GSB – MBA – 2010 -2012 TM I – Sep – Nov – 2010

BA 6115

Organisational BehaviourUnit I – lesson I

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“OB is concerned with the emerging realities in the work-place revolution. Knowledge is replacing infrastructure. Self-leadership is superceding command-control management. Networks are replacing hierarchies. Virtual teams are replacing committees. Companies are looking for employees with emotional intelligence, not for just technical smarts. Globalisation has become the mantra of corporate survival. Co-workers are not down the hall; they are at the end of an internet connection located somewhere else on the planet.”

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• “The organisation is above all social. It is people.” Peter Drucker

“People are the key” – Sam Walton, the founder of Wal-Mart and the richest person in the world when he died .

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•“Effective organisational behaviour is the bedrock on which effective organisational action rests. Long term competitive advantage comes from the rich portfolio of individual and team based competencies of an organisation’s employees, managers and leaders.”Hellriegal and Slocum 4

Ch I-Understanding OB• Introduction and back ground• Definition• Management skills• Generalisations about behaviour• Theoretical framework• Models of OB

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Definition • Organizational behaviour, is “… a

study and application of knowledge about human behaviour – as individuals and in groups – in orgns – strives to identify ways in which people can act more effectively.”

• “The understanding, prediction and management of human behaviour in organisations.”

• Is an applied science- best practices in one orgn can be communicated to others6

Insert Figure 1.1 here

What is Organizational Behavior?

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• Organizational Behaviour studies encompass the study of organizations from multiple viewpoints, methods, and levels of analysis. Provides a set of useful tools;-at the individual level- interpersonal relations,- at the group level – group dynamics – formal teams and informal groups – inter-group relations,- at the orgn level – inter-organisational gps – M&As.

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• Traditional distinction, present especially in American academia, is between the study of "micro" organizational behavior—which refers to individual and group dynamics in an organizational setting-

• and "macro" organizational theory which studies whole organizations, how they adapt, and the strategies and structures that guide them.

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• To this distinction, some scholars have added an interest in "meso" -- primarily interested in power, culture, and the networks of individuals and units in organizations—and "field" level analysis which study how whole populations of organizations interact. In Europe these distinctions do exist as well, but are more rarely reflected in departmental divisions.

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Why Study Organizational Behavior

OrganizationalOrganizationalBehaviorBehaviorResearchResearch

UnderstandUnderstandorganizationalorganizational

eventsevents

PredictPredictorganizationalorganizational

eventsevents

InfluenceInfluenceorganizationalorganizational

eventsevents

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Goals

• Describe how people behave under a variety of conditions

• Understand why people behave as they do• Predict future employee behaviour• Control and develop human activity at

work to improve productivity, skill improvement, team effort, etc

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Forces

• People- individuals and groups• Structure- jobs and relationships• Technology-machinery, computers• Environment-govt, competition, social

pressures.All the above forces interact on each other

resulting in OB.

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The major problem is and will continue to be managing people – the HRs of the organisation – the major challenge and critical competitive advantage. Globalisation, diversity, strategic partnerships, emphasis on TQM, environmental issues, Corporate Governance and ethics serve as important contextual or environmental dimensions for OB.

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• Technology can be purchased or copied, it levels the playing field.

• The people, cannot be copied. It is possible to clone human bodies- their ideas, personalities, motivation, and organisation cultural values cannot be copied.

• The HRs of an organisation and how they are managed represent the competitive advantage of today’s and tomorrow’s organisations.

• A study of over 300 cos for more than 20 yrs found that management of human resources through extensive training and techniques such as empowerment resulted in performance benefits, but operational initiatives such as TQM or advanced manufacturing technology did not.

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Generalisations about human behaviour> happy workers are productive workers.

