BME 12 Human Behavior in Organization Chapter 2 PDF

# Kingfisher School of Business and Finance, Inc. ## BME 12: HUMAN BEHAVIOR IN ORGANIZATION ### Chapter 2: The Changing Environment of Organization (Narrative of Discussion) #### Book Reference: Organizational Behavior: Managing People and Organization #### Author: Ricky Griffin, Jean Phillips, Stan...

# Kingfisher School of Business and Finance, Inc. ## BME 12: HUMAN BEHAVIOR IN ORGANIZATION ### Chapter 2: The Changing Environment of Organization (Narrative of Discussion) #### Book Reference: Organizational Behavior: Managing People and Organization #### Author: Ricky Griffin, Jean Phillips, Stanley Gully ## The Changing Environment of Business The changing environment of business presents both opportunities and challenges for managers today. Five important environmental forces are globalization, diversity, technology, ethics and corporate governance, and new employment relationships. ## 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. - **Types of Diversity:** - **Surface-level diversity** refers to observable differences in people, including race, age, ethnicity, physical abilities, 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. - **Separation diversity** refers to differences in position or opinion among group members reflecting disagreement or opposition. - **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. - **Trends of 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, 10 percent Hispanics, 12.8 percent African Americans, 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. - **Generational Differences:** - Age-based diversity is a major issue facing many organizations today. - May result in younger managers supervising older workers. - Reverse mentoring: pairing a junior employee with a senior employee to transfer technical/computer skills from the junior employee to the senior one. ## 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. - **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. ## 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. - **The "Like Me" bias:** Consciously or unconsciously, we tend to associate with others whom we perceive to be like ourselves. - **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. - **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. - **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. - **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. - **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. - **Managing Diversity:** The most important element in effectively leveraging the positive potential of diversity is top management support for diversity and for diversity initiatives. - Top management support for diversity and for diversity initiatives. - Reciprocal mentoring: matches senior employees with diverse junior employees to allow both individuals to learn more about a different group. - Older adults may benefit from self-paced learning environments and confidence-boosting interventions. - It is not realistic to claim or to pursue an "I'm totally unbiased" stance with regard to diversity. - 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. ## II. Globalization 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. - **Trends in Globalization:** - Advances in communication and transportation - Businesses have expanded internationally to increase their markets. - Control of labor, distribution and distribution costs - Increased international competition - 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. - 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. - **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. - **Culture:** 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 - **Cultural competence** is the ability to interact effectively with people of different cultures. - Awareness of our own cultural worldview, and of our reactions to people who are different. - Our attitude toward cultural differences. - Knowledge of different worldviews and cultural practices. - Cross-cultural skills. - **Cross-Cultural Differences and Similarities:** - 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. - behavior in organizational settings does indeed vary across cultures. - 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. - 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. - The same individual behaves differently in different cultural settings. - Cultural diversity can be an important source of synergy in enhancing organizational effectiveness. - **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. - 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. - **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. ## III. Technology and Business - Technology refers to the methods used to create products, including both physical goods and intangible services. - **Reasons:** - the shift toward a service-based economy, - the growing use of technology for competitive advantage, and - mushrooming change in information technology. - **Manufacturing and Service Technologies:** - **Manufacturing** is a form of business that combines and transforms resources into tangible outcomes that are then sold to others. - A **service organization** is one that transforms resources into an intangible output and creates time or place utility for its customers. - Managers have come to see that many of the tools, techniques, and methods that are used in a factory are also useful to a service firm. At the same time, though, service-based firms must hire and train employees based on a different skill set than is required by most manufacturers. - **Technology and Competition:** - Technology is the basis of competition for some firms, especially those whose goals include being the technology leaders in their industries. But because of the rapid pace of new developments, keeping a leadership position based on technology is becoming increasingly challenging. - Businesses have increasingly found that they can be more competitive if they can systematically decrease **cycle times** (the time that it takes a firm to accomplish some recurring activity or function from beginning to end). - **Information Technology:** Most people are very