GSB MBA 2010 -2012

TM I Sep Nov 2010

BA 6115

Organisational Behaviour
Unit I lesson I

1
OB is concerned with the emerging realities in the
work-place revolution. Knowledge is replacing
infrastructure. Self-leadership is superceding
command-control management. Networks are
replacing hierarchies. Virtual teams are
replacing committees. Companies are looking
for employees with emotional intelligence, not
for just technical smarts. Globalisation has
become the mantra of corporate survival. Co-
workers are not down the hall; they are at the
end of an internet connection located
somewhere else on the planet.

2
 The organisation is above
all social. It is people.
Peter Drucker
People are the key Sam
Walton, the founder of Wal-Mart
and the richest person in the
world when he died .
3
 Effective organisational behaviour is
the bedrock on which effective
organisational action rests. Long term
competitive advantage comes from the
rich portfolio of individual and team
based competencies of an
organisations employees, managers
and leaders.
Hellriegal and Slocum
4
 Ch I-Understanding OB
Introduction and back ground
Definition
Management skills
Generalisations about behaviour
Theoretical framework
Models of OB

5
 Definition
Organizational behaviour, is a study and
application of knowledge about human
behaviour as individuals and in groups in
orgns strives to identify ways in which people
can act more effectively.
The understanding, prediction and
management of human behaviour in
organisations.
Is an applied science- best practices in one orgn can
be communicated to others
6
What is Organizational Behavior?

Insert Figure 1.1 here

7
 Organizational Behaviour studies encompass the
study of organizations from multiple viewpoints,
methods, and levels of analysis. Provides a set of
useful tools;
-at the individual level- interpersonal relations,
- at the group level group dynamics formal
teams and informal groups inter-group
relations,
- at the orgn level inter-organisational gps
M&As.

8
 Traditional distinction, present especially in
American academia, is between the study of
"micro" organizational behaviorwhich refers
to individual and group dynamics in an
organizational setting-
and "macro" organizational theory which
studies whole organizations, how they adapt,
and the strategies and structures that guide
them.

9
 To this distinction, some scholars have added
an interest in "meso" -- primarily interested in
power, culture, and the networks of
individuals and units in organizationsand
"field" level analysis which study how whole
populations of organizations interact. In
Europe these distinctions do exist as well, but
are more rarely reflected in departmental
divisions.

10
Why Study Organizational Behavior

Understand
organizational
events

Organizational
Behavior
Research

Influence Predict
organizational organizational
events events

11
 Goals
Describe how people behave under a
variety of conditions
Understand why people behave as they do
Predict future employee behaviour
Control and develop human activity at
work to improve productivity, skill
improvement, team effort, etc

12
 Forces
People- individuals and groups
Structure- jobs and relationships
Technology-machinery, computers
Environment-govt, competition, social
pressures.
All the above forces interact on each other
resulting in OB.

13
The major problem is and will continue to
be managing people the HRs of the
organisation the major challenge and
critical competitive advantage.
Globalisation, diversity, strategic
partnerships, emphasis on TQM,
environmental issues, Corporate
Governance and ethics serve as important
contextual or environmental dimensions
for OB.
14
 Technology can be purchased or copied, it levels
the playing field.
The people, cannot be copied. It is possible to clone
human bodies- their ideas, personalities, motivation,
and organisation cultural values cannot be copied.
The HRs of an organisation and how they are
managed represent the competitive advantage of
todays and tomorrows organisations.
A study of over 300 cos for more than 20 yrs found that
management of human resources through extensive
training and techniques such as empowerment resulted in
performance benefits, but operational initiatives such as
TQM or advanced manufacturing technology did not.
15
Generalisations about human behaviour
> happy workers are productive workers.
> Individuals are most productive when the boss is
friendly, reliable and unassuming.
> behaviour of good leaders is consistent irrespective
of the situations they face.
> Interviews are effective selection devices.
> Everybody likes a challenging job
> People will have to be bullied/intimidated to make
them to do their jobs.
> Money motivates all.
> People are more concerned about their own salaries than others.
> Members of effective groups do not quarrel among themselves16.
Levels of Analysis

Organizational Level

Group Level

Individual
Level

17
 Characteristics of OB

Inter-disciplinary
Research based theories and practice
Increased acceptance of findings by
managers

18
Components of Organizational Behavior
Understanding
organizational behavior
requires studying

Part One Individuals in Organizations

Part Two Group and Team Processes

Part Three Organizational Processes

19
A Short History of Organizational Behavior

The Greek philosopher Plato wrote about the essence

of leadership. Aristotle addressed the topic of
persuasive communication. The writings of the
Chinese philosopher Confucius in 500 BC are
beginning to influence contemporary thinking
about ethics and leadership. The writings of 16th
century Italian philosopher Niccol Machiavelli laid
the foundation for contemporary work on
organizational power and politics.

20
In 1776, Adam Smith advocated a new
form of organizational structure based
on the division of labour. One hundred
years later, German sociologist Max
Weber wrote about rational
organizations and initiated discussion of
charismatic leadership.

21
 Soon after, Frederick Winslow Taylor
introduced the systematic use of goal setting
and rewards to motivate employees. In the
1920s, Australian-born Harvard professor Elton
Mayo and his colleagues conducted productivity
studies at Western Electric's Hawthorne plant in
the United States. They discovered the
importance of formal and informal group
dynamics in the work place, resulting in a
dramatic shift towards the human relations
school of thought.
22
 Though it traces its roots back to Max Weber
and earlier, organizational studies is generally
considered to have begun as an academic
discipline with the advent of scientific
management in the 1890s, with Taylorism
representing the peak of this movement.
Proponents of scientific management held that
rationalizing the organization with precise sets
of instructions and time-motion studies would
lead to increased productivity. Studies of
different compensation systems were carried
out. 23
 After the First World War, the focus of
organizational studies shifted to analysis of how
human factors and psychology affected
organizations, a transformation propelled by the
identification of the Hawthorne Effect. This
Human Relations Movement focused on teams,
motivation, and the actualization of the goals of
individuals within organizations.
Prominent early scholars included Chester
Barnard, Henri Fayol, Frederick Herzberg,
Abraham Maslow, David McClelland, and Victor
Vroom.
24
 The Second World War further shifted the
field, as the invention of large-scale logistics
and operations research led to a renewed
interest in rationalist approaches to the study
of organizations. Interest grew in theory and
methods native to the sciences, including
systems theory, the study of organizations
with a complexity theory perspective and
complexity strategy. Influential work was done
by Herbert Alexander Simon and James G.
March and the so-called "Carnegie School" of
organizational behavior.
25
 In the 1960s and 1970s, the field was strongly
influenced by social psychology and the emphasis in
academic study was on quantitative research. An
explosion of theorizing, much of it at Stanford
University and Carnegie Mellon, produced Bounded
Rationality, Informal Organization, Contingency
Theory, Resource Dependence, Institutional Theory,
and Organizational Ecology theories, among many
others.
Starting in the 1980s, cultural explanations of
organizations and change became an important part of
study. Qualitative methods of study became more
acceptable, informed by anthropology, psychology and
sociology. A leading scholar was Karl Weick 26
 Frederick Winslow Taylor Frederick
Winslow Taylor (18561915) was the first
person who attempted to study human
behavior at work using a systematic approach.
Taylor studied human characteristics, social
environment, task, physical environment,
capacity, speed, durability, cost and their
interaction with each other. His overall
objective was to reduce and/or remove human
variability.

27
 Taylor worked to achieve his goal of making
work behaviors stable and predictable so that
maximum output could be achieved. He relied
strongly upon monetary incentive systems,
believing that humans are primarily motivated
by money. He faced some strong criticism,
including being accused of telling managers to
treat workers as machines without minds, but
his work was very productive and laid many
foundation principles for modern management
studies.

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 Four Principles of
Scientific Management
1. Study the way employees perform their
tasks, gather informal job knowledge that
employees possess, and experiment with
ways of improving the way tasks are
performed.
2. Codify the new methods of performing
tasks into written rules and standard
operating procedures.

29
 Four Principles of
Scientific Management
3. Carefully select employees so that they
possess skills and abilities that match the
needs of the task, and train them to
perform the task according to the
established rules and procedures.
4. Establish an acceptable level of
performance for a task, and then develop
a pay system that provides a reward for
performance above the acceptable level.
30
 The Hawthorne Studies
Hawthorne Works of the Western Electric
Company near Chicago; 1924-1932 these
studies mark the starting point of the field of
Organisational Behaviour
Initiated as an attempt to investigate how
characteristics of the work setting affect
employee fatigue and performance (i.e.,
lighting).
Found that productivity increased regardless of
whether illumination was raised or lowered.
31
Started in 1924 to examine the relationship between light
intensity and employee productivity a test group and a
control group were used the test group initially did not
show any increase or decrease in output in proportion to
the increase/decrease in illumination. The control group
with unchanged illumination increased output by the same
amount overall by the test group. Subsequent phases
brought the level of light down to moonlight intensity: the
workers could barely see what they were doing, but
productivity increased. The results baffled the researchers.
Obviously, something besides the level of illumination
was causing the change in productivity the complex
human variable.
32
The serendipitous results of these experiments
provided the impetus for the further study of
human behaviour in the work place.
Subsequent phase relay room, where operators
assembled relay switches test specific variables,
such as length of workday, rest breaks, and method
of payment. basically the same results each test
period yielded higher productivity than the earlier
one. Even when the workers were subjected to the
original conditions of experiment, productivity
increasedthat was causing the change in the
output.
33
 Conclusion the independent variables (rest
pauses, etc.,) were not by themselves causing the
change in the dependent variable (output).
Something was still not being controlled.
The bank wiring room study: the bank wirers were
placed in a separate test room. No experimental
changes during the study an observer and an
interviewer gathered objective data departments
regular supervisors were used to maintain order
and control.

34
Findings were opposite to relay room experiments output
was restricted informal group norm was lower than
managements social pressures used to gain compliance
with group norms. The incentive system dictated that the
more a worker produced, the more money he would earn
Also, the best producers will be laid off last In spite of
this output was restricted. Social ostracism, ridicule, and
name-calling were the major sanctions used by the group
to enforce this restriction. In some cases, actual physical
pressure in the form of a game called binging was applied.
In this, a worker will be hit as hard as possible, with the
privilege of returning one bing or hit. Forcing rate-
busters play the game was an effective sanction. Group
pressures more effective than management incentives
35
 Implications
Workers preference to work in the relay room,
because of:
i. Small group
ii. Type of supervision
iii Earnings
iv Novelty of the situation
v. Interest in the experiment
vi attention received in the test room
The last 3 associated with Hawthorne Effect
special attention paid to them 36
 summary
Factors influencing behavior:
Attention from researchers
Managers leadership approach
Work group norms
The Hawthorne Effect

37
 Mary Parker Follett
Management must consider the human
side
Employees should be involved in job
analysis
Person with the knowledge should be in
control of the work process regardless of
position
Cross-functioning teams used to
accomplish projects
38
 Douglas McGregor:
Theory X and Theory Y

Theory X
Average employee is lazy,
dislikes work, and will try to
do as little as possible
Managers task is to
supervise closely and
control employees through
reward and punishment
Theory Y
Employees will do what is
good for the organization
when committed
Managers task is create a
work setting that
encourages commitment to
organizational goals and
provides opportunities for
employees to be exercise
initiative

39
 At first employees were considered a cost, then
Human Resources, and now are becoming
widely recognised as human capital (what you
know education, experience, skills). Investing
in this capital results in desired performance
outcomes such as increased productivity and
customer satisfaction.
Even going beyond human capital are more recently
recognised as social capital ( who you know
networks, connections, friends), and positive
psychological capital ( who you are confidence,
hope, optimism, resiliency and more importantly who
you can become, i.e., ones possible authentic self).
40
 Growing research evidence that
employees psychological capital is
positively related to their performance and
desired attitudes.
As the ultimate techie Bill Gates
observed;
the inventory, the value of my company,
walks out the door every evening.

41
Because management is always about
people, its essence is dealing with human
nature. Since human nature seems to
have been extremely stable over recorded
history, the essence of management has
been extremely stable over recorded
history, the essence of management has
been and will be equally stable over time.
Geert Hofstede
International Management scholar

42
 Challenges to Management
Todays challenges to management:
- a turbulent economy
- dangerous geopolitics
At the organisations level:
- understanding global competition
- diversity
- ethical problems

43
The nature of work and the work place itself,
the traditional employment contract, and the
composition of the workforce are all
dramatically changing yet human behaviour
is still to be understood in full.
Although the problems with human
organisations and the solutions over the ages
have not changed much, the emphasis and
surrounding environmental context have
changed.
44
 E.g., In the 1980s and 90smanagers were
preoccupied with restructuring their organisations
to improve productivity and meet the competitive
challenges in the international market place and
quality expectations of customers. the resulting
lean and mean organisations offered some short
run benefits in terms of lowered costs and improved
productivity, instead of making significant changes
to meet the changing environment, most
organisations continued with more of the same.

45
 E.g., one analysis of Fortune 500 firms between
1995 and 2005 found the most prominent
initiatives were;
- restructuring (downsizing),
- cost reduction programmes,
- globalising supply chains,
- creating shared services, and,
- Six Sigma (almost perfect).
Top management compensation was primarily tied to
stock options and thus to the firms stock price
led to high risk mergers, acquisitions, and a highly
regulated winner-take-all environment. 46
e.g., the head of the nearly century-old investment
house Merryl Lynch bet his firm and ultimately
lost on the sub-prime financial market and out-
sized leverage a whopping $160 mln severance
package on exit.
This type of behaviour and many other social,
economic and geopolitical factors led to the stock
market crash in 2008 most of the focus had been
on financial markets, massive unemployment,
impact on those not laid off, the remaining
employees has been slighted.
47
 An expert on corporate psychology noted:
After years of downsizing, outsourcing, and
a cavalier attitude that treats employees as
costs rather than assets, most of todays
workers have concluded that the company no
longer values them. So they, in turn, no longer
feel engaged in their work or committed to the
company.
The turmoil has left employees hurt and fearful,
feeling very vulnerable the single most
prominent thought of people all over the world
is I want a good job.
48
 The Head of Gallup, at the end of the survey, said:
Work is crucial to every adult human because
work holds within it the soul of the relationship of
one citizen to one government and one country.
Ideal time for meeting challenges in HRM. A crisis
is a terrible thing to waste. - Jim Collins
The time has come not only to recognise and appreciate the
importance of human resources, but also to use recent
history as a catalyst for paradigmatic change in the way
we understand and use HRs.
What is a paradigm shift?
Not just keeping up with incremental change, but a new way
of thinking about and managing HRs in todays 49
dramatically changed work place.
 Paradigm Shift
The term comes from the Gk word paradeigma,
meaning, a model, pattern or example.
Introduced by philosophy-of-science historian
Thomas Kuhn, paradigm now means a broad model,
a framework, a way of thinking or a scheme for
understanding reality the rules , defines the
boundaries and tells one how to behave within
those boundaries to be successful impact of
globalisation, - work force consisting of post war
increase in population, Gen Xers (born in the late 60s
and 70s ), and people with inadequate literacy skills from
disadvantaged areas, and techies raised on computers has 50
led to a paradigm shift.
 E.g., James Brian Quinn refers to the
Intelligent enterprise as the new
paradigm the organisation of
enterprises and effective strategies will
depend more on development and
deployment of intellectual resources
than on the management of physical
assets.
51
 A new set of challenges and required ways of
thinking. For todays and tomorrows
organisations and management to be successful,
there are new rules with different boundaries
require new and different behaviour inside the
boundaries for organisations and management to
be successful. Paradigm shifts have invalidated the
advantages of certain firms, e.g., almost all auto,
financial and retail firms, in recent years and
created new opportunities for others. (e.g., Google).

52
 Paradigm effect
A situation in which those in the existing
paradigm may not even see the changes that
are occurring, let alone reason and draw
logical inferences and perceptions about
changes. explains why there is considerable
resistance to change and why it is difficult to
move from old management paradigm to the
new. There is discontinuous change in the
shift to the new paradigm.
53
 As one author put it:

The depth of change required demands that

those charged with charting a passage through
hurricane like seas do more than run up a new
set of sails. What is involved equates to a
quantum shift in, not just learning, but how we
learn, not just doing things differently, but
questioning whether we should be doing many
of the things we currently believe in, at all; not
just in drawing together more information, but
in questioning how we know what it is (we
think) we know.
54
Contributing Disciplines to the OB Field

EXHIBIT 1-3a
55
Contributing Disciplines to the OB Field

EXHIBIT 1-3c
56
Contributing Disciplines to the OB Field

EXHIBIT 1-3b
57
Contributing Disciplines to the OB Field

EXHIBIT 1-3c
58
Contributing Disciplines to the OB Field

EXHIBIT 1-3d
59
Contributing Disciplines to the OB Field

EXHIBIT 1-3f
60
 5 OB Models

given by Keith Davis and Newstrom are:

1) Autocratic
2) Custodial
3) Supportive
4) Collegial
5) Systems
61
 AUTOCRATIC MODEL
The basis of this model is power with a managerial
orientation of authority. The employees in turn are
oriented towards obedience and dependence on the
boss. The employee need that is met is subsistence.
The performance result is minimal - most
prevalent during he industrial revolution persons
in power can demand work from workers
pushing, directing and persuading tight control
unfair practices, low payment and exploitation employees
put in min work in the job to serve the basic needs of the
family - though harsh, it has worked well in certain
conditions, e.g., organisational crisis.
62
 Custodial
The basis of this model is economic resources
with a managerial orientation of money. The
employees in turn are oriented towards security
and benefits and dependence on the
organization. The employee need that is met is
security. The performance result is passive
cooperation. To perk up the sagging morale of
the workers under the autocratic model
employers began to offer various welfare
schemes in the 19th century paternalism
fringe benefits job security.
63
 E.g., IBM makes considerable efforts to stabilise the
workforce and preserve their jobs reduces
overtime, freezes hiring, allows job transfers and
offers retirement incentives and lessens sub-
contracting to adjust IT slow downs. The
organisation should have considerable resources to pay
pension benefit from physical needs to security needs.
Workers depend more on the organisation and less on the
managers ensures loyalty economic rewards are
assuredeven if the employee does not perform contented
but performance may decline because of job security
1940s and 50s University of Michiganconducted studies
which revealed that happy employees are not necessarily
the ost producticve employees. 64
 Supportive
The basis of this model is leadership with a managerial
orientation of support. The employees in turn are oriented
towards job performance and participation. The employee
need that is met is status and recognition. The performance
result is awakened drives.
The leadership and other processes of the organisation must
be such as to ensure a maximum probability that in all
interactions and all relationships within the organisation
each member will, in the light of his or her back ground,
values, and expectations view the experience as supportive
and one which builds and maintains his or her sense of
personal worth and importance. e.g., TATAs.
Ensures organisatinal harmony.
65
 Collegial
The basis of this model is partnership with a managerial
orientation of teamwork. The employees in turn are
oriented towards responsible behavior and self-discipline.
The employee need that is met is self-actualization. The
performance result is moderate enthusiasm. Collegial
means a group of people working for a common purpose.
Manager is not addressed as boss but is a facilitator.
Employees are self disciplined, self content and self
actualised. E.g., a R&D team or a project team.
Although there are four separate models, almost no
organization operates exclusively in one. There will
usually be a predominate one, with one or more areas over-
lapping in the other models.
66
 autocratic Custodial Supportive Collegial
Autocratic Custodial Supportive Collegial
Model
Model depends
depends on on Power Economic
Leadership Partnership
resources
PowerEconomic resourcesLeadershipPartnershipManagerial
orientationAuthorityMoneySupportTeamworkEmployee
orientationObedienceSecurityJobResponsiblityEmployee
Managerial orientation Authority Money Support Teamwork
psychological resultDependence on bossDependence on
organizationParticipationSelf-disciplineEmployees needs
Employee orientation Obedience Security
metSubsistemceMaintenanceHigher-orderSelf- Job Responsibility
actualizationPerformance resultMinimumPassive
cooperationAwakened
Employee drivesModerate
Dependence
Dependence enthusiasm
on Participation Self-discipline
psychological result on boss
organization

Self-
Employees needs met Subsistence Maintenance Higher-order
actualization

Passive Awakened Moderate

Performance result Minimum 67
cooperation drives enthusiasm