Organizational Behavior

Fred Luthans

An Evidence-Based Approach

12th Edi t ion

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ISBN 978-0-07-353035-2MHID 0-07-353035-2

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The Twelfth Edition of Organizational Behavior: An Evidence-Based Approach is ideal for those who wish to take an up-to-date, evidence-based approach to organizational behavior and management. This latest edition continues the tradition of narrowing the theory/research effective application/practice gap by incorporating recent breakthrough research to provide and add to the evidence on the theories and techniques presented throughout the text.

New to the Twelfth Edition:> The new subtitle An Evidence-Based Approach reafrms the importance of the research

foundation to the text. A new major section has been added to Chapter 1 that explains why this evidence-based focus is so critical and what it entails.

> Because communication, decision making, and perception continue to be important to or-ganizational behavior, Chapter 8, Communication and Decision Making, has been com-pletely revised and the concept of perception has been added to Chapter 5, Personality, Perception and Employee Attitudes.

> Besides updating the evidence-base and providing new real-world examples in each chapter, breakthroughs on important new topics such as the following are included:

on organizational behavior

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OrganizationalBehaviorAn Evidence-Based Approach Twelfth Edition

Fred LuthansGeorge Holmes Distinguished Professor of Management, University of Nebraska

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ORGANIZATIONAL BEHAVIOR: An Evidence-Based Approach

Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright 2011, 2008, 2005, 2002, 1998, 1995, 1992, 1989, 1985, 1981, 1977, 1973 by The McGraw-Hill Companies, Inc. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

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Vice president and editor-in-chief: Brent GordonPublisher: Paul DuchamDirector of development: Ann TorbertManaging development editor: Laura Hurst SpellEditorial coordinator: Jane BeckVice president and director of marketing: Robin J. ZwettlerAssociate marketing manager: Jaime HaltemanVice president of editing, design and production: Sesha BolisettySenior project manager: Harvey YepSenior production supervisor: Debra R. SylvesterDesign coordinator: Joanne MennemeierMedia project manager: Suresh Babu, Hurix Systems Pvt. Ltd.Cover design: Joanne MennemeierCover image: Digital VisionTypeface: 10.5/12 Times RomanCompositor: Glyph InternationalPrinter: Worldcolor

Library of Congress Cataloging-in-Publication Data

Luthans, Fred.Organizational behavior : an evidence-based approach / Fred Luthans.12th ed.

p. cm.Includes index.ISBN-13: 978-0-07-353035-2 (alk. paper)ISBN-10: 0-07-353035-2 (alk. paper)1. Organizational behavior. I. Title.

HD58.7.L88 2011658.4dc22

2009041522

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For Kay, Kristin, Brett, Kyle, and Paige

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iv

Fred Luthans is the George Holmes Distinguished Professor of Management atthe University of NebraskaLincoln. He received his B.A., M.B.A., and Ph.D. from theUniversity of Iowa where he received the distinguished alumni award in 2002, and didpostdoctoral work at Columbia University. While serving as a Captain in the U.S. Army,he taught at the U.S. Military Academy at West Point. He has been at the University ofNebraska since 1967, his entire academic career, and won the distinguished teachingaward in 1986, the excellence in graduate education award in 2000, and in 2008 the high-est award in the system for outstanding research. In 2003, he received an honorary doc-torate from DePaul University. A prolific writer, he has published a number of majorbooks and about 200 articles in applied and academic journals. His book OrganizationalBehavior Modification, coauthored with Robert Kreitner, won the American Society ofPersonnel Administration award for outstanding contribution to human resource man-agement, and another book entitled Real Managers is the result of a four-year researchstudy that observed managers in their natural settings. International Management, coau-thored with the late Richard Hodgetts and Jonathon Doh, also published by McGraw-Hill,is in its seventh edition. He also has two recent books, The High Impact Leader (withBruce Avolio, McGraw-Hill, 2006) and Psychological Capital (with Carolyn Youssef andBruce Avolio, Oxford, 2007). The co-editor-in-chief of the Journal of World Business,Professor Luthans is also the editor for Organizational Dynamics and Journal of Lead-ership and Organizational Studies. He has been very active in the Academy of Man-agement over the years and was elected a fellow in 1981. He is a former president ofthe National Academy in 1986 and, in 1997, received the Academys distinguished edu-cator award. In 2000 he became an inaugural member of the Academys Hall of Famefor being one of the Top Five all-time published authors in the prestigious Academyjournals. Also active in the Decision Sciences Institute (DSI), he was elected a fellow in1987. Professor Luthans has a very extensive research program at the University ofNebraska. Most recently, he has developed positive organizational behavior, or POB(outlined in 2002 articles in the Academy of Management Executive and Journal ofOrganizational Behavior), and is conducting research on positive psychological capitaland, with close colleague Bruce Avolio, authentic leadership. He has been a visitingscholar at a number of universities in the United States and has lectured at universitiesand conducted workshops for managers in many countries around the world. In recentyears, he has been actively involved in Germany, China, Thailand, Singapore, Russia,Albania, and Macedonia. In addition, he has been on the executive committee of theannual Pan Pacific Conference since its beginning in 1984 and in 1995 was elected a fel-low. This international research and experience is reflected in his approach to the fieldof organizational behavior. In addition, he is an active consultant and trainer to both private-(such as Walmart and Ameritas Life Insurance, Inc.) and public-sector organizations.Since 1998 he has been a senior research scientist with the Gallup Organization. He isan avid golfer and University of Nebraska sports fan. He and Kay, his wife of 47 years,have four grown children and so far six adorable grandchildren.

About the Author

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vPrefaceHere is the twelfth edition. As I indicated in the last edition, I am still in what positivepsychologists call flow. I am so engrossed and passionate about my field of organiza-tional behavior that time just flies. As I have said before, I take considerable pride in thesustainability of this text. It took me four years to write the first edition, and then abouta year to do each subsequent edition. Because of the rapidly expanding body of knowl-edge in organizational behavior, these revised editions through the years have becomeincreasingly challenging. However, I am stillactually even more than everin flow intrying to keep this first mainline organizational behavior text totally up-to-date with thevery latest and relevant theory building, basic and applied research, and best-practiceapplications. I decided with this edition to give special recognition of this scientific foun-dation by adding the subtitleAn Evidence-Based Approach.

As is now emphasized in the introductory chapter, the time has come to help narrowthe theory/researcheffective application/practice gap. This has been my mission fromthe beginning of this text and my now over 20-year editorship of the journalOrganizational Dynamics. As hard evidence for this theory/research base for this text,I can say unequivocally that no other organizational behavior text has close to the num-ber of footnote references. For example, whereas a few texts may have up to 40 or even50 references for some chapters, the chapters of this text average more than twice thatamount. This latest edition continues the tradition by incorporating recent breakthroughresearch to provide and add to the evidence on the theories and techniques presentedthroughout.

Before getting into the specific additions of this new edition, I would like to again pointout the distinguishing features that no other organizational behavior textbook can claim:

1. I am convinced at this stage of development of the field of OB, we need a compre-hensive theoretical framework to structure our introductory textbooks. Instead of apotpourri of chapters and topics, and maybe using an inductive (or should it be deduc-tive?) sequencing, there is now the opportunity to have a sound conceptual frameworkto present our now credible (evidence-based) body of knowledge. I use the widelyrecognized, very comprehensive social cognitive theory to structure this text. I presentthe background and theory building of this framework in the introductory chapter andalso provide a specific model (Figure 1.5) that fits in all 14 chapters. Importantly, thelogic of this conceptual framework requires two chapters not found in other texts andthe rearrangement and combination of several others. For example, in the organizationalcontext part there is Chapter 4, Reward Systems, and in the cognitive processes part,Chapter 7, Positive Organizational Behavior and Psychological Capital, that no othertext contains.

2. Besides having the only comprehensive theoretical framework for an introductory OBtext, a second unique feature is one or more OB Principles at the end of each chap-ter. Importantly, these principles are derived from meta-analytic research findings. Thereason for including meta-analytically derived principles is that the field of organiza-tional behavior has matured to the point where there are not just isolated studies buta stream of research on a number of topics that now need to be systematically (quan-titatively) summarized for students and practitioners. For example, Alex Stajkovic andI have completed a meta-analysis of the studies with which I have been most closelyassociated over the past 35 years, focusing on the positive effect that organizationalbehavior modification (O.B. Mod.) has on task performance. (This analysis is published

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in the Academy of Management Journal; a follow-up research study conducted in thelargest credit card processing company in the world is in a subsequent issue of AMJ;another meta-analysis of all behavioral management studies with emphasis on the dif-ferent types of interventions was published in Personnel Psychology; and mostrecently nonfinancial rewards were found to be as impactful on unit performance out-comes and employee retention over time as were financial rewards, published in the Journal of Applied Psychology with Suzanne Peterson). In addition, Alex and I pub-lished in Psychological Bulletin a meta-analysis (114 studies, 21,616 subjects) thatfound a very strong positive relationship between self-efficacy and task-related per-formance. These provide end-of-chapter evidence-based OB Principles.

