Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1-1
CHAPTER ONE: Organizational Behavior: The Quest for People-Centered
Organizations and Ethical Conduct
LEARNING OJBECTIVES
See Slides 1-2, 1-3
When you finish studying the material in this chapter, you should be able to:
• Define the term organizational behavior, and contrast McGregor’s Theory X and
Theory Y assumptions about employees.
• Identify the four principles of total quality management (TQM).
• Define the term e-business, and describe the Net Generation.
• Contrast human and social capital, and explain why we need to build both.
• Define the term management, and identify at least five of the eleven managerial
skills in Wilson’s profile of effective managers.
• Characterize 21st-century managers.
• Describe Carroll’s global corporate social responsibility pyramid, and discuss the
problem of moral erosion.
• Identify four of the seven general ethical principles, and explain how to improve
an organization’s ethical climate.
• Describe the sources of organizational behavior research evidence.
CHAPTER SUMMARY
Chapter 1 defines organizational behavior (OB) and discusses the importance of
studying OB. This chapter traces the evolution of OB and explores how the Internet and
social media are impacting OB. Chapter 1 discusses what managers do and the skills
managers need, in particular those skills needed for a 21st century manager. This
chapter also discusses ethical behavior in organizations, a topic that appears in various
forms throughout the rest of the book. Finally, sources of research on organizational
behavior are discussed and a roadmap is provided for what the readers can expect
going forward in the textbook.
OB is an interdisciplinary field drawing from many disciplines including psychology,
management, sociology, organization theory, social psychology,
Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1-2
statistics, anthropology, general systems theory, economics, information technology,
political science, vocational counseling, human stress management, psychometrics,
ergonomics, decision theory, and ethics. Knowledge of OB can help people to better
understand themselves and others. OB skills can make or break careers for those in
supervisory or leadership positions. OB cuts across almost every job category and
functional area making it essential to virtually every business person regardless of their
specialization.
A historical perspective of OB is the study of the subject in light of its earliest phases
and subsequent evolution. We can better understand where the field of OB is today
and where it appears to be headed by appreciating where it has been and how it is
being redirected. The evolution of OB is marked by four significant landmarks in the
understanding and management of people in the workplace: the human relations
movement, the quality movement, the Internet and social media revolution, and the age
of human and social capital.
The HR movement introduced a more progressive way of thinking about people in the
workplace. Managers began to view employees as active social beings who required,
deserved, and demanded more humane working conditions. Ideas put forth by Elton
Mayo, Mary Parker Follett, and Douglas McGregor were instrumental in this movement.
Mayo advised managers to attend to employees’ emotional needs. Follett encouraged
managers to motivate job performance instead of merely demanding it. McGregor
formulated two contrasting sets of assumptions about human nature. His Theory X
assumptions are negative and represent the traditional perceptions of employees
whereas his Theory Y challenges managers to adopt a more positive, developmental
approach to employees.
The total quality management (TQM) movement focuses on continuous, customer–
centered, employee-driven improvement. TQM is largely based on the work of W.
Edwards Deming. According to Deming, when problems arise, there is an 85% chance
that the system (e.g., machinery or management) is at fault and only about 15% of the
time is the employee is responsible. Four common principles underlie the TQM
approach: do it right the first time, listen to and learn from customers and employees,
make continuous improvement an everyday matter, and build teamwork, trust, and
mutual respect.
The rise of the Internet has had a profound impact on the business world. Following its
rocky start and the tech crash of 2001, the Internet has established itself as a force to
be reckoned with. Over time, e-commerce (buying and selling goods and services over
the Internet) has evolved into e-business (using the Internet to facilitate every aspect of
a business). Those who grow up with Internet technology tend to value freedom, want
to customize everything (even their jobs), are skeptical of the media, value integrity, are
great collaborators, thrive on speed, and love to innovate.
Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1-3
What you know and who you know increasingly are the keys to both personal and
organizational success. Human capital is the productive potential of an individual’s
knowledge and actions. Social capital is the productive potential resulting from strong
relationships, goodwill, trust and cooperative effort. Organizations can gain a
competitive advantage by helping their employees build human and social capital.
Figure 1-2 lists the various dimensions of human and social capital.
