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LEARNING OBJECTIVES  Discuss the impact of globalization as an environmental context for organizational

behavior.  Identify what is meant by diversity and how it has become an important dynamic in the

field of management and organizational behavior.  Examine diversity in today’s organizations and the individual and organizational

approaches to effectively manage diversity.  Discuss the meaning of ethics and the major factors of ethical behavior.  Describe major areas of ethical concern, including “bottom-line” impact and some of

the steps that can be taken to effectively address the major ethical concerns.

Today’s environmental context for organizational behavior is markedly different from that of the past. As pointed out in the opening chapter, globalization, diversity, and ethics have forced management of all types of organizations to totally rethink their approach to both operations and human resources. Because of the paradigm shift, organizations are now more responsive to both their external and internal environments. This chapter examines globalization, diversity, and ethics as the environmental context for today’s organizational behavior.

GLOBALIZATION

Most scholars and practicing managers would agree that a, if not the, major environmental context impacting organizational behavior is globalization. The advances made in informa- tion technology and in air travel have truly made the world a smaller place. This has led to a borderless “flat” world described by Thomas Friedman.1 The best-selling author and widely recognized commentator feels we have now entered the third phase of globalization. The first, from about 1492–1800, was characterized by countries globalizing. The second (1800–2000) was companies globalizing. And the third, since the turn of the new century, mainly fueled by information technology available to everyone in the world, groups and individuals. As Friedman declares, “In Globalization 1.0 there was a ticket agent. In Global- ization 2.0 the e-ticket replaced the ticket agent. In Globalization 3.0 you are your own ticket agent.”2

The implications of this globalization for organizational behavior are profound and direct.3 As the head of Brunswick Corporation declared, “Financial resources are not the problem. We have the money, products, and position to be a dominant global player. What we lack are the human resources. We just don’t have enough people with needed global

CHAPTER 2 Environmental Context: Globalization, Diversity, and Ethics

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leadership capabilities.”4 GE’s Jack Welch, arguably the best-known corporate leader in modern times, stated before leaving GE: “The Jack Welch of the future cannot be like me. I spent my entire career in the United States. The next head of General Electric will be somebody who spent time in Bombay, in Hong Kong, in Buenos Aires. We have to send our best and brightest overseas and make sure they have the training that will allow them to be the global leaders who will make GE flourish in the future.”5 Today, nobody ques- tions that the new globalization context has changed the way global, transnational leaders strategize, organize, and manage.

Although there is a trend toward similar clothes, entertainment, and material posses- sions, and even general recognition that English is the international business language, there are still important differences in the ways in which people think and behave around the world.6 In other words, cultures around the world impact the organizational behavior of managers and employees quite differently. For example, recent studies have found that cul- tural differences (by country, race/ethnicity, and religion) affected the attitudes, percep- tions and behaviors of managers toward planning, profit and other related business concerns.7

In understanding and applying organizational behavior concepts in other countries around the world, one must be aware of the similarities and differences. For example, a research study conducted by Welsh, Luthans, and Sommer found that U.S.-based extrinsic rewards and behavioral management approaches significantly improved the productivity of workers in a Russian factory, but a participative technique did not.8 A follow-up critique concluded:

What this study shows is that there are both potential benefits and problems associated with transporting U.S.-based human resource management theories and techniques to other cultures. On the one hand, the findings confirmed that the use of valued extrinsic rewards and improved behavioral management techniques may have a considerable impact on productivity among Russian workers in ways that are similar to American workers. On the other hand, participation had a counterproductive effect on Russian workers’ performance.9

Another example would be that in some countries managers prefer to use—and may be more effective with—an autocratic leadership style rather than the typical U.S. man- ager’s leadership style. Germany is a visible example. Typical U.S. managers who are transferred to Germany may find their leadership style to be too participative. German sub- ordinates may expect them to make more decisions and to consult with them less. Research on obedience to authority found that a higher percentage of Germans were obedient than were their U.S. counterparts.10 Similarly, a U.S. manager in Japan who decides to set up a performance-based incentive system that gives a weekly bonus to the best worker in each work group may be making a mistake. Japanese workers do not like to be singled out for individual attention and go against the group’s norms and values. Perhaps this impact of similarities and differences across cultures was best stated by the cofounder of Honda Motor, T. Fujisawa, when he stated: “Japanese and American management is 95 percent the same, and differs in all important aspects.”11

The global context is now an accepted reality, but its impact on the study and applica- tion of organizational behavior will increase into the future. The problem is that the increasingly frequent intercultural encounters cannot be solved by just simple guidelines (e.g., when dealing with Spaniards, be aware that they tend to be late, or when the Japanese say “yes” they may mean “no”). Nardon and Steers summarized some of the reasons for the complexity of cross-cultural management:

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1. People are influenced by multiple cultures—national, regional, organizational, func- tional, and professional.

2. Even though people are from the same country, they still have different beliefs, val- ues, and behaviors.

3. Counterparts from other cultures are becoming savvy in how to deal with foreigners and thus may not be typical of their own culture.

4. Because of the complexity of culture, simplistic categorizations may initially be help- ful, but turn out to be poor predictors of behavior.12

Because of this complexity and the fact that managers today often deal with several cultures at a time in their current role, they must have ready access to cross-cultural train- ing tools,13 but more importantly, develop learning skills that will on-the-spot compensate for cultural knowledge gaps.14 In other words, today’s organizational leaders must develop and use a “global mindset.”

Although there are many meanings, a conference dedicated to global mindset derived the following comprehensive definition: “a set of individual attributes that enable an indi- vidual to influence individuals, groups, and organizations from diverse social/cultural/ institutional systems.”15 Those with such a global mindset are able to view and evaluate a cultural event or interaction through a broad array of potential categories and quickly rec- ognize nuances (e.g., nonverbals) that differentiate cultural groups. An example would be an encounter with a smiling business person from Thailand:

To an outsider, such Thai smiles are not readily transparent. However, an outsider with a global mindset would have the wherewithal to develop strategies to such nuances, demonstrating a keen awareness and understanding of cultural differences, and know how to act accordingly. Once encoded into the individual’s global mindset, this infor- mation could be readily accessed when dealing with different cultural groups in which nonverbal expressions carry greater weight when interpreting how people are thinking, feeling, and ultimately behaving. 16

Such global mindset development is needed for effectively dealing with the complex cul- tural context facing the study and application of organizational behavior.

