Changing Social and Cultural Environment

Chapter 1 Introduction to Organizational Behavior

Outline

· Overview

· What Is Organizational Behavior?

· Challenges for Organizational Behavior

· Challenge 1: The Changing Social and Cultural Environment

· Challenge 2: The Evolving Global Environment

· Challenge 3: Advancing Information Technology

· Challenge 4: Shifting Work and Employment Relationships

· Summary

· Exercises in Understanding and Managing Organizational Behavior

· Appendix 1 : A Short History of Organizational Behavior

 

What is Organizational Behavior?

To begin our study of organizational behavior, we could just say that it is the study of behavior in organizations and the study of the behavior of organizations, but such a definition reveals nothing about what this study involves or examines. To reach a more useful and meaningful definition, let’s first look at what an organization is. An organization is a collection of people who work together and coordinate their actions to achieve a wide variety of goals. The goals are what individuals are trying to accomplish as members of an organization (earning a lot of money, helping promote a worthy cause, achieving certain levels of personal power and prestige, enjoying a satisfying work experience, and so forth). The goals are also what the organization as a whole is trying to accomplish (providing innovative goods and services that customers want; getting candidates elected; raising money for medical research; making a profit to reward stockholders, managers, and employees; and being socially responsible and protecting the natural environment). An effective organization is one that achieves its goals.

Organization

A collection of people who work together and coordinate their actions to achieve individual and organizational goals.

Police forces, for example, are formed to achieve the goals of providing security for law-abiding citizens and providing police officers with a secure, rewarding career while they perform their valuable services. Paramount Pictures was formed to achieve the goal of providing people with entertainment while making a profit in the process. Actors, directors, writers, and musicians receive well-paid and interesting work.

Organizations exist to provide goods and services that people want, and the amount and quality of these goods and services are products of the behaviors and performance of an organization’s employees—of its managers, of highly skilled employees in sales or research and development, and of the employees who actually produce or provide the goods and services. Today, most people make their living by working in or for some kind of company or organization. People such as a company’s owners or managers—or company employees who desire to become future owners or managers—all benefit from studying organizational behavior. Indeed, people who seek to help or volunteer their time to work in nonprofit or charitable organizations also must learn the principles of organizational behavior. Like most employees today, volunteers attend training courses that help them understand the many kinds of issues and challenges that arise when people work together and cooperate in a company or organization to benefit others, such as when they seek to aid ill, distressed, or homeless people.

The Nature of Organizational Behavior

Organizational behavior (OB) is the study of the many factors that have an impact on how people and groups act, think, feel, and respond to work and organizations, and how organizations respond to their environments. Understanding how people behave in an organization is important because most people work for an organization at some point in their lives and are affected—both positively and negatively—by their experiences in it. An understanding of OB can help people to enhance the positive, while reducing the negative, effects of working in organizations.

Organizational behavior

The study of factors that affect how individuals and groups act in organizations and how organizations respond to their environments.

Most of us think we have a basic, intuitive, commonsense understanding of human behavior in organizations because we all are human and have been exposed to different work experiences. Often, however, our intuition and common sense are wrong, and we do not really understand why people act and react the way they do. For example, many people assume that happy employees are productive employees—that is, that high job satisfaction causes high job

 

Exhibit 1.1 What is Organizational Behavior?

performance—or that punishing someone who performs consistently at a low level is a good way to increase performance or that it is best to keep pay levels secret. As we will see in later chapters, all of these beliefs are either false or are true only under very specific conditions, and applying these principles can have negative consequences for employees and organizations.

The study of OB provides guidelines that help people at work to understand and appreciate the many forces that affect behavior in organizations. It allows employees at all levels in an organization to make the right decisions about how to behave and work with other people in order to achieve organizational goals. OB replaces intuition and gut-feeling with a well-researched body of theories and systematic guidelines for managing behavior in organizations. The study of OB provides a set of tools—concepts and theories—that help people to understand, analyze, and describe what goes on in organizations and why. OB helps people understand, for example, why they and others are motivated to join an organization; why they feel good or bad about their jobs or about being part of the organization; why some people do a good job and others don’t; why some people stay with the same organization for 30 years and others seem to be constantly dissatisfied and change jobs every 2 years. In essence, OB concepts and theories allow people to correctly understand, describe, and analyze how the characteristics of individuals, groups, work situations, and the organization itself affect how members feel about and act within their organization (see Exhibit 1.1 ).

Levels of OB

In practice, OB is examined at three main levels: the individual, the group, and the organization as a whole. A full understanding of OB is impossible without a thorough examination of the factors that affect behavior at each level (see Exhibit 1.2 ).