3. A third unique feature is an Evidence-Based Consulting Practices summary to openup each major part of the text. Specifically, in addition to my long academic appoint-ment at the University of Nebraska, since 1998 I have been a senior research scien-tist with the Gallup Organization. Mostly known for the famous Gallup Poll, thisworld-class firm also has a widely known management consulting practice. Abouthalf of the Fortune 50 are among Gallups recent clients. With my input, TimHodges, executive director of Gallup University, drew from Gallups tremendous sur-vey research-base consisting of thousands of organizations and millions of peopleover the years. We provide Gallups evidence-based practices relevant to each majorpart of the text.

4. The fourth unique feature reflects my continuing basic research program over theyears. Chapter 7 contains my most recent work on what I have termed PositiveOrganizational Behavior and Psychological Capital (or PsyCap). To meet theinclusion criteria (positive; theory and research based; valid measures; open todevelopment; and manage for performance improvement), for the first time the top-ics of optimism, hope, happiness/subjective well-being, resiliency, emotional intel-ligence, self-efficacy, and the overall core construct of psychological capital havebeen given chapter status. Because of my involvement in the emerging Positive Psy-chology movement through Gallup and my research on PsyCap and authentic lead-ership with colleagues in the University of Nebraskas Leadership Institute, I feelthe time has come to incorporate this positive approach into the mainstream orga-nizational behavior field.

Besides these truly significant four unique features, there are a number of specificrevisions and additions to this edition. These include:

1. The new subtitle An Evidence-Based Approach reaffirms the importance of theresearch foundation to the text. A new major section has been added to Chapter 1 thatexplains why this evidence-based focus is so critical and what it entails.

2. Because communication, decision making, and perception continue to be important toorganizational behavior, in this edition there is a new Chapter 8, Communication andDecision Making and perception is added to Chapter 5, Personality, Perception, andEmployee Attitudes.

3. To make room for the new chapter, the separate chapter on job design and goal settingis now incorporated into Chapter 6, Motivational Needs, Processes, and Applications.

4. Besides updating the evidence-base and providing new real-world examples in eachchapter, breakthroughs on important new topics such as the following are included:

Contextual impact of the recent financial crisis and stock market crash on organi-zational behavior

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Collins Good to Great expectations

Managing the global workforce

Global mindset

Diversity management skills

Glass ceiling outside the United States

Corporate social responsibility (CSR)

Ethics of downsizing

Hollow organization design

Modular organization design

Organization culture in an economic crisis

Incentive/rewards analysis of the financial crisis

Costs of obesity

Neuroscience explanations

Health-Relationships-Work (H-R-W) well-being model

Intentional component of psychological capital (PsyCap)

Background on PsyCap

Performance impact and research summary of PsyCap

PsyCap development model and research summary

Evidence-based happiness

Broaden and Build Theory of positivity

Use of Facebook

Gen X and Gen Y

Stress from 24/7 technology and job loss threat

Stress levels around the world

Bullying problem

Slacker teammate problem

Followership

Positive and authentic leadership research

Just as real-world management can no longer afford to evolve slowly, neither canthe academic side of the field. With the uncertain, very turbulent environment mostorganizations face today, drastically new ideas, approaches, and techniques as repre-sented above are needed both in the practice of management and in the way we studyand apply the field of organizational behavior. This revision mirrors these neededchanges.

Social Cognitive Conceptual Framework. The book contains 14 chapters in four majorparts. Social cognitive theory explains organizational behavior in terms of both environ-mental, contextual events and internal cognitive factors, as well as the dynamics and out-comes of the organizational behavior itself. Thus, Part One provides the evidence-basedand organizational context for the study and application of organizational behavior. Theintroductory chapter provides the environmental perspective, historical background,methodology, theoretical framework, and specific social cognitive model for the field oforganizational behavior in general and specifically for this text. This is followed by anoverall environmental context chapter:

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Chapter 2, Environmental Context: Globalization, Diversity, and Ethics (with majorsections on globalization, diversity, and a major ending section on the impact of ethicson bottom-line outcomes).

After this broad environmental context is laid out in Chapter 2, there are two chaptersfor the organizational context of the social cognitive framework:

Chapter 3, Organizational Context: Design and Culture (with special emphasisgiven to the learning organization and horizontal, hollow, modular, network, and vir-tual designs; best-practice cultures; and a major section on the culture clashes frommergers and acquisitions) and

Chapter 4, Organizational Context: Reward Systems (a unique chapter with spe-cial emphasis given to money as a reward, effectiveness of pay, forms of new pay,recognition systems, and benefits).

The second part of the text recognizes the well-known micro-oriented cognitiveprocesses of the social cognitive framework plus unique topics such as the following:

Chapter 5, Personality, Perception, and Employee Attitudes (with unique major sec-tions on the role of heredity and the brain and emphasis given to Big Five personalitytraits, the Myers-Briggs personality indicator, the perceptual process, and organiza-tional citizenship behavior);

Chapter 6, Motivational Needs, Processes, and Applications (with major sectionson extrinsic versus intrinsic motives, procedural justice, attribution theory, job designand goal setting); and

Chapter 7, the most unique chapter, not only for this text, but any other, on Posi-tive Organizational Behavior and Psychological Capital. In addition to the focus onthe unique POB psychological states of efficacy, optimism, hope, resiliency, and over-all psychological capital, there are also major sections on emotion, multiple intelli-gences, and general mental abilities.

Parts Three and Four are concerned with the dynamics and behavior management andleadership dimensions of organizational behavior in the social cognitive framework. PartThree contains, in addition to widely recognized topics, the following four chapters:

Chapter 8, Communication and Decision Making with particular emphasis givento nonverbal and interpersonal communication and behavioral dimensions, styles, andtechniques of decision making.

Chapter 9, Stress and Conflict (with material on stress and conflict from advancedtechnology and globalization, burnout, and work-family initiatives);

Chapter 10, Power and Politics (with material on empowerment, trust, resourcedependency, and the dynamics of power and politics in the new environment); and

Chapter 11, Groups and Teams (with material on the punctuated equilibrium modelof groups, group/team effectiveness, role conflict and ambiguity, social loafing, cross-functional teams, virtual teams, and cultural/global issues with the use of teams).

The final Part Four gives an applied emphasis to the text. It focuses on how to man-age and lead for high performance. These applied organizational behavior chaptersinclude the following:

Chapter 12, Behavioral Performance Management (with material on the role ofsocial cognition, critical analysis of reinforcement theory, pay for performance, social

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recognition, and the latest research on contingencies with type of organization andinterventions for O.B. Mod. effectiveness).

Chapter 13, Effective Leadership Processes (with major sections on the historicalstudies, traditional and modern theories of leadership and the new authentic leader-ship being developed at the University of Nebraskas Leadership Institute, and lead-ership across cultures and the GLOBE project).

Chapter 14, Great Leaders: An Evidence-Based Approach (with major sectionson leading in the new environment, leadership styles, including the new positive,authentic style, the activities and skills of leadership, and leadership developmentprograms).

Pedagogical Features. Besides the many unique features already described, there are alsoseveral strong pedagogical features that have characterized the text over the years. Toreflect and reinforce the applications orientation of the text, highlighted, currently rele-vant, boxed real-world OB in Action examples appear in each chapter. In this twelfthedition there are many new real-world examples drawn from BusinessWeek articles. Inaddition to these application boxes, the text also features experiential exercises at the endof each part. The exercises get participants involved in solving simulated problems orexperiencing firsthand organizational behavior issues. Also there are end-of-chapter Internetexercises to get students involved in online relevant resources and vehicles for discus-sion and critique.

Besides the usual end-of-chapter short organizational behavior discussion cases, thereis also at least one Real Case at the end of each chapter. These cases are drawn fromrecent real-world events (excerpted from current BusinessWeek articles) and are intendedto enhance the relevancy and application of the theories and research results presentedin the chapter. These end-of-chapter real cases serve as both examples and discussionvehicles. It is suggested that students read them even if they are not discussed directlyin class. The intent is that they can serve as supplemental readings as well as discus-sion cases.

This edition also contains learning objectives at the start of each chapter. These objec-tives should help students better focus and prepare for what follows in the chapter.Finally, the chapters have the usual end-of-chapter summaries and review and discussionquestions.

