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PART ONE – INTRODUCTION TO ORGANIZATIONAL BEHAVIOR
Chapter One – An Overview of Organizational Behavior
Overview
Managers strive to make their organizations as effective and successful as possible. To do this they rely on
assets such as financial reserves and earnings, technology and equipment, raw materials, information, and
operating systems and processes. At the center of everything are the employees who work for the
organization. It is usually their talent, effort, skill, and ability that differentiates effective from less
effective organizations. It is critical, then, that managers understand how the behaviors of their employees
impact organizational effectiveness. In general, managers work to enhance employee performance
behaviors, commitment and engagement, and citizenship behaviors and to minimize various dysfunctional
behaviors. A number of environmental, individual, group and team, leadership, and organizational
characteristics can make the manager’s work easier or more difficult depending on how well they
understand organizational behavior. This model will be more fully developed in Chapter 1 and will serve
as a roadmap for your study of organizational behavior throughout this book.
Regardless of their size, scope, or location, all organizations have at least one thing in common—they are
comprised of people. It is these people who make decisions about the strategic direction of a firm, it is
they who acquire the resources the firm uses to create new products, and it is they who sell those
products. No matter how effective a manager might be, all organizational successes—and failures—are
the result of the behaviors of many people. Indeed, no manager can succeed without the assistance of
others.
This book is about those people. It is also about the organization itself and the managers who operate it.
Together, the study of organizations and the study of the people who work in them constitute the field of
organizational behavior. Our starting point in exploring this field begins with a more detailed discussion
of it
The primary purpose of this chapter is to introduce the field of organizational behavior. The chapter
begins by defining organizational behavior as the study of human behavior in organizational settings, the
interface between human behavior and the organization, and the organization itself. The four functions
that make up the manager’s job—planning, organizing, leading, and controlling—are discussed. Then the
chapter explores the various skills—technical, interpersonal, conceptual, and diagnostic—managers must
apply in organizations. The chapter then discusses human resource management. The strategic context of
organization behavior is discussed, including maintaining a competitive advantage, sources of
competitive advantage and types of business strategies. The next section provides some historical context
on organizational behavior, looking at scientific management, Hawthorne effect and the human relations
movement. The chapter continues by defining a system and systems perspective, the situational
perspective, and interactionalism. The chapter continues by examining the outcomes—individual, group
and team, and organization—that are important for organizational effectiveness, including the scientific
method and meta-analysis. The chapter concludes with a preview of the remaining text.
Learning Outcomes
After studying this chapter, students should be able to:
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1. Define organizational behavior and describe how it impacts both personal and organizational
success.
2. Identify the basic management functions and essential skills that comprise the management
process and relate them to organizational behavior.
3. Describe the strategic context of organizational behavior and describe the relationships between
strategy and organizational behavior.
4. Identify and describe contextual perspectives on organizational behavior.
5. Describe the role of organizational behavior in managing for effectiveness and discuss the role of
research in organizational behavior.
6. Summarize the framework around which this book is organized.
Real World Challenge: Managing Growth at Google
Summary: Google’s popular search engine was created in 1998 with the goal of making the world’s
information available to everyone. Google’s explosive growth needed to be closely monitored, and that its
employees needed to continue feeling like an important part of the team. The founders wanted to make
Google an engaging place to work and set out to design the organization and its culture in a way that
would appeal to its current and future employees.
Real World Challenge: What advice would you give them about the role of its people in its future
success and how to set up the company to maximize employee innovation, trust, and loyalty?
Real World Response: Between 1998 and 2015 Google’s rapid growth presented tremendous challenges
in integrating new employees while motivating them to be innovative, productive, and loyal to the fast
growing company. The founders’ believed that people thrive in and are loyal to their jobs when they feel
fully supported and authentically valued. This understanding led to the development of a culture
anchored by trust, transparency, and inclusion.
Google is now known for offering its employees a wide variety of perks. Google regularly surveys
employees about their managers, using the information to publicly recognize the best ones and give the
worst managers intensive coaching and support that helps 75 percent of them improve within three
months. Google also hires smart, ambitious people who share the company’s goals and vision and
maintains an open culture in which employees feel comfortable sharing opinions and ideas. Google’s
proactive efforts to be an engaging and inspiring place for its employees has both helped the company
succeed and made it a staple on various “most desired employer” lists, including being named the #1 Best
Place to Work honor from Glassdoor in 2015.
Chapter Outline
I. WHAT IS ORGANIZATIONAL BEHAVIOR?
A. The Meaning of Organizational Behavior
Organizational behavior (OB) is the study of human behavior in organizational settings, the
interface between human behavior and the organization, and the organization itself.