DIVERSITY IN THE WORKPLACE

Similar to globalization, diversity and social issues have had a dramatic effect on the study and application of management and organizational behavior. In the past, diversity was treated primarily as a legal issue; that is, for over 50 years it has been directly against the law to discriminate against anyone, on any basis. Now organizations are beginning to real- ize that diversity is not just something to deal with, but instead a reality to build on to make a stronger, more competitive enterprise. As noted in a recent report on needed strategic ini- tiatives to succeed in the new global economy, “Diversity must be recognized and nurtured as the organization’s greatest asset, and the ability to attract and work with diverse talent must be seen as a critical competitive advantage.”17 In other words, the contemporary envi- ronmental context of diversity is no longer simply a “tack on” or afterthought in the study of organizational behavior; it plays a central role in today’s environmental context.

Although surveys indicate that a vast majority of organizations believe that workplace diversity is important and virtually all value diversity management skills and strategies to achieve diversity initiatives, they still are not sure of the meaning or domain of diversity.18

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The trend, however, is clear: “Diversity means much more than ethnicity, gender, or sexual orientation. New and evolving diverse populations include a full range of ages, as well as career and geographic experiences.”19 As the head of the huge Society of Human Resource Management (SHRM) diversity initiatives recently noted, “Organizational diversity initia- tives should not simply focus on getting people of color and women in the door, but embracing an inclusive culture to maintain these employees.”20 SHRM has identified out- comes such as the following for effective diversity management:

1. Creating a work environment or culture that allows everyone to contribute all that they can to the organization.

2. Leveraging differences and similarities in the workforce for the strategic advantage of the organization; and

3. Enhancing the ability of people from different backgrounds to work effectively together.21

Reasons for the Emergence of Diversity

As shown in Figure 2.1, a major reason for the emergence of diversity as an important reality is changing demographics. Older workers, women, minorities, and those with more education are now entering the workforce. The composition of today’s and tomorrow’s workforce is and will be much different from that of the past. For example, USA Today cal- culates a Diversity Index (based on population racial and ethnic probabilities) that shows now about 1 out of 2 people randomly selected in the United States are racially or ethni- cally different, up from 1 out of 3 in 1980. In addition, the U.S. Department of Labor esti- mates that the majority of new workers entering the workforce will be women or minorities. At the more micro level, assuming talent and ability are equally distributed throughout the population and that everyone has an equal opportunity, there should be diversity in every level of an organization. Unfortunately, such an assumption is not yet

FIGURE 2.1. Major Reasons for Increasing Diversity

Changing Workforce

Demographics (age,

gender, ethnicity,

and education)

The Recognition

and Desire for

Diverse Viewpoints

Legislation

and Lawsuits

Increasing Diversity

in Today‘s

Organizations

Competitive

Pressures

Rapidly Growing

Increase in

International Business

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valid because diversity has not to date noticeably reached the top levels of most organiza- tions. There is still only a handful of women who have broken through the “glass ceiling” of large corporations to become CEO, and only a small minority of Fortune 500 board directors or corporate officers are women.22 In addition, the U.S. Bureau of Labor Statis- tics indicates that women on average continue to trail men in terms of pay for the same types of jobs.23 However, prospects for the future may be better because women now make up more than half of all college students, about half of all medical and law students, account for over a third of MBA (Master of Business Administration) degree-holders, and now make up about half of middle managers.24 Also, outside of business organizations, about a quarter of university presidents are women (including around half of the Ivy League schools) and they are well-represented in senior management levels in health care and NGOs (nongovernmental organizations such as the United Way).25

The glass ceiling may be worse in other countries, especially in Asia. Yet, U.S. women executives also are facing a particularly thick glass ceiling when it comes to receiving desirable foreign assignments and experience.26 In the global economy, not being able to obtain such international experience may be a major obstacle (i.e., contribute to the glass ceiling) in reaching upper management.

Although challenges facing women in the workplace receive relatively more attention in the media, the problems facing people of color, an aging workforce, and others fighting for equal opportunities and inclusion remain significant. As indicated, legislation going as far back as the Civil Rights Act of 1964 prohibited discrimination in employment on any basis. The full effects of that landmark law and other more recent legislation, such as the following, are still being determined.

1. Age Discrimination Act of 1978. This law at first increased the mandatory retirement age from 65 to 70 and then was later amended to eliminate an upper age limit alto- gether.

2. Pregnancy Discrimination Act of 1978. This law gives full equal opportunity protec- tion to pregnant employees.

3. Americans with Disabilities Act of 1990. This law prohibits discrimination against those essentially qualified individuals challenged by a disability and requires organi- zations to reasonably accommodate them.

4. Civil Rights Act of 1991. This law refined the 1964 act and the reinstated burden of proof falls on employers to eliminate discrimination and ensure equal opportunity in employment to employees. It also allows punitive and compensatory damages through jury trials.

5. Family and Medical Leave Act of 1993. This law allows employees to take up to 12 weeks of unpaid leave for family or medical reasons each year.

These laws, along with lawsuits and the threat of lawsuits, have put teeth into diversity. Individuals and groups that have found themselves excluded from organizations or mana- gerial positions can bring and have brought lawsuits in an effort to overcome discrimina- tory barriers and ensure themselves equal opportunity in employment. For example, successful lawsuits with resulting multimillion dollar penalties have in recent years been brought against many well-known firms.