Intended Audience. Despite the four unique features and very extensive updating (hav-ing anywhere from 530 or more new references per chapter) throughout, the purposeand intended audience of the book remain the same. As in the earlier editions, this edi-tion is aimed at those who wish to take a totally up-to-date, evidence-based approachto organizational behavior and management. It does not assume the readers priorknowledge of either management or the behavioral sciences. Thus, the book can beused effectively in the first or only course in either four-year or two-year colleges. Itis aimed primarily at the required organizational behavior course, at the undergradu-ate level or in the M.B.A. program. I would like to especially acknowledge and thankcolleagues in countries around the world who have used previous editions of the bookand point out that the continued international perspective and coverage should makethis new edition relevant and attractive. Finally, the book should be helpful to practicingmanagers who want to understand and more effectively manage their most importantassetstheir human resources.

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Acknowledgments. Every author owes a great deal to others, and I am no exception.First and foremost, I would like to acknowledge the help on this as well as many otherwriting projects over the years that I received from my deceased friend and colleague,Professor Richard M. Hodgetts of Florida International University. Next, I would liketo acknowledge the total support and standards of excellence provided by my friend andlongtime department chairman, Sang M. Lee and my former colleague now at the Uni-versity of Washington, Bruce Avolio. Special thanks goes to Cathy Watson from theManagement Department staff who has been very helpful to me over the years. I cannever forget the education, encouragement, and scholarly values I received from Pro-fessors Henry H. Albers and the deceased Max S. Wortman when starting out in myacademic career. Over the years, I have been very lucky to have been associated withexcellent doctoral students. I would like to thank them all for teaching me as much asI have taught them. In particular, I would like to thank Don Baack, Steve Farner, andSuzanne Peterson who have helped on previous editions. I am also very grateful to thoseprofessors who used the previous editions of the book and gave me valuable feedbackfor making this revision. The reviewers for this edition are Charles B. Daniels, OldDominion University; Laura Finnerty Paul, Skidmore College; and James Harbin, TexasA&M UniversityTexarkana. Finally, as always, I am deeply appreciative and dedicateOrganizational Behavior, twelfth edition, to my wife and now grown children and theirfamilies, who have provided me with a loving, supportive relationship and climateneeded to complete this and other projects over the years.

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Contents in BriefPART ONEEnvironmental and Organizational Context 1

1 Introduction to Organizational Behavior:An Evidence-Based Approach 5

2 Environmental Context: Globalization,Diversity, and Ethics 31

3 Organizational Context: Design and Culture 57

4 Organizational Context: Reward Systems 88

PART TWOCognitive Processes of OrganizationalBehavior 123

5 Personality, Perception, and EmployeeAttitudes 125

6 Motivational Needs, Processes, andApplications 156

7 Positive Organizational Behavior andPsychological Capital 199

PART THREEDynamics of Organizational Behavior 245

8 Communication and Decision Making 247

9 Stress and Conflict 277

10 Power and Politics 312

11 Groups and Teams 339

PART FOURManaging and Leading for HighPerformance 373

12 Behavioral Performance Management 378

13 Effective Leadership Processes 413

14 Great Leaders: An Evidence-BasedApproach 445

Footnote References and Supplemental Readings 482

References for Application Boxes andReal Cases 548

INDEX 551

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Contents

About the Author iv

Preface v

PART ONEENVIRONMENTAL AND ORGANIZATIONAL CONTEXT 1

Evidence-Based Consulting Practices 1

Chapter 1Introduction to Organizational Behavior:An Evidence-Based Approach 5

Learning Objectives 5The Challenges Facing Management 6Undergoing a Paradigm Shift 8A New Perspective for Management 10Evidence-Based Management 12Historical Background: The Hawthorne Studies 13

The Illumination Studies: A Serendipitous Discovery 13Subsequent Phases of the Hawthorne Studies 14Implications of the Hawthorne Studies 15

Research Methodology to Determine Valid Evidence 16The Overall Scientific Perspective 16Starting with Theory 17The Use of Research Designs 18The Validity of Studies 19

Defining Organizational Behavior 20Theoretical Foundation for Organizational

Behavior 20Cognitive Framework 20Behavioristic Framework 21Social Cognitive Framework 22

The Conceptual Framework for the Text 25Summary 25Ending with Meta-Analytic Research Findings 26Questions for Discussion and Review 27Internet Exercise: Nonjobs or Telecommuting 27Real Case: The Big Squeeze on Workers 28Organizational Behavior Case: How Is This Stuff

Going to Help Me? 29Organizational Behavior Case: Too Nice to People 29

Organizational Behavior Case: Conceptual Model: Dream or Reality? 30

Chapter 2Environmental Context: Globalization,Diversity, and Ethics 31

Learning Objectives 31Globalization 31Diversity in the Workplace 34

Reasons for the Emergence of Diversity 35Developing the Multicultural Organization 38Individual Approaches to Managing Diversity 39Organizational Approaches to Managing Diversity 41

Ethics and Ethical Behavior in Organizations 46The Impact of Ethics on Bottom-Line Outcomes 47

Summary 49Ending with Meta-Analytic Research Findings 50Questions for Discussion and Review 52Internet Exercise: Ethical Issues in the Workplace 52Organizational Behavior Case: How Far-Reaching Are

Globalization and Technology? 52Organizational Behavior Case: I Want Out 53Real Case: Not Treating Everyone the Same 53Organizational Behavior Case: Changing with the

Times 54Real Case: The Ethics of Downsizing 55

Chapter 3Organizational Context: Design and Culture 57

Learning Objectives 57The Organizational Theory Foundation 58

Historical Roots 58Modern Theoretical Foundation 58What Is Meant by a Learning Organization? 59Organizational Behavior in the Learning Organization 60Learning Organizations in Action 61

Modern Organization Designs 63Horizontal Organizations 64Contemporary Designs: Hollow and Modular 65Network Designs 66The Virtual Organization 68

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The Organizational Culture Context 71Definition and Characteristics 71Uniformity of Culture 73

Creating and Maintaining a Culture 74How Organizational Cultures Start 75Maintaining Cultures through Steps of Socialization 76Changing Organizational Culture 79

Summary 83Ending with Meta-Analytic Research Findings 84Questions for Discussion and Review 84Internet Exercise: The Structure and Culture of

Organizations 85Real Case: Web-Based Organizations 85Organizational Behavior Case: The Outdated

Structure 86Organizational Behavior Case: Keeping Things the

Same 86Organizational Behavior Case: Out with the Old,

In with the New 87

Chapter 4Organizational Context: Reward Systems 88

Learning Objectives 88Pay: The Dominant Organizational Reward 90

The Theoretical Background on Money as a Reward 90Research on the Effectiveness of Pay 92Traditional Methods of Administering Pay 93Pay for Performance 95New Pay Techniques 99

Recognition as an Organizational Reward 100Recognition versus Money 100Examples of Effective Formal Recognition Systems 102

Benefits as Organizational Rewards 106Traditionally Offered Benefits 106Newer Types of Benefits 108

Summary 111Ending with Meta-Analytic Research Findings 112Questions for Discussion and Review 113Internet Exercise: Rewards in the Workplace 114Real Case: CEOs Get Fewer Perks 114Real Case: Rewarding Teamwork in the Plains 115Real Case: Different Strokes for Different Folks 116Organizational Behavior Case: Huge Benefits, Little

Understanding or Use 117

Experiential Exercises for Part One 118

Exercise: Synthesis of Student and Instructor Needs 118

Exercise: Work-Related Organizational Behavior: Implications for the Course 118

Exercise: Organizations 119

PART TWOCOGNITIVE PROCESSES OF ORGANIZATIONAL BEHAVIOR 123

Evidence-Based Consulting Practices 123

Chapter 5Personality, Perception, and EmployeeAttitudes 125

Learning Objectives 125The Meaning of Personality 125The Role of Heredity and the Brain 126

Self-Esteem 128Person-Situation Interaction 129The Socialization Process 129The Big Five Personality Traits 132Myers-Briggs Type Indicator (MBTI) 134

The Perception Process 135Sensation versus Perception 136Subprocesses of Perception 137

Social Perception 138Characteristics of Perceiver and Perceived 138Stereotyping 139The Halo Effect 139

Work-Related Attitudes: PA/NA 140Employee Attitudes 141

What Is Meant by Job Satisfaction? 141Influences on Job Satisfaction 142Outcomes of Job Satisfaction 144Organizational Commitment 146The Meaning of Organizational Commitment 147The Outcomes of Organizational Commitment 148Guidelines to Enhance Organizational

Commitment 148Organizational Citizenship Behaviors (OCBs) 149

Summary 150Ending with Meta-Analytic Research

Findings 151Questions for Discussion and Review 152Internet Exercise: Assessing Your Personality 153Real Case: Its All a Matter of Personality 153Organizational Behavior Case: Same Accident,

Different Perceptions 154Organizational Behavior Case: Ken Leaves the

Company 155

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Chapter 6Motivational Needs, Processes,and Applications 156

