Organizatinal Behaviour IIKTUMBASyllabus

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Organizatinal Behaviour II KTU MBA Syllabus
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Preface
The first edition of “Organizational behaviour II” is based on the assumption that managing
people, structure and processes in organizations is a compelling and crucial set of tasks. It is
really challenging to manage organizational behaviour in good as well as difficult economic
times. Conventional approaches that worked a decade ago or even a few years ago are currently
being questioned, modified or replaced. This book will provide an opportunity for readers to look
inside organizations and to develop a unique perspective and skills for managing organizational
behaviour. Your own view point and approach will help you in the positions you hold, the issues
you face and the career choices you make.
This book presents theories, research outcomes and applications that concentrate on managing
organizational behaviour in small as well as large and global organizations. A consistent theme
throughout the book is that effective management of organizational behaviour requires an
understanding of theory, research and practice. Keeping this in mind, author has viewed his task
as presenting and interpreting organizational behaviour theory and studies so that the students
can comprehend the three factors common to all organizations – behaviour, structure and
processes – as they are influenced by actions of managers. Based on this, author tries to explain
how organizational behaviour theory leads to research and how both theory and research provide
the fundamental foundation for practical applications in business firms, hospitals, educational
institutions, government agencies and other organizations.
Being totally dedicated to organizational behaviour and management, author is guided by student
needs, feedback and applications in real life settings. The book is relevant, current and offers
different techniques to ensure student involvement. The book challenges students to continue to
investigate the content areas long after they successfully complete their current course. This self
propelled explanation will result in continuous learning and inquiry so that student’s knowledge,
skills and competencies are improved at each new juncture. To make organizational behaviour
meaningful and realistic, a student friendly style is incorporated throughout the book. The
writing and presentation style adopted will be helpful in inspiring students to engage in
classroom analysis, discussion and learning.
Manu Melwin Joy
Manu completed his under graduation in civil engineering from Govt. Engineering College,
Thrissur and post graduation in management from Amrita School of Business, Coimbatore.
Currently, he has submitted his doctoral thesis in social science at School of management
studies, CUSAT. Apart from this, he has acquired post graduation in psychology, psychotherapy,
training and development and sociology. At present, he is working as assistant professor in Ilahia
School of Management studies, Muvattupuzha. In addition to his teaching and research expertise,
he is a professional management trainer with 10 years of experience and has conducted more
than 500 programs across ten states in India. His training clientele includes more than 100
corporate and government organizations with Bharat Matrimony, ICAI and ICWAI to name a
few. His writings appear in both scholarly and applied publications.
Permanent address
Manu Melwin Joy, Pazhoor House, Thiruvanikkavu, Ollukkara.P.O, Thrissur, Kerala, Pin –
680655.
Mailing address
Manu Melwin Joy, Flat No: 10C, Estonia, Olive Courtyard, Kakkanad, Kochi, Kerala, Pin –
682030.
Mobile Number: 9744551114, 9400287814
Email Id – manu_melwinjoy@yahoo.com
Module 1
1.1 Study of Organizational Behaviour

1.2 Defining Organizational Behaviour
1.3 How OB Research is Done?
1.4 Organizational Components that Need to be Managed
1.5 Disciplines Contributing to OB
1.6 Effectiveness in Organizations
1.7 Models of Organizational Behaviour
1.8 Approaches to Study of Organizational Behaviour
1.9 Latest trends in Organizational Behaviour
Module 2
2.1 Managing Individuals at Work.

2.2 Measuring Personality Attitudes.
2.3 Managing Employee Attitudes.
2.4 Managing Teams at Work
2.5 Definition of Group
2.6 Types of Groups
2.7 Group Development
2.8 Group Structure
2.9 Team
2.10 Developing High Performance Teams
2.11 Turning Individuals into Team Players
2.12 Developing Interpersonal Awareness
2.13 Johari Window
2.14 Transactional Analysis
2.15 Leadership
2.16 Leadership Theories
2.17 Developing Leadership Skills
2.18 Power
2.19 Bases of Power
2.20 Power Tactics
2.21 Politics
2.22 Consequences of Political Behaviour
2.23 Conflict Management
2.24 Different Views of Conflict
2.25 Conflict Process
2.26 Levels of Conflict
2.27 Destructive and Constructive Conflict
2.28 Strategies for Encouraging Constructive Conflicts
2.29 Conflict resolution Strategies
2.30 Negotiation
2.31 Developing Negotiation Skills
Module 3
3.1 Managing Organization System
3.2 Organizational Culture
3.3 Effects of Organizational Culture on Employee Performance
3.4 Organizational Cultural Model
3.5 Sustaining Culture
3.6 Influencing Cultural Change
3.7 Management of Change
3.8 Forces Responsible for Change
3.9 Resistance to Change
3.10 Overcoming Resistance to Change
3.11 Planned Change
3.12 Approaches to Managing Organizational Change
3.13 Creating a Culture of Change Through Innovation
3.14 Work Stress and its Management
Module 4
4.1 Communication in Organizations
4.2 Historical Trends
4.3 Types of Communication
4.4 Classification Based on Parties – Internally and Externally Directed Communication.
(Vertical, Horizontal and Diagonal)
4.5 Classification Based on Formality – Formal and Informal Communication.
4.6 Classification Based on Media – Written, Verbal and Non Verbal Communication
4.7 Classification Based on Other Criteria – Mass, Intrapersonal and Interpersonal
communication
4.8 Problems of Communication Within an Organization
4.9 Key Functions of Communication in an Organization
4.10 Organizational Design.
4.11 Change Management.
4.12 Organization Development.
4.13 OD Interventions.
4.14 Down Sizing.
4.15 Learning Organization.
4.16 Ethical Decision Making in Organizations.
4.17 Factors that Inhibit Ethical Decision making in Organizations.
4.18 Steps to Ensure Ethical Decisions
Module 5
5.1 Global Implications of Organizational Behaviour
5.2 International Settings for Management Criteria
5.3 Methods to do International Business
5.4 Managing International Setting of Business
5.5 Cultural Influences on International Negotiations
5.6 Managing Multi-Cultural Teams
5.7 Organizational Structure that Connects Organizational Departments, Functions and
Geography to Achieve Organizational Goals
5.8 Impacts of Globalization on Organizational Culture
KTU OB II Syllabus
Module 1
 Disciplines contributing to OB - Psychology, Sociology, Anthropology, Social

Psychology, Economics & Political Science
 Approaches to the study of OB - Human Resource Approach, Contingency Approach,
Productivity Approach, and System Approach
Module 2
 Managing Individuals at Work - Measuring personality attitude, managing employee

attitudes
 Managing Teams at Work - Definition of Group - group development- group structure -
teams -Formal Organization and Informal Groups and their interaction
 Developing high performance teams - turning individuals into team players
 Developing interpersonal awareness - Johari Window - Transactional Analysis
 Leadership - theories – developing leadership skills
 Managing Power, Politics and Conflict
 Power - basis of power - power tactics - Politics – consequences of political behavior –
 Conflict Management: Different views of conflict - conflict process - levels of conflict - -
Constructive and Destructive conflict - Conflict process - strategies for encouraging
constructive conflict – Conflict resolution strategies
 Negotiation - developing negotiating skills
Module 3
 Managing the Organization System - Effects of organization culture on employee

performance
 Creating and sustaining organization culture - Management of Change: forces responsible
for change - resistance to change - overcoming resistance to change - planned change -
approaches to manage organization change - creating a culture for change
 Work stress and its management
Module 4
 Communications in organizations - Historical trends; Forms of communications - formal

and informal communications - Vertical, Horizontal, and Diagonal Communications -
Internally versus Externally directed communication - problems of communications
within an organization - key functions of communication in organizations
 Fundamental principles, theories and concepts in organization design and development -
change management - OD inventions.
 Down Sizing - Learning Organizations
 Ethical decision making in organizations: Factors that inhibit or facilitate ethical decision
making in organizations, Steps to ensure ethical decisions;
Module 5
 Global implications of organizational behavior: International setting for the management

criteria - planning, organizing, staffing, controlling and leading
 Methods to do international business - imports and exports, licensing, joint venture
 Managing international setting of business - political and legal aspects, socio-cultural
aspects, economic aspects and technological environment
 Cultural influences on international negotiations; managing multi-cultural teams
 Organizational structure that connects organizational departments, functions and
geography to achieve organizational goals
 Impacts of globalization on organizational culture
Module 1
Introduction to Organizational
Behaviour
1.3 How OB Research is Done?
1.4 Organizational Components that Need to be Managed

Contents
1.9 Latest trends in Organizational Behaviour

The formal study of organizational behaviour began between 1949 and 1953. This still emerging
field tries to help managers understand individuals better so that productivity improvements,
customer satisfaction and a superior competitive position can be achieved through well
established management practices. Because of its relationship with individuals, groups and
organizations, the study of organizational behaviour is both interesting and challenging at the
same time. The challenging element of organizational behaviour lies in the fact that no two
individuals are likely to behave in the same manner in a particular work situation. Since there are
no absolutes in human behaviour, managers find it difficult to predict the behaviour of
employees. Since human capital contributes to overall organizational effectiveness, the study of
human behaviour is crucial for long term success. Researchers, management experts,
psychologists and social scientists have spent years to understand the relevance of individual, his
background and social framework in organizational settings. Managers should be in a position to
forecast, evaluate and modify behaviours of their subordinates based on this unique skill and
experience in handling large group of people in diverse circumstances. Apart from this,
organizational development and organizational culture can contribute greatly in molding
employee behaviours.
Rather than relying solely on gut feelings, field of organizational behaviour tries to collect
information regarding a problem in a scientific and controlled manner. It uses information and
interprets the results so that the behaviour of a employee and the team can be manipulated as per
the requirements of the top management. Researches done across the globe have shown that
employee performance and job satisfaction are determinants of achievements of individuals and
organizational objectives. To outsmart the competitors in this competitive world, organizations
have to be growth oriented and should link firm productivity with individual performance.
Negative behaviours such as employee absenteeism and turnover have a detrimental effect on
productivity and call stall the growth of the firm. Satisfied employees who are usually productive
contribute towards creating an appropriate work culture.
Individuals work independently or collectively in teams, number of such teams makes a

department and multiple department forms an organization. For organizations to achieve the
strategic goals, it has to assume a formal structure and all departments have to work in a
coordinated manner. For this to happen, all employees should exhibit positive attitude towards
work in particular and organization as a whole. They have to work in congenial atmosphere and
achieve the assigned objectives. Managers should ensure that an appropriate work culture suiting
the values of the work force has to be in place. For the smooth functioning of the organization,
important factors such as exercise of authority, delegation of power to grass root level
employees, division of labor, transparent communication, benchmarking, re-engineering, job re-
design and empowerment is inevitable. Irrespective of being a manufacturing or a service
organization, all these components are crucial for thriving in the competitive world.

Organizational behaviour can be defined as the field of study that explores the effect that
individuals, groups and organizational structure have on behaviour within the organization, for
the purpose of applying such knowledge towards the betterment of organizational effectiveness.
The above definition has three important components. First, organizational behaviour is an
exploratory study concerning individuals and groups. Second is about the effect of this field of
research on human behaviour and the third one focuses on the application of knowledge to
accomplish organizational effectiveness. The interactive nature of these factors ensures that the
impact of such behaviours is applied to different systems so that the objectives are attained. The
study of organizational behaviour is exploratory in nature since it tries to establish the cause and
effect relationship. Therefore, this is a comprehensive field of study in which individuals, groups
and organizational structure is studied in connection with organizational growth and
organizational culture, in an environment where impact of modern technology is great.
According to L.M.Prasad, organizational behaviour is the study and application of knowledge

about human behaviour related to other elements of an organization such as structure, technology
and social systems. Stephen P Robbins defines organizational behaviour as a systematic study of
the actions and attitudes that people exhibit within organizations. It has been found that
individuals usually form opinion based on the symptoms of a problem and do not actually go to
the root cause of the issue. Science of organizational behaviour is applied in nature since various
disciplines have contributed in terms of theories and studies. A leader should be able to
communicate the big picture with his subordinates so that they will be well updated with the
happenings within and outside the organization. For modifying human behaviour, conflict and
manipulated power bases need to be handled in the right manner so that individuals are
stimulated towards achieving higher productivity.
The multidisciplinary definition of organizational behaviours demonstrates a number of points.

First, OB signifies that behaviour of people which operate at individual, team and organizational
levels. This observation suggests that while studying OB, we must clearly define the level of
analysis being used – individual, team, organization or all three. Second, OB is multidisciplinary
in nature since it utilizes principles, models, theories and methods from other disciplines such as
Psychology, Sociology, Anthropology and Social Sciences. The study of OB is neither a
discipline nor an accepted science, but is a field that is evolving and developing in stature. Third,
there is a distinctly humanistic orientation within organizational behaviour. Individuals and their
attitudes, perceptions, learning capacities, feelings and goals are crucial to the organization.
Fourth, the study of OB is performance oriented. Important issues like low performance,
methods to improve it and the role of training in enhancing on the job performance can be
addressed using principles of OB. Fifth, OB acknowledges the significant role that external
environment plays in influencing human behaviour. Sixth, scientific method is important in
studying variables and relationships since OB relies heavily on recognized disciplines. Finally,
the field has a unique applications orientation because of it’s concern on providing useful
answers to questions that arise in the context of managing day to day operations of the
organization.
1.3 How OB research is Done?

There are many tools and techniques employed by OB researchers to find out how individuals,
groups and organizations behave. Researchers have developed working hypothesis based on their
own observations, in-depth analysis of the subject and data from employees. Based on these
researches, they try to figure out the connection between multiple variables. There are number of
unique research methods adopted by experts to study organizational behaviour.
 Surveys – Surveys are one the important methods adopted by management researchers to
learn more about OB. Usually, a survey consists of asking multiple questions (Open
ended or close ended) to individuals. If you are adopting open ended questions, ask the
employees about their feeling towards a particular issue and then summarize your
findings. On the other hand, close ended questions ask employees to make specific
choices from the response provided in a scale of 1 to 10. Nowadays, it is easy to create
online surveys that quickly compile results automatically.
 Field Studies – To correctly know what is truly going within the organization, field
studies can be used. Compared to surveys, more compelling evidence come from field
studies that employ an experimental design. Usually, half the employees are exposed to
experimental conditions where as the other half remains undisturbed. The control group
won’t get any information regarding the experiment but the treatment group does. By
comparing the outcomes of both groups, we could find out the relevant information.
 Laboratory Studies – In this method, researchers conduct a lab study in which one
group is assigned one condition and the other group is assigned the controlled condition
which generally involves no change at all. While utilizing laboratory studies, researchers
enjoy a great deal of control over the environment they are studying but do so in a less
realistic way, since they are not studying real employees in real working conditions. For
example, in a lab study, a researcher could simulate hiring and firing to see if these
actions affect the goal setting behaviours of other employees in real work settings.
 Case Studies – These are in-depth descriptions of a single sector or firm. Case writers
typically employ a systematic approach in collecting data and explaining the event in at
most detail. The main advantages of case studies are that they provide rich information
for drawing conclusions about the environment and people involved in the issues
discussed. The disadvantage is that it is sometimes tough to generalize what worked in a
single situation at a single firm to other situations and organizations.
 Meta Analysis – This is a technique adopted by researchers to summarize what the
fellow researchers have discovered about a given topic. This analysis is based on taking
observations in each study, and finding out if, overall the impact holds or not. For
example, what is the average connection between job satisfaction and performance?
Studies show that, looking across 250 studies, the relationship is moderately strong. The
main advantage of meta-analysis is that it gives more definitive answer to a question than
a single study ever could. The disadvantage is that meta-analysis is only possible if
sufficient research has been done on the topic at hand.
1.4 Organizational Components That Need to be Managed

1.4.1 People
People consist of one of the main components of any organization that has to be successful.
Every individual is driven by a personal goal. Firms must find out the need spectrum of people
and take necessary steps for its fulfillment to help them to perform effectively so that they
complete their allotted task on time. With the help of complete understanding and trust, good
relationship should be developed between workers, subordinates and superiors. This environment
will be congenial for mutual trust so that it is so easy to communicate and understand each
other’s perspective. Work teams and groups play a crucial role in the organization. People may
have to keep their personal interest aside if it conflicts with team or organizational goals. Apart
from managing internal workforce, it is also important to manage clients who are the end
consumers using organization’s products or services. Since stakeholders, government,
employees, social groups and nongovernmental organizations play a dominant role in the society,
all of them have to be well acknowledged. Along with this, adequate consideration should be
extended to competitors, regulatory agencies, suppliers and resource persons.
1.4.2 Structure
Organizations are usually divided into formal and informal organizations. While informal
organizations do not have a specific structure, formal ones are built based on strategic objectives.
In formal organizations, structure is hierarchical in nature, with individuals at each level having
their own unique objectives, which contributes towards the attainment of overall objective of the
firm. Since these systems has the principle of unity of command built in it, lower level people
report to higher level managers. Factors such as size, number of products/services produced,
knowledge, skill and experience of employees, managerial staff and geographical location of the
organization play crucial role in defining it’s structure. The efficiency of the organization
depends upon the free flow of information, quality communication system existing in the
organization and proper rules and regulations in place. The firm should have a well laid out
system understood by employees, supervisors and managers. The leaders should keep his mind
open while interacting with the subordinates so that they could enjoy higher levels of job
satisfaction.
1.4.3 Technology
Any management should give special attention to managing technology since it is a significant
element of any unit. Factors such as selection of technology along with it’s procurement,
installment, operation and maintenance is crucial for attaining productivity. Different systems
and sub systems existing in the organization should be well supported by latest or advanced
technology. Based on the technology, a firm should create job structure and resultant
procurement of human resource so that they are complimentary to each other. For example, an
appropriate procedure has to be installed in a hospital to ensure that the patient’s record is
maintained in a proper manner. All information related to admission record, past treatment,
drugs, availability of beds, schedule of operations are maintained with the help of software so
that maximum number of patients could be treated within minimum number of days.
1.4.4 Jobs
Job which encompasses various tasks within it is an assignment given to an individual. For
instance, HR manger wants to fill up seven vacancies in the finance department with six months.
Jobs will have various tasks inbuilt in it like developing the job specification, selection of media,
advertising vacancies and scheduling of selection. Managers have to deal with various tasks to
accomplish a particular job which forms a part of the managerial functions. The job of the
manager will be simple with the right kind of delegation, supervision, application of various
control techniques. With the introduction of computers, managerial functions have become
simpler since adequate information is available for decision making.
1.4.5 Processes
Management of processes and its inter-dependence is very important to high productivity and
better job satisfaction. Managers should take extra care in ensuring high morale of the
employees. For attaining this, they must identify various managerial dictums. Select the right
subordinate to carry out a job based on aptitude, personality traits, psychological build up and
attitude. Managers should be a role model himself and lead employees by personal example. In
army, it is the quality of leadership that helps troops to achieve near impossible task. Different
role models assist leaders in finding out as to which approach would be ideal to mould
subordinates in suitable frame that may be required by any organization. Nothing motivates
employees better if you give them their entitlements in continuous intervals and challenge them
to take up higher responsibilities. By doing so, manager must develop and build an
organizational culture that will bind employees to a common cultural bond.
1.4.6 External environment

Apart from all the above points discussed, external environment plays a crucial part. The impact
that culture has on individuals has to be well studied so that an understanding about how people
cope up with change can be obtained. Study of external environment consists of economic,
socio-cultural, legal, political, demographical aspects and its impact. If one views the external
environment that is prevailing in India, it is evident that individuals are dying to be a part of
upper class as it is synonymous with high standards of living, material possession, higher
education, attempt to copy western culture, food habits, dressing pattern and the like. If the
above factors are assessed appropriately, a manager will be able to forecast human behaviour in
the organization. Therefore, it is crucial to evaluate market situation, competitors, and
availability of raw material, technology, availability of skilled, semi skilled and non-skilled
personnel.

Organizational behaviour is an applied behavioural science whish has been developed based on
contributions from a number of different behavioural disciplines such as Psychology, Social
Psychology, Sociology, Anthropology, Economics and Political Sciences. While psychology has
made contributions mainly at individual or micro level of analysis, other disciplines have helped
to widen our understanding of macro concepts such as group processes and organization.
FIG. 1.1 Disciplines That Contributes to OB Field
Psychology
Psychology is an applied science which tries to explain human behaviour is a particular setting
and forecasts actions of individual. Psychologists have been able to modify behaviour of
individuals with the help of research findings. The main objective of psychology is to explain
human behaviour in a specific situation and predict their behaviour. The studies done by many
psychologists on modifying individual behaviours have helped in development of various
theories related to learning, motivation, personality, decision making, performance appraisal and
negotiation. Studies of these theories can enhance individual efficiency, result in attitudinal
change and build positive approach to organizational systems. Organizations employ
psychological tests for selection of employees, measuring personality attributes and aptitude.
The instruments used for measuring is scientific in nature and have been finalized after a great
deal of research. Field of psychology continues to explore new areas of application in the realm
of organizational behaviour, thereby enriching the subject.
FIG. 1.2 Contribution and Level of Focus of Psychology

Social Psychology
Social psychology, generally considered as a branch of psychology, blends concepts from both
psychology and sociology to focus on peoples’ influence on one another. It is the scientific study
of how people's thoughts, feelings, and behaviours are influenced by the actual, imagined, or
implied presence of others. Social psychologists deal with the factors that lead us to behave in a
given way in the presence of others, and look at the conditions under which certain
behaviour/actions and feelings occur. Working organizations are formal assembly of people who
are assigned specific jobs and play a vital role in formulating human behaviour. 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 behaviour, power, and conflict.
FIG. 1.3 Contribution and Level of Focus of Social Psychology
Sociology
Sociology is the study of social behaviour or society, including its origins, development,
organization, networks, and institutions. It is a social science that uses various methods of
empirical investigation and critical analysis to develop a body of knowledge about social order,
disorder, and change. Sociology studies the impact of culture on group behaviour and has
contributed to the field of group-dynamics through research on the role that individual plays in
the organization, communication, norms, status, power, conflict management, formal
organization theory, group processes and group decision-making. 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 important, sociologists have
studied organizational culture, formal organization theory and structure, organizational
technology, communications, power, and conflict.
FIG. 1.4 Contribution and Level of Focus of Sociology
Anthropology
Anthropology is the science that deals with the origins, physical and cultural development,
biological characteristics, and social customs and beliefs of humankind. It studies societies to
learn about human beings and their activities. The study is more relevant to organizational
behaviour today due to globalization, mergers and acquisitions of various industries. The advent
of the 21st century has created a situation wherein cross-cultural people will have to work in one
particular industry. Managers will have to deal with individuals and groups belonging to
different ethnic cultures and exercise adequate control or even channelize behaviour in the
desired direction by appropriately manipulating various cultural factors. Anthropologists’ work
on cultures and environments has helped us understand differences in fundamental values,
attitudes, and behaviour between people in different countries and within different organizations.
Much of our current understanding of organizational culture, organizational environments, and
differences among national cultures is a result of the work of anthropologists or those using their
methods. Environment studies conducted by the field of anthropology aims to understand
organizational human behaviour so that acquisitions and mergers are smooth.
FIG. 1.5 Contribution and Level of Focus of Anthropology
Economics
Economics is the study of scarcity, the study of how people use resources, or the study of
decision-making. Economics often involves topics like wealth, finance, recessions, and banking,
leading to the misconception that economics is all about money and the stock market. One of the
central tenets of economics is that people want certain things and will change their behaviour to
get those things – in other words, people will respond to incentives. Much of economics involves
using data gathered by businesses to test hypotheses about whether a certain program, event, or
incentive will have the expected effect. Another branch of economics focuses on using economic
theory to make predictions about how people and markets will behave. Managerial economics
applies microeconomic analysis to specific decisions in business firms or other management
units. It draws heavily from quantitative methods such as operations research and programming
and from statistical methods such as regression analysis in the absence of certainty and perfect
knowledge. A unifying theme is the attempt to optimize business decisions, including unit-cost
minimization and profit maximization, given the firm's objectives and constraints imposed by
technology and market conditions.
FIG. 1.6 Contribution and Level of Focus of Economics
Political Science
Political Science focuses on the theory and practice of government and politics at the local, state,
national, and international levels. Political scientists see themselves engaged in revealing the
relationships underlying political events and conditions, and from these revelations they attempt
to construct general principles about the way the world of politics works. They measure the
success of governance and specific policies by examining many factors, including stability,
justice, material wealth, peace and public health. Political science has contributed to the field of
organizational behaviour. Stability of government at national level is one major factor for
promotion of international business, financial investments, expansion and employment. Various
government rules and regulations play a very decisive role in growth of the organization. All
organizations have to abide by the rules of the government of the day.
FIG. 1.7 Contribution and Level of Focus of Political Science

1.6.1 Definition of Organizational Effectiveness
Organizational effectiveness can be defined as the effectiveness of an organization in achieving

the intended outcomes. In other words, organizational efficiency is the capacity of an
organization to produce the desired results with a minimum expenditure of energy, time, money,
and material resources. The main measure of organizational effectiveness for a business will
generally be expressed in terms of how well its net profitability compares with its target
profitability. Additional measures might include growth data and the results of customer
satisfaction surveys. Highly effective organizations exhibit strengths across five areas:
leadership, decision making and structure, people, work processes and systems, and culture.
Understanding a company's level of organizational effectiveness is important for several reasons:
it serves as a check-in to see how well internal procedures are meeting an initial vision, it
provides investors, donors, or employees with an idea of the company's strengths, and it
highlights areas of ineffectiveness that can be the focus of improvements.
1.6.2 Four Dimensions of Organizational Effectiveness
Assessing organizational effectiveness is a topic of great interest for all the stakeholders in an
organization. A good way of understanding this topic is to consider the four generic approaches
to assessing an organization's effectiveness. These criteria for effectiveness apply equally well
irrespective of whether the organization is large, small, profit or non profit. Most managers use
these four effectiveness criteria in various combinations. You have to always remember that
there is no best approach to evaluate effectiveness in all circumstances or for all organization
types.
FIG. 1.8 Four Dimensions of Organizational Effectiveness
 Goal Accomplishment - Goal accomplishment is widely used as a criterion for

measuring organizational effectiveness. Management always compares key
organizational outcomes with previously stated goals and corrective action is initiated for
any kind of deviation. Being an organizational variation of person goal setting process,
effectiveness is gauged by how well the organization meets or exceeds its goals.
Organization level goals include productivity improvement, minority recruiting and
quality control measures. Considering the fast paced business world, innovation and
speed are very important organizational goals. This approach is suitable when goals are
clear, time bound and measurable.
 Resource Acquisition – The second criteria for organizational effectiveness is connected

with inputs rather than outputs. An organization is considered effective if it acquires
necessary elements of production such as raw materials, labor, capital and managerial and
technical expertise. For evaluating the effectiveness of charitable organizations, you have
to consider how much money they raise from private and corporate donations. Resource
acquisition is appropriate when inputs have a traceable impact on the outputs.
 Internal Processes – Many experts refer to the third criteria of effectiveness as the
healthy system approach. For an organization to be healthy, information has to flow
smoothly and employee loyalty, commitment, job satisfaction and trust should prevail. In
a healthy system, people are emotionally connected with each other and they are free to
discuss about their fears and failures. This approach is suitable when organizational
performance is strongly influenced by specific processes.
 Strategic Constituencies Satisfaction – The key consideration of the final criterion of

organizational effectiveness rests in the satisfaction of the main interested parties. A
strategic constituency is defined as any group of people who have some stake in the
organization and whose lives are significantly affected by the organization. They usually
have competing or conflicting interests which forces managers to do some balancing act
to achieve stability. This approach is appropriate when powerful stakeholders can
significantly benefit or harm the organization.

The development of models of organizational behaviour is based on input, process and output.
Inputs containing various independent variables and process involving interaction among
individuals or groups lead to outputs in the form of dependant variables. Every organization
adopts one or more models of behaviour. The most popularly used models of organizational
behaviour are autocratic, custodial, supportive and collegial models.
FIG. 1.9 Models of Organizational Behaviour
1.7.1 Autocratic Model

The basis of this model depends upon strength, power and formal authority. They have ultimate
power over the employees and their words are considered final. According to Max Weber, power
can be defined as the probability that one actor, within a social relationship, will be in a position
to carry out his own will, despite resistance. The fundamental principle behind this model is that
management has superior business expertise, and the average employee has relatively low levels
of skill and needs to be fully directed and guided into performance. Thinking is done by
management and employees have to just obey the orders. This perspective of managing
organizations has been developed by D. McGregor in his theory X. This traditional view leads to
rigid control of employees at work. Even though the autocratic model might be appropriate for
some very automated factory situations, it has become outdated for most modern-day
organizations because of the human rights regulations and minimum wages law. Thus, the
managers cannot threaten employees to cut down the wages or compensation. Moreover, the
workers are educated and organized and they cannot be dictated to by the managers all the time.
1.7.2 Custodial Model
The custodial model came into existence to overcome the shortcomings of the autocratic model.
The custodial model revolves around the concept of providing economic security for employees
– through wages and other benefits – that will create employee loyalty and motivation. Custodial
model argues that owners are custodian of resources in the organization and they are bound to
look after the welfare of employees. The success of the custodial model depends upon the
economic resources because this model emphasizes the economic rewards and benefits. Since
employee’s physiological needs are already met, the employer looks to security needs as a
motivating force. The employees under custodial model depend upon organisation rather than
their boss. If the organisation has got good welfare and development programmes for the
employees, they cannot afford to leave the organisation. The flipside of the custodial model is
that it also attracts and retains low performance staff or even deliver a lower level of motivation
from some staff who feel that they are trapped in an organisation because the benefits are too
good to leave.
1.7.3 Supportive Model

Unlike the two earlier approaches, the supportive model depends on leadership. It is not based
upon control and authority (the autocratic model) or upon incentives (the custodial model), but
instead tries to motivate staff through the manager-employee relationship and how employees are
treated on a day-to-day basis. The intent of this model is to motivate employees through a
positive workplace where their ideas are encouraged and often adapted. This model considers
employees as active workers who have their value, attitude, desire, and preferences. The leader
assumes that the worker will take responsibility, make their contributions and improve
themselves, if given a chance. Supportive behaviour helps in creating friendly superior-
subordinate interaction with a high degree of confidence and trust. Supportive model facilitates
the development of individuals, groups and organizations and is found to be more effective in
developed countries. This model has limited application in a developing country like India where
most workers are concerned about their physiological needs and security rather than
psychological needs.
1.7.4 Collegial Model
The basis of collegial model is teamwork – everybody working as colleagues. This model creates
a favourable climate in the organisation as the workers feel that they are the partners in the
organisation. Managerial cadre is not considered superior to the employees and they contribute
jointly rather than bosses or leaders. The collegial model inculcates the team spirit in an
organisation. The workers accept responsibilities because they find it their obligation to do so,
not because that they will be punished by the management. In this kind of collegial environment,
the workers have job satisfaction, job involvement, job commitment and some degree of
fulfillment. The collegial model is quite effective in organizations that need to find new
approaches and operates in a competitive landscape that is constantly changing. The collegial
model is especially useful in research laboratories and similar work situations.
.
Key points Autocratic Custodial Supportive Collegial
Economic
Basis of Model Power Leadership Partnership
resource
Management
Authority Money Support Teamwork
Orientation
Employee Security and Responsible

Obedience Job performance
Orientation benefits behaviour
Employee
Depends on Depends on
Psychological Participation Self discipline
boss organization
Results
States and
Employee Needs Subsistence Security Self actualization
recognition
Performance Passive Moderate

Minimum Awakened drives
Results cooperation enthusiasm
FIG. 1.10 Comparison of four models of organizational behaviour

After reviewing all the four models it becomes very evident that there is no single model which
is best suited to the requirements of all the organizations. The managers will have to make use of
a blend of models depending upon the requirements of the case. But keeping in view the
emergence of professional management, we can say that the use of supportive and collegial will
be more advisable as compared to the autocratic and custodial models.

Organizational behaviour is the systematic study and careful application of knowledge about
how people - as individuals and as groups - act within organizations. Approaches to the study of
organizational behaviour are a result of the research done by experts in this field. These experts
studied and attempted to quantify research done about actions and reactions of employees, with
regard to their work environments. The four approaches to study organizational behaviour are –
human resources approach, contingency approach, productivity approach, and systems approach.
FIG. 1.11 Approaches to Study of Organizational Behaviour
1.8.1 Human Resource Approach
Human resource approach acknowledges the fact that people are the central resource in any
organisation and that they should be developed towards higher levels of competency, creativity
and fulfillment. Human resources approach provides for the changes in the managerial role. It
requires that the managers, instead of controlling the employees, should provide active support to
them by treating them as part of the group. Therefore, it is also known as supportive approach.
The supportive approach contrasts with the traditional management approach. In the traditional
approach managers decided what employees should do and closely monitored their performance
to ensure task accomplishment. In the human resources approach, role of managers changes, as
stated above, from structuring and controlling to supporting. The superiors and managers should
practice a style where workers are given the opportunities and encouragement to perform under
loose supervision. By treating individuals as mature adults, organizations can increase
productivity and at the same time meet the needs of individuals for independence and growth.
1.8.2 Contingency Approach
This approach is based on the assumption that methods or behaviours which work effectively in
one situation fail in another. In other words, this approach stresses that there is no single way to
manage effectively under all circumstances. OD programmes, for example, way work brilliantly
in one situation but fail miserably in another situation. The organizational structure and the
processes of management are governed by the external environment and several aspects of the
internal environment. Effective management processes will vary in different situations
depending on the individuals and groups in the organisation, the nature of the job and
technology, the environment facing the organisation and its structure. The strength of the
contingency approach lies in the fact that it encourages analysis of each situation prior to action
while at the same time discourages habitual practice of universal assumptions about methods and
people. The contingency approach is also more interdisciplinary, more system – oriented and
more research-oriented than in any other approach.
1.8.3 Productivity Approach
Productivity can be defined as the numerical value of the ratio of output to input. Higher the
value of this ratio, greater is the efficiency and effectiveness of the management. It also reveals
manager’s efficiency in optimizing resource utilization. The traditional concept of productivity
was concerned with economic inputs and output only. But nowadays human and social inputs
and outputs are equally important. For example, if better organizational behaviour can improve
job satisfaction, a human output or benefit occurs. In the same manner, when employee
development programmes lead to a by product of better citizens in a community, a valuable
social output occurs. Organizational behaviour decisions typically involve human, social, and /
or economic issues, and so productivity is usually recognized as a significant part of these
decisions is recognized and discusses extensively in the literature on OB.
1.8.4 Systems Approach
According to the systems approach to the study of organizational behaviour, an organisation is a

powerful system with several subsystems which are highly and closely interconnected. This
approach gives managers a way of looking at the organisation as a whole, whole person, whole
group, and the whole social system. Any action taken to solve the problems in one subsystem
will have its effect on the other subsystems as well; since all the parts of the organisation are
closely connected. A systems view should be the concern of every person in an organisation.
The clerk at a service counter, the machinist, and the manager all work with the people and
thereby influence the behavioural quality of life in an organisation and its inputs. Systems
approach has become an integral part of modern organizational theory. Organizations are termed
as complex systems comprising of interrelated and interlocking systems. The role of managers,
then, is to use organizational behaviour to help build an organisation culture in which talents are
utilized and further developed, people are motivated, teams become productive, organizations
achieve their goals and society reaps the reward.
1.9 Latest Trends in Organizational Behaviour

There are many trends within the organization and around the world that have and will continue
to affect the workplace and your career. These trends can be noticed simply by reading
newspaper headlines. Now, we will discuss some of these trends that have a direct impact on
organizational behaviour.
1.9.1 Business Ethics
Business ethics can be defined as applying ethical principles to situations that arise at work.
Recently, number of leading business firms has been facing serious ethical challenges.
Organizations should continue to think about business ethics on a day-to-day basis and institute
cultures that support ethical decision making. All organizations have an opportunity to be on the
forefront of ethical thinking and take action. OB practitioners argued that the most important
determinant of whether a company acts ethically is not necessarily related to the policies and
rules regarding ethical conduct but instead whether it has a culture of consistent ethical
behaviour and if leaders are committed to this ethical behaviour.
1.9.2 Employee Engagement
Researchers have shown that fostering engagement in employees has a significant impact on the
organizational success. An engaged employee is a person who is fully involved in and
enthusiastic about their work. These employees are those who are performing at the top of their
abilities and happy about it. Studies have found that only 20% of employees feel very passionate
about their jobs, less than 15% agree that they feel strongly energized by their work and only
31% believe that their employer inspires the best in them. This shows that wide gap existing that
can only be bridged with the help of employee engagement. According to a study done by
Gallup, it was found that 100% employee engagement leads to 70% customer loyalty, 70% drop
in employee turnover and 40% increase in profit. It is clear that engagement is both a challenge
and an opportunity for OB.
1.9.3 Technology
Technology has brought a sea change in the way business is done. The effects of increasing
personal computing power, the internet, as well as nanotechnology are allowing things to be
created that were unthinkable in the past. As computers get faster, new software is written to
capitalize on the increased computing power. We are also more connected by technology than
ever before. It is now possible to send and receive e-mails or text messages with your coworkers
and customers regardless of where in the world you are. Technology has also brought a great
deal of challenges to individuals and organizations alike. To combat the overuse of e-mail,
companies such as Intel have instituted no e-mail Fridays, in which all communication is done
via other communication channels. The technology trend contains challenges for organizational
behaviour.
1.9.4 Sustainable Business Practices
The concept of triple bottom line has gained popularity among top organizations. These firms
believe that beyond economic viability, businesses need to perform well socially and
environmentally. Many organizations are relying on green washing, the marketing of products or
processes as green to gain customers without truly engaging in sustainable business practices.
Sustainable business practices are those that meet the present needs without compromising the
needs of future generations. The challenge is to generate wealth for their shareholders while
attending to the triple bottom line. On the other hand, organizations also have an opportunity to
leverage a proactive stance toward innovative processes that can result in even greater profits for
their products. In the future, increasing interdependence between businesses, governmental
agencies, and NGOs is bound to effect change throughout the economy.
1.9.5 Changing Work Force
The demographic trend of aging workforce and workers from Generations X and Y entering the
labor force will create both challenges and opportunities for organizations. Aging workforces can
create great opportunities for industries such as health care, but it can also mean that great
challenges lie ahead as entire industries related to basic infrastructure face massive retirement
projections. The Millennial Generation differs from previous generations in terms of technology
and multitasking as a way of life. Having never known anything different, this population has
technology embedded in their lives. In addition, they value teamwork, feedback, and challenging
work that allows them to develop new skills. Organizational behaviour is to keep individuals
from different generations communicating effectively and managing people across generational
lines despite different values placed on teamwork, organizational rewards, work–life balance,
and desired levels of instruction.
1.9.6 Outsourcing
Outsourcing has become an indispensable part of most organizations, especially those operating
in information technology sector. It can be defined as having someone outside the formal
ongoing organization doing work previously handled in-house. This practice can involve
temporary employees, consultants, or even off shoring workers. Off shoring means sending jobs
previously done in one country to another country. Nowadays, organizations consists of one-
third regular employees, one-third temporary employees, and one third consultants and
contractors. The flip side of the changing trend in organization composition revolves around
potential unemployment issues as companies move toward a shamrock layout. Fortunately, this
shift also presents an opportunity for organizations to staff more flexibly and for employees to
consider the tradeoffs between consistent, full-time work within a single organization versus the
changing nature of work as a temporary employee, contract worker, or consultant—especially
while developing a career in a new industry, in which increased exposure to various
organizations can help an individual get up to speed in a short amount of time. The challenge for
organizational behaviour is managing teams consisting of different nationalities separated not
only by culture and language but also in time and space.
1.9.7 Shrinking world
The world is becoming flat and it created an environment in which there is a more level playing
field in terms of access to information. This access to information has led to an increase in
innovation, as knowledge can be shared instantly across time zones and cultures. It has also
created intense competition, as the speed of business is growing faster and faster all the time. Of
course, information by itself is not as important as having the right information at the right time.
A major challenge for individuals in the flattened world is learning how to evaluate the quality of
the information they find.
Review Questions
Objective type questions
Mark the correct answers:
1. The science that deals with the origins, physical and cultural development, biological
characteristics, and social customs and beliefs of humankind is known as
a) Psychology b) Sociology c) Social Psychology d) Anthropology
2. Which one is not a dimension of organizational effectiveness?
a) Goal accomplishment b) Sophisticated communication c) Resource acquisition

d) Internal processes
3. Applying ethical principles to situations that arise at work
a) Ethical Thinking b) Business ethics c) Ethical behaviour d) Ethical thinking.
4. The basis of collegial model of organizational behaviour is
a) Leadership b) Critical thinking c) Team work d) Creativity
5. Who introduced theory X?

a) Max Weber b) Karl Marx c) Stephen Robbins d) D. McGregor
State whether each of the following statement is true or false
1. According to L.M.Prasad, organizational behaviour is the study and application of

knowledge about human behaviour related to other elements of an organization such as
structure, technology and social systems.
2. Sociology is an applied science which tries to explain human behaviour is a particular
setting and forecasts actions of individual.
3. Human resource approach acknowledges the fact that people are the central resource in
any organisation and that they should be developed towards higher levels of competency,
creativity and fulfillment.
4. The basis of supportive model depends upon strength, power and formal authority.
5. Productivity can be defined as the numerical value of the ratio of output to input.
Fill in the blanks
1. ________ defines organizational behaviour as a systematic study of the actions and

attitudes that people exhibit within organizations.
2. ________ is the study of social behaviour or society, including its origins, development,
organization, networks, and institutions.
3. ________ is the study of scarcity, the study of how people use resources, or the study of
decision-making.
4. According to _________, power can be defined as the probability that one actor, within a
social relationship, will be in a position to carry out his own will despite resistance.
5. _________ approach is based on the assumption that methods or behaviours which work
effectively in one situation fail in another.
Match the following
1. 1.Theory and practice of government and politics - Economics

2. Study of scarcity, how people use resources and decision-making - Social Psychology.
3. study of social behaviour - Political Science
4. Applied science which tries to explain human behaviour - Sociology
5. Scientific study of how people's thoughts, feelings, and behaviours are influenced by the
presence of others - Psychology.
Short answer type questions
1. Define Organizational Behaviour.

2. Explain the four dimensions of organizational effectiveness.
3. Why there is a need to study organizational behaviour?
4. Define organizational effectiveness.
5. Explain the contingency approach to organizational behaviour?
Essay Type questions
1. What are the different unique methods adopted by experts to study organizational
behaviour?
2. Which are the Organizational components that need to be managed?
3. Which are the important disciplines that are contributing to organizational behaviour?
4. Explain in detail the different models of organizational behaviour.
5. Compare between the four approaches to study organizational behaviour.
Module 2
Managing Individuals and

Teams at Work
2.1 Managing Individuals at Work.
2.2 Measuring Personality Attitudes.
2.3 Managing Employee Attitudes.
2.6 Types of Groups
2.8 Group Structure
2.9 Team
2.13 Johari Window
Contents

2.15 Leadership
2.18 Power
2.19 Bases of Power
2.20 Power Tactics
2.21 Politics
2.23 Conflict Management
2.29 Conflict resolution Strategies
2.30 Negotiation
2.1 Managing Individuals at Work
It is extremely difficult to explain human behaviour by one broad generalization since it is a very
complex phenomenon. Biological, situational and cultural factors play a crucial role in predicting
human behaviour. The culture in which he is brought up and various social systems in which he
is working decides the behaviour of an individual. Behaviour varies from individual to individual
and it is tough to alter it without a strong stimuli. There is the existence of a cause and effect
relationship in individual behaviour. It is important for managers to acknowledge the individual
behaviour differences and consider it while managing organizational behaviour.
To have a better understanding about individual differences, managers must identify and
recognize the differences, research on variables that affect individual behaviour and find out the
relationships among the variables. If managers are well aware about employees’ attitudes,
perceptions, and mental abilities as well as how these and other variables are related, they will be
in a position to take good decisions. For instance, if an organization compensates employees very
well, the productivity can be improved. This means that there is a positive link between extrinsic
rewards like compensation and productivity of individuals. But some individuals are motivated
to excel when they are provided with intrinsic rewards like recognition or change in status.
Therefore, to motivate employees, managers have to discover the true need of individual
employee and develop strategies that satisfy them. The ability to spot out differences, understand
relationships, and forecast linkages helps managers to improve efficiency of employees.
Individual behaviour includes a wide range of activities such as talking to a colleague, listening
to customer, updating the supervisor or hiring a new employee. It also consists of negative
behaviours like surfing through social networks or taking unwanted breaks to avoid work. Kurt
Lewin stated that behaviour is a function of individual and environmental factors. He came up
with a formula, B=f(I,E). The behaviour that is displayed at work is unique to each individual,
but the underlying process is fundamental to all people. Since work behaviours are pivotal for
organizational success and individual difference is a crucial variable affecting it, it is important
to understand in depth about individual differences.
2.2 Measuring Personality Attitudes
2.2.1 Measuring Personality
Since personality tests are useful in hiring decision and forecasts best job performer,
measurement of personality can be really helpful for managers. Usually, four classes of
indicators are employed for measuring personality: Observation, questionnaires, test situations
and physiological responses.
FIG. 2.1 Methods of Measuring Personality
2.2.1.1 Observation
In this method, individuals are observed when they are doing their job in the work settings. A
judgment about their personality is made based on their behaviour. In short, this method consists
of objectifying and systematizing the process of making impression of other individuals while
observing them. Because of its closeness to experience and apparent simplicity, observation is
very appealing for most of the managers. Critics point out the fact that the data generated are
subject to observer’s idiosyncrasies and often fall short of scientific standards of reproducibility.
Effectiveness of this method depends heavily on the quality of the observers, the range of
contexts in which judges observe the subject, and the way in which the observations are codified
so as to formulate a dimensional index. For example, if a panel of judges in trying to check the
anxiety level of an individual, they will observe him in different situation for a particular period
of time. After that, they will rate him in an anxiety continuum so that an average value can serve
as a score or measurement of the subject with respect to anxiety level.
2.2.1.2 Questionnaire
This is one of the most commonly employed methods to measure personality. Usually, a
questionnaire consists of a broad range of questions on highly personal matters, which the
respondents are asked to answer. This method is very convenient for the investigator since direct
answers are given by the respondents regarding many issues, and these responses are processed
through a variety of analytical techniques. One disadvantage of questionnaires is that the
participants may tend to give answers expected out of them rather than sharing their real feelings
about issues discussed.
Minnesota Multiphasic Personality Inventory (MMPI)
The Minnesota Multiphasic Personality Inventory (MMPI) is a psychological test that is widely
used in assessing personality traits and psychopathology. It consists of statements to which an
individual responds true, false, or cannot say. MMPI items cover a broad range of areas such as
health, psychosomatic symptoms, neurological disorders, and social attitudes. Managers usually
adopt MMPI in screening candidates during the personnel selection process. Because of its high
level of psychological oriented, managers may find it difficult to use it.
Myers-Briggs Type Indicator (MBTI)
The primary objective of Myers-Briggs Type Indicator (MBTI) is to simplify the theory of
psychological type introduced by C. G. Jung and make it useful in the lives of people. The
central principle of MBTI lies in four simple preferences. Do you prefer to deal with:
 People and things (Extraversion or "E"), or ideas and information (Introversion or "I").
 Facts and reality (Sensing or "S"), or possibilities and potential (Intuition or "N").
 Logic and truth (Thinking or "T"), or values and relationship (Feeling or "F").
 A lifestyle that is well-structured (Judgment or "J"), or one that goes with the flow
(Perception or "P").
FIG. 2.2 Myers Briggs Type Indicator
For each pair, you prefer one style over the other. You combine the letters associated with your
preferences to get your Myers Briggs personality type. For instance, having preferences for E, S,
T and J gives a personality type of ESTJ. Even though you have preferences, you still use all
eight styles - in the same way that most people are right-handed but they still use both hands
2.2.1.3 Test Situations
Since observations are very much reliant on the quality of the judges and questionnaire often
fails to capture actual behaviours, it is ideal to use test situations to measure personality. Test
situations are designed by the researcher to present to the participating subject a psychological
context developed in a way that makes it relevant to the personality variable under study.
Projective Tests
With the help of projective tests, some hidden fantasies, feelings, hopes and aspirations of the
subject is measured to evaluate his personality. Tests such as Rorschach Ink Blot Test or the
Thematic Apperception Test comes under this category. In Rorschach ink blot test, subjects are
shown ten vague, unstructured inkblots and are asked to specify what they see in these pictures.
In thematic appreciation tests, subjects are shown pictures representing specific social settings
and are asked to write a story of what might be happening in that social situation.
2.2.1.4 Physiological Responses
The major limitation of the previous three approaches is that the behaviour of the subject is to a
large extent under his volitional control. This means that he has the liberty to decide how he will
respond when under observation or while faced with an inventory or when functioning in a test
situation. But, the real picture can be captured by studying the autonomic nervous system. It is
very difficult to mimic an increase in heart rate, a hyper motility of the stomach or a rise in
circulating epinephrine. For evaluating anxiety of an individual, the subject is placed in a
stressful situation and then captures the changes in the electrical conductance of his skin.
Emotionality of the subject can be well depicted with the minor changes in skin conductivity.
2.2.2 Measuring Attitude
Since individuals may give socially acceptable responses to protect their self image, directly
asking them may not be an ideal way to find out about their attitude. To overcome this problem,
different methods have been developed to measure attitude in scientific manner. Attitude
measurement can be fundamentally classified into direct and indirect measurement. The most
common methods of direct attitude measurement are by using likert and semantic scale whereas
the indirect measurement consists of projective techniques.
2.2.2.1 Direct Measurement of Attitude
Likert Scale
Likert scale is a psychological tool used to measure attitudes, values, and opinions. They are
usually in fixed choice response formats and are designed to measure attitudes or opinions. An
individual is made to fill in a questionnaire in which they have to indicate the extent to which
they agree or disagree with a series of statements. A Likert-type scale assumes that the
strength/intensity of experience is linear, i.e. on a continuum from strongly agree to strongly
disagree. Respondents may be given a choice of five to seven or even nine pre-coded responses
with the neutral point being neither agree nor disagree.
FIG. 2.3 Example of Likert scale
Semantic Differential Scale
In this technique, people are asked to rate an issue or topic on a standard set of bipolar adjectives,
each representing a seven point scale. For developing a semantic differential scale, you must first
identify lots of words with opposite meanings that describe the subject of the test. For instance,
respondents are given a word, for example 'bus', and presented with different adjectives to
describe it. Participants tick to show how they feel about what is being measured. The semantic
differential requires respondents that are intelligent and cooperative. It requires respondents with
a good knowledge of language, who are willing and able to make fine distinctions. It would not
appropriate for children, unless presented in a simplified form. Although a 7-point scale is
common, it is acceptable to provide fewer choices, 5 or even 3. The blanks are numbered from 1
to 7 and then the responses are averaged for each dimension. The average is plotted on the form
and provides a profile of the connotation of the target concept.
Fig 2.4 Semantic Differential Scale
An attitude scale is developed to provide an accurate measure of an individual’s social attitude.

People usually reply in a manner that makes them appear unbiased, open minded and democratic.
Self report scales that measure attitudes towards race, religion, sex etc. are strongly influenced
by socially desirability bias. Respondents who harbor a negative attitude towards a particular
group may not wish be admit to the experimenter (or to themselves) that they have these
feelings. Consequently, responses on attitude scales are not always 100% valid.
2.2.2.2 Indirect Measurement of Attitudes
Projective Techniques
For resolving the problem of social desirability, various indirect measures of attitudes have been
employed. Either individuals are ignorant of what is being measured or they are unable to
consciously find out what is being measured. Indirect methods typically involve the use of a
projective test. A projective test consists of presenting an individual with a vague or incomplete
stimulus (e.g. picture or words) which he has to interpret. Based on the interpretation of the
vague stimulus, his attitude is inferred.
 Rorschach Inkblot Test – Created by Hermann Rorschach in 1921, this projective

psychological test consists of 10 inkblots printed cards (five in black and white, five in
color). Psychologists make use of this test to examine the personality characteristics and
emotional functioning of their patients. The Rorschach test is appropriate for subjects
from the age of five to adulthood. The Rorschach test is used when the patient is reluctant
to openly admit to psychotic thinking and is employed in diagnosing underlying thought
disorder. With the help of this test, a basic understanding of the person’s past and future
behaviour can be obtained. The interpretation of a Rorschach record is a complex
process. It requires a wealth of knowledge concerning personality dynamics generally as
well as considerable experience with the Rorschach method specifically.
FIG. 2.5 Rorschach Inkblot Test

 Thematic Apperception Test – This projective technique taps into an individual’s
unconscious mind to reveal the hidden aspects of their personality. The TAT is widely
known as the picture interpretation technique because it uses a standard series of
provocative yet vague pictures about which the respondent is asked to tell a story. Even
though the drawing must be interesting enough to encourage discussion, it should be
vague enough not to immediately give away what the project is about.TAT can be used in
different ways, from eliciting qualities associated with different products to perceptions
about the kind of people that might use certain products or services.
FIG. 2.6 Thematic Apperception Test
2.3 Managing Employee Attitudes