> Individuals are most productive when the boss is friendly, reliable and unassuming.> behaviour of good leaders is consistent irrespective of the situations they face.> Interviews are effective selection devices.> Everybody likes a challenging job> People will have to be bullied/intimidated to make them to do their jobs.> Money motivates all. > People are more concerned about their own salaries than others’.> Members of effective groups do not quarrel among themselves. 16

Levels of Analysis

Group Level

Individual Level

Organizational Level

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Characteristics of OB

• Inter-disciplinary• Research based – theories and practice• Increased acceptance of findings by

managers

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Components of Organizational BehaviorUnderstanding

organizational behavior requires studying

Part One Individuals in Organizations

Part Two Group and Team Processes

Part Three Organizational Processes

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A Short History of Organizational Behavior

The Greek philosopher Plato wrote about the essence of leadership. Aristotle addressed the topic of persuasive communication. The writings of the Chinese philosopher Confucius in 500 BC are beginning to influence contemporary thinking about ethics and leadership. The writings of 16th century Italian philosopher Niccolò Machiavelli laid the foundation for contemporary work on organizational power and politics. 20

In 1776, Adam Smith advocated a new form of organizational structure based on the division of labour. One hundred years later, German sociologist Max Weber wrote about rational organizations and initiated discussion of charismatic leadership.

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• Soon after, Frederick Winslow Taylor introduced the systematic use of goal setting and rewards to motivate employees. In the 1920s, Australian-born Harvard professor Elton Mayo and his colleagues conducted productivity studies at Western Electric's Hawthorne plant in the United States. They discovered the importance of formal and informal group dynamics in the work place, resulting in a dramatic shift towards the ‘human relations’ school of thought.

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• Though it traces its roots back to Max Weber and earlier, organizational studies is generally considered to have begun as an academic discipline with the advent of scientific management in the 1890s, with Taylorism representing the peak of this movement. Proponents of scientific management held that rationalizing the organization with precise sets of instructions and time-motion studies would lead to increased productivity. Studies of different compensation systems were carried out.

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• After the First World War, the focus of organizational studies shifted to analysis of how human factors and psychology affected organizations, a transformation propelled by the identification of the Hawthorne Effect. This Human Relations Movement focused on teams, motivation, and the actualization of the goals of individuals within organizations.

• Prominent early scholars included Chester Barnard, Henri Fayol, Frederick Herzberg, Abraham Maslow, David McClelland, and Victor Vroom.

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• The Second World War further shifted the field, as the invention of large-scale logistics and operations research led to a renewed interest in rationalist approaches to the study of organizations. Interest grew in theory and methods native to the sciences, including systems theory, the study of organizations with a complexity theory perspective and complexity strategy. Influential work was done by Herbert Alexander Simon and James G. March and the so-called "Carnegie School" of organizational behavior.25

• In the 1960s and 1970s, the field was strongly influenced by social psychology and the emphasis in academic study was on quantitative research. An explosion of theorizing, much of it at Stanford University and Carnegie Mellon, produced Bounded Rationality, Informal Organization, Contingency Theory, Resource Dependence, Institutional Theory, and Organizational Ecology theories, among many others.

• Starting in the 1980s, cultural explanations of organizations and change became an important part of study. Qualitative methods of study became more acceptable, informed by anthropology, psychology and sociology. A leading scholar was Karl Weick

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• Frederick Winslow Taylor Frederick Winslow Taylor (1856–1915) was the first person who attempted to study human behavior at work using a systematic approach. Taylor studied human characteristics, social environment, task, physical environment, capacity, speed, durability, cost and their interaction with each other. His overall objective was to reduce and/or remove human variability.

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• Taylor worked to achieve his goal of making work behaviors stable and predictable so that maximum output could be achieved. He relied strongly upon monetary incentive systems, believing that humans are primarily motivated by money. He faced some strong criticism, including being accused of telling managers to treat workers as machines without minds, but his work was very productive and laid many foundation principles for modern management studies. 28

Four Principles of Scientific Management

1. Study the way employees perform their tasks, gather informal job knowledge that employees possess, and experiment with ways of improving the way tasks are performed.

2. Codify the new methods of performing tasks into written rules and standard operating procedures.

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Four Principles of Scientific Management

3. Carefully select employees so that they possess skills and abilities that match the needs of the task, and train them to perform the task according to the established rules and procedures.

4. Establish an acceptable level of performance for a task, and then develop a pay system that provides a reward for performance above the acceptable level.

