Chapter One: Effective Managers Understand Organizational Behavior
Chapter Synopsis
This chapter launches the students’ study of organizational behavior by providing an overview of
management history and the OB field, and by identifying forces that promise to reshape the nature of
management. It exposes the how, what, why, and when of organizational behavior, as viewed and
practiced by managers. It also identifies the skills and competencies that leaders will need to create
Learning Objectives
After completing this chapter, students should be able to:
1. Summarize key contributions from the evolution of management.
2. Discuss why it is important to understand organizational behavior.
Key Terms
scientific management—A body of literature that emerged during the period 1890–1930 and that
reports the ideas and theories of engineers concerned with such problems as job definition, incentive
systems, and selection and training.
inputs— Goods and services (raw materials, human resources, energy, etc.) organizations take in
and use to create products or services.
outputs— The products and services (smartphones, food, social networking sites, etc.) that
organizations create.
power— The ability to get things done in the way one wants them to be done.
globalism— The interdependency of transportation, distribution, communication, and economic
networks across international borders.
diversity— Refers to those attributes that make people different from one another
speed of change— Rapid change is found in many areas such as technology, demographics,
globalism, and new products and services.
Lecture Outline
The chapter outline is organized to correspond with the PowerPoint slides.
The chapter title slide may be used as a background to introduce the class.
Learning objectives
Review the chapter learning objectives. These will be reviewed on the last slide of the
pack.
Introduction
Environmental Forces Reshaping Management
Managers must be agile and flexible to help their firms develop and sustain an
advantage in an increasingly competitive globalized world. They will need to harness
the powers of information technology and human capital to be successful.
The competitive forces facing managers are led by technological changes and increasing
globalization. These driving forces are characterized by greater knowledge and the use
of information, the liberalization of developing economies (e.g., Brazil, Russia, India,
and China), and new economic alliances and rules.
Romans were all noted in history for major managerial feats such as the building of the
pyramids, organizing governments, planning military maneuvers, operating trading
companies that traversed the world, and controlling a geographically dispersed empire.
However, management as a process was based on trial and error in order to accomplish
specific goals, with little or no theory and virtually no sharing of ideas and practices.
This lack of sharing slowed the influence of management practices throughout the
world.
A new industrial era began in the United States around the time of the Civil War. There
was a dramatic expansion of mechanical industries such as the railroad. In addition,
large industrial manufacturing complexes employed hundreds of thousands of workers
and grew in importance. Attempts to better plan, organize, lead, and control the work of
employees in these complexes led managers to discuss and write about their ideas and
managerial problems in engineering journals.
The Origins of Management (2 of 2)
In 1886, an engineer named Frederick W. Taylor presented a paper titled “The Engineer
Why Study Organizational Behavior? (1 of 2)
Understanding the behavior of people in organizations—productivity, teamwork, work-
life balance, job stress, and career progression—are top concerns of all managers and
Drawing on psychology, sociology, political science, and cultural anthropology, OB is
the study of the impact that individuals, groups, and organizational structure and
processes have on behavior within organizations.
Why Study Organizational Behavior? (2 of 2)
This multidisciplinary view of organizational behavior illustrates a number of points.
First, OB is a way of thinking. Behavior is viewed as operating at individual, group, and
organizational levels. This approach suggests that when studying OB, we must identify
clearly the level of analysis being used—individual, group, and/or organizational.
Second, OB is multidisciplinary. This means that it utilizes principles, models, theories,
and methods from other disciplines. The study of OB is not a discipline or a generally
accepted science with an established theoretical foundation. It is a field that only now is
beginning to grow and develop in stature and impact.
People and their attitudes, perceptions, learning capacities, feelings, and goals are of
major importance to the organization. Fourth, the field of OB is performance-oriented
the scientific method has been used in conducting research on organizational behavior, a
set of principles and guidelines on what constitutes good research has emerged. Finally,
questions that arise in the context of managing organizations.
