Unit 5 Discussion – Conflict due 6-7-22. 1000w. 4 reference

http://fastcom-pany.com

http://www.marketbusting.comlcasestudies

http://oniine.wsj.com

http://www.counterpunch.org

http://online.wsj.com

6 Whole Foods, Whole People

O P E N I N G C A S E S T U D Y

20. B. Steverman. 2009. Wal-Mart vs. Whole foods. Business- Week, at http://www.businessweek.com, May 14.

21. S. Taub. 2008. Whole Foods “blogging” probe dropped by SEC. CFO, at http://www.cfo.com, April 28.

22. S. Thurm. 2007. Whole Foods CEO serves up heated word for FTC. Wall Street Journal Online, at http://online.swj. com, June 27.

23. Welcome to Whole Foods Market. 2009. Whole Foods Mar- ket website, http://www.wholefoodsmarket.com, August 30.

24. J.E. Wells & T. Haglock. 2005. Whole Foods Market, Inc. Harvard Business School Case #9-705-476, June 9.

25. Whole Foods closes buyout of Wild Oats. 2007. New York Times, at http://www.nytimes.com, August 29.

26. Whole Foods Market soars to #5 spot on Fortune’s “100 Best Companies to Work For” list. Whole Foods Market website, at http://www.wholefoodsmarket.com, January 9.

27. Whole Foods Market. 2007. Wikipedia, at http://www. wikipedia.com, September 2.

28. Whole Foods promotes local buying. 2007. New York Times, at http://www.nytimes.com, April 29.

WHOLE FOODS CASE DISCUSSION QUESTIONS

Chapter 1 1. Describe how Whole Foods uses human capital as a

source of competitive advantage. 2. Identify the aspects of high-involvement management

contained in Whole Foods’ approach to managing its associates.

Chapter 2 1. Compared to other companies in the service sector,

is Whole Foods more or less likely to experience dis- crimination problems? Explain your answer.

2. How could Whole Foods’ democratic model of selec- tion interfere with the development or continuance of a diverse workforce? What should it do to prevent difficulties?

Chapter 3 1. How do you think that globalization will affect Whole

Foods over time? Please explain several ways it could affect the company operations.

2. In what ways can national culture affect the manage- ment of human capital? Will Whole Foods have to adapt its democratic approach to selecting new team members or the benefits it provides to its associates as it expands further into international markets?

Chapter 4 1. To what extent do you think that training and as-

sociate learning would be more important for Whole Foods than for other grocery stores?

2. What type of perceptual problems on the part of as- sociates and the public may have resulted from the scandal regarding John Mackey’s blog activities?

Chapter 5 1. Given the nature of Whole Foods’ jobs and the way

in which associates are selected, what type of person- ality traits are important for Whole Foods’ associates to possess?

2. Compared to the industry average, Whole Foods has a low turnover rate and is consistently ranked as a great place to work. Why do you think Whole Foods’ associates are so satisfied and committed to the organization?

Chapter 6 1. Are Whole Foods’ team members likely to experience

problems with procedural and/or distributive justice? Explain.

2. Which of the major motivational practices are empha- sized by Whole Foods in its management system? For example, do they include meaningful rewards, tying rewards to performance, designing enriched jobs, pro- viding feedback, or clarifying expectations and goals?

Chapter 7 1. Based on the demand–control and effort–reward mod-

els of stress, are Whole Foods’ team members likely to experience a great deal of stress? What about its executives?

2. Does Whole Foods need a wellness program? Why or why not?

Chapter 8 1. Is John Mackey a transformational leader? Why or

why not? 2. Based on contingency theories of leadership, what

approach to leadership should be used by Whole Foods’ team leaders?

Chapter 9 1. Whole Foods’ open-book policy allows all associ-

ates to have full access to all information about the company and its executives. Would this degree of open communication work as well in other compa- nies? Why or why not? What impact do you think this degree of transparency has on the attitudes and behavior of Whole Foods’ associates?

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http://www.cfo.com

http://online.swj.com

http://www.wikipedia.com

http://www.menswearhouse.com

7 Whole Foods, Whole People

O P E N I N G C A S E S T U D Y

2. What ethical issues arise from John Mackey’s use of a pseudonym to post opinions, information, and cri- tiques on blog sites?

Chapter 10 1. What decision styles does John Mackey appear to

use? Do these fit his situation? 2. Which group decision-making pitfalls appear most

likely within Whole Foods’ teams, and which decision- making techniques would you recommend to counter those pitfalls?

Chapter 11 1. What policies and procedures does Whole Foods en-

act that allow it to develop successful associate teams? 2. What impact do you think that the process of allowing

team members to vote on hiring new members has on the dynamics and performance of the Whole Foods teams?

Chapter 12 1. Whole Foods’ “Declaration of Interdependence” states

that two of the company’s core values are “creating wealth through profits and growth“ and “caring about our communities and the environment.” Often, these two values are in conflict for many companies. How does Whole Foods resolve this conflict?

2. Whole Foods has been opposed to the unionization of its associates. However, associates in a Madison, Wisconsin, store voted to become unionized. What type of conflicts or power struggles may have caused this to occur?

Chapter 13 1. Analyze the effects of the democratic approach to

store operations and hiring new associates on store performance.

2. What does the transparency about company finan- cial data and associate and managers’ compensation communicate about Whole Foods’ culture? How does the Declaration of Interdependence reflect aspects of Whole Foods’ culture?

Chapter 14 1. Analyze how Whole Foods has managed change

over the years since it started. 2. Whole Foods now faces a significant amount of

competition. How should it respond to the changes in the competitive landscape of its industry? What future challenges do you envision for Whole Foods’ market?

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the strategic lens This book describes the rich and impor- tant concepts that make up the fi eld of organizational behavior. We have based the book on cutting-edge research as well as current practices in organizations. Beyond this, the book is unique in pre- senting these concepts through a strategic lens. That is, in each chapter, we explain the strategic importance of the primary concepts presented in the chapter. Our discussions emphasize how managers can use knowledge of these concepts to improve organizational performance.

In Part I, we develop and explain the strategic lens for organizational be- havior. To begin, we describe in Chapter 1 the concept of competitive advantage and how behavior in an organization

affects the organization’s ability to gain and maintain an advantage over its competitors. Gaining and maintain- ing a competitive advantage is critical for organizations to perform at high levels and provide returns to their stakeholders (including owners). We emphasize the importance and management of human capital for high performance and describe the high-involvement organization and how to manage associates to achieve it.

Chapter 2 examines the criti- cal topic of organizational diversity. Given the demographic diversity in the United States, all organizations’ work- forces are likely to become increasingly diverse. Thus, it is important to under- stand diversity and how to manage it

effectively in order to gain a competitive advantage. This chapter explains how these outcomes can be achieved.

Chapter 3 discusses managing organizations in a global environment. International markets offer more op- portunities but also are likely to present greater challenges than domestic mar- kets. Understanding the complexities of managing in international markets is a necessity. It is especially important to understand how to manage diverse cul- tures and operations in varying types of institutional environments.

The three chapters of Part I pro- vide the setting for exploring the topics covered in the chapters that follow.

PART 1

ORGANIZATIONAL BEHAVIOR

A GLOBAL CONTEXT

ORGANIZATIONAL BEHAVIOR

A STRATEGIC APPROACH

ORGANIZATIONAL DIVERSITY

THE STRATEGIC LENS

INDIVIDUAL PROCESSES LEARNING AND PERCEPTION PERSONALITY, INTELLIGENCE, ATTITUDES, AND EMOTIONS WORK MOTIVATION STRESS AND WELL-BEING

GROUPS, TEAMS, AND SOCIAL PROCESSES LEADERSHIP

COMMUNICATION

DECISION MAKING BY INDIVIDUALS AND GROUPS GROUPS AND TEAMS CONFLICT, NEGOTIATION, POWER, AND POLITICS

THE ORGANIZATIONAL CONTEXT ORGANIZATIONAL STRUCTURE AND CULTURE ORGANIZATIONAL CHANGE AND DEVELOPMENT

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a strategic approach to organizational behavior exploring behavior in action

Strategic Use of Human Capital: A Key Element of Organizational Success

I n their book, The New American Workplace, James O’Toole and Edward Lawler described the existence of high-in- volvement, high-performance companies that spanned many industries. Examples of such companies are Nucor, W.L. Gore & Associates, Proctor & Gamble, and the Men’s Wearhouse, among others. For example, Proctor & Gamble

adopted high-involvement work practices at some of its manufacturing facilities, including empowerment of work teams to allocate the tasks among their members, establish their own work schedules, recruit new members to their team and even to select the methods used to accomplish their tasks. In addition, P&G invests in building human capital, and much of the training is done by P&G managers instead of human resource management or training specialists. In fact, P&G views work life as a career-long learning and development process. P&G has a different “college” for educating its workforce in the knowledge and skills needed for their current and future jobs. The company also carefully screens all candidates in the hiring pro- cess. The company received approximately 400,000 applications in 2009 for entry-level management posi- tions and hired fewer than 2,000 (less than one-half of one percent).

The Men’s Wearhouse is another company ben- efi ting from high-involvement work practices. George Zimmer, founder and chief executive offi cer (CEO) of the Men’s Wearhouse, described his company’s approach in managing the people who carry out day- to-day work:

We give people the space they need to be creative, set goals, defi ne strategies, and implement a game plan. We call it “painting our own canvas.” Our people like that freedom and the underlying trust behind it.

? knowledge objectives After reading this chapter, you should be able to: 1. Defi ne organizational behavior and explain the

strategic approach to OB. 2. Provide a formal defi nition of organization. 3. Describe the nature of human capital. 4. Discuss the conditions under which human capi-

tal is a source of competitive advantage for an organization.

5. Describe positive organizational behavior and explain how it can contribute to associates’ pro- ductivity.

6. Explain the fi ve characteristics of high-involvement management and the importance of this approach to management.

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Sources: “Fulfi llment at Work,” Men’s Wearhouse, September 27, 2009, at http://www.menswearhouse.com; R. Crockett. 2009. “How P&G Finds and Keeps a Prized Workforce,” BusinessWeek, Apr. 9, at http://www.businessweek.com; “Fortune 100 Best Companies to Work For 2009,” CNNMoney, Feb. 2, 2009, at http://www.money.cnn.com; J. O’Toole and E. E. Lawler, III. 2007. “A Piece of Work,” Fast Company, Dec. 19, at http://www.fastcompany.com; M. Cianciolo. 2007. “Tailoring Growth at Men’s Wearhouse: Fool by the Numbers,” The Motley Fool, May 23 at http://www.fool.com; C.A. O’Reilly and J. Pfeffer. 2000. Hidden Value: How Great Companies Achieve Extraordinary Results with Ordinary People (Boston: Harvard Business School Press); G. Zimmer. 2005. “Building Community through Shared Values, Goals, and Experiences,” at http://www.menswearhouse. com/home_page/common_threads; G. Zimmer. 2005. “Our Philosophy,” at http://www.menswearhouse.com/home_page/ common_threads.

©iStockphoto

Under this philosophy, individuals are given sub- stantial discretion in choosing work methods and goals. Training is both quantitatively and qualitatively greater at the Men’s Wearhouse than at the vast majority of retail- ers. Such training provides the base for effective use of discretion by individuals. Reward systems that value individual and team pro- ductivity help to encour- age the type of behavior that is desired. Responsi- bility and accountability complement the system.

The base for the sys- tem of discretion and accountability is a core set of workplace beliefs, including the following:

1. Work should be fulfi lling.

2. Workplaces should be fearless and energized.

3. Work and family life should be balanced.

4. Leaders should serve followers.

5. Employees should be treated like customers.

6. People should not be afraid to make mistakes.

The success of the Men’s Wearhouse should pro- mote frequent attempts to imitate its practices, but this has not been the case. Instead, confronted with diffi cult industry conditions, managers in many retailing fi rms have attempted to minimize costs through low compensa- tion and little training. They have implemented supervi- sion and surveillance systems designed to tightly control

employees. Many companies make assumptions about their workforce, but their actions do not allow the human potential existing in their workforce.

Yet, some of the highest-performing companies treat their associates in a different way. The leadership of these

companies believe that valuing people is crucial for business success. They believe they get more out of their employees by providing them power and autonomy, and the results support this belief. These companies con- tinue to grow, have low labor costs and achieve high profi ts while paying high compensation be- cause of the productivity of their workforce. For ex-

ample, Starbucks provides a much larger and more costly benefi ts package to its workforce than most other retail- ers. Starbucks can do this not because of the “premium” it charges for its products but because of its productive, customer-oriented associates who produce a premium for the company. The bottom line is that companies that allow associates to participate in major decisions, invest heavily in training, and provide profi t-sharing programs to their associates have a much more productive workforce and enjoy the many benefi ts that are derived from it. They are often among the Best 100 Companies to Work For and are among the top fi nancial performers in industry. They perform well because they gain the most value from their human capital.

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http://www.money.cnn.com

http://www.menswearhouse.com/home_page/common_threads

http://www.fool.com

Basic Elements of Organizational Behavior 13

The examples of Men’s Wearhouse, Proctor & Gamble, and Starbucks show the powerful difference that a fi rm’s human capital can make. Faced with less-than-favorable industry character- istics and a labor pool that many fi nd unattractive in the retail fi eld, Men’s Wearhouse and Starbucks have suc- ceeded in part by paying careful atten- tion to human behavior. Any fi rm can sell men’s clothing and coffee, but it requires special management to effec- tively embrace and use to advantage the complexities and subtleties of hu- man behavior. From the motivational and leadership practices of managers to the internal dynamics of employee- based teams to the values that provide

the base for the organization’s culture, successful fi rms develop approaches that unleash the potential of their peo- ple (human capital).

In the current highly competitive landscape, the ability to understand, appreciate, and effectively leverage hu- man capital is critical in all industries. A strategic approach to organizational behavior is focused on these issues. In this chapter, we introduce the concept of organizational behavior and explain how to view it through a strategic lens in order to enhance organizational per- formance.

To introduce the strategic ap- proach to organizational behavior, or OB, we address several issues. First,

we defi ne organizational behavior and discuss its strategic importance for or- ganizational performance. Next, we explore the concept of human capital and its role in organizations. We then discuss how human capital most likely contributes to a competitive advantage for an organization. An explanation of high-involvement management follows. This form of management is helpful in developing and using human capital and is becoming increasingly impor- tant as fi rms search for ways to maxi- mize the potential of all of their people (managers and nonmanagers). In the fi - nal section of the chapter, we describe the model and plan for the concepts explained in this book.

the strategic importance of Organizational Behavior

Basic Elements of Organizational Behavior Important resources for businesses and other types of organizations include technologies, distribution systems, fi nancial assets, patents, and the knowledge and skills of people. Organizational behavior involves the actions of individuals and groups in an organi- zational context. Managing organizational behavior focuses on acquiring, developing, and applying the knowledge and skills of people. The strategic OB approach rests on the premise that people are the foundation of an organization’s competitive advantages.1 An organization might have exceptionally high-quality products and services, excellent customer service, best-in-class cost structure, or some other advantage, but all of these are outcomes of the capabilities of the organization’s people—its human capital. If orga- nized and managed effectively, the knowledge and skills of the people in the organization drive sustainable competitive advantage and long-term fi nancial performance.2 Thus, the strategic approach to OB involves organizing and managing the people’s knowledge and skills effectively to implement the organization’s strategy and gain a competitive advantage.

Individual, interpersonal, and organizational factors determine the behavior and the ultimate value of people in an organization; these factors are shown in Exhibit 1-1. For individuals, factors such as the ability to learn, the ability to be self-managing, techni- cal skills, personality characteristics, and personal values are important. These elements represent or are related to important capabilities. At the interpersonal level, factors such

organizational behavior The actions of individuals and groups in an organizational context.

managing organizational behavior Actions focused on acquiring, developing, and applying the knowledge and skills of people.

strategic OB approach An approach that involves organizing and managing people’s knowledge and skills effectively to implement the organization’s strategy and gain a competitive advantage.

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14 Chapter 1 A Strategic Approach to Organizational Behavior

Exhibit 1-1 Factors and Outcomes of a Strategic Approach to Organizational Behavior

Interpersonal Factors (leadership, communication, decision-making skill, intra- and intergroup dynamics,

communication)

Individual Factors (learning ability,

personality, values, motivation, stress)

Organizational Factors (culture, work environments,

adaptability)

Organizational Success

Productivity of Individuals and Groups

Satisfaction of Individuals and Groups

as quality of leadership, communication within and between groups, and confl ict within and between groups are noteworthy. These elements infl uence the degree to which the capabilities of individuals are unleashed and fully utilized within an organization. Finally, at the organizational level, the culture and policies of the organization are among the most important factors, as they infl uence whether the talents and positive attitudes of individu- als are effectively leveraged to create positive outcomes.

The factors discussed above interact to produce the outcomes of productivity, satis- faction, and organizational success. Productivity refers to the output of individuals and groups, whereas satisfaction relates to the feelings that individuals and groups have about their work and the workplace. Organizational success is defi ned in terms of competitive advantage and ultimately fi nancial performance. In essence, then, a strategic approach to organizational behavior requires understanding how individual, interpersonal, and orga- nizational factors infl uence the behavior and value of the people in an organization, where value is refl ected in productivity, satisfaction, and ultimately the organization’s competi- tive advantages and fi nancial success.

The Importance of Using a Strategic Lens Studying organizational behavior with a strategic lens is valuable for managers and aspir- ing managers at all levels of the organization, as well as for the workers who complete the basic tasks. For example, effective senior managers spend much of their time talking with insiders and outsiders about vision, strategy, and other major issues crucial to the direc- tion of the organization.3 Senior leaders make the strategic decisions for the fi rm.4 Skills in

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The Importance of Using a Strategic Lens 15

conceptualizing, communicating, and understanding the perspectives of others are critical for these discussions, and these skills are addressed by strategic OB. Senior managers also spend time helping middle managers to defi ne and redefi ne their roles and to manage confl ict, because middle managers are often central to the organization’s communication networks.5 Skills in listening, confl ict management, negotiating, and motivating are cru- cial for these activities. Finally, senior managers invest effort in shaping the internal norms and informal practices of the organization (that is, creating and maintaining the culture). Skill in interpersonal infl uence is an important part of this work. The strategic approach to OB addresses each of these issues.

In recent times, senior managers have commonly been referred to as strategic leaders.6 However, exercising strategic leadership is not a function of one’s level in the organization; rather, it is a matter of focus and behavior. Strategic leaders think and act strategically, and they use the skills noted above to motivate people and build trusting relationships to help implement the organization’s strategy. Although their primary tasks differ from senior managers, middle and lower-level managers also can act as strategic leaders in the accomplishment of their tasks.7

Effective middle managers spend much of their time championing strategic ideas with senior managers and helping the fi rm to remain adaptive.8 They also play an important role in implementing the organization’s strategy. They serve as champions of the strategy and work with other middle managers and lower-level managers to build the processes and set them in motion to implement the strategy. Skills in networking, communicat- ing, and infl uencing are important for these aspects of their work. Middle managers also spend time processing data and information for use by individuals at all levels of the fi rm, requiring skills in analysis and communication. When delivering the strategic initiatives to lower-level managers, skills in communicating, motivating, understanding values, and managing stress are among the most important. A strategic approach to OB addresses each of these aspects of managerial work.

Effective lower-level managers spend a great deal of their time coaching the fi rm’s associates—our term for the workers who carry out the basic tasks.9 Skills in teaching, listening, understanding personalities, and managing stress are among the most impor- tant for performing these activities. Lower-level managers also remove obstacles for as- sociates and deal with personal problems that affect their work. Skills in negotiating and infl uencing others are critical for removing obstacles, whereas skills in counseling and understanding personalities are important for dealing with personal problems. Finally, lower-level managers expend effort to design jobs, team structures, and reward systems. Skills in analysis, negotiating, and group dynamics are among the most important for these activities. The strategic approach to OB addresses each of these aspects of manage- rial work.

Lower-level managers will be more effective when they understand the organiza- tion’s strategy and how their work and that of their associates fi t into the strategy. Much of what they do is required to implement the strategy. It is also helpful for these manag- ers to take a longer-term view. If they do not take a strategic approach, many of these managers are likely to focus on short-term problems. In fact, they may emphasize re- solving problems without examining how they can prevent them in the future. Taking a strategic approach enables them to use their skills to prevent problems, implement the strategy effectively, and complete their current tasks effi ciently while remaining focused on the future.

associates The workers who carry out the basic tasks.

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16 Chapter 1 A Strategic Approach to Organizational Behavior

Despite the relevance of formal study in OB, some people believe that managers can be successful solely on the basis of common sense. If this were true, fewer organizations would have diffi culty unleashing the potential of people, and there would be less dissatis- faction and unhappiness with jobs. Also, if this were true, absenteeism and turnover rates would be lower. The truth is that fully leveraging the capabilities of people involves subtle- ties that are complex and diffi cult to manage. Common sense cannot be the only basis of action for managers. Effective managers deeply understand that knowledge about people and organizations is the true source of their success.

Without meaningful working knowledge of OB, managers’ efforts to be successful resemble those of the drunkard and his keys. According to this classic story, the drunkard dropped his keys by the car but could not fi nd them because it was very dark there. So, instead of bringing light to the appropriate area, he looked under a nearby streetlight where he could see better!10

Managers in today’s fast-paced organizations cannot afford to adopt the drunkard’s approach when working with associates and each other, especially not in a challenging economic environment with signifi cant competition. They must avoid looking for an- swers where it is easiest to see. Managers are often unsuccessful when they fail to develop the insights and skills necessary for working with others effectively.

In closing our discussion regarding the importance of understanding organizational behavior, we focus on the fi ndings of two research studies. In both studies, the investiga- tors examined the impact of formal business education on skills in information gathering, quantitative analysis, and dealing with people.11 Signifi cantly, they found that business education had positive effects on these important skills, including the interpersonal skills of leadership and helping others to grow. These fi ndings suggest that understanding a strategic approach to OB can add value to our managerial knowledge and skills. There is no substi- tute for experience, but formal study can be very helpful in providing important insights and guidance.

Foundations of a Strategic Approach to Organizational Behavior Insights from several disciplines inform our understanding of OB. The fi eld builds on behavioral science disciplines, including psychology, social psychology, sociology, eco- nomics, and cultural anthropology. A strategic approach to OB, however, differs from these disciplines in two important ways. First, it integrates knowledge from all of these areas to understand behavior in organizations. It does not address organizational phe- nomena from the limited perspective of any one discipline. Second, it focuses on be- haviors and processes that help to create competitive advantages and fi nancial success. Unlike basic social science disciplines, where the goal is often to understand human and group behavior, the goal of the strategic OB approach is to improve the performance of organizations.

One might ask the following questions: Can taking courses in psychology, social psychology, sociology, economics, and cultural anthropology provide the knowledge needed to be an effective manager or to successfully accept the responsibility of working as a key member of an organization? Is it necessary to take a course in organizational behavior?

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The Importance of Using a Strategic Lens 17

Acquiring knowledge directly from other disciplines can inform the study of organi- zational behavior. Knowledge from other disciplines, however, is not a substitute for the unique understanding and insights that can be gained from studying OB from a strategic perspective. As noted earlier, a strategic approach to OB integrates useful concepts from other disciplines while emphasizing their application in organizations.

Gaining an effective working knowledge of organizational behavior helps those who want to become successful managers. The following points summarize this important fi eld of study:

1. There are complexities and subtleties involved in fully leveraging the capabilities of people. Common sense alone does not equip the manager with suffi cient understanding of how to leverage human capabilities.

2. Managers must avoid the allure of seeking simple answers to resolve organizational issues. A working knowledge of OB helps managers gain the confi dence required to empower associates and work with them to fi nd creative solutions to problems that arise. The complexity of organizational life requires that managers and associates perform at high levels to contribute to organizational success and to achieve personal growth.

3. The strategic approach to OB integrates important behavioral science knowledge within an organizational setting and emphasizes application. This knowledge cannot be obtained from information derived independently from other specialized fi elds (psychology, economics, and the like).

Defi nition of an Organization As we have already emphasized, OB is focused on organizations and what happens inside them. This is important, because organizations play an important role in modern society. Several commentators from Harvard University expressed it this way: “Modern societies are not market economies; they are organizational economies in which companies are the chief actors in creating value and advancing economic progress.”12 But what is an organi- zation? Below we provide a formal defi nition of this term.

Although it is sometimes diffi cult to defi ne the term organization precisely, most peo- ple agree that an organization is characterized by these features:13

• Network of individuals • System • Coordinated activities • Division of labor • Goal orientation • Continuity over time, regardless of change in individual membership

Thus, we defi ne an organization as a collection of individuals, whose members may change over time, forming a coordinated system of specialized activities for the purpose of achieving specifi c goals over an extended period of time.

A prominent type of organization is the business organization, such as Intel, Microsoft, or Procter & Gamble. There are other important types of organizations as well. Public-sector organizations (e.g., government organizations), for example, have a major

organization A collection of individuals forming a coordinated system of specialized activities for the purpose of achieving certain goals over an extended period of time.

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18 Chapter 1 A Strategic Approach to Organizational Behavior

FPO

EXPERIENCING ORGANIZATIONAL BEHAVIOR

BusinessWeek has ranked Apple as the most innovative company for the past several years (2007–2009). And, largely because of Apple’s successful innovations, Steve Jobs has been chosen by Fortune as the CEO of the decade (2000–2009). How has Apple achieved this lofty status? The following state- ment by Apple CEO, Steve Jobs explains, “Inno- vation has noth- ing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how they’re led, and how much you get it.” In the early 1990s, Apple redesigned its workplace for the R&D associates, providing them both with private offi ces and also common areas where they could gather and share ideas, engage in teamwork, and gen- erally discuss their research. A former manager at Apple notes that Apple’s success is based on empowering its associates, delegating authority and responsibility down in the organiza- tion, and allowing the people a lot of freedom.

The results are obvious. Busi- nessWeek describes Apple as the

creative king. For example, to launch the iPod, Apple’s immensely success- ful portable music player, it integrated seven different innovations. It was

able to create these inno- vations because of

the innovation cul- ture created at

Apple and the high-quality s c i e n t i s t s and engi- neers it has a t t r a c t e d to the com-

pany. Apple managers en-

courage and nurture a sense of

community in which a passion for creative de-

signs and innovation exists. Apple’s designs have been described as more elegant, functional for customers, and effective than those developed by competitors. In short, Apple sets the standard in design. Apple and other innovative companies are the stars today and in the future. For example, Apple’s iPhone has changed the stan- dard in the wireless communications industry.

Apple is very careful in the hir- ing process by recruiting people who share its values and are passionate about what they do. In addition, they provide substantial training to build their skills and to emphasize the im- portance of working as a team. Yet, associates are valued as individuals;

for example, staff associates in the Apple retail stores have personal business cards. This approach also suggests caring and quality to cus- tomers, not typical of most retail organizations.

Steve Jobs is a critical compo- nent of Apple’s success, as suggested by his selection as the CEO of the decade. His vision and ability to see opportunities in future markets where others see only challenges has helped Apple rise above competitors and perform better than most other busi- nesses in the world. Yet, his vision is only as good as the creativity and productivity of Apple’s managers and associates. Warren Bennis states it this way, “The real test of exem- plary leadership … [is in] develop- ing a deep, talented bench who … can unite a company and unleash creativity in their own way.” Michael Hawley, professional pianist and computer scientist, says that he thinks “of Apple as a great jazz orchestra.” Hawley suggested that Apple has a talented staff and that the conductor’s job is largely nominal at this stage.

Creating Innovation: Leading and Managing the Human Capital at Apple

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The Role of Human Capital in Creating Competitive Advantage 19

It involves continuing to attract highly talented members and adding energy in places where they are needed.

Apple’s performance in the fi rst decade of the 21st century has been

exceptional. Sales of each of its major products have increased dramatically (several of those products were devel- oped and introduced to the market in this decade). And the market value of

the company increased by over $250 billion during the decade. Thus, Ap- ple’s passion for innovation and the power of its human capital portends a very bright future for the company.

Sources: A. Lashinsky. 2009. “The Decade of Steve: How Apple’s Imperious, Brilliant CEO Transformed American Business,” Fortune, Nov. 23, pp. 93–100; “The 50 Most Innovative Companies,” BusinessWeek, at http://bwnt.busi- nessweek.com/interactive_reports/innovative_50_2009, Nov. 16, 2009; S. Lohr. 2009. “One Day You’re Indispen- sible, the Next Day …,” New York Times, at http://www.nytimes.com, Jan. 18; A. Frankel. 2007. “Magic Shop,” Fast Company, at http://www.fastcompany.com, Dec. 19; J. Scanton. 2007. “Apple Sets the Design Standard,” BusinessWeek.com, at http://www.businessweek.com, Jan. 8; B. Helm. 2005. “Apple’s Other Legacy: Top Designers,” BusinessWeek.com, www.businessweek.com, Sept. 6; R. Enderle. 2004. “Apple’s Competitive Advantage,” TechNews- World, at http://www.technewsworld.com/story, Mar. 8.

presence in most countries. Although we focus primarily on business fi rms in this book, the strategic approach to OB applies to the public sector as well as the not-for-profi t sec- tor. For example, we can discuss motivating associates in the context of business fi rms, but motivating people is important in all types of organizations. Some organizations may have more motivational problems than others, but the knowledge of how to motivate workers is critical for managers in all types of situations.

As explained in the Experiencing Organizational Behavior feature, Apple has achieved signifi cant success because of its innovations. In turn, Apple’s innovations are due to the quality associates working in design, its innovation culture, and the way managers lead by empowering the associates to be creative and develop innovations. Apple’s strategic leaders (exemplifi ed by its CEO, Steve Jobs) are willing to take risks, and they nurture the innovation culture. But it also requires strategic leadership to implement Apple’s innova- tion strategy throughout the company. As noted in the quote by Apple CEO Steve Jobs, the basic component of Apple’s innovation is its human capital. Thus, Apple invests sig- nifi cant resources and energy into attracting, holding, and leading effectively high-quality human capital.

The Role of Human Capital in Creating Competitive Advantage We have already noted the importance of human capital and competitive advantage to strategic OB. We now examine these concepts more closely.

The Nature of Human Capital An organization’s resource base includes both tangible and intangible resources. Prop- erty, factories, equipment, and inventory are examples of tangible resources. Historically, these types of resources have been the primary means of production and competition.14 This is less true today because intangible resources have become critically important

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20 Chapter 1 A Strategic Approach to Organizational Behavior

for organizations to successfully compete in the global economy. Intangible resources, including the reputation of the organization, trust between managers and associates, knowledge and skills of associates, organizational culture, brand name, and relationships with customers and suppliers, are the organization’s nonphysical economic assets that provide value.15 Such assets are often deeply rooted in a company’s history and experi- ences, for they tend to develop through day-to-day actions and accumulate over time.16 On a comparative basis, it is more diffi cult to quantify the value of intangible resources than that of tangible resources, but the importance of intangible resources continues to increase nonetheless.

Human capital is a critical intangible resource. As a successful business executive re- cently stated, “Burn down my buildings and give me my people, and we will rebuild the company in a year. But leave my buildings and take away my people . . . and I’ll have a real problem.”17 As we highlighted in the opening case, human capital is the sum of the skills, knowledge, and general attributes of the people in an organization.18 It represents capacity for today’s work and the potential to exploit tomorrow’s opportunities. Human capital encompasses not only easily observed skills, such as those associated with oper- ating machinery or selling products, but also the skills, knowledge, and capabilities of managers and associates for learning, communicating, motivating, building trust, and effectively working on teams. It also includes basic values, beliefs, and attitudes.

Human capital does not depreciate in value as it is used, but rather, it is commonly enhanced through use. Contrast this with tangible resources—for example, manufac- turing equipment—whose productive capacity or value declines with use. In economic terms, we can say that human capital does not suffer from the law of diminishing returns. In fact, increasing returns are associated with applications of knowledge because knowl- edge tends to expand with use.19 In other words, we learn more as we apply knowledge. Knowledge, then, is “infi nitely expansible” and grows more valuable as it is shared and used over time.20

Knowledge has become a critical resource for many fi rms.21 Knowledge plays a key role in gaining and sustaining an advantage over competitors. Firms that have greater knowledge about their customers, markets, technologies, competitors, and themselves can use this knowledge to gain a competitive advantage. Because most knowledge in organizations is held by the managers and associates, it is important to acquire and hold a highly knowledgeable workforce to perform well.22 Because of the importance of knowledge and human capital, fi rms need to invest in continuous development of their human capital. The goal is to enhance organizational learning and build the knowledge and skills in the fi rm. In short, fi rms try to acquire and enrich their human capital.23

The importance of human capital and knowledge is explained in the Experiencing Organizational Behavior on innovation. Apple is able to be a leader in innovation largely because of its high-quality human capital and the manner in which it empowers its associ- ates working in design. These associates developed and designed the highly successful iPod and iPhone, for which major sales have been achieved.

The Concept of Competitive Advantage A competitive advantage results when an organization can perform some aspect of its work better than competitors can or when it can perform the work in a way that competitors cannot duplicate.24 By performing the work differently from and better than

human capital The sum of the skills, knowledge, and general attributes of the people in an organization.

competitive advantage An advantage enjoyed by an organization that can perform some aspect of its work better than competitors can or in a way that competitors cannot duplicate, such that it offers products/services that are more valuable to customers.

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The Role of Human Capital in Creating Competitive Advantage 21

competitors, the organization offers products/services that are more valuable for the cus- tomers.25 For example, Apple developed and marketed the iPod, which took signifi cant market share from Sony’s previously highly successful Walkman MP3 players. Its iPhone did the same in the wireless communications market. As noted by the statement by Steve Jobs, Apple’s CEO, the primary difference in Apple’s ability to create innovation is its people and how they are led.

Human Capital as a Source of Competitive Advantage Although human capital is crucial for competitive advantage, not all organizations have the human resources needed for success. The degree to which human capital is useful for creating true competitive advantage is determined by its value, rareness, and diffi culty to imitate.26

Value In a general sense, the value of human capital can be defi ned as the extent to which indi- viduals are capable of handling the basic work of an organization. Lawyers with poor legal training do not add value to a law fi rm because they cannot provide high-quality legal services. Similarly, individuals with poor skills in painting and caulking do not add value to a house-painting company.

More directly, human capital value can be defi ned as the extent to which individuals are capable of producing work that supports an organization’s strategy for competing in the marketplace.27 In general, business fi rms emphasize one of two basic strategies. The fi rst involves creating low-cost products or services for the customer while maintaining acceptable or good quality.28 Buyers at the Closeout Division of Consolidated Stores, Inc., for example, scour the country to purchase low-cost goods. Their ability to fi nd such goods through manufacturers’ overruns and discontinued styles is crucial to the success of Closeout, the largest U.S. retailer of closeout merchandise. The buyers’ skills allow the di- vision to sell goods at below-discount prices.29 The second strategy involves differentiating products or services from those of competitors on the basis of special features or superior quality and charging higher prices for the higher-value goods.30 Ralph Lauren designers, for example, create special features for which customers are willing to pay a premium.31

Human capital plays an important role in the development and implementation of these strategies. For example, top managers are generally highly valuable resources for the fi rm. Their human capital as perceived by investors coupled with the strate- gic decisions that they make affect the investors’ decisions about whether to invest in the fi rm.32 Yet, most senior managers’ knowledge and skills become obsolete very quickly because of the rapidly changing competitive landscape. Thus, these managers must invest time and effort to continuously enrich their capabilities in order to main- tain their value to the fi rm.33 Overall, managers must expend considerable effort to acquire quality human capital and demonstrate to the fi rm’s external constituencies its value.34

Rareness Human capital rareness is the extent to which the skills and talents of an organiza- tion’s people are unique in the industry.35 In some cases, individuals with rare skills are

human capital value The extent to which individuals are capable of producing work that supports an organization’s strategy for competing in the marketplace.

human capital rareness The extent to which the skills and talents of an organization’s people are unique in the industry.

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22 Chapter 1 A Strategic Approach to Organizational Behavior

hired into the organization. Corporate lawyers with relatively rare abilities to reduce the tensions of disgruntled consumers, programmers with the unusual ability to pro- duce thousands of lines of code per day with few errors, and house painters who are exceptionally gifted can be hired from the outside. In other cases, individuals develop rare skills inside the organization.36 Training and mentoring programs assist in these efforts.

Sales associates at Nordstrom, an upscale retailer, have several qualities that are relatively rare in the retailing industry. First, they tend to be highly educated. Nord- strom explicitly targets college graduates for its entry-level positions. College graduates are willing to accept these positions because of their interest in retailing as a career, because managers are commonly drawn from the ranks of successful salespeople, and because Nordstrom’s strong incentive-based compensation system provides fi nancial rewards that are much higher than the industry average. Second, sales associates at Nordstrom have both the willingness and the ability to provide “heroic service.” This type of service at times extends to delivering merchandise to the homes of custom- ers, changing customers’ fl at tires, and paying for customers’ parking. Nordstrom’s culture, which is based on shared values that support exceptional customer service, is an important driver of heroic service. Some believe that Nordstrom’s culture is more important to the company’s performance than are its strategy and structure and even its compensation system.37

Imitability Human capital imitability is the extent to which the skills and talents of an organiza- tion’s people can be copied by other organizations.38 A competing retailer, for example, could target college graduates and use a promotion and compensation system similar to Nordstrom’s. If many retailers followed this approach, some of the skills and talents at Nordstrom would be attracted to its competitors in the industry.

The skills and talents most diffi cult to imitate are usually those that are complex and learned inside a particular organization. Typically, these skills involve tacit knowl- edge,39 a type of knowledge that people have but cannot articulate. Automobile design- ers at BMW, the German car manufacturer, cannot tell us exactly how they develop and decide on effective body designs. They can describe the basic process of styling with clay models and with CAS (computer-aided styling), but they cannot fully ex- plain why some curves added to the auto body are positive while others are not. They just know. They have a feel for what is right.40 As a result, those fi rms that manage their knowledge effectively can make their skills and capabilities diffi cult to imitate by competitors.41

The culture of an organization represents shared values, which in turn partially deter- mine the skills and behaviors that associates and managers are expected to have.42 In some cases, organizational culture promotes the development and use of diffi cult-to-imitate skills and behavior. Southwest Airlines, for example, is thought to have a culture that en- courages people to display spirit and positive attitudes that are valuable, rare, and diffi cult to duplicate at other airlines. Spirit and attitude result from complex interactions among people that are challenging to observe and virtually impossible to precisely describe. As- sociates and managers know the spirit and attitude are there. They cannot, however, fully explain how they work to create value for customers.43

human capital imitability The extent to which the skills and talents of an organization’s people can be copied by other organizations.

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The Role of Human Capital in Creating Competitive Advantage 23

Overall Potential for Competitive Advantage For human capital to be the basis for sustainable competitive advantage, it must satisfy all three conditions discussed earlier: it must be valuable for executing an organization’s strategy, it must be rare in the industry, and it must be diffi cult to imitate. An organization that hires individuals with valuable but common skills does not have a basis for competi- tive advantage, because any organization can easily acquire those same skills. As shown in Exhibit 1-2, the human capital in such an organization can contribute only to competitive parity; that is, it can make the organization only as good as other organizations but not better. An organization that hires individuals with valuable and rare skills, or an organiza- tion that hires individuals with valuable skills and then helps them to develop additional rare skills, has the foundation for competitive advantage, but perhaps only in the short run. The organization may not have the foundation for long-term competitive advantage because other organizations may be able to copy what the organization has done. For long- term advantage through people, an organization needs human capital that is valuable, rare, and diffi cult to imitate.44

Although the value, rareness, and low imitability of skills and talents are crucial for competitive advantage, alone they are not enough. These three factors determine the potential of human capital. To translate that potential into actual advantage, an or- ganization must leverage its human capital effectively.45 An organization may have highly talented, uniquely skilled associates and managers, but if these individuals are not moti- vated or are not given proper support resources, they will not make a positive contribu- tion. Thus, sustainable competitive advantage through people depends not only on the skills and talents of those people, but also on how they are treated and deployed.46 In the next section, we discuss a general approach for effectively developing and leveraging

Valuable?

Yes

Rare?

—

Yes

Performance

Below normal

Normal

Above normal

Difficult to

Imitate?

Supported by Effective

Management?

Are human resources in the firm . . .

—

Yes

Competitive Implications

Competitive Disadvantage

Competitive Parity

Temporary Competitive Advantage

Sustained Competitive Advantage

Exhibit 1-2 Human Capital and Competitive Advantage

Source: Adapted from J. Barney and P. Wright. 1999. “On Becoming a Strategic Partner,” Human Resource Man- agement, 37: 31–46.

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24 Chapter 1 A Strategic Approach to Organizational Behavior

MANAGERIAL ADVICE

Originally, businesses were con-cerned with the explosion in social networking tools used by people inside their organization (and externally as well). The concerns focused on staff members spending time on personal networking to the exclusion of completing tasks on their jobs. Thus, managers feared the loss of productiv- ity. Yet, they began to realize the poten- tial for the social networking tools such as Twitter and others. Some of the so- cial networking tools are more person- alized (i.e., Facebook is better suited to individualized interests, perhaps). But,

Twitter holds special promise to further business-related goals.

Twitter has been promoted to build brand names, enhance internal relationships among those who need to coordinate their tasks, and in build- ing a broad sense of community within the organization. Twitter can help managers to obtain broad inputs for making decisions and to gain associ- ates’ commitment to decisions made. It can also be used to support or even change the organization’s culture. Twitter (and other social networking tools) is also useful to build and main- tain relationships with customers/cli- ents. It may even be useful in attracting new customers for the organizations’ products and services. Managers and associates can use Twitter to serve as brand ambassadors. Companies such as Dell, Whole Foods, JetBlue, Star- bucks, Popeyes, and Home Depot use Twitter to further business goals. For example, JetBlue offers Twitter-based customer service. Whole Foods uses Twitter to communicate with custom- ers, learning more about their tastes and interests, posting news about new food podcasts and inviting them to upcoming company events. Many of

these companies monitor what is said about them on Twitter. It is a way of monitoring their brand equity with the public and especially with customers.

The social networking sites are popular means of accessing the Inter- net. For example, more than 150 mil- lion people use Facebook and about 50 percent of them use it daily. Face- book achieved more than 1 billion vis- its monthly in 2009. Facebook is used in more than 170 countries, suggesting that social networking is cross cultural and is a global phenomenon. Recent research by Nielsen shows that Face- book is more popular than e-mail as a communications tool. Social network- ing now accounts for approximately 10 percent of all time spent on the Inter- net. Twitter use in 2009 was more than 1,000 percent higher than in 2008. The top three social networking tools are Facebook, MySpace, and Twitter.

Thus, companies are trying to har- ness the power of social networking to facilitate the productivity of managers and associates and to promote their busi- ness brands and goods and services in the marketplace. Social networking tools can help to enhance the capabilities of their human capital.

Leveraging Human Capital with Twitter and Other Social Networking Tools: Managing the Tweets

Sources: L. Safko. 2009. “The twitter about twitter.” Fast Company, June 13, at http://www.fastcompany.com; M. Colin & D. MacMillan. 2009. “Managing the tweets,” BusinessWeek, June 1, pp 20–21; A. Yee. 2009. “Social network rankings—Who’s hot and who’s not,” Ebizq, April 13, at http://www.ebizq.net; C.D. Marcan. 2009. “10 Twitter tips for the workplace,” PCWorld, April 12, at http://www.pcworld.com; L. King. 2009. “Put twitter to work,” PCWorld, March 29, at http://www.pcworld.com; M. Gotta. 2009. “Twitter in the workplace,” March 6, at http://mikeg.typepad.com; J.F. Rayport. 2009. “Social networks are the new web portals,” BusinessWeek, January 21, at http://www.businessweek. com; J. Owyang. 2009. “A collection of social network stats for 2009,” January 11, at http://www.web-strategist.com; L. Watrous. 2008. “The role of twitter in business,” November 19, at http://www.brighthub.com; A. Smarty. 2008. “16 Examples of huge brands using twitter for business,” October 7, at http://www.searchenginejournal.com; R. King. 2008. “How companies use twitter to bolster their brands,” BusinessWeek, September 6, at http://www.businessweek.com.

©AP/Wide World Photos

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Positive Organizational Behavior 25

human capital. As a prelude, we explore a unique new tool that can be used for leverag- ing human capital in the workplace, microblogging as a social networking tool in the Managerial Advice feature.

As suggested in the Managerial Advice, companies are trying to harness the poten- tial power of social networking tools to facilitate the human capital in the organization and to increase its productivity. Because of the critical nature of human capital to gain- ing and maintaining competitive advantages, the countries and companies operating in them must invest heavily in attracting the best available talent and in developing managers’ and associates’ capabilities. It is also critical that their capabilities be fully used. Thus, social networking tools can help to use the skills and capabilities of the organization’s human capital.

The previous arguments and research underscore the strategic value of human capi- tal.47 Because of the potential value of human capital to an organization, the way it is man- aged is critical. We next discuss positive organizational behavior.

Positive Organizational Behavior Positive organizational behavior grew out of positive organizational psychology, which de- veloped to avoid focusing on trying to “fi x” what was wrong with people. Rather, positive organizational behavior focuses on nurturing individuals’ greatest strengths and help- ing people use them to their and the organization’s advantage.48 Positive OB suggests that people will likely perform best when they have self-confi dence, are optimistic (hope), and are resilient.49

People are healthier and more productive if they have a strong self-effi cacy with regard to the work that they are doing. Thus, managers should try to build associates’ self-effi cacy for the tasks assigned to them. Yet, we know from research that the effects of self-effi cacy are perhaps more important on average in the United States than in many other countries.50 In addition to the self-effi cacy of individual associates, recent research suggests the importance of the effi cacy of teams’ performance. To the extent that a team believes that it can accomplish its assigned tasks, the team’s performance is likely to be higher.51

Leaders who practice positive organizational behavior build stronger ties with their associates and peers.52 Research suggests that more than 25 percent of associates ex- press distrust in their leaders.53 Rebuilding trust after it has dissolved represents a signifi cant challenge.54 Alternatively, leaders are able to rebuild trust by developing positive psychological capital among their associates. And when positive psychologi- cal capital exists within units and organizations, individuals tend to be more highly motivated and persist longer in trying to achieve goals. Therefore, such units perform at higher levels.55

Individuals who are managed in a positive manner and who take a personally positive approach to outperform the other candidates often are healthier mentally and physically. These people are likely to have a positive self-concept, lead life with a purpose, and have quality relationships with other people. Such people tend to be healthier, happier, and more productive and thus usually experience less stress on the job.56 As such, managers should help their associates to develop positive emotions in themselves and others. It helps them to develop the means and implement them so as to achieve success within the organization.57

positive organizational behavior An approach to managing people that nurtures each individual’s greatest strengths and helps people use them to their and the organization’s advantage.

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26 Chapter 1 A Strategic Approach to Organizational Behavior

Providing leadership that encourages and nurtures positive emotions often requires the application of emotional intelligence (EI). Persons with strong EI have self-awareness, possess good social skills, display empathy, have strong motivation, and regulate their own behavior without the oversight of others (discussed in more depth in Chapter 5).58 Lead- ers using EI build trusting relationships with their associates, exhibit optimism, and build associates’ effi cacy by providing the training needed and empowering them to complete the task without direct oversight.59 The leadership approach using positive OB resembles high-involvement management, which we discuss next.

High-Involvement Management High-involvement management requires that senior, middle, and lower-level managers all recognize human capital as the organization’s most important resource. Sometimes referred to as “high-performance management” or “high-commitment management,” the high-involvement management approach involves carefully selecting and training as- sociates and giving them signifi cant decision-making power, information, and incentive compensation.60 Combining decision power with important tactical and strategic infor- mation provides associates with the ability to make or infl uence decisions about how to complete tasks in ways that create value for the organization. Associates are closer to the day-to-day activities than are others in the organization, and empowering them through high-involvement management allows them to use their unique knowledge and skills.61 In general, empowerment can increase the likelihood that associates will provide maximum effort in their work, including a willingness to: (1) work hard to serve the organization’s best interests, (2) take on different tasks and gain skills needed to work in multiple capaci- ties, and (3) work using their intellect as well as their hands.62

Key Characteristics of High-Involvement Management Five key characteristics of high-involvement management have been identifi ed. We sum- marize these characteristics in Exhibit 1-3 and examine them further in the following discussion.

Selective Hiring Sound selection systems are the fi rst crucial characteristic of the high-involvement ap- proach. An organization must select the right people if managers are to delegate authority and information to associates. Efforts to generate a large pool of applicants and to assess applicants through rigorous evaluations, including multiple rounds of interviews with managers and peers, are important in the selection process.63 These efforts help to identify the most promising candidates while promoting the development of commitment on the part of the individuals chosen. Individuals selected in the course of thorough processes often respect the integrity of the organization.

Another important part of the selection process involves examining applicants’ fi t with the organization’s culture and mission; selecting new hires solely on the basis of technical skills is a mistake. In situations where most or all of the required technical skills can be taught by the organization, it is quite acceptable to pay less attention to existing skills and more attention to cultural fi t (along with the person’s ability to learn the needed

high-involvement management Involves carefully selecting and training associates and giving them signifi cant decision- making power, information, and incentive compensation.

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High-Involvement Management 27

EXHIBIT 1-3 Dimensions of High-Involvement Management

Aspect Description

Selective Hiring Large pools of applicants are built through advertising, word of mouth, and internal recommendations. Applicants are evaluated rigorously using multiple interviews, tests, and other selection tools. Applicants are selected on the basis not only of skills but also of fi t with culture and mission.

Extensive Training New associates and managers are thoroughly trained for job skills through dedicated training exercises as well as on-the-job training. They also participate in structured discussions of culture and mission. Existing associates and managers are expected or required to enhance their skills each year through in-house or outside training and development. Often, existing associates and managers are rotated into different jobs for the purpose of acquiring additional skills.

Decision Power Associates are given authority to make decisions affecting their work and performance. Associates handle only those issues about which they have proper knowledge. Lower- level managers shift from closely supervising work to coaching associates. In addition to having authority to make certain decisions, associates participate in decisions made by lower-level and even middle managers.

Information Sharing Associates are given information concerning a broad variety of operational and strategic issues. Information is provided through bulletin boards, company intranets, meetings, posted performance displays, and newsletters.

Incentive Compensation Associates are compensated partly on the basis of performance. Individual performance, team performance, and business performance all may be considered.

skills).64 This is the approach taken by the Men’s Wearhouse. A number of studies show the impact of cultural fi t on satisfaction, intent to leave the organization, and job per- formance.65 For example, a study of newly hired auditors in the largest accounting fi rms in the United States found that lack of fi t with the organizational culture caused dissatis- faction and lower commitment among these auditors.66 Furthermore, work context can affect the creative output of individuals so that individuals wishing to use their creative capabilities are attracted to organizations with cultures that promote the expression of creativity in work.67 Finally, research suggests that careful selection of new associates leads to the provision of better customer service that in turn produces higher fi nancial performance for the fi rm.68

Extensive Training Training is the second vital component of high-involvement management. Without proper education and training, new hires cannot be expected to perform adequately.69 And even when new hires are well trained for a position, it is important to help them build skills and capabilities beyond those needed in their present position. Furthermore, socialization into the norms of the organization is an important part of initial training. For existing associ- ates, ongoing training in the latest tools and techniques is crucial.

Although valid calculations of return on investment for training are diffi cult to make, several studies reinforce the value of training. One study involving 143 Fortune 1000

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28 Chapter 1 A Strategic Approach to Organizational Behavior

companies reported that training signifi cantly affected productivity, competitiveness, and employee satisfaction. (Training included job skills, social skills, quality/statistical analysis, and cross-training in different jobs.)70

Decision Power The third key dimension of high-involvement management is decision-making power—providing associates with the authority to make some important decisions while inviting them to infl uence other decisions. For example, in a mass-production fi rm, such as Dell Computer, a single associate might have the authority to stop an entire production line to diagnose and address a quality problem. The associate might also have the authority, in conjunction with co-workers, to contact a supplier about quality problems, to schedule vacation time, and to discipline co-workers behaving in inappropriate ways. Beyond this decision-making authority, an associate might have signifi cant input to capital expenditure decisions, such as a decision to replace an aging piece of equipment.

In many cases, decision power is given to teams of associates. In fact, self-managed or self-directed teams are a central part of most high-involvement systems.71 With regard to our mass-production example, such a team might include the individuals working on a particular production line, or it might include individuals who complete similar tasks in one part of a production line. The tellers in a particular branch bank can operate as a team, the nurses in a particular hospital unit on a particular shift could be a team, and junior brokers in an investment banking fi rm might act as a formal team in a particular area. Teams working in high-involvement contexts often achieve the outcomes desired by the organization.72

Many studies of decision-making power have been conducted over the years. In gen- eral, these studies support giving associates bounded authority and infl uence. The study of Fortune 1000 fi rms discussed earlier assessed the impact of associates’ holding signifi cant decision power. As with training, the executives in the 143 fi rms reported a positive effect on productivity, competitiveness, and employee satisfaction.73 Another recent study of empowering associates found that it enhanced knowledge sharing within and the effi cacy of teams that in turn increased performance.74

Information Sharing The fourth characteristic of high-involvement management is information sharing. In order for associates to make effective decisions and provide useful inputs to decisions made by managers, they must be properly informed. Furthermore, sharing informa- tion among team members promotes collaboration, coordination and high team per- formance.75 Examples of information that could be shared include the fi rm’s operating results and business plan, costs of materials, costs of turnover and absenteeism, potential technologies for implementation, competitors’ initiatives, and results and roadblocks in supplier negotiations. At AES, a Virginia-based power company, so much information had been shared with associates that the Securities and Exchange Commission (SEC) identifi ed every employee of the fi rm as an insider for stock-trading purposes. This was unusual; typically, only those at the top of a fi rm have enough information to be consid- ered insiders by the SEC.

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High-Involvement Management 29

Incentive Compensation The fi fth and fi nal dimension of high-involvement management is incentive compensa- tion. This type of compensation can take many forms, including the following:

• Individual piece-rate systems, where associates are compensated based on the amount produced or sold

• Individual incentive systems, where associates receive bonuses based on short- or long-term performance

• Knowledge or skill-based pay, where associates are paid based on the amount of knowledge or number of skills they acquire

• Profi t sharing, where associates earn bonuses based on company profi ts • Gain sharing, where associates share in a portion of savings generated from

employee suggestions for improvement

In the study of Fortune 1000 fi rms mentioned earlier, executives indicated that incen- tive pay positively affected productivity and competitiveness.76

Evidence for the Effectiveness of High-Involvement Management Considering the fi ve aspects of high-involvement management as a coherent system, research evidence supports the effectiveness of the approach. One study, for example, found this approach to have a positive effect on the performance of steel mini-mills.77 In this study, 30 U.S. mini-mills were classifi ed as having a control orientation or a com- mitment orientation. Under the control orientation, employees were forced to comply with detailed rules, had little decision-making authority or infl uence, received limited training and information, and had no incentive compensation. Under the commitment orientation, which closely resembled the high-involvement approach described above, employees had strong training; information on quality, costs, productivity, and usage rates of materials; incentive pay; the authority to make decisions regarding workfl ow scheduling and new equipment; and input into strategic decisions. The mills with com- mitment systems had lower rates of unused materials, higher productivity, and lower associate turnover.

In another study, 62 automobile plants around the world were classifi ed as using tra- ditional mass production or fl exible production.78 Under the traditional mass-production system, employees did not participate in empowered teams, whereas employees under the fl exible approach participated in such teams. Companies that used the fl exible system also offered employees more cross-training in different jobs and opportunities for incentive compensation. Furthermore, these companies displayed fewer symbols of higher status for managers (no reserved parking, no separate eating areas, and so on). The plants with fl exible production had 47.4 percent fewer defects and 42.9 percent greater productivity than those with traditional production systems.

In a third study, fi rms were drawn from many different industries, ranging from bio- technology to business services.79 Firms placing strong value on their people had a 79 per- cent probability of surviving for fi ve years after the initial public offering (IPO), whereas fi rms placing low value on their people had a 60 percent probability of surviving fi ve years.

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30 Chapter 1 A Strategic Approach to Organizational Behavior

Other studies have shown that high-involvement systems promote stronger relationships in the work- place and provide environments where associates and managers feel empowered. As such, they have higher job satisfaction and productivity. In turn, they service the organization’s customers effectively to promote high customer satisfaction.80

Demands on Managers When a high-involvement approach has all of the charac- teristics identifi ed above, associates are fully and properly empowered. High-involvement managers place signifi - cant value on empowerment because empowered associ- ates have the tools and support required to create value for

the organization. But managers implementing high-involvement approaches must take specifi c and calculated actions to promote empowerment. We turn now to a discussion of the demands a high-involvement approach places on managers.

Because they believe strongly in empowering associates, high-involvement managers constantly seek to identify situations in which responsibility can be delegated. The intent is to move decision making to the lowest organization level at which associates have the information and knowledge required to make an effective decision. Managing through encouragement and commitment rather than fear and threats, high-involvement manag- ers respect and value each associate’s skills and knowledge. In addition, effective managers understand that cultural differences in a diverse workforce challenge them to empower people in ways that are consistent with their uniqueness as individuals.81 Listening care- fully to associates and asking questions of them in a genuine attempt to understand their perspectives demonstrates managerial respect and facilitates attempts to be culturally sen- sitive. People who feel respected for their values as well as for their skills and knowledge are motivated to act in a prudent and forthright manner in completing their assigned work. Over time, empowered, respected associates increase their confi dence in their ability to help create value for the organization.

Trust between managers and associates is critical in a high-involvement organization. Managers must trust associates not to abuse their decision power. For their part, associates must trust managers not to punish them for mistakes when they are trying to do the right thing for the organization. Furthermore, research has shown that trust between associates and those formally responsible for their behavior has a positive effect on the organization’s fi nancial performance. Thus, effective managers invest effort in building and maintaining trust. In so doing, they dramatically increase their credibility with associates.82 Confi dent in their abilities as well as their associates’ abilities, high-involvement managers recognize that they don’t have all the knowledge necessary for the organization to be successful. As a result, they work with their peers and associates to fi nd solutions when problems arise.83 Managers employing a high-involvement approach to management of their associates ex- hibit many of the characteristics of a transformational leader (this leadership approach is discussed in more depth in Chapter 8).84

High-involvement managers think continuously about how human capital can be used as the foundation for competitive advantage. Is there another way to use our people’s skills and knowledge to further reduce costs or to more crisply differentiate the products

©iStockphoto

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Organization of the Book 31

we produce? How can the creativity of our empowered associates be used to create more value for the organization? How can we use information our associates gather through their work with people outside our organization (such as customers and suppliers) to make certain we are currently doing things that will allow us to shape the competitive advan- tages needed to be successful tomorrow? Finding answers to these questions and others that are unique to a particular organization can lead to long-term success.

As suggested in the Experiencing Organizational Behavior feature, fi rms use their core strengths to provide value to customers. And core strengths are commonly based on human capital, which is clearly the case with Pixar. Pixar’s managers and associ- ates have been critical to the production of ten major animated fi lm successes. Pixar largely exhibits the characteristics of a high-involvement organization. It empowers its associates with considerable authority to determine their work projects, schedule, and how they will complete most of their work. Pixar hires top talent and gains the most from their capabilities. The freedom it provides its associates, the development of their skills and the culture promoting a happy, trusting and collaborative atmosphere retain their services for Pixar over the long term. It has been described as the “corporation of the future.”85 Pixar’s success suggests why there is now global competition for the best human capital.86 The Pixar experience suggests the importance of human capital for all organizations in order to compete effectively in the highly complex and challenging global economy they face in the current environment.

Organization of the Book Our objective in this book is to provide managers, aspiring managers, and even individual contributors with the knowledge they need to perform effectively in organizations, es- pecially in today’s high-involvement organizations. Essentially, the book offers readers a working knowledge of OB and its strategic importance. The book has 14 chapters divided into four parts. The titles of the parts and the topics of the chapters are presented in Exhibit 1-4, which graphically depicts the model for the book.

As suggested in the exhibit, the strategic approach to OB emphasizes how to manage behavior in organizations to achieve a competitive advantage. The book unfolds in a logical sequence. In Part I, The Strategic Lens, we explain the strategic approach to OB (Chapter 1) and then discuss the importance of managing diversity in organizations (Chapter 2) and describe how organizations must operate in a global context (Chapter 3). In Part II, Individual Processes, we focus on the individual as the foundation of an organization’s human capital, emphasizing the development of a sound understanding of individuals and how they affect each other and the organization’s success. Topics considered include learn- ing and perception (Chapter 4), personality (Chapter 5), motivation (Chapter 6), and stress (Chapter 7). In Part III, Groups, Teams, and Social Processes, we examine the effects of interpersonal processes on individual and organizational outcomes. Specifi c interpersonal processes include leadership (Chapter 8), communication (Chapter 9), decision making (Chapter 10), group dynamics (Chapter 11), and confl ict (Chapter 12). Finally, in Part IV, The Organizational Context, we examine several organization-level processes and phenom- ena. Using insights from the book’s fi rst three parts, we study organizational design and culture (Chapter 13) and organizational change (Chapter 14). Overall, the book takes you on an exciting journey through managerial opportunities and problems related to behavior in organizations.

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32 Chapter 1 A Strategic Approach to Organizational Behavior

EXPERIENCING ORGANIZATIONAL BEHAVIOR

P ixar is one of the most success-ful and unique organizations in its industry and perhaps anywhere. It has produced ten major movie hits, and they are all highly creative and computer animated. The highly acclaimed movies include Toy Story, A Bug’s Life, Monsters Inc, Find- ing Nemo, The Incredibles, Cars, and Wall . E, among others. In fact, all of Pixar’s movies have been successful, which is an incredible feat. And they developed these movies in a highly unique way, not in the tradition of Hol- lywood. A typical movie involves a number of free agents in key positions brought together for a single, albeit major, movie project. Yet, all of Pixar’s movies are developed and produced totally by its in-house staff.

Pixar’s success is due to the in- credible talent of its managers and associates and how it manages its human capital. It begins with a thor- ough recruiting and careful selection

process. The fi rm searches for people who are innovative with good com- munication skills. In fact, the people in charge of hiring like to fi nd people who have failed but overcame the failure. Randy Nelson, the person in charge of recruiting, explains the rea- son why these people are attractive to Pixar, “the core skill of innovators is error recovery not failure avoidance.” But identifying and hiring top human capital is only the fi rst step on the road to success. Managing this tal- ent in ways that allow the people to reach their potential and to be highly productive in their tasks is highly criti- cal to Pixar’s success.

Pixar leaders build teams of peo- ple and expect them to work together to produce their end product. Every- one is expected to participate. When they have problems to solve, they do it as a team. In fact, all 200 to 250 members of a production group are encouraged and expected to offer

their ideas. Essentially, the company produces team innovations. Pixar University was created, and all members of the organization (artists, software programmers, accountants, security guards) are encouraged to take courses up to four hours per week. PU

offers 110 different courses, essen- tially a complete curriculum on making fi lms. In these courses, they also learn to collaborate and to trust each other. In addition, they build new capabili- ties and sometimes discover new pas- sions.

The culture of Pixar emphasizes teamwork, honesty, communication, collaboration in an environment where people can have fun and pursue their passions. Interdisciplinary learning is encouraged, creativity is rewarded, and intensity is prized. Taking risks is valued. One analyst claimed that Pixar’s culture “out-Googled Google.” The end results of the top human capi- tal and effective management of it has been a string of hit movies. And the success has been aided by the abil- ity of Pixar not only to attract and de- velop highly talented staff but also to keep it. Turnover at Pixar is less than fi ve percent annually.

George Lucas, the legendary fi lm- maker (creator of Star Wars) founded Pixar in the 1970s. He sold it to Steve Jobs in the late 1980s for $10 million. Jobs sold Pixar to Walt Disney in 2006 for $7.4 billion. When one considers that the major assets of this company are a building, some computer equip- ment, and about 400 people, one can understand the potential value of ex- cellent human capital and managing that talent to gain the most from it.

Pixar: An Organization of Happy, Innovative People

Sources: G. Adams. 2009. “Pixar: The real toon army,” The Independent, September 23, at http://license.icopyright.net; C. Kuang. 2009. “Pixar’s approach to HR,” Fast Company, February 8, at http://www.fastcompany.com; E. Catmull. 2008. “How Pixar fosters collective creativity,” Harvard Business Review, September, at http://hbr.harvardbusiness.org; W.C. Taylor. 2008 “Bill Taylor: Pixar’s blockbuster secrets,” BusinessWeek, July 8, at http://www.businessweek.com; C. Hawn. 2008. “Pixar’s Brad Bird on fostering innovation,” The GigaOM Network, April 17, at http://www.gigaom. com; T. Balf. 2007. “Out of juice? Recharge!” Fast Company, December 18, at http://www.fastcompany.com; M. Greer. 2006. “Pixar U and whistling while you work,” The Motley Fool, November 16, at http://www.fool.com.

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http://hbr.harvardbusiness.org

http://www.gigaom.com

http://www.fool.com

What This Chapter Adds to Your Knowledge Portfolio 33

What This Chapter Adds to Your Knowledge Portfolio In this chapter, we have examined the strategic importance of organizational behavior to the success of individuals and organizations. In addition, we have discussed the nature of human capital and the circumstances under which it can be the source of competitive advantage for an organization. Finally, we have explored the high-involvement approach to management. To summarize, we have covered the following points:

• The strategic approach to organizational behavior involves knowledge and application of how individual, interpersonal, and organizational factors infl uence the behavior and value of an organization’s people, where value is represented by productivity, satisfaction, and ultimately the organization’s competitive advantages and fi nancial success.

Exhibit 1-4 Managing Organizational Behavior for Competitive Advantage

The Strategic Lens

A Strategic Approach to

Organizational Behavior

Organizational Diversity

Organizational Behavior in a

Global Context

Individual Processes

Learning and Perception

Personality, Intelligence, Attitudes, and Emotions

Stress and Well-Being

Motivation

The Organizational Context

Organizational Design and Culture

Organizational Change

Groups, Teams, and Social Processes

Leadership

Communication

Groups and Teams

Decision Making

Conflict, Negotiation, Power, and Politics

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34 Chapter 1 A Strategic Approach to Organizational Behavior

• A strategic approach to organizational behavior is important because it addresses key issues for managers at all levels of the organization. For senior managers, the strategic approach to OB provides guidance for activities such as shaping the internal norms and practices of the organization. For middle managers, it provides guidance on matters such as implementing the strategic initiatives designed by senior managers. For lower- level managers, taking a strategic approach to OB helps with coaching and negotiating, among other important activities necessary to effectively implement the organization’s strategy. Managers who lack an appreciation for the subject matter of organizational behavior are likely to experience less-successful careers.

• A strategic approach to organizational behavior builds on knowledge from the behavioral sciences. It differs from these fi elds, however, in two important ways. First, it integrates knowledge from these fi elds, rather than taking the narrow view of any one of them. Second, it focuses on behaviors and processes that help to create competitive advantages and fi nancial success for the organization. Other fi elds

often adopt the goal of understanding individual and group behavior without also understanding how such knowledge can contribute to enhancing the performance of organizations.

• An organization is formally defi ned as a collection of individuals, whose members may change over time, formed into a coordinated system of specialized activities for the purpose of achieving certain goals over some extended period of time.

• Human capital is an intangible resource of the organization. It represents capacity for current work and potential for future work. It includes the skills, knowledge, capabilities, values, beliefs, and attitudes of the people in the organization. Human capital is important because in the current global economy, an organization’s ability to create something of value for customers comes largely from the know-how and intellect embodied in its people rather than from machinery and other tangible assets.

• Human capital can be a source of competitive advantage for an organization when it has value (it is relevant for the organization’s strategy), is rare (skills and knowledge are possessed by relatively few outside the organization), and has low imitability (other organizations cannot easily duplicate the skills and knowledge). These three characteristics set the stage for gaining an advantage. For human capital to be a source of competitive advantage, it must be managed effectively.

• Positive organizational behavior focuses on nurturing individuals’ greatest strengths and helping people use them to their and the organization’s advantage. Positive OB suggests that people will likely perform best when they have self-confi dence, are optimistic (hope), and are resilient. People are healthier and more productive if they have a strong self-effi cacy with regard to the work that they are doing. Individuals who are managed in a positive manner and who take a personally positive approach to outperform the other candidates often are healthier mentally and physically.

• High-involvement management is an important method for developing and leveraging human capital. This approach has fi ve key components: (1) selective hiring, (2) extensive

? back to the knowledge objectives 1. What is organizational behavior? Why is it important

for managers and aspiring managers to study OB us- ing a strategic approach? Can the study of a fi eld such as psychology substitute for a strategic approach to organizational behavior? Why or why not?

2. What is an organization? What are the defi ning char- acteristics of an organization?

3. What is human capital? Be specifi c. 4. How does human capital provide the basis for competi-

tive advantage? 5. What is positive organizational behavior and how can

it contribute to associates’ productivity? 6. What are the fi ve characteristics of high-involvement

management? What evidence exists to support the ef- fectiveness of this approach?

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Building Your Human Capital 35

training, (3) decision power, (4) information sharing, and (5) incentive compensation. Collectively, these fi ve aspects of high-involvement management yield empowered workers.

• The effectiveness of high-involvement management is supported by strong evidence. In studies of many industries, high-involvement management has been found to lead to high productivity, satisfaction, fi nancial success, and competitiveness.

Key Terms organizational behavior, p. 13 managing organizational

behavior, p. 13 strategic OB approach, p. 13 associates, p. 15

organization, p. 17 human capital, p. 20 competitive advantage, p. 20 human capital value, p. 21 human capital rareness, p. 21

human capital imitability, p. 22 positive organizational

behavior, p. 25 high-involvement

management, p. 26

Human Resource Management Applications Recruitment and selection are critical Human Resource Management (HRM) functions because they provide the human capital necessary to accomplish the work in the organization. The examples of Apple and Pixar show the importance of human capital to an organization’s success. Organizations employing high-involvement management use selective hiring practices.

Training is an HRM function designed to help managers and associates increase their knowledge and to develop new skills and abilities. Pixar University provides a good example of how extensive training contributes to organization performance. Training may be especially critical to help manag- ers build the capabilities to understand and apply the techniques of high-involvement management (e.g., empowering associates).

Compensation is an HRM function that is important to the high-involvement management ap- proach. In high-involvement management, often some of the managers’ and associates’ compensa- tion is based on their performance and that of the organization. They may also be paid to acquire additional knowledge and skills (incentive compensation).

building your human capital

Career Style Inventory Different people approach their careers in different ways. Some, for example, attempt to obtain as much power as possible in order to control personal and organizational outcomes. Others em- phasize hard work and cooperative attitudes. The questionnaire that follows is designed to assess your tendencies, as well as your beliefs about the approaches of most managers. Following the questionnaire, we describe four distinct approaches to careers, some of which are more useful in high-involvement organizations than others.

Instructions A number of descriptive paragraphs appear below. They describe sets of beliefs or perceptions that vary among individuals. The paragraphs are divided into four sections: Life Goals, Motivation, Self- Image, and Relations with Others. Please evaluate each paragraph as follows:

1. Read the paragraph. Taking the paragraph as a whole (using all of the information in the paragraph, not just one or two sentences), rate the paragraph on a scale from “not characteristic of me” (1) to “highly characteristic of me” (7). If you are currently a full-time

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36 Chapter 1 A Strategic Approach to Organizational Behavior

student, rate each paragraph on the basis of how you believe you would feel if you were working full-time in an organization. If you are a part-time student with a career, rate each paragraph on the basis of how you actually feel.

1 2 3 4 5 6 7 Not

characteristic of me

Somewhat characteristic

of me

Generally characteristic

of me

Highly characteristic of

2. In addition, rate each paragraph in terms of the way you would like to be, regardless of how you are now. Rate each on a scale from “would not like to be like this” (1) to “would very strongly like to be like this” (7).

1 2 3 4 5 6 7 I would

not like to be like this

I would somewhat like to be like this

I would generally like to be like this

I would very strongly like to be like this

3. Finally, rate each paragraph in terms of how descriptive it is of most managers, from “not at all characteristic of most managers” (1) to “very characteristic of most managers” (7). In providing this assessment, think about managers with whom you have worked, managers you have read about or heard about, and managers you have seen in videos.

1 2 3 4 5 6 7 Not at all

characteristic of most managers

Somewhat characteristic of most managers

Generally characteristic of most managers

Very characteristic of most managers

Questionnaire Please be as honest, realistic, and candid as possible in your self-evaluations. Try to accurately de- scribe yourself, not represent what you think others might want you to say or believe. In general, individuals do not have high scores on every question.

A. Life Goals 1. I equate my personal success in life with the development and success of the organization

for which I work. I enjoy a sense of belonging, responsibility, and loyalty to an organization. If it were best for my organization, I would be satisfi ed with my career if I progressed no higher than a junior- or middle-management level.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

2. I have two major goals in life: to do my job well and to be committed to my family. I believe strongly in the work ethic and want to succeed by skillfully and creatively accomplishing goals and tasks. I also want to be a good family person. Work and family are equally important.

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Building Your Human Capital 37

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

3. My goal in life is to acquire power and prestige; success for me means being involved in a number of successful, diverse enterprises. I generally experience life and work as a jungle; like it or not, it’s a dog-eat-dog world, and there will always be winners and losers. I want to be one of the winners.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

4. I tend to view life and work as an important game. I see my work, my relations with others, and my career in terms of options and possibilities as if they were part of a strategic game that I am playing. My main goal in life is to be a winner at this game while helping others to succeed as well.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

B. Motivation 1. My interest in work is in the process of building something. I am motivated by problems

that need to be solved; the challenge of work itself or the creation of a quality product gets me excited. I would prefer to miss a deadline rather than do something halfway—quality is more important to me than quantity.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

2. I like to take risks and am fascinated by new methods, techniques, and approaches. I want to motivate myself and others by pushing everyone to the limit. My interest is in challenge, or competitive activity, where I can prove myself to be a winner. The greatest sense of exhilaration for me comes from managing a team of people and gaining victories. When work is no longer challenging, I feel bored and slightly depressed.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

3. I like to control things and to acquire power. I want to succeed by climbing the corporate ladder, acquiring positions of greater power and responsibility. I want to use this power to gain prestige, visibility, and fi nancial success and to be able to make decisions that affect many other people. Being good at “politics” is essential to this success.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

4. My interest in work is to derive a sense of belonging from organizational membership and to have good relations with others. I am concerned about the feelings of people with whom I work, and I am committed to maintaining the integrity of my organization. As long as the organization rewards my efforts, I am willing to let my commitment to my organization take precedence over my own narrow self-interest.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

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38 Chapter 1 A Strategic Approach to Organizational Behavior

C. Self-Image 1. I am competitive and innovative. My speech and my thinking are dynamic and come in

quick fl ashes. I like to emphasize my strengths and don’t like to feel out of control. I have trouble realizing and living within my limitations. I pride myself on being fair with others; I have very few prejudices. I like to have limitless options to succeed; my biggest fears are being trapped or being labeled as a loser.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

2. My identity depends on being part of a stable, noteworthy organization. I see myself as a trustworthy, responsible, and reasonable person who can get along with almost anyone. I’m concerned about making a good impression on others and representing the organization well. I may not have as much toughness, aggressiveness, and risk-taking skills as some, but I make substantial contributions to my organization.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

3. My sense of self-worth is based on my assessment of my skills, abilities, self-discipline, and self-reliance. I tend to be quiet, sincere, and practical. I like to stay with a project from conception to completion.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

4. I tend to be brighter, more courageous, and stronger than most of the people with whom I work. I see myself as bold, innovative, and entrepreneurial. I can be exceptionally creative at times, particularly in seeing entrepreneurial possibilities and opportunities. I am willing to take major risks in order to succeed and willing to be secretive if it will further my own goals.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

D. Relations with Others 1. I tend to dominate other people because my ideas are better. I generally don’t like to

work closely and cooperate with others, I would rather have other people working for me, following my directions. I don’t think anyone has ever really helped me freely; either I controlled and directed them, or they were expecting me to do something for them in return.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

2. My relations with others are generally good. I value highly those people who are trustworthy, who are committed to this organization, and who act with integrity in the things that they do. In my part of the organization, I attempt to sustain an atmosphere of cooperation, mild excitement, and mutuality. I get “turned off ” by others in the organization who are out for themselves, who show no respect for others, or who get so involved with their own little problems that they lose sight of the “big picture.”

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

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Building Your Human Capital 39

3. At times, I am tough and dominating, but I don’t think I am destructive. I tend to classify other people as winners and losers. I evaluate almost everyone in terms of what they can do for the team. I encourage people to share their knowledge with others, trying to get a work atmosphere that is both exciting and productive. I am impatient with those who are slower and more cautious, and I don’t like to see weakness in others.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

4. My relations with others are generally determined by the work that we do. I feel more comfortable working in a small group or on a project with a defi ned and understandable structure. I tend to evaluate others (both peers and managers) in terms of whether they help or hinder me in doing a craftsman-like job. I do not compete against other people as I do against my own standards of quality.

How characteristic is this of you (1–7)?________ How much would you like to be like this (1–7)?________ How characteristic is this of most managers (1–7)?________

When you have evaluated each paragraph, follow the instructions below and “score” the questionnaire.

Scoring Key for Career Style Inventory To calculate scores for each of the four primary career orientations, add up your scores for indi- vidual paragraphs as shown below. For example, to obtain your “characteristic of me” score for the orientation known as “craftsperson,” add your “characteristic of me” scores for paragraph 2 under Life Goals, paragraph 1 under Motivation, paragraph 3 under Self-Image, and paragraph 4 under Relations with Others.

Scores can range from 4 to 28. A score of 23 or higher can be considered high. A score of 9 or lower can be considered low.

Characteristic Would like to Characteristic of me be like this of most managers Craftsperson Orientation Life Goals—Paragraph 2 Motivation—Paragraph 1 Self-Image—Paragraph 3 Relations with Others—Paragraph 4 TOTAL scores for Craftsperson

Company Orientation Life Goals—Paragraph 1 Motivation—Paragraph 4 Self-Image—Paragraph 2 Relations with Others—Paragraph 2 TOTAL scores for Company Man/Woman

Jungle Fighter Orientation Life Goals—Paragraph 3 Motivation—Paragraph 3 Self-Image—Paragraph 4 Relations with Others—Paragraph 1 TOTAL scores for Jungle Fighter

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40 Chapter 1 A Strategic Approach to Organizational Behavior

Strategic Game Orientation Life Goals—Paragraph 4 Motivation—Paragraph 2 Self-Image—Paragraph 1 Relations with Others—Paragraph 3 TOTAL scores for Gamesman/ Gameswoman

Descriptions of the Four Primary Career Orientations • The Craftsperson, as the name implies, holds traditional values, including a strong work ethic,

respect for people, concern for quality, and thrift. When talking about work, such a person tends to show an interest in specifi c projects that have a defi ned structure. He or she sees others, peers as well as managers, in terms of whether they help or hinder the completion of work in a craftsman-like way.

The virtues of craftspersons are admired by almost everyone. In high-involvement organizations, craftspersons are valuable because they respect people and work hard and smart. On the downside, they can become overly absorbed in perfecting their projects, which can slow them down and harm their leadership on a broader stage.

• The Jungle Fighter lusts for power. He or she experiences life and work as a jungle where “eat or be eaten” is the rule and the winners destroy the losers. A major part of his or her psychic resources is budgeted for a personal department of defense. Jungle fighters tend to see their peers as either accomplices or enemies and their associates as objects to be used.

There are two types of jungle fi ghters: lions and foxes. The lions are the conquerors who, when successful, may build an empire. The foxes make their nests in the corporate hierarchy and move ahead by stealth and politicking. The most gifted foxes rise rapidly by making use of their entrepreneurial skills. In high-involvement organizations, jungle fi ghters can cause many problems. They tend not to value people. Leveraging human capital may take place, but only in limited ways for the purpose of self-gain.

• The Company Man or Woman bases personal identity on being part of a protective organization. He or she can be fearful and submissive, seeking security even more than success. These are not positive attributes for high-involvement organizations. On the other hand, the company man or woman is concerned with the human side of the company, interested in the feelings of people, and committed to maintaining corporate integrity. The most creative company men and women sustain an atmosphere of cooperation and stimulation, but they tend to lack the daring to lead in competitive and innovative organizations.

• The Strategic Gamesman or Gameswoman sees business life in general, and his or her career in particular, in terms of options and possibilities, as if he or she were playing a game. Such a person likes to take calculated risks and is drawn to new techniques and methods. The contest is invigorating, and he or she communicates enthusiasm, energizing peers and associates like the quarterback on a football team. Unlike the jungle fi ghter, the gamesman or gameswoman competes not to build an empire or to pile up riches, but to gain the exhilaration of victory. The main goal is to be known as a winner, along with the rest of the team.

The character of a strategic gamesman or gameswoman, which might seem to be a collection of near paradoxes, is very useful in a high-involvement organization. Such a person is cooperative but competitive, detached and playful but compulsively driven to succeed, a team player but a would-be superstar, a team leader but often a rebel against bureaucratic hierarchy, fair and unprejudiced but contemptuous of weakness, tough and dominating

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An Organizational Behavior Moment 41

After earning a business degree with a major in marketing, Ann Wood went to work for Norwich Enterprises as a research ana- lyst in the Consumer Products Division. While working, she also attended graduate school at night, receiving her MBA in three years. Within a year of reaching that milestone, Ann was promoted to manager of market research. Ann became assistant director of marketing after another three years. After a stay of slightly less than 24 months in that position, Ann was appointed director of marketing for the Consumer Products Division. In this new role, she leads many more people than in her previous roles—85 in total across three different groups: market research, marketing strategy and administration, and advertising and pub- lic relations.

Ann felt good this morning, ready to continue working on several important projects that Anil Mathur, Norwich’s executive vice president for marketing, had assigned to her. Ann felt that she was on a fast track to further career success and wanted to continue performing well. With continuing success, she expected an appointment in Norwich’s international business operations in the near future. Ann was pleased about this prospect, as in- ternational experience was becoming a prerequisite at Norwich for senior-level managerial positions—her ultimate goal. Several problems, however, were brought to her attention on what she thought was going to be a good day at the offi ce.

As Ann was entering the building, Joe Jackson, the current manager of the market research group, stopped her in the hall and complained that the company’s intranet had been down about half of the night. This technical problem had prevented timely access to data from a central server, resulting in a delay in the completion of an important market analysis. Ann thought that immediately jumping in to help with the analysis would be useful in dealing with this matter. She had promised Anil that the analysis would be available to him and other upper- level managers this morning. Now it would have to be fi nished on a special priority basis, delaying work on other important projects.

Joe also told Ann that two of his analysts had submitted their resignations over the last 24 hours. Ann asked, “Why are we hav- ing so much trouble with turnover?” The manager responded, “The

market is tight for smart analysts who understand our product lines. We’ve been having problems hiring anyone with the skills we need, much less people who have any loyalty. Maybe we should offer higher starting salaries and more attractive stock options if we expect to have much hope of keeping the people we need.” Ann asked Joe to develop a concrete proposal about what could be done to reduce turnover, promising to work with him to resolve the issue.

Just as she reached her offi ce, Ann’s phone rang. It was Brooke Carpenter, the manager of market strategy and adminis- tration. “I’m glad you’re here, Ann. I need to talk to you now. I’m on my way.” As Brooke came through the door, Ann could tell that he was quite upset. He explained that two of his people had discovered through searches on the Internet that the average pay for their type of work was 7 percent higher than what they were currently earning. Sharing this information with co-workers had created an unpleasant environment in which people were concen- trating on pay instead of focusing on tasks to be completed. Ann had a conference call coming in a few minutes, stopping her from dealing with the matter further, but she asked Brooke to set up a time when the two of them could meet with his people to talk about their concerns.

After her conference call, Ann spent the rest of her morning dealing with e-mails that were primarily related to dissatisfaction with her department’s work. Most of these concerned the delays that other Norwich units were experiencing in receiving outputs from her department. The problem was complicated by the in- ability to retain workers.

Ann had just returned from lunch when her phone rang. “Ann, it’s Brooke. Can you meet with us at 2:30 this afternoon? I know that this is short notice, but we really do need to talk with my people.” Although the time was inconvenient, given that Anil expected his analysis today, Ann knew that dealing with issues concerning Brooke’s associates was also important. Plus, she be- lieved that Anil’s report was about to be fi nished by the research group, taking that immediate problem off her plate.

The meeting with Brooke and his people lasted almost an hour. Not surprisingly, other concerns surfaced during the con- versation. Ann thought to herself that this was to be expected. Her managerial experience indicated that complaints about pay

an organizational behavior moment

All in a Day’s Work

but not destructive. Balancing these issues is important in a team-oriented organization, where associates and managers at all levels are expected to work together for personal and organizational success.

Source: Adapted from Experiences in Management and Organizational Behavior, 4th ed. (New York: John Wiley & Sons, 1996). Original instrument developed by Roy J. Lewicki.

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42 Chapter 1 A Strategic Approach to Organizational Behavior

often masked concerns about other issues. She learned that people weren’t satisfi ed with the technology made available to them to do their work or Norwich’s commitment to training and devel- opment. Young and eager to advance, Brooke’s associates wanted assurances from Ann that Norwich would spend more money and time to develop their skills. Ann agreed to the importance of skill development—both for associates and for Norwich. She said that she would examine the matter and provide feedback to them. “It may take some time, but my commitment to you is that I’ll work hard to make this happen. While I can’t promise much about the pay structure overnight, I’ll also investigate this matter to become more informed. Brooke and I will work on this together so you can have direct access to what is going on.” Ann wanted to deal with these issues, knowing that their resolution had the potential to help both associates and the company reach their goals.

Ann then spent a couple of hours dealing with still more e-mail messages, a few phone calls, and other requests that reached her desk

during the day. Anil received the report he needed and seemed to be satisfi ed. Although she had been busy, Ann felt good as she left for home around 8:30 that night. Nothing came easily, she thought.

Discussion Questions 1. Describe the people-related problems or issues Ann Wood

faced during the day. Did she handle these effectively? If not, what do you believe she should have done?

2. Is Ann Wood a high-involvement manager? If so, provide evidence. If not, how well do you think she’ll perform in her new job as head of marketing?

3. Assume that Ann Wood wants her managers and associates to be the foundation for her department’s competitive ad- vantages. Use the framework summarized in Exhibit 1-2 (in the chapter text) to assess the degree to which Ann’s people are a source of competitive advantage at this point in time.

team exercise

McDonald’s: A High-Involvement Organization? One experience most people in North America and Europe have shared is that of dining in the ham- burger establishment known as McDonald’s. In fact, someone has claimed that thirtieth-century ar- cheologists may dig into the ruins of our present civilization and conclude that twenty-fi rst-century religion was devoted to the worship of golden arches.

Your group, Fastalk Consultants, is known as the shrewdest, most insightful, and most overpaid management consulting fi rm in the country. You have been hired by the president of McDonald’s to make recommendations for improving the motivation and performance of personnel in their franchise operations. Some of the key activities in franchise operations are food preparation, order- taking and dealing with customers, and routine clean-up operations.

The president of McDonald’s must always be concerned that his company’s competitors, such as Burger King, Wendy’s, Jack in the Box, Dunkin’ Donuts, various pizza establishments, and others, have the potential to make heavy inroads into McDonald’s market. Thus, he hired a separate mar- ket research fi rm to investigate and compare the relative merits of the sandwiches, french fries, and drinks served by McDonald’s and the competitors and asked the market research fi rm to assess the advertising campaigns of the competitors. Hence, you will not be concerned with marketing issues, except as they may affect employee behavior. The president wants you to evaluate the organization’s franchises to determine their strengths and weaknesses of how they manage their associates hoping their work will be productive. He is very interested in how the restaurants’ management approach compares to high-involvement management and the impact on their approach on McDonald’s.

The president has established an unusual contract with you. He wants you and your colleagues in the fi rm to make recommendations based on your observations as customers. He does not want you to do a complete analysis with interviews, surveys, or behind-the-scenes observations.

STEPS 1. Assemble into groups of four to fi ve. Each group will act as a separate Fastalk consulting team. 2. Think about your past visits to McDonald’s. What did you see and experience? How was the

food prepared and served? What was the process? Did the employees seem to be happy with

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Endnotes 43

their work? Did they seem to be well trained and well suited for the work? Did the supervisor act as a coach or a superior? Your instructor may ask you to visit a McDonald’s in preparation for this exercise and/or to research the organization via the Internet or school library.

3. Assess McDonald’s on each dimension of high-involvement management. 4. Develop recommendations for the president of McDonald’s. 5. Reassemble as a class. Discuss your group’s assessments and recommendations with the rest of

the class, and listen to other groups’ assessments. Do you still assess McDonald’s in the same way after hearing from your colleagues in the class?

6. The instructor will present additional points for consideration.

Source: Adapted from Experiences in Management and Organizational Behavior, 4th ed. (New York: John Wiley & Sons, 1996). Original version developed by D.T. Hall and F.S. Hall.

Endnotes 1. Wang, H.C., He, J. & Mahoney, J.T. 2009. Firm-specifi c knowledge

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2. Holcomb, T.R., Holmes, R.M. & Connelly, B.L., 2009. Mak- ing the most of what you have: Managerial ability as a source of resource value creation. Strategic Management Journal, 30: 457– 485; Athey, R. 2008. It’s 2008: Do you know where your talent is? Connecting people to what matters. Journal of Business Strategy, 29 (4): 4–14; ; Barney, J.B. 1991. Firm resources and sustained competitive advantage. Journal of Management, 17: 99–120; Hitt, M.A., & Ireland, R.D. 2002. The essence of strategic leadership: Managing human and social capital. Journal of Leadership and Organizational Studies, 9: 3–14.

3. Ling, Y., Simsek, Z., Lubatkin, M.H. & Veiga. J.F. 2008. Trans- formational leadership’s role in promoting corporate entrepre- neurship: Examining the CEO=TMT interface, Academy of Management Journal, 51: 557–576; Kor, Y.Y. 2006. Direct and interaction effects of top management team and board composi- tions on R&D investment strategy. Strategic Management Journal, 27: 1081–1099; Heifetz, R.A., & Laurie, D.L. 1997. The work of the leader. Harvard Business Review, 75(1): 124–134; Ireland, R.D., & Hitt, M.A. 1999. Achieving and maintaining strategic competitiveness in the 21st century: The role of strategic leader- ship. Academy of Management Executives, 13(1): 43–57.

4. Adegbesan, J.A. 2009. On the origins of competitive advantage: Strategic factor markets and heterogeneous resource complemen- tarity. Academy of Management Review, 34: 463–475; Elbanna, S., & Child, J. 2007. Infl uences on strategic decision effective- ness: Development and test of an integrative model. Strategic Management Journal, 28: 431–453.

5. Cocks, G. 2009. High performers down under: Lessons from Australia’s winning companies. Journal of Business Strategy, 30 (4): 17–22; Pappas, J.M., & Woolridge, B. 2007. Middle managers divergent strategic activity: An investigation of multiple measures of network centrality. Journal of Management Studies, 44: 323–341.

6. Finklestein, S., Hambrick, D.C., & Cannella, A.A. 2008. Strategic leadership: Top executives and their effects on organizations. New York: Oxford University Press.

7. Hitt, M.A., Black, S., & Porter, L. 2008. Management. Upper Saddle River, NJ: Prentice Hall.

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9. Manz, C., & Neck, C.P. 2007. Mastering self leadership. Upper Saddle River, NJ: Prentice Hall.

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44 Chapter 1 A Strategic Approach to Organizational Behavior

16. Hitt, M.A., Ireland, R.D., & Hoskisson, R.E. 2011. Strategic management: Competitiveness and globalization. Mason, OH: South-Western Cengage Learning.

17. Nelson, M.C. 2000. Facing the future: Intellectual capital of our workforce. Vital Speeches of the Day, December 15: 138–143.

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26. Our discussion of the value, rare, and nonimitable terms draws signifi cantly from: Barney, J.B., & Wright, P.M. 1998. On be- coming a strategic partner: The role of human resources in gain- ing competitive advantage. Human Resource Management, 37: 31–46.

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28. Porter, Competitive strategy. 29. Hitt, Ireland, & Hoskisson, Strategic management. 30. Porter, Competitive strategy. 31. Hitt, Ireland, & Hoskisson, Strategic management. 32. Smith, W.S. 2009. Vitality in business: Executing a new strategy

at Unilever. Journal of Business Strategy, 30 (4): 31–41; Higgins, M.C., & Gulati, R. 2006. Stacking the deck: The effects of top management backgrounds on investor decisions. Strategic Management Journal, 27: 1–25.

33. Henderson, A.D., Miller, D., & Hambrick, D.C. 2006. How quickly do CEOs become obsolete? Industry dynamism, CEO tenure, and company performance. Strategic Management Journal, 27: 447–460.

34. Ployhart, R.E. 2006. Staffi ng in the 21st century: New challenges and strategic opportunities. Journal of Management, 32: 868–897.

35. Newbert, S.L. 2007. Empirical assessments of the resource-based view of the fi rm: An assessment and suggestions for future re- search. Strategic Management Journal, 28: 121–146; Barney & Wright, On becoming a strategic partner; Lepak & Snell, The human resource architecture.

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37. Pfeffer, J. 1994. Competitive advantage through people: Unleashing the power of the work force. Boston: Harvard Business School Press.

38. Barney & Wright, On becoming a strategic partner. 39. Ibid. 40. Bangle, C. 2001. The ultimate creativity machine: How BMW

turns art into profi t. Harvard Business Review, 79(1): 47–55. 41. Bogner, W.C., & Bansal, P. 2007. Knowledge management as

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agement in dyadic competitive rivalry: The effects of resource bundling and deployment. Academy of Management Journal, 51: 918–935; Sirmon, Hitt, & Ireland, Managing fi rm resources in dynamic environments to create value.

46. Sirmon & Hitt, Contingencies within dynamic managerial capa- bilities; Bowman, C., & Swart, J. 2007. Whose human capital? The challenge of value capture when capital is embedded. Journal of Management Studies, 44: 488–505.

47. Collins, C.J., & Smith, K.G. 2006. Knowledge exchange and combination: The role of human resource practices in the per- formance of high-technology fi rms. Academy of Management Journal, 49: 544–560; Reed, K.K., Lubatkin, M., & Srinivasan, N. 2006. Proposing and testing an intellectual capital-based view of the fi rm. Journal of Management Studies, 43: 867–893.

48. West, B.J., Patera, J.L. & Carsten, M.K. 2009. Team-level posi- tivity: Investigating positive psychological capacities and team level outcomes. Journal of Organizational Behavior, 30: 249– 267; Luthans, F. 2002. The need for and meaning of positive organizational behavior. Journal of Organizational Behavior, 23: 695–706.

49. Avey, J.B. Luthans, F. & Smith, R.M. 2010. Impact of psy- chological capital on employee well-being over time. Journal of Occupational Health Psychology,15: 17–28.

50. Luthans, F. 2006. The impact of effi cacy on work attitudes across cultures. Journal of World Business, 41: 121–132.

51. Gibson, C.B., & Earley, P.C. 2007. Collective cognition in action: Accumulation, interaction, examination, and accom- modation in the development and operation of group effi cacy beliefs in the workplaces. Academy of Management Review, 32: 438–458.

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Endnotes 45

52. Walumbwa, F.O., Luthans, F, Avey, J.B. & Oke, A. 2009. Au- thentically leading groups: The mediating role of collective psychological capital and trust. Journal of Organizational Behavior, 30: 1–21.

53. Keyton, J. & Smith, F.L. 2009. Distrust in leaders: Dimensions, patterns and emotional intensity. Journal of Leadership and Or- ganizational Studies, 16: 6–18; Luthans, F. & Avolio, B.J. 2009. The point of positive organizational behavior. Journal of Organi- zational Behavior, 30: 291–307.

54. Gillespie, N., & Dietz, G. 2009. Trust repair after an organization-level failure. Academy of Management Review, 34: 127–145.

55. Gooty, J., Gavin, M. Johnson, P.D., Frazier, M.L., & Snow, D.B. 2009. In the eyes of the beholder: Transformational leadership, positive psychological capital and performance. Journal of Leader- ship and Organizational Studies, 15: 353–367.

56. Cooper, C.L., Quick, J.C. & Schabracq, M.J. 2010. Epilogue. In C.L. Cooper, J.C. Quick & M.J. Schabracq (Eds.), Work and health psychology: The handbook. Hoboken, NJ: John Wiley & Sons; Quick, J.C., Macik-Frey, M., & Cooper, C.L. 2007. Managerial dimensions of organizational slack. Journal of Man- agement Studies, 44: 189–205.

57. Fineman, S. 2006. On being positive: Concerns and counter- points. Academy of Management Review, 31: 270–291.

58. Goleman, D. 2004. What makes a leader? Harvard Business Review, 82 (January): 82–91.

59. McKee, A., & Massimillian, D. 2006. Resonant leadership: A new kind of leadership for the digital age. Journal of Business Strat- egy, 27(5): 45–49.

60. The fi ve aspects of high-commitment management that are used in this book are the most commonly mentioned aspects. See, for example, the following: Arthur, J.B. 1994. Effects of human resource systems on manufacturing performance and turnover. Academy of Management Journal, 37: 670–687; Becker, B., & Gerhart, B. 1996. The impact of human resource management on organizational performance: Progress and prospects. Academy of Management Journal, 39: 779–801; Guthrie, J.P. 2001. High- involvement work practices, turnover, and productivity: Evi- dence from New Zealand. Academy of Management Journal, 44: 180–190; MacDuffi e, J.P. 1995. Human resource bundles and manufacturing performance: Organizational logic and fl exible production systems in the world auto industry. Industrial and La- bor Relations Review, 48: 197–221; Pfeffer, The human equation; Pfeffer, J., & Veiga, J.F. 1999. Putting people fi rst for organiza- tional success. Academy of Management Executive, 13(2): 37–48.

61. Zatzick, C.D., & Iverson, R.D. 2006. High-involvement management and workforce reduction: Competitive advan- tage or disadvantage. Academy of Management Journal, 49: 999–1015.

62. Takeuchi, R, Chen, G. & Lepak, D.P., 2009. Through the looking glass of a social system: Cross-level effects of high- performance work systems on employees’ attitudes. Personnel Psychology, 62: 1–29; Baron, J.N., & Kreps, D.M. 1999. Strategic human resources: Frameworks for general managers. New York: John Wiley & Sons.

63. Ployhart, Staffi ng in the 21st century; Pfeffer, The human equation; Pfeffer & Veiga, Putting people fi rst for organizational success.

64. Ibid. 65. For example, see Erdogan, B., Liden, R.C., & Kraimer, M.L.

2006. Justice and leader-member exchange: The moderating role of organizational culture, Academy of Management Journal, 49: 395–406.

66. O’Reilly, C.A., Chatman, J., & Caldwell, D.F. 1991. People and organizational culture: A profi le comparison approach to assess- ing person-organization fi t. Academy of Management Journal, 34: 487–516.

67. Perry-Smith, J.E. 2006. Social yet creative: The role of social relationships in facilitating individual creativity. Academy of Management Journal, 49: 85–101.

68. Van Iddekinge, C.H., Ferris, G., Perrewe, P., Perryman, A., Blass, F.R. & Thomas, D. 2009. Effects of selection and training on unit-level performance over time: A latent growth modelling approach. Journal of Applied Psychology, 94: 829–843.

69. Ng, T.W.H., & Feldman, D.C. 2009. How broadly does edu- cation contribute to job performance? Personnel Psychology, 62: 89–134.

70. Lawler, E.E., Mohrman, S.A., & Benson, G. 2001. Organizing for high performance: Employee involvement, TQM, reengineering, and knowledge management in the Fortune 1000. San Francisco: Jossey-Bass.

71. Manz & Neck, Mastering self leadership; Pfeffer, The human equation; Pfeffer & Veiga, Putting people fi rst for organizational success.

72. Hulsheger, U.R., Anderson, N. & Salgado, J.F. 2009. Team-level predictors of innovation at work: A comprehensive meta-analysis spanning three decades of research. Journal of Applied Psychology, 94: 1126–1145.

73. Lawler, Mohrman, & Benson, Organizing for high performance. 74. Srivastava, A., Bartol, K.M., & Locke, E.A., 2006. Empowering

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75. Mesmer-Mangus, J.R. & DeChurch, L.A. 2009. Informa- tion sharing and team performance: A meta-analysis, Journal of Applied Psychology, 94: 535–546.

76. Lawler, Mohrman, & Benson, Organizing for high performance. 77. Arthur, Effects of human resource systems on manufacturing

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46 Chapter 1 A Strategic Approach to Organizational Behavior

infl uence processes on service quality. Journal of Applied Psychol- ogy, 94: 371–391.

81. Kirkman, B.L., Chen, G., Farh, J.-L., Chen, Z.X., & Lowe, K.B. 2009. Individual power distance orientation and follower reac- tions to transformational leaders: A cross-level, cross- cultural ex- amination. Academy of Management Journal, 52: 744–764.

82. Davis, J.H., Schoorman, F.D., Mayer, R.C., & Tan, H.H. 2000. The trusted general manager and business unit performance: Em- pirical evidence of a competitive advantage. Strategic Management Journal, 21: 563–576; Mayer, R.C., Davis, J.H., & Schoorman, F.D. 1995. An integrative model of organizational trust. Academy of Management Review, 20: 709–734.

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84. Gong, Y., Huang, J.-C. & Farh, J.-L. 2009. Employee learning orientation, transformational leadership, and employee creativity: The mediating role of employee creative self-effi cacy. Academy of Management Journal, 52: 765–778.

85 Taylor, W.C., 2008. Bill Taylor: Pixar’s blockbuster secrets. BusinessWeek, at http://www.businessweek.com, July 10.

86 Lewin, A.Y., Massini, S. & Peeters, C. 2009. Why are compa- nies offshoring innovation? The emerging global race for talent. Journal of International Business Studies, 40: 901–925.

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http://www.joinlafd.org/CoreValues.htm

? knowledge objectives After reading this chapter, you should be able to: 1. Defi ne organizational diversity and distinguish

between affi rmative action and diversity manage- ment.

2. Distinguish among multicultural, plural, and mono- lithic organizations.

3. Describe the demographic characteristics of the U.S. population and explain their implications for the composition of the workplace.

4. Discuss general changes occurring in the United States that are increasing the importance of man- aging diversity effectively.

5. Understand why successfully managing diversity is extremely important for high-involvement work organizations.

6. Discuss the various roadblocks to effectively man- aging a diverse workforce.

7. Describe how organizations can successfully man- age diversity.

organizational diversity

exploring behavior in action

Diversity in the Los Angeles Fire Department

M elissa Kelley had a rich background in fi refi ghting. Early in life, she learned from her grandfather, who worked as a fi refi ghter. In college, she learned through coursework as a fi re-science major. After college, she spent fi ve years learning and honing her skills as a fi refi ghter with the California Department of Forestry.

Armed with her experiences and passion for the work, she joined the Los Angeles Fire Department in 2001. Although aware of possible discrimination and harassment against women in the department, she did not hesitate to join when presented with the opportu- nity. In her words, “I was willing to overlook … the dirty jokes, the porn, the … mentality. … I just wanted to be part of the team.” To her, only two simple rules ap- plied: “Do not touch me. Do not hurt me on purpose.”

According to media accounts, the fi rst of her rules was violated early in her career with the LAFD. Soon after joining the department, a male colleague entered her bed at the fi rehouse. He then attempted to kiss and touch her. She resisted and the colleague left, but for several weeks following the incident he clucked like a chicken whenever she was present.

During a routine training exercise later in her career, the second rule came into sharp focus. While the rule probably was not violated explicitly, it is relevant none- theless to the events that occurred. Following a fi re call, Ms. Kelley engaged in the “Humiliator” drill, a drill that involves lifting and positioning a heavy ladder, climb- ing the ladder with a large saw, and using the saw to cut through metal bars in a window. Although she had previ- ously demonstrated the abilities needed for the drill, on that particular day she dropped the ladder onto her head,

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Sources: S. Banks. 2006. “Firehouse Culture an Ordeal for Women,” Los Angeles Times, Dec. 3, p. A.1; S. Glover. 2007. “Rising Star Caught in Turmoil at the LAFD,” Los Angeles Times, Feb. 12, B.1; D. Hernandez. 2006. “Bringing Diversity to the Force,” Los Angeles Times, Feb. 6, B.4; J. Kandel. 2006. “Hostile Acts,” The IRE Journal 29, no. 4: 22; LAFD, “Core Values,” 2007, at http://www.joinlafd. org/CoreValues.htm; L. Richardson. 2006. “Audit Faults Fire Dept.,” Los Angeles Times, Jan. 27, p. B.4; L. Richardson. 2006. “L.A. Fire Captain Alleges Gender Bias,” Los Angeles Times, Sept. 28, p. B.4. “Lesbian fi refi ghter in L.A. wins $6.2 mil. in discrimination case.” Jet, July 30, 2007, at FindArticles.com. http://fi ndarticles.com/p/articles/mi_m1355/is_4_112/ai_n27328045.

resulting in her helmet becoming stuck between two of its rungs. She immediately felt pain and could not lift her arm to free herself, saying in a later interview: “In my head I’m thinking, I’m dying. My arm is messed up. My back is hurt- ing. My legs are going to give out if I don’t get this ladder off me.” She continued to struggle with the ladder while showing obvious signs of pain. One colleague apparently tried to help but was stopped. Oth- ers reportedly cursed at the struggling fi refi ghter. In the end, Ms. Kelley was taken to a local hospital where multi- ple injuries were discovered. She subsequently had to be reassigned as a dispatcher. In refl ecting on the events of that day, she summed up the situation this way: “Those were my teammates. They would help a dog pinned under a ladder. But they wouldn’t help me.”

Ms. Kelley’s experiences are not unique. Alicia Mathis, a captain who joined the LAFD in 1989, also reports being approached in bed at a fi rehouse. She fi led a complaint with the California Department of Fair Employment and Housing. Ruthie Bernal settled a lawsuit related to sexual advances that were followed by harsh treatment when the advances were rejected. Interestingly, Ms. Bernal reports that such advances and subsequent harsh treatment oc- curred in three different situations involving three differ- ent fi refi ghters. Beyond sexual advances, other inappropri- ate acts have been reported, including mouthwash bottles being fi lled with inappropriate substances, unfl attering female training experiences being captured on video and circulated among male colleagues, sexual materials being delivered, and disproportionately diffi cult training/testing being applied. In a survey released by the City Controller, 80 percent of women reported discrimination as an issue.

Beyond gender-based problems, race also has played a role in the Los Angeles Fire Department. In a racially charged incident that took place a few years ago, an African

American fi refi ghter ate dog food that had been put into his spaghetti at a fi rehouse. The nature of this incident remains a matter of controversy, as some claim it was harmless horse- play. Even so, because of a history of racial discrimination and harassment, it sparked outrage and a lawsuit. In the survey just mentioned, 87 percent of African Americans re-

ported discrimination as an issue. Hispanics have also reported problems.

The overall effects of these gender and racial is- sues have been signifi cant. Beyond the loss of talented individuals and the reduced opportunity to attract tal- ented women and minori- ties, the LAFD has had to pay millions of dollars to settle lawsuits. For example, Brenda Lee was recently awarded more than $6.2

million in a discrimination, harassment, and retaliation case against the LAFD and her former supervisor for being harassed because she is African American, female, and gay.

Job satisfaction also has been affected for some indi- viduals of both genders and all races. In addition, turmoil at the top of the organization has been signifi cant, as mul- tiple fi re chiefs have been fi red because of the discrimi- nation and harassment. Has the ultimate mission of the organization been compromised? The mission is to “pre- serve life and property, promote public safety and foster economic growth. …” Given the loss of talent, reduced satisfaction for some, and turmoil at the top, the effective pursuit of the mission has not been helped.

The news is not all bad, however. City and fi re depart- ment offi cials have taken steps to remedy the situation. Surveys designed to stay abreast of the problems have been conducted, as noted earlier. Events such as “Black History Month Recruitment Exposition and Family Carnival” have been held. A new fi re chief committed to a positive culture has been hired. The fi rst female African American fi re captain has been installed.

©iStockphoto

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http://findarticles.com/p/articles/mi_m1355/is_4_112/ai_n27328045

LAFD’s legal troubles, fi nancial settlement costs, and public embar- rassment have led to renewed efforts to change the culture. The changing nature of the fi refi ghter’s job, where 80 percent of fi re calls no longer in- volve structural or brush fi res, probably has helped in this process.1 Many or- ganizations, however, have not needed public embarrassment or changing jobs to motivate diversity efforts. Many orga- nizations, particularly large ones, have voluntarily adopted diversity manage- ment programs aimed at recruiting, retaining, and motivating high-quality associates from all demographic back- grounds. Most Fortune 500 companies, for example, have diversity manage- ment programs.2 A full 78 percent of organizations with 10,000 or more employees report having a diversity strategy, as compared with 44 percent of companies with 100 to 999 em- ployees and 31 percent in companies

with fewer than 100 workers. Over 79 percent of human resource managers at Fortune 1000 companies said they believed that successfully managing di- versity improves their organizations.3

In the case of nonprofi t organiza- tions or governmental units such as the Los Angeles Fire Department, diversity can help build a form of competitive ad- vantage. For instance, hiring and retain- ing managers and associates from both genders and multiple ethnic groups could help a nonprofi t organization bet- ter understand its actual and potential client base as well as its actual and po- tential donors. Thus, the organization might be able to attract resources that would have gone to another nonprofi t organization or that would have been

We begin this chapter by defi n- ing organizational diversity and distin- guishing it from other concepts, such as affi rmative action. Next, we describe the forces in a changing world that have made diversity such a crucial con- cern. We then discuss possible benefi ts of effective diversity management, fol- lowed by roadblocks to such manage- ment and to the development of an inclusive workplace. We conclude the chapter with a discussion of what can be done to successfully manage a di- verse organization.

the strategic importance of Organizational Diversity

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50 Chapter 2 Organizational Diversity

Diversity Defi ned Diversity can be defi ned as a characteristic of a group of people where differences exist on one or more relevant dimensions such as gender.6 Notice that diversity is a group charac- teristic, not an individual characteristic. Thus, it is inappropriate to refer to an individual as “diverse.” If the group is predominantly male, the presence of a woman will make the group more diverse. However, if the group is predominantly female, the presence of a particular woman will make the group more homogeneous and less diverse.

In practice, diversity is often defi ned in terms of particular dimensions, most com- monly gender, race, and ethnicity. Other important dimensions also exist.7 These include age, religion, social class, sexual orientation, personality, functional experience (e.g., fi nance, marketing, accounting), and geographical background (e.g., background in the Canadian province of Ontario versus the province of Saskatchewan).8 Any characteristic that would infl uence a person’s identity or the way he or she approaches problems and views the world can be important to consider when defi ning diversity.9 Two diversity scholars put it this way: “the effects of diversity can result from any attribute that people use to tell themselves that another person is different.”10 Visible attributes (e.g., race, gender, ethnicity),11 attributes directly related to job performance (e.g., education and functional experience),12 and rare attributes13 are the most likely to be seen as important. Examples of how some large organizations defi ne diversity appear below:

Texas Instruments: “Diversity refers to the ways in which people differ. This includes obvious differences such as race and gender, and more subtle differences in religion and culture, as well as variations in work styles, thoughts and ideas.”14

Microsoft: “[Diversity] means not only having a workforce balanced by race, ethnic origin, gender, sexual orientation, and gender identity and expression, but also having a workforce that embraces differences in approaches, insights, ability, and experience.”15

Bank of America: “Our commitment to diversity is … about creating an environment in which all associates can fulfi ll their potential without artifi cial barriers, and in which the team is made stronger by the diverse backgrounds, experiences and perspectives of individuals.”16

Affi rmative action programs (AAPs) differ from diversity management programs. This important distinction should be noted before proceeding. AAPs are specifi c measures an organization takes to remedy and/or prevent discrimination. The key idea is to ensure fair representation of women and racial and ethnic minorities in the workplace. In the United States, federal contractors (with 50 or more employees or government contracts over $50,000) are required to have AAPs. Other organizations may voluntarily adopt an AAP or may be court-ordered to adopt a program to remedy discriminatory practices. Central features of AAPs include a utilization analysis, which indicates the proportion of women and minorities hired and occupying various positions; goals and timetables for remedying underutilization of women and minorities; specifi c recruiting practices aimed at recruiting women and minorities (for example, recruiting at traditionally African Amer- ican universities); and provision of developmental opportunities.17 AAPs do not require that specifi c hiring quotas be implemented (which may be illegal) or that standards for selection and promotion be lowered. Also, AAPs usually provide temporary action; once women and minorities are appropriately represented in an organization, the AAP (with the exception of monitoring) is no longer necessary.

diversity A characteristic of a group of people where differences exist on one or more relevant dimensions such as gender.

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Diversity Defi ned 51

In contrast, diversity management programs are put in place to improve organiza- tional performance. Because of their different goals, these programs differ from AAPs in several ways,18 as summarized in Exhibit 2-1. Diversity management programs address diversity on many dimensions. They are often meant to change the organizational culture to be more inclusive and to enable and empower all associates. In addition, they focus on developing people’s ability to work together.

When diversity is managed successfully, a multicultural organization is the result.19 A multicultural organization is one in which the organizational culture fosters and values differences. As Google, a company often praised for their diversity initiatives, states on their website “At Google, we don’t just accept difference—we thrive on it. We celebrate it. And we support it, for the benefi t of our employees, our products and our community.” People of any gender, ethnic, racial, and cultural backgrounds are integrated and repre- sented at all levels and positions in the organization. Because of the effective management of diversity, there is little intergroup confl ict. Very few organizations in the United States or elsewhere are truly multicultural organizations; most organizations are either plural or monolithic.

Plural organizations have diverse workforces and take steps to be inclusive and re- spectful of people from different backgrounds. However, diversity is tolerated rather than valued and fostered. Whereas multicultural organizations take special actions to make the environment inclusive and to ensure that all members feel valued, plural organizations focus on the law and on avoiding blatant discrimination.20 Furthermore, people of various backgrounds may not be integrated throughout the levels and jobs of the organization, as they are in multicultural organizations. For example, even though a company may

multicultural organization An organization in which the organizational culture values differences.

plural organization An organization that has a diverse workforce and takes steps to be inclusive and respectful of differences, but where diversity is tolerated rather than truly valued.

EXHIBIT 2-1 Differences between Affi rmative Action Programs and Diversity Management Programs

Affi rmative Action Diversity Management

Purpose To prevent and/or remedy discrimination To create an inclusive work environment where all associates are empowered to perform their best

Assimilation Assumes individuals will individually assimilate Assumes that managers and the organizations into the organization; individuals will adapt will change (i.e., culture policies, and systems

foster an all-inclusive work environment)

Focus Recruitment, mobility, and retention Creating an environment that allows all associates to reach their full potential

Cause of Does not address the cause of problems Attempts to uncover the root causes of Diversity Problems diversity problems

Target Individuals identifi ed as disadvantaged (usually All associates racial and ethnic minorities, women, people with disabilities)

Time Frame Temporary, until there is appropriate Ongoing, permanent changes representation of disadvantaged groups Sources: Adapted from R.R. Thomas, Jr. 1992. “Managing Diversity: A Conceptual Framework,” in S.E. Jackson et al. (Eds.), Diversity in the Workplace (New York: Guilford Press), pp. 306–317. Society for Human Resource Management, “How Is a Diversity Initiative Different from My Affi rmative Action Plan?,” 2004, at http://www.shrm.org/diversity.

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52 Chapter 2 Organizational Diversity

employ a large number of women, most of them may be in secretarial jobs. Plural orga- nizations may also have human resource management policies and business practices that exclude minority members, often unintentionally. For example, many companies reward people for being self-promoters; that is, people who brag about themselves and make their achievements known are noticed and promoted, even though their achievements may not be as strong as those who do not self-promote. However, self-promoting behavior may be quite unnatural for people from cultural backgrounds where modesty and concern for the group are dominant values, such as the Japanese and Chinese cultures.21 Finally, we would expect more intergroup confl ict in plural organizations than in multicultural organiza- tions because diversity is not proactively managed.

Finally, monolithic organizations are homogeneous. These organizations tend to have extreme occupational segregation, with minority group members holding low-status jobs. Monolithic organizations actively discourage diversity; thus, anyone who is differ- ent from the majority receives heavy pressure to conform. Most U.S. organizations have moved away from a monolithic model because changes in the external environment and the workforce have required them to do so.22 In the next section, we describe what these changes have been.

Forces of Change Over the past 20 years, several important changes in the United States and in many other countries have focused more attention on diversity, and these trends are expected to con- tinue. The most important changes are: (1) shifts in population demographics, (2) in- creasing importance of the service economy, (3) the globalization of business, and (4) new management methods that require teamwork.

Changing Population Demographics Over the past ten years, more than one-third of people entering the U.S. workforce have been members of racial or ethnic minority groups.23 Moreover, the proportion of racial and ethnic minorities in the workforce is expected to increase indefi nitely. The situation is similar in some European countries.24

Exhibit 2-2 provides data on trends that affect the workforce in the United States. It shows, for example, that non-Hispanic white people are expected to decrease as a percent- age of the overall population, moving from almost 65 percent to less than 50 percent by 2050 (note that most Hispanics are racially white). The percentage of the population from Hispanic origins (any race) is expected to almost double, from just under 16 percent to almost 30 percent. The Asian American population is also expected to grow, from approxi- mately 5 percent to 9 percent of the overall population. The expansion of the Hispanic American and Asian American populations is due in part to immigration. The percentage of black Americans (some of whom are of Hispanic origin) is expected to remain stable at around 13 percent.

Exhibit 2-2 also shows a trend related to the continued aging of the U.S. popula- tion. The decade between 2000 and 2010 saw a growth spurt in the group made up of people aged 45 through 64. This spurt refl ects the aging of the post–World War II baby boom generation—people born between 1946 and 1964. A major U.S. labor shortage is expected between 2015 and 2025 as members of the baby boom generation retire.25 Thus,

monolithic organization An organization that is homogeneous.

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Forces of Change 53

it will be even more important for organizations to be able to attract and retain talented associates. Another aspect of the aging population also will likely infl uence the composi- tion of the labor force. As can be seen in the exhibit, the population over 65 years old will continue to grow. In 2050, it is expected that one in fi ve Americans will be 65 years old or older. If people work beyond the traditional retirement age of 65 due to improved health and the Age Discrimination Act (which protects people 40 and older from discrimination such as being forced to retire), the workforce will continue to age.

Finally, Exhibit 2-2 indicates that the proportion of men and women in the popula- tion is likely to remain stable. While women make up 50.9 percent of the population, approximately 48 percent of the labor force is female.26 This number has grown from 40 percent in 1975 and is expected to increase slightly over the next decade,27 indicating that proportionally more women than men will be entering the workforce. About 73 percent of mothers work, and about 60 percent of mothers who work have children under the age of three.28 In contrast, less than 50 percent of mothers worked in 1975. The number of combined hours per week that married couples with children work increased from 55 in 1969 to 66 in 2000.29 These trends create a need for policies that take family issues into consideration and that deal with the differing issues of workers who have children versus those who do not have children.

Increase in the Service Economy The U.S. Bureau of Labor Statistics has predicted that the number of service-producing jobs (including those in transportation, utility, communications, wholesale and retail

EXHIBIT 2-2 Projected U.S. Population Demographics

Percentage by Race or Hispanic Origin 2010 2030 2050

White, alone 79.5 76.6 74.0 Black, alone 12.9 13.1 13.0 Asian, alone 5.3 7.3 9.2 More than one 1.8 2.6 3.7 Hispanic origin (all races) 15.8 22.6 29.6 White (not Hispanic origin) 64.7 55.5 46.3

Percentage by Age 2010 2030 2050

0–4 6.8 6.5 6.4 5–17 17.4 17.0 16.7 18-–24 9.9 9.1 9.0 25–44 26.8 25.5 25.2 45–64 26.1 22.6 22.4 65� 12.5 19.3 20.2

Percentage by Sex 2010 2030 2050

Male 49.1 49.1 49.2 Female 50.9 50.9 50.8 Source: U.S. Census Bureau, “U.S. Population Projections,” 2009. At http://www.census.gov/population/ www/projections/summarytables.html.

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http://www.census.gov/population/www/projections/summarytables.html

54 Chapter 2 Organizational Diversity

trade, fi nance, insurance, real estate, and govern- ment) will grow by approximately 17 percent be- tween 2004 and 2014.30 Service jobs are projected to make up more than 78 percent of all jobs in the United States by 2014.31 Importantly, a service- based economy depends on high-quality interac- tions between people, whether between beauticians and their clients, home health-care workers and their patients, or human resource managers and their corporate associates. Because diversity within these and other customer groups is increasing, the service economy demands greater understanding and appre- ciation of diversity.32

The Global Economy Globalization of the business world is an accelerating trend, gaining momentum from the increasing ease of communication, the opening of new markets, and growth in the num- ber of multinational fi rms. In 2006, the United States exported $1,437 billion in goods and services and imported $2,202 billion in goods and services.33 Since 2003, the export fi gure has increased by more than 40 percent in nominal dollars, while the import fi gure has increased by 45 percent.34 Most of the largest companies in the world (for example, GE, Exxon, and Toyota) are the largest owners, worldwide, of foreign assets.35 These same companies employ millions of workers outside of their home countries. Also, many of these companies require workers in their home countries to work with people from other parts of the world. Finally, many companies now conduct worldwide searches for manag- ers and executives, so that the world serves as the labor market.

The continuing growth of globalization indicates that people will be working with others from different countries and cultures at an ever-increasing rate. Furthermore, many U.S. associates will work outside the United States with people who speak different lan- guages, are accustomed to different business practices, and have different worldviews. As globalization increases, the need for successful diversity management also increases. You will read more about global issues in Chapter 3.

Requirements for Teamwork Organizations that wish to succeed must respond to increasing globalization, rapidly changing technology and knowledge, and increasing demands for meaningfulness of as- sociates’ work. Teamwork is one way to provide better-quality goods and services, because people are more likely to become engaged and committed to the goals of the organization when they are members of strong teams. Whole Foods Market provides an example. At this very successful U.S.-based international provider of organic foods, everyone is as- signed to a small, self-directed team.36

Teamwork requires that individuals work well together. Having diverse teams may allow for synergistic effects, where the variety of team experiences, attitudes, and view- points leads to better team performance.37 However, to realize these positive effects, diver- sity must be managed effectively. Teams are discussed in more detail in Chapter 11.

©AP/Wide World Photos

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Diversity Management and High-Involvement Organizations 55

Diversity Management and High-Involvement Organizations High-involvement organizations expect their associates to respect, learn from, and help one another. They also recognize that associates must be committed to the organization in order to use training, information, and decision power in appropriate ways. Managing diversity effectively is important in the achievement of these aims. Individuals, groups, organizations, and even society as a whole can benefi t.

Individual Outcomes Associates’ perceptions of the extent to which they are valued and supported by their orga- nization have a strong effect on their commitment to the organization and their job involve- ment and satisfaction.38 In the case of associates who are different from those around them, a positive, inclusive climate for diversity is necessary for full engagement in the work.39 Re- search has found that women, racial and ethnic minority group members, and people with disabilities have less positive attitudes toward their organizations, jobs, and careers when they feel that their organizations have poor climates for diversity.40 In addition, when an organization encourages and supports diversity, individuals are less likely to feel discrimi- nated against and to be treated unfairly. When people feel they have been treated unfairly, they react negatively by withdrawing, performing poorly, retaliating, or fi ling lawsuits.41

Consider the case of a person whose religion forbids alcohol use, requires prayer at certain times of the day, and considers sexual jokes and materials offensive. This person, though, works in an environment where many deals are made over drinks in the local bar, where co-workers tease him because of his daily prayers, and where offi ce walls are covered with risqué pictures. It is likely that this person feels uncomfortable in the offi ce and devalued by his co-workers, leading to dissatisfaction and low commitment to his as- sociates and the organization. Furthermore, he may avoid uncomfortable social activities where important information is exchanged and work accomplished, thus hurting his job performance. A work environment and culture that are sensitive, respectful, and accept- ing of this person’s beliefs would likely result in a more committed, satisfi ed, and higher- performing associate.

With respect to individuals who are in the majority, diversity management programs must be sensitive to their needs as well. Otherwise, the ideals of diversity management will not be met and outcomes for some individuals will be less positive than they should be. In the United States, white men are often in the majority in a given organizational situa- tion. For them, diversity management can be threatening. One study showed that white men placed less value on efforts to promote diversity.42 Another study showed that white men perceived injustice when laid off in disproportionate numbers in the face of active diversity management, but did not perceive injustice in the face of disproportionate layoffs in situations without active diversity management.43 To ensure commitment, satisfaction, and strong performance among those in a majority group, organizational leaders must: (1) carefully build and communicate the case for diversity by citing the forces of change discussed earlier and (2) ensure fair decision processes and fair outcomes for all.

Organizations that create, encourage, and support diversity make all associates feel valued and provide them with opportunities to reach their full potential and be truly en- gaged in their work. This is a necessary condition of high-involvement work environments.

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56 Chapter 2 Organizational Diversity

To put it another way, creating and successfully managing diversity is a necessary condi- tion for achieving a high-involvement work environment.

Group Outcomes Diversity should have positive effects on the outcomes of organizational groups, particularly on decision-making, creative, or complex tasks.44 This is because individual group members have different ideas, viewpoints, and knowledge to contribute, resulting in a wider variety of ideas and alternatives being considered.45 Individuals who are different in terms of age, gender, race, ethnicity, functional background, and education often think about issues differently.46

For example, have you ever wondered why phones have rounded edges instead of sharp corners and why there is often a raised dot on the “5” key? One reason is that de- sign groups at AT&T include people who have disabilities, including visual impairments. Rounded corners are less dangerous for people who cannot see the phone, and a raised dot on the “5” key allows people who cannot see to orient their fi ngers on the keypad. Ohmny Romero, who has worked as a manager in AT&T’s technical division and is visually im- paired, stated that AT&T associates with disabilities become involved in developing new technologies because they want to “give back” to their community.47 As a result, everyone has less dangerous phones and keypads that can be used when it is diffi cult to see. These innovations might never have come about if AT&T design teams had not included mem- bers with disabilities and respected their inputs.

In spite of its potential benefi ts, diversity has been described as a “mixed blessing” in terms of outcomes for organizational groups.48 Indeed, research has produced mixed re- sults, with some studies showing positive effects but other studies failing to show such ef- fects.49 There are two issues to consider in interpreting these research outcomes. First, fault lines can be present in situations characterized by diversity. Fault lines occur when two or more dimensions of diversity are correlated. For example, if all/most of the young people on a cross-functional task force represent marketing while all/most of the older individuals represent product engineering, then a fault line is said to exist. Fault lines merge multiple identities (e.g., young and marketing focused) to produce barriers to effective collabora- tion within a group. Research on this phenomenon is relatively new, but has produced fi ndings suggesting poor group outcomes.50

Second, problems can develop in all situations characterized by some level of diversity. People often label group members who are different from themselves as “out-group mem- bers” and like them less,51 leading to diffi culties in group problem solving and decision making. Diverse organizational groups are more likely to experience personal confl ict, problems in communication, and confl ict among subgroups.52

In light of the above issues, the goal becomes one of facilitating the positive effects of di- versity while eradicating the potentially negative effects. One way of harnessing the positive potential of group diversity, while avoiding the negative, is to establish a common identity for the group and to focus on common goals.53 Richard Hackman, a leading researcher and consultant in the area of teams, has pointed out the importance of common goals for a team, as well as the importance of coaching for team problems.54 Furthermore, when a company has a positive diversity culture, the problems associated with group diversity are much less likely to occur.55 An organization that implements effective diversity programs, philosophies, and practices tends to avoid the problems associated with diversity, allowing it to yield the benefi ts that can be so important.56 We develop these ideas later in this chapter.

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Diversity Management and High-Involvement Organizations 57

Organizational Outcomes As discussed above, diversity can lead to more satisfi ed, motivated, and committed as- sociates who perform more effectively at their individual tasks. Properly managed, diver- sity can also lead to better-performing and more innovative groups. Therefore, diversity, through its effects on individual and group outcomes, is likely to affect the bottom-line performance of the organization.57

Despite the importance of the issue, little systematic research has been conducted that explicitly examines whether the diversity of an organization’s workforce is tied to bottom-line performance. One exception is a study that examined the effect of racial and ethnic diversity in the banking industry. Diversity was positively related to the productiv- ity, return on equity, and market performance of banks, but only when the bank had a corporate strategy that refl ected growth. The positive relationship between diversity and fi rm performance was not found in banks that were pursuing a downsizing strategy. In these banks, greater diversity tended to result in poorer performance.58 Another exception is a large-scale study commissioned by business executives and conducted by researchers at MIT’s Sloan School of Management, Harvard Business School, the Wharton School, Rut- gers University, the University of Illinois, and the University of California at Berkeley.59 This research examined the impact of demographic diversity on various aspects of fi rm performance in several Fortune 500 companies. Diversity was found to have no straight- forward effects on performance. The researchers concluded that organizations need to manage diversity more effectively, especially because of the potential benefi ts that diversity offers. That is, diversity alone does not guarantee good corporate performance. It’s what the company does with diversity that matters!

In addition to diversity in the workforce, diversity among those leading an orga- nization might have effects. During the past decade or so, the business press has called for an increase in the demographic diversity of boards of directors and upper-echelon management teams.60 Indeed, the number of women and racial/ethnic minority group members on corporate boards and in top executive positions has been consistently increasing.61

This trend appears to make good sense. A recent study of Fortune 500 fi rms found that the companies with the highest representation of women in top positions strongly outperformed those with the poorest representation of women in terms of return on eq- uity and return to shareholders.62 Other studies have found that the demographic diversity of boards of directors (in terms of race, gender, and age) is positively related to fi rm perfor- mance.63 Thus, demographic diversity on boards can have a direct positive impact on the organization. One reason for this effect is that women and minorities who actually make it to the top may be better performers and better connected than typical board members.64 Thus, including them on boards of directors usually increases the quality and talent of the board; the same is usually true for the upper-echelon management team. Another reason for positive outcomes is that by having demographically diverse boards and management teams, companies are sending positive social signals that attract both associates and poten- tial shareholders.65

Other types of diversity on boards of directors and upper-echelon management teams also might be benefi cial to the fi rm’s bottom-line performance. Research suggests that diversity in functional areas, educational background, social/professional networks, and length of service can have positive effects on fi rm performance through better decision making.66 Again, the diversity must be managed properly for benefi ts to appear.

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Societal and Moral Outcomes In order to have a society based on fairness and justice, U.S. federal laws prohibit employ- ers from discriminating against applicants or employees on the basis of age, gender, race, color, national origin, religion, or disability. Discrimination is an expensive proposition for companies. Some recent awards to plaintiffs resulting from either out-of-court settle- ments or court cases include the following:

• Ford Motor Company paid out $10.5 million for age discrimination and $8 million for sex discrimination.

• Coca-Cola paid out $192.5 million for race discrimination. • Texaco paid out $176 million for race discrimination. • CalPERS paid out $250 million for age discrimination. • Shoneys paid out $132.5 million for race discrimination. • Rent-A-Center paid out $47 million for sex discrimination. • Information Agency and Voice of America paid out $508 million for sex

discrimination. • Wal-Mart recently paid $17.5 million to settle a class action lawsuit regarding

discrimination against African Americans in recruitment and hiring of truck drivers for its private fl eet. The company is currently dealing with the largest discrimination lawsuit in history. There is an unresolved class action suit fi led by two million current and former female employees for sex discrimination.

Apart from these direct costs, fi rms suffer other losses when suits are fi led against them, including legal costs, bad publicity, possible boycotts, and a reduction in the number of job applicants. One study found that stock prices increased for companies that won awards for affi rmative action and diversity initiatives, whereas they fell for companies that experienced negative publicity because of discrimination cases.67 Exhibit 2-3 summarizes applicable federal laws. Individual states may also have laws that protect people from discrimination based on additional characteristics, such as sexual orientation and marital status.

EXHIBIT 2-3 Federal Laws Preventing Employment Discrimination

Law Employers Covered Who Is Protected

Title VII of the 1964 Civil Private employers, state and local governments, Everyone based on race, color Rights Act, Civil Rights Act education institutions, employment agencies, religion, sex, or national origin of 1991 and labor unions with 15 or more individuals

Equal Pay Act of 1963 Virtually all employers Men and women who perform substantially equal work

Age Discrimination in Private employers, state and local governments, Individuals who are 40 years old Employment Act of 1967 education institutions, employment agencies, or older and labor unions with 20 or more individuals

Title I of the Americans with Private employers, state and local governments, Individuals who are qualifi ed and Disabilities Act of 1990 education institutions, employment agencies, have a disability and labor unions with 15 or more individuals Source: U.S. Equal Employment Opportunity Commission, 2002, http://www.eeoc.gov/facts/qanda.html.

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Diversity Management and High-Involvement Organizations 59

FPO

EXPERIENCING ORGANIZATIONAL BEHAVIOR

Obama’s tenure in offi ce lengthens and he brings in new of- fi cials.

joint effort among organizations concerned with board diversity) con- cluded that: • There is a severe underrepresenta-

tion of women and minorities on corporate boards when compared to general U.S. population demo- graphics for race and gender.

• Particular areas of concern include the lack of representation of minor- ity women and of Asian Ameri- cans and Hispanics.

• There is a recycling of the same minority individuals—especially African American men—as board members. Minority and female board members hold more seats per person than do white males.

• Very few boards have represen- tation from all groups. Only four boards had representation by all four groups (women, African Americans, Asian Americans, and Hispanics).

Will the diversity evident in the Obama administration fi lter down to

Diversity at the Top

©MANDEL NGAN/Getty Images, Inc.

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60 Chapter 2 Organizational Diversity

corporate America? Gloria Castillo, president of Chicago United (an orga- nization that advocates for diversity in business) suggests that the Obama administration will help change things. She states “The Obama lesson for corporate directors and C.E.O.’s is that they must accept accountability for proactively seeking out executives

of difference to unleash even greater innovation in their enterprises. ... [O]nce they institute true diversity and inclusion in their businesses, other leaders throughout the organizations must follow that lead and actively cre- ate an environment that fully engages the best qualifi ed stakeholders . . . regardless of ethnicity.” In the next

Experiencing Organizational Behav- ioral section “Women, Work, and Stereotypes” we indicate that women are advancing into management posi- tions. Will women and minorities con- tinue their integration into the very top positions, as evidenced in the White House? Only time will tell.

Sources: E.J. Cepeda. November 11, 2008. At “More Diversity in Workplace? Black Man in White House No Silver Bul- let, But a Start”. At http://www.huffi ngtonpost.com/esther-j-cepeda/more-diversity-in-workpla_b_142938.html; Oprah Winfrey Interview with Barack Obama, January 11, 2009. At http://www.oprah.com/media/20090112_inaug_di- versity.; “ Meet Barack.” At http://www.barackobama.com/about/; J.A Barnes. June 20, 2009. Obama’s Team: The Face Of Diversity. National Journal Magazine. At http://www.nationaljournal.com/njmagazine/nj_20090620_3869. php; “Fortune 500 Black, Latino, and Asian CEOs.” July 22, 2009. Diversity Inc. At http://www.diversityinc.com/con- tent/1757/article/3895/?Fortune_500_Black_Latino_Asian_CEOs; D. Jones. January 2, 2009. “Women CEOs slowly gain on Corporate America”. At http://www.usatoday.com/money/companies/management/2009-01-01-women- ceos-increase_N.htm.; “2009 Catalyst Census of the Fortune 500 Reveals Women Missing From Critical Business Lead- ership’ December 9, 2009. At http://www.catalyst.org/press-release/161/2009-catalyst-census-of-the-fortune-500- reveals-women-missing-from-critical-business-leadership; “African Americans Lost Ground on Fortune 500 Boards” July 21, 2009. At http://urbanmecca.net/news/?p=7649; “Alliance for Board Diversity: Fact Sheet” December 2009. Catalyst. At http://www.catalyst.org/press-release/117/alliance-for-board-diversity-fact-sheet.

Companies that manage diversity well do not discriminate, and their associates are less likely to sue for discrimination. Managing diversity means more than just avoiding discrimination, however. In addition to legal reasons for diversity, there are also moral reasons.

The goal of most diversity programs is to foster a sense of inclusiveness and provide all individuals with equal opportunity—an important cultural value in the United States and in many other countries. Although many countries pride themselves on equality and inclusiveness, they take very different approaches to encourage these ideals. For example, in the United States, differences across groups are highlighted and even cel- ebrated, and laws are used to help in the advancement of minority and disadvantaged groups. In France, differences are downplayed as unimportant and there is limited affi r- mative action to promote the advancement of minority groups. Britain takes the middle road by recognizing differences but with limited affi rmative action to promote fair out- comes in society.68

Roadblocks to Diversity In the preceding section, we focused on the potential benefi ts of creating and managing diversity in organizations. Organizations working to institute effective diversity manage- ment programs face a number of obstacles, however. In this section, we consider the road- blocks to creating an inclusive workplace.

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http://www.nationaljournal.com/njmagazine/nj_20090620_3869.php

http://www.diversityinc.com/con-tent/1757/article/3895/?Fortune_500_Black_Latino_Asian_CEOs

http://www.usatoday.com/money/companies/management/2009-01-01-women-ceos-increase_N.htm

http://www.catalyst.org/press-release/161/2009-catalyst-census-of-the-fortune-500-reveals-women-missing-from-critical-business-leadership

http://urbanmecca.net/news/?p=7649

http://www.catalyst.org/press-release/117/alliance-for-board-diversity-fact-sheet

http://www.oprah.com/media/20090112_inaug_diversity

http://www.barackobama.com/about/

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Roadblocks to Diversity 61

Prejudice and Discrimination Prejudice refers to unfair negative attitudes we hold about people who belong to social or cultural groups other than our own. Racism, sexism, and homophobia are all examples of prejudice. Prejudice infl uences how we evaluate other groups (“Arabs are bad,” “People with disabilities are to be pitied”) and can also lead to emotional reactions, such as hate, fear, disgust, contempt, and anxiety. Unfair discrimination is behavior that results in unequal treatment of individuals based on group membership. Examples of discrimination include paying a woman less than a man to do the same work, assigning people with disabilities easier jobs than others, and not promoting Asian Americans to leadership positions.

Prejudice and discrimination do not have to be overt or obvious. Consider racism as an example. Overt prejudice and discrimination toward racial minorities have been on the decline in the United States since passage of the 1964 Civil Rights Act.69 Whites have be- come more accepting of residential integration and interracial marriage over the past sev- eral decades, for example. However, prejudice and discrimination still exist in more subtle forms, a phenomenon often referred to as “modern racism.”70 In general, modern racism occurs when people know that it is wrong to be prejudiced against other racial groups and believe themselves not to be racists. However, deep-seated, perhaps unconscious, prejudice still exists in these people, confl icting with their belief that racism is wrong.

People who are modern racists do not make racial slurs or openly treat someone of an- other race poorly. However, they may discriminate when they have an opportunity to do so, and then attribute their discriminatory behavior to another cause (such as poor performance) or hide their discriminatory behavior. In some cases, the discrimination is unintentional.

A recent study demonstrates modern racism in action.71 Participants were asked to evaluate candidates for a university peer counseling position. White participants evaluated either a black or a white candidate. The qualifi cations of the candidates were varied, so that sometimes the candidates had very good qualifi cations, sometimes they had very bad qualifi cations, and sometimes qualifi cations were ambiguous and less obviously good or bad. The white evaluators showed no discriminatory behavior toward black candidates who had either very good or very bad qualifi cations. These candidates were chosen (or rejected) as frequently as white candidates with similar credentials. However, when quali- fi cations were ambiguous and it was not obvious what hiring decision was appropriate, the evaluators discriminated a great deal against black candidates. When qualifi cations were ambiguous, black candidates were chosen only 45 percent of the time, whereas white candidates with ambiguous qualifi cations were chosen 76 percent of the time.

Most research and discussion concerning modern racism has focused on whites’ attitudes toward and treatment of blacks. However, evidence reveals that the same dynamics occur with non-Hispanic white behavior toward Hispanics, men’s behavior toward women, nondisabled individuals’ behavior toward people with disabilities, and heterosexuals’ behav- ior toward homosexuals.72 Further, minority group members may hold negative attitudes toward major- ity group members, and one minority group may hold

prejudice Unfair negative attitudes we hold about people who belong to social or cultural groups other than our own.

discrimination Behavior that results in unequal treatment of individuals based on group membership.

modern racism Subtle forms of discrimination that occur despite people knowing it is wrong to be prejudiced against other racial groups and despite believing they are not racist.

©Tyler Edwards/Photodisc/Getty Images, Inc.

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62 Chapter 2 Organizational Diversity

negative attitudes toward another. Regardless of the source, prejudice and discrimination can prevent people from working effectively, getting along with one another, and reaping the benefi ts that can be derived from a diverse workforce.

Prejudice and discrimination can serve as barriers to effectively managing diversity, leading to stress, poor performance, feelings of injustice, and poor organizational com- mitment on the part of its victims.73 In addition to preventing an organization from be- coming a high-involvement workplace, prejudice and discrimination, as discussed above, can also be costly in terms of lawsuits and poor public relations. The Los Angeles Fire Department has experienced this fi rsthand. Thus, diversity management programs must eliminate prejudice and discrimination before they can be effective and foster a high- involvement work environment.

Stereotyping A stereotype is a generalized set of beliefs about the characteristics of a group of individu- als. Stereotypes are unrealistically rigid, often negative, and frequently based on factual errors.74 When individuals engage in stereotyping, they believe that all or most members of a group have certain characteristics or traits. Thus, when we meet a member of that group, we assume that the person possesses those traits.

The problem with stereotypes is, of course, that they ignore the fact that the individu- als within any group vary signifi cantly. We can always fi nd examples of someone who fi ts our stereotype; alternatively, we can just as easily fi nd examples of people who do not fi t the stereotype. For example, a common stereotype is that black people are poor.75 How- ever, the overwhelming majority of black people are middle class (just as are the majority of white people). It is statistically easier to fi nd a middle-class black person than a poor one—and yet the stereotype persists.

Stereotyping is particularly diffi cult to stop for several reasons. First, stereotypes are very diffi cult to dispel. When we meet someone who has characteristics that are incongru- ent with our stereotypes (a smart athlete, a rich black person, a socially skilled accountant, or a sensitive white male), we ignore the discrepancy, distort the disconfi rming informa- tion, see the individual as an exception to the rule, or simply forget the disconfi rming information.76 Thus, disconfi rming information is not as likely as it should be to change stereotypes.

Second, stereotypes guide what information we look for, process, and remember.77 For example, suppose I believe that all accountants are socially inept. When I meet an accountant, I will look for information that confi rms my stereotype. If the accountant is alone at a party, I will assume he or she is antisocial. I will remember instances of when the accountant was quiet and nervous around people. I may also actually “remember” seeing the accountant acting like a nerd, even if I actually did not. Thus, my stereotype is guiding how I process all information about this person based on his or her membership in the accountant group.

Third, stereotypes seem to be an enduring human quality; we all hold stereotypes. Stereotyping is so prevalent in part because it allows us to simplify the information that we deal with on a day-to-day basis.78 Another reason is that it allows us to have a sense of predictability. That is, if we know a person’s group membership (such as race, occupation, or gender), we also believe we have additional information about that person based on our stereotype for that group. Thus, the stereotype provides us with information about other

stereotype A generalized set of beliefs about the characteristics of a group of individuals.

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Roadblocks to Diversity 63

EXHIBIT 2-4 Common Stereotypes Applied to Various Groups of People

Women People with Disabilities White Men

Dependent Quiet Responsible for society’s problems Passive Helpless Competitive Uncompetitive Hypersensitive Intelligent Unconfi dent Bitter Aggressive Unambitious Benevolent Ignorant Warm Inferior Racist Expressive Depressed Arrogant

Black People Japanese Men Jewish People

Athletes Meticulous Rich Underqualifi ed Studious Miserly Poor Workaholics Well-educated Good dancers Racist Family-oriented Unmotivated Unemotional Cliquish Violent Defer to authority Status conscious Funny Unaggressive Good at business

Athletes Accountants Arab People

Dumb Smart Terrorists Strong Nerdy Extremely religious Sexist Unsociable Extremely sexist Macho Good at math Rich Male Bad dressers Hate Americans Uneducated Quiet Jealous of Americans Greedy Dishonest Don’t value human life Sources: M.E. Heilman. 1983. “Sex Bias in Work Settings: The Lack of Fit Model,” in B.M. Staw and L.L. Cummings (Eds.), Research in Organizational Behavior, Vol. 5 (Greenwich, CT: JAI Press), pp. 269–298; C.S. Fichten and R. Amsel. 1986. “Trait Attributions about College Students with a Physical Disability: Circumplex Analysis and Methodological Issues,” Journal of Applied Social Psychology, 16: 410–427; Reprinted with permission of the publisher. From Cultural Diversity in Organizations: Theory, Research and Practice, © 1993 by T.H. Cox, Jr., Berrett-Koehler Publishers, Inc., San Francisco, CA. All rights reserved. www.bkconnection.com.

people that enables us to predict their behavior and know how to respond to them. The comedian Dave Chappelle provides an amusing example of this in a skit in which he plays a fortuneteller. Instead of relying on mystic powers, he relies on his stereotypes. Given the race and gender of a phone-in caller, fortuneteller Chappelle can identify all sorts of infor- mation about the person’s life (like whether the person is calling from prison or is on drugs).

Because stereotypes can drive behavior and lead to unrealistic or false assumptions about members of other groups, they can have very detrimental effects on interpersonal relations. Stereotypes can also have direct effects on individuals’ careers by causing unfair treatment. In essence, when we rely on stereotypes to make judgments about an individ- ual, rather than obtaining factual information, we are engaging in faulty decision making that causes harm. Exhibit 2-4 lists some common stereotypes for select groups.

The Experiencing Organizational Behavior feature shows that many individuals con- tinue to stereotype women, and to harm their outcomes. Over time, changes in how women are viewed might be aided by examples of success and ambition among women

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64 Chapter 2 Organizational Diversity

Over the past three decades, women in Western, industrial-ized nations have achieved a great deal in workplace acceptance, respect, and advancement. In fi elds as diverse as accounting, risk man- agement, general management, and police work, women have made sub- stantial progress. For example, chief fi nancial offi cers, polled a few years ago by America’s Community Bank- ers, reported substantial increases in the number of women managers in their banks. Women in Business re- cently reported that the percentage of women holding supervisory roles had increased from 20 percent to al- most 50 percent in a recent 30-year period. Fortune 500 fi rms reported a few years ago that women in offi cer positions had increased from 2 per- cent to more than 10 percent.

With this advancement, it would seem that stereotypes characterizing women as submissive, frivolous, in- decisive, and uncommitted to the workplace have been eliminated. Even though one study found that ste- reotypes of women were becoming more compatible with beliefs about what it takes to be a good manager, problems still exist. Consider the lan- guage used in major media outlets to describe some businesswomen.

Carly Fiorina, former chief execu- tive offi cer of Hewlett-Packard, has been characterized as being “as comfortable with power as any woman could be.” A former chief executive at Mattel, Jill Barad—who admittedly had some problems—was slighted with the following dismissive statement: “She should have stuck to marketing, rather than worrying her pretty little head about running the company.” Darla Moore, who con- tributed $25 million to the University of South Carolina School of Busi- ness, was characterized as a “babe in business.” This type of language may help to keep gender stereo- types alive. Stereotypical language and images routinely found in such places as television commercials, radio ads, and travel brochures may also contribute.

Further evidence that gender stereotypes are not dead comes from the fi nancial sector. According to Sheila McFinney, an organizational psychologist familiar with Wall Street, “Stereotypes about wom- en’s abilities run rampant in the fi nancial industry. A lot of men in management feel that women don’t have the stomach for sell- ing on Wall Street.” In support of this statement, a number of Wall

Street fi rms have been forced to settle major harassment and discrimination claims with thousands of current and former women associates. Interest- ingly, women are more prevalent in fi nance than in many other functional areas.

Finally, evidence that suggests ongoing stereotypes comes from a 2007 survey conducted by Elle mag- azine in conjunction with MSNBC .com. Sixty-thousand respondents from a variety of occupations and industries answered questions about women and men as leaders. Ap- proximately half of them indicated that women and men have differing abilities, with women being less able than men. Women, however, were given high marks for supportive en- vironments.

Sources: “Women Accountants Advance in Management Ranks,” Community Banker, 10, no. 4 (2001): 52; J. Ander- son. 2006. “Six Women at Dresdner File Bias Suit,” New York Times, Jan. 10, C.1; C. Daily and D.R. Dalton. 2000. “Coverage of Women at the Top: The Press Has a Long Way to Go,” Columbia Journalism Review, 39, no. 2: 58–59; M.K. Haben. 2001. “Shattering the Glass Ceiling,” Executive Speeches, 15, no. 5: 4–10; M.-L. Kamberg. 2005. “A Woman’s Touch,” Women in Business, 57, no. 4: 14–17; M. Ligos. 2000. “Nightmare on Wall Street,” Sales and Marketing Management, 152, no. 2: 66–76; E. Tahmincioglu. 2007. “Men Rule—At Least in Workplace Attitudes,” at http://www.msnbc.msn.com/id/17345308; E. E. Duehr, & J.E. Bono. 2006. Men, women, and managers: Are stereotypes fi nally changing? Personnel Psychology, 59: 815–846.

te ve

H ix

/S om

os Im

ag es

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EXPERIENCING ORGANIZATIONAL BEHAVIOR

Women, Work, and Stereotypes

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Roadblocks to Diversity 65

leaders. Anne Mulcahy, CEO of Xerox, and Meg Whitman, former CEO of eBay, are ex- amples. Mulcahy has been instrumental in turning around a company that was near death only a few years ago.79 Whitman helped to build eBay from a very small company to one in which millions of people do more than $50 billion in business annually. Her vision for eBay was ambitious and included changing consumers’ current emphasis on buying at re- tail stores. Although competition and market dynamics have cooled the company’s growth to some degree, eBay continues to be strong.80

Differences in Social Identity Everyone’s personal self-identity is based in part on his or her membership in various so- cial groups.81 This aspect of self-identity is referred to as “social identity.” Social identity is defi ned as a person’s knowledge that he or she belongs to certain social groups, where belonging to those groups has emotional signifi cance.82 In describing yourself, you might respond with a statement such as “I am a Catholic,” “I am Jewish,” “I am a member of my sorority,” “I am of Puerto Rican descent,” “I am an African American,” or “I am a Repub- lican.” Such a statement describes an aspect of your social identity structure. Exhibit 2-5 provides examples of overall structures.

Having a social identity different from that of the majority can be very diffi cult, for several reasons. First, a person’s social identity becomes more salient, or noticeable, when the person is in the minority on an important dimension. Accordingly, racial and ethnic minorities are much more likely to state that their membership in a racial or ethnic group is an important part of their self-concept.83 For example, in one study, researchers said to people, “Tell me about yourself.”84 Only one out of every 100 white people mentioned

social identity A person’s knowledge that he or she belongs to certain social groups, where belonging to those groups has emotional signifi cance.

Hispanic

Male Football

Fan

Student

Fraternity Member

Marathon Runner

Scientist

Jewish NASA

Employee

Woman

Feminist

African American

Christian

Mother

Lawyer

Woman

Texan

Exhibit 2-5 Sample Social-Identity Structures

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66 Chapter 2 Organizational Diversity

that she was white. However, one in six black respondents mentioned his race, and one in seven Hispanic respondents mentioned ethnicity. Also, many women remark that they are more conscious of being female when they are in a work environment that is all male than when they are in a mixed-gender group. When a person’s minority social identity becomes salient, the person is made more aware that he or she is different from the majority of people in the situation.

Second, having a social identity different from that of the majority may make people feel they have to behave in ways that are unnatural for them in certain contexts. Feeling that they are acting out a false role will in turn lead to stress and dissatisfaction.85 For example, women operating in an all-male environment may try to act more like men in order to fi t in and meet others’ expectations.86 In discussing being an African American in a predominantly white business world, Kenneth I. Chenault, CEO of American Express, says that he had to learn how to become comfortable dealing with multiple cultures with different expectations. He states, “I learned very early on how to move between both worlds and develop a level of comfort and confi dence no matter what world I’m operating in.”87 Clearly, if you belong to the majority group, you do not have to learn how to act in different worlds.

A third issue resulting from differences in social identities is that often minority group members fear losing this social identity.88 Social identity is often a source of pride and honor.89 Thus, being forced to “check their identity at the gate” creates a sense of loss and discomfort for many people.

A fi nal issue related to differences in social identities concerns the fact that people often evaluate others based on their membership in social groups. People tend to favor members of their own groups because their group membership is often tied to feelings of high self-esteem.90 We think people who belong to our own group must somehow be better than those who do not belong. In other words, we tend to categorize people ac- cording to in-group and out-group membership,91 and we tend to favor members of our own group—the in-group—and disfavor those whom we have categorized as belonging to an out-group. We often exaggerate the positive attributes of our own group and the negative aspects of the out-group. Furthermore, we are more likely to have stereotypes regarding out-group members and to ignore differences among out-group members.92 So, for example, members of the legal department, who have strong identities as lawyers, may view other associates who are not lawyers as being similar, less savvy, and peripheral to the success of the company. In contrast, the lawyers are more likely to see other lawyers as individuals, and think they are smarter and are central to the company’s success. In conclusion, social identity dynamics can be a roadblock to successful diversity manage- ment because they foster forming in-groups and out-groups and can lead to stress and dissatisfaction among those with minority identities.

Power Differentials Power is not equally distributed among the individuals and groups in an organization. Individuals gain power in many ways—by having expert knowledge or a powerful formal position, by controlling valuable rewards or important resources, or by being irreplaceable, for example.93 In some organizations that rely on selling, the individuals in the sales and marketing departments have most of the power, whereas the individuals in the human resources and accounting departments have less power. An executive secretary controlling

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Roadblocks to Diversity 67

those who are allowed to meet with and speak to the CEO also has power. In essence, this secretary controls everyone’s communication with top management.

On the other hand, people are also awarded or deprived of power and status for rea- sons that have nothing to do with work life. On a societal level, groups of people have what is called ascribed status and power. Ascribed status is status and power that is assigned by cultural norms and depends on group membership.94 In other words, societal culture defi nes who has power and who does not. In North America, women, racial and ethnic minorities, and people with disabilities, among other groups, are traditionally perceived to be of lower status than white men.95 Thus, members of these groups have traditionally had less power in the workplace than white men. When such power differentials exist, they can prevent an organization from developing an inclusive workplace for at least two reasons.

First, research has shown that high-status individuals speak more and use stronger infl uence tactics than members of low-status groups.96 Thus, low-status individuals may not have a chance to contribute as much to group problem-solving tasks. When people do not feel free to speak up, a major benefi t of diversity is lost because different ideas and viewpoints are not presented. This phenomenon also causes problems because it perpetu- ates status differentials and may lead to frustration and dissatisfaction among people who do not feel free to speak up.

Second, people belonging to groups with different amounts of power and status may avoid interacting with one another and may form cliques with members of their own groups.97 High-status groups may downgrade, ignore, or harass members of low-status groups. Associates in low-status groups may stay away from high-status associates in order to avoid rejection or humiliation. This tendency to form cliques undermines diversity ef- forts by setting the stage for increased confl ict among groups.

Poor Structural Integration You may have heard phrases such as “pink-collar ghetto” and “glass ceiling.” These phrases refer to the tendency for women and members of racial and ethnic minority groups to be “stuck” in certain occupations or at certain levels in an organization. Recall from the earlier part of this chapter that one criterion for having a truly multicultural organization is that people from traditionally underrepresented groups appear at all levels and in all occupations. Exhibit 2-6 illustrates a well-integrated organization and a poorly integrated organization.

Note in the fi gure that 35 percent of the employees in both Company A and Com- pany B are either female and/or a member of a racial minority group. So if we look only at the total number of employees, then we might conclude that both companies are equally well integrated. Such a conclusion would be erroneous, however.

In Company A, on average across functional areas, only .5 percent of top manage- ment jobs are held by women or minorities. At the same time, on average across functional areas, 70 percent of the lowest-level jobs are held by women and minorities. These fi gures indicate that women and minorities are extremely underrepresented in high-level posi- tions and overrepresented in low-level (low-status, low-power, and low-pay) positions. Furthermore, in Company A, women and racial minorities are severely underrepresented in the areas of fi nance, marketing, and sales. Coca-Cola was sued by African Americans because it resembled Company A (to some degree) despite having talented people in the minority group. The company settled in 2000 for $192.5 million.98

ascribed status Status and power that is assigned by cultural norms and depends on group membership.

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68 Chapter 2 Organizational Diversity

Contrast these patterns with those in Company B. In that company, women and mi- norities are represented in all areas in proportion to their total representation in the com- pany. Company B illustrates the ideal distribution for an inclusive organization—which occurs infrequently.

Data compiled in 2003 by the Equal Employment Opportunity Commission suggest that U.S. companies look more like Company A than Company B.99 White males made up about 37 percent of the workforce in private industry but held about 56 percent of the executive and managerial jobs. In contrast, they only held about 13 percent of lower- level clerical jobs and 21 percent of service jobs. White women, who made up almost 33 percent of the workforce, held almost 55 percent of clerical jobs. Black people (both men and women) made up almost 14 percent of the workforce but held less than 7 percent of executive and managerial jobs. Black women were overrepresented in clerical and service jobs, and black men were overrepresented in operations and laborer jobs. This pattern held true for most other minority groups as well.

Why are social groups so unequally distributed across occupations and job levels? Many explanations have been offered, with discrimination being a common one. Lack of skills on the part of groups holding lower-level positions is also cited frequently. Whatever the reason, poor integration of women and minorities in organizations can present several roadblocks to creating a multicultural environment.

• Poor integration creates power and status differentials, which then become associated with gender or race.

• Poor integration fosters negative stereotypes.

Poorly Integrated

Company A

Finance Marketing HR Sales

0% 0% 2% 0%

0% 1% 10% 2%

0% 5% 15% 5%

25% 25% 40% 26%

60% 65% 80%

Average across

functions

.5%

3.25%

6.25%

29%

70%75%

Finance Marketing HR Sales

35% 35% 35% 35%

35% 35% 35%

Average across

functions

35%

35%35%

Top Management

The numbers in each cell represent the percentage of people in each job level and functional area who are female and/or racial and ethnic minority group members.

The total percentage of employees for both companies who are female and/or a racial ethnic minority is 35%.

Mid Management

Supervisor

Staff

Line Worker

L e ve

Functional Area

Well Integrated

Company B

Top Management

Mid Management

Supervisor

Staff

Line Worker

L e ve

Functional Area

Exhibit 2-6 Examples of Poorly Integrated and Well-Integrated Organizations

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Effectively Creating and Managing Diversity 69

• Where integration is poor overall, women and minorities who do reach higher levels may have token status. That is, since they may be the only persons of their race or gender in that type of job, they will be considered an exception.100

• Where integration is poor, most women and minorities may feel that it is impossible for them to rise to the top.

Communication Problems Communication can be a roadblock to establishing an effective diversity environment. One potential communication problem arises when not everyone speaks the same lan- guage fl uently. Associates who are less fl uent in the dominant language may refrain from contributing to conversations. Furthermore, groups may form among those who speak the same language, excluding those who do not speak that language. Finally, many misunder- standings may occur because of language differences. For example, U.S. college students often complain that having teachers who are not fl uent in English makes it diffi cult for them to understand class lectures.

Another communication problem arises because different cultures have different norms about what is appropriate. For example, African Americans, Hispanics, and Asians are less likely than Anglo Americans to feel they can speak freely during meetings.101 Com- mon areas of communication disagreement among cultures include the following:

• Willingness to openly disagree • The importance of maintaining “face,” or dignity • The way agreement is defi ned • The amount of time devoted to establishing personal relationships • Willingness to speak assertively • Mode of communication (written, verbal) • Personal space and nonverbal communication

While communication differences exist for people from different backgrounds, it is important not to stereotype. Some individuals from a particular background will not share the communication preferences often associated with that background.

Effectively Creating and Managing Diversity Organizations face many roadblocks to creating multicultural environments, but these roadblocks are not insurmountable. In this section, we discuss some strategies for effec- tively creating and managing diversity.

Most large companies and many small companies have in recent years instituted some type of diversity management plan. These plans have varied in effectiveness, from being very successful at creating a diverse, inclusive, and productive workplace to having no ef- fect or to actually having negative effects. Because so many diversity programs have been instituted, there is substantial knowledge about what works and what does not work. The U.S. Department of Commerce studied 600 fi rms that had been cited for having excellent diversity climates.102 The study revealed several criteria for success, including commitment by the organization’s leaders, integration of the program with the organization’s strategic plan, and involvement of all associates.

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70 Chapter 2 Organizational Diversity

Commitment of the Organization’s Leaders The fi rst criterion for having an effective diversity program is genuine commitment from the organization’s upper-level leadership. Insincere support of diversity is damaging. Lead- ers must take ownership of diversity initiatives and effectively communicate the vision that inclusiveness is important. Actions that corporate leaders have initiated to ensure that the message comes across include the following:

• High-ranking leaders send relevant communications through multiple channels, such as intranet postings, policy statements, formal newsletters, meetings, speeches, and training programs.

• One high-ranking leader personally leads all diversity efforts. He holds town meetings and eats lunch in the cafeteria to talk about diversity.

• Multiple high-ranking executives sponsor employee councils devoted to fostering cross-cultural communication. The councils are all-inclusive—anyone who wants to join can do so. Therefore, anyone can “have the ears” of executives on diversity issues.

• Managers at all levels are held accountable for advancing diversity initiatives.

The Managerial Advice feature focuses on ideas that managers can use to promote posi- tive work environments. The actions recommended are valuable for associates but are most important for managers because they have the strongest effects on the organization’s culture.

Integration with the Strategic Plan The second criterion for effective diversity management requires that diversity be linked to the organization’s strategic plan. That is, it is necessary to be clear about the ways in which diversity can contribute to the strategic goals, directions, and plans of the organiza- tion. The organization must develop ways of defi ning and measuring diversity effective- ness and then use these measures in the strategic planning process. Common measures of diversity effectiveness focus on:

• Increased market share and new customer bases • External awards for diversity efforts • Associates’ attrition rate • Associates’ work satisfaction • Associates’ and managers’ satisfaction with the workplace climate

Another tactic for elevating diversity to the strategic level involves making it a core value and part of the formal mission statement of the organization. Many organizations that truly value diversity express this as a core value and include their beliefs in a mission statement. These statements go beyond the common catchphrase that “We are an affi rma- tive action employer.” For example, one of six principles in Starbucks’ mission statement is: “Embrace diversity as an essential component in the way we do business.” Another is: “Provide a great work environment and treat each other with respect and dignity.”103

Associate Involvement The third criterion for effective diversity management calls for the involvement of all associates. Diversity programs can produce suspicion or feelings of unfairness in some as- sociates, particularly if they misinterpret the program’s purpose. Some individuals may feel they are excluded from the program, whereas others may feel that it infringes on benefi ts

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Effectively Creating and Managing Diversity 71

MANAGERIAL ADVICE

a. Pause to short circuit the emo- tion and refl ect. Individuals who

have experienced an uncomfortable event should take a few mo- ments to identify their feelings and consider a range of responses.

e. Shift the mindset. Individuals who have experienced an uncomfort- able event should be open to the idea that both parties might need to change to some degree.

Promoting a Positive Diversity Environment

©Tom Grill/Corbis

they are currently enjoying. It is important for diversity programs to address the needs of both majority group members and minority group members. Organizations can use many methods to obtain input from associates. Some of these include:

• Discussion groups made up of all types of associates who help in developing, implementing, and evaluating the program

• Employee satisfaction surveys • Cultural diversity audits, which help the company studying the diversity culture

and environment of the organization • Informal employee feedback hotlines where associates can provide unsolicited

feedback

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http://www.learnaslead.com/index.php

72 Chapter 2 Organizational Diversity

Another common way of involving associates in diversity programs is to develop and support affi nity groups—groups that share common interests and serve as a mechanism for the ideas and concerns of associates to be heard by managers. Affi nity groups are also good sources of feedback about the effectiveness of diversity initiatives. Finally, these groups can provide networking opportunities, career support, and emotional support to their members. Ford Motor Company has the following affi nity groups: Ford-Employee African American Ancestry Network; Ford Asian Indian Association; Ford Chinese Asso- ciation; Ford Finance Network; Ford Gay, Lesbian, or Bisexual Employees; Ford Hispanic Network Group; Professional Women’s Network; Ford’s Parenting Network; Women in Finance; Ford Interfaith Network; Middle Eastern Community @ Ford Motor Company; and Ford Employees Dealing with Disabilities.104

Finally, another way of involving all associates is through training. Training programs often include an explanation of the business necessity for effectively managing diversity, along with empathy training, cross-cultural knowledge instruction, and exercises to help associates avoid stereotyping and engaging in offensive or prejudicial treatment of others. To create a truly inclusive environment, diversity programs also need to teach people how to value and respect diversity rather than just tolerate it.

Denny’s, the U.S. restaurant chain, is an example of a company that has implemented the three aspects of diversity management discussed here. Following lawsuits and settle- ments in the 1990s, Jim Anderson became the CEO in 1996 and drove true commitment to diversity. Anderson himself was committed to building what Roosevelt Thomas, an expert on corporate diversity, terms a diversity-mature organization, in which the mission and vision of the company includes a diversity management component.

To fully integrate the management of diversity into its mission, Denny’s requires all managers and associates to participate in diversity training sessions. In addition, they are held accountable for their behavior. Associates who engage in inappropriate behavior are

THE STRATEGIC LENS

refl ects the demographic composition of U.S. society is smart business.106

Critical Thinking Questions

1. How does organizational diversity contribute to an organization’s competitive advantage?

2. What actions are required to create diversity in an organization, particularly in one that has homo- geneous membership at present?

3. How does diversity in an organi- zation affect its strategy?

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What This Chapter Adds to Your Knowledge Portfolio 73

put on notice and must indicate how they will change their behavior in the future. Those who do not change their behavior are terminated. More blatant transgressions, such as racial slurs, result in immediate termination.

Overall, companies such as Denny’s use diversity initiatives in at least seven different areas:105

1. Recruiting (e.g., diverse recruiting teams, minority job fairs)

2. Retention (e.g., affi nity groups, on-site child care)

3. Development (e.g., mentoring programs, leadership development programs)

4. External partnerships (e.g., minority supplier programs, community outreach)

5. Communication (e.g., addresses by high-ranking leaders, newsletters)

6. Training (e.g., awareness training, team building)

7. Staffi ng and infrastructure (e.g., dedicated diversity staffs, executive diversity councils).

What This Chapter Adds to Your Knowledge Portfolio In this chapter we discussed the importance of di- versity to organizations and the need to effectively manage diversity. We also discussed the forces of change that have made diversity a primary concern of many organizations, and we described some of the more common roadblocks to successfully man- aging diversity. Finally, we discussed the essential components of an effective diversity program. To summarize, we made the following points:

• Organizational diversity refers to differences among the individuals in an organization. Important differences are those that are personally important to people and affect the way in which they perceive the world. Common dimensions of diversity include race, ethnicity, gender, disability, functional area, sexual orientation, and parenthood.

• Diversity programs are aimed at developing inclusive work cultures, which are impor- tant in high-involvement work environ- ments. Affi rmative action programs are aimed at making sure there is fair represen- tation or numbers of various groups within jobs and organizations. Affi rmative action programs can be legally mandated or vol- untarily adopted.

? back to the knowledge objectives 1. What is organizational diversity, and how does di-

versity management differ from affi rmative action? Do these kinds of programs have anything in common?

2. Distinguish between multicultural, plural, and mono- lithic organizations. How might these organizations dif- fer in the types of policies they use? For example, how would they differ in terms of staffi ng practices?

3. What trends can be seen in the demographic charac- teristics of the U.S. population? What are the implica- tions of these trends for organizational diversity?

4. What other changes are occurring in the environment that contribute to the importance of managing diversity effectively? Why do these changes have this effect?

5. Why is successfully managing diversity important to high- involvement work organizations? Give specifi c examples.

6. What problems do discrimination, prejudice, and stereo- typing create in an organization attempting to manage a diverse workforce?

7. How do social identities, power differentials, and poor structural integration affect the successful management of diversity?

8. What does a diversity program need in order to be effective? How would you determine whether your diversity program was effective?

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74 Chapter 2 Organizational Diversity

• Multicultural organizations have diverse associates and are inclusive of all associ- ates. Plural organizations have reasonably diverse associates and tolerate diversity. Monolithic organizations are homogeneous and do not tolerate diversity.

• The U.S. population is getting older and more diverse in terms of race and ethnic- ity. Other changes that are occurring in the environment include an increasing ser- vice economy, increasing globalization, and increasing need for teamwork. These changes make management of diversity more important today than ever.

• Successfully managing diversity is important because it can lead to more com- mitted, better satisfi ed, better-performing employees, attraction of the best talent, better group decision making, and potentially better fi nancial performance for the organization. Effectively managing diversity also ensures that the moral prin- ciple that everyone be treated fairly will be upheld. Furthermore, effective diversity management can result in fewer lawsuits for discrimination.

• Discrimination, prejudice, stereotyping, differing social identities, power differ- entials, poor structural integration, and communication concerns have a negative impact on managing a diverse workforce.

• Organizations that successfully manage diversity have senior managers who fully support diversity initiatives, tie their diversity plans to the overall strategic goals of the organization, and ensure involvement from all associates through a variety of mechanisms.

Thinking about Ethics 1. Suppose that an organization has discriminated in the past. Should it now simply stop its

discriminatory practices, or should it also take specifi c actions to increase its diversity by targeting, hiring, and promoting minorities ahead of nonminorities? Discuss.

2. Should all managers and associates in an organization be required to undergo diversity training regardless of their desire to do so? Why or why not?

3. Are there any circumstances in which it is appropriate to discriminate against a particular class of people (such as women)? If so, explain the circumstances. If not, explain why.

5. Should all cultures and modes of conduct be tolerated, even if they confl ict with the values of the organization? Why or why not?

Key Terms diversity, p. 50 multicultural

organization, p. 51 plural organization, p. 51

monolithic organization, p. 52

prejudice, p. 61 discrimination, p. 61

modern racism, p. 61 stereotype, p. 62 social identity, p. 65 ascribed status, p. 67

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Building Your Human Capital 75

building your human capital

Use the following scale to answer the questions below:

1 point = never 2 points = once or twice

3 points = three or four times 4 points = four or more times

background. 7. Visit a church that was of a religion different from yours. 8. Visit a place where people spoke a language different from your fi rst language. 9. Do something you’ve never done before. 10. Attend a cultural event (art show, concert). 11. Eat ethnic food. 12. Visit a foreign country. 13. Watch a program about world (non-U.S.) history. 14. Read a book about another culture.

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76 Chapter 2 Organizational Diversity

15. Watch a movie or TV show about another culture. 16. Attend a social event where you didn’t know anyone. 17. Read a book written by a foreign author. 18. Listen to music from a different culture. 19. Attend an event where you were in a minority based on any demographic characteristic

(age, gender, race, ethnicity, religion, sexual orientation). 20. Learn something new about a country or culture other than your own. 21. Study a different language. 22. Attend an event about a different culture (an ethnic festival, a concert by musicians from a

different culture, a student meeting of an ethnic group). 23. Have a conversation with someone from a different social class. 24. Develop a friendship with someone from a different background. 25. Discuss world affairs with someone who disagreed with you.

Scoring: Add up your total points for the 25 questions. Scoring can range from 25 to 100 25–39: Your current environment is rather homogeneous. You can increase your DQ by making a concerted effort to reach out to people who are different from you, attend events that expose you to different cultures, and learn about people and cultures that differ from yours. Your score may be low because you live in an area where there is little diversity in people or cultural events. You will need to go out of your way to gain exposure to different cultures.

40–59: Your current environment could be more diverse than it currently is. You can increase your DQ by making a concerted effort to reach out to people who are different from you, at- tend events that expose you to different cultures, and learn about people and cultures that differ from yours.

60–79: Your environment is fairly culturally diverse. Look more closely at your scores for each question and determine whether there are any areas in which you can broaden your horizons even further. Perhaps, for example, you read and watch materials that expose you to different cultures but do not personally interact frequently with people who are different from you. If that is the case, join a club where you are likely to meet people different from yourself.

80–100: Your environment is quite culturally diverse. You experience a great deal of cultural variety, which should help prepare you for working in a culturally diverse work environment.

an organizational behavior moment

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An Organizational Behavior Moment 77

the project to graduate from the program. The project is also a good way of meeting and impressing important executives in the business community.

The A-Team consists of fi ve people, who did not know each other before the project began. They are:

• Rebecca—A 27-year-old marketing manager for a large, high-end Italian fashion company. Rebecca is a white female of Italian descent who was born and raised in New York City. Rebecca earned her bachelor’s degree in business at the University of Virginia’s McIntire Business School when she was 22. She speaks English, Italian, and Spanish fl uently. She speaks a little German and Japa- nese as well. Rebecca is single. Her job involves analyz- ing worldwide markets and traveling to the 136 stores around the world that carry her company’s clothes. She hopes the EMBA from BSU will help her to be promoted to an executive position.

• Aran—The 52-year-old founder and CEO of an Egyp- tian management consulting fi rm. His fi rm employs 12 people who consult with local companies on issues in- volving information systems. Aran is an Egyptian male who is a fairly devout Muslim. He earned his business degree 25 years ago at the American University in Cairo. He speaks English and Arabic fl uently. Aran is married with two adult children. He is attending BSU’s program because he wants to retire from his consulting fi rm and become an in-house information systems consultant to a large multinational fi rm.

• Katie—A 30-year-old fi nancial analyst at a large Wall Street fi rm. At present, Katie’s job requires little travel, but she works long hours as a fi nancial analyst. Katie is an Ameri- can female who does not consider herself to have any strong ethnic roots. She earned her business degree two years ago from New York University. Before going to college, she worked as a bank teller on Long Island. She was concerned about her lack of progress and went back to college to get a degree. She now wants to further her education to open up even more opportunities. Katie speaks only English. She is married but has no children. However, she cares for her elderly mother, who lives nearby in New Jersey.