 

Exhibit 1.2 Levels of Analysis in Organizational Behavior

Much of the research in OB has focused on the way in which the characteristics of individuals (such as personality, feeling, and motivation) affect how well people do their jobs, whether they like what they do, whether they get along with the people they work with, and so on. In Chapters 2 through 9 , we examine individual characteristics critical in understanding and managing behavior in organizations: personality and ability; attitudes, values, and moods; perception and attribution; learning; motivation; and stress and work-life linkages (see Exhibit 1.3 ).

The effects of group or team characteristics and processes (such as communication and decision making) on OB also need to be understood. A group is two or more people who interact to achieve their goals. A team is a group in which members work together intensively and develop team-specific routines to achieve a common group goal. A virtual team is a group whose members work together intensively via electronic means using a common IT platform, and who may never actually meet. The number of members in a group, the type and diversity of team members, the tasks they perform, and the attractiveness of a group to its members all influence not just the behavior of the group as a whole but also the behaviors of individuals within the group. For example, a team can influence its members’ decisions on how diligently they should do their jobs or how often they are absent from work, as happens at Xerox. Chapters 10 through 15 examine the ways in which groups affect their individual members and the processes involved in group interactions such as leadership, communication, and decision making.

Group

Two or more people who interact to achieve their goals.

Team

A group in which members work together intensively and develop team specific routines to achieve a common group goal.

Virtual team

A group whose members work together intensively via electronic means, and who may never actually meet.

Many studies have found that characteristics of the organization as a whole (such as its culture and the design of an organization’s structure) have important effects on the behavior of individuals and groups. The values and beliefs in an organization’s culture influence how people, groups, and managers interact with each other and with people (such as customers or suppliers) outside the organization. Organizational culture also shapes and controls the attitudes and behavior of people and groups within an organization and thus influences their desire to work toward achieving organizational goals. An organization’s structure controls how people and groups cooperate and interact to achieve organizational goals. The principal task of organizational structure is to encourage people to work hard and coordinate their efforts to ensure high levels of organizational performance. Chapters 16 through 18 examine

 

the ways organizational structure and culture affect performance, and they also examine how factors such as the changing global environment, technology, and ethics impact work attitudes and behavior.

OB and Management

The ability to use the tools of OB to understand behavior in organizations is one reason for studying this topic. A second reason is to learn how to use and apply these concepts, theories, and techniques to improve, enhance, or change behavior so that employees, groups, and the whole organization can all better achieve their goals. For example, a salesperson working in Neiman Marcus in Houston has the individual goal, set by his supervisor, of selling $5,000 worth of men’s clothing per week. In addition, he and the other members of the men’s clothing department have the group goals of keeping the department looking neat and attractive and of never keeping customers waiting. The store as a whole (along with all the other stores in the nationwide Neiman Marcus chain) has goals of being profitable by selling customers unique, high-quality clothes and accessories and providing excellent service. If all these different goals are met, employees receive a large yearly pay bonus and Neiman Marcus makes a profit.

Knowledge of OB can help Neiman Marcus employees earn their bonuses. For example, OB research has found that organizations whose employees have been taught how to work as a team, and to take pains to be helpful, courteous, and agreeable to each other and to customers will be more effective than those organizations whose employees do not behave in this way. At Neiman Marcus, employees know what kinds of behaviors result in satisfied customers. They know that if they work hard to be courteous and agreeable to each other and to customers, they will sell more clothes and so they will achieve (a) their personal sales goal, (b) their department’s goal of never keeping customers waiting, and (c) the organization’s goals of being profitable and providing excellent service.

 

Sam Palmisano introduces the companies’ new products to reporters and analysts at trade meetings.

K.M. Cannon\Getty Images, Inc – Liaison

A working knowledge of OB is important to employees at all levels in the organization because it helps them to appreciate the work situation and how they should behave to achieve their own goals (such as promotion or higher income). But knowledge of OB is particularly important to managers , people who direct and supervise the activities of one or more employees. For example, Sam Palmisano, CEO of IBM, and Ursula Burns, CEO of Xerox, have ultimate responsibility for the behavior of the hundreds of thousands of employees who work for these companies. The sales managers of IBM’s or Xerox’s southern region, who control hundreds of salespeople, are also managers, as are the managers (or supervisors) in charge of these companies’ technical service centers who supervise small teams of service technicians.

Managers

Persons who supervise the activities of one or more employees.

Managers at all levels confront the problem of understanding the behavior of their subordinates and responding appropriately. Palmisano and Burns have to manage their companies’ top-management teams , the group of high-ranking executives who jointly work to develop the strategies that allow an organization to achieve its goals. Similarly, sales managers have to train their salespeople so that they can offer each customer the mix of IT hardware and software that best satisfies their company’s specific needs. And, service managers have to manage IT technicians so that they respond promptly and courteously to customers’ appeals for help and quickly solve their IT problems—providing customers with high-quality customized or personalized service is currently a major strategy of both IBM and Xerox.

