What is

1 Organizational
Behavior?

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Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.
Human Factor at the Workplace
1900’s: Scientific Management
 Job analysis as the basis of
selection, training and
compensation
 Pay for performance
 The worker as an
economic actor

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 1915’s:
World War I
 The importance of selection
and training emphasized due
to army recruitment
Employment of Tests and
Assessments
 Tight labor markets due to
army recruitment

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 1930’s:
Hawthorne Experiments
 The worker as a social
actor
Group identity
Group norms

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 1950’s-1970’s

 Socio-technical
systems
Job enrichment
concerns as technology
develops
 Motivation theories
Motivating and
retaining a highly
qualified workforce Slide
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 1980’s:
U.S. Demise, Japanese on the Rise
 Japanese success investigated:
 Intensive socialization
 Extensive training
 Teamwork
 Lifetime employment
 Seniority-based compensation
 Differences in national culture
Collectivism: Long-term perspective on
relationships, strong normative pressures for
group welfare, conformity
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 1990s and on:
The New Competitive Environment

Increasing product and process innovation

Shortened product life-cycles
Erosion of patent protection
Decreased regulation and protected
markets
Increased access to capital markets

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 What Makes a Resource Valuable?
 Rare
 Resources, people
 Inimitable
 History
A collective pool of experience, wisdom, and knowledge that
benefits the organization
 Numerous small decisions
People make many small decisions day-in and day-out, week-in
and week-out
 Socially complex resources
Culture, teamwork, trust, reputation

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 Illustrative case:
Southwest Airlines
 No economies of scale
 Existed after airlines deregulation
 No unique technology (Boeing 737s)
 Did all its marketing
 Did not operate a hub-and-spoke route system
 Flying non-stop origin to destination
 Used uncongested airports
 “No frills” service
 Only drinks and snacks
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 The Competition
 Continental Lite gave up the fight, hired a new CEO, and has
successfully gone back to their original strategy.
 Kiwi Air is in Chapter 11 for the 2nd time.
 New low-cost airlines have emerged (e.g., Vanguard, Frontier,
Jet Blue, and Pan Am); some have already failed (Western
Pacific, Pan Am).
 Delta and USAir have begun low-cost airlines, Delta Express
and MetroJet.
 United’s Shuttle cut back flights on 4 of 10 routes in California
and is running at about breakeven.

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 Southwest Airlines:
Competitive Advantage
 COMPETITIVE ADVANTAGE:
Low cost airlines
Fewer personnel who work
efficiently
Lower turnaround time
Exceptional service

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 Slide
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Source: Adapted from “Creating a Strategy Map,”

 Southwest Airlines
 The Mission of Southwest Airlines
 Dedication to the highest quality of Customer Service
delivered with a sense of warmth, friendliness,
individual pride, and Company Spirit.
 To Our Employees
 We are committed to provide our Employees a stable
work environment with equal opportunity for learning
and personal growth. Creativity and innovation are
encouraged for improving the effectiveness of
Southwest Airlines. Above all, Employees will be
provided the same concern, respect, and caring
attitude within the organization that they are expected
to share externally with every Southwest Customer.
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 Southwest: Workforce
 Southwest received 90,043 resumes and hired 831
new Employees in 2009.
 35,000+ employees (incl. 1,164 married couples)
 Airline industry’s 1st profit-sharing plan (1974)
 Employees own 8% of SWA
 Approximately 83% unionized
 Southwest’s longer contracts (10-year):
 Reduce negotiation costs
 Provide greater predictability
 Signal greater trustworthiness to labor
 Reduce productivity loss during “pre-negotiation” periods before
contract deliberations and “recovery” periods after settlement
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 The Southwest Model
 Top management commitment
 Four times a year, Southwest managers work as
baggage handlers, ticket agents, and flight
attendants so they get a feel for the problems
facing other employees
 Family Fun
 Playing games on board and ground
 “Guess the weight of the gate agent”
 Hiding in the overhead luggage to surprise passengers
 Playing games at the office and other social
events
 “Plane pull”
 CEO’s rap and Elvis performances
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 The Southwest Model
 Emphasis on person-organization fit
 Selection tools identifying attitudes rather than skills
 Rigorous interviewing (also by customers)
 Peer hiring (only restriction is that relatives can not
report to one another)
 Southwest’s People University
 Training on team building; cross-training
 Recognition, and celebrations
 80% of all promotions internal
 Flexibility in working schedules, that also affected compensation
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 Research Evidence
 OB practices were associated with better firm
performance
 Firms that valued OB had a 19% higher survival
rate than firms that did not value OB
 Good people comprise a valuable resource for
companies
 There is no “magic bullet” OB practice – no one
thing, in-and-of itself, can increase profitability
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What does Good OB Practices involve?
 High Performance Work Practices (HPWP)
Selective hiring
Extensive training
Employee empowerment
Decentralization, information sharing, reduction of
status differences
Comparatively high compensation contingent on
organizational performance
Employment security
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 What is the Reality of HPWP?
 People work harder because of increased
involvement and commitment that comes
from having more say in their work
 People work smarter because they are
encouraged to build skills and competence
 People work more responsibly because
responsibility is placed in the hands of
employees farther down in the organization
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 Organizational Behavior Defined
 Organizational behavior (OB) is the field of study
devoted to understanding, explaining, and ultimately
improving the attitudes and behaviors of individuals
and groups in organizations.
 Human resource management takes the theories
and principles studies in OB and explores the “nuts-
and-bolts” applications of those principles in
organizations.
 Strategic management focuses on the product
choices and industry characteristics that affect an
organization's profitability.
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 OB Foundations
 Theories and concepts in OB are drawn from a
wide variety of disciplines
Industrial and organizational psychology
Job performance and individual characteristics
Social psychology
Satisfaction, emotions, and team processes
Sociology
Team characteristics and organizational structure
Economics
Motivation, learning, and decision making
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Integrative Model of OB