• Cameron—A 23-year-old Internet entrepreneur who heads his own small but successful company. He is the youngest student BSU has ever accepted. He was some- thing of a child prodigy, graduating from Georgia Tech at the age of 19 with a degree in computer science. Cameron is a single, African American male who has lived all over the United States. His company is based in Austin, Texas. He speaks only English. He is attending BSU’s program because, though confi dent of his technical expertise, he

would like to learn more about business, since he is plan- ning to expand his company.

• Pranarisha—A 31-year-old manager for a nongovern- mental organization (NGO) that provides support to poverty-stricken areas of Thailand. Pranarisha’s job is to coordinate efforts from a variety of worldwide charitable organizations. She speaks four languages fl uently; however, she is not fl uent in English. She graduated from the most prestigious university in Thailand. She is married with a four-year-old son and is a devout Buddhist. She is attend- ing BSU’s program at the request of her organization, so she can help to make the organization more effi cient.

The A-Team was doomed almost as soon as the project began. The team’s fi rst task was to decide how roles would be al- located to individuals on the team.

Aran: Before we begin, we need to decide what everyone will be doing on this project, how we will divide and coordinate the work. Since I have the most experience, I should serve in the executive function. I’ll assign and oversee everyone’s work. I will also give the presentation at the end of the project, since I know how to talk to important people. Cameron will be in charge of analyzing the fi nancial feasibility of our project, developing the marketing plan, and evaluating the technical operations. The girls will assist him in …

Rebecca (Interrupting): Hold on a minute! First, we are not girls! Second, Cameron, Katie, and I decided last night over beers at happy hour that I should handle the marketing plan, Cameron the technical aspects, and Katie the fi nancial aspects. You can serve as the coordinator, since you’re not going to be attending class on campus—you can keep track of everything when we submit electronic reports.

Cameron: Yeah—your role would be to just make sure everyone is on the same page, but we’d individually decide how to con- duct our own projects.

Aran: This team needs a leader and I …

Cameron and Katie (in unison): Who says?

Rebecca: We’re all responsible adults, and since the three of us are most accustomed to the Western way of doing business— which as we all know focuses on individual empowerment— then we’ll get the most out of the project doing it our way.

Aran: You are all young and inexperienced. What do you know about the business world?

Katie: I know a lot more about fi nance than you.

Rebecca: Get with the twenty-fi rst century. Just because we’re women doesn’t mean …

Cameron: He isn’t just ragging on women. He’s ragging on me, too.

Katie: Yeah, but at least he gave you a real job. You’re a guy— “Boy Wonder.”

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78 Chapter 2 Organizational Diversity

Cameron: What kind of crack was that? After all, you two didn’t start your own company. You’re a number cruncher, and Re- becca sells dresses, and …

Rebecca: I think we need to stop this right now, and the four of us need to decide once and for all who is doing what!

Katie: Four of us? Wasn’t our team supposed to have fi ve people? Where’s that other woman? The one from Vietnam? Parisa? Prana? Whatever her name is?

At this point, Professor Bowell, the group’s advisor, walks in and tells them that the team is to be disbanded. Pranarisha had walked out of the group meeting (without anyone noticing) and informed Dr. Bowell that she just couldn’t take it any longer. She had come here to learn how to run an organization more effi ciently and how to work with businesspeople. However, she was so disheartened by the way the group was acting, she was

going to quit the program. This was the fi rst time in over 10 years that Dr. Bowell had heard of anyone quitting the program in the fi rst week because of the behavior of the members of her team. The advisor just didn’t see any way that this group of individuals could get their act together to become a functioning team.

Discussion Questions 1. What happened with the A-Team? Why did the group

process break down? What dimensions of diversity were responsible for the confl ict?

2. Describe which barriers to effectively managing diversity were present in this situation.

3. What could have been done to manage the group process better?

team exercise

STEP 1: Choose an event that you would not normally attend and at which you will likely be in the minority on some important dimension. Attend the event.

• You can go with a friend who would normally attend the event, but not one who will also be in a minority.

• Make sure you pick a place where you will be safe and where you are sure you will be wel- comed, or at least tolerated. You may want to check with your instructor about your choice.

• Do not call particular attention to yourself. Just observe what is going on and how you feel.

• A religious service for a religion totally different from your own.

• A sorority or fraternity party where the race of members is mostly different from your own.

• A political rally where the politics are different from your own.

STEP 2: After attending the event, write down your answers to the following questions: 1. How did you feel being in a minority situation? Did different aspects of your self-identity

become salient? Do you think others who are in minority situations feel as you did? 2. What did you learn about the group you visited? Do you feel differently about this group now? 3. What did people do that made you feel welcome? What did people do that made you feel self-

conscious?

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Endnotes 79

4. Could you be an effective team member in this group? How would your differences with group members impact on your ability to function in this group?

5. What did you learn about managing diversity from this exercise?

STEP 3: Discuss the results of the exercise in a group as assigned by the instructor.

Endnotes 1. Bamattre, W. (former LAFD Fire Chief ), as reported in Rich-

ardson, L. 2006. Audit faults fi re department. Los Angeles Times, January 27, B.4.

2. See, for example, Ball, P., Monaco, G., Schmeling, J., Schartz, H., Blanck, P. 2005. Disability as diversity in Fortune 100 companies. Behavioral Sciences and Law, 23: 97–121; Jolna, K.A. 2003. Be- yond race and gender? Doctoral Dissertation. Atlanta, GA: Emory University; Society of Human Resources Management. 1997. SHRM survey of diversity of programs. Alexandria, VA: Society for Human Resources Management.

3. Samdahl, E. November 6, 2009. “Most Companies Don’t Mea- sure the Bottom-Line Impact of Diversity Programs,” at http:// hrmtoday.com.; Campbell, T. 2003. Diversity in depth. HRMagazine, 48(3): 152.

4. Johnson, K. 2007. Kevin Johnson, Diversity Executive Work- group Sponsor, on executive commitment. At http://www.micro- soft.com/about/diversity/exec.mspx.

5. Schneider, B., Goldstein, H.W., & Smith, D.B. 1995. The ASA framework: An update. Personnel Psychology, 48: 747–773.

6. Ely, R.J., & Thomas, D.A. 2001. Cultural diversity at work: The effects of diversity perspectives on work group processes and out- comes. Administrative Science Quarterly, 46: 229–274.

7. See, for example, Kochan, T., Bezrukova, K., Ely, R., Jackson, S., Joshi, S., Jehn, K., Leonard, J., Levine, D., & Thomas, D. 2003. The effects of diversity on business performance: Report of the di- versity research network. Human Resource Management, 42: 3–21.

8. For additional commentary on the various dimensions, see the following: Ball, C., & Haque, A. 2003. Diversity in religious practice: Implications of Islamic values in the public workplace. Public Personnel Management, 32: 315–328; Bantel, K.A., & Jack- son, S.E. 1989. Top management and innovations in banking: Does the composition of the top team make a difference? Strategic Management Journal, 10: 107–124; Barsade, S.G., Ward, A.J., Turner, J.D.F., & Sonnenfeld, J.A. 2000. To your heart’s content: A model of affective diversity in top management teams. Admin- istrative Science Quarterly, 45: 802–837; Cummings, J.N. 2004. Work groups, structural diversity, and knowledge sharing in a global organization. Management Science, 50: 352–365; Ely, R.J., & Thomas, D.A. 2001. Cultural diversity at work: The effects of diversity perspectives on work group processes and outcomes. Administrative Science Quarterly, 46: 229–274; Kochan et al., The effects of diversity on business performance; Richard, O.C., Ford, D., & Ismail, K. 2006. Exploring the performance effects of visi- ble attribute diversity: The moderating role of span of control and organizational life cycle. International Journal of Human Resource Management, 17: 2091–2109.

9. Konrad, A.M. 2003. Special issue introduction: Defi ning the do- main of workplace diversity scholarship. Group and Organization Management, 28: 4–18.

10. Williams, K.Y., & O’Reilly, C.A. 1998. Demography and diver- sity in organizations: A review of 40 years of research. In L.L. Cummings & B.M. Staw (Eds.), Research in Organizational Behavior, 20: 77–140. Greenwich, CT: JAI Press, p. 81.

11. Ibid. 12. See, for example, Jehn, K.A., Northcraft, G.B., & Neale, M.A.

1999. Why differences make a difference: A fi eld study of diver- sity, confl ict, and performance in groups. Administrative Science Quarterly, 44: 741–763.

13. Kanter, R.M. 1977. Men and women of the corporation. New York: Basic Books.

14. Texas Instruments. 2009. Diversity and inclusion. At http://www. ti.com/corp/docs/csr/empwellbeing/diversity.

15. Microsoft. 2007. Message from Claudette Whiting. At http:// www.microsoft.com/about/diversity/fromoffi ce.mspx?pf=true.

16. Bank of America. 2007. Fact sheets. At http://careers.bankofa- merica.com/learnmore/factsheets.asp.

17. U.S. Department of Labor. 2002. Facts on Executive Order 11246—Affi rmative Action. At www.dol.gov/esa/regs/compli- ance/ofccp/aa.htm.

18. Thomas, R.R., Jr. 1992. Managing diversity: A conceptual frame- work. In S.E. Jackson & Associates (Eds.), Diversity in the work- place. New York: Guilford Press, pp. 306–317.

19. Cox, T.H., Jr. 1993. Cultural diversity in organizations: Theory, research, and practice. San Francisco, CA: Berrett-Koehler Publishers.

20. Gilbert, J.A., & Ivancevich, J.M. 2000. Valuing diversity: A tale of two organizations. Academy of Management Review, 14: 93–106.

21. Farh, J.L., Dobbins, G.H., & Cheng, B. 1991. Cultural relativity in action: A comparison of self-ratings made by Chinese and U.S. workers. Personnel Psychology, 44: 129–147.

22. Cox, Cultural diversity in organizations. 23. See, for example, Campbell, T. 2003. Diversity in depth. HR-

Magazine, 48(3): 152. 24. Farouky, J. 2007. The many faces of Europe. Time International,

169 (9): 16–20. 25. U.S. Department of Labor. 2000. Working in the 21st century. At

http://www.bls.gov/opub/home.htm. 26. U.S. Equal Employment Opportunity Commission. 2003. Oc-

cupational employment in private industry by race/ethnic group/ sex, and by industry. At http://www.eeoc. gov/stats/jobpat/2003/ national.html.

27. U.S. Department of Labor, Working in the 21st century. 28. Ibid.

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http://hrmtoday.com

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80 Chapter 2 Organizational Diversity

29. Ibid. 30. Bureau of Labor Statistics. 2005. Economic and employment

projections. At http://www.bls.gov/news.release/ecopro.toc.htm. 31. Ibid. 32. See, for example, Jackson, S.E., & Alvarez, E.B. 1992. Working

through diversity as a strategic imperative. In S.E. Jackson & Associates (Eds.), Diversity in the workplace, pp. 13–29.

33. U.S. Department of Commerce. 2007. FT900: U.S. International trade in goods and services. At http://www.census. gov/foreign- trade/Press-Release/current_press_release/press.html#current.

34. Ibid. 35. Hitt, M.A., Ireland, D.I., & Hoskisson. 2007. Strategic manage-

ment: Competitiveness and globalization (7th ed.). Stamford, CT: Thompson Learning.

36. Whole Foods Market. 2007. Our core values. At http://www. wholefoodsmarket.com/company/corevalues.html.

37. Cox, T.H., & Blake, S. 1991. Managing cultural diversity: Impli- cations for organizational competitiveness. Academy of Manage- ment Executive, 5(3) 45–56; Jackson & Alvarez, Working through diversity as a strategic imperative.

38. Eisenberger, R., Huntington, R., Hutchison, S., & Sowa, D. 1986. Perceived organizational support. Journal of Applied Psychology, 71: 500–507; Eisenberger, R., Fasolo, P., & Davis-LaMastro, V. 1990. Perceived organizational support and employee diligence, commit- ment, and innovation. Journal of Applied Psychology, 75: 51–59.

39. Cox, Cultural diversity in organizations; McKay, P.F., Avery, D.R., & Morris, M.A. 2008. Mean racial differences in employee sales performance: The moderating role of diversity climate. Personnel Psychology, 61:349–374.

40. Hicks-Clarke, D., & Iles, P. 2000. Climate for diversity and its effects on career and organizational perceptions. Personnel Review, 29: 324–347.

41. For research on these outcomes, see: Colquitt, J.A., Conlon, D.E., Wesson, M.J., Porter, C.O.L.H., & Ng, K.Y. 2001. Justice at the millennium: A meta-analytic review of 25 years of organiza- tional justice research. Journal of Applied Psychology, 86: 425–445; Goldman, B.M. 2001. Toward an understanding of employment discrimination claiming by terminated workers: Integration of organizational justice and social information processing theories. Personnel Psychology, 54: 361–386; Goldman, B.M. 2003. The application of referent cognitions theory to legal-claiming by terminated workers: The role of organizational justice and anger. Journal of Management, 29: 705–728; Skarlicki, D.P., & Folger, R. 2003. Broadening our understanding of organizational retalia- tory behavior. In R.W. Griffi n & A.M. O’Leary-Kelly (Eds.), The darkside of organizational behavior. San Francisco, CA: Jossey- Bass, pp. 373–402.

42. Kossek, E.E., & Zonia, S.C. 1993. Assessing diversity climate: A fi eld-study of reactions to employer efforts to promote diversity. Journal of Organizational Behavior, 14: 61–81.

43. Mollica, K.A. 2003. The infl uence of diversity context on white men’s and racial minorities’ reactions to disproportionate group harm. Journal of Social Psychology, 143: 415–431. Jehn, North- craft, & Neale, Why differences make a difference.

44. Bantel, K.A., & Jackson, S.E. 1989. Top management and inno- vations in banking: Does the composition of the top team make a

difference? Strategic Management Journal, 10: 107–124; Jackson, S.E. 1992. Consequences of group composition for the interper- sonal dynamics of strategic issue processing. Advances in Strategic Management, 8: 345–382.

45. For research related to these dimensions, see: Hambrick, D.C., Cho, S.T., & Chen, M.J. 1996. The infl uence of top manage- ment team heterogeneity on fi rm’s competitive moves. Adminis- trative Science Quarterly, 41: 659–684; Jackson, S.E., May, K., & Whitney, K. 1995. Diversity in decision making teams. In R.A. Guzzo & E. Salas (Eds.), Team effectiveness and decision making in organizations. San Francisco, CA: Jossey-Bass, pp. 204–261; Jehn, Northcraft, & Neale, Why differences make a difference; Wood, W. 1987. Meta-analysis of sex differences in group performance. Psychological Bulletin, 102: 53–71; Zajac, E.J., Golden, B.R., & Shortell, S.M. 1991. New organizational forms for enhancing in- novation: The case of internal corporate joint ventures. Manage- ment Science, 37: 170–184.

46. Grensing-Phophal, L. 2002. Reaching for diversity: What minor- ity workers hope to get from diversity programs is what all em- ployees want in the workplace. HRMagazine, 47 (5): 52–56.

47. Williams & O’Reilly, Demography and diversity in organizations. 48. Van Knippenberg, D., & Schippers, M.C. 2007. Work group di-

versity. Annual Review of Psychology, 58: 515–541. 49. See, for example, Li, J.T., & Hambrick, D.C. 2005. Factional

groups: A new vantage on demographic faultlines, confl ict, and disintegration in work teams. Academy of Management Journal, 48: 794–813; Molleman, E. 2005. Diversity in demographic charac- teristics, abilities and personality traits: Do faultlines affect team functioning? Group Decision and Negotiation, 14: 173–193; Rico, R., Molleman, E., Sanchez-Manzanares, M., & Van der Vegt, G.S. 2007. The effects of diversity faultlines and team task autonomy on decision quality and social integration. Journal of Management, 33: 111–132; Sawyer, J.E., Houlette, M.A., & Yeagley, E.L. 2006. Decision performance and diversity structure: Comparing fault- lines in convergent, crosscut, and racially homogeneous groups. Organizational Behavior and Human Decision Processes, 99: 1–15.

50. Williams & O’Reilly, Demography and diversity in organizations. 51. See, for example, Richard, O.C., Kochan, T.A., & McMillan-

Capehart. 2002. The impact of visible diversity on organizational effectiveness: Disclosing the contents in Pandora’s black box. Jour- nal of Business and Management, 8: 265–291; Pelled, L.H. 1996. Demographic diversity, confl ict, and work group outcomes: An intervening process theory. Organization Science, 7: 615–631.

52. Williams & O’Reilly, Demography and diversity in organizations. 53. Hackman, J.R. 2002. Leading teams: Setting the stage for great per-

formances. Boston, MA: Harvard Business School Press. 54. Richard, Kochan, & McMillan-Capehart, The impact of visible

diversity on organizational effectiveness. 55. Ibid. 56. Cox, Cultural diversity in organizations; Cox & Blake, Managing

cultural diversity. 57. Richard, O.C. 2000. Racial diversity, business strategy, and fi rm

performance: A resource based view. Academy of Management Journal, 43: 164–177.

58. Kochan, T., Bezrukova, K., Ely, R., Jackson, S., Joshi, A., Jehn, K. Leonard, J., Levine, D., & Thomas, D. 2003. The effects

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Endnotes 81

of diversity on business performance: Report of the Diversity Research Network. Human Resource Management, 42: 3–21.

59. See, for example, Fletcher, A.A. 2000. Business and race: Only halfway there. Fortune, 141 (5): 76–77.

60. See, for example, Westphal, J., & Zajac, E. 1997. Defections from the inner circle: Social exchange, reciprocity and the diffusion of board independence in U.S. corporations. Administrative Science Quarterly, 42: 161–183.

61. Sellers, P. 2004. By the numbers: Women and profi ts. Fortune, at http://www.fortune.com/fortune/subs/article/0,15114,582783, 00.html.

62. Siciliano, J.I. 1996. The relationship of board member diversity to organizational performance. Journal of Business Ethics, 15: 1313–1320.

63. Hillman, A.J., Cannella, A.A., Jr., & Harris, I.C. 2002. Women and racial minorities in the boardroom: How do directors differ? Journal of Management, 28: 747–763.

64. Ibid. 65. Bantel, & Jackson, Top management and innovations in bank-

ing; Hambrick, Cho, & Chen, The infl uence of top management team heterogeneity on fi rm’s competitive moves.

66. Wright, P., Ferris, S.P., & Kroll, M. 1995. Competitiveness through management of diversity: Effects on stock price evalua- tion. Academy of Management Journal, 38: 272–287.

67. Cowell, A. 2005. What Britain can tell France about rioters. The New York Times, November 20, 4.4.

68. Dovidio, J.F., Gaertner, S.L., Kawakami, K., & Hodson, G. 2002. Why can’t we just get along? Interpersonal biases and interracial dis- trust. Cultural Diversity and Ethnic Minority Psychology, 8: 88–102.

69. Bobo, L.D. 2001. Racial attitudes and relations at the close of the twentieth century. In N.J. Smelser, W.J. Wilson, & F. Mitchell (Eds.), Racial trends and their consequences (Vol. 1). Washington, DC: National Academic Press, pp. 264–301.

70. McConahay, J.B. 1986. Modern racism, ambivalence, and the modern racism scale. In J.F. Dovidio & S.L. Gaertner (Eds.), Prej- udice, discrimination, and racism. Orlando, FL: Academic Press, pp. 91–125.

71. Dovidio, J.F., & Gaertner, S.L. 2000. Aversive racism and selection decisions: 1989 and 1999. Psychological Science, 11: 319–323.

72. For example research, see: Cleveland, J.N., Vescio, T.K., & Barnes-Farrell, J.L. 2005. Gender discrimination in organiza- tions. In R.L. Dipboye, & A. Colella (Eds.), Discrimination at work: The psychological and organizational bases. Mahwah, NJ: Lawrence Erlbaum; Colella, A., & Varma, A. 2001. The impact of subordinate disability on leader-member exchange dynamics. Academy of Management Journal, 44: 304–315; Dovidio, J.F., Gaertner, S.L., Anastasio, P.A., & Sanitaso, R. 1992. Cognitive and motivational bases of bias: The implications of aversive rac- ism for attitudes towards Hispanics. In S. Knouse, P. Rosenfeld, & A. Culbertson (Eds.). Hispanics in the workplace. Newbury Park, CA: Sage, pp. 75–106; Hebl, M.R., Bigazzi Foster, J., & Dovidio, J.F. 2002. Formal and interpersonal discrimination: A fi eld study of bias toward homosexual applicants. Personality and Social Psychology Bulletin, 28: 815–825.

73. Dipboye, R.L. & Colella, A. 2005. The dilemmas of workplace dis- crimination. In R.L. Dipboye & A. Colella (Eds.), Discrimination

at work: The psychological and organizational bases. Mahwah, NJ: Lawrence Erlbaum. pp. 425–462.

74. Cox, Cultural diversity in organizations. 75. Crocker, J., Fiske, S.T., & Taylor, S.E. 1984. Schematic bases of

belief change. In J.R. Eiser (Ed.), Attitudinal judgment. New York: Springer-Verlag, pp. 197–226; Weber, R., & Crocker, J. 1983. Cognitive processes in the revision of stereotypic beliefs. Journal of Personality and Social Psychology, 45: 961–977.

76. von Heppel, W., Sekaquaptewa, D., & Vargas, P. 1995. On the role of encoding processes in stereotype maintenance. In M.P. Zanna (Ed.), Advances in experimental social psychology, Vol. 27. San Diego, CA: Academic Press, pp. 177–254.

77. Fiske, S.T. 1998. Stereotyping, prejudice, and discrimination. In D.T. Gilbert, S.T. Fiske, & G. Lindzey (Eds.), The handbook of social psychology, Vol. 2 (4th ed.). New York: McGraw-Hill, pp. 357–411.

78. Cox, Cultural diversity in organizations. 79. Helft, M. 2007. Xerox’s strategy pays off with a new search ven-

ture. The New York Times, February 9, C.3; Maney, K. 2006. Mulcahy traces steps of Xerox’s comeback. USA Today, September 21, 4B.

80. Ireland, R.D., Hoskisson, R.E., & Hitt, M.A. 2006. Understand- ing business strategy. Mason, OH: South-western Publishing; Stone, B. 2007. eBay beats the estimates for 4th-quarter earnings. New York Times, January 25, C.3; Vara, V. 2007. eBay’s strong earnings, outlook help to quiet critics, for now. Wall Street Jour- nal, January 25, A.3.

81. Brewer, M.B., & Miller, N. 1984. Beyond the contact hypoth- esis: Theoretical perspectives on desegregation. In N. Miller & M.B. Brewer (Eds.), Groups in contact. San Diego, CA: Academic Press, pp. 281–302; Tajfel, H. 1978. Differentiation between so- cial groups: Studies in the social psychology of intergroup relations. San Diego, CA: Academic Press; Ashforth, B., & Mael, F. 1989. Social identity theory and the organization. Academy of Manage- ment Review, 14: 20–39.

82. Abrams, D., & Hogg, M.A. 1990. An introduction to the social identity approach. In D. Abrams & M.A. Hogg (Eds.), Social identity theory: Constructive and critical advances. New York: Springer-Verlag, pp. 1–9.

83. Cox, Cultural diversity in organizations. 84. McGuire, W.J., McGuire, C.V., Child, P., & Fujioka, T. 1978.

Salience of ethnicity in the spontaneous self-concept as a function of one’s ethnic distinctiveness in the social environment. Journal of Personality and Social Psychology, 36: 511–520.

85. Cox, Cultural diversity in organizations. 86. Ely, R.J. 1994. The effects of organizational demographics and

social identity on relationships among professional women. Administrative Science Quarterly, 39: 203–239.

87. Cited in Slay, H.S. 2003. Spanning two worlds: Social identity and emergent African American leaders. Journal of Leadership and Organizational Studies, 9: 56–66.

88. Cox, Cultural diversity in organizations. 89. Abrams & Hogg, An introduction to the social identity approach. 90. Turner, J.C. 1975. Social comparison and social identity: Some

prospects for intergroup behavior. European Journal of Social Psychology, 5: 5–34.

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82 Chapter 2 Organizational Diversity

91. Hogg, M.A., & Terry, D.J. 2000. Social identity and self- categorization processes in organizational contexts. Academy of Management Review, 25: 121–140.

92. Ibid. 93. French, J.R.P., & Raven, B. 1959. The bases of social power.

In D. Cartwright (Ed.), Social power. Ann Arbor: University of Michigan, Institute for Social Research, pp. 150–167; Pfeffer, J., & Salancik, G.R. 1978. The external control of organizations: A resource dependence view. New York: Harper and Row.

94. Sidananius, J., & Pratto, F. 1999. Social dominance. Cambridge, UK: Cambridge University Press.

95. Ibid. 96. Kalkhoff, W., & Barnum, C. 2000. The effects of status-

organizing and social identity processes on patterns of social infl u- ence. Social Psychology Quarterly, 63: 95–115.

97. Konard, A.M. 2003. Special issue introduction: Defi ning the domain of workplace diversity scholarship. Group and Organiza- tional Management, 28: 4–18.

98. For additional details, see Deogun, N. Coke was told in ’95 of need for diversity. Wall Street Journal, May 20, A.3; McKay, B. 2000. Coke settles bias suit for $192.5 million. Wall Street Jour- nal, November 17, A.3.

99. U.S. Equal Employment Opportunity Commission. 2005. Oc- cupational employment in private industry by race/ethnic group/

sex, and by industry. At http://archive.eeoc.gov/stats/jobpat/2005/ national.html.

100. Kanter, Men and women of the corporation. 101. Winters, M.F. 2003. Globalization presents both opportuni-

ties and challenges for diversity. At http://search.shrm.org/ search?q=cache:8b6YiQjDjFoJ:www.shrm.org/diversity/ library_published/nonIC/CMS_012382.asp��globalization1 challenges1diversity&access=p&output=xml_no_dtd&ie=UTF- 8&lr=&client=shrm_frontend&num=10&site=&proxystyleshee t=shrm_frontend&oe=ISO-8859-1.

102. U.S. Department of Commerce and Vice President Al Gore’s National Partnership for Reinventing Government Benchmark- ing Study. 1998. Best practices in achieving workplace diversity. Washington, DC: U.S. Department of Commerce.

103. Starbucks. 2007. Starbucks mission statement. At http://www. starbucks.com/aboutus/environment.asp.

104. Ford Motor Company. 2007. Valuing diversity. At http://www. mycareer.ford.com/ONTHETEAM.ASP?CID=15.

105. Jayne, M.E.A., & Dipboye, R.L. 2004. Leveraging diversity to improve business performance: Research fi ndings and recom- mendations for organizations. Human Resource Management, 43: 409–424.

106. Cox, T.H. 2001. Creating the multicultural organization: A strategy for capturing the power of diversity. San Francisco: Jossey-Bass.

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http://www.starbucks.com/aboutus/environment.asp

http://www.mycareer.ford.com/ONTHETEAM.ASP?CID=15

? knowledge objectives After reading this chapter, you should be able to: 1. Defi ne globalization and discuss the forces that

infl uence this phenomenon. 2. Discuss three types of international involvement by

associates and managers and describe problems that can arise with each.

3. Explain how international involvement by associ- ates and managers varies across fi rms.

4. Describe high-involvement management in the international arena, emphasizing the adaptation of this management approach to different cultures.

5. Identify and explain the key ethical issues in inter- national business.

organizational behavior in a global context exploring behavior in action

McDonald’s Thinks Globally and Acts Locally

I n 1948, brothers Richard and Maurice McDonald opened the fi rst McDonald’s restaurant in San Bernardino, California. Over the next decade, hundreds of McDonald’s restaurants were built alongside the new interstate highway systems in the United States. McDonald’s was one of the fi rst restaurants to make fast food available to the newly mobile American

population. In 1967, McDonald’s decided to go international and opened its fi rst restaurant outside the United States in Richmond, British Columbia. Today there are over 32,000 McDonald’s restaurants in 122 countries. And, its international operations have become highly important to McDonald’s fi nancial performance. For example, its restaurants in Europe now produce more revenues than its restaurants in the United States, despite the fact that McDonald’s has more units in the United States. McDonald’s success in international operations is partially because it has adapted to the cultural differences in the various foreign locations of its restaurants.

Trying to maintain a global brand is diffi cult because of the different cultural expectations experienced across different countries. It is important to ensure a positive reputation for the company and also maintain the quality of its products. So, McDonald’s had to build and sustain a reputation for quality products and effi cient service globally while simultaneously meeting consumer expec- tations across different cultures. McDonald’s developed a competitive advantage because the company has taken steps to know, understand, and service customers’ needs without compromising its core strengths (fast, easy, clean meals for families to enjoy). An example of McDonald’s adaptation to cultural differences is exhibited in how McDonald’s dispenses its food products in order to respect and serve its Israeli customers. All meat served in McDonald’s restaurants located in Israel is 100 percent kosher. McDonald’s operates both kosher and nonkosher restaurants in Israel. The kosher restaurants are closed on Saturday and on religious holidays, while the nonkosher restaurants remain open for those customers who do not

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Sources: “Welcome to McDonald’s Israel”, McDonald’s, Nov. 22, 2009, www.mcdonalds.com; E. Ganley. 2009. “McDonald’s to Become Mona Lisa’s New Neighbor,” BusinessWeek, Oct. 5, www.businessweek.com; S.E.D. Aloui & Y. Genena. 2009. “McDonald’s Egypt continues the ’Open Door’ program,” AMEinfo, June 28, at http://www.ameinfo.com; N. El Ajou. 2008. “McDonald’s UAE Concludes its 7th World Children’s Day Campaign,” AMEinfo, Dec. 24, 2008; K. Capell. 2008. “A Golden Recipe for McDonald’s Europe,” BusinessWeek, July 17; “McDonalds’s and Conservation International Team Up to Protect China’s Panda Habitats”, Mc- Donalds, June 10, 2008, at http://www.crmcdonalds.com; Nini Bhan and Brad Nemer. 2006. “Brand Magic in India,” BusinessWeek, May 8, at http://www.businessweek.com; Beth Carney. 2005. “In Europe, the Fat Is in the Fire,” BusinessWeek, Feb. 8, at http://www. businessweek.com; Conrad P. Kottak. 2003. McDonald’s in Brazil: Culturally Appropriate Marketing, Ethnographic Solutions, at http:// www.ethnographic-solutions.com.

strictly adhere to kosher law. In the kosher restaurant, the menu includes no dairy products and food is prepared in accordance with kosher law. In addition, McDonald’s sup- ports the local communities by obtaining many of its food products (e.g., beef, potatoes, lettuce, etc.) from local sup- pliers. In Israel, it obtains 80 percent of its food supplies within the country.

To display the effi ciency and cleanliness of its restau- rants in Egypt, McDonald’s operates an open-door pol- icy, in which customers are invited to visit their kitch- ens to view the preparation of the food. In this way, consumers can view how McDonald’s restaurants pre- pare their food effi ciently, maintaining quality and in ways that meet high health and safety standards. For example, employees must wash their hands with disin- fectant soap every 30 minutes and continuously wash and disinfect utensils. The tours provided to customers fulfi ll a process of transparency and have elicited highly positive customer responses and expressions of appreciation.

Other examples of how McDonald’s adapts to local culture and ways of life include vegetarian meals in India, with local creations such as the McPuff and the McVeg- gie. Today, 70 percent of the menu in India has been al- tered to meet the customers’ needs and desires. In Europe, McDonald’s introduced a menu featuring salads, fruit, and the option of substituting carrots in Happy Meals for French fries, a menu modifi cation made to appeal to health-conscious consumers. These same menu items have been offered in the United States as well. So, while the menu may be different in some ways, the McDon- ald’s experience around the world is consistent by offering quality, great service, cleanliness, and value. It is equally

important to develop a culturally appropriate strategy for a new international location. Innovation is successful when it is culturally appropriate. In Brazil, McDonald’s promotes an afternoon meal rather than a lunch meal. This change was made because Brazilians prefer their main meal at midday, often eating at a leisurely pace with

business associates. There are many abroad

who are concerned about having companies like McDonald’s expand their restaurants globally, such as the concerns expressed about a McDonald’s res- taurant opening in the food court adjoining France’s famous Louvre museum. Countering some of these concerns is McDonald’s commitment to impor- tant local social concerns. For example, McDonald’s supports Conservation In-

ternational’s efforts to protect wild pandas, a threatened species. Taking this further, McDonald’s announced a local treasures program in China to encourage children to learn about their country’s special environment and rare animals. Another example is McDonald’s major dona- tion to the Dubai Autism Center as a part of McDonald’s World Children’s Day campaign.

McDonald’s is regularly adapting its restaurants and marketing tactics to refl ect cultural, architectural, and re- gional differences within each country. Even in the United States, McDonald’s adapts to local communities. In Maine, McDonald’s offers lobster rolls. And in Michigan, customers can purchase Halal McNuggets, chicken that is processed under strict religious supervision in order to cater to the 150,000 Muslims who live in the Detroit area. Thus, McDonald’s is a prime example of a company that thinks globally and acts locally.

©ZAHID HUSSEIN/Reuters/Landov LLC

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http://www.ethnographic-solutions.com

The Exploring Behavior in Action discus- sion of McDonald’s shows how one fi rm operates on the world stage and em- phasizes the importance of cross-cultural knowledge and skills. Because of sub- stantial competition and differing cultural expectations across the many countries in which McDonald’s has restaurants, the company has strong needs for fl exibility and for effi ciency in resource use. Mc- Donald’s has developed a global reputa- tion for providing clean restaurants and fast and easy meals for value-conscious families. From strategic locations, the fi rm develops, produces, sells, and supports its products for the world marketplace. To be successful, however, this fi rm must be especially attentive to local cultural values and desired foods. McDonald’s always provides some consistent products on its menu regardless of location (e.g., the Big Mac) but it also provides menu items adapted to the local cultural tastes (such as vegetable meals in India and kosher foods in Israel). Obviously, McDonald’s has trained its managers to be sensitive to local culture and yet to take advantage of global effi ciencies. Actions such as those used by McDonald’s to take advan- tage of the different international markets opened due to glob alization have led to higher overall fi rm performance.1

To create cost advantages, to pur- sue growth, or to spread risk across dif- ferent markets, many fi rms have adopted strategies that call for investment in

foreign countries. Such involvement can take many forms, including the creation of company-owned manufacturing or back-offi ce facilities, company-owned marketing and sales units, and/or alli- ances with companies based in a par- ticular foreign country. In all cases, ef- fectively handling cross-country cultural differences is crucial. Executing competi- tive strategies would be impossible with- out an understanding of how these dif- ferences affect day-to-day relationships among associates and managers, as well as relationships with external par- ties (such as suppliers and customers).2

One of the most famous examples of a corporate failure that emphasizes the importance of cultural differences is Walt Disney Company’s attempt to execute a strategy involving effi cient operations and exceptional customer service in its theme park located close to Paris.3 American leaders of the Euro Disney project failed to understand some European workplace norms that produced a less friendly ap- proach to guests in the park. Disney lead- ers also failed to anticipate the uproar over grooming and dress requirements for associates, including “appropriate under- garments,” and they did not recognize the potential for confl ict between individuals of different nationalities. One of the 1,000 associates and lower-level managers who departed in the fi rst nine weeks of Euro Disney’s operation commented, “I don’t think [non-European supervisors] realized

what Europeans were like.” Concerning the park, a critic expressed the feelings of the French elite: “A horror made of cardboard, plastic, and appalling colors; a construction of hardened chewing gum and idiotic folklore taken straight out of comic books written for obese Ameri- cans.”4 Failure to fully appreciate and respond to cultural differences contributed to a disastrous early period for Euro Dis- ney. Its performance suffered, but having learned several hard lessons, the com- pany improved its practices in the park and increased its performance as well.

Because of the importance of glob alization and the related diversity and ethical issues it poses, we present examples and applications involving fi rms operating in multiple countries throughout the book. In this chapter, we discuss these issues in depth. We open the chapter with a discussion of globalization, addressing the opportu- nities and challenges that globalization presents for nations and fi rms. Next, we discuss the ways in which associ- ates and managers can deal with in- ternational problems and the pitfalls to avoid in their activities. A discussion of high-involvement management follows, with a focus on how this management approach can be tailored to different countries and regions of the world. Finally, we describe ethical issues fre- quently confronted by fi rms with sub- stantial international involvement.

the strategic importance of Organizational Behavior in a Global Context

Forces of Globalization In a global economy, products, services, people, technologies, and fi nancial capital move relatively freely across national borders.5 Tariffs, currency laws, travel restrictions, immi- gration restrictions, and other barriers to these international fl ows become less diffi cult

Forces of Globalization 85

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86 Chapter 3 Organizational Behavior in a Global Context

to manage. Essentially, a global economy provides fi rms with a unifi ed world market in which to sell products and services, as well as a unifi ed world market for acquiring the resources needed to create those products and services.

Globalization, the trend toward a more global economy, has increased substantially since 1980. Direct foreign investment by fi rms based in developed countries has increased. While several developed countries suffered a recession early in the twenty-fi rst century, there were healthy increases in direct foreign investments made by them through 2007. In fact, such investments reached an all-time high in 2007. In this year, the total stock of direct foreign investments achieved $15 trillion in value.6 However, the global economic recession led to a reduction in the total amount of direct foreign investments in 2008 and 2009. Yet, with the recovery, projections call for increases in direct foreign investment in 2010 and several years beyond.7 These investments represent increased interest in producing goods and services in foreign countries. Exporting goods and services into other countries increased over the same time period. Exports have grown at a high rate in recent years except during the major global recession.8 Interestingly, in recent years, signifi cant amounts of foreign investment has been focused on emerging-economy countries such as China and India. Fur- thermore, these emerging economies have been making major foreign investments in other countries. Their growing economic power is evident in the projections that within the next few decades China and India are expected to have the largest and third largest economies, respectively, in the world.9 The results of globalization are evident in the fact that major multinational fi rms obtain almost 55 percent of their sales from outside their home country and almost 50 percent of their assets and associates reside outside of their home country.10 Clearly, goods and services fl owed across borders in record amounts at the end of the twenti- eth century and early in the twenty-fi rst century, with fi rms such as Toyota leading the way.

Many national leaders promote globalization as a means for economic growth inside their countries as well as in the world as a whole. Most economists agree that a highly global economy would be benefi cial for most countries. Goods, services, and the resources needed to produce them freely fl owing across borders likely reduce the costs of doing business, resulting in economic stimulation.11 It has been estimated that genuine free trade (i.e., trade with no tariffs) in manufactured goods among the United States, Europe, and Japan would result in a 5 to 10 percent annual increase in the economic output of these three areas. Genuine free trade in services would increase economic output by an additional 15 to 20 percent.12

Despite the potential economic benefi ts, offi cials in a number of nations have expressed concerns about globalization’s long-term effects on societal culture.13 Culture involves shared values and taken-for-granted assumptions about how to act and think.14 Many fear that unique cultures around the world will disappear over time if the world becomes one unifi ed market for goods and services. They argue that cultural distinctiveness—indeed what makes a country special—will disappear as similar products and services are sold worldwide.15 Individuals with these concerns took notice when a Taiwanese Little League baseball team playing in the United States was comforted by a McDonald’s restaurant be- cause it reminded them of home.16 In developing nations, there are also concerns over labor exploitation and natural resource depletion. In wealthy nations, there are concerns over the export of jobs to low-wage countries and the possibility that wealthy nations ultimately will need to lower their wage structures in order to compete in a truly global economy.17

From the perspective of an individual company, there are many reasons to consider substantial international involvement (see Exhibit 3-1). First, a fi rm may want to expand sales efforts across borders in order to sustain growth. Opportunities for growth may have

globalization The trend toward a unifi ed global economy where national borders mean relatively little.

culture Shared values and taken- for-granted assumptions that govern acceptable behavior and thought patterns in a country and give a country much of its uniqueness.

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Forces of Globalization 87

been exhausted in the home country (e.g., if the market is saturated), but owners, business analysts, and the media often demand continuing sales and profi t growth.18 Second, a fi rm may be able to reduce its business risk by selling its products and services in a number of different countries. By diversifying its sales across a number of regions of the world, a company may be able to offset bad economic times when they occur in one part of the world with good economic times in other parts of the world. Third, a fi rm may enjoy greater economies of scale by expanding its markets internationally. This applies most often to manufacturing fi rms. Hyundai, for example, could not develop operations with effi cient scale by serving only the domestic South Korean automobile market.19 To achieve a reasonable cost structure, the fi rm needed to build and sell more automobiles than the South Korean market could handle. The larger volume of automobiles manufactured and sold allows them to obtain quantity discounts on raw materials purchased and to spread their fi xed costs across more autos, thereby reducing their cost per unit (increasing their profi t margins). Fourth, when locating units internationally, a fi rm may enjoy location advantages such as low labor costs, specialized expertise, or other valuable resources.20

Clearly, globalization and the value to be gained from participating in international markets is changing the competitive landscape for many fi rms, regardless of their home base.21Even many smaller and younger fi rms are now participating in international mar- kets. The openness of markets and advancing technology (and lower costs of this tech- nology) provide opportunities for young and small fi rms as well as for older, larger, and established fi rms.22 These opportunities in international markets have been prompted by changes in many countries’ institutional environments. For example, several emerging- economy countries have reduced regulations to allow more foreign fi rms to enter their markets (e.g., China and India). In this way, their economies have grown larger and their fi rms have learned new capabilities, allowing them to compete more effectively in their home markets and abroad. Thus, the countries’ institutional environments affect home and foreign country fi rms’ strategies.23 Institutional environments contribute to the op- portunities and challenges depicted in Exhibit 3-1.

Political Risks

Growth

Diversification of Risk

Economies of Scale

Location Advantages

Opportunities

Managerial Risks

Economic Risks

Challenges

Exhibit 3-1 Opportunities and Challenges for Firms with International Involvement

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88 Chapter 3 Organizational Behavior in a Global Context

Globalization has greatly increased the interactions among countries and cul- tures. The vast improvements in com- munication technologies (and trans- portation as well) have affected much of what we do across the world. The world’s fi nancial markets have be- come tightly integrated, as shown by the world recession in 2008–2009. The political actions of opening coun- try markets and the entry into those markets by multinational corporations (MNCs) have jointly increased the amount and speed of globalization. MNCs sell more than $11 trillion in goods globally on an annual basis. And, although MNCs have been blamed for a number of ills (e.g., vio- lation of workers’ rights, harm to the natural environment, etc.), they have also enriched the fortunes of people in less-developed countries. MNCs have played a major role in the economic

development in important regions of the world such as China, India, and even Latin America.

However, MNCs now face a number of challenges, including signif- icant competition from major compa- nies in emerging markets such as Tata, Cemex, and Lenova, among others. These companies are not only compet- ing effectively in their home markets, but they are also developing capabili- ties (ability to successfully enter new foreign markets, building global re- source bases) to become major forces in global markets. Thus, MNCs must not only develop major global capa- bilities but also must learn the local markets well and acquire knowledge from these countries/markets that can be diffused throughout the company to enhance their ability to compete in global markets. This is sometimes called glocalization.

The CEO of GE’s business unit in India suggests that serving custom- ers in 10 countries having signifi cant cultural diversity in the managerial and professional associate ranks is a tremendous asset. He argues that the knowledge held by this group, espe- cially the local insight, allows the company to be well positioned to exploit opportunities as they arise in local markets. In addition, using the insight afforded by the cultural

diversity allows the management team to “see around the corner” regarding expectations for the future and thereby to stay ahead of the competition.

Procter & Gamble (P&G) has also learned to gain greater value from its international operations. Specifi cally, they design units and programs to help them acquire new knowledge avail- able in certain countries and regions. They then use this knowledge to enrich their products, services, and processes in other regions of the world. In this way, they stay ahead of their global and local competitors. For example, in China, they have encouraged reluctant research and development (R&D) re- searchers to speak up and share their ideas with others. In so doing, they have enhanced their R&D output there and also added unique knowledge to their global R&D efforts.

These efforts are especially im- portant because it is predicted that the Asian region, led by a strong China, will be the most infl uential geographic region for the global economy by 2020. And this means that Asian MNCs are also likely to be even more highly infl uential by this time. Thus, Western MNCs will experience in- creasing competitive challenges from this region of the world. They can only remain competitive by taking actions such as those noted by GE and P&G.

Multinational Corporations Achieving Glocalization

MANAGERIAL ADVICE

ou rt es

y of

P ro

ct or

& G

am bl

Sources: “Earning staff’s respect was pivotal for GE capital man,” Wall Street Journal, Nov. 16, 2009, at http://www. wsj.com; V. Govindarajan. 2009. “The case for ’reverse innovation’ now,” BusinessWeek, Oct. 26, at http://www. businessweek.com; R.O. Crockett. 2009. “P&G gets reticent researchers to speak up,” BusinessWeek, Oct. 2, at http:// www.businessweek.com; “Asian multinational corporations poised for global success and Asian region may be world’s most infl uential economy by 2020,” Fleishman-Hillard Point of View, Sept. 10, 2009, at http://pov.fl eishman.com; D. Patel. 2009. “Multinational corporations in an increasingly globalized world,” Prospect, Feb. 3, at http://www. prospectjournal.ucsd.edu.

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http://www.prospectjournal.ucsd.edu

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The Globalization Experience for Associates and Managers 89

These powerful forces encourage many fi rms to expand into international markets, but there are substantial risks. These risks can be classifi ed as political, economic, and managerial.24

• Political risks relate to instability in national governments, the threat of civil or international war, and the threat of state-sponsored terrorism. These risks create uncertainty, and they can result in the destruction of assets and disruption of resource fl ows.25 One of the most diffi cult situations occurs when a government nationalizes an industry, meaning that it takes over the assets of private companies, often with little or no compensation provided to the fi rms.

• Economic risks relate to fl uctuations in the value of foreign currencies and the possibility of sudden economic contraction in some countries.26 When a foreign country’s currency declines in value relative to the home country’s currency, assets and earnings in that foreign country are worth less, and exporting to that country becomes more diffi cult, as exported goods cost more there.

• Managerial risks relate to the diffi culties inherent in managing the complex resource fl ows required by most international fi rms.27 Tariffs, logistics, and language issues can become a signifi cant challenge as a fi rm does business in an increasing number of countries. Radically new marketing programs and distribution networks may be needed as fi rms enter new countries. Some executives and managers are better at managing these complexities than are others.

The Managerial Advice segment explains how managers develop their fi rm’s capabili- ties to compete effectively in global markets. They must develop a global mindset but also understand local market requirements. The most effective fi rms such as GE and P&G enter markets with the intent to learn. Firms can gain valuable ideas in foreign markets that they can then use in business units competing in other regions of the world.28 Mul- tinational fi rms based in Western (developed) countries have a number of advantages. However, companies from Asia, particularly China and India, are building their resources and capabilities. They will be formidable competitors in the coming decade.

The Globalization Experience for Associates and Managers For individual associates and managers, international exposure or experience can occur in several ways, which we discuss below. In each case, opportunities for personal learning, growth, and advancement are substantial. Several pitfalls, however, must be avoided.

Internationally Focused Jobs An individual may work directly on international issues as part of her day-to-day job. Although dealing with fi nance issues, accounting concerns, information technology tasks, and so on can be challenging in a purely domestic context, adding an international dimen- sion usually creates situations with signifi cant complexity. Individuals who thrive on chal- lenge are well suited to these environments. At Dow Chemical, for example, international fi nance activities are often demanding because of the fi rm’s exposure to fl uctuations in the value of many different countries’ currencies. With manufacturing facilities in dozens of countries and sales in well over 100 countries, Dow faces substantial currency risk.

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90 Chapter 3 Organizational Behavior in a Global Context

Associates and managers who hold internationally focused jobs are often members of geographically dispersed teams. Many of these teams complete work related to new market- ing programs, new-product-development projects, and other nonroutine initiatives. Other teams focus on routine issues, such as product fl ow from central manufacturing facilities. In many cases, associates and managers working on geographically dispersed teams have differ- ent working and decision styles because of cultural differences. Some prefer starting meet- ings with social rather than business topics, others prefer an autocratic rather than an egali- tarian team leader, and still others prefer indirect to direct confrontations. To facilitate their work, team members use a complex set of tools to communicate, including electronic mail, Internet chat rooms, company intranets, teleconferencing, videoconferencing, and perhaps occasional face-to-face meetings.29 Individuals complete team-related tasks around the clock as they live and work in different time zones, creating additional coordination challenges.

Because international teams largely rely on electronically mediated communication to coordinate and accomplish their work, they are often referred to as virtual electronic teams.30 Although virtual teams are effi cient, a virtual world with little face-to-face com- munication combined with substantial cross-cultural differences sets the stage for misper- ceptions and misunderstandings. Small disagreements can escalate quickly, and trust can be strained. One study showed that virtual teams with substantial cross-cultural differ- ences often exhibit lower trust than virtual teams with more cross-cultural similarities.31 Low trust, suggesting little confi dence that others will maintain their promises, be honest, and not engage in negative politics, is harmful to the team’s efforts.32 Researchers have discovered several potential negative outcomes for virtual teams with low trust, including unwillingness to cooperate, poor confl ict resolution, few or no goals established, poor risk mitigation, and lack of adjustment to the virtual format for work.33 Although trust is important for any group, it is particularly important for virtual teams because of the propensity for misunderstanding as well as the absence of traditional direct supervision.34

The initial communications of a virtual cross-cultural team may be particularly im- portant in the development of trust. When early communication is task-focused, posi- tive, and reciprocated (i.e., questions and inputs do not go unanswered), a phenomenon known as swift trust can occur.35 Swift trust occurs when individuals who have little or no history of working together, but who have a clear task to accomplish, quickly develop trust in one another based on interpersonal communication. Although social communication (i.e., friendly, non-task-related) can help to maintain this trust, task-related exchanges that facilitate the team’s progress are critical.36

In the face of possible trust issues, it is important for managers to help team members identify with the team. According to identity theory, when an individual identifi es with a team, he feels connected to it, and he takes very seriously his role as a team member. Failure to identify with the team often results in withholding of effort on team projects, a common problem.37 Steps can be taken to increase the chances that an individual will identify with the international team. First, it is important to provide training in interna- tional negotiating and confl ict resolution.38 Techniques that are sensitive to cultural differ- ences and focused on collaborative outcomes work best. Exhibit 3-2 provides specifi c ideas on how managers can be sensitive to cultural differences. Second, it is important to have team members jointly develop a unifi ed vision.39 The shared experience of discussing the future of the team, its goals and aspirations, can draw people together. Finally, it is helpful for team members to spend some time in face-to-face meetings, especially early in a team’s life.40 Face-to-face meetings increase the chances that team members will identify personal

virtual electronic teams Teams that rely heavily on electronically mediated communication rather than face-to-face meetings as the means to coordinate work.

swift trust A phenomenon where trust develops rapidly based on positive, reciprocated task- related communications.

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The Globalization Experience for Associates and Managers 91

similarities, and these similarities contribute to understanding and cooperation.41 Absent face-to-face interactions, videoconferencing provides richer communication than Internet chat rooms and teleconferencing because of the value of seeing each other. In one study, members of international teams reported that it was even helpful to have photographs of teammates posted in the workplace.42

Although research on the role of personal characteristics is not conclusive, several characteristics appear to play important roles in the success of cross-cultural virtual teams.43 Individuals who value diversity, fl exibility, and autonomy may offer more posi- tive contributions to both the task and social aspects of the team. A general disposition to trust, a signifi cant degree of trustworthiness, relational skills (involving the ability to work with others who possess different knowledge), and skills for communicating through electronic means are also important to success in virtual teams.

Foreign Job Assignments Individuals may accept foreign job assignments that entail dealing directly with the com- plexities of operating in a foreign culture. These people are referred to as expatriates, or “expats” for short.44 Foreign experience can be exciting because of the new and different work situations that are encountered. The opportunity outside of work to learn about and

expatriate An individual who leaves his or her home country to live and work in a foreign land.

EXHIBIT 3-2 Learning about a Counterpart’s Culture

• Don’t attempt to identify another’s culture too quickly. Common cues (name, physical appearance, language, accent, and location) may be unreliable. In a global economy and multicultural societies, some people are shaped by more than one culture.

• Beware of the Western bias toward taking actions. In some cultures, thinking and talking affect relationships more than actions do.

• Try to avoid the tendency to formulate simple perceptions of others’ cultural values. Most cultures are highly complex, involving many dimensions.

• Don’t assume that your values are the best for the organization. For example, U.S. culture is individualistic, and this is often assumed to be productive. While individual competition and pride can be positive to some degree, cultural values in India and China emphasize the importance of family, friends, and social relationships, making associates in these countries highly loyal to the organizations for which they work, and this is positive as well. Loyalty to the organization is less common among U.S. associates.

• Recognize that norms for interactions involving outsiders may differ from those for interactions between compatriots. Trust is especially important in some cultures and greatly affects interactions with others.

• Be careful about making assumptions regarding cultural values and expected behaviors based on the published dimensions of a person’s national culture. Different ages, genders, and even geographic regions may cause differences within a country.

Source: Based on work in M. Javidan & R.J. House. 2001. Cultural acumen for the global manager. Organizational Dynamics, 29(4): 289–305; C.J. Robertson, J.A. Al-Khatib, M. Al-Habib, & D. Lanoue. 2001. Beliefs about work in the Middle East and the convergence versus divergence of values. Journal of World Business, 36(3): 223–244; S.E. Weiss. 1994. Negotiating with “Romans”—Part 2. MIT Sloan Management Review, 35 (3): 85–99.

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92 Chapter 3 Organizational Behavior in a Global Context

live in a different culture can also be valuable. Many companies indicate that international experience results in faster promotions and makes associates more attractive to other com- panies because of the enhanced knowledge and capabilities they develop. In addition to the knowledge gained by expatriates, they also provide a means of transferring knowledge from the home company to foreign subsidiaries. In other words, expatriates carry with them the knowledge of the industry, technology, and fi rm.45 Using expatriate managers also can facilitate coordination between the home offi ce and foreign subsidiaries.46

Petroleum engineers, management consultants, operations managers, sales managers, and information technology project managers are among the common candidates for in- ternational assignments. According to recent relocation trends, international assignments are commonly made to fi ll skill gaps in foreign units, to launch new units, to facilitate technology transfer to another country, and to help build management expertise in a foreign unit.47

International assignments, however, should be treated with caution. Many things can go wrong, resulting in poor job performance and an early return to the home country.48 Culture shock is a key factor in failure. This stress reaction can affect an individual who faces changes in and uncertainty over what is acceptable behavior.49 Some behaviors that are acceptable in the home country may not be acceptable in the new country, and vice versa. For example, in many cultures, one of the hands (either the left or the right, depend- ing on the culture) is considered dirty and should not be used in certain situations. This

can be diffi cult for an American or European to remem- ber. In addition, simple limitations such as an inability to acquire favorite foods, read road signs, and communicate easily often cause stress.

Beyond the associate’s or manager’s experience of cul- ture shock, a spouse may also experience stress. Research suggests that spousal inability to adjust to the new setting is a signifi cant cause of premature departure from a foreign assignment.50 One study suggested that spousal adjustment occurs on three dimensions: (1) effectiveness in building relationships with individuals from the host country, (2) effectiveness in adjusting to local culture in general, and (3) effectiveness in developing a feeling of being at home in the foreign country.51 This same study showed that spouses who spoke the language of the host country adjusted much more effectively. Spouses with very young children also

fared better because that spouse will likely spend a great deal of time engaged in the same activities as before the move—child care in the home. Familiar activities make the adjust- ment easier. In short, the family plays an important role in the ability of the associate or manager to adjust to and be effective in foreign assignments.52

Individuals exposed to ethnocentrism in foreign assignments can also experience stress. Ethnocentrism is the belief that one’s culture is superior to others, and it can lead to discrimination and even hostility.53 In some cases, discrimination is subtle and even unintentional. It nonetheless can harm an expatriate’s ability to adjust.

A number of remedies have been proposed to reduce or eliminate expatriate stress. In most cases, these remedies include screening and training before departure, training and social support after arrival in the country, and support for the individual returning to the home country.

culture shock A stress reaction involving diffi culties coping with the requirements of life in a new country.

ethnocentrism The belief that one’s culture is better than others.

©Hans Neleman/Photonica/Getty Images, Inc.

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The Globalization Experience for Associates and Managers 93

Predeparture activities set the stage for success. Such activities include favoring for selection those individuals who have personal characteristics associated with success in foreign assignments. Although there are no simple relationships between personal characteristics and success in foreign posts, associates and managers who possess strong interpersonal skills, are fl exible, and are emotionally stable often adapt effectively as expatri- ates.54 Even so, predeparture training often plays a more important role than do personal characteristics.

Training can take many forms; a fi rm may provide books and CDs or arrange for role playing and language training, for example.55 An expert on training for expatriates has offered the following advice.56

• Train the entire family, if there is one. If the spouse or children are unhappy, the expatriate assignment is more likely to be unsuccessful.

• Conduct the predeparture orientation one to two months prior to departure. The associate or manager and the family can forget information provided earlier than that, and if the orientation occurs too close to departure, the individuals may be too preoccupied to retain training information. Activities such as packing and closing up a home must be handled and will occupy family members in the days immediately prior to moving.

• Include in the training key cultural information. The Aperian Global consulting fi rm provides training for associates selected for expatriate assignments. The fi rm recommends providing side-by-side cultural comparisons of the home and host cultures, an explanation of the challenges that will likely be faced and when, lifestyle information related to areas such as tipping and gift-giving, and personal job plans for the jobholder, with an emphasis on cultural issues that help the expatriate to thrive in the new environment.57

• Concentrate on conversational language training. The ability to converse with individuals is more important than the ability to fully understand grammar or to write the foreign language.

• Be prepared to convince busy families of the need for training. Families with little foreign experience may not recognize the value of predeparture training.

After arrival, additional training may be useful, especially if little training was pro- vided before departure. Language training may continue, and initial cultural exposure may bring new questions and issues. Host-country social support is also important, par- ticularly in the early months. Individuals familiar with the country may assist in showing newcomers the area, running errands, identifying appropriate schools, and establishing local bank accounts.58

Finally, reintegration into the home country should be carefully managed following an international assignment. And companies should be especially mindful to take advantage of the knowledge these individuals have gained through the expatriate assignment. In fact, if managed effectively, the learning by associates and managers can provide them with ad- ditional capabilities and thereby increase their motivation and job performance after they return.59 Such actions by the fi rm are even more important because research suggests that many associates and managers returning from foreign assignments leave their companies in the fi rst year or two.60 Old social and political networks may not be intact; information technology may have changed; and key leaders with whom important relationships existed may have departed. Each of these factors can infl uence the decision to leave. Career plan- ning and sponsors inside the company can help in understanding the new landscape.

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94 Chapter 3 Organizational Behavior in a Global Context

EXPERIENCING ORGANIZATIONAL BEHAVIOR

There are many women who experience barriers prevent-ing them from reaching career aspirations. For international women, these barriers may be even stronger. For example, women in Asian and Middle Eastern countries often expe- rience these barriers because of cul- tural values and traditions. For many women, marriage and male chauvin- ism are primary reasons they are un- able to reach their career potential. All countries should be concerned about this problem because of the need for more human capital, which is especially troubling when they are not fully utilizing the human capital available.

With the population rapidly aging and most able-bodied men al- ready employed in many economies (especially in strong economies such as China), companies throughout the world need more women associates. They will need to develop and effec- tively utilize all of the organization’s human capital. The current situation has led Korean companies to adopt global business practices that include rewarding performance regardless of seniority or gender.

Interestingly, this is a global phenomenon. While there are some high-profi le women executives in the United States, such as Indra Nooyi (CEO of Pepsico), Ursula Burns (CEO of Xerox) and Irene Rosenfeld (CEO of Kraft), the percentage of women in top executive positions has not

increased in recent years. For ex- ample, one survey showed that only about 10 percent of the executives and board members were women

at the 400 largest publicly traded companies in California. In addi- tion, a study of the top 100 compa- nies based in Massachusetts showed that only 8.6 of their executives were women. A global study by Grant Thornton International found that only 24 percent of senior executive positions in privately held companies were held by women. In fact, 34 per- cent of the companies had no women executives. There were a few bright spots, however. In the Philippines, 47

percent of the senior management po- sitions were held by women and 42 percent were held by women in Rus- sia. In total, these data suggest that the glass ceiling continues to exist in most countries.

One prominent analyst of the general treatment of women, Shere Hite, argues that they also experience a glass fl oor. The glass fl oor hinders even lateral movement into other posi- tions at the basic level. The glass fl oor barriers include short-term job con- tracts, child-care tasks, labor markets divided along gender lines, caring for elderly family members, etc. Many of these are the result of culture- and gender-based biases.

The third concern is the glass bor- der. For example, it remains problem- atic in many Asian cultures to have a woman in charge. Even though women have been a part of the work- force for a long time, for the most part their roles have been limited to staff entry-level positions and lower-level positions in manufacturing; rarely are they found in managerial or execu- tive positions. A glass border (which is an unseen and strong discrimina- tory barrier) exists, blocking women from accessing many managerial and executive-level positions. It is im- portant to note that many Asian com- panies are still family-owned, with the men in the family in higher-level po- sitions than the women. In addition, Asian companies often are unwilling to support having the female as the

The Glass Ceiling, the Glass Floor, and the Glass Border: The Global Business Environment for Women

©Image Source/Getty Images, Inc.

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The Globalization Experience for Associates and Managers 95

Although participation by women appears to be increasing,61 women historically have not had as many opportunities for expatriate assignments as men. Managers must be sensitive to this defi cit because they need to develop and effectively utilize all of the or- ganization’s human capital. As explained in the Experiencing Organizational Behavior fea- ture, there are several reasons for the development of this glass border. By not providing women with international assignments, they are failing to develop women’s knowledge and capabilities for higher-level jobs. As a result, these organizations may not be able to exploit strategic opportunities in international markets because of a shortage of human capital. And interestingly, some research suggests that women are often more effective in expatriate roles because they tend to be fl exible and develop a more empowering identity in order to be effective in a variety of situations.62 The plight of women executives is largely a global phenomenon, as the segment suggests. Women professionals in many countries must con- tend with glass ceilings, glass borders, and even glass fl oors. The human capital represented by these women presents a signifi cant opportunity for businesses. Companies that utilize all of their human capital effectively are more likely to gain a competitive advantage.

Foreign Nationals as Colleagues Beyond gaining international exposure and experience through a job focused on interna- tional work or through a foreign assignment, an associate or manager can gain international experience in other ways. For example, associates and managers may work in a domestic unit with people from other countries or may report to a manager/executive who has relocated

glass border The unseen but strong discriminatory barrier that blocks many women from opportunities for international assignments.

expatriate while her husband remains at his job in the home country. In ad- dition, in some Asian cultures, men rarely help to care for the children, thereby requiring women who work outside the home to rely on female rel- atives for babysitting. Finally, patriar- chal attitudes are diffi cult to change, especially at the offi ce. Many clients still ask to replace women consultants with men and some bankers continue to require female CEOs to obtain loan guarantees from their husbands.

There is some light beginning to shine in some parts of the world. For

example, in 2009 the fi rst two female Islamic judges were appointed in the Palestinian territories. In the Arab countries, these are the fi rst women judges outside of Sudan. In addition, the Saudi king appointed the fi rst women to his council of ministers. While these represent a minor crack in the glass ceiling, these are positive steps for women.

Even though there is an increase in the number of female nonexecu- tives and a few positive appointments of women to leadership positions, the change in the number becoming

executives and directors has been small. To overcome this problem, companies must promote on the basis of merit and ignore gender in the workplace. Women must continue to work hard to break these barriers and overcome the glass ceilings, fl oors, and borders. Given the demograph- ics around the world, the most suc- cessful companies will have a healthy number of women leaders. They will be successful because they are taking advantage of the total human capital available.

Sources: “Women still hold less than a quarter of senior management positions in privately held businesses,” Grant Thornton International, Nov. 21, 2009, at http://www.internationalbusinessreport.com; Amy Laskowsky. 2009. “The Glass Ceiling Remains Strong,” Nov. 20, www.bu.edu; Don Thompson. 2009. “Study fi nds women still face diffi cult time breaking through glass ceiling at Calf. Companies,” Nov. 19, at http://www.baltimoresun.com; Steve Tobak. 2009. “Is there still a glass ceiling for women in business?” Aug. 24, at http://www.blogs.bnet.com; Diane Tucker. 2009. “Arab women beginning to crack the glass ceiling,” March 18, at http://www.huffi ngtonpost.com; Nasser Shiyoukhi. 2009. “2 Palestinian women crack the glass ceiling in court,” Feb. 24, at http://www.abcnews.go.com; Hiroko Tashiro & Ian Rowley. 2005. “Japan: The Glass Ceiling Stays Put,” BusinessWeek, May 2, at http://www.businessweek.com.

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from another country. In the United States, H-1B visas allow skilled foreign professionals to live and work in the country for up to six years. L1 visas allow workers in foreign-based multinational companies to be transferred to the United States. Finally, J1 visas allow foreign students to fi ll seasonal jobs in U.S. resort areas, including jobs as waiters, lifeguards, fast- food cooks, and supermarket clerks. In fact, in recent years the demand for foreign skilled workers has been growing in many countries, including the United States.63

With hundreds of thousands of visas approved each year, an individual born in the United States and working in a domestic company may therefore work alongside a foreign national. U.S.-based associates and managers at Microsoft, for example, often work with foreign nationals. An associate there observed, “I am surrounded every day by people from many diverse cultural and ethnic backgrounds, each contributing their unique ideas and talents so that people around the world can realize their full potential.”64 True to its mul- ticultural profi le, Microsoft supports a number of international worker groups, including Brazilian, Chinese, Filipino, Hellenic, Indian, Korean, Malaysian, Pakistani, Singaporean, and Taiwanese groups.65

Working side by side with individuals from other countries can indeed be a rich and rewarding experience, but problems sometimes develop. As already noted, individuals from different countries often have different values and different ways of thinking—and even different norms for behavior in business meetings.66 Although differences in values and thought patterns can be a source of creativity and insight, they also can create friction. Pref- erences for different working styles and decision styles can be particularly troublesome.67

A key aspect of the cultural effects on international working relationships is high versus low context cultural values.68 In high-context cultures, such as Japan and South Korea, individuals value personal relationships, prefer to develop agreements on the basis of trust, and prefer slow, ritualistic negotiations.69 Understanding others and understand- ing particular messages depend in large part on contextual cues, such as the other person’s job, schooling, and nationality. Being familiar with a person’s background and current station in life is crucial, and likely important in establishing trust-based relationships in international exchange relationships.70 In low-context cultures, such as the United States and Germany, individuals value performance and expertise, prefer to develop agreements that are formal and perhaps legalistic, and engage in effi cient negotiations.71 Understand- ing others in general and understanding particular messages depend on targeted question- ing. Written and spoken words are crucial; contextual cues tend to carry less meaning.

A related aspect of culture is monochronic versus polychronic time.72 Individuals with a monochronic time orientation prefer to do one task or activity in a given time period. They dislike multitasking; they prefer not to divert attention from a planned task because of an interruption; and they usually are prompt, schedule-driven, and time-focused.73 North Americans and Northern Europeans are usually viewed as relatively monochronic. In contrast, individuals with a polychronic time orientation are comfortable engaging in more than one task at a time and are not troubled by interruptions.74 For these individu- als, time is less of a guiding force, and plans are fl exible. Latin Americans and Southern Europeans are often polychronic. Individuals from the Southern region of Asia are also largely polychronic, but many Japanese do not fi t this pattern.

Understandably, individuals from high-context cultures can have diffi culty working with people from low-context cultures. A high-context individual may not understand or appreciate the direct questioning and task orientation of a low-context individual. As a result, the high-context individual can experience hurt feelings, causing him or her dis- comfort in a low-context culture. In the same way, a low-context person can be frustrated

high-context cultures A type of culture where individuals use contextual cues to understand people and their communications and where individuals value trust and personal relationships.

low-context cultures A type of culture where individuals rely on direct questioning to understand people and their communications and where individuals value effi ciency and performance.

monochronic time orientation A preference for focusing on one task per unit of time and completing that task in a timely fashion.

polychronic time orientation A willingness to juggle multiple tasks per unit of time and to have interruptions, and an unwillingness to be driven by time.

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with the pace and focus of a high-context culture. In addition, monochronic individuals may experience confl ict with people who are more polychronic. People who are driven by schedules and who do not appreciate interruptions often are frustrated by the more re- laxed view of time held by polychronic people. To alleviate these cross-cultural diffi culties, training in cultural differences is crucial in order to build managers’ cultural intelligence. Cultural intelligence helps people understand others’ behavior, with the ability to sepa- rate those aspects that are universally human from those that are unique to the person and those that are based in culture. It allows managers to understand and respond effectively to people from different cultures.75 Cultural intelligence is important for managers, as they need to be sensitive to these differences when they evaluate the performance of associates and assign rewards based on these evaluations.76

Opportunities for International Participation Associates’ and managers’ opportunities for international experiences differ across fi rms. Purely domestic fi rms offer few opportunities beyond perhaps working with foreign na- tionals who have been hired or trying to compete with foreign fi rms operating in the local markets where they sell their goods. Firms that export their goods into foreign markets offer more opportunities, because some individuals are needed for internationally focused work, such as international accounting, and a few are needed to staff foreign sales offi ces. Firms that have more substantial commitments to foreign operations usually provide even greater opportunities for international work, but the amount and type of opportunities vary with the type of strategy. Furthermore, the different approaches to markets in sepa- rate countries used by fi rms affect associates’ and managers’ behavior and job satisfac- tion.77 As shown in Exhibit 3-3, we can classify fi rms with substantial commitments to foreign operations as multidomestic, global, or transnational.

cultural intelligence The ability to separate the aspects of behavior that are based in culture from those unique to the individual or all humans in general.

EXHIBIT 3-3 International Approaches and Related Organizational Characteristics

Multidomestic Global Transnational

Local responsiveness

Local production High Low Medium Local R&D High Low Medium Local product modifi cation High Low Medium/High Local adaptation of marketing High Low/Medium Medium/High

Organizational design

Delegation of power to local units High Low Medium/Low Interunit resource fl ows between and among local units Low Low/Medium High International resource fl ows from and/or controlled Low High Low/Medium by corporate headquarters

International participation

Opportunities for associates and managers Low High High Source: Information in this exhibit is based on A.-W. Harzing. 2000. “An Empirical Analysis and Extension of the Bartlett and Ghoshal Typology of Multinational Companies,” Journal of International Business Studies, 31: 101–120.

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98 Chapter 3 Organizational Behavior in a Global Context

Multidomestic Firms Firms that use a multidomestic strategy tailor their products and services for various countries or regions of the world.78 When customer tastes and requirements vary sub- stantially across countries, a fi rm must be responsive to these differences. Tastes often vary, for example, in consumer packaged goods. Unilever, the British/Dutch provider of detergents, soaps, shampoos, and other consumer products, is a prime example by offering different versions of its products in various parts of the world.79 It produces, for example, approximately 20 brands of black tea in order to meet the unique tastes of individuals in different countries.

Firms such as Unilever often transfer power from the corporate headquarters to units based in various countries or homogeneous regions of the world (i.e., local units).80 These units typically are self-contained—they conduct their own research and development, produce their own products and services, and individually market and distribute their goods. This approach is expensive because geographically based units do not share resources or help one another as much as in fi rms using other international strategies. Yet, it may be important to allow autonomy when the subsidiary is a long distance from the home offi ce, especially when that distance entails major differences in culture and institutional environments. In these cases, the subsidiary needs to develop a strategy that fi ts its competitive environment, and the home offi ce is less likely to be of help in doing so.81

Among fi rms with substantial foreign commitments, multidomestic fi rms provide fewer opportunities for associates, lower-level managers, and midlevel managers to par- ticipate in international activities. Individuals tend to work within their home countries and have little interaction with people located in other geographical locations. Individuals in each unit are focused on their unit’s country or homogeneous set of countries (region). Interunit learning, interunit transfers of people, and interunit coordination are rare in fi rms using a multidomestic strategy.

Global Firms Firms following a global strategy offer standardized products and services in the coun- tries in which they are active.82 When cost pressures demand effi cient use of resources and when tailoring to local tastes is not necessary, a fi rm must do all it can to manage its resources effi ciently. It is costly to develop, produce, and market substantially different versions of the same basic product or service across different countries. For example, Mi- crosoft does not signifi cantly tailor the functionality of Windows for different countries. Nor does Cemex, the world’s third largest cement company, tailor its cement for differ- ent countries. While the fi rm sells almost 240 million metric tons of cement annually across four major regions of the world, the fi rm provides the same product in all countries where it operates.

Cemex exhibits many features typical of global fi rms.83 First, key decisions related to: (1) products and services, (2) research and development, and (3) methods for serving each country are often made at corporate headquarters in Monterrey, Mexico. (In con- trast, fi rms using the multidomestic strategy make key decisions locally.) Second, coun- try- and region-based units do not have a full complement of resources covering all of the major functions (production, marketing, sales, fi nance, research and development, human

multidomestic strategy A strategy by which a fi rm tailors its products and services to the needs of each country or region in which it operates and gives a great deal of power to the managers and associates in those countries or regions.

global strategy A strategy by which a fi rm provides standard products and services to all parts of the world while maintaining a strong degree of central control in the home country.

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Opportunities for International Participation 99

resources). For example, Cemex has operations in more than 50 countries but only has manufacturing operations in select parts of the world. A great deal of manufacturing also takes place in the home country of Mexico, and the product is then exported to other countries. By not having manufacturing plants located in and dedicated to each country or even each region, and by having large-scale manufacturing facilities in select locations, Cemex effi ciently uses its resources. Cemex also focuses signifi cant attention on global coordination. With units depending on decisions and resources controlled by the home country as well as resources from other countries, coordinating a global fl ow of informa- tion and resources is crucial. One means of growth for Cemex has been by acquisition. Fortunately, the strong global coordination used by the fi rm helps to rapidly integrate major acquisitions.

Compared with fi rms following a multidomestic strategy, fi rms using the global strat- egy provide more opportunities for associates and managers to participate in international activities. For example, many individuals in the home country and in foreign units must coordinate effectively to ensure a smooth fl ow of worldwide resources. Thus, many jobs are internationally oriented. In addition, there are often a large number of expatriate as- signments. Global fi rms treat the world as a unifi ed market and frequently transfer people across borders. Thus, in any given unit, there may be a signifi cant number of foreign nationals. As noted earlier, expatriates learn and transfer knowledge across borders. Yet, to achieve the most learning at the team level requires the fi rm to consciously manage the fl ow of knowledge across the organization.84

Transnational Firms Firms using a transnational strategy attempt to achieve both local responsiveness and global effi ciency.85 In industries where both of these criteria are important for success, a careful integration of multidomestic and global approaches is necessary. Thus, a transna- tional strategy calls for more tailoring to individual countries than is typically found in global fi rms but generally less tailoring than in multidomestic fi rms.

Such an approach also requires the deployment of more resources in a given country than is typical in the global fi rm but fewer resources in each country than is typical in the multidomestic fi rm. Finally, the approach calls for less central direction from the corporate headquarters than the global strategy but more central coordination than the multidomes- tic strategy. In a transnational fi rm, interdependent geographical units must work closely together to facilitate interunit resource fl ows and learning. In the multidomestic fi rm, these fl ows are trivial. In the global fi rm, they are largely controlled by corporate headquarters.

Ogilvy & Mather Worldwide, a U.S.-based advertising subsidiary of WPP, a world- wide marketing communications group, uses a transnational strategy.86 At one time, the fi rm used a strategy that most closely resembled a multidomestic approach. Ogilvy & Mather tailored the advertising it produced to different areas of the world based on local customs, expressions, sensibilities, and norms for humor. To support this strategy, it had strong, self-contained local units. Clients, however, began to object to costs, and because many of these clients were becoming global fi rms, they wanted a more unifi ed message spread around the world through advertising. Ogilvy & Mather began to pursue global effi ciency and local responsiveness simultaneously. It refers to itself as “the most local of internationals and the most international of the locals.” It has more than 450 offi ces in 120 countries across the globe.87

transnational strategy A strategy by which a fi rm tailors its products and services to some degree to meet the needs of different countries or regions of the world but also seeks some degree of standardization in order to keep costs reasonably low.

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100 Chapter 3 Organizational Behavior in a Global Context

To prevent local units from reinventing largely the same advertising campaign (in other words, unnecessarily tailoring campaigns to the local market), Ogilvy & Mather implemented international teams that were assigned to service major accounts.88 These teams create ad campaigns and send them to local units for implementation. One team is called OgilvyAction, designed to provide a full range of brand activation services to customers on a global basis.89 Local units pursue local accounts and have complete con- trol over them but are constrained in their ability to pursue and oversee international work.

Overall, individual associates and managers have many opportunities for interna- tional exposure and experiences in fi rms using a transnational approach. Geographically based units are highly interdependent because they must exchange resources, and they often must coordinate these resource exchanges for their benefi t as well. Rich personal networks and formal coordination mechanisms such as international work teams are developed to handle the interdependence. International meetings and travel are very important, and foreign assignments are common. Interestingly, the location of the head- quarters for these fi rms is less important and some move their headquarters unit from their traditional home country when they adopt the transnational strategy. Normally, these moves are designed to respond to external stakeholders such as shareholders and fi nancial markets.90

High-Involvement Management in the International Context High-involvement management provides associates with decision power and the informa- tion they need to use that power effectively. As discussed in Chapter 1, fi rms that adopt this approach often perform better than other fi rms. Although most evidence support- ing the effectiveness of the high-involvement approach has been collected from domestic units of North American fi rms,91 sound evidence has come from other countries as well. Studies, for example, have been conducted in automobile plants worldwide,92 in a variety of fi rms in New Zealand,93 and in fi rms in 11 different countries.94 A study in China suggested that such practices enhanced short-term associates’ feelings of competence and increased their commitment to the organization.95

Although available evidence is supportive of high-involvement management, care must be taken when implementing this approach in different cultures. Modifying the approach to fi t local circumstances is crucial.96 In this section, we discuss several dimen- sions of national culture that should be considered. The dimensions are drawn from the GLOBE (Global Leadership and Organizational Behavior Effectiveness) research pro- gram, in which a number of researchers studied issues regarding organizational behavior in 61 countries.97

Dimensions of National Culture As shown in Exhibit 3-4, the GLOBE project uses nine dimensions of national culture. Four of these dimensions have been used by many other researchers over the years. These four dimensions were originally developed by the Dutch social scientist Geert Hofstede98 and they are listed fi rst.

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High-Involvement Management in the International Context 101

1. Uncertainty avoidance is the degree to which members of a society wish to avoid unpredictable lives. It is focused on a society’s desire for orderliness through formal procedures and rules as well as through strong norms that govern behavior. Countries with high scores do not value free spirits. Such countries include Austria and Germany. Countries with lower scores include Russia and Hungary. The United States has a midrange score.

2. Power distance is the degree to which members of a society expect power to be unequally distributed. This dimension corresponds to expectations for strong autocratic leadership rather than more egalitarian leadership. Strong central governments and centralized decision structures in work organizations are frequently found in countries with high scores. For example, Russia scores high on this dimension. Alternatively, Denmark and the Netherlands have low scores on power distance.

3. Individualism is the degree to which members of society are comfortable focusing on personal goals and being rewarded for personal efforts and outcomes. In individualistic cultures, personal outcomes are valued. Countries scoring high on individualism include Italy and Germany. Countries scoring low on this dimension include Japan, Singapore, and South Korea.99

4. Assertiveness is the degree to which members of society are aggressive and confrontational. In his original work, Hofstede labeled this aspect of culture “masculinity.” Examples of countries with high scores on this dimension are the United States, Austria, and Germany. Examples of countries with low scores are Sweden and Kuwait.

5. In-group collectivism indicates how much members of society take pride in the groups and organizations to which they belong, including the family. China and India have high scores on this dimension in the GLOBE research.

Exhibit 3-4 Dimensions of National Culture

Power Distance Individualism

Assertiveness

Humane Orientation

Performance Orientation

Future Orientation

Gender Egalitarianism

In-group Collectivism

Uncertainty Avoidance

National Culture

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102 Chapter 3 Organizational Behavior in a Global Context

6. Gender egalitarianism refers to equal opportunities for women and men. Sweden and Denmark score high on this dimension.

7. Future orientation is the degree to which members of the society value long-term planning and investing in the future. Denmark and the Netherlands are among those scoring high on this dimension.

8. Performance orientation is the degree to which members of society appreciate and reward improvement and excellence in schoolwork, athletics, and work life. The United States, Taiwan, Hong Kong, and Singapore have high performance orientations.

9. Humane orientation is the degree to which members of society value generous, caring, altruistic behavior. Countries scoring high on this dimension include the Philippines and Malaysia.

Exhibit 3-5 compares India, Germany, and the United States on all nine culture dimensions.

Research has shown that national culture affects major business practices.100 For example, decisions to enter particular international markets are affected by the cultural dimensions of the targeted country.101 In particular, the cultural distance between a fi rm’s home country and the country targeted for entry has a major impact. Cultural distance refers to the extent of the differences in culture between countries.102 Therefore, managers must pay careful attention to culture in designing and implementing management practices in each country.

In the Experiencing Organizational Behavior feature, we learn of the pioneering work of Geert Hofstede to identify the universal dimensions of national culture. He also discov- ered that national culture had a stronger effect on the behavior of managers and associ- ates than did organizational culture. Hofstede’s work suggested the need to understand and manage diverse cultures. This need is highlighted in the problems experienced in

EXHIBIT 3-5 National Culture in India, Germany, and the United States

Culture Dimension India Germany United States

Uncertainty avoidance Medium High Medium

Power distance Medium/High Medium Medium/Low

Individualism Medium High Medium

Assertiveness Low/Medium High High

In-group collectivism High Low/Medium Medium/Low

Gender egalitarianism Low Medium/Low Medium

Future orientation Medium Medium Medium

Performance orientation Medium Medium High

Humane orientation High/Medium Low Medium Source: Based on the GLOBE Project.

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FPO

Geert Hofstede pioneered the study of culture in the workplace and conducted research to examine global variations in the psychology of work and of orga- nizations, which affected international human resource management. While working at IBM in 1968, he noticed that although the company had a strong company culture, there were variations in cultural values among the employees of IBM subsidiaries around the world. Between 1968 and 1972, he surveyed over 116,000 employ- ees. His survey responses from over 40 countries showed general similari- ties within cultural groups, even when their social and economic histories were profoundly different. For exam- ple, Hong Kong and mainland China have more in common with each other but are quite different from Sweden and the United States. Hofstede found that values we observe in the work- place refl ect much deeper cultural attri- butes, suggesting that the impact of na- tional culture on the workplace is much greater than that of the organization’s culture. His work has profound mean- ing for managers employed by multi- national organizations.

Managers and top executives of companies seeking to expand glob- ally need to recognize the complexi- ties of cross-border collaboration. Diffi culty in managing people is mag- nifi ed when even small differences in perceptions and expectations occur, making collaboration diffi cult, as re- fl ected in the cross-cultural problems that occurred in the merger between Daimler and Chrysler. Some experts

believed that the merger had substan- tial potential because of the different but complementary capabilities pos- sessed by the two fi rms. However, that potential was not realized partly because of national cultural differ- ences between Germans and Ameri- cans. The Germans in Daimler dis- liked Chrysler managers’ unstructured approach, while American Chrysler managers found the German Daimler managers too rigid and formal. The culture clash disallowed effective in- tegration of the two fi rms and their respective associates. Many Chrysler managers left the organization, and the potential synergy between the two fi rms was never realized. Daimler eventually sold the Chrysler business at a tremendous loss over what it paid to acquire it.

Managers may need to utilize dif- ferent concepts and methods for differ- ent times and places. Managers need to be aware of the local cultures’ val- ues, social ideals, and their workplace behavior and attitudes. Multinational companies engaging in cross-border mergers can be successful when they have managers who possess “cultural intelligence,” the ability to understand and effectively manage different val- ues and expectations existing in differ- ent parts of the world. Several fi rms have promoted diversity in their work- force as a means of managing and taking advantage of many cultures in the world. For example, Siemens believes that a diverse workforce can be a competitive advantage because it helps the company to understand and better serve its customers across

the world. Sie- mens currently employs more than 430,000 managers and associates rep- resenting 140 different na- tionalities in its top 10 markets. To encourage collaboration and communication among its workforce members, it has launched several networks such as the Global Leadership Organization of Women (GLOW Network) and the diversity ambassadors program. The diversity ambassadors are 100 spe- cially selected managers and associ- ates who are profi led and share their success stories while serving as role models and mentors for others in the company.

Other companies are also pro- moting diversity as a way to take advantage of culturally diverse knowl- edge and ways of thinking. For ex- ample, ABB has a highly diverse board of directors with members from Belgium, Finland, France, Germany, India, Scotland, Sweden, Switzer- land, and the United States. Procter & Gamble (P&G) also promotes a diverse workforce. The fi rm does so to understand and maintain a good relationship with its customers around the world and its global suppliers as well. P&G’s CEO stated that “Diverse organizations will out-think, out-inno- vate and out-perform a homogeneous organization. …”

Sources: “Siemens AG—Diversity,” Siemens, Nov. 22, 2009, at http://www.siemens.com; G. Schoech. 2009. “Diversity to strengthen Siemens leadership—catching up or taking the lead?” Gehson Lehrman Group, March 17, at http://www. glgroup.com; H. Brown. 2009. “Diversity does matter,” Forbes, July 21, at http://www.forbes.com; “No. 14: Procter & Gamble,” Diversity Inc., May, 2007, at http://www.diversityinc.com; Morgan Witzel. 2003. “Geert Hofstede: The Quantifi er of Culture,” Financial Times, Aug. 25, at http://www.ft.com; M.A. Hitt, R.S. Harrison, & R.D. Ireland. 2001. Mergers and Acquisitions: A Guide to Creating Value for Stakeholders, New York: Oxford University Press.

EXPERIENCING ORGANIZATIONAL BEHAVIOR

Managing Diverse Cultures

©Siemens AG

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104 Chapter 3 Organizational Behavior in a Global Context

the merger between Daimler Benz and Chrysler, in which the managers of the respective fi rms were not understanding and tolerant of the cultural attributes that differed from their own. Yet, other companies recognize the value of diversity and have promoted it in various ways. For example, Siemens does so through its global networks to encourage col- laboration across cultures and its diversity ambassadors program. ABB has a highly diverse board of directors, and P&G promotes diversity because it will provide the company with a competitive advantage. With increasing globalization, understanding and manag- ing diverse cultures has become a critical managerial attribute for competitive success in international markets.

National Culture and High-Involvement Management High-involvement management must be implemented in accordance with a country’s cultural characteristics. Although not every individual from a country will possess all of the cultural characteristics associated with that country, many people will share these traits. In the next section, we discuss how information sharing and decision power can be adapted to different levels of power distance, uncertainty avoidance, individualism, and assertiveness.103

Information Sharing A fi rm’s leaders must share tactical and strategic information if empowered individuals and teams are to make high-quality decisions. In cultures high in uncertainty avoidance, associates must have information to clarify issues and provide basic direction. If they lack such information, anxiety and poor performance can result. Where uncertainty avoid- ance is low, associates need less information of this kind. Rather, increasing information that encourages new ideas and ways of thinking can be useful. In cultures where asser- tiveness is high, associates want information that clearly and directly informs them what is needed for effective performance. In addition, they desire continuous information on how well they are performing. In cultures with low assertiveness, associates do not want information that is exclusively focused on performance and bottom-line business goals. Instead, they desire information on improving soft processes such as teamwork. Simi- larly, associates in individualistic cultures desire information regarding their individual jobs and responsibilities; they are less interested in information on team, department, and company issues. Associates in collectivistic cultures tend to have the opposite needs. Finally, associates in high-power-distance cultures do not expect to receive a great deal of information and may not pay much attention to it if they receive it. For these individu- als, careful training in information use is often required. In low-power-distance cultures, associates expect information and put it to use when it is received. Thus, cultural attri- butes affect the type and amount of information shared and the knowledge learned in organizations.104

Decision Power and Individual Autonomy Some high-involvement systems give a great deal of decision power to individual associates rather than to teams. In cultures characterized by high uncertainty avoidance, such auton- omy can cause stress because it is associated with less direction from above as well as less support from peers. To avoid stress, clear boundaries must be set for how the autonomy

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High-Involvement Management in the International Context 105

is used, and managers must be readily available to provide direction. In cultures with low uncertainty avoidance, associates do not need direction and are generally able to tolerate uncertainty regarding the boundaries to their authority. In high-assertiveness cultures, as- sociates are likely to use autonomy creatively to achieve task success. In low-assertiveness cultures, associates may channel too much of their autonomy into work on soft issues such as relationships and social networks. Managers must guard against any such excesses. In countries characterized by an individualistic culture, associates appreciate autonomy pro- vided to individuals rather than to teams, and emphasize individual goals. Because of this focus, managers may need to explicitly channel associates’ attention to any required group or team tasks. In countries characterized by a collectivistic culture, associates are unlikely to be motivated by individual autonomy. Managers may wish to emphasize autonomy at the team level in such cultures. Finally, in cultures characterized by high power distance, autonomy may be diffi cult to implement. Associates expect a great deal of direction from managers. In this situation, managers may want to provide small increases in autonomy over time, allowing associates to become accustomed to having discretion. Managers may want to maintain a fairly strong role even in the long run. In cultures characterized by low power distance, associates welcome autonomy from managers and can channel their efforts to be more innovative.105

Decision Power and Self-Managing Teams In cultures with high uncertainty avoidance, associates need clear boundaries for self- managing teams, and managers must be readily available for mentoring and coaching.106 In cultures with low uncertainty avoidance, teams can defi ne their own roles. In coun- tries characterized by high assertiveness, teams often are task-focused. For low-assertive- ness cultures, associates frequently devote a great deal of time to soft issues, such as team dynamics, requiring managers to monitor the time focused on such issues. In cultures characterized by individualism, managers must pay particular attention to team training for associates and to the design of team-based reward systems. Alternatively, in cultures characterized by collectivism, managers have a more favorable situation because associ- ates prefer teamwork. Finally, in cultures characterized by high power distance, associates may have diffi culties using their decision power if their manager is too visible. Managers must be less visible and resist the temptation to offer a great deal of assistance to the team. Where power distance is low, associates work comfortably with the manager as an equal or as a coach rather than a supervisor.

AES, a U.S.-based power-generation company, is known for its high-involvement management system. Associates enjoy tremendous freedom to make decisions individually and in teams. Firing vendors for safety violations, expending funds from capital budgets, and making key decisions about important day-to-day work are common for associates. With careful selection and training, and with access to key information, AES associates typically use their freedom wisely.

As AES began to grow and establish operations in several countries, many analysts and reporters questioned whether its high-involvement system and underlying values could be applied in an international context. Although AES leaders remained committed to the system, they realized that some modifi cations might be needed for a particular country. Therefore, while the core of the approach was preserved, some aspects were altered to fi t each local culture.

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106 Chapter 3 Organizational Behavior in a Global Context

When entering Nigeria, for example, AES responded appropriately to the prevailing culture. Norman Bell, the lead on the Nigerian project, and his AES colleagues encoun- tered high power distance and high individualism among the associates in Nigeria. These prominent cultural values initially forced Bell to adopt a more autocratic management system. Bell needed time to delegate decision power to associates, and teams required training and team-based reward systems.

AES used the same basic approach in its operations across 29 countries and 25,000 managers and associates: high-involvement management built on the company’s core values with sensitivity to local cultural differences.107 Thus, executives and managers at AES effectively used the high-involvement approach on a global basis while modify- ing the approach to fi t local cultures. The high-involvement approach facilitated the global strategy used by AES. Therefore, it helped top managers to implement the fi rm’s strategy.

Ethics in the International Context A critically important issue in globalization and international business is ethics. The American Heritage Dictionary defi nes ethics as “principle[s] of right or good conduct; a sys- tem of moral principles and values.” Implicit in this defi nition is the idea that ethical con- duct can be different in different cultures. What one society deems “appropriate conduct” may be unacceptable to another. For example, nepotism that is unacceptable in many Western cultures is often more acceptable in relationship-oriented cultures. Alternatively, the use of formal contracts and lawsuits are highly acceptable in many Western cultures but are perceived negatively in other cultures.108 Thus, international ethics are complex.

Corruption is often considered to be the misuse of power for private gain.109 Three is- sues are prominent in discussions of proper conduct in developed nations: (1) corruption, (2) exploitation of labor, and (3) environmental impact.110 For corruption, the chief issue involves bribing foreign public offi cials in order to win business. Asking for payment of bribes is based partially on culture and partly on economic needs and institutional weak- nesses in a country.111 Many developed nations have taken steps to fi ght corruption because it creates uncertainty and results in a reduction of merit-based decision making. The United States, for example, passed the Foreign Corrupt Practices Act in 1977 to prevent U.S. man- agers from bribing foreign offi cials. (See Exhibit 3-6 for a recent ranking of countries based on corruption.) Exploitation of labor involves the employment of children, the forced use of prison labor, unreasonably low wages, and poor working conditions. In one well-known example involving a line of clothing produced for Wal-Mart, Chinese women were work- ing 84 hours per week in dangerous conditions while living in monitored dormitories with 12 persons to a room.112 Americans and others expressed their strong unhappiness with this practice, and Wal-Mart discontinued it. Finally, environmental impact relates to pollution and overuse of scarce resources. From global warming to clear cutting of forests, the con- cerns are many. In the United States and globally, many people have become more sensitive to the environment because of the obvious effects of global warming.

The economic development of countries with higher levels of corruption tends to suffer. For example, countries with high corruption index scores as shown in Exhibit 3-6 often receive less direct investment from foreign fi rms. In addition, the foreign investment in these countries more commonly comes from fi rms based in other countries with greater corruption.113 Thus, corruption harms the country and its citizens.

international ethics Principles of proper conduct focused on issues such as corruption, exploitation of labor, and environmental impact.

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Ethics in the International Context 107

EXHIBIT 3-6 Absence of Corruption in Select Countries

Rank Country Rank Country

1 New Zealand 158 Tajikistan

2 Denmark 162 Angola

3 Singapore 162 Congo Brazzaville

3 Sweden 162 Democratic Republic of Congo

5 Switzerland 162 Guinea-Bissau

6 Finland 162 Kyrgyzstan

6 Netherlands 162 Venezuela

8 Australia 168 Burundi

8 Canada 168 Equatorial Guinea

8 Iceland 168 Guinea

11 Norway 168 Haiti

12 Hong Kong 168 Iran

12 Luxembourg 168 Turkmenistan

14 Germany 174 Uzbekistan

14 Ireland 175 Chad

16 Austria 176 Iraq

17 Japan 176 Sudan

17 United Kingdom 178 Myanmar

19 United States 179 Afghanistan

20 Barbados 180 Somalia Source: Rankings are drawn from Transparency International’s Corruption Perception’s Index 2009 for 180 countries (http://www.transparency.org). Scores are based on the perceptions of the degree of corruption as seen by businesspeople and country analysts. The score ranges from 10 (highly clean) to 0 (highly corrupt).

The United Nations, the World Bank, the International Labor Organization, the World Trade Organization, and the Organization for Economic Co-operation and De- velopment are among many organizations that advocate a unifi ed set of global ethical standards to govern labor practices and general issues related to international business. As shown in the Exhibit 3-7, business leaders from Japan, Europe, and North America in the Caux Round Table have developed a list of expectations for companies engaging in inter- national business. These ethical standards are intended to govern what strategies managers select and how they implement those strategies in dealings with others, both within and outside their organizations.

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http://www.transparency.org

108 Chapter 3 Organizational Behavior in a Global Context

EXHIBIT 3-7 Caux Round Table Principles for Business

Business leaders from Japan, Europe, and North America formed the Caux Round Table in 1986 to promote moral values in business. The principles they developed are based on two ideals: kyosei and human dignity. Kyosei, a Japanese concept, means “living and working together for the common good, enabling cooperation and mutual prosperity to exist with healthy and fair competition.” The seven specifi c principles the executives promote are listed below:

1. The Responsibilities of Business. The value of a business to society is the wealth and employment it creates and the marketable products and services it provides to consumers at a reasonable price commensurate with quality. To create such value, a business must maintain its economic health and viability, but survival is not a suffi cient goal. Businesses have a role to play in improving the lives of all of their customers, associates, and shareholders by sharing with them the wealth they have created. Suppliers and competitors as well should expect businesses to honor their obligations in a spirit of honesty and fairness. As responsible citizens of the local, national, regional, and global communities in which they operate, businesses have a part in shaping the future of those communities.

2. The Economic and Social Impact of Business. Businesses established in foreign countries to develop, produce, or sell should also contribute to the social advancement of those countries by creating productive employment and helping to raise the purchasing power of their citizens. Businesses also should contribute to human rights, education, welfare, and vitalization of the countries in which they operate. Businesses should contribute to economic and social development not only in the countries in which they operate, but also in the world community at large, through effective and prudent use of resources, free and fair competition, and emphasis upon innovation in technology, production methods, marketing, and communications.

3. Business Behavior. While accepting the legitimacy of trade secrets, businesses should recognize that sincerity, candor, truthfulness, the keeping of promises, and transparency contribute not only to their own credibility and stability but also to the smoothness and effi ciency of business transactions, particularly on the international level.

4. Respect for Rules. To avoid trade frictions and to promote freer trade, equal conditions for competition, and fair and equitable treatment for all participants, businesses should respect international and domestic rules. In addition, they should recognize that some behavior, although legal, can still have adverse consequences.

5. Support for Multilateral Trade. Businesses should support the multilateral trade systems of the General Agreement in Tariffs and Trade (GATT) World Trade Organization (WTO), and similar international agreements. They should cooperate in efforts to promote the progressive and judicious liberalization of trade and to relax those domestic measures that unreasonably hinder global commerce, while giving respect to national policy objectives.

6. Respect for the Environment. A business should protect and, where possible, improve the environment, promote sustainable development, and prevent the wasteful use of natural resources.

7. Avoidance of Illicit Operations. A business should not participate in or condone bribery, money laundering, or other corrupt practices: indeed, it should seek cooperation with others to eliminate these practices. It should not trade in arms or other materials used for terrorist activities, drug traffi c, or other organized crime.

Sources: Caux Round Table, “Principles for Business,” 2007, at http://www.cauxroundtable.org; P. Carlson and M.S. Blodgett. 1997. “International Eth- ics Standards for Business: NAFTA, CAUX Principles and Corporate Code of Ethics,” Review of Business, 18, no. 3: 20–23.

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http://www.cauxroundtable.org

What This Chapter Adds to Your Knowledge Portfolio 109

What This Chapter Adds to Your Knowledge Portfolio In this chapter, we have defi ned globalization and discussed the forces that infl uence it. We have also discussed three types of international involvement on the part of associates and managers: internationally focused jobs, foreign job assignments, and working with foreign nationals in the home country. After describing differing opportunities for international involvement, we explored dimensions of culture from the GLOBE project and examined the implications of cultural differences for high-involvement management. Finally, we examined issues regarding ethics in international settings. More specifi cally, we covered the following points:

• Globalization is the trend toward a global economy whereby products, services, people, technologies, and fi nancial capital move relatively freely across national borders. Globalization increased dramatically in the last 20 years of the twentieth century and in the fi rst decade of the twenty-fi rst century.

• Globalization presents opportunities and challenges for nations. The principal opportunity is for economic growth. Challenges include the possible loss of a nation’s cultural uniqueness as uniform goods and services become commonplace throughout the world. For developing nations, additional challenges include the

THE STRATEGIC LENS

Organizations large and small must develop strategies to compete in the global econ- omy. For some organizations, strate- gies leading to direct investment in foreign operations are valuable for growth, lower costs, and better man- agement of the organization’s risk. For other organizations, only exporting goods and services for selling in other countries is suffi cient to meet their goals. For still other fi rms, particularly small ones, participation in interna- tional markets may be limited, but com- petition from foreign fi rms in their local domestic markets may require that they respond with competitive actions. In all cases, understanding other cul- tures and effectively managing cross- cultural activities and contexts are crucial. Without insight and sensitivity

to other cultures, senior managers are unlikely to formulate effective strate- gies. Without appreciation for other cultures, associates and midlevel and lower-level managers can also fail in their efforts to implement carefully de- veloped strategic plans. Furthermore, managers must prepare associates to work in international environments. This preparation often requires train- ing and international assignments. Managers must also develop all of the organization’s human capital—includ- ing women, who often have not had as many opportunities for expatriate assignments as men—and must ensure that the organization has the capabili- ties to take advantage of and exploit opportunities in international markets when they are identifi ed. Cultural di- versity among the fi rm’s human capital

can be an advantage if managers use it effectively. Many organizations op- erate or sell their products in foreign markets. Thus, managers and associ- ates must understand cultural diversity and use this knowledge to their advan- tage in managing it.

Critical Thinking Questions

1. Given the complexity and chal- lenges in operating in foreign countries, why do organizations enter international markets?

2. How can understanding and man- aging cultural diversity among as- sociates contribute positively to an organization’s performance?

3. How can being knowledgeable of diverse cultures enhance an indi- vidual’s professional career?

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110 Chapter 3 Organizational Behavior in a Global Context

protection of labor from exploitation and natural resources from depletion. For wealthy nations, additional challenges include prevention of job loss to lower-wage countries and preservation of high-level wage structures at home.

• Globalization presents opportunities and chal- lenges for organizations. Opportunities include growth, risk reduction through diversifi cation, greater economies of scale, and location advan- tages (e.g., moving into an area with a particularly talented labor pool). Challenges include political risk (instability of national governments, threat of war, and threat of state- sponsored terrorism), economic risk (fl uctuation in the value of foreign currencies and the possibility of sudden economic contraction in some countries), and managerial risk (diffi culties inherent in managing the complex resource fl ows required in a global or transnational fi rm).

• Individuals can be involved in the international domain through internationally focused jobs. Such individuals work from their home countries

but focus on international issues as part of their day-to-day work. Membership in one or more virtual teams is often part of the job. Members of a virtual team coordinate their activities mainly through videoconferencing, teleconferencing, chat rooms, and e-mail. Having some face-to-face meetings and taking steps to ensure that individuals identify with the team facilitate team success.

• Individuals can also be involved in the international domain through foreign job assignments. These individuals are known as expatriates, and they often are on a fast track for advancement. In their new countries, expatriates may experience culture shock, a stress reaction caused by the foreign context. Failure of a spouse to adjust and strong ethnocentrism in the host country are two additional factors leading to stress for expats. Careful screening of candidates for foreign assignments and rich cultural training can reduce stress and improve chances for success.

• Individuals can be involved in the international domain by working alongside foreign nationals. This is often exciting and rewarding, but cultural differences must be appreciated and accommodated, particularly those differences related to low- versus high-context values and monochronic versus polychronic time values.

• Some executives and managers choose a multidomestic strategy for their fi rm’s international activities. This strategy, involving tailoring products and services for different countries or regions, tends to be used when preferences vary substantially across local markets where the fi rm has subsidiary operations. Because country-based or regionally based units are focused on their own local domains, associates and managers have limited opportunities for international exposure and experience.

• Some executives and managers choose a global strategy for their fi rm’s international activities. This strategy, involving standardized products and services for world markets, tends to be emphasized when needs for global effi ciency are strong.

? back to the knowledge objectives 1. What is globalization? 2. What are the three types of international involvement

available to associates and managers? What problems can be encountered with each type?

3. How do opportunities for international involvement dif- fer in fi rms emphasizing multidomestic, global, and transnational strategies? Which type of fi rm would you prefer to join and why?

4. What are the key dimensions of national culture that infl uence the success of high-involvement management? How should high-involvement management be adapted to differences in culture?

5. What are several international standards for ethical behavior by businesses (refer to the Caux Round Table Principles)? Briefl y discuss each one.

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Key Terms 111

Country- or region-based units are not self-contained, independent, or exclusively focused on local markets. Instead, at a minimum, each unit interacts frequently and intensively with the home country, and probably with some units located in other countries. Global fi rms offer associates and managers many more opportunities for international involvement than do multidomestic fi rms.

• Some executives and managers choose a transnational strategy for their fi rm’s international activities. This strategy balances needs for local responsiveness and global effi ciency through a complex network of highly interdependent local units. Associates and managers enjoy many opportunities for international involvement in transnational fi rms.

• National cultures differ in many ways. Four dimensions have proven to be particularly useful in understanding these differences: uncertainty avoidance, power distance, individualism, and assertiveness. Organizational behavior researchers have proposed fi ve other dimensions: in-group collectivism, gender egalitarianism, future orientation, performance orientation, and humane orientation.

• High-involvement management must be adapted to differences in national culture. Two aspects of this management approach, information sharing and decision power, are particularly important for adaptation.

• Many groups, including the World Trade Organization and the Caux Round Table, have developed guidelines for ethics in the international context. Key issues for developed countries include: (1) corruption, (2) exploitation of children, and (3) environmental impact.

Thinking about Ethics 1. Some have argued that globalization is a negative process because it can destroy national

cultures. Do senior managers in global fi rms have a responsibility to prevent such damage? Or is their primary responsibility to maximize profi ts for their shareholders?

2. The members of cross-cultural virtual teams are prone to misperceptions and misunderstandings due to the lack of rich face-to-face communication. Under these circumstances, should a manager terminate an individual who has been a source of interpersonal problems in the context of such a team? Explain your answer.

3. A hard-working and generally effective associate has shown little appreciation for the cultural diversity in his unit. In fact, he has expressed some minor hostility toward several foreign nationals in the workplace. Also, he has not taken cross-cultural training seriously. How should the manager respond?

4. An experienced expatriate has hired underage labor at a cheap rate in order to save money. How should her fi rm respond to this situation?

Key Terms globalization, p. 86 culture, p. 86 virtual electronic teams, p. 90 swift trust, p. 90 expatriate, p. 91 culture shock, p. 92 ethnocentrism, p. 92

glass border, p. 95 high-context cultures, p. 96 low-context cultures, p. 96 monochronic time

orientation, p. 96 polychronic time

orientation, p. 96

cultural intelligence, p. 97 multidomestic

strategy, p. 98 global strategy, p. 98 transnational

strategy, p. 99 international ethics, p. 106

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112 Chapter 3 Organizational Behavior in a Global Context

Human Resource Management Applications The Human Resource Management (HRM) function plays a key role in a fi rm’s capability to manage international operations and to compete effectively in global markets. Following are several activities in which they facilitate management in the fi rm.

The HRM unit is often responsible for establishing the policies related to expatriate assign- ments. For example, there are often important compensation issues that must be handled for expatri- ates. Questions must be answered, such as: (1) Should they receive extra pay while on assignment away from home (Commonly, they retain their current home and must have living quarters in the foreign location as well)? (2) How are the tax differences in the different countries to be handled? (3) Do they need additional or different benefi ts (e.g., health care) in the foreign location?

Training (an HRM responsibility) plays a key role in expatriate assignments and in building managerial capabilities. For example, associates and managers undertaking expatriate assignments often receive cultural training to prepare them to live and work in the new cultural environment. Training may also be used to help managers learn how to more effectively manage in a global market environment. Frequently, such training will emphasize the value of cultural diversity and effectively using all of the organization’s available human capital. Career planning (an HRM responsibility) is important for identifying when to give associates and managers expatriate assignments based on the knowledge and skills needed for the future positions in positions projected for their careers in the organization.

building your human capital

Assessment of Openness for International Work In this age of globalization, it is important to clearly understand your own feelings about interna- tional teams and assignments. In the following installment of Building Your Human Capital, we present an assessment of openness for international work. The assessment measures specifi c atti- tudes and behaviors thought to be associated with this type of openness.

Instructions In the following assessment, you will read 24 statements. After carefully reading each statement, use the accompanying rating scale to indicate how the statement applies to you. Rate yourself as honestly as possible. Never Often 1. I eat at a variety of ethnic restaurants. 1 2 3 4 5 2. I attend foreign fi lms. 1 2 3 4 5 3. I read magazines that address world events. 1 2 3 4 5 4. I follow world news on television or the Internet. 1 2 3 4 5 5. I attend ethnic festivals. 1 2 3 4 5 6. I visit art galleries and/or museums. 1 2 3 4 5 7. I attend the theater, concerts, ballet, etc. 1 2 3 4 5 8. I travel widely within my own country. 1 2 3 4 5

Strongly Strongly Disagree Agree 9. I would host a foreign exchange student. 1 2 3 4 5 10. I have extensively studied a foreign language. 1 2 3 4 5

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Building Your Human Capital 113

11. I am fl uent in another language. 1 2 3 4 5 12. I have spent substantial time in another part of the world. 13. I visited another part of the world by the age of 18. 1 2 3 4 5 14. My friends’ career goals, interests, and education are diverse. 1 2 3 4 5 15. My friends’ ethnic backgrounds are diverse. 1 2 3 4 5 16. My friends’ religious affi liations are diverse. 17. My friends’ fi rst languages are diverse. 1 2 3 4 5 18. I have moved or been relocated substantial distances. 1 2 3 4 5 19. I hope the company I work for (or will work for) will

send me on an assignment to another part of the world. 1 2 3 4 5 20. Foreign-language skills should be taught in 1 2 3 4 5

elementary school. 21. Traveling the world is a priority in my life. 1 2 3 4 5 22. A year-long assignment in another part of the world would 1 2 3 4 5

be a fantastic opportunity for me and/or my family. 23. Other cultures fascinate me. 1 2 3 4 5 24. If I took a vacation in another part of the world, I would 1 2 3 4 5

prefer to stay in a small, locally owned hotel rather than a global chain.

Scoring Key for Openness to International Work Four aspects of openness to international work have been assessed. To create scores for each of the four, combine your responses as follows:

Extent of participation in cross-cultural activities: Item 1 � Item 2 � Item 3 � Item 4 � Item 5 � Item 6 � Item 7 � Item 8

Participation scores can range from 8 to 40. Scores of 32 and above may be considered high, while scores of 16 and below may be considered low.

Extent to which international attitudes are held: Item 9 � Item 19 � Item 20 � Item 21 � Item 22 � Item 23 � Item 24

Attitude scores can range from 7 to 35. Scores of 28 and above may be considered high, while scores of 14 and below may be considered low.

Extent of international activities: Item 10 � Item 11 � Item 12 � Item 13 � Item 18

Activity scores can range from 5 to 25. Scores of 20 and above may be considered high, while scores of 10 and below may be considered low.

Degree of comfort with cross-cultural diversity: Item 14 � Item 15 � Item 16 � Item 17

Diversity scores can range from 4 to 20. Scores of 16 and above may be considered high, while scores of 8 and below may be considered low.

High scores on two or more aspects of openness, with no low scores on any aspects, suggest strong interest in and aptitude for international work.

Source: Based on P.M. Caligiuri, R.R. Jacobs, & J.L. Farr. 2000. “The Attitudinal and Behavioral Openness Scale: Scale Development and Construct Validation,” International Journal of Intercultural Relations, 24: 27–46.

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114 Chapter 3 Organizational Behavior in a Global Context

an organizational behavior moment

Managing in a Foreign Land Spumonti, Inc., is a small manufacturer of furniture. The com- pany was founded in 1987 by Joe Spumonti, who had been em- ployed as a cabinetmaker in a large fi rm before he decided to open his own shop in the town of Colorado Springs. He soon found that some of his customers were interested in special furniture that could be built to complement their cabinets. Joe found their requests easy to accommodate. In fact, it wasn’t long before their requests for custom furniture increased to the point that Joe no longer had time to build cabinets.

Joe visited a banker, obtained a loan, and opened a larger shop. He hired several craftspeople, purchased more equipment, and obtained exclusive rights to manufacture a special line of furniture. By 1997, the business had grown considerably. He then expanded the shop by purchasing adjoining buildings and converting them into production facilities. Because of the high noise level, he also opened a sales and administrative offi ce several blocks away, in the more exclusive downtown business district.

Morale was very good among all associates. The workers often commented on Joe Spumonti’s dynamic enthusiasm, as he shared his dreams and aspirations with them and made them feel like members of a big but close-knit family. Associates viewed the future with optimism and anticipated the growth of the com- pany along with associated growth in their own responsibilities. Although their pay was competitive with that provided by other local businesses, it was not exceptional. Still, associates and others in the community viewed jobs with Spumonti as prestigious and desirable. The training, open sharing of information, and indi- vidual autonomy were noteworthy.

By 2009, business volume had grown to the extent that Joe found it necessary to hire a chief operating offi cer (COO) and to incorporate the business. Although incorporation posed no prob- lem, the COO did. Joe wanted someone well acquainted with modern management techniques who could monitor internal op- erations and help computerize many of the procedures. Although he preferred to promote one of his loyal associates, none of them seemed interested in management at that time. Ultimately, he hired Wolfgang Schmidt, a visa holder from Germany who had recently completed his MBA at a German university. Joe thought

Wolfgang was the most qualifi ed among the applicants, especially with his experience in his family’s furniture company in Germany.

Almost immediately after Wolfgang was hired, Joe began to spend most of his time on strategic planning and building exter- nal relationships with key constituents. Joe had neglected these functions for a long time and felt they demanded his immediate attention. Wolfgang did not object to being left on his own be- cause he was enthusiastic about his duties. It was his fi rst leader- ship opportunity.

Wolfgang was more conservative in his approach than Joe had been. He did not like to leave things to chance or to the gut feel of the associates, so he tried to intervene in many deci- sions the associates previously had been making for themselves. It wasn’t that Wolfgang didn’t trust the associates; rather, he simply felt the need to be in control. Nonetheless, his approach was not popular.

Dissatisfaction soon spread to most associates in the shop, who began to complain about lack of opportunity, noise, and low pay. Morale was now poor, and productivity was low among all associates. Absenteeism increased, and several longtime associates expressed their intention to fi nd other jobs. Wolfgang’s approach had not been successful, but he attributed its failure to the lack of employee openness to new management methods. He suggested to Joe that they give a pay raise to all associates “across the board” to improve their morale and reestablish their commitment. The pay raise would cost the company $120,000 annually, but Joe ap- proved it as a necessary expense.

Morale and satisfaction did not improve, however. Shortly after the pay raise was announced, two of Spumonti’s senior as- sociates accepted jobs at other companies and announced their resignations. Wolfgang was bewildered and was considering rec- ommending a second pay increase.

Discussion Questions 1. What weaknesses do you see in Joe’s handling of Wolfgang? 2. Could Joe have anticipated Wolfgang’s approach? 3. Can Wolfgang’s career at Spumonti be saved?

team exercise

International Etiquette A business traveler or expatriate must be aware of local customs governing punctuality, greetings, introductions, gift-giving, dining behavior, and gestures. Customs vary dramatically around the world, and what is accepted or even valued in one culture may be highly insulting in another. Many

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Endnotes 115

business deals and relationships have been harmed by a lack of awareness. In the exercise that fol- lows, your team will compete with other teams in a test of international etiquette.

STEP 1: As an individual, complete the following quiz by selecting T (True) or F (False) for each item. a. In Japan, slurping soup is considered bad manners. b. In Italy, giving chrysanthemums is appropriate for a festive event. c. In Ecuador, it is generally acceptable to be a few minutes late for a business meeting. d. In England, the “V” sign formed with two fi ngers means victory when the palm faces outward

but is an ugly gesture if the palm is facing inward. e. In China, a person’s surname is often given or written fi rst with the given name appearing after. f. In Japan, shoes are generally not worn past the doorway of a home. g. In Brazil, hugs among business associates are considered inappropriate. h. In Germany, use of formal titles when addressing another person is very common. i. In Saudi Arabia, crossing one’s legs in the typical style of U.S. men may cause problems. j. In China, green hats are a symbol of achievement for men. k. In China, a gift wrapped in red paper or enclosed in a red box is appropriate for celebrating a

successful negotiation. l. In Kuwait, an invitation to a pig roast would be warmly received. m. In India, a leather organizer would be warmly received as a gift. n. In Japan, it is most appropriate to give a gift with two hands. o. In Iraq, passing a bowl or plate with the left hand is appropriate. p. In Saudi Arabia, ignoring a woman encountered in a public place is insulting to the woman’s

family.

STEP 2: Assemble into groups of four to fi ve, using the assignments or guidelines provided by the instructor.

STEP 3: Discuss the quiz as a group, and develop a set of answers for the group as a whole.

STEP 4: Complete the scoring form that follows using the answer key provided by your instructor.

Number of answers that I had correct: ________ Average number of answers that individuals in the group had correct: ________ Number of answers that the group had correct following its discussion: ________

International mastery: 13–15 correct International competence: 9–12 correct International defi ciency: 5–8 correct International danger: 1–4 correct

STEP 5: Designate a spokesperson to report your group’s overall score and to explain the logic or information used by the group in arriving at wrong answers.

T F T F T F T F

T F T F T F T F T F T F T F

T F T F T F T F T F

Endnotes 1. Dastidar, P. 2009. International corporate diversifi cation and per-

formance: Does fi rm self-selection matter? Journal of International Business Studies, 40: 71–85; Gande, A., Schenzler, C. & Senbet, L.W. 2009. Valuation of global diversifi cation. Journal of Interna- tional Business Studies, 40: 1515–1532; Makino, S., Isobe, T., & Chan, C.M. 2005. Does country matter? Strategic Management Journal, 25: 1027–1043.

2. Bouquet, C, Morrison, A., & Birkinshaw, J. 2009. International attention and multinational enterprise performance. Journal of International Business Studies, 40: 108–131.

3. Loveman, G., Schlesinger, L., & Anthony, R. 1993. Euro Disney: The fi rst 100 days. Boston: Harvard Business School Publishing.

4. Ibid.

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116 Chapter 3 Organizational Behavior in a Global Context

5. Hitt, M.A., Ireland, R.D., & Hoskisson, R.E. 2011. Strategic management: Competitiveness and globalization (9th ed.). Mason, OH: South-Western Cengage Learning.

6. United Nations Conference on Trade and Development. 2008. World Investment Report, New York, U.S.A.; United Nations Con- ference on Trade and Development. 2009. World Investment Re- port, New York, U.S.A.

7. United Nations Conference on Trade and Development. 2010. World Investment Report, New York, U.S.A.

8. World Trade Organization. 2009. World Trade Report 2009. Ge- neva, Switzerland.

9. Hitt, M.A. & He, X. 2008. Firm strategies in a changing global competitive landscape. Business Horizons, 51: 363–369.

10. World Investment Report, 2005. Transnational corporations and the internationalization of R&D. Geneva, Switzerland: United Nations Conference on Trade and Development (UNTAD).

11. Wiersema, M.E. & Bowen, H.P. Corporate diversifi cation: The impact of foreign competition, industry globalization and prod- uct diversifi cation. Strategic Management Journal, 29: 115–132; Malik, O.R. & Kotabe, M. 2009. Dynamic capabilities, govern- ment policies and performance in fi rms from emerging econo- mies: Evidence from India and Pakistan. Journal of Management Studies, 46:421–450.

12. Hitt, Ireland, & Hoskisson, Strategic management. 13. For a discussion of this issue, see Asgary, N., & Walle, A.H. 2002.

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14. Hall, P.A. & Soskice, D. 2001. An introduction to the varieties of capitalism. In P. A. Hall & D. Soskice (Eds.), Varieties of capital- ism: The institutional foundations of comparative advantage. Ox- ford, UK: Oxford University Press, 1–68; Hall, E.T. 1976. Beyond culture. New York: Anchor Books–Doubleday.

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PA R T I C A S E S T U D Y

1. SITUATION: THE PROJECT IS DOMINATED BY GERMANS

The American perspective Introduction Two months ago I was sent by my company from our Philadelphia head- quarters to Stuttgart in order to pre- pare the launch of a new product on the European market. The product, a laser for eye surgery, was developed by a joint venture between us and our German partner. Even though the joint venture belongs in equal shares to both companies it was agreed that our German partner would take the lead in introducing the product on the European market and that we

COOPERATING AND communicating across cultures Americans and Germans Working in a Project Team

Markus Pudelko University of Edinburgh Management School

T his case was written by Dr Markus Pudelko, The University of Edinburgh Management School. It is intended to

be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from generalized experience and on relevant literature, in particular Schroll-Machl, S. (1996) ‘Kulturbedingte Unterschiede im Prob- lemlösungsprozeß bei deutsch-amerikanischen Arbeitsgruppen’, in Thomas, A. (ed) Psychologie interkulturellen Handelns, Göttingen et al: Hogrefe, 383–409).

Reference no 406-034-1. © 2006, The University of Edinburgh. No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever with- out the permission of the copyright owner.

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PA R T I C A S E S T U D Y 122 Cooperating and Communicating Across Cultures

would have the say for launching the product in North America. For all other regions both partners agreed to work in tandem.

So I was selected to represent our company on what was otherwise a German team. Even though I had never worked in Germany before, I was considered to be the natural candidate for the assignment: I speak fluent German as my wife is Ger- man. In addition, I thought I was also culturally quite well prepared for the job. Next to speaking the language and having gotten used to putting up with my wife’s tick for over-punctu- ality, I also regularly travel to Ger- many to visit my wife’s family. Also, I have had frequent e-mail exchanges and telephone conversations with our German partners. But now, after two months working around the clock with my German team colleagues, I realize how difficult it has been for me to cooperate and communicate effectively with them. Our project of preparing the launch of our new la- ser is finished now and in the end we did a good job, but it was very tough and certainly not without fric- tions. Now I am happy and relieved to be returning to the States.

Planning phase The problems already started with our first meeting. We were sup- posed to define our key objectives, our main challenges and our overall strategy. I was expecting something like a brainstorming session, in or- der to develop some general ideas and solutions, select the best ones, develop a plan and delegate specific tasks to the project team members. I anticipated this meeting to last for one morning or so. Instead, we sat

there for three full days. All details were discussed at great length, but no concrete decisions were taken, no real plan was developed and no clear-cut objectives were formulated. The Germans love to see themselves as “Volk der Dichter und Denker” (people of poets and thinkers), but we don’t have to endlessly dispute everything and act like a bunch of little Immanuel Kants in order to get a laser on the market! In the begin- ning, I patiently sat there, joined the discussion and thought it best to just go with the flow. On the second day, however, I became increasingly im- patient and suggested several times to focus on what we should do now and then start working. But I was only looked at with amazement and was told that this was still much too early for any specific plan and so our philosophy seminar continued. Much of the third day of the debate I hardly bothered to pay attention anymore.

At the end of day three we fi- nally came up with a decision of where to go from there, but I still was not content. We had wasted a lot of time to achieve so little. This was all very inefficient. How would we ever get the project finished if we contin- ued like this? And moreover, I still did not have a precise idea of what I was supposed to do now. My Ger- man team members had discussed all issues at great length and from every possible perspective and devel- oped a fantastic picture of the overall problem, but spent little time on spell- ing out our next activities. Many de- tails which were relevant to our tasks were mentioned in our lengthy discus- sions but were never systematically

summarized on a chart. How could I remember everything which was said during a three day long discussion? Furthermore, we came up with over- all objectives to achieve, but never specified any broken down targets. How can we effectively work with- out having specific targets by which we can measure our progress and our performance along the way? An overall objective is just not provid- ing enough guidance. To summarize, the Germans are obsessed with their focus on the problem, whereas we Americans focus more on solutions.

Working under the team leader I would have expected my German team leader to be much more deci- sive. He was the boss, so he should have called the shots. But no, in par- ticular during the planning phase he consistently asked his team members what they were thinking, was patiently listening to everyone and acted more like just another team member. For a while I would have listened to every- one’s opinion, but then I would just have made my mind up, announced my decision, delegated the tasks and controlled the outcome.

I also got particularly annoyed that the team leader frequently inter- fered in my work. He kept insisting that I had to double-check every lit- tle detail before I pass it on to other team members. I don’t like to be con- trolled all the time, I know what I am doing. At the end of the assignment I am happy to get evaluated on my per- formance, but until then I prefer to be left alone, so that I can do my job. My team leader also constantly reminded me to observe certain procedural rules of which the company seemed to have an endless amount. It seemed to me

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123 Cooperating and Communicating Across Cultures

PA R T I C A S E S T U D Y

that they followed their internal proce- dural rules for the sake of it. It is like the red traffic lights. No German pedestrian crosses the street on red, even if no car is in sight for miles.

Another thing, I thought our team leader was a poor motivator. Instead of pushing people, making them ex- cited about the job and provide them with encouraging feedback, our team leader was always very reserved, for- mal and fact oriented. No emotions ever came across. Sometimes a pat on the shoulder wouldn’t do any harm.

Working with the team members Not only had I no clear understand- ing of what I was supposed to do when we started our assignments, I also didn’t have a good understand- ing of what my German colleagues were working on. And there was lit- tle exchange of information among us. I am used to working sequentially on a clear set of well broken down targets and at every step of the way getting the information I need from my colleagues. However, whenever I went over to my team members and asked them a specific question, they did answer me politely, but I had the impression they felt disturbed by me asking them questions. Everyone just worked on his or her own.

Furthermore, I was deliberately brought in to share my specific know- how with the Germans. But when we started working on our assign- ments no one came to see me and asked me for advice. They probably thought they knew everything better and didn’t need my expertise. But then why did they want an expert from the States on their team?

I was also puzzled by how badly my German counterparts

reacted when I suggested some changes in our strategy. Whenever we hit a problem, it seemed natural for me to adapt our strategy, after all one cannot foresee everything at first and one needs to keep an open mind and remain flexible. It is through trial and error that objectives are reached. But no, we had to stick to our grand master-plan, because so much time was invested in reaching it in the first place.

The German perspective Introduction For two months we had Jim, a mar- keting expert from our joint venture partner in the States, here in Stutt- gart. His job was to help us in preparing the launch of our new laser on the European market. He was certainly well qualified for the job and also a really nice guy. He even spoke fluent German. That fa- cilitated our job greatly. Otherwise it would have been quite odd, on a team with 16 Germans and one American, to speak English all the time. It’s not so much of a problem during a formal meeting, when eve- ryone listens to what the one speak- ing has to say. But what about a more informal setting, over lunch for example? If the American is listen- ing, it’s fine to talk in English, but if he directs his attention to someone else, should I then continue talking in English with my other German col- leagues, as he might want to enter our conversation again? It is com- pletely awkward to talk among Ger- mans in English, searching for words for what you could otherwise express so easily in your own language. Also, to adapt to the Anglo-Saxon style and not look overly formal, we

use first names when speaking in English. But it is very embarrassing to call my boss “Hans” when talk- ing in English and then switch right away to “Herr Doktor Fischer” when speaking German again. In the end, with English entering our company communication more and more, we even tend to avoid addressing by name colleagues we have known for years, out of pure confusion over what to say. Therefore, we were re- ally relieved when we heard that our American colleague was speaking German, it saved us from a lot of potentially embarrassing situations. But, as we found out, mastering the language is one thing, being able to truly communicate is a completely dif- ferent story. I think Jim had no clue of how we do things here and he was little willing to adapt, always thinking that the American way is the only one which makes sense.

Planning phase First, all members of a newly estab- lished team gather all relevant infor- mation and discuss them intensively. The objective is to reach a holistic understanding of the problems to be solved. During this phase team leader and team members cooper- ate on quite equal terms. The team leader is more the moderator of this thought process. Our deliberations are rather complex and abstract, with the intention to establish an overall conceptual foundation that covers all possible eventualities, as- sumptions and ramifications which lead to a set of logical conclusions. In this process we focus on the under- lying principles but already include all potentially relevant details to get to the bottom of our problem. From

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the multitude of information and ideas we subsequently generate the solution to our problem. By doing so, we frequently recur to theories and scholarly methods. Subsequently, the group decides which tasks need to be tackled in order to reach the overall objective. It is expected that every team member brings his or her expertise and thoughts into this discussion process. The decisions to be reached should be based on a general consensus, be supported by everyone and be regarded as final. The decisions taken at this meeting will direct all ensuing activities. This process might take some time in the beginning, but in the end it might well save us time as we don’t need to go back to the drawing board anymore. Unfortunately, Jim didn’t understand this concept at all. We tried to encourage him to share with us his perspective on our project. In fact, we specifically asked for an American expert who could share with us the experiences won on the American market, but he just didn’t come forward with his knowledge. We found this particularly unhelpful. Instead, he always tried to push us prematurely to break up the work into individual assignments, but at this initial phase we barely started to grasp the problem we were facing. How are we supposed to break our work down into assignments if we collectively still don’t fully understand what we are trying to achieve? After some time he even stopped paying full attention to our deliberations. But once we fully understood the prob- lem, developed our strategy and sub- sequently started working we noticed that Jim just had not grasped the

concept which was the basis of our work. Typical American: no willing- ness to invest time in the beginning to thoroughly understand a problem, just focusing on setting some superfi- cial targets and then seeing later on how one gets along and muddling your way through. We prefer to do things a lot more methodically.

Working under the team leader Once we reached an agreement about what to do, all the team members started working on their assignments. They had a good under- standing of our overall objective and how we wanted to achieve this. We had discussed all eventualities during the planning phase, so everyone had all the information which was needed and was now ready to focus fully on working individually on his or her job. That is everyone except Jim. As he hadn’t paid attention when we had discussed our overall strategy, he was subsequently unable to under- stand what was expected from him. Instead, he felt confused by not hav- ing targets nicely broken down for him, so that he didn’t have to think about the overall picture but could sequentially tick off one job after the other. This is what I call intellectual laziness. I also thought Jim had com- pletely different expectations from me as his team leader. He expected me to show more authority and be less participatory while we planned our project. I tried to explain to him my more “democratic” understand- ing of my role as team leader, that I perceived myself more as a “primus inter pares”. As team leader I have probably the best technical know- how about our project and all its de- tails, and this is also what my team

members expect from me. However, this does not mean that I tell my team what they have to do, I moderate more the decision making process, keep the group together, promote consensus and control the outcome. It is only in the case of conflict that I will enforce a decision. But I think he considered this leadership concept just as a weakness. Also, during the implementation phase he wanted more guidance from me, as he con- tinuously asked me what exactly he should be doing and the exact target against which his performance would be measured. I think our German team members are much more inde- pendent in the way they do their job.

Jim also seemed quite annoyed when I tried to align his work to our way of operating and insisted he knew best how to do his job. I should judge his results, not his meth- ods, he said. However, we have cer- tain procedures here and everyone is expected to follow them. I under- stand that while we have all worked here for at least 10 years and know our company procedures very well, all this was unknown to Jim. But he should have at least shown some respect for our methods and should have tried to follow them, instead of insisting on doing things in his own way. Furthermore, it only makes sense to check on someone regularly and not just evaluate the final result, because by then it can be already too late to adjust things.

Working with the team members While all team members were con- centrating on their jobs, Jim both- ered them all the time with specific questions. If he had paid more at- tention in the first place, this would

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have been completely unnecessary. During the implementation phase we prefer to work individually in a focused way on our own and don’t need much communication with other members of the team. At that stage group meetings only take place if another exchange of information is considered necessary. The incentive to such meetings can come from anybody in the group. And if we come together, we tend to have again a holistic discussion of the entire project, but this time based on a more advanced degree of understanding. What we certainly don’t like is to make some little changes here and there, because it might be momentarily more conven- ient. We try to come up with fun- damental solutions to fundamental problems and some quick fixes will only endanger the overall applicabil- ity of these solutions. We therefore expect that everybody sticks to what was initially agreed upon and solves their tasks in a way they will be in harmony to our overall plan. If we have to correct any mistakes then we will do this in a very systematic and thorough way and try to under- stand all possible effects a change in plan will have. Consequently, we were not too pleased that whenever a problem occurred Jim was willing to throw overboard everything we had carefully elaborated on and just try out something different. Chang- ing direction without prior intensive reflection is a sign of sloppiness. Good solutions should last a long time and we try to work here for the long-term.

When we had the final meeting in which he presented us the results of his work, we noticed that he had

actually done quite a good job. How- ever, a little more modesty about his work would have been appropriate. He was also somewhat playing out too much his certainly well established presentation skills. I would have pre- ferred a little more substance in his presentation and less of a show. For example, instead of just telling us his conclusions of what we should be do- ing and elaborating on that, he should first have explained more about the way he developed his proposals.

To sum up, I had thought the Americans were such great manag- ers. But now, having had the experi- ence of working with Jim, I honestly believe that our way of doing busi- ness makes more sense.

2. SITUATION: THE PROJECT IS DOMINATED BY AMERICANS

The German perspective Introduction While our company was responsible for the launch of the new laser in Europe, our American partners called the shots for the North American market. Still, I was sent over from our headquarters in Stuttgart to share with our American partners the experi- ences we gained in Germany and to make sure that our interests were also sufficiently considered on the Ameri- can turf. In principle, the task wasn’t that difficult, as we hardly had any genuine conflicts of interest. It was just a matter of getting it right. But, as it turned out, working with the Americans was not so easy. I always thought they were so professional, however I wasn’t overly impressed by how the project was managed. But in the end we did alright and I am glad to return home now.

Planning phase Problems had already started in the planning phase. I am an expert in my field and could have contributed more thoroughly to the definition of our overall strategy. Instead, I was given right away specific targets and was expected to reach them in a very short period of time. But were these really the best targets I could have been given? I would have preferred to give more of my input during the all important planning phase. I was actually not overly convinced about the underlying assumptions on which our strategy was based. But for the sake of speed a thorough collection of information and discussion did not take place. How should one do qual- ity work on this basis?

Working under the team leader Right from the word go, I was put under so much time pressure that there was no way that I could deliver something with real substance. And yet to my surprise what I did was good enough for my American team leader. Well, it wasn’t for me. And indeed later on I had to substantially modify my original suggestions once more information became available. All these subsequent improvements here and there annoyed me greatly. These are indications of sloppy work and in the end cost more time and energy than if we had invested a lit- tle more thought in the first place. Moreover, these “quick and dirty” solutions and quick fixes are not ex- actly testament to the upholding of high quality standards. There was no sense of perfection.

I was always astonished to see how quickly my American team leader reached a decision. He briefly thought

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about a problem, announced his deci- sion and that was it. Never any doubts about possibly being wrong. Also the other team members just accepted his decisions without ever questioning them. They were even expecting our team leader to make specific decisions all the time, so that they knew exactly what to do. Despite the casual tone in the company, my American colleagues were much more hierarchy oriented compared to what I am used to in Ger- many. Even though we are much more formal in Germany, I thought in the American company the atmosphere was in the end more authoritarian. This actually came as quite a surprise to me, as I wasn’t expecting this.

The head of the department in- sisted that everybody addressed him by first name, but at the same time he wouldn’t have the slightest prob- lem firing someone as soon as he detected some underperformance. By contrast, in Germany we would never call our boss by first name (and neither would he address us by first name) even though we have known each other for more than ten years. But he would also never fire someone who works loyally for the company, after all we are a team, care for each other and the company has a social responsibility.

I was also put off by the speeches our team leader gave us all the time. I guess they were supposed to motivate us, but for me that was just cheap pep talk, probably copied from these motivation seminars the Americans are so fond of. However, what I really appreciated was the feed-back our team leader gave us, particularly as it always focused on the positive. I think that is something I’d also like to see in Germany.

Working with the team members While working on our assignments, frequent adaptations had to be made. If we all had followed more precise procedures this could have been entirely avoided. Moreover, as long as we met our individual tar- gets my American team colleagues didn’t even care if the overall result made any sense or not. No team member except the leader has any holistic concern for the entire project and feels responsible for the greater picture. I found it somewhat of a paradox that the Americans, the ar- chetype of capitalists, were almost as obsessed with reaching specific targets as the communists were under the centrally planned economy.

At one instance, I was criticized, because my work didn’t fit with what the others were doing. But this was exactly my point. If we don’t bother to make a detailed picture for our- selves in the first place, how should I know what to do? But I was only told I should have checked with my team members.

I always had problems with these informalities. I don’t mind enjoying a drink after work, but during work we should refrain from joking around. As we say in German: “Work is work and schnaps are schnaps.” I also noticed that women in the com- pany don’t like to be treated with special courtesy. Whenever I held a door open for a woman or, after a working lunch, helped a woman with her coat, I was looked at as if I was doing something bad.

And when we discussed our final results, I felt my American colleagues were all highlighting their individual in- puts by far too much. We are all team members and there is no reason to

brag about one’s own achievements. All my American team members at first appeared to be so collegial but in the end everyone was fighting for his or her own. Everyone pretends to be good buddy with the others, but at the same time I have never seen so much open and almost aggressive competition among team members. In this company they always talk about their team spirit, but I think that is all corporate propaganda.

The American perspective Introduction For two months we had Klaus work- ing with us in order to prepare the presentation of our new laser system on the North American market. Klaus had been sent over by our German joint venture partner. He was cer- tainly very competent and in addition a really nice guy, once one got to know him a little better. Nevertheless, working with him proved to be quite difficult, he just drove us nuts with his complete inflexibility. What can you say, a real German.

Planning phase Klaus just couldn’t focus on specific targets and solutions. When we had our first meeting in order to decide who does what, Klaus wanted to drag us into a long discussion about funda- mental issues which we just perceived as either irrelevant or something to think about at a later stage. He wanted to plan everything down to the last detail. But you just can’t foresee every- thing and therefore you have to adapt and be flexible along the way. But Klaus just misunderstood our flexibility and open-mindedness for superficiality which of course is nonsense. A first planning meeting should be solution driven. What exactly do we want to

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achieve? Once we understand this, we identify the specific steps we need to take in order to get there. The main task of the team leader in the plan- ning phase is to assign specific team members to clearly defined tasks and develop a time plan, specifying what and when tasks should be achieved. With the delegation of responsibilities the planning process is finished and off you go.

Working under the team leader Klaus was always quite nervous about the fact that as team leader I expected him to be fully responsible for his assignment. When I told him his evaluation would be primarily based on his results he got quite anx- ious about it, always saying that the final result could depend on many things some of which could well be beyond his control. But as a man- ager you have to stand up for your own performance. No excuses.

In our company it is the team leader who defines the overall objec- tive and specific targets, who struc- tures the assignments, and delegates responsibilities. Subsequently, during the implementation phase, the team leader is always available for ques- tions, provides constant feed-back, supports the information exchange, keeps the morale of the team up, controls whether the various tasks are achieved on time and evaluates the team members according to their individual performance. Overall, the team leader has a strong position, he pushes the project forward.

In the end, Klaus came up with some good results, but in the final presentation he was completely un- derselling himself. How should people see whether you are a high performer if you can’t even show how good you

are? Also, instead of telling us his pro- posal right away he started out ex- plaining at great lengths the specific assumptions on which his proposal was based, the various alternative solutions he formulated, what his se- lection criteria were etc. etc. When we all thought he would never come to the point, he finally told us what his proposal was. That was quite a clumsy way of doing a presentation.

Working with the team members Once Klaus got his assignment he com- plained that he didn’t have enough information to do his job. But that is what a manager is about: to make de- cisions under uncertainty. And if you don’t have the information you need, well, then get it. First he complained that we hadn’t discussed the problem enough, but then he just never really communicated with his team mem- bers or participated in the ongoing exchange of information. While we continuously popped into each others’ offices to clarify things, Klaus just sat in his office and worked by himself.

When we get our tasks from our team leader we are expected to clearly structure our working schedule and solve each single task, one after the other. The trial-and-error principle is an important and often used mecha- nism. In this phase we use our own knowledge but also frequently ask our colleagues for advice. This implemen- tation phase is usually characterized by an intense information exchange. We see constant feed-back from both team leader and team members as essential to achieving our individual tasks. This information exchange takes place in a very informal way, through e-mails, telephone calls, dropping by at others’ offices or just a quick chat on the corridor. Everyone is available

at every point in time for a short dis- cussion. We frequently circulate writ- ten documentation to update each other on the various working steps. If we feel that we can improve the final solution by modifying our plan we do so at every stage in the process. If one solution doesn’t work we try the next one. To quickly come up with a solu- tion is important, but to be prepared to quickly drop a decision if a bet- ter one is found is equally important. This way we constantly improve the final outcome. For all this, good time management is important so that we can stick to the initial time plan. But I think Klaus had little understanding for all that.

Overall, I think Klaus should loosen up a bit. He can actually be quite a humorous guy and when we went to a bar after work we often had a good laugh. But the next day at work he was dead serious again, never made a joke and came across as rather unfriendly and cold. In par- ticular, the secretaries didn’t like him much, as he never spoke a private word with them, only focused on the job. Also female colleagues felt at times rather uncomfortable with his manners. They thought of the spe- cial attention and courtesy he paid them as rather sexist. I don’t think he meant it in that way, but female managers in this country prefer to be treated as fully equal to men and that includes no preferential treatment.

Anyway, Klaus will be going back to Germany now. It was inter- esting to see how differently people from other countries act and behave. And I am relieved to say that our way of doing things clearly appears to me to make most sense.

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PART 2

The chapters in Part I provided the strategic lens that is central to discus- sions throughout the book, and they explained how organizational diversity and the global environment affect all organizations. In Part II, we explore im- portant concepts related to individual- level processes in organizations.

Chapter 4 explains the concepts of learning and perception. Through individual learning, associates gain the knowledge and skills they need to perform their jobs in organizations. Individual learning contributes to the value of an organization’s human capi- tal and provides the base for organi- zational learning, both of which are critical for organizations to capture a competitive advantage.

Chapter 5 focuses on personality, intelligence, attitudes, and emotions. Managers in organizations need to understand how each of these human characteristics affects individual behav- ior. Personality and intelligence are an important determinant of a person’s behavior and performance and cannot be easily changed. Thus, organizations must learn how to select associates with desirable personalities and intel- ligence levels to maximize the value of their human capital. However, atti- tudes and emotions can and do vary. Attitudes and emotions affect behavior, and managers can have a signifi cant effect on individuals’ behavior by tak- ing actions that affect their attitudes and emotions.

Chapter 6 examines a fundamen- tal concept in organizational behavior: motivation. Individuals can be moti- vated in various ways and by various factors. Because individual motivation is highly critical to individual and or- ganizational productivity, understand- ing how to motivate is vital to effective management.

Chapter 7 deals with stress and well-being, critical issues in today’s workplace. While some stress can be functional, much of the stress individu- als experience can have negative ef- fects on their productivity and health. When managers understand the causes and consequences of stress, they can attempt to manage it to reduce dysfunc- tional outcomes.

individual processes

ORGANIZATIONAL BEHAVIOR

A GLOBAL CONTEXT

ORGANIZATIONAL BEHAVIOR

A STRATEGIC APPROACH

ORGANIZATIONAL DIVERSITY

THE STRATEGIC LENS

INDIVIDUAL PROCESSES LEARNING AND PERCEPTION PERSONALITY, INTELLIGENCE, ATTITUDES, AND EMOTIONS WORK MOTIVATION STRESS AND WELL-BEING

GROUPS, TEAMS, AND SOCIAL PROCESSES LEADERSHIP

COMMUNICATION

DECISION MAKING BY INDIVIDUALS AND GROUPS GROUPS AND TEAMS CONFLICT, NEGOTIATION, POWER, AND POLITICS

THE ORGANIZATIONAL CONTEXT ORGANIZATIONAL STRUCTURE AND CULTURE ORGANIZATIONAL CHANGE AND DEVELOPMENT

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? knowledge objectives After reading this chapter, you should be able to: 1. Describe the effects on learning of positive rein-

forcement, negative reinforcement, punishment, and extinction.

2. Discuss continuous and intermittent schedules of reinforcement.

3. Explain how principles of learning can be used to train newcomers as well as to modify the behavior of existing associates.

4. Describe the conditions under which adults learn, in addition to rewards and punishments.

5. Describe some specifi c methods that organizations use to train associates.

6. Discuss learning from failure. 7. Identify typical problems in accurately perceiving

others and solutions to these problems. 8. Explain the complexities of causal attributions and

task perception.

learning and perception exploring behavior in action

The Strategic Importance of Learning and Perception

V F Corporation, headquartered in Greensboro, North Carolina, is the world’s largest apparel manufacturer, with revenues of $7 billion plus annually. Chances are that you have several items of their clothing in your closet. Their more than thirty brands include: Wran-

gler, Lee, Vans, The North Face, 7 for all mankind, and Jansport. In 2004, the VF Corporation launched a new growth plan, that has been incredibly successful. The goal of this plan was to transform the VF Corporation in a global lifestyle apparel company. At the center of the plan are six Growth Drivers, one of which is build- ing new growth enablers. The company describes this goal as: “Taking our company to new heights requires new capabilities and skills, and we’ve invested in areas that are specifi cally designed to support our growth. … [W]e know that providing our leaders and associates with new tools and training that stretches their capa- bilities is crucial to our continued success.” Thus, as- sociate learning, development, and knowledge sharing has become one of the crucial drivers of the VF Cor- poration’s new strategy. Tom Nelson, VF Corporation’s manager of global sourcing states, “Learning and devel- opment makes a signifi cant contribution to the com- pany’s ongoing success.”

VF Asia Ltd., a subsidiary of VF Corporation lo- cated in Hong Kong, took this directive very seriously. This subsidiary totally reorganized its learning unit, which had previously been somewhat piecemeal, with a program here, a learning opportunity there. Tommy

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132

Sources: ASTD BEST Awards. At http://www.astd.org/ASTD/aboutus/AwardsandBestPractices/bestAwards/; ASTD Learning Circuits, Nov. 17, 2009. At http://www.astd.org/LC/news.htm. J.J. Salopek, P. Harris, P. Ketter, M. Laff, & J. Llorens. 2009. “Success is in the details.” T � D, Oct. 63, 10 ; pp. 36–38. VF Corporation. Dec. 2009. At http://www.vfc.com/about/our-strategy/growth-drivers.

The redevelopment of VF Asia Ltd.’s learning and development strategy illustrates the importance of learning to the overall strategic goals of the organization. The learning processes in this organization serve to develop current associates so that they have the knowledge, skills, and abilities to allow the organization to grow. Associates simply do not go through one-time training programs—what they learn in training is later assessed

Lo, learning and development manager, guided the two- person regional training team by fi rst creating a strategy. The company’s 780 employees were grouped into one of four learning categories, determined by their level in the organization and the content that needed to be learned and skills developed. These categories are personal competen- cies, functional leadership, managerial leadership, and strategic leadership. Fur- thermore, all functions associated with training, performance review and de- velopment, feedback, and reward were grouped to- gether in the same program. Thus, training and develop- ment is tied to on-the-job performance. A further part of the fi rm’s learning and development strategy was to keep as many programs and initiatives as possible in-house rather than outsourc- ing them to vendors and contractors. Not only is this cost-effective, but it makes the most use out of in-house knowledge and talent. Finally, although VF Asia is across the world from its parent company, learning and develop- ment at the subsidiary is well integrated with that which takes place at headquarters. Tommy Lo belongs to the VF Global Learning Community, which shares new ideas and best practices through conference calls, and certain em- ployees attend corporate learning programs such as the VF Leadership Institute.

There are many specifi c initiatives in place, all of which are tied to company core competencies. One con- cern was leadership development. To that end, Lo and his team developed a senior executive curriculum and middle- manager-level curriculum. Another concern was turnover.

Thus, they developed a program to improve managers’ in- terviewing skills, so that they would be better at judging job candidates. Turnover decreased from 26.8 percent in 2007 to 19.3 percent in 2008. In order to improve associ- ates’ ability to deal with customers from diverse cultures, the SELF (Self Enhancement Learning Fundamentals) pro-

gram was initiated. This is an online training program covering topics such as etiquette and negotiations. Associates can use this pro- gram at their own leisure. Overall, the 780 associates at VF Asia Ltd. underwent 14,200 hours of training in 2008.

The vast majority of organizations do not assess the effectiveness of their training programs beyond getting participants’ reac-

tions to the programs. Things are different at VF Asia Ltd. Learning goals are tied into individual performance evaluations and to the strategic goals of the organization. Monthly learning and development summaries are sent to executives. VF Asia Ltd. makes sure its training and development dollars are well spent. In 2009, this focus on learning was recognized with a BEST award by the Amer- ican Society for Training and Development (ASTD). The criteria for this award are:

• learning has an enterprise-wide role • learning has value in the organization’s culture • learning links to individual and organizational

performance • investment is made in learning and performance

initiatives

©Martin Gerten/epa/Corbis

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http://www.astd.org/ASTD/aboutus/AwardsandBestPractices/bestAwards/

http://www.astd.org/LC/news.htm

http://www.vfc.com/about/our-strategy/growth-drivers

Fundamental Learning Principles 133

as part of their job performance and is thus tied to individual rewards. As we will soon discuss, rewards play an important role in the learning process.

At a second level, learning processes help VF Asia tie individual training, develop- ment, performance evaluation, and rewards to the overall strategic vision of the organiza- tion. The corporate strategy and goals determine what is to be learned, and the success of training and development initiatives are evaluated at the executive level by the degree to which they achieve the fi rm’s strategic goals. Learning is fully integrated into the culture at VF Asia Ltd. and is therefore viewed as an important part of the organization’s success by associates and leaders at all levels in the fi rm.

To be competitive in the dynamic twenty-fi rst century, an organization must have as- sociates and managers who can effectively learn and grow. Continuous learning based on trying new things plays a critical role in an organization’s capability to gain and sustain a competitive advantage. Organizations can improve only when their human capital is en- riched through learning. Their human capital must be better and produce more value for customers than their competitors to gain an advantage in the marketplace and to maintain that advantage.1 Furthermore, providing developmental opportunities to associates helps organizations attract and retain the people most interested in personal growth and becom- ing better at their work. Thus, managers need to develop the means for associates and all managers to continuously improve their knowledge and skills.

To open this chapter, we explore the fundamentals of learning, including contin- gencies of reinforcement and various schedules of reinforcement. From there, we apply learning principles to the training of newcomers and the purposeful modifi cation of existing associates’ behavior. We focus on specifi c conditions helpful to learning, the use of behavior modifi cation, simulations, and how people can learn from failure. Next, we move to a discussion of perception. Accurately perceiving characteristics of people, at- tributes of tasks, and the nature of cause-and-effect relationships is critical to properly assessing and learning from experiences. Several mental biases, however, can interfere with accurate perceptions.

Fundamental Learning Principles When individuals fi rst enter an organization, they bring with them their own unique experiences, perceptions, and ways of behaving. These patterns of behavior have de- veloped because they have helped these individuals cope with the world around them. However, associates introduced to a new organization or to new tasks may need to learn new behaviors that will make them effective in the new situation. Associates and managers must therefore be acquainted with the principles and processes that govern learning.

In the fi eld of organizational behavior, learning refers to relatively permanent changes in human capabilities that occur as a result of experience rather than a natural growth pro- cess.2 These capabilities are related to specifi c learning outcomes, such as new behaviors, verbal information, intellectual skills, motor skills, attitudes, and cognitive strategies. Both parts of this defi nition are important. First, learning takes place only when changes in capabilities occur. Ultimately, these changes should result in changed behavior, since true learning represents adaptation to circumstances, and this must be refl ected in behavior. Furthermore, this change should be relatively permanent until a new response is learned

learning A process through which individuals change their relatively permanent behavior based on positive or negative experiences in a situation.

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134 Chapter Learning and Perception

to the given situation. Second, learning is driven by experience with a particular situation. An associate may gain insights into a situation by thoughtfully trying different approaches to see what happens, by randomly trying different actions in a trial-and-error process, or by carefully observing others’ actions. In all cases, however, the associate has gained experi- ence in the situation—experience that affects behavior when the situation occurs again. Change in one’s capabilities due to a natural growth process (e.g., gaining muscle strength) is not learning.

Operant Conditioning and Social Learning Theory Most behavior exhibited by associates and managers is intentional in the sense that a given behavior is designed to bring about a positive consequence or avoid a negative conse- quence. Some associates shake hands when they see each other in the morning because it feels good and expresses respect or affection. Other associates apply the brakes on a fork- lift to avoid an accident. Managers may not develop close social relationships with their organization’s associates in order to avoid the complications that can result. All of these behaviors have been learned.

Operant conditioning theory and social learning theory both can be used to explain learning. Both are reinforcement theories based on the idea that behavior is a function of its consequences.3 Operant conditioning theory traces its roots at least back to a famous set of experiments involving cats, dogs, and other animals in the late 1800s.4 The goal of the experiments was to show that animals learn from the consequences of their behavior in a very straightforward way—that presentation of a reward, such as food, conditions an animal to repeat the rewarded behavior in the same or similar situations. In later years, researchers such as B.F. Skinner emphasized this same conditioning in people.5 These researchers, known as behaviorists, adopted the position that higher mental processes typi- cally ascribed to human beings are irrelevant for behavior because all human learning is the result of simple conditioning, just as in cats, rats, dogs, and monkeys. In other words, people do not need to think to learn.

While operant conditioning explains a great deal of human learning, later scientists argued that people can learn in other ways. The most prominent of these theories is social learning theory. Social learning theory, developed by psychologist Albert Bandura, re- jects the idea that higher mental processes are nonexistent or irrelevant in humans.6 This theory emphasizes that humans can observe others in a situation and learn from what they see. Thus, humans do not need to directly experience a particular situation to develop some understanding of the behaviors that are rewarded in that situation.

Contingencies of Reinforcement The basic elements of learning include:

• The situation (sometimes referred to as “the stimulus situation”) • The behavioral response of the associate or manager to the situation • The consequence(s) of the response for the associate or manager

These elements interact to form contingencies of reinforcement. These contingen- cies, explained below, describe different types of consequences that can follow behavioral responses.

operant conditioning theory An explanation for consequence-based learning that assumes learning results from simple conditioning and that higher mental functioning is irrelevant.

social learning theory An explanation for consequence-based learning that acknowledges the higher mental functioning of human beings and the role such functioning can play in learning.

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Fundamental Learning Principles 135

Positive and Negative Reinforcement As shown in Exhibit 4-1, when the consequences of a behavior are positive in a particular situation, individuals are likely to repeat that behavior when the situation occurs again. The introduction of positive consequences, such as peer approval for an associate’s correc- tion of quality problems, increases the likelihood of that behavior being repeated in similar settings. This is called positive reinforcement. Similarly, when a particular behavior in a given situation results in the removal of previous negative consequences, the likelihood of repeating the behavior in similar settings will probably increase. Thus, the removal of negative consequences is called negative reinforcement. If working harder and smarter removes the frown from a manager’s face, an associate may attempt to work harder and smarter.

Punishment When behavior results in the introduction of a negative consequence, individuals are less likely to repeat the behavior. This is called punishment. Punishment differs from nega- tive reinforcement in that an undesirable consequence is introduced rather than removed. Punishment reduces the likelihood of a behavior, whereas negative reinforcement increases the likelihood. An associate who is reprimanded by peers for returning a few minutes late from lunch experiences punishment, as does an associate whose manager assigns him less preferred work hours in response to tardiness.

Punishment must be used judiciously in organizations because it can create a backlash both among those punished and among those who witness the punishment.7 It is impera- tive when punishment is doled out that it be made contingent upon associates engaging in negative behavior.8 Several examples illustrate this problem. At the Providence Journal, a newspaper organization in the northeastern United States, senior management repri- manded two individuals and suspended a third for an editorial cartoon that seemed to poke fun at the publisher. Union offi cials and many union members believed the punish- ments were too harsh, resulting in ill will at a time when relations were already strained.9 At Fireman’s Fund, the leadership of a Tampa offi ce terminated an associate who had “dangerous and violent propensities.” Although termination was probably a reasonable

positive reinforcement A reinforcement contingency in which a behavior is followed by a positive consequence, thereby increasing the likelihood that the behavior will be repeated in the same or similar situations.

negative reinforcement A reinforcement contingency in which a behavior is followed by the withdrawal of a previously encountered negative consequence, thereby increasing the likelihood that the behavior will be repeated in the same or similar situations.

punishment A reinforcement contingency in which a behavior is followed by a negative consequence, thereby reducing the likelihood that the behavior will be repeated in the same or similar situations.

New behavioral response to the situation

Introducing positive consequences or removing negative ones cause a person to repeat behavior in similar situations in the future.

Aversive consequences (punishment) cause the person to avoid the same behavior and try new behaviors in a similar situation in the future.

The situation Behavioral response

to the situation Consequences of

the behavior

Exhibit 4-1 Effects of Reinforcing Conse- quences on Learning New Behaviors

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response, the result was far from reasonable; the terminated individual returned intending to harm former co-workers, illustrating the complexity of managing punishment.10 At the IRS, some managers failed to discipline associates for tardiness, extended lunches, and so forth in a consistent manner, resulting in numerous problems.11

What constitutes an appropriate use of punishment in an organization? When associ- ates exhibit minor counterproductive behaviors, such as rudeness to a peer or a lunch that lasts a few minutes too long, punishment involving a verbal reprimand can be delivered informally by peers or a manager. For more serious behaviors, such as intentional and repeated loafi ng or consistently leaving the workplace early, a more formal process should be used. Based on requirements set by the National Labor Relations Act, Union Carbide has successfully used the following formal process when dealing with problems as they unfold over time: (1) the problem is discussed informally, and the associate is reminded of expectations; (2) the associate receives one or more written reminders; (3) the associate is suspended for one day, with pay, and asked to consider his future with the organization; and (4) the associate is terminated.12

Whether they are imposing minor informal punishment or major formal punish- ment, associates and managers should follow several guidelines:

• Deliver the punishment as quickly as possible following the undesirable behavior. • Direct the punishment at specifi c behaviors that have been made clear to the

recipient. • Deliver the punishment in an objective, impersonal fashion. • Listen to the offending party’s explanation before taking action.

The problems at Korean Air discussed in the Managerial Advice feature were caused at least in part by the overuse of punishment. Clearly, as the case illustrates, the use of punishment at this airline played a role in the crash. Being struck by a person above you in the organization is a particularly diffi cult situation, even for those in an authoritarian culture. Such an approach is inappropriate in a high-involvement organization. In com- plex situations, associates and managers need the input of others to avoid making possibly serious errors such as those leading to the Korean Air crash. The changes implemented by the new president of the airline and the director of fl ight operations have helped to resolve the problem. Because Korean culture respects traditional authority, changing the culture at this airline was diffi cult.13 Yet the changes were important for the airline to compete in a global marketplace.

Extinction Because punishment can be a diffi cult process to manage, organizations may instead de- sire to extinguish dysfunctional behavior by removing its reinforcing consequences. This procedure is called extinction. It is diffi cult to use extinction, however, unless a manager has full control over all reinforcing consequences. For instance, an associate may be con- sistently late to work because he prefers to avoid morning rush-hour traffi c or likes to sleep late. Missing the rush hour and sleeping late are both activities that offer rewarding consequences for being late to work. Associates and managers desiring to extinguish this behavior are unlikely to be able to remove these reinforcing consequences.

The reinforcing consequences of some dysfunctional work behaviors, however, may be completely removable. For example, an associate may have developed a habit of regularly

extinction A reinforcement contingency in which a behavior is followed by the absence of a previously encountered positive consequence, thereby reducing the likelihood that the behavior will be repeated in the same or similar situations.

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Fundamental Learning Principles 137

MANAGERIAL ADVICE

A t 1:00 A.M. on August 6, 1997, the pilots of a Ko-rean Air 747 prepared to land at the Guam airport. Because the airport’s glide slope guidance system had been turned off for main- tenance and because the airport’s ra- dio beacon was located in a nonstan- dard position, the landing was more diffi cult than usual. A rainstorm fur- ther complicated the situation. Under these conditions, the captain needed frank and timely advice from a fully informed and empowered co-pilot and fl ight engineer. Sadly, no such advice was given by the intimidated subordinates. The resulting crash claimed 228 lives.

The suboptimal cockpit climate on board the aircraft that morning seems to have been caused in part by Ko- rean Air’s authoritarian culture, which included heavy-handed punishment delivered by captains for unwanted subordinate input and mistakes. Park Jae Hyun, a former captain with the airline and then a fl ight inspector with the Ministry of Transportation, believed that teamwork in the cockpit was nearly impossible in the existing “obey or else” environment, where co-pilots “couldn’t express themselves if they found something wrong with the captain’s piloting skills.” This

environment was perhaps most clearly evident dur- ing training. An Ameri- can working as a pilot for the airline reported, “I’ve seen a captain punch a co-pilot … for a mistake and the co-pilot just said, ’Oh, sorry, sorry.’” An- other American reports being hit as well, but as an outsider he did not ac- cept the abuse and said to the captain, “Do it again and I’ll break your arm.”

Korean offi cials, American offi - cials, and many others believed change was necessary to prevent additional accidents and to gener- ally improve the organization. Fol- lowing another crash and the forced resignations of key leaders in the late 1990s, new leaders inside Korean Air took actions to change the au- thoritarian, punishment-oriented cul- ture. Yi Taek Shim, the new president, vowed that cultural and technologi- cal problems would be addressed whatever the cost. Koh Myung Joon, who became the new director of fl ight operations, sought captains for training duty who had “the right temperament,” meaning they would not use inappropriate, heavy-handed

punishment but rather would focus on positive reinforcement for desired behavior. These leaders clearly had useful insights. Korean Air has had an excellent safety record in the twenty-fi rst century, and crucial rela- tionships with partner airlines have been strengthened.

Consistent with actions and out- comes at Korean Air, Francis Fried- man of Time & Place Strategies in New York has said that individuals in positions of authority should not “get into a kick-the-dog mentality.” Even Simon Kukes, a Russian who achieved notoriety as CEO of Tyu- men Oil, has suggested that manag- ers should not “yell, scream, and try to fi nd someone to punish.” This is interesting advice, given the general authoritarian culture in Russia.

Punishment Taken Too Far

Sources: “Korean Air Is Restructuring Its Flight Operations Division,” Aviation Week & Space Technology, 152, no. 21 (2000): 21; “Cargo Airline of the Year: Korean Air Cargo,” Air Transport World, 40, no. 2 (2000): 30–31; W.M. Carley and A. Pasztor. 1999. “Pilot Error: Korean Air Confronts Dismal Safety Record Rooted in Its Culture,” Wall Street Journal, July 7; Z. Coleman and M. Song. 2001. “Inquiry Blames Cockpit Crew for KAL Crash,” Wall Street Journal, June 6, P.M. Perry. 2001. “Cage the Rage,” Warehousing Management, 8, no. 2: 37–40; P. Starobin. 2001. “The Oilman as Teacher,” BusinessWeek, June 25, G. Thomas. 2000. “Korean Air CEO Vows ’No More Excuses,’” Aviation Week & Space Technology, 153, no. 1: 48; G. Thomas. 2002. “The Yin and Yang of Korean Air,” Air Trans- port World, 39, no. 10: 26–29.

©Charles Polidano/Touch the Skies/Alamy

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138 Chapter Learning and Perception

visiting the manager’s offi ce to complain about her co-workers. Most of the complaints are trivial, and the manager wishes to extinguish this practice. However, the fact that the manager has appeared to be attentive and understanding is a positive, reinforcing conse- quence. The manager may therefore extinguish the behavior by refusing to listen whenever this associate complains about her co-workers. (During a useful conversation with the associate, the manager would, of course, be attentive; only the dysfunctional behavior should be extinguished.) To use extinction, then, managers must recognize the reinforcing consequences of a behavior, and these consequences must be controllable.

Extinction is supposedly used to eliminate dysfunctional behavior. However, this phe- nomenon can also result in unintended consequences by extinguishing desirable behavior. In a study of hospital employees, some researchers found that when managers failed to provide feedback for good performance (a reward), employees performed more poorly and became unsatisfi ed with their jobs.14

Schedules of Reinforcement Positive and negative reinforcement are powerful tools in many situations. To fully lever- age these two tools, it is important to understand schedules of reinforcement.15 These schedules determine how often reinforcement is given for desired behavior. Reinforcement does not necessarily need to follow every instance of a positive behavior.

The simplest schedule is continuous reinforcement, whereby reward occurs after each instance of a particular behavior or set of behaviors. This schedule tends to produce reasonably high rates of the rewarded behavior because it is relatively easy for an indi- vidual to understand the connection between a behavior and its positive consequences.16 Behavior in organizations, however, often is not reinforced on a continuous schedule, for several reasons. First, once initial learning has occurred through training and/or coach- ing, continuous reinforcement is not required to maintain learned behavior. Second, in today’s organizations, both managers and associates are presumed to be self-managing, at least to some degree. Thus, they do not need continuous reinforcement of positive actions.

Intermittent reinforcement, then, is often used to maintain learned behavior. Sched- ules can vary by rewarding responses only after a specifi ed number of correct behaviors have occurred or after a specifi ed amount of time has passed. The four most common intermittent schedules found in organizations are as follows:

1. Fixed interval. With this schedule, a reinforcement becomes available only after a fi xed period of time has passed since the previous reinforcement. For example, an associate at an airport car rental counter might receive a dollar and praise for saying “May I help you?” rather than using the grammatically incorrect “Can I help you?” Because the manager delivering the reinforcement has a limited amount of money and time to devote to this bonus plan, he might listen from his back offi ce for the proper greeting only after two hours have passed since his last delivery of reinforcement. Upon hearing the greeting after the two-hour interval, the manager would provide the next reinforcement. A fi xed-interval schedule like this one can make the desired behavior more resistant to extinction than the continuous schedule because the associate is not accustomed to being reinforced for every instance of the desired behavior. However, it can also yield lower probabilities of the desired behavior immediately after reinforcement has

continuous reinforcement A reinforcement schedule in which a reward occurs after each instance of a behavior or set of behaviors.

intermittent reinforcement A reinforcement schedule in which a reward does not occur after each instance of a behavior or set of behaviors.

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Fundamental Learning Principles 139

occurred because the person may realize that no additional reinforcement is possible for a period of time. Moreover, it can yield generally low probabilities of the desired behavior if the fi xed interval is too long for the situation.17 Overall, this schedule of reinforcement tends to be the least effective.

2. Variable interval. With this second schedule, a reinforcement becomes available after a variable period of time has passed since the previous reinforcement. In our car rental example, the manager might listen for and reward the desired greeting one hour after the previous reinforcement and then again after one half hour, and then again after three hours. This schedule can produce a consistently high rate of the desired behavior because the associate does not know when reinforcement might be given next. If, however, the average time between reinforcements becomes too great, the variable-interval schedule can lose its effectiveness.18

3. Fixed ratio. With this third reinforcement schedule, a reinforcer is introduced after the desired behavior has occurred a fi xed number of times. In our car rental example, the manager might listen closely to all of the greetings used by a given associate and reward the desired greeting every third time it is used. In industrial settings, managers may create piece-rate incentive systems whereby individual production workers are paid, for example, $5.00 after producing every fi fth piece. Although the fi xed-ratio schedule can produce a reasonably high rate of desired behavior, it can also result in a short period immediately following reinforcement when the desired behavior does not occur.19 Such outcomes occur because associates and managers relax following reinforcement, knowing they are starting over.

4. Variable ratio. With our fi nal schedule, a reinforcement is introduced after the desired behavior has occurred a variable number of times. The manager of our car rental counter may listen closely all day to the greetings but, because of money and time constraints, reward only the fi rst desired greeting, the fi fth, the eight, the fi fteenth, the seventeenth, and so on. This schedule of reinforcement tends to produce consistently high rates of desired behavior and tends to make extinction less likely than under the other schedules.20 The variable-ratio schedule is very common in many areas of life, including sports: baseball and softball players are reinforced on this schedule in their hitting, basketball players in their shot making, anglers in their fi shing, and gamblers in their slot machine activities. In business organizations, salespersons are perhaps more subject to this schedule than others, with a variable number of sales contacts occurring between actual sales.

Exhibit 4-2 summarizes various schedules of reinforcement.

Social Learning Theory Although the principles of operant conditioning explain a great deal of learning that takes place, people also learn in other ways. Social learning theory—and later, social cognitive theory—argues that in addition to learning through direct reinforcement, people can also learn by anticipating consequences of their behavior and by modeling others.21 In other words, learning occurs through the mental processing of information.22

According to these approaches to learning, one way that associates can learn is through symbolization and forethought.23 People have the ability to symbolize events and

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140 Chapter Learning and Perception

to anticipate consequences. This means that rather than having to directly experience pos- sible consequences of one’s behavior, a person can try out various scenarios in his or her mind to determine what potential consequences may result from a particular behavior. For example, if a manager has to make a decision about whether to open a new branch offi ce, she can rely on past experience to come up with symbolic representation of the problem and then anticipate what outcomes may occur if she decides to open the new offi ce.

According to social learning theory, people also learn by observing others. Rather than having to experience consequences fi rst-hand, associates can observe the behavior of oth- ers and the results of that behavior.24 When results are positive, then associates will model the behavior demonstrated by the other person. For example, if an associate is trying to learn how to give presentations, rather than try out many different presentation styles, he may observe his supervisor, who is a wonderful presenter, and then model the supervisor’s presentation style. Associates are most likely to model the behavior of people they perceive to be competent, powerful, friendly, and of high status within the organization.25

Social learning theory also states that an individual’s belief that he will be able to per- form a specifi c task in a given situation is important to learning. This belief is referred to as one’s self-effi cacy.26 When associates have high self-effi cacy toward a particular task, they believe that they can perform that task well. People will not engage in behaviors or will perform poorly when they do not believe that they are able to accomplish the task at a sat- isfactory level. Athletes are often trained to visualize themselves performing extremely well

self-effi cacy An individual’s belief that he or she will be able to perform a specifi c task in a given situation.

Fixed Interval (Reinforcement based on a consistent unit of lapsed time following previous reinforcement)

Continuous Schedule (Reinforcement follows each instance of the desired behavior)

Intermittent Schedules (Reinforcement does not follow each instance of the desired behavior)

B R B R B R B R

1 unit of time 1 unit of time 1 unit of time

Variable Interval (Reinforcement based on varying lapses of time)

B R B R B R B R

1 unit of time 2 units of time 1 unit of time

Fixed Ratio (Reinforcement based on consistent number of instances of the desired behavior)

R 3 instances

of the behavior

3 B R 3 instances

of the behavior

3 B R 3 instances

of the behavior

3 B R 3 instances

of the behavior

3 B

Variable Ratio (Reinforcement based on varying numbers of instances of the desired behavior)

R 1 instance of

desired behavior

1 B R 3 instances of

desired behavior

3 B R 2 instances of

desired behavior

2 B R 1 instance of

desired behavior

1 B

Exhibit 4-2 Schedules of Reinforcement

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Training and Enhancing the Performance of Associates 141

in order to increase their self-effi cacy, and consequently their performance. A great deal of research has shown that self-effi cacy increases performance and learning, beyond ability.27 If there are two people with the same ability, the person with the higher self-effi cacy will tend to perform better and learn more.

Other Conditions for Learning In addition to learning through consequences and observing others, more recent research has noted that the following conditions help facilitate adult learning:28

• Associates need to know why they are learning what they are learning. People become more motivated to learn when they understand why what they are learning is important.29 For example, in order for associates to successfully train to engage in safe behaviors, they must fi rst understand what constitutes safe behavior and then understand the consequences of not engaging in these behaviors.30 In order for associates to know why they are learning what they are learning, they must be provided with specifi c learning objectives.31 Also, allowing associates to either directly or vicariously experience the negative effects of not learning may help them understand why learning the material is important.32 We discuss learning from failure in more detail later in this chapter.

• Associates need to use their own experiences as the basis for learning. Many teaching and learning experts believe that people learn best when they can tie newly learned material to their past experiences, take an active role in their own learning, and are able to refl ect on their learning experiences.33 According to the experiential learning perspective, it is imperative for learning to include active experimentation and refl ective observation.34 This is why many MBA programs include team exercises to teach teamwork skills. Rather than just reading about the importance of teamwork and how to achieve it, students actually experience their lessons and later are asked to refl ect upon what they have learned.

• Associates need to practice what they have learned. Practicing means repetitively demonstrating performance stated in the learning objectives. Overlearning due to constant practice improves the likelihood that associates will engage in newly learned behaviors once they leave the learning situation.35 Overlearning means that performing the new behavior takes little conscious thought, so that the performance becomes automatic.

• Associates need feedback. A great deal of research has been conducted on the effects of feedback on learning.36 Feedback can facilitate learning by providing associates with information about what they should be learning and it can also act as a reward. Feedback is most conducive to learning when associates are comfortably familiar with the material to be learned or when the material is relatively simple.37

Training and Enhancing the Performance of Associates The learning concepts discussed thus far have been successfully used over the years to train newcomers as well as to improve the performance of existing associates. To achieve posi- tive results when training a newcomer, managers often reinforce individuals as they move

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closer to the desired set of behaviors. The following steps capture the most important elements in the process:

1. Determine the new behaviors to be learned.

2. For more complex behavior, break the new behavior down into smaller, logically arranged segments.

3. Demonstrate desired behaviors to the trainee. Research indicates that modeling appropriate behaviors is very useful.38 Research also indicates that unless the key behaviors are distinctive and meaningful, the trainee is not likely to remember them on the job.39

4. Have the trainee practice the new behaviors in the presence of the trainer.

5. Make reinforcement contingent on approximations of desired behavior. At the outset, mild reinforcement can be given for a good start. As the training continues, reinforcement should be given only as progress is made. Reinforcement should be immediate, and over time behavior should be reinforced only if it comes closer to the ultimate desired behavior.40

In newcomer training, managers in many organizations use this approach. Trilogy, a software fi rm based in Austin, Texas, uses positive reinforcement as new hires work through successively more diffi cult assignments in a boot camp that lasts several months.41 E.L. Harvey & Sons, a refuse collector based in Westborough, Massachusetts, has used positive reinforcement as well as mild punishment in its training and orientation program for new drivers.42 Dallas-based Greyhound Bus Company has used positive reinforcement and mild punishment as drivers master proper city, rural, and mountain driving tech- niques. As one recent trainee stated, “You’re not going to be perfect the fi rst time. Some things you’ll get used to doing. I’ll get better.”43

Organizations use numerous methods to train employees.44 On-the-job training meth- ods include orientation programs, organizational socialization experiences, apprenticeship training, coaching, formal mentoring, job rotation, career development activities, and tech- nology-based training. Off-site training methods include instructor-led classrooms, video- conferencing, corporate universities and institutes, and virtual-reality simulators. Learning can also take place informally through trial-and-error, informal mentoring relationships, interactions with co-workers, and from learning from one’s mistakes. We highlight three learning methods below: OB Mod, simulation learning, and learning from failure.

OB Mod To improve the performance of existing associates on ongoing tasks, organizations must be concerned not only with developing good habits but also with breaking bad ones. As an aid in this process, a formal procedure known as organizational behavior modifi cation, or OB Mod, is often used.45 The basic goal of OB Mod, which some refer to as performance management, is to improve task performance through positive reinforcement of desirable behaviors and elimination of reinforcements that support undesirable behaviors.46 Its value lies in the specifi c, detailed steps that it offers.

