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PART ONE – INTRODUCTION TO ORGANIZATIONAL BEHAVIOR
Chapter Two – The Changing Environment of Organizations
Overview
The environment of all organizations is changing at an unprecedented rate. People work in different ways
and places than in the past, the workplace is increasingly diverse, ethical challenges are a constant issue,
and globalization is commonplace.
Understanding and addressing the environment of a business has traditionally been the purview of top
managers. But the effects of today’s changing environment permeate the entire organization. Hence, to
truly understand the behavior of people in organizational settings, it is also necessary to understand the
changing environment of business.
This chapter is intended to provide the framework for such understanding. Specifically, as illustrated in
Figure 2.1, we introduce and examine five of the central environmental forces for change faced by today’s
organizations: diversity, globalization, technology, ethics and corporate governance, and new employment
relationships. An understanding of these forces will then set the stage for our in-depth discussion of
contemporary organizational behavior.
Learning Outcomes
After studying this chapter, students should be able to:
1. Describe the nature of diversity in organizations.
2. Describe the different types of diversity and barriers to inclusion that exist in the workplace.
3. Discuss the emergence of globalization and cross-cultural differences and similarities.
4. Discuss the changing nature of technology and its impact on business.
5. Describe emerging perspectives on ethics and corporate governance.
6. discuss the key issues in new employment relationships.
Real World Challenge: Global Diversity at Coca-Cola
Summary: With over 130,000 global employees, over 65,000 of them in the U.S., beverage giant The
Coca-Cola Company is a global business that operates in a multicultural world both in the workplace and
in the marketplace. The company recognizes that its ability to thrive in a multicultural world is both
critical to its financial performance and consistent with its values. Accordingly, diversity is recognized by
Coca-Cola as an important component of their vision for the company in 2020. The Coca-Cola Company
understands that although it has been recognized as a diversity leader there is always more it can do.
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Real World Challenge: Imagine that the company’s leaders ask you for advice on how to build a diverse
and inclusive workforce that allows it to leverage the potential of its diverse employees to enhance the
company’s performance. After reading this chapter, what would you tell them?
Real World Response: Senior executives including the Chairman and CEO are involved with many
nonprofits involving underrepresented groups, and corporate goals are linked to individuals’ diversity
metrics including being a cross-cultural mentor and the recruitment, promotion, engagement, and
retention of diverse employees. The company also offers a variety of diversity education programs that
have evolved from minimizing conflict to strengthening the company’s ability to amplify, respect, value,
and leverage employee differences to influence sustainable business outcomes. Rather than just focusing
on diversity numbers, The Coca-Cola Company focuses on fostering an inclusive culture using social
psychology research on unconscious bias and change management techniques.
Chapter Outline
I. DIVERSITY AND BUSINESS
Diversity refers to the variety of observable and unobservable similarities and differences among
people.
Some differences, such as gender, race, and age, are often the first diversity
characteristics to come to mind. But diversity is much more than demographics and
can reflect combinations of characteristics rather than a single attribute. Each
individual also has a variety of characteristics, and combinations of them can result in
diversity.
II. TYPES OF DIVERSITY AND BARRIERS TO INCLUSION
A. Types of Diversity
Surface-level diversity refers to observable differences in people, including race, age,
ethnicity, physical abilities, physical characteristics, and gender.
Deep-level diversity refers to individual differences that cannot be seen directly,
including goals, values, personalities, decision-making styles, knowledge, skills,
abilities, and attitudes.
Three other types of within-group diversity reflect different types of deep-level
diversity.
Separation diversity refers to differences in position or opinion among group members
reflecting disagreement or opposition – dissimilarity in an attitude or value, for example,
especially with regard to group goals or processes.
Variety diversity refers to differences in a certain type or category, including group members’
expertise, knowledge, or functional background.
Disparity diversity refers to differences in the concentration of valuable social assets or
resources – dissimilarity in rank, pay, decision-making authority, or status, for example.
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Table 2.1 summarizes these five types of diversity.
B. Trends in Diversity
Some short-term demographic trends are strong enough to suggest that the changing
demographic mix in the workforce will continue to increase the importance of understanding
and leveraging diversity.
The Census Bureau projects that by 2020 the U.S. workforce will consist of 62.3 percent White
non-Hispanics, 18.6 percent Hispanics, 12 percent Blacks, and 5.7 percent Asians.
Longer-term U.S. demographic projections further highlight the increasingly diverse character
of the United States:
The population is projected to become older.
By 2050, the total population is forecasted to increase 49%.
Non-Hispanic Whites are expected to decrease from 69.4% to 50.1% of the total
population by 2050.
People of Hispanic origin is projected to increase 188% by 2050.
The Black population is projected to increase by 71% by 2050.
The Asian population is forecasted to grow 213% by 2050.
In 2014, only 23 of the Fortune 500 CEOs were minorities, and White people held 87% of total
seats on corporate boards of directors.
Many countries and regions face talent shortages at all levels, and those gaps are expected to
worsen. Talent shortages are forecast to rise globally.