Change is the only thing that is constant in the present business world. Irrespective of the
organization and the industry, the business environment is continuously evolving. For ensuring
organizational survival, the business should go through change on a regular basis. Usually,
employees respond to these environmental changes with a negative attitude which may seriously
affect your business efforts. This makes the managing of employee attitudes a critical
management function. Some of the important steps in managing employee attitudes are as
follows.
 Clear Communication - Communicate clearly and continuously with your employees.
Employees should be aware about the changes in the external and internal business
environment and how they might affect them. Publish a newsletter or regular company-
wide email updates that inform employees about current events leading to changes in
your firm. Understand that employees’ resistance to change is often a feeling of being
caught off-guard. Informing your staff will improve attitudes because they won’t feel
excluded or left “out of the loop.”
 Employee Involvement – Make sure that your employees are actively involved in the
planning and implementation process when addressing changes within the organization.
Regularly conduct focus groups or send out employee surveys to gain feedback about the
environment, operations, job satisfaction or anything that might affect attitudes of
employees. By identifying what your employees think and what their issues or
motivations are, you can act find resolution in those areas. Acknowledge that your
employees may be your greatest informational resource regarding ground level operations
and addressing consumer needs. Enquire them about the changes that make their work
lives easier and you may improve your firm’s efficiency as well as employee attitudes.
 Fun at Work - Introduce fun activities where employees and employers get to interact.
Host a barbecue, join a softball league or hold a holiday costuming contest where the
managers dress up and the staff votes on the best costume. Involve in activities that make
the work environment more human, one that erases the impression of management versus
labor. Replace that image with one that is cooperative, inclusive and fun.
 Employee Empowerment – Staff should be empowered to support aspects of the
business environment. Assign special committees to host certain events, allow staff
members to contribute to the company newsletter, implement a cross-training program so
staff members from complementary departments or divisions are able to gain exposure to
how other parts of the business operates. Work with staff to map out career paths within
your company and educate them on how a supportive attitude and flexible demeanor in
the face of business change can help them progress along that path.
 Setting Good Role Models – Influential people can set good example. The tone of the
manager or company owner often sets the tone of the entire office. If you are a negative
person, or are chronically upset and in a bad mood, this will affect the quality of work life
of your employees. If you want your employees to be positive, be the first one to set a
good example. While everyone can't positive 100 percent of the time, making a
commitment to having a positive attitude and sticking with that commitment is essential.
 Identify Employee Motivators - Find out what really motivates your employees. Every
person is a unique individual, and he will have unique motivators that help create a
positive attitude. Some employees may be goal oriented and need to feel that they are
accomplishing these goals and being recognized for their achievements. Others may be
motivated by monetary rewards. Find what works for each of your employees and
implement strategies to get your workforce motivated and positive.
 Remove Trouble Makers – Make sure that the work environment is free from
troublemakers. One employee with a bad attitude can ruin the whole atmosphere of your
business and demolish morale. Talk to employees who seem to be in a chronically poor
mood and discuss why they act this way. Give them an opportunity to improve their
behaviour. If they do not, you may need to transfer them to another department or
terminate them.
 Reinforce Good Attitudes - Good attitudes should be reinforced thorough praise,
encouragement and acknowledgement. Every individual always look forward for
situations in which he/she is appreciated. Establish a reward system for your employees,
and frequently encourage and praise their successes. Avoid berating them for mistakes,
and use a positive approach to get them to complete their tasks. Always acknowledge a
job well done and make sure your employees know that they are appreciated for the good
work that they do.
 Support Your Employees - Extend support for employees going through tough times.
Sometimes, employees who are normally positive people may exhibit negative behaviour.
If this behaviour is sustained, it may be a sign that something is going wrong in some part
of their lives. Establish an open-door policy under which employees are free to discuss
their problems with you. If you have the resources, set up an employee counseling service
or contract with one for those going through rough patches in their lives.
Success of an organization is very much dependent on the effectiveness of its teams. Great
leaders show the courage to make the decisions and establish standards of performance that are
constantly being met. To build a wonderful team, a keen understanding of people, their
strengths and what gets them excited to work with others is crucial. Team building requires the
management of egos and their constant demands for attention and recognition – not always
warranted. Team building is both an art and a science and the leader who can consistently build
high performance teams.
Building organizations requires the know-how to create long-lasting teams. It requires the
ability to master the “art of people” and knowing how to handle hundreds of people at the right
place and at the right time. It means knowing how each person thinks and how to best utilize
their competencies rightly at all times. It’s playing a continuous chess match – knowing that
every wrong move that is made can cost the company hundreds of thousands, if not millions of
dollars. This is why most managers never become leaders and why most leaders never reach the
highest pinnacle of leadership success.
Groups form an indispensable part of social life. Because of its relevance for success of
members of the society, there is a need for research, exploration and action. A group is usually
defined as two or more interacting and interdependent individuals who come together to achieve
particular objectives. A group behaviour can be stated as a course of action that a group takes as
a family. In organizational setting, a group is the collection of people who are located, grouped
or gathered together, either by classification or in a more general sense. Individuals are often
put in groups, such as a department, or groups are created by the same culture or objectives
within an organisation. Researchers have given different definitions to the concept of group and
some of them are given below.
 According to Rupert Brown, a group exists when two or more people define themselves
as members of it and when its existence is recognized by at least one other.
 According to George Homans, a group consists of a number of persons who
communicate with one another often over a span of time, and who are few enough so
that each person is able to communicate with all the others, not at second-hand, through
other people, but face-to-face.
 Theodore.M.Mills defined group as units composed of two or more persons who come
into contact for a purpose and who consider the contact meaningful.
 According to John.C.Turner, a group is a collection of individuals who have relations to
one another that make them interdependent to some significant degree.
2.6 Types of Groups
Groups are normally classified into formal and informal groups. Formal groups are further
divided into task, command and functional groups where as informal groups are classified into
interest and friendship groups.
FIG. 2.7 Types of Groups
Formal Groups
A formal group is created within an organisation to complete a specific role or task. This may
be a one off objective such as the launch of a particular product or service or a
permanent/ongoing objective such as the provision of Information Technology (IT).
 Command Group - These groups are specified by the organizational chart and
frequently consist of a manager and the subordinates that report to that manager. An
example of a command group is an academic department chairman and the faculty
members in that department.
 Task Group - These groups consist of individuals who work together to achieve a
common task. Members of the task group are brought together to accomplish a narrow
range of goals within a specified time period. The firm appoints members and assigns
the goals and tasks to be accomplished. Examples of assigned tasks are the development
of a new product, the improvement of a production process, or the proposal of a
motivational contest.
 Functional Group - This group is created by the organization to accomplish specific
goals within an unspecified time frame. Functional groups remain in existence after
achievement of current goals and objectives. Examples of functional groups would be a
marketing department, a customer service department, or an accounting department.
Informal Groups
When individuals decide to interact with each other, they form informal groups. Usually,
informal groups lack a specific purpose and are formed because the group members regularly
happen to be in the same location or because they enjoy each other's company. For instance,
individuals may form a group because they sit close together in an office or live together in a
house.
 Interest Group - These groups usually last longer than general informal groups and
may continue over time. Members of interest groups may not be part of the same
organizational department but they are bound together by some other common interest.
The goals and objectives of group interests are specific to each group and may not be
related to organizational goals and objectives. An example of an interest group would be
students who come together to form a study group for a specific class.
 Friendship Group - These groups are formed by people who involve in similar social
activities, political beliefs, religious values, or other common bonds. Members enjoy
each other's company and often meet after work to participate in these activities. For
example, a group of employees who form a friendship group may have an exercise
group, a softball team, or a potluck lunch once a month.
 Reference Group - These groups are usually used people to evaluate themselves.
Cherrington stated that the main purposes of reference groups are social validation and
social comparison. Social validation allows people to justify their attitudes and values
while social comparison helps people evaluate their own actions by comparing
themselves to others. Reference groups have a strong influence on members' behaviour.
Groups are an integral part of today's business environments. Any manager who works with or
supervises groups should be familiar with how they develop over time. Perhaps the best known
scheme for a group development was advanced by Bruce Tuckman. He came up with the
memorable phrase "forming, storming, norming, performing and adjourning" and used it to
describe the path that most teams follow on their way to high performance. When you
understand it, you can help your new team become effective more quickly. It is believed that
these stages are universal to all teams despite the group's members, purpose, goal, culture,
location, demographics and so on.
FIG 2.8 Stages of Group Development
1. Forming - The first stage of group development is known as the forming stage. In this
stage, the group meets and learns about the opportunities and challenges, and then agrees
on goals and begins to tackle the tasks. Members are cautious with their behaviour, which
is driven by the desire to be accepted by all members of the group. Conflict, controversy
and personal opinions are avoided even though members are beginning to form
impressions of each other and gain an understanding of what the group will do together.
Mature team members begin to model appropriate behaviour even at this early phase. The
meeting environment also plays an important role to model the initial behaviours of each
individual.
2. Storming - The second stage of group development is known as the storming stage. In
this stage, conflict and competition are at its greatest. Storming often starts when there is
a conflict between team members' natural working styles. People may work in different
ways for all sorts of reasons but, if differing working styles cause unforeseen problems,
they may become frustrated. The storming stage is where the more dominant of the group
members emerge, while other, less confrontational members stay in the comfort and
security of suppressing their feelings just as they did in the previous stage. Even though
these individuals stay quiet, issues may still exist. All members have an increased need
for clarification. Activities such as lack cohesion, subjectivity, hidden agendas, conflicts,
confrontation, volatility, resentment, anger, inconsistency and failure mark the storming
phase.
3. Norming - The third stage of group development is known as the norming stage. In
norming stage, group members establish implicit or explicit rules about how they will
achieve their goal. At this point, people start to resolve their differences, appreciate
colleagues' strengths, and respect your authority as a leader. Morale is high as group
members actively acknowledge the talents, skills and experience that each member brings
to the group. A sense of community is established and the group remains focused on the
group's purpose and goal. Members are flexible, interdependent and trust each other.
Leadership is shared, and members are willing to adapt to the needs of the group.
Information flows seamlessly and is uninhibited due to the sense of security members
feel in the norming stage. There is often a prolonged overlap between storming and
norming, because, as new tasks come up, the team may lapse back into behaviour from
the storming stage.
4. Performing - The fourth stage of group development consists of performing. The team
reaches the performing stage, when hard work leads, without friction, to the achievement
of the team's goal. The structures and processes that you have set up support this well.
The team members are now competent, autonomous and able to handle the decision-
making process without supervision. Dissent is expected and allowed as long as it is
channeled through means acceptable to the team. Supervisors of the team during this
phase are almost always participating. The team will make most of the necessary
decisions. Even the most high-performing teams will revert to earlier stages in certain
circumstances. Many long-standing teams go through these cycles many times as they
react to changing circumstances. For example, a change in leadership may cause the team
to revert to storming as the new people challenge the existing norms and dynamics of the
team.
5. Adjourning - The last stage of group development process is adjourning. As the group
project ends, the group disbands in the adjournment phase. This phase was added when
Tuckman and Jensen's updated their original review of the literature in 1977. Many teams
will reach this stage eventually. For example, project teams exist for only a fixed period,
and even permanent teams may be disbanded through organizational restructuring. Team
members who like routine, or who have developed close working relationships with
colleagues, may find this stage difficult, particularly if their future now looks uncertain.
2.8 Group Structure
When a group comes together for the first time and begins to interact, various differences
between the members begin to appear. The pattern of relationships established is known as the
group structure. Structure is the underlying pattern of stable relationships among the group
members. The pattern will, of course, change according to the nature of the task or the stage of
discussion and the most influential person for one purpose may not be so for another. Where
there is no appointed leader, as in tutorless groups, the leadership may, therefore, move round
different members of the group. A structure that emerges in these ways is known as the invisible
structure. A visible structure exists when the group agrees a division of labour, roles, and
responsibilities, in order to get essential tasks performed. Structure can be described in a variety
of ways. Among the more common considerations are group size, group roles, group norms, and
group cohesiveness.
FIG. 2.9 Components of Group Structure
2.8.1 Group Size
Group size is an important component of group structure. It can vary from a small group of two
to a very large number of people. Small groups which consist of two to ten members tend to be
more effective because each member has ample opportunity to participate and become actively
involved in the group. Large groups may waste time by deciding on processes and trying to
decide who should participate next. Group size will affect not only participation but satisfaction
as well. Evidence supports the notion that as the size of the group increases, satisfaction
increases up to a certain point. In other words, a group of six members has twice as many
opportunities for interaction and participation as a group of three people. Beyond 10 or 12
members, increasing the size of the group results in decreased satisfaction. It is increasingly
difficult for members of large groups to identify with one another and experience cohesion.
2.8.2 Group Roles
Roles are a set of expected behaviour patterns associated to someone occupying a given position
in a social unit. Each role will have specific responsibilities and duties. Group roles are usually
classified into work roles, maintenance roles, and blocking roles. Work roles are task-oriented
activities that involve accomplishing the group's goals. They involve a variety of specific roles
such as initiator, informer, clarifier, summarizer, and reality tester. Maintenance roles are social-
emotional activities that help members maintain their involvement in the group and raise their
personal commitment to the group. The maintenance roles are harmonizer, gatekeeper, consensus
tester, encourager, and compromiser. Blocking roles are activities that disrupt the group. They
make take the form of dominating discussions, verbally attacking other group members, and
distracting the group with trivial information or unnecessary humor. The blocking roles are
aggressor, blocker, dominator, comedian, and avoidance behaviour.
2.8.3 Group Norms
Group norms are the patterns and expectations within a group of people, including family, co-
workers or neighborhoods. These group norms can determine how people interact and how they
view people of other races and sexes as well. They are typically created in order to facilitate
group survival, make behaviour more predictable, avoid embarrassing situations, and express the
values of the group. Each group will establish its own set of norms that might determine
anything from the appropriate dress to how many comments to make in a meeting. Groups exert
pressure on members to force them to conform to the group's standards. The norms often reflect
the level of commitment, motivation, and performance of the group. The majority of the group
must agree that the norms are appropriate in order for the behavior to be accepted. There must
also be a shared understanding that the group supports the norms. It should be noted, however,
that members might violate group norms from time to time. Group members who do not conform
to the norms will be punished by being excluded, ignored, or asked to leave the group.
2.8.4 Group Conformity
Conformity is a type of social influence involving a change in belief or behaviour in order to fit
in with a group. It can be simply defined as yielding to group pressures. Three types of
conformity can be identified as normative, informational and ingratiational. Normative
Conformity is yielding to group pressure because an individual wants to fit in with the group.
Conforming usually takes place because the individual is scared of being rejected or neglected by
the group. This type of conformity usually includes compliance like where a person publicly
accepts the views of a group but privately rejects them. Informational Conformity usually
happens when a person lacks knowledge and looks to the group for guidance or when a person is
not clear about a situation and socially compares one’s behaviour with the group. This type of
conformity includes internalization where a person accepts the views of the groups and adopts
them as an individual. Ingratiational Conformity happens where a person conforms to gain a
favor or acceptance from other people. It is relative to normative influence but is encouraged by
the need for social rewards rather than the threat of being rejected. In other words, group
pressure is not always the reason to conform.
2.8.5 Group Cohesiveness
Group cohesiveness is one of the characteristic features of the groups, which is very important
from behaviouristic point of view. Cohesiveness is the degree to which the group members are
attracted to each other and are motivated to stay in the groups. Cohesiveness refers to the
bonding of group members and their desire to remain part of the group. Groups tend to become
cohesive when they are in intense competition with other groups or face a serious external threat
to survival. Smaller groups and those who spend considerable time together also tend to be more
cohesive. The more the members feel attracted to the group, the greater will be the group
cohesiveness. The greater the cohesiveness, the greater the influence of the group members to
persuade one another to conform to the group norms. The greater the conformity, the greater the
identity of the members to the group and the greater the group cohesiveness.
2.9 Team
It is impossible for an individual to perform all tasks on his own. For achieving complex goals,
he needs the support as well as guidance of others to be excellent in whatever he does. A team is
a group of people, each of whom possesses particular expertise; each of whom is responsible for
making individual decisions; who together hold a common purpose; who meet together to
communicate, collaborate and consolidate knowledge, from which plans are made, actions
determined and future decisions influenced. Individuals who are not compatible with each other
can never form a team. They should have similar if not the same interests, thought processes,
attitude, perception and likings.
2.9.1 Importance of Teams
For employees to contribute efficiently to the organization, they need the support and help of
their co-workers. The successful accomplishment of a task is the result of high level of
interdependence existing among team members. It has been observed that outcomes are far better
when employees work in a team rather than individually as every individual can contribute in his
best possible way. In organizations, individuals having a similar interest and specializations
come together on a common platform and form a team. Team work is essential to ensure better
output and a better bonding among employees.
 Revenue Generation – The main objective of an organization is to meet targets and

generate revenue. Tasks must not be kept pending for a long time and has to be
completed within the desired timeframe. A single brain can’t always come with solutions
or take decisions. He needs someone with whom he can discuss his ideas. In a team,
every team member has equal contribution and each team member comes out with a
solution best suited to the problem. All the alternatives can be explored to come out with
the best possible solution. Thoughts can be discussed among the team members and the
pros and cons can be evaluated.
 Time Efficiency- If an individual is held responsible for everything, it will definitely take
more time to perform. When employees work together, they start helping each other and
responsibilities are shared. Thus it reduces the work load and work pressure. When every
team member is assigned one or the other responsibility according to his specialization
and level of interest, output is much more efficient and faster.
 Healthy Competition – Healthy competition has proved to be beneficial for both
employees as well as the organization. Every individual feels motivated to perform better
than his team members and his overall efficiency improves.
 Improved Relations – People working in teams share warm relationships with each
other. They work in close coordination and thus come to know each other better. Team
work also reduces the chances of unnecessary conflicts among the employees and every
individual tries his level best to support his team member. The level of bonding increases
as a result of team work.
 Mutual Benefit – Each person is unique and has some qualities. One can always benefit
from his team members which would help him in the long run. Everyone is hungry for
recognitions and praises. One feels motivated to work hard in a team and to live up to the
expectations of the other members. Each member is a critic of the other and can correct
him whenever the other person is wrong. One always has someone to fall back on at the
time of crisis.
Team and team work must be encouraged at workplace as it strengthens the bond among the
employees and the targets can be met at a faster pace.
2.9.2 Types of Teams
Majority of corporate leaders feel that today’s problems are very complex and they acknowledge
the role played by teams in providing effective solutions. These leaders believe that collaboration
can fuel creative thinking and problem solving is critical to positive business outcomes. An
organization may use different types of teams depending on the work that needs to be
accomplished to meet its goals. Some teams are permanent while others are temporary. Some are
part of the corporate hierarchy while others are adjunct. One thing you can be sure of is that your
career will involve working with teams. The list of the most common types of teams in the
workplace is given below:
FIG. 2.10 Types of teams
 Permanent Teams- These teams perform on a permanent basis and are not dissolved
once the task is accomplished. Since teams such as human resources team, operation
team and administration team functions effectively throughout the year, they can be
considered as permanent teams.
 Temporary Teams - Temporary teams lose their importance, once the task is achieved.
Such teams are usually formed for a shorter duration either to assist the permanent team
or work when the members of the permanent team are busy in some other project. When
organizations have excess of work, they generally form temporary teams which work in
association with the members of the permanent team for the accomplishment of the task
within the stipulated time.
 Task Force – Task force is formed for a particular objective of working on any specific
project or finding a solution to a very critical problem. The government generally
appoints special teams to investigate critical issues like bomb blasts, terrorist attacks and
so on. The task force explores all the possible reasons which led to a severe problem and
tries to resolve it within a given deadline.
 Committee – These teams are usually created to work on a particular assignment either
permanently or on a temporary basis. Individuals with common interests, more or less
from the same background and with similar attitude come together on a common
platform to form a committee and work on any matter. To organize any cultural event,
organizations generally make committees to raise funds, invite celebrities and all the
major tasks involved to successfully organize any event.
 Work Force – Work force is created in firms where team members work together under
the expert guidance of leader. A leader or a supervisor is generally appointed among the
members itself and he along with his team works hard to achieve a common goal. The
leader all through must stand by his team and extract the best out of each team member.
He must not underestimate any of his team members and take his team along to avoid
conflicts.
 Self Managed Teams – These teams consists of people who work together again for a
common purpose but without the supervision of any leader. As the name suggests, every
individual is accountable for his individual performance. The team members of self
managed teams must respect each other and should never lose focus on their target. No
leader is appointed and the team members have to take their own responsibility.
Individuals take the initiative on their own and are their own guides and mentors.
 Cross Functional Team – Cross functional teams consists of individuals from different
functions or departments. Ideally the employees should be more or less on the same level
to avoid ego hassles. Individuals from different areas come and work together for a
common objective to form a cross functional team. In such teams, people from different
areas, interests and likings join hands to come out with a unique idea to successfully
complete a task.
 Virtual Teams – These teams consist of people who are separated by distances and
connected through computer. Here, individuals communicate with each other online
through internet. Such teams are helpful when employees need to connect with each other
and are located at different places. Individuals supporting any community in social
networking sites such as Facebook or Linkedin also form a virtual team as all the
members are from different locations but support a common community.
2.9.3 Team Models
Whether you are operating in private, non-profit or government sector, teams constitute the
fundamental building blocks of a successful organization. The sum of the efforts undertaken by
each team member for the achievement of the team’s objective is called team work. In other
words, team work is the backbone of any team. When a team becomes more aligned, a
commonality of direction emerges, and the individual energies harmonize. This way there is a
shared vision as well as an understanding of how to complement each others’ efforts. Once you
know the type of team you are in, it will help you choose how to plan your work and what you
can expect as outcomes. The five most common team models are discussed below.
FIG. 2.11 Types of team models
 The Traditional Model – Traditional model consists of a group of individuals with a

boss. The boss shares some of his/her responsibility as well as authority. How much is
being shared by the boss is usually dependent on the issues under consideration. This
traditional boss is in charge of all activities that the team is involved. But still, on certain
issues, this person may allow his other team members to take on the leadership role.
 The Team Spirit Model – Team spirit model consists of a group of individuals who are
working for a single boss. The team members are very happy and everything seems to be
going well. There is team spirit in people. But in reality, this is not a team. This is
because there is one person who calls all the shots. Besides, there is no sharing of
authority or responsibility.
 The Cutting Edge Model – Cutting edge model consists of a group of individuals who
are managing themselves. There is no single individual in this group who has the
authority to make decisions about the events which will impact the whole group. This is
also known as a self-directed work team. This is because each one has the authority as
well as responsibility for all the decisions that they need to make.
 The Task Force Model – Task force model refers to a group of individuals who come
together for a specific time only. This is because it has to work on a special project or a
task. Such a group has traditionally been called a task force or a committee. This may
also include quality circles which are used in TQM efforts.
 The Cyber Model – In cyber model, members see one another rarely or even, not at all.
What makes these teams different is that the team has to work together in order to
accomplish goals, but they may be meeting only at the beginning of their project. Post
that, they may be interacting through e-mail, telephone or through video conferencing
only.
2.9.4 Difference Between Group and Team
A group is a collection of people who coordinate their individual efforts. On the other hand, team
is a group of individuals who share a common team purpose and a number of challenging goals.
Members of the team are mutually committed to the goals and to each other. This mutual
commitment also creates joint accountability which creates a strong bond and a strong
motivation to perform.
FIG. 2.12 Difference Between Group and Team
Without purpose and goals you cannot build a team. The purpose must be worthwhile and create
a sense of doing something important together. The goals must be challenging and specific so
that each member can understand how they contribute to the success of the team.
A high performing team is a group of individuals who share a common vision, goals and metrics.
They collaborate, challenge and hold each other accountable to achieve outstanding results.
These teams outperform all other similar teams and expectations given their composition. A
high-performance team is characterized by a group of people with specific roles and
complementary talents. These individual are committed towards a common objective and they
consistently show high levels of collaboration and innovation that produce superior results. Solid
teams are the foundation of a high performance organization and developing those teams is an
effort that requires serious effort and consistent discipline.
High performance teams generate commitment. They provide the structure and a common vision
that inspire people to give their best effort. Within the high-performance team, people are highly
skilled and are able to interchange their roles. Also, leadership within the team is not vested in a
single individual. Instead the leadership role is taken up by various team members, according to
the need at that moment in time. High-performance teams have robust methods of resolving
conflict efficiently, so that conflict does not become a roadblock to achieving the team's goals.
There is a sense of clear focus and intense energy within a high-performance team. Collectively,
the team has its own consciousness, indicating shared norms and values within the team. The
team feels a strong sense of accountability for achieving their goals. Team members display high
levels of mutual trust towards each other.
2.10.1 Rules for High Performing Teams
High performance teams can be distinguished based on many different characteristics. Despite
varying approaches to describing high-performance teams, there is a set of common
characteristics that are recognized to lead to success.
FIG. 2.12 Rules for High Performing Teams
 Define and Create Interdependencies – Role of team members has to be well defined
and structured. For instance, in a sports team, everyone has their position to play, and
success happens when all of the players are playing their roles effectively. In baseball, a
double-play is a beautiful example of team interdependency.
 Establish Goals - Teams need to concentrate on shared goals and outcomes to ensure
high performance. Commitment to that goal is essential for success. Ideally, team goals
should allow both the team as a unit and the individual members to achieve both personal
and group goals.
 Decision Making Process - Whether decision making is a democratic or consensus
process, the team needs to understand beforehand how decisions will be made. This
reduces conflict within the team when a decision or choice has to be made.
 Clear and Constant Feedback - Teams need to know how they are doing in order to
stay motivated and to correct performance problems or inefficiencies. Ideally, a system
should be in place so that team members receive ongoing feedback while doing their
jobs. A simple example from manufacturing is when the team members do both
production and quality control testing. They find out immediately what their
success/failure rate is and can take action to improve.
 Stability of Membership - Particularly in complex tasks, it takes a lot of time for team
members to learn to work together at an optimum level. In sports, there is a relationship
between how long team members have played together and their winning record.
 Challenge the Status Quo - It is critical that team members feel secure in being able to
challenge processes, if they feel that there is a way to improve. In order to innovate,
teams need to be open to constructively criticize existing practices when needed.
 Talent Identification and Attraction - Just as processes sometimes need improvement,
teams can get better by attracting new talent. Organizations that put a lot of resources into
identifying and recruiting talent simply do better.
 Team-Based Reward Systems - Too much emphasis on individual rewards can lead to
in-fighting and resentment. A combination of individual and team-based rewards is often
best.
 Learning Environment - Emphasize the development of team learning through
successes, but particularly through mistakes. A team with a culture of continuous
improvement and where members are motivated to develop their skills and knowledge
are high-performing teams.
 Collective Mission - Mission-driven teams and organizations perform better because
they see beyond their individual workload and tasks and feel as if they are working for a
higher purpose. It is imperative that team members be committed to the shared mission,
or they should be replaced.
These rules apply whether teams have a formal, appointed leader, or whether they are self-
governing. The key is to put in the time and energy needed to adhere to these best practices
Selection, training and rewarding are the three most popular ways in which mangers usually
motivates their subordinates. These factors will enhance and ensure that the individuals to
become very effective team players in the organization.
FIG. 2.13 Turning Individuals into Team Players
 Selection (Hiring team players) - Some individuals naturally possess the interpersonal
skills to be effective team players. While hiring, care should be given to ensure that
candidates can fulfill their team roles as well as technical requirements. Many job
candidates don't have team skills. This is especially true for those socialized around
individual contributions. When faced with such candidates, managers basically have three
options. The candidates can undergo training to "make them into team players". If this
isn't possible, the other two options are to transfer the individual to another unit within
the organisation that does not have teams or not to hire the candidate. When established
organizations decide to redesign jobs around teams, it should be expected that some
employees will resist being team players and may be untrainable. Unfortunately, such
people typically become causalities of the team approach.
 Training (Developing team players) - Majority of individuals raised on the importance
of individual accomplishments can be trained to become team players. Training
specialists conduct exercises that allow employees to experience the satisfaction that
team-work can provide. They typically offer workshops to help employees improve their
problem-solving, communication, negotiation, conflict-management, and coaching skills.
Employees also learn the five-stage group development model. In some organizations,
trainers focus on how a team goes through various stages before it finally gels. Finally,
employees are reminded of the importance of patience because teams take longer to make
decisions than do employees acting alone.
 Rewarding (Compensating team players) – By reworking the reward system of an
organization, cooperative efforts compared to competitive ones can be encouraged. For
example, many organizations are adding to its basic individual incentive system an
annual bonus based on achievement of team goals. Some organizations set goals for the
business unit, the team and, the individual. The achievement of these goals will determine
the rewards. Promotions, pay raises, and other forms of recognition should be given to
individuals who work effectively as collaborative team members. This doesn't mean
individual contributions should be ignored; rather, they should be balanced with selfless
contributions to the team. Examples of behaviours that should be rewarded include
training new colleagues, sharing information with teammates, helping to resolve team
conflicts, and mastering new skills that the team needs but in which it is deficient.
Finally, don't forget the intrinsic rewards that employees can receive from teamwork.
Teams provide camaraderie. It's exciting and satisfying to be an integral part of a
successful team. The opportunity to engage in personal development and to help
teammates grow can be a very satisfying and rewarding experience for employees.
Interpersonal awareness can be defined as the ability to exhibit a true understanding of yourself
and others, and having a deep knowledge of your own thoughts and feelings. Interpersonal
awareness is crucial for social/emotional learning, and it’s a skill that helps us get along with
others.
2.12.1 Interpersonal Skills
Interpersonal skills consist of a set of interconnected skills including listening skills,

communication skills and attitude. In the business world, the term may mean the ability of an
employee to get along with his or her colleagues at the workplace. Currently, proper
interpersonal skills are vital in most job positions as well as organizations.
 Effective Communication – For effectively conveying your message, you need good
communication skills, including oral, written and nonverbal communication skills. To
communicate effectively, you need to listen actively before giving your opinion. Good
communication skills are necessary in any profession; they help to combat conflicts at the
work place, facilitate productivity and allow one to convey accurate and understandable
message to colleagues and clients.
 Positive Attitude - Positive attitude is an important aspect of good interpersonal skills.
Exhibiting a positive attitude implies that you appreciate your work and the company.
Displaying a positive attitude includes smiling while interacting and communicating with
your colleagues and customers, greeting people cheerfully at the work place, expressing
appreciation for other people’s efforts and undertaking challenging with optimism.
 Inclusiveness – By welcoming the views of others in to the work you are doing, you can
pump in more positivity to the work place. To demonstrate your team spirit, willingness
to cooperate and open-mindedness, you need to ask for the opinion and input of your
colleagues at the workplace. To foster inclusiveness in the company, you should also
push for a socially inclusive environment in the workplace.
 Problem Solving - Conflicts are part and parcel of workplace. Rather than focusing on
speedy resolution of conflicts, you should focus on the best way to resolve conflicts. To
resolve a conflict, you first need to understand the cause. You should then evaluate all the
possible solutions to the conflict and set up objectives and strategies for solving the issue.
Finally, implement the plan and monitor its success.
 Assertiveness – Being assertive helps a lot in nurturing interpersonal relations at
workplace. Assertiveness entails defending what you believe in, standing up for your
ideas and confidently instructing others on what should be done. If not properly
practiced, assertiveness can be confused with aggressiveness. However, this is a very
important aspect, with regards to effective interpersonal skills. When used tactfully, this
skill can earn you respect from other people.
 Manners – Display of good manners is a very desirable aspect that enriches interactions
at work settings. Different communities across the world tend to judge people by their
manners. With many businesses going global, the need for proper manners at work is
becoming more important. Proper etiquette is essential in business-to-business
interactions in both small and big companies across the world.
 Social Awareness – There is a tendency for people to ignore other people’s concerns and
focus only on success of one’s project. Being aware of the emotions of the other people at
the place of work is an important interpersonal skill. Additionally, this skill can make it
easier for you to identify opportunities. For example, a person undergoing professional
challenges tends to become desperate for aid. However, such person will not tell you that
they are desperate. Having social awareness skills will ensure that you identify such cases
with ease.
 Self-Management - Self management is a skill that solves a lot of problems that might
disrupt the efficiency of workplace. Many things will offend you in your line of duty, but
this skill will enable you to conceal anger and hide frustration. Learning this skill is vital
as it will enable you to control your emotions and remain calm in adverse conditions for
optimal production.
 Accountability and Responsibility – These two qualities ensures that an individual does
what he said he would do. Therefore, accountability and responsibility will ensure that
you are a trusted and responsible person. Accountability can also be very helpful in
conflict resolution. For instance, admitting your mistakes and their consequences means
that you are accountable and will solve many conflicts you might have with your
colleagues.
 Team Player – In a culturally diverse work setting, being a team player is essential for a
position which requires optimal performance. Additionally, it implies that you are able to
work in harmony with people from varied nationalities. This skill is particularly
important if you are looking for a leadership or a highly technical position in an
organization or company.
2.12.2 Developing Interpersonal Skills
A lot of unique techniques and tools can be adopted for developing interpersonal. Some of the
most commonly used techniques are given below.
 Smile – It is an accepted fact that majority of people enjoy being with a happy person. To
improve your interpersonal skills, it is advisable to smile frequently. In addition, be
cheerful about your work and life which also helps to appreciate your colleagues. You
may do this by identifying a positive attribute about them and positively commenting on
it. Thank your colleagues when they assist you with anything and let your colleagues feel
welcome when they seek assistance from you.
 Active Listening – Use the technique of active listening when other people are talking to
you so that they may feel like you're interested in them. For instance, you can
demonstrate active listening by restating what the person has said in your own words to
show that you understand what they are saying. Your colleagues will be happy to know
that you are listening. You should acknowledge other peoples' achievements and
sympathize with them when they face difficulties like death or illness.
 Conflict Resolution - Resolving conflict also plays a major role in bringing people
together. Always strive to create a favourable environment for everyone in the place of
work. This may be achieved by treating all the people in an organization equally,
following up with requests from your colleagues and avoiding gossip. When conflicts
arise between your colleagues, solve them in the fairest way. This will earn you
admiration and respect.
 Communicate Clearly and Use Humor – Misunderstandings can be avoided with the
help of clear communication. Therefore, mind what you say as well as how you say it. In
addition to effectively passing the message, communicating clearly implies that you are
intelligent and mature, regardless of your age. Additionally, use humor once in a while.
People like someone who makes them laugh. Using humor will help you develop good
interpersonal skills and gain people's affection.
 Understand Others and Avoid Complaining – Empathy will take you a long way in
building good relationships with others. It is important to empathize with what others are
going through at work. In doing this, you need to employ your emotions and try to put
yourself in your colleague’s shoes. Additionally, avoid verbalizing your disappointments
which will only serve to fuel conflicts in the organization than bring people together.
2.13 Johari Window
The Johari Window was invented by Joseph Luft and Harrington Ingham in the 1950s as a model
for mapping personality awareness. It is a simple yet powerful tool for illustrating and improving
self-awareness, and mutual understanding between individuals within a group. It can also be
used to assess and improve a group's relationship with other groups. There are two key ideas
behind this tool. First one is that you can build trust with others by disclosing information about
yourself. Secondly, with the help of feedback from others, you can learn about yourself and
come to terms with personal issues. By explaining the idea of the Johari Window, you can help
team members to understand the value of self-disclosure, and you can encourage them to give,
and accept, constructive feedback. Done sensitively, this can help people build better, more
trusting relationships with one another, solve issues, and work more effectively as a team.
The Johari Window model is also referred to as a disclosure/feedback model of self awareness,
and by some people an information processing tool. The Johari Window actually represents
information within or about a person - in relation to their group, from four perspectives.
Information consists of feelings, experience, views, attitudes, skills, intentions, motivation, etc
experienced by the individual. The four Johari Window perspectives are called quadrants and
each of these quadrants contains and represents information known about the person, in terms of
whether the information is known or unknown by the person, and whether the information is
known or unknown by others in the group.
FIG. 2.14 Johari Window
2.13.1 Open Area
The first quadrant of Johari window is known as open area. This is the information about the
person known by the person and known by the group. The aim in any group should always be to
maximize the open area. This is because of the fact that when people operate in this area, they
and the team in which they are working are at their productive best. The open area can be seen as
the space where good communications and cooperation occur, free from distractions, mistrust,
confusion, conflict and misunderstanding.
The size of the open area can be expanded horizontally into the blind space, by seeking and
actively listening to feedback from other group members. This process is known as 'feedback
solicitation. Also, other group members can help a team member expand their open area by
offering feedback, sensitively of course. The size of the open area can also be expanded
vertically downwards into the hidden or avoided space by the person's disclosure of information,
feelings, etc about him/herself to the group and group members. Also, group members can help a
person expand their open area into the hidden area by asking the person about him/herself.
2.13.2 Blind Area
The second quadrant of Johari window is known as blind area. This quadrant consist of what is
known about a person by others in the group, but is unknown by the person him/herself. By
seeking or soliciting feedback from others, the aim should be to reduce this area and thereby to
increase the open area ie, to increase self-awareness. This blind area is not an effective or
productive space for individuals or groups. This blind area could also be referred to as ignorance
about oneself, or issues in which one is deluded. A blind area could also include issues that
others are deliberately withholding from a person. We all know how difficult it is to work well
when kept in the dark. People who are 'thick-skinned' tend to have a large 'blind area'.
Group members and managers can take some responsibility for helping an individual to reduce
their blind area - in turn increasing the open area - by giving sensitive feedback and encouraging
disclosure. Managers should promote a climate of non-judgemental feedback, and group
response to individual disclosure, which reduces fear and therefore encourages both processes to
happen. The extent to which an individual seeks feedback, and the issues on which feedback is
sought, must always be at the individual's own discretion. Some people are more resilient than
others. Care should be taken to avoid causing emotional upset. The process of soliciting serious
and deep feedback relates to the process of 'self-actualization' described in Maslow's Hierarchy
of Needs development and motivation model.
2.13.3 Hidden Area
The third quadrant of Johari window is known as hidden area. This quadrant consists of what is
known to ourselves but kept hidden from, and therefore unknown, to others. The hidden area
could also include sensitivities, fears, hidden agendas, manipulative intentions, secrets - anything
that a person knows but does not reveal, for whatever reason. It's natural for very personal and
private information and feelings to remain hidden, indeed, certain information, feelings and
experiences have no bearing on work, and so can and should remain hidden. However, typically,
a lot of hidden information is not very personal, it is work- or performance-related, and so is
better positioned in the open area.
Relevant hidden information and feelings, etc, should be moved into the open area through the
process of 'disclosure'. The aim should be to disclose and expose relevant information and
feelings - hence the Johari Window terminology 'self-disclosure' and 'exposure process', thereby
increasing the open area. By telling others how we feel and other information about ourselves we
reduce the hidden area, and increase the open area, which enables better understanding,
cooperation, trust, team-working effectiveness and productivity. Reducing hidden areas also
reduces the potential for confusion, misunderstanding, poor communication, etc, which all
distract from and undermine team effectiveness.
2.13.4 Unknown Area
The fourth and final quadrant of Johari window is known as unknown area. It contains
information, feelings, latent abilities, aptitudes, experiences etc, that are unknown to the person
him/herself and unknown to others in the group. These unknown issues take a variety of forms:
they can be feelings, behaviours, attitudes, capabilities, aptitudes, which can be quite close to the
surface, and which can be positive and useful, or they can be deeper aspects of a person's
personality, influencing his/her behaviour to various degrees. Large unknown areas would
typically be expected in younger people, and people who lack experience or self-belief.
Whether unknown 'discovered' knowledge moves into the hidden, blind or open area depends on
who discovers it and what they do with the knowledge, notably whether it is then given as
feedback, or disclosed. As with the processes of soliciting feedback and disclosure, striving to
discover information and feelings in the unknown is relates to the process of 'self-actualization'
described in Maslow's Hierarchy of Needs development and motivation model.
2.13.4 Self Disclosure
The ultimate goal of the Johari Window is to enlarge the open area, without disclosing
information that is too personal. The open area is the most important quadrant, as, generally, the
more your people know about each other, the more productive, cooperative, and effective they'll
be when working together. The process of enlarging the open area quadrant is called "self-
disclosure," and it's a give-and-take process that takes place between yourself and the people that
you're interacting with.
FIG. 2.15 Application of Johari window
As you share information, your open area expands vertically and your hidden area gets smaller.
As people on your team provide feedback to you about what they know or see about you, your
open area expands horizontally, and your blind area gets smaller. Done well, the process of give
and take, sharing, and open communication builds trust within the group. At first glance, the
Johari Window may look like a complex tool, but it's actually very easy to understand with just a
little effort. As such, it provides a visual reference that people can use to look at their own
character, and it illustrates the importance of sharing, being open, and accepting feedback from
others.
Transactional Analysis is a system of popular psychology based on the idea that one's behaviour
and social relationships reflect an interchange between parental (critical and nurturing), adult
(rational), and childlike (intuitive and dependent) aspects of personality established early in life.
In transactional analysis, the patient is taught to alter the ego state as a way to solve emotional
problems. The method deviates from Freudian psychoanalysis which focuses on increasing
awareness of the contents of unconsciously held ideas. Eric Berne developed the concept and
paradigm of transactional analysis in the late 1950.
2.14.1 Ego states
Like Freud, Berne argued that each person possesses three ego states. His ego states—the Parent,
the Adult, and the Child— is entirely different from that of Freud’s Id, Ego, and Superego,
however. These states represent an individual’s internal model of parents, adults, and children.
An individual may assume any of these roles in transactions with another person or in internal
conversation. These roles are not directly associated with their typical English definitions but can
be described as follows:
FIG. 2.16 Parent, Adult and Child Ego states
 Parent Ego State – This ego state represents recordings of external events observed and
experienced by a child from birth through approximately the first five years of life. These
recordings are not filtered or analyzed by the child; they are simply accepted without
question. Many of these external events are likely to involve the individual’s parents or
other adults in parent-link roles, which led Berne to call this ego state “the Parent.”
 Child Ego State – This ego state consists of all brain recordings of internal events
(feelings or emotions) that are directly linked to the external events observed by the child
during the first five years of life. This is the seeing, hearing, feeling, and emotional body
of data within each of us. When anger or despair dominates reason, the Child is in
control. Like our Parent, we can change it even though it is no easy.
 Adult Ego State – This ego state represents the phase in which a child develops the
capacity to perceive and understand situations that are different from what is observed
(Parent) or felt (Child). The Adult serves as a data processing center that utilizes
information from all three ego states in order to arrive at a decision.
2.14 2 Transactions
Any sign (speech, gestures or other nonverbal cues) that recognizes the presence of another
individual is called a transactional stimulus. All transactions are initiated with the use of a
transactional stimulus. When two individuals encounter each other and the receiver reacts in a
manner related to the transactional stimulus, that individual has performed a transactional
response. The key to successful person-to-person communication generally lies in identifying
which ego state (in the speaker) initiated the transactional stimulus and which ego state (in the
receiver) provided the transactional response.
2.14.2.1 Complementary Transactions
A complementary transaction occurs when the transaction response from the receiver is directed
to the sending ego state in the speaker. For example, if the Adult in the speaker sends a
transactional stimulus to the Adult in the receiver, then the transaction will be complementary if
the Adult in the receiver then sends the transactional response to the Adult in the speaker.
According to Berne, communication will continue if the transactions remain complementary.
FIG. 2.17 Complementary Transactions

2.14.2.2 Crossed Transactions
In crossed transactions, an ego state that did not receive the transactional stimulus sends the
transactional response. Crossed transactions may lead to breakdowns in communication, which
may sometimes be followed by conflict. For example, the Adult state in an individual may send a
transactional stimulus to the Adult in another individual, asking “Have you seen my coat?” But
the Child in the second individual may instead send the transactional response to the Parent in
the first individual by replying, “You always blame me for everything!”
FIG. 2.18 Crossed Transactions
2.14.2.3 Ulterior Transactions
In the case of ulterior transactions, words seem to be coming from one ago state, but in reality
the words or behaviours are coming from another. For example, after a training program, one of
the participants came up to a consultant asking advice on an adult ego sate. When the consultant
gave advice, the participant twice had quick responses as to why the advice would not work
(child rather than adult behaviour). The consultant realized that what the participant actually
wanted was sympathetic understanding for his situation, not advice. The consultant stopped
making suggestions and listened actively, using reflective responses. The consultant changed
from the adult to the sympathetic parent ego state in order to have a complimentary transaction.
FIG. 2.19 Ulterior Transactions
2.15 Leadership
In the organizational context, leadership is one of the most important aspects of human
behaviour. Leaders play significant roles and often work behind the scenes to encourage the
well-being and effectiveness of efforts undertaken by groups of individuals who alone could not
accomplish their intended purposes. Good leadership helps organizations to be effective and
accomplish their goals. All leaders are not managers as they have to work in non-organized
sectors while the managers work in the organized sectors. All managers should be leaders so that
they are able to work efficiently.
According to the traditional definition of leadership, it is an interaction between members of a
group where leaders are agents of change and persons whose acts affect other people more than
other people’s acts affect them. Leadership happens when one group member modifies the
motivation or competencies of others in the group. The leadership definition implies that it
involves the use of influence and that all interpersonal relationships can involve leadership. A
second element in the definition involves the importance of being a change agent—being able to
affect follower’s behaviour and performance. Finally, the definition focuses on accomplishing
goals. The effective leader may have to deal with individual, group, and organizational goals.
2.15.1 Importance of Leadership

Leadership plays an important part in the success of any organization. It helps in maximizing
efficiency and achieving organizational goals. The following points justify the importance of
leadership in a concern.
 Influence Behaviour - A manager influences his subordinates with his leadership ability.
He brings them under his control in such a way that they put in their best efforts to
achieve the goals of the organisation. Good leaders always get good results through their
followers.
 Motivation- A leader proves to be playing an incentive role in the working of an
organization. He motivates the employees with economic and non-economic rewards and
thereby gets the work from the subordinates.
 Introducing Desired Change - These days, the business environment is changing
rapidly. In order to face the changing environment, many changes have to be introduced
in the organisation. Since the people already happen to be under the influence of the
leader, he readily makes them agree to implement these changes. In this way, the possible
opposition to the change is eliminated with the strength of leadership ability.
 Creating Confidence- Confidence is an important factor which can be achieved through
expressing the work efforts to the subordinates, explaining them clearly their role and
giving them guidelines to achieve the goals effectively. It is also important to hear the
employees with regards to their complaints and problems.
 Conflict Resolution - A leader can solve every type of conflict (employee’s vs.
employees and employees vs. employer) effectively under the weight of his influence. A
leader always allows his followers to express their views freely.
 Building Morale- Morale denotes co-operation of the employees towards their work. It
includes getting them into confidence and winning their trust. A leader can be a morale
booster by achieving full co-operation so that they perform with best of their abilities as
they work to achieve goals.
 Training Subordinates - A leader proves helpful in the training and development of his
subordinates. He provides them the information about the modern techniques of work.
Not only this, he makes it possible for them to be good leaders in future.
 Co-ordination- Co-ordination can be achieved through reconciling personal interests
with organizational goals. This synchronization can be achieved through proper and
effective co-ordination which should be primary motive of a leader.
2.15.2 Ingredients of leadership

There are four essential ingredients for leadership. They are communication, authenticity,
knowledge and empathy.
FIG. 2.20 Ingredients of Leadership
 Communication – One unique quality that distinguishes world’s greatest leaders from
others is that they are all exceptional communicators. They have the ability to
communicate a message and consistently engage deeply with their audiences. You may
be familiar with the communication model that says only 7 percent of the words you use
are heard, and the rest of what you communicate is found in your tone (38 percent) and
nonverbal cues like body language and gestures (55 percent). If you communication in a
dominating manner, you run the risk of being overpowering and losing the message. If
you communicate in a vague and unclear manner,you may not be understood.
 Authenticity – By being unique or original, a leader can be authentic. If you try to sound
or behave like somebody else (i.e., mimicking a colleague’s leadership style), you will
surely lose your authenticity. If you say and do what you genuinely believe, you are
authentic. If you are too authentic, it will appear that you are trying too hard and you may
lose impact. If you lose authenticity, and you will not have the credibility and conviction
you need.
 Knowledge – A good leader shows the courage to share the right kind of knowledge that
empowers his employees. Knowledge is powerful only if you or your business shares that
knowledge. Occasionally when somebody has more knowledge than others, it can create
a sense of technical hierarchy. In every organization, the broader the distribution of each
staff member’s knowledge, the better equipped the organization can be at responding
with agility to different situations and scenarios. With too much knowledge, your teams
can hide behind their technical acumen and appear indispensable, but they are often less
productive. With too few knowledge will mean your organization may lack the
competitive edge needed.
 Empathy - Empathy can be defined as the power of identifying oneself mentally with an
individual or object of contemplation. When you engage in active listening, you could
display your strength as a strong leader. Too much empathy means that you stray into
sympathy and add to a problem. While this can be very supportive, leaders have to
balance their empathy to avoid getting too close. Little empathy will have your teams
believing you do not really understand them, and they are less likely to be supportive of
you.
2.15.3 Difference between Management and Leadership

Management and leadership are two entirely different concepts. But still, many people use it
synonymously. Currently, there is a debate about the correlation between leadership and
management — does a manager have to be a great leader and does a leader needs to have good
management skills? What is the difference between leadership and management? The most
important differences between management and leadership are given below.
 Mission - The conventional perspective of management assumes that a manager’s job is
to run a machine. The presumption is that the machine is more important and more
powerful than anyone who helps to run it. Leadership takes just the opposite view. The
energy of your team powers everything you will accomplish. A leader and his team have
a mission. They all know what the mission is and they know their piece in it. A mission
has a beginning, middle and an end, no matter what the mission is. When you complete
the mission, you’ll start a new one.
 Self Awareness - The traditional, command-and-control view of management did not
require that a manager look in the mirror, but leadership requires that activity of a leader
every day. A leader is someone who get outside his busy brain to see himself rather than
being controlled by his emotions, especially fear.
 Risk and Trust – Trust and risk are inversely related. Trusting a person you are not in
love with or related to requires you to take a risk. In the accepted view of management,
there is no such risk, because the manager by virtue of his position has all the authority.
In modern view of leadership, there is risk. You might trust the wrong person. Leadership
requires you to rely on someone else without threatening them or offering them rewards
if they do what you want them to do.
 Two Way Learning – Learning on a continuous basis is crucial for long term existence
of an organization. Leadership rests on trust and learning. If the trust level on your team
is too low to support collaboration, it’s vital for you as a manager to figure out what e is
causing that problem and dismantle it. When your team trust level is right, you will learn
from your teammates, they will learn from you and all of you will learn from one another.
 Counting or Creating Value – If you are managing people, you’re probably counting
value, not adding it. Managers only count value and some even reduce value by disabling
those who add value. If a diamond cutter is asked to report every 15 minutes to say how
many stones he has cut, his boss is subtracting value by distracting him. By contrast,
leaders focus on creating value, saying: “I’d like you to handle A while I deal with B.”
He generates value over and above that which the team creates, and is as much a value-
creator as his or her followers are. Leading by example and leading by enabling people
are the hallmarks of action-based leadership.
 Circles of Influence and Circles of Power - While managers create circles of power,
leaders create circles of influence. While managers have subordinates, leaders have
followers. The quickest way to figure out which of the two you’re doing is to count the
number of people outside your reporting hierarchy who come to you for advice. The
more that do, the more likely it is that you are perceived to be a leader.
2.15.4 Leadership Styles

A leadership style is a leader's style of providing direction, implementing plans, and motivating
people. Different leadership styles exist in work environments. The culture and goal of an
organization determine which leadership style fits best. There are many different leadership
styles proposed by various authors that can be exhibited by leaders in the political, business or
other fields. The five most common leadership styles existing in the corporate world are
autocratic, democratic, laissez-faire, transformational and transactional.
FIG. 2.21 Leadership Styles
2.15.4.1 Autocratic Style

In this leadership style, managers seldom consider the input of his subordinates while taking
important decisions. They tend to assume complete authority and force their will on employees.
No one challenges the decisions of autocratic leaders. For instance, countries such as Cuba and
North Korea operate under the autocratic leadership style. This leadership style benefits
employees who require close supervision. Creative employees who thrive in group functions
detest this leadership style.
2.15.4.2 Laissez – Faire Style
In laissez-faire leadership, leaders fall short in giving direct supervision and continuous feedback
to his subordinates. This type of leadership style is suitable when employees are highly
experienced and trained. However, not all employees possess those characteristics. This
leadership style hinders the production of employees needing supervision. The laissez-faire style
produces no leadership or supervision efforts from managers, which can lead to poor production,
lack of control and increasing costs.
2.15.4.3 Democratic Style
A democratic leader considers the suggestions put forward by his co-workers even though the
final decision will be taken by him. This styles helps in improving the morale of the employees
since their contributions are valued in the decision making process. It causes them to feel as if
their opinions matter. When a company needs to make changes within the organization, the
democratic leadership style helps employees accept changes easily because they play a role in
the process. This style meets challenges when companies need to make a decision in a short
period.
FIG. 2.22 Autocratic, laissez-faire and democratic leadership styles
2.15.4.4 Transactional Style

In transformational leadership, leader works through creating clear structures whereby it is clear
what is required of their subordinates, and the rewards that they get for following orders.
Managers and team members set predetermined goals together, and employees agree to follow
the direction and leadership of the manager to accomplish those goals. The manager possesses
power to review results and train or correct employees when team members fail to meet goals.
Employees receive rewards, such as bonuses, when they accomplish goals.
2.15.4.5 Transformational Style
Transformational leader works with subordinates to identify needed change, creating a vision to
guide the change through inspiration, and executing the change in tandem with committed
members of a group. The transformational leadership style depends on high levels of
communication from management to meet goals. Leaders motivate employees and enhance
productivity and efficiency through communication and high visibility. This style of leadership
requires the involvement of management to meet goals. Leaders focus on the big picture within
an organization and delegate smaller tasks to the team to accomplish goals.

2.16.1 Great Man Theory
Proposed by Thomas Carlyle, this theory stated that leaders are born and not made and posses
certain traits which are inherited. Early research on leadership was based on the study of
people who were already great leaders. These people were often from the aristocracy, even
though few from lower classes had the opportunity to lead. This contributed to the notion that
leadership had something to do with breeding. According to this theory, great leaders can arise
when there is a great need The idea of the Great Man also strayed into the mythic domain, with
notions that in times of need, a Great Man would arise, almost by magic. This was easy to
verify, by pointing to people such as Eisenhower and Churchill, let alone those further back
along the timeline, even to Jesus, Moses, Mohammed and the Buddha.
2.16.2 Trait Theory

The trait model of leadership is based on the characteristics of many leaders - both successful
and unsuccessful - and is used to predict leadership effectiveness. Early research on leadership
was based on the psychological focus of the day, which was of people having inherited
characteristics or traits. The basic assumptions of this theory are that people are born with
inherited traits, some traits are particularly suited to leadership and people who make good
leaders have the right (or sufficient) combination of traits. Attention was thus put on
discovering these traits, often by studying successful leaders, but with the underlying
assumption that if other people could also be found with these traits, then they, too, could also
become great leaders. McCall and Lombardo (1983) identified four primary traits by which
leaders could succeed or 'derail':
 Emotional Stability and Composure - Calm, confident and predictable, particularly

when under stress.
 Admitting Error - Owning up to mistakes, rather than putting energy into covering up.
 Good Interpersonal Skills - Able to communicate and persuade others without resort
to negative or coercive tactics.
 Intellectual Breadth - Able to understand a wide range of areas, rather than having a
narrow (and narrow-minded) area of expertise.
2.16.3 Behavioural Theories

Behavioural theories of leadership are based on the assumptions that leaders can be made,
rather than are born and successful leadership is based in definable, learnable behaviour. These
theories do not seek inborn traits or capabilities. Rather, they look at what leaders actually do.
If success can be defined in terms of describable actions, then it should be relatively easy for
other people to act in the same way. This is easier to teach and learn then to adopt the more
ephemeral 'traits' or 'capabilities'. Behavioural is a big leap from Trait Theory, since it assumes
that leadership capability can be learned, rather than being inherent. This opens the doors to
leadership development, as opposed to simple psychometric assessment that sorts those with
leadership potential from those who will never have the chance.
2.16.3.1 Role Theory

According to role theory of leadership, individuals define roles for themselves and others
based on social learning and they form expectations about the roles that they and others will
play. We all have internal schemas about the role of leaders, based on what we read, discuss
and so on. We subtly send these expectations to our leaders, acting as role senders. For
example, through the balance of decisions, we take upon ourselves and the decisions we leave
to the leader. Leaders are influenced by these signals, particularly if they are sensitive to the
people around them, and will generally conform to these, playing the leadership role that is put
upon them by others. Within organizations, there is much formal and informal information
about what the leader's role should be, including leadership values, culture, training sessions,
modeling by senior managers, and so on. These and contextual factors act to shape
expectations and behaviours around leadership.
2.16.3.2 Managerial Grid
The managerial grid model is a style leadership model developed by Robert R. Blake and Jane
Mouton in the year 1964. This model originally identified five different leadership styles based
on the concern for people and the concern for production. Leaders may be concerned for their
people and they also must also have some concern for the work to be done. The question is,
how much attention to they pay to one or the other?
FIG. 2.33 Managerial Grid

 Impoverished Management - The Impoverished or "indifferent" manager is mostly
ineffective. With a low regard for creating systems that get the job done, and with little
interest in creating a satisfying or motivating team environment, his results are
inevitably disorganization, dissatisfaction and disharmony.
 Task Management - Individuals in this category believe that their team members are
simply a means to an end. The team's needs are always secondary to its productivity.
This type of manager is autocratic, has strict work rules, policies and procedures, and
can view punishment as an effective way of motivating team members. This approach
can drive impressive production results at first, but low team morale and motivation
will ultimately affect people's performance, and this type of leader will struggle to
retain high performers.
 Country Club Management - The Country Club style of manager is most concerned
about her team members' needs and feelings. She assumes that, as long as they are
happy and secure, they will work hard. What tends to be the result is a work
environment that is very relaxed and fun, but where productivity suffers because there
is a lack of direction and control.
 Middle of the Road Management - A middle of the road manager tries to balance
results and people, but this strategy is not as effective as it may sound. Through
continual compromise, he fails to inspire high performance and also fails to meet
people's needs fully. The result is that his team will likely deliver only mediocre
performance.
 Team Management - Team management is the most effective leadership style. It
reflects a leader who is passionate about his work and who does the best he can for the
people he works with. Team managers commit to their organization's goals and
mission, motivate the people who report to them, and work hard to get people to stretch
themselves to deliver great results. But, at the same time, they're inspiring figures who
look after their teams.
2.16.4 Participative Leadership

Participatory leadership style attempts to add a democratic dimension in modern management,
which has generally been top-down and hierarchical in nature. A participative leader tries to
involve other people in the process, possibly including subordinates, peers, superiors and other
stakeholders. Even though it is within the managers' discretion to give or deny control to his or
her subordinates, most participative activity is within the immediate team. The question of how
much influence others are given may vary on the manager's preferences and beliefs, and a
whole spectrum of participation is possible, as in the table below.
FIG. 2.4 Continuum of Participatory Style
2.16.4.1 Lewin’s Leadership Styles

Kurt Lewin identified three different styles of leadership, in particular around decision-
making. Based on the situation, any of these three styles could be the perfect one for the job.
At the same time, any of these three could be the wrong one for the job if used under incorrect
circumstances. Pairing the right leadership style with the right situation is a task that every
leader should take quite seriously.
 Autocratic - An autocratic leader takes decisions without consulting with others. The
decision is made without any form of consultation. In Lewin's experiments, he found
that this caused the most level of discontent. An autocratic style works when there is no
need for input on the decision, where the decision would not change as a result of
input, and where the motivation of people to carry out subsequent actions would not be
affected whether they were or were not involved in the decision-making.
 Democratic - A democratic leader involves the people in the decision-making,
although the process for the final decision may vary from the leader having the final
say to them facilitating consensus in the group. Democratic decision-making is usually
appreciated by the people, especially if they have been used to autocratic decisions
with which they disagreed. It can be problematic when there are a wide range of
opinions and there is no clear way of reaching an equitable final decision.
 Laissez-Faire - A laissez-faire style is to minimize the leader's involvement in
decision-making, and hence allowing people to make their own decisions, although
they may still be responsible for the outcome. Laissez-faire works best when people are
capable and motivated in making their own decisions, and where there is no
requirement for a central coordination, for example in sharing resources across a range
of different people and groups.
FIG. 2.5 Lewin’s Theory of Leadership
2.16.4.2 Likert’s Leadership Styles
Likert's management systems are management styles developed by Rensis Likert in the 1960s.
He outlined four systems of management to describe the relationship, involvement, and roles
of managers and subordinates in industrial settings. He mastered the four management styles,
exploitative – authoritative system, benevolent- authoritative system, consultative system and
participative-group system.
FIG. 2.26 Likert’s Leadership Styles
 Exploitive Authoritative - In this style, the leader is not concerned about people and
uses such methods as threats and other fear-based methods to achieve conformance.
Communication is almost entirely downwards and the psychologically distant concerns
of people are ignored.
 Benevolent Authoritative – A benevolent dictatorship is formed when the leader adds
concern for people to an authoritative position. The leader now uses rewards to
encourage appropriate performance and listens more to concerns lower down the
organization, although what they hear is often rose-tinted, being limited to what their
subordinates think that the boss wants to hear. Although there may be some delegation
of decisions, almost all major decisions are still made centrally.
 Consultative - Lower-level employees, in this system, have the freedom to make
specific decisions that will affect their work. Upper-management still has control over
policies and general decisions that affect an organization. Managers will talk to their
subordinates about problems and action plans before they set organizational goals.
Communication in this system flows both downward and upward, though upward is
more limited. This promotes a more positive effect on employee relationships and
allows them to be more cooperative.
 Participative - Likert argued that the participative system was the most effective form
of management. This system promotes genuine participation in making decisions and
setting goals through free-flowing horizontal communication and tapping into the
creativity and skills of workers. Managers are fully aware of the problems that are
going on in the lower-levels of the organization. All organizational goals are accepted
by everyone because they were set through group participation. There is a high level of
responsibility and accountability of the organizational goals in all of the employees.
2.16.5 Situational Leadership

Developed by Dr. Paul Hersey in the late 1960s, the situational leadership model is a powerful,
yet flexible tool that enables leaders of all kinds; managers, salespeople, peer leaders, teachers
or parents to effectively influence others. This model is based on the relationship between
leaders and followers and serves as a framework to analyze each situation based on: the
amount of guidance and direction (task behavior) a leader gives, the amount of socio-
emotional support (relationship behavior) a leader provides and the readiness level that
followers exhibit in performing a specific task, function, or objective.
2.16.5.1 Hersey and Blanchard's Approach
The Hersey-Blanchard situational leadership theory is one that is based around variable
leadership, depending on a variety of circumstances. The four leadership styles that are
presented in this theory are directing, coaching, supporting and delegating.
FIG. 2.27 Hersey and Blanchard Approach
 Directing - Here, follower is characterized by low competence and low commitment.
They are unable and unwilling. Therefore, leaders should adopt high task focus and low
relationship focus. When the follower cannot do the job and is unwilling or afraid to
try, then the leader takes a highly directive role, telling them what to do but without a
great deal of concern for the relationship. The leader may also provide a working
structure, both for the job and in terms of how the person is controlled.
 Coaching - Here, follower is characterized by some competence and variable
commitment. They are unable but willing. Therefore, leaders should adopt high task
focus and high relationship focus. When the follower can do the job, at least to some
extent, and perhaps is over-confident about their ability in this, then 'telling' them what
to do may demotivate them or lead to resistance. The leader thus needs to 'sell' another
way of working, explaining and clarifying decisions. The leader should spend time
listening, advising and, where appropriate, helping the follower to gain necessary skills
through coaching methods.
 Supporting - Here, follower is characterized by high competence and variable
commitment. They are able but unwilling or insecure. Therefore, leaders should adopt
low task focus and high relationship focus. When the follower can do the job, but is
refusing to do it or otherwise showing insufficient commitment, the leader need not
worry about showing them what to do, and instead is concerned with finding out why
the person is refusing and persuading them to cooperate. There is less excuse here for
followers to be reticent about their ability, and the key is very much around motivation.
If the causes are found, then they can be addressed by the leader. The leader thus
spends time listening, praising and otherwise making the follower feel good when they
show the necessary commitment.
 Delegating - Here, follower is characterized by high competence and high
commitment. They are able and willing. Therefore, leaders should adopt low task focus
and low relationship focus. When the follower can do the job and is motivated to do it,
then the leader can basically leave them to it, largely trusting them to get on with the
job although they also may need to keep a relatively distant eye on things to ensure
everything is going to plan. Followers at this level have less need for support or
frequent praise, although as with anyone, occasional recognition is always welcome.
2.16.5.2 Vroom and Yetton's Normative Model

The Vroom–Yetton contingency model developed by Victor Vroom, in collaboration with
Phillip Yetton argues the best style of leadership is contingent to the situation. This model
suggests the selection of a leadership style for group decision-making. This model identifies
five different styles (ranging from autocratic to consultative to group-based decisions) on the
situation & level of involvement. They are given below.
FIG. 2.28 Vroom and Yetton's Normative Model