Still another reason for the emergence of the importance of diversity to organizations is the realization that diversity can help them meet the competitive pressures they currently face. Firms that aggressively try to hire and promote women and minorities are going to end up with a more talented and capable workforce than those that do not take such a pro-

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active, affirmative action approach. For example, a large study by the American Manage- ment Association found that the more accurately the senior team of a company represents the demographics of its market, the more likely it is that the company will design products, market services, and create ad campaigns that score a hit.27 Moreover, companies that gain a reputation for “celebrating diversity” are more likely to attract the best employees regard- less of age, gender, or ethnicity. The most talented and qualified people will feel that opportunities are better with these firms than with others. In other words, diversity can pro- vide an organization with competitive advantage.28 For example, one study examined the relationships among racial diversity, business strategy, and firm performance in the bank- ing industry.29 It was found that racial diversity interacted with business strategy in deter- mining company performance as measured in three different ways: productivity, return on equity, and market performance. This study concluded that the results demonstrated that diversity not only adds value but, in the proper context, also contributes to a firm’s com- petitive advantage. Such research findings are not limited to U.S. firms. For example, a recent study found that the percentage of women on the boards of Spanish firms was posi- tively related to their value.30

Stimulated by competitive pressures, organizations now recognize and strive to obtain diverse viewpoints in their decision-making processes and teams. Academic research points out the complex linkage between work group diversity and work group function- ing,31 but there is also growing practical evidence that diversity leads to innovation and often breakthrough competitive advantages. For example, women working for Reebok pointed out that there was no good shoe available for aerobics. The firm took this advice and began marketing aerobic shoes, which became very profitable and served as a break- through for Reebok in the very competitive athletic shoe industry. Another example occurred at the giant chemical firm DuPont, which used input from African American employees to develop and successfully market agricultural products for small farmers in the South.

A final major reason for the emerging challenge of diversity is that more and more organizations are entering the international arena. A natural by-product of going interna- tional is increased diversity, in this case cultural diversity. If domestic organizations have and promote diversity, then, as they expand globally, they will be accustomed to working with people who have different cultures, customs, social norms, and mores. For example, a multicultural team at DuPont is given credit for gaining the firm about $45 million in new business worldwide. Among other things, this diverse team recommended an array of new colors for countertops that was very appealing to overseas customers.

The international arena is not a threatening place for diverse firms, a fact that is partic- ularly important because of the major role that international operations and sales will play in the growth, and even survival, of companies in the global economy. The percentage of overall revenues from international operations and sales continues to increase dramati- cally. The advantage of multinational companies that have and value cultural diversity becomes abundantly clear in this global environment discussed in the previous section.

Developing the Multicultural Organization

The foundation and point of departure for creating and effectively managing diversity is the development of a truly multicultural organization.32 A multicultural organization has been described as one that:

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1. Reflects the contributions and interests of diverse cultural and social groups in its mission, operations, and product or service.

2. Acts on a commitment to eradicate social oppression in all forms within the organiza- tion.

3. Includes the members of diverse cultural and social groups as full participants, espe- cially in decisions that shape the organization.

4. Follows through on broader external social responsibilities, including support of other institutional efforts to eliminate all forms of social oppression.33

Several stages have been identified in leading up to such a multicultural organiza- tion:34

1. Exclusionary organization. This type of organization is the furthest from a multicul- tural organization. It is devoted to maintaining the dominance of one group over all others on factors such as age, education, gender, or race. This organization is charac- terized by exclusionary hiring practices and other forms of discrimination. Even though such organizations are directly violating laws, they unfortunately still exist.

2. Club organization. This organization is characterized by the maintenance of privi- leges by those who traditionally have held power. These organizations may techni- cally get around the laws by hiring and promoting women and minorities, but only those who are deemed to have the “right” credentials and perspectives. For example, a recent analysis noted that such organizations do not practice “overt discrimination of forty years ago but, rather, subtler forms that can arise from seemingly rational behav- ior and can operate at an institutional level” and end up hiring “people just like us.”35

3. Compliance organization. This type of organization is committed to removing some of the discriminatory practices that are inherent in the exclusionary and club organiza- tions. For example, women and minorities are hired and promoted to give the impres- sion of openness and fair play. However, the strategy is more of meeting the letter of the laws, not the spirit. For example, only tokenism is carried out; the basic exclusion- ary or club culture of the organization remains entrenched. For instance, a research study found de facto segregation in a bank.36 White and African American employees were assigned to supervisors of the same race in numbers that could not be attributed to mere statistical chance. Although the bank may not have done this deliberately, the fact remains that there was simply compliance going on, not the development of a true multicultural organization.

4. Redefining organization. This advanced stage organization is characterized by an examination of all activities for the purpose of evaluating their impact on all employ- ees’ opportunity to both participate in and contribute to their own and the firm’s growth and success. Redefining the organization goes beyond being just proactively antiracist and antisexist. This approach questions the core cultural values of the orga- nization as manifested in the mission, structure, technology, psychosocial dynamics, and products and services. The redefining organization not only deals with but recog- nizes the value of a diverse workforce; it engages in visionary planning and problem solving to tap the strength of the diversity. This approach involves both developing and implementing policies and practices that distribute power among all diverse groups in the organization.

5. Multicultural organization. The true multicultural organization is characterized by core cultural values and an ongoing commitment to eliminate social oppression and promote dignity and respect for everyone throughout the organization. All members

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of diverse cultural and social groups are involved in the decisions that shape the mis- sion, structure, technology, psychosocial dynamics, and products and services of the organization.

The true multicultural organization as defined is the stated ideal of an increasing num- ber of organizations, although most are still in transition to this fifth stage. If carefully stud- ied and objectively analyzed, most of today’s organizations would still be best described by one of the other preceding forms discussed. A high-profile exception would be a generally recognized multicultural firm such as Microsoft. It has a Diversity Department and Diver- sity Advisory Council that is charged with upholding the vision of “maximizing the com- pany’s performance through understanding and valuing differences.” As the Microsoft Diversity Director declared:

We need to stress that all human cultures have common needs, a common sense of humanity. But there are differences, too. How in the world do you please a customer, for example, if you don’t know what he or she values? That’s what culture is all about, that’s what differences are all about. Diversity assumes not only that people are differ- ent—we know that—but that their difference is value-added. If you know how to harness that difference, you’ll be more competitive as a corporation than those firms that don’t, whether in the domestic marketplace, and certainly in the global marketplace.37

Moving toward and building a truly multicultural organization, as Microsoft has done, is perhaps the most important, but there are also some individual- and organization-level steps and techniques that can be used to effectively manage diversity. Unfortunately, to date, most of these diversity programs have fallen short of their objectives. For example, one study by the New York–based research organization Catalyst asked African American women if diversity programs were effective in addressing subtle racism. A large majority (64 percent) said that they were not, and only 12 percent said that they had benefited from these programs to a great or very great extent.38 The following sections provide some indi- vidual and organizational approaches that may help make managing diversity more effec- tive.

