation Continuity over time, regardless of change in individual membership

Human Capital and Competitive Advantage Human capital: The sum of the skills, knowledge, and general attributes of the people in an organization Competitive advantage: An advantage enjoyed by an organization that can perform some aspect of its work better than competitors or in a way that competitors cannot duplicate such that it offers products/services that are more valuable to customers

Human Capital as Source of Competitive Advantage Human Capital Value Human Capital Imitability Associates are capable of performing the basic work of the organization Skills and talents of associates cannot be copied by other organizations Human Capital Rareness Skills and talents of associates are unique in the industry

Human Capital as Source of Competitive Advantage Are human resources in the firm . . . Valuable Rare Difficult to imitate Supported by effective management Competitive implications Performance No Competitive Disadvantage Below Normal Yes No Competitive Parity Normal Yes Yes No Temporary Competitive Advantage Above Normal Yes Yes Yes Sustained Competitive Advantage Above Normal Exhibit 1.2 Human Capital and Competitive Advantage Source: Adapted from J. Barney and P. Wright, “On Becoming a Strategic Partner,” Human Resource Management 37 (1999): 31–46.

Dimensions of High-Involvement Management Exhibit 1.3 Dimensions of High-Involvement Management Aspect Description Selective Hiring Large pools of applicants are built through advertising, word of mouth, and internal recommendations. Applicants are evaluated rigorously using multiple interviews, tests, and other selection tools. Applicants are selected on the basis of not only skills but also fit with culture and mission. Extensive Training New associates and managers are thoroughly trained for job skills through dedicated training exercises as well as on-the-job training. They also participate in structured discussions of culture and mission. Existing associates and managers are expected or required to enhance their skills each year through in-house or outside training and development. Often, existing associates and managers are rotated into different jobs for the purpose of acquiring additional skills. Exhibit 1.3 Dimensions of High-Involvement Management

Dimensions of High-Involvement Management Exhibit 1.3 Dimensions of High-Involvement Management Aspect Description Decision Power Associates are given authority to make decisions affecting their work and performance. Associates handle only those issues about which they have proper knowledge. Lower-level managers shift from closely supervising work to coaching associates. In addition to having authority to make certain decisions, associates participate in decisions made by lower-level and even middle managers. Information Sharing Associates are given information concerning a broad variety of operational and strategic issues. Information is provided through bulletin boards, company intranets, meetings, posted performance displays, and newsletters. Incentive Compensation Associates are compensated partly on the basis of performance. Individual performance, team performance, and business performance all may be considered. Exhibit 1.3 Dimensions of High-Involvement Management

High-Involvement Managers Identify situations in which responsibility can be delegated Manage through encouragement and commitment rather than fear and threats Respect and value each associate’s skills and knowledge Empower people in ways that are consistent with their uniqueness as individuals Invest effort in building and maintaining trust

Managing Organizational Behavior Exhibit 1.4 Managing Organizational Behavior for Competitive Advantage