 Autocratic Type 1 (AI) – In this type, leader takes known information and then
decides alone. This type is completely autocratic.
 Autocratic Type 2 (AII) - Leader collects required information from followers, then
makes decision alone. Problem or decision may or may not be informed to followers.
Here, followers' involvement is just providing information.
 Consultative Type 1 (CI) - Leader shares problem to relevant followers individually
and seeks their ideas and suggestions and makes decision alone. Here followers do not
meet each other and the leader’s decision may or may not reflect his followers'
influence. So, followers involvement is at the level of providing alternatives
individually.
 Consultative Type 2 (CII) - Leader shares problem to relevant followers as a group
and seeks their ideas and suggestions and makes decision alone. Here followers meet
each other, and through discussions they understand other alternatives. But the leader’s
decision may or may not reflect his followers' influence. So, here followers
involvement is at the level of helping as a group in decision-making.
 Group-based Type 2 (GII) - Leader discuss problem and situation with followers as a
group and seeks their ideas and suggestions through brainstorming. Leader accepts any
decision and does not try to force his idea. Decision accepted by the group is the final
one.
2.16.5.3 House's Path-Goal Theory of Leadership
The path goal theory of leadership was developed to describe the way that leaders encourage
and support their followers in achieving the goals. The goal is to increase your employees'
motivation, empowerment, and satisfaction so that they become productive members of the
organization. House and Mitchell describe four styles of leadership:
FIG. 2.29 House's Path-Goal Theory of Leadership
 Supportive Leadership – In supportive leadership, the focus of the leader is on

relationships. You show sensitivity to individual team members' needs, and you
consider your team members' best interests. This leadership style is best when tasks are
repetitive or stressful.
 Directive Leadership – In directive leadership, leader communicates goals and
expectations, and assigns clear tasks. This style works best when tasks or projects are
unstructured, or when tasks are complex and team members are inexperienced.
 Participative Leadership – In participative leadership, leader focus on mutual
participation. You consult with your group, and you consider their ideas and expertise
before making a decision. This approach works best when your team members are
experienced, when the task is complex and challenging, and when your team members
want to give you their input.
 Achievement-Oriented Leadership – Here, leader set challenging goals for your
team. You have confidence in your team's abilities, so you expect your team to perform
well, and you maintain high standards for everyone. This style works best when team
members are unmotivated or unchallenged in their work.
2.16.6 Contingency Theory
A contingency theory is an organizational theory that claims that there is no best way to
organize a corporation, to lead a company, or to make decisions. Instead, the optimal course of
action is contingent (dependent) upon the internal and external situation. An effect of this is
that leaders who are very effective at one place and time may become unsuccessful either
when transplanted to another situation or when the factors around them change. This helps to
explain how some leaders who seem for a while to have the 'Midas touch' suddenly appear
ineffective go off the boil and make very unsuccessful decisions.
2.16.6.1 Fiedler's Least Preferred Co-worker (LPC) Theory
The Fiedler Contingency Model was created in the mid-1960s by Fred Fiedler, a scientist who
studied the personality and characteristics of leaders. Identifying leadership style is the first
step in using the model. Fiedler believed that leadership style is fixed, and it can be measured
using a scale he developed called Least-Preferred Co-Worker (LPC) Scale. The scale asks you
to think about the person who you've least enjoyed working with. This can be a person who
you've worked with in your job, or in education or training. You then rate how you feel about
this person for each factor, and add up your scores. If your total score is high, you're likely to
be a relationship-orientated leader. If your total score is low, you're more likely to be task-
orientated leader. Three factors are then identified about the leader, member and the task, as
follows:
 Leader-Member Relations: The extent to which the leader has the support and
loyalties of followers and relations with them are friendly and cooperative.
 Task Structure: The extent to which tasks are standardized documented and
controlled.
 Leader's Position Power: The extent to which the leader has authority to assess
follower performance and give reward or punishment.
FIG. 2.30 Fiedler's Least Preferred Co-worker (LPC) Theory
The model says that task-oriented leaders usually view their LPCs more negatively, resulting
in a lower score. Fiedler called these low LPC leaders. He said that low LPCs are very
effective at completing tasks. They're quick to organize a group to get tasks and projects done.
Relationship-building is a low priority. However, relationship-oriented leaders usually view
their LPCs more positively, giving them a higher score. These are high-LPC leaders. High
LPCs focus more on personal connections, and they're good at avoiding and managing
conflict. They're better able to make complex decisions.
2.16.6.2 Cognitive Resource Theory
The cognitive resource theory is a leadership theory of industrial and organizational

psychology developed by Fred Fiedler and Joe Garcia in 1987 as a reconceptualization of the
Fiedler contingency model. The theory focuses on the influence of the leader's intelligence and
experience on his or her reaction to stress. Cognitive resource theory predicts that:
 A leader's cognitive ability contributes to the performance of the team only when
the leader's approach is directive - When leaders are better at planning and decision-
making, in order for their plans and decisions to be implemented, they need to tell
people what to do, rather than hope they agree with them. When they are not better
than people in the team, then a non-directive approach is more appropriate, for example
where they facilitate an open discussion where the ideas of team can be aired and the
best approach identified and implemented.
 Stress affects the relationship between intelligence and decision quality - When
there is low stress, then intelligence is fully functional and makes an optimal
contribution. However, during high stress, a natural intelligence not only makes no
difference, but it may also have a negative effect. One reason for this may be that an
intelligent person seeks rational solutions, which may not be available (and may be one
of the causes of stress). In such situations, a leader who is inexperienced in 'gut feel'
decisions is forced to rely on this unfamiliar approach. Another possibility is that the
leader retreats within him/herself, to think hard about the problem, leaving the group to
their own devices.
 Experience is positively related to decision quality under high stress - When there
is a high stress situation and intelligence is impaired, experience of the same or similar
situations enables the leader to react in appropriate ways without having to think
carefully about the situation. Experience of decision-making under stress also will
contribute to a better decision than trying to muddle through with brain-power alone.
 For simple tasks, leader intelligence and experience is irrelevant - When
subordinates are given tasks which do not need direction or support, then it does not
matter how good the leader is at making decisions, because they are easy to make, even
for subordinates, and hence do not need any further support.
2.16.6.3 Strategic Contingencies Theory
A strategic contingencies' theory of intraorganizational power is presented in which it is

hypothesized that organizations, being systems of interdependent subunits, have a power
distribution with its sources in the division of labor. Intraorganizational power depends on
three factors: problem skills, actor centrality and uniqueness of skill. If you have the skills and
expertise to resolve important problems, then you are going to be in demand. And by the law
of supply and demand, that gives your the upper hand in negotiations. It also gives you power
from the reciprocity created. If you work in a central part of the workflow of the organization,
then what you do is very important. This gives you many opportunities to be noticed. It also
means you are on the critical path, such that if your part of the company fails, the whole show
stops. Again creating attention and giving you bargaining power. Finally, if you are difficult to
replace, then if you do make enemies up the hierarchy, then they cannot just move you out or
sideways.
2.16.7 Transactional Leadership
Introduced by Max Weber in 1947, the transactional style concentrates on the basic
management process of controlling, organizing, and short-term planning. Transactional
leadership involves motivating and directing followers primarily through appealing to their
own self-interest. The power of transactional leaders comes from their formal authority and
responsibility in the organization. The main goal of the follower is to obey the instructions of
the leader. The leader believes in motivating through a system of rewards and punishment. If a
subordinate does what is desired, a reward will follow, and if he does not go as per the wishes
of the leader, a punishment will follow. Here, the exchange between leader and follower takes
place to achieve routine performance goals. These exchanges involve four dimensions:
 Contingent Rewards - Transactional leaders link the goal to rewards, clarify

expectations, provide necessary resources, set mutually agreed upon goals, and provide
various kinds of rewards for successful performance. They set SMART (specific,
measurable, attainable, realistic, and timely) goals for their subordinates.
 Active Management by Exception - Transactional leaders actively monitor the work
of their subordinates, watch for deviations from rules and standards and taking
corrective action to prevent mistakes.
 Passive Management by Exception - Transactional leaders intervene only when
standards are not met or when the performance is not as per the expectations. They may
even use punishment as a response to unacceptable performance.
 Laissez-faire - The leader provides an environment where the subordinates get many
opportunities to make decisions. The leader himself abdicates responsibilities and
avoids making decisions and therefore the group often lacks direction
2.16.7.1 The Leader–Member Exchange (LMX) Theory
The leader–member exchange (LMX) theory is a relationship-based approach to leadership

that focuses on the two-way (dyadic) relationship between leaders and followers. Relationships
are based on trust and respect and are often emotional relationships that extend beyond the
scope of employment. In particular, leaders often have a special relationship with an inner
circle of trusted lieutenants, assistants and advisors, to whom they give high levels of
responsibility, decision influence, and access to resources. This in-group pay for their position.
They work harder, are more committed to task objectives, and share more administrative
duties. They are also expected to be fully committed and loyal to their leader. The out-group,
on the other hand, are given low levels of choice or influence. This also puts constraints upon
the leader. They have to nurture the relationship with their inner circle whilst balancing giving
them power with ensuring they do not have enough to strike out on their own.
FIG. 2.31 The Leader–Member Exchange (LMX) Theory
These relationships, if they are going to happen, start very soon after a person joins the group
and follow three stages.
 Role Taking - The member joins the team and the leader assesses their abilities and
talents. Based on this, the leader may offer them opportunities to demonstrate their
capabilities. Another key factor in this stage is the discovery by both parties of how the
other likes to be respected.
 Role Making - In the second phase, the leader and member take part in an unstructured
and informal negotiation whereby a role is created for the member and the often-tacit
promise of benefit and power in return for dedication and loyalty takes place.
Trustbuilding is very important in this stage, and any felt betrayal, especially by the
leader, can result in the member being relegated to the out-group.
 Routinization - In this phase, a pattern of ongoing social exchange between the leader
and the member becomes established.
2.16.8 Transformational Leadership
Transformational leadership is a style of leadership where a leader works with subordinates to

identify needed change, creating a vision to guide the change through inspiration, and
executing the change in tandem with committed members of a group. Transformational
leadership goes beyond normal leadership and as the name implies, it results in a complete
rejuvenation of the company and a transformation of its place in the corporate world.
2.16.8.1 Bass' Transformational Leadership Theory
Bass defined transformational leadership in terms of how the leader affects followers, who are
intended to trust, admire and respect the transformational leader. Followers go after a leader
because of trust, honesty, and other qualities and the stronger these are, the greater loyalty they
have for the leader. The leader transforms the followers because of him having these qualities.
Not only is the leader a role model but he exhorts the following to challenging the existing
order, the revolutionary being a stark example of this. While the leader may have democratic
motives in mind, he can assume a transaction leadership style at the same time, directing the
followers to do things. Bass saw these aspects of transformational leadership:
FIG. 2.32 Bass' Transformational Leadership Theory

 Individual Consideration – This happens where there is an emphasis on what a group
member needs. The leader acts as a role model, mentor, facilitator, or teacher to bring a
follower into the group and be motivated to do tasks.
 Intellectual Stimulation – This is provided by a leader in terms of challenge to the
prevailing order, task, and individual. He seeks ideas from the group and encourages
them to contribute, learn, and be independent. The leader often becomes a teacher.
 Inspiration – Inspiration by a leader means giving meaning to the follows of a task.
This usually involves providing a vision or goal. The group is given a reason or
purpose to do a task or even be in the organization. The leader will resort to charismatic
approaches in exhorting the group to go forward.
 Idealized Influence – This refers to the leader becoming a full-fledged role model,
acting out and displaying ideal traits of honesty, trust, enthusiasm, pride, and so forth.
2.16.8.2 Burns Transformational Leadership Theory
Burns defined transformational leadership as a process where leaders and followers engage in
a mutual process of raising one another to higher levels of morality and motivation. Burns
focuses upon motivations and values in assessing how a leader approaches power.
Transformational leaders raise the bar by appealing to higher ideals and values of followers. In
doing so, they may model the values themselves and use charismatic methods to attract people
to the values and to the leader. This aspect of having that basic ethical system sets leaders apart
from those merely aspiring to power. Gandhi and Castro would be the ones leading through
morality and be transformational, while Hitler and Stalin would represent the ego and be
transactional.
Burns' view is that transformational leadership is more effective than transactional leadership,
where the appeal is to more selfish concerns. An appeal to social values thus encourages
people to collaborate, rather than working as individuals (and potentially competitively with
one another). He also views transformational leadership as an ongoing process rather than the
discrete exchanges of the transactional approach. A transforming leadership is superseded by a
transcendent leadership, where the whole leadership process completely changes the character
of an individual from being a mere leader to one with a noble ethos, and that leader,
accordingly brings the led up into the same atmosphere.
2.16.8.3 Kouzes and Posner's Leadership Participation Inventory
This inventory was developed and published by James Kouzes and Barry Posner in their book,
The Leadership Challenge. They asked people about what characteristics of a leader they
admire and would cause them to follow. Based on the responses, they developed Leadership
Participation Inventory. The five characteristics for successful leadership put forward by them
are given below:
FIG. 2.33 Characteristics of Successful Leadership
 Model the Way - A leader needs to be an exemplar, initiating action and presenting
himself as a paradigm case of what a person should be and how actions should be
performed. Remember that the best leaders are examples of what they want their
followers to be. By definition, a leader is in the lead, right up front, ready to take the
heat if something goes wrong. If something does go wrong, a true leader never blames
his followers even if in fact they failed.
 Inspire a Shared Vision - The others need to feel that they should follow and they
need to be inspired but with a goal. They need to see that there is a desired endpoint to
their actions. Leaders may intellectualize a situation but they have to be able to stand
firm in the face of adversity. The key to true leadership is to inspire a shared vision
among your followers. Before you can convey a vision, however, you have to develop
it. You must be absolutely clear in your vision, live it before others can see it, and
model it from your behavior.
 Challenge the Process - Courage is a hallmark of good leadership. That is a main
feature that others see in a good leader. Often a leader will have to be creative, and it is
this creation that sets a person off from the humdrum of those who follow. As a leader,
you must search out opportunities to change, grow, innovate and improve. There is no
reward without risk however, so you must be willing to experiment, take risks, and
learn from any mistakes. Ask questions, even if you fear the answers.
 Enable Others to Act – A good leader should convey a sense of empowerment to the
others. To be a true leader, you must enable others to act responsibly and not encourage
bad worker habits by compensating for them or overlooking them. The goal of a leader
is to empower others to work. The only man who makes no mistakes is the man who
never does anything.
 Encouraging the Heart- A vital component of leadership is not only getting others to
act, but they need to act with passion. Employees, workers and followers are not
robots. Human beings have intellect and emotions. Failing to deal with them on those
levels will ultimately backfire. You cannot program loyalty. Those who fail to plan,
plan to fail.
Leadership skills play a crucial role in career development. Apart from technical skills, you need
soft skills if you want to move ahead in your career. Therefore, leadership skills are considered
to be important traits which can help you get to the top of your career. You're more likely to be
hired or get a promotion if you've been successful in leadership roles in your professional or
personal life. Few people are born to be leaders. Most of us need to practice being a good leader,
and that's why leadership development is so important. There are many different types of
leadership, and there are many skill sets that can help you become a successful leader.
 Inspire and Motivate Others - Great leaders create a vision of the future that is vivid
and compelling, and that motivates employees to want to achieve it. Everyone wants to
work for a company that makes a difference in the world. As a leader, you are best able to
help the members of your team connect what they do to the impact it has on customers
and communities.
 Taking Initiative - Most bosses will assign their employees tasks that the employees
have proven to be adept at. Therefore, don't wait to take on more responsibilities. Go
above and beyond at your current position. A good way to develop your skills is to take
on extra projects outside of your job description. Remember, the more work you do, the
more you are learning. Learning more and taking on more responsibility can help move
you into a leadership role in the workplace.
 Powerful Communication - Great leaders communicate with their people often, and in a
variety of different ways. Whether it's by means of one-on-one conversations, team
meetings, blog posts, email messages, phone or Skype calls, or any other such medium,
leaders don't talk about communicating. They just do it.
 Critical Thinking - To be hired for a high-profile job, you will need to be a critical
thinker. Good leaders foresee potential problems before they happen. They can then
develop ways to prevent the problems from happening. Good leaders are also aware of
potential opportunities and take advantage of them to benefit the company and
employees.
 Building Relationships - Business is built on a solid foundation of relationships and
trust. Without these two things, you can't have a business, or at least not a successful
business. Take time every day to build relationships with the members of your team, your
customers and vendors, your boss and your boss's boss, others in your industry, and your
community. The stronger your relationships, the better a leader you will be.
 Listening Effectively - One of the most important skills for a leader is listening. Without
listening skills, you are not able to get feedback from others and get a sense of what team
members like about the projects they work on. Feedback is the key. To listen effectively,
you need to maintain eye contact, avoid distractions and respond appropriately. Keep in
mind that communication is not only about verbal communication. Be aware of body
language and gestures to determine what people are really saying.
 Professional Expertise - Most leaders start out in business with a specific skill, such as
selling, or accounting, or designing software. The best leaders build on their technical and
professional skills over time, becoming valuable experts in their field and skilled at
leading their team.
 Discipline - Discipline is required in order to execute the goal. Even if you have a vision
or a good idea, it's useless without discipline. If you want to execute effectively, you need
discipline. For example, you and your team wanted to create a business plan to attract
investors. You had lots of ideas for the business plan, but there was no discipline in place
to ensure the presentation was rehearsed. When it came time to present the proposal, you
were not able to properly communicate your objective to the investors. This resulted in
the investors declining your proposal. To be a good leader, you need to be self-
disciplined and make sure others on your team are disciplined.
 Handling Conflicts - Leaders have to know how to handle difficult people and resolve
conflicts. If an employee doesn't work to the best of his or her ability and brings a
negative attitude to work, leaders have to step up and talk to that person in private.
Leaders have to be honest and straight to the point. This requires a lot of courage. It is not
easy to point out a problem or fire someone. Always listen to the employee's side of the
story before you reach a conclusion.
 Be a Follower - Leaders should learn to recognize the value of team members, learn from
them and encourage other team members to learn from them. Learn things that you didn't
know from a person who specializes in that area.
2.18 Power
In business environment, it is crucial to have a clear understanding of power. Managers need

power for getting things done through other people. Every day, managers in public and private
organizations acquire and use power to accomplish goals and, in many cases, to strengthen their
own position. Proper use of power in organization is necessary so that the sources of power is not
misused and directed towards attainment of organizational goal. A person’s success or failure at
using or reacting to power is largely determined by understanding power, knowing how and
when to use it, and being able to anticipate its probable effects.
2.18.1 Power and Authority
An individual derives power from the official position that he holds in a firm. Rosabeth Kanter
defined power is the ability to get things done. Wolfe referred to power as the potential ability of
a person to induce forces on another person towards movement or change in a given direction
within a given behaviour region, at a given time. When used for the good of the organization,
power can be a positive force for higher levels of organizational effectiveness. However, when
power is used in selfish or destructive ways, it can dramatically decrease the morale and
productivity of employees in an organization.
According to Max Weber, there is a clear distinction between power and authority. While power
involves force and coercion, authority is a subset of power. Authority is very narrow in scope
and carries the implication of force. Rather, it involves a suspension of judgment on the part of
its recipients. Authority is the formal power that a person has because of the position in the
organization. Authority has the following characteristics. First, it is vested in a person’s position.
An individual has authority because of the position that he holds, not because of any specific
personal characteristics. Second, it is accepted by subordinates. The individual in an official
authority position exercises authority and can gain compliance because she has a legitimate right.
Finally, authority is used vertically and flows from the top down in the hierarchy of an
organization.
2.19 Bases of Power
Five bases of power were identified by French and Raven in 1960, which laid the groundwork
for most discussions of power and authority in the latter half of the twentieth century. These five
types of power are coercive, legitimate, reward, referent, and expert. Power can be manifested
through one or more of these bases.
FIG. 2.34 Bases of Power

 Legitimate Power - Legitimate power rests in the belief among employees that their
manager has the right to give orders based on his or her position. A president, prime
minister or monarch has legitimate power. So does a CEO, a religious minister, or a fire
chief. In a corporate setting, employees comply with the orders of a manager who relies
on legitimate power based on the position in the organizational hierarchy that the
manager holds. This type of power, however, can be unpredictable and unstable. If you
lose the title or position, your legitimate power can instantly disappear, because people
were influenced by the position you held rather than by you.
 Reward Power - Reward power, as the name implies, rests on the ability of a manager to
give some sort of reward to employees. Raises, promotions, desirable assignments,
training opportunities, and simple compliments – these are all examples of rewards
controlled by people in power. When reward power is used in a flexible manner, it can
prove to be a strong motivator. The problem with this power base is that it may not be as
strong as it first seems. Supervisors rarely have complete control over salary increases,
managers often can't control promotions by themselves, and even CEOs need permission
from their boards of directors for some actions. Also, when you use up rewards, or when
the rewards don't have enough perceived value, your power weakens.
 Coercive Power - Coercive power rests in the ability of a manager to force an employee
to comply with an order through the threat of punishment. This source of power is
problematic, and can be abused. Threats and punishment are common coercive tools.
Coercive power typically leads to short-term compliance, but in the long-run produces
dysfunctional behaviour. You use coercive power when you imply or threaten that
someone will be fired, demoted or denied privileges. While your position may allow you
to do this, though, it doesn't mean that you have the will or the justification to do so. You
may sometimes need to punish people as a last resort but if you use coercive power too
much, people will leave.
 Expert Power - Expert power rests on the belief of employees that an individual has a
particularly high level of knowledge or highly specialized skill set. When you have
knowledge and skills that enable you to understand a situation, suggest solutions, use
solid judgment, and generally outperform others, people will listen to you, trust you, and
respect what you say. As a subject matter expert, your ideas will have value, and others
will look to you for leadership in that area. Expert power has within it a built-in point of
weakness: as a point of power, expertise diminishes as knowledge is shared. If a manager
shares knowledge or skill instruction with his or her employees, in time they will acquire
a similar knowledge base or skill set. As the employees grow to equal the manager's
knowledge or skills, their respect for the superiority of his expertise diminishes.
 Referent Power - Referent power derives from employees' respect for a manager and
their desire to identify with or emulate him or her. Celebrities have referent power, which
is why they can influence everything from what people buy to which politician they elect.
Referent power rests heavily on trust. It often influences employees who may not be
particularly aware that they are modeling their behaviour on that of the manager and
using what they presume he or she would do in such a situation as a point of reference.
The concept of empowerment in large part rests on referent power. Referent power may
take considerable time to develop and thus may not prove particularly effective in a
workforce with a rapid turnover of personnel.
2.19.1 Contingencies of Power

Contingencies limit the extent to which power bases can be used. The four important
contingencies of power are substitutability, centrality, discretion, and visibility. Each in it’s own
way contributes to the way the power base can and will influence others within an organization.
FIG. 2.35 Contingencies of Power

 Substitutability - Substitutability refers to the availability of alternative. It is defined as a
contingency of power pertaining to the availability of alternatives. Greater the value of a
person in the organization, the greater the power it holds. There are some people who
amass power because of their specialty. By virtue of their contribution to the
organization, they become indispensable. What is important is that people have a
tendency to take advantage of their specialization and high demand in the market and
exploit organizations by using added amassed power.
 Centrality - Centrality is the degree of inter-dependence between the power holder and
others. Centrality increases with the quantity of people depending on you. Finance is
central activity in the organization hence the finance manager holds power in excess of
his authority. Finance manager further allocates funds to various departments.
Department heads therefore also become powerful not because they can further allocate
funds to their subordinates but because centrality of activity. Managers of various
departments have power based on their departmental position.
 Visibility - Visibility is when you need to consciously build relationships when you don’t
have the natural ways. The only way others will know how much power an employee has
is by how well known is that person with the senior managers. People often use diplomas
or trophies to display how much knowledge or power they control. The best way to
become visible to an employer or manager is to take on tasks that stand out from the rest,
either in difficulty or presentation.
 Discretion - Discretion in the context of leadership theory is the freedom to make
decisions and exercise judgment without permission from others and without referring to
rulebooks. It is actually the ability to follow company protocol. Management seems to the
average employee as the people who tell them what to do, but what they do not
understand is that each individual is actually being tested no matter what their position is.
The only difference between the workers at the top and the workers at the bottom is their
ability to follow specified rules and regulations. If a supervisor fires a worker, the worker
feels anxiety towards the man instead of himself for not following the rules. Discretion
increases as you move up in management.
2.20 Power Tactics
It is important that we understand and identify the different types of power tactics that are
present. The interesting thing is, once we identify and discuss them, you will begin to notice
them a lot more in your place of business. You will begin to see when people are using these
tactics and, in some ways, better understand how to deal with them. Let us take a look at some of
the most commonly adopted power tactics.
 Legitimacy - This comes from having a position where power is associated with status or
rank. For example, a vice president at a bank has legitimate power due to his position. If
he gives someone below them in the organizational chart an order, they have to follow
that order. Thus, legitimately, the vice president has power.
 Rational Persuasion - This power usually comes from someone who is an expert in their
field and is based on using logic and evidence to influence others. A great example of this
is a doctor. They are an expert in what they do (or at least we hope they are), and when
they tell us we have to lose weight or have to quit smoking, they are doing it from a
rational, expert position.
 Inspirational Appeal - When someone arouses our enthusiasm for an issue by hitting on
what we value or what we want to become or obtain, they are using inspirational appeal.
Think of someone telling you that if you continue to work hard and put in the effort, there
will be a promotion for you. That person is tapping into your aspirations to get a better
job with more pay. Many managers and motivators use this type of power.
 Consultation - Consultation refers to the influence agent asking others for help in
directly influencing another person or group. Consultation is most effective in
organizations and cultures that value democratic decision making.
 Ingratitaiton - Ingratiation refers to different ways of making others feel good about
themselves. Ingratiation is effective when it is honest, infrequent, and well intended.
 Personal Appeal - Personal appeal refers to helping another person because you like
them and they asked for your help. Personal appeals are most effective with people who
know and like you.
 Exchange - Exchange refers to give and take in which someone does something for you,
and you do something for them in return.
 Coalition - Coalition tactics refer to a group of individuals working together toward a
common goal to influence others. Unions are common examples of coalitions within
organizations.
 Pressure - Pressure refers to pushing someone to do what you want or else something
undesirable will occur. This often includes threats and frequent interactions until the
target agrees. Pressure tactics are most effective when used in a crisis situation.
 Legitimating - Legitimating tactics occur when the appeal is based on legitimate or
position power. This tactic relies upon compliance with rules, laws, and regulations. It is
not intended to motivate people but to align them behind a direction.
2.21 Politics
Organizational politics is the process of using an informal network to gain power and accomplish
tasks to meet a person's wants or needs. Nowadays, work in firms requires skill in managing
conflicting agendas and changing power bases. Effective politics isn’t about winning at all costs
but about maintaining relationships while achieving results. Organizational politics may be a
positive practice when the greater good of the company is affected. However, it can also be
negative when people promote self-interests. It’s important to be aware of the potentially
destructive aspects of organizational politics in order to minimize their negative effect.
Reasons for Organizational Politics

For attaining, retaining and displaying power, politics at workplace is a very effective tool. It
mostly manifests itself as work-lobbies or groups which surprisingly even move within or even
outside organizations as a body. Power grows tangibly & non-tangibly even as individuals
compete neck to neck for a one up on one another. These factors are indicative list on the reasons
for the existence of politics in organization.
 Availability of Information - It was found that employees will perceive their work
environment as politically charged, if they believe that they lack information about job
objectives, job opportunities and the outcome of job performance. Control over
information is a result of legitimate power position within an organisation. Primarily a
function of official formal channels of communication, it is common in more centralized
structures. Differentiation happens as a result of such control over power, information,
labour and tasks which makes the individual non-substitutable and thus enviable.
 Jealousy – Jealousy happens usually among peers and colleagues in same departments or
different departments of the same organisation. At times, personal concerns may tend to
displace substantive material in a decision making process as people become increasingly
conscious of influence, proximity and other such factors which in their opinion may
influence evaluation of similar output
 Struggle for Power – The primary objective of every organisation is to thrive in the
market and ensure its profitability. Every individual who is a part of this organisation is
expected to be a responsible contributor to this overall objective of the organisation.
However, the politically charged human structures that they are, organizations tend to
transform into ego satisfying and career progression avenues that employees use as a
mode of forwarding their self worth. At this juncture, the objectives of the organisation
and its constituent employees seem to be headed for opposite directions.
 Comparison – While moving up the corporate ladder, opportunity of wielding formal
positions becomes smaller and the amount of power available seems scarce. Here,
individuals struggle to prove themselves superior, either by gaining power at someone
else’s expense or by a comparative gain in perceived power. This include creating better
impression on immediate superior and ensuring higher proximity or visibility in the
organization. It is here that the mentality of comparison, as a basis of measuring his self
esteem, takes over an individual. There is a perceived attrition in one’s own power base
as another peer becomes better. This may be due to visible organizational rewards or a
sense of falling on personal standards
 Limited Resources – Since increase in compensation and promotion opportunities are
scarce, it create pressures and feeling of competition among the fellow members of an
organization. A marked distinction occurs between those who have and those who don’t
have power which in turn spurs undercurrents in day to day affairs and dealings.
 Subjectivity of Evaluation - Subjectivity that exists in the evaluation of structures is one
main reason that spurs power struggle and resultant politicking. A major part of
performance evaluation that in turn determines compensation is subjective that leads to
the same cycle of impression management in the eyes of one’s superior.

Lazy employees who want to make their position secure at the workplace indulge in nasty
politics. These individuals play politics mainly to gain undue attention and appreciation from the
seniors. Nobody has ever gained anything out of politics; instead it leads to a negative ambience
at the workplace. The important consequences of political behaviours are given below.
 Decrease in Overall Productivity – Organizational politics results in decreased

productivity of employees which eventually leads to lowering productivity of the entire
firm. Common observation says that individuals who play politics at the workplace pay
less attention to their work. They are more interested in leg pulling and back biting. They
spend most of their times criticizing their fellow workers. As a result of politics at the
workplace, employees fail to achieve targets within the stipulated time frame. Work gets
delayed in such an organization.
 Affects Concentration – Employees may find it difficult to focus on their work. They
are more interested in spoiling the other person’s image in front of the superiors. An
individual involved in politics is bound to make more mistakes as his focus is somewhere
else.
 Spoils the Work Environment - Politics leads to a negative ambience at the workplace.
It spoils the relationships amongst individuals. An individual playing politics at the
organization is disliked by all.
 Changes the Attitude of Employees - Politics have a serious impact on the attitude of
the employees. Even the serious employees lose interest in work and attend office just for
the sake of it. Internal politics do not allow employees to give their hundred percent at
work. No matter how much hard work an employee puts in, it goes unnoticed in a
politically driven organization.
 Demotivated Employees – An unproductive employee may get a promotion just because
he is the boss’s favourite, thus demotivating the performers. Discussions are essential at
the workplace to extract the best out of employees. Evaluating the pros and cons of an
idea always helps in the long run. Employees playing politics always look for an
opportunity to tarnish the image of the fellow workers. Employees feel demotivated when
they are not rewarded suitably or someone who has not worked hard gets the benefits due
to mere politics.
 Increases Stress – Politics increases the stress levels experienced by the employees. It is
rightly said that problems evaporate if discussed. Individuals find it difficult to confide in
any of their fellow workers due to the fear of secrets getting leaked. Politics increases the
stress level of the employees. Individuals are not machines who can work continuously
for 8-9 hours without talking to others. It is important to have friends at the workplace
who help you when needed. Individuals fail to trust each other.
 Wrong Information – Individuals involved in politics try to manipulate information and
it is never passed on in its desired form. Superiors get a wrong picture of what is actually
happening in the organization. A wrong person walks away with the credit in an
organization where employees are indulged in politics.
2.23 Conflict management
Conflict is a clash of interests, values, actions, views or directions. People disagree because they
see things differently, want different things, have thinking styles which encourage them to
disagree, or are predisposed to disagree. For successful functioning of an organization,
interdependent individuals and groups must establish working relationships across organizational
boundaries, between individuals, and among groups. Individuals or groups may depend on one
another for information, assistance, and coordinated action. In general, as cooperation increases
across different individuals and groups, so does the level of organizational effectiveness.
However, this interdependence may foster either cooperation or conflict. Conflict is inevitable in
organizations. However, because it can be both a positive and a negative force, management
should not strive to eliminate all conflict, but only that which has disruptive effects on the
organization’s efforts to achieve its goals.
Conflict refers to the process that begins when one party perceives that another party has
negatively affected something that the first party cares about. Conflict can be defined as a
disagreement between two or more individuals or groups, with each individual or group trying to
gain acceptance of its views or objective over others. Conflict management is the practice of
being able to identify and handle conflicts sensibly, fairly, and efficiently. Since conflicts are a
natural part of the workplace, it is important that there are people who understand conflicts and
know how to resolve them. This is important in today's market more than ever. Everyone is
striving to show how valuable they are to the company they work for and at times, this can lead
to disputes with other members of the team.
There is very little consensus among researchers over the role played by conflict in organizations
and groups. However, there are mainly three schools of thought that emphasize the different
roles of conflict in the organizations. These three schools of thought present the traditional view,
the human relation view and the interaction view.
 The Traditional View: Proponents of traditional view considers conflict as harmful for
the organization. Conflict is viewed as a completely negative phenomenon and is often
related with violence and destruction. In the traditional view, conflict was believed to be
a dysfunction outcome of factors like poor communication, lack of trust among the
employees and a failure of the management to respond to the needs and desired of the
employees. It was believed that conflict could cause a loss in productivity and too much
conflict at the work place could also distract the managers from efficiently discharging
their duties. In this way, we see that the traditional view considered conflict as a totally
bad thing and advocated its complete avoidance. This sometime resulted in a tendency to
suppress the conflict and push it under the carpet. By ignoring the presence of conflict,
we somehow try to wish it away. Both the scientific management approach and the
administrative school of management related heavily on developing such organizational
structures that would specify task, rules, regulations procedures and authority
relationships so that if a conflict develops, then these inbuilt rules will identify and
correct problems of such conflict. Thus, through proper management techniques and
attention to the causes of conflict, it could be eliminated and organizational performance
can be improved.
 Human Relation View: The human relations approach considers conflict as a natural
phenomenon occurring at workplace and management should accept this fact. This theory
says that conflict is avoidable by creating an environment of goodwill and trust. But still
conflicts are bound to happen due to differences in opinions, faulty policies and
procedures, lack of cooperation, allocation of resources which will lead to distortion and
blockage in communication. Accordingly, management should always be concerned with
avoiding conflict if possible and resolving it at the earliest, in the interests of the
organizations and the individuals.
 The Interactions View: The proponents of inter-actionist view encouraged conflict. This
view is based on a belief that conflict could be a positive force in a group but it is even
necessary for a group to perform efficiently. Thus, this approach encourages conflict as
these approaches believes that if there is harmony, peace and co-operation in a group it
can become static and non-responsive towards the needs for change and innovation.
Therefore, it becomes imperative that the leader of the group allows some conflict in the
group so that it remains creative viable and self critical. This conflict however should be
kept under control at all times so that the dysfunction consequences of conflict avoided.
Organizational conflict arises when the goals, interests or values of different individuals or
groups are incompatible and those individuals or groups block or thwart one another’s attempts
to achieve their objective. Conflict process shows how conflict works within the organization.
The conflict process deals with five steps that help alleviate disagreement, problems or fighting
within organizations. The five steps are potential opposition or incompatibility, cognition and
personalization, intentions, behavior and outcomes.
FIG. 2.37 Conflict Process

 Potential Opposition - The first stage of the conflict process is called potential
opposition or incompatibility. In this stage, there are potential areas of conflict that could
develop, and they consist of communication, structure and personal variables. Different
words connotations, jargon insufficient exchange of information and noise in
communication channel are all antecedent conditions to conflict. Too much
communication as well as too little communication can lay the foundation for conflict. In
this context, the term structure is used to include variables such as size, degree of
specialization in the tasks assigned to group members etc. The size and specialization act
as forces to stimulate conflict. The larger the group and the more specialized its activities,
the greater the likelihood of conflict. Certain personality types, for example individuals
who are highly authoritarian and dogmatic lead to potential conflict.
 Cognition and Personalization - When one of the factors mentioned in the potential
opposition stage actually materializes as a conflict, then stage two occurs based on
cognition and personalization. During this stage, the perception of conflict arises between
the parties. If no one is aware of a conflict, then it is generally agreed that no conflict
exists. Because conflict is perceives does not mean that is personalized. For example, A
may be aware that B and A are in serious disagreements but it may not make A tensed
and it may have no effect whatsoever on A’s affection towards B. It is at the felt level,
when individuals become emotionally involved that parties experience anxiety , tension
or hostility. Stage-2 is the place in the process where the parties decide what the conflict
is about and emotions plays a major role in shaping perception.
 Intentions - The third stage is regarding intentions or decisions to take action in a certain
way. Using two dimensions cooperativeness (the degree to which one party attempts to
satisfy the other party’s concerns) and assertiveness (the degree to which one party
attempts to satisfy his or her own concerns), five conflict handling intentions can be
identified. Intentions provide general guidelines for parties in a conflict situation. They
define each party’s purpose. Yet people intention is not fixed. During the course of
conflict, they might change because of re-conceptualization or because of an emotional
reaction to the behaviour of other party.
 Behaviour - The fourth stage is all about behavior or where the conflicts become visible
through yelling, fighting or crying. This is usually the most difficult stage because major
issues have to be resolved. Strikes and wars would be an extreme example of this stage.
The behaviour stage includes the statements, actions and reactions made by the
conflicting parties. These conflict behaviours are usually overt attempt to implement each
party’s intentions.
 Outcomes – This is the final stage in the conflict process. The action reaction interplay
between the conflicting parties result in consequences. These outcomes may be functional
in that the conflict results in an improvement in the group’s performance, or
dysfunctional in that it hinders group performance. Conflict is constructive when it
improves the quality of decisions simulates creativity and innovations encourages interest
and curiosity among group members provides the medium through which problems can
be aired and tensions released and fosters an environment of self-evaluation and change.
Conflict is dysfunctional when uncontrolled opposition breeds discontent, which acts to
dissolve common ties and eventually leads to the destruction of the group. Among the
more undesirable consequences are a retarding of communication, reductions in group
cohesiveness and subordination of group goals to the primacy of infighting between
members.

In an organizational setting, managers spend a lot of time in dealing with conflict situations. To
do it efficiently, they should have a clear understanding about the types of conflict so that they
can find appropriate techniques to deal with these conflicts. The different categories of conflict
are discussed in details below:
2.26.1 Individual Level Conflict
When an individual is confronted with compelling roles and goals, he experience conflict. It can
also happen when people experience hindrance in their motives or drives. There are some basic
causes of conflict among individuals.
 Incomparability – It is tough for a person to take quality decisions when the outcomes
cannot be compared with each other. Similarly, an individual could also be unable to
make a comparison between the different alternatives available. For making a
comparison, a technique of comparison is required which includes assigning weight to
different components, rationality in behaviour and attitude and the competence to
perform the task. The process of comparison also depends on the clarity and the
decisiveness of the individual regarding the minimum standard of achievement. An
individual can not make a comparison if he lacks the clarity regarding the acceptance.
 Unacceptability - Conflict arises when there is incongruity between alternative selected
by individuals and organizations. Individuals have some acceptable alternatives in terms
of their goals and perceptions. They will be unhappy if the alternatives selected by the
organizations are not matching with theirs. This unacceptability is subjective as some
alternatives unacceptable to one may be acceptable to others. When an individual finds
the alternatives unacceptable, he searches for the alternatives that are acceptable to him.
This search continues but sometimes repeated failure to find acceptable alternatives may
lead to a redefinition of acceptable alternatives.
 Uncertainty – Usually, people regularly experience uncertainty regarding the external
and internal environment of the organization. The behaviour of the individuals regarding
the acceptability of the alternative and effectiveness of the alternative could be
determined with a certain level of certainty if the environment of the organization could
be depicted properly. In case of uncertainty, an individual may feel frustrated which
could ultimately be reflected in a conflict. There are a number of competing roles and
goals within an individual and usually there are three types of conflicts in an individual:
Frustration, goal conflict and role conflict.
2.26.2 Interpersonal Level Conflict

This is the most common type of conflict and happens when two or more people are involved.
All the conflict can be considered as interpersonal since most of them involve in a conflict
between a person in one organization or a group and another person in some other organization
or a group. Every individual has a separate alternative course of action that is acceptable to him
and different individuals prefer different alternatives. Sometimes the organizations also create
such circumstances that two individuals find themselves in a situation of conflict. For example,
two managers could be competing for the limited capital or man power resources. The other type
of conflict is the disagreement over the goals and objectives of the organization. Four primary
sources of interpersonal conflict are:
 Personal Differences – Personal difference can be a major source of conflicts between
individuals. Due to the difference in the upbringing, culture, education, experience,
values and traditions and the family background of the individuals, interpersonal conflict
could arise.
 Lack of Information – Lack of proper information may lead to inter-personal conflict.
This information deficiency is often a result of the communication breakdown in an
organization.
 Role Incompatibility - Role incompatibility could also be a source of conflict as in the
present day inter-functional organizations, many managers are assigned task which are
inter dependent and the individual’s roles of these managers may be incompatible.
 Stress - Environmental stress in an organization can also cause inter-personal conflict.
Such a stress is caused by a lack of resources, downsizing, competitive pressures and the
high level of uncertainty among the employees of organization.
2.26.3 Group Level Conflict

Since members of a group regularly interact with each other and with other groups in the
organization, two types of conflicts may arise : Intra-group conflict or inter-group conflict. Intra-
group conflict arises when there are differences between the members of group themselves. The
conflicts that take place between different groups in an organization are called inter-group
conflicts. These conflicts may be caused by
 Absence of Joined Decision Making – Groups operating in the organization puts its
urgency for having maximum share in the limited resources. They pressurize for the
acceptance of its own time schedule for the performance of a task. If the wishes of a
group in respect of resources and time schedule are accepted, justice cannot be done to
other groups, which will ultimately lead to organizational ineffectiveness. Joint decision
making is the only solution to resolve the conflict. The conflicting parties may sit
together and discuss their own needs in the overall organizational perspective.
 Difference in Goals – When different groups with varying goals come together, it is
natural to have conflict. The difference in the goals of the group is caused by (i) factors
which affect the commonality within the organization such as heterogeneity in groups
and (ii) factors that the clarity and consistency of reward structure and the comparability
of reward structure.
 Difference in Perception: The difference in perception that can cause inter-group
conflicts arises due to the difference sources of information of different members,
different techniques adopted for processing the information and the difference in goals.
2.26.4 Organizational Level Conflict
Individual, interpersonal and group conflicts are related to conflicts that happen within the
organization. Inter-organizational conflicts take place between the organizations that are
dependent on each other in some way. The conflicts that take place at the individual level or the
group level are all inherent in the organization level conflict. Such a conflict could be between
the buyer and the seller organization, between the government agencies that regulate certain
organizations and the organization that the affected by them or between the unions of workers
and their organization. The organization level conflict should be properly handled so that it can
play a constructive role in achieving the goals of the organization. It can act as a stimulus and
provide a challenge and motivational force to keep the organization moving.

Morton Deutsch introduced a model of conflict in the year 1969 which is widely used nowadays.
He argued that the negative or positive nature of conflict really is determined by people's
behaviours and it is not an inherent quality of conflict itself. Some behaviours produce
dysfunctional, destructive and unproductive responses whereas other behaviours produce
functional, constructive and productive responses.
 Destructive Conflict - Destructive conflict often flows from narrowly defined or rigid
goals, and most often produces negative results. Behaviours that escalate a conflict until
it seems to have a life of its own are dysfunctional and destructive. They may degenerate
sufficiently so that the conflict parties forget the substantive issues and transform their
purposes to getting even, retaliating or hurting the other person. In destructive conflict,
no one is satisfied with the outcome and possible gains are not realized. The negative
taste left over at the end of one conflict episode is carried over to the beginning of the
next conflict--creating a degenerating or negative spiral. Destructive conflicts are more
likely to occur when behaviours come from rigid, competitive systems.
 Constructive Conflict - Constructive conflict refers to conflict in which the benefits
exceed the cost, Behaviours that are adaptive to the situation, person and issues of the
moment are functional and constructive. Constructive conflicts try to balance the interests
of both parties to maximize the opportunities for mutual gains. Constructive conflicts
contain an element of creative adaptation. This is born from a realization that one must
know both one's own and the other's interests to find a road both parties are willing to
walk to discover a mutually acceptable outcome. Focusing on the process, not just the
outcome one person desires, is key to productive conflict management.
Organizations usually employ four different types of conflict management strategies to

encourage teams to engage in the right types of conflict:
 Value Individuality – If the needs for uniqueness of individuals are satisfied, they tend
to support one another and less likely to compete. For example, Tom may be great at
organizing and reporting out meeting notes, while Mia is skilled at facilitating
conversation among the group. Highlight these assets and leverage them when the team is
working together. It’s important to value individuality but don’t forget to tie it into the
group’s goals. Too much uniqueness might compromise alignment between group
members.
 Use Humor – For creating a safe psychological space, it is ideal to bring in fun and
humour. People seldom get defensive if they are not feeling threatened. This can
minimize the chances of people taking questioning personally. The goal here is to
facilitate a positive, light-hearted mood. Subtle (and even self-deprecating) humor can
provide a safe way to relieve tension without needing to test out risqué jokes.
 A Shared Group Goal – When all the members of a group are working towards a higher
level goal, there is very less chance of conflict. For example, a team may be rewarded for
completing a project ahead of a deadline – each member still has their own
responsibilities, but being rewarded as a team and receiving feedback as a team can
redirect members to focus on shared responsibility. Ensuring each team member’s
responsibilities are clearly tied to the overall task will help facilitate healthy debate
among members, and the team will constructively challenge the means for achieving
those goals as a single entity.
 Balance the Power Distribution – Conflict levels in a team can be brought down if there
is a proper mechanism to share decision making power. Shared accountability for
decisions can increase the likelihood that all voices will be heard in times of conflict, thus
finding a solution will be a more transparent process. All members should be given a
voice for something. If the leader of a team is able to solicit others’ perspective on
important decisions, the leader will empower others and distribute ownership.
2.29 Conflict Resolution Strategies
K.W. Thomas and R.H. Kilmann devised a model for effectively managing conflict. The model
organizes 5 conflict management styles based on two dimensions: assertiveness and
cooperativeness.
FIG. 2.38 Thomas Kilmann Conflict Mode Instrument
Here are the five conflict management styles according to Thomas, K.W., and R.H. Kilmann.
 Accommodating – This is when you cooperate to a high-degree, and it may be at your

own expense. It may actually work against your own goals, objectives, and desired
outcomes. This approach is effective when the other party is an expert or has a better
solution. It can also be effective for preserving future relations with the other party.
 Avoiding – This is when you simply avoid the issue. You aren’t helping the other party
to reach their goals, and you aren’t assertively pursuing your own. This works when the
issue is trivial or when you have no chance of winning. It can also be effective when the
issue would be very costly. It’s also very effective when the atmosphere is emotionally
charged and you need to create some space. Sometimes issues will resolve themselves,
and, in general, avoiding is not a good long term strategy.
 Collaborating – This is where you pair up with the other party to achieve both of your
goals. This is how you break free of the “win-lose” paradigm and seek the “win-win.”
This can be effective for complex scenarios where you need to find a novel solution.
This can also mean re-framing the challenge to create a bigger space and room for
everybody’s ideas. The downside is that it requires a high degree of trust. Reaching a
consensus can require a lot of time and effort to get everybody on board and to synthesize
all the ideas.
 Competing – This is the win-lose approach. You act in a very assertive way to achieve
your goals, without seeking to cooperate with the other party, and it may be at the
expense of the other party. This approach may be appropriate for emergencies when
time is of the essence, or when you need quick, decisive action, and people are aware of
and support the approach.
 Compromising – This is the lose-lose scenario where neither party really achieves what
they want. This requires a moderate level of assertiveness and cooperation. It may be
appropriate for scenarios where you need a temporary solution, or where both sides have
equally important goals. The trap is to fall into compromising as an easy way out, when
collaborating would produce a better solution.
2.30 Negotiation
Negotiation is a method by which people settle differences. It is a process by which compromise

or agreement is reached while avoiding argument and dispute. This desirable outcome can be for
all the parties involved, or just for some of them. It is aimed to resolve points of difference, to
gain advantage for an individual or collective, or to craft outcomes to satisfy various interests. It
is often conducted by putting forward a position and making small concessions to achieve an
agreement. The degree to which the negotiating parties trust each other to implement the
negotiated solution is a major factor in determining whether negotiations are successful.
Negotiation is not a zero-sum game. If there is no cooperation, the negotiation will fail. Everyone
negotiates every day, often without even considering it a negotiation. Negotiation occurs in
business, sales, non-profit organizations, government branches, legal proceedings, among
nations, and in personal situations such as marriage, divorce, parenting, etc.
2.30.1 Types of Negotiation in Organizations
Managers should adopt different types of negotiations based on changing situation and time. The
skills of negotiations depend and differ widely from one situation to the other. Basically the
types can be divided into three broad categories.
 Managerial Negotiations – Managerial negotiations happen within the organization and

have to do with the working relationship between groups of employees. Usually, the
manager needs to interact with the members at different levels in the organization
structure. For conducting the day-today business, the superior needs to allot job
responsibilities, maintain a flow of information, direct the record keeping and many more
activities for smooth functioning. All this requires entering into negotiations with the
internal parties of the organization.
 Commercial Negotiations – When negotiations are done with external parties, it is
called commercial negotiations. The driving forces behind such negotiations are usually
financial gains. They are based on a give-and-take relationship. Commercial negotiations
successfully end up into contracts. It relates to foregoing of one resource to get the other.
 Legal Negotiations - These negotiations are usually formal and legally binding. Disputes
over precedents can become as significant as the main issue. They are also contractual in
nature and relate to gaining legal ground.
2.30.2 Steps in Negotiation Process
There are five steps involved in the negotiation process. They are given below:
FIG. 2.39 Negotiation Process
 Preparation and Planning - Before the start of negotiations, one must be aware of the
history leading to the negotiation, the people involved and their perception of the conflict
expectations from the negotiations etc.
 Definition of Ground Rules - Once the planning and strategy is developed, one has to
begin defining the ground rules and procedures with the other party over the negotiation.
Where will it take place? What time constrains, if any will apply? To what issues will
negotiations be limited? Will there be a specific procedure to follow in an impasse is
reached? During this phase the parties will also exchange their initial proposals or
demands.
 Clarification and Justification - When initial positions have been exchanged both the
parties will explain, amplify, clarify, and justify their original demands. This need not be
confrontational. Rather, it is an opportunity for educating and informing each other on the
issues why they are important and how each arrived at their initial demands. This is the
point where one party might want to provide the other party with any documentation that
helps support its position.
 Bargaining and Problem Solving - The essence of the negotiation process is the actual
give and take in trying to hash out an agreement. It is here where concessions will
undoubtedly need to be made by both parties.
 Closure and Implementation - The final step in the negotiation process is formalization
of the agreement that has been worked out and developing and procedures that are
necessary for implementation and monitoring. For major negotiations – this will require
hammering out the specifics in a formal contract.
2.30.3 Negotiation Skills
Most of the organizations consider negotiation skills as a desirable asset for job candidates. For
effective negotiation, an individual should posses a collection of interpersonal and
communication skills used together to bring a desired result. The circumstances of negotiation
occur when two parties or groups of individuals disagree on the solution for a problem or the
goal for a project or contract. A successful negotiation requires the two parties to come together
and hammer out an agreement that is acceptable to both.
 Problem Analysis - Effective negotiators must have the skills to analyze a problem to
determine the interests of each party in the negotiation. A detailed problem analysis
identifies the issue, the interested parties and the outcome goals. For example, in an
employer and employee contract negotiation, the problem or area where the parties
disagree may be in salary or benefits. Identifying the issues for both sides can help to find
a compromise for all parties.
 Preparation - Before entering a bargaining meeting, the skilled negotiator prepares for
the meeting. Preparation includes determining goals, areas for trade and alternatives to
the stated goals. In addition, negotiators study the history of the relationship between the
two parties and past negotiations to find areas of agreement and common goals. Past
precedents and outcomes can set the tone for current negotiations.
 Active Listening - Negotiators have the skills to listen actively to the other party during
the debate. Active listening involves the ability to read body language as well as verbal
communication. It is important to listen to the other party to find areas for compromise
during the meeting. Instead of spending the bulk of the time in negotiation expounding
the virtues of his viewpoint, the skilled negotiator will spend more time listening to the
other party.
 Emotional Control - It is vital that a negotiator have the ability to keep his emotions in
check during the negotiation. While a negotiation on contentious issues can be
frustrating, allowing emotions to take control during the meeting can lead to unfavorable
results. For example, a manager frustrated with the lack of progress during a salary
negotiation may concede more than is acceptable to the organization in an attempt to end
the frustration. On the other hand, employees negotiating a pay raise may become too
emotionally involved to accept a compromise with management and take an all or
nothing approach, which breaks down the communication between the two parties.
 Verbal Communication - Negotiators must have the ability to communicate clearly and
effectively to the other side during the negotiation. Misunderstandings can occur if the
negotiator does not state his case clearly. During a bargaining meeting, an effective
negotiator must have the skills to state his desired outcome as well as his reasoning.
 Collaboration and Teamwork - Negotiation is not necessarily a one side against another
arrangement. Effective negotiators must have the skills to work together as a team and
foster a collaborative atmosphere during negotiations. Those involved in a negotiation on
both sides of the issue must work together to reach an agreeable solution.
 Problem Solving - Individuals with negotiation skills have the ability to seek a variety of
solutions to problems. Instead of focusing on his ultimate goal for the negotiation, the
individual with skills can focus on solving the problem, which may be a breakdown in
communication, to benefit both sides of the issue.
 Decision Making Ability - Leaders with negotiation skills have the ability to act
decisively during a negotiation. It may be necessary during a bargaining arrangement to
agree to a compromise quickly to end a stalemate.
 Interpersonal Skills - Effective negotiators have the interpersonal skills to maintain a
good working relationship with those involved in the negotiation. Negotiators with
patience and the ability to persuade others without using manipulation can maintain a
positive atmosphere during a difficult negotiation.
 Ethics and Reliability -Ethical standards and reliability in an effective negotiator
promote a trusting environment for negotiations. Both sides in a negotiation must trust
that the other party will follow through on promises and agreements. A negotiator must
have the skills to execute on his promises after bargaining ends.
For an effective leader, negotiation skills form an important part of his skill set. The important
strategies that can be adopted to develop negotiation skills are given below.
 Utilizing Negotiation Opportunities - We spent every part of our day negotiating, from
the time we get up and ask a family member to let the dog out to the time we go to bed
and ask someone to take the trash out. Our lives are filled with negotiation opportunities:
credit card, phone and cable bills and fees; salaries and raises; negotiations with friends,
family and colleagues over vacations, work load, time off, etc. Start asking people to do
things, you will be amazed at how often people will try to help you. You may not get
everything you ask for, but you won't get anything unless you ask.
 Adequate Preparation - If asked what was one of the most important tips to successful
negotiations, most of the executives will mention the importance of preparation. If you do
prepare, you can be way ahead of the game. You wouldn't walk into a car dealership
without reviewing the research on the car and invoice prices. All this requires
preparation.
 Build Trust - View every situation as the beginning of a potential relationship. Then
you'll go into it looking for areas of mutual interest and opportunities to collaborate. You
also need to be credible to build trust. For example, if you say you are going to call them
back the next day, then you need to follow up. If you can't be trusted on these small
things, then they won't trust you on the larger things.
 Identifying Best Alternative - Be willing to walk out if your best alternative is more
attractive than the deal in front of you. So many people go in to ask for a raise with no
alternative in mind. They haven't even looked to see how marketable they are. Having an
attractive [alternative] gives you strength in asking for what you want.
 Good Communication - It's not just about what you say. Using silence strategically is
extremely powerful. Ask a question, then say nothing to allow the other party to respond.
Invariably the other party makes another comment that helps me better understand their
position or they offer another concession.
 Handling Difficult Negotiations - Control your emotions, remain calm and listen to the
other side of things before you get the other party to think about things from your
perspective. It is essential to find common ground that both parties can agree on. This
smoothes out the process and enables everyone to feel receptive to listening to each
other."
 Personality Factors - Be personable, flexible, and build rapport. Often people from the
US are too impatient to get the deal done and don't allow enough time to build the
relationship. This is a deal-breaker in many countries today. You have to be willing to
spend the time to get to know the other party.
 Practice and Get Feedback - There are great books out there, Web sites with tips, and
excellent courses. Take advantage of all the resources to practice your skills, get feedback
and work on improving. You don't get better at negotiations without practicing and
getting feedback.
Review Questions
1. Which among the following is an informal group?
a) Command group b) Task group c) Functional group d)Reference group.
2. This team model refers to a group of individuals who come together for a specific time only.
a) Cyber b) Team spirit c) Task force d) Cutting edge.
3. The fourth and final quadrant of Johari window is known as ________.
a) Open area b) Blind area c) Hidden area d) Unknown area
4. Which one does not belong to Lewin's leadership styles?
a) Transactional b) Autocratic c) Democratic d) Laissez-Faire
5. This power rests in the ability of a manager to force an employee to comply with an order
through the threat of punishment.
a) Expert b) Legitimate c) Reward d) Coercive
1. The Minnesota Multiphasic Personality Inventory (MMPI) is a psychological test that is

widely used in assessing personality traits and psychopathology.
2. Eric Berne developed the concept and paradigm of transactional analysis in the late 1950.
3. The great man theory of Leadership was developed to describe the way that leaders
encourage and support their followers in achieving the goals they have been set by
making the path that they should take clear and easy.
4. The Fiedler Contingency Model was created in the mid-1960s by Fred Fiedler.
5. Coercive power rests on the belief of employees that an individual has a particularly high
level of knowledge or highly specialized skill set.
Fill in the blanks
1. The primary objective of ________ is to simplify the theory of psychological type

introduced by C. G. Jung and make it useful in the lives of people.
2. According to ________, a group exists when two or more people define themselves as
members of it and when its existence is recognized by at least one other.
3. The ________ was invented by Joseph Luft and Harrington Ingham in the 1950s as a
model for mapping personality awareness.
4. According to the traditional definition of ________ , it is an interaction between members
of a group where leaders are agents of change and persons whose acts affect other people
more than other people’s acts affect them.
5. Proposed by Thomas Carlyle, _______ theory stated that leaders are born and not made
and posses certain traits which were inherited.
6. The __________ model is a style leadership model developed by Robert R. Blake and
Jane Mouton in the year 1964.
7. Likert's management systems are management styles developed by ________ in the
1960s.
8. Developed by Dr. Paul Hersey in the late 1960s, the ____________ Model is a powerful,
yet flexible tool that enables leaders of all kinds.
9. _________ power rests in the belief among employees that their manager has the right to
give orders based on his or her position.
10. ________ refers to the process that begins when one party perceives that another party
has negatively affected something that the first party cares about.
Match the following
1. Leaders seldom consider the input of his subordinates while taking important decisions -
Laissez Faire Leadership.
2. Leaders fall short in giving direct supervision and continuous feedback to his
subordinates - Transformational Leadership.
3. Leaders consider the suggestions put forward by his co-workers even though the final
decision will be taken by him - Autocratic leadership.
4. Leaders work through creating clear structures whereby it is clear what is required of
their subordinates, and the rewards that they get for following orders - Transformational
leadership.
5. Leaders work with subordinates to identify needed change, creating a vision to guide the
change through inspiration, and executing the change in tandem with committed
members of a group - Democratic Leadership.
1. Explain the four classes of indicators employed for measuring personality.

2. What are the different methods used for measuring attitudes.
3. Give a brief description about the various components of group structure.
4. List the different teams existing in the organization with examples.
5. What are the common characteristics of a high performing team.
6. Give a small description about Johari window.
7. Write down the essential ingredients of leadership.
8. Explain different contingencies of power.
9. List down the different consequences of political behaviour.
10. How many levels of conflict exist? Explain.
1. Describe the Bruce Tuckman's stages of group development with the help of a diagram.
2. Write short notes about 5 different team models.
3. Elaborate on the concept of transactional analysis.
4. Discuss about the five styles of leadership.
5. Explain all the leadership theories in detail.
6. Briefly explain the five bases of power.
7. Write short notes about the different views of conflict.
8. With the help of a diagram, explain conflict process.
9. Explain in detail about the five conflict management styles.
10. Explain negotiation process.
Module 3
Managing the organization

system

Contents
3.11 Planned Change

The important condition for successful economic upliftment of an organization is the

improvement of the management of economic activity of the enterprises by creation of effective
organizational systems and structures. Organizational system is the integrating mechanism that
integrates functions of management, promotes development and acceptance of managing
decisions, ensure managerial effectiveness and applications of the different forms of authority.
For solution the problems of organizational design, it is necessary to acquire the essence,
significance and place of managing organizational systems. The main objectives of managing
organizational systems include acquiring the main concepts of the theory of organizations and
organizational systems, receiving skills of analysis and finally, designing and reforming of
managing organizational systems.