Learning Objectives 156The Basic Motivation Process 157

Primary Motives 157Secondary Motives 158Intrinsic versus Extrinsic Motives 160

Work-Motivation Theories 161Maslows Hierarchy of Needs: An Important Historical

Contribution 162Herzbergs Two-Factor Theory of Motivation 165The Porter-Lawler Expectancy Theory of Work

Motivation 167Equity Theory of Work Motivation 169The Relationship between Equity Theory and

Organizational Justice 172Attribution Theory 173Other Work Motivation Theories: Control and Agency 177

Motivational Application through Job Design 178Job Rotation 179Job Enlargement 179Job Enrichment 179The Job Characteristics Approach to Task Design 180Practical Guidelines for Redesigning Jobs 182

Motivational Application through Goal Setting 183Theoretical Understanding of Goal Setting 183Research Evidence on the Impact of Goal Setting 184Other Performance Management Application Techniques

Associated with Goal Setting 187Impact on the Psychological Contract 189

Summary 189Ending with Meta-Analytic Research Findings 190Questions for Discussion and Review 192Internet Exercises: What Types of Jobs Motivate

You? 193Internet Exercise: What Is the Motivation Potential of

Jobs at Southwest Airlines? 193Real Case: At UPS Managers Learn to Empathize

with Their Employees 194Real Case: Making It a Nice Place to Work 195Organizational Behavior Case: What Do They

Want? 196Organizational Behavior Case: Tom, Dick, and

Harry 196Organizational Behavior Case: The Rubber Chicken

Award 197Organizational Behavior Case: Specific Goals for

Human Service 197

Chapter 7Positive Organizational Behavior and Psychological Capital 199

Learning Objectives 199Positive Psychology 200Self-Efficacy/Confidence 202

The Theoretical Background and Meaning of Efficacy 202

The Process and Impact of Self-Efficacy 204Sources of Efficacy 206Implications for Efficacy in the Workplace

and POB 209Optimism 212

The Dimensions of Optimism 212Optimism in the Workplace 214

Hope 217Resiliency 218Psychological Capital (PsyCap) 219

Background and Research on PsyCap 220PsyCap Development 221

Other Positive Constructs 222Happiness or Subjective Well-Being (SWB) 222The Background on SWB 224Emotional Intelligence (EI) 225The Role of Intelligence 229Emotional Intelligence 231

Summary 234Ending with Meta-Analytic Research Findings 236Questions for Discussion and Review 236Internet Exercise: What Is Your IQ and EQ? 237Real Case: High TechHigh Fear 238Organizational Behavior Case: People Problems

at HEI 238

Experiential Exercises for Part Two 240

Exercise: Self-Perception and Development of the Self-Concept 240

Exercise: Job Design Survey 240Exercise: Motivation Questionnaire 242

PART THREEDYNAMICS OF ORGANIZATIONAL BEHAVIOR 245

Evidence-Based Consulting Practices 245

Chapter 8Communication and Decision Making 247

Learning Objectives 247

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Background of the Role of Communication 248The Definition of Communication 249

Nonverbal Communication 250Body Language and Paralanguage 250Improving Nonverbal Effectiveness 252

Interpersonal Communication 252Importance of How to Talk to Others 254The Importance of Feedback 254Other Important Variables in Interpersonal

Communication 256Interactive Communication in Organizations 256

The Extent and Implications of Interactive Communication 257

The Purposes and Methods of Interactive Communication 257

The Decision-Making Process 259Behavioral Decision Making 260

Decision Rationality 260Decision-Making Styles 262

Participative Decision-Making Techniques 264Creativity and Group Decision Making 265

The Process of Creativity 265Psychological Definition and Analysis of Creativity 267Creativity Techniques for Management Decision

Making 268Group Decision Making 269

Summary 270Ending with Meta-Analytic Research Findings 271Questions for Discussion and Review 272Internet Exercise: Communication in the Workplace 272Internet Exercise: Decision Making

in Organizations 273Real Case: Online Communication to Share

Knowledge 273Organizational Behavior Case: Doing

My Own Thing 274Organizational Behavior Case: Bad Brakes 274Real Case: Putting a Human Face on Rational

Decisions 275Organizational Behavior Case: Harry SmartOr

Is He? 276

Chapter 9Stress and Conflict 277

Learning Objectives 277The Emergence of Stress 277

Contemporary Environment Demands 277What Stress Is, and Is Not 278What about Burnout? 279

The Causes of Stress 280Extraorganizational Stressors 281Organizational Stressors 282Group Stressors 282Individual Stressors: The Role of Dispositions 284

Intraindividual Conflict 288Conflict Due to Frustration 288Goal Conflict 290Role Conflict and Ambiguity 290

Interactive Conflict 292Interpersonal Conflict 292Intergroup Behavior and Conflict 293

The Effects of Stress and Intraindividual Conflict 294Physical Problems Due to Stress and Conflict 295Psychological Problems Due to Stress and

Conflict 295Behavioral Problems Due to Stress and Conflict 296

Coping Strategies for Stress and Conflict 297Individual Coping Strategies 298Organizational Coping Strategies 300

Negotiation Skills: Going Beyond Conflict Management 302Traditional Negotiation Approaches 302Contemporary Negotiation Skills 304

Summary 305Ending with Meta-Analytic Research Findings 306Questions for Discussion and Review 307Internet Exercise: Managing Stress in

Organizations 308Real Case: When Workers Just Cant Cope 308Real Case: Round-the-Clock Stress 309Organizational Behavior Case: Sorry, No Seats Are

Left; Have a Nice Flight 310Organizational Behavior Case: A Gnawing

Stomachache 311Organizational Behavior Case: Drinking Up the

Paycheck 311

Chapter 10Power and Politics 312

Learning Objectives 312The Meaning of Power 313

The Distinctions among Power, Authority, and Influence 313

The Classifications of Power 314Contingency Approaches to Power 318

The Special Case of Empowerment 322The Complexity of Empowerment 323Putting Empowerment into Action 324

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Political Implications of Power 326A Political Perspective of Power in Organizations 327Specific Political Strategies for Power Acquisition 330A Final Word on Power and Politics 333

Summary 334Ending with Meta-Analytic Research Findings 335Questions for Discussion and Review 336Internet Exercise: The Uses and Abuses of

Power 336Real Case: Fighting Back 337Organizational Behavior Case: Throwing Away a

Golden Opportunity 337

Chapter 11Groups and Teams 339

Learning Objectives 339The Nature of Groups 339

The Meaning of a Group and Group Dynamics 340The Dynamics of Group Formation 340Types of Groups 343Implications from Research on Group and Team

Dynamics 345Group/Team Effectiveness 346

The Dynamics of Informal Groups 347Norms and Roles in Informal Groups 347The Informal Organization 348

The Dysfunctions of Groups and Teams 350Norm Violation and Role Ambiguity/Conflict 350The Groupthink, Conformity Problem 350Risky Shift Phenomenon 351Dysfunctions in Perspective 351Social Loafing 352

Work Teams 352The Nature of a Team 353Cross-Functional Teams 354Virtual Teams 355Self-Managed Teams 356How to Make Teams More Effective 356

Summary 360Ending with Meta-Analytic Research Findings 361Questions for Discussion and Review 361Internet Exercise: Work Environment in Team-Based

Organizations 362Real Case: There Are Teams, and There Are

Teams 362Organizational Behavior Case: The Schoolboy

Rookie 363Organizational Behavior Case: The Blue-Ribbon

Committee 364

Experiential Exercises for Part Three 365

Exercise: Groups and Conflict Resolution 365Exercise: NASA Moon Survival Task 367Exercise: TGIF (Thank God Its Friday!) 368Exercise: Power and Politics 371

PART FOURMANAGING AND LEADING FOR HIGHPERFORMANCE 373

Evidence-Based Consulting Practices 373

Chapter 12Behavioral Performance Management 378

Learning Objectives 378Learning Theory Background 379

Behavioristic Theories 379Cognitive Theories 381Social Learning and Social Cognitive Theory 382

Principles of Learning: Reinforcement and Punishment 384Laws of Behavior 384Critique of Reinforcement Theory 384Reinforcement as Used in Behavioral Management 386Positive and Negative Reinforcers 386The Use of Punishment 387

The Role of Organizational Reward Systems 389Analysis of Money as a Reinforcer 390Nonfinancial Rewards 391

Behavioral Performance Management, or O.B. Mod. 394Step 1: Identification of Performance Behaviors 398Step 2: Measurement of the Behavior 399Step 3: Functional Analysis of the Behavior 399Step 4: Development of an Intervention Strategy 400Step 5: Evaluation to Ensure Performance

Improvement 403Application of Behavioral Management 404Manufacturing versus Service Applications 405

Summary 406Ending with Meta-Analytic Research Findings 406Questions for Discussion and Review 408Internet Exercise: Applying Behavior Management