As shown in Exhibit 4-3, the OB Mod framework can be represented as a simple fl ow- chart. In the initial steps, managers determine desirable and undesirable behaviors and assess the extent to which individuals are currently exhibiting those behaviors. Desirable

OB Mod A formal procedure focused on improving task performance through positive reinforcement of desired behaviors and extinction of undesired behaviors.

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Training and Enhancing the Performance of Associates 143

Must be IDENTIFY

Behaviors for change

Use • Positive reinforcement • Extinction

Measure Post-intervention

frequency

Apply intervention

Develop intervention

INTERVENE

ANALYZE Existing reinforcers

• Observable • Measurable • Task-related • Critical to the task

Use MEASURE

Existing frequency of desired behaviors

• Direct observation • Archival data

EVALUATE For performance

improvement

Schedules of Reinforcement

Use

• Continuous • Intermittent • Ratio • Interval

Yes

Behavior modified?

Maintain the modification

Exhibit 4-3 Shaping Behavior through OB Modifi cation

Source: Adapted from Luthans, F., & Stajkovic, A.D. 1999. “Reinforce for Performance: The Need to Go Beyond Pay and Even Rewards,” Academy of Management Executive, 13 (2): 49–57.

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144 Chapter Learning and Perception

behaviors may be as simple as using a production machine or answering the telephone in a different way. In the next step, the functional analysis, managers determine reinforcers that can be used to increase the frequency of desired behavior (e.g., praise, preferential work arrangements, time off ) and reinforcers that must be eliminated to extinguish un- desirable behaviors (e.g., social approval from co-workers for loafi ng). Next, managers apply the knowledge they have gained concerning reinforcers in an effort to alter behavior in a fruitful way. If successful in this step, they can develop an appropriate reinforcement schedule for the future. Finally, the impact of modifi ed behaviors on job performance indicators, such as units produced per day, is assessed.

Research has been generally supportive of OB Mod. One study found that PIGS (positive, immediate, graphic, and specifi c) feedback, coupled with social reinforcement for desired behavior (e.g., praise, attention, compliments), improved the delivery of qual- ity service by tellers in a bank.47 Another study found that feedback coupled with social reinforcement and time off helped overcome signifi cant performance problems among municipal workers.48 In Russia, a study determined that feedback and social reinforce- ment improved the quality of fabric produced by textile workers.49 Overall, research has found an average performance gain of 17 percent when OB Mod was explicitly used.50

OB Mod research reveals that performance improvements tend to be greater in manu- facturing organizations (33 percent on average) than in service organizations (13 percent on average).51 This difference across types of organizations highlights a weakness of the OB Mod approach. For jobs that are complex and nonroutine, such as those found in some service organizations (e.g., accounting fi rms, law fi rms, and hospitals), OB Mod tends to be less effective. In complex jobs, where excellent performance in core job areas (successful audits, effective surgical procedures) is based on deep, rich knowledge and on skills that can take months or years to develop, short-term interventions based on the simple principles of operant conditioning and social learning may not yield particularly strong performance gains.52 For organizations seeking to develop their human capital for competitive advantage, this limitation must be considered.

OB Mod research also reveals another important fact: performance feedback coupled with social reinforcements can be as effective as feedback coupled with monetary reinforc- ers.53 In the studies of bank tellers, municipal workers, and Russian textile workers, for example, no monetary reinforcement was involved. For managers and organizations, this is very important. Although managers, as part of high-involvement management, should provide fair fi nancial compensation overall, they do not necessarily need to spend signifi - cant amounts of money to improve performance.

Simulations In some situations, an associate or manager may take a particular action with unclear con- sequences.54 This happens when the effects of an action combine with the effects of other factors in unpredictable ways. Suppose, for example, that a team leader brings pizza to celebrate a week of high productivity. The team members express appreciation and appear generally pleased with the gesture, but the appreciation is not overwhelming. The team leader may conclude that having a pizza party is not worth the trouble. She may be cor- rect, or she may be incorrect because other factors may have contributed to the situation. At the time of the pizza party, a key member of the team was out caring for a sick parent. In addition, rumors circulated among the team members that the new plant controller did

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Training and Enhancing the Performance of Associates 145

not embrace high-involvement management. Did these two factors affect the team’s reac- tion to the pizza?

In this example, the team leader could discuss the situation with team members in order to better understand their reactions. Other situations may be so complex that discus- sions with team members may not be adequate. Consider the complex situation facing the general manager at a Canadian curling club. He plans to increase the annual membership fee to enhance profi ts. As shown in Exhibit 4-4, the annual fee does infl uence profi ts, but the effects are not clear. On the one hand, increasing the annual fee has a positive effect on revenue from membership fees because members who stay are paying more, and this in turn has a positive effect on profi ts. On the other hand, increasing the annual fee puts up- ward pressure on the cancellation rate among members and therefore downward pressure on the total number of club members. As the number of club members declines, revenue

TOTAL PROFIT

BAR B FOOD

REVENUE

ICE RENTAL REVENUE

NO. OF RENTERS APPLICATION

RATE

NO. OF CLUB

MEMBERS

MEMBERSHIP REVENUE

RAFFLE PROFIT CANCELLATION

RATE

ANNUAL FEE

ALLOWED WAGE COST

OF BAR B FOOD SERVICE

COSTS

NO. OF EMPLOYEES

QUALITY OF SERVICE QUALITY

OF ICE

QUALITY OF MANAGEMENT

+ +

+++

+ +

+ –

–

– –

–

Exhibit 4-4 Causal Relationships at a Sports Club

Note: A “�” between two variables indicates a direct, noninverse relationship. When the variable at the start of an arrow exhibits an increase, there is upward pressure on the variable at the end of that arrow. When the variable at the start exhibits a decrease, there is downward pressure on the variable at the end. A “�” between two variables indicates an inverse relationship. When the variable at the start of an arrow exhibits an increase, there is downward pressure on the variable at the end of that arrow. When the variable at the start exhibits a decrease, there is upward pressure on the variable at the end.

Source: Reprinted by permission, R.D. Hall. 1983. “A Corporate System Model of a Sports Club: Using Simulation as an Aid to Policy Making in a Crisis,” Management Science, 29 (1): 52–64, the Institute for Operations Research and the Management Sciences (INFORMS), 901 Elkridge Landing Road, Suite 400, Linthicum, Maryland 21090-2909 USA.

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146 Chapter Learning and Perception

is lost, which reduces profi ts. What actual effect, then, will an increase in the membership fee have? Is the overall effect positive or negative? Perhaps an increase up to a point results in more revenue from the members who stay than is lost from the members who leave. But where is the point at which total revenue begins to decline? A further complication is that factors other than the membership fee infl uence revenues and costs and profi ts.

In situations where a complex system of variables exists and we have some under- standing of how the variables affect one another, a simulation may be a useful tool for understanding the effects of a potential action. A simulation mimics the real system but allows us to take one action at a time to understand its effects. In our curling club ex- ample, the relationships among the variables shown in Exhibit 4-4 could be developed into a simulation. If the manager of the club wanted to change the annual fee to affect profi ts, he could implement various increases in this fee within the simulation to observe the effects.

Although simulations are important and useful, they typically represent simplifi ed models of reality. For this reason, and because some situations are too complex to be ac- curately represented in simulations, some organizations prefer to substitute or augment simulations with formal experimentation in the real world.55 The idea is to have associates and managers try different approaches, even though some will no doubt fail to discover which approach seems to work best under particular conditions. Such experimentation has often been used in the development of technology for new products,56 and it has also been used in areas such as setting the strategic direction of the organization.57 Bank of America is one of many organizations that regularly conducts experiments.58 It has a number of branches specifi cally designated for testing new ideas in décor, kiosks, service procedures, and so on.

Learning from Failure High-involvement fi rms often attempt to leverage their human capital in ways that will enhance innovation.59 Accordingly, they often empower associates and managers to ex- periment. In addition to the formal experimentation discussed earlier, these organizations often promote informal and smaller-scale experimentation in almost all areas of organi- zational life, ranging from a manager trying a new leadership style to an associate on the assembly line trying a new method of machine setup. Such experimentation yields learn- ing that otherwise would not occur. A manager’s leadership style may have been working well, but trying a new style will provide him with information on the effectiveness of the new style.

Experimentation, however, does not always result in success; by its nature, it often produces failure. New approaches sometimes are less effective than old ways of doing things. New product ideas sometimes are not attractive in the marketplace. Gerber Singles (adult foods produced by the baby food company), Life-Savers Soda (carbonated bever- ages produced by the candy maker), and Ben-Gay Aspirin (pain relievers produced by the heating-rub company) are reasonable ideas that failed in the marketplace.60

The key is to learn from failure.61 A failure that does not result in learning is a mis- take; a failure that results in learning is an intelligent failure. Intelligent failures are the result of certain kinds of actions:62

• Actions are thoughtfully planned. • Actions have a reasonable chance of producing a successful outcome.

simulation A representation of a real system that allows associates and managers to try various actions and receive feedback on the consequences of those actions.

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Training and Enhancing the Performance of Associates 147

EXPERIENCING ORGANIZATIONAL BEHAVIOR

This credo of the Ritz-Carlton Hotel Associates may seem simple. However, in order to enact it, associates must go through constant training of a quality that led Training magazine to name the Ritz- Carlton the number-one company for employee training and development in 2007. The Ritz-Carlton is known for its exemplary service, which has been recognized by two Malcolm Baldrige National Quality Awards and consistently high rankings in travel periodicals of the world’s great- est hotels. The Ritz-Carlton has 78 ho- tels worldwide, with at least 14 other projects underway; 38,000 associ- ates work for the company.

All Ritz-Carlton associates are expected to go for what the company calls the “wow” factor by not only meeting guests’ needs but also antici- pating them. If you order your favorite drink at a Ritz-Carlton in Hong Kong, the bartender at the Ritz-Carlton in New Orleans will know what you want when you sit down at his bar. Special room requests, such as M&Ms in the minibar, will be met each time someone visits a Ritz-Carlton without the guest ever having to ask for the favor. Special software makes such anticipatory service doable. How- ever, this type of service could never be carried out without exceptional as- sociate service performance.

In order to reach this performance level, all associates go through con- stant training throughout their careers with the Ritz-Carlton. It all begins with a two-day orientation session taught by master trainers. However, training does not stop there. New associates go through at least 310 hours of train- ing in their fi rst year, where they are personally paired with a departmen- tal trainer. They receive a training cer- tifi cation, much like mastercraftsmen, when they can demonstrate mastery of their job. Reviews take place on days 21 and 365.

New employees are not the only associates who receive constant training. All Ritz-Carlton associates are trained continuously. Methods of training include:

• Daily meetings, where all employ- ees give and receive feedback on what has been done right and what has been done wrong. Time is also spent discussing one of the Ritz-Carlton’s 12 service values.

• On-the-job training by mentors and training directors.

• Classroom training delivery.

• Good performance is clearly re- warded either monetarily or by verbal praise. Ritz-Carlton Associ- ates are almost twice as likely as other hotel associates to report

that they receive constructive feed- back and are clearly rewarded.

Unlike many other companies, the Ritz-Carlton also devotes a great deal of time to evaluating their train- ing programs, using knowledge tests, performance appraisals, associate and guest surveys, and quantitative service-quality measures. Their train- ing programs are responsible for the fact that the Ritz-Carlton sets industry standards for the total revenue per hours worked, employee satisfaction, low turnover rates, and customer sat- isfaction. In fact, the Ritz-Carlton train- ing methods are so successful that the company began the Leadership Cen- ter, which provides training to asso- ciates, mostly senior managers, from other companies.

“We Are Ladies and Gentlemen Serving Ladies and Gentlemen”

Sources: http://corporate.ritzcarlton.com. Anonymous, “Ritz-Carlton: Redefi ning Elegance (No. 1 of the Training Top 125),”Training, Mar. 1, 2007, at http://www.trainingmag.com; Lampton, B. 2003. “My Pleasure,”ExpertMagazine. com, Dec. 1, at http://www.expertmagazine.com; The Ritz-Carlton Hotel Company, L.L.C., “Application Summary for the Malcolm Baldrige National Quality Award,” 2000, at http://corporate.ritzcarlton.com.; Ritz-Carlton Press Release facts sheet. December, 2009, at http://corporate.ritzcarlton.com/en/Press/FactSheet.htm.

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148 Chapter Learning and Perception

• Actions are typically modest in scale, to avoid putting the entire fi rm or substantial parts of it at risk.

• Actions are executed and evaluated in a speedy fashion, since delayed feedback makes learning more diffi cult.

• Actions are limited to domains that are familiar enough to allow proper understanding of the effects of the actions.

Firms serious about experimentation and intelligent failure create cultures that pro- tect and nurture associates and managers willing to take calculated risks and to try new things.63 Such cultures have visible examples of individuals who have been promoted even after having failed in trying a new approach. Such cultures also have stories of associates who have been rewarded for trying something new even though it did not work out. At IDEO, a product design fi rm based in Palo Alto, California, the culture is built on the idea that designers should “fail often to succeed sooner.”64 At 3-M, the global giant based in St. Paul, Minnesota, the culture is built on the idea that thoughtful failure should not be a source of shame.65

Learning from failure, OB Mod, and simulations are just three ways in which or- ganizations can train associates. Many organizations, such as the Ritz-Carlton Hotel Company, use multiple methods as evidenced in the Experiencing Organizational Behav- ior feature. The Ritz-Carlton provides an excellent example of the strategic importance of training and continuous employee learning. Although the Ritz-Carlton Hotel Com- pany spends much more on associate training than its competitors, the company sees payoff from its training on all important indicators. Customer satisfaction is higher and associates work harder and turn over less frequently at the Ritz-Carlton than they do at other hotels. This superb performance has led the Ritz-Carlton to win almost every prestigious business and training award, while making it an exceptionally successful company.

Perception As we have shown in the preceding sections, associates and managers who can effectively learn from experience, and help others to do so, contribute positively to an organization’s human capital and therefore contribute positively to its capacity to develop sustainable competitive advantage. To further develop the story of learning, we now turn to issues of perception. If an associate or manager does not perceive people, tasks, and events ac- curately, learning from experience is diffi cult. If an associate or manager does not perceive the world accurately, he will base his behavior on inaccurate perceptions of the world rather than on reality.

Associates and managers are constantly exposed to a variety of sensory inputs that infl uence their perceptions. Sensory inputs refer to things that are heard, seen, smelled, tasted, and touched. These inputs are processed in the mind and organized to form con- cepts pertaining to what has been sensed or experienced. For instance, an associate in a catering fi rm may sense a common item such as a loaf of bread. He touches it, squeezes it, smells it, looks at its shape and color, and tastes it. His mind processes all of the sensory inputs, and he forms ideas and attitudes about that loaf of bread and the bakery that pro- duced it. He may determine that the bread is fresh or stale, good or bad, worth the price or not, and may subsequently decide whether products of this particular bakery are to be used. These are his perceptions of the bread and of the producer.

perception A process that involves sensing various aspects of a person, task, or event and forming impressions based on selected inputs.

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Perception 149

Perception comprises three basic stages:66

1. Sensing various characteristics of a person, task, or event. This stage consists of using the senses (touch, sight, smell, and so on) to obtain data. Some data in the environment, however, cannot be detected by the sensory organs. For example, operators of the Three Mile Island nuclear facility, which almost melted down in the 1970s, could not sense that a relief valve was stuck open in the nuclear core because they could not see it and the instrument panel indicated that it was closed.67 Some data, though accessible, are not sensed. Engineers and managers with NASA and Morton Thiokol failed to sense certain features of their booster rockets when considering whether to launch the ill-fated Challenger shuttle in the 1980s.68

2. Selecting from the data those facts that will be used to form the perception. An individual does not necessarily use all of the data that she senses. At times, a person may be overloaded by information and unable to use all of it. For example, U.S. Defense Department offi cials dealt with overwhelming amounts of data from various sources with regard to the events of September 11 and the confl ict in Iraq. At other times, a person may purposely exclude information that is inconsistent with her other existing perceptions. A manager who fi rmly believes an associate is a weak performer, for example, may discount and ultimately exclude information suggesting otherwise.69 Accurate perception, however, requires the use of all relevant information.

3. Organizing the selected data into useful concepts pertaining to the object or person. An individual must order and sort data in a way that is useful in establishing approaches to dealing with the world. We now explore this aspect of perception in discussing perceptions of people.

Perceptions of People Shortcomings in the ability to sense the full range of data, to select appropriate data for further processing, and to organize the data into useful information can lead to inaccurate perceptions about people.70 These erroneous perceptions in turn can interfere with learning how to best interact with a person and can lead to poor decisions about and actions toward the person. Effective associates and managers are able to develop complete and accurate perceptions of the various people with whom they interact—customers, sales representa- tives, peers, and so on. An effective manager, for example, knows when a sales representative is sincere, when an associate has truly achieved superior performance, and when another manager is dependable. These accurate perceptions are crucial to a fi rm’s human capital that contributes to competitive advantage. Next, we discuss several factors that infl uence the process of perceiving other people. These factors are shown in Exhibit 4-5.

The Nature of the Perceiver The perception process is infl uenced by several factors related to the nature of the per- ceiver. Impaired hearing or sight and temporary conditions such as those induced by alco- hol or prescribed medications can, of course, affect perception. Beyond those challenges, the most important factors are the perceiver’s familiarity with the other person, the per- ceiver’s existing feelings about the other person, and the emotional state of the perceiver.

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©E.Neitzel/WireImage/Getty Images, Inc.

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150 Chapter Learning and Perception

Nature of Perceiver

Familiarity with the Other Person

Feelings Toward the Other Person

General Emotional State Perception

of the Person

Nature of the Situation

General Nature of the Other Person

Apparent Intentions of the Other Person

Consequences of the Interaction

Problems in Person Perception

Implicit Person Theories

Halo Effect

Projecting

Stereotyping

Exhibit 4-5 Person Perception

Familiarity with the person is important. On the one hand, an individual may have more accurate perceptions of people with whom she has had a substantial history. Over time, the individual has had many opportunities to observe those people. On the other hand, an individual may pay more attention to newcomers, making extra efforts to notice and process data about them.

If an individual has put a great deal of effort over time into properly understanding certain people, she probably has developed accurate perceptions of their characteristics and abilities. If, however, those characteristics and abilities change, or if the people act in ways that are not consistent with their longstanding characteristics and abilities, the perceiving individual may not accurately interpret the new characteristics or behaviors. In this case, the perceiver may be too focused on existing beliefs about the friends and as- sociates to accurately interpret new characteristics or behaviors. A manager who has had an excellent, trusting relationship with an associate over many years may thus disregard evidence of lying or poor performance because it does not fi t preexisting conceptions of the person.71

An individual’s feelings about another person also may affect the perception process. If the individual generally has positive feelings toward a particular person, he may view the person’s actions through a favorable lens and thus may interpret those actions more positively than is warranted. In contrast, if the individual generally has negative feelings toward a particular person, he may view the person’s actions through an unfavorable lens and thus interpret those actions more negatively than is warranted.

Research conducted at a large multinational fi rm provides evidence for these com- monsense effects. In this research, 344 middle managers were rated by 272 superiors, 470 peers, and 608 associates. The feelings of the 1,350 raters were assessed through measures of admiration, respect, and liking. Raters who had positive feelings toward a particular ratee consistently rated his or her performance more leniently than they should have. Rat- ers who had negative feelings rated performance too severely.72

An individual’s emotional state may also affect perceptions of others. If the individual is happy and excited, she may perceive others as more exuberant and cheerful than they really are. If the individual is sad and depressed, she may perceive others as more unhappy than they really are or even as more sinister than they really are. For example, in one study,

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Perception 151

several women judged photographs of faces after they had played a frightening game called “Murder.” Those women perceived the faces to be more menacing than did women who had not played the game.73

The Nature of the Situation Factors present in a situation can affect whether an associate or manager senses important information, and these factors can infl uence whether this information is used in percep- tions. Relevant factors are numerous and varied. Three of them are discussed here: obvious characteristics of the other person, the other person’s apparent intentions, and the conse- quences of interactions with the person.

As previously discussed, an individual’s perceptions of another person can be infl u- enced by his own internal states and emotions. In addition, the individual’s perceptions of another person are affected by that person’s most obvious characteristics (those that stand out). For instance, the perceiver is likely to notice things that are intense, bright, noisy, or in motion. He is also likely to notice highly attractive and highly unattractive people, people dressed in expensive clothes and those dressed in clothes refl ecting poor taste, and bright, intelligent people or extremely dull-witted ones. He is less likely to notice normal or average people. This effect on perceptions has been demonstrated in research.74

In organizations, extremely good and bad performers may be noticed more than av- erage associates. Managers must be aware of this tendency because most associates are average. Large numbers of associates may go unnoticed, unrewarded, and passed over for promotions, even though they have the potential to contribute to a fi rm’s goals and to the achievement of competitive advantage.

An individual’s perceptions may also be affected by the assumed intentions behind another person’s actions. If, for example, assumed intentions are undesirable from the per- ceiver’s point of view, the other person may be seen as threatening or hostile.75

Finally, an individual may be affected by the consequences of a single interaction with another person. If the consequences are basically positive, the individual is likely to perceive the other person favor- ably. If, however, the results of the interaction are nega- tive, the individual is more likely to view the other person unfavorably.

In one study, a researcher’s accomplice was the only member of a work group to fail on the assigned task. The study included two conditions. In one condition, the ac- complice’s failure prevented the other members from re- ceiving payment for the task. This accomplice was per- ceived unfavorably (as less competent, less dependable, and less likable). In a second condition, the other members received payment despite the accomplice’s failure. This ac- complice was seen as being more competent, dependable, and likable, even though the actual level of performance was the same as the fi rst accomplice’s.76

Problems in Person Perception The preceding discussion shows that perceiving others accurately can be challenging. In fact, some of the most

©Tobi Corney/Getty Images, Inc.

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152 Chapter Learning and Perception

noteworthy confl icts in organizations have been the result of misperceiving others. In a well-known example involving Apple Computer, a midlevel manager in charge of dis- tribution misperceived the character and motives of a manager in charge of one of the manufacturing operations, resulting in a battle that was unnecessarily protracted.77 The distribution manager almost resigned her job with the organization before realizing the other manager was not committed to dismantling the existing distribution function. Be- cause perceptions infl uence how associates and managers behave toward one another, it is important to strengthen our understanding of the perceptual process so that our percep- tions of others refl ect reality.

The perceptual process is infl uenced by factors associated with both the perceiver and the general situation. The problems that prevent the formation of accurate perceptions arise from factors that can be ordered into four general problem groups: implicit personal- ity theories, halo effect, projecting, and stereotyping.

People hold implicit person theories,78 which are personal theories about what per- sonality traits and abilities occur together and how these attributes are manifested in be- havior. For example, if an associate notices that her colleague’s offi ce is brightly decorated and messy, she may infer that this associate will be very talkative and outgoing because her implicit personality theory states that messiness and extraversion go together.79 One type of implicit personality theory that individuals hold concerns whether people believe that personality traits and abilities are fi xed and unchangeable in people.80 Those who believe that people cannot change are called entity theorists, while those who believe that people’s attributes such as skills and abilities can change and develop are called incremental theorists. Research has shown that managers who hold an entity theorist perspective are less likely to help and coach their subordinates because they believe that their behavior is unchangeable.81

The halo effect occurs when a person makes a general assessment of another person (such as “good” or “bad”), and then uses this general impression to interpret everything that the person does, regardless of whether the general impression accurately portrays the behavior.82 With regard to the halo effect, if a person is perceived as generally “good,” a manager or associate will tend to view the person in a positive way in any circumstance or on any evaluative measure. Thus, if Marianne is perceived as being a generally “good” person, she may be seen as an active, positive force in the organization’s culture even if she is actually neutral in promoting a positive culture. If Ted is perceived as being a “bad” person, he may be considered insolent and cunning even if he does not truly exhibit those particular negative traits. In the many studies of this phenomenon, halo error has been found in ratings given to job candidates, teachers, ice skaters, and others.83

Assuming that most other people have the same values and beliefs as we do is known as projecting. For example, a production manager may think that lathe operators should always check with her on important decisions. The production manager may also believe that the lathe operators prefer this checking to making their own decisions. This may be an inaccurate perception, however, and the lathe operators may complain about the need to check with the manager. Obviously, falsely believing that other persons share our beliefs can lead to ineffective behavior. Specifi c problems include overestimating consensus, un- dervaluing objective assessments, and undervaluing those with opposing views.84

As already noted in Chapter 2, when an individual has preconceived ideas or percep- tions about a certain group of people, stereotyping can occur. When the individual meets someone who is obviously a member of a particular group, he may perceive that person as

implicit person theories Personal theories about what personality traits and abilities occur together and how these attributes are manifested in behavior.

halo effect A perception problem in which an individual assesses a person positively or negatively in all situations based on an existing general assessment of the person.

projecting A perception problem in which an individual assumes that others share his or her values and beliefs.

stereotyping A perception problem in which an individual bases perceptions about members of a group on a generalized set of beliefs about the characteristics of a group of individuals.

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Perception 153

having the general characteristics attributed to the group rather than perceiving the person as an individual with a unique set of characteristics.85 For example, a manager may perceive union members (a group) to be strong, assertive troublemakers. When she meets John, a union member, she perceives him to be a troublemaker simply because he is a union member. This type of perceptual problem is commonly found among managers who deal ineffectively with union leaders, associates who deal ineffectively with members of the other gender, and associates who deal ineffectively with members of other ethnic groups.

To fully leverage its human assets, an organization must have associates and managers who respect one other and appreciate the unique characteristics of each person. Stereotyp- ing can interfere with these outcomes. Effective, productive interactions require accurate perceptions of people, and stereotypes are frequently incorrect, for two reasons. First, the stereotyped characteristics of a group may simply be wrong. Erroneous stereotypes may re- sult from a number of factors, such as fear of a group and contact with only a select subset of a group. Obviously, when the stereotype itself is inaccurate, applying the stereotype to an individual can only result in error. Second, even if stereotyped characteristics of a group are generally correct, any given individual within the group is unlikely to have all, or even most, of the characteristics attributed to the group.

One basis for stereotyping individuals is their physical attractiveness. Elysa Yanowitz was fi red by L’Oreal USA, Inc. for not fi ring a Macy’s saleswoman who was “not good look- ing enough.”86 A company executive said, “Get me somebody hot” for the job. Annette McConnell, a sales company employee who weighed 300 pounds, was told by a manager that “they were going to lay me off because people don’t like buying from fat people.”87 It is well documented that people associate those who are physically attractive with positive qualities and those who are unattractive with negative qualities.88 Thus, perceptions of a person’s attractiveness and/or weight can infl uence how they are evaluated on the job and even how much they get paid.89 For example, overweight women were found to earn 7 to 30 percent less than normal-weight women performing at the same level in the same jobs.90 Such bias, while usually not illegal, is strategically unsound for organizations. Bias of this type means that organizations are making less-than-optimal decisions about how to use their human capital.91 Furthermore, such unfair treatment can be demoralizing and stressful and may lead associates to perform at less-than-optimal levels.92 In some cases, such as the L’Oreal case, such treatment can lead to charges of sex discrimination when men and women are held to different attractiveness standards.93 As discussed in Chapter 2, such cases are extremely costly for organizations, not to mention the individuals involved.

Self-Perception It is widely recognized that perceptions of others have important consequences, but an individual’s perception of self may have important consequences as well. Individuals who perceive themselves as highly competent are likely to try new approaches to tasks and perhaps be more productive than their peers. Self-confi dence is a powerful force. In an examination of lower-level managers, self-perceptions of competence were found to play a signifi cant role in task performance.94

Attributions of Causality As individuals consider the behavior of others, they will perceive that actions have various causes. Different people, however, may see the same behavior as being caused by different

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154 Chapter Learning and Perception

factors. For example, suppose two people observe someone busily working at a task. Both may conclude that he is being positively reinforced for the task, but they may disagree about the nature of the reinforcement. One of the observers may believe that the person is making diligent efforts “because the boss is looking and smiling,” whereas the other observer may believe the efforts are caused by the satisfaction inherent in doing the task. As evidenced in the Experiencing Organizational Behavior section, Pilot Long inaccurately concluded that Ken Good’s lack of knowledge about how to radio was due to a general lack of knowledge, and thus, later ignored his expert advice about their location. He could have concluded that Ken Good’s lack of knowledge about the radio was simply due to his not knowing the correct password. The process of deciding what caused the behavior is known as attribution.95

Internal–External Attribution A person’s behavior is often interpreted as having been caused by either internal factors (such as personality, attitudes, and abilities) or external factors (such as organizational

EXPERIENCING ORGANIZATIONAL BEHAVIOR

Flight SEA04GA192 took off from Glacier National Park air-port on September 20, 2004. On board were fi ve people, includ- ing pilot Jim Long, 60; Chief of Party, Ken Good, 58; and forestry scientists Davita Bryant, 32; Matthew Ramige, 29; and Jodee Hogg, 23. They were heading for Schafer Meadows, an air- strip in 1.5 million acres of Montana wilderness. They were heading out to collect forestry data for the U.S. For- est Service. The weather that day was horrible, with low clouds obscuring mountain peaks. Flight SEA04GA192 never reached her destination. Two days later, only two of the crew mem- bers barely survived, Matthew Ramige and Jodee Hogg. The rest of the crew lay dead at the site of the plane crash in the Great Bear Wilderness.

The weather, which had ham- pered visibility, led pilot Long to abandon the planned fl ight course. The plane fl ew into a boxed canyon

with mountain walls on three sides and no way out. At the last minute, Long attempted to turn out of the can- yon and crashed into the side of the mountain. Pilot Long and forestry sci- entist Bryant were killed at the time of the crash. Ken Good died at the crash site the following morning. The next day, Ramige and Hogg walked out of the canyon by themselves, without being rescued. They were found two days later when they reached civiliza- tion. Thus, apart from the disaster of the crash, there was also the failure of the search team to fi nd the survivors.

While weather seems the most obvious cause of this problem, closer examination reveals that human error, based on a lack of learning and mis- guided perceptions, played a role in this disaster. Based on recollections of survivors Hogg and Ramige, there was confusion between pilot Long and Chief of Party Good when the plane ran into trouble. When trying

to call in the plane’s location, Good was unable to do so.

“Ken tried to radio in and Jim—I think Jim ended up actually making the radio because Ken didn’t know the code word. … [H]e looked at Jim and said, What’s your number? ... He’s like, Okay, How do you do it? And Jim’s like, Here. Just let me do it. And Ken is like, I really want to do it, blah, blah, blah. …”

Furthermore, while Good had superior knowledge of the area, Long failed to take his advice, possi- bly because he did not know how to

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Perception 155

resources, luck, and uncontrollable infl uences). When making these internal–external at- tributions, we depend to a great extent on our perceptions of the consistency, consensus, and distinctiveness associated with the behavior.

• Consistency is the extent to which the same person behaves in the same manner in the same situation over time (he returns from lunch late every day).

• Consensus is the degree to which other people in the same situation behave in the same manner (everyone returns from lunch late).

• Distinctiveness is the degree to which the same person tends to behave differently in other situations (he returns from lunch late every day but does not come to work late in the morning or leave work early at night).96

As shown in Exhibit 4-6, when we see a person’s behavior as high in consistency, low in consensus, and low in distinctiveness, we tend to attribute that behavior to internal fac- tors. If the behavior is low in consistency, high in consensus, and high in distinctiveness, we tend to attribute the behavior to external factors. If the behavior is perceived as having

call in their location. Thus, he attrib- uted Long’s inability to use the radio as being due to his general lack of knowledge, and may have assumed he didn’t know about anything. In- deed, right before the crash, pilot Long had radioed in a wrong posi- tion, after arguing with Good about it. Clearly, if these two men had been able to learn from each other, this di- saster may have been avoided. Fur- thermore, Long was a retired chemist, who had very little experience fl ying in this type of terrain and certainly under these weather conditions. He just did not have the experience to handle the crisis situation.

A second tragic aspect of this dis- aster is that the search party arrived

at the site of the accident the next day, September 21, after searching the wrong location. They surveyed the crash site and declared that there were no survivors, when in fact Hogg and Ramige had left the site after realizing that the search plane fl ying overhead had not seen them. Rather than looking for the survivors, it was just assumed that they were dead and that their bodies had been burned in the plane crash. Search ef- forts were canceled and the families were notifi ed that their loved ones had perished. When asked to explain how they had made this mistake, the searchers blamed the survivors, rather than their own misreading of the scene. They stated, “There were

no footprints leaving the site, no piled rocks, no written message—nothing indicating anyone had survived or left the area.” Clearly, they had failed to learn from their error and engaged in making self-serving bias attributions for their failure to rescue the survivors.

In the end, learning, or lack of it, played a big role in this disaster. If Long and Good had been willing or able to learn from each other, the crash may have been avoided. If the search team were more accurate in their perceptions, Ken Good’s life may have been saved and Jodee Hogg and Matthew Ramige would not have had to suffer for two days in the bitter cold wilderness while se- verely wounded.

Sources: W.S. Becker, & M.J. Burke. 2008. “Shared decision making in a wilderness aviation accident.” In M. Burke (Chair), Shared Decision Making in Singular Events. Symposium at the 2008 Annual Meeting of the Academy of Management, Anaheim, California; W.S. Becker. 2007. “Missed Opportunities: The Great Bear Wilderness Disas- ter,“ Organizational Dynamics, 36; 363–376.; National Transportation Safety Board (NTSB. (2005). Aircraft Accident Report: SEA04GA192, Essex, MT, September 20, 2004. Washington, D.C. Probable Cause and Narrative Report; U.S. Department of Agriculture Forest Service (USFS) (2005). Accident Investigation Factual Report. Press Release FS-025A USDA Forest Service, 9/23/2004.

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156 Chapter Learning and Perception

a mixed profi le (such as high in consistency and high in distinctiveness with consensus being neutral), we often are biased toward internal attributions.

Studies have highlighted many situations in which internal and external attributions play major roles in attitudes and behavior. For example, one study suggests that unemployment counselors and their clients are infl uenced by these attributions in contrasting ways. On the one hand, unemployed persons are at the greatest risk for mental depression when they be- lieve their situation is caused by uncontrollable external factors. The less control we perceive ourselves to have over events, the more likely we are to become despondent. On the other hand, a counselor is more likely to help an unemployed person if she sees that the unemploy- ment is caused by uncontrollable external factors. If the counselor has attributed the cause of a client’s unemployment to an internal factor (such as poor attitude or low motivation), she is less likely to be helpful.97 Interestingly, researchers suggest that, in general, observers tend to overestimate the impact of internal causes on other people’s behavior and underestimate the effect of external causes. This general tendency is called the fundamental attribution error.98

Attributions of Success and Failure Monitoring and responding to poor performance are important tasks for managers and, in high-involvement organizations, for associates as well. To respond appropriately, managers must accurately assess the cause of any poor performance they observe. If they are unable to accurately identify the cause, individuals could suffer or benefi t unjustly. Unfortunately, several troublesome attributional tendencies play a role.

First, the fundamental attribution error has an effect, although it may be minor. This error causes managers to attribute the behavior of others to internal factors. Thus, an individual’s poor performance may have an external cause, but a manager may attribute it to an internal cause. For example, equity fund managers who perform poorly are often subjected to unfair criticism from those above them in the fi rm. Although skill is involved, fund-manager performance is often determined by uncontrollable factors.

Second, the self-serving bias plays a role, and it often has a signifi cant effect on at- tributions. This bias works as follows. We have a strong tendency to attribute our own successes to internal factors (a high level of skill or hard work) and our own failures to

fundamental attribution error A perception problem in which an individual is too likely to attribute the behavior of others to internal rather than external causes.

self-serving bias A perception problem in which an individual is too likely to attribute the failure of others to internal causes and the successes of others to external causes, whereas the same individual will be too likely to attribute his own failure to external causes and his own successes to internal causes.

External High

Low

Distinctiveness

Individual Behavior

Internal

External High

Low

Consensus

Internal

Internal High

Low

Consistency

ExternalExhibit 4-6 Attribution Theory

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Perception 157

external causes (a diffi cult task or bad luck). Conversely, we tend to attribute someone else’s success to external factors and someone else’s failures to internal factors. We saw this bias at work when the rescue team in the Great Bear Wilderness case blamed the survivors for the team’s failure to recognize that there had been survivors.

The fundamental attribution error and the self-serving bias work together to produce a signifi cant bias toward assessments of internal causation for poor perform- ance.99 This bias means that managers and others make evaluation errors more often than they should. Was the Three Mile Island nuclear disaster in the late 1970s a func- tion of several unforeseeable events coming together unexpectedly or a function of simple operator error? Operators received much of the blame, but it is not clear that they deserved it.100 Are failures of new ventures typically a function of uncontrollable market developments or the missteps of entrepreneurs? Entrepreneurs receive much of the blame from venture capitalists,101 but they may not deserve as much blame as they receive.

Task Perception As we have described, perceptions of people and their behavior are created in subjective ways. Similarly, perceptions of tasks develop through subjective and sometimes idiosyn- cratic processes. Factors such as intelligence, age, and gender have been found to infl u- ence perceptions of tasks. One study, for example, found that individuals with higher levels of intelligence perceive more complexity in various tasks than individuals with lower levels of intelligence.102 In addition, many studies have found that individuals with higher levels of satisfaction in the workplace perceive more autonomy and variety in their tasks than individuals with lower levels of satisfaction. In a study focused on

THE STRATEGIC LENS

O rganizations compete on the basis of their resources. The strongest organizations usu- ally win the competitive battles if their managers develop effective strategies and implement them well. To be com- petitive, managers use the organiza- tion’s resources to create capabilities to act.107 A critical component of these capabilities is knowledge. In fact, Bill Breen of Fast Company sug- gests that “Companies compete with their brains as well as their brawn. Organizations today must not only outgun and outhustle competitors, they must also outthink them. Compa- nies win with ideas.”108

Given the importance of knowl- edge in gaining a competitive advan- tage, learning is critical to organiza- tional success. Managers and associ- ates must continuously learn if they are to stay ahead of the competition. Perception is a key component of learning. It is particularly important to top executives, as they must carefully and thoroughly analyze their organi- zation’s external environment, with special emphasis on competitors. If they do not perceive their environment correctly, these executives may formu- late ineffective strategies and cause the organization to lose its competi- tive advantage. Understanding the

concepts of learning and perception, then, is absolutely essential to the ef- fective operation of an organization.

Critical Thinking Questions

1. How does the knowledge held by managers and associates affect the performance of an organization?

2. What are some important ways in which associates can learn and thereby enhance their stock of knowl- edge? What role does perception play in the learning process?

3. What are the connections between learning, perception, and organi- zational strategies?

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158 Chapter Learning and Perception

past graduates of a Hong Kong university, satisfaction and job perceptions were assessed multiple times over a two-year period. Satisfaction was found to infl uence job percep- tions to a greater extent than job perceptions were found to infl uence satisfaction.103

How managers and associates perceive their jobs has important implications for be- havior and outcomes. Task perceptions have been linked to intrinsic motivation as well as job performance.104 They have even been linked to mood.105 One group of researchers proposed that employees fi rst perceive their jobs at an information level, then perceive the tasks at an evaluative level, and thereafter react to their jobs behaviorally and emotion- ally.106 The process of task perception and the resulting effects on behavior have important consequences for organizations. We explore these issues in greater depth in Chapter 6.

What This Chapter Adds to Your Knowledge Portfolio In this chapter, we have discussed basic learning principles and described how they can be used in effectively training and developing associates and managers. We have discussed problems that can occur in complex learning situations and how these problems can be avoided. Finally, we have seen many problems associated with perception processes. For individuals to function as effectively as possible, these perception issues must be under- stood and managed. At a more detailed level, we have covered the following points:

• Learning is the process by which we acquire new, relatively permanent, behav- iors from experience. Operant conditioning theory and social learning theory are important explanations for how learning from experience works in practice. Learning new behaviors involves three basic elements: the situation, the behav- ioral response to the situation, and the consequences of that response for the person.

• Positive reinforcement involves the presentation of positive consequences for a behavior, such as praise for working hard, which increases the probability of an individual repeating the behavior in similar settings. Negative reinforcement is the removal of a negative consequence following a behavior, such as taking an employee off probation, which also increases the probability of an individual repeating the behavior. Punishment involves the presentation of negative conse- quences, such as a reduction in pay, which reduces the probability of repeating a behavior. Extinction refers to the removal of all reinforcing consequences, which can be effective in eliminating undesired behaviors.

• Various schedules of reinforcement exist for learning, including continuous re- inforcement and several types of intermittent schedules. Although continuous schedules are rare in organizational settings, several applications of intermit- tent schedules can be found. Strategic use of reinforcement schedules helps in effectively shaping the behavior of newcomers and modifying the behavior of current associates and managers.

• In addition to direct reinforcement or punishment, individuals also learn by an- ticipating potential outcomes associated with certain behaviors and by modeling similar or important others.

• Self-effi cacy is an important condition for learning to occur. Other important condi- tions are that people know why they are learning what they are learning, that they

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Thinking About Ethics 159

can tie the material to be learned to their own previous experiences, that they have the opportunity to practice, and that they receive feedback.

• People learn through many formal and informal mechanisms in organizations. Three examples are OB Mod programs, simulations, and learning from failure.

• Perception refers to the way people view the world around them. It is the process of receiving sensory inputs and organiz- ing these inputs into useful ideas and concepts. The process consists of three stages: sensing, selecting, and organizing.

• Person perception is infl uenced by several factors associated with the nature of the perceiver, including the perceiver’s famil- iarity with the person, feelings toward the person, and general emotional state. Situational factors infl uencing person perception include the general nature of the other person, that person’s apparent intentions, and the anticipated or actual consequences of the interaction between perceiver and perceived.

• Four general perceptual problems are implicit person theories, halo effect, project- ing, and stereotyping. Implicit person theories are individuals’ beliefs about the nature of human personality and attributes that can infl uence how they perceive other people. Halo effect is similar but involves having a general impression of a person and allowing it to affect perceptions of all other aspects of the person. Projecting is the tendency to believe that other people have characteristics like our own. Stereotyping occurs when we have generalized perceptions about a group that we apply to an individual who belongs to that group.

• Attribution refers to the process by which individuals interpret the causes of be- havior. Whether behavior is seen as resulting from internal or external forces is infl uenced by three factors: distinctiveness, consistency, and consensus. Beyond these factors, there is a general tendency to attribute someone else’s failures to internal causes.

Thinking about Ethics 1. Should associates be punished for making mistakes? If so, for what types of mistakes should they

be punished? Are there mistakes for which they should not be punished? If so, what are they?

2. Should all associates be given the opportunity to learn new skills? If not, explain. Should some associates have greater learning opportunities than others? If so, when should this occur?

3. Are there circumstances when it is acceptable to use perceptual stereotypes of others? Explain why or why not.

? back to the knowledge objectives 1. Explain the difference between negative reinforcement

and punishment. Give examples of how each process might be used by managers with their associates.

2. What are four intermittent schedules of reinforcement? Give an example of how each schedule might be used by managers with their associates.

3. Explain how an instructor might effectively apply OB Mod in the classroom.

4. What can an organization do to promote learning from failure?

5. What can organizations do to train people to deal with complex and novel problems?

6. What are implicit person theories and the halo effect? How can an individual overcome a tendency to make these mistakes?

7. Give an example of a situation in which you attributed someone’s behavior to internal or external factors. What infl uenced the attribution?

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160 Chapter Learning and Perception

4. Are accurate perceptions always necessary? In what situations (if any) is it less important to ensure that perceptions are accurate?

5. You are a manager of a unit with 15 associates. These associates have varying levels of education (high school to college-educated) and varying levels of skills and motivation. In your organization, associates receive higher pay for acquiring new and valuable skills. How would you decide to whom you would give learning opportunities and to whom you would not provide such opportunities?

Key Terms learning, p. 133 operant conditioning

theory, p. 134 social learning theory, p. 134 positive reinforcement, p. 135 negative reinforcement, p. 135 punishment, p. 135 extinction, p. 136

continuous reinforcement, p. 138

intermittent reinforcement, p. 138

self-effi cacy, p. 140 OB Mod, p. 142 simulation, p. 146 perception, p. 148

implicit person theories, p. 152

halo effect, p. 152 projecting, p. 152 stereotyping, p. 152 fundamental attribution

error, p. 156 self-serving bias, p. 156

building your human capital

Assessment of Approaches Used to Handle Diffi cult Learning Situations

Associates and managers often face diffi culties in learning from experience. When there is little opportunity to learn from experience and when experience is unclear, individuals at all levels in an organization may draw the wrong conclusions. Interestingly, individuals vary in how they handle these situations. Some are prone to contemplate major issues alone. Others tend to discuss major issues with others. Both approaches can be useful, but extremes in either direction may be risky. In this installment of Building Your Human Capital, we present an assessment tool focused on ap- proaches to handling diffi cult learning situations.

Instructions In this assessment, you will read 12 phrases that describe people. Use the rating scale below to in- dicate how accurately each phrase describes you. Rate yourself as you generally are now, not as you wish to be in the future, and rate yourself as you honestly see yourself. Keep in mind that very few

Human Resource Management Applications Training is usually carried out with the human resource management (HRM) function. In addition to conducting the actual training, the HRM department may also conduct a needs analysis to determine what type of training is needed and by whom and follow through with an evaluation of the training. It may be the HRM department’s responsibility to make sure that the organization realizes a fi nancial and/or performance return on their investment of training dollars.

Many companies also offer outside learning opportunities for their associates. For example, some companies may pay for college tuition or reimburse expenses for adult learning classes. This type of learning opportunity is often viewed as a benefi t of employment, and the HRM function involves developing such benefi t plans.

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An Organizational Behavior Moment 161

people have extreme scores on all or even most of the items (a “1” or a “5” is an extreme score); most people have midrange scores for many of the items. Read each item carefully, and then circle the number that corresponds to your choice from the rating scale.

1 2 3 4 5 Not at all like me

Somewhat unlike me

Neither like nor unlike me

Somewhat like me

Very much like me

1. Spend time refl ecting on things. 1 2 3 4 5 2. Enjoy spending time by myself. 1 2 3 4 5 3. Live in a world of my own. 1 2 3 4 5 4. Enjoy my privacy. 1 2 3 4 5 5. Don’t mind eating alone. 1 2 3 4 5 6. Can’t stand being alone. 1 2 3 4 5 7. Do things at my own pace. 1 2 3 4 5 8. Enjoy contemplation. 1 2 3 4 5 9. Prefer to be alone. 1 2 3 4 5 10. Have point of view all my own. 1 2 3 4 5 11. Don’t like to ponder over things. 1 2 3 4 5 12. Want to be left alone. 1 2 3 4 5

Scoring Key for Approaches to Handling Diffi cult Learning Situations To create your score, combine your responses to the items as follows:

Private refl ection � (Item 1 � Item 2 � Item 3 � Item 4 � Item 5 � Item 7 � Item 8 � Item 9 � Item 10 � Item 12) � (12 � (Item 6 � Item 11))

Scores can range from 12 to 60. Scores of 50 and above may be considered high, while scores of 22 and below may be considered low. Other scores are moderate. High scores suggest that a person prefers to spend time alone considering major issues (high private refl ection). Such a person spends quality quiet time considering the possibilities. Low scores suggest that a person prefers to talk through problems with others (low private refl ection). This type of person spends time exchanging information and viewpoints with others.

Additional Task Think of a time when you faced a major problem with no clear answer. Did you handle the situ- ation mostly by thinking alone, mostly by consulting with others, or with a mix of these two ap- proaches? How effective was your approach? Explain.

Source of the Assessment Tool: International Personality Item Pool (2001). A Scientifi c Collaboration for the Development of Advanced Measures of Personality Traits and Other Individual Differences, at http://ipip.ori.org.

an organizational behavior moment

It’s Just a Matter of Timing Teresa Alvarez ate dinner slowly and without enthusiasm. Mike, her husband of only a few months, had learned that Teresa’s “blue funks” were usually caused by her job. He knew that it was best to let her work out the problem alone. He excused himself and went

to watch TV. Teresa poked at her dinner, but the large knot in her stomach kept her from eating much.

She had been very excited when Vegas Brown had ap- proached her about managing his small interior decorating fi rm.

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162 Chapter Learning and Perception

At the time, she was a loan offi cer for a local bank and knew Vegas through his fi nancial dealings with the bank. As Vegas explained to her, his biggest problem was in managing the fi rm’s fi nancial assets, mostly because the fi rm was undercapitalized. It was not a severe problem, he assured her. “Mostly,” he had said, “it’s a cash fl ow problem. We have to be sure that the customers pay their accounts in time to pay our creditors. With your experience, you should be able to ensure a timely cash fl ow.”

Teresa thought this was a good opportunity to build her managerial skills, since she had never had full responsibility for a company. It also meant a substantial raise in salary. After explor- ing the opportunity with Mike, she accepted the job.

During her fi rst week with Vegas, she discovered that the fi nancial problems were much more severe than he had led her to believe. The fi rm’s checking account was overdrawn by about $40,000. There was a substantial list of creditors, mostly compa- nies that sold furniture and carpeting to the fi rm on short-term credit. She was astonished that this fi nancial position did not seem to bother Vegas.

“All you have to do, Teresa, is collect enough money each day to cover the checks we have written to our creditors. As you’ll see, I’m the best sales rep in the business, so we have lots of money coming in. It’s just a matter of timing. With you here, we should turn this problem around in short order.”

Teresa, despite her misgivings, put substantial effort into the new job. She worked late almost every day and began to realize that it was more than simple cash-fl ow timing. For example, if the carpet layers made an error or if the furniture came in dam- aged, the customer would refuse to pay. This would mean that the customer’s complaint must be serviced. However, the carpet lay- ers disliked correcting service complaints, and furniture reorders might take several weeks.

Thus, Teresa personally began to examine all customer or- ders at crucial points in the process. Eventually, this minimized problems with new orders, but there remained a large number of old orders still awaiting corrections.

Teresa also arranged a priority system for paying creditors that eased some fi nancial pressures in the short run and that

would allow old, noncritical debts to be repaid when old cus- tomer accounts were repaid. After six months, the day arrived when the checking account had a zero balance, which was sub- stantial progress. A few weeks later, it actually had a $9,000 posi- tive balance. During all this time Teresa had made a point of concealing the fi nancial status from Vegas. But with the $9,000 positive balance, she felt elated and told Vegas.

Vegas was ecstatic, said she had done a remarkable job, and gave her an immediate raise. Then it was Teresa’s turn to be ec- static. She had turned a pressure-packed job into one of prom- ise. The future looked exciting, and the fi nancial pressures had developed into fi nancial opportunities. But that was last week.

This morning Vegas came into Teresa’s offi ce and asked her to write him a check for $30,000. Vegas said everything was looking so good that he was buying a new home for his family ($30,000 was the down payment). Teresa objected violently. “But this will overdraw our account by $21,000 again. I just got us out of one hole, and you want to put us back in. Either you delay the home purchase or I quit. I’m not going to go through all the late nights and all the pressure again because of some stupid personal decision you make. Can’t you see what it means for the business to have money in the bank?”

“No, I can’t!” Vegas said sternly. “I don’t want to have money in the bank. It doesn’t do me any good there. I’ll just go out and keep selling our services, and the money will come in like always. You’ve proved to me that it’s just a matter of timing. Quit if you want, but I’m going to buy the house. It’s still my company, and I’ll do what I want.”

Discussion Questions 1. What did Teresa learn? 2. Other than quitting, what can Teresa do to resolve the

problem? What learning and perception factors should she consider as she analyzes the situation?

3. If you were an outside consultant to the fi rm, could you rec- ommend solutions that might not occur to Teresa or Vegas? What would they be?

team exercise

Best Bet for Training Management-development programs are expensive. When organizations are determining which of several managers to send to these programs, they must evaluate each person. Some of the criteria considered might be whether the manager has the ability to learn, whether the manager and the organization will benefi t, and whether a manager is moving into or has recently moved into a new position. The purpose of this exercise is to evaluate three potential candidates for developmental training, thus gaining insight into the process.

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Endnotes 163

The exercise should take about 20 minutes to complete and an additional 15 to 20 minutes to discuss. The steps are as follows.

1. Read the following case about High Tech International. 2. Assemble into groups of four. 3. List the criteria you should consider for determining which of the three managers to send to

the training program. 4. Choose the manager to send using the criteria developed in step 3. 5. Reassemble. Discuss your group’s choice with the rest of the class, and listen to other groups’

choices and criteria. Do you still prefer your group’s choice? Why or why not? 6. The instructor will present additional points for consideration.

High Tech International High Tech International has reserved one training slot every other year in an off-site leadership- development program. The program emphasizes personal and professional assessment and requires six days of residency to complete. High Tech’s vice president for human resources must choose the manager to attend the next available program, which is to be run in three months. The cost of the program is high, including a tuition fee of $7,500, round-trip airfare, and lodging. The challenge is to choose the individual who has the greatest capacity to learn from the assessment and apply that learning back in the organization. Because of prior commitments and ongoing projects, the list of nominees has been narrowed to three:

• Gerry is slated for a major promotion in four months from regional sales manager to vice president for marketing. Her division has run smoothly during the past three years. Antici- pating the move upward, she has asked for training to increase her managerial skills. Gerry is to be married in two months.

• John was a supervisor over a portion of a production process for two years before being pro- moted one year ago to manager of the entire process. His unit has been under stress for the past eight months due to the implementation of new technology and a consequent decline in productivity and morale. No new technological changes are planned in John’s unit for at least another year.

• Bill has been considered a “fast-tracker” by his colleagues in the organization. He came to the company four years ago, at the age of 37, as a vice president for foreign operations. Histori- cally, this position has been the stepping stone for division president. In the past year, Bill has displayed less energy and enthusiasm for the work. Eight months ago Bill and his wife separated, and two months ago he was hospitalized temporarily with a mild heart problem. For one month twice a year Bill has to travel abroad. His next trip will be in four months.

Endnotes 1. Hitt, M.A., Bierman, L., Shimizu, K., & Kochhar, R. 2001.

Direct and moderating effects of human capital on strategy and performance in professional service fi rms: A resource-based per- spective. Academy of Management Journal, 44: 13–28; Sirmon, D.G., Hitt, M.A., & Ireland, R.D. 2007. Managing resources in dynamic environments to create value: Looking inside the black box. Academy of Management Review, 32, 273–292.

2. Gange, R.M., & Medsker, K.L. 1996. The conditions of learning. Fort Worth, TX: Harcourt-Brace.

3. Luthans, F., & Stajkovic, A.D. 1999. Reinforce for performance: The need to go beyond pay and even performance. Academy of Management Executive, 13(2): 49–57.

4. Thorndike, E.L. 1898. Animal intelligence. Psychological Review, 2: all of issue 8; Thorndike, E.L. 1911. Animal intelligence: Ex- perimental studies. New York: Macmillan.

5. Hull, C.L. 1943. Principles of behavior. New York: D. Apple- ton Century; Skinner, B.F. 1969. Contingencies of reinforce- ment: A theoretical analysis. Englewood Cliffs, NJ: Prentice Hall.

6. Bandura, A. 1996. Social foundations of thought and action: A so- cial cognitive theory. Englewood Cliffs, NJ: Prentice Hall; Kreit- ner, R., & Luthans, F. 1984. A social learning theory approach to behavioral management: Radical behaviorists “mellowing out.” Organizational Dynamics, 13 (2): 47–65.

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164 Chapter Learning and Perception

7. Podsakoff, P.M., Bommer, W.H., Podsakoff, N.P., & MacKenzie, S.B. 2006. Relationships between leader reward behavior and punishment behavior and subordinate attitudes, perceptions, and behaviors: A meta-analytic review of existing and new research. Organizational Behavior and Human Decision Processes, 99: 113–142.

8. Trevino, L.K., 1992. The social effects of punishment in organiza- tions: A justice perspective. Academy of Management Review, 17: 647–676.

9. Strupp, J. 2000. No providence in Rhode Island. Editor and Pub- lisher, 133 (11): 6–8.

10. Friedman, S. 1994. Allstate faces suit over Fireman’s Fund Shoot- ing. National Underwriter, 98 (39): 3.

11. Guffey, C.J., & Helms, M.M. 2001. Effective employee disci- pline: A case of the Internal Revenue Service. Public Personnel Management, 30: 111–127.

12. Ibid. 13. Hitt, M.A., Lee, H., & Yucel, E. 2002. The importance of social

capital to the management of multinational enterprises: Rela- tional networks among Asian and western fi rms. Asia Pacifi c Jour- nal of Management, 19: 353–372.

14. Hinkin, T.R., & Schreisheim, C.A. 2004. “If you don’t hear from me you know you are doing fi ne”: The effects of management nonresponse to employee performance. Cornell Hotel and Restau- rant Administration Quarterly, 45: 362–373.

15. Latham, G.P., & Huber, V. 1992. Schedules of reinforcement: Lessons from the past and issues for the future. Journal of Organi- zational Behavior Management, 12(1): 125–149.

16. Scott, W.E., & Podsakoff, P.M. 1985. Behavioral principles in the practice of management. New York: John Wiley & Sons.

17. Ibid. 18. Ibid. 19. Ibid. 20. Ibid. 21. Bandura, A. 1986. Social foundations of thought and action. Eng-

lewood Cliffs, NJ: Prentice Hall; Bandura, A. 2001. Social cogni- tive theory: An agentic perspective. Annual Review of Psychology, 52: 1–26.

22. Stajkovic, A.D., Luthans, F., & Slocum, J.W., Jr. 1998. Social cogni- tive theory and self-effi cacy: Going beyond traditional motivational and behavioral approaches. Organizational Dynamics, 26: 62–74.

23. Ibid. 24. Bandura, Social foundations of thought and action. 25. Wexley, K.N, & Latham, G.P. 2002. Developing and training hu-

man resources in organizations (3rd ed.). Upper Saddle River, NJ: Prentice Hall.

26. Bandura, A. 1997. Self-effi cacy: The exercise of self-control. New York: W.H. Freeman.

27. Judge, T.A., & Bono, J.E. 2001. Relationship of core self-evalua- tions traits, self-esteem, generalized self-effi cacy, locus of control and emotional stability with job satisfaction and job performance: A meta-analysis. Journal of Applied Psychology, 86: 80–93; Judge, T.A., Jackson, C.L., Shaw, J.C., Scott, B.A., & Rich, B.L. 2007. Self-effi cacy and work-related performance: The integral role of individual differences. Journal of Applied Psychology, 92: 107–127; Stajkovic, A.D., & Luthans, F. 1998. Social cognitive theory and

work-related performance: A meta-analysis. Psychological Bulletin, 124: 240–261.

28. Noe, R.A. 1999. Employee training and development. Boston: Ir- win McGraw-Hill.

29. Colquitt, J., Lepine, J., & Noe, R.A. 2000. Toward an integrative theory of training motivation: A meta-analytic pat analysis of 20 years of research. Journal of Applied Psychology, 85: 678–707.

30. Burke, M.J., Bradley, J., & Bowers, H.N. 2003. Health and safety programs. In J.E. Edwards, J. Scott, & N.S. Raju (Eds.), The hu- man resources-evaluation handbook. Thousand Oaks, CA: Sage, pp. 429–446.

31. Noe, Employee training and development. 32. Burke, M.J., Holman, D., & Birdi, K. 2006. A walk on the

safe side: The implications of learning theory for developing effective safety and health training. In G.P. Hodgkinson, & J.K. Ford (Eds.), International review of industrial and organi- zational psychology, vol. 21. Hoboken, NJ: John Wiley & Sons, pp. 1–44.

33. Weill, S., & McGill, I. 1989. Making sense of experiential learning. Buckingham, UK: SRHE/OU Press.

34. Kolb, D.A. 1984. Experiential learning: Experience as the source of learning and development. Englewood Cliffs, NJ: Prentice Hall.

35. Ford, J.K., Smith, E.M., Weissbein, D.A., Gully, S.M., & Salas, E. 1998. Relationships of goal orientation, metacognitive mem- ory, and practice strategies with learning outcomes and transfer. Journal of Applied Psychology, 83: 218–233.

36. Kluger, A.N., & DeNisi, A.S. 1996. The effects of feedback inter- ventions on performance: Historical review, a meta-analysis and a preliminary feedback intervention theory. Psychological Bulletin, 119:254–284.

37. Ibid. 38. Bandura, A. 1977. Social learning theory. Englewood Cliffs, NJ:

Prentice Hall. 39. Mann, R.B., & Decker, P.J. 1984. The effect of key behavior

distinctiveness on generalization and recall in behavior modeling training. Academy of Management Journal, 27: 900–910.

40. Sidman, M. 1962. Operant techniques. In A.J. Bachrach (Ed.), Ex- perimental foundations of clinical psychology. New York: Basic Books.

41. Tichy, N.M. 2001. No ordinary boot camp. Harvard Business Re- view, 79(4): 63–70.

42. Fickes, M. 2000. Taking driver training to new levels. Waste Age, 31 (4): 238–248.

43. Robertson, G. 2001. Steering true: Greyhound’s training is weed- ing-out process. Richmond Times-Dispatch, May 14: B1, B3.

44. Wexley & Latham, Developing and training human resources in organizations.

45. Luthans, F., & Kreitner, R. 1975. Organizational behavior modifi - cation. Glenview, IL: Scott & Foresman; Luthans, F., & Kreitner, R. 1985. Organizational behavior modifi cation and beyond. Glen- view, IL: Scott & Foresman.

46. Frederiksen, L.W. 1982. Handbook of organizational behavior management. New York: John Wiley & Sons.

47. Luthans, F., & Davis, E. 1991. Improving the delivery of quality service: Behavioral management techniques. Leadership and Or- ganization Development Journal, 12(2): 3–6.

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Endnotes 165

48. Nordstrom, R., Hall, R.V., Lorenzi, P., & Delquadri, J. 1988. Organizational behavior modifi cation in the public sector. Journal of Organizational Behavior Management, 9 (2): 91–112.

49. Welsh, D.H.B., Luthans, F., & Sommer, S.M. 1993. Manag- ing Russian factory workers: The impact of U.S.-based behav- ioral and participatory techniques. Academy of Management Journal, 36: 58–79; Welsh, D.H.B., Luthans, F., & Sommer, S.M. 1993. Organizational behavior modifi cation goes to Rus- sia: Replicating an experimental analysis across cultures and tasks. Journal of Organizational Behavior Management, 13 (2): 15–35.

50. Stajkovic, A.D., & Luthans, F. 1997. A meta-analysis of the ef- fects of organizational behavior modifi cation on task perform- ance, 1975–95. Academy of Management Journal, 5: 1122–1149.

51. Ibid. 52. Schneier, C.J. 1974. Behavior modifi cation in management.

Academy of Management Journal, 17: 528–548. 53. Stajkovic & Luthans, A meta-analysis of the effects of organiza-

tional behavior modifi cation on task performance, 1975–95. 54. Levitt, B., & March, J.G. 1988. Organizational learning. Annual

Review of Sociology, 14: 319–340. 55. Thomke, S. 2001. Enlightened experimentation: The new

imperative for innovation. Harvard Business Review, 79 (2): 66–75.

56. Thomke, S.H. 1998. Managing experimentation in the design of new products. Management Science, 44: 743–762.

57. Nicholls-Nixon, C.L., Cooper, A.C., & Woo, C.Y. 2000. Strate- gic experimentation: Understanding change and performance in new ventures. Journal of Business Venturing, 15: 493–521.

58. Thomke, S. 2003. R&D comes to service: Bank of America’s path- breaking experiments. Harvard Business Review, 81(4): 70–79.

59. Pfeffer, J. 1998. The human equation. Boston: Harvard Business School Press.

60. Master, M. 2001. Spectacular failures. Across the Board, 38 (2): 20–26.

61. McGrath, G. 1999. Falling forward: Real options reasoning and entrepreneurial failure. Academy of Management, 24: 13–30; Sit- kin, S.B. 1992. Learning through failure: The strategy of small losses. Research in Organizational Behavior, 14: 231–266.

62. Sitkin, Learning through failure. 63. Shimizu, K., & Hitt, M.A. 2004. Strategic fl exibility: Managerial

capability to reverse poor strategic decisions. Academy of Manage- ment Executive, 18, 44–59.

64. Thomke, Enlightened experimentation. 65. Ibid. 66. Robinson, H. 1994. Perception. New York: Routledge. 67. Perrow, C. 1984. Normal accidents: Living with high-risk technolo-

gies. New York: Basic Books. 68. Tufte, E.R. 1997. Visual and statistical thinking: Displays of evi-

dence for making decisions. Cheshire, CT: Graphics Press. 69. Einhorn, H.J., & Hogarth, R.M. 1978. Confi dence in judg-

ment: Persistence in the illusion of validity. Psychological Review, 85: 395–416; Wason, P.C. 1960. On the failure to eliminate hy- potheses in a conceptual task. Quarterly Journal of Experimental Psychology, 20: 273–283.

70. Bierhoff, H.-W. 1989. Person perception. New York: Springer- Verlag; Heil, J. 1983. Perception and cognition. Berkeley: Univer- sity of California Press.

71. Jacobs, R., & Kozlowski, S.W.J. 1985. A closer look at halo error in performance ratings. Academy of Management Journal, 28: 201–212.

72. Tsui, A.S., & Barry, B. 1986. Interpersonal affect and rating er- rors. Academy of Management Journal, 29: 586–599.

73. Murray, H.A. 1933. The effects of fear upon estimates of the ma- liciousness of other personalities. Journal of Social Psychology, 4: 310–329.

74. See, for example, Assor, A., Aronoff, J., & Messe, L.A. 1986. An experimental test of defensive processes in impression formation. Journal of Personality and Social Psychology, 50: 644–650.

75. Berkowitz, L. 1960. Repeated frustrations and expectations in hostility arousal. Journal of Abnormal and Social Psychology, 60: 422–429.

76. Jones, E.E., & deCharms, R. 1957. Changes in social perception as a function of the personal relevance of behavior. Sociometry, 20: 75–85.

77. Jick, T., & Gentile, M. 1995. Donna Dubinsky and Apple Com- puter, Inc. (Part A). Boston: Harvard Business School Publishing.

78. Mehl, M.R., Gosling, S.D., & Pennebaker, J.W. 2006. Personal- ity in its natural habitat: Manifestations and implicit folk theories of personality in daily life. Journal of Personality and Social Psychol- ogy, 90: 862–877.

79. Gosling, S.D., Ko, S.J., Mannarelli, T., & Morris, M.E. 2002. A room with a cue: Personality judgments based on offi ces and bed- rooms. Journal of Personality and Social Psychology, 82: 379–398.

80. Dweck, C.S. 1999. Self-theories: Their role in motivation, personal- ity, and development. Philadelphia, PA: Psychology Press.

81. Heslin, P.A., Vandewalle, D., & Latham, G.P. 2006. Keen to help: Managers’ implicit person theories and their subsequent employee coaching. Personnel Psychology, 59: 871–902.

82. Guilford, J.P. 1954. Psychometric methods. New York: McGraw-Hill. 83. Becker, B.E., & Cardy, R.L. 1986. Infl uence of halo error on

appraisal effectiveness: A conceptual and empirical reconsidera- tion. Journal of Applied Psychology, 71: 662–671; Jacobs, R., & Kozlowski, S.W.J. 1985. A closer look at halo error in performance ratings. Academy of Management Journal, 28: 201–212; Nisbett, R.D., & Wilson, T.D. 1977. The halo effect: Evidence for un- conscious alteration of judgments. Journal of Personality and Social Psychology, 35: 250–256; Solomon, A.L., & Lance, C.E. 1997. Ex- amination of the relationship between true halo and halo error in performance ratings. Journal of Applied Psychology, 82: 665–674.

84. Gross, R.L., & Brodt, S.E. 2001. How assumptions of consensus undermine decision making. Sloan Management Review, 42(2): 86–94.

85. See, for example, Finkelstein, L.M., & Burke, M.J. 1998. Age stere- otyping at work: The role of rater and contextual factors on evalua- tion of job applicants. Journal of General Psychology, 125: 317–345.

86. “L’Oreal to Ask S.C. to Review Ruling on the Firing of Unat- tractive Worker,” Metropolitan New Enterprise, Apr. 14, 2003, at http://www.metnews.com.

87. Tahmincioglu, E. (Jan. 26, 2007) It’s Not Easy for Obese Work- ers, MSNBC.com, at http://www.msnbc.msn.com.

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88. Dion K., Berscheid, E., & Walster, E. (1972). What is beau- tiful is good. Journal of Personality and Social Psychology, 24: 285–290.

89. Hosoda, M., Stone-Romero, E.F., & G. Coats. 2003. The effects of physical attractiveness on job-related outcomes: A meta-anal- ysis of experimental studies. Personnel Psychology, 26: 431–462; Rudolph, C.W., Wells, C.L., Weller, M.D., Baltes, B. 2009. A meta-analysis of empirical studies of weight-based bias in the workplace. Journal of Vocational Behavior, 74: 1–10.

90. Fikkan, J., & Rothblum, E. 2005. Weight bias in employment. In K.D. Brownell, R.M. Puhl, M.B. Schwartz, & L. Rudd (Eds.), Weight bias: Nature, consequences, and remedies (pp. 15-28). New York: The Guilford Press.

91. Dipboye, R.L., & Colella, A. 2005. Discrimination at work: The psychological and organizational bases. Mahwah, NJ: Lawrence Erlbaum Associates.

92. Ibid. 93. Corbett, W.R. 2007. The ugly truth about appearance discrimi-

nation and the beauty of our employment discrimination law. Duke Journal of Gender Law and Policy, 14: 153–175.

94. McEnrue, M.P. 1984. Perceived competence as a moderator of the relationship between role clarity and job performance: A test of two hypotheses. Organizational Behavior and Human Perform- ance, 34: 379–386.

95. Heider, F. 1958. The psychology of interpersonal relations. New York: John Wiley & Sons.

96. Kelley, H.H., & Michela, J. 1981. Attribution theory and re- search. Annual Review of Psychology, 31: 457–501.

97. Young, R.A. 1986. Counseling the unemployed: Attributional is- sues. Journal of Counseling and Development, 64: 374–377.

98. Harvey, J.H., & Weary, G. 1984. Current issues in attribution theory and research. Annual Review of Psychology, 35: 428–432.

99. Mitchell, T.R., & Green, S.G. 1983. Leadership and poor per- formance: An attributional analysis. In J.R. Hackman, E.E. Lawler, & L.W. Porter (Eds.), Perspectives on behavior in organiza- tions. New York: McGraw-Hill.

100. Perrow, Normal accidents: Living with high risk technologies. 101. Ruhnka, J.C., & Feldman, H.D. 1992. The “Living Dead” phe-

nomenon in venture capital investments. Journal of Business Ven- turing, 7: 137–155.

102. Ganzach, Y., & Pazy, A. 2001. Within-occupation sources of vari- ance in incumbent perception of complexity. Journal of Occupa- tional and Organizational Psychology, 74: 95–108.

103. Wong, C., Hui, C., & Law, K.S. 1998. A longitudinal study of the perception–job satisfaction relationship: A test of the three alternative specifi cations. Journal of Occupational and Organiza- tional Psychology, 71: 127–146.

104. Hackman, J.R., Oldham, G., Janson, R., & Purdy, K. 1975. A new strategy of job enrichment. California Management Review, 17(4): 57–71.

105. Saavedra, R., & Kwun, S.K. 2000. Affective states in job char- acteristic theory. Journal of Organizational Behavior, 21 (Special Issue): 131–146.

106. Slusher, E.A., & Griffi n, R.W. 1985. Comparison processes in task perceptions, evaluations, and reactions. Journal of Business Research, 13: 287–299.

107. Simon, D., Hitt, M.A., & Ireland, D. 2007. Managing resources in dynamic environments to create value. Academy of Management Review, 32:273–292.

108. Breen, B. 2004. Hidden asset. Fast Company, March: 93.

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? knowledge objectives After reading this chapter, you should be able to: 1. Defi ne personality and explain the basic nature of

personality traits. 2. Describe the Big Five personality traits, with par-

ticular emphasis on the relationship with job per- formance, success on teams, and job satisfaction.

3. Discuss specifi c cognitive and motivational con- cepts of personality, including locus of control and achievement motivation.

4. Defi ne intelligence and describe its role in the workplace.

5. Defi ne an attitude and describe how attitudes are formed and how they can be changed.

6. Discuss the role of emotions in organizational behavior.

personality, intelligence, attitudes, and emotions exploring behavior in action

I Know She’s Smart and Accomplished . . . But Does She Have “Personality”?

Answer “true” or “false” to the following questions:

It’s maddening when the court lets guilty criminals go free. Slow people irritate me. I can easily cheer up and forget my problems. I am tidy. I am not polite when I don’t want to be. I would like the job of a race car driver. My teachers were unfair to me in school. I like to meet new people.

The way you answer these questions, or similar items, could determine whether you get the job or not. These questions are examples of the types found on per- sonality tests commonly used to hire people for jobs. One survey found that over 30 percent of employers use some form of personality test when hiring employees. Another survey found that 29 percent of adults aged 18 to 24 took a personality test in the past two years in order to be considered for a job. One of the largest testing companies, Unicru (now a part of Kronos), tested over 11 million candidates in one year for companies such as Universal Studios. Personality testing has taken the em- ployment fi eld by storm. Employers are no longer relying only on stellar resumes and amazing experience, they also care about whether an applicant has the right tempera- ment to carry out the job and fi t in with the organization. “Although personality-based testing has been around for years, it’s now in the spotlight,” said Bill Byham, CEO of

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168

Development Dimensions International, a consulting fi rm that is a leader in the personality testing fi eld.

So, what are the right answers? That depends on what the employer is looking for. Common things that employers look for are conscientiousness, ability to handle stress, ability to get along with others, potential leadership, problem-solving style, and service orientation. Differ- ent employers look for dif- ferent personality profi les, and often it depends on the job being sought.

For example, Karen Schoch, who hires employ- ees for Women & Infants Hospital of Rhode Island, states, “A person must be qualifi ed to do the job, but they also require the right personality. We’re a hos- pital that puts a premium on patient care, and we want people who can deliver the concept.” Thus, she looks for people who have a blend of compassion, diplomacy, energy, and self-confi dence.

Harbor Group LLC, a Houston fi nancial advisory fi rm, examines dominance, infl uence, steadiness, and consci- entiousness to predict how its associates will handle stress. David Hanson, a founding principal at First Harbor, states “Stress can result in lower productivity, increased absentee- ism, tardiness, and high employee turnover.” Thus, it is im- portant for his company to identify how people deal with stress so that they can develop ways to counteract the effects of stress.

Southwest Airlines, a company well known for its re- laxed, fun culture, takes creating a relaxed, warm environ- ment on its fl ights seriously. To accomplish this goal, South- west Airlines carefully screens job applicants to ensure that only individuals with personalities and attitudes consistent with the desired culture are hired. Libby Sartain, former vice president of the People Department at Southwest, put it this way: “If we hire people who don’t have the right

attitude, disposition, and behavioral characteristics to fi t into our culture, we will start to change that culture.” Herb Kelleher, former CEO, has said, “We look for attitudes; people with a sense of humor who don’t take themselves too seriously. We’ll train you on whatever it is you have to do, but the one thing Southwest cannot change in people

is inherent attitudes.” Thus, Southwest tests people for kindness and creativity.

These four organiza- tions all have different cul- tures and work environ- ments. Therefore, they all look for different personal- ity traits in new employees. The extent to which the personality of associates fi ts with an organization’s cul- ture has been found to have a positive impact on both associates and the organiza-

tion, and personality testing is one way to make sure that employees have the right disposition to mesh with the or- ganization’s culture. This emphasis on cultural fi t is found in many high-involvement organizations, where identifying and selecting individuals who complement a carefully de- veloped and maintained culture is a highly important task.

One example of a company that has used personal- ity testing to directly impact its bottom line is Outback Steakhouse. Personality testing helped Outback to identify applicants who would fi t the fi rm’s needs. Better hiring decisions resulted in growth in revenues and higher prof- its over time. As a result, associate turnover was reduced by 50 percent, decreasing the company’s recruitment and training costs by millions of dollars. A popular and valid personality test is the Hogan Personality Inventory (HPI). Using this test in employee selection led to 50 percent reduced turnover in a retail company, 48 percent im- proved productivity in an insurance company, decreased accidents resulting in lost time among hospital workers, and an increase of $308,000.00 per year in sales in a bank.

Sources: “Why is Personality Testing Important to Recruitment,” January 12, 2010, at http://www.hoganassessments.com/_ hoganweb/documents/Why%20Personality%20Testing%20is%20Important%20to%20Recruitment.pdf; A.E. Cha. 2005. “Employ- ers Relying on Personality Tests to Screen Applicants,” Washington Post, Mar. 27, p. A01; A. Overholt. 2002. “True or False: You’re Hiring the Right People,” Fast Company, Issue 55, Jan. p. 110; S.B. Fink. 2006. “Getting Personal: 10 Reasons to Test Personality Before Hir- ing,” Training, Issue 43, Nov. p. 16; V. Knight. 2006. “Personality Tests as Hiring Tools,” Wall Street Journal (Eastern Edition), Mar. 15,

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169

Sources: (continued from page 168) p. B3A; B. Dattner. 2004. “Snake Oil or Science? That’s the Raging Debate on Personality Test- ing,” Workforce Management, Issue 83 (10), Oct., p. 90, accessed at www.workforce3.com, Mar. 2007; E. Frauenheim. 2006. “The (Would Be) King of HR Software,” Workforce Management, Issue 85 (15), Aug. 14, pp. 34–39, accessed at www.workforce3.com, Mar. 2007; www.kronos.com, accessed Mar. 2007; K. Brooker. 2001. “The Chairman of the Board Looks Back,” Fortune 143, no. 11: 62–76; R. Chang. 2001. “Turning into Organizational Performance,” Training and Development 55, no. 5: 104–111; K. Ellis. 2001. “Libby Sartain,” Training 38, no. 1: 46–50; L. Ellis. 2001. “Customer Loyalty,” Executive Excellence 18, no. 7: 13–14; K. Freiberg & J. Freiberg. 1996. Nuts!: Southwest Airlines’ Crazy Recipe for Business and Personal Success (Austin, TX: Bard Press); K. Freiberg & J. Freiberg. 2001. “Southwest Can Find Another Pilot,” Wall Street Journal (Eastern Edition), Mar. 26, p. A22; H. Lancaster. 1999. “Herb Kelleher Has One Main Strategy: Treat Employees Well,” Wall Street Journal (Eastern Edition), Aug. 31, p. B1; S.F. Gale. 2002. “Three Companies Cut Turnover with Tests,” Workforce 81, no. 4: 66–69.

The discussion of personality testing in Exploring Organizational Behavior in Action illustrates how important it is for organizations to select the right in- dividuals. Everyone has individual dif- ferences that cannot be easily changed. As Herb Kelleher mentioned above, organizations can train people to do only so much; there are individual dif- ferences in people that are not easily infl uenced. In this chapter we explore three such differences: personality, intel- ligence, and emotions. We also explore another individual difference: attitudes that can be more easily affected by one’s organizational experience. All of these human attributes infl uence organi- zational effectiveness by infl uencing as- sociates’ performance, work attitudes, motivation, willingness to stay in the or- ganization, and ability to work together in a high-involvement environment.

In Chapter 1, we stated that an important part of high-involvement work systems was that organizations engage in selective hiring, illustrating the impor- tance of hiring people with the right set of attributes. A great deal of research has been done that has shown that certain traits, such as conscientiousness1 and intelligence,2 are related to associates’ performance. Associates’ traits have also

been linked to how likely they will be to engage in counterproductive work be- havior, such as being frequently absent or stealing.3 In addition to traits directly af- fecting performance, the degree to which associates’ traits fi t the work environment and culture is also linked with how sat- isfi ed and committed associates are to their organization4 and how likely they will be to remain in the organization.5 Furthermore, the attributes of top leaders in the organization have a direct impact on organizational functioning by relating to the group dynamics among top deci- sion makers6 and the strategic decisions they make.7 Thus, the individual traits and attitudes of everyone in the organi- zation can have an important impact on the functioning of that organization.

Because personalities have such important effects on behavior in organi- zations, care must be taken in adding new people. For a manufacturing fi rm emphasizing stable, effi cient operations because it competes on the basis of low cost, hiring newcomers who are serious, conscientious, and emotionally stable is logical. For a manufacturing fi rm com- peting on the basis of frequent process and product innovations, hiring new- comers who embrace change and are inquisitive is important. Furthermore, as

you will learn in this chapter, it is critical to hire associates who fi t the characteris- tics of the particular jobs they will hold. Inside the same fi rm, personalities suit- able for the tasks required in sales may be less suitable for the tasks involved in research and development. Although personality, intelligence, attitudes, and emotions are not perfect predictors of job performance and should never be used alone in selection decisions, they are important.

In this chapter, we open with a discussion of fundamentals of personal- ity, including its origins and the degree to which it changes over time. Building on this foundation, we examine a ma- jor personality framework, the Big Five, that has emerged as the most useful for understanding workplace behaviors. Next, we discuss several cognitive and motive-based characteristics of person- ality not explicitly included in the major framework. Next, we examine intel- ligence, another individual difference that has become a controversial topic in employee selection. We then move on to an exploration of attitudes, including at- titude development and change as well as several important types of workplace attitudes. Finally, we address emotions and their role in organizations.

the strategic importance of Personality, Intelligence, Attitudes, and Emotions

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170 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

Fundamentals of Personality The term personality may be used in several ways. One common use—or, rather, misuse— of the word is in describing the popularity of our classmates or colleagues. We may think that Hank has a pleasant personality or that Susan is highly personable. In your high- school yearbook, someone was probably listed with the title of Mr. or Ms. Personality. When personality is used in this way, it means that person is popular or well liked. This meaning has little value, however, in understanding or predicting behavior. To know that some people are popular does not enable us to have a rich understanding of them, nor does it improve our ability to interact with them.

For our purposes, personality describes a person’s most striking or dominant characteristics—jolly, shy, domineering, assertive, and so on. This meaning of personality is more useful because a set of rich characteristics tells us much about the behavior we can expect a person to exhibit and can serve as a guide in our interactions with her.

More formally, personality is a stable set of characteristics representing the internal properties of an individual, which are refl ected in behavioral tendencies across a variety of situations.8 These characteristics are often referred to as “traits” and have names such as dominance, assertiveness, and neuroticism. More important than the names of personality traits, however, is the meaning given to them by psychologists. The traditional meaning of personality traits rests on three basic beliefs:

1. Personality traits are individual psychological characteristics that are relatively enduring—for example, if a person is introverted or shy, he or she will likely remain so for a long period of time.

2. Personality traits are major determinants of one’s behavior—for example, an introverted person will be withdrawn and exhibit nonassertive behavior.

3. Personality traits infl uence one’s behavior across a wide variety of situations—an introverted person will be withdrawn and nonassertive at a party, in class, in sports activities, and at work.

Some researchers and managers have criticized these traditional beliefs about person- ality traits, believing instead that personality can undergo basic changes. They believe, for example, that shy people can become more assertive and outgoing. Furthermore, by examining our own behaviors, we may learn that sometimes we behave differently from situation to situation. Our behavior at a party, for example, may be different from our behavior at work.

Still, we often can observe consistencies in a person’s behavior across situations. For example, many people at various levels of Scott Paper saw Al Dunlap act in hard-hearted ways and exhibit outbursts of temper when he served this company as CEO. Many in- dividuals at Sunbeam, where he next fi lled the CEO role, observed the same behaviors. Apparently, family members also experienced similar treatment. When Dunlap was fi red by the board of directors at Sunbeam, his only child said, “I laughed like hell. I’m glad he fell on his ... .”9 His sister said, “He got exactly what he deserved.”10

Determinants of Personality Development To properly understand personality, it is important to examine how it develops. Both heredity and environment play important roles in the development of personality.

personality A stable set of characteristics representing internal properties of an individual, which are refl ected in behavioral tendencies across a variety of situations.

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Fundamentals of Personality 171

Heredity From basic biology, we know that parents provide genes to their children. Genes in turn determine height, hair color, eye color, size of hands, and other basic physical charac- teristics. Similarly, genes seem to infl uence personality, as demonstrated in three different types of studies.

The fi rst type of study involves examinations of identi- cal twins. Identical twins have identical genes and should therefore have similar personalities if genes play an impor- tant role. Moreover, if genes infl uence personality, identical twins separated at birth should have more similar adult per- sonalities than regular siblings or fraternal twins who have been raised apart. This is precisely the case, as has been found in a number of studies.11 Consider identical twins Oskar and Jack, who were parented by different people. Oskar was raised in Germany by his Roman Catholic maternal grand- mother, whereas Jack was raised outside Germany by his Jewish father. As adults, however, both of the brothers were domineering, prone to anger, and absentminded.12

The second type of study involves assessments of new- borns. Because newborns have had little exposure to the world, the temperaments they exhibit—including their activity levels, adaptability, sensitivity to stimulation, and general disposition—are probably determined to a large degree by genetics. If newborn temperament in turn predicts personality later in life, a link between genes and personality is suggested. Several studies have provided evidence for this relationship. In one such study, newborns ranging in age from 8 to 12 weeks were tracked into adult life. Temperament in the early weeks of life was found to predict per- sonality later in life.13

The third type of study supporting genetic effects focuses directly on genes. In sev- eral studies, researchers have identifi ed distinct genes thought to infl uence personality. Gene D4DR serves as a useful example. This gene carries the recipe for a protein known as dopamine receptor, which controls the amount of dopamine in the brain. Dopamine is crucial because it seems to affect initiative and adventure-seeking. Individuals with a long version of the gene, where a key sequence of DNA repeats itself six or more times, are more likely to be adventure-seeking than individuals with a short version of the gene.14

Although genes clearly play an important role in personality, we must be careful not to overemphasize their effects. Researchers typically believe that 50 percent of adult per- sonality is genetically determined. Furthermore, we should not conclude that a single magical gene controls a particular aspect of personality. The best information currently available suggests that combinations of genes infl uence individual personality traits.15 For example, gene D4DR plays an important role in how much adventure a person desires, but other genes also affect this trait.

Environment Beyond genes, the environment a person experiences as a child plays an important role in personality. In other words, what a child is exposed to and how she is treated infl uence the type of person she becomes. Warm, nurturing, and supportive households are more

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172 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

likely to produce well-adjusted, outgoing individuals.16 Socioeconomic circumstances of the household may also play a role, with favorable circumstances being associated with value systems that promote hard work, ambition, and self-control.17 Events and experi- ences outside the home can also affect personality. Schools, churches, and athletic teams are important places for lessons that shape personality.

Although research suggests that personality is reasonably stable in the adult years,18 events and experiences later in life can affect personality. Reports have described, for exam- ple, how a heart attack survivor reaches deep inside to change himself. In addition, some psychological theories suggest that change may occur over time. One theory proposes a model of personality that includes possible transitions at various points in life, including infancy, early childhood, late childhood, the teenage years, early adulthood, middle adult- hood, and late adulthood, for instance.19 The specifi c changes that might occur are less important than the fact that change is possible.

The Big Five Personality Traits For managers and associates to effectively use personality traits in predicting behavior, they must work with a concise set of traits. But thousands of traits can be used to describe a per- son. Which traits are most useful? Which correspond to the most meaningful behavioral tendencies in the workplace? These questions have puzzled researchers for many years. Fortunately, a consensus among personality experts has emerged to focus on fi ve traits. These traits, collectively known as the Big Five, include extraversion, conscientiousness, agreeableness, emotional stability, and openness to experience, as shown in Exhibit 5-1.

Extraversion The extraversion trait was an important area of study for many well-known psycholo- gists in the early-to-middle portion of the twentieth century, including Carl Jung, Hans

extraversion The degree to which an individual is outgoing and derives energy from being around other people.

Conscientiousness— degree to which an individual focuses on goals and works toward them in a disciplined way.

Extraversion—degree to which an individual is outgoing and derives energy from being around people.

Openness to experience—degree to which an individual seeks new experiences and thinks creatively about the future.

Emotional stability— degree to which an individual easily copes with stressful situations or heavy demands.

Agreeableness—degree to which an individual is easygoing and tolerant.

Personality

Exhibit 5-1 The Big Five Personality Traits

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Fundamentals of Personality 173

Eysenck, and Raymond Cattell. For Jung and many of his contemporaries, this aspect of personality was considered the most important driver of behavior. Extraversion is the degree to which a person is outgoing and derives energy from being around other people. In more specifi c terms, it is the degree to which a person: (1) enjoys being around other people, (2) is warm to others, (3) speaks up in group settings, (4) maintains a vigor- ous pace, (5) likes excitement, and (6) is cheerful.20 Herb Kelleher of Southwest Airlines clearly fi ts this mold, as does Carol Bartz, current CEO of Yahoo!21

Research has shown that people scoring high on this dimension, known as extraverts, tend to have a modest but measurable performance advantage over introverts in occupa- tions requiring a high level of interaction with other people.22 Specifi c occupations where extraverts have been found to perform particularly well include sales and management. In contrast, introverts, who do not score high on extraversion, tend to do particularly well in occupations such as accounting, engineering, and information technology, where more solitary work is frequently required. For any occupation where teams are central, or in a high-involvement organization where teams are emphasized, extraverts may also have a slight edge, as teams involve face-to-face interaction, group decision making, and navigation of interpersonal dynamics.23 A team with a very high percentage of extraverts as members, however, may function poorly, for too many team members may be more interested in talking than in listening. Finally, research suggests that extraversion is related to job satisfaction, with extraverts exhibiting slightly more satisfaction regardless of the specifi c conditions of the job situation.24

Conscientiousness The conscientiousness trait has played a central role in personality research in recent years. Many current personality researchers believe this dimension of personality has the greatest effect of all personality dimensions on a host of outcomes in the workplace. Con- scientiousness is the degree to which a person focuses on goals and works toward them in a disciplined way. In specifi c terms, it is the degree to which a person: (1) feels capable, (2) is organized, (3) is reliable, (4) possesses a drive for success, (5) focuses on completing tasks, and (6) thinks before acting.25

Research has shown that individuals scoring high on conscientiousness have a per- formance edge in most occupations and tend to perform well on teams.26 This is to be expected, because irresponsible, impulsive, low-achievement-striving individuals generally are at a disadvantage in activities both inside and outside the workplace. In an impor- tant study, hundreds of individuals were tracked from early childhood through late adult- hood.27 Their success was assessed in terms of job satisfaction in midlife, occupational sta- tus in midlife, and annual income in late adulthood. Conscientiousness, which was fairly stable over the participants’ lifetimes, positively affected each of these success measures. This is the reason companies such as Microsoft, Bain & Company, and Goldman Sachs emphasize conscientiousness when searching for new associates.28 Interestingly, research shows that conscientiousness has a stronger positive effect on job performance when the person also scores high on agreeableness, the trait considered next.29

Agreeableness The agreeableness trait has also received a great deal of attention in recent years. Agree- ableness is the degree to which a person is easygoing and tolerant—the degree to which a person: (1) believes in the honesty of others, (2) is straightforward, (3) is willing to help

conscientiousness The degree to which an individual focuses on goals and works toward them in a disciplined way.

agreeableness The degree to which an individual is easygoing and tolerant.

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174 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

others, (4) tends to yield under confl ict, (5) exhibits humility, and (6) is sensitive to the feelings of others.30

Research has not shown a consistent pattern of job outcomes for individuals scoring high or low on agreeableness. After all, being agreeable and disagreeable can be valuable at different times in the same job. A manager, for example, may need to discipline an as- sociate in the morning but behave very agreeably toward union offi cials in the afternoon. A salesperson may need to be tough in negotiations on one day but treat a long-standing customer with gracious deference on the next day.

Agreeable individuals do, however, seem to be consistently effective in teamwork.31 They are positive for interpersonal dynamics, as they are sensitive to the feelings of oth- ers and often try to ensure the participation and success of all team members. Teams with many members who are agreeable have been found to perform well.32 Having an extremely high percentage of very agreeable team members, however, may be associated with too little debate on important issues. When teams must make important decisions and solve non-routine problems, having some individuals with lower scores on agreeable- ness may be an advantage.

Emotional Stability The trait of emotional stability relates to how a person copes with stressful situations or heavy demands. Specifi c features of this trait include the degree to which a person: (1) is relaxed, (2) is slow to feel anger, (3) rarely becomes discouraged, (4) rarely becomes embarrassed, (5) resists unhealthy urges associated with addictions, and (6) handles crises well.33 Research has shown that emotionally stable individuals tend to have an edge in task performance across a large number of occupations.34 This is reasonable, for stable individuals are less likely to exhibit characteristics that may interfere with performance, such as being anxious, hostile, and insecure. Similarly, emotionally stable individuals seem to have modest but measurable advantages as team members.35 Several studies reveal that teams perform more effectively when composed of members scoring high on this trait.36 Furthermore, when individuals are high on emotional stability, in combination with high extraversion and high conscientiousness, they are more likely to have team leadership potential, than those who do not have this personality profi le.37 Finally, research shows that emotional stability is positively linked to job satisfaction, independent of the specifi c conditions of the job situation.38

Openness to Experience The openness trait is the degree to which a person seeks new experiences and thinks creatively about the future. More specifi cally, openness is the degree to which a person: (1) has a vivid imagination, (2) has an appreciation for art and beauty, (3) values and respects emotions in himself and others, (4) prefers variety to routine, (5) has broad intellectual curiosity, and (6) is open to reexamining closely held values.39 Research sug- gests that both individuals scoring high and individuals scoring low on openness can perform well in a variety of occupations and can function well on teams.40 Those who score high on this dimension of personality, however, are probably more effective at particular tasks calling for vision and creativity, such as the creative aspects of advertis- ing, the creative aspects of marketing, and many aspects of working in the arts. At W.L. Gore and Associates, maker of world-renowned Gore-Tex products (such as sealants and

emotional stability The degree to which an individual easily handles stressful situations and heavy demands.

openness to experience The degree to which an individual seeks new experiences and thinks creatively about the future.

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Fundamentals of Personality 175

fabrics), strong openness is valued for many aspects of engineering, sales, and marketing because the company has been successful through innovation and wants to keep its cul- ture of creativity, discovery, and initiative.41 Individuals with lower openness scores may be more effective in jobs calling for strong adherence to rules, such as piloting airplanes and accounting.

The Big Five as a Tool for Selecting New Associates and Managers Given the links between important competencies and specifi c personality traits, it is not surprising that personality assessment can play a role in hiring decisions. Although no single tool should be used as the basis for hiring new associates and managers, personality assessment can be a useful part of a portfolio of tools that includes structured interviews and skills evaluations. In some reviews of available tools, Big Five assessments have been shown to provide useful predictions of future job performance.42 It is important, however, to develop a detailed understanding of how personality traits predict performance in a specifi c situation. Such understanding requires that the general information just discussed be supplemented by: (1) an in-depth analysis of the requirements of a particular job in a particular organization and (2) an in-depth determination of which traits support perfor- mance in that particular job. In some cases, only certain aspects of a trait may be impor- tant in a specifi c situation. For example, being slow to anger and not prone to frustration may be crucial aspects of emotional stability for particular jobs, whereas being relaxed may be much less important for these jobs. Call center operator positions call for this particular combination of characteristics. They have to respond positively to customers, even when customers are rude or hostile.43

The Big Five and High-Involvement Management We now turn to competencies that are important for high-involvement management. Combinations of several Big Five traits likely provide a foundation for important com- petencies. Although research connecting the Big Five to these competencies has not been extensive, the evidence to date suggests important linkages.

Recall that high-involvement management focuses on developing associates so that substantial authority can be delegated to them. Available research suggests that managers’ competencies in developing, delegating, and motivating are enhanced by high extraver- sion, high conscientiousness, and high emotional stability.44 This research is summarized in Exhibit 5-2 and is consistent with our earlier discussion, which pointed out that con- scientious, emotionally stable individuals have advantages in many situations and that extraverts have a slight advantage in situations requiring a high level of interaction with people.

As might be expected, available research also indicates that these same characteris- tics provide advantages to associates in high-involvement organizations. For associates, competencies in self-development, decision making, self-management, and teamwork are crucial. Conscientious, emotionally stable individuals are likely to work at these com- petencies, and being an extravert may present a slight advantage.45 Agreeableness and openness do not appear to have consistent effects on the competencies discussed here.

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176 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

Cognitive and Motivational Properties of Personality We turn next to several cognitive and motivational concepts that have received attention as separate and important properties related to personality. They are defi ned as follows (see Exhibit 5-3):

• Cognitive properties—properties of individuals’ perceptual and thought processes that affect how they typically process information

• Motivational properties—stable differences in individuals that energize and maintain overt behaviors

Cognitive Concepts Differences in how people use their intellectual capabilities may result in vastly different perceptions and judgments. Personality concepts that focus on cognitive processes help us

EXHIBIT 5-2 The Big Five and High-Involvement Management

Competencies Description Big Five Traits*

For Managers

Delegating to others Patience in providing information and support E� C� A� ES� O� when empowering others, but also the ability to confront individuals when there is a problem

Developing others Interest in sharing information, ability to coach and E� (C�) A�� ES� (O�) train, and interest in helping others plan careers

Motivating others Ability to bring out the best in other people, desire E�� C� (A�) ES� to recognize contributions of others, and in general an interest in others

For Associates

Decision-making skills Careful consideration of important inputs, little E� C�� A– ES� O� putting off of decisions, and no tendency to change mind repeatedly

Self-development Use of all available resources for improvement, E� C�� A� ES� (O�) interest in feedback, and lack of defensiveness

Self-management Little procrastination, effective time management, E� C� (A�) and a focus on targets

Teamwork Willingness to subordinate personal interests for the E� C� A�� ES� O� team, ability to follow or lead depending on the needs of the team, and commitment to building team spirit

* Entries in the exhibit are defi ned as follows: E � extraversion, C � conscientiousness, A � agreeableness, ES � emotional stability (many researchers defi ne this using a reverse scale and use the label “need for stability” or “neuroticism”), and O � openness to experience. A ”�” indicates that higher scores on the trait appear to promote the listed competency. A “��” indicates that higher scores on a trait appear to have very signifi cant effects on the listed competency. Similarly, a “�” indicates that low levels of a trait appear to promote the listed competency. Parentheses are used in cases where some aspects of a trait are associated with the listed competency but the overall trait is not. For example, only the fi rst and fourth aspects of conscientiousness (feels capable and possesses a drive for success) have been found to be associated with the competency for developing others.

Source: Adapted from P.J. Howard and J.M. Howard. 2001. The Owner’s Manual for Personality at Work (Austin, TX: Bard Press).

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Fundamentals of Personality 177

to understand these differences. Three such concepts are locus of control, authoritarian- ism, and self-monitoring.

The personality concept of locus of control refers to a person’s tendency to attribute the cause or control of events either to herself or to factors in the external environment. People who tend to believe that they have control over events are said to have an “internal” locus of control. Those who consistently believe that events are controlled by outside forces in the environment have an “external” locus of control.46

Internals believe they can control what happens to them. This often leads them to engage in work and leisure activities requiring greater skill47 and to conform less to group infl uences.48 Internals, then, tend to think they can be successful if they simply work hard enough, and this belief may be refl ected in their work habits, especially on diffi cult tasks. They also tend to exhibit a greater sense of well-being, a fi nding that holds worldwide.49 Externals believe that what happens to them is more a matter of luck or fate, and they see little connection between their own behavior and success or failure. They are more conforming and may therefore be less argumentative and easier to supervise. Structured tasks and plenty of supervision suit them well. Overall, associates with an internal locus of control experience more positive work outcomes than people with an external locus of control, including higher motivation and less job stress.50

The original research on authoritarianism began as an effort to identify people who might be susceptible to anti-Semitic ideologies. Over time, the concept evolved into its

locus of control The degree to which an individual attributes control of events to self or external factors.

authoritarianism The degree to which an individual believes in conventional values, obedience to authority, and legitimacy of power differences in society.

Self-monitoring— degree to which an individual attempts to present the image he or she thinks others want to see in a given situation

Locus of control— degree to which an individual attributes control of events to self or to external factors

Achievement motivation— degree to which an individual desires to perform in terms of a standard of excellence or to succeed in competitive situations

Authoritarianism— degree to which an individual believes in conventional values, obedience to authority, and legitimacy of power differences in society

Social dominance orientation— degree to which one prefers social relationships to be equal or to reflect status differences

Approval motivation— degree to which an individual is concerned about presenting self in a socially desirable way in evaluative situations

Cognitive and Motivational Concepts of Personality

Exhibit 5-3 Cognitive and Motivational Concepts of Personality

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178 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

present meaning—the extent to which a person believes in conventional values, obedience to authority, and the legiti- macy of power and status differences in society.51 Authori- tarianism has been extensively researched. Individuals who score high on this concept tend to believe that status and the use of power in organizations are proper. They are sub- missive to people in power and aggressive toward those who break rules.52 Furthermore, they may be more willing to ac- cept unethical behavior in others when those others are in powerful or high-status positions.53 Such people tend to ad- just readily to rules and regulations and emerge as leaders in situations requiring a great deal of control by the manager.

Related to authoritarianism, is social dominance orientation (SDO).54 SDO refers to a general attitudinal orientation concerning whether one prefers social relation- ships to be equal or to refl ect status differences. Further-

more, people with a high SDO view their own groups as superior and dominant over other “outgroups.”55 SDO is negatively related to the Big Five personality traits agreeableness and openness to experience.56 People high in SDO have also been found to be more likely to discriminate against job applicants from different demographic groups57 and prefer to work in nondiverse organizations58 as compared with people low in SDO.

Self-monitoring is an important personality concept that describes the degree to which people are guided by their true selves in decisions and actions. It determines whether people are fully consistent in behavior across different situations. Low self-monitors follow the advice given by Polonius to Laertes in Shakespeare’s Hamlet 59: “To thine own self be true.” Low self-monitors ask, “Who am I, and how can I be me in this situation?”60 In contrast, high self-monitors present somewhat different faces in different situations. They have been referred to as “chameleon-like,” as they try to present the appropriate image to each separate audience.61 High self-monitors ask, “Who does this situation want me to be, and how can I be that person?”62

High self-monitors can be quite effective in the workplace, with a tendency to out- perform low self-monitors in several areas.63 Because they are highly attentive to social cues and the thoughts of others, they are sometimes more effective at confl ict resolution. Because they are attentive to social dynamics and the expectations of others, they fre- quently emerge as leaders. Because they are more likely to use interpersonal strategies that fi t the desires of other people, they tend to perform well in jobs requiring cooperation and interaction. Management is one such job, and research indicates that high self-monitors are more effective managers. In one study, MBA graduates were tracked for fi ve years after graduation. MBAs who were high self-monitors received more managerial promotions.64

Motivational Concepts Motivational concepts of personality are refl ected more in a person’s basic needs than in his or her thought processes. Two important concepts in this category are achievement motivation and approval motivation.

Achievement motivation is commonly referred to as the need for achievement (or n-Ach). It is an important determinant of aspiration, effort, and persistence in situ- ations where performance will be evaluated according to some standard of excellence.65

social dominance orientation A general attitudinal orientation concerning whether one prefers social relationships to be equal or to refl ect status differences.

self-monitoring The degree to which an individual attempts to present the image he or she thinks others want to see in a given situation.

achievement motivation The degree to which an individual desires to perform in terms of a standard of excellence or to succeed in competitive situations.

©Janie Barrett/Fairfax photos/Redux Pictures

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Fundamentals of Personality 179

Thus, need for achievement is the strength of a person’s desire to perform in terms of a standard of excellence or to succeed in competitive situations. Unlike most conceptualiza- tions of personality traits, need for achievement has been related to particular situations. That is, it is activated only in situations of expected excellence or competition. The in- teraction of personality and the immediate environment is obvious in this theory, and it affects the strength of motivation.

Persons with a high need for achievement set their goals and tend to accept respon- sibility for both success and failure. They dislike goals that are either extremely diffi cult or easy, tending to prefer goals of moderate diffi culty. They also need feedback regarding their performance. People with a high need for achievement are also less likely to procras- tinate than people with a low need for achievement.66

This personality characteristic is often misinterpreted. For example, some may think that need for achievement is related to desire for power and control. High need achievers, however, tend to focus on task excellence rather than on power.

Approval motivation is another important motive-based personality concept. Researchers have noted the tendency for some people to present themselves in socially desirable ways when they are in evaluative situations. Such people are highly concerned about the approval of others. Approval motivation is also related to conformity and “going along to get along.”67

Ironically, the assessment of one’s own personality is an evaluative situation, and per- sons high in approval motivation tend to respond to personality tests in socially desirable ways. In other words, such people will try to convey positive impressions of themselves. Such tendencies lead individuals to “fake” their answers to personality questionnaires ac- cording to the perceived desirability of the responses. Many questionnaires contain “lie” scales and sets of items to detect this social approval bias. Such precautions are espe- cially important when personality tests are used to select, promote, or identify persons for important organizational purposes.

Some Cautionary and Concluding Remarks Personality characteristics may change to some degree, and situational forces may at times overwhelm the forces of personality. People can adjust to their situations, particularly those who are high self-monitors. An introverted person may be somewhat sociable in a sales meeting, and a person with an external locus of control may on occasion accept per- sonal responsibility for his failure. Furthermore, some people can be trained or developed in jobs that seem to confl ict with their personalities. Fit between an individual’s personal- ity and the job does, however, convey some advantages. Overall, the purpose of measuring personality is to know that some people may fi t a given job situation better than others. For those who fi t less well, we may want to provide extra help, training, or counseling be- fore making the decision to steer them toward another position or type of work. We also note that personality testing in organizations should focus only on “normal” personality characteristics. According to the Americans with Disabilities Act (1990), it is illegal to screen out potential employees based on the results of personality tests designed to mea- sure psychological disabilities (e.g., depression or extreme anxiety).

The information on personality and performance presented in this chapter has been de- veloped largely from research in the United States and Canada. Research in Europe is reason- ably consistent,68 but other parts of the world have been studied less. Great care must be taken in applying the results of U.S.- and Canadian-based research to other regions of the world.

approval motivation The degree to which an individual is concerned about presenting himself or herself in a socially desirable way in evaluative situations.

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EXPERIENCING ORGANIZATIONAL BEHAVIOR

Patricia Harris uses the above phrase to describe her com-mitment and fi t with the Mc- Donald’s Corporation. Ms. Harris, cur- rently a Vice President of McDonald’s Corporation, USA. and the Global Chief Diversity Offi cer, began her ca- reer with the company over 30 years ago. She started at McDonald’s in 1976 in a secretarial position and soon began rising through the ranks, while attending college part-time and raising a family. Many of Ms. Harris’s positions have been in human resource manage- ment, and she is often attributed in making McDonald’s a current leader and early forerunner in promoting em- ployee diversity, leading the company to win the coveted Equal Employment Opportunity Commission’s “Freedom to Compete Award” in 2006 and the na- tional Restaurant Association’s Diversity Award in 2009, among many other honors concerning diversity.

Several attributes of Patricia Har- ris have led to her phenomenal career. First of all, she is high on conscientious- ness. Ms. Harris’s colleagues describe her as “driven,” and she has often “stepped out of her comfort zone” to take on new job challenges. She is also goal-driven to develop diver- sity processes and programs to help build McDonald’s business all over the world. While being extremely perform- ance-focused, Ms. Harris also displays agreeableness by serving as a mentor to many other McDonald’s associates

and crediting her own mentors and team members when asked about her success. Her high need for achieve- ment came through when, early in her career, she told her boss and mentor: “I want your job!” Ms. Harris also has a strong internal locus of control because she focuses on making her environment and the company’s a bet- ter place to work. Finally, she demon- strates a great deal of intelligence in dealing with her job. In addition to a temperament that makes her very well suited for her career, she also pos- sesses the knowledge and intelligence that have helped make McDonald’s a leader in diversity. Rich Floersch, Ex- ecutive Vice President in Charge of Human Relations, states: “She’s very well informed, a true student of diver- sity. She is good at analyzing U.S. diversity principles and applying them in an international market. She’s also a good listener who understands the business and culture very well.”

Patricia Harris would probably be a success anywhere she worked—yet her true passion for McDonald’s and its diversity initiatives seems to set her apart from most other executives. In 1985, when Ms. Harris was fi rst asked to become an affi rmative action man- ager, she was apprehensive about tak- ing the job because affi rmative action was not a popular issue at the time. She overcame her apprehension and started on her path to dealing with di- versity issues. She states that “this job truly became my passion. It’s who I am, both personally and professionally.” By working on diversity issues, Ms. Harris was able to realize not only her pro- fessional goals, but also her personal goals of helping women and minorities. Ray Kroc, the founder of McDonald’s, stated that “None of us is as good as all of us,” focusing on the importance of inclusion and ownership by all employ- ees. This value permeates McDonald’s corporate vision and also coincides with the personal vision of Patricia Harris. Harris says that her company’s mission “is to create an environment in which everyone within McDonald’s global system is able to contribute fully regardless of role.” Thus, not only is she extremely competent at her job, she is also passionate about her job and her organization. Patricia Harris exempli- fi es what happens when an individual’s traits, abilities, and passion line up with the vision of the organization.

“I Have Ketchup in My Veins”

Sources: K. Whitney. Jan. 18, 2009. Diversity is everybody’s business at McDonald’s. Diversity Executive. At http://www.diversity-executive.com/article.php?article�480; McDonald’s, May 14, ”National Restaurant Asso- ciation Honors McDonald’s With Diversity Award” at http://www.aboutmcdonalds.com/mcd/csr/news/national_ restaurant.5.html?DCSext.destination�http://www.aboutmcdonalds.com/mcd/csr/news/national_restaurant.5.html; A. Pomeroy. Dec. 2006. “She’s Still Lovin’ It,” HRMagazine, Dec., pp. 58–61; anonymous staff writer. 2007. “An Inter- view with Pat Harris, Vice President Diversity Initiatives with McDonald’s Corporation” at http://www.employmentguide. com/careeradvice/Leading_the_Way-in_Diversity. html, accessed Apr. 18, 2007; J. Lawn. 2006. “Shattered Glass and Personal Journeys,” FoodManagement, July, at http://www.food-management.com/article/13670; anonymous. 2005. “Ray Kroc: Founder’s Philosophies Remain at the Heart of McDonald’s Success,” Nation’s Restaurant News, Apr. 11, at http://fi ndarticles.com/p/articles/mi_m3190/is_15_39/ai_n13649039.

©Nathan Mandell Photography

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http://www.diversity-executive.com/article.php?article480

http://www.employmentguide.com/careeradvice/Leading_the_Way-in_Diversity.html

http://www.food-management.com/article/13670

http://findarticles.com/p/articles/mi_m3190/is_15_39/ai_n13649039

http://www.aboutmcdonalds.com/mcd/csr/news/national_restaurant.5.html?DCSext.destination

http://www.aboutmcdonalds.com/mcd/csr/news/national_restaurant.5.html

Fundamentals of Personality 181

In conclusion, determining the personality and behavioral attributes of higher per- formers in an organization can help a fi rm to improve its performance over time, as sug- gested in the Experiencing Organizational Behavior feature. Patricia Harris, Vice President of McDonald’s Corporation, USA, and Global Chief Diversity Offi cer, exemplifi es such a high performer whose personality fi ts the organization’s strategies and goals.

Intelligence In the preceding section, we saw how important personality is to organizational behavior and achieving a high-involvement workplace. There is another stable individual differ- ence that can greatly affect organizational behavior, particularly job performance. This trait is cognitive ability, more commonly referred to as intelligence. Intelligence refers to the ability to develop and understand concepts, particularly more complex and abstract concepts.69 Despite its importance, intelligence as an aspect of human ability has been somewhat controversial. Some psychologists and organizational behavior researchers do not believe that a meaningful general intelligence factor exists. Instead, they believe that many different types of intelligence exist and that most of us have strong intelligence in one or more areas. These areas might include the following:70

• Number aptitude—the ability to handle mathematics • Verbal comprehension—the ability to understand written and spoken words • Perceptual speed—the ability to process visual data quickly • Spatial visualization—the ability to imagine a different physical confi guration—

for example, to imagine how a room would look with the furniture rearranged • Deductive reasoning—the ability to draw a conclusion or make a choice that

logically follows from existing assumptions and data • Inductive reasoning—the ability to identify, after observing specifi c cases or

instances, the general rules that govern a process or that explain an outcome—for example, to identify the general factors that play a role in a successful product launch after observing one product launch at a single company

• Memory—the ability to store and recall previous experiences

Most psychologists and organizational behavior researchers who have extensively studied intelligence believe, however, that a single unifying intelligence factor exists, a factor that blends together all of the areas from above. They also believe that general intel- ligence has meaningful effects on success in the workplace. Existing evidence points to the fact that general intelligence is an important determinant of workplace performance and career success.71 This is particularly true for jobs and career paths that require complex information processing, as opposed to simple manual labor. Exhibit 5-4 illustrates the strong connection between intelligence and success for complex jobs.

Although the use of intelligence tests is intended to help organizations select the best human capital, as explained in the Experiencing Organizational Behavior feature on page 183, their use is controversial. It is controversial because some question the ability of these tests to accurately capture a person’s true level of intelligence. Also, there can be legal problems with intelligence tests if they result in an adverse impact. However, if a test accurately refl ects individual intelligence, it can help managers select higher-quality associ- ates. The superior human capital in the organization will then lead to higher productivity and the ability to gain an advantage over competitors. A competitive advantage, in turn, usually produces higher profi ts for the organization.72

intelligence General mental ability used in complex information processing.

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182 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

Attitudes It is sometimes diffi cult to distinguish between an individual’s personality and attitudes. The behavior of Southwest associates and managers described in the opening case, for ex- ample, might be interpreted by some as based primarily on attitudes rather than personal- ity, whereas others might believe that personality plays a larger role. Regardless, managers are concerned about the attitudes of associates because they can be major causes of work behaviors. Positive attitudes frequently lead to productive efforts, whereas negative atti- tudes often produce poor work habits.

An attitude is defi ned as a persistent mental state of readiness to feel and behave in a favorable or unfavorable way toward a specifi c person, object, or idea. Close examination of this defi nition reveals three important conclusions. First, attitudes are reasonably stable.

attitude A persistent tendency to feel and behave in a favorable or unfavorable way toward a specifi c person, object, or idea.

EXHIBIT 5-4 Intelligence and Success

Job Effects of Intelligence

Military Jobs* Percentage of Success in Training Attributable to General Intelligence

Nuclear weapons specialist 77%

Air crew operations specialist 70%

Weather specialist 69%

Intelligence specialist 67%

Fireman 60%

Dental assistant 55%

Security police 54%

Vehicle maintenance 49%

General maintenance 28%

Civilian Jobs** Degree to which General Intelligence Predicts Job Performance (0 to 1 scale)

Sales .61

Technical assistant .54

Manager .53

Skilled trades and craft workers .46

Protective professions workers .42

Industrial workers .37

Vehicle operator .28

Sales clerk .27

* Source: M.J. Ree and J.A. Earles. 1990. Differential Validity of a Differential Aptitude Test, AFHRL-TR-89–59 (San Antonio, TX: Brooks Air Force Base). ** Source: J.E. Hunter and R.F. Hunter. 1984. “Validity and Utility of Alternative Predictors of Job Performance,” Psychological Bulletin 96: 72–98.

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Attitudes 183

FPO

EXPERIENCING ORGANIZATIONAL BEHAVIOR

Each spring, representatives of National Football League teams join a large group of college football players in India- napolis, Indiana. They are in town to participate in the so-called draft combine, where the players are given the opportu- nity to demonstrate their football skills. After showing their speed, strength, and agility, the players hope to be selected by a team early in the draft process and to command a large salary. For some, suc- cess at the combine is critical to be- ing chosen by a team. For others, suc- cess is important because the combine plays a role in determining the amount of signing bonuses and other fi nancial incentives.

Talented football players work to achieve the best physical condi- tion they can in anticipation of the important evaluations. They focus on the upcoming medical examinations, weightlifting assessments, 40-yard dashes, vertical- and broad-jump tests, and tackling-dummy tests. They may be less focused on another key feature of the draft combine—the in- telligence test. The practice of testing general intelligence has been a fi x- ture of the NFL since the early 1970s. The test that is used by all teams, the Wonderlic Personnel Test, has 50 questions and a time limit of 12 minutes in its basic version.

Teams place different levels of im- portance on the intelligence test. The Green Bay Packers, for example, his-

torically have not put a great deal of emphasis on

it. “The Wonderlic has never been

a big part of what we do here,” said former Green Bay general man- ager and cur-

rent consultant Ron Wolf. “To

me, it’s [just] a sig- nal. If it’s low, you bet-

ter fi nd out why it’s low, and if the guy is a good football player, you better satisfy your curiosity.” The Cincin- nati Bengals, in contrast, have gener- ally taken the test very seriously, in part “because it is the only test of its kind given to college players.” In Atlanta, former head coach Dan Reeves showed his faith in the intelligence-testing proc- ess by choosing a linebacker who was equal in every way to another line- backer, except for higher intelligence scores. In New York, intelligence and personality testing has been taken to an extreme for the NFL. The Giants organi- zation has used a test with nearly 400 questions. The late Giants manager, George Young, stated, “Going into a draft without some form of psychologi- cal testing on the prospects is like going into a gunfi ght with a knife.”

Can a player be too smart? According to some, the answer is

yes. “I’ve been around some play- ers who are too smart to be good football players,” said Ralph Cin- drich, a linebacker in the NFL many years ago. Many others have the opinion that high intelligence scores are indicative of a player who will not play within the system but will want to improvise too much on the fi eld and argue with coaches too much off the fi eld. There isn’t much evidence, however, to support this argument. Many successful quar- terbacks, for example, have had high scores. Super Bowl winner Tom Brady of the New England Patriots scored well above average, as did the New York Giants’ Eli Manning.

Quarterbacks score higher on the test than players in several other positions but do not score the highest. Average scores for various positions are shown below, along with scores from the business world for compari- son. A score of 20 correct out of 50 is considered average and equates to approximately 100 on a standard IQ test. Any score of 15 (the lowest score shown below) or above repre- sents reasonable intelligence.

Offensive tackles—26

Centers—25

Quarterbacks—24

Fullbacks—17

Safeties—19

Wide receivers—17

Chemists—31

Programmers—29

News reporters—26

Intelligence and Intelligence Testing in the National Football League

©PCN/Corbis Images

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184 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

Unless people have strong reasons to change their attitudes, they will persist or remain the same. People who like jazz music today will probably like it tomorrow, unless important reasons occur to change their musical preferences.

Second, attitudes are directed toward some object, person, or idea; that is, we may have an attitude toward our job, our supervisor, or an idea the college instructor presented. If the attitude concerns the job (for example, if a person dislikes monotonous work), then the attitude is specifi cally directed toward that job. We cannot extend that negative job attitude to an attitude toward jazz music.

Third, an attitude toward an object or person relates to an individual’s behavior to- ward that object or person. In this sense, attitudes may infl uence our actions. For example, if an individual likes jazz music (an attitude), he may go to a jazz club (a behavior) or buy a jazz CD (a behavior). If an associate dislikes her work (an attitude), she may avoid com- ing to work (absenteeism behavior) or exert very little effort on the job (poor productivity behavior). People tend to behave in ways that are consistent with their feelings. Therefore, to change an unproductive worker into a productive one, it may be necessary to deal with that worker’s attitudes.

Halfbacks—16

Salespersons—24

Bank tellers—17

Security guards—17

Warehouse workers—15

Many players become tense over the NFL intelligence test. What types of questions are causing the anxi- ety? A sample of the easier questions follows (to learn more, go to www. wonderlic.com):

1. The 11th month of the year is: (a) October, (b) May, (c) November, (d) February.

2. Severe is opposite of: (a) harsh, (b) stern, (c) tender, (d) rigid, (e) unyielding.

3. In the following set of words, which word is different from the others? (a) sing, (b) call, (c) chat- ter, (d) hear, (e) speak.

4. A dealer bought some televisions for $3,500. He sold them for $5,500, making $50 on each television. How many televisions were involved?

5. Lemon candies sell at 3 for 15 cents. How much will 11⁄2 dozen cost?

6. Which number in the following group of numbers represents the smallest amount? (a) 6, (b) .7, (c) 9, (d) 36, (e) .31, (f) 5.

7. Look at the following row of num- bers. What number should come next? 73 66 59 52 45 38.

8. A plane travels 75 feet in 1⁄4 sec- ond. At this speed, how many feet will it travel in 5 seconds?

9. A skirt requires 21⁄3 yards of ma- terial. How many skirts can be cut from 42 yards?

10. ENLARGE, AGGRANDIZE. Do these words: (a) have similar meanings, (b) have contradic- tory meanings, (c) mean neither the same nor the opposite?

11. Three individuals form a partner- ship and agree to divide the prof- its equally. X invests $4,500, Y in- vests $3,500, Z invests $2,000. If the profi ts are $2,400, how much less does X receive than if profi ts were divided in propor- tion to the amount invested?

Sources: D. Dillon. 2001. “Testing, Testing: Taking the Wonderlic,” Sporting News.com, Feb. 23, at www.sportingnews. com/voices/dennis_dillon/20010223.html; K. Kragthorpe. 2003. “Is Curtis Too Smart for NFL?” Utah Online, Apr. 23, at www.sltrib.com/2003/Apr/04232003/Sports/50504.asp; J. Litke. 2003. “Smarter Is Better in the NFL, Usually: But Not Too Smart to Be Good Football Players,” National Post (Canada), May 1, p. S2; J. Magee. 2003. “NFL Employs the Wonderlic Test to Probe the Minds of Draft Prospects,” SignOnSanDiego.com, Apr. 20, at www.signonsandiego. com/sports/nfl /magee/200304209999–ls20nfl col.html; J. Merron. 2002. “Taking Your Wonderlics,” ESPN Page 2, Feb. 2, at www.espn.go.com/page2/s/closer/020228.html; T. Silverstein. 2001. “What’s His Wonderlic? NFL Uses Time-Honored IQ Test as Measuring Stick for Rookies,” Milwaukee Journal Sentinel, Apr. 18, p. C1 ; A. Barra. 2006. “Do These NFL Scores Count for Anything?” Wall Street Journal (Eastern Edition), Apr. 25, p. D.6

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www.wonderlic.com

www.sportingnews.com/voices/dennis_dillon/20010223.html

www.sltrib.com/2003/Apr/04232003/Sports/50504.asp

www.espn.go.com/page2/s/closer/020228.html

www.signonsandiego.com/sports/nfl/magee/200304209999%E2%80%93ls20nflcol.html

Attitudes 185

As illustrated in Exhibit 5-5, our behavior toward an object, person, or idea is infl u- enced by our attitudes. In turn, our attitudes are constantly developing and changing as a result of our behaviors. It is important to recognize that our behaviors are also infl uenced by other factors, such as motivational forces and situational factors. We therefore can un- derstand why behaviors are not always predictable from attitudes. For example, we may have a strong positive attitude about a close friend. But we might reject an opportunity to go to a movie with that friend if we are preparing for a diffi cult exam to be given tomor- row. Thus, attitudes include behavioral tendencies and intentions, but our actual behav- iors are also infl uenced by other factors.

Attitude Formation Understanding how attitudes are formed is the fi rst step in learning how to apply attitude concepts to organizational problems. This understanding can be developed by examining the three essential elements of an attitude: (1) cognitive, (2) affective, and (3) behavioral.73

• The cognitive element of an attitude consists of the facts we have gathered and considered about the object, person, or idea. Before we can have feelings about something, we must fi rst be aware of it and think about its complexities.

• The affective element of an attitude refers to the feelings one has about the object or person. Such feelings are frequently expressed as like or dislike of the object or person and the degree to which one holds these feelings. For example, an employee may love the job, like it, dislike it, or hate it.

• Finally, most attitudes contain a behavioral element, which is the individual’s intention to act in certain ways toward the object of the attitude. As previously explained, how we behave toward people may depend largely on whether we like or dislike them based on what we know about them.

The formation of attitudes may be quite complex. In the following discussion, we examine some ways in which attitudes are formed.

Attitude toward object, person, or idea

Other influences on behavior toward object, person, or idea (situational forces, motivation,

and so on)

Behavior toward object, person, or idea

Object, person, or idea

Exhibit 5-5 Infl uence of Attitudes on Behavior

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186 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

Learning Attitudes can be formed through the learning process.74 As explained in Chapter 4, when people interact with others or behave in particular ways toward an object, they often experience rewards or punishments. For example, if you touch a cactus plant, you may experience pain. As you experience the outcomes of such behavior, you begin to develop feelings about the objects of that behavior. Thus, if someone were to ask you how you felt about cactus plants, you might reply, “I don’t like them—they can hurt.” Of course, attitudes can also develop from watching others experience rewards and punishments. A person may not touch the cactus herself, but a negative attitude toward cacti could develop after she watches a friend experience pain.

Self-Perception People may form attitudes based on simple observations of their own behaviors.75 This is called the self-perception effect, and it works as follows. An individual engages in a particular behavior without thinking much about that behavior. Furthermore, no signifi cant positive rewards are involved. Having engaged in the behavior, the person then diagnoses his actions, asking himself what the behavior suggests about his attitudes. In many instances, this person will conclude that he must have had a positive attitude toward the behavior. Why else would he have done what he did? For example, an individual may join co-workers in requesting an on-site cafeteria at work, doing so without much thought. Up to that point, the person may have had a relatively neutral attitude about a cafeteria. After having joined in the request, however, he may conclude that he has a positive attitude toward on-site cafeterias.

Infl uencing people through the foot-in-the-door technique is based on the self- perception effect. This technique involves asking a person for a small favor (foot-in-the- door) and later asking for a larger favor that is consistent with the initial request. After com- pleting the small favor with little thought, the target often concludes that she has a positive view toward whatever was done, and therefore she is more likely to perform the larger favor. In one study of the foot-in-the-door technique, researchers went door-to-door asking in- dividuals to sign a petition for safer driving.76 The request was small and noncontroversial; thus, most people signed the petition without much thought. Weeks later, colleagues of the researchers visited these same people and asked them to put a large, unattractive sign in their yards that read “Drive Carefully.” These same colleagues also approached other homeowners who had not been asked for the initial small favor. Fifty-fi ve percent of the in- dividuals who had signed the petition agreed to put an ugly sign in their yards, whereas only 17 percent of those who had not been asked to sign the petition agreed to the yard sign.

Need for Consistency A major concept associated with attitude formation is consistency.77 Two well-known theo- ries in social psychology, balance theory and congruity theory, are important to an understand- ing of attitude consistency. The basic notion is that people prefer that their attitudes be con- sistent with one another (in balance or congruent). If we have a specifi c attitude toward an object or person, we tend to form other consistent attitudes toward related objects or persons.

A simple example of attitude formation based on consistency appears in Exhibit 5-6. Dan is a young accounting graduate. He is impressed with accounting theory and thinks that accountants should work with data to arrive at important conclusions for manage- ment. Obviously, he has a positive attitude toward accounting, as illustrated by the plus sign between Dan and accounting in the exhibit. Now suppose that Dan’s new job requires him to work with someone who dislikes accounting (represented by the minus sign between

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Attitudes 187

the new colleague and accounting). In this case, Dan may form a negative attitude toward the person in order to have a consistent set of attitudes. Dan likes accounting and may have a negative attitude toward those who do not.

Two Important Attitudes in the Workplace The two most thoroughly examined attitudes in organizational behavior are job satisfac- tion and organizational commitment. Job satisfaction is a broad attitude related to the job. A high level of satisfaction represents a positive attitude toward the job, while a low level of satisfaction represents a negative attitude. Organizational commitment, as defi ned here, is a broad attitude toward the organization as a whole. It represents how strongly an individual identifi es with and values being associated with the organization. Strong commitment is a positive attitude toward the organization, whereas weak commitment is a less positive attitude. As we discuss below, these two attitudes can impact behavior that is important to the functioning of an organization; thus, it is important to consider job satisfaction and organizational commitment as desirable aspects of human capital.78

Job Satisfaction and Outcomes Organizations need to be concerned with the satisfaction of their associates, because job satisfaction is linked to many important behaviors that can have an impact on the bottom line of an organization’s performance. Satisfaction has a highly positive effect on inten- tions to stay in the job and a modest effect on actually staying in the job.79 Factors such as attractive job openings during a booming economy and reaching retirement age can cause satisfi ed people to leave, but in general satisfaction is associated with low turnover. With the costs of replacing a departed worker generally quite high, maintaining higher levels of satisfaction is important. High satisfaction also has a modestly positive effect on regular attendance at work.80 Factors such as a very liberal sick-leave policy can, however, cause even highly satisfi ed associates and managers to miss work time. Satisfaction also has a moderately strong relationship with motivation.81

Job satisfaction has a reasonably straightforward relationship with intention to stay, ac- tually staying, absenteeism, and motivation. In contrast, the specifi c form of the relationship

Exhibit 5-6 For- mation of Consistent Attitudes

Formation of a consistent work attitude

Dan

Accounting

Dan’s new colleague

–

–+

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188 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

between satisfaction and job performance has been the subject of a great deal of contro- versy. Many managers and researchers believe that high satisfaction produces strong per- formance. This idea seems reasonable, for a positive attitude should indeed result in strong effort and accountability. Other managers and researchers, however, believe that it is strong performance that causes workers to be satisfi ed with their jobs. For this second group of investigators, a positive attitude does not cause strong performance but strong performance does cause a positive attitude. Still others believe that satisfaction and performance are not related or are only weakly related. For this last group, factors other than attitudes, such as skills and incentive systems, are believed to have much stronger effects on job performance.

A recent study has helped to put these differences of opinion into perspective.82 In this study, all previously published research on satisfaction and performance was synthe- sized using modern quantitative and qualitative techniques. The study concluded with an integrative model suggesting that all three of the groups mentioned above are correct to some degree. High satisfaction causes strong performance, strong performance also causes high satisfaction, and the relationship between the two is weaker in some situations. On this last point, low conscientiousness and the existence of simple work are examples of fac- tors that may cause the relationship to be weaker. Individuals who have positive attitudes toward the job but who are lower in conscientiousness may not necessarily work hard, which weakens the effects of job satisfaction on performance. In addition, strong perform- ance at simple work does not necessarily result in strong satisfaction, which weakens the effects of performance on satisfaction. For engineers, managers, and others with complex jobs, performance and satisfaction have a reasonably strong connection.

Organizational Commitment and Outcomes in the Workplace Similar to satisfaction, commitment has important effects on intentions to stay in the job and modest effects on actually staying in the job and attending work regularly.83 Com- mitment also is signifi cantly related to motivation. Interestingly, length of employment plays a role in the relationship between commitment and staying in the job. A high level of organizational commitment tends to be more important in decisions to stay for associates and managers who have worked in their jobs for less time.84 For longer-term employees, simple inertia and habit may prevent departures independent of the level of commitment to the organization. Commitment also has positive effects on job performance, but the effects are somewhat small.85 This link to performance appears to be stronger for manag- ers and professionals. Although the relationship between commitment and regular job performance is not extremely strong, organizational commitment does have a very strong relationship with discretionary organizational citizenship behaviors, such as helping others and taking on voluntary assignments.86

Causes of Job Satisfaction and Organizational Commitment Given that job satisfaction and organizational commitment can impact on many impor- tant organizational behaviors, it is imperative that organizations understand what makes their associates satisfi ed and committed. Many of the same factors that lead to job satisfac- tion also lead to organizational commitment. These factors include:

• Role ambiguity87

• Supervision/leadership88

• Pay and benefi ts89

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Attitudes 189

• Nature of the job90

• Organizational climate91

• Stress92

• Perceptions of fair treatment93

Although these factors have all been linked to satisfaction and commitment, the re- lationships are not always so simple. For example, in order to best understand whether someone will be satisfi ed with a given dimension of her work, you need to consider her comparison standard. People compare desirable facets of their work with what they expect to receive or what they think they should receive.94 So, while one person may be very satis- fi ed with earning $100,000 per year, another person may fi nd this amount unsatisfactory because she was expecting to earn more.

Another complication arises when we consider that associates may be committed to their organization for different reasons. There are three general reasons why people are committed to their organizations.95 Affective commitment is usually what we think of when we talk about organizational commitment because it means someone has strong posi- tive attitudes toward the organization. Normative commitment means that someone is committed to the organization because he feels he should be. Someone who stays with their organization because he does not want to let his co-workers down is normatively com- mitted. Finally, associates may experience continuance commitment, which means that they are committed to the organization because they do not have any better opportunities. Different factors affect different types of commitment.96 For example, benefi ts may affect continuance commitment, for example, when a person is committed to an organization only because her retirement plan will not transfer to another organization. On the other hand, benefi ts may not infl uence how positive one feels about the organization, so that benefi ts would be unrelated to affective commitment.

One other thing to note about the factors affecting satisfaction and commitment is that the presence of high-involvement management is particularly important. Individu- als usually have positive experiences working with this management approach, and thus strong satisfaction and commitment is likely to develop through the learning mechanism of attitude formation. As part of high-involvement management, individuals are selected for organizations in which their values fi t, they are well trained, they are encouraged to think for themselves, and they are treated fairly (e.g., receive equitable compensation).

Finally, satisfaction and commitment are not totally dependent on situational factors; personality also can play a role. Some individuals have a propensity to be satisfi ed and committed, whereas others are less likely to exhibit positive attitudes, no matter the actual situation in which they work.97 In addition to one’s personality disposition, emotions can also affect job attitudes. Thus, we discuss emotions in the workplace later in this chapter.

Attitude Change Personality characteristics are believed to be rather stable, as we have seen, but attitudes are more susceptible to change. Social forces, such as peer pressure or changes in society, act on existing attitudes, so that over time attitudes may change, often in unpredictable ways. In addition, in many organizations, managers fi nd they need to be active in changing em- ployee attitudes. Although it is preferable for associates to have positive attitudes toward the job, the manager, and the organization, many do not. When the object of the attitude cannot be changed (for example, when a job cannot be redesigned), managers must work

affective commitment Organizational commitment due to one’s strong positive attitudes toward the organization.

normative commitment Organizational commitment due to feelings of obligation.

continuance commitment Organizational commitment due to lack of better opportunities.

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190 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

directly on attitudes. In such cases, it is necessary to develop a systematic approach to change attitudes in favorable directions. We discuss two relevant techniques next.

Persuasive Communication Most of us experience daily attempts by others to persuade us to change our attitudes. Television, radio, and Internet advertisements are common forms of such persuasive com- munication. Political campaigns are another form. Occasionally, a person who is virtu- ally unknown at the beginning of a political campaign (such as Bill Clinton) can win an election by virtue of extensive advertising and face-to-face communication.

The persuasive communication approach to attitude change consists of four elements:98

1. Communicator—the person who holds a particular attitude and wants to convince others to share that attitude

2. Message—the content designed to induce the change in others’ attitudes

3. Situation—the surroundings in which the message is presented

4. Target—the person whose attitude the communicator wants to change

Several qualities of the communicator affect attitude change in the target. First, the communicator’s overall credibility has an important effect on the target’s response to the persuasion attempt. Research shows that people give more weight to persuasive messages from people they respect.99 It is more diffi cult to reject messages that disagree with our attitudes when the communicator has high credibility.

Second, people are more likely to change their attitudes when they trust the inten- tions of the communicator. If we perceive that the communicator has something to gain from the attitude change, we are likely to distrust his or her intentions. But if we believe the communicator is more objective and less self-serving, we will trust his or her inten- tions and be more likely to change our attitudes. Individuals who argue against their own self-interests are effective at persuasion.100

Third, if people like the communicator or perceive that person to be similar to them in interests or goals, they are more likely to be persuaded.101 This is one reason that movie stars, athletes, and other famous people are used for television ads. These people are widely liked and have characteristics that we perceive ourselves to have (correctly or incorrectly) or that we would like to have.

Finally, if the communicator is attractive, people have a stronger tendency to be per- suaded. The effects of attractiveness have been discussed in studies of job seeking and political elections. The most notable example is the U.S. presidential election of 1960. By many accounts, Richard Nixon had equal, if not superior, command of the issues in the presidential debates that year, but the more handsome John Kennedy received higher ratings from the viewing public and won the election.102

The message involved in the communication can also infl uence attitude change. One of the most important dimensions of message content is fear arousal. Messages that arouse fear often produce more attitude change.103 For example, a smoker who is told that smok- ing is linked to heart disease may change his attitude toward smoking. The actual amount of fear produced by the message also seems to play a role. If the smoker is told that smok- ing makes teeth turn yellow, rather than being told of a link to heart disease, the fear is weaker, and the resulting attitude change also is likely to be weaker.

Greater fear usually induces larger changes in attitudes, but not always. Three fac- tors beyond amount of fear play a role:104 (1) the probability that negative consequences

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Attitudes 191

will actually occur if no change in behavior is made, (2) the perceived effect of changing behavior, and (3) the perceived ability to change behavior. Returning to our smoker, even if the message regarding smoking risk arouses a great deal of fear, he still may not alter his attitude if he does not believe that he is likely to develop heart disease, if he has been smoking for so many years that he does not believe that quitting now will help the situa- tion, or if he does not believe he can stop smoking.

So far, we have discussed how the communicator and the message affect attitude change. In general, each affects the degree to which the target believes the attitude should be changed. Frequently, however, people are motivated by factors outside the actual per- suasion attempt. Such factors may be found in the situation in which persuasion is at- tempted. We can see a good example of this when a person is publicly reprimanded. If you have ever been present when a peer has been publicly chastised by an instructor, you may have been offended by the action. Instead of changing your attitude about the student or the student’s skills, you may have changed your attitude about the instructor. Other situational factors include the reactions of those around you. Do they smile or nod their heads in approval when the communicator presents her message? Such behaviors encour- age attitude change, whereas disapproving behavior may infl uence you to not change your attitudes.

Finally, characteristics of the target also infl uence the success of persuasion. For exam- ple, people differ in their personalities, their perceptions, and the way they learn. Some are more rigid and less willing to change their attitudes—even when most others believe that they are wrong. Locus of control and other characteristics also infl uence attitudes. People with high self-esteem are more likely to believe that their attitudes are correct, and they are less likely to change them. Therefore, it is diffi cult to predict precisely how different people will respond, even to the same persuasive communication. The effective manager is prepared for this uncertainty.

Cognitive Dissonance Another way in which attitudes can change involves cognitive dissonance. Like bal- ance and congruity theories, discussed earlier in this chapter, dissonance theory deals with consistency.105 In this case, the focus is usually on consistency between attitudes and behaviors—or, more accurately, inconsistency between attitudes and behaviors. For example, a manager may have a strong positive attitude toward incentive compensation, which involves paying people on the basis of their performance. This manager, however, may refuse workers’ requests for such a compensation scheme. By refusing, she has cre- ated an inconsistency between an attitude and a behavior. If certain conditions are met, as explained below, this inconsistency will create an uneasy feeling (dissonance) that causes the manager to change her positive attitude.

What are the key conditions that lead to dissonance and the changing of an attitude? There are three.106 First, the behavior must be substantially inconsistent with the attitude rather than just mildly inconsistent. Second, the inconsistent behavior must cause harm or have negative consequences for others. If no harmful or negative consequences are involved, the individual exhibiting the inconsistent behavior can more easily move on without giving much consideration to the inconsistency. Third, the inconsistent behavior must be voluntary and not forced, or at least the person must perceive it that way.

In our example, the manager’s behavior satisfi es the fi rst two conditions. It was sub- stantially inconsistent with her attitude, and it had negative consequences for the workers

cognitive dissonance An uneasy feeling produced when a person behaves in a manner inconsistent with an existing attitude.

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192 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

MANAGERIAL ADVICE

In 1987, a major-ity, 61.1 percent, of Americans re- sponded that they were satisfi ed with their jobs. This was the fi rst year that the Conference Board, a global inde- pendent membership organization that col- lects and disseminates information for senior executives around the world, surveyed work- ers about their job sat- isfaction. At the end of 2009, following a steady decrease over the years, that fi gure had plum- meted to 45.3 percent. A less-scientifi c MSNBC poll of almost 45,000 people found that less than 34 percent of re- spondents were satisfi ed or somewhat satisfi ed with their jobs and 11.5 per- cent hated every part of their jobs.

The Conference Board survey found that while satisfaction has de- creased for all age groups, it is par- ticularly bad for younger workers. Less than 36 percent of those under 25 years old are satisfi ed with their jobs, as compared with a satisfac- tion rate of 47 percent for those 45 to 54 years old. These results also

held across all income brackets. Furthermore, satisfaction decreased for all specifi c aspects of one’s job, including: job design, organiza- tional health, manage- rial quality, and extrin- sic rewards.

Why are Ameri- cans so unhappy with their jobs? One could argue it is because of the economic down- turn experienced dur- ing 2008 and 2009.

Associates are required to do more, are afraid of losing their jobs, and are likely to receive fewer extrin- sic rewards (“no raises this year!”). However, this is not the entire story. “It says something troubling about work in America. It is not about the business cycle or one grumpy genera- tion,” says Linda Barrington, manag- ing director of human capital at the Conference Board. On of the major reasons that respondents were dis- satisfi ed with their jobs was because the jobs were uninteresting. Ratings of interest in one’s work dropped al- most 19 percentage points between 1987 and 2009, with only about half

of respondents currently fi nding their jobs interesting. Americans are fi nding their jobs increasingly boring and un- engaging. Other reasons given for job dissatisfaction included salaries that were not keeping up with infl ation, job insecurity, and health care costs.

These fi ndings should be a wake- up call for employers. John Gibbons, program director of employee en- gagement research and services at the Conference Board, says “Wide- spread job dissatisfaction negatively affects employee behavior and reten- tion, which can impact enterprise- level success.” Lynn Franco, director of the Conference Board’s Consumer Research Center, concurs, “What’s really disturbing about growing job dissatisfaction is the way it can play into the competitive nature of the U.S. work force down the road and on the growth of the U.S. economy—all in a negative way.” John Hollon warns, “my counsel for managers and ex- ecutives is simple: If you ignore these numbers, you do so at your own peril.” It is imperative that managers pay attention to these fi ndings, given the effects that low satisfaction and commitment can have on the climate, functioning, and bottom-line success of an organization.

Job Satisfaction Takes a Dive!

Sources: http://www.conference-board.org/aboutus/about.cfm; The Conference Board. Jan. 5, 2010, “U.S. Job Satisfaction at Lowest Level in Two Decades,” at http://www.conference-board.org/utilities/pressDetail. cfm?press_ID�3820. MSNBC, Jan. 5, 2010. “Are you satisfi ed with your job?” at http://business.newsvine.com/_ question/2010/01/05/3716711-are-you-satisfi ed-with-your-job?threadId�759420&pc�25&sp�25#short%20com- ment; MSNBC, Jan. 5, 2010. “Job satisfaction falls to a record low: Economists warn discontent could stifl e innovation, hurt U.S. productivity,” at C:\Documents and Settings\Administrator\My Documents\Americans’ job satisfaction falls to record low - Careers- msnbc_com.mht; J. Hollon. Jan. 5, 2010. “A Ticking Time Bomb: Job Satisfaction Hits Record-Low Levels,” Workforce Management, at C:\Documents and Settings\Administrator\My Documents\Workforce Blogs - The Business of Management.mht.

©iStockphoto

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Emotions 193

who wanted incentive pay. We have no way of knowing whether the third condition was met because we do not know whether someone higher in the organization ordered the manager to refuse the requests for incentive compensation or whether a union agreement prohibited such a compensation scheme. If the manager’s behavior was not forced by a higher-level manager or an agreement, dissonance is more likely to occur, leading to a change of the manager’s attitude toward incentive pay from positive to negative.

If an executive had wanted to change this manager’s attitude toward incentive pay, he could have gently suggested that such pay not be used. If the manager acted on this suggestion, she may have experienced dissonance and changed the attitude because her behavior was at least partly voluntary. She was not required to act in a manner inconsistent with her attitude, but she did so anyway. To eliminate the uneasy feeling associated with the inconsistent behavior, she may convince herself that she does not like incentive pay as much as she previously thought.

Emotions During a sales force team meeting, Chad became frustrated with team leader Bob’s pre- sentation. He felt that Bob was ignoring the needs of his unit. In a pique of anger, Chad yelled out that Bob was hiding something from everyone and being dishonest. Bob’s reac- tion to Chad’s outburst was to slam his fi st on the table and tell him to be quiet or leave. Next door, in the same company, Susan had just learned that her team had won a coveted account. She jumped with joy and was all smiles when she ran down the hall to tell her teammates. Everyone she passed grinned and felt better when they saw Susan running past their desks.

Chad, Bob, and Susan are all displaying their emotions at work. Despite the com- mon norms that associates should hide their emotions when they are at work,107 people are emotional beings, and emotions play a big role in everyday organizational behavior. Indeed, organizational scholars have recently begun studying the role emotions play at work,108 and organizations have become more concerned with the emotions of their em- ployees. For example, Douglas Conant, CEO of Campbell Soup, says that in his company care is taken to make sure that employees focus their emotions on their jobs, so that em- ployees “fall in love with (the) company’s agenda.”109

Emotions are complex reactions that have both a physical and a mental component. These reactions include anger, happiness, anxiety, pride, contentment, and guilt. Emo- tional reactions include a subjective feeling accompanied by changes in bodily functioning such as increased heart rate or blood pressure.110 Emotions can play a part in organi- zational functioning in several ways. First, associates’ emotions can directly affect their behavior. For example, angry associates may engage in workplace violence111 or happy employees may be more likely to help other people on the job.112 Another way in which emotions come into play at work is when the nature of the job calls for associates to display emotions that they might not actually be feeling. For example, on a rocky airplane ride, fl ight attendants have to appear calm, cool, and collected, while reassuring passen- gers that everything is okay. However, these fl ight attendants may have to do this while hiding their own fear and panic. This dynamic is called emotional labor. Finally, both business scholars and organizations have become concerned with what has been termed emotional intelligence. We turn now to discussions of these three roles that emotions play in organizational behavior.

emotions Complex subjective reactions that have both a physical and mental component.

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194 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

Direct Effects of Emotions on Behavior Emotions can have several direct causal effects on behavior. The relationship between emotions and other important behaviors, such as job performance, is less clear. While it would seem most likely that positive emotions would always lead to high performance, this is not always the case. In some instances, negative emotions, such as anger, can serve as a motivator. Research on creativity demonstrates this point. Some researchers have found that positive emotions increase creativity,113 while others have found that negative emo- tions lead to greater creativity.114 Positive emotions should lead to greater creativity be- cause when people feel good they are more likely to be active and inquisitive. On the other hand, negative emotions, such as fear, can serve as a signal that something is amiss, leading people to search for creative solutions to solve the problem. Indeed, a recent study found that people were most creative when they were experiencing emotional ambivalence, that is, both positive and negative emotions at the same time.115

The direct effects of emotions can be either benefi cial or harmful to organizational effectiveness. The impact of these emotions, whether negative or positive, is even greater when one considers the phenomenon of emotional contagion. Emotional contagion oc- curs when emotions experienced by one or a few members of a work group spread to other members.116 One study found that leaders’ emotions were particularly important in infl uencing the emotions of followers.117 This study indicated that charismatic leaders have a positive infl uence on organizational effectiveness because they are able to induce positive emotions in their followers. Thus, angry and anxious leaders are likely to develop followers who are angry and anxious, whereas leaders who are happy and passionate about their work are likely to develop followers who experience the same emotions. Exhibit 5-7 summarizes the direct effects of emotions.

emotional contagion Phenomenon where emotions experienced by one or a few members of a work group spread to other members.

EXHIBIT 5-7 The Direct Effects of Emotion

Positive Emotions Infl uence: Social activity Altruism and helping behavior Effective confl ict resolution Job satisfaction Motivation Organizational citizenship behavior

Negative Emotions Infl uence: Aggression against co-workers Aggression toward the organization Workplace deviance Job dissatisfaction Decision making Negotiation outcomes Sources: S. Lyubomirsky, L. King, & E. Deiner. 2005. The benefi ts of frequent positive affect: Does happiness lead to success? Psychological Bulletin, 131: 803–855; T.A. Judge, B.A. Scott, & R. Ilies. 2006. Hostility, job attitudes, and workplace deviance: Test of a multilevel model. Journal of Applied Psychology, 91: 126–138; M.S. Hershcovis, N. Turner, J. Barling, K.A. Arnols, K.E. Dupre, M. Inness, M.M. LeBlanc, & N. Sivanathan. 2007. Predicting workplace aggression: A meta-analysis. Journal of Applied Psychology, 92; 228–238; A.P. Brief, H.M. Weiss. 2002. Organizational behavior: Affect in the workplace. In S.T. Fiske (Ed.), Annual Review of Psychology, 53: 279–307. Palo Alto, CA: Annual Reviews.

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Emotions 195

Emotional Labor Many service and sales jobs require that individuals display certain emotions, regardless of what they are really experiencing. For example, fl ight attendants are expected to be warm and cordial, call center employees are expected to keep their cool when customers are hostile toward them, and sales associates are expected to be enthusiastic about the product they are selling, no matter what they actually feel. The process whereby associates must display emotions that are contrary to what they are feeling is termed emotional labor.118 Organizations often indicate to employees what emotions they must express and under what circumstances. When these required emotions, or display rules, are contrary to what associates are actually feeling, they can experience stress, emotional exhaustion, and burn- out.119 Emotional labor does not always lead to overstressed employees. When associates actually come to feel the emotions they are required to display, they can experience posi- tive outcomes such as greater job satisfaction.120

Even when associates may not feel the emotions they are required to express, several factors can infl uence whether this acting will have a negative outcome on associates’ well- being. First, the manner in which supervisors enforce display rules can infl uence whether emotional labor is harmful to associates.121 When supervisors are quite demanding, associ- ates will become more exhausted. Another factor that infl uences the effects of emotional labor is the self-identities of associates.122 When associates have a strong self-identity as a service worker or a caregiver then they will be less likely to experience negative effects from emotional labor. For example, a hospice care worker may feel tired and frustrated, but behave in a caring and nurturing manner with her patients. If the care worker has a strong self-identity as a caregiver, she will experience less exhaustion from her emotional labor. Finally, when associates have networks of supportive people and caring mentors, the negative effects of emotional labor will be mitigated.123

Emotional Intelligence Are some people just better dealing with emotions, theirs and others, than are other people? The past decade or so has seen an explosion in what has been termed the concept of emotional intelligence in both the study and practice of management. The best- accepted defi nition of emotional intelligence (EI) is that it is the ability to

• Accurately appraise one’s own and others’ emotions. • Effectively regulate one’s own and others’ emotions. • Use emotion to motivate, plan, and achieve.124

A person displaying high emotional intelligence can accurately determine his or her own emotions and the effect those emotions will have on others, then go on to regulate the emotions to achieve his or her goals.

Emotional intelligence has been linked to career success, leadership effectiveness, managerial performance, and performance in sales jobs.125 It also is the subject of many management development programs, popular books,126 and articles that may at times infl ate the value of emotional intelligence relative to cognitive intelligence.127 The specifi c abilities generally associated with emotional intelligence include:128

• Self-awareness. Associates with high self-awareness understand how their feelings, beliefs, and behaviors affect themselves and others. For example, a supervisor knows that her reaction to a valuable (and otherwise high-performing)

emotional labor The process whereby associates must display emotions that are contrary to what they are feeling.

emotional intelligence The ability to accurately appraise one’s own and others’ emotions, effectively regulate one’s own and others’ emotions, and use emotion to motivate, plan, and achieve.

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196 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

associate’s chronic lateness and excuses is one of anger, but she realizes that if she displays this anger, it will cause the associate to withdraw even further.

• Self-regulation. Self-regulation is the ability to control one’s emotions. The supervisor may feel like yelling at the associate or being punitive in making work assignments; however, if she is high in self-regulation, she will choose her words and actions carefully. She will behave in a manner that will more likely encourage the associate to come to work on time rather than make the associate withdraw even more.

• Motivation or drive. This characteristic is the same as achievement motivation, discussed previously in this chapter, and drive, discussed above under trait theories. Associates with high EI want to achieve for achievement’s sake alone. They always want to do things better and seek out feedback about their progress. They are passionate about their work.

• Empathy. Effective empathy means thoughtfully considering others’ feelings when making decisions and weighting those feelings appropriately, along with other factors. Consider again our example of the supervisor dealing with the tardy associate. Suppose she knows that the associate is frequently late because he is treated poorly by the work group. The supervisor can display empathy by acknowledging this situation and can act on it by attempting to change work arrangements rather than punishing the associate for being late. Thus, she can remove an obstacle for the associate and perhaps retain an associate who performs well and comes to work on time.

• Social skill. Social skill refers to the ability to build effective relationships with the goal of moving people toward a desired outcome. Socially skilled associates know how to build bonds between people. Often, leaders who appear to be

THE STRATEGIC LENS

Understanding personality, intel-ligence, attitudes, and emo-tions enables managers to more effectively manage the behavior of their associates. Selecting new asso- ciates based on personality and intel- ligence can have an impact on organi- zational performance, as demonstrated by Outback Steakhouse and the Na- tional Football League. Hiring associ- ates who fi t its culture in turn enables an organization to better implement its strategy, as illustrated by the suc- cess of Patricia Harris at McDonald’s. Organizations can further increase existing associates’ organizational fi t,

performance, and tenure by creating work environments that lead to positive attitudes and emotionally healthy envi- ronments. Furthermore, from the exam- ples presented throughout the chapter and summarized above, we can see how knowledge of personality, intelli- gence, attitudes, and emotions allows executives to more effectively imple- ment their strategies through manage- ment of behavior in their organizations.

Critical Thinking Questions

1. Specifi cally, how can you use knowledge of personality, attitudes,

intelligence, and emotions to make better hiring decisions?

2. If top executives wanted to imple- ment a strategy that emphasized innovation and new products, how could they use knowledge of per- sonality, attitudes, and emotions to affect the organization’s culture in ways to enhance innovation?

3. How could a manager use know- ledge about personality and atti- tudes to form a high-performance work team?

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What This Chapter Adds to Your Knowledge Portfolio 197

socializing with co-workers are actually working to build relationships and exercise their infl uence in a positive manner.

While emotional intelligence is quite a popular concept right now, it is not without its critics.129 One major criticism is that emotional intelligence is not intelligence at all, but rather a conglomeration of specifi c social skills and personality traits. Another criticism is that sometimes emotional intelligence is so broadly defi ned that it is meaningless. None- theless, the basic abilities that make up emotional intelligence are important infl uences on organizational behavior, whether they form one construct called emotional intelligence or are simply considered alone.

What This Chapter Adds to Your Knowledge Portfolio In this chapter, we have discussed personality in some detail. We have seen how personality develops and how important it is in the workplace. We have also discussed intelligence. If an organization is to be successful, its associates and managers must understand the effects of personality and intelli- gence and be prepared to act on this knowledge. Moving beyond enduring traits and mental ability, we have examined attitude formation and change. Without insights into attitudes, associates and managers alike would miss important clues about how a person will act in the workplace. Finally, we have briefl y examined emotions and their various roles in behavior and organizational life. More specifi cally, we have made the following points:

• Personality is a stable set of characteristics representing the internal properties of an individual. These characteristics, or traits, are relatively enduring, are major determinants of behavior, and infl uence behavior across a wide variety of situations.

• Determinants of personality include heredity and environment. Three types of studies have demonstrated the effects of heredity: (1) investigations of identical twins, (2) assessments of newborns and their behavior later in life, and (3) direct examinations of genes. Studies of environmental effects have emphasized childhood experiences as important forces in personality development.

• There are many aspects of personality. Five traits, however, have emerged as particularly important in the workplace. These traits, collectively known as the Big Five, are extraversion, conscientiousness, agreeableness, emotional stability, and openness to experience.

• Extraversion (the degree to which a person is outgoing and derives energy from being around people) tends to affect overall job performance, success in team interactions, and job satisfaction. For performance, fi t with the job is important, as extraverts have at least modest advantages in occupations calling for a high level of interaction with other people, whereas introverts appear to have advantages in occupations calling for more solitary work.

• Conscientiousness (the degree to which a person focuses on goals and works toward them in a disciplined way) also affects job performance, success as a team member, and job satisfaction. Higher levels of conscientiousness tend to be positive for these outcomes.

• Agreeableness (the degree to which a person is easygoing and tolerant) does not have simple, easily specifi ed effects on individual job performance but does appear to contribute positively to successful interactions on a team.

• Emotional stability (the degree to which a person handles stressful, high-demand situations with ease) affects job performance, success as a team member, and job satisfaction. Higher levels of emotional stability tend to be positive.

• Openness to experience (the degree to which a person seeks new experiences and thinks creatively about the future) does not have simple links to overall job performance, success

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198 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

at teamwork, or job satisfaction, but individuals scoring higher on this aspect of personality do appear to have an edge in specifi c tasks calling for vision and creativity.

• The Big Five personality traits may play a role in high- involvement management. Certain combinations of these traits seem to provide a foundation for the competencies needed by managers and associates. Absent these trait combinations, individuals may still be effective in high-involvement systems, but they may need to work a little harder.

• A Big Five assessment can be useful in selecting new associates and managers but must be combined with other tools, such as structured interviews and evaluations of the specifi c skills needed for a particular job.

• Beyond the Big Five, several cognitive and motivational personality concepts are important in the workplace. Cognitive concepts correspond to perceptual and thought processes and include locus of control, authoritarianism, social dominance orientation, and self- monitoring. Motivational concepts correspond to needs in individuals and are directly involved in energizing and maintaining overt behaviors. They include achievement motivation and approval motivation.

• There are many areas of intelligence, including number aptitude, verbal comprehension, and perceptual speed. Most psychologists who have extensively studied intelligence believe these various areas combine to form a single meaningful intelligence factor. This general intelligence factor has been found to predict workplace outcomes.

• An attitude is a persistent mental state of readiness to feel and behave in favorable or unfavorable ways toward a specifi c person, object, or idea. Attitudes consist of a cognitive element, an affective element, and a behavioral element.

• Attitudes may be learned as a result of direct experience with an object, person, or idea. Unfavorable experiences are likely to lead to unfavorable attitudes,

and favorable experiences to favorable attitudes. Attitudes may also form as the result of self-perception, where an individual behaves in a certain way and then concludes he has an attitude that matches the behavior. Finally, attitudes may form on the basis of a need for consistency. We tend to form attitudes that are consistent with our existing attitudes.

• Job satisfaction and organizational commitment are two of the most important workplace attitudes. Job satisfaction is a favorable or unfavorable view of the job, whereas organizational commitment corresponds to how strongly an individual identifi es with and values being associated with the organization. Both of these attitudes affect intentions to stay in the job, actual decisions to stay, and absenteeism. They are also related to job performance, though not as strongly as some other factors. Attitudes may change through exposure to persuasive communications or cognitive dissonance. Persuasive communication consists of four important elements: the communicator, message, situation, and target. Dissonance refers to inconsistencies between attitude and behavior. Under certain

? back to the knowledge objectives 1. What is meant by the term personality? What key be-

liefs do psychologists traditionally hold about personal- ity traits?

2. What are the Big Five traits, and how do they infl uence behavior and performance in the workplace? Give an example of someone you know whose personality did not fi t the job he or she had. This could be a person in an organization in which you worked, or it could be a person from a school club or civic organization. What was the outcome? If you had been the individual’s man- ager, how would you have attempted to improve the situation?

3. Describe a situation in which a manager’s or a friend’s locus of control, authoritarianism, social dominance orientation, self-monitoring, need for achievement, or approval motivation had an impact on your life.

4. What is intelligence, and what is its effect in the work- place?

5. How are attitudes similar to and different from per- sonality? How do attitudes form? How can managers change attitudes in the workplace? Assume that the target of the attitude cannot be changed (that is, the job, boss, technology, and so on cannot be changed). Be sure to address both persuasive communication and dissonance.

6. What is the relationship between emotions and attitudes? Describe the emotions displayed by a past or current boss and explain how those emotions affected your job.

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Human Resource Management Applications 199

conditions, a behavior that is inconsistent with an existing attitude causes the attitude to change. Key conditions include: (1) the behavior being substantially inconsistent with the attitude, (2) the behavior causing harm or being negative for someone, and (3) the behavior being voluntary.

• Emotions are the subjective reactions associates experience that contain both a psychological and physiological component. Emotions can infl uence organizational behavior directly, as the basis of emotional labor, or through associates’ emotional intelligence.

Thinking about Ethics 1. Is it appropriate for an organization to use personality tests to screen applicants for jobs?

Should organizations reject applicants whose personalities do not fi t a particular profi le, ignoring the applicants’ performance on previous jobs, their capabilities, and their motivation?

2. Should organizations use intelligence tests to screen applicants even though the accuracy of such tests is questioned by some? Why or why not?

3. Are there right and wrong values? How should values be used to manage the behavior of associates in organizations?

4. Can knowledge of personality, attitudes, and values be used inappropriately? If so, how?

5. Is it appropriate to change people’s attitudes? If so, how can a person’s attitudes be changed without altering that person’s values?

Key Terms personality, p. 170 extraversion, p. 172 conscientiousness, p. 173 agreeableness, p. 173 emotional stability, p. 174 openness to experience, p. 174 locus of control, p. 177 authoritarianism, p. 177

social dominance orientation, p. 178

self-monitoring, p. 178 achievement

motivation, p. 178 approval motivation, p. 179 intelligence, p. 181 attitude, p. 182 affective commitment, p. 189

normative commitment, p. 189

continuance commitment, p. 189

cognitive dissonance, p. 191 emotions, p. 193 emotional contagion, p. 194 emotional labor, p. 195 emotional intelligence, p. 195

Human Resource Management Applications Personality traits and intelligence are often used in employee selection. Human Resource Management (HRM) departments are often charged with developing selection procedures or choosing vendors of selection tests. Furthermore, HRM departments are often responsible for conducting job analyses to determine what traits and abilities are necessary to perform various jobs.

HRM departments conduct employee surveys and climate audits to assess the satisfaction and commitment of current employees. Exit interviews may also be conducted to determine why people leave the organization.

Finally, Employee Assistance Programs (EAPs) are part of the HRM function. These programs help employees cope with problems resulting from emotional strain on the job.

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200 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

building your human capital

Big Five Personality Assessment Different people have different personalities, and these personalities can affect outcomes in the workplace. Understanding your own personality can help you to understand how and why you behave as you do. In this installment of Building Your Human Capital, we present an assessment tool for the Big Five.

Instructions In this assessment, you will read 50 phrases that describe people. Use the rating scale below to indicate how accurately each phrase describes you. Rate yourself as you generally are now, not as you wish to be in the future; and rate yourself as you honestly see yourself. Keep in mind that very few people have extreme scores on all or even most of the items (a “1” or a “5” is an extreme score); most people have midrange scores for many of the items. Read each item carefully, and then circle the number that corresponds to your choice from the rating scale.

1 2 3 4 5 Not at

all like me Somewhat unlike me

Neither like nor unlike me

Somewhat like me

Very much like me

1. Am the life of the party. 1 2 3 4 5 2. Feel little concern for others. 1 2 3 4 5 3. Am always prepared. 1 2 3 4 5 4. Get stressed out easily. 1 2 3 4 5 5. Have a rich vocabulary. 1 2 3 4 5 6. Don’t talk a lot. 1 2 3 4 5 7. Am interested in people. 1 2 3 4 5 8. Leave my belongings around. 1 2 3 4 5 9. Am relaxed most of the time. 1 2 3 4 5 10. Have diffi culty understanding abstract ideas. 1 2 3 4 5 11. Feel comfortable around people. 1 2 3 4 5 12. Insult people. 1 2 3 4 5 13. Pay attention to details. 1 2 3 4 5 14. Worry about things. 1 2 3 4 5 15. Have a vivid imagination. 1 2 3 4 5 16. Keep in the background. 1 2 3 4 5 17. Sympathize with others’ feelings. 1 2 3 4 5 18. Make a mess of things. 1 2 3 4 5 19. Seldom feel blue. 1 2 3 4 5 20. Am not interested in abstract ideas. 1 2 3 4 5 21. Start conversations. 1 2 3 4 5 22. Am not interested in other people’s problems. 1 2 3 4 5 23. Get chores done right away. 1 2 3 4 5

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Building Your Human Capital 201

24. Am easily disturbed. 1 2 3 4 5 25. Have excellent ideas. 1 2 3 4 5 26. Have little to say. 1 2 3 4 5 27. Have a soft heart. 1 2 3 4 5 28. Often forget to put things back in their

proper place. 1 2 3 4 5 29. Get easily upset. 1 2 3 4 5 30. Do not have a good imagination. 1 2 3 4 5 31. Talk to a lot of different people at parties. 1 2 3 4 5 32. Am not really interested in others. 1 2 3 4 5 33. Like order. 1 2 3 4 5 34. Change my mood a lot. 1 2 3 4 5 35. Am quick to understand things. 1 2 3 4 5 36. Don’t like to draw attention to myself. 1 2 3 4 5 37. Take time out for others. 1 2 3 4 5 38. Shirk my duties. 1 2 3 4 5 39. Have frequent mood swings. 1 2 3 4 5 40. Use diffi cult words. 1 2 3 4 5 41. Don’t mind being the center of attention. 1 2 3 4 5 42. Feel others’ emotions. 1 2 3 4 5 43. Follow a schedule. 1 2 3 4 5 44. Get irritated easily. 1 2 3 4 5 45. Spend time refl ecting on things. 1 2 3 4 5 46. Am quiet around strangers. 1 2 3 4 5 47. Make people feel at ease. 1 2 3 4 5 48. Am exact in my work. 1 2 3 4 5 49. Often feel blue. 1 2 3 4 5 50. Am full of ideas. 1 2 3 4 5

Scoring Key To determine your scores, combine your responses to the items above as follows:

Extraversion � (Item 1 � Item 11 � Item 21 � Item 31 � Item 41) � (30 � (Item 6 � Item 16 � Item 26 � Item 36 � Item 46))

Conscientiousness � (Item 3 � Item 13 � Item 23 � Item 33 � Item 43 � Item 48) � (24 – (Item 8 � Item 18 � Item 28 � Item 38))

Agreeableness � (Item 7 � Item 17 � Item 27 � Item 37 � Item 42 � Item 47) � (24 – (Item 2 � Item 12 � Item 22 � Item 32))

Emotional stability � (Item 9 � Item 19) � (48 – (Item 4 � Item 14 � Item 24 � Item 29 � Item 34 � Item 39 � Item 44 � Item 49))

Openness to experience � (Item 5 � Item 15 � Item 25 � Item 35 � Item 40 � Item 45 � Item 50) � (18 – (Item 10 � Item 20 � Item 30))

Scores for each trait can range from 10 to 50. Scores of 40 and above may be considered high, while scores of 20 and below may be considered low.

Source: International Personality Item Pool. 2001. A Scientifi c Collaboration for the Development of Advanced Measures of Personality Traits and Other Individual Differences (http://ipip.ori.org).

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202 Chapter 5 Personality, Intelligence, Attitudes, and Emotions

team exercise

Experiencing Emotional Labor Have you ever been forced to smile at someone who was annoying you? Have you ever had to be calm when you felt very afraid? If so, you have probably engaged in emotional labor. The purpose of this exercise is to examine how emotional labor can affect us in different ways and the factors that impact the toll that emotional labor can take on us.

an organizational behavior moment

Whatever Is Necessary! Marian could feel the rage surge from deep within her. Even though she was usually in control of her behavior, it was not easy to control her internal emotions. She could sense her rapid pulse and knew that her face was fl ushed. But she knew that her emo- tional reaction to the report would soon subside in the solitary confi nes of her executive offi ce. She would be free to think about the problem and make a decision about solving it.

Marian had joined the bank eight months ago as manager in charge of the consumer loan sections. There were eight loan sec- tions in all, and her duties were both interesting and challenging. But for some reason there had been a trend in the past six months of decreasing loan volume and increasing payment delinquency. The month-end report to which she reacted showed that the past month was the worst in both categories in several years.

Vince Stoddard, the president, had been impressed by her credentials and aggressiveness when he hired her. Marian had been in the business for 10 years and was the head loan offi cer for one of the bank’s competitors. Her reputation for aggressive pursuit of business goals was almost legendary among local bankers. She was active in the credit association and worked long, hard hours. Vince believed that she was the ideal person for the position.

When he hired her, he had said, “Marian, you’re right for the job, but I know it won’t be easy for you. Dave Kattar, who heads one of the loan sections, also wanted the job. In fact, had you turned down our offer, it would have been Dave’s. He is well liked around here, and I also respect him. I don’t think you’ll have any problems working with him, but don’t push him too hard at fi rst. Let him get used to you, and I think you’ll fi nd him to be quite an asset.”

But Dave was nothing but a “pain in the neck” for Marian. She sensed his resentment from the fi rst day she came to work. Although he never said anything negative, his aggravating way of ending most conversations with her was, “Okay, Boss Lady. Whatever you want is what we’ll do.”

When loan volume turned down shortly after her arrival, she called a staff meeting with all of the section heads. As she

began to explain that volume was off, she thought she noticed several of the section heads look over to Dave. Because she saw Dave only out of the corner of her eye, she couldn’t be certain, but she thought he winked at the other heads. That action im- mediately angered her—and she felt her face fl ush. The meeting accomplished little, but each section head promised that the next month would be better.

In fact, the next month was worse, and each subsequent month followed that pattern. Staff meetings were now more frequent, and Marian was more prone to explode angrily with threats of what would happen if they didn’t improve. So far she had not followed through on any threats, but she thought that “now” might be the time.

To consolidate her position, she had talked the situation over with Vince, and he had said rather coolly, “Whatever you think is necessary.” He hadn’t been very friendly toward her for several weeks, and she was worried about that also.

“So,” Marian thought to herself, “I wonder what will hap- pen if I fi re Dave. If I get him out of here, will the others shape up? On the other hand, Vince might not support me. But maybe he’s just waiting for me to take charge. It might even get me back in good graces with him.”

Discussion Questions 1. What role did personality play in the situation at the

bank? Which of the Big Five personality traits most clearly infl uenced Marian and Dave? Which of the cognitive and motivational aspects of personality played a role?

2. Working within the bounds of her personality, what should Marian have done when trouble fi rst seemed to be brewing? How could she have maintained Dave’s job satisfaction and commitment?

3. How should Marian proceed now that the situation has become very diffi cult?

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Endnotes 203

STEPS 1. At the beginning of class, assemble into teams of six to eight people. 2. During the next 30 minutes of class, each individual will be required to follow emotional

display rules for one of the following emotions: a. Happiness b. Anger c. Compassion and caring d. Fear

Assign the display rules so that at least one person is displaying each emotion. 3. Each person is to display his or her assigned emotion during the next 30 minutes of class

lecture or activity—no matter what he or she actually feels! 4. At the end of the 30 minutes (or when instructed by your teacher), re-form into groups and

address the following questions: a. How diffi cult was it for you to display your assigned emotion? Was your assigned emotion

different from how you actually felt? Did your felt emotions begin to change to coincide with your displayed emotion?

b. To what extent did the type of emotion required (e.g., happiness versus anger) infl uence your reaction to this exercise?

c. How much longer could you have continued displaying your assigned emotion? Why? 5. Appoint a spokesperson to present the group’s conclusions to the entire class.

Source: Adapted from Experiences in Management and Organizational Behavior, 4th ed. New York: John Wiley & Sons, 1997.

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Endnotes 205

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110. Lazarus, R.S., & Lazarus, A.D. 1994. Passion and reason: Making sense of emotions. New York: Oxford University Press.

111. Hershcovis, M.S., Turner, N., Barling, J., Arnols, K.A., Dupre, K.E., Inness, M., LeBlanc, M.M., & Sivanathan, N. 2007. Predicting workplace aggression: A meta-analysis. Journal of Applied Psychology, 92: 228–238.

112. George, J.M. & Brief, A.P. 1992. Feeling good—doing good: A conceptual analysis of mood at work—organizational sponta- neity. Psychological Bulletin, 112: 310–329.

113. Isen, A.M., Daubman, K.A., & Nowicki, G.P. 1987. Positive affect facilitates creative problem solving. Journal of Personality and Social Psychology, 52: 1122–1131.

114. George, J.M., & Zhou, J. 2002. Understanding when bad moods foster creativity and good ones don’t: The role of context and clarity of feelings. Journal of Applied Psychology, 87: 687–697.

115. Ting Fong, C. 2006. The effects of emotional ambivalence on creativity. Academy of Management Journal, 49: 1016–1030.

116. Barsade, S. 2002. The ripple effect: Emotional contagion and its infl uence on group behavior. Administrative Science Quar- terly, 47: 644–675; Hatfi eld, E., Cacioppo, J.T., & Rapson, R.L. 1994. Emotional contagion. Cambridge, England: Cambridge University Press.

117. Bono, J.E., & Ilies, R. 2006. Charisma, positive emotions and mood contagion. The Leadership Quarterly, 17(4): 317–334.

118. Hochschild, A.R. 1983. The managed heart: Commercialization of human feeling. Berkeley, CA: University of California Press; Ashforth, B.E., & Humphrey, R.H. 1993. Emotional labor in service roles: The infl uence of identity. Academy of Management Review, 18: 88–115.

119. Cropanzano, R., Weiss, H. M., & Elias, S. M. 2004. The im- pact of display rules and emotional labor on psychological well- being at work. In P.L. Perrewé, & D.C. Ganster (Eds.), Research

in occupational stress and well-being (Vol. 3). Amsterdam: Elsevier, pp. 45–89; Schaubroeck, J., & Jones, J.R. 2000. Antecedents of workplace emotional labor dimensions and moderators of their effects on physical symptoms. Journal of Organizational Behavior, 21: 163–183.

120. Zapf, D., & Holz, M. 2006. On the positive effect and nega- tive effects of emotion work in organizations. European Journal of Work and Organizational Psychology, 15: 1–26.

121. Wilk, S.L., & Moynihan, L.M. 2005. Display rule “regulators”: The relationship between supervisors and worker emotional exhaustion. Journal of Applied Psychology, 90: 915–927.

122. Wilk & Moynihan Display rule “regulators”; Ashforth, B.E., & Humphrey, R.H. 1993. Emotional labor in service roles: The infl uence of identity. Academy of Management Review, 18: 88–115.

123. Bozionelos, N. 2006. Mentoring and expressive network resources: Their relationship with career success and emotional exhaustion among Hellenes employees involved in emotion work. Journal of Human Resource Management, 17: 362–378.