Top-management teams

High-ranking executives who plan a company’s strategy so that the company can achieve its goals.

Each of these managers faces the common challenge of finding ways to help the organization achieve its goals. A manager who understands how individual, group, and organizational characteristics affect and shape work attitudes and behavior can begin to experiment to see whether changing one or more of these characteristics might increase the effectiveness of the organization—and the individuals and groups it consists of. Organizational effectiveness is the ability of an organization to achieve its goals. The study of OB helps managers meet the challenge of improving organizational effectiveness by providing them with a set of tools.

Organizational effectiveness

The ability of an organization to achieve its goals.

· A manager can work to raise an employee’s self-esteem or beliefs about his or her ability to accomplish a certain task in order to increase the employee’s productivity or job satisfaction.

· A manager can change the reward system to change employees’ beliefs about the extent to which their rewards depend on their performance.

· A manager can change the design of a person’s job or the rules and procedures for doing the job to reduce costs, make the task more enjoyable, or make the task easier to perform.

Recall from the chapter-opening case that Xerox’s goal is to attract customers by providing them with high-quality, affordable copiers and customized service. To achieve this goal, Xerox’s CEOs created a work setting in which employees were taught what kinds of organizational behaviors are necessary to create superior color copiers customized to the needs of different organizations. Xerox succeeded because it chose a way to motivate and reward employees that encourages them to work hard and well and behave in a way that benefits everyone. A key challenge for all organizations, and one that we address throughout this book, is how to encourage organizational members to work effectively for their own benefit, the benefit of their work groups, and the benefit of their organization.

Managerial Functions

The four principal functions or duties of management are planning, organizing, leading, and controlling an organization’s human, financial, material, and other resources to increase its effectiveness. 3 And, as our previous examples show, managers who are knowledgeable about OB are in a good position to improve their ability to perform these functions (see Exhibit 1.4 ).

Management

The process of planning, organizing, leading, and controlling an organization’s human, financial, material, and other resources to increase its effectiveness.

Planning

In planning , managers establish their organization’s strategy—that is, they decide how best to allocate and use resources to achieve organizational goals. At Southwest Airlines, for example, CEO Gary Kelly’s goal is to provide customers with low-priced air travel, and to achieve this Southwest has created many strategies to use its resources as efficiently as possible. 4 For example, Southwest uses only one kind of plane, the Boeing 737, to keep down operating, training, and maintenance costs; employees cooperate and share jobs when necessary to keep down costs; and the company sells its tickets on its own website—one of the easiest to use in the industry.

Planning

Deciding how best to allocate and use resources to achieve organizational goals.

Planning is a complex and difficult task because managers must make decisions under uncertain conditions and so considerable risks are involved when they choose which strategies to pursue. A knowledge of OB can help improve the quality of decision making, increase the chances of success, and lessen the risks inherent in planning and decision

 

Exhibit 1.4 Four Functions of Management

making. First, the study of OB reveals how decisions get made in organizations and how politics and conflict affect the planning process. Second, the way in which group decision making affects planning, and the biases that can influence decisions, are revealed. Third, the theories and concepts of OB show how the composition of an organization’s top-management team can affect the planning process. As a result, the study of OB can improve a CEO’s and top management team’s planning abilities and allow them to increase organizational performance.

Organizing

In organizing , managers establish a structure of work relationships that determines how members of an organization will cooperate and act jointly to achieve organizational goals. Organizing involves grouping employees into groups, teams, or departments according to the kinds of tasks or jobs they perform. At Southwest and Xerox, for example, the technicians who service and maintain their products (planes and copiers) are grouped into the service-operation department; and their salespeople are grouped into the sales department.

Organizing

Establishing a structure of relationships that dictates how members of an organization work together to achieve organizational goals.

OB offers many guidelines on how best to organize employees (an organization’s human resources) to make the most effective use of their personal skills and capabilities. In later chapters, we discuss various methods of grouping workers to enhance communication and coordination while avoiding conflict or politics. At Southwest Airlines, for example, although employees are members of particular departments (pilots, flight attendants, baggage handlers), they are expected to perform one another’s nontechnical jobs when needed.

Leading

In leading , managers encourage workers to do a good job (work hard, produce high-quality products) and coordinate individuals and groups so that all organizational members are working to achieve organizational goals. The study of different leadership methods and of how to match leadership styles to the characteristics of the organization and all its components is a major concern of OB. Today, the way managers lead employees is changing because millions of employees work in self-managed teams —groups of employees who are given both the authority and responsibility to manage important aspects of their own work behaviors. These groups, for example, are often responsible for interviewing job applicants and for selecting their new team members who they often train as well. Also, these groups work together to improve work methods and procedures that can increase their effectiveness and help each other raise their own personal job skills and knowledge. The managers who used to actively supervise the team now play a different role—that of coaches or mentors. Their new role is to provide advice or support as needed and to champion the team and help it to obtain additional resources that will allow it to perform at a higher level and earn greater rewards as well.