Figure 1-1

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 True or False?
 Money is the best motivator
 People generally shy away from challenges on the job
 Specific goals make people nervous; people work
better when asked to do their best
 Because “two heads are better than one”, groups
make better decisions than individuals
 People who are satisfied with one job tend to be
satisfied with other jobs, too
 People get bored easily, leading them to welcome
organizational change
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 How Do We Know
 Method of Experience – People hold firmly to some belief
because it is consistent with their own experience and
observations.
 Method of Intuition – People hold firmly to some belief
because it “just stands to reason”—it seems obvious or self-
evident.
 Method of Authority – People hold firmly to some belief
because some respected official, agency, or source has said it
is so.
 Method of Science – People accept some belief because
scientific studies have tended to replicate that result using a
series of samples, settings, and methods.
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 The Scientific Method
Figure 1-3

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 Scientific Studies, cont’d
 Correlation (r)
Describes the statistical relationship between two
variables
Can be positive or negative and range from 0 (no
statistical relationship) to ± 1 (a perfect statistical
relationship)

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Different Correlation Sizes
Figure 1-4

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 Social Recognition & Job Performance
 How often does social recognition lead to higher job
performance?
 Burger King study
 Correlation between social recognition
and job performance was .28
Restaurants that received training in social
recognition averaged 44 seconds of drive-
through time nine months later versus 62
seconds for the control group locations.
 Correlation between social recognition and retention rates
was .20
Restaurants that received training in social recognition had a 16
percent better retention rate than the control group locations
nine months later.

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 Establishing Relationships
 It turns out that making causal inferences —
establishing that one variable really does
cause another — requires establishing three
things.
The two variables are correlated.
The presumed cause precedes the presumed
effect in time.
No alternative explanation exists for the
correlation.
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 Meta-analysis
 The best way to test a theory is to conduct many
studies, each of which is as different as possible from
the ones that preceded it.
 Meta-analysis takes all of the correlations found in
studies of a particular relationship and calculates a
weighted average (such that correlations based on
studies with large samples are weighted more than
correlations based on studies with small samples).
 .50 correlation is considered “strong,” a .30 correlation is
considered “moderate,” and a .10 correlation is
considered “weak.”
 Form the foundation for evidence-based management —
a perspective that argues that scientific findings should
form the foundation for management education, much as
they do for medical education.
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 Takeaways
 Organizational behavior is a field of study devoted to
understanding and explaining the attitudes and
behaviors of individuals and groups in organizations.
More simply, it focuses on why individuals and
groups in organizations act the way they do.
 The two primary outcomes - job performance and
organizational commitment.
 A number of factors affect performance and commitment,
including individual mechanisms, individual characteristics,
group mechanisms, and organizational mechanisms.

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 Takeaways, Cont’d
 The effective management of organizational
behavior can help a company become more
profitable because good people are a valuable
resource.
 Rare
 Hard to imitate
 History that cannot be bought or copied
 Make numerous small decisions that cannot be observed
by competitors
 Create socially complex resources such as culture,
teamwork, trust, and reputation.

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