UNIT I

MODULE - I
BY
DR. NAVANEETHAKRISHNAN K
GITAM
 INTRODUCTION
• Managers get things done through other people. They make decisions,
allocate resources, and direct the activities of others to attain goals
• Managers do their work in an organization, which is
- a consciously coordinated social unit,
- composed of two or more people,
- that functions on a relatively continuous basis to achieve a
common goal or set of goals
 DEFINITION

• Manager - An individual who achieves goals through other people

• Organization - A consciously coordinated social unit, composed of two or

more people, that functions on a relatively continuous basis to achieve a

common goal or set of goals.

MANAGEMENT FUNCTIONS
 MANAGEMENT FUNCTIONS

Henri Fayol wrote that all managers perform five management functions:
• Planning
• Organizing
• Leading
• Controlling
 PLANNING

• The planning function encompasses defining an organization’s goals,

establishing an overall strategy for achieving those goals, and developing a

comprehensive set of plans to integrate and coordinate activities

 ORGANIZING
• Managers are also responsible for designing an organization’s structure. We
call this function organizing.

• It includes determining what tasks are to be done, who is to do them, how the
tasks are to be grouped, who reports to whom, and where decisions are to be

made
 LEADING

• Every organization contains people, and it is management’s job to direct and

coordinate those people. This is the leading function.

• When managers motivate employees, direct their activities, select the most
effective communication channels, or resolve conflicts among members, they’re

engaging in leading
 CONTROLLING

• To ensure things are going as they should, management must monitor the
organization’s performance and compare it with previously set goals.

• If there are any significant deviations, it is management’s job to get the

organization back on track. This monitoring, comparing, and potential

correcting is the controlling function

WHO IS A PERFECT MANAGER?
ORGANIZATIONAL BEHAVIOR
 WHAT IS OB?
• Organizational behavior (OB) is an applied behavioral science that emerged
from the disciplines of psychology, sociology, anthropology, political science,
and economics.
• OB is the study of individual and group dynamics within an organization
setting. Whenever people work together, numerous and complex factors
interact.
• The discipline of OB attempts to understand these interactions so that
managers can predict behavioral responses and, as a result, manage the
resulting outcomes.
 ROBBINS DEFINITION

• Organizational behavior (OB) is a field of study that investigates the impact

that individuals, groups, and structure have on behavior within organizations,

for the purpose of applying such knowledge toward improving an

organization’s effectiveness
 THREE GOALS OF OB
• First, OB attempts to explain why individuals and groups behave the
way they do within the organizational setting.

• Second, OB tries to predict how individuals and groups will behave on

the basis of internal and external factors.

• Third, OB provides managers with tools to assist in the management of

individuals’ and groups’ behaviors so they willingly put forth their best
effort to accomplish organizational goals.
 WHAT WILL WE BE LEARNING?
• OB is the study of what people do in an organization and how their
behavior affects the organization’s performance

• OB includes the core topics of motivation, leader behavior and power,

interpersonal communication, group structure and processes, learning,

attitude development and perception, change processes, conflict, work

design, and work stress

 NEO-CLASSICAL OR BEHAVIOURAL
6
APPROACH……CONTINUED
Elton Mayo: Focus on Human Relation

Elton Mayo: regarded as the “Father of the Human Relations Approach

A study was conducted at Western Electric’s Hawthrone Plant between

1924-1933 to evaluate the attitude and psychological reactions of workers
in on-the-job situations.

The Experiment was carried out in 4 Phases

1. Illumination Experiments
2. Relay Assembly Test room Experiments
3. Interview Phase
4. Bank Wiring Observation Room Experiments www.gitam.edu
 ILLUMINATION EXPERIMENT

1. The experiment was carried out during 1924-1927

2. Two group of workers were made, one is the experimental or test

group and another is the control group

3. Illumination was changed

 CONT…,

• Test Group: Performance went up when intensity of the light was

increased. However the performance of the test group rose steadily
even when the illumination is dimmed.