Leading

Encouraging and coordinating individuals and groups so that all organizational members are working to achieve organizational goals.

Self-managed teams

Groups of employees who are given the authority and responsibility to manage many different aspects of their own organizational behavior.

Controlling

Finally, in controlling , managers monitor and evaluate individual, group, and organizational performance to see whether organizational goals are being achieved. If goals are met, managers can take action to maintain and improve performance; if goals are not being met, managers must take corrective action. The controlling function also allows managers to evaluate how well they are performing their planning, organizing, and leading functions.

Controlling

Monitoring and evaluating individual, group, and organizational performance to see whether organizational goals are being achieved.

Once again, the theories and concepts of OB allow managers to understand and accurately diagnose work situations in order to pinpoint where corrective action may be needed. Suppose the members of a group are not working effectively together. The problem might be due to personality conflicts between individual members of the group, to the faulty leadership approach of a supervisor, or to poor job design. OB provides valuable tools managers can use to diagnose which of these possible explanations is the source of the problem, and it enables managers to make an informed decision about how to correct the problem. Control at all levels of the organization is impossible if managers do not possess the necessary organizational-behavior knowledge. The way in which Joe Coulombe founded a retail company called Trader Joe’s, which follows this approach to managing OB, illustrates many of these issues as the following OB Today suggests.

 

 

Managerial Roles

Managers perform their four functions by assuming specific roles in organizations. A role is a set of work behaviors or tasks a person is expected to perform because of the position he or she holds in a group or organization. One researcher, Henry Mintzberg, has identified ten roles that manager’s play as they manage the behavior of people inside and outside the organization (such as customers or suppliers). 5 (See Exhibit 1.5 .)

Role

A set of behaviors or tasks a person is expected to perform because of the position he or she holds in a group or organization.

Managerial Skills

Just as the study of OB provides tools that managers can use to increase their abilities to perform their functions and roles, it can also help managers improve their skills in managing OB. A skill is an ability to act in a way that allows a person to perform well in his or her role.

Skill

An ability to act in a way that allows a person to perform well in his or her role.

Type of Role	Examples of Role Activities
Figurehead	Gives speech to workforce about future organizational goals and objectives; opens a new corporate headquarters building; states the organization’s ethical guidelines and principles of behavior that employees are to follow in their dealings with customers and suppliers.
Leader	Gives direct commands and orders to subordinates; makes decisions concerning the use of human and financial organizational resources; mobilizes employee commitment to organizational goals.
Liaison	Coordinates the work of managers in different departments or even in different parts of the world; establishes alliances between different organizations to share resources to produce new products.
Monitor	Evaluates the performance of different managers and departments and takes corrective action to improve their performance; watches for changes occurring in the industry or in society that may affect the organization.
Disseminator	Informs organizational members about changes taking place both inside and outside the organization that will affect them and the organization; communicates to employees the organization’s cultural and ethical values.
Spokesperson	Launches a new organizational advertising campaign to promote a new product; gives a speech to inform the general public about the organization’s future goals.
Entrepreneur	Commits organizational resources to a new project to develop new products; decides to expand the organization globally in order to obtain new customers.
Disturbance handler	Moves quickly to mobilize organizational resources to deal with external problems facing the organization, such as environmental crisis, or internal problems facing the organization, such as strikes.
Resource allocator	Allocates organizational resources between different departments and divisions of the organization; sets budgets and salaries of managers and employees.
Negotiator	Works with suppliers, distributors, labor unions, or employees in conflict to solve disputes or to reach a long-term contract or agreement; works with other organizations to establish an agreement to share resources.

Exhibit 1.5 Types of Managerial Roles

Managers need three principal kinds of skill in order to perform their organizational functions and roles effectively: conceptual, human, and technical skills. 6

Conceptual skills allow a manager to analyze and diagnose a situation and to distinguish between cause and effect. Planning and organizing require a high level of conceptual skill, as do the decisional roles previously discussed. The study of OB provides managers with many of the conceptual tools they need to analyze organizational settings and to identify and diagnose the dynamics of individual and group behavior in these settings.

Conceptual skills

The ability to analyze and diagnose a situation and to distinguish between cause and effect.

Human skills enable a manager to understand, work with, lead, and control the behaviors of other people and groups. The study of how managers can influence behavior is a principal focus of OB, and the ability to learn and acquire the skills needed to coordinate and motivate people is a principal difference between effective and ineffective managers.

Human skills

The ability to understand, work with, lead, and control the behavior of other people and groups.

