Chapter 1: What Is Organizational Behavior? PDF

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1 Source: Mark Lennihan/A.P./Shutterstock What Is Organizational Behavior? LEARNING OBJECTIVES After studying this chapter, you should be able to: 1-1 Define organizational behavior (OB). 1-5 Identify managers’ challenges and opportunities in applying OB 1-2 Show the value of systematic study concepts. to OB. 1-6 Compare the three levels of analysis 1-3 Identify the major behavioral science in this text’s OB model. disciplines that contribute to OB. 1-7 Describe the key employability skills 1-4 Demonstrate why few absolutes gained from studying OB that are apply to OB. applicable to other majors or future careers. 36 M01_ROBB0025_19_GE_C01.indd 36 13/12/22 1:55 AM  What Is Organizational Behavior?     CHAPTER 1 37 THE RISE AND FALL OF WEWORK’S CEO A dam Neumann and his vision for reinventing work appeared to flourish overnight with the success of his company, WeWork. Although shared offices existed long before the rise of WeWork, early coworking spaces were not the most desirable. In contrast, what WeWork had to offer was a holistic approach that could provide services anywhere—from one person to one hundred people. The company took coworking to the next level by offering many of the services that can make starting a business tough, including IT, financial, and legal services. However, WeWork’s expansion did not come without a cost, especially when the company opened on average two locations each day at its peak. Although Neumann has his fair share of critics, his vision was likely responsible for at least part of WeWork’s impressive growth. He is known for his charisma, willingness to take bold risks, and entrepreneurial vision. On the other hand, his somewhat unorthodox leadership style is probably also to blame for some of the problems WeWork encountered. Individuals within the company have noted that he could make impulsive decisions at times, which contributed to a sense of ambiguity within WeWork. Many also describe the organizational culture during Neumann’s tenure as problematic. The “work hard, party hard” mentality appeared to be pervasive. After all, WeWork was one of the first coworking places to offer free beer to its clients. Furthermore, the company’s frequent parties made it an uncomfortable work environment for some employees. The company has also faced allegations of racial discrimination and sexual assault, with some blaming its partying culture for exacerbating these significant ethical lapses. WeWork’s growth appeared to be almost unstoppable. It was on the verge of filing a highly anticipated initial public offering (IPO) but rather abruptly made the unexpected move to postpone this decision in 2019. At the time, the company’s losses were close to $2 billion. Potential investors also appeared to be aware and concerned, not only with the company’s questionable business model but also with its leadership structure. Not long after, Neumann (WeWork’s cofounder and CEO of nine years) stepped down after facing pressure from SoftBank, a Japanese company that invested a significant amount of money in WeWork. The following year, the other cofounder (Miguel McKelvey) left the company as SoftBank began implementing a ­five-year turnaround plan for WeWork. The challenges that faced WeWork during Neumann’s tenure highlight that the factors contributing to organizational crises do not only affect specific people, like an organization’s leadership. Instead, they also concern groups, teams, and the organizations themselves. In this case, Neumann’s motivations and decisions likely had a negative impact. Still, the group dynamics and M01_ROBB0025_19_GE_C01.indd 37 13/12/22 1:55 AM  38 PART 1    Introduction organizational culture also appeared to play a role in problems at WeWork. The case of WeWork provides an excellent example of the behavioral complexity within organizations that contributes to their survival and success. The effect of behavior in organizations extends beyond individual people, affecting groups, teams, departments, and entire organizations.1 T he details of WeWork’s CEO’s rise and fall reflect the increasing complexity and depth of organizational life. The effects of behavior ring through organizations—felt by workers, managers, groups, teams, and sometimes the whole organization. They also highlight several issues of interest to those seeking to understand organizational behavior, including motivation, justice, ethics, structure, culture, personality, and their organizationally relevant outcomes, such as turnover, productivity, and survival. Throughout this text, you will learn how organizational challenges often cut across areas like these, which is why the systematic approach pursued in this text and your course is essential. ­Management and Organizational Behavior 1-1 Define organizational behavior (OB). Right now, you might be wondering, “What is organizational behavior, and why does it matter to me?” We will define organizational behavior (OB) shortly, but first, let’s begin with the end in mind: why OB matters and what the study of OB offers you. Historically, business school coursework emphasized the technical aspects of management, focusing on economics, accounting, finance, and quantitative techniques. Coursework on human behavior in organizations received relatively less attention. This might be surprising to you because you might be thinking “the people make the place”:2 organizations are only as effective as the people who comprise them, so shouldn’t we try to understand people in the workplace as well as how we make decisions, communicate, and interact with one another? Over the past several decades, however, business schools have realized the signif- icant role that interpersonal skills play in determining managers’ and employ- ees’ effectiveness. This realization led to the birth of OB, which, at its core, focuses on individuals and groups in organizations. Understanding OB is important to you now more than ever. We are in the midst of an OB revolution of sorts that is gaining traction year by year. As noted in the 2016 Deloitte Global business trends report, organizations have figured out that they need to understand “what makes people join, perform well in, and stay with an organization; who will likely be successful; who will make the best leaders; and what is required to deliver the highest-quality customer service and innovation.”3 A knowledge of OB and interpersonal skills is critical for your success and advancement in the modern workplace. According to Jeff Weiner, executive chair of LinkedIn, “Communications is the No. 1 skills gap across... major cities in the United States.”4 It is also relevant to nearly every job: one study by Monster mined about a million market-wide job postings to determine the most frequently desired skills in applicants.5 Communication skills were at the top of the list, followed by other OB-relevant skills, including problem- solving and influence skills. Furthermore, these skills are also necessary for your career advancement. A survey of over 2,100 CFOs across 20 industries indicated that a lack of interper- sonal skills is the top reason why some employees fail to advance.6 Ultimately, OB can equip you with critical tools for success and advancement in the w ­ orkplace. M01_ROBB0025_19_GE_C01.indd 38 13/12/22 1:55 AM  What Is Organizational Behavior?     