• Control Group: Surprisingly their performance also increased

simultaneously.

• Researchers concluded, that group productivity was not directly

related to illumination intensity. There is something more to it.
 2. RELAY ASSEMBLY TEST
ROOM EXPERIMENTS

1. The experiment was carried out during 1927-1933

2. Researchers were concerned about working conditions

such as the number of working hours frequency and
duration of rest periods.

3. 6 +2 women were selected who were working in the relay assembly

line. They were informed beforehand about the experiment.

www.gitam.edu
 CONT…,

4. In course of the experiment a number of variables were changed like wages

were increased, rest periods of varying length were introduced, duration of
work was shortened.
5. Theworkers were also granted certain privileges such as leaving their
workstation without obtaining permission.
6. These workers received special attention from the researchers and company
officials.
7. Productivity increased over the period of the study, regardless
 LEARNING FROM THE RELAY ASSEMBLY TEST
ROOM EXPERIMENTS
1. Better treatment of the employees made them more productive
2. This experiments recognized the social relations among participants
3. Since there was no formal supervisor (only observer) the participants
experienced more freedom and having a feeling of importance as they are
consulted on proposed changes.
4. Researchers concluded that employees work better when management
are concerned about their welfare and supervisors paid special attention to
them.
5. “Hawthorne Effect” was proposed which is defined as the possibility that
individuals picked up to participate in a study may show higher productivity
only because of the added attention they receive from the researchers rather
than any other factor being tested in the study.
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 3. INTERVIEW PHASE EXPERIMENTS

The experiment was carried out during 1928-1930

21, 000 people were interviewed to explore the reasons for human behaviour at
work

1. Complaint are not necessarily an objective recital of facts rather they can be a
symptom of personal disturbance, the cause of which may be deed rooted

2. Objects, things, and events carry social meaning. Their relationship with
employee satisfaction or dissatisfaction is purely based on employee’s personal
situation and how he perceived them.

3. The personal situation of the worker is a configuration of relationships. This

includes personal preference ( sentiments, desires, interests) and social
preference (interpersonal skills) www.gitam.edu
 CONT…,

4. The position or status of the worker in the company is a reference from

which the worker assigns meaning and value to the events, objects, and
features of his environment such as hours of work or wages

5. The social demands of the worker are influenced by social experiences in

groups both inside and outside the workplace
 4. BANK WIRING OBSERVATION ROOM EXPERIMENTS

The experiment was carried out during 1931-1932

It was undertaken by researchers to test some of the ideas they gathered during
the interview
1. 14 participants were invited to the experiment
2. Incentive pay plan was implemented where pay increased with output
3. No physical conditions were altered in the experiment room
4. Researchers observed that output stayed at a fairly constant level, which was
contrary to their expectations.

www.gitam.edu
 CONT…,

5. Their analysis showed that group encouraged neither too much nor too
little work. They had their own idea of “fair day’s work” was and enforced it
themselves.

6. Group acceptance appeared to be more important to the worker than

money and informal relationships among the group found to be important
 CONTRIBUTIONS OF
HAWTHORNE STUDIES
Contributions:
A business organization is a Social System: Social Satisfaction for workers
Group Influence: Informal Social Groups influence the behavior of members
Conflict: Informal groups overcome the hindrances and support achieving
Organizational goals
Leadership: Informal Leadership among groups motivate members
Supervision: Supervisory climate must be conducive, supportive and productivity-
oriented
Communication: Open Communication channel needs to be implemented
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 CONT…,

Pre-judgements Findings

Job performance depends on the The group is the key factor in job
individual worker performance
Fatigue is the main factor affecting output Perceived meaning and importance of the
work
determine output
Management sets production standards Workplace culture sets its own production
standards
 CRITICISM OF HAWTHORNE STUDIES
The Hawthorne Study received considerable criticism on the following
grounds

1. The procedures, analysis of findings, and the conclusion reached were found to be
questionable. Critics felt that the conclusions were supported by little evidence

2. The relationship made between the satisfaction or happiness of workers and their
productivity was too simplistic.

3. These studies failed to focus attention on the attitude of employees at the workplace.

4. Hawthorne studies looked upon workers as means to an end and not an end
himself. They assumed acceptance of management goals and looked at the worker as
someone to be manipulated by management.