Technical skills are the job-specific knowledge and techniques that a manager requires to perform an organizational role—for example, in manufacturing, accounting, or marketing. The specific technical skills a manager needs depend on the organization the manager is in and on his or her position in the organization. The manager of a restaurant, for example, needs cooking skills to fill in for an absent cook, accounting and bookkeeping skills to keep track of receipts and costs and to administer the payroll, and artistic skills to keep the restaurant looking attractive for customers.

Technical skills

Job-specific knowledge and techniques.

Effective managers need all three kinds of skills—conceptual, human, and technical. The lack of one or more of these skills can lead to a manager’s downfall. One of the biggest problems that entrepreneurs confront—a problem often responsible for their failure—is lack of appropriate conceptual and human skills. Similarly, one of the biggest problems faced by scientists, engineers, and others who switch careers and go from research into management is their lack of effective human skills. Management functions, roles, and skills are intimately related, and the ability to understand and manage behavior in organizations is indispensable to any actual or prospective manager over the long run.

Challenges for OB

In the last few decades, the challenges facing organizations to effectively utilize and develop the skills, knowledge, and “human capital” of their employees have been increasing. As we noted earlier, among these challenges, those stemming from changing pressures or forces in the social and cultural, global, technological, and work environments stand out. To appreciate the way changes in the environment affect behavior in organizations, it is useful to model an organization from an open-systems perspective. In an open system , an organization takes in resources from its external environment and converts or transforms them into goods and services that are sent back to that environment, where customers buy them (see Exhibit 1.6 ).

Open system

Organizations that take in resources from their external environments and convert or transform them into goods and services that are sent back to their environments where customers buy them.

 

Exhibit 1.6 An Open System View of Organizational Behavior

The activities of most organizations can be modeled using the open-systems view. At the input stage, companies such as Ford, General Electric, Ralph Lauren, Xerox, and Trader Joe’s acquire resources such as raw materials, component parts, skilled employees, robots, and computer-controlled manufacturing equipment. The challenge is to create a set of organizational behaviors or procedures that allow employees to identify and purchase high-quality resources at a favorable price. An organizational procedure is a behavioral rule or routine an employee follows to perform some task in the most effective way.

Organizational procedure

A rule or routine an employee follows to perform some task in the most effective way.

Once the organization has gathered the necessary resources, conversion begins. At the conversion stage, the organization’s workforce—using appropriate skills, tools, techniques, machinery, and equipment—transforms the inputs into outputs of finished goods and services such as cars, appliances, clothing, and copiers. The challenge is to develop the set of behaviors and procedures that results in high-quality goods and services produced at the lowest possible cost.

At the output stage, the organization releases finished goods and services to its external environment where customers purchase and use them to satisfy their needs. The challenge is to develop the set of behaviors and procedures that attract customers to a company’s products and who come to believe in the value of a company’s goods and services and thus become loyal customers. The money the organization obtains from the sales of its outputs to customers allows the organization to acquire more resources so that the cycle can begin again.

The system just described is said to be open because the organization continuously interacts with the external environment to secure resources to make its products and then to dispose of its products or outputs by selling them to customers. Only by continually altering and improving its work behaviors and operating procedures to respond to changing environmental forces can an organization adapt and prosper over time. Organizations that fail to recognize the many changing forces in the environment lose their ability to acquire resources and sell products, so they often disintegrate and disappear over time.

In the next sections, we introduce the four major OB challenges resulting from a changing environment that confront people who work in companies and organizations today. We then examine these challenges in more depth throughout the rest of the book to reveal the many dramatic ways in which managers can use constantly improving OB tools and procedures to allow organizations to adapt, change, and prosper.

Challenge 1: The Changing Social and Cultural Environment

Forces in the social and cultural environment are those that are due to changes in the way people live and work—changes in values, attitudes, and beliefs brought about by changes in a nation’s culture and the characteristics of its people. National culture is the set of values or beliefs that a society considers important and the norms of behavior that are approved or sanctioned in that society. Over time, the culture of a nation changes, and this affects the values and beliefs of its members. In the United States, for example, beliefs about the roles and rights of women, minorities, gays, and the disabled—as well as feelings about love, sex, marriage, war, and work—have all changed in each passing decade.

National culture

The set of values or beliefs that a society considers important and the norms of behavior that are approved or sanctioned in that society.

Organizations must be responsive to the changes that take place in a society because they affect all aspects of their operations. Change affects their hiring and promotion practices, for one, as well as the types of organizational behaviors and procedures considered as appropriate in the work setting. For example, in the last 10 years, the number of women and minorities assuming managerial positions in the workforce has increased by over 25 percent. As we discuss in detail in later chapters, organizations have made many significant changes to their organizational rules and procedures to prevent employees from discriminating against others because of factors such as age, gender, or ethnicity, and to work to prevent sexual harassment. Two important challenges facing OB today are those that derive from a breakdown in ethical values and from the increasing diversity of the workforce.