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The Hawthorne Studies• Hawthorne Works of the Western Electric

Company near Chicago; 1924-1932 – these studies mark the starting point of the field of Organisational Behaviour

• Initiated as an attempt to investigate how characteristics of the work setting affect employee fatigue and performance (i.e., lighting).

• Found that productivity increased regardless of whether illumination was raised or lowered.

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Started in 1924– to examine the relationship between light intensity and employee productivity – a test group and a control group were used – the test group initially did not show any increase or decrease in output in proportion to the increase/decrease in illumination. The control group with unchanged illumination increased output by the same amount overall by the test group. Subsequent phases brought the level of light down to moonlight intensity: the workers could barely see what they were doing, but productivity increased. The results baffled the researchers. Obviously, something besides the level of illumination was causing the change in productivity – the complex human variable.32

The serendipitous results of these experiments provided the impetus for the further study of human behaviour in the work place.

Subsequent phase – relay room, where operators assembled relay switches – test specific variables, such as length of workday, rest breaks, and method of payment. – basically the same results – each test period yielded higher productivity than the earlier one. Even when the workers were subjected to the original conditions of experiment, productivity increased–that was causing the change in the output. 33

• Conclusion – the independent variables (rest pauses, etc.,) were not by themselves causing the change in the dependent variable (output). Something was still not being controlled.

• The bank wiring room study: the bank wirers were placed in a separate test room. No experimental changes during the study – an observer and an interviewer gathered objective data – department’s regular supervisors were used to maintain order and control. 34

Findings were opposite to relay room experiments – output was restricted – informal group norm was lower than management’s – social pressures used to gain compliance with group norms. The incentive system dictated that the more a worker produced, the more money he would earn – Also, the best producers will be laid off last – In spite of this output was restricted. Social ostracism, ridicule, and name-calling were the major sanctions used by the group to enforce this restriction. In some cases, actual physical pressure in the form of a game called ‘binging’ was applied. In this, a worker will be hit as hard as possible, with the privilege of returning one ‘bing’ or hit. Forcing rate-busters play the game was an effective sanction. Group pressures more effective than management incentives

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Implications• Workers’ preference to work in the relay

room, because of:i. Small groupii. Type of supervisioniii Earningsiv Novelty of the situationv. Interest in the experimentvi attention received in the test room

The last 3 associated with “Hawthorne Effect” – special attention paid to them

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summary• Factors influencing behavior:

– Attention from researchers– Manager’s leadership approach– Work group norms

• The “Hawthorne Effect”

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Mary Parker Follett

• Management must consider the human side• Employees should be involved in job

analysis• Person with the knowledge should be in

control of the work process regardless of position

• Cross-functioning teams used to accomplish projects

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Douglas McGregor: Theory X and Theory Y

Theory X• Average employee is lazy,

dislikes work, and will try to do as little as possible

• Manager’s task is to supervise closely and control employees through reward and punishment

Theory Y• Employees will do what is

good for the organization when committed

• Manager’s task is create a work setting that encourages commitment to organizational goals and provides opportunities for employees to be exercise initiative

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• At first employees were considered a cost, then Human Resources, and now are becoming widely recognised as ‘human capital’ (what you know – education, experience, skills). Investing in this capital results in desired performance outcomes such as increased productivity and customer satisfaction.

• Even going beyond human capital are more recently recognised as ‘social capital’ ( who you know – networks, connections, friends), and ‘positive psychological capital’ ( who you are – confidence, hope, optimism, resiliency and more importantly who you can become, i.e., one’s possible authentic self).40

• Growing research evidence that employees’ psychological capital is positively related to their performance and desired attitudes.

• As the ultimate ‘techie’ Bill Gates observed;

“the inventory, the value of my company, walks out the door every evening.”

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“Because management is always about people, its essence is dealing with human nature. Since human nature seems to have been extremely stable over recorded history, the essence of management has been extremely stable over recorded history, the essence of management has been and will be equally stable over time.”Geert Hofstede – International Management scholar

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Challenges to Management

• Today’s challenges to management:- a turbulent economy- dangerous geopolitics

• At the organisation’s level:- understanding global competition- diversity- ethical problems

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The nature of work and the work place itself, the traditional employment contract, and the composition of the workforce are all dramatically changing – yet human behaviour is still to be understood in full.