C. Generational Differences
Age-based diversity is a major issue facing many organizations today. Figure 2.2 provides a
clear indicator of why this is true.
The U.S. Bureau of Labor Statistics projects a dramatic increase in workers age sixty-five and
older during the next decade, while the percentage of younger workers is expected to decrease.
Most experts characterize today’s workforce as comprising four generations. According to date
of birth, they are: seniors (1922–1943); baby boomers (1943–1963); Generation X (1964–
1980); and Generation Y, also referred to as the Millennial Generation (1980–2000).
The U.S. workforce is aging at the same time Generation Y, the largest generation since the
baby boomers, is entering the workforce. This increases the importance of understanding the
role of age in organizations, and how to manage generational differences at work.
The influence of age in training environments has been extensively studied. Age was negatively
associated with learning scores in an open learning program for managerial skills. Older
trainees demonstrated lower motivation, reduced learning, and less post-training confidence in
comparison to younger trainees. This suggests that age has a negative relationship with
learning, and that part of its influence may be due to motivation.
Increasing conscientiousness and knowledge counteract some of the negative effects of aging
that result from reductions in information processing speed and motivation to learn.
© 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.
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Some organizations are using reverse mentoring to bridge generational differences and transfer
the technology skills younger workers bring to the workplace to more senior employees.
D. Diversity Issues for Managers
Why should we care about diversity? As managers, diversity awareness will enable us to hire,
retain, and engage the best talent, which will help to maximize the organization’s performance.
Diversity also fosters greater creativity and innovation.
1. The Business Case for Diversity
One reason that organizations should promote diversity is performance. Recent research
has found that firm performance increases when employees have more positive attitudes
toward diversity.
Diversity contributes to a firm’s competitive advantage when it enables all employees to
contribute their full talents and motivation to the company.
Diversity management is also important for legal reasons. The Civil Rights Act of 1991
allows monetary damages in cases of intentional employment discrimination. Obeying the
law and promoting diversity is consistent with hiring the people best suited for the job and
organization.
2. Barriers to Inclusion
Given both the performance benefits and legal imperatives of diversity, then, what prevents
companies from becoming inclusive and making the most of their diversity? A report of the
U.S. Equal Employment Opportunity Commission identified several common diversity
barriers that exist in many organizations. These barriers, summarized in Table 2.2, stem
from a variety of decision-making and psychological factors as well as from employee
unawareness.
Understanding and proactively addressing the barriers can minimize their impact and
enhance inclusion.
a. The “Like Me” Bias
Consciously or unconsciously, we tend to associate with others whom we perceive to
be like ourselves. This bias is part of human nature.
b. Stereotypes
A stereotype is a belief about an individual or a group based on the idea that everyone
in that particular group will behave the same way. Stereotypes are harmful because
they result in judgments about an individual based solely on his or her being part of a
particular group, regardless of his or her unique identity. Stereotypes are often negative
and erroneous, and thus adversely affect the targeted individuals.
c. Prejudice
Even if an organization has a strong commitment to inclusion, it is possible that the
beliefs and actions of individual employees or managers are inconsistent with the
organization’s policies and values.
© 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.
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d. Perceived Threat of Loss
As voluntary efforts are made by companies to promote inclusion, members of groups
who traditionally have been the predominant employees of a particular workforce or
occupation may grow anxious or angry. If they perceive a direct threat to their own
career opportunities, they may feel that they need to protect their own prospects by
impeding the prospects of others.
e. Ethnocentrism
Ethnocentrism reflects the belief that one’s own language, native country, and cultural
rules and norms are superior to all others. Ethnocentrism often has less to do with
prejudice and more to do with inexperience or ignorance about other people and
environments.
f. Unequal Access to Organizational Networks
All organizations have formal and informal networks. These organizational networks
influence knowledge sharing, resource accessibility, and work opportunities. Women
and minorities are often excluded from informal organizational networks, which can be
important to job performance, mentoring opportunities, and being seen as a candidate
for promotion.
3. Managing Diversity
The most important element in effectively leveraging the positive potential of diversity is
top management support for diversity and for diversity initiatives.
An inclusive environment is created when all employees’ cultural awareness and empathy
are enhanced through diversity training and all employees are given equal access to
mentors and other influential company employees.
Creating fair company policies and practices that give all employees equal access to
performance feedback, training and development, and advancement opportunities is also
critical.
Diversity initiatives are more successful when the company is able to keep employees
thinking about diversity issues, even when they do not feel a direct, negative impact.
Training and mentoring can also help. Diversity training and diversity education need to
communicate that bias is a part of being human. It is not realistic to claim or to pursue an
“I’m totally unbiased” stance with regard to diversity.
CASE STUDY: Diversity at Wegmans
Summary: East coast grocer Wegmans views diversity as more than just a legal or moral obligation or
business necessity – to them it is a business opportunity. The company strives to attract and retain a
workforce that reflects different backgrounds, experiences, and viewpoints and mirrors the communities
in which it operates. Wegmans believes that to be a great place to shop, they must first be a great place to
work. Wegmans emphasizes diversity in hiring to refresh stores with new ideas. Corporate values
including respect, caring, empowerment, and high standards have helped the company repeatedly appear
on Fortune’s list of the 100 Best Companies to Work For.