 

 

Developing Organizational Ethics and Well-Being

Over the last decade, major ethical scandals have plagued hundreds of U.S. companies such as Lehman brothers, Countryside Mortgage, WorldCom, Tyco, and Enron whose top managers put personal gain ahead of their responsibility toward their employees, customers, and investors. Many of these companies’ stock prices collapsed and they have been absorbed into other companies, but ordinary Americans have seen the value of their pension plans and investments plunge in value as a result of the financial crises caused by their managers’ unethical behavior. In light of these scandals, the effect of ethics—an important component of a nation’s social and cultural values—on the behavior of organizations and their members has increasingly taken center stage. 7

An organization’s ethics are the values, beliefs, and moral rules that its managers and employees should use to analyze or interpret a situation and then decide what is the “right” or appropriate way to behave to solve an ethical dilemma. 8 An ethical dilemma is the quandary managers experience when they have to decide if they should act in a way that might benefit other people or groups, and that is the “right” thing to do, even though doing so might go against their own and their organization’s interests. An ethical dilemma may also arise when a manager has to decide between two different courses of action, knowing that whichever course chosen will inevitably result in harm to one person or group even while it may benefit another. The ethical dilemma here is to decide which course of action is the “lesser of two evils.”

Ethics

The values, beliefs, and moral rules that managers and employees should use to analyze or interpret a situation and then decide what is the “right” or appropriate way to behave.

Ethical dilemma

The quandary managers experience when they have to decide if they should act in a way that might benefit other people or groups, and is the “right” thing to do, even though doing so might go against their own and their organization’s interests.

Managers and employees know they are confronting an ethical dilemma when their moral scruples come into play and cause them to hesitate, debate, and reflect upon the “rightness” or “goodness” of a course of action. The ethical problem is to decide how a particular decision or action will help or harm people or groups—both inside and outside the organization—who will be affected by it. 9 Ethical organizational behavior is important because it can enhance or reduce the well-being —that is, the happiness, health, and prosperity—of a nation and its citizens in several ways. 10

Well-being

The condition of being happy, healthy, and prosperous.

First, ethics help managers establish the goals that their organizations should pursue and the way in which people inside organizations should behave to achieve them. 11 For example, one goal of an organization is to make a profit so that it can pay the managers, employees, suppliers, shareholders, and others who have contributed their skills and resources to the company. Ethics specify what actions an organization should take to make a profit. Should an organization be allowed to harm its competitors by stealing away their skilled employees or by preventing them from obtaining access to vital inputs? Should an organization be allowed to produce inferior goods that may endanger the safety of customers? Should an organization be allowed to take away the jobs of U.S. employees and transfer them overseas to employees in countries where wages are $5 per day? What limits should be put on organizations’ and their managers’ attempts to make a profit? And who should determine those limits? 12 For example, Apple’s 2010 ethics report revealed that sweatshop conditions still existed in over 55 of the 102 factories it uses abroad to assemble its products which had ignored its rule that workers cannot work more than 60 hours a week. Apple is continuing its efforts to reduce these abuses, so it is publically defining its ethical position. 13

The devastating effect of a lack of organizational ethics is illustrated by the behavior of the company Metabolife International that made and sold the drug Ephedra, which used to be a widely used supplement taken for weight loss or body-building purposes. Although fears about this drug’s side effects had been around for years, Metabolife resisted attempts by the Food and Drug Administration (FDA) to obtain a list of customer reports about the effects they had experienced from using its pills. After being threatened with a criminal investigation, Metabolife released over 16,000 customer reports about its Ephedra products that listed nearly 2,000 adverse reactions including 3 deaths, 20 heart attacks, 24 strokes, and 40 seizures. 14 Metabolife did not have to reveal this negative information about its products’ side effects because no laws existed to force supplement makers to do so, although pharmaceutical companies are governed by laws that require them to reveal side effects. Its actions might have been legal but they were unethical, and those who had suffered adverse reactions from using its pills began to sue the company and win large settlements. 15 A national lobbying campaign began to ban Ephedra from the market, and the FDA eventually banned the drug.

In addition to defining right and wrong behavior for employees, ethics also define an organization’s social responsibility , or its obligations and duty toward people or groups outside the organization that are affected by its actions. 16 Organizations and their managers must establish an ethical code and standards that describe acceptable behaviors, and they must create a system of rewards and punishments to enforce this ethical code.

Social responsibility

An organization’s obligations toward people or groups directly affected by its actions.