3.2.1 Definition of Organizational Culture
Every organization has its own unique personality which is referred to as its culture.
Organizational culture consists of values and behaviours that contribute to the unique social and
psychological environment of an organization. According to Needle, organizational culture is the
sum total of the values, beliefs and principles of organizational members and is an outcome of
history, technology or management style. It is an invisible but powerful force that determines the
behaviour of the members in that group. According to Bernard L. Rosauer who developed an
actionable definition of organizational culture, it is an very complex incalculable state that results
from the combination of a few simple ingredients such as employee, work and customer. Ravasi
and Schultz defined organizational culture as a set of shared assumptions that guide what
happens in organizations by defining appropriate behaviour for various situations. Every
organization develops and maintains a unique culture that helps members to take decisions and
adjust their behaviour to match this perceived set of values.
3.2.2 Characteristics of Organizational Culture

There are seven characteristics to organizational culture. They are the following:
 Innovation - Organizations that promote innovation and creative thinking at work place
encourage their employees to take risk and think out of the box. Companies with low
innovation quotient forces their members to do their jobs the same way that they have
been trained to do them, without looking for ways to improve their performance.
 Attention to Details - Organizations with high levels of attention to details expects their
employees to be accurate in their work. This characteristic of organizational culture
forces employees to perform their work with precision. A culture that places a low value
on this characteristic give much importance to accuracy.
 Emphasis on outcome - Companies with high levels of achievement orientation places at
most importance to accomplishment of results, not on how the results are achieved. Firms
that instructs their sales force to do whatever it takes to get sales orders has a culture that
places a high value on this characteristic of organizational culture.
 Emphasis on People – A company whose culture places a high value on fairness always
considers the ways in which their decisions will affect the people in their organizations.
These firms treat their employees with respect and dignity.
 Team Work - Companies that focus on collaboration orientation organize their work
activities around teams instead of individuals. Individuals who work for these types of
companies maintain a positive relationship with their coworkers and managers.
 Aggressiveness - The Competitive characteristic of organizational culture decides
whether employees are expected to be assertive or easy going when dealing with
competitors. Organizations with an aggressive culture consider competitiveness and
outperforming the competition at all costs as their prime priority.
 Stability - Companies that organize work activities around stability are usually rule-
oriented, predictable, and bureaucratic in nature. These types of companies typically
provide predictable levels of output and operate best in static market conditions.
3.2.3 Determinants of Organizational Culture

The five most important determinants of organizational culture are as follows:
 Organizational Policies - Dimensions of organizational culture is influenced by specific
organizational policies. A supportive and humanistic internal environment can be
nurtured if the company policy states that layoffs will be used only as a last resort to cope
with business downturn. A company that acknowledges employees as the first
beneficiaries of increased profit is fostering a culture of high reward orientation.
 Managerial Values - Since values held by executives lead to actions and shape
decisions, they have a strong influence on organizational culture. Values help in
perceiving the organization as impersonal, paternalistic, formal, informal, hostile or
friendly. An organization with employee friendly values will be rewarded with higher
levels of employee loyalty and satisfaction.
 Organization Structure - Perception of the internal environment of an organization is
influenced by the organizational structure. The organizational culture of a bureaucratic
structure will be entirely different from that of an autocratic structure. If the organization
wants to project a favourable work environment, the best way is to work on the
organizational culture.
 Characteristics of Members - Climate prevailing in the organization is influenced by
personal characteristics of the members of an organization. The organization culture of a
firm with well educated, ambitious and younger employees will be quite different from
the one with less educated, and less upwardly mobile, older employees. The former might
promote an environment of competitiveness, calculated risk-taking, frankness of
opinions, etc.
 Organizational Size - It is easy to build a climate for creativity and innovation in a small
sized organization compared to larger firms. In small firms, it is possible to stress on
horizontal distribution of responsibilities. Larger organizations tend to pursue a more
authoritative kind of management with stress on vertical distribution of responsibilities.
3.2.3 Types of Organizational Culture

Charles Handy came up with four types of organizational cultures: the power culture, the role
culture, the task culture, and the support culture. This typology helps us understand why
employees are more comfortable in some organizations than others.
3.2.3.1 Power Culture

According to Handy, power culture can be well depicted as a spider's web, with the all-important
spider sitting in the centre. The key to the whole organisation sits in the centre, surrounded by
ever-widening circles of intimates and influence. If you are closer to the spider, you have more
influence.
FIG. 3.1 Power Culture

These kinds of organizations rely heavily on the abilities of the people at the centre and face
succession issues. Power culture attracts power orientated and politically minded people, who
take risks and do not rate security highly. This type of culture is not suitable for large
organizations where there are too many activities to consider and strict control should be in
place. This type of culture relies heavily on individuals rather than on committees and
performance is judged on results.
3.2.3.2 Role Culture

Handy illustrated role culture as a building supported by columns and beams. Each column and
beam plays a specific role in keeping up the building. Individuals are mere role occupants and
the role continues even after the individual leaves.
FIG. 3.2 Role Culture
The main characteristic of this kind of organization is the presence of strong functional areas
coordinated by a narrow band of senior management at the top and a high degree of
formalization and standardization. In role culture, position serves as the main source of power
and rules are the main method of influence. Rationality of the allocation of work and
responsibility determines the efficiency of this culture. This type of organisation is likely to be
successful in a stable environment, where the market is steady, predictable or controllable. Role
culture offers employees with security and the opportunity to acquire specialist expertise.
However, this culture is frustrating for power orientated people who want control over their
work.
3.2.3.3 Task Culture

According to Handy, task culture is a job oriented one which can be best represented as a net.
Some strands of the net are stronger than others, and much of the power is located at the
interstices of the net.
FIG. 3.3 Task Culture
The main focus here is to get the work done by bringing together the right people at the right
level in order to assemble the relevant resources for the completion of a particular project. In this
kind of culture, unifying power of the group helps in improving efficiency and helps the
individual in identifying with the objectives of the organisation. In short, it is a team culture with
team's work taking precedence over individual objectives. Influence is vested upon expert power
and is more widely dispersed than in other cultures. When flexibility and sensitivity to the
market are crucial for organizational success, task culture is appropriate. Middle and junior
levels, prefer to work in the task culture because of its emphasis on groups, expert power,
rewards for results and a merging of individual and group objectives.
3.2.3.4 Person Culture

Person culture is a rare culture characterized by a loose cluster or a constellation of stars.
Individual is the focal point of this culture and the existence of the organization is to serve and
assist the individuals within it.
FIG. 3.4 Person Culture
The lack of popularity for this kind of culture lies in the fact that it is difficult for most
organizations to survive in the absence of some form of corporate objective over and above the
personal objectives of those who comprise them. Control mechanisms and management
hierarchies can exist in person culture only with the existence of mutual consent. With
organization having no power to evict an individual, the decision to leave is completely vested
upon him. People with expertise have power in personal culture. Examples of person-orientation
are consultants and freelance workers who follow a very casual approach towards formal work
settings. Since these people are difficult to manage and their expertise is highly valued, these
arrangements work well.
3.2.4 Hofstede’s Dimensions of Culture

Psychologist Geert Hofstede proposed the cultural dimensions theory which describes the effects
of a society's culture on the values of its members, and how these values relate to behaviour.
Based on these comprehensive studies of how values in the workplace are influenced by culture,
he came up with six dimensions along which cultural values could be analyzed: individualism-
collectivism; uncertainty avoidance; power distance, masculinity-femininity, long term - short
term orientation and indulgence-restraint.
Figure 3.5 Hofstede’s Dimensions of Organizational Culture
3.2.4.1 Power Distance

This dimension of culture expresses the degree of inequality that is accepted between powerful
and less powerful members of a society. The fundamental issue here is how a society handles
inequalities among people. In organizations with high power distance, an unequal, hierarchical
distribution of power is accepted and people understand their place in the system. When power
index in low, people tend to question authority and attempt to distribute power. For example, in a
country like Malaysia with high power distance, team members will not initiate any action but
will be guided and directed to complete a task. Employees may consider a task as unimportant if
the manager doesn't take charge.
3.2.4.2 Masculine Versus Feminity

This dimension of culture refers to the distribution of roles between men and women in a society.
Organizations with high levels of masculinity will follow different policies as compared to
organizations with high levels of feminity. In societies where male employees dominate their
female counterparts, preference is given to achievement, heroism, assertiveness and material
rewards. In feminine societies, they share modest and caring views equally with men. Japan and
Austria are considered to be countries with high level of masculinity where men score highly for
exhibiting "tough," masculine values and behaviours. In fact, women also score relatively highly
for having masculine values, though on average lower than men. Therefore, if you are opening
an office in Japan, you should expect your female team members to display these notionally
masculine traits as their male colleagues. On the other end, Sweden is a nation with high levels
of feminity and they focus on managing through discussion, consensus, compromise, and
negotiation.
3.2.4.3 Individualism Versus Collectivism

This dimension of organizational culture explores the degree to which people in a society are
integrated into groups. In simple terms, it refers to the strength of the ties that people have to
others within their community. In an individualistic society, social framework is loosely knit
with individuals expected to take care of only themselves and their immediate families. This
indicates weak interpersonal connection among those who are not part of a core family. On the
contrary, collectivism describes a society which has tightly-integrated relationships. A
organization's position on this dimension is reflected in whether people’s self-image is defined in
terms of “I” or “we.”Central American countries such as Panama and Guatemala have very low
individualistic scores. Therefore, marketing campaign that emphasizes benefits to the community
has more chances of success, as long as the people addressed feel part of the same group.
3.2.4.4 Uncertainty Avoidance

This dimension describes how well people can cope with anxiety. It deals with the tolerance
level of the organizational members in both comfortable and uncomfortable situations.
Organizations avoid such situations and prepare the employees to adjust well in uncomfortable
conditions. Societies that score a high degree in this dimension consist of people trying to make
life as predictable and controllable as possible. People from countries with high levels of
uncertainty avoidance follow rigid codes of belief and behaviour and are intolerant of
unorthodox behaviour and ideas. Greece is a country with high levels of this dimension and
people tend to take safest, most conservative decisions during business meetings, despite any
emotional outbursts. Therefore, you have to encourage your team mates from Greece to become
more open to different ideas and approaches.
3.2.4.5 Short term Versus Long Term Orientation
This dimension of culture refers to the connection of the past with the current and future
actions/challenges. It refers to the degree to which people need to explain the inexplicable.
Societies with a high degree in this dimension consider adaptation and pragmatic problem-
solving as a necessity for survival of the organization. They are more pragmatic, modest, long-
term oriented, and thrifty. In low-scoring countries, economic growth will be minimal and people
tend to be religious and nationalistic. United States is a country with high scores in short term
dimension since they focus on quick results. It is also reflected in strong normative positions
politically and socially.
3.2.4.6 Indulgence Versus Restraint

The final and latest dimension of culture is a measure of happiness. Indulgence refers to the
extent to which a society allows relatively free gratification of basic and natural human drives.
Restraint refers to the degree to which a society suppresses gratification of needs and regulates it
by means of strict social norms. Countries with high levels of indulgence score encourage
enjoying life and having fun. Those with high levels of restraint emphasis on regulation of
people's conduct and behaviour, and there are stricter social norms. While indulgent societies
believe themselves to be in control of their own life, restraint societies consider other factors
dictate their life and emotions.
Organizational development depends on analysis and identification of the factors that define the
effectiveness of the organization. Organizations and managers are willing to get employees
commitment which leads to improved productivity. Management would like to introduce
employee with norm, values and objectives which are importance to understand the
organizational culture. It is the responsibility of the management to introduce the organizational
culture to its employees to get them familiarized with the system of organization. Management
must try to maintain a learning environment within the organization. Proper understanding of
organizational culture leads to improvement of employee’s performance. As organizational
development is concerned, performance of employee is considered as a back bone of the
industry. So organization should get the loyalty of their employees to ensure success. Four
theories explain the effect of organization culture on employee performance.
FIG. 3.6 Theories Explaining Effect of Culture on Performance
3.3.1 Consistency Theory
According to consistency theory, organizations tend to be effective because they have strong
cultures that are highly consistent, well-coordinated and well integrated. Employee behaviour is
rooted in a set of core values which has to be followed in every situation. Both leaders and
followers are skilled at reaching an agreement even when they have differing views. This type of
consistency is a powerful source of stability and internal integration that results from a common
mindset and a high degree of conformity.
3.3.2 Involvement Theory
This theory is based on the idea that involvement and participation will contribute to a sense of
responsibility and ownership which in turn leads to superior organizational performance.
Effective organizations empower their people, build their organizations around teams, and
develop human capability at all levels. Executives, managers and employees are committed to
their work and feel that they own a piece of the organization. People at all levels feel that they
play some role in decisions that will affect their work and that their work is directly connected to
the goals of the organization.
3.3.3 Mission Theory
A shared sense of purpose, direction and strategy can coordinate and galvanize organizational
members toward collective goals. Successful organizations have a clear sense of purpose and
direction that defines organizational goals and strategic objectives. These organizations express a
vision of how the organization will look in the future. When an organization’s underlying
mission changes, changes also occur in other aspects of the organization’s culture.
3.3.4 Adaptability Theory
This theory is based on the assumption that norms and beliefs that enhance an organization’s
ability to receive, interpret and translate signals from the environment into internal
organizational and behavioural changes will promote its survival, growth and development.
Ironically, organizations that are well integrated are often the most difficult ones to change due
to the deep levels of adaptability acquired over time. Adaptable organizations are driven by their
customers, take risks and learn from their mistakes. They have the capability and experience at
creating change. Such organizations are continuously changing their systems to promote
improvements and provide value for their customers.
These theories focus on different aspects of culture but more importantly, they stress different
functions of culture. Consistency theory and mission theory tend to promote stability whereas
involvement theory and adaptability theory allow for change and adaptability. Consistency
theory and involvement theory see culture as focusing on internal organizational dynamics while
mission theory and adaptability theory see culture as addressing the relation of the organization
to its external environment.

American professor Edgar Schein developed a organizational culture model which argued that
organizations do not adopt a culture in a single day. Instead, it evolves in due course of time as
the members of the organization go through various changes, adapt to the external environment
and solve problems. Employees learn from their past experiences and start practicing it every day
thus forming the culture of the workplace. The new entrants in the organization also strive hard
to adjust to the new culture and enjoy a stress free life. The organizational culture model is
directly influenced by direct mechanisms in the organizations such as exemplary behaviour,
opinions, status and appointments.
3.4.1 Levels of Organizational Cultural Model

Edgar Schein divided organizational culture into three different levels as shown in the figure. In
reality, the three levels of the organizational culture model can be represented as an onion model
since it is based on different layers. Adaptation and change is very easy in the outer layer
(artifacts and symbols). The deeper the layer, the harder it becomes to adjust it. Deeply
embedded in the core of the onion we find the assumptions which is almost impossible to
replace.
FIG. 3.7 Levels of Organizational Cultural Model
Artifacts and Symbols

Artifacts and symbols form the outermost layer of the organizational culture. They are easily
viewed, heard and felt by individuals and include dress code of the employees, office furniture,
facilities, behaviour of the employees, mission and vision of the organization. For example, one
company insists it's employees to wear dress that exude professionalism and strictly follow the
policies of the organization. On the other hand, another organization adopts a laid back attitude
and employees can wear whatever they feel like. In this case, first company follows a strict
professional culture whereas second one follows a weak culture where the employees do not
accept the things willingly.
Espoused Values
According to Schein, the middle layer in the organizational cultural model consists of standards,
values and rules of conduct of the employees. The values of the individuals working in the
organization play an important role in deciding the organization culture. This answers the
question such as how the organization express strategies, objectives and philosophies does and
how these are made public. The thought process, mindset and attitude of organizational members
have deep impact on the culture of any particular organization. Problems could arise when the
ideas of managers are not in line with the basic assumptions of the organization.
Assumptions
The third and the deepest level of the organizational cultural model consists of assumed values of
the employees which can’t be measured but do make a difference to the culture of the
organization. The fundamental underlying assumptions are deeply embedded in the
organizational culture and are experienced as self-evident and unconscious behaviour. It includes
certain beliefs and facts which is not visible but do affect the culture of the organization. The
inner aspects of human nature come under the third level of organization culture. Most
organizations follow certain practices which are not discussed often but understood on their own.
For instance, organizations where women dominate their men do not believe in late sittings as
they are not very comfortable with such kind of culture. Men on the other hand would be more
aggressive and would not have any problems with late sittings. Assumptions are hard to
recognize from within.

The task of OB practitioners doesn’t end with the creation of a good organizational culture. They
have to keep many practices in place to maintain the organizational culture by giving employees
a set of similar experiences. Many HR practices such as selection, performance evaluation,
compensation, training and career development reinforce the organization's culture and ensure
that those hired fit in with the culture. The factors that affect the sustenance of organizational
culture are selection process, the actions of top management and socialization methods.
FIG. 3.7 Sustaining organizational culture
3.5.1 Selection Process

The main objective of the selection process is to attract and hire individuals with the right kind of
knowledge, skills, and abilities to perform successfully. The recruiter checks for how well the
candidates will fit into the organization and identify people whose values are aligned with that of
the organization. Selection process helps both employers and applicants to avoid a mismatch and
sustaining an organization’s culture by selecting those who adhere to it.
3.5.2 Top Management

The action of top management is another factor that has serious implications on the
organization’s culture. Senior executives establish the desirable norms through what they say and
how they behave. These norms are filtered down into the organization through their implicit and
explicit conduct. The norms include the extent to which risk taking behaviour are encouraged,
freedom that managers give to their employees, criteria for rewards and recognitions etc.
3.5.3 Socialization
Even though organization excels in recruitment and selection, the new recruits need help in
adapting to the existing culture. Socialization facilitates the familiarization of the prevailing
culture and maintains the new entrants at ease. Many organizations have an ongoing social
networking application in place to link new workers with more established members and ensures
the transmission of culture over time.

Culture is of prime importance during periods of organizational change. Change happen when
companies merge and their cultures clash or existing culture becomes inappropriate because of
growth and strategic change. In stable companies, cultural issues may lead to low morale,
absenteeism or high staff turnover, with all of the adverse effects those can have on productivity.
Organizational culture has a huge impact on an organization's work environment and output.
Researchers have done extensive work on what makes an effective corporate culture, and how to
go about changing a culture that isn't working. The Cultural Web, developed by Gerry Johnson
and Kevan Scholes provides a unique approach for looking at and changing your organization's
culture. This model can be used to expose cultural assumptions and practices, and set to work
aligning organizational elements with one another, and with your strategy.
3.6.1 Cultural Web

The cultural web describes the taken-for-granted assumptions of an organisation and the physical
manifestations of organizational culture. It identifies six interlinking processes that determine
how culture is established and reinforced. By analyzing the factors in each, you begin to see the
bigger picture of your culture: what is working, what isn't working, and what needs to be
changed. The six elements are depicted in the figure.
FIG. 3.9 Cultural Web
3.6.1.1 Stories
This consists of anecdotes and stories about the community, history and people that reinforce the
traditions, models and beliefs. The stories told by members of the organisation to each other, to
outsiders, etc, embed the present in its organizational history. Stories cover successes, disasters,
heroes, villains and mavericks. Who and what the company chooses to immortalize says a lot
about what it values, and perceives as great behaviour. Employees taking about the founder who
started the company from scratch or sharing success stories with new entrants are examples of
this aspect of cultural web.
3.6.1.2 Rituals and Routines

Rituals and Routines consist of daily behaviour and actions of people that signal acceptable
behaviour. It shows the way they do things in the organization on a day to day basis and provides
a distinctive organizational competence. This decides what is expected to happen in given
situations, and what is valued by management. The rituals of the organizational life are specific
activities through which the organisation emphasizes what is most important. For instance,
expectations of customer and employees when they enter into the organizational setting or the
behaviours encouraged by the top management are all examples of rituals and routines.
3.6.1.3 Symbols
Symbols constitute the visual representations of the organization. In usually include logos, plush
offices, cars, formal or informal dress codes, language, status and titles which represent the
nature of the organization. If the company is following any specific jargons or language to
distinguish itself from the competitors, it can be considered as a cultural symbol. Apart from the
language, the different status symbols adopted by the firm such as luxury cars and expensive
suits used by the directors influence the way in which the company is looked upon by both client
and staff.
3.6.1.4 Power Structures

Power structure represents pockets of real power in the company. This may involve few key
senior executives, a whole group of executives, or even a department who have the greatest
amount of influence on decisions, operations, and strategic direction. If you want to dissect the
power structure in an organization, check who has the real power, who influences key decisions,
how is power abused or what these people champion within the organization. For example, when
the owner believes in a low cost, high profit model, and is prepared to lose repeat customers, the
threat of docked pay keeps mechanics working.
3.6.1.5 Control Systems

Control systems represents the ways that the organization is controlled which include financial
systems, quality systems, and rewards. The way in which these components are measured and
distributed within the organization also matters. Reward systems are important influences on
behaviours, but can also prove to be a barrier to success of new strategies. Management should
always think about process that has the strongest control, the degree to which company is tightly
controlled, extent to which employees are rewarded for good work and the mechanisms in place
to keep control of the operations. In an organization where cost is highly controlled, customers
are heavily billed. In another company where quality is not emphasized, getting the work done
with the least amount of direct costs is promoted.
3.6.1.6 Organizational Structure
Organizational Structure includes both the structure defined by the organization chart, and the
unwritten lines of influence that shows whose contributions are most valued. It reflects power
and show important roles and relationships. Organizational structure can be flat or hierarchical,
formal or informal, or organic or mechanistic. In formal, hierarchical, mechanistic structures, top
management takes all decisions and other members have to just follow orders. On the contrary,
many other organizations may promote collaboration and give less priority to competition. In a
flat structure, owner will be donning most of the work and his wife may do the role of a
receptionist.
3.6.2 Cultural Web as a Tool for Organizational Change

In an organizational setting, the six elements influence a lot in encouraging tradition and long-
standing practices. Because of the interdependent nature of these elements, a change in one will
have an effect on all the others and nothing can be handled in isolation. Many companies
overlook this fact while trying to encourage shifts in practice. The cultural web can be a tool to
change when we are aware about it and use this awareness to help you anticipate how your
community may react to new opportunities. But more than this, as you plan your strategy for
implementing change, consider which of the six elements you might be able to harness, to begin
to provide an alternative view of the world and a new paradigm that promotes the benefits of the
proposed changes.
When an organizational system is disturbed by some internal or external force, change occurs.
Organizational change can be defined as the movement of an organization from one state of
affairs to another. Usually, change happens in the organization's structure, strategy, policies,
procedures, technology, or culture. The change may be planned years in advance or may be
forced upon an organization because of a change in the environment. Organizational change can
be drastic and alter the way an organization operates, or it may be incremental and slowly change
the way things are done. Change usually involves letting go of the old ways in which work is
done and adjusting to the new ways. Therefore, fundamentally, it is a process that involves
effective people management.
There are a number of internal and external factors that affect the efficient functioning of
organizations. Any minute change in these factors necessitates change in an organization. The
most important factors are as shown in the figure.
3.8.1 External Forces
There are direct and indirect ways in which external environment affect an organization.
Variables in such environment are beyond the control of the organization. Therefore, the
organization must change itself to get aligned with the change in the environment. A few of these
factors are:
 Technology - The adoption of new technologies such as computers, telecommunication

systems and flexible manufacturing operations have a significant impact on the
organizations that adopt them. When computer replaced direct supervision, it resulted in
wider spans of control for managers and flatter organizations. Both the organizations and
their employees will have to become more adaptable when many jobs are reshaped.
Companies will have to increase their investment in training and development of the
employees because employees' skills are becoming outdated more quickly.
 Marketing Conditions - Marketing conditions are very dynamic in nature because of the
rapid change happening in the needs, desires and expectations of the customers.
Furthermore, there is stiff competition as the market is flooded with new products and
innovations happen every now and then. Firms are continuously innovating their
advertising strategies to attract and influence their customer base. The concept of
consumerism has gained prominence and thus, the consumers are treated as the kings.
 Social Changes - Organizations have to frequently adopt according to the social and
cultural changes happening in their environment. Lot of social changes are happening as
a result of spread of education, knowledge and governmental efforts. Management is
facing challenges in issues related to social equality like equal opportunities to women
and equal pay for equal work. The management has to follow certain social norms in
shaping its employment, marketing and other policies.
 Political Process - Political environment within and outside the country have an
important impact on business especially the transnational corporations. The interference
of the government in business has increased tremendously in most of the countries. The
corporate sector is regulated by a lot of laws and regulations. The organizations do not
have any control over the political and legal forces, but they have to adapt to meet the
pressure of these forces.
3.8.2 Internal Forces

Internal forces are too many and it is very difficult to list them comprehensively. However,
major internal causes are explained as follows:
 Nature of the Work Force: The nature of work force is changing very fast. Nowadays,
managers should be adept in managing work force diversity to achieve organizational
objectives. The new generation of workers have better educational qualifications, greater
emphasis on human values and tendency to question authority of managers. Their
behaviour has also become very complex and leading them towards organizational goals
is a challenge for the managers. With more women employees, organizations have to
modify transfer and promotion policies as well as make child care and elder care
available, in order to respond to their needs.
 Change in Managerial Personnel: Change in managerial personnel brings about a lot of
change in organization. Old managers are replaced by new managers as a result of
promotion, retirement, transfer or dismissal. Each manager brings his own ideas and way
of working in the organization. The informal relationships change because of changes in
managerial personnel. Sometimes, even though there is no change in personnel, their
attitudes change. As a result, the organization has to change accordingly.
 Deficiencies in Existing Management Structure: Deficiencies in the existing
organizational structure, arrangement and processes may necessitate change in an
organization. The deficiencies may range from unmanageable span of control, larger
number of managerial levels, lack of co-ordination among various departments, obstacles
in communication, multiplicity of committees, lack of uniformity in policy decisions,
lack of cooperation between line and staff and so on. But, the need for change in such
cases goes unrecognized until some major crisis occurs.
 To Avoid Developing Inertia: In many occasions, organizational changes take place just
to avoid developing inertia or inflexibility. Prudent managers take into account this view
that organization should be dynamic because any single method is not the best tool of
management every time. Thus, changes are incorporated so that the personnel develop
liking for change and there is no unnecessary, resistance when major changes in the
organization are brought about.
3.9.1 Individual Sources of Resistance to Change
Individual sources of resistance to change reside in basic human characteristics such as

perceptions, personalities, and needs. The following summarizes five reasons why individuals
may resist change.
FIG. 3.10 Individual sources of resistance to change

 Habit - Human beings are complex creatures of habit. We don't check for all the options
available for the hundreds of decisions we make every day. We rely on habits to cope
with this complexity. The tendency to respond in our accustomed ways becomes a source
of resistance when we are confronted with change.
 Security - Individuals with a high security needs tend to resist change because it
challenges their feeling of safety. When organizations announce personnel cutbacks or
introduces new technology, many employees at these firms may fear that their jobs are in
jeopardy.
 Economic Factors - Concerns regarding the impact of change on one's income is a major
source of individual resistance. Changes in established work routines may result in
economic fears if people are apprehensive that they won't be able to perform the new
tasks or routines to their previous standards, especially when compensation is tightly
related to productivity.
 Fear of Unknown - It is human nature to be comfortable with the known and ambiguous
about unknown. Change substitute ambiguity for unknown. Introduction of a new
equipment means that many employees will have to learn to operate them and some of
them may fear that they may fail to do so. Therefore, they may develop a negative
attitude toward working with that particular equipment or behave dysfunctional if
required to use them.
 Selective Information Processing - Perception plays a crucial role in shaping the world
of an individual and it always resist change once they have created this world. Individuals
have a tendency to process information selectively in order to adhere to their perceptions.
They see, hear and feel what they wanted to and ignores all other information that
challenges their perceptions. Employees may ignore the arguments made by their
managers in explaining why the new equipment has been purchased or the potential
benefits that the change will provide them.
3.9.2 Organizational Sources of Resistance to Change
Organizations are conservative in nature and they actively resist change. This is very evident
from government agencies refusing to deviate from what they were doing for years even though
the need for their services has changed. Six major sources of organizational resistance to change
are given below:
FIG. 3.11 Organizational sources of resistance to change
 Structural Inertia - There are lots of built-in mechanisms in organizations to ensure

stability. For example, the selection process ensures that people with certain kind of
mindset and skill set enters into the organization. Training and other socialization
techniques reinforce specific role requirements. Formalization provides job descriptions,
rules, and procedures for employees to follow. When organizations are confronted with
change, this structural inertia works against the change to ensure stability.
 Limited Focus of Change - Organizations are made up of many interdependent
subsystems which are highly related to each other. A change in technology has to be
supported by modification to a matching organization's structure in order for the change
to be accepted among the members. So minor changes in sub - systems tend to get
negated by the larger system.
 Group Inertia - Group norms may act as constraint when individual wants to change
their behaviour. For example, even though an employee is willing to accept the changes
in this job description suggested by the management, he may decline it under pressure
from the union to resist any unilateral change made by management.
 Threat to Expertise - Sudden changes in organizational patterns may jeopardize the
expertise of specialized groups. When decentralized personal computers were introduced,
it was strongly resisted by many information systems departments since this facility could
help managers to gain access to information directly from a company's mainframe and
bring down their significance in the organization.
 Threat to Established Power Relationships - Rearrangement of decision making
authority can disrupt long -established power relationships within the organization.
Usually, supervisors and middle managers consider introduction of participative decision
making or self-managed work teams as a kind of threat to their authority.
 Threat to Established Resource Allocation - Individuals or groups who control major
resources in the organization often consider change as a potential threat. For them, a
change can result in a reduction in their budgets or a cut in the staff size. People who
drew benefit from the present allocation often feel threatened by changes that may affect
future allocations.

Eight tactics can help change agents deal with resistance to change. Let’s review them briefly.
 Education and Communication - Communicating the logic of a change can reduce
employee resistance at two levels. First, it fights the effects of misinformation and poor
communication. If employees receive the full facts and clear up misunderstandings,
resistance should subside. Second, communication can help sell the need for change by
packaging it properly. A study of German companies revealed that changes are most
effective when a company communicates a rationale that balances the interests of various
stakeholders (shareholders, employees, community, and customers) rather than those of
shareholders only. Another study of a changing organization in Philippines found that
formal change information sessions decreased employee anxiety about the change, while
providing high-quality information about the change increased commitment to it.
 Participation - It’s difficult to resist a change decision in which we’ve participated.
Assuming participants have the expertise to make a meaningful contribution, their
involvement can reduce resistance, obtain commitment, and increase the quality of the
change decision. However, against these advantages are the negatives: potential for a
poor solution and great consumption of time.
 Building Support and Commitment - When employees’ fears and anxieties are high,
counseling and therapy, new-skills training, or a short paid leave of absence may
facilitate adjustment. When managers or employees have low emotional commitment to
change, they favour the status quo and resist it. Employees are also more accepting of
changes when they are committed to the organization as a whole. So, firing up employees
and emphasizing their commitment to the organization can also help them emotionally
commit to the change rather than embrace the status quo.
 Develop Positive Relationships - People are more willing to accept changes if they trust
the managers who implement them. One study surveyed 235 employees from a large
housing corporation in the Netherlands that was experiencing a merger. Those who had a
more positive relationship with their supervisors, and who felt that the work environment
supported development, were much more positive about the change process. Another set
of studies found that individuals who were dispositionally resistant to change felt more
positive about the change if they trusted the change agent. This research suggests that if
managers are able to facilitate positive relationships, they may be able to overcome
resistance to change even among those who ordinarily don’t like changes.
 Implementing Changes Fairly - One way organizations can minimize negative impact
is to make sure change is implemented fairly. Procedural fairness is especially important
when employees perceive an outcome as negative, so it’s crucial that employees see the
reason for the change and perceive its implementation as consistent and fair.
 Manipulation and Cooptation - Manipulation refers to covert influence attempts.
Twisting facts to make them more attractive, withholding information, and creating false
rumors to get employees to accept change are all examples of manipulation. If
management threatens to close a manufacturing plant whose employees are resisting an
across-the-board pay cut, and if the threat is actually untrue, management is using
manipulation. Cooptation, on the other hand, combines manipulation and participation. It
seeks to “buy off” the leaders of a resistance group by giving them a key role, seeking
their advice not to find a better solution but to get their endorsement. Both manipulation
and cooptation are relatively inexpensive ways to gain the support of adversaries, but
they can backfire if the targets become aware they are being tricked or used. Once that’s
discovered, the change agent’s credibility may drop to zero.
 Selecting People Who Accept Change - Research suggests the ability to easily accept
and adapt to change is related to personality—some people simply have more positive
attitudes about change than others. Such individuals are open to experience, take a
positive attitude toward change, are willing to take risks, and are flexible in their
behaviour. One study of managers in the United States, Europe, and Asia found that those
with a positive self-concept and high risk tolerance coped better with organizational
change. A study of 258 police officers found that those with higher growth needs, internal
locus of control, and internal work motivation had more positive attitudes about
organizational change efforts. Individuals higher in general mental ability are also better
able to learn and adapt to changes in the workplace. In sum, an impressive body of
evidence shows organizations can facilitate change by selecting people predisposed to
accept it. Besides selecting individuals who are willing to accept changes, it is also
possible to select teams that are more adaptable. Studies have shown that teams that are
strongly motivated by learning about and mastering tasks are better able to adapt to
changing environments. This research suggests that it may be necessary to consider not
just individual motivation, but also group motivation when trying to implement changes.
 Coercion - Last on the list of tactics is coercion, the application of direct threats or force
on the resisters. If management really is determined to close a manufacturing plant whose
employees don’t acquiesce to a pay cut, the company is using coercion. Other examples
are threats of transfer, loss of promotions, negative performance evaluations, and a poor
letter of recommendation. The advantages and drawbacks of coercion are approximately
the same as for manipulation and cooptation.
3.11 Planned Change
Every change should have a planned way. Planned change may help people to adapt with the
changed environment. Planned change is pre determined since it is decided in advance what is to
be done in future. It is a deliberate process. For making any planned change, pre thinking is
supposed to be done about the outcomes and impact of change. Despite carefulness, if anything
goes wrong, one should be prepared to face the changes. We can define planned change as any
kind of alternation or modification which is done in advance and differently for the improvement
of present position into brighter one.
3.11.1 Steps in Planned Change
Once managers and organization commit to planned change, they need to create a logical step‐by
step approach in order to accomplish the objectives. Planned change requires managers to follow
an eight‐step process for successful implementations, which is illustrated in Figure 3.12.
FIG. 3.12 Steps in Planned Change
1. Recognize the Need for Change - Recognition of the need for change may occur
at the top management level or in peripheral parts of the organization. The change
may be due to either internal or external forces.
2. Develop Goals of Change - Remember that before any action is taken, it is
necessary to determine why the change is necessary. Both problems and
opportunities must be evaluated. Then it is important to define the needed changes
in terms of products, technology, structure, and culture.
3. Select a Change Agent - The change agent is the person who takes leadership
responsibility to implement planned change. The change agent must be alert to
things that need revamping, open to good ideas, and supportive of the
implementation of those ideas into actual practice.
4. Diagnose the Current Climate - In this step, the change agent sets about
gathering data about the climate of the organization in order to help employees
prepare for change. Preparing people for change requires direct and forceful
feedback about the negatives of the present situation, as compared to the desired
future state, and sensitizing people to the forces of change that exist in their
environment.
5. Select an Implementation Method - This step requires a decision on the best way
to bring about the change. Managers can make themselves more sensitive to
pressures for change by using networks of people and organizations with different
perspectives and views, visiting other organizations exposed to new ideas, and
using external standards of performance, such as competitor's progress.
6. Develop a Plan - This step involves actually putting together the plan, or the
“what” information. This phase also determines the when, where, and how of the
plan. The plan is like a road map. It notes specific events and activities that must be
timed and integrated to produce the change. It also delegates responsibility for each
of the goals and objectives.
7. Implement the Plan - After all the questions have been answered, the plan is put
into operation. Once a change has begun, initial excitement can dissipate in the
face of everyday problems. Managers can maintain the momentum for change by
providing resources, developing new competencies and skills, reinforcing new
behaviours, and building a support system for those initiating the change.
8. Follow the Plan and Evaluate it - During this step, managers must compare the
actual results to the goals established in Step 4. It is important to determine
whether the goals were met; a complete follow‐up and evaluation of the results aids
this determination. Change should produce positive results and not be undertaken
for its own sake.
There are three major approaches to effectively manage change in an organization. They are
Lewin’s classic three step model, Kotter’s eight-step plan and action research.
3.12.1 Lewin’s Three-Step Model
Kurt Lewin developed a simple and practical model for understanding the change process. His
change model involved three steps: unfreezing the status quo, movement to a desired end state,
and refreezing the new change to make it permanent. According to him, the change process
entails creating the perception that a change is needed, then shifting toward the new, desired
level of behaviour and finally, solidifying that new behaviour as the norm. The model is still
widely used and serves as the basis for many modern change models.
FIG. 3.13 Lewin’s Three Step Model of Organizational Change
 Step 1- Unfreezing - Executing change without prior preparation leads to failure.

Therefore, before a change is implemented, it must go through the initial step of
unfreezing and make sure that employees are ready for and receptive to change. Since
many people naturally resist change, main objective during this stage is to create an
awareness of how the current state is hindering the organization in some way. Out dated
behaviours, ways of thinking, processes, people and organizational structures must all be
carefully examined to show employees how crucial a change is for the organization to
survive in a competitive marketplace.
 Step 2 – Change - The second stage of Lewin’s three-step change model is executing
change. Since people are unfrozen, they can begin to move. At this stage, the
organization implements the planned changes on technology, structure, culture, or
procedures. During this step, people begin to learn the new behaviours, processes and
ways of thinking. Success of this stage mainly depends on the education, communication,
support and time that employees receive so that they become familiar with the change. To
ensure smooth implementation of change, employees should be reminded of the reasons
for the change and how it will benefit them once fully implemented.
 Step 3 – Refreezing - If the implemented change has to be successful, the new situation
must be refrozen so it can be sustained over time. Refreezing symbolizes the act of
reinforcing, stabilizing and solidifying the new state after the change. Without this last
step, change will likely be short-lived and employees will attempt to revert to the
previous equilibrium state. Continuous Efforts must be made to ensure that the change is
not lost and is cemented into the organization's culture. Management could employ
positive rewards and acknowledgment of individualized efforts as tools to reinforce the
new state.
3.12.2 Kotter’s Eight-Step Plan for Implementing Change

By building on the three step model proposed by Kurt Lewin, John Kotter of the Harvard
Business School created a more detailed approach for implementing change. He proposed eight
steps that companies must follow while instituting change.
FIG. 3.14 Kotter’s Eight-Step Plan for Implementing Change
 Step 1- Create Urgency - Many change initiatives fall short of their original goal
because the organisation either lacks interest in the proposed change effort or spends too
much energy resisting the change management process. For change to happen,
management should develop a sense of urgency around the need for change. It takes
much more effort than just showing poor sales statistics or talking about increased
competition. Opening a convincing dialogue about current scenario will help to start
people talk about the proposed change.
 Step 2 – Form a Powerful Coalition- For convincing people about the necessity for
change, strong leadership and visible support from key people within the organization is
required. Instead of trying to manage change, organizations have to lead it. Identifying
effective change leaders who refuse to follow the traditional company hierarchy helps in
this process. To lead change, a strong coalition of influential people whose power comes
from a variety of sources such as job title, status, expertise, and political importance has
to be formed and they should work as a team to build urgency and momentum around the
need for change.
 Step 3- Create a Vision for Change - In this stage, a new vision is created to direct the
change and strategies for achieving the vision. When you first start thinking about
change, many great ideas and solutions come in. Connect these concepts to an overall
vision that people can grasp easily and remember. Clarity in vision can help everyone
understand why you're asking them to do something. When people are convinced about
what the organization is trying to achieve, then the directives they're given tend to make
more sense.
 Step 4 – Communicate the Vision - Once the vision is created, it has to be
communicated throughout the organization. The vision has to be communicated
frequently and powerfully so that it is embedded in everything that the firm does. Instead
of calling special meetings to convey the vision, talk about it in every change available.
Encourage employees to use the vision daily to make decisions and solve problems.
When you keep it fresh on everyone's minds, they'll remember it and respond to it. It is
advisable for top management to walk the talk - demonstrate the kind of behaviour that
they want from others.
 Step 5 – Remove Obstacles - Once the first four steps are completed, you want
employees to get busy and achieve the benefits that you've been promoting. In this stage,
organizational members have to be empowered to act on the vision by removing barriers
to change and encouraging risk taking and creative problem solving. For succeeding in
this stage, the following questions have to be addressed: Is anyone resisting the change?
Are there processes or structures that are getting in its way?
 Step 6 – Create Short Term Wins - Since success provides the highest level of
motivation, give your company a taste of victory early in the change process. Within a
short time frame, you have to plan for, create, and reward some quick wins that move the
organization toward the new vision. Without this, skeptics and negative thinkers might
hurt your progress. By creating small achievable targets, your change management team
could produce many small wins that can further motivate the entire workforce.
 Step 7 – Build on Change - According to Kotter, declaring the victory too early is a sure
shot towards failure of change projects. Organizations should consolidate improvements,
reassess changes, and make necessary adjustments in the new programs. You should
follow up on creating continuous short wins so that each success provides an opportunity
to build on what went right and identify what you can improve.
 Step 8 – Anchoring the Change - Finally, the changes should be reinforced by
demonstrating the relationship between new behaviours and organizational success. For
any change to stick, it should become part of the core of your organization. Efforts have
to be made to ensure that the change is visible in every aspect of your organization. This
will help give that change a solid place in your organization's culture.
3.12.3 Action Research

The action research is a change process model that focuses on planned change as a cyclical
process in which initial research about the organization provides information to guide subsequent
action. It involves systematic collection of data and selection of a change action based on what
the analyzed data indicate. This cyclical process of research and action involves considerable
collaboration among organization members and OD practitioners. The five steps involved in the
process of action research are diagnosis, analysis, feedback, action, and evaluation.
 Step 1 – Diagnosis - Diagnosis involves gathering appropriate information and analyzing
it to determine the underlying causes of organizational problems. A normal approach to
this phase begins with observation, proceeds to a semi-structured interview, and
concludes with a questionnaire to measure precisely the problems identified.
 Step 2 – Analysis - In the analysis stage, OD practitioners normally tries to narrow down
the common problems faced by the employees and identify any key patterns. They
convert this information into main concerns, problem areas, and possible actions.
 Step 3 – Feedback - In the feedback stage, employees are given the information gathered
by the OD practitioner that helps them realize the strengths and weaknesses of the
organization under study. At this point, employees with the help of the change agents
develop action plans for bringing about any needed change.
 Step 4 – Action – In this step, organizational members and OD practitioners carry out the
specific action they have identified to correct the problem that exist in the client
organization.
 Step 5 – Evaluation - In the final step of action research process, evaluation of the
effectiveness of action plan is done using initial data gathered as a benchmark.

3.13.1 Definition of Innovation
A simple definition of innovation goes much beyond just new products or services. It means
improving the process of creating, selling or experiencing those products or even improving the
ways we manage the people who do all of the above. According to Scott Berkun, innovation is
significant positive change. That change can apply to products and processes, or it can apply to
people.
3.13.2 Sources of Innovative Opportunity

The 7 sources of innovative opportunity were listed by Peter Drucker in his book “Innovation
and Entrepreneurship.
 The Unexpected - A good manager should consider market place as the number one area
to look for opportunities and should be constantly studying the market. He has to ask the
following questions: Is a particular product or service in greater or lesser demand than
anticipated? Why? Is there a way we can exploit this unexpected success? What has to
happen if we want to convert this success into an opportunity?
 The Incongruity - Incongruity is basically thinking different from competitors and the
society. There is a discrepancy between what is and what should be and it is the key to
developing wildly successful businesses. Customer complaints and unmet wants are the
best places to look for incongruity and they are all the hints you need.
 Process Needs - Process need involves finding an innovative way to fix the weak spots in
your business. This is a task oriented solution meaning that the source of innovation
comes from within your existing capabilities and ways of doing business – not the
market. Essentially your company will want to look for all weak links and eliminate
them.
 Industry and Market Structure Change - Your industry and the market are very
dynamic in nature. Regulatory changes and expansion of product lines happens within a
short time span so that firms should continually be on the watch for this. For example,
when a previously regulated industry becomes open, there is historical precedence for
companies that enter early to be very successful. Apart from that, convergence of
multiple technologies and structural problems that occur from time to time should be
considered.
 Demographics - Demographics is essentially change in populations, income levels,
human capital (education) and age ranges and innovative firms always pay attention to
this. Combining demographic data with segmentation and targeting is a powerful method
of accurately meeting a target market’s desires.
 Changes in Perception - Perception is the way people perceive something and it changes
over time. The way people view life, where they take their meaning from, and how they
feel about things also gets modified continuously and smart companies must pay attention
to this in order to capitalize. Companies should adapt as overall meaning changes in
culture.
 New Knowledge - Business owners must be well updated with the current technology to
survive. With the increasing speed of technological revolution, there are never ending
number of opportunities that open up. New knowledge is about more than just technology
and involves finding better ways of doing things and improving processes.
3.13.3 Linear Model of Innovation

According to the Linear Model of Innovation, technical change happens in a linear fashion from
Invention to Innovation to Diffusion. This model prioritizes scientific research as the basis of
innovation, and plays down the role of later players in the innovation process.
Figure 3.15 Linear Model of Innovation
 Invention - Invention is the process of discovering product or process of producing by
using imagination, thinking and experimenting. Scientific knowledge is the basis of
invention and it is the result of work of individuals who work on their own or as members
of Research and Development (R&D) departments in firms. Government promotes
invention by providing patents, right to sell any innovative process of production,
machines or products in a set time.
 Innovation - There is a direct relationship between innovation and invention. Invention
is discovery and proof of workability whereas innovation is the successful introduction of
new product (invention) in the market, the first use of a new method of producing, or the
creation of new form of business firm. The two types of innovation are product
innovation (improving products and services) and process innovation (improving ways of
production and spreading of these inventions in the market).
 Diffusion - The final step, diffusion involves spreading of inventions through imitating or
copying. When firms try to implement the innovations for taking advantage of new
profits or to slow down disappearing of others, it leads to wide spread imitation of
inventions. Imitation of fast food hamburger by many firms after its introduction by
McDonald's is a classic example of diffusion of innovation.
3.13.4 Organizational Practices that Drive Innovation
Researchers have studied many top companies and people in the fields of management and
innovation to find out the best people management practices at organizations known for
innovation. They found several ways that those companies develop and manage their human
capital and the top 5 practices that drive innovation are as follows:
 Use Technology for Collaboration and Knowledge Sharing – Collaboration
encourages creativity and innovation within the organization. With the help of social
media and conferencing technologies, companies can bring members together (or
virtually together) more often for that collaboration.
 Encourage Innovation as an Organizational Value – The strategy of the top innovative
companies in the world is not restricted to just attract and select the best creative talent.
They nurture a culture of creativity with innovation as the core value so that even average
people have a unique opportunity to enhance their creativity. If you want to build an
innovative culture, you should develop leaders who value creativity and are creative
themselves.
 Link Compensation to Innovation – Studies have found out a positive relationship
between compensation and innovation. Therefore, companies who try to instill innovation
in their organizational members should connect reward with innovation. Deviating from
traditional compensation methods, companies can reward innovation with engaging
work. Research demonstrates that companies that are able to identify their most creative
employees can enhance their creative ability by providing them autonomy to work on
projects that are naturally interesting to them.
 Develop and Review Innovative Ideas - Innovative companies build a system that
utilizes the collective knowledge of everyone and help promote good ideas. Even the best
ideas don’t come fully formed. There is a process to refining, developing and identifying
the ideas with the most market potential. Creating a review process allows this to happen
and signals that innovative ideas are valued.
 Fund Creativity Training and Outside Projects - Creativity isn’t natural. Creative
thinking skills can be cultivated and the most innovative companies fund training
programs to develop them. It might sound counterintuitive to permit funding to develop
projects that are technically outside your organization, but as market boundaries continue
to blur, strategic innovation partnerships become even more important.

3.14.1 Definition of Stress
Stress is defined by psychologists as the body’s reaction to a change that requires a physical,
mental, or emotional adjustment or response. OB specialists defined stress as a dynamic
condition in which an individual is confronted with an opportunity, demand, or resource related
to what the individual desires and for which the outcome is perceived to be both uncertain and
important. In simple terms, it is a state of mental tension and worry caused by problems in your
life, work, etc. Stress is an inevitable feature of life. We may not be able to avoid stress
completely, but we can change how we respond to stress, which is a major benefit. Our ability to
recognize, manage, and maximize our response to stress can turn an emotional or physical
problem into a resource.
3.14.2 Types of Stress

Dr Karl Albrecht, a pioneer in the development of stress-reduction training for business people
defined four common types of stress.
 Time Stress - You experience time stress when you worry about time, or the lack of it.
You worry about the number of things that you have to do, and you fear that you'll fail to
achieve something important. You might feel trapped, unhappy, or even hopeless.
Common examples of time stress include worrying about deadlines or rushing to avoid
being late for a meeting.
 Anticipatory Stress - Anticipatory stress describes stress that you experience concerning
the future. Sometimes this stress can be focused on a specific event, such as an upcoming
presentation that you're going to give. However, anticipatory stress can also be vague and
undefined, such as an overall sense of dread about the future, or a worry that something
will go wrong.
 Situational Stress - You experience situational stress when you're in a scary situation
that you have no control over. This could be an emergency. More commonly, however,
it's a situation that involves conflict, or a loss of status or acceptance in the eyes of your
group. For instance, getting laid off or making a major mistake in front of your team are
examples of events that can cause situational stress.
 Encounter Stress - Encounter stress revolves around people. You experience encounter
stress when you worry about interacting with a certain person or group of people – you
may not like them, or you might think that they are unpredictable. Encounter stress can
also occur if your role involves a lot of personal interactions with customers or clients,
especially if those groups are in distress. For instance, physicians and social workers have
high rates of encounter stress, because the people they work with routinely don't feel
well, or are deeply upset. This type of stress also occurs from contact overload, That
means when you feel overwhelmed or drained from interacting with too many people.
3.14.3 Stress Model

3.14.3.1 Response Based Model
This model was first proposed by Austrian physician, Hans Selye in 1939. The main concept
related to response based model is General Adaptation Syndrome, or GAS. It is a term used to
describe the body's short-term and long-term reactions to stress. Stressors in humans include
such physical stressors as starvation, being hit by a car, or suffering through severe weather.
Additionally, humans can suffer such emotional or mental stressors as the loss of a loved one, the
inability to solve a problem, or even having a difficult day at work. The general adaptation
syndrome represents a three-stage reaction to stress.
FIG. 3.16 Response Based Model
The first stage is the alarm reaction which involves immediate reaction to a stressor. In the initial
phase of stress, humans exhibit a fight or flight response, which prepares the body for physical
activity. During second stage, if the stress continues, the body adapts to the stressors it is
exposed to. Changes at many levels take place in order to reduce the effect of the stressor. At
third stage, the stress has continued for some time. The body's resistance to the stress may
gradually be reduced, or may collapse quickly. Generally, this means the immune system, and
the body's ability to resist disease, may be almost totally eliminated.
3.14.3.2 Lazarus’s Transactional Model

The Transactional model of stress and coping is a framework for evaluating the processes of
coping with stressful events. Stressful experiences are construed as person-environment
transactions. These transactions depend on the impact of the external stressor. This is mediated
by firstly the person’s appraisal of the stressor and secondly on the social and cultural resources
at his or her disposal.
FIG. 3.17 Lazarus’s Transactional Model
When faced with a stressor, a person evaluates the potential threat (primary appraisal). Primary
appraisal is a person’s judgment about the significance of an event as stressful, positive,
controllable, challenging or irrelevant. Facing a stressor, the second appraisal follows, which is
an assessment of people’s coping resources and options. Secondary appraisals address what one
can do about the situation. Actual coping efforts aimed at regulation of the problem give rise to
outcomes of the coping process.
3.14.3.3 Karasek’s Demand-Control Model

Karasek’s demand-control model of occupational stress had a large influence on the job design
and occupational health literature, in part because of its practicability and testability. In
Karasek’s model, workplace stress is a function of how demanding a person’s job is and how
much control (discretion, authority or decision latitude etc.) the person has over their own
responsibilities. This creates four kinds of jobs: passive, active, low strain and high strain.
FIG. 3.18 Karasek’s Demand-Control Model
Crossing the dimensions of strain and latitude give us four stress categories for jobs, as follows:
 P – High Strain Jobs (Low Latitude, High Strain) – Producers are more likely to
augment their strain levels by taking more on without seeking additional latitude, partly
because of their appreciation of challenge and their desire to enjoy individual mastery
experiences, and partly because they take an individual approach to responsibility
ascription, which may cause them to overlook opportunities to ask for more latitude.
Producers enjoy levels of strain that people with other dominant styles would find
excessive. Of all the styles, they are most likely to thrive in high strain jobs.
 A – Passive Jobs (Low Latitude, Low Strain) - As long as the passivity of a job stems
from successfully forestalling disruptions, then that passivity is likely to be highly
satisfying to an administrator. Passivity that stems from the job being either irrelevant or
unimportant will not be satisfying. The administrative style seeks to manage disruptions
by putting processes into place that cope with all contingencies and buffer the vital
variables of the organization, preventing them from disruption. When latitude is reduced
by following a procedure, and when that procedure causes things to proceed smoothly
with low levels of strain, an administrator will take that as evidence of success. The goal
state of administration will be reached, and maintaining that peace will be a pleasure.
 E – Active Jobs (High Latitude, High Strain) - Active jobs are not seen as stressful in
Karasek’s typology, because employees have many protective measures available to them
to reduce the strain. Of all the PAEI styles, it is E that most naturally thrives in active
situations. E is characterized by great ambition and almost no fear surrounding
disruptions of the status quo. Strain is thus a continual consequence of E type work. E
also needs great flexibility and latitude both to stir up problems and seek out solutions.
The active mode most nearly matches the mode in which E naturally works.
 I – Low Strain Jobs (High Latitude, Low Strain) - The combination of high levels of
latitude with low levels of strain indicates that social processes are very significant in the
low strain job. Employees will have a lot of authority relative to their strain levels, and
thus will presumably participate more in the definition and management of tasks than in
other, more stressful working environments.
3.14.3.4 Warr’s Vitamin Model

Warr in his vitamin model suggests that job characteristics affect mental health. Warr suggests
nine (later 10) broad categories of job characteristics, grouping together the principal variables.
Warr’s vitamin model was based on the analogy that as vitamins are required for physical health,
a similar pattern can be observed with the environmental features on the mental health and well-
being of individuals. According to the vitamin model, the availability of vitamins is important for
physical health up to, but not beyond, a certain level. At low levels of intake vitamin deficiency
gives rise to physiological impairment and ill health, but after attainment of specified levels,
there are no benefits from additional quantities. Principal features of the environment are
important to mental health in a similar manner, their absence leads to impairment in mental
health, and their presence beyond a required level does not yield further benefits.
FIG. 3.19 Warr’s Vitamin Model
According to Warr, low levels or extremely high levels of certain environmental features can
have a harmful effect and give rise to an additional decrement (AE) in mental health, depending
on the environmental feature; some can have a constant effect (CE). Within the vitamin model
there are six AD features and three with CE. For example job autonomy (opportunity for control)
is assumed to follow an inverted U-shape or AD pattern; very high levels of job autonomy are
harmful to the employee’s level of mental health, since it involves high job responsibility,
uncertainty and difficulty in decision making.
3.14.3.5 Diathesis Stress Model

This model looks at behaviours as a susceptibility burden together with stress from life
experiences. It is useful to distinguish stressful job conditions or stressors from an individual's
reactions or strains. Strains can be mental, physical or emotional. Occupational stress can occur
when there is a discrepancy between the demands of the environment/workplace and an
individual’s ability to carry out and complete these demands. Often a stressor can lead the body
to have a physiological reaction that can strain a person physically as well as mentally. A variety
of factors contribute to workplace stress such as excessive workload, isolation, extensive hours
worked, toxic work environments, lack of autonomy, difficult relationships among coworkers
and management, management bullying, harassment and lack of opportunities or motivation to
advancement in one’s skill level.
3.14.3.6 Effort-Reward Imbalance Model
This model focuses on the reciprocal relationship between efforts and rewards at work. More
specifically, the ERI Model claims that work characterized by both high efforts and low rewards
represents a reciprocity deficit between high costs and low gains, which could elicit negative
emotions in exposed employees. The accompanying feelings may cause sustained strain
reactions. Working hard without receiving adequate appreciation or being treated fairly are
examples of a stressful imbalance. Another assumption of the ERI Model concerns individual
differences in the experience of effort-reward imbalance. It is assumed that employees
characterized by a motivational pattern of excessive job-related commitment and a high need for
approval (i.e., over commitment) will respond with more strain reactions to an effort-reward
imbalance, in comparison with less overcommitted people.
3.14.4 Work Stressors

Job stress results from various interactions of the worker and the environment of the work they
perform their duties. Following are the most common work stressors.
FIG. 3.20 Important causes of work place stress
 Working Conditions - Research suggests that certain working conditions are stressful to
most people. The proponents of this view point argues for a greater emphasis on working
conditions as the key source of job stress, and for job redesign as a primary prevention
strategy. As a rule of thumb, if working conditions are causing stress levels to be
inappropriate, then either remove the person or condition causing the stress, or remove
the worker from the position. It is very difficult to learn to adapt to the stressor, or to
change the stressor.
 Work Load - In an organizational setting, dealing with workload can be stressful and
serve as a stressor for employees. The three aspects of workload that can be stressful are
quantitative work load, qualitative work load and under load. Workload as a work
demand is a major component of the demand-control model of stress. This model
suggests that jobs with high demands can be stressful, especially when the individual has
low control over the job. In other words, control serves as a buffer or protective factor
when demands or workload is high. This model was expanded into the demand-control-
support model that suggests that the combination of high control and high social support
at work buffers the effects of high demands.
 Long Hours - Nowadays, majority of employees work very long hours. If you look at the
statistics, it can be found that the hours of working of both men and women has increased
substantially compared to the past three decades. Researches shows that there have been a
rise in increasing amount of hours in the work place by employed women, an increase in
extended work weeks by men, and a considerable increase in combined working hours
among working couples, particularly couples with young children.
 Status - An employee's status in the workplace can also affect levels of stress. While
workplace stress has the potential to affect employees of all categories; those who have
very little influence to those who make major decisions for the company. However, less
powerful employees (that is, those who have less control over their jobs) are more likely
to suffer stress than powerful workers. Managers as well as other kinds of workers are
vulnerable to work overload.
 Economic Factors - Economic factors that employees are facing in the 21st century have
been linked to increased stress levels. Researchers and social commentators have pointed
out that the computer and communications revolutions have made companies more
efficient and productive than ever before. This boon in productivity however, has caused
higher expectations and greater competition, putting more stress on the employee.
 Bullying - Bullying in the workplace can also contribute to stress. This can be broken
down into five different categories: Threat to profession status, threat to personal status,
isolation, excess work and destabilization i.e. lack of credit for work, meaningless tasks
etc. This in effect can create a hostile work environment for the employees that, which in
turn, can affect their work ethic and contribution to the organization.
 Narcissism and Psychopathy - Researchers suggest that there tends to be a higher level
of stress with people who work or interact with a narcissist, which in turn increases
absenteeism and staff turnover. People find the same dynamic where there is corporate
psychopath in the organisation.
 Work Place Conflict - Interpersonal conflict among people at work has been shown to
be one of the most frequently noted stressors for employees. Conflict has been noted to
be an indicator of the broader concept of workplace harassment. It relates to other
stressors that might co-occur, such as role conflict, role ambiguity, and workload. It also
relates to strains such as anxiety, depression, physical symptoms, and low levels of job
satisfaction.
 Sexual Harassment - Women are more likely than men to experience sexual harassment,
especially for those working in traditionally masculine occupations. In addition, a study
indicated that sexual harassment negatively affects workers' psychological well-being.
Another study found that level of harassment at workplaces lead to differences in
performance of work related tasks. High levels of harassment were related to the worst
outcomes, and no harassment was related to least negative outcomes. In other words,
women who had experienced a higher level of harassment were more likely to perform
poorly at workplaces.
 Occupational Group - Lower occupational groups are at higher risk of work-related ill
health than higher occupational groups. This is in part due to adverse work and
employment conditions. Furthermore, such conditions have greater effects on ill-health to
those in lower socio-economic positions.
3.14.5 Stress Outcomes
Stress shows itself in a number of ways, such as high blood pressure, ulcers, irritability,
difficulty making routine decisions, loss of appetite, accident proneness, and the like. These
symptoms fit under three general categories: physiological, psychological, and behavioural
symptoms.
 Physiological Symptoms - Physiological symptoms that may occur because of
occupational stress include fatigue, headache, upset stomach, muscular aches and pains,
weight gain or loss, chronic mild illness, and sleep disturbances. Studies show that stress
could create changes in metabolism, increase heart and breathing rates and blood
pressure, bring on headaches, and induce heart attacks. Evidence now clearly suggests
stress may have harmful physiological effects. If exposure to stressors in the workplace is
prolonged, then chronic health problems can occur including stroke. The effects of job
stress on chronic diseases are more difficult to ascertain because chronic diseases develop
over relatively long periods of time and are influenced by many factors other than stress.
Nonetheless, there is some evidence that stress plays a role in the development of several
types of chronic health problems—including cardiovascular disease, musculoskeletal
disorders, and psychological disorders.
 Psychological Symptoms - The simplest and most obvious psychological effect of stress
is job dissatisfaction. Researches show that stress due to high workloads was related to
higher blood pressure and lower emotional well-being. Jobs that make multiple and
conflicting demands or that lack clarity about the incumbent’s duties, authority, and
responsibilities increase both stress and dissatisfaction. Similarly, the less control people
have over the pace of their work, the greater their stress and dissatisfaction. Jobs that
provide a low level of variety, significance, autonomy, feedback, and identity appear to
create stress and reduce satisfaction and involvement in the job. Not everyone reacts to
autonomy in the same way. However, for those with an external locus of control,
increased job control increases the tendency to experience stress and exhaustion.
 Behavioural Symptoms - Research shows a consistent relationship between stress and
behaviour. Behaviour-related stress symptoms include reductions in productivity,
absence, and turnover, as well as changes in eating habits, increased smoking or
consumption of alcohol, rapid speech, fidgeting, and sleep disorders. Low to moderate
levels of stress stimulate the body and increase its ability to react. Individuals then often
perform their tasks better, more intensely, or more rapidly. But too much stress places
unattainable demands on a person, which result in lower performance. Studies showed
role ambiguity, role conflict, role overload, job insecurity, environmental uncertainty, and
situational constraints were all consistently negatively related to job performance. There
is also evidence that challenge stress improves job performance in a supportive work
environment, whereas hindrance stress reduces job performance in all work
environments.
3.14.6 Stress Moderators
Stress moderators are things that help reduce stress and its harmful effects. Stress can sometimes
be useful, but if left unmitigated, it can be detrimental to a person's health, relationships and
peace of mind. The important moderators of work place stress include self efficacy expectations,
psychological hardiness, locus of control and social support.
• Self Efficacy Expectations - According to renowned Psychologist Albert Bandura, self-

efficacy is people's beliefs about their capabilities to produce designated levels of
performance that exercise influence over events that affect their lives. Self-efficacy
beliefs determine how people feel, think, motivate themselves and behave. Such beliefs
produce these diverse effects through four major processes. They include cognitive,
motivational, affective and selection processes. One's sense of self-efficacy can play a
major role in how one approaches goals, tasks, and challenges. Self-efficacy expectations
are beliefs to the effect that one can handle a task or manage stress. Research shows that
high self efficacy expectations contribute to lower adrenaline levels in the blood stream.
• Psychological Hardiness - Introduced by Suzanne C. Kobasa in 1979, psychological

hardiness refers to a set of traits that buffer stress and are characterized by commitment,
challenge, and control. Kobasa described a pattern of personality characteristics that
distinguished managers and executives who remained healthy under life stress, as
compared to those who developed health problems. She also found that those who are
psychologically hardy have these characteristics (a) Commitment to their goals and feel
involved in their lives (b) Challenge is viewed as normal and see it as a way to grow and
(c) Control over their lives where they feel that they can prepare for the challenges.
• Locus of control - This concept was first introduced by Julian B. Rotter in 1954. Locus
of control refers to the extent to which individuals believe they can control events
affecting them. Those who are psychologically hardy also see themselves as having an
internal locus of control. Control allows us to feel that we are not at the mercy of
randomness and that we can influence our lives (a) Internals are those who believe that
they can exercise the control necessary to obtain reinforcement (b) Externals are those
who believe that other people or the situation exercises control.
• Social Support - Social support, the perception or reality of care or assistance from
others, is vital to successful stress management. Sources of social support include the
following: (a) Emotional Concern—listening to the problems of others and expressing
feelings of empathy (b) Instrumental Aid—having material support and services available
to help (after hurricane, the government provides resources) (c) Information—Guidance
and advice that enhances people’s ability to cope (d) Appraisal—feedback from others
about how one is doing to make sense of what has happened (e) Socializing—simple
conversation or recreation with another.
3.14.7 Stress Prevention and Management