All three are ultimately necessary for a comprehensive understanding of organizational
behavior.
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OB helps explain and predict how people and groups interpret events, react, and behave in
organizations and describes the role of organizational systems, structures, and process in
shaping behavior. Figure 1.1 illustrates this view of organizational behavior.
B. How Organizational Behavior Impacts Personal Success
The core of OB is being effective at work. Since most people reading this book are either
present or future managers we take a managerial perspective of the field. Using your
knowledge of OB can help you to succeed faster in any organization or career.
The study of organizational behavior can greatly clarify the factors that affect how managers
manage. Hence, the field attempts to describe the complex human context of organizations and
to define the opportunities, problems, challenges, and issues associated with that realm.
C. How Organizational Behavior Impacts Organizational Success
Organizations as a whole also benefit from OB.
By appropriately applying OB knowledge about individuals, groups, and the effect of
organizational structure on worker behavior, the conditions can be created that make
organizations most effective.
OB also helps companies perform well.
In addition to financial performance and job satisfaction, OB also influences absenteeism and
turnover. Reducing absenteeism and turnover can be worth millions of dollars to organizations
through increased productivity and customer service and decreased staffing costs.
One central value of organizational behavior is that it isolates important aspects of the
manager’s job and offers specific perspectives on the human side of management: people as
organizations, people as resources, and people as people.
Case Study: The J.M. Smucker Company
Summary: From its founding in 1897, the J.M. Smucker Company recognizes that acting ethically is a
key element of its success. The manufacturer wants to ensure that its fruit spreads, frostings, juices, and
beverages remain American staples, and that its daily operations are guided by honesty, respect, trust,
responsibility, and fairness.
1. Why would ethics be important to a company like Smucker? How can its focus on ethics
improve its business performance?
Acting ethically is a key element of the company’s success. The benefits to the company include
cultivating teamwork and productivity, supporting employee growth, avoiding criminal acts of
2. Appearing on “best places to work” lists can increase an employer’s popularity, even among
lower-qualified applicants. The increased volume of applicants can be costly and time-
consuming. What do you feel are the benefits and drawbacks to being on this type of list? Do you
feel that it is generally beneficial to be publicly recognized as a good employer? Why or why not?
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
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The benefits include employee pride in working for an organization known for its high ethical
3. Does Smucker’s culture appeal to you as a potential employee? Why or why not?
The culture is appealing because the company is dedicated to higher ethical ideals that better society as
II. THE MANAGERIAL CONTEXT OF ORGANIZATIONAL BEHAVIOR
The managerial context of OB can be viewed from the perspective of basic
management functions, critical management skills, and overall human resource
management.
A. Basic Management Functions and Organizational Behavior
In characterizing managerial work, most experts find it useful to conceptualize the activities
performed by managers as reflecting one or more of four basic functions.
1.Planning is the process of determining an organization’s desired future position and the best
means of getting there.
2.Organizing is the process of designing jobs, grouping jobs into units, and establishing
patterns of authority between jobs and units.
3.Leading is the process of getting the organization’s members to work together toward the
organization’s goals.
4.Controlling is the process of monitoring and correcting the actions of the organization and its
members to keep them directed toward their goals.
B. Critical Management Skills and Organizational Behavior
In general, most successful managers have a strong combination of technical, interpersonal,
conceptual, and diagnostic skills.
Technical skills are the skills necessary to accomplish specific tasks within the organization.
Interpersonal skills are the ability to effectively communicate with, understand, and motivate
individuals and groups.
Conceptual skills are the ability to think in the abstract.
Diagnostic skills are the ability to understand cause-and-effect relationships and to recognize
the optimal solutions to problems.
C. Organizational Behavior and Human Resource Management
Human resource management (HRM) is the set of organizational activities directed at
attracting, developing, and maintaining an effective workforce.
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More precisely, HR managers select new employees, develop rewards and incentives to
motivate and retain employees, and create programs for training and developing employees.
III. THE STRATEGIC CONTEXT OF ORGANIZATIONAL BEHAVIOR
Competitive advantage is anything that gives a firm an edge over rivals in attracting customers and
defending itself against competition.
A. Sources of Competitive Advantage
There are many sources of competitive advantage including having the best-made or cheapest
product, providing the best customer service, being more convenient to buy from, having
shorter product development times, and having a well-known brand name.
Because it is an organization’s people who are responsible for gaining and keeping any
competitive advantage, effective management is critical to business success.