Individual Approaches to Managing Diversity

Individual approaches to managing diversity typically take two interdependent paths: learning and empathy. The first is based on acquiring real or simulated experience; the sec- ond is based on the ability to understand feelings and emotions.

Learning

Many managers are often unprepared to deal with diversity; because of their inexperi- ence they are unsure of how to respond. Even those who think they are knowledgeable may actually need, but not seek, diversity training. For example, one recent study revealed an interesting counterintuitive finding. Those with low competence in the diversity domain were unaware of their deficiency and therefore were not motivated to participate in diver- sity training, while those who were relatively competent expressed more interest in addi- tional diversity training and the opportunity to attend a voluntary session.39 In other words,

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those who may not think they need to learn about diversity must work especially hard to learn and experience as much as they can about developing appropriate behavior.

At the heart of this learning process is communication. Managers must openly com- municate one-on-one, regardless of age, gender, ethnicity, sexual orientation, religion, or those challenged with a disability, in order to determine how best to understand and inter- act with them. In this way managers can learn more about a diverse group’s personal values and how the individuals like to be treated.

Managers can also begin to develop a personal style that works well with each member of a diverse group. For example, to their amazement, many managers have learned that people who are challenged with a disability do not want special treatment. They want to be treated like everyone else, asking only for equal opportunities in employment. Many man- agers are unaware of their biased treatment of these employees. For example, after a review of the research literature in this area, the following conclusion was drawn:

It should be noted that several of these studies have found that the physically challenged workers were more intelligent, motivated, better qualified, and had higher educational levels than their nonphysically challenged counterparts. While these findings may help account for the superior performance of those physically challenged, they may also reflect hidden biases whereby a physically challenged person must be overqualified for a specific job. In addition, they may reflect hesitancy to promote physically challenged individuals: the physically challenged may stay in entry-level jobs whereas similarly qualified nonphysically challenged individuals would be rapidly promoted.40

In this learning process, managers can also encourage diverse employees to give them candid feedback regarding how they are being treated. In this way, when the manager does something that an employee does not feel is proper, the manager quickly learns this and can adjust his or her behavior. This form of feedback is particularly important in helping orga- nizations gain insights to effectively manage diversity.

Empathy

Closely linked to the individual learning strategy is empathy, the ability to put oneself in another’s place and see things from that person’s point of view. Empathy is particularly important in managing diversity because members of diverse groups often feel that only they can truly understand the challenges or problems they are facing. For example, many women are discriminated against or harassed at work because of their gender, and, despite surface efforts to discourage these problems, discrimination and a negative climate for women have become institutionalized through male-dominated management. Discrimina- tion and harassment may become the way things are done. A meta-analysis of 62 studies of gender differences in harassment perceptions found that women perceive a broader range of social-sexual behaviors as harassing. In particular, women were most different from men on perceptions involving a hostile work environment, derogatory attitudes toward women, dating pressure, or physical sexual contact, but women and men were closer on their perceptions of sexual propositions or sexual coercion.41 These problems have some- times resulted in sex bias or sexual harassment suits against organizations, and in recent years, the courts have favorably ruled on these charges.42

Empathy is an important way to deal with more subtle problems because it helps the manager understand the diverse employee’s point of view. For example, many women in business offices say that they are willing to get coffee for their male counterparts or bosses if they are on their way to the coffee room, but, importantly, they feel that they should be

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given similar treatment and have coffee brought to them on the same basis. Similarly, many managers try very hard to promote minorities into management positions and to give them work-related experiences that can help their careers. At the same time, however, these man- agers need to empathize with the fact that some minority members may be ambivalent or have mixed emotions about being promoted. They may like advancement in terms of pay and prestige, but at the same time they may be concerned about receiving special treatment, failing, or not living up to everyone’s expectations. By learning how to empathize with these feelings and by offering encouragement, guidance, and after-the-fact backup support, the manager can play an important individual role in more effectively managing diversity.

Organizational Approaches to Managing Diversity

Organizational approaches to managing diversity include a variety of techniques. Some of the most common involve testing, training, mentoring, and programs designed to help personnel effectively balance their work and family lives. The following sections examine each of these techniques.

Testing

A problem that organizations have encountered with the use of tests for selection and evaluation is that they may be culturally biased. As a result, women and minorities may be able to do the job for which they are being tested even though their test scores indicate that they should be rejected as candidates. Most tests traditionally used in selection and evalu- ation are not suited or valid for a diverse workforce. As a result, in recent years a great deal of attention has been focused on developing tests that are indeed valid for selecting and evaluating diverse employees.43

One way to make tests more valid for diverse employees is to use job-specific tests rather than general aptitude or knowledge tests. For example, a company hiring word pro- cessing personnel may give applicants a timed test designed to measure their speed and accuracy. The applicant’s age, gender, and ethnic background are not screening criteria. This approach differs sharply from using traditional tests that commonly measure general knowledge or intelligence (as defined by the test). People from different cultures (foreign or domestic) often did poorly on the traditional tests because they were culturally biased toward individuals who had been raised in a white, middle-class neighborhood. Older applicants may also do poorly on such culturally biased tests. Job-specific tests help pre- vent diversity bias by focusing on the work to be done.

Besides being culturally unbiased, tests used in effectively managing diversity should be able to identify whether the applicant has the necessary skills for doing the job. The word processing example above is a good illustration because it measures the specific skills, not the subjective personal characteristics, required for the work. In some cases care- fully conducted interviews or role playing can be used because this is the only effective way of identifying whether the person has the necessary skills. For example, a person applying for a customer service job would need to understand the relevant language of cus- tomers and be able to communicate well. The customer service job would also require someone who listens carefully, maintains his or her composure, and is able to solve prob- lems quickly and efficiently. Carefully constructed and conducted interviews could be use- ful in helping identify whether the applicant speaks well, can communicate ideas, and has the necessary personal style for dealing effectively with customers. Role-playing exercises

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could be useful in helping identify the applicant’s ability to focus on problems and solve them to the satisfaction of the customer. Also, the applicant could be given a case or exer- cise in a group setting to assess interpersonal skills. The point is that multiple measures and multiple trained raters would yield the most valid assessment of needed complex skills.