Different organizations have different views about social responsibility. 17 To some organizations, being socially responsible means performing any action as long as it is legal. Other organizations do more than the law requires and work to advance the well-being of their employees, customers, and society in general. 18 Target, UPS, and Ben & Jerry’s, for example, each contribute a percentage of their profits to support charities and community needs and expect their employees to be socially active and responsible. Starbuck’s and Green Mountain Coffee Roasters seek out coffee-growing farmers and cooperatives that (1) do not use herbicides and pesticides on their crops, (2) control soil erosion, and (3) treat their employees fairly and with respect in terms of safety and benefits. Starbuck’s also signs contracts with small coffee growers abroad to ensure they receive a fair price for their coffee crop, even if world prices for coffee plunge—they want their growers to remain honest and loyal.

Not all organizations are willing or able to undertake such programs, but all organizations need codes of conduct that spell out fair and equitable behavior if they want to avoid doing harm to people and other organizations. Developing a code of ethical standards helps organizations protect their reputations and maintain the goodwill of their customers and employees. Today, most companies are strengthening their ethical standards, and employees at all levels have to sign off that they understand and will abide by them. For example, the Sarbanes-Oxley Act requires that the CEO and chief financial officer (CFO) personally sign their company’s financial reports to affirm that they are a true and accurate account of its performance. 19

The challenge is to create an organization whose members resist the temptation to behave in illegal and unethical ways that promote their own interests at the expense of the organization or promote the organization’s interests at the expense of people and groups outside the organization. Employees and managers have to recognize that their behavior has important effects not only on other people and groups inside and outside the organization but also on the organization itself. 20 The well-being of organizations and the well-being of the society of which they are a part are closely linked and are the responsibility of everyone. 21 (How to create an ethical organization is an issue that we discuss throughout the text.) With this in mind, take a look at the ethical exercise in “A Question of Ethics,” found in Exercises in Understanding and Managing Organizational Behavior, a collection of experiential exercises located at the end of every chapter of this book. For an example of the way unethical behavior can destroy an organization, consider the actions of the CEO of the meat-packing plant discussed in the following Ethics in Action box.

 

Dealing with a Diverse Workforce

A second social and cultural challenge is to understand how the diversity of a workforce affects OB. Diversity results from differences in age, gender, race, ethnicity, religion, sexual orientation, socioeconomic background, and capabilities or disabilities. If an organization or group is composed of people who are all of the same gender, ethnicity, age, religion, and so on, the attitudes and behavior of its members are likely to be very similar. Members are likely to share the same attitudes or values and will tend to respond to work situations (projects, conflicts, new tasks) in similar ways. By contrast, if the members of a group differ in age, ethnicity, and other characteristics, their attitudes, behavior, and responses are likely to differ as well.

Diversity

Individual differences resulting from age, gender, race, ethnicity, religion, sexual orientation, and socioeconomic background.

In the last 20 years, the demographic makeup of employees entering the workforce and advancing to higher-level positions in organizations has been changing rapidly. For example, the percentage of African-American, Hispanic, Asian, and female employees has steadily increased through the 2000s as the U.S. labor force has also increased in size; these employees are also reaching higher levels in organizations. However, they are still underrepresented and paid less than comparable white male employees who still comprise the largest group of U.S. employees. 25 Finally, because of increased globalization, the diversity of the U.S. population is increasing because of the large numbers of people born in other nations who immigrate to the United States to live and work.

The increasing diversity of the workforce presents three challenges for organizations and their managers: a fairness and justice challenge, a decision-making and performance challenge, and a flexibility challenge (see Exhibit 1.7 ).

Fairness and Justice Challenge

Jobs in organizations are a scarce resource, and obtaining jobs and being promoted to a higher-level job is a competitive process. Managers are challenged to allocate jobs, promotions, and rewards in a fair and equitable manner. As diversity increases, achieving fairness can be difficult because many organizations have traditionally appointed white-male employees to higher organizational positions but today all kinds of diverse employees must be judged by the same equitable and unbiased criteria if companies are to avoid

 

Exhibit 1.7 The Challenge Posed by Diverse Workplace

employment lawsuits that have cost companies such as Walmart hundreds of millions of dollars. 26 Increasing diversity can strain an organization’s ability to satisfy the aspirations of all the diverse groups in its workforce—and this can create problems that, in turn, affect the well-being of employees and organizational performance. Deciding how to promote diversity to increase employee well-being and organizational performance poses difficult ethical problems for managers.