To have a competitive advantage a company must ultimately be able to give customers superior
value for their money (a combination of quality, service, and acceptable price)—either a better
product that is worth a premium price or a good product at a lower price can be a source of
competitive advantage.
Table 1.1 lists some possible sources of competitive advantage. You should note that an
organization’s talent is the key to securing each of these.
B. Types of Business Strategies
A company may create value based on price, technological leadership, customer service, or
some combination of these and other factors.
Business strategy involves the issue of how to compete, but also encompasses:
The strategies of different functional areas in the firm.
How changing industry conditions such as deregulation, product market maturity, and
changing customer demographics will be addressed.
How the firm as a whole will address the range of strategic issues and choices it faces.
Business strategies are partially planned, and partially reactive to changing circumstances.
Companies may also pursue more than one strategy at a particular time.
Three primary business strategies are:
1. Cost leadership
2. Differentiation
3. Specialization
1. Cost Leadership Strategy strives to be the lowest-cost producer for a particular level of
product quality. Walmart is a good example of a firm that uses a cost leadership strategy.
Operational excellence maximizes the efficiency of the manufacturing or product
development process to minimize costs. Dell computers, Federal Express, and Walmart are
good examples of companies whose competitive advantage is based on operational
excellence.
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2. Differentiation Strategy develops a product or service that has unique characteristics
valued by customers.
Firms can differentiate along various dimensions, including image (Coca-Cola), product
durability (Wrangler clothing), quality (Lexus), safety (Volvo), and usability (Apple
Computer).
Product innovation is developing new products or services.
This strategy is common in technology and pharmaceutical companies. Johnson &
Johnson, Nike, and 3M are good examples.
3. Specialization Strategy focuses on a narrow market segment or niche and pursues either a
differentiation or cost leadership strategy within that market segment.
This strategy can be successful if it results in either lower costs than competitors serving
the same niche, or an ability to offer customers something other competitors do not, such as
Chuck E. Cheese, Dunkin’ Donuts, and Starbucks.
Customer intimacy is delivering unique and customizable products or services to meet
customers’ needs and increase customer loyalty.
Consulting, retail, and banking organizations often adopt this approach.
4. Growth Strategy occurs when companies expand organically or through acquisitions.
Chipotle Mexican Grill is a growth-oriented chain and regularly opens new stores requiring
additional management, employees, and even product distribution staff.
C. Connecting Business Strategy to Organizational Behavior
There are a number of significant linkages that connect business strategy and OB.
For instance, a firm that relies on a cost leadership strategy will usually need to keep all of its
expenses as low as possible. Therefore, this strategy might dictate relying on low-wage
employees and trying to automate as many jobs as possible. These actions, in turn, clearly relate
to employee motivation and the design of work.
Likewise, a company using a differentiation strategy might want to emphasize exemplary
customer service. As a result, it needs employees who are motivated to provide high levels of
service, leaders who can help develop a customer service culture, and a reward structure tied to
customer service.
A specialization strategy often requires employees with specialized skills and abilities.
Effective managers understand what needs to be done to execute a company’s business strategy,
then they plan, organize, direct, and control the activities of employees to get it done. It is
important to note that managers do not accomplish organizational objectives by themselves—
they get work done through others. Flexibly applying OB principles will help you to do that
most effectively.
IV. CONTEXTUAL PERSPECTIVES ON ORGANIZATIONAL BEHAVIOR
A. Where Does Organizational Behavior Come From?
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Formal study of OB began in the 1890s, following the industrial relations movement spawned
by Adam Smith’s introduction of the division of labor. In the 1890s, Frank and Lillian Gilbreth
and Frederick Winslow Taylor identified the positive effects of precise instructions, goal
setting, and rewards on motivation. Their ideas became known as scientific management, and
are often considered the beginning of the formal study of OB.
Scientific management is based on the belief that productivity is maximized when
organizations are rationalized with precise sets of instructions based on time-and-motion
studies.
The four principles of Taylor’s scientific management are:
1. Replace rule-of-thumb work methods with methods based on scientifically studying the
tasks using time-and-motion studies.
2. Scientifically select, train, and develop all workers rather than leaving them to passively
train themselves.
3. Managers provide detailed instructions and supervision to workers to ensure that they are
following the scientifically developed methods.
4. Divide work nearly equally between workers and managers. Managers should apply
scientific management principles to planning the work, and workers should actually
perform the tasks.
Although scientific management improved productivity, it also increased the monotony of
work.
After World War I, attention shifted to understanding the role of human factors and psychology
in organizations. This interest was spawned by the discovery of the Hawthorne effect in the
1920s and 1930s.