We all respond to stress differently so, there’s no one size fits all solution to managing stress.
But if you feel like the stress in your life is out of control, it’s time to take action. Stress
management can teach you healthier ways to cope with stress, help you reduce its harmful
effects, and prevent stress from spiraling out of control again in the future. No matter how
powerless you may feel in the face of stress, you still have control over your lifestyle, thoughts,
emotions, and the way you deal with problems. Stress management involves changing the
stressful situation when you can, changing your reaction when you can’t, taking care of yourself,
and making time for rest and relaxation.
5.14.7.1 Individual Approaches
An employee can take personal responsibility for reducing stress levels. Individual strategies that
have proven effective include implementing time-management techniques, increasing physical
exercise, relaxation training and expanding the social support network.
 Time Management Techniques - Research have shown that well-organized employees
achieve twice as much as the person who is poorly organized. So an understanding and
utilization of basic time management principles can help individuals better cope with
tensions created by job demands. A few of the well-known time management principles
are: (1) making daily lists of activities to be accomplished (2) prioritizing activities by
importance and urgency; (3) scheduling activities according to the priorities set; and (4)
knowing your daily cycle and handling the most demanding parts of your job during the
high part of your cycle when you are most alert and productive.
 Increasing Physical Exercise - Non-competitive physical exercises such as aerobics,
walking, jogging, swimming and riding a bicycle have long been recommended by
physicians as a way to deal with excessive stress levels. These forms of physical exercise
increase heart capacity, lower the at-rest heart rate, provide mental diversion from work
pressures, and offer a means to ‘let off steam’.
 Relaxation Training – Individuals can teach themselves to reduce tension through
relaxation techniques such as meditation, hypnosis and biofeedback. The objective is to
reach a state of deep relaxation, in which one feels physically relaxed, somewhat
detached from the immediate environment and detached from body sensations. Deep
relaxation for 15 or 20 minutes a day releases tension and provides a person with a
pronounced sense of peacefulness. Importantly, significant changes in heart rate, blood
pressure, and other physiological factors result from achieving the conditions of deep
relaxation.
 Social Support Network – Having friends, family to or work colleagues to talk to
provides an outlet when stress levels become excessive. Expanding your social support
network therefore can be a means for tension reduction. It provides you with someone to
hear your problems and to offer a more objective perspective on the situation.
5.14.7.2 Organizational Approaches
Several of the factors that case stress particularly task and role demands are controlled by
management. As such, they can be modified or changed. Strategies that management might want
to consider include improved selection and job placement, training and use of realistic goal
setting, redesigning of jobs, increased employee involvement improved organizational
communication, offering employee sabbaticals and establishment of corporate wellness
programs.
 Improved Selection and Job Placement - Certain jobs are more stressful than others
but, individuals differ in their response to stressful situations. We know individuals with
little experience or an external locus of control tend to be more prone to stress. Selection
and placement decisions should take these facts into consideration. Obviously,
management shouldn’t restrict hiring to only experienced individuals with an internal
locus, but such individuals may adapt better to high-stress jobs and perform those jobs
more effectively.
 Training and Use of Realistic Goal Setting – Training can increase an individual’s self-
efficacy and thus lessen job strain. Individuals perform better when they have specific
and challenging goals and receive feedback on their progress toward these goals. Goals
can reduce stress as well as provide motivation. Employees who are highly committed to
their goals and see purpose in their jobs experience less stress because they are more
likely to perceive stressors as challenges rather than hindrances. Specific goals perceived
as attainable clarify performance expectations.
 Redesigning Jobs – Redesigning jobs to give employees more responsibility, more
meaningful work, more autonomy, and increased feedback can reduce stress because
these factors give employees greater control over work activities and lessen dependence
on others. But as we noted in our discussion of work design, not all employees want
enriched jobs. The right redesign for employees with a low need for growth might be less
responsibility and increased specialization. If individuals prefer structure and routine,
reducing skill variety should also reduce uncertainties and stress levels.
 Organizational Communication - Increasing formal organizational communication with
employees reduces uncertainty by lessening role ambiguity and role conflict. Given the
importance that perceptions play in moderating the stress–response relationship,
management can also use effective communications as a means to shape employee
perceptions.
 Sabbaticals - These sabbaticals —ranging in length from a few weeks to several
months—allow employees to travel, relax, or pursue personal projects that consume time
beyond normal vacations. Proponents say they can revive and rejuvenate workers who
might otherwise be headed for burnout.
 Employee Wellness Programs - These typically provide workshops to help people quit
smoking, control alcohol use, lose weight, eat better, and develop a regular exercise
program; they focus on the employee’s total physical and mental condition. Some help
employees improve their psychological health as well. A meta-analysis of 36 programs
designed to reduce stress (including wellness programs) showed that interventions to help
employees reframe stressful situations and use active coping strategies appreciably
reduced stress levels. Most wellness programs assume employees need to take personal
responsibility for their physical and mental health and that the organization is merely a
means to that end. Most firms that have introduced wellness programs have found
significant benefits. A study of eight Canadian organizations found that every dollar
spent on comprehensive wellness programs generated a return of $1.64, and for high-risk
employees, such as smokers, the return was nearly $4.00.
Review Questions
1. Handy illustrated _____ culture as a building supported by columns and beams.
a) Power b) Role c) Task d) Person.
2. _____ theory is based on the idea that involvement and participation will contribute to a sense
of responsibility and ownership which in turn leads to superior organizational performance.
a) Consistency b) Mission c) Involvement d) Adaptability
3. According to Schein, ________ consists of the middle layer in the organizational cultural
model.
a) Artifacts and symbols b) Espoused values c) Goals d) Assumptions.
4. Which of the following is not a component of cultural web?
a) Control Systems b) Symbols c) Uncertainty avoidance d) Rituals and routines.
5. The first step of action research is
a) Action b) Feedback c) Diagnosis d) Analysis
1. According to consistency theory, organizations tend to be effective because they have

strong cultures that are highly consistent, well-coordinated and well integrated.
2. Time orientation dimension of culture refers to the connection of the past with the current
and future actions/challenges.
3. Kurt Lewin developed a simple and practical model for understanding the change
process.
4. Stress is defined by psychologists as the body’s reaction to a change that requires a
physical, mental, or emotional adjustment or response.
5. The Transactional model of stress and coping is a framework for evaluating the processes
of coping with stressful events.
6. Diathesis model looks at behaviours as a susceptibility burden together with stress from
life experiences.
7. Effort reward imbalance model focuses on the reciprocal relationship between efforts and
rewards at work.
8. Person culture is a rare culture characterized by a loose cluster or a constellation of stars.
Fill in the blanks
1. ________ dimension of culture expresses the degree of inequality that is accepted

between powerful and less powerful members of a society.
2. _________ dimension describes how well people can cope with anxiety.
3. American professor _______ developed a organizational culture model which argued that
organizations do not adopt a culture in a single day.
4. ________ form the outermost layer of the organizational culture.
5. The _________ describes the taken-for-granted assumptions of an organisation and the
physical manifestations of organizational culture.
6. By building on the three step model proposed by Kurt Lewin, _______ of the Harvard
Business School created a more detailed approach for implementing change.
7. According to Scott Berkun, ________ is significant positive change.
8. ________ model was first proposed by Austrian physician, Hans Selye in 1939.
9. Warr in his _______ model suggests that job characteristics affect mental health.
10. ________ is considered as the most important cause of work place stress.
Match the following
1. Charles Handy - Dimensions of culture.

2. Geert Hofstede - Types of organizational culture.
3. Edgar Schein - Cultural Web.
4. Gerry Johnson & Kevan Scholes - Organizational Cultural Model.
5. Kurt Lewin - Eight step plan for change.
6. Philip Kotter - classic three step model
7. Hans Selye - Psychological Hardiness.
8. Suzanne C. Kobasa - Response Based stress model.
9. Julian B. Rotter - Self Efficacy.
10. Albert Bandura - Locus of control.
1. Define Organizational Culture.

2. State the different characteristics of organizational culture.
3. What are the ways adopted for sustaining organizational culture?
4. Explain the tactics used for overcoming resistance to change.
5. What are the various steps involved in planned change?
6. What is linear model of innovation?
7. List the organizational practices that promote innovation.
8. Write short notes about different types of stress.
9. Explain the important causes of work place stress.
10. Name the factors that moderate stress.
1. What are the various determinants of organizational culture?

2. Write about the different types of organizational culture with the help of relevant
diagrams.
3. Describe in detail about Hofstede’s Dimensions of Culture.
4. Which are the four theories used to explain the effect of organization culture on employee
performance.
5. Explain the different levels of organizational cultural model.
6. State the external and internal factors responsible for change.
7. Describe the individual and organizational sources of resistance to change.
8. Write in detail about the three approaches to managing organizational change.
9. State the important models of stress.
10. What are the important stress outcomes?
11. Explain the individual and organizational approaches for managing stress.
Module 4
Organizational Communication
and Development
4.4 Classification Based on Parties – Internally and Externally Directed
Communication. (Vertical, Horizontal and Diagonal)
4.5 Classification Based on Formality – Formal and Informal
Communication.
4.6 Classification Based on Media – Written, Verbal and Non Verbal
Communication
4.7 Classification Based on Other Criteria – Mass, Intrapersonal and
Contents
Interpersonal communication
4.8 Problems of Communication Within an Organization
4.10 Organizational Design.
4.11 Change Management.
4.12 Organization Development.
4.13 OD Interventions.
4.14 Down Sizing.
4.15 Learning Organization.
4.16 Ethical Decision Making in Organizations.
4.17 Factors that Inhibit Ethical Decision making in Organizations.
4.18 Steps to Ensure Ethical Decisions.
Effective Communication is significant for managers in the organizations to perform the basic
functions of management such as planning, organizing, leading and controlling. Without
communication, organization would only be an assembly of men, material and processes which
are inoperative. Quality of communication is directly proportional to effectiveness of the
organization. An individual spend most of their productive time communicating with their
superiors, colleagues and subordinates. Communication gives life and strength to the
organization structure and holds together all the units, sub units, processes, systems, culture
together. When communication stops, the organization will cease to exist. Communication is
crucial for the very existence of the organization. Organizations have to communicate with other
firms, agencies and incorporate various inputs for survival and growth. Communication not only
integrates various sub units but shifts information of value acquired from the environment to
various departments, groups and individuals. An effective communication is a great tool for
successful managers. As the organization develops, the role of communication becomes more
significant. Therefore there is a need for change in the communication systems according to
shape, size, performance, location and the services that the organization offers.
Effective communication is synonymous with effective management whereas ineffective

communication results in frustration, interpersonal conflict and stress. Communication plays a
significant role in building relationship among colleagues since we spend most of the time
interacting with them by way of speaking, listening, reading and writing. Poor communication
leads to unpleasant situations and breaking up of relationships. Verbal and written
communication is critical not only to assure you a job but to retain it. Verbal communication is
the most effective way of communication and considered to be the most important skill that an
employee possesses. Effective communication is important for management to successfully
perform its functions and is an essential ingredient in employee – employer relationship.
Communication is essential to keep entire organization functioning at optimum levels and to
achieve maximum output of our greatest management resource – the people.
4.1.1 Importance of Communication
Effective communication is an important life skill that enables us to better understand and
connect with the people around us. It allows us to build respect and trust, resolve differences and
foster environments where problem solving, caring, affection and creative ideas can thrive. Lack
of effective communication inadvertently leads to conflict and frustration in both professional
and personal relationships. From an organizational perspective, communication is important
because of the following reasons:
 Employee Trust – The best way to build trust among employees is to create a sense of
transparency in your organization by putting in place clear and open communication.
Withholding vital information from employees can result in resentments, tension, and a
feeling of low job security. On the other hand, strong communication can help them feel
valued and trusted. Open communication can reduce feelings of uncertainty and
cluelessness about the state of the company which staff feel secure and safe.
 Relationships – The role played by communication in building relationships between
different stakeholders of the organization is very crucial. An environment of open
communication makes it safe for employees to express their ideas and as a result, you
will have the benefit of your staff's combined experience in coming up with innovative
solutions. Communication prevents employees from feeling isolated, builds teamwork,
and creates a more collegial atmosphere in the office. When relationships are strong,
employees are better able to trust one another and work together more effectively.
 Clarity – A tense environment and negative feelings are the result of confusion and
uncertainty existing in the organization. By making roles and responsibilities clear to
everyone on staff, you can give your employees the information they need to get their
jobs done. This is particularly important when your employees are dispersed or come
from different backgrounds. Communication reduces misunderstandings and cuts the
costs associated with mistakes.
 Collaboration – Effective communication helps your employees to bring the best out of
them through productive team work. When you have multiple departments who are
working on different facets of the same project, communication can streamline the
process and improve the end result. When your staff talks openly to each other, they can
communicate potential issues, requirements and feedback that can make the result
stronger. Communication can ensure that everyone is on the same page and prevent
problems down the road.
 Controlling Process – Communication is a unique tool used by top management to
maintain control over their employees. It helps in controlling organizational member’s
behaviour in various ways. There are various levels of hierarchy and certain principles
and guidelines that employees must follow in an organization. They must comply with
organizational policies, perform their job role efficiently and communicate any work
problem and grievance to their superiors. Thus, communication helps in controlling
function of management.
4.1.2 Objectives of Communication
According to William Scott, communication is a process which involves the transmission and
accurate replication of ideas ensured by feedback for the purpose of eliciting actions which will
accomplish organizational goals. Communication is the process of sending and receiving
messages. However, it is said to be effective only when the message is understood and when it
stimulates action or encourages the receiver to think in new ways. It is one of the three important
elements of an organization along with common purpose and willingness to serve. The main
objectives of communication are the following.
 Exchange of Information - The main objective of business communication is to

exchange information with the internal and external parties. Internal communication
occurs within the organization through orders, instructions, suggestions, opinions etc
where as external communication occurs through advertisements and company
announcements.
 Improved Decision Making and Productivity – Effective communication enhances
individual and organizational productivity. With good communication skills, you can
anticipate problems, make decisions, co-ordinate work flow, supervise others, develop
relationships and promote products and services.
 Enhance Professional Image – In the absence of proper communication, there is a
chance of misunderstanding that happens among people. With the help of effective
communication, one could shape good impressions among people in the organization in
addition to perceiving and responding to the needs of these stakeholders (the various
group you interact with).
 To Develop Plans - Plan is the blueprint of future courses of actions. The plan must be
formulated for attaining organizational goals. In order to develop a plan, management
requires information. In this regard, the objective of communication is to supply required
information to the concerned managers.
 Provide Advice and Order - Advice should not given to the person for pinpointing his
mistakes rather it should be helpful for his improvement. Effective advice promotes
understanding and it can be a two way process if the subordinate staff is given freedom.
Order is an authoritative communication pattern and it is directive a subordinate to do
something. Orders are categorized as written and oral orders, general and specific orders,
procedural and operational orders, mandatory and discretionary order. Order should be
clear and complete. Execution of the order should be in a friendly way.
 To Facilitate Policy Formulation - Policies are guidelines for performing organizational
activities. Policies are also termed as standing decisions to recurring problems. Every
organization needs to develop a set of policies to guide its operation. Preparing policies
also require information from various sources. Therefore, the objective of communication
is to collect necessary information for policy formulation.
 Suggestion and Persuasion – Suggestion is supposed to be very mild and subtle form of
communication. Suggestions are welcomed since it is not obligatory to accept them. It
can be voluntary and anonymous and submitted through suggestion boxes. Persuasion
may be defined as an effort ‘to influence the attitudes, feelings, or beliefs of others, or to
influence actions based on those attitudes, feelings, or beliefs. Through persuasion, you
are trying to convince the other person and encouraging them to look at the situation from
the other person’s angle also.
 Motivation - A pre-requisite of employee motivation is the satisfaction of their financial
and non-financial needs. Financial needs are fulfilled thorough monetary returns.
However, in order to satisfy non-financial needs, management must communicate with
employees on a regular basis, both formally and informally.
 Education and Warning- Education is a very conscious process of communication. It
involves both teaching and learning which organizations provide to their employees in
the form of training. Education is given for management, employees and outside public.
If the employees do not abide by the norms of the organization, warning is a powerful
communication tool. Warming can be general or specific in nature. Specific warning
should be administered in private and after thorough investigation. The aim of the
warning should be the organization betterment.
 Give and Receive Information – The main idea behind communication is to give and
receive information. Managers need complete, accurate and precise information to plan
and organize employee needs and translate them in to reality. Information will cover all
aspects of the business.
4.1.3 Communication process
According to Robert Kreitner, Communication process is a chain made up of identifiable links.

The chain includes sender, encoding, message, receiver, decoding, and feedback.
Communication process begins when the sender wants to transmit a fact, idea, opinion or other
information to the receiver and ends with receiver’s feedback to the sender. It is clear
that communication process is the set of some sequential steps involved in transferring message
as well as feedback. The process requires a sender who transmits message through a channel to
the receiver. Then, the receiver decodes the message and sends back some type of signal or
feedback.
FIG. 4.1 Communication Process

The communication process refers to the steps through which communication takes place
between the sender and the receiver. This process starts with conceptualizing an idea or message
by the sender and ends with the feedback from the receiver. In detail, communication process
consists of the following eight steps:
1. Developing Idea by the Sender – The first step in the communication process is to
develop an idea that has to be transmitted. It is also known as the planning stage since in
this stage the communicator plans the subject matter of communication.
2. Encoding - Encoding means converting or translation the idea into a perceivable form that
can be communicated to others.
3. Developing the Message – Once encoding is done, the sender gets a message that can be
transmitted to the receiver. The message can be oral, written, symbolic or nonverbal. For
example, when people talk, speech is the message; when people write a letter, the words
and sentences are the message; when people cries, the crying is the message.
4. Selecting the Medium - The channel of transmitting the message to the receiver is called
medium. Once the sender has encoded his into a message, the next step is to select a
suitable medium for transmitting it to the receiver. The medium of communication can be
speaking, writing, signaling, gesturing etc.
5. Transmission of Message: In the transmission stage of communication process, the sender
actually transmits the message through chosen medium. In the communication cycle, the
tasks of the sender end with the transmission of the message.
6. Receiving the Message by Receiver - This stage simply involves the reception of sender’s
message by the receiver. The message can be received in the form of hearing, seeing,
feeling and so on.
7. Decoding - When receiver interprets the sender’s message, decoding happens. Here the
receiver converts the message into thoughts and tries to analyze and understand it. Effective
communication can occur only when both the sender and the receiver assign the same or
similar meanings to the message.
8. Feedback - The final step of communication process is feedback. Feedback means
receiver’s response to sender’s message. It increases the effectiveness of communication. It
ensures that the receiver has correctly understood the message. Feedback is the essence of
two-way communication.
Views of organizational communication can be categorized as those that view organizational

communication as one aspect of an organization versus those that see it as the underlying basis of
the organization itself. An example of the former is exemplified by Drenth, who define
communication as the sending and receiving of messages by means of symbols and see
organizational communication as a key element of organizational climate. The latter viewpoint is
reflected by Myers and Myers who define organizational communication as the central binding
force that permits coordination among people and thus allows for organized behaviour, and
Rogers and Rogers who argue that the behaviour of individuals in organizations is best
understood from a communication point of view.
People communicate with each other in a number of ways depending upon the message and the
context in which it is being sent. Choice of communication channel and your style of
communicating also affect communication. So, the are different types of communication are
depicted in FIG. 4.2.
FIG. 4.2 Types of Communication
4.4 Classification Based on Parties – Internally and Externally Directed Communication
The secret behind any successful project is the effective internal and external communications.
The main objective of internal communication is to inform employees of developments that are
influencing their organization, particularly the projects that they are collectively involved with.
However, in a project environment, external communication becomes extremely important as
well, particularly if the project is a controversial one. External communication in a project
environment has the objective of facilitating collaboration and cooperation with various
stakeholders that are outside the formal structure of the organization. The collaboration and
cooperation of these stakeholders is viewed as being essential to project success.
4.4.1 Internally Directed Communication
Managers have widely acknowledged the role played by internal communication in encouraging
participation and is seen as being a vital ingredient for high performance project teams. Studies
have shown that majority of employees and their managers are dissatisfied with the internal
communication system of their organization. In this fast paced business environment, managers
have to live with rapidly changing business conditions that result in a radical change to their
business strategies. This radical change to the business strategies has in turn resulted in
overloading their internal communication process leading to severe criticism from employees.
Employees complain that they were often confused by conflicting messages, were overloaded
with information, had difficulty prioritizing their activities and felt there was insufficient
leadership.
The prevailing tough and competitive environment has forced management to put in place a
communication that enables the management team to formulate and impart clear and consistent
messages to all the employees. There is also a need for management to display leadership by
having face-to-face meetings with employees and holding regular team briefing sessions.
Moreover, a communication strategy only becomes effective when it is a meaningful two-way
process. Employees, either as individuals or as a team, must be given the opportunity to provide
their feedback. However, the provided feedback is to be perceived as being seriously taken into
consideration by management and be visibly seen to be applied in the organization’s decision-
making process.
For the facilitation and enhancement of organizational performance, effective communication is

inevitable. This will happen when management starts treating as if they were part owners of the
organization. Thus, as perceived shareholders, employees through employee-management
meetings will be informed about the organization’s corporate and functional strategies, and about
the organization’s results. With suitable impetus, the communications process can develop into a
programme for different types of organizational improvements, particularly if the process is
linked to the organization’s incentive scheme.
Management should take extra effort to ensure a non-threatening environment during employee-
employer meetings. The atmosphere should support complete openness, honest spontaneous
responses to all types of questions, acceptance of constructive criticism and a request for
feedback. The setting for these meetings must be based on mutual trust where all cards are
placed on the table. It is through such a process that everyone in the organization is focused on
the vision, mission, strategies and objectives of the organization. Hence, the internal
communication process provides direction in terms of where the organization is heading, defines
clear objectives in terms of expected productivity and quality levels, provides momentum by
focusing everyone towards a common goal and offers an opportunity for senior management to
demonstrate leadership qualities and further develop their leadership competencies.
Research indicates the following key principles to keep in mind to meet the internal
communication challenge:
 Communication is About Future – Communication has more to do with future than

with present or past. It is not about what happened last week but what is about to happen.
An efficient internal communication strategy mitigates employee anxiety and uncertainty.
 Communication Must be Made to Happen - It requires proper planning and helps in
supporting staff to prepare information, answer queries, document and follow up
feedback from different sources;
 Communication Requires Honesty – Open management leads to development of trust
among employees. Open management means providing good and bad news, answering
embarrassing questions, discussing issues that management may not know the answers to
or prefer not to contend with.
 Communication Takes Effort - Deciding and preparing relevant information requires
energy. Therefore, adequate time must be devoted to it.
 Consider Various Communication Approaches – Communication can be done in
multiple ways such as newsletters, face-to-face sessions, group sessions, team briefings,
employee forums and many other approaches. Examine the work environment and use
the most appropriate and effective approach.
 Consistency of Message - The communication strategy should be coordinated and be
designed to send a consistent and clear message.
 Develop Communication Skill Competencies - Implement a communication skills
training programme. The training programme will need to be designed for different levels
of employees and not just for managers and supervisors.
 Ensure the Communication Strategy is Affordable - Make sure that the internal
communication strategy is realistic. An internal communication strategy that is elaborate
for the available resources will not work. Therefore, ensure that the internal
communication strategy is designed to operate within the allocated resource availability.
 Establish a Communication Schedule - Develop a regular internal communication
programme for a specific period, say three or six months. The internal communication
programme should incorporate the different approaches to be used, including time
allowed for each activity, the scheduled date, agenda, resource requirements and the
target audience.
 Link the Internal Communication Strategy to Business Goals and Management
Concerns - The linkage between communication and business success is essential and
should be emphasized. Business success is to embrace all issues that are important to the
project and the organization, including management concerns and decisions.
It is vital for management to monitor the internal communication strategy and be particularly
aware of any employee grievances about communication. Grievances about internal
communication may point to a concern that needs to be addressed.
4.4.1.1 Vertical Communication
Vertical communication is the communication where information or messages flows between or

among the subordinates and superiors of the organization. According to Stoner and his
associates, vertical communication consists of communication up and down the organization’s
chain of command. In other words, vertical communication means upward and downward
communication. In this channel of communication, messages do not jump directly from the top
to the bottom or vice versa, but they come through a correct channel, It clearly provides a proper
channel to management to transmit ideas, information, and instructions to the employees and
enables to communicate their responses upwards. There are two types of vertical
communication: Upward and downward communication.
FIG.. 4.3 Vertical Communication
4.4.1.2 Upward Communication
The communication channel which pushes the flow of information upward is known as upward
communication. According to Bartol and Martin, upward communication is the vertical
communication flows from lower level to one or more higher levels in the organization.
Managers of the business organizations have to receive information continually form the levels
below them to know about the progress of works. It occurs when information flow up the
hierarchy from subordinates to superiors. Media of these types of communications are meetings,
suggestions, direct letters, direct communications etc.
FIG. 4.4 Upward Communication
Upward communication keeps managers aware of how employees feel about their jobs, policies
and procedures, and the business in general. Some advantages of upward communication are:
 Development of Plan - The information received from subordinate plays important role
to help development of planning of the organization.
 Feedback - Managers can get feedback from employees that can help improve
organizational development. Employees who are encouraged to provide feedback feel
respected and that they have a say in how the organization is run.
 Employee Motivation - Upward communication system allows lower level staff to
express their attitude or opinion to upper level staff. As a result sub-ordinates are
influenced to work more towards fulfillment to target.
 Mutual Trust - Mutual trust brings employees and managers closer to each other. As
trust grows, relationships between employees and managers become stronger.
 Good Employee - Employer Relationship - Upward communication is participative in
nature. Here, information is invited from lower level executives and employees and on
the basis of this information top executive makes a decision. So, a good relation between
subordinates and bosses should create for the betterment of the organization.
 Introduction of New Policies - Front line employees do the work every day. They can
usually tell managers if something works or doesn't work. Employees can be instrumental
in forming new policies or changing those that are outdated.
 Facilitating Collective Decision - Since upward communication is participative in
nature. It allows the subordinates to convey their feelings, constructive suggestions and
opinions and the work related in the decision making process.
In spite of having many advantages, upward communication it is not free from limitations of
disadvantages. The main disadvantages of upward communication are as follows:
 Loss or Distortion of Information - In upward communication, subordinates may

change their accurate information. Information may be fabricated by the employees to
maintain lengthy channel. So, the conveyed information may lose its originality and top
executive cannot take accurate decision.
 Fear of Inefficiency – Most subordinates are afraid to communicate with their superiors.
Generally, superiors ask questions about the work position and efficiency of employees.
Many individuals are afraid to communicate and share their ideas, constructive
suggestions and opinions with the superiors.
 Slow System - Vertical communication is the slowest communication method because it
requires passing through the various levels of an organization. For this reason, it may
become ineffective.
 Indiscipline - Sometimes employees communicate directly to superior by avoiding
proper channel or chain of command. Here disciplines are not properly maintained.
 Bypassing - In the process of upward communication, sometimes workers directly
approach the top most authority with their suggestions or by passing their immediate
boss. This is harmful to any organization.
 Negligence of Supervisor – Sometimes, top level executives discourage the upward flow
of information and neglect the constructive suggestions and opinions about the work
related issues of the organization.
4.4.1.3 Downward Communication
Downward communication can be defined as the flow of information and messages from a
higher level inside an organization to a lower one. Effective downward communication is crucial
to an organization's success. Creating concise communications and maintaining a respectful tone
help ensure effective downward communication.
FIG. 4.5 Downward Communication in a Bank
There are many advantages for downward communication happening within an organization.
Through this communication, managers provide necessary information and directives to the
subordinates. The major advantages of downward communication are highlighted below:
 Delegating Authority - Delegation means making the subordinates capable in

performing their jobs. Since downward communication starts from higher level, it helps
managers in delegating authority to the right persons.
 Transferring of Information - - The top management focuses on developing plans,
policies, strategies, procedures etc and downward communication plays a significant role
in communicating these to the lower levels of the organization.
 Maintaining Good Employee-Employer Relationship - Downward communication
helps to create and maintain good employee - employer relationship in the firm. When
top management communicates with their subordinates sincerely and courteously, it
develops good interpersonal and inter-group relationships between management and
works. In turn, this will motivate the employees and ensure good labor management
relation in the organization.
 Adhering to Hierarchy - Downward communication takes place by following the
established chain of command of the organization. Thus, it reduces the chance of sending
message to someone through by-passing the immediate subordinate.
 Improving Efficiency - Downward communication provides necessary guidance, orders,
instructions and explanations of various complex issues to the subordinates that
ultimately increase the efficiency of the employees.
Even though downward communication provides many advantages to the organization, it is not
free limitations. The major disadvantages are discussed below:
 Time Consuming - Downward communication is a time consuming process. In this

communication, information flows through different levels of hierarchy. As a result,
when information reaches the lower level workers, it may have lost its significance or
utility.
 Worsening of Relationships – When top management relies heavily on downward
communication, worsening of relationship between employee and employer happens.
This happens because it does not provide any scope for direct communication between
them.
 Misrepresentation of Information - Downward communication also suffers form
problem of misrepresentation of message. People have the tendency to modify or
manipulate information. Therefore, information is passed from one individual to another
or form one level to another and authenticity of information is lost.
 Absence of Feedback - Lack of proper feedback is a major disadvantage of downward
communication. The top-level executives usually place little or no importance to the
messages received from subordinates. Superiors hardly seek feedback from the
subordinates. Due to negligence of the superiors, subordinates also seldom send
feedback. As a result, the entire system lacks improvement.
 Creation of Frustration - Downward communication is directive in nature. This type of
communication hardly allows the subordinates to discuss any matter with their superiors.
Moreover, the subordinates are compelled to follow the orders and instructions of the
superiors. Such coercion creates frustration in the mind of the employees.
4.4.1.4 Diagonal Communication
Diagonal communication can be referred to as cross functional communication happening

between employees at different levels of the organizational hierarchy. It involves higher level
management communicating to lower level management about various aspects related to the
future of the organization.
FIG. 4.6 Diagonal Communication
There are many advantages for diagonal communication happening within an organization. The
major advantages of are highlighted below:
 Coordination - Diagonal communication serves the important purpose of coordination

through informal meetings, formal conferences, lunch hour meetings, general notices etc.
 Practicable – It is a known fact that not all communication takes place strictly on the
lines of organizational hierarchy, i.e., downwards or upwards.
 Improving Employee Morale - By providing opportunities to lower level workers to
interact with managers in informal meetings, it improves morale of employees and
further commitment to the organisation. More and more organizations are now
encouraging diagonal communication and building up bonhomie.
Even though diagonal communication provides many advantages to the organization, it is not
free limitations. Its major disadvantages of diagonal communication are discussed below:
 Fear of Infringement - The superior may feel it as an infringement when his subordinate
has been given undue importance and that he has been by passed.
 Resistance to Compliance - The superior may not implement the suggestion as he has
not been consulted.
 Anarchy - The lack of accepted procedures may lead to internal anarchy and external
animosity.
4.4.1.5 Horizontal Communication
Horizontal communication can be defined as the flow of messages across functional areas on the
same level of an organization. Effective use of horizontal communication in work settings can
improve productivity by making information sharing, problem solving, collaboration, and
conflict resolution more efficient. Issues with horizontal communication can arise from
territoriality, rivalry, specialization, lack of motivation, and rivalry.
FIG. 4.7 Horizontal Communication
There are many advantages to horizontal communication and some of them are as given below.
 Group Activities - In this system of communication, a department is well known to other

department and can exchange their affection. So, group activities and direction of the
sound work program will be easier.
 Coordination - Coordination is the most important objective of horizontal
communication. Coordination of factions between and among different departments and
person is vitally important for smooth functioning of organizational activities. Lack of
coordination may cause disastrous effect on the performance of an organization.
Horizontal communication helps the concerned authority to bring coordination among the
various departments of the organization.
 Quick Communication - Horizontal communication takes place more quickly than other
communication systems, because here the information flows at the same levels of officers
and there are no formal layers in the organization.
 Dynamism in Work - Horizontal communication helps to establish dynamic working
environment as all the personnel in the various departments work in a coordinated way.
The aim of horizontal communication is to bring congenial working atmosphere in the
organization.
Horizontal communication is not free from limitations. The major disadvantages of this type of
communication are as follows:
 Jealousy among Superiors - This is one major drawback of horizontal communication.

If there is jealousy or misunderstanding existing between any two persons of equal status,
it will not allow the smooth functioning of organization.
 Information Overload - Since information is less filtered in horizontal communication,
one must sort through a greater amount of data which may lead to overload.
 Disruption of Organizational Hierarchy - If there is too much horizontal
communication, both the employees at the junior level and seniors at the higher level are
never consulted or even informed. Thus, it is likely to disrupt the organizational
hierarchy.
 Over Specialization - Specialization is a problem that often happens when organizations
do not have uniformity within departments, causing communication difficulties.
Specialization can occur with procedures or vocabulary used by different departments.
When this occurs organizations have trouble functioning properly and do not run
smoothly.
 Lack of Motivation - Horizontal communication often fails simply because organization
members are unwilling to expend the additional effort that it requires. It may require
contacting with people in units and rules of interaction may be unclear. Sometimes we do
not really know all people. The need to communicate with them makes us uneasy or takes
too much time.
FIG. 4.8 Types of Internal Communication
4.4.1.6 Comparison Between Horizontal and Vertical Communication

Horizontal and vertical communications are the two different types of internal communication.
These two types of communications differ in the following ways:
FIG. 4.9 Comparison Between Horizontal and Vertical Communication
4.4.2 Externally Directed Communication
The main objective of external communications is to facilitate cooperation and collaboration

with the various stakeholders that are outside the formal structure of the organization. Different
channels of communications such as internet, print and broadcast media, face-to-face meetings
and establishing virtual discussion forums are used for external communication. The choice of
the type of communication channels depends on the nature of the relationship with the specific
stakeholder. For example, when contractors and suppliers of a firm are considered as external
stakeholders, the major channel of communication could be the management information
systems of the respective organizations, to procure supplies, track orders and initiate payments.
External communication should be interactive and bi-directional. In other words, it should be a
two-way communication process similar to internal communication. External communication
should be sensitive to the requirements of the organization and the stakeholders with whom the
organization intends to communicate. The content and form of external communications should
be developed in a participatory manner, to foster cooperation and collaboration. External
communications should be objective, use accurate and reliable data sources, and be clear and
accessible to its intended audiences.
4.4.2.1 External Stakeholders
The complexity of external communication can be attributed to the fact that there are various
stakeholders involved with entirely different agendas and objectives. Stakeholders may be
categorized into five groups, namely clients, investors and shareholders, contractors and
suppliers, employee unions and society in general.
 Clients - Manager should maintain close contact with the clients on a regular basis to
ensure that the eventual project outcomes match the requirements and expectations of the
client. First, it is important that there is a formal project scope and contract that is explicit
and defines in a clear manner the project deliverables and outcomes. Second, there must
also be a formal project change management process. If the scope of the project is to be
amended, the amendments must be clear and the consequences of the changes be made
known to all concerned, particularly the client. The objective of the external
communication process at this level is to seek collaboration from the client.
 Investors and Shareholders – Complete information regarding the position of the firm
in terms of vision and future potential, finance and competitiveness should be conveyed
on a regular basis to all the investors and shareholders. This helps them in making
prudent investment decisions. Management must seek to be informed by investors and
shareholders. Management need to know the financial expectations of the investors and
shareholders. They need to know the attitudes and values of the majority of the investors
and shareholders towards specific issues. For instance, investors and shareholders may
not want to see the organization undertake projects which have military implications or
projects that arouse environmental controversy.
 Contractors and Suppliers – They are special type of stakeholders having dual external-
internal roles. These stakeholders are likely be associated to the information management
systems of the firm and vice versa. The communication process is crucial because the
contractors and suppliers, although independent from the firm, must abide by the
production practices and quality levels stipulated by the organization. Therefore, the
organization must keep these stakeholders informed of its management practices and
quality standards. Again, the communication process is two ways. Contractors and
suppliers must keep the organization informed about task performance, particularly the
specific deliverables.
 Employee Unions – Avoiding industrial disputes is one of the main objectives of the
external communication. These problems may range from a change in work practices to
work safety. Employee unions are also a specific type of stakeholder because they are
considered to be external, yet they represent the project team members, who are internal.
Management should aim through its internal communication strategy to resolve employee
grievances before they are escalated to the employee unions. Often industrial disputes
occur because of a severe breakdown of the internal communication process. Industrial
disputes literally destroy project team harmony.
 Society – Even though general public are not directly concerned or interested in the
activities of the organization, the concerns may turn emotional at times. Emotional issues
often transform into angry protests that may eventually become violent. For instance, no
one would be keen to have a waste management plant erected in their region, even if the
plant is seen as having an environmentally friendly objective.
The external communication strategy must be aimed at obtaining as much input as possible from
the public about the specific concerns, and providing reliable and honest information about the
threats and opportunities of the project to mitigate the concerns of the general public of the
relevant region. In addition, the external communication strategy should aim at convincing the
public that the threats will be addressed and resolved. The objective of the external
communication process at this level is to seek cooperation rather than collaboration.
4.4.3 Comparison of Internally and Externally Directed Communication
Internal communication is the process of exchanging information among the people of different
level or internal participants within the organization. On the other hand, external communication
is an exchange of information and messages between an organization and other organizations,
groups or individuals outside its formal structure. The important differences between internal and
external communication are as follows:
FIG. 4.10 Comparison between Internal and External Communication
4.5 Classification Based on Formality – Formal and Informal Communication.
Communication plays a crucial role in everybody’s life. People exchange their thoughts,
information, opinions and feelings by communicating. Communication can be in form of verbal
i.e. written or oral, or non-verbal i.e. with help of sign language, facial expressions, body
movements, eye contact, gestures or rate or pitch of voice. In any organization, verbal
communication could be divided into two forms : formal and informal.
FIG. 4.11 Formal and Informal Communication
4.5.1 Formal Communication
According to Oregon State University, formal communication is a system of passing messages

and information between positions within an organization through officially designated channels.
The content of the communication is related to the organization’s activity and the work. It
consists of verbal messages, nonverbal messages, written, under the shape of letters, telephone
messages, radio messages, printed or internal notes. Usually, all formal communications are
recorded and kept in the organization’s evidence. Examples of formal communications are given
by work commands, reports and financial evidence, reports over sells / inventory, statements
referring to the company’s policies, post descriptions, etc.
The formal communication can sometimes take place on the horizontal, along the parallel
directions of authority. The formal communication network from an organization along with the
keeping spaces of these communications, are serving to more purposes. It defines the channel on
which will be sent important messages. It will be creating a transmitting plan of this information,
both for the transmitter and for the receivers. It will be indicating the direction towards the
persons who will react and to the persons who need to be informed about these actions, their
steps and result. It offers an information storage space which will be necessary on planning the
operations and control. It creates an ordered system for the superiors and subordinates, in order
to keep each other informed constantly.
Following are the chief characteristics of formal communication:
 Written and Oral - Formal communication can both be written and oral. Daily works
are handled through oral communication, while the policy matters require written
communication.
 Formal Relations - This communication is adopted among those employees where
formal relations have been established by the organisation. The sender and the receiver
have some sort of organizational relations.
 Prescribed Path - The communication has to pass through a definite channel while
moving from one person to another. For example, to convey the feelings of a worker to
the manager, the foreman’s help has to be sought.
 Organizational Message - This channel is concerned with the authorized organizational
messages only and the personal messages are out of its jurisdiction.
 Deliberate Effort - This channel of communication is not established automatically but
effort has to be made for its creation. It is decided keeping in view the objectives of the
organisation.
The main advantages of formal communication are given below:
 Maintenance of Authority - Formal communication maintains constant relations among

the superiors and the subordinates as a result of whom the dignity of the line superiors is
maintained. Consequently, it is convenient to control the subordinates and fix their
responsibility which is absolutely needed for effective and successful control.
 Ease of Cooperation and Coordination - Cooperation and coordination is very much
essential to carry out the business activity smoothly. Formal communication is a part of
coordination. So, coordinated activities can be done properly and easily through formal
communication.
 Clear and Effective Communication - In formal communication, there is a direct
contact among the managers and the subordinates. Both understand the capability, habits,
feelings, etc. of one another. Managers know as to when and under which conditions their
subordinates need information. In this way, this communication is capable of making
available timely information. Hence, it is clear and effective.
 Maintenance of Discipline - Under the formal communication system the workers are
bound to be careful to their own duty. So it makes discipline in the organization.
 Orderly Flow of Information - The information has to pass through a definite route
from one person to another. Hence, the flow of information is systematic.
Following are the disadvantages or limitations of formal communication:
 Work Overload - In a modern business organisation, a lot of information and messages

and other things have to be communicated. Under formal communication, they are routed
through a definite channel and this consumes much of the time of the superiors. Thus,
some other important works are left unattended.
 Wastage of Time - Top level management communicates with their employees by
maintaining the board of succession, not by-passing any executive or any level. That is
why it takes a lot of time and it consumes much time of the concerned person.
 Distortion of Information - This method can be a hindrance in the flow of information.
Sometimes the distance between the sender and the receiver is so big that the information
has to pass through many hands and by the time it reaches the receiver it is distorted.
Thus it fails to serve its purpose.
 Inflexibility – Normally, the formal communication is inflexible. If somebody out of the
channel intends to change his views it is not possible. Even when it is needed to change,
it is very much difficult.
 Indifferent Officers - The officers do not pay much attention to the suggestions and
complaints of the subordinates. In such a case, a subordinate may come lose his faith in
the effectiveness of communication.
4.5.2 Informal Communication
Informal communication occurs outside an organization's established channels of sending and

receiving messages. It frequently crosses boundaries within an organization and is commonly
separate from work flows. It has become increasingly important in maintaining the interpersonal
relationships and networks that facilitate getting work done. Informal communication takes place
due to the individual needs of the members of an organization. Normally, such communication is
oral and may be expressed even by simple glance, sign or silence. Informal communication, is
implicit, spontaneous, multidimensional and diverse. It often works in group of people, i.e. when
one person has some information of interest; he passes it on to his informal group and so on.
For strengthening the formal channels of communication, organizations can utilize informal
channels. It can be used for expressing certain information that cannot be channeled via the
official channels. It satisfies the people desires to identify what is happening in the organization
and offers an opportunity to express dreads, worries and complaints. Informal communication
also facilitates to ameliorate managerial decisions as more people are involved in the process of
decision-making. Informal communication is also called grapevine communication because there
is no definite channel of communication. Under it, some information passes through many
individuals and covers a long distance making its origin obscure. This is exactly like a grapevine
where it is difficult to find the beginning and the end.
Informal communication has the following characteristics:
 Formation through Social Relations - This communication is born out of social

relations which mean that it is beyond the restrictions of the organisation. No superior-
subordinate relationship figures therein. A more sociable superior can gather much
information through this channel.
 Two types of Information - Through this communication, information about the work
and the individual can be collected.
 Uncertain Path - Since it is beyond the restrictions of the organisation, it follows no
definite channel. Like a grapevine, it moves in a zigzag manner.
 Possibility of Rumour and Distortion - Responsibility for the true or false nature of
communication does not lie on any individual and, therefore, not much attention is paid
to its meaning while communicating. Consequently, the rumours keep floating.
 Quick Relay - Informal communication makes news spread like wildfire. Not only this,
people start adding something of their own which sometimes changes the real meaning of
the communication.
The advantages of informal communication are given below:
 Interpret - The information is given by the top level management under the formal
system. It is easy for the employees to take the explanation by informal system. So this
system plays a vital role to complete the work properly.
 Free Environment - Informal communication is done in a free environment. Free
environment means that there is no pressure. The reactions of the employees can easily
be collected.
 Improved relationship - Any problem between the workers and the management can be
solved by informal system. So it makes good relationships among the employees and the
management.
 Easy Solution of the Difficult Problems - There are many problems which cannot be
solved with the help of formal communication. There is more freedom in informal
communication which helps the solution of difficult problems.
 Increase Efficiency - Under the informal system, the employees discuss their problem
openly and they can solve it. For this, the work is done properly and it develops the
efficiency of the employee.
The disadvantages of informal communication are as follows:
 Unsystematic Communication - This communication is absolutely unsystematic and it

is not necessary that information reaches the person concerned.
 Difficulty in Controlling - Under informal communication system, no established rules
or policy is obeyed. So it is very much difficult to control the information.
 Unreliable Information - Most of the information received through this communication
is undependable and no important decision can be taken on its basis.
 Misunderstanding - Under this system, generally, the employees do not obey the formal
authorization system. So it creates the opportunity to develop misunderstanding.
 Non-cooperation - Informal communication system sometimes develops the adversary
culture among the employees. So they are not to be cooperative with each other and their
efficiency may be reduced.
4.5.3 Comparison between Formal and Informal Communication
Formal communication is the process of exchanging information by following the prescribed or

official rules, procedures, systems, formalities, chain of command etc. in the organizational
structure. On the other hand, informal communication is the process of spontaneous exchange of
information among various people of different status in the organizational structure. The
difference between formal and informal communication are as follows:
FIG. 4.12 Comparison between Formal and Informal Communication

4.6 Classification Based on Media – Written, Verbal and Non Verbal communication
4.6.1 Written Communication
Written communication plays a crucial role is succeeding in the business world. It can be
considered as an innovative activity of the mind and it is important for preparing worthy
promotional materials for business development. Effective writing involves careful choice of
words, their organization in correct order in sentences formation as well as cohesive composition
of sentences. Also, writing is more valid and reliable than speech. But while speech is
spontaneous, writing causes delay and takes time as feedback is not immediate.
Written communication is inevitable in many business situations. It helps in putting in place

apparent principles, policies and rules for running of an organization. Since written
communication is permanent in nature, it is useful where record maintenance is required. It
assists in proper delegation of responsibilities. While in case of oral communication, it is
impossible to fix and delegate responsibilities on the grounds of speech as it can be taken back
by the speaker or he may refuse to acknowledge. Written communication is more precise and
explicit. Effective written communication develops and enhances an organization’s image. It
provides ready records and references. Legal defenses can depend upon written communication
as it provides valid records.
Amidst these advantages, written communication is not free from limitations. It is very costly in
terms of stationery and the manpower employed in writing/typing and delivering letters. Also, if
the receivers of the written message are separated by distance and if they need to clear their
doubts, the response is not spontaneous. Written communication is time-consuming as the
feedback is not immediate. The encoding and sending of message takes time. Effective written
communication requires great skills and competencies in language and vocabulary use. Poor
writing skills and quality have a negative impact on organization’s reputation. Too much paper
work and e-mails burden is involved.
4.6.2 Oral/ Verbal Communication
Verbal communication is the use of sounds and words to express yourself, especially in contrast
to using gestures or mannerisms (non-verbal communication). It includes face-to-face
conversations, speech, telephonic conversation, video, radio, television, voice over internet. In
oral communication, communication is influence by pitch, volume, speed and clarity of
speaking. An example of oral communication is saying “No” when someone asks you to do
something you don't want to do. With advances in technology, new forms of oral communication
continue to develop. Video phones and video conferences combine audio and video
communication so that workers in distant locations can both see and speak with each other. Other
modern forms of oral communication include Podcasts (audio clips that you can access on the
Internet) and Voiceover Internet Protocol (VoIP), which allows callers to communicate over the
Internet and avoid telephone charges.
There are two types of verbal communication: Interpersonal communication and public speaking.
While later involves one or more people delivering a message to a group, former generally refers
to a two-way exchange that involves both talking and listening. Signs and symbols are the major
signals that make up verbal communication. Words act as symbols, and signs are secondary
products of the underlying message and include things like tone of voice, blushing and facial
expressions. Verbal communication has many purposes, but its main function is relaying a
message to one or more recipients. It encompasses everything from simple one-syllable sounds
to complex discussions and relies on both language and emotion to produce the desired effect.
Verbal communication can be used to inform, inquire, argue and discuss topics of all kinds. It is
vital to teaching and learning, as well as forming bonds and building relationships with other
people.
Oral communication which is more personal and less formal in nature is preferred over written
communication in many situations. In circumstances where time is limited and quick decisions
have to be taken, oral communication is ideal. It is very flexible so that you can discuss various
aspects of an issue and make decisions more quickly than you can in writing. Oral
communication can be especially effective in addressing conflicts or problems. Talking things
over is often the best way to settle disagreements or misunderstandings. Finally, oral
communication is a great way to promote employee morale and maintain energy and enthusiasm
within a team. But in situations that demands written record, you will find that even strong
verbal skills are not a substitute for putting things in writing. Apart from that, oral
communication tends to be less detailed and more subject to misunderstanding than written
communication. It's best to always think carefully about which method of communication best
fits your objective.
4.6.3 Non – Verbal Communication
Nonverbal Communication has been defined as communication without words. It includes

apparent behaviours such as facial expressions, eye contact, touching, and tone of voice, as well
as less obvious messages such as dress, posture and spatial distance between two or more people.
It is all about the body language of speaker. Nonverbal communication helps receiver in
interpreting the message received. Often, nonverbal signals reflect the situation more accurately
than verbal messages. Sometimes nonverbal response contradicts verbal communication and
hence affects the effectiveness of message. The components of non verbal communication are:
 Kinesics - Kinesics can be defined as the interpretation of body motion communication

such as facial expressions and gestures, nonverbal behaviour related to movement of any
part of the body or the body as a whole. For example, in Argentina, to raise a fist in the
air with knuckles pointing outwards expresses victory. But in Lebanon, raising a closed
fist is considered rude.
 Oculesics – Oculesics refers to the study of eye contact and pupil dilation in terms of
nonverbal communication. Eye contact indicates interest, opennesss, and sometimes
even arousal, though staring can be interpreted as a sign of hostility. In addition to this,
lack of eye contact also transmits a message, oftentimes that the listener is bored and/or is
not paying attention. For example, it takes only 90 seconds to 4 minutes to decide
whether you are interested in someone or not. Researches show that 50% of this first
impression comes from non-verbal communication which includes oculesics
 Haptics - There are several types of touch, including functional-professional, social-
polite, friendship-warmth, love-intimacy, and sexual-arousal touch. At the functional-
professional level, touch is related to a goal or part of a routine professional interaction,
which makes it less threatening and more expected. For example, we let barbers,
hairstylists, doctors, nurses, tattoo artists, and security screeners touch us in ways that
would otherwise be seen as intimate or inappropriate if not in a professional context. In
Thailand, touching someone's head may be considered as rude.
 Proxemics – Proxemics is the study of space and how we use it, how it makes us feel
more or less comfortable, and how we arrange objects and ourselves in relation to space.
There are 4 kinds of distance that people generally use in communication such as public,
social, personal and intimate space. This can vary by place and different cultures have
different standards. These are known as realms of personal territory. While the amount of
personal space when having an informal conversation should vary between 18 inches - 4
feet, the personal distance needed when speaking to a crowd of people should be around
10-12 feet.
 Chronemics - Chronemics can be defined as the interrelated observations and theories of
man's use of time - – the way in which one perceives and values time, structures time,
and reacts to time frames communication. Time perception plays a large role in the
nonverbal communication process. Time perceptions include punctuality, willingness to
wait, and interactions. The use of time can affect lifestyle, daily agendas, speed of
speech, movements, and how long people are willing to listen. For example, an employee
will not worry about running a few minutes late to meet a colleague, But a manager who
has a meeting with the CEO, a late arrival will be considered as a nonverbal cue that he /
she does not give adequate respect to his superior.
 Paralinguistics - Paralinguistic features in verbal communication are the vocal signals
beyond the basic verbal message. Paralinguistic elements in a person's speech convey
meaning beyond the words and grammar used. Examples of paralinguistic features
include pitch, rate, quality of voice and amplitude. Forms of paralanguage can also
include laughter or imitative speech. Prosody, which is the rhythm, pattern, stress and
intonation of a person's speech, is also a form of paralanguage. People express meaning
not just in what they say but in the way they say it. The paralinguistic features employed
by a speaker provide nuanced meaning, communicate attitudes and convey emotion.
 Physical Appearance: Your physical appearance always contributes towards how people
perceive you. Neatly combed hair, ironed clothes and a lively smile will always carry
more weight than words.
4.7 Classification Based on Other Criteria – Mass, Intrapersonal and Interpersonal
Communication
4.7.1 Mass Communication
Mass communication can be defined as the process in which an individual, group or organization
sends a message through a channel of communication to a large group of anonymous and
heterogeneous people and organizations. It is the study of how people and entities relay
information through mass media to large segments of the population at the same time. You can
think of a large group of anonymous and heterogeneous people as either the general public or a
segment of the general public. Channels of communication include broadcast television, radio,
social media, and print. The sender of the message is usually a professional communicator that
often represents an organization. Mass communication is an expensive process. The study of
mass communication is chiefly concerned with how the content of mass communication
persuades or otherwise affects the behavior, attitude, opinion, or emotion of the person or people
receiving the information.
4.7.2 Intrapersonal Communication
When an individual communicates with himself, it is called intrapersonal communication. This

type of communication takes place entirely within a single individual. The main objectives of
intrapersonal communication include clarifying things and reflecting on complex ideas. There
are several levels of activity in intrapersonal communication:
 Internal Discourse - It involves analysis and rendering information. Psychologists

include various dreaming processes in this level of intrapersonal communication.
 Solo Vocal Communication - It is performed in order to clarify things or to be relieved
of certain thoughts.
 Solo Written Communication - At this level of intrapersonal communication, an
individual expresses his thoughts on paper, being the sole possible reader of the written
text. The example of this is a personal diary or an imaginary dialogue between two
“identities” of a person via email. This level of intrapersonal communication has to be
distinguished from the writings that are addressed to a future audience, such as poetry,
love letters, etc.
4.7.3 Interpersonal Communication
Interpersonal communication is the process by which people exchange information, feelings, and
meaning through verbal and non-verbal messages. Here, two or more individuals are provided
with the means of interaction with one another and are able to exchange information. They can
be direct or mediated, depending on whether the sender and the receiver of the information in the
process of communication use media, such as telephone or email. If technology is required for
interpersonal communication, then it is a mediated communication. If, on the other hand, two
people are exchanging information face to face, then it is a direct communication. Direct
communication is characterized by immediacy and primacy. It happens here and now and has a
stronger feedback component than a mediated interpersonal communication. It is preferable for
people to discuss via means of direct communication things that require immediate feedback in
order to continue the discussion.
FIG. 4.13 Interpersonal Communication
Interpersonal communication can be categorized by the number of participants.
 Dyadic communication involves two people. For example, a husband and a wife are
discussing things during dinner.
 Group communication involves three or more persons. Specialists cannot not agree on
what should be the maximum number of people involved in order to categorize
interpersonal communication as group communication. Often group communication is
done for the purpose of solving a problem or making an important decision. Examples:
focus group targeting marketing issues, United Nations assembly etc.
 Public communication involves a large group with one speaker. There is only a minimal
feedback in the course of public communication. Sharing knowledge, entertainment and
ideology-charged speeches are common forms of public communication. Example:
University lectures or political campaign speeches.
SI NO Intrapersonal Communication Interpersonal Communication
1 Requires only one person Requires two or more persons
2 Takes a form of thinking and analysis Takes a form of exchanging ideas
3 Information is circuited A flow of information
4 Invisible Visible
FIG. 4.14 Comparison between Intrapersonal and Interpersonal Communication
4.8 Problems of Communication within an Organization
4.8 1 Barriers to Communication
There are many barriers to communication and these may occur at any stage in the
communication process. Barriers will distort the message and intention of the message being
conveyed which may result in failure of the communication process. Effective communication
involves overcoming these barriers and conveying a clear and concise message.
FIG. 4.15 Barriers to Communication
4.8.2 Physical & Environmental Barriers
When environmental and natural condition acts as a barrier in communication, it is considered as