124. Salovey, P., & Mayer, J. 1990. Emotional intelligence. Imagina- tion, Cognition, and Personality, 9: 185–211.

125. Kerr, R., Garvin, J., Heaton, N., & Boyle, E. 2006. Emotional intelligence and leadership effectiveness. Leadership and Orga- nizational Development Journal, 27: 265–279; Cote, S., & Min- ers, C.T.H. 2006. Emotional intelligence, cognitive intelligence, and job performance. Administrative Science Quarterly, 51: 1–28; Semadar, A., Robins, G., & Ferris, G.R. 2006. Comparing the validity of multiple social effectiveness constructs in the predic- tion of managerial job performance. Journal of Organizational Behavior, 27: 443–461. Rozell, E.J., Pettijohn, C.E., & Parker, R.S. 2006. Journal of Marketing Theory and Practice, 14: 113–125; Rooy, D.L., & Viswasvaran, C. 2004. Emotional intelligence: A meta-analytic investigation of predictive validity and nomono- logical net. Journal of Vocational Behavior, 65: 71–95.

126. Goleman, D. 1995. Emotional intelligence. New York: Bantam. 127. Locke, E.A. 2005. Why emotional intelligence is an invalid con-

cept. Journal of Organizational Behavior, 26: 425–443. 128. Goleman, D. 2004. What makes a leader? Harvard Busi-

ness Review, Jan. 2004: 82–91; Goleman, D. 1995, Emotional intelligence, New York: Bantam; Fineman, S. 2005. Appreciating emotion at work: Paradigm tensions. International Journal of Work Organisation and Emotion, 1: 4–19.

129. Locke, E.A. 2005. Why emotional intelligence is an invalid concept. Journal of Organizational Behavior, 26: 425–431; Mur- phy, K.R. (Ed.) 2006. A critique of emotional intelligence: What are the problems and how can they be fi xed? Mahwah, NJ: Lawrence Erlbaum Associates; Fineman, S. 2005. Appreciating emotion at work: Paradigm tensions. International Journal of Work Organisa- tion and Emotion, 1: 4–19.

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? knowledge objectives After reading this chapter, you should be able to: 1. Defi ne work motivation and explain why it is im-

portant to organizational success. 2. Discuss how managers can use Maslow’s need hi-

erarchy and ERG theory to motivate associates. 3. Describe how need for achievement, need for af-

fi liation, and need for power relate to work moti- vation and performance.

4. Explain how Herzberg’s two-factor theory of motivation has infl uenced current management practice.

5. Discuss the application of expectancy theory to motivation.

6. Understand equity theory and procedural justice, and discuss how fairness judgments infl uence work motivation.

7. Explain how goal-setting theory can be used to motivate associates.

8. Describe how jobs can be enriched and how job enrichment can enhance motivation.

9. Based on all major theories of work motivation, describe specifi c actions that can be taken to in- crease and sustain employee motivation.

work motivation

exploring behavior in action

Work Motivation at W.L. Gore & Associates

O n January 1, 1958, Wilbert and Genevieve Gore founded a small company to develop ap- plications of polytetrafl uoroethylene (PTFE).

Wilbert, a chemist and research scientist, tended to the technical work while Genevieve handled accounting and other business matters.

Wilbert Gore initially focused on applications in the emerging computer industry, where PTFE’s insu- lation characteristics were potentially useful in cables and circuit boards. After solving a number of techni- cal issues, he and his company succeeded with cable and wire products. Some of these products eventually landed on the moon as part of the technology used in the Apollo space program. More recently, they have been incorporated into the U.S. space shuttle program. Moving beyond cables and wires, Gore has created a number of leading products for a number of industries. Best known among consumers for wa- terproof Gore-Tex fabrics, the company also places products in industries such as aerospace, automotive, chemical processing, computing, telecommunica- tions, environmental protection, medical/health care, pharmaceutical, biotechnology, and textiles. Gore-Tex fabrics were used in the uniforms of the 2010 U.S. Olympic snowboarding team.

Having previously experienced bureaucratic road- blocks in highly structured organizations, Wilbert Gore designed a different kind of company to support the work with PTFE. Using the term lattice structure

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209

to signify an emphasis on informal communication and fl uid work networks, he set up a company that focused on equality among people as well as freedom for those people to pursue their own ideas and projects. To a signifi cant de- gree, individuals were and still are expected to defi ne their own jobs within areas that interest them. Assigned spon- sors help both new and ex- isting Gore personnel with job defi nition.

Formal leadership as- signments are less common at Gore than in more struc- tured companies. Instead of formal assignments, Gore looks for individuals who have attracted “fol- lowers” for their ideas and projects. Thomas Malone, a professor at Massachu- setts Institute of Technol- ogy, has studied the com- pany and summarizes the approach as follows: “The way you become a [leader] is by fi nding people who want to work for you. … In a certain sense, you’re elected rather than appointed. It’s a democratic structure inside a busi- ness organization.”

Culturally, four principles govern the behavior of in- dividuals within W.L. Gore & Associates:

• The ability to make one’s own commitments and keep them

• Freedom to encourage, help, and allow other associates to grow in knowledge, skill, and scope of responsibility

• Consultation with others before undertaking actions that could impact the reputation of the company

• Fairness to each other and everyone with whom contact is made

These structural and cultural features of the com- pany set the stage for personal fulfi llment and growth. The offi cial Gore website puts it this way: “Everyone can quickly earn the credibility to defi ne and drive projects. Sponsors help associates chart a course in the organiza- tion that will offer personal fulfi llment while maximizing their contribution to the enterprise.” Current CEO Terri Kelly said this: “We work hard at maximizing individual

potential … and cultivating an environment where crea- tivity can fl ourish.” He later stated that “Thanks largely to the pioneering corporate culture established by our founders … Gore is a place where innovation thrives and where every individual has the ability to contribute to the success of the enterprise … our culture is our biggest

competitive advantage.” Of course, Gore is not

for everyone. Individuals who work at the company must tolerate a certain amount of ambiguity and must thrive in autono- mous settings. Moreover, they must value personal growth in the workplace. While many or even most individuals desire personal growth, some do not. Through rigorous selection procedures, Gore tends to

fi nd the right people. The result is a highly motivated and effective workforce.

The emphasis on fairness also affects motivation and effectiveness. In many companies, pay systems promote dysfunctional internal competition and jealousy. At W.L. Gore & Associates, the pay system tends to promote a sense of equity and justice. A key aspect of the system is the spon- sor. Each individual at Gore has a sponsor, either a peer or a leader, who is responsible for ensuring fair pay. The sponsor collects information on contributions and achieve- ments from an individual’s peers and leaders and then shares this information with a compensation committee. Overall, Gore’s approach can be summarized as follows: “Unlike companies which base an employee’s pay on the evaluations of one or two people—or supervisors’ opinions alone—Gore involves many [people] in the process. Our goal: internal fairness and external competitiveness.”

Recognition and success have resulted from Gore’s practices. For example, W.L. Gore & Associates has been listed for 12 consecutive years on the Fortune list of the “Best 100 Companies to Work For.” It has also been listed as a top company for which to work in German, Italian, and British rankings, and indeed in rankings for the entire European Union. It has received awards for many techno- logical breakthroughs. Financially, the privately held com- pany has enjoyed consistently strong performance.

©Tyler Stableford/Stone/Getty Images

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210 Chapter 6 Work Motivation

Going forward, the company seems poised for con- tinued success. Today Gore has approximately 9,000 as- sociates located in 30 countries worldwide, with manufac- turing facilities in the United States, Germany, Scotland,

Japan, and China and sales offi ces around the world. Their annual revenues are $2.5 billion. As it continues to grow, the company seems intent on maintaining its current structure and culture.

Formulating strategies that can deliver competitive advantage is not easy. Senior managers working with other individuals engage in countless con- versations, meetings, experiments, and analyses in order to create or modify company strategies. Implementing strat- egies and engaging in the day-to-day behaviors that help to create competi- tive advantage also are not easy tasks. Hard work is involved. Managers and associates must be willing to deliver strong efforts if a fi rm is to succeed.1

With strong efforts being so im- portant, work motivation is a crucial topic in any discussion of organiza- tional behavior. People must be moti- vated if they are to effectively engage in the behaviors and practices that bring advantage and success to a fi rm.

It is important to note that differ- ent strategies require different types of people and behavior, and therefore dif- ferent approaches to motivation. W.L. Gore has adopted a general strategy of differentiation based on innovation and creativity. Differentiating in this way requires people who can think differently, experiment in smart ways, accept responsibility, and appreciate the learning that accompanies failed ef- forts. The strategy also requires people who want to be challenged and grow in the workplace. To fully motivate such people, resources for trying new ideas must be made available, including time. Opportunities to develop new skills and polish old ones are important. Recogni- tion for successes and pats on the back for strong efforts that unexpectedly did

not bear fruit also might be useful. Pay, while important, often takes a backseat.

There are many ways to motivate people. Hence, there is no simple an- swer to the question of what managers should do to increase and sustain their associates’ motivation. A great deal is known, however, about how people are motivated. In this chapter, we de- scribe the major theories of work moti- vation and the practices that are most likely to increase and sustain strong efforts. We begin by formally defi ning what is meant by motivation. Next, we describe fundamental theories of work motivation, including both content and process theories. To synthesize these theories, we close the main body of the chapter by distilling useful management practices.

the strategic importance of Work Motivation

Sources: D. Anfuso. 1999. “Core Values Shape W.L. Gore’s Innovative Culture,” Workforce, 78 no. 3: 48–53; A. Deutschman. 2004. “The Fabric of Creativity,” Fast Company, no. 89: 54–59; Gore & Associates, “Compensation,” 2007, at http://www.gore.com/en_xx/ careers/benefi ts/compensation.html; Gore & Associates, “Corporate Culture,” 2007, at http://www.gore.com/en_xx/aboutus/culture/ index.html; Gore & Associates, “Fast Facts,” 2010, at http://www.gore.com/en_xx/aboutus/fastfacts/index.html; P. Kriger. 2006. “Power of the Individual,” Workforce Management, 85, no. 4: 1–7; F. Shipper and C.C. Manz. 1993 “W.L. Gore & Associates, Inc.,” Pinnacle Management Strategy Case Base; M. Weinreb. 2003. “Power to the People,” Sales and Marketing Management, 155, no. 4: 30–35; W.L. Gore and Associates Press Release (Jan. 22, 2009), “W.L. Gore and Associates Marks 12th Year as One of Nation’s Best,” at http://www.gore.com/en_xx/news/FORTUNE2009.html; Gore and Associates, “About Us.” at http://www.gore.com/en_xx/aboutus/ index.html.

What Is Motivation? Man and machine … work in close harmony to achieve more than either could alone. Ma- chines bring precision and capacity. They make our lives easier, perfect our processes, and in many ways, enrich our quality of life. But people possess something that machines don’t— human spirit and inspiration. Our people work continuously at setting goals and tracking results for ongoing improvement as an overall business. They are an inspiration and their goals and accomplishments have won Branch-Smith Printing recognition on the highest of levels.2

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http://www.gore.com/en_xx/careers/benefits/compensation.html

http://www.gore.com/en_xx/aboutus/culture/index.html

http://www.gore.com/en_xx/aboutus/fastfacts/index.html

http://www.gore.com/en_xx/news/FORTUNE2009.html

http://www.gore.com/en_xx/aboutus/index.html

Content Theories of Motivation 211

This quotation from Branch-Smith Printing, a 2002 recipient of the Malcolm Bald- rige National Quality Award, gets at the heart of motivation: it is the spirit and inspiration that leads people to apply their human capital to meet the goals of the organization. In Chapter 1, we discussed the strategic importance of human capital to the success of a fi rm. However, human capital alone is not enough to ensure behaviors that support organiza- tional performance. Associates must translate their human capital into actions that result in performance important to the achievement of organizational goals. Motivation is the process through which this translation takes place.

Consider the following example. A manager has three assistants reporting to her. They have similar levels of experience and education. However, they have different levels of abil- ity for the tasks at hand, and they perform at different levels. It is interesting that the person with the least ability has outperformed his counterparts. How can a person with less ability outperform individuals who have greater abilities? The answer may be that he is more moti- vated to apply his abilities than the others. The two other assistants are approximately equal to one another in their motivation to perform, judging by the fact that they work equally hard, and yet one of these assistants outperforms the other. How can this be when they are equally motivated? The answer may lie in their different ability levels. Thus, we can see that a person’s level of performance is a function (f ) of both ability and motivation:

Performance � f (Ability � Motivation)

Now consider another scenario. Two salespersons are equally motivated and have the same ability, yet one of them outperforms the other. How can we explain this, if perform- ance is a function of ability and motivation? In this case, the better performer has a more lucrative sales territory than the other salesperson. Thus, environmental factors can also play a role in performance.

This brings us to our defi nition of work motivation. We know from the preceding discussion that ability and certain environmental factors exert infl uences on performance that are separate from the effects of motivation. Motivation, then, refers to forces coming from within a person that account for the willful direction, intensity, and persistence of the person’s efforts toward achieving specifi c goals, where achievement is not due solely to ability or to environmental factors.3 Several prominent theories offer explanations of mo- tivation. Most of the theories can be separated into two groups: those concerned largely with content and those concerned largely with process. In the next two sections, we con- sider theories in each of these two groups.

Content Theories of Motivation Content theories of motivation generally focus on identifying the specifi c factors that motivate people. These theories are, for the most part, straightforward. Four impor- tant content theories of motivation are Maslow’s need hierarchy, Alderfer’s ERG theory, McClelland’s need theory, and Herzberg’s two-factor theory.

Hierarchy of Needs Theory One of the most popular motivation theories, frequently referred to as the hierarchy of needs theory, was proposed in the 1940s by Abraham Maslow.4 According to Maslow, peo- ple are motivated by their desire to satisfy specifi c needs. Maslow arranged these needs in

motivation Forces coming from within a person that account for the willful direction, intensity, and persistence of the person’s efforts toward achieving specifi c goals, where achievement is not due solely to ability or to environmental factors.

hierarchy of needs theory Maslow’s theory that suggests people are motivated by their desire to satisfy specifi c needs, and that needs are arranged in a hierarchy with physiological needs at the bottom and self-actualization needs at the top. People must satisfy needs at lower levels before being motivated by needs at higher levels.

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212 Chapter 6 Work Motivation

hierarchical order, with physiological needs at the bottom, followed by safety needs, social and belongingness needs, esteem needs, and, at the top, self-actualization needs. In general, lower-level needs must be substantially met before higher-level needs become important. Below, we look at each level and its theoretical implications in organizational settings.

1. Physiological needs. Physiological needs include basic survival needs—for water, food, air, and shelter. Most people must largely satisfy these needs before they become concerned with other, higher-order needs. Money is one organizational award that is potentially related to these needs, to the extent that it provides for food and shelter.

2. Safety needs. The second level of Maslow’s hierarchy concerns individuals’ needs to be safe and secure in their environment. These needs include the need for protection from physical or psychological harm. People at this level might consider their jobs as security factors and as a way to keep what they have acquired. These managers and associates might be expected to engage in low-risk job behaviors, such as following rules, preserving the status quo, and making career decisions based on security concerns.

3. Social and belongingness needs. Social needs involve interaction with and acceptance by other people. These needs include the desire for affection, affi liation, friendship, and love. Theoretically, people who reach this level have primarily satisfi ed physiological and safety needs and are now concerned with establishing satisfying relationships with other people. Although a great deal of satisfaction may come from family relationships, a job usually offers an additional source of relationships. Managers and associates at this level may thus seek supportive co-worker and peer-group relationships.

4. Esteem needs. Esteem needs relate to feelings of self-respect and self-worth, along with respect and esteem from peers. The desire for recognition, achievement, status, and power fi ts in this category. People at this level may be responsive to organizational recognition and awards programs and derive pleasure from having articles about them published in the company newsletter. Money and fi nancial rewards may also help satisfy esteem needs, because they provide signals of people’s “worth” to the organization.

5. Self-actualization needs. A person’s need for self- actualization represents her desire to fulfi ll her potential, maximizing the use of her skills and abilities. People at the self-actualization level are less likely to respond to the types of rewards described for the fi rst four levels. They accept their own achievements and seek new opportunities to use their unique skills and talents. They often are highly motivated by work assignments that challenge these skills, and they might even reject common rewards (salary increase, promotion) that could distract them from using their primary skills. Only a few people are assumed to reach this level.

As mentioned, these needs are arranged in hierarchical order, with physiological needs the lowest and self-actualization

©Ryan McVay/Getty Images, Inc.

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Content Theories of Motivation 213

the highest. According to Maslow’s theory, each need is prepotent over all higher-level needs until it has been satisfi ed. A prepotent need is one that predominates over other needs. For example, a person at the social and belongingness level will be most concerned with rewards provided by meaningful relationships and will not be so concerned with esteem-related rewards, such as public recognition or large bonuses. It follows that a satisfi ed need is no longer a motivator. For example, after a person’s social needs are met, she will no longer be concerned with developing and maintaining relationships but will instead be motivated to seek esteem-related rewards. The need hierarchy theory is supposed to apply to all normal, healthy people in a similar way.

The need hierarchy theory has not been well supported by empirical research.5 Re- search has indicated that a two-level hierarchy of lower-order and higher-order needs may exist, but it has not found much support for the fi ve specifi c need categories proposed by Maslow. One reason for this fi nding may be the context of the studies. Most people in the United States, where the studies typically have been done, have satisfi ed their basic needs and are faced with a complex system of means to satisfy their higher-order ones. It may be diffi cult for researchers to separate the needs these people experience into the fi ve specifi c categories proposed by Maslow.

In addition, the idea of prepotency has been questioned.6 Some researchers have noted that several needs may be important at the same time. For example, a person can simultaneously have strong social, esteem, and self-actualization needs. Even Maslow’s clinical studies showed that the idea of prepotency is not relevant for all individuals.7

A fi nal problem with the need hierarchy theory involves a practical concern. It is diffi cult to determine the present need level for each associate and the exact rewards that would help satisfy that associate’s specifi c needs. For example, a person’s concern with being popular with co-workers may be related to either social and belongingness needs or esteem needs (or both). Being popular can mean that one is liked, but it can also mean that one has high status in the group. If a manager is attempting to diagnose the meaning behind a person’s desire to be popular, she could make an erroneous judgment. As another example, money can be used to meet both physiological and esteem needs, but it may not have the desired effect in all cases where esteem is the key issue. In general, it is challenging for managers to apply the need hierarchy to motivate associates.

Although the need hierarchy theory has many weaknesses, it is historically important because it focused attention on people’s esteem and self-actualization needs. Previously, behaviorism had been the dominant approach to understanding human motivation. As you may recall, behaviorism proposes that people’s behaviors are motivated solely by ex- trinsic rewards. The need hierarchy, in contrast, suggests that the behavior of many people is motivated by needs refl ecting a human desire to be recognized and to grow as an indi- vidual. Beyond its historical signifi cance, the need hierarchy also continues to guide some research in fi elds such as humanistic psychology.8

ERG Theory ERG theory, developed by Clayton Alderfer, is similar to Maslow’s need hierarchy theory in that it also proposes need categories.9 However, it includes only three categories: exis- tence needs (E), relatedness needs (R), and growth needs (G). The relationship of these categories to those of Maslow’s need hierarchy theory is shown in Exhibit 6-1. As you can see in the exhibit, existence needs are similar to Maslow’s physiological and safety needs,

ERG theory Alderfer’s theory that suggests people are motivated by three hierarchically ordered types of needs: existence needs (E), relatedness needs (R), and growth needs (G). A person may work on all three needs at the same time, although satisfying lower-order needs often takes place before a person is strongly motivated by higher-level needs.

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214 Chapter 6 Work Motivation

relatedness needs are similar to Maslow’s social and belongingness needs, and growth needs are similar to Maslow’s needs for esteem and self-actualization. Growth needs are particularly important in an organization such as W.L. Gore & Associates.

ERG theory differs from Maslow’s theory in two important ways. First, the notion of prepotency is not fi xed in ERG theory. A person’s existence needs do not necessarily have to be satisfi ed before she can become concerned about her relationships with others or about using her personal capabilities. Her desire to meet the existence needs may be stronger than her desire to meet the two other types of needs, but the other needs may still be important. The need hierarchy theory proposes that the hierarchy is fi xed and that physiological needs must be largely satisfi ed before other needs become important.

Second, even when a need is satisfi ed, it may remain the dominant motivator if the next need in the hierarchy cannot be satisfi ed. For instance, if a person has satisfi ed his relatedness needs but is frustrated in trying to satisfy his growth needs, his desire for relat- edness needs again becomes strong (recall that a satisfi ed need is no longer a motivator in the need hierarchy theory). Alderfer called this the frustration-regression process.10 Thus, it is possible that a need may never cease to be a motivator. An associate who has many friends and is very well liked may continue to seek friends and social approval if frustrated in satisfying growth needs. Understanding this is important for managers because it may provide them with the reasons for a person’s behavior.

ERG theory has more research support than Maslow’s hierarchy of needs. For exam- ple, some research has found evidence for the meaningfulness of the three categories of needs.11 Support has also been found for several of Alderfer’s basic propositions, such as the concept that a satisfi ed need may remain a motivator.12 Indeed, relatedness and growth needs have been found to increase as they are satisfi ed. In other words, the more they are satisfi ed, the more they are desired. However, more research on ERG theory is necessary to test its usefulness under different conditions. In general, ERG theory may be viewed as a refi nement of the need hierarchy theory.13

Maslow’s Need Hierarchy Alderfer’s ERG Theory

Existence Needs

Relatedness Needs

Growth Needs

Esteem Needs

Social and Belongingness Needs

Safety Needs

Physiological Needs

Self-

Actualization

Exhibit 6-1 Maslow’s Need Hierarchy and Alderfer’s ERG Theory Compared

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Content Theories of Motivation 215

Theory of Achievement, Affi liation, and Power A third theory, largely developed by David McClelland, also uses need classifi cations and focuses on the needs for achievement, affi liation, and power. Some have referred to these as learned needs because they are infl uenced by cultural background and can be acquired over time.14 The three needs are also viewed as independent, meaning a person can be high or low on any one or all three needs. Although all three needs are important, the need for achievement has received the most attention from researchers because of its prominent organizational effects.15

Need for Achievement Need for achievement, fi rst discussed in Chapter 5, was originally defi ned by McClelland and his colleagues as a “desire to perform well against a standard of excellence.”16 People with a high need for achievement feel good about themselves when surpassing a standard that is meaningful to them. Further, people with a high need for achievement prefer to set their own goals rather than to have no goals or to accept the goals set for them by others. Specifi cally:

• They tend to set goals of moderate diffi culty that are achievable. • They like to solve problems rather than leave the results to chance. They are more

interested in achieving the goal than in the formal rewards they may receive, although they recognize the value of their inputs and tend to earn good incomes.

• They prefer situations in which they receive regular, concrete feedback on their performance.17

• They are positive thinkers who fi nd workable solutions to life’s hurdles and challenges.18

• They assume strong personal responsibility for their work.

Some consider the achievement motive to be a component of self-actualization.19 Consistent with this belief, people high on need for achievement tend to do well in chal- lenging jobs but do less well in boring or routine jobs. In a study of sales and sales support personnel, individuals with high achievement needs had positive outcomes only when oc- cupying more demanding, technically oriented roles.20 Related to this fi nding, people who aspire to be entrepreneurs frequently have a high need for achievement.21 Also, managers who have high achievement needs tend to manage differently relative to those who have lower achievement needs because of a more pronounced goal orientation.22

Although need for achievement is thought to be a relatively stable characteristic in adults, it is possible to train adults to increase their need for achievement. This training includes the following steps:23

1. Teach people how to think like persons with a high need for achievement. This includes teaching people how to imagine the achievement of desired goals and mentally rehearse the steps necessary to reach those goals.

2. Teach and encourage people to set challenging but realistic work-related goals.

3. Give people concrete feedback about themselves and their performance. Ensure that people are knowledgeable about their behavior and its outcomes.

4. Create esprit de corps.

In organizations such as W.L. Gore & Associates, people with high achievement needs are generally positive. Such people, however, can react negatively to the ambiguity found

need for achievement The need to perform well against a standard of excellence.

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216 Chapter 6 Work Motivation

in these organizations. Without reasonably clear pathways to success, high achievement needs can go unmet in any given time period.

Need for Affi liation People with a high need for affi liation have a strong desire to be liked and to stay on good terms with most other people. Affi liative people tend not to make good managers. They are more concerned with initiating and maintaining personal relationships than with focusing on the task at hand. In one study, managers of product development units were assessed. Those with high needs for affi liation were seen as less infl uential and as having less-infl uential units. They also had units with weaker innovation profi les.24

Need for affi liation is a particularly important consideration in today’s world, where working from home as virtual contributors is common. About 17 percent of the U.S. workforce works from home at least two days per week. At IBM, 42 percent of the work- force works from home, on the road, or at a client location. Signifi cant percentages of people work virtually at Sun Microsystems, Convergys, and many other companies.

Without daily contact with other associates or managers, individuals with strong af- fi liation needs might have diffi culty developing strong relations and assessing how well they are liked. They may be particularly prone to feelings of isolation and dissatisfaction. To combat these and other issues, companies that rely heavily on virtual contributors have introduced a host of technologies and practices. To ensure satisfi ed and productive work- ers, they generally have provided key technologies that help people stay connected, such as laptops, Internet access, and a personal digital assistant. Many companies also support in- stant messaging and provide sophisticated collaboration software. Companies such as Sun Microsystems, Ernst & Young, and Deloitte & Touche designate offi ce and conference space for associates who occasionally stop in. Also, some managers insist on face-to-face team meetings every now and then.25

Need for Power The need for power can be defi ned as the desire to infl uence people and events. Accord- ing to McClelland, there are two types of need for power: one that is directed toward the good of the organization (institutional power) and one that is directed toward the self (personal power).26 People high in the need for institutional power want to infl uence others for altruistic reasons—they are concerned about the functioning of the organization and have a desire to serve others. They are also more controlled in their exercise of power. In contrast, those high in the need for personal power desire to infl uence others for their own personal gain. They are more impulsive in exercising power, show little concern for other people, and are focused on obtaining symbols of prestige and status (such as big offi ces).

Research has shown that a high need for institutional power is critical for high-per- forming managers. People with a high need for institutional power are particularly good at increasing morale, creating clear expectations, and infl uencing others to work for the good of the organization. Need for institutional power seems to be more important than need for achievement in creating managerial success,27 although blending both is perhaps better than having one or the other.

As discussed in the Managerial Advice feature, the Hay Group has conducted a great deal of research on managers’ needs. Its consultants apply this work in the fi rm’s well-re- garded global consulting practice. Importantly, Hay research shows that a strong need for achievement can create problems. Such problems, however, are less likely to occur when a

need for affi liation The need to be liked and to stay on good terms with most other people.

need for power The desire to infl uence people and events.

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Content Theories of Motivation 217

MANAGERIAL ADVICE

The Hay Group, an internation-ally renowned consulting fi rm, studies managers’ needs for achievement, affi liation, and power. Through its McClelland Center, it continues the work that David McClel- land began many years ago.

In a recent report, the organiza- tion identifi ed changes in the needs of tens of thousands of managers, most of them from the United States. In terms of average strength, need for achievement exhibited a substantial increase from the mid-1980s, with most of the increase occurring after 1995. Moreover, it became by far the strongest need. Need for affi lia- tion exhibited little change during the key time period, but slipped from the strongest to the second strongest need. Need for power weakened and then strengthened over the time pe- riod. Overall, the average strength of this need exhibited little net change, ending the time period close to where it began. In terms of rank, it settled into a distant third place.

While increased need for achievement among managers im- plies many positive behaviors and outcomes, very high levels of this need can create problems for two reasons. First, a strong achievement need in a manager can set the stage for coercive tendencies, particularly when this need is paired with relatively weak needs for affi liation and institutional power. These coercive tendencies result from the manager wanting to achieve at

any cost while having limited needs to be liked and to build engaged associ- ates. Hay research on IBM managers showed these tendencies in action. High-need-for-achievement managers with lower needs for affi liation and institutional power produced inferior work climates through less delega- tion, less effort in connecting associ- ates’ work to the overall strategy and mission of the organization, more command-and-control behaviors, and more instances of taking over work that should be done by others.

Second, a strong achievement need can set the stage for shortcuts and illicit actions, all in the name of achievement. Again, this is of most concern when high need for achieve- ment is paired with relatively weak needs for affi liation and institutional power. Hay researchers cite Jeffery Skilling as a relevant example. Skill- ing was sentenced to prison for his role in the fall of Enron.

Scott Spreier, a senior consultant with The Hay Group; Mary Fontaine, a vice president at Hay; and Ruth Malloy, director of research at Hay’s McClelland Center recently provided a set of guidelines designed to help high-achievement managers avoid problems.

• Understand needs. Without ex- plicitly understanding their own personal needs in the workplace, managers cannot manage those needs. Understanding needs can

be accomplished by simply think- ing about valued activities and outcomes or by using available assessment tools (one popular tool will be presented in this chapter’s installment of Building Your Human Capital ).

• Manage needs. Having gained awareness of their needs, manag- ers can take actions to handle them effectively. A manager with quite a strong achievement need might ask a trusted colleague to monitor his behavior for coercion. Such a man- ager might also seek training fo- cused on the benefi ts of delegation and an empowered workforce. Fi- nally, she might channel some of the need for achievement into nonwork pursuits (e.g., competitive golf).

Managers over the Edge

Sources: Hay Group, “About Hay Group,” 2007, at http://www.haygroup.com/ww/About/Index.asp?id=495; Hay Group, “A Recent Rise in Achievement Drive among Today’s Executives,” 2006, at http://www.haygroup.com/ ww/Media/index.asp; Hay Group, “The McClelland Center Fact Sheet,” 2002, at http://www.haygroup.com/ wwResearch/Detail.asp?PageID=703; S.W. Spreier, M.H. Fontaine, & R.L. Malloy. 2006. “Leadership Run Amok: The Destructive Potential of Overachievers,” Harvard Business Review, 84, no. 6: 72–82.

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218 Chapter 6 Work Motivation

strong achievement need is blended and balanced with a signifi cant need for institutional power and perhaps also with some level of need for affi liation.

Two-Factor Theory The two-factor theory (sometimes called the dual-factor theory) is based on the work of Frederick Herzberg.28 It has some similarities to the other need theories, but it focuses more on the rewards or outcomes of performance that satisfy individuals’ needs. The two-factor theory emphasizes two sets of rewards or outcomes—those related to job sat- isfaction and those related to job dissatisfaction. This theory of motivation suggests that satisfaction and dissatisfaction are not opposite ends of the same continuum but are inde- pendent states. In other words, the opposite of high job satisfaction is not high job dissat- isfaction; rather, it is low job satisfaction. Likewise, the opposite of high dissatisfaction is low dissatisfaction. It follows that the job factors leading to satisfaction are different from those leading to dissatisfaction, and vice versa. Furthermore, receiving excess quantities of a factor thought to decrease dissatisfaction will not produce satisfaction, nor will increas- ing satisfaction factors overcome dissatisfaction.

The factors related to job satisfaction have been called satisfi ers, or motivators. These are factors that, when increased, will lead to greater levels of satisfaction. They include:

• Achievement • Recognition • Responsibility • Opportunity for advancement or promotion • Challenging work • Potential for personal growth

The factors related to dissatisfaction have been called dissatisfi es, or hygienes. When these factors are defi cient, dissatisfaction will increase. However, providing greater amounts of these factors will not lead to satisfaction—only to less dissatisfaction. Hygiene factors include:

• Pay • Technical supervision • Working conditions • Company policies, administration, and procedures • Interpersonal relationships with peers, supervisors, and subordinates • Status • Security

Research has not generally supported Herzberg’s two-factor theory.29 One criticism is that the theory is method-bound—meaning that support can be found for the the- ory only when Herzberg’s particular methodology is used. Researchers using different methodologies to test the theory have not found support. A second criticism is that the theory confuses job satisfaction and motivation. As discussed in Chapter 5, job satis- faction does not always lead to increased motivation. Happy associates are not always motivated associates. The causal path can also go the other way—with motivation, and consequently performance, infl uencing satisfaction—or there may be no relationship at all. A third criticism is that motivators and hygienes may not be uniquely different. For

two-factor theory Herzberg’s motivation theory that suggests that job satisfaction and dissatisfaction are not opposite ends of the same continuum but are independent states and that different factors affect satisfaction and dissatisfaction.

motivators Job factors that can infl uence job satisfaction but not dissatisfaction.

hygienes Job factors that can infl uence job dissatisfaction but not satisfaction.

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Process Theories of Motivation 219

example, some factors, such as pay, can affect both satisfaction and dissatisfaction. Pay can help satisfy basic food and shelter needs (hygiene), but it can also provide recognition (motivator).

Despite the criticisms of two-factor theory, managers tend to fi nd it appealing. In- deed, Herzberg’s 1965 Harvard Business Review article on this theory was reprinted in a more recent Harvard Business Review volume (January 2003), indicating that these ideas continue to be popular with managers. At a practical level, the theory is easy to understand and apply. To motivate associates, managers should provide jobs that include potential for achievement and responsibility. They should also try to maintain the hygiene factors at an appropriate level to prevent dissatisfaction. Thus, managers can motivate associates by manipulating job-content factors and can prevent associate dissatisfaction by manipulat- ing the job context or environment.

Perhaps the most important managerial conclusion is that organizations should not expect high productivity in jobs that are weak in motivators, no matter how much they invest in hygienes. Simply providing good working conditions and pay may not result in consistently high performance. Thus, managers now give much more attention to how jobs are designed. Indeed, Herzberg’s work helped launch the current focus on enriched jobs that emphasize responsibility, variety, and autonomy. This focus is consistent with high-involvement management, a key theme of our book.

Conclusions Regarding Content Theories The four content theories we have just discussed address the factors that affect motivation. These factors include associates’ needs and the various job and contextual attributes that might help them meet these needs. All four theories are popular among managers because each has an intuitive logic and is easy to understand. Although research support for the theories has not been strong overall, the theories have been useful in developing specifi c managerial practices that increase motivation and performance. Further, these theories can be integrated with process theories, discussed next.

Process Theories of Motivation Whereas content theories emphasize the factors that motivate, process theories are con- cerned with the process by which such factors interact to produce motivation. One of the weaknesses of content theories is the assumption that motivation can be explained by only one or two factors, such as a given need or the content of a job. As we have seen, human motivation is much more complex than that. In most cases, several conditions interact to produce motivated behavior. Process theories take this complexity into account. Process theories generally focus on the cognitive processes in which people engage to infl uence the direction, intensity, and persistence of their behavior. Three important process theories of motivation are expectancy theory, equity theory, and goal-setting theory.

Expectancy Theory The fi rst process theory to recognize the effects of multiple, complex sources of motivation was Victor Vroom’s expectancy theory.30 Expectancy theory suggests that managers and associates consider three factors in deciding whether to exert effort.

expectancy theory Vroom’s theory that suggests that motivation is a function of an individual’s expectancy that a given amount of effort will lead to a particular level of performance, instrumentality judgments that indicate performance will lead to certain outcomes, and the valences of outcomes.

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220 Chapter 6 Work Motivation

First, they consider the probability that a given amount of effort will lead to a par- ticular level of performance. For example, an associate might consider the probability that working on a report for an extra four hours will lead to a signifi cant improvement in that report. This probability is referred to as an expectancy.

The second factor individuals consider is the perceived connection between a particu- lar level of performance and important outcomes. For example, the associate cited above would consider the potential outcomes of a better report. She may believe there is a strong positive connection between a better report and (1) praise from her supervisor and (2) interesting future assignments. In other words, she may perceive that good performance makes these outcomes very likely. She may also believe that there is a weak positive con- nection between a better report and an increase in pay, meaning she believes that good performance makes this outcome only slightly more likely to occur. Overall, she is inter- ested in the effects of good performance on three outcomes. Each perceived connection between performance and an outcome is referred to as an instrumentality.

The third factor is the importance of each anticipated outcome. In our example, the associate may believe that more praise from her boss, better assignments, and an increase in pay would bring her a great deal of satisfaction. As a result, these outcomes have high valence. Valence is defi ned as the value placed on an outcome.

In essence, expectancy theory suggests that people are rational when deciding whether to expend a given level of effort. The following equation formally states how people imple- ment expectancy theory:

MF � E � � (I � V )

where: MF � Motivational force. E � Expectancy, or the subjective probability that a given level of effort will lead to a

particular level of performance. It can range from 0 to �1. Further, the expectancy of interest usually corresponds to the probability that strong effort will result in good performance.31 Thus, an expectancy of zero means that an individual thinks there is no chance that strong effort will lead to good performance. An expectancy of one means that an individual thinks it is certain that strong effort will lead to good performance. For a given person in a given situation, self-esteem, previous experience with the task, and availability of help from a manager can infl uence this subjective probability.32

I � Instrumentality, or the perceived connection between a particular level of perfor- mance and an outcome. Instrumentality can range from –1 to �1, because it is possible for a performance level to make an outcome less likely as well as make an outcome more likely. For example, an instrumentality of –.8 indicates that an individual expects that performing at a particular level would make an outcome very unlikely (e.g., praise from co-workers might be unlikely because of jealousy).

V � Valence, or the value associated with an outcome. Valence can be negative or posi- tive, because some outcomes may be undesirable while others are desirable.

Exhibit 6-2 illustrates the expectancy theory process. As an example, consider a car salesman who is considering the possibility of selling

15 automobiles next month. Would he attempt to sell that many cars? Assume that our salesman believes there is a .7 probability that strong effort would result in the desired per- formance. Also, assume that he perceives the following connections between performance

expectancy The subjective probability that a given amount of effort will lead to a particular level of performance.

instrumentality Perceived connections between performance and outcomes.

valence Value associated with an outcome.

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Process Theories of Motivation 221

and four key outcomes: �.9 for a $1,000 bonus, �.8 for strong praise from his manag- ers, �.9 for high intrinsic satisfaction, and –.7 for meaningful praise from co-workers.33 Finally, assume valences for these outcomes of 5, 3, 4, and 1 (on a scale from 1 to 5, where 1 means not valued at all and 5 means highly valued). Based on these beliefs and percep- tions, our salesman probably would be motivated to attempt to sell the automobiles. He believes there is a good chance that his strong effort would result in success (expectancy of .7), and he perceives strong positive connections between performance and three valued outcomes (instrumentalities of .9, .8, and .9) while perceiving a strong negative connec- tion to a nonvalued outcome (–.7) (he perceives that success probably would yield no praise, and perhaps even scorn, from co-workers, but he does not care).

Another example of expectancy theory in action is a study of over 400 police offi cers’ productivity in terms of drug arrests.34 This study found that offi cers who made the most arrests were more likely to have: (1) received specialized training in drug interdiction, and perceived that they had suffi cient time in their shift to properly investigate suspected drug offenses (high expectancies); (2) perceived that drug arrests were rewarded by their agency (high instrumentality); and (3) perceived that management saw drug enforcement as a priority (high valence).

Research has generally been supportive of expectancy theory.35 Criticisms, however, have been expressed concerning how the components of expectancy theory are measured, how they should be combined, and the impact of individual differences. For example, it has been shown that all three components of expectancy theory predict motivation bet- ter when they are considered together than when any one component is examined alone. However, the three components do not appear to have equal strength in affecting motiva- tion. That is, the desirability of outcomes may be the most important element in the equa- tion. Not surprisingly, valence seems to be most important.36 Another issue results from consideration of individual differences. For example, people who have high consideration of others are less likely to engage in the rational, outcome-maximizing decision-making processes underlying expectancy theory.37 Although subsequent research has led to revised versions of Vroom’s original model, the basic components remain the same.38

Expectancy theory has clear implications for managers. In order to increase motiva- tion, managers can do one or more of the following:

• Heighten expectancy by increasing associates’ beliefs that strong effort will lead to higher levels of performance.

Motivational Force = Effort

Expectancy = Subjective probability that strong effort will lead to good performance. Instrumentality = Perceived connection between performance and an outcome. Valence = Value associated with each outcome.

Performance Outcome 1 V1

Outcome 2 V2

Outcome 3 V3

E I1

Motivational Force = E × Σ (I × V )

Exhibit 6-2 Expectancy Theory

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222 Chapter 6 Work Motivation

• Increase instrumentalities by clearly linking high performance to outcomes. • Increase valence by providing outcomes that are highly valued.

We discuss specifi c procedures later in this chapter.

Equity Theory The notion of fairness and justice has been of concern to human beings throughout writ- ten history and undoubtedly before that as well. Thus, it should not be surprising that people’s perception of how fairly they are being treated infl uences their motivation to per- form tasks. The study of organizational justice has been popular in recent years,39 and its popularity is likely to continue with the increasing incidence of corporate scandals (such as those involving Enron and Arthur Andersen) and discrimination lawsuits.40 Further, the concept of equity has taken on added importance with the demands by minority groups and women for equitable treatment on the job.41

The basic model for using the fairness concept to explain human motivation comes from J. Stacey Adams’s equity theory.42 According to this theory, motivation is based on a person’s assessment of the ratio of outcomes she receives (e.g., pay, status) for inputs on the job (e.g., effort, ability) compared with the same ratio for a comparison other, frequently a co-worker. Thus, in assessing equity, the person makes the following comparison:

My Outcomes

____________ My Inputs

vs. Other’s Outcomes _______________ Other’s Inputs

After making the comparison, the person forms equity perceptions. Based on the perceptions of equity or the lack of it, people make choices about the action to take (e.g., how much effort to exert to perform the task). Equity exists when the person’s ratio of outcomes to inputs is equal to that of the other person, and inequity exists when the ratios are not equal. Inequity may result, for example, when one person is paid more than the other for the same inputs or when one person provides less input for the same pay. Note that an individual may compare his outcome/input ratio to the average ratio of several other people, but often the comparison is to one other person.

When individuals perceive inequity, they can reduce it in several ways. Consider the following tactics (pay is the focus here, but other inputs can affect perceptions of inequity):

• Increasing or decreasing inputs. Underpaid associates could decrease their effort, whereas overpaid associates could increase their effort to resolve inequity. This reaction to inequity demonstrates how equity perceptions can infl uence motivation.

• Changing their outcomes. If underpaid associates convince their supervisor to increase their pay, inequity is resolved. It is less likely, but possible, that overpaid workers would seek a salary reduction. However, they may seek to reduce or give up other outcomes, such as not taking interesting assignments or taking a less desirable offi ce.

• Distorting perceptions of their inputs and outcomes. If it is not possible to actually change inputs or outcomes, inequitably paid associates may distort their perceptions of the situation. One common erroneous perception by underpaid workers is that their jobs offer many psychological benefi ts. Overpaid workers often believe they are working much harder than they actually are.

equity theory A theory that suggests motivation is based on a person’s assessment of the ratio of outcomes she receives (e.g., pay, status) for inputs on the job (e.g., effort, ability) compared to the same ratio for a comparison other.

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Process Theories of Motivation 223

• Distorting perceptions of the inputs or outcomes of the referent other. This is similar to distorting perceptions of one’s own inputs and outcomes to resolve inequity. For example, if an associate feels she is underpaid compared to her co-worker, she can reason that the co-worker really does stay late more often or has a degree from a better school and thereby the co-worker has higher inputs.

• Changing the referent other. If an associate perceives inequity in comparison to one co-worker, it may be easiest to fi nd a co-worker who compares more favorably.

• Leaving the organization. In cases where inequity is resistant to other forms of resolution, associates may be motivated to resign from the organization and seek a more equitable situation elsewhere.

Research generally suggests that inequity is an important concept.43 For example, some individuals have been found to respond to overpayment by increasing their effort and performance.44 When these individuals believe they are being paid more than they deserve, they increase their inputs to bring them into balance with outcomes. In general, different individuals have been found to react differently to inequity. Sensitives are indi- viduals who pay a great deal of attention to outcome/input ratios and are motivated to resolve any inequity, whether the inequity is favorable or unfavorable to them. Benevolents are tolerant of inequity that is unfavorable but are not comfortable with inequity that favors them. Entitleds do not tolerate unfavorable inequity but are comfortable with in- equity that favors them.45 In the overall population, many people exhibit behavior that seems consistent with the entitleds.

Professional athletes provide interesting case studies for the inequity concept, as in- dicated by frequent headlines telling us that some “star” is upset about his compensation. These highly paid athletes evidently feel that their outcome/input ratios—their salaries compared with their contributions to their teams—do not measure up to those of similar athletes in the same sport. In 2001, Alex Rodriguez, a young and talented professional baseball player, agreed to a 10-year, $252 million contract to play for the Texas Rangers. Even in the era of exceptional salaries for professional sports fi gures, this amount seemed almost outrageous. The contract provided Rodriguez, known as A-Rod to his fans, $25.2 million annually. However, that is not all. If by chance anyone in professional baseball negotiated a higher salary in the 10 years of his contract, A-Rod would be given that fi gure plus $1. In other words, his contract guaranteed that he would be the highest-paid professional baseball player for a decade.46 Yet, partly because of this very high compen- sation level, he was traded to the New York Yankees, where he has had both good times and bad.47

Perceptions of inequity have several important effects in the workplace.48 For exam- ple, research has found that feelings of inequity can lead to negative employee behaviors such as theft and revenge.49 On the positive side, feelings of equity frequently lead to outcome satisfaction and job satisfaction,50 organizational commitment,51 and organiza- tional citizenship behaviors.52 Organizational citizenship behavior refers to an associate’s willingness to engage in organizationally important behaviors that go beyond prescribed job duties, such as helping co-workers with their work or expending extra effort to bring positive publicity to the organization.53

Perceptions of inequity often are defi ned in terms of distributive justice, a form of justice that relates to perceptions of fairness in outcomes. Another type of justice is also important, however. Procedural justice is the degree to which procedures used to deter- mine outcomes seem fair.54 Research shows that when outcomes are unfavorable, people

distributive justice The degree to which people think outcomes are fair.

procedural justice The degree to which people think the procedures used to determine outcomes are fair.

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224 Chapter 6 Work Motivation

are likely to be concerned with the fairness used in determining those outcomes.55 People will be less likely to have negative reactions to unfavorable or questionable outcomes when they perceive that procedures used to arrive at the outcomes are fair. Procedures based on the following rules are more likely to be perceived as fair:56

• People should feel that they have a voice in the decision process. For example, good performance-appraisal systems allow associates to provide input into the evaluation process.

• Procedures should be applied consistently. For example, the same criteria should be used to decide on everyone’s pay increase.

• Procedures should be free from bias. • Procedures should be based on accurate information. • A mechanism should be in place for correcting faulty outcome decisions. Such

mechanisms sometimes involve formal grievance procedures. • Procedures should conform to the prevailing ethical code. • People should be treated with respect. • People should be given reasons for the decisions. For example, survivors of a

layoff are much more likely to remain motivated if the reasons for the layoff are explained.57 Overall, equity and procedural-justice concepts can help managers understand associates’ reactions to decisions about rewards. As discussed earlier, individuals at W.L. Gore & Associates have already mastered the use of equity and procedural justice.

Goal-Setting Theory Goal-setting theory, developed by Edwin Locke, posits that goals enhance human perfor- mance because they direct attention and affect effort and persistence.58 Given the nature of human beings, individuals are likely to be committed to the achievement of goals after they have been set and to exert effort toward goal attainment.59 Indeed, goals serve as ref- erence points that energize behavior.60 The positive effects of goals on work motivation is one of the strongest fi ndings in research on organizational behavior. Goal setting has been found to increase the motivation of associates in a multitude of jobs, such as air traffi c controllers, truck drivers, faculty researchers, marine recruits, managers, social workers, nurses, research and development workers, truck maintenance workers, and weightlift- ers.61 To effectively set goals for associates, managers should address several factors, includ- ing goal diffi culty, goal specifi city, goal commitment, participation in goal setting, and feedback:

• Goal diffi culty. How diffi cult should the performance goal be? Should the goal be easy, moderately diffi cult, or very diffi cult to achieve?

• Goal specifi city. How specifi c should the expected outcome be (e.g., number of parts assembled), or can goals be more loosely defi ned (do your best)?

• Goal commitment. What will make associates commit to goals? • Participation in setting goals. How important is it for associates to have input in

selecting the goals and levels of performance to be achieved? If important, how should they be involved?

• Feedback. To what extent should associates be informed of their progress as they work toward the performance goals?

goal-setting theory A theory that suggests challenging and specifi c goals increase human performance because they affect attention, effort, and persistence.

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Process Theories of Motivation 225

Goal Diffi culty From the perspective of expectancy theory and achievement motivation theory, we might expect that associates exert the maximum effort at work when their performance goals are set at moderate levels of diffi culty (i.e., somewhat diffi cult but achievable). Goals that are too diffi cult may be rejected by associates because the expectancy is low (strong effort would not lead to goal attainment). A number of researchers, however, have found that associates exert more effort when they have goals that are diffi cult to a signifi cant degree. This has been found to be true of engineers and scientists, loggers, and many experimental subjects working on a variety of tasks in laboratory settings.62 Thus, it seems that goals should be as diffi cult as possible, but not unreasonable. Stretch goals that are extremely diffi cult can be quite demotivating.

Goal Specifi city Performance goals can be explicitly stated, clear in meaning, and specifi c in terms of quan- tity or quality of performance. For example, a goal might be to “generate twenty-seven pages of edited copy with an error rate of less than one error per ten pages in each work period” or “make twelve new customer contacts each month.” The nature of some tasks, however, makes it diffi cult to clearly determine and state the exact performance levels that should be achieved. In such cases, a performance goal can be stated only in vague terms, such as “do your best” or “increase sales during the month.”

Many studies have shown that specifi c goals lead to better performance than do vague goals, such as “do your very best.”63 If a goal is to act as a motivator, it must establish a specifi c target toward which people can direct their effort. Managers are likely to fi nd this aspect of setting goals to be challenging because many jobs involve activities that are diffi cult to specify. For example, it may be diffi cult for a manager to be specifi c about an engineer’s goals; yet the manager must make the attempt, or the engineer’s motivation could be adversely affected.

Goal Commitment In general, associates must accept and be committed to reaching externally set goals for these goals to be motivating. A great deal of research has been conducted on the factors that infl uence people’s commitment to externally set goals. Expectancy theory provides a useful framework for organizing these factors; people will be committed to goals that: (1) carry a reasonable expectation of being attained and (2) are viewed as desirable to attain.64 A sum- mary of the factors that can affect goal commitment is presented in Exhibit 6-3.

Participation in Setting Goals A practical question for a manager, especially during performance-counseling sessions with associates, is, “Should I set performance goals for the associate on the basis of my own knowledge and judgment of her abilities, or should I allow the associate to provide input and have some degree of control over them?” Importantly, associates who participate in set- ting a goal rather than having it dictated to them might be more satisfi ed with the goal and be more committed to it, resulting in stronger performance.65 While some researchers have failed to fi nd a relationship between participation in goal setting and performance,66 others have found that performance is better when associates participate in setting goals.67 Also, as discussed earlier, individuals with high achievement needs tend to dislike assigned goals.

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Subconscious Goals Some management research has demonstrated that goals do not have to be consciously assigned to infl uence motivation and performance.68 That is, people do not need to be consciously aware that they have been given a goal in order for the goal to infl uence their behavior. Studies examining this phenomenon usually use supraliminal priming to assign goals. Supraliminal priming involves consciously providing people with achievement in- formation, but in a manner that appears to be unrelated to the task that they are about to perform.69 For example, people may be asked to circle words in a large matrix of letters or they may be asked to unscramble words to make sentences. Those who are being assigned goals are given words or sentences having to do with motivation and achievement (“win” or “the man will succeed”), along with other neutral words or sentences. Later they are asked to perform some task. Research has found that those who are primed with achieve- ment goals outperform those who are not primed with goals70 and that this effect can last quite awhile.71 It appears that subconsciously primed goals lead people to set higher self-set goals than do non-goal-oriented primes.72 This line of research is still very new and most of it has been conducted in the laboratory, so it remains to be seen to what extent subconscious goals can be primed in actual workplace settings and to what extent these subconscious goals will affect behavior.73 However, one preliminary study found that sub- conscious goals can be primed (in this case there was a picture of a woman winning a race to show achievement) and do increase motivation and performance in the workplace.74

Feedback The motivational effect of providing feedback to associates about their progress toward performance goals is well established. In fact, feedback on performance, even in the ab- sence of established goals, is likely to have a positive effect on motivation.75 However,

EXHIBIT 6-3 Factors Affecting Goal Commitment

Factors Increasing the Desirability of Attaining a Given Goal

1. The goal is set by or in conjunction with an appropriate authority fi gure. 2. The goal fosters a sense of self-achievement and potential for development. 3. The goal is set by or in conjunction with someone who is trustworthy. 4. The goal is set by or in conjunction with someone who is supportive and promotes

self-effi cacy. 5. Peers are committed to the goal. 6. The goal assigner, if there is one, provides a rationale for the goal. 7. The goal provides a challenge to prove oneself and meets ego needs. 8. The goal is public.

Factors Increasing the Perceived Ability of Attaining a Given Goal

1. There is high self-effi cacy on the task. 2. There are successful role models. 3. The task is not impossibly diffi cult. 4. Expectancy for success is high. 5. There is competition with others. Source: Based on E.A. Locke, & G.P. Latham. 1990. A Theory of Goal Setting and Task Motivation (Englewood Cliffs, N J: Prentice Hall).

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Process Theories of Motivation 227

EXPERIENCING ORGANIZATIONAL BEHAVIOR

Imagine a grand ballroom fi lled with people in black ties and ball gowns. The crowd hushes as the award ceremony begins. A young woman in a red dress steps up on stage to receive her award: a $40,000 bonus. The woman is 25-year-old Lara Hadad, whose total pay package, including her bonus, will be almost a quarter of a million dollars. Lara is joining other col- leagues who together are receiving 11 cars, a trip to Greece, and part of $8.7 million in bonuses.

Interestingly, Lara doesn’t work for a large multinational fi rm. She is a hair stylist with Visible Changes hair salons. Visible Changes is an innova- tor in the hair salon industry. The com- pany was started in 1977 in Houston, Texas. At the time, hairdressing was considered a risky business, and the McCormacks—the entrepreneurs who started the fi rm—had a diffi cult time convincing mall owners and bankers to support their project. However, the McCormacks implemented a man- agement philosophy that has made them leaders in their fi eld. Visible Changes has been recognized in Inc. magazine’s list of the fastest-growing companies in the United States and won Salon Entrepreneur of the Year at the Global Salon Business Awards in Barcelona, Spain. Furthermore, in an industry plagued by high turnover and employment problems, Visible Changes associates have a low turn- over rate and high satisfaction. The fi rm currently has 17 locations in major Texas malls with a total of over 800 associates. And each salon averages

over $2 million in annual sales—well above the industry average.

How did the McCormacks build such a high-performance cli- mate? Most of their suc- cess has been due to the way they moti- vate their employ- ees:

• They provide well-defined career paths, and the per- formance stan- dards required to move from one level to another are well known by stylists. For example, to move from a senior cutter to a master cutter (with an associated increase in pay and potential bonuses), a stylist must increase the total number of haircuts given from 7,000 to 14,000, be re- quested by 65 percent of his clients, and complete additional education. Training and encour- agement help to establish posi- tive expectancies for these perfor- mance levels.

• They provide valued rewards and benefi ts, showing employees that they are a part of the company “family” and that the company cares about them. For example, they have a profi t-sharing plan whereby the company makes yearly contributions to associates’ accounts. Associates are fully vested after 7 years, and the aver- age person has about $100,000 in her account after 10 years. Such

a plan is highly unusual in the hair salon industry. Furthermore, in ad- dition to bonuses, employees are

rewarded with cars, public- recognition ceremonies,

and travel to interest- ing locations. The

“manager of the year” receives a one-carat dia- mond and the use of the com- pany Mercedes.

If she wins three times consecutively,

she gets to keep the car! All these perks are

based on meeting and exceed- ing clear performance standards. John McCormack promised his employees that should any of their children want to go to medical school, the company would pay for it. Several employees have taken him up on this offer.

• They set specifi c, challenging goals for each time period and re- ward people for achieving them. The stylists at Visible Changes make three times the industry aver- age, with some earning six-fi gure incomes. The industry average is below $18,500. Beginning styl- ists are guaranteed $7 per hour; however, they are free to make as much as they can in commissions and bonuses.

• In order to encourage customer service performance, commis- sions and bonuses are based on the number of requests by custom- ers, amount of products sold, and

Making Visible Changes

©Digital Vision

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228 Chapter 6 Work Motivation

feedback is especially important when performance goals exist and when they are relatively diffi cult to achieve. In this case, feedback permits an associate to gauge his actual progress toward the goal and make corresponding adjustments in his efforts. Such adjustments are unlikely in the absence of feedback. Thus, the presence of both goals and feedback exerts a positive infl uence on employee motivation.

Conclusions Regarding Process Theories Expectancy theory, equity theory, and goal-setting theory emphasize the processes that occur in motivation. Expectancy theory focuses on people as rational decision makers: “If I exert a given amount of effort, how likely is it that my performance will result in outcomes I value?” The manager’s job in this case is to develop situations in which associates have high expec- tancies and strong performance is rewarded. Equity theory focuses more on people’s general feelings about how fairly they are being treated. This theory suggests that managers must take into account how associates are comparing themselves with others in the organization; a manager’s treatment of one individual can infl uence the motivation of others. Finally, goal- setting theory suggests that managers can motivate associates by setting or helping to set goals.

In the Experiencing Organizational Behavior feature, the importance of associates’ moti- vation is emphasized. The owners of Visible Changes, the McCormacks, ensure challenging goals for their associates and then pay them handsome bonuses for meeting those goals. They also focus on expectancies held by associates and use a variety of meaningful rewards. Finally, they support associates’ growth needs through an education program, and they allow associates to participate in decisions. As a result, associates earn well above the industry aver- age, and turnover is exceptionally low. The associates’ high motivation and strong perform- ance have made Visible Changes a top performer in its industry. Thus, Visible Changes is an industry leader both in methods of motivating associates and in company performance.

general performance of the stylist. When requested by name, the stylist receives an extra 10% com- mission. When that happens 50% of the time the bonus increases an additional 10%, and then again by another 10% when a stylist is requested by name 75% of the time. When a stylist is among the top 50 requested in the entire

chain, he or she earns another super bonus.

• They provide support for their styl- ists to help them build their client base. For example, they provide brochures, business cards, and coupons.

• They avoid layoffs of associates. • They engage associates in a vari-

ety of organizational decisions.

The McCormacks have been industry pioneers in the ways they motivate and provide support to their associates. Thus, their company is an industry leader. Other salons are copying their methods by introducing such things as better benefi ts pack- ages and profi t-sharing plans. We might say that the McCormacks have made signifi cant Visible Changes.

Sources: D. Lauk. 2003. “Up Close: Local Company Puts Employees First,” 11 News (Houston, Texas), Apr. 14, at http://www.khou.com; I. MacMillan & R.G. McGrath. 2000. The Entrepreneurial Mindset: Strategies for Continuously Creating Opportunity in an Age of Uncertainty (Cambridge, MA: Harvard Business School Press); Visible Changes, “Careers,” 2010, at http://www.visiblechanges.com/Careers.aspx; Visible Changes, “Stylist,” 2010, at http:// www.visiblechanges.com/Stylist.aspx; Leadership-and-Motivation Training. Jan. 29, 2010. “Managing Change in the Workplace,” at http://www.leadership-and-motivation-training.com/managing-change-in-the-workplace.html; A. Ragsdale. May 30, 2007. “Texas CEO makes big promise to employees”. Houstonist.com at http://houstonist .com/2007/05/30/texas_ceo_makes.php.

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http://www.khou.com

http://www.visiblechanges.com/Careers.aspx

http://www.visiblechanges.com/Stylist.aspx

http://www.leadership-and-motivation-training.com/managing-change-in-the-workplace.html

http://houstonist.com/2007/05/30/texas_ceo_makes.php

Motivating Associates: An Integration of Motivation Theories 229

Motivating Associates: An Integration of Motivation Theories Viewed as a set, the various motivation theories may suggest that motivation is highly com- plex and even confusing. That is not actually the case, however. Motivating associates and junior managers can be undertaken in a reasonably straightforward and meaningful way. While there are no foolproof approaches, there are sound tactics to use. Exhibit 6-4 identi- fi es connections between the various motivation theories and fi ve categories of motivation practices that managers can use. As shown in the exhibit, multiple theories have similar implications for managers. We discuss these implications in the remainder of the chapter.

Find Meaningful Individual Rewards All of the content theories suggest that individuals vary in what they fi nd motivating. Furthermore, expectancy theory implies that individuals assign different valences to out- comes. This means that by tailoring individual rewards to individual needs and desires, companies can create a competitive advantage in attracting and motivating associates. One area in which this is obvious is the provision of benefi ts. An unmarried 28-year-old as- sociate with no children likely places different values on various retirement and insurance plans relative to a 50-year-old associate with three children in college, for example.

One mistake that managers often make when trying to determine what motivates individual associates involves placing too much emphasis on extrinsic rewards (e.g., pay increases, bonuses, pay level, job security, job titles) while underemphasizing intrinsic rewards (e.g., satisfaction based on exciting and challenging work, feelings of accomplish- ment).76 Indeed, one survey of a random sample of U.S. adults indicated that they ranked “important work” as the most important aspect of their jobs. Pay was ranked third. When,

EXHIBIT 6.4 Motivation Practices Resulting from Motivation Theories

Motivation Practices

Find Meaningful Tie Rewards to Redesign Provide Clarify Expectations Motivation Theories Individual Rewards Performance Jobs Feedback and Goals

Need Hierarchies X X X Maslow ERG

McClelland’s Needs X X X X X

Herzberg’s Two-Factor X Theory

Expectancy Theory X X X X

Equity Theory X X X X

Goal-Setting Theory X X X Note: The fact that there is no X in a particular cell indicates that the theory has nothing specifi c to say about the practice, not that the theory says the practice is ineffective.

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230 Chapter 6 Work Motivation

however, these same people were asked what motivates “other people,” 75 percent re- sponded that pay was the primary motivator of others.77 Apparently, most people feel that they are motivated by outcomes that meet higher-order growth or achievement needs, but they think others are primarily motivated by money as a way to meet physiological and security needs.

Some research has shown that if a person receives extrinsic rewards for performing an intrinsically satisfying task, he may attribute the performance to external forces, with a resulting reduction in his intrinsic interest in the job.78 This suggests that relying too heavily on extrinsic rewards can cause people to lose any natural interest they have in per- forming their jobs. However, this position has been challenged by some researchers, who argue that in work situations, extrinsic rewards are necessary for motivation on any kind of task. Despite the mixed research,79 it is clear that managers must be concerned with both extrinsic and intrinsic rewards and not overemphasize either, striving instead for an appropriate balance between the two (keeping in mind that the appropriate balance differs across different people or types of people).

Individuals may vary in what they fi nd motivating based on their position in the organization. People in different jobs and at different levels may have different concerns. Indeed, when Harvard Business Review asked a dozen top leaders to state their most im- portant thoughts on motivating people, Liu Chuanzhi, chairman of the Legend Group of Beijing, noted that a leader must establish different incentives for people at different levels in the organization.80 He divided his organization into three groups and provided appropriate incentives for each group:

• The company’s executives wanted a sense of ownership in the company, so the company gave all of its executives stock, an unusual practice in Chinese state-owned organizations. They also wanted recognition, so they were given opportunities to speak to the media.

• Midlevel managers wanted to become senior-level managers. The major incentives applied to this group involved opportunities to display and develop their knowledge, skills, and abilities, so they would be in a better position to achieve promotions within the company.

• Associates wanted outcomes that would provide a sense of stability and security. Thus, based on their performance, they received predictable bonuses. Furthermore, they were allowed to participate in decisions regarding how bonuses were allotted.

Tie Rewards to Performance A basic characteristic of high-involvement management involves tying rewards to perfor- mance. The importance of this tactic is supported by many theories concerning human motivation and learning. One of the basic principles of operant conditioning (Chapter 4) is that rewards should be tied directly to performance to encourage the desired behavior. This basic proposition is refl ected in the process theories of motivation as well. Expec- tancy theory proposes that motivation is a function of the perceived connections between performance and outcomes. To the extent that people have experience with performance leading to rewards, they will develop stronger instrumentalities.

Equity theory suggests that performance in the recent past (an input) should play a role in rewards (outcomes). In addition, justice research indicates that linking performance

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Motivating Associates: An Integration of Motivation Theories 231

and rewards should result in greater motivation because the reward decisions will be viewed as more ethical and unbiased as people are rewarded based on their achievement and con- tribution. Finally, goal-setting theory suggests that providing rewards for the achievement of goals can help associates accept and become committed to those goals, although exter- nal rewards are not necessarily required for goals to affect motivation.81

Although tying rewards to performance may seem obvious and simple, managers often fi nd it to be challenging. One reason for this problem is that performance is some- times diffi cult to measure.82 How does one evaluate the work of an R&D professional whose job entails developing and testing many new ideas, most of which will not result in usable products? What if an individual is highly interdependent with others? Can his indi- vidual contributions be clearly assessed? Further, some managers may supervise too many employees to closely observe and easily evaluate the contributions of all of them. If one cannot measure or evaluate performance accurately, then one cannot link performance to rewards. To partially address these issues, managers can have their direct reports under- take self-assessments and generate peer assessments. These tactics coupled with managers’ knowledge of performance are often very helpful.

Another problem with tying rewards to performance is that managers may have little fl exibility with rewards, particularly fi nancial rewards. For example, a manager may be able to give an average raise of only 3 percent to her employees. If the bottom third of performers are given 2 percent increases, to adjust for the cost of living, this means the best performers can receive only 4 percent increases. Associates are not likely to see this small differential as being commensurate with performance differences. Such a small differential can produce low instrumentalities or perceptions of inequity.

Such problems with fl exibility underscore the importance of nonfi nancial rewards. Although managers may be restricted in how they can distribute fi nancial rewards, they often can be more creative in assigning other types of rewards based on performance. For example, high-performing associates can be given job assignments that allow them to de- velop new skills, or they can be given credits toward payment of tuition at a local univer- sity. The Society for Human Resource Management surveyed its members and developed a list of over 150 creative rewards that companies offer their associates. These included the services of an ergonomics consultant, sophisticated offi ce chairs, textbook money, funding to attend conferences in exotic locations, allowing pets at work, concierge services, free dinners, and fl exible work hours.

To think more deeply about tying fi nancial rewards to performance, consider the case of Susan. Susan supervises 10 customer call-center representatives. One of her associates, Angelo, clearly outperforms the others. Angelo’s customer satisfaction ratings are much higher than those of the others, he handles the most calls, and there have been no com- plaints against him. Susan is highly pleased with Angelo’s performance, especially because he has been on the job for only one month. Susan’s worst performer is Jessica, who has the lowest customer service rating, handles an average number of calls, and has been the target of several customer complaints about rudeness. Jessica has worked in the unit for the past three years, which is a long tenure for a customer service representative. It’s time to assign pay increases, and Susan’s boss told her that her budget for salaries would be only 4 percent. This means that her employees can receive, on average, only a 4 percent raise. Susan is con- sidering an 8 percent increase for Angelo and no increase for Jessica. However, when she begins to assign pay increases, she has a change of heart. She realizes that if she gives Angelo an 8 percent increase and gives no pay increase to Jessica, Angelo will receive more overall

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232 Chapter 6 Work Motivation

pay than Jessica, who has been on the job much longer. Susan doesn’t want to alienate Jes- sica, because it is diffi cult to retain people on the job (and Jessica has a tendency to react quite negatively to bad news). In the end, Susan gives Angelo a 5 percent pay increase and Jessica a 3 percent pay increase. Three months later, Susan notices that Angelo’s customer service rating has decreased and that he is handling fewer calls. Jessica’s performance hasn’t improved either. In fact, the number of complaints against her has increased.83

Susan’s dilemma illustrates several common pitfalls in tying fi nancial rewards to per- formance.

One problem is that Susan didn’t differentiate more between Angelo’s and Jessica’s pay increases because of her fear that Jessica would become angry. This is a common reaction of managers when distributing fi nancial rewards. Too often, managers are overly focused on superfi cial harmony, and they mistakenly distribute rewards equally or nearly equally rather than equitably based on performance. Monica Barron, a management consultant from AMR research, has stated, “You should make your best performers role models and say to others ‘Here’s what you can do to get one of these checks.’”84

A second problem was that Susan really wanted to reward performance, but instead she ended up rewarding tenure. Jessica received a larger pay increase because she had remained with the organization and in the job for a relatively long time. If Susan was asked whether mediocre, or even poor, performers should be rewarded for remaining on the job, she would probably answer “No.” This might not have happened if Susan had clearly established what performance she expected from associates and how that performance would be rewarded.

A third problem was Susan’s dilemma of having a budget of only 4 percent for pay in- creases. Her situation refl ects the current state for many companies. Indeed, Robert Hene- man, a compensation expert from Ohio State University, has said that managers “need a 7 percent or 8 percent [compensation increase] just to catch anybody’s attention.”85 Thus, the amount of money Susan had for rewards limited her fl exibility.

Beyond the simple amount of money available, how the money is used also can make a difference. A frequent issue is too much emphasis placed on merit pay increases (i.e., year-to-year pay increases). With such a focus, rewards provided for good performance in any given year are maintained in an associate’s pay regardless of future performance. In addition, such an approach is often infl exible in dealing with economic downturns (be- cause higher levels of pay are locked in for some individuals who are no longer performing among the best). Finally, the approach constrains managers from being able to provide a wide distribution of rewards. There are more creative ways to provide merit-based pay, including profi t sharing and bonuses.

Redesign Jobs Job redesign is viewed as a way to make jobs more intrinsically meaningful to people and thus more likely to satisfy higher-order needs. Job redesign generally takes one of two forms: job enlargement or job enrichment.

Job Enlargement Job enlargement involves adding tasks with similar complexity to the current tasks. The added tasks offer more variety and often require the use of different skills. However, the additional tasks are not of greater complexity and therefore offer little opportunity for personal growth. Some refer to this practice as horizontal job loading.

job enlargement The process of making a job more motivating by adding tasks that are similar in complexity relative to the current tasks.

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Motivating Associates: An Integration of Motivation Theories 233

An example of job enlargement involves giving a data entry specialist the additional task of fi ling correspondence. In this case, a different skill is utilized, but fi ling is no more complex than routine data entry. Even so, by providing variety, job enlargement may pre- vent boredom in simple tasks. However, the effects may be only temporary because the tasks do not offer more challenges or opportunities for personal growth. Overall, research has shown that the effects of job enlargement are mixed. Some studies have found that job enlargement produces positive results, whereas others have not.86 Individuals with lower growth needs may benefi t the most.

Job Enrichment For our purposes, job enrichment can be differentiated from job enlargement by the complexity of tasks added to the job. Job enrichment is frequently referred to as vertical job loading. In enriched jobs, workers have greater responsibility for accomplishing as- signed tasks; it may be said that they become “managers” of their own jobs. The concept of job enrichment was popularized by Herzberg’s two-factor concept of motivation, which emphasizes responsibility, achievement, and the work itself as motivators. The concept of job enrichment also is consistent with McClelland’s notion of developing a strong need for achievement and with Maslow’s and Alderfer’s ideas about meeting higher-order needs.

Many organizations, including AT&T, Corning, IBM, and Procter & Gamble, have implemented job enrichment programs. Usually, job enrichment involves adding tasks formerly handled at levels higher in the hierarchy. Boeing, for example, has implemented job enrichment by using work teams, empowering employees to work on their own ideas, and providing continuous learning opportunities. Because job enrichment involves giving associates greater control over their work, expanded job duties, and greater decision power, job enrichment is an integral part of high-involvement management.

Numerous studies have found positive results from job enrichment using outcome variables such as job satisfaction, commitment to the organization, and performance.87 However, job enrichment programs are not always successful. To be effective, such pro- grams must be carefully planned, implemented, and communicated to associates and must also take into account individual differences.88

Interestingly, many individuals who are currently entering the workforce may embrace enriched jobs to a greater degree than some others have. These individuals are members of Generation Y, those born between 1981 and 1993. According to Deloitte Consulting, members of Generation Y love challenges in the workplace, appreciate the opportunity to be fl exible and explore new ideas, and want to make a difference.89

The work of two researchers, Richard Hackman and Greg Oldham, has been very infl uential in specifying how to enrich jobs so that the motivating potential of the jobs is increased. They identifi ed fi ve job characteristics impor- tant in the design of jobs—skill variety, task identity, task signifi cance, autonomy, and feedback:90

• Skill variety refers to the degree to which associates utilize a broad array of skills in doing their jobs.

• Task identity is the extent to which job performance results in an identifi able piece of work. Contrast the situation in which an

job enrichment The process of making a job more motivating by increasing responsibility.

©Adrian Bradshaw/epa/Corbis

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234 Chapter 6 Work Motivation

assembly line worker’s entire job is screwing bolts into one piece of metal versus the situation in which that associate is responsible for turning out an entire dashboard assembly.

• Task signifi cance is the extent to which a job has an impact on the organization. It is important because people need to see how the work they do contributes to the functioning of the organization.

• Autonomy means that the associate has the independence to schedule his or her own work and infl uence the procedures with which it is carried out.

• Feedback involves obtaining accurate information about performance.

Hackman and Oldham propose that these fi ve characteristics affect three psycho- logical states: feeling of the work’s meaningfulness, feeling of responsibility for the work done, and knowledge of results of personal performance on the job. Skill variety, task identity, and task signifi cance affect the feeling of meaningfulness. Feeling of responsibil- ity is affected by autonomy, and knowledge of results is affected by feedback. The fol- lowing formula combines these factors to compute a motivating potential score (MPS) for a given job:91

MPS � (Skill variety � Task identity � Task Signifi cance) � Autonomy � Feedback

____________________________________________________________ 3

Research has been generally supportive of the Hackman and Oldham model, fi nding that associates’ perceptions of task characteristics relate to intrinsic motivation and perform- ance.92 However, several factors have been found to infl uence whether employees are moti- vated by enriched jobs. The most heavily researched factor is growth need strength.93 People with high growth need strength tend to be more motivated by enriched jobs than those with low growth need strength. Perceptions of job characteristics have also been found to relate to job satisfaction and growth satisfaction.94 Indeed, in one poll, one of the major reasons given for the decline in the job satisfaction of U.S. associates, is that they perceive their jobs to be boring and unengaging.95 On the negative side, however, enriched jobs, which require more skill variety, responsibility, and control, can also be more stressful to certain associates.96

As discussed in the Experiencing Organizational Behavior feature, there are steps man- agers can take to ensure that the demands of enriched jobs are successfully handled. When managers provide a proper setting and resources, associates interested in growth and chal- lenge usually rise to the occasion.

Provide Feedback Feedback is critical to motivation from a variety of perspectives. Those high in need for achievement seek it, it is necessary for the development of expectancies and instrumentali- ties, it can infl uence perceptions of fairness by providing explanations for decisions, and it enhances the goal-setting process. A great deal of research has been conducted on the effects of performance feedback. A review of this research resulted in the following impli- cations for making feedback effective:97

• Feedback is most effective when provided in conjunction with goals. • Feedback should be repeated and provided at regular intervals. Robert Eckert,

chairman and CEO of Mattel, states this succinctly: “People can’t and won’t do much for you if no one in the organization knows what’s going on, what you expect of them. … And talking to them once a quarter is not enough.”98

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Motivating Associates: An Integration of Motivation Theories 235

EXPERIENCING ORGANIZATIONAL BEHAVIOR

Enriched jobs have the poten-tial to be highly motivating and rewarding. Such jobs, however, place signifi cant demands on jobholders. To ensure success in dealing with these demands, indi- viduals must rely on one another. In a recent report, Deloitte Research, an arm of Deloitte & Touche, put it this way: “Work has always been done through relationships. But as jobs become more complex, people increasingly depend on one another, whether it’s to design software, lead a call center, or sell a service.”

To facilitate connections among people, Deloitte recommends a number of tactics:

• Design physical space that fosters connections. Proximity and layout matter. Being located far away from others who have relevant knowledge and insight can be particularly harmful to those with complex jobs. A lack of face-to- face interactions, the richest type, can be harmful to those who have such jobs. Also, an absence of dedicated areas for collaborative

discussions as well as areas for quiet contemplation can be detri- mental.

• Build an organizational cushion of time and space. Overly busy asso- ciates and managers often do not have the time to consult with others. With today’s leaner organizations and stretched people, connecting to other people in rich ways can be diffi cult. Yet, those connections can improve productivity and qual- ity in the long run, particularly for those who have complex jobs.

• Cultivate communities. Without a sense of community, associates and managers may not seek out those who have relevant knowl- edge and insight. Communities re- volve around shared interests and goals, and they foster a sense of shared identity and belonging.

• Stimulate rich networks of high- quality relationships. Many as- sociates and managers have limited informal networks of col- leagues. Without a rich network that stretches across departments, divisions, and hierarchical levels,

individuals are blocked from key sources of information and prob- lem solving. In some organiza- tions, explicit mapping of informal networks is carried out and those with defi cient networks are coun- seled on how to improve.

• Provide collaboration tools. A lack of interactive, real-time col- laborative technologies can be a roadblock for some types of jobs. Tools such as shared whiteboards and interactive decision-support systems can be quite useful. Wikis are also becoming useful (these involve open-access information sites whose core content can be edited by anyone at any time).

Connecting People in the Workplace

Sources: R. Athey. 2004. “It’s 2008: Do You Know Where Your Talent Is?—Part 1” (New York: Deloitte & Touche USA); R. Athey. 2007. “It’s 2008: Do You Know Where Your Talent Is?—Part 2” (New York: Deloitte & Touche USA); C. Mamberto. 2007. “Instant Messaging Invades the Offi ce,” Wall Street Journal, July 24, B.1; D. Fichter. 2005. “The Many Forms of E-Collaboration,” Online, July-Aug., pp. 48–50.

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• Feedback should contain information about how associates can improve their performance. It is not enough to tell people whether they did well or poorly; performance strategies and plans must also be part of the message.

• Feedback should come from a credible source. The person giving the feedback should have the authority to do so and should also have suffi cient knowledge of the recipient’s performance.

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236 Chapter 6 Work Motivation

• Feedback should focus on the performance, not on the person. In other words, feedback should always refer specifi cally to a performance measure, as in “Your performance is poor because you missed your quota by 10 percent,” not “Your performance is poor because you are not a very good salesperson.”

Clarify Expectations and Goals The importance of goal setting to associates’ motivation is made explicit in goal-setting theory. However, goal setting is also important from other motivational perspectives. Goal setting can be used to strengthen the relationships important in expectancy theory. For ex- ample, because goals help people analyze and plan performance, their effort-performance expectancies may be enhanced. Also, higher goals may be associated with higher outcome valences. Furthermore, goal setting is an important part of need for achievement because people high in this characteristic tend to set moderately diffi cult and reachable goals for themselves.

Many organizations have adopted goal setting, for two reasons. One is the motivating potential of goals; the other is that goals often can serve to align individual motives with organizational goals. One formal management program that aims to align motives and goals is referred to as management by objectives (MBO). Throughout the organization, in- dividuals meet with their managers to agree on expectations for the upcoming time period.

THE STRATEGIC LENS

A ssociates’ motivation is very important in all types of organizations. In general, associates who have greater motiva- tion perform at higher levels, and this helps to implement the organiza- tion’s strategy. When the associates achieve their goals, the strategy is implemented. When the strategy is implemented effectively, the organiza- tion achieves higher performance. This result was evident in the case of W.L. Gore and later in the example of Vis- ible Changes. The goals of associates at Visible Changes related to the strate- gic goal of the organization to provide high-quality service to its customers.

As part of motivation and per- formance, individuals must work with others to achieve success on interde- pendent tasks. Karl Malone, a former

professional basketball player, expe- rienced fi rsthand the disappointment that can occur when colleagues are unwilling to work together. He moved from the Utah Jazz to the Los Angeles Lakers in order to have a better chance to be on a championship team. He gave up a great deal of money as well as status as the sole star on a team in order to move, and he was highly motivated to perform well for the Lak- ers.99 The Lakers, however, failed to play effectively as a team, and as a result they failed to win the champi- onship. For organizations to achieve their goals and enjoy strong perfor- mance, associates and managers must be motivated not only to perform their individual tasks well but also to coordinate their activities with others in the organization to ensure that the

organization’s strategy is well imple- mented and success is ensured.

Critical Thinking Questions

1. Assume that you are managing a talented but unmotivated associ- ate. Also assume that organiza- tional resources needed for the job are generally suffi cient. What factors would you consider fi rst in attempting to motivate the associ- ate? Why those factors?

2. A number of theories of motiva- tion suggest that different rewards might be important to different people. How diffi cult is it to re- ward people differently for per- forming the same or similar work?

3. How will your individual motivation affect your career opportunities?

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What This Chapter Adds to Your Knowledge Portfolio 237

What This Chapter Adds to Your Knowledge Portfolio In this chapter, we have discussed work motiva- tion in some detail. We have defi ned motivation, discussed both content and process theories of motivation, and described how these theories can be integrated and translated into managerial prac- tice. More specifi cally, we have made the follow- ing points:

• Motivation refers to forces coming from within a person that account for the willful direction, intensity, and persistence of the person’s efforts toward achieving specifi c goals, where achievement is not due solely to ability or to environmental demands.

• Content theories of motivation generally are concerned with identifying the specifi c factors (such as needs, hygienes, or motiva- tors) that motivate people. They tend to be somewhat simplistic and are easily under- stood by managers. The basic implications of these theories suggest that managers must take individual needs into account when trying to decipher what motivates associates.

• Maslow’s need hierarchy includes fi ve levels of needs: physiological, safety, social and belongingness, esteem, and self-actualiza- tion. These needs are arranged in prepotent hierarchical order. Prepotency refers to the concept that a lower-order need, until satis- fi ed, is dominant in motivating a person’s behavior. Once a need is satisfi ed, the next higher need becomes the active source of motivation. Research has not been very supportive of Maslow’s theory; however, this theory has served as the basis for other theories and practices that have received empirical support.

• ERG theory is similar to Maslow’s hierarchy but does not consider prepotency to be relevant. The three needs in ERG theory are existence, relatedness, and growth. A person may work on all three needs at the same time, although satisfying lower-order needs often takes place before a person is strongly motivated by higher-level needs.

• Achievement, affi liation, and power needs are the focus of McClelland’s theory. Practitioners have given the most attention to the need for achievement. People with a high need for achievement like to establish their own goals and prefer

? back to the knowledge objectives 1. What do we mean by work motivation, and how does

it relate to performance? Why is individual work moti- vation important to organizational success?

2. What assumptions do Maslow’s need hierarchy and ERG theory make about human motivation? How can managers use these theories to motivate associates? How do need for achievement, need for affi liation, and need for power differ? How do these needs relate to work performance and motivation? How would you distinguish McClelland’s notion of needs from those of other content theorists?

3. What does Herzberg’s two-factor theory of motivation say about human motivation? How has it infl uenced current management practice?

4. What does expectancy theory suggest about people and motivation at work? When does expectancy theory best explain motivation? What implications does this theory have for managers?

5. What do equity theory and ideas from procedural jus- tice suggest about motivation? How do fairness judg- ments infl uence work motivation, and how can man- agers ensure that associates perceive judgments as having been made fairly?

6. What are the basic tenets of goal-setting theory? What should a manager keep in mind when engaging in goal setting with his associates?

7. How does job enrichment affect associates’ motivation to perform? To make sure job enrichment has the de- sired effects, what should the organization consider?

8. Considering the various theories of motivation, what can managers do to increase motivation?

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238 Chapter 6 Work Motivation

moderately diffi cult ones. They seek feedback on their achievements and tend to be positive thinkers. However, the need that most distinguishes effective managers from nonmanagers is the need for institutionalized power.

• Herzberg’s two-factor theory identifi es two types of organizational rewards: those related to satisfaction (motivators) and those related to dissatisfaction (hygienes). It also raises the issue of intrinsic and extrinsic rewards. One important application of this theory, job enrichment, is widely practiced today.

• Whereas content theories emphasize the factors that motivate, process theories are concerned with the process by which such factors interact to produce motivation. They generally are more complex than content theories and offer substantial in- sights and understanding. Their application frequently results in highly motivated behaviors.

• Expectancy theory suggests that motivation is affected by several factors acting together. This theory emphasizes associates’ perceptions of the relationship be- tween effort and performance (expectancy), the linkage between performance and rewards (instrumentalities), and anticipated satisfaction with rewards (valence). Managers can infl uence employee motivation by affecting one of these areas but can have greater impact by affecting more than one.

• Equity theory considers the human reaction to fairness. According to this theory, a person compares her outcome/input ratio with that of another person, often a co-worker, to determine whether the relationship is equitable. An inequitable situ- ation causes an individual to alter inputs or outcomes, distort his or her perception of inputs or outcomes, change the source of comparison, or leave the organization. Associates’ perceptions of procedural justice can also infl uence how they react to perceived inequities.

• Goal-setting theory is concerned with several issues that arise in the process of setting performance goals for employees, including goal diffi culty, goal specifi city, goal commitment, associates’ participation, and feedback. In general, goals should be diffi cult but realistic and specifi c. Participation and feedback are also useful for increasing the effectiveness of goals in infl uencing motivation.

• Motivation theories support the use of several managerial practices to increase associates’ motivation: (1) fi nd meaningful individual rewards; (2) tie rewards to performance; (3) redesign jobs through enlargement or enrichment; (4) provide feedback; and (5) clarify expectations and goals.

Thinking about Ethics 1. Is there anything wrong with providing no pay increase to a person whose performance is

average or below average? What are the implications of this action?

2. If the rewards provided are equitable, must the process used in providing them be fair? Why or why not?

3. Suppose a manager has provided what she believes is an equitable reward to an associate but he does not believe it is fair. What are the manager’s responsibilities to the associate?

4. Is it appropriate for managers to set higher goals for some associates and lower goals for others performing the same job? Why or why not?

5. Is it acceptable to terminate an associate for being openly critical of managers? What effect will such actions probably have on other associates?

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Building Your Human Capital 239

6. Can senior managers terminate whistle-blowers who report what they believe to be wrongdoing by managers? Would the termination be acceptable if the whistle-blowers truly believed that the managers were in the wrong but, in fact, the managers’ actions had been judged as appropriate by independent external observers?

Key Terms

Human Resource Management Applications Human Resource Management (HRM) practices play a large role in fostering associates’ motivation. Most obvious is HRM’s role in determining and administering compensation and benefi ts packages. Often, the HRM department must determine what to compensate the people in various positions. This requires research of external markets and analyses of the jobs in question. Furthermore, strategic decisions must be made on how to compensate people. What should the salary/bonus ratio be? What should the average pay increase be, and how should individual raises be determined?

Performance appraisal and feedback are an important part of managing associates’ motivation. HRM departments train managers in the performance-appraisal system, and frequently in how to conduct appraisals and give feedback. HRM departments may also develop the performance- appraisal procedures and policies used in an organization, as well as monitor the process. HRM departments may also develop goal-setting programs, train employees in the use of these programs, and then assess the results in terms of increased productivity.

HRM departments can also conduct associate surveys to assess whether they are engaged with their work, what they fi nd rewarding, and whether they feel that their efforts are being rewarded. This information can be then used to design performance-management programs, evaluation pro- grams, and compensation policies. Also, should there be a need for job design, HRM departments could be responsible for introducing and implementing these changes.

motivation, p. 211 hierarchy of needs

theory, p. 211 ERG theory, p. 213 need for achievement, p. 215 need for affi liation, p. 216 need for power, p. 216

two-factor theory, p. 218 motivators, p. 218 hygienes, p. 218 expectancy theory, p. 219 expectancy, p. 220 instrumentality, p. 220 valence, p. 220

equity theory, p. 222 distributive justice, p. 223 procedural justice, p. 223 goal-setting theory, p. 224 job enlargement, p. 232 job enrichment, p. 233

building your human capital

Assessing Your Needs Look at the picture to the right for 60 seconds. Turn the picture over or close your book and take 15 to 20 minutes to write a story about what you see happening in the picture. Your story should be at least one to two pages in length and it should address the following issues:

1. Who are the people in the picture? What is their relationship? 2. What is currently taking place in the picture? What are the people

doing? 3. What took place in the hour preceding the taking of the picture? 4. What will take place in the hour following the taking of the picture? ©

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240 Chapter 6 Work Motivation

This exercise is based on a tool, the Thematic Apperception Test, used by McClelland and as- sociates to assess people’s needs for achievement, affi liation, and power. The Hay Group and other leading consulting and development fi rms continue to use this type of tool. To determine where you fall on the three needs, do the following:

1. Give yourself one point for need for achievement every time one of the following themes appears in your story: • Your story involves a work or competitive situation. • Feedback is being given or received. • Goals or standards are being discussed. • Someone is taking responsibility for his or her work. • Someone is expressing pride over his or her own accomplishments or those of another

person.

2. Give yourself one point for need for affi liation every time one of the following themes appears in your story: • The relationship between the characters is personal. • Help is being given or received. • Encouragement, comfort, empathy, or affection is being given or received. • Someone is expressing a desire to be close to the other person. • The characters are engaged in or talking about social activities

3. Give yourself one point for need for power every time one of the following themes appears in your story: • The relationship between the characters is hierarchical. Someone has higher status than

the others. • Someone is trying to get someone else to do something. • Someone is attempting to get others to work together. • Someone is concerned about reaching organizational goals. • Someone is evoking rules, policies, or regulations.

Add up your points for each of the needs, and answer the following questions.

1. What is your dominant need? That is, in which category did you have the most points? What does this suggest about you?

2. Does this assessment seem valid to you? Why or why not? 3. If you are not as high on need for achievement as you thought you would be, what can you

do to increase it?

Sources: D.C. McClelland et al. 1958. “A Scoring Manual for the Achievement Motive,” in J.W. Atkinson (Ed.), Motives in Fantasy, Action and Society (New York: Van Nostrand); C.D. Morgan & H.A. Murray. 1935. “A Method for Investigat- ing Fantasies: The Thematic Apperception Test,” Archives of Neurology and Psychiatry, 34: 289–306.

an organizational behavior moment

The Motivation of a Rhodes Scholar Frances Mead, compensation director for Puma Corporation, was pleased because she had just hired an individual whom she consid- ered to be highly qualifi ed to fi ll the position of benefi ts administra- tor. Dan Coggin was an extremely bright fellow. He had graduated summa cum laude with a B.S. degree in fi nance from the University

of Chicago. He had then traveled to England for a year of study as a Rhodes Scholar. After returning from England, he had worked for a large bank in the investments area for a year. He had then accepted the position of benefi ts administrator in the corporate personnel department at Puma, headquartered in Salt Lake City, Utah.

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Team Exercise 241

Dan felt good about his new job. He would be well paid and have a position of some status. Most importantly, the job was located in Utah. Dan had always enjoyed the outdoors, and he liked to backpack, camp, and do some mountain climbing. Salt Lake City was the perfect location for him.

He arrived on the job happy and ready to tackle his new re- sponsibilities. Dan’s fi nancial background aided him greatly in his new job, where he was responsible for the development and ad- ministration of the pension plan, life and health insurance pack- ages, employee stock purchase plan, and other employee benefi t programs. Within a month, Dan had learned all of the program provisions and had things working smoothly. Frances was satis- fi ed with her selection for benefi ts administrator. In fact, she ex- pected Dan to move up in the department ranks rapidly. Dan was enjoying himself, particularly his opportunities to get into the mountains. His only concern was that he did not seem to have enough time to enjoy his outdoor activities. After six months, he had his job mastered. He was quite talented, and the job did not present a strong challenge to him.

Frances recognized Dan’s talents and wanted him to evalu- ate Puma’s complete benefi ts package for the purpose of making needed changes. Frances believed that Puma’s benefi ts package was outdated and needed to be revised. With Dan’s abilities, Frances thought new programs could be designed without the help of costly outside consultants.

She held several discussions with Dan, encouraging him to evaluate the total benefi ts package. However, at the end of a year

on the job, Dan had accomplished little in the way of evaluation. He seemed to be constantly thinking of and discussing his out- door activities. Frances became concerned about his seeming lack of commitment to the job.

In the ensuing months, Dan’s performance began to slack off. He had had the current programs running smoothly shortly after his arrival, but complaints from employees regarding errors and time delays in insurance claims and stock purchases began to increase. Also, he was making no progress in the evaluation of the benefi t package and thus no progress in the design of new benefi t programs. In addition, he began to call in sick occasionally. Inter- estingly, he seemed to be sick on Friday or Monday, allowing for a three-day weekend.

It was obvious that Dan had the ability to perform the job and even more challenging tasks. However, Frances was becom- ing concerned and thought that she would have to take some action.

Discussion Questions 1. Using ERG theory, explain the reasons for the situation

described in the case. 2. Using expectancy theory, explain the reasons for the situa-

tion. 3. Using the integration framework found in the last major sec-

tion of the chapter, describe what actions Frances should and should not take.

team exercise

Workplace Needs and Gender Do women and men have similar needs in the workplace? Do they exhibit similar levels of need for achievement, need for affi liation, and need for power? In this exercise, you will have the opportunity to address these questions.

STEPS 1. As an individual, think about women’s and men’s achievement, affi liation, and power needs.

On average, do women and men exhibit similar levels of these needs? Spend fi ve minutes on this step.

2. Assemble into groups of four or fi ve. Each group should consist of both women and men (two or three of each). Spend 15 minutes completing the next steps.

3. Decide as a group whether: a. Women and men exhibit similar levels of the need for achievement. b. Women and men exhibit similar levels of the need for affi liation. c. Women and men exhibit similar levels of the need for institutional power. d. Women and men exhibit similar levels of the need for personal power.

4. Identify the reasons for your group’s beliefs. 5. Appoint a spokesperson to present the group’s ideas to the class.

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242 Chapter 6 Work Motivation

Endnotes 1. Hitt, M.A., Ireland, R.D., & Hoskisson, R.E. 2007. Strategic man-

agement: Competitiveness and globalization (7th ed.). Cincinnati, OH: South-Western.

2. Branch-Smith Printing. 2007. Accomplishments & Quality Awards. At http://www.branchsmith.com/bsaawards.html.

3. Kanfer, R. 1995. Motivation. In N. Nicholson (Ed.), Encyclopedic dictionary of organizational behavior. Cambridge, MA: Blackwell Publishing, pp. 330–336.

4. Maslow, A.H. 1943. A theory of human motivation. Psychological Review, 50: 370–396; Maslow, A.H. 1954. Motivation and person- ality. New York: Harper.

5. Wahba, M.A., & Bridwell, L.G. 1976. Maslow reconsidered: A review of the research on the need hierarchy theory. Organiza- tional Behavior and Human Performance, 15: 212–225; Kanfer, R. 1990. Motivation theory and industrial and organizational psychology. In M.D. Dunnette & L. Hough (Eds.), Handbook of industrial and organizational psychology (Vol. 1). Palo Alto, CA: Consulting Psychologists Press, pp. 75–170.

6. Ibid. 7. Ibid. 8. See, for example, Laas, I. 2006. Self-actualization and society: A

new application for an old theory. Journal of Humanistic Psychol- ogy, 46: 77–91; Zalenski, R.J., & Raspa, R. 2006. Maslow’s hi- erarchy of needs: A framework for achieving human potential in hospice. Journal of Palliative Medicine, 9: 1120–1127.

9. Alderfer, C.P. 1972. Existence, relatedness and growth human needs in organizational settings. New York: The Free Press.

10. Ibid. 11. See, for example, Wanous, J.P., & Zwany, A. 1977. A cross sec-

tional test of need hierarchy theory. Organizational Behavior and Human Performance, 16: 78–97.

12. See, for example, Alderfer, C.P., Kaplan, R.E., & Smith, K.K. 1974. The effect of variations in relatedness need satisfaction on relatedness desires. Administrative Science Quarterly, 19: 507–532.

13. Arnolds, C.A., & Boshoff, C. 2002. Compensation, esteem va- lence and job performance: An empirical assessment of Alderfer’s ERG theory. International Journal of Human Resource Manage- ment, 13: 697–719.

14. McClelland, D.C. 1966. That urge to achieve. Think, 32: 19–23. 15. McClelland, D.C. 1961. The achieving society. Princeton, NJ:

Van-Nostrand. 16. McClelland, D.C., Atkinson, J.W., Clark, R.A., & Lowell, E.L.

1953. The achievement motive. New York: Appleton-Century-Crofts. 17. McClelland, That urge to achieve. 18. Korn, E.R., & Pratt, G.J. 1986. Reaching for success in new ways.

Management World, 15 (7): 6–10. 19. Hershey, P., & Blanchard, K.H. 1972. Management and organiza-

tional behavior. New York, NY: Prentice-Hall. 20. Eisenberger, R., Jones, J.R., Stinglhamber, F., Shanock, L., &

Randall, A.T. 2005. Flow experiences at work: For high achievers alone? Journal of Organizational Behavior, 26: 755–775.

21. See Shaver, K.G. 1995. The entrepreneurial personality myth. Business and Economic Review, 41 (3): 20–23.

22. Hall, J. 1976. To achieve or not: The manager’s choice. California Management Review, 18: 5–18.

23. McClelland, D.C. 1965. Toward a theory of motivation acquisi- tion. American Psychologist, 20: 321–333; Steers, R.M. 1981. An introduction to organizational behavior. Glenview, IL: Scott, Fores- man, & Co.

24. Frischer, J. 1993. Empowering management in new product de- velopment units. Journal of Product Innovation Management, 10: 393–401.

25. Material related to virtual workers was drawn from: King, R. 2007. Working from home: It’s in the details. BusinessWeek, spe- cial report at http://www.businessweek.com/technology/content/ feb2007/tc20070212_457307.htm.

26. McClelland, D.C. 1975. Power: The inner experiences. New York: Irvington; McClelland, D.C., & Burnham, D.H. 1976. Power is the great motivator. Harvard Business Review, 54 (2): 100–110 (reprinted in 1995 and in 2003).

27. McClelland & Burnham, Power is the great motivator. 28. Herzberg, F., Mausner, B., & Synderman, B. 1959. The motiva-

tion to work. New York: John Wiley & Sons; Herzberg, F. 1966. Work and the nature of man. Cleveland, OH: World Publishing.

29. House, R., & Wigdor, L. 1967. Herzberg’s dual-factor theory of job satisfaction and motivation: A review of the empirical evidence and a criticism. Personnel Psychology, 20: 369–380; Dunnette, M.D., Campbell, J., & Hakel, M. 1967. Factors contributing to job dissatisfaction in six occupational groups. Organizational Be- havior and Human Performance, 2: 143–174.

30. Vroom, V.H. 1964. Work and motivation. New York: John Wiley & Sons.

31. See, for example, Ferris, K.R. 1977. A test of the expectancy the- ory of motivation in an accounting environment. The Accounting Review, 52: 605–615; Reinharth, L., & Wahba, M.A. 1975. Ex- pectancy theory as a predictor of work motivation, effort expendi- ture, and job performance. Academy of Management Journal, 18: 520–537.

32. See Pinder, C.C. 1984. Work motivation. Glenview, IL: Scott & Foresman.

33. In Vroom’s original theory, extrinsic rewards were the focus. In some later work, intrinsic rewards were also a point of emphasis.

34. Johnson, R.R. 2009. Explaining patrol offi cer drug arrest activ- ity through expectancy theory. Policing: An International Journal of Police Strategies & Management, 32: 6–20.

35. Durocher, S., Fortin, A., & Cote, L. 2007. Users’ participation in the accounting standard-setting process: A theory-building study. Accounting, Organizations, and Society, 32: 29–59; House, R.J., Shapiro, H.J., & Wahba, M.A. 1974. Expectancy theory as a pre- dictor of work behavior and attitudes: A reevaluation of empirical evidence. Decision Sciences, 5: 481–506; Kanfer, R. 1990. Mo- tivation theory and industrial and organizational psychology. In Dunnette & Hough (Eds.), Handbook of industrial and organiza- tional psychology (Vol. 1); Landy, F.J., & Trumbo, D.A. 1980. Psy- chology of work behavior (2nd ed.). Homewood, IL: Dorsey Press, pp. 343–351; Wahba, M.A., & House, R.J., 1972. Expectancy

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http://www.branchsmith.com/bsaawards.html

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Endnotes 243

theory in work and motivation: Some logical and methodologi- cal issues. Human Relations, 27: 121–147; Watson, S. 2006. “A multi-theoretical model of knowledge transfer in organizations: Determinants of knowledge contribution and knowledge reuse.” Journal of Management Studies, 43: 141–173.

36. Landy & Trumbo, Psychology of work behavior. 37. Korsgaard, M.A., Meglino, B.M., & Lester, S.W. 1997. Beyond

helping: Do other-oriented values have broader implications in organizations? Journal of Applied Psychology, 82: 160–177.

38. For one revised model, see: Porter, L.W., & Lawler, E.E. 1968. Managerial attitudes and performance. Homewood, IL: Irwin- Dorsey.

39. See, for example, Camerman, J. 2007. The benefi ts of justice for temporary workers. Group & Organization Management, 32: 176– 207; Cropanzano, R., Rupp, D.E., Mohler, C.J., & Schmincke, M. 2001. Three roads to organizational justice. In G. Ferris (Ed.), Research in personnel and human resources management. Oxford, UK: Elsevier Science, pp. 1–113; Greenberg, J., Ashton-James, C.E., & Ashkanasy, N.M. 2007. Social comparison processes in organizations. Organizational Behavior and Human Decision Processes, 102: 22–41; Wong, Y.-T., Ngo, H.-Y., & Wong, C.-S. 2006. Perceived organizational justice, trust, and OCB: A study of Chinese workers in joint ventures and state-owned enterprises. Journal of World Business, 41: 344–355.

40. Pasturis, P. 2002. The corporate scandal sheet. At http://www. Forbes.com.

41. See Cox, T. 2001. Creating the multicultural organization: A strat- egy for capturing the power of diversity. San Francisco: Jossey-Bass.

42. Adams, J.S. 1965. Inequity in social exchange. In L. Berkowitz (Ed.), Advances in experimental social psychology (Vol. 2). New York: Academic Press, pp. 267–299.

43. Colquitt, J.A., Conlon, D.E., Wesson, M.J., Porter, C.O.L.H., & Ng, K.Y. 2001. Justice at the millennium: A meta-analytic review of 25 years of organizational justice research. Journal of Applied Psychology, 86: 425–445; Greenberg, Ashton-James, & Ashka- nasy, Social comparison processes in organizations.

44. Greenberg, J., & Leventhal, G. 1976. Equity and the use of over- reward to motivate performance. Journal of Personality and Social Psychology, 34: 179–190.

45. See, for example, Bing, M.N., & Burroughs, S.M. 2001. The pre- dictive and interactive effects of equity sensitivity in teamwork- oriented organizations. Journal of Organizational Behavior, 22: 271–290; Huseman, R.C., Hatfi eld, J.D., & Miles, E.W. 1987. A new perspective on equity theory: The equity sensitivity con- struct. Academy of Management Review, 12: 222–234.

46. For details of this story, see: Boswell, T. 2000. A Texas-sized mis- take involving no lone star. The Washington Post, December 12, p. D.01; Simmons, M. 2003. A-Rod hits the jackpot, super Mario returns. At www.askmen.com.

47. White, P. 2007. How A-Rod learned to relax and enjoy N.Y.: In a turnabout he’s on a roll but Yankees aren’t. USA Today, May 4, p. 1A.

48. Colquitt, Conlon, Wesson, Porter, & Ng, Justice at the millennium. 49. Greenberg, J. 1993. Stealing in the name of justice: Informational

and interpersonal moderators of theft reactions to underpayment inequity. Organizational Behavior and Human Decisions Processes,

54: 81–103; Umphress, E.E., Ren, L.R., Bingham, J.B., & Gogus, C.I. 2009. The infl uence of distributive justice on lying and steal- ing from a supervisor. Journal of Business Ethics, 86: 507–518; Hershcovis, M.S. et al. 2007. Predicting workplace aggression: A meta-analysis. Journal of Applied Psychology, 92: 228–238; Jones, D.A. 2009. Getting even with one’s supervisor and one’s organiza- tion: Relationships among types of injustice, desires for revenge, and counterproductive work behaviors. Journal of Organizational Behavior, 30, 525–542.

50. Loi, R., Yan, J., & Diefendorff, J.M. 2009. Four-factor justice and daily job satisfaction: A multilevel investigation. Journal of Applied Psychology, 94, 770–781; Colquitt, Conlon, Wesson, Por- ter, & Ng, Justice at the millennium.

51. Colquitt, Conlon, Wesson, Porter, & Ng, Justice at the millennium. 52. Colquitt, Conlon, Wesson, Porter, & Ng, Justice at the millennium. 53. Borman, W. C., & Motowidlo, S. J. 1993. Expanding the cri-

terion domain to include elements of contextual performance. In N. Schmitt & W. C. Borman (Eds.), Personnel selection in or- ganizations. San Francisco: Jossey-Bass, pp. 71–98. Organ, D. W. 1988. Organizational citizenship behavior: The good soldier syn- drome. Lexington, MA: Lexington Books.; Organ, D.W. 1997. Organizational citizenship behavior: It’s construct clean-up time. Human Performance, 10: 85–97.

54. Distributive and procedural justice are the two most studied types of justice. A third type, however, has been distilled and has received some attention. This third type, interactional justice, relates to quality of interpersonal treatment, typically from the supervisor. In our chapter, we focus on the main two anchors of justice phenomena. For additional discussion, see, for example, Olkkonen, M.-E., & Lipponen, J. 2006. Relationships between organizational justice, identifi cation with the organization and work unit, and group related outcomes. Organizational Behav- ior and Human Decision Processes, 100: 202–215; Roch, S.G., & Shanock, L.R. 2006. Organizational justice in an exchange framework: Clarifying organizational justice distinctions. Journal of Management, 32: 299–322.

55. Brockner, J., & Wiesenfeld, B.M. 1996. An integrative frame- work for explaining reactions to decisions: Interactive effects of outcomes and procedures. Psychological Bulletin, 120: 189–208; Thibaut, J., & Walker, L. 1975. Procedural justice: A psychological analysis. Hillsdale, NJ: Lawrence Erlbaum.

56. Bies, R.J., & Moag, J.F. 1986. Interactional justice: Communica- tion criteria of fairness. In R.J. Lewicki, B.H. Sheppard, & M.H. Bazerman (Eds.), Research on negotiations in organizations (Vol. 1). Greenwich, CT: JAI Press, pp. 43–55; Leventhal, G.S. 1980. What should be done with equity theory: New approaches to the study of fairness in social relationships. In K. Gergen, M. Greenberg, & R. Willis (Eds.), Social exchange: Advances in theory and research. New York: Plenum, pp. 27–55; Thibaut & Walker, Procedural justice.

57. Brockner, J., DeWitt, R.L., Grover, S., & Reed, T. 1990. When it is especially important to explain why: Factors affecting the rela- tionship between managers’ explanations of a layoff and survivors’ reactions to the layoff. Journal of Experimental Social Psychology, 26: 389–407.

58. Locke, E.A., & Latham, G.P. 1990. A theory of goal setting and task performance. Englewood Cliffs, NJ: Prentice Hall.

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http://www.Forbes.com

www.askmen.com

244 Chapter 6 Work Motivation

59. Locke, E.A. 1968. Toward a theory of task motivation and incentives. Organizational Behavior and Human Performance, 3: 157–189.

60. Heath, C., Larrick, R.P., & Wu, G. 1999. Goals as reference points. Cognitive Psychology, 38: 79–109.

61. Locke & Latham, A theory of goal setting and task performance. 62. Locke, E.A., & Latham, G.P. 1979. Goal setting: A motivational

technique that works. Organizational Dynamics, 8 (2): 68–80. 63. See, for example: Motowidlo, S.J., Loehr, U., & Dunnette, M.D.

1978. A laboratory study of the effects of goal specifi city on the relationship between probability of success and performance. Journal of Applied Psychology, 63: 172–179.

64. Locke & Latham, A theory of goal setting and task performance. 65. Locke, Toward a theory of task motivation and incentives; Renn,

R.W. 1998. Participation’s effects on task performance: Mediating roles of goal acceptance and procedural justice. Journal of Business Research, 41: 115–125.

66. Latham, G.P., & Marshall, H.A. 1982. The effects of self-set, par- ticipatively set and assigned goals on the performance of govern- ment employees. Personnel Psychology, 35: 399–404; Latham, G.P., Steele, T.P., & Saari, L.M. 1982. The effects of participation and goal diffi culty on performance. Personnel Psychology, 35: 677–686.

67. Renn, Participation’s effect on task performance. 68. Latham, G.P., Stajkovic, A.D., & Locke, E.A. 2010. The rele-

vance and viability of subconscious goals in the workplace. Jour- nal of Management, 36: 234–255.

69. Chartrand, T. L, & Bargh, J. A. 2002. Nonconscious motivations: Their activation, operation, and consequences. In D. Tesser, A. Stapel, & J. V. Wood (Eds.), Self and motivation: Emerging psy- chological perspectives. Washington, DC: American Psychological Association, pp. 13–41.

70. Stajkovic, A. D., Locke, E. A., Bandura, A., & Greenwald, J. 2009a. Effects of subconscious self effi cacy on performance. Paper presented at the Academy of Management, Philadelphia; Stajko- vic, A.D., Locke, E.A., Bandura, A., & Greenwald, J. 2009b. The effects of subconscious self-effi cacy on performance and media- tion of conscious self-effi cacy and conscious self-set goals. In A.D. Stajkovic (Chair), Subconscious goals, self effi cacy, need for achieve- ment: The latest priming research. Symposium at the annual meet- ing of the Society of Industrial-Organizational Psychology, New Orleans; Stajkovic, A. D., Locke, E. A., & Blair, E. S. 2006. A fi rst examination of the relationships between primed subconscious goals, assigned conscious goals, and task performance. Journal of Applied Psychology, 91: 1172–1180.

71. Shantz, A., & Latham, G. P. 2009. An exploratory fi eld experi- ment on the effect of subconscious and conscious goals on em- ployee performance. Organizational Behavior and Human Deci- sion Making Processes, 109: 9–17.

72. Stajkovic, Locke, Bandura, & Greenwald, The effects of subcon- scious self-effi cacy on performance and mediation of conscious self-effi cacy and conscious self-set goals.

73. Latham, Stajkovic, & Locke, The relevance and viability of sub- conscious goals in the workplace.

74. Shantz, A., & Latham, G.P. 2009. An exploratory fi eld experi- ment on the effect of subconscious and conscious goals on em- ployee performance.

75. Becker, L.J. 1978. Joint effect of feedback and goal setting on per- formance: A fi eld study of residential energy conservation. Journal of Applied Psychology, 63: 428–433.

76. Morse, G. 2003. Why we misread motives. Harvard Business Re- view, 81 (1): 18.

77. Ibid. 78. Deci, E.L. 1972. Effects of noncontingent rewards and controls

on intrinsic motivation. Organizational Behavior and Human Per- formance, 8: 217–229.

79. See, for example: Pate, L.E. 1978. Cognitive versus reinforcement views of intrinsic motivation. Academy of Management Review, 3: 505–514.

80. Chuanzhi, L. Set different incentive levels. Harvard Business Re- view, 81 (1): 47.

81. Locke & Latham, A theory of goal setting and task performance. 82. Kerr, S. 1975. On the folly of rewarding A, while hoping for B.

Academy of Management Journal, 18: 769–783. 83. This story is based on the following materials: Bates, S. 2003. Top

pay for best performers. HR Magazine, 48 (1): 31–38; Leventhal, G.S. 1976. The distribution of rewards and resources in groups and organizations. In L. Berkowitz & E. Walster (Eds.), Advances in Experimental Social Psychology (Vol. 9). New York: Academic Press, pp. 91–131; Mizra, P., & Fox, A. 2003. Reward the best, prod the rest. HR Magazine, 48 (1): 34–35.

84. Bates, Top pay for best performers 85. Ibid. 86. Aldag, R.J., & Brief, A.P. 1979. Task design and employee motiva-

tion. Glenview, IL: Scott, Foresman, pp. 42–43. 87. See, for example, Ford, R. 1969. Motivation through the work it-

self. New York: American Management Association; Fried, Y., & Ferris, G.R. 1987. The validity of the job characteristics model: A review and meta-analysis. Personnel Psychology, 40: 287–322; Walton, R.E. 1972. How to counter alienation in the plant. Harvard Business Review, 50 (6): 70–81; Whittington, J.L., Goodwin, V.L., & Murray, B. 2004. Transformational leader- ship, goal diffi culty, and job design: Independent and interac- tive effects on employee outcomes. The Leadership Quarterly, 15: 593–606.

88. Hulin, C.L. 1971. Individual differences and job enrichment: The case against general treatments. In J. Maher (Ed.), New per- spectives in job enrichment. Berkeley, CA: Van Nostrand Reinhold; Aldag & Brief, Task design and employee motivation.

89. Deloitte Consulting. 2005. Who are the millennials (aka Genera- tion Y)? New York: Deloitte & Touche USA.

90. Hackman, J.R., & Oldham, G.R. 1974. The job diagnostic sur- vey: An instrument for the diagnosis of jobs and the evaluation of job design projects, Technical Report No. 4. New Haven, CT: Yale University, Department of Administrative Sciences.

91. Hackman, J.R., & Oldham, G.R. 1976. Motivation through the design of work: Test of a theory. Organizational Behavior and Hu- man Decision Performance, 16: 250–279.

92. See, for example, Abbott, J.B., Boyd, N.G., & Miles, G. 2006. Does type of team matter? An investigation of the relationships between job characteristics and outcomes within a team-based en- vironment. The Journal of Social Psychology, 146: 485–507; Fried & Ferris, The validity of the job characteristics model.

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Endnotes 245

93. Kanfer, Motivation; Fried & Ferris, The validity of the job char- acteristics model.

94. Fried & Ferris, The validity of the job characteristics model. 95. The Conference Board, January 5, 2010, “U.S. Job Satisfaction at

Lowest Level in Two Decades” at http://www.conference-board. org/utilities/pressDetail.cfm?press_ID=3820; Hollon, J. January 5, 2010. “A Ticking Time Bomb: Job Satisfaction Hits Record- Low Levels,” Workforce Management at http://www.workforce. com/wpmu/bizmgmt/category/recession/.

96. Schaubroeck, J., Ganster, D.C., & Kemmerer, B.E. 1994. Job complexity, “type A” behavior, and cardiovascular disorder: A prospective study. Academy of Management Journal, 37: 426–439;

Dwyer, D.H., & Fox, M.L. 2000. The moderating role of hostil- ity in the relationship between enriched jobs and health. Academy of Management Journal, 43: 1086–1096.

97. Kluger, A.N., & DeNisi, A.S. 1996. The effects of feedback inter- ventions on performance: A historical review, a meta-analysis, and a preliminary feedback intervention theory. Psychological Bulletin, 119: 254–284.

98. Eckert, R.A. 2003. Be a broken record. Harvard Business Review, 81 (1): 44.

99. Miller, P. 2003. Signed, delivered: Malone cannot hide his excite- ment about playing for a title in L.A. Salt Lake Tribune, July 18, at http://www.sltrib.com.

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http://www.conference-board.org/utilities/pressDetail.cfm?press_ID=3820

http://www.workforce.com/wpmu/bizmgmt/category/recession/

http://www.sltrib.com

? knowledge objectives After reading this chapter, you should be able to: 1. Defi ne stress and distinguish among different types

of stress. 2. Understand how the human body reacts to stress

and be able to identify the signs of suffering from too much stress.

3. Describe two important models of workplace stress and discuss the most common work-related stres- sors.

4. Recognize how different people experience stress. 5. Explain the individual and organizational conse-

quences of stress. 6. Discuss methods that associates, managers, and

organizations can use to manage stress and pro- mote well-being.

stress and well-being

exploring behavior in action

Striking for Stress at Verizon

T he pay is good, and sales bonuses can be generous. So why did Verizon call-center service representatives go on strike for 18 days several years ago? The answer in part is excessive stress.

Verizon, a Fortune 100 telecommunications company with revenues of more than $107 billion, depends on call-center representatives to provide positive customer service. These representatives provide the service link between the company and its customers. They answer many calls each day, covering a wide range of service issues. In addition, they sell products to the customers who call (such as caller ID services and DSL high-speed Internet access). The repre- sentatives are monitored electronically and in person on such factors as courtesy, length of calls, and sales of products.

They are also closely monitored for tardiness, break times, and attendance. Failure to meet strict perfor- mance standards can lead to severe penalties, such as probation, suspension, or “separation from the pay- roll.” Finally, service representatives are required to work overtime.

Call-center representatives are well paid and can earn commissions on sales. Over the years, they have voiced few complaints about the pay associated with the job. They have, however, voiced complaints about other issues. Associates said the following a few years ago:

You are constantly monitored on everything that you do. Every call is timed …, If you go to the bathroom too long they say something about it.

It is very stressful because we don’t have enough people. … People aren’t treated as people anymore. The company only sees us as numbers and dollar signs. …

You’re worried that before you let the customer go, you have to offer [sell] him something, no matter how upset he is, because the person sitting next to you or in that observation room is going to mark you off.

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247

Sources: Anonymous, “Union Rejects Contract Offer—Verizon Communication Workers Speak on Issues in Strike,” Aug. 2000, at http://www.wsws.org/articles/2000/aug2000/cwa-a15.shtml; Communication Workers of America, “Protections against Abusive Mon- itoring, Adherence, and Sales Quotas in CWA Contracts,” 2003, at http://www.cwa-union.org/workers/customers/protections.asp; Communication Workers of America, “Contract Improvements for CWA Customer Service Professionals: 1999–Spring 2001,” 2003, at http://www.cwa-union.org/workers/customers/improv_99-01.asp; K. Maher. 2001. “Stressed Out: Can Worker Stress Get Worse?” Wall Street Journal, Jan. 16: B1; L. Caliri. 2003. “‘The Call Center Is a Gold-Plated Sweatshop’: A Retired Employee of Roanoke Center Says Verizon Strike Likely as Workers Complain about Work Stress,” roanoke.com, August, at www.roanoke.com/roatimes/news/ story152897.html; Verizon Communications, “Executive Center: Awards and Honors,” 2007, at http://www22.verizon.com/about/ executivecenter/besttofl ists/bestofl ists_index.html; Verizon Communications, “Verizon Careers,” 2007, at http://www22.verizon.com/ jobs/. A. Sharma. 2008. “Verizon-Union Deal Averts Strike Three-Year Pact Will Create Jobs; Ratifi cation Awaits,” Wall Street Journal, Aug. 11, at http://online.wsj.com/article/SB121840111215927955.html. Verizon News Release. Verizon named to working mother magazine’s List of 100 Best Companies.” Sept. 23, 2009, at http://newscenter.verizon.com/press-releases/verizon/2009/verizon-named- to-working.html. D. Adams. “Views differ on call-center experience” July 19, 2009, Roanoke.com at http://www.roanoke.com/news/ roanoke/wb/212332.Verizon Website. “Investor Relations” February 9, 2010 at http://investor.verizon.com/profi le/overview.aspx

In addition to the above issues, one associate com- plained of being forced to sell a product to a person who was calling to have phone service shut off for a dead relative.

Several associates complained that managers moni- tored employees for personal reasons rather than to evalu- ate performance.

The Communication Workers of America (CWA), representing the call-center associates, and Verizon set- tled the strike that partially resulted from these work- place conditions. The settle- ment attempted to alleviate some of the more stressful conditions. Some of the changes included:

• Advance notifi cation of monitoring and limits on the number of calls that can be monitored based on associates’ performance.

• Monitoring only during regular working hours— not during overtime hours.

• Face-to-face feedback on monitoring within 24 hours of observation.

• Permission to be away from phones for 30 minutes per day to do paperwork.

• The formation of a CWA–Verizon committee to examine stressful conditions.

• Funding for work and family support programs. • At some locations, recording of performance at

the team level rather than the individual level.

• Split shifts, job sharing, and limited fl extime at various locations.

• Limits on overtime at some locations—for example, 24-hour advance notice of overtime, 7.5 hours per week limit on mandatory overtime,

and 15-minute breaks for every three hours of overtime worked.

Although the new contract addressed many of the call-center associ- ates’ complaints, some still argue that not enough has been done. To that end, some call-center associates and other employees have threatened to strike again over the last few years.

Overall, though, Ve- rizon seems to have ad- dressed these issues. Veri-

zon has received awards and recognition recently from Working Mother, LATINAStyle, CEO, Training, and sev- eral other periodicals. Yet contention still remains. Ve- rizon call-center employees still express frustration with the stress experienced on their jobs. For example, Abbey Bailey-Parrish recently stated that her call center job in Roanoke Virginia was a source of “constant pressure” due to an atmosphere of fear about being fi red and the push to get callers to buy new products that they could not afford. She said “If you check your values at the door, this is a great job for you because the pay is great.”

©AP/Wide World Photos

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http://www.wsws.org/articles/2000/aug2000/cwa-a15.shtml

http://www.cwa-union.org/workers/customers/protections.asp

http://www.cwa-union.org/workers/customers/improv_99-01.asp

www.roanoke.com/roatimes/news/story152897.html

www.roanoke.com/roatimes/news/story152897.html;

http://www22.verizon.com/jobs/

http://online.wsj.com/article/SB121840111215927955.html

http://newscenter.verizon.com/press-releases/verizon/2009/verizon-named-to-working.html

http://www.roanoke.com/news/roanoke/wb/212332.Verizon

http://investor.verizon.com/profile/overview.aspx

http://www22.verizon.com/about/executivecenter/besttoflists/bestoflists_index.html

248 Chapter 7 Stress and Well-Being

By most standards, call-center service representatives have stressful jobs. Of course, individuals in other jobs also can experience stress, and such stress can lead to poor performance, work- place violence, sabotage, substance abuse, and other types of maladaptive behaviors; depression; and increased health-care costs.1 It has been esti- mated that 75 percent of all medical problems are directly attributable to stress.2 Time away from work is also an issue. According to the U.S. Bureau of Labor Statistics, individuals with sub- stantial occupational stress missed 23 days of work per person (the median number), with 44 percent of absences lasting more than 31 days—much lon- ger than absences resulting from inju- ries and illnesses.3

As suggested by the Verizon call- center case, many jobs and organiza- tional policies can cause stress. Rapid technological changes, long work hours, repetitive computer work, work– family issues, and a growing service economy can also lead to stress. Given the many sources of stress, it is not sur- prising that a National Institute for Oc- cupational Safety and Health (NIOSH) report on stress at work indicates that 26 to 40 percent of Americans fi nd their work to be very or extremely stressful.4 A survey by Northwestern National Life found that 25 percent of people believe their jobs to be the most stressful aspect of their lives.5 A 2009 Gallup survey indicated that 31 percent of respon- dents were somewhat or completely dissatisfi ed with the stress produced in their jobs.6 Finally, a Marlin Company

survey of attitudes in the American workplace found that 43 percent of re- spondents believed managers at their companies did not help associates deal with stress.7

Although not all stress is bad (some of it can have positive outcomes, as explained later in this chapter), much of it is dysfunctional and, as we have seen, costly to organizations in terms of lost human capital and lower productiv- ity. As a result, managers at all levels are increasingly aware of the effects of their decisions and actions on the stress of others. Indeed, it is imperative that managers effectively deal with the stress of those around them if they are to develop/maintain a high-involvement, high-performance workforce.

Given the prevalence of stress in the workplace and the high direct and indirect costs of stress at work, it should be a priority item on the agenda of top executives. In fact, many top execu- tives also experience signifi cant stress. The CEO makes decisions that affect many people. The strategy adopted by the organization affects the jobs per- formed by managers and associates. Poor decisions concerning strategy may mean that some people lose their jobs because of decreased demand for the organization’s products or services, for example.

Top executives also make deci- sions to acquire or merge with other fi rms, and they must decide how many people will be laid off as a result of an acquisition or merger. Sometimes, too, they make decisions to lay off employ- ees simply to cut costs. Layoffs create

stress for the associates and managers who lose their jobs and for the survivors as well. Survivors experience stress be- cause of job insecurity. In addition, re- search shows that they often feel guilty because their friends and co-workers were chosen to lose their jobs and they were not.8 For stress to be as low as possible, those chosen to be laid off as well as survivors must view the actions of the senior leaders to be fair and hu- mane. Research has shown that commu- nicating effectively about the layoffs, im- plementing layoffs by careful selection of the units (those less valuable to the organization), and helping those laid off (e.g., providing severance pay, pro- viding services to help them fi nd new jobs) produces better outcomes.9 For ex- ample, these actions result in investors seeing managers as more effective and more likely to produce higher perfor- mance, and thus stock price is positively affected.10

In the fi rst section of this chap- ter, we defi ne stress and related con- cepts. In the two sections that follow, we (1) present two important models of workplace stress that explain why and when people experience stress, and (2) discuss common workplace stress- ors. Next, we discuss individual charac- teristics that can cause people to experi- ence more stress or help them cope with stressors. We then describe individual and organizational outcomes resulting from stress reactions. Finally, we pres- ent methods that associates, managers, and organizations can use to combat the effects of stress.

the strategic importance of Workplace Stress

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Workplace Stress Defi ned 249

Workplace Stress Defi ned Unfortunately, we all know what it feels like to be stressed. For some people, stress mani- fests itself as an upset stomach. For others, heart palpitations and sweaty palms signal stress. The list of stress reactions is almost endless and differs from individual to indi- vidual. Even though we know what stress feels like, we may not know just how to defi ne it. In fact, stress is a diffi cult concept to defi ne, and researchers have argued over its defi nition and measurement for many years.11

For our purposes, stress can be defi ned as a feeling of tension that occurs when a person perceives that a given situation is about to exceed her ability to cope and conse- quently could endanger her well-being.12 In such situations, people fi rst ask themselves: “Am I in trouble or danger?” and then ask, “Can I successfully cope with this situation?” If people respond with “yes” to the fi rst question and “no” to the second, they are likely to experience stress. Extending this defi nition, we can defi ne job stress as the feeling that one’s capabilities, resources, or needs do not match the demands or requirements of the job.13

Consider a call-center representative who has a child in day care who must be picked up at 5:30 p.m. The representative has sole responsibility for picking up his child because his wife is out of town. At 4:58 p.m., as the representative is beginning to close down his station, his supervisor walks over and tells him that he must stay and work for another two hours. If the representative refuses to stay, he can be put on probation or even be fi red, but he cannot think of anyone to call to pick up his child for him. Clearly, the demands of this situation are taxing his ability to cope, and therefore stress results. It is easy to see why being notifi ed about overtime at least 24 hours in advance was such an important issue for Verizon’s call-center representatives.

There are several important issues regarding the defi nition of stress. First, the level of stress experienced depends on individual reactions to a situation. Therefore, an event experienced by one person as stressful may not be as stressful to another person. For ex- ample, some people fi nd stopping at a traffi c light while driving to be stressful, whereas others do not. A second issue is that the source of stress, or stressor, can be either real or imagined. People do not actually need to be in danger to experience stress—they have only to perceive danger.

Stress can be defi ned as acute or chronic.14 Acute stress is a short-term reaction to an immediate threat. For example, an associate might experience acute stress when being rep- rimanded by a supervisor or when not able to meet a dead- line. Chronic stress results from ongoing situations. For example, it can result from living in fear of future layoffs or from having continuing problems with a supervisor. The constant monitoring in the call centers also is an example of a stressor likely to result in chronic stress.

Reactions involving chronic stress are potentially more severe than those involving acute stress because of the way the body responds. Stress makes demands that create an imbalance in the body’s energy supply that is diffi cult to restore. The body reacts with a special physi- ological response commonly referred to as the stress response. A stress response is an unconscious mobiliza- tion of the body’s energy resources that occurs when the

stress A feeling of tension that occurs when a person perceives that a situation is about to exceed her ability to cope and consequently could endanger her well-being.

job stress The feeling that one’s capabilities, resources, or needs do not match the demands or requirements of the job.

acute stress A short-term stress reaction to an immediate threat.

chronic stress A long-term stress reaction resulting from ongoing situations.

stress response An unconscious mobilization of energy resources that occurs when the body encounters a stressor.

©Somos/Veer/Getty Images, Inc.

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250 Chapter 7 Stress and Well-Being

body encounters a stressor.15 The body gears up to deal with impending danger by releas- ing hormones and increasing the heartbeat, pulse rate, blood pressure, breathing rate, and output of blood sugar from the liver.16 If stress is short-lived, or acute, then stress responses tend to be short term. If, on the other hand, stress lasts over a period of time, with little relief, stress responses begin to wear down the body and result in more serious problems. Exhibit 7-1 displays some of the conditions that can be caused by acute and by chronic stress.

Not all demands that associates and managers encounter on the job lead to negative stress responses. Sometimes people become energized when faced with diffi culties. Hans Seyle, one of the most infl uential stress researchers, distinguished between eustress and dystress.17 Eustress is positive stress that results from facing challenges and diffi culties with the expectation of achievement. Eustress is energizing and motivating.18 Stressors do not necessarily have to be perceived in a negative manner, since they are often the result of a positive experience or result in positive outcomes.19 For example, a promotion may result in more stressful responsibility but is viewed in a very favorable light, or completing a stressful assignment may lead to a feeling of achievement. Indeed, some research suggests that a certain level of stress is necessary for maximum performance.20 Too little stress can produce boredom and even apathy, whereas reasonable levels of stress increase alertness and concentration. However, as stress increases, it reaches a point at which the effects become negative. If a high level of stress continues for prolonged periods, dystress, or bad stress, results. Note that we use the general term stress to refer to dystress throughout the book. This type of stress overload can lead to the physiological and psychological problems discussed here.

eustress Positive stress that results from facing challenges and diffi culties with the expectation of achievement.

dystress Negative stress; often referred to simply as stress.

EXHIBIT 7-1 Some Stress-Related Conditions

Conditions That Can Result from Acute Stress

Alertness and excitement Increase in energy Feelings of uneasiness and worry Feelings of sadness Loss of appetite Short-term suppression of the immune system Increased metabolism and burning of body fat

Conditions That Can Result from Chronic Stress

Anxiety and panic attacks Depression Long-term disturbances in eating (anorexia or overeating) Irritability Lowered resistance to infection and disease Diabetes High blood pressure Loss of sex drive Source: Adapted from: Mayo Clinic, “Managing Work Place Stress: Plan Your Approach.” 2003, at http:// www.mayoclinic.com/invoke.cfm?id=HQ01442.

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http://www.mayoclinic.com/invoke.cfm?id=HQ01442

Two Models of Workplace Stress 251

How can you tell when stress is reaching a negative level? Dr. Edward Creagan, an oncologist at the Mayo Clinic, identifi es fi ve basic signs in everyday life that indicate you are under too much stress:21

1. You feel irritable.

2. You have sleeping diffi culties. Either you are sleepy all the time, or you have problems falling asleep and/or staying asleep.

3. You do not get any joy out of life.

4. Your appetite is disturbed. Either you lose your appetite, or you cannot stop eating.

5. You have relationship problems and diffi culties getting along with people who are close to you.

Two Models of Workplace Stress We have seen that workplace stress, or job stress, can occur when individuals perceive the demands of the workplace to outweigh their resources for coping with those demands. We turn now to two popular and important models of workplace stress—the demand– control model22 and the effort–reward imbalance model.23

Demand–Control Model The demand–control model is focused on two factors that can create situations of job strain and ultimately the experience of stress. Job strain is a function of the following two factors:

1. The workplace demands faced by an associate or manager

2. The control that an individual has in meeting those demands

Workplace demands are aspects of the work environment that job holders must handle. Examples of workplace demands abound in the call-center example at the beginning of this chapter and include long hours, pressure to handle calls quickly, and being subjected to monitoring. Control refers to the extent to which individuals are able to (or perceive themselves as able to) affect the state of job demands and to the amount of control they have in making decisions about their work. In the call-center example, one issue of the greatest concern to associates was their lack of control over how many hours they worked.

The demand–control model suggests that job strain is highest when job demands are high and control is low. In this condition, individuals face stressors but have little control over their situation. Call-center associates who must try to sell a product to every caller— with no authority to decide whether a particular caller needs or can afford the product— operate in a state of high strain and consequently experience stress. Compare this with a situation in which a call-center associate has a sales quota but also has the power to decide what products to try to sell and to whom to sell them. In this situation, the associate could exercise a great deal of creativity in determining how to classify customers so that their needs are met and still meet her sales goals. This situation exemplifi es the “Active” condi- tion in which both demands and control are high. The result is similar to the notion of eustress discussed earlier. Individuals are most likely to be energized, motivated, and cre- ative in this condition.24 Less research has been done on the other two conditions, labeled

demand–control model A model that suggests that experienced stress is a function of both job demands and job control. Stress is highest when demands are high but individuals have little control over the situation.

effort–reward imbalance model A model that suggests that experienced stress is a function of both required effort and rewards obtained. Stress is highest when required effort is high but rewards are low.

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252 Chapter 7 Stress and Well-Being

“Low Strain” and “Passive,” which are characterized by low demands. In any event, people facing these conditions are unlikely to experience stress. The demand–control model is depicted in Exhibit 7-2.

Research on the demand–control model has yielded somewhat mixed results. Some research has found that people in the high-strain condition are more likely to experience stress-related health problems, such as coronary heart disease and high blood pressure.25 Other research has found less support for the model.26 On balance, most researchers agree that both demands and control are important factors in explaining stress. However, how they work together, what constitutes job control, and the role of other variables (such as social support) must be considered in refi ning the demand–control model of workplace stress.27 Furthermore, control may have only a buffering effect if it serves to reduce a per- son’s perception of job demands.28

Effort–Reward Imbalance Model The effort–reward imbalance model is focused on two factors, as depicted in Exhibit 7-3:

1. The effort required by an associate or manager

2. The rewards an individual receives as a result of the effort

Passive High Strain

(DYSTRESS/STRESS)

Low High

Job Demands

Low Strain

Low

High Active

(EUSTRESS)

Job Control

Exhibit 7-2 The Demand–Control Model of Workplace Stress

Source: R. Karasek. 1989. Control in Workplace and its Health-Related Aspects. In S.L. Sauter, J.J. Hurrell, Jr., & C.L. Cooper (Eds.), Job Con- trol and Worker Health. New York: John Wiley & Sons, pp. 129–159.

High effort Low reward

Demands Obligations

Overcommitment

Pay Esteem

Exhibit 7-3 The Effort–Reward Imbal- ance Model of Stress

Source: Adapted from: J. Siegrist. 1999. Occupational Health and Public Health in Germany, In P.M. Le Blanc, M.C.W. Peeters, A. Bussing, & W.B. Schaufeli (Eds.), Organiza- tional Psychology and Healthcare: European Contributions. Munchen: Rainer Hampp Verlag.

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Organizational and Work-Related Stressors 253

Effort required relates to the performance demands and obligations of the job. It is very similar to the demand dimension in the demand–control model, but it is somewhat more narrowly focused on the job itself rather than on broader aspects of the overall work environment. Rewards include extrinsic (e.g., pay) and intrinsic (e.g., esteem) outcomes of the work.

The effort–reward imbalance model highlights the fact that a combination of strong required efforts and low rewards violates the principle of reciprocity. Ongoing violation of this principle results in strong negative emotions and harmful changes in the autonomic nervous system. Although an individual facing such a situation could simply exit, many stay because of: (1) limited opportunities in the labor market, (2) hope for changes in the situation, and (3) excessive work-related overcommitment.29 Overcommitment, the factor that most researchers have focused on, is driven by achievement motivation and approval motivation.

Research has yielded generally supportive results for the effort–reward imbalance model. For example, in a study of hospital workers, effort–reward imbalance predicted musculoskeletal injury.30 In a synthesis of 45 studies, effort–reward imbalance pre- dicted a variety of negative outcomes.31 The relevance of overcommitment has been questioned (it may not play an important role), but other aspects of the model appear to be valid.

Organizational and Work-Related Stressors A great deal of research has focused on identifying the specifi c aspects of the work environ- ment likely to cause associates and managers to experience stress—that is, the factors that act as stressors. Organizational and work-related causes of stress include role confl ict, role ambiguity, work overload, occupation, resource inadequacy, working conditions, manage- ment style, monitoring, job insecurity, and incivility.32 We examine these factors next.

Role Confl ict All of us have many roles (student, fraternity/sorority member, athlete, spouse, associ- ate). Many times, these roles are reasonably compatible. Sometimes, however, they are not compatible and create confl icting demands and requirements. This situation, known as role confl ict, has been demonstrated to be a signifi cant work stressor and is often as- sociated with dissatisfaction, tardiness, absenteeism, and turnover.33 It has been labeled a hindrance stressor in recent stress research.34

A specifi c example of role confl ict and its connection to stress is provided by the case of fl ight attendants after the September 11 terrorist attacks.35 Prior to the attacks, the fl ight attendants’ role focused on providing service to passengers—“service with a smile.” However, since September 11, fl ight attendants, under federal rulings, have been required to perform extraordinary security procedures and to scrutinize passengers. It is diffi cult to provide friendly service (customer service role) while taking extreme security precautions (security role). Pat Friend, president of the Association of Flight Attendants, noted that before the attacks, fl ight attendants could ignore or “grin and bear” unruly passenger behavior. Now, however, they are required to treat the mildest infraction as a “level-one” threat. This approach has produced an increase in passenger complaints,

stressors Environmental conditions that cause individuals to experience stress.

role confl ict A situation in which different roles lead to confl icting expectations.

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254 Chapter 7 Stress and Well-Being

stress-management programs for fl ight attendants, and a study of job stress sponsored by a major fl ight attendants’ union.

Apart from confl ict among work roles, it is not uncommon for a person’s work and nonwork roles to confl ict. For example, a person’s job demands may confl ict with a role as a spouse and mother or father. Such confl ict was seen in the Verizon case, and it can be quite serious. One study, for example, connected work–family confl ict to mental is- sues. Individuals with high levels of such confl ict exhibited mood problems, anxiety, and substance use. This was true for women and men, with single mothers and married fathers having the highest levels of work–family tension.36 Overall, men and women seem to exhibit similar levels of work–family issues.37

The discussion in the Managerial Advice feature highlights a number of useful ideas for managing work–life confl ict. Ensuring an appropriate balance between work and personal lives is crucial to the well-being and productivity of associates and man- agers. Because high-involvement organizations expect a great deal from associates, these organizations must pay particular attention to work–life balance among those individuals.

Role Ambiguity Role ambiguity refers to the situation in which jobholders are unclear about the goals, expectations, or requirements of their jobs. Under ambiguous job demands, people are unsure of what is expected of them and how they will be evaluated. A number of manage- ment jobs have high role ambiguity; thus, ambiguity is another contributor to the high stress often experienced in managerial jobs.

Ambiguity on the job creates tension and anxiety.38 Reactions to this stress are likely to be emotional. Moreover, role ambiguity has been shown to have strong negative effects on job motivation and performance, even stronger than role confl ict in many instances. Further, it often has stronger effects on tardiness, absenteeism, and turnover than does role confl ict.39 Finally, role ambiguity seems to be most problematic when the job demands are perceived as quite challenging.40

Work Overload Another common cause of stress in organizations is work overload. Overload can be quan- titative (too much work) or qualitative (work is too complex). Research suggests that qualitative overload creates more stress than quantitative overload. For example, qualita- tive work overload has been found to create greater depression, less enjoyment of work, and greater hostility.41 In a study of nurses, those with an overload of complex cases were sick more frequently.42 Therefore, managers should be very sensitive to overloading associ- ates with work that is too complex for them.

Evidence suggests that workload has been increasing over the past few decades.43 In one study of high earners, 62 percent reported working more than 50 hours per week, 35 percent reported working more than 60 hours per week, and 10 percent re- ported working more than 80 hours per week.44 The majority of these respondents also reported qualitative overload such as unpredictability, a fast pace with tight deadlines, and 24/7 client demands. U.S. workers are not the only ones experiencing overload, it appears to be a global phenomenon. The problem of work overload and its ensuing

role ambiguity A situation in which goals, expectations, and/or basic job requirements are unclear.

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MANAGERIAL ADVICE

Work–life confl ict is a seri-ous source of stress in many parts of the world. Work demands have increased for many people because of longer work- ing hours, heightened speed and complexity of the work world, and advances in communication tech- nology that tie together workplaces and workers 24 hours per day. At the same time, personal lives have become more complex, particularly for those with families. Families have become complicated by increases in dual-career couples, increases in the number of long-distance relationships, greater needs for taking care of par- ents and other older family members, and more time-consuming non–school activities for children. Work–family confl ict leads to role confl ict, interper- sonal confl ict, dissatisfaction, exhaus- tion, time pressures, and guilt, all of which can lead to increased stress.

To help individuals cope in to- day’s world, organizations such as the Mayo Clinic, the National Men- tal Health Association, and WebMD have developed useful ideas. Their advice is particularly important for managers, professionals, and other white-collar workers who have high- demand jobs. Here is our adaptation of their advice:

• Focus on what is truly important. Track and record all activities for

one week, those that are work- related and those that are not. Prioritize the items on the list. At work, delegate tasks that are less important or person- ally less enjoyable. At home, outsource less enjoyable tasks. If mowing the lawn is not an enjoyable task, outsource it if possible. At both work and home, delete nonessential tasks. Less important, non-enjoyed, and nonessential tasks clutter the days of a surprising number of people.

• Take advantage of work-related options. If commuting is time-con- suming and stressful, consider tele- commuting some days, or request longer working hours on some days to avoid going to the offi ce on other days. If onsite day-care is offered, consider using it to simplify drop-off and pickup routines. If fi - nancial services are offered onsite or nearby through a credit union, consider using those services to avoid traveling to a fi nancial institu- tion for face-to-face transactions.

• Protect nonwork time. Do not allow work-related matters to creep into nonwork time. Rejuvenation is cru- cial. Attempt to complete less de- sirable personal tasks (e.g., laun- dry, changing the bed linen) on work days so that days off can be spent on more enjoyable activities.

• Manage your personal time. Rather than going out multiple times to handle different errands, use mul- tipurpose outings. Cook multiple meals for the week during a single evening. Complete multiple chores simultaneously whenever possible and comfortable (such as washing clothes and preparing dinner).

• Set aside specifi c time each week for recreation. Stay away from cell phones and work-related comput- ing while enjoying activities with family and friends.

If stress becomes unmanageable, employee-assistance programs might be helpful. Given the complexity of today’s world, some companies now offer programs designed specifi cally to help managers and associates strengthen relationships with spouses and signifi cant others. For a suite of helpful tools, techniques, and re- sources, see the Mayo Clinic Stress Center at http://www.mayoclinic. com/health/stress/SR99999.

Restoring and Maintaining Work–Life Balance

Sources: Mayo Clinic. 2006, “Work-life balance: Ways to Restore Harmony and Reduce Stress,” at http://www.mayo- clinic.com/health/work-life-balance/WL00056; National Mental Health Association, 2007, “Finding Your Balance: At Work and at Home,” at http://www.nmha.org/go/fi nding-your-balance-at-work-and-home; R. Silverman. 2007. “Working on Your Marriage—At Work,” Wall Street Journal, May 31, p. D.1; E. White. 2006. “How to Balance Home-Life Issues with Work Duties,” Wall Street Journal, Aug. 22, p. B.8; WebMD. 2006, “5 Tips for Better Work-Life Balance,” at http://www.webmd.com/balance/guide/5-strategies-for-life-balance?page=1; Livingston, B.A., & Judge, T. 2008. Emotional responses to work-family confl ict: An examination of gender role orientation among working men and women. Journal of Applied Psychology, 93: 207–216; Cooper, C, Lu, L., Kao, S., Chang, T. & Wu, H. 2008. Work- family demands, work fl exibility, work/family confl ict and their consequences for work. International Journal of Stress Management, 15: 1–21; Eby, L.T., Maher, C.P., & Butts, M.M. 2010. The intersection of work and family life: The role of affect. Annual Review of Psychology, 61: 599–622.

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http://www.nmha.org/go/finding-your-balance-at-work-and-home

http://www.webmd.com/balance/guide/5-strategies-for-life-balance?page=1

256 Chapter 7 Stress and Well-Being

stress-related health consequences has become so prevalent in Japan that they have spe- cial terms to describe the phenomenon: “karoshi,” which means “work to death” and “karo-jisatsu,” which means “suicide by overwork.”45 Causes for the growth in overload are far ranging, from economic downturns leading to more work for fewer employees, more competitive work environments, and the increasing ease with which employees are available because of technology. “BlackBerry Thumb” has become an actual medical condition.

Occupation In accordance with the models of stress discussed above, occupations characterized by high demands and strong required efforts can generate stress. Statistics from the U.S. Depart- ment of Labor indicate that white-collar occupations are associated with a higher propor- tion of stress cases than the blue-collar and service occupations combined.46 Technical, sales, and administrative support personnel contribute most of these cases, but managerial and professional occupations also contribute a substantial number of them. Although the white-collar occupations may allow greater control and offer substantial rewards, demands and requirements for people holding these jobs are typically much greater than in other occupations. On the other hand, the effects of control and rewards are demonstrated in research fi ndings that suggest senior managers (upper-level executives, such as CEOs) ex- perience less stress than middle managers. Even though demands on the senior managers may be greater, these managers are also likely to have more control,47 and they frequently have generous reward packages.

Resource Inadequacy People may also experience job stress when they lack needed resources.48 Having inad- equate resources makes it diffi cult to accomplish tasks effectively and effi ciently and can therefore increase job demands or lessen control. There may be too few people, too little support, or inadequate material to accomplish a task, placing pressure on the person who has responsibility for the task. Severe resource shortages caused by situations such as loss of sales may lead to other stressful events, such as layoffs. As mentioned earlier, layoff deci- sions are stressful for the managers who make them, for those who lose their jobs, and even for those who stay. Those who remain on the job experienced stress before the layoff deci- sion (because of uncertainty about who would be laid off ), experienced the loss of friends and co-workers who were laid off, and then must endure added pressures to accomplish tasks with fewer workers.

Working Conditions The job environment can have major effects on job attitudes and reactions. The job en- vironment includes both physical surroundings (lighting, temperature, noise, offi ce ar- rangements, and so on) and psychological aspects (such as peer relationships, warmth, and perceived rewards). If the working conditions are unpleasant, they can be stressful. For example, working with inadequate lighting, loud noise, or uncomfortable temperatures or working in isolation from others creates pressure and stress.49

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Organizational and Work-Related Stressors 257

Management Style Management style signifi cantly affects the psychological climate of the workplace, and certain styles of dealing with subordinates create more stress than others. For example, one study found that high scores on Machiavellianism (managing through fear) were nega- tively related to job satisfaction and positively related to job tension.50 Certain types of jobs and associate personalities may interact with managerial style to produce stress. For example, directive managerial styles may produce less stress on routine jobs and with as- sociates who prefer a more structured environment. However, for people in professional jobs and for those who prefer more personal involvement and self-determination in their jobs, a less directive managerial style produces less stress.

Monitoring Relatively recent developments in technology have led to an explosion of stricter monitor- ing of associates’ behavior—both work-related and non-work-related. Organizations are able to read associates’ e-mail, detect websites they visit, listen to phone conversations, and keep track of any work they do electronically. As illustrated in our opening feature, Verizon’s call-center associates frequently mentioned phone monitoring as a source of stress. Moni- toring can cause associates to experience increased demands and loss of control at the same time, making monitoring extremely stressful.51 Demands are increased because associates feel that they must always be “on” and that any mistake will be noticed. Control is lessened because associates who are being monitored may feel that they have little discretion in how they do their jobs. Call-center associates, for example, complained about having to follow strict scripts when they felt that it was inappropriate and would even hinder performance.

Job Insecurity In the early part of the twenty-fi rst century, the U.S. unemployment rate increased some- what, and more organizations became involved in mergers and acquisitions, downsizing, and moving work offshore. The economic downturn beginning in 2008 has led to record numbers of jobs lost and unemployment rates over 9 percent. As a result, U.S. associates today are more likely to experience insecurity about keeping their jobs. Job insecurity can be an enormous stressor.52

Incivility in the Workplace Have you ever been annoyed by someone taking a cell phone call while you were in a meeting, or by someone sending rude jokes over the Internet, or by someone purposefully failing to include you in a conference call? If so, then you have experienced incivility at work. Incivility is defi ned as slightly deviant behavior with ambiguous intent to harm an- other person.53 Slightly deviant behavior means that the behavior is not overtly aggressive, physical, or violent. Ambiguous intent means that the perpetrator behaves in a way so that he or she can deny the intent to harm someone else. Incivility at work has been found to be related to job stress, mental health, and physical health of employees,54 as well as other outcomes that impact an organization’s bottom line.55 Incivility in the workplace is dis- cussed in more detail in the Experiencing Organizational Behavior feature.

incivility Slightly deviant behavior with ambiguous intent to harm another person.

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258 Chapter 7 Stress and Well-Being

EXPERIENCING ORGANIZATIONAL BEHAVIOR

On September 9, 2009, Presi-dent Barack Obama was giving a speech to a joint session of congress about health care issues. In the middle of the President’s speech, Republican Representative Joe Wilson from South Carolina very loudly and angrily said “You lie!” Pres- ident Obama paused and said “That’s not true.” and then continued on.

Wilson’s behavior went against all the norms and mores for deco- rum and respect in this type of event, where proper behavior is somewhat ritualized. After receiving pressure from his colleagues, Wilson came back an hour later with the follow- ing apology: “This evening I let my emotions get the best of me. While I disagree with the President’s state- ment, my comments were inappropri- ate and regrettable. I extend sincere apologies to the President for this lack of civility.” Several days later, when Wilson refused to apologize to his colleagues in Congress about his outburst, House Democrats, and some Republicans, reprimanded him. New York Times columnist, Maureen Dowd, wrote of the incident “It was a rare triumph for civility in a country that seems to have lost all sense of it.”

Have we become an uncivil society, and does this behavior gen- eralize to the workplace (outside

of congressional meetings with the President)? A 10-year-long study by Christine Pearson and Christine Po- rath suggests that we have. In their survey of thousands of employees, 96 percent reported experiencing incivility at work, and nearly half re- ported that were treated rudely once or more a week. Ninety-nine percent reported that they had witnessed inci- vility being infl icted on other people. Another study by Lilia Cortina and her colleagues found that 71 percent of employees reported being the targets of incivility in the past fi ve years. Ex- amples of incivility include:

• passing blame for our own mistakes

• taking credit for other’s efforts

• checking e-mail or texting during meetings

• talking down to others

• belittling others

• withholding information

• paying little attention to others’ opinions

• making demeaning remarks about someone

• avoiding someone

Clearly, workplace incivility is a common occurrence, and accord- ing to Porath and Pearson’s study, an expensive one for organizations. They found that associates who were

victims of uncivil treatment reacted by generally withdrawing from work. About half of the respondents said they decreased effort, time at work, or the quality of their work, so not surpris- ingly, 66 percent reported that their performance declined. Almost 80 percent said they became less com- mitted to their organizations and 12 percent said they quit their jobs as a direct result of being the victim of inci- vility. Lilia Cortina and Vicki Magley’s studies of thousands of other people in several professions found further costs of incivility in that it was a major stressor and was related to negative mental and physical health outcomes.

Incivility on the Job: The Cost of Being Nasty

Sources: C. Pearson & C. Porath. 2009. The cost of bad behavior: How incivility is costing your business and what you can do about it. New York: Penguin Group; C.L. Porath, & C.M. Pearson. 2010. The cost of bad behavior. Or- ganizational Dynamics, 39: 64–71; M. Dowd. Sept. 15, 2009. “Rapping Joe’s Knuckles.” The New York Times, at http://www.nytimes.com/2009/09/16/opinion/16dowd.html; A. Graves. Sept. 16, 2009. “Joe Wilson.” The New York Times, at http://topics.nytimes.com/top/reference/timestopics/people/w/addison_graves_wilson/index.html; L. M. Cortina, V. J. Magley, J. H. Williams, & R. D. Langhout. 2001. Incivility at the workplace: Incidence and impact. Journal of Occupational Health Psychology, 6 (1): 64–80; S. Lim, L. M Cortina, & V. J Magley. 2008. Personal and workgroup incivility: Impact on work and health outcomes. Journal of Applied Psychology, 93: 95–107; L. M. Cortina, & V. J. Magley. 2009. Patterns and profi les of response to incivility in the workplace. Journal of Occupational Health Psychology, 14: 272–288.

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Individual Infl uences on Experiencing Stress 259

Individual Infl uences on Experiencing Stress Earlier, in defi ning stress, we noted that individuals vary in how they respond to external stressors. For example, some individuals may be energized by quite demanding workloads, whereas others respond with negative stress reactions. A great deal of research has examined characteristics that are likely to infl uence how an individual reacts to stress. These character- istics include Type A versus Type B personality, self-esteem, hardiness, and gender.

Type A versus Type B Personality Many researchers have studied people with Type A and Type B personalities and how they respond to stress. People with Type A personalities are competitive, aggressive, and impa- tient. Type A’s may push themselves to achieve higher and higher goals until they become frustrated, irritated, anxious, and hostile. Type A behavior is exemplifi ed by the driver who blasts the car horn when the car in front of him is a second too slow in moving through an intersection after the light has turned green. In the words of the two physicians who focused attention on this phenomenon:

The Type A pattern is an action–emotion complex that can be observed in any person who is aggressively involved in a chronic, incessant struggle to achieve more and more in less and less time, and if required to do so, against the opposing efforts of other things or other persons. It is not psychosis or a complex of worries or fears or phobias or obsessions, but a socially acceptable—indeed often praised—form of confl ict.56

People with Type B personalities are quite different. They tend to be less competitive, less aggressive, and more patient.

People with Type A personalities are more susceptible to stress-induced illness.57 Type A individuals may experience more stress for two reasons. First, given their competitive and aggressive tendencies, they may actually create more stressors in their environments. For example, Type A people have been known to increase work overload on their own, whereas Type B people are more reasonable.58 Second, Type A people are more likely to appraise any given event as a stressor than are Type B people.59

Self-Esteem Research has found that people with high self-esteem suffer fewer negative effects from stress than people with low self-esteem.60 People with high self-esteem, in general, experi- ence greater well-being and may be more resistant to the effects of stressors. Furthermore, people with high self-esteem are more likely to engage in active coping behaviors when they experience stressful demands relative to those with low self-esteem. For example, when faced with a heavy workload, people with high self-esteem may break tasks down into manageable units and prioritize their work so that they can begin to tackle exces- sive work demands. In contrast, someone with low self-esteem may withdraw from the work or procrastinate, making the work overload even worse. Consequently, people with high self-esteem are more likely to gain control over stressful situations and decrease the amount of stress they experience.

Hardiness Individuals who are high in hardiness tend to have a strong internal commitment to their activities, have an internal locus of control, and seek challenge in everyday life. Research

Type A personality A personality type characterized by competitiveness, aggressiveness, and impatience.

hardiness A personality dimension corresponding to a strong internal commitment to activities, an internal locus of control, and challenge seeking.

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260 Chapter 7 Stress and Well-Being

has shown that people who are high in hardiness experience less severe negative stress reac- tions than those who are low in hardiness.61 For example, one study showed that managers in a public utility who had scored high on hardiness had fewer illnesses following exposure to signifi cant stress.62

Perhaps the most important aspect of hardiness is locus of control. Recall from Chap- ter 5 that people with an internal locus of control are likely to view themselves as respon- sible for the outcomes they experience. Those with an external locus of control are more likely to view themselves as victims of fate or luck. It is not surprising that people with an internal locus of control are more likely to develop active coping strategies and to perceive that they have control when experiencing stressful work demands. However, research has shown that the relationship between stress and locus of control may be more complex be- cause people who have an extreme internal locus of control are likely to blame themselves for negative events and thus experience more responsibility, a stressor.63

Gender Although the evidence is not entirely conclusive, women and men do not seem to differ in how stressful they perceive a given stressor to be.64 They do, however, seem to cope differently. More specifi cally, women seek more emotional social support (comfort and a shoulder to lean on), seek more instrumental social support (specifi c support to solve a problem), engage in more positive self-talk, and exhibit rumination (thinking over the situation).65 Social support tends to be an effective coping strategy.66

Beyond the above issues, women might be exposed to more stressors in the workplace. In some cases, women are paid less than men are for similar work. They are more likely than men to experience discrimination and stereotyping and to work in service industries that are stressful (such as nursing). Research suggests that women experience a greater va- riety of stressors in the workplace than men.67 Some studies directly comparing the stress experienced by men and women at work also suggest that women experience more stress overall.68 The U.S. Bureau of Labor Statistics reported that for every case of stress leading to work absence for men, there were 1.6 cases for women.69

Individual and Organizational Consequences of Stress It should be clear by now that stress can be detrimental to developing a high- involvement, high-performance work organization. High-involvement organizations require that as- sociates be engaged and motivated to perform at high levels and that their individual capabilities be used in the most productive and effi cient manner. However, the conse- quences of work stress can sabotage managerial attempts to develop such an environ- ment. The following discussion focuses on the individual and organizational conse- quences of stress.

Individual Consequences Individual consequences of stress can be classifi ed as psychological, behavioral, or physi- ological.

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Individual and Organizational Consequences of Stress 261

Psychological Consequences Psychological responses to stress include anxiety, depression, low self-esteem, sleeplessness, frustration, family problems, and burnout.70 Some of these psychological reactions are more severe than others. Their importance and overall effect on individual behavior and physical condition depend on their degree or level. Extreme frustration or anxiety can lead to other, more severe behavioral and physiological problems.

One important psychological problem is burnout. Associates and managers experi- encing burnout show little or no enthusiasm for their jobs and generally experience con- stant fatigue. These individuals often complain bitterly about their work, blame others for mistakes, are absent from work more and more often, are uncooperative with co-workers, and become increasingly isolated.71 Burnout often occurs in jobs that require individuals to work closely and intensely with others under emotionally charged conditions (nurs- ing is an example). Burnout is a major concern in American industry and governmental organizations.

Behavioral Consequences Behavioral consequences of stress include excessive smoking, substance abuse (alcohol, drugs), accident proneness, appetite disorders, and even violence.72 Probably the most severe behavioral consequences are substance abuse and violence.

Substance abuse, unfortunately, has become much more common in the United States in recent years. The Department of Health and Human Services has reported that alcohol, tobacco, and other drug-related problems cost U.S. businesses over $100 billion every year.73 Studies have shown that alcoholics and other drug users in the workforce exhibit the following characteristics:74

• They are much less productive than other associates. • They use three times as many sick days as other associates. • They are more likely to expose themselves and co-workers to serious safety

hazards because of poor judgment and coordination. Up to 40 percent of industrial fatalities are linked to alcohol and drug consumption.

• They are fi ve times more likely to fi le worker’s compensation claims. In general, they are subject to higher rates of absenteeism, accidents, and sickness.

• They report missing work frequently because of hangovers. Each year, 500 million workdays are lost because of alcoholism.

Although there are many reasons for alcoholism and drug abuse, many people use alcohol and drugs as a means of handling stress. Alcohol and some drugs are depressants that can substantially reduce emotional reactions. Studies have shown that in small doses, alcohol has little effect. However, with moderate-to-heavy consumption, alcohol can substan- tially reduce tension, anxiety, fear, and other emotional reactions to dis- turbing situations.75 Drugs can have the same effects. Alcohol and drugs, then, give people a means of blocking stress reactions when they cannot control the situation. Of course, emotions are suppressed only as long as the individual continues to consume large quantities of alcohol or drugs. Because the disturbing situation still exists, emotional reactions return when the effects of drugs or alcohol wear off, leading to continued usage of these substances.

burnout A condition of physical or emotional exhaustion generally brought about by stress; associates and managers experiencing burnout show various symptoms, such as constant fatigue, or lack of enthusiasm for work, and increasing isolation from others.

©John Sleeman/Photodisc/Getty Images, Inc.

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262 Chapter 7 Stress and Well-Being

Another serious behavioral consequence of stress is workplace violence. The Oc- cupational Safety and Health Administration (OSHA) reports that approximately two million workers are victims of workplace violence every year. Homicide is the third leading cause of workplace fatalities. Workplace violence can be either physical or men- tal, as in the case of excessive taunting or harassment. Many cases of tragic outbursts at work are related to stressful working conditions. The case of Mark O. Barton offers an example.

On July 31, 1999, Barton shot and killed 9 people and injured 13 more at two At- lanta day-trading organizations. In the previous days, he had killed his wife and two chil- dren by hammering them to death. After being spotted by the police at a gas station a few hours after the shootings, Barton shot and killed himself. What caused Barton to commit these unspeakable acts of violence? While the causes of such behavior are highly complex, one contributing factor was the extreme stress involved in day trading.76

Day trading involves the buying and selling of stocks on a very-short-term basis. Trad- ers often use their own money, and they can experience heavy gains and losses daily. In the month before the killings, Mark Barton had lost $105,000. Day traders have no security and no regular paycheck. Some have said that day traders must have a casino mentality.77 Christopher Farrell, author of Day Trading Online, states: “A day trader makes a living at the game; you live or die by your profi t and loss. You never get away from it. It’s on your mind twenty-four hours a day. You don’t have a steady paycheck.”78 Although day trading is not as popular as it once was, it continues to be a widespread phenomenon.79

Stress probably was not the only factor that led to Barton’s deadly outburst; he most likely suffered from personality disorders. However, the stress of trading may have been one factor that set him off. And while Barton’s behavior may have been extreme, work- place violence is so prevalent that we have nicknames for it, such as “going postal,” “desk rage,” and “air rage” to describe it.

Physiological Consequences Physiological reactions to stress include high blood pressure, muscle tension, head- aches, ulcers, skin diseases, impaired immune systems, musculoskeletal disorders (such as back problems), and even more serious ailments, such as heart disease and cancer.80 Stress has also been linked to obesity, a rising health epidemic worldwide.81 Stress can be directly related to physiological problems, or it can make existing conditions worse. As we mentioned earlier, it has been estimated that 75 percent of all medical problems are directly attributable to stress.82 The physical ailments noted above may lower pro- ductivity while on the job and increase absences from work (thereby reducing overall productivity even more).

Rick Speckmann exemplifi es the debilitating physiological effects that can result from stress.83 Speckmann was a hard-driving entrepreneur, burned out from the stress of run- ning his executive search company in Minneapolis. One day, at age 40, Speckmann ex- perienced an intense tightness in his chest after exercising. He was promptly sent to the hospital in an ambulance, where he received a battery of tests. The fi nal diagnosis: acute overstress. Luckily, Speckmann paid attention to this lesson and changed his lifestyle to a less stressful one. It is important to note that physiological stress begins with normal bio- logical mechanisms. Recall from our earlier discussion that the stress response prepares the body to deal with impending danger by releasing hormones and increasing the heartbeat, pulse rate, blood pressure, breathing rate, and output of blood sugar from the liver. These

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Individual and Organizational Consequences of Stress 263

physiological changes helped primitive human beings respond to danger.84 Such a physi- ological response to stress is often referred to as the fi ght-or-fl ight response. However, the stress response is best adapted for dealing with acute stress. As noted earlier, it is chronic stress, and the physiological responses to it, that can lead to physical ailments. The human body has not yet adapted well to an environment of continuous stress. Therefore, indi- vidual responses to stress can be severe and costly.

Organizational Consequences Stress has consequences for organizations as well as for individuals. These consequences follow from the effects on individuals that include lower motivation, dissatisfaction, lower job performance, increased absenteeism, increased turnover, and lower quality of relation- ships at work. Research has shown strong connections between stress, job dissatisfaction, turnover, and health-care costs.85 Stress-related illnesses cost companies millions of dollars in insurance and worker’s compensation claims. Employees who report high levels of stress have health-care expenditures that are 50 percent higher than those reporting lower levels of stress.86 Exhibit 7-4 gives some perspective to these costs.

Furthermore, individual consequences of stress may interact to cause organizational problems. For example, behavioral problems, such as violence, and psychological conse- quences, such as anxiety, can lower the quality of the relationships between co-workers, resulting in distrust, animosity, and a breakdown in communications. When individu- als frequently miss work because of stress-related illness, their colleagues may become resentful at having to take over their work while they are absent.87 We have already discussed the increased safety risks for everyone that result from one person’s alcohol or drug use. Thus, the organizational consequences of stress can be dangerous as well as costly. Fortunately, many organizations and professionals, including companies, govern- ment agencies (NIOSH, OSHA), medical doctors, and psychologists, have recognized the importance of addressing stress in the workplace, and a variety of techniques have been developed to combat stress-induced problems. We now turn to a discussion of ac- tions that can be taken to alleviate the debilitating effects of stress on individuals and organizations.

EXHIBIT 7-4 Managerial Costs of Job Stress

The cost of job stress to American industry can be estimated at $200 billion per year due to:

Absenteeism Diminished productivity Compensation claims Health insurance Direct medical expenses

Sources: 2007, at http://www.bca.gov/national/txt/dpga.txt; Bureau of Economic Analysis, 2007, at http://www.bea.gov/national/xls/gdplev.xls; J. Cahill, P.A. Landsbergis & P.L. Schnall. 1995. “Reducing Occupational Stress,” at http://workhealth.org/prevention/prred.html.

To put this fi gure into perspective, consider the following:

Total U.S. corporate profi ts were $897.6 billion in 2006 (after taxes, with inventory valuation and capital accounted for).

The entire U.S. gross domestic product (the market value of the nation’s goods and services) was approximately $13,246 billion in 2006.

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264 Chapter 7 Stress and Well-Being

Managing Workplace Stress Individual associates and managers can implement a number of tactics to more effectively deal with stress. Similarly, organizations can be helpful in alleviating stress. They also can be mindful of stressful working conditions that cause stress in the fi rst place.

Individual Stress Management Based on the models of stress discussed earlier in this chapter, associates and managers can avoid workplace stress by fi nding jobs that provide a personally acceptable balance between demands and control, and between effort required and rewards. They can also propose that a dysfunctional job be redesigned. Further, they can avoid or reduce some stress by following the tactics for work–life balance presented in the earlier Managerial Advice feature. Beyond these tactics, individuals can adopt several positive tactics for cop- ing with existing stress. The goal is to develop healthy ways of coping. Because individuals experience multiple sources of stress, using multiple tactics for coping is benefi cial.

One of the most important tactics is regular exercise. Three areas are important: endurance, strength, and fl exibility.88 Endurance activities maintain or increase aerobic capacity. Key activities include regular walking, treadmill walking, jogging, running, cy- cling, and swimming. Extreme amounts of endurance exercise are not required. Moderate amounts improve fi tness and reduce mortality.89 Moderate exercise has been defi ned as 30 minutes of sustained activity three to four times per week, at a heart rate that is above the normal rate but below the maximum rate. An individual’s target heart rate can be calcu- lated by subtracting his age from 220, and then taking 65 to 80 percent of that number.90

Strength activities maintain or improve muscle mass and can prevent loss of bone mass as well. Key activities include weight training and aqua-aerobics. Twenty minutes of these types of exercises three times per week can provide important benefi ts.91 Flex- ibility activities maintain or improve range of motion and energy. Stretching is the key activity. Stretching various muscle groups three times per week provides important and sustainable benefi ts.92

A second tactic for coping with stress is proper diet. Diet affects energy, alertness, and overall well-being. According to research conducted at the Cooper Institute, four key areas should be considered.93 First, it is important to monitor fat intake. Adults over 30 should obtain no more than 20 to 25 percent of calories from fat per day. Younger adults also should be careful with fat consumption. Fifty to 70 percent of calories should come from complex carbohydrates (drawn from fruits, vegetables, and whole grain foods, not from candy and cakes). Ten to 15 percent of calories should come from protein (drawn from fi sh, poultry, and meats). Second, it is important to consume a reasonable amount of fi ber, both insoluble and soluble. Third, consumption of calcium is important. Fourth, consumption of foods rich in antioxidants can be helpful. Antioxidants seem to be helpful in preventing damage caused by normal bodily operations involving oxygen.

In today’s world, implementing a proper diet can be diffi cult. Time for grocery shop- ping and cooking is often limited. Many companies (not to mention school cafeterias) make the situation worse by providing or facilitating the consumption of junk food. In a poll conducted by Harris Interactive for the Marlin Company (a workplace communica- tions company), 63 percent of respondents reported that vending machines on the job mostly contain junk food, such as potato chips, candy bars, and cookies. In a second poll, 74 percent of respondents reported that it is common for special occasions to be celebrated

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Managing Workplace Stress 265

with candy, cookies, or cake. Even on routine workdays, accessible candy bowls are in many cubicles and offi ces.

A third tactic for coping with stress involves the development and use of social-sup- port networks.94 Social support is very important. Research has shown that such support is positively related to cardiovascular functioning and negatively related to perceived stress, anxiety, and depression.95 Having friends and family to talk with about problems can be quite useful (emotional social support). Having friends and family who can offer specifi c suggestions, provide resources, and break down barriers can also be quite useful (instru- mental social support).

A fourth tactic involves the use of relaxation techniques. For some, meditation, yoga, and visualization of serene settings work very well. For others, a simple walk in the park is more useful.

Other tactics include developing and using planning skills, being realistic about what can be accomplished, and avoiding unnecessary competition.

Organizational Stress Management Organizations can help to reduce stress or help managers and associates deal more effec- tively with stress. To reduce stress, the following actions can be taken. These actions are consistent with high-involvement management:

• Increase individuals’ autonomy and control. According to the demand–control model, increased control should help to keep experienced stress to manageable levels.

• Ensure that individuals are compensated properly. According to the effort– rewards imbalance model, proper compensation should help to keep experienced stress to manageable levels.

• Maintain job demands/requirements at healthy levels. • Ensure that associates have adequate skills to keep up-to-date with technical

changes in the workplace. • Increase associate involvement in important decision making. • Improve physical working conditions. For example, use ergonomically sound

equipment and tools. • Provide for job security and career development. Provide educational

opportunities so that associates can continue to improve their skill sets. Use job redesign and job rotation to expand associates’ skill sets.

• Provide healthy work schedules. Avoid constant shifting of schedules. Allow for fl extime or other alternative work schedules.

• Improve communication to help avoid uncertainty and ambiguity.

In addition to actions taken to reduce stress, organizations can help associates and managers cope with stress and its effects. Specifi cally, they can encourage some managers to be “toxin handlers” and they can implement wellness programs. These are discussed next.

Toxin handlers, a term coined by renowned educator and consultant Peter Frost, are people who take it upon themselves to handle the pain and stressors that are part of ev- eryday life in organizations.96 Frost argues that toxin handlers are necessary for organiza- tions to be successful, even though their contributions are often overlooked. Without the efforts of these organizational heroes, both individual and organizational well-being and productivity would suffer.

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266 Chapter 7 Stress and Well-Being

Managers can become more effi cient, compassionate toxin handlers. Frost lists the following behaviors as necessary for handling the pain, strain, and stress of others:

• Read your own and others’ emotional cues and understand the impact that emotional cues have on others. For example, be aware that when you show signs of anger, the most common response will be defensiveness or hostility. This can begin a cycle of negative emotions and nonproductive behavior that could have been avoided. The ability to avoid negative behaviors is one of the major components of emotional intelligence.

• Keep people connected. Devise ways in which people at work can react to each other as human beings. This can be accomplished by encouraging intimacy and fun.

• Empathize with those who are in pain. Actively listen with compassion. • Act to alleviate the suffering of others. Providing a shoulder to cry on might be

appropriate. Arranging for discreet fi nancial aid to an associate in need might be useful.

• Mobilize people to deal with their pain and get their lives back on track. Actively acknowledge problems, encourage helping behavior, and celebrate achievements.

• Create an environment where compassionate behavior toward others is encouraged and rewarded.

Wellness programs are very popular and important tools that organizations use to manage stress and its effects.97 These programs include health screenings, health advice, risk-management programs, smoking cessation, weight control, and exercise. The main goal is to develop/maintain a healthy and productive workforce. In some organizations, health coaches are used to proactively monitor participating associates and managers. These coaches, often nurses, offer advice based on health-screening information as well as ongoing medical events and drug prescriptions.98

The wellness program at Johnson & Johnson (J&J) is one of the oldest and most recognized. Originally called “Live for Life,” the program has helped thousands of people lead healthier lives. In terms of company benefi ts, assessments have shown positive returns to the bottom line through enhanced productivity and lower health-care costs. In 2002, one estimate suggested that savings just from reduced medical expenditures have been approximately $224 per person per year, which translates into a total of $22.4 million per year based on J&J’s employment base of 100,000.99 In 2008, J&J estimates that it avoided $15.9 million in health care costs for its U.S. employees alone. J&J has exceeded its program goals given that:

• 96 percent of employees are tobacco-free. • 94 percent of employees have blood pressures of 140/90 or better. • 93 percent of employees have total cholesterol levels below 240. • 68 percent of employees are physically active, defi ned as 30 minutes of activity

three or more times each week.100

Evidence suggests that wellness programs provide benefi ts to both individuals and or- ganizations. As such, organizations want as many people as possible to participate. Partici- pation, though, is voluntary. As discussed in the next Experiencing Organizational Behavior feature, incentives have been used to raise participation levels. These incentives, however, have a dark side, and legal issues have arisen.

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FPO

EXPERIENCING ORGANIZATIONAL BEHAVIOR

Evidence supporting the bot-tom-line impact of wellness programs has begun to ac- cumulate. Overall, research suggests a return of three dollars for every one dollar spent, with some recent estimates suggesting a return of six dollars per dollar spent on a wellness program. In one recent evaluation of programs at organizations such as LL Bean, Duke University, and General Motors, returns on investment were very positive.

With substantial benefi ts avail- able, incentives designed to increase participation are now offered by many companies. Indeed, according to a 2008 Harris Interactive poll, 91 percent of employers “believed they could reduce their health care costs by infl uencing employees to adopt healthier lifestyles.” Because partici- pation by associates and managers is voluntary, these incentives are very important. At Baptist Health Florida, individuals who complete the wellness program’s health assessment receive an additional $10,000 in life insur- ance survivor benefi ts. At IBM, individ- uals who complete a health risk assess- ment at the start of the year are given up to two $150 payments. At Scotts Miracle-Gro, associates receive a $10 monthly fi tness center membership fee, which is reimbursable after 120 uses of the center, free health coaching,

free medical services for employees and covered dependents, and free prescriptions for generic drugs.

At some companies, however, in- centives have become heavy-handed, and this is a source of growing con- cern. Employees at Weyco who failed to have mandated medical tests and evaluations in 2006 paid an addi- tional $65 per month for insurance premiums. After 2006, additional increases have come into play for those who continue to resist the pro- gram. Employees at Scotts Miracle- Gro Company who failed to have “requested” evaluations saw $40 per month added to their insurance premi- ums. Moreover, all employees were subjected to investigation by an out- side health-management company. This company used data-mining tech- niques and available databases to uncover any health problems or risks. Those who had issues/risks were as- signed a health coach and an action plan was developed. Individuals who failed to comply with the action plan saw $67 per month added to their in- surance premiums.