© 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.
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1. In what ways can diverse employees contribute to Wegmans’ business performance?
Research finds that firm performance increases when employees have positive attitudes toward
diversity. Diversity contributes to a firm’s competitive advantage when it enables all employees to
2. What types of diversity do you think Wegmans should focus on? Why?
Wegmans should focus on deep-level diversity which is individual differences that cannot be seen
3. What are the downsides, if any, of building a diverse workforce?
As employees, the better we are able to work with all types of people, the more effective we will be in
our jobs. As mangers, diversity awareness will enable us to hire, retain, and engage the best talent,
which will help to maximize the organization’s performance. Diversity also fosters greater creativity
III. GLOBALIZAITON AND BUSINESS
Another environmental factor that affects OB is globalization or the internationalization of business
activities and the shift toward an integrated global economy. From a business standpoint the
widespread effects of globalization are relatively new, at least in the United States.
A. Trends in Globalization
In 2014, the volume of international trade in current dollars was about 50 times greater than the
amount in 1960.
Four major factors account for much of the growth in international trade.
First, communication and transportation have improved dramatically over the past several
decades. It is simply easier to conduct international business today than was the case just a few
years ago.
Second, businesses have expanded internationally to increase their markets.
Third, more and more firms are moving into international markets to control costs, especially to
reduce labor costs.
© 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.
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Finally, many organizations have become international in response to competition. If an
organization starts gaining strength in international markets, its competitors often must follow
suit to avoid falling too far behind in sales and profitability.
B. Cultural Competence
One of the worst, yet easiest, mistakes people can make is to assume that other people are just
like them. People from different cultures see and do things in different ways. Cultural
competence is the ability to interact effectively with people of different cultures.
There are four components of cultural competence:
1. Awareness of our own cultural worldview, and of our reactions to people who are different.
2. Our attitude toward cultural differences.
3. Knowledge of different worldviews and cultural practices.
4. Cross-cultural skills.
C. Cross-Cultural Differences and Similarities
We now turn our attention to differences and similarities in behavior across cultures.
1. General Observations
Cultural and national boundaries do not necessarily coincide. Given this basic assumption,
one major review of the literature on international management reached five basic
conclusions.
First, behavior in organizational settings does indeed vary across cultures.
Second, culture itself is one major cause of this variation. Culture is the set of shared
values, often taken for granted, that help people in a group, organization, or society
understand which actions are considered acceptable and which are deemed unacceptable.
Third, although the causes and consequences of behavior within organizational settings
remain quite diverse across cultures, organizations and the ways they are structured appear
to be growing increasingly similar.
Fourth, the same individual behaves differently in different cultural settings.
Finally, cultural diversity can be an important source of synergy in enhancing
organizational effectiveness.
Global Issues: Cultural Etiquette Quiz
Summary: The text offers 12 questions or statements about business cultures and students are asked to
answer the quiz questions to get an idea of how aware they are of the business cultures of other areas of
the world. Answers provided at the bottom of the quiz.
2. Specific Cultural Issues
Geert Hofstede, a Dutch researcher, studied workers and managers in 60 countries and
found that specific attitudes and behaviors differed significantly because of the values and
beliefs that characterized those countries. Table 2.3 shows how Hofstede’s categories help
us summarize differences for several countries.
© 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.
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The two primary dimensions that Hofstede found are the individualism/collectivism
continuum and power distance. Individualism exists to the extent that people in a culture
define themselves primarily as individuals rather than as part of one or more groups or
organizations.
Collectivism, on the other hand, is characterized by tight social frameworks in which
people tend to base their identities on the group or organization to which they belong.
Power distance, which might also be called orientation to authority, is the extent to which
people accept as normal an unequal distribution of power.
Hofstede also identified other dimensions of culture. Uncertainty avoidance, which might
also be called preference for stability, is the extent to which people feel threatened by
unknown situations and prefer to be in clear and unambiguous situations.
Masculinity, which might be more accurately called assertiveness or materialism, is the
extent to which the dominant values in a society emphasize aggressiveness and the
acquisition of money and other possessions as opposed to concern for people, relationships
among people, and overall quality of life.
Hofstede’s framework has recently been expanded to include long-term versus short-term
orientation. Long-term values include focusing on the future, working on projects that have
a distant payoff, persistence, and thrift. Short-term values are more oriented toward the
past and the present and include respect for traditions and social obligations.
The important issue to remember is that people from diverse cultures value things
differently from each other and that people need to take these differences into account as
they work.
D. Global Perspective
A global perspective is distinguished by a willingness to be open to and learn from the
alternative systems and meanings of other people and cultures, and a capacity to avoid
assuming that people everywhere are the same.
Given globalization trends and the multicultural nature of the U.S. workforce, managers
increasingly need a global perspective and a supportive set of skills and knowledge to be most
effective.
© 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.