a physical barrier. Organizational environment or interior workspace design problems,
technological problems and noise are the parts of physical barriers.
 Time - The timing of sending a message is very crucial. If a message is not sent in
appropriate time, the message will not have the effect that it should have, as the intention
will not be met. Receiver must get sufficient time to carry out the instruction given in the
communication. If the action on the message is required to be taken in a distant future,
there is a possibility that receiver may forget the content of the message. Inadequacy of
timing and a last minute communication is likely to put too much pressure on the
receiver. Message therefore should be sent at an appropriate time.
 Place – Place in which the communication is happening has an important role in its
effectiveness. If the employees' workspaces are far away from the room of employers',
they will not be able to communicate with the employers, take proper orders, make plans,
get feedbacks and suggest new ideas. They must work through phones or emails. These
mediums have more noise and other technical problems than face to face communication.
In this way, workspace designs act as a physical barrier to effective communication.
 Space - Channels of command and communication should be clearly communicated to all
the members of the organization. Employees should be aware about the power centers.
Authority and responsibility must be clearly defined so that the communication is
directed towards the correct person and quick decision making is achieved. Information
overload is dangerous. Secretary to the various managers must maintain a log book in
which incoming and outgoing messages are recorded. Professional jealousy must not be
allowed to interfere with various communication.
 Climate –Flow of the message is hindered by noise created by environmental factors
such as thunder, rain and wind. Similarly, fluctuating temperature makes people
unfocused on creating the message. If temperature of a place is too high or low, people
cannot concentrate on the information they are sending. It promotes uncomfortable
feelings which lead to environmental and physical barrier to communication. Similar is
the case of improper lightening which impairs proper visual communication.
 Noise – Noise is one of the important physical barriers to effective communication. Noise
may be physical noise, written noise or technological noise. Physical noises are the
disturbances that occur due to outside or background disturbance and environment. This
type of noise occurs in mostly all kinds of communication like face to face, written, etc.
Written noise like bad handwriting or typing is also taken as physical barrier.
Technological noise are the noise that occur in the medium or channel like no sound
while talking on phone or message sending failure in chats. All of the mentioned types of
noises are included as physical communication barriers.
 Choice of Medium - Mediums and channels of communication must be decided upon by
the role it plays, distance that must be covered, disturbances that might arise, etc.
Message can be sent in written, verbal instruction (face to face) or conveyed by electronic
media, on line by telephone or using combinations. Routine messages should be passed
on verbally to subordinates and boss. Important messages should be followed in writing
as a confirmation to verbal conversation. Face to face communication is more effective
because of the body language of sender and receiver. It provides spontaneous solutions to
misunderstanding.
4.8.3 Barriers to Communication by Wrong Choice of Medium
A wrong medium or an inappropriate medium chosen for communicating a message will act as a
barrier to communication. On a shop floor, you cannot use a long written memo of instructions
whereas your information on a new product in the market could be only through an effective and
attractive advertisement. Complementing one medium of communication with another
appropriately can help overcome communication barrier caused by the medium chosen. An oral
reminder in person or over the telephone followed up with a written letter can easily produce the
desired response or expected reaction.
4.8.4 Semantic Barriers
Semantic barriers refer to the obstacles caused in communication due to problems with the
interpretation of word meanings. The meaning of words, signs and symbols might be different
from one person to another and the same word might have hundreds of meanings. So, when a
message is sent by a sender to a receiver, it might be interpreted wrongly in a communication
process causing misunderstandings between them. It also arises due to language, education,
culture and place of origin (dialect or accent) or most likely their experiences. The chief
language-related barriers are as under:
 Badly Expressed Message – Wrong interpretation of the messages can happen as a

result of obscurity of language. This barrier is created because of the wrong choice of
words, in civil words, the wrong sequence of sentences and frequent repetitions. This
may be called linguistic chaos.
 Symbols or Words with Different Meanings – There will be multiple meanings for a
symbol or word. Communication becomes meaningless if the receiver misunderstands it.
For example, the word ‘value’ can have different meanings in the following sentences:
(a) What is the value of computer education these days? (b) What is the value of this
mobile set? (c) Value of our friendship.
 Faulty Translation – An individual receives much information from his superiors and
subordinates. Then, he translates it for all the employees according to their level of
understanding. Hence, the information has to be moulded according to the understanding
or environment of the receiver. If this process is carried out carelessly, the faulty
translation can be a barrier in the communication.
 Unclarified Assumptions – People normally assume that the receiver knows some basic
things and, therefore, it is enough to tell him about the major subject matter. This point of
view of the sender is correct to some extent with reference to the daily communication,
but it is absolutely wrong in case of some special message.
 Technical Jargon - Normally, individuals working in an organization are connected with
some special technical group who have their separate technical language. Their
communication is not so simple as to be understood by everybody. Hence, technical
language can be a barrier in communication. This technical group includes industrial
engineers, production development manager, quality controller, etc.
 Body Language and Gesture Decoding - When the communication is passed on with
the help of body language and gestures, its misunderstanding hinders the proper
understanding of the message. For example, moving one’s neck to reply to a question
does not indicate properly whether the meaning is ‘Yes’ or ‘No’.
4.8.5 Cultural Barriers
Effective communication with people of different cultures is especially challenging. Cultures

provide people with ways of thinking--ways of seeing, hearing, and interpreting the world. Thus,
the same words can mean different things to people from different cultures, even when they talk
the "same" language. When the languages are different, and translation has to be used to
communicate, the potential for misunderstandings increases. In America, people communicate
freely and that is a part of their culture. In Germany, an Indian who is used to being very indirect
with his communication might find their direct way of speaking rude. Being direct is part of the
German culture and it is reflected in the way they communicate. Communication shapes culture
and culture shapes communication.
 Language - When misunderstandings are common among people who speak the same
language, it's not surprising that people from different cultural and linguistic backgrounds
face communication barriers. There are billions of people in the world who do not
understand English or cannot communicate in English properly. Different cultures have
developed their own language as a part of their heritage. People are comfortable in
communicating in their own language but have to work hard to learn new languages. For
instance, if an operations director in Los Angeles asks a contractor in Chile to do
something soon, the two parties may have a different interpretation of the word 'soon.'
Language is a reflection of culture, and different cultures have very different ways of
assigning meanings to words.
 Signs and Symbols – Like language, signs, symbols and gestures conveyed between
people from different cultures is also different. For instance, the sign “thumbs up” is
taken as a sign of approval and wishing luck in most of the cultures but is taken as an
insult in Bangladesh. Similarly, the “V” hand gesture with palm faced outside or inside
means victory and peace in US, but back of hand facing someone showing the sign is
taken as insulting in many cultures.
 Stereotypes – A stereotype is a preconceived notion, especially about a group of people.
It is a belief about a certain group and is mostly negative. Many stereotypes are racist,
sexist, or homophobic. Stereotyping can be done on the basis of many things like
nationality, gender, race, religion, ethnicity, age, etc. For instance, Asian students are
stereotyped to be good at Math which is a positive stereotype. There is also cultural
stereotype of all people following a particular religion as being violent like Islam and it is
negative stereotyping.
 Behaviour and Beliefs – People from different cultures display diverse behaviours and
beliefs which results in miscommunication. For instance, in some cultures, eye contact is
important whereas in some it is rude and disrespectful. Culture also sets specific norms
which dictates behaviour as they have guidelines for accepted behaviour. It explains what
is right and wrong.
 Ethnocentrism – Ethnocentrism is judging another culture solely by the values and
standards of one's own culture. The people of someone's own culture are categorized as
in-group and the other culture is out-group. There is always greater preference to in-
group. There is an illusion of out-group as evil and inferior. This evaluation is mostly
negative. If the culture is similar to us, then it is good and if is dissimilar, it is bad.
Other’s culture is evaluated and assessed with the standard being their own culture.
Ethnocentrism affects the understanding of message, and encourages hostility. For
example, the books in schools use reference of their own culture to describe other
cultures by either showing common things or differences.
 Religion – Since religion creates specific image of the followers, it disrupts
communication. People find it difficult to talk to people who follow different religions.
Religious views influence how people think about others. It creates differences in
opinions. For example, in Pakistan, the Christians have to speak up for their rights as the
majority is of Islam and the Christians are discriminated. There is also a lack of
communication between these religious groups.
4.8.6 Psychological / Attitudinal Barriers
Psychological state of the communicators has a very big impact on the effectiveness of
communication. It was found the psychological disturbances can seriously disrupt
communication process. If the people involved in communication are not emotionally well, they
won’t be able to communicate properly. Every person’s mind is unique and communication does
not work like that in machines or in numbers. The people who are involved in the
communication matter as much as the message For example, if your boss doesn't trust you,
he/she will only send selective information, which makes the communication ineffective.
 Lack of Attention – When an individual is distracted by many other things, he fails to

form proper message, listen to what others tell him, interpret the message as required and
give appropriate feedback. The communication will face problems and becomes
ineffective. A person in tragedy, for instance, does not want to listen to other people
giving advice. A person might be preoccupied by the problems of his professional life or
personal life, which affects both.
 Poor Retention – When memory of the brain has sufficient capacity to store necessary
information, an individual is said to be having excellent retention. Brain does not store all
the information it comes across, but only the ones it deems useful for future. So, half the
information is lost in the retention process. Similarly, brain also loses information that is
old and not taken as useful with time. Extracting the information is also a process in the
formation of message. Here, the brain tries to remember the required information, the
fragments of which have already been lost.
 Lack of Trust – Trust among communicators is crucial for success of the
communication. When they lack trust, negative meaning of the message is derived and
the message is neglected. When a person tries to force his own ideas and opinions, the
receiver does not listen. If the receiver does not agree to the message provided or thinks
of it as a threat, he will not listen to it. Similarly, when the message is not transferred
across to the receiver, the communication fails. For example, If I don’t trust a friend, I
will only give the details, of my personal life which I think are harmless.
 Perception and Viewpoint – Perception is the organization, identification, and
interpretation of sensory information in order to represent and understand the
environment. Each individual has his/he own perception of reality which is shaped from
mental and sensory experiences. Likewise, viewpoint is also a mindset to look at the
world. Sender might have a particular viewpoint that is not shared by the receiver. The
sender does not explain the viewpoint but takes the viewpoint as granted. The message is
not understood by the receiver as must have been understood, creating a barrier to
effective communication.
 Attitudes and Opinions - An attitude is an expression of favour or disfavour toward a
person, place, thing, or event and creates a psychological communication barrier. For
example, a person takes females to be weak which is the person’s perception. He/she tells
that to someone who does not think so. This causes a misunderstanding between the two.
Everything they communicate after that becomes unsuccessful since the view of the
person is already set.
 Emotions – Emotion is any relatively brief conscious experience characterized by intense
mental activity and a high degree of pleasure or displeasure. A preoccupied mind is not
good at communicating. For example, when a person is angry, he might say things he
regret later. Even when listening to someone, an angry person might easily misinterpret
the message. Various other emotions like fear, nervousness, confusion, mistrust and
jealousy affect communication process. For example, a person having extreme moods of
happiness will laugh at anything said to him. The same person when sad will cry or get
angry at insignificant situations.
 Closed Mind and Filtering – Human beings have the tendency to give prime priority to
their problems. Therefore, they tend to filter information that someone is trying to convey
to them. This might be due to mistrust, competition, jealousy, or the view that the
message is insignificant. For example, a senior in a company does not want the junior to
do better at work. The person filters the information and does not provide crucial
information that could help the junior. The junior therefore will not be able to complete
the work properly and progress in ranks. Similarly, when a person is close minded, the
person will have fixed opinions on many things which the person believes resolutely. The
person will interpret any information in a negative way.
 Premature Evaluation – By nature, some people have the tendency to jump into quick
judgments and they usually end up in trouble. They neglect some aspects of the
information such as social, cultural, economic, etc. and often end up taking quick and
wrong decisions. It is important to hear the whole message to make proper judgments
because they are not changed easily after they are once made. For example, a person is in
a hurry and talks on the phone, the person does not listen to half the message and makes
the decision which is wrong in the situation.
4.8.7 Barriers Caused by Varying Perception of Reality
Perception can be defined as the understanding that an individual has about the world around
him. Everybody perceives the world in his own unique way and interprets what has been
perceived in yet another unique way. When we strongly disagree, we simply say “I am sorry, our
perceptions appear to be different”.
 Abstraction – Abstraction refers to condensation of something. While communicating,

all of us unconsciously resort to ‘abstracting’, i.e., keeping to the essentials. We get rid of
what we decide to be superfluous. But the receiver may not be in a position to understand
what we have eliminated. Even though it is necessary for good and effective
communication, abstracting should not be done in certain demanding situations. If done,
it becomes a barrier. When you are instructing a lay and illiterate person about cleaning
the house, you have to tell literally to remove cobwebs, sweep, dust and mop. Abstracting
at this situation may not prove to be useful. The worker may not understand that you
want every step and process to be gone through. But when you give the job to an agency,
you can simply say, I want the house “thoroughly cleaned”. They share your perception
about the job. Good abstracting can remove barriers in communication caused by
unnecessary words and details. In a communication process, if the participants have
different levels of perception, abstraction will be a barrier to communication.
 Slanting – Slanting is another barrier to communication caused by varying perception of
reality. When you get a slanted report, it means that the information shared in it is lop
sided. Expressions such as small ‘crowd’ or a large crowd’ are generally slanted giving
only relative meanings. Instead, if you say a gathering of about five thousand people you
avoid slanting. Communication should also be unaffected by inferences and assumptions.
Most inferences and all assumptions are highly subjective. They tend to become barriers
if they form the basis of a message or information.
4.8.8 Overcoming Barriers to Communication
For achieving operational optimization, it is very important for management to recognize and
overcome barriers to effective communication. This would involve diagnosing and analyzing
situations, designing proper messages and selecting appropriate channels for communicating
these messages. It also includes assisting receivers of messages in correct decoding and
interpretation of the messages and providing for an efficient and effective feedback system.
 Feedback and Upward Communication – Feedback plays a crucial role in bringing

down the extent of misunderstanding happening within the organization. When receiver
gets an opportunity to clarify questions related to message, information can be transferred
more accurately Two-way communication, even though more time consuming, avoids
distrust and leads to trust and openness which builds a healthy relationship between the
sender and the receiver and contributes to effective communication. Upward
communication is strengthened by keeping an open door policy and providing
opportunities for workers to give suggestions. These suggestions should be taken
seriously by the management by acknowledging them and taking appropriate action.
 Improve Listening Skills – Experts have stated that listening is the other half of talking
and is considered as an important component of the communication process. Listening is
an active psychological process and goes beyond just hearing. Good listening habits
results in better understanding and good relationships between members of the
organization. Listening is a recognition that the receiver has responsibility in the
communication process. Do not let your mind wander or be preoccupied with something
else, since you would not be able to grasp the meaning of the message in its entirety. The
language used tone of the voice and emotions should receive proper attention. Listen for
feelings in the content of the message and respond positively to these feelings.
 Develop Writing Skills – Semantic and perception barriers can be overcome with the
help of well written messages and it eliminates the possibility of any misunderstanding.
Written messages should be kept short and simple. It helps in making meaning as clear as
possible so that it accomplishes the desired purpose. While the rules of grammar and
composition must be respected, they should not take priority over the ultimate purpose of
the communication. Do not be brief at the cost of completeness, but express your
thoughts, opinions and ideas in the fewest number of words possible. Vagueness destroys
accuracy which leads to misunderstanding of the meaning of the intent of the message.
Accordingly, be specific and to the point.
 Avoid Credibility Gaps – The ultimate objective of the communication process is the
complete and accurate understanding of the message as well as the creation of trust
among all members of the organization. Accordingly, management must be sincere and
should earn the trust of the subordinates. Management should not only be sensitive to the
needs and feelings of workers but also its promises should be supported by actions. The
word of management should be as good as a bond. Only then would an atmosphere of
congeniality accrue, which would enhance the communication process. Studies have
shown that openness and an atmosphere of trust builds healthy relationships and closes
credibility gaps, thus contributing to communication effectiveness and enhancement.
Communication consists of a mutual exchange of understanding and is the essence of the basic
functions of business management, which include staffing, directing, planning, organizing and
controlling. Communication is inevitable for effective functioning both inside an organization
and when dealing with the outside world. Business communication can be both oral and written
in nature. The main functions of communication are as follows.
 Informing – Informing is done within the organization to provide data and information
so that employees can effectively complete their job. Information ensures that an
employee is aware of the rules and procedures of an organization. It also eliminates job
uncertainty for workers when they are fully informed.
 Motivation – Motivation is the most commonly used tool employed by managers to
make their workers achieve peak performance. By having a clear understanding about the
expectations of employees and providing incentives for meeting or exceeding
expectations, communication can help companies reach specific objectives. For example,
by communicating to salespeople that they'll receive a 10 percent bonus if they reach
their annual sales goal, it helps the company reach its overall sales goals.
 Control – For maintaining control over employees and their work environment,
companies use communication. Written human resources policies and procedures dictate
how employees are permitted to act in the workplace. Job descriptions outline the
parameters of an employee's job functions. Performance reviews control whether an
employee receives a raise or attains a promotion.
 Persuasion – Persuasion is an essential function played by communication in
organizational setting. It is the ability to change the attitude or behaviour of employees,
vendors, clients, etc. The three parts of persuasion are source credibility, emotional
appeal, and social and ego needs. In general, persuasion is used in an organizational
environment effectively when the source of the information is a trusted.
 Interaction – The interaction between customers and with each other is facilitated with
the help of effective communication. A customer service department communicates with
customers to help them resolve issues. A business letter can be used to introduce a
company to a potential customer. Communication is essential for employees who work
together on a project or during the training process. Employees may interact socially both
at work and outside the workplace.
 Providing Information – Written or verbal communication is usually employed for
dispersing information throughout an organization. A human resources representative or
business owner may send out a memo explaining a change in the company's health plan.
A business meeting may be used as a way to communicate a new office procedure. A
webinar allows a company to conduct a meeting over the Internet with employees or
customers who cannot attend in person.
 Providing Feedback – Employees, managers and business owners give and receive
feedback on changes that are being considered or have already been implemented with
the help of communication. For example, if a small business owner is considering the
purchase of a new computer system, he may first consult with his employees to determine
what features the system should include and what help they may need in learning the
system.
4.10 Organizational Design
Organizational design is a step-by-step methodology which identifies dysfunctional aspects of

work flow, procedures, structures and systems. It realigns them to fit current business
realities/goals and then develops plans to implement the new changes. The process focuses on
improving both the technical and people side of the business. For most companies, this process
leads to a more effective organizational design, significantly improving results (profitability,
customer service, internal operations), making employees who are empowered and committed to
the business. The hallmark of the design process is a comprehensive and holistic approach to
organizational improvement that touches all aspects of organizational life.
4.10.1 Key Concepts in Organizational Design

Any operating organization should have its own structure in order to function efficiently. An
organizational structure can be defined as the way in which activities such as task allocation,
coordination and supervision are directed toward the achievement of organizational aims. The
organizational structure of an organization tells about the character of an organization and the
values it believes in. Therefore, when you do business with an organization or getting into a new
job in an organization, it is always a great idea to get to know and understand their organizational
structure. There are six important components that managers should deal with when they design
their organization’s structure: work specialization, departmentalization, chain of command, span
of control, centralization and decentralization, and formalization.
4.10.1.1 Work Specialization

Work Specialization can be defined as the degree to which tasks in an organization are divided
into separate jobs. In some companies, this is also referred to as division of labor. Work
specialization helps organizations become more efficient, and productive. It is always important
for a company’s productivity to go up or stay stable. The essence of work specialization is to
divide a job into many different steps, each completed by a separate individual. Here, individuals
specialize in doing part of an activity rather than the entirety. Henry Ford was one of the first
businessmen who implemented this idea of work specialization. He believed that assembly line
was beneficial since it focused on workers only performing one specific task and passing it to the
next person. It had all the ingredients needed for success in auto industry such as being well-
organized, speed and efficiency and Ford proved it right.
4.10.1.2 Departmentalization
While work specialization divides jobs, departmentalization involves dividing an organization
into different departments, which perform tasks according to the departments' specializations in
the organization. Departmentalization as a means of structuring an organization can be found in
both public and private organizations. Organizations using functional structures group jobs based
on similarity in functions and have departments such as marketing, manufacturing, finance,
accounting, human resources, and information technology. The major benefit of functional
departmentalization is the efficiencies obtained from putting similar specialists together. In
organizations using divisional structures, each department represents the unique products,
services, customers, or geographic locations the company is serving. Therefore, each unique
product or service the company is producing will have its own department. In reality, most of the
companies form a hybrid of functional and divisional forms.
4.10.1.3 Chain of Command

Another important element of a company’s structure is the number of levels it has in the
hierarchy. Chain of command can be defined as a hierarchy of authority where those at the top of
the organization direct and control the activities of the organizational members below them.
Chain of command allows coordination of different individuals and groups engaging in task
specialization in order to accomplish organizational goals. Individuals or groups involved in
specialized tasks do not always understand the big picture; their efforts must be coordinated by
management so that the overall goal is achieved. For example, different employees are involved
in putting together a car on an assembly line, but no one employee knows how to put together the
entire car. Management ensures that all the tasks are performed such that a car is properly
completed.
4.10.1.4 Span of Control

The question of how many employees can a manager efficiently and effectively direct can be
answers using the concept of span of control. Keeping the size of the organization constant, tall
structures have multiple layers of management between frontline employees and the top level,
while flat structures consist of few layers. Span of control or span of management is a dimension
of organizational design measured by the number of subordinates that report directly to a given
manager. Tall structures have smaller span of control resulting in greater opportunities for
managers to supervise and monitor employee activities. In contrast, flat structures involve a
wider span of control restricting close supervision, leading to greater levels of freedom of action
for each employee. Research shows that flat organizations provide greater need satisfaction for
employees, and higher levels of self-actualization.
4.10.1.5 Centralization and Decentralization

Centralization and decentralization are two types of organizational structure adopted by
companies nowadays. In centralization, the power of planning and decision making are
exclusively in the hands of top management where as the powers for the same has been
disseminated by the top management to middle or low level management in the case of
decentralization. In centralized companies, many significant decisions are made at higher levels
of the hierarchy, whereas in decentralized companies, decisions are made and problems are
solved at lower levels by employees who are closer to the problem in question. Decentralized
companies give more power to lower level employees, resulting in a sense of empowerment.
Decisions are often quick, and employees believe that decentralized companies provide greater
levels of procedural fairness to employees.
4.10.1.6 Formalization
Formalization in organizational structure is the degree to which managers specify policies,
procedures, job descriptions, and rules for the individual employees, organizational units, groups,
teams and the organization as a whole. Formalized structures are usually characterized by a lot of
written rules and regulations. These structures control employee behavior using written rules,
and employees have little power to make decisions on day to day issues. Therefore, formalization
makes employee behavior more predictable since employees respond to problems in a similar
way across the organization, which leads to consistency of behavior. While it reduces ambiguity
and provides direction to employees, high degree of formalization may actually lead to reduced
innovativeness, because employees are used to behaving in a certain manner. Low formalization
leads to unprogrammed job behaviors and employees enjoy a great deal of autonomy in their
work.
4.10.2 Traditional Organizational Design

4.10.2.1 Simple Structure
The simple structure is most widely adopted in small businesses in which the manager and owner
are one and the same. Simple structure is a basic organizational structure with low
departmentalization, little work specialization, wide spans of control, centralized authority and
little formalization or rules that govern operation. Organizations that use a simple structure are
typically flat, in that there are not many hierarchical levels. Because there are a limited number
of employees, it is necessary for each employee to perform multiple functions in various areas of
the organization, creating little departmentalization. Policies, procedures and rules are limited in
the simple structure due to the wide span of control and limited work specialization. The main
advantages of simple structure are speed, flexibility, and low operational cost and clear
accountability. One major disadvantage is that it becomes increasingly inadequate as an
organization expands, because its low formalization and high centralization tend to create
information overload at the top.
FIG. 4.16 Simple Organizational Structure
4.10.2.2 Bureaucratic Structure

Most large and complex organizations in the government and the business world utilize a
bureaucratic structure, and understanding bureaucratic structure will help you understand how
the government and large corporations operate. The bureaucracy is characterized by highly
routine operating tasks achieved through specialization, formalized rules and regulations, tasks
grouped into functional departments, centralized authority, narrow spans of control, and decision
making that follows the chain of command. The main strength of bureaucratic structure is its
ability to perform standardized activities in a highly efficient manner. Bureaucracies can be less
costly since there is little need for experienced decision makers below the level of senior
executives. One major disadvantage of a bureaucracy is its obsessive concern with following the
rules.
4.10.3 Contemporary Organizational Design

4.10.3.1 Virtual Organizations
Virtual organization consists of a network of independent firms that temporarily join together to
produce a service or product. Structurally, virtual organization is highly centralized, with little or
no departmentalization. The main features of these organizations include a purpose that is
motivated by specific market opportunities, world-class core competence, information networks,
interdependent relationships, and permeable boundaries. The core of the organization is a small
group of executives whose job is to oversee directly any activities done in-house and to
coordinate relationships with the other organizations that manufacture, distribute, and perform
other crucial functions for the virtual organization. Virtual organizations can be very complex
and they fail as often as they succeed.
4.10.3.2 Boundary Less Organization

A boundary less organization is a contemporary approach in organization design. Coined by Jack
Welsh, former chairman of General Electric, the term boundary less organization refers to
organization that is not defined by, or limited to, the horizontal, vertical, or external boundaries
imposed by a predefined structure. By taking away the vertical boundaries, management flattens
the hierarchy and minimizes status and rank. Boundary less organizations are usually classified
into modular organizations where all the non essential functions are outsources and into strategic
alliances where two or more companies find an area of collaboration. Their main advantage lies
in eliminating the barriers separating employees, such as traditional management layers or walls
between different departments.
4.10.3.3 Learning Organization
Coined by Peter Senger, the term learning organization refers to an organization that facilitates
the learning of its members and continuously transforms itself. According to Sange, such an
organization is a place where people continually expand their capacity to create the results they
truly desire, new and expansive patterns of thinking are nurtured, collective aspiration is set free,
and people are continually learning to see the whole together. Here, employees acquire
knowledge and change behavior as a result of the newly gained knowledge. Management
encourages experimenting, learning new things, and reflecting on new knowledge. For setting up
a learning organization, an environment where failure is tolerated and risk taking is encouraged
has to be created.
4.10.3.4 Lean Organization

A lean organizational structure is a structure that is designed to enhance customer value using
fewer resources than a conventional organizational structure. The ultimate objective for all
members of an organization is to provide perfect value to the customer through a zero waste
value creation process. Lean organization employs few job classifications to organize the
workers. Employees of this organization are more broadly skilled and flexible and are
empowered to look for and solve problems as they occur in the day-to-day operations of the
business. Instead of functional departments, employees perform in self-managed work teams.
Working as teams, employees are constantly looking for ways to improve their work processes
and eliminate waste. These work teams have regular meetings to discuss new ideas and solutions
to current problems they face in their day-to-day jobs.
4.10.3.5 Hybrid Structure

Organizations usually adopt hybrid structure to strike a balance in exercising command and
control yet giving organizations a freedom of action so that the productivity is enhanced. A
hybrid organizational structure is an approach to designing the internal operating structure of a
company or other entity in a manner that makes use of several different organizational patterns,
rather than relying on one particular model. This structure helps to capitalize on the strengths of
both functional and product based structures while avoiding disadvantages of both. Here,
functions that are critical and central for each product or market are decentralized, but functions
like legal services, employee welfare are centralized. An example of hybrid structure is given at
FIG. 4.17.
FIG. 4.17 Hybrid Structure
4.10.4 Approaches to Organizational Design
Organizations must take crucial decisions about how to group people together to perform their
work. Five common approaches — functional, divisional, matrix, team, and networking—help
managers determine departmental groupings (grouping of positions into departments). The five
designs are basic organizational designs, which are then adapted to an organization's needs. All
five approaches combine varying elements of mechanistic and organic designs. For example, the
organizational design trend today incorporates a minimum of bureaucratic features and displays
more features of the organic design with a decentralized authority structure, fewer rules and
procedures, and so on.
4.10.4.1 Functional Design
A functional design may work if an organization has self-contained departments that have many
employees who require an overseeing manager or executive. Production, marketing, finance, and
human resources are common groupings within a functional structure. As the simplest approach,
a functional design features well‐defined channels of communication and authority/responsibility
relationships. Not only can this structure improve productivity by minimizing duplication of
personnel and equipment, but it also makes employees comfortable and simplifies training as
well.
FIG. 4.17 Functional Organizational Design
Functional departments arguably permit greater operational efficiency because employees with
shared skills and knowledge are grouped together by functions performed. Each group of
specialists can therefore operate independently with management acting as the point of cross-
communication between functional areas. This arrangement allows for increased specialization.
The functional design has many downsides that may make it inappropriate for some
organizations. The functional design can result in narrowed perspectives because of the
separateness of different department work groups. Managers may have a hard time relating to
marketing, for example, which is often in an entirely different grouping. As a result, anticipating
or reacting to changing consumer needs may be difficult. In addition, reduced cooperation and
communication may occur. Decisions and communication are slow to take place because of the
many layers of hierarchy. Authority is more centralized. The functional structure gives managers
experience in only one field - their own. Managers do not have the opportunity to see how all the
firm's departments work together and understand their interrelationships and interdependence.
4.10.4.2 Divisional Design
Specialized departments are developed since managers in large companies may have difficulty
keeping track of all their company's products and activities. These departments are divided
according to their organizational outputs. Examples include departments created to distinguish
among production, customer service, and geographical categories. This grouping of departments
is called divisional design.
FIG. 4.18 Divisional Organizational Design
As with all organizational structure types, the divisional design offers distinct advantages and
disadvantages. Generally speaking, divisions work best for companies with wide variance in
product offerings or regions of geographic operation. The divisional design can be useful
because it affords the company greater operational flexibility. In addition, the failure of one
division does not directly threaten the other divisions. In the multidivisional structure,
subsidiaries benefit from the use of the brand and capital of the parent company. Some
disadvantages of this structure include operational inefficiencies from separating specialized
functions—for example, finance personnel in one division do not communicate with those in
another division. Disadvantages of the multidivisional structure can include increased accounting
and tax implications.
4.10.4.3 Matrix Design
A matrix organizational design is a company structure in which the reporting relationships are set
up as a grid, or matrix, rather than in the traditional hierarchy. In other words, employees have
dual reporting relationships - generally to both a functional manager and a product manager.
Matrix organizations are a perfect blend of traditional functional design with a product structure.
FIG. 4.19 Matrix Organizational Structure

In this type of organization, the company uses teams to complete tasks. The teams are formed
based on the functions they belong to (ex: software engineers) and product they are involved in
(ex: Project A). Therefore, each individual reports to a department manager as well as a project
or product manager. Matrix structures are created in response to uncertainty and dynamism of
the environment and the need to give particular attention to specific products or projects. The
matrix structure enhances communication and cooperation among departments, because project
managers will need to coordinate their actions with department managers. In fact, studies shows
that matrix structure increases the frequency of informal and formal communication within the
organization. One disadvantage of matrix structure is the potential for interpersonal conflict with
team members as well as with leaders.
4.10.4.4 Team Design
Organizations can be structured in various ways, and the structure of an organization determines
how it operates and performs. The team design in large organizations is considered a newer type
of organization that is less hierarchical, less structured, and more fluid than traditional designs
(such as functional or divisional). A team is a group of employees—ideally with complementary
skills and synergistic efforts—working toward a common goal. Teams are created by grouping
employees in a way that generates a variety of expertise and addresses a specific operational
component of an organization. These teams can change and adapt to fulfill group and
organizational objectives.
FIG. 4.20 Team Organizational Design
The team structure has many potential advantages such as breaking down of intradepartmental
barriers, speeding up of decision making and response times, motivated employees, elimination
of levels of managers and lowering of administrative costs. The disadvantages include
conflicting loyalties among team members, time‐management issues and increased time spent in
meetings. Manager’s awareness about how well team members work together often depends on
the quality of interpersonal relations, group dynamics, and their team management abilities.
4.10.4.5 Network Design
A network organizational structure refers to a system of delegating and coordinating tasks among
a number of partner companies or business entities with a common goal of producing a specific
product. This arrangement gives a company the chance to collaborate with other related business
entities to concertedly work toward realizing a common goal.
FIG. 4.21 Network Organizational Design
The network design relies on other organizations to perform critical functions on a contractual
basis . In other words, managers can contract out specific work to specialists. This approach
provides flexibility and reduces overhead because the size of staff and operations can be reduced.
On the other hand, the network structure may result in unpredictability of supply and lack of
control because managers are relying on contractual workers to perform important work.
4.10.5 Theories of Organizational Design
4.10.5.1 Scientific Management Theory (Frederick Taylor)
Frederick Winslow Taylor started the scientific management movement where he and his
associates studied the work process scientifically. Scientific management methods called for
optimizing the ways in which t tasks were performed and simplifying the jobs so that workers
could be trained to perform their specialized sequence of motions in the one "best" way. Taylor's
philosophy focused on the belief that making people work as hard as they could was not as
efficient as optimizing the way the work was done. He also advanced the idea that workers and
managers needed to cooperate with one another. This was very different from the way work was
typically done in businesses beforehand. A factory manager at that time had very little contact
with the workers, and he left them on their own to produce the necessary product. There was no
standardization, and a worker's main motivation was often continued employment. There was no
incentive to work as quickly or as efficiently as possible.
Taylor's four principles are as follows:
 Actively gathering, analyzing, and converting information to laws, rules, or even

mathematical formulas for completing tasks.
 Utilizing a scientific approach in the selection and training of workers.
 Bringing together the science and the worker so that the workers apply the scientifically
developed techniques for the task.
 Applying the work equally between workers and managers where management applies
scientific techniques to planning and the workers perform the tasks according to the
plans.
Scientific management principles indeed improved productivity and had a substantial impact on
industry, but they also increased the monotony of work. The core job dimensions of skill variety,
task identity, task significance, autonomy, and feedback all were missing from the picture of
scientific management. The new ways of working were accepted by many of the workers, in
some cases they were not. Complaints that Taylorism was dehumanizing led to an investigation
by the United States Congress. Despite its controversy, scientific management changed the way
that work was done, and forms of it continue to be used today.
4.10.5.2 Bureaucratic Management Theory (Max Weber)
Bureaucratic management is a theory set forth by Max Weber, a German sociologist and political
economist whose theory contained two essential elements, including structuring an organization
into a hierarchy and having clearly defined rules to help govern an organization and its members.
Bureaucratic management can be thought of as a formal system within an organization that is
distinctly based on precisely defined hierarchical roles and levels to help maintain efficiency and
effectiveness.
Bureaucracies have six key characteristics that make their resemblance to beehives all the more
apparent.
FIG. 4.22 Six Key Characteristics of Bureaucracy
 A Clear Hierarchy - Bureaucracies are characterized by a strong chain of command.

Every worker has his own place in the chain, and everyone's work is overseen by
someone on the next level up. Power flows down from the top of the hierarchy and
diminishes as it approaches the bottom. Just think of the beehive. The queen bee stands at
the top, and each worker bee has its own place in the hive's chain of command.
 Impersonal Relationships - A notable feature of bureaucracy is that relationships among
individuals are governed through the system of official authority and rules. Official
positions are free from personal involvement, emotions and sentiments. Thus, decisions
are governed by rational factors rather than personal factors. This impersonality concept
is used in dealing with organizational relations as well as relations between the
organisation and outsiders.
 A Division of Labor - In a bureaucracy, nearly every task is broken down into its
component parts, and different people work on different parts of the task. Together they
get the job done, just like bees in a hive who divide their labor for maximum efficiency.
 Career Orientation – Career building opportunity is offered highly. Lifelong
employment and adequate protection of individuals against arbitrary dismissal is
guaranteed. Here, managers are professional officials who work for a fixed salaries and
pursue their career within the organization.
 A Set of Formal Rules - These so-called standard operating procedures are the clear,
written instructions for each specialized job at every level of the hierarchy. Workers who
follow them can be sure that they are on the same page as their colleagues and are doing
their jobs properly. According to beekeepers, bees, too, have a sophisticated system of
communication that keeps their hives running smoothly.
 Formal Selection – All organizational members are to be selected on the basis of
technical qualifications and competence demonstrated by training, education or formal
examination.
4.10.5.3 Administrative Theory (Henry Fayol)
Prior to Henri Fayol's development of an administrative theory of management, managers took a

scientific approach to work, attempting to maximize productivity by treating their workers like
machines. He focused on the entire organization rather than just the work. Unlike Taylor's
scientific management theory, Fayol believed that it was more than just work and workers.
Managers needed specific roles in order to manage work and workers. He synthesized the 14
principles of management which were published in the book ‘General and Industrial
Management'.
14 principles of management are statements that are based on a fundamental truth. These
principles serve as a guideline for decision-making and management actions. They are drawn up
by means of observations and analyses of events that managers encounter in practice. Henri
Fayol was able to synthesize 14 principles of management after years of study, namely:
FIG. 4.23 Principles of Management by Henry Fayol
 Division of Work – Work should be divided among individuals and groups to ensure that
effort and attention are focused on special portions of the task. Fayol presented work
specialization as the best way to use the human resources of the organization.
 Authority and Responsibility - The concepts of Authority and responsibility are closely
related. Authority was defined by Fayol as the right to give orders and the power to exact
obedience. Responsibility involves being accountable, and is therefore naturally
associated with authority. Whoever assumes authority also assumes responsibility.
 Discipline - This third principle of the 14 principles of management is about obedience.
It is often a part of the core values of a mission and vision in the form of good conduct
and respectful interactions. This management principle is essential and is seen as the oil
to make the engine of an organization run smoothly.
 Unity of Command – This principle means that an individual employee should receive
orders from one manager and that the employee is answerable to that manager. If tasks
and related responsibilities are given to the employee by more than one manager, this
may lead to confusion which may lead to possible conflicts for employees. By using this
principle, the responsibility for mistakes can be established more easily.
 Unity of Direction - All employees deliver the same activities that can be linked to the
same objectives. All activities must be carried out by one group that forms a team. These
activities must be described in a plan of action. The manager is ultimately responsible for
this plan and he monitors the progress of the defined and planned activities. Focus areas
are the efforts made by the employees and coordination.
 Subordination of Individual Interest – For the smooth functioning of the organization,
personal interests have to be subordinated to organizational interests. The primary focus
is on the organizational objectives and not on those of the individual. This applies to all
levels of the entire organization, including the managers.
 Remuneration – This principle argues that the remuneration should be sufficient to keep
employees motivated and productive. There are two types of remuneration namely non-
monetary (compliments, more responsibilities, credits) and monetary (compensation,
bonus or other financial compensation). Ultimately, it is about rewarding the efforts that
have been made.
 Centralization - Fayol defined centralization as lowering the importance of the
subordinate role. Decentralization is increasing the importance. The degree to which
centralization or decentralization should be adopted depends on the specific organization
in which the manager is working.
 Scalar Chain - Managers in hierarchies are part of a chain like authority scale. Each
manager, from the first line supervisor to the president, possess certain amounts of
authority. The President possesses the most authority; the first line supervisor the least.
Lower level managers should always keep upper level managers informed of their work
activities. The existence of a scalar chain and adherence to it are necessary if the
organization is to be successful.
 Order - According to this principle of the 14 principles of management, employees in an
organization must have the right resources at their disposal so that they can function
properly in an organization. In addition to social order (responsibility of the managers)
the work environment must be safe, clean and tidy.
 Equity - The management principle of equity often occurs in the core values of an
organization. According to Henri Fayol, employees must be treated kindly and equally.
Employees must be in the right place in the organization to do things right. Managers
should supervise and monitor this process and they should treat employees fairly and
impartially.
 Stability of Tenure of Personnel - Retaining productive employees should always be a
high priority of management. Recruitment and selection costs, as well as increased
product-reject rates are usually associated with hiring new workers.
 Initiative - Henri Fayol argued that employees should be allowed to express new ideas.
This encourages interest and involvement and creates added value for the company.
According to Henri Fayol, employee initiatives are a source of strength for the
organization. This encourages the employees to be involved and interested.
 Esprit de Corps – This refers to striving for the involvement and unity of the employees.
Managers are responsible for the development of morale in the workplace; individually
and in the area of communication. Esprit de corps contributes to the development of the
culture and creates an atmosphere of mutual trust and understanding.
4.10.5.4 Neo – Classical Theory
In the early 1920s, a shift away from classical management theory took place as theorists began
to consider the human side of an organization and the social needs of employees. The
neoclassical theory was an attempt at incorporating the behavioral sciences into management
thought in order to solve the problems caused by classical theory practices. The premise of this
inclusion was based on the idea that the role of management is to use employees to get things
done in organizations. Rather than focus on production, structures, or technology, the
neoclassical theory was concerned with the employee. Neoclassical theorists concentrated on
answering questions related to the best way to motivate, structure, and support employees within
the organization.
Human Resource Movement
The human relations movement was a direct result of Elton Mayo and Fritz J. Roethlisberger's
Hawthorne studies, which were designed to find ways to increase worker productivity at Western
Electric's Hawthorne Works factory by assessing working conditions related to things such as
lighting levels, rest periods, and the length of a work day. Essentially the Hawthorne studies
concluded that when employers take an interest in workers and make decisions based on their
natural needs and psychological makeup, productivity increases. They also found that people
work best when organized into groups, when they can have effective two-way communication
with their leaders, and when leaders communicate and share information freely as part of an
overall cohesive decision-making process. The human relations movement is seen as the
precursor of the modern human resources function. Before the human relations movement,
workers were typically seen as replaceable cogs in organizational systems that put the ultimate
value on higher output.
Behavioural Science Movement
Behavioural science movement is an extension of human relations movement. It covered wider

aspects in inter-personal roles and responsibilities. It laid emphasis on the application of the
methods and findings of general and social psychology and sociology for understanding the
organizational behaviour. The important aspects of behavioural approach were motivation of
employees for improving productivity, organisation as a social system, leadership-study of
managerial behaviour, communication for better understanding in the organisation and employee
development- upgrading of employee and managerial skills. The contributors to this thinking of
management included Abraham Maslow, Douglas McGregor, Rensi Linkert, Chester Bernard.
4.11 Change Management
Change management is a structured approach for ensuring that changes are thoroughly and
smoothly implemented, and that the lasting benefits of change are achieved. The focus is on the
wider impacts of change, particularly on people and how they, as individuals and teams, move
from the current situation to the new one. The change in question could range from a simple
process change, to major changes in policy or strategy needed if the organization is to achieve its
potential. Theories about how organizations change draw on many disciplines such as
psychology and behavioral science, engineering and systems thinking. The underlying principle
is that change does not happen in isolation – it impacts the whole organization (system) around
it, and all the people touched by it.
In order to manage change successfully, it is therefore necessary to attend to the wider impacts of
the changes. While considering the tangible impacts of change, it's important to pay attention to
the personal impact on those affected, and their journey towards working and behaving in new
ways to support the change. Change management is, therefore, a very broad field, and
approaches to managing change vary widely, from organization to organization and from project
to project. Many organizations and consultants subscribe to formal change management
methodologies. These provide toolkits, checklists and outline plans of what needs to be done to
manage changes successfully.
4.11.1 Change Curve
The Change curve is a popular and powerful model used to understand the stages of personal
transition and organizational change. It helps in predicting how people will react to change, so
that they could make their own personal transitions and ensure help and support they need. The
change curve model describes the four stages most people go through as they adjust to change.
FIG. 4.24 Change Curve
The change curve model describes the six stages most people go through as they adjust to
change.
 Stage 1 begins when a change is first introduced. People's initial reaction may be shock
or denial. This manifests by blaming others as they react to the challenge of the status
quo.
 People then move to Stage 2 of the change curve: they become critical of themselves. As
long as people resist the change and remain at Stages 1 and 2, the change will be
unsuccessful, at least for the people who react in this way. This is a stressful and
unpleasant stage. It should also be noted that people can waver between these two stages
for quite some time.
 Stage 3 is where confusion and doubt set it, but it’s a good sign as people are beginning
to move on. This manifests in various ways but people will shows signs of doubt and
confusion. Signs of acceptance will, however shine through, as they may ask questions
such as: Do I carry on with my work? What will my job be now? How do I use this new
machine?
 Acceptance Rationalization – In the 4th stage, people stop focusing on what they have
lost. They start to let go, and accept the changes. They begin testing and exploring what
the changes mean, and learn the reality of what's good and not so good, and how they
must adapt. It is useful to be cautious at this stage of people sliding backwards into doubt.
This can be common.
 By Stage 5 is about solutions and problem solving. Here, people not only accept the
changes but also start to embrace them. They begin to rebuild their ways of working.
Only when people get to this stage can the organisation really start to reap the benefits of
change. It is here that new job descriptions, ideas and innovation now blossom.
 By Stage 6, the change is now starting to become ‘normal’ or the beginnings of routine
and status quo. Learning can now be captured through a review process and feed into the
next cycle of change. Individuals have a greater awareness of how to respond to change
and begin to build the personal development aspects of this. This stage is the one you
have been waiting for. This is where the changes start to become second nature, and
people embrace the improvements to the way they work.
4.12 Organization Development
Organisation Development (OD) is a growing field of Human Resource Management. It has its
foundations in a number of behavioural and social sciences. It is an area of research, theory, and
practice dedicated to expanding the knowledge and effectiveness of people to accomplish more
successful organizational change and performance. OD is a process of continuous diagnosis,
action planning, implementation and evaluation, with the goal of transferring knowledge and
skills to organizations to improve their capacity for solving problems and managing future
change. Very often organizations invest heavily in transformational change programmes or OD
interventions that fail to deliver performance in a sustainable way. OD believes that every part of
an organisation is integral to a system that relies on and impacts other elements of the internal
and external environment in which the organisation operates.
4.12.1 The Importance of Organizational Development
Organizational development can be defined as the use of organizational resources to improve

efficiency and expand productivity. The main objective of OD is to solve problems within the
organization or to analyze a process and find a more efficient way of doing it. Implementing
organizational development requires investment of time and money. But when you understand its
importance, you can justify the costs.
 Organizational Change – OD experts find out areas of company operations where

change is needed. Individual needs are analyzed, and the potential effects are projected
into a change management plan. The plan outlines the specific ways in which the change
will improve company operations, who will be affected by the change and how it can be
rolled out efficiently to employees. Without organizational development as part of change
management, a company would have a difficult time developing effective change
management programs.
 Growth – Organizational development plays a crucial role in managing and planning
corporate growth. For determining the rate of organizational growth, organizational
development analysis brings together sales projections and consumer demand. This
information is used to alter the company business plan and plan the expansion and use of
company resources such as personnel and the distribution network to accommodate
future growth.
 Work Processes – When an organization initiates organizational development, it
analyzes work processes for efficiency and accuracy. Quality control measures required
for attaining company standards are put in place. Evaluators analyze duplicate process, or
processes that can be combined for greater efficiency, and develop and implement
detailed plans on how to improve company methods.
 Product Innovation – For the success of product innovation, analysis of several kinds of
information is required. Organizational development is an indispensible part of product
innovation because it can help analyze each element of product development and create a
method for using it effectively. Some of the processes that come together in
organizational development to assist in product innovation are competitive analysis,
technology development, consumer preferences, target market research, manufacturing
capabilities analysis and patents and trademarks.
4.12.2 Objectives of Organization Development
Objectives of organizational development varies according to situation since they are framed
keeping in view of specific situations. In short, all OD efforts are tailored to meet the
requirements of particular situation. But broadly specking, all organization development
programs try to attain the objectives which are briefly discussed below:
 Application of Behavioral Science Theories - The main objective of organization

development is to apply some behavioral science theories in the organization. By
applying these theories, organization development practices hope for development.
 Improvement of Organizational Performance - Improving the overall performance of
organization in another important objective of organizational development. Thus
organization can be established as one of the important institutions in human history.
 Proper Use of Individual Efforts – For enhancing individual performance, individual
efforts has to be used properly. Organization development ensures proper use of human
efforts and commitment.
 Creating Awareness - Organization development creates awareness among the people
working in the enterprise. They feel the need for change in comparison with other
organizations.
 Encourage Problem Solving - Every organization has many problems and challenges.
Organization development encourages people to solve these problems and face
challenges of present and future.
 Maintenance of Interpersonal Relations - Organization development activities may be
implemented with a view to establish and maintain interpersonal relations among the
people of the organization. This can ensure continuous growth.
 Maintenance of Work Environment - Working environment must be favourable in the
organization. Organization development practitioner’s should create favourable working
environment and maintain the same for smooth functioning in future.
 Enhancement of Knowledge & Skills - Knowledge on latest methods and skills can
streamline the growth of any organization. Organization development intends to increase
the knowledge and skill levels through training.
 Minimize Resistance to Change - In most of the cases, every change is resisted and it
hampers achievement of goal. Organization development helps minimize the resistance to
change in a positive mood so that management becomes more alert.
 Creating Job Satisfaction - Job satisfaction encourages people to work hard and enjoy
at the same time. Organization development creates job satisfaction of employees who
are involved in organization development activities.
 Improve Motivation Level - Motivation creates interest for work among the employees.
Therefore another important objective of organization development is to increase
motivation.
 Instill Supportive Values - Every organization and employee has some values and
norms. These values and norms can help the organization to uphold its own culture.
Organization development creates supportive values and norms.
4.12.3 Eight Steps for Organizational Development Interventions
For improving organizational agility and effectiveness, an organization will introduce various
interventions with the help of various change agents. The objective of such interventions is to
improve productivity, performance or behaviours through a series of structured individual and
team activities that focus on what employees do and how they do it.
 Eliminating Hierarchical Decision Making – For ensuring organizational change, the

responsibilities of decision-making should shift from managers to all the employees
share. In healthy organizations, managers understand that decision making should occur
where the sources of information are, which is not always toward the top of the chain of
command.
 Focusing on Groups – To make a difference in the culture, change must primarily occur
in groups. Groups within an organization must have a clear understanding about its
purpose, mission and goals, as well as the purpose and organization of the company's
structure. For change agents to be effective, employees and their respective departments
should have a good understanding regarding the various departments within an
organization and their relationships.
 Building Trust – A culture of mutual trust has to be developed for creating change and
promoting open communication. Managers cannot expect employees to trust them
automatically. Instead, in order to breed trust, managers must first show employees that
they are trusted.
 Focus on Collaboration –Instead of creating an environment focused on competition, a
company should concentrate on creating a culture promoting collaboration. Collaborative
conditions can help improve teamwork and communication, as well as help employees
feel their contributions are important.
 Investing in Human Resource - When an organization invests in human resource,
employees will reciprocate by spending their time and talents back into the company. In
addition to monitoring goals, providing feedback and reinforcing positive employee
activities, organizations should also work toward developing the skills of their employees
and enhancing their sense of well-being. Such investments can include educational
opportunities, providing employee benefits and providing the support and tools needed to
accomplish work efficiently.
 Interim Measurements of Control - While working toward a goal, it is important for a
company to understand that the responsibility of achieving goals rests at all levels of the
organization. Therefore, the organization as a whole, individual departments and
employees must evaluate their activities against set goals.
 Active Employee Participation - Employees will be highly motivated if they get
adequate opportunity to involve in decision making. In order to create change, all
employees should have opportunities to participate actively in the decisions and
achievements of their employer. Doing so will help create a sense of ownership and
loyalty in employees and help them to embrace change agents.
 Strategic Interventions - Strategic interventions are essential in creating change within
an organization and its relationship with the external environment. Such interventions can
include mergers or acquisitions, a rapid expansion of the market, new or increased
competition from another company or reestablishing relationships with stakeholders.
4.13 OD Interventions
OD intervention can be defined as a procedure that the OD consultant employs once they have
identified the organizational situation. They give feedback to management on how to address the
problem. They are structured activities used individually or in combination by the organizational
members to enhance their task performance. They may be introduced by a change agent as part
of an improvement program, or they may be used by the client following a program to check on
the state of the organization's health, or to effect necessary changes in its own behavior.
Structured activities mean such diverse procedures as experiential exercises, questionnaires,
attitude surveys, interviews, relevant group discussions, and even lunchtime meetings between
the change agent and a member of the client organization. Every action that influences an
organization's improvement program in a change agent-client system relationship can be said to
be an intervention
FIG. 4.24 OD Interventions
4.13.1 Individual OD interventions
FIG. 4.25 Individual OD Interventions
4.13.1.1 T – Group
T - Group is a group of people under the leadership of a trainer who seek to develop self-
awareness and sensitivity to others by verbalizing feelings uninhibitedly at group sessions. They
use feedback, problem solving, and role play to gain insights into themselves, others, and groups.
T-Group training is generally used either for gaining a deeper understanding of self and personal
growth or exploring group dynamics and the relationships between members as a strategy for
team building interventions within organizations. A T-group meeting does not have an explicit
agenda, structure, or express goal. Under the guidance of a facilitator, the participants are
encouraged to share emotional reactions that arise in response to their fellow participants' actions
and statements. The emphasis is on sharing emotions, as opposed to judgments or conclusions. In
this way, T-group participants can learn how their words and actions trigger emotional responses
in the people they communicate with. Many varieties of T-groups have existed, from the initial
T-groups that focused on small group dynamics, to those that aim more explicitly to develop
self-understanding and interpersonal communication. This type of training is controversial as the
behaviours it encourages are often self-disclosure and openness, which many people believe
some organizations ultimately punish. The feedback used in this type of training can be highly
personal, hence it must be given by highly trained observers.
4.13.1.2 Action Learning
Action learning is an approach to solving real problems that involves taking action and reflecting
upon the results, which helps improve the problem-solving process, as well as the solutions
developed by the team. It focuses on critical problems whose solution is highly important to an
individual, a team, or an organization. Action learning is most appropriate where the problem is
complex, the desired outcome is vague, and the solution is uncertain or unknown. In many, but
not all, forms of action learning, a coach is included who is responsible for promoting and
facilitating learning as well as encouraging the team to be self-managing. In addition, the
learning acquired by working on complex, critical, and urgent problems that have no currently
acceptable solutions can be applied by individual, teams, and organizations to other situations.
The ALT consists of four to eight people with diverse backgrounds and work experiences.
Diversity enables team members to perceive the problem from various perspectives and to offer
innovative viewpoints. Teams may consist of volunteers or appointees who come from various
departments or hierarchical levels. They may include individuals from other organizations or
professions. They may involve suppliers as well as customers or other stakeholders. One or more
team members may also be problem presenters. Some team members may serve as observers.
4.13.1.3 Mentoring
Mentoring is to support and encourage people to manage their own learning in order that they
may maximize their potential, develop their skills, improve their performance and become the
person they want to be. It is a relationship in which a more experienced or more knowledgeable
person helps to guide a less experienced or less knowledgeable person. A mentor is a guide who
can help the mentee to find the right direction and who can help them to develop solutions to
career issues. Mentors rely upon having similar experiences to gain an empathy with the mentee
and an understanding of their issues. Mentoring provides the mentee with an opportunity to think
about career options and progress. The goal is help mentees improve their skills and, hopefully,
advance their careers. A mentoring partnership may be between two people within the same
company, same industry, or same networking organization. However the partners come together,
the relationship should be based on mutual trust and respect, and it typically offers personal and
professional advantages for both parties. Mentor helps you develop your ability to motivate and
encourage others. This can help you become a better manager, employee, and team member.
Because your mentee may come from a different background or environment, the two of you
may not "speak the same language." This may force you to find a way to communicate more
effectively as you navigate your way through the mentoring relationship.
4.13.1.4 Coaching
Coaching is a useful way of developing people's skills and abilities, and of boosting
performance. It can also help deal with issues and challenges before they become major
problems. Coaching is a form of development in which a person called a coach supports a learner
or client in achieving a specific personal or professional goal by providing training, advice and
guidance. The learner is sometimes called a coachee. In some organizations, coaching is still
seen as a corrective tool, used only when things have gone wrong. But in many companies,
coaching is considered to be a positive and proven approach for helping others explore their
goals and ambitions, and then achieve them. Coaches in the workplace are not counselors,
psychotherapists, gurus, teachers, trainers, or consultants – although they may use some of the
same skills and tools. Most formal, professional coaching is carried out by qualified people who
work with clients to improve their effectiveness and performance, and help them achieve their
full potential. Coaches can be hired by coachees, or by their organizations. Coaching on this
basis works best when everyone clearly understands the reason for hiring a coach, and when they
jointly set the expectations for what they want to achieve through coaching.
4.13.1.5 360 Degree Feedback
360 degree feedback is a system or process in which employees receive confidential, anonymous
feedback from the people who work around them. This typically includes the employee's
manager, peers, and direct reports. A mixture of about eight to twelve people fill out an
anonymous online feedback form that asks questions covering a broad range of workplace
competencies. The feedback forms include questions that are measured on a rating scale and also
ask raters to provide written comments. The person receiving feedback also fills out a self-rating
survey that includes the same survey questions that others receive in their forms. 360-degree
feedback is so named because it solicits feedback regarding an employee's behavior from a
variety of points of view (subordinate, lateral, and supervisory). It therefore may be contrasted
with downward feedback or upward feedback delivered to supervisory or management
employees by subordinates only. Organizations have most commonly utilized 360-degree
feedback for developmental purposes, providing it to employees to assist them in developing
work skills and behaviours. However, organizations are increasingly using 360 degree feedback
in performance evaluations and employment decisions. When 360 degree feedback is used for
performance evaluation purposes, it is sometimes called a 360 degree review.
4.13.2 Team Work OD interventions
FIG. 4.26 Group OD Interventions
4.13.2.1 Dialogue Sessions
Dialogue session is a structured conversation designed to explore a topic with the potential for
being conflictual, with the desired outcome resulting from a deeper understanding rather than
from persuasion. First, identify and clarify what the issue is that is to be the focus of the dialogue
process. Reinforce to the group that all members of the group are equal. Then, reiterate the
importance of confidentiality and anonymity. Go around the group, allowing each group member
to express the basic assumptions that he or she has about the issue. During the process,
individuals should note what their reaction is to each member's sharing. It is not the goal of a
dialogue process to reach a solution or agreement; the dialogue has been successful if members
of the group understand each other’s position better. Therefore, the final step might be to close
the session by going around the group one last time, asking each participant to state one new
understanding that has emerged from the session.
4.13.2.2 Fishbowls
It overcomes barriers to communication such as pressure to conform from peers, ‘professional

detachment’ and intimidation. The general idea is that rather than a large group having an open
discussion about something, which can be difficult to handle and often only benefits a few active
participants, a smaller group (ideally 3 – 6 people) is isolated to discuss while the rest of the
participants (maximum of 50 people) sit around the outside and observe without interrupting.
Facilitation is focused on the core group discussion. The fishbowl can be used by staff and
residents that wish to communicate in depth. No special skills are necessary, but there are some
general guidelines and principles that will enhance and improve results. Fishbowls are useful for
ventilating “hot topics” or sharing ideas or information from a variety of perspectives. When the
people in the middle are public officials or other decision-makers, this technique can help bring
transparency to the decision-making process and increase trust and understanding about complex
issues. Sometimes the discussion is a “closed conversation” among a specific group. More often,
one or more chairs are open to visitors who want to ask questions or make comments. Although
largely self-organizing once the discussion gets underway, the fishbowl process usually has a
facilitator or moderator. The fishbowl is almost always part of a larger process of dialogue and
deliberation.
4.13.2.3 Confrontation Meeting
The confrontation meeting developed by Richard Beckhard, is a one day meeting of the entire
management of an organization, in which they take a reading of their own organizational health.
In a series of activities, the management group generates information about its major problems,
analyzes the underlying causes, develops action plans to correct the problems, and sets a
schedule foe completed remedial work. This intervention is an important one in OD. It is quick,
simple, and reliable way to generate data about an organization and to set the action plans.
Confrontation meeting is effective where there is a genuine commitment to solving the problems
on the part of top management, the top management intends to improve the conditions rapidly
and there is adequate cohesiveness in the top management team to ensure follow-up. The
different benefits of confrontation meeting are improved direct communication, increased morale
of employees, better work culture, improved inter department human relationship and get
solutions on day-to-day problems.
4.13.2.4 Team building
Team building has long been a core intervention for OD and continues to be widely used. It is a
collective term for various types of activities used to enhance social relations and define roles
within teams, often involving collaborative tasks. Several of these activities, classified broadly as
icebreakers, are designed for groups that are forming so that individuals get to know each other,
often at a level a little deeper than superficial. It is distinct from team training, which is designed
to improve the efficiency, rather than interpersonal relations. Many team building exercises aim
to expose and address interpersonal problems within the group. Over time, these activities are
intended to improve performance in a team based environment. Team building is one of the
foundations of organizational development that can be applied to groups such as sports teams,
school classes, military units or flight crews. The formal definition of team-building includes
aligning around goals, building effective working relationships, reducing team members' role
ambiguity and finding solutions to team problems. Team building is one of the most widely used
group-development activities in organizations.
4.13.2.5 Meeting Facilitation
There are many aspects for meeting facilitation. First, it must be clear why the team is meeting.
What do you expect to accomplish? Second, the right people need to be invited. Are guests need
to provide their expertise? Third, the agenda should be developed by inviting all team members
to contribute to the agenda - it might even be set before the previous meeting is adjourned.
Fourth, an estimated time is assigned to each agenda item. Another process that can be used to
improve effectiveness is to identify ongoing role identification and description. A sample
document of how role identification and description might appear should be developed based on
the many other models. There is no expectation that these roles will appear in all teams, but some
similar to this document will help improve the effectiveness of team meetings. The OD
professional needs to plan appropriate facilitation, provide feedback and train team participants.
4.13.3 Comprehensive OD Interventions
FIG. 4.27 Comprehensive OD Interventions
4.13.3.1 Stream Analysis
Stream analysis developed by Jerry Porras is a valuable model for thinking and managing
change. It is an exciting alternative to the usual "top down" approach driven by outside experts.
It is a technique for discovering core problems that stand in the way of getting optimal results for
projects, initiatives, and organizational effectiveness. Problems of an organization are
graphically displayed and interconnections between the problems are examined. Once the core
problem is identified, corrective actions taken to solve the problems are graphically tracked. A
thorough diagnosis of the organization’s problems and barriers to effectiveness is performed via
brainstorming sessions, interviews, questionnaires and other methods. Each problem is
categorized in one stream. The interconnections between the problems are noted. Problems that
have many interconnections are identified as core problem. Action plans are developed to correct
the core problems. In stream analysis, OD programs change the work setting, which leads to
organizational improvement.
4.13.3.2 Survey Feedback
Survey Feedback is tool which provides an organization with an honest opinion of what their
present or future customers think about them and helps them in taking an informed decision. This
survey enables the top management to know about the issues of the employees regarding their
workplace. Employers use survey feedback to improve workplaces. The study of survey
Feedback played an important role in formation and history of organizational development. It is
cost-effective means of implementing a comprehensive OD program and generates great amount
of information efficiently and quickly which can be used in solving problems faced by the
organization and its members. Well designed and executed survey feedback can be instrumental
in achieving customer retention, brand loyalty and profitability goals. Some of the most difficult
aspects of managing survey feedback is selecting the best collection method and then using the
data to achieve desired business goals.
4.13.3.3 High Performance Systems
The term large scale change is frequently used when a number of OD and other interventions are
combined to create major changes in the total culture and operations of an organization.
Similarly, the creation of high performance systems, high performance organizations, high
involvement organizations or self designing organizations - terms that are used somewhat
synonymously - usually involve a broad array of interventions, and typically feature extensive
member participation and involvement. High performance work systems (HPWS) represent a
systematic and integrated approach of managing human resources toward the alignment of HR
functions and the achievement of firm strategy. The relationship of HPWS with firm
performance has been extensively examined, though the mechanism underlying HPWS—
performance relationship is not well researched, especially at the organizational level. Change in
such areas as job design and workflow, staffing procedure, training and compensation are usually
combined with such interventions.
4.13.3.4 Grid Training
Developed by Blake and Mouton, grid training focuses the overall development of individuals,
groups and the organization as a whole. The grid training programme is designed in such a way
that it enables the individuals as well as the groups to ascertain their strengths and weaknesses
and focus on their skills, knowledge and processes that are essential to perform effectively at
different levels in the organization. The major objective behind the grid training is to consider
the entire organization as an interactive system where the analysis techniques could be applied to
diagnose the problems and understand the reasons behind the changes in the organization. Also,
it helps in determining the leadership styles and techniques of participation to help in producing
the desirable results.
4.13.3.5 Strategic Management Activities
Strategic management involves the formulation and implementation of the major goals and
initiatives taken by a company's top management on behalf of owners, based on consideration of
resources and an assessment of the internal and external environments in which the organization
competes. Strategic management activities are defined based on their fitness for the function of
developing and sustaining a competitive advantage. They form and execute strategy. They
produce the understanding necessary to develop innovative strategy, the business designs to be
deployed, plan the deployment, and carry out the deployment. Collectively, this portfolio of
activities develops competitive advantage, transforms the business organization, and develops
the capabilities for the organization's members. The strategic management activities are defined
based on their fitness for the function of developing and sustaining a competitive advantage. This
fitness screening filter comes from the broad understanding of the factors involved, such as, the
creative destructive nature of the economy, people's cognitive capabilities, and the nature of
organizations as complex systems.
4.13.4 Process OD Interventions
FIG. 4.28 Process OD Interventions