CHAPTER 1 39 In this text, we pay special attention to how the knowledge and practice of OB can help you (1) think analytically and critically, (2) make better decisions, (3) communicate and collaborate more effectively with others, and (4) act with a sense of social responsibility in the workplace. Research has demonstrated that these types of “employability skills” are highly valued and desired by employers. A lack of these skills can lead to problems in the workplace.7 Incorporating OB principles into the workplace can also yield many criti- cal organizational outcomes. For one, companies known as good places to work—such as Hilton, UKG, Wegmans, Cisco, Workday, Salesforce, and Edward Jones8—have been found to generate superior financial performance due to their attention to OB.9 Second, developing managers’ and employees’ interpersonal skills helps organizations attract and keep high-performing employees. This function is vital because outstanding employees are always in short supply and costly to replace.10 Third, strong associations exist between the quality of workplace relationships and employee job satisfaction, stress, and turnover. One extensive study of hundreds of workplaces and more than 200,000 respondents showed that social relationships among coworkers and supervisors were strongly related to overall job satisfaction. Positive social rela- tionships were also associated with lower stress at work and lower intentions to quit.11 Additional research suggests that positive work relationships help employees to flourish—leading to improvements in job and life satisfaction, positive emotions at work, perceptions that one’s work has meaning, and even performance.12 Fourth, an emphasis on OB can foster awareness for organiza- tions’ environmental, social, and sustainability performance.13 Accordingly, universities have begun to incorporate social entrepreneurship education into their curriculum to train future leaders in addressing social issues within their organizations.13 But enough of the positives—incorporating OB principles into the workplace can also help us understand how to manage the negative aspects and outcomes of work, such as unethical or deviant workplace behavior, vio- lence, stress, discrimination, sexual harassment, conflict, drug abuse, incivility, and theft.15 Clearly, there are tremendous benefits to understanding people and their behavior within organizations. As such, this text has been written to help managers, potential managers, and employees develop an understanding of human behavior as individuals, members of groups or teams, and workers. Who’s Who in the World of Work Let’s begin by briefly defining the terms worker, manager, and organization. First, workers are people within organizations who get things done. Workers, worker An individual who contributes to as individuals, members of work groups, teams, or organizations, contribute the accomplishment of work goals. to the accomplishment of goals. It may seem unnecessary to define a worker up front, but as the past decade has demonstrated, the nature of work and what it means to be a worker is changing. For instance, today’s world of work is much more autonomous and interdependent. It requires a greater variety of skills than work 30 years ago.16 As we will discuss later in this chap- ter, the turn of the millennium has led to a new era many refer to as the gig economy.17 Outside a full-time employee’s traditional role, nonstandard worker arrangements are much more common in today’s day and age, with many people working as contract workers, independent contractors, freelancers, or temporary workers. Second, the most notable characteristic of managers manager An individual who achieves goals is that they get things done through other people. They make decisions, through other people. allocate resources, and direct others’ activities to attain goals. Managers are organization A consciously coordinated sometimes called administrators, especially in nonprofit organizations. They social unit, composed of two or more people, do their work in an organization, a consciously coordinated social unit com- that functions on a relatively continuous basis posed of two or more people, that functions on a relatively ­continuous basis to achieve a common goal or set of goals. M01_ROBB0025_19_GE_C01.indd 39 13/12/22 1:55 AM  40 PART 1    Introduction to achieve a common goal or set of goals. By this definition, ­manufacturing and service firms are organizations, and so are schools; hospitals; churches; military units; nonprofits; police departments; and local, state, and federal government agencies. More than ever, new hires and other employees are placed into man- agement positions without sufficient management training or informed experience.18 According to a large-scale survey, more than 58 percent of managers reported that they had not received any training, and 25 percent admitted that they were not ready to lead others when they were given the role.19 In addition to the lack of training and preparation, job demands have increased: The average manager has seven direct reports (having five was once the norm) and spends less time supervising them than managers of the past.20 Considering that a Gallup poll found organizations chose the wrong candidate for management positions 82 percent of the time,21 we conclude that the more you can learn about people and how to manage them, the bet- ter prepared you will be to be the right management candidate. OB will help you get there. planning A process that includes defining goals, establishing strategy, and developing Management Activities plans to coordinate activities. The world of work involves an overwhelming number of activities, tasks, and organizing Determining what tasks are to responsibilities. For instance, workers can collect, process, and make sense of be done, who is to do them, how the tasks data; make decisions; perform physical activities; interact with others; or per- are to be grouped, who reports to whom, and form administrative activities.22 Although workers’ activities may also involve where decisions are to be made. interacting and coordinating work with other people, it is usually a much more leading A function that includes motivating significant component of managerial jobs. Managers’ work can be categorized employees, directing others, selecting the into four different activities: planning, organizing, leading, and controlling. The most effective communication channels, and planning function encompasses defining an organization’s goals, establishing an resolving conflicts. overall strategy for achieving those goals, and developing a comprehensive set controlling Monitoring activities to ensure of plans to integrate and coordinate activities. Evidence indicates the need for that they are being accomplished as planned planning increases the most as managers move from lower-level to mid-level and correcting any significant deviations. management.23 When managers design their work unit’s structure, they are organizing. The organizing function includes determining what tasks are to be done, who is to do them, how the tasks are to be grouped, who reports to whom, and where decisions are to be made. Every organization contains people, and it is management’s job to direct and coordinate those people, which is the leading function. When managers moti- vate employees, direct their activities, select the most effective communication channels, or resolve conflicts, they are engaging in leading. Management must monitor its organization’s performance and compare it with previously set goals to ensure that activities are going as they should. If there are any significant deviations, management’s job is to get the organiza- tion back on track. This monitoring, comparing, and potential correcting is the controlling function. Management Roles Henry Mintzberg, now a prominent management scholar, undertook a careful study of executives early in his career to determine what they did on their jobs. Based on his observations, Mintzberg concluded that managers perform ten different, highly interrelated roles or sets of behaviors, thus serving a critical function in organizations.24 As shown in Exhibit 1-1, these ten roles are primar- ily (1) interpersonal, (2) informational, or (3) decisional. Although much has changed in the world of work since Mintzberg developed this model, research indicates the roles have changed very little.25 M01_ROBB0025_19_GE_C01.indd 40 13/12/22 1:55 AM  What Is Organizational Behavior?     