Preface

About OpenStax

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About *Organizational Behavior*

The field of management and organizational behavior exists today in a constant state of evolution and change. Casual readers of publications like the New York Times, The Economist and the Wall Street Journal will learn about the dynamic nature of organizations in today’s ever-changing business environment. *Organizational Behavior* is designed to meet the scope and sequence requirements of the introductory course on Organizational Behavior. This is a traditional approach to organizational behavior. The table of contents of this book was designed to address two main themes. What are the variables that affect how, when, where, and why managers perform their jobs? What theories and techniques are used by successful managers at a variety of organizational levels to achieve and exceed objectives effectively and efficiently throughout their careers? Management is a broad business discipline, and the Organizational Behavior course covers many areas such as individual and group behavior at work, as well as organizational processes such as communication in the workplace and managing conflict and negotiation. No one individual can be an expert in all areas of management, so an additional benefit of this text is that specialists in a variety of areas have authored individual chapters. Finally, we all made an effort to present a balanced approach to gender and diversity throughout the text in the examples used, the photographs selected, and the use of both male and female in alternating chapters when referring to generic managers or employees.

Additional Resources

Contributing Authors

J. Stewart Black, INSEAD

David S. Bright, Wright State University

Donald G. Gardner, University of Colorado-Colorado Springs

Eva Hartmann, University of Richmond

Jason Lambert, Texas Woman’s University

Laura M. Leduc, James Madison University

Joy Leopold, Webster University

James S. O’Rourke, University of Notre Dame

Jon L. Pierce, University of Minnesota-Duluth

Richard M. Steers, University of Oregon

Siri Terjesen, American University

Joseph Weiss, Bentley University

Reviewers

Susan Adams, Bentley University

Shane Bowyer, Minnesota State University

Kim S. Cameron, University of Michigan

Stephen J. Carroll, University of Maryland

Daniel R. Cillis, Molloy College

Linda Davenport, Klamath Community College

Diana L. Deadrick, Old Dominion University

James J. Freiburger, Southern New Hampshire University

Robert A. Giacalone, John Carroll University

Gregory O. Ginn, Embry-Riddle Aeronautical University

John Goldberg, University of California-Davis

Brian Graham-Moore, University of Texas

Regina Greenwood, Nova University

William F. Grossnickle, East Carolina University

Nell Tabor Hartley, Robert Morris University

Nai H. Lamb, University of Tennessee at Chattanooga

Kristie J. Loescher, University of Texas

Marcia Marriott, Monroe Community College

Therese Madden, Notre Dame de Namur University

Eleonor Moore, Kirtland Community College

Bonnie L. McNeely, Murray State University

Robert McNulty, Bentley University

Jeffrey Muldoon, Emporia State University

Karli Peterson, Colorado State University

Raymond Pfang, Tarrant Community College

Jodell Raymond, Monroe Community College

Richard Savior, SUNY Empire State

Amit Shah, Frostburg State University

Paul L. Starkey, Pennsylvania College of Technology

Carolyn Stevenson, Kaplan University

Dianna L. Stone, University of New Mexico

Maria Vitale, Chaffey College

Valerie Wallingford, Bemidji State University

Management and Organizational Behavior

Introduction

The Nature of Work

The Meaning of Work

What is work, and how do people feel about the work they do? These questions may be answered from several perspectives. Perhaps one of the best ways to understand how people feel about their jobs is simply to ask them. A number of years ago Chicago writer Studs Terkel did exactly that. How did the people he interviewed feel about their jobs? Here are some excerpts from his book *Working*.

S. Terkel, *Working* (New York: Pantheon, 1974).

Functions of Work

We know why work activities are important from an organization’s viewpoint. Without work there is no product or service to provide. But why is work important to individuals? What functions does it serve?

The Changing Workplace

The Challenge of International Competition

Until the 1980s, many American firms had little in the way of serious international competition. As a result, there was little incentive to innovate and remain efficient and competitive. Many companies became lazy and lost touch with their customers. This situation changed abruptly as companies in Asia and Western Europe developed more sophisticated products and marketing systems and gained significant market shares in home electronics, automobiles, medical equipment, telecommunications, and shipbuilding, to name a few areas. As a result, American companies lost considerable clout—and profitability. In the 1990s and into the new millennium, the lowering of trade barriers and acceptance of trade agreements like NAFTA led corporations to seek less expensive labor overseas. This led to lower costs and the ability to offer products at more competitive prices, but also led to a drop in manufacturing in industries like steel production, a drop in manufacturing of products like iPhones, and the relocation of call centers from the U.S. to India.

The Challenge of New Technologies

Although it is common to think of “high tech” as applying only to the aerospace and telecommunications industries, advanced technologies can be found throughout most industries. For example, most of us are familiar with the explosive growth in computing. Both hardware and software change so rapidly that it is difficult for many companies to keep up. Personal computers are being replaced by cell phones that are now faster and more powerful than their predecessors. Cloud computing and access to big data and applications transform data into useful information that is increasingly complex and increasingly user friendly. In November of 1971 Intel launched the first microchip. Today, a modern Intel Skylake processor contains around 1.75 billion transistors—half a million of them would fit on a single transistor from the 4004—and collectively they deliver about 400,000 times as much computing muscle.

“The Future of Computing,” *The Economist,* March 12, 2015, https://www.economist.com/leaders/2016/03/12/the-future-of-computing. More and more companies are using computer-based systems and equipment—such as e-mail, real-time messaging and file sharing, PDAs, and cell phones—for communications. As a result, the way in which employees and managers communicate and make decisions is changing dramatically, and the importance of educated and knowledgeable workers is increasing rapidly.

The Challenge of Increased Quality

The challenge of industrial competitiveness incorporates several interrelated factors, including an appropriate product mix, manufacturing efficiency, effective cost controls, investment in research and development, and so forth. Not to be ignored in this pursuit is the quest for increased quality control of the products and services offered in the marketplace. Total Quality Management (TQM) is a term often used to describe comprehensive efforts to monitor and improve all aspects of quality within a firm. BMW established and continues to maintain its reputation in part because customers have come to respect its high level of quality. Quality is also a major reason for the success of many Japanese products in North America. Simply put, if companies are going to compete, renewed efforts must be devoted to enhanced quality assurance. This, too, is a management challenge. How can managers get employees to care about the products they produce or the services they offer? In this book, we will consider both the issue of quality control (what is it?) and mechanisms of ensuring improved product quality (how do we get it?).

The Challenge of Employee Motivation and Commitment

A major hurdle in the pursuit of industrial competitiveness is the traditional adversarial relationship between management and workers. Whether a company is unionized or not, we see situations in which the average employee simply sees no reason to increase output or to improve the quality of existing outputs. Frequently, the company’s reward system restricts, rather than increases, performance. At other times, rewards encourage employees to increase quantity at the expense of quality. Furthermore, North American companies often view their workforce as a variable expense (in contrast to Japan, where the workforce is viewed as a fixed expense) and lay workers off when they are not needed for short-run activities. As a result, returning the favor, employees see little reason to be committed or loyal to their employers. Turnover and absenteeism rates are often unreasonably high, further eroding performance efficiency and effectiveness.

The Challenge of Managing a Diverse Workforce

Historically, the American economy has been dominated by White males. They have filled the vast majority of managerial positions and many of the more important blue-collar jobs, becoming skilled craftsmen. Traditionally, women filled lower-paying clerical positions and often left the workforce to raise their families. Minorities of both genders found considerable barriers to entering the labor market at the higher (and higher-paying) levels. Now, things are changing, and the pace of this change is accelerating. Among other changes, the twenty-first century will also bring major changes in terms of workforce demographics. We will see changes in gender, race, and age.

The Challenge of Ethical Behavior

Finally, the future will bring a renewed concern with maintaining high standards of ethical behavior in business transactions and in the workplace. Many executives and social scientists see unethical behavior as a cancer working on the fabric of society both in business and beyond. Many are concerned that we face a crisis of ethics in the West that is undermining our competitive strength. This crisis involves business, government, customers, and employees. Especially worrisome is unethical behavior among employees at all levels of the organization. For example, recent reports found that employees and vendors accounted for a higher percentage of thefts than did retail customers.

Elaine Pofeldt, “This Crime in the Workplace is Costing US Business \$50 Billion a Year,” *CNBC*, September 12, 2017, https://www.cnbc.com/2017/09/12/workplace-crime-costs-us-businesses-50-billion-a-year.html; and “Shoplifting, other Fraud Cost US Retailers \$44 Billion in 2014: Survey,” CNBC, June 24, 2015, https://www.cnbc.com/2015/06/24/shoplifting-other-fraud-cost-us-retailers-44-billion-in-2014-survey.html.