Decision-Making and Performance Challenge

Another important challenge posed by a diverse workforce is how to take advantage of differences in the attitudes and perspectives of people of different ages, genders, or races, in order to improve decision making and raise organizational performance. 27 Many organizations have found that tapping into diversity and taking advantage of the potential of diverse employees, leads to new and improved OBs and procedures. 28 Accenture, the global management consulting company, provides an example of one company that has enjoyed huge success because of the way it has developed an approach to diversity that reflects the needs of its employees, customers, and its environment. 29

Accenture serves the IT needs of thousands of client companies located in over 120 countries around the world. A major driving force behind Accenture’s core organizational vision is to manage and promote diversity in order to improve employee performance and client satisfaction. At Accenture, managers at all levels realize that its highly diverse consultants bring distinct experiences, talents, and values to their work, and a major management initiative is to take advantage of that diversity to improve the service Accenture provides to each of its global clients. Because Accenture’s clients are also diverse by country, religion, ethnicity, and so forth, it tries to match its teams of consultants to the attributes of its diverse clients.

Accenture provides hundreds of diversity management training programs to its consultants each year using its 13 teams of global human capital and diversity experts who collaborate to create its programs. Accenture also encourages each of its consultants to pursue opportunities to “work across different geographies, workforces, and generations to create agile global leaders.” 30 In 2010, one-third of its global workforce was composed of women, who also hold 16 percent of its management positions at all levels. Accenture chooses to buy from suppliers who can also demonstrate their commitment to diversity and in 2010 nearly $300 million or 15 percent of Accenture’s purchasing came from small minority- or women-owned suppliers. The firm also provides diversity training programs to its suppliers and prospective suppliers around the world to show them how diversity can increase their efficiency and effectiveness. In all these ways, Accenture uses its expertise in managing diversity to promote individual and organizational performance—one reason it has become the most successful and fast-growing consultancy company in the world. Takahiro Moriguchi, when CEO of Union Bank of California has a similar philosophy, as he eloquently said when accepting a diversity award for his company, “By searching for talent from among the disabled, both genders, veterans, all ethnic groups, and all nationalities, we gain access to a pool of ideas, energy, and creativity as wide and varied as the human race itself. I expect diversity will become even more important as the world gradually becomes a truly global marketplace.” 31

Flexibility Challenge

A third diversity challenge is to be sensitive to the needs of different kinds of employees and to try to develop flexible employment approaches that increase employee well-being. Examples of some of these approaches include the following:

· New benefits packages customized to the needs of different groups of employees such as single employees with no children and families, gays and lesbians in long-term committed relationships, and employees caring for aged parents or disabled children

· Flexible employment conditions (such as flextime or working from home) that give employees input into the length and scheduling of their workweek

· Arrangements that allow for job sharing so that two or more employees can share the same job (to take care of children or aged parents, for example)

· Designing jobs and the buildings that house organizations to be sensitive to the special needs of handicapped employees (and customers)

· Creating management programs designed to provide constructive feedback to employees about their personal styles of dealing with minority employees

· Establishing mentoring relationships to support minority employees

· Establishing informal networks among minority employees to provide social support

Managing diversity is an ongoing activity that has many important implications for organizations. We discuss diversity in depth in Chapter 4 .

Challenge 2: The Evolving Global Environment

The challenge of responding to social and cultural forces increases as organizations expand their operations globally and set up international operations in countries throughout the world. Global organizations , like GM, Toyota, Xerox, Nokia, PepsiCo, and Sony, are companies that produce or sell their products in countries and regions throughout the world. Each country has a different national culture, and so when they expand their operations abroad global organizations encounter much greater differences in social and cultural values, beliefs, and attitudes. They therefore face the increased challenge of dealing with ethical and diversity-related issues across countries and national boundaries. 32 Two important challenges facing global organizations are to appreciate the differences that exist between countries and then to benefit from this new global knowledge to find ways to improve organizational behavior. 33

Global organizations

Companies that produce or sell their products in countries and regions throughout the world.

Understanding Global Differences

Companies must learn about many different kinds of factors when they operate globally. 34 First, there are the considerable problems of understanding OB in different global settings. 35 Evidence suggests that people in different countries have different values, beliefs, and attitudes about the value of the jobs they perform and the organizations they work for. For example, U.S. employees have an individualistic orientation toward work while Japanese employees have a collectivist orientation and this cultural difference affects employees’ personal work behavior, their behavior in groups, and their commitment and loyalty to an organization.

OB becomes especially complex at a global level because the attitudes, aspirations, and values of the workforce differ by country. For example, most U.S. employees are astonished to learn that in Europe the average employee receives from 4 to 6 weeks paid vacation a year. In the United States, a comparable employee receives only 1 or 2 weeks. Similarly, in some countries, promotion by seniority is the norm, but in others, level of performance is the main determinant of promotion and reward. Understanding the differences between national cultures is important in any attempt to manage behavior in a global organization.

Second, problems of coordinating the activities of an organization to match its environment become much more complex as an organization’s activities expand across the globe. 36 Decision making, for example, must be coordinated between managers at home and abroad—each of whom are likely to have different views about what goals and strategies their organization should pursue. One of the most important organizing tasks of global

 

Global Learning