Exhibit 1.1 Contributions to the Study of OB
Exhibit 1.1 offers a framework and overview of the multiple disciplines that have
contributed to the study of OB and the application of OB principles in organizational
settings.
Leaders and Organizational Behavior
Changes occurring within and outside of institutions present major challenges to leaders,
managers, and administrators in organizations. Terms such as social responsibility,
cultural diversity, ethics, global competitiveness, social networking, and reengineering
are used freely by experts and non-experts. Each of these concepts reinforces the fact
that leaders are being asked to perform effectively in a changing world.
Another challenge that leaders face is the increased emphasis that consumers are placing
on value. The trend among consumers is to consider the total value of a product or
compete globally.
The Hawthorne Studies (1 of 2)
Trade unions rebelled against Taylor’s scientific management principles
Mary Parker Follet promoted participatory decision making and decentralization
Industry wanted evidence that focusing on people produces higher productivity
Harvard University conducted studies
From 1900 to 1930, Taylor’s concept of scientific management dominated thought about
management. His approach focused on maximizing worker output. However,
Taylor’s emphasis on output and efficiency didn’t address employees’ needs, leading
The Hawthorne Studies (2 of 2)
Trade unions rebelled against Taylor’s scientific management principles
Mary Parker Follet promoted participatory decision making and decentralization
Industry wanted evidence that focusing on people produces higher productivity
Harvard University conducted studies
The Harvard researchers learned that economic rewards did not totally explain worker
behavior. Workers were observant, complied with norms, and respected the informal
number of actual study participants and a reanalysis of data raised doubts about a
number of the original conclusions. The conclusion that supportive managers helped
boost productivity is considered incorrect by critics. Instead, the fear of job loss during
the Great Depression and managerial discipline, not the practices of supportive
managers, are considered responsible for the higher rate of productivity in the relay
assembly test room experiments. Despite the criticism, the Hawthorne studies are still
considered the major impetus behind the emphasis on understanding and dealing with
human resources.
EXHIBIT 1.2 The Basic Elements of a System
In systems theory, the organizations are seen as one element of a number of elements
that act interdependently. The flow of inputs and outputs is the basic starting point in
describing the organization. In the simplest terms, the organization takes resources
(inputs) from the larger system (environment), processes these resources, and returns
them in changed form (output). Exhibit 1.2 displays the fundamental elements of the
organization as a system.
Systems Theory
Systems theory suggests that an organization is a managed system that changes inputs
into outputs. It enables managers to describe the behavior of organizations both
organizations perform their individual and group tasks. Externally, you can relate the
essentially complex process can be simplified, for analytical purposes, by employing the
basic concepts of systems theory.
Ways to Improve Effectiveness
The concept of organizational effectiveness presented in this book relies on systems
theory. Two main conclusions suggested by systems theory are: (1) effectiveness criteria
must reflect the entire input-process-output cycle, not simply output, and (2)
effectiveness criteria must reflect the interrelationships between the organization and its
outside environment.
Quality- An Organizational Perspective
J. M. Juran and W. Edwards Deming, in 1950, were prophets without recognition in
inspiration to the Japanese because he applied quality to everyone from the top of the
firm to the clerical staff.
Time-Based Criteria
Productivity reflects the relationship between inputs and output.
Efficiency is defined as the ratio of outputs to inputs. Among the measures of efficiency
are rate of return on capital or assets, unit cost, scrap and waste, downtime, occupancy
rates, and cost per patient, per student, or per client. Satisfaction and morale are similar
Environmental Forces Reshaping Management Practice
A number of forces are reshaping the nature of managing within organizations.
Organizations that have recognized these forces are working to channel their managerial
talents to accomplish goals by using their knowledge about each of six major forces.
The first force at work is the power of human resources. The way managers and
employees work, think, and behave exerts a major influence on the overall effectiveness
and success of an organization. Over the next several years as baby boomers (those born
between 1946 and 1964) retire, organizations of all types will be facing a shrinking pool
prevalent.