Management is defined as the process of working with and through others to achieve
organizational objectives in an efficient and ethical manner. Good management
involves finding a clear purpose, being aware that past experience and a mass of
information can interfere with wise decisions, maintaining a bias toward action, being
open to change, and seeking feedback. Research has revealed 11 skills and behaviors
exhibited by effective managers: (1) clarification of goals and objectives, (2)
encouragement of participation, (3) planning and organization, (4) technical and
administrative expertise, (5) facilitation of work, (6) providing of feedback, (7) keeping
things moving, (8) controlling details, (9) pressuring for goal accomplishment, (10)
empowering and delegating, and (11) recognition of good performance.
The changes occurring in the workplace necessitate a new kind of manager in the 21st
century. Modern organizations have been reengineered for greater speed, efficiency,
and flexibility. Teamwork has become a primary method of getting work done in today’s
complex organizations and antiquated “command-and–control” style management is
increasingly displaced by a more participative style which facilitates employee
empowerment. Table 1-3 profiles the skills needed by the 21st-century manager.
Contingency approaches to management contend that management concepts and
techniques cannot be universally applied in all situations. Rather, management
concepts and by extension OB theories should be applied in a situationally appropriate
manner. According to the contingency approach, the “correct” managerial technique is
situationally specific.
Ethics is the study of moral issues and choices. Corporate social responsibility (CSR)
contends that businesses should go beyond just making a profit and they should serve
the interests and needs of a variety of stakeholders. Carroll’s model of CSR/business
ethics illustrates that firms have four levels of increasing responsibility. A firm’s Level 1
responsibility is to make a profit, while its Level 2 responsibility is to obey the law. Its
Level 3 responsibility is to be ethical, while its highest level responsibility is to be a good
corporate citizen. Individuals also face ethical challenges in the workplace and some
believe there has been an erosion of morality. People often see ethical lapses at work
and individuals are socialized from a very young age, as young as high school, to focus
on results.
Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1-4
Managers can use Hodgson’s magnificent seven moral principles to guide their
behavior to be ethical. In the end ethical behavior is an individual choice driven by a
person’s perception and motivation. Although organizational climate, role models,
structure, training, and rewards all can point employees in the “right direction,”
individuals must take responsibility for their own moral attentiveness and their actions.
Organizational behavior research comes from five primary sources. A meta-analysis is
a statistical pooling (i.e., aggregation) technique that allows researchers to draw general
conclusions from a large group of studies. Field studies probe processes in an
organizational setting. In contrast, laboratory studies manipulate and measure variables
in controlled situations. In surveys, samples of participants from specified populations
respond to questionnaires and conclusions are drawn about the parent population.
Finally, a case study is an in-depth analysis of a single individual, group, or
organization.
LECTURE OUTLINE
I. Introduction
i) People matter to organizations and CEOs such as Tony Hsieh of
Zappos often contend that people are their “top priority.”
ii) Research by Pfeffer shows that people-centered practices are strongly
associated with higher profits and lower employee turnover.
iii) Pfeffer’s Seven People-Centered Practices
(1) Job security.
(2) Careful hiring.
(3) Power to the people.
(4) Generous pay for performance.
(5) Lots of training.
(6) Less emphasis on status.
(7) Trust building.
iv) These factors are a package deal, meaning they need to be installed in
a coordinated and systematic manner.
Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1-5
v) According to Pfeffer, only 12% of today’s organizations have the
systematic approaches and persistence to qualify as true people-
centered organizations, thus giving them a competitive advantage.
vi) Pfeffer recently couched his call for greater people-centeredness in the
“green management” term sustainability and contends there could be a
similar level of concern for protecting human resources.
vii) The Real World/Real People: Lola Gonzalez Laid Herself Off First!
profiles how at people-centered organizations, layoffs are a very last
resort.
viii) The mission of this book is to help increase the number of people
centered and ethically managed organizations around the world to
improve the general quality of life.
II. Welcome to the World of OB
i) Organizational Behavior: An Interdisciplinary Field
(1) Organizational behavior (OB): interdisciplinary field dedicated to
better understanding and managing people at work. See
Slide 1-4
(2) The three basic levels of analysis in OB are individual, group and
organizational.
(3) OB draws upon a diverse array of disciplines including psychology,
management, sociology, organization theory, social psychology,
statistics, anthropology, general systems theory, economics,
Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1-6
information technology, political science, vocational counseling,
human stress management, psychometrics, ergonomics, decision
theory, and ethics.
ii) Some FAQs about Studying OB
(1) Why Study OB?
(a) Knowledge of OB will help you better understand yourself and
others.
(b) Figure 1-1: OB-Related Skills Are the Ticket to Ride the
Virtuous Career Spiral illustrates how OB-related skills can
point you toward career success. See Slide 1-5
(2) If I’m an Accounting (or Other Technical) Major, Why Should I
Study OB?