The Nature of Management

What Is Management?

Many years ago, Mary Parker Follett defined management as “the art of getting things done through people.” A manager coordinates and oversees the work of others to accomplish ends they could not attain alone. Today this definition has been broadened. Management is generally defined as the process of planning, organizing, directing, and controlling the activities of employees in combination with other resources to accomplish organizational objectives. In a broad sense, then, the task of management is to facilitate the organization’s effectiveness and long-term goal attainment by coordinating and efficiently utilizing available resources. Based on this definition, it is clear that the topics of effectively managing individuals, groups, or organizational systems is relevant to anyone who must work with others to accomplish organizational objectives.

Managerial Responsibilities

An important question often raised about managers is: What responsibilities do managers have in organizations? According to our definition, managers are involved in planning, organizing, directing, and controlling. Managers have described their responsibilities that can be aggregated into nine major types of activities. These include:

Variations in Managerial Work

Although each manager may have a diverse set of responsibilities, including those mentioned above, the amount of time spent on each activity and the importance of that activity will vary considerably. The two most salient perceptions of a manager are (1) the manager’s level in the organizational hierarchy and (2) the type of department or function for which they are responsible. Let us briefly consider each of these.

The Twenty-First Century Manager

We discussed above many of the changes and challenges facing organizations in the twenty-first century. Because of changes such as these, the managers and executives of tomorrow will have to change their approaches to their jobs if they are to succeed in meeting the new challenges. In fact, their profiles may even look somewhat different than they often do today. Consider the five skills that *Fast Company* predicts that successful future managers, compared to the senior manager in the year 2000, will need. The five skills are: the ability to think of new solutions, being comfortable with chaos, an understanding of technology, high emotional intelligence, and the ability to work with people and technology together.

A Model of Organizational Behavior and Management

What Is Organizational Behavior?

The study of the behavior of people in organizations is typically referred to as *organizational behavior*. Here, the focus is on applying what we can learn from the social and behavioral sciences so we can better understand and predict human behavior at work. We examine such behavior on three levels—the individual, the group, and the organization as a whole. In all three cases, we seek to learn more about what causes people—individually or collectively—to behave as they do in organizational settings. What motivates people? What makes some employees leaders and others not? Why do groups often work in opposition to their employer? How do organizations respond to changes in their external environments? How do people communicate and make decisions? Questions such as these constitute the domain of organizational behavior and are the focus of this course.

Building Blocks of Organizations

Understanding the behavior of people at work is fundamental to the effective management of an organization. Obviously, a number of factors come together to determine this behavior and its organizational consequences. In order to understand the origins and characteristics of these factors, it is necessary to have a model that organizes and simplifies the variables involved. We offer such a model here in the hope that it will bring some order to the study of this subject. The model can be considered in two parts (see **[link]**).

Individual and Cultural Differences

Introduction

Individual and Cultural Factors in Employee Performance

Employee Abilities and Skills

Mental Abilities

It is possible to divide our discussion of abilities and skills into two sections: mental abilities and physical abilities. Mental abilities are an individual’s intellectual capabilities and are closely linked to how a person makes decisions and processes information. Included here are such factors as verbal comprehension, inductive reasoning, and memory. A summary is shown in **[link]**.

Physical Abilities

The second set of variables relates to someone’s physical abilities. Included here are both basic physical abilities (for example, strength) and psychomotor abilities (such as manual dexterity, eye-hand coordination, and manipulation skills). These factors are summarized in **[link]**.

E. J. McCormick and J. Tiffin, *Industrial Psychology* (Englewood Cliffs, N.J.: Prentice-Hall, 1976). Considering both mental and physical abilities helps one understand the behavior of people at work and how they can be better managed. The recognition of such abilities—and the recognition that people have *different* abilities—has clear implications for employee recruitment and selection decisions; it brings into focus the importance of matching people to jobs. For example, Florida Power has a 16-hour selection process that involves 12 performance tests. Over the test period of a couple of years, 640 individuals applied for “lineperson” jobs. Of these, 259 were hired. As a consequence of the new performance tests and selection process, turnover went from 43 percent to 4.5 percent, and the program saved net \$1 million.Dale Feuer & Chris Lee. 1988. The Kaizen Connection: How Companies Pick Tomorrow’s Workers. Training. May, 23–35. In addition to selection, knowledge of job requirements and individual differences is also useful in evaluating training and development needs. Because human resources are important to management, it is imperative that managers become more familiar with the basic characteristics of their people.

Personality: An Introduction

Definition of Personality

Personality can be defined in many ways. Perhaps one of the more useful definitions for purposes of organizational analysis is offered by Salvatore Maddi, who defines *personality* as follows:

Influences on Personality Development

Early research on personality development focused on the issue of whether heredity or environment determined an individual’s personality. Although a few researchers are still concerned with this issue, most contemporary psychologists now feel this debate is fruitless. As noted long ago by Kluckhohn and Murray:

Personality and Work Behavior

Self-Esteem

One trait that has emerged recently as a key variable in determining work behavior and effectiveness is an employee’s self-esteem. Self-esteem can be defined as one’s opinion or belief about one’s self and self-worth. It is how we see ourselves as individuals. Do we have confidence in ourselves? Do we think we are successful? Attractive? Worthy of others’ respect or friendship?

Locus of Control

Locus of control refers to the tendency among individuals to attribute the events affecting their lives either to their own actions or to external forces; it is a measure of how much you think you control your own destiny. Two types of individual are identified. People with an *internal* locus of control tend to attribute their successes—and failures—to their own abilities and efforts. Hence, a student would give herself credit for passing an examination; likewise, she would accept blame for failing.

Introversion-Extroversion

The third personality dimension we should consider focuses on the extent to which people tend to be shy and retiring or socially gregarious. *Introverts* (introversion) tend to focus their energies inwardly and have a greater sensitivity to abstract feelings, whereas *extroverts* (extroversion) direct more of their attention to other people, objects, and events. Research evidence suggests that both types of people have a role to play in organizations.

L. R. Morris, *Extroversion and Introversion: An Interactional Perspective* (New York: Hemisphere, 1979), p.8. Extroverts more often succeed in first-line management roles, where only superficial “people skills” are required; they also do better in field assignments—for example, as sales representatives. Introverts, on the other hand, tend to succeed in positions requiring more reflection, analysis, and sensitivity to people’s inner feelings and qualities. Such positions are included in a variety of departments within organizations, such as accounting, personnel, and computer operations. In view of the complex nature of modern organizations, both types of individual are clearly needed.

Authoritarianism and Dogmatism

Authoritarianism refers to an individual’s orientation toward authority. More specifically, an authoritarian orientation is generally characterized by an overriding conviction that it is right and proper for there to be clear status and power differences among people.

T. W. Adorno, E. Frenkel-Brunswik, and D. J. Levinson, *The Authoritarian Personality* (New York: Harper & Row, 1950). According to T. W. Adorno, a high authoritarian is typically (1) demanding, directive, and controlling of her subordinates; (2) submissive and deferential toward superiors; (3) intellectually rigid; (4) fearful of social change; (5) highly judgmental and categorical in reactions to others; (6) distrustful; and (7) hostile in response to restraint. Nonauthoritarians, on the other hand, generally believe that power and status differences should be minimized, that social change can be constructive, and that people should be more accepting and less judgmental of others.

Dependability

Finally, people can be differentiated with respect to their behavioral consistency, or dependability. Individuals who are seen as self-reliant, responsible, consistent, and dependable are typically considered to be desirable colleagues or group members who will cooperate and work steadfastly toward group goals.

R. Stogdill, “Personal Factors Associated with Leadership: A Survey of the Literature,” *Journal of Psychology,* 1948, *25,* pp. 35–71; F. L. Greer, *Small Group Effectiveness* (Philadelphia: Institute for Research on Human Relations, 1955). Personnel managers often seek a wide array of information concerning dependability before hiring job applicants. Even so, contemporary managers often complain that many of today’s workers simply lack the feeling of personal responsibility necessary for efficient operations. Whether this is a result of the personal failings of the individuals or a lack of proper motivation by superiors remains to be determined.

Personality and Organization: A Basic Conflict?