CHAPTER 1 41 Exhibit 1-1 Minztberg’s Managerial Roles Role Description Interpersonal Figurehead Symbolic head; required to perform a number of routine duties of a legal or social nature Leader Responsible for the motivation and direction of employees Liaison Maintains a network of outside contacts who provide favors and information Informational Monitor Receives a wide variety of information; serves as nerve center of internal and external information of the organization Disseminator Transmits information received from outsiders or from other employees to members of the organization Spokesperson Transmits information to outsiders on organization’s plans, policies, actions, and results; serves as expert on organization’s industry Decisional Entrepreneur Searches organization and its environment for opportunities and initiates projects to bring about change Disturbance handler Responsible for corrective action when organization faces important, unexpected disturbances Resource allocator Makes or approves significant organizational decisions Negotiator Responsible for representing the organization at major negotiations Source: H. Mintzberg, The Nature of Managerial Work, 1st ed., © 1973, pp. 92–93. Reprinted and electronically reproduced by permission of Pearson Education, Inc., New York, NY. Interpersonal Roles All managers must perform duties that are ceremonial and symbolic in nature. For instance, when the president of a college hands out diplomas at commencement or a factory supervisor gives a group of high school students a tour of the plant, they are acting in a figurehead role. Another key interpersonal role all managers have is a leadership role. This role includes hir- ing, training, motivating, and disciplining employees. The third role within the interpersonal grouping is the liaison role, or contacting and fostering relation- ships with others who provide valuable information. The sales manager who obtains information from the quality-control manager in their own company has an internal liaison relationship. When that sales manager has contact with other sales executives through a marketing trade association, they have external liaison relationships. Informational Roles To some degree, all managers collect information from outside organizations and institutions. They typically scan the news media and talk with other people to learn of changes in the public’s tastes and what com- petitors may be planning. Mintzberg called this the monitor role. Managers also act as a conduit to transmit information to organizational members. This is the disseminator role. Also, managers perform a spokesperson role when representing the organization to outsiders. Decisional Roles Mintzberg identified four roles that require making choices. In the entrepreneur role, managers initiate and oversee new proj- ects to improve their organization’s performance. As disturbance handlers, M01_ROBB0025_19_GE_C01.indd 41 13/12/22 1:55 AM  42 PART 1    Introduction managers take corrective action in response to unforeseen problems. As resource allocators, managers are responsible for allocating human, physical, and monetary resources. Finally, managers perform a negotiator role. In this role, they discuss issues and bargain with other units (internal or external) to gain advantages for their unit. Management Skills Another way to consider what managers do is to look at the skills or competen- cies they need to achieve their goals. Researchers have identified several skills that differentiate effective from ineffective workers and managers.26 These skills are essential, and all are necessary to become a well-rounded and effec- tive manager. technical skills The ability to apply Technical Skills Technical skills encompass the ability to apply specialized ­specialized knowledge or expertise. knowledge or expertise. When you think of the skills of professionals such as civil engineers or oral surgeons, you typically focus on the technical skills they have learned through extensive formal education. Of course, profes- sionals do not have a monopoly on technical skills. Not all technical skills have to be learned in schools or other traditional training programs. All jobs require some specialized expertise, and many people develop their technical skills on the job. People Skills The ability to understand, communicate with, motivate, and people skills The ability to work with, support other people, both individually and in groups, defines people understand, and motivate other people, both skills. Many people may be technically proficient but poor listeners, unable individually and in groups. to understand others’ needs, or weak at managing conflicts. Managers must have good people skills because they need to get things done through other people. Conceptual Skills Managers must have the mental ability to analyze and diag- conceptual skills The mental ability to nose complex situations. These tasks require conceptual skills. Decision mak- analyze and diagnose complex situations. ing, for instance, requires managers to identify problems, develop alternative solutions to correct those problems, evaluate those alternative solutions, and select the best one. After they have chosen a course of action, managers must organize a plan of action and then execute it. The abilities to integrate new ideas with existing processes and innovate on the job are also crucial conceptual skills for today’s managers. Effective Versus Successful Managerial Activities What makes one manager more effective than another? To answer this ques- tion, Fred Luthans, a prominent OB researcher, and associates looked at what managers do from a somewhat different perspective.27 They asked, “Do man- agers who move up most quickly in an organization do the same activities and with the same emphasis as managers who do the best job?” You might think the answer is yes, but that is not always the case. Luthans and his associates studied more than 450 managers, all engaged in four managerial activities: 1. Traditional management. Decision making, planning, and controlling. 2. Communication. Exchanging routine information and processing paperwork. 3. Human resources (HR) management. Motivating, disciplining, managing conflict, staffing, and training. 4. Networking. Socializing, politicking, and interacting with outsiders. M01_ROBB0025_19_GE_C01.indd 42 13/12/22 1:55 AM  What Is Organizational Behavior?     CHAPTER 1 43 Exhibit 1-2 Allocation of Activities by Time Average Successful Effective managers managers managers Traditional management 19% 13% 11% 19% Human resource management 32% 48% 26% 20% 28% Communication Networking 44% 29% 11% Source: Based on F. Luthans, R. M. Hodgetts, and S. A. Rosenkrantz, Real Managers (Cambridge, MA: Ballinger, 1988). The “average” manager spent 32 percent of their time in traditional man- agement activities, 29 percent communicating, 20 percent in HR manage- ment activities, and 19 percent networking. However, the time and effort that different individual managers spent on those activities varied greatly. As shown in Exhibit 1-2, networking made the most considerable contribution among successful managers (defined in time to promotion within their organiza- tion). HR management activities made the least relative contribution. Indeed, other studies in Australia, Israel, Italy, Japan, and the United States confirm the link between networking, social relationships, and success within an orga- nization.28 However, Luthans and associates found that among effective man- agers (defined in terms of quantity and quality of their performance and the satisfaction and commitment of employees), communication made the most considerable contribution and networking the least. The connection between communication and effective managers is also evident. Managers who explain their decisions and seek information from colleagues and employees—even if the information turns out to be negative—are the most effective.29 This research offers important insights. Successful (in terms of promotion) managers give almost the opposite emphases to traditional management, com- munication, HR management, and networking as do effective managers. This finding