(a) OB skills can make or break your career once you progress to a
supervisory or leadership position.
(b) In today’s team-oriented and globalized workplace, your
teamwork, cross-cultural, communication, conflict handling, and
negotiation skills and your powers of persuasion will be needed
early and often.
(3) Can I Get a Job in OB?
(a) OB is not an everyday job category such as accounting,
marketing or finance.
(b) OB is a horizontal discipline cutting across virtually every job
category, business function, and professional specialty.
Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1-7
III. A Historical Perspective of OB
i) The Human Relations Movement See Slide 1-6
(1) The Hawthorne Legacy See Slide 1-7
(a) The Hawthorne study (erroneously) suggested that supportive
supervision led to high production output.
(b) Subsequent reanalysis of original data from the Hawthorne
studies does not support the initial conclusions about the
positive effect of supportive supervision.
(c) The human relations movement gathered momentum through
the 1950s, as academics and managers alike made stirring
claims about the powerful effect that individual needs,
supportive supervision, and group dynamics apparently had on
job performance.
(2) The Writings of Mayo and Follet
(a) Elton Mayo advised managers to attend to employees’
emotional needs.
(b) Mary Parker Follett was a pioneer, female management
consultant in the male-dominated world of the 1920s and she
told managers to motivate job performance instead of just
demanding it.
Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1-8
(3) McGregor’s Theory Y See Slide 1-9
(a) McGregor formulated two contrasting sets of assumptions about
human nature.
(b) Table 1-1: McGregor’s Theory X and Theory Y compares
Theory X and Theory Y assumptions. See Slide 1-10
(c) Theory X assumptions were pessimistic and negative.
See Slide 1-8
(i) To break with negative tradition, McGregor formulated
Theory Y: modern and positive assumptions about
employees being responsible and creative.
(4) New Assumptions about Human Nature
(a) Unsophisticated behavioral research methods caused the
human relationists to embrace some naive and misleading
conclusions.
(b) Despite its shortcomings, the human relations movement
opened the door to more progressive thinking about human
nature.
(c) Managers began to see employees as active social beings and
took steps to create more humane work environments.
ii) The Quality Movement
(1) What Is TQM?
Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1-9
(a) Total quality management (TQM): an organizational culture
dedicated to training, continuous improvement, and customer
satisfaction. See Slide 1–12
(b) TQM is necessarily employee driven because product or service
quality cannot be continuously improved without the active
learning and participation of every employee.
(c) In successful quality improvement programs, TQM principles
are embedded in the organization’s culture.
(2) The Deming Legacy
(a) W. Edwards Deming led a pioneering effort in training in TQM.
(b) His passion was the statistical measurement and reduction of
variations in industrial processes.
(c) Regarding the human side of quality improvement, he called for:
(i) Formal training in statistical process control techniques and
teamwork.
(ii) Helpful leadership, rather than order giving and punishment.
(iii) Elimination of fear so employees will feel free to ask
questions.
(iv) Emphasis on continuous process improvements rather than
on numerical quotas.
(v) Teamwork.
(vi) Elimination of barriers to good workmanship.
(d) One of his most enduring lessons was his 85-15 rule.
Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1–10
(i) When things go wrong, there is roughly an 85% chance the
system (including management, machinery, and rules) is at
fault.
(ii) Only about 15% of the time is the individual employee at
fault.
(iii)Deming observed that managers typically blamed individuals
for system factors not directly under their control.
(3) Principles of TQM See Slide 1-13
(a) There are four common TQM principles:
(i) Do it right the first time to eliminate costly rework.
(ii) Listen to and learn from customers and employees.
(iii)Make continuous improvement an everyday matter.
(iv)Build teamwork, trust, and mutual respect.
(b) TQM advocates have made a valuable contribution to the field
of OB by providing a practical context for managing people.
iii) The Internet and Social Media Revolution See Slide 1–14
(1) After a tumultuous start, the Internet has become a major force in
the business world.
(2) Over time e-commerce (buying and selling goods and services over
the Internet) has expanded into e-business (virtually all facets of
business are handled through the Internet).
1–11
(3) Any activity that depends on the flow of information can be altered
by the Internet.
(4) An important shift in the Internet is growing importance of user–
generated content, which has been enabled by social media
innovations such as Facebook, LinkedIn, and Twitter.