5. Hawthorne plant was an unpleasant place to work and the results could not be valid for
others.
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EARLY MANAGEMENT / PRE-CLASSICAL SCHOOL
• Management has been practiced a long time. Organized endeavors directed by people responsible for
planning, organizing, leading, and controlling activities have existed for thousands of years.

• Regardless of what these individuals were called, someone had to perform those functions. Example:
Great Wall of China, Egyptian Pyramid are proof of management.

• Charles Babbage - He was an advocate of division of labour and work specialization.

• He proposed that each operation with a particular skill set be identified and isolated.
• Each worker to be trained in a one specific skill set and made responsible for that part of the
operation.

• He believed that work specialization will reduce training cost, time for training and also improve
efficiency.
 EVOLUTION OF MANAGEMENT THOUGHTS

The industrial revolution that began in mid 1700s,was the

starting point of development of management concepts and theories

The rapid growth in number of factories during these period and need
to co-ordinate the efforts of large number of workers in the production
process necessitated the need for management concepts and principles

Many theorist and practioners in the mid and late 1800s contributed
valuable ideas that laid the foundation for subsequent broader
enquiries into the nature of management
 PRE-CLASSICAL
CONTRIBUTORS
Name Contribution
Robert Owen He was the earliest management thinker to realize the importance of human resources. He
believed that workers performance was influenced by the environment in which they
worked.
He proposed legislative reform for reducing the number of working hours and also
restrict child labour.
Charles He was an advocate of division of labour and work specialization.
Babbage He proposed that each operation with a particular skill set be identified and isolated. Each
worker to be trained in a one specific skill set and made responsible for that part of the
operation.
He believed that work specialization will reduce training cost, time for training and also
improve efficiency.
Andrew Ure Explained various principles and practices of management
Charles Dupin Advocated the study of Management
Henry R. Emphasized the need to consider management as a separate field of study and the
Towne importance of business skills for running a business
1. SCIENTIFIC MANAGEMENT
Management conducts business by standards established by facts or
truths gained through systematic observation and experiment or
reasoning.
Frederick Winslow Taylor is considered as the “Father of Scientific
Management”. He observed that workers deliberately working at a
slower pace than their capabilities called “Soldiering”

Taylor’s Principles of Scientific Management

Develop a scientific way of performing each job

Scientifically select employees, train them properly to perform a particular job
Establish harmonious relations among management and workers so that the
job is performed in the desired way

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 SCIENTIFIC
MANAGEMENT…..CONTI
NUED
Two major managerial practices emerged from Taylor’s Approach

Piece-rate Incentive System: Reward the worker producing the maximum unit
Workers who meet the established standard of performance will earn the basic wage
Workers exceeding the established standard will get proportionate increase in their wage as
per the extra unit produced.
Time and Motion Study
The art of observing and recording the time required to do each detailed element of an
industrial operation
Jobs are broken down into various small tasks or motions and unnecessary motions are
removed to find out the best way of doing a job.

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 SCIENTIFIC
MANAGEMENT…..CONTINUED

• 2. Frank Gilbreth is considered as the “Father of Motion Study” And

Lillian Gilbreth contributed to “Motion Study” Motion study involves finding
out the best sequence and minimum number of motions needed to complete a
task.
• They both explored new ways of eliminating unnecessary motions to reduce
work fatigue
• 3. Henry Laurence Gantt is best remembered for his work on the task-and
bonus system.
• He is also known as the “Gantt Chart” which the progress of production in
terms of time rather than quantity.
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SCIENTIFIC MANAGEMENT…..CONTINUED

Limitation of Scientific Management

• The principles of Scientific Management revolve round problems at

the operational level and do not focus on management of an
organization from manager’s point of view
• They believed that workers were motivated by material gain and
overlooked social needs. They overemphasized economic and physical
needs.
• They ignored human desire for job satisfaction