If pencil-and-paper or online tests are used, then to help ensure that they are not biased, scientific norming could be used. This is a process that ensures the tests are equivalent across cultures. As a result, all test questions have the same meaning regardless of the per- son’s cultural background.

Training

Surveys indicate that the majority of U.S. companies have diversity training and have moved into the mainstream from the traditional role of merely equal employment opportu- nity compliant.44 A comprehensive research study found those firms that adopted diversity training tended to have the following profile: (1) large size, (2) positive top-management beliefs about diversity, (3) high strategic priority of diversity relative to other competing objectives, (4) presence of a diversity manager, and (5) existence of a large number of other diversity supportive policies.45 There are two ways in which this training can play a key role in managing diversity. One way is by offering training to diverse groups. Members from a diverse group can be trained for an entry-level skill or how to more effectively do their existing or future job. The other approach is to provide training to managers and other employees who work with diverse employees. In recent years a number of approaches have been used in providing such diversity training.

Most diversity training programs get the participants directly involved. An example is provided by Florida International University’s Center for Management Development (CMD). This center provides diversity training for employers in South Florida, a geo- graphic area where Latinos and African Americans constitute a significant percentage of the population. One of CMD’s programs involves putting trainees into groups based on ethnic origin. Then each group is asked to describe the others and to listen to the way its own group is described. The purpose of this exercise is to gain insights into the way one ethnic group is perceived by another ethnic group. Each group is also asked to describe the difficulties it has in working with other ethnic groups and to identify the reasons for these problems. At the end of the training, both managers and employees relate that they have a better understanding of their personal biases and the ways in which they can improve their interaction with members of the other groups.

Sometimes training games are used to help participants focus on cultural issues such as how to interact with personnel from other cultures. Here is an example:

In Hispanic families, which one of the following values is probably most important? a. Achievement b. Money c. Being on time d. Respect for elders

The correct answer is “d.” As participants play the game, they gain an understanding of the values and beliefs of other cultures and learn how better to interact with a diverse work- force.

In many cases these diversity-related games are used as supplements to other forms of training. For example, they are often employed as icebreakers to get diversity training ses- sions started or to maintain participant interest during a long program. Research has found

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that the major key to the success of diversity training is top-management support for diver- sity; also important are mandatory attendance for all managers, long-term evaluation of training results, managerial rewards for increasing diversity, and a broadly inclusionary definition of diversity in the organization.46 However, it must be remembered that aware- ness training is valuable to shift perceptions, but may not lead to behavioral change.47 All- state and other firms learned that the training must be linked to business outcomes in order to produce actual behavioral change.48

A major problem of training in general, and diversity training in particular, is the trans- fer problem. Those going through the diversity training may see the value and gain some relevant knowledge, but then do not transfer this training back to the job. A major reason for this transfer problem is a lack of confidence or self-efficacy (i.e., the trainees do not believe that they can successfully carry out the diversity training objectives back on the job in their specific environment). A field experiment by Combs and Luthans was designed to increase trainees’ diversity self-efficacy. The results were that the training intervention sig- nificantly increased the trainees’ (N = 276 in 3 organizations) measured diversity self-effi- cacy. More importantly, there was a strong positive relationship between the trained participants diversity self-efficacy and the number and difficulty of their stated intentions for initiating diversity goals in their specific environments of insurance and manufacturing firms and a government agency.49 Chapter 7 will get into the self-efficacy psychological state in detail, but it is these types of organizational behavior concepts that are needed to improve important application areas such as diversity training.

Mentoring

A mentor is a trusted counselor, coach, or advisor who provides advice and assistance. In recent years, many organizations have begun assigning mentors to women and minori- ties. The purpose of the mentor program is to help support members of a diverse group in their jobs, socialize them in the cultural values of the organization, and pragmatically help their chances for development and advancement. There are a number of specific benefits that mentors can provide to those they assist, including the following:

1. Identify the skills, interests, and aspirations the person has 2. Provide instruction in specific skills and knowledge critical to successful job perfor-

mance 3. Help in understanding the unwritten rules of the organization and how to avoid saying

or doing the wrong things 4. Answer questions and provide important insights 5. Offer emotional support 6. Serve as a role model 7. Create an environment in which mistakes can be made without losing self-confi-

dence50

A number of organizations now require their managers to serve as mentors, but besides the above types of benefits, there may also be a downside. One problem is that mentors may become overly protective and encase those they mentor into a “glass bubble” by shunting them into jobs with adequate pay and professional challenges, but eliminate all chance of further advancement.51

Some guidelines for establishing an effective mentoring program typically involves several steps. First, top-management support is secured for the program. Then mentors and

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their protégés are carefully chosen. The mentor, who provides the advice and guidance, is paired with an individual who is very likely to profit from the experience. Research on the networking strategies of minorities has implications for this step. It seems that highly suc- cessful, fast-track minorities are well connected to both minority and white informal cir- cles, whereas their unsuccessful counterparts have very few, if any, network ties with other minorities.52 In other words, this study would indicate that the effective mentor would be one who would be able to get the protégé involved in both the majority and the minority inner circles. Sometimes the advice has been to avoid association with other minorities, but this research would indicate the contrary.

The third step in an effective mentoring program would be to give both mentors and protégés an orientation. The mentors are taught how to conduct themselves, and the protégés are given guidance on the types of questions and issues that they should raise with their mentor so that they can gain the greatest value from the experience. Fourth, through- out the mentoring period, which typically lasts one year or less, mentor and protégé indi- vidually and together meet with the support staff of the program to see how well things are going. Fifth, and finally, at the end of the mentoring cycle, overall impressions and recom- mendations are solicited from both mentors and protégés regarding how the process can be improved in the future. This information is then used in helping the next round of mentors do a more effective job.

Work/Family Programs

In the typical family today, both the mother and the father have jobs and work-family issues have recently received considerable attention in research and practice. Initially the needs of the dual-career family were met through alternative work schedules, which allow the parents flexibility in balancing their home and work demands. The most common alter- native work schedule arrangements are flextime, the compressed workweek, job sharing, and telecommuting, but there are also some newer programs that help balance work and family.