Personality and Employee Selection

Recent years have seen an increased interest in the use of preemployment screening tests. Several key assumptions underlie the use of personality tests as one method of selecting potential employees: (1) individuals have different personalities and traits, (2) these differences affect their behavior and performance, and (3) different job have different requirements. Consequently, tests can be used to select individuals who match the overall company as well as match particular types of people to specific jobs. However, managers must be careful in their use of these selection instruments. Legally all selection tests must meet the guidelines for nondiscrimination set forth in the Equal Employment Opportunity Commission’s Uniform Guidelines on Employee Selection Procedures. Specifically, in 1971 the Supreme Court ruled (Griggs v*.* Duke Power Company) that “good intent or the absence of discriminatory intent does not redeem . . . testing mechanisms that operate as built-in ‘head-winds’ for minority groups and are unrelated to measuring job capability.” This ruling led to two important cases in which discrimination might apply to selection practices. First, “disparate treatment” involves the intentional discrimination against an individual based on race, color, gender, religion, or national origin. Second, “disparate impact” involves the adverse effect of selection practices (as well as other practices) on minorities regardless of whether these practices were intended to have an adverse impact or not. Consequently, although personality tests can be an important means of selecting potential employees as well as matching them to appropriate jobs, care must be taken to demonstrate that the characteristics measured actually predict job performance.

Personal Values and Ethics

Characteristics of Values

The values people have tend to be relatively stable over time. The reason for this lies in the manner in which values are acquired in the first place. That is, when we first learn a value (usually at a young age), we are taught that such-and-such behavior is *always* good or *always* bad. For instance, we may be taught that lying or stealing is always unacceptable. Few people are taught that such behavior is acceptable in some circumstances but not in others. Hence, this definitive quality of learned values tends to secure them firmly in our belief systems. This is not to say that values do not change over time. As we grow, we are increasingly confronted with new and often conflicting situations. Often, it is necessary for us to weigh the relative merits of each and choose a course of action. Consider, for example, the worker who has a strong belief in hard work but who is pressured by her colleagues not to outperform the group. What would you do in this situation?

Role of Values and Ethics in Organizations

Personal values represent an important force in organizational behavior for several reasons. In fact, at least three purposes are served by the existence of personal values in organizations: (1) values serve as standards of behavior for determining a correct course of action; (2) values serve as guidelines for decision-making and conflict resolution; and (3) values serve as an influence on employee motivation. Let us consider each of these functions.

Example: A Country Tries to Reduce Its Workweek

What does a country do when its people are overmotivated? Consider the case of Japan. On the basis of Japan’s newfound affluence and success in the international marketplace, many companies—and the government—are beginning to be concerned that perhaps Japanese employees work too hard and should slow down. They may be too motivated for their own good. As a result, the Japanese Department of Labor has initiated a drive to shorten the workweek and encourage more Japanese employees to take longer holidays. The effort is focusing on middle-aged and older employees, because their physical stamina may be less than that of their more junior colleagues. Many companies are following this lead and are beginning to reduce the workweek. This is no easy task in a land where such behavior may be seen by employees as showing disloyalty toward the company. It requires a fundamental change in employee attitudes.

Cultural Differences

What Is Culture?

Simply put, culture may be defined as “the collective programming of the mind which distinguishes the members of one human group from another; the interactive aggregate of common characteristics that influences a human group’s response to its environment.”

G. Hofstede, *Culture’s Consequence,* (Beverly Hills, Calif.: Sage, 1980), p. 25. More to the point, culture is the “collective mental programming of a people.”Ibid. It is the unique characteristics of a people. As such, culture is:

Dimensions of Culture

There are several ways to distinguish different cultures from one another. Kluckhohn and Strodtbeck have identified six dimensions that are helpful in understanding such differences.

F. Kluckhohn and F. Strodtbeck, *Variations in Value Orientations* (Evanston, III.: Row, Peterson, 1961). These are as follows:

Perception and Job Attitudes

Introduction

The Perceptual Process

Perceptual Selectivity: Seeing What We See

As noted above, perceptual selectivity refers to the process by which individuals select objects in the environment for attention. Without this ability to focus on one or a few stimuli instead of the hundreds constantly surrounding us, we would be unable to process all the information necessary to initiate behavior. In essence, perceptual selectivity works as follows (see **[link]**). The individual is first exposed to an object or stimulus—a loud noise, a new car, a tall building, another person, and so on. Next, the individual focuses attention on this one object or stimulus, as opposed to others, and concentrates his efforts on understanding or comprehending the stimulus. For example, while conducting a factory tour, two managers came across a piece of machinery. One manager’s attention focused on the stopped machine; the other manager focused on the worker who was trying to fix it. Both managers simultaneously asked the worker a question. The first manager asked why the machine was stopped, and the second manager asked if the employee thought that he could fix it. Both managers were presented with the same situation, but they noticed different aspects. This example illustrates that once attention has been directed, individuals are more likely to retain an image of the object or stimulus in their memory and to select an appropriate response to the stimulus. These various influences on selective attention can be divided into external influences and internal (personal) influences (see **[link]**).

External Influences on Selective Attention

External influences consist of the characteristics of the observed object or person that activate the senses. Most external influences affect selective attention because of either their physical properties or their dynamic properties.

Personal Influences on Selective Attention

In addition to a variety of external factors, several important personal factors are also capable of influencing the extent to which an individual pays attention to a particular stimulus or object in the environment. The two most important personal influences on perceptual readiness are response salience and response disposition.

Social Perception in Organizations

Up to this point, we have focused on an examination of basic perceptual processes—how we see objects or attend to stimuli. Based on this discussion, we are now ready to examine a special case of the perceptual process—social perception as it relates to the workplace. Social perception consists of those processes by which we perceive other people.

S. T. Fiske and S. E. Taylor, *Social Cognition* (Reading, Mass.: Addison-Wesley, 1984). Particular emphasis in the study of social perception is placed on how we interpret other people, how we categorize them, and how we form impressions of them.

Characteristics of the Situation

The second major influence on how we perceive others is the situation in which the perceptual process occurs. Two situational influences can be identified: (1) the organization and the employee’s place in it, and (2) the location of the event.

Characteristics of the Perceiver

The third major influence on social perception is the personality and viewpoint of the perceiver. Several characteristics unique to our personalities can affect how we see others. These include (1) self-concept, (2) cognitive structure, (3) response salience, and (4) previous experience with the individual.

Levine and Shefner, op. cit.

Barriers to Accurate Social Perception

Stereotyping

One of the most common barriers in perceiving others at work is stereotyping. A stereotype is a widely held generalization about a group of people. Stereotyping is a process in which attributes are assigned to people solely on the basis of their class or category. It is particularly likely to occur when one meets new people, since very little is known about them at that time. On the basis of a few prominent characteristics such as sex, race, or age, we tend to place people into a few general categories. We ascribe a series of traits to them based upon the attributes of the category in which we have put them. We assume that older people are old-fashioned, conservative, obstinate, and perhaps senile. We view professors as absentminded, impractical, idealistic, or eccentric.

Selective Perception

Selective perception is the process by which we systematically screen out information we don’t wish to hear, focusing instead on more salient information. Saliency here is obviously a function of our own experiences, needs, and orientations. The example of the Dearborn and Simon

Dearborn and Simon, op. cit. study of managers described earlier provides an excellent glimpse of selective perception. Production managers focused on production problems to the exclusion of other problems. Accountants, personnel specialists, and sales managers were similarly exclusive. Everyone saw his own specialty as more important in the company than other specialties.

Perceptual Defense

A final barrier to social perception is perceptual defense.

Levine and Shefner, op. cit. Perceptual defense is founded on three related principles:

Attributions: Interpreting the Causes of Behavior

The Attribution Process

The underlying assumption of attribution theory is that people are motivated to understand their environment and the causes of particular events. If individuals can understand these causes, they will then be in a better position to influence or control the sequence of future events. This process is diagrammed in **[link]**. Specifically, attribution theory suggests that particular behavioral events (e.g., the receipt of a promotion) are analyzed by individuals to determine their causes. This process may lead to the conclusion that the promotion resulted from the individual’s own effort or, alternatively, from some other cause, such as luck. Based on such cognitive interpretations of events, individuals revise their cognitive structures and rethink their assumptions about causal relationships. For instance, an individual may infer that performance does indeed lead to promotion. Based on this new structure, the individual makes choices about future behavior. In some cases, the individual may decide to continue exerting high levels of effort in the hope that it will lead to further promotions. On the other hand, if an individual concludes that the promotion resulted primarily from chance and was largely unrelated to performance, a different cognitive structure might be created, and there might be little reason to continue exerting high levels of effort. In other words, the way in which we perceive and interpret events around us significantly affects our future behaviors.