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 2. ADMINISTRATIVE THEORY
Henri Fayol Proposed that the business operation of an organization
organization could be divided into six activities
1. Technical: Producing & manufacturing
2. Commercial: Buying & Selling
3. Financial: Search for & Optimal use of capital
4. Security: Protecting employees and property
5. Accounting: Book Keeping, balance Sheets, Profit and Liabilities upkeeping,
taking stock of cost
6. Managerial: Planning, Organizing, Staffing, Directing & Controlling
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 3. BUREAUCRATIC
MANAGEMENT
The term “bureaucracy” referred to organizations that operated on a rational basis.

Max Weber defined “bureaucracy” as a highly structured , formalized and

impersonal
organization having set of rules and regulations

Limitations of Bureaucratic Management and Administrative Theory

1. Not Universally applicable to today’s complex organizations

2. Not so popular today as strict division of labour, adherence to formal rules &
regulations destroy individual creativity, and flexibility to respond to changes

Limitations of Classical Approach

1. They ignored importantaspects of organizationalbehaviour(leadership,Motivation,

Informal Relations)
www.gitam.edu
2. They failed to consider the impact of internal & external environments upon
employee behaviour
 NEO-CLASSICAL OR
BEHAVIOURAL APPROACH
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.
Name Contribution
Mary Parker Emphasized group influence and advocated the concept of “power sharing”
Follet and integration.
Elton Mayo Laid the foundation for the Human Relations Movement: recognized the
influence of group and workplace culture on job performance.
Abraham Advocated that humans are essential motivated by a hierarchy of needs
Maslow
Douglas Differentiated employees and managers into Theory X and Theory Y
McGreor personalities.
Chris Argyris Classified organizations based on the employees set of values.
www.gitam.edu
 A BRIEF OVERVIEW OF
CLASSICAL APPROACH

Approach Rationale Focus

Scientific Management One best way to do each job Job Level

Administrative Principles One best way to put an organization together Organization Level

Bureaucratic Organization Rationale and impersonal Organization Level

organizational
arrangements
 QUANTITATIVE APPROACH
The Quantitative approach to management includes the application of
statistics, optimization models, informational models and computer
Three main simulations.
important • This approach focuses on achieving organizational effectiveness through the
branches are application of mathematical and statistical concepts.

1. Management 1. Management Science

Science • This approach stresses the use of mathematical models and statistical methods for decision-
2. Operations making. It visualizes management as a logical entity, the action of which can be expressed in
Management terms of mathematical symbols, relationships and measurement data.
3. Management • This is also termed as “Operation Research” and George B. Dantzig is considered as the
Information “Father of Operations Research”.
Systems • Recent developments in computers have made it possible to use complex mathematical and
statistical models like Queuing theory, linear programming, decision theory, program evaluation
review technique (PERT), Critical Path Method (CPM), Simulation theory, probability theory and
time series analysis have increased effectiveness of managerial-decision making.
• Aircraft Scheduling, Optimum Inventory Levels, Planning HR Devlp. Prog., Production
Scheduling, Capital Budgeting, Cash Flow Management, Devlp. Of product strategies.
 QUANTITATIVE APPROACH……CONTINUED
2. OPERATION MANAGEMENT
It is an applied form of management science .It deals with the effective
management of the production process and timely delivery of company’s
products and services.
Operation Management is concerned with • 3. Management Information
1. Inventory management System
2. Work Scheduling
3. Production Planning
• MIS focuses on designing and implementing
4. Facilities location and design computer based information system for business
5. Quality Assurance organization.
• This tool is used by operations manager for • In simple terms MIS converts raw data into
information and provides the needed information
1. Forecasting to each manager at the right time, in the needed
2. Inventory Analysis form.
3. Material Requirement Planning System • Charles Babbage was one of the earliest
4. Networking Models contributor to information system.
5. Statistical Quality Control
6. Project Planning & Control Techniques
 MODERN APPROACHES
TO MANAGEMENT
Systems Theory:
• The systems theory approach is an extension of the quantitative school of
thought. This approach considers organizations as a whole because of the
interdependent nature of activities that requires organizations to interact with the
external environmental factors. In this competitive scenario, organizations
cannot function in isolation.
• They have to operate in an open system, interacting with their environment.
• Synergy is the phenomenon of open systems of management in which the
total system is more than a simple sum of its parts. This means that if a manager
effectively coordinates the efforts of the related sub-systems, the result would
be greater than the sum total of such independent efforts, that is, two plus two
would be greater than four.
 MODERN APPROACHES TO MANAGEMENT…..CONTINUED
Contingency Theory:

• The contingency theory approach, another extension of the modern approach, also contributed
significantly to the evolution of management thoughts. This approach discards the concept of the
universality of management principles and favours taking managerial decisions after carefully
considering the situational factors.

• The task of a manager, according to this theory, is to identify which technique will, in a
particular situation and at a particular point of time, contribute best to achieving
organizational goals. The theory contends that organizational phenomena exist in a logical
pattern, which managers can understand gradually by interpreting the various situations. They can
thereby frame their managerial styles, which may vary from situation to situation.

• Contingency theory and systems theory together are classified as the integrative school of
management thought because these two theories integrate the classical, behavioural, and
quantitative theories into a framework that uses only the best of each approach in a given
situation.
 ORGANIZATIONAL ENVIRONMENT

• An organization must interact with the outside world, with its environment. That
environment has become more volatile, uncertain, complex and ambiguous
(‘VUCA’).
• Organizational effectiveness and survival thus depend on monitoring and
understanding these trends and developments, and on responding
appropriately.
• The study of the organizational environment is critical
 CONT…,
• Stakeholders anyone who is concerned with how an organization operates,
and who will be affected by its decisions and actions
• Organizations are constantly involved in exchanges with their suppliers,
customers, regulatory agencies and other stakeholders, including their
employees.
 THINK A MINUTE!

• What are the main factors in the environment of your college or university?
How are those factors influencing management actions – and how are these
affecting you?
 WHY STUDY THE ENVIRONMENT

• Understanding the dynamics of the environment is central to organizational

survival. Organizations which are ‘out of fit’ have to change, or go out of
business
• As the complexity and pace of environmental change seem to have increased,
organizations that are able to adapt quickly to new pressures and
opportunities are likely to be more successful than those which are slow to
respond.
 CONT…,

• External environments do not determine internal structures and processes.

• Our perception is selective, paying attention to some factors and filtering
out others.

• The same environment may be perceived differently by different

managers, even in the same sector.

• It is management perceptions that affect decisions about organization

strategy, structures, and processes
TYPOLOGY OF ENVIRONMENT
 ENVIRONMENTAL SCANNING

• The methods used to analyse the environment are known as environmental

scanning techniques.

• Environmental scanning involves collecting information from different

sources: government statistics, websites, newspapers and magazines,
specialist research and consulting agencies, demographic analysis, market
research, focus groups.
 TECHNOLOGY
• Technology is probably the most tangible and visible aspect of environmental
change. The pace of development appears to be unchecked

• Applications of computing affect almost all aspects of our lives: how we entertain
ourselves, how we buy goods and services, and how we communicate.

• These developments have increased the number of ‘knowledge workers’ whose value
depends more on what they know than on what they can do