Flextime allows employees greater autonomy by permitting them to choose their daily starting and ending times within a given time period called a bandwidth, as shown in Fig- ure 2.2. For example, consider the case of two parents who are both employed at a com- pany that has a bandwidth of 7 A.M. to 7 P.M. Everyone working for the firm must put in his or her eight hours during this time period. For example, the father may go to work at 7 A.M. and work until 3 P.M., at which time he leaves and picks up the children from school. The mother, meanwhile, drops the children at school at 8:45 A.M. and works from 9:30 A.M. to 5:30 P.M. Thus both parents are able to adjust their work and home schedules to fit within the bandwidth. Many companies are using this concept and similar ones to help their employees meet both organizational and personal demands. Recent U.S. Bureau of Labor Statistics data indicate that over a quarter of working women with children under 18 work flexible schedules.53 Prominent examples are that about three-fourths of the workforce of both Hewlett-Packard and IBM use flexible work arrangements.

Another alternative work arrangement is the compressed workweek. This arrange- ment, which has been widely used in Europe, compresses the workweek into fewer days. For example, while the typical workweek is 40 hours spread over five days, a compressed work-week could be four 10-hour days. For those working a 35-hour week, the time could be compressed into three days of approximately 12 hours each. These arrangements give employees more time with their families, although their full impact on productivity, prof- itability, and employee satisfaction is still to be determined.

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Job sharing is the splitting of a full-time position between two people, each of whom works part-time. This arrangement is more common in professional positions in banking, insurance, and teaching. A husband and wife, or any two people, could share the job 50-50 or in any other combination. For example, parents who want to return to work on a part- time basis only have found job sharing to be an attractive employment alternative.54 Com- pared to decade ago, on average, working mothers increasingly indicate that part-time work over full-time or not working at all would be ideal for them.55

Still another alternative work schedule that has become very popular is telecommut- ing. Over a third of organizations allow employees to work from home or off site on a reg- ular basis.56 For example, over 9,000 Hewlett-Packard employees work entirely from home. This entails receiving and sending work between home and the office and is cur- rently being used to supplement the typical work arrangement. For instance, employees may come into the office on Monday and Tuesday, work out of their homes on Wednesday and Thursday via telecommuting, and come in again on Friday. By varying the on-site assignments of the personnel, companies are able to reduce the number of people who are in the building at any one time, thus cutting down on the amount of floor space and parking spots they need to rent. Increasingly employees have no office and work from home on a permanent basis.

Besides alternative work schedules, very innovative family-friendly programs have emerged. When large numbers of women began entering the workforce a number of years ago, organizations were ill prepared for the resulting conflict that both women and men had between their work and family responsibilities. Research shows that conflict goes both ways with dysfunctional outcomes. Specifically, for both men and women, work-to-family conflict was found to be linked to job dissatisfaction, turnover intentions, and stress, while family-to-work conflict resulted in stress and absenteeism.57 However, there is additional research evidence indicating that multiple roles provide benefits (e.g., practice at multi- tasking, relevant experience) for the managerial role at work and those who are committed to multiple roles (i.e., doing it all) may have higher life satisfaction, self-esteem, and self- acceptance.58

Today there are programs to help solve the reality of dual-career families and working parents. Table 2.1 provides a broad sampling of these work/family programs.59 Of course, not all organizations are using these programs, but an increasing number are, and a few well-known firms such as the following have even more unique programs.60

1. PepsiCo has a “concierge service” (similar to hotels) that helps employees with errands or tasks that need to be done during the workday (e.g., getting an oil change, lining up a baby-sitter, or contracting for house repairs).

FIGURE 2.2. A Flextime Framework

Flexible starting time

Core period

Flexible ending time

7 A.M. 10 A.M. 3 P.M. 7 P.M. Bandwidth

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TABLE 2.1. Innovative Work/Family Programs

Child care or elder care • These may include child care facilities at the work site benefits and transportation of aging parents to a senior citizens center.

Adoption benefits • These include leave policies and reimbursement for legal fees, medical expenses, agency or placement fees, temporary foster care, and/or travel expenses.

Leave/time-off policies • These may include free time off for no reason or prior notice and paybacks for unused days off.

Convenience benefits • This refers to on-site services such as dry cleaning, ATM machines, postal services, and video rentals.

Life-cycle accounts • These are savings accounts designed to pay for specific life events, such as a college edu- cation. Often employers will match employee contributions.

Health promotion benefits • These include such things as fitness centers, health screenings, flu shots, and stress- management clinics.

Education assistance • Examples include tutoring programs, tuition benefits reimbursement, and scholarships.

Housing assistance • This refers to such items as relocation assistance, seminars, and preferred mortgage arrangements.

Group purchase programs • These include legal and financial planning assistance, discounts with local merchants, group auto and home owners insurance, and fleet arrangements for auto purchases.

Casual day program • This would be dress-down days to have everyone relaxed in an on-the-job family atmo- sphere.

2. Eastman Kodak has a “humor room” where employees can read light, funny materials or engage in activities to take their minds off a stressful day.

3. Ben & Jerry’s has a “Joy Gang” charged with creating happiness in the workplace. This group plans birthday and anniversary celebrations and creates other joyful events.

Research by Thomas and Ganster found work/family programs decrease family con- flict, job dissatisfaction, and stress-related problems,61 but it is difficult to empirically demonstrate the direct positive impact that these programs have on performance outcomes. However, one comprehensive research study did find a strong link between work/family programs and the use of high-commitment work systems containing employee involve- ment/ participation and total quality initiatives.62

ETHICS AND ETHICAL BEHAVIOR IN ORGANIZATIONS

Ethics involves moral issues and choices and deals with right and wrong behavior. Although ethics was given at least surface attention through the years, starting with the now infamous Enron debacle that ended in bankruptcy right after the turn of the century, soon followed by other high profile cases such as high-ranking executives arrested and charged with “loot- ing” their companies, public accounting firms being found guilty of obstruction, celebrity entrepreneurs such as Martha Stewart sent to prison for illegal business practices, and other recent corporate scandals at the likes of Lehman Brothers, Dynegy, and SAC Capital, ethics has taken center stage. In this post-Enron, corporate ethics meltdown era, the study of ethics became critical to business education in general and organizational behavior in particular.63

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As the dean of Northwestern’s Kellogg School of Management declared, “We are facing new realities, and for that we need a new body of knowledge.”64

