Organizational Behavior 6 Assignment

Fundamentals of Decision Making Decisions are choices. We make decisions every day. We decide when we want to get up in the morning, what clothes we will wear, what we will eat for breakfast, and what our schedule of activities will be. We also make more important decisions. We decide what college or university to attend, what our major will be, what job to accept, what career path to follow, and how to manage our finances. Each time we make a purchase, a decision is involved. Clearly, decision- making activities are important to each of us. They are also important to organizations. Making decisions is one of the primary activities for senior managers. Senior managers make decisions related to things such as entering new businesses, divesting existing business, and coordinating the units of the firm. Other managers in the firm make decisions regarding how a unit should be organized, who should lead various work groups, and how job performance should be evaluated. In a high-involvement organiza- tion, associates also make many important decisions. They may decide on scheduling of work, job-rotation schedules, vacation time, approaches to various tasks, and ways to discipline an individual for problem behavior. Overall, decision-making skills are critical to organizational effectiveness. Basic Steps in Decision Making As a process, decision making involves multiple steps, as shown in Exhibit 10-1. First, effec- tive decision making begins with a determination of the problem to be solved. Problems are typically gaps between where we are today and where we would like to be tomorrow. We need a new associate in the work group but do not have one. We have excess cash in the firm but do not know where to invest it. We are experiencing quality problems and must correct them. Two individuals examining the same situation may see the problem differently. Consider the following example. A manufacturing unit has a broken machine. One person might define the problem in terms of the need to repair the machine or perhaps buy a new one. When developing possible solutions later in the process, she would focus either on a set of possible companies to do the repair work or a set of possible new machines. Another person, however, might define the problem very broadly in terms of a need to return the manufacturing unit to an operational status. By broadening the problem, this person would gain access to a larger.

range of alternative solutions. Alternatives might include buying a new machine, repairing the existing machine, outsourcing the work, using a different type of machine already on hand to do the work, redesigning the workflow so that the machine is no longer needed, and so on. Overly narrow problem definitions are a chief concern in decision making, as they restrict options.3 The next step in decision making, identification of decision criteria, requires the decision maker to determine exactly what is important in solving the problem. In the case of purchasing a new machine to replace a broken one, she might consider price, maintenance costs, tolerance levels that can be achieved, size, delivery speed, and so on. Decision criteria determine what information the decision maker needs to collect in order to evaluate alternatives, and they help her explain the choice that she ultimately makes.4 Failure to thoroughly identify important criteria results in faulty decision making. After the decision criteria have been identified, the decision maker must gather and pro- cess information to better understand the decision context and to discover specific alternatives that might solve the problem. In discovering or identifying possible alternatives, she should be careful not to constrain or evaluate the alternatives to any significant degree, because in so doing she may prematurely eliminate more creative or novel approaches. In this context, two truisms should be understood.5 First, a decision maker cannot choose an alternative that has not been considered. Second, a decision maker cannot choose an alternative that is better than the best alternative on the list. Therefore, careful attention to developing the list of alternatives is important. The next step in the decision-making process involves evaluating all relevant alternatives. To complete this step, the decision maker assesses each alternative using each criterion. When purchasing a new machine, she would rate each machine on the criteria of price, projected maintenance costs, tolerance levels, size, delivery speed, and so on. After evaluating each alternative, the decision maker chooses the alternative that seems to best satisfy the criteria, thereby solving the problem in the best manner possible. The decision-making process does not end when the decision is made. The decision must be implemented, and the decision maker must follow up and monitor the results to ensure that the adopted alternative solved the problem. By monitoring the outcomes, the decision maker may determine that the chosen alternative did not work. A new problem then must be solved. Optimal versus Satisfactory Decisions A decision maker typically wants to make an effective decision. For the purposes of this book, we define an effective decision as one that is timely, acceptable to those affected by it, and satis- factory in terms of the key decision criteria.6 Although the systematic, logical process outlined in Exhibit 10-1 may not be ideal in all situations, such as when a decision must be made very quickly, it does serve as a useful framework for producing effective decisions. The process of making decisions is not as simple, however, as it may seem from reviewing standard decision-making steps like those shown in the exhibit. Each step is more complex than it appears on the surface. Furthermore, individuals and groups cannot always make decisions that maximize their objectives, because to make such decisions we must have complete knowl- edge about all possible alternatives and their potential results. Complete knowledge would allow us to choose the best possible alternative, but it is unlikely that we actually would have complete knowledge for any real-world decisions. Thus, we tend to make satisficing decisions, or what many psychologists and economists refer to as boundedly rational decisions.7 There are two important reasons that people often make satisfactory decisions rather than optimal, maximizing ones. First, as already suggested, we do not have the capability to collect and process all of the information relevant for a particular decision. In theory, the number of alternatives that could be considered for most decisions is very large, as are the number of people who could be consulted and the number of analyses that could be completed. However, most of us, and certainly managers, lack the time and other resources required to complete these activities for most decisions. Consider the simple situation of hiring an individual to head a new public relations unit. Literally millions of people could possibly fill that role. Would the company consider millions of people so that the absolute best person could be found? No! Most likely, a convenient group of perhaps two dozen people would be considered. Second, we often display a tendency to choose the first satisfactory alternative discovered. Because we are busy and typically want to conserve the resources used in making any one decision, we often stop searching when we find the first workable alternative. Research has indicated, however, that some individuals are more likely than others to choose the first satis- factory option.8 Some continue to search for additional alternatives after encountering the first satisfactory one, thereby increasing their odds of finding a better solution. Interestingly, these individuals tend to be less satisfied with their choices, perhaps because they are more aware of the complexities and risks in decision situations. Individual Decision Making Decision making is a cognitive activity that relies on both perception and judgment. If two people use different approaches to the processes of perception and judgment, they are likely to make quite different decisions, even if the facts and objectives are identical. Although many individual characteristics can affect an individual’s decision process, the four psychological predispositions isolated by noted psychologist Carl Jung are of special importance for decision making in organizations. We consider these next and then turn to other factors that influence an individual’s decision making, including degree of acceptable risk and cognitive biases. 314 Chapter 10 Decision Making by Individuals and Groups sensing A decision style focused on gathering concrete information directly through the senses, with an emphasis on practical and realistic ideas. Decision-Making Styles According to Jung’s theory, an individual’s predispositions can affect the decision process at two critical stages: (1) the perceiving of information and (2) the judging of alternatives. Decisions, then, reflect the person’s preference for one of two perceptual styles and one of two judgment styles. How these styles relate to the decision process is illustrated in Exhibit 10-2. Although some have questioned the usefulness of Jung’s ideas, research has offered reasonable support for those ideas,9 and assessment tools based on his work are very popular in the corporate world. Gathering Information Individuals may differ in how they gather information to use in making decisions. As described in Chapter 4, gathering information involves perceptual processes. Some individuals prefer information that is concretely grounded and readily accessible through the five basic senses, whereas others prefer abstractions and figurative examples as sources. An associate or manager who relies on facts gathered directly by the five senses is said to use a sensing style.10 Such a person believes in experience and typically wants to focus on rules and regulations, step-by-step explanations, and fact checking. Decision makers who use a sensing style are concerned primarily with developing a factual database that will support any resulting decision. People who prefer this style of gathering information see themselves as practical and realistic. They work steadily in the early stages of the decision process and enjoy the

information-gathering stage. Such persons observe the actual situation very carefully: specific details, concrete examples, real experiences, practicalities, and literal statements. They are down-to-earth people who believe that creativity involves much effort. Steve Ballmer, former CEO of Microsoft, seems to fit this profile. He is attracted to facts and hard data and sees things as “black or white, on or off.”11 Decision makers who use the intuition style dislike details and the time required to sort and interpret them.12 These people become impatient with routine details and often perceive information in large chunks—for example, as holistic, integrated abstractions. A decision made using this style is often based on imagination. Intuitive people believe that creativity comes from inspiration rather than concentrated effort. Although this second style may appear to be illogical and risky, many consultants and senior managers believe that it can be an effective approach. Managers with good intuition may be better able to cope with rapid change and crisis situations. They frequently have a vision for the future and can react quickly to urgent needs. Former U.S. president Bill Clinton has been classified as having the intuition style,13 as has former British prime minister Margaret Thatcher (now deceased).14 Dawn Ostroff, the first programming executive for the CW televi- sion network, also seems to fit the profile.15 Billy Beane of the Oakland Athletics seems to fit the profile as well. Overall, both the sensing and intuition styles of perception can be effective, but their effectiveness may vary depending on the context. The sensing style may be most appropriate for jobs where routine decisions are typical.16 In one relevant study, researchers examined how loan officers handled a number of lending decisions.17 Individuals with a sensing style used more information and made better choices. The intuition style may be most appropriate for jobs where novel decisions and a need for creativity are common. Research on innovation illus- trates this point. In one important study, individuals responsible for new business ideas in a Fortune 500 company were divided into two groups of equal size, with one group representing the sensing style and the other representing the intuition style.18 In the sensing group, indi- viduals displayed less creativity and identified ideas that resulted in only $15.2 million of profit during the period of the study. Individuals in the intuition group displayed more creativity and delivered $197.5 million in profit. Specific situations in which the intuition style may prove valuable include the following: • When a high level of ambiguity exists • When few or no precedents exist • When facts are limited • When facts don’t clearly indicate which way to go • When time is limited and there is pressure to make the right decision • When several plausible alternative solutions exist with good arguments for each Evaluating Alternatives Jung proposed that once information has been gathered, decision makers again diverge in their approaches, tending to adopt either a thinking style or a feeling style to make judgments. As seen in Exhibit 10-2, there is no fixed relationship between a person’s information-gathering style and his judgment style. A person using a sensing style of gathering information may use either a thinking or a feeling style in evaluating and judging the alternatives. Similarly, an intuitive information gatherer may use either of the judgment styles. Managers and associates who use an impersonal, rational approach to arrive at their judg- ments are said to prefer a thinking style.19 Decision makers who use the thinking style to derive conclusions from their perceptions are objective, analytical, logical, and firm. People who use this style are concerned with principles, laws, and objective criteria. They find it easy to critique the work and behavior of others but are often uncomfortable dealing Chapter 10 Decision Making by Individuals and Groups with people’s feelings. Thinkers prefer objective analysis and fair decisions based on standards and policies. They are able to discipline and reprimand people, even fire them, if necessary. They are firm and may seem detached and impersonal to subordinates. Their apparently detached nature is likely due to the organized and structured approach they prefer. They would seldom leap to a conclusion without fully evaluating a substantial number of alternatives. They are often conservative in their decisions. At the other extreme, people who prefer to rely on their emotions and personal, subjec- feeling tive judgments are said to use a feeling style.20 People concerned with feelings emphasize the A decision style focused on maintenance of harmony in the workplace. Their judgments are influenced by their own or subjective evaluation and the emotional reactions of others. others’ personal likes and dislikes. Such persons are subjective, sympathetic, and appreciative in their decisions. They also dislike decision problems that would require them to say unpleas- ant things to people. Managers who use a feeling approach frequently give more weight to maintaining a friendly climate in the work group than to effective task achievement. These managers often interpret problems as having been caused by interpersonal factors rather than by other issues. Both the thinking and feeling styles are important in organizations. The thinking style is consistent with careful decision making, and a number of studies have shown this style to be effective. In one study, for example, real estate agents were asked to provide information on decision style as well as performance in selling properties.21 Those who used the thinking style tailored their approach to selling based on circumstances and reported stronger performance. The feeling style, however, also can have positive effects. Concern for the feelings and morale of those around us is important. To take advantage of the positive outcomes of each style and to balance the factors consid- ered in a decision, a decision maker who emphasizes the feeling style should consult with one or more others who emphasize the thinking style. Similarly, decision makers who emphasize the thinking style should consult with those who use the feeling style. Because most managers at all levels in an organization tend to emphasize the thinking style,22 they are likely to ben- efit from seeking out a feeling type. In addition, when a manager creates a team to address a problem and make a decision, he is likely to benefit from including both styles on the team. Using Decision Styles Although it may seem that decision-making styles are fixed, there is some flexibility in the styles used by managers and associates. As stated by Jung and later researchers, a decision style is simply a preference.23 Many experienced decision makers are able to adjust their styles as need dictates, at least to some degree. Billy Beane, for example, clearly emphasizes the thinking style but he also seems capable of adopting the feeling style. As a thinker, he tends to be objective, logical, and analytical, and perhaps a bit impersonal as well, particularly when dealing with tasks such as sending a player down to the minor leagues. On the other hand, he did decline an exceptionally lucrative offer to lead the Boston Red Sox in order to stay close to family. Steve Ballmer, the former CEO of Microsoft, also emphasizes the thinking style but has been known to take into account the feelings of others. He has been known to scream, yell, and even be sarcastic and then feel badly about the behavior and attempt to make amends.24 The accounting and marketing examples discussed in the Managerial Advice feature rep- resent a larger problem involving many functional areas. Associates and managers in many areas can have decision styles that work well most of the time but interfere with effectiveness on occasion. Although not all individuals working in a given functional area think in the same way, they often share some general tendencies. The mind-stretching techniques discussed in the advice segment can be quite helpful in addressing the problem of limited styles by extend- ing ways of thinking about situations and broadening the decision styles used. Use of the Six Thinking Hats technique, for example, enabled MDS SCIEX to save roughly $1 million on a ingle project.25 Similarly, Hermann International’s brain dominance technique has been cred- ited with helping UGN, a maker of automotive acoustic materials, to substantially enhance productivity.26 Overall, the use of these techniques can enhance organizational performance.

Chapter 10 Decision Making by Individuals and Groups Degree of Acceptable Risk Risk exists when the outcome of a chosen course of action is not certain.27 Most decisions in business carry some degree of risk. For example, a manager may be considering two candidates for a new position. One of them has a great deal of experience with the type of work to be performed and has been very steady, though not outstanding, in her prior jobs, whereas the other has limited experience but seems to have great potential. If the manager chooses the first candidate, the likelihood of poor work performance is relatively low but not zero. If he chooses the second candidate, the likelihood of poor work performance is higher, but there is also a chance of excellent performance, performance that would be out of reach for the first candidate. Who should be chosen? risk-taking propensity In choosing between less and more risky options, an individual’s risk-taking propensity, Willingness to take chances. or willingness to take chances, often plays a role.28 Two persons with different propensities to take risks may make vastly different decisions when confronted with identical decision situations and information. One who is willing to face the possibility of loss, for example, may select a riskier alternative, whereas another person will choose a more conservative alternative. U.S. businessman Donald Trump is known for taking risks. Over the years, he has made and lost and made again significant amounts of money in buying and selling real estate.29 In making decisions, individuals with lower risk-taking propensities may collect and evaluate more information. They may even collect more information than they need to make the decision. In one study, managers made hiring decisions in a practice exercise.30 Manag- ers with low risk-taking propensity used more information and made decisions more slowly. Although information is important, managers and associates with low risk-taking propensities must avoid becoming paralyzed by trying to obtain and consider too much detailed informa- tion. Conversely, those with high risk-taking propensities must avoid making decisions with too little information. Beyond general risk-taking propensity, reference points play an important role in many reference point decisions.31 A reference point can be a goal, a minimum acceptable level of performance, or A possible level of perhaps the average performance level of others, and it is used to judge one’s current stand- performance used to evaluate one’s current standing. ing. If a particular individual’s current position in an ongoing activity is below his reference point, he is more likely to take a risk in an attempt to move above the reference point. If his current position is above the reference point, he is less likely to take risks. For example, a manager of a division in a consumer products firm who is below the goal she has set for profitability may undertake a risky project in order to meet her goal. A manager who is above a reference point she has adopted is less likely to take on such a project. In an extreme case, a student in a finance course who is performing below the level he considers minimally acceptable may decide to take drugs to help him stay awake all night studying for the next exam, or he may even decide to cheat. A student who is above his reference point is less likely to engage in these types of risky behavior. A poker player who has just lost a big hand, and is therefore below his performance goals, may adopt a riskier approach to the game, while a player who has just won a big hand is less likely to exhibit such a shift, even though he is better positioned to take on more risk.32 Each individual chooses, consciously or unconsciously, his own reference point in a given situation. Two different students are likely to have different minimally acceptable performance levels for a class, and these different levels can serve as their respective reference points. In a recent study, senior managers from small firms subjectively rated disappointment with their firms’ business performance.33 In some cases, managers were disappointed with a level of per- formance that other leaders endorsed as very positive. Clearly, reference points differed. More- over, managers expressing dissatisfaction based on their individual reference points were more likely to undertake particularly risky projects. Cognitive Biases Individuals often make mistakes in decision making. Although carelessness, sloppiness, fatigue, and task overload can be contributing factors, some mistakes are caused by simple cognitive biases. Such biases represent mental shortcuts.34 Although these shortcuts can be harmless and save time, they often cause problems. Being aware of their existence is an important step in avoiding them. The confirmation bias is particularly important, because it often has strong effects on the type of information gathered. This bias leads decision makers to seek information that confirms beliefs and ideas formed early in the decision process.35 Rather than also search for information that might disconfirm early beliefs, as a thorough decision process requires, indi- viduals subconsciously seek only information that supports their early thinking. Failing to look for disconfirming information is particularly likely if a decision maker is revisiting a decision that has already been made and partially or fully implemented. The following story illustrates the problem. An equities broker is concerned about a com- pany in which many of his clients have invested. Because of some recent R&D failures, the company’s long-term growth prospects are not as strong as originally expected. The broker’s initial position, however, is to recommend that his clients retain the stock; he believes in the company’s management and does not want to recommend divesting based only on one sign of possible trouble. Before making a decision, he calls two other brokers who are acquaintances and who also remain supporters of the company. He wants to understand why they continue to be positive about the firm. In the end, he decides to stay the course without seeking the opinions of other brokers who have recommended divesting the company’s stock. In other words, he makes his decision having contacted only those who were likely to agree with his initial thinking. Research suggests this is a common occurrence.36 In addition to business domains, research also reveals the presence of confirmation bias in medicine, where doctors may have some tendency to seek only confirming data after form- ing initial diagnostic impressions.37 Similarly, research reveals the confirmation bias in the legal system, where police investigators and prosecutors may have some tendency to seek only confirming data after forming initial opinions.38 Clearly, the potential for problems caused by confirmation tendencies is quite significant. The ease-of-recall bias is also important because it affects the amount and type of infor- mation that is gathered and evaluated. In the context of this bias, a decision maker gath- ers information from his own memory and relies on information that he can easily recall.39 Unfortunately, easily recalled information may be misleading or incomplete. Vivid and recent information tends to be easily recalled but may not be indicative of the overall situation. In performance appraisals, for example, a supervisor may recall a vivid incident such as an angry disagreement between two associates while forgetting many common instances of good per- formance. When selecting a new supplier for a key raw material, a manager may find one or two informal stories of poor performance easier to remember than the comprehensive numbers in an evaluative report on the various alternative suppliers. As the brutal despot Joseph Stalin once said, “A single death is a tragedy, a million deaths is a statistic.”40 Another bias is the anchoring bias. Here, decision makers place too much emphasis on the first piece of information they encounter about a situation.41 This initial information then has undue influence on ideas, evaluations, and conclusions. Even when decision makers acquire a wide range of additional information (thereby avoiding the confirmation bias), initial information can still have too much influence. In one study of this phenomenon, auditors from the largest accounting firms in the United States were asked about management fraud.42 Some of the auditors were asked if executive-level fraud occurred in more than 10 out of every 1,000 client organizations. Then they were asked to estimate the actual incident rate. Others in the study were asked if executive-level fraud occurred Decision Making by Individuals and Groups sunk-cost bias A cognitive bias in which past investments of time, effort, and/or money are heavily weighted in deciding on continued investment. in more than 200 out of every 1,000 client organizations. Auditors in this latter group also were asked to estimate the actual incident rate. Interestingly, auditors in the first group estimated the actual fraud rate to be 16.52 per 1,000 client organizations whereas auditors in the second group estimated the fraud rate to be 43.11. Despite answering the same question about actual fraud, trained auditors in the most prestigious accounting firms appear to have anchored on arbitrary and irrelevant numbers (10 in the first group and 200 in the second). Finally, the sunk-cost bias causes decision makers to emphasize past investments of time and money when deciding whether to continue with a chosen course of action.43 Decision makers are reluctant to walk away from past investments, preferring to build on them and make them successful. Decision makers should, however, treat a past investment as a sunk cost—a cost that is unrecoverable and irrelevant—and focus on the future costs and benefits of continued investment. For example, when the CEO of a small business returns to a loan officer at the local bank saying that he needs another $250,000 to succeed, the loan officer should not consider the first $250,000 that was loaned. She should consider the likelihood that a new $250,000 will truly help the small firm succeed. What is the probability of success going forward? What has occurred in the past is not directly relevant to the new decision. In this chapter’s first Experiencing Organizational Behavior feature, the power of the sunk- cost bias is illustrated through its role in the deaths of a number of Mt. Everest climbers. Fortu- nately, the effects of this bias are normally much less severe than death. Yet, the sunk-cost bias can have significant effects on organizational performance. For example, recent research has shown that CEOs are unlikely to sell off poorly performing businesses that they have acquired. In fact, a major event, such as a change in CEO or a new outside member added to the board of directors, is frequently needed to force a change in the earlier decision. When these events occur, the firm is more likely to divest the poorly performing business.44 Decision-making bias clearly plays a role in such scenarios.