• Technology affects organizational behaviour in many ways, and on many levels: the
design and delivery of products and services, corporate strategies, modes of
communications and information exchange, the day-to-day work of individuals
 GLOBALIZATION
• Increased foreign assignments
• Working with people from different cultures
• Coping with anti-capitalism backlash
• Overseeing movement of jobs to countries with low-cost labor
• Managing people during the war on terror.
Globalization is an uneven process. Many people around the world do not
have access to the goods and technologies that contribute to the experience of
globalization for affluent members of developed economies. Many societies and
groups reject the dislocation that globalization can bring, and object to the spread of
Western culture, signified most clearly by brand labels.
 DIVERSITY MANAGEMENT
• Effective diversity management increases an organization’s access to the
widest possible pool of skills, abilities, and ideas. Managers also need to
recognize that differences among people can lead to miscommunication,
misunderstanding, and conflict
• Changing Workforce (US and rest of the world)
• Surface-level and Deep-level diversity
• Diversity does present many opportunities for organizations, effective
diversity management also means working to eliminate unfair discrimination
• Rather than looking at individual characteristics, unfair discrimination assumes
everyone in a group is the same. This discrimination is often very harmful to
organizations and employees
MAJOR WORKFORCE DIVERSITY CATEGORIES

Gender
National
Disability Origin
Age
Non-Christian
Race
Domestic
Partners
 ETHICS
• Ethics is involved with moral issues and choices and deals with right and wrong
behavior.

• A number of cultural (family, friends, neighbors, education, religion, and the media),
organizational (ethical codes, role models, policies and practices, and reward and
punishment systems), and external forces (political, legal, economic, and
international developments) help determine ethical behavior.

• These influences, acting interdependently, serve to help identify and shape ethical
behavior in today’s organizations.

• There is increasing evidence of the positive impact that ethical behavior and
corporate social responsibility programs have on “bottom-line” performance.
 ORGANIZATIONAL STRUCTURE

• Organizational structure defines the manner in which the roles, power,

authority, and responsibilities are assigned and governed, and depicts how

information flows between the different levels of hierarchy in an organization

• An organizational structure is a system that outlines how certain activities

are directed in order to achieve the goals of an organization
 ELEMENTS OF ORGANIZATION STRUCTURE

Work Specialization Departmentalization Chain of Command

Centralization and
Span of Control Formalization
Decentralization
 HORIZONTAL ORGANIZATION DESIGN &GUIDING
PRINCIPLES MAKE HORIZONTAL DESIGNS
AS EFFECTIVE AS POSSIBLE.

• Horizontal organizational Make Make teams, not individuals, the cornerstone of the
organizational design and performance.
structure is a flat
management structure. Decrease hierarchy by eliminating non-value-added
Organizations with these Decrease work and by giving team members the authority to
make decisions directly related to their activities
structures often have few within the process flow.
managers with many
Emphasize multiple competencies and train
employees, and they allow Emphasize people to handle issues and work in
employees to make crossfunctional areas.
decisions without needing Measure for end-of-process performance objectives,
manager approval. Measure as well as customer satisfaction, employee
satisfaction, and financial contribution.

Build a corporate culture of openness, cooperation, and

collaboration, a culture that focuses on continuous
Build performance improvement and values employee
empowerment, responsibility, and well-being.
 CONTEMPORARY DESIGNS: HOLLOW AND
MODULAR
• In order to compete in the global economy, far-thinking
management recognized and then embraced the fact
that they needed to outsource
• selected tasks, functions, and processes.
• For example, much of manufacturing on all levels
and industries were outsourced to China and other
developing countries, while information processing
and customer service were outsourced to India and
a few other countries.
This movement of entire processes outside the
organization left what has been termed the “Hollow
Organization” design and when just parts of the
product or service are outsourced, it’s called the
“Modular Organization” design.
 MODULAR
• The modular designs are also based on outsourcing, but instead of the entire
process being taken offshore, as in hollow designs (e.g., manufacturing, logistics, or
customer service) only parts of the process are being outsourced

• The advantages of modular designs in terms of cost, speed of response to market

changes, and innovation through recombination of modules in different ways.