For starters, it is now realized that not only individuals and groups but also a number of relevant factors from the cultural, organizational, and external environment determine ethical behavior. Cultural influences on ethical behavior come from family, friends, neigh- bors, education, religion, and the media. Organizational influences come from ethical codes, role models, policies and practices, and reward and punishment systems. The exter- nal forces having an impact on ethical behavior include political, legal, economic, and international developments. These factors often work interdependently in shaping the eth- ical behavior of individuals and groups in organizations. For example, minimum wage jobs may lock people into an economic existence that prevents them from bettering their lives. Is it ethical to pay people only a minimum wage? Or what about Nike initially denying charges of sweatshop labor conditions in its overseas factories, then trying to justify its low wages on the basis of different living standards? What about unsafe products or the tobacco chief executive officers denying the addictive properties of nicotine? Or consider the facts that many obese workers and those with certain types of appearance (e.g., tattoos/piercings, facial hair or manner of dress) report that they are discriminated against in the workplace.65

Also, what about the research study that found applicants judged to be relatively less attrac- tive were at a distinct disadvantage in decisions involving suitability for hiring and proba- ble organizational progression?66 Is it ethical to treat these workers differently, given that very limited legal protection is afforded to them and thus they have no recourse?

These questions help illustrate the problems and controversies in determining what ethical behavior is, and why good people sometimes do unethical things.67 Moreover, as Rosabeth Kanter observed, the often cited Enron debacle resulted from a number of factors besides the unethical behavior of the leaders. She notes that there was also

a tendency during boom years in the economy not to examine success too closely; man- agerial hubris—confidence turning into over-confidence when Enron turned from oil and gas leasing to other financial transactions; managers being egged on by Wall Street and the business press that wanted heroes in a growth story, which produced a tendency to hide any weakness or mistake, and assuming that one could make up for any mistakes later with growth. And at least one good theory was involved in the Enron case: inno- vation—which requires breaking some “rules” in the sense of departing from tradition.68

Besides these other factors leading to ethical problems in organizations, many people would argue that they are highly ethical in their own personal dealings. However, empirical evidence has found that such people are often viewed as unlikable by their peers in the orga- nization.69 Simply put, there is peer pressure on many people to be less ethical. Additionally, what one person or group finds unethical may be viewed differently by another individual or group.70 For example, a study investigated attitudes toward unauthorized copying of soft- ware among both business executives and business faculty members. It was found that the faculty members did not view this to be as big an ethical problem as did the executives.71

These examples all help illustrate the elusiveness and contingent nature of determining guidelines for ethical behavior. Besides the obvious ethical concerns relating to the protec- tion of the environment and global warming (the so-called green or sustainability issues),72

the use of bribes, price fixing, “creative” accounting, and other illegal activities now legis- lated by the Sarbanes-Oxley (S-Ox) Act—and responding by drawing up and disseminat- ing an ethical code which all large firms now have—only in recent years has it been recognized that ethics needs theory-building and basic research in the study of organiza-

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tional behavior.73 In addition, with the arrival of the global economy, ethics has broadened out to become a major concern for international management.74

Taking an organizational behavior perspective, Stajkovic and Luthans proposed a social cognitive model (see Chapter 1) of ethics across cultures.75 This model uses national cultures as the social foundation for institutional (ethics legislation), organizational (codes of ethics), and personal (values and self-regulatory mechanisms) factors that interact to influence the perception of ethical standards and actual ethical behavior across cultures.

The Impact of Ethics on “Bottom-Line” Outcomes

Besides the morality issues surrounding ethics in the workplace,76 there is increasing evidence that ethics programs and being ethical pays off for organizations. Although in the past the linkage between corporate social performance and bottom-line results has been vague or dependent on faith and anecdotal evidence, the cost of illegal, unethical practices is now clearly documented, and recent research studies find a statistically significant rela- tionship. For example, one study compared 67 Fortune 500 firms that were convicted of acts such as antitrust violations, product liabilities, and acts of discrimination with 188 firms in the same time period that were not. The results indicated that the convicted firms had significantly lower returns on assets and returns on sales.77

Other studies have found a strong link between a company’s ethical commitment and its market value added (MVA)78 and the investment in social programs and the firm’s finan- cial outcomes.79 The social programs involved community and employee relations, product characteristics, diversity, and especially an ethical organizational culture.80 Some firms with widely recognized reputations for having an ethical culture include Ben & Jerry’s (ice cream), Johnson & Johnson’s (health care), Levi Strauss (clothing), and Newman’s Own (food). For example, Johnson & Johnsons “credo,” authored by the son of the founder, spells out the firm’s first responsibility is to customers, second to employees, third to the community and environment, and then fourth to the shareholders. As a current VP at J&J explains, “When we operate according to these principles, the stockholders should realize a fair return. What that means is that the credo is not a brake on our success; it’s the engine of our success.”81 In terms of research, one study focusing on the environment found a strong positive relationship between having preventative, proactive programs (e.g., pollu- tion control and/or reduction of hazardous waste) and bottom-line profitability gains.82

This accumulating evidence on the value of ethical practices is leading to the develop- ment of theory, research, and measurement of corporate social responsibility (CSR) or per- formance (CSP).83 Although there are various definitions of CSR, “most share the theme of engaging in economically sustainable business activities that go beyond legal require- ments to protect the well-being of employees, communities, and the environment.”84 For example, besides the currently popular efforts on the part of companies to reduce carbon emissions to help sustain the planet, there are also less publicized CSR programs such as Burger King’s perspective and policies with regard to animal rights (e.g., the use of cage- free chicken products). In practice there are newly created ethics officer positions, and con- trol systems are being suggested to monitor ethical behaviors.85 On the other hand, there are also simple guidelines for employees to follow in doing the authentic,86 right thing in ethical gray areas. Here is an “ethics quick test” when employees are faced with such a dilemma:

1. Is the action legal? 2. Is it right?

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3. Who will be affected? 4. Does it fit the company’s values? 5. How would I feel afterwards? 6. How would it look in the newspaper? 7. Will it reflect poorly on the company?87

Besides the moral issues and ethics program’s guidelines and organizational cultural climate, in the framework of this chapter on the environmental context for today’s organi- zations, ethics also has an impact on the way employees are treated and how they perform their jobs. In other words, like globalization and diversity, ethics can affect the well-being of employees and their performance.