ources: A. Arnette, “Everest 2013: Season Recap – Summits, Records and Fights,” [email protected], (June 6, 2013), http://www.alanarnette.com/blog/2013/06/03/everest-2013-season-recap/; J. Hemmleb, Ghosts of Everest: The Search for Mallory and Irvine (Seattle: The Mountaineers Books, 1999); T.F. Hornbein, Everest: The West Ridge (San Francisco: The Sierra Club, 1966); J. Krakauer, Into Thin Air: A Personal Account of the Mount Everest Disaster (New York: Villard Books, 1997); R. Ruiz, Climbers’ Traffic Jam Blamed for Mount Everest Deaths, NBC (2012), http://www.nbcnews .com/travel/climbers-traffic-jam-blamed-mount-everest-deaths-790946; M.A. Roberto, “Lessons from Everest: The Interac- tion of Cognitive Bias, Psychological Safety, and System Complexity,” California Management Review 45, no. 1 (2002): 136–158; M.A. Roberto, & G.M. Carioggia, Mount Everest—1996 (Boston: Harvard Business School Publishing, 2003); G. Schaffer, “Take a Number,” Outside Magazine (Sept. 12, 2012), http://www.outsideonline.com/outdoor-adventure/ climbing/mountaineering/everest-2012/Take-a-Number.html ; P.S. Turner, “Going Up: Life in the Death Zone,” Odyssey 12, no. 8 (2003): 19. Decision Making by Individuals and Groups Moods and Emotions moods Affective states corresponding to general positive or negative feelings disconnected from any particular event or stimulus. emotions Affective states corresponding to specific feelings, such as anger, that tend to be associated with particular events, people, or other stimuli. Moods and emotions are two aspects of affective phenomena in organizations.44 Moods are affective states that correspond to general feelings disconnected from any particular event or stimulus in the workplace. Moods typically are described in generic terms, such as positive or negative, good or bad. Emotions correspond to more specific feelings that are often tied to particular events, people, or other stimuli. Also, emotions typically are described in terms of discrete forms, such as fear and anger. Research in the field of organizational behavior has increasingly emphasized moods and emotions in the workplace. Mood appears to have important effects on decision making, but those effects are complex and not fully understood at this point.45 On the one hand, individuals in positive moods may exhibit more breadth in ideas considered, which can create more exploration and creativity, and even more risk taking if recent outcomes have been favorable. These effects of mood are positive in situations calling for fresh ideas or bold steps. On the other hand, individuals in positive moods may neglect the details of decision situations. This could lead to poor outcomes when such details are crucial. In one study of the mood phenomenon, foreign exchange traders with positive moods were found to be overconfident and their overall performance was lower than those in bad moods, presumably because details mattered in the trading context.46 In another study, auditors with positive moods were found to be less consistent and careful than auditors in bad moods, which was not positive for the auditing context.47 Emotion also appears to have important effects on decision making. In recent years, one of the most studied emotions has been regret. Regret is an aversive emotion involving self- blame that comes from unwanted outcomes.48 One possible reaction to this aversive emotion involves avoiding in the future a choice that has led to a poor outcome (i.e., not repeating a choice associated with failure when faced with a similar decision situation in the future). Although this reaction often is appropriate, it can be dysfunctional. For example, bad luck can create an unwanted outcome even though a good choice has been made. In that situation, a viable choice might be ruled out of future consideration when it should not be.49 Another reaction to regret involves self-management. This reaction can protect the ego of the decision maker. When engaged in self-management, decision makers may:50 1. Attempt to reverse the decision. 2. Run from the decision by denying responsibility for it. 3. Argue that other alternative choices would not have led to a better outcome. 4. Attempt to suppress self-knowledge of the unwanted outcome. 5. Engage in after-the-fact justifications of the decision by using, for example, a self- affirmation such as “I did the best that I could.” A second often-studied emotion is anger. This emotion is widely believed to have important effects on decision making. First, anger may cause decision makers to be superficial gatherers and evaluators of information.51 Second, anger may lead to an enhanced willingness to take risks, particularly in comparison to the effects that other negative emotions have on risk taking (e.g., fear).52 A study of public attitudes and beliefs concerning terrorism illustrates the connection to risk.53 Individuals who were angry about terrorism estimated the probability of future attacks as relatively small. Nonetheless, they preferred relatively bold, risky preven- tive measures and had relatively little concern for the consequences. Those who were fearful of terrorism estimated the probability of attacks as relatively large. Even so, they preferred less direct, less risky preventive measures, as they were concerned about the consequences of bolder actions. The victory of Barrack Obama in the U.S. presidential election in 2008 provides a second illustration of anger and risk. Despite little leadership experience, somewhat limited political experience, and a number of friends and political connections that made many mainstream Americans uneasy, Obama attracted the support of a large number of voters. To do so, he and his team positioned his Republican opponent in the election as an extension of then-president George W. Bush, which leveraged the anger many American’s felt toward Bush over the Iraq war, perceived corporate favoritism, and enormous government spending. Beyond simply link- ing the opponent to Bush in order to leverage existing anger, the Obama team also actively sought to create anger related to the general state of the country. By creating all of this anger rather than creating fear for the future, the campaign helped voters to overlook limited experi- ence and take a risk. The campaign was very effective.54 Group Decision Making We often view decision making as an individual activity, with thoughtful indi- viduals making good or bad organizational decisions. For example, it is easy to credit the success of Intel in the 1990s microchip industry to the effective decision making of Andy Grove, the CEO for many years. But it is common for a number of people to participate in important organizational decisions, working together as a group to solve organizational problems. This is particularly true in high- involvement organizations, where associates participate in many decisions with lower-level and middle-level managers and where lower-level and middle-level managers participate in decisions with senior-level managers. In high-involvement organizations, teams of associates also make some decisions without managerial input. In this way, human capital throughout the organization is utilized effectively. Group decision making is similar in some ways to the individual decision making we described earlier. Because the purpose of group decision making is to arrive at a preferred solution to a problem, the group must use the same basic decision-making process—define the problem, identify criteria, gather and evaluate information, list and evaluate alternatives, and choose the best alternative and implement it. On the other hand, groups are made up of multiple individuals, resulting in dynamics and interpersonal processes that make group decision making different from decision making by an individual.55 For instance, some members of the decision group will arrive with their own expectations, problem definitions, and predetermined solutions. These characteristics are likely to cause some interpersonal problems among group members. Also, some members will have given more thought to the decision situation, engagement may differ across members, and so on. Thus, a group leader may be more concerned with turning a collection of individuals into a collaborative decision-making team than with the development of individual decision-making skills. In this section, we consider these and other issues in group decision making. Group Decision-Making Pitfalls Although group decision making can produce positive outcomes, the social nature of group decisions sometimes leads to undesired results. In fact, group dynamics that occur during decision making often prevent full discussion of facts and alternatives. Group norms, mem- ber roles, dysfunctional communication patterns, and too much cohesiveness may deter the group, thereby producing ineffective decisions. Researchers have identified several critical pitfalls in decision-making groups. These include groupthink, common information bias, diversity-based infighting, and the risky shift (see upper half of Exhibit 10-3). Groupthink When group members maintain or seek consensus at the expense of identifying and earnestly debating honest disagreements, groupthink is said to occur.56 Focusing too much attention on consensus, especially early in a decision process, can result in a faulty decision. Many important ideas and alternative courses of action may not be seriously considered.

his type of group phenomenon can occur under a number of different conditions, including the following: • Group members like one another and therefore do not want to criticize each other’s ideas.57 • Group members have high regard for the group’s collective wisdom and therefore yield to early ideas or the ideas of a leader.58 • Group members derive satisfaction from membership in a group that has a positive self-image and therefore try to prevent the group from having any serious divisions.59 In essence, then, a variety of factors can cause group members to avoid surfacing divergent opinions and ideas within the group. Groupthink may be most likely when a group that has a positive image is under threat, such as when a management team faces a tough competitor or when a presidential adminis- tration faces possible military engagement.60 At Enron, the failed energy company, managers valued being part of the leadership of a company perceived as progressive, innovative, and sophisticated. Being employed by Enron, and especially being a part of the favored group in the company, was powerfully reinforcing. This seems to have contributed to managers’ ten- dency to agree with increasingly risky investments and accounting tricks.61 At least eight specific symptoms are associated with groupthink: 1. Self-censorship. Group members who recognize flaws or errors in the group position tend to remain quiet during group discussions and avoid issues that might upset the group. 2. Pressure. Group members apply pressure to any member who expresses opinions that threaten group consensus and harmony. 3. Unanimity. Censorship and pressure lead to the illusion of unanimous support for the final group decision. Members who have been quiet are assumed to be in complete agreement, which further discourages consideration of other decision alternatives. 4. Rationalization. Many group members build complex rationales that effectively discount warnings or information that conflict with their thinking. Thus, sources of negative information are discredited in group discussions. Such actions often narrow the decision alternatives considered. 5. Invulnerability. Group members may develop an illusion of invulnerability, which causes them to ignore any dangers. As a result, they become overly optimistic and take unwarranted risks; the group seriously overestimates its collective wisdom. 6. Mindguards. Certain group members take on the social role of “mindguard.” They attempt to shield the group from any facts, criticisms, or evaluations that may alter the illusion of unanimity and invulnerability. 7. Morality. Most group members believe in the morality of the group’s position. The members may even speak about the inherent morality of what they are doing and the immorality of opposing views. This can result in decisions that ignore ethical and legal issues as viewed by the broader society and lead to negative consequences for others. 8. Stereotypes. Group members may develop negative stereotypes of other people and groups. These stereotypes can protect their own position and block the possibility of reasonable negotiations with outsiders. As the most discussed group decision-making phenomenon, groupthink has been linked to a number of actual decisions.62 Many of these have been U.S. government or military deci- sions, in part because a great deal of groupthink research has been conducted in the United States and access to important materials for assessing U.S. decision making is reasonably good. Examples include the decision of Admiral Kimmel and his advisors to focus on training instead of defense of Pearl Harbor prior to its being attacked in 1941; the decision of President John F. Kennedy and his cabinet to authorize an invasion of Cuba at the Bay of Pigs in 1960; and the decision of President Lyndon Johnson and his inner circle to escalate the war in Vietnam in the mid-1960s.63 At NASA, examples in which groupthink may have played a role include the decision to launch the Challenger Shuttle in 198664 and the handling of the Hubble telescope.65 For business firms, examples abound, with many of them involving boards of directors.66 The collapse of Swissair in 2009 provides one illustration.67 Groupthink has also been found in self- managing work teams.68 This has implications for high-involvement organizations. Groupthink does not guarantee a poor decision but simply increases the likelihood of such a result. When good judgment and discussion are suppressed, the group can still be lucky. However, because the purpose of group decision making is to increase the likelihood of a good decision, managers must take steps to reduce groupthink. Such steps are discussed later in this chapter. Common Information Bias Some information a group might consider in making a decision may be held by one or a few group members. Other pieces of information are held by most or all group members. The common information bias leads groups to unconsciously neglect information held by one group member or a few members while focusing on more commonly held information in the group, thereby neglecting potentially important issues and ideas.69 The common information bias defeats one of the presumed advantages of group decision making—the availability of unique information, ideas, and perspectives brought to the process by individual group members. The following study illustrates this phenomenon.70 First, managers were asked to evaluate PeopleSoft as an alternative to the firm’s existing accounting and enterprise management soft- ware. Next, these managers assembled to discuss whether adopting PeopleSoft would be positive for the firm. Concerns and ideas held by one or a few members received less attention than con- cerns and ideas held by most or all group members, resulting in a very limited group discussion. Diversity-based Infighting When groupthink is an issue, one or more members of the group typically act to suppress diverse ideas, and many members censor themselves. With the common information bias, individuals subconsciously focus on common information and ideas. Thus, in many groups, diverse ideas are not discussed. In other groups, however, diverse ideas are emphasized. Although this is generally positive for group decision making, it can become extreme. Instead of creating rich discussions and insight, diverse ideas can create ill will and frac- tured groups.71 Such diversity-based infighting is likely to occur when individuals feel very strongly about their ideas and no mechanisms to channel disagreement in productive ways have been instituted. As discussed in the next section, mechanisms that can help channel diver- sity include formal brainstorming procedures and the formal use of devil’s advocacy. Risky Shift As discussed earlier, most decisions involve some degree of risk. Because decision-making groups are composed of individuals, it would seem that risk taken by a group should be the same as the average risk that would have been taken by the individual group members acting alone. But the social forces involved in group decisions make this assumption incorrect. Research on the risk taken by groups in making decisions began in the 1960s, when investigators compared individual and group decisions on the same problems.72 Possible solutions to the problems ranged from relatively safe alternatives with moderate payoffs to relatively risky options with higher potential payoffs. Contrary to expectations, groups con- sistently made riskier decisions than individuals. This finding has since been called the risky shift phenomenon. Subsequent analysis of these findings and additional research have determined that deci- sions made by groups are not always riskier. In fact, they are sometimes more cautious. How- ever, group decisions seem to shift toward increased risk more often than toward increased cautiousness.73 Several explanations for such shifts have been offered, but the most common and most powerful explanation involves diffusion of responsibility. Because individual group members believe that no single person can be blamed if the decision turns out poorly, they can shift the blame entirely to others (the group). This diffusion of individual responsibility may lead members to accept higher levels of risk in making a group decision.74 Group Decision-Making Techniques As the preceding discussion makes clear, groups may flounder when given a problem to solve. It is important, therefore, to understand the techniques that can be used to encourage full and effective input and discussion before the group reaches a decision. Several techniques have been developed, including brainstorming, the nominal group technique, the Delphi technique, dialectical inquiry, and devil’s advocacy (see Exhibit 10-3). Brainstorming For major decisions, it is usually important to generate a wide variety of new ideas during the data-gathering and alternative-generation phases of decision making. Increasing the number of ideas during these phases helps ensure that important facts or considerations are not overlooked. Unfortunately, if the group evaluates or critiques each new idea as it is introduced in a group meeting, individual members may withhold other creative ideas because they fear critical com- ments. In contrast, if ideas are not evaluated immediately, members may offer a number of inputs, even if they are uncertain of the value of their ideas. This is the essence of brainstorming.75 Brainstorming within groups has the following basic features: • Imagination is encouraged. No idea is too unique or different, and the more ideas offered the better. • Using or building on the ideas of others is encouraged. • There is no criticism of any idea, no matter how bad it may seem at the time. • Evaluation is postponed until the group can no longer think of any new ideas. Many companies—such as IDEO, a Silicon Valley product design firm—use this basic approach.76 Research supports the approach, as it suggests that groups using brainstorming often generate more ideas than groups that do not use brainstorming.77 However, research also suggests that groups following this approach do not do as well as individuals brainstorming alone.78 In one study, for example, a brainstorming group developed 28 ideas, and 8.9 percent of them were later judged as good ideas by independent experts.79 The same number of people engaging in solitary brainstorming developed a total of 74.5 ideas, with 12.7 percent judged as good ideas. Why is group brainstorming often less effective than individual brainstorming? One prob- lem may be that group members believe criticism will not be entirely eliminated but will sim- ply remain unspoken.80 In other words, if a member contributes a unique idea, she may believe that others are silently ridiculing it. Another problem may be that some group members are simply distracted by the significant amount of discussion in a group brainstorming session.81 Two techniques may be helpful in overcoming the problems of standard group brainstorming: 1. Brain-writing can be used. In a common version of brain-writing, group members stop at various points in a group meeting and write down all of their ideas.82 Then the written ideas are placed on a flipchart or whiteboard by an individual assigned the task of pooling the written remarks. By moving from an oral to a written approach, and by introducing anonymity, this method makes many individuals feel less inhibited. Furthermore, less talking takes place in the room, so distractions are reduced. 2. Electronic brainstorming (EBS) can be used. In a common version of EBS, group members sit around a table with computer stations in front of them.83 Each individual attempts to develop as many ideas as possible and enter them into a database. As an idea is entered, it is projected onto a large screen that everyone can see. Because there is anonymity, individuals feel less inhibited, and because there is less talking in the room, they are not distracted. Individuals can, however, build on the ideas of others as they appear on the screen. Nominal Group Technique Another technique used to overcome some of the inhibiting forces in group decision making is called the nominal group technique. This technique shares some features of brain-writing and electronic brainstorming. In its basic form, it calls for a decision meeting that follows four procedural rules:84 1. At the outset, individuals seated around a table write down their ideas silently and without discussion. 2. Each member presents one idea to the group. After the initial round has been completed, each member presents a second idea. The process is repeated until all ideas have been presented. No group discussion is permitted during this period. 3. After the ideas have been recorded on a blackboard or a large flipchart or in a computer database for projection, the members discuss them. The major purpose here is to clarify and evaluate. 4. The meeting concludes with a silent and independent vote or ranking of the alternative choices. The group decision is determined by summing or pooling these independent votes. The nominal group technique eliminates a great deal of interaction among group mem- bers. Discussion and interaction occur only once during the entire process. Even the final choice of an alternative occurs in silence and depends on an impersonal summing process. Decision Making by Individuals and Groups Delphi technique A highly structured decision- making process in which participants are surveyed regarding their opinions or best judgments. dialectical inquiry A group decision-making technique that relies on debate between two subgroups that have developed different recommendations based on different assumptions. devil’s advocacy A group decision-making technique that relies on a critique of a recommended action and its underlying assumptions. Proponents of this technique believe that inhibitions are overcome at crucial stages, whereas group discussion occurs at the time it is needed for evaluation. Research has suggested that the technique yields better results than a standard group brainstorming session.85 Delphi Technique Brainstorming and the nominal group technique generally require group members to be in close physical proximity (seated around a table, for example). However, groups using the Delphi technique do not meet face-to-face. Instead, members are solicited for their judgments at their various homes or places of business.86 In the most common approach, group members respond to a questionnaire about the issue of interest. Their responses are summarized and the results are fed back to the group. After receiving the feedback, individuals are given a second opportunity to respond and may or may not change their judgments. Some Delphi approaches use only two sets of responses, whereas others repeat the question–summary–feedback process several times before a decision or conclusion is reached. The final decision is derived by averaging or otherwise combining the members’ responses to the last questionnaire; often, the members’ responses become more similar over time. Although some research has been supportive of this technique,87 it is a highly structured approach that can inhibit some types of input, especially if some individuals feel constrained by the particular set of questions posed. Even so, the Delphi technique is an option to consider, especially when members of the group are geographically dispersed. Dialectical Inquiry and Devil’s Advocacy The techniques for group decision making explained above are more concerned with increasing the number of ideas generated than with directly improving the quality of the final solution. Although having a greater number of ideas enhances the possibility that a superior alternative will be identified, other techniques can help the group find the best choice. Two key approaches are dialectical inquiry and devil’s advocacy. These approaches counter the tendency of groups to avoid conflict when evaluating alternative courses of action and to prematurely smooth over differences within the group when they occur.88 In its basic form, dialectical inquiry calls for two different subgroups to develop very different assumptions and recommendations in order to encourage full discussion of ideas. The two subgroups debate their respective positions. Devil’s advocacy calls for an individual or subgroup to argue against a recommended action put forth by other members of the group. Thus, both dialectical inquiry and devil’s advocacy use “constructive” conflict. Proponents assert that both are learning-ori- ented approaches because the active debates can help the group to discover new alternatives and to develop a more complete understanding of the issues involved in the decision problems.89 In spite of these similarities, however, there are important differences between the two approaches. The dialectical inquiry technique requires group members to develop two distinct points of view. More specifically, one subgroup develops a recommendation based on a set of assumptions, and a second subgroup develops a significantly different recommendation based on different assumptions. Debate of the two opposing sets of recommendations and assumptions maximizes constructive conflict, and the resulting evaluation of the two points of view helps ensure a thor- ough review and also helps to promote the development of new recommendations as differences are bridged. Devil’s advocacy, however, requires the group to generate only one set of assumptions and a single recommendation, which are then critiqued by the devil’s advocate (or advocates). Research on these techniques suggests that both are effective in developing high-quality solutions to problems.90 At the same time, however, they can result in somewhat lower levels of group satisfaction than approaches such as brainstorming.91 This outcome is probably due to the intragroup conflict that can arise when these methods are used. Still, both approaches are apt to be effective in controlling undesirable group phenomena that suppress the full exploration of issues. Because both approaches aim to create constructive conflict through assigned roles, they are not likely to cause major dissatisfaction among group members. Who Should Decide? Individual versus Group Decision Making In this closing section, we first provide guidance on how a manager should approach a decision that he must make. Should he make the decision alone, should he invite limited participation by associates, or should he use a group decision-making approach with associates? Following the discussion of associate involvement in managerial decisions, we summarize the general advantages and disadvantages of having an individual versus a group make a decision. Associate Involvement in Managerial Decisions Although associates in high-involvement firms make many important decisions, other decisions remain for managers to address, perhaps with the assistance of associates. For these latter decisions, managers must determine the correct level of associate involvement in the decision-making process. Two researchers, Victor Vroom and Philip Yetton, point out that the correct level of involvement depends on the nature of the decision problem itself.92 If the manager can diagnose the nature of the problem, he can determine the degree to which a group of associates should participate. The Vroom–Yetton method requires the manager first to diagnose the problem situation and then to determine the extent to which associates will be involved in the decision-making process. The optimal extent of involvement depends on the probable effect participation will have on: (1) the quality of the decision, (2) the acceptance or commitment subordinates exhibit when implementing the decision, and (3) the amount of time needed to make the decision.93 As you can see in Exhibit 10-4, there are several levels of involvement, ranging from the manager’s making the decision alone to a fully participative group approach. Vroom and Yetton suggest that managers can determine the best strategy for associate participation by

Exhibit 10-5 Decision Tree Method for Diagnosing the Appropriate Level of Subordinate Involvement in Decisions Source: V. H. Vroom & P.W. Yetton, Leadership and Decision Making (Pittsburgh, PA: University of Pittsburgh Press, 1973). asking seven diagnostic questions. This procedure yields a decision tree that indicates the most effective level of participation, as shown in Exhibit 10-5. It is not always necessary, however, to ask all seven questions to determine the level of involvement because some branches of the decision tree end after a few questions are asked. Research has supported the Vroom–Yetton method. The method predicts the technical quality, subordinate acceptance, and overall effectiveness of final solutions.94 As shown in the Experiencing Organizational Behavior feature, the success of many U.S. Civil War generals was at least partially determined by a proper level of subordinate involve- ment in decisions. Like a top general during the Civil War, a CEO must decide on the proper level of involvement for the other senior managers. When, for example, the CEO needs to address a complex strategic decision (such as whether to enter a new market), she probably should fully involve other managers in the decision, given the need for a variety of inputs. The input from other top-level managers can be especially valuable when the team mem- bers are heterogeneous in their backgrounds and knowledge.95 As you can see, the Vroom– Yetton model is useful not only for lower-level managers deciding on the appropriate level of involvement for associates but also for generals deciding on the level of involvement for

subordinate officers and for senior managers deciding on the level of involvement for those who report directly to them. One final point is important. When a group decision approach is to be used (Type GII), the manager must determine how much agreement should exist within the group. Must all the members agree on the decision, or will the manager accept the decision even though some members disagree? Typically, managers seek either a majority or a unanimous decision from the decision-making group.96 Seeking agreement from a majority has several advantages over seeking unanimous agreement, including increased speed and reduced risk of impasse.97 Try- ing to obtain unanimity, however, generally creates more discussion and often causes group members to explore the assumptions that underlie the positions and preferences held within the group.98 Managers must balance these factors when deciding which approach to use for group decision making. Value of Individual versus Group Decision Making Under the proper conditions, group decision making should increase the number of ideas generated and improve the evaluation of alternatives. Such outcomes are desirable because they generally produce better decisions. However, our earlier discussion of group decision making suggested that these results are not guaranteed. Furthermore, the generation of ideas and their evaluation are not the only outcomes from group decision making. Commitment and satisfac- tion of participants must also be considered. Important considerations for judging the overall value of group decision making as opposed to individual decision making include the time needed to reach the decision, the costs of making it, the nature of the problem, the satisfaction and commitment of employees affected by the decision, and opportunities for personal growth (see Exhibit 10-6). Time Not surprisingly, groups typically take more time to reach decisions than do individuals. There are several reasons for this difference: • Many social needs are met by the group (exchanging greetings, talking about the weekend, and so forth). The time required to meet these needs increases the time needed to reach a decision.

More ideas and opinions are held by the members of a group vs. a single individual, and discussing these increases the time required. The use of techniques such as brainstorming and dialectical inquiry also adds to the time required. • Arrangements for the group meeting place, format, and assembly must be made, taking more time. Managers must consider the importance of time in their decisions, as well as the potential quality of the decisions. Some decisions must be made immediately. In other situations, time may be available for decision making. When time is an important consideration, the manager may elect to do one of the following: • Make the decision alone. • Use the group for advice only. • Use an already-existing group to minimize the arrangement time. • Use a majority-decision rule rather than requiring unanimity. • Use the nominal group technique to reduce lengthy discussion time. Cost It is also inevitable that group decision making costs more than individual decision making. Time costs money, especially when expensive managers and associates are involved. The addi- tional time must be multiplied by the number of members in the group and their respective financial compensation levels to arrive at the total cost. The additional cost of group deci- sion making can be substantial. Therefore, managers must determine whether the decision is important enough to warrant the extra cost. Nature of the Problem Members of a group typically have more information and ideas than does a single individual.99 If the information and ideas are discussed and integrated, group decisions will often be better informed than individual decisions. Many groups, however, have difficulty managing their collective knowledge. Groupthink and common information bias can prevent information from coming to the surface. Diversity-based infighting and the risky shift can prevent sound integration of information. However, the decision-making techniques discussed in this chap- ter, such as devil’s advocacy, can help the group to overcome these negative social forces and create high-quality decisions. The nature of the problem being examined should be considered in choosing the approach to use. Complex problems that require many different types of input tend to be solved more effectively by groups than by individuals. Deciding whether to develop a new product, for example, may require specialized knowledge of production facilities, engineering and design capabilities, market forces, government legislation, labor markets, and financial considerations. Thus, a group should be better at making this decision. In a key study focused on new-product decision making, groups were in fact more effective than individuals.100 Deciding how to handle dynamic situations where a decision elicits a response from com- petitors also may require different types of inputs. In studies of such situations, groups have been found to be more effective than individuals.101 Satisfaction and Commitment Even though quality is not consistently improved by group decision making, individual sat- isfaction and commitment to the final solution are often enhanced.102 These outcomes could result from several factors. First, group members might change their attitudes toward the vari- ous alternatives as a result of the group’s discussions. In addition, “team spirit” might develop as group members discover similarities among themselves. simply may be that people who share in an important activity such as decision making feel more “ownership” of the decision than when they are excluded from it. Commit- ment as a result of sharing in decision making has been consistently demonstrated by research, as seen in the classic work of Kurt Lewin. During World War II in the United States, there was a scarcity of good cuts of meat but an abundance of organ meats (liver, kidneys, and so forth). Lewin thought that households could be persuaded to buy organ meats if they participated in the decision to do so. He arranged to meet with two groups to test his belief.103 One group was given an informative lecture on the value of using organ meats. The other group was given the same information, but members then were asked to discuss it among themselves and arrive at a group decision on whether to use such meat. It was found that the group decision resulted in a much higher rate of consump- tion (32 percent versus 3 percent). The implementation of the decision was more effective because the group had arrived at the decision. Members of the group were more satisfied and committed to it because it was their decision, not someone else’s. Personal Growth The opportunity for personal growth provided by participation in group decision making is a benefit that is often overlooked. Advancement in a career depends on the ability to learn new skills. One of the most important skills to be learned is how to make decisions, and participation in group decision making may be an ideal opportunity for individuals to acquire this skill.

2. What are the major factors to consider in individual decision making? Related to this type of decision making, please consider the following questions: a. What are the four Jungian decision styles, and how do they influence decisions and effectiveness in the workplace? Give an example of a person you know who had a decision style that did not seem to fit his or her role in an organi- zation. This could be a person in an organization in which you have worked, or it could be a person from a school club or civic organization. What were the outcomes for this person in terms of satisfaction and performance? If you had been the individual’s manager, how would you have managed the situation? b. Can you describe a personal situation involving a reference point?. Were you above or below your reference point? What was the effect on your behavior? c. Which cognitive bias worries you the most, and why? d. How could you use anger to motivate associates to embrace change in the organization? 3. What are the major factors to consider in group decision making? Related to this type of decision making, please consider the following questions: a. Compare the four primary pitfalls of group decision making. If you had to choose one of these pitfalls, which would you prefer to deal with as a manager, and why? b. What are the major group decision-making techniques? If you were dealing with diversity-based infighting, which of these techniques would you try first, and why? 4. What factors should a manager consider when deciding on the level of associate involvement in a decision? What shortcomings do you see in the Vroom–Yetton model? What This Chapter Adds to Your Knowledge Portfolio In this chapter, we have discussed individual and group decision making. We have covered the major steps in decision making, taking note of decision makers’ tendencies to make satisficing rather than optimal decisions. In discussing individuals, we have emphasized decision styles, approaches to risk, cognitive biases, and moods and emotions. To be successful, an organiza- tion’s associates and managers must understand these elements of individual decision making. In discussing groups, we have focused on a set of problems that can affect group decision mak- ing and have described techniques for avoiding or overcoming these problems. Finally, we have discussed a model for assessing the extent to which associates should be involved in managerial decisions. In summary, we have made the following points: • Decisions are choices. Decision making is a process involving several steps: defining the problem, identifying criteria for a solution, gathering information, evaluating alternatives, selecting the best alternative, and implementing the decision. • Satisfactory rather than optimal decisions are common. Satisficing occurs because: (1) individuals cannot gather and process all information that might be relevant for a particular decision and (2) individuals have a tendency to stop searching after the first acceptable solution has been found. • Decision styles represent preferred ways of gathering information and evaluating alternatives. For gathering information, associates and managers can have either a sensing style or an intuition style. With the sensing style, individuals focus on concrete information that is directly available through the five senses. They also tend to focus on rules and facts and are usually practical and realistic. They often are effective in jobs requiring routine decision making. With the intuition style, individuals dislike details and tend to focus on abstractions and figurative examples. They are often effective in jobs that require nonroutine decisions and creativity. For evaluating alternatives, associates and managers can have either a thinking or a feeling style. With the thinking style, individuals focus on objective criteria and systematic analysis. With the feeling style, individuals use subjective approaches and are concerned with the emotional reactions of others. Although the thinking style is consistent with careful decision making, organizations need both thinkers and feelers to achieve a balance. • Risk-taking propensity and reference points affect an individual’s overall approach to risk. Risk-taking propensity relates to a person’s willingness to take chances, whereas

a reference point refers to a possible level of performance that a person uses to evaluate current standing. When a person has a strong propensity for risk and is below his reference point, risk taking is likely. • Cognitive biases represent mental shortcuts that often cause problems. Four important biases are: confirmation bias (information confirming early beliefs and ideas is sought, but potentially disconfirming information is not sought), ease-of-recall bias (information that is easy to recall from memory is relied on too much), anchoring bias (the first piece of information encountered about a situation is emphasized too much), and the sunk-cost bias (past investments are weighted much too heavily). • Moods and emotions are both part of the affective make-up of an individual. Moods correspond to general positive or negative feelings, while emotions correspond to more specific, discrete feelings such as anger and fear. Both moods and emotions can affect decision making. • Several pitfalls are associated with group decision making. First, groupthink occurs when group members are too focused on consensus, particularly early in a decision process. This problem may occur because: (1) group members like one another and do not want to criticize each other’s ideas, (2) group members have high regard for the group’s collective wisdom and therefore yield to early ideas or the ideas of a leader, and (3) group members derive satisfaction from membership in a group that possesses a positive self-image and therefore they try to prevent the group from having any serious divisions. Second, the common information bias leads group members to unconsciously focus on information that is held by many Thinking about Ethics 1. Suppose your manager continues to invest more money in a failing project in which he has already made a significant investment. Does this decision present ethical concerns? If so, describe these concerns. If not, explain. Would you report any concerns to his boss? 2. You are charged with the responsibility of deciding the location for the new manufacturing plant in your division. The existing facility is old. In addition, the new facility will use advanced technology, but the workforce in the current community does not have the skill levels needed to staff it. Thus, you will likely decide on a location in another state. You also must make decisions on when and how to close the current plant. This will mean laying off 300 associates currently working at the plant. How will you tell them that 3. 4. members of the group while ignoring information held by only one or a few group members. Third, diversity-based infighting relates to disagreements being channeled in unproductive ways. Finally, the risky shift occurs when a group makes a more risky choice than individuals would have made (on average) when working separately. • Several techniques exist to address the problems that may arise in group decision making. Brainstorming is a heavily used technique, but in its traditional form it fails in comparisons with individual brainstorming. Brain-writing and electronic brainstorming are useful alternatives. Nominal group technique, Delphi technique, dialectical inquiry, and devil’s advocacy also can be very useful. • Associates make many decisions in high-involvement firms. Managers address many other decisions but may involve associates in those decisions. The Vroom– Yetton model offers advice for assessing the proper level of involvement. To diagnose the situation, seven key questions are asked, and then a suggested approach is found through a decision tree. • Groups have both advantages and disadvantages in decision making. One advantage is better quality, or at least a significant chance of better quality, particularly when complex decisions are being made. This advantage is based on the fact that groups bring more knowledge and facts to the decision and often engage in a richer assessment of alternatives. Other advantages include better acceptance of decisions, greater satisfaction in the organization, and personal growth for group members. Time is one of several disadvantages associated with using a group to make a decision. they will lose their jobs soon? Should you provide severance pay or other help? How will you make these decisions? If an individual observes a group decision in which groupthink has occurred, does she have an obligation to report it to her superiors in order to prevent a serious error in the decision for the organization? Does she take any risks in taking such an action? The risky shift occurs when a group makes a choice riskier than the choice group members would have made individually. Is it unethical for an individual group member to assume more risk when he is part of a group? What issues should be considered with regard to the level of risk involved in a group decision?

Decision Making at a Nuclear Power Facility Part A. Harry, the Reluctant Maintenance Man Harry opened his lunch bucket and was disappointed to find two tuna fish sandwiches again. “Damn,” he muttered to him- self, “four days in a row.” He would have to get on his daughter, Susan, again. She graciously prepared his lunch most days but did not always provide the variety he liked. Of course, Susan would explain that she had other things to do besides providing him with a full lunch menu. Across the cafeteria, Dan Thompson was eating with one of the design engineers, Marty Harris. Dan didn’t like to talk shop while eating, but today had decided to continue a previous discussion over lunch. Dan was the supervisor of technical main- tenance and had noticed that several of his people were reluctant to follow maintenance procedures. He had been told that the specifications were too complex to understand, that the proce- dures were often unnecessary, and that the plant engineers did not really appreciate maintenance problems. On the one hand, Dan realized that most of their complaints were just excuses for “doing things their own way.” On the other hand, he didn’t re- ally know which procedures were important and which were not. That’s why he had asked Marty to meet with him. “Look, Dan,” Marty was saying, “I know these procedures are complex. But damn it, nuclear power plants are complex— and potentially risky. Every specification, every procedure has a reason for being there. If your maintenance people ignore one procedure, they might get by with it and nothing happens. But one of them just might do it at the wrong time, and something could go haywire. You might explain that we have safety and cost to consider. If we lost expensive equipment, how’d they like to pay for it? Not much, I bet. If they lose a finger or get exposed to too much radiation, they wouldn’t like that either. Now, just tell your people that the specifications and procedures, if followed, are the guarantee that things won’t go wrong. They can count on it. If they take shortcuts, I won’t guarantee a thing.” Dan nodded. This really wasn’t what his maintenance staff wanted. They had hoped for a little flexibility, but he was going to have to tell them to follow the procedures. They wouldn’t like it, but they would have to do it. Later that afternoon, Dan met with his unit and relayed the instructions. He reminded them of the rules and disciplinary actions for not following procedures. At the end of the meeting, he couldn’t decide whether it had done any good. On Thursday, Harry noticed that he had been assigned the routinely scheduled maintenance on the three auxiliary feedwa- ter (AFW) pumps. These pumps were normally used only for startup and shutdown and as emergency backup. When the main feedwater system malfunctioned, these pumps would activate to keep the system from “drying out.” The procedure also specified that the pumps should be serviced and tested one at a time and that, at most, one pump should be out of service at a time. “That’s horse manure,” Harry thought. “Takes three hours to service the pumps that way. I can do it in two if I shut ’em down together. Two’s better than three. Those stupid design people have probably never tried to service one of these things.” Harry didn’t bother to open the manual for pump servicing. He had serviced these pumps several times in the past and felt no need to do it from the book any longer. He reached over and shut off three discharge valves, set out his equipment, and got to work. Two hours later he was done. He packed up his tools and hurried to get home.

xploring behavior in action Teamwork at Starbucks Although a few setbacks have occurred in recent years, Starbucks remains one of the most successful business stories in history. The company’s growth and financial success have been nothing short of phenomenal. As of early 2014, Starbucks had more than 19,500 retail outlets in more than 60 countries. For the 2013 fiscal year, sales were $14.9 billion, and $1.2 billion was returned to investors through dividends and stock buybacks. In the most recent quarter for which data are available, the company’s profits soared by 29 percent and more than 558 new coffee shops were added. In addition to its retail coffee shops and kiosks, with which you are probably familiar, the company has entered into several suc- cessful joint ventures and partnerships. For example, a partner- ship with Capitol Records resulted in a series of Starbucks jazz CDs, and a partnership with PepsiCo produces the bottled cof- fee drink Frappuccino. Furthermore, Starbucks has partnered with other companies, including Alaska Airlines and Barnes & Noble Bookstores—all of which exclusively serve or sell Star- bucks coffee. Recently, the company announced a partnership with Danone to produce specialty yogurt products for both Starbucks outlets and grocery stores. The list of industry awards is also impressive, including national and international awards for best management, humanitarian efforts, brand quality, and workplace experiences. Much has been written about the sources of success at Starbucks. Several factors have been singled out for attention— effective branding, superior product quality, periodic product innovation, outstanding customer service, innovative human resource practices, sound real estate strategies, and exceptional corporate social responsibility. However, to anyone who has ever visited a Starbucks, another factor for its success is apparent—the teamwork of Starbucks baristas (the associates who take orders and who make and serve coffee and food). Watching the baristas at work in a busy Starbucks can be like watching a well-choreographed ballet. Baristas are mak- ing elaborate coffee drinks, serving up dessert, taking orders at record speed, answering customer questions, helping each other out when needed, and seemingly enjoying their work. Starbucks is legendary for its customer service, and teamwork is an impor- tant part of how this service is delivered. The extent to which baristas work together as a team, then, is an important aspect of Starbucks’ success. And baristas are not only part of their shop’s team—they are also part of the corporate Starbucks team. Starbucks fosters a teamwork-based culture in many ways. It begins by hiring baristas who have the desires and skills to be successful team players (#tobeapartner). For potential job appli- cants, Starbucks has put it this way: What’s it like to work at Starbucks? We call each other “part- ners.” We understand, respect, appreciate and include different people. We hear each partner’s voice. And we learn from each other. Training is an important element in this culture as well. Within their first month, all baristas receive many hours of training (most other coffee shops barely train their counter staff). New baristas are trained in the exact methods for mak- ing Starbucks drinks, care and maintenance of machinery, and customer service practices. In addition, they receive training in how to interact with each other. One of the guiding principles in Starbucks’ mission statement involves providing a great work environment where people treat each other with respect and dig- nity. Historically, all baristas have been trained to (1) maintain and enhance (others’) self-esteem; (2) listen and acknowledge; and (3) ask questions. Another factor leading to increased teamwork is Star- bucks’ generous benefits package. Because it enhances overall

commitment to Starbucks and its val- ues, the package enhances teamwork. In terms of specific benefits, Baris- tas receive higher pay, better health care, and more vacation time than the industry norm. Even part-time employees working at least 20 hours per week receive benefits. Further- more, Starbucks has a stock option plan in which baristas can participate if they wish to. Yet another way in which Star- bucks fosters a team atmosphere is by providing numerous communication channels so that every barista can communicate directly with headquarters. These com- munication channels include e-mail, suggestion cards, and regu- lar forums with executives. Sources: M. Gunther, “How UPS, Starbucks, Disney Do Good,” Fortune, (Feb. 25, 2006), http://money.cnn.com/2006/02/23/news/companies/mostadmired_fortune_ responsible/index.htm; “Company Profile,” http://www.starbucks.com/about-us/ company-information. Accessed 2014; “Our Starbucks Mission,” http://www.starbucks .com/about-us/company-information/mission-statement. Accessed 2014; “Quarterly Re- sults,” http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-irhome. Accessed In addition to teamwork inside the company, Starbucks promotes teamwork in the community, as can be seen in the following statement: Connecting with each other, with our customers and the communities we are a part of fosters a deep sense of purpose at Starbucks. We believe we can all become a part of something bigger and inspire positive change in the world around us. That’s why we go out to do community service as a team throughout the year (#extrashotofgood), partnering up with organizations to revi- talize and enhance the neighborhoods we serve. These are some of the most telling signs of Starbucks’ desire to create a teamwork culture. 2014; “The Partner Experience,” http://www.starbucks.com/aboutus/jobcenter_ partner_experience.asp. Accessed 2010; “Working at Starbucks,” http://www.starbucks .com/careers/working-at-starbucks. Accessed 2014; A. A. Thompson, J. E. Gamble, & A. J. Strickland, Strategy: Winning in the Marketplace (Chicago: McGraw-Hill, 2006); G. Weber, “Preserving Starbucks Counter Culture,” Workforce Management (Feb. 2005), pp. 28–34.

markets (such as Costa Rica, India, Finland, and Vietnam). To make such important decisions, the team must work together effectively. For the reasons just noted, the development and management of teams is highly critical to organizational performance. However, simply having people work together does not guarantee positive out- comes. Teams must be effectively composed, structured, developed, managed, and sup- ported in order to become high-performance work teams. In this chapter, we begin by exploring the nature of teams and their effectiveness. We then examine the factors that affect team performance. Next, we describe how teams develop and change overtime. Finally, we explain how to develop an effective team and how to manage teams. The Nature of Groups and Teams For over 100 years, social science research has focused on studying collections of people inter- acting together. It is often said that human beings are social animals and that we seek out inter- actions with others. Organizations provide many opportunities for such interactions. Business transactions such as planning and coordinating require that individuals interact. Also, because associates are assigned to work units on the basis of their work skills and backgrounds, they are likely to find others with whom they share common interests. Furthermore, organizations frequently structure work so that jobs are done by associates working together. Two terms are used to define these clusters of associates: groups and teams. Groups and Teams Defined There are many definitions for both group and team, with most researchers using the terms interchangeably.11 For our purposes, a group can be defined in general terms as “two or more interdependent individuals who influence one another through social interaction.”12 In this chapter, however, our focus is more specific: we are mainly interested in teams—groups of individuals working toward specific goals or outcomes.13 The common elements in the defini- tion of a team are as follows:14 1. Two or more people, 2. with work roles that require them to be interdependent, 3. who operate within a larger social system (the organization), 4. performing tasks relevant to the organization’s mission, 5. with consequences that affect others inside and outside the organization, 6. and who have membership that is identifiable to those who are on the team and to those who are not on the team. This definition helps us understand what a team is and is not. For example, mere assem- blies of people are not teams. A crowd watching a parade is not a team because the people have little, if any, interaction, nor are they recognized as a team. A collection of people who interact with and influence each other, such as a sorority or a book club, can be thought of as a general group. When the goals of a group become more specific, such as winning a game, we refer to the group as a team (baseball team, project team, senior management team, and so forth). The baristas at Starbucks work as a team because they work interdependently toward the goal of serving customers, are recognized by others as a team, and most likely perceive themselves as a team. Several types of groups and teams exist, and they differ in important ways. These differences may affect how the group or team is formed, what values and attitudes are developed, and what behaviors result. In the discussion that follows, we describe various types of groups and teams. nformal and Formal Groups Many groups are not formally created by management but arise spontaneously as individuals find others in the organization with whom they wish to interact. These informal groups form because their members share interests, values, or identities. Membership in an informal group depends on voluntary commitment. Members are not assigned, and they may or may not share common tasks or task goals. They do, however, share other social values and attitudes, and their group goals are often related to individual social needs. For example, groups of employees may gather to go to Happy Hour on Friday afternoons or to play in a fantasy football league. The informal group may exist regardless of any formal purpose, and it endures as long as social satisfaction is achieved. Because of their various characteristics, informal groups are not considered teams. Both formal and informal groups exist within organizations. People become members of formal groups because they are assigned to them. Thus, in our terminology, teams are formal groups. To complete their tasks, members of these teams must interact. They often share simi- lar task activities, have complementary skills, and work toward the same assigned goals. They recognize that they are part of the team, and the team exists as long as the task goals remain.15 Examples of such teams are a faculty department, a highway crew, a small unit of production workers in an aircraft plant, and an assigned project team for class. Identity Groups In Chapter 2, we discussed the importance of social identity. Associates often form groups based on their social identities, such as gender identity, racial identity, or religious identity. These groups are referred to as identity groups.16 Individuals belong to many identity groups that are not based on membership in the work organization (e.g., Hispanic, female, Catho- lic). Thus, any member of a team is also a member of several identity groups. Effective team performance can be more difficult to achieve when team members belong to different identity groups or when their identification with these groups conflicts with the goals and objectives of the team.17 For example, suppose most of the members of a team are white North Americans who prefer a decision-making process in which all arguments are open and group members are encouraged to debate and question each other publicly. Some of the team members, however, identify with the Japanese culture, in which publicly contradicting someone is viewed as impo- lite. These team members will likely find the team’s decision-making process to be uncomfort- able and disrespectful, and they may not participate. Thus, team functioning will be impaired. Virtual Teams First discussed in Chapter 3, a virtual team is made up of associates who work together as a team but are separated by time, distance, or organizational structure.18 Exhibit 11-1 dis- plays common tools through which virtual teams operate. The benefits of virtual teams are obvious—they allow people who are physically separated to work together. Virtual teams, however, have been shown to be less effective than face-to-face teams in many instances.19 There are several reasons for this outcome. First, because fewer opportunities exist for informal discussions, trust can be slower to develop among virtual team members. Second, virtual team members rely on communication channels that are less rich than face-to-face interactions. (Chapter 9 discussed communication richness.) Consequently, misunderstand- ings are more likely to occur among team members. Third, it is more difficult for virtual teams to develop behavioral norms that are strongly shared. Finally, it is easier for some members to be free riders (those who do not contribute effectively to the team’s work), thereby causing frustration among other team members. Thus, it is very important that virtual teams be man- aged well, because they have a tendency to fall apart if care is not taken to maintain the team. Research has shown that the effectiveness of virtual teams increases as a function of the number of face-to-face meetings members actually are able to have.20 Also, virtual teams in

which members have a great deal of empowerment (authority to make their own decisions and act without supervision) are more effective than virtual teams with little empowerment.21 The impact of empowerment becomes even more important when virtual teams have little face-to-face interaction.22 Further, virtual teams are more effective when led by transformational leaders.23 In fact, transformational leadership (involving vision, attention to collective interests, and lofty aspirations) may be more important for the success of virtual teams than for the success of face-to-face teams.24 This type of leadership facilitates the development of trust, positive team norms, and commitment to the team and team task, each of which is particularly difficult in virtual situations. Finally, virtual teams may perform better when members enhance social relationships by playing on-line games together (e.g., Scavenger Hunt, Everquest) and when they are taught specific collaboration skills (e.g., active listening, balancing advocacy of ideas with inquiries into what others think of those ideas).25 PricewaterhouseCoopers and my Greenlight, for example, have been very successful with collaboration training.26 When implemented properly, virtual teams can increase productivity and save companies millions of dollars.27 For example, IBM shortened its project completion times and reduced person-hours with virtual teams. Marriott Corporation saved millions of dollars by reducing the number of person-hours required for certain tasks. By using same-time, different-place technology, Hewlett-Packard connected research and development teams in California, Colo- rado, Japan, Germany, and France so that all teams could participate in the same presentation. Functional Teams Teams can be distinguished by the work they do and the purposes they serve. Types of func- tional teams include the following:28 • Production teams—groups of associates who produce tangible products (e.g., automotive assemblers or a team of restaurant chefs) • Service teams—groups of associates who engage in repeated transactions with customers (e.g., sales teams or Starbucks baristas) • Management teams—groups of managers who coordinate the activities of their respective units (e.g., senior management teams) • Project teams—groups of associates (often from different functional areas or organizational units) who temporarily serve as teams to complete a specific project (e.g., new-product development teams) • Advisory teams—groups of associates formed to advise the organization on certain issues (e.g., disability groups that advise on the technical aspects of various products) Self-Managing Teams Self-managing teams have a great deal of autonomy and control over the work they do.29 Usually, self-managing teams are responsible for completing a whole piece of work, an entire project, or a significant portion of a product or service delivery process. For example, rather than working only on one part of an automobile, a self-managing auto-assembly team might build the whole automobile or a significant portion of it. Although a self-managing team typi- cally has formal supervision from above, the supervisor’s role is to facilitate team performance and member involvement rather than to direct the team. The members of the team make important decisions that in other types of teams are made by the supervisor, such as assigning members to specific tasks, setting team performance goals, and even deciding the team’s pay structure. Team members are also held more accountable for team performance. Self-managed work teams can lead to many benefits, including more satisfaction for work- ers, lower turnover and absenteeism, increased productivity, and higher-quality work.30 These benefits result because members of self-managed work teams are more engaged in their work and more committed to the team. However, the effectiveness of self-managed teams can be thwarted by several factors, including leaders who are too autocratic.31 A well-known example of a self-managed work team is the Orpheus Chamber Orchestra, the orchestra without a conductor. Orpheus musicians collaborate to take on leadership roles usually reserved for the conductor. The orchestra is incredibly flexible, with members moving into and out of roles as the need arises. As a result of this collaboration and flexibility, orchestra members always give their best performance, rather than acting passively as they might when working under the direction of a conductor. The Orpheus Chamber Orchestra is more success- ful (sells more tickets, takes in more money, and receives more positive reviews) and has lower turnover and greater member loyalty than many other orchestras.32 Because of its success, the Orchestra has been asked to help with organizational development in companies such as Morgan Stanley, and it has been asked to help with development of student collaborative skills in institutions of higher learning such as Dartmouth College and the University of Maryland. The Orchestra now markets a formal training program focused on the “Orpheus Process.”33 In this chapter’s first Experiencing Organizational Behavior feature, teams at McKinsey & Company are highlighted. Unlike the barista teams at Starbucks, the consulting teams at McKin- sey are temporary project teams. While both the barista and consulting teams operate predomi- nantly in a face-to-face mode, there is a substantial amount of virtual work for McKinsey teams as they access supporting resources from offices dispersed globally (and some virtual work is also carried out between/among team members themselves). Further, both sets of teams experience empowerment, although in McKinsey’s case the teams are more clearly in the self-managing category. For McKinsey, there is also a great deal of complexity. This is often the case with project teams inside and outside consulting. Project teams typically have diverse members who must bridge differences against the backdrop of a temporary existence. A well-developed, time-tested, and globally deployed approach to project work helps McKinsey address the inherent difficulties. Team Effectiveness How do we know when a team is effective? When a team reaches its performance goals, does this alone mean it was effective? Consider a class project in which a team turns in one report and everyone on the team receives the same grade. If the project earns an A, can we say the

team was effective? What if only one person on the team did all the work and everyone else loafed? The person who did all the work is likely to be angry and dissatisfied, while the others have learned nothing and walk away with the idea that it pays to loaf, especially when they have a conscientious teammate. In this case, it would have been better to have individuals work separately, even though the final team product was successful. Because outcome by itself is not enough, team effectiveness is measured on several dimensions: knowledge cri- teria, affective criteria, and outcome criteria. A final consideration in team effectiveness is whether a team is even needed to perform the work, or whether the work is best performed by individuals. Knowledge Criteria Knowledge criteria reflect the degree to which the team continually increases its performance capabilities.34 Teams are more effective when team members share their knowledge with one another and develop a collective understanding of the team’s task, tools and equipment, and processes, as well as members’ characteristics.35 This shared knowledge is referred to as the team’s mental model.36 Shared mental models allow team members to have common expecta- tions and agreed-on courses of action, improve information processing and decision making, and facilitate problem solving.37 Another knowledge-based criterion for team effectiveness is team learning—the ability of the team as a whole to learn new skills and abilities over time.38 Clearly, in the class project example just discussed, this criterion was not met. Affective Criteria Affective criteria address the question of whether team members have a fulfilling and satisfying team experience.39 One important affective criterion is the team’s affective tone, or the general emotional state of the team.40 It is important that the team, as a whole, have a positive, happy outlook on their work. Unfortunately, it is easy for even one member to contaminate the mood of a team.41 The team’s emotional tone influences the way it communicates as well as its cohe- sion, as discussed later. Outcome—Acceptability of Team Outputs One outcome criterion is the acceptability of team outputs to those who depend on the team, whether inside or outside of the organization.42 This criterion is often expressed in terms of the quantity and/or quality of the team’s output.43 The outcome should reflect synergy, as described earlier in the chapter. In the Starbucks case, customer satisfaction with the quality of service, quality of coffee and food products, and length of wait might be assessed. For McK- insey & Company, client satisfaction with the advice provided by a team might be assessed, along with actual improvements in business processes and outcomes. For an airline, the safe and timely arrival of a flight might be used to assess the cockpit team. Outcome—Team Viability for the Future Another important outcome criterion is team viability—that is, the ability of the team to remain functioning as long as needed.44 Research has shown that teams have a tendency to burn out over time. One study, for example, found that the performance of research-and- development teams peaks at around years 2 to 3 and shows significant declines after year 5.45 This decline in performance can be due to team members becoming too complacent and mired in old routines, or to breakdowns in communication among team members. Often, teams are created to deal with changing environments and uncertainty. Consider, for example, a military special operations team that must operate secretly in a foreign and hostile environment. In this case, a team’s ability to adapt to the environment becomes an extremely important outcome.46 Is the Team Needed? As stated earlier, teamwork has become very popular in business, as well as other types of orga- nizations. However, is teamwork always the best way to accomplish a job? According to Jon Kat- zenbach, a popular team consultant who has worked with companies such as Citicorp, General Electric, and ExxonMobil, some situations do not call for teamwork and are better handled by individuals working alone.47 He argues that because teams are popular, managers often “jump on the team bandwagon” without giving a thought to whether a team is needed in the first place. He offers the following diagnostic checklist to determine whether a team should be created: • Does the project really require collective work? If the work can be done by individuals working alone without any need for integration, teamwork is not necessary and merely adds to the burden by creating additional coordination tasks. • Do team members need to focus on collective work a significant portion of the time? Can they instead focus on different aspects of the project most of the time? If the latter, then it might be more efficient to assign specific duties to individuals, rather than make the team responsible for all duties. • Do people on the team hold one another accountable? Mutual accountability signals greater commitment to the team. If there is a situation where these criteria are not met, then perhaps it is better to not use a team to accomplish the job. For example, at Safelite AutoGlass, individuals work in the field at customer locations to install replacement windshields and windows. Because individuals working alone can efficiently complete all of the steps involved, it would make little sense for a team approach to be used.48 Factors Affecting Team Effectiveness As discussed in the opening section on the strategic importance of teams, when used properly, teams can yield great performance benefits to organizations. Teams can create synergy for sev- eral reasons, including greater goal commitment, a greater variety of skills and abilities applied to task achievement, and a greater sharing of knowledge. However, teamwork can also lead to poorer performance than individuals working alone, as suggested earlier. In addition to per- forming their regular work-related tasks and achieving organizational goals, team members must also deal with any interpersonal problems that arise, overcome the propensity to be lazy that some individuals might exhibit, coordinate tasks between/among individuals, and imple- ment effective communication within the team. This extra “teamwork” can be quite substantial and can produce a significant process loss,49 which is the difference between actual and poten- tial team performance. If teams are not able to achieve synergy, less positive outcomes will result. To ensure that the benefits of teamwork outweigh the costs that occur from it, teams must be structured and managed properly. Literally thousands of studies in almost every type of organizational context have examined factors that influence team effectiveness. We focus on three factors: team composition, team structure, and team processes. Team Composition Team composition is important because it addresses who members of the team are and what human resources (skills, abilities, and knowledge) they bring to the team. When managers

assign associates to teams, they often make three questionable assumptions, which can lead to mistakes:50 1. They assume that people who are demographically similar and share beliefs will work better together, and so they attempt to compose teams that are somewhat homogeneous in these areas. 2. They assume that everyone knows how or is suited to work in a team. 3. They assume that a larger team size is always better. In this section, we address these issues. Diversity In Chapter 2, we explored in depth the impact of demographic diversity on group perfor- mance. Some studies have found negative effects for demographic diversity,51 others have found positive effects,52 and still others have found no effect.53 Another type of diversity that can impact team performance corresponds to differences in important beliefs among team members. Much of the research on belief diversity has taken place in the context of senior management teams, exploring how differences in beliefs regarding the attractiveness of various strategies/goals impact management-team performance and, consequently, firm performance. Consistent with research on demographic diversity, the impact of belief diversity on perfor- mance has been mixed.54 Overall, the effects of demographic and belief diversity on team performance seem to depend on several factors:55 • Type of task. Diversity seems to have more positive effects when the team’s tasks require complex problem solving such as that demanded by the pursuit of innovation and creativity.56 Experiences with diverse teams at McKinsey are consistent with this idea. • Type of diversity. If team members are diverse on factors that lead them to have different performance goals or levels of commitment to the team, then the relationship between diversity and performance can be negative.57 • Fault lines. If team members exhibit diversity along two or more dimensions and those dimensions converge, then diversity can be negative.58 For example, team members on a product development team might fall into the following two camps: (1) older male engineers and (2) younger female marketers. In this case, age, gender, and functional background converge such that two quite different subgroups exist. • Time. Diversity can have negative effects in the short run but positive effects in the long run.59 • Outcome. Diversity may have a positive effect on performance but a negative effect on members’ reactions to the team and subsequent behaviors, such as turnover.60 Personality The relationship between members’ personalities and team performance can be quite strong, but the exact relationship depends on the type of task that the team is trying to accomplish. Researchers have several ways of determining the personality of the team; however, all methods are based on aggregating individuals’ scores. The personality traits that have important effects on team performance include agreeable- ness (the ability to get along with others and cooperate) and emotional stability (the tendency to experience positive rather than negative emotions).61 Also, the greater the degree of con- scientiousness among team members, the higher the team’s performance tends to be.62 This is particularly true when the team’s task involves planning and performance rather than creativ- ity. It appears that agreeable team members contribute to team performance by fulfilling team maintenance roles, whereas conscientious team members perform critical task roles.63 Finally, team-level extraversion and openness to experience can be positively related to performance in situations requiring nonroutine decision making and creative tasks.64 (All of these personality traits are discussed in more detail in Chapter 5.) Team Orientation Some individuals are better at working on teams than others because they like working on teams and have the requisite skills. Team orientation refers to the extent to which an indi- vidual works well with others, wants to contribute to team performance, and enjoys being on a team.65 When a team comprises many members who have a positive team orientation, that team will adapt and perform better than a team whose members do not have such an orienta- tion.66 Notice that both Starbucks and McKinsey & Company hire associates based on their teamwork orientation, among other things. Size Many studies have examined the relationship between team size and team performance, and two lines of thought have emerged based on the research. These two ideas are depicted in Exhibit 11-2. The first suggests that the relationship between team size and team performance is shaped like an inverted U.67 As teams become larger, the diversity of skills, talents, ideas, and indi- vidual associate inputs into the task is greater, leading to improved performance. However, as the number of team members continues to increase, the difficulty of ensuring cooperation and coordination also increases. At some point, the effort that goes into managing the team outweighs the benefits of having more members, and team performance begins to decline. The second idea suggests that performance increases linearly with team size without ever showing a downturn.68 This linear relationship, however, most likely results when a team finds a way to avoid the problems associated with too many members, such as social loafing (to be

discussed later in the chapter), poor coordination, and worsening communication. Thus, the actual relationship between team size and performance probably depends on team skill at pro- cess management, and it also no doubt depends on factors such as the scope of the task or the complexity of the environment.69 When task scope and environmental complexity are high, more team members are needed for task accomplishment and strong performance. Overall, there is no single ideal number of team members for all situations. Team Structure Team structure refers to the ongoing means of formal coordination. How tasks are grouped is one key issue. For example, consider a bank with a loan department and a collection department (each department can be considered a team). One department is assigned tasks related to making loans, such as credit analysis, interest computation, loan closing, and filing. These are somewhat dissimilar tasks, but they form a sequential chain related to the lending process—loans cannot be closed until credit analysis has been performed and interest computed. Thus, grouping the tasks in one department under one leader makes sense. The other department is assigned phone collections, field collections, and repossessing tasks. These tasks are less sequential but they are very similar to one another. Task similarity is another basis for grouping tasks under one leader. Beyond grouping together tasks and the individuals assigned to them, it is necessary to use additional structural methods to coordinate the efforts of individuals within a particular team. Otherwise, tasks may not be performed in the best manner possible, and employees may duplicate their efforts or work against each other. Important aspects of team structure include roles, norms, and task structure. Team Member Roles Team roles are expectations shared by team members about who will do what and under which conditions.70 Roles can be formally assigned, or they can be informally adopted by team members. Some members primarily serve in leadership roles, and others take the roles of fol- lowers. The leadership role does not need to be formally assigned or to be a function of formal authority. Leaders can emerge informally in groups. Apart from leadership roles, all teams need to have members fulfilling both task roles and socioemotional, or expressive, roles.71 Task roles involve behaviors aimed at achieving the team’s performance goals and tasks. Socioemotional roles require behaviors that support the social aspects of the team. A team member may also emphasize destructive individual roles, which involve behaviors that place that individual’s needs and goals above those of the team.72 As we would expect, these roles impede team performance rather than facilitate it. Exhibit 11-3 depicts examples of specific task, socioemotional, and individual roles. As a team becomes more stable and structured, the roles of individual members often become resistant to change.73 Group social pressures tend to keep members “in their place,” and the team resists outside forces that would change members’ roles, even if these roles were not the ones assigned by the formal organization. Norms Norms are informal rules or standards that regulate the team’s behavior. Norms tend to emerge naturally in a team and are part of the team’s mental model, although occasionally they are systematically recorded. Norms serve the purpose of regulating team members’ behavior and providing direction. When individual team members violate team norms, some type of pun- ishment or sanction is usually applied. For example, Hudson Houck, a former offensive line coach for the Dallas Cowboys, stated that anyone on the team who didn’t work hard all the time (a team norm) was shunned.

Team norms can become very powerful and resistant to change. Witness a situation such as a regular team meeting, or even a college class, where everyone sits in the same seat at every meeting. Any change in seating can cause unease on the part of group or team members. In these situations, seating norms develop to curb the social unease that could result from choosing a different seat at every meeting. No one has to wonder why someone is or is not sitting next to her. Nor does anyone have to worry about how others will interpret his motives for a seating choice. Although norms allow teams to function smoothly, they can sometimes be harmful to team members. Research on the causes of eating disorders in young women illustrates this fact.75 Certain groups, such as cheerleading squads, sororities, and dance troupes, have par- ticularly high rates of bulimia among their members. Examination of these groups has indi- cated that they often develop group norms of binging and purging. Instead of considering this behavior to be abnormal and unhealthy, team members come to view it as a normal way of controlling weight. At NASA in the United States, a past norm regarding safety has been cited for creating some difficulties. In an apparent reversal of standard engineering practice, engineers were not asked to show that a mission would be safe, but rather were asked to prove that a problem existed, if indeed a problem was suspected. The standard approach is very conservative, but the approach cited at NASA creates a more difficult task for engineers. Some partly blame the Columbia shuttle disaster on this norm.76 Because norms are not always positive, it is important that teams develop norms that foster team productivity and performance and promote the welfare of individual members. Task Structure Task structure has been shown to be an important determinant of how teams function and per- form.77 Several typologies have been proposed for categorizing tasks. One of the most popular typologies emphasizes the following: (1) whether tasks can be separated into subcomponents, (2) whether tasks have quantity or quality goals, and (3) how individual inputs are combined to achieve the team’s product.78 First, then, we consider whether a task can be broken down into parts. Tasks such as play- ing baseball, preparing a class project, and cooking a meal in a restaurant are divisible tasks because they can be separated into subcomponents. Thus, different individual associates can perform different parts of the task. Unitary tasks cannot be divided and must be performed by a single individual. Examples of unitary tasks are reading a book, completing an account sheet, and talking to a customer on the phone. If a particular goal or mission requires the completion of unitary tasks, it may not be advantageous for a team to complete the mission. Second, we consider the goals of the task. Tasks with a quantity goal are called maximiza- tion tasks. Examples of maximization tasks include producing the most cars possible, running the fastest, and selling the most insurance policies. Tasks with a quality goal are referred to as optimization tasks. Optimization tasks often require innovation and creativity. Examples of optimization tasks include developing a new product and developing a new marketing strategy. As mentioned earlier, diverse teams tend to perform better on optimization tasks. Finally, we consider how individual inputs are combined to achieve the team’s product. The manner in which this is done places a limit on how well the team can perform. We can classify how inputs are combined by determining whether a task is additive or compensatory and whether it is disjunctive or conjunctive. Additive tasks are those in which individual inputs are simply added together—for exam- ple, inputting data. When members’ inputs are additively combined, team performance is usu- ally better than the best individual’s performance.79 Compensatory tasks are those in which mem- bers’ individual performances are averaged together to arrive at the team’s overall performance. For example, members of a human resource management team might individually estimate future labor demands in the organization, and the total projection might then be based on the average of the managers’ estimates. Team performance on this type of task is likely to be better than the performance of most of the individual members. Disjunctive tasks are those in which teams must work together to develop a single, agreed- on product or solution. A jury decision is an example of a disjunctive task. Usually, disjunctive tasks result in team performance that is better than that of most of the individual members but not as good as the best member’s performance (i.e., not as good as the best member’s inputs/ideas).80 Conjunctive tasks are those in which all members must perform their individual tasks to arrive at the team’s overall performance. Examples of conjunctive tasks are assembly lines and trucks moving in a convoy. Teams working on conjunctive tasks cannot perform any better than their worst individual performers. For example, an assembly line cannot produce goods at a rate faster than the rate at which its slowest member performs. Team Processes Team processes are the behaviors and activities that influence the effectiveness of teams. Team processes have strong effects on outcomes. Team processes include cohesion, conflict, social facilitation, social loafing, and communication. Cohesion Team cohesion refers to members’ attraction to the team.81 Interpersonal cohesion is the team members’ liking or attraction to other team members. Task cohesion is team members’ attraction and commitment to the tasks and goals of the team.82 Team cohesion is an impor- tant criterion because research indicates that cohesion affects team performance outcomes and viability.83 Furthermore, members of cohesive teams are more likely to be satisfied with their teams than are members of noncohesive teams.84 Cohesive teams are likely to have strong performance when there is task cohesion.85 When there is only interpersonal cohesion, performance may be low. In fact, if team members really like each other and enjoy spending time together but are not committed to their organizational tasks and goals, they could perform worse than if they were not interpersonally cohesive. A classic study of factory workers illustrates these effects.86 Interpersonally cohesive teams com- mitted to organizationally sanctioned performance goals performed the best, whereas inter- personally cohesive teams without commitment to such goals performed the worst—even worse than non–interpersonally cohesive teams lacking commitment to the performance goals. Finally, it is worth noting that cohesion also has stronger effects on performance when there is a great deal of interdependence among team members.87 In the next Experiencing Organizational Behavior feature, we discuss a form of behavior that is consistent with both task and interpersonal cohesion—backing-up behavior. As in many jobs, performers in the Cirque du Soleil must be ready to take over for their team members at a moment’s notice and do more than their fair share. The support that team members provide to each other can be quite important in the performance of the team and the unit in which it operates. The Experiencing Organizational Behavior feature describes the necessity of backing-up behavior by Cirque du Soleil performers. However, this behavior is necessary in almost all teams. Think of the need for backup among police officers. Backing-up behavior may be one of the strongest indicators of team effective- ness, because not only is everyone on the team doing his or her share, but each member is will- ing to take on others’ work when assistance is needed or to fill in any gaps. Teams that engage in backing-up behavior are displaying the spirit of high-involvement engagement by going beyond what is merely necessary to get the job done. Conflict When the behaviors or beliefs of a team member are unacceptable to other team members, conflict occurs. Several types of intragroup (within-team) conflict exist; they include personal conflict (sometimes referred to as relationship conflict), substantive conflict (sometimes referred to as task conflict), and procedural conflict (sometimes referred to as process conflict). Personal conflicts result when team members simply do not like each other. As we might expect, people assigned to a team are more likely to experience this sort of conflict than are people who choose to belong to the same informal group. Personal conflict may be based on personality clashes, differences in values, and differences in likes and dislikes. No disagreement over a specific task issue is necessary for personal conflict to occur. One study of business

Sources: “Cirque Du Soleil at a Glance,” Cirque du Soleil, at http://www.cirquedusoleil.com/en/home/about-us/at-a- glance.aspx; R.M. McIntyre & E. Salas, “Measuring and Managing for Team Performance: Emerging Principles from Com- plex Environments,” in R.A. Guzzo et al. (eds.), Team Effectiveness and Decision Making in Organizations (San Francisco: Jossey-Bass, 1995), pp. 9–45; J. Mullen, Cirque du Soleil and MGM Grand Cited in Acrobat’s Death Plunge in Vegas, CNN (2013), http://www.cnn.com/2013/10/30/us/nevada-cirque-death-investigation; C.O.L.H. Porter et al. “Backing Up Behaviors in Teams: The Role of Personality and Legitimacy of Need,” Journal of Applied Psychology 88 (2003): 391–403; L. Tischler, “Join the Circus,” Fast Company (July 5, 2005), http://www.fastcompany.com/magazine/96/cirque-du-soleil. executives found that 40 percent of their conflicts resulted from personal dislike rather than disagreement over a specific issue.88 Substantive conflicts occur when a team member disagrees with another’s task-related ideas or analysis of the team’s problem or plans. For example, a design team whose task is developing a better product may disagree about whether they should focus on making the product more attractive or making it easier to use. Substantive conflicts can often lead to greater creativity and innovation, if they do not become personal conflicts.89 Finally, procedural conflicts occur when team members disagree about policies and pro- cedures. That is, they disagree on how to work together. For example, a member of a virtual team may believe that the correct way to work as a team is to check in by e-mail with other members at least twice a day. Furthermore, he may believe that team members should respond immediately to such e-mails. Other team members, however, may believe that checking in so frequently is a waste of time and may want to contact others only when necessary. Group norms develop as a way to avoid procedural conflicts. Teams may also develop specific policies or rules to avoid conflicts of this kind. Robert’s Rules of Order provides one such device because it specifically defines how group meetings should be conducted. Depending on the specific type, conflict can have negative or positive consequences for team effectiveness.90 On the one hand, personal conflict tends to be negative because it inter- feres with cooperation and a healthy task focus. On the other hand, substantive conflict can be positive, particularly for tasks involving creativity and innovation. This type of conflict gener- ates multiple ideas and sets the stage for the best ones to be emphasized. Openly confronting and discussing the different task ideas is important, however. Ignoring differences of opinion is less helpful. Overall, substantive conflict can be beneficial when teams cooperatively problem solve, develop positive norms, and create a consistent team mental model.91 Effective leader- ship as well as strong team orientations among team members help to create these beneficial circumstances. Procedural conflict has not been studied as often as the other two types of conflict, but it seems to have negative effects if not adequately addressed.92 Social Facilitation In the late 1890s, Norman Triplett, a bicyclist and early social scientist, noticed that cyclists performed better racing against others than when they were timed cycling alone.93 This effect— that is, when the presence of others improves individual performance—has been termed the social facilitation effect. Social facilitation suggests that teamwork can lead to increased per- formance because others are present. Several reasons for the social facilitation effect have been suggested. One is that the presence of human beings creates general arousal in other human beings.94 This general arousal then leads to better performance. Another explanation is that the presence of others arouses evaluation apprehension, so that people perform better because they think they are being evaluated.95 What- ever the reason, social facilitation seems to occur only when people are performing well-learned, simple, or familiar tasks.96 The presence of others can actually decrease performance on tasks that are complex or unfamiliar. For example, someone who is not accustomed to giving speeches is likely to perform more poorly when speaking in front of others relative to practicing alone. Further, social facilitation seems to occur mostly for people who are extraverted and high in self- esteem. These positive attributes make the presence of others a positive force.97 Social Loafing Research suggests that the simple act of grouping individuals together does not necessarily increase their total output; in fact, people working together on a common task may actually perform at a lower level than they would if they were working alone. This phenomenon is called social loafing98 or shirking,99 and it can obviously result in serious losses. There are three primary explanations for the social loafing effect. First, if individual outputs are not identifiable, associates may shirk because they can get away with poor performance. Second, if associates, when working in teams, expect their teammates to loaf then they may reduce their own efforts to establish an equitable division of labor.100 In this case, individual team members do not have a team identity and place their own good (working less) over the good of the team. Finally, when many individuals are working on a task, some individuals may feel dispensable and believe that their own contributions will not matter.101 This is likely to happen when indi- viduals think that they have low ability and cannot perform as well as other team members.102 Research on shirking supports these explanations. In one study, individuals were asked to pull alone as hard as possible on a rope attached to a strain gauge. They averaged 138.6 pounds of pres- sure while tugging on the rope. When the same individuals pulled on the rope in groups of three, however, they exerted only 352 pounds of pressure, an average of 117.3 pounds each. In groups of eight, the individual average dropped even lower, to an astonishing 68.2 pounds of pressure. This supports the first explanation of social loafing—that the less identifiable the individual’s output is, the more the individual loafs.103 Also, if the people with the least physical strength decrease their pressure the most, then there would also be support for the dispensability explanation. In a second study, participants expected to work on a group task. Some of the subjects were told by a co-worker (a confederate of the researchers) that the co-worker expected to work as hard on the group task as she had on an individual task. Other participants were told that the co-worker expected to work less hard on the group task than on the individual task. In a third condition, nothing was said about the co-worker’s intention. In the group task, the participants who had been told to expect lower performance from the co-worker reduced their efforts. However, the participants who had been told to expect no slacking of effort from the co-worker maintained their effort during the group task.104 This supports the second explana- tion of social loafing—that individuals reduce their efforts to establish an equitable division of labor when they expect their co-workers to slack off in their efforts. Students often experience social loafing. It occurs frequently when students are assigned to team projects in one of their courses. Inevitably, when student teams work on a class project, one or two members coast along, not “pulling their own weight.” These “loafers” frequently miss the project team’s meetings, fail to perform their assigned tasks, and so on. They rely on the fact that the more motivated members will complete the project without their help. The loafers still expect to share the credit and obtain the same grade, because the professor may not be concerned about determining who worked and who did not. One study examining social loafing in student groups found that the most common reasons for loafing were perceptions of unfairness (i.e., others were loafing) and perceived dispensability because one was not as talented as others.105 Social loafing is always a possibility in work teams, especially in teams that have lim- ited task cohesion. For example, in a study of almost 500 work team members, 25 percent expressed concern that members of their teams engaged in social loafing. This can be extremely costly to organizations, because creating and supporting work teams requires investments in such things as new technology to aid teamwork, coordination efforts, more complicated pay systems, and restructuring of work. Thus, when teams perform worse than individuals, not only is performance lower, but costs are also higher. Social loafing can occur in any team at any level in an organization. And because social loaf- ing clearly results in lower performance, it is a serious problem. At the least, when social loafing occurs, the organization’s human capital is underutilized. Fortunately, managers can use several methods to address this problem.106 First they can make individual contributions visible. This can be accomplished by using smaller rather than larger teams, using an evaluation system where everyone’s contributions are noted, and/or appointing someone to monitor and oversee everyone’s contributions. The second thing that can be done is to foster team cohesiveness by providing team- level rewards, training members in teamwork, and selecting “team players” to be on the team. Communication Team members must communicate to effectively coordinate their productive efforts. Task instructions must be delivered, results must be reported, and problem-solving discussions must take place. Because communication is crucial, teams create many formal communication processes, which may include formal reports (such as profit-and-loss statements), work sched- ules, interoffice memoranda, and formal meetings. But informal communication also is necessary. Associates need and want to discuss per- sonal and job-related problems with each other. Informal communication is a natural conse- quence of group processes. The effectiveness and frequency of communication are affected by many of the same factors that lead to group formation. For example, frequency of communi- cation is partially the result of the opportunity to interact. People who share the same office, whose jobs are interconnected, and who have the same working hours are likely to commu- nicate more frequently. Thus, the opportunity to interact leads to both group formation and frequent communication. This is why virtual teams are more likely to be effective when they occasionally have more face-to-face interaction.107 In addition to affecting task performance, communication frequency and effectiveness are related to team member satisfaction, particularly in cohesive teams. Increased communication enhances team members’ satisfaction with their membership on the team. Also, communication becomes more rewarding as team membership increases in importance and satisfaction to associ- ates.108 Thus, communication is both a cause and a consequence of satisfaction with the team. Team Development The nature of interactions among team members changes over time. Teams behave differently when they meet for the first time relative to when they have been together long enough to be accustomed to working together. At the beginning of a team’s life cycle, members may spend more time getting to know each other than they do on the task. As time progresses, however, the team often becomes more focused on performance. According to Bruce Tuckman’s group devel- opment model, teams typically go through four stages over their life cycle: forming, storming, norming, and performing.109 During the forming stage, associates come to teams without established relationships but with some expectations about what they want in and from the team. The new team members focus on learning about each other, defining what they want to accomplish, and determining how they are going to accomplish it. Sometimes personality conflicts or disagreements arise about what needs to be done or how the team should go about doing it. At this point, the team has entered the storming stage, marked by conflict among team members. If the team is to be successful, team members need to resolve or manage personal conflicts and work through sub- stantive and procedural conflicts in order to reach sufficient agreement on desired performance outcomes and processes. In working through substantive and procedural conflicts, the team will come to some understanding concerning desired outcomes, rules, procedures, and norms for team behavior. This is the norming stage, in which team members cooperate with each other and become more cohesive. Once the team has established norms and is working as a cohesive whole, it enters the performing stage. In this stage, team members are more committed to the team, focus on task performance, and are generally more satisfied with the team experience.110 Most teams experience some sort of end. Individual members may leave, or the team may be formally disbanded when its mission has been accomplished. Thus, teams ultimately go through a fifth stage, adjourning, when individuals begin to leave the team and terminate their regular contact with other team members. Adjourning can result from voluntary actions on the part of team members, as when individuals take jobs with other organizations or retire. It can also result from actions over which team members have little control, such as reassignments by the parent organization or the end of a project. When sev- eral members of a cohesive team leave in a short period of time, the remaining members often experience feelings of loss, and the team becomes less cohesive and less structured, until it no longer exists, unless new members replace the members who have left. In this instance, the team is similar to a new team, and the process of team development is likely to begin again. Teams may not go through all of the stages described above in all situations. For example, the members of a newly formed team who belong to the same organization may already know each other. They are likely to be familiar with performance expectations and may even share similar work-related values. Thus, the forming and storming stages are not needed. Further- more, the nature of the team’s work can influence the formation of the team. Most research on Tuckman’s stage theory has focused on simple teams that worked on a single project and whose members were relative strangers.110 Thus, the theory may not apply to teams that work on complex projects or that have members who have had a long history together.111 The punctuated equilibrium model (PEM) of team development provides an alterna- tive view of development over time.112 This model suggests that teams do not go through linear stages but that team formation depends on the deadlines for the task at hand. The PEM is essentially a two-stage model representing two periods of equilibrium “punctuated” by a shift in focus. In the first stage, team members get to know one another and engage in norm- ing activities. The focus at this stage is the development of socioemotional roles. When the deadline for the team’s work approaches, the team undergoes a dramatic change in function- ing. This is the point at which the “punctuation” occurs. After this point is reached, the team refocuses its activities on performing the task. Thus, the focus shifts to task roles. This model contrasts with Tuckman’s stage model because it suggests that team life-cycle stages are deter- mined by temporal aspects of the task, not by social dynamics within the team. Exhibit 11-4 compares the two models. Overall, research suggests that the PEM model best describes the development of new teams working on a very specific, clearly time-bounded task

Managing for Effective Teams To experience the potential gains of teamwork, organizations must provide support for teams to work effectively. An organization cannot simply declare that it will increase the level of teamwork without planning, training, selecting, and rewarding people for teamwork. Follow- ing are several “best practices” for managing effective teams. Top Management Support Effective teamwork requires support from the top of the organization.114 All organizations that are known for their teamwork, such as Harley-Davidson, Whole Foods, Mayo Clinic, FedEx, and Boeing, have senior management teams that actively promote teamwork. Several manage- ment practices can help senior management to support team effectiveness:115 • Make an explicit decision about using teams and tie the decision to business objectives. • Have an explicit vision and strategic plan that serves as the basis for determining desirable team outcomes. • Actively include associates and managers at all levels in the decision-making process related to the use of teams. • Use results-oriented measurement of team outcomes and expect all leaders in the organization to do the same. • Actively manage and review support systems for teams. Senior managers at Starbucks, described in the chapter-opening case, clearly follow these recommended practices. For example, two of the company’s stated missions are to make profits and to be environmentally sensitive. These missions are incorporated into the baristas’ perfor- mance assessments. The company also provides mechanisms that enable baristas to regularly communicate and share their ideas with senior management. Support Systems Support systems allow a team to function well. Support systems include technology, information systems, selection processes for team members, training procedures, rewards, and leadership. Technology It is important that teams have access to the technology they need to do their work. This includes the technology necessary to carry out tasks (such as tools and computer software) and also technology to help team members coordinate their work. Many technologies are designed to help teams communicate and interact more fully and efficiently. Examples can be found at McKinsey & Company. Each team member has access to personal computing technology as well as mobile communication devices. Each member has access to the Internet for web- conferencing and other tasks. Also important for success, team members should have input into the adoption or development of communication technologies.116 Information Systems Teams must have the necessary information to act, but they frequently need more information than they possess. An example is provided by the now-defunct People Express Airlines, which used customer service teams to conduct much of the airline’s business.117 The customer service teams needed important information, such as future bookings, to do their work; however, executives were reluctant to allow them access to this information because they were afraid that it might leak out to their competitors. Teams can also suffer from receiving too much information.118 Often, information tech- nology can provide people with a flood of information; but as discussed in Chapter 9, too much information creates overload. In such situations, associates may not know to which information they should attend. They may become overwhelmed and attend to only a portion of the information, or perhaps attend to none of it, or they may even shut the system down entirely. A related problem is information unavailable in the form most useful to the team. To address this problem, it is important that teams have “user-friendly” information systems. Selection of Team Members Traditionally, it is recommended that organizations select team members who have the knowledge, skills, and abilities to perform their individual jobs and have values that fit well with the organi- zational culture.119 However, team members also must fill other roles. For example, they may perform teamwork roles, such as energizing the team or soliciting and elaborating on the ideas of others. Furthermore, because teamwork often involves a variety of activities, a broader set of skills may be necessary for team-based jobs. Thus, team selection needs to consider more factors than selection for traditional jobs. Following are some suggestions for selecting team members:120 • Conduct a teamwork analysis to identify the knowledge, skills, and abilities needed to perform both individual task work and teamwork. • Carefully consider who is to do the assessment of potential team members’ knowledge, skills, and abilities and who will decide whom to select. It is often useful to have existing members of the team itself (if any) involved in the selection process. Whole Foods has been a proponent of this approach. • Tailor the selection process to the type of team. For example, personality tests may be appropriate for service teams but not for senior management teams. • Consider political issues. It may be important to have members representing different constituencies on a team. For example, a university’s internal review board that evaluates whether faculty research is ethical in its treatment of human subjects often includes a community member who does not have ties to the university community and does not do research. Rewards If people are to work together effectively as a team, they must be rewarded as a team. Team members have little motivation to engage with and support one another if they are rewarded only for individual performance. Thus, it is important that the reward system for teams have multiple components, some of which reflect team performance and some of which reflect individual performance. Gain sharing at the team-level is one type of reward system for teams, where gains in efficiency or quality lead to financial rewards. Overall, the stronger the interde- pendence among team members (e.g., disjunctive tasks), the greater the team-based compensa- tion should be. Furthermore, if the teamwork requires cross-functional work and knowledge, team members may receive skill-based or knowledge-based pay. Such pay is determined by the skills and knowledge associates acquire rather than by how they perform on specific tasks. Finally, team-based pay should be provided only for those aspects of performance under the team’s control.121 Leadership A team’s internal leadership is crucial for the effectiveness of the team.122 Team leaders can naturally emerge, or they can be assigned based on special skills or authority. Successful team leaders must fulfill three roles.123 The first role, team liaison, requires the leader to network with information sources both inside and outside the team, creating a bridge between the two. Outside sources include

suppliers, clients, customers, other teams, and higher levels of management. In the liaison role, a team leader also acts as a representative of the team and watches out for the team’s interests. In essence, the team leader connects the team to the outside world. Another leader role involves direction setting. The leader must help to ensure the develop- ment of a direction for team action. This means that the leader must guide the development of action plans based on the long-term organizational goals and strategies developed by senior managers. Finally, the team leader must ensure operational coordination. This role represents the man- agement of the team’s work and processes. The major responsibilities of this role involve recogniz- ing each member’s contributions and deciding how to best integrate the various contributions; monitoring team performance and suggesting or making necessary changes if feedback indicates problems; and facilitating a psychological climate that will enable the team to function effectively. Training Recall from an earlier section that one of the assumptions often held by managers is that people generally know how to work on teams and are suited for such work. The existence of thousands of team training programs and methods, however, speaks to the criticality of adequate training. Team training generally focuses on four different types of skills:124 (1) interpersonal skills, especially communication, supportiveness, and trust; (2) problem-solving skills, which allow team members to identify problems, generate solutions, and evaluate solutions; (3) goal-setting skills, and (4) role-clarification skills, which allow members to articulate role requirements and responsibilities. A great deal of research has been done on the effectiveness of team training in improving team performance. This research shows that training has positive but somewhat weak effects on performance outcomes while having stronger positive effects on team members’ evaluations of their team.125 We should note that most of this research has been conducted on intact teams whose members had considerable experience working together. As a result, these teams had existing structures, roles, and norms, which probably made them more difficult to change. Training is likely to have a greater impact on the performance of newly formed teams. In the Managerial Advice feature, a specific and important type of team training is profiled.

? back to the knowledge objectives 1. What makes a collection of people a team? How does a team differ from a group? What are some different types of teams? 2. To determine whether a team is effective, what should be assessed? In your opinion, which of the three areas of team effectiveness is most important to assess and why? Discuss a situation where your chosen area of effectiveness might not be so important. 3. What influences the effectiveness of teams? Be sure to address each of the following specific questions: a. Which composition factors should a manager consider in designing an effective team? Would these factors differ depending on the type of team being formed? b. What are the important aspects of team structure? How does each affect team performance? c. Which team processes can have a positive influence on team performance? Which processes can have negative effects? 4. How do the stage model and the punctuated equilibrium model of team development differ? 5. What can organizations do to encourage and support effective teamwork? Be sure to rank your suggestions in order of importance? What This Chapter Adds to Your Knowledge Portfolio This chapter discussed the importance of teams and teamwork in organizations. We began by discussing the nature of groups and teams and their different forms. Then, we addressed the cri- teria that should be used to determine whether a team is effective and the factors that influence team effectiveness. Next, we exam- ined how teams develop over time. Finally, we described ways in which organizations and leaders can promote team effectiveness. To summarize, we focused on the following points: • A group can be defined in very general terms as “two or more interdependent individuals who influence one another through social interaction.” A team is a group that consists of two or more people who work interdependently within an organization, with tasks that are relevant and consequential for the organization’s mission, and who are identified as a team by people within and outside the team. • Groups and teams can be classified in a number of ways. Both informal and formal groups arise in organizations. People in organizations often belong to identity groups based on their social identities, such as gender identity, racial identity, or religious identity. Types of teams include virtual teams, functional teams, and self- managing teams. The type and purpose of the team can affect how the team develops and functions. • Team effectiveness is measured in terms of the team’s learning and cognition, team members’ feelings about the team, and team outputs and viability. • The composition of the team influences the team’s effectiveness. The diversity of members, their personalities, and the size of the team all influence team effectiveness. • The structure of a team, including the roles held by members, the norms, and the task structure, can all influence a team’s effectiveness. • The processes used and experienced by the team also influence team performance. Team processes include team cohesion, conflict among team members, social facilitation, social loafing, and communication. • Teams change and develop over time. The stage model of development proposes that teams experience four developmental stages: forming, storming, norming, and performing. A fifth stage, in which the team disbands, is adjourning. The punctuated equilibrium model of team development holds that teams undergo a shift from interpersonally-focused to task-focused when the deadline for the team project moves closer. • Organizations can promote effective teamwork through senior management support, technical and informational support, selecting appropriate people for teamwork, training people in teamwork skills, and rewarding team performance. • Effective team leaders are also important for teamwork. They act as liaisons, ensure proper direction, and operationally coordinate team activities. Thinking about Ethics 1. Should associates be required to work in teams if they prefer not to do so—that is, if they prefer to be evaluated based only on their individual efforts? What are the implications of allowing people such choices (positive or otherwise)? 2. Is it appropriate to exclude some members from teams when status and long-term rewards (such as promotions) in an organization are based largely on team performance? 3. What types of sanctions (if any) should be imposed on team members identified as engaging in social loafing? Who should apply those sanctions (if any)? 4. What are team leaders’ responsibilities with regard to political processes within the organization? That is, when other individuals outside the team promote their own self-interests at the expense of the organization, especially when these actions have negative effects on the team’s productivity, what should team leaders do? How can they best fulfill these responsibilities to the team and to the organization? Human Resource Management Applications The human resource management (HRM) function often plays a very large role in creating effective teams for an organization. Specific activities executed by the HRM department are as follows: HRM units offer selection tools that can help to find team- oriented individuals. HRM professionals often develop specific interview questions designed to highlight team orientation. They also may develop case experiences that can reveal a person’s pre- dispositions. Finally, they may obtain personality tests that can provide information on team skills and interests. Tests of the Big Five personality traits are useful for this purpose (see Chapter 5). building your human capital Do You Have a Team? The benefits of teamwork are clearly outlined in this chapter. Not only can teams increase organization-related performance and contribute to the competitive advantage of the organiza- tion, they can also increase individual well-being. This has HRM units also develop or otherwise make available team training. This training may involve webinars, lunch-and-learn lectures, and testing. It may involve the assignment of a mentor to difficult team members. It may also involve outsourced experiential teambuilding. HRM units often help to design reward structures to promote team spirit and performance. For teams with disjunctive tasks, the reward structure should emphasize team outcomes to a substan- tial degree, with an individual’s rewards being a function of those outcomes. For teams with conjunctive tasks, the reward system should put significant emphasis on individual accomplishments.

the strategic importance of Conflict, Negotiation, Power, and Politics The Exploring Behavior in Action feature illus- trates a fundamental conflict between envi- ronmental organizations and businesses that was once believed to be a zero-sum game, where one side had to win and the other had to lose. It was thought that businesses could either act responsibly toward the environment and thus decrease profits (environmentalists win) or they could operate to increase profits at the expense of the environment (business wins). However, today many environmental organizations and businesses are handling this conflict in a different manner so that effective compromises or even win–win out- comes are achieved. Environmentalists have learned to work with businesses to develop more environmentally friendly practices rather than to protest and embarrass them. At the same time, many businesses have come to view being environmentally responsible as a profitable business strategy.1 In a recent report from the Boston Consulting Group, a number of companies were identified as having found ways to generate profit from their environmental initiatives.2 For those businesses that have been able to solve this conflict, the payoff has been immense. First, many practices that are environmentally sound have also served to save businesses money. For example, DuPont has saved billions of dollars from reductions in energy use since 1990.3 Another way in which companies benefit is by improving sustainability of the environment. This is a long-term perspective whereby companies operate so as not to deplete needed re- sources, thereby ensuring that they can op- erate in the future. For example, Walmart, one of the largest purveyors of seafood, has developed a program of sustainable fishing practices to maintain commercial stocks of fish, which can become depleted.4 Finally, companies’ reputations are bolstered by acting in an environmentally responsible manner.5 There are many very public “report cards” (e.g., the Dow Jones Sustainability Index and the FTSE4Good Index) that evaluate how well companies perform in terms of environmental responsibility, as well as other types of social responsibility.6 Com- pany reputation has been linked to profits,7 associates’ morale,8 and the ability to recruit top talent.9 In this case, effectively dealing with and resolving conflict has been shown to have a very important strategic impact on firm performance. In the case of conflict over environ- mental issues, environmental organizations and business firms have been able to work together in many cases. Further, individuals within environmental organizations who have been in conflict over how far to push certain companies have been able to effect- ively resolve their differences in many cases. Finally, managers within business firms who have been in conflict over how far to go in satisfying the demands of environmentalists have been able to effectively resolve their dif- ferences in many cases. In this chapter, we examine the nature of conflict, the process of negotiation, and the use of power and politics. We begin by defining conflict and differentiating among different types of con- flict. We then turn to the causes of conflict, its outcomes, and various responses to it. After discussing conflict-resolution techniques in or- ganizations, we conclude with a discussion of power and politics. The Nature of Conflict Conflict is a “process in which one party perceives that its interests are being opposed or nega- tively affected by another party.”10 In this chapter, we focus on conflict between individuals, between organizational units, and between organizations. As we noted in the opening discus- sion, some conflicts are dysfunctional and some are not. In this section, we look more closely at the difference between functional and dysfunctional conflict and then describe three major types of conflict. Dysfunctional and Functional Conflict Dysfunctional conflict is conflict that interferes with performance. Conflict can be dysfunc- tional for several reasons. First, conflict with important constituencies can create doubt about the organization’s future performance in the minds of shareholders, causing stock prices to drop.11 For example, this happened when Greenpeace protested Shell Oil’s sinking of the oil rig, Brent Spar, in the North Sea.12 Second, conflict can cause people to exercise their own indi- vidual power and engage in political behavior directed toward winning the battle at any cost rather than attaining broader organizational goals. Third, conflict can have negative effects on interpersonal relationships, as shown in Exhibit 12-1. Finally, it takes time, resources, and emo- tional energy to deal with conflict, both on an interpersonal and an organizational level. Thus, resources that could be invested in achieving the organization’s mission are used in the effort to address the conflict. One survey showed that managers spend approximately 25 percent of their time dealing with conflict internal to their organizations. In some fields (such as hospital administration and management of municipal organizations), managers can spend as much as 50 percent of their time managing conflict. Managers have rated conflict management as equal to or higher in importance than planning, communicating, motivating, and decision making.13 As mentioned, however, conflict need not be dysfunctional. Conflict that has beneficial results is considered functional conflict.14 An organization without functional conflict frequently lacks the energy and ideas to create effective innovation. Indeed, to encourage functional conflict in

groups, some managers have implemented a formal dialectical-inquiry or devil’s advocacy approach (described in Chapter 10). For example, the person serving as devil’s advocate has the responsibility of questioning decisions to ensure that as many alternatives as possible are considered.15 By stimulating energy and debate, conflict can have a number of functional consequences for organizations, including the following: • • • • • Facilitation of change Improved problem solving or decision making Enhanced morale and cohesion within a group (based on conflict with other groups) More spontaneity in communication Stimulation of creativity and, therefore, productivity16 Types of Conflict Three types of conflict occur in the workplace: personal conflict, substantive conflict, and pro- cedural conflict.17 As shown in Exhibit 12-2, unresolved personal conflict and procedural conflict tend to be dysfunctional, but ongoing or periodic substantive conflict can prove constructive. As mentioned in Chapter 11, personal conflict refers to conflict that arises out of per- sonal and relationship differences between people—differing values, personal goals, personal- ities, and the like. Individuals involved in personal conflict often report disliking one another, making fun of one another, being angry with or jealous of one another, having problems with each other’s personalities, or perceiving each other as enemies.18 Personal conflict is likely to result in poor performance.19 This form of conflict creates distrust, misun- derstanding, strain, and suspicion, and reduces goodwill.20 As a result, asso- ciates have trouble focusing their attention fully on their job responsibilities and find it difficult to work together toward organizationally relevant goals. personal conflict Conflict that arises out of personal differences between people, such as differing values, personal goals, and personalities. substantive conflict Conflict that involves work content, tasks, and task goals. The second type of conflict, substantive conflict, occurs over work con- tent, tasks, and task goals.21 In essence, differing opinions exist for task-related issues. One example of substantive conflict relates to an event described as the “Great Petunia War.”22 On U.S. installations, two types of military retail- ers historically have sold goods to military personnel: commissaries and post exchanges. In 1997, these retailers entered into a turf war over who had the right to sell garden plants and flowers. The battle soon escalated to include cooking oil, fruits and vegetables, and other types of food. These retailers

were in conflict over their work goals. The conflict became so heated that two generals had to get involved because the conflict was threatening a proposal to reduce costs by integrating the operations of both retailers in the same facility on some bases. As this example illustrates, substantive conflicts often lead to problems and poor performance,23 but it is possible for such conflicts to create positive outcomes, if managed correctly.24 More specifically, moderate levels of substantive conflict can actually increase performance. Even somewhat higher levels might lead to creative, positive outcomes if collaborative problem solving is emphasized. This seems most likely when personal conflict is low. In a recent study, substantive conflict was found to yield open discussions and strong decisions when personal conflict was low, but to yield rigid- ity and poor decisions when personal conflict was high.25 The third type of conflict, procedural conflict, concerns how work should be com- pleted.26 Procedural conflict occurs, for example, when students working together on a project disagree about who will work on which parts of the project or whether they should meet face to face or communicate by e-mail. Unresolved procedural conflict has been found to negatively affect performance. If individuals cannot decide who should be responsible for completing a task or how it should be done, there is little chance that they will accomplish their goals or even complete the project.27 Causes of Dysfunctional Conflict within Organizations Conflict within organizations can be caused by many factors, which are frequently interrelated. To manage conflict effectively, managers should understand the causes of conflict and be able to diagnose them. Some of the more common causes are structural factors, communication fac- tors, cognitive factors, individual characteristics, and the history of relations between the parties. Structural Factors

other units. Centralization can lessen dysfunctional conflict between units because all units are more likely to share the same goals and perspectives in a centralized system. However, conflict between individuals and their supervisors within units or between individual units and the decision-making unit can arise because individuals and units have less control over their own work situations. A recent study of advertising agencies demonstrated these effects.30 For example, many organizations have centralized recruiting; that is, the human resource department recruits associates for jobs in all departments. Centralized recruiting has many advantages for the organization. It ensures that Equal Employment Opportunity Commission rules are followed, and it can save the organization money by avoiding duplication of effort.31 However, many units may resent the human resource department’s control over whom they hire (after all, the people in the unit have to work with the new hires). The hiring goals of the human resource department may be different from those of the individual units. Thus, dysfunctional conflict can arise between individual units and the human resource department. Decentralized authority means that each unit manager can make important decisions. Although decentralized authority can reduce conflict between superiors and subordinates within a unit, because subordinates are usually given more control over their work situations, it also creates the potential for more conflict between units because decisions made by one unit may conflict with decisions made by another.32 Furthermore, these decisions may reflect biased perceptions associated with the separate units. Shared cultural values and strong information flows can prevent these problems, but the potential for difficulties remains. Physical Layout The physical layout of work environments can produce dysfunctional conflict through sev- eral mechanisms. In Chapter 11, we discussed how virtual work teams, whose members are physically separated from one another, are more likely to suffer from poor communication that can lead to conflict. Conflict can also arise when associates must work too closely together.33 Associates sometimes work in small, crowded cubicles that do not allow for privacy or personal space—a phenomenon sometimes termed the “Dilbertization effect” (after the comic-strip character).34 Associates in such environments experience a stressful type of interdependency. Because everyone is continuously in view and can be easily overheard when talking, even in private conversations, conflict can arise. Conflict is especially likely if associates are unaware of the effect their behavior is having on others around them. For example, someone with a loud phone voice can be particularly irritating to co-workers. Furthermore, such environments do not allow associates to handle sensitive matters in private, a situation that can further increase conflict.35 Overall, positive face-to-face collaboration that could ease conflict and generate synergies is not necessarily facilitated.36 This chapter’s first Experiencing Organizational Behavior feature describes how two firms combined decentralization and physical design to avoid conflict in a cubicle environment. The practices of these firms, which were based on the advice and products of Herman Miller, Inc., offer substantial value. Communication As discussed in Chapter 9, a common cause of dysfunctional conflict is poor communication, which can lead to misunderstandings and allow barriers to be erected.37 Probably the easiest way to prevent conflict is to ensure good communication. One of the authors observed conflict caused by poor communication a few years ago in a consulting case. The situation involved two company vice presidents who did not communicate well with one another. They would talk to each other, but neither of them would listen to the other. As a result, misunderstand- ings occurred and were never resolved. There were frequent, heated arguments in meetings. This hostility extended to their respective departments, and problems of coordination became evident. The conflict became so bad that the chief executive officer asked one of the vice presi- dents to resign. Both too little and too much communication can lead to conflict.38 On the one hand, when there is too little communication, individuals do not know enough about each other’s intentions, goals, or plans. Coordination becomes difficult, and misunderstandings are more likely to occur, which can result in dysfunctional conflict. On the other hand, too much com- munication can also result in information overload and misunderstandings that cause conflict. Other factors leading to poor communication were discussed in Chapter 9

Cognitive Factors Certain beliefs and attitudes can lead to conflict. Two such cognitive factors involve differing expectations and one party’s perceptions of the other party. Differing Expectations People sometimes differ in their expectations about jobs, careers, and managerial actions. A common example of such differences involves professional associates (such as research scien- tists, accountants, or attorneys). Professional associates often perceive themselves as being loyal to their professions and define their careers as extending beyond a particular organization. In so doing, they focus on those activities valued by the profession, which the management of the organization does not necessarily value. This can lead to lower organizational loyalty and potentially to conflict between these associates and management. If the differences in expectations are great and conflict ensues, the associates may even leave the organization.39 Thus, managers must be aware of this potential problem and work to reduce differences in expectations. Perceptions of the Other Party The perceptions that one party holds about another can set the stage for conflict. One person may perceive that another has extremely high goals and that these goals will interfere with her own goal attainment.40 For example, if Smith perceives that a co-worker, Johnson, desires to be promoted at any cost, Smith might fear that Johnson will try to steal her work or sabotage her performance to “beat the competition.” In general, perceptions that result in conflict include the perception that the other party’s intentions are harmful, violate justice norms, are dishonest, or are counter to one’s own intentions.41 Individual Characteristics Individual characteristics that may lead to conflict include personality factors, differences in the value placed on conflict, and differences in goals. Personality The Type A personality trait has been linked to increased conflict. Recall from Chapter 7 that people with Type A personalities are competitive, aggressive, and impatient.42 One study found that managers with Type A personalities reported more conflict with subordinates.43 Because people with Type A personalities are more competitive, they are more likely to perceive others as having competing goals, even when this is not the case. Another type of personality characteristic likely to influence how people experience and react to conflict is dispositional trust. People who are low in trust are less likely to cooperate with others44 and less likely to try to find mutually beneficial solutions when conflict arises.45 When people are high in trust, they are more likely to concede to another party during conflicts, especially when it appears that the other party is upset or disappointed.46 High-trust individu- als are more likely than others to become vulnerable because they have positive expectations about the motives of others.47 Differences in personality across people can also facilitate conflict. People high in con- scientiousness plan ahead, are organized, and desire feedback. While working on a project, a person high in conscientiousness wants to plan the project out, start early, set clear goals, and consistently seek feedback. Someone who is low in conscientiousness may see these actions as unnecessary, creating the potential for procedural conflict. Note that it is not the degree of conscientiousness per se that leads to conflict here; it is the difference in this trait between two people who must work together. Differences Across People in the Perceived Value of Conflict People vary in the degree to which they value conflict. Some people think conflict is neces- sary and helpful, whereas others avoid it at all costs. There are important cultural differences as well in the way people view conflict.48 People in Western cultures tend to view conflict as an inevitable and sometimes beneficial aspect of life. Those in some Asian cultures (such as Chinese) believe that conflict is bad and should be avoided.49 These value differences make it more difficult to resolve conflicts when the parties are from different cultures. Value differences are most likely to get in the way of conflict resolution when the parties have a high need for closure.50 That is, when people desire for there to be closure to a situation, they will resort to their strongest cultural norms to guide their decision making. So an American with a high need for closure might seek out solutions that put her at the best advantage for prevailing, whereas a Chinese associate with a high need for closure would focus on avoiding the conflict and maintaining harmony. Goals By definition, when individuals have competing or contrary goals, they often engage in con- flict. In addition, certain aspects of individual goals make conflict more likely.51 Associates with lofty goals, rigid goals, or competitive goals are more likely to experience conflict, especially when they are strongly committed to the goals. Differences in goals can result from structural characteristics of the organization, such as increased specialization and interdependency. Recall our earlier example of the merit system for state-government employees. The merit system has the goal of ensuring that only qualified candidates are on the eligible-for-hire list and that all applicants are given a fair chance. A state agency wants qualified applicants for a job opening, but it also needs the position filled quickly so that the required work is done. It takes time to be fair to all and to be cautious about who is on the eligible list, which can delay getting the list to the state agency. Meanwhile, the agency may have a vacant job and a work backlog during the delay. In this case, differences in goals generate conflict. As the difference between the goals of two units becomes greater, the likelihood that conflict will occur increases. Organizations with structures that align individual and subgroup goals with those of the organization experience less conflict.52 History Previous relationships between two parties can influence the likelihood of conflict in the future. Past performance and previous interactions are two such relationship factors. Past Performance When individuals or groups receive negative feedback because of poor past performance, they often perceive it as a threat.53 When a threat is perceived, individuals frequently attempt to deal with it by becoming more rigid, exerting more control over deviant group members and ideas, and restricting the flow of communication.54 When people become more rigid and communicate less, personal, substantive, and procedural issues can become heated. Thus, when past performance is poor, the chances for conflict are greater.55 Previous Interactions Individuals who have experienced conflict in the past are more likely to experience it in the future.56 Previous conflict can influence the probability of future conflict in several ways. First, the parties often engage in the same conflict-inducing behaviors. Second, the parties likely dis- trust one another. Third, they may expect conflict, and this expectation may become a self- fulfilling prophecy. Think of the old story of the warring Hatfield and McCoy families. These two families had been fighting so long that younger members of each family did not know what had caused the initial conflict. All they had learned was to engage in conflict with the other family. Later in the chapter we discuss the negotiation process, which is an illustration of how associ- ates and managers attempt to resolve conflict. Negotiation situations are influenced by the nego- tiators’ previous interactions. Research has shown that negotiators’ history of negotiation in terms of the quality of deals they arranged influences how they negotiate in other situations—even if they are negotiating with a different person.57 Negotiators who have a history of not being able to reach a satisfactory conclusion during previous negotiations are much more likely to reach unfa- vorable solutions in future negotiations than those who have had a successful negotiation history. Conflict Escalation and Outcomes As we have just seen, conflict has many causes, and they are often interrelated. For example, structural factors such as specialization are related to differences in goals and perceptions. The physical environment can cause conflict because it can interfere with communication. How- ever a conflict begins, though, there are only a certain number of ways in which it can end. Fortunately, most cases of conflict are resolved, although not necessarily in a manner sat- isfactory to both parties (as in the earlier example, where two vice presidents were in conflict and one was fired by the CEO). In this section, we discuss conflict escalation and then focus on conflict outcomes. Conflict Escalation Conflict escalation is the process whereby a conflict intensifies over time. Escalation is char- acterized by several features. Tactics become increasingly severe on both sides, and the number of issues grows. In addition, the parties become more and more deeply involved in the conflict. Eventually, as their goals shift from caring about their own welfare and outcomes to trying to harm the other party, they lose sight of their own self-interests Many reasons have been proposed for conflict escalation. Some experts feel that escalation is inevitable unless direct measures are taken to resolve the conflict.59 Others believe that con- flicts do not have to escalate. Rather, there are certain general conditions that make escalation more likely. These include the following: • Cultural differences exist between the parties.60 • The parties have a history of antagonism.61 • The parties have insecure self-images.62 • Status differences between the parties are uncertain.63 • The parties have informal ties to one another.64 • The parties do not identify with one another.65 • One or both parties have the goal of escalating the conflict in order to beat the other party.66 Conflict escalation might involve overt expressions of aggression. This aspect of escalation may be one-sided, where one party becomes more hostile than the other(s). These issues are taken up in the next Experiencing Organizational Behavior feature. Conflict Outcomes There are five ways in which conflict can end in terms of how the outcome satisfies each party’s concerns, interests, or wishes: lose–lose, win–lose, lose–win, compromise, and win–win. Lose–Lose In this conflict outcome, neither party gets what was initially desired. In situations involving verbal aggression, lose–lose outcomes are often seen. The aggressor often fails to obtain an initially desired goal such as a promotion or continued employment, and he also frequently fails to obtain true satisfaction through the aggressive behavior. The aggrieved sometimes fails to achieve desired peace in the workplace, and can suffer negative consequences beyond that. Win–Lose or Lose–Win In either of these outcome scenarios, one party’s concerns are satisfied, whereas the other par- ty’s concerns are not. This type of outcome is obviously not advantageous for the losing party, and it often is not particularly advantageous for the organization. Such outcomes can be dif- ficult to avoid, however. When conflicts involve “zero-sum,” or distributive issues, one party can gain only at the expense of the other. This can cause each party to attempt to fully satisfy its concerns at the expense of the other party. For example, consider a situation in which two opposing parties are competing for a limited number of resources. The more of the resources one party obtains, the less of the resources the other party obtains. When United Airlines fought its unions following the 9/11 attacks on New York, distributive issues were at the heart of the conflict.67 Each dollar obtained by the unions for salaries and pension benefits repre- sented a dollar out of the pocket of the airline. Compromise Compromise occurs when both parties give in to some degree on an issue or set of issues. Had management at United Airlines been willing to agree to somewhat less drastic pay cuts, then the unions in exchange could have moderated their demands in other strongly contested areas, such as pensions. Indeed, compromise was actually achieved several times during the travails at United. For example, a compromise resulted in employees’ accepting more substantial pay cuts than they wanted while management agreed to more employee stock ownership than it wanted. Compromise can be a desirable solution to conflict.

Win–Win A win–win situation occurs when both parties get what they want. Consider a situation in which a union bargains for increased pay, but management does not have the resources to increase pay. A win–win situation would occur if the union decided to accept specific pro- ductivity incentives. Increases in productivity would be accompanied by cash bonuses, thus

Responses to Conflict People respond to conflict in different ways. One person might try to win at all costs, whereas another person might try to ensure that both her own concerns and those of the other party are addressed. There are five potential responses to conflict, as well as situations in which each response is appropriate.68 Each of these responses is described in terms of assertiveness and cooperativeness.69 Here, assertiveness refers to the extent to which a party tries to satisfy his, her, or its own concerns. Cooperativeness refers to the extent to which a party attempts to satisfy the other party’s concerns. 1. Competing. A party with a competing response attempts to win at the expense of the other party. Other names for this response include forcing and dominating. This style is useful when quick, decisive action is required, when an unpopular course of action must be taken, or when the other party would take advantage of noncompetitive behavior. For example, some countries have more lenient copyright laws than the United States, leading to a proliferation of imitative (knockoff) goods (such as fake Gucci purses, Adidas sneakers, and Rolex watches). The Calvin Klein Company used a competing conflict response in dealing with counterfeiters by establishing a worldwide network to investigate and take legal action against any organization counterfeiting its goods.70 2. Accommodating. An accommodating response is the opposite of a competitive style. A person using an accommodating response will forgo his own concerns so that the concerns of the other party can be met. For example, when someone has to work on a holiday, a particular associate may agree to be that person so that a co-worker can have the holiday off, in order to avoid conflict. An accommodating style may be used by a party who believes that he cannot win. It may also be useful when the issue is less important to one party than to the other. An individual or unit can adopt an accommodating style in return for a favor at a future time. 3. Avoiding. A party who exhibits an avoiding response neglects both his own concerns and those of the other party. An avoiding style may be necessary to allow emotions to cool down or as a means of delaying decisions until effective solutions can be found. IBM has avoided conflict by refusing to do business in countries that allow bribery of public officials.71 4. Compromising. Compromising responses are those in which a party tries to partially meet both his own concerns and those of the other party. A compromising response is best used when the parties are of relatively equal power, when temporary settlements to complex problems are required, when there is time pressure, and as a backup when collaboration (described next) is unsuccessful. 5. Collaborating. Collaborating responses are attempts to fully meet the concerns of both parties. To use a collaborating response, the parties must work together to identify solutions in which both parties can win.72 This type of response is most likely to result in the win–win outcome described earlier. A collaborating response is best used when both parties’ concerns are too important to ignore and when the objective is to learn and to gain commitment. Negotiation The resolution of conflict often requires negotiations between the conflicting parties. Negotiation is a process through which two or more parties with different preferences and interests attempt to agree on a solution through back-and-forth communication. Furthermore, the parties are committed to achieving a peaceful means of dispute resolution.73 In the resolution of conflict, the parties often engage in informal or formal bargaining that requires them to react using compromise, collaboration, accommodation, or competition. Al- though each party usually approaches negotiations with the intent to gain the most benefits for its side, for negotiations to be successful all parties must bargain in good faith. Managers should build their skills in negotiation because they will be called on to negotiate in many situations. The political skills explained later can be useful to managers in negotiations if they use them for the benefit of the organization to achieve a negotiated agreement whereby both or all parties gain benefit and agree to abide by the decision. Depending on the circumstances, a manager can serve as a mediator or an arbitrator in negotiations. A mediator acts as a neutral third party who facili- tates a positive solution to the negotiations, whereas an arbitrator acts as a third party with the authority to require an agreement. In reality, managers often serve in both roles simultaneously, and require tact and strong interpersonal skills to achieve negotiated agreement in a conflict situation. The skills and means of negotiation depend on the negotiator’s bargaining strategy. Negotiation Strategies Negotiators typically emphasize one of two strategies.74 The distributive bargaining strategy involves a competing, win–lose approach. It tends to be used when one party’s goals are in direct conflict with the goals of another party. For example, if a buyer and a supplier are nego- tiating over the price of a product, the higher the agreed-upon price, the bigger the win for the supplier and the bigger the loss for the buyer. On the other hand, the integrative bargaining strategy involves a collaborative, win–win approach. This strategy tends to be used when the nature of the problem permits a solution that is attractive to both parties. Sometimes what appears to be a distributive situation at the beginning can be turned into an integrative strategy by broadening the issues under consideration. For example, if the above buyer were to also offer the supplier bigger orders and offer to buy additional products in return for a lower price on the product under negotiation, then an integrative solution could be reached. The buyer would get a lower price; the supplier would get increased volume, an issue that it feels much more strongly about. Depending on what type of strategy a negotiator is using, different types of tactics are appropriate and likely to be effective. These tactics are listed in Exhibit 12-4. Apart from the issues directly under negotiation, there is often the long-term rela- tionship between parties to consider. Most often during negotiations, the parties desire to remain friendly, trustful, and respectful of each other. For example, if a company was negotiating with an environmental group and the negotiations turned hostile, future rela- tionships between the two groups would remain antagonistic. The company might do only what is absolutely required to meet the terms of negotiations and fail to develop new ways in which to protect the environment. The environmental group might then give only a

weak endorsement to the company or refuse to work with it on environmental practices. The activities aimed at influencing the attitudes and relationships of the negotiating par- attitudinal structuring ties are referred to as attitudinal structuring.75 Examples of tactics to use for attitudinal Activities aimed at influencing the attitudes and relationships of the negotiating parties. structuring are also presented in Exhibit 12-4. The Formal Negotiation Process For formal negotiations, there are generally four stages that a negotiation process should follow:76 1. Preparation. Prior to the negotiation, each party outlines the specific goals he or she hopes to achieve. At this point, negotiators must determine their best alternative to a negotiated agreement (BATNA). This is crucial for identifying the least that the negotiator is willing to accept. Also, during the preparation stage, negotiators should engage in self-analysis and opponent analysis. It is important for negotiators to understand their own tendencies and behavior during negotiations as well as those of the other party. At this stage, the following questions should be asked about the other party: a. What is the other party’s position and power? Must the other party confer with other people to make concessions? b. What does the other party consider a “win”? c. What is the history of the other party’s negotiating style? Does she tend to focus on the distributive strategy or rely on the integrative strategy? 2. Determining the negotiation process. Determine the timeline, place, and structure of the negotiation. Also, agreements should be made about confidentiality, the sharing of information, and how agreements will be approved. At this point, who will be present during the negotiation process should be clarified. 3. Negotiating the agreement. During this stage the actual negotiation takes place and negotiation strategies and tactics are used. 4. Closing the deal. At this stage, both parties should be quite clear about the conclusion of the negotiations and the particulars of the final agreement. Final agreements should be formalized and it should be made clear what each party’s responsibility is in implementing the agreement. This process appears to be quite strict. However, it should be followed in any formal negotiation, ranging from negotiating one’s pay increase to negotiating major merger and acquisition deals. In the Managerial Advice feature, we explore a common type of negotiation scenario—that of negotiating one’s salary when taking a new job.

As suggested in the Managerial Advice feature, the natural conflict over salary and its reso- lution are important to both the organization and the individual involved. Jane negotiated a higher salary before accepting the job offer, but Rob did not do so. Therefore, even though Rob and Jane had equal qualifications, they were compensated differently. Furthermore, assuming that they perform at equal levels over time and thus receive the same percentage pay increases, the gap between Jane’s salary and Rob’s will grow. Furthermore, although the organization may save almost $14,700 over a five-year period, it may also lose a productive associate. Rob is likely to be unhappy about the difference in pay if he discovers it (which is likely). As we explained in Chapter 6, in the discussion of equity theory, Rob will feel that he is not being treated equi- tably. Consequently, he might search for a job with another organization. Unfortunately, if it leads to conflict between Rob and the organization, he is likely to depart for a job elsewhere. In this case, the organization loses valuable human capital. Before closing this section on negotiation, it is important to point out that associates negotiate all the time in everyday work life. When we think of negotiations, we tend to think of formalized negotiations such as labor–management bargaining or merger-and-acquisition talks. However, negotiations take place whenever there are two or more parties who need to come to an agreement about a proposed course of action. Negotiation is just a means of trying to influence others to obtain outcomes that one desires. Thus, a major issue that underlies all negotiations as well as conflict situations is power.77 When two parties try to influence each other to attempt to maximize their own outcomes or attain a target outcome, the issue of power can be critical to resolving the conflict. Power The concept of power is one of the most pervasive in the study of organizational behavior.78 Power is generally defined as the ability to achieve desired outcomes.79 Power can also be thought of as the ability of one person to get another person to do something.80 Thus, any time someone persuades another person to do something, he or she is exercising power. For example, a coach who requires players to do pushups is exercising power. An administrative assistant who has the boss change her schedule to accommodate an associate is also exercis- ing power. Often, power is thought to be negative. However, little would be accomplished if power were not exercised on a regular basis.81 Whether or not the exercise of power is harmful depends on the intent of the person holding the power. A manager who exercises power to meet organizational goals is using power in a positive, productive way. In contrast, a man- ager who exercises power to promote personal interests, at the expense of others, is misusing power. Power exists on different levels. Individuals and organizational units can have power. For example, a student body president can have power to influence university policy. Powerful units such as academic departments that bring in a great deal of external money can also influ- ence university policy, as can the alumni association. It is generally easy to identify people in an organization or social unit who have power.82 Think of an organization to which you belong, for example, and identify who has the power in that organization. Bases of Individual Power Power in organizations can come from many sources. John French and Bertram Raven developed one of the most commonly used typologies for describing the bases of power.83 It includes five categories: legitimate power (formal authority), reward power, coercive power, expert power, and referent power. Legitimate Power People derive legitimate power (or formal authority) from the positions they hold in the orga- nization. Legitimate power is narrow in scope because it can be applied only to acts that are defined as legitimate by everyone involved. For example, after being elected to a second term in 2004, President George W. Bush replaced many of the cabinet members from his first term. This was an exercise in legitimate power because the president has the formal authority to choose his cabinet members. However, when Attorney General Alberto Gonzales fired many U.S. attorneys, he came under fire because he was viewed as not having the legitimate authority to do so, and his motives were questioned.84 Reward Power Reward power results when one person has the ability or perceived ability to provide another with desired outcomes (i.e., the person controls or is believed to control desired resources). In the long run, reward power is limited by the person’s actual ability to supply desired outcomes. For example, a supervisor may have power because she can assign pay raises to associates. However, if the company has a bad year, and the supervisor is not permitted to give pay raises, then she loses this source of power. Reward power is not limited to formal sources, such as the supervisor’s power to give raises; it can also come from informal sources. For example, an administrative assis- tant who often controls his boss’s schedule may then reward associates with access to the boss. Coercive Power Coercive power exists when one person believes that another person has the ability or perceived ability to punish people. Coercive power is usually considered a negative form of power; thus, its use should be limited. Overuse or inappropriate application of this type of power can produce unintended results. For example, associates might respond with negative or undesired behaviors. Like reward power, coercive power can be derived from informal as well as formal sources. For example, an associate who spreads negative gossip about others may have coercive power because others fear that he will spread negative gossip about them.85 Coercive power is limited by the fact that those being influenced must be highly dependent on the person wielding the power.86 Expert Power Expert power arises from special expertise or technical knowledge that is valuable to others or the organization. Expert power is limited by the degree to which this expertise is irreplaceable. For example, an associate can gain power by becoming the only person in the unit who knows how to use certain software. However, if others learn to use the software, this person’s power will be diminished. Referent Power People are said to have referent power when others are attracted to them or desire to be associ- ated with them. For example, it has been found that executives who have prestigious reputations among their colleagues and shareholders have greater influence on strategic decision-making processes in their firms.87 Referent power is the most resilient type of power because it is dif- ficult to lose once it has been achieved. In addition, referent power can be used to influence a wide range of behaviors.88 An Example of Power The use of different power bases is not mutually exclusive. Associates and managers can use multiple bases at one time. The past CEO of Disney, Michael Eisner, is an example of some- one who drew power from a variety of sources.89 During the years of Eisner’s reign at Disney (1984–2006), the entertainment giant went through a number of ups and downs. Owing to Eisner’s efforts in his early years, the company’s performance improved dramatically. In later years, Disney experienced a number of complex issues: hostile takeover threats; the acquisi- tion of Miramax Studios and Capital Cities/ABC; conflict with Bob and Harvey Weinstein of Miramax; a successful alliance with Pixar Animation studios; the dissolution of the alliance with Pixar; the very public and contentious resignation of Jeffrey Katzenberg as president of Disney; constant battles with Disney family member Roy Disney; and the expensive hiring and resignation of Eisner’s friend, Michael Ovitz. For a long time, Eisner was incredibly successful in maintaining power over Disney, despite opposition from shareholders, other Disney companies, the Disney family, and even his own executives. How did he do it? Numerous reports exist about Eisner’s strategies for increasing and holding his power. First, Eisner had a great deal of legitimate power. He was both the chairman of the board of directors and the CEO. These positions allowed him to make managerial decisions while at the same time having the authority to evaluate those decisions. He also had the power to hire and fire executives and board members, almost guaranteeing that he was surrounded by people who supported him. This led to complaints by Eisner’s detractors that he dominated the board by filling it with his own people, who often did not work in the best interests of other shareholders. A second way in which Eisner obtained power was by lavishing attention on board mem- bers, important investors (like Warren Buffett and Sid Bass), members of the Disney family, and even the widows of former executives. In this way, he was able to curry favor with im- portant Disney stakeholders. Eisner was also a genius at using information. He wooed board members to support him by constantly supplying them with information. He stated, “If I filled them in, made them my partner, if things didn’t go so well, the likelihood of, ‘I told you so’ and those kind of reac- tions would not exist.” At the same time, he controlled communication between executives and board members so that any disagreements, important discussions, or decisions had to go through him. When Eisner wanted to fire Michael Ovitz only months after hiring him, he went through elaborate procedures, talking to board members without Ovitz’s knowledge and spreading the word that Ovitz wasn’t working out. Another way that Eisner maintained power was to divide those who might oppose him and to make himself indispensable. He encouraged and allowed rivalries between executives and board members to develop so that other important decision makers were unable to form a cohesive unit. He also refused to train or plan for who would succeed him in the chairman and CEO roles, thus making his departure a problem for Disney. Finally, Eisner maintained power by restricting the power of others. One of the reasons that the Weinstein brothers wanted to separate Miramax from Disney was that Eisner tried to stop them from releasing the movie Fahrenheit 911, which was critical of the Bush administration. Ovitz’s experiences seem to be parallel. According to Michael Ovitz, Eisner implied in the hir- ing process that the chief financial officer and the corporate operations chief would report to Ovitz. However, Ovitz soon learned at a dinner party that both of these men would report to Eisner. By March 2004, Disney shareholders had become highly dissatisfied. Led by Roy Disney, among others, they participated in a 43 percent no-confidence vote to oust Eisner as the chairman of the Disney board. One of the major factors leading to this vote was the $140 million severance pay package that Eisner gave to Ovitz after Ovitz had been at Disney for only 15 months. Shareholders argued that they had not been given enough information about this deal and that the cost was detrimental to the company. They believed that Disney board members had buckled under Eisner’s pressure at shareholders’ expense. By December 2005, Eis- ner had stepped down as chairman; however, he stated that he planned to remain as CEO of Disney until his retirement in 2006. It appears that Michael Eisner’s use of power was sometimes inappropriate. This was a spe- cial concern because Eisner was both chairman and CEO of Disney. Thus, he already had sig- nificant legitimate power. Furthermore, his position also gave him reward power throughout the entire company. This entailed not only control of financial rewards but also the ability to give attention and information to those who valued inclusion. Because of his efforts in turning around Disney after he became CEO, many perceived him to have expert power. In addition, his prominent position afforded him referent power. His actions regarding Michael Ovitz sug- gest that he used coercive power as well. He fired Ovitz but only after conducting a negative campaign with members of the board of directors. He then gave Ovitz an exceptionally large severance pay package. It seems that Eisner may often have acted in his own best interests and not in the best interests of the company or its shareholders. This story perhaps suggests why Disney’s performance suffered during the last years of Eisner’s reign. Strategic Contingencies Model of Power Individuals and organizational units can also obtain power by being able to address the strategic problems that an organization faces. This is referred to as the strategic contingencies model of power.90 For example, when an organization is in a highly innovative industry, where success depends on being able to develop new products, the research and development (R&D) depart- ment and its key people have a great deal of power. The R&D unit has the knowledge (human capital) critical for the success of the firm’s strategy to produce innovations and compete effec- tively in its industry. Consider the pharmaceutical industry. Pharmaceutical firms must intro- duce valuable new drugs regularly, especially as their patents on current drugs expire. Without new drugs, their revenues will decrease, and the firms will eventually die. The knowledge and expertise needed to develop new drugs is very important to the company strategy. Thus, the R&D units in pharmaceutical firms often have significant power. Essentially, these units control resources that are valuable to the organization.91 Units or individuals may obtain power, then, by identifying the strategic contingencies faced by an organization and gaining control over them. For example, in the United Airlines situation discussed earlier in this chapter, management (which controls the financial resources) gained more power by arguing that financial difficulties were critical and could be solved only by the unions’ agreement to salary and pension concessions. However, the unions (which control the human capital in some ways) gained power by highlighting the importance and sensitivity of operations. They did this through disruptive work slowdowns. The most immediate problem for the organization, then, was to get its flights running on schedule again. The strategy of operating flights on time and satisfying customers was negatively affected by the union’s exercise of its power. Thus, the unions controlled the most important resources for the strategy and had more power at that point. If units or people are able to identify the contingencies important to the organization’s strategy and performance and control them, they should be able to maintain their bases of power. They can then use that power to require the organization to act in ways that benefit them. Take, for example, an athletic department that brings a great deal of alumni money to its university. Because of its ability to provide the university with financial resources, the athletic department has power. The department then uses that power to demand that the university provide more resources to the athletic department. In so doing, the athletic department gains even more power. Strategic contingency power is related to dependency.92 Dependency occurs when a unit or person controls something that another unit/person wants or needs. For example, in the popular TV show The Sopranos, all the gangsters were dependent on Tony Soprano, the mob boss. Because Tony controlled all of the mob’s “businesses” (such as phone-card fraud rings and truck-hijacking operations), the gangsters were able to make a living only if Tony allowed them to operate one of these businesses. Beyond dependency, a key source of power in the structural contingencies model is the ability to cope with uncertainty.93 Uncertainty creates threats for the organization. Anyone who can help reduce this uncertainty by addressing key issues will gain power. In the opening case, it was implied that environmental organizations have achieved greater power and influence with businesses. There are several reasons for this, including the uncertainties of tougher environ- mental regulations and the growing public concern with environmental issues. Environmental organizations gain power because they can help businesses deal with these uncertainties. Another source of power involves being irreplaceable.94 One of the power moves made by Michael Eisner at Disney was to avoid developing a succession plan. After all, if no one was prepared to replace him, the board would be unlikely to ask him to resign.95 In contrast, Jack Welch, the former CEO of General Electric, announced 10 years before stepping down that finding a successor was the most important job he had to do.96 Finally, strategic contingency power can result from controlling the decision process, either by setting parameters on the types of solutions that are acceptable or by controlling the range of alternatives to be considered.97 For example, consider a class project in which student project teams must choose a company to analyze. If a team member states that he knows what types of projects the professor prefers and what types of projects have received good grades in the past, he can gain a great deal of control over the group’s decision making regarding the type of project on which they will work. Organizational Politics When conflict is present in organizations, associates are likely to engage in political behavior. Indeed, politics are a fact of life in most organizations.98 Organizational politics corre- sponds to behavior that is directed toward furthering one’s own self-interests without con- cern for the interests or well-being of others.99 The goal of political behavior is to exert influ- ence on others. One survey of top-level executives and human resource managers indicated that organizational politics are on the rise.100 Seventy percent of survey respondents said that they had been harmed by the political behavior of others and 45 percent said they had gained power and influence by acting politically. Further, a recent synthesis of past research showed that politics in an organization is significantly related to stress and counter-produc- tive work behaviors.101 We now discuss the specifics of political behavior.102 Political behavior can occur at several levels. At the individual level, it involves an associate or manager who uses politics to suit his best interests, such as an individual who attempts to take sole credit for a project that was jointly completed. Political behavior at the group level often takes place in the form of coalitions. Coalitions are groups whose members act in an integrated manner to actively pursue a common interest. For example, when a new CEO must be chosen for an organization, groups of shareholders may act together to influence the board of directors’ choice of a particular successor. Politics can also occur at the organizational level, such as when particular organizations hire lobbyists who try to influence congresspersons’ votes on issues important to that organization.103 Political tactics can also be aimed at any target. Upward political influence refers to individual or group in fluence on someone in a superior position, such as a manager. Lateral poli- tics refers to attempts to influence targets at the same hierarchical level. Finally, downward influence refers to attempts to influence those lower down in the hierarchy. What do politics look like in organizations? In other words, what do people do to engage in political behavior? A great deal of research has examined the political tactics used within or by organizations.104 These tactics include the following: • Rational persuasion. A rational persuasion tactic involves using logical arguments or factual information to persuade targets that the persuader’s request will result in beneficial outcomes. For example, a sales associate who is the number-one seller may tell her boss all the benefits of switching to a purely commission-based compensation system while ignoring the potential disadvantages. • Consultation. A consultation tactic requires getting the target to participate in the planning or execution of whatever the politician wants accomplished. For example, a unit manager who wants to implement a specific strategy would consult associates and supervisors to gain their support for her plan. These consultations, though, may be quite cynical because the manager is not really interested in anyone’s input. • Personal appeal. A personal appeal tactic often focuses on the target’s loyalty or affection. For example, an associate may remind targets about how he has always supported their ideas and causes before asking them to support his idea. • Ingratiation. An ingratiation tactic makes the target feel good by flattering or helping him. For example, a person may tell a colleague how valuable he is before asking for his support. • Inspirational appeal. An inspirational appeal tactic is used to generate the enthusiasm and support of targets by appealing to their important values and ideals. For example, to obtain a target’s support for her new web-based advertising plan, a person may appeal to an ecology-conscious target by explaining how electronic advertising saves trees as opposed to advertising in newspapers and magazines. • Exchange. Using an exchange tactic, a person volunteers a favor in order to gain a favor in return. This is exemplified by the old axiom, “I’ll scratch your back if you’ll scratch mine.” • Coalition. As discussed above, a coalition tactic is used when people with common interests join together to pursue their interests. For example, a coalition might be represented by ethnic and minority group members who band together to promote organizational diversity. • Legitimizing. A legitimizing tactic involves making a request seem legitimate or official. For example, an associate who wants to complete a project in a certain manner will try to convince targets that this is “how management wants it done.” • Pressure. A pressure tactic involves threats, nagging, or demands as a means of influencing targets. For example, an associate who threatens to expose a target’s secret if the target does not comply with her wishes is using pressure tactics. Events from a few years ago at Morgan Stanley, the large financial services firm, illustrate the use of some of these political tactics.105 Over the five-year period ending in April 2005, Morgan Stanley stock lost one-third of its value, and the company was performing worse than its major competitors. In March 2005, a group of eight disgruntled Morgan Stanley ex-executives initiated a process intended to oust the CEO, Philip Purcell. Because they col- lectively owned only 1.1 percent of Morgan Stanley shares, they needed to convince other shareholders that Purcell should go.106 One action they took involved sending a letter to other shareholders blaming the company’s poor performance solely on Purcell’s leadership. Because there are likely to be many causes for an organization’s poor performance, this statement can be seen as a legitimizing tactic because they state the cause of the problem with assumed expertise (substantial experience in Morgan Stanley and the industry). The ex-executives also personally courted shareholders, displaying ingratiation. Another tactic involved speaking pas- sionately about the future of Morgan Stanley. This was done by Robert Scott, who was the ex-president and would-be-CEO of the company. Unfortunately for Scott, many investors were concerned only with short-term profit, so his inspirational appeal held little sway over investors. As one independent analyst noted, “People who hold those shares are going to want something concrete before they give up their votes”107; he suggested that the ex-executives use an exchange tactic instead. As of late April 2005, Purcell continued as CEO, but the walls were beginning to crumble. Many important Morgan Stanley executives and senior analysts were deserting for competitors, and a large shareholder publicly expressed support for the dis- gruntled former ex-executives. In June 2005, Purcell resigned.108 Research has examined the issue of who is better or more successful in behaving politically. One line of research has found that personality is related to the types of political tactics people are likely to use.109 For example, extraverts are likely to use inspirational appeals and ingratia- tion, whereas people high on conscientiousness are most likely to use rational appeals. Also, people have varying abilities to engage in political behavior. Some people are quite good at it, but others are more transparent in their actions, thus alerting the target to their intentions. Research has identified an individual difference known as political skill that affects the success- ful use of political tactics. Political skill is the ability to effectively understand others at work and to use this knowledge to enhance one’s own objectives.110 People with strong political skills have the following qualities:111 • They find it easy to imagine themselves in others’ positions or take another’s point of view. • They can understand situations and determine the best response. They can adjust their behavior to fit the situation. • They develop large networks and are known by a great many people. • They can easily gain the cooperation of others. • They make others feel at ease. Individuals with strong political skills can use them to the advantage of the organization (e.g., gaining the cooperation of diverse groups). Using political skills for one’s own political gain, however, can harm the organization. Therefore, political skills can be positive, but only if used to achieve the appropriate goals.

What This Chapter Adds to Your Knowledge Portfolio 401 ? back to the knowledge objectives 1. Under what circumstances can conflict be functional? When is conflict dysfunctional? Which of the basic types of conflict are likely to be dysfunctional, and why? 2. Why does conflict often develop? In your opinion, which cause of conflict is the most difficult to manage?

3. What is conflict escalation, and what conditions make it likely? In general, how can people respond to conflict, and under what circumstances is each type of response most effective?

4. Describe basic negotiating strategies and the tactics most likely to accomplish those strategies. Which strategy fits your personality the best?

5. Why is the exercise of power necessary for organizations to operate effectively? What are some of the ways in which people gain power in organizations? 6. Why is political behavior common in organizations? How do people go about carrying out political behavior, and what makes them successful at it?

What This Chapter Adds to Your Knowledge Portfolio This chapter has explored conflict, negotiation, power, and poli- tics in organizations. It has covered the nature and types of con- flict, causes of conflict, outcomes of conflict, responses to conflict, and how organizations can manage conflict. The chapter has also discussed various sources of power. In summary, we have made the following points: • Conflict is a process in which one party perceives that its interests are being opposed or negatively affected by another party. Conflict can be either functional or dysfunctional for organizational effectiveness. Functional conflict leads to creativity and positive change. Dysfunctional conflict detracts from the achievement of organizational goals. • Conflict can be classified as personal, substantive, or procedural. Personal conflict corresponds to relationship issues; substantive conflict concerns the work that is to be done; and procedural conflict concerns how work is to be accomplished. • Causes of conflict include structural arrangements (e.g., specialization), communication problems, cognitive factors (e.g., differing expectations), individual characteristics (e.g., personality), and the history of the parties (e.g., their previous interactions). • Conflict escalation occurs when the conflict is not resolved and becomes worse. Possible resolution outcomes of conflict include lose–lose, win–lose, lose– win, compromise, and win–win. • Parties to a conflict can adopt one of several responses to the conflict: competing, accommodating, avoiding, compromising, or collaborating. These responses vary in the degree to which they reflect assertiveness and cooperativeness on the part of conflicting parties. • Often, negotiations are required to resolve conflict. In some cases, managers act as a third party, using both mediator and, if necessary, arbitrator roles to achieve a negotiated settlement. • Distributive and integrative negotiation strategies focus on either winning or reaching a mutually beneficial outcome. Attitudinal restructuring focuses on developing positive feelings and relationships between/ among negotiating parties. • Power is the ability of those who hold it to achieve the outcomes they desire. Nothing would be accomplished in organizations if individuals did not exercise power. • Individuals can obtain power through several means. The bases of power include legitimate power, reward power, coercive power, expert power, and referent power. Referent power can influence a wider range of behaviors than the other four types of power. • The strategic contingencies model of power suggests that units or individuals can obtain power by being able to address the important problems or issues facing the organization. Power can be obtained by identifying the critical contingencies facing an organization, creating dependency, being able to cope with uncertainty, being irreplaceable, and controlling the decision-making process. • Organizational politics is a fact of life in most organizations. Political behavior can be carried out through a wide range of tactics. The extent to which a politician is successful in achieving his or her own goals depends on political skill.

Human Resource Management Applications The human resource management (HRM) function plays an important role in managing conflict and power in an organi- zation. First, HRM units can develop or obtain selection tools that assist in the identification of individuals who are prone to destructive conflict and self-interested politics. Such individuals can then be screened out during the selection process, or if hired they can be monitored for dysfunctional behavior. Second, HRM units can develop or identify external train- ing programs that deliver crucial negotiation skills. External training programs are available from management development firms and also from major universities. Northwestern University building your human capital and Harvard University are two of the leading U.S. providers of negotiation programs. Third, HRM units can provide mediation and counseling services for severe situations involving dysfunctional personal conflict. This type of mediation and counseling is difficult to enact in an effective way, requiring formally trained individuals to maximize the chances of success. Related to the above, HRM units must stand ready to assist managers and associates in dealing with anyone who exhibits workplace aggression. Sophisticated actions are required. Are You Ready to Manage with Power? All types of managerial tasks require the exercise of power. After all, power is the ability to get others to do something you want them to do. Thus, any time you find yourself in a situation in which you need to get others to do something, you need to exercise power. However, many people are un- comfortable thinking about power and its use. The next time

an organizational behavior moment The Making of the Brooklyn Bluebirds The Brooklyn Bluebirds is a professional baseball team. Years ago, it was the best team in professional baseball. Then it hit a period of almost 10 years without a pennant. Recently, though, things have been looking up. A new owner, Trudy Mills, acquired the Bluebirds and proclaimed that she intended to make them world champions again. Trudy quickly began to use her wealth to rebuild the team by acquiring big-name players in the free-agent draft. She also signed a manager well known for his winning ways, Marty Bell- man. Marty was also known for his “fighting ways,” on and off the field. However, Trudy was more concerned with his winning record. The first year of Trudy’s and Marty’s tenure, the Bluebirds came in second in the division, showing it was a team to be reckoned with. Trudy acquired even more big-name players in the free-agent draft. Everyone was predicting a pennant for the Bluebirds in the coming year. The year began with great expectations. During the first month, the Bluebirds looked unstoppable. At the end of the month, the team was in first place with a record of 20 wins and 7 losses. But then problems began. Rumors of conflict between players were reported in the sports columns. Russ Thompson, a five-year veteran and starting first baseman, publicly stated that he wanted to renegotiate his contract. (He was unhappy that Trudy had brought in so many players at much higher salaries than his.) He and his lawyer met with Trudy and the Bluebirds’ general manager, but the meeting ended in disagreement. Both Russ and Trudy were angry. The team’s record began to deteriorate, and by the All-Star Game at midseason, the Bluebirds had lost as many games as they had won and were back in fourth place. Right after the All-Star break, Marty decided he had to make a move. He benched both Russ Thompson and Mickey Ponds, a well-known player with a multimillion-dollar contract. Marty called them to his office and said, “You guys are not playing baseball up to your abilities. I think you’ve been loafing. When you decide to start playing base- ball and quit counting your money or worrying how pretty you look on television, I’ll put you back in the starting lineup. Until then, you can sit on the bench and cheer for your teammates.” Russ responded hotly, “The owner won’t pay me what I’m worth, and now you won’t play me. I don’t want to play for the Bluebirds anymore. I’m going to ask to be traded.” Mickey was no happier than Russ. “I’m going to Trudy. You can’t bench me. You’re the biggest jerk I’ve ever played for!” At that, both players left his office, got dressed, and left the ballpark. Later, a few minutes before game time, Marty received a phone call in his office. It was Trudy, and she was upset. “Why did you bench Russ and Mickey? I hired you to manage the team, not create more problems. They’re two of our best players, and the customers pay to see them play. I want you to apologize to them and put them back in the starting lineup.” Marty was not known for his diplomacy. “You hired me to manage, and that’s just what I’m doing. Keep your nose out of my business. You may own the team, but I manage it. Russ and Mickey will stay benched until I say otherwise!” With that, Marty slammed the receiver down and headed for the field to get the game under way. Discussion Questions 1. Describe the types of conflict that seem to exist within the Bluebirds organization. What are the causes? 2. Is the situation characterized by functional or dysfunctional conflict, or both? Explain. 3. Assume that Trudy has hired you as a consultant to help her address the situation. Describe the steps that you would take

team exercise Managing Conflict The purpose of this exercise is to develop a better understanding of the conflict-management process by examining three different conflict situations. Procedure 1. With the aid of the instructor, the class will be divided into four- or five-person teams. 2. The teams should read each case and determine: a. Which response to conflict should be used (this may require starting with one style and moving to others as the situation changes). b. Which negotiation tactics should be used. 3. Each team should appoint a leader to explain its results to the class. 4. The instructor should call on the teams to explain the response(s) to conflict and the negotiation tactics recom- mended. The information should be recorded on a board or flipchart for comparisons. The cases should be discussed one at a time. 5. The instructor will lead a general discussion regarding the application of conflict responses and negotiation tactics. This exercise usually requires about 25 minutes for case analyses and another 20 to 30 minutes (depending on the num- ber of teams) for class discussion. Case Incident 1 You are James Whittington, manager of internal auditing. The nature of your position and of your unit’s work often put you in conflict with managers of other units. Most of your audits are supportive of the actions taken in the audited units, although some are not. Nonetheless, the managers seem to resent what they consider an intrusion on their authority when the audits are conducted. You have come to accept this resentment as a part of your job, although you would prefer that it didn’t occur. One case has been a particular problem. Bill Wilson, manager of compensation in the human resource department, has created problems every time your auditors have worked in his depart- ment. He has continually tried to hold back information neces- sary for the audit. Unfortunately, during the last year and a half, you have had to audit activities in his department several times. Your department now has been assigned to audit the incen- tive bonus calculations for executives made by Bill’s department. Bill was irate when he discovered that you were again going to audit his employees’ work. When he found out about it, he called your office and left a message for you not to send your employees down, because he was not going to allow them access to the infor- mation. You are now trying to decide how to respond. Case Incident 2 Irene Wilson is manager of corporate engineering and has a staff of 17 professional engineers. The group is project-oriented and thus must be flexible in structure and operation. Irene likes to hire only experienced engineers, preferably with division expe- rience in the firm. However, during the past several years, the market for engineers has been highly competitive. Owing to shortages of experienced personnel, Irene has had to hire a few young engineers right after college graduation. Robert Miller was one of those young engineers. Robert was considered a good recruit, but his lack of experience and arrogance have created some problems. Irene has tried to work with him to help him gain the needed experience but has not yet discussed his arrogant attitude with him. Last week, Robert got into an argument with several engi- neers from the International Division with whom he was work- ing on a project. One of them called Irene, and she met with Robert and discussed it with him. Irene thought Robert would do better after their discussion. However, a few minutes ago, Irene received a call from the project manager, who was very angry. He and Robert had just had a shouting match, and he demanded that Robert be taken off the project. Irene did not commit to anything but said she would call him back. When Irene confronted Robert about the phone call that she had just received, he turned his anger on her. They also had an argument. Irene believes Robert has potential and does not want to lose him, but he has to overcome his problems. Case Incident 3 Steve Bassett, a supervisor in the marketing research depart- ment, is scheduled to attend a meeting of the budget committee this afternoon at 1:30. Sarah McDonald, supervisor of budget analysis, is also a member of the committee. It has been a bad day for Steve; he and his wife argued about money as he left the house, one of his key employees called in sick, and the compa- ny’s intranet went down at 9:00 this morning. Steve is not fond of being a member of this committee and really does not care to waste his valuable time listening to Sarah today. (He thinks that Sarah talks too much.) Steve arrives at Sarah’s office at 1:38 P.M. After glancing at her watch and offering a few harmless pleasantries, Sarah begins her assessment of the budget committee’s agenda

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