4.13.4.1 Six Sigma
Six sigma is a method that provides organizations tools to improve the capability of their
business processes. This increase in performance and decrease in process variation lead to defect
reduction and improvement in profits, employee morale, and quality of products or services. The
fundamental objective of the six sigma methodology is the implementation of a measurement-
based strategy that focuses on process improvement and variation reduction through the
application of six sigma improvement projects. A six sigma process is one in which 99.99966%
of all opportunities to produce some feature of a part are statistically expected to be free of
defects (3.4 defective features per million opportunities). Each six sigma project carried out
within an organization follows a defined sequence of steps and has specific value targets, for
example: reduce process cycle time, reduce pollution, reduce costs, increase customer
satisfaction, and increase profits.
4.13.4.2 Total Quality Management
Total Quality Management is a management approach that originated in the 1950s and has
steadily become more popular since the early 1980s. Total quality is a description of the culture,
attitude and organization of a company that strives to provide customers with products and
services that satisfy their needs. In a TQM effort, all members of an organization participate in
improving processes, products, services, and the culture in which they work. Total quality
management can be summarized as a management system for a customer focused organization
that involves all employees in continual improvement. It uses strategy, data, and effective
communications to integrate the quality discipline into the culture and activities of the
organization. TQM is mainly concerned with continuous improvement in all work, from high
level strategic planning and decision-making, to detailed execution of work elements on the shop
floor. It stems from the belief that mistakes can be avoided and defects can be prevented. It leads
to continuously improving results, in all aspects of work, as a result of continuously improving
capabilities, people, processes, technology and machine capabilities
4.13.4.3 Socio-Technical Systems
The term socio-technical systems was coined by Eric Trist, Ken Bamforth and Fred Emery,
World War II era, based on their work with workers in English coal mines. Socio-technical
systems (STS) are usually used to identify the interaction between people and technology in
workplaces. It is also used to represent interactions between society's complex infrastructures
and human behaviour. In this sense, society itself, and most of its substructures, are complex
socio-technical systems. Socio-technical systems pertain to theory regarding the social aspects of
people and society and technical aspects of organizational structure and processes. Here,
technical does not necessarily imply material technology. The focus is on procedures and related
knowledge. Socio-technical refers to the interrelatedness of social and technical aspects of an
organization or the society as a whole. Socio-technical theory therefore is about joint
optimization, with a shared emphasis on achievement of both excellence in technical
performance and quality in people’s work lives.
4.13.4.4 Bench Marking
Benchmarking is used to compare the business processes of one company to another or to

industry standards. It is employed for monitoring and measuring a firm's internal processes, such
as operation, and then comparing the data with information from companies that excel in those
areas. Although the concept of bench marking seems straightforward, it is imperative to justify
any intervention. Just because company X performed a successful intervention, does not mean
that company Y could do an identical intervention with the same results. Every company has its
own unique culture and situation, so finding the best practices of another company at best can be
considered a launching pad that enables employees to move beyond replication and actually find
meaningful change. Although bench marking often reveals insights, actual implementation
should be used with caution, as only the need for an intervention is supported by data.
4.13.4.5 Process Re-engineering
Process re-engineering is the fundamental rethinking and radical redesign of business processes
to achieve dramatic improvements in performance. Reengineering transforms how organization
traditionally produces and delivers goods and services. Reengineering addresses the core
problems in organizations by breaking down specialized work units into more integrated, cross
functional work processes. this streamlines work processes and makes them faster and more
flexible; consequently, they are more responsive to change in competitive conditions, customer
demands, product life cycles and technologies. Successful reengineering requires almost
revolutionary change in how organizations design their structures and their work. It identifies
and questions the often unexamined assumptions underlying how organizations perform work
and why do they do it in a particular way. This effort typically results in radical changes in
thinking and work methods - a shift from specialized jobs, tasks, and structures to integrated
processes that deliver value to customers.
4.13.5 Structural OD Interventions
FIG. 4.29 Structural OD Interventions
4.13.5.1 Quality of Work Life
Quality of work life (QWL) refers to the favourableness or unfavourableness of a job

environment for the people working in an organisation. The period of scientific management
which focused solely on specialization and efficiency, has undergone a revolutionary change.
The QWL as strategy of Human Resource Management has assumed increasing interest and
importance. Many other terms have come to be used interchangeably with QWL such as
‘humanizations of work’ ‘quality of working life, ‘industrial democracy’ and ‘participative
work’. American society of training and development has defined QWL as a process of work
organizations which enable its members at all levels to actively; participate in shaping the
organizations environment, methods and outcomes. This value based process is aimed towards
meeting the twin goals of enhanced effectiveness of organizations and improved quality of life at
work for employees. From the above definitions, it can be concluded that QWL is concerned
with taking care of the higher-order needs of employees in addition to their basic needs. The
overall climate of work place is adjusted in such a way that it produces more humanized jobs.
QWL is viewed as that umbrella under which employees feel fully satisfied with the working
environment and extend their wholehearted co-operation and support to the management to
improve productivity and work environment.
4.13.5.2 Work Redesign
Work redesign is an effort where job responsibilities and tasks are reviewed, and possibly re-
allocated among staff, to improve output. Redesigning jobs can lead to improvements in both
productivity and job satisfaction. The process includes revising, analyzing, altering, reforming
and reshuffling the job-related content and dimensions to increase the variety of assignments and
functions to motivate employees and make them feel as an important asset of the organization.
The main objective of conducting work redesigning is to place the right person at the right job
and get the maximum output while increasing their level of satisfaction. A job redesign effort
would walk through the following steps. First, clarify exactly what is being done today versus
the job description, and identify any difficulties in completing work. Second, determine skills of
the employees and their level of fit with their current positions. Next, re-allocate tasks so that
employees have a better fit between their skills, interests, and position requirements. Then
provide training as needed to get employees ready for their new responsibilities. Next,
implement the program by providing a new job description to each employee and having them
focus on the tasks in their revised position. Finally, revisit regularly to make sure the redefined
positions are a good fit for the skills of the staff involved.
4.13.5.3 Self Managed Teams
Self-managed teams have grown rapidly in popularity following their introduction in the 1960s.
Around 80 percent of companies in the Fortune 1000 and 81 percent of manufacturing
companies use self-managed teams within their organizational structure. A self-managed team is
a group of employees that's responsible and accountable for all or most aspects of producing a
product or delivering a service. Traditional organizational structures assign tasks to employees
depending on their specialist skills or the functional department within which they work. A self-
managed team carries out supporting tasks, such as planning and scheduling the workflow and
managing annual leave and absence, in addition to technical tasks. Self-managed teams have
greater ownership of the tasks they perform and the end product or service they deliver. Self-
managed teams tend to be less costly and more productive than employees working within a
traditional hierarchical structure because the team performs both technical and management
tasks. Although a cohesive self-managed team may create a sense of trust and respect between
team members, overly cohesive teams can lead to groupthink. Team members are more likely to
conform to team norms than raise issues that may upset other team members. This may lead to
reduced effort or stifled innovation.
4.13.5.4 Quality Circles
A quality circle is a participatory management technique that enlists the help of employees in
solving problems related to their own jobs. It consists of a group of workers who do the same or
similar work, who meet regularly to identify, analyze and solve work-related problems. Circles
are formed of employees working together in an operation who meet at intervals to discuss
problems of quality and to devise solutions for improvements. Normally small in size, the group
is usually led by a supervisor or manager and presents its solutions to management; where
possible, workers implement the solutions themselves in order to improve the performance of the
organization and motivate employees. Employees who participate in quality circles usually
receive training in formal problem-solving methods—such as brain-storming, Pareto analysis,
and cause-and-effect diagrams—and are then encouraged to apply these methods either to
specific or general company problems. After completing an analysis, they often present their
findings to management and then handle implementation of approved solutions. Japanese
industry obviously embraced and applied quality circles and QC has contributed to Japanese
current dominance in many sectors, notably in automobiles.
4.13.5.5 High Involvement Organizations
The concept of the high-involvement organization stems from the principles of employee
involvement. The creation of a high-involvement organization is the result of a change in the
entire design of the organization through implementation of employee involvement strategies.
When employees are given the appropriate combination and amount of PIRK (Power,
Information, Reward & Knowledge), which are the four key elements that promote employee
involvement, the organization is on the verge of creating a high-involvement organization. The
idea is to ensure that significant amounts of PIRK are located at all levels of the organization,
and is moved down through the ranks to the lowest level. The farther these elements are moved
downward throughout the organization, the greater the employee involvement. When employees
are given the power to make decisions about work that impacts the organization, up to date
information about the company in order to make effective decisions, an opportunity to build
upon existing skills and learn new skills, and rewards that that are linked to performance
outcomes, they are involved in their organization.
4.14 Down Sizing
When the management of an organization determines that their organization is not operating at
peak efficiency, they typically look for ways to make the organization more productive. This is
frequently accomplished via organizational downsizing. In a business enterprise, downsizing is
reducing the number of employees on the operating payroll. Some users distinguish downsizing
from a layoff , with downsizing intended to be a permanent downscaling and a layoff intended to
be a temporary downscaling in which employees may later be rehired. Organizational
downsizing affects the work processes of an organization since the end result of the downsizing
is typically fewer people performing the same workload that existed before the downsizing took
place. The act of downsizing results in two categories of people: Victims (the people who
involuntarily lose their jobs due to organizational downsizing) and survivors (the employees who
remain after organizational downsizing takes place).
4.14.1 Effective Downsizing Methods
In downsizing, structure of the organization is reorganized to meet the needs of the customers.
Even though downsizing does not always involve staff reduction, it does bring about substantial
eliminations. A company may decide to maintain its staff and incentive programs to better meet
the needs of consumers. Such a decision is categorized as downsizing because the act is
voluntary and not forced as with liquidation. In order to be effective, downsizing must be
intentional, personal, and efficient. There are several types of downsizing strategies that can be
used to make reduction efforts beneficial for the company and employees.
4.14.1.1 Workforce Reduction
Workforce reduction is one of the most popular downsizing strategies which involves laying off
employees, mandating early retirement, and transferring individuals to fulfill critical positions.
The main objective of workforce reduction is to remove unnecessary positions and hence bring
down head count. For example, a bagging position at the grocery store may not be viewed as a
significant job. Such a position may be eliminated during workforce reduction and the duties
may be placed with the cashier, making her responsible for the entire checkout experience.
Although a way to gain immediate profit, workforce reduction should not be the first strategy of
downsizing that employers seek. Instead, executives and small business owners should consider
reorganizing the entire company and then resorting to eliminating manpower if necessary.
Following this procedure can save jobs and help the company maintain a positive reputation.
When workforce reduction is unavoidable, individuals responsible for downsizing should

communicate it with employees. Even though they don’t have to disclose every detail, you have
to be honest about finances when they negatively affect workers. Although large corporations
often call large meetings to discuss financial difficulty, it is best to assemble individuals who will
be directly affected by manpower reductions. If cafeteria workers are scheduled to be laid off in
three months, an exclusive meeting should be called to prepare workers for the layoff. It is in
poor taste to inform employees of layoffs or firings on the day of execution. It is also not a good
idea to inform unaffected departments of reductions. Since workforce reductions are devastating
for everyone involved, it is best for employers to be upfront and professional when implementing
plans.
4.14.1.2 Work Redesign
Apart from manpower reductions, employers use work redesign as a method of downsizing. The
main focus of work redesign is to eliminate unnecessary work. Unlike workforce reduction,
redesign does not focus on eliminating employees or positions. As a result, vacant positions are
typically targeted for elimination during redesign. A cataloging position at a library that has not
been filled for months may be eliminated and its duties transferred to clerks. Work redesign is
less traumatic for workers and employers since downsized positions or departments are already
vacant and hence ineffective.
Apart from removing special roles or hierarchies, work redesign also involves merging. When an
organization experiences an unrecoverable loss, it may seek to partner with another corporation
that is thriving. For example, a baby's clothing store may seek to partner with a toy store after
experiencing a serious decline in sales. In order for a merger to be effective, the company
experiencing financial difficulty must seek help from a stable organization. It would not profit a
gasoline station to merge with a small restaurant that is also struggling to maintain its financial
status. Such partnering would only prove harmful and could result in both companies going out
of business. In most instances, work redesign by merger requires more time and effort than
simply eliminating vacant positions. The profit for such a merger, however, may be substantially
greater than decreasing the budget by internal means.
4.14.1.3 Systemic Approach
Systematic downsizing is a less popular but equally effective strategy of downsizing. This
approach focuses on changing the cultural atmosphere of the company. Instead of viewing
downsizing as a negative attribute, the systemic approach highlights positive effects of reducing
costs. Increasing productivity and clientele are the key points those systemic downsizing places
on display for employees to appreciate. Although the short-term effects of such tactics are not
recognizable, the long-term results are positive. Instead of focusing on job loss and company
gain, the systemic approach places emphasis on the customer. Such emphasis leads to better
customer service during economic hardship, which ultimately leads to increased profit. While an
individual will not dine at a restaurant that previously rendered poor service, he will return to a
diner that gave him special attention. The systemic approach is most effective at the beginning
stages of financial difficulty and least effective during major crises.
FIG. 4.30 Effective Downsizing Methods
4.14.2 Criticisms of Downsizing
Even though organizations implement downsizing plans to increase profitability and productivity
quite often, they do not always yield these results. Critics of downsizing argue that it is over-
applied and often used as a quick fix without sufficient planning to bring about long-term
benefits. Moreover, downsizing can lead to additional problems, such as poor customer service,
low employee morale, and bad employee attitudes. Laying workers off to improve
competitiveness often fails to produce the intended results because downsizing can lead to the
following unforeseen problems and difficulties:
 The loss of highly-skilled and reliable workers and the added expense of finding new
workers.
 An increase in overtime wages.
 A decline in customer service because workers feel they lack job security after layoffs.
 Employee attitudes that may change for the worse, possibly leading to tardiness,
absenteeism, and reduced productivity.
 An increase in the number of lawsuits and disability claims, which tends to occur after
downsizing episodes.
 Restructuring programs sometimes take years to bear fruit because of ensuing employee
confusion and the amount of time it takes for employees to adjust to their new roles and
responsibilities.
4.14.3 Support for Down Sizing
Proponents of downsizing consider it as inevitable for remaining profitable. They argue that any
organization ignoring downsizing go bankrupt when there is fierce competition and slow growth.
Downsizing ultimately saves the larger number of jobs that would be lost if a company went out
of business. Supporters of downsizing also argue that job creation from technological advances
offsets job declines from downsizing. Hence, displaced workers are able to find new jobs
relatively easily, especially if those workers have skills that enhance the technological
competence of prospective employers. In other words, despite the admitted discomfort and
difficulties that downsizing has on displaced workers, some workers are able to locate new jobs
and companies are able to achieve greater efficiency, competitiveness, and profitability.
Moreover, even though downsizing may not solve all of a company's competitive problems or
bolster a company's profits indefinitely, downsizing can help reduce costs, which can lead to
greater short-term profitability. In addition, advocates of downsizing contend that staff-reduction
efforts help move workers from mature, moribund, and obsolete industries to emerging and
growing industries, where they are needed. Economists argue that this process strengthens the
economy and helps it grow. This process also enables companies with growing competitive
advantages to maintain their positions in the market in the face of greater domestic and global
competition, and it is the difficult but necessary result of the transition toward a global economy.
4.15 Learning Organization
The term learning organization was popularized by Peter Senge. It describes an organization with
an ideal learning environment, perfectly in tune with the organization's goals. Such an
organization is a place where people continually expand their capacity to create the results they
truly desire, where new and expansive patterns of thinking are nurtured, where collective
aspiration is set free, and where people are continually learning to see the whole (reality)
together. The basic justification for learning organizations is that in this fast paced world, only
those that are flexible, adaptive and productive will succeed. For this to happen, it is argued,
organizations need to ‘discover how to tap people’s commitment and capacity to learn at all
levels.
While all people have the capacity to learn, the structures in which they have to function are
often not conducive to reflection and engagement. Furthermore, people may lack the tools and
guiding ideas to make sense of the situations they face. Organizations that are continually
expanding their capacity to create their future require a fundamental shift of mind among their
members. For Peter Senge, real learning gets to the heart of what it is to be human. We become
able to re-create ourselves. This applies to both individuals and organizations. Thus, for a
‘learning organization it is not enough to survive. Survival learning or what is more often termed
adaptive learning is important – indeed it is necessary. But for a learning organization, adaptive
learning must be joined by generative learning, learning that enhances our capacity to create.
4.15.1 Dimensions of Learning Organization
The dimension that distinguishes learning from more traditional organizations is the mastery of
certain basic disciplines or component technologies. The five that Peter Senge identifies are said
to be converging to innovate learning organizations. They are depicted in the FIG. 4.31.
FIG. 4.31 Dimensions of Learning Organization
 Systems Thinking - Systemic thinking is the conceptual cornerstone of this approach. It

is the discipline that integrates the others, fusing them into a coherent body of theory and
practice. Systems theory’s ability to comprehend and address the whole, and to examine
the interrelationship between the parts provides both the incentive and the means to
integrate the disciplines. An appreciation of systems will lead to recognition of the use of,
and problems with, such reinforcing feedback, and also an understanding of the place of
balancing (or stabilizing) feedback. A further key aspect of systems is the extent to which
they inevitably involve delays – ‘interruptions in the flow of influence which make the
consequences of an action occur gradually. The systems viewpoint is generally oriented
toward the long-term view. That’s why delays and feedback loops are so important.
 Personal Mastery - Organizations learn only through individuals who learn. Individual
learning does not guarantee organizational learning. But without it, no organizational
learning occurs’. Personal mastery is the discipline of continually clarifying and
deepening our personal vision, of focusing our energies, of developing patience, and of
seeing reality objectively’. It goes beyond competence and skills, although it involves
them. It goes beyond spiritual opening, although it involves spiritual growth. Mastery is
seen as a special kind of proficiency. It is not about dominance, but rather about calling.
Vision is vocation rather than simply just a good idea. People with a high level of
personal mastery are acutely aware of their ignorance, their incompetence, their growth
areas. Personal mastery is not something you possess. It is a process and a lifelong
discipline.
 Mental Models - These are ‘deeply ingrained assumptions, generalizations, or even
pictures and images that influence how we understand the world and how we take action’
We are often not that aware of the impact of such assumptions on our behaviour and,
thus, a fundamental part of our task is to develop the ability to reflect in and take action.
The discipline of mental models starts with turning the mirror inward; learning to unearth
our internal pictures of the world, to bring them to the surface and hold them rigorously
to scrutiny. It also includes the ability to carry on learningful conversations that balance
inquiry and advocacy, where people expose their own thinking effectively and make that
thinking open to the influence of others. If organizations are to develop a capacity to
work with mental models, then it will be necessary for people to learn new skills and
develop new orientations, and for their to be institutional changes that foster such change.
 Building Shared Vision - If any one idea about leadership has inspired organizations for
thousands of years, ‘it’s the capacity to hold a share picture of the future we seek to
create’. Such a vision has the power to be uplifting – and to encourage experimentation
and innovation. When there is a genuine vision, people excel and learn, not because they
are told to, but because they want to. But many leaders have personal visions that never
get translated into shared visions that galvanize an organization. What has been lacking is
a discipline for translating vision into shared vision – not a ‘cookbook’ but a set of
principles and guiding practices. The practice of shared vision involves the skills of
unearthing shared ‘pictures of the future’ that foster genuine commitment and enrolment
rather than compliance. In mastering this discipline, leaders learn the counter-
productiveness of trying to dictate a vision, no matter how heartfelt.
 Team Learning - Team learning is viewed as the process of aligning and developing the
capacities of a team to create the results its members truly desire. It builds on personal
mastery and shared vision – but these are not enough. People need to be able to act
together. When teams learn together, not only can there be good results for the
organization, members will grow more rapidly than could have occurred otherwise. The
discipline of team learning starts with ‘dialogue’, the capacity of members of a team to
suspend assumptions and enter into a genuine ‘thinking together’. To the Greeks dia-
logos meant a free-flowing discussions through a group, allowing the group to discover
insights not attainable individually. It also involves learning how to recognize the
patterns of interaction in teams that undermine learning.
4.16 Ethical Decision Making in Organizations
4.16.1 Ethics
Ethics are the rules or standards governing the conduct by which you live your life and make
your decisions. One of the best ways of thinking about ethics is to take a quick look at what you
believe and then think about how you would react if those beliefs were challenged. Ethics is two
things. First, ethics refers to well-founded standards of right and wrong that prescribe what
humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or
specific virtues. Ethics, for example, refers to those standards that impose the reasonable
obligations to refrain from rape, stealing, murder, assault, slander, and fraud. Ethical standards
also include those that enjoin virtues of honesty, compassion, and loyalty. And, ethical standards
include standards relating to rights, such as the right to life, the right to freedom from injury, and
the right to privacy. Such standards are adequate standards of ethics because they are supported
by consistent and well-founded reasons.
Secondly, ethics refers to the study and development of one's ethical standards. As mentioned
above, feelings, laws, and social norms can deviate from what is ethical. So it is necessary to
constantly examine one's standards to ensure that they are reasonable and well-founded. Ethics
also means, then, the continuous effort of studying our own moral beliefs and our moral conduct,
and striving to ensure that we, and the institutions we help to shape, live up to standards that are
reasonable and solidly-based. Your ethics govern your thought process so that when a problem
arises or you need to try and work your way through a situation, your solution is based on your
ethics. Ethics are more like a jigsaw puzzle that is thrown together over time, that when complete
makes up who you are and what you believe.
4.16.2 Five Sources of Ethical Standards
FIG. 4. Sources of Ethical Standards
 The Utilitarian Approach - This approach takes an individual's actions and then
categorizes them as right or wrong based on the amount of pleasure or pain that those
actions produce in society as a whole. Proponents of this approach says that the ethical
action is the one that provides the most good or does the least harm, or, to put it another
way, produces the greatest balance of good over harm. The ethical corporate action, then,
is the one that produces the greatest good and does the least harm for all who are
affected-customers, employees, shareholders, the community, and the environment.
Ethical warfare balances the good achieved in ending terrorism with the harm done to all
parties through death, injuries, and destruction. The utilitarian approach deals with
consequences; it tries both to increase the good done and to reduce the harm done.
 The Rights Approach – This approach states that the best ethical action is one that will
preserve the rights of the people who are affected by that action. This approach is
inspired by the belief that all humans are given dignity, and treating people humanely is a
requirement. Proponents of this approach suggest that the ethical action is the one that
best protects and respects the moral rights of those affected. This approach starts from the
belief that humans have a dignity based on their human nature per se or on their ability to
choose freely what they do with their lives. On the basis of such dignity, they have a right
to be treated as ends and not merely as means to other ends. The list of moral rights -
including the rights to make one's own choices about what kind of life to lead, to be told
the truth, not to be injured, to a degree of privacy, and so on-is widely debated; some now
argue that non-humans have rights, too. Also, it is often said that rights imply duties-in
particular, the duty to respect others' rights.
 The Fairness Approach – The main proponents of this approach include Aristotle and
many other Greek philosophers. They have contributed the idea that all equals should be
treated equally. In the present day scenario, This idea is used to say that ethical actions
treat all human beings equally and fairly based on some standard that is defensible. We
pay people more based on their harder work or the greater amount that they contribute to
an organization, and say that is fair. But there is a debate over CEO salaries that are
hundreds of times larger than the pay of others; many ask whether the huge disparity is
based on a defensible standard or whether it is the result of an imbalance of power and
hence is unfair.
 The Common Good Approach – This approach to ethics assumes a society comprising
individuals whose own good is inextricably linked to the good of the community.
Community members are bound by the pursuit of common values and goals. This
approach suggests that the interlocking relationships of society are the basis of ethical
reasoning and that respect and compassion for all others-especially the vulnerable-are
requirements of such reasoning. This approach also calls attention to the common
conditions that are important to the welfare of everyone. This may be a system of laws,
effective police and fire departments, health care, a public educational system, or even
public recreational areas.
 The Virtue Approach – The virtue approach to ethics assumes that there are certain
ideals toward which we should strive, which provide for the full development of our
humanity. These ideals are discovered through thoughtful reflection on what kind of
people we have the potential to become. These virtues are dispositions and habits that
enable us to act according to the highest potential of our character and on behalf of values
like truth and beauty. Honesty, courage, compassion, generosity, tolerance, love, fidelity,
integrity, fairness, self-control, and prudence are all examples of virtues. Virtue ethics
asks of any action, "What kind of person will I become if I do this?" or "Is this action
consistent with my acting at my best?"
4.16.3 Model for Ethical Decision Making
The character based decision making model, developed by the Josephson Institute of Ethics, can
be applied to many common problems and can also be used by most individuals facing ethical
dilemmas. It involves three steps:
 All decisions must take into account and reflect a concern for the interests and well
being of all affected individuals ("stakeholders"). The underlying principle here is the
Golden Rule — help when you can, avoid harm when you can.
 Ethical values and principles always take precedence over non ethical ones. Ethical
values are morally superior to non ethical ones. When faced with a clear choice between
such values, the ethical person should always choose to follow ethical principles.
Perceiving the difference between ethical and non ethical values can be difficult. This
situation often occurs when people perceive a clash between what they want or "need"
and ethical principles that might deny these desires. If some rationalization begins to
occur, this situation is probably present.
 It is ethically proper to violate an ethical principle only when it is clearly necessary
to advance another true ethical principle, which, according to the decision-maker's
conscience, will produce the greatest balance of good in the long run. Some decisions
will require you to prioritize and to choose between competing ethical values and
principles when it is clearly necessary to do so because the only viable options require the
sacrifice of one ethical value over another ethical value. When this is the case, the
decision-maker should act in a way that will create the greatest amount of good and the
least amount of harm to the greatest number of people.
4.16.4 Lawrence Kohlberg's Stages of Moral Development
The theory about stages of moral development developed by Lawrence Kohlberg is an adaptation
of a psychological concept originally conceived by the Swiss psychologist Jean Piaget.
According to the theory moral reasoning which is the basis for ethical behaviour, has six
identifiable developmental stages, each more adequate at responding to moral dilemmas than its
predecessor. The six stages of moral development are grouped into three levels: pre-conventional
morality, conventional morality, and post-conventional morality.
FIG. 4.32 Lawrence Kohlberg's Stages of Moral Development
4.16.4.1 Pre-Conventional Level
This level of moral reasoning is very common in children, even though adults can also exhibit
this level of reasoning. At this level, individuals judge the morality of an action by its direct
consequences. This level consists of the first and second stages of moral development and is
solely concerned with the self in an egocentric manner. A child with pre-conventional morality
has not yet adopted or internalized society's conventions regarding what is right or wrong but
instead focuses largely on external consequences that certain actions may bring.
 Obedience and Punishment – In the first stage of moral development, people
concentrate on the direct consequences of their actions on themselves. For instance, an
action is considered morally wrong because the perpetrator is punished. The worse the
punishment for the act is, the more bad the act is perceived to be. So people tend the infer
that even innocent victims are guilty in proportion to their suffering. It is egocentric in
nature which lacks recognition that others' points of view are different from one's own.
There is deference to superior power or prestige. An example of obedience and
punishment driven morality would be a child refusing to do something because it is
wrong and that the consequences could result in punishment. For example, a child's
classmate tries to dare the child to skip school. The child would apply obedience and
punishment driven morality by refusing to skip school because he would get punished.
 Self Interest – In this stage, right behavior is defined by whatever the individual believes
to be in their best interest but understood in a narrow way which does not consider one's
reputation or relationships to groups of people. At this stage, reasoning shows a limited
interest in the needs of others, but only to a point where it might further the individual's
own interests. As a result, concern for others is not based on loyalty or intrinsic respect,
but rather a "You scratch my back, and I'll scratch yours" mentality. The lack of a societal
perspective in the pre-conventional level is quite different from the social contract (stage
five), as all actions at this stage have the purpose of serving the individual's own needs or
interests. For proponents of stage two, the world's perspective is often seen as morally
relative. An example of self-interest driven is when a child is asked by his parents to do a
chore. The child asks, "what's in it for me?" The parents offer the child an incentive by
giving a child an allowance to pay them for their chores. The child is motivated by self-
interest to do chores.
4.16.4.2 Conventional Stage
This level of moral reasoning is typical of adolescents and adults. Here, morality of actions is
judged by comparing them to society's views and expectations. This level consists of the third
and fourth stages of moral development. It is characterized by an acceptance of society's
conventions concerning right and wrong. At this level an individual obeys rules and follows
society's norms even when there are no consequences for obedience or disobedience. Adherence
to rules and conventions is somewhat rigid, however, and a rule's appropriateness or fairness is
seldom questioned.
 Interpersonal – In this stage, an individual enters society conforming to social standards.

They are receptive to approval or disapproval from others as it reflects society's views.
They try to be a "good boy" or "good girl" to live up to these expectations, having learned
that being regarded as good benefits the self. Stage three reasoning may judge the
morality of an action by evaluating its consequences in terms of a person's relationships,
which now begin to include things like respect, gratitude, and the "golden rule". "I want
to be liked and thought well of; apparently, not being naughty makes people like me."
Conforming to the rules for one's social role is not yet fully understood. The intentions of
actors play a more significant role in reasoning at this stage; one may feel more forgiving
if one thinks that "they mean well".
 Authority - In this stage, focus is on obeying laws, dictums, and social conventions
because of their importance in maintaining a functioning society. Here, moral reasoning
is beyond the need for individual approval exhibited in stage three. The basis idea
prescribe what is right and wrong. If one person violates a law, perhaps everyone
would—thus there is an obligation and a duty to uphold laws and rules. When someone
does violate a law, it is morally wrong; culpability is thus a significant factor in this stage
as it separates the bad domains from the good ones. Most active members of society
remain at stage four, where morality is still predominantly dictated by an outside force.
4.16.4.3 Post-Conventional Stage
This level of moral reasoning is characterized by a growing realization that individuals are
separate entities from society, and that their own perspective may take precedence over society’s
view. People may disobey rules inconsistent with their own principles. Proponents of this level
live by their own ethical principles—principles that typically include such basic human rights as
life, liberty, and justice. People who exhibit post-conventional morality view rules as useful but
changeable mechanisms—ideally rules can maintain the general social order and protect human
rights. Rules are not absolute dictates that must be obeyed without question. Because post-
conventional individuals elevate their own moral evaluation of a situation over social
conventions, their behavior, especially at stage six, can be confused with that of those at the pre-
conventional level. Some theorists have speculated that many people may never reach this level
of abstract moral reasoning.
 Social Contract - In this stage, the world is viewed as having different opinions, rights,
and values. These viewpoints should be mutually respected as unique to each person or
community. Laws are regarded as social contracts rather than rigid edicts. Those that do
not promote the general welfare should be changed when necessary to meet “the greatest
good for the greatest number of people". This is achieved through majority decision and
inevitable compromise. Democratic government is ostensibly based on stage five
reasoning.
 Universal Ethics - In this stage, the basis of moral reasoning is abstract reasoning using
universal ethical principles. Laws are valid only if they are grounded in justice, and a
commitment to justice carries with it an obligation to disobey unjust laws. Decisions are
not reached hypothetically in a conditional way but rather categorically in an absolute
way, as in the philosophy of Immanuel Kant. This involves an individual imagining what
they would do in another’s shoes, if they believed what that other person imagines to be
true.The resulting consensus is the action taken. In this way action is never a means but
always an end in itself; the individual acts because it is right, and not because it avoids
punishment, is in their best interest, expected, legal, or previously agreed upon. Although
Kohlberg insisted that stage six exists, he found it difficult to identify individuals who
consistently operated at that level.
4.17 Factors that Inhibit Ethical Decision Making in Organizations
Business ethics refers to the moral principles or values that generally govern the conduct of an
individual or group. Ethical behavior is acting in ways that are consistent with how the business
world views moral principles and values. Business ethics determine employees' everyday
conduct. Let's take a look at some of the factors that affect your ethical behavior in the
workplace.
4.17.1 Individual Factors
Many individual factors such as knowledge, values, personal goals, morals and personality affect
a person's ethical behavior at work. The more information that you have about a subject, the
better chance you will make an informed, ethical decision. Without the right kind of knowledge,
you could be choosing an unethical path.
 Values – These are a person’s judgment or standard of behaviour affect his ethical
behaviour. To some individuals, acting in an improper way is just a part of doing
business. For instance, would you feel that it is ethical to make up lies about your
competitor just to win a contract? Some people's standard of behaviour will feel that
lying for a business financial win is not unethical.
 Morals –Morals consists of rules individuals develop as a result of cultural norms and
values and are, traditionally, what employees learn from their childhood, culture,
education, religion, etc. Morals have a great impact on ethical behaviour. They are
usually described as good or bad behavior. For example, would you have good morals if
you pushed a product on a customer that you knew was not going to help solve a
problem?
 Personality – Finally, personality of an individual plays an important factor in
determining ethical behavior. The question is whether you enjoy risk or do you prefer the
safe route? People who prefer to take risks tend to have a higher chance of unethical
conduct at work. For instance, if you are willing to risk dumping chemicals into a nearby
water supply to launch a profitable drug, then your riskiness could end up creating health
issues in local citizens for the sake of financial gain.
4.17.2 Social Factors
Cultural norms and the Internet are two social factors that can affect ethical behavior.
 Cultural Norms – In business world, different cultures have different norms that vary
from place to place. For instance, you might have to face a request for a bribe in order to
conduct business in certain countries in South America. This might be unethical to you
but considered an acceptable norm in their workplace.
 Internet - Acceptable behavior for using internet can be termed as internet ethics. We
should be honest, respect the rights and property of others on the internet. One has to
accept that Internet is not a value free-zone. It means World Wide Web is a place where
values are considered in the broadest sense so we must take care while shaping content
and services and we should recognize that internet is not apart from universal society but
it is a primary component of it.
4.17.3 Organizational Factors
Organizational values and social networks form the organizational factors that affect ethical
behaivour of an individual.
 Organizational Values - Values adopted within the organization are very important
considering that most managers operate at the conventional level of moral development.
Most believe their duty is to fulfill the obligations and expectations of others.
 Social Networks - Social networks in organizations play an important role in guiding
people's actions. The norms and values of the team, department, or organization have a
profound influence on ethical behavior.
4.18 Steps to Ensure Ethical Decisions
There are many ways in which individuals and organizations can ensure ethical decision making.
Some of the most commonly used methods are given below:
1. Stop and Think - There are many benefits for just stopping and thinking before taking
action. It prevents rash decisions, prepares us for more thoughtful discernment, and can
allow us to mobilize our discipline.
2. Clarify Goals – It is good to clarify your short-term and long-term aims before you choose.
Determine which of your many wants and "don't wants" affected by the decision are the
most important. The big danger is that decisions that fulfill immediate wants and needs can
prevent the achievement of our more important life goals.
3. Determine Facts - Always rely on right kind of information to ensure that you are making
an intelligent choice. To determine the facts, first resolve what you know, then what you
need to know. Be prepared for additional information and to verify assumptions and other
uncertain information. In addition:
o Consider the reliability and credibility of the people providing the facts.
o Consider the basis of the supposed facts. If the person giving you the information says
he or she personally heard or saw something, evaluate that person in terms of honesty,
accuracy, and memory.
4. Develop Options – Once you are clear about your goals and have made best judgment as to
the relevant facts, make a list of actions you can take to accomplish your goals. If it's an
especially important decision, talk to someone you trust so you can broaden your
perspective and think of new choices. If you can think of only one or two choices, you're
probably not thinking hard enough.
5. Consider Consequences - Filter your choices to determine if any of your options will
violate any core ethical values, and then eliminate any unethical options. Identify who will
be affected by the decision and how the decision is likely to affect them.
6. Choose - Make a decision. If the choice is not immediately clear, try:
o Talking to people whose judgment you respect.
o Think of a person of strong character that you know or know of, and ask yourself what
they would do in your situation.
o If everyone found out about your decision, would you be proud and comfortable?
o Follow the Golden Rule: treat others the way you want to be treated, and keep your
promises.
7. Monitor and Modify - Ethical decision makers monitor the effects of their choices. If they
are not producing the intended results, or are causing additional unintended and undesirable
results, they re-assess the situation and make new decisions.
Review Questions
1. __________ communication is the communication where information or messages flows

between or among the subordinates and superiors of the organization.
a) Horizontal b) Vertical c) Downward d) Upward
2. _________ refers to the study of eye contact and pupil dilation in terms of nonverbal
communication.
a) Kinesics b) Oculesics c) Haptics d) Proxemics
3. When an individual communicates with himself, it is called ________ communication.
a) intrapersonal b) External c) Internal c) intrapersonal
4. ___________ barriers refer to the obstacles caused in communication due to problems with
the interpretation of word meanings.
a) Physical b) Cultural c)Semantic d) Psychological
5. __________ can be defined as the degree to which tasks in an organization are divided into
separate jobs.
a) Work Specialization b) Departmentalization c) Chain of command d)

Formalization
1. Semantic barriers refer to the obstacles caused in communication due to problems with
the interpretation of word meanings.
2. Virtual organization consists of a network of independent firms that temporarily join
together to produce a service or product.
3. Chain of command can be defined as a hierarchy of authority where those at the top of
the organization direct and control the activities of the organizational members below
them.
4. A boundary less organization is a contemporary approach in organization design.
5. A lean organizational structure is a structure that is designed to enhance customer value
using fewer resources than a conventional organizational structure.
6. Frederick Winslow Taylor started the scientific management movement where he and his
associates studied the work process scientifically.
7. Organizational development can be defined as the use of organizational resources to
improve efficiency and expand productivity.
8. The ___________ exercise is a technique for discussing difficult and controversial issues
between two groups of people who may be in disagreement.
9. The confrontation meeting is developed by ___________, is a one day meeting of the
entire management of an organization.
10. Stream analysis developed by Jerry Porras is a valuable model for thinking and managing
change.
Fill in the blanks
1. _______ can be defined as the process in which a individuals, groups, or an organization

sends a message through a channel of communication to a large group of anonymous and
heterogeneous people and organizations.
2. When an individual communicates with himself, it is called __________ communication.
3. ____________ communication is the process by which people exchange information,
feelings, and meaning through verbal and non-verbal messages.
4. _____________ can be defined as the degree to which tasks in an organization are
divided into separate jobs.
5. ____________ in organizational structure is the degree to which managers specify
policies, procedures, job descriptions, and rules for the individual employees,
organizational units, groups, teams and the organization as a whole.
6. Coined by _________, the term learning organization refers to an organization that
facilitates the learning of its members and continuously transforms itself.
7. A ________ organizational design is a company structure in which the reporting
relationships are set up as a grid, or matrix, rather than in the traditional hierarchy.
8. Bureaucratic management is a theory set forth by _________.
9. ___________ is a structured approach for ensuring that changes are thoroughly and
smoothly implemented, and that the lasting benefits of change are achieved.
10. _____________ is a process in which employees receive confidential, anonymous
feedback from the people who work around them.
Match the following
1. Information flows between or among the subordinates and superiors of the organizational
- Upward communication.
2. The communication channel which pushes the flow of information upward - Vertical
Communication.
3. Flow of information and messages from a higher level inside an organization to a lower
one - Diagonal communication.
4. Cross functional communication happen between employees at different levels of the
organizational hierarchy - Horizontal communication.
5. Flow of messages across functional areas on the same level of an organization -
Downward communication.
6. Interpretation of body motion communication such as facial expressions and gestures -
Oculesics.
7. Study of eye contact and pupil dilation in terms of nonverbal communication - Kinesics.
8. Study of space and how we use it - Paralinguistics.
9. Interrelated observations and theories of man's use of time - Proxemics.
10. verbal communication through the vocal signals beyond the basic verbal message -
Chornemics.
1. Why communication is important in organizations?

2. What are the main objectives of communication?
3. List the key functions of communication in an organization.
4. Explain the key concepts in organizational design.
5. What is a change curve?
6. Write down the major objectives of organizational development.
7. Describe the eight steps for organizational development intervention.
8. What are the different types of comprehensive OD interventions.
9. Write short note about downsizing.
10. Explain the five sources of ethical standards.
1. Give a detailed explanation about communication process.

2. Write about the different types of communication with the help of a diagram.
3. What are the different barriers to communication?
4. Discuss in detail about traditional and contemporary organizational designs.
5. What are the different approaches to organizational design?
6. Explain the individual and Team work OD interventions.
7. Differentiate between process and structural OD interventions.
8. What is a learning organization? What are it's various dimensions?
9. Write about Lawrence Kohlberg's stages of moral development.
10. What are the factors inhibiting ethical decision making in organizations?
Module 5
Global Implications of
Organizational Behaviour

Contents
5.7 Organizational Structure that Connects Organizational Departments,
Functions and Geography to Achieve Organizational Goals
5.8 Impacts of Globalization on Organizational Culture

For the past few decades, the term globalization has been a buzzword. Globalization is a process
of interaction and integration among the people, companies, and governments of different
nations which is driven by international trade and investment and aided by information
technology. The generally accepted meaning of globalization is the integration of world politics,
economies and cultures from one country or countries upon another country or countries.
5.1.1 Challenges Managers Face
From a managerial perspective, the global workplace implies an enormous amount of diversity
management. Due to the diversity that is inherent in globalization, managers now must deal with
a more expansive list of issues and challenges, many of which are unique. Organizations that
have operations around the world pose a unique problem to the organizational behaviour. Each
location has its own view of observed holidays, communication, organizational change and
gender and a manager must consider all these aspects. All of these aspects, and more, make up a
country's economy, culture and politics. As a manager, this means developing a globally aware
perspective that lends itself well to the specific geographic needs, values, and customs in which
the business operates. Developing this global skill set is a powerful managerial skill.
Managers should also be aware of the best way to approach global demographics from a business
to consumer perspective, taking an international product or service and localizing it successfully
For example, how does a manager deal with attendance of employees when there are different
religious and historical holidays around the world, all on different days and for different lengths
of time? Think of the unique challenge a manager would have in scheduling work to be done,
when different offices overseas observe different holidays at different times. How does a
manager bring together a team of individuals from around the world, when one country could be
feuding with another? These are all real-world issues a global manager must work with, and as
globalization spreads, the influence of countries upon countries will spread as well.
5.1.2 Characteristics of International Managers in Global Organizations
Managers should plan, control, organize, and lead their organizations and departments. When we
look at international scenario, many different factors influence the success of a manager. Every
manager has to have a wide range of skills to truly be successful. In order to be successful, a
manager has to be able to:
 Plan: Have a specific outline of the steps that it will take to be successful.
 Control: Be able to keep all the pieces and parts of the plan moving together.
 Organize: Get all the people and equipment together to support the plan.
 Lead: Show vision and enthusiasm to reach the goal of the plan.
From the employee’s perspective, everybody have good as well as bad managers. What made
those managers good or bad probably also contributed to their overall success. If all these areas
were part of their success or failure, just think how much more comes into play when a manager
is working in a global company. Globally successful managers have skills that those who work
only for domestic probably lack. While there are certain skill sets that a global manager needs
that a domestic manager may indeed have, they will not use them as detailed or as frequently as
the global manager will. Let's take a look at the specific characteristics a global manager needs to
be successful.
5.1.2.1 Cultural Awareness
Cultural Awareness is the foundation of communication and it involves the ability of standing
back from ourselves and becoming aware of our cultural values, beliefs and perceptions. It is the
ability to understand the intricacies of a specific culture. Now, it could be argued that a manager
that works for a company in the India needs to be culturally aware (and they do), but think for a
moment the depth of cultural awareness needed when dealing with a different country. A
manager would have to understand how the entire culture views business. That would include
negotiating, the work environment, and communication, among other things. It's one thing to
work with someone that is of a different culture; it's another thing to manage someone working
in a different culture where all aspects of how they work are accepted as the norm. A smart
global manager will review and understand the culture from different perspectives (religion,
culture, etc.) so they have a better chance of being successful.
5.1.2.2 Dealing with Uncertainty
Randomness and uncertainty play increasingly greater roles in determining business success,
largely because of rapidly evolving social networks. There is uncertainty in every job, position,
and company. Some of us might say that it makes work fun or exciting. But a global manager is
dealing with a broader range of uncertainty than any Indian manager could ever deal with.
Everything for the global manager is a learning curve. For instance, if you are promoted to a
manager position here in the India, you could probably understand what is expected: how to treat
people, legal issues, work environment, etc. Now, let us take that same situation and drop you in
a company office in Taiwan. Think of the level of uncertainty that you will have to deal with. Do
you think there would be more uncertainty present in this situation than if you were promoted to
a position in the India? How you deal with that, and what systems you put in place to lessen the
uncertainty, will dictate your success or failure.
Managers just don't go out and haphazardly perform their responsibilities. Good managers
discover how to master five basic functions: planning, organizing, staffing, directing, and
controlling. Now, we will address those areas and integrate them into international business.
5.2.1 Ingredients in Management
For a person to be an effective manager, they will have to take the ingredients they would
normally use in their home country and change them a little to make them work in an
international setting. The ingredients are:
FIG. 5.1 Functions of Management
 Planning - Developing and implementing strategy for the organization to function.

 Organizing - Ensuring the company has all the right people and parts, in the right place,
at the right time.
 Staffing - Hiring, training and developing personnel.
 Controlling - Making sure the steps of your plan and the results of your work are
monitored.
 Directing - Supplying a vision to the personnel in the organization.
Even though all these are key aspects of being a manager, they take on a very different flavour
when we put them in an international context, for a variety of reasons.
5.2.2 Planning
The planning function of management controls all the planning that allows the organization to
run smoothly. Planning involves defining a goal and determining the most effective course of
action needed to reach that goal. In an international setting, planning takes on a different feel
because the manager has to take into account all the different aspects present in an international
environment. They have to understand aspects such as:
 How taxes are handled in a foreign country and how that impacts their business?
 The employment or staffing requirements and laws per country.
 The amounts of money that can be put into and taken out of the company, based on laws
present in that country.
 Regulatory issues that would impact what the company can do should they want to
expand.
As you can see, these are not much different than what we would experience in the India. but
they need to be understood from the aspect of the international country you are in. For example,
many countries have foreign direct investment laws - laws that regulate, among other things, how
much profit can be taken out of the company and sent back to the corporate office in the India. If
you are operating within just the India, this is not an issue, but in international settings, it's a very
real issue.
5.2.3 Organizing
The organizing function of leadership controls the overall structure of the company. Organizing
involves designating tasks and responsibilities to employees with the specific skill sets needed to
complete the tasks. For instance, if you have to talk to a group of people who speaks a language
other than your language and get things do with their help, it is going to be really tough. This is
the primary challenge when looking at organizations from an international perspective. People
might interpret what you are saying differently because they do not fully understand you due to
language barriers. Now take this example and multiply it by having to run an organization in
Europe. You would have to organize individuals who do not speak your language but who also
do not speak each other's language. The challenges here are fairly apparent, and it's something a
manager has to learn to overcome to work in a foreign setting. Remember, we are not talking
about only the languages but also how the translation is interpreted.
5.2.4 Staffing
The staffing function of management controls all recruitment and personnel needs of the
organization. The main purpose of staffing is to hire the right people for the right jobs to achieve
the objectives of the organization. Obviously, a manager wants to find the best person he can for
the job. In the home country, we have familiar, understood rules for hiring people via
background checks and the interview process. In foreign markets, those rules are totally
different. For instance, in Germany, if you have a sales representative who handles a market for
you, and you want to let that person go, you must pay that person the commissions earned in that
territory for a year after you let them go. The German courts look at it as that person developed
that market and is entitled to that money. Thus, you have replaced a person who was not
performing and have to pay the new person, but you also have to pay the person you let go for a
year. This is a very different aspect to staffing that we would not experience in the India.
Compound tricky laws with different holiday schedules, religious beliefs and accepted work
ethics, and a manager in a foreign market really has a lot to think through when it comes to
staffing.
5.2.5 Directing
The directing function of leadership controls all the organizing, planning and staffing activities
of the company and ensures all activities function together for the good of the organization. It is
that part of managerial function which actuates the organizational methods to work efficiently
for achievement of organizational purposes. It is considered life blood of the enterprise which
sets it in motion the action of people because planning, organizing and staffing are the mere
preparations for doing the work. Direction is that inert-personnel aspect of management which
deals directly with influencing, guiding, supervising, motivating sub-ordinate for the
achievement of organizational goals. Direction has following elements:
 Supervision – It implies overseeing the work of subordinates by their superiors. It is the

act of watching & directing work & workers.
 Motivation – It means inspiring, stimulating or encouraging the sub-ordinates with zeal
to work. Positive, negative, monetary, non-monetary incentives may be used for this
purpose.
 Leadership – It may be defined as a process by which manager guides and influences the
work of subordinates in desired direction.
 Communications - It is the process of passing information, experience, opinion etc from
one person to another. It is a bridge of understanding.
5.2.6 Controlling
The controlling function of management is useful to ensure that all other functions of the
organization are in place and are operating successfully. Controlling involves establishing
performance standards and monitoring the output of employees to ensure each employee’s
performance meets those standards. International managers have to work with unfamiliar
information and try to organize it so they can put everything together. In an international setting,
it's not as easy to control the process because you are unaware of all the nuances of how they
work or fit together. So, organizing in a foreign setting is really challenging. The controlling
process often leads to the identification of situations and problems that need to be addressed by
creating new performance standards. The level of performance affects the success of all aspects
of the organization.
An organization can adopt different ways to enter a foreign market. No one market entry strategy
works for all international markets. Direct exporting may be the most appropriate strategy in one
market while in another you may need to set up a joint venture and in another you may well
license your manufacturing. There will be a number of factors that will influence your choice of
strategy, including, but not limited to, tariff rates, the degree of adaptation of your product
required, marketing and transportation costs. While these factors may well increase your costs it
is expected the increase in sales will offset these costs. The following strategies are the main
entry options open to you.
FIG. 5.2 Methods to do International Business
5.3.1 Exporting
An export is a function of international trade whereby goods produced in one country are
shipped to another country for future sale or trade The seller of such goods and services is
referred to as an exporter. In international trade, exports refer to selling goods and services
produced in the home country to other markets. Methods of export include a product or good or
information being mailed, hand-delivered, shipped by air, shipped by vessel, uploaded to an
internet site, or downloaded from an internet site. Exports also include the distribution of
information that can be sent in the form of an email, an email attachment, a fax or can be shared
during a telephone conversation.
5.3.1.2 Direct Exporting
Direct exporting means you export directly to a customer interested in buying your product. You
are responsible for handling the market research, foreign distribution, logistics of shipment and
for collecting payment. Direct export works the best if the volumes are small. Large volumes of
export may trigger protectionism. The main characteristic of direct exports entry model is that
there are no intermediaries. Passive exports represent the treating and filling overseas orders like
domestic orders. The two types of direct exporting are sales representatives and import
distributors.
 Sales Representatives - Sales representatives represent foreign suppliers/manufacturers

in their local markets for an established commission on sales. It provide support services
to a manufacturer regarding local advertising, local sales presentations, customs clearance
formalities and legal requirements. Manufacturers of highly technical services or
products such as production machinery, benefit the most from sales representation.
 Importing Distributors - Importing distributors purchase product in their own right and
resell it in their local markets to wholesalers, retailers, or both. Importing distributors are
a good market entry strategy for products that are carried in inventory, such as toys,
appliances, prepared food.
5.3.1.2 Indirect Exporting
Indirect exporting refers to selling to or through an intermediary. It is a relatively cheap and

straightforward way to enter a new market. Intermediaries are typically agents or distributors
based in your target export market who sell your products or services to end users. The exporter
has no control over its products in the foreign market. The different types of indirect exporting
are given below.
 Export Trading Companies (ETCs) - These provide support services of the entire
export process for one or more suppliers. Attractive to suppliers that are not familiar with
exporting, ETCs usually perform all the necessary work such as locate overseas trading
partners, present the product, quote on specific enquiries, etc.
 Export Management Companies (EMCs) - These are similar to ETCs in the way that
they usually export for producers. Unlike ETCs, they rarely take on export credit risks
and carry one type of product, not representing competing ones. Usually, EMCs trade on
behalf of their suppliers as their export departments.
 Export Merchants - Export merchants are wholesale companies that buy unpackaged
products from suppliers/manufacturers for resale overseas under their own brand names.
The advantage of export merchants is promotion. One of the disadvantages for using
export merchants result in presence of identical products under different brand names and
pricing on the market, meaning that export merchant’s activities may hinder
manufacturer’s exporting efforts.
 Confirming Houses - These are intermediate sellers that work for foreign buyers. They
receive the product requirements from their clients, negotiate purchases, make delivery,
and pay the suppliers/manufacturers. An opportunity here arises in the fact that if the
client likes the product it may become a trade representative. A potential disadvantage
includes supplier’s unawareness and lack of control over what a confirming house does
with their product.
 Nonconforming Purchasing Agents - These are similar to confirming houses with the
exception that they do not pay the suppliers directly – payments take place between a
supplier/manufacturer and a foreign buyer.
5.3.1.3 Advantages of Exporting
The reason for your company to consider exporting is quite compelling. The following are few of
the major advantages of exporting:
 Increased Sales and Profits - Selling goods and services to new boost sales and
increases revenues. It gives additional foreign sales over the long term, once export
development costs have been covered, increase overall profitability.
 Enhance Domestic Competitiveness - Most companies become competitive in the
domestic market before they venture in the international arena. Being competitive in the
domestic market helps companies to acquire some strategies that can help them in the
international arena.
 Diversification - Selling to multiple markets allows companies to diversify their business
and spread their risk. Companies will not be tied to the changes of the business cycle of
domestic market or of one specific country.
 Expand Life Cycle of Product - Many products go through various cycles namely
introduction, growth, maturity and declining stage that is the end of their usefulness in a
specific market. Once the product reaches the final stage, maturity in a given market, the
same product can be introduced in a different market where the product was never
marketed before.
5.3.1.4 Disadvantages of Exporting
While the advantages of exporting by far outweigh the disadvantages, small and medium size
enterprises especially face some challenges when venturing in the international marketplace.
 Extra Costs - Because it takes more time to develop extra markets, and the pay back
periods are longer, the up-front costs for developing new promotional materials,
allocating personnel to travel and other administrative costs associated to market the
product can strain the meager financial resources of small size companies.
 Product Modification - When exporting, companies may need to modify their products
to meet foreign country safety and security codes, and other import restrictions. At a
minimum, modification is often necessary to satisfy the importing country's labeling or
packaging requirements.
 Financial Risk - Collections of payments using the methods that are available (open-
account, prepayment, consignment, documentary collection and letter of credit) are not
only more time-consuming than for domestic sales, but also more complicated. Thus,
companies must carefully weigh the financial risk involved in doing international
transactions.
 Market Information - Finding information on foreign markets is unquestionably more
difficult and time-consuming than finding information and analyzing domestic markets.
In less developed countries. For example, reliable information on business practices,
market characteristics, cultural barriers may be unavailable.
5.3.2 Licensing
Licensing means renting or leasing of an intangible asset. It is a process of creating and

managing contracts between the owner of a brand and a company or individual who wants to use
the brand in association with a product, for an agreed period of time, within an agreed territory.
Licensing allows a firm to provide its technology in exchange for fees or some other benefits.
This allows companies to sell their technology (maybe in form of softwares) internationally to
other countries electronically and this constitutes international business. As in this mode of entry
the transference of knowledge between the parental company and the licensee is strongly present.
The decision of making an international license agreement depend on the respect the host
government show for intellectual property and on the ability of the licensor to choose the right
partners and avoid them to compete in each other market. Licensing is a relatively flexible work
agreement that can be customized to fit the needs and interests of both, licensor and licensee.
The major advantages of licensing are the following.
 Revenue - Issuing a license can provide instant and guaranteed revenue for the licensing
company. The license agreement can require several types of payments, including a
guaranteed license payment or variable payments based on the profits of the licensee
business. Either way, the licensee pays for the right to hold the license, which produces
revenues to the licensing company.
 Brand Recognition - A more subtle advantage of licensing a business process is the
promotion of brand recognition. The licensing company should consider retaining the
right to market the fact that the licensee has obtained a license from the licensing
company. This can provide brand credibility and recognition benefits for the licensing
company, as more people become aware that the licensing company is responsible for the
production of the licensee business.
Licensing has its own limitations. They are given below.
 Competition - One of the major disadvantages of issuing a license is that it creates

competition. In fact, the license places your competition on a level playing field because
the competitor now has the right to use the same production processes you use. A
licensing company may attempt to limit competition by limiting the scope of the license
as much as possible. For example, the license may contain geographic, time or quantity
restrictions that protect the market of the licensing company.
 Confidentiality - If another business is willing to pay you for a license on your
production process, your production process is a valuable property right. The risk with a
license is that it increases exposure of your confidential, proprietary production process.
The more people who know your process, the higher the risk that somebody will breach
confidentiality. This is especially true where the licensing company has no direct control
over the employees and contractors who work with the licensee business.
5.3.3 Franchising
Franchising is a form of business by which the owner (franchisor) of a product, service or

method obtains distribution through affiliated dealers (franchisees). If buying an existing
business doesn't sound right for you but starting from scratch sounds a bit intimidating, you
could be suited for franchise ownership. The franchisor grants the franchisee the right to use a
developed concept, including trademarks and brand names, production, service and marketing
methods and the entire business operation model, for a fee. The franchisee then provides the
time, capital, and desire to utilize the brand and services provided by the franchisor to build a
thriving business. The product, method or service being marketed is usually identified by the
franchisor's brand name, and the holder of the privilege (franchisee) is often given exclusive
access to a defined geographical area for a defined period of time, all of which is defined in the
Franchise Agreement. The terms involved with franchising are given below:
 Franchise - A privilege or right officially granted to offer specific products or services