challenges the historical assumption that promotions are based on per- formance. Instead, it illustrates the importance of networking and political skills to getting ahead in organizations. Organizational Behavior (OB) Defined Now that we have established the importance of what workers and managers do, we turn our focus more broadly toward how people behave in organiza- tions. Organizational behavior (OB) is a field of study investigating the impact organizational behavior (OB) A field of that individuals, groups, and structure have on behavior within organizations to study that investigates the impact that individuals, groups, and structure have on apply such knowledge toward improving an organization’s effectiveness. That is behavior within organizations for the purpose a mouthful, so let us break it down. of applying such knowledge toward improving OB is a field of study, meaning that it is a distinct area of expertise with an organization’s effectiveness. a common body of knowledge. It focuses on three determinants of behavior in organizations: individuals, groups, and structure and applies the knowledge gained about individuals, groups, and the effect of structure on behavior to make organizations work more effectively. To sum up our definition, OB is the study of what people do in an organiza- tion and how their behavior affects the organization’s performance. Because M01_ROBB0025_19_GE_C01.indd 43 13/12/22 1:55 AM  44 PART 1    Introduction Internet retailer Zappos.com under- stands how organizational behavior affects an organization’s performance. The firm maintains good employee re- lationships by offering generous bene- fits, extensive training, and a positive work environment in which employees are encouraged “to create fun and a little weirdness.” Source: Ronda Churchill/Bloomberg/Getty Images OB is concerned specifically with employment-related situations, it examines behavior in the context of job attitudes, absenteeism, employee turnover, productivity, performance, and management. Although debate exists about the relative importance of each, OB includes these core topics: 30 Performance, citizenship, Communication and deviance, and creativity relationships Diversity and inclusion Leadership and management Job attitudes, emotions, and Power, politics, and corruption moods Conflict and negotiation Personality and individual Organizational theory and differences structure Judgment and decision making Organizational culture and Motivation climate Justice and ethics in Organizational health, stress, organizations and safety Groups and teams Complementing Intuition with Systematic Study 1-2 Show the value of systematic study to OB. Whether you have explicitly thought about it before or not, you have been “reading” people almost all your life. You have watched their actions and inter- preted what you see or tried to predict what people might do under different conditions. This casual approach to reading others can often lead to errone- ous predictions, but using a systematic approach can improve your accuracy. Underlying the systematic approach in this text is the belief that behavior is not random. Instead, we can identify consistencies underlying people’s behavior and modify them to reflect individual differences. These consistencies are fundamental. Why? Because they allow predictability. systematic study Looking at relationships, Behavior is generally predictable, and the systematic study of behavior is a way to attempting to attribute causes and effects, make reasonably accurate predictions. When we use the term systematic study, we and drawing conclusions based on scientific mean looking at relationships, attempting to attribute causes and effects, and bas- evidence. ing our conclusions on scientific evidence. That is, we base our predictions on data gathered under controlled conditions and measured and interpreted rigorously. evidence-based management (EBM) Basing Evidence-based management (EBM) complements systematic study by bas- managerial decisions on the best available ing managerial decisions on the best available scientific evidence.31 For exam- scientific evidence. ple, we want doctors to make decisions about patient care based on the latest M01_ROBB0025_19_GE_C01.indd 44 13/12/22 1:55 AM  What Is Organizational Behavior?     CHAPTER 1 45 available evidence. EBM argues that managers should do the same, thinking more scientifically about management problems. For instance, a manager might pose a question, search for the best available evidence, and apply the relevant information to the question or case at hand. You might wonder what manager would not base decisions on evidence. However, the vast majority of manage- ment decisions are still made “on the fly,” with little to no systematic study of available evidence. Even more worrisome, there is mounting public distrust of scientists and researchers, which often leads managers to ignore evidence and “go with their guts.”32 But should we trust our guts? Systematic study and EBM add to intuition, or intuition An instinctive feeling not those “gut feelings” about what makes others (and ourselves) “tick.” Of course, ­necessarily supported by research. the things you have come to believe in an unsystematic way are not necessarily incorrect. One review of hundreds of studies suggests that data-driven judgments (based on algorithms) were about ten percent more accurate than human’s intui- tive judgments.33 Another study found that laypeople may prefer data-driven judgments to judgments made by others (e.g., experts) and even to judgments made by themselves, contrary to conventional wisdom.34 Jack Welch (former CEO of General Electric) noted, “The trick, of course, is to know when to go with your gut.” But if we make all decisions with intuition or gut instinct, we are likely working with incomplete information—like making an investment decision with only half the data about the potential for risk and reward. As such, EBM becomes a balancing act in which one critically weighs evidence from multiple sources. These sources include the opinions of professional experts and respected figures, evidence collected from one’s own business, and, of course, scientific evidence.35 Relying on intuition is made worse because we tend to overestimate what we think we know. Many managers hold so-called commonsense opinions regard- ing effective management that have been flatly refuted by empirical evidence. Moreover, managers are often motivated to hold onto these beliefs even in the face of contradictory evidence. They negatively react to this information, especially when it counteracts their beliefs, self-image, self-interest, or iden- tity.36 We find a similar problem in chasing the business and popular media for ­management wisdom.37 The business press tends to be dominated by fads, made worse by their proliferation through social media.38 As a writer for The New Yorker put it, “Every few years, new companies succeed, and they are scrutinized for the underlying truths they might reveal. But often there is no underlying truth; the companies just happened to be in the right place at the right time.”39 Although we try to avoid it, we might also fall into this trap. It is not that the business press stories are all wrong; it is that without a systematic approach, it is difficult to accu- rately conclude what makes prospering companies successful. ­Building on Big Data with Artificial Intelligence Data has been used to evaluate behavior since at least 1749. On this date, the word statistic was coined to mean a “description of the state.”40 Statistics back then were used for governance purposes, but since the data collection methods were clumsy and simplistic, so were the conclusions. Big data—the extensive use of statistical compilation and analysis—did not become possible until comput- ers were sophisticated enough to store and manipulate large amounts of infor- mation.41 Let us look at the roots of big data for business, which originated in online retailers’ marketing departments. Background It is difficult to