Internal and External Causes of Behavior

Building upon the work of Heider, Harold Kelley attempted to identify the major antecedents of internal and external attributions.

Ibid. He examined how people determine—or, rather, how they actually perceive—whether the behavior of another person results from internal or external causes. Internal causes include ability and effort, whereas external causes include luck and task ease or difficulty.Ibid. Kelley’s conclusion, illustrated in **[link]**, is that people actually focus on three factors when making causal attributions:

Attributional Bias

One final point should be made with respect to the attributional process. In making attributions concerning the causes of behavior, people tend to make certain errors of interpretation. Two such errors, or attribution biases, should be noted here. The first is called the fundamental attribution error. This error is a tendency to *underestimate* the effects of external or situational causes of behavior and to *overestimate* the effects of internal or personal causes. Hence, when a major problem occurs within a certain department, we tend to blame people rather than events or situations.

Attitudes and Behavior

How Are Attitudes Formed?

There is considerable disagreement about this question. One view offered by psychologist Barry Staw and others is the dispositional approach,

B. M. Staw and J. Ross, “Stability in the Midst of Change: A Dispositional Approach to Job Attitudes,” *Journal of Applied Psychology*, 1985, 70, pp. 469–480. which argues that attitudes represent relatively stable predispositions to respond to people or situations around them. That is, attitudes are viewed almost as personality traits. Thus, some people would have a tendency—a predisposition—to be happy on the job, almost regardless of the nature of the work itself. Others may have an internal tendency to be unhappy, again almost regardless of the actual nature of the work. Evidence in support of this approach can be found in a series of studies that found that attitudes change very little among people before and after they make a job change. To the extent that these findings are correct, managers may have little influence over improving job attitudes short of trying to select and hire only those with appropriate dispositions.

Behavioral Intentions and Actual Behavior

Regardless of how the attitudes are formed (either through the dispositional or social-information-processing approach), the next problem we face is understanding how resulting behavioral intentions guide actual behavior (return to **[link]**). Clearly, this relationship is not a perfect one. Despite one’s intentions, various internal and external constraints often serve to modify an intended course of action. Hence, even though you decide to join the union, you may be prevented from doing so for a variety of reasons. Similarly, a person may have every intention of coming to work but may get the flu. Regardless of intent, other factors that also determine actual behavior often enter the picture.

Behavioral Justification

Finally, people often feel a need for behavioral justification to ensure that their behaviors are consistent with their attitudes toward the event (see **[link]**). This tendency is called cognitive consistency.

L. Festinger, *A Theory of Cognitive Dissonance* (Palo Alto: Stanford University Press, 1957). When people find themselves acting in a fashion that is inconsistent with their attitudes—when they experience cognitive dissonance—they experience tension and attempt to reduce this tension and return to a state of cognitive consistency.

Work-Related Attitudes

Job Involvement and Organizational Commitment

First, however, we should introduce two job attitudes that should also be recognized: job involvement and organizational commitment. Job involvement refers to the extent to which a person is interested in and committed to assigned tasks. This is not to say that the person is “happy” (or satisfied) with the job, only that they feel a certain responsibility toward ensuring that the job itself is done correctly and with a high standard of competence. Here the focus of the attitude is the job itself.

T. Lodahl and M. Kejner, “The Definition and Measurement of Job Involvement,” *Journal of Applied Psychology*, 1965, *49*, pp. 24–33.

Job Satisfaction

Job satisfaction may be defined as “a pleasurable or positive emotional state resulting from the appraisal of one’s job or job experience.”

E. A. Locke, “The Nature and Causes of Job Satisfaction,” in M. D. Dunnette, ed., *Handbook of Industrial and Organizational Psychology* (Chicago: Rand McNally, 1976). It results from the perception that an employee’s job actually provides what they value in the work situation.

Learning and Reinforcement

Introduction

Basic Models of Learning

Classical Conditioning

Classical conditioning is the process whereby a stimulus-response (S-R) bond is developed between a conditioned stimulus and a conditioned response through the repeated linking of a conditioned stimulus with an unconditioned stimulus. This process is shown in **[link]**. The classic example of Pavlov’s experiments illustrates the process. Pavlov was initially interested in the digestive processes of dogs but noticed that the dogs started to salivate at the first signal of approaching food. On the basis of this discovery, he shifted his attention to the question of whether animals could be trained to draw a causal relationship between previously unconnected factors. Specifically, using the dogs as subjects, he examined the extent to which the dogs could learn to associate the ringing of a bell with the act of salivation. The experiment began with unlearned, or *unconditioned*, stimulus-response relationships. When a dog was presented with meat (unconditioned stimulus), the dog salivated (unconditioned response). No learning was necessary here, as this relationship represented a natural physiological process.

Operant Conditioning

The major focus of operant conditioning is on the effects of reinforcements, or rewards, on desired behaviors. One of the first psychologists to examine such processes was J. B. Watson, a contemporary of Pavlov, who argued that behavior is largely influenced by the rewards one receives as a result of actions.

J. B. Watson, Behavior: An *Introduction to Comparative Psychology* (New York: Holt, Rinehart and Winston, 1914). This notion is best summarized in Thorndike’s law of effect. This law states that of several responses made to the same situation, those that are accompanied or closely followed by satisfaction (reinforcement) will be more likely to occur; those that are accompanied or closely followed by discomfort (punishment) will be less likely to occur.E. L. Thorndike, *Animal Intelligence* (New York: Macmillan, 1911), p. 244.

Operant versus Classical Conditioning

Operant conditioning can be distinguished from classical conditioning in at least two ways.

F. Luthans, et. al., *Organizational Behavior* 13th Edition (Charlotte: *Information Age Publishing,* 2016). First, the two approaches differ in what is believed to cause changes in behavior. In classical conditioning, changes in behavior are thought to arise through changes in stimuli—that is, a transfer from an unconditioned stimulus to a conditioned stimulus. In operant conditioning, on the other hand, changes in behavior are thought to result from the *consequences* of previous behavior. When behavior has not been rewarded or has been punished, we would not expect it to be repeated.

Social Learning Theory

The last model of learning we should examine is noted psychologist Albert Bandura’s social learning theory. Social learning theory is defined as the process of molding behavior through the reciprocal interaction of a person’s cognitions, behavior, and environment.

A. Bandura, *Social Learning Theory* (Englewood Cliffs, N.J.: Prentice-Hall, 1977). This is done through a process that Bandura calls reciprocal determinism. This concept implies that people control their own environment (for example, by quitting one’s job) as much as the environment controls people (for example, being laid off). Thus, learning is seen as a more active, interactive process in which the learner has at least some control.

Reinforcement and Behavioral Change

Reinforcement versus Motivation

It is important to differentiate reinforcement from the concept of employee motivation. Motivation, as described in the next chapter, represents a primary psychological process that is largely cognitive in nature. Thus, motivation is largely internal—it is *experienced* by the employee, and we can see only subsequent manifestations of it in actual behavior. Reinforcement, on the other hand, is typically observable and most often externally administered. A supervisor may reinforce what is considered desirable behavior without knowing anything about the underlying motives that prompted it. For example, a supervisor who has a habit of saying “That’s interesting” whenever she is presented with a new idea may be reinforcing innovation on the part of the subordinates without the supervisor really knowing why this result is achieved. The distinction between theories of motivation and reinforcement should be kept in mind when we examine behavior modification and behavioral self-management later in this chapter.

Strategies for Behavioral Change

From a managerial standpoint, several strategies for behavioral change are available to facilitate learning in organizational settings. At least four different types should be noted: (1) positive reinforcement; (2) avoidance learning, or negative reinforcement; (3) extinction; and (4) punishment. Each type plays a different role in both the manner in which and extent to which learning occurs. Each will be considered separately here.

Schedules of Reinforcement

Having examined four distinct strategies for behavioral change, we now turn to an examination of the various ways, or *schedules*, of administering these techniques. As noted by Costello and Zalkind, “The speed with which learning takes place and also how lasting its effects will be is determined by the timing of reinforcement.”