Principles to Athletic Performance 408Real Case: The Elite Circle of $1 CEOs 408Organizational Behavior Case: Contrasting Styles 410Organizational Behavior Case: Volunteers Cant Be

Punished 410

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Organizational Behavior Case: Up the Piece Rate 411

Organizational Behavior Case: A Tardiness Problem 411

Chapter 13Effective Leadership Processes 413

Learning Objectives 413What is Leadership? 413The Historically Important Studies

on Leadership 415The Iowa Leadership Studies 416The Ohio State Leadership Studies 416The Early Michigan Leadership Studies 418

Traditional Theories of Leadership 418Trait Theories of Leadership 419From Traits to States and Skills Development 420Group and Exchange Theories of Leadership 421Contingency Theory of Leadership 423Path-Goal Leadership Theory 426

Modern Theoretical Processes of Leadership 428Charismatic Leadership Theories 428Transformational Leadership Theory 430Substitutes for Leadership 431Authentic Leadership 433Leadership across Cultures 434Project GLOBE and the Future of International

Leadership Studies 436Summary 439Ending with Meta-Analytic Research Findings 440Questions for Discussion and Review 441Internet Exercise: Leading in Times of Crisis 442Real Case: No Organization Chart and an 80-Blank-

Pages Policy Manual 442Real Case: The Seven Secrets of Inspiring

Leaders 443

Chapter 14Great Leaders: An Evidence-BasedApproach 445

Learning Objectives 445

Leadership in the New Environment 446Leadership Styles 448

Style Implications of the Classic Studies and the Modern Theories 449

Classic Styles 451Leadership Styles in Perspective 452An Evidence-Based Positive, Authentic Leadership

Style 454The Roles and Activities of Leadership 455

Leader/Manager Roles 455Activities of Successful and Effective Leaders: The Real

Managers Study 457Leadership Skills 463

What Skills Do Leaders Need? 463Traditional Leadership Development Programs 466Contemporary Leadership Development

Approaches 468Other Indirect Techniques for Developing Leadership

Effectiveness 469Summary 471Ending with Meta-Analytic Research Findings 472Questions for Discussion and Review 472Internet Exercise: Leaders as Coaches 473Real Case: Jeanne P. Jackson: A Retailing Leader 473Real Case: For Leaders, Ignorance Isnt Bliss 474Organizational Behavior Case: The Puppet 475

Experiential Exercises for Part Four 476

Exercise: Role Playing and O.B. Mod. 476Exercise: Leadership Questionnaire 477Exercise: Paper Plane Corporation 480

Footnote References and Supplemental Readings 482

References for Application Boxes and Real Cases 548

Index 551

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Part One

Environmental andOrganizational Context1. Introduction to Organizational Behavior: An Evidence-Based Approach 52. Environmental Context: Globalization, Diversity, and Ethics 313. Organizational Context: Design and Culture 574. Organizational Context: Reward Systems 88

EVIDENCE-BASED CONSULTINGPRACTICES

A major component of the evidence-based theme of this text and the link topractice are these part openers from the world-famous Gallup Organization. Gallupdraws from its internationally recognized survey science and cadre of internal andexternal researchers (e.g., the author of this text and a Nobel Prize winner in behav-ioral economics are Gallup Senior Scientists), publishes its findings in the topacademic journals such as Journal of Applied Psychology, and provides thisevidenced-based perspective and representative practices for each text part. Gallupis the recognized world leader in the measurement and analysis of human attitudes,opinions, and behavior, building on over three-quarters of a century of success.Gallup employs many of the worlds leading scientists in management, economics,psychology, and sociology. Gallup performance management systems help organiza-tions maximize employee productivity and increase customer engagement throughmeasurement tools, management solutions, and strategic advisory services. Gallups2000 professionals deliver services on-site at client organizations, through the Web,at Gallup Universitys campuses, and in 40 offices around the world. Gallup has subsidiary operations in 20 countries, covering 75 percent of the worlds GNP.Gallup clients include top-performing organizations such as Toyota, Marriott, Wal-Mart, Wells Fargo, and Best Buy.

The details and depth of Gallups consulting practices can be found in the best-selling books such as First, Break All the Rules (Simon & Schuster, 1999) Now,Discover Your Strengths (The Free Press, 2001), How Full Is Your Bucket (Gallup Press,

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2 Part One Environmental and Organizational Context

2004), and Strength Finder 2.0 (Gallup Press, 2007), which recently passed themillion copies sold mark. These books are all authored by Gallup scientists and prac-tice leaders. All the part opening Gallup practices for this text are written by TimHodges, Executive Director of the Gallup University, with some input by formerGallup Senior Analyst Dr. Dennis Hatfield and this author. The following gives anintroductory overview of the Gallup evidenced-based approach, and the other openers are more directly concerned with the theme of the respective part.

AN INTRODUCTION TO THE GALLUP EVIDENCE-BASED APPROACH:THE GALLUP PATH

According to numerous think tanks, recent global competition caused corporateexecutives to pose one common, all-consuming question: What is the role of humannature in driving business outcomes?

As described in Coffman and Gonzalez-Molinas Follow This Path, the GallupOrganization sorted through unprecedented bits of economic information and datafrom customers and employees to develop The Gallup Path management theory,answering the question concerning the role of human nature in driving businessoutcomes.

The Gallup Path serves as Gallups premier management consulting model. Atthe models core is the theory that within every organization, every employee, at alllevels, contributes to some degree to sales growth, profitability, and ultimately, shareprice. The path serves as the first management theory to track the connectedness ofmanagers to employees, employees to customers, and customers to real financialoutcomes.

The steps along The Gallup Path progress from (1) individuals identificationof strengths to (2) finding the right fit to (3) great management to (4) engagedemployees to (5) engaged customers to (6) sustainable business growth to (7) realprofit increase to (8) stock increase.

Just as The Gallup Poll reports the will of global citizens, The Gallup Pathreports the will of customers and employees around the world through GallupsHumanSigma metrics.

GALLUPS GREAT PLACE TO WORK

One of Gallups core practices involves the measurement and development ofemployee engagement, leading to the creation of great places to work. Asdescribed in Buckingham and Coffmans First, Break All the Rules, Gallupconsultants use the Q12 to provide a measure of the extent to which individuals arerightly placed and rightly managed, creating the great place to work. These Q12

questions are: (1) Do I know what is expected of me at work? (2) Do I have thematerials and equipment I need to do my work right? (3) At work, do I have theopportunity to do what I do best every day? (4) In the last seven days have I receivedrecognition or praise for good work? (5) Does my supervisor, or someone at work,seem to care about me as a person? (6) Is there someone at work who encourages

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Part One Environmental and Organizational Context 3

my development? (7) At work, do my opinions seem to count? (8) Does themission/purpose of my company make me feel like my work is important? (9) Aremy coworkers committed to doing quality work? (10) Do I have a best friend atwork? (11) In the last six months, have I talked with someone about my progress?(12) At work, have I had opportunities to learn and grow? (See Buckingham &Coffman, 1999, p. 28. These questions are the results of Gallup research, and assuch they are proprietary. They cannot be reprinted or reproduced in any mannerwithout the written consent of the Gallup Organization. Copyright 19931998The Gallup Organization, Washington, DC. All rights reserved).

A recent issue of the Journal of Applied Psychology published a meta-analysis of7,939 business units in 36 companies examining the relationship between employeeengagement and work-related outcomes of customer satisfaction, profit, productiv-ity, turnover, and safety (Harter, Schmidt, & Hayes, 2002). Generalizable rela-tionships of substantial practical value were found for all outcome measures,providing research evidence of the connection between an employees level ofengagement and the level of quality of his or her performance. Related publishedworkplace studies (e.g., Schmidt & Rader, Personnel Psychology, 1999) have alsoillustrated the validity of the right fit and management of talent in predicting super-visory ratings of job performance, sales volumes, production records, andabsenteeism.

GALLUPS APPROACH TO STRENGTHS-BASED DEVELOPMENT

For decades following World War II, the science of psychology focused almost completely on what is wrong with people. Bucking this trend of negativity, Gallupscientists analyzed more than 30 years of research on what is right about people.This in-depth study of over two million individuals led to the creation of theStrengthsFinder, Gallups Web-based talent assessment tool and psychologys firsttaxonomy of strengths. For his leadership in the development of the StrengthsFinderand for his thought leadership that changed the entire field of psychology, in 2003Gallups former chairman and chief scientist, Dr. Donald O. Clifton, was officiallynamed the Father of Strengths Psychology and Grandfather of PositivePsychology by the American Psychological Association.