believe now, but not long ago, companies treated online shopping as a virtual point-of-sale experience. Shoppers browsed web- sites anonymously, and sellers tracked sales data only on what customers bought. Gradually, online retailers began to track and act on customer preferences M01_ROBB0025_19_GE_C01.indd 45 13/12/22 1:55 AM  46 PART 1 Introduction Myth or Science? Management by Walking Around Is the Most Effective Management T his is mostly a myth, but with a focused on building trust and relation- 3. Application. The principle behind caveat. Management by walk- ships are more useful for manage- MBWA is that the more managers ing around (MBWA) is an organi- ment. Limitations include available know their employees, the more zational principle made famous with hours, focus, and application. effective those managers will be. This the 1982 publication of In Search of principle is not always (or even often) Excellence and based on a 1970s initia- 1. Available hours. Managers are true. As we will learn in the chapter tive by Hewlett-Packard—in other words, charged with planning, organiz- on Perception and Individual Decision it is a dinosaur. Years of research indi- ing, coordinating, and controlling. Making, knowing something (or think- cate that effective management prac- Yet even CEOs—the managers ing we know it) should not always tices are not built around MBWA. But who should be the most in con- lead us to act on only that informa- the idea of requiring managers at all lev- trol of their time—report spend- tion. Our internal decision making is els of the organization to wander around ing 53 percent of their average subjective—as such, we need objec- their departments to observe, converse, 55-hour workweek in time-wasting tive data to make the most effective and hear from employees continues as meetings. management decisions. a standard business practice. 2. Focus. MBWA turns management’s Many companies expecting man- focus toward the concerns of Based on the need for managers to agers and executives to do regular employees. Such a focus is good, dedicate their efforts to administering “floor time” have claimed benefits but only to a degree. As noted and growing businesses and given the from increased employee engage- by Jeff Weiner, chair of LinkedIn, proven effectiveness of objective per- ment to deeper management under- “Part of the key to time manage- formance measures, it seems the time standing of company issues. A three- ment is carving out time to think, for MBWA is gone. Yet there is that one year study also suggested that a as opposed to constantly react- caveat: Managers should know their modified form of MBWA may signifi- ing. And during that thinking time, employees well. As Rick Russell, former cantly improve safety in organizations you’re not only thinking strategi- president of Minerva Neurosciences, because employees become more cally, thinking proactively, think- says, “Fostering close ties with your mindful of following regulatory proce- ing longer-term, but you’re literally lieutenants is the stuff that gets dures when supervisors observe and thinking about what is urgent ver- results. You have to rally the troops. You monitor them frequently. sus important.” Weiner and other can’t do it from a memo.” Management While MBWA sounds helpful, its limi- executives argue that meetings dis- should, therefore, not substitute walking tations suggest that modern practices tract them from their purpose. around for actual management.42 obtained through the Internet shopping experience. This knowledge was far superior to data gathered in simple store transactions. This action enabled them to create more targeted marketing strategies than ever before. The bookselling industry is a case in point. Before online selling, brick-and-mortar bookstores could collect data about book sales only to create projections about consumer interests and trends. With the advent of Amazon, suddenly a vast array of infor- mation about consumer preferences became available for tracking. These pref- erences included what customers bought, what they looked at, how they navi- gated the site, and what influenced them (such as promotions, reviews, and page presentation). The challenge for Amazon was to identify which statistics were persistent, giving relatively constant outcomes over time, and which were predictive, showing steady causality between certain inputs and outcomes. The company used these statistics to develop algorithms to forecast which books cus- tomers would like to read next. Amazon could then base its wholesale purchase decisions on the feedback customers provided, through both these passive col- lection methods and solicited recommendations for upcoming titles. M01_ROBB0025_19_GE_C01.indd 46 13/12/22 1:55 AM  What Is Organizational Behavior?     CHAPTER 1 47 It is good news for the future of business that researchers, the media, and com- pany leaders have identified the potential of data-driven management and decision making. A manager who uses data to define objectives, develop theories of causal- ity, and test those theories can determine which employee activities are relevant to their objectives.43 Big data is increasingly applied toward managing organizational change and making effective decisions (which we discuss in Chapter 6 on percep- tion and decision making). Managers seem to be reacting well to it. For instance, in one study, managers were given automated, d ­ ata-driven decision support systems to assist them with their hiring tasks. In this study, managers reported being happier with and more confident in the decisions they made.44 Current Usage No matter how many terabytes of data firms collect or from how many sources, the reasons for data analytics are essentially the same. They include predicting any event, from a book purchase to a spacesuit malfunction; detecting how much risk is incurred at any time, from the risk of a fire to that of a loan default; and preventing catastrophes large and small, from a plane crash to an over- stock of product.45 With big data, United States defense contractor BAE Systems protects itself from cyberattacks. San Francisco’s Bank of the West uses customer data to create tiered pricing systems. As a final example, London’s Graze.com ana- lyzes customers’ preferences to select snack samples to send with their orders.46 Naturally, big data has been used by technology companies like Google and Facebook, which rely on advertising dollars for revenue and thus need to predict user behavior. Companies like Netflix and Uber similarly use big data to pre- dict where and when customers may want to use their services. Insurance firms predict behavior to assess risks, such as the chance of traffic accidents, to set cus- tomer premiums. Even museums like the Solomon R. Guggenheim Museum in New York, the Dallas Museum of Art, and the Minneapolis Institute of Arts ana- lyze data from transmitters, kiosks, and surveys to cater to their paying guests.47 Online retailers like eBay and Amazon that market tangible products through online platforms also rely on big data to predict what will sell. For organizations like Nielson, which tracks television and radio watching, the results of data analy- ses are the product they sell. Still other organizations collect big data but do not use it directly. These are often organizations whose primary business is not online. Kroger, a United States grocery store chain, collects electronic information from 55 million customers who have loyalty cards and sells the data to vendors who stock Kroger’s shelves.48 Sometimes technology companies simply sell their data; Twitter sells 500 million tweets a day to four data assimilation companies.49 New Trends The use of big data to understand, help, and manage people is relatively new but is “as ubiquitous as the air we breathe.”50 In fact, research on 10,000 workers in China, Germany, India, the United Kingdom, and the United States indicated that transformations in the way work is performed will rely more on technological advancements than on