• For Example : Nissan’s modular design is known for being very efficient because
parts such as the frame, dashboard, and seats are made by subcontractors and then
shipped to the Nissan plant for assembly
 • The commonality found in the horizontal, hollow, and
NETWORK modular organization designs is that they all provide an
alternative to the traditional bureaucratic model in terms
DESIGN of both perspective and actual structure.
• All three of these contemporary designs are sometimes
subsumed under the single term “Network Designs”
because of the boundaryless conditions created by
advanced information technology and globalization.
 VIRTUAL ORGANIZATION
• Besides the more specific horizontal, hollow, and modular contemporary designs,
another more all-encompassing design besides the network organization is the so-
called virtual organization
• This term virtual organization has emerged not so much because it describes
something distinct from network organizations but because the term itself represents
the new environment and the partnering, alliances, and outsourcing arrangements
found in an increasing number of global companies
• Anand and Daft note that “collaboration or joint ventures with competitors usually
take the form of a virtual organization—a company outside a company created to
specifically respond to an exceptional market opportunity that is often temporary.”
• Interestingly, the word virtual as used here comes not from the popular virtual reality
but from virtual memory, which has been used to describe a way of making a
computer’s memory capacity appear to be greater than it really is but does require
a strong information technology platform
 KEY ATTRIBUTES OF THE VIRTUAL ORGANIZATION
• 1. Technology. Informational networks will help far-flung companies and entrepreneurs link
up and work together from start to finish. The partnerships will be based on electronic
contracts to keep the lawyers away and speed the linkups.
• 2. Opportunism. Partnerships will be less permanent, less formal, and more opportunistic.
Companies will band together to meet all specific market opportunities and, more often than
not, fall apart once the need evaporates
• 3. No borders. This new organizational model redefines the traditional boundaries of the
company. More cooperation among competitors, suppliers, and customers makes it harder to
determine where one company ends and another begins.
• 4. Trust. These relationships make companies far more reliant on each other and require far
more trust than ever before. They share a sense of “codestiny,” meaning that the fate of each
partner is dependent on the other.
• 5. Excellence. Because each partner brings its “core competence” to the effort, it may be
possible to create a “best-of-everything” organization. Every function and process could be
world class—something that no single company could achieve.
ORGANIZATION CULTURE
CHARACTERISTICS OF ORGANIZATION CULTURE
• 1. Observed behavioral regularities. When organizational participants interact
with one another, they use common language, terminology, and rituals related to
deference and demeanor.
• 2. Norms. Standards of behavior exist, including guidelines on how much work to
do, which in many organizations come down to “Do not do too much; do not do too
little.”
• 3. Dominant values. There are major values that the organization advocates and
expects the participants to share. Typical examples are high product quality, low
absenteeism, and high efficiency.
• 4. Philosophy. There are policies that set forth the organization’s beliefs about how
employees and/or customers are to be treated.
• 5. Rules. There are strict guidelines related to getting along in the organization.
Newcomers must learn those “ropes” in order to be accepted as full-fledged
members of the group.
• 6. Organizational climate. This is an overall “feeling” that is conveyed by the
physical layout, the way participants interact, and the way members of the
organization conduct themselves with customers or other outsiders.
 CREATING AND MAINTAINING A CULTURE-HOW
ORGANIZATIONAL CULTURES START

• 1. A single person (founder) has an idea for a new enterprise.

• 2. The founder brings in one or more other key people and creates a core
group that shares a common vision with the founder. That is, all in this core group
believe that the idea is a good one, is workable, is worth running some risks for,
and is worth the investment of time, money, and energy that will be required.
• 3. The founding core group begins to act in concert to create an organization
by raising funds, obtaining patents, incorporating, locating space, building, and so
on.
• 4. At this point, others are brought into the organization, and a common history
begins to be built.
Most of today’s successful corporate giants in all industries basically followed
these steps. Two well-known representative examples are McDonald’s and Wal-
Mart.
 Rewards