under explicit guidelines at a certain location for a declared period of time.
 Franchise Agreement - The legal document between the Franchisor and the Franchisee
that governs the relationship between the two entities for a specified period of time. It
frames the relationship in a concise manner.
 Franchisee - A person or entity to whom the right to conduct a business is granted by the
franchisor or licensor.
 Franchisor - The company owning/controlling the rights to grant franchises to potential
franchisees.
FIG 5.3 Difference Between Franchising and Licensing
5.3.4 Strategic Alliance
A strategic alliance is an arrangement between two companies that have decided to share
resources to undertake a specific, mutually beneficial project. A strategic alliance is less involved
and less permanent than a joint venture, in which two companies typically pool resources to
create a separate business entity. The strategic partners maintain their status as independent and
separate entities, share the benefits and control over the partnership, and continue to make
contributions to the alliance until it is terminated. Strategic alliances are often formed in the
global marketplace between businesses that are based in different regions of the world.
5.3.4.1 Five Criteria of a Strategic Alliance
Many alliances default to some form of revenue generation—which is certainly important— but
revenue alone may not be truly strategic to the objectives of the business. There are five general
criteria that differentiate strategic alliances from conventional alliances. An alliance meeting any
one of these criteria is strategic and should be managed accordingly.
 Critical to a Business Objective - While the most common type of alliance generates
revenue through a joint go-to-market approach, not every alliance that produces revenue
is strategic. For example, consider the impact on revenue objectives if the relationship
were terminated? Clearly, a truly strategic relationship would have a great bearing on the
prospects for achieving revenue growth targets. In addition to a single strategic alliance,
related groupings of alliances—networks or constellations—may also be critical to a
business objective. Sun Microsystems has established a group of integrator alliances that
function as an effective marketing channel and drive significant revenues for the
company each quarter.
 Competitive Advantage and Core Competency - Another way in which an alliance can
prove to be strategic is to play a key role in developing or protecting a firm’s competitive
advantage or core competency. Learning alliances are the most common form of
competitive strategic alliances. An organization’s need to build incremental skills in an
area of importance is often accelerated with the help of an experienced partner. In some
cases, the learning objective of the relationship is openly agreed between the partners;
however, this is not always the case.
 Blocking a Competitive Threat - An alliance can be strategic even when it falls short of
establishing a competitive advantage. Consider the case of an alliance that blocks a
competitive threat. It is strategic to bring competitive parity to a secondary segment of a
market in which the firm competes, when the absence of parity creates a competitive
disadvantage in the related primary segments of that market. For example, competing in
the high and medium price range of a market with a premium product may leave the firm
vulnerable to a low-priced entry. If the firm’s manufacturing processes do not permit the
creation of a low-priced product entry, a strategic alliance with a volume partner in an
adjacent market can successfully block the competitive threat.
 Future Strategic Options - From a longer-term perspective, an alliance that is not
fundamental to achieving a business objective today could become critical in the future.
For example, in 1984, a U.S. consumer products company needed to expand distribution
beyond the Midwestern states. Faced with the prospect of European competition at some
point in the future, the firm made a strategic decision to invest in an alliance with a
distribution and support services company that had incremental distribution capacity in
the U.S. and a similar presence in Europe, rather than invest in expanding its own local
distribution capabilities. With the option to expand into European distribution at any
point, the firm could work to sew up the U.S. market before expanding too quickly
internationally.
 Risk Mitigation - When an alliance is driven by intent to mitigate significant risk to an
underlying business objective, the nature of the risk and its potential impact on the
underlying business objective are the key determinants of whether or not it is truly
strategic. Dual sourcing strategies for critical production components or processes are
excellent examples of how risk mitigation can become the context for supply-side
strategic alliances.
5.3.4.2 Advantages of Strategic Alliances
The main advantages of strategic alliances are given below:
 Access to Supplementary Services - One of the most attractive benefits of an alliance

with another business is the opportunity to offer supplementary services to clients that
otherwise would not be available. It is vital to a business’ success to focus on its core
competencies because when a business becomes a jack of all trades, it becomes a master
of none. An alliance allows a company to offer its clients a whole new realm of services
without losing focus on its capabilities and its specialized services.
 Opportunity to Reach New Markets - Entering a strategic alliance will automatically
increase awareness of a brand among an entirely new market that the franchise business
has not had the resources to reach beforehand. In most cases of franchising alliances, a
partner will be a business that offers a completely different set of services to a market that
is similar to its own, allowing the business to increase its market size with little impact on
the franchise business.
 Increased Brand Awareness - The opportunity to grow market size with a partnership
presents the additional opportunity to increase awareness of the brand. One of the key
elements of a business’ success is constant, growing brand awareness. If your brand
awareness isn’t growing, your business isn’t growing. Strategic alliances allow an
organization to reach a broader audience without putting in extra time and capital.
 Access to New Customer Base - A franchise business is constantly searching for new,
creative ways to increase its clientele and reach new potential customers, and forming a
strategic alliance provides an opportunity to do that. A trusting, solid business partnership
will provide access to a completely new customer base that the franchise would not have
had access to otherwise.
5.3.4.3Potential Challenges of Strategic Alliances
The potential challenges of strategic alliances are given below:
 Choosing the Right Partner - The challenges to a strategic alliance begin during the
very first stage of choosing a partner. Choosing the wrong partner can be damaging if it is
not able to contribute to the growth of your business and offer a degree of dedication,
honesty and integrity to the partnership. When researching different businesses that your
company could potentially form an alliance with, it is important to keep in mind that this
will often be an exclusive relationship, meaning it may very well be the only business
your brand will be able to partner with in the category. In partnerships, the franchise
company is going to want to choose businesses with a positive reputation in its industry
that uphold similar policies and values as within its business model. Once a relationship
is formed with a business in a specific industry, the odds of forming more in that same
industry are very slim, so it is important to do it right the first time.
 Building a Mutually Beneficial Alliance - One of the biggest challenges of entering a
strategic alliance is ensuring that the partnership is going to benefit both businesses
involved. With human nature being motivated by self-interest, it is often difficult to enter
into a business relationship with the goal to benefit the other party just as much as it will
benefit your brand. Once that emotion is overcome, a new challenge arises to continue to
keep the relationship mutually beneficial throughout its lifetime, which will require
dedication, trust and honesty.
 Upholding Trust and Honesty - Without a certain degree of trust and honesty, a
partnership has no foundation to build on. It is important for both parties approaching an
alliance to set their expectations clearly and concisely before the partnership is solidified.
 Knowing When to Reassess the Alliance - Every business will experience constant flux
and change and initiatives that have once been prosperous may not be right two to three
years down the road. To ensure that a business alliance continues to mutually benefit both
parties, it is important to know when to reassess the alliance and change the foundation.
Both businesses must understand that change is inevitable and must be able to work
together to reach new agreements over time. Sometimes the need to restructure will be
clear, while at other times it will take the initiative of one or both sides of the partnership
to actively seek whether or not the partnership is still working. It is a good idea to
reassess a business alliance at regular intervals.
4.3.5 Contract Manufacturing
In contract manufacturing, a firm finds a suitable manufacturer in the country it wants to enter
into. It is the outsourcing of part of the manufacturing process of a product to a third-party. More
specifically, contract manufacturing is an outsourcing of certain production activities that were
previously performed by the manufacturer to a third-party. A company may outsource the
manufacture of certain components for the product or outsource the assembly of the product.
Nowadays, outsourcing companies have become specialists in a multitude of services for
manufacturers including design, production, assembly, and distribution.
5.3.5.1 Advantages of Contract Manufacturing
 Cost Savings – Companies save on their cost of capital because they do not have to pay
for a facility and the equipment needed for production. They can also save on labor costs
such as wages, training and benefits. Some companies may look to contract manufacture
in low-cost countries, such as India, to benefit from the low cost of labor.
 Mutual Benefit to Contract Site – A contract between the manufacturer and the
company it’s producing for may last several years. The manufacturer will know that it
will have a steady flow of business until then.
 Advanced Skills – Companies can take advantage of skills that they may not possess, but
the contract manufacturer does. The contract manufacturer is likely to have relationships
formed with raw material suppliers or methods of efficiency within their production.
 Economies of Scale – Contract manufacturers have multiple customers that they produce
for. Because they are servicing multiple customers, they can offer reduced costs in
acquiring raw materials by benefiting from economies of scale. The more units there are
in one shipment, the less expensive the price per unit will be.
5.3.5.2 Disadvantages of Contract Manufacturing
 Relationships - It is imperative that the company forms a good relationship with its
contract manufacturer. The company must keep in mind that the manufacturer has other
customers. They cannot force them to produce their product before a competitor’s. Most
companies mitigate this risk by working cohesively with the manufacturer and awarding
good performance with additional business.
 Quality concerns – When entering into a contract, companies must make sure that the
manufacturer’s standards are congruent with their own. They should evaluate the
methods in which they test products to make sure they are of good quality. The company
has to rely on the contract manufacturer for having good suppliers that also meet these
standards.
 Intellectual property loss – When entering into a contract, a company is divulging their
formulas or technologies. This is why it is important that a company not give out any of
its core competencies to contract manufacturers. It is very easy for an employee to
download such information from a computer and steal it.
 Loss of flexibility and responsiveness – Without direct control over the manufacturing
facility, the company will lose some of its ability to respond to disruptions in the supply
chain. It may also hurt their ability to respond to demand fluctuations, risking their
customer service levels.
5.3.6 Mergers and Acquisitions
Mergers and acquisitions (M&A) is the area of corporate finances, management and strategy
dealing with purchasing and/or joining with other companies. As an aspect of strategic
management, M&A can allow enterprises to grow, shrink, change the nature of their business or
improve their competitive position. Mergers and acquisitions are both changes in control of
companies that involve combining the operations of multiple entities into a single company. In a
merger, two companies agree to combine their operations into a single entity. In an acquisition,
one company purchases another company, and has the right to sell off operations, merge them
into similar groups in the purchasing company, or close facilities or cancel products altogether.
5.3.6.1 Mergers
From a legal point of view, a merger is a legal consolidation of two entities into one entity. A
merger is a corporate strategy of combining different companies into a single company in order
to enhance the financial and operational strengths of both organizations. A merger usually
involves combining two companies into a single larger company. The combination of the two
companies involves a transfer of ownership, either through a stock swap or a cash payment
between the two companies. In practice, both companies surrender their stock and issue new
stock as a new company.
5.3.6.1.1 Types of Mergers
The most common types of mergers are the following: conglomerate merger, horizontal merger,
market extension merger, vertical merger and product extension merger. The term chosen to
describe the merger depends on the economic function, purpose of the business transaction and
relationship between the merging companies.
 Conglomerate - A merger between firms that are involved in totally unrelated business
activities. There are two types of conglomerate mergers: pure and mixed. Pure
conglomerate mergers involve firms with nothing in common, while mixed conglomerate
mergers involve firms that are looking for product extensions or market extensions.
 Horizontal Merger - A merger occurring between companies in the same industry.
Horizontal merger is a business consolidation that occurs between firms who operate in
the same space, often as competitors offering the same good or service. Horizontal
mergers are common in industries with fewer firms, as competition tends to be higher and
the synergies and potential gains in market share are much greater for merging firms in
such an industry.
 Market Extension Mergers - A market extension merger takes place between two
companies that deal in the same products but in separate markets. The main purpose of
the market extension merger is to make sure that the merging companies can get access to
a bigger market and that ensures a bigger client base.
 Product Extension Mergers - A product extension merger takes place between two
business organizations that deal in products that are related to each other and operate in
the same market. The product extension merger allows the merging companies to group
together their products and get access to a bigger set of consumers. This ensures that they
earn higher profits.
 Vertical Merger - A merger between two companies producing different goods or
services for one specific finished product. A vertical merger occurs when two or more
firms, operating at different levels within an industry's supply chain, merge operations.
Most often the logic behind the merger is to increase synergies created by merging firms
that would be more efficient operating as one.
5.3.6.2 Acquisitions
An acquisition takes place when one company completely buys out another company, and the
former company remains. Acquisitions are often made as part of a company's growth strategy
when it is more beneficial to take over an existing firm's operations and niche compared to
expanding on its own. Acquisitions are often paid in cash, the acquiring company's stock or a
combination of both.
5.3.6.2.1 Types of Acquisition
 Asset Acquisitions - In an asset sale, individually identified assets and liabilities of the
seller are sold to the acquirer. The acquirer can choose which specific assets and
liabilities it wants to purchase, avoiding unwanted assets and liabilities for which it does
not want to assume responsibility. The asset purchase agreement between the buyer and
seller will list or describe and assign values to each asset (or liability) to be acquired,
including every asset from office supplies to goodwill.
 Stock Acquisitions - In a stock purchase, all of the assets and liabilities of the seller are
sold upon transfer of the seller's stock to the acquirer. As such, no tedious valuation of
the seller's individual assets and liabilities is required and the transaction is mechanically
simple. The acquirer does not receive a stepped-up tax basis in the acquired net assets
but, rather, a carryover basis. Any goodwill created in a stock acquisition is not tax-
deductible.
5.3.7 Production Facility in Foreign Market
5.3.7.1 Assembly Operations
This is a market entry strategy in which an organization sends parts for products to a foreign
plant for final assembly. It is a variation of the subsidiary. A foreign production plan might be set
up simply to assemble components manufactured in the domestic market or elsewhere. The
exporting company may try to retain key component manufacture in the domestic plant, allowing
development, production skill and investment to be concentrated, while maintaining the benefit
from economies of scale. Some parts of the products may be produced in various countries in
order to gain each country´s comparative advantage. Capital-intensive parts may be produced in
advanced countries, and labour-intensive assemblies may be produced in less developed
countries (LDCs), where labour is abundant and labour costs are low. When a product becomes
mature and faces intense price competition, it may be necessary to shift all of the labour-intense
operations to LDCs.
5.3.7.2 Wholly Owned Manufacturing Facility
A company with long term interest in a foreign market may establish fully owned manufacturing
facilities. Factors like trade barriers, cost differences, government policies etc. encourage the
setting up of production facilities in foreign markets. Manufacturing abroad provides the firm
with total control over quality and production. Wholly owned subsidiaries offer some advantages
to the parent company. Companies that must rely upon suppliers and service providers can take
control of their supply chain by use of wholly owned subsidiaries. This is a means of vertical
integration where companies in a supply chain are under the control of a common owner. For
example, a car manufacturing company may have several wholly owned subsidiaries, including a
tire company and several different auto parts companies. Wholly owned subsidiaries also offer
an opportunity for companies to diversify and manage risk. Diversification is a means for a
company to reduce risk by developing different types of businesses so that if one business or
industry isn't doing well, its other businesses may be able to pick up the slack and keep the
company profitable. For example, a computer company may decide to get into the printer
business, the television business, and the tablet business and either buy or form a wholly owned
subsidiary for each new business. Damage from the failure of one subsidiary will not necessary
be fatal to the parent company.
5.3.8 Joint Ventures
A joint venture is a business enterprise undertaken by two or more persons or organizations to

share the expense and (hopefully) profit of a particular business project. In a joint venture, each
of the participants is responsible for profits, losses and costs associated with it. However, the
venture is its own entity, separate and apart from the participants' other business interests.
Companies typically pursue joint ventures for one of four reasons: to access a new market,
particularly emerging markets; to gain scale efficiencies by combining assets and operations; to
share risk for major investments or projects; or to access skills and capabilities.
5.3.8.1 Advantages of Joint Ventures
 New and Improved Technology - One partner may have the new and improved
technology but do not have the resources. Other partner may have resources like capital
but do not have the technology. In such causes joint venture can fetch new and improved
technology as well as great resources. By engaging a foreign partner, improved foreign
technology can be availed from it's foreign collaborator.
 Exchange of Products - Joint venture companies can offer their existing product to sell
through the partner’s network and share the profit. Both JV partners can do the same. By
exchanging products and services of the partner, they can diversify the product basket
and sell it to their existing customers and increase the profit.
 Sufficient Resources - Since two or more persons pool their resources, there is sufficient
capital available.
 Ability and Experience - In joint venture the different venturers may be having different
skills and experience. The benefit of their common wisdom will be available to the
venture.
5.3.8.2 Disadvantages of Joint Ventures
 Management - The management of a business can often lead to conflicts in joint venture
as a joint venture requires the input from both or all of the parties involved. However, it
is likely that one party may dominate the management of the project or of the new
company and so tensions may arise within the joint venture. There may also be confusion
as to who the management consists of, it may be that each party brings in his own
management team, or that a new joint venture management team needs to be created.
Disagreements will also have to be resolved by senior management.
 Differences - Although ultimately the parties have the same interest in the joint venture,
their objectives for the outcome may differ; causing conflicts. Joint ventures also require
parties to work in close proximity, which may highlight different working patterns
adopted by respective parties. This can affect the harmony amongst the management
team and may make the operation of the joint venture lengthy and costly.
 Competition – Even though there is no appropriate clause in the contract or the
agreement between the parties when creating the joint venture, it may be possible for one
party to take the market knowledge from the other party or parties in the joint venture and
set up a business in direct competition. This is of particular significance when the joint
venture comes to an end, with each business taking away from the joint venture what they
have learned from each other.
5.3.8.3 Types of Joint Ventures
 Short Term Collaborations - The length of the joint venture is of importance here as it
is often that such collaborations will only take place for a particular project, rather than to
create a long lasting business relationship.
 Limited Function Joint Ventures – The powers in a limited-function joint venture are
based largely on co-operation or co-ordination between the joint venture parties rather
than a complete merge of businesses.
 Full Function Joint Ventures - A full-function joint venture on the other hand is
designed on a much larger scale compared to the limited function, with the intent to
merge the businesses involved to create an autonomous economic entity, often a new
company, in exchange for shares.
 Full Scale World Wide Mergers - This type of joint venture is on the largest scale,
which is often with the involvement of international companies, creating a new company
or subsidiary. For example the merger between Shell and Texaco, to create Equilon to
deal with a particular product, namely industrial lubricants.
Business owners should consider multiple factors and understand the larger forces shaping their
choices before entering the foreign market for launching a new product, One of the best ways to
examine any decision is to conduct a PESTEL analysis - Political, Economic, and Social,
Technological, Environmental and Legal analysis. Any successful business needs to understand
that all these issues vary from country to country. This means you need to have a comprehensive
understanding of the market you are about to deal with. At the same time, PESTEL helps you
understand how the dynamics of one market may affect the dynamics of another.
FIG 5.4 PESTEL Analysis
5.4.1 Political Aspects
These factors determine the extent to which a government may influence the economy or a
certain industry. For example, a government may impose a new tax or duty due to which entire
revenue generating structures of organizations might change. Political factors include tax
policies, fiscal policy, trade tariffs etc. that a government may levy around the fiscal year and it
may affect the business environment (economic environment) to a great extent.
FIG 5.5 Political Aspects of International Business
5.4.1.1 Common Political Factors
Let's look at some common political factors that influence the international business landscape.
The type of economic system a country builds is a political choice. Foreign countries often will
have different economic systems from your domestic market and adjustments often need to be
made to take these differences into account.
 Market Economy - For example, a country may operate in a market economy where
private individuals own most of the property and operate most of the businesses. A
market economy is usually the best economic environment for a foreign business because
of the protection of private property and contract rights.
 Socialist Economy - Some countries lean more towards a socialist economy where many
industries and businesses are owned by the state. Operating businesses in this
environment will be more difficult, but products can still be produced and sold as people
still pick their jobs and earn money.
 Communistic Economy - A few countries operate under a communistic economic
system where the state pretty much controls all aspects of the economy. Conducting
business in this environment ranges from difficult to impossible.
 Mixed Economies - Of course, the reality is that all economies are mixed economies that
take parts from two or more of the 'pure' economic systems. For example, you can
conduct business in communist China in Hong Kong and other special areas where a
market economy is allowed to operate.
 Governmental Systems - Businesses also must often contend with different
governmental systems. Examples include democracies, authoritarian governments, and
monarchies. Some governments are easier to work with than others. Democracies, for
example, are answerable to their citizens and the rule of law.
 Authoritarian Regimes – They are usually answerable to no one, including the law. It is
less risky to conduct business in democracies and constitutional monarchies, a monarchy
with a constitution that protects the public and subjects the monarch to the rule of law,
than in countries with authoritarian regimes.
 Trade Agreements - The next major factor is trade agreements. Countries often enter
into trade agreements to help facilitate trade between them. If your country has entered
into a trade agreement with another country, conducting business in that country will
usually be easier and less risky because the trade agreement will provide some
predictability and protection. One great advantage, for example, is that your products will
be subjected to fewer trade barriers that serve as obstacles to exporting your products into
the country.
 Trade Barriers - A trade barrier is simply anything that makes it harder for a company
to export products to a foreign country. Formal trade barriers are enacted by governments
for the purpose of restricting imports to protect a country's domestic industries. Formal
trade barriers include tariffs, which are taxes on imports that helps make domestic
products more competitive, and product quotas that limit the number of products
imported into the country.
5.4.2 Economic Aspects
Economic factors cannot be undermined in the world of business. Economic factors include
interest rates in a country, exchange rates, interest rates, etc. The economic factors of any
country are a prime indicator of much a company may profit from the market. The exchange
rates speak volumes about how much an organization can benefit from operating in a foreign
market.
FIG 5.6 Economic Aspects of International Business
5.4.2.1The Importance of Paying Attention to the Economic Environment
Every business has a single goal in mind and that is to earn the maximum amount of profit. This
can only be done if an organization is successfully able to analyze the demands of consumers and
maintain quality goods and services. However, economic factors, such as recession, inflation,
demand, and supply, can significantly impact a business’ progress:
 Economic Growth - A country’s economic growth and development play an imperative

role in determining how much revenue an organization can earn there. Economic growth
commands the amount of finances that a foreign market generates at large and
development provides an indication of the volume of money being invested in the various
channels.
 Inflation - Inflation is when there is an excess supply of money in the economy which is
not supported by the outputs of good and services. With the increased amount of money,
the prices of goods also increase in order to sustain the business, making it unprofitable
for an organization to do business in this market.
 Interest Rates - The interest rates have a direct impact on the loans organizations take to
sustain and drive their growth. The higher the interest rate, the more difficult it may get
for an organization to commit to projects that require high investments.
 Currency Exchange Rates - When buying goods from an international market, a
company has to convert its currency in order to make payments. If the currency of the
buyer is strong, it is beneficial for the business. However, lower exchange rates would
mean the company would have to shell out more money.
5.4.3 Social Aspects
Businesses do not exist in a vacuum, and even the most successful business must be aware of
changes in the cultures and societies in which it does business. As society and culture change,
businesses must adapt to stay ahead of their competitors and stay relevant in the minds of their
consumers.
FIG 5.7 Social Aspects of International Business
 Changing Preferences - A major socio-cultural factor influencing businesses and

business decisions is changing consumer preferences. What was popular and fashionable
20 years ago may not be popular today or 10 years down the road. Different styles and
priorities can undermine long successful products and services. For example, a clothing
company must constantly be aware of changing preferences when creating new products
or it will quickly become outdated.
 Demographics - Changes in demographics are also a significant factor in the business
world. As populations age, for example, markets for popular music and fashions may
shrink while markets for luxury goods and health products may increase. Additionally,
changes in the proportion of genders and different racial, religious and ethnic groups
within a society may also have a significant impact on the way a company does business.
 Advertising Techniques - Advertising is perhaps the area of business most closely in
touch with socio-cultural changes. Advertising often seeks to be hip and trendsetting, and
to do this, advertising agencies and departments cannot lose track of the pulse of the
societies in which they engage in business. Changes in morals, values and fashions must
all be considered when creating outward facing advertising.
 Internal Environment - In addition to a company's interactions with the market and its
customers, socio-cultural factors also impact a company's internal decision-making
process. For example, changing gender roles and increasing emphasis on family life have
led to increased respect for maternity and even paternity leave with organizations.
Additionally, attitudes towards racial discrimination and sexual harassment have changed
drastically over the years as a result of socio-cultural change.
5.4.4 Technological Aspects
Technology permeates the internal and external environments of a business and can transform a
business into a success or failure. In this session, we will discuss about technological factors in
business.
FIG. 5.8 Technological Aspects of International Business
5.4.4.1 Technological Framework
Technology is a broad term that refers to the means by which we can adapt to our environment,
control our environment, and even change it. You can break technology down into two broad
categories: products and processes. Technological products are meant for consumer
consumption, while technological processes are a means to make and improve products and
services. An example of a technological product is a new innovative game console with
technological features not seen on the market before, while an example of a technological
process is a new way to manufacture faster microchips. You also need to understand that
technology is not science but rather the practical application of science.
Technological change is advancement in the 'art' of making products or in the development of

processes. Technological change can be either incremental or radical. Incremental change can be
thought of as an evolutionary process where you change, modify, refine, or improve a product or
process. Radical change can be thought of as revolutionary, where completely new products and
processes are designed. Radical technological change can rock the foundation of the world.
Probably the most important radical technological change in the world was the invention of
agriculture. A more recent radical change is the development of the Internet.
5.4.4.2 Technological Effects
Advances in technological processes provide many advantages. Technological innovations in

processes can improve productivity and efficiency that will reduce costs and improve profit
margins. It can make a business more competitive. Innovation in technological processes can
also make products possible that were otherwise impossible with older technology. One only
needs to look at the computer industry and compare processing abilities from a few years ago to
what's available today to see evidence of this. Thus, technology permits the development of new
products and markets that can lead to economic growth. For example, the rise of the Internet and
smart phones has launched entire new industries.
5.4.4.3 The Importance of Paying Attention to the Technological Environment
 Improved technology allows organizations to produce goods for less money, reducing
production costs.
 Improved technology allows businesses to expand efficiency and effectively.
 Allows businesses to compete with other organizations in the marketplace.
 Allows businesses to determine feasibility and profitability of the new venture.
5.4.5 Environmental Aspects
Environmental issues have been engaging increasing discussion in the international business
horizon. As in the case of some other social issues in the fore, the environmental issues raised are
mostly which disadvantage the developing countries, ignoring or relegating to the background
several serious which hold the developed nations or firms from such nations guilty. Some
countries prohibit the import of goods which cause ecological damage. For example, the US has
banned the import of shrimp harvested without turtle excluder devise because of its concern for
the endangered sea turtles. Countries like India are affected by it.
FIG. 5.9 Environmental Factors Affecting International Business
Developing countries are affected by the relocation of polluting industries from the developed it
the developing ones. Similarly, several products which are banned in the developed nations are
marketed in the under developed world. The dumping of nuclear and hazardous wastes in
developing countries and the shifting of polluting industries to the developing countries impose
heavy social costs on them. The exploitation of the natural resources of the developing countries
to satisfy the global demand also often causes ecological problems. When the multinationals
employ in the developing nations polluting technologies which are not allowed in the developed
countries or do not care for the ecology as much as they do in the developed nations, it is
essentially a question of ethics.
Another serious problem is that developed nations some times raise environmental issues as a
trade barrier or a coercive measure rather than for genuine reasons.
 The debate has intensified in recent years on the links between trade and the
environment, and the role the WTO should play in promoting environmental friendly
trade. A central concern of those who have raised the profile of this issue in the WTO is
that there are circumstances where trade and the pursuit of trade liberalization may have
harmful environmental effects. There main arguments are forwarded as to how this might
occur. First, trade can have adverse consequences on the environment when property
rights in environmental resources are ill defined or prices do not reflect scarcity This
situation results in production or consumption ‘externalities’ and can lead to the abuse of
scarce environmental resources and degradation, which is exacerbated through trade.
Some of the pollution can be purely local, such as a very noisy factory. Other pollution
can have global repercussions, for example, the excessive emission of greenhouse gases,
the destruction of rainforests, and so on. Critics argue that trade liberalization which
encourage trade in products creating global pollution is undesirable.
 The second argument linking trade and the environment is related to the first one. If some
countries have low environmental standards, industry is likely to shift production of
environment-intensive or highly polluting products so called pollution havens. Trade
liberalization can make the shift of ‘smoke stack’ industries across borders to pollution
havens even more attractive. If these industries then create pollution with global adverse
effects, trade liberalization, indirectly, promote environmental degradation. Worse trade
induced competitive pressure may force countries to lower their environmental standards.
The argument in other words, is that trade liberalization leads to a race to the bottom in
environmental standards.
 The third concern about environmental issues is the role of trade relating to more social
preferences. Some practices may simply be unacceptable for certain people or societies,
so they oppose trade in products which encourage such practice. These can include
killing dolphins in the process of catching tuna, using leg hold traps for catching animals
for their furs, or the use of polluting production methods which have only local effects.
On the other hand, it has also been pointed out that trade liberalization may improve the quality
of the environment rather than promote degradation. First, trade stimulates economic growth and
growing prosperity is one of the key factors in societies demand for a cleaner environment.
Growth also provides the resources to deal with environmental problems at hand – resource
which poor countries often do not have. Second, trade and growth can encourage the
development and dissemination of environmental friendly production techniques as the demand
for cleaner products grows and trade increases the size of markets. International companies may
also contribute to a cleaner environment by using the most modern and environmentally clean
technology in all their operations.
5.4.6 Legal Aspects
The list of legal factors that should be considered includes current and impending legislation that
may affect the industry in areas such as employment, competition, and health and safety.
Anticipated changes in legislation in the main trading partner countries should also be
investigated. Recent years have seen a significant rise in the number of regulatory bodies that
have been set up to monitor organizations' observance of legislation relating to all areas of
operations, including consumer protection, employee welfare, waste disposal, and how their
earnings and investments will be taxed. There are also the trading restrictions, quotas, and excise
duties to consider.
FIG 5.10 Legal Aspects of International Business
All these factors affect the way in which an organization functions and have cost implications
that need to be taken into account when formulating business strategy. For example,
 Insurance and banking organizations have to demonstrate their legal compliance to the
regulatory body, which has implications for how they operate.
 The level of market share is often restricted (e.g. under the Antitrust laws of America) to
prevent organizations having an unhealthy control of a market or obtaining it through
acquisition.
Your PESTEL Analysis should consider the impact of your own national laws as well as those
originating in other countries that could have implications for you, for example global
accounting regulations, safety compliance, etc. This analysis needs to include those laws
affecting working relationships with other organizations that form part of your overall
operations. Examples of this type of legislation include:
 The 2002 US federal law, Sarbanes-Oxley Act. This set out new or enhanced public
accounting standards for all American public company boards. This law came about after
several major corporate accounting scandals, such as Enron, Peregrine Systems, and
WorldCom.
 The Waste Electrical and Electronic Equipment Directive (WEEE Directive) is a
European Union directive, which, together with the RoHS Directive, set legally binding
collection, recycling, and recovery targets for all types of electrical goods sold in the EU.
Many regulations are applied at a regional as well as a national level and create another layer of
complexity that you must consider when developing your strategy. It is these types of influences
that can have a significant impact on the ease of operations and re-quire detailed investigations
before any decision is made.
Apart from dealing cross borders, international business crosses culture. Culture has a significant
impact on how people think, communicate, and behave. It also affects the kinds of transactions
they make and the way they negotiate them. Differences in culture between business
executives—for example, between a Chinese public sector plant manager in Shanghai and a
Canadian division head of a family company in Toronto– can create barriers that impede or
completely stymie the negotiating process. The great diversity of the world’s cultures makes it
impossible for any negotiator, no matter how skilled and experienced, to understand fully all the
cultures that may be encountered. Researchers have identified ten particular elements
consistently arise to complicate intercultural negotiations. These “top ten” elements of
negotiating behavior constitute a basic framework for identifying cultural differences that may
arise during the negotiation process. Applying this framework in your international business
negotiations may enable you to understand your counterpart better and to anticipate possible
misunderstandings.
FIG. 5.11 Cultural Influences on International Business
5.5.1 Negotiating Goal
People from different cultural backgrounds view negotiation process from different perspectives.
In some countries, the main objective of negotiation is to sign a contract between the parties
whereas many negotiators consider creation of a relationship between the two sides as the end
objective. Although the written contact expresses the relationship, the essence of the deal is the
relationship itself. For example in my survey of over 400 persons from twelve nationalities,
reported fully in The Global Negotiator, I found that whereas 74 percent of the Spanish
respondents claimed their goal in a negotiation was a contract, only 33 percent of the Indian
executives had a similar view. The difference in approach may explain why certain Asian
negotiators, whose negotiating goal is often the creation of a relationship, tend to give more time
and effort to negotiation preliminaries, while North Americans often want to rush through this
first phase of deal making.
The preliminaries of negotiation, in which the parties seek to get to know one another
thoroughly, are a crucial foundation for a good business relationship. They may seem less
important when the goal is merely a contract. It is therefore important to determine how your
counterparts view the purpose of your negotiation. If relationship negotiators sit on the other side
of the table, merely convincing them of your ability to deliver on a low-cost contract may not be
enough to land you the deal. You may also have to persuade them, from the very first meeting,
that your two organizations have the potential to build a rewarding relationship over the long
term. On the other hand, if the other side is basically a contract deal maker, trying to build a
relationship may be a waste of time and energy.
5.5.2 Negotiating Attitude
Based on the attitude of people involved in negotiation process, it can be seen as a process in
which both can gain (win-win) or a struggle in which, of necessity, one side wins and the other
side loses (win-lose). Win –win negotiators see deal making as a collaborative, problem-solving
process; win-lose negotiators view it as confrontational. As you enter negotiations, it is important
to know which type of negotiator is sitting across the table from you. Here too, my survey
revealed significant differences among cultures. For example, whereas 100 percent of the
Japanese respondents claimed that they approached negotiations as a win-win process, only 33%
of the Spanish executives took that view.
5.5.3 Personal Style
Personal style of the negotiator has a crucial role to play in the success of a negotiation process.
Culture strongly influences the personal style of negotiators. It has been observed, for instance,
that Germans have a more formal style than Americans. A negotiator with a formal style insists
on addressing counterparts by their titles, avoids personal anecdotes, and refrains from questions
touching on the private or family life of members of the other negotiating team. A negotiator
with an informal style tries to start the discussion on a first-name basis, quickly seeks to develop
a personal, friendly relationship with the other team, and may take off his jacket and roll up his
sleeves when deal making begins in earnest. Each culture has its own formalities with their own
special meanings. They are another means of communication among the persons sharing that
culture, another form of adhesive that binds them together as a community. For an American,
calling someone by the first name is an act of friendship and therefore a good thing. For a
Japanese, the use of the first name at a first meeting is an act of disrespect and therefore bad.
Negotiators in foreign cultures must respect appropriate formalities. As a general rule, it is
always safer to adopt a formal posture and move to an informal stance, if the situation warrants
it, than to assume an informal style too quickly.
5.5.4 Communication
Different cultures adopt various methods of communication. Whereas some focus on direct and
simple methods of communication, others rely heavily on indirect and complex methods. The
latter may use circumlocutions, figurative forms of speech, facial expressions, gestures and other
kinds of body language. In a culture that values directness, such as the American or the Israeli,
you can expect to receive a clear and definite response to your proposals and questions. In
cultures that rely on indirect communication, such as the Japanese, reaction to your proposals
may be gained by interpreting seemingly vague comments, gestures, and other signs. What you
will not receive at a first meeting is a definite commitment or rejection.
The confrontation of these styles of communication in the same negotiation can lead to friction.
For instnace, the indirect ways Japanese negotiators express disapproval have often led foreign
business executives to believe that their proposals were still under consideration when in fact the
Japanese side had rejected them. In the Camp David negotiations that led to a peace treaty
between Egypt and Israel, the Israeli preference for direct forms of communication and the
Egyptian tendency to favor indirect forms sometimes exacerbated relations between the two
sides. The Egyptians interpreted Israeli directness as aggressiveness and, therefore, an insult. The
Israelis viewed Egyptian indirectness with impatience and suspected them of insincerity, of not
saying what they meant.
5.5.5 Time Sensitivity
Time sensitivity varies across culture and has to be considered while negotiation with people
from different countries. For instance, it is said that Germans are always punctual, Latins are
habitually late, Japanese negotiate slowly, and Americans are quick to make a deal.
Commentators sometimes claim that some cultures value time more than others, but this
observation may not be an accurate characterization of the situation. Rather, negotiators may
value differently the amount of time devoted to and measured against the goal pursued. For
Americans, the deal is a signed contract and time is money, so they want to make a deal quickly.
Americans therefore try to reduce formalities to a minimum and get down to business quickly.
Japanese and other Asians, whose goal is to create a relationship rather than simply sign a
contract, need to invest time in the negotiating process so that the parties can get to know one
another well and determine whether they wish to embark on a long-term relationship.
They may consider aggressive attempts to shorten the negotiating time as efforts to hide
something. For example, in one case that received significant media attention in the mid-1990’s,
a long-term electricity supply contract between an ENRON subsidiary, the Dabhol Power
Company, and the Maharashtra state government in India, was subject to significant challenge
and was ultimately cancelled on the grounds that it was concluded in “unseemly haste” and had
been subject to “fast track procedures” that circumvented established practice for developing
such projects in the past. Important segments of the Indian public automatically assumed that the
government had failed to protect the public interest because the negotiations were so quick. This
difference between the Indian and U.S. attitudes toward time was clearly revealed in my survey.
Among the twelve nationalities surveyed, the Indians had the largest percentage of persons who
considered themselves to have a low sensitivity to time.
5.5.6 Emotionalism
Different countries have unique ways of exhibiting emotions and a good negotiator should
understand the meaning to end up with a successful negotiation. For instance, Latin Americans
show their emotions at the negotiating table, while the Japanese and many other Asians hide their
feelings. Obviously, individual personality plays a role here. There are passive Latins and hot-
headed Japanese. Nonetheless, various cultures have different rules as to the appropriateness and
form of displaying emotions, and these rules are brought to the negotiating table as well. Deal
makers should seek to learn them. In the author’s survey, Latin Americans and the Spanish were
the cultural groups that ranked themselves highest with respect to emotionalism in a clearly
statistically significant fashion. Among Europeans, the Germans and English ranked as least
emotional, while among Asians the Japanese held that position, but to a lesser degree.
5.5.7 Form of Agreement
In all negotiating processes, there will be some sort of written agreement followed by the parties.
Cultural factors influence the form of the written agreement that the parties make. Generally,
Americans prefer very detailed contracts that attempt to anticipate all possible circumstances and
eventualities, no matter how unlikely. Why? Because the deal is the contract itself, and one must
refer to the contract to handle new situations that may arise. Other cultures, such as the Chinese,
prefer a contract in the form of general principles rather than detailed rules. Why? Because, it is
claimed, that the essence of the deal is the relationship between the parties. If unexpected
circumstances arise, the parties should look primarily to their relationship, not the contract, to
solve the problem. So, in some cases, a Chinese negotiator may interpret the American drive to
stipulate all contingencies as evidence of a lack of confidence in the stability of the underlying
relationship.
In a global survey, 78 percent preferred specific agreements, while only 22 percent preferred
general agreements. On the other hand, the degree of intensity of responses on the question
varied considerably among cultural groups. While only 11 percent of the English favored general
agreements, 45.5 percent of the Japanese and of the Germans claimed to do so. Some
experienced executives argue that differences over the form of an agreement are caused more by
unequal bargaining power between the parties than by culture. In a situation of unequal
bargaining power, the stronger party always seeks a detailed agreement to “lock up the deal” in
all its possible dimensions, while the weaker party prefers a general agreement to give it room to
“wiggle out” of adverse circumstances that are bound to occur. According to this view, it is
context, not culture that determines this negotiating trait.
5.5.8 Building an Agreement
Negotiation process can be inductive or deductive in nature. Does it start from an agreement on
general principles and proceed to specific items, or does it begin with an agreement on specifics,
such as price, delivery date, and product quality, the sum total of which becomes the contract?
Different cultures tend to emphasize one approach over the other. Some observers believe that
the French prefer to begin with agreement on general principles, while Americans tend to seek
agreement first on specifics. For Americans, negotiating a deal is basically making a series of
compromises and trade-offs on a long list of particulars. For the French, the essence is to agree
on basic principles that will guide and indeed determine the negotiation process afterward. The
agreed-upon general principles become the framework, the skeleton, upon which the contract is
built.
For example, the French, the Argentineans, and the Indians tend to view deal making as a top
down (deductive process); while the Japanese, the Mexicans and the Brazilians tended to see it as
a bottom up (inductive) process. A further difference in negotiating style is seen in the
dichotomy between the “building-down” approach and the “building-up approach.” In the
building down approach, the negotiator begins by presenting the maximum deal if the other side
accepts all the stated conditions. In the building-up approach, one side begins by proposing a
minimum deal that can be broadened and increased as the other party accepts additional
conditions. According to many observers, Americans tend to favor the building-down approach,
while the Japanese tend to prefer the building-up style of negotiating a contract.
5.5.9 Team Organization
The way in which a particular team is organized is crucial for the success of a negotiating
initiative. Culture is one important factor that affects how executives organize themselves to
negotiate a deal. Some cultures emphasize the individual while others stress the group. These
values may influence the organization of each side in a negotiation. One extreme is the
negotiating team with a supreme leader who has complete authority to decide all matters. Many
American teams tend to follow this approach. Other cultures, notably the Japanese and the
Chinese, stress team negotiation and consensus decision making. When you negotiate with such
a team, it may not be apparent who the leader is and who has the authority to commit the side. In
the first type, the negotiating team is usually small; in the second it is often large. For example,
in negotiations in China on a major deal, it would not be uncommon for the Americans to arrive
at the table with three people and for the Chinese to show up with ten. Similarly, the one-leader
team is usually prepared to make commitments more quickly than a negotiating team organized
on the basis of consensus. As a result, the consensus type of organization usually takes more time
to negotiate a deal.
In a world wide survey, 59 percent tended to prefer one leader while 41 percent preferred a more
consensual form of organization. On the other hand, the various cultural groups showed a wide
variety of preferences on the question of team organization. The group with the strongest
preference for consensus organization was the French. Many studies have noted French
individualism. Perhaps a consensual arrangement in the individual French person’s eyes is the
best way to protect that individualism. Despite the Japanese reputation for consensus
arrangements, only 45 percent of the Japanese respondents claimed to prefer a negotiating team
based on consensus. The Brazilians, the Chinese, and the Mexicans to a far greater degree than
any other groups preferred one-person leadership, a reflection perhaps of the political traditions
of those countries.
5.5.10 Risk Taking
Studies done across the globe have shown that some cultures are more risk averse than others.
The negotiators’ cultures can affect the willingness of one side to take risks—to divulge
information, try new approaches, and tolerate uncertainties in a proposed course of action. The
Japanese, with their emphasis on requiring large amount of information and their intricate group
decision-making process, tend to be risk averse. Americans, by comparison, are risk takers. In a
global survey, approximately 70 percent claimed a tendency toward risk taking while only 30
percent characterized themselves as low risk takers. Among cultures, the responses to this
question showed significant variations. The Japanese are said to be highly risk averse in
negotiations, and this tendency was affirmed by the survey which found Japanese respondents to
be the most risk averse of the twelve cultures. Americans in the survey, by comparison,
considered themselves to be risk takers, but an even higher percentage of the French, the British,
and the Indians claimed to be risk takers.
Cross-functional and multicultural teams have become very common working groups in recent
years due to economic and workforce globalization. One of the primary talents international
leaders need today is the ability to manage and leverage cultural differences. Executives have to
be comfortable in working in both international and cross-cultural environments. It is not an easy
job handling cultural and social differences, language barrier, different management styles,
locations, time zones, and communication channels. Cross-functional global projects in business
and technology particularly need custom approach.
A cross-functional team can be defined as a group of employees from different functions within
an organization, such as research and product development, information technology, marketing
or finance, who are all focusing on a specific objective and have the responsibility to work as a
team to achieve desired common goals. On the other hand, multicultural teams are made up of
people from different social and professional cultures who work together for a common project
goal. Managing cross-functional teams is a complex skill and process, and it becomes even more
challenging when the multicultural component is included in the team mix.
Intercultural differences can present serious obstacles to the teams. In today's global and
knowledge-oriented environment, the alignment and utilization of human resources is just as
important as material supply, production and marketing. Managing cross-functional global
projects can be even more challenging when dealing with organizational change, business and
technology transformation, mergers and acquisitions, or when integrating different systems and
organizations. In managing and aligning cross-functional and multicultural teams in product
development and commercialization, the following 7 key components for building highly
effective cross-functional and multicultural global teams were found to be crucial.
 Learn, understand, respect and leverage the cultural differences - Cultural

differences exist across countries and are also influenced by age, gender, region, religion
and social sub groups. Learn the expectations between people from different cultures.
Keep the differences in mind when speaking or confronted with opposite views. Seek to
understand before being understood. Show your appreciation and respect to other
cultures. Done correctly, cultural differences can help the teams leverage each culture's
advantage and strength in different areas.
 You cannot over-communicate, but only in the right way - Managing cross-functional
and multicultural teams requires open, regular and timely communication. The cultural
difference in communication component deserves attention. Direct vs. indirect
communication: Some team members (U.S. and also other Western European countries)
use direct, explicit communication in asking questions and identifying problems, while
others (China and also other Asian countries) are indirect in asking and responding.
 Build a team of ONE - The company, management, team and project manager are
chartered to agree on a clear understanding of project goals, business objectives,
milestone, timeline, deliverables, budget, and communication plan. Review team
composition and working styles on how members interact, process information, make
decisions and organize themselves. Clarify each team member's responsibilities and
expectations in relation to other team members.
 Make culturally correct decision - With team members usually spreading over in
different locations in time zones, it becomes a challenge to make timely decision or reach
a consensus in every action item. Different decision-making styles and hierarchical
attitude in different cultures could make it worse. Team members differ in how much
information and analysis they need to make decisions. In some cultures, a bold thinking
on top of the head may be seen as being proactive, while it may be viewed as reckless ill-
thought-out in other cultures. In addition, team members from strong hierarchical cultures
expect to be treated differently according to their status in the organization. Members
from egalitarian cultures do not mind at all. The failure of some members to honor those
expectations can cause humiliation or loss of stature and credibility.
 Foster cohesive relationship and build trust - It's a global team. Team members have
to come together as a cohesive team to build strong working relationship, to support each
other and to build mutual respect and trust. No global projects go to completion without
overcoming obstacles along the way. The cohesive team energy and spirit working
toward the common goal serves as the driving force helping the team push through the
rough spots in tough times.
 Resolve conflicts quickly and peacefully - Hopefully, understanding the cultural
differences, communication and decision-making styles, and fostering trust help reduce
misunderstanding or performance issue. However, conflicts are inevitable and often occur
due to "lost in translation" in cultural, language and communication differences for
multicultural teams. Every team member is allowed to have their voice to agree to
disagree. The project leader has to play the devil rounding up team members involved to
open the dialog and communicate clearly about the issues and bring the team back on
track. Conflicts have to be resolved as quickly and peacefully as possible before they turn
south and negatively affect team performance.
 Play to win - When team members work together as a team of ONE, understanding each
other, supporting each other, and trusting each other, the whole team naturally become a
winning team with the shared mindset and vision of win-win-win. Win for themselves.
Win for their team. Win for their organization and customers.
5.7 Organizational structure that connects organizational departments, functions and
geography to achieve organizational goals
An organizational structure is the framework around which an organization’s operations are

based on. In most cases, it is referred to as the “manual of operations” of an organization or a
company, showing how it is formed and how it works or functions. This encompasses various
processes including, but not limited to, recruitment, settlement of disputes, and other decision-
making actions. It details how work is performed, who does what, and who is accountable for
what, while keeping in view the organizational goals.
5.7.1 Importance of an Organizational Structure
An organization cannot exist or even come about without any structure or order. It requires a
framework, regardless of the type of the organization or the purpose of its existence. Its
development could be on the onset of the organization, when it is still in the process of being
formed, or during the life of the organization, when it is already in operation. In most cases,
development of a structure within an organization is a continuous or ongoing process, with
changes implemented to adapt to various circumstances directly (or even indirectly) affecting the
members, or the organization, as a whole. Organizational structure is important for the following
reasons:
 An organizational structure lends “organizational” identity to the members. Members will

instinctively feel that they are part of something solid or of a cohesive unit. It displays the
working relationships that are in effect in the flow of work within the organization, so
they will know exactly where they are supposed to be or what their roles are. In effect,
this also clears up issues regarding responsibilities and accountabilities.
 An organizational structure provides clear guidelines. Essentially, it sets out the scope of
acceptable behavior of members within an organization. Members refer to the structure to
get an idea how things work, or what rules should prevail in certain situations. This
ensures an improvement of the operational efficiency of the members and the company or
organization.
 An organizational structure aids in decision-making. After all, it is considered as an
operations manual of guidebook. Decisions can be made more easily if they have
something solid – the structure – to base on.
 An organizational structure facilitates growth of the organization. For the precise reason
that it serves as the guide for the company, it provides direction on how certain matters or
issues must be resolved.
5.7.2 Elements of an Organizational Structure
With more than one or two types of organizational structures currently prevailing, there are
bound to be several elements that comprise them. The basic ones, however, are enumerated
below:
 Leadership or Governance - The persons or individuals who have the power to make
decisions or steer the organization towards its common goal are clearly identified.
 Implementing Rules - These are the rules – both the explicitly stated rules and those that
are implicit by nature – that must be followed in the organization’s normal operations or
functioning.
 Division of Labour - Within the organization, the division and subsequent distribution of
work among the members must also be laid out, with their roles and responsibilities
clearly defined.
Taking into account the significance of an organizational structure in the grand scheme of things,
it follows that an organization should have a proper structure in place: one that is most suitable
for the type of organization, its operations, its scale (or size), as well as its ultimate goal.
5.7.3 Emerging and Future Trends in Organizational Structures
The constantly evolving or changing landscape of business on a global scale calls for a more
proactive attitude from organizations. They simply cannot sit still, doing nothing or making no
attempts to adapt to these changes. Fortunately, more and more organizations are taking active
steps to do so.
5.7.3.1 ‘Flattening’ the Organization
By “flattening”, it is a move of organizations to adopt a “flat” structure, where the horizontal

relationships are more emphasized than the vertical relationships. The characteristic move
performed by organizations to achieve a flatter structure is to eliminate middle management.
Instead of having multiple levels of management, they will be left with only a few levels. As a
result, the organization becomes more streamlined, and decision-making becomes faster while
communication within the entire organization becomes more free-flowing. Another way to
improve the communication within the organization is to take advantage of technology. Internet
has played an active role in recent years in business and has even reshaped the way organizations
go about their operations.
5.7.3.2Industry Consolidation
Today, we see conglomerates and global companies entering alliances, merging with other
companies, and entering into joint ventures and various other cooperation agreements. This
results in an overlapping and consolidation of industries. Naturally, this would mean the
organization would be more complex, and there would be a seemingly constant need for a more
well-defined and suitable structure to accommodate these changes. Do not be surprised when, in
the future, more organizational structures will crop up, in order to meet the ever-increasing
complexity and demands of organizations.
5.8 Impacts of globalization on organizational culture
The concept of organizational culture is fundamental for explaining the functioning of

organizations critical phenomena, phenomena creating g the hierarchy of values upon which the
strategic direction of the system, establish the paradigm of human relations, interpretation of
time and space, system configuration information or determining fundament al attitudes
towards the internal and external environment. Organizational culture is increasingly accepted by
managers as a tool to improve the management of the organization, because the organization
incorporates facts which, although difficult to define, are relevant to its competitive operation.
According to experts’ opinions, globally we can identify several types of cultures: global
(overall), national, economic, branches of economic activity and organizational. Global culture,
the national and organizational interconnected as it provides outstanding support and are
indicators in the birth, evolution, performance and visibility of an organization. All processes
taking place in an organization is subject to organizational culture. This in turn is subjected to
pressure by certain factors such as: economic restructuring (generating insecurity in business),
the collapse of the former geopolitical structures, human capital mobility , globalization, anti-
globalization movement, political alliances, the rapid development of information technology.
Globalization generates new demands in the economic, political, cultural new regions,
resurrection of local identities. Globalization catalyzes a different kind of pressure in
organizations: economic and national borders dissolve favours rush new markets in order to
survive. To achieve a global vision is no question of the importance of using organizational
culture. Thus, many US multinational companies move from holding international divisions
while adopting a “global”. Even multinational European companies have a long history in
international affairs due to smaller markets, a colonial legacy and a great near foreign countries
are wondering how they can become more international.
Globalization, ideas, attitudes, cultural and symbolic elements spread and crossed borders.
Globalization has reduced distances, but has generated new demands in the economic, political,
cultural new regions, resurrection of local identities. Some organizations rely on the small
number of local branches of foreign employees, using a superior management team with a
multinational composition to emphasize their openness to globalization. Other organizations use
organizational culture to promote coordination and consistency. To avoid problems related to
the importance of organizational culture for global integration, the organization will pay
particular attention to the following: the need for differentiation vs. integration; autonomy vs.
and limits of corporate control vs. national.
 Differentiation vs. integration - Differentiation into question the extent to which

organizational culture is able to overcome national and cultural differences to create a
global organization. This raises the question of the extent to which global practices are
preferred over local and what is needed to be done for the organization to integrate into a
global organization.
 Control vs. autonomy - Visions of globalization, with organizational culture as a control
strategy, may have some unpleasant consequences. Some organizations who value
conformity more than individuality, might be able to use organizational culture as a
control mechanism, even if such could lose the advantage of individual initiative.
 National vs corporations - Vision on the development of an international framework
through multiple and frequent transfers, designed to encourage identification with home
loss and transfer to the corporation is frightening. In these "clans" global corporation
exceed identification with community and family identity.
Globalization can generate changes that get out of control as systems are always sensitive in
interdependence: what happens in one part of the system affects the other parts. Along with the
expansion of the organization and beyond, it will have to focus on finding factors generating
conflict and reduce their influence. Cultural factors of national and organizational culture can be
a barrier to development organizations. At the same time, information and documentation of
countries where the organization is to expand businesses can help reduce these barriers.
Review Questions
1. _______ is about ensuring that the company has all the right people and parts, in the right
place, at the right time.
a) Planning b) organizing c) Staffing d) Controlling
2. ________ are wholesale companies that buy unpackaged products from

suppliers/manufacturers for resale overseas under their own brand names.
a)Export merchants b) Export Management Companies c) Export Trading Companies

d) Confirming Houses
3. ________ implies overseeing the work of subordinates by their superiors.
a) Supervision b) Motivation c) Leadership d) Communication
4. Which of the following is not a part of PESTEL framework?
a) Political b) Scientific c) Legal d) Economical
5. ________ is a merger between firms that are involved in totally unrelated business activities.
a) Conglomerate b) Vertical merger c) Horizontal Merger d) Product extension merger
1. Cultural Awareness is the foundation of communication.

2. Randomness and uncertainty play increasingly greater roles in determining business
success.
3. A strategic alliance is an arrangement between two companies that have decided to share
resources to undertake a specific, mutually beneficial project.
4. Latin Americans show their emotions at the negotiating table.
5. Germans are always punctual.
6. Chinese people prefer a contract in the form of general principles rather than detailed
rules.
7. For Americans, negotiating a deal is basically making a series of compromises and trade-
offs on a long list of particulars.
8. The Brazilians to a far greater degree prefer one-person leadership.
9. Directing is about supplying a vision to the personnel in the organization.
10. Licensing allows a firm to provide its technology in exchange for fees or some other
benefits.
Fill in the blanks
1. _________ involves developing and implementing strategy for the organization to

function.
2. __________refers to selling to or through an intermediary.
3. __________ means renting or leasing of an intangible asset.
4. In ____________, a firm finds a suitable manufacturer in the country it wants to enter
into.
5. A _________ is a legal consolidation of two entities into one entity.
6. __________ are intermediate sellers that work for foreign buyers.
7. In _______, organization sends parts for products to a foreign plant for final assembly.
8. ________takes place between two companies that deal in the same products but in
separate markets.
9. ________ is the process by which manager guides and influences the work of
subordinates in desired direction.
10. The _________ function of management controls all recruitment and personnel needs of
the organization.
Match the following
1. Have a specific outline of the steps that it will take to be successful - Lead.
2. Be able to keep all the pieces and parts of the plan moving together - Organize.
3. Get all the people and equipment together to support the plan - Control.
4. Show vision and enthusiasm to reach the goal of the plan - Plan.
5. A merger between firms that are involved in totally unrelated business activities -
Horizontal Merger.
6. A merger occurring between companies in the same industry - Vertical merger.
7. A merger between two companies producing different goods or services for one specific
finished product - Conglomerate.
1. What are the challenges faced by managers operating in international business?

2. List out the advantages and disadvantages of exporting.
3. Discuss about the different types of indirect exporting.
4. Write short note about the five criteria of strategic alliance.
5. Elaborate on the ways for managing a multi cultural team.
6. Why organizational structure is considered important?
7. What is the difference between licensing and franchising?
8. List the advantages and disadvantages of strategic alliances?
9. What is the difference between mergers and acquisitions?
10. Discuss about the elements of organizational structure.
1. What are the main characteristics of international managers in global organizations?

2. Discuss about the functions of management in international setting.
3. Write in detail about the various methods of doing international business.
4. Write an essay on PESTEL Analysis.
5. Discuss about cultural influence on international negotiations.
6. What are the emerging and future trends in organizational structure?
7. Explain about the impact of globalization on organizational culture.
8. How to do international business by setting production facility in a foreign country?
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Organizatinal Behaviour II KTU MBA Syllabus

Book · May 2019

Manu Melwin Joy

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1.1 Study of Organizational Behaviour

2.1 Managing Individuals at Work.

 Disciplines contributing to OB - Psychology, Sociology, Anthropology, Social

 Managing Individuals at Work - Measuring personality attitude, managing employee

 Managing the Organization System - Effects of organization culture on employee

 Communications in organizations - Historical trends; Forms of communications - formal

 Global implications of organizational behavior: International setting for the management

1.2 Defining Organizational Behaviour

1.3 How OB Research is Done?

1.4 Organizational Components that Need to be Managed

1.5 Disciplines Contributing to OB

1.6 Effectiveness in Organizations

1.7 Models of Organizational Behaviour

1.8 Approaches to Study of Organizational Behaviour

1.9 Latest trends in Organizational Behaviour

Individuals work independently or collectively in teams, number of such teams makes a

1.2 Defining Organizational Behaviour

According to L.M.Prasad, organizational behaviour is the study and application of knowledge

The multidisciplinary definition of organizational behaviours demonstrates a number of points.

1.3 How OB research is Done?

1.4 Organizational Components That Need to be Managed

1.4.6 External environment

1.5 Disciplines Contributing to OB

FIG. 1.2 Contribution and Level of Focus of Psychology

FIG. 1.3 Contribution and Level of Focus of Social Psychology

FIG. 1.4 Contribution and Level of Focus of Sociology

FIG. 1.7 Contribution and Level of Focus of Political Science

1.6.1 Definition of Organizational Effectiveness

Organizational effectiveness can be defined as the effectiveness of an organization in achieving

1.6.2 Four Dimensions of Organizational Effectiveness

 Goal Accomplishment - Goal accomplishment is widely used as a criterion for

 Resource Acquisition – The second criteria for organizational effectiveness is connected

 Strategic Constituencies Satisfaction – The key consideration of the final criterion of

1.7 Models of Organizational Behaviour

1.7.1 Autocratic Model

1.7.3 Supportive Model

Employee Security and Responsible

Performance Passive Moderate

FIG. 1.10 Comparison of four models of organizational behaviour

1.8 Approaches to Study of Organizational Behaviour

FIG. 1.11 Approaches to Study of Organizational Behaviour

1.8.1 Human Resource Approach

1.8.2 Contingency Approach

1.8.3 Productivity Approach

1.8.4 Systems Approach

According to the systems approach to the study of organizational behaviour, an organisation is a

1.9 Latest Trends in Organizational Behaviour

Objective type questions

Mark the correct answers:

a) Psychology b) Sociology c) Social Psychology d) Anthropology

2. Which one is not a dimension of organizational effectiveness?

a) Goal accomplishment b) Sophisticated communication c) Resource acquisition

3. Applying ethical principles to situations that arise at work

a) Ethical Thinking b) Business ethics c) Ethical behaviour d) Ethical thinking.

4. The basis of collegial model of organizational behaviour is

a) Leadership b) Critical thinking c) Team work d) Creativity

5. Who introduced theory X?