T. W. Costello and S. S. Zalkind, *Psychology in Administration: A Research Orientation* (Englewood Cliffs, N. J.: Prentice-Hall, 1963), p. 193. Thus, a knowledge of the types of schedules of reinforcement is essential to managers if they are to know how to choose rewards that will have maximum impact on employee performance. Although there are a variety of ways in which rewards can be administered, most approaches can be categorized into two groups: continuous and partial (or intermittent) reinforcement schedules. A continuous reinforcement schedule rewards desired behavior every time it occurs. For example, a manager could praise (or pay) employees every time they perform properly. With the time and resource constraints most managers work under, this is often difficult, if not impossible. So, most managerial reward strategies operate on a partial schedule. A partial reinforcement schedule rewards desired behavior at specific intervals, not every time desired behavior is exhibited. Compared to continuous schedules, partial reinforcement schedules lead to slower learning but stronger retention. Thus, learning is generally more permanent. Four kinds of partial reinforcement schedules can be identified: (1) fixed interval, (2) fixed ratio, (3) variable interval, and (4) variable ratio (see **[link]**).

Behavior Modification in Organizations

Assumptions of Behavior Modification

The foundation of behavior modification as a technique of management rests on three ideas.

B. F. Skinner, *Beyond Freedom and Dignity* (New York: Knopf, 1971). First, advocates of behavior modification believe that individuals are basically passive and reactive (instead of proactive). They tend to respond to stimuli in their environment rather than assuming personal responsibility in initiating behavior. This assertion is in direct contrast to cognitive theories of motivation (such as expectancy/valence theory), which hold that individuals make conscious decisions about their present and future behaviors and take an active role in shaping their environment.

Designing a Behavior Modification Program

If behavior modification techniques are to work, their application must be well-designed and systematically applied. Systematic attempts to implement these programs typically go through five phases (see **[link]**).

Behavior Modification in Practice

There are many ways to see how the principles of behavior modification can be applied in organizational settings. Perhaps one of the best examples can be found in a classic study carried out by Luthans and Kreitner.

F. Luthans and R. Kreitner, *Organizational Behavior Modification and Beyond* (Glenview, III.: Scott, Foresman, 1985), pp. 150–159. These researchers carried out a field experiment in a medium-sized light manufacturing plant. Two separate groups of supervisors were used in the study. In one group (the experimental group—see **Appendix A**), the supervisors were trained in the techniques of behavior modification. This program was called “behavioral contingency management,” or BCM. Included here were ten 90-minute lectures conducted over 10 weeks on behavioral change strategies. The second group of supervisors (the control group) received no such training. Following this, the trained supervisors were asked to implement what they had learned among their groups; obviously, the control group supervisors were given no such instructions.

Behavioral Self-Management

The Self-Regulation Process

Underlying BSM is a firm belief that individuals are capable of self-control; if they want to change their behavior (whether it is to come to work on time, quit smoking, lose weight, etc.), it is possible through a process called self-regulation, as depicted in **[link]**.

F. H. Kanfer and A. P. Goldstein, *Helping People Change: A Textbook of Methods* (New York: Pergamon Press, 1980). According to the model, people tend to go about their day’s activities fairly routinely until something unusual or unexpected occurs. At this point, the individual initiates the self-regulation process by entering into **self-monitoring** (Stage 1). In this stage, the individual tries to identify the problem. For example, if your supervisor told you that your choice of clothing was unsuitable for the office, you would more than likely focus your attention on your clothes.

Self-Management in Practice

When we combine the above self-regulation model with social learning theory (discussed earlier), we can see how the self-management process works. As shown in **[link]**, four interactive factors must be considered. These are *situational cues, the person, behaviors,* and *consequences*.

C. C. Neck and C. P. Manz, Mastering Self Leadership 6th edition, (Pearson, 2013). (Note that the arrows in this diagram go in both directions to reflect the two-way process among these four factors.)

Reducing Absenteeism through Self-Management

In a recent study, efforts were made to reduce employee absenteeism using some of the techniques found in behavioral self-management. The employees were unionized state government workers with a history of absenteeism. Self-management training was given to these workers. Training was carried out over eight one-hour sessions for each group, along with eight 30-minute one-on-one sessions with each participant.

Diversity in Organizations

Introduction

An Introduction to Workplace Diversity

Diversity and the Workforce

Gender

Increasingly more women are entering the workforce.

U.S. Department of Labor, Bureau of Labor Statistics. (2017). Table 2: Employment status of the civilian noninstitutional population 16 years and over by sex, 1977 to date 11. Retrieved from https://www.bls.gov/cps/cpsaat02.pdf. Compared to 59% in 1977, the labor force participation rate for men is now approximately 53% and is expected to decrease through 2024 to 52%.Toosi, Mitra,"Labor force projections to 2024: the labor force is growing, but slowly," Monthly Labor Review, U.S. Bureau of Labor Statistics, December 2015, https://doi.org/10.21916/mlr.2015.48. As the labor force participation rate decreases for men, the labor force growth rate for women will be faster. Their percentage of the workforce has steadily risen, as can be seen in **[link]**, which compares the percentage of the workforce by gender in 1977 to 2017.U.S. Department of Labor, Bureau of Labor Statistics. (2017). Table 2: Employment status of the civilian noninstitutional population 16 years and over by sex, 1977 to date 11. Retrieved from https://www.bls.gov/cps/cpsaat02.pdf.

Race

Another important demographic shift in workforce diversity is the distribution of race. (Note that we are using categories defined by the U.S. Census Bureau. It uses the term “Black (African American)” to categorize U.S. residents. In this chapter, we use the term “Black.”)

Age

The age distribution of an organization’s workforce is an important dimension of workplace diversity as the working population gets older. Some primary factors contributing to an older population include the aging of the large Baby Boomer generation (people born between 1946 and 1964), lower birth rates, and longer life expectancies

Alley, D., & Crimmins, E. 2007. The demography of aging and work. In K. S. Shultz & G. A. Adams (Eds.), Aging and work in the 21st century: 7-23. New York: Psychology Press. due to advances in medical technology and access to health care. As a result, many individuals work past the traditional age of retirement (65 years old) and work more years than previous generations in order to maintain their cost of living.

Sexual Orientation and Gender Identity

Sexual orientation diversity is increasing in the workforce. In June, 2020, the Supreme Court ruled that the Civil Rights Act prohibits discrimination based on sexual orientation and gender identity. Until this ruling, only 21 states and Washington D.C. prohibited such discrimination.

Human Rights Campaign. (2018). State maps of laws and policies. Retrieved from http://www.hrc.org/state-maps/employment With this new federal protection, individuals cannot for employment or fired for their sexual orientation , gender identity, or gender expression.Ragins, B.R., Cornwell, J.M. and Miller, J.S. (2003), “Heterosexism in the workplace: do race and gender matter?”, Group & Organization Management, Vol. 28, pp. 45-74. However, although the Civil Rights Act does not provide federal protection to lesbian, gay, bisexual and transgender, and queer/questioning (LGBTQ) employees, that protection is not complete. LGBTQ people can still face other types of discrimination inside and outside of the workplace, and some employers and lawmakers may take up the issue in the future. On a positive note, more than half of the Fortune 500 companies have corporate policies that protect sexual minorities from discrimination at work and offer domestic-partner benefits.Human Rights Campaign Foundation (2018), “Corporate equality index 2018 ”, available at:https://assets2.hrc.org/files/assets/resources/CEI-2018-FullReport.pdf?_ga=2.120762824.1791108882.1521675202-2105331900.1521675202 Many employers are beginning to understand that being perceived as inclusive will make them more attractive to a larger pool of job applicants.Button, S.B. (2001), “Organizational efforts to affirm sexual diversity: a cross-level examination”, Journal of Applied Psychology, Vol. 86 No. 1, pp. 17-28. Furthermore, many organizations have come to recognize that gender and sexual orientation equity aligns to their mission and ethics.

Immigrant Workers

Every year a new record is set for the time it takes to reach the U.S. cap of H-1B visas granted to employers.