The StrengthsFinder serves as the starting point for self-discovery in all of Gallupsstrengths-based development programs. After an individual has completed theassessment, a list of developmental suggestions is customized to the individuals topfive themes of talentcalled Signature Themes. Over the past several years,StrengthsFinder has been used in the development of millions of individuals acrosshundreds of roles including manager, salesperson, teacher, student, leader, pastor,nurse, and many more. StrengthsFinder is available in more than a dozen languages.Role-specific strengths-based developmental information is available through thefollowing Gallup books (each including a personal ID number allowing the reader tocomplete the StrengthsFinder): Now, Discover Your Strengths (Buckingham &Clifton, 2001); StrengthsQuest (Clifton & Anderson, 2002); Discover Your SalesStrengths (Smith & Rutigliano, 2003); Living Your Strengths (Winseman, Clifton, &Liesveld, 2003); and StrengthsFinder 2.0 (Rath, 2007).

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4 Part One Environmental and Organizational Context

EXAMPLES OF CLIENT SUCCESS: GALLUPS EVIDENCED-BASEDPRACTICES IN ACTION

An important aspect of Gallups evidence-based approach is measuring the value ofclient engagements, known as Business Impact Analysis. The following examples ofrecent client success illustrate the impact of Gallups research in action.

1. A national clothing retailer was experiencing declining business. The retailerbrought Gallup in to create an integrated performance management systemdesigned to provide each store manager with the tools to optimize employee and customer engagement. The client engagement consisted of several adminis-trations of employee and customer engagement, followed by in-depth analysis,executive consulting, and manager training. Gallups Business Impact Analysisuncovered a trend where employee and customer engagement significantly influ-enced each stores financial performance. In fact, the group of stores with top-level performance on employee and customer engagement metrics realized a significant net benefit to the organization of approximately$114.8 million in sales, $47.6 million in margins, and $34.7 million in operatingprofit when compared to the group of stores with lower employee and customerengagement metrics.

2. Gallups extensive work in the health care sector has also led to valuable results forclients. For example, a relationship with one of the largest for-profit hospitalnetworks created value for many years. Since the inception of an ongoing,systemwide program to improve employee engagement, more than 26,000 employ-ees of this hospital network have moved from being not engaged (neitherpositive nor negative about their work environment) or actively disengaged (fundamentally disconnected from their work) to being engaged, or emotionallyinvested, in their jobs. According to the clients estimates, these engaged employeesrepresent over $46 million in reduced absenteeism costs alone. Further, over a recentthree-year period, systemwide employee engagement levels closely reflect steady,incremental increases in the clients stock price. Positive multimillion dollarrelationships between employee engagement and reduced malpractice claims, earnings per admission, patient loyalty, and decreased nurse turnover have alsobeen realized over the course of this successful client partnership.

3. One of the largest banks in North America entered into a partnership with Gallupto improve sales performance in three call centers. Gallup consultants studied thecall center structure and business strategy, reviewed job performance criteria, andstudied the best performers in each role to identify the talents that contributed totheir success. Gallup developed and implemented hiring systems for customer service representatives and inbound sales representatives. Not only did employeeshired through the Gallup system deliver a higher sales success rate, high-scoringnew hires substantially outperformed their lower-scoring counterparts in revenues,sales, call handling time, and loan accuracy.

Many more examples of successful client partnerships, as well as actionable manage-ment insights and perspectives from Gallup experts, are available in the monthlyonline newsletter, the Gallup Management Journal (http://www.gallupjournal.com).

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5Chapter One

Introduction toOrganizationalBehavior: An Evidence-Based ApproachLearning Objectives

Provide an overview of the major challenges and the paradigm shift facingmanagement now and in the future.

Outline an evidence-based approach to organizational behavior.

Summarize the Hawthorne studies as the starting point of the study of organiza-tional behavior.

Explain the methodology that is used to accumulate knowledge and facilitateunderstanding of organizational behavior.

Relate the various theoretical frameworks that serve as a foundation for the studyof organizational behavior.

Present the social cognitive model of organizational behavior that serves as theconceptual framework for the text.

Every era laments about daunting challenges. However, even previous generations wouldprobably agree that effectively managing todays organizations is very difficult. Ask anyonetodaymanagement professors, practitioners, or studentswhat the major challenges arein todays environment, and the answer will be fairly consistent: A turbulent economy anddangerous geopolitics preoccupy everyones concerns. However, at the organization level,understanding global competition and diversity, and trying to solve ethical problems anddilemmas come to the fore. These are unquestionably major issues facing contemporyorganizations and are given major attention in this text. However, the basic premise andassumptions of the field of organizational behavior in general, and of this text in particular,are that managing the peoplethe human resources of an organizationhave been, are, andwill continue to be, the major challenge and critical competitive advantage.

Globalization, diversity, and ethics serve as very important environmental or contextualdimensions for organizational behavior. However, as Sam Walton, the founder of Wal-Martand richest person in the world when he died, declared to this author over lunch a numberof years ago when asked what the answer was to successful organizationsPeople are the

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6 Part One Environmental and Organizational Context

key! The technology can be purchased and copied; it levels the playing field. The people,on the other hand, cannot be copied. Although it may be possible to clone human bodies,their ideas, personalities, motivation, and organization cultural values cannot be copied.The human resources of an organization and how they are managed represent the compet-itive advantage of todays and tomorrows organizations. A recent study of over three hun-dred companies for over 20 years provides evidence for this statement. The researchersfound that management of human resources through extensive training and techniques suchas empowerment resulted in performance benefits, but operational initiatives such as totalquality management or advanced manufacturing technology did not.1

At first employees were considered a cost, then human resources, and now are becomingwidely recognized as human capital2 (what you knoweducation, experience, skills).Recent research indicates that investing in this human capital results in desired performanceoutcomes such as increased productivity and customer satisfaction.3 Even going beyondhuman capital are more recently recognized social capital4 (who you knownetworks,connections, friends) and positive psychological capital5 (who you areconfidence,hope, optimism, resiliency) and (who you are in terms of confidence, hope, optimism,resiliency, and, more importantly, who you can become, i.e., ones possible authentic self).Although Chapter 7 will be specifically devoted to positive organizational behavior in gen-eral and psychological capital in particular, let it be simply noted here that there is growingresearch evidence that employees psychological capital is positively related to their per-formance and desired attitudes.6 As the ultimate techie Bill Gates astutely observed:The inventory, the value of my company, walks out the door every evening.

Interestingly, whereas the technology dramatically changes, sometimes monthly or evenweekly, the human side of enterprise has not changed and will not change that fast. As notedby well-known international management scholar Geert Hofstede, Because management isalways about people, its essence is dealing with human nature. Since human nature seems tohave been extremely stable over recorded history, the essence of management has been andwill be equally stable over time.7 The nature of work and the workplace itself,8 the tradi-tional employment contract,9 and the composition of the workforce10 are all dramaticallychanging and given attention in this text. Yet, the overriding purpose of the first edition, now38 years ago, of trying to better understand and effectively manage human behavior inorganizations remains the essence of this twelfth edition.

This introductory chapter gives the perspective, background, methodology, and evidence-based approach to the field. After a brief discussion of the current environmental challengesand the paradigm shift facing management and why an evidence-based approach is needed,the historical background is touched on. Particular attention is given to the famousHawthorne studies, which are generally recognized to be the beginning of the systematicstudy and understanding of organizational behavior. Next, an overview of the methodologyused in the scientific study of organizational behavior is given. The chapter concludes bydefining exactly what is involved in organizational behavior and by providing a conceptualmodel for the rest of the text.

THE CHALLENGES FACING MANAGEMENT

The academic field of organizational behavior has been around for about a half century.However, as the accompanying OB in Action: Some Things Never Really Change clearlyindicates, problems facing managers of human organizations have been around since thebeginning of civilization. This case, with but a few word modifications, is taken from the Old(not New) Testament of the Bible (Exodus 18:1327), recognized by the Jewish, Christian,

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and Islam religions. The case took place over 3,000 years ago, the charismatic leader wasMoses (when he led his people from Egypt to Palestine), the well-known consultant wasJethro, Moses father-in-law, and the higher authority was God. Embedded in the case aremany topics covered in this textfor example, charismatic leadership, management of con-flict, empowerment, management of change, and nonfinancial incentives.