SUMMARY

This chapter examines the environmental context in terms of globalization, diversity, and ethics. The new “flat-world” international context in which organizational behavior oper- ates has become an increasingly important environmental context. Few would question that there is now globalization and that cultural differences must be recognized in the study and understanding of organizational behavior.

Two other major environmental realities facing modern organizations are diversity and ethics. There are a number of reasons for the rise of diversity in organizations, includ- ing the increasing number of women, minorities, and older employees in the workforce and legislative rulings that now require organizations to ensure equal opportunity to women, minorities, older employees, and those challenged by a disability. There are individual and organizational approaches to managing diversity. Approaches at the individual level include learning and empathy; at the organizational level, testing, training, mentoring, and the use of alternative work schedules and work/family programs can be implemented.

Ethics is involved with moral issues and choices and deals with right and wrong behavior. A number of cultural (family, friends, neighbors, education, religion, and the media), organizational (ethical codes, role models, policies and practices, and reward and punishment systems), and external forces (political, legal, economic, and international developments) help determine ethical behavior. These influences, acting interdependently, serve to help identify and shape ethical behavior in today’s organizations. There is increas- ing evidence of the positive impact that ethical behavior and corporate social responsibility programs have on “bottom-line” performance.

QUESTIONS FOR DISCUSSION AND REVIEW

1. What is meant by and what are some examples of globalization? 2. What are some of the major reasons why diversity has become such an important

dimension of today’s organizations? 3. How can diversity be effectively managed? Offer suggestions at both the individual

and organizational levels. 4. What is meant by ethics, and what types of factors influence ethical behavior? 5. What is meant by corporate social responsibility? How can and does it affect the “bot-

tom-line” of today’s organizations?

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Bob is the owner and operator of a medium-sized grocery store that has been in his family for more than 40 years. Currently his business is flourish- ing, primarily because it has an established cus- tomer base in a busy part of town. Also, Bob is a good manager. He considers himself to be highly knowledgeable about his business, having contin- uously adapted to the changing times. For exam- ple, he recently expanded his business by putting in a full-service deli. His philosophy is that by continuously providing customers with new prod- ucts and services, he will always have a satisfied customer base to rely on.

At a management seminar he attended last year, the hot topic was globalization and the impact of technology on going global. He has also been bombarded by the many television ads and

mailers regarding the opportunities available in international markets. For the most part, Bob doesn’t think that globalization is an issue with his business, as he doesn’t even intend to expand outside the city. Furthermore, he feels that the Internet has no applications in his branch of the retail industry and would simply be a waste of time.

1. Is Bob correct in his assessment of how glo- balization will impact his business?

2. Can you think of any global applications that Bob could profit from?

3. How could Bob’s business be negatively impacted by both technology and globaliza- tion if he does not keep on top of these developments?

Organizational Behavior Case: How Far-Reaching Are Globalization and Technology

When the Budder Mining Equipment company decided to set up a branch office in Peru, top man- agement felt that there were two basic avenues the company could travel. One was to export its machinery and have an agent in that country be responsible for the selling. The other was to set up an on-site operation and be directly responsible for the sales effort. After giving the matter a great deal of thought, management decided to assign one of their own people to this overseas market. The person who was chosen, Frank Knight, had expressed an interest in the assignment, but had no experience in South America. He was selected because of his selling skills and was given a week to clear out his desk and be on location.

When Frank arrived, he was met at the air- port by Pablo Gutierrez, the local who was hired to run the office and break Frank in. Pablo had rented an apartment and car for Frank and taken care of all the chores associated with getting him settled. Frank was very impressed. Thanks to Pablo, he could devote all his efforts to the busi- ness challenges that lay ahead.

After about six months, the vice president for marketing received a call from Frank. In a tired

voice Frank indicated that even though sales were okay, he couldn’t take it anymore. He wanted to come home. If nothing could be worked out within the next three months, Frank made it clear that he would resign. When his boss pressed him regarding the problems he was having, here is what Frank reported:

Doing business over here is a nightmare. Every- one comes to work late and leaves early. They also take a two-hour rest period during the after- noon. All the offices close down during this afternoon break. So even if I wanted to conduct some business during this period, there would be no customers around anyway. Also, no one works very hard, and they seem to assume no responsibility whatsoever. There seems to be no support for the work ethic among the people. Even Pablo, who looked like he was going to turn out great, has proved to be as lazy as the rest of them. Sales are 5 percent over forecasted but a good 30 percent lower than they could be if everyone here would just work a little harder. If I stay here any longer, I’m afraid I’ll start becoming like these people. I want out, while I still can.

Organizational Behavior Case: I Want Out

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1. In Frank’s view, how important is the work ethic? How is this view causing him prob- lems?

2. Why do the people not work as hard as Frank does? What is the problem?

3. What mistake is Frank making that is undoubtedly causing him problems in man- aging the branch office?

Jerry is director of marketing for a large toy com- pany. Presently, his team of executives consists entirely of white males. The company says it is committed to diversity and equal opportunity. In a private conversation with Robert, the company president, about the makeup of top-level manage- ment in the marketing department, Jerry admitted that he tends to promote people who are like him.

Jerry stated, “It just seems like when a pro- motion opportunity exists in our department, the perfect person for the job happens to be a white male. Am I supposed to actively seek women and minorities, even if I don’t feel that they are the best person for the job? After all, we aren’t violat- ing the law, are we?”

Robert responded, “So far the performance in your department has been good, and as far as I know, we are not violating any discrimination laws. Your management team seems to work well together, and we don’t want to do anything to

upset that, especially considering the big market- ing plans we have for this coming fiscal year.”

The big marketing plans Robert is referring to have to do with capturing a sizable share of the overseas market. The company thinks that a large niche exists in various countries around the world—and who better to fill that niche than an organization that has proved it can make top-qual- ity toys at a competitive price? Now the market- ing team has the task of determining which countries to target, which existing toys will sell, and which new toys need to be developed.

1. Do Jerry and Robert understand what “man- agement of diversity” means? How would you advise them?

2. Considering the marketing plans, how could they benefit from a more diverse manage- ment team? Be specific.

Organizational Behavior Case: Changing With the Times

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