(5) Managers need to focus on how the evolving Internet has changed
the behavior of those who have grown up with the Internet and take
Google, Facebook, YouTube, and tweeting for granted.
(6) The Real World/Real People: Is Your Robot Watching Me?
discusses how organizations may change with continued advances
in technology.
iv) The Need to Build Human and Social Capital
(1) What is Human Capital? (Hint: Think BIG)
(a) Human capital: the productive potential of one’s knowledge
and actions. See Slide 1-17
(b) A present or future employee with the right combination of
knowledge, skills, and motivation to excel represents human
capital with the potential to give the organization a competitive
advantage.
(2) What is Social Capital? See Slide 1-18
Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1–12
(a) Social capital: the productive potential of strong, trusting, and
cooperative relationships.
(b) In a general survey, 77% of the women and 63% of the men
rated “good relationship with boss” extremely important.
(3) Building Human and Social Capital
(a) Figure 1-2: The Strategic Importance and Dimensions of
Human and Social Capital identifies components of human
and social capital. See Slide 1-16
IV. The Managerial Context: Getting Things Done with and through Others
i) What Do Managers Do? A Skills Profile
(1) Management: process of working with and through others to
achieve organizational objectives, efficiently and ethically, amid
constant change. See Slide 1-20
(2) Table 1-2: Skills Exhibited by an Effective Manager provides a
statistically validated profile of managerial skills. An effective
manager: See Slide 1-21
(a) Clarifies goals and objectives for everyone involved.
(b) Encourages participation, upward communication, and
suggestions.
(c) Plans and organizes for an orderly work flow.
Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1–13
(d) Has technical and administrative expertise to answer
organization-related questions.
(e) Facilitates work through team building, training, coaching, and
support.
(f) Provides feedback honestly and constructively.
(g) Keeps things moving by relying on schedules, deadlines, and
helpful reminders.
(h) Controls details without being overbearing.
(i) Applies reasonable pressure for goal accomplishment.
(j) Empowers and delegates key duties to others while maintaining
goal clarity and commitment.
(k) Recognizes good performance with rewards and positive
reinforcement.
(3) Clark Wilson’s skills-assessment technique includes self-reports
and assessments by those who report directly to a manager.
(4) The Wilson managerial skills research yields four useful lessons:
(a) Dealing effectively with people is what management is all about.
(b) Managers with high skills mastery tend to have better subunit
performance and employee morale than managers with low
skills mastery.
(c) Effective female and male managers do not have significantly
different skill profiles.
Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1–14
(d) At all career stages, derailed managers tended to be the ones
who overestimated their skill mastery.
ii) 21st-Century Managers See Slide 1-22
(1) Today’s workplace is indeed undergoing immense and permanent
changes.
(2) A summit of executives and management scholars prompted a call
for a “reinvention” of management.
(3) Table 1-3: Evolution of the 21st-Century Manager profiles the
kind of manager needed in the 21st century for more flexible,
innovative, and responsive organizations. See Slide 1-24
iii) The Contingency Approach to Management See Slide 1-23
(1) Contingency approach: using management tools and techniques
in a situationally appropriate manner; avoiding the one-best-way
mentality.
(2) Encourages managers to view organizational behavior within a
situational context.
(3) Evolving situations, not hard-and-fast rules determine when and
where various management techniques are appropriate.
(4) Harvard’s Clayton Christensen: “Many of the widely accepted
principles of good management are only situationally appropriate.”
Chapter 01 – Organizational Behavior: The Quest for People-Centered Organizations and Ethical Conduct
1–15
(5) Calls on managers to carefully read the situation and then be
flexible enough to adapt.
(6) The Real World/Real People: Will Happy Employees Mean
Happy Customers for American Express? profiles an example of
the contingency approach.
V. The Ethics Challenge See Slide 1-25
i) The Ethics Challenge Overview
(1) If OB can provide insights about managing human work behavior,
then it can teach us something about avoiding misbehavior.
(2) Ethics: study of moral issues and choices.
(3) Ethics is concerned with right versus wrong, good versus bad, and
the many shades of gray in supposedly black-and-white issues.
ii) A Model of Global Corporate Social Responsibility and Ethics
See Slides 1-27, 1-29, 1-30
(1) Corporate social responsibility (CSR): corporations are expected
to go above and beyond following the law and making a profit.
See Slide 1-26
(2) CSR challenges businesses to go above and beyond just making a
profit to serve the interests and needs of “stakeholders,” including
past and present employees, customers, suppliers, and countries
and communities where facilities are located.