Although the problems with human organisations and the solutions over the ages have not changed much, the emphasis and surrounding environmental context have changed.44

• E.g., In the 1980s and 90smanagers were preoccupied with restructuring their organisations to improve productivity and meet the competitive challenges in the international market place and quality expectations of customers. – the resulting ‘lean and mean’ organisations offered some short run benefits in terms of lowered costs and improved productivity, instead of making significant changes to meet the changing environment, most organisations continued with more of the same.

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• E.g., one analysis of Fortune 500 firms between 1995 and 2005 found – the most prominent initiatives were;- restructuring (downsizing),- cost reduction programmes,- globalising supply chains,- creating shared services, and,- Six Sigma (almost perfect).

Top management compensation was primarily tied to stock options and thus to the firm’s stock price – led to high risk mergers, acquisitions, and a highly regulated winner-take-all environment. 46

e.g., the head of the nearly century-old investment house Merryl Lynch bet his firm – and ultimately lost – on the sub-prime financial market and out-sized leverage – a whopping $160 mln severance package on exit.

This type of behaviour and many other social, economic and geopolitical factors led to the stock market crash in 2008 – most of the focus had been on financial markets, massive unemployment, impact on those not laid off, the remaining employees has been slighted.

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• An expert on corporate psychology noted:“After years of downsizing, outsourcing,

and a cavalier attitude that treats employees as costs rather than assets, most of today’s workers have concluded that the company no longer values them. So they, in turn, no longer feel engaged in their work or committed to the company.”

The turmoil has left employees hurt and fearful, feeling very vulnerable – the single most prominent thought of people all over the world is “I want a good job.”

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• The Head of Gallup, at the end of the survey, said:“Work is crucial to every adult human because work holds within it the soul of the relationship of one citizen to one government and one country.”

Ideal time for meeting challenges in HRM. “A crisis is a terrible thing to waste.” - Jim Collins

The time has come not only to recognise and appreciate the importance of human resources, but also to use recent history as a catalyst for paradigmatic change in the way we understand and use HRs. – What is a “paradigm” shift?

Not just keeping up with incremental change, but a new way of thinking about and managing HRs in today’s dramatically changed work place.

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Paradigm ShiftThe term comes from the Gk word ‘paradeigma,’

meaning, “ a model, pattern or example.”Introduced by philosophy-of-science historian

Thomas Kuhn, paradigm now means a broad model, a framework, a way of thinking or a scheme for understanding reality – the rules , defines the boundaries and tells one how to behave within those boundaries to be successful – impact of globalisation, - work force consisting of post war increase in population, Gen Xers (born in the late 60s and 70s ), and people with inadequate literacy skills from disadvantaged areas, and techies raised on computers has led to a paradigm shift. 50

•E.g., James Brian Quinn refers to the ‘Intelligent enterprise’ as the new paradigm – “ the organisation of enterprises and effective strategies will depend more on development and deployment of intellectual resources than on the management of physical assets.”

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• A new set of challenges and required ways of thinking. For today’s and tomorrow’s organisations and management to be successful, there are new rules with different boundaries – require new and different behaviour inside the boundaries for organisations and management to be successful. Paradigm shifts have invalidated the advantages of certain firms, e.g., almost all auto, financial and retail firms, in recent years and created new opportunities for others. (e.g., Google).

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Paradigm effectA situation in which those in the existing

paradigm may not even see the changes that are occurring, let alone reason and draw logical inferences and perceptions about changes. – explains why there is considerable resistance to change and why it is difficult to move from old management paradigm to the new. There is discontinuous change in the shift to the new paradigm.

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• As one author put it:“ The depth of change required demands

that those charged with charting a passage through hurricane like seas do more than run up a new set of sails. What is involved equates to a quantum shift in, not just learning, but how we learn, not just doing things differently, but questioning whether we should be doing many of the things we currently believe in, at all; not just in drawing together more information, but in questioning how we know what it is (we think) we know.” 54

Contributing Disciplines to the OB Field

E X H I B I T 1-3a55

Contributing Disciplines to the OB Field

E X H I B I T 1-3c56

Contributing Disciplines to the OB Field

E X H I B I T 1-3b57

Contributing Disciplines to the OB Field

E X H I B I T 1-3c58

Contributing Disciplines to the OB Field

E X H I B I T 1-3d59

Contributing Disciplines to the OB Field

E X H I B I T 1-3f60

5 OB Models

given by Keith Davis and Newstrom are:

1) Autocratic 2) Custodial 3) Supportive 4) Collegial 5) Systems

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AUTOCRATIC MODEL• The basis of this model is power with a

managerial orientation of authority. The employees in turn are oriented towards obedience and dependence on the boss. The employee need that is met is subsistence. The performance result is minimal - most prevalent during he industrial revolution – persons in power can demand work from workers – pushing, directing and persuading – tight control – unfair practices, low payment and exploitation – employees put in min work in the job to serve the basic needs of the family - though harsh, it has worked well in certain conditions, e.g., organisational crisis.

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Custodial • The basis of this model is economic resources

with a managerial orientation of money. The employees in turn are oriented towards security and benefits and dependence on the organization. The employee need that is met is security. The performance result is passive cooperation. To perk up the sagging morale of the workers under the autocratic model employers began to offer various welfare schemes in the 19th century – paternalism – fringe benefits – job security.

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• E.g., IBM makes considerable efforts to stabilise the workforce and preserve their jobs – reduces overtime, freezes hiring, allows job transfers and offers retirement incentives and lessens sub-contracting to adjust IT slow downs. The organisation should have considerable resources to pay pension benefit from physical needs to security needs.

• Workers depend more on the organisation and less on the managers – ensures loyalty – economic rewards are assuredeven if the employee does not perform – contented – but performance may decline because of job security – 1940s and 50s – University of Michiganconducted studies which revealed that happy employees are not necessarily the ost producticve employees. 64

Supportive The basis of this model is leadership with a

managerial orientation of support. The employees in turn are oriented towards job performance and participation. The employee need that is met is status and recognition. The performance result is awakened drives.

“The leadership and other processes of the organisation must be such as to ensure a maximum probability that in all interactions and all relationships within the organisation each member will, in the light of his or her back ground, values, and expectations view the experience as supportive and one which builds and maintains his or her sense of personal worth and importance.” e.g., TATAs.

Ensures organisatinal harmony. 65

Collegial • The basis of this model is partnership with a

managerial orientation of teamwork. The employees in turn are oriented towards responsible behavior and self-discipline. The employee need that is met is self-actualization. The performance result is moderate enthusiasm. “Collegial” means a group of people working for a common purpose. Manager is not addressed as ‘boss’ but is a facilitator. Employees are self disciplined, self content and self actualised. E.g., a R&D team or a project team.

• Although there are four separate models, almost no organization operates exclusively in one. There will usually be a predominate one, with one or more areas over-lapping in the other models.

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•  Autocratic Custodial Supportive Collegial • Model depends on • PowerEconomic resourcesLeadershipPartnershipManagerial

orientationAuthorityMoneySupportTeamworkEmployee orientationObedienceSecurityJobResponsiblityEmployee psychological resultDependence on bossDependence on organizationParticipationSelf-disciplineEmployees needs metSubsistemceMaintenanceHigher-orderSelf-actualizationPerformance resultMinimumPassive cooperationAwakened drivesModerate enthusiasm 

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autocratic Custodial Supportive Collegial

Model depends on Power Economic resources Leadership Partnership

Managerial orientation Authority Money Support Teamwork

Employee orientation Obedience Security Job Responsibility

Employee psychological result

Dependence on boss

Dependence on

organizationParticipation Self-discipline

Employees needs met Subsistence Maintenance Higher-order Self-actualization

Performance result Minimum Passive cooperation

Awakened drives

Moderate enthusiasm