any other factor.51 Organizations are also beginning to focus on “fast data,” emphasizing a consistent influx of actionable data to guide business decisions in real time.52 Big data has enabled organizations to acquire and manage large amounts of data and information (sometimes with more variables than people!).53 Even more recent advancements have shifted toward processing and analyzing all this information.54 One way organizations have been able to adapt to the massive amounts of data and the sheer speed at which it is acquired is through artifi- cial intelligence (AI; i.e., machines programmed to think, work, and react like humans).55 When you think of AI, your mind may wander to robots, regard- less of your status as a Star Trek or Star Wars fan. We are certainly seeing robotics becoming used in the workplace (for example, robots can help hospital night staff remotely assist their patients during night rounds).56 However, much of M01_ROBB0025_19_GE_C01.indd 47 13/12/22 1:55 AM  48 PART 1    Introduction the current focus has been on machine learning (i.e., a subset of AI in which software is trained to perform a task while at the same time “learning” and “improving” from incoming data and feedback).57 Indeed, 60 percent of the billions of dollars invested in AI has been allocated toward machine learning.58 Machine learning has contributed immensely to many organizations’ success, especially those in the e-commerce industry. One estimate suggests that over a third of Amazon transactions stem from AI-facilitated product recommenda- tions.59 In the coming chapters, we discuss how and in what ways big data and AI approaches have contributed to the study and practice of OB. In the meantime, here are some examples of novel methods researchers and organizations have used to apply big data to study OB:60 Robotics Artificial intelligence/machine learning Serious games and gamification (i.e., designing games that inherently col- lect rich data on worker behavior to improve training, hiring, and even worker attitudes) “Always on” technology (i.e., devices that are continuously “on” and con- stantly collect data, such as smartphones and digital assistants) Mobile sensors and biometrics (i.e., wearable technology that monitors biometric data, such as sleep quality and heart rate) ­ Social media (i.e., data concerning interactions between and among groups of people, including social networking and the formation/dissolu- tion of relationships) Text or sentiment analysis (i.e., analyzing the words or phrases people use in electronic communication to determine mood and personality traits) Limitations As technological capabilities for handling big data and AI have increased, so have privacy issues and appropriate application.61 This limitation is particularly true when data collection includes surveillance instruments. For instance, an experiment in Brooklyn, New York, was designed to improve res- idents’ quality of life. The researchers collected intensive data from infrared cameras, sensors, and smartphone Wi-Fi signals on these residents.62 A bank call center and a pharmaceutical company (through similar methods) found that employees were more productive with more social interaction, so they changed their break-time policies so more people took breaks together. They then saw sales increase and turnover decrease. Bread Winners Café in Dallas, Texas, continuously monitors all restaurant employees through surveillance and uses the data to promote or discipline its servers.63 These big data tactics and oth- ers might yield results. For instance, research indicates that surveillance may increase task performance and citizenship behavior (helping behaviors toward others), at least in the short term.64 But critics point out that after Frederick Taylor introduced surveillance ana- lytics in 1911 to increase productivity, these techniques were surpassed by Alfred Sloan’s greater success, achieved by providing meaningful work to employees.65 Further, pioneering studies at the Hawthorne Western Electric plant demon- strated the massive role of group dynamics and norms. From these studies, productivity was a function of both whether workers feel management cares about them and the social forces that cause group members to behave in certain ways.66 In other words, it is less about the direct effect of surveillance on workers but more so a function of the social forces at play. These issues bring up a larger concern: What do people think about big data when they are the data source? Organizations using big data run the risk of offending the very people they are trying to influence: employees and custom- ers. As Alderman Bob Fioretti said about the 65 sensors installed on Chicago’s streets, “This type of invasion is a very slippery slope.”67 The use of AI also has its M01_ROBB0025_19_GE_C01.indd 48 13/12/22 1:55 AM  What Is Organizational Behavior?     CHAPTER 1 49 own privacy and appropriateness issues.68 Despite traditional concerns regard- ing the safety and job security threats robots and automation bring to mind,69 perhaps the most straightforward limitation is that machines can often fail to capture the obvious “big picture” and may ignore their limits.70 For example, an algorithm may inadvertently include pizza topping preferences in predicting which employees are more likely to steal at work. Research demonstrates that it is crucial for machine learning to be supervised to avoid atheoretical predic- tions and decision making.71 AI may also be used to engage in unethical behav- iors at work. For example, Facebook banned a large UK car insurance company from mining users’ social media information, learning their personality traits, and charging them different premiums based on their personality traits (and predictions for how safely they would drive).72 We must keep in mind that big data will always be limited in predicting behavior, curtailing risk, and preventing catastrophes. In contrast to the rep- licable results we can obtain through big data, human behavior can often be unpredictable and elusive. Otherwise, our decision making would have been taken over by artificial intelligence by now! But that will never be a worthy goal.73 Management is more than the sum of data. Overall, we do not advise you to throw your intuition out the window. We are also not suggesting you base all your decisions on a machine learning algorithm. In dealing with peo- ple, leaders often rely on hunches, and sometimes the outcomes are excellent. At other times, human tendencies get in the way. The prudent use of big data and AI, along with an understanding of human behavioral tendencies, can contribute to sound decision making and ease natural biases. What we are advising is to use evidence as much as possible to inform your decisions. That is the promise of OB. Disciplines That Contribute to OB OB is an applied behavioral science built on contributions from several behav- ioral disciplines, mainly psychology and social psychology, sociology, and 1-3 Identify the major behavioral science anthropology. Psychology’s contributions have been principally at the indi- disciplines that contribute vidual or micro level of analysis. In contrast, the other disciplines have con- to OB. tributed to our understanding of macro concepts such as group processes and organization. Exhibit 1-3 is an overview of the major contributions of other disciplines to the study of OB. In turn, OB has influenced the working world, specifically HR practices (e.g., work design, training, employee selection, per- formance appraisal). Psychology Psychology seeks to measure, explain, and sometimes change humans and psychology The science that seeks to other animals’ behavior. Contributors to OB’s knowledge are learning theorists; measure, explain, and sometimes change the behavior of humans and other animals. personality theorists; counseling psychologists; and, most important, industrial and organizational psychologists. Early industrial/organizational psychologists studied fatigue, boredom, and other working conditions that