Trautwein, C. Apr 7 2017. H-1B Visa applications just hit their limit for the year in less than a week. Time. Retrieved 4/21/2017 from http://time.com/4731665/h1b-visa-application-cap/; U.S. Citizenship and Immigration Services. (2017, Apr 7). USCIS reaches FY 2018 H-1B Cap. Retrieved on 4/21/2017 at https://www.uscis.gov/news/news-releases/uscis-reaches-fy-2018-h-1b-cap H- 1B visas are a type of work visa, a temporary documented status that authorizes individuals to permanently or temporarily live and work in the United States.U.S. Citizenship and Immigration Services. (2013). Working in the U.S. Retrieved from http://www.uscis.gov/working-united-states/working-us; U.S. Department of State, Bureau of Consular Affairs. (2014). Directory of Visa Categories. Retrieved from http://travel.state.gov/content/visas/english/general/all-visa-categories.html#iv As a result of the demand for work visas by employers, the number of immigrant workers in the U.S. workforce has steadily grown within the last decade from 15% in 2005 to 17% in 2016.Bureau of Labor Statistics, U.S. Department of Labor. (2016, May 19). Labor force characteristics of foreign-born workers summary. Economic News Release. Retrieved online at https://www.bls.gov/news.release/forbrn.nr0.htm Compared to those born in the United States, the immigrant population in America is growing significantly faster.Kandel, W. A. (2011). The US foreign-born population: Trends and selected characteristics. Congressional Research Service Report. Retrieved from http://www.fas.org/sgp/crs/misc/R41592.pdf This is partly because of the U.S. demand for workers who are proficient in math and scienceBound, J., Demirci, M., Khanna, G., & Turner, S. (2014). Finishing degrees and finding jobs: U.S. higher education and the flow of foreign IT workers (NBER Working Paper No. 20505). Retrieved January 4, 2015, from http://www.nber.org/papers/w20505 and wish to work in America.

Other Forms of Diversity at Work

Workers with disabilities are projected to experience a 10% increase in job growth through the year 2022.

U.S. Department of Labor. (2012). Key points on Disability and Occupational Projections Tables. Retrieved from https://www.dol.gov/odep/pdf/20141022-KeyPoints.pdf This means that more public and corporate policies will be revised to allow greater access to training for workers with disabilities and employers.Ibid. Also, more companies will use technology and emphasize educating employees about physical and mental disabilities as workplace accommodations are used more often.

Diversity and Its Impact on Companies

Reaping the Advantages of Diversity

The business case for diversity introduced by Taylor Cox and Stacy Blake outlines how companies may obtain a competitive advantage by embracing workplace diversity.

Cox, T.H. & Blake, S. (1991). Managing cultural diversity: Implications for organizational competitiveness. Academy of Management Executive, 5(3): 45-56. Six opportunities that companies may receive when pursuing a strategy that values diversity include cost advantages, improved resource acquisition, greater marketing ability, system flexibility, and enhanced creativity and better problem solving (see **[link]**).

Aligning Diversity Programs with an Organization’s Mission and Strategic Goals

Diversity helps organizations perform best when it is aligned with a specific business strategy. For example, when companies use heterogeneous management teams that are directed by an entrepreneurial strategy focusing on innovation, the companies’ productivity increases.

Using Human Resources Tools Strategically

To effectively align diversity with an organization’s strategy, the human resources function must be able to engage employees at dynamic levels. Using a strategic human resources management approach to an organization can successfully integrate diversity with the organization’s goals and objectives.

McMahan, G.C., Bell, M.P., & Virick, M. (1998). Strategic human resource management: Employee involvement, diversity, and international issues. Human Resource Management Review, 8 (3): 193-214. Strategic human resources management (SHRM) is a system of activities arranged to engage employees in a manner that assists the organization in achieving a sustainable competitive advantage. SHRM practices vertically integrate with the mission and strategy of the organization while horizontally integrating human resources activities across its functional areas. By doing so, a unique set of resources can be made available to specific to the needs of the organization. Furthermore, when human resources becomes a part of the strategic planning process instead of just providing ancillary services, improved communication, knowledge sharing, and greater synergy between decision makers can occur within the organization to improve organizational functioning.

Diversity and Organizational Performance

Research indicates that having diversity in an organization produces mixed results for its success. Some studies show a positive relationship, some show a negative relationship, and others show no relationship between diversity and performance. Some researchers believe that although findings regarding a direct relationship between diversity and success in the marketplace may be inconsistent, the relationship may be due to other variables not taken into account.

Challenges of Diversity

Lower Organizational Attachment

Although diversity programs attract and retain women and minorities, they may have the opposite effect on other, nonminority employees. When diversity is not managed effectively, White and male employees can feel alienated from or targeted by the organization as diversity programs are put in place. A study that examined 151 work groups across three large organizations investigated whether the proportion of group membership based on race or sex affected the group members’ absentee rates, psychological attachment to their work group, and turnover intentions,

Tsui, A.S., Egan, T. D., & O’Reilly, C.A. 1992. Being different: relational demography and organizational attachment. Administrative Science Quarterly, 37: 549-579. three factors that play significant roles in an employee’s attachment to their organization. Results showed a positive relationship between group heterogeneity and lower organizational attachment, higher turnover intentions, and greater frequency of absences for men and for White group members. In other words, as work group diversity increased, White employees and male employees felt less attached to the organization and were more likely to quit. Because heterogeneous groups improve creativity and judgement, managers should not avoid using them because they may be challenging to manage. Instead, employers need to make sure they understand the communication structure and decision-making styles of their work groups and seek feedback from employees to learn how dominant group members may adjust to diversity.

Legal Challenges and Diversity

The legal system is used to combat discrimination. Among the ways that we will cover here are reverse discrimination, workplace discrimination, harassment, age discrimination, disability discrimination, national origin discrimination, pregnancy discrimination, race/color discrimination, religious discrimination, sex-based discrimination and other forms of discrimination.

Key Diversity Theories

Cognitive Diversity Hypothesis

Some research shows that diversity has no relationship to group performance, and some shows that there is a relationship. Of the latter research, some shows a negative relationship (greater diversity means poorer group performance, less diversity means better group performance) and some shows a positive relationship.

Similarity-Attraction Paradigm

The cognitive diversity hypothesis explains how diversity benefits organizational outcomes. The similarity-attraction paradigm explains how diversity can have negative outcomes for an organization.

Social Cognitive Theory

**Social cognitive theory** is another theory that seeks to explain how diversity can result in negative outcomes in a group or organization. Social cognitive theory suggests that people use categorization to simplify and cope with large amounts of information. These categories allow us to quickly and easily compartmentalize data, and people are often categorized by their visible characteristics, such as race, sex, and age. Thus, when someone sees a person of a particular race, automatic processing occurs and beliefs about this particular race are activated. Even when the person is not visible, they can be subject to this automatic categorization. For example, when sorting through resumes a hiring manager might engage in gender categorization because the person’s name provides information about the person’s gender or racial categorization because the person’s name provides information about their race.

Bertrand, Marianne, and Sendhil Mullainathan. "Are Emily and Greg more employable than Lakisha and Jamal? A field experiment on labor market discrimination." *The American Economic Review* 94, no. 4 (2004): 991-1013. Stereotypes are related to this categorization, and refer to the overgeneralization of characteristics about large groups. Stereotypes are the basis for prejudice and discrimination. In a job-related context, using categorization and stereotyping in employment decision-making is often illegal. Whether illegal or not, this approach is inconsistent with a valuing-diversity approach.

Social Identity Theory

**Social identity theory** is another explanation of why diversity may be perceived as a negative outcome. Social identity theory suggests that when we first come into contact with others, we categorize them as belonging to an in-group (i.e., the same group as us) or an out-group (not belonging to our group).

Tajfel, H. 1974. Social identity and intergroup behavior. Social Science Information, 15: 1010-118.; Tajfel H, Turner JC. (1985). The social identity theory of intergroup behavior. In S. Worchel, and W.G. Austin (Eds.), Psychology of Intergroup Relations (2nd ed., pp. 7–24). Chicago:Nelson-Hall. We tend to see members of our in-group as heterogeneous but out-group members as homogeneous. That is, we perceive out-group members as having similar attitudes, behaviors, and characteristics (i.e., fitting stereotypes).

Schema Theory

Schema theory explains how individuals encode information about others based on their demographic characteristics.

Fiske ST, Taylor SE. (1991). Social cognition (2nd ed.). New York: McGraw-Hill. Units of information and knowledge experienced by individuals are stored as having patterns and interrelationships, thus creating schemas that can be used to evaluate one’s self or others. As a result of the prior perceived knowledge or beliefs embodied in such schemas, individuals categorize people, events, and objects. They then use these categories to evaluate newly encountered people and make decisions regarding their interaction with them.

Justification-Suppression Model

The justification-suppression model explains the circumstances in which prejudiced people might act on their prejudices. The process by which people experience their prejudice is characterized as a “two-step” process in which people are prejudiced against a certain group or individual but experience conflicting emotions in regard to that prejudice and are motivated to suppress their prejudice rather than act upon it.