Globalism Must be Understood and Leveraged
To compete effectively in the 21st century, globalism must be understood and leveraged.
Globalism is characterized by networks that interconnect countries, institutions, and
people. Of the largest 25 global corporations in terms of market value in 2012, 9 are
from the United States, 6 from China, 2 from the U.K., 2 from France, and one each
from the Netherlands, Russia, Japan, German, Spain, and Brazil. As a result of global
integration, the growth rate of world trade has increased faster than that of world gross
interdependent world.
Exhibit 1.3 The Six Forces Reshaping Management Practice
As illustrated in Exhibit 1.3, the six forces reshaping management practice—the power
of human resources, globalism, diversity, the speed of change, a new worker–employer
psychological contract, and technology—offer challenges to managers. Resisting the
reality of these forces will likely lead to unnecessary conflict, reduced managerial and
Chapter 01 – Effective Managers Understand Organizational Behavior
non-managerial performance, and lost opportunities. In managerial terms, failing to cope
and deal with these forces will likely result in job dissatisfaction, poor morale, reduced
commitment, lower work quality, burnout, poor judgment, and a host of unhealthy
consequences.
The Speed of Change
Elements of change include almost instantaneous communication and computation.
Technology is facilitating online connectivity through such social networking sites as
Facebook, Twitter, and LinkedIn that has resulted in the shrinking of space and distance.
Intangible value of all kinds, such as services or products that “go viral” and reach
millions of potential users, is growing at a rapid speed. The modern manager is going to
have to be adaptable to such rapid change.
employers must be honest, open, and fair and also be willing to give employees a larger
say in their jobs. Employees also want organizations to pay more attention to their
family commitments and their physical and mental health.
EXHIBIT 1.4 Framework for Studying Organizational Behavior
Exhibit 1.4 illustrates the flow of chapters in this book and presents a perspective on
how to frame the study of organizational behavior and management within
influence; organizational processes; and organizational design, change, and innovation.
Understanding and Managing Individual Behavior
Because organizational performance depends on individual performance, managers must
have more than a passing knowledge of the determinants of individual performance.
Motivation and ability to work interact to determine performance. Motivation theory
attempts to explain and predict how the behavior of individuals is aroused, started,
sustained, and stopped.
Management can use rewards (or punishment) to increase performance by present
employees. Management also can use rewards to attract skilled employees to join the
organization.
itself in such symptoms as insomnia, excessive perspiration, nervousness, and
irritability. Whether stress is positive or negative depends on the individual’s tolerance
level.
Group Behavior and Interpersonal Influence
Interpersonal influence and group behavior are also powerful forces affecting
organizational performance.
Groups form because of managerial action, and also because of individual efforts.
Managers create work groups to carry out assigned jobs and tasks. Such groups, created
by managerial decisions, are termed formal groups.
Groups also form as a consequence of employees’ actions. Such groups, termed
informal groups, develop around common interests and friendships.
Group Behavior and Interpersonal Influence
Power is the ability to get someone to do something you want to be done or to make
things happen in the way you want them to happen. Managers derive power from both
organizational and individual sources.
Organizational Processes
Certain behavioral processes give life to an organization. When these processes do not
function well, problems can arise.
The communication process links the people within the organization. Information
integrates the activities of the organization with the demands of the environment.
structural factors, management can increase the probability that high-quality decisions
causes of such leadership.
Organizational Structure
To work effectively in organizations, managers must have a clear understanding of the
organizational structure. Viewing an organization chart on a piece of paper or framed on
a wall, one sees only a configuration of positions, job duties, and lines of authority
among the parts of an organization. However, organizational structures can be far more
complex.
Organizational Change and Innovation
Receiving feedback from employees about their jobs, feelings, attitudes, preferences,
improvement.
Review progress against objectives.