could impede efficient work performance. More recently, their contributions have expanded to include learning, perception, personality, emotions, training, leadership effectiveness, needs, motivational forces, job satisfaction, decision-making processes, performance appraisal, atti- tude measurement, employee-selection techniques, work design, and job stress. The study of emotions and moods, in particular, has been immensely transfor- mative in the study of OB, leading to an “Affective Revolution.” This revolution heavily impacted (and continues to influence) OB research across virtually all of the “contributions” in Exhibit 1-3.74 M01_ROBB0025_19_GE_C01.indd 49 13/12/22 1:55 AM  50 PART 1    Introduction Exhibit 1-3 Toward an OB Discipline Behavioral Contribution Unit of Output Application science analysis Learning Motivation Personality Emotions Perception Leadership effectiveness Job satisfaction Psychology Individual decision making Attitude measurement Work stress Performance (Un)ethical behavior Creativity Health Individual Behavioral change Attitude change Social psychology Communication Group processes Group decision making Diversity Justice Training Study of Performance appraisal Communication Group organizational Power Employee selection behavior Work design Conflict Intergroup behavior Politics Sociology Formal organization theory Organizational technology Organizational change Organizational culture Organizational climate Organization system Comparative values Comparative attitudes Cross-cultural analysis Anthropology Organizational culture Organizational environment Power Social Psychology social psychology An area of psychology Social psychology, generally considered a branch of psychology, blends concepts that blends concepts from psychology and from psychology and sociology to focus on people’s influence on one another. sociology to focus on the influence of people One central study area is change —how to implement it and reduce barriers to on one another. its acceptance. Social psychologists also contribute to measuring, understand- ing, and changing attitudes; identifying communication patterns; and building trust. They have made significant contributions to our study of group behavior, power, and conflict. ­Sociology sociology The study of people in relation to While psychology focuses on the individual, sociology studies people in rela- their social environment or culture. tion to their social environment or culture. Sociologists have contributed to OB by studying group behaviors in organizations, particularly formal and complex organizations. Perhaps most important, sociologists have studied organizational culture, formal organization theory and structure, organizational technology, communications, power, and conflict. M01_ROBB0025_19_GE_C01.indd 50 13/12/22 1:55 AM  What Is Organizational Behavior?     CHAPTER 1 51 Anthropology Anthropology is the study of societies to learn about human beings and their anthropology The study of societies activities. Anthropologists’ work on cultures and environments has helped us to learn about human beings and their understand differences in fundamental values, attitudes, and behavior among activities. people in different countries and organizations. Much of our current under- standing of organizational culture, organizational climate, and differences among national cultures results from anthropologists’ work or those using their methods. There Are Few Absolutes in OB Laws in the physical sciences—chemistry, astronomy, physics—are consistent and apply in various situations. They allow scientists to generalize about the 1-4 Demonstrate why few absolutes apply to OB. pull of gravity or be confident about sending astronauts into space to repair satellites. Human beings are complex, and few, if any, simple and universal principles explain organizational behavior. Because we are not alike, our ability to make simple, accurate generalizations about ourselves is limited. Two people often act very differently in the same situation, and the same person’s behavior changes in different cases. For example, you may behave much differently during a job interview than you would with your friends on a Saturday morning. Of course, this does not mean that we cannot offer reasonably accurate explanations of human behavior or make valid predic- tions. It does mean that OB concepts must reflect situational or contingency conditions. We can say x leads to y, but only under conditions specified in z—the contingency variables. contingency variables Situational factors OB was developed by applying general concepts to a particular situation, or variables that moderate the relationship person, or group. For example, OB scholars and practitioners would avoid stat- between two or more variables. ing that everyone likes complex and challenging work (a generalization). Why? Because not everyone wants a challenging job. Some people prefer routine over varied work or simple over complex tasks. A job attractive to one person may not be to another; its appeal is contingent on the person who holds it. Often, we find both general effects and contingencies. For instance, money does have some ability to motivate most of us (a general effect). On the con- trary, some of us are more motivated by money than others, and some situa- tions are more about money than others (both contingencies). We will best understand OB when we realize how both general effects and their contingen- cies guide behavior. ­Challenges and Opportunities Understanding organizational behavior has never been more critical for manag- ers. Take a quick look at the dramatic changes in organizations. The workforce 1-5 Identify managers’ challenges and opportunities in applying is becoming increasingly diverse; organizations are continuing to develop a OB concepts. global, integrated presence; technology is revolutionizing how (and where) we do work; managers are increasingly interested in the role that justice and ethics play in the workplace; organizations are beginning to focus on their responsi- bilities to the environment, societies, and communities—and at the same time developing strengths in workers; and finally, the nature of work itself has been shifting with the advent of the “Gig Economy” and global crises, such as the COVID-19 pandemic.75 In short, today’s challenges bring opportunities for managers to use OB con- cepts. In this section, we review some—but not nearly all—of the critical devel- oping issues confronting managers. OB offers solutions to these challenges and opportunities—or at least meaningful insights toward solutions. M01_ROBB0025_19_GE_C01.indd 51 13/12/22 1:55 AM  52 PART 1    Introduction Workforce Diversity and Inclusion With the advent of social movements such as #metoo and Black Lives Matter,76 organizations, their management and leadership, and workers worldwide are continuing to realize the importance of workforce diversity in crafting equitable, inclusive workplaces. One of the most compelling opportunities for organiza- workforce diversity The heterogeneous tions is managing workforce diversity, which recognizes that the workforce is characteristics of organizations, work groups, heterogeneous in its gender identity, age, race, ethnicity, sexual orientation, and teams that recognize that their workers and other characteristics.77 vary in gender, age, race, ethnicity, sexual orientation, and other characteristics. Beyond recognizing diversity, all organization members are responsible for doing something about it if a fair, equitable, and productive workplace is to be workforce inclusion The act of creating realized. Workforce inclusion focuses on creating and maintaining workplaces and maintaining workplaces that support that support and leverage their members’ diversity.78 Inclusion compels the and leverage the diversity of their members. workforce and managers to recognize that people are like mosaics, character- ized by tiles representing the various identities and value systems that “make them who they are.”79 An inclusive