Although it makes sense to have people with higher risks pay more for insurance, there are some problems to consider. First, health assessments are becoming less and less voluntary and seek very personal information (e.g., information on depression, the quality

of a relationship with a spouse/part- ner, parents’ causes of death). Is it appropriate to provide, directly or indirectly, this information to an em- ployer? Second, the use of fi nancial incentives tied to health plan costs and the pushing of action plans based on health status may bring legal issues. Certainly, charging people in certain categories (i.e., smokers) more for health insurance can be a complex undertaking. In the United States, the Health Insurance Portability and Ac- countability Act (HIPAA), the Ameri- cans with Disabilities Act (ADA), and Bona Fide Wellness Program Excep- tions (BFWP) must be considered, along with applicable state laws.

Overall, the use of heavy-handed incentives (and indeed punishments) is becoming more common as com- panies strive for a smarter, fi tter workforce. Only time will tell how ac- cepted these practices become.

Incentives for Participating in Wellness Programs

Sources: L. Chapman. 2006. “Wellness Programs Hitting Their Stride,” Benefi ts & Compensation Digest, 43, no. 2: 15–17; M. Conlin. 2007. “Get Healthy or Else: One Company’s All-out Attack on Medical Costs,” BusinessWeek, Feb. 26, pp. 58–69; R. Dotinga. 2006. “Can Boss Insist on Healthy Habits?” Christian Science Monitor, Jan. 11, p. 15; D. Koffman, R. Goetzel, V. Anwuri, K. Shore, D. Orenstein, & T. Lapier. 2005. “Heart Healthy and Stroke Free,” American Journal of Preventive Medicine, 29: 113–121; L. McGinley. 2006. “Health Costs: The Big Push for Wellness,” Wall Street Journal, July 16, p. 2A; M. McQueen. 2006. “The Road to Wellness Is Starting at the Offi ce: Employers’ Efforts to Push Preventative Care Begin to Show Both Health and Cost Benefi ts,” Wall Street Journal, Dec. 5, p. D1; T.M. Simon, F. Bruno, N. Grossman, & C. Stamm. 2006. “Designing Compliant Wellness Programs: HIPAA, ADA, and State Insurance Laws,” Benefi ts Law Journal, 19, no. 4: 46–59; T. Walker. 2007. “Businesses Justify Worker Incentives,” Managed Healthcare Executive, 17, no. 5: 18; L. Hand. Winter, 2009. Employer health incentives: Employee wellness programs prod workers to adopt healthy lifestyles. Harvard Public Health Review. At http://www.hsph.harvard.edu/ news/hphr/winter-2009/winter09healthincentives.html.

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268 Chapter 7 Stress and Well-Being

What This Chapter Adds to Your Knowledge Portfolio In this chapter, we have discussed workplace stress, focusing on its causes and conse- quences and what can be done to help manage it. A high-involvement, high-performance workplace requires that associates perform at their best; however, stress can prevent them from doing so. If an organization is to compete successfully, it is important both to man- age the stress experienced by associates and to eliminate some of the sources of stress. In summary, we have made the following points.

• Stress is a feeling of tension experienced by an individual who feels that the demands of a situation are about to exceed her ability to cope. It can also be acute (short- term) or chronic (long-term). Not all stress has negative effects; eustress is positive stress that results from facing challenges with an expectation of achievement.

• The demand–control model of stress suggests that experienced stress is a function of both job demands and job control. Stress is highest when demands are high but control is low. The effort–reward imbalance model suggests that stress comes about when effort required is high but rewards are low.

• Organizational and work-related stressors include role confl ict, role ambiguity, work overload, occupation, resource inadequacy, working conditions, manage- ment style, monitoring, job insecurity, and incivility.

• Individual differences can infl uence how people experience stress, react to stress, and cope with stress. These individual differences include Type A versus

THE STRATEGIC LENS

S tress is an important com-ponent of organizational life. Although some stress has positive effects on people’s be- havior, much stress is dysfunctional. Stress affects everyone in the organi- zation—top executives, middle and lower-level managers, and associates at all levels. All of these individuals represent human capital to an orga- nization. We know that human capi- tal is important because it represents much of the knowledge and skill in an organization and affects task per- formance. Effective task performance and problem solving are necessary for an organization to gain and hold a competitive advantage, which in

turn results in positive outcomes for the organization and its external stakeholders. However, dysfunctional stress prevents associates and manag- ers from fully utilizing their knowledge and applying it in their jobs. When this occurs, their productivity suffers, and organizational performance is harmed. If many associates and man- agers are overstressed, the organiza- tion may suffer millions of dollars in extra costs and lower profi ts. In short, top executives who want the strate- gies they develop to be successfully implemented must manage the stress in their organizations. Overall, man- agers’ ability to prevent stress and help associates cope with the stress

they experience will have a major im- pact on the performance of individu- als and the organization as a whole.

Critical Thinking Questions

1. How can good stress be distin- guished from bad stress? How much stress is too much stress?

2. How can managing stress in an or- ganization contribute to improved strategy implementation and orga- nizational performance?

3. How much stress do you currently experience? How can reducing your stress increase your perfor- mance in school and enhance your life in general?

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Key Terms 269

Type B personalities, self-esteem, hardiness, and gender.

• The consequences of stress are serious for both individuals and organizations. For the individual, stress can lead to psychological consequences, such as burnout; behavioral consequences, such as substance abuse and violence; and physiological consequences, such as high blood pressure, impaired im- mune systems, and heart disease. Many medical problems are attributed to stress.

• Organizational consequences of stress include lower job performance across a number of people, higher absenteeism and turnover rates, lower quality of work re- lationships, increased safety risks, and in- creased health-care and insurance costs.

• Associates and managers can do many things to help manage their own stress. Coping tactics include exercise, healthy diets, social support, and relaxation techniques.

• Organizations can reduce the stress experi- enced by associates and managers by reduc- ing stressors. They also can encourage toxin handlers and implement wellness programs.

Thinking about Ethics 1. What responsibility do senior managers have to understand how their decisions affect the stress

experienced by other managers and by associates?

2. Do managers have any responsibility to help associates manage stress caused by life events outside of work? Explain.

3. What actions should a manager take if she has an associate experiencing burnout?

4. Do organizations have a responsibility to offer programs or benefi ts that can help associates manage stress, such as more vacations, fl exible work arrangements, and wellness programs? Why or why not?

5. Is it appropriate for employers to seek detailed personal information in order to make recommendations for wellness action plans?

Key Terms

? back to the knowledge objectives 1. What do we mean by stress? What are the distinguish-

ing features of acute and chronic stress, and eustress and dystress? Does all stress result in negative consequences?

2. How does the human body react to stress? What are the outcomes of this reaction? How can you tell if you or someone you know may be suffering from too much stress?

3. What are the general causes of workplace stress ac- cording to the demand–control model? What are the general causes of stress according to the effort–reward imbalance model? What implications do these models have for creating a high-involvement workplace? What are the most common workplace stressors?

4. What types of people are likely to experience the most stress at work? If you are experiencing too much stress, what can you do to help manage it?

5. What specifi c effects does workplace stress have on in- dividuals and organizations?

6. What can organizations do to prevent and manage workplace stress? What specifi c changes can they make?

stress, p. 249 job stress, p. 249 acute stress, p. 249 chronic stress, p. 249 stress response, p. 249 eustress, p. 250

dystress, p. 250 demand–control

model, p. 251 effort–reward imbalance

model, p. 251 stressors, p. 253

role confl ict, p. 253 role ambiguity, p. 254 incivility, p. 257 Type A personality, p. 259 hardiness, p. 259 burnout, p. 261

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270 Chapter 7 Stress and Well-Being

Human Resource Management Applications Human Resource Management (HRM) departments play a big role in helping organizations and their associates assess and manage stress. Employee Assistance Programs (EAPs), which are designed to help associates deal with personal, mental health, and physical health concerns are a part of the HRM function. EAPs also involve developing programs that serve to prevent or buffer stress.

Employers often use incentives and sanctions to motivate associates to engage in healthy be- haviors and learn how to cope with stress. This often involves modifi cations to benefi ts programs, which are handled by HRM departments.

Finally, the HRM department may conduct surveys to assess stressors in the work environment and associates’ perceptions of stress.

building your human capital

How Well Do You Handle Stress? One of the most famous stress studies was published in 1960 and illustrated that it was possible to predict the likelihood that a person would succumb to stress-related illnesses within two years. The study resulted in the following list of life events with assigned points that can be used to predict a person’s chances of becoming ill. The list is slightly modifi ed to refl ect modern life. Even though this research is almost 40 years old, the questionnaire still predicts stress-related illness.

To fi nd out how likely you are to experience health problems due to stress, mark each life event that you have experienced in the last 12 months.

RANK LIFE EVENT POINT VALUE 1 Death of a spouse or life partner 100 2 Divorce or breakup with life partner 73 3 Marital separation or separation from life partner 65 4 Jail term 63 5 Death of close family member 63 6 Personal injury or illness 53 7 Marriage 50 8 Fired from job or laid off 47 9 Relationship reconciliation 45 10 Retirement 45 11 Change in health of family member 44 12 Pregnancy 40 13 Sex diffi culties 39 14 Gain of new family member 39 15 Major business readjustment 39 16 Change in fi nancial state 38 17 Death of close friend 37 18 Change in one’s line of work 36 19 Change in number of arguments with spouse or partner 35 20 Taking on large mortgage or debt 31 21 Foreclosure of mortgage or loan 30 22 Change in work responsibilities 29 23 Child leaving home 29 24 Trouble with in-laws 29 25 Outstanding personal achievement 28

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An Organizational Behavior Moment 271

RANK LIFE EVENT POINT VALUE 26 Spouse or partner’s work begins or stops 26 27 Beginning or ending schooling 26 28 Change in living conditions 25 29 Revision of personal habits (e.g., diet, quit smoking) 24 30 Trouble with boss 23 31 Change in work hours or conditions 20 32 Change in residence 20 33 Change in schools 20 34 Change in recreation 19 35 Change in church activities 19 36 Change in social activities 18 37 Taking on a small mortgage or debt 17 38 Change in sleep habits 16 39 Change in number of family get-togethers 15 40 Change in eating habits 15 41 Vacation 13 42 Christmas (or other major holiday) 12 43 Minor violations of the law 11

Scoring Total the point values of the life events that you marked. Use the total to assess your risk of health problems, as follows:

Up to 150 points You are unlikely to experience health problems due to stress.

151–300 points You have a 50 percent chance of experiencing health problems due to stress.

301 or more points You have an 80 percent chance of experiencing health problems due to stress.

Source: Adapted from T. Holmes & R. Rahe. 1967. “Holmes-Rahe Social Readjustment Rating Scale,” Journal of Psycho- somatic Research, 11: 213–218.

an organizational behavior moment

Friend or Associate? Walt strode angrily to the kitchen to see Tony. Tony had begun showing up late for work and had missed several shifts altogether. In fact, Walt had had to cover his shift last night. The problem was that Walt really liked Tony despite the drinking problem. “I even named my kid after him,” Walt thought to himself.

He had fi rst met Tony when they both worked at the old Frontier Hotel. Tony was the chef, and Walt was head- waiter. Perhaps because they were both in their late thirties and headed nowhere, they really hit it off. Even in those days, Tony had a taste for the booze. Tony’s marriage was breaking up, and he seemed to be lost. Walt often traveled the bars looking for Tony when he had missed a few days of work. He would get Tony sobered up and help him straighten it out with the boss. Tony would be okay for two or three months, and then it would happen all over again. Throughout all this time, Walt

remained a faithful friend, believing that some day Tony would straighten himself out.

It was during one of Tony’s good periods that the idea of starting a restaurant came up. Tony encouraged Walt to start a place of his own. Walt thought the idea was crazy, but Tony in- sisted on having Walt meet another friend, Bill, who might be interested in backing the idea. After several meetings and a lot of planning, they opened a small place, converting an old two-story home into a quaint Italian restaurant.

Walt and Bill were full partners, and Tony was to be the chef. They had both tried to convince Tony to join them in partner- ship, but he had refused. It had something to do with losing his freedom, but Walt was never sure what Tony had meant by that.

The restaurant had been an almost-instant success. Within a year, they had to move to a larger location. Walt couldn’t believe

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272 Chapter 7 Stress and Well-Being

how much money he was making. He took care of his associ- ates, sharing his revenues generously with them and frequently acknowledging their efforts. Tony was earning nearly twice what he had made at the Frontier and seemed to be happy.

Then, about a week ago, Tony didn’t come in to work. He hadn’t called in sick; he just didn’t show up. Walt was a little wor- ried about him, but he covered the shift and went over to Tony’s the next morning. Tony answered the door still half asleep, and Walt demanded an explanation.

Groggily, Tony explained, “I met the nicest woman you ever saw. Things were going so well, I just couldn’t leave her. You un- derstand, don’t you?”

Walt laughed. It was all right with him if his friend had met someone and was happy. After all, Tony was a friend fi rst and an associate second. “Sure, Tony. Just meet her a little earlier next time, okay? Can’t do without a chef every day, you know.”

Tony came to work late the next couple of nights, showed up the third night on time, but missed the last two. Although Walt was a patient man, he found it irritating to have to work Tony’s

shifts. After all, he was the boss. And then it happened. While complaining about Tony’s “love life” to one of the other cooks, Walt nearly dropped a pizza platter when the cook said, “What love life, Walt? Tony’s drinking again. I saw him last night over at Freddie’s place on my way home. He was so drunk he didn’t even recognize me.”

Walt was worried. It had been almost two years since Tony had “gone on the wagon.” He was concerned and irritable when a waitress, Irene, came up to the front and said, “Walt, Tony’s in the back—drunk. He says he wants his money. He looks awful.”

Discussion Questions 1. Could Tony’s problem with alcohol be stress-related? Explain

why or why not. 2. What should Walt do in this circumstance to help Tony

cope? 3. Is Tony savable? Do the benefi ts outweigh the costs of trying

to save him?

team exercise

Dealing with Stress 1. If you have not done so already, complete the assessment presented in Building Your Human

Capital. In addition to the periodic stressors identifi ed in that assessment, identify and list any ongoing stressors (demanding classes, a teacher who is not treating you appropriately, etc.).

2. Write down what you currently do to cope with stress. Be specifi c in commenting on each element found in the section entitled “Individual Stress Management” (e.g., endurance exercise, instrumental social support, meditation).

3. Give your results from Steps 1 and 2 to two classmates, as identifi ed by your instructor (if you have privacy concerns, consult with your instructor).

4. Receive results from the same two classmates, and evaluate the effectiveness of their coping strategies in light of their stressors.

5. Team up with the other two people and discuss your evaluations.

Steps 1–4 should take about 30 minutes to complete, and step 5 should take about 20–30 minutes.

Endnotes 1. Manning, M.R., Jackson, C.N., & Fusilier, M.R. 1996. Occupa-

tional stress, social support, and the costs of health care. Academy of Management Journal, 39: 738–751; Webster, J.R., Beehr, T.A., & Christianson, N.D. 2009. Toward a better understanding of the effects of hindrance and challenge stressors on work behavior. Journal of Vocational Behavior; 76: 68–77. Netterstrøm, B., Conrad, N., Bech, P., Fink, P., Olsen, O., Rugulies, R., & Stansfeld, S. 2008. The relation between work-related psychosocial factors and the development of depression. Epidemiologic Reviews, 30:118–132.

2. Hughes, G.H., Person, M.A., & Reinhart, G.R. 1984. Stress: Sources, effects, and management. Family and Community Health, 7: 47–58.

3. U.S. Bureau of Labor Statistics. 2006. Occupational stress and time away from work. At http://www.bls.gov/opub/ted/1999/ oct/wk3/art03.htm (originally published in 1999).

4. Sauter, S, Murphy, L., Colligan, M., Swanson, N., Hurrell, J., Scharf, F., Sinclair, R., Grubb, P., Goldenhar, L., Alterman, T., Johnston, J., Hamilton, A., & Tisdale, J. 1999. Stress … At Work.

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Endnotes 273

Publication No. 99–101. Washington, D.C.: National Institute for Occupational Safety and Health.

5. Ibid. 6. The Gallup Poll. 2009. Work and Work Place. At http://www.

gallup.com/poll/1720/Work-Work-Place.aspx. 7. The Marlin Company. 2003. Workplace behavior: Gossip, stress,

rudeness. At http://www.themarlincompany.com/Media Room/ PollResults.aspx.

8. Brockner, J., Grover, S., Reed, T.F., & DeWitt, R.L. 1992. Layoffs, job insecurity and survivors’ work effort: Evidence of an inverted- U relationship. Academy of Management Journal, 35: 413–425.

9. See, for example, Hopkins, S.M., & Weathington, B.L. 2006. The relationship between justice perceptions, trust, and employee attitudes in a downsized organization. The Journal of Psychology, 140: 477–498; Mishra, K.E., Spreitzer, G.M., & Mishra, A.K. 1998. Preserving employee morale during downsizing. Sloan Management Review, 39(2): 83–95.

10. Nixon, R.D., Hitt, M.A., Lee, H., & Jeong, E. 2004. Market reactions to announcements of corporate downsizing actions and implementation strategies. Strategic Management Journal, 25: 1121–1129.

11. Dewe, P. 1991. Primary appraisal, secondary appraisal and cop- ing: Their role in stressful work encounters. Journal of Occupa- tional and Organizational Psychology, 64: 331–351.

12. See, for example, Lazarus, R.S., & Folkman, S. 1984. Stress, ap- praisal and coping. New York: Springer; Medline Plus Medical Encyclopedia. 2007. Stress and Anxiety. At http://www.nlm.nih. gov/medlineplus/ency/article/003211.htm.

13. Sauter et al., Stress … At Work. 14. Mayo Clinic. 2003. Managing work place stress: Plan your ap-

proach. At http://www.mayoclinic.com/invoke.cfm?id=HQ01442; Mayo Clinic. 2006. Understand your sources of stress. At http:// www.mayoclinic.com/health/stress-management/SR00031.

15. Quick, J.C., & Quick, J.D. 1984. Organizational stress and pre- ventive management. New York: McGraw-Hill.

16. Mayo Clinic, Managing work place stress. 17. Seyle, H. 1982. History and present status of the stress concept.

In L. Goldberger and S. Breniznitz (Eds.), Handbook of stress. New York: Free Press, pp. 7–17.

18. Simmons, B.L., & Nelson, D.L. 2007. Eustress at work: Extend- ing the holistic stress model. In D.L. Nelson & C.L. Cooper (eds.), Positive organizational behavior. London: Sage, pp. 40–54.

19. Beehr, T.A. & Grebner, S.I. 2009. When stress is less (harmful). In A.-S.G. Antiniou, C.L. Cooper, G.P. Chrousos, C.D. Speil- berger, & M.W. Eysenck (Eds.) Handbook of managerial behav- ior and occupational health. Northhampton, MA: Edward Elgar Publishing, Inc., pp. 20–34.

20. McGrath, J.E. 1976. Stress and behavior in organizations. In M.D. Dunnette (Ed.), Handbook of industrial and organizational psychology. Chicago: Rand McNally, pp. 1351–1395.

21. From Mayo Clinic, Managing work place stress. 22. Karasek, R. 1979. Job demands, job decision latitude, and mental

strain: Implications for job redesign. Administrative Science Quar- terly, 24: 285–306; Karasek, R. 1989. Control in the workplace and its health related aspects. In S.L. Sauter, J.J. Hurrell, & C.L. Cooper (Eds.), Job control and worker health. New York: John

Wiley & Sons, pp. 129–159; Karasek, R., Theorell, T., 1990. Healthy Work: Stress, Productivity, and the Reconstruction of Working Life. Oxford, United Kingdom: Basic Books.

23. Siegrist, J. 1996. Adverse health effects of high-effort/low-reward conditions. Journal of Occupational Health Psychology, 1: 27–41; Siegrist, J. 1999. Occupational health and public health in Germany. In P.M. Le Blanc, M.C.W. Peeters, A. Büssing, & W.B. Schaufeli (Eds.), Organizational psychology and healthcare: European contributions. München: Rainer Hampp Verlag, pp. 35–44; Siegrist, J., Siegrist, K., & Weber, I. 1986. Sociological concepts in the etiology of chronic disease: The case of ischemic heart disease. Social Science & Medicine, 22: 247–253.

24. Ibid. 25. See, for example, Karasek, Control in the workplace and health re-

lated aspects; Stansfeld, S., & Candy, B. 2006. Psychosocial work environment and mental-health: A meta-analytic review. Scandi- navian Journal of Work Environment & Health, 32: 443–462.

26. Daniels, K., & Guppy, A. 1994. Occupational stress, social sup- port, job control, and psychological well-being. Human Relations, 47: 1523–1544; Ganster, D.C., & Schaubroeck, J. 1991. Work stress and employee health. Journal of Management, 17: 235–271; Perrewe, P.L., & Ganster, D.C. 1989. The impact of job demands and behavioral control on experienced job stress. Journal of Or- ganizational Behavior, 10: 213–229.

27. Daniels & Guppy, Occupational stress, social support, job con- trol, and psychological well-being.

28. Flynn, N, James, J.E. 2009. Relative effects of demand and con- trol on task-related cardiovascular reactivity, task perceptions, performance accuracy, and mood. International Journal of Psycho- physiology, 72, 217–227.

29. Siegrist, Adverse health effects of high-effort/low-reward condi- tions; van Vegchel, N., de Jonge, J., Bosma, H., & Schaufeli, W. 2005. Reviewing the effort-reward imbalance model: Drawing up the balance of 45 empirical studies. Social Science & Medicine, 60: 1117–1131.

30. Gillen, M., Yen, I.H., Trupin, L., Swig, L., Rugulies, R., Mullen, K., Font, A., Burian, D., Ryan, G., Janowitz, I., Quinlan, P.A., Frank, J., & Blanc, P. 2007. The association of status and psychosocial and physical workplace factors with musculoskeletal injury in hospital workers. American Journal of Industrial Medicine, 50: 245–260.

31. van Vegchel, de Jonge, Bosma, & Schaufeli, Reviewing the effort- reward imbalance model.

32. Kahn, R.L., & Byosiere, P. 1992. Stress in organizations. In M.D. Dunnette & L.M. Hough (Eds.), Handbook of industrial and or- ganizational psychology (Vol. 3). Palo Alto, CA: Consulting Psy- chologists Press, pp. 571–650.

33. Jackson, S.E., & Schuler, R. 1985. A meta-analysis and occu- pational critique of research on role ambiguity and role confl ict in work settings. Organizational Behavior and Human Decision Pro cesses, 36: 16–78; Jamal, M. 1984. Job stress and job per- formance controversy: An empirical assessment. Organizational Behavior and Human Performance, 33: 1–21; Kalliath, T., & Morris, R. 2002. Job satisfaction among nurses: A predictor of burnout levels. Journal of Nursing Administration, 32: 648–654; O’Driscoll, M.P., & Beehr, T.A. 1994. Supervisor behaviors, role stressors and uncertainty as predictors of personal outcomes for

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http://www.mayoclinic.com/invoke.cfm?id=HQ01442

http://www.mayoclinic.com/health/stress-management/SR00031

http://www.themarlincompany.com/MediaRoom/PollResults.aspx

http://www.nlm.nih.gov/medlineplus/ency/article/003211.htm

274 Chapter 7 Stress and Well-Being

subordinates. Journal of Organizational Behavior, 15: 141–155; Piko, B.F. 2006. Burnout, role confl ict, job satisfaction and psy- chosocial health among Hungarian health care staff. International Journal of Nursing Studies, 43: 311–318.

34. Podsakoff, N.P., LePine, J.A., & LePine, M.A. 2007. Differential challenge stressor-hindrance stressor relationships with job atti- tudes, turnover intentions, turnover, and withdrawal behavior: A meta-analysis. Journal of Applied Psychology, 92: 438–454.

35. Barnes, B. 2003. The new face of air rage. Wall Street Journal (Eastern Edition), Jan. 10: W1.

36. Wang, J.L., Afi fi , T.O., Cox, B., & Sareen, J. 2007. Work-family confl ict and mental disorders in the United States: Cross-sectional fi ndings from the National Comorbidity Survey. American Jour- nal of Industrial Medicine, 50: 143–149.

37. Byron, K. 2005. A meta-analytic review of work-family confl ict and its antecedents. Journal of Vocational Behavior, 67: 169–198.

38. Glazer, S., & Beehr, T.A. 2005. Consistency of implications of three role stressors across four countries. Journal of Organizational Behavior, 26: 467–487; Jackson & Schuler, A meta-analysis and occupational critique of research on role ambiguity and role con- fl ict in work settings.

39. Jamal, Job stress and job performance controversy. 40. Lang, J., Thomas, J.L., Bliese, P.D., & Adler, A.B. 2007. Job de-

mands and job performance: The mediating effect of psychologi- cal and physical strain and the moderating effect of role clarity. Journal of Occupational Health Psychology, 12: 116–124.

41. Shaw, J.B., & Weekley, J.A. 1985. The effects of objective work- load variations of psychological strain and post-work-load per- formance. Journal of Management, 11: 87–98; Ganter & Schau- broeck, Work stress and employee health.

42. Rauhala, A., Kivimäki, M., Fagerström, L., Elovainio, M., Virtanen, M., Vahtera, J., Rainio, A., Ojaniemi, K., & Kinnunen, J. 2007. What degree of work overload is likely to cause increased sickness absenteeism among nurses? Evidence from the RAFAELA patient classifi cation system. Journal of Advanced Nursing, 57: 286–295.

43. Hewlett, S.A. & Luce, C.B. December 2006. Extreme jobs: The dangerous allure of the 70-hour workweek. Harvard Business Re- view, 43: 49–59.

44. Ibid. 45. Kanai, A. 2009. “Karoshi (Work to Death)” in Japan. Journal of

Business Ethics, 84:209–216. 46. U.S. Bureau of Labor Statistics. 1999. Issues in labor statistics: Sum-

mary 99-10. At http://www.bls.gov/opub/ils/pdf/opbils35.pdf. 47. Ivancevich, J.M., Matteson, M.T., & Preston, C. 1982. Occupa-

tional stress, Type A behavior, and physical well-being. Academy of Management Journal, 25: 373–391.

48. Jamal, Job stress and job performance controversy. 49. Kahn & Byosiere, Stress in organizations. 50. Holton, C.J., 1983. Machiavellianism and managerial work at-

titudes and perceptions. Psychological Reports, 52: 432–434. 51. Aiello, J.R., & Kolb, K.J. 1995. Electronic performance monitor-

ing and social context: Impact on productivity and stress. Journal of Applied Psychology, 80: 339–353.

52. Reisel, W., & Banai, M. 2002. Job insecurity revisited: Reformu- lating with affect. Journal of Behavioral and Applied Management, 4: 87–96.

53. Andersson, L. M., & Pearson, C. M. 1999. Tit for tat? The spiral- ing effect of incivility in the workplace. Academy of Management Review, 24: 452–471.

54. Lim, S., Cortina, L.M., & Magley, V.J. 2008. Personal and work- group incivility: Impact on work and health outcomes. Journal of Applied Psychology, 93: 95–107.

55. C. Pearson & C. Porath. 2009. The cost of bad behavior: How incivility is costing your business and what you can do about it. New York: Penguin Group.

56. Friedman, M., & Rosenman, R.H. 1974. Type A behavior and your heart. New York: Knopf, p. 47.

57. Kahn & Byosiere, Stress in organizations; Ganster & Schau- broeck, Work stress and employee health; Sanz, J., Garcia-Vera, M.P., Magan, I., Espinosa, R., & Fortun, M. 2007. Differences in personality between sustained hypertension, isolated clinic hypertension and normotension. European Journal of Personality, 21: 209–224.

58. Froggatt, K.L., & Cotton, J.L. 1987. The impact of Type A behavior pattern on role overload-induced stress and performance attributions. Journal of Management, 13: 87–90.

59. Ganster & Schaubroeck, Work stress and employee health. 60. Ibid. 61. Jimenez, B.M., Natera, N.I.M., Munoz, A.R., & Benadero,

M.E.M. 2006. Hardy personality as moderator variable of burn- out syndrome in fi refi ghters. Psicothema, 18: 413–418; Kobasa, S.C.O., & Puccetti, M.C. 1983. Personality and social resources in stress resistance. Journal of Personality and Social Psychology, 45: 839–850; McCalister, K.T., Dolbier, C.L., Webster, J.A., Mallon, M.W., & Steinhardt, M.A. 2006. Hardiness and support at work as predictors of work stress and job satisfaction. American Journal of Health Promotion, 20: 183–191.

62. Kobasa, S.C., Maddi, S.R., & Kahn, S. 1982. Hardiness and health: A prospective study. Journal of Personality and Social Psy- chology, 42: 168–177.

63. Ganster & Schaubroeck, Work stress and employee health. 64. See, for example, Martocchio, J.J., & O’Leary, A.M. 1989. Sex

differences in occupational stress: A meta-analytic review. Journal of Applied Psychology, 74: 495–501; Tamres, L.K., Janicki, D., & Helgeson, V.S. 2002. Sex differences in coping behavior: A meta- analytic review and an examination of relative coping. Personal- ity and Social Psychology Review, 6: 2–30; Vagg, P.R., Speilberger, C.D., & Wasala, C.F. 2002. Effects of organizational level and gender on stress in the workplace. International Journal of Stress Management, 9: 243–261.

65. Tamres, Janicki, & Helgeson, Sex differences in coping behav- ior; Torkelson, E., & Muhonen, T. 2004. The role of gender and job level in coping with occupational stress. Work and Stress, 18: 267–274.

66. Daniels & Guppy, Occupational stress, social support, job con- trol, and psychological well-being.

67. McDonald, K.M., & Korabik, K. 1991. Sources of stress and ways of coping among male and female managers. In R.L. Per- rewe (Ed.), Handbook on job stress. New York: Select Press, pp. 185–199; Lim, V.K.G., & Thompson, S.H.T. 1996. Gender dif- ferences in occupational stress and coping strategies among IT personnel. Women in Management Review, 11: 20–29.

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Endnotes 275

68. Nelson, D.L., & Quick, J.C. 1985. Professional women: Are dis- tress and disease inevitable? Academy of Management Review, 10: 206–213.

69. Webster, Y., & Bergman, B. 1999. Occupational stress: Counts and rates. Compensation and Working Conditions, Fall: 38–41.

70. Nelson & Quick, Professional women. 71. For a more extensive list, see: Mayo Clinic. 2006. Job burnout:

Know the signs and symptoms. At http://www.mayoclinic.com/ health/burnout/WL00062.

72. Quick, J.C., & Quick, J.D. 1985. Organizational stress and pre- ventive management. New York: McGraw-Hill.

73. U.S. Department of Health and Human Services. 1995. Alcohol, tobacco and other drugs in the workforce. At http://www.health. org/govpubs/m1006; U.S. Department of Health and Human Services. 2010. Division of Workplace Programs: Drugs in the workplace. At http://workplace.samhsa.gov/DrugTesting/Files_ Drug_Testing/FactSheet/factsheet041906.aspx

74. Ibid 75. Bandura, A. 1969. Principles of behavior modifi cation. New York:

Holt, Rinehart & Winston; Cook, R., Walizer, D., & Mace, D. 1976. Illicit drug use in the Army: A social-organizational analy- sis. Journal of Applied Psychology, 61: 262–272.

76. Colarusso, D. 1999. Over the edge: Amateur traders stressed be- yond capacity to cope. ABC News.com, at http://abcnews.go.com/ sections/business?TheStreet/daytraders_990729.html; Immel- man, A. 1999. The possible motives of Atlanta day-trading mass murderer Mark O. Barton. Unit for the Study of Personality in Poli- tics, at http://www.csbsju.edu/uspp/Research/Barton.html.

77. Harmon, A. 1999. “Casino mentality” linked to day trading stresses. New York Times, Aug. 1, p. 1.16.

78. Colarusso, Over the edge: Amateur traders stressed beyond capac- ity to cope.

79. For additional information on day trading, go to http://www. daytraders.com.

80. Quick & Quick, Organizational stress and preventive management; Sauter et al., Stress … At Work.

81. Chrousos, G.P., & Gold, P.W. 1992. The concepts of stress and stress system disorders: Overview of physical and behavioral home- ostasis. Journal of the American Medical Association, 267: 1244– 1252. Peeke, P. 2000. Fight fat after forty. New York: Penguin.

82. Hughes, G.H., Pearson, M.A., & Reinhart, G.R. 1984. Stress: Sources, effects, and management. Family and Community Health, 6: 47–58.

83. Margoshes, P. 2001. Take the edge off. Fortune Small Busi- ness, June 23, at http://www.fortune.com/smallbusiness/arti- cles/0,15114,358931,00.html.

84. Quick & Quick, Organizational stress and preventive management. 85. Kemery, E.R., Bedeian, A.G., Mossholder, K.W., & Touliatos, J.

1985. Outcomes of role stress: A multisample constructive replica- tion. Academy of Management Journal, 28: 363–375; Manning & Jackson, Occupational stress, social support, and the costs of health care; Parasuraman, S., & Alluto, J.A. 1984. Sources and outcomes of stress in organizational settings: Toward the development of a structural model. Academy of Management Journal, 27: 330–350.

86. Sauter et al., Stress … At work.

87. Colella, A. 2001. Coworker distributive fairness judgments of the workplace accommodation of employees with disabilities. Acad- emy of Management Review, 26: 100–116.

88. Neck, C.P., & Cooper, K.H. 2000. The fi t executive: Exercise and diet guidelines for enhancing performance. Academy of Manage- ment Executive, 14 (2): 72–83.

89. Blair, S.N., Kohl, H.W., Paffenbarger, R.S., Clark, D.G., Cooper, K.H., & Gibbons, L.W. 1989. Physical fi tness and all-cause mor- tality: A prospective study of healthy men and women. Journal of the American Medical Association, 262: 2395–2401.

90. Neck & Cooper, The fi t executive: Exercise and diet guidelines for enhancing performance.

91. For additional details, see Cooper, K.H. 1995. It’s better to believe. Nashville: Thomas Nelson, Inc.

92. For additional details, see Neck & Cooper, The fi t executive. For important safety tips, see Blake, R. 1998. Don’t take muscle fl ex- ibility for granted. Executive Health’s Good Health Report, 34 (12): 7–8. In general, individuals with any health concerns should con- sult a physician prior to beginning a new exercise program.

93. For details, see: Cooper, K.H. 1996. Advanced nutritional therapies. Nashville: Thomas Nelson, Inc.; Neck & Cooper, The fi t executive.

94. R. Cieslak. 2009. Social support in the work stress context. In A.-S.G. Antiniou, C.L. Cooper, G.P. Chrousos, C.D. Speilberger, & M.W. Eysenck (Eds.) Handbook of managerial behavior and oc- cupational health. Northhampton, MA: Edward Elgar Publishing, Inc., pp. 427-436.

95. Clay, R.A. 2001. Research to the heart of the matter. Monitor on Psychology, 32: 42–45; Schirmer, L.L., & Lopez, F.G. 2001. Prob- ing the social support and work strain relationship among adult workers: Contributions of adult attachment orientations. Journal of Vocational Behavior, 59: 17–33.

96. Frost, P.J. 2003. Toxic emotions at work. Boston: Harvard Business School Press.

97. For general information, see: Wellness Councils of America, 2007, WELCOA Overview. At http://www.welcoa.org/presskit/ index.php. Note that we are using the term “wellness” broadly to include a number of health and general well-being initiatives.

98. See, for example: Schoeff, M. 2006. UPS employees get advice from health coaches. Workforce Management, 85 (16): 14.

99. Ozminkowski, R.J., Ling, D., Goetzel, R.Z., Bruno, J.A., Rutter, K.R, Isaac, F., & Wang, S. 2002. Long-term impact of Johnson & Johnson’s Health and Wellness Program on health care utiliza- tion and expenditures. Journal of Occupational and Environmental Medicine, 44: 21–29.; Edwards, J.R., & Greenwood, P. John- son & Johnson: The Live for Life Program (a). Darden Case No. UVA-OB-0412. At http://www.jnj.com/connect/caring/ employee-health/?fl ash=true; Johnson & Johnson webpage. 2010. Protecting our people. At http://ssrn.com/abstract=1421087. Note that some controversy exists over the exact benefi ts received by J&J, but most analysts agree that the impact has been substan- tially positive.

100. Johnson & Johnson. 2010. Protecting our people. At http://ssrn. com/abstract=1421087. Note that some controversy exists over the exact benefi ts received by J&J, but most analysts agree that the impact has been substantially positive.

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http://www.health.org/govpubs/m1006

http://workplace.samhsa.gov/DrugTesting/Files_Drug_Testing/FactSheet/factsheet041906.aspx

http://abcnews.go.com/sections/business?TheStreet/daytraders_990729.html

http://www.csbsju.edu/uspp/Research/Barton.html

http://www.daytraders.com

http://www.fortune.com/smallbusiness/arti-cles/0,15114,358931,00.html

http://www.welcoa.org/presskit/index.php

http://www.jnj.com/connect/caring/employee-health/?flash=true

http://ssrn.com/abstract=1421087

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PA R T I I C A S E S T U D Y

BRUSSELS AND

bradshaw

In all my years as the acting Busi- ness Development Manager, I have never seen a more talented

individual who repeatedly re- ceived such poor reviews from her peers. She seemed like a great

hire at the time. I can’t understand what happened to make her so bitter and frustrated.

— Kelly Richards

INTRODUCTION

It was August 26, 2008, and Audrey Locke, summer intern at Brussels and Bradshaw Investment Bank (B&B), had come to the end of another frustrating day. With reluctance, she made her way to Kelly Richards’s office. There she would receive her final review, which would end with Richards’s decision whether to offer Locke full-time employment in Sep- tember. Locke was uneasy. Despite working tirelessly to appear eager, intelligent and organized to her superiors, she had received almost entirely bad reviews from the mem- bers of her project teams. To make matters worse, Locke often found her- self to be the subject of rumors and pranks, all of which had caused her to grow increasingly disheartened and less productive.

As Locke collected herself outside Richards’s door, she reflected on the last four months of her employment. Would this review bear more posi- tive results, given her continued ef- fort to reconcile personal conflict with her co-workers? Should she raise the

S hannon Thomson wrote this case under the supervision of Professor Alison Konrad solely to provide material for

class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identify- ing information to protect confidentiality.

Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction of this mate- rial is not covered under authorization by any reproduction rights organization. To order cop- ies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Serv- ices, c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail [email protected]. Copyright © 2009, Ivey Management Services Version: (A) 2009-05-19

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278 Brussels and Bradshaw

PA R T I I C A S E S T U D Y

unresolved issues that had overshad- owed her internship with mistrust and frustration? Most importantly, would her hard work be rewarded with a full-time offer of employment at the end of the meeting? As Locke raised her hand to knock on Richards’s of- fice door, she couldn’t help but won- der what, if any, issues she should raise with Richards and whether, if given the opportunity, she should ac- cept B&B’s offer of employment for September.

BRIEF HISTORY OF INVESTMENT BANKING

Despite its title, investment banking was historically neither investing nor banking. Instead, it was the busi- ness of raising or supplying capital for clients during growth or expan- sion, when the required cash was not available within the organiza- tion. Throughout the world, govern- ments and companies financed much of their operational development and monetary needs through investment bank lending. This arrangement cre- ated a global need for such services to facilitate corporate and economic activity. As investment banking evolved, these institutions grew both in size and importance, resulting in many of the largest players operat- ing in multiple countries. Currently, most investment banks offered com- mercial and investment banking serv- ices, which diversified their risk and product offerings in an increasingly complex and competitive global banking environment.

Rivalry between investment banks has continued to this day, particularly concerning retention of clients, investor support and capital,

and the recruitment of top undergrad- uate and MBA students. The competi- tiveness of an investment banking firm derived primarily from its staff because innovation, expertise and maintenance of customer relations all played vital roles in the quantity and quality of deals “closed” in any given year. This approach carried important implications for invest- ment banks because the loss of key personnel also included the loss of current or potential clients connected with each employee.

A firm’s credibility and reputa- tion depended largely on the ex- posure and magnitude of the deals “closed” by its staff. Therefore, losing clients and key employees to a com- petitor was a devastating occurrence that firms aimed to keep to an abso- lute minimum. Despite the competi- tive compensation and prestige of an investment banking position, in recent years investment banks found it increasingly difficult to retain ex- perienced employees. For example, an entry-level analyst, typically hired directly after completing a relevant undergraduate degree, worked be- tween 80 and 120 hours a week for two to three years. The training and experience gained in these initial years, as well as the generous com- pensation, were increasingly viewed by analysts as a platform from which to apply to graduate school or to pursue another facet of the financial industry, such as private equity. The growing popularity of hedge funds also provided another exit from in- vestment banking. This trend of us- ing a brief stint in investment banking as a jump-off point for other career pursuits had grown substantially

in recent years, making it difficult for investment banks to retain their home-grown talent for more senior positions.

Investment banking was never known for its work–life balance or for its progressive human resources policies; however, the lucrative bo- nuses were often enough to initially attract and keep employees within the firm for at least the first few years. Throughout an investment banker’s career, a substantial por- tion of compensation was derived from performance-based bonuses. A defection of personnel from one firm to another was often seen as a loss of confidence in the ability of the abandoned firm to produce products and opportunities that were more lucrative than those of the competitor firm that gained the new employee. Given the relatively small social and professional circles within the financial industry, this view could be devastating for a firm’s recruiting prospects and its business reputation going forward.

Since the beginning in 2007, the economic downturn connected to the credit crises in the United States had sparked an industry-wide slow down in both the dollar value and frequency of deals. This effect, in turn, intensified firms’ competition for business and their need to retain personnel.

INVESTMENT BANKING

An investment bank’s primary func- tion was to raise capital and provide advisory services during corporate mergers and acquisitions (M&As). As a result, numerous products and divisions of expertise were necessary

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within a firm to meet the unique chal- lenges of a diverse client base. Often, the opportunities within the market outweighed the capital available to fi- nance them. Thus, investment bankers needed to remain aware of economic conditions, business trends and mar- ket performance to maintain an acute ability to assess the risk, demand and appetite in the market for particular fi- nancial offerings. In addition, a keen understanding of monetary and inter- national policy was critical because firms were becoming increasingly global and, therefore, faced more risk and opportunities when dealing with foreign clients.

Organizational Structure Investment banks were characterized by five basic levels of authority: jun- ior analyst, senior analyst, associate, vice president and managing director (see Exhibit 1). Each of these levels existed within assigned product and

industry groups. Product groups in- cluded debt capital markets, equity capital markets and M&A expertise; whereas industry groups included natural resources, consumer retail, financial institutions, real estate, technology, media and industrial (see Exhibit 2). The purpose of these groups was to hone expertise in mul- tiple areas of business industry, allow- ing employees within each group to develop expertise in their assigned area. As a result, many project teams were cross-staffed. For example, if a real estate company needed to raise equity to fulfill its intention to acquire another company, the deal could be staffed by analysts from the M&A, equity capital markets and real estate groups. This cross-staffing allowed investment banks to harness proficiencies from multiple areas to benefit one transaction, thus allow- ing for more innovative and tailored strategic advising.

Project Teams Project teams were typically staffed by at least one employee from each

organizational level, depending on the timeline and magnitude of the potential deal. Junior and senior ana- lysts, being the entry-level employees, were assigned most of the technical grunt work on pitch books and in deal teams. They built most of the valuation models and performed the majority of financial-based analysis, overseen by the associate. The vice president and managing director set the strategic direction of the pitch books and actively managed the cli- ent relationships. Project teams were typically coordinated by an independ- ent individual within the company. Selection of the project teams was based primarily on availability and the technical skills of the employee.

Profit Generation Investment banking analysts spent the majority of their time working on pitch books, which were essentially business plans based on a financial product, idea or valuation technique. The purpose of the pitch book was to educate the client about the op- portunity and entice them to buy in.

Managing Director

REPORTING HIERARCHY

Vice- President

Associate

Senior Analyst

Junior Analyst

Exhibit 1 Reporting Hierarchy

EXHIBIT 2 Product and Industry Groups

Product Groups

Merger and Debt Capital Equity Capital Acquisition Markets Markets Expertise

Natural Resources

Consumer Retail

Financial Institutions

Real Estate

Technology

Media

Industrial

In du

st ry

G ro

up s

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These books required anywhere from a few days to a week to put together and acted as a means to market the bank’s advisory services and to drum up new business for the bank. Once a pitch was approved, the deal went “live,” taking anywhere from a few weeks to a month to complete.

Profit was derived from “closing” these live deals by collecting a fee for providing transaction advice on corporate M&As and by gaining a margin on the issuance and sale of securities. This activity was conducted in both the debt and equity capital markets. Advisory revenue and the value of transaction margins varied depending on the market focus of the investment bank. Some banks focused on the high-end market, tar- geting large companies and major deals, whereas others focused on the middle to low-end markets. These markets dealt with smaller companies and consequently smaller transac- tions. Lastly, investment banks earned profit by insuring bonds through the use of credit default swaps.

Compensation The compensation of investment bankers was notoriously competitive, bonus-driven and known to escalate greatly with seniority. For example, an entry-level Canadian investment banking analyst could expect a be- ginning annual base salary of at least $65,000, with bonus potential of $20,0001 per year, depending on personal and company-wide finan- cial results. As seniority increased, compensation levels throughout the industry were largely based on the

performance of the individual, with vice presidents generally compen- sated at approximately $1,000,000 per year, including their bonus. Bo- nuses were paid once, at the end of the year, and were calculated by evaluating the number of deals an employee was involved with, the em- ployee’s ability to work with others, the bank’s general performance and other benchmarks outlined in a firm’s review structure.

BRUSSELS AND BRADSHAW

Founded in 1915, Brussels and Bradshaw (B&B) had become a well- respected and established financial institution, with net revenues of $42 bil- lion and net profit of $15 billion in 2007. By 2008, B&B was operating globally in more than 25 countries, with a particular focus in the United States, England, Canada and Hong Kong. B&B prided itself on its innova- tive ability to adapt to market trends and close some of the largest deals in North America. B&B was a leader in the creation of block trading, the privatization movement, and one of the first financial institutions to hire MBAs on Wall Street. B&B’s mission statement had always been “To offer our clients competitive, innovative and feasible solutions for the betterment of their organization and community environments.” As a result, B&B man- agement regarded the client as king and often worked its employees to the bone to meet tight project deadlines for clients. Even employees at the as- sociate and VP levels had come to expect working through weekends and holidays (including Christmas Eve and New Year’s Day) when closing a large deal.

Throughout its history, B&B’s strategic activities had focused on growing the investment banking arm of the company, with substantial re- sources used to recruit newly gradu- ated young talent and to groom analysts for more senior roles within the company. As was standard throughout the industry, B&B offered services in investment banking, sales and trading, asset management, commercial banking and various other financial services. Within the last 30 years of its history, B&B had offered these services worldwide to a diversified client base to gain more global market share.

The Summer Internship Position Since 1985, B&B had recruited and hired undergraduates in their final year of business school to work from May to August in B&B’s regional of- fices across the continent. The intern- ship experience was largely meant as a screening process for poten- tial full-time candidates. The experi- ence also allowed undergraduates to experience the firm’s culture — thereby recommending the firm as an employer to their well-educated colleagues. For the last five years, B&B’s internships always began in Chicago, where summer interns from all offices throughout North America attended two weeks of initial train- ing to learn basic valuation tech- niques and sophisticated methods of financial statement analysis. The training was entirely quantitative and very intense. After completing their training, interns were expected to spend their first few weeks in their respective regional office, acting as a “helper” to existing deal teams. Interns spent these first few weeks

1All funds in Canadian dollars unless specifi ed otherwise.

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getting acquainted with the jargon, models and expectations surrounding the junior analyst role.

The 2008 summer intern- ship position (see Exhibit 3) paid

approximately $20,000 for the con- tracted term of 14 weeks. The dif- ficulty of the work depended largely on how capable the analysts proved themselves to be and the projects

available during their employment. As the summer progressed, interns became responsible for the full ar- ray of junior analyst activities and in return saw an increase in the hours

EXHIBIT 3 Brussels and Bradshaw Summer Internship Job Posting

Description of the Company: Since its inception 93 years ago, Brussels and Bradshaw, Canada’s largest investment banking institution, has operated globally in over 25 countries with a particular focus on contributing to the economies of North America through investor capital and sound fi nancial advisory. Brussels and Bradshaw has built a solid reputation based on consistently stellar fi nancial performance and employee development. Our values of leadership, intelligence and innovation have shaped our past success and the employees which make our fi rm one of the best in the industry. At Brussels and Bradshaw, you will experience accelerated learning in a fast-paced environment full of bright and driven individuals. Our summer internship program is an ideal way to launch your career in investment banking, by joining a winning fi rm that wants to help you achieve your greatest potential.

The Summer Internship Position: We are looking for driven, highly intelligent individuals who seek an environment of constant learning and change. You will work alongside other motivated individuals throughout the 14 week summer internship program. As an intern at Brussels and Bradshaw you will be provided with two initial weeks of investment banking training in Chicago, Illinois, a diverse array of assignments in multiple project teams, and assigned the work and daily responsibilities of a full time junior analyst.

Qualifi cations: Candidates must be currently working towards a B.A., B.S., or B.B.A. in accounting, fi nance, business or ap- plied economics. A minimum of one statistics, and two fi nance courses, must be successfully completed in order to apply.

Skill and Competency Requirements: – Solid understanding of various equity and debt instruments – Profi cient problem-solving, quantitative and analysis skills – Fundamental understanding of valuation theory, methodologies and their application – Excellent verbal and written communication skills – Team player with high energy and demonstrated initiative – Self-starter with the ability to balance multiple tasks in the face of competing priorities – Self-motivated with strong independent work ethic – Highly skilled in Microsoft Excel and Offi ce applications – 1–2 years of work experience in a fi nancial analyst position or related role

The position will entail the following responsibilities: 1) Building, using, and expanding on fi nancial models. 2) Performing discounted cash fl ow, fi nancial valuation, and multiples-based analyses. 3) Participation in collecting, synthesizing and applying product and industry research

Qualifi ed applicants who are interested in this position should submit their cover letter, resume and unoffi cial university transcript via email to Kelly Richards, at [email protected]

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they were expected to be in the of- fice. The first two weeks of work ranged between 70 and 80 hours per week, steadily increasing over the term and typically peaking at 120 hours per week in mid-June. This pace lasted until the conclusion of the internship at the end of August. At B&B, similar to other investment banks, the expected office hours were unspoken, as was the rule that summer interns were expected to be both the first employees in at 9:00 a.m. and the last to leave, at ap- proximately 3 a.m.

B&B had always invested sub- stantial resources into recruiting and interviewing top candidates to ensure the interns they hired were well suited for both the work and the corporate environment. To remain competitive, B&B always strived to communicate to undergraduates the importance of employee satisfaction to the firm strategy. B&B typically hired two to three summer interns for each ma- jor regional office throughout North America; however, given the state of the economy, Audrey Locke was the only intern of more than 300 appli- cants who was hired for the Toronto office in 2008. Locke was chosen af- ter four rounds of intense interviews with multiple managing directors from Toronto.

The Toronto Office B&B’s Toronto office was small in relation to its other North American offices. With three managing direc- tors, four vice presidents, four as- sociates and three full-time analysts, B&B was a top-heavy organization. Teams had always been staffed by the business department manager (BDM), Kelly Richards, on two of

the most common types of projects: pitches and live transactions. Given the small size of the office, analysts such as Locke were often assigned to work with the same people, or alternatively were paired with em- ployee members from other regional offices. Locke, for example, spent a quarter of her summer working for Don Spenser, a managing director in New York, whom she had never met. Despite the lack of direct com- munication, Locke had quite enjoyed the tasks and feedback she received from Spenser. In addition, Spenser had been thrilled with her work and gave her glowing reviews.

Corporate Culture B&B attributed much of its growth and success to its corporate cul- ture, and it prided itself on a “work hard, play hard” mentality whereby employees were expected to work toward hard-fast deadlines until the work was finished. Often a typical day for a junior or intermediate analyst would average 12 hours, with little supervision besides check- ins to have their work proofed and to ensure the project was on track. Associates and vice presidents some- times assumed a fraternity mentality toward analysts, initiating them with the same aggressive treatment they had received. Creating false dead- lines, assigning projects with no real purpose and applying unnecessary pressure to multiple projects were not uncommon. Often these pranks were not for humor’s sake, but to see how well analysts fared under such con- stant treatment. Senior employees of all ranks often turned a blind eye if an analyst was struggling as a result, despite the rising turnover rate of

summer interns and junior analysts. The company had come to view the summer internships as a “weed- ing out” process whereby only the strong would remain until the end of the summer. At B&B, an analyst who left the internship early was viewed as having been too weak to commit to the industry and therefore was bet- ter off in another field or firm. Junior analysts were particularly susceptible to this treatment.

Without a formal human re- sources representative, analysts had no one to speak to about such treat- ment; thus, interpersonal conflict be- tween employees was either dealt with by those involved or completely ignored. Associates, VPs and man- aging directors also deliberately ignored employee issues and com- plaints about the work environment or interpersonal conflict. In the words of Blake Cooper, one of the manag- ing partners of the Toronto office:

We cannot afford to get soft on our people by listening to analysts whine and complain about each other. Once you start, where does it stop? They’ll figure out how to get along on their own if you let them. These are professionals. We are all here to make money and the only way to make money in this business is to work together. Those that want to get ahead will recognize that — and those are the people we want at B&B.

In addition, requests for any time off, regardless of how brief, had to be submitted and approved by one of the managing partners. Despite the expectation of long hours dur- ing the workweek, the taking of sick

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days and requests for time off for medical appointments were met with great resistance and gossip among the superiors. Although such requests were never formally held against an employee, the prestige of an employ- ee’s future projects and the timeline for promotion were often altered as punishment without any formal com- munication to the targeted employee.

KELLY RICHARDS

Kelly Richards had been the BDM at B&B for the last 10 years and was the only employee in the office with- out a finance background. Her duties were strictly administrative, includ- ing printing pitch books, scheduling project teams and submitting quali- fied resumes to the managing direc- tors of the Toronto office. Although Richards assumed some of the tasks of a human resources employee, her position held no real authority over hiring, firing, promotion or profes- sional discipline for poor reviews or misconduct. These functions were handled by the manager partners as a means to hire those whom the part- ners felt would work best within the established culture at B&B.

Richards did not have her CHRP (Certified Human Resources Profes- sional) certification and was there- fore not trained in conflict resolution, benefits and compensation, or any of the other human resource func- tions typically taught during the cer- tification process. Even if employees spoke to Richards about such issues, as often was the case, Richards had no authority to enforce behavior al change or punishment for poor treatment of subordinates. Because Richards conducted all performance

reviews and scheduled the project teams, she often received requests from one employee not to be staffed with another. However, given the expertise and product/industry func- tions of the organization, these re- quests could rarely be honored. As a result of Richards’s limited authority, she was given little respect by any of the company’s associates, VPs and managing directors. Richards was compensated at a competitive sal- ary for her title and duties. It was well known at B&B that Richards had three children and a husband who had recently been fired from his posi- tion as a high school teacher.

AUDREY LOCKE

Audrey Locke had enjoyed the re- cruitment process of finding a sum- mer internship position. Because of her grade point average (GPA) of 3.9 and a solid resume of related financial experience (see Exhibit 4), Locke finished the recruitment pro- cess with five competitive summer internship offers at some of the larg- est investment banks in the country. Despite the stellar reputation of each of the banks, Locke had been intent on B&B since attending their infor- mation session. With its prestigious reputation, competitive recruitment process and global presence, Locke viewed B&B as a strong career move to start her finance career. Despite being warned by some of her friends about the intensity of the position, Locke was excited to begin work at B&B’s regional office in Toronto on May 5, 2008.

In mid-April, Locke received an information package that outlined what she could expect during her

summer work term. A letter from Richards was also enclosed, detail- ing two important points of contact for Locke. An assigned mentor, Jake Frescott, a senior analyst who had been at B&B for only one year after transferring from a competitor would be available to Locke once a week to help her with the technical as- pects of her position. In addition, a “buddy” would be assigned to Locke as someone to interact with on a more informal level. Christine Page, a first-year analyst in the Toronto of- fice, was Locke’s assigned buddy. Ri- chards had paired Locke with Page because they had both attended the Richard Ivey School of Business at the University of Western Ontario. Page and Locke were the only two females in the Toronto office. The letter concluded by saying that Rich- ards was looking forward to meeting Locke and would provide formal in- troductions to both Page and Frescott during Locke’s first week.

CHRISTINE PAGE

Christine Page had been employed with B&B since her summer intern- ship placement at the New York City office in 2006. Page had worked on many large deals that summer and had been offered a full-time position at the Toronto office, which included a staggering signing bonus due to her proven work ethic and quantita- tive abilities. Page had been given no notice of her buddy assignment and therefore made little effort to get to know Locke in her first few weeks because they were both in- credibly busy on different projects. It was not until Locke’s fourth week that Richards provided the formal

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EXHIBIT 4 Audrey Locke’s Resume

EDUCATION

Richard Ivey School of Business, London, Ontario 2009 Candidate for Bachelor of Arts, Honours Business Administration, Dean’s Honour List

University of Toronto, Toronto, Ontario 2005–2007 Honours Applied Math, Dean’s Honour List, Faculty of Mathematics, 2005–2007 Recipient of Continuing Scholarship for Academic Excellence

EMPLOYMENT

The Richard Ivey School of Business, London, Ontario 2006–2007 Research Assistant • Assisted fi nance professor with intensive research project by providing executive

compensation data through the use of proxy statements for over 300 companies. • Investigated and rectifi ed 25 anomalies between the information stored in archives

and the information listed on the annual corporate proxy statements. • Compiled, analyzed and drew conclusions from compiled data, writing a

comprehensive report of fi ndings and data trends.

Ernst & Young, Toronto, Ontario Summer 2007 Audit & Assurance Summer Analyst • Verifi ed corporate accounting systems through the use of cash receipts, journal

vouchers, weighted-average cost purchase cut-offs, currency triangulation and unrecorded liability tests to guarantee they were recorded properly.

• Performed stock counts and inventory ageing tests, ensuring that Ernst & Young’s values were consistent with company records.

• Corrected two major accounting errors amounting to $60,000 during fi rst audit engagement.

Kraft Foods Inc., Toronto, Ontario Summer 2005–2007 Summer Financial Planning Analyst, Customer Finance • Led a project to recover invalid charges from a distributor by collecting suffi cient

evidence to reverse incorrect deductions of $1.2 million. • Evaluated sales promotion and incentive programs, providing recommendations

to improve effectiveness and eliminate $500,000 of unnecessary costs from the current budget, and ensuring synchronization among the category team, the sales force and the fi nance department.

• Developed an inventory projection model to estimate inventory levels in the customer’s warehouse and prevent unanticipated fl uctuations in sales from month to month.

TRAINING, TEAMWORK AND LEADERSHIP

Wall Street Prep Course—Completed intensive fi nancial valuation and modeling course 2008

VP Finance—Finance Club—Managed club budget, bank account, and club audits 2007–2008

Royal Conservatory of Music—Completed grade 9 certifi cation in violin and piano 1995–Present

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introduction between Locke and Page and discussed the importance of the “buddy” role in Locke’s anticipated development. Following this introduc- tion, Page took the liberty of taking Locke for lunch to give her some advice about the expectations and projects of the firm. Locke was taken aback by Page’s invested interest to see her succeed, but warmed to her company. Page made a concentrated effort throughout Locke’s remaining work term to check in and speak with her at least three times a week. As the only two female analysts in the Toronto office, Locke and Page were coined the “sorority girls” by two of the associates. Despite twice mentioning to Richards the promised introduction to her assigned mentor, by the end of the summer Locke had not been introduced to Frescott, who had passed Locke multiple times in the office without saying hello.

TROUBLE BREWING

In Chicago, Locke had enjoyed her training, which she found to be relatively easy. During Locke’s first day in the Toronto office, Richards showed her to her designated work station and promptly left, saying she would follow up with her later that day. Locke was soon approached by Sean Petterson, a long-time asso- ciate at B&B who had experienced difficulty moving above his current position. Petterson promptly plopped a pile of papers on Locke’s desk and mumbled something about compiling the data before noon. After skimming through the pages to get a feel for the work, Locke went to find Petter- son, only to learn that he had left for a meeting and would not be back

until 3 p.m. Upon Petterson’s re- turn, Locke had completed what she thought he would have expected. He looked over the first two pages and frowned. “Summer interns … every year you all seem to become more incompetent.” Petterson gave it back to Locke. “Don’t worry about it, I’ll do it myself.”

Locke did not see Richards again until the following week when, at Locke’s request, they met briefly in Richards’s office. Locke said:

I’m just not feeling like I know what my responsibilities are here. When I’ve done my work, I’m not sure who I should report to for more. Also, when I have questions there doesn’t seem to be anyone to ask. What do you suggest I do?

Richards smiled and replied:

The work will come when it needs to be done, your job is to sit and wait for it. You are here to help make deals happen so sit tight and work when you’re told to. Also, I’ve been hearing complaints that you’ve been listening to mu- sic while you’ve been working — don’t let me find out about that again. Now if you’ll excuse me, I’ve got a conference call to attend in about five minutes.

Locke left Richards’s office dis- couraged and upset. Locke had never listened to music while at the office. Who would have lied to Rich- ards about something she had never done? As Locke returned to her desk, Petterson was waiting for her, angrily tapping his fingers on her chair. “Where have you been? This was supposed to be done two hours ago!

Do you have any idea how impor- tant this deadline is?” This outburst was only the beginning of the type of behavior that Locke would come to expect from Petterson on a daily basis. Often around 10 p.m. when he began to get increasingly tired, he would call Locke into his office, close the door and raise his voice while complaining about her format- ting and assumption decisions. Locke often stood by her assumptions and explained her judgments to learn why they needed adjusting; however, Pet- terson always cut her off saying, “I don’t have time to teach you things you should already know.”

As the weeks progressed, Rich- ards staffed Locke with Petterson on every project despite Locke’s request to be staffed with another project manager. Locke’s first formal review from Petterson comprised scathing remarks about Locke’s personality and work performance, remarking that she was arrogant, slow to meet deadlines and too friendly with Page. Petterson had never liked Page, who had experienced similar run-ins with Petterson when she had been a jun- ior analyst. Although never proven or formally addressed, Petterson had a tendency to be harder on female an- alysts than male analysts. Although Richards was aware of this tendency, she made no effort to change Pet- terson’s approach.

Many of the weeks following held similar experiences. Locke continued to work longer hours than anyone else in the office without complaint. Although she remained unsure about the expectations and communication lines of her position, Locke worked quietly and diligently, making sure

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she completed all projects by their deadlines. Locke found it frustrating that Petterson would play games with her, often giving her a deadline of Wednesday at 2 a.m. without re- ally needing the work until Friday at noon. When Locke raised this is- sue with Richards, Richards looked at Locke sourly: “Audrey, are you questioning the competency of your project manager because of your in- terpersonal issues? You need to learn to deal with these things yourself.” Following that brief discussion, Locke decided not to call Petterson on his false deadlines because she didn’t want to feed him more ammunition for her next performance review. Locke remained irritated, however, by the lack of feedback and recog- nition regarding her sound technical abilities.

Unknown to Locke, her work was being routinely reviewed by Ri- chards. Although much of her work was submitted directly to Petterson, Locke had one assignment that was

submitted directly to Page. When Page submitted it to Richards for re- view, Page was immediately called into Richards’s office only to be met with accusations:

No summer intern has ever been capable of building this type of model with such precision. I know you and Locke are friends, Page, but you’re not doing her any favors by increasing the quality of her work before submitting it to me.

Despite her expected confidential- ity about the issue, Page thought Locke should be aware of the accusation and told her what had been said dur- ing the meeting. Locke was distraught and offended. When she asked Page for advice, Page responded:

I know you’re working hard. You just have to keep your head down, do your work and get through the first few years. I had similar treat- ment. There’s just nothing you can do about it.

THE FINAL REVIEW

Locke cleared her throat and fo- cused on her objectives for the coming meeting. After the negative treatment and feedback she had received, Locke desperately wanted Richards to understand and appre- ciate her concentrated effort to be a valuable employee. Despite her negative experience, Locke was still keen on a career in finance, and, at the very least, she wanted to end her internship with B&B on a high note. Locke was two minutes early for her meeting with Richards and knocked confidently on the door. The next 10 minutes would decide her future at B&B. Locke wondered what, if any- thing, she could say so that Richards could see her summer experience from her perspective and whether, in the larger scheme of things, it would even make a difference.

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ORGANIZATIONAL BEHAVIOR

A GLOBAL CONTEXT

ORGANIZATIONAL BEHAVIOR

A STRATEGIC APPROACH

ORGANIZATIONAL DIVERSITY

THE STRATEGIC LENS

INDIVIDUAL PROCESSES LEARNING AND PERCEPTION PERSONALITY, INTELLIGENCE, ATTITUDES, AND EMOTIONS WORK MOTIVATION STRESS AND WELL-BEING

GROUPS, TEAMS, AND SOCIAL PROCESSES LEADERSHIP

COMMUNICATION

DECISION MAKING BY INDIVIDUALS AND GROUPS GROUPS AND TEAMS CONFLICT, NEGOTIATION, POWER, AND POLITICS

THE ORGANIZATIONAL CONTEXT ORGANIZATIONAL STRUCTURE AND CULTURE ORGANIZATIONAL CHANGE AND DEVELOPMENT

PART 3

In Part II, we examined individual-level processes that affect organizational behavior. In Part III, we explore group, team, and social processes, which can directly or indirectly affect behavior in organizations. Knowledge of each of these types of processes helps manag- ers achieve and maintain a competi- tive advantage. Therefore, each has important strategic implications for the organization.

Chapter 8, the fi rst chapter in Part III, discusses various concepts related to leadership and explains what makes a leader effective. In the chapter, we pay

special attention to the effects of lead- ership on motivation and productivity. Chapter 9 explores communication in organizations. Communication is criti- cal for achieving objectives because it provides the information on which people in organizations act. In addi- tion, leaders communicate in order to motivate individuals and teams and to obtain the behavior desired.

Chapter 10 describes individual and group decision making. Decision making is a critical dimension of leader- ship and has substantial effects on or- ganizational behavior. In Chapter 11,

we turn to an examination of group dynamics and teams. Because orga- nizations make frequent use of teams (groups of associates integrated to ac- complish specifi ed goals), understand- ing and managing teams can be essen- tial to organizational success. Finally, in Chapter 12, we explore power, confl ict, politics, and negotiations within orga- nizations. Both the exercise of power and occurrences of confl ict can have either functional or dysfunctional con- sequences. Chapter 12 provides an understanding of how managers can achieve functional outcomes.

groups, teams, and social processes

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? knowledge objectives After reading this chapter, you should be able to: 1. Defi ne leadership and distinguish between formal

and informal leaders. 2. Demonstrate mastery of the trait concept of leader-

ship. 3. Compare and contrast major behavioral theories

of leadership. 4. Explain contingency theories of leadership, empha-

sizing how they relate leadership effectiveness to situational factors.

5. Describe transformational leaders. 6. Integrate concepts and ideas from behavioral,

contingency, and transformational leadership. 7. Discuss several additional topics of current rele-

vance, including leader–member exchange, ser- vant leadership, gender effects on leadership, and global differences in leadership.

leadership

exploring behavior in action

Maria Yee and the Green Furniture Revolution

A number of issues confront the global furniture industry. Perhaps the most important of these is the loss of hard- wood forests in many parts of the world. This loss threatens the supply of raw materials for furniture makers, and it also affects the air-cleansing capacity of the earth’s tree stock and the potential for rainfall downwind of lost

timberland. In addition, toxic lacquers and adhesives are commonplace in furniture manufacturing. Ethylene oxide is one example. Problematic fabric-embedded chemicals are ubiquitous as well, including perfl uorooctanoic acid for stain and water resistance as well as decabromodiphenyl ether for fl ame retardation.

To combat these problems, a number of forward- thinking entrepreneurs have worked on green (i.e., sus- tainable) technologies for high-quality furniture materi- als and manufacturing. Their work, however, has been an uphill struggle. Hardwoods from sustainable sources are not always easy to fi nd. Alternatives to traditional hardwoods, such as bamboo, can be diffi cult to trans- form into attractive, durable tables, chairs, and dressers. Alternatives to traditional adhesives can be challenging to develop. Safe and easy-to-produce compounds offer- ing important fl ame-retardant qualities are not readily available. Perhaps most diffi cult, the costs of green tech- nologies are typically greater than traditional methods, and consumers are not necessarily ready to pay higher prices. In a survey conducted by the market-research fi rm NPD Group, 64 percent of respondents supported green products but only 38 percent were willing to pay for them.

Against this diffi cult backdrop, Maria Yee has at- tempted to successfully implement green technologies in the furniture industry. Born in mainland China, Ms. Yee immigrated to the United States, where she founded

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Sources: S. Fornoff. 2007. “What’s in Furniture? It’s Enough to Make You Sick,” San Francisco Chronicle, Oct. 24, p. G.1; Maria Yee Inc., “Maria’s Story,” 2010, at http://www.mariayee.com/about/maria/index.php; Maria Yee Inc., “Who We Are,” 2010, at http://www. mariayee.com/about/index.php; M. Shao. 2009. “A Fine Green Niche,” Stanford Social Innovation Review, Fall, pp. 68–71; M. Shao & G. Carroll. 2009. Maria Yee Inc.: Making ‘Green’ Furniture in China (Stanford, CA: Stanford Graduate School of Business).

her company, Maria Yee Inc., in 1988. With manufactur- ing located in China, the company initially relied on wood reclaimed from destroyed Chinese buildings. Later, it used hardwoods grown by reasonably managed Chinese grow- ing companies. From there, the company moved toward hardwoods sourced only from growers using principles of true sustainable produc- tion, including preserva- tion of biological diversity, limited harvesting, and respect for forest workers and local communities. Along with the pursuit of sustainably produced hard- woods, the company began in 2002 to experiment with bamboo boards. By 2009, approximately 50 percent of its products were based on innovative materials called BambooTimbre and RidgeBamboo. Because bamboo is a grass rather than a tree, a stand of bamboo can be harvested and replanted in fi ve-year cycles, which makes it a rapidly renewable re- source under prevailing standards. Beyond its approach to wood and boards, Maria Yee Inc. also has taken seri- ously the challenge of developing or encouraging others to develop nontoxic or less toxic lacquers, adhesives, sealers, water guards, stain guards, and fl ame retardants. Finally, the company has used a number of recycled raw materials for fuel and other inputs in the manufacturing process.

In 2009, Maria Yee Inc. had grown from a one-person hobby to a 30-million-dollar business with two manu- facturing sites and hundreds of employees. A number of successful patent applications had been fi led for a variety of materials and processes. Key customers included Crate & Barrel, Room & Board, and Magnolia Home Theatre. How has this success been achieved, given the tremendous competition in the furniture industry and the diffi culties associated with green strategies in that industry?

The key to Ms. Yee’s success seems to lie at least par- tially in her passion for a sustainable world and her ability to inspire others to share in her pursuit of such a world

through the activities of the company. Her vision demands a company that follows a moral path of protecting the envi- ronment while delighting end users with safe and elegantly designed furniture, and to produce that furniture in a way that ensures that associates in the manufacturing plants are healthy and happy. Commenting on the vision, Ms. Yee

said this, “Being green is not just for marketing. … Because I’m a human, I want to take a very small step to protect the environ- ment. We actually did so much more on green than we told people. We did it because of our beliefs.”

Beyond the compelling vision and the ability to en- list others in pursuit of that vision, Ms. Yee is known for her coaching and devel- opment of others. She has,

for example, helped to develop local Chinese management talent for her manufacturing facilities. She has also insisted on well-trained associates, and has paid them wages above average for the area while offering a full range of benefi ts.

Ms. Yee, however, is not just a people-oriented person. She can also be a tough taskmaster when necessary. During a recent visit to one of the manufacturing sites, an observer noted that she was “both encouraging and tough, insisting they sweat the details and strive for perfection.” After discov- ering a table that had not been sanded properly, she asked, “Which one of you is going to be responsible for this?”

Overall, Ms. Yee is a smart, confi dent, high-energy person with insight into both people and technical is- sues. One observer had this to say, “I have not met a lot of people like Maria. … She clearly is someone who is very focused, very hard-working, gives incredible attention to detail, very customer-focused, respectful of the environ- ment, and a strong leader. Clearly a very strong leader with impeccable standards.” Another put it this way: “We love her intense level of working. … She’s always available to us directly. … That’s something that makes the relationship special.” Indeed, Ms. Yee is a special person on a mission.

©iStockphoto

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Maria Yee has displayed remarkable leadership for a number of years. As a visionary who can inspire others, she has provided important direction and energy. Although not operating at the same level or with the same scope, she is similar in many ways to Mohandas Gandhi and Margaret Thatcher in the political domain and Bill Hewlett and Dave Packard in the business world. Be- yond vision, Ms. Yee also demonstrates a crucial balance between people and technical issues. As discussed in this chapter, strong leadership involves at- tention to both.

Ms. Yee’s leadership has had a profound impact on her company. Re- search has not always revealed such a strong link between the leadership of senior executives and organizational performance,1 but the overall body of evidence does provide a number of supportive studies. One study focused on the leadership of chief executives and showed positive effects for per- formance among Fortune 500 fi rms. These effects were especially strong for fi rms operating in uncertain environ- ments.2 In another study, chief execu- tives of major league baseball clubs were examined in the United States. Again, leadership had positive effects, in this case on team winning percent- age and fan attendance.3 In both of these studies, the leaders who exhib- ited a transformation, which includes vision creation, had the strongest posi- tive effect on performance. We discuss

transformational leadership in this chapter.

Consistent with these studies, a survey of chief executive offi cers (CEOs) conducted by the Center for Creative Leadership showed that almost 80 per- cent of respondents believe leadership development throughout the organiza- tion is the most important factor or one of the top fi ve factors in achieving a com- petitive advantage in the market.4 The survey respondents also reported that leadership quality is linked to a fi rm’s fi - nancial performance. CEOs of fi rms with superior performance were more likely to indicate that their companies support the development of leadership skills through human resource systems, that there is a shared understanding of the nature of ef- fective leadership, and that their leader- ship development practices are tailored to meet individual needs.

Actions taken by senior manag- ers correspond to the original defi nition of strategic leadership.5 Certainly, the CEO and those working directly with him are very important given the sub- stantial infl uence they have in designing the organization’s strategy and oversee- ing its implementation. Effective imple- mentation, however, involves all leaders in the organization. Thus, the concept of strategic leadership has been extended in recent years to include leaders from all levels.

In this context, strategic leader- ship covers a spectrum of behaviors for those below the rank of senior

management. For example, this type of leadership might entail developing a vi- sion for the unit or group being led, a vision that is consistent with the overall strategy of the fi rm.6 Furthermore, recent work has focused on the importance of strategic leaders’ managing the re- sources under their direction, to include fi nancial capital but especially human capital and valuable interpersonal rela- tionships (social capital). Particular em- phasis has been placed on the impor- tance of providing effective leadership that enhances associates’ productivity (i.e., managing human capital well) and building and maintaining important relationships both within the organiza- tion (with associates and other leaders) and externally (e.g., with alliance part- ners). Those who manage this human and social capital well are effective leaders.7 Based on this work, we assert that leadership is necessary in building and maintaining a high-involvement, high-performance workforce.

In this chapter, we examine the concept of leadership. We begin by de- scribing its fundamental nature. Next, we address three types of theories that have historically been used to explain leadership effectiveness: trait theories, behavioral theories, and contingency approaches. We then focus on more re- cent developments in leadership theory: the transformational and charismatic approaches. We close with a discussion of several additional topics of current relevance and importance.

the strategic importance of Leadership

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292 Chapter 8 Leadership

The Nature of Leadership We usually attribute the success or failure of an organization to its leaders. When a com- pany or an athletic team is successful, for example, it is the president or coach who receives much of the credit. These individuals are also subject to criticism if the company does not meet its goals or the team has a losing season.

Leadership has been defi ned in many ways, but most defi nitions emphasize the con- cept of infl uence. Here, we defi ne leadership as the process of providing general direction and infl uencing individuals or groups to achieve goals.8 A leader can be formally desig- nated by the organization (formal leader) or can provide leadership without such formal designation (informal leader).

Leaders can do many things to provide direction and to infl uence people. These ac- tivities include providing information, resolving confl icts, motivating followers, anticipat- ing problems, developing mutual respect among group members, and coordinating group activities and efforts.9 Warren Bennis, who has studied leadership for a number of years, suggests that effective leaders are concerned with “doing the right things” rather than “doing things right.”10 The right things, according to Bennis, include the following:

• Creating and communicating a vision of what the organization should be • Communicating with and gaining the support of multiple constituencies • Persisting in the desired direction even under bad conditions • Creating the appropriate culture and obtaining the desired results

From this defi nition of leadership, company presidents and many managers can be identifi ed as leaders. Coaches, basketball captains, and football quarterbacks are leaders. Army drill sergeants are leaders. The person who organizes a social gathering is also a leader. In other words, many people serve as either formal or informal leaders, and almost anyone can act as a leader. However, some positions provide more opportunities to display leadership behavior than others. And not all people in positions that call for leader behav- ior (e.g., managerial positions) act as leaders. For example, a manager who merely follows rules and fails to provide direction to and support for his associates is not acting as a leader.

Trait Theory of Leadership At one time, it was thought that some people were born with certain traits that made them effective leaders, whereas others were born without leadership traits.11 The list of traits generated by this early research was substantial (in the thousands) and included physical characteristics (such as height and appearance), personality characteristics (such as self- esteem and dominance), and abilities (such as intelligence and verbal fl uency). Additional traits that were thought to characterize leaders are presented in Exhibit 8-1.

Early trait research has been criticized for several reasons. For example, the methodol- ogy used to identify the traits was poor. Investigators simply generated lists of traits by loosely comparing people who were labeled as leaders with those who were not—without actually measuring traits or systematically testing for meaningful differences. A second criticism is that the list of traits associated with leadership grew so large it became mean- ingless. A third criticism is that the results of this research were inconsistent—different leaders possessed different traits. Finally, no leadership trait was found to relate consistently to unit or organizational performance, and different situations seemed to require different

leadership The process of providing general direction and infl uencing individuals or groups to achieve goals.

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Trait Theory of Leadership 293

traits.12 Although famous leaders (e.g., Abraham Lincoln, Gandhi, Martin Luther King, Jr.) had “special” traits, a close examination reveals differences among them. Numerous studies conducted to determine the traits that relate to effective leadership found that not all leaders possess the same traits.

Nevertheless, the notion of leadership traits has been revived in recent years.13 Re- search has demonstrated that leaders usually are different from other people. It is now believed, however, that many of the traits (or characteristics) that are possessed by leaders can be learned or developed (i.e., leaders are not born but are made). Moreover, possess- ing leadership traits is not enough to make a person a successful leader; he must also take specifi c actions necessary for strong leadership.14 The measurement and understanding of personal characteristics have improved since the early twentieth century, and modern researchers have proposed that important leadership traits can be categorized as follows:15

• Drive. Drive refers to the amount of ambition, persistence, tenacity, and initiative that people possess. Leaders must have the energy and will to continue to act during turbulent and stressful times. Drive and ambition are also important to a leader’s ability to create a vision and engage in behavior to achieve the vision.

• Leadership motivation. Leadership motivation refers to a person’s desire to lead, infl uence others, assume responsibility, and gain power. We must distinguish here between two types of motives. Leaders can have a socialized power motive, whereby they use power to achieve goals that are in the organization’s best interests or in the best interests of followers. In contrast, a leader with a personalized power motive desires power solely for the sake of having power over others.

• Integrity. Leaders with honesty are truthful and maintain consistency between what they say and what they do. Followers and others in the organization are not likely to trust a leader who does not have these characteristics.

• Self-confi dence. Leaders must be confi dent in their actions and show that confi dence to others. People who are high in self-confi dence are also able to learn from their mistakes, react positively to stress, and remain even-tempered and display appropriate emotions.

• Cognitive ability. Leaders who possess a high degree of intelligence are better able to process complex information, solve problems, and deal with changing environments.

• Knowledge of the domain. Knowledge of the domain in which they are engaged allows leaders to make better decisions, anticipate future problems, and understand the implications of their actions.

EXHIBIT 8-1 Traits Associated with Leadership

Energy Achievement drive Initiative Sense of humor Appearance Adaptability Insightfulness Tolerance for stress Intelligence Aggressiveness Integrity Interpersonal skill Judgment Enthusiasm Persistence Prestige Verbal fl uency Extraversion Self-confi dence Tact Source: Based on A.C. Jago. 1982. “Leadership: Perspectives in Theory and Research,” Management Science, 28: 315–336.

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294 Chapter 8 Leadership

EXPERIENCING ORGANIZATIONAL BEHAVIOR

W illiam Bratton was ap-pointed police commis-sioner of New York City in 1994 at perhaps one of the worst times in the history of the huge New York City Police Department (NYPD). New York City had experienced three decades of increasing crime rates, and some critics claimed that there was nothing the police department could do about it. Bratton, who had previously worked his way up through the Boston Police Department, faced a challenge that had been unresolved by his predecessors, and he had to handle the problem without an in- crease in resources.

Mr. Bratton became the head of the Los Angeles Police Department in 2002 at one of the worse times in its history. Los Angeles had just become the murder capital of the United States. The city was operating under federal supervision because of a number of corruption scandals and civil rights violations. Relations between the po- lice and citizens were strained. As in New York, many questioned whether Bratton could handle the situation.

To say that William Bratton exhib- ited successful leadership would be an understatement. Within two years, his leadership of the NYPD made New York City one of the safest large cities in the world. Felony crimes fell 39 percent, theft decreased 35 per- cent, and murders dropped 50 per- cent. Public confi dence in the police department, reported in Gallup polls, soared from 37 percent to 73 per- cent. Not only was the NYPD ef- fective in fi ghting crime, but police

offi cers were also happier with their jobs, reporting record levels of job satisfaction. In Los Angeles, violent crimes declined by nearly 50 per- cent during Bratton’s leadership from 2002 to 2009. The federal supervi- sion ended. Approval ratings from the public soared to 83%.

Does William Bratton exhibit the leadership traits suggested by mod- ern research? Yes, he does:

Drive. Bratton has been called a “cannonball,” which provides an idea of his drive and ambition. Bratton shows passion for his vi- sion that police should be held ac- countable for reducing crime and that success should be measured by how much crime, disorder, and fear are reduced.

Leadership motivation. From his early years in the Boston Police Department, Bratton expressed the desire to lead it some day. When he was leaving the New York City police commissioner’s job, he en- tertained the idea of running for mayor. Today, he is considering various leadership posts. He has been mentioned as a possible can- didate for the U.S. senate, gover- nor of New York, and director of the FBI.

Integrity. Bratton’s actions have always supported his words. Even in the face of opposition from political contingencies and civil liberties groups, he has remained committed to police accountability and zero-tolerance policies. Brat- ton has not tailored his messages

to his audiences. For example, he has said, “One of the things people like about me is that when I’m talking to a black audience I’m not talking any different than when I’m talking to a white audience.” Furthermore, he has been tough on corruption, fi ring offi cers who are dishonest.

Self-confi dence. Bratton has always displayed self-confi dence, particu- larly in the face of adversity. His self-confi dence has sometimes been interpreted as arrogance; however, over his career he has learned the difference between the two.

Cognitive ability. One of the most telling indications of Bratton’s strong cognitive ability is the stra- tegic manner in which he has ap- proached managing the country’s largest police departments.

Knowledge of the domain. Bratton worked his way through the ranks of the Boston Police Department, gaining knowledge about how po- licing works from the bottom up. As the NYPD police commissioner,

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Trait Theory of Leadership 295

he would ride the subway to work so that he had a better understand- ing of what was going on in the street. In Los Angeles, he would regularly visit barbershops, parks, and other gathering places to bet- ter understand the community.

Openness to new experiences. Bratton has been open to new ideas and change. He has fre- quently adopted the new ideas of others during his career. In Los An- geles, he changed his approach to minority relations, as the situation was quite different relative to what he had experienced in New York.

Extraversion. One of the key at- tributes that Bratton has brought to the policing is his hands-on ap- proach and vigorous pace. From informal chats with community leaders to Sunday dinners with his inner circle in New York, he has embraced people and the energy they create for him.

Beyond the traits listed above, Bratton undertook a number of spe- cifi c actions that led to success and

to his being named “Police Executive of the 20th Century” (and having his photo on the cover of Time). His suc- cess has been attributed to four major actions:

1. He endorsed decentralization, giv- ing strong authority and autonomy to precinct/division commanders. Instead of having to deal with bu- reaucratic policies that prevented them from combating crime, com- manders were able to deal more aggressively and decisively with it and do so with more understand- ing, involvement, and commitment from the communities in which they served.

2. He engaged in systematic stra- tegic planning to analyze crime patterns and use of resources. The end result was more effi cient use of resources. More police offi cers were assigned to higher-crime areas, and more focus was placed on common and serious crimes.

3. He adopted the Compstat process. This process uses computerized crime statistics, electronic maps,

and management meetings where precinct/division heads are held accountable (and rewarded or reprimanded) for the crime activity in their precincts.

4. He instigated a controversial policy known as zero-tolerance crime fi ghting. Police offi cers were required to arrest people for seem- ingly petty crimes such as graffi ti writing, panhandling, and minor vandalism. The philosophy behind this policy is that if a neighborhood is plagued by petty crime, it ap- pears to be out of control—reduc- ing the felt presence of the police and making criminals feel freer to commit more serious crimes.

Although there are critics of Brat- ton’s zero-tolerance style of policing and questions about some of his other tactics, the fact remains that crime was substantially reduced in both New York and Los Angeles, and po- lice relations with their communities were strengthened. Few doubt that Bratton is an effective leader.

Sources: W.J. Bratton, & P. Knobler. 1998. The Turnaround: How America’s Top Cop Reversed the Crime Epidemic New York: Random House; G. Kahn. 2009. “Bratton Joins Private Sector after 7 Years as L.A.’s Top Cop,” Wall Street Journal, Aug. 6, p. A.2; W.C. Kim, & R. Mauborgne. 2003. “Tipping Point Leadership,” Harvard Business Review, 81, no. 4: 60–69; J. Newfi eld & M. Jacobson. 2000. “An Interview with William Bratton,” at http://www.tikkun.org/ magazine/index.cfm/action/tikkun/issues/tik0007/article/000727.html; J. Zengerie. 2009. “Repeat Defender: After Taming Crime in Los Angeles Bill Bratton Has Won Over Skeptics Who Doubted His Success in New York,” New York, Nov. 30, pp. 12–16.

• Openness to new experiences. Being open to new ideas and approaches is associated with fl exibility, which can be very important in today’s dynamic world.

• Extraversion. Leaders who enjoy being around people, prefer to maintain a vigorous pace, and seek excitement are more likely to be proactive in engaging both problems and opportunities.

William Bratton, former chief of police for New York City and now retired head of the Los Angeles Police Department, exhibits these traits. As discussed in the Expe- riencing Organizational Behavior feature, he has leveraged them to create positive out- comes in the areas of enhanced public safety and reduced crime. He also has exhibited

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296 Chapter 8 Leadership

the characteristics of strategic leaders that were explained earlier. For example, he engaged in strategic planning in both New York and Los Angeles and effectively implemented the resulting strategies. To implement these strategies, he decentralized authority to leverage the talents of various leaders and used effective communication processes to enhance co- ordination. He used his knowledge of policing to have a strong positive effect on police- department performance.

Most studies of leaders have concluded that the traits focused on here are important. As noted, however, although specifi c traits may be necessary for a person to be an effective leader, ultimately she must take action to be successful.

Before ending this discussion of trait theory, it is important to mention charisma. Think of famous (or infamous) leaders such as John F. Kennedy, Adolf Hitler, Winston Churchill, Eleanor Roosevelt, Martin Luther King, Jr., Ronald Reagan, and Barbara Jor- dan. Many people believe that all of these individuals possessed charisma. Charisma is usually defi ned by the effect it has on followers. Charismatic leaders inspire their followers to change their needs and values, follow visionary quests, and sacrifi ce their own personal interests for the good of the cause. Traditionally, charisma was thought of as a personality trait. However, conceptualizing charisma as a simple personality trait has been subject to criticism. In addition, charisma has been diffi cult to defi ne precisely, and different leaders have displayed charisma in different ways.

The notion of charisma has become popular again in modern theories. Charismatic leadership, though possibly based in personality to some degree, can be learned over time (at least partially) and is ultimately refl ected in a leader’s behavior. Thus, it is best de- scribed by the leader’s behavior and her relationship to followers.16 We discuss charisma in more detail later in this chapter in the section on transformational leadership.

Behavioral Theories of Leadership In response to the heavy reliance in the earlier part of the twentieth century on trait theory and the notion that leaders are born and not developed, large research projects were conducted at the University of Michigan and the Ohio State University to examine what leaders actually did to be effective. This research concentrated largely on leadership style. Although both managerial thought and scholarly investigation have progressed beyond these two lines of research, this work provided the foundation for more contemporary theories of leadership, such as the transformational leadership approach discussed later in the chapter.

University of Michigan Studies The leadership studies at the Institute for Social Research of the University of Michigan were conducted by such scholars as Rensis Likert, Daniel Katz, and Robert Kahn. The studies involved both private and public organizations, including businesses from nu- merous industry groups. These studies examined two distinct styles of leader behavior: the job-centered and employee-centered styles.17

The job-centered leader emphasizes employee tasks and the methods used to ac- complish them. A job-centered leader supervises individuals closely (provides instruc- tions, checks frequently on performance) and sometimes behaves in a punitive manner toward them. Alternatively, an employee-centered leader emphasizes employees’ personal needs and the development of interpersonal relationships. An employee-centered leader

job-centered leadership style A behavioral leadership style that emphasizes employee tasks and the methods used to accomplish them.

employee-centered leadership style A behavioral leadership style that emphasizes employees’ personal needs and the development of interpersonal relationships.

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Trait Theory of Leadership 297

frequently delegates decision-making authority and responsibility to others and provides a supportive environment, encouraging interpersonal communication.

To measure these styles, leaders completed a questionnaire consisting of a number of items. Based on their responses, they were classifi ed as either job-centered or employee- centered. The effectiveness of these leaders was then examined by measuring factors such as the productivity, job satisfaction, absenteeism, and turnover rates of those being led.

The results of these studies were inconsistent. In some cases, units whose leaders used a job-centered style were more productive, whereas in other cases units with em- ployee-centered leaders were more productive. The job-centered style, however, resulted in less-productive units more often than did the employee-centered style. In addition, even when productivity was high, employees with job-centered leaders had lower levels of job satisfaction than those who worked with employee-centered leaders. Therefore, many of the researchers involved in the studies concluded that the employee-centered style was more effective.

The situations in which job-centered leaders were effective could not be explained well. In addition to style, then, other factors seemed to affect a leader’s effectiveness. In addition, the leadership style examined in these studies was unidimensional. A leader was classifi ed as either job-centered or employee-centered but could not possess characteristics of both styles. This oversimplifi cation no doubt affected the results of the research.

If we consider the case of Police Commissioner William Bratton, discussed in the ear- lier Experiencing Organizational Behavior feature, it is clear why the unidimensional view of leadership behavior is problematic. Although Bratton displayed a job-centered style by care- fully monitoring police offi cers’ performance and providing rewards or punishment based on that performance, he also demonstrated an employee-centered style by decentralizing authority and opening communication channels within the department. Similarly, Maria Yee from the opening case displayed both the job-centered and employee-centered styles.

Ohio State University Studies At around the same time that the University of Michigan studies were being conducted, leadership studies were underway at Ohio State University led by such scholars as Ralph Stogdill and Edwin Fleishman. These studies emphasized a two-dimensional view of lead- ers’ behavior. The two independent dimensions of leadership behavior were initiating structure and consideration.

Initiating structure indicates behavior that establishes well-defi ned patterns of organi- zation and communication, defi nes procedures, and delineates the leader’s relationships with those being led. Leaders who initiate structure emphasize goals and deadlines and en- sure that employees are assigned tasks and know what performance is expected from them.

Consideration refers to behavior that expresses friendship, develops mutual trust and respect, and builds strong interpersonal relationships with those being led. Leaders who exhibit consideration offer support to their employees, use employees’ ideas, and frequently allow them to participate in decisions.18

These two concepts are similar to the ones used in the Michigan studies—initiating structure is similar to job-centered leadership, while consideration is similar to employee- centered leadership. The important difference is that leaders can exhibit characteristics of both. Thus, an individual could be classifi ed in any of the four cells shown in Exhibit 8-2,

initiating structure A behavioral leadership style demonstrated by leaders who establish well-defi ned patterns of organization and communication, defi ne procedures, and delineate their relationships with those being led.

consideration A behavioral leadership style demonstrated by leaders who express friendship, develop mutual trust and respect, and have strong interpersonal relationships with those being led.

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298 Chapter 8 Leadership

whereas the Michigan approach artifi cially forced a person to be classifi ed in either Cell A or Cell C.

Various studies have examined the linkage between these two dimensions of leader behavior and effectiveness. Results of early research suggested that leaders high in both initiating structure and consideration were more effective than other leaders. However, further studies showed that the relationship between leaders’ behavior and their effective- ness, as measured by factors such as employee productivity, satisfaction, and turnover, was more complicated. In addition, each of the leader-behavior dimensions might affect vari- ous outcomes in different ways (structuring might have stronger effects on productivity, whereas consideration seems to have stronger effects on satisfaction, for example). A 2004 review of studies on initiating structure and consideration showed that the basic ideas of the Ohio State studies still applied.19 Newer theories of leadership, however, present a more complex and complete view.

Contingency Theories of Leadership Studies of trait and behavioral leadership concepts hinted at the importance of situational factors in leader effectiveness. Those studies led other researchers to conclude that effective leadership practices are “contingent” on the situation. Contingency leadership concepts were then developed. The two best known are the aptly named contingency theory of leader- ship effectiveness and the path–goal theory of leadership.

Fiedler’s Contingency Theory of Leadership Effectiveness The contingency theory of leadership effectiveness was developed by Fred Fiedler.20 According to this theory, the effectiveness of a leader depends on the interaction of the leader’s behavioral style with certain characteristics of the situation.

Leader Style Different leaders may, of course, exhibit different styles of behavior. Fiedler explains that leaders’ behavior is based on their motivational needs. The most important needs of

contingency theory of leadership effectiveness A theory of leadership that suggests that the effectiveness of a leader depends on the interaction of his style of behavior with certain characteristics of the situation.

Exhibit 8-2 Com- parison of Initiating Structure and Consider- ation with Job-Centered and Employee-Centered Concepts

B C

Low

Initiating Structure High

Low

High

C o

n s id

e ra

ti o

(Employee-Centered)

(Job-Centered)

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Contingency Theories of Leadership 299

leaders, according to Fiedler, are interpersonal-relationship needs and task-achievement needs. As you can see, these are similar to the concepts used in the Michigan and Ohio State studies.

The relative importance of these needs to a leader determines the leader’s style. In determining which need is strongest, the esteem for the least-preferred co-worker (LPC) must be assessed.21 If leaders describe their least-preferred co-worker mainly in negative terms (uncooperative, unfriendly), they obtain a low LPC score, which indicates a task- oriented leader whose task-achievement needs have fi rst priority. Leaders who describe their least-preferred co-worker in positive terms (cooperative, friendly) receive a high LPC score. A high score indicates that the leader has a relationship-oriented style where inter- personal relationship needs have fi rst priority.

Perhaps you have had a supervisor who focused mainly on the work to be done and did not engage in much personal interaction with those being led. This supervisor would probably have a low LPC score and be considered task-oriented. Contrast this person with another leader you have known who really cared about others and put a great deal of ef- fort into maintaining positive relationships with everyone. This leader would have a high LPC score and be considered relationship-oriented. Which of these styles is most effective? That depends on situational characteristics.

Situational Characteristics In some situations, leaders have more control over the work environment. In the context of Fiedler’s contingency theory, this means that leaders can infl uence events in a straight- forward way and work systematically toward desired outcomes. Important situational characteristics that determine a leader’s level of control include leader–member relations, task structure, and position power.

• Leader–member relations correspond to the degree to which a leader is respected, is accepted as a leader, and has friendly interpersonal relations. When a leader has the respect and admiration of those who are led, he tends to have more control over the situation. He can more easily infl uence events and outcomes. This is the most important of the three situational variables.

• Task structure is the degree to which tasks can be broken down into easily understood steps or parts. When a leader deals with structured tasks, she has more control over the situation. She can more easily infl uence events and drive for goal achievement.

• Position power is the degree to which a leader can reward, punish, promote, or demote individuals in the unit or organization. When a leader can reward and punish, he has greater control and infl uence over the situation.22

Situational Favorableness The amount of control a leader has determines the favorableness of the situation. In the most favorable situations, leader–member relations are good, the tasks are highly struc- tured, and the leader has strong position power. In the least favorable situations, leader– member relations are poor, tasks are unstructured, and leader position power is weak. Situations may, of course, vary between these two extremes.

Consider leading a project team for this course. Suppose that you have the respect of the team members, you are engaged in a set of tasks that can be easily managed, and you

leader–member relations The degree to which a leader is respected, is accepted as a leader, and has friendly interpersonal relations.

task structure The degree to which tasks can be broken down into easily understood steps or parts.

position power The degree to which a leader can reward, punish, promote, or demote individuals in the unit or organization.

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300 Chapter 8 Leadership

are able to assign participation grades. This represents a favorable situation in which you, as leader, could easily infl uence events and outcomes. Now suppose instead that you do not get along with the members of the team, you are engaged in a set of tasks that are dif- fi cult to manage, and you have no power to reward or punish team members. This would be a very unfavorable situation, in which you would have much less infl uence over events and probably would have more diffi culty working toward goal achievement.

Leadership Effectiveness The leader’s effectiveness is determined by the interaction of the leader’s style of behavior and the favorableness of the situational characteristics. The leader’s effectiveness is judged by the performance of the group being led. The linkages involving the leader’s effective- ness, her style of behavior, and situational favorableness are shown in Exhibit 8-3.

Fiedler’s research on the contingency model has shown that task-oriented leaders are more effective in highly favorable (I, II, III) and highly unfavorable (VII, VIII) situations, whereas relationship-oriented leaders are more effective in situations of intermediate fa- vorableness (IV, V, VI). More specifi cally, the correlations between LPC scores and group performance in favorable and unfavorable situations is negative (performance was higher when LPC was lower). The correlation between LPC and group performance in situa- tions of intermediate favorableness is positive (performance was higher when LPC was higher).23

Fiedler has also found that leaders may act differently in different situations. Relationship-oriented (high-LPC) leaders often display task-oriented behaviors under highly favorable conditions and display relationship-oriented behaviors in situations that are unfavorable or intermediate in favorableness. Conversely, task-oriented (low-LPC) leaders often display task-oriented behaviors in situations that are unfavorable or interme- diate in favorableness but display relationship-oriented behaviors in favorable situations.24 These fi ndings help to explain why various leadership styles are effective in different situ- ations, as discussed below.

Favorable situations do not require leaders to provide strong oversight or frequent task-focused inputs. Tasks can be accomplished with less direction from the leader. The

Effective Leader

Situational Favorableness

Leader–Member Relations

Task Structure

Leader Position Power

Situation

Task-Oriented (Low LPC)

Favorable

Good

Structured

Strong

Good

Structured

Weak

Good

Un- structured

Strong

III

Relationship-Oriented (High LPC)

Intermediate Favorableness

Good

Weak

Poor

Structured

Strong

Poor

Un- structured

Task-Oriented (Low LPC)

Unfavorable

Poor

Strong

VII

Poor

Weak

VIII

Un- structured

Weak

Structured

Exhibit 8-3 Fiedler’s Contingency Model of Leadership Effectiveness

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Contingency Theories of Leadership 301

task-oriented (low-LPC) leader’s interpersonal needs are activated in favorable situations; however, the relationship-oriented (high-LPC) leader’s needs for task achievement are ac- tivated in favorable situations. The low-LPC leader is thus more effective in favorable situ- ations because they require leaders to provide encouragement, support, and interpersonal trust (relationship-oriented behavior).

Unfavorable situations require stronger oversight and more task-focused inputs. In such situations, the high-LPC leader’s natural needs for interpersonal relations are acti- vated, which creates diffi culties. On the other hand, the low-LPC leader’s natural needs for task achievement are activated. This matches the requirements of the situation.

Situations of intermediate favorableness provide neither of these extremes. Where the task is unstructured, a naturally relationship-oriented leader may be necessary to get the group to use its creativity to solve problems. Where leader-member relations are poor, a naturally relationship-oriented leader may be better able to overcome the negative rela- tions with the group and build trust.

According to the contingency model, then, a leader cannot be effective in all situ- ations by exhibiting only one leadership style. Fiedler believes that individuals should be matched with situations in which their leadership styles are likely to be most effec- tive. Lacking the ability to reassign leaders, the characteristics of the situation should be changed to provide an effective match between the leader’s style and the favorableness of the situation.

Fiedler conducted extensive research on the contingency model, and most of his re- search provided support for it.25 Furthermore, the general observation that previously successful leaders do not always perform well after moving to a new job provides some support for a central idea in Fiedler’s theory—leaders have a certain style and cannot easily adjust to a new context. In a study of senior managers who had departed from GE, lack of fi t with a new job situation was cited as a cause of diffi culties.26 Still, the overall pool of research has provided only mixed support for Fiedler’s ideas.27 One issue is the simplicity of the model. It incorporates only two narrow behavioral styles (task and relationship). Moreover, it does not explain outcomes for the middle-LPC leader. Interestingly, some re- search suggests that the middle-LPC leader may be more effective than either the high- or low-LPC leader. Because the middle-LPC leader is more fl exible and is not constrained by one orientation, she may better adapt to multiple situations.28 Another concern has been the validity of the LPC measure. Critics believe that other measures of leader behavior are more reliable and valid.29 A fi nal concern has been the model’s failure to explicitly address followers’ satisfaction with leaders. Some research, however, has found the model to pre- dict follower satisfaction.30

These criticisms do not reduce the importance of Fiedler’s model. It represents one of the fi rst comprehensive attempts to explain a complex subject. In addition, a signifi cant amount of research supports the model, and researchers continue to investigate and at- tempt to extend it.

The Path–Goal Leadership Theory The path–goal leadership theory was originally developed by Martin Evans31 and Robert House.32 The theory, which is based on expectancy concepts from the study of motivation, emphasizes a leader’s effects on subordinates’ goals and the paths used to achieve those goals. It provides a bridge to the modern study of leadership.

path–goal leadership theory A theory of leadership based on expectancy concepts from the study of motivation, which suggests that leader effectiveness depends on the degree to which a leader enhances the performance expectancies and valences of her subordinates.

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Recall from Chapter 6 that expectancies relate to the perceived probability of goal at- tainment and valences correspond to the value or attractiveness of goal attainment. Leader- ship can affect employees’ expectancies and valences in several ways:

• Facilitating employees’ efforts to achieve task goals (effort : performance expectancy). Effective leaders help employees (through encouragement, training, and technical direction, for example) believe that their efforts on a task will lead to goal attainment. As part of this, leaders address any barriers perceived by a given employee.

• Tying extrinsic rewards (pay raise, recognition, promotion) to accomplishment of task goals (performance : reward instrumentality).

• Linking individuals to tasks for which goal attainment is personally valuable (valence). In other words, leaders can assign individuals to tasks that they will fi nd rewarding.

These tactics used by leaders increase effectiveness; employees achieve higher perfor- mance because of their increased motivation on the job. Specifi c behaviors through which these tactics are implemented must be tailored, however, to the situation. More so than Fielder’s theory, the path–goal theory highlights the ability of managers to tailor their behaviors.33

Leader Behavior and Situational Factors The path–goal leadership theory focuses on several types of leader behavior and situational factors. The main types of leader behavior are as follows:34

• Directive leadership behavior is characterized by implementing guidelines, providing information on what is expected, setting defi nite performance standards, and ensuring that individuals follow the rules.

• Supportive leadership behavior is characterized by being friendly and showing concern for well-being, welfare, and needs.

• Achievement-oriented leadership behavior is characterized by setting challenging goals and seeking to improve performance.

• Participative leadership behavior is characterized by sharing information, consulting with those who are led, and emphasizing group decision making.

Directive leadership and achievement-oriented leadership are related to the earlier concepts of job-centered style (Michigan studies), initiating structure (Ohio State studies), and task orientation (Fiedler’s contingency theory of leadership effectiveness). Supportive leadership and participative leadership are related to the concepts of employee-centered style (Michigan studies), consideration (Ohio State studies), and interpersonal orientation (Fiedler’s contingency theory of leadership effectiveness).

There are two sets of situational factors: subordinates’ characteristics (such as needs, locus of control, experience, and ability) and characteristics of the work environment (such as task structure, interpersonal relations in the group, role confl ict, and role clarity). The effectiveness of various leader behaviors depends on these situational factors.

Interaction of Leader Behavior and Situational Factors Path–goal theory specifi es a number of interactions between leader behavior and situ- ational factors, with these interactions infl uencing outcomes. Researchers, however, have

directive leadership Leadership behavior characterized by implementing guidelines, providing information on what is expected, setting defi nite performance standards, and ensuring that individuals follow rules.

supportive leadership Leadership behavior characterized by friendliness and concern for individuals’ well-being, welfare, and needs.

achievement-oriented leadership Leadership behavior characterized by setting challenging goals and seeking to improve performance.

participative leadership Leadership behavior characterized by sharing information, consulting with those who are led, and emphasizing group decision making.

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Contingency Theories of Leadership 303

provided only mixed support for the theory,35 with some studies supporting it and others failing to support it.36 Relationships that appear to be valid are listed below:

• Associates with an internal locus of control (who believe outcomes are a function of their own behavior) are likely to be more satisfi ed with a participative leader. Individuals with an external locus of control (who believe outcomes are a function of chance or luck) are more likely to be effective with directive leaders.

• Associates who have a high need for affi liation are likely to be more satisfi ed with a supportive leader. Supportive leaders fulfi ll their needs for close personal relationships.

• Associates with a high need for security probably will be more satisfi ed with a directive leader who reduces uncertainty by providing clear rules and procedures.

• Supportive and participative leaders are more likely to increase satisfaction on highly structured tasks. Because the tasks are routine, little direction is necessary. Directive leaders are more likely to increase satisfaction on unstructured tasks, where individuals (particularly those with less experience and ability) often need help in clarifying an ambiguous task situation.

• Directive leadership is often more effective on unstructured tasks because it can increase an employee’s expectation that effort will lead to task-goal accomplishment (particularly when employees have less experience and/or ability). Supportive leadership is often more effective on structured tasks because it can increase a person’s expectation that accomplishing goals will lead to extrinsic rewards.37

• Associates with a high need for growth who are working on a complex task probably perform better with a participative or achievement-oriented leader. Because they are intrinsically motivated, they appreciate information and diffi cult goals that help in achievement. Individuals with a low growth need strength working on a complex task perform better with directive leaders.38

A summary of these interactions involving leader behavior and situational factors is presented in Exhibit 8-4. Although any number of situational factors could play roles in leader effectiveness,39 those discussed here have been shown to be important.

Situational Factors

Subordinate Characteristics

Characteristics of the Work Environment

Internal Locus of Control

External Locus of Control

High Need for Affiliation

High Need for Security

High Growth Need Strength

Low Growth Need Strength

High Growth Need Strength

Low Growth Need Strength

Structured Task

Unstructured Task

Complex Task

Simple Task

Participative

Directive

Supportive

Directive

Supportive

Directive

Participative Achievement Oriented

Directive

Supportive

Effective Leader Behaviors

Exhibit 8-4 Interac- tion of Leader Behavior and Situational Factors

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304 Chapter 8 Leadership

Phil Jackson’s success as a coach in the National Bas-ketball Association (NBA) is legendary. He has won eleven championships, six with the Chicago Bulls and fi ve with the Los Angeles Lakers. He has more playoff victories than anyone else in the history of the league and has the best winning percentage in playoff games among coaches with signifi cant playoff experience. He also sports the best winning percentage in regular sea- son games.

Some have suggested that Jackson’s success is due only to having great players, such as Michael Jordan, Shaquille O’Neal, and Kobe Bryant. But the facts do not support this. In both Chicago and Los Angeles, the great play- ers did not win championships until Jackson arrived.

So what makes him special? One answer to this question is his philosophy of leadership. His philosophy, which has been infl uenced by Zen Bud- dhism, embraces humility, respect for others, and a belief in the intercon- nected nature of humankind. Jackson said this:

In terms of leadership, this means treating everyone with the same

care and respect you give your- self—and trying to understand their reality without judgment. When we can do that, we begin to see that we all share human struggles, desires, and dreams.

In essence, Jackson applies a philosophy that suggests less direc- tive leadership, which fi ts the situa- tion he faces in the NBA. His play- ers typically have strong ability, a great deal of experience, and strong growth needs in terms of wanting to achieve on the basketball court. In addition, the relevant tasks are rela- tively structured. Under these condi- tions, directive leadership behaviors would be less desirable, and Jack- son is known to be one of the least- directive coaches during basketball games.

In Los Angeles, Jackson helped his star player, Kobe Bryant, rebuild respect with his fellow players after a tumultuous period. Although tensions continue to arise from time to time, Jackson helped to make the situation better. He did so by advising Bryant to exhibit fewer directive behaviors in his own leadership. In Bryant’s words:

Sometimes it’s best if you just step back and kind of guide

them a little bit and allow them to learn on their own. Very subtle. That’s … one of the things he taught me. …

Within his overall approach, Jackson tailors his leadership to cir- cumstances. If players are less expe- rienced or have growth needs that are dormant, he is more directive. His goal is to be “invisible,” but he would not advise such invisibility in all situations.

Sources: Basketball-Reference.com, “Phil Jackson,” 2009, at http://www.basketball-reference.com/coaches/ jacksph01c.html; M. Bresnahan. 2007. “Leader Counsel,” Los Angeles Times, Feb. 20, p. D.1; D. Dupree. 2002. “Phil Jackson: Zen and Now,” USA Today.com, June 6, at http://www.usatoday.com/sports/nba/02playoffs/2002- 06-05-cover-jackson.htm; P. Jackson, & H. Delehanty. 1995. “Sacred Hoops” New York: Hyperion; NBA Encyclo- pedia, “All-Time Regular Season Victories-Coaches,” 2009, at http://www.nba.com/history/records/victories_ coaches.html; J.P. Pfeffer, & R.I. Sutton. 2006. “Hard Facts, Dangerous Half-truths, & Total Nonsense” Boston: Harvard Business School Press.

MANAGERIAL ADVICE

Phil Jackson and Leadership Success

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Transformational Leadership 305

Conclusions Regarding Contingency Theories Contingency leadership concepts are more diffi cult to apply than the trait or behavioral concepts because they are more complex. But when appropriately used, they are more practical and should therefore lead to higher levels of effectiveness. In essence, they require that leaders correctly diagnose a situation and identify the behaviors that are most appro- priate (those that best fi t the characteristics of the situation). Also, contingency theories imply that a leader might need to change her approach over time. Among those being led, abilities and experience levels change, as do other features of the situation, suggesting that leaders must change their approaches.40 Finally, path–goal theory implies that leaders might need to treat individuals differently within the same unit or organization.41 If indi- viduals in a unit are different, then leaders can benefi t from approaching them in different ways, at least to some degree.

In order to be successful, leaders must act in ways that fi t the situation in which they fi nd themselves. Phil Jackson, one of basketball’s great coaches, leads in a way that fi ts his situation. His story is presented in the Managerial Advice feature.

Although important and useful, contingency theories of leadership have received less at- tention in recent years. The dynamic business environment and rapid technological advance- ments of the past two decades have combined to create the need for a new approach to leader- ship.42 We next turn to one of the most signifi cant contemporary paradigms for leadership.

Transformational Leadership The need for organizations to change and adapt rapidly while creating a high-performance workforce has become increasingly apparent in recent years. To stay competitive, business leaders must be able to inspire organizational members to go beyond their ordinary task requirements and exert extraordinary levels of effort and adaptability. As a result, new ap- proaches to leadership have emerged.

Transactional leadership43 provides a useful starting point in this discussion. This type of leadership focuses primarily on leaders’ extrinsic exchange relationships with fol- lowers—that is, the degree to which leaders provide what followers want in response to good performance. Followers comply with leaders’ wishes to gain desired rewards. Trans- actional leaders have the following four specifi c characteristics:44

1. They understand what followers want from their work, and they attempt to deliver these rewards if deserved.

2. They clarify the links between performance and rewards.

3. They exchange rewards and promises of rewards for specifi ed performance.

4. They respond to interests of followers only if performance is satisfactory.

Transactional leaders are characterized by contingent reward behavior and active management-by-exception behavior.45 Contingent reward behavior involves clarifying performance expectations and rewarding followers when those expectations are met. Active management-by-exception behavior is demonstrated when a leader clarifi es mini- mal performance standards and punishes those who do not perform up to the standards. Transactional leaders consistently monitor the performance of their followers.

In contrast to this extrinsic exchange-based approach, transformational leadership involves motivating followers to do more than expected, to continuously develop and

transactional leadership A leadership approach that is based on the exchange relationship between followers and leaders. Transactional leadership is characterized by contingent reward behavior and active management- by-exception behavior.

transformational leadership A leadership approach that involves motivating followers to do more than expected, to continuously develop and grow, to increase self- confi dence, and to place the interests of the unit or organization before their own. Transformational leadership involves charisma, intellectual stimulation, and individual consideration.

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grow, to increase their level of self-confi dence, and to place the interests of the unit or organization before their own.46 Transformational leaders do the following three things:

1. They increase followers’ awareness of the importance of pursuing a vision or mission and the strategy required.

2. They encourage followers to place the interests of the unit, organization, or larger collective before their own personal interests.

3. They raise followers’ aspirations so that they continuously try to develop and improve themselves while striving for higher levels of accomplishment.

Transformational leadership results from both personal characteristics and specifi c ac- tions. Three characteristics have been identifi ed with transformational leaders: charisma, intellectual stimulation, and individual consideration.47 Charisma refers specifi cally to the leader’s ability to inspire emotion and passion in his followers and to cause them to identify with the leader.48 A charismatic leader displays confi dence, goes beyond self-in- terest, communicates and lives up to organizational values, draws attention to the purpose of the organization or mission, and speaks optimistically and enthusiastically. The second characteristic, intellectual stimulation, is the leader’s ability to increase the followers’ focus on problems and to develop new ways of addressing them. Leaders who provide intel- lectual stimulation reexamine assumptions, seek out different views, and try to be inno- vative. Finally, individual consideration involves supporting and developing followers so that they become self-confi dent and desire to improve their performance. Leaders showing individual consideration provide individualized attention to followers, focus on followers’ strengths, and act as teachers and coaches.

A great deal of research has focused on how transformational leaders behave—that is, what they do to become transformational leaders. The list of common behaviors includes the following:49

• Transformational leaders articulate a clear and appealing vision, which is benefi cial to the followers.

• They communicate the vision through personal action, emotional appeals, and symbolic forms of communication (such as metaphors and dramatic staged events).

• They delegate signifi cant authority and responsibility. • They eliminate unnecessary bureaucratic constraints. • They provide coaching, training, and other developmental experiences to

followers. • They encourage open sharing of ideas and concerns. • They encourage participative decision making. • They promote cooperation and teamwork. • They modify organization structure (such as resource allocation systems) and

policies (such as selection and promotion criteria) to promote key values and objectives.

The proactive and energetic nature of transformational leadership hints at an opposite approach, called laissez-faire or passive-avoidant leadership.50 Leaders displaying a laissez- faire style are not proactive, react only to failures or chronic problems, avoid making deci- sions, and are often absent or uninvolved in followers’ activities. Such leaders typically do not have positive outcomes.51 Leaders who strongly display transformational leadership do not display laissez-faire behaviors.

charisma A leader’s ability to inspire emotion and passion in his followers and to cause them to identify with the leader.

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Transformational Leadership 307

Commander D. Michael Abrashoff exemplifi ed trans- formational leadership during his days on the USS Ben- fold.52 First, Abrashoff ’s charisma was evident in several different ways. He demonstrated confi dence with his in- formal but passionate manner. Consistent with this, he said the following: “I divide the world into believers and infi dels. What the infi dels don’t understand … is that in- novative practices combined with true empowerment produce phenomenal results.” He focused on the vision of extreme readiness in order to protect the United States, and he communicated that vision clearly to all crew mem- bers, often meeting with them individually. He tried to link each crew member’s tasks to the vision. He also went beyond self-interest, saying, “Anyone on my ship will tell you that I’m a low maintenance CO. It’s not about me; it’s about my crew.”

Abrashoff demonstrated his ability to create intellectual stimulation by continuously reexamining the way things were done on the ship and changing procedures when a better way was found. He stated, “There is always a better way to do things.” During his fi rst few months on the Benfold, he thoroughly analyzed all operations. He questioned everyone involved in each operation to fi nd out whether they had suggestions for how to do things better. They almost always did.

Finally, Abrashoff displayed individual consideration by meeting individually with all new recruits on the ship and asking three questions: “Why did he/she join the Navy? What’s his/her family situation like? What are his/her goals while in the Navy—and be- yond?” He said that getting to know the sailors as individuals and linking that knowledge to the vision for the ship was critical. He always treated the sailors with respect and dignity. For example, he had the ship’s cooks train at culinary schools so that the food would be the best of any ship in the Navy. Furthermore, he created learning opportunities for the crew. He wanted the crew to take the time to thoroughly learn their jobs and develop the skills necessary for job success and promotion.

The Benfold achieved notable performance, both in terms of reduced maintenance and repair budgets and in terms of combat-readiness indicators such as gunnery scores. At one point, the ship was considered the best in the U.S. Navy’s Pacifi c Fleet, and it was awarded the prestigious Spokane Trophy. Furthermore, the commitment and satisfaction of the crew was quite high. One hundred percent of the crew signed up for a second tour of duty (the average for the Navy at the time was 54 percent).

Systematic research on transformational leadership is still being conducted. However, several conclusions have become apparent. First, leaders can be trained to exhibit trans- formational leadership behaviors.53 Second, leaders can display both transformational and transactional leadership styles.54 William Bratton provides a clear example of this. While exhibiting many charismatic qualities and decentralizing authority (transformational lead- ership), he also closely monitored offi cers’ performance and rewarded or punished that performance accordingly (transactional leadership). Likewise, Maria Yee provides a clear example. While inspiring a shared vision and empowering individuals to make decisions (transformational leadership), she has also rewarded key performers and generally held people accountable (transactional leadership).

©Reuters/Corbis

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308 Chapter 8 Leadership

Third, both transformational and transactional leadership can be positive.55 Transac- tional leadership has been associated with follower satisfaction, commitment, performance, and in some cases organizational citizenship (contingent reward behavior appears to be more positive than active management by exception).56 Transformational leadership has also been linked to follower satisfaction and commitment, unit performance, organizational perform- ance, and individual performance.57 There are some differences. For example, the effects of transformational leadership seem to be stronger at the unit level than at the individual level (collective unit outcomes versus the outcomes of individuals). Furthermore, transforma- tional leaders are viewed as better leaders by their followers and are more likely to enhance the self-concepts of followers.58 This can pay important dividends in terms of confi dence and sustained efforts. Finally, transformational leaders seem to be more effective in bringing about signifi cant change in a unit or organization,59 which explains why this form of leader- ship receives so much attention in today’s fast-paced world. By focusing on shared visions of the future and collective interests, transformational leaders promote change.60

A unique study used historical data to assess U.S. presidents’ charismatic leadership (part of transformational leadership). The study found that presidential charisma was posi- tively related to presidential performance (measured by the impact of the president’s deci- sions and various ratings by historians).61 Another particularly interesting study found that the market value (stock price) of companies led by charismatic leaders was higher than the market value of other companies. This study also found that external stakeholders were more likely to make larger investments in a fi rm led by a charismatic leader than in fi rms whose leaders did not display charismatic qualities.62 In another study, transformational leaders positively affected the outcomes of a strategic acquisition.63 Because diversifi cation and growth strategies often involve acquisitions of other fi rms, this is an important fi nd- ing. As mentioned, however, it appears that both types of leadership can be effective; the organizational context may determine which one should be emphasized.64 Transactional leadership perhaps should be a greater part of the leadership mix in stable situations, where signifi cant change is not required. Transformational leadership perhaps should be a greater part of the mix in more dynamic situations, where associates must perform outside of explicit expectations, in terms of either providing extraordinary effort or being innova- tive. Overall, though, an integration of transformational and transactional leadership ap- proaches seems to provide the most effective leadership strategy.65 The basic relationships are shown in Exhibit 8-5.

Very recently, transformational leadership theory has been put to use in the pursuit of more ethical behavior in organizations. We describe this work in the Experiencing Organi- zational Behavior feature.

The scandals described in the Experiencing Organizational Behavior feature dramati- cally illustrate the effects of leaders on the performance of an organization. Unfortunately, they show the negative effects of leadership. The leaders at Enron, for example, destroyed all value in a multibillion-dollar corporation, and many people lost their jobs and all re- tirement savings because of the unethical leadership.

Additional Topics of Current Relevance In closing our discussion of leadership, we cover several additional topics relevant to lead- ing in today’s workplaces. We discuss leader–member exchange, servant leadership, gender effects on leadership, and global differences in leadership.

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Additional Topics of Current Relevance 309

EXPERIENCING ORGANIZATIONAL BEHAVIOR

The twenty-fi rst century seems to have brought an all-time low in ethical behavior by corpo- rate leaders. A record number of top executives have been caught in out- rageous scandals, leading to a large drop in public confi dence in business leadership. Here are some examples:

• In one of the most widely reported scandals, numerous Enron execu- tives—including former CEO Ken- neth Lay; former COO, president, and CEO Jeffrey Skilling; and for- mer CFO Andrew Fastow—were indicted on various charges, in- cluding conspiracy, fraud, and money laundering. Fastow alone was indicted on 788 charges and was sentenced to a 10-year prison term in return for pleading guilty to conspiracy and agreeing to help prosecutors with the rest of the cases. Enron declared bankruptcy in December 2001—the scandal involved, among other things, out- rageous attempts to cover up the company’s poor performance. Ar- thur Andersen LLP, the accounting fi rm that served as Enron’s auditor, was convicted in June 2002 of obstruction of justice for destroy- ing Enron documents. The Enron fi asco had a terrible fi nancial im- pact on thousands of employees, who had most of their retirement in Enron stock, as well as on share- holders and on the company’s creditors, who have received little of what they are owed.

• Samuel D. Waksal, founder of ImClone Systems, pleaded guilty in October 2002 to charges of

securities fraud, perjury, and ob- struction of justice. He played a major role in the fl urry of stock sales that occurred after he learned that the Food and Drug Administration was not going to approve one of ImClone’s new cancer drugs.

• The Waksal case led to the even- more-publicized trial of Martha Stewart, the popular lifestyle guru, who stood trial on charges related to her sale of ImClone stock. As part of the trial, many personally embarrassing details about Stew- art’s behavior were revealed (e.g., her tendency to treat employees badly). She was convicted and sent to prison.

• Bernard Madoff was jailed in 2009 for running a giant Ponzi scheme that cost investors billions of dollars. Paying earlier investors with the money of later investors rather than generating actual in- vestment returns has been a popu- lar crime over the years, but the scale of Madoff’s fraud was epic. Charities that had entrusted funds to Madoff were among the hard- est hit. Several had to close their doors. Retirees were also hard hit.

• In an alleged Ponzi scheme, fi nan- cier R. Allen Stanford of the Stan- ford Financial Group was indicted in 2009. Laura Pendergest-Holt, the fi rm’s chief investment offi cer, was also indicted not only for possible involvement in the Ponzi scheme but also for obstruction of justice. Billions of investor dollars have been lost.

The large number of scandals (and there were many more than reported here) has led to a public outcry demanding that the manage- ment community, including business schools, place more emphasis on the ethical behavior of leaders. In re- sponse to this demand, new concep- tualizations of leadership have been advanced. One such conceptualiza- tion is authentic leadership, proposed by Fred Luthans and Bruce Avolio.

Building on the research regard- ing transformational leadership, which partially addresses the quality of moral behavior, Luthans and Avolio posit the need to focus attention on developing leaders who are not only transformational but also authentic. An authentic leader is someone who is genuine, trustworthy, and truthful. Authentic leaders “own” their thoughts, emotions, and beliefs and act accord- ing to their true selves. These leaders have the following qualities:

• They are guided by values that focus on doing what’s right for their constituencies.

Ethical Leadership? Authentic Leadership!

©Stan Honda/AFP/Getty Images, Inc.

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310 Chapter 8 Leadership

Leader–Member Exchange The leader–member exchange (LMX) model builds on a simple idea: leaders develop different relationships with different followers.66 A leader develops positive relationships with some followers but develops less positive relationships with others. An individual’s ability to contribute at a high level is one factor that determines the relationship with the leader. An individual’s similarity to the leader, in terms of personality and interests, is another factor.67

leader–member exchange A model of leadership focused on leaders developing more positive relationships with some individuals and having more positive exchanges with these individuals.

• They try to act in accordance with their values.

• They remain transparent. That is, they are aware of their own short- comings and discuss these short- comings with others. Others are free to question them.

• They “walk the talk.” That is, they model confi dence, hope, optimism, and resiliency.

• They place equal weight on get- ting the task accomplished and developing associates.

• They continuously develop them- selves.

• They have developed the values and personal strength they need to deal with ambiguous ethical issues.

The concept of authentic lead- ership is important in today’s com- plex business environment. Future

leadership development and training should encompass authentic qualities so that leaders will be less likely to succumb to greed and dishonesty. Perhaps with this new stage in leader- ship development, images of execu- tives from major companies being led away in handcuffs and innocent peo- ple being emotionally and fi nancially devastated by corporate corruption will be a less common sight!

Sources: Associated Press, “Timeline of Events in Enron Scandal,” press release, Feb. 19, 2004; A. Efrati, T. Lau- ricella, & D. Searcey. 2008. “Top Broker Accused of $50 Billion Fraud,” Wall Street Journal, Dec. 12, p. A.1; B. George, P. Sims, A. McLean, & D. Mayer. 2007, “Discovering Your Authentic Leadership,” Harvard Business Review, 85, pp. 129–138; F. Luthans & B.J. Avolio. 2003 “Authentic Leadership,” in K.S. Cameron, J.E. Dutton, & R.E. Quinn (Eds.), Positive Organizational Scholarship San Francisco: Berrett-Koehler; E. Perez, & S. Stecklow. 2009. “Stanford is Indicted in Fraud, Surrenders,” Wall Street Journal, June 19, p. C.1; “The Perp Walk,” BusinessWeek Online, Jan. 13, 2003, at http://www.businessweek.com/print/magazine/content/03_02/bb3815660.htm.

Dynamism of the task/

organizational environment

Charisma

Intellectual stimulation

Individual consideration

Contingent reward behavior

Active management-by-exception

Transformational Leadership

Transactional Leadership

Individual outcomes

Unit/organization outcomes

Outcomes

Exhibit 8-5 The Effects of Transformational and Transactional Leadership

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Additional Topics of Current Relevance 311

Individuals who have positive relationships with the leader are members of an in-group. They experience leader–member exchange characterized by mutual trust, mutual support, and the provision of substantial resources. Individuals who have less positive relationships with the leader are members of an out-group. They experience out-group leader–member exchange characterized by more formality, less respect, lack of mutual support, and fewer opportunities for growth. Research on the LMX model indicates that members of an out- group tend to have lower levels of satisfaction, commitment, and performance.68

The existence of an out-group is inconsistent with high-involvement management. The high-involvement approach requires selection and retention of qualifi ed individuals, proper training and coaching for each of them, and meaningful work for each of them. This is not simply a moral imperative. As explained in Chapter 1, organizational performance is at stake. Leaders should provide opportunities for all employees, or at least for as many as possible.

Servant Leadership Similar to authentic leadership, servant leadership overlaps with the transformational tradition.69 It includes elements such as valuing individuals, developing people, building community, conceptualizing, exhibiting foresight, and displaying wisdom.70 Its distinc- tive focus, however, lies with an emphasis on serving others, both inside and outside the organization. Servant leaders want to serve others. They want to serve those who follow them. Their self-concepts are those of servants rather than leaders. And they often do not seek out leadership roles. Rather, such roles are thrust upon them.

Max De Pree, former CEO of Herman Miller, often told a story that illustrates the key idea. In his words:

I arrived at the local tennis club just after high school students had vacated the locker room. Like chickens, they had not bothered to pick up after themselves. Without thinking too much about it, I gathered up all their towels and put them in a hamper. A friend of mine quietly watched me do this and then asked me a question that I’ve pondered many times over the years. “Do you pick up towels because you’re the president of the company? Or are you the president because you pick up towels?”71

The premise of the fi rst question is more consistent with servant leadership. It sug- gests a mentality of “I am the leader, therefore I serve,” rather than “I am the leader, therefore I lead.”72

Systematic research into the effects of servant leadership is very limited. Even so, the research that is available suggests positive effects on associates’ job satisfaction and commitment to the organization.73 James Blanchard, former CEO of Synovus Financial Corporation, put it this way:

The heart of the servant-leader brings order, brings meaning to employees. When employees feel order and meaning and that they are part of a team that stands for something good, that there is a higher calling than just working to get a paycheck, that they are improving mankind, there is an energy level that explodes and great things happen.74

Gender Effects on Leadership Do women lead differently relative to men? Given the increase in the number of women in the U.S. workforce since the 1970s and the concern over the glass ceiling facing women who wish to advance in U.S. corporations,75 it is not surprising that a great deal

servant leadership An approach to leadership focused on serving others.

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312 Chapter 8 Leadership

of attention has been focused on this question. For over three decades, researchers have investigated the issue of gender and leadership, and this research has been characterized by a great deal of debate.76 There are reasons to believe that women often lead differently (for better or worse) than men, and there are also reasons to expect no differences in how men and women lead, particularly in U.S. work organizations.

One argument suggesting that women and men behave differently as leaders is referred to as the structural–cultural model of leader behavior.77 This model sug- gests that because women often experience lack of power, lack of respect, and certain stereotypical expectations that result from cultural norms and stereotypes, they must behave differently from men to be effective leaders.78 For example, followers are likely to expect different behaviors from women than from men. Thus, a female leader who acts aggressively might be viewed as mean-spirited or overly emotional, whereas a man behaving in the same way might be thought of as strong, confi dent, or passionate. Women may also be pressured to conform to certain gender-role stereotypes, such as being more interpersonally oriented and nurturing.79 In essence, they are required to fi nd a way to lead while making associates comfortable by exhibiting behavior consis- tent with gender-role stereotypes. Women who do this will not necessarily be less effec- tive leaders because, as we discussed above, the effectiveness of specifi c leader behaviors depends on situational factors. Therefore, when the situation calls for a leader who emphasizes concern and caring for followers, women exhibiting nurturing behavior and strong interpersonal skills are likely to be effective and perhaps will be better at leading than men.80

In contrast, the socialization model suggests that there should be no differences in the way male and female leaders behave.81 According to this argument, when all newcom- ers enter an organization, they are socialized into the organization’s norms and accepted ways of behaving. Regardless of gender, all who advance to leadership positions have ex- perienced the same organizational socialization and therefore are likely to display similar leader behaviors.82 Therefore, women and men who have advanced into leadership posi- tions will behave in the same way in a given organization. Across all organizations, both women and men will display a variety of behaviors.

Research evidence exists for both points of view. On the one hand, some studies have found that women display more interpersonal and social behaviors in small groups assembled as part of formal experiments, whereas men display more task-oriented behav- iors.83 Other studies have found women to be more democratic and participative than men in both experimental situations and in real organizations.84 On the other hand, some research examining female leaders in organizational work settings has found no differ- ences in the way male and female leaders behave.85 Interestingly, in one study of almost 700 middle-level and executive managers, female managers and executives engaged more frequently in both stereotypical female behaviors (interpersonal behaviors) and stereo- typical male behaviors (task-oriented behaviors).86 In this case, the organization highly valued both types of behaviors—and it appeared that female leaders had to demonstrate those behaviors to a greater degree than did men. In conclusion, answering the question of whether women and men lead differently is not simple.87 Overall, a number of studies support the idea that some stereotypical differences exist among managers, but the evi- dence is not quite as clear as we would like it to be. Moreover, studies that are supportive of this idea tend to reveal differences that are quite small in magnitude (i.e., women and men might differ but only to a small degree).

structural–cultural model A model holding that because women often experience lack of power, lack of respect, and certain stereotypical expectations, they develop leadership styles different from those of the men.

socialization model A model proposing that all leaders in a particular organization will display similar leadership styles, because all have been selected and socialized by the same organization.

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Additional Topics of Current Relevance 313

The arguments concerning the differences or lack thereof between male and female leaders could be ex- tended to differences between racial/ethnic minority lead- ers and white majority leaders. However, less research has been done on this issue than on gender differences. Re- sults tend to show weak differences or no differences.88 However, to address this issue more fully we need to better understand glass-ceiling issues that also affect racial/ethnic minority group members.

Global Differences in Leadership As discussed in greater detail in Chapters 2 and 3, the U.S. workforce has become more diverse. In particular, global- ization has produced situations in which U.S. managers lead associates socialized in different cultures, interna- tional managers lead U.S. associates, and work groups are made up of people from differ- ent cultures who must work together. Most of the theories and fi ndings discussed so far in this chapter have focused primarily on the North American workforce, which values par- ticipation in decision making, narrow power distance (power should be equally shared), a high-performance orientation (people should be rewarded for good performance), signifi - cant individualism, and reasonably strong orientation toward the future (planning, invest- ing, delaying gratifi cation).89 We can easily understand why leaders who are charismatic, engender participation, and provide relevant rewards for high performance are effective with this workforce.

But what happens in a culture that values collectivism (i.e., the group is viewed as more important than individuals) or has a high power distance (where people believe that power should be hierarchically distributed)? Such views are common in Arabic cultures such as Egypt and Morocco.90 Would effective leadership take a different form? Or are there universal truths about what makes a good leader? As Michael Marks, CEO of Flex- tronics, a multinational manufacturing company, points out, “I have learned that in every place we operate, in every country, the people want to do a good job [and] there is no place where people can’t do a world class job. … This isn’t to say we approach every region with cookie-cutter uniformity.”91

The U.S. National Science Foundation funded a worldwide project, headed by Rob- ert House, to examine whether leadership differs across different cultures and whether the effectiveness of different types of leadership varies by culture. This study is referred to as the GLOBE project (Global Leadership and Organizational Behavior Effectiveness).92 It was fi rst introduced in Chapter 3. Findings from the GLOBE project, based on surveys of thousands of people, cluster countries into groups with shared histories and values. Below is a description of the ideal leader for four cultural clusters:

1. Anglo cluster93 (Australia, Canada, England, Ireland, New Zealand, South Africa [white sample], and United States): The ideal leader demonstrates charismatic infl uence and inspiration while encouraging participation. Ideal leaders are viewed as being diplomatic, delegating authority, and allowing everyone to have their say.

©AP/Wide World Photos

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314 Chapter 8 Leadership

2. Arabic Cluster94 (Egypt, Morocco, Kuwait, and Qatar, with Turkey also being included with these Arabic countries): Ideal leaders need to balance a paradoxical set of expectations. On one hand, they are expected to be charismatic and powerful, but on the other, they are expected not to differentiate themselves from others and to have modest styles. Leaders are also expected to have a great deal of power and to direct most decisions and actions.

3. Germanic cluster95 (Austria, Germany, the Netherlands, and Switzerland): The ideal leader is one who is charismatic and participative, and who conceptualizes her relationships in a team-like fashion.

THE STRATEGIC LENS

Leadership is a critically important concept in orga-nizational behavior and equally important for the performance of organizations. As demonstrated in this chapter, leaders have direct and strong effects on the performance of the individuals and teams they lead. At all levels in the organization, lead- ers often have major goals for perfor- mance, and they provide the context and take actions that affect and sup- port efforts to achieve those goals. Leaders at the top of organizations, with input from lower-level leaders and associates, establish the strate- gies designed to achieve the organi- zation’s overall goals. Furthermore, the actual achievement of those goals is based strongly on the quality of the leadership they and other leaders throughout the organization provide in the implementation of strategies. In such implementations, leaders may need to be directive while simultane- ously exhibiting compassion for their associates.

For strategies to be effective, they need to be formulated and im- plemented within a context of appro- priate organizational values and with

a working knowledge of the global environment. In addition, organiza- tional strategies can be more effec- tively implemented when the value of diversity is understood and used to advantage. Research has shown that entering international markets with current products helps the fi rm achieve economies of scale (reduces the cost for each product sold), but selling goods in international markets has additional benefi ts that are even greater. For example, organizations operating in international markets often gain access to new knowledge. People from different cultures develop different ways of thinking and operat- ing. As a result, leaders can obtain new ideas from employees, custom- ers, and suppliers in international markets and incorporate them into their domestic operations and other foreign operations as well.99

International operations provide an excellent opportunity to gain ben- efi ts from diversity, as discussed in Chapters 2 and 3. For example, some fi rms develop teams composed of peo- ple from multiple ethnic and cultural backgrounds. With effective lead- ership, these heterogeneous teams

often produce more creative ideas and solutions to problems. Also, they can better understand diverse cus- tomers and satisfy their needs.100 Al- though the global context is complex, effective leadership adjusts to it and uses the multicultural environments to benefi t the organization. Thus, lead- ers who espouse and exhibit ethical values, understand and use a diverse workforce to benefi t the organization, and adapt to and extract knowledge from different environments in interna- tional markets contribute to an organi- zation’s capability to achieve and sus- tain a competitive advantage. These leadership characteristics contribute to the formulation of better strategies and to more effective implementation of those strategies.101

Critical Thinking Questions

1. How should leaders approach in- dividuals, units, and organizations suffering from poor performance?

2. Why is ethical leadership often of utmost importance to various stakeholders?

3. Should women and men lead in different ways?

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What This Chapter Adds to Your Knowledge Portfolio 315

4. Southern Asia cluster96 (India, Indonesia, Iran, Malaysia, Philippines, and Thailand): The ideal leader is humane, participative, and charismatic. Leaders are expected to be benevolent while maintaining a strong position of authority.

The fi ndings from the GLOBE project suggest that charismatic leadership is viewed as effective and desirable across all cultures. Other dimensions of leadership, such as participation, humaneness, and team orientation, vary in importance across cultures. As numerous CEOs of multinational fi rms have indicated,97 today’s managers need to develop the cultural sensitivity required to understand differences in leadership require- ments across national boundaries and cultures in order to develop highly productive multinational workforces.98

What This Chapter Adds to Your Knowledge Portfolio In this chapter, we have discussed ideas about what makes a leader effective. We have covered trait theories, behavioral theories, contingency theories, and transformational leadership theory. All of these theories are related and build on one another. In specifi c terms, the following points were made:

• Leadership is the process of providing general direction and infl uencing individu- als or groups to achieve goals.

• Trait theories of leadership propose that a person must possess certain characteristics to become a leader. Older trait theories held that leaders were born, not made. More modern trait theories state that certain characteristics are necessary but not suffi - cient for a person to be an effective leader and that many leadership characteristics can be developed or learned. Eight core traits of leaders are drive, leadership motiva- tion, integrity, self-confi dence, cognitive ability, knowledge of the relevant domain, openness to new experiences, and extraversion. Charisma may also be important.

• The Michigan studies focused on two distinct behavioral leadership styles—job- centered and employee-centered. The job-centered leader emphasizes tasks and the methods used to accomplish them. The employee-centered leader emphasizes employees and their needs and the development of interpersonal relationships. Research on which style is more effective has been inconclusive.

• The Ohio State studies focused on two dimensions of leader behavior: initiating structure and consideration. Leaders exhibiting initiating structure establish well- defi ned patterns of structure and communication, defi ning both the work activities and the relationship between leaders and subordinates. A leader showing consider- ation expresses friendship and develops mutual trust and strong interpersonal re- lationships with subordinates. Leaders may possess any combination of these two dimensions. Early research indicated that leaders exhibiting high levels of both initiating structure and consideration were most effective. However, later research showed that leadership effectiveness is more complex than this simple idea suggests.

• Fiedler’s contingency model of leadership suggests that effectiveness depends on the match between a leader’s style and the degree of favorableness of the situation.

The important situational characteristics in this model are leader–member rela- tions, task structure, and the leader’s position power. Situational favorableness is determined by the amount of control a leader has. Fiedler’s research indicates

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316 Chapter 8 Leadership

that task-oriented leaders are more effective in highly favorable or highly unfavorable situations, whereas relationship-oriented leaders are more effective in situations of intermediate favorableness. Fiedler’s model has been criticized, but it is one of the fi rst contingency concepts proposed and is sup- ported by some research.

• The path–goal leadership model pro- posed by Robert House is based on the expectancy concept of motivation. Leaders positively infl uence individuals by enhanc- ing their beliefs about the attainability of goals, giving consistent rewards for task- goal achievement, and assigning tasks that have valuable rewards for people being managed. Research has provided support for many of the specifi c predictions of the theory.

• Transformational leadership has been the subject of recent attention. Transactional leaders, who provide a useful contrast to transformational leaders, provide clear

expectations and reward or punish follow- ers based on their performance. Followers comply with leaders’ wishes to gain desired rewards. Transformational leaders moti- vate followers to do more than expected, to

continuously develop and grow, to build up their own confi dence, and to put the interests of the team or organization before

their own. They display charisma, intellectual stimulation, and individual consid- eration of followers. Research shows that both types of leadership can be positive and even necessary, with the appropriate degree of emphasis on each varying with the context (stable versus dynamic situations).

• Leader–member exchange is focused on the nature of the relationship between a leader and an individual in his unit/organization. When a positive relationship exists, the individual is a member of an in-group and experiences positive inter- actions. When a less positive relationship exists, the individual is a member of an out-group and experiences less positive interactions. Research shows that out- group members have lower satisfaction, commitment, and performance.

• Servant leadership means serving others. Research has been scant, but a number of individuals report success with the approach.

• Whereas the structural–cultural model suggests that there are signifi cant differ- ences in the leadership styles used by men and women, the socialization model holds that men and women experience the same organizational socialization and therefore exhibit the same leadership behaviors in U.S. work organizations. Re- search is mixed.

? back to the knowledge objectives 1. What is leadership, and why is it important for organiza-

tions? 2. Are leaders born or made? Explain your answer. What are

the core traits possessed by effective leaders? 3. Considering the fi ndings from the Michigan and Ohio State

studies, what do you think is the most effective leadership style? Give reasons to support your choice.

4. What key situational variables are related to leadership effectiveness in Fiedler’s model of leadership effectiveness and in the path–goal model of leadership? In what ways do contingency models fall short in specifying a complete picture of effective leadership?

5. How do transformational and transactional leaders differ? What kind of results can be expected from each type of leader?

6. How do the leader–member exchange and servant–leader- ship models differ?

7. Explain why male and female leaders might engage in dif- ferent leadership behaviors. What does the evidence show with respect to differences in leadership?

8. Describe the characteristics of an effective leader in each of the following clusters of countries: Anglo, Arabic, Germanic, and Southern Asia.

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Human Resource Management Applications 317

• The globalization of business has helped us understand that leaders must exhibit different styles to be effective in different regions of the world. For example, in the Anglo region, the ideal leader demonstrates charismatic infl uence and inspiration while encouraging participation, whereas in the Arabic region leaders are expected to have a great deal of power and to direct most decisions and actions.

Thinking about Ethics 1. What ethical responsibilities do leaders have in the organizations in which they work? What

are the primary ethical issues involved in the leader’s relationship to the organization?

2. What is more important, associates’ productivity or leaders’ exhibiting ethical behaviors? Is ethical behavior more important even if the result is poor performance? Why or why not?

3. Are ethical leaders more effective than leaders who exhibit unethical behaviors? Explain why or why not.

4. Assume that you are the leader of a marketing group and have been trying for some time to acquire a large new customer in a foreign country. One of your sales representatives reports that a competitor has offered a bribe to a key offi cial of the company to obtain the contract. If you do not respond, your organization will likely lose this major new contract and your group will probably not meet its sales goal for the year. What should you do? Explain the reasons for your recommendation.

Key Terms leadership, p. 292 job-centered leadership

style, p. 296 employee-centered leadership

style, p. 296 initiating structure, p. 297 consideration, p. 297 contingency theory of leader-

ship effectiveness, p. 298 leader–member

relations, p. 299

task structure, p. 299 position power, p. 299 path–goal leadership

theory, p. 301 directive leadership, p. 302 supportive leadership,

p. 302 achievement-oriented

leadership, p. 302 participative leadership,

p. 302

transactional leadership, p. 305

transformational leadership, p. 305

charisma, p. 306 leader–member exchange,

p. 310 servant leadership, p. 311 structural–cultural

model, p. 312 socialization model, p. 312

Human Resource Management Applications The Human Resource Management (HRM) function plays a key role in a fi rm’s ability to develop leaders at all levels of the fi rm. Several specifi c activities managed by the HRM department are particularly important.

In many organizations, the development of a comprehensive leadership model is partly the responsibility of the HRM unit. These models specify the precise behaviors and values that are expected in the organization. In many ways, these models defi ne the culture of the organization. Culture is crucial for effective execution of strategies and attainment of organizational goals, as discussed in Chapter 13.

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318 Chapter 8 Leadership

building your human capital

Are You a Transformational Leader? Individuals lead in different ways. Understanding your own leadership behavior is very useful in as- sessing its appropriateness. In this chapter’s Building Your Human Capital, we provide an assessment tool for transformational, transactional, and laissez-faire leadership.

Instructions If you currently hold or have recently held a leadership position, ask several individuals who have experienced your leadership to respond to the questions that appear below. Your leadership position could involve managing a formal work unit in a company, leading a temporary team in an organiza- tion, being captain of an intramural basketball team, being pledge chairwoman for a sorority, and so on. If you do not have recent leadership experience, then complete a self-assessment, being very honest with yourself about the behaviors that you probably would exhibit in a future leadership role. Alternatively, you could complete the assessment with another leader in mind (i.e., rate some- one who has been a leader for a unit or organization in which you have been a member).

For each item, tell your respondents to rate the frequency with which you engage in the be- havior described. Also tell them that few people have extreme scores (low or high) on all or even most items (a “1” or a “4” is an extreme score). Have each respondent circle the appropriate number beside the item, using the following scale (note that “L” stands for Leader):

1 2 3 4 Never Infrequently Frequently Always

1. L goes beyond self-interest. 1 2 3 4 2. L has my respect. 1 2 3 4 3. L displays power and confi dence. 1 2 3 4 4. L talks of values. 1 2 3 4 5. L models integrity. 1 2 3 4 6. L considers the integrity dimension of situations. 1 2 3 4 7. L emphasizes the collective mission. 1 2 3 4 8. L talks optimistically. 1 2 3 4 9. L expresses confi dence. 1 2 3 4 10. L talks enthusiastically. 1 2 3 4 11. L arouses awareness about important issues. 1 2 3 4 12. L reexamines assumptions. 1 2 3 4 13. L seeks different views. 1 2 3 4 14. L suggests new ways. 1 2 3 4 15. L suggests different angles. 1 2 3 4 16. L individualizes attention. 1 2 3 4 17. L focuses on your strengths. 1 2 3 4

The administration of internal leadership development programs is also an important responsi- bility for many HRM units. These face-to-face programs are designed to raise the skill levels of new and experienced managers. Frequently, internal instructors are augmented with university-based faculty to facilitate the introduction of leading-edge knowledge.

The development and administration of intranet- and Internet-based programs are also tasks for HRM units. These programs can encompass many tactical and strategic topics, ranging from time management and motivating through goals to vision creation and articulation.

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Building Your Human Capital 319

18. L teaches and coaches. 1 2 3 4 19. L differentiates among us. 1 2 3 4 20. L clarifi es rewards. 1 2 3 4 21. L assists based on effort. 1 2 3 4 22. L rewards your achievements. 1 2 3 4 23. L recognizes your achievements. 1 2 3 4 24. L focuses on your mistakes. 1 2 3 4 25. L puts out fi res. 1 2 3 4 26. L tracks your mistakes. 1 2 3 4 27. L concentrates on failures. 1 2 3 4 28. L reacts to problems but only when very serious. 1 2 3 4 29. L reacts to only the biggest failures. 1 2 3 4 30. L displays a philosophy of “If it’s not broke, don’t fi x it.” 1 2 3 4 31. L reacts to problems, if chronic. 1 2 3 4 32. L avoids involvement. 1 2 3 4 33. L is absent when he or she is needed. 1 2 3 4 34. L avoids deciding. 1 2 3 4 35. L delays responding. 1 2 3 4

Scoring Items 1–11: These items measure charisma. To calculate your score, sum the points given to you by each respondent and then divide by the number of respondents (i.e., calculate the average total score given by the respondents). If your score is above 29, then you display signifi cant charisma. If the score is greater than 41, then you score very high on charisma.

Items 12–15: These items measure intellectual stimulation. If the total score for these items (aver- aged across respondents) is greater than 10, then you display signifi cant intellectual stimulation. If the score is greater than 14, you score very high on intellectual stimulation.

Items 16–19: These items measure individualized consideration. If you scored higher than 11 (averaged across respondents), you display individual consideration to a signifi cant degree. If the score is greater than 15, then you score very high on individual consideration.

Items 20–23: These items measure contingent reward behavior. If you scored higher than 10 (averaged across respondents), you display contingent reward behavior to a signifi cant degree. If the score is greater than 14, then you score very high on contingent reward behavior.

Items 24–27: These items measure management-by-exception behavior. If you scored higher than 7 (averaged across respondents), you demonstrate management-by-exception behavior to a signifi cant degree. If the score is greater than 11, then you score very high on management-by-exception behaviors.

Items 28–35: These items measure tendencies toward laissez-faire leadership. If you scored more than 8 (averaged across respondents), you display passive behavior to some degree. If the score is greater than 16, then you score very high on passive leadership.

Transformational leaders are characterized by charisma, intellectual stimulation, and individualized consideration. If you scored high on these three scales, then you are a good example of a transforma- tional leader.

Transactional leaders provide contingent rewards and exhibit management-by-exception behaviors. If you scored high on these two scales, then you engage in transactional leadership. It is possible for a leader to be high on both transformational and transactional leadership.

Laissez-faire managers score high on avoidant/passive behaviors. If you scored high on the last set of items, then you are most likely a passive leader.

Source: Based on B.J. Avolio, B.M. Bass, and D.I. Jung. 1999. “Re-examining the Component of the Transformational and Transactional Leadership Using the Multifactor Leadership Questionnaire,” Journal of Occupational and Organiza- tional Psychology, 72: 441–462.

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320 Chapter 8 Leadership

team exercise

Coping with People Problems The purpose of this exercise is to develop a better understanding of leadership through participation in a role-play in which a leader must cope with an employee problem.

an organizational behavior moment

The Two Presidents Frances Workman had been president of Willard University for less than two years, but during that time she had become very popular throughout the state. Frances was an excellent speaker and used every opportunity to speak to citizen groups statewide. She also worked hard to build good relationships with the major politicians and business leaders in the state. This was not easy, but she managed to maintain favorable relationships with most.

She also had worked on the internal structure of the orga- nization, streamlining the administrative component. She started a new alumni club to help fi nance academic needs, such as new library facilities and higher salaries for faculty and staff. In addi- tion, she lobbied the state legislature and the state university co- ordinating board for a larger share of the state’s higher education budget dollars. Her favorable image in the state and her lobbying efforts resulted in large increases in state funding for Willard. In- terestingly, Frances was so busy with external matters that she had little time to bother with the daily operations of the university. However, she did make the major operational decisions. She del- egated the responsibility for daily operations to her three major vice presidents.

Before Frances’s arrival, Willard University had several presi- dents, none of whom had been popular with the state’s citizens or particularly effective in managing the university’s internal af- fairs. The lack of leadership resulted in low faculty morale, which affected student enrollment. Willard had a poor public image. Frances worked hard to build a positive image, and she seemed to be succeeding.

Another state university, Eastern State, had Alvin Thomas as president. Al had been president about three years. He was not as popular externally as Frances. He was not a particularly effective speaker and did not spend much time dealing with the external affairs of the university. Al delegated much of that responsibility to a vice president. He did work with external groups but in a quieter and less conspicuous way than Frances did.

Al spent much of his time working on the internal opera- tion of the university. When he arrived, he was not pleased to fi nd that Eastern was under censure by the American Association of University Professors (AAUP) and that the university had a large number of students without adequate faculty. In addition,

Eastern was not involved in externally funded research. Al was committed to developing a quality university. Although he did not change the fundamental administrative structure of Eastern, he did extend considerable responsibilities to each of his vice pres- idents. He had high performance expectations for those on his staff, set ambitious goals, and reviewed every signifi cant decision made in the university, relying heavily on his vice presidents and deans to implement them effectively. He developed a thorough planning system, the fi rst of its kind at Eastern. He maintained good relations with the board of regents, but faculty viewed him as somewhat “stilted” and indifferent.

Frances projected a positive image to people in the state and along with that had built a positive image of Willard. The results of her efforts included an increase in enrollment of more than a thousand students in the past year. This occurred when enroll- ments were declining for most other colleges and universities in the state. Willard received the largest budget increase ever from the state university coordinating board and the state legislature. Finally, the outside funds from her special alumni club totaled al- most $2 million in its fi rst year. Faculty morale was higher, but fac- ulty members viewed Frances warily because of her external focus.

In contrast, Eastern received an average budget increase similar to those it had received in the past. Although Eastern still had more students than Willard, its student enrollment declined slightly (by almost 300 students). However, the university was removed from AAUP censure. Externally funded research had increased by ap- proximately $2 million during the previous year. Faculty morale was declining, and most faculty members did not believe they had an important voice in the administration of the university.

Discussion Questions 1. Based on the information provided, describe Frances’s and

Al’s leadership styles. 2. What are the important factors that the leaders of Willard

and Eastern must consider in order to be effective? 3. Compare and contrast Frances’s and Al’s effectiveness as lead-

ers of their respective universities. What did each do well? What could each have done to be more effective?

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Team Exercise 321

Procedure 1. Assemble into three-person teams. 2. Within each team, one person should be selected as Don Martinez, the manager; one person

selected as John Williams, the subordinate; and one person as the observer. 3. Each person should read his or her role and prepare to role-play the situation (allow 10

minutes for reading and preparing for roles). Each person, except the observer, should read only the role assigned. The observer should read all role materials.

4. After preparation, each team will engage in the role-play for approximately 20 minutes. 5. Following the role-play, each observer will answer the relevant questions and prepare

to discuss how the leader (Don Martinez) handled the subordinate’s (John Williams’) problem.

6. Reassemble as a class. Each observer will describe the leadership situation in his or her team. 7. The instructor will present additional points for consideration.

Role for Don Martinez You are manager of material control for Xenex Corp. You have had the job for fi ve years and have almost 15 years of managerial experience. You enjoy working at Xenex, although advancement op- portunities have become somewhat limited in the fi rm and budget constraints have been nontrivial in recent months. Four supervisors report to you, and John Williams is one of them. John is super- visor of inventory control. He has 22 people under his direction and has held the position for nine years. He is a good supervisor, and his unit performance has never been a problem.

However, in recent weeks you’ve noticed that John seems to be in a bad mood. He doesn’t smile and has snapped back at you a couple of times when you’ve made comments to him. Also, one of his lead persons in the warehouse quit last week and claimed John had been “riding” him for no apparent reason. You think there must be some problem (maybe at home) for John to act this way. It is uncharacteristic.

John made an appointment to see you today and you hope that you can discuss this problem with him. You certainly want to deal with the problem because John has been one of your best supervisors.

Role for John Williams You have been supervisor for inventory control for Xenex Corp. for almost nine years. You’ve had this job since about six months after graduating from college. When you took the job, Xenex was much smaller, but the job was a real challenge for a young, inexperienced person. The job has grown in complexity and number of people supervised (now 22).

Don Martinez, your boss, is manager of material control. He has held the job for about fi ve years. When he was selected for the position, you were a little disappointed that you were not pro- moted to it, because you had done a good job. However, you were young and needed more experi- ence, as the director of manufacturing told you.

Overall, Don has been a fairly good manager, but he seems to have neglected you during the past couple of years. You have received good pay increases, but your job is boring now. It doesn’t present any new challenges. You just turned 31 and have decided that it’s time to move up or go elsewhere. In past performance-appraisal sessions, you tried to talk about personal development and your desire for a promotion, but Don seemed unresponsive.

You’ve decided that you must be aggressive. You have done a good job and don’t want to stay in your present job forever. You believe that you have been overlooked and ignored and don’t intend to allow that to continue.

The purpose of your meeting today is to inform Don that you want a promotion. If the com- pany is unable or unwilling to meet your needs, you are prepared to leave. You intend to be aggressive.

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322 Chapter 8 Leadership

Role for Observer You are to observe the role-play with Don Martinez and John Williams without participating. Please respond to the following based on this role-play:

1. Briefl y describe how the situation evolved between Don and John.

2. What leadership style did Don use in trying to deal with John?

3. How was the problem resolved?

4. How could Don have handled the situation more effectively?

Endnotes 1. Pfeffer, J., & Sutton, R.I. 2006. Hard facts, dangerous half-truths, &

total nonsense: Profi ting from evidence based management. Boston: Harvard Business School Press, pp. 187–214.

2. Waldman, D.A., Ramirez, G.C., House, R.J., & Puranam, P. 2001. Does leadership matter? CEO leadership attributes and probability under conditions of perceived environmental uncer- tainty. Academy of Management Journal, 44: 134–143.

3. Resick, C.J., Whitman, D.S., Weingarden, S.A., & Hiller, N.J. 2009. The bright-side and the dark-side of CEO personality: Examining core self-evaluations, narcissism, transformational leadership, and strategic infl uence. Journal of Applied Psychology, 94: 1365–1381.

4. Haapniemi, P. 2003. Leading indicators: The development of ex- ecutive leadership. At http//www.ccl.org.

5. Finkelstein, S., & Hambrick, D. 1996. Strategic leadership. St Paul, MN: West Publishing Co.

6. For additional insights related to vision creation as an aspect of strategic leadership, see Ireland, R.D., & Hitt, M.A. 1999.

Achieving and maintaining strategic competitiveness in the 21st century: The role of strategic leadership. Academy of Management Executive, 13(1): 43–57.

7. Hitt, M.A., & Ireland, R.D. 2002. The essence of strategic lead- ership: Managing human and social capital. Journal of Leadership and Organizational Studies, 9(1): 3–14.

8. Wesley, K.N., & Yukl, G.A. 1975. Organizational behavior and industrial psychology. New York: Oxford University Press, pp. 109–110.

9. Kouzes, J.M., & Posner, B.Z. 2002. The leadership challenge. San Francisco: Jossey-Bass.

10. Bennis, W. 1982. The artform of leadership. Training and Devel- opment Journal, 36(4): 44–46.

11. Kirkpatrick, S.A., & Locke, E.A. 1991. Leadership: Do traits matter? Academy of Management Executive, 5: 48–60.

12. Stogdill, R.M. 1974. Handbook of leadership: A survey of theory and research. New York: Free Press.

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http://www.ccl.org

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13. Judge, T.A., Piccolo, R.F., & Kosalka, T. 2009. The bright and dark sides of leader traits: A review and theoretical extension of the leader trait paradigm. Leadership Quarterly, 20: 855–875; Zaccaro, S.J. 2007. Trait-based perspectives of leadership. Ameri- can Psychologist, 62: 6–16.

14. Kirkpatrick & Locke, Leadership: Do traits matter? 15. Our list of important traits is based heavily on the work of Kirk-

patrick & Locke, Leadership: Do traits matter? It also refl ects the following: Judge, T.A., Hono, J.E., Ilies, R., & Gerhardt, M.W. 2002. Personality and leadership: A qualitative and quantitative review. Journal of Applied Psychology, 87: 765–780; Judge, Piccolo, & Kosalka, The bright and dark sides of leader traits: A review and theoretical extension of the leader trait paradigm; Peterson, S.J., Walumbwa, F.O., Byron, K., & Myrowitz, J. 2009. CEO Positive psychological traits, transformational leadership, and fi rm performance in high-technology start-up and established fi rms. Journal of Management, 35: 348–368.

16. Bass, B.M., & Avolio, B.J. 1990. The implications of transac- tional and transformational leadership for individual, team, and organizational development. In W.A. Pasmore, & R.W. Wood- man (Eds.), Research in organizational change and development, Vol. 4. Greenwich, CT: JAI Press, pp. 231–272; House, R.J., Spangler, W.D., & Woycke, J. 1991. Personality and charisma in the U.S. presidency: A psychological theory of leader effective- ness. Administrative Science Quarterly, 36: 364–396.

17. Likert, R. 1961. New patterns of management. New York: McGraw-Hill.

18. Stogdill, Handbook of leadership. 19. Judge, T.A., Piccolo, R.F., & Illies, R. 2004. The forgotten ones?

The validity of consideration and initiating structure in leader- ship research. Journal of Applied Psychology, 89: 36–51.

20. Fiedler, F.E. 1967. A theory of leadership effectiveness. New York, NY: McGraw-Hill.

21. Ibid. 22. For additional information on situational factors, see Fiedler, F.E.

1993. The leadership situation and the black box in contingency theories. In M.M. Chemers, & R.Y. Ayman (Eds.), Leadership theory and research: Perspectives and directions. New York, NY: Aca- demic Press, pp. 2–28.

23. Fiedler, F.E. 1971. Validation and extension of the contingency model of leadership effectiveness: A review of empirical fi ndings. Psychological Bulletin, 76: 128–148.

24. Fiedler, F.E. 1972. Personality, motivational systems, and behav- ior of high and low LPC persons. Human Relations, 25: 391–412.

25. Chemers, M.M., & Skrzypek, C.J. 1972. Experimental test of the contingency model of leadership effectiveness. Journal of Personal- ity and Social Psychology, 24: 173–177; Fiedler, F.E., & Chemers, M.M. 1972. Leadership and effective management. Glenview, IL: Scott, Foresman.

26. Groysberg, B., McLean, N., & Nohria, N. 2006. Are leaders por- table? Harvard Business Review, 84 (5): 92–100.

27. For meta-analyses of LPC research, see Peters, L.H., Hartke, D.D., & Pohlmann, J.T. 1985. Fiedler’s contingency theory of leader- ship: An application of the meta-analysis procedures of Schmidt and Hunter. Psychological Bulletin, 97: 274–285; Schriesheim, C.A., Tepper, B.J., & Tetrault, L.A. 1994. Least-preferred

co-worker score, situational control, and leadership effectiveness: A meta-analysis of contingency model performance predictions. Journal of Applied Psychology, 79: 561–573.

28. Kennedy, J.K. 1982. Middle LPC leaders and the contingency model of leadership effectiveness. Organizational Behavior and Human Performance, 30: 1–14.

29. Green, S.C., & Nebeker, D.M. 1977. The effects of situational factors and leadership style on leader behavior. Organizational Be- havior and Human Performance, 20: 368–377; Hare, A.P., Hare, S.E., & Blumberg, H.H. 1998. Wishful thinking: Who has the least preferred co-worker? Small Group Research, 29: 419–435; Shifl ett, S. 1981. Is there a problem with the LPC score in leader match? Personnel Psychology, 34: 765–769; Singh, B. 1983. Lead- ership style and reward allocation: Does Least Preferred Co- Worker scale measure task and relation orientation? Organiza- tional Behavior and Human Performance, 32: 178–197.

30. Rice, R.W. 1981. Leader LPC and follower satisfaction: A review. Organizational Behavior and Human Performance, 28: 1–25.

31. Evans, M.C. 1970. The effects of supervisory behavior on the path-goal relationship. Organizational Behavior and Human Per- formance, 7: 277–298.

32. House, R.J. 1971. A path-goal theory of leadership effectiveness. Administrative Science Quarterly, 16: 321–338.

33. Liden, R.C., & Antonakis, J. 2009. Considering context in psy- chological leadership research. Human Relations, 62: 1587–1605.

34. For work that followed the original specifi cation of the theory, see: Fulk, J., & Wendler, E.R. 1982. Dimensionality of leader- subordinate interactions: A path-goal investigation. Organiza- tional Behavior and Human Performance, 30: 241–264; House, R.J., & Mitchell, T.R. 1974. Path-goal theory of leadership. Jour- nal of Contemporary Business, 3: 81–99; Podsakoff, P.M., Todor, W.D., Grover, R.A., & Huber, V.L. 1984. Situational modera- tors of leader reward and punishment behaviors: Fact or fi ction? Organizational Behavior and Human Performance, 34: 21–63.

35. For a quantitative synthesis of research, see: Woffard, J.C., & Liska, L.Z. 1993. Path-goal theories of leadership: A meta-analy- sis. Journal of Management, 19: 857–876. For a supportive study in Taiwan, see: Silverthorne, C. 2001. A test of path-goal lead- ership theory in Taiwan. Leadership and Organizational Develop- ment Journal, 22: 151–158.

36. For additional insight on the mixed results, see: House, R.J. 1996. Path-goal theory of leadership effectiveness: Lessons, legacy, and a reformulated theory. Leadership Quarterly, 7: 305–309.

37. For additional insight, see: House, R.J., & Dessler, G.A. 1974. Path-goal theory of leadership: Some post hoc and a priori tests. In J.G. Hunt & L.L. Larsen (Eds.), Contingency approaches to leader- ship. Carbondale: Southern Illinois University Press, pp. 29–59.

38. For additional insight, see: Griffi n, R.W. 1979. Task design de- terminants of effective leader behavior. Academy of Management Review, 4: 215–224; and Johnsen, A.L., Luthans, F., & Hennes- sey, H.W. 1984. The role of locus of control in leader infl uence behavior. Personnel Psychology, 37: 61–75.

39. Podsakoff, P.M., MacKenzie, S.B., Ahearne, M., & Bommer, W.H. 1995. Searching for a needle in a haystack: Trying to iden- tify illusive moderators of leadership behaviors. Journal of Man- agement, 21: 422–470.

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324 Chapter 8 Leadership

40. For details of one framework emphasizing this point, see: Hersey, P., & Blanchard, K.H. 1988. Management of organizational be- havior: Utilizing human resources (5th ed.). Englewood Cliffs, NJ: Prentice Hall.

41. See, for example: Schriesheim, C.A., Castro, S.L., Zhou, X., & DeChurch, L.A. 2006. An investigation of path-goal and trans- formational leadership theory at the individual level of analysis. Leadership Quarterly, 17: 21–38.

42. For related commentary from the key fi gure in path-goal theory, see: House, R.J. 1999. Weber and the neocharismatic paradigm. Leadership Quarterly, 10: 563–574.

43. Bass & Avolio, The implications of transactional and transforma- tional leadership for individual, team, and organizational devel- opment; Whittington, J.L., Coker, R.H., Goodwin, V.L., Ickes, W. 2009. Transactional leadership revisited: Self-other agreement and its consequences. Journal of Applied Social Psychology, 39: 1860–1886.

44. Bass, B.M. 1985. Leadership and performance beyond expectations. New York: Free Press.

45. Bass & Avolio, The implications of transactional and transforma- tional leadership for individual, team, and organizational devel- opment.

46. Bass, Leadership and performance beyond expectations; Bass & Avolio, The implications of transactional and transformational leadership for individual, team, and organizational development.

47. Others have specifi ed four or more characteristics, but our three are grounded in the original work and have proven useful. For additional details, see: Judge, T.A., & Piccolo, R.F. 2004. Trans- formational and transactional leadership: A meta-analytic test of their relative validity. Journal of Applied Psychology, 89: 755–768; Rafferty, A.E., & Griffi n, M.A. 2004. Dimensions of transforma- tional leadership: Conceptual and empirical extensions. Leader- ship Quarterly, 15: 329–354.

48. Charisma has been studied as a standalone concept by a number of researchers and has spawned its own research tradition. It is, however, an integral part of the broader concept of transforma- tional leadership. For details of the origins of charismatic lead- ership research, see House, R.J. 1977. A 1976 theory of charis- matic leadership. In J.G. Hunt, & L.L. Larsen (Eds.), Leadership: The cutting edge. Carbondale, IL: South Illinois University Press, pp. 189–207. For example research studies, see: Howell, J.M., & Hall-Merenda, K.E. 1989. A laboratory study of charismatic leadership. Organizational Behavior and Human Decision Process, 43: 243–269; Shamir, B., Zakay, E., Breinin, E., & Popper, M. 1998. Correlates of charismatic leader behavior in military units: Subordinates’ attitudes, unit characteristics, and superiors’ ap- praisals of leader performance. Academy of Management Journal, 41: 387–409.

49. Yukl, G., & Van Fleet, D.D. 1992. Theory and research on leadership in organizations. In M.D. Dunnette & L.M. Hough (Eds.), Handbook of industrial and organizational psychology (2nd Ed.), Vol. 3. Palo Alto, CA: Consulting Psychologists Press, pp. 147–197.

50. Avolio, B.J., Bass, B.M., & Jung, D.I. 1999. Re-examining the components of transformational and transactional leadership

using the Multifactor Leadership Questionnaire. Journal of Oc- cupational and Organizational Psychology, 72: 441–462.

51. Hinkin, T.R., & Schriesheim, C.A. 2008. An examination of “nonleadership”: From laissez-faire leadership to leader reward omission and punishment omission.” Journal of Applied Psychology, 93: 1234–1248; Judge & Piccolo, Transformational and transac- tional research; Skogstad, A., Einarsen, S., Torsheim, T., Assland, M.S., & Hetland, H. 2007. The destructiveness of laissez-faire leadership behavior. Journal of Occupational Health Psychology, 12: 80–92.

52. LaBarre, P. 1999. The agenda–Grass roots leadership. Fast Com- pany, 23 (April): 114–120.

53. Bass & Avolio, The implications of transactional and transforma- tional leadership for individual, team, and organizational devel- opment.

54. Bass, B.M., Avolio, B.J., Jung, D.I., & Berson, Y. 2003. Predict- ing unit performance by assessing transformational and transac- tional leadership. Journal of Applied Psychology, 88: 207–218.

55. Bass, Avolio, Jung, & Berson, Predicting unit performance by assessing transformational and transactional leadership; DeG- root, T., Kiker, D.S., & Cross, T.C. 2000. A meta-analysis to review organizational outcomes related to charismatic leader- ship. Canadian Journal of Administrative Sciences, 17: 356–371; Judge & Piccolo, Transformational and transactional research; Lowe, K.B., Kroeck, K.G., & Sivasubramaniam, N. 1996. Ef- fectiveness correlates of transformational and transactional leadership: A meta-analytic review. Leadership Quarterly, 7: 385–425.

56. Lowe, Kroeck, & Sivasubramaniam, Effectiveness correlates of transformational and transactional leadership; Podsakoff, P.M., Bommer, W.H., Podsakoff, N.P., & MacKenzie, S.B. 2006. Rela- tionships between leader reward and punishment behaviour and subordinate attitudes, perceptions, and behaviors: A meta-ana- lytic review of existing and new research. Organizational Behavior and Human Decision Processes, 99: 113–142.

57. Bass & Avolio, The implications of transactional and transfor- mational leadership for individual, team, and organizational development; Lowe, Kroeck, & Sivasubramaniam, Effective- ness correlates of transformational and transactional leader- ship; Peterson, Walumbwa, Byron, & Myrowitz. CEO posi- tive psychological traits, transformational leadership, and fi rm performance in high-technology start-up and established fi rms; Rowold, J., & Laukamp, L. 2009. Charismatic leadership and objective performance indicators. Applied Psychology—An In- ternational Review, 58: 602–621; Shamir, B., House, R.J., & Arthur, M.B. 1993. The motivational effects of charismatic leadership: A self-concept based theory. Organizational Science, 4: 577–594.

58. Ruggieri, S. 2009. Leadership in virtual teams: A comparison of transformational and transactional leaders. Social Behavior and Personality, 37: 1017–1021; Shamir, House, & Arthur, The moti- vational effects of charismatic leadership.

59. See, for example: Nemanich, L.A., & Keller, R.T. 2007. Transfor- mational leadership in an acquisition: A fi eld study of employees. Leadership Quarterly, 18: 49–68.

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Endnotes 325

60. Bass & Avolio, The implications of transactional and transforma- tional leadership for individual, team, and organizational devel- opment.

61. House, R.J., Spangler, W.D., & Woycke, J. 1991. Personality and charisma in the U.S. presidency: A psychological theory of leader effectiveness. Administrative Science Quarterly, 36: 364–396.

62. Flynn, F.J., & Staw, B.M. 2004. Lend me your wallets: The effect of charismatic leadership on external support for an organization. Strategic Management Journal, 25: 309–330.

63. Nemanich & Keller, Transformational leadership in an acquisition. 64. Ibid. 65. Bass, Avolio, Jung, & Berson, Predicting unit performance by as-

sessing transformational and transactional leadership. 66. Graen, G.B. 1976. Role-making processes within complex organ-

izations. In M.D. Dunnette (Ed.), Handbook of industrial and or- ganizational psychology. Chicago: Rand McNally, pp. 1201–1245; Graen, G., Novak, M., & Sommerkamp, P. 1982. The effects of leader-member exchange and job design on productivity and sat- isfaction: Testing a dual attachment model. Organizational Behav- ior and Human Performance, 30: 109–131.

67. For research related to factors that infl uence leader-member rela- tionships, see Sparrowe, R.T., & Liden, R.C. 1997. Process and structure in leader-member exchange. Academy of Management Review, 22: 522–552.

68. Chen, Z., Lam, W., & Zhong, J.A. 2007. Leader-member ex- change and member performance: A new look at individual-level negative feedback-seeking behavior and team-level empowerment climate. Journal of Applied Psychology, 92: 202–212; DeConinck, J.B. 2009. The effect of leader-member exchange on turnover among retail buyers. Journal of Business Research, 62: 1081–1086; Gerstner, C.R., & Day, D.V. 1997. Meta-analytic review of leader-member exchange theory: Correlates and construct issues. Journal of Applied Psychology, 82: 827–844; Ilies, R., Nahrgang, J.D., & Morgeson, F.P. 2007. Leader-member exchange and citi- zenship behaviors: A meta-analysis. Journal of Applied Psychology, 269–277.

69. Barbuto, J.E., & Wheeler, D.W. 2006, Scale development and construct clarifi cation of servant leadership. Group & Organiza- tion Management, 31: 300–326.