ORGANIZATION REWARD SYSTEM Pay Recognition Benefits

• Organizations provide rewards to their personnel in order to try to motivate their

performance and encourage their loyalty and retention. Organizational rewards take a
number of different forms including money (salary, bonuses, incentive pay), recognition,
and benefits. This first part examines money as the most dominant reward system in
today’s organizations.
• Money has also played an integral role in helping develop theories of organizational
behavior.
• For example, if employees are interested in money, how much effort will they expend
in order to earn it, and how much is “enough”? It is like the philosopher Arthur
Schopenhauer once said, “Wealth is like seawater, the more we drink the thirstier we
become.”Moreover, if people work very hard but do not receive the rewards they
expect, how much of a dampening effect will this have on their future efforts?
 • Pay administration takes several forms. Traditional methods
include base salary and merit pay.
• Both of these, however, are often insufficient for retaining
TRADITIONAL talented people.
• Organizations have to offer incentives for desirable
METHODS OF outcomes. As a result, pay-for performance systems are in
ADMINISTERING place in many firms.
• These include both individual and group incentive plans.
PAY • Common examples of individual incentives include
commissions based directly on sales or work output, bonuses,
and stock options.
• Group incentives include gain sharing, profit sharing, and
employee stock ownership plans
 NEW PAY TECHNIQUES

Commissions Rewarding Rewarding new Pay for

beyond sales to leadership goals knowledge
customers effectiveness. workers in teams

Competency
Skill pay Broadbanding
pay
 RECOGNITION
• In addition to money, forms of recognition to identify and reward
outstanding performance can be a vital, but too often overlooked,
part of the organizational reward system. When people are asked
what motivates them, money is always prominently featured on their
list. However, both formal organizational recognition and social
recognition used systematically by supervisors and managers is very
important to their people and their day-to-day behaviors and
performance effectiveness
 BENEFITS
• Benefits are the third major component of organizational reward systems. Some of these benefits
are mandated by the federal government (e.g., Social Security and workers’ compensation).
• However, numerous other benefits are received by today’s permanent employees (not by temps,
and this is a major problem for them).
• Examples include paid vacations, days off for religious holidays, personal leave, life and health
insurance, and pensions.
• In addition there are benefits that have emerged in recent years that are proving quite popular.
• Examples include wellness programs, child care benefits, employee assistance programs (EAPs),
tuition assistance, prepaid legal expenses, and a host of other perks. In recent years the value of
benefits as part of the reward system has increased, but so has the cost.
THE INDIVIDUAL: FOUNDATION
OF INDIVIDUAL
BEHAVIOR, ABILITY
ABILITY, INTELLECT, AND INTELLIGENCE
Ability
An individual’s capacity to perform
the various tasks in a job.

Intellectual Ability
The capacity to do mental activities.

Multiple Intelligences
Intelligence contains four subparts:
cognitive, social, emotional, and cultural.
© 2007 Prentice Hall Inc. All rights reserved.
 DIMENSIONS OF
INTELLECTUAL ABILITY

• Number aptitude
• Verbal comprehension
• Perceptual speed
• Inductive reasoning
• Deductive reasoning
• Spatial visualization
• Memory
EXHIBIT
© 2007 Prentice Hall Inc. All rights reserved.

2–1
 PHYSICAL ABILITIES

Physical Abilities
The capacity to do tasks
demanding stamina, dexterity,
strength, and similar
characteristics.

© 2007 Prentice Hall Inc. All rights reserved.

NINE PHYSICAL ABILITIES
Strength Factors
1. Dynamic strength
2. Trunk strength
3. Static strength
4. Explosive strength Flexibility Factors
5. Extent flexibility
6. Dynamic flexibility
Other Factors
7. Body coordination
Source: Adapted from
8. Balance HRMagazine published by
the Society for Human
Resource Management,
9. Stamina Alexandria, VA.
EXHIBIT
© 2007 Prentice Hall Inc. All rights reserved.

2–2
THE ABILITY-JOB FIT

Ability-Job
Employee’s Fit Job’s Ability
Abilities Requirements

© 2007 Prentice Hall Inc. All rights reserved.

BIOGRAPHICAL CHARACTERISTICS
Biographical Characteristics
Personal characteristics—such as age, gender,
race and tenure—that are objective and easily
obtained from personnel records.

© 2007 Prentice Hall Inc. All rights reserved.

BASIC
MODEL
OF OB
Thank You!