workplace is one in which workers feel that they are involved in critical processes, feel welcomed and valued, and are treated as “insiders.”80 As an example of diversity and inclusion in action in the modern workplace, longevity and birth rates have changed organizations’ dynamics. Global longev- ity rates have increased by about six years in a very short time (since 2000—the fastest increase since the 1960s),81 while birth rates have decreased in many developed countries. Together, these trends indicate a lasting shift toward an older workforce. First, OB research can explain what this means for attitudes, organizational culture, leadership, structure, and communication, among other core OB topics. Second, managers and organizations need to think about how best to craft an inclusive workplace for older workers while reducing discrimina- tion and prejudice in their practices.82 Socioeconomic shifts also have a profound effect on workforce diversity. Equal access to work and education, regardless of gender identity or sexual ori- entation, has been deemed a human rights issue by the United Nations (see OB Poll).83 Despite increasing representation in the workforce, people of various demographic backgrounds (e.g., gender identities and sexual orientations) con- tinue to experience inequality, underrepresentation as managers, prejudice, and even violence.84 OB researchers study how people from diverse backgrounds fare in the workplace, the unique challenges and benefits they e­ xperience, and how their conditions can be improved. This example is just one way cultural and socioeconomic changes affect workforce diversity, and it is one of many. We will discuss how OB can provide insights on workforce issues throughout this text. Though we have more to say about diversity in the next chapter, we start here by saying that diversity presents promising opportunities and poses challenging questions for managers and employees. How can we recognize the strengths in our diversity? How can we adapt to accommodate each other’s differences? What are the legal requirements in each country that protect workplaces from prejudice, discrimination, and inequality? Does workforce diversity lead to posi- tive outcomes for employees and organizations? What can employees, manag- ers, and organizations do to manage diversity effectively? It is vital to address the spoken and unspoken concerns of organizations today. Continuing Globalization Globalization has led organizations, leaders, and employees to become increas- globalization The process in which ingly connected across the globe, now more than ever.85 Globalization refers to worldwide integration and interdependence the process in which worldwide integration and interdependence are promoted are promoted across national borders. across national borders. Samsung, the largest South Korean business conglom- erate, sells most of its products to organizations in other countries; a Brazilian firm owns Burger King; and McDonald’s operates in over one hundred countries M01_ROBB0025_19_GE_C01.indd 52 13/12/22 1:55 AM  What Is Organizational Behavior? CHAPTER 1 53 OB POLL Percentage of Men and Women Working 100% 90% 80% 76.2% Men 69.1% 70% 60% Women 57.1% 50% 40.8% 40% 30% 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Sources: Based on U.S. Bureau of Labor Statistics, “Women in the Labor Force: A Datebook,” 2019, https://www.bls.gov/opub/reports/womens- databook/2019/home.htm on six continents. Although globalization united the international community following the Second World War, the slow recovery from the global financial cri- sis has caused much of the world’s population to be embittered by globaliza- tion.86 In modern times, the world is at a tension point in which societies choose between sectioning off their economies and remaining open to the world, given how globalization can change the employment landscape rapidly for many com- munities, sometimes resulting in poverty and economic inequality.87 Meanwhile, we are on the brink of a new Industrial Revolution, disrupting many industries and leaving many without jobs.88 One of the unique challenges of this tide of globalization is to forge cooperation between organizations and their employees worldwide and pursue the public good with social responsibility in mind. Furthermore, as a result of globalization, the manager’s job has changed. To be effective in the workplace, you should try to anticipate and adapt your approach to the global issues we discuss next. Increased Expatriate Assignments You are much more likely to find yourself working outside your native country as an expatriate. For instance, you might expatriate A person who works outside find yourself transferred to your employer’s operating division or subsidiary in their native country. another country. Once there, you will have to interact with a workforce with very different needs, aspirations, and attitudes than those you are used to back home. To be effective, you will need to understand everything you can about your new location’s culture and workforce (i.e., demonstrating your cultural sensitivity). Understanding what leads to success for expatriate assignments is critical to organizations. For instance, one UK consulting firm estimates that the average expatriate assignment costs $311,000 per year—a high price to pay when considering that 40 percent of all expatriate assignments end up in failure.89 Working With People From Different Cultures Even in your own country, you will find yourself working with people born and raised in different cultures. What motivates you may not motivate them. Or your communication style may be straightforward and blunt, which others may find rude or threatening. To work effectively with people from different cultures, you need to understand how their culture and background have shaped them and how to adapt your management style to accommodate these differences. For instance, managers need to know the workforce’s cultural norms in each country where they do business. A large percentage of the workforce enjoys long holidays in some countries. There will be country and local regulations to consider, too. Managers of subsidiaries abroad need to be aware of the unique financial and legal regulations applying to guest M01_ROBB0025_19_GE_C01.indd 53 13/12/22 1:55 AM  54 PART 1    Introduction companies or risk violating them. Violations can have implications for operations in that country and political relations between countries. Managers also need to be mindful of differences in regulations for competitors in that country; understand- ing the laws can often lead to success rather than failure. For example, knowing local banking laws allowed one multinational firm—the Bank of China—to seize a storied (and priceless) London building, Grosvenor House, from the owner, the Indian hotel group Sahara. Management at Sahara contends that the loan default that led to the seizure was a misunderstanding regarding one of its other proper- ties in New York.90 Globalization can get complicated. Technology and Social Media Technology, such as the advancements in AI discussed earlier, has profoundly affected the business world. As another example, many organizations continue to struggle with employees’ social media use in the workplace. In February 2015, a Texas pizzeria fired an employee before the first day of work because of an unflattering tweet about the job. In December 2014, Nordstrom fired an Oregon employee who had posted a personal Facebook comment seeming to advocate violence against police officers.91 These examples show that social media is a complicated issue for today’s managers, presenting both a challenge and an opportunity for OB. For instance, should HR investigate a candidate’s social media presence? Should a hiring manager read the candidate’s Twitter feed or just do a quick perusal of their Facebook profile? How can managers attract applicants and customers through their own social media presence?92 Managers need to adopt evidence-based policies designed to protect employees