Crandall, Christian S., and Amy Eshleman. "A justification-suppression model of the expression and experience of prejudice." Psychological bulletin 129.3 (2003): 414. Theory about prejudice suggests that all people have prejudices of some sort, that they learn their prejudices from an early age, and that they have a hard time departing from them as they grow older. Prejudices are often reinforced by intimate others, and individuals use different methods to justify those prejudices.

Benefits and Challenges of Workplace Diversity

Three Perspectives on Workplace Diversity

Ely and Thomas’s work on cultural diversity was designed to theoretically and empirically support some of the hypothesized relationships between diversity and workplace outcomes. Their research yielded a paradigm that identifies three perspectives regarding workplace diversity:

Ely, Robin J., and David A. Thomas. "Cultural diversity at work: The effects of diversity perspectives on work group processes and outcomes." Administrative science quarterly. 46.2 (2001): 229-273. integration and learning, access and legitimacy, and discrimination and fairness.

Recommendations for Managing Diversity

Interview Selection Process

To ensure fairness for all applicants, organizations should use highly structured interviews during the selection process to avoid bias based on race or gender.

McCarthy, J.M, Van Iddekinge, C.H., & Campion, M.(2010). Are highly structured job interviews resistant to demographic similarity effects?: *Personnel Psychology, 63*: 325-359. Highly structured interviews consists of the following 15 characteristics: “(1) job analysis, (2) same questions, (3) limited prompting, (4) better questions, (5) longer interviews, (6) control of ancillary information, (7) limited questions from candidates, (8) multiple rating scales, (9) anchored rating scales, (10) detailed notes, (11) multiple interviewers, (12) consistent interviewers, (13) no discussion between interviews, (14) training, and (15) statistical prediction.”McCarthy, J.M, Van Iddekinge, C.H., & Campion, M.(2010). Are highly structured job interviews resistant to demographic similarity effects?: *Personnel Psychology, 63*: 325-359, p.333.; Campion M.A., Palmer D.K., Campion J.E. (1997). A review of structure in the selection interview. *Personnel Psychology, 50*, 655–702. Similarity bias can occur when interviewers prefer interviewees with whom they share similar traits. Organizations can mitigate this challenge if all 15 characteristics of a structured interview are used consistently with each job applicant.

Diversified Mentoring Relationships

Thanks to the rapid growth of international travel and globalization, managers are often called upon to manage a workforce that is increasingly diverse. Research has shown that racially and ethnically diverse firms have better financial performance than more homogeneous firms, because, as mentioned, employees from different backgrounds and with different experiences can give the firm a competitive advantage in various ways. It is necessary, however, that managers and those in positions of power are adequately equipped to manage diverse workforces in ways that are beneficial to all. Diversified mentoring relationships are relationships in which the mentor and the mentee differ in terms of their status within the company and within larger society. The differences could be in terms of race, gender, class, disability, sexual orientation, or other status. Research has found that these types of relationships are mutually beneficial and that the mentor and the mentee both have positive outcomes in terms of knowledge, empathy, and skills related to interactions with people from different power groups.

Young, Cheri A., Badiah Haffejee, and David L. Corsun. "Developing Cultural Intelligence and Empathy Through Diversified Mentoring Relationships." *Journal of Management Education* (2017): 1052562917710687.

Visible Leadership

Another key to ensure that employees are treated fairly is utilizing appropriate leadership strategies.

Thoms, D.A., & Ely, R.J. (Sep 1996). Making differences matter: A new paradigm for managing diversity. Harvard Business Review. Leadership must sincerely value variety of opinions, and organizational culture must encourage openness and make workers feel valued. Organizations must also have a well-articulated and widely understood mission and a relatively egalitarian, nonbureaucratic structure. Having such a work environment will ensure that the attitudes and values of employees are aligned with those of the organization. In this way culture serves as a control mechanism for shaping behaviors.

Strategies for Employees

Individuals can increase positive employment outcomes by obtaining high levels of education, because for all groups education is a predictor of employment and increased earnings. Individuals can also seek employment in larger firms, which are more likely to have formal hiring programs and specific diversity provisions in place. Individuals of any race or ethnic background can also take steps to eliminate discrimination by being aware of their own personal stereotypes or biases and taking steps to challenge and address them.

Perception and Managerial Decision Making

Introduction

Overview of Managerial Decision-Making

Deciding When to Decide

While some decisions are simple, a manager’s decisions are often complex ones that involve a range of options and uncertain outcomes. When deciding among various options and uncertain outcomes, managers need to gather information, which leads them to another necessary decision: how much information is needed to make a good decision? Managers frequently make decisions without complete information; indeed, one of the hallmarks of an effective leader is the ability to determine when to hold off on a decision and gather more information, and when to make a decision with the information at hand. Waiting too long to make a decision can be as harmful for the organization as reaching a decision too quickly. Failing to react quickly enough can lead to missed opportunities, yet acting too quickly can lead to organizational resources being poorly allocated to projects with no chance of success. Effective managers must decide when they have gathered enough information and must be prepared to change course if additional information becomes available that makes it clear that the original decision was a poor one. For individuals with fragile egos, changing course can be challenging because admitting to a mistake can be harder than forging ahead with a bad plan. Effective managers recognize that given the complexity of many tasks, some failures are inevitable. They also realize that it’s better to minimize a bad decision’s impact on the organization and its stakeholders by recognizing it quickly and correcting it.

What’s the Right (Correct) Answer?

It’s also worth noting that making decisions as a manager is not at all like taking a multiple-choice test: with a multiple-choice test there is always one right answer. This is rarely the case with management decisions. Sometimes a manager is choosing between multiple good options, and it’s not clear which will be the best. Other times there are multiple bad options, and the task is to minimize harm. Often there are individuals in the organization with competing interests, and the manager must make decisions knowing that someone will be upset no matter what decision is reached.

What’s the Right (Ethical) Answer?

Sometimes managers are asked to make decisions that go beyond just upsetting someone—they may be asked to make decisions in which harm could be caused to others. These decisions have ethical or moral implications. Ethics and morals refer to our beliefs about what is right vs. wrong, good vs. evil, virtuous vs. corrupt. Implicitly, ethics and morals relate to our interactions with and impact on others—if we never had to interact with another creature, we would not have to think about how our behaviors affected other individuals or groups. All managers, however, make decisions that impact others. It is therefore important to be mindful about whether our decisions have a positive or a negative impact. “Maximizing shareholder wealth” is often used as a rationalization for placing the importance of short-term profits over the needs of others who will be affected by a decision—such as employees, customers, or local citizens (who might be affected, for example, by environmental decisions). Maximizing shareholder wealth is often a short-sighted decision, however, because it can harm the organization’s financial viability in the future.

Lynn Stout. 2012. The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public. San Francisco, CA: Berrett-Koehler Publishers. Bad publicity, customers boycotting the organization, and government fines are all possible long-term outcomes when managers make choices that cause harm in order to maximize shareholder wealth. More importantly, increasing the wealth of shareholders is not an acceptable reason for causing harm to others.

How the Brain Processes Information to Make Decisions: Reflective and Reactive Systems

Reactive Decision-Making

We tend to assume that the logical, analytical route leads to superior decisions, but whether this is accurate depends on the situation. The quick, intuitive route can be lifesaving; when we suddenly feel intense fear, a fight-or-flight response kicks in that leads to immediate action without methodically weighing all possible options and their consequences. Additionally, experienced managers can often make decisions very quickly because experience or expertise has taught them what to do in a given situation. These managers might not be able to explain the logic behind their decision, and will instead say they just went with their “gut,” or did what “felt” right. Because the manager has faced a similar situation in the past and has figured out how to deal with it, the brain shifts immediately to the quick, intuitive decision-making system.

Malcolm Gladwell. 2005. Blink: The Power of Thinking Without Thinking. New York: Back Bay Books.

Reflective Decision-Making

The quick route is not always the best decision-making path to take, however. When faced with novel and complex situations, it is better to process available information logically, analytically, and methodically. As a manager, you need to think about whether a situation requires not a fast, “gut” reaction, but some serious thought prior to making a decision. It is especially important to pay attention to your emotions, because strong emotions can make it difficult to process information rationally. Successful managers recognize the effects of emotions and know to wait and address a volatile situation after their emotions have calmed down. Intense emotions—whether positive or negative—tend to pull us toward the quick, reactive route of decision-making. Have you ever made a large “impulse” purchase that you were excited about, only to regret it later? This speaks to the power our emotions exert on our decision-making. Big decisions should generally not be made impulsively, but reflectively.

