Chapter One: Why Organizational Behavior Matters
Learning Objectives:
- Explain basic concept of organizational
behavior (OB) and its value in
organizations
- Describe the key role of managing human
capital in creating a sustainable
competitive advantage for organizations
- Identify the major behavioral science
disciplines that contribute to OB
- Demonstrate the value of critical thinking
in the context of OB
- Identify the major challenges and
opportunities in the field of OB
- Differentiate the three basic levels of
analysis at which OB may be examined
- Outline the benefits of positive OB and
high involvement management
LO 1.1: Explain basic concept of organizational behavior (OB) and its value in
organizations
Organizations need managers who can understand, anticipate and direct people in a fast-paced
competitive market. People with Organizational Behavior Skills are regarded as a valuable and
essential commodity.
Organizational Behavior (OB): a field of study focused on understanding, explaining, and
improving attitudes of individuals and groups in organizations.
Organization: structured arrangement of people working together to accomplish specific goals.
In short OB focuses on figuring out how and why individual employees and groups of
employees behave the way they do within an organizational setting. Researchers have studied
OB. One American study concluded employees would rather have a better boss than a raise.
Managers who lack OB skills lose good employees.
Understanding organizational behavior and the ways people act and interact within
organizations provides three key advantages:
1. You can explain behavior. Why your boss, coworkers, or subordinates are doing what
they are doing.
2. You can predict behavior. Anticipate what you boss, coworkers, or subordinates will do
in certain circumstances and situations.
3. You can influence behavior. Shape the actions of your subordinates, as well as your
boss and coworkers in order to help them accomplish their goals and achieve
organizational objectives.
Influencing behavior is the greatest interest to a practicing manager. Can be used to optimize
performance by providing effective direction and guidance.
OB provides a systematic approach, based on scientific evidence, to further our understanding
of behavior. Relying on common sense results in the use of inaccurate generalizations, incorrect
suppositions, and common misconceptions to justify or define other people’s behaviors.
Managers carry out four main functions: planning, organizing, leading, and controlling.
Planning: manager evaluates an organization’s current position and where it wants to be in the
future, and sets goals, designs strategies, and identifies actions and resources need to achieve
success.
Organizing: arranging resources such as people and functions to implement the strategy made
during planning stage.
Leading: managers ensure goals are achieved by motivating and communicating with
employees.
Controlling: allows managers to monitor employee performance, ensure milestones are being
reached, and take corrective or preventative action where necessary.
Organizational members need to be equipped with specific skills to carry out their roles
effectively. Skills required include technical skills, human skills, and conceptual skills.
Technical Skills: the aptitude to perform and apply specialized tasks.
Employees need to be proficient in using the latest technologies, including databases,
spreadsheets, email and social networking tools.
Human Skills: the ability to relate to other people.
People with effective human skills take the feelings of others into account and are adept at
dealing with conflict. Skills are essential for managing relationships. Human skills require
emotional intelligence.
Emotional Intelligence (EI): the ability to understand emotions in oneself and others in order to
effectively manage one’s own behaviors and relationships with others.
Conceptual Skills: the capacity to see the organization as a whole and understand how each
part relates to each other and how it fits into its overall environment.
Conceptual skills help managers solve problems, identify opportunities and challenges, and
think creatively when making decisions.
Managers who embrace OB principles understand the success of an organization lies with it
people.
Strategic OB Approach: the idea that people are the key to productivity, competitive edge, and
financial success.
Human Capital: people’s skills, knowledge, experience, and general attributes.
LO 1.2: Describe the key role of managing human capital in creating a sustainable
competitive advantage for organizations
Organizations have two kinds of resources: tangible and intangible.
Tangible: physical assets such as equipment, property, and inventory.
Intangible: organization’s reputation and culture, its relationship with customers, and the trust
between managers and coworkers. Difficult to measure due to subtle nature but they remain
crucial for competing in global economy.
Human capital is intangible resources. Mangers focuses on enriching their human capital by
nurturing and enhancing their employees’ knowledge and skills. Human capital is essential for
gaining competitive advantage.
Competitive Advantage: the edge that gives organizations a more beneficial position than their
competitors and allows them to generate more profits and retain more customers.
Employees can add value in different ways, human capital value. Essential that employees have
skills and abilities to execute a company strategy, they must also have willingness to contribute
to the performance and success of an organization. Critical that managers make effort to
continuously nurture their high-performing employees, because outstanding employees are in
always in short supply.
Human Capital Value: The way employees work toward the strategic goals of an organization
to achieve competitive advantage.
Not everyone has the right skillset for progression of organization, human capital rareness. Rare
skills that employees may bring with them into an organization but can be learned with right
training and encouragement.
Human Capital Rareness: the skills and talents of an organization’s people that are unique in
the industry.
Employees may be able to add real value and possess rare and important skills but these
attributes must inimitable (unique and difficult to copy or replicate) for an organization to achieve
success. The high level of inimitability, the more competitive an organization will be. Employees
have a degree of tacit knowledge: they have a feel or an instinct for a method or a process but
can’t easily articulate; they just know it is right. Organization’s culture or values are also difficult
to imitate and often determine why employees choose to work for on company over another;
usually comes down to shared values, attitudes, and type of culture.
Human Capital Inimitability: the degree to which the skills and talents of employees can be
emulated by other organizations.
LO 1.3: Identify the major behavioral science disciplines that contribute to OB
In early days of management theory, studies focused on more efficient manual labor and
improvements for physical working conditions. There was little focus on human element. In the
last 100 years, researchers have studied the practiced and application of BO, taking advantage
of its strong links to five main behavioral science disciplines: psychology, sociology, social
psychology, political science, and anthropology.
Psychology: the scientific study of the human mind that seeks to measure and explain
behavioral characteristics.
Early psychology research focused on factors affecting work performance and efficiency, such
as lethargy and boredom. Recently studies focused on the mental health and well-being of
employees in relationship to their work performance and have created methods to help
employees deal with challenges such as job stress. Psychology also helped design
performance appraisals, decision-making processes, recruitment techniques and training
programs.
Sociology: the study of the behavior of groups and how they relate to each other in a social
setting.
Sociologist have made valuable contributions to OB within areas such as group dynamics,
communication, power, organization culture, and conflict.
Social Psychology: the social science that blends concepts from sociology and psychology
and focuses on how people influence each other in a social setting.
Significant contributions to reducing the level of prejudice, discrimination, and stereotyping by
designing processes to change attitudes, build communication, and improve the ay groups work
together.
Political Science: the study of the behavior of individuals and groups within a political
environment.
Anthropology: the study of people and their activities in relation to societal, environmental, and
cultural influences.