70. Ibid.; Smith, B.N., Montagno, R.V., & Kuzmenko, T.N. 2004. Transformational and servant leadership: Content and contextual comparisons. Journal of Leadership & Organizational Studies, 10 (4): 8091; Spears, L. 1995. Servant leadership and the Greenleaf legacy. In L.C. Spears (Ed.), Refl ections on leadership. New York: John Wiley & Sons.

71. Max De Pree, quoted in: Sendjaya, S., & Sarros, J.C. 2002. Ser vant leadership: Its origin, development, and application in organizations. Journal of Leadership & Organizational Studies, 9 (2): 57–64.

72. Ibid. 73. Avolio, B.J., Walumbwa, F.O., & Weber, T.J. 2009. Leadership:

Current theories, research, and future directions. Annual Review of Psychology, 60: 421–449.

74. James Blanchard, quoted in: Sendjaya & Sarros, Servant leadership.

75. Cleveland, J.N., Stockdale, M., & Murphy, K.R. 2000. Men and women in organizations: Sex and gender issues at work. Mahwah, NJ: Lawrence Erlbaum.

76. Ibid. 77. Dobbins, G.H., & Platz, S.J. 1986. Sex differences in leadership:

How real are they? Academy of Management Review, 11: 118–127; Powell, G.N. 1990. One more time: Do female and male manag- ers differ? Academy of Management Executive, 4: 68–75.

78. Kanter, R.M. 1977. Men and women of the corporation. New York: Basic Books.

79. Heilman, M.E. 1995. Sex stereotypes and their effects in the workplace: What we know and what we don’t know. Journal of Social Behavior and Personality, 10: 3–26; Eagly, A.H., & Karau, S.J. 2002. Role congruity theory of prejudice toward female lead- ers. Psychological Review, 109: 573–598.

80. Bass, B.M., & Avolio, B.J. 1997. Shatter the glass ceiling: Women may make better managers. In K. Grint (Ed.), Leadership: Clas- sical, contemporary, and critical approaches. Oxford, United King- dom: Oxford University Press, pp. 199–210.

81. Bartol, K.M., Martin, D.C., & Kromkowski, J.A. 2003. Leader- ship and the glass ceiling: Gender and ethnic group infl uences on leader behaviors at middle and executive managerial levels. Jour- nal of Leadership and Organizational Studies, 9: 8–16.

82. Eagly, A.H., & Johnson, B.T. 1990. Gender and leadership style: A meta-analysis. Psychological Bulletin, 108: 233–256; Ragins, B.R., & Sundstrom, E. 1989. Gender and power in organiza- tions: A longitudinal perspective. Psychological Bulletin, 105: 51–88.

83. Wheelan, S.A., & Verdi, A.F. 1992. Differences in male and fe- male patterns of communication in groups: A methodological artifact? Sex Roles, 27: 1–15.

84. Eagly & Johnson, Gender and leadership style. 85. Dobbins & Platz, Sex differences in leadership; Powell, One more

time. Also, see van Engen, M.L., & Willemsem, T.M. 2004. Sex and leadership styles: A meta-analysis of research published in the 1990s. Psychological Reports, 94: 3–18.

86. Bartol, Martin, & Kromkowski, Leadership and the glass ceiling. 87. For an additional point of view see: Eagly, A.H. 2007. Female

leadership advantage and disadvantage: Resolving the contradic- tions. Psychology of Women Quarterly, 31: 1–12.

88. Bartol, Martin, & Kromkowski, Leadership and the glass ceiling.

89. Hofstede, G. 1980. Culture’s consequences: International differ- ences in work related values. London: Sage; Ashkanasy, N.M., Trevor-Roberts, E., & Earnshaw, L. 2002. The Anglo cluster: Legacy of the British Empire. Journal of World Business, 37: 28–39.

90. Kabasakal, H., & Bodur, M. 2002. Arabic cluster: A bridge be- tween East and West. Journal of World Business, 37: 40–54.

91. Marks, M. In search of global leaders. Harvard Business Review, 81 (8): 43–44.

92. House, R.J., Hanges, P.J., Javidan, M., Dorfman, P.W., Gupta, V., & GLOBE Associates. 2004. Cultures, leadership, and organiza- tions: GLOBE—a 62 nation study (Vol. 1). Thousand Oaks, CA: Sage Publishing; House, R.J., Javidan, M., Dorfman, P.W., & de

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Luque, M.S. 2006. A failure of scholarship: Response to George Graen’s critique of GLOBE. Academy of Management Perspec- tives, 20 (4): 102–114; Javidan, M., House, R.J., Dorfman, P.W., Hanges, P.J., & de Luque, M.S. 2006. Conceptualizing and mea- suring cultures and their consequences: A comparative review of Globe’s and Hofstede’s approaches. Journal of International Busi- ness Studies, 37: 897–914.

93. Ashkanasy, Trevor-Roberts, & Earnshaw, The Anglo cluster. 94. Kabasakal & Bodur, Arabic cluster. 95. Szabo, E., Brodbeck, Den Hartog, D.N., Reber, G., Weibler, J.,

& Wunderer, R. 2002. The Germanic Europe cluster: Where employees have a voice. Journal of World Business, 37: 55–68.

96. Gupta, V., Surie, G., Javidan, M., & Chhokar, J. 2002. Southern Asia Cluster: Where the old meets the new? Journal of World Business, 37: 16–27.

97. Marks, In search of global leaders.

98. For additional information related to the GLOBE project, go to http://www.thunderbird.edu/wwwfi les/ms/globe. Also see: Chhokar, J.S., Brodbeck, F.C., & House, R.J. 2007. Culture and leadership across the world. Mahwah, NJ: Lawrence Erlbaum Associates.

99. Hitt, M.A., Hoskisson, R.E., & Kim, H. 1997. International diversifi cation: Effects on innovation and fi rm performance in product diversifi ed fi rms. Academy of Management Journal, 40: 767–798.

100. Hitt, M.A., Keats, B.W., & DeMarie, S. 1998. Navigating in the new competitive landscape: Building strategic fl exibility and com- petitive advantage in the 21st century. Academy of Management Executive, 12 (4): 22–42.

101. Hitt, M.A., Ireland, R.D., & Hoskisson, R.E. 2007. Strategic management: Competitiveness and globalization (7th ed.). Cincin- nati, OH: South-Western.

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? knowledge objectives After reading this chapter, you should be able to: 1. Explain why communication is strategically impor-

tant to organizations. 2. Describe the fundamental communication process. 3. Discuss important aspects of communication that

affect the organization or its units, including net- works and the direction of communication fl ow.

4. Defi ne interpersonal communication and discuss the roles of formal versus informal communication, communication media, communication technol- ogy, and nonverbal communication.

5. Describe organizational and individual barriers to effective communication.

6. Understand how organizations and individuals can overcome communication barriers.

communication

exploring behavior in action

IBM and Virtual Social Worlds

F or a recent IBM conference, participants arrived at a wonderful facility featuring a plush reception area, well- equipped meeting rooms, a support library, informal mingling spaces, picnic grounds, and relaxing gardens. Greet- ers offered directions to meeting rooms as well as other assistance. Kiosks also offered important information on

conference activities. Once underway, the conference itself included three keynote speakers and 37 breakout sessions. The individuals attending the conference were not physically present. Instead, they participated remotely in a virtual social

world. Unlike social media such as YouTube (a simple content community), Facebook (a social networking site), or Wikipedia (an asynchronous knowledge-building endeavor), virtual worlds offer real-time interactions where people exist in a three- dimensional setting as self-generated representations of themselves (i.e., avatars). Participants can communicate using voice rather than text, utilize virtual equipment of all kinds, walk around in cleverly constructed settings, and sit down with others in venues such as cafés. Provid- ers of virtual social worlds such as Second Life have cre- ated sophisticated systems (http://secondlife.com).

Although most often thought of as places that in- dividuals go to socialize or live secret alternative lives, virtual social worlds can be used for collaborative meet- ings, training, and a number of other organizational purposes. In fact, virtual worlds are becoming viable al- ternatives to face-to-face meetings and training sessions even in cases where complex and important informa- tion must be exchanged. The ability for back-and-forth conversations and the ability to read body language is very helpful in this regard. Participants can offer ideas, ask questions, and even show a limited range of emo- tions within the virtual world.

Was IBM’s conference successful? Yes it was! IBM estimates that it saved several hundred thousand U.S. dollars in comparison to what the conference would have

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328

Sources: L. Cherbakov, R. Brunner, R. Smart, & C. Lu. 2009. “Virtual Spaces: Enabling Immersive Collaborative Enterprise, Part 1,” at http://www.ibm.com/developerworks/webservices/library/ws-vitualspaces; IBM Global Innovation Outlook, “Virtual Worlds, Real Leaders: Online Games Put the Future of Business Leadership on Display,” 2007, at http://www.ibm.com/ibm/ideasfromibm/us/ giogaming/073007/index.shtml; A.M. Kaplan, & M. Haenlein. 2009. “The Fairyland of Second Life: Virtual Social Worlds and How to Use Them,” Business Horizons, 52, no. 6, pp. 563–572; Linden Lab, “Case Study: How Meeting in Second Life Transformed IBM’s Technology Elite into Virtual World Believers,” 2009, at http://secondlifegrid.net/casestudies/IBM; S. Morrison. 2009. “A Second Chance for Second Life: Northrop, IBM Use Virtual World as Setting for Training, Employee Meetings,” Wall Street Journal, Aug. 19, p. B.5; World of Warcraft, “Intro to WOW,” 2010, at http://www.worldofwarcraft.com/info/beginners/index.html.

cost had it been done on a face-to-face basis. Moreover, the presentations were well received, with many sessions run- ning long as participants continued to chat. Also, partici- pants met on their own at the end of each day for conver- sations over virtual cocktails. This meant that people were informally networking, which is one reason to have a con- ference. Overall, the learn- ing, information develop- ment, and social outcomes were much greater than they would have been with less rich substitutes for face-to- face interactions such as web chats, teleconferences, and videoconferences.

Based on its success, IBM is now actively using virtual social worlds for a number of purposes, including:

• Events (e.g., Human Capital Management University)

• White-board Brainstorming (e.g., metaverse- brainshare application integration)

• Mentoring (e.g., mentoring from the corporate learning group)

• New employee orientation (e.g., Fresh Blue Program in China)

• Simulations and rehearsals (e.g., energy-effi cient data center)

• Software development (e.g., Bluegrass-Rational Jazz Team)

In a different type of virtual social world, participants engage in games known as massively multiplayer online role playing games (MMORPG). World of Warcraft and Star Wars Galaxies are examples. World of Warcraft describes it- self this way: “Players assume the roles of Warcraft heroes as they explore, adventure, and quest across a vast world. … Whether adventuring together or fi ghting against each other in epic battles, players will form friendships, forge alliances, and compete with enemies for power and glory.”

IBM has partnered with Seriosity, a software company that develops organizational tools, to study leadership in MMORPGs. Opportunities to lead abound in these online games, where it is crucial to craft a vision for the future, create ways to attain that future through raids and other techniques, motivate others to join and sustain the fi ght,

and make sense of events and outcomes in a complex and fl uid setting. Individu- als who are successful and move up the game-world hierarchies may have lead- ership skills that can gener- alize to the real world, par- ticularly to situations that are dynamic and uncertain.

Although this work is in its early stages, the re-

search carried out by IBM suggests that successful gamers can be effective corporate leaders. One participant said this,

I’ve grown more accustomed now to directing various aspects of running the [on-line battle coalition] and providing a vi- sion and leadership to members, Follow-up and assertiveness now feel more natural to me, even in real life. It has been an amazing opportunity to push myself beyond my boundaries.

Another participant had this to say,

Finally, I … rallied the troops to revive one another and try again, mostly because I didn’t know what else to do. It was me, this girl, talking to a room of 39 guys. And to my shock and surprise, everyone complied. … That was a defi ning moment for me.

Surveys also provide useful evidence. A survey of IBM managers and associates active in online games revealed that 50 percent of respondents believed game-playing had improved their real-world leadership. Forty percent indi- cated that they had applied specifi c techniques from the gaming world to improve leadership outcomes at IBM.

IBM clearly has benefi ted from the interactions that occur in virtual social worlds. What does the future hold? With developments occurring so rapidly, it is diffi cult to say.

©Carol & Mike Werner/Visuals Unlimited, Inc./Getty Images, Inc.

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http://www.ibm.com/ibm/ideasfromibm/us/giogaming/073007/index.shtml

http://secondlifegrid.net/casestudies/IBM

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Good communication is vital to better organizational performance. Effective communication is important because few things are accomplished in orga- nizations without it.1 Managers must communicate with their subordinates in order for jobs to be performed effec- tively. Top management must communi- cate organizational goals to the associ- ates who are expected to achieve them. Many jobs require coordination with others in the organization, and coordi- nation requires communication. In fact, communication is such an important part of a manager’s job that manag- ers spend between 50 and 90 percent of their time at work communicating.2

Top managers must digest information, shape ideas, coordinate tasks, listen to others, and give instructions. Decisions and policies are of little value unless they are fully understood by those who must implement them.3 Good communication is also the basis for effective leadership, the motivation of subordinates, and the exercise of power and infl uence. It is also necessary for establishing effective relations with important external enti- ties, such as suppliers, consumers, and government agencies.

Communication systems in orga- nizations affect numerous outcomes that are central to an organization’s function- ing and competitive advantage, These include productivity,4 quality services and products,5 reduced costs, creativity, job satisfaction, absenteeism, and turn- over.6 In other words, organizational

communication is interrelated with or- ganizational effectiveness.7 Indeed, surveys asking managers to give the reasons for project failures cite com- munication problems as an important, if not the most important, explanation.8

Given the importance of organi- zational communication, it is troubling that a number of managers fi nd commu- nication a challenging task. One study found that many managers underesti- mate the complexity and importance of superior–subordinate communications.9 In addition, although research confi rms that communication is an integral part of corporate strategy,10 an important survey showed that only 22 percent of line associates and 41 percent of their supervisors understand the organiza- tion’s strategy and that 54 percent of organizations do a poor job of com- municating their strategy.11 Thus, it ap- pears that organizations and managers at middle and high levels have much to learn about effective communication. Also, it is not surprising that a recent sur- vey of corporate trainers found that 44 percent of their organizations planned to greatly increase their budgets for communication training for managers and senior leaders.12

Communication can take many forms, such as face-to-face discussions, phone calls, e-mails, letters, memos, notes posted on electronic bulletin boards, and presentations to people who are physically in the same room. As seen in the case of IBM, communication

can also occur inside virtual social worlds. These worlds offer a number of advantages that can address some of the problems plaguing communication. For example, the use of virtual social worlds might help managers and associates express themselves more freely when facing contentious issues. The use of this new creative medium could unlock pre- viously frozen interactions, and it could facilitate the inputs of shy or confl ict- avoidant people. For discussing or con- veying the organization’s strategy, the use of virtual social worlds might help senior managers to more effectively and less expensively reach various groups of geographically dispersed managers and associates. The fundamental pur- poses of communication are to provide information and instructions, to infl uence others, and to integrate activities.13 Vir- tual social worlds have a great deal to offer in accomplishing these tasks.

In this chapter, we examine a va- riety of issues related to communication in organizations. In the fi rst section, we discuss the fundamental communication process. Next, we describe aspects of communication that affect the organiza- tion or major units within it. We then discuss interpersonal communication— that is, communication between and among individual associates. Finally, after describing various barriers to ef- fective communication, we present ways in which these barriers can be overcome to build a successful commu- nication process.

the strategic importance of Communication

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330 Chapter 9 Communication

The Communication Process Communication involves the sharing of information between two or more people to achieve a common understanding about an object or situation. Successful communication occurs when the person receiving the message understands it in the way that the sender intended. Thus, communication does not end with the message sent. We also need to consider the message that is received. Think of a time when you meant to compliment someone, but the person understood your remark as an insult. This was not successful communication—the message received was not the same as the one sent.

Communication can be viewed as a process, as shown in Exhibit 9-1. The starting point in the communication process is the sender—the person who wishes to commu- nicate a message. To convey information, the sender must fi rst encode it. Encoding in- volves translating information into a message or a signal.14 The encoded message is then sent through a communication medium, or communication channel, to the intended receiver. Communication media are numerous and include writing, texting, face-to-face verbal exchanges, verbal exchanges without face-to-face contact (e.g., phone conversa- tions), and e-mail.

Once the message has been received, the receiver must decode it. In decoding, the receiver perceives the message and interprets its meaning.15 To ensure that the meaning the receiver attaches to the message is the same as the one intended by the sender, feed- back is necessary. Feedback is the process through which the receiver encodes the message received and sends it or a response to it back to the original sender. Communication that includes feedback is referred to as two-way communication. If feedback is not present (re- sulting in one-way communication), the receiver may walk away with an entirely different interpretation from that intended by the sender.

communication The sharing of information between two or more people to achieve a common understanding about an object or situation.

encoding The process whereby a sender translates the information he or she wishes to send in a message.

communication medium or communication channel The manner in which a message is conveyed.

decoding The process whereby a receiver perceives a sent message and interprets its meaning.

feedback The process whereby a receiver encodes the message received and sends it or a response to it back to the original sender.

Communication Medium

Feedback

Sent Message

S e n

d e r

R e c e iv

e r

Received Feedback

Decoded Message

Received Message

Encoded Message

Exhibit 9-1 Sent Message

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Organizational Communication 331

All parts of the communication process are important. A communication breakdown can occur in any part of the process. For example, information must be encoded into a message that can be understood as the sender intended. In addition, some forms of media may not be as effective as others in communicating the meaning of a particular message. Some communication media are richer than others—that is, they provide more informa- tion.16 Consider e-mail as an example. People often use symbols such as “:)” to indicate intent (in this case, humor) because the medium is not very rich. If the message had been spoken, the humorous intent could have been indicated by the sender’s tone of voice or facial expression. We describe more barriers to effective communication, as well as more details about media richness, later in the chapter.

Organizational Communication Communication occurs at several different levels. On one level is the communication that occurs between and among individuals. This is referred to as interpersonal communication, and we discuss it in the next section. Here, we focus on organizational communication— that is, the patterns and types of communication that occur at the organizational and unit levels. The purpose of organizational communication is to facilitate the achievement of the organization’s goals. As we have already seen, communication is a necessary part of almost any action taken in an organization, ranging from transmitting the organization’s strategy from top executives to integrating operations among different functional areas or units. Organizational communication involves the use of communication networks, poli- cies, and structures.17

Communication Networks Communication networks represent patterns of communication (who communicates with whom). Thus, they correspond to the structure of communication fl ows in the orga- nization and they affect coordination, innovation, and performance.18 There are a variety of possible patterns, and a few of the more common ones are presented in Exhibit 9-2.

Y Network All Connected Network

Wheel Network Circle Network

Exhibit 9-2 Commu- nication Networks

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332 Chapter 9 Communication

Each line shown in the exhibit represents two-way communication and, as such, counts as two network connections for the purposes of this chapter.

Networks can be characterized in terms of their density.19 In sparse networks, there are few connections among members. In dense networks, there are many connections. The wheel, Y, and circle networks depicted in Exhibit 9-2 are sparse. In the wheel, for example, most members communicate regularly with only one other person, resulting in a density score of only .33 (10 connections among 6 people divided by 30 possible con- nections). In contrast, the well-connected network is dense, with a density score of .80 (16 connections among 5 people divided by 20 possible connections.

Networks can also be characterized in terms of their centralization.20 In centralized networks, all communications pass through a central point or points, so that one or a few members of the network control most of the information exchanges. The wheel and the Y networks depicted in Exhibit 9-2 are examples of centralized networks. In the wheel, one member of the network communicates with every other member while the other members do not communicate with one another. In the Y network, one network member commu- nicates with three other members while most of the others communicate with only one other member. Traditional organizational hierarchies, where subordinates communicate mostly or only with their bosses, who in turn communicate with their bosses, represent centralized networks. Companies in which units do not communicate with one other but only with a central headquarters, which then simultaneously coordinates all the units, are also centralized.

In decentralized networks, no single member of the network dominates information exchanges. The circle and the well-connected networks are examples. In the circle, each member of the network talks with two others. In the well-connected network pictured here, one member of the network communicates with each of the other four, but those other four members also communicate with almost everyone else. Centralization is somewhat higher in the well-connected network relative to the circle, but it is not excessively high.

To some degree, the effectiveness of networks depends on situational factors such as type of work and goals of the unit or organization.21 For example, sparse highly centralized networks such as the wheel and the Y can be effective in accomplishing simple tasks. These structures promote effi ciency, speed, and accuracy by channeling communication through a central person. On the other hand, dense networks with some degree of centralization in the leader role might be more effective for complex tasks. The well-connected network fi ts here. Communication among most or many parties facilitates trust and rich exchanges of information, which are helpful in solving complex problems. Also, having a leader with some degree of centrality is helpful to ensure that proper direction is given to the unit/ organization and to ensure that a clear resolution point exists for disagreements. Overall, independent of the situational context, reasonably dense networks with some degree of leader centrality tend to be the most effective.22 This is consistent with high-involvement management, where associates exist in a somewhat egalitarian system and have bounded authority to coordinate and solve problems among themselves.

In addition to effects on unit or organizational performance, network structure af- fects individual outcomes. As discussed above, in sparse networks many individuals do not directly communicate with one another. This creates an opportunity for brokerage, where one or more members of a network act as a conduit or go-between for informa- tion exchanges between members without direct ties. For example, if member B does not communicate with member C but member A communicates with both of them, then

sparse networks A communication network in which most or all network members communicate with only a few other members.

dense networks A communication network in which most or all network members communicate with many other members.

centralized networks A communication network in which one or a few network members dominate communications.

decentralized networks A communication network in which no single network member dominates communications.

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Organizational Communication 333

member A is said to be a broker of the B–C relationship. Individuals who broker a number of relationships tend to have more positive outcomes in terms of power, job performance, and fi nancial compensation, even after controlling for factors such as hierarchical level and education.23 Importantly, brokers in networks are not necessarily in formal leadership positions.

The networks depicted in Exhibit 9-2 involve fi ve or six individuals; however, net- works are often considerably larger. For example, the manufacturing department in a mid- sized company might have hundreds of people in it. Social scientists have been developing theories that can be used to explain and predict outcomes in these large organizational networks. In recent years, scientists and mathematicians also have been developing so- phisticated network models and analytical techniques to study diverse phenomena such as stock market crashes, the relationships among CEOs, the spread of disease, and the spread of computer viruses.24

For example, in the late 1990s, Toyota had a brief brush with disaster that has been attributed to its heavy reliance on affi liated companies. Interestingly, the situation was resolved quickly through the network structure that connected the affi liates.25

To accomplish its goals, Toyota depends on a large number of affi liated companies. Those companies provide Toyota with the parts it needs to manufacture vehicles. They are independent, and each one focuses on making a unique part (such as electrical compo- nents or seat covers). At the same time, the companies are integrated because all of them must endorse Toyota’s strict production system guidelines and protocols.

One of the companies in the Toyota network is Aisin Seiki, which produces a number of products including P-valves—brake devices that help prevent cars from skidding. The production of P-valves requires high precision, and the P-valves are a necessary compo- nent of every vehicle. If production of P-valves stops, Toyota cannot complete the manu- facture of any vehicles. Aisin Seiki was the sole provider of P-valves for Toyota, and all the valves were made in one plant. In 1997, this plant burned down, and it was predicted that production would stop for at least a month—which would have severely harmed Toyota. However, because of the close coordination and effective communication among the various parts of the network, other plants were able to pick up the production of the precision P-valves with only about three days’ preparation! Within a week, Toyota was once more manufacturing cars. Toyota’s amazingly quick recovery can be attributed to the integration of all the members of its network.

Direction of Organizational Communication Communication within organizations can occur in any of three directions: downward, upward, or horizontally.

Downward Communication Downward communication, which refers to communication from senior managers to junior managers and from junior managers to associates, is necessary to provide job instructions, information on organization poli- cies, and performance feedback. Downward communication can also be used to inform those at lower levels about the organization’s goals and about changes faced by the organization. Downward communication, however, is

downward communication Communication that fl ows from superior to subordinate.

©Michael Hitoshi/Digital Vision/ Getty Images, Inc.

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334 Chapter 9 Communication

frequently defi cient in this regard. Lower-level managers and associates often complain about the lack of information on goals and changes being made in the organization, as mentioned in the earlier discussion of potential uses of communication through virtual social worlds.

An example of the importance of downward communication can be seen in the acqui- sition of a large consumer-goods manufacturing company. The company was acquired by a large conglomerate, but no downward communication had taken place informing associ- ates of the effects they would experience. A rumor began to circulate among the acquired company’s highly professional fi nance department staff suggesting that the department was to be reduced to a record-keeping function. All major fi nancial responsibilities were sup- posed to be transferred to the fi nancial staff at the conglomerate’s headquarters. Because of this rumor, many of the fi nance department’s professional staff members sought and obtained jobs with other organizations. When top management realized the problem, it immediately announced that the rumor was false and assured associates that the fi nancial responsibilities would remain in their organization. Even so, the acquired company had lost almost 50 percent of its fi nancial staff before this downward communication occurred. With a large number of acquisitions and mergers occurring in the current time period, particularly in the fi nancial area with such combinations as Wachovia and Wells Fargo, downward communication regarding merger details must be proactively managed.26

Upward Communication Upward communication, which fl ows from associates to junior managers and from ju- nior managers to senior managers, is necessary to provide feedback on downward com- munication and to provide ideas and information. It can, however, be diffi cult to achieve in an effective way. Thus, it is one of the less frequently used forms of communication in organizations. Common channels for upward communication include departmental meetings, “open-door” policies, suggestion boxes, attitude surveys, participation in deci- sions, grievance procedures, and exit interviews. Upward communication may be neces- sary for hierarchical superiors to monitor the effectiveness of decisions, gather information on problems and opportunities, ensure that jobs are being done properly, and maintain morale among those lower in the organization. However, it will not occur in organizations where superiors give the impression that they do not want to hear negative feedback or where subordinates do not trust superiors and fear reprisals. Upward communication can also be costly to organizations because policies and procedures must be developed to carry it out and also because it requires managers’ time.27

Upward communication seems to be particularly diffi cult in larger organizations, probably because relationships in large organizations are more complex and formalized.28 Certainly, larger size may inhibit the quantity of interactions between superiors and sub- ordinates; however, the quality of the interaction is the most critical element.29 Meg Whit- man, the CEO of eBay until recently, fostered upward communication through her prac- tice of enabling those at lower levels in the organization to be totally honest with her. So successful was this approach that a newly minted MBA associate at eBay once felt free to proclaim that almost anyone could manage the company—implying that Whitman’s job as CEO was easy. Because Whitman enabled associates to communicate upward, this brash young MBA is still an associate with the company.30 Another organization, Connecticut Bank, encouraged upward communication through employee attitude surveys. When sur- vey results revealed that associates were dissatisfi ed with written communications in the

upward communication Communication that fl ows from subordinate to superior.

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Organizational Communication 335

EXPERIENCING ORGANIZATIONAL BEHAVIOR

Zena Olijnyk became extremely frustrated when responding to a promotional e-mail from J. Crew advertising the “retro-dot” mini skirt. She immediately tried to order the skirt online, but her size was not available. In a pique, she fi red off an e-mail to J. Crew’s customer service department complaining about send- ing promotional e-mail ads for items that were sold out. She received a re- sponse immediately from a customer service representative who told her that the demand was much larger than expected and then apologized. She was still annoyed, so she asked that her complaint be forwarded to someone higher up—maybe even the CEO. The next day, Zena received the following e-mail from someone named Millard Drexler:

Thx much for taking time to send email-have copied our team-it has been somewhat diffi cult for us to forecast demand on our fashion merchandise as have not expected the reaction we have been getting- your points about how we handle are right on-have been trying to communicate more effectively than doing right now, and obviously not doing a great job. If one of [our] team members not already search- ing your size, please let know if still interested.

Millard “Mickey” Drexler is the chairman and CEO of J. Crew. He took over the company after being forced out of the GAP in 2002, where he had been for 19 years. Drexler left the GAP because of a

29-month decline in profi ts. How- ever, Drexler is the person credited with putting the GAP on the map, turning the company into a $14.5 billion business, and revolutionizing the way the world dresses (some say he invented “casual chic”). He has done the same for J. Crew, taking the company from a failing business that lost $40 million in 2002 to one of the most profi table retail clothing companies in 2010. Even Michelle Obama has endorsed the company by wearing and discussing a J. Crew outfi t on NBC’s Tonight Show. Drexler turned J. Crew around by bringing in his own team, raising prices while raising quality, applying his uncanny talent for spotting clothing trends, cutting operating costs, and engag- ing in a communication style that is somewhat unique among CEOs.

Not only does Drexler e-mail and call unhappy customers, he habitually drops by J. Crew stores around the country to get a feel for what’s selling, what’s not, and what is happening in individual stores and to get input from sales associates in those stores. He walks into stores and quizzes customers about what they think and what they want. He also keeps in close contact with individual store managers. Once a week Drex- ler holds a conference call with store managers across the country. He asks them specifi c questions about what’s going on in their stores, such as how customers reacted to a win- dow display featuring suits (they liked it; sales rose dramatically). While Drexler is in his offi ce at J. Crew

headquarters, he spends most of his time running around, sticking his head into cubicles to personally talk with all associates. A recent survey found that most associates complain about a lack of face-to-face contact with the “higher-ups” and about not being asked their opinion. It seems unlikely that J. Crew team members would ever feel this way.

Drexler’s communication style is also unique. He’s loud, boisterous, infectiously passionate about the busi- ness, and incredibly honest when he voices his frequent opinions. A col- league from his GAP days described him as letting it all hang out—he does victory dances when pleased and yells when frustrated. In response to a pair of shorts shown to him by the de- sign team, Drexler responded, “This

Communication at J. Crew: Mickey Drexler

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organization, the bank focused on reducing the quantity and improving the quality of written information transfers. Communication quality improved, and so did employee satisfaction and productivity. Finally, as illustrated in the Experiencing Organizational Behavior feature, J. Crew CEO Mickey Drexler makes it quite easy for his subordinates to communicate directly with him by frequently dropping by J. Crew stores.

Horizontal Communication Horizontal communication, which takes place between and among people at the same level, is also important but is frequently overlooked in the design of organizations. Co- ordination among organizational units is facilitated by horizontal communication. For example, the manufacturing and marketing departments must coordinate and integrate their activities so that goods will be available for sales orders. This frequently is achieved through face-to-face conversations, phone conversations, and e-mail. Formal integrating positions may also be used to facilitate horizontal communications between units. These positions are often referred to as “boundary-spanning positions” because the position holders cross the boundaries that separate different units.31 For example, some human re- source departments have representatives or liaison members in each functional unit of the organization to coordinate and communicate staffi ng, compensation, and performance- management activities.32

Some time ago, organizations began to use communication from all three directions in the area of performance appraisal. Almost all Fortune 500 companies use 360-degree multi-rater feedback to evaluate senior managers.33 Such feedback includes performance appraisals from peers (horizontal communication), subordinates (upward communica- tion), and superiors (downward communication).34 Evaluations from customers/clients, and suppliers are also sought in some cases.

There are, however, some problems with 360-degree feedback. One problem with subordinates evaluating superiors is that retaliation for negative performance evaluations can occur. Another problem is that peers may be politically motivated to either overrate or underrate their co-workers. Thus, it is usually recommended that upward and horizontal appraisals be used only for training and development purposes and that the superiors’ evaluation be given more weight when appraisals are used to make personnel decisions

horizontal communication Communication that takes place between and among people at the same level.

is a monster! No one is doing these!” Another colleague stated “Mickey’s fun, but he was making so much noise we had to close the doors. He yells and screams. …”

In the end, it is not surpris- ing that Mickey Drexler has taken what was known as a failing, staid, preppy clothing company and turned it into an exciting, profi table, and

much-talked-about success story. Through his direct and passionate communication with all stakeholders in the business, he seems to have channeled his energy and excitement.

Sources: B. Ebenkamp. 2009. “Marketer of the Year: Mickey Drexler,” Mediaweek, 19, no. 32: pp. 26–27; M. Gordon. 2004. “Mickey Drexler’s Redemption,” New York, Nov. 29, pp. 40–41; L. Lee. 2006. “J. Crew’s Smart-Looking IPO,” BusinessWeek, June 28, at http://www.businessweek.com/print/investor/content/jun2006/pi20060628_109690. htm; A. Maitland. 2006. “Employees Want to Hear It Straight from The Boss’s Mouth,” Financial Times, Dec. 1, p. 12; Z. Olijnyk. 2007. “Now That’s Service,” Canadian Business Online, Feb. 20, at http://candianbusiness.com/shared/ print.jsp?content= 20070220_130900_5412; T. Rozhon. 2004. “A Leaner J. Crew Is Showing Signs of a Turnaround,” New York Times, June 24, at http://query.nytimes.com/gst/fullpage.html?res=9D02EFD6123F937A35755C0A96 29C8; S.M. Sears. 2009. “The Queen of J. Crew,” Barron’s, 89, no. 14: M9.

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Interpersonal Communication 337

(such as those involving promotions and pay raises).35 However, if superiors do take their own 360-degree feedback seriously, and change their behavior as a result of feedback from subordinates and peers, the loyalty of subordinates will also increase.36

Interpersonal Communication We now move from the organizational level to the interpersonal level of communication. Interpersonal communication involves a direct verbal or nonverbal interaction between two or more active participants.37 Interpersonal communication can take many forms, both formal and informal, and be channeled through numerous media and technologies. Furthermore, people can communicate without even intending to do so, through nonver- bal communication. In this section, we discuss each of these issues: formal versus informal communication, communication media, technology, and nonverbal communication.

Formal versus Informal Communication Interpersonal communication can be formal or informal. Formal communication fol- lows the formal structure of the organization (e.g., superior to subordinate) and entails organizationally sanctioned information. A major drawback of formal communication is that it can be slow. In contrast, informal communication involves spontaneous interac- tion between two or more people outside the formal organization structure. For example, communication between peers on their coffee break may be considered informal com- munication.

The informal system frequently emerges as an important source of communication for organization members.38 Managers must recognize it and be sensitive to communica- tion that travels through informal channels (such as the grapevine). In addition, managers may fi nd that the informal system enables them to reach more members than the formal one. Another benefi t of informal communication is that it can help build solidarity and friendship among associates.39

Effective communication is crucial in implementing the organization’s strategy. How- ever, there is a downside to informal interpersonal communication—rumors and gossip. Rumors entail unsubstantiated information of universal interest. People often create and communicate rumors to deal with uncertainty.40 This is why rumors are so prevalent dur- ing times of organizational upheaval, particularly during mergers and acquisitions. For example, in 2000, the Coca-Cola Company undertook a major restructuring to overcome its lagging fi nancial performance.41 During this period, persistent (and untrue) rumors fl ourished—such as “Coke is leaving Atlanta,” “They’re removing the fl agpoles so that the American fl ag doesn’t fl y over the company,” and “The CEO is leaving.” These rumors resulted in dissatisfaction, loss of morale, and turnover, and senior management had to spend a great deal of time overcoming and eliminating them.

Gossip is information that is presumed to be factual and is communicated in pri- vate or intimate settings.42 Often, gossip is not specifi cally work-related and focuses on things such as others’ personal lives. Furthermore, gossip usually refl ects information that is third-hand, fourth-hand, and even farther removed from the person passing it along. Gossip can cause problems for organizations because it reduces associates’ focus on work, ruins reputations, creates stress, and can lead to legal problems. People are thought to engage in gossip in order to gain power or friendships or to enhance their own egos. For

interpersonal communication Direct verbal or nonverbal interaction between two or more active participants.

formal communication Communication that follows the formal structure of the organization (e.g., superior to subordinate) and entails organizationally sanctioned information.

informal communication Communication that involves spontaneous interaction between two or more people outside the formal organization structure.

rumors Unsubstantiated information of universal interest.

gossip Information that is presumed to be factual and is communicated in private or intimate settings.

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example, groups of low-status offi ce workers may try to keep their supervisor in check by continuously gossiping about him and thus threatening his reputation. Interestingly, good performers might also use gossip as an indirect weapon against poor performance. Even this use of gossip does not help unit performance and in fact can harm it.43

To avoid rumors in the workplace, managers are advised to provide honest, open, and clear information in times of uncertainty. Rumors should be addressed by those in a posi- tion to know the truth. To combat gossip, managers can include questions in 360-degree evaluations to identify individuals who habitually traffi c in irrelevant, unsubstantiated information. Offenders can then be asked to end their dysfunctional behavior. Some or- ganizations have dealt with rumors by placing restrictions on idle chatter.

Communication Media Interpersonal communication, as already mentioned, can be based on many different media, and different media vary in degree of richness. Recall that richness describes the amount of information a medium can convey. Richness depends on: (1) the availability of feedback, (2) the use of multiple cues, (3) the use of effective language, and (4) the extent to which the communication has a personal focus.44 Face-to-face verbal communication is the richest medium.45 Think about all that happens during a face-to-face interaction. Sup- pose that you (the sender) are talking to a friend. If your friend does not understand the message or interprets it inaccurately, she can let you know either verbally or nonverbally (e.g., with a puzzled expression). In the interaction, you use multiple cues, including tone of voice, semantics (the words that are used), facial expressions, and body language. You use natural language and thus communicate more precise meaning. Finally, because you and your friend are face-to-face, it is easy to create a personal focus in the message.

Research has ordered common communication media in terms of richness.46 In order of richest to least rich, they are:

1. Face-to-face communication

2. Telephone communication

3. Electronic messaging (such as e-mail and instant messaging)

4. Personal written text (such as letters, notes, and memos)

5. Formal written text (such as reports, documents, bulletins, and notices)

6. Formal numerical text (such as statistical reports, graphs, and computer printouts)

Virtual social worlds have not been included in the research discussed above because communication through this medium is too new. The experiences of IBM discussed in the opening case suggest, however, that this medium scores well in terms of richness. Immedi- ate feedback is possible, multiple cues are available, including some emotional reactions, effective language can be used, and the communication can be personalized.47

For a particular communication task, choosing from among available media involves a trade-off between the richness of a medium and the cost (especially in time) of using it. For example, it is much easier and quicker to send someone a brief e-mail rather than to fi nd his phone number, call him, and have a phone conversation, yet the phone conversa- tion would likely yield richer information exchange. Research on media richness has not produced consistent results, but much of it suggests that effective managers will use richer media as the message becomes more equivocal.48 Equivocal messages are those that can

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be interpreted in multiple ways. “We’re having a meeting in the boardroom at 2 p.m. on Thursday” is an unequivocal message. “Your performance is not what I expected” is an equivocal message. Research has also shown that managers will use richer media when the message is important and when they feel the need to present a positive self-image.49

Another factor that infl uences the choice of media corresponds to organizational norms that indicate which types of communication media are desirable.50 Some organiza- tions have strong norms that employees communicate in a face-to-face manner, resulting in many meetings and chatting in the offi ce. Other organizations have strong norms for using electronic communications and the Internet. One study found that associates’ use of e-mail and instant messaging was highly dependent on their organization’s norms for the use of these approaches.51

Communication Technology Modern technology allows organizations and their members to communicate quickly, across any distance, and to collaborate more effectively than ever before.52 Indeed, in or- der for organizations to remain competitive, they need to constantly keep up–to-date on modern communication technologies.53 For example, after the great blackout of 2003 struck the eastern United States and Canada, IBM employees were able to fall back on instant messaging to continue working, while many other organizations, which did not use wireless technology, were crippled.

Communication technology will continue to rapidly advance. The world wide web, private intranets, virtual private networks (VPNs), web-based conferencing technologies, cell phones, and multifeatured mobile communication devices (e.g., iPhones) did not exist or were not commonly used 15 years ago.54 Today, these technologies and the new forms of communication they support are all around us. For example, billions of e-mail messages are sent via the Internet each day from company accounts. Instant messaging is now used by the vast majority of companies worldwide. Even blogging has become more popular within the business world:

• As of December 2009, approximately 16 percent of Fortune 500 companies had created blogs (informal electronic communication sites that reach a wide audience) and made them available to the public. Many more had blogs that were available only internally for use by the company’s managers and associates.55 Examples of publicly available blogs are: • Coca Cola Conversations (Coca Cola) • Fast Lane Blog (General Motors) • Nuts about Southwest (Southwest Airlines)

• Hundreds if not thousands of CEOs and top executives worldwide now have personal blogs to communicate with associates, clients/customers, and the general public.56 Individuals with blogs available to the public include: • John Mackey, CEO, Whole Foods Market • Tom Glocer, CEO, Reuters • Marc Cuban, Chairman, HDNet, and Owner, Dallas Mavericks

Basketball Club

Organizations have been creating blogs to provide information related to advertis- ing and corporate decisions and to seek information related to consumer thinking in the

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340 Chapter 9 Communication

EXHIBIT 9-3 Communicating with Customers

22-February-2007 Dear JetBlue Customers,

We are sorry and embarrassed. But most of all, we are deeply sorry.

Last week was the worst operational week in JetBlue’s seven year history. Following the severe winter ice storm in the Northeast, we subjected our customers to unacceptable delays, fl ight cancellations, lost baggage, and other major inconveniences. The storm disrupted the movement of aircraft, and, more importantly, disrupted the movement of JetBlue’s pilots and in-fl ight crewmembers who were depending on those planes to get them to the airports where they were scheduled to serve you. With the busy President’s Day weekend upon us, rebooking opportunities were scarce and hold times at 1-800-JETBLUE were unacceptably long or not even available, further hindering our recovery efforts.

Words cannot express how truly sorry we are for the anxiety, frustration and inconvenience that we caused. This is especially saddening because JetBlue was founded on the promise of bringing humanity back to air travel and making the experience of fl ying happier and easier for everyone who chooses to fl y with us. We know we failed to deliver on this promise last week.

We are committed to you, our valued customers, and are taking immediate corrective steps to regain your confi dence in us. We have begun putting a comprehensive plan in place to provide better and more timely information to you, more tools and resources for our crewmembers and improved procedures for handling operational diffi culties in the future. We are confi dent, as a result of these actions, that JetBlue will emerge as a more reliable and even more customer responsive airline than ever before.

Most importantly, we have published the JetBlue Airways Customer Bill of Rights—our offi cial commitment to you of how we will handle operational interruptions going forward—including details of compensation. I have a video message to share with you about this industry leading action.

You deserved better—a lot better—from us last week. Nothing is more important than regaining your trust and all of us here hope you will give us the opportunity to welcome you onboard again soon and provide you the positive JetBlue Experience you have come to expect from us.

Sincerely,

David Source: http://www.jetblue.com/aboutourcompany/fl ightlog/archive_February2007/.html.

general marketplace.57 For example, Stonyfi eld Farm, the largest organic yogurt company in the world, uses blogs to interact with its customers on health-related topics relevant to the yogurt business.58 When JetBlue Airways canceled half of its fl ights and kept passengers waiting in planes on the runway for up to 11 hours, they had a great deal of apologizing to do—especially for a company known for its customer service.59 One way in which the company regained its service reputation was through Chairman David Neeleman’s blog message to the passengers and the general public. This message is presented in Exhibit 9-3.

Although the adoption of communication technologies and the new forms of com- munication they support can be benefi cial, new communication technologies can also create issues for organizations and individuals. One common problem is information over- load, which is discussed later in this chapter. Another problem is that the new technology makes it easier to leak private or secret information to an unintended audience, often with unintended consequences. For example, Mark Jen, a programmer at Google, blogged about the company’s unfavorable health plan.60 This blog caused Jen to be fi red and served as a warning to other bloggers at Google. Finally, as illustrated in the Managerial Advice feature, personal privacy concerns that did not exist 10 years ago are now very apparent.

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Interpersonal Communication 341

MANAGERIAL ADVICE

Eva Montibello, a marketing manager with a Boston-based fi rm, was sorting through job applications, when a member of her staff came up and told her to check out a particular applicant’s MySpace page. Eva did, and was quite shocked to fi nd many compromising photos of the applicant, including one involving Jell-O wrestling. When this applicant was asked about the photos in her interview, she laughed it off and was quite silly about them. In the end, the unprofessional photos and unprofes- sional response to the photos were a factor in why this applicant was not hired by Eva’s fi rm.

In recent years, the way in which companies recruit associates has gone through a revolution because of the availability of technology that al- lows employers to connect with and get information about potential job applicants. It used to be that when an individual applied for a job, the hiring organization had access only to information provided by past em- ployers, schools, and/or the appli- cant. Now, for many people, there exists an abundance of information in cyberspace, and organizations are using this information to evaluate job candidates. Employers have access to information about candidates that they would never dream of asking about in an interview, such as social activities, religious activities, friends, and what people really think about their old bosses.

In a 2006 survey by executive search fi rm ExecuNet, 77 percent of recruiters said they use search

engines to check out job can- didates. In a 2009 Career- Builder.com survey of 2,600 hiring managers, 45 percent reported using search engines to gather information on ap- plicants, with many specifi - cally checking social network- ing sites such as Facebook and MySpace. According to the CareerBuilder survey, re- cruiters found these searches quite informative. Thirty-fi ve percent indicated that candidates had been rejected based on information found in social networking sites. Among those recruiters screening out candi- dates, the following issues were cited:

• Candidate posted provocative/in- appropriate photos or information (53 percent).

• Candidate posted content about drinking or drug use (44 percent).

• Candidate bad-mouthed one or more previous employers, co-work- ers, or clients (35 percent).

• Candidate demonstrated poor com- munication skills (29 percent).

• Candidate made discriminatory re- marks (26 percent).

• Candidate posted information on qualifi cations that confl icted with information provided directly to the company (24 percent).

• Candidate shared confi dential in- formation from one or more previ- ous employers (20 percent).

To avoid problems and to present a positive image, job seekers must be proactive. Rosemary Haefner (Vice President of Human Resources at

CareerBuilder), Dave Willmer (Execu- tive Director of a talent management company), and a number of other ex- perts in recruiting and job searches have offered helpful advice. Collec- tively, they suggest the following:

• Conduct a comprehensive search of your name using major search engines (for common names, the search can be narrowed by add- ing employer names and/or rel- evant cities).

• For any web-based content that can be directly controlled, delete entries that could cast a negative light on your candidacy (see list of items presented above).

• For content that cannot be directly controlled (e.g., information some- one else has posted about you), contact the relevant parties and request that the information be de- leted or modifi ed. If some negative content cannot be deleted, be pre- pared to discuss it in an interview.

• Reconsider your friends. Searches of social networking sites will turn up information not only on you but also on your friends and their com- ments to you.

Surfi ng for Applicants

P/ W

id e

W or

ld P

ho to

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342 Chapter 9 Communication

• Consider creating your own pro- fessional group on sites such as Facebook or BrightFuse.com. Such a group would cast a positive light on your candidacy and might lead to important contacts.

• Present yourself in a positive way by: (1) communicating effectively

when blogging and posting to so- cial networking sites; (2) providing evidence of creativity and initia- tive in your web-based content; and (3) mentioning awards, acco- lades, and positive references in your web-based content.

Overall, the message is quite clear: people must be aware of the electronic image that they project. Not only do recruiters screen people out based on negative information found in cyberspace, they also look for positive information there.

Sources: D. Aucoin. 2007. “MySpace vs. Workplace,” Boston Globe, May 29, at http://www.boston.com/news/ globe/living/articles/2007/05/29/myspace_vs_workplace; M. Brandel. 2007. “How to ‘Get Found’ On the Web,” Computerworld, March 26, vol. 41, no. 13, p. 30; W.M. Bulkeley. 2006. “Technology (A Special Report)—The Inside View: Employee Blogs Can Put a Human Face on Companies, But That’s Not Always a Good Thing,” Wall Street Jour- nal (Eastern Edition), New York: April 3, p. R.7;.R. Haefner. 2009. “More Employers Screening Candidates via Social Networking Sites,” at http://www.careerbuilder.com/Article/CB-1337-Getting-Hired-More-Employers-Screening-Candi- dates-via-Social-Networking-Sites/; D. Willmer. 2009. “Managing Your Digital Footprint,” T � D, 63 no. 6: pp. 84–85.

Nonverbal Communication We can easily understand the concept of verbal communication, which involves written or spoken language; however, nonverbal communication is frequently as important or even more important. Forms of nonverbal communication include facial expressions, tone of voice, personal appearance (such as dress), contact or touch, and various mannerisms. In general, nonverbal communications fall into three categories: body language, paralan- guage, and gestures. Body language (sometimes referred to as “kinesics”) includes facial expressions; the use of hands, arms, and legs; and posture. Paralanguage refers to how something is said, such as how tone of voice, pitch of voice, and silence are used. Gestures are signs used to convey specifi c meanings (such as making a circle with your fi ngers to indicate “okay” or shrugging your shoulders to indicate “I don’t know”).

All of us have had a great deal of experience with nonverbal communication. In fact, between 60 and 90 percent of all interpersonal communication is nonverbal.61 You have probably heard the adage “actions speak louder than words” or heard someone say they received “good vibes” from someone else. These phrases refer to nonverbal communica- tion. One of the reasons that we place so much weight on nonverbal behavior is that it is “leaky behavior.” Leaky behaviors are those that we cannot control. Therefore, people may be more likely to express their true feelings through nonverbal means rather than through verbal means, which are easy to control.

Nonverbal communication is important because, along with the sender’s verbal ex- pressions, it provides information about the person’s attitudes and emotional or mental state. For example, a person’s tone of voice, facial expression, and body movements can give us information about the person’s feelings (timidity, enthusiasm, anger), which may either support or confl ict with the words used. Nonverbal communication can also provide a useful form of feedback. Facial expressions can show whether the receiver understands the sender’s message and how he or she feels about it. For this reason, face-to-face communica- tion is frequently more effective than written communication, as we have already seen. In general, therefore, a manager should try to provide job directions and discuss performance through face-to-face communication with associates.

nonverbal communication Communication that takes place without using spoken or written language, such as communication through facial expressions and body language.

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Barriers to Effective Communication 343

Because nonverbal behavior is more diffi cult to control than verbal behavior, it can reveal whether a person is lying. This issue has been given a great deal of attention, espe- cially in light of its practical implications. For example, U.S. Customs offi cials were able to increase their hit rate in spotting drug carriers from 4.2 percent to 22.5 percent after they had been trained to read body language.62 In the area of business negotiations, it is particularly important that people be able to read body language to identify when others are being deceptive. It is also important for negotiators to be aware of their own nonverbal cues.63 For example, experienced negotiators often are able to determine whether the other party is lying through nonverbal cues such as the following:

• Subtle shifts in the pitch or tone of a person’s voice64

• Long pauses before answering a question65

• Certain mannerisms, such as shifting limbs, licking one’s lips repeatedly, scratching, or grooming66

• Fleeting smiles67

Another issue involves cultural differences in nonverbal communication. Given the increase in diversity within U.S. organizations and the globalization of the business world, it has become very important for people to understand these differences. Members of different cultures vary a great deal in how they present themselves and in their norms for nonverbal communication. Some of these differences are discussed later in the chapter. However, one aspect of nonverbal communication appears to be the same for all human beings. People of all cultures seem to discern and label facial expressions showing certain basic emotions in the same way.68 These basic emotions include fear, disgust, surprise, happiness, and anger. Therefore, people in a variety of countries such as the United States, Spain, Argentina, New Guinea, and Japan are all likely to recognize a smile as a sign of happiness and a scowl as a sign of disgust.

Barriers to Effective Communication At the beginning of this chapter, we emphasized how important timely, accurate, and informative communication is to an organization’s overall performance and to the in- dividuals who work within the fi rm. We also pointed out that organizations experience many communication problems. Here, we address the barriers to effective communica- tion. These barriers can be categorized into organizational and individual sources.69

Organizational Barriers Organizational barriers to effective communication include information overload, infor- mation distortion, jargon, time pressures, cross-cultural barriers, and breakdowns in the communication network.

Information Overload In our present-day organizations, managers and associates are frequently burdened with more information than they can process. This overload occurs for several reasons. First, organizations face higher levels of uncertainty because of escalating change and turbulence in the external environment, so they obtain more information to reduce the uncertainty. Second, the increasing complexity of tasks and organizational structures creates a need for

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more information. Again, organizations employ more specialists to provide the needed information, placing greater information-processing burdens on organizational members. Third, ongoing developments in technology increase the amount of information available to associates and managers.

As mentioned, when associates or managers are overloaded with information, they cannot process all of it. Instead, they may try to escape the situation, or they may prioritize information so that some is attended to and the rest is ignored. Consider what happens when you are at a party and there are several conversations going on around you, music is playing, and someone is watching the game on TV. It is impossible to focus on everything. In order to focus on a specifi c conversation, you need to tune out everything else. Selecting only a portion of the available information for use, however, can result in inaccurate or incomplete communication in the organizational context.70

In recent years, the development and widespread use of cell phones, e-mail, and in- stant messaging has further increased the information overload problem—anyone can contact anyone anywhere. People in most organizations send and receive e-mail messages at work on a regular basis. Therefore, even associates at lower levels can quickly and easily send messages to higher-level managers, although this is frowned upon in many organiza- tions. Similarly, top executives can communicate messages almost instantaneously to all associates regardless of their location. Obviously, this technology contributes to informa- tion overload, particularly for managers at higher levels. With these advances in technol- ogy, we are facing two overload problems that were not so common only a few years ago: forwarding frenzies and spamming.

Forwarding frenzies occur because electronic communication makes it very easy to pass on information to everyone. One common behavior is to forward messages to anyone who might have even the remotest interest. Thus, we receive many messages that we need to process but in which we do not have any real interest.

As you are no doubt aware, spam is unsolicited electronic junk mail. Despite anti- spam legislation in many states and increasingly sophisticated fi ltering systems that guard against offensive spam, the amount of spam with which people must cope at work is in- creasing at an alarming rate. Indeed, InformationWeek reported that almost 80 percent of all e-mail sent in a recent month was spam mail.71 A study conducted by researchers at the University of Maryland estimated that spam mail cost U.S. businesses almost $22 billion due to time lost by associates reading and deleting junk mail.72

One way in which organizations are trying to deal with the overload caused by elec- tronic messaging and e-mail is by adopting newer, web-based interactive technologies for internal communications. These include blogs, wiki sites, and social networking sites. With this technology, messages are all posted in one place, avoiding redundancy.

Information Distortion It is common for information to be distorted, either intentionally or unintentionally. Un- intentional distortion can occur because of honest mistakes or time pressure. On the other hand, intentional distortion often occurs because of competition between work units in an organization. Departments frequently have to compete for scarce resources in their operat- ing budgets. Research has suggested that some units may believe that they can compete more effectively by distorting or suppressing information, thus placing their competitors at a disadvantage by keeping accurate information from them.73 This is not a healthy situ- ation, but it can occur if managers are not careful.

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Barriers to Effective Communication 345

Suppression or distortion of information can (and does) also occur when a subordi- nate has more information than his manager. One study found that some subordinates suppress or misrepresent information about budgets when they have private information unknown to the manager.74 For example, associates may suppress information about the amount of travel expenses, leaving the supervisor to discover the problem at audit time.

Specialty Area Jargon One problem in large, complex organizations concerns the proliferation of specialists. Specialists are highly knowledgeable within their own fi elds but often have limited under- standing of other fi elds. In addition, they often have their own “language,” or jargon. It may be diffi cult for two specialists in different fi elds to communicate effectively with one another because they use different terminology. For example, a fi nancial specialist may use terms such as EBITA, accelerated depreciation, and P and L statement. An information- systems specialist may use terms such as fi rmware, hexadecimal, bytes, and PLII. Each must understand the other’s terminology if the two are to communicate.

Time Pressures In most organizations, work needs to be done under deadlines, which create time pressures and constrain an individual’s ability to communicate. When people are under time pres- sure, they sometimes do not carefully develop a message before sending it.75 In addition, the pressure of a deadline often does not allow time to receive feedback, so the sender may not know whether the receiver accurately perceived the message.

Cross-Cultural Barriers As discussed in Chapter 3, the business world is becoming more global, increasing the amount of regular cross-cultural communication. Effective cross-cultural communication is necessary for the fi nancial success of international ventures.76 Communication problems cause many expatriate managers to fail in their international assignments, leading to the removal of the manager or the failure of the international venture. These failures cost mul- tinational corporations billions of dollars.77 Many U.S. fi rms compete in foreign markets, and increasing numbers of foreign fi rms have moved into the U.S. market in recent years. Also, millions of U.S. workers are foreign-born. Thus, North American workers must deal with cross-cultural communication issues even in domestic locations. Exhibit 9-4 lists common differences in communication patterns in the United States and other cultures.

Cross-cultural barriers involve lack of language fl uency or a broader lack of cultural fl u- ency.78 Even though English is frequently used for business around the world,79 the potential for language barriers continues to exist in cross-cultural communications. Independently of whether English is used, one or more parties to a conversation might not speak the chosen language as well as others. Also, research has shown that many messages coming into a foreign unit of a fi rm arrive in the local language.80 If knowledge of that language is weak, then trou- ble can ensue. Those who learn the local language often earn more respect within the culture.

Because many products are sold internationally, language is a very important con- sideration in product names and slogans. Major companies have experienced poor results by trying to use North American English names for products sold in foreign countries, especially when they have ignored how the name translated into other languages. For example, Enco (the former name of Exxon petroleum company) means “stalled car” in Japanese. Direct translation of advertising slogans presents similar problems. The slogan “Come alive with Pepsi,” for instance, translated into “Come out of the grave” in German.

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Language fl uency is one dimension of what is known as cultural fl uency—the ability to identify, understand, and apply cultural differences that infl uence communication.81 Language fl uency is necessary for cultural fl uency but is not enough by itself. Take, for ex- ample, the situation faced by Sue, an expatriate manager. When she was in Singapore, she asked a hotel clerk, who spoke English fl uently, for the location of the health spa. She had seen several signs indicating that the hotel had opened a new spa, but none of the signs gave the location. The clerk responded that the hotel had no spa, although Sue kept arguing, “But I saw the signs!” After asking others and fi nally fi nding the spa, Sue concluded that the fi rst clerk either had lied to her or was totally incompetent. Had she understood that many Asian cultures uphold the value of “face,” or unwillingness to experience the embar- rassment of saying “I don’t know,” she might have interpreted the situation differently.

Network Breakdowns Breakdowns in the communication network frequently occur in large organizations be- cause so much information fl ows through those networks. Many things can interfere with the fl ow—mail can be misplaced, messages may not be received by those targeted, and people can forget to relay pieces of information. Larger organizations have more problems because messages must fl ow through more people, increasing the probability that a mes- sage will be transmitted inaccurately at some point.

Breakdowns can also involve technology. The aftermath of Hurricane Katrina provides a vivid example. The Experiencing Organizational Behavior feature illustrates the strategic importance of managing communications technology and the information exchanges they support. When companies lose servers due to power outages or when malware infects intranets or when BlackBerrys will not function because of systemwide failure, the results might not be death and mayhem on the scale of Hurricane Katrina, but the chaos and fi nancial losses can be substantial.

cultural fl uency The ability to identify, understand, and apply cultural differences that infl uence communication.

EXHIBIT 9-4 Examples of Cultural Differences between the United States and Other Cultures

Communication In the United States Elsewhere

Eye contact Direct In many Asian countries, extended eye contact is unacceptable.

Time orientation Punctual—“Time Asian and Latin American cultures have is money” longer time horizons; resolving issues is

more important than being on time.

Answering Direct and factual Many Asian cultures view being questions direct as rude and aggressive.

Self-presentation Self-promotion Many other cultures (e.g., Asian, rewarded Russian) fi nd this rude.

Posture Open body posture In Japan, a closed body posture is preferred (e.g., arms preferred (e.g., crossed arms and relaxed) legs).

Indicating “no” Shaking one’s head In Bulgaria, the “no” signal means from side to side “I’m listening,” rather than “I disagree.”

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Barriers to Effective Communication 347

EXPERIENCING ORGANIZATIONAL BEHAVIOR

On August 29, 2005, Hurri-cane Katrina ripped through the Gulf Coast, devastating hundreds of thousands of homes, lev- eling entire towns, and resulting in over 1,800 deaths. After the storm, several levees surrounding Lake Pont- chartrain failed, causing 80 percent of the city of New Orleans to be cov- ered in water. For blocks and blocks, all that was visible from aerial views were rooftops, often with desperate people on top trying to fl ag down rescue helicopters. Cars and refrig- erators fl oated down main streets. In many areas, the only way to get around was by boat. Swimming in the toxic, sludgy fl oodwater was ex- tremely dangerous, even though it was the only way many people were able to save their lives. Some weren’t so lucky, as dead bodies were often found fl oating down the streets of once-active and charming neighbor- hoods.

As if the disaster weren’t enough, the attempt by authorities to respond to the disaster was shockingly inept, with a few exceptions, such as the ef- forts of the U.S. Coast Guard. Thou- sands of people waited on rooftops or overpasses for days to be rescued from the fl ood, without adequate food or water in insufferable heat. Looting was rampant in the city, with reports that even some New Orle- ans police offi cers were taking part in the activities. About 30,000 peo- ple were trapped in the Superdome without basic necessities, under a leaking roof, and in fi lthy condi- tions. It took fi ve days to rescue these

people. Another 15,000 to 20,000 people were stranded at the Ernest N. Morial Convention Center, right outside the famed French Quarter, suffering from the same heat, fi lth, and lack of food and water as those in the Superdome. Peo- ple who needed medi- cine for diseases such as diabetes, hypertension, and asthma became critically ill because of the lack of medical care. Rumors of rape and murder terrifi ed the crowds. Ap- proximately 15 percent of the police force deserted. The rest of the nation looked on in horror while watching TV reports of scenes that one would never imagine taking place in a major U.S. city.

Since that late-summer week in 2005, a great deal of examination of what went wrong has taken place. Why weren’t agencies, such as the Federal Emergency Management As- sociation (FEMA), the Red Cross, or the New Orleans Police Department able to come to the aid of New Orle- anians sooner and more effectively? Blame can be, and has been, placed on many. One factor, however, that everyone agrees thwarted rescue attempts and fostered the chaos fol- lowing Katrina was a major failure of communications.

In order to deal effectively with such a crisis, rescue agencies and fi rst responders, such as FEMA, the New Orleans Police Department, the Red Cross, the Louisiana National

Guard, and local rescue organiza- tions, must be able to work together, which means they must be able to communicate among themselves. There is a need for strong communi- cation related to the extent and form of damage, what type of problems are emerging, where the damage has occurred, and what type of aid is needed and where. Also, in order to prevent panic, people affected by the crisis must be provided with commu- nications about what has happened, safety procedures, potential dangers, and instructions for further action. In the case of Katrina, the communica- tion system needed to accomplish these tasks was broken:

• Millions of telephone lines were knocked down.

• Thirty-eight 911 call centers went down.

• Local wireless networks had con- siderable damage, making most cell phones in the area useless.

• Thirty-seven of 41 radio stations in New Orleans were unable to broadcast.

• The NOPD’s communications sys- tem was inoperable for three days.

Communication Casualties

P/ W

id e

W or

ld P

ho to

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348 Chapter 9 Communication

Six out of eight police headquar- ters were fl ooded, making it impos- sible to establish command cen- ters. There was a severe shortage of satellite phones that allowed for communication.

• Hundreds of fi rst responders were able to communicate through only two radio channels, jamming the system and causing great delays in the communication of vital infor- mation.

• Verizon Wireless did have genera- tors for its cell towers; however, a number of these were stolen and a

fuel truck bringing fuel to the gen- erators was stopped at gunpoint and its fuel taken.

• FEMA did not provide New Or- leans with a mobile multimedia communications unit (used in emergencies) until four days after the storm.

In the case of Katrina, the break- down of communication technology proved to be disastrous. What could have prevented this situation? Clearly, technology could have been more up-to-date and in better condition. More redundancies in communication

systems also would have been help- ful. Beyond these technology issues, better planning before the storm hit would have been benefi cial.

Were lessons learned? Perhaps. The City of New Orleans and the entire Gulf Coast seemed better pre- pared for Gustav, which struck as a Category 2 hurricane just southwest of New Orleans in 2008. Houston and most of the surrounding areas of Texas seemed to be reasonably well prepared for Ike, which also struck as a Category 2 hurricane in 2008.

Sources: Select Bipartisan Committee to Investigate the Preparation for and Response to Hurricane Katrina, “A Failure of Initiative,” U.S. Government Printing Offi ce, Feb. 15, 2006, at http://www.gpoaccess.gov/congress/index.html; D. Brinkley. 2006. The Great Deluge New York: Harper Collins; W. Haygood, & A.S. Tyson. 2005. “It Was as If All of Us Were Already Pronounced Dead,” Washington Post, Sept. 15, p. A01; M. Hunter. 2006. “Deaths of Evacuees Push Death Toll to 1,577,” Times Picayune, May 19, at http://www.nola.com; C. Landry. 2008. “After the Storms,” Oil & Gas Journal, 106 no. 48: A7–A9; M. Williams. 2008. “Thousands Flee from New Orleans: Hurricane Gustav Described as ‘The Storm of the Century,’” The Glasgow Herald, Sept. 1, p. A2.

Individual Barriers We have examined several organizational factors that can make effective communication diffi cult. Individual factors, however, are the most commonly cited barriers to effective communication. These factors include differing perceptual bases, semantic differences, status differences, consideration of self-interest, issues related to personal space, and poor listening skills.

Differing Perceptions One of the most common communication problems occurs when the sender has one perception of a message and the receiver has another. Differing perceptions are caused by differing frames of reference. Our expectations or frames of reference can infl uence how we recall and interpret information.82

This communication problem is vividly displayed in an exchange that occurred between a coach and a quarterback in a hotly contested U.S. football game. There were 16 seconds left in the game. The team was behind by one point and had the ball on its opponent’s 20- yard line with no timeouts remaining. A fi eld goal would win the game. The safest thing to do would be to call a running play and then kick a fi eld goal. The coach decided, how- ever, that it was necessary to risk a pass play because no timeouts were left. (If the pass was dropped, the clock would stop. If it was caught in the end zone, the game would be won.)

The coach told the quarterback to call the play that they had discussed in practice for just such a situation. But they had discussed two plays (one a pass into the end zone

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Barriers to Effective Communication 349

and the other a running play). The quarterback assumed the coach wanted to take the safest course and called the running play. He handed off to the fullback, who carried the ball into the middle of the line. A big pileup ensued, and the clock continued to run. Before the quarterback could get off another play, time had run out, and the team lost the game. The coach and the quarterback had two different perceptions of the meaning of one message.

Semantic Differences Semantics refers to the meaning people attach to symbols, such as words and gestures. Because the same words may have different meanings to different people, semantic dif- ferences can create communication problems. For example, the word profi t has a positive connotation to most professionals in business, but for others it has a negative connotation as they interpret it to mean “rip-off ” or “exploitation.” Such differences are evident in the problems U.S. oil, pharmaceutical, and insurance companies have had in explaining their profi ts to the general public in the face of political attacks from Washington.

One reason for semantic differences inside organizations relates to the proliferation of specialists, as we mentioned earlier. Specialists tend to develop their own jargon; such terminology may have little meaning or a different set of meanings to a person outside the specialist’s fi eld. A second reason for semantic differences relates to variance in cultural background. This issue was also discussed earlier.

Status Differences Status differences can result from both organizational and individual factors. Organizations create status differences through titles, offi ces, and support resources, but individuals attri- bute meaning to these differences. Status differences can lead to problems of source credibil- ity and can create problems that block upward communication.83 Sometimes, for example, subordinates are reluctant to express an opinion that is different from their managers’, and managers—because of either time pressures or arrogance—may strengthen status barriers by not being open to feedback or other forms of upward communication. To be effective communicators, managers must overcome status differences with those who report to them.

Consideration of Self-Interest Often, information provided by a person is used to assess her performance. For example, it is not uncommon for fi rms to request information from managers about their units’ performance. Data such as forecasts of future activity, performance standards, and recom- mendations on capital budgets are often used in determining the managers’ compensa- tion. Research shows that where data accuracy cannot be independently verifi ed, managers sometimes provide information that is in their own self-interest.84 Although they might not intentionally distort the information that is sent, they might provide incomplete data, selecting only information that is in their own best interests.

Personal Space All of us have a personal space surrounding our bodies. When someone enters that space, we feel uncomfortable. The size of the personal space differs somewhat among individu- als; it also differs by gender and across cultures.85 Women seem to have smaller personal

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350 Chapter 9 Communication

spaces than men. Similarly, the typical personal space in some cultures (such as some European and South American cultures) is smaller than that in other cultures (such as the United States). Personal space affects, for example, how close together people stand when conversing. Suppose someone from a culture where the norm is to stand close together is talking with someone from a culture where the norm is to stand farther apart. The fi rst person will tend to move forward as the second backs away, with each trying to adjust the space according to a different cultural norm. Each may consider the other discourteous, and it will be diffi cult for either to pay attention to what the other is saying. In this case, the difference in personal space can be a barrier to communication.

Poor Listening Skills A frequent problem in communication rests not with the sender but with the receiver. The receiver must listen in order to hear and understand the sender’s message, just as the sender must listen to feedback from the receiver. Managers spend more than 50 percent of their time in verbal communication, and some researchers estimate that they spend as much as 85 percent of this time talking. This does not leave much time for listening and receiv- ing feedback. Perhaps more importantly, it has been estimated that managers listen with only about 25 percent effi ciency.86 Therefore, they hear and understand only 25 percent of what is communicated to them verbally. This can lead the speaker to become annoyed and discouraged, thus creating a bad impression of the listener.87 Poor listening is not conducive to high-involvement management, because it breaks down the communication process and limits information sharing. Later we discuss ways in which listening can be improved.

Overcoming Communication Barriers Several actions can be taken to address the problems identifi ed in this chapter. We discuss those actions next.

Conduct Communication Audits Analyzing the organization’s communication needs and practices through periodic com- munication audits88 is an important step in establishing effective communication. A communication audit examines an organization’s internal and external communication to assess communication practices and capabilities and to determine needs. Communica- tion audits can be conducted in-house (for example, by the Human Resource Manage- ment department) or by external consulting fi rms. Communication audits often are used to ascertain the quality of communication and to pinpoint any defi ciencies in the organi- zation. Audits can be conducted for the entire organization or for a single unit within the organization.

Communication audits usually examine the organization’s communication philosophy and objectives, existing communication programs, communication media, quantity and quality of personal communications, and employee attitudes toward existing communica- tions. The following is a recommended method for conducting a communication audit:

• Hold a planning meeting with all major parties to determine a specifi c approach and gain commitment to it.

communication audit An analysis of an organization’s internal and external communication to assess communication practices and capabilities and to determine needs.

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Overcoming Communication Barriers 351

• Conduct interviews with top management. • Collect, inventory, and analyze communication material. • Conduct associate interviews. • Prepare and administer a questionnaire to measure attitudes toward

communication. • Communicate survey results.89

Improve Communication Climates An organization’s communication climate corresponds to associates’ perceptions of the quality of communication within the organization.90 The communication climate is im- portant because it infl uences the extent to which associates identify with their organiza- tion.91 Organizations can overcome communication barriers by establishing a communi- cation climate where mutual trust exists between senders and receivers, communication credibility is present, and feedback is encouraged. Managers also should encourage a free fl ow of downward, upward, and horizontal communication.92 People must be comfortable in communicating their ideas openly and in asking questions when they do not under- stand or they want to know more. Information should be available and understandable. People in organizational units should be allowed to develop their own communication systems independently for an effective communication climate.93

Encourage Individual Actions Managers and associates can also act as individuals to help overcome communication bar- riers. Experts recommend the following ways to improve interpersonal communication.

Know Your Audience People often engage in what communication expert Virgil Scudder refers to as “me to me to me” communication.94 With this phrase, Scudder is describing communicating with others as if you were communicating with yourself. Such communication assumes that others share your frame of reference and, in the absence of feedback, that people interpret the message as you intend it. Take, for example, an information technology expert trying to explain to his technologically unsophisticated colleagues how to use new computer soft- ware. He may use jargon that they do not understand, not fully explain the steps, and mis- take their dumbfounded silence for understanding. In the end, the IT professional believes he has done his job and taught others how to use the new program. However, because of poor communication, his colleagues learned little and are frustrated. To communicate ef- fectively, people must know their audience, including the audience’s experience, frames of references, and motivations.

Select an Appropriate Communication Medium Earlier, we discussed how various communication media differ in richness. When mes- sages are complex and/or important, use of rich media, such as face-to-face communica- tion, should be considered.95 Also, when dealing with complex/important information, it can be benefi cial to use several media—for example, by following a face-to-face commu- nication with an e-mail message summarizing the discussion.

communication climate Associates’ perceptions regarding the quality of communication within the organization.

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352 Chapter 9 Communication

Regulate Information Flow and Timing Regulating the fl ow of information can help to alleviate communication problems. Regu- lating fl ow involves discarding information of marginal importance and conveying only signifi cant information. That is, do not pass on irrelevant information, or else important messages may be buried by information overload or noise.

The proper timing of messages is also important. Sometimes people are more likely to be receptive to a message and to perceive it accurately than at other times. Thus, if you have an important message to send, you should not send it when recipients are about to leave work, are fully engaged in some other task, or are receiving other communication.

Encourage Feedback Related to Understanding Communication should be a two-way process. To ensure that the received message is interpreted as intended, feedback from the recipient is necessary. Some guidelines that individuals can use to obtain feedback are as follows:

• Ask recipients to repeat what they have heard. • Promote and cultivate feedback, but don’t try to force it. • Reward those who provide feedback and use the feedback received. For example,

thank people for providing feedback. • Respond to feedback, indicating whether it is correct.96 In other words, obtain

feedback, use it, and then feed it back to recipients.

Listen Actively As mentioned earlier, poor listening skills are a common barrier to effective communi- cation. Listening is not a passive, naturally occurring activity. People must actively and consciously listen to others in order to be effective communicators. Exhibit 9-5 outlines the steps in being an active listener.

EXHIBIT 9-5 Steps to Effective Listening

1. Stop talking. Often, we talk more than we should without giving the other person a chance to respond. If we are thinking about what we will say when we talk, we cannot focus attention on the person to whom we wish to listen. Do not interrupt.

2. Pay attention. Do not allow yourself to be distracted by thinking about something else. Often, we need to make an active effort to pay attention when others are speaking.

3. Listen empathetically. Try to take the speaker’s perspective. Mirror the speaker’s body language and give him or her nonjudgmental encouragement to speak.

4. Hear before evaluating. Do not draw premature conclusions or look for points of disagreement. Listen to what the person has to say before jumping to conclusions or judgment.

5. Listen to the whole message. Look for consistency between the verbal and the nonverbal messages. Try to assess the person’s feelings or intentions, as well as just facts.

6. Send feedback. In order to make sure that you have heard correctly, paraphrase what was heard and repeat it to the person you were listening to.

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What This Chapter Adds to Your Knowledge Portfolio 353

THE STRATEGIC LENS

O rganizations cannot accom-plish their goals without us-ing effective communication practices. Managers and leaders must communicate with associates to ensure that they understand the tasks to be done. In doing so, they need to use a two-way communication process to make certain that communication is understood as intended. Without effec- tive communication, human capital in the organization will be underutilized and will not be leveraged successfully. Organizations that do not use their human capital well usually implement their strategies ineffectively, and so their performance suffers. In this cir- cumstance, a fi rm might unnecessar- ily change its strategy because senior managers do not realize that strategy implementation—not the actual strat- egy—was the problem. Of course, with continued poor performance, CEOs are likely to lose their jobs.97

Information serves as a base for developing organizational strate- gies. Usually, the organization gath- ers signifi cant amounts of information on its markets, customers, and com- petitors to use in the development of the best strategy. Interestingly, some organizations use blogging to gather intelligence on their competitors. In addition, before selecting a strategy, managers frequently obtain informa- tion on the organization’s strengths and weaknesses. To get all of this information requires substantial com- munication with internal and external parties. If managers do not communi- cate well, they are unlikely to obtain the information needed to develop the correct strategy. Therefore, top ex- ecutives must ensure that they commu- nicate effectively and that all manag- ers (and hopefully associates) do so as well. Good communication is the

base on which most of what happens in the organization depends.

Critical Thinking Questions

1. For which tasks in a manager’s job is effective communication critical? Explain.

2. Which contributes more to an or- ganization’s performance—oral communication or written commu- nication? Justify your answer.

3. What are the strengths and weak- nesses in your personal communi- cation abilities? How can you best take advantage of your strengths and overcome your weaknesses to have a successful career?

4. What impact is rapidly developing communication technology likely to have on communication in or- ganizations?

What This Chapter Adds to Your Knowledge Portfolio In this chapter, we have discussed the communication process and have examined both organizational and interpersonal communication issues. We have also described organi- zational and individual barriers to communication, along with ways of overcoming these barriers. To summarize, we have covered the following points:

• The communication process is a two-way process in which a sender encodes a message, the message travels through a communication medium to the receiver, and the receiver decodes the message and returns feedback to the sender. Effective communication occurs when the received message has the same meaning as the sent message.

• Two important aspects of organizational communication are communication net- works and the direction of communication fl ow. Networks can be sparse or dense and centralized or decentralized. Communi cation can occur in a downward, up- ward, or horizontal direction; in the case of 360- degree feedback, it occurs in all three directions.

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354 Chapter 9 Communication

• Important aspects of interpersonal com- munication include its formal or informal nature, media choices, communication technology, and nonverbal dynamics.

• Common barriers to effective communica- tion that occur at the organizational level are information overload, information distor- tion, jargon, time pressures, cross- cultural barriers, and breakdowns in the communi- cation network.

• Common individual barriers to effective communication include differing percep- tions, semantic differences, status differences, self-interest, issues related to personal space, and poor listening skills.

• Organizations can improve communication effectiveness by conducting communication audits and creating positive communica- tion climates.

• Individuals can improve their interpersonal communication by knowing their audi- ence, selecting appropriate communication media, regulating information fl ow and timing, encouraging feedback, and engag- ing in active listening.

Thinking about Ethics 1. Do managers have a compelling reason to tell the truth to everyone (associates, customers,

suppliers, and so forth)? Are there any circumstances in which it is ethically acceptable not to tell the truth? Explain.

2. Do people who are central to communication networks within organizations have a responsibility to pass on important information they receive? Explain.

3. What ethical issues are related to the use of “the grapevine”?

4. In the Managerial Advice feature, we discussed how organizations are using the Internet to check up on job applicants. Are there potential legal and ethical concerns with this practice?

Key Terms

? back to the knowledge objectives 1. Why is communication strategically important to organiza-

tions? 2. How would you describe an effective communication process? 3. What are the advantages and disadvantages of the various

types of communication networks? 4. How are upward, downward, and horizontal communica-

tion accomplished? 5. Defi ne interpersonal communication. How do formal and

informal communication processes differ? 6. What is media richness, and how do different communica-

tion media vary in richness? 7. How can technology affect the communication process? 8. How does nonverbal communication contribute to the com-

munication process? 9. What are six organizational barriers to effective communi-

cation? 10. What are six individual barriers to effective communication? 11. What are communication audits, and how are they conducted? 12. What specifi c actions can individuals take to overcome

communication barriers?

communication, p. 330 encoding, p. 330 communication medium

or communication channel, p. 330

decoding, p. 330 feedback, p. 330

sparse networks, p. 332 dense networks, p. 332 centralized networks, p. 332 decentralized networks.

p. 332 downward communication,

p. 333

upward communication, p. 334

horizontal communication, p. 336

interpersonal communication, p. 337

formal communication, p. 337

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Building Your Human Capital 355

Human Resource Management Applications The Human Resource Management (HRM) function is charged with helping to make managers and associates better communicators. Specifi c activities that are often managed by the HRM department are briefl y discussed below.

Many HRM units offer training to aid in the development of interview skills. Managers in various units of the organization interview potential job candidates. In high-involvement organi- zations, associates often interview candidates as well. In these interviews, managers and associates must effectively convey questions and actively listen to answers, paying close attention not only to the verbal answers but also to the body language and gestures that might provide additional insights.

HRM units also develop performance-appraisal forms and systems, including those used for 360-degree assessments. In developing the relevant materials and instructions, representatives of the HRM function emphasize the sensitivity and importance of the communication that occurs in appraisal sessions.

Beyond the traditional tasks discussed above, some leading-edge HRM units are using web- based technology to: (1) develop procedures for recruiting through blogs, (2) establish standardized procedures for checking on candidates through social networking sites, and (3) create permanent information and application centers within virtual social worlds.

informal communication, p. 337

rumors, p. 337 gossip, p. 337

nonverbal communication, p. 342

cultural fl uency, p. 346 communication audit, p. 350

communication climate, p. 351

building your human capital

Presentation Dos and Don’ts Making presentations can be one of the most challenging communication exercises faced by any- one, especially those who are not accustomed to presenting. Below is a quiz to help you determine how you fare in giving public presentations. The fi rst 16 questions are presentation “dos” while the second 16 questions are presentation “don’ts.”

Answer the questions based on your own recollections of presentations you have given. Perhaps an even better assessment of your presentation effectiveness would involve having a friend in the audience fi ll out this questionnaire for you when you are giving a presentation. In answering the questions, use the following scale:

1 2 3 4 5 Rarely Seldom Sometimes Frequently Almost Always

Presentation “Dos” When you are making a presentation to a group of people, how often do you: 1. Think about the audience’s collective point of view? 2. Acknowledge that the audience may be different from you? 3. Do research on who constitutes your audience?

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4. Tailor your message to suit the audience? 5. Provide a clear outline of what you are going to discuss? 6. Provide illustrative visual information? 7. Summarize your main points? 8. Make between three and six major points? 9. Gauge the audience’s reaction as you proceed? 10. Ask the audience for feedback? 11. Stop and provide clarifi cation when the audience seems confused? 12. Solicit questions? 13. Use body language to get your points across? 14. Maintain eye contact with the audience? 15. Modulate your tone of voice to keep people interested? 16. Show enthusiasm for your topic?

Presentation “dos” scoring: Add together your scores on the items for each section below. If you scored less than 16 in a particu- lar section, you need to work on that aspect of your presentation style.

Questions 1–4: Knowing your audience. Total score on questions 1–4:

Questions 5–8: Structure. Total score on questions 5–8:

Questions 9–12: Feedback. Total score on questions 9–12:

Questions 13–16: Animation. Total score on questions 13–16:

Presentation “Don’ts” When you are making a presentation to a group of people, how often do you: 1. Present information at the most diffi cult level possible, because it will make you appear

knowledgeable? 2. Assume everyone in the audience agrees with you? 3. Make the presentation as simple as possible so even the least-educated person will understand? 4. Believe that if a presentation works with one crowd, it will work with another? 5. Present very detailed visual information to make sure the audience picks up on all the details? 6. Avoid a summary because it should be obvious what you have already said? 7. Get distracted by random questions? 8. Attempt to be extremely thorough in getting all of your points across, even if it means you

don’t have time to explain all of them? 9. Look out over the heads of the people in the audience? 10. Refuse questions in order to get your message across? 11. Ignore signs of confusion or lack of interest in the audience because it will just get you off

your point? 12. Focus all your attention on a friendly face in the audience? 13. Read from your notes? 14. Make nervous gestures (fi dget with your hair, tap your foot, rattle your change, or the like)? 15. Speak in monotone because it is more authoritative? 16. Speak as quickly as possible?

Presentation “don’ts” scoring: Add together your scores on the items for each section below. If you scored more than 8 in a par- ticular section, you need to work on that aspect of your presentation style.

Questions 1–4: Knowing your audience. Total score on questions 1–4:

Questions 5–8: Structure. Total score on questions 5–8:

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An Organizational Behavior Moment 357

Questions 9–12: Feedback. Total score on questions 9–12:

Questions 13–16: Animation. Total score on questions 13–16:

Explanation of Section Topics Knowing your audience: In order to reach audience members and engage their interest, you must understand their point of view, their motivation for hearing your presentation, their attitudes about what you are saying, and their level of knowledge about your topic.

Structure: To get your message across, it is usually best to keep it organized and fairly simple— stick to a few major, important points. If some members of the audience want more details, offer to speak to them later, provide handouts, or give them a source of further information. If your visual presentation is too complicated, the audience will be reading your slides rather than listen- ing to you.

Feedback: Remember that feedback is an essential part of the communication process. You need to be aware of how your audience is responding so that you can further tailor your presentation to ensure that audience members understand or are engaged with what you are telling them. Do not ignore their reactions.

Animation: Everyone has experienced both “good speakers” and “boring speakers.” Don’t be one of the latter. Be lively, animated, and show enthusiasm for your subject. If you don’t, your audience won’t either.

an organizational behavior moment

Going North “Roll ’em!” “Take number 64. Lights. Camera. Action!” “Jane, I’ve missed you so much these past few weeks.” “I know, my darling. I’ve missed you, too.” “We must make up for lost time.” “Cut, cut, cut! Tom, you’re playing this scene like a frozen

polar bear. This is a tender love scene!” Helen screamed in her loudest, shrillest voice. “You’re supposed to play it with feeling and tenderness. You want to make people think you love Jane.”

“Helen, I could play the part better if you’d just get off my back. I knew more about romance when I was a teenager than you do now. Who are you to tell me how to play a love scene?” Tom shot back.

Helen called out, “That’s all for today, everybody. We can let our mechanical lover calm down and maybe get in a better mood for this scene tomorrow.”

With that Tom stomped off the set, and everyone began to disperse.

Helen Reardon is the producer and director of the fi lm Going North, based on a novel that had stayed on the bestseller list for 16 months. Helen is considered to be one of the best directors in Hollywood. She already has two Academy Awards to her credit and many hit motion pictures.

Tom Nesson is a promising young actor. His most recent fi lm, The Western Express, was well received at the box offi ce and

thrust him into the limelight. In fact, one of the reasons he was chosen to play the leading male part in Going North was his cur- rent popularity. He is considered by industry insiders as a poten- tial superstar.

All went well on the set for the fi rst few weeks. But then problems began to arise. First came arguments between the set- design and wardrobe staff. There were feelings that the sets and the costumes didn’t match. Some thought that the colors even clashed at times. The question was, “Whose fault is it?” Of course, each group blamed the other.

Later, the makeup staff walked off the job, claiming that they were being asked to work unreasonable hours. Helen did have a penchant for shooting movies at odd hours, particularly if the scene called for it. The makeup staff claimed that they had an informal agreement with studio management about the hours they would work and that this agreement had been violated. Al- though studio executives convinced them to return to work, the “peace” was an uneasy one. Now there was this blowup between Helen and Tom. Everyone hoped that the problems between the two were temporary.

The next day, everybody was back on the set on time except Tom. He came in about 10 minutes late. He explained that the makeup people were slow in getting his makeup on. No one ques- tioned this, and they began where they had left off the previous day.

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358 Chapter 9 Communication

“Take number one. Lights. Camera. Action! … Take num- ber 9. … Take number 19. … Take number 31. … ” Finally, Helen yelled “Cut! Tom, we’ve got to fi nd a way to get this right. We can’t go on like this forever. What do you suggest?”

“I suggest you shoot it like it is. The scene was good. I’ve done it well several times, but you seem to keep fi nding small things wrong.”

“Tom, do you really know what love is? Your acting doesn’t show it.”

With that Tom exploded. “Yes, I know what love is, but you obviously don’t.” He then left the set, shouting, “I’m not coming back on the set until you’re gone!”

Helen left the set immediately, going straight to the studio executive offi ces. She barged into the president’s offi ce and stated, “Either you get rid of Tom Nesson on this movie, or I go!”

The studio executives were in a quandary. They did not want to lose either Helen or Tom. Neither had a history of being

diffi cult to work with. They were not sure what was causing the problem. This movie seemed to be causing all kinds of prob- lems, with the wildcat strike by makeup staff and the disagree- ments between wardrobe and set design. They obviously needed to examine all of the circumstances involved in the making of this fi lm.

Discussion Questions 1. What do you suppose is really causing the problem between

Helen and Tom? Explain. 2. Discuss the problems between the set design and wardrobe

staff and those with the makeup department. 3. Could any of the problems in this case have been prevented?

If so, how? How can the problems now be solved?

team exercise

Communication Barriers This exercise demonstrates the importance of communication in organizations and shows how bar- riers affect communications.

Procedure 1. With the aid of the instructor, the class will be divided into teams of three to fi ve persons. 2. The teams will perform the following tasks:

• Identify all of the major ways in which your institution communicates with students (cata- log, registration, advising, etc.). Be as specifi c as possible. Write each of these down.

• Determine instances in which communication problems arise between the institution and students (for example, where students need more or better information). Write these down.

• Identify specifi c barriers that make effective communication between students and the in- stitution diffi cult. Write these down.

• Development recommendations to overcome the barriers and solve the communication problems previously noted.

The instructor will allow 30 minutes for the teams to complete their analyses.

3. The teams will present their lists of means of communication, communication problems, and recommendations, in that order. First, each team will present one item from the means-of- communication list, then the next team will present one, and so on, until all communication means have been presented. This same procedure will be followed for communication problems and recommendations, respectively. The instructor will compile a list of all the teams’ responses.

4. The instructor will guide a discussion of this exercise, noting the similarity of communication problems in all types of organizations.

The presentation and discussion should require about 30 minutes.

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Endnotes 359

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? knowledge objectives After reading this chapter, you should be able to: 1. Describe the fundamentals of decision making, in-

cluding the basic steps and the need to balance ideal and satisfactory decisions.

2. Discuss four important decision-making styles, em- phasizing the effectiveness of each one.

3. Explain the role of risk-taking propensity and refer- ence points.

4. Defi ne cognitive bias and explain the effects of com- mon types of cognitive bias on decision making.

5. Explain the role of moods and emotions in deci- sion making.

6. Discuss common pitfalls of group decision making. 7. Describe key group decision-making techniques. 8. Explain the factors managers should consider in

determining the level of associate involvement in managerial decisions.

exploring behavior in action

Dawn Ostroff’s Decision Making at the CW Television Network

A s president of the new CW Television Network, Dawn Ostroff faced many challenges in the spring of 2006. Chief among these was programming the lineup of shows for the network’s fi rst season. One issue making this a diffi cult task was the newness of the operation. Recently created through a combination of the WB network and UPN, the

combined entity had no viewer base. What mix of exist- ing shows versus exciting new shows would draw former WB and UPN viewers? What mix of shows would mo- tivate former WB and UPN viewers to fi nd and watch the new network? In some markets, WB viewers would need to fi nd the old UPN station. In other markets, UPN viewers would need to fi nd the old WB station. In still other markets, both WB and UPN viewers would need to fi nd a completely new station carrying CW.

A second issue was the reduction in primetime hours available. The combination of WB and UPN had resulted in a shift from 23 centrally scheduled prime- time hours to 13 centrally scheduled hours. Which ex- isting shows should be cut? With a lineup of shows such as America’s Next Top Model (UPN), WWE Smackdown (UPN), Veronica Mars (UPN), Gilmore Girls (WB), Reba (WB), Smallville (WB), and One Tree Hill (WB), this issue was noteworthy.

Ostroff attacked the programming task with her usual zeal. As an individual, she considered a number of factors, such as the importance of retaining current WB and UPN viewers, the passion that WB and UPN view- ers displayed in lobbying for particular shows, the overall popularity of existing shows as assessed by Nielsen ratings,

decision making by individuals and

groups

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363

Sources: J. Benson. 2007. “Is This the CW’s New Reality?” Broadcasting & Cable, March 26, p. 12; A. Elberse and S.M. Young. 2008. The CW: Launching a Television Network (Boston: Harvard Business School Press); M. Fernandez. 2007. “Youth Must Be Served: The Revitalized CW Seeks to Regain the 18 to 34 Crowd,” Los Angeles Times, July 11, p. E.1; M. Guthrie. 2009. “The CW: New Year, New Focus,” Broadcasting & Cable, May 25, p. 16; C. Littleton. 2006. “Dialogue with Dawn Ostroff and John Maata,” Hollywood Reporter, Feb. 28, pp. 1–2; M. Miller. 2007. “CW Forms a Plan of Action: ‘Online Nation’ and ‘Gossip Girls,’ with Web Components, Are Meant to Woo the 18–34 Group,” Los Angeles Times, July 21, p. E.17; S. Schechner, & Y.I. Kane. 2009. “Apple TV Proposal Gets Some Nibbles, “Wall Street Journal, Dec. 22, p. B.1; M. Schneider. 2007. “Young CW Makes Brand Stand,” Variety, Jan. 8, p. 22.

and the current and future preferences of the new network’s demographic target group (18-to-34-year-olds). As a leader, she considered the views of others as well. Two dozen indi- viduals were involved in the decision making, with a group of six providing strong inputs for the fi nal lineup of shows. Given the nonroutine and complex nature of the situ- ation, incorporating infor- mation and opinions from other people was crucial.

Although Ostroff had a great deal of information at her disposal, she did not become mired in evaluat- ing detailed information. Instead, she tended to keep the big picture in mind and used her judgment in evaluating alternatives. In her words,

Ultimately the people who are successful in this business have a tacit abil- ity to make right decisions based on a wide variety of inputs; they are able to integrate those inputs into what seems to be a gut decision. Deciding on programming is not formulaic.

In the end, Ostroff and her group decided to use mostly existing shows, emphasizing the more popular ones. Although some of these shows had begun to fade and none were top performers in the overall Nielsen ratings, they be- lieved their strategy to be the best one for developing an audience quickly. Exciting new shows would have to wait.

The new CW network performed as well as could be expected in its fi rst season of operation. Although the net- work had no established track record, no direct ownership of stations in large markets, and limited resources, it attracted a small but meaningful audience. Some were disappointed with the performance, believing that the network had used too many fading shows and had not established a consist- ent identity, but most saw a foundation for the future. CW executives and affi liate stations remained optimistic.

To aggressively pursue success over the long run, Os- troff has maintained her focus on the big picture and has continued to draw from her group of advisors, particularly John Maatta, the chief operating offi cer of the network. Taking into account factors such as Nielsen ratings, web-

based use of their shows, affi liate interests, and repo- sitioning of the CW brand toward young women, they have made a number of changes to the lineup since the early days. Some of the shows from the fi rst season have been dropped, particularly those such as WWE Smackdown that did not fi t the new focus on young women. A few shows have been retained, such as Smallville and One Tree Hill. New shows have been added, including Gossip Girl, Vampire Diaries, and

remakes of 90210 and Melrose Place. For the 2008–2009 season, these changes produced some success, with the CW network having the largest percentage increase in DVR use among broadcast networks, an 18 percent increase in ratings within its target demographic of 18-to-34-year-old women, more than 200 million Internet streams from CW.com, and strong download traffi c from Apple’s iTunes for shows such as Gossip Girls and Vampire Diaries (within iTunes, these two shows are among the most popular purchases on a per- episode basis). For the 2009–2010 season, CW scheduled as much prime-time scripted programming as NBC. This is an indicator of maturity and growth at the network.

Has success been ensured for the long run? This is a diffi cult question. The situation remains challenging at the small network, but as of mid-2010 Ostroff has made and continues to make decisions that have the potential to pay off. Given her history of accomplishments and awards, she may have created a viable network for many years to come.

©CW Network, Timothy White/The Kobal Collection, Ltd.

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364 Chapter 10 Decision Making by Individuals and Groups

Individuals in charge of businesses make very important decisions. When we think about these decisions, we tend to think of decisions that are strategic in nature, such as adding or deleting products and services. However, these individuals also make other important decisions that have strategic implica- tions. For example, deciding to out- source a function can have implications for effectively implementing a strategy. As another example, deciding to hire a particular person as a senior manager can affect strategy implementation.

The decisions made by individu- als at the top of an organization are important because they often have the greatest effects on the organization’s performance. However, the decisions of other managers also affect perfor- mance; frequently, even decisions by lower-level managers have signifi cant effects on the success of the organiza- tion.1 In particular, managers through- out the organization make decisions about the actions needed to implement strategic decisions. The quality and speed of those decisions affect the suc- cess of strategy-implementation efforts.

The example of Dawn Ostroff at the CW Network provides important insights into decision making, and not only for those at the top. Ostroff made many important decisions related to

programming, advertising formats, organizational structure, personnel, logos, and trademarks. Other manag- ers in the fi rm made decisions that sup- ported her efforts. Managers in charge of web-based offerings made some of the decisions related to the availability and timing of online links to episodes of television shows. Managers courting and working with advertisers made de- cisions related to commercials. Beyond the many managerial decisions, asso- ciates made choices in areas ranging from broadcast standards to develop- ment resources of new shows. And in many instances, joint decisions were made by groups of people.

Faced with numerous challenges in her job, Ostroff gathered informa- tion, discussed issues with managers and associates, and made choices based on the big picture and even intuition. This approach can be effec- tive. As you will learn in this chapter, however, not all decision makers fol- low this approach. Indeed, personal styles vary, and different situations call for different approaches. Furthermore, cognitive biases affect decision makers, causing them to collect less information or poor information in some cases. The cognitive models used by managers to make decisions are affected by the amount and type of their education and

experience. For example, a manager with an engineering degree and several years of experience in an engineering unit and a manager with a degree in marketing and several years of experi- ence in a marketing unit are likely to approach the same problem in very dif- ferent ways.2

In this chapter, we open with a discussion of the fundamentals of deci- sion making, including the basic steps and the need for balance between ideal and satisfactory decisions. Follow- ing this, we cover individual decision making, focusing on individual deci- sion styles, risk taking, cognitive biases, and moods and emotions. Next, we examine the important area of group decision making. Key topics include techniques for improving group deci- sions and tools for evaluating how well groups have done. Finally, we ad- dress a crucial question: To what extent should a manager involve associates in a particular decision? While high- involvement management, an important concept presented in this book, requires managers to delegate many decisions to associates and to involve them in many others, under some circumstances a manager should make a decision alone or with limited input from associ- ates. A framework is offered to guide managers in addressing this issue.

the strategic importance of Decision Making

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 col- lege or university to attend, what our major will be, what job to accept, what career path

decisions Choices of actions from among multiple feasible alternatives.

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Fundamentals of Decision Making 365

to follow, and how to manage our fi nances. 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 fi rm. Other managers in the fi rm make decisions regarding how a unit should be organ- ized, who should lead various work groups, and how job performance should be evaluated. In a high-involvement organization, 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, effective decision making begins with a determination of the problem to be solved. Prob- lems are typically gaps between where we are today and where we would like to be tomor- row. We need a new associate in the work group but do not have one. We have excess cash in the fi rm 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. Con- sider the following example. A manufacturing unit has a broken machine. One person might defi ne the problem in terms of the need to repair the machine or perhaps buy a new

Define the Problem

Identify Criteria

Gather and Evaluate Information

Feedback

List and Evaluate Alternatives

Select Best Alternative

Implement and Follow Up

Exhibit 10-1 The Decision-Making Process

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366 Chapter 10 Decision Making by Individuals and Groups

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 might defi ne the problem very broadly in terms of a need to return the manufac- turing 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 workfl ow so that the machine is no longer needed, and so on. Overly narrow problem defi nitions are a chief concern in decision making, as they restrict options.3

The next step in decision making, identifi cation of decision criteria, requires the deci- sion 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 cri- teria 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 identifi ed, the decision maker must gather and process information to better understand the decision context and to discover specifi c al- ternatives that might solve the problem. In discovering or identifying possible alternatives, she should be careful not to constrain or evaluate the alternatives to any signifi cant 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 alterna- tives. To complete this step, the decision maker assesses each alternative using each cri- terion. 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 defi ne an effective decision as one that is timely, acceptable to those affected by it, and satisfactory 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 re- viewing standard decision-making steps like those shown in the exhibit. Each step is more

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Individual Decision Making 367

complex than it appears on the surface. Furthermore, individuals and groups cannot al- ways make decisions that maximize their objectives, because to make such decisions we must have complete knowledge about all possible alternatives and their potential results. Complete knowledge would allow us to choose the best possible alternative, but it is un- likely that we actually would have complete knowledge for any real-world decisions. Thus, we tend to make satisfi cing 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 fi ll 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 fi rst satisfactory alternative discov- ered. Because we are busy and typically want to conserve the resources used in making any one decision, we often stop searching when we fi nd the fi rst workable alternative. Research has indicated, however, that some individuals are more likely than others to choose the fi rst satisfactory option.8 Some continue to search for additional alternatives after encoun- tering the fi rst satisfactory one, thereby increasing their odds of fi nding a better solution. This is an important individual difference that is of interest to managers and those inter- ested in organizational behavior.

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 infl uence an individual’s decision making, including degree of accept- able risk and cognitive biases.

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, refl ect 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 popu- lar in the corporate world.

satisfi cing decisions Satisfactory rather than optimal decisions.

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368 Chapter 10 Decision Making by Individuals and Groups

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 indi- viduals prefer information that is concretely grounded and readily accessible through the fi ve basic senses, whereas others prefer abstractions and fi gurative examples as sources.

An associate or manager who relies on facts gathered directly by the fi ve 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 in- formation-gathering stage. Such persons observe the actual situation very carefully: spe- cifi c details, concrete examples, real experiences, practicalities, and literal statements. They are down-to-earth people who believe that creativity involves much effort. Steve Ballmer, CEO of Microsoft, seems to fi t this profi le. 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

sensing A decision style focused on gathering concrete information directly through the senses, with an emphasis on practical and realistic ideas.

intuition A decision style focused on developing abstractions and fi gurative examples for use in decision making, with an emphasis on imagination and possibilities.

Define the Problem

Identify Criteria

P e rc

e p tu

a l

In flu

e n ce

Gather and Evaluate Information

Sensing Intuition

Using abstractions and describing the “big picture”

Ju d g m

e n ta

l In

flu e n ce

Thinking

Using objective analysis and rational

procedures

Feeling

Using subjective values with emotional and

personal factors

F e e d b a ck

List and Evaluate

Alternatives

Select Best Alternative

Implement and Follow Up

Using the five senses to identify

factual details

Exhibit 10-2 Infl uence of Decision Styles

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Individual Decision Making 369

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 classifi ed as having the intuition style,13 as has former British prime min- ister Margaret Thatcher.14 Dawn Ostroff of the CW network also seems to fi t the profi le.

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 appropri- ate for jobs where routine decisions are typical.15 In one relevant study, researchers exam- ined how loan offi cers handled a number of lending decisions.16 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 illustrates 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.17 In the sensing group, individuals displayed less creativity and identifi ed ideas that resulted in only $15.2 million of profi t during the period of the study. Individuals in the intuition group displayed more creativity and delivered $197.5 million in profi t.

Specifi c 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 fi xed relationship between a person’s infor- mation-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 alter- natives. 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 judgments are said to prefer a thinking style.18 Decision makers who use the thinking style to derive conclusions from their perceptions are objective, analytical, logical, and fi rm.

People who use this style are concerned with principles, laws, and objective criteria. They fi nd it easy to critique the work and behavior of others but are often uncomfortable dealing 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 fi re them, if necessary. They are fi rm and may seem detached and impersonal to subordinates. Their apparently detached nature is likely due to the organized and structured approach

thinking A decision style focused on objective evaluation and systematic analysis.

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370 Chapter 10 Decision Making by Individuals and Groups

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, subjective judgments are said to use a feeling style.19 People concerned with feelings em- phasize the maintenance of harmony in the workplace. Their judgments are infl uenced by their own or 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 unpleasant 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 interper- sonal 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 in- formation on decision style as well as performance in selling properties.20 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 considered 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,21 they are likely to benefi t from seeking out a feeling type. In addition, when a manager creates a team to address a problem and make a decision, she is likely to benefi t from including both styles on the team.

Using Decision Styles Although it may seem that decision-making styles are fi xed, there is some fl exibility in the styles used by managers and associates. As stated by Jung and later researchers, a decision style is simply a preference.22 Many experienced decision makers are able to adjust their styles as need dictates, at least to some degree. Microsoft’s Steve Ballmer, for example, clearly emphasizes the thinking style but at times seems capable of adopting the feeling style. As a thinker, he tends to be objective, logical, and analytical, and perhaps a bit imper- sonal as well, but he can also 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.23 Dawn Ostroff appears to emphasize the thinking style, but not as strongly as Ballmer. She, therefore, probably moves more easily between thinking and feeling.

The accounting and marketing examples discussed in the Managerial Advice feature represent a larger problem involving many functional areas. Associates and managers in many areas can have personal 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 briefl y discussed in the advice segment can be quite helpful in addressing the problem of limited styles by extending ways of thinking about situations and broadening the decision styles used. Using the Six Thinking Hats technique, for example, enabled MDS SCIEX to save $1 million on a single project. Similarly, Hermann International’s

feeling A decision style focused on subjective evaluation and the emotional reactions of others.

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MANAGERIAL ADVICE

Many accounting students and practicing accountants combine the sensing and thinking styles. In fact, many accoun- tants are attracted to the accounting fi eld because it allows them to em- phasize rules, procedures, facts, and analysis. The structure in professional accounting activities appeals to them. They must, for example, follow gener- ally accepted accounting principles in creating and analyzing fi nancial data for their companies or clients. In contrast, many marketing students and practicing marketers combine the intu- ition and feeling styles. Marketers are often drawn to the marketing fi eld be- cause it allows them to engage in cre- ative problem solving and requires an understanding of the feelings of others.

Although accountants and market- ers may need to emphasize the deci- sion styles that fi t the type of work they generally do, they must be careful not to overemphasize those styles. Accoun- tants, for example, can be too narrowly focused on standard data and analysis, thereby failing to take a strategic view of fi nancial information in the fi rm. In one case, a controller was asked by the CEO to provide a summary of the fi rm’s fi nancial position. She proceeded to tell him about debits and credits that had been recorded on certain dates. The fi rm’s chief fi nancial offi cer, who was also present at the meeting, described the CEO’s reaction this way:

As she continued, you could lit- erally see the CEO’s eyes cross.

He turned in frustration and said, “No, what I mean is, where are we … ? What do we need to work on?”

In refl ecting on this experience, the chief fi nancial offi cer concluded that: (1) many accountants are biased toward a belief that having more data is better and (2) many accountants hide behind “a mass of data.” He recommended that accountants focus on the strategic objectives of the fi rm and provide written or oral communi- cations that interpret analyses in light of those objectives.

Some marketers also have “blind spots.” For those marketers who work in the more strategic, creative areas of marketing, detailed study of a sta- tistical market analysis is often not ap- pealing, but such work may provide key insights. Even in areas of market- ing that are more quantitative, such as marketing research, individuals may not be evaluating the data care- fully enough. In the words of a suc- cessful consultant:

[M]any, both within and outside the profession, don’t think market- ing research has fulfi lled its man- date. … Researchers have become too long on observation, descrip- tion and problem identifi cation, and too short on rigorous hypoth- esis testing, analysis-based conclu- sions and accurate predictions.

In refl ecting on the state of marketing research, this consultant

suggested additional training in rigor- ous methods, among other tactics.

To maximize effectiveness, ac- countants and marketers must be comfortable with alternative decision styles. They must use their “whole brains,” in the words of a Harvard Business Review article. To support such efforts, several companies offer training programs and materials. The de Bono Group, for example, offers training called Six Thinking Hats. The purpose is to promote the use of dif- ferent ways of thinking (go to http:// debonogroup.com). Numerous com- panies have used de Bono resources, including 3-M, AT&T, Federal Ex- press, Intel, Microsoft, PPG, The New York Times, and Procter & Gamble. Herrmann International offers a brain dominance assessment and creative ideas for working with decision styles (go to http://www.hbdi.com). Many companies have also utilized Her- rmann resources, including Ameri- can Express, Citibank, Coca-Cola, DuPont, General Electric, IBM, MTV, Starbucks, and Weyerhaeuser. Over- all, 70 percent of Fortune 500 compa- nies have used Herrmann resources.

Nurturing Alternative Decision Styles

Sources: K.A. Brown, & N.L. Hyer. 2002. “Whole-Brain Thinking for Project Management,” Business Horizons, 45, no. 3: 47–57; de Bono Group, “What We Do,” 2010, at http://debonogroup.com/what_we_do.php; B. Hamilton. 2003. “How to Be a Top Strategic Advisor,” Strategic Finance, 84, no. 12: 41–43; Herrmann International, “Why Herrmann Interna- tional,” 2010, at http://www.hbdi.com/WhyUs/index.cfm; D. Leonard & S. Straus. 1997. “Putting Your Company’s Whole Brain to Work,” Harvard Business Review, 75, no. 4: 112–121; W.D. Neal. 2002. “Shortcomings Plague the Industry,” Marketing News, 36, no. 19: 37–39; P.D. Tieger, & B. Barron-Tieger. 2001. Do What You Are: Discover the Perfect Career for You Through the Secrets of Personality Type, 3rd ed. New York: Little, Brown; P. Wheeler. 2001. “The Myers-Briggs Type Indicator and Applications to Accounting Education and Research,” Issues in Accounting Education, 16: 125–150.

ig ita

l V is

io n

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http://debonogroup.com

http://www.hbdi.com

http://debonogroup.com/what_we_do.php

http://www.hbdi.com/WhyUs/index.cfm

372 Chapter 10 Decision Making by Individuals and Groups

brain dominance technique has been credited with helping DuPont-Mexico gain new clients, worth millions of dollars in total additional revenue. Overall, the use of these techniques can enhance organizational performance.

Degree of Acceptable Risk Risk exists when the outcome of a chosen course of action is not certain.24 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 fi rst 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 fi rst candidate. Who should be chosen?

In choosing between less and more risky options, an individual’s risk-taking propensity, or willingness to take chances, often plays a role.25 Two persons with differ- ent 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 signifi cant amounts of money in buying and selling real estate.26

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.27 Managers 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 information. 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 decisions.28 A reference point can be a goal, a minimum acceptable level of perfor- mance, or perhaps the average performance level of others, and it is used to judge one’s current standing. 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 fi rm who is below the goal she has set for profi tability 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 fi nance 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.29

risk-taking propensity Willingness to take chances.

reference point A possible level of performance used to evaluate one’s current standing.

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Individual Decision Making 373

Each individual chooses, consciously or unconsciously, his own reference point in a given situation. Two different students are likely to have different minimally accept- able performance levels for a class, and these different levels can serve as their respective reference points. In a recent study, senior managers from small fi rms subjectively rated disappointment with their fi rms’ business performance.30 In some cases, managers were disappointed with a level of performance that other leaders endorsed as very positive. Clearly, reference points differed. Moreover, 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.31 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 confi rmation 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 confi rms beliefs and ideas formed early in the decision process.32 Rather than also search for information that might disconfi rm early beliefs, as a thorough decision process requires, individuals subconsciously seek only information that supports their early think- ing. Failing to look for disconfi rming 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 company in which many of his clients have invested. Because of some recent R&D fail- ures, 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 fi rm. 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 that this is a common occurrence.33

In addition to business domains, research also reveals the presence of confi rmation bias in medicine, where doctors may have some tendency to seek only confi rming data after forming initial diagnostic impressions.34 Similarly, research reveals the confi rmation bias in the legal system, where police investigators and prosecutors may have some ten- dency to seek only confi rming data after forming initial opinions.35 Clearly, the potential for problems caused by confi rmation tendencies is quite signifi cant.

The ease-of-recall bias is also important because it affects the amount and type of information that is gathered and evaluated. In the context of this bias, a decision maker gathers information from his own memory and relies on information that he can easily re- call.36 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

cognitive biases Mental shortcuts involving simplifi ed ways of thinking.

confi rmation bias A cognitive bias in which information confi rming early beliefs and ideas is sought while potentially disconfi rming information is not sought.

ease-of-recall bias A cognitive bias in which information that is easy to recall from memory is relied upon too much in making a decision.

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such as an angry disagreement between two associates while forgetting many common instances of good performance. When selecting a new supplier for a key raw material, a manager may fi nd one or two informal stories of poor performance easier to remember than the comprehensive numbers in an evaluative report on the various alternative sup- pliers. As the brutal despot Joseph Stalin once said, “A single death is a tragedy, a million deaths is a statistic.”37

Another bias is the anchoring bias. Here, decision makers place too much emphasis on the fi rst piece of information they encounter about a situation.38 This initial informa- tion then has undue infl uence on ideas, evaluations, and conclusions. Even when decision makers acquire a wide range of additional information (thereby avoiding the confi rmation bias), initial information can still have too much infl uence.

In one study of this phenomenon, auditors from the largest accounting fi rms in the United States were asked about management fraud.39 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 incidence rate. Others in the study were asked if executive-level fraud occurred in more than 200 out of every 1,000 client organiza- tions. Auditors in this latter group also were asked to estimate the actual incidence rate. Interestingly, auditors in the fi rst 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 fi rms appear to have anchored on arbitrary and irrelevant numbers (10 in the fi rst 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.40 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 benefi ts of continued investment. For example, when the CEO of a small business returns to a loan offi cer at the local bank saying that he needs another $250,000 to suc- ceed, the loan offi cer should not consider the fi rst $250,000 that was loaned. She should consider the likelihood that a new $250,000 will truly help the small fi rm succeed. What is the probability of success going forward? What has occurred in the past is not directly relevant to the new decision.

The power of the sunk-cost bias is illustrated by its role in the deaths of a number of Mt. Everest climbers. Rob Hall’s ill-fated 1996 expedition provides one of the best known examples.41 Hall was co-founder of Adventure Consultants, a company specializing in guiding individuals to the highest peaks in the world. By the mid-1990s, he had guided 39 clients to the summit of Everest. To avoid problems, Hall used a prespecifi ed turnaround time for the fi nal leg of the journey. If the summit could not be reached by a particular time in the afternoon, the party returned to the intermediate camp used during the previ- ous night. Although the technology of climbing—clothing, supplemental oxygen, tents, and so on—has improved dramatically since the early days of Everest climbs, it still is crucial to avoid being anywhere near the uninhabitable summit as darkness approaches.

Even with the prespecifi ed turnaround time, Rob Hall lost his life and the lives of several in his party in May 1996. In part, these deaths happened because Hall ignored his turnaround rule. In this fateful ascent, he and his party encountered delays and slow progress on the fi nal leg. Despite the delays and the slipping schedule, Hall pressed on

anchoring bias A cognitive bias in which the fi rst piece of information that is encountered about a situation is emphasized too much in making a decision.

sunk-cost bias A cognitive bias in which past investments of time, effort, and/or money are heavily weighted in deciding on continued investment.

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and failed to send back clients who were obviously struggling. These clients had invested a great deal in the effort to climb Mount Everest and did not want to be sent down after coming so far. Several members of the party did, however, decide to turn around without being forced down by Hall, prompting the following observation:

In order to succeed you must be exceedingly driven, but if you’re too driven you’re likely to die. Above 26,000 feet, moreover, the line between appropriate zeal and reckless summit fever becomes grievously thin. Thus, the slopes of Everest are littered with corpses. Taske, Huthchi- son, Kasischke, and Fischbeck [party members who turned back] had each spent as much as $70,000 and endured weeks of agony to be granted this one shot at the summit … and yet, faced with a tough decision, they were among the few who made the right choice that day.42

Moods and Emotions Moods and emotions are two aspects of affective phenomena in organizations.43 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 specifi c 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 fi eld of orga- nizational 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.44 On the one hand, individuals in positive moods seem to neglect the details of decision situations. This can lead to poor outcomes when such details are crucial. On the other hand, individuals in positive moods seem to exhibit more breadth in ideas considered, which can create more exploration, less conser- vatism, more creativity, and perhaps more risk taking. These decision attributes are positive in situations calling for fresh ideas or bold steps. In one study of the mood phenomenon, foreign exchange traders with positive moods were found to exhibit more confi dence and risk taking, but their overall performance was lower than those in bad moods presumably because details mattered in the trading context.45 In another study, auditors with positive moods were found to be less conservative than auditors in bad moods.46

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.47 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.48 In contrast to the above circumstances, decision makers sometimes avoid full feedback so as to limit their knowledge of bad outcomes, which makes avoiding a truly poor choice diffi cult in the future.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

moods Affective states corresponding to general positive or negative feelings disconnected from any particular event or stimulus.

emotions Affective states corresponding to specifi c feelings, such as anger, that tend to be associated with particular events, people, or other stimuli.

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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 justifi cations of the decision by using, for example, a self- affi rmation such as “I did the best that I could”.

A second often-studied emotion is anger. This emotion is widely believed to have im- portant, potentially problematic effects on decision making. First, anger may cause decision makers to be less effective gatherers and evaluators of information.51 Second, anger may lead to lower perceived risk unwanted decision consequences, particularly in comparison to the effects that other negative emotions have on perceived risk (e.g., fear).52 A study of public at- titudes 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.

EXPERIENCING ORGANIZATIONAL BEHAVIOR

Barack Obama earned an impressive victory in the U.S. presidential election of 2008. In part, his success was based on personal qualities such as cha- risma and strong oratorical skills. His success also was driven by a strong team of strategic advisors, including David Axelrod and David Plouffe. These advisors helped to develop important strategies, such as the very strong emphasis on being consistent with the political message even when setbacks and unexpected problems occurred. Energized grassroots or- ganizations also played a role in the election outcome, as did unprec- edented use of web-based media and a focus on young people.

Despite all of those positives, the victory was improbable in many ways. Obama had little leadership experience. He also had somewhat limited political experience, having served for only a few years in the U.S. Senate and roughly eight years in the Illinois state legislature. Obama also

had a number of friends and political connections that made many main- stream Americans more than a little uneasy. Reverend Jeremiah Wright is the most famous example. Wright had a long history of controversial re- marks on a wide range of issues.

Scott Brown also recently earned an impressive political victory. In Brown’s case, the election focused on one of Massachusetts’s two seats in the U.S. Senate. Although per- haps not as gifted a campaigner as Obama, Brown worked hard to gen- erate a win in the January 2010 spe- cial election to replace the deceased Edward Kennedy. Brown traveled widely in the state and talked with potential voters in a down-to-earth style that won high praise. He suc- cessfully applied lessons from a num- ber of effective previous campaigns for local and state offi ces. He also drew on his lengthy and dedicated service in the National Guard, where he had achieved the rank of lieuten- ant colonel.

Scott Brown’s victory was even more improbable than Obama’s. He ran as a Republican in a heavily Dem- ocratic state. Moreover, he sought the Senate seat formerly held by the popular Democrat Kennedy, which meant many voters for sentimental reasons thought a Democratic candi- date should have the seat. Also, his legislative record was somewhat un- distinguished, and his opponent had Obama campaigning for her, albeit late in the game.

Anger and Fear in Recent U.S. Elections

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Nonetheless, they preferred relatively bold, risky preventive 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. These dynamics are ex- plored further in the Experiencing Organizational Behavior feature.

Group Decision Making We often view decision making as an individual activity, with thoughtful individu- als 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

Obama and Brown overcame strong odds to earn their victories. Personal styles and abilities as well as strong campaign teams certainly played important roles, but the re- inforcement of existing anger or the creation of new anger among voters also played a role, and a very strong one. For Obama, a key element of his overall strategy entailed positioning his opponent as an extension of then president George Bush, which lever- aged the anger many American’s felt toward Bush over the Iraq war, perceived corporate favoritism, and enormous government spending. Be- yond simply linking the opponent to Bush to leverage existing anger, the Obama team also actively sought to create more anger related to the state of the country.

In the case of Brown, a key ele- ment of his overall strategy entailed leveraging existing anger over tactics being used in the U.S. Congress and also leveraging existing anger and creating more of it over economic conditions. He positioned himself as a Washington outsider while criticizing those working in the nation’s capital. His success prompted one reporter to say this, “People are so angry out here in the real world, they can’t see straight.”

The strategic use of anger by Obama and Brown was no doubt critical to their success. Both candi- dates had a substantial number of potentially damaging attributes, as well as potentially formidable oppo- nents. Anger among voters, though, can result in relatively low perceived

risks for bold actions that address the anger, which means such voters may be willing to take a chance on a newcomer with substantial nega- tives. Obama and Brown could have reduced their focus on anger, while putting greater emphasis on people’s fears over where the country was heading, but that approach may not have worked as well. Further, these candidates could have deempha- sized anger to some degree while fo- cusing even more on inspiring visions for the future (both candidates did put a great deal of energy into visions for the future). While inspiring visions are very powerful, this approach also may not have worked as well in their political situations.

Sources: M. Creamer. 2008. “Barack Obama and Audacity of Marketing,” Advertising Age, Nov. 10, pp. 1–2; R. W. Forsyth. 2010. “The New Dismal,” Barron’s, Jan. 25, pp. 7–8; E. Hornick. 2010. “Independents’ Anger in Massachusetts: A sign of Things to Come?,” CNN.com, Jan. 21, at http://www.cnn.com/2010/POLITICS/01/21/mass.independent. vote/index.html; R. Lizza. 2008. “Battle Plans: How Obama Won,” The New Yorker, Nov. 17, pp. 46–55; D. Weigel. 2010. “Conservative Grassroots Strategy Propels Brown to the Senate,” Washington Independent, Jan. 20, at http:// washingtonindependent.com/74251/conservative-grassroots-strategy-propels-brown-to-senate.

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http://www.cnn.com/2010/POLITICS/01/21/mass.independent

http://washingtonindependent.com/74251/conservative-grassroots-strategy-propels-brown-to-senate

378 Chapter 10 Decision Making by Individuals and Groups

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 orga- nizations, 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 as- sociates 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 indi- vidual 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—defi ne the problem, identify criteria, gather and evalu- ate information, list and evaluate alternatives, and choose the best alternative and implement it.

On the other hand, groups are made up of multiple indi- viduals, resulting in dynamics and interpersonal processes that

make group decision making different from decision making by an individual.54 For instance, some members of the decision group will arrive with their own expectations, problem defi nitions, 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 than others, members’ expectations about what is to be accomplished may differ, 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 processes that occur during decision making often prevent full discussion of facts and alternatives. Group norms, member roles, dysfunctional communication patterns, and too much cohesive- ness may deter the group, thereby producing ineffective decisions. Researchers have identifi ed several critical pitfalls in decision-making groups. These include groupthink, common information bias, diversity-based infi ghting, 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.55 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.

groupthink A situation in which group members maintain or seek consensus at the expense of identifying and debating honest disagreements.

©Karen Moskowitz/Getty Images, Inc.

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This 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.56

• Group members have high regard for the group’s collective wisdom and therefore yield to early ideas or the ideas of a leader.57

• 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.58

In essence, then, a variety of factors can cause group members to avoid surfacing di- vergent 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 administration faces possible military engagement.59 At Enron, the failed energy com- pany, 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 contrib- uted to managers’ tendency to agree with increasingly risky investments and accounting tricks.60

At least eight specifi c symptoms are associated with groupthink:

1. Self-censorship. Group members who recognize fl aws 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 fi nal group decision. Members who have been quiet are assumed to be in

Exhibit 10-3 Group Decision-Making Phenomena—Pitfalls and Techniques

Common Information

Bias

Diversity- based

Infighting

Risky Shift

Devil's Advocacy

Dialectical Inquiry

Delphi Technique

Nominal Group

Technique

Brainstorming

Groupthink

Group Decision Making

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380 Chapter 10 Decision Making by Individuals and Groups

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 confl ict 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.61 Many of these have been U.S. government or military decisions, 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.62 At NASA, examples in which groupthink may have played a role include the decision to launch the Challenger Shuttle in 198663 and the handling of the Hubble telescope.64 For business fi rms, examples abound, with many of them involving boards of directors.65 Groupthink has also been found in self-managing work teams.66 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 likeli- hood 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 mem- bers. 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.67

common information bias A bias in which group members overemphasize information held by a majority or the entire group while failing to be mindful of information held by one group member or a few members.

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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.68 First, managers were asked to evaluate PeopleSoft as an alternative to the fi rm’s existing accounting and enterprise man- agement software. Next, these managers assembled to discuss whether adopting People- Soft would be positive for the fi rm. Concerns and ideas held by one or a few members received less attention than concerns and ideas held by most or all group members, result- ing in a very limited group discussion.

Diversity-based Infi ghting When groupthink is an issue, one or more members of the group typically act to sup- press 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 empha- sized. 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.69 Such diversity-based infi ghting 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 diversity 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 act- ing 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.70 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 consistently made riskier decisions than individuals. This fi nding has since been called the risky shift phenomenon.

Subsequent analysis of these fi ndings and additional research have determined that decisions made by groups are not always riskier. In fact, they are sometimes more cautious. However, group decisions seem to shift toward increased risk more often than toward in- creased cautiousness.71 Several explanations for such shifts have been offered, but the most common and most powerful explanation involves diffusion of responsibility. Because indi- vidual 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.72

Group Decision-Making Techniques As the preceding discussion makes clear, groups may fl ounder when given a problem to solve. It is important, therefore, to understand the techniques that can be used to encour- age full and effective input and discussion before the group reaches a decision. Several

diversity-based infi ghting A situation in which group members engage in unproductive, negative confl ict over differing views.

risky shift A process by which group members collectively make a more risky choice than most or all of the individuals would have made working alone.

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382 Chapter 10 Decision Making by Individuals and Groups

techniques have been developed, including brainstorming, the nominal group technique, the Delphi technique, dia- lectical 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. Increas- ing 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 comments. In contrast, if ideas are not evalu-

ated 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.73

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 fi rm—use this basic approach.74 Research supports the approach, as it suggests that groups using brainstorming often generate more ideas than groups that do not use brainstorming.75 However, research also suggests that groups following this approach do not do as well as individuals brain- storming alone.76 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.77 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 problem may be that group members believe criticism will not be entirely eliminated but will simply remain unspoken.78 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 signifi cant amount of discussion in a group brainstorming session.79

Two techniques may be helpful in overcoming the problems of standard group brain- storming. First, 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.80 Then the written ideas are placed on a fl ipchart 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. Second, 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.81 Each individual attempts to develop as many ideas as possible and enter them into a database. As an idea is entered, it is

brainstorming A process in which a large number of ideas are generated while evaluation of the ideas is suspended.

©Andreas Pollok/Getty Images, Inc.

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projected onto a large screen that everyone can see. Because there is anonymity, individu- als 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 mak- ing 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:82

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 fl ipchart 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 members. Discussion and interaction occur only once during the entire process. Even the fi nal choice of an alternative occurs in silence and depends on an impersonal sum- ming process. 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.83

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.84 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 fi nal 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,85 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.

nominal group technique A process for group decision making in which discussion is structured and the fi nal solution is decided by silent vote.

Delphi technique A highly structured decision- making process in which participants are surveyed regarding their opinions or best judgments.

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384 Chapter 10 Decision Making by Individuals and Groups

Dialectical Inquiry and Devil’s Advocacy The techniques for group decision making explained above are more concerned with in- creasing the number of ideas generated than with directly improving the quality of the fi nal solution. Although having a greater number of ideas enhances the possibility that a superior alternative will be identifi ed, other techniques can help the group fi nd the best choice.

Two key approaches are dialectical inquiry and devil’s advocacy. These approaches counter the tendency of groups to avoid confl ict when evaluating alternative courses of action and to prematurely smooth over differences within the group when they occur.86 In its basic form, dialectical inquiry calls for two different subgroups to develop very differ- ent 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” confl ict. Pro- ponents assert that both are learning-oriented 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.87 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 specifi cally, one subgroup develops a recommendation based on a set of assumptions, and a second subgroup develops a signifi cantly different recommendation based on different assumptions. Debate of the two opposing sets of recommendations and assumptions maximizes constructive confl ict, and the resulting evaluation of the two points of view helps ensure a thorough 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) (this devil’s advocacy process can be repeated over time with additional recommendations).

Research on these techniques suggests that both are effective in developing high- quality solutions to problems.88 At the same time, however, they can result in somewhat lower levels of group satisfaction than approaches such as brainstorming.89 This outcome is probably due to the intragroup confl ict 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 confl ict 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 fi rst 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 asso- ciates? Following the discussion of associate involvement in managerial decisions, we sum- marize the general advantages and disadvantages of having an individual versus a group make a decision.

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.

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Who Should Decide? Individual versus Group Decision Making 385

Associate Involvement in Managerial Decisions Although associates in high-involvement fi rms make many important decisions, other de- cisions 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.90 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 fi rst 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.91

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 partici- pation by 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 al- ways 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 techni- cal quality, subordinate acceptance, and overall effectiveness of fi nal solutions.92

EXHIBIT 10-4 Managerial Approaches to Associate Involvement in Decision Making

Approach

Low AI—Manager solves the problem or makes the decision alone, using the information to which she has current access.

AII—Manager requests information but may not explain the problem to associates. The associates’ role in the process is to provide specifi c information; associates do not generate or evaluate alternatives.

CI—Manager explains the problem to the relevant associates one by one, requesting their input without discussing the problem as a group. After discussing it with each of the relevant associates, the manager makes the decision alone. It is unclear whether the decision refl ects the associates’ input.

CII—Manager explains the problem to associates as a group. The manager obtains group members’ ideas and suggestions. Afterward, the manager makes the decision alone. The associates’ input may or may not be refl ected in the manager’s decision.

GII—Manager explains the problem to the associates in a group setting. They work together to generate and evaluate alternatives and agree on a solution. The manager acts as a facilitator, guiding the discussion, focusing on the problem, and ensuring that the important issues are examined. The manager does not force the group to accept her solution and will accept and implement a solution supported by

High the group.

Source: Adapted from V.H. Vroom, & A.G. Jago. 1978. “On the validity of the Vroom–Yetton Model,” Journal of Applied Psychology, 69: 151–162; V.H. Vroom, & P.W. Yetton. 1973. Leadership and Decision Making. Pittsburgh, PA: University of Pittsburgh Press.

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386 Chapter 10 Decision Making by Individuals and Groups

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 involvement 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 members are heterogeneous in their backgrounds and knowledge.93 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 offi cers and for senior managers deciding on the level of involvement for those who report directly to them.

One fi nal 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.

Is there a quality requirement such that one solution is likely to be more rational than another (is it worth working hard to find the best possible solution, or will any number of solutions work reasonably well)? B: Do I have sufficient information to make a high-quality decision? C: Is the problem structured (do I know the questions to ask and where to look for relevant information)? D: Is acceptance of the decision by associates critical to effective implementation (if implementation would be relatively easy, then full acceptance is less important; if implementation would be pursued out of loyalty, then full acceptance is less important)? E: If I were to make the decision by myself, is it reasonably certain that it would be accepted by my associates? F: Do the associates share the organization’s goals to be attained in solving this problem? G: Is conflict among associates likely in preferred solutions?

A B C D E F G

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No No

Yes

Yes Yes

Yes

Yes Yes

Yes

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Yes

4-AI

5-AI 6-GlI

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9-AII

10-AII 11-CII

14-CII

12-GlI

13-ClI Recommended strategies

Decision points

Exhibit 10-5 Decision Tree Method for Diagnosing the Appropriate Level of Subordinate Involvement in Decisions

Source: V.H. Vroom & P.W. Yetton, 1973. Leadership and Decision Making. Pittsburgh, PA: University of Pittsburgh Press.

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Who Should Decide? Individual versus Group Decision Making 387

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 unani- mous decision from the decision-making group.94 Seeking agreement from a majority has several advantages over seeking unanimous agreement, including increased speed and reduced risk of impasse.95 Trying 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.96 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

EXPERIENCING ORGANIZATIONAL BEHAVIOR

The U.S. Civil War remains one of the bloodiest confl icts in human history. Both the North and the South sustained heavy losses in this fi ght over the abolition of slavery, economic issues, and states’ rights. Eventually, the North won the confl ict, preserving the national union that had been established only de- cades earlier.

In deciding how and when to conduct battles, Northern and South- ern generals needed information on the opposing side’s troop locations, troop strength, and logistical weak- nesses. They also needed informa- tion on the condition of their own forces, the nature of terrain where a battle might be fought, and so on. After considering the available infor- mation and after collecting as much new information as desired, the generals made decisions related to battle strategy.

As in business-related de- cision making, these generals could have involved others in making decisions or could have made decisions alone. General McClellan of the North, for ex- ample, orchestrated the Battle of Antietam without much input from others, using information he had available (in terms of Exhibit 10-4, the AI approach). General Robert E. Lee of the South followed this same approach at the Battle of Antietam (AI approach) but used a different approach at the Battle of Chancellorsville. At Chancellorsville, he collected substantial information from his subordinate commanders be- fore making the decision on his own (AII approach).

Interestingly, the Vroom–Yetton framework seems to predict the suc- cess of generals in Civil War battles. For example, at the Battle of Shiloh,

General Grant of the North faced a situation in which: (1) the quality of the decision was important, (2) the decision maker (Grant himself) did not have enough information to make a quality decision, (3) the problem was not well structured, and (4) ac- ceptance by subordinate offi cers was not crucial for implementation (Situation 14 in Exhibit 10-5). Grant sought information but not ideas from his offi cers and made the battle-strat- egy decision alone (AII approach). Group discussion and idea gen- eration would have been benefi cial,

The Vroom–Yetton Model and Military Decisions during the U.S. Civil War

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388 Chapter 10 Decision Making by Individuals and Groups

however, because the problem was unstructured. Grant did not meet his objectives at Shiloh.

At the Battle of Gettysburg, General Meade of the North faced a situation in which: (1) the quality of the decision was important, (2) the decision maker (Meade himself) had the crucial information, and (3) acceptance by subordinate offi cers was not crucial for implementation (Situation 4 in Exhibit 10-5). Meade alone made the key decision related to strategy, without collecting substan- tial new information from others (AI approach, perhaps close to an AII ap- proach). As predicted by the Vroom– Yetton model, he met his objectives.

In the following table, a number of battles are profi led. As shown, the model correctly predicts outcomes in 10 of 12 cases.

Sources: Adapted from W.J. Duncan, K.G. LaFrance, & P.M. Ginter. 2003. “Leadership and Decision Making: A Retro- spective Application and Assessment,” Journal of Leadership and Organizational Studies, 9: 1–20 (principal source); B.J. Murphy. 2004. “Grant versus Lee,” Civil War Times Illustrated, 43, no. 1: 42–52; United States War Department, The War of the Rebellion: A Compilation of the Offi cial Records of the Union and Confederate Armies, multiple series and volumes within series (Washington, DC: Government Printing Offi ce, 1880–1891).

Outcome Recommended (Relative to Battle/ Problem Decision Style Original Commanders Type Approach Used Objective)

Battle of Shiloh General Grant 14 CII AII Not Achieved General Johnston 12 GII AII Not Achieved Battle of Antietam General McClellan 5 AI AI Achieved General Lee 9 AII AI Not Achieved Battle of Chancellorsville General Hooker 14 CII AI Not Achieved General Lee 5 AI AII Achieved Battle of Gettysburg General Meade 4 AI AI Achieved General Lee 11 CII AI Not Achieved Battle of Chickamauga General Rosecrans 11 CII AII Not Achieved General Bragg 11 CII AI Not Achieved Battle of Nashville General Thomas 11 CII AII Achieved General Hood 13 CII AI Not Achieved

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. Com- mitment and satisfaction 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 em- ployees 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 group, and discussing these increases the time required. The use of techniques such as brainstorming and dialectical inquiry also adds to the time required.

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Who Should Decide? Individual versus Group Decision Making 389

• 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 consid- eration, 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 mak- ing. Time costs money, especially when expensive managers and associates are involved. The additional time must be multiplied by the number of members in the group and their respective fi nancial compensation levels to arrive at the total cost. The additional cost of group decision 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 individ- ual.97 If the information and ideas are discussed and integrated, group decisions will often be better informed than individual decisions. Many groups, however, have diffi culty man- aging their collective knowledge. Groupthink and common information bias can prevent information from coming to the surface. Diversity-based infi ghting and the risky shift can prevent sound integration of information. However, the decision-making techniques discussed in this chapter, such as devil’s advocacy, can help the group to overcome these negative social forces and create high-quality decisions.

ADVANTAGES

Groups can accumulate more knowledge and facts and thus generate more and better alternatives.

Groups often display superior judgement when evaluating alternatives, especially for complex problems.

Group involvement in decisions leads to a higher level of acceptance of the decisions and greater satisfaction.

Group decision making can result in growth for members of the group.

DISADVANTAGES

Groups take more time to reach decisions than do individuals.

Group social interactions may lead to premature compromise and failure to consider all alternatives fully.

Groups are sometimes dominated by one or two “decision leaders,” which may reduce acceptance, satisfaction, and quality.

Managers may rely too much on group decisions, leading to loss of their own decision and implementation skills.

Exhibit 10-6 Advan- tages and Disadvan- tages of Group Decision Making

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390 Chapter 10 Decision Making by Individuals and Groups

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 fi nancial considerations. Thus, a group should be better at making this decision. In one study focused on new-product decision making, groups were in fact more effective than individuals.98

Satisfaction and Commitment Even though quality is not consistently improved by group decision making, individual satisfaction and commitment to the fi nal solution are often enhanced.99 These outcomes may result from several factors. First, group members may change their attitudes toward the various alternatives as a result of the group’s discussions. In addition, “team spirit” may develop as group members discover similarities among themselves.

Finally, it simply may be that people who share in an important activity such as deci- sion making feel more “ownership” of the decision than when they are excluded from it. Commitment 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.100 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 consumption (32 per- cent versus 3 percent). The implementation of the decision was more effective because the group had arrived at the decision. Members of the group were satisfi ed 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 benefi t 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.

What This Chapter Adds to Your Knowledge Portfolio In this chapter, we have discussed individual and group decision making. We have cov- ered the major steps in decision making, taking note of decision makers’ tendencies to make satisfi cing rather than optimal decisions. In discussing individuals, we have empha- sized decision styles, approaches to risk, cognitive biases, and moods and emotions. To be successful, an organization’s associates and managers must understand these elements

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What This Chapter Adds to Your Knowledge Portfolio 391

of individual decision making. In discussing groups, we have focused on a set of prob- lems that can affect group decision making 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: defi n- ing the problem, identifying criteria for a solution, gathering information, evaluat- ing alternatives, selecting the best alternative, and implementing the decision.

• Satisfactory rather than optimal decisions are common. Satisfi cing 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 fi rst 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 fi ve 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, in- dividuals dislike details and tend to focus on abstractions and fi gurative 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

THE STRATEGIC LENS

Decision making is the es-sence of management. The primary task of manag- ers is to make decisions. Top-level managers decide what products and services to provide and what markets to enter. Middle managers decide where to locate facilities and how many products to manufacture. Lower-level managers decide what tasks should be assigned to particular associates and when certain associ- ates should be laid off. Therefore, the quality of managers’ decisions at all levels has a major effect on the suc- cess of an organization. If managers decide to enter the wrong markets or to hire less than the best applicants, the organization’s performance is

likely to suffer. If, however, they de- cide on excellent products for the market and hire outstanding associ- ates and motivate them to achieve, the organization is likely to fl ourish. Thus, understanding how to make ef- fective decisions is necessary to be a successful manager; and organiza- tions must have managers who are effective decision makers if they are to achieve their goals.101 All strate- gic decisions—down to decisions regarding what holidays to allow for associates—affect the organization’s performance.

Critical Thinking Questions

1. You are a manager of a unit with 25 associates. You have just been

informed that you must lay off 20 percent of the associates in your unit. What process will you follow to make the decision and to implement it?

2. If you made a decision that your manager told you was important for the organization and later you learned that you made an error in that decision, what actions would you take? Assume that others will not notice the error for some time.

3. You make decisions on a daily basis. Do you fi nd it diffi cult to make decisions, especially those of importance? What can you do to improve your decision-making abilities?

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392 Chapter 10 Decision Making by Individuals and Groups

a feeling style. With the thinking style, individ- uals 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 af- fect 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 per- son 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: confi rmation bias (information confi rming early beliefs and ideas is sought, but potentially disconfi rming information is not sought), ease- of-recall bias (information that is easy to recall from memory is relied on too much), anchoring bias (the fi rst 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 af- fective make-up of an individual. Moods cor- respond to general positive or negative feelings, while emotions correspond to more specifi c, dis- crete 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 pos- sesses 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 members of the group while ignoring information held by only one or a few group members. Third, diversity-based infi ghting relates to disagreements being channeled in unproduc- tive ways. Finally, the risky shift occurs when a group makes a more risky choice than individuals would have made (on average) when working separately.

? back to the knowledge objectives 1. What are the basic steps in decision making? How should

a decision maker approach the problem-defi nition step? Why do decision makers usually fail to achieve optimal decisions?

2. What are the four Jungian decision styles, and how do they infl uence decisions and effectiveness in the work- place? Give an example of a person you know who had a decision style that did not seem to fi t his or her role in an organization. This could be a person in an or- ganization 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 satisfac- tion and performance? If you had been the individual’s manager, how would you have managed the situation?

3. Describe a personal situation involving a reference point. Were you above or below your reference point? What was the effect on your behavior?

4. Which cognitive bias worries you the most, and why? 5. Compare the four primary pitfalls of group decision

making. If you had to choose one, which would you prefer to deal with as a manager, and why?

6. What are the major group decision-making techniques? If you were dealing with diversity-based infi ghting, which of these techniques would you try fi rst, and why?

7. What factors should a manager consider when decid- ing on the level of associate involvement in a decision? What shortcomings do you see in the Vroom–Yetton model?

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Thinking about Ethics 393

• 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 tech- nique, dialectical inquiry, and devil’s advocacy also can be very useful.

• Associates make many decisions in high-involvement fi rms. 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 diag- nose 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 advan- tage is better quality, or at least a signifi cant 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 engage in a richer as- sessment 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.

Thinking about Ethics 1. You are a senior vice president with responsibility for a major business division in a large

company. The CEO has decided that the fi rm has to cut costs and that a large layoff of associates is necessary. He has asked you to decide how many associates should be laid off in your division. You know that the CEO wants a signifi cant reduction in costs, which points to the large layoff. Of course, a layoff has a substantial effect on associates’ lives. Should you recommend a large layoff to please the CEO or a smaller one, justifying a smaller layoff with plans to save money in other areas and increase sales? Explain your reasoning.

2. Suppose your manager continues to invest more money in a failing project in which he has already made a signifi cant investment. Does this decision present ethical concerns? If so, describe these concerns. If not, explain. Would you report any concerns to his boss?

3. You are charged with the responsibility of deciding the location for the new manufacturing plant in your division. The current facility is old. In addition, the new facility will use advanced technology, but the workforce in the 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 they will lose their jobs soon? Should you provide severance pay or other help? How will you make these decisions?

4. 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?

5. 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?

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394 Chapter 10 Decision Making by Individuals and Groups

Human Resource Management Applications The Human Resource Management (HRM) function is usually involved in strengthening decision making in the organization. More specifi cally, the HRM unit may offer training in the fundamentals of decision making, including tactics for problem defi nition, strategies for information search, and techniques for alternative generation and evaluation. The HRM unit also may offer training in and critiques of group decision making. Creating synergy in group decision making can be diffi cult, and HRM specialists tend to spend quite some time on these issues. Beyond hands-on training and interventions, they might develop survey items for merit reviews focused on how individuals behave and perform in a group decision situation.

Key Terms decisions, p. 364 satisfi cing decisions, p. 367 sensing, p. 368 intuition, p. 368 thinking, p. 369 feeling, p. 370 risk-taking propensity, p. 372 reference point, p. 372 cognitive biases, p. 373

confi rmation bias, p. 373 ease-of-recall bias, p. 373 anchoring bias, p. 374 sunk-cost bias, p. 374 moods, p. 375 emotions, p. 375 groupthink, p. 378 common information

bias, p. 380

diversity-based infi ghting, p. 381

risky shift, p. 381 brainstorming, p. 382 nominal group technique,

p. 383 Delphi technique, p. 383 dialectical inquiry, p. 384 devil’s advocacy, p. 384

building your human capital

Decision Style Assessment Different people use different decision styles. Understanding how you approach the gathering of information and the evaluation of alternatives can help make you a better decision maker. Such an understanding clarifi es your strengths and weaknesses, which better positions you to deal effectively with them. Below, we present an assessment tool for decision styles.

Instructions In this assessment, you will read 24 phrases that describe people. Please use the rating scale below to indicate how accurately each phrase describes you. Rate yourself as you generally are now, not as you wish to be in the future. Rate yourself as you honestly see yourself. Please read each item carefully, and then circle the number that corresponds to your choice from the rating scale.

1 2 3 4 5 Not at all like me

Somewhat unlike me

Neither like nor unlike me

Somewhat like me

Very much like me

1. Do things in a logical order 1 2 3 4 5 2. Do things that others fi nd strange. 1 2 3 4 5 3. Come straight to the point. 1 2 3 4 5 4. Like to get lost in thought. 1 2 3 4 5 5. Sympathize with the homeless. 1 2 3 4 5 6. Do things by the book. 1 2 3 4 5

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An Organizational Behavior Moment 395

7. Believe in a logical answer for everything. 1 2 3 4 5 8. Enjoy wild fl ights of fantasy. 1 2 3 4 5 9. Am not as strict as I could be. 1 2 3 4 5 10. Seldom daydream. 1 2 3 4 5 11. Get a head start on others. 1 2 3 4 5 12. Love to daydream. 1 2 3 4 5 13. Let people pull my leg. 1 2 3 4 5 14. Seldom get lost in thought. 1 2 3 4 5 15. Dislike imperfect work. 1 2 3 4 5 16. Swim against the current. 1 2 3 4 5 17. Do things in a halfway manner. 1 2 3 4 5 18. Take deviant positions. 1 2 3 4 5 19. Let my attention wander off. 1 2 3 4 5 20. Do unexpected things. 1 2 3 4 5 21. Believe in an eye for an eye. 1 2 3 4 5 22. Have no sympathy for criminals. 1 2 3 4 5 23. Reason logically. 1 2 3 4 5 24. Believe that criminals should receive 1 2 3 4 5

help rather than punishment.

Scoring Key for Decision Style Assessment To create scores, combine your responses to the items as follows:

Sensing vs. intuition � (Item 2 � Item 4 � Item 8 � Item 12 � Item 16 � Item 18 � Item 20) � (18 – (Item 6 � Item 10 � Item 14))

Thinking vs. feeling � (Item 1 � Item 3 � Item 7 � Item 11 � Item 15 � Item 21 � Item 22 � Item 23) � (36 – (Item 5 � Item 9 � Item 13 � Item 17 � Item 19 � Item 24))

Scores for sensing versus intuition can range from 10 to 50. Scores below 30 suggest a sensing style, while scores of 30 and above suggest an intuition style. More extreme scores (very low or very high) indicate a stronger preference for one style over another. Scores from 26 to 34 suggest weaker prefer- ences for a particular style.

Scores for thinking versus feeling can range from 14 to 70. Scores of 42 and above suggest a thinking style, while scores below 42 suggest a feeling style. More extreme scores (very low or very high) indicate a stronger preference for one style over another. Scores from 37 to 47 suggest weaker preferences for a particular style.

Source: International Personality Item Pool (2001). A Scientifi c Collaboration for the Development of Advanced Mea- sures of Personality Traits and Other Individual Differences (http://ipip.ori.org).

an organizational behavior moment

Decision Making at a Nuclear Power Facility Part A. Harry, the Reluctant Maintenance Man Harry opened his lunch bucket and was disappointed to fi nd two tuna fi sh 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

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396 Chapter 10 Decision Making by Individuals and Groups

while eating, but today had decided to continue a previous discus- sion over lunch. Dan was the supervisor of technical maintenance and had noticed that several of his people were reluctant to follow maintenance procedures. He had been told that the specifi cations were too complex to understand, that the procedures 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 really 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 specifi cation, 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 fi nger or get exposed to too much radiation, they wouldn’t like that either. Now, just tell your people that the specifi cations 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 fl exibility, 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 ac- tions 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 feed- water (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 acti- vate to keep the system from “drying out.” The procedure also specifi ed 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 peo- ple 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.

Part B. System Breakdown Marv Bradbury was working the graveyard shift. Most techni- cians didn’t like this shift, but Marv didn’t mind it at all. In fact, he thrived on it. Over the past few months, he had discovered that he enjoyed the solitude. He also liked to sleep in the morn- ings. Many of his co-workers thought he was nuts, but he didn’t mind. He especially liked the extra responsibility that the grave- yard shift put on the technician position.

Marv’s job in the nuclear generating plant was particularly important. His primary job was to monitor a series of dials and readouts in the control room. Most of the time, the job was a lit- tle monotonous because the system was so automatic. However, if the readings indicated some variance in the system, Marv’s re- sponsibilities were great. He would have to interpret the readings, diagnose the problem, and—if the automatic correcting system failed—initiate corrective actions. For two reasons, Marv never worried about the enormous responsibilities of his job. First, the system was fault-free and self-correcting. It was a good system with no weaknesses. Second, Marv was exceptionally qualifi ed and had a great deal of understanding about the system. He al- ways knew what he had to do in the event of a problem and was capable of doing it. Several years of training had not been wasted on him.

It was about 4 a.m. when he noticed the feedwater dial read- ing begin to move rapidly. Temperature in the system was increas- ing quickly. The readings alerted Marv that the main system was malfunctioning, and he knew just what to do. He glanced over to the AFW indicator lights to be sure they were activated. The lights switched on, and he knew everything was in order. Obvi- ously, he would have to fi nd the malfunction in the main system, but for the time being everything was okay. The temperature in the cooling system should drop back down to normal as the AFW pumps took over.

Suddenly, the indicator light for the pressurizer relief valve showed that it had opened. In rapid succession the high reac- tor tripped, and the hot leg temperature in the primary loop increased to about 607 degrees Fahrenheit.

Marv knew the system was in severe trouble and got on the phone to get help. Before he could get back, the high-pressure injection pump had started, and he could feel an unusual and threatening vibration that shouldn’t be there. Indicators showed that the steam generators were drying out, but that didn’t make sense—the auxiliaries were running. He knew that if they dried out, the temperature was really going to go up and that the core was going to be damaged. “Why the hell isn’t that secondary loop running?” he yelled to himself.

It took eight minutes to get someone down to the auxiliary pump room and discover that the three valves were still closed. They opened the valves, but it was too late. Now no one seemed to know what to do.

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Endnotes 397

Discussion Questions 1. Analyze the critical problem in Part A of the case. Did Dan

handle it in the best way? What decision styles did he use? 2. In what important ways is Harry’s behavior different from

Marv’s?

3. How might group decision making be applied at the end of Part B?

4. What alternatives do you see for reducing the possibility of a similar problem in the future?

team exercise

Group Decision Making in Practice In this chapter, we discussed several techniques for group decision making. The purpose of this exercise is to demonstrate two of the techniques and to show how they facilitate group decision activities. The exercise should take about 40 minutes to complete.

Procedure 1. The instructor will assign you to either a group that will use brain-writing and dialectical

inquiry (BD group) or a group that will engage in general discussion (GD group). 2. All groups will list as many ideas as possible concerning the general problem, “How can the

college of business enhance its reputation among the business leaders in the regional business community?” This should take no more than 20 minutes. Each BD group will follow the rules of brain-writing to generate the list of ideas. Each GD group will discuss the issue in a group setting.

3. All groups will develop a fi nal recommendation. Each BD group will follow the dialectical inquiry method. Each GD group will again engage in general discussion.

4. The instructor will lead a discussion about your experiences.

Endnotes 1. Hitt, M.A., Ireland, R.D., & Hoskisson, R.E. 2009. Strategic man-

agement: Competitiveness and globalization (8th ed.). Cincinnati, OH: South-Western.

2. Hitt, M.A., & Tyler, B.B. 1991. Strategic decision models: Inte- grating different perspectives. Strategic Management Journal, 12: 327–351.

3. Bazerman, M.H., & Moore, D.A. 2009. Judgment in managerial decision making (7th ed.). New York: John Wiley & Sons.

4. Hammond, J.S., Keeney, R.L., & Raiffa, H. 1999. Smart choices: A practical guide to making better decisions. Boston: Harvard Busi- ness School Press.

5. Ibid. 6. Based on Huber, G.P. 1980. Managerial decision making. Glen-

view, IL: Scott, Foresman. 7. Simon, H. 1957. Administrative behavior. New York: Macmillan. 8. Cecil, E.A., & Lundgren, E.F. 1975. An analysis of individual

decision making behavior using a laboratory setting. Academy of Management Journal, 18: 600–604; Schwartz, B., Ward, A., Mon- terosso, J., Lyubomirsky, S., White, K., & Lehman, D.R. 2002. Maximizing versus satisfi cing: Happiness is a matter of choice. Journal of Personality and Social Psychology, 83: 1178–1197.

9. Most research based on Jung’s ideas has used the Myers–Briggs Type Indicator (MBTI). For a review of relevant research in orga- nizational behavior, see Gardner, W.L., & Martinko, M.J. 1996. Using the Myers-Briggs Type Indicator to study managers: A lit- erature review and research agenda. Journal of Management, 22: 45–83. For a recent study based on the MBTI, see Davies, J., & Thomas H., 2009. What do business school deans do? Insights from a UK study. Management Decision, 47: 1396–1419; For supportive research on the internal consistency and test–retest reliability associated with the MBTI, see Capraro, R.M., & Cap- raro, M.M. 2002. Myers-Briggs Type Indicator score reliability across studies: A meta-analytic reliability generalization study. Educational and Psychological Measurement, 62: 590–602; and see Myers, I.B., & McCaulley, M.H. 1989. Manual: A guide to the development and use of the Myers-Briggs Type Indicator. Palo Alto, CA: Consulting Psychologists Press. For research on the construct validity associated with the MBTI, see Carlyn, M. 1977. An as- sessment of the Myers-Briggs Type Indicator. Journal of Personal- ity Assessment, 41: 461–473; and see Thompson, B., & Borrello, G.M. 1986. Construct validity of the Myers-Briggs Type Indica- tor. Educational and Psychological Measurement, 60: 745–752. For

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research on temporal stability, see Salter, D.W., Evans, N.J., & Forney, D.S. 2006. A longitudinal study of learning style prefer- ences on the Myers-Briggs type indicator and learning style inven- tory. Journal of College Student Development, 47: 173–184; For criticism of the MBTI, see, for example, Pittenger, D.J. 1993. The utility of the Myers-Briggs Type Indicator. Review of Educa- tional Research, 63: 467–488.

10. Gardner & Martinko, Using the Myers-Briggs Type Indicator to study managers; Jaffe, J. 1985. Of different minds. Association Management, 37 (October): 120–124.

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maker: How appraisal tendencies shape anger’s infl uence on cog- nition. Journal of Behavioral Decision Making, 19: 115–137.

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54. For an excellent example of social interactions in decision making, see Anderson, P.A. 1983. Decision making by objection and the Cuban missile crisis. Administrative Science Quarterly, 28: 201–222.

55. For the original formulation of groupthink, see the following: Janis, I.L. 1972. Victims of groupthink: A psychological study of foreign-policy decisions and fi ascos. Boston: Houghton Miffl in; Janis, I.L. 1982. Groupthink: Psychological studies of policy deci- sions and fi ascos (revised version of Victims of groupthink). Boston:

Houghton Miffl in. For later variants of the groupthink model, see the following examples: Hart, P.T. 1990. Groupthink in gov- ernment: A study of small groups and policy failure. Amsterdam: Swets & Zeitlinger; Turner, P.E., & Pratkanis, A.R. 1998. A so- cial identity maintenance model of groupthink. Organizational Behavior and Human Decision Processes, 73: 210–235; Whyte, G. 1998. Recasting Janis’s groupthink model: The key role of col- lective effi cacy in decision fi ascos. Organizational Behavior and Human Decision Processes, 73: 163–184. For an interesting cri- tique of some past groupthink research, see Henningsen, D.D., Henningsen, M.L.M., Eden, J., & Cruz, M.G. 2006. Examin- ing the symptoms of groupthink and retrospective sensemaking. Small Group Research, 37: 36–64. Also see: Haslam, S.A., Ryan, M.K., Postmes, T., Spears, R., Jetten, J., & Webley, P. Sticking to our guns: Social identity as a basis for the maintenance of com- mitment to faltering organizational projects. Journal of Organiza- tional Behavior, 27: 607–628.

56. See, for example: Callaway, M.R., & Esser, J.K. 1984. Group- think: Effects of cohesiveness and problem-solving procedures on group decision making. Social Behavior and Personality, 12: 157–164; Courtright, J.A. 1978. A laboratory investigation of groupthink. Communication Monographs, 45: 229–246; Janis, Victims of groupthink.

57. Whyte, Recasting Janis’s groupthink model. 58. See, for example, Turner & Pratkanis, A social identity main-

tenance model of groupthink; Turner, M.E., & Pratkanis, A.R. 1997. Mitigating groupthink by stimulating constructive confl ict. In C. De Dreu, & E. Van de Vliert (Eds.), Using Confl ict in Orga- nizations. London: Sage.

59. Turner & Pratkanis, A social identity maintenance model of groupthink; Turner & Pratkanis, Mitigating groupthink by stim- ulating constructive confl ict.

60. Stephens, J., & Behr, P. 2002. Enron’s culture fed its demise: Groupthink promoted foolhardy risks. The Washington Post, Janu- ary 27, p. A.01.

61. For summaries of published case research, see: Esser, J.K. 1998. Alive and well after 25 years: A review of groupthink research. Organizational Behavior and Human Decision Processes, 73: 116– 141; Park, W. 2000. A comprehensive empirical investigation of the relationships among variables of the groupthink model. Jour- nal of Organizational Behavior, 21: 873–887.

62. Janis, Victims of groupthink; Tetlock, P.E., Peterson, R.S., McGuire, C., Chang, S., & Field, P. 1992. Assessing political group dynamics: A test of the groupthink model. Journal of Personality and Social Psychology, 63: 403–425.

63. Moorehead, G., Ference, R., & Neck, C.P. 1991. Group decision fi ascos continue: Space Shuttle Challenger and revised groupthink framework. Human Relations, 44: 539–550.

64. Chisson, E.J. 1994. The Hubble wars. New York: Harper-Perennial. 65. Horton, T.R. 2002. Groupthink in the boardroom. Directors and

Boards, 26(2): 9; Hymowitz, C. 2003. Corporate governance: What’s your solution? Wall Street Journal, February 24: R8.

66. Manz, C.C., & Sims, H.P. 1982. The potential for “groupthink” in autonomous work groups. Human Relations, 35: 773–784.

67. Kim, P.H. 1997. When what you know can hurt you: A study of experiential effects on group discussion and performance.

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Organizational Behavior and Human Decision Processes, 69: 165– 177; Stasser, G., & Titus, W. 1985. Pooling of unshared infor- mation in group decision making: Biased information sampling during discussion. Journal of Personality and Social Psychology, 48: 1467–1478.

68. Hunton, J.E. 2001. Mitigating the common information sam- pling bias inherent in small-group discussion. Behavioral Research in Accounting, 13: 171–194.

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70. Stoner, J. 1968. Risky and cautious shifts in group decisions: The infl uence of widely held values. Journal of Experimental Social Psy- chology, 4: 442–459.

71. See, for example: Dahlback, A confl ict theory of group risk taking. 72. Dahlback, A confl ict theory of group risk taking; Mynatt, C., &

Sherman, S.J. 1975. Responsibility attribution in groups and in- dividuals: A direct test of the diffusion of responsibility hypoth- esis. Journal of Personality and Social Psychology, 32: 1111–1118; Wallach, M.A., Kogan, N., & Bem, D.J. 1964. Diffusion of re- sponsibility and level of risk taking in groups. Journal of Abnormal and Social Psychology, 68: 263–274.

73. Osborn, A.F. 1957. Applied imagination (revised edition). New York: Scribner.

74. Thompson, L. 2003. Improving the creativity of organizational work groups. Academy of Management Executive, 17 (1): 96–109.

75. Bouchard, T. 1971. Whatever happened to brainstorming? Jour- nal of Creative Behavior, 5: 182–189.

76. Mullen, B., Johnson, C., & Salas, E. 1991. Productivity loss in brainstorming groups: A meta-analytic integration. Basic and Ap- plied Social Psychology, 12: 3–23; Stroebe, W., & Nijstad, B.A. 2004. Why brainstorming in groups impairs creativity: A cogni- tive theory of productivity losses in brainstorming groups. Psy- chologische Rundschau, 55: 2–10; Taylor, D.W., Berry, P.C., & Block, C.H. 1958. Does group participation when using brain- storming facilitate or inhibit creative thinking? Administrative Sci- ence Quarterly, 3: 23–47.

77. Diehl, M., & Stroebe, W. 1987. Productivity loss in brainstorm- ing groups: Toward a solution of a riddle. Journal of Personality and Social Psychology, 53: 497–509.

78. Camacho, L.M., & Paulus, P.B. 1995. The role of social anxious- ness in group brainstorming. Journal of Personality and Social Psy- chology, 68: 1071–1080; Thompson, Improving the creativity of organizational workgroups.

79. Thompson, Improving the creativity of organizational workgroups. 80. Ibid. Also see: Heslin, P.A. 2009. Better than brainstorming? Po-

tential contextual boundary conditions to brainwriting for idea generation in organizations. Journal of Occupational and Organi- zational Psychology, 82: 129–145.

81. Ibid. Also see: DeRosa, D.M., Smith, C.L., & Hantula, D.A. 2007. The medium matters: Mining the long-promised merit of group interaction in creative idea generation tasks in a meta-anal- ysis of the electronic group brainstorming literature. Computers in

Human Behavior, 23: 1549–1581; Lynch, A.L., Murthy, U.S., & Engle, T.J. 2009. Fraud brainstorming using computer-mediated communication: The effects of brainstorming technique and fa- cilitation. The Accounting Review, 84: 1209–1232.

82. Van de Ven, A., & Delbecq, A. 1974. The effectiveness of nomi- nal, Delphi, and interacting group decision processes. Academy of Management Journal, 17: 605–621.

83. For supporting evidence, see: Gustafson, D.H., Shukla, R., Del- becq, A., & Walster, W. 1973. A comparative study in subjective likelihood estimates made by individuals, interacting groups, Del- phi groups, and nominal groups. Organizational Behavior and Hu- man Performance, 9: 280–291. Also see: Asmus, C.L., & James, K. 2005. Nominal group technique, social loafi ng, and group cre- ative project quality. Creativity Research Journal, 17: 349–354.

84. Van de Ven &Delbecq, The effectiveness of nominal, Delphi, and interacting group decision processes.

85. See, for example, Landeta, J. 2006. Current validity of the Delphi method in social sciences. Technology Forecasting & Social Change, 73: 467–482; Van de Ven & Delbecq, The effectiveness of nomi- nal, Delphi, and interacting group decision processes.

86. For early research on these two techniques, see the following: Mason, R. 1969. A dialectical approach to strategic planning. Management Science, 15: B403–B411; Mason, R.O., & Mitroff, I.I. 1981. Challenging strategic planning assumptions, New York: Wiley; Schweiger, D.M., Sandberg, W.R., & Ragan, J.W. 1986. Group approaches for improving strategic decision making: A comparative analysis of dialectical inquiry, devil’s advocacy, and consensus. Academy of Management Journal, 29: 51–71.

87. Cosier, R.A. 1983. Methods for improving the strategic decision: Dialectic versus the devil’s advocate. Strategic Management Jour- nal, 4: 79–84; Mitroff, I.I. 1982. Dialectic squared: A fundamen- tal difference in perception of the meanings of some key concepts in social science. Decision Sciences, 13: 222–224.

88. Schwenk, C. 1989. A meta-analysis on the comparative effective- ness of devil’s advocacy and dialectical inquiry. Strategic Manage- ment Journal, 10: 303–306; Valacich, J.S., & Schwenk, C. 1995. Structuring confl ict in individual, face-to-face, and computer- mediated group decision making: Carping versus objective devil’s advocacy. Decision Sciences, 26: 369–393.

89. Schweiger, Sandberg, & Ragan, Group approaches for improving strategic decision making.

90. Vroom, V.H., & Yetton, P.W. 1973. Leadership and decision mak- ing. Pittsburgh, PA: University of Pittsburgh Press.

91. Ibid. 92. Field, R.H.G. 1982. A test of the Vroom-Yetton normative model

of leadership. Journal of Applied Psychology, 67: 523–532; Field, R.H.G., & House, R.J. 1990. A test of the Vroom-Yetton model using manager and subordinate reports. Journal of Applied Psychol- ogy, 75: 362–366; Tjosvold, D., Wedley, W.C., & Field, R.H.G. 1986. Constructive controversy, the Vroom–Yetton model, and managerial decision-making. Journal of Occupational Behaviour, 7: 125–138; Vroom, V.H., & Jago, A.G. 1978. On the validity of the Vroom-Yetton Model. Journal of Applied Psychology, 69: 151–162; Vroom, V.H., & Jago, A.G. 2007. The role of the situ- ation in leadership. American Psychologist, 62: 17-24.

93. Hitt, Ireland, & Hoskisson, Strategic management.

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Endnotes 401

94. For discussions of consensus vs. majority rule, see: Hare, A.P. 1976. Handbook of small group research (2nd ed.). New York: Free Press; Miller, C.E. 1989. The social psychological effects of group decision rules. In P.B. Paulus (Ed.), Psychology of Group Infl uence. Hillsdale, NJ: Erlbaum; Mohammed, S., & Ringseis, E. 2001. Cognitive diversity and consensus in group decision making: The role of inputs, processes, and outcomes. Organizational Behavior and Human Decision Processes, 85: 310–335.

95. Mohammed & Ringseis, Cognitive diversity and consensus in group decision making.

96. Ibid. 97. Maier, N.R.F. 1967. Assets and liabilities in group problem solv-

ing: The need for an integrative function. Psychological Review, 74: 239–249.

98. Schmidt, J.B., Montoya-Weiss, M.M., & Massey, A.P. 2001. New product development decision-making effectiveness: Comparing individuals, face-to-face teams, and virtual teams. Decision Sci- ences, 32: 575–600.

99. Maier, Assets and liabilities in group problem solving. 100. Weiner, B. 1977. Discovering psychology. Chicago: Science Re-

search Associates. 101. For an interesting history of the study of decision making, see:

Buchanan, L., & O’Connell, A. 2006. A brief history of decision making. Harvard Business Review, 84 (1): 32-41.

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? knowledge objectives After reading this chapter, you should be able to: 1. Describe the nature of groups and teams and dis-

tinguish among different types of teams. 2. Explain the criteria used to evaluate team effective-

ness. 3. Discuss how various aspects of team composition

infl uence team effectiveness. 4. Understand how structural components of teams

can infl uence performance. 5. Explain how various team processes infl uence

team performance. 6. Describe how teams develop over time. 7. Know what organizations can do to encourage

and support effective teamwork. 8. Understand the roles of a team leader.

exploring behavior in action

Teamwork at Starbucks

A lthough a few setbacks have occurred in recent years, Starbucks remains one of the most successful business stories in history. The company’s growth and fi nancial success have been nothing short of phenomenal. As of early 2010, Starbucks has more than 16,000 retail outlets in more than 45 countries. For the 2009 fi scal year,

sales were $9.7 billion. In the most recent quarter for which data are available, the company’s profi ts soared as the global recession eased. In addition to its retail coffee shops and kiosks, with which you are probably familiar, the company has entered several successful joint ventures and partnerships. For example, a partnership with PepsiCo produces the

bottled coffee drink Frappuccino, and a joint venture with Unilever produces Starbucks coffee-fl avored ice cream, which is sold in grocery stores. A partnership with Capitol Records resulted in a series of Starbucks jazz CDs. Furthermore, Starbucks has partnered with other companies, including United Airlines and Barnes & Noble Bookstores—all of which exclusively serve or sell Starbucks coffee. 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 suc- cess at Starbucks. Several factors have been singled out for attention—effective branding, superior product quality, product innovation, superior customer ser- vice, innovative human resource practices, effective real estate strategies, and exceptional corporate social responsibility, for example. However, to anyone who has ever visited a Starbucks, another factor for its suc- cess is apparent—the teamwork of Starbucks “baristas” (the associates who take orders and who make and serve coffee and food).

groups and teams

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403

Sources: M. Gunther. 2006. “How UPS, Starbucks, Disney Do Good,” Fortune, Feb. 25, at http://money.cnn.com/2006/02/23/news/ companies/mostadmired_fortune_responsible/index.htm; D. Kesmodel. 2009. “Earnings: Starbucks Says Demand Perking Up: Cof- fee Retailer Reports Surge in Earnings as Cost Cuts Pay Off, Raises Outlook for 2010,” Wall Street Journal, Nov. 6, p. B.5; Starbucks, “Our Starbucks Mission,” 2010, at http://www.starbucks.com/mission/default.asp; Starbucks, “Starbucks Posts Strong Fourth Quarter and Fiscal 2009 Results,” 2009, at http://investor.starbucks.com; Starbucks, “The Partner Experience,” 2010, at http://www.starbucks. com/aboutus/jobcenter_partner_experience.asp; A.A. Thompson, J.E. Gamble, & A.J. Strickland. 2006. Strategy: Winning in the Mar- ketplace (Chicago: McGraw-Hill); G. Weber. 2005. “Preserving Starbucks Counter Culture,” Workforce Management, Feb., pp. 28–34

Watching the baristas at work in a busy Starbucks can be like watching a well-choreographed ballet. Baris- tas are making elaborate coffee drinks, serving up dessert, taking orders at record speed, answering customer ques- tions, helping each other out when needed, and seem- ingly enjoying their work. Starbucks is legendary for its customer service, and teamwork is an important part of how this service is delivered. The extent to which baristas work to- gether 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 corpo- rate Starbucks team.

Starbucks fosters a teamwork-based culture in many ways. It begins by hiring baristas who have the desires and skills to be suc- cessful team players. For potential job applicants, Star- bucks puts it this way:

What’s it like to work at Starbucks? We call each other “partners.” 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 fi rst month, all baristas receive many hours of training (most other coffee shops barely train their

counter staff ). New baristas are trained in the exact meth- ods for making 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 state- ment involves providing a great work environment where

people treat each other with respect and dignity. Histor- ically, all baristas have been trained in the “Star Skills”: (1) maintain and enhance (others’) self-esteem; (2) lis- ten and acknowledge; and (3) ask questions.

Another factor leading to increased teamwork and commitment to the com- pany is Starbucks’ generous benefi ts package. Baristas receive higher pay, better health benefi ts, and more

vacation time than the industry norm. Even part-time em- ployees receive benefi ts. Furthermore, Starbucks has a stock option plan (the Bean Stock plan) in which baristas can par- ticipate if they wish to.

Yet another way in which Starbucks fosters teamwork is by providing numerous communication channels so that every barista can communicate directly with headquarters. These communication channels include e-mail, suggestion cards, and regular forums with executives.

These are some of the most telling signs of Starbucks’ desire to create a teamwork culture.

©Kevin P. Casey/©AP/Wide World Photos

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http://money.cnn.com/2006/02/23/news/companies/mostadmired_fortune_responsible/index.htm

http://www.starbucks.com/mission/default.asp

http://investor.starbucks.com

http://www.starbucks.com/aboutus/jobcenter_partner_experience.asp

404 Chapter 11 Groups and Teams

U.S. organizations, following popular practice in other countries such as Japan, have adopted teamwork as a common way of doing work. The focus on teams in U.S. organizations developed during the 1980s. By 1993, 91 percent of For- tune 1000 companies used work teams, and 68 percent used self-managed work teams.1 The presence of teamwork in business has only become greater since then. Indeed, after complaints from re- cruiters and advice from executives con- cerning the lack of interpersonal skills and teamwork skills of new graduates, many elite MBA programs have added teamwork training to the MBA curricula.2

Effective work teams have a syn- ergistic effect on performance. Synergy means that the total output of a team is greater than the output that would re- sult from adding together the outputs of the individual members working alone. Working in a team can produce synergy for several reasons. Team members are given more responsibility and auton- omy; thus, they are empowered to do their jobs. Greater empowerment can produce higher motivation and identi- fi cation with the organization.3 Work teams also allow employees to develop new skills that can increase their moti- vation and satisfaction.4 In addition,

work teams can provide a means for employees to be integrated with higher levels in the organization, thereby align- ing individual goals with the organiza- tion’s strategy.5 Finally, work teams can promote creativity, fl exibility, and quick responses to customer needs.6 These outcomes can be seen in the teams of baristas that work in Starbucks’ stores.

Organizations have reported a great deal of success with work teams. Studies have documented tenfold reduc- tions in error rates and quality problems, product-to-market cycles cut in half, and 90 percent reductions in response times to problems.7 Extremely effective teams, often known as high-performance work teams, are able to achieve extraordi- nary results. A team of this kind seems to act as a whole rather than as a col- lection of individuals.8

In many companies, the organiza- tion’s strategy is developed by a team of senior managers. Research has shown that heterogeneous teams that work to- gether effectively develop strategies that lead to higher organizational perfor- mance.9 Heterogeneity of backgrounds and experiences among team members has been shown to produce more and diverse ideas, helping to resolve com- plex problems more effectively. The

quality of strategic decisions made by the management team affects the or- ganization’s ability to innovate and to create strategic change. Teams of top executives are used to make strategic decisions because of the complexity and importance of such decisions.10 The senior management team at Starbucks, for example, made the strategic deci- sions to develop new products (such as Cinnamon Dolce Latte) and to enter new international markets (such as Rus- sia and India). To make such important decisions, the team must work together effectively.

For the reasons noted above, the development and management of teams is highly critical to organizational performance. However, simply having people work together as a team does not guarantee positive outcomes. Teams must be effectively composed, struc- tured, developed, managed, and sup- ported in order to become high-perfor- mance work teams. In this chapter, we begin by exploring the nature of teams and their effectiveness. We then exam- ine the factors that affect team perfor- mance. 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 interacting together. It is often said that human beings are social animals and that we seek out interactions with others. Organizations provide many opportunities for such inter- actions. 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 fi nd others with whom they share common interests.

synergy An effect wherein the total output of a team is greater than the combined outputs of individual members working alone.

the strategic importance of Groups and Teams

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The Nature of Groups and Teams 405

Furthermore, organizations frequently structure work so that jobs are done by associates working together. Two terms are used to defi ne these clusters of associates: groups and teams.

Groups and Teams Defi ned There are many defi nitions for both group and team, with most researchers using the terms interchangeably.11 For our purposes, the term group can be defi ned in very general terms as “two or more interdependent individuals who infl uence one another through social in- teraction.”12 In this chapter, however, our focus is more specifi c: we are mainly interested in teams—groups of individuals working toward specifi c goals or outcomes.13 The com- mon elements in the defi nition 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 identifi able to those who are in the team and to those who are not in the team.

This defi nition helps us understand what a team is and is not. For example, mere assemblies 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 infl uence 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 specifi c, 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 within organizations that differ in important ways. These differences may affect how the group or team is formed, what values and atti- tudes are developed, and what behaviors result. In the discussion that follows, we describe various types of groups and teams.

Formal and Informal Groups 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 similar 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.

Many groups that are not formally created by management arise spontaneously as individuals fi nd 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,

group Two or more interdependent individuals who infl uence one another through social interaction.

team Two or more people with work roles that require them to be interdependent, who operate within a larger social system (the organization), performing tasks relevant to the organization’s mission, with consequences that affect others inside and outside the organization, and who have membership that is identifi able to those on the team and those not on the team.

formal groups Groups to which members are formally assigned.

informal groups Groups formed spontaneously by people who share interests, values, or identities.

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406 Chapter 11 Groups and Teams

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 sat- isfaction is achieved. Because of their various characteristics, informal groups are not considered teams.

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, Catholic). Thus, any member of a team is also a member of several identity groups. Ef- fective team performance can be more diffi cult to achieve when team members belong to different identity groups or when their identifi cation with these groups confl icts 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 impolite. These team members will likely fi nd the team’s decision-making process to be uncomfortable 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 displays common tools through which virtual teams operate. The benefi ts of virtual

identity groups Groups based on the social identities of members.

virtual teams Teams in which members work together but are separated by time, distance, or organizational structure.

EXHIBIT 11-1 Tools Commonly Used by Virtual Teams

Audio conferencing (traditional or Internet-based) Videoconferencing (room to room from two or three locations or via dispersed micro-electronic equipment) Online chat rooms E-mail and online bulletin boards Keypad voting systems Project-management software Instant messaging Messaging boards Web conferencing Blogs and wiki sites Sources: D. Mittleman, & R.O. Briggs. 1999. “Communicating Technologies for Traditional and Virtual Teams.” In E. Sundstrom, & Associates (Eds.), Supporting Work Team Effectiveness, pp. 246–270; W. Combs, & S. Peacocke. 2007. “Leading Virtual Teams,” T&D, 61, no. 2, pp. 27–28; B. Williamson. 2009. “Managing at a Distance,” BusinessWeek, July 27, p. 64.

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The Nature of Groups and Teams 407

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, misunder- standings are more likely to occur among team members. Third, it is more diffi cult for virtual teams to develop behavioral norms. Finally, it is easier for some members to be free riders (those who do not contribute effectively to the team’s work), thereby causing frustra- tion among other team members. Thus, it is very important that virtual teams be managed 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 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. The impact of empowerment becomes even more important when virtual teams have little face-to-face interaction.21 Finally, virtual teams are more effective when led by trans- formational leaders.22 In fact, transformational leadership (involving vision, attention to collective interests, and lofty aspirations) seems to be more important for the success of virtual teams than for the success of face-to-face teams.23 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 diffi cult in virtual situations.

When implemented properly, virtual teams can increase productivity and save com- panies millions of dollars.24 For example, IBM has shortened its project completion times and reduced person-hours with virtual teams. Marriott Corporation has saved millions of dollars by reducing the number of person-hours required for certain tasks. By using same-time, different-place technology, Hewlett-Packard has connected research and devel- opment teams in California, Colorado, Japan, Germany, and France so that all teams can participate in the same presentation.

Functional Teams Teams can be distinguished by the type of work they do and the purpose they serve. Types of functional teams include the following:25

• 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 specifi c project (e.g., new-product development teams)

• Advisory teams—groups of associates formed to advise the organization on certain issues (e.g., disability groups who advise on the technical aspects of various products)

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Self-Managing Teams Self-managing teams have a great deal of autonomy and control over the work they do.26 Usually self-managing teams are responsible for completing a whole piece of work, an en- tire project, or a signifi cant 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 signifi cant portion of it. Although a self- managing team typically 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 specifi c tasks, setting team performance goals, and even deciding the team’s pay structure. Team members are also held more ac- countable for team performance.

Self-managed work teams can lead to many benefi ts, including more satisfaction for workers, lower turnover and absenteeism, increased productivity, and higher- quality work.27 These benefi ts 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.28

A well-known example of a self-managed work team is the Orpheus Chamber Or- chestra, the orchestra without a conductor. Orpheus musicians collaborate to take on leadership roles usually reserved for the conductor. The orchestra is incredibly fl exible, with members moving into and out of roles as the need arises. As a result of this collabo- ration and fl exibility, 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 successful (sells more tickets, takes in more money, and receives more positive reviews) and has lower turnover and greater member loyalty than many other orchestras.29

In this chapter’s fi rst Experiencing Organizational Behavior feature, teams at McKinsey & Company are highlighted. Unlike the barista teams at Starbucks, the consulting teams at McKinsey are temporary project teams. While both the barista and consulting teams operate predominantly in a face-to-face mode, there is a substantial amount of virtual work for McKinsey teams as they access supporting resources from offi ces dispersed glob- ally (and some virtual work is also carried out between/among team members). 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 diffi culties.

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

408 Chapter 11 Groups and Teams

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Team Effectiveness 409EXPERIENCING ORGANIZATIONAL BEHAVIOR

McKinsey & Company is one of the most revered con-sulting fi rms in the world. Through 90 offi ces in more than 50 countries, it offers a broad array of services in areas such as competitive strategy, organizational behavior and change, risk management, and corpo- rate fi nance. Its mission is simple:

To help leaders make distinc- tive, lasting, and substantial im- provements in performance, and constantly build a great fi rm that attracts, develops, excites, and re- tains exceptional people.

Similar to other major fi rms in the consulting industry, McKinsey & Company relies on project teams to accomplish its objectives. These teams are small, usually comprising fewer than 10 members. They are also temporary. Once a project has been completed, the team disbands and its members join new teams working with different clients. Each team generally has a mix of tenures represented, in- cluding a partner, an associate part- ner, an engagement manager, several associates, and one or more business analysts. Members of the team are drawn from more than 7,000 indi- viduals positioned globally.

In addition to these core ele- ments, McKinsey emphasizes dissent within its teams. If anyone on a team believes that inappropriate choices are being made, that individual has a responsibility to speak up. The fi rm says this to candidates for positions:

All McKinsey consultants are ob- ligated to dissent if they believe

something is incorrect or not in the best interests of the client. Everyone’s opinion counts. While you might be hesitant to disagree with the team’s most senior member or the client, you’re expected to share your point of view.

In a typical work week, team members fl y on Monday morning or Sunday evening to the client’s site. During the week, individuals com- plete technical tasks working alone; create presentation materials alone or with others; join face-to-face team meetings; and participate in face-to- face meetings with representatives of the client. They use teleconferences, video conferences, and e-mail ex- changes to access supporting re- sources at various McKinsey offi ces. Late nights are common. Lunches and dinners often involve substantive tasks or socializing with the client. On Friday afternoon or evening, team members fl y home.

Clearly, the life of a consultant is complex and dynamic. Consul- tants must work effectively with team- mates who are diverse in many ways, including their areas of expertise, national origins, levels in the fi rm, religions, races, and genders. They must travel constantly and work long hours. They must move to a newly forming team every two to six months. And they must live up to very high performance expectations. To ensure that consultants and their teams per- form well and avoid undue stress, McKinsey & Company emphasizes

the fundamentals that we would ex- pect: sophisticated selection systems for new hires, proper training, sound information technology, and effective leadership. Perhaps more important than these tactics, McKinsey empha- sizes consistent consulting method- ologies at each of the more than 90 offi ces worldwide. This is diffi cult but crucial, as it allows each consultant who joins a new project team to know what to expect from others and to provide what others expect from him (recall that team members for a proj- ect are drawn from various locations around the world). The familiarity and predictability created by this ap- proach adds structure to an otherwise complex and dynamic situation.

Also, McKinsey has addressed a history of stress and voluntary turn- over by reducing travel to some de- gree and by generally being more attentive to work–life balance. These efforts have paid off, but stress and turnover remain issues in the consult- ing industry.

To further experience the complex McKinsey team environment, take the company’s leadership test at http:// www.mckinsey.com/locations/swiss/ career/team_leader/index.asp.

Teams at McKinsey & Company

Sources: H. Coster. 2007. “Baby Please Don’t Go,” Forbes, Oct. 15, p. 86; McKinsey & Company, “About Us: What We Believe,” 2010, at http://www.mckinsey.com/aboutus/whatwebelieve/index.asp; McKinsey & Company, “McKinsey Careers: Teams,” 2010, at http://www.mckinsey.com/careers/what_will_it_be_like_if_i_join/the_day_to_day/ teams.aspx; McKinsey & Company, “McKinsey Careers: The Day-to-Day,” 2010, at http://www.mckinsey.com/careers/ what_will_it_be_like_if_i_join/the_day_to_day.aspx; A. Taylor. 1998. “Consultants Have a Big People Problem,” Fortune, April 13, pp. 162–166.

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http://www.mckinsey.com/aboutus/whatwebelieve/index.asp

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http://www.mckinsey.com/careers/what_will_it_be_like_if_i_join/the_day_to_day.aspx

410 Chapter 11 Groups and Teams

everyone else loafed? The person who did all the work is likely to be angry and dissatisfi ed, while the others have learned nothing and walk away with the idea that it pays to loaf, es- pecially when they have a conscientious teammate. In this case, it would have been better to have individuals work separately, even though the fi nal product was successful. Because outcome by itself is not enough, team effectiveness is measured on several dimensions: knowledge criteria, affective criteria, and outcome criteria. A fi nal 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 refl ect the degree to which the team continually increases its performance capabilities.30 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.31 This shared knowledge is referred to as the team’s mental model.32 Shared mental models allow team members to have common expec- tations and agreed-upon courses of action, improve information processing and decision making, and facilitate problem solving.33 Another knowledge-based criterion for team effec- tiveness is team learning—the ability of the team as a whole to learn new skills and abilities over time.34 Clearly, in the class project example discussed above, this criterion was not met.

Affective Criteria Affective criteria address the question of whether team members have a fulfi lling and sat- isfying team experience.35 One important affective criterion is the team’s affective tone, or the general emotional state of the team.36 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.37 The team’s affect infl uences the way they communicate and their cohesion, as discussed later.

Outcome Criteria Outcome criteria refer to the quantity and quality of the team’s output38 or the extent to which the team’s output is acceptable to clients.39 The outcome should refl ect synergy, as described earlier in the chapter. Another important outcome criterion is team viability— that is, the ability of the team to remain functioning as long as needed.40 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 signifi cant declines after year 5.41 This decline in performance can be due to teams becoming overly cohesive (which can lead to groupthink, as discussed in Chapter 10) or to breakdowns in communication between team members. Often teams are created to deal with changing environments and uncertainty. Consider, for example, a military special op- erations 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.42

Is the Team Needed? As stated earlier, teamwork has become very popular in business, as well as other types of organizations. However, is teamwork always the best way to accomplish a job? According to

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Factors Affecting Team Effectiveness 411

Jon Katzenbach, a popular team consultant to companies such as Citicorp, General Electric, and ExxonMobil, some situations do not call for teamwork and are better handled by indi- viduals working alone.43 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 fi rst 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 signifi cant 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 effi cient to assign specifi c 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.

Factors Affecting Team Effectiveness As discussed in the opening section on the strategic importance of teams, when used prop- erly, teams can yield great performance benefi ts to organizations. Teams can create synergy for several reasons, including greater goal commitment, a greater variety of skills and abili- ties 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 performing 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 implement effective communication within the team. This extra “teamwork” can be quite substantial and can produce a signifi cant process loss,44 which is the difference between actual and potential team performance. If teams are not able to achieve synergy, less positive outcomes will result.

To ensure that the benefi ts of teamwork outweigh the process loss that occurs from it, teams must be structured and managed properly. Literally thousands of studies in almost every type of organizational context have examined factors that infl uence team effective- ness. 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:45

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.

process loss The difference between actual and potential team performance that is caused by diverting time and energy into maintaining the team as opposed to working on substantive tasks.

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412 Chapter 11 Groups and Teams

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,46 others have found positive effects,47 and still others have found no effect.48 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 attractive- ness of various strategies/goals impact management-team performance and consequently fi rm performance. Consistent with research on demographic diversity, the impact of belief diversity on performance has been mixed.49 Overall, the effects of demographic and belief diversity on team performance seem to depend on several factors:50

• 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.51 Experiences with diverse teams at McKinsey are consistent with this idea.

• 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.52

• Time. Diversity can have negative effects in the short run but positive effects in the long run.53

• 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 the relationship between diversity and performance can be negative.54

• Fault lines. If team members exhibit diversity along two or more dimensions and those dimensions converge, then diversity can be negative.55 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.

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 agreeableness (the ability to get along with others and cooperate) and emotional stability (the tendency to experience positive rather than negative emotions).56 Also, the greater the degree of conscientiousness among team members, the higher the team’s performance tends to be.57 This is particu- larly true when the team’s task involves planning and performance rather than creativity. It appears that agreeable team members contribute to team performance by fulfi lling team maintenance roles, whereas conscientious team members perform critical task roles.58 Finally, team-level extraversion and openness to experience can be positively related to

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Factors Affecting Team Effectiveness 413

performance in situations requiring nonroutine decision making and creative tasks.59 (All of these personality traits are discussed 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 individual works well with others, wants to contribute to team performance, and enjoys being on a team.60 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 orientation.61 Notice that both Starbucks and McKinsey & Company hire associates based on their teamwork orientation, among other things.

Size There is no one ideal number of team members for all situations. Many studies have ex- amined the relationship of team size and team performance, and two lines of thought have emerged. These two ideas are depicted in Exhibit 11-2.

The fi rst suggests that the relationship between team size and team performance is shaped like an inverted U.62 As teams become larger, the diversity of skills, talents, ideas, and individual associate inputs into the task is greater, leading to improved performance. How- ever, as the number of team members continues to increase, the need for cooperation and coordination also increases. At some point, the effort that goes into managing the team will outweigh the benefi ts of having more members, and team performance will begin to decline.

Other researchers, however, have found that performance increases linearly with team size without ever showing a downturn.63 This linear relationship most likely results when a team avoids the problems associated with too many members, such as social loafi ng (to be discussed later in the chapter), poor coordination, and worsening communication. Thus, the relationship between team size and performance probably depends on team skill at process management, and it also no doubt depends on factors such as the scope of the task

team orientation The extent to which an individual works well with others, wants to contribute to team performance, and enjoys being on a team.

Exhibit 11-2 The Relationship between Team Size and Team Performance

T e a m

P e rf

o rm

a n

c e

High

Low

2 Number of Team Members

5 8 11 13 . . . . . . . . . .

Task, Environment

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414 Chapter 11 Groups and Teams

or the complexity of the environment.64 When task scope and environmental complexity are high, more team members are needed for task accomplishment and strong performance.

Team Structure Team structure refers to the ongoing means of coordinating formal team efforts. The con- tribution of structure to team achievement is evident. 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 fi ling. 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, fi eld 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. 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 perform what types of tasks and under what conditions.65 Roles can be formally assigned, or they can be in- formally adopted by team members. Some members primarily serve in leadership roles, and others take the roles of followers. 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 fulfi lling both task roles and socioemotional, or expressive, roles.66 Task roles involve behaviors aimed at achiev- ing 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.67 As we would expect, these roles impede team performance rather than facilitate it. Exhibit 11-3 depicts examples of specifi c task, socioemotional, and individual roles.

As a team becomes more stable and structured, the roles of individual members often become resistant to change.68 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 punishment or sanction is usually applied. For example, Hudson Houck, the offensive line coach for the 1996 Dallas Cowboys, stated that anyone on the team who didn’t work hard all the time (a team norm) was shunned.69

roles Expectations shared by group members about who is to perform what types of tasks and under what conditions.

task roles Roles that require behaviors aimed at achieving the team’s performance goals and tasks.

socioemotional roles Roles that require behaviors that support the social aspects of the organization.

destructive individual roles Roles involving self- centered behaviors that put individual needs and goals ahead of the team.

norms Informal rules or standards that regulate the team’s behavior.

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Factors Affecting Team Effectiveness 415

EXHIBIT 11-3 Team Member Roles

Role Function

Task Roles Initiator/Contributor Suggests new ideas, solutions, or ways to approach

the problem Information Seeker Focuses on getting facts Information Giver Provides data for decision making Elaborator Gives additional information, such as rephrasing, examples Opinion Giver Provides opinions, values, and feelings Coordinator Shows the relevance of various specifi c ideas to the

overall problem to be solved Orienter Refocuses discussion when the team gets off topic Evaluator/Critic Appraises the quality of the team’s work Energizer Motivates the team when energy falters Procedural Technician Takes care of operational details, such as technology Recorder Takes notes and keeps records

Socioemotional Roles Encourager Provides others with praise, agreement, warmth Harmonizer Settles confl icts among other members Compromiser Changes his or her position to maintain team harmony Gatekeeper Controls communication process so that everyone gets a

chance to participate Standard Setter Discusses the quality of the team process Observer Comments on the positive or negative aspects of the

team process and calls for changes Follower Accepts others’ ideas and acts as a listener

Destructive Individual Roles Aggressor Attacks others Blocker Unnecessarily opposes the team Dominator Manipulatively asserts authority Evader Focuses on expressing own feelings and thoughts that

are unrelated to the team goals Help Seeker Unnecessarily expresses insecurities Recognition Seeker Calls unnecessary attention to himself or herself Sources: K.D. Benne and P. Sheets. 1948. “Functional Roles of Group Members,” Journal of Social Issues, 4: 41–49. D.R. Forsyth. 1999. Group Dynamics (Belmont, CA: Wadsworth Publishing Company). Copyright 2006 John Wiley & Sons, Inc. All rights reserved.

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 some- one 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

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416 Chapter 11 Groups and Teams

this fact.70 Certain groups, such as cheerleading squads, sororities, and dance troupes, have particularly high rates of bulimia among their members. Examination of these groups has indicated that they often develop group norms of binging and purging. Instead of con- sidering this behavior to be abnormal and unhealthy, team members come to view it as a normal way of controlling weight. 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 perform.71 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.72

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, run- ning 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. Exam- ples 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 prod- uct. 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 ex- ample, pulling a rope or inputting data. When members’ inputs are additively combined, team performance will often be better than the best individual’s performance because of social facilitation processes (discussed later in the chapter).73 Compensatory tasks are those in which members’ individual performances are averaged together to arrive at the team’s overall per- formance. For example, members of a human resource management team may individually estimate future labor demands in the organization, and the total projection may then be based on the average of the managers’ estimates. The potential 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-upon 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.74 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

divisible tasks Tasks that can be separated into subcomponents.

unitary tasks Tasks that cannot be divided and must be performed by an individual.

maximization tasks Tasks with a quantity goal.

optimization tasks Tasks with a quality goal.

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Factors Affecting Team Effectiveness 417

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 infl uence the effectiveness of teams. Team processes have strong effects on outcomes. Team processes include cohesion, con- fl ict, social facilitation, social loafi ng, and communication.

Cohesion Team cohesion refers to members’ attraction to the team.75 Interpersonal cohesion is the team members’ liking or attraction to other team members. Task cohesion is team mem- bers’ attraction and commitment to the tasks and goals of the team.76 Team cohesion is an important criterion because research indicates that cohesion affects team performance outcomes and viability.77 Furthermore, members of cohesive teams are more likely to be satisfi ed with their teams than are members of noncohesive teams.78

Cohesive teams are likely to have strong performance when there is task cohesion.79 When there is only interpersonal cohesion, performance is likely to be low. In fact, if team members really like each other and enjoy spending time together but are not commit- ted to their organizational tasks and goals, they will perform worse than if they were not interpersonally cohesive. A classic study of factory workers illustrates these effects.80 In- terpersonally cohesive teams committed to organizationally sanctioned performance goals performed the best, whereas interpersonally 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.81

In the 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 Orga- nizational 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 offi cers. Backing-up behavior may be one of the strongest indicators of team effectiveness, because not only is everyone on the team doing his or her share, but each member is willing to take on others’ work when assistance is needed or to fi ll in any gaps. Teams that engage in backing-up behavior are displaying the spirit of high-involvement management by going beyond what is merely necessary to get the job done.

Confl ict When the behaviors or beliefs of a team member are unacceptable to other team mem- bers, confl ict occurs. Several types of intragroup (within-team) confl ict exist; they include personal confl ict (sometimes referred to as “relationship confl ict”), substantive confl ict (sometimes referred to as “task confl ict”), and procedural confl ict (sometimes referred to as “process confl ict”).

interpersonal cohesion Team members’ liking or attraction to other team members.

task cohesion Team members’ attraction and commitment to the tasks and goals of the team.

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418 Chapter 11 Groups and Teams

EXPERIENCING ORGANIZATIONAL BEHAVIOR

Chances are that you have seen a performance by Cirque du Soleil (approxi- mately 15 million people saw their performances in 2009). What started out as a band of street performers in 1984 in Quebec, Canada, has grown into a business with over 5,000 em- ployees (1,200 are performing art- ists), a number of touring companies that perform all over the world, and resident shows in Las Vegas, Orlando, New York, Tokyo, and Macau. Cirque du Soleil has come to redefi ne what we mean by the term circus. There are no animals, the shows are aimed at adult audiences, and performances provide visuals not seen before, such as the shows conducted under water (“O”) and the amazing costumes. The company builds its brand on creativity and teamwork.

Cirque du Soleil hires people from all over the world, searching for people with various talents, ranging from being an acrobat and scuba- certifi ed, to doing gymnastics on rollerblades. It does not just look for run-of-the mill acrobats, jugglers, and trapeze artists. Everyone must meet certain artistic qualifi cations and be predisposed to teamwork. Indeed, be- cause about 20 percent of the artists turn over (due to injury or retirement) every year, Cirque has resorted to cre- ating its own training camps, such as a

camp for contortionists in Mongolia, to make sure it has a constant supply of talent.

Once artists are cast, they go through an eight-week boot camp where they learn how to operate as a team. One important aspect of this teamwork is the ability to be fl exi- ble, creative, and work off of other performers. Their coach, Boris Verkhovsky, states that this is not always easy, because many are trained athletes who are accustomed to performing on their own using strict protocols rather than engaging in ar- tistic performances. An important part of a Cirque performer’s job is to be able to back up other performers. As with many jobs, such as police offi - cers or retail sales clerks, it is impor- tant that these performers be able to monitor the performance of all of their team members and be able to step in when there is trouble, a team mem- ber is overtaxed, or the artistic role requires it. Thus, providing backup to other performers is an essential com- ponent of all Cirque du Soleil artists’ jobs. Consider the job of an aerialist who relies on her team members for safety support should she make a mis- take during her routine.

Research has addressed the issue of who is likely to provide backup, who is likely to receive it, and under what conditions backing-up behav- iors are likely to occur. When team members are highly conscientious and emotionally stable, they are more likely to provide backup to team mem- bers in need. Team members must also be knowledgeable about others’ job responsibilities, as well as their own, in order to provide backup. When the team member who needs help is highly conscientious and ex- traverted, he or she will more likely receive backup from other team mem- bers. Finally, when team members perceive that the person who needs backing up has a larger workload or fewer resources to accomplish his or her work, they are more likely to pro- vide the support needed.

Backup at Cirque Du Soleil

Sources: Cirque du Soleil, “Cirque Du Soleil at a Glance,” 2009, at http://www.cirquedusoleil.com/cirquedusoleil/pdf/ pressroom/en/cds_en_bref_en.pdf; R.M. McIntyre, & E. Salas. 1995. “Measuring and Managing for Team Performance: Emerging Principles from Complex Environments,” in R.A. Guzzo et al. (Eds.), Team Effectiveness and Decision Making in Organizations (San Francisco: Jossey-Bass, pp. 9–45); C.O.L.H. Porter et al. 2003. “Backing Up Behaviors in Teams: The Role of Personality and Legitimacy of Need,” Journal of Applied Psychology, 88: 391–403; L. Tischler. 2005. “Join the Circus,” Fast Company, July 5, at http://www.fastcompany.com/magazine/96/cirque-du-soleil.

©ALFREDO ALDA/epa/Corbis

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Factors Affecting Team Effectiveness 419

Personal confl icts 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 confl ict than are people who choose to belong to the same informal group. Personal confl ict may be based on personality clashes, differences in values, and differences in likes and dislikes. No disagreement over a specifi c issue is necessary for personal confl ict to occur. One study of business executives found that 40 percent of their confl icts resulted from personal dis- like rather than disagreement over a specifi c issue.82

Substantive confl icts 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 confl icts can often lead to greater creativity and innovation, if they do not become personal confl icts.83

Finally, procedural confl icts occur when team members disagree about policies and procedures. 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 confl icts. Teams may also develop specifi c policies or rules to avoid confl icts of this kind. Robert’s Rules of Order are one such device because they specifi cally defi ne how group meetings should be conducted.

Depending on the specifi c type, confl ict can have negative or positive consequences for team effectiveness.84 Personal confl ict tends to be negative because it interferes with cooperation and a healthy task focus. On the other hand, substantive confl ict can be positive, particularly for tasks involving creativity and innovation. This type of confl ict generates 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 differ- ences of opinion is less helpful. Overall, substantive confl ict can be benefi cial when teams cooperatively problem solve, develop positive norms, and create a consistent team mental model.85 Procedural confl ict has not been studied often enough for fi rm conclusions to be drawn, but it certainly would have negative effects if not addressed to some degree.

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.86 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 performance 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.87 This general arousal then leads to better performance. Another explanation is that the presence of oth- ers arouses evaluation apprehension, so that people perform better because they think they are being evaluated.88 Whatever the reason, social facilitation seems to occur only when people are performing well-learned, simple, or familiar tasks.89 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.

social facilitation effect Improvement in individual performance when others are present.

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420 Chapter 11 Groups and Teams

Social Loafi ng Research suggests that the simple act of grouping individuals together does not neces- sarily 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 loafi ng90 or shirking,91 and it can obviously result in serious losses. There are three primary explanations for the social loafi ng effect. First, if individual outputs are not identifi able, 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.92 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.93 This is likely to happen when individuals think that they have low ability and cannot perform as well as other team members.94

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 pressure 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 fi rst explanation of social loafi ng—that the less identifi able the individual’s output is, the more the individual loafs.95 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 their 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.96 This supports the second explanation of social loafi ng—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 loafi ng. It occurs frequently when students are as- signed 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 loafi ng in student groups found that the most common reasons for loafi ng were perceptions of unfairness (i.e., others were loafi ng) and perceived dispensability because one was not as talented as others.97

Social loafi ng 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 loafi ng. This can be extremely costly to organizations, because creating and supporting work teams requires

social loafi ng A phenomenon wherein people put forth less effort when they work in teams than when they work alone.

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Team Development 421

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 are performance and productivity lower, but costs are also higher.

Social loafi ng can occur in any team at any level in an organization. And because so- cial loafi ng clearly results in lower productivity, it is a serious problem. At the least, when social loafi ng occurs, the organization’s human capital is underutilized. Fortunately, man- agers can use several methods to address this problem.98 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 communi- cation processes, which may include formal reports (such as profi t-and-loss statements), work schedules, interoffi ce memoranda, and formal meetings.

But informal communication also is necessary. Associates need and want to discuss personal and job-related problems with each other. Informal communication is a natural consequence of group processes. The effectiveness and frequency of communication are affected by many of the same factors that lead to group formation and group structure. For example, frequency of communication is partially the result of the opportunity to interact. People who share the same offi ce, whose jobs are interconnected, and who have the same working hours are likely to communicate more frequently. Thus, the opportunity to inter- act leads to both group formation and frequent communication. This is why virtual teams are more likely to be effective when they have more face-to-face interaction.99

In addition to affecting task performance, communication frequency and effective- ness 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 impor- tance and satisfaction to associates.100 Thus, communication is both a cause and a conse- quence of satisfaction with the team.

Team Development The nature of interactions among team members changes over time. Teams behave dif- ferently when they meet for the fi rst 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. Accord- ing to Bruce Tuckman’s group development model, teams typically go through four stages over their life cycle: forming, storming, norming, and performing.101

During the forming stage, associates come to teams without established relation- ships but with some expectations about what they want in and from the team. The

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422 Chapter 11 Groups and Teams

new team members focus on learning about each other, defi ning what they want to ac- complish, and determining how they are going to accomplish it. Sometimes personality confl icts 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 confl ict among team members. If the team is to be successful, team members need to resolve or manage personal confl icts and work through substantive and procedural confl icts in order to reach suffi cient agreement on desired performance outcomes and processes. In working through substantive and procedural confl icts, 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 satisfi ed with the team experience.102

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 ulti- mately go through a fi fth stage, adjourning, when individuals begin to leave the team and terminate their regular contact with other team members. Adjourning can result from vol- untary actions on the part of team members, as when a team member takes a job with another organization or retires. It can also result from actions over which team members have little control, such as reassignment by the parent organization or the end of a project. When individual members of a cohesive team leave, the remaining members often experi- ence 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 belong to the same organization and may already know each other. They are also likely to be familiar with performance expectations and may even share similar work-related values. Thus, the forming and storming stages are not needed. Furthermore, the nature of the team’s work can infl uence the formation of the team. Most research on Tuckman’s stage theory has focused on simple teams that worked on a single proj- ect and whose members were relative strangers.103 Thus, the theory may not apply to teams that work on complex projects or that have members who have had a long history together.

The punctuated equilibrium model (PEM) of team development provides an al- ternative view of development over time.104 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 fi rst stage, team members get to know one another and engage in norming activities. The focus at this stage is the development of socio- emotional roles. When the deadline for the team’s work approaches, the team undergoes a dramatic change in functioning. 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 determined 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 teams working on a very specifi c, clearly time-bounded task.105

punctuated equilibrium model (PEM) A model of team development that suggests that teams do not go through linear stages but that team formation depends on the task at hand and the deadlines for that task.

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Managing for Effective Teams 423

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 team- work. Following are several “best practices” for managing effective teams.

Top Management Support Effective teamwork requires support from the top of the organization.106 All organizations that are known for their teamwork, such as Xerox, Harley-Davidson, FedEx, and Boeing, have senior management teams that actively promote teamwork. Several management practices can help senior management to support team effectiveness:107

• Have an explicit vision and strategic plan that serves as the basis for determining desirable team outcomes.

• Use results-oriented measurement of team outcomes and expect all leaders in the organization to do the same.

• Actively include associates and managers at all levels in the decision-making process related to the use of teams.

• Make an explicit decision about using teams and tie the decision to business objectives.

• Actively manage and review support systems for teams.

Stage Model

Forming

Orientation: Members become familiar with each other

Storming

Conflict: Disagreement and tension among members

Norming

Structure: Cohesiveness and roles develop

Performing

Work: High task and goal orientation

Adjourning

Dissolution: Task completion, termination of roles

Punctuated Equilibrium Model

First Stage: Norming Activities— Focus on Socioemotional Roles

Second Stage: Performing Activities — Focus on Task Roles

Task deadline approaches or halfway mark in teams’ tenure.

Exhibit 11-4 Models of Team Development

Sources: B.W. Tuckman. 1965. “Developmental Sequences in Small Groups,” Psychological Bulletin, 6: 384–399; B.W. Tuckman, & M.A.C. Jensen. 1977. “Stages of Small Group Development,” Group and Organizational Studies, 2: 419–427; C.J.G. Gersick. 1988. “Time and Transition in Work Teams: Toward a New Model of Group Develop- ment,” Academy of Management Journal, 31: 9–41; C.J.G. Gersick. 1989. “Marking Time: Predictable Transitions in Task Groups,” Academy of Management Journal, 32: 274–309; D.R. Forsyth. 1999. Group Dynamics (Belmont, CA: Wadsworth Publishing Company).

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424 Chapter 11 Groups and Teams

Senior management at Starbucks, described in the chapter-opening case, clearly fol- lows these recommended practices. For example, two of the company’s stated missions are to make profi ts and to be environmentally sensitive. These missions are incorporated into the baristas’ performance assessments. The company also provides mechanisms that enable baristas to regularly communicate and share their ideas with senior management.

Support Systems Support systems are aspects of organizational life that allow a team to function well. Sup- port systems include technology, information systems, selection of team members, train- ing, 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 effi ciently. Examples can be found at McKinsey & Company. Each team member has access to personal comput- ing 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.108

Information Systems Teams must have the necessary information to act, but they frequently need more infor- mation 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.109 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.110 Often, information technology can provide people with a fl ood of information; but as discussed in Chapter 9, too much information creates overload. In such situations, associates may not know to what 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 with the knowl- edge, skills, and abilities to perform their individual jobs and with values that fi t well with the organizational culture.111 However, team members also have other roles to fulfi ll. 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, teamwork

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Managing for Effective Teams 425

selection needs to consider more factors than selection for a traditional job. Following are some suggestions for selecting team members:112

• Tailor the staffi ng process to the type of team. For example, paper-and-pencil personality tests may be appropriate for service teams but not for senior management teams.

• Conduct a teamwork analysis to identify the knowledge, skills, and abilities needed to perform both individual task work and teamwork.

• 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 includes a community member who does not have ties to the university community and does not do research.

• 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 members of the team itself involved in the selection process.

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 each other if they are rewarded only for their individual performance. Thus, it is important that the reward system for teams have multiple components, some of which refl ect team performance. One such reward system is a profi t-sharing plan in which associates receive bonuses based on the profi ts generated by their team. 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 what skills and knowledge associates acquire rather than by how they perform on specifi c tasks. Finally, team-based pay should be provided for only those aspects of performance under the team’s control.113

Leadership A team’s leadership is crucial to the effectiveness of the team.114 Team leaders can naturally emerge, or they can be assigned based on special skills or authority. Successful team leaders must fulfi ll three roles.115

The fi rst 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 in- clude 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 ensure the develop- ment of a direction for team action. This means that the leader must develop or help to develop short-term action strategies based on the long-term organizational strategies de- veloped by the senior management team. Overall, the leader must help to translate those long-term strategies into directions, goals, and action plans for team members.

Finally, the team leader must serve as the team’s operational coordinator. This role represents the management of the team’s work and processes. The major responsibilities of this role are to recognize each member’s contributions and decide how to best integrate the various team members’ contributions; to monitor team performance and functioning

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426 Chapter 11 Groups and Teams

MANAGERIAL ADVICE

Experiential teambuilding is used by many organizations around the world. The gen- eral idea is to move a team outside of its day-to-day routines and place it in a situation where fun and challeng- ing activities are offered. The goal is to create stronger camaraderie and commitment among team members. Strengthening skills in the areas of problem solving and goal setting are also a part of the plan in many cases. Example activities include: • Murder mysteries—Participants at-

tempt to solve a murder staged by actors.

• Improv sessions—Participants en- gage in comedic improvisation exercises.

• Ropes courses—Participants help one another to navigate a series of challenges involving ropes that range from ground level to 10 to 12 feet above the ground.

• Scavenger hunts—Participants com- pete in subteams to decipher clues that lead to valuable items.

• Family feuds—Participants en- gage in a version of the storied game show.

• Boats—Participants form subteams to build and race boats made from barrels, boards, and ropes.

These types of activities are very popular in the business world. Despite their popularity, critics have questioned their effectiveness. Judith Mair, a German entrepreneur in the communication and advertising fi eld,

famously complained that corporate fun and games blurred the distinc- tion between business and personal lives, eroded the German work ethic, and imperiled the German economy. Other critics have not been quite this harsh, but have questioned the ability of experiential teambuilding to create real behavioral change in the work- place. The key concern is that team- building activities often are not tied to specifi c workplace problems.

Merrick Rosenberg, Chief Learn- ing Offi cer at Team Builders Plus, un- derstands the issues but believes they are not insurmountable. In his view, the fi rst step is to score teams in terms of the degree to which they have deep problems with confl ict, lack of trust, and lack of cooperation. For teams with few problems, simple participation in a teambuilding activity can provide a val- ued break from routine and a boost to morale. For teams with many problems, the basic experience is not enough. In- stead, preactivity personality tests and surveys to determine specifi c problems must be emphasized so that teambuild- ing can be tailored to specifi c needs. Based on these assessments, particu- lar activities can be chosen, particular individuals can be selected for certain subteams or leadership roles, and particular points can be made when instructors debrief the activities. Also, follow-up contacts, either virtually or through face-to-face meetings, become quite important for reinforcing lessons from the teambuilding experience.

Studies suggest that well-exe- cuted experiential teambuilding does in fact provide reasonable benefi ts. A recent participant put it this way:

We had a wonderful time! Facing a set of challenges that were very different than what we do 50–60 hours a week, we all learned dif- ferent and surprising things about each other. … I think we will be a closer, better team for it.

David Goldstein, founder of a very successful company called Team- bonding, certainly agrees with this assessment. He points out that well- designed team-based play delivers results because it: (1) is involving, (2) is low risk, (3) explores team dynamics, (4) promotes self-awareness, (5) builds trust, (6) shows the value of the team, (7) promotes pleasure, and (8) provides specifi c problem-solving and communi- cation lessons. Based on scientifi c anal- ysis and real-world applications, the power of experiential teambuilding for creating better attitudes and perform- ance seems to be reasonably strong.

The Pros and Cons of Experiential Teambuilding

Sources: D. Goldstein. 2009. “The Power of Play,” at http://www.teambonding.com/blog; H.L. Gillis, & E. Speelman. 2008. “Are Challenge (Ropes) Courses an Effective Tool? A Meta-Analysis,” The Journal of Experiential Education, 31: pp. 111–135; J. Harkin. 2003. “Executives Go Out To Play,” New Statesmen, Feb. 10, p. 18; C. Klein, D. DiazGranados, E. Salas, H. Le, C.S. Burke, R. Lyons, & G.F. Goodwin. 2009. “Does Team Building Work?” Small Group Research, 40: pp. 181–222; M. Rosenberg. 2007. “Beyond the Basics of Experiential Learning,” T&Dˆ 61, no. 12: pp. 26–28; Teambonding, “Programs,” 2010, at http://www.teambonding.com/programs.

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http://www.teambonding.com/blog

http://www.teambonding.com/programs

Managing for Effective Teams 427

and make necessary changes if feedback indicates problems; and to ensure that the team is operating in a psychological climate that will enable it to function effectively.

Training The thousands of team training programs and methods that exist speak to the criticality of adequate team training. Recall from an earlier section that one of the assumptions often held by managers is that people know how and are suited to work on teams. This is ques- tionable in many cases. Team-building training generally focuses on four different types of skills:116 (1) interpersonal skills, especially communication, supportiveness, and trust; (2) problem-solving skills, which allow team members to identify problems, generate solu- tions, and evaluate solutions; (3) goal-setting skills, and (4) role-clarifi cation 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 improv- ing 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.117 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 diffi cult to change. Training is likely to have a greater impact on the performance of newly formed teams.

In the Managerial Advice feature, a specifi c and important type of team training is profi led.

THE STRATEGIC LENS

In recent times much of the or-ganization’s work has been accomplished by teams. Some teams correspond to formal units of the fi rm (e.g., a department), some teams exist within formal units, and some teams cut across formal units. The work begins with the senior man- agement team, which develops the or- ganization’s vision and the strategies intended to help realize the vision. These strategies are implemented by teams throughout the organization. For example, when the organiza- tion’s goal is innovation, cross-func- tional teams are often assigned to develop new products. Members of these teams commonly represent re- search and development, marketing,

and manufacturing units. Sometimes additional team members are drawn from customers and also external sup- pliers, who will provide materials for the new products.

Because of the pervasive use and importance of teams, an orga- nization’s performance ultimately de- pends on its teams’ effectiveness. The effectiveness of the baristas in Star- bucks stores, for example, has been largely responsible for the success of the overall organization. The design of teams, the selection of team mem- bers, and team leadership and man- agement are all critical for organiza- tional success. As a result, strategic leaders should invest signifi cant effort in developing and managing teams.

Critical Thinking Questions

1. Think of some teams of which you have been a member. How suc- cessful were they? To what do you attribute your teams’ success or lack thereof?

2. Why do organizations use teams to accomplish the work that needs to be done? What value do teams provide?

3. Someday you will be a leader of a team. What processes will you use to select team members? What specifi c actions will you take to manage the team to ensure high team productivity?

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428 Chapter 11 Groups and Teams

? 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 measured?

3. What composition factors should a manager consider in designing an effective team? Would these factors dif- fer depending on the type of team being formed?

4. What are the important aspects of team structure? How does each affect team performance?

5. What types of team processes can have a positive infl u- ence on team performance? What processes can have negative effects?

6. How do the stage model and the punctuated equilib- rium model of team development differ?

7. What can organizations do to encourage and support effective teamwork?

8. What are some important team leader roles? Describe an example from your own experience of a team leader who fi lled one or more of these roles.

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 infl uence team effectiveness. Next, we examined 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 defi ned in very general terms as “two or more interdependent indi- viduals who infl uence 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 consequen- tial for the organization’s mission, and who are identifi ed as a team by people within and outside the team.

• Groups and teams can be classifi ed in a number of ways. Both formal and informal 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 iden- tity. 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 infl uences the team’s effectiveness. The diversity of members, their personality, and the size of the team all infl uence team effec- tiveness.

• The structure of a team, including the roles held by members, the norms, and the task structure, can all infl uence a team’s effectiveness.

• The processes used and experienced by the team also infl uence team performance. Team processes include team cohesion, confl ict among team members, social facilitation, social loafi ng, 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 fi fth 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.

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Human Resource Management Applications 429

• Organizations can promote effective teamwork through senior management sup- port, technical and informational support, selecting appropriate people for team- work, 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 identifi ed as engaging in social loafi ng? 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 fulfi ll these responsibilities to the team and to the organization?

Key Terms synergy, p. 404 group, p. 405 team, p. 405 formal groups, p. 405 informal groups, p. 405 identity groups, p. 406 virtual teams, p. 406 process loss, p. 411 team orientation, p. 413 roles, p. 414

task roles, p. 414 socioemotional roles,

p. 414 destructive individual roles,

p. 414 norms, p. 414 divisible tasks, p. 416 unitary tasks, p. 416 maximization tasks, p. 416 optimization tasks, p. 416

interpersonal cohesion, p. 417

task cohesion, p. 417 social facilitation effect,

p. 419 social loafi ng, p. 420 punctuated equilibrium

model (PEM), p. 422

Human Resource Management Applications The Human Resource Management (HRM) function often plays a very large role in creating effective teams for an organization. Specifi c activities executed by the HRM department are as follows:

HRM units offer selection tools that can help to fi nd team-oriented individuals. HRM profes- sionals often develop specifi c interview questions designed to highlight team orientation. They also may develop case experiences that can reveal a person’s predispositions. 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).

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 dif- fi cult 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 substantial

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430 Chapter 11 Groups and Teams

building your human capital

Do You Have a Team? The benefi ts of teamwork are clearly outlined in this chapter. Not only can teams increase organiza- tion-related performance and contribute to the competitive advantage of the organization, they can also increase individual well-being. This has led the business world to adopt teamwork whenever possible. However, sometimes what we call a team does not really function as a team. Think of a team that you belong to, whether it is a sports team, a class project team, or a work team. Answer the following questions below to determine whether your team is really operating as a team:

1. To what extent is your team working interdependently? • Do team members work well together? • Are there problems in coordinating the team’s activities? • Do people work together, or do they mostly do their work independently of one another? • What happens when a team member does not perform up to standards?

2. Is your team structured as a team? • Is the team organized? • Is it clear who is supposed to be doing what? • Are there confl icts over who is in charge?

3. Is your team interpersonally cohesive? • Is your team close or tight-knit? • Do team members like each other? • Do team members frequently quit the team?

4. Does your team have an identity? • Does your team have a name (either formal or informal)? • Are team members proud to tell others that they are a part of this team? • Do the team members have a sense of shared identity with each other? • Do team members put the team goals above their own personal goals? • Do team members work hard to reach the team’s goals? • Does the team have a specifi c mission that everyone is clear about?

Source: Information adapted from and based on D.R. Forsyth. 1999. Group Dynamics (Belmont, CA: Wadsworth).

an organizational behavior moment

The New Quota “One club.” Jack closed his hand and, almost imperceptibly, leaned forward a little. To most people, such a movement would have gone unnoticed. But all three of the others knew that Jack’s opening bid was a little weak.

“Pass.” “Three no trump.” Bill was gleeful. He had 16 points, and

this would be the fi rst hand he had played this lunch hour. He watched as Jack spread his hand and noted that the play would be uneventful.

“Bid three, making four,” Dennis said as he penciled down the score. “Got time for another?”

“Not really. Gotta get back to the grind,” Steve grimaced as he spoke. “Listen, what do you guys think about the new quota?”

“It’s ridiculous!” Bill was anxious to fi nd out how his co- workers felt, and he also wanted to express his own opinion. “When I came here fi ve years ago, we were supposed to wire three assemblies an hour. Now we’re supposed to do eight. They aren’t paying me that much more. I think it stinks.”

degree, with an individual’s rewards being a function of those outcomes. For teams with conjunctive tasks, the reward system should put signifi cant emphasis on individual accomplishments.

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Team Exercise 431

“I do, too.” Dennis was usually pretty low key. But as he spoke, his eye began to twitch, revealing his anxiety. “I’m not sure that I could meet it even if I tried, and I’m sure as hell not going to try. They can have my stinking job if they want. Only reason I stick around here, anyway, is because you guys are such lousy bridge players.”

They all laughed. Then Jack, seeing that Steve was waiting, said, “Eight’s possible, but I think some of us are going to be laid off if we all do it. I was talking to this guy over in engineering the other day, and he explained how to make a jig that lets you just lay those wires in real easy. I tried it and it really works. It saved me about six minutes on the fi rst assembly. Of course, I went back and told him it didn’t work. I just don’t want to do eight— won’t help any of us if we do.”

Steve looked curiously at Jack. “So that’s what you were up to! I saw you really pushing a couple of days ago and thought you’d lost your screws. Anyway, I’m glad you guys feel the same as me. It makes me feel a lot better. Don’t fi gure the boss will do much to us if he thinks an old pro like Jack can’t do eight.”

It was several days later when Dave, the shop supervisor, was called to the manager’s offi ce. Dave knew that it was going to be about the quota, and he didn’t know exactly what he was going to say. Mr. Martin was on the phone but motioned for him to sit down.

When he hung up, he faced Dave and said, “That was Pacifi c Electronics. They want to know if we can meet the shipping schedule or not. What do I tell them when I call back?”

“I don’t know, honestly. The guys have picked their speed up some, but I don’t think we’re going to do better than six-and-a- half, maybe seven.”

“That won’t cut it, Dave. This new business is important. If we can’t handle it, we’ll have to cut back some workers. We have too many budget problems without it. Are you sure they’re really trying?”

“Yes!” Dave responded. “Jack even tried a new jig that engi- neering thought up, but it didn’t seem to help. Maybe if we added some more incentive bonus it would help. I don’t know.”

“We can’t do that. Costs are already too high. We’re being hurt on scrap rate, too. You just go back there and really push them. I’m going to tell Pacifi c that we can meet the schedule. Now you get that crew of yours to do it!”

Discussion Questions 1. What factors seem to be infl uencing team performance here? 2. Identify the team norms and goals. Are they compatible with

organizational objectives? 3. How does the team function to meet individual needs? If you

were Dave, what team concepts would you apply? Why?

team exercise

Virtual versus Real Teams As discussed in this chapter, the use of virtual teams is common in the business world. Although virtual teams can save an organization time and money, they can also have their disadvantages. The purpose of this exercise is to explore the different dynamics that occur between face-to-face teams and virtual teams.

Procedure DAY 1 1. The instructor will randomly divide the class into teams of fi ve to seven people. The instructor

will designate half of the teams as face-to-face teams and the other half as virtual teams. 2. Each team is responsible for developing a new school logo and branding slogan. They will have

approximately one week to do this.

INTERIM PERIOD (APPROXIMATELY ONE WEEK) 1. Each team is responsible for completing its task outside class. Face-to-face teams can meet any

time they desire and can also use electronic means of communication. Virtual teams may not meet face-to-face but can use any form of electronic communication to complete their task. Virtual teams also should not discuss the task in class. In addition, it is not necessary for all team meetings to include everyone on the team but several members should be present and all members should participate in some of the meetings.

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432 Chapter 11 Groups and Teams

2. The task is to develop a new school logo and branding slogan. Each team must also develop a three- to fi ve-minute presentation of its product to present in class on Day 2 of the exercise.

3. Before class, each team should prepare answers to the following questions: a. How many meetings between team members took place? To what extent were these

meetings productive? b. What were the most frustrating aspects of working on this project? c. To what extent did everyone contribute to the project? d. What type of communication problems arose in your team? e. To what extent was your team congenial? Were there misunderstandings? How well do

team members now understand each other? f. How diffi cult was it to coordinate your work?

DAY 2 (APPROXIMATELY ONE WEEK AFTER DAY 1) 1. Each team presents its logo and slogan to the class. 2. The class votes on which team has the best logo and slogan. 3. The instructor leads the class in a discussion of their answers to the above questions and the

different dynamics between face-to-face and virtual teams.

Endnotes 1. Lawler, E.E., III, Mohrman, S.A., & Ledford, G.E. 1995. Creat-

ing high performance organizations: Practices and results in Fortune 1000 companies. San Francisco: Jossey-Bass.

2. Fisher, A. 2007. The trouble with MBAs. Fortune, April 23, at http://cnnmoney.printhis.clikckability.com/pt/cpt?action=cpt& title�The trouble�with�MBAs.

3. Kirkman, B.L., Rosen, B., Tesluk, P.E., & Gibson, C.B. 2004. The impact of team empowerment on virtual team performance: The moderating role of face-to-face interaction. Academy of Management Journal, 47: 175–192.

4. Hackman, J.R., & Oldham, G.R. 1980. Work redesign. Reading, MA: Addison-Wesley.

5. Cohen, S.G., Ledford, G.E., & Spreitzer, G.M. 1996. A pre- dictive model of self-managed work team effectiveness. Human Relations, 49: 643–679.

6. Sundstrom, E. 1999. The challenges of supporting work team effectiveness. In E. Sundstrom, & Associates (Eds.), Supporting work team effectiveness: Best management practices for fostering high performance. San Francisco: Jossey-Bass, pp. 3–23.

7. Ibid. 8. Labich, K. 1996. Elite teams get the job done. Fortune, February

19: 90–99. 9. Finkelstein, S., & Hambrick, D.C. 1996. Strategic leadership: Top

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18. See, for example, Furumo, K. 2009. The impact of confl ict and confl ict management style on deadbeats and deserters in virtual teams. Journal of Computer Information Systems, 49 (4): 66–73; Mittleman, D., & Briggs, R.O. 1999. Communicating technolo- gies for traditional and virtual teams. In E. Sundstrom & Associates (Eds.), Supporting work team effectiveness. San Francisco: Jossey- Bass, pp. 246–270.

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21. Kirkman, Rosen, Tesluk, & Gibson, The impact of team empow- erment on virtual team performance.

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106. Hitt, M.A., Nixon, R.D., Hoskisson, R.E., & Kochhar, R. 1999. Corporate entrepreneurship and cross-functional fertilization: Activation, process and disintegration of a new product design team. Entrepreneurship, Theory & Practice, 23: 145–167.

107. Sundstrom, E. 1999. Supporting work team effectiveness: Best practices. In E. Sundstrom, & Associates (Eds.), Supporting work team effectiveness: Best management practices for fostering high performance. San Francisco: Jossey-Bass, pp. 301–342.

108. Sundstrom, Supporting work team effectiveness. 109. Hackman, Group infl uences on individuals in organizations. 110. Ibid. 111. Heneman, H.G. III, & Judge, T.A. 2003. Staffi ng organizations.

Middleton, WI: Mendota House. 112. Klimoski, R.J., & Zukin, L.B. 1999. Selection and staffi ng for

team effectiveness. In E. Sundstrom, & Associates (Eds.), Support- ing work team effectiveness: Best management practices for fostering high performance. San Francisco: Jossey-Bass, pp. 63–91.

113. Sundstrom, Supporting work team effectiveness. 114. McIntyre, R.M., & Salas, E. 1995. Measuring and managing

for team performance: Emerging principles from complex en- vironments. In R.A. Guzzo, E. Salas, & Associates (Eds.), Team effectiveness and decision making in organizations. San Francisco: Jossey-Bass, pp. 9–45.

115. Chen, G., Kirkman, B.L., Kanfer, R., Allen, D., & Rosen, B. 2007. A multilevel study of leadership, empowerment, and performance in teams. Journal of Applied Psychology, 92: 331– 346; Zaccaro, S.J., & Marks, M.A. 1999. The roles of leaders in high-performance teams. In E. Sundstrom, & Associates (Eds.), Supporting work team effectiveness: Best management practices for fostering high performance. San Francisco: Jossey- Bass, pp. 95–125.

116. Salas, E., Rozell, D., Driskell, J.D., & Mullen, B. 1999. The effect of team building on performance: An integration. Small Group Research, 30: 309–329.

117. Ibid; Klein, C., DiazGranados, D., Salas, E., Le, H., Burke, C.S., Lyons, R., & Goodwin, G.F. 2009. Does Team Building Work? Small Group Research, 40. 181–222

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? knowledge objectives After reading this chapter, you should be able to: 1. Explain how confl ict can be either functional or

dysfunctional and distinguish among various types of confl ict.

2. Discuss common causes of confl ict. 3. Describe confl ict escalation and the various out-

comes of confl ict. 4. Explain how people respond to confl ict and under

what circumstances each type of response is best. 5. Understand how organizations can manage con-

fl ict. 6. Describe the basic negotiation process as well as

effective strategies and tactics for negotiating. 7. Explain why organizations must have power to

function, and discuss how people gain power in organizations.

8. Defi ne organizational politics and the tactics used to carry out political behavior.

exploring behavior in action

Green Confl ict

I n November 2007, Thomas Falk, the CEO of Kimberly-Clark Corporation, arrived at the University of Wisconsin where he would deliver an address on corporate governance as part of the annual Director’s Summit (a meeting designed for the continuing education of board members from various companies). As he began to work through

his PowerPoint presentation, the audience noticed some peculiar slides, slides that pointedly protested Kimberly-Clark’s use of old-growth forests for its tis- sue paper products (Kleenex, Cottonelle, Scott, and other brands). After terminating the presentation and adjourning early for lunch, the directors and others in attendance found interesting menus at their tables. Those menus included entries such as “Songbird Stir- fry” and “Caribou Clearcut Cake.” The appetizer was “Social Confl ict Scramble.” Clearly, Greenpeace activ- ists had been active that day!

After speaking at the Consumer Electronics show in Las Vegas in 2003, Michael Dell was confronted by a group of angry environmental activists from the Silicon Valley Toxics Coalition. They were dressed as prisoners and shackled to PCs. The protest was against Dell’s then-practice of using prison labor and unsafe practices to recycle old computers while competitors such as Hewlett-Packard were using much safer and more effective means. In 2005, Greenpeace activists dumped hundreds of used PCs outside of Wipro head- quarters in Bangalore, India, to protest the computer assembler’s lack of a “take-back” recycling practice. Greenpeace mounted a different type of campaign to motivate Apple to become more environmentally

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437

responsive by creating the “Green My Apple” website in 2006. In 2007, the Center for Health, Environment, and Justice staged a huge protest against Target stores for using PVC vinyl. The protest included newspaper ads against Target, a petition to the CEO, letters to store managers, and picketing at individ- ual stores. In 2009, the World Wildlife Federa- tion presented a petition with 50,000 signatures to ExxonMobil protesting activities that endanger the Western gray whale.

These are just six out of thousands of examples where confl ict between environmental groups and business corporations has surfaced. Traditionally, the goals of the environmental groups have included re- ducing carbon emissions, protecting wildlife and natural habitats, avoiding the use of poisonous substances, recycling, and the development and use of sustainable products and energy sources. Corporate goals have usually centered on providing value to shareholders—meaning companies typically benefi t from using the least expensive products, processes, energy sources, and labor practices to produce their goods and services. Typically, environmen- tally sound business practices have not been the most cost (or profi t) effective. Thus, it is no surprise that there is a long history of confl ict between environmental groups and business fi rms.

However, things are beginning to change, with envi- ronmentalist organizations working together with business corporations to obtain mutual benefi t. In fact, in order for many organizations to survive now, they must work with environmental groups. For example, when William K. Reilly was contemplating a private equity takeover of TXU corporation, a Texas utilities fi rm, a major drawback was that TXU did not have support from environmentalist organizations. In order for the deal to go through, TXU had to win support from those organizations. TXU had been doing battle with Environmental Defense, a major environmentalist organization, over the opening of 11

coal-fi red power plants. As part of the deal negotiation, Environmental Defense was brought in. After harrowing negotiations, the new owners of TXU agreed to Environ- mental Defense’s terms and dropped 8 of the original 11 proposed plants. When asked why environmentalists’ sup-

port was so important for the TXU deal, Reilly re- sponded, “We all swim in the same culture—and the culture is going green.”

TXU is not the only company forming partner- ships with environmental- ist organizations. Shortly after the 2003 protest against their recycling pol- icies, Dell joined together with Silicon Valley Tox- ics Coalition to develop a state-of-the-art recycling plan. DuPont, which is known as a green leader in its industry, employs Paul

Gilding, the former head of Greenpeace, to work on its environmental policies and practices. In a much-publicized campaign, Walmart is working with Conservation Interna- tional and the consulting fi rm BlueSkye to become a leader in environmentally sound retail practices. Walmart’s former CEO, Lee Scott, stated that what started out as a defensive strategy in response to public protests over Walmart’s en- vironmental practices has turned out to be exactly the op- posite.

Kimberly-Clark also has been working with environ- mental groups. In 2009, it agreed to alter its procurement policy by: (1) avoiding the use of fi ber from the world’s most sensitive forests, (2) giving preference to FSC (For- est Stewardship Council) certifi ed fi ber over other virgin wood, and (3) using postconsumer recycled fi ber (e.g., from offi ce paper) in some products rather than virgin fi ber or preconsumer recycled fi ber (e.g., wood chips from furniture manufacturing). For Kimberly-Clark, these changes will reduce the protests and pressure from activ- ists while not substantially affecting the bottom line. For activists, the agreement is not perfect but the changes do mean more protection for ancient forests and their wild- life. For example, the National Resource Defense Council

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438

estimates that 425,000 trees would be saved annually if each U.S. household replaced once per year a 500-sheet roll of non-recycled bathroom tissue with a roll made from 100 percent recycled material. In 2009, an iPhone

app was introduced to help consumers determine which tissue and bath tissue products are the most positive for the environment.

Sources: Anonymous. 2008. “Gotcha: CEO’s Presentation Foiled,” Greenpeace Update, Spring, p. 7; Associated Press. 2003. “Environ- mentalists at Vegas Trade Show Protest Dell’s Recycling,” press release, Jan. 9; J. Carey & M. Arndt. 2007. “Hugging the Tree-Huggers: Why So Many Companies Are Suddenly Linking Up with Eco Groups—Hint: Smart Business,” BusinessWeek, Mar. 12, pp. 66–67; Center for Health, Environment, and Justice. 2007. “Target Faces Mounting Pressure to Phase Out Toxic Products & Packaging on Day of Annual Shareholder Meeting,” news release, May 24, at http://www.besafenet.com/pvs/ newsreleases/target_may_24_doa_ release. htm; Greenpeace, “About Kimberly-Clark’s Campaign, Aug. 5, 2009, at http://www.greenpeace.org/canada/en/recent/kimberly-clark- and-greenpeace/about-kimberly-clark-s-campain; Greenpeace. 2007. “Green My Apple Bears Fruit,” June 1, at http://www.greenpeace. org/ use/news/green-my-apple-bears-fruit; M. Gunther. 2006. “The Green Machine,” Fortune, July 31, pp. 42–45; J. Ribeiro. 2005. “Greenpeace Protests Recycling Policies,” PCWorld, Sept. 6, at http://www.pcworld.com/printable/article/ id.122419/printable.html; B. Walsh. 2009. “A Delicate Undertaking,” Time, June 22, p. 97; World Wildlife Fund. 2009. “Exxon Ignores Pleas from 50,000 People to Stop Threatening Rare Whales,” Aug. 9, at http://worldwildlife.org/who/media/press/2009/WWFPresitem13143b.html.

The Exploring Behavior in Action fea- ture illustrates a fundamental confl ict between environmental 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 profi ts (environmen- talists win) or they could operate to increase profi ts at the expense of the environment (business wins). However, today many environmental organiza- tions and businesses are handling this confl ict in a different manner so that ef- fective compromises or even win–win outcomes are achieved. Environmen- talists have learned to work with busi- nesses to develop more environmentally friendly practices rather than to protest and embarrass them. At the same time, many businesses have come to view be- ing environmentally responsible as a profi table business strategy.1

For those businesses that have been able to solve this confl ict, the payoff has been immense. First, many practices that are environmentally sound have also served to save busi- nesses money. For example, DuPont has saved over $2 billion from reductions in energy use since 1990.2 Another way in which companies benefi t is by improving sustainability of the environ- ment. This is a long-term perspective whereby companies operate so as not to deplete their resources thereby ensur- ing that they can operate in the future. For example, Walmart, one of the larg- est purveyors of seafood, has devel- oped a program of sustainable fi shing practices to maintain commercial stocks of fi sh, which can become depleted.3 Finally, companies’ reputations are bolstered by acting in an environmen- tally responsible manner.4 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.5 Company reputation has been linked to profi ts,6 associates’ morale,7 and the ability to recruit top talent.8 In this case, effectively dealing with and resolving confl ict has been shown to have a very important strategic impact on fi rm per- formance.

In this chapter, we examine the nature of confl ict, the process of nego- tiation, the exercise of power, and the political behavior that is common in organizations. We begin by defi ning confl ict and differentiating among dif- ferent types of confl ict. We then turn to the causes of confl ict, its outcomes, and various responses to it. After discussing confl ict-resolution techniques in organi- zations, we conclude with a discussion of power and politics.

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http://www.greenpeace.org/canada/en/recent/kimberly-clark-and-greenpeace/about-kimberly-clark-s-campain

http://www.greenpeace.org/use/news/green-my-apple-bears-fruit

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The Nature of Confl ict 439

The Nature of Confl ict Confl ict is a “process in which one party perceives that its interests are being opposed or negatively affected by another party.”9 In this chapter, we focus on confl ict between indi- viduals and between organizational units, with some attention given to interorganizational confl ict as well. As we noted in the opening discussion, some confl icts are dysfunctional and some are not. In this section, we look more closely at the difference between func- tional and dysfunctional confl ict and then describe three major types of confl ict.

Dysfunctional and Functional Confl ict Dysfunctional confl ict is confl ict that interferes with performance. Confl ict can be dysfunctional for several reasons. First, confl ict with important constituencies can create doubt about the organization’s future performance in the minds of shareholders, causing stock prices to drop.10 For example, this happened when Greenpeace protested Shell Oil’s sinking of the oil rig, Brent Spar, in the North Sea.11 Second, confl ict can cause people to exercise their own individual power and engage in political behavior directed toward achieving their own goals at the expense of attaining organizational goals. Third, con- fl ict can have negative effects on interpersonal relationships, as shown in Exhibit 12-1. Finally, it takes time, resources, and emotional energy to deal with confl ict, both on an interpersonal and an organizational level. Thus, resources that could be invested in achiev- ing the organization’s mission are used in the effort to address the confl ict. One survey showed that managers spend approximately 25 percent of their time dealing with confl ict. In some fi elds (such as hospital administration and management of municipal organiza- tions), managers can spend as much as 50 percent of their time managing confl ict. Man- agers have rated confl ict management as equal to or higher in importance than planning, communicating, motivating, and decision making.12

As mentioned, however, confl ict need not be dysfunctional. Confl ict that has benefi - cial results for both the organization and the individual is considered functional confl ict.13 An organization without functional confl ict frequently lacks the energy and ideas to create effective innovation. Indeed, to encourage functional confl ict in groups, some managers have implemented a formal dialectical-inquiry or devil’s advocacy approach (described in

confl ict A process in which one party perceives that its interests are being opposed or negatively affected by another party.

dysfunctional confl ict Confl ict that is detrimental to organizational goals and objectives.

functional confl ict Confl ict that is benefi cial to organizational goals and objectives.

EXHIBIT 12-1 Effects of Confl ict

Effects on Individuals Effects on Behavior Effects on Interpersonal Relationships

• Anger • Reduced motivation and productivity • Distrust • Hostility • Avoidance of other party • Misunderstandings • Frustration • Emotional venting • Inability to see other’s perspective • Stress • Threats • Questioning of other’s intentions • Guilt • Aggression (psychological or physical) • More negative attitudes toward others • Low job satisfaction • Quitting • Changes in the amount of power • Embarrassment • Absenteeism • Changes in the quality of communication • Biased perceptions • Changes in the amount of communication • Stereotyped thinking • Increased commitment to one’s perspective • Demonizing others

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440 Chapter 12 Confl ict, Negotiation, Power, and Politics

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.14

By stimulating energy and debate, confl ict can have a number of functional conse- quences for organizations, including the following:

• Facilitation of change • Improved problem solving or decision making • Enhanced morale and cohesion within a group (based on confl ict with other

groups) • More spontaneity in communication • Stimulation of creativity and, therefore, productivity15

Types of Confl ict Three types of confl ict occur in the workplace: personal confl ict, substantive confl ict, and procedural confl ict.16 As shown in Exhibit 12-2, unresolved personal confl ict and proce- dural confl ict tend to be dysfunctional, but ongoing or periodic substantive confl ict can prove constructive.

As mentioned in Chapter 11, personal confl ict refers to confl ict that arises out of personal and relationship differences between people—differing values, personal goals, personalities, and the like. Individuals involved in personal confl ict often report dislik- ing 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.17 Personal confl ict is likely to result in poor performance.18 This form of confl ict creates distrust, misunderstanding, and suspicion and reduces goodwill.19 As a result, associates have trouble focusing their attention fully on their job responsibilities and fi nd it diffi cult to work together toward organizationally relevant goals.

personal confl ict Confl ict that arises out of personal differences between people, such as differing values, personal goals, and personalities.

High

Low

Low Degree of Conflict

High

Substantive Conflict

Personal Conflict Procedural Conflict

T a s k P

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Exhibit 12-2 The Effects of Different Types of Confl ict on Task Per- formance

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Causes of Confl ict 441

The second type of confl ict, substantive confl ict, oc- curs over work content, tasks, and task goals.20 In essence, differing opinions exist for task-related issues. One exam- ple of substantive confl ict relates to an event described as the “Great Petunia War.”21 Two types of military retailers sell 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 fl owers. The battle soon escalated to include cooking oil, fruits and vegetables, and other types of food. These retailers were in confl ict over their work goals. The confl ict became so heated that two generals had to get involved because the confl ict was threatening a proposal to reduce costs by inte- grating the operations of both retailers in the same facility on some bases. Substantive confl icts do not have to result in poor performance, if man- aged correctly.22 Moderate levels of substantive confl ict can actually increase performance. Even somewhat higher levels might lead to creative, positive outcomes if collaborative problem solving is emphasized. We discuss these issues later in this chapter.

The third type of confl ict, procedural confl ict, concerns how work should be com- pleted.23 Procedural confl ict 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 confl ict has been found to negatively affect performance. If individuals cannot decide who should be re- sponsible 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.24

Causes of Confl ict Confl ict within organizations can be caused by many factors, which are frequently inter- related. To manage confl ict effectively, managers should understand the causes of confl ict and be able to diagnose them. Some of the more common causes are structural factors, communication factors, cognitive factors, individual characteristics, and the history of relations between the parties.

Structural Factors Among the structural factors that can lead to confl ict are increased specialization, interde- pendency among parties, centralization versus decentralization, and physical layout.

Increased Specialization As organizations become larger and more diverse, they require more specialization for ef- fective operation. For example, smaller organizations may have general human resource managers who perform most or all of the Human Resource Management functions, but larger organizations frequently have specialists for employment, labor relations, train- ing, compensation, and affi rmative action. This situation represents specialization within one function. Organizations also add new functional areas as they serve a more diverse public. Dividing up the work in this manner is referred to as differentiation. Effective

substantive confl ict Confl ict that involves work content, tasks, and task goals.

procedural confl ict Confl ict that arises over how work should be completed.

©Libby Welch/Alamy

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442 Chapter 12 Confl ict, Negotiation, Power, and Politics

organizations become more differentiated as they grow larger or as their external environ- ment becomes more complex.25

Increasing specialization has many positive benefi ts, but it also creates a greater po- tential for confl ict. Specialists frequently view issues from different perspectives. They also often differ with regard to time perspectives and goals. For example, within a human resource unit the training specialists may have different perspectives relative to the com- pensation specialists. Also, a research and development department often operates within a long-term time frame because developing a product and preparing it for manufacture often require several years. However, a production department operates within a much shorter time frame, perhaps a few weeks (the time required to produce the products for a given order). Confl ict can result when the research and development department is late in developing and testing product prototypes, thereby creating scheduling delays for the production department.

Interdependency In most organizations, work must be coordinated between/among units and between/ among individuals inside those units. The more interdependent units or individuals are, the more the potential for confl ict exists. A good example of interdependence can be found within state governments. Many state employees work under what is referred to as a merit system. This system is designed to alleviate political patronage; employment is based on a person’s merit. A Human Resource Management agency based on the merit system is used to screen applicants for state employment and to maintain lists of those who are eligible for certain jobs within state government. When a state agency has a job opening, it must request a list of eligible applicants from the merit system. The state agency, then, depends on the merit system, and the merit system exists to serve state agencies. If the merit system is slow in responding to a request, confl ict can occur.

Interdependency can result from limited resources or from required coordination in the timing and sequencing of activities. All organizations have limited resources and at- tempt to fi nd the most effi cient way to divide the resources and accomplish tasks. For example, an organization orders new computers for many of its associates. However, be- fore the associates can use the computers, the company computer technician must hook them up. If there is only one technician and each job takes an hour, competition will arise among associates for the technician’s time. One study found that competition for limited resources often leads to dysfunctional confl ict. In this case, such competition caused units to distort and suppress information needed by other units.26

Centralization Versus Decentralization Both centralization and decentralization of authority can cause confl ict, but each causes a different form of confl ict. At the level of the overall organization, centralized authority means that one individual makes decisions for all units or that one higher unit makes deci- sions for all other units. Centralization can lessen confl ict between units because all units are more likely to share the same goals and perspectives in a centralized system. However, confl ict 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.

For example, many organizations have centralized recruiting; that is, the human re- source department recruits associates for jobs in all departments. Centralized recruiting

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Causes of Confl ict 443

has many advantages for the organization. It ensures that Equal Employment Opportu- nity Commission rules are followed, and it can save the organization money by avoiding duplication of effort.27 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, confl ict 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 confl ict between superiors and subordinates within a unit, because subordinates have more control over their work situations, it also creates the potential for more confl ict between units because decisions made by one unit may confl ict with decisions made by another. Furthermore, these decisions may refl ect biased perceptions associated with the separate units.

Physical Layout The physical layout of work environments can produce confl ict through several mecha- nisms. 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 confl ict. Confl ict can also arise when associates must work too closely together.28 Associates commonly 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).29 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, confl ict can arise. Confl ict 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 confl ict.30 In the Experiencing Organizational Behavior feature, Herman Miller’s approach to physical layout for teamwork is discussed. Their ideas offer substantial benefi ts.

Communication As discussed in Chapter 9, a common cause of confl ict is poor communication, which can lead to misunderstandings and allow barriers to be erected.31 Probably the easiest way to prevent confl ict is to ensure good communication. One of the authors observed confl ict 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, misunderstandings occurred and were never resolved. There were frequent heated argu- ments in meetings. This hostility extended to their respective departments, and problems of coordination became evident. The confl ict became so bad that the chief executive of- fi cer asked one of the vice presidents to resign.

Both too little and too much communication can lead to confl ict.32 On the one hand, when there is too little communication, associates do not know enough about each other’s intentions, goals, or plans. Coordination becomes diffi cult, and misunderstand- ings are more likely to occur, which can result in confl ict. On the other hand, too much

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444 Chapter 12 Confl ict, Negotiation, Power, and Politics

EXPERIENCING ORGANIZATIONAL BEHAVIOR

Herman Miller, Inc. was voted onto Fortune maga-zine’s list of most admired companies in 2009, for the 21st time in the past 23 years. The company, which designs furniture, primarily for the workplace, and provides consult- ing and research services for offi ce design, consistently wins awards for being a great place to work. Her- man Miller, founded in 1923 by D.J. DePree, is one of the largest offi ce furniture companies in the world and had sales of $1.63 billion in its most recent fi scal year. Thus, the company itself serves as its own best advertisement for the products and services it sells. Overall, its purpose is quite simple: “To Design and Build a Better World.”

Part of its foundation for provid- ing great work environments involves fostering teamwork through the physi- cal design of the company’s offi ces. The company has made the following suggestions for arranging an area that is conducive to teamwork:

First it is important to delineate boundaries, so that everyone has their own private space over which they feel ownership. At the same time, associates should always be able to see each other, which makes for easier collaboration. Next, a collaborative workspace

should be created in a quiet secluded space. Holding team meetings in more public, central spaces, allows “outsid- ers” to intrude on the team’s meeting. It is also important that team mem- bers be provided with furniture they can arrange themselves. This allows the team to reconfi gure itself to suit the task. For example, when one person on the team is present- ing information to the others, that would require a different furniture arrangement than if everyone were working collectively on the same document. Finally, it is impor- tant for team members to create ways to signal each other that they are unavailable and should not be disturbed.

Herman Miller follows these suggestions in the design of its own workspaces, particularly those in which creative teams are working. However, the design team is quick to point out that simply arranging the physical layout of the offi ce space is not enough to support teamwork, al- though it greatly facilitates it. Rather, the company must also have a culture, management system, and reward sys- tem that fosters positive personal and

task relationships. Herman Miller in- corporates these types of elements in several ways. For example, the com- pany has an employee-participation and profi t-sharing plan. To comple- ment this plan, all employees are taught during orientation about how to link their team’s performance to the profi ts of the company.

Looking to the future, the com- pany believes that balancing more ef- fectively the needs for interaction and solitude will depend on advances in cognitive science. New developments connecting cognitive processing and the design of the work environment are likely to better identify factors that contribute to distraction. These developments are also likely to yield more sophisticated aids and tactics for cognitive processing in the work place. Clearly, Herman Miller is think- ing ahead.

Herman Miller, Designing for Teamwork

Sources: Herman Miller. 2010. “About Us: Overview,” at http://www.hermanmiller.com/About-Us/Overview; Herman Miller. 2010. “About Us: For Our Investors,” http://www.hermanmiller.com/About-Us/For-Our-Investors; Herman Miller. 2008. “Making Room for Collaboration,” at http://www.hermanmiller.com/MarketFacingTech/hmc/research_summaries/ pdfs/wp_Collaboration.pdf; Herman Miller. 2007. “Making Teamwork Work,” at http://www.hermanmiller.com; J.C. Sarros, B.K. Cooper, & J.C. Santora. 2007, May–June. “The Character of Leadership,” Ivey Business Journal, at http:// www.iveybusinessjournal.com/article.asp?intArticle_ID=689.

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Causes of Confl ict 445

communication can also result in information overload and misunderstandings that cause confl ict. Other factors leading to poor communication are discussed in Chapter 9.

Cognitive Factors Certain beliefs and attitudes can lead to confl ict. Two such cognitive factors involve differ- ing 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 scientists, accountants, or attorneys) and managers. Professional associates often perceive themselves as being loyal to their professions and defi ne their careers as extending beyond a particular organization. In so doing, they focus on those activities valued by the profes- sion, which the management of the organization does not necessarily value. This can lead to lower organizational loyalty and potentially to confl ict between these associates and management. If the differences in expectations are great and confl ict ensues, the associates may even leave the organization.33 Thus, managers must be aware of this potential prob- lem 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 confl ict. One per- son may perceive that another has extremely high goals and that these goals will interfere with his own goal attainment.34 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 his work or sabotage his performance to “beat the competition.” In general, perceptions that result in confl ict include the perception that the other party’s intentions are harmful, violate justice norms, are dishonest, or are counter to one’s own intentions.35

Individual Characteristics Individual characteristics that may lead to confl ict include personality factors, differences in the value placed on confl ict, and differences in goals.

Personality The Type A personality trait has been linked to increased confl ict. Recall from Chapter 7 that people with Type A personalities are competitive, aggressive, and impatient.36 One study found that managers with Type A personalities reported more confl ict with subor- dinates.37 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 infl uence how people experience and react to confl ict is dispositional trust. People who are low in trust are less likely to coop- erate with others38 and less likely to try to fi nd mutually benefi cial solutions when confl ict arises.39 When people are high in trust, they are more likely to concede to another party during confl icts, especially when it appears that the other party is upset or disappointed.40 High-trust individuals are more likely than others to become vulnerable because they have positive expectations about the motives of others.41

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446 Chapter 12 Confl ict, Negotiation, Power, and Politics

Differences in personality across people can also facilitate confl ict. People high in conscientiousness 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 confl ict. Note that it is not the degree of conscientiousness per se that leads to confl ict here; it is the difference in this trait between two people who must work together.

Differences Across People in the Perceived Value of Confl ict People vary in the degree to which they value confl ict. Some people think confl ict is necessary and helpful, whereas others avoid it at all costs. There are important cultural differences as well in the way people view confl ict.42 People in Western cultures tend to view confl ict as an inevitable and sometimes benefi cial aspect of life. Those in some Asian cultures (such as Chinese) believe that confl ict is bad and should be avoided.43 These value differences make it more diffi cult to resolve confl icts when the parties are from different cultures. Value differences are most likely to get in the way of confl ict resolution when the parties have a high need for closure.44 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 mak- ing. 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 confl ict and maintaining harmony.

Goals By defi nition, when individuals have competing or contrary goals, they often engage in confl ict. In addition, certain aspects of individual goals make confl ict more likely.45 As- sociates with lofty goals, rigid goals, or competitive goals are more likely to experience confl ict, 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 qualifi ed candidates are on the eligible-for-hire list and that all applicants are given a fair chance. A state agency wants qualifi ed applicants for a job opening, but it also needs the position fi lled 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 confl ict. As the difference between the goals of two units becomes greater, the likelihood that confl ict will occur increases. Organizations with structures that align individual and subgroup goals with those of the organization experience less confl ict.46

History Previous relationships between two parties can infl uence the likelihood of confl ict 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.47 When a threat is perceived, individuals frequently

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Confl ict Escalation and Outcomes 447

attempt to deal with it by becoming more rigid, exerting more control over deviant group members and ideas, and restricting the fl ow of communication.48 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 confl ict are greater.49

Previous Interactions Individuals who have experienced confl ict in the past are more likely to experience it in the future.50 Previous confl ict can infl uence the probability of future confl ict in several ways. First, the parties often engage in the same confl ict-inducing behaviors. Second, the parties likely distrust one another. Third, they may expect confl ict, and this expectation may become a self-fulfi lling prophecy. Think of the old story of the warring Hatfi eld and McCoy families. These two families had been fi ghting so long that younger members of each family did not know what had caused the initial confl ict. All they had learned was to engage in confl ict with the other family.

Later in the chapter we discuss the negotiation process, which is an illustration of how associates and managers attempt to resolve confl ict. Negotiation situations are infl uenced by the negotiators’ previous interactions. Research has shown that negotiators’ history of negotiation in terms of the quality of deals they arranged infl uences how they negotiate in other situations—even if they are negotiating with a different person.51 Negotiators who have a history of not being able to reach a satisfactory conclusion during previous nego- tiations are much more likely to reach unfavorable solutions in future negotiations than those who have had a successful negotiation history.

Confl ict Escalation and Outcomes As we have just seen, confl ict has many causes, and they are often interrelated. For ex- ample, structural factors such as specialization are related to differences in goals and per- ceptions. The physical environment can cause confl ict because it can interfere with com- munication. However a confl ict begins, though, there are only a certain number of ways in which it can end.

Fortunately, most cases of confl ict are resolved, although not necessarily in a manner satisfactory to both parties or to the organization (as in the earlier example, where two vice presidents were in confl ict and one was fi red by the CEO). In this section, we discuss confl ict escalation and then focus on confl ict outcomes.

Confl ict Escalation Confl ict escalation is the process whereby a confl ict intensifi es over time. Escalation is characterized 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 confl ict. 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.52

Many reasons have been proposed for confl ict escalation. Some experts feel that esca- lation is inevitable unless direct measures are taken to resolve the confl ict.53 Others believe

confl ict escalation The process whereby a confl ict grows increasingly worse over time.

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448 Chapter 12 Confl ict, Negotiation, Power, and Politics

that confl icts 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.54

• The parties have a history of antagonism.55

• The parties have insecure self-images.56

• Status differences between the parties are uncertain.57

• The parties have informal workplace ties to one another.58

• The parties do not identify with one another.59

• One or both parties have the goal of escalating the confl ict in order to beat the other party.60

Confl ict escalation might involve overt expressions of workplace 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.

Confl ict Outcomes There are fi ve ways in which confl ict can end in terms of how the outcome satisfi es each party’s concerns, interests, or wishes: lose–lose, win–lose, lose–win, compromise, and win–win.

Lose–Lose In this confl ict outcome, neither party gets what was initially desired. In aggression situ- ations, 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 many negative consequences beyond that.

Win–Lose or Lose–Win In either of these outcome scenarios, one party’s concerns are satisfi ed, whereas the other party’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 diffi cult to avoid, however. When confl icts involve “zero-sum,” or distributive, issues, one party can gain only at the expense of the other. This can cause each party to at- tempt 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 ob- tains. When United Airlines fought its unions following the 9/11 attacks on New York, distributive issues were at the heart of the confl ict.61 Each dollar obtained by the unions for salaries and pension benefi ts represented 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

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Confl ict Escalation and Outcomes 449

EXPERIENCING ORGANIZATIONAL BEHAVIOR

On January 12, 2010, a dis-gruntled ex-employee of an Atlanta-area Penske truck rental facility visited his former em- ployer. He arrived at the start-time of his former shift wearing camoufl age clothing. According to police reports, the ex-employee then entered the work site and began shooting. Two individuals were killed and several others were critically injured, includ- ing the former supervisor of the al- leged assailant.

On January 7, 2010, an em- ployee of ABB’s St. Louis–area trans- former plant arrived at work with more than his lunch pail. He also had an assault rifl e, two shotguns, and two handguns. He proceeded to kill three co-workers, seriously wound fi ve others, and kill himself. The indi- vidual had been a party to a lawsuit related to the retirement plan.

In an offi ce situation, a disagree- ment erupted. Soon, one party had the other pinned against a wall with punch after punch being delivered to the individual’s face. Blood was everywhere. In another situation, an unhappy subordinate led his supervi- sor to a vault under false pretenses. He then locked the supervisor in the vault and turned the lights off. In an- other instance, a disagreement arose between two supervisors over who would deliver layoff notices. One

supervisor threw a large, fi lled enve- lope at the other.

The events discussed above rep- resent workplace aggression. This type of aggression involves behavior by one or more individuals that is designed to physically or psychologi- cally harm a worker or multiple work- ers in a workplace setting. Including murders involving co-workers (or for- mer co-workers) as well as murders committed by customers, clients, and the general public, several hundred to over one thousand workplace mur- ders occur in any given year in the United States. Other physical forms of aggression such as fi ghts or shoving affect millions each year. Milder acts of aggression, such as psychological bullying, affect even more. In one sur- vey, the U.S. Bureau of Labor Statis- tics reported that about 50 percent of establishments with more than 1,000 employees had experienced some form of noteworthy workplace ag- gression in the previous 12-month pe- riod, with roughly 34 percent of the establishments having experienced co-worker–on–co-worker aggression.

The stereotypical portrait of workplace aggressors involves young white males who have poor self- esteem and/or aggressive personali- ties, perhaps coupled with substance abuse issues. This stereotype seems to be both right and wrong. Males with

self-esteem issues and/or aggressive personalities (or anger as a general trait) do seem to be somewhat more likely to commit acts of workplace aggression. Abusers of alcohol also are more likely to commit such acts. On the other hand, individuals who are young and/or white do not ap- pear to carry a higher likelihood of aggression in the workplace. Beyond demographic and personality factors, lack of justice in the organization and constraints on task performance are predictive of aggression.

In addition to the human suffer- ing, the fi nancial costs of workplace aggression are staggering (billions of dollars each year). To reduce these costs, many tactics have been sug- gested. The president of PCM Con- sultants, Chuck Mannila, suggests the following actions, with a particular emphasis on reducing or avoiding the most severe forms of aggression:

• Adopt a zero-tolerance policy • Implement a formal workplace pre-

vention program • Train managers and associates to

address the issues • Take every threat seriously • Immediately investigate all threats • Implement tighter security • Provide access to employee assis-

tance programs

Workplace Aggression

Sources: J. Barling, K.E. Dupre, & E.K. Kelloway. 2009. “Predicting Workplace Aggression and Violence,” Annual Review of Psychology, 60:671–692; Bureau of Labor Statistics. 2005. “Survey of Workplace Prevention, 2005,” at http://www.bls.gov/iif/oshwc/osnr0026.pdf; A. Gomstyn. 2009. “Workplace Horror Stories: Yale and Beyond,” ABC News.com, Sept. 21, at http://abcnews.go.com/Business/workplace-horror-stories-yale/story?id=8615343; C. Mannila. 2008. “How to Avoid Becoming a Workplace Violence Statistic,” T � D, 62(7): 60–66; K. Nolan, V. Dagher. 2010. “Workplace Shooting in St. Louis Leaves Four Dead, Wall Street Journal, Jan. 8, p. A.5; K. Rowson. 2010. “Police Sources: Penske Gunman Was Fired,” 11Alive.com, Jan. 13, at http://www.11alive.com/rss/rss_story. aspx?storyid=139675; D. Yusko. 2010. “Offi cial Drops Claim Over Tossed Envelope,” Timesunion.com, Jan. 16, at http://www.timesunion.com/ASPStories/Story.asp?StoryID=889607.

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http://www.bls.gov/iif/oshwc/osnr0026.pdf

http://abcnews.go.com/Business/workplace-horror-stories-yale/story?id=8615343

http://www.11alive.com/rss/rss_story.aspx?storyid=139675

http://www.timesunion.com/ASPStories/Story.asp?StoryID=889607

http://www.11alive.com/rss/rss_story.aspx?storyid=139675

450 Chapter 12 Confl ict, Negotiation, Power, and Politics

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 confl ict.

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 specifi c productivity incentives. Increases in productivity would be accompanied by cash bonuses, thus increasing union members’ pay to the levels they desired in the fi rst place. Manage- ment would win because productivity (and consequently profi t) would be expected to increase, in turn covering the higher pay. Exhibit 12-3 depicts the fi ve confl ict outcomes.

Responses to Confl ict People respond to confl ict in different ways. One person may try to win at all costs, whereas another person may try to ensure that both her own concerns and those of the other party are met. There are fi ve potential responses to confl ict, as well as situations in which each response is appropriate.62 Each response is described in terms of assertiveness and cooperativeness.63 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 will take advantage

D e g

re e o

f S

a ti

s fa

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o n

o f

P a rt

y A

's C

o n

c e rn

High

Low Low High

Win–Lose

Lose–Lose Lose–Win

Win–Win

Compromise

Degree of Satisfaction of Party B's Concern

Exhibit 12-3 Possible Confl ict Outcomes

Source: Adapted from K.W. Thomas. 1992. “Confl ict and Negotiation Processes.” In M.D. Dunnette, & L.M. Hough (Eds.), Handbook of Industrial and Organizational Psychology, Vol. 3 Palo Alto, CA: Consulting Psychologists Press, pp. 651–717.

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Negotiation 451

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 confl ict response in dealing with counterfeiters by establishing a worldwide network to investigate and take legal action against any organization counterfeiting its goods.64

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, an associate may agree to work on the holiday so that a co-worker can have the holiday off, in order to avoid confl ict. 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 her 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 confl ict by refusing to do business in countries that allow bribery of public offi cials.65

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.66 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 confl ict usually requires negotiations between the confl icting 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. Fur- thermore, the parties are committed to achieving a peaceful means of dispute resolution.67

In the resolution of confl ict, the parties often engage in bargaining that requires them to engage in several reactions to confl ict such as compromise, collaboration, accommoda- tion, or competition. Although each party usually approaches negotiations with the intent to gain the most benefi ts 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 benefi t of the organization to achieve a negotiated agreement whereby both or all parties gain benefi t and agree to abide

negotiation A process through which parties with different preferences and interests attempt to agree on a solution.

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452 Chapter 12 Confl ict, Negotiation, Power, and Politics

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 facilitates 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 re- quire tact and strong interpersonal skills to achieve negotiated agreement in a confl ict situ- ation. The skills and means of negotiation depend on the negotiator’s bargaining strategy.

Negotiation Strategies Negotiators typically emphasize one of two strategies.68 The distributive bargaining strategy involves a competing, win–lose approach. It tends to be used when one party’s goals are in direct confl ict with the goals of another party. For example, if a buyer and a supplier are negotiating 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 attrac- tive 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 re- lationships 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 infl uencing the attitudes and relationships of the negotiating par- ties are referred to as attitudinal structuring.69 Examples of tactics to use for attitudinal structuring are also presented in Exhibit 12-4.

The Negotiation Process There are generally four stages that a negotiation process should follow:70

1. Preparation. Prior to any negotiation, each party outlines the specifi c goals he or she hopes to achieve. At this point, negotiators must determine their best alternative to a negotiated agreement (BATNA). This is 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?

distributive bargaining A strategy that: (1) involves a competing, win–lose approach and (2) tends to be used when one party’s goals are in direct confl ict with the goals of another party.

integrative bargaining A strategy that: (1) involves a collaborative, win–win approach and (2) tends to be used when the nature of the problem permits a solution that is attractive to both parties.

attitudinal structuring Activities aimed at infl uencing the attitudes and relationships of the negotiating parties.

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Negotiation 453

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 negotiations. Also, agreements should be made about confi dentiality, the sharing of information, and how agreements will be approved. At this point, who will be present during the negotiation process should be clarifi ed.

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 fi nal agreement. Final

EXHIBIT 12-4 Negotiation Tactics

Distributive Tactics • Convince the other that breaking off negotiations would be costly for him/her/it. • Convince the other that you feel very committed to reaching your target outcome. • Prevent the other from making a fi rm commitment to an outcome close to her target. • Allow the other to abandon his position without loss of face or other cost. • Convince the other that your own target outcome is fair. • Convince the other that her target outcome is unfair. • Convince the other that important third parties favor your own target outcome. • Use nonhostile humor to build positive affect. • Distract the other to impair his ability to concentrate.

Integrative Tactics • Show the other that his/her/its concerns are important to you. • Show the other that your target outcome is too important to compromise. • Show the other that a win–win outcome is a possibility. • Demonstrate that you are fl exible with respect to various solutions. • Insist on fair criteria for deciding among possible solutions. • Make collaborative norms salient. • Minimize use of behaviors or tactics that would cause negative emotions. • Provide an emotionally supportive climate. • Shield the other from emotional distractions.

Attitudinal Structuring Tactics • Use language similar to the other party’s. • Dissociate oneself from others not liked by the opponent. • Associate oneself with others the opponent likes. • Reward opponent’s behavior. • Express appreciation. • Remind opponent of role obligations. • Assist opponent in working through negative attitudes. • Return favors. • Fight the antagonism, not the antagonist. Sources: K.W. Thomas. 1992. “Confl ict and Negotiation Processes,” in M.D. Dunnette & L.M. Hough (Eds.), Handbook of industrial and organizational psychology, Vol. 3 Palo Alto, CA: Consulting Psychologists Press, pp. 651–717; R.E. Walton, & R.B. McKersie. 1965. A Behavioral Theory of Labor Negotiations New York: McGraw-Hill.

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454 Chapter 12 Confl ict, Negotiation, Power, and Politics

MANAGERIAL ADVICE

A Costly Confl ict Resolution: The Importance of Negotiation

ya lty

-F re

e/ C

or bi

Raise Rob’s Salary Jane’s Salary

Year 1 — $40,000.00 $42,500.00 Year 2 5% 42,000.00 44,625.00 Year 3 10% 46,200.00 49,087.50 Year 4 10% 50,820.00 53,996.25 Year 5 10% 55,902.00 59,395.88

Jane and Rob are very happy today. Both were offered jobs at ABSCO in the manage- ment trainee program. Because Jane and Rob had the same qualifi cations, ABSCO offered them the same sal- ary of $40,000 per year. This was Rob’s dream job, so he accepted right away. This was also Jane’s dream job; however, she realized that she would be working in an area where the cost of living was high, and when this was taken into consideration, she would be making less than many of her col- leagues in similar positions. So Jane negotiated her salary up to $42,500.

At ABSCO, pay increases are calculated as a percentage of salary. As can be seen in the chart, given the pay-raise schedule, Jane’s initial increase over Rob of $2,500 will

grow to nearly $3,500 at the end of a fi ve-year period. Over that time, Jane will make almost $14,700 more than Rob. Should they both stay at ABSCO, Jane’s salary will continue to grow faster than Rob’s, even if they receive the same percentage increases. Thus, Rob’s failure to negotiate a higher sal- ary will mean that he is likely to re- ceive less compensation than Jane for the rest of his career at ABSCO.

Salary negotiations are a classic case of confl ict. The hiring organiza- tion wants to minimize its costs (lower compensation), whereas the applicant wants to earn as much as possible. This involves a distributive issue, as described earlier, in which two par- ties are contesting a limited resource. The confl ict must be resolved. When you negotiate your salary, how can

you participate effectively in this reso- lution? Advice abounds for how to ne- gotiate your salary, but most experts agree on the fundamentals. Below are some commonly prescribed steps that you can take:

1. Do your homework. Know what you are worth on the job market and what the industry standards are for the position you are being offered. Numerous sources of in- formation exist to help you with this task, including:

• Salary survey information at your university’s career services center.

• Job listings that indicate sala- ries for similar positions.

agreements should be formalized and it should be made clear what each party’s responsibility is in implementing the agreement.

The process outlined above appears to be quite formal. However, it should be followed in any form of negotiation, ranging from negotiating one’s pay increase to negotiating major merger and acquisition deals. In the Managerial Advice feature, we explore a com- mon type of negotiation scenario—that of negotiating one’s salary when taking a new job.

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Negotiation 455

• Online salary surveys such as those found at JobStar.

• Friends, other students, and net- working contacts.

• Websites that allow you to calculate the cost of living for various parts of the country; $40,000 goes a lot further in Houston than it does in New York City.

2. Determine your best alternative to a negotiated agreement (BATNA). This is the lowest offer you will consider; you will reject any offer lower than your BATNA. Your BATNA is a dynamic cutoff. You should always strive to increase it. One way to do this during salary negotiations is to have alternative job offers. The best current offer becomes your BATNA.

3. Know what salary you want— your target salary. Your BATNA is your least acceptable outcome. Your target salary is your preferred outcome.

4. Never make vague counteroffers, such as “I need more money.” Be prepared to offer a specifi c salary range and a justifi cation for the salary range. This is where your homework will come in handy. Ensure that the range you specify to the company does not limit your possibilities for negotiation. For example, if you specify your BATNA (say, $30,000) as the low end of your range, you may not be able to get more than your mini- mal acceptable amount. This does not mean you should communicate an unrealistically high fi gure, how- ever. Suggesting unrealistically high fi gures leaves a bad impres- sion with the organization.

5. Although you should not be vague, neither should you say, “I need X amount of dollars.” This indicates that you are unwilling to negoti- ate. On the one hand, the organi- zation can say no and withdraw the offer. On the other hand, if the

organization accepts immedi- ately, you may experience “win- ner’s remorse,” whereby you feel that your suggested amount was too low.

6. Be realistic. Often, when organi- zations offer salaries for entry- level positions, they leave little room for negotiation. The higher you go in the organization, the more room there usually is for ne- gotiation.

7. Be polite and direct during nego- tiations.

8. Never infl ate your past salary or experience. Be honest in all as- pects of the negotiation.

9. Remember to calculate benefi ts as part of the offer package. One offer may have a lower salary fi gure but a much more generous retirement plan. Again, do your homework.

10. Do not play “hard to get” when you have little bargaining power.

Sources: D. Gordon. 2004. “Suggested Salary Negotiation Guidelines for Recent College Graduates,” at http://www. adguide.com/pages/articles/article257.htm; C. Krannich & R.L. Krannich. 2004. “30 Salary Negotiation Mistakes to Avoid,” at http://www.washingtonpost.com/wl/jobs/Content?Content=/Career_Advic…/impactadvice8.html; L.L. Thompson. 2008. The Mind and Heart of the Negotiator, 4th ed. Upper Saddle River, NJ: Prentice Hall.

As suggested in the Managerial Advice feature, the natural confl ict over salary and its resolution are important to both the organization and the individual involved. Jane negoti- ated a higher salary before accepting the job offer, but Rob did not do so. Therefore, even though Rob and Jane had equal qualifi cations, they were compensated differently. Fur- thermore, 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,

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456 Chapter 12 Confl ict, Negotiation, Power, and Politics

although the organization may save almost $14,700 over a fi ve-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 equitably. Consequently, he might search for a job with another organization. Unfortunately, if it leads to confl ict between Rob and the organiza- tion, 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 infl uence others to obtain outcomes that one desires. Thus, a major issue that underlies all negotiations as well as confl ict situations is power.71 When two parties try to infl uence each other to attempt to maximize their own outcomes or attain a target outcome, the issue of power can be critical to resolving the confl ict.

Power The concept of power is one of the most pervasive in the study of organizational behav- ior.72 Power is generally defi ned as the ability to achieve desired outcomes.73 Power can also be thought of as the ability of one person to get another person to do something.74 Thus, any time someone persuades another person to do something, he or she is exercis- ing power. For example, a coach who requires players to do pushups is exercising power. A secretary who has the boss change her schedule to accommodate an associate is also exercising power.

Often, power is thought to be negative. However, little would be accomplished if power were not exercised on a regular basis.75 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 con- trast, a manager who exercises power to promote his 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 infl uence university policy. Powerful units such as academic departments that bring in a great deal of ex- ternal money can also infl uence university policy, as can the alumni association. It is generally easy to identify people in an organization or social unit who have power.76 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.77 It includes fi ve categories: legitimate power (formal authority), reward power, coercive power, expert power, and referent power.

power The ability to achieve desired outcomes.

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Legitimate Power People derive legitimate power (or formal authority) from the positions they hold in the organization. Legitimate power is narrow in scope because it can be applied only to acts that are defi ned 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 fi rst 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 fi red many U.S. attorneys, he came under fi re because he was viewed as not having the legitimate authority to do so and his motives were questioned.78

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 sup- ply 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 lim- ited to formal sources, such as the supervisor’s power to give raises; it can also come from informal sources. For example, a secretary 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 gos- sip about them.79 Coercive power is limited by the fact that those being infl uenced must be highly dependent on the person wielding the power.80

Expert Power Expert power arises from special expertise or technical knowledge that is valuable to oth- ers or the organization. Expert power is limited by the degree to which this expertise is ir- replaceable. 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 associated with them. For example, it has been found that executives who have prestigious reputations among their colleagues and shareholders have greater infl uence on strategic decision-making processes in their fi rms.81 Referent power is the most resilient type of power because it is diffi cult to lose once it has been achieved. In addition, referent power can be used to infl uence a wide range of behaviors.82

legitimate power Power derived from position; also known as formal authority.

reward power Power resulting from the ability to provide others with desired outcomes.

coercive power Power resulting from the ability to punish others.

expert power Power resulting from special expertise or technical knowledge

referent power Power resulting from others’ desire to identify with the referent.

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458 Chapter 12 Confl ict, Negotiation, Power, and Politics

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 someone who drew power from a variety of sources.83 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 dra- matically. In later years, Disney experienced a number of complex issues: hostile takeover threats; the acquisition of Miramax Studios and Capital Cities/ABC; confl ict 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 strate- gies 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 deci- sions while at the same time having the authority to evaluate those decisions. He also had the power to hire and fi re 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 fi lling 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 members, 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 important 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 fi lled them in, made them my partner, if things didn’t go so well, the likelihood of, ‘I told you so’ and those kind of reactions would not exist.” At the same time, he controlled communication be- tween executives and board members so that any disagreements, important discussions, or decisions had to go through him. When Eisner wanted to fi re Michael Ovitz only months after hiring him, he went through elaborate procedures, talking to board members with- out 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 hiring process that the chief fi nancial offi cer and the cor- porate operations chief would report to Ovitz. However, Ovitz soon learned at a dinner party that both of these men would report to Eisner.

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By March 2004, Disney shareholders had become highly dissatisfi ed. Led by Roy Disney, among others, they participated in a 43 percent no-confi dence 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 in- formation 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, Eisner 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 special concern because Eisner was both chairman and CEO of Disney. Thus, he already had signifi cant legitimate power. Furthermore, his position also gave him reward power throughout the entire company. 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 suggest that he used coercive power as well. He fi red Ovitz but only after conducting a negative campaign with members of the board of directors. He then gave Ovitz an exceptionally large sever- ance 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 stra- tegic problems that an organization faces. This is referred to as the strategic contingencies model of power.84 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) department 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 fi rm’s strategy to produce innova- tions and compete effectively in its industry. Consider the pharmaceutical industry. Pharma- ceutical fi rms must introduce valuable new drugs regularly, especially as their patents on their current drugs expire. Without new drugs, their revenues will decrease, and the fi rms 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 fi rms often have signifi cant power. Essentially, these units control resources that are valuable to the organization.85

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 Air- lines situation discussed earlier in this chapter, management (which controls the fi nancial resources) gained more power by arguing that fi nancial diffi culties 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 slow- downs. The most immediate problem for the organization, then, was to get its fl ights run- ning on schedule again. The strategy of operating fl ights 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

strategic contingencies model of power A model holding that organizational units and people gain power by being able to address the major problems and issues faced by the organization.

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460 Chapter 12 Confl ict, Negotiation, Power, and Politics

power. They can then use that power to require the organization to act in ways that benefi t 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 fi nancial 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.86 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.87 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 infl uence with businesses. There are several reasons for this, including the uncertainties of tougher environmental 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.88 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.89 In contrast, Jack Welch, the former CEO of General Electric, announced 10 years before stepping down that fi nding a successor was the most important job he had to do.90

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.91 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 mak- ing regarding the type of project on which they will work.

Organizational Politics When confl ict is present in organizations, associates are likely to engage in political be- havior. Indeed, politics are a fact of life in most organizations.92 Organizational politics corresponds to behavior that is directed toward furthering one’s own self-interests without concern for the interests or well-being of others.93 The goal of political behavior is to exert infl uence on others. One survey of top-level executives and human resource managers in- dicated that organizational politics are on the rise.94 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 infl uence by acting politically. We now discuss the conditions under which political behavior is more likely to occur.95

Political behavior can occur at several levels. At the individual level, it involves an as- sociate 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

organizational politics Behavior that is directed toward furthering one’s own self-interests without concern for the interests or well-being of others.

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Organizational Politics 461

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 infl uence 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 infl uence congresspersons’ votes on issues important to that organization.

Political tactics can also be aimed at any target. Upward political infl uence refers to in- dividual or group infl uence on those in a superior position, such as their manager. Lateral politics refers to attempts to infl uence targets at the same hierarchical level. Finally, down- ward infl uence refers to attempts to infl uence 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.96 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 benefi cial outcomes. For example, a sales associate who is the number-one seller may tell her boss all the benefi ts 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 CEO who wants to implement a specifi c strategy would consult associates and managers at every relevant organizational level to gain their support for her plan. These consultations, though, may be quite cynical because the CEO 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 fl attering 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 exemplifi ed 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 is 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 offi cial. 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.”

coalition A group whose members act together to actively pursue a common interest.

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462 Chapter 12 Confl ict, Negotiation, Power, and Politics

• Pressure. A pressure tactic involves threats, nagging, or demands as a means of infl uencing 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 fi nancial services fi rm, illus- trate the use of some of these political tactics.97 Over the fi ve-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. Be- cause they collectively owned only 1.1 percent of Morgan Stanley shares, they needed to convince other shareholders that Purcell should go.98 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 passionately 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 profi t, 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”99; 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 com- petitors, and a large shareholder publicly expressed support for the disgruntled former ex- executives. In June of 2005, Purcell resigned.100

Research has examined the issue of who is better or more successful in behaving po- litically. One line of research has found that personality is related to the types of political tactics people are likely to use.101 For example, extraverts are likely to use inspirational appeals and ingratiation, 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 identifi ed an individual difference known as political skill that affects the successful 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.102 People with strong political skills have the following qualities:103

• They fi nd 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 fi t 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 organiza- tion (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 posi- tive, but only if used to achieve the appropriate goals.

political skill The ability to effectively understand others at work and to use this knowledge to enhance one’s own objectives.

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What This Chapter Adds to Your Knowledge Portfolio 463

THE STRATEGIC LENS

Managing confl ict and power are important to the success organizations enjoy. As we learned in the chapter opener, companies such as Kimberly- Clark, Dell, and DuPont have learned to develop useful solutions with envi- ronmental organizations, which not only has had a positive impact on the companies’ performance but will also benefi t society. Most strategic leaders must deal with confl ict while making decisions. Some of this confl ict is func- tional; it produces better decisions because it forces consideration of a broader range of ideas and alterna- tives. Much of the confl ict that occurs in organizations is dysfunctional, however. If the organization’s strat- egy is to be effectively implemented, this confl ict must be resolved, or at least managed. Negotiation is one way to resolve confl ict.

Some confl ict can be resolved through the exercise of power. In ad- dition, people and units that have power because they control critical

contingencies or resources can add a great deal of value to the organi- zation. Most strategic leaders have considerable power, especially legiti- mate power, and their use of power is necessary for the achievement of their organizations’ goals. Yet, they must exercise their power appropriately, or it could produce undesired con- sequences. Michael Eisner exercised his power primarily for his own ben- efi t rather than for the best interests of the organization. By exercising power in this way, he created con- siderable internal politics (e.g., oth- ers vying for infl uence and working in their own best interests) throughout the organization. As a result, Dis- ney’s performance suffered. Similarly, the exercise of political behavior at Morgan Stanley cost the organiza- tion valuable human capital. The use of political tactics often has negative consequences for the organization. However, the attributes of people with political skills are not negative. These skills, such as easily gaining

cooperation from others, can be espe- cially helpful to managers. The skills are negative only if they are used for personal gain at the expense of oth- ers and the organization. They are especially bad when exercised in a negative way by the CEO or other top managers (e.g., at Morgan Stanley) because they tend to have signifi cant effects on the organization.

Critical Thinking Questions

1. Can you describe a situation in which confl ict was functional (i.e., it had positive outcomes)? If so, in what ways was the confl ict func- tional?

2. A strategic leader must use power in many actions that she takes. In what ways can she exercise this power to achieve positive outcomes?

3. How can knowledge of confl ict, negotiations, power, and politics in organizations help you be more successful in your career? Please be specifi c.

What This Chapter Adds to Your Knowledge Portfolio This chapter has explored confl ict, negotiation, power, and politics in organizations. It has covered the nature and types of confl ict, causes of confl ict, outcomes of confl ict, responses to confl ict, and how organizations can manage confl ict. The chapter has also discussed various sources of power. In summary, we have made the following points:

• Confl ict is a process in which one party perceives that its interests are being op- posed or negatively affected by another party. Confl ict can be either functional or dysfunctional for organizational effectiveness. Functional confl ict leads to creativ- ity and positive change. Dysfunctional confl ict detracts from the achievement of organizational goals.

• Confl ict can be classifi ed as personal, substantive, or procedural. Personal confl ict corresponds to relationship issues; substantive confl ict concerns the work that is to be done; and procedural confl ict concerns how work is to be accomplished.

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464 Chapter 12 Confl ict, Negotiation, Power, and Politics

• Causes of confl ict include structural arrange- ments (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).

• Confl ict escalation occurs when the confl ict is not resolved and becomes worse. Possible reso- lution outcomes of confl ict include lose–lose, win–lose/lose–win, compromise, and win–win.

• Parties to a confl ict can adopt one of several responses to the confl ict: competing, accom- modating, avoiding, compromising, or col- laborating. These responses vary in the degree to which they refl ect assertiveness and coop- erativeness on the part of confl icting parties.

• Often negotiations are required to resolve con- fl ict. In some cases, managers act as a third party, using both mediator and, if necessary, ar- bitrator roles to achieve a negotiated settlement.

• Distributive and integrative negotiation strate- gies focus on either winning or reaching a mu- tually benefi cial outcome. Attitudinal restruc- turing focuses on developing positive feelings and relationships between negotiating parties.

• Power is the ability of those who hold it to achieve the outcomes they desire. Noth- ing 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 infl uence 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.

Thinking about Ethics 1. Under what circumstances is it ethically appropriate to use coercive power? When should

managers not use coercive power to deal with problems in organizations?

2. How can a manager know when confl ict is functional? How can confl ict be managed to ensure that it remains functional? Do managers have a responsibility to ensure that confl ict is functional or to eliminate dysfunctional confl ict?

? back to the knowledge objectives 1. Under what circumstances can confl ict be functional?

When is confl ict dysfunctional? Which of the basic types of confl ict are likely to be dysfunctional, and why?

2. Why does confl ict often develop? 3. What is confl ict escalation, and what conditions make

it likely? What are other possible outcomes of confl ict? 4. How do people respond to confl ict, and under what

circumstances is each type of response most effective? 5. What can organizations do to manage confl ict? 6. Describe basic negotiating strategies and the tactics

most likely to accomplish those strategies. 7. Why is the exercise of power necessary for organiza-

tions to operate effectively? What are some of the ways in which people gain power in organizations?

8. Why is political behavior common in organizations? How do people go about carrying out political behav- ior, and what makes them successful at it?

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Building Your Human Capital 465

3. You are chairman of the board and CEO of a major corporation. Is it appropriate for you to select the other board members? Why or why not?

4. If you control resources that are critical to an organization, you have power. Are there circumstances in which it would be acceptable to use that power to garner more resources for your unit (and thus more power)?

5. You have recently hired fi ve new associates in your unit, all of whom have excellent knowledge and skills. Each was offered a beginning annual salary of $100,000. Four of them accepted the salary offered, but one negotiated for $5,000 more. Should you give each of the other associates $5,000 more as well? Over time, such an action would cost your unit and the organization considerable money. If you take no action, what do you expect the long-term consequences to be?

Key Terms confl ict, p. 439 dysfunctional confl ict, p. 439 functional confl ict, p. 439 personal confl ict, p. 440 substantive confl ict, p. 441 procedural confl ict, p. 441 confl ict escalation, p. 447 negotiation, p. 451

distributive bargaining, p. 452

integrative bargaining, p. 452 attitudinal structuring, p. 452 power, p. 456 legitimate power, p. 457 reward power, p. 457 coercive power, p. 457

expert power, p. 457 referent power, p. 457 strategic contingencies model

of power, p. 459 organizational politics,

p. 460 coalition, p. 461 political skill, p. 462

Human Resource Management Applications The Human Resource Management (HRM) function plays an important role in managing confl ict and power in an organization. First, HRM units can develop or obtain selection tools that assist in the identifi cation of individuals who are prone to destructive confl ict and self-interested politics. Such individuals can then be screened out of the selection process, or if hired they can be monitored for dysfunctional behavior.

Second, HRM units can develop or identify external training programs that deliver crucial ne- gotiation skills. External training programs are available from management development fi rms and also from major universities. Northwestern University and Harvard University are two of the lead- ing U.S. providers of negotiation programs.

Third, HRM units can provide mediation and counseling services for severe situations involving dysfunctional personal confl ict. This type of mediation and counseling is diffi cult 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.

building your human capital

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 oth- ers to do something you want them to do. Thus, any time you fi nd yourself in a situation in which you need to get others to do something, you need to exercise power. However, many people are

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466 Chapter 12 Confl ict, Negotiation, Power, and Politics

uncomfortable thinking about power and its use. The next time you fi nd yourself in a situation in which you need to infl uence others, consider the following questions before acting:

1. What are your goals? What are you trying to accomplish? 2. Who will be infl uential in allowing you to achieve your goal? Who is dependent on you for

certain outcomes? 3. How do you think others will feel about what you are trying to do? Do you think there

will be resistance? 4. What are the power bases of those you wish to infl uence? For example, do they have reward

power? Referent power? 5. What are your bases of power and infl uence? What rewards or valued outcomes can you

control? What type of power can you exert to gain more control over the situation?

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 Bellman. Marty was also known for his “fi ghting ways” on and off the fi eld. However, Trudy was more concerned with his winning record.

The fi rst year of Trudy’s and Marty’s tenure, the Bluebirds came in second in the division, showing it was a team to be reck- oned with. Trudy acquired even more big-name players in the free-agent draft. Everyone was predicting a pennant for the Blue- birds in the coming year.

The year began with great expectations. During the fi rst month, the Bluebirds looked unstoppable. At the end of the month, the team was in fi rst place with a record of 20 wins and 7 losses. But then problems began. Rumors of confl ict between players were reported in the sports columns. Russ Thompson, a fi ve-year veteran and starting fi rst 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 offi ce and said, “You guys are not playing baseball up to your abilities. I think you’ve been loafi ng. 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 offi ce, got dressed, and left the ballpark. Later, a few minutes before game time, Marty received a phone call in his offi ce. 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 fi eld to get the game under way.

Discussion Questions 1. Describe the types of confl ict that seem to exist within the

Bluebirds organization. What are the causes? 2. Is the confl ict functional, dysfunctional, or both? Explain. 3. Assume that Trudy has hired you as a consultant to help her

resolve the confl ict. Describe the steps that you would take.

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Team Exercise 467

team exercise

Managing Confl ict The purpose of this exercise is to develop a better understanding of the confl ict-management pro- cess by examining three different confl ict situations.

Procedure 1. With the aid of the instructor, the class will be divided into four- or fi ve-person teams. 2. The teams should read each case and determine:

a. Which confl ict response should be used to manage the confl ict (this may require starting with one style and moving to others as the situation changes).

b. Which negotiation tactics should be used to resolve the confl ict. 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 confl ict response and negotiation tactics

recommended. The information should be recorded on a board or fl ipchart for comparisons. The situations should be discussed one at a time.

5. The instructor will lead a general discussion regarding the application of confl ict responses and negotiation tactics.

This exercise usually requires about 25 minutes for case analyses and another 20 to 30 minutes (depending on the number 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 confl ict with managers of other units. Most of your audits are sup- portive 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 de- partment. He has continually tried to hold back information necessary 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 incentive bonus calculations for execu- tives 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 offi ce and left a message for you not to send your employees down, because he was not going to allow them access to the informa- tion. 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 fl exible in structure and operation. Irene likes to hire only experienced engineers, preferably with division experience in the fi rm. 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 dis- cussed his arrogant attitude with him.

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468 Chapter 12 Confl ict, Negotiation, Power, and Politics

Last week, Robert got into an argument with several engineers from the International Divi- sion with whom he was working 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 department, 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 company’s intranet went down at 9:00 this morning. Steve is not fond of being a member of this committee and re- ally does not care to waste his valuable time listening to Sarah today. (He thinks that Sarah talks too much.)

Steve arrives at Sarah’s offi ce at 1:38 P.M. After glancing at her watch and offering a few harm- less pleasantries, Sarah begins her assessment of the budget committee’s agenda. Although not excit- ing, everything seems to be all right until she mentions how poorly Steve’s unit has been responding to the budgeting department’s requests for information. Steve becomes visibly irritated and tells Sarah that nothing good has ever come out of these committee meetings and that she places entirely too much emphasis on them. Sarah responds by noting that Steve has not followed company policy about preparing budget information. These failures, she reasons, are the causes of his inability to achieve positive results. Having heard this comment, Steve states, in a loud voice, that whoever designed the company’s policy did not know a thing about the budgeting process.

Sarah realizes that she and Steve are in disagreement and that she should try to deal with it. How, she wonders, should she deal with Steve?

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2. Porter & Kramer, The link between competitive advantage and corporate social responsibility.

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7. Collier, J., & Esteban, R. 2007. Corporate social responsibility and employee commitment. Business Ethics, 16 (1): 12–31.

8. Turban, D.B., & Greening, D.W. 1997. Corporate social perfor- mance and organizational attractiveness to perspective employees. Academy of Management Journal, 40: 848–868.

9. Wall, J.A., Jr., & Callister, R.R. 1995. Confl ict and its manage- ment. Journal of Management, 21: 515–558.

10. Bromiley, P. 1990. On the use of fi nance theory in strategic management. In P. Shrivastava and R. Lamb (Eds.), Advances in strategic management (Vol. 6). Greenwich, CT: JAI Press, pp. 71– 98; Nixon, R.D., Hitt, M.A., Lee, H., & Jeong, E. 2004. Mar- ket reactions to announcements of corporate downsizing actions and implementation strategies. Strategic Management Journal, 25: 1121–1129; Orlitzky, Schmidt, & Rynes, Corporate social and fi nancial performance.

11. Porter, & Kramer, The link between competitive advantage and corporate social responsibility.

12. Lippitt, G.L. 1982. Managing confl ict in today’s organizations. Training and Development Journal, 36: 66–72, 74.

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Endnotes 469

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http://www.usatoday.com/money/media/2004-03-03disney-shareholder-meeting_x.htm

http://www.dailynews.com/cda/article/print/0,1674,200%257E20950%257E2554402,00.html

http://www.newyorker.com/talk/content/?011004ta_talk_surowiecki

Endnotes 471

86. Pfeffer, J. 1981. Power in organizations. Marshfi eld, MA: Pitman Publishing.

87. Ibid. 88. Ibid. 89. Surowiecki, J. 2004. Good grooming. The New Yorker, October

4, at http://www.newyorker.com/talk/content/?011004ta_ talk_ surowiecki.

90. Ibid. 91. Pfeffer, Power in organizations. 92. Mintzberg, H. 1985. The organization as political arena. Journal

of Management Studies, 22: 133–154. 93. Kacmar, K.M., & Baron, R.A. 1999. Organizational politics: The

state of the fi eld, links to related processes, and an agenda for future research. In G.R. Ferris (Ed.), Research in personnel and hu- man resource management (Vol. 17). Stamford, CT: JAI Press, pp. 1–39; Zivnuska, S., Kacmar, K.M., Witt, L.A., Carlson, D.S., & Bratton, V.K. 2004. Interactive effects of impression management and organizational politics on job performance. Journal of Organi- zational Behavior, 25: 627–640.

94. Anonymous. 2002. Politics at work: Backstabbing, stolen ideas, scapegoats. Director, 56: 74–80.

95. Poon, J.M.L. 2003. Situational antecedents and outcomes of or- ganizational politics perceptions. Journal of Managerial Psychology, 18: 138–155.

96. Yukl, G., Kim, H., & Falbe, C.M. 1996. Antecedents of infl uence outcomes. Journal of Applied Psychology, 81: 309–317.

97. Popper, M. 2004. Morgan Stanley’s board must end inaction, in- vestor Matrix says. Bloomberg.com, April 21, at www. bloomberg. com/apps/news?pid=10000103&sid=aluJZFE02LOA &refer=us.

98. Martinez, M.J. 2005. Uphill fi ght for Morgan Stanley dis- sidents. Associated Press, April 8, at www.biz.yahoo.com/ ap/0504080morgan_stanley.html.

99. Ibid. 100. Davis, A. 2005. Mack Takes Step to Clean House: Morgan Stan-

ley CEO Bids Adieu to Crawford, but Move Will Cost Firm’s Shareholders $32 Million. Wall Street Journal, July 12: C.1

101. Cable, D.M., & Judge, T.A. 2003. Managers’ upward infl uence tactic strategies: The role of manager personality and supervisor leadership style. Journal of Organizational Behavior, 24: 197–214.

102. Ahearn, K.K., Ferris, G.R., Hochwater, W.A., Douglas, C., & Ammeter, A.P. 2004. Leader political skill and team performance. Journal of Management, 30: 309–327.

103. Ferris, G.R., Treadway, D.C., Kolodinsky, R.W., Hochwater, W.A., Kacmar, C.J., Douglas, C., & Frink, D.D. 2005. Devel- opment and validation of the political skill inventory. Journal of Management, 31: 126–152.

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www.bloomberg.com/apps/news?pid=10000103&sid=aluJZFE02LOA&refer=us

www.biz.yahoo.com/ap/0504080morgan_stanley.html

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PA R T I I I C A S E S T U D Y

My only concern is Susan’s ten- dency to stay in her office and avoid contact with others in the company. As the controller, she should be involved with the pro- duction, postproduction, licensing, royalties, and other departments. She should be aware of the activ- ity going on in each and should

“touch base” with the department heads periodically to determine

the future requirements of the ac- counting department.

She should also become more involved in the personnel matters of the department. She should be aware at all times of the status of work in the department and should be the first ’manager’ to tackle per- sonnel problems as they arise.

As Susan reflected on these com- ments, the following thoughts went through her mind:*

Perhaps I should have listened to Bill, my assistant, confidant, and

S usan Reynolds carefully studied her first annual performance review at Marco Pictures, a highly successful motion pic-

ture company headquartered in Los Angeles. Although in many respects the review was favo- rable, she was disturbed by the following com- ments made by Anita Lockwood, her immediate supervisor (Appendix I and Appendix II):

BRIGHT AND DEDICATED:

what more do you want?

H. Richard Eisenbeis, Colorado State University—Pueblo Sue Hanks, Colorado State University—Pueblo

Linda Shaw, Colorado State University—Pueblo

*These are direct quotes from one of the principal characters. The names of the fi rm and people involved in the case have been disguised. Copyright © 2009 by the Case Research Journal, H. Richard Eisenbeis, Sue Hanks, and Linda Shaw. All rights reserved to the authors and NACRA. This case was presented to the North American Case Research Association at its annual meeting October 27–29, 2005, North Falmouth, MA. We want to thank the editor of the Case Research Journal and the anonymous reviewers for their time and valuable suggestions.

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colleague (at Marco), who ad- vised me to find a job where I didn’t have to supervise people, and where my considerable audit- ing skills would be more valued. He also suggested that perhaps instead of worrying, I should have spent more time looking for another position. Maybe, he was right.

But, my job with Marco is consistent with those where au- dit managers with my skills and experience end up and perform very effectively. I like this job. I like these responsibilities. Why isn’t this working? Maybe I had better be moving on.

But, Anita has been good to me. I don’t want to take advan- tage of Marco by not telling her that I am in the process of looking for another position. It would be just plain unfair for me to remain on the payroll knowing I may soon be leaving.

MARCO PICTURES, INC.

Marco Pictures was founded by two individuals, who became highly successful in distributing motion pic- tures in international markets. In the 1970s and 1980s, these two men decided to make a relatively inex- pensive movie that became a monu- mental box office hit. Because of the success of this movie, the partners decided to make more motion pic- tures, capitalizing upon their inter- national distribution experience to finance these movies by “pre-selling” the rights in worldwide markets. By September 1986, the movie and its sequel had generated worldwide

box office revenues of more than $390 million.

In 1986, Marco became a publicly traded company. By 1990, Marco had consolidated assets of $632 million. Consolidated net in- come for the year ending December 31, 1990, was $61 million on rev- enues of $269 million.

In the high risk motion picture industry companies must make a large investment in the production of each motion picture while gam- bling that the movie will be well received in theaters and other ven- ues. Often a picture’s success in future markets depends largely on its success in theaters. Even movies that are highly acclaimed by crit- ics are not guaranteed a profitable outcome.

Marco operated under three ba- sic principles that were established to minimize shareholder risk:

1. to produce and distribute a lim- ited number of “event” motion pictures (movies with casts and themes having major box office appeal),

2. to finance those productions through “pre-sales” of exhibition rights in the various media around the world, and

3. to maximize return on investment from “ancillary” markets such as video, television, and merchan- dizing.

The financial group at Marco was headed by Anita Lockwood (vice president of finance) and in- cluded the accounting, payroll, royalty, and cash management de- partments. Although Susan Reynolds, in her position as controller, was nominally in charge of the twelve- person accounting department and

reported to Anita Lockwood, there was no formal organizational chart. Those accounting personnel who had been with the company since its inception, as well as those who had worked directly with Anita be- fore her career move from controller to vice president, continued to report directly to Anita after her promotion. Moreover, Anita directly assigned projects to personnel in all depart- ments regardless of position. This lack of formal reporting lines was somewhat consistent for the enter- tainment industry, and especially for a company that was still young and entrepreneurial.

Anita Lockwood Anita Lockwood, 37, grew up in an affluent Los Angeles suburb. She was the younger of two sisters and was quite vivacious. She had initially planned to become an el- ementary school teacher, but even- tually attained a master’s degree in accounting. She began her account- ing career with the audit division of a big-six accounting firm. After two years, Anita left public accounting to work in the accounting department of a large entertainment company where, in her capacity as manager of general ledger reporting, she su- pervised several accounting clerks and worked closely with other ac- counting supervisors. A year after Anita’s former supervisor had de- parted the company to accept the controller position at Marco Pictures, he was promoted to the position of vice president of finance. Faced with filling the controller position, he re- membered Anita’s professional com- petencies and managerial ability and offered her the position. Recognizing

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the future opportunities she might have, she eagerly accepted. Later, when he was promoted to chief fi- nancial officer, he once more chose Anita to be his successor.

After her promotion to vice president, one of Anita’s first respon- sibilities was to find a new control- ler. During the search and interview process she learned that Susan, who had worked in the same big-six ac- counting firm with Anita, was look- ing for new employment challenges and opportunities. Anita had been impressed by Susan’s auditing and accounting skills and believed that Susan would be a valuable addition for Marco. Following interviews by Anita and Marco’s CEO, Anita of- fered Susan the job. Anticipating that this would be a smart career move, Susan accepted.

Susan Reynolds Susan Reynolds was born and raised in rural America. Growing up, her activities were restricted to public school, household chores, and church activities. Religion was very important to Susan’s family and her parents were strict disci- plinarians. Spending her formative years in this environment, Susan developed a strong work ethic and a respect for authority. She was also quite reserved and shared little about her personal life with anyone other than her few close friends. Her parents were strong supporters of higher education, even though both had managed only to earn a high school education. Graduating as valedictorian of her high school class, Susan went on to complete an undergraduate degree in ac- counting maintaining a 3.88 GPA.

Upon graduation, she was recruited by several of the leading accounting firms and eventually accepted a po- sition with a big-six accounting firm in Los Angeles.

Within two years Susan was promoted to audit senior and three years later to audit manager, a posi- tion she held for four years prior to her move to Marco. Susan’s respon- sibilities included being in charge of the audit of a large entertainment client. The assignment included co- ordinating the activities of two other audit seniors and supervising two to three staff members. She was most comfortable and motivated in her position as audit manager when she was designated as the second man- ager on a project. The primary man- ager would be in charge of the more ambiguous aspects of the task, such as developing and maintaining inter- personal relationships, while Susan worked behind the scenes making sure that all the details of the assign- ment were carried out as required. In situations where responsibilities were not well defined, such as following through on client billings and main- taining client contacts, Susan was often uncomfortable.

THE CURRENT SITUATION AT MARCO

“What a fantastic office! What a fantastic job!” Susan often marveled at her large corner office overlook- ing Sunset Boulevard. Tower Records was located right across the street and she recalled that not long ago she watched in awe the throng of people standing in line hoping for a chance to get the autograph of a fa- mous recording artist. In the evening

she was able to see the sun setting over Hollywood. Nevertheless, even before receiving her annual perform- ance review, she began to feel ap- prehensive that something was not quite right.

Susan’s earliest projects with Marco had gone smoothly. Her schedules had been concise and reasonable and the external auditors had been able to finish in less time than the previous year, resulting in substantial savings for Marco. Susan worked closely with the auditors and welcomed the interaction with them and the opportunity to learn more about Marco’s corporate structure and its international ventures. But, as she was assigned other projects, her enthusiasm waned. Her first concerns surfaced after seven months, when Anita’s office was moved to the op- posite corner of the building. Before the move, Susan could catch Anita in the mornings for a short chat about what was going on within the de- partments before she had settled into her schedule for the day. Gone were the days when Anita would spend an hour here and there with her, telling her about the company’s ongoing operations, its key players, and the company’s financial strategies. She was also concerned that the partici- pations/royalties and payroll clerks offices—two departments with which she had to work very closely—were now located closer to Anita’s office than hers.

However, these morning meet- ings were no longer feasible. Anita commuted 60 miles to work and her time in traffic was often unpredict- able. By the time Susan was certain that she had arrived, Anita was

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often busy with others or engrossed in her current spreadsheet project. Susan felt that just “touching base” was not a valid reason for interrupt- ing Anita’s train of thought. Conse- quently, Susan felt they talked all too briefly and then only about specific questions regarding Susan’s current projects. Although Susan knew that Anita was busy, she often wished that Anita would hold weekly staff meetings so she would know more about what was going on in the de- partment and the company. As a re- sult of Anita’s move, Susan suddenly felt out of the loop.

Susan’s Reflections One of Susan’s first assignments had been to complete the annual U.S. Department of Commerce survey. Anita’s instructions had been:

This survey needs to be completed as soon as possible. We’ve al- ready extended the due date once. This project will be a good way for you to learn where spe- cific financial information can be found in the general ledger and files. It will also be a good way for you to learn about Marco’s operations. Feel free to ask me any questions you may have as you compile the data and write the final report.

After successfully completing the project, Anita had Susan undertake some of the department’s more rou- tine activities, giving Susan the fol- lowing instructions:

Until we hire an assistant con- troller, I want you to review the invoice packages before the checks are taken to Joe (the chief

financial officer) for signature. We’re just now finishing the fi- nancial package for May. Joe wants us to reduce the time it’s taking to close the general ledger at the end of the month and pre- pare the financial package for his review. Beginning the last week of June, I also want you to start working with the participation/ royalty and pay clerks to make sure they get their journal entries prepared and posted as quickly as possible. Once we have the final copy of May’s package, we can go through it together so you can see how each department contributes to the final product.

Susan had been performing as expected for three months when An- ita was finally successful in hiring an assistant controller to support Susan.

Bill Mayer Bill Mayer (30) was a recent gradu- ate of UCLA with a master’s degree in accounting. Prior to returning to school to pursue his graduate de- gree, he had completed two years active duty with the Army reserves and been employed by a small ac- counting firm in Los Angeles. Upon completing his MS in accounting, Bill passed the CPA exam on his first attempt and immediately began searching for a more challenging position than was possible with his current employer. He was brought to Anita’s attention by a member of UCLA’s accounting faculty, an acquaintance of Anita’s, who had heard through the grapevine that Marco was searching for an assistant controller. An interview followed dur- ing which Anita became convinced

that Bill would be a perfect fit. She found him to be outgoing and per- sonable and was impressed with his academic performance and his recommendations from his previous employer. Susan had also expressed to Anita that she believed Bill would be a welcome addition to the team. Susan and Bill began an enduring cordial relationship.

Once Bill was on board, Anita gave the following instructions to Susan and her new assistant:

Now that Bill is on board, I want him to review all of accounts pay- ables work. I also want him to orchestrate the month-end closing process, as well as the prepara- tion of the financial package. I want you (Susan) to review the financial package before I do. Then, I’ll review it before we give it to Joe. Deloitte and Touche will be here in two weeks to audit Marco International’s financial statements. Here’s a list of the schedules you need to prepare and have ready for them when they arrive. I also want you to provide access to all the docu- ments they may need and answer any questions that may arise.

THREE MONTHS LATER

Although Bill was a welcome addi- tion to the accounting department, as time passed Bill assumed more and more responsibility, and Susan be- gan to feel that her talents were not being utilized to the extent that they should be. In addition Anita seemed to be becoming more distant. For example, one night as Susan was leaving the office, she noticed that

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Anita was working late. On her way out, Susan stopped by Anita’s office and asked:

“Is it going to be another late one?”

“Looks like it,” Anita replied.

“Anything I can do to help?”

“No, Charles (Marco’s CFO) wants me to run some new num- bers through this pro forma for his meetings tomorrow,” Anita answered.

“Sure you couldn’t use some help?”

“No, but thanks for asking”

“Okay, see you in the morning.”

“Have a good evening”

It bothered Susan that Anita would not let her help and seemed to be so determined to do the work herself. “But, she’s the boss and in reality this appears to be how she prefers to do things,” she thought. Another concern was that although Anita had instructed her to review the month-end financial package be- fore passing it to her for review, over the next few months Susan’s review came to be concurrent with Anita’s or was skipped altogether. Having these responsibilities taken from her further increased her anxieties.

Susan would have preferred to have more interaction with others in the department but felt left out when it came to administrative and per- sonnel matters. She believed that if more information was shared with her, she would have been able to help the department run more smoothly. She knew she had more to offer than she had the opportunity to give. For example, Susan recalled

the time when Bill had told her that he and Anita were getting ready to dismiss the cash management clerk in her department. She knew nothing of the decision until right before Bill and Anita had asked him to clean out his desk! Susan believed that Bill informed her only so that she would be ready for any commotion should it arise.

Moreover, Susan was not en- joying her current assignment. It involved a lengthy analysis of all the transactions posted to the “inter- company” accounts between Marco and Marco International over the last two years. This long, complex and tedious project required that Susan spend countless hours doing the work herself. Although she wished that she could have delegated some of the work, in the past Anita had indicated that she had taken sole responsibility for this undertaking. Susan believed that Anita also ex- pected her to do the entire project without assistance.

As the task of analyzing the intercompany accounts began to drag on, Susan began to think more and more about her current situation. It bothered her that she was receiv- ing inadequate feedback from Anita. And, although Susan continued to view Bill as a close friend, she began to have concerns about her willing- ness to share supervisory responsi- bilities with him—especially those tasks she found to be distasteful— and how this would affect her over- all performance review. Several questions went through her mind: Shouldn’t Anita be giving me more direction? Why doesn’t Anita tell me directly if she is dissatisfied with my

performance and what she expects me to do differently? What exactly are my supervisory duties? What does it really mean to “manage” this department? What should I do at this point?

It had been very different in pub- lic accounting where each assign- ment had an overall plan from which it was easy to identify each person’s specific duties. And, although she had had supervisory responsibilities, the staff members under her direction were all self-motivated high achiev- ers who required little or no direct supervision.

Because of Susan’s doubt, her belief that asking for more direc- tion would reflect negatively on her performance, and her increasing concerns about her overall value to Marco, her self-confidence and self-esteem began to suffer. She was troubled that working diligently and producing accurate reports and schedules was simply not enough.

ANITA’S REFLECTIONS AND THE ANNUAL PERFORMANCE REVIEW

In preparing for Susan’s upcoming year-end performance evaluation, Anita thought about Susan’s initial orientation into the accounting de- partment. When Susan began her employment at Marco, Anita re- called that she had spent quite a bit of time with Susan talking about the company, how its projects were going, and its financial status. In ad- dition to expecting that Susan com- plete the special projects assigned, Anita anticipated that Susan would easily be able to assume the day- to-day supervisory responsibilities

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in the department. However, as projects were assigned to Susan, it appeared that she tended to be- come so engrossed in each project that important departmental person- nel matters were neglected. One ex- ample was a situation that occurred earlier in the year when it became necessary to discharge the cash management clerk. In her position as controller, Anita had expected Susan to be more involved in over- seeing the clerk’s performance and noting or correcting any improprie- ties. She believed that Susan had failed to appropriately monitor and manage the situation. This aspect of Susan’s management style con- cerned Anita.

Anita wanted to make sure that her upcoming evaluation of Susan’s performance included her apprecia- tion for the significant and substan- tial contributions that she had made to the accounting department over the last year. She also, however, had to include her concerns in the evaluation. Specifically, she needed to convey to Susan the need to de- velop her interpersonal skills and to take the appropriate disciplinary action on her own when necessary. Anita considered how she could best approach Susan without causing bad feelings that might lead to the loss of one of Marco’s most valuable employees.

Anita had expected Susan to be more of a “take-charge” person and to be more outgoing and assertive. She had had excellent references and had been highly spoken of by those with whom she had previously worked. Although Susan produced excellent reports and analyses that

required minimal input from Anita, she had not made any obvious effort to assume responsibility for directing and supervising the de- partment personnel. No one could deny that Susan was highly moti- vated and an outstanding performer on the tasks she was assigned. But, Anita wondered why Susan was so reluctant to perform these duties at Marco. She performed them in her previous position; why isn’t she do- ing it here?

The following week, Anita met with Susan to discuss Susan’s an- nual performance evaluation. Anita began the discussion by saying:

You’ve been at Marco for over a year now and it’s time we evalu- ated your performance. Let me begin by telling you that you’re doing a great job and we’re giving you a nine percent sal- ary increase. I am pleased with your overall contribution to the accounting department over the past year. You did an excellent job with the Touche Ross audit of Marco International and with the Ernst and Young audit of the com- pany’s financial statements.

However, I am concerned that you appear to feel uncomfort- able working with other managers within the company. I want you to begin attending the monthly production meetings. These meet- ings should give you a feeling of where the company’s projects are in the production process and the problems encountered, some of which may have accounting implications. You’ll also have the opportunity to get to know more

of the people within various de- partments. And, we’ll figure out some other ways in which you can interact more with the other managers.

Take a couple of minutes to read through your Employee Eval- uation Report (Appendix I and Appendix II) and let’s go over any concerns you might have.

Susan’s Reaction As Susan read the evaluation, she failed to notice the many positive comments. Never in her 32 years had she felt more of a failure. “What should I do now?” she thought. “I know I have terrific technical and administrative skills. How can I be- come a better manager? Or, should I even try?” Intellectually, she knew how important it was to her career that she display strong interpersonal skills and she knew that she should have been more involved in person- nel matters and politics within the department. She disliked dealing with conflict and being even mar- ginally involved in internal politics. And, quite truthfully, she didn’t know what steps to take to become more aware and involved. She believed that Anita’s recommendations would undoubtedly help, but she was afraid that it would take more energy and time than was possible on both their parts. But, once again, as was typi- cal of Susan, she chose not to share her feelings with Anita and signed the evaluation. With copy in hand, she returned to her office overlooking Sunset Boulevard to further consider her options.

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APPENDIX I: SUSAN REYNOLDS’ EMPLOYEE EVALUATION REPORT

EMPLOYEE EVALUATION REPORT

Date of this evaluation 1/22 Date of previous evaluation

Reason for evaluation. General Performance. Salary Increase. Promotion.

Name Susan Reynolds Soc. Sec. No. 444-55-2222

Job Title Controller Dept. Accounting Clock No.

Date Hired 9/15 Time Employed one Years Months

Education: Elementary Junior H.S. Senior H.S. College 1 2 3 4

Current Salary $ 85,000 per year Time employed at this rate one Years Months

Date of last previous increase Previous rate of pay $ per

Time employed at present job Years Months Date of last promotion

ATTENDANCE RECORD Excellent Good Poor

Number of days absent this year Approved days Unauthorized days

Number of days absent last year Approved days Unauthorized days

Number of days late this year Number of days late last year

WORK PERFORMANCE

Ability to do job assigned: Superior Meets Standard Below Standard

Comments on job ability: See attached

Comparison to previous evaluation: Improved No Change Negative

Productivity: Superior Meets Standard Below Standard

Comments on productivity: Susan’s ability to complete projects in a timely manner is excellent. She is an extremely hard

worker and always puts in whatever time is necessary to complete projects on time.

Comparison to previous evaluation: Improved No Change Negative

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Ability to follow instructions: Excellent Good Poor

Comments on ability to follow instructions:

Comparison to previous evaluation: Improved No Change Negative

—Comparison to previous evaluation—

Cooperation Excellent Good Poor Improved No Change Negative

Attitude Excellent Good Poor Improved No Change Negative

Initiative Excellent Good Poor Improved No Change Negative

Work Habits Excellent Good Poor Improved No Change Negative

Comments on cooperation, attitude, initiative and work habits:

PERSONAL

Relationship with fellow employees: Well liked Accepted Other (explain below)

See attached

Relationship with customers: Excellent Good Unsatisfactory (explain below)

n/a

Comparison to previous evaluation Improved No Change Negative

Personality (check those which apply):

Friendly Out-going Courteous Aloof Neat in appearance Untidy

Enjoys work Dependable Conscientious Calm under pressure Nervous

Complains excessively Negative influence on others Positive influence on others

Desire for achievement: High Average Low

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SUMMARY OF EVALUATION

Overall evaluation: Positive Negative

Overall comparison to previous evaluation: Improved No Change Poorer

Continued employment: Recommended Not recommended

Salary increase: Recommended Not recommended

Recommended salary increase: $ 8,000 – 9% per year Effective 1/22

Promotion: Recommended Not recommended. Job Change: Recommended Not recommended

Recommended promotion: Effective

Recommended job change: Effective

COMMENTS The overall performance of Susan’s work is excellent, except for the area discussed in the attachment. This, however,

is not such a problem that she cannot perform her work satisfactorily.

Date Evaluated by Anita Lockwood

Date Recommendations approved by

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APPENDIX II: ATTACHMENT TO SUSAN REYNOLDS’ ANNUAL EVALUATION OF 1/22

Susan has been a valuable addition to the accounting department. In the past year she has assumed respon- sibility for:

1. Accounting related to our foreign tax structure

2. Overseeing the audit of Marco and its subsidiaries by Deloitte and Touche

3. Mentoring the reporting require- ments to US Commerce Dept. re: foreign ownership of US corpora- tions

4. Coordinating and completing au- dit schedules for year end and quarterly reviews by Ernst & Young

5. Coordinating the gathering of in- formation and documents for com- pletion of the tax return

Susan is very reliable and her strong technical skills have been

instrumental in accomplishing many special projects. For example:

1. Analysis of the foreign/domestic inter company balances and ac- tivity.

2. Foreign vs. domestic cash flow statements.

Susan has been very helpful in completing these and other day-to- day projects. Her work is always ac- curate and she is always willing to do whatever is necessary to complete the task at hand, even if it means working through the night!

My only concern is Susan’s tendency to stay in her office and avoid contact with others in the com- pany. As the controller, she should be involved with the production, postproduction, licensing, royalties,

and other departments. She should be aware of the activity going on in each and should “touch base” with the department heads periodically to determine what requirements of the accounting department will be made in the future.

She should also become more involved in the personnel matters of the department. She should be aware at all times of the status of work in the department and should be the first “manager” to tackle per- sonnel problems as they arise.

I’ll work with Susan in the near future to provide opportunities for her to develop these interpersonal skills and I feel that with little effort she should be able to improve in this area.

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ORGANIZATIONAL BEHAVIOR

A GLOBAL CONTEXT

ORGANIZATIONAL BEHAVIOR

A STRATEGIC APPROACH

ORGANIZATIONAL DIVERSITY

THE STRATEGIC LENS

INDIVIDUAL PROCESSES LEARNING AND PERCEPTION PERSONALITY, INTELLIGENCE, ATTITUDES, AND EMOTIONS WORK MOTIVATION STRESS AND WELL-BEING

GROUPS, TEAMS, AND SOCIAL PROCESSES LEADERSHIP

COMMUNICATION

DECISION MAKING BY INDIVIDUALS AND GROUPS GROUPS AND TEAMS CONFLICT, NEGOTIATION, POWER, AND POLITICS

THE ORGANIZATIONAL CONTEXT ORGANIZATIONAL STRUCTURE AND CULTURE ORGANIZATIONAL CHANGE AND DEVELOPMENT

PART 4

In the fi nal part of the book, we exam- ine the organizational context for the in- dividual and group processes discussed in Parts II and III. Thus, we began the book with a chapter that presented the strategic lens for managing behavior in organizations, and we end with two chapters that explain the organizational processes and context for that behavior.

In Chapter 13, we discuss struc- ture and organizational culture. The or- ganization’s structure can have a signifi - cant effect on behavior. Organizational culture is based on shared values in the organization. Therefore, the fi t between individual values and organizational values is important. Organizational

culture can signifi cantly infl uence asso- ciates’ and managers’ behavior. It can affect individuals’ motivation and atti- tudes as well as team processes such as leadership and confl ict.

Chapter 14, the last chapter in the book, focuses on organizational change and development. Most organizations exist in dynamic environments requir- ing them to change regularly in order to adapt to environmental changes. Shifting environments also require that organiza- tions develop fl exibility in their strate- gies. Being fl exible, however, necessi- tates taking an approach to change that associates and managers in the organi- zation will accept. Most people dislike

and resist change because of the uncer- tainty involved. This chapter explains how managers can develop a change process that unfreezes associates’ atti- tudes and allows them to accept change. The chapter also discusses org anization development, a form of internal consult- ing aimed at improving communication, problem solving, and learning in the organization. The problem-solving pro- cess involves diagnosing the problem, prescribing interventions, and monitor- ing progress. The change processes and problem-resolution processes discussed in this chapter draw on many of the con- cepts explored in the previous chapters of this book.

the organizational context

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? knowledge objectives After reading this chapter, you should be able to: 1. Defi ne key elements of organizational struc-

ture, including both structural and structuring dimensions.

2. Explain how corporate and business strategies relate to structure.

3. Explain how environment, technology, and size relate to structure.

4. Defi ne organizational culture, and discuss the competing values cultural framework.

5. Discuss socialization. 6. Describe cultural audits and subcultures. 7. Explain the importance of a fi t between individual

values and organizational culture.

organizational structure and culture exploring behavior in action

Growth and Structure Provide an Integrated Portfolio of Services at FedEx

M any companies have goals designed to achieve growth and diversifi cation of the markets they serve, both product and geographical. These long-term goals are often maintained even during economic recessions such as that experienced at the end of the fi rst decade of the twenty-fi rst century. Growth can be achieved by de-

veloping new products and services internally or by acquiring other organizations. Growth by external acquisition has been popular because it is often a faster and less risky means of achieving the desired growth. FedEx’s corporate strategy involved both of these approaches.

In 1971, Federal Express Corporation was founded in Little Rock, Arkansas. Early in its history, FedEx used internal development to achieve rapid growth. In 1983, Federal Express achieved $1 billion in revenue; it made its fi rst acquisition in 1984, Gelco Express Inter- national, launching its operations in the Asia Pacifi c re- gion. Five years later, Federal Express purchased Flying Tigers to expand its international presence. That same year, Roberts Express (now FedEx Custom Critical) began providing services to Europe. In 1995, FedEx acquired air routes from Evergreen International with authority to serve China and opened an Asia Pacifi c Hub in Subic Bay, Philippines, launching the FedEx AsiaOne Network. By 1996, FedEx Ground achieved 100 percent coverage in North America. In 1998, FedEx acquired Caliber Systems, Inc. and created FDX Corporation. This series of acquisitions made FedEx a $16 billion transportation powerhouse. But the acqui- sitions and growth continued. In 1999, Federal Express Corporation acquired Caribbean Transportation Serv- ices. In January 2000, FDX Corporation was renamed

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486

FedEx Corporation. Also in 2000, FedEx Trade Networks was created with the acquisitions of Tower Group Interna- tional and WorldTariff.

In 2001, FedEx acquired American Freightways; in 2004, it acquired Kinko’s for $2.4 billion and also Parcel Di- rect; and it completed its acquisitions in 2007, with its pur- chase of Chinese shipping partner DTW Group in order to obtain more control over and access to services in secondary Chinese cities.

As suggested by the large list of acquisitions, FedEx’s strategy to achieve growth was realized. It also diversifi ed the company’s portfolio of services. For ex- ample, it acquired Kinko’s to expand the company’s retail services through the 1,200-plus Kinko’s stores. In addition, by acquiring Parcel Direct, FedEx was able to expand services for customers in the e-tail and catalog seg- ments. All of the companies acquired by FedEx Corp were carefully selected to ensure a corporate culture with a posi- tive service-oriented spirit, thereby providing a good fi t with FedEx. For example, in 2009, FedEx continued to be listed

among Fortune’s 100 Best Companies to Work For and in the top ten of Fortune’s World’s Most Admired Companies.

Because of the growth and additional services, FedEx adopted a multidivisional structure. FedEx Corporation provides strategic direction and consolidated fi nancial re- porting for the operating companies that are collectively

under the FedEx name worldwide (FedEx Express, FedEx Ground, FedEx Freight, FedEx Kinko’s Offi ce and Print Services, FedEx Custom Critical, FedEx Trade Networks, and FedEx Services). Because of the growth in the size and scope of the company, FedEx delegated signifi cant authority to the divisions. Together, the various divi- sions are FedEx, but inde- pendently, each division

offers fl exible, specialized services that represent an array of supply chain, transportation, and business and re- lated information services. Operating independently, each FedEx company manages its own specialized network of ser- vices. The FedEx Corporation acts as the hub, allowing its decentralized divisions to work together worldwide. FedEx

FedEx Freight

FedEx Supply Chain

Services

FedEx Custom Critical

FedEx Trade

Network

FedEx Ground

FedEx Kinko’s

Office & Print Services

FedEx Express FedEx

Corp

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487

When considering the implementation of organizational strategies, we often focus on the roles of strong leaders, talented managers and associates, and effective processes such as communica- tion and confl ict management. Although all these factors are important, as em- phasized in prior chapters, they provide only part of the support to implement an organization’s strategy. The organiza- tion’s structure and culture also play crucial roles in strategy implementation.

Organizational structure re- fers to the formal system of work roles and authority relationships that govern how associates and managers interact with one another.1 To properly imple- ment a strategy, an organization must build a structure ensuring that formal and informal activities and initiatives support strategic goals. Structure infl u- ences communication patterns among individuals and groups and the degree

to which they have the discretion to be innovative. If, for example, a strategy calls for rapid responses in several dynamic and different markets, it is important to create divisions around those markets and delegate authority to managers in those divisions so that they can act when necessary, similar to the decentralized divisions created by FedEx as described in the Explor- ing Behavior in Action. Firms that fail to design and maintain effective structures experience problems. FedEx also co- ordinates activities across its divisions in order to achieve synergies among its various services and geographical markets. Doing this enhances FedEx’s performance.

An appropriate culture is also required to implement strategy effec- tively and achieve strong overall per- formance. Organizational culture involves shared values and norms that

infl uence behavior.2 It is a powerful force in organizations. For example, Google’s organizational culture has been touted as one reason for its phe- nomenal success. We examine the spe- cifi c characteristics of Google’s culture later in this chapter.

As one of the top companies to work for and one of the most admired companies in the world, FedEx is known to have a special culture as well. FedEx grew rapidly early in its existence by internally expanding its services and especially by reaching new geographi- cal markets. It then began to expand into international markets, partly by acquisition (e.g., its acquisition of Fly- ing Tigers). It also used acquisitions to diversify the services that it offered. An example of this expansion was the acquisition of Kinko’s with its 1,200 re- tail outlets across the United States to support the diversifi cation strategy and

the strategic importance of Organizational Structure and Culture

coordinates the activities of operating divisions in ways that integrate them to provide customers a unique and powerful portfolio of services globally.

Along with its competitive array of services, FedEx remains innovative and sensitive to its environment. For example, in 2010, it implemented a new service, Sense- aware, a sensor-enabled device that provides real-time data on the location and other important information (e.g., temperature) of a package. The device allows FedEx and

customers to monitor the condition and travel of highly important and sensitive packages. In addition, FedEx also has initiatives to promote a sustainable environment. In 2009, for example, it announced plans to install the largest rooftop solar power system in the United States at its major distribution facility in New Jersey. There- fore, despite an exceptionally diffi cult global economy in 2009, two analysts predicted that FedEx would “soar like an eagle” in 2010.

Sources: Associated Press. 2009. “FedEx Meets Estimates but Gives Cautious Forecast,” New York Times, Dec. 17, www.nytimes.com; Paul Rubillo & Tom Reese. 2009. “FedEx Flies Like an Eagle,” Forbes, Dec. 8, www.forbes.com; Cliff Kuang. 2009. “If the Delivery Guy Drops Your Package, Senseaware Updates You Online,” Fast Company, Nov. 24, at http://www.fastcompany.com; Stephanie N. Metha. 2009. “Smart Phones. Smart networks. Smart Packages?” Fortune, Nov.17, at http://www.fortune.com; Ariel Schwartz. 2009. “FedEx to Build Largest Rooftop Solar Array in U.S.,” Fast Company, July 30, at http://www.fastcompany.com; Mitch Jackson. 2009. “Is the Overnight Envelope Anti-green?” Money, May 1, at http://www.cnnmoney.com; “Best Big Companies to Work for,” Money, April 27, 2009, www.cnnmoney.com; Associated Press. 2007. “FedEx Completes Acquisition of DTW Group,” BusinessWeek, Feb. 28, at http://www.businessweek.com; Sarah Murray. 2006. “Putting the House in Order,” Financial Times, Nov. 8, at http://www.ft.com; Dean Foust. 2006. “Taking Off Like ‘a Rocket Ship,’” BusinessWeek, Apr. 3, at http://www.businessweek.com; 2007. “About FedEx,” FedEx Homepage, at http://www.fedex.com.

organizational structure Work roles and authority relationships that infl uence behavior in an organization.

organizational culture The values shared by associates and managers in an organization.

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www.nytimes.com

www.forbes.com

http://www.fortune.com

www.cnnmoney.com

http://www.ft.com

http://www.fedex.com

488 Chapter 13 Organizational Structure and Culture

Fundamental Elements of Organizational Structure The structure of an organization can be described in two different but related ways. First, structural characteristics refer to the tangible, physical properties that determine the basic shape and appearance of an organization’s hierarchy,3 where hierarchy is defi ned in terms of the reporting relationships depicted in an organization chart. Essentially, an orga- nization’s structure is a blueprint of the reporting relationships, distribution of authority, and decision making in the organization.4 These characteristics infl uence behavior, but their effects are sometimes subtle. Second, structuring characteristics refer to policies and approaches used to directly prescribe the behavior of managers and associates.5

Structural Characteristics Structural characteristics, as mentioned, relate to the basic shape and appearance of an organization’s hierarchy. The shape of a hierarchy is determined by its height, spans of control, and type of departmentalization.

Height refers to the number of levels in the organization, from the CEO to the lower- level associates. Tall hierarchies often create communication problems, as information mov- ing up and down the hierarchy can be slowed and distorted as it passes through many differ- ent levels.6 Managers and associates can be unclear on appropriate actions and behaviors as decisions are delayed and faulty information is disseminated, causing lower satisfaction and commitment. Tall hierarchies also are more expensive, as they have more levels of managers.7

A manager’s span of control is to the number of individuals who report directly to her. A broad span of control is possible when a manager can effectively handle many indi- viduals, as is the case when associates have the skills and motivation they need to complete their tasks autonomously.

Broad spans have advantages for an organization. First, they result in shorter hier- archies (see Exhibit 13-1), thereby avoiding communication and expense problems.8 Second, they promote high-involvement management because managers have diffi culty micromanaging people when there are larger numbers of them. Broad spans allow for

structural characteristics The tangible, physical properties that determine the basic shape and appearance of an organization’s hierarchy.

hierarchy The reporting relationships depicted in an organization chart.

structuring characteristics The policies and approaches used to directly prescribe the behavior of managers and associates.

height The number of hierarchical levels in an organization, from the CEO to the lower-level associates.

span of control The number of individuals a manager directly oversees.

divisional structure. Over time, FedEx had to adopt a new structure in order to manage its diversifi ed portfolio of services and geographical markets. The new divisional structure granted signifi cant autonomy to each operating business (division) with corporate coor- dination across the divisions to achieve synergy in offering customers integrated services. FedEx was careful in its acqui- sitions to ensure that the acquired fi rms fi t well with its positive customer-oriented

culture. Both organizational structure and culture infl uence the behavior of managers and associates and therefore play a critical role in the success of an organization’s strategy and its overall organizational performance.

In this chapter, we explore is- sues related to structure and culture. We open with a discussion of the fundamental elements of structure, emphasizing how they infl uence the behavior and attitudes of managers

and associates. Next, we discuss the link between strategy and structure as well as the structural implications of environmental characteristics, internal technology, and organizational size. In the second part of the chapter, we focus on culture. Cultural topics include the competing values model of culture, socialization, cultural audits, and sub- cultures. We close with a discussion of person–organization fi t.

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Fundamental Elements of Organizational Structure 489

more initiative by associates.9 In making employment decisions, many individuals take these realities into consideration.

Spans of control can be too broad, however. When a manager has too many direct reports, she cannot engage in important coaching and development activities. When tasks are more complex and the direct reports more interdependent, a manager often requires a relatively nar- row span of control to be effective. It has been argued that a CEO’s span of control should not exceed six people because of the complexity and interdependency of work done by direct reports at this level.10

Many older companies have removed layers of management and increased spans of control in recent years, whereas younger companies, such as AES, avoided unnecessary layers and overly narrow spans from the beginning.11 Because of their profound effects on behavior and attitudes among associates and managers, spans of control are of con- cern to many organizations such as PricewaterhouseCoopers (PwC).12 Through their Saratoga Institute, managers and consultants at PwC track spans of control in various industries and use the resulting in- sights in various reports and consulting engagements. They reported a few years ago that the median span for all managers in all industries was seven. An earlier Wall Street Journal report indicated an average span of nine. Yet, the Saratoga Institute reports that managerial spans of control have been increasing in recent years due to reductions in the number of managers in the recent global economic recession.13

Departmentalization describes the approach used in grouping resources within an organization. As highlighted in the opening case, one of the two basic options is the functional form of departmen- talization, in which resources related to a particular functional area are grouped together (see Exhibit 13-2). The functional form provides several potential advantages, including deep specialized knowledge in each functional area (because functions are the focus of the fi rm) and economies of scale within functional areas (resources can be shared by all individuals working within each functional area).14 This form, however, also has a potential major weakness: managers and associates in each functional department can become isolated from those who work in other departments, which harms coordinated action and causes slow responses to major industry changes that require two or more functional areas to work together.15 Lateral relation mechanisms, discussed in a later section, can help to overcome this weakness.

If an organization has multiple products or services or operates in multiple geographi- cal areas, it can group its resources into divisions (see Exhibit 13-3). The divisional form offers several benefi ts, such as better coordination among individuals in functional areas. Functional resources have been divided among the divisions, and associates and manag- ers in the smaller functional departments within each division tend to coordinate with one another relatively easily. With smaller departments, people tend to be closer to one another, and there are fewer barriers (formal or informal) to direct communication. A second, related benefi t is rapid response to changes in the industry that call for a cross- functional response. Because associates and managers in the various functional areas co- ordinate more effectively, response times are often faster. A third benefi t is tailoring to the

departmentalization The grouping of human and other resources into units, typically based on functional areas or markets.

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490 Chapter 13 Organizational Structure and Culture

different product/service or geographical markets. This occurs because the people in each division are dedicated to their own markets.16

The divisional form is not without its drawbacks, however. Two of the most im- portant are (1) lack of collaboration across the product/service or geographic markets (individuals in one division can become isolated from those in other divisions) and (2) diseconomies of scale within functional areas (individuals in a given functional area but working on different markets cannot share resources as they can in the functional struc- ture).17 As described in the Exploring Behavior in Action feature, FedEx developed a diverse set of businesses offering a portfolio of services. To manage these businesses effi ciently and to offer customers the most effective services, FedEx implemented a divisional structure.

Number of Managers at Each Level

Average Span of TenAverage Span of Four

O rg

a n

iz a ti

o n

a l L

e v e l

Number of First-level Managers = 1000 Number of Managers above First Level = 111

Number of Management Levels = 4

Number of First-level Managers = 1000 Number of Managers above First Level = 335

Number of Management Levels = 6

(Highest)

1 1

100

1000

Associates

250

1000

Associates

Exhibit 13-1 Average Span of Control: Effects of Height of the Hierarchy

CEO

VP Research and Development

VP Finance

VP Operations

VP Marketing

VP Human

Resources

Exhibit 13-2 Simplifi ed Functional Organization

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Fundamental Elements of Organizational Structure 491

Hybrid forms also exist, with some functional areas divided across divisions, while others remain intact at the corporate level, often for cost reasons. Network organizations are another option, where many or most functional areas are outsourced to other organiza- tions.18 Home builders are usually network organizations, as they often do not complete their own architectural work and typically outsource to subcontractors much of the actual construction work. Nike is generally considered to be a network organization because it outsources manufacturing and other types of work.

The network approach has been emphasized by a number of fi rms in recent years, at least to some degree. Its chief benefi t lies in allowing a fi rm to focus on what it does best while outsourcing the rest.19 Quality control, however, is sometimes an issue, and coordi- nation of internal and external efforts is often a substantial problem. Effective information technology that facilitates coordination across organizational boundaries is crucial.

Structuring Characteristics Whereas structural characteristics indirectly affect behavior, structuring characteristics re- late to policies and approaches used to directly prescribe the behavior of managers and associates. This second category of structure includes centralization, standardization, for- malization, and specialization.

Centralization refers to the amount of decision-making authority that is held at the top of the organization.20 In centralized organizations, top-level managers retain most au- thority, leaving less for mid- and lower-level managers and very little for associates. This is not consistent with high-involvement management, and research suggests that centralized organizations generally perform less well.21 There are several conditions, however, that call for a signifi cant degree of centralization. We discuss this issue in a later section.

Standardization refers to the existence of rules and standard operating procedures. When standardization is high, managers and associates are expected to follow prearranged approaches to their work. Under these circumstances, their behavior is very predictable. Although standardization is sometimes necessary for effi ciency and safety, it reduces

centralization The degree to which authority for meaningful decisions is retained at the top of an organization.

standardization The degree to which rules and standard operating procedures govern behavior in an organization.

CEO

Head of Human

Resources

Head of Operations

Head of Marketing

Head of R & D

Head of Finance

VP Product/Service

Area 3

Head of Human

Resources

Head of Operations

Head of Marketing

Head of R & D

Head of Finance

Head of Human

Resources

Head of Operations

Head of Marketing

Head of R & D

Head of Finance

VP Product/Service

Area 2

VP Product/Service

Area 1

Exhibit 13-3 Simplifi ed Divisional Organization

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492 Chapter 13 Organizational Structure and Culture

opportunities for individual initiative, creativity, and self-directed collaboration with oth- ers inside and outside the organization. Thus, it can negatively affect motivation and satis- faction for many. Formalization is a closely related phenomenon; it is the degree to which rules and procedures are documented. Specialization is the degree to which managers and associates have narrow jobs that use focused skills; usually these jobs offer little variety. As discussed in Chapter 6, narrow jobs can negatively affect motivation, satisfaction, and performance for individuals who want to be challenged and to grow in the workplace. Yet, in some self-managed teams with associates having higher levels of specialization, some degree of formalization can produce positive results.22

The Modern Organization Structural and structuring characteristics combine to create very different types of orga- nizations. Some in the fi eld of organizational behavior label the two fundamental types organic versus mechanistic.23 Others label these types learning versus nonlearning.24 Still others use the labels boundaryless versus traditional to make the same basic distinction.25 In all cases, the more fl exible empowering type of structure (i.e., organic, learning, or bound- aryless) is associated with fewer management levels; broader spans of control; and lesser amounts of centralization, standardization, formalization, and specialization. Departmen- talization at the top of the fi rm can be either functional or divisional. The fl exible ap- proach provides freedom for lower-level managers and associates to think for themselves, to communicate with anyone who could be helpful, and to try new ideas.

Although substantial freedom may exist, it is not unlimited, nor should it exist with- out alternative mechanisms designed to ensure that managers and associates are working for the common good of the organization. First, even in relatively organic fi rms there is some standardization, and some decisions are made by middle and senior-level manag- ers. At Southwest Airlines, pilots and fl ight attendants have more freedom than at other airlines, but they still must follow applicable laws and safety rules.26 Interestingly, research shows that new-venture fi rms need structure and thus often are more successful if their organization structure is less organic.27 In addition, new-venture fi rms often are “bound- aryless” in that they must operate in networks to gain access to needed resources. While these alliances may be critical to their survival, it can be diffi cult for them to break into an existing network of relationships. Working across these organizational boundaries requires that they not be too standardized or formalized. They need fl exibility.28

Second, alternative mechanisms are used to ensure that individuals are working for the good of the organization. These mechanisms include selection systems, socializa- tion schemes, and leadership processes. Selection systems should be designed to iden- tify individuals who share the values of the organization. Socialization schemes, discussed later in this chapter, should be designed to further shape values and to promote a shared vision of the organization’s future. Similarly, strong leadership at the top of the fi rm instills shared purpose among managers and associates. Shared values and vision act as guides to behavior, and reduce the chances of lower-level managers and associates acting in ways that are counterproductive. Reward systems also are used to promote appropriate behav- ior. Although lower-level managers and associates may not realize it, powerful forces guide their behavior in organizations characterized by relative freedom of thought and action.

Through the 1960s and into the 1970s, freedom in most organizations was severely limited. Over time, however, the value of unleashing human capital throughout an orga- nization became widely recognized. Today, senior leaders in modern organizations tend to favor organic structures. Although this is positive, given that organic structures are closely

formalization The degree to which rules and operating procedures are documented on paper or in company intranets.

specialization The degree to which associates and managers have jobs with narrow scopes and limited variety.

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Factors Affecting Organizational Structure 493

aligned with high-involvement management, there are situations in which some aspects of this approach are not appropriate.

Factors Affecting Organizational Structure Senior managers must choose the structures to use for their fi rms. Middle and lower-level managers often are involved in these choices and play a key role in the implementation of the choices. Factors that should be considered in designing the structure of the fi rm include strategy, external environment, internal technology, and organizational size.

The Role of Strategy An organization’s task environment is composed of customers, suppliers, competitors, government regulatory agencies, and perhaps unions. These are external components with which the organization frequently interacts and that have an effect on the organization.29 Organizations adapt to their environments through formal strategies. In turn, these strate- gies affect the organization’s structure.

Corporate Strategy Corporate strategy is the overall, predominant strategy of the organization. It determines the direction for the total organization. Senior managers formulating corporate strategies focus on the organization’s stockholders and other critical external constituents. Their strategies can be oriented toward growth, diversifi cation, or both.30

Almost all types of organizations use growth as a measure of success. Awards are given for growth, such as the Growth Strategy Leadership Award given by the consulting fi rm Frost and Sullivan.31 Under some circumstances, senior leaders are even willing to trade profi ts for increasing sales. Growth can be achieved through internal development or by external acquisition. Although the internal growth strategy is an attractive option, growth by external acquisition is popular with many companies.32 Cisco Systems, a maker of tele- communication equipment, is known for its frequent acquisitions.33 Acquisition is often a faster method of achieving growth, but it does carry some risk, in part because cultural differences between fi rms often cause diffi culties in the post-acquisition integration of op- erations.34 Some fi rms that have diversifi ed through multiple acquisitions later retrenched and sold off prior acquisitions because of poor performance.35

Each of these two growth strategies has implications for structure. For example, fi rms using an internal-growth strategy are likely to have larger marketing and research and development (R&D) departments. It is also probable that authority for decisions is de- centralized to the heads of these departments. In contrast, fi rms following an external ac- quisition strategy are likely to have the more well-developed fi nancial and legal functions required to analyze and negotiate acquisitions. These fi rms may even have a separate spe- cialized planning and acquisitions department. For example, given the number of acquisi- tions completed by FedEx over time, the company likely has enriched these functions.

Diversifi cation has also been a common and popular corporate strategy. Diversifi ca- tion involves adding products or services different from those currently in the fi rm. Firms may diversify for several reasons, but the primary one is to reduce overall risk by decreas- ing dependency on one or a few product markets.36 Thus, if demand for one of the fi rm’s products falls, the other products may continue to sell.37 Firms may also diversify the geo- graphic markets they serve by entering new foreign markets.38 Most companies start out

corporate strategy The overall approach an organization uses in interacting with its environment. The emphasis is placed on growth and diversifi cation.

growth Relates to increases in sales as well as associates and managers.

diversifi cation Related to the number of different product lines or service areas in the organization.

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494 Chapter 13 Organizational Structure and Culture

as single-product fi rms, which are fi rms where more than 95 percent of annual sales come from one product. Dominant-product fi rms obtain 70 to 94 percent of their sales from one product. Most companies following a diversifi cation strategy move on to become related- product fi rms, where less than 70 percent of annual sales come from one product and the various products are related to one another. The most diversifi ed fi rms are classifi ed as unrelated-product fi rms. In these fi rms, less than 70 percent of annual sales come from any one product, and the fi rm’s various products are unrelated to the primary core business.39

As fi rms become more diversifi ed, research suggests that they should adopt the divi- sional form.40 In other words, they should develop divisions for each of their end-product businesses. Also, as fi rms become more diversifi ed and divisionalized, authority should be delegated to the divisions.41

Matches between diversifi cation and structure are shown in Exhibit 13-4. Single- product and most dominant-product fi rms should use a functional structure, where the major units of the organization are based on the functions performed (marketing, pro- duction, fi nance) rather than on products. Related-product and most unrelated-product fi rms should use a divisionalized structure. Large, highly diversifi ed unrelated-product fi rms may use a holding company structure, in which the operating divisions are extremely autonomous.42 Firms with functional structures are sometimes referred to as U-form (uni- tary) organizations and fi rms with divisionalized structures as M-form (multidivisional) organizations. Over time, FedEx changed from a single-product fi rm to a related-product fi rm. As such, it implemented the divisional structure and decentralized primary author- ity to make decisions to the heads of each division. Because the businesses are all related, the corporate offi ce coordinated activities across the divisions to offer customers the full portfolio of FedEx’s services (as described in the Exploring Behavior in Action feature).

Business Strategy Firms must formulate business strategies in addition to corporate strategies. A business strategy is developed for a particular product/service market and is a plan of action de- scribing how the fi rm will operate in a particular market.43

Business strategies are necessary to ensure effective competitive actions in the different markets in which a fi rm intends to operate. One popular competitive strategy involves maintaining low internal costs as a basis for low prices offered to customers. Consum- ers interested in buying the least expensive goods in a particular market are targeted. To

business strategy How a fi rm competes for success against other organizations in a particular market.

EXHIBIT 13-4 Matches between Diversifi cation Strategy and Structure

Diversifi cation Structure

Single product Functional

Dominant product (few products) Functional

Dominant product (several products) Divisional

Related product Divisional

Unrelated product Divisional

Unrelated product Holding company

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Factors Affecting Organizational Structure 495

effectively implement this strategy, effi ciency and control are important inside the fi rm or division utilizing this approach, and a somewhat more mechanistic structure is useful, if not taken to an extreme.44 The structure used to implement a low-cost strategy often emphasizes functions, and the decisions are also centralized to maintain economies of scale in operations.45 A second popular competitive strategy involves product/service differentia- tion. Consumers are targeted who are willing to pay more for a product/service that is dif- ferent in some meaningful way (higher quality, superior technology, faster availability). To effectively implement this strategy, fl exibility and initiative are useful for staying ahead of the competition, and a more organic structure can be helpful in supporting these needs.46 To be effective, each strategy requires a unique set of internal resources (e.g., human capital as illustrated in the IDEO example) that can be used to effectively implement the strategy.47

In the Experiencing Organizational Behavior segment, IDEO illustrates four key points. First, this fi rm shows how a differentiation strategy can be used in the business of designing products and services. IDEO has distinguished itself through its unique ap- proach to working with clients, and it promotes the innovation and initiative required to maintain its edge by using an organic structure. Second, the fi rm highlights the fact that companies occasionally supplement their internal human capital as they work to create a competitive advantage in the marketplace. All or most of IDEO’s clients have talented associates and managers. Yet, on occasion they still need outside assistance. Third, IDEO promotes design thinking throughout their and their clients’ organizations. In so doing, innovation is integrated into the organization’s culture and DNA. Finally, the IDEO case again illustrates the value of teams with diverse members, as explained in Chapters 2 and 11. Teams provided invaluable help for IDEO and its client fi rms to implement a strategy of innovation designed to create or maintain a competitive advantage.

A more advanced form of the divisional structure, strategic business units (SBUs) are sometimes used for more complex fi rms. Large fi rms with multiple diversifi ed businesses sometimes group their businesses into SBUs. At General Electric, for example, businesses are grouped into SBUs that include GE Advanced Materials, GE Commercial Finance, GE Consumer Finance, GE Consumer and Industrial Products, GE Energy, GE Healthcare, GE Infrastructure, GE Insurance Solutions, GE Transportation, and NBC Universal.48 A business strategy is then formulated for each separate SBU, thus allowing the complex organization to be more effectively managed. The key to developing effective strategies for each SBU is the appropriate grouping of businesses. Each group must have commonalities among its businesses for a coherent strategy to be developed. These commonalities may cor- respond to market relatedness, shared technology, or common distinctive competencies.49

The Role of the Environment Environmental forces account for many differences between organizations, and they have a marked effect on the way organizations conduct business.50 Because organizations must obtain their inputs from the external environment, their relationships with suppliers and customers are critical. They also must satisfy governmental regulations, adapt to changes in the national and world economies, and react to competitors’ actions.

Environment and Basic Structure Managers must closely monitor their organization’s external environment. However, some environments are more diffi cult to monitor than others because they are more uncer- tain (complex and changing). A number of researchers have found that the degree of

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The computer mouse, stand-up toothpaste containers, Palm V, i-Zone cameras, patient-friendly waiting rooms, and shopper-friendly intimate apparel displays. Differen- tiation is not easy, but these products and services helped to differentiate Apple Computer, Procter & Gamble, Palm Inc., Kaiser Permanente, and Warnaco. In cooperation with IDEO, Shimano, a global company head- quartered in Japan, developed an innovative new bicycle introduced in 2007. Ford is working closely with IDEO to design its new hybrid elec- tric vehicle that will closely meet the needs of its customers. Ford refers to its project as SmartGauge with Eco- Guide to design a more-connected, fuel-effi cient driving experience. IDEO is now the design fi rm that many or- ganizations use to help design their new products and services. What is the secret of IDEO’s success? It may have something to do with the associ- ates and managers at IDEO, a design fi rm based in Palo Alto, California.

The people of IDEO have a long history of helping fi rms design award- winning products and services. More recently, IDEO has begun offering consulting and training in innovation and culture change. To make a differ- ence, IDEO’s associates and manag- ers rely on a simple concept—empa- thy. Although this concept may not be conventional, IDEO’s record of suc- cess is diffi cult to question. The pur- pose of this training and IDEO’s ap- proach more generally is to inculcate

“design thinking” even into the top leaders of the organization.

Empathy for the customer is created in clients through a set of time-tested, systematic research methods. First, IDEO forms a diverse team composed of client and IDEO members. Team members from IDEO may represent the disciplines of cognitive psychology, en- vironmental psychology, anthropology, industrial design, interaction design, mechanical engineering, and business strategy. Team members from the client fi rm are key decision makers. With the team in place, observations in the real world are orchestrated. Team members observe how people use relevant prod- ucts and services. For a project focused on intimate apparel, team members followed women as they shopped for lingerie, encouraging the shoppers to verbalize everything they were think- ing. Team members may even act as customers themselves. For a health-care project, team members received care at various hospitals and documented their experiences by video and other media.

Second, team members engage in brainstorming. After some preliminary work, the designers, engineers, social scientists, and individuals from the cli- ent company engage in intense interac- tions to develop a rich understanding of an existing product/service design or of the needs in a novel product cat- egory. Unlike some group sessions, IDEO’s brainstorming sessions have been compared to managed chaos.

Third, team members engage in rapid prototyping. This is one of the

characteristics that have made IDEO famous. IDEO associates and man- agers believe in the power of trying many different ideas rather than just talking about them. Rudimentary ver- sions of products and services are quickly constructed and examined.

Finally, team members imple- ment the fruits of their labor. Detailed design and engineering work is com- pleted, and the team works closely with clients to ensure a successful launch. In many other design fi rms, team members simply turn over their work with little follow-up.

The critical component in this ac- cording to the president and one of the founders, Tim Brown, is design thinking. He suggests that all of these actions will not work effectively without this compo- nent. Innovation must be a part of the organization’s DNA, Brown suggests. This thinking requires work across func- tions and combines creative confi dence with analytic ability. This type of thinking is now used by Steelcase and Procter & Gamble, both of which have used it to become highly innovative companies.

IDEO has become so popular that many fi rms send their manag- ers to the fi rm to observe the organic structure and to be trained in innova- tive thinking and action. These man- agers use what they have learned to enhance the operations and structures of their own fi rms. IDEO’s approach continues to be highly successful. In 2009, it tied with Samsung for the most IDEA awards (eight) given for the top designs of the year.

Sources: IDEO. 2009. “Hybrid Electric Vehicle Dashboard Interaction for Ford Motor Company,” at http://www. ideo.com, Dec. 29; V. Wong. 2009. “How to Nurture Future Leaders,” BusinessWeek, at http://www.businessweek. com, Sept. 30; T. Brown. 2009. “Change by Design,” BusinessWeek, at http://www.businessweek.com, Sept. 24; C. Kuang. 2009. “Big Awards for the Year’s Best industrial Designs,” FastCompany, at http://www.fastcompany. com, July 30; 2007. “Coasting Bicycle Design Strategy for Shimano,” at http://www.ideo.com/ideo.asp, Apr. 16; B. Moggridge. 2006. Designing Interactions, Boston: MIT Press; IDEO. 2004. “About Us: Methods,” at http://www. ideo.com/about/index.asp?x=3&y=3.

EXPERIENCING ORGANIZATIONAL BEHAVIOR

IDEO and the Differentiation Strategy

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http://www.ideo.com/ideo.asp

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Factors Affecting Organizational Structure 497

environmental uncertainty experienced by managers is related to the type of structure an organization utilizes. And, this is especially important today because of the high un- certainty of environments in which many organizations must operate.51 Classic research indicated that effective organizations exhibit a match between environmental character- istics and organizational structures.52 Although the evidence is not entirely consistent, a number of other researchers have found similar results, using mostly small organizations or units of larger ones.53

The classic study reported the following important fi ndings:

• Effective organizations experiencing high environmental uncertainty tend to be more organic because lower-level managers and associates must be able to think for themselves. They must be able to respond to events quickly.

• Effective organizations experiencing low environmental uncertainty tend to be less organic. Mid and senior-level managers in conjunction with operations specialists can create effi cient and effective rules and operating procedures. They can gain suffi cient insight to understand and anticipate most situations that will arise and carefully create procedures to handle those situations.

It is important to understand the reasons for differences in functional departments within an organization. Because separate departments focus on different areas of the ex- ternal environment, they often exhibit different types of structure. R&D, for example, is focused on technological advances and the changing pool of knowledge in the world. The relatively high level of uncertainty involved often requires a more organic structure with longer time horizons for decision making and planning and a greater emphasis on interpersonal relationships to promote important discussions and information sharing. In contrast, the accounting function is focused on more slowly evolving developments in accounting standards. The relatively low level of uncertainty generally supports use of a less organic structure, with shorter time horizons and lower emphasis on interpersonal relationships. In effective organizations, then, differences in the level of uncertainty in subenvironments create differences in functional departments.

Recent work suggests that environmental uncertainty also affects the way resources should be managed in organizations. For example, organizations operating in uncertain environments need to constantly enrich their current capabilities and even create new ones. Thus, they continuously train their managers and associates to upgrade their skills and are on the lookout for new associates with “cutting-edge” knowledge that can add to the organization’s stock of knowledge. They also need to search for opportunities in the environment and to engage in entrepreneurial behavior to maximize the use of their capa- bilities to provide products and services that create value for their customers.54 IDEO, as explained in the Experiencing Organizational Behavior feature, is helping fi rms to be more entrepreneurial and create products that are valued by their customers. All of the research then suggests that managers must continuously scan their fi rm’s external environment to identify factors that may affect how the fi rm should act. Their scanning behavior is even more important in dynamic environments.55

Environment and Integration Functional departments within a single-product fi rm or a division of a larger fi rm must be integrated. They must share information and understand one another in order to co- ordinate their work.56 Thus, organizations must be structured to provide the necessary

environmental uncertainty The degree to which an environment is complex and changing; uncertain environments are diffi cult to monitor and understand.

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498 Chapter 13 Organizational Structure and Culture

information, or perhaps to reduce the need for it. Structural arrangements that address information needs are particularly important when the environment is uncertain. Use- ful arrangements include: (1) creation of slack resources, (2) creation of self-contained tasks, (3) investment in information technology, and (4) creation of traditional lateral rela- tions.57 Exhibit 13-5 shows the relationship of these elements of organizational structure and information processing needs.

The creation of slack resources reduces the need for interdepartmental information processing. Departments can operate more independently. Examples of slack resources include having extra time to complete tasks that other departments need as inputs and maintaining large inventories of raw materials provided by others. Although these extra resources reduce information exchange needs, they are costly.

The creation of self-contained tasks reduces the need for interdepartmental process- ing of information. This approach provides departments with more of the resources they need to do the job. For example, a department’s tasks may require the help of a design engineer and a process engineer on a part-time basis. Instead of having a group of design engineers to which various departments would come when they need help, a design en- gineer is specifi cally assigned to each department, with nonengineering work used to fi ll any unused time. This method reduces the need for coordination between groups (e.g., the engineering group and other groups needing engineering services) and thereby reduces information-processing requirements.

Unlike the two elements of structure discussed above, information technology facili- tates the processing of information rather than reducing the need to process it. This technol- ogy can help to transfer information up and down the hierarchy as well as horizontally from department to department. E-mail, web-based discussion boards, chat rooms, and Twitter

slack resources An integration technique whereby a department keeps more resources on hand than absolutely required in order to reduce the need for tight communication and coordination with other departments.

self-contained tasks An integration technique whereby a department is given resources from other functional areas in order to reduce the need to coordinate with those areas.

information technology An overall set of tools, based on microelectronic technology, designed to provide data, documents, and commentary as well as analysis support to individuals in an organization.

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Factors Affecting Organizational Structure 499

are examples of simple tools that facilitate communication and coordination. An informa- tion repository is a more complex tool for integration. Such a repository requires individuals in various departments to deposit documents, data, and commentary in an open-access cen- tral database. An enterprise resource planning (ERP) system is an even more complex tool. ERP systems provide a common set of planning and analysis capabilities across departments, as well as a platform for electronically sharing evolving plans and analyses. This type of sys- tem has provided important benefi ts in the integration of departments,58 particularly when the system has been explicitly designed to support the organization’s strategy. An ERP sys- tem has even been used to coordinate the cross-functional curriculum of a business school.59

In addition to facilitating integration across existing departments in an organization, information technology has helped to fl atten organizations and has promoted project- based structures.60 Shorter hierarchies are consistent with high-involvement management because they push decision authority to the lowest levels of the organization and increase the speed and quality of decisions as a result. Such hierarchies would not be possible, how- ever, without information technology to ensure that associates and lower-level managers have the information they need to make sound decisions. Project-based structures utilize individuals from various departments to work on complex projects requiring intense and integrated efforts. In some cases, these individuals are temporarily assigned to a project on a full-time basis. In other instances, individuals participate part-time as project members and part-time as members of their functional departments. In both cases, information technology ensures that project participants working on different aspects of the overall project understand the goals and activities of those working in other areas. Without so- phisticated information technology, individuals could not integrate the various aspects of the project as effectively or as rapidly, resulting in some complex projects not being under- taken and others being handled more slowly through the traditional hierarchy.

Relations among departments are based on the need for coordinating their various tasks. Because lateral relations increase information fl ow at lower levels, decisions requir- ing interdepartmental coordination need not be referred up the hierarchy. Lateral relations are traditional elements of structure used to help organizations process more information. These relations may be facilitated by information technology but often are based on face- to-face communication. A number of alternative lateral processes can be used. Listed in order of least complex to most complex, they are as follows:

• Direct contact involves two individuals who share a problem and work directly with one another to solve it.

• Liaison roles are temporary coordination positions established to link two departments that need to have a large amount of contact.

• Task forces are temporary groups composed of members from several departments who solve problems affecting those departments.

• Teams are permanent problem-solving groups for continuous interdepartmental problems.

• Integrating roles are permanent positions designed to help with the coordination of various tasks.

• Managerial linking roles are integrative positions with more infl uence and decision-making authority.

• Matrix designs establish dual authority between functional managers (marketing manager, engineering manager) and project or product managers (leisure furniture manager, offi ce furniture manager).

lateral relations Elements of structure designed to draw individuals together for interchanges related to work issues and problems.

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500 Chapter 13 Organizational Structure and Culture

The Role of Technology Within an organization, technology refers to the knowledge and processes required to accomplish tasks. It corresponds to the techniques used in transforming inputs into outputs. The relationship of technology and structure has been described in several ways, as discussed below.

Technology and Structure: A Manufacturing Framework Early work on the relationship between technology and organization structure focused on manufacturing technology: small-batch production, mass production, and continuous- process production.61

This research found that technological complexity infl uenced structure and that ef- fective organizations exhibited matches between technology and structure.62

Today, new types of technology are being used in smaller and larger manufacturing operations alike. Technology can equalize the competition between smaller and larger organizations. The use of advanced manufacturing technology (AMT), computer-aided design (CAD), and computer-aided manufacturing (CAM) helps fi rms of all sizes to cus- tomize their strategies by manufacturing products of high variety at lower costs and to commercialize new products in a shorter amount of time.63 These technologies have been integrated to create forms of “mass customization.” Mass customization is a process that integrates sophisticated information technology and management methods in a fl exible manufacturing system with the ability to customize products in a short time.64 Organiza- tions using mass customization need a more fl exible and organic structure.65

Technology and Structure: A Broader Framework The link between technology and structure using a broader view of technology is useful in both manufacturing and service organizations. In this view, technology is defi ned as the number of different problem types that are encountered over time (task variability) and the degree to which problems can be solved using known steps and procedures (task analyzability).66 Based on these two dimensions, he delineated four types of technology:

1. Routine: There is little variation in the fundamental nature of problems encountered over time, but any new problems can be solved using readily available methods.

2. Craft: There is little variation in the fundamental nature of problems encountered over time, but any new problems often require a novel search for unique solutions.

3. Engineering: There is signifi cant variation in the fundamental nature of problems encountered over time, and new problems can be solved using readily available methods.

4. Nonroutine: There is signifi cant variation in the fundamental nature of problems encountered over time, and new problems often require new methods to fi nd unique solutions.

Exhibit 13-6 provides examples of organizations with these types of technologies. To be most effective, fi rms should match their structure to the technology used. Nonrou- tine organizations should adopt an organic structure; craft and engineering organizations should adopt a moderately organic structure; and routine organizations should adopt the least organic structure.67 Essentially, as routineness increases, organic structures become somewhat less useful.

mass customization A manufacturing technology that involves integrating sophisticated information technology and management methods to produce a fl exible manufacturing system with the ability to customize products for many customers in a short time.

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Factors Affecting Organizational Structure 501

These technology concepts can be applied to an organization as a whole or to units within the organization. For example, the technology of W. L. Gore, the maker of Gore- Tex fabric, can be described as a mixture of routine and craft technology at the fi rm level, but its R&D area can be described as nonroutine. Any unit can be assessed with respect to task variability and task analyzability and placed into one of the four technology catego- ries. A number of studies have shown that technology infl uences structure at the unit level and that effective units exhibit a signifi cant match between technology and structure.68

The Role of Organizational Size It is not surprising that size has implications for organizational structure.69 As an organiza- tion grows, it generally becomes taller; otherwise, the average span of control for managers becomes too large. As organizations increase in size, formalization also tends to increase to help maintain order. However, centralization tends to decrease, as senior managers cannot comprehend all of the organization’s work and make all decisions.

The most important measure of size is the number of associates and managers. Re- search shows that managerial decisions regarding structure are based on the factors that are most salient to managers. Because people are highly important to most managers, managerial decisions on structure are often infl uenced by the number of people for whom the managers have responsibility.70

A common outcome of larger organizations and the heightened formalization and standardization that accompanies growing size is inertia.71 Large formal organizations often have more standardized policies and routines for managers and associates to follow. These attributes often produce a resistance to change and thus lower innovation. Yet, in- novation is a critical component of competitiveness for most organizations in our current global economic environment. The potential for inertia in large organizations and the need for innovation have led to the development of ambidextrous structures and practices.

Ambidextrous organizations balance the formalization and standardization that help to achieve effi ciency and the fl exibility required to explore new ideas and opportunities

ambidextrous organization An organization structure that balances formalization and standardization to help to achieve effi ciency and fl exibility.

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Routine Craft

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Public School

Exhibit 13-6 Organi- zations and Technology

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502 Chapter 13 Organizational Structure and Culture

necessary to be innovative.72 The intent is to achieve effi ciency to exploit the fi rm’s current capabilities and simultaneously explore to learn new capabilities, discover new technolo- gies, and develop new products and services.73 To do so fi rst requires top management to have a shared vision of an ambidextrous organization and to develop an incentive sys- tem to reward the achievement of both exploitation and exploration. This often requires transformational leadership (as discussed in Chapter 8) and design thinking, such as that promoted by IDEO.74 Another dimension involved in building an ambidextrous organi- zation is the structure. Often, fi rms trying to achieve the needed balance maintain some parts of the organization with formalized routines but then also develop semi-autonomous units that have signifi cant freedom to explore new ideas and unique approaches to prob- lems.75 These approaches allow the organization to unbundle operations and processes to manage the costs of operations but also pursue the development of technological innova- tions. This type of organization, structure, and leadership is becoming more common.76

Summary Comments on Structure In summary, corporate strategy and organizational size have strong effects on the structural characteristics of organizations—those that determine the shape and appearance of the hi- erarchy. Corporate strategy is a particularly strong determinant of departmentalization, and size is an especially strong determinant of height and spans of control. Business strategy, environmental uncertainty, and technological nonroutineness have strong effects on unit structuring within organizations, as well as the overall structure of the organization.

An important study has shown how business strategy, environmental uncertainty, technological nonroutineness, and structure work together to infl uence performance in organizational units as well as in small organizations.77 In this study, strong performance was associated with consistency among these factors:

• Uncertain environments led to strategies based on differentiation and innovation, which in turn led to nonroutine work, all of which were matched by organic structure.

• More certain environments led to strategies based on low costs and effi ciency, which in turn led to routine work, all of which were matched by a less organic structure.

Other studies have provided similar results,78 suggesting that managers in effective fi rms create consistency across strategy, environment, technology, and structure.

Organizational Culture Culture is closely related to most other concepts in the fi eld of organizational behavior, including structure, leadership, communication, groups, motivation, and decision mak- ing.79 Culture is affected by and can also affect these other areas of organizational func- tioning and it is related to social, historic, and economic issues as well.80 Thus, it is an important and encompassing concept.

Google’s organizational culture is described in the Experiencing Organizational Behav- ior feature. Google’s culture is highly informal, with a decentralized structure designed to enhance associates’ creativity. Google must be doing something right because it is a highly successful company. Its culture and structure, along with its interrelated management model, have attracted signifi cant human capital, which is one of the reasons for its success. Google’s approach is highly similar to a high-involvement organization.

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Organizational Culture 503

EXPERIENCING ORGANIZATIONAL BEHAVIOR

Larry Page and Sergy Brin graduated from Stanford University in 1995 with computer science degrees. They wanted to build a search engine that would retrieve selective information from the vast amount of data available on the Internet. In 1997, they named their search engine “Backrub,” and in 1998 they renamed it “Google” (Google is a play on googol, the mathematical term for a � followed by 100 zeros—a ref- erence to organizing the seemingly infi nite Web). By 2003, it was the most preferred search engine in the world because of its precision and speed in delivering the desired data in searches. But their success can also be attributed to Google’s or- ganizational culture.

In organizing the fi rm, Page and Brin avoided unnecessary managerial hierarchies, creating a decentralized structure, and giving their engineers signifi cant autonomy to encourage creative thinking. Google has a small management hierarchy and most en- gineers work in teams of three, with project leadership rotating among them. These teams had complete autonomy and freedom to create, re- porting directly to the vice president. Open communication is encouraged and employees are free to approach top management as desired. They are allowed to communicate with

anyone in any department. Employ- ees were also asked to eat in the cafeteria so they could meet others in the company and create opportu- nities for them to share and discuss technical ideas or issues. In addition,

every Friday afternoon all employees are provided information about new products and the company’s fi nancial performance. Google’s emphasis on innovation and commitment to cost containment requires each employee to be a contributor. The decentralized model of management and open lines of communication are essential parts of Google’s organizational culture. And the organizational structure and culture have helped the fi rm attract and retain the most talented individu- als in the fi eld. Although still a young fi rm, Google’s work culture has be- come legendary in Silicon Valley.

Larry and Sergy wanted to cre- ate a fun place to work and use in- centives that could attract top talent. Google headquarters, known as the Googleplex, was decorated with lava lamps, giant plastic balls, and bright

colors. Employees are also allowed to bring their pets to work and are provided free snacks, lunch, and din- ner, prepared by an award-winning former chef to the Grateful Dead. The founders said that the free, healthy

meals came about after calculating the time saved from driving off-site and reduced health-care costs. They have even provided a Webcam that monitors the cafeteria lunch line, so employees can avoid a long wait. Employees are also provided recreational activities, which include workout gyms, assorted video games, pool tables, ping-pong tables, and roller-skater hockey. Addi-

tional benefi ts include fl exible work hours, company-paid, midweek ski trips to Squaw Valley, and maternity/ paternity leave with 75 percent pay. A benefi t addition in 2008 was free afternoon tea service. The company reportedly has the best package of benefi ts available, even after some minor benefi t cuts in 2009 due to the major economic recession.

A few people have criticized Google’s organizational culture and management model. Some believe that Google has outgrown the infor- mal culture and that it will not be able to sustain the growth and still main- tain the informal lines of communica- tion. Critics argue that even though engineers are free to pursue individ- ual projects, the informality makes it diffi cult to coordinate and plan ac- tivities. Alternatively, as Google has

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504 Chapter 13 Organizational Structure and Culture

Organizational cultures are based on shared values, as described earlier.81 As noted, culture begins with shared values, which then produce norms that govern behavior. Be- havior produces outcomes that are reinforced or punished, thereby bolstering the culture. Thus, any culture, positive or negative, becomes self-reinforcing and diffi cult to change. The process of culture development and reinforcement is shown in Exhibit 13-7.

The strength of an organization’s culture is based to some degree on the homogene- ity of associates and managers and the length and intensity of shared experiences in the organization.82 The longer a culture is perpetuated, the stronger it becomes because of its self-reinforcing nature. An organization’s culture not only reinforces critical values but also important behaviors. For example, Google’s culture could be described as a learning culture in which new knowledge is created, acquired externally, diffused internally,83 and applied to create innovative services for Google’s markets and customers. Organizational culture also affects an organization’s ability to resolve problems and to create change. For example, in an open culture in which managers and associates are engaged (i.e., a high- involvement organization), more alternatives are likely to be generated and considered to resolve problems. Also, the open communication can help to resolve confl icts if they exist.84 In addition, the openness of communications between managers and associates (exemplifi ed by Google) and transparency because of the high involvement makes all par- ticipants more open to change. And, by participating in creating the change, managers and associates are more likely to be committed to it.85

grown much larger (from 1,000 to almost 15,000 managers and associ- ates), sustaining its culture has been more challenging. A few associates have complained that they now feel a distance between them and manage- ment. They express concerns that the fi rm has become more bureaucratic. And, Google has begun losing some of its top talent, especially those who have increased their wealth with Google stock ownership and have departed to establish their own busi- ness. Yet, Google continues to be highly innovative. It was ranked as

the second most innovative company in BusinessWeek’s 2009 rankings of the top 25 most innovative compa- nies. In addition, Google continues to be ranked at the top of Fortune’s 100 best companies to work for.

But Google continues to engage its associates, involving them in ad- dressing major issues, maintaining a fl at organization, and striving to keep the entrepreneurial spirit alive. Thus, although it is losing some of the tal- ent recruited in past years, it contin- ues to attract some of the top talent in the industry. For example, in 2008,

it received almost 1 million applica- tions for the 3,000 positions it was trying to fi ll.

Google’s culture and its talented associates have allowed it to continue to enhance its Internet search capabil- ities, maintaining its competitive ad- vantage over formidable rivals such as Microsoft and Yahoo!. The culture and structure encourages and facili- tates the development of innovative new services by associates, helping Google to remain one of the most suc- cessful companies in the world.

Sources: Staff of the Corporate Executive Board. 2009. “Involve Your Employees,” Says Google, CEB, Business Week, Dec. 11, at http://www.businessweek.com; Andrzej Zwaniechi. 2009. “Google Aims to Retain Entrepreneurial Spirit as It Grows,” America.gov, Oct. 28, at http://www.america.gov; “Google Hits Reset on Company Culture,” Glassdoor, Oct. 8, 2009, at http:// www.glassdoor.com; Elizabeth Montailbano. 2009. “At 10-year mark, Google’s glossy façade shows cracks,” Macworld, Sept. 8, at http://www.macworld.com; “The 25 Most Innovative Companies,” Business- Week, Apr. 20, 2009, at http://www.businessweek.com; Adam Lashinsky. 2008. “Can Google three-peat?” Money, Jan. 31, at http://www.cnnmoney.com; B-School News. 2006. “They Love it Here, and Here, and Here,” Business- Week, June 4, at http://www.businessweek.com; Jade Chang. 2006. “Behind the Glass Curtain,” BusinessWeek, July 18, at http://www.businessweek.com.

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Organizational Culture 505

Shared Values

Individual and Group Behavior

Reinforcing Outcomes

Norms

Exhibit 13-7 Process of Developing Organizational Culture

Competing Values Model of Culture One of the most popular models of culture in business fi rms is the competing values model, in which two value dimensions are central.86 The fi rst dimension relates to the value placed on fl exibility and discretion versus stability and control. In some organiza- tions, managers and associates believe in the power and usefulness of fl exibility and dis- cretion, while in other organizations individuals believe in the power of a stable work situation where control is strongly maintained. Ambidextrous organizations, described earlier, achieve a balance in these values through the culture and structure. The second dimension relates to the value placed on an internal focus coupled with integration versus an external focus coupled with differentiation in the marketplace. In some organizations, associates and managers prefer to focus internally; in other organizations, individuals have an external orientation.

Four types of culture result from different combinations of these dimensions (see Exhibit 13-8):

1. Clan—strong value placed on fl exibility and discretion with a focus inside the organization. Leaders tend to be mentors and coaches. Effectiveness is evaluated in terms of the cohesion and morale of individuals inside the fi rm and tacit knowledge held. Overall, the organization tends to be a friendly place to work, with a great deal of commitment and loyalty.

2. Hierarchy—strong value placed on control and stability with a focus inside the organization. Leaders tend to be monitors and organizers. Effectiveness is measured in terms of effi ciency and orderly coordination. The organization tends to be a formal and standardized place to work, with emphasis on explicit knowledge.87

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3. Market—strong value placed on control and stability with a focus outside the organization. Leaders tend be driven and competitive. Effectiveness is measured in terms of goal achievement and beating the competition in the marketplace. The organization can be a diffi cult place to work because there is a constant focus on results and doing better than colleagues.

4. Adhocracy—strong value placed on fl exibility and discretion with a focus outside the organization. Leaders tend to be entrepreneurial and innovative, perhaps even visionary. Effectiveness is evaluated in terms of creativity and leading-edge innovation in the marketplace. The organization tends to be a vibrant place to work, with signifi cant risk taking.

Organizations usually possess elements of all four cultural types. In fact, organizations need all four because morale, innovation, success relative to competitors in the market- place, and effi ciency are all important for long-term performance and survival.88 In most cases, however, an organization emphasizes one cultural type over another. Each culture can be useful as a point of emphasis, depending on circumstances. Hierarchy, for exam- ple, might be emphasized in an organization pursuing a low-cost business strategy in all of its product lines. In such an organization, however, managers must be careful not to allow the emphasis on hierarchy to become too great. If hierarchy is overemphasized, it will be diffi cult to incorporate the decision- and team-related aspects of high-involvement management.89 Furthermore, research suggests that the hierarchy culture can reduce com- mitment and satisfaction. Market culture could be useful in industries that are highly competitive. Clan culture is often more useful for organizations operating in regulated industries or in small new-venture fi rms where working with good colleagues and positive

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Internal Focus and Integration versus External Focus and Differentiation

Clan Adhocracy

Hierarchy Market

Leadership—Mentors and Coaches

Effectiveness— Cohesion and Morale

Leadership— Entrepreneurs and

Innovators

Effectiveness—Creativity and Innovation

Leadership—Monitors and Organizers

Effectiveness— Efficiency and Order

Leadership—Hard Drivers and Competitors

Effectiveness—Goal Achievement and Winning

Exhibit 13-8 Competing Values Model of Organizational Culture

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Organizational Culture 507

working relationships are emphasized more than fi nancial compensation. Google has used such a culture since its beginning. However, even as a large, more established organization, Google continues to use this culture successfully. Adhocracy might be emphasized in an organization pursuing the differentiation strategy in its product lines.

Clearly, organizational cultures affect managers’ and associates’ behaviors and thus organizational performance. The core values of an organization serve to attract new asso- ciates who share similar values or at least are comfortable with the organization’s values.90 For example, research has shown that organizational culture affects the extent to which associates are willing to accept changes in an organization. Specifi cally, associates who perceive an organizational culture that positively values human relations are more willing to participate in and accept changes made by the organization.91 In addition, other studies have shown that when the organizational culture promotes respect for people, associates are more likely to view relationships with leaders more positively, to trust others, and to perceive that the organization treats associates fairly.92 Therefore, such cultures are likely to support an organization’s competitive advantage because of a motivated workforce and low turnover among associates.93

Cultural Socialization Newcomers are taught an organization’s culture through socialization—the imparting of the organization’s values. Socialization can take several forms. Based on groundbreak- ing work by noted culture researchers John Van Maanen and Ed Schein, researchers have focused on three sets of issues: context, content, and social dynamics.94

Context refers to whether newcomers are exposed to key values through a collective or an individual process, and whether they ex- perience a formal or an informal approach. In a collective process, all newcomers experience the same socialization events (videos, senior leadership greetings, exercises, receptions, stories, and so on). In an individual process, the experiences are unique. With a formal ap- proach, newcomers learn about the organization away from the jobs they will be taking (off-the-job learning and training), whereas an informal approach puts them in their jobs immediately (on-the-job learning and training). To maximize absorption of an organization’s values, a collective, formal approach may be best. This approach en- sures that newcomers are exposed to a standard set of tactics in a focused manner away from the pressures of the new job. Bain and Company, a management consulting fi rm, illustrates this approach. It uses a formal standard induction program to provide specifi c train- ing and to build cohesiveness and a sense of identity with the fi rm. This is supported by excellent materials on the Bain website that explain the company’s culture and provide consultants’ journals with valuable information on the jobs the new recruits will likely hold. In the program and on the website, information is provided to reinforce the idea that senior colleagues serve as mentors and coaches.95

Content refers to whether newcomers are provided information on the probable sequence of development activities and job rota- tions for the fi rst year or two in the organization, and whether they are given specifi c information on the likely duration of each activity.

socialization A process through which an organization imparts its values to newcomers.

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With detailed information on upcoming development activities, newcomers experience less uncertainty. They have a better sense of where they are going in the organization. When information provided to newcomers conveys a variable and random situation (no set sequence of development activities and no estimates of duration times), newcomers are less able to discern a clear path to success and advancement. This latter situation can create satisfaction and commitment issues.

Social dynamics refer to whether newcomers experience serial or disjunctive processes and whether they are exposed to an investiture or a divestiture approach. Newcomers experiencing a serial approach have experienced organizational members as role models. The disjunctive process does not formally establish contact with experienced associates and managers, forcing newcomers to make sense of the situation on their own. With the investiture approach, positive social support is provided from the beginning rather than negative information through a hazing process. The combination of serial and investiture techniques yields better socialization experiences.

In a high-involvement organization, socialization is usually an easier task, as the pro- cess begins before employment, during the selection process. Most applicants are rigor- ously screened with the purpose of discouraging those who may not fi t the culture. For example, at Southwest Airlines, the socialization process begins well before the applicant is hired. Applicants are exhaustively screened by a number of interviewers. The interview team does not oversell Southwest but describes both the advantages and disadvantages of working for the fi rm. The purpose is to make sure that the applicant’s values and objec- tives mesh with those of the airline.96 The process has been highly effective, as South- west’s culture is often given credit for the company’s success. In 2009, Southwest Airlines was ranked number 7 in Fortune magazine’s list of the most admired corporations in the United States.97

Integrating new associates into the organization’s culture is important, especially for maintaining the culture. Research has shown that organizations with highly integrative cultures, whether they are focused on associate development and harmony or customer orientation and innovation often perform better than organizations that pay less attention to their cultures.98

Cultural Audits Managers must understand and monitor their organization’s current culture to develop and effectively manage it.99 Thus, a cultural audit should be conducted periodically. This type of audit is an analysis designed to uncover shared values and beliefs in an organiza- tion. It should identify the strengths and weaknesses of the current culture with respect to the support it provides for the achievement of the organization’s goals.100

The following fi ve steps may be used in conducting a cultural audit:101

1. Analyze the process and content of the socialization of new associates and managers (interview those directly involved in socialization).

2. Analyze responses to critical incidents in the organization’s history (construct an organizational biography from documents and interviews of past and present associates and managers).

3. Analyze the values and beliefs of culture creators (founders) and carriers (current leaders) (observe and/or interview the founders and current leaders).

cultural audit A tool for assessing and understanding the culture of an organization.

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Organizational Culture 509

4. Explore anomalies or puzzling features discovered in other analyses (initiate joint problem-solving sessions with current leaders in the organization).

5. Examine the linkage of the current organizational culture to its goals.

A cultural audit is a complex and sometimes lengthy process that should be conducted only after careful planning and preparation. The results of an audit might indicate a cul- ture that is not well developed or might disclose the presence of subcultures. An under- developed culture poses less of a problem than one that is dysfunctional, fully developed, and self-reinforcing, because the less-developed culture can be more easily infl uenced and its path altered if necessary.

Subcultures It is possible for subcultures to develop in an organization, particularly when no domi- nant organizational culture exists or when the organization is diverse and geographi- cally dispersed.102 Subcultures are based on values shared by a group rather than by an organization as a whole. Some of the values of the subculture are similar to and others are dissimilar from the organization’s values and the values of other groups. The existence of subcultures complicates the development and management of an organi- zational culture.

In large, diverse organizations, some researchers advocate viewing organizational cul- ture as a system of integrated subcultures rather than a unifi ed set of values.103 In such cases, senior managers need to understand each subculture, ensure that it is appropriate for its market segment, and decide whether it fi ts with critical organizational values. Thus, a manager’s purpose is to encourage the integration of critical organizational values in each subculture.

It is possible for a subculture to include values that are counter to those of the overall organization. Such a counterculture may be diffi cult to manage. Although a countercul- ture often creates problems, it can also produce positive outcomes. For example, a coun- terculture can induce a revolution, forcing change in a staid, outmoded culture. It also may encourage the development of new and creative ideas not allowed by existing norms of the organizational culture.104

It is also possible that some subcultures are related to national culture. This may be even more likely in large countries where there are several regional cultures that differ in some values (e.g., China, United States). Research has shown that attributes of national culture (e.g., extent of collectivism) interact with managerial actions such as rewards pro- vided to affect how associates react to the organization (e.g., their commitment to the organization).105 However, some research has found that national culture has only a small infl uence on organizational culture.106

The Managerial Advice segment provides an example of a misfi t between a key man- ager and the company’s culture. Bob Nardelli was hired as CEO of Home Depot to make some changes. He did so, but went further than desired by the board. His changes strongly revised the culture of the fi rm, making it control-oriented, thereby losing the entrepreneurial spirit among store managers and associates. While Home Depot likely needed better control systems, Nardelli’s changes went too far. Although Home Depot has made several positive changes since Nardelli’s departure, the effects of his tenure as CEO have been long lasting. This example shows the importance of a person–organiza- tion fi t, discussed next.

subcultures In the organizational context, groups that share values that differ from the main values of the organization.

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MANAGERIAL ADVICE

Research indicates that simi-larity in values and goals at-tracts individuals to specifi c organizations. When an individual’s management style and values are not congruent with the organization’s cul- ture, problems can develop. This is the reason why problems developed after Home Depot hired Bob Nardelli as CEO in 2000. Home Depot wanted to remain adaptive and make some necessary changes to increase stock prices by bringing in a key individual that the board of directors felt could accomplish these goals. In addition, the board believed that Nardelli’s ideas might prompt refl ection and help Home Depot make needed changes to impress investors and “pump up” its stock price.

In the early years, Home Depot founders Bernie Marcus and Arthur Blank took it personally if a cus- tomer left without buying something. Home Depot’s culture was similar to a clan, as the founders placed strong value on fl exibility, leaders tended to be mentors and coaches, and they worked to achieve group cohesion and high morale among the associ- ates. The organization was known to be a friendly place to work, and they established a decentralized, entrepre- neurial business model. Home Depot

was famous for its freewheeling, entre- preneurial spirit, with individual stores operated in a highly autonomous manner. All aspects of the store opera- tions were the responsibility of local management. Using that model, it became the fastest-growing retailer in U.S. history, expanding from a three-

store startup in 1979 to a $45 billion chain in 2000. The substantial growth caused the company to struggle with its internal systems and controls, and change was necessary in order to ac- commodate and manage additional growth.

However, Nardelli’s changes were too signifi cant and confl icted with the Home Depot culture. After fi ve years with Nardelli as CEO, the com- pany felt more like a military organi- zation. He embarked on an aggres- sive plan to centralize control, and to support this change Home Depot invested more than $1 billion in new technology. To help generate the de- sired data, the company purchased

self-checkout aisles and inventory management systems. Nardelli felt it was important to measure everything that occurred in the company and hold executives accountable for meet- ing “their numbers.” He implemented a management model that imported ideas, people, and platitudes from

the military, which was a key part of the move to reshape Home Depot into a more cen- tralized organization. The culture he was trying to cre- ate was similar to a hierarchy culture, emphasizing control, and stability with leaders monitoring and organizing in an effi cient manner. In mak- ing these changes, Nardelli failed to keep the entrepre- neurial spirit alive in the com- pany.

Some former executives said that Nardelli had cre-

ated a “culture of fear” and a de- moralized staff, which in turn caused customer service to wane. While some praised Nardelli for bringing greater discipline and structure, oth- ers blamed him for eroding the en- trepreneurial culture at Home Depot. Many on Wall Street felt that Nardelli never understood the value of the pre- vious organizational culture. Associ- ates did not embrace the new culture and some feel this was the reason Home Depot struggled with customer satisfaction and performance in the stock market. Thus, the fi t between an individual and the organization was unsuccessful and had debilitating ef- fects on the company’s performance.

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Person–Organization Fit 511

Person–Organization Fit As suggested throughout this discussion of structure and culture, the fi t between an in- dividual and the organization has important implications for satisfaction, commitment, intent to turnover, and job performance.107 Values are abstract ideals related to proper life goals and methods for reaching those goals. As such, individual values often underlie groups of attitudes. Although people may have thousands of attitudes, most likely they have only a few-dozen values.108 Thus, values are more general than attitudes and form the basis for how we should behave. For example, we could have the underlying value that family time is highly important and a corresponding negative attitude toward a colleague who works most nights and many weekends.

Values emerge as individuals mature and as they develop the ability to form general concepts from their accumulated experiences. Also, during value formation, the value judgments of people we respect infl uence the nature of our values. Finally, as discussed in Chapter 2, national and ethnic culture affects the development of values.

Once formed, values serve as frames of reference that help guide people’s behavior in many different contexts. Values can be modifi ed or refi ned as a result of new experi- ences but are much more resistant to change than are attitudes. Thus, individuals will not change their values to join a particular organization. Rather, they make choices based on the agreement between their personal values and those of the organization. Many organi- zations try to select new associates who share the values consistent with their organiza- tional culture. For example, the individuals who work at Southwest Airlines are likely to share values concerning equality, hard work and having fun at work, partly because of the

values Abstract ideals that relate to proper life goals and methods for reaching those goals.

In early 2007, it was announced that Nardelli departed the company in a disagreement with the board of direc- tors. Home Depot has not fully recov- ered since, although it has made a number of positive changes. Because of its lost sales to rivals and poor stock market performance, it also sold its entire supply business in 2007. It also closed 15 underperforming stores in 2008 and closed 34 EXPO design stores in 2009. Along with these ac- tions, 7,000 people were laid off,

including 10 percent of the corporate offi cers. One of the fi rst actions taken by the new CEO, Frank Blake, after assuming the position was to abolish the daily catered lunch for top execu- tives. He encouraged his colleagues to eat in the cafeteria with the compa- ny’s other home offi ce managers and associates. In addition, in 2009, he promoted Marvin Ellison to executive vice president of U.S. stores because of his emphasis on customer service. Home Depot lost many customers to

rivals such as Lowe’s because of the poor customer service during Nardel- li’s tenure as CEO. But, the customers who have come back to Home Depot in recent times have had a positive experience.

Home Depot remains a large company, ranked 25th on Fortune’s list of the largest 500 corporations. But it continues to struggle because of the poor fi t between Nardelli and the company and perhaps the industry as well.

Sources: Jean Niemi. 2009. “The Home Depot to Launch Exclusive Martha Stewart Living Brand,” Home Depot, Sept. 14, at http://www.phx.corporate-ir.net; Jena McGregor. 2009. “Smart Cost-Cutting: How Home Depot Built It in,” BusinessWeek, Aug. 4, at http://www.businessweek.com; Jena McGregor. 2009. “Marvin Ellison: Home Depot’s Mr. Fixit?” BusinessWeek, May 7, at http://www.businessweek.com; “25. Home Depot,” Fortune, May 4, 2009, at http://www.cnnmoney.com; Michael Barbaro. 2007. “Home Depot Gets a Fresh Coat of Less-Glossy Paint,” The New York Times, Feb. 8, at http://www.nytimes.com; Theresa Forsman. 2000. “The Maverick’s Manual for Entrepreneurial Success,” BusinessWeek, Dec. 5, at http://www.businessweek.com; Brian Grow. 2006. “Renovating Home Depot,” BusinessWeek, Mar. 6, at http://www.businessweek.com; Julie Creswell & Michael Barbaro. 2007. “Home Depot Ousts Chief,” International Herald Tribune, Jan. 4, at http://www.iht.com.

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512 Chapter 13 Organizational Structure and Culture

EXHIBIT 13-9 Types of Personal Values

End (Goal) Values Means (Behavior) Values

Prosperity Ambition and hard work

Stimulating, active life Open-mindedness

Achievement Competence

World peace Cheerfulness

Harmony in nature and art Cleanliness

Equality Courageousness

Personal and family security Forgiving nature

Freedom Helpfulness

Happiness Honesty

Inner peace Imagination

Mature love Independence and self-reliance

National security Intelligence

Pleasure and enjoyment Rationality

Religion and salvation Affection and love

Self-respect Obedience and respect

Social respect Courtesy

Friendship Responsibility

Wisdom Self-discipline Source: Adapted from M. Rokeach. 1973. The Nature of Human Values (New York: The Free Press).

recruitment practices of Southwest and partly due to the choices made by individuals on where they prefer to work.

Values develop along two dimensions: (1) the types of personal goals that one ought to have and (2) the types of behaviors that one ought to use in reaching those goals.109 These two dimensions are sometimes referred to as the end–means dimensions of values. Thus, individuals may develop an end value that they should seek a life of prosperity and a means value that they should be ambitious and hardworking to achieve that goal. These values complement each other by specifying a general goal in life and identifying acceptable behaviors for reaching it. A list of “end” values and “means” values is shown in Exhibit 13-9.

Research has shown that basic personal values affect individual reactions to job situa- tions.110 Our satisfaction with the type of work we do, the rules imposed by the organization, career advancement opportunities, and other organizational factors are evaluated in terms of our values. Workers’ reactions to jobs in different cultures may vary because of differing basic value systems. For example, the basic value systems in the United States emphasize

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W e have emphasized that an organization’s structure and culture play important roles in the implementation of its strategy. For example, if an organi- zation’s business strategy is to be a “fi rst mover” in the market, it must be innovative in order to develop and introduce new products before com- petitors do so. To be entrepreneurial and innovative, the organization needs an organic structure, one that is fl exible and decentralized. A cen- tralized mechanistic structure would not allow managers and associates the freedom to be creative and take the risks necessary to identify market opportunities and develop innova- tive products. Similarly, the culture of the organization must allow for the use of intuition and risk-taking behav- iors because associates and manag- ers should not be afraid of making errors or failing. To be successful over time, most organizations must be ambidextrous.

In the chapter, we mentioned that Southwest Airlines has been highly successful because of its culture and its ability to hire new associates and managers who fi t well with the culture. Southwest has followed an integrated low-cost/differentiation business strat- egy since its founding. Many airlines have tried to imitate this strategy but have been unable to reproduce South- west’s success. These competitors have

failed to realize that Southwest uses not only low cost but also a differentiated high-quality service provided through its associates. Southwest’s associates have fun at work and work together as a team. These attributes come through in the service provided and also help the airline to hold down its costs. Thus, Southwest Airlines’ unique strategy, which integrates low cost and differ- entiation, is implemented effectively because of its culture and human re- source management system.116 Other airlines could not reproduce and effec- tively implement this integrated strat- egy because they could not imitate Southwest’s culture.

A strategy will be only as effec- tive as its implementation. If the strat- egy is well formulated, and the struc- ture and the culture fi t the strategy well, the organization will achieve higher performance. Congruence among strategy, structure, and culture is necessary to achieve the highest possible organization performance.

Culture’s effects on strategy are also often evident in mergers and acquisitions. Many mergers between companies fail. Often these failures occur not because of fi nancial or tech- nical problems but because the com- panies involved have vastly different organizational cultures.117 One com- pany may be entrepreneurial and fl ex- ible, for example, whereas the other may be traditional and rigid. Merging

these two cultures is problematic, at the least.

Therefore, senior managers who expect their fi rm to acquire an- other fi rm should understand the tar- get fi rm’s culture and what must be done to integrate it. They must also act immediately after the completion of the acquisition to merge the cul- tures. Doing so will require develop- ing shared values between the two fi rms. Cisco Systems is well known for its ability to integrate acquisitions.118 This fi rm assigns key people to preac- quisition integration teams and care- fully includes individuals from the fi rm being acquired.

Critical Thinking Questions

1. Consider an organization of which you are a member or an associate. What is the structure in this organization? Is it centralized or decentralized? Is it organic and fl exible? How would you change the structure in this organization to make it more effective?

2. How would you describe the cul- ture in the organization identifi ed in your answer to question 1? How does the culture affect members’ behavior in the organization?

3. When you become a manager, what type of culture will you estab- lish in your unit? What values do you want to emphasize? Why?

THE STRATEGIC LENS

self-reliance and initiative, whereas in Japan basic value systems emphasize self-sacrifi ce, obedience, and cooperation. As explained in Chapter 3, this difference has implications for how high-involvement management systems should be developed in different cultures.

When an individual’s values and preferences do not fi t prevailing structural arrange- ments, she may be a less-satisfi ed and a less-positive contributor to the organization. Simi- larly, and perhaps more importantly, when an individual’s values are not congruent with the

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organization’s culture, problems are likely to develop. In fact, when the lack of fi t is between the CEO and the organization’s culture, the problems are likely to be more severe, as in the case of Home Depot and Bob Nardelli. The outcomes are consistent with a great deal of re- search suggesting that similarity in values and goals attracts individuals to one another and to organizations.111 Job applicants as well as associates and managers in an organization should assess applicant fi t with structure and culture prior to making fi nal employment decisions. Selection for fi t is a key aspect of high-involvement management, as discussed in Chapter 1.

Interestingly, socialization can bridge some differences between newcomer prefer- ences and organizational structure and between newcomer values and organizational cul- ture. Socialization achieves this function by highlighting how a person’s preferences and values may fi t in unseen or partial ways. To some small degree, socialization also may alter a newcomer’s preferences. In one study based on the socialization framework presented earlier, individuals exposed to strong socialization efforts exhibited more congruence be- tween their personal attributes and the organization’s structure and culture. (This was true even after taking into account the initial level of congruence.)112

Although personal fi t with structure and culture is important, two issues must be ad- dressed. First, an organization that hires only those who fi t existing organizational charac- teristics may fi nd it diffi cult to make major changes when they become necessary.113 With individuals throughout the organization sharing preferences and values, the organization may be resistant to change. To remain adaptive, an organization may want to hire a few key individuals who do not fi t. Their ideas may prompt refl ection and thereby help the or- ganization to change if necessary. These issues are addressed more fully in Chapter 14. Sec- ond, an organization that hires only those who fi t may inadvertently discriminate against minorities or foreign nationals.114 Such an organization fails to experience the benefi ts from having a multicultural workforce, as discussed in Chapter 2. Perhaps the best advice is to hire for fi t, but with a relatively broad defi nition of fi t allowing exceptions and a spe- cifi c plan for nurturing the exceptions, no matter what their differences.115

What This Chapter Adds to Your Knowledge Portfolio In this chapter, we described several aspects of structure and explained how strategy, envi- ronment, technology, and fi rm size infl uence structure. We also discussed the competing values culture framework, as well as socialization, subcultures, and cultural audits. Person– organization fi t has also been addressed. In summary, we have made the following points:

• Organizational structure is the formal system of work roles and authority relation- ships that govern how associates and managers interact with one another. Structure can be described using structural characteristics, which determine the shape and appearance of an organization’s hierarchy. These characteristics include height, spans of control, and departmentalization (functional versus divisional group- ing of resources). Structure can also be described using structuring characteris- tics, which directly prescribe behavior. These include centralization (the amount of decision authority held at the top of the organization), standardization (the existence of rules and standard operating procedures), formalization (the degree to which rules and procedures exist in written form), and specialization (the degree to which associates and managers have narrow jobs). Modern organizations tend

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to emphasize confi gurations of structural and structuring characteristics that yield a substantial amount of freedom for lower-level managers and associates.

• Strategy plays an important role in orga- nizational structure. Corporate strategy corresponds to the emphasis placed on growth and diversifi cation in a fi rm. An emphasis on growth through internal development suggests the need for sub- stantial research and development and marketing departments. An emphasis on growth though acquisition suggests the need for well-developed fi nancial and legal functions. Diversifi cation must be matched by type of departmentaliza- tion, with a single business strategy and a dominant-product strategy calling for a functional structure and higher levels of diversifi cation calling for a divisional structure. Business-level strategies repre- sent the method of competing in a partic- ular product or service market. Low-cost and differentiation are two popular strat- egies, with the low-cost strategy calling for a less organic structure and differenti- ation requiring a more organic structure.

• The external environment also plays a role in structure. Uncertain environments (those that are complex and changing) create a need for organic structure. They also increase the need for integration among functional departments focused on the same market. Elements of structure that address integration include slack resources, self-contained tasks, information technology, and lateral relations. Furthermore, different levels of uncertainty may be experienced by different functional depart- ments, resulting in a need to differentiate the departments, with some being more organic than others.

• Technology, too, plays a role in structure. An early framework suggests that tech- nological complexity determines the structure required in small manufacturing fi rms. More recent work demonstrates that mass customization can be used in manufacturing fi rms of all sizes and that organic structure facilitates this ap- proach. Recent work has also focused on technological nonroutineness in manu- facturing and service organizations, suggesting that high levels of nonroutineness in small organizations and units of larger ones should be matched with more organic structures.

• Finally, organizational size plays a role in structure. Large organizations must be taller and more formalized in order to ensure smooth functioning. Centralization tends to decrease, however, because senior managers cannot make all decisions. However, as organizations grow in size, the potential increases that they will suf- fer from inertia. To avoid or overcome inertia, organizations must try to develop

? back to the knowledge objectives 1. Compare and contrast the structural and structuring as-

pects of organizational structure. 2. Assume you manage a fi rm with three substantially dif-

ferent product lines. A differentiation strategy is used for each product line. What structure choices would you make, and why?

3. Assume you manage a small R&D department. When mak- ing choices concerning structure, would you be more con- cerned about the external environment, more concerned about technology, or equally concerned about the external environment and technology? Explain your answer.

4. What are the four types of culture in the competing values model? In which would you prefer to work, and why?

5. What is socialization? Describe a situation in which you were socialized into an organization (a club, a business fi rm, a church, or a volunteer organization).

6. What is a cultural audit? Why should organizations con- duct cultural audits?

7. How does an organization ensure a fi t between its associ- ates’ values and its organizational culture?

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516 Chapter 13 Organizational Structure and Culture

ambidextrous attributes. Ambidextrous organizations balance formalization and fl exibility and thereby are able to maintain effi ciency while also being innovative.

• Organizational culture represents shared values that infl uence behavior. The com- peting values culture model is an important and popular framework for analyzing cultural phenomena in organizations. The model is based on two value dimen- sions: (1) fl exibility and discretion versus stability and control and (2) internal focus coupled with integration versus an external focus coupled with differentia- tion in the marketplace. Based on these two dimensions, four culture types emerge: clan, hierarchy, market, and adhocracy.

• Socialization involves imparting an organization’s values to newcomers. Socializa- tion is accomplished by exposing individuals to experiences that highlight the or- ganization’s values. In designing socialization activities, managers and associates should consider context (collective and formal versus individual and informal), content (sequential and fi xed versus variable and random), and social dynamics (serial and investiture versus disjunctive and divestiture).

• Culture audits are formal analyses designed to uncover shared values in an orga- nization. They involve: (1) analyzing the process and content of socialization, (2) analyzing how the organization has responded to critical incidents in its history, (3) analyzing the values and beliefs of founders and current leaders, and (4) explor- ing any puzzling fi ndings from the earlier analyses.

• Subcultures can develop in an organization. In large, diverse organizations, the organizational culture can be seen as a system of integrated subcultures rather than a unifi ed set of values. Although subcultures can sometimes cause problems when they are substantially inconsistent with the overall culture of the organization, they can also help to produce fresh insights and ideas.

• Individuals bring values to the organization. The fi t between individual values and organization values can be important. If there is a misfi t, individuals are likely to be unproductive or become dissatisfi ed and leave.

Thinking about Ethics 1. Organizations can have some units with organic structures and others with mechanistic

structures. Is it equitable to allow some associates a great deal of freedom and fl exibility and to tightly control the behaviors of the others? Why or why not?

2. Intuit’s CEO, Steve Bennett, is fond of saying, “If you don’t involve me in the takeoff, don’t involve me in the crash.” When a fi rm performs poorly, do the managers who design and implement a mechanistic structure have responsibilities to protect the jobs of associates who have relatively little involvement and opportunity to affect the fi rm’s results?

3. An organization, such as Southwest Airlines, might not hire a person who is fully qualifi ed for the job but who is thought to be a poor fi t with the fi rm’s organizational culture. What are the ethical implications, if any? Explain your answer.

4. In a market organizational culture, associates may be encouraged to compete against one another, with the emphasis on winning. What are the ethical implications, if any? Explain your answer.

5. An organization with an adhocracy culture encourages risk taking and allows associates to make errors. How do managers operating in such a culture decide when an associate is doing a poor job and should be laid off? Should the organization specify a maximum acceptable number of errors? Explain your answer.

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Building Your Human Capital 517

Key Terms organizational structure, p. 487 organizational culture, p. 487 structural characteristics, p. 488 hierarchy, p. 488 structuring characteristics,

p. 488 height, p. 488 span of control, p. 488 departmentalization, p. 489 centralization, p. 491

standardization, p. 491 formalization, p. 492 specialization, p. 492 corporate strategy, p. 493 growth, p. 493 diversifi cation, p. 493 business strategy, p. 494 environmental uncertainty,

p. 497 slack resources, p. 498

self-contained tasks, p. 498 information technology, p. 498 lateral relations, p. 499 mass customization, p. 500 ambidextrous organization,

p. 501 socialization, p. 507 cultural audit, p. 508 subcultures, p. 509 values, p. 511

Human Resource Management Applications The Human Resource Management (HRM) function is often responsible for several applications of the concepts explained in this chapter. For example, managerial training programs help managers learn how to develop the most effective structures for their context (e.g., when to use an organic structure). They may also be responsible for the organization development function that helps managers to identify when and how to make needed changes such as structure changes.

The HRM department often has responsibility for designing, implementing and interpreting culture surveys (to assess the current culture and identify changes needed if any). In addition, they frequently conduct culture audits.

Finally, the HRM function has the responsibility for recruitment and selection of new human cap- ital. Therefore, HRM professionals play a major role in maintaining the person– organization fi t.

building your human capital

An Assessment of Creativity Many organizations use a differentiation strategy that calls for initiative and creativity. Many of these same organizations have an adhocracy culture, where innovation and risk taking are valued. Not all individuals, however, are equally suited for these organizations. This assessment focuses on creativity. Although an individual’s propensity to be creative can vary from situation to situation, his or her general tendencies provide useful insight.

Instructions In this assessment, you will read 50 statements that describe people. Use the rating scale below to indicate how accurately each statement describes you. Rate yourself as you generally are now, not as you wish to be in the future; and rate yourself as you honestly see yourself. Read each item carefully, and then circle the number that corresponds to your choice from the rating scale.

1 2 3 4 5 Strongly Disagree

Disagree In Between or Don’t Know

Agree Strongly Agree

1. I always work with a great deal of certainty that 1 2 3 4 5 I am following the correct procedures for solving a particular problem.

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518 Chapter 13 Organizational Structure and Culture

2. It would be a waste of time for me to ask questions 1 2 3 4 5 if I had no hope of obtaining answers.

3. I feel that a logical step-by-step method is best for 1 2 3 4 5 solving problems.

4. I occasionally voice opinions in groups that seem 1 2 3 4 5 to turn some people off.

5. I spend a great deal of time thinking about what 1 2 3 4 5 others think of me.

6. I feel that I may have a special contribution to 1 2 3 4 5 give to the world.

7. It is more important for me to do what I believe 1 2 3 4 5 to be right than to try to win the approval of others.

8. People who seem unsure and uncertain about 1 2 3 4 5 things lose my respect.

9. I am able to stick with diffi cult problems over 1 2 3 4 5 extended periods of time.

10. On occasion I get overly enthusiastic about things. 1 2 3 4 5 11. I often get my best ideas when doing nothing in 1 2 3 4 5

particular. 12. I rely on intuitive hunches and the feeling of 1 2 3 4 5

“rightness” or “wrongness” when moving toward the solution of a problem.

13. When problem solving, I work faster analyzing 1 2 3 4 5 the problem and slower when synthesizing the information I’ve gathered.

14. I like hobbies that involve collecting things. 1 2 3 4 5 15. Daydreaming has provided the impetus for 1 2 3 4 5

many of my more important projects. 16. If I had to choose from two occupations other 1 2 3 4 5

than the one I now have or am now training for, I would rather be a physician than an explorer.

17. I can get along more easily with people if they 1 2 3 4 5 belong to about the same social and business class as myself.

18. I have a high degree of aesthetic sensitivity. 1 2 3 4 5 19. Intuitive hunches are unreliable guides in 1 2 3 4 5

problem solving. 20. I am much more interested in coming up with 1 2 3 4 5

new ideas than in trying to sell them to others. 21. I tend to avoid situations in which I might 1 2 3 4 5

feel inferior. 22. In evaluating information, the source of it 1 2 3 4 5

is more important to me than the content. 23. I like people who follow the rule “business 1 2 3 4 5

before pleasure.” 24. One’s own self-respect is much more important

than the respect of others. 1 2 3 4 5 25. I feel that people who strive for perfection

are unwise. 1 2 3 4 5 26. I like work in which I must infl uence others. 1 2 3 4 5 27. It is important for me to have a place for 1 2 3 4 5

everything and everything in its place.

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Building Your Human Capital 519

28. People who are willing to entertain 1 2 3 4 5 “crackpot” ideas are impractical.

29. I rather enjoy fooling around with new ideas, 1 2 3 4 5 even if there is no practical payoff.

30. When a certain approach to a problem doesn’t 1 2 3 4 5 work, I can quickly reorient my thinking.

31. I don’t like to ask questions that show my 1 2 3 4 5 ignorance.

32. I can more easily change my interests to 1 2 3 4 5 pursue a job or career than I can change a job to pursue my interests.

33. Inability to solve a problem is frequently due 1 2 3 4 5 to asking the wrong questions.

34. I can frequently anticipate the solution to 1 2 3 4 5 my problems.

35. It is a waste of time to analyze one’s failures. 1 2 3 4 5 36. Only fuzzy thinkers resort to metaphors 1 2 3 4 5

and analogies. 37. At times I have so enjoyed the ingenuity of a 1 2 3 4 5

crook that I hoped he or she would go scot-free. 38. I frequently begin work on a problem that I can 1 2 3 4 5

only dimly sense and cannot yet express. 39. I frequently tend to forget things, such as names 1 2 3 4 5

of people, streets, highways, and small towns. 40. I feel that hard work is the basic factor in success. 1 2 3 4 5 41. To be regarded as a good team member is 1 2 3 4 5

important to me. 42. I know how to keep my inner impulses in check. 1 2 3 4 5 43. I am a thoroughly dependable and responsible person. 1 2 3 4 5 44. I resent things being uncertain and unpredictable. 1 2 3 4 5 45. I prefer to work with others in a team effort rather 1 2 3 4 5

than solo. 46. The trouble with many people is that they take 1 2 3 4 5

things too seriously. 47. I am frequently haunted by my problems and 1 2 3 4 5

cannot let go of them. 48. I can easily give up immediate gain or comfort 1 2 3 4 5

to reach the goals I have set. 49. If I were a college professor, I would rather 1 2 3 4 5

teach factual courses than those involving theory. 50. I’m attracted to the mystery of life. 1 2 3 4 5

Scoring Key Combine the numbers you have circled, as follows:

Item 4 � Item 6 � Item 7 � Item 9 � Item 10 � Item 11 � Item 12 � Item 15 � Item 18 � Item 20 � Item 24 � Item 29 � Item 30 � Item 33 � Item 34 � Item 37 � Item 38 � Item 39 � Item 40 � Item 46 � Item 47 � Item 48 � Item 50 � [162 � (Item 1 � Item 2 � Item 3 � Item 5 � Item 8 � Item 13 � Item 14 � Item 16 � Item 17 � Item 19 � Item 21 � Item 22 � Item 23 � Item 25 � Item 26 � Item 27 � Item 28 � Item 31 � Item 32 � Item 35 � Item 36 � Item 41 � Item 42 � Item 43 � Item 44 � Item 45 � Item 49)]

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520 Chapter 13 Organizational Structure and Culture

Total scores can be interpreted as follows:

210–250 Very creative 170–209 Somewhat creative 130–169 Neither creative nor noncreative 90–129 Not very creative 50–89 Noncreative

Source: Adapted from D.D. Bowen, R.J. Lewicki, D.T. Hall, & F.S. Hall. 1997. Experiences in Management and Organi- zational Behavior (New York: John Wiley & Sons).

an organizational behavior moment

How Effective Is Hillwood Medical Center? Sharon Lawson is the administrator of Hillwood Medical Center, a large hospital located in Boston, Massachusetts. She has been its administrator for almost fi ve years. Although it has been a re- warding position, it has not been without its frustrations. One of Sharon’s primary frustrations has been her inability to determine how she should measure the effectiveness of the hospital.

The chief medical offi cer, Dr. Ben Peters, thinks that the only way to measure the effectiveness of a hospital is the number of human lives saved, compared with the number saved in other, similar hospitals. But the board to which Sharon reports is highly concerned about the costs of running the hospital. Hillwood is non- profi t but has no outside sponsors, and so it must remain fi nancially solvent without contributions from another major institution.

In order to be reimbursed for Medicare and Medicaid pa- tients, the hospital must meet the licensing requirements of the state health department, as well as the requirements of the U.S. Department of Health and Human Services. Sharon fi nds that some of these requirements refl ect minimum standards, whereas others are more rigid. She also fi nds that the demands of the ad- ministrative board and those of doctors on the staff frequently confl ict. She must mediate these demands and make decisions to maximize the effectiveness of the hospital.

Sharon’s day begins when she arises at 6:00 a.m., exercises, showers, has a quick breakfast, and heads for the offi ce. She usu- ally arrives at the offi ce around 7:15 a.m. She likes to get there before others so that she can review and plan her day’s activities without interruption. Today she sees that she has an appointment at 8:30 a.m. with a member of the state health department con- cerning its recent inspection. At 10:00 a.m., she has an adminis- trative staff meeting. At 2:00 p.m., she has scheduled a meeting with the medical staff, and at 4:00 p.m. she has an appointment with the hospital’s attorney. (She also has a luncheon appoint- ment with an old college friend who is in town for a few days.) It looks as if her day is well planned.

At 8:15, Sharon receives a call from Dr. Ramon Garcia, chief of surgery.

“Sharon, I must see you. Do you have time now so that we could talk about an important matter?”

“Ramon, I have an appointment in fi fteen minutes and probably won’t be free until about eleven this morning. Would that be okay?”

“I guess so. I don’t have much choice, do I?” With that, he hangs up.

At 8:30, Sharon ushers in Holly Wedman from the state health department. She learns that Hillwood has passed the gen- eral inspection but that some areas need to be improved. The kitchen meets only minimum standards for cleanliness, and some other areas are questionable. The inspectors also questioned hos- pital procedures that allow many people access to the drug sup- plies. (Sharon recalls that she tried to tighten up those proce- dures only two months ago, but the medical staff complained so strongly that she relented and made no change.) The state health department representative requests that appropriate changes be made and notes that these areas will be given especially rigor- ous scrutiny at the next inspection in six months. As the meeting ends, Sharon looks at her watch. It is 9:55—just enough time to make it to the conference room for her next meeting.

The administrative staff meeting begins normally, but after about 30 minutes, Helen Mathis, controller, asks to speak.

“Sharon, when are we going to get the new computer soft- ware we requested six months ago?”

“I don’t know, Helen. I’ve discussed it with the board, but they’ve been noncommittal. We’ll have to try to build it into next year’s budget.”

“But we need it now. We can’t process our billing effi ciently. Our accounts receivable are too large. We’re going to run into a cash-fl ow problem soon if we don’t fi nd other ways to increase our billing effi ciency.”

Sharon thought, “Cash-fl ow problems. I wonder how those fi t into Dr. Peters’s defi nition of effectiveness.”

It is fi nally decided that Sharon will make a new and stronger request to the board for the computer software.

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Team Exercise 521

At 11:00 sharp, Dr. Garcia comes stomping into Sharon’s offi ce, exhibiting his usual crusty demeanor. “Sharon, we have a serious problem on our hands. I’ve heard through the grapevine that a malpractice suit will be fi led against one of our surgeons, Dr. Chambers.”

“That’s nothing new; we get several of those a year.” “Yes, but I think this one may have some merit, and the

hospital is jointly named in the suit.” “What do you mean?” “Well, I’ve suspected for several months that Dr. Chambers

has been drinking a lot. He may have performed an operation while under the infl uence. I’ve talked to several people who were in the operating room at the time, and they believe that he was drunk.”

“Oh, no! If you suspected this why didn’t you do something?” “What was I supposed to do? Accuse one of the oldest and

most respected members of our surgical staff? You just don’t ac- cuse a person like that without proof. We’ve got to meet with Chambers now and confront him.”

“Well, set up a meeting.” “I already have. His only free time was at lunch, so I took

the liberty of scheduling a meeting with him for you and me at that time.”

“I already have an engagement. I can’t do it today. Try to set one up tomorrow.”

Dr. Garcia, obviously feeling a great deal of stress, explodes, “You administrators are never available when we need you. Your only concern is holding down costs. We’re talking about human lives here. Chambers may do it again before tomorrow.”

Sharon seethes at his insinuation. “If that mattered to you, why did you wait until you heard of the malpractice suit to do something about it?”

Garcia leaves, slamming the door. Sharon goes to lunch with her friend, but she can’t enjoy it.

Her mind is on problems at the hospital. She can hardly wait for the 2:00 p.m. medical staff meeting.

The meeting begins with only about half of the doctors in at- tendance, which is not unusual. Most of them will show up before the meeting is over. Much of the time is taken up discussing why the hospital has not purchased an upgraded piece of standard diagnos- tic equipment used in body scanning. Of course, it “only” costs $1

million. The meeting ends without resolving the problem. Sharon agrees to buy the equipment next year but does not have the money for it in this year’s budget. The doctors do not fully understand why it cannot be purchased now if it can be purchased next year.

As soon as Sharon gets back to her offi ce, her secretary gives her a message to call Terry Wilson, one of the third-fl oor pediatric nurses. Terry had said it was urgent.

“Terry, this is Sharon Lawson. What can I do for you?” “Ms. Lawson, I thought you should know. The nurses in

pediatrics are planning a walkout tomorrow.” “What? A walkout? Why?” Sharon is beginning to get a

headache. “Yes, a walkout. The nurses feel that Supervisor Tyson is a

tyrant, and they want her replaced.” “Terry, can you get a group of those nurses together and

meet me in my offi ce in fi fteen minutes? Be sure to leave several to cover the fl oor while you’re gone.”

“Okay. See you in a few minutes.” Sharon and the nurses meet and discuss the situation. The

nurses are quite adamant but fi nally agree to give Sharon a week to investigate the situation and attempt to resolve it. A meeting is scheduled for next week to review the situation.

The hospital’s attorney has to wait for almost 20 minutes be- cause Sharon’s meeting with the nurses runs past 4:00 p.m. Finally they meet, and as Sharon feared, he brings news of the malprac- tice suit fi led against Dr. Chambers and Hillwood. They discuss the steps that should be taken and how the situation with Dr. Chambers should be handled from a legal viewpoint. Obviously, some hard decisions will have to be made.

The attorney leaves at 5:30, and Sharon sits in her offi ce pondering the day’s problems. She also thinks of her original problem: how to measure Hillwood’s effectiveness.

Discussion Questions 1. Describe the culture or cultures at Hillwood. Are there sub-

cultures? 2. How would you recommend that Sharon measure effective-

ness at Hillwood? What do you think some of the effective- ness criteria might be?

team exercise

Words-in-Sentences Company In this exercise, you will form a “mini-organization” with several other people. You will also compete with other companies in your industry. The success of your company will depend on your planning and organizational structure. It is important, therefore, that you spend some time thinking about the best design for your organization.

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522 Chapter 13 Organizational Structure and Culture

Step 1: 5 Minutes Form companies and assign workplaces. The total class should be divided into small groups of four or fi ve individuals. Each group should consider itself a company.

Step 2: 10 Minutes Read the directions below and ask the instructor about any points that need clarifi cation. Everyone should be familiar with the task before beginning Step 3.

You are members of a small company that manufactures words and then packages them in meaningful (English-language) sentences. Market research has established that sentences of at least three words but not more than six words are in demand.

The “words-in-sentences” (WIS) industry is highly competitive in terms of price, and several new fi rms have recently entered the market. Your ability to compete depends on effi ciency and quality control.

GROUP TASK Your group must design and participate in running a WIS company. You should design your orga- nization to be as effi cient as possible during each 10-minute production run. After the fi rst produc- tion run, you will have an opportunity to reorganize your company if you want to.

RAW MATERIALS For each production run, you will be given a “raw material word or phrase.” The letters found in the word or phrase serve as the raw materials available to produce new words in sentences. For example, if the raw material word is organization, you can produce the following words and sentence: “Nat ran to a zoo.”

PRODUCTION RULES Several rules must be followed in producing “words-in-sentences.” If these rules are not fol- lowed, your output will not meet production specifi cations and will not pass quality-control inspection.

1. A letter may appear only as often in a manufactured word as it appears in the raw-material word or phrase; for example, organization has two o’s. Thus, zoo is legitimate, but zoology is not—it has too many o’s.

2. Raw-material letters can be used over again in new, different manufactured words. 3. A manufactured word may be used only once in a sentence and in only one sentence during a

production run; if a word—for example, zoo—is used once in a sentence, it is out of stock. 4. A new word may not be made by adding s to form the plural of an already used manufactured

word. 5. A word is defi ned by its spelling, not its meaning. 6. Nonsense words or nonsense sentences are unacceptable. All words must be in the English

language. 7. Names and places are acceptable. 8. Slang is not acceptable.

MEASURING PERFORMANCE The output of your WIS company is measured by the total number of acceptable words that are packaged in sentences in the available time. The sentences must be legible, listed on no more than two sheets of paper, and handed to the quality-control review board at the completion of each production run.

DELIVERY Delivery must be made to the quality-control review board 30 seconds after the end of each produc- tion run.

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Team Exercise 523

QUALITY CONTROL If any word in a sentence does not meet the standards set forth above, all of the words in the sentence will be rejected. The quality-control review board (composed of one member from each company) is the fi nal arbiter of acceptability. In the event of a tie vote on the review board, a coin toss will determine the outcome.

Step 3: 15 Minutes Design your organization’s structure using as many group members as you see fi t to produce your words-in-sentences. There are many potential ways of organizing. Since some are more effi cient than others, you may want to consider the following:

1. What is your company’s objective? 2. How will you achieve your objective? How should you plan your work, given the time allowed? 3. What degree of specialization and centralization is appropriate? 4. Which group members are more qualifi ed to perform certain tasks?

Assign one member of your group to serve on the quality-control review board. This person may also participate in production runs.

Step 4: 10 Minutes—Production Run 1 1. The instructor will hand each WIS company a sheet with a raw material word or phrase. 2. When the instructor announces “Begin production,” you are to manufacture as many words

as possible and package them in sentences for delivery to the quality-control review board. You will have 10 minutes.

3. When the instructor announces “Stop production,” you will have 30 seconds to deliver your output to the quality-control review board. Output received after 30 seconds does not meet the delivery schedule and will not be counted.

Step 5: 10 Minutes 1. The designated members of the quality-control review board will review output from each

company. The total output should be recorded (after quality-control approval) on the board. 2. While the review board is completing its task, each WIS company should discuss what

happened during Production Run 1.

Step 6: 5 Minutes Each company should evaluate its performance and organization. Companies may reorganize for Run 2.

Step 7: 10 Minutes—Production Run 2 1. The instructor will hand each WIS company a sheet with a raw-material word or phrase. 2. Proceed as in Step 4 (Production Run 1). You will have 10 minutes for production.

Step 8: 10 Minutes 1. The quality-control review board will review each company’s output and record it on the

board. The totals for Runs 1 and 2 should be tallied. 2. While the board is completing its task, each WIS company should prepare an organization

chart depicting its structural characteristics for both production runs and should prepare a description of its structuring characteristics.

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524 Chapter 13 Organizational Structure and Culture

Step 9: 10 Minutes Discuss this exercise as a class. The instructor will provide discussion questions. Each company should share the structure information it prepared in Step 8.

Source: Adapted from D.D. Bowen, RJ. Lewicki, D.T. Hall, & F.S. Hall. 1997. Experiences in Management and Organi- zational Behavior (New York: John Wiley & Sons).

Endnotes 1. Etzioni, A. 1964. Modern organization. Englewood Cliffs, NJ:

Prentice Hall; Jones, G.R. 2010. Organizational theory, design and change (6th ed.). Englewood Cliffs, NJ: Pearson-Prentice Hall.

2. Ravashi, D. & Schultz, M. 2006. Responding to organiza- tional identity threats: Exploring the role of organizational culture. Academy of Management Journal, 49: 433–458; Ger- hart, B. 2009. How much does national culture constrain organizational culture? Management and Organization Review, 5: 241–259.

3. Campbell, J.P., Bownas, D.A., Peterson, N.G., & Dunnette, M.D. 1974. The measurement of organizational effectiveness: A review of the relevant research and opinion. Report Tr-71-1, San Diego, Navy Personnel Research and Development Center; Dalton, D.R., Todor, W.D., Spendolini, M.J., Fielding, G.J., & Porter, L.W. 1980. Organization structure and performance: A critical review. Academy of Management Review, 5: 49–64.

4. Keats, B. W. & O’Neill, H. 2001. Organizational structure: Looking through a strategy lens, in M.A. Hitt, R.E. Freeman, and J.S. Harrison (eds.), Handbook of strategic management, Oxford, United Kingdom: Blackwell Publishers, pp. 520–542.

5. Campbell, Bownas, Peterson, & Dunnette, The measurement of organizational effectiveness; Dalton, Todor, Spendolini, Fielding & Porter, Organization structure and performance.

6. Child, J. 1984. Organization: A guide to problems and practices (2nd ed.). London: Harper & Row; Larson, E.W., & King, J.B. 1996. The systematic distortion of information: An ongoing challenge to management. Organizational Dynamics, 24 (3): 49–61; Nahm, A.Y., Vonderembse, M.A., & Koufteros, X.A. 2003. The impact of organizational structure on time-based manufacturing and plant performance. Journal of Operations Management, 21: 281–306.

7. Child, Organization: A guide to problems and practices. 8. Ibid. 9. Bohte, J., & Meier, K.J. 2001. Structure and the performance of

public organizations: Task diffi culty and span of control. Public Organization Review, 1: 341–354; Worthy, J.C. 1950. Organi- zational structure and employee morale. American Sociological Review, 15: 169–179.

10. Jones, Organizational theory, design and change. 11. Paine, L.S., & Mavrinac, S.C. 1995. AES Honeycomb. Boston:

Harvard Business School Publishing; AES Corporation 2005 Annual Report, at http://www.aes.com, March 3, 2007.

12. Davison, B. 2003. Management span of control: How wide is too wide? The Journal of Business Strategy, 24 (4): 22–29.

13. The Saratoga Review, 2009. Talent strategies for tough times: Reductions in force. PricewaterhouseCoopers, July 4–5.

14. Duncan, R. 1979. What is the right organization structure? Decision tree analysis provides the answer. Organizational Dynamics, 7 (3): 59–80.

15. Ibid. 16. Ibid. 17. Ibid. 18. Rank, O.N., Robins, G.L. & Pattison, P.E. 2010. Structural logic

of intraorganizational networks. Organization Science, in press; Maria, J., & Marti, V. 2004. Social capital benchmarking sys- tem: Profi ting from social capital when building network organi- zations. Journal of Intellectual Capital, 5: 426–442; Miles, R.E., Snow, C.C., Mathews, J.A., Miles, G., & Coleman, H.J. 1997. Organizing in the knowledge age: Anticipating the cellular form. Academy of Management Executive, 11 (4): 7–20.

19. Zhiang, L., Peng, M.W., Yang, H. & Sun, S.L. 2009. How do networks and learning drive an institutional comparison between China and the United States? Strategic Management Journal, 30: 1113–1132; Zhiang, L., Yang, H. & Arya, B. 2009. Alliance partners and fi rm performance: Resource complementarity and status association, Strategic Management Journal, 30: 921–940; Hitt, M.A., Ireland, R.D., & Hoskisson, R.E., 2011. Strategic management: Competitiveness and globalization. Cincinnati, OH: Cengage South-Western Publishing .

20. Mintzberg, H. 1993. Structuring in fi ves: Designing effective organizations. Englewood Cliffs, NJ: Prentice Hall; Zabojnik, J. 2002. Centralized and decentralized decision making in organiza- tions. Journal of Labor Economics, 20: 1–21.

21. Huber, G.P., Miller, C.C., & Glick, W.H. 1990. Developing more encompassing theories about organizations: The centrali- zation-effectiveness relationship as an example. Organization Sci- ence, 1: 11–40; Tata, J., & Prasad, S. 2004. Journal of Managerial Issues, 16: 248–265.

22. Bunderson, J.S., & Boumgarden, P. 2010. Structure and learning in self-managed teams: Why “bureaucratic” teams can be better learners, Organization Science, in press.

23. Burns, T., & Stalker, G.M. 1966. The management of innovation. London: Tavistock Institute; Jones, Organization theory, design and change.

24. The term “learning organization” has been defi ned in many dif- ferent ways. As it stands, there is considerable confusion and disa- greement concerning its proper defi nition. Many users of the term, however, focus on aspects of structure just as we do here. See, for example, Dodgson, M. 1993. Organizational learning: A review of some literatures. Organization Studies, 1: 375–394. Also see Goh, S.C. Toward a learning organization: The strategic building

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http://www.aes.com

Endnotes 525

blocks. S.A.M. Advanced Management Journal, 63 (2): 15–22; For general insights, see Garvin, D.A. 1993. Building a learning or- ganization. Harvard Business Review, 71 (4): 78–91.

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egy, structure, environment, and fi nancial performance in 48 United Kingdom companies. Academy of Management Journal, 23:193–220; Hitt, & Ireland. Relationships among corporate level distinctive competence, diversifi cation strategy, corporate structure and performance.

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46. See, for example: Govindarajan, A contingency approach to strategy implementation at the business unit level: Integrating administrative mechanisms with strategy; Jones. Organizational theory, design and change; Vorhies, D.W., & Morgan, N.A. 2003. A confi guration theory assessment of marketing organization fi t with business strategy and its relationship with marketing per- formance. Journal of Marketing, 67: 100–115.

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526 Chapter 13 Organizational Structure and Culture

action: An integrated view, Strategic Management Journal, 29: 1395–1427.

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59. Johnson, T., Lorents, A.C., Morgan, J., & Ozmun, J. 2004. A customized ERP/SAP model for business curriculum integration. Journal of Information Systems Education, 15: 245–253.

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62. Harvey, E., 1968. Technology and the structure of organizations. American Sociological Review, 33: 241–259; Zwerman, W.L. 1970. New perspectives on organizational effectiveness. Westwood, CT: Greenwood.

63. Hitt, M.A., Keats, B.W., & Demarie, S.M. 1998. Navigating in the new competitive landscape: Building strategic fl exibility and competitive advantage in the 21st century. Academy of Management Executive, 12(4):22–42.

64. Kotha, S. 1995. Mass customization: Implementing the emerg- ing paradigm for competitive advantage. Strategic Management Journal, 16: 21–42; Pine, B. 1993. Mass customization. Boston, MA: Harvard Business School Press.

65. Hitt, M.A. 2000. The new frontier: Transformation of management for the new millennium. Organizational Dynamics, 28 (3): 7–17.

66. Ibid. 67. Ibid. 68. See, for example: Argote, L. 1982. Input uncertainty and organi-

zational coordination in hospital emergency units. Administrative Science Quarterly, 27: 420–434; Drazin, R., & Van de Ven, A.H. 1985. Alternative forms of fi t in contingency theory. Administra- tive Science Quarterly, 30: 514–539; Schoonhoven, C.B. 1981. Problems with contingency theory: Testing assumptions hidden within the language of contingency theory. Administrative Science Quarterly, 26: 349–377.

69. Child, Organization: A guide to problems and practices. 70. Ford, J.D., & Hegarty, W.H. 1984. Decision makers’ beliefs

about the causes and effects of structure: An exploratory study. Academy of Management Journal, 27: 271–291.

71. Peli, G. 2009, Fit by founding, fi t by adaptation: Reconcil- ing confl icting organization theories with logical formalization, Academy of Management Review, 34: 343–360.

72. Luo, Y., & Rui, H. 2009. An ambidexterity perspective toward multinational enterprises from emerging economies. Academy of Management Perspectives, 23 (4): 49–70; Simsek, Z. 2009. Organizational ambidexterity: Towards a multilevel understand- ing, Journal of Management Studies, 46: 597–624.

73. Simsek, Z., Heavey, C., Veiga, J.F., & Souder, D. 2009. A typology for aligning organizational ambidexterity’s conceptu- alizations, antecedents and outcomes. Journal of Management Studies, 46: 864–894.

74. Jansen, J.J.P., George, G., Van den Bosch, F.A.J., & Volberda, H.W. 2008. Senior team attributes and organizational ambidex- terity: The moderating role of transformational leadership. Journal of Management Studies, 45: 982–1007.

75. Fang, C., Lee, J., & Schilling, M.A. 2009. Balancing exploration and exploitation through structural design: The isolation of sub- groups and organizational learning. Organization Science, in press.

76. Taylor, A. 2010. The next generation: Technology adoption and integration through internal competition in new product development. Organization Science, 21: 23–41; Leiblein, M.J. & Madsen, T.L. 2009. Unbundling competitive heterogeneity: Incentive structures and capability infl uences on technological innovation. Strategic Management Journal, 30: 711–735.

77. Doty, D.H., Glick, W.H., & Huber, G.P. 1993. Fit, equifi nal- ity, and organizational performance: A test of two confi gurational theories. Academy of Management Journal, 36: 1196–1250.

78. See, for example: Burton, R.M., Lauridsen, J., & Obel, B. 2002. Return on assets loss from situational and contingency misfi ts. Management Science, 48: 1461–1485.

79. See, for example: Burton, R.M., Lauridsen, J., & Obel, B. 2002. Return on assets loss from situational and contingency misfi ts. Management Science, 48: 1461–1485.

80. Deetz, S. 1985. Critical-cultural research: New sensibilities and old realities. Journal of Management, 11: 121–136.

81. Chatman, J.A., & Cha, S.E. 2003. Leading by leveraging culture. California Management Review, 45 (4): 20–34; Keeley, M. 1983. Values in organizational theory and management education. Academy of Management Review, 8: 376–386.

82. Tetrick, L.E., & Da Silva, N. 2003. Assessing culture and cli- mate for organizational learning. In S.E. Jackson, M.A. Hitt, & A. DeNisi (Eds.), Managing knowledge for sustained competitive advantage. San Francisco, CA: Jossey-Bass, pp. 333–359; Schein, E.H. 1984. Coming to a new awareness of organizational culture. Sloan Management Review, 25 (2): 3–16.

83. Joo, B.-K. & Lim, T. 2009. The effects of organizational learning culture, perceived job complexity, and proactive personality on organizational commitment and intrinsic motivation. Journal of Leadership and Organizational Studies, 16: 48–60.

84. Ren, H. & Gray, B. 2009. Repairing relationship confl ict: How violation types and culture infl uence the effectiveness of restora- tion rituals. Academy of Management Review, 34: 105–126.

85. Latta, G.F. 2009. A process model of organizational change in cul- tural context (OC3 Model), Journal of Leadership and Organizational Studies, 16: 19–37.

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Endnotes 527

86. Cameron, K.S., & Quinn, R.E. 1999. Diagnosing and changing organizational culture: Based on the competing values framework. Reading, MA: Addison-Wesley.

87. Turner, K.L., & Makhija, M.V. 2006. The role of organizational controls in managing knowledge. Academy of Management Review, 31: 197–217.

88. Bernard, C. 2009. Cultural innovation in software design: The new impact of innovation planning methods. Journal of Busi- ness Strategy, 30(2/3): 57–69; Quinn, R.E. 1988. Beyond rational management. San Francisco, CA: Jossey-Bass.

89. Goodman, E.A., Zammuto, R.F., & Gifford, B.D. 2001. The competing values framework: Understanding the impact of organ- izational culture on the quality of work life. Organization Develop- ment Journal, 19 (3): 59–68.

90. van Rekom, J., van Riel, C.B.M., & Wierenga, B. 2006. A method- ology for assessing organizational core values. Journal of Management Studies, 43: 175–201.

91. Jones, R.A., Jimmieson, N.L., & Griffi ths, A. 2005. The impact of organizational culture and reshaping capabilities on change im- plementation success: The mediating role of readiness for change. Journal of Management Studies, 42: 361–386.

92. Pech, R.J. 2009. Delegating and devolving power: A case study of engaged employees. Journal of Business Strategy, 30(1): 27–32.

93. Erdogan, B., Liden, R.C., & Kraimer, M.L. 2006. Justice and leader-member exchange: The moderating role of organizational culture. Academy of Management Journal, 49: 395–406.

94. Cable, D.M., & Parsons, C.K. 2001. Socialization tactics and person-organization fi t. Personnel Psychology, 54: 1–23; Jones, G.R, 1986. Socialization tactics, self-effi cacy, and newcomers’ ad- justments to organizations. Academy of Management Journal, 29: 262–279. Also see Van Maanen, J., & Schein, E.H. 1979. Toward a theory of organizational socialization. Research in Organizational Behavior, 1: 209–264.

95. Bain & Company. 2007. At http://www.bain.com, April 17. 96. Freiberg & Freiberg, Nuts! 97. Most admired companies. 2009. CNNMoney.com, at http://

money.cnn.com/magazines/fortune/mostadmired/2009/full_list/ index.html, Jan. 21, 2010.

98. Zander, U., & Zander, L. 2010. Opening the grey box: Social com- munities, knowledge and culture in acquisitions. Journal of Inter- national Business Studies, 41: 27–37; Tsui, A.S., Wang, H., & Xin, K.R. 2006. Organizational culture in China: An analysis of culture dimensions and culture types. Management and Organization Review, 2: 345–376.

99. Wilkins, A.L. 1983. The culture audit: A tool for understanding organizations. Organizational Dynamics, 12: 24–38.

100. Culture Audit. 2007. Smith Weaver Smith Accelerated Cultural Transformation, at http://www.smithweaversmith.com.

101. Schein, Coming to a new awareness. 102. Wilkins, A.L. 1983. Effi cient cultures: Exploring the relationship

between culture and organizational performance. Administrative Science Quarterly, 28: 468–481.

103. Riley, P. 1983. A structurationist account of political culture. Administrative Science Quarterly, 28: 414–437.

104. Martin, J., & Siehl, C. 1983. Organizational culture and coun- terculture: An uneasy symbiosis. Organizational Dynamics, 12: 52–64.

105. Williamson, I.O., Burnett, M.F. & Bartol, KM. 2009. The inter- active effect of collectivism and organizational rewards on affec- tive organizational commitment, Cross Cultural Management, 16: 28–43.

106. Gerhard, B. 2008. How much does national culture constrain organizational culture? Management and Organization Review, 5: 241–259.

107. Chatman & Cha, Leading by leveraging culture; Kristof, A.L. 1996. Person-organization fi t: An integrative review of its conceptualiza- tions, measurement, and implications. Personnel Psychology, 49: 1–48; O’Reilly, C.A., Chatman, J.A., & Caldwell, D.F. 1991. Peo- ple and organizational culture: A profi le comparison approach to assessing person-organization fi t. Academy of Management Journal, 14: 487–516; Tziner, A. 1987. Congruency issue retested using Fineman’s achievement climate notion. Journal of Social Behavior and Personality, 2: 63–78; Vandenberghe, C. 1999. Organizational culture, person-culture fi t, and turnover: A replication in the health care industry. Journal of Organizational Behavior, 20: 175–184.

108. Ronen, S. 1978. Personal values: A basis for work motivation set and work attitude. Organizational Behavior and Human Performance, 21: 80–107.

109. Rokeach, M. 1973. The nature of human values. New York: The Free Press.

110. Ronen, Personal values. 111. Schneider, B. 1987. The people make the place. Personnel Psychology,

40: 437–453. 112. Cable & Parsons, Socialization tactics and person-organization

fi t. 113. See, for example, Bowen, D.E., Ledford, G.E., & Nathan, B.R.

1991. Hiring for the organization, not the job. Academy of Management Executive, 5 (4): 35–51.

114. See, for example, Lovelace, K., & Rosen, B. 1996. Differences in achieving person-organization fi t among diverse groups of man- agers. Journal of Management, 22: 703–722.

115. For additional insights, see Powell, G. 1998. Reinforcing and ex- tending today’s organizations: The simultaneous pursuit of per- son-organization fi t and diversity. Organizational Dynamics, 26 (3): 50–61.

116. Hitt, Ireland, & Hoskisson, Strategic management: Competitiveness and globalization.

117. Hitt, Harrison, & Ireland. 2001. Mergers and acquisitions; Cart- wright, S., & Cooper, C.L. 1993. The role of culture compatibi- lity in successful organizational marriage. Academy of Management Executive, 7 (2): 57–70.

118. Holloway, Wheelwright, & Tempest, Cisco Systems, Inc.

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http://www.bain.com

http://money.cnn.com/magazines/fortune/mostadmired/2009/full_list/index.html

http://www.smithweaversmith.com

? knowledge objectives After reading this chapter, you should be able to: 1. Describe three major internal pressures for change. 2. Identify and explain six major external pressures

for change. 3. Describe the three-phase model of planned change. 4. Discuss important tactical choices involving the

speed and style of a change effort. 5. Explain the four general causes of resistance to

change and the tactics that can be used to address each cause.

6. Discuss the role of the DADA syndrome in organi- zational change.

7. Describe the basic organization development (OD) model and discuss OD interventions, including rela- tionship techniques and structural techniques.

organizational change and

development exploring behavior in action

Reinventing the Dream at Starbucks

H oward Schultz, the entrepreneurial force behind the organization, provided the guiding vision and a golden touch in building Starbucks into a huge company with 16,700� stores at the beginning of 2010. Although Starbucks has achieved amazing success, it has experienced some “bumps in the road” along the way. In

2008, Starbucks began experiencing a reduction in its average sales per store for the fi rst time in its history. The decline continued for 2008 and 2009. There are several reasons for the weakness in Starbucks’s performance. Among them are increased competition (from national and local coffee wholesalers and retailers such as Green Mountain Coffee roast- ers and others introducing gourmet coffees, such as McDonald’s) and the global recession’s causing potential custom-

ers to reduce their discretionary purchases (Starbucks coffee is viewed by most as a luxury item). As a result there was a stock-price decline that became serious for Starbucks shareholders because it made its shares less attractive to potential investors.

In January 2010, Starbucks announced its fi rst quarterly increases since 2008 in average sales per store open at least one year; and its quarterly profi t tripled. The 4 percent increase was achieved through a se- ries of major changes in Starbucks’ operations. Prior to these changes, Howard Schultz stepped back in as the chief executive offi cer (CEO). One of his fi rst ac- tions as CEO was to announce the closing of several unprofi table stores. Eventually, Starbucks closed almost 800 stores and reduced the number of managers and associates by approximately 18,000 across its U.S. and international operations. Although, these actions were designed to stem the performance declines, Schultz felt that much more was needed to rejuvenate Starbucks and its performance.

A second action taken by Schultz was to con- duct a thorough organizational analysis to identify the

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529

problems that precipitated the weak performance over re- cent years. This analysis identifi ed several problems, chief among them was the lost focus on customers’ desires. In becoming a large company with standardized prod- ucts and store designs, customers thought Starbucks had also become sterile. Customers preferred coffee that was unique and customized to their tastes. Based on these fi ndings, Schultz initiated other actions.

As described in Chap- ter 11, Starbucks has a strong team-based culture. Schultz engaged managers and associates to help re- design their local stores in ways that best fi t with the local community and its interests. The structure was changed to include more geographic regional groups, allowing them to focus on the drinks desired most in their

areas (e.g., cold drinks in the southern U.S. region and espresso in the Pacifi c Northwest region). Starbucks has also increased its innovation of new products such as the new instant coffee, Via. The company is refocusing its at- tention on customer needs and service. Schultz asked the managers and associates (Starbucks refers to them as “part-

ners”) to invest energy in attentiveness to customers, providing them excellent service, and to be innova- tive in adapting their oper- ations to local community values.

Howard Schultz re- cently expressed concerns that in the drive to increase its size and gain the econo- mies of scale, the company may have compromised the “soul” of its original stores. He is now in the process of

reinventing Starbucks to recapture that soul.

Sources: C.C. Miller. 2010. “Now at Starbucks: A Rebound,” The New York Times, Jan. 21, at http://www.nytimes.com; M. Montan- don. 2010. “Bean Counters No More: Starbucks Finding Success by Thinking Local,” Fast Company, Jan. 21, at http://www.fast- company.com; A.M. Heher. 2010. “Starbucks Rallies, Sets Sights Overseas,” The Seattle Times, Jan. 21, at http://www.seattletimes. nwsource.com; M. Allison. 2010. “Starbucks Reports Strong First-Quarter Results as Via, International Sales Take Off,” The Seattle Times, Jan. 21, at http://www.seattletimes.nwsource.com; J. Jargon. 2010. “Starbucks Growth Revives, Perked by Via,” The Wall Street Journal, Jan. 21, at http://www.wsj.com; B.J. Barr. 2010. “Now Brewing Starbucks Gets a Makeover,” The New York Times Style Magazine, Jan. 11, at http://www.tmagazine.blogs.nytimes.com; M. Bartiromo. 2008. “Howard Schultz on Reinventing Starbucks,” BusinessWeek, Apr. 9, at http://www.businessweek.com; 2008. “Starbucks Makes Organizational Changes,” Restaurant News Resource, Feb. 25, at http://www.restaurantnewsresource.com.

Few, if any, organizations can remain the same for very long and survive. A classic case is Polaroid Corporation, which shows the outcome of being too slow to change. Polaroid introduced in- stant photography to the market and at one time was among the top 50 corpo- rations in the United States.

However, in 2001, it declared bankruptcy, and in 2002, what was left

of the company was sold to Bank One’s OEP Imaging Unit and then sold again in 2005 to the Petters Group. Polaroid’s problem was its failure to adapt in a timely way to technological change. The company lost its market because it was too slow to recognize the impor- tance of digital imaging technology and then too slow to change after competi- tors developed digital cameras.1

The development of a new tech- nology created the need for change at Polaroid. Although top managers are responsible for instituting such changes, managers and associates lower in the organization must help because of their knowledge of the environment (mar- kets, customers, competitors, technol- ogy, government regulations, and so forth). All managers should actively scan

the strategic importance of Organizational Change and Development

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http://www.fast-company.com

http://www.seattletimes.nwsource.com

http://www.seattletimes.nwsource.com;

http://www.seattletimes.nwsource.com

http://www.tmagazine.blogs.nytimes.com

http://www.restaurantnewsresource.com

530 Chapter 14 Organizational Change and Development

the environment for changes and help to identify external opportunities and threats. Unfortunately, Polaroid’s man- agers did not perceive the threat to their existing business quickly enough to trans- form the fi rm. After learning of the need for a change, these managers began the diffi cult process of designing and imple- menting a new approach, but they were unable to do so in time to avoid failure. Competitors developed and introduced new cameras using digital technology before Polaroid could do so, causing Polaroid to lose a substantial share of its market.

In contrast, Starbucks has achieved considerable success since its founding. The company has been rec- ognized for its high-involvement man- agement practices (the manner in which it has valued and managed its human capital), environmentally conscious policies, accessibility to those with disabilities, and high-quality coffees. Yet, although Starbucks did change signifi cantly over time, it had become rather predictable in store format and standardized coffee-product offerings. And it encountered signifi cant com- petition from such unlikely sources as McDonald’s and Dunkin Donuts, a re- cessionary economy, and disgruntled customers. Its sales per store began

declining, and its profi ts followed a similar path. Thus, Howard Schultz stepped back into the CEO position and instituted a number of changes. After downsizing the number of stores and the workforce, the fi rm made sev- eral other very important changes. The company reinstituted its strong focus on customer service and satisfaction. It be- gan to remodel its stores, tailoring the décor to local community preferences. And it reinvigorated its focus on inno- vation, exemplifi ed by its introduction of the new instant coffee, Via. Many of these changes were implemented by engaging managers and associates to gain their recommendations. Thus, Starbucks continued its commitment to high-involvement practices—effectively using the talents of associates and enhancing their motivation—which helped to reduce resistance to change by lower-level managers and associ- ates. Some experts believe that effec- tive management of human capital and developing effective ways of dealing with change have contributed signifi - cantly to Starbucks’s ability to build and maintain a competitive advan- tage. Starbucks’s leaders showed their concern by recapturing the soul that had made Starbucks successful. After experiencing two years of decline,

these changes began to pay dividends as the company’s sales and profi ts be- gan to increase again.

Change often involves an entire fi rm, as in the Starbucks case. In other instances, a single division or work group must change. To be prepared for either situation, managers must un- derstand and appreciate change and possess the skills and tools necessary for implementing it. In high-involvement organizations, associates also play key roles in planning and implementing change, and they, too, must possess ap- propriate skills and tools.

In this chapter, we discuss organi- zational change and renewal. First, we examine internal and external pres- sures for change. Such pressures must be properly understood for effective change to occur. Next, we describe the basic process of planned change and consider important tactical decisions involved in a change effort. Building on this foundation, we then address the important topic of resistance to change. Individuals and groups often resist change, and the ability to diag- nose causes of resistance and deal with them effectively is crucial. Finally, we discuss a set of assessment techniques and change tactics, collectively known as organizational development.

Pressures for Organizational Change Organizations constantly face pressure for change; in order to cope, they must be agile and react quickly.2 Organizations that understand and manage change well tend to be the most effective.3 As suggested by Exhibit 14-1, pressures for change can be categorized as internal or external.

Internal Pressures for Change Although many pressures for change exist in the external environments of organizations, some pressures are more closely identifi ed with internal dynamics. Aspiration–performance

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Pressures for Organizational Change 531

discrepancies, natural life-cycle forces, and changes in the CEO or top management team are three of the most important pressures.

Aspiration–Performance Discrepancies Perhaps the most fundamental pressure for change involves aspiration–performance discrepancies, or differences between aspirations and current performance.4 When an indi- vidual, work group, division, or organization is not meeting its expectations (often expressed in goals), changes in tactics, strategies, and processes often follow. Failing to live up to ex- pectations is an uncomfortable state that often motivates change. Some changes motivated by failing to satisfy aspirations include divesting poorly performing units5 or acquiring other businesses to access resources that will hopefully allow the fi rm to achieve its aspirations.6

To fully appreciate the role of aspirations, it is important to understand how they develop. Research has identifi ed three factors.7 First, past aspirations play a role in current aspirations. Thus, if an associate had high expectations of herself yesterday, she is likely to have high expectations today as well. This point underscores an important phenomenon: stickiness in aspirations. Stickiness exists when individuals, units, and organizations are slow to revise their aspirations even when those aspirations appear to be too high or too low. One study, for example, found that units of a company adjusted performance aspira- tions less than might be expected in the face of information suggesting that greater change, either up or down, was warranted.

Second, past performance plays an important role. If performance in the recent past was below target levels, aspirations are likely to be reduced, although stickiness places limits on the degree of adjustment in the short run. Conversely, if performance has been above target levels, it is common for aspiration levels to be increased to some degree. For example, in the early days, Starbucks executives learned that it was relatively easy to perform well in a high-growth environment, and thus they increased the fi rm’s aspiration levels. Although such changes in aspiration levels may seem benign, they can be harmful.

aspiration–performance discrepancies Gaps between what an individual, unit, or organization wants to achieve and what it is actually achieving.

Aspiration– Performance Discrepancies

Life-Cycle Forces

Growing International

Interdependence

Changes in Demographics

Shifting Political Dynamics

Changes in Societal Values

Introduction or Removal of Government Regulations

Technological Advances Pressure

for Change

Exhibit 14-1 Internal and External Pressures for Organizational Change

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532 Chapter 14 Organizational Change and Development

Poorly performing individuals, units, and organizations may reduce aspiration levels in- stead of making changes suffi cient to increase performance. Alternatively, individuals, units, and organizations that are performing well may increase aspiration levels, causing satisfaction with current performance to be fl eeting.

Third, comparisons with others play a role in determining aspirations. A management trainee may compare himself with other management trainees. A fi rm often compares itself with other fi rms in the same industry. When comparisons with similar others suggest that better performance is possible (especially when the fi rm’s performance is perceived to be below par), aspirations will likely increase and strategies will be formulated to achieve the higher aspirations.8 Similarly, when comparisons suggest that others are performing less well, aspirations are likely to decrease. For example, one study found that leaders of retail fi nancial-service units that were performing poorly in comparison with other fi nancial- service units increased their aspirations, whereas leaders of units performing well in com- parison with others lowered their aspirations.9 This latter fi nding is particularly intriguing, because it suggests that many individuals and business units are content to be as good as others but not necessarily better. This obviously did not apply to the founders of Starbucks.

Life-Cycle Forces Organizations tend to encounter predictable life-cycle forces as they grow.10 Not every organization experiences the same forces in the same way as others, but most organizations face similar pressures. Although several models of the organizational life cycle have been proposed, an integrative model best highlights the key pressures that organizations experi- ence. This model has four stages: entrepreneurial, collectivity, formalization and control, and elaboration (see Exhibit 14-2).

life-cycle forces Natural and predictable pressures that build as an organization grows and that must be addressed if the organization is to continue growing.

Entrepreneurial Stage

Focus on product/service ideas

Acquisition of financial capital

Initial entrance into exploitable niche

Informal real-time decision making

Informal coordination

Collectivity Stage

Continue focus on product/service development

Continued acquisition of financial capital

A family feeling as vision is pursued

Strong commitment among growing pool of managers and associates

Long hours often for low pay

Informal coordination but more consistency than before

N e

e d

f o

r a

d d

it io

n a

l p

e o

p le

Formalization and Control Stage

Elaboration Stage

Balance

Focus on efficiency and innovation

Formal procedures exist alongside empowered lower- level managers and associates

N e

e d

f o

r b

a la

n c

Focus on efficiency in operations

Formal processes and rules

Strict division of labor

Increase in professional managers

Increase in number of formal departments

Increase in number of levels in the hierarchy

N e

e d

f o

r m

o re

s ta

b il

it y

a n

d s

tr u

c tu

Exhibit 14-2 Integrative Life-Cycle Model

Source: Based on R.E. Quinn, & K. Cameron. 1983. “Organizational Life Cycles and Shifting Criteria of Effectiveness.” Management Science, 24: 33–51.

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Pressures for Organizational Change 533

In the entrepreneurial stage, founders and perhaps initially a few managers and associ- ates develop ideas for products or services, acquire fi nancial capital, and take actions to enter a niche in the marketplace. This is an exciting time, but after the market has been entered and success achieved, growth requires founders to add managers and associates. Processes must be introduced for selecting, training, and coordinating these individuals. In the collectivity stage, founders, managers, and associates continue to emphasize product or service development and fund-raising. Individuals in the young organization tend to feel like a family as they pursue the vision that attracted them to the fi rm. Individuals often work long hours for relatively low pay, and they tend to be highly committed. In- formal communication and coordination are important, but founders often begin to han- dle more managerial responsibilities and fewer entrepreneurial responsibilities than they would like. As the fi rm continues to grow, professional managers and formal processes must be incorporated to resolve or prevent coordination and control problems.

In the formalization and control stage, managers and associates are guided by formal processes and rules, a strict division of labor, and a stable organizational structure. And they emphasize effi ciency more than innovation. Functional disciplines such as account- ing and operations management are elevated in status. As the fi rm continues to grow, more rules and procedures are often added, along with a greater number of management levels. Eventually, managers and associates can become alienated from the fi rm, partly because they lose discretion in decision making. Furthermore, in larger organizations, newer asso- ciates and managers do not have a connection to the original vision, and overall commit- ment may be lower. To prevent or overcome these problems, a renewed effort to empower both managers and associates should be considered. At Starbucks, Schultz and other lead- ers maintained their commitment to a high-involvement workplace, which helped the company postpone some of the negative side effects of the formalization stage. Starbucks grew rapidly and thus reached this stage more quickly than many fi rms. The fi rm con- tinued to grow and eventually was unable to prevent the negative effects of this stage and thereby suffered performance declines. However, Schultz responded quickly with changes that now appear to be working, as evidenced in the Exploring Behavior in Action segment.

Unilever, a large multinational fi rm, began to experience declines in market share and profi ts largely due to more aggressive competitors such as Procter & Gamble and more in- novative competitors such as Reckitt Benckiser. When the performance problems surfaced in 2005, top managers decided a change was in order. Its growth strategy appeared to have been unsuccessful. However, a thorough analysis showed that the strategy was correct but that Unilever had failed in its execution (implementation) of the strategy. To improve execution, the company streamlined its structure and developed a process referred to as “strategy in action,” which involved mobilizing teams to implement the planned actions based on the strategies, and then a review process to monitor the results and make adjust- ments where needed to ensure success. This process was communicated to all 180,000 managers and associates. One of the outcomes was a signifi cant increase in the amount of collaboration across teams and units. Unilever achieved its strategic vision in 2010 partly because of the changes implemented.11

In the elaboration stage, managers and associates experience a more balanced, mature organization. Formal rules and processes exist alongside empowered lower-level managers and associates. Effi ciency concerns coexist with concerns for innovation and renewal. As discussed in Chapter 13, balancing these concerns is challenging but possible. Starbucks currently exemplifi es this stage, especially with the changes it has implemented.

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534 Chapter 14 Organizational Change and Development

Overall, some fi rms handle life-cycle forces reasonably well; Starbucks and Unilever are examples of such fi rms. Other fi rms handle these issues less well. In these cases, there is often a change in the leadership of the organization that can trickle down through the organization. If effective leaders are chosen to replace the previous ones and the transition is handled in an orderly manner, the organization can experience positive outcomes from the change.12

Changes in Top Management Changes in top management involve the replacement of top management team mem- bers who retire or depart the company for other reasons (e.g., resign). The changes often begin with the selection of a new CEO. When CEOs and other members of the top man- agement team have been in their positions for some time, the organization can experience inertia. In these cases, it is more diffi cult to identify, develop, and implement changes. The reason for the inertia is an overly strong commitment to the current strategy and courses of action. Such commitment may be because of high performance in the past or because the managers feel personally invested in the approach they chose and implemented (e.g., feel their reputation is at stake).13 To overcome the inertia caused by the unwillingness of top managers to make needed changes, a change in the CEO and perhaps other members of the top management team may be necessary.14

A new CEO and new members of the top management team, bring unique ideas on how to deal with problems the organization is experiencing. They also have no special commitment to the previous strategies and actions, unless they represent an inside suc- cession. However, to make major changes, it is common for the new top managers to be chosen from outside the organization.15 New top managers often select and implement new strategies that can turn around the organization’s performance.16

Of course, not all new managers will be successful. Some may not make changes and others may make changes that do not adequately meet the challenges faced. As a result, some new managers may be replaced after a short tenure.17 In particular, when an organiza- tion needs changes, perhaps they should search for specifi c types of individuals to under- take the top leadership roles. For example, managers with a strong belief in their capabilities have been found to be more entrepreneurial.18 Thus, fi rms that require more innovation to be competitive may need such individuals in their top management team. Careful selection of a new leader can help an organization create the type of change needed.

External Pressures for Change Along with internal pressures, organizations face external pressures for change. Organiza- tions must be sensitive to these external pressures, or they may not survive. For example, if an organization does not react to changes in the market for its product, the demand for its product probably will decline. Such was the case for Polaroid, as discussed earlier. The new digital cameras introduced to the market by Polaroid’s competitors greatly reduced the demand for Polaroid’s products. When Polaroid was unable to respond quickly, it fi led for bankruptcy and ceased to exist as an independent business.

External pressure for change comes from several sources, including technological ad- vances, the introduction or removal of government regulations, changes in societal values, shifting political dynamics, changing demographics, and growing international interde- pendency (see Exhibit 14-1).

changes in top management Involve the replacement of top management team members who retire or depart the company for other reasons.

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Pressures for Organizational Change 535

Technological Advances Scientifi c knowledge, produced by both companies and universities, has been developing rapidly over the past 50 years.19 For example, in 2007, there were 23,750 scien- tifi c journals that published 1.35 million pages.20 With advances in research methods and a continuing need for answers to many important research questions, the rapid development of knowledge is expected to continue.

Technological advances are based on advances in sci- entifi c knowledge. Such advances can lead to incremen- tal or radical changes in how services and products are designed, produced, and delivered. Two facts illustrate the point that scientifi c knowledge drives technology. First, scientifi c knowledge is routinely cited in patent applications, with the number of scientifi c articles cited per patent on the increase in the United States, Germany, France, Britain, and other countries.21 Second, the number of patents granted by the U.S. Patent Offi ce is increasing at a growing rate, which matches the growth in science. In the fi rst half of the twentieth century, patents granted increased by 50 percent.22 In the second half of the twentieth century, they quadrupled.23 These rapid changes can be seen in technologies of recent origin, such as advancements in wireless communications technologies, advanced manufacturing technologies, and nanotechnologies.24 New technologies are being developed faster than they can be implemented. A prime example is provided by new developments in microelectronic technology, which occur before previous developments can be fully implemented.

Firms must adapt to technological advances or risk becoming outdated and ineffec- tive.25 Manufacturing fi rms, for example, must adopt new manufacturing technologies or suffer disadvantages in cost, quality, or speed relative to their competition in the market- place.26 Firms that failed, or were slow, to take advantage of computer-aided manufactur- ing, computer-aided design, and modern manufacturing resource planning experienced competitive disadvantages.

Changes in Government Regulations and Other Institutions The U.S. government has the responsibility to regulate commerce for the common good. Much of the regulation is initiated because of societal pressures. Major regulation has been implemented over the years in areas such as civil rights and equal opportunity, environ- mental protection, and worker safety and health.

In recent times, regulations have been implemented that establish fuel-effi ciency standards for automobile manufacturers, requirements for regional telephone companies to provide competitors access to their hardwired networks, and rules limiting telemarket- ers’ ability to call people’s homes.27 The Drug-Free Workplace Act was passed to encourage employers to test associates for drugs and to implement employee assistance programs for substance abuse. Additional rules and regulations have been enacted since the original legislation to enhance effects. However, these regulations have been only partially effective in achieving the goals. For one thing, it covers only employers with federal contracts. In addition, the programs implemented by employers vary in their effectiveness.28 Without question, however, organizations must adapt to regulatory changes.

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536 Chapter 14 Organizational Change and Development

Institutional changes such as in the rule of law can have a major effect on economic activ- ity and especially on the willingness of foreign fi rms to enter markets.29 Often fi rms are espe- cially interested in the rule of law such as in relation to intellectual property rights (i.e., protec- tion of copyrights and patents) and to corrupt practices (e.g., bribery).30 Clearly, uncertainty related to regulations and the potential for changes may cause fi rms to postpone investments or to change their strategies.31 Clearly, regulations can infl uence fi rm changes. For example, the U.S. government recently implemented new regulations on banks, and particularly those receiving funds from the government, to remain solvent. The banks are required to maintain ceilings on executive pay until they pay back all of the monies provided to them.32

The U.S. government also occasionally removes regulations created in earlier times. The airline, trucking, and communication industries, for example, have been largely de- regulated. Such deregulation also requires changes. For example, fi rms in deregulated in- dustries typically must adapt to a more competitive environment, which many fi rms in these industries have found diffi cult to do. Many airlines that prospered in the regulated era, such as Pan Am and Braniff, failed under deregulation.

Changes in Societal Values Changes in societal values are normally seen in four ways. First, changing values infl u- ence consumer purchases, affecting the market for an organization’s products or services. Second, society’s values are evidenced in employee attitudes, behaviors, and expectations. Third, they affect potential investors in the company. Finally, society’s values are repre- sented in government regulations. The changing social values regarding environmental consciousness have had a major infl uence on organizational strategies and practices, as shown in the Managerial Advice segment.

Because of the increasing concerns about global warming, many people throughout the world have become sensitive to environmental issues. The importance of green issues is re- fl ected by consumers’ buying behaviors, by investors’ purchases of stock in companies, and in other ways as well. The interest in green issues has encouraged Boeing, ExxonMobil, and Coca-Cola Enterprises to develop environmentally sensitive policies and practices as explained in the Managerial Advice segment. For example, ExxonMobil is developing a biofuel from algae that consumes carbon dioxide and thus helps to reduce emission of greenhouse gases.

The infl uence of societal values on consumer purchases can have a major effect on organizations. For example, Americans have become increasingly hostile to products manufactured by companies using questionable practices in foreign countries. Such prac- tices include child labor, periods of intense overtime work, and very low wages. In past decades, individuals thought less about these issues, and fi rms could neglect them as well. Today, fi rms must be very careful.

Other infl uences of societal values are more indirect. They affect politicians who enact laws such as the Drug-Free Workplace Act.With over $200 billion in costs to or- ganizations because of associates’ substance abuse, the employee-assistance programs promoted by the Act are important to save lives and reduce costs to organizations from substance abuse.33 Thus, societal values also infl uence government regulation, which in turn places external pressures on the organization.

Shifting Political Dynamics Political pressures, both national and international, can infl uence organizational opera- tions. The political philosophy of those elected to offi ce affects legislation and the inter- pretation of existing legislation and government policies. For example, President Ronald

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MANAGERIAL ADVICE

While in times past, fi nancing or regulatory approval were the most critical concerns for many major investments, in current times many investors are focused on the company’s environmental sustainabil- ity policies and actions. Many compa- nies have realized that changing their environmental policies— making them more green—will actually contribute to their bottom line, improve their public image, and make them more attractive to many investors. Sustainability in sim- ple terms means meeting our current human needs without harming future generations. It is a major cause among environmentalists, human rights activ- ists, and economic-development ex- perts. And it has become important to many in the global society, such that companies are expected to be envi- ronmentally conscious. In the past, sustainability often meant higher costs for companies, but in current times, better environmental and social prac- tices can yield strategic advantages. Customers are shifting their loyalties to companies that embrace the concept of sustainability.

The Boeing Company found that air used to cool its computers at its four- acre information technology processing site in Seattle was seeping out through openings in the fl oor. Those openings were plugged with insulation, thereby saving approximately 685,000 kilo- watt-hours of electricity and $55,000 annually. Although the cost reduction is

meaningful, this action also reduced Boeing’s carbon emissions. Boe- ing voluntarily reports its carbon emissions to the Carbon Disclosure Project. This project provides companies with information about ways to measure their emissions and compare them with their rivals (industry data). Scientists suggest that companies and energy providers produce 45 percent of the carbon emissions that contribute to global warming. Many companies are reporting these data and sharing in- formation on their reductions in carbon emissions with the public to convince potential customers and investors that they are green.

Companies are beginning to make major investments in green projects. For example, ExxonMobil announced in 2009 that it will invest in a $600 million project to develop a new biofuel from algae. If the project is successful it could represent a major advancement in the sustainability war because algae can be grown using land and water unsuitable for other uses (e.g., food production) and algae consumes carbon dioxide, the major contributor to greenhouse gases. Like- wise, GE announced a $1.4 billion contract to produce and provide main- tenance service for 338 large wind turbines. The turbines are to be located

in Oregon and produce renewable energy for Southern California Edison. This is the largest order for wind tur- bines that GE has ever had.

Other companies are also invest- ing in energy-saving projects. For ex- ample, Clorox is expanding its line of eco-friendly cleaners (Green Works), which have been highly successful in the market. In fact, sales have exceeded expectations by 600 percent. In addi- tion, Coca-Cola Enterprises, the larg- est bottler of Coke drinks, announced plans to double the size of its fl eet of hybrid trucks to 327 vehicles. McKinsey & Co. projected that the many efforts to reduce energy consumption will lead to a 17 percent decline in energy use in 2020 as compared with 2008. Al- though U.S. regulators do not require companies to quantify the effects of their environmental practices, these practices have become a powerful in- dicator of future market performance. Thus, responding positively to environ- mental pressures may help companies achieve long-term survival.

Social Pressures for “Green” Policies and Practices: The War against Carbon Emissions

Sources: L. Kaufman. 2009. “NYT: Emissions Disclosure as Business Virtue,” MSNBC, Dec. 29, at http://www.msnbc. msn.com; 2009. “GE Inks Largest Wind Turbine Contract Ever,” MSNBC, Dec. 10, at http://www.msnbc.msn.com; A. Stone. 2009. “Honeywell: Green and Clean,” Forbes, Nov. 2, at http://www.forbes.com; 2009. “Exxon Makes First Big Biofuel Investment,” MSNBC, July 14, at http://www.msnbc.msn.com; J. Makower. 2009. “In Recession, Business Keeps Going Green,” BusinessWeek, Feb. 2, at http://www.businessweek.com; J. Carey. 2007. “Hugging the Tree-Huggers,” BusinessWeek, Mar. 12, at http://www. businessweek.com; Speeches. 2007. At http://www. thecoca-colacompany.com/presscenter; P. Engardio. 2007. “Beyond the Green Corporation,” BusinessWeek, Jan. 29, at http://www.businessweek.com.

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http://www.msnbc.msn.com

http://www.msnbc.msn.com

http://www.thecoca-colacompany.com/presscenter

538 Chapter 14 Organizational Change and Development

Reagan’s views on U.S. defense spending created massive shifts in government expen- ditures that affected fi rms in several industries. These fi rms had to gear up to meet the government demand. International politics also infl uence organizational change. For ex- ample, the major changes in the former Soviet Union exemplifi ed by the destruction of the wall separating East and West Germany led to a decline in the Cold War and thereby a reduction in U.S. defense spending (in turn leading to a downsizing of several indus- tries). In addition, disagreements over proper tariffs between the European Union and the United States, for example, can cause uncertainty and perhaps higher costs for a fi rm if tariffs increase. Faced with increased tariffs in an important export market, a fi rm may need to enhance its effi ciency to avoid being forced to raise prices to noncompetitive lev- els. Alternatively, it may need to shift exports to other markets.

Changes in Demographics As discussed in Chapter 2, the average age of U.S. citizens has been increasing, along with the proportion of U.S. residents who belong to groups other than non-Hispanic whites. To deal with these changes, many organizations have altered internal practices to ensure fair treatment for people of all races and ages. Diversity programs designed to increase understanding across different groups have become common. Further changes in the de- mographic profi le of the nation may require additional organizational changes.

Firms also have introduced products and marketing tactics designed to appeal to a broader mix of individuals or to a particular targeted niche that has grown in importance. In North Carolina, where the Hispanic population is growing rapidly as compared with most other states, auto dealers and service businesses have added Spanish-speaking associ- ates; and Time-Warner Cable has created a special TV package targeting Hispanic viewers in the state.34

Age and income distribution are additional demographic characteristics of impor- tance for workforce composition and marketplace opportunities. For example, Florida now has the largest percentage of citizens aged 65 or over (17.6 percent). This demo- graphic has signifi cant implications for the type of products and services likely to be in demand in that state. Incomes enjoyed by families are also important for the types of products and services likely important for particular geographic markets. The extent to which the income is produced by dual-career couples also has workforce implications. For example, dual-career couples are often less willing to accept international assignments because of the inability of the spouse to move with them.35

Growing International Interdependence You have probably heard someone say that “the world is getting smaller.” Or, in recent times a common statement is “the world is becoming fl atter.” Clichés such as this are frequently used to describe the growing interdependency among countries in the world today. The United States is no longer as self-suffi cient as it once was. Growing interde- pendencies are created by many factors. At the national level, countries may have mutual national defense goals, which are implemented through organizations such as the North Atlantic Treaty Organization (NATO). At the organizational level, a company may need natural resources that it cannot obtain in its own country, or a fi rm from one country may establish operations in another.36 One result of interdependency is that organizations must be concerned about what happens throughout the world, even if they have no operations outside the United States. As such, managers need to develop a global mindset whereby

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Planned Change 539

they are attentive to changes around the world, analyzing their potential infl uences on their organization.37 For example, events in the Middle East have an effect on most major organizations in the United States in some way. International interdependencies provide both opportunities and constraints.38 Many fi rms have found that international markets present more opportunities for sales growth than U.S. markets, as discussed in Chapter 3. Likewise, organizations have to remain fl exible in their international activities, adapting to major events (e.g., acts of terror; major political changes in a country that likely will lead to changes in important policies) when they occur.39

Planned Change How does an organization respond to pressures for change? One possibility is planned change, which involves deliberate efforts to transform an organization or a subunit from its current state to a new state. Planned change may be evolutionary over time, or can be more revolutionary, involving major changes in a shorter period of time.40 To effec- tively move the organization from one state to another, those managing the change must consider a number of issues in three distinct parts of the change process.41 Resistance to change may develop along the way, however.

Process of Planned Change Change is typically thought of as a three-phase process that transforms an organization from an undesirable state through a diffi cult transition period to a desirable new state. Although researchers tend to agree on the nature of these three phases,42 different names for the phases have been used by different people.

Kurt Lewin, a noted social psychologist, provided the most commonly used labels: unfreezing, transforming, and refreezing.43 That is, the change process involves unfreezing an organization from its current state, moving (changing) it to a new state, and refreezing it in the new state (see Exhibit 14-3).

planned change A process involving deliberate efforts to move an organization or a unit from its current undesirable state to a new, more desirable state.

Create minor levels of

guilt/anxiety about not changing

Create sense of psychological

safety concerning

change

Bring about actual shifts in behavior

Create minor levels of

guilt/anxiety about not changing

Implement new hiring and promotion systems

Provide rationale

for change

Provide information

that supports proposed changes

Implement new

evaluation systems

Unfreezing Transforming Refreezing

Exhibit 14-3 Process of Planned Change

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540 Chapter 14 Organizational Change and Development

Unfreezing Unfreezing involves three activities.44 First, change leaders provide a rationale—a reason why individuals in the organization should de-commit from the status quo. In particular, they need to motivate managers and associates to break out of the path dependence that currently exists;45 instead of going down the same path, they need to select and start on a new path.46 The leaders may accomplish this by providing information on poor fi nancial performance, an impending regulatory change, or a new technological development. Second, leaders create at least minor levels of guilt or anxiety about not changing. Although causing undue negative emotion is not the intent, creation of psychological discomfort can be motivating. Leaders may create such a feeling by discussing the negative outcomes that the organization and its managers and associates will suffer if changes are not made. Third, leaders create a sense of psychological safety concerning the change. Managers and associates must believe they can successfully change.47 Tactics that change leaders might use include the following:

• Reminding individuals that they have successfully changed in the past • Communicating to individuals that managers and associates in other

organizations in similar circumstances have successfully changed • Explaining to individuals that support and training will be available for the

specifi c changes to be made

Transforming Transforming involves three key activities.48 First, change leaders must provide informa- tion and evidence that supports the proposed changes. Without supporting information, managers and associates may not have faith in what they are being asked to do, and they will not be committed. Pilot tests, outside experts, and data on how others have benefi ted from similar changes can be effective tactics. Furthermore, as noted in our discussion of transformational leaders in Chapter 8, a compelling vision of the future also can be use- ful in building commitment to proposed changes. Indeed, such a vision is likely to be crucial for creating change. Second, any potential constraints to making the change must be removed by the change leaders. This might require investing more money to reduce fi nancial constraints or providing more training to remove constraints due to associates’ capability limitations.49 Third, change leaders must be able to shift behavior and imple- ment the change.50 They must arrange for the resources required for change, such as new equipment or budgets, and they must ensure that education and training are available. With resources and training in place, actual change can begin.51 Feedback on progress can be used to make any necessary adjustments along the way. Small wins, or quick and highly visible successes, can be helpful in supporting this stage of the change process.

Refreezing Refreezing involves three interrelated activities.52 First, change leaders implement evalu- ation systems that track expected behaviors after the change, and they implement per- manent training systems to continuously upgrade relevant knowledge and skills. If, for example, working in teams is part of a new approach to production work in a particular organization, an individual’s willingness to contribute to a team must be measured and must also be enhanced when necessary. Second, change leaders arrange for permanent reward structures, involving both monetary and nonmonetary rewards, to positively re- inforce the new behaviors. Many managers suggest that, “You get what you reward.”53 Third, change leaders ensure that new hiring and promotion systems and other forms of support are designed to satisfy the altered demands.54

unfreezing A phase in the change process in which leaders help managers and associates move beyond the past by providing a rationale for change, by creating guilt and/or anxiety about not changing, and by creating a sense of psychological safety concerning the change.

transforming A phase in the change process in which leaders help to implement new approaches by providing information that supports proposed changes and by providing resources and training to bring about actual shifts in behavior.

refreezing A phase in the change process in which leaders lock in new approaches by implementing evaluation systems that track expected behaviors, by creating reward systems that reinforce expected behaviors, and by ensuring that hiring and promotion systems support the new demands.

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Several years after the phar-maceutical fi rm Novartis emerged from a merger, Dan Vasella, CEO, decided to make radical changes. Part of the reason for these changes was the lack of new “blockbuster” drugs in Novartis’s pipe- line. These new drugs were needed to replace major revenue-producing drugs in the fi rm’s current portfolio that were scheduled to go off of pat- ents and thus faced competition from makers of generic drugs (which would be marketed at a much lower price). In fact, the whole drug industry faces this problem, as few have new block- buster drugs in their pipelines. Vasella decided that a major problem for No- vartis and, indeed, all drug makers was that their research was not based strongly enough in science. Rather, the research targeted big diseases be- cause of the opportunity to earn ma- jor returns. Vasella decided to include in the long and costly testing process required for the approval of new drugs only drugs that were backed by proven science. Often this means that the drugs are more targeted for very specifi c diseases, some of which may not affect large numbers of people. Thus, unless the drugs can help control multiple diseases, they promise only small returns. This approach changes the whole business model for drugs.

Vasella met resistance to this change from his marketing managers and others. He moved forward any- way. He hired a new person to head the R&D operations who was a strong academic scientist/researcher but did

not have industry experience. He also moved the major research laboratories from Switzerland to Cambridge, Mas- sachusetts, to be near Harvard and MIT. The research scientists were quite unhappy about the change in location, change in policy, and change in lead- ership. Thus, the changes were radi- cal and also created uncertainty and concern among many of the managers and associates in the company.

His changes were praised by some management experts. For exam- ple, well-known management consult- ant, Ram Charan, said that Vasella was trying to change the existing para- digm in the industry rather than being a prisoner to it. Another management expert suggested that he had “the mind of a long-term strategist.”

Vasella continued to make changes in the top executive ranks and fi nally in building a new and expensive corporate headquarters and research facilities. The new facili- ties were designed to be more open and to facilitate more communication among managers and associates, es- pecially across units and functions. It is designed to promote cross-disciplinary perspectives and problem solving. A Harvard psychologist was consulted to help with the design and explain its value to people in the company. Yet, the change bothered people because it was dramatically different from what they had previously.

While many of the changes were based in logic and appeared to have the support of specialists who understood their value, Vasella

experienced signifi cant resistance in the company. And, shareholders and analysts wanted better business performance to enhance the value of the fi rm’s stock. Thus, in January 2010, it was announced that Vasella would depart the CEO position while remaining as chairman of the board. Joe Jimenez was promoted to be the new CEO. Jimenez had done a good job as head of the fi rm’s dominant drug unit. Prior to his position with Novartis, Jimenez’s experience was primarily in sales and marketing. He takes over the fi rm after a strong fi - nancial performance by Novartis in 2009. However, analysts are con- cerned about their lack of major drugs approved for the market and a recent and costly acquisition of the U.S. eye-care group, Alcon. Novartis paid $50 billion to acquire Alcon.

Thus, Jimenez has a full and chal- lenging agenda in a highly competi- tive market and tough economic en- vironment.

EXPERIENCING ORGANIZATIONAL BEHAVIOR

The Radical Transformation of Novartis

Sources: 2010. “New Novartis CEO: Cafepharma Reader, Former Heinz Exec,” The Wall Street Journal, Jan. 26, at http://www.wsj.com; 2010. “Novartis Taps Joe Jimenez as CEO,” The New York Times, Jan. 26, at http://www.nytimes. com; A. Jack & H. Simonian. 2010. “Novartis in Stealthy Pursuit of Change,” Financial Times, Jan. 26, at http://www. ft.com; H. Plumridge. 2010. “New Novartis Chief Needs Surgery Skills,” The Wall Street Journal, Jan. 26, at http:// www. wsj.com; N. Ouroussoff. 2009. “Many Hands, One Vision,” The New York Times, Dec. 27, at http://www.nytimes.com; K. Capell. 2009. “Novartis: Radically Remaking its Drug Business,” BusinessWeek, June 11, at http://www.businessweek. com; K. Capell. 2008. “Novartis Moves to the Next Stage,” BusinessWeek, Oct. 20, at http://www.businessweek.com.

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542 Chapter 14 Organizational Change and Development

The Experiencing Organizational Behavior feature illustrates major changes imple- mented by Novartis. The changes described are substantial and represent a major depar- ture from the way that research to identify major new drugs is commonly conducted in the industry. Overall, the changes implemented appear to be positive for the company and to hold value for future performance. They received praise from several management experts. However, the process used by the CEO to develop and implement the changes does not follow the process outlined herein. For example, rather than unfreezing the managers and associates in the organization, the CEO decided on the changes and an- nounced them with little input from key managers. As a result, he encountered resistance from managers in the marketing unit (a very important function in the pharmaceutical industry) and from research scientists who not only had to change the focus of their research but also had to move from Switzerland to the United States, the new location of Novartis’s research laboratories. The resistance likely produced less-effective changes or at least delayed the fi rm’s ability to most effectively implement the changes. The end results were that the shareholders were unhappy with the fi nancial performance of the fi rm and a new CEO was put in place to improve it. We conclude that Vasella appeared to have identifi ed many positive changes for the company but followed a poor process to implement the changes in the company. Thus, they have not been as effective as they might have been.

The Novartis example emphasizes that the time and attention change leaders spend on the unfreezing phase can have a signifi cant effect on the success of the change. When change leaders fail to treat unfreezing as a distinct and crucial phase, they often encoun- ter problems, as Vasella obviously did. Without explicit attention to unfreezing, resis- tance to change is likely to be strong. Failure to focus attention on this phase, however, is common and is a source of failure in many change efforts. Two additional points are important. First, managers and associates should not expect all change activities to occur sequentially. Thus, activities important in one phase of the process may overlap activities necessary in the next phase.55 For example, change leaders may engage in vari- ous activities in the moving phase while continuing to convince people of the need to change, an activity associated with the unfreezing phase. Although it is very useful to think in terms of three distinct phases, a measure of fl exibility is required in actually creating change.

Second, a team of change leaders, rather than a single individual, should guide an or- ganization through a major change effort. Relying on a single leader is risky because there is too much work required for one person to handle.56 Deciding how best to unfreeze peo- ple, developing a vision, communicating a vision, generating small wins, and overseeing numerous change projects require more than one key change leader.57

In constructing the team, several factors should be considered. According to a well- known researcher and business consultant, John Kotter, four factors are crucial:58

1. Position power plays a role. Individuals with power based on their formal positions can block change or at least slow it down. Including some of these individuals on the team will leave fewer potential resisters who have the power to slow or resist the change.

2. Informal credibility is important. Individuals who have credibility are admired and respected and can be effective in selling change. Associates often are selected as change leaders based on this criterion.

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Planned Change 543

3. Expertise is a relevant factor. Individuals on the team should possess knowledge related to the problems requiring the change effort and should have diverse points of view on potential solutions.

4. Proven leadership is crucial. The team needs individuals who can lead other managers and associates through the transition.

The size of the team is also a concern. There is little agreement on how large or small the team of change leaders should be, but the size of the organization that will be changed plays a role.59 Six may be suffi cient in a smaller organization or in a division of a larger organization. Fifteen or more may be required in a larger organization. However, as the team grows, it will be more diffi cult to coordinate and manage.

Important Tactical Choices Change leaders must make many decisions. Among these are two important tactical deci- sions, the fi rst involving speed and the second involving style.60 Although these issues have no right or wrong answers, certain criteria must be considered when making informed choices.

Speed of Change A fundamental decision in any change effort involves speed. A fast process, where unfreez- ing, moving, and refreezing occur quickly, can be useful if an ongoing problem will cause substantial damage in the near term.61 Senior managers, for example, often initiate rapid change when they realize that organizational strategies or structure no longer provide value to customers. When Charlotte Beers became CEO of Ogilvy and Mather, a global adver- tising fi rm, the fi rm was out of step with the needs of the advertising industry, was los- ing important customers, and was suffering from declining overall performance. To save the fi rm, she and her circle of senior advisors created a vision, designed transformational change, and orchestrated its implementation in a matter of months.62

Overall, criteria that can be usefully considered when deciding on speed include:63

• Urgency: If the change is urgent, a faster pace is warranted. • Degree of support: If the change is supported by a wide variety of people at the

outset, a faster pace can be used. • Amount and complexity of change: If the change is small and simple, a faster pace

often can be used; but if the change is large, more time may be required.64

• Competitive environment: If competitors are poised to take advantage of existing weaknesses, a faster pace should be considered.

• Knowledge and skills available: If the knowledge and skills required by the new approach exist in the fi rm or can be easily acquired, a faster pace can be used.

• Financial and other resources: If the resources required by the change are on hand or easily acquired, a faster pace can be considered.

Style of Change A second fundamental decision involves style. When using a top-down style, change lead- ers design the change and plan its implementation with little participation from those below them in the hierarchy. In contrast, when using a participatory style, change lead- ers seek the ideas and advice of those below them and then use many of those ideas.

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544 Chapter 14 Organizational Change and Development

Unfortunately, the Novartis CEO did not use a participatory style, and his top-down approach likely dulled the effectiveness of the changes he desired to implement. A trans- formational leadership style would have been more successful in this case.65

In a high-involvement organization, leaders use a participatory style whenever pos- sible. Participation can be useful in generating ideas and developing commitment among those who will be affected by a change.66 Participation, however, can be time-consuming and expensive, as meetings, debates, and synthesis of multiple sets of ideas take signifi cant time. Overall, the following criteria are useful in evaluating the degree to which a partici- patory approach should be used:67

• Urgency: If the change is urgent, a participatory approach should not be used, as it tends to be time-consuming.

• Degree of support: If the idea of changing is supported initially by a wide variety of people, a participatory approach is less necessary.

• Referent and expert power of change leaders: When change leaders are admired and are known to be knowledgeable about pertinent issues, a participatory approach is less necessary.

Resistance to Change Although organizations experience both internal and external pressures to change, they frequently encounter strong resistance to needed changes. Resistance to change involves efforts to block the introduction of new ways of doing things. Dealing with resistance is one of the most important aspects of a manager’s job. In a high-involvement organization, associates also must take responsibility for helping to motivate change among their peers.

Resistance may be active or passive.68 Individuals may actively argue and use political connections in the fi rm to stop a change. In extreme cases of active resistance, resisters may sabotage change efforts through illegal means. In other cases, individuals passively resist change, which is more diffi cult to detect. Resisters may act as though they are trying to make the change a success, but in reality they are not. This often occurs in organizations that have attempted to change too frequently in the recent past, because individuals in these organizations have become tired of change.69

Resistance to change can usually be traced to one or more of the following four causal fac- tors: lack of understanding, different assessments, self-interest, and low tolerance for change.70

Lack of Understanding The fi rst possible cause is lack of understanding. In some cases, individuals are unsure of what a change would entail. They resist because they do not understand the change.71 For example, change leaders may decide to redesign jobs in a manufacturing facility using job en- richment. Such a redesign can result in substantial benefi ts to associates in the affected jobs, as discussed in Chapter 6. If, however, change leaders fail to explain the expected changes, some associates may begin to make false assumptions. They may, for example, believe that if job enrichment is implemented, their pay status will change from hourly wages to estab- lished salaries (with no overtime or incentive pay provided). Thus, they resist the change.

The key to avoiding or handling resistance to change based on lack of understand- ing is to communicate clearly what the change entails.72 Many organizational researchers have emphasized the importance of rich communication for successful change. Meetings, articles in newsletters, and articles on company intranets are examples of possible com- munication tools.

resistance to change Efforts to block the introduction of new approaches. Some of these efforts are passive in nature, involving tactics such as verbally supporting the change while continuing to work in the old ways; other efforts are active in nature, involving tactics such as organized protests and sabotage.

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Different Assessments A second possible cause of resistance involves differing assessments of the change. Associ- ates and managers who resist on this basis believe that the change would have more costs and fewer benefi ts than claimed by those who desire the change.73 In this case, it is often not that the resisters have inaccurate or insuffi cient information, but rather that they un- derstand the change but disagree with change leaders about the likely outcome. For exam- ple, a midlevel manager may resist an increase in product diversifi cation because she sees more costs from the loss of focus than do those who are encouraging the change. Further- more, she may see less potential for synergy across product lines than others do. Increased diversifi cation may or may not be benefi cial to a fi rm. Many factors are involved, and the situation is usually quite complex. Thus, honest disagreements are common when a fi rm is considering product-line expansion. Obviously, this is true for many other changes as well.

To prevent or deal with resistance based on different assessments, change leaders should consider including potential or actual resisters in the decision-making process.74 This focus on participation serves two purposes. First, change leaders can ensure that they have all of the information they need to make good decisions.75 Individuals resisting on the basis of different assessments may have more and better information than change lead- ers, making their resistance to change positive for the organization. Change leaders must explore why resisters feel the way they do.

Second, by emphasizing participation, change leaders can help to ensure procedural justice for actual or potential resisters.76 In the context of organizational change, procedural justice is defi ned as perceived fairness in the decision process. Individuals are more likely to believe the process is fair and are more likely to trust the organization and change leaders if they are included in the decision process. One study showed the potential power of proce- dural justice. Associates in two U.S. power plants who believed they had input into change- related decisions felt more obligated to treat the organization well, trusted management to a greater degree, and expressed an intention to remain with the organization.77

Self-Interest Individuals who resist change because of self-interest believe that they will lose something of value if the change is implemented.78 Power, control over certain resources, and a valued job assignment are examples of things that could be lost. For example, the head of market- ing in a small, rapidly growing fi rm might resist the establishment of a unit devoted to new-product development. If such a unit were established, he would lose his control over product development. Another example of self-interest is when individuals oppose an ap- pointment to a higher-level position on the basis of gender or ethnicity.79 Finally, manag- ers and associates may resist change when they have no incentives to support it and could actually lose resources if changes are made such as in the current U.S. health care system (i.e., government payments are tied to specifi c actions and may not be made if innovations changing the treatments are made).80

To combat this type of resistance, change leaders can try to reason with resisters, explaining that the health of the organization is at stake. Leaders can also transfer resist- ers or, in extreme cases, ask them to leave the organization. Another option is to adopt a more coercive style and insist on compliance. In rare cases, when the resisters are extremely valuable to the organization and other tactics have failed or are unavailable, change leaders can negotiate in an effort to overcome the resistance.81 Valuable resisters who are manag- ers can be offered larger budgets or a valued new assignment for favored subordinates, for

procedural justice In the context of organizational change, the perceived fairness of the change process.

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546 Chapter 14 Organizational Change and Development

example. In the case of associates, additional vacation time might be offered. These ac- tions, however, should be undertaken only under exceptional circumstances because they may create expectations on the part of other managers or associates.

Low Tolerance for Change Associates and managers who resist on the basis of low tolerance for change fear the un- known. They have diffi culty dealing with the uncertainty inherent in signifi cant change. Such resistance leads to higher commitment to the current activities and thus organiza- tional inertia (very slow or no change).82 A manager, for example, may resist a change that seems good for the organization but that will disrupt established patterns. He may not be able to cope emotionally with the uncertainty and be concerned about having the capability to perform in the new situation.83 Change leaders should offer support to these resisters.84 Kind words, emotional support, and attention to training and education that properly prepare the individuals for the planned changes are appropriate tactics.

Research has shown that certain individual characteristics are associated with low tol- erance for change. Lack of self-effi cacy is perhaps the most important of these characteris- tics.85 An associate or manager low in self-effi cacy does not believe that he or she possesses or can mobilize the effort and ability needed to control events in his or her life. In the workplace, this translates into uncertainty about the capacity to perform at reasonable lev- els.86 Another factor is low risk tolerance.87 Individuals who do not tolerate risk very well often dislike major change. In a study of 514 managers from companies headquartered in Asia, Australia, Europe, and North America, poor views of self and low risk tolerance were found to harm the ability to deal with change.88 In particular, openness to change is critical for organizations to be innovative.89

The DADA Syndrome Beyond the resistance to change discussed above, change leaders must realize that associ- ates and managers can become trapped in the so-called DADA syndrome—the syndrome of denial, anger, depression, and acceptance.90 This syndrome highlights what can occur when individuals face unwanted change. In the denial stage, individuals ignore possible or current change; in the anger stage, individuals facing unwanted change become angry about the change; and in the depression stage, they experience emotional lows. Finally, in the acceptance stage, they embrace the reality of the situation and try to make the best of it. Not all individuals who experience this syndrome move through all of the stages se- quentially, but many do. Some, however, remain in the anger or depression stage, resulting in negative consequences for them and the organization.

In a well-known incident, Donna Dubinsky at Apple Computer experienced the DADA syndrome.91 Dubinsky headed the distribution function at Apple in the mid- 1980s. She had performed well in her time at Apple and was considered to be a valuable part of the organization. Even so, Steve Jobs, chairman of the board at the time, began to criticize distribution and called for wholesale changes in the way this unit functioned. Dubinsky, incredulous that her unit was being questioned, decided the issue would go away on its own (denial stage). But the issue did not go away. Instead, Jobs asked the head of manufacturing in one of the operating divisions to develop a proposal for a new approach to distribution. Dubinsky still could not believe her unit would be changed, particularly without her input. Over time, however, she became defensive and challenged the criticisms (anger stage).

DADA syndrome A sequence of stages— denial, anger, depression, and acceptance—through which individuals can move or in which they can become trapped when faced with unwanted change.

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Planned Change 547

B2BL

Cisco experienced its share of problems dur-ing the fi rst decade of the twenty-fi rst century. The two recessions during this time were especially unkind to tech- nology-based fi rms. Yet, John Chambers, CEO of Cisco, has designed and implemented substantial changes in the or- ganization. In his view, he is positioning the fi rm to be a growth machine for many years to come. To do so has required that he take several aggres- sive actions to transform the fi rm and to take these actions during a signifi - cant recession. However, because the fi rm has been well managed over the years, Chambers has $40 billion in cash that can be invested in aggres- sive actions.

First, Cisco has made a number of acquisitions and formed strategic alliances, both of which have the purpose of broadening Cisco’s reach in attractive markets. For example, Cisco recently acquired companies with products and capabilities in the Internet videoconferencing, web se- curity, and large-data-management markets. It also recently formed a joint venture, partnering with EMC, which expands Cisco’s networking capabilities. These actions have spe- cial signifi cance for Cisco’s future. For example, Cisco predicts that 80 percent of the Internet data traffi c will be in video form within four years.

This could be especially important because Cisco is currently the largest seller of networking equipment in the world.

Cisco managers believe that col- laboration will play a major role in business operations in the future, par- ticularly to take advantage of human capital in the organization. As such organizations are likely to be decen- tralized networks of managers and associates working to accomplish the broad goals of the organization. The expectation is that the collaboration fostered by this environment will lead to more innovation and enhanced op- erational effectiveness. Some refer to this approach as collaborative social networking. And these networks will require tools that facilitate the commu- nication and collaboration. The tools focus on video, collaboration, and virtualization.

In addition, Cisco has made substantial changes in its struc- ture and mode of operation. The

reorganization has produced a much fl atter structure, with people and managers organ- ized in teams. The teams are empowered to make decisions that commit resources and act without central manage- ment approval. Managers and teams have compensatory incentives to work with other teams (i.e., collaborate) to de- velop new products and take advantage of new market op- portunities. The structure then

represents a distributed network with the hope of making fast decisions to move into new markets shortly after the market opportunity is identifi ed. The bold promise is, “Power to the people and profi ts to the company.”

Chambers suggests that with these changes, his company should be able to achieve annual sales growth of 12 to 15 percent. For a company with annual sales of $36 billion, this amount of increase per year is not trivial. Given Cisco’s posi- tive record and the changes made to resemble more of a high-involvement organization, many believe that this level of growth is achievable.

Cisco made major changes in its organization largely by acquir- ing products and capabilities to enter markets new to the fi rm and by dramatically changing the organiza- tional structure and approach to man- agement. The decentralized and dis- tributed social networks of managers

Transforming Cisco into a Recession-Proof Growth Machine

EXPERIENCING ORGANIZATIONAL BEHAVIOR

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548 Chapter 14 Organizational Change and Development

Concerned with the process through which Jobs was attempting to change distribu- tion, senior management in the company protested, which led to the creation of a task force to examine distribution issues. Dubinsky continued to be defensive as a member of this task force. As it became clear that the task force would endorse Jobs’s proposed changes, however, Dubinsky reached an emotional low (depression stage). She was eventu- ally revived by conversations at a retreat for executives. There, Dubinsky realized she had not invested her considerable talents in effectively handling the criticisms and plans for change in the distribution function. She went on the offensive and asked that she be al- lowed to develop her own proposal for change (acceptance). She was allowed to do so, and after examining the concerns and alternatives, she recommended major changes—changes that were different from Jobs’s original ideas. Dubinsky’s ideas were incorporated in the fi nal plan.

Change leaders should be sensitive to the potential for the DADA syndrome. To prevent associates and managers from entering the DADA stages or to ensure they do not become mired in the anger or depression stage, leaders must monitor their organizations for actual or potential resistance to change. If resistance is discovered, its cause must be diagnosed and addressed.

Organization Development Leaders must recognize internal and external pressures for change and introduce initiatives designed to cope with them. In addition, leaders can proactively position their organiza- tions to better recognize the need for change and to more easily implement change when necessary. In other words, leaders can develop their organizations so that communication, problem solving, and learning are more effective.

To achieve these goals, organization development (OD) is useful. Although re- searchers have not always agreed on the specifi c features of organization development, they agree that its purpose is to improve processes and outcomes in organizations.92 OD has had its share of critics in recent years but it has produced some worthwhile results.93

organization development (OD) A planned organization-wide continuous process designed to improve communication, problem solving, and learning through the application of behavioral science knowledge.

and associates help to produce greater innovation and to act quickly to exploit opportunities after they are identifi ed. Chambers has been more successful in making changes and in producing positive results than the

CEO of Novartis. As noted previously, although the changes made by the Novartis CEO appeared to be good ones, the process used to create the change and implement it was ineffec- tive. The CEO at Cisco encountered

less resistance than the changes in Novartis, because Cisco empowered managers and associates who in turn helped implement the change. As a result one could predict greater future success for Cisco than for Novartis.

Sources: A. Greenberg. 2010. “Cisco Aims Telepresence at Consumers’ TVs,” Forbes, Jan. 6, at http://www.forbes. com; D. Clark. 2009. “Tech Firms Jockey Ahead of Recovery,” The Wall Street Journal, Dec. 31, at http://www.wsj.com; J. Fortt. 2009. “Cisco: We’re a Growth Machine,” Fortune, Dec. 9, at http://www.cnnmoney.com; A. Dugdale. 2009. “Cisco’s Collaboration Platform: Facebook for Business?” Fast Company, Nov. 9, at http://www.fastcompany.com; A.S. Cohen. 2009. “The Latest Tech Tool? People Power,” Fortune, Nov. 9, at http://www.cnnmoney.com; A. Greenberg. 2009. “Cisco Preps for Recovery,” Forbes, Nov. 2, at http://www.forbes.com; E. McGirt. 2008. “How Cisco’s CEO John Chambers Is Turning the Tech Giant Socialist,” Fast Company, Nov. 25, at http://www.fastcompany.com.

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Organization Development 549

OD can be defi ned as a planned, organization-wide, continuous process designed to improve communication, problem solving, and learning through the application of be- havioral science knowledge.94 With its roots in humanistic psychology, OD is grounded in values of individual empowerment and interpersonal cooperation.95 Thus, it is consistent with the high-involvement management approach.

The Basic OD Model The basic OD model uses a medical approach, in which organizations are treated when they suffer ill health. OD researchers and practitioners diagnose the illness, prescribe in- terventions, and monitor progress.96 Exhibit 14-4 provides an overview.

Diagnosis Diagnosis is an important step in organization development. Without effective diagnosis, managers will not understand what their organization really needs, and the chosen course of action will likely be ineffective.

Although the diagnostic approaches used by physicians and managers are similar, the tools they use vary. Over the years, physicians’ diagnostic tools have become quite sophis- ticated (laboratory tests, CT scans, MRIs, electrocardiograms, and so on). Those of the manager, though useful, are less precise. Even so, our knowledge of diagnostic tools has increased rapidly in recent years.

Diagnostic devices for managers include interviews, surveys, group sociometric de- vices, process-oriented diagnosis, and accurate records (e.g., performance records). Of these tools, the most frequently used are surveys and individual and group interviews.97 Managers can conduct many different surveys, including job-satisfaction surveys (such as the Job Description Index), organization climate or culture surveys (such as the Or- ganizational Practices Questionnaire), job design measures (such as the Job Diagnostic Survey), and assessments of leaders (such as the Leadership Practices Inventory). In many cases, standard survey forms can be used; in other cases, surveys may need to be custom- designed for the situation. These diagnostic tools can be useful in determining needed interventions. Some organizations administer surveys to employees on a regular basis, such as annually, to identify problems.

Interventions After the situation has been diagnosed, interventions can be prescribed. Organization de- velopment interventions include different forms of group training, team building, and job redesign.98 The most appropriate technique will vary with the situational factors involved.

Diagnosis of Situation

Introduction of Interventions

Progress Monitoring

Feedback

Exhibit 14-4 Basic Organization Develop- ment Model

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550 Chapter 14 Organizational Change and Development

Unfortunately, there are no ready-made answers that can be used for all situations. Several of the more important techniques are described later in this chapter.

Proper implementation is crucial in organization development. For example, job enrichment may be useful when individuals desire more challenging jobs and more responsibility. Providing such jobs can enhance intrinsic motivation and satisfaction, yielding empowered individuals who are better positioned for effective problem solving and learning. OD leaders must properly prepare the individuals for job enrichment, however, even though they may have requested it. Overall, the interventions must be well planned. Increased job responsibilities often raise the question, “Don’t I deserve more pay if I’m performing a more responsible job?” OD leaders must be prepared to answer such questions.

A well-trained OD specialist should play an important role in any intervention.99 Often, managers who understand only one or two specifi c OD techniques attempt to use these approaches to solve whatever problem exists. But the techniques must match the situation, or the likelihood of failure is high. Furthermore, people who are not fully knowledgeable about organization development frequently have problems implementing a successful program. For example, only experts in group training, team building, or con- fl ict resolution should implement those particular OD change techniques.

Progress Monitoring The effects of the interventions must be evaluated after an appropriate interval.100 The evaluation is important to ensure that the objectives have been met.101 A common evalu- ation technique is the survey, which may be used to diagnose a problem and then reused after an OD technique has been implemented to determine what progress has been made toward resolving the problem. Other evaluation tools may be used as well. In any case, the main criterion for evaluation is to determine whether the original objectives have been accomplished. Some OD tools such as process consultation have evaluation processes built into them.102

If the evaluation shows that objectives have not been accomplished, further efforts may be necessary. A new or modifi ed approach may be designed and implemented. The type and degree of these actions depend on why the objectives were not reached and by how far they were missed. Questions such as “Was the original process correct?” and “Was it correctly implemented?” must be answered.

Frequently, some modifi cations are needed to increase the positive benefi ts of OD work, but if care has been taken in the OD process, wholesale changes are unnecessary at this stage. Because a comprehensive OD program is continuous, the process of sensing the organization’s need for development is continuous. In this way, an organization is in a constant state of renewal and regularly checks its health.

Organization Development Interventions The interventions used to create organizational change are at the heart of organization de- velopment. Here, we describe several of the more important OD intervention techniques. Research suggests that using more than one technique is generally superior to using a single technique.103 For convenience of discussion, we have placed the interventions into two groups: techniques directly focused on how individuals relate to one another104 and techniques focused on structure and systems105 (see Exhibit 14-5).

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Organization Development 551

Relationship Techniques Relationship techniques focus on how individuals perceive and respond to one another. T-group training, team building, survey feedback, and more general training are among the most important techniques in this category.

In t-group training, individuals participate in various interpersonal and group situa- tions to better understand how they act, how others perceive their actions, and how others react to them.106 In many cases, individuals involved in this type of training do not know one another before the group experience. Participating with strangers rather than work colleagues helps to promote honest behavior. T-group training is aimed at helping indi- vidual associates and managers learn about themselves in a group setting and then transfer that learning to the workplace. An individual often is able to learn about unintended negative effects created by certain types of behavior, for example, and then change that behavior, resulting in a positive effect on the workplace environment.

T-group training must be used carefully and only with a trained, qualifi ed facilitator. The facilitator plays an important role in increasing the chances of success. The use of this technique is declining because it can produce negative outcomes for some people (e.g., those who are insecure). Thus, group participants must be chosen with great care. Neglect- ing to take such care is one reason that OD efforts fail.

Team building, a cornerstone of organization development, is a technique that re- quires members of a team to work together to understand their problems and implement solutions.107 A team is any group of associates and/or managers who work together to accomplish a task (see Chapter 11 for additional details). The problems faced by teams usually involve substantive team tasks (e.g., technical design problems for a new-product- development team), the processes of the team (e.g., weaknesses in problem solving), and interpersonal relationships among team members (e.g., diffi culties based on differences in personality).

In successful applications of team building, team members focus mostly on substan- tive tasks rather than on process and interpersonal issues.108 While team members con- centrate on substantive problem solving, a skilled leader can introduce interpersonal and other process guidance as needed.109

Overall, the team-building process can help to positively reinforce relations among team members and may be particularly useful for teams experiencing confl ict, lack of co- hesiveness, or ambiguous goals. Team building can be important for self-managed teams and teams that have new leaders.110 New leaders taking over the responsibility for a team

t-group training Group exercises in which individuals focus on their actions, how others perceive their actions, and how others generally react to them; participants often learn about unintended negative consequences of certain types of behavior.

team building A process in which members of a team work together and with a facilitator to diagnose task, process, and interpersonal problems within the team and create solutions.

Organizational Development

Relationship Techniques Structural Techniques

T-group Training

Team Building

Survey Feedback

Job Redesign

Management by Objectives

Supplemental Organizational Processes

Exhibit 14-5 Organization Develop- ment Interventions

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552 Chapter 14 Organizational Change and Development

often fi nd that team building reduces suspicion, increases trust, and promotes a healthy working relationship. At times, the use of a third-party consultant may be necessary to guide the process, particularly when confl ict is present.

In summarizing their experiences, two OD researchers have offered a useful list of team-building tips:111

1. Get the right people together for

2. a large block of uninterrupted time

3. to work on high-priority problems or opportunities that

4. they have identifi ed and have them work

5. in structured ways to enhance the likelihood of

6. realistic solutions and action plans, which are then

7. implemented enthusiastically and

8. followed up to assess actual versus expected results.

The survey feedback technique emphasizes the collection and use of data from ques- tionnaires.112 Although all OD efforts involve collecting data through surveys and in- terviews as part of diagnosing the organization’s situation, surveys can also be used as an intervention following diagnosis. If, for example, the diagnosis suggests that poor moti- vation among associates is driven partly by a feeling of lack of input, using surveys more frequently may be helpful in changing this feeling.

The fi rst step in the survey feedback technique involves collecting data on how in- dividuals feel about various aspects of leadership and interpersonal relations within the unit, as well as broader organizational issues. Each manager in the organization receives a summary of the survey results for her unit. An internal or external OD consultant meets with the manager to discuss the results. A second meeting is then arranged for the manager to present the fi ndings to associates and lower-level managers. The OD consultant often attends this unit meeting to explain any technical aspects of the data. The unit members then work together to interpret the fi ndings, understand problems, and fi nd solutions.

It is important that all information from a survey be discussed. Positive information is crucial in helping to build and maintain a positive climate. Negative information is critical for understanding problems.

Training is a process used in OD to help managers and associates to gain skills and capabilities needed to accomplish tasks in their jobs.113 It is common, for example, to provide managers leadership training to help them become more effective leaders. Train- ing can also enrich managers’ and associates’ capabilities that help prepare them for future positions in the organization. Such training provides the organization with more fl ex- ibility, allowing it take advantage of new opportunities that are identifi ed.114 Training is a common tool used universally by all types of organizations. In addition, training is a global phenomenon. For example, most multinational enterprises have their managers and associates participate in training in their subsidiaries throughout the world. However, they do have to adjust their processes and content to adapt to local cultural values.115

Structural Techniques Structural OD techniques, as the name implies, involve adjustments in the organization’s structure. In the fi eld of organization development, some structural interventions are fo- cused on changing tasks; others are focused on changing the method of setting task ob- jectives; and still others are broadly focused on communication, problem solving, and

survey feedback Data obtained from questionnaires; managers receive the data for their units and are expected to hold unit meetings to discuss problems.

training A process used in OD to help managers and associates to gain skills and capabilities needed to accomplish tasks in their jobs.

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Organization Development 553

learning. Commonly used techniques include job redesign, management by objectives (MBO), and supplemental organizational elements.

The job redesign technique may include job enlargement, job enrichment, or both.116 As discussed in Chapter 6, job enlargement involves adding tasks that offer more variety and that may require the use of different skills. The additional tasks, however, are not of greater complexity. Some refer to this as horizontal loading. Job enrichment involves adding more complex tasks, generally by incorporating tasks formerly handled by managers (e.g., sched- uling of maintenance on a production machine) and staff specialists (e.g., making quality- control decisions). Thus, associates whose jobs are enriched have greater responsibility because they begin to manage their own jobs individually or as members of self-managing teams.

Much of the emphasis on the redesign of jobs in organization development grew out of controversy surrounding boring, repetitive tasks often seen in mass-production systems. Many observers, believing that repetitive tasks led to an alienated workforce, proposed to enrich jobs by providing more challenging tasks. Through enrichment, associates become more engaged problem solvers. Because managers no longer need to closely supervise the routine activities of associates, they can focus more of their attention on helping to solve key organizational problems and helping to establish a learning orientation in their units. In current organizations, jobs are often enriched by assigning coordination responsibili- ties related to interdependent tasks. And, these tasks frequently require collaboration with people and units based in other countries.117

When an organization uses management by objectives (MBO), individuals negoti- ate task objectives with their managers at each level in the organization. (See Chapter 6 for a more detailed discussion of participation in setting goals and the motivational properties of goals.) This technique changes the objective-setting structure from one determined by the supervisor to one in which both supervisor and subordinates participate. Once set, objectives are used in performance assessments.

As an OD technique, MBO involves several specifi c steps.118 First, information col- lected from organization members, senior managers, and perhaps others is used to di- agnose organizational problems. This diagnosis provides a focus for MBO efforts. After diagnosis, senior managers and others can defi ne major organizational objectives. Next, workshops about the MBO process generally are conducted for all managers to help them understand and use the technique correctly.

Objectives for middle managers are then defi ned by teams of middle and senior man- agers. Objectives for lower-level managers are set by teams of lower-level and middle man- agers, with senior managers also possibly involved. Finally, objectives for associates are es- tablished by teams of associates and managers. The participatory approach embedded in MBO often yields associates and managers who are more satisfi ed with and committed to the organization. As a result, they are more likely to be enthusiastic problem solvers who are open to learning.

Management by objectives can be a useful technique, but it does carry risks.119 First, objectives can be rather static and infl exible, while the environment is constantly chang- ing. People may have to change their focus and what they do in order to meet changing environmental demands. Second, an associate’s accomplishments are often infl uenced by factors outside of his control. Thus, performance assessments tied to meeting objectives can be unfair. Third, a strong focus on objective attainment may mean that intangible aspects of the job for which objectives have not been set are ignored.

Finally, senior managers can create supplemental organizational processes to en- hance communication, problem solving, and learning. Examples of such processes include

job redesign Enlargement or enrichment of jobs; enrichment is the better method to enhance motivation for effective problem solving, communication, and learning.

management by objectives (MBO) A management process in which individuals negotiate task objectives with their managers and then are held accountable for attainment of those objectives.

supplemental organizational processes Processes in which associates and/or managers have ongoing meetings for the purpose of understanding and addressing important problems.

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554 Chapter 14 Organizational Change and Development

quality circles, safety councils, regular union-management meetings, and periodically scheduled management retreats. At the core, these supplemental processes involve ongo- ing meetings of associates and/or managers for the purpose of understanding and address- ing important problems. Team building, with its attention to process and interpersonal issues, sometimes is involved.

Senior managers at General Electric used a number of OD interventions to improve honest communication, problem solving, and learning. Their efforts had remarkable re- sults.120 The management–union meetings implemented in the transportation division constituted a supplemental organizational process. Work-out was also a supplemental process, and it involved aspects of team building as well. The boundaryless organization involved job redesign, as individuals were expected to search across unit lines for ideas— an activity formerly outside their domain. Many analysts believe that the work-out and boundaryless organization concepts contributed to GE’s phenomenal performance during the 20 years of Jack Welch’s tenure as CEO. During this time, GE created more value for shareholders than any other company in the world.121

Beginning with the efforts of Thomas Edison, over the years GE has provided sig- nifi cant advances in many useful products, including the incandescent light bulb, x-ray equipment, the electric fan, radios, TVs, and turbines. But despite GE’s history of innova- tion in product development and its overall success, the company had become stale and out of step with its environment by the time Welch took over as CEO in 1981. Many associates and managers were unhappy and unproductive, and fi nancial performance was beginning to decline. Internal processes and structures were hindering rather than helping. But, OD interventions helped to create a healthier company. Through these interven- tions, associates and lower-level managers became more motivated to help identify needed changes, middle and senior managers had better forums for information exchange, and everyone had greater incentives to develop, borrow, and share ideas. The outcome was highly positive for GE’s shareholders, managers, and associates.

Organizational Learning Most organizational development and change require learning. The changes may be based on learning new capabilities, new processes, or adding new knowledge that helps the organization more effectively use its current capabilities and processes. Thus, man- aging organizational change entails managing knowledge transfers and development.122 Learning how to more effectively use current knowledge is referred to as exploitative learning. Alternatively, exploratory learning involves creating new knowledge and being innovative.123

As explained earlier, some of the OD techniques also involve learning about relation- ships and building relationship skills.124 Some of this learning can eventually be integrated into and enrich current organizational routines (e.g., regular processes and approaches for problem solving) or create new ones.125 But, it is critical to emphasize that organizational change is successful in the long term only if learning occurs. For example, the changes that enhanced GE’s phenomenal performance during Jack Welch’s tenure as CEO were based on managers learning how to make effective decisions that created value for the organization. And, in turn, managers must help the associates who work with her to learn as well.126 Individual learning is important to solicit creative ideas from associates and to build their capabilities to participate in problem-solving activities important in high- involvement organizations.127

exploitative learning Learning how to more effectively use current knowledge.

exploratory learning Creating new knowledge and being innovative.

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Organization Development 555

Organization Development across Cultures The growth of multinational corporations and the global marketplace requires that the cultural implications of OD programs be considered. Behavioral science techniques may not work the same way in different cultures, and methods of managing successful orga- nizations can vary across cultures. Managers hoping to implement an OD program in a culture different from their own must avoid an ethnocentric attitude (assuming that everyone is similar to those back home) as well as stereotyping.

To implement OD successfully in different cultures, those involved should demon- strate the following qualities:

• Flexibility—openness to new approaches, ideas, and beliefs and willingness to change one’s own behavior

• Knowledge of specifi c cultures—understanding of the beliefs and behavior patterns of different cultures (see Chapter 3 for a discussion of cultural differences)

• Interpersonal sensitivity—the ability to listen to and resolve problems with people from different cultures128

THE STRATEGIC LENS

O rganizations must adapt to their external environments in order to survive, grow, and achieve fi nancial success. Organiza- tions design their strategies to engage in actions that give them an advan- tage over their competitors. Because most organizations exist in dynamic environments, they have to adjust their strategies regularly. Implement- ing strategies and adjustments to them requires the involvement and support of all managers and associates in the organization. Therefore, identifying the need for major changes and imple- menting those changes are critical de- terminants of organizational success. Managers must overcome resistance to change and effectively use the hu- man capital in the organization to achieve and sustain a competitive ad- vantage. Yet, the largest challenge in creating organizational change is in changing the behavior of people. This conclusion is supported by research

showing that 90 percent of people who have serious heart disease fi nd it highly diffi cult to change their lifestyle even though they understand the im- portance of doing so for their personal health.129 One can easily surmise that if people cannot change their lifestyle when it affects their health, changing their behavior for the good of the or- ganization is likely to be even more diffi cult. Research also shows that events creating a need for substantial change (often referred to as “discon- tinuous change”) rarely trigger a re- sponse until they are perceived as a threat to survival.130

The examples of major changes implemented at Starbucks, Cisco, and GE show the importance of manag- ing organizational change, as well as the potential importance of OD in- terventions. The major organizational changes implemented at GE are re- portedly the primary reason that Jack Welch enjoyed so much success as

CEO during his 20-plus years in that role. Alternatively, the major changes recently implemented at Starbucks and Cisco are positioning them to be successful in the future. Develop- ing and implementing effective orga- nizational strategies and managing orga nizational change are interde- pendent.

Critical Thinking Questions

1. Why do organizations need to make changes on a regular basis? What are the major causes of these changes?

2. Why is it so diffi cult for people to change their behavior, even when they know it is important to do so?

3. If you were in a managerial po- sition and believed that a major change in your unit’s structure was needed, what actions would you take to ensure that the change was made effectively?

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556 Chapter 14 Organizational Change and Development

What This Chapter Adds to Your Knowledge Portfolio In our fi nal chapter, we have discussed change in organizations. More specifi cally, we have discussed pressures for change, a three-phase change model, two critical tactical decisions, and resistance to change. We have also examined organization development, offering a defi nition and basic model, along with a set of techniques. In summary, we have made the following points:

• Organizations experience pressures for change, some of which are internal. Aspira- tion–performance discrepancies constitute one internal source of pressure. These discrepancies are simply differences between desired and actual performance. Past aspirations, past performance, and comparisons with others affect today’s aspi- rations. Life-cycle forces constitute a second internal source of pressure. When organizations grow, pressure tends to build at certain predictable points, forcing organizations to respond. If an organization responds effectively, it tends to move through several stages: entrepreneurial, collectivity, formalization, and elabora- tion. Changes in the persons occupying top management positions often produce broader organizational changes. First, new managers are not committed to previ- ous strategies and decisions made. Second, new managers bring unique ideas and perhaps a different vision for the organization. In turn, these reduce resistance to change and provide directions for change.

• Organizations experience a host of external pressures for change. Such pressures originate with technological advances, the introduction or removal of government regulations, changes in societal values, shifting political dynamics, changes in de- mographics, and growing international interdependencies.

• Planned change entails deliberate efforts to move an organization or a subunit from its current state to a new state. Such change is typically thought of as a three- phase process comprising unfreezing, transforming, and refreezing. Unfreezing in- volves providing a rationale for change, producing minor levels of guilt or anxiety about not changing, and creating a psychological sense of safety concerning the change. Transforming involves providing information that supports the proposed change and creating actual change. Refreezing focuses on implementing evaluation systems to track expected new behaviors and training systems to ensure continuous upgrading of relevant knowledge and skills. It also involves creating permanent reward structures to reinforce the new behaviors, as well as hiring and promotion systems that support the new approaches.

• Decisions related to speed and style must be made in all planned change projects. Whether movement toward change should be fast or slow depends on the urgency of the change, the degree of support for changing, the amount or complexity of the change, the competitive environment, the knowledge and skills available to support the change, and the availability of fi nancial and other resources necessary to imple- ment the change. Style involves using a top-down or participatory approach. Key criteria for this decision are the urgency of the change, the degree of support for changing, the referent and expert power of change leaders, and organizational norms.

• Resistance to change can be traced to a general set of causes: lack of understanding, different assessments, self-interest, and/or low tolerance for change. To address lack of understanding, change leaders should ensure proper communication about proposed

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What This Chapter Adds to Your Knowledge Portfolio 557

changes. To address different assessments, leaders should include actual or potential change resisters in the decision-making pro- cess in order to learn as much as possible about their thinking and to create a sense that all voices are being heard. To address self-interest, leaders must consider a host of tactics, includ- ing transferring resisters or even terminating their employment, using a coercive style to ensure compliance, and in rare situations, ne- gotiating compliance. Finally, to address low tolerance for change, change leaders should offer emotional support and ensure proper education and training to break the inertia.

• Individuals facing unwanted change may move through a series of stages known as denial, anger, depression, and acceptance. Change leaders must understand this so- called DADA syndrome. To prevent as- sociates and others from experiencing it, they must monitor their organizations for potential and actual resistance to change and deal effectively with resistance when it is identifi ed.

• Organization development is an applied fi eld of study focused on improving pro- cesses and outcomes in organizations. It can be formally defi ned as a planned, orga- nization-wide, continuous process designed to improve communication, problem solv- ing, and learning. Because it has roots in humanistic psychology, it is grounded in values of individual empowerment and interpersonal cooperation. The basic OD model has three steps: diagnosis, intervention, and progress monitoring.

• The various interventions used in organization development can be classifi ed as either relationship techniques or structural techniques. Relationship techniques, which focus on how individuals perceive and respond to one another, include t-group training, team building, survey feedback, and more general skills training. Structural techniques, which involve adjustments to the structural aspects of an organization, include job redesign, management by objectives, and supplemental structural elements. OD techniques involve organizational learning in order to create the desired change.

• Cultural differences must be considered when organization development tech- niques are being used. Techniques must be chosen in light of the prevailing cul- ture. To implement OD successfully in different cultures, those involved should be fl exible, understand the various cultures, and possess interpersonal sensitivity.

? back to the knowledge objectives 1. What are the three major sources of internal pressure

for organizational change? In your opinion, which of these three is most diffi cult to handle? Why?

2. What are the six major sources of external pressure for organizational change? In your opinion, which of these is most diffi cult to handle? Why?

3. What is involved in each phase of the unfreezing– transforming–refreezing model of planned change?

4. What are the factors to consider in deciding whether a fast or slow approach to change is best? What are the factors to consider in deciding whether a top-down or participatory approach to change is best? Describe a situation in which you were either a change recipient or a change leader and a poor choice was made for at least one of these two decisions (use an example from an organization in which you currently work or formerly worked, or use a voluntary organization, a church, a sports team, or a fraternity/sorority).

5. Compare the four basic causes of resistance to change. If you had to choose one, which would you prefer to deal with as a manager, and why?

6. What is the DADA syndrome? 7. What is organization development? Provide a defi ni-

tion as well as a basic model. A number of interven- tions can be used in organization development. As a manager, which of these interventions would you prefer to use, and why?

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558 Chapter 14 Organizational Change and Development

Thinking about Ethics 1. The entrepreneurial stage of an organization’s life cycle is an exciting time. But while the

founders are deciding how they will enter new markets and what products they will offer, do they have any obligation to consider the general public’s interests in these decisions? In this chapter, we suggested that managers can adopt a coercive style to overcome resistance to change when it is based on self-interest. Do managers have any responsibility to people whose resistance is based on self-interest? Explain.

2. When implementing OD interventions, how should managers deal with people who have low self-effi cacy?

3. What ethical issues are involved in implementing major organizational changes in which a large number of associates are laid off? How should these issues be handled?

4. Suppose you identify a person going through the DADA process in response to an organizational change. Should you intervene or leave the person alone to move through the stages on his or her own? Explain your answer. If the person is in the anger stage, how can you intervene successfully?

Key Terms aspiration–performance

discrepancies, p. 531 life-cycle forces, p. 532 changes in top management,

p. 534 planned change, p. 539 unfreezing, p. 540 transforming, p. 540 refreezing, p. 540

resistance to change, p. 544 procedural justice, p. 545 DADA syndrome, p. 546 organization development

(OD), p. 548 t-group training, p. 551 team building, p. 551 survey feedback, p. 552 training, p. 552

job redesign, p. 553 management by objectives

(MBO), p. 553 supplemental organizational

processes, p. 553 exploitative learning, p. 554 exploratory learning, p. 554

Human Resource Management Applications The Human Resource Management (HRM) function likely plays an important role in helping the organization to change as it desires and to achieve the objectives of that change. For example, they should have a small group of people who carefully diagnose the pressures for changes and to develop recommendations as to what changes should be made. This activity may be a part of an organization development unit within the HRM function.

In addition, the HRM function is commonly in charge of the organization development tech- niques used in the organization. They either have an internal team to design and implement them or they hire an external consultant to do so. These include t-group training, team building, survey feedback, and more general skills training.

HRM also commonly guides job redesign programs and helps implement management-by- objectives programs along with any other techniques designed to help managers and associates learn new capabilities and improve the job performance.

building your human capital

An Assessment of Low Tolerance for Change People differ in their tolerance for change. Low self-effi cacy and low risk tolerance are two impor- tant factors that affect tolerance for change. Although an individual’s self-effi cacy and risk tolerance may vary from situation to situation, overall scores on these factors provide insight into general

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Building Your Human Capital 559

tendencies. Understanding these tendencies can help you to understand how and why you behave as you do. In this installment of Building Your Human Capital, we present an assessment tool for effi cacy and risk.

Instructions In this assessment, you will read 19 phrases that describe people. Use the rating scale below to indicate how accurately each phrase describes you. Rate yourself as you generally are now, not as you wish to be in the future, and rate yourself as you honestly see yourself. Keep in mind that very few people have extreme scores on all or even most of the items (a “1” or a “5” is an extreme score); most people have midrange scores for many of the items. Read each item carefully, and then circle the number that corresponds to your choice from the rating scale that follows.

1 2 3 4 5 Not at all like me

Somewhat unlike me

Neither like nor unlike me

Somewhat like me

Very much like me

1. Enjoy being reckless 1 2 3 4 5 2. Become overwhelmed by events 1 2 3 4 5 3. Would never go hang-gliding or bungee-jumping 1 2 3 4 5 4. Readily overcome setbacks 1 2 3 4 5 5. Take risks 1 2 3 4 5 6. Am often down in the dumps 1 2 3 4 5 7. Would never make a high-risk investment 1 2 3 4 5 8. Can manage many things at the same time 1 2 3 4 5 9. Seek danger 1 2 3 4 5 10. Feel that I am unable to deal with things 1 2 3 4 5 11. Stick to the rules 1 2 3 4 5 12. Can tackle anything 1 2 3 4 5 13. Know how to get around rules 1 2 3 4 5 14. Am afraid of many things 1 2 3 4 5 15. Avoid dangerous situations 1 2 3 4 5 16. Think quickly 1 2 3 4 5 17. Am willing to try anything once 1 2 3 4 5 18. Need reassurance 1 2 3 4 5 19. Seek adventure 1 2 3 4 5

Scoring Key To determine your score, combine your responses to the items above as follows:

Self-effi cacy � (Item 4 � Item 8 � Item 12 � Item 16) � (30 � (Item 2 � Item 6 � Item 10 � Item 14 � Item 18))

Tolerance for risk � (Item 1 � Item 5 � Item 9 � Item 13 � Item 17 � Item 19) � (24 � (Item 3 � Item 7 � Item 11 � Item 15))

Scores for self-effi cacy can range from 9 to 45. Scores of 36 or above may be considered high, while scores of 18 or below may be considered low. Scores for risk tolerance can range from 10 to 50. Scores of 40 or above may be considered high, while scores of 20 or below may be considered low.

Source: International Personality Item Pool. 2001. A Scientifi c Collaboration for the Development of Advanced Measures of Personality Traits and Other Individual Differences, at http://ipip.ori.org.

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