Programmed and Nonprogrammed Decisions

Programmed Decisions

Programmed decisions are those that are repeated over time and for which an existing set of rules can be developed to guide the process. These decisions might be simple, or they could be fairly complex, but the criteria that go into making the decision are all known or can at least be estimated with a reasonable degree of accuracy. For example, deciding how many raw materials to order should be a programmed decision based on anticipated production, existing stock, and anticipated length of time for the delivery of the final product. As another example, consider a retail store manager developing the weekly work schedule for part-time employees. The manager must consider how busy the store is likely to be, taking into account seasonal fluctuations in business. Then, they must consider the availability of the workers by taking into account requests for vacation and for other obligations that employees might have (such as school). Establishing the schedule might be complex, but it is still a programmed decision: it is made on a regular basis based on well-understood criteria, so structure can be applied to the process. For programmed decisions, managers often develop heuristics, or mental shortcuts, to help reach a decision. For example, the retail store manager may not know how busy the store will be the week of a big sale, but might routinely increase staff by 30% every time there is a big sale (because this has been fairly effective in the past). Heuristics are efficient—they save time for the decision maker by generating an adequate solution quickly. Heuristics don’t necessarily yield the optimal solution—deeper cognitive processing may be required for that. However, they generally yield a good solution. Heuristics are often used for programmed decisions, because experience in making the decision over and over helps the decision maker know what to expect and how to react. Programmed decision-making can also be taught fairly easily to another person. The rules and criteria, and how they relate to outcomes, can be clearly laid out so that a good decision can be reached by the new decision maker. Programmed decisions are also sometimes referred to as *routine* or *low-involvement* decisions because they don’t require in-depth mental processing to reach a decision. High- and low-involvement decisions are illustrated in **[link]**.

Nonprogrammed Decisions

In contrast, nonprogrammed decisions are novel, unstructured decisions that are generally based on criteria that are not well-defined. With nonprogrammed decisions, information is more likely to be ambiguous or incomplete, and the decision maker may need to exercise some thoughtful judgment and creative thinking to reach a good solution. These are also sometimes referred to as *nonroutine* decisions or as *high-involvement* decisions because they require greater involvement and thought on the part of the decision maker. For example, consider a manager trying to decide whether or not to adopt a new technology. There will always be unknowns in situations of this nature. Will the new technology really be better than the existing technology? Will it become widely accepted over time, or will some other technology become the standard? The best the manager can do in this situation is to gather as much relevant information as possible and make an educated guess as to whether the new technology will be worthwhile. Clearly, nonprogrammed decisions present the greater challenge.

The Decision-Making Process

While decisions makers can use mental shortcuts with programmed decisions, they should use a systematic process with nonprogrammed decisions. The decision-making process is illustrated in **[link]** and can be broken down into a series of six steps, as follows:

Barriers to Effective Decision-Making

Bounded Rationality

While we might like to think that we can make completely rational decisions, this is often unrealistic given the complex issues faced by managers. Nonrational decision-making is common, especially with nonprogrammed decisions. Since we haven’t faced a particular situation previously, we don’t always know what questions to ask or what information to gather. Even when we have gathered all the possible information, we may not be able to make rational sense of all of it, or to accurately forecast or predict the outcomes of our choice. Bounded rationality is the idea that for complex issues we cannot be completely rational because we cannot fully grasp all the possible alternatives, nor can we understand all the implications of every possible alternative. Our brains have limitations in terms of the amount of information they can process. Similarly, as was alluded to earlier in the chapter, even when managers have the cognitive ability to process all the relevant information, they often must make decisions without first having time to collect all the relevant data—their information is incomplete.

Escalation of Commitment

Given the lack of complete information, managers don’t always make the right decision initially, and it may not be clear that a decision was a bad one until after some time has passed. For example, consider a manager who had to choose between two competing software packages that her organization will use on a daily basis to enhance efficiency. She initially chooses the product that was developed by the larger, more well-established company, reasoning that they will have greater financial resources to invest in ensuring that the technology is good. However, after some time it becomes clear that the competing software package is going to be far superior. While the smaller company’s product could be integrated into the organization’s existing systems at little additional expense, the larger company’s product will require a much greater initial investment, as well as substantial ongoing costs for maintaining it. At this point, however, let’s assume that the manager has already paid for the larger company’s (inferior) software. Will she abandon the path that she’s on, accept the loss on the money that’s been invested so far, and switch to the better software? Or will she continue to invest time and money into trying to make the first product work? Escalation of commitment is the tendency of decision makers to remain committed to poor decision, even when doing so leads to increasingly negative outcomes. Once we commit to a decision, we may find it difficult to reevaluate that decision rationally. It can seem easier to “stay the course” than to admit (or to recognize) that a decision was poor. It’s important to acknowledge that not all decisions are going to be good ones, in spite of our best efforts. Effective managers recognize that progress down the wrong path isn’t really progress, and they are willing to reevaluate decisions and change direction when appropriate.

Time Constraints

Managers often face time constraints that can make effective decision-making a challenge. When there is little time available to collect information and to rationally process it, we are much less likely to make a good nonprogrammed decision. Time pressures can cause us to rely on heuristics rather than engage in deep processing. While heuristics save time, however, they don’t necessarily lead to the best possible solution. The best managers are constantly assessing the risks associated with acting too quickly against those associated with not acting quickly enough.

Uncertainty

In addition, managers frequently make decisions under conditions of uncertainty—they cannot know the outcome of each alternative until they’ve actually chosen that alternative. Consider, for example, a manager who is trying to decide between one of two possible marketing campaigns. The first is more conservative but is consistent with what the organization has done in the past. The second is more modern and edgier, and might bring much better results . . . or it might be a spectacular failure. The manager making the decision will ultimately have to choose one campaign and see what happens, without ever knowing what the results would have been with the alternate campaign. That uncertainty can make it difficult for some managers to make decisions, because committing to one option means forgoing other options.

Personal Biases

Our decision-making is also limited by our own biases. We tend to be more comfortable with ideas, concepts, things, and people that are familiar to us or similar to us. We tend to be less comfortable with that which is unfamiliar, new, and different. One of the most common biases that we have, as humans, is the tendency to like other people who we think are similar to us (because we like ourselves).

Christopher L. Aberson, Michael Healy, & Victoria Romero. 2000. Ingroup Bias and Self-Esteem: A Meta-Analysis. *Personality and Social Psychology Review*, 4: 157-173. While these similarities can be observable (based on demographic characteristics such as race, gender, and age), they can also be a result of shared experiences (such as attending the same university) or shared interests (such as being in a book club together). This “similar to me” bias and preference for the familiar can lead to a variety of problems for managers: hiring less-qualified applicants because they are similar to the manager in some way, paying more attention to some employees’ opinions and ignoring or discounting others, choosing a familiar technology over a new one that is superior, sticking with a supplier that is known over one that has better quality, and so on.

Conflict

Finally, effective decision-making can be difficult because of conflict. Most individuals dislike conflict and will avoid it when possible. However, the best decision might be one that is going to involve some conflict. Consider a manager who has a subordinate who is often late to work, causing others to have to step away from their responsibilities in order to cover for the late employee. The manager needs to have a conversation with that employee to correct the behavior, but the employee is not going to like the conversation and may react in a negative way. Both of them are going to be uncomfortable. The situation is likely to involve conflict, which most people find stressful. Yet, the correct decision is still to have the conversation even if (or especially if) the employee otherwise is an asset to the department.

Improving the Quality of Decision-Making

The Importance of Experience

An often overlooked factor in effective decision-making is experience. Managers with more experience have generally learned more and developed greater expertise that they can draw on when making decisions. Experience helps managers develop methods and heuristics to quickly deal with programmed decisions and helps them know what additional information to seek out before making a nonprogrammed decision.

Techniques for Making Better Programmed Decisions

In addition, experience enables managers to recognize when to minimize the time spent making decisions on issues that are not particularly important but must still be addressed. As discussed previously, heuristics are mental shortcuts that managers take when making programmed (routine, low-involvement) decisions. Another technique that managers use with these types of decisions is satisficing. When satisficing, a decision maker selects the first *acceptable* solution without engaging in additional effort to identify the *best* solution. We all engage in satisficing every day. For example, suppose you are shopping for groceries and you don’t want to overspend. If you have plenty of time, you might compare prices and figure out the price by weight (or volume) to ensure that every item you select is the cheapest option. But if you are in a hