Introduction to Industrial-Organisational Psychology

What is Organisational Behaviour?

Organizational behavior (OB) is a field of study that investigates the impact of individuals,
groups, and structure have on behavior within organizations, for the purpose of applying such
knowledge toward improving an organization’s effectiveness. It studies three determinants of
behavior within organizations: individuals, groups, and structure. In addition, OB applies the
knowledge gained about individuals, groups, and the effect of structure on behavior in order to
make organizations work more effectively.

OB is the study of what people do in an organization and the way their behavior affects the
organization’s performance. Because OB is concerned specifically with employment-related
situations, it examines behavior in the context of job satisfaction, absenteeism, employment
turnover, productivity, human performance, and management. Although debate exists about the
relative importance of each, OB includes these core topics:
● Motivation
● Leader behavior and power
● Interpersonal communication
● Group structure and processes
● Attitude development and perception
● Change processes
● Conflict and negotiation
● Work design

What is an Organisation?

Organizations have existed for as long as people have worked together. Archaeologists have
discovered massive temples dating back to 3500 BC that were constructed through the organized
actions of many people. They are groups of people who work interdependently towards some
purpose. Organizations are not buildings or other physical structures. Rather, they consist of people

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who interact with each other to achieve a set of goals. Employees have structured patterns of
interaction, meaning that they expect each other to complete certain tasks in a coordinated way—
in an organized way.

A social unit of people that is structured and managed to meet a need or to pursue collective goals.
All organizations have a management structure that determines the relationships between the
different activities and the members and subdivides and assigns roles and responsibilities.

Nature and Definitions

An organization is the rational coordination of the activities of a number of people for the
achievement of some common explicit purpose or goal, through division of labour and function,
and through a hierarchy of authority and responsibility. (Schein, 1980, p. 15)

An organization is a collection of interacting and interdependent individuals who work toward

common goals and whose relationships are determined according to a certain structure.
(Duncan,1981)

An organization is a relatively enduring social system which is purposive and hierarchical.

(Mansfield, 1984).

1. First of all, they suggest that organizations are shaped by the activities of people whose
behaviours are geared towards the achievement of a goal or goals; these may or may not
be shared in common.
2. Secondly, implicit or explicit in the concept of organization is the idea of structure or
ordered activity: activities are coordinated, there may be a division of labour, and
relationships are shaped into a hierarchy according to people's authority and their
responsibilities. However, as Mansfield points out, organizations are not people; they are
a theoretical abstraction. While senior management may be largely responsible for shaping
organizational goals, organizational goals are conceptually distinct from those of any single
individual manager's goals. This leads to a further refinement of the concept of goals,
formally defined goals or charter goals; and operational goals (Perrow, 1961). Charter
goals tend to be written in very general terms, laying down the objects of the institution but
not how these should be arrived at or achieved, while operational goals are the goals set by

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 members of the organization with the intention of achieving what they perceive to be the
organization's goals. Thus, for example, the formal charter of a charitable trust may be
couched in such general terms as, for instance, that it is established to alleviate the problems
of the sick and needy. It is then up to the trustees to determine how it should act in order to
best fulfil the spirit and intent behind this charter.
3. In a large, complex organization levels may consist of several tiers between organization
and workgroup. Secondly, the degree of formality tends to vary according to hierarchical
level; divisions, departments or sections tend to have formal functions to perform, whereas
the workgroup tends to be sufficiently small to fulfil employees' social needs. Moreover, it
is at this level that the broadly-based organizational objectives are operationalized, that is,
translated into specific tasks which can be performed. Individual managers and operatives
have their own formally specified task functions to perform - though, in addition, they may
well have their own personal or non-formal goals to which they aspire. In essence, it is the
function of line management to translate and interpret higher order goals into a series of
tasks whose efficient performance will result in the fulfilment of those goals.
4. There are many different kinds of organization within the industrial, commercial, banking,
educational and medical spheres. While the objective of a firm in a particular industry may
be to produce widgets efficiently, that of a traditional university is to pursue and
disseminate knowledge.
5. Furthermore, as has already been indicated, organizations are differentiated into levels or
hierarchy. The precise number of such levels will vary, some organizations being described
as being relatively 'flat' and others relatively 'tall'. A 'tall organization is said to have high
vertical differentiation, whereas 'flat' organizations are said to have low vertical
differentiation. This aspect of structure, however, carries with it yet a further implication -
that of the command of authority and responsibility. In general terms, the 'higher' a person's
position in the hierarchy, the greater his or her authority to act and command others and
the greater his or her responsibility for those actions and their consequences. Paradoxically,
greater seniority does not necessarily equate with more power (Pettigrew, 1973).
Management can occur only with the consent of the workforce, as is frequently
demonstrated by the countervailing forces of the trade unions.

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Nature and Definitions of Organisational Behaviour
Organizational behaviour has emerged as a separate field of study. The nature it has acquired is
identified as follows:

1. A Separate Field of Study and not a Discipline Only: By definition, a discipline is an

accepted science that is based on a theoretical foundation. But OB has a multi-
interdisciplinary orientation and is, thus, not based on a specific theoretical background.
Therefore, it is reasonable to call OB a separate field of study rather than a discipline only.
2. An Interdisciplinary Approach: Organizational behaviour is essentially an interdisciplinary
approach to study human behaviour at work. It tries to integrate the relevant knowledge
drawn from related disciplines like psychology, sociology and anthropology to make them
applicable for studying and analysing organizational behaviour.
3. An Applied Science: The very nature of OB is applied. What OB basically does is the
application of various researches to solve the organizational problems related to human
behaviour. The basic line of difference between pure science and OB is that while the
former concentrates of fundamental research, the latter concentrates on applied research.
OB involves both applied research and its application in organizational analysis. Hence,
OB can be called both science as well as art.
4. A Normative Science: Organizational Behaviour is a normative science also. While the
positive science discusses only cause effect relationship, OB prescribes how the findings
of applied research can be applied to socially accepted organizational goals. Thus, OB deals
with what is accepted by individuals and society engaged in an organization. Yes, it is not
that OB is not normative at all. In fact, OB is normative as well that is well underscored by
the proliferation of management theories.
5. A Humanistic and Optimistic Approach: Organizational Behaviour applies humanistic
approach towards people working in the organization. It deals with the thinking and feeling
of human beings. OB is based on the belief that people have an innate desire to be
independent, creative and productive. It also realizes that people working in the
organization can and will actualize these potentials if they are given proper conditions and
environment. Environment affects performance or workers working in an organization.
6. A Total System Approach: The system approach is one that integrates all the variables,
affecting organizational functioning. The systems approach has been developed by the
behavioural scientists to analyse human behaviour in view of his/her socio-psychological

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 framework. Man's socio-psychological framework makes man a complex one and the
systems approach tries to study his/her complexity and find solution to it.

Brief History of Organisational Behaviour

Organizational behaviour as a distinct discipline started when scientific approaches to management
began to indicate that behavioural considerations were important predictors of productivity. The
famous Hawthorne Studies were conducted between 1924 and 1932 at Hawthorne Electrical
Company. The scientists involved were trying to discover the optimal temperature, lighting levels,
and work pace to maximize productivity. Instead, they discovered that being observed and having
people pay attention to the efforts of workers increased productivity regardless of temperature,
lighting, etc. This helped launch an entire area of study devoted to motivation and teams.

In the 1950s, the Carnegie School headquartered at Carnegie Mellon University was influential in
directing attention to the integration of decision analysis, management science, and psychology.
This resulted in the development of important concepts such as bounded rationality, which states
that decision making is influenced not only by rational assessment but also by cognitive limitations
that can result in subconscious biases and inaccurate risk assessments. This insight helped
practitioners understand why suboptimal decisions are frequently made by managers and leaders,
and further research brought better understanding of some of those problems and better decision
making.

The 1960s and 1970s saw many developments in organizational behaviour, with important
discoveries being made in the areas of motivation, team behaviour, and leadership. Systems
approaches that considered the influence of broader social structures also emerged such as
institutional theory, which focused on norms, rules, and routines, and contingency theory, which
looked at the influence of the broader environment on management practice.

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The 1980s and 1990s saw more focus on organizational culture and organizational change. This
change was partly driven by new insights emerging from anthropology and psychology but also
influenced by economic changes that led to increased globalization and widespread corporate
downsizing, making understanding of culture and change more immediately relevant.

More recently, research inspired by the anthropological approach has focused on, among other
things, situational models of leadership. Systems theories have offered new insights about
optimizing the effectiveness of diversity management programs. Scholars in the Carnegie tradition
have examined bounded rationality in the context of attitudes about mental health in the workplace
and the influence of those attitudes on policy formulation. Each of these schools of thought
continues to be developed today, making organizational behaviour an exciting and innovative area
of ongoing research.

Four individuals stand out as the founding figures of Industrial-Organisational Psychology:

Walter Dill Scott
Scott published two books after he was persuaded to give a talk on the need for applying
psychology to advertising: The Theory of Advertising (1903) and The Psychology of Advertising
(1908). The first book dealt with suggestion and argument as a means of influencing people. The
second book was aimed at improving human efficiency with such tactics as imitation, competition,
loyalty, and concentration. By 1911 Scott had expanded his areas of interest and published two
more books: Influencing Men in Business and Increasing Human Efficiency in Business. During
World War I, Scott was instrumental in the application of personnel procedures in the army. Scott
was described as a consummate scientist–practitioner who was highly respected in both spheres of
professional activity. Scott had a substantial influence on increasing public awareness and the
credibility of industrial psychology.

Frederick W. Taylor
Taylor was an engineer by profession. As he worked himself up through one company as a worker,
supervisor, and finally plant manager, Taylor realized the value of redesigning the work situation

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to achieve both higher output for the company and a higher wage for the worker. His best-known
work is his book The Principles of Scientific Management (1911). Van De Water (1997) reported
these principles as: (1) science over rule of thumb, (2) scientific selection and training, (3)
cooperation over individualism, and (4) equal division of work best suited to management and
employees. As a consequence of his methods, it was charged that Taylor inhumanely exploited
workers for a higher wage and that great numbers of workers would be unemployed because fewer
were needed. Because unemployment was rampant at this time, the attacks on Taylor were virulent.
Taylor replied that increased efficiency led to greater, not less, prosperity and that workers not
hired for one job would be placed in another that would better use their potential. The arguments
were never really resolved; World War I broke out and the controversy faded.

Lillian Moller Gilbreth

Lillian Gilbreth was one of several female psychologists who made substantial contributions in
the early era of I/O psychology. She pioneered industrial management techniques that are still used
and was more concerned with the human aspects of time management. Lillian Gilbreth was among
the first to recognize the effects of stress and fatigue on workers. In 1908, she remarked that “the
human being, of course, was the most important element in industry, and that it seemed to her this
element had not been receiving the attention it warranted.” She called attention to the fact that
psychology was fast becoming a science and that it had much to offer that was being ignored by
management engineers. The plea in her impromptu remarks was for the new profession of scientific
management to open its eyes to the necessary place psychology had in any program industrial
engineers worked out” (Koppes, 1997).

Hugo Münsterberg
Münsterberg was interested in applying traditional psychological methods to practical industrial
problems. His book Psychology and Industrial Efficiency (1913) was divided into three parts:
selecting workers, designing work situations, and using psychology in sales. One of Münsterberg’s
most renowned studies involved determining what makes a safe trolley car operator. Some writers
consider Münsterberg the founder of industrial psychology. Landy (1992) reported that many

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prominent I/O psychologists throughout the 20th century can trace their professional roots back to
Münsterberg. Münsterberg’s influence in the history of the field is well evidenced by the coterie
of I/O psychologists who were guided by his teachings.

The primary emphasis of the early work in I/O psychology was on the economic gains that could
be accrued by applying the ideas and methods of psychology to problems in business and industry.
Business leaders began to employ psychologists, and some psychologists entered applied research.
However, World War I caused a shift in the direction of industrial psychological research.

Goals of Organizational Behavior

According to Johns and Saks (2005) the aims of OB could be said to be the following in any
organisation:

● Prediction – this is an important prerequisite for an organisation as it enables the

prediction of future behaviours and can generate meaningful insights or solutions to any
problems around misbehaviour in the organisation. It also permits the prediction of future
occurrences through systematic study. An important reason behind understanding
behaviour is that it should help managers to then predict behaviour in various situations.
It is often said: ‘the best predictor of future behaviour is past behaviour’. Armed with
knowledge about human behaviour in organisations, managers should, for example, be
able to predict which employees might be committed and productive or which ones might
be counterproductive. This would help them to take preventive actions.
● Explanation – this enables organisations to understand why people behave as they do and
in certain ways under various conditions. The ability to understand behaviour is a
necessary condition for effectively managing it. The first goal therefore is to describe
systematically (in an objective non-prescriptive manner), often in minute detail, how
people behave at work under a variety of conditions.
● Management – this enables organisations to get things done through people. If
organizations are able to predict and explain behaviours, then they can be equipped with

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 the knowledge to effectively manage them. From an OB point of view, they will have a
good basis to develop an effective strategy to manage their employees. Managers need to
be able to achieve such goals through the actions they and their employees take, and
organisational behaviour can help managers meet these goals.

Models of Organisational Behaviour

The Autocratic Model: The basis of this model is power with a managerial orientation of
authority. The employees in turn are oriented towards obedience and dependence on the boss.
The employee need that is met is subsistence. The performance result is minimal. In case of an
autocratic model, the managerial orientation is doctorial. The managers exercise their commands
over employees. The managers give orders and the employees have to obey the orders. Thus, the
employee’s orientation towards the managers/bosses is obedience. Under autocratic conditions,
employees give higher performance either because of their achievement drive or their personal
liking to the boss or because of some other factor.

Evidence such as the industrial civilization of the United States and organizational crises do
suggest that the autocratic model produced results. However, its principal weakness is its high
human cost. The combination of emerging knowledge about the needs of the employees and
ever-changing societal values and norms suggested managers to adopt alternative and better
ways to manage people at work. This gave genesis to the second type of models or
organizational behaviour.

The Custodial Model: The basis of this model is economic resources with a managerial
orientation of money. The employees in turn are oriented towards security and benefits and
dependence on the organization. The employee need that is met is security. The performance
result is passive cooperation.

While studying the employees, the managers realized and recognized that although the
employees managed under autocratic style do not talk back to their boss they certainly think back

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about the system. Such employees filled with frustration and aggression vent them on their co-
workers, families and neighbors. This made the managers think how to develop better employee
satisfaction and security. It was realized that this can be done by dispelling employees'
insecurities, frustration and aggression. This called for the introduction of welfare programmers
to satisfy security needs of employees. Provision for an on-site day-care centre for quality child
care is an example of welfare programmes meant for employees. Welfare programmes lead to
employee dependence on the organization. Stating more accurately, employees having
dependence on organization may not afford to quit even there seem greener pastures around. The
welfare programmes for employees started by the Indira Gandhi National Open University
(IGNOU), New Delhi are worth citing in this context, IGNOU, in the beginning provided its
employees facilities like house-lease facility, subsidized transport facility, daytime child care
centre in the campus, etc. These made employees dependent on IGNOU which, in turn, became
custodian of its employees.

The basis of this model is partnership with a managerial orientation of teamwork. The employees
in turn are oriented towards responsible behavior and self-discipline.

Although the custodian approach brings security and satisfaction, it suffers from certain flaws
also. Employees produce anywhere near their capacities. They are also not motivated to increase
their capacities of which they are capable. Though the employees are satisfied, still they do not
feel motivated or fulfilled in their work they do. This is in conformity with the research finding
that the happy employees are not necessarily the most productive employees. Consequently,
managers and researchers started to address yet another question. "Is there a better approach/way
to manage people?" The quest for a better way provided a foundation for evolvement to the
supportive type of model of organizational behaviour.

The Supportive Model: The basis of this model is leadership with a managerial orientation of
support. The employees in turn are oriented towards job performance and participation. The
employee need that is met is status and recognition. The performance result is awakened drives.

The supportive model is founded on leadership, not on money or authority. In fact, it is the
managerial leadership style that provides an atmosphere to help employees grow and accomplish
their tasks successfully. The managers recognize that the workers are not by nature passive and

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disinterested to organizational needs, but they are made so by an inappropriate leadership style.
The managers believe that given due and appropriate changes, the workers become ready to share
responsibility, develop a drive to contribute their mite and improve themselves. Thus, under
supportive approach, the management's orientation is to support the employee's job performance
to meet both organizational and individual goals.

However, the supportive model of organizational behaviour is found more useful and effective in
developed nations and less effective in developing nations like ours because of employee's more
awakening in the former and less one in the latter nations.

The Collegial Model: The collegial model is an extension of the supportive model. As the literal
meaning of the work 'college' means a group of persons having the common purpose, the collegial
model relates to a teamwork/concept. The basic foundation of the collegial model lies on
management's building a feeling of partnership with employees. Under collegial approach,
employees feel needed and useful. They consider managers as joint contributors to organizational
success rather than as bosses.

Its greatest benefit is that the employee becomes self-discipline. Feeling responsible backed by
self-discipline creates a feeling of team work just like what the members of a football team feel.
The research studies report that compared to traditional management model, the more open,
participative, collegial managerial approach produced improved results in situations where it is
appropriate.

Although there are four separate models, almost no organization operates exclusively in one. There
will usually be a predominate one, with one or more areas overlapping in the other models.

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The first model, autocratic, had its roots in the industrial revolution. The managers of this type of
organization operate out of McGregor's Theory X. The next three models begin to build on
McGregor's Theory Y. They have each evolved over a period of time and there is no one "best"
model. The collegial model should not be thought as the last or best model, but the beginning of a
new model or paradigm.

Scope of Organisational Behaviour

OB is the study of human behavior at work in organizations. Accordingly to the Scope of OB it

includes the study of Individuals, Groups And Organization structure. Organization are the
association of Individuals.

Organizational behavior sheds light on the complex human factor in organization by identifying
causes and effects of human behavior. Organization behavior is called social science because its
main concern is people and their behavior. It is the field of study that integrates behavioral sciences
like psychology, and anthropology for the study of human behavior in land around organizations.
The organizational behavior focuses on Five levels of analysis:

1. Individual
2. Group
3. Personality
4. Attitude
5. Perception

The three internal organizational elements viz., people, technology and structure and the fourth
element, i.e., external social systems may be taken as the scope of OB

1. People

The people constitute the internal social system of the organization. They consist of individuals
and groups. Groups may be large or small, formal or informal, official or unofficial. They are
dynamic. They form, change and disband. Human organization changes everyday. Today, it is not
the same as it was yesterday. It may change further in the coming days. People are living, thinking

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and feeling being who created the organization and try to achieve the objectives and goals. Thus,
organizations exist to serve the people and not the people exist to serve the organization.

2. Structure

Structure defines the sole relationship between people in an organization. Different people in an
organization are given different roles and they have certain relationships with others. It leads to
division of labour so that people can perform their duties or work to accomplish the organizational
goal. Thus, everybody cannot be an accountant or a clerk. Work is complex and different duties
are to be performed by different people. Some may be accountant, others may be managers, clerks,
peons or workers. All are so related to each other to accomplish the goal in a coordinated manner.
Thus, structure relates to power and duties. One has the authority and others have a duty to obey
him.

3. Technology

Technology imparts the physical and economic conditions within which people work. With their
bare hands people can do nothing so they are given assistance of buildings, machines, tools,
processes and resources. The nature of technology depends very much on the nature of the
organization and influences the work or working conditions. Thus, technology brings effectiveness
and at the same restricts people in various ways.

4. Social System

Social system provides external environment in which the organization operates. A single
organization cannot exist also. It is a part of the whole. One organization cannot give everything
and therefore, there are many other organizations. All these organizations influence each other. It
influences the attitudes of people, their working conditions and above all provides competition for
resources and power.

Fields Contributing to Organisational Behaviour

Organisational Behaviour is an applied behavioral science built on contributions from a number

of behavioural disciplines, mainly psychology and social psychology, sociology, and
anthropology. Psychology’s contributions have been principally at the individual or micro-level of

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analysis, while the other disciplines have contributed to our understanding of macro concepts such
as group processes and organization.

Psychology seeks to measure, explain, and sometimes change the behavior of humans and other
animals. Contributors to the knowledge of OB are learning theorists, personality theorists,
counseling psychologists, and, most important, industrial and organizational psychologists. Early
industrial and organizational psychologists studied the problems of fatigue, boredom, and other
working conditions that could impede efficient work performance. More recently, their
contributions have expanded to include learning, perception, personality, emotions, training,
leadership effectiveness, needs and motivational forces, job satisfaction, decision-making
processes, performance appraisals, attitude measurement, employee-selection techniques, work
design, and job stress.

Social Psychology, generally considered a branch of psychology, blends concepts from both
psychology and sociology to focus on people’s influence on one another. One major study area is
change—how to implement it and how to reduce barriers to its acceptance. Social psychologists
also contribute to measuring, understanding, and changing attitudes; identifying communication
patterns; and building trust. Finally, they have made important contributions to our study of group
behavior, power, and conflict.

While psychology focuses on the individual, sociology studies people in relation to their social
environment or culture. Sociologists have contributed to OB through their study of group
behaviour in organizations, particularly formal and complex organizations. Perhaps most
importantly, sociologists have studied organizational culture, formal organization theory and
structure, organizational technology, communications, power, and conflict.

Anthropology is the study of societies in order to learn about human beings and their activities.
Anthropologists’ work on cultures and environments has helped us understand differences in
fundamental values, attitudes, and behavior among people in different countries and within
different organizations. Much of our current understanding of organizational culture,
organizational climate, and differences among national cultures is a result of the work of
anthropologists or those using their methods.

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There are few absolutes in Organisational Behaviour

Laws in the physical sciences—chemistry, astronomy, physics—are consistent and apply in a wide
range of situations. They allow scientists to generalize about the pull of gravity or to be confident
about sending astronauts into space to repair satellites. Human beings are complex, and few, if
any, simple and universal principles explain human behavior. Because people are not alike, our
ability to make simple, accurate, and sweeping generalizations about ourselves is limited. Two
people often act very differently in the same situation, and the same person’s behavior changes in
different situations.

Political Sciences

Contributions of political scientists are significant to the understanding of behavior in

organizations. Political scientists study the behavior of individuals and groups within a political
environment. They contribute to understanding the dynamics of power centers, structuring of
conflict and conflict resolution tactics, allocation of power and how people manipulate power for
individual self-interest. In a business field, organizations wanted to attain supremacy in their field
and indulge in politicking activities to gain maximum advantages by following certain tasks like
Machiavellianism, coalition formation, malpractices, etc. The knowledge of political science can
be utilized in the study the behavior of employees, executives at micro as well as macro level.

Economics

Economics contributes organizational behavior to a great extent in designing the organizational

structure. Transaction cost economics influence the organization and its structure. Transaction
costs economics implies costs components to make an exchange on the market. This transaction
cost economics examines the extent to which the organization structure and size of an organization
varies in response to attempts to avoid market failures through minimizing production and
transaction costs within the constraints of human and environmental factors. Costs of transactions
include both costs of market transactions and internal coordination. A transaction occurs when a
good or service is transferred across a “technologically separable barrier” Transaction costs arise
for many reasons.

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 A flow chart representation of fields contributing to OB

What is Industrial Psychology?

Industrial psychology is concerned with people at work. Industrial psychology provides theory and
research methods to personnel management. It is also called personnel psychology. A closely
related field is known as organizational psychology. Though the goal of I/O psychology is to
increase the productivity and well-being of employees, there are two approaches as to how this
can be accomplished. The industrial approach (the “I” in I/O psychology) focuses on determining
the competencies needed to perform a job, staffing the organization with employees who have
those competencies, and increasing those competencies through training. The organizational
approach (the “O” in I/O psychology) creates an organizational structure and culture that will
motivate employees to perform well, give them the necessary information to do their jobs, and
provide working conditions that are safe and result in an enjoyable and satisfying work/life

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environment. The name change of the division from "industrial psychology" to "industrial and
organizational psychology" reflected the shift in the work of industrial psychologists who had
originally addressed work behavior from the individual perspective, examining performance and
attitudes of individual workers. Their work became broader. Group behavior in the workplace
became a worthy subject of study. The emphasis on "organizational" underlined the fact that when
an individual joins an organization (e.g., the organization that hired him or her), he or she will be
exposed to a common goal and a common set of operating procedures. In the 1970s in the UK,
references to occupational psychology became more common than I/O psychology.

According to Bryan and Vinchur, "while organizational psychology increased in popularity

through the 1960s and 1970s, research and practice in the traditional areas of industrial psychology
continued, primarily driven by employment legislation and case law" (p. 53).There was a focus on
fairness and validity in selection efforts as well as in the job analyses that undergirded selection
instruments. For example, i/o psychology showed increased interest in behaviorally anchored
rating scales. What critics there were of i/o psychology accused the discipline of being responsive
only to the concerns of management.

Difference between Industrial Psychology and Organizational Psychology

Industrial psychology is concerned with people at work. Industrial psychology provides theory and
research methods to personnel management. It is also called personnel psychology. A closely
related field is known as organizational psychology.

Traditionally, industrial psychologists have assessed differences among individual workers and
have evaluated individual jobs. Organizational psychologists generally seek to understand how
workers function in an organization, and how the organization functions in society.

The distinctions between industrial psychology and organizational psychology are not always
clear. Thus, the two areas are often referred to jointly as industrial/organizational psychology, or
I/O psychology. I/O psychologists work for businesses, consulting firms, government departments,
and colleges and universities.

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Both industrial and organizational psychologists help determine fair pay scales, generally based
on the levels of skill and education a job requires and any hazards it poses. I/O psychologists also
research causes of industrial accidents and ways of reducing them.

Industrial psychologists typically help employers find the best person for a job, evaluate job
performance, and train employees. In developing a system for matching an individual to a job, an
industrial psychologist must first determine what special knowledge, skills, and abilities the job
demands. The psychologist then designs a selection system to judge an applicant’s qualifications
for the job. The objective of such a system is to predict a person’s performance in the workplace.
Commonly used selection tools include interviews, letters of reference, work samples, and tests of
aptitudes, abilities, knowledge, interests, and personality. Developing methods of evaluating job
performance is a major function of an industrial psychologist. Psychologists often create a
numerical scale to use in rating an employee’s performance. To have value, a system should
maximize the accuracy with which people rate performance and minimize bias.

Industrial psychologists commonly develop training programmes. This function involves

identifying performance or technical needs of employees that can be met by training. It also deals
with evaluating the effectiveness of the training programmes.

Training needs may include ways to:

1. help new employees get used to the organization,

2. update technical skills of current employees, and
3. prepare employees for new responsibilities.

Techniques used in training include classroom lectures, work simulators, computer-assisted

instruction, and role playing. Organizational psychologists devote much time to job satisfaction.
They investigate factors that have been found to relate to satisfaction, including employee
turnover, absenteeism, age, pay, and attitudes toward unions.

Organizational psychologists also study motivation because evidence suggests that both
motivation and ability are necessary for employees to succeed in their jobs. Thus, psychologists

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develop systems for rewarding good performance, and they redesign jobs for greater interest and
challenge. Another important concern of organizational psychologists is what makes an effective
leader. The psychologists help identify the personality traits of a good leader and the types of
leaders who should be selected for a particular position. Organizational psychologists also help
maximize efficiency by redesigning the lines of authority or communication in an organization.
Organizational psychologists may also work to improve an organization’s efficiency by addressing
such physical factors as its work schedules, layout, design of its tools and equipment, and levels
of heat, light, and noise.

How is Organisational Behaviour Different from Human Resource Management

While Organizational behaviour studies determinants of behaviour in organizations- individuals,

groups, and structure and applies the knowledge gained about individuals, groups, and the effect
of structure on behaviour in order to make organizations work more effectively, human resource
management (HRM) is the process of acquiring, training, appraising and compensating employees,
and of attending to their labour relations, health and safety, and fairness concerns. OB studies
motivation, leader behavior and power, interpersonal communication, etc., whereas HRM is
involved in planning human resource needs, recruiting job candidates, providing incentives and
benefits, and so on.

Goals and Scope of Industrial Psychology

Goals of Industrial Psychology

1. Care of Worker’s Health: If the worker does not have good mental and physical health the
work the industry cannot progress steadily. His mental and physical health is profoundly
influenced by working conditions and by his relations with the management. The motive
of industrial psychology is to discover the ideal conditions in which the best mental and
physical health of the worker can be maintained.
2. Search of Proper Method of Work: One main reason of accidents and mishaps in factories
is the improper methods of work. Improper working also gives rise to fatigue and
boredom. Hence the other objectives of industrial psychology are to find out the proper

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 methods of work so that accidents are prevented, and fatigue and boredom is reduced to
the minimum.
3. Reform of Working Conditions: It is the task of the industrial psychologists to find out the
ideal conditions in which the maximum efficiency can be attained, and the worker
maintained at the peak of mental and physical health. The most important working
conditions are arrangements for required and proper lighting, proper ventilation absence
of noise, provision for periodical rest, normal convenience for the male and female
employees etc.
4. Aid in Industrial Training: It is now realized that the efficiency of a worker can be
considerably improved by the proper kind of training and that the expense involved in
training is paid off double fold. Trained people can avoid accidents while the quality and
quantity of their production is higher than that of untrained people. Hence, different kinds
of training programmes for different jobs are now called for. Such training programmes
can be devised only by the psychologist, who can locate the basis of such training and the
various methods employed in it.
5. Maintaining Morale: In order to maintain a proper level of production and to improve the
quality of production it is necessary in each industry and profession to maintain a high
level of morale among the workers. Psychologists, after having studied the factors
affecting morale can give suggestions for improving the morale.

Scope of Industrial Psychology:

1. Economic, Social and Psychological Aspect of the Industry: Industrial psychology deals
with human behavior in the entire industrial environment. Consequently, it studies the
economic, social and psychological aspects of human behaviour. In the modern age most
of economic factors have some psychological influence. The various factors in communal
life of workers living in industrial environment also influence the psychology of the
worker. Industrial psychology studies these factors.
2. Study of the Physical Aspect of Work Environment: In an industry the worker is greatly
influenced by the working conditions. If the conditions are well, the worker feels satisfied
and remains healthy while on the other hand if the conditions are not good, the workers
become dissatisfied. Industrial psychology deals with the physical working conditions.

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 3. Principles of Human Relationships: Irrespective of the automation introduced in
industries, the human element cannot be eliminated Even most efficient machine needs
an engineer to run it, and because the engineer is a human being the most importance of
the psychological element in the running of the factory cannot be ignored. The efficiency
of the human being will depend very much upon the nature of his relations with the
management. In the previous century most industrialists behaved like autocrats and
considered the workers as nothing more than tools. But in that period the efficiency level
was not very high. It has been seer that an industrialist can achieve a higher rate of
production if he behaves sympathetically with his employees. An industrialist who cannot
maintain good relations with his workers does not succeed for long time. Industrial
psychology tries at discover principles for improving human relationships in an industrial
environment.

Challenges and Opportunities for Organisational Behaviour

Understanding organizational behavior has never been more important for managers. The typical
employee is getting older; the workforce is becoming increasingly diverse; and global competition
requires employees to become more flexible and cope with rapid change. As a result of these
changes and others, employment options have adapted to include new opportunities for workers.
For instance, at one point in the career one may find himself employed full time in an office in a
localized, nonunion setting with a salary and bonus compensation package, while at another point
one may wish to negotiate for a flex time, virtual position and choose to work from overseas for
a combination of salary and extra paid time off. In short, today’s challenges bring opportunities
for managers to use OB concepts. Organizations are no longer constrained by national borders.
Samsung, the largest South Korean business conglomerate, sells most of its products to
organizations in other countries; Burger King is owned by a Brazilian firm; and McDonald’s sells
hamburgers in 118 countries on 6 continents. Even Apple—arguably the U.S. company with the
strongest U.S. identity—employs twice as many workers outside the United States as it does inside
the country. And all major automobile makers now manufacture cars outside their borders; Honda
builds cars in Ohio, Ford in Brazil, Volkswagen in Mexico, and both Mercedes and BMW in the

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United States and South Africa. The world has become a global village. In the process, the
manager’s job has changed. Effective managers anticipate and adapt their approaches to the global
issues.

Working with People from Different Cultures

In your own country or on foreign assignment, you’ll find yourself working with bosses, peers,
and other employees born and raised in different cultures. What motivates you may not motivate
them. Or your communication style may be straightforward and open, which others may find
uncomfortable and threatening. To work effectively with people from different cultures, you need
to understand how their culture and background have shaped them and how to adapt your
management style to fit any differences.

Adapting to Different Cultural and Regulatory Norms

To be effective, managers need to know the cultural norms of the workforce in each country where
they do business. For instance, in some countries a large percentage of the workforce enjoys long
holidays. There are national and local regulations to consider, too. Managers of subsidiaries abroad
need to be aware of the unique financial and legal regulations applying to “guest companies” or
else risk violating them. Violations can have implications for their operations in that country and
also for political relations between countries. Managers also need to be cognizant of differences in
regulations for competitors in that country; many times, understanding the laws can lead to success
or failure.

For example, knowing local banking laws allowed one multinational firm—the Bank of China—
to seize control of a storied (and very valuable) London building, Grosvenor House, from under
the nose of the owner, the Indian hotel group Sahara. Management at Sahara contended that the
loan default that led to the seizure was a misunderstanding regarding one of their other properties
in New York. Globalization can get complicated.

Workforce Demographics

The workforce has always adapted to variations in the economy, longevity, birth rates,
socioeconomic conditions, and other changes that have a widespread impact. People adapt to

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survive, and OB studies the way those adaptations affect individuals’ behavior. For instance, even
though the 2008 global recession ended years ago, some trends from those years are continuing:
many people who have been long unemployed have left the workforce, while others have cobbled
together several part-time jobs or settled for on demand work.

Further options that have been particularly popular for younger educated workers have included
obtaining specialized industry training after college, accepting full-time jobs that are lower-level,
and starting their own companies.

Longevity and birth rates have also changed the dynamics in organizations. Global longevity rates
have increased by six years in a very short time (since 1990), while birth rates are decreasing for
many developed countries; trends that together indicate a lasting shift toward an older workforce.
OB research can help explain what this means for employee attitudes, organizational culture,
leadership, structure, and communication. Finally, socioeconomic shifts have a profound effect on
workforce demographics. For example, the days when women stayed home because it was
expected are just a memory in some cultures, while in others, women face significant barriers to
entry into the workforce.

Workforce Diversity

One of the most important challenges for organizations is workforce diversity, a trend by which
organizations are becoming more heterogeneous in terms of employees’ gender, age, race,
ethnicity, sexual orientation, and other characteristics. Managing this diversity is a global concern.
Though we have more to say about it in the next chapter, suffice it to say here that diversity presents
great opportunities and poses challenging questions for managers and employees. Questions like-
How can one leverage differences within groups for competitive advantage, Should one treat all
employees alike, Should one recognize individual and cultural differences, What are the legal
requirements in each country, Does increasing diversity even matter, It is important to address the
spoken and unspoken concerns of organizations today.

Demographic Characteristics

Worldwide, workplace demographics have undergone rapid and lasting change toward equality in
the past 50–60 years. Perhaps most noticeably, the predominantly White, male managerial

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workforce of the past has given way to a gender-balanced, multiethnic workforce. For instance, in
1950 only 29.6 percent of the U.S. workforce was female, but by 2014, women comprised 47
percent.2 Both in the United States and internationally, women today are much more likely than
before to be employed full time. In comparison, in the United Kingdom women constitute about
51 percent of the workforce, though with significant differences in the wages offered to them in
comparison to their male counterparts, and ethnic minorities account for about 32 percent.
Migrants account for about 10 percent (6 percent from European economic area and the remaining
4 percent from outside the EU).

From the perspective of age, in the United States and globally, workers over the age of 55 are an
increasingly large portion of the workplace. Currently, in Australia there are more workers over
age 55 than there are under age 25.5 Similarly, in the United Kingdom workers over the age of 49
account for 24 percent of employees, up from 20 percent in 2004, and this shift is set to continue.
These changes are increasingly reflected in the makeup of managerial and professional positions
across Europe and several other regions in the world.

Social Media

social media in the business world is here to stay. Despite its pervasiveness, many organizations
continue to struggle with employees’ use of social media in the workplace.

For instance, in February 2015, a Texas pizzeria fired an employee before her first day of work
because she tweeted unflattering comments about her future job. Another example,In December
2014, Nordstrom fired an Oregon employee who had posted a personal Facebook comment
seeming to advocate violence against white police officers. These examples show that social media
is a difficult issue for today’s managers, presenting both a challenge and an opportunity for OB.
For instance, how much should HR look into a candidate’s social media presence? Should a hiring
manager read the candidate’s Twitter feeds, or just do a quick perusal of his or her Facebook
profile? Managers need to adopt policies designed to protect employees and their organizations
with balance and understanding.

Employee Well-Being at Work

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One of the biggest challenges to maintaining employee well-being is the reality that many workers
never get away from the virtual workplace. While communication technology allows many
technical and professional employees to do their work at home, in their cars, or on the beach in
Tahiti, it also means many feel like they’re not part of a team. Another challenge is that
organizations are asking employees to put in longer hours. According to one recent study, one in
four employees shows signs of burnout, and two in three report high stress levels and fatigue.37
This may actually be an underestimate because workers report maintaining “always on” access for
their managers through email and texting. Finally, employee well-being is challenged by heavy
outside commitments. Millions of single-parent employees and employees with dependent parents
face significant challenges in balancing work and family responsibilities, for instance.

Ethical Behavior

In an organizational world characterized by cutbacks, expectations of increasing productivity, and

tough competition; it’s not surprising many employees feel pressured to cut corners, break the
rules, and engage in other questionable practices. Increasingly they face ethical dilemmas and
ethical choices in which they are required to identify right and wrong conduct. Should they “blow
the whistle” if they uncover illegal activities in their companies? Should they “play politics” to
advance their careers? Today one sees people all around us engaging in unethical practices—
elected officials pad expense accounts or take bribes; corporate executives inflate profits to cash
in lucrative stock options; and university administrators look the other way when winning coaches
encourage scholarship athletes to take easy courses or even. Today’s manager must create an
ethically healthy climate for employees in which they can do their work productively with minimal
ambiguity about right and wrong behaviors. Companies that promote a strong ethical mission,
encourage employees to behave with integrity, and provide strong leadership can influence
employee decisions to behave ethically.

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 Contemporary World Challenges for OB

CASE STUDY: Netflix and Good to Great

Netflix is a good example of a great company that mainly focuses on the two characteristics: “the
culture of discipline” and, “First Who, Then What‟ concept. It portrays somewhat all of the seven
characteristics of ‘Good to Great Companies’. Netflix has taken this to an extreme with amazing
results.

Overview of the Company and its Services:

Netflix, Inc. is an American company was established in 1997 that provides on-demand Internet
streaming media to North and South America, the Caribbean, U.K. and many other European
countries. The company’s website was launched in August 1997 with only 30 employees and 925
workers available for rent. It brought the traditional online pay-per-rental model. In September
1999, the company introduced its monthly subscription concept and then dropped the single-rental
model in 2000. Since then the company has adopted the business model of flat-fee unlimited rentals
without due date, late fees, shipping and handling fees, or per title rental fees.

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In 2005 Netflix shipped 1 million DVDs out every day and in 2007, the company delivered its
billionth DVD. By September 2013, Netflix had 40.4 Million (31.2 million in U.S.) global
streaming subscribers. Netflix has played a prominent role in independent film distribution and
has also been one of the most successful dot-com ventures. Films were licensed and distributed
independently by Netflix through a division called Red Envelope Entertainment. Moreover, the
company has exclusive pay-tv deals with major and mini-major movie studios.

In September 2010, Netflix first expanded their business by launching their stream only service in
Canada and then in spring 2011, they expanded their business to Latin America and again into the
European market in the following year. It officially launched as a streaming-only service in the
United Kingdom and Ireland in early 2012 and reached the one-million-member milestone in the
UK the same year. By the time Netflix launched its services in many European countries and
expanded its business.

Culture of Discipline:

For Netflix, culture matters a lot. It has the corporate culture that allows a customer service rep to
have fun and that is the reason the customers have the impression that Netflix is fun, responsive,
and delights their customers. Netflix and many other companies such as Southwest Airlines, and
Nordstrom let their employees make decision immediately in case of any issue or problem i.e. the
employees have the authority to a certain extent. There is no need to escalate. Only a confident
company having a strong culture can do this.

The seven aspects of Netflix culture as described by the CEO Reed Hastings are:

● Values are what we value

● High performance
● Freedom and responsibility
● Context not Control
● Highly aligned, loosely coupled
● Pay top of market
● Promotions and development

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The culture of the company does not value process adherence. It values freedom, responsibility,
innovation, and self-discipline. It seeks to achieve high performance and growth and focus on the
results not the process. The aim and focus of the company is not to control but to context. As the
company grows more freedom is provided to the employees rather than making it more complex.
Their approach towards growth and innovation revolves around the staff of the company. They
have a responsible staff that by following a set of few rules, perform high, creatively respond to
opportunities and can recover from the previous miscalculations. They have the ability to think
critically and have the authority to take small decisions for the solutions of small problems and
continue towards the growth and innovation of the company. The culture of the company focuses
on achieving excellence on what the CEO calls it “stunning colleagues”: a culture that attracts
people and retains. By stunning colleagues, he meant the employees who have the capability “to
responsibly perform amidst the ambiguity of a technology driven, fast-paced market that’s
attracting competitors every day”.

First Who, Then What: Get the Right People on the Bus

According to author Jim Collins, during the transition from Good to Great Company, only the right
people must be on board and the wrong people should be invited to descend. As a result, the
company would naturally track to a destination of choice (Collins, 2001). Netflix does not provide
any room for “good performers‟. Adequate performance will get an employee cut from the team
at any level to make room for a star in that position as called by the Netflix CEO, “stunning
employees‟. For instance, the stunning colleagues of the company had created a killer iPad
application that enables live streaming of hundreds of television shows and movies at the touch of
a button. It is amazing technology that just works.

Netflix hires and promotes people who demonstrate some particular behaviors and skills: the
company value these behaviors and skills:

● Judgment: Individuals who make wise decisions despite ambiguity, can identify root
causes and can go beyond treating symptoms, who can think strategically and can articulate
what they are and are not trying to do and can smartly separate and decide what can be
done now and what can be improved later.

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 ● Communication: People who listen well instead of reacting immediately, who are concise
and have good in speech and writing skills, treat people with respect unbiased, and do not
panic or create fuss in stressful situations.
● Impact: People who accomplish tremendous amount of important work, who demonstrate
strong performance consistently, who focus on achieving great results rather than focusing
on the process and who exhibit bias-to-action.
● Curiosity: People who learn rapidly and seek to understand the company’s strategy, market,
consumers and suppliers, who have a broad knowledge of business, technology and
entertainment, and who contribute effectively outside of their specialty.
● Innovation: Individuals who can re-conceptualize issues to discover measures for hard
problems, who can challenge prevailing assumptions and approaches and suggest better
ones, who can create new useful ideas and who keep the company nimble by minimizing
complexity.
● Courage: Individuals who have the courage to say what they think even if it controversial,
who make tough decisions and take smart risks and who can argue any questions that they
find inconsistent to the values of the company.
● Passion: Individuals who inspire others and care intensely about Netflix‟ progress and
success, who work to win and celebrate and are tenacious.
● Honesty: Individuals who are known for candor and are non-political, who can only say
those things about their fellows which they can say on their faces and who have the courage
to admit their mistakes.
● Selflessness: Individuals seek what is best for Netflix rather than best for themselves, who
are ego-less and also manage to help their colleagues and who share information openly.

Netflix leaders hire, develop and cut smartly and there are stars in every position. The company
believes the more talent it hires, the more it accomplishes, and the people assist each other and
work as a team. All this information described in this study shows that Netflix strongly focuses on
the culture and hiring of employees in the company and for this it has predefined values and aspects
that the company strongly follows.

Furthermore, each year the company conducts a 360-degree review during which it gives feedback
to, and receives feedback from, individuals with whom it works. The foundation of these kinds of
reviews lies in the nine values. The employees are able to discover how well they are doing and
learn ways in which their colleagues believe they can improve going forward. This is really a

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refreshingly honest and healthy approach to remind people how well actually the company lives
its values.

References:
Robbins, S.P., Judge T.A. and Breward, K. E., (2018). Essentials of Organizational Behaviour
(Canadian Edition). Pearson Education.

Griffin, R. W., Moorhead G., (2010). Organisational Behaviour (11th Ed). Cengage Learning
Dessler, G. and Varkkey, B. (2018) Human Resource Management (15th Ed). Pearson India.

Muchinsky, P. (2007). Psychology Applied to Work: An Introduction to Industrial and

Organizational Psychology (8th Ed). Thomson Wadsworth

Johns, G., & Saks, A. M. (2011). Organizational Behaviour: Understanding and Managing Life
at Work. Toronto: Pearson Canada.

Luthans, F. (2011). Organizational Behavior: An Evidence-based Approach. New York: McGraw-

Hill Irwin.

Thibuti, K. A. (2014). Netflix and Good to Great: Case Study: International Journal of
Mechanical and Industrial Technology, 2(1), 35-38.

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