Summary of Key Points
❑ The key to an organization’s success is the institution’s human resources. Organizations need
human resources that work hard, think creativity, and perform excellently. Rewarding,
encouraging, and nurturing the human resources in a timely and meaningful manner is what
is required.
❑ The “effect” is the behavior or reaction of a person who is being observed. Individuals who
are being observed are likely to react in a non-routine way because they are being watched or
are part of an experiment.
❑ Employers and employees enter into psychological contracts. The employer believes that no
worker is guaranteed a lifelong job or pay raise. If the worker’s performance is good and
profit is earned, then employment continues and pay raises are provided. Employees today
believe that employers should be honest, concerned about their families, and interested in
their overall health. These assumptions are the basis of the new psychological contract.
Review and Discussion Questions
1. Describe some of the innovative management practices that managers like Tony Hsieh.
Ans: Hsieh believes in treating employees and customers well; compared to many businesses that
place most of their focus on the customer. A major goal of Zappos is to treat its employees and
2. What are the key principles of scientific management?
Ans: Frederick W. Taylor’s major thesis was that maximum good for society could come only
through the cooperation of management and labor in the application of scientific methods. He stated
that the principles of management were to:
• Develop a science for each element of an employee’s work, which replaces the old rule-of-
thumb method.
3. What knowledge about human behavior in the workplace was discovered during the
Hawthorne studies?
Ans: The Hawthorne studies demonstrated that factors other than economic rewards influenced
4. Why does the field of organizational behavior draw on so many different disciplines?
Ans: OB is the study of the impact that individuals, groups, and organizational structure and
5. How would you determine whether a large public hospital in your city (community or
region) is effective?
Ans: Student answers will vary. Sample answer: As with any other service organization, the
effectiveness of a hospital can be measured by examining key indicators:
(1) Long term—What is the hospital’s mission and how well does it seem to be meeting the
a responsible, effective management group on board? Is it working to develop new programs? To
work with the community? To train employees to handle new problems, equipment, etc.? Is it
6. In today’s fast-paced, global, and technological environment, it is important for an
organization of any size to be adaptive. How do firms like Facebook, Google, and Apple adapt?
Ans: Adaptiveness refers to the extent to which the organization can and does respond to internal
7. What abilities will managers need in order to be successful in the 21st century? Which of
these abilities do you have now? How do you plan to acquire the others?
Ans: The abilities that managers and leaders will need in the 21st century include: people-sensitive,
astute, flexible, quick and agile, multi-lingual, knowledgeable about technology and the law,
8. The psychological contract between workers and employers specifies what each expects to
give and receive from the other. What can you offer an employer, and what do you expect in
return?
Ans: Student answers will vary, especially as they relate to what they can offer an employer. The
most admired employers typically offer employees openness, integrity, opportunities, and support
9. As a manager, what type of quality improvement results should you strive for to achieve
success over both the short and long run?
Ans: Managers should strive for such things as more satisfied customers, a move involved
10. What are five things that you, as a manager, can do to lead the way to higher levels of
effectiveness?
Ans: Student answers may vary, but should include all or most of the following: (a) Provide
opportunities for training and continuous learning. (b) Share information with employees. (c)
EXERCISE 1.1 INITIAL VIEW OF ORGANIZATIONAL BEHAVIOR
Purpose
To test the impact of your course in organizational behavior on the perspectives of students
concerning their assumptions and understanding of organizational behavior.
The Exercise in Class
Every individual possesses some particular assumptions and viewpoints about relevant topics on
organizational behavior such as whether leaders are born or made, whether people are generally
motivated by money or the work itself, and whether people seek or resist change. However, it’s
In conducting this activity, it is useful to:
1. Have students complete the exercise after completing Chapter 1 and mark their responses on a
separate sheet of paper. Collect their response sheets. Ask them to avoid writing their
responses in their books, because knowing their first-round responses will bias their responses
at the end of the semester.
2. Have students again complete the questionnaire after finishing Chapter 16, writing their
responses on a sheet of paper. Once they have completed the exercise, return the initial
response sheet.