familiar with the swift advances in information technology. - Breakthroughs in information technology have resulted in leaner organizations, more flexible operations, increased collaboration among employees, more flexible work sites, and improved management processes and systems. - On the other hand, they have also resulted in less personal communication, less "down time" for managers and employees, and an increased sense of urgency vis-à-vis decision making and communication-changes that have not necessarily always been beneficial. - **Information technology and social media:** - **Advantages:** leaner and more flexible organizations, increased collaboration, improved management processes/systems - **Disadvantages:** less personal communication, less "down time," an increased sense of communication and decision-making urgency ## IV. Ethics and Corporate Governance - **Ethics:** A person's beliefs regarding what is right or wrong in a given situation - **Framing Ethical Issues:** One special aspect of business ethics, corporate governance, has also taken on increased importance. Ethics also increasingly relate to information technology. - Most ethical dilemmas faced by managers relate to how the organization treats its employees, how employees treat the organization, and how employees and organizations treat other economic agents. - **Employees:** - Conflicts of interest - Secrecy and confidentiality - Honesty - Hiring and firing - Wages and working conditions - Privacy and respect - Subject to Ethical Ambiguities - Advertising and promotions - Financial disclosure - Ordering and purchasing - Shipping and solicitations - Bargaining and negotiation - Other business relationships - **Organization:** - **Economic Agents:** - Customers - Competitors - Stockholders - Suppliers - Dealers - Unions - **How an Organization Treats Its Employees:** This area includes policies such as hiring and firing, wages and working conditions, and employee privacy and respect. Wages and working conditions, although tightly regulated, are also areas for potential controversy. The same goes for employee benefits, especially if an organization takes action that affects the compensation packages and welfare of an entire workforce or segment of it. Finally, most observers would also agree that an organization is obligated to protect the privacy of its employees. - **How Employees Treat the Organization:** Numerous ethical issues also stem from how employees treat the organization, especially in regard to conflicts of interest, secrecy and confidentiality, and honesty. - **A conflict of interest** occurs when a decision potentially benefits the individual to the possible detriment of the organization. - **Divulging company secrets** is also clearly unethical. (that's why sometimes, there's a Non-Disclosure Agreement) - **Honesty in general.** Relatively common problems in this area include such activities as using a business telephone to make personal calls, stealing supplies, and padding expense accounts. Although most employees are basically honest, organizations must nevertheless be vigilant to avoid problems resulting from such behaviors. - **How Employees and the Organization Treat Other Economic Agents:** Managerial ethics also come into play in the relationship between the firm and its employees with other economic agents. As shown in Figure 2.3, the primary agents of interest include customers, competitors, stockholders, suppliers, dealers, and unions. - The interactions between the organization and these agents that may be subject to ethical ambiguity include advertising and promotions, financial disclosures, ordering and purchasing, shipping and solicitations, bargaining and negotiation, and other business relationships. - financial reporting by some e-commerce firms. In at least a few cases, some firms have substantially overstated their earnings projections to entice more investment. (window dressing) - Ethical business practices in different countries. In some countries, bribes and side payments are a normal and customary part of doing business. - **Ethical Issues in Corporate Governance:** A related area of emerging concern relates to ethical issues in corporate governance the oversight of a public corporation by its board of directors. The board of a public corporation is expected to ensure that the business is being properly managed and that the decisions made by its senior management are in the best interests of shareholders and other stakeholders. But in far too many cases the recent ethical scandals alluded to previously have actually started with a breakdown in the corporate governance structure. - **Boards of directors** are also increasingly being criticized even when they are not directly implicated in wrongdoing. The biggest complaint here often relates to board independence. - **Ethical Issues and Information Technology:** Issues in this section is individual rights to privacy and the potential abuse of information technology by companies. - One-way management can address these concerns is by posting a privacy policy on its website. The policy should explain exactly what data the company collects and who gets to see the data. It should also allow people a choice about having their information shared with others and indicate how people can opt out of data collection. - In addition, companies can offer web surfers the opportunity to review and correct information that has been collected, especially medical and financial data. - Despite the technical difficulties, government agencies are already working on Internet privacy guidelines; this means, in turn, that companies will also need internal guidelines, training, and leadership to ensure compliance. - **Social Responsibility.