The Hawthorne effect occurs when people improve some aspect of their behavior or
performance simply because they are being assessed.
Rather than viewing workers as interchangeable parts in mechanical organizations as the
scientific management movement had done, the human relations movement viewed
organizations as cooperative systems and treated workers’ orientations, values, and feelings as
important parts of organizational dynamics and performance.
B. Organizations as Open Systems
A system is an interrelated set of elements that function as a whole. The framework for systems
study consists of inputs, transformation, outputs, and feedback.
An organizational system receives four kinds of input from its environment: material, human,
financial, and informational. These inputs are combined and transformed and then returned to
the environment in the form of products or services, profits or losses, employee behaviors, and
additional information.
Finally, the system receives feedback from the environment regarding these outputs.
The systems perspective is valuable to managers for a variety of reasons.
First, it underscores the importance of an organization’s environment. The systems perspective
also helps managers conceptualize the flow and interaction of various elements of the
organization itself as they work together to transform inputs into outputs.
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license distributed with a certain product or service or otherwise on a password‐protected website or school-approved learning management system for classroom use.
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C. Situational Perspectives on Organizational Behavior
Another useful viewpoint for understanding behavior in organizations comes
from the situational perspective which suggest that in most organizations, situations and
outcomes are influenced by other variables.
Because of the complexities of human behavior and organizational settings, universal
conclusions are impossible. In organizations, most situations and outcomes are contingent; that
is, the precise relationship between any two variables is likely to be situational and dependent
on other variables.
There are distinct differences between universal and situational perspectives.
D. Interactionalism: People and Situations
Interactionalism suggests that individuals and situations interact continuously to determine
individuals’ behavior. This view attempts to explain how people select, interpret, and change
various situations.
V. MANAGING FOR EFFECTIVENESS
Essentially, managers and leaders generally try to direct the behaviors of people in their
organizations in ways that promote organizational effectiveness.
A. Enhancing Individual and Team Performance Behaviors
Several individual behaviors result from a person’s participation in an organization.
One important behavior is productivity. A person’s productivity is a relatively narrow indicator
of his or her efficiency and is measured in terms of the products or services created per unit of
input.
Performance, another important individual-level outcome variable, is a somewhat broader
concept and is made up of all work-related behaviors.
Another set of outcomes exists at the group and team level. Some of these outcomes parallel the
individual-level outcomes just discussed.
Individuals, not groups, have attitudes. But groups or teams can also have unique outcomes that
individuals do not share.
Managers need to assess both common and unique outcomes when considering the individual
and group levels.
B. Enhancing Employee Commitment and Engagement
Levels of job satisfaction or dissatisfaction, organizational commitment, and employee
engagement all play an important role in organizational behavior.
Extensive research conducted on job satisfaction has indicated that personal factors. Contrary to
what many managers believe, however, high levels of job satisfaction do not necessarily lead to
higher levels of performance.
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license distributed with a certain product or service or otherwise on a password‐protected website or school-approved learning management system for classroom use.
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A person with a high level of commitment is likely to see herself as a true member of the
organization. In contrast, a person with less organizational commitment is more likely to see
himself as an outsider
C. Promoting Organizational Citizenship Behaviors
Organizational citizenship is the behavior of individuals that makes a positive overall
contribution to the organization.
The determinant of organizational citizenship behaviors is likely to be a complex mosaic of
individual, social, and organizational variables. Although the study of organizational citizenship
is still in its infancy, preliminary research suggests that it may play a powerful role in
organizational effectiveness.
D. Minimizing Dysfunctional Behaviors
Some work-related behaviors are dysfunctional in nature.
Dysfunctional behaviors are those that detract from, rather than contribute to, organizational
performance.
Two other important individual-level behaviors are absenteeism and turnover. Absenteeism is a
measure of attendance. Turnover occurs when a person leaves the organization.
Other forms of dysfunctional behavior may be even more costly for an organization.
Theft and sabotage result in direct financial costs for an organization. Sexual and racial
harassment also cost an organization, both indirectly and directly.
So, too, can politicized behavior, intentionally misleading others in the organization, spreading
malicious rumors, and similar activities.
Incivility and rudeness can result in conflict and damage to morale and the organization’s
culture.
Bullying and workplace violence are also growing concerns in many organizations.
E. Driving Strategic Execution
Finally, another set of outcome variables exists at the organization level. These outcomes
usually relate to strategic execution—how well managers and their employees understand and
carry out the actions needed to achieve strategic goals.
As before, some of these outcomes parallel those at the individual and group levels, but others
are unique.