3. Ask students to compare their two sets of responses by:
A. Calculating difference scores. For each question pair, subtract the smaller number response
from the larger one. A three is the largest possible difference score per item.
4. In post-exercise discussion:
A. First, determine via a show of hands the range of total difference scores (to determine overall
the degree to which student assumptions about organizational behavior have changed).
CASE 1.1: REI TELLS EMPLOYEES TO GO OUTSIDE
1. How does REI leverage its social and environmental stewardship to attract and retain top
employees?
Ans: REI’s culture of environmental stewardship and desire for lifelong employees is communicated
2. Explain how REI uses social media to communicate its organizational culture to employees,
co-op members, and potential new hires.
Ans: “Membership” produces an instant rebate opportunity and an avenue for targeting marketing.
3. Why does giving “Yay Days” to employees help support REI’s overall business
strategies?
Ans: This additional paid time off allows staffers to reconnect with the outdoors in an effort to gain
Lecture Ideas
1. To encourage students to think about the forces affecting the nature of managerial work, ask
them to discuss the topic of globalization. What can students do now, during their academic
careers, to prepare for the likelihood that they will be engaged in international business? How
is the global economy affecting curriculums and the way that college education is delivered?
Is it true that English is the international language of business, and if it is, does that mean that
speaking another language is really not necessary?
2. Ask students to identify a problem that seems to occur in different types of organizations.
Then ask them to develop a strategy for studying, and perhaps solving that problem, using
3. The text suggests that the key to an organization’s success lies in its human resources. Ask
students to discuss the implications of viewing people as resources. How does this
perspective differ from the view of employees as “labor cost?” Then, using an example of
4. One way to clarify the components of the systems theory model and the impact of the
external environment on organizations is to apply the concepts to a particular example:
A. Use a manufacturing business (e.g., Ford, Apple) or a service business (GEICO, a
local non-profit organization) to illustrate the systems theory concepts explained in
the chapter.
C. Select a visible industry (e.g., automobile, computer, construction industries, fast food
industry, drug industry) and discuss how the industry’s characteristics affect an
organization.
To demonstrate the influence of the goal approach on much of OB theory (and
practice), use strategic planning as an example. The foundation of this fast-growing
field is the assumption that organizational effectiveness requires a well developed and
5. Survey the class to see how many were born and/or raised in a different nation. Then have
them informally give their impressions of the US from the perspective of the country from
which they came. Ask if it has changed since arriving in America.
Project and Class Speaker Ideas
1. Globalization affects the way American businesses do business and the way they select and
manage employees. Divide the class into groups of three or four, and then assign each group
a different country to investigate. Ask students to research answers to the following
questions:
• What is the “business language” in this country?
• The currency?
• How does the country’s standard of living compare with that in the U.S.?
• What labor laws or common managerial practices are significantly different or similar
to the U.S.?
• How do this country’s citizens view work and wealth?
During the next class period, ask the questions and let each group informally answer for its
country. Afterward, ask the entire group to reflect on the implications this information has for
their educational/career plans.
2. Invite a faculty member who is noted for his or her work in organizational behavior research
to talk to your class about the nuts and bolts of conducting research in organizations today.
3. One way to increase students’ understanding of the dynamics of the external environment
(specifically its diverse and multi-dimensional impact on an organization) is to assign them
the task of conducting an environmental profile of a particular organization. Each group of
4. How does an organization measure its adaptiveness (a critical effectiveness criteria given the
increasing rate of change in many external environments)? Have your students answer this
5. To enhance understanding of quality and its application in different organizations, ask
student teams to develop a quality index for an organization—possibly your own school.
Using the college or university offers many advantages, including these:
A. Students have a common base of experience and real knowledge of the organization;
6. Increasingly, there are wonderful films from many nations. You could have students view
some films and then report back to class on their impressions of that culture as seen through
the eyes of the filmmaker.