** Definitions of corporate social responsibility often include businesses living and working together for the common good and valuing human dignity. An important part of this is how employers treat their employees. Is it really the responsibility of businesses to be good citizens? Doing so can help a firm attract the best talent, and customers are increasingly favoring companies that do the right thing. - Businesses living and working together for the common good and valuing human dignity - Have lasting effects, social responsibility efforts should be integrated into the culture of the organization. - Corporate sustainability initiatives can be top-down, with someone in a position of authority dictating to managers and employees what to do. Corporate sustainability efforts can also be grassroots, with employees identifying projects and taking the initiative to organize their own activities. - The International Organization for Standardization (ISO) has created a variety of standards that help organizations gain international acceptance of their practices and outcomes ## V. New Employment Relationships - A final significant area of environmental change that is particularly relevant for businesses today involves what we call new employment relationships. - Two particularly important areas today involve: - the management of knowledge workers and - the outsourcing of jobs to other businesses, especially when those businesses are in other countries. - Managing temporary and contingency workers and tiered workforces is also becoming increasingly complex. The nature of psychological contracts is also changing. - **The Management of Knowledge Workers:** Traditionally, employees added value to organizations because of what they did or because of their experience. However, during today's "information age," many employees add value simply because of what they know. These employees are often referred to as **knowledge workers** (ex. computer scientists, physical scientists, engineers, product designers, video game developers) - **Issues:** - As the importance of information-driven jobs grows, the need for knowledge workers will grow as well. However, these employees require extensive and highly specialized training, and not everyone is willing to make the human capital investments necessary to move into these jobs. - Compensation and related policies for knowledge workers must also be specially tailored. - **Outsourcing and Offshoring:** Outsourcing is the practice of hiring other firms to do work previously performed by the organization itself; when this work is moved overseas, it is often called offshoring. - **Advantage:** It is an increasingly popular strategy because it helps firms focus on their core activities and avoid getting sidetracked by secondary activities. Firms today often outsource numerous activities, including payroll, employee training, facility maintenance, and research and development. Up to a point, at least, outsourcing makes good business sense in areas that are highly unrelated to a firm's core business activities. - **Disadvantage:** - Disaffected employees: out-of-job workers are used to train the newly hired foreign replacements - Reduction of domestic job opportunities - However, what has attracted considerably more attention in recent years is the growing trend toward outsourcing abroad in order to lower labor costs; this practice is often called offshoring. - **Temp and Contingency Workers:** Another trend that has impacted employment relationships in business involves the use of contingent or temporary workers. - A **contingent worker** is a person who works for an organization on something other than a permanent or full-time basis. Categories of contingent workers include independent contractors, on-call workers, temporary employees (usually hired through outside agencies), and contract and leased employees. Another category is part-time workers. - Managing contingent workers is not always straightforward, however, especially from a behavioral perspective. Expecting too much from such workers, for example, is a mistake that managers should avoid. - Managers must understand that they need to develop a strategy for integrating contingent workers according to some sound logic and then follow that strategy consistently over time. - **Tiered Workforce:** Yet another emerging issue in new employment relationships is what we call the tiered workforce. - A **tiered workforce** exists when one group of an organization's workforce has a contractual arrangement with the organization objectively different from that of another group performing the same jobs. - These and similar arrangements, of course, may pose new challenges in the future. For instance, recently hired workers may come to feel resentment towards their more senior colleagues who are getting paid more for the same work. Likewise, as the job market improves and workers have more options, firms may face higher turnover among their newer lower-paid employees. - **The Changing Nature of Psychological Contracts:** A final element of the business environment that both affects and is affected by employment relationships such as those discussed above is the psychological contract. - A **psychological contract** is a person's overall set of expectations regarding what he or she will contribute to the organization and what the organization will provide in return. - In return for these contributions, the organization provides inducements to the individual. Some inducements, such as pay and career opportunities, are tangible rewards. Others, such as job security and status, are more intangible. If either party sees an inequity in the contract, that party may initiate a change. The employee might ask for a pay raise or promotion, put forth less effort, or look for a better job elsewhere. The organization can also initiate change by training the worker to improve his skills, by transferring him to another job, or by firing him. All organizations face the basic challenge of managing psychological contracts. They want value from their employees, and they need to give employees the right inducements. Recent trends in downsizing and cutbacks have complicated the process of managing psychological contracts, especially during the recession of 2008-2010. Increased globalization of business also complicates the management of psychological contracts. A related problem faced by international businesses is the management of psychological contracts for expatriate managers. In some ways, this process is more like a formal contract than are other employment relationships.