Although the problems with human organizations and the solutions over the ages havenot really changed that much, the emphasis and surrounding environmental context cer-tainly have changed. For example, in the 1980s to the mid-1990s managers were preoccu-pied with restructuring their organizations to improve productivity and meet thecompetitive challenges in the international marketplace and quality expectations of cus-tomers. Although the resulting lean and mean organizations offered some short-runbenefits in terms of lowered costs and improved productivity, instead of making signifi-cant changes to meet the changing environment, most organizations continued with moreof the same. For example, one analysis of Fortune 500 firms between 1995 and 2005 foundthe most prominent initiatives were restructuring (downsizing), cost reduction programs,globalizing supply chains, creating shared services and Six Sigma (almost perfect) qual-ity programs.11 During this era, top management compensation was primarily tied to stockoptions (covered in Chapter 4) and thus the firms stock price, which in turn led to high-risk mergers, acquisitions, and a highly regulated, winner-take-all environment.12 Forexample, the head of nearly century-old investment house Merrill Lynch bet his firmand ultimately loston the subprime financial market and outsized leverage and then tooka whopping $160 million severance package on the way out the door.13

This type of behavior, and of course many other social, economic, and geopoliticalfactors, led to the financial crisis and stock market crash starting at the end of 2008.Although most of the focus has been on financial markets, government interventionthrough the so-called bailouts, and massive unemployment, the impact on those not laidoff, the remaining employees, human resources of organizations, has been slighted. As anexpert on the psychology of the corporate environment recently noted, after years ofdownsizing, outsourcing, and a cavalier corporate attitude that treats employees as costsrather than assets, most of todays workers have concluded that the company no longervalues them. So they, in turn, no longer feel engaged in their work or committed to thecompany.14

This turmoil has certainly left employees hurt and fearful, and feeling very vulnerable.There is also powerful evidence from the Gallup World Poll (a representative sample of thepopulation of over 100 countries) that by far the single most dominant thought and primarydriver of almost everyone, in every corner of the plant, is, I want a good job.15 As the

OB in Action: Some Things Never Really Change

A powerful, charismatic leader is having problems. Awell-known consultant is called in to help. The consultantnotices that the leader tries to handle all problems andconflicts of his people himself. People queue up beforehis office; because he is overwhelmed, he cannot handleall the business. So the consultant has a private talk withthe leader and tells him to structure his organization bydelegating authority, empowering subordinates to han-dle the workload. These subordinates should be selectednot only on their leadership abilities, but also on their

character: They should be truthful, not driven by materialgain. The new structure should resolve all daily issues atthe lowest possible level; only the big and difficult issuesshould be brought before the leader. He should focus onstrategyon dealing with the higher authority, on estab-lishing new approaches and teaching these to the peo-ple, on showing them the way to go and the work to bedone. The case states that the leader listens to the con-sultant and carries out the reorganization, which is a suc-cess, and the consultant returns home.

7

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head of Gallup, Jim Clifton, concluded on the basis of this evidence, Work is crucial toevery adult human because work holds within it the soul of the relationship of one citizento one government and one country.16 In other words, even though recent history has beentough not only on the economy but also on organizations and employees, the burning desirefor a good job still prevails among all people.

In the tradition of an effective strategy of turning threats into opportunities, such an envi-ronment as the world has experienced in recent times may ironically be the ideal time to meetthe challenges facing the management of human resources. As in the words of popular lead-ership author (Good to Great) Jim Collins, A crisis is a terrible thing to waste.17 The timehas come to not only recognize and appreciate the importance of human resources, but alsoto use recent history as a catalyst for paradigmic change in the way we understand and man-age human resources. This process starts with understanding what is meant by a paradigmshift, not just keeping up with incremental change, but a new way of thinking about and man-aging human resources in todays dramatically changed workplace.

UNDERGOING A PARADIGM SHIFT

The term paradigm comes from the Greek paradeigma, which translates as model, pat-tern, or example. First introduced years ago by the philosophy of science historianThomas Kuhn,18 the term paradigm is now used to mean a broad model, a framework, away of thinking, or a scheme for understanding reality.19 In the words of popular futuristJoel Barker, a paradigm simply establishes the rules (written or unwritten), defines theboundaries, and tells one how to behave within the boundaries to be successful.20 Theimpact of globalization, diversity, and ethics given detailed attention in the next chapter, aturbulent, very problematic economy,21 and a workforce described as a blend of tradi-tionally trained baby boomers, in-your-face Gen Xers, people with inadequate literacyskills from disadvantaged areas, and techies raised on computers,22 has led to a paradigmshift. For example, James Brian Quinn offers the intelligent enterprise as new paradigm.He believes that the organization of enterprises and effective strategies will depend moreon development and deployment of intellectual resources than on the management ofphysical assets.23 These human and intellectual resources have moved into the new para-digm, and as indicated by the interview with Jim Collins in the accompanying OB inAction: Good to Great Expectations, with a new set of challenges and required ways ofthinking. In other words, for todays and tomorrows organizations and management, thereare new rules with different boundaries requiring new and different behavior inside theboundaries for organizations and management to be successful. Paradigm shifts haveinvalidated advantages of certain firms (e.g., consider the well-known problems of almostall auto, financial, and retail firms in recent years) and created new opportunities for oth-ers (e.g., Google and Costco).

Those who study paradigm shifts, such as the shift that took place in the basic sciencesfrom deterministic, mechanistic Cartesian-Newtonian to Einsteins relativity and quantumphysics, note that real controversy takes place, often involving substantial restructuring ofthe entire scientific community under conditions of great uncertainty.24 Commonly calledthe paradigm effect, a situation arises in which those in the existing paradigm may noteven see the changes that are occurring, let alone reason and draw logical inferences andperceptions about the changes. This effect helps explain why there is considerable resis-tance to change and why it is very difficult to move from the old management paradigm tothe new. There is discontinuous change in the shift to the new paradigm. As one observerof the needed new paradigm organization noted:

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OB in Action: Good to Great Expectations

9

For Jim Collins, the Stanford Graduate School of Businesslecturer-turned-management thinker, the workplaceis a pleasant office suite set amid the Rocky Mountains inBoulder, Colo. Managing generational tension amountsto shepherding a team of smart, curious students whohelp him with the research projects that have led toblockbuster books like Built to Last and Good to Great.And dealing with difficult bosses means stepping out-side to do some rock climbing in the mountain air if hegets frustrated with himself.

But the author of Good to Great, the worlds best-selling guide to taking companies to the next level, stillhas plenty of insights for those of us stuck in gray-walledcubicles where the scenic view is often the parking lotof a drab corporate campus. Management Editor JenaMcGregor asked Collins to translate some of his popularconcepts to todays workplace. Here are edited excerptsof that conversation:

One of the big concepts in your book is first who, orthat the most important thing is getting the right peo-ple on the bus. But for cubicle dwellers who canttrade in their boss or their co-workers, what shouldthey think about doing?

The idea of a personal board of directors came to mewhen I was in my 20s. I drew a little conference table ona sheet of paper with seven chairs around it and wrotenames on them of people I admired. I pasted it above mycomputer and would look up and in my mind poll thepersonal board when I was wrestling with tough ques-tions. If I was really stuck, I might talk to some of them.Its sort of like a group of tribal elders that you create foryourself.

How many of the leaders running the companies inGood to Great had any kind of work-life balance? Isit possible to run a great company and also have agreat life?

The bad news is, about half the CEOs didnt really seemto have a life. They defined a great life as building agreat company. A lot of people who do extraordinarythings are not balanced. Im not even convinced that theidea makes sense [since] theres a certain neurotic obses-sion with doing exceptional things. But heres the goodnews: It was only about half. So I draw the conclusionthat its a choice.

But havent BlackBerrys and globalization made suchchoices nearly impossible?

The imperative is to manage our time, not our work. Thisis why the whole question of balance and finishing our

work is insane. There are only 24 hours in a day, so whatdifference does it really make if you work 10 hours or 14,given that there are a thousand potential hours ofwork? The real question is the incredible rigor of whatgoes into the hours you allocate.

As I look at the most effective people weve studied,a stop-doing list or not-to-do list is more importantthan a to-do list, because the to-do list is infinite. Forevery big, annual priority you put on the to-do list, youneed a corresponding item on the stop-doing list. Its likean accounting balance.

Youve got to admit, though, that technology hasmade it harder today. I dont think its obviously hardertoday at all. Technology helps, not hurts, as long as youhave the discipline to turn these things off. You dontreport to your BlackBerry.

What we know about people who are really effectiveis that they think. The key is to build pockets of quietudeinto your scheduletimes when you have an appoint-ment with yourself and its protected. I have on my cal-endar white space days. I set them six months inadvance, and everyone around me can see them. Its notthat Im not working, but absolutely nothing can bescheduled on a white space day.

You talk in Good to Great about leaders needing toconfront brutal facts. But organizations loaded withbureaucracy are the exact places where truth doesntrise to the top. What do the best managers do tobreak down that bureaucracy?

How do you create a climate in which the truth is heard?The first thing is to increase your questions-to-state-ments ratio. Have someone track it and see if you candouble it in the next year. The leaders in our studiesasked lots of questions. They were Socratic. By askingquestions, they got the brutal facts, as well as lots ofinsights and ideas.

What can people who arent in leadership positionsdo to better navigate bureaucracies?

I think about how the leaders we studied handled thisbefore they were in charge. If you look at [formerGillette CEO] Colman Mockler or Ken Iverson before hebecame CEO of Nucor, what did they do? They werefocused on what they could control. That is Job One. Butthey were also really good at figuring out the three tofour people in the organization who really matteredand became very good at presenting to them evidenceand arguments that were persuasive.

If you produce exceptional work, your ability forinfluence is very high. Most people, even in bureaucracies,

(continued)

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10 Part One Environmental and Organizational Context

The depth of change required demands that those charged with charting a passage throughhurricane-like seas do more than run up a new set of sails. What is involved equates to aquantum shift in, not just learning, but how we learn; not just doing things differently, butquestioning 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 (wethink) we know.25

This text on organizational behavior has the goal of helping todays and tomorrowsmanagers make the transition to the new paradigm. Some of the new paradigm charac-teristics include Chapter 2s coverage of globalization, diversity, and ethics; Chapter 3 onthe organizational context of design and culture; and Chapter 4 on reward systems. Thenew paradigm sets the stage for the study, understanding, and application of the time-tested micro cognitive processes (Chapters 57), dynamics (Chapters 811), and the finalpart on managing and leading for high performance (Chapters 1214). However, beforegetting directly into the rest of the text, we must know why management needs a new per-spective to help meet the environmental challenges and the shift to the new paradigm. Wemust gain an appreciation of the historical background, methodology, and theoreticalframeworks that serve as the basis of this texts perspective and model for organizationalbehavior.

A NEW PERSPECTIVE FOR MANAGEMENT

How is management going to meet the environmental challenges and paradigm shift out-lined above? Management is generally considered to have three major dimensionstechnical, conceptual, and human. The technical dimension consists of the managersfunctional expertise in accounting or engineering or marketing and increasingly in infor-mation technology. There seems little question that todays managers are competent intheir functional specialization. Overall, however, although managers are certainly moreaware and becoming competent in their functional/technical component, few todaywould question that, at least in the past, most practicing managers either slighted the con-ceptual and human dimensions of their jobs or made some overly simplistic assumptions.

Following the assumptions that pioneering management scholar Douglas McGregorlabeled many years ago as Theory X, most managers thought, and many still think, thattheir employees were basically lazy, that they were interested only in money, and that if youcould make them happy, they would be high performers. When such Theory X assumptionswere accepted, the human problems facing management were relatively clear-cut and easyto solve. All management had to do was devise monetary incentive plans, ensure job secu-rity, and provide good working conditions; morale would then be high, and good perfor-mance would result. It was as simple as one, two, three. Human relations experts, industrial/

(continued)are hard-working, well-intentioned people trying to dogood things. If you ever wake up and say the majorityof people here arent that, then for sure its time tojump.

You manage a team of student researchers. Anysecrets youve discovered to managing Generation Y?

I dont understand this generational tension thing otherthan that I think the tension is great. You should find away to have young people in your face all the time.Wrestle with it. Revel in it. Learn from them. My view is,we ought to get those people into positions of leader-ship as fast as we can.

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organizational psychologists, and industrial engineers supported this approach, and humanresource managers implemented it.

Unfortunately, this approach no longer works with the current environmental demandsunder the new paradigm. Although good pay, job security, and working conditions are neces-sary, it is now evident that such a simplistic approach falls far short of providing a meaningfulsolution to the complex challenges facing todays human resource management. For example,a recent report in The Economist in reference to McGregors Theories X and Y include thatcompanies are coming to realize that knowledge workers, who have been identified as the cre-ators of future wealth, thrive only under Theory Y. Theory X is becoming extinct.26

The major fault with the traditional approach is that it overlooks and oversimplifies fartoo many aspects of the problem. Human behavior at work is much more complicated anddiverse than is suggested by the economic-securityworking-conditions approach. The newperspective assumes that employees are extremely complex and that there is a need for the-oretical understanding backed by rigorous empirical research before applications can bemade for managing people effectively. In the academic world, transition has now been com-pleted. The traditional human relations approach no longer has a dominant role in businessand applied psychology education. Few people would question that the organizationalbehavior approach, with its accompanying body of knowledge and applications, dominatesthe behavioral approach to management education now and will do so in the foreseeablefuture. Unfortunately, still only a minority of practicing managers and their organizationcultures really buy into, fully implement, and then stick with this research-based organiza-tional behavior approach to management practice.

Stanford professor Jeff Pfeffer has summarized the status of the organizational behav-ior approach to real-world management as a one-eighth situation.27 By one-eighth hemeans that roughly half of todays managers really believe and buy into the importance ofthe human side of enterprise and that the people are truly the competitive advantage oftheir organizations. Taken a step further, however, only about half of those who believereally do something about it. Thus, he says that only about one-fourth are fully imple-menting the high performance work practices (HPWPs) that flow from organizationalbehavior theory and researchsuch as pay for performance, self-managed teams, 360degree (multisource) feedback systems, behavioral management, and investing in psycho-logical capital. Most organizations have tried one or a few of the approaches and tech-niques emphasized in the chapters of this text, but only about a fourth fully implement thewhole approach. So now that we are down to one-fourth, where does the one-eighth comefrom? Well, Pfeffer estimates that only about one-half of the one-fourth who implementthe approach stick with it over time. Thus, only about one-eighth (12 12 12 18) oftodays organizations believe it, do it, and stick with it (the 3 Its). The so-called one-eighth organizations have as their organizational cultural values the importance of humancapital and the techniques in place to carry it out over time. Importantly, as Pfeffer welldocuments in his book Human Equation, these one-eighth organizations are world class,the best in the worldsuch as General Electric, Southwest Airlines, Google, Gallup, andSAS (the software development firm).

Today there is ample accumulated research findings and documented practices of the bestfirms to prove the value of the human factor. Pfeffer and Sutton felt compelled to try toexplain why most managers today know this importance and how to implement the approachto improve organizational performance, but still are not doing it (i.e., The Knowing-DoingGap).28 They identify five sources that seem to prevent the majority of managers from effec-tive implementation and sustainability: (1) hollow talk, (2) debilitating fear, (3) destructiveinternal competition, (4) poorly designed and complex measurement systems, and (5) mind-less reliance on precedent. They are convinced that if these obstacles (i.e., resistance to

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12 Part One Environmental and Organizational Context

change) can be overcome, then Competitive advantage comes from being able to do some-thing others dont do. When most companies are stuck talking about what should be done,those that get down to business and actually do will emerge as star performers.29 This newperspective is now called evidence-based management or simply EBM and, as indicated bythe subtitle, is the approach taken by this text.

EVIDENCE-BASED MANAGEMENT

Although the academic study and research of management in general and organizationalbehavior in particular is thriving (e.g., membership in the academic professional asso-ciation Academy of Management has doubled in the past 10 years), there is growingconcern that the divide, the gap, between theory/research and practice seems to bewidening. As noted in the introductory comments of a special issue of the Academy ofManagement Journal, devoted to the problem, It is hardly news that many organiza-tions do not implement practices that research has shown to be positively associatedwith employee productivity and firm financial performance, and this gap between sci-ence and practice is so persistent and pervasive that some have despaired of its everbeing narrowed.30

The problem largely comes from the fact that when it comes to people, everyone is anexpert. However, management academics add to the gap by too often concentrating only onthe creation of knowledge by rigorous scientific methods and pay too little attention on thetranslation and diffusion of research findings to practice.31 Both management consultantsand journalists (and popular book authors) also contribute to the problem. Too often con-sultants tend to conduct in house (not peer-reviewed scientific process) research anddepend only on narrow personal or client experience, and the journalists tell interesting sto-ries and make interpretations based on some facts, but also depend too much on limitedanecdotes and personal experience.32

Obviously, the bridge to help close the theory/research-practice gap must be built fromboth sides, practice and academic. Traditionally, practitioners have neither had the time northe desire to read and translate rigorous academic research and academics have not had thetime, desire, nor talent to write (translate the research) for practitioners.33 In other words,practitioners must take on more of a Practitioner-Scientist role and academics mustassume a more Scientist-Practitioner role. This movement to not only recognize, but alsodo something about what Pfeffer and Sutton called the Knowing-Doing Gap, is therecently emerging movement toward evidence-based management (EBM).

Drawing from how professions such as education and especially medicine have han-dled this similar gap problem, Denise Rousseau in her recent presidential speech to theAcademy of Management called for the field to take an evidence-based approach. Shedefined evidence-based management or EBM as translating principles based on best evi-dence into organizational practices. Through evidence-based management, practicingmanagers develop into experts who make organizational decisions informed by social sci-ence and organizational researchpart of the zeitgeist moving professional decisionsaway from personal preference and unsystematic experience toward those based on thebest available scientific evidence.34 The historical roots for this EBM can be traced backto one of the founding fathers of social psychology, Kurt Lewin, who astutely observedmany years ago that there is nothing so practical as a good theory and No action withoutresearch, no research without action.35 Following this sage advice, advocates of EBMstress the need to refocus management education based on valid theory and research,translated for effective practice.

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As indicated, this text from the beginning and through subsequent editions has beenknown for and prided itself