The manager must look at the full array of outcomes and attempt to balance them in an optimal
fashion. The manager’s ability to do this is a major determinant of the organization’s success
and how well it implements its business strategy.
F. How Do We Know What We Know?
Another important part of being an effective manager is understanding the quality of the
information you use to make decisions. Not all information is accurate!
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Accordingly, it is important for you to understand the processes that have been used to establish
our knowledge about OB, and why we know what we know.
1. Intuition
Decades of research have both reinforced some of the things many people intuitively
believe and identified common misunderstandings or misperceptions about OB.
The authors encourage you to read this book with an open mind, and to not assume that you
know all there is to know about a topic before you have studied it. Their goal is to help you
be as effective as possible in organizations, and to help you create successful organizations.
2. The Scientific Method
Rather than relying on experience or intuition, or just assuming that ideas are correct
because they seem to make sense, the scientific method relies on systematic studies that
identify and replicate a result using a variety of methods, samples, and settings. Sir Francis
Bacon developed the scientific method in the 1600s.
The scientific method begins with theory, which is a collection of verbal and symbolic
assertions that specify how and why two or more variables are related, and the conditions
under which they should and should not relate.
The second step in the scientific method is the development of hypotheses, or written
predictions specifying expected relationships between certain variables.
Hypothesis testing can be done using a variety of research methods and statistical analyses.
For our purposes, assume we collect data on our predictor, or independent variable, and
our criterion, or dependent variable.
Setting a specific, difficult, achievable goal is the independent variable, and the number of
products assembled is our dependent variable.
We can then analyze the correlation, abbreviated r, between the two variables to test our
hypothesis. The correlation reflects the strength of the statistical relationship between two
variables.
The correlation ranges from −1 to +1, and can be positive or negative. A correlation of 0
means that there is no statistical relationship. A negative correlation is not necessarily bad.
It may simply mean that to maximize assemblers’ performance, the manager should set
lower goals.
In reality, we never see perfect +1.0 or −1.0 correlations when it comes to people’s
behavior—people are just too complicated.
A statistical technique called meta-analysis is used to combine the results of many different
research studies done in a variety of organizations and for a variety of jobs.
The goal of meta-analysis is to estimate the true relationship between various constructs
and to determine whether the results can be generalized to all situations or if the
relationship works differently in different situations.
3. Global Replication
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Assuming that everyone in the world shares the same values, norms, and expectations about
work is incorrect. National boundaries no longer limit many organizations, and many U.S.
companies employ people from around the world.
Global Issues Feature: Managing Across Cultures
Summary: Effective management requires flexibility and an appreciation that expectations and values
differ. The U.S. workforce is expected to become more diverse. The more comfortable students are in
tailoring motivation and leadership efforts to the people they lead, the more effective they will be as
managers. Although good pay and interesting work appear to be universally motivating, people from
different cultures have different traditions, are motivated by different things, and communicate in
different ways. Motivating employees in a multinational organization is challenging, particularly if
managers adopt a “one-size-fits-all” strategy. Cultural differences also influence the effectiveness of
different leadership behaviors. Managers supervising employees from different cultures must recognize
these differences and adapt their behaviors and relationships accordingly.
VI. THE FRAMWORK OF THE BOOK
Figure 1.7 presents the framework around which our book is organized.
Summary and Application
Organizational behavior is the study of human behavior in organizational settings, the interface between
human behavior and the organization, and the organization itself. The study of OB is important because
organizations have a powerful influence on our lives and it directly relates to management in
organizations.
A manager’s job can be characterized in terms of four functions. These basic managerial functions are
planning, organizing, leading, and controlling. Planning is the process of determining the organizations’
desired future position and deciding how best to get there. Organizing is the process of designing jobs,
grouping jobs into manageable units, and establishing patterns of authority among jobs and groups of
jobs. Leading is the process of motivating members of the organization to work together toward the
organization’s goals. Controlling is the process of monitoring and correcting the actions of the
organization and its people to keep them headed toward their goals.
Why is it that some people rise in organizations despite being only average accountants, marketers,
researchers, and so on? Often the answer is that those people know how to interact effectively with other
people. Effective interaction with people is critical for advancement in organizations, and often for
effective job performance. Being able to understand what people think and feel, knowing how to persuade
and motivate others, and knowing how to resolve conflicts and forge cooperation are among the most
important skills of successful leaders. This book can help you better understand yourself, understand
organizations, understand the role of organizational behavior in your personal career success, and improve
your OB skills.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password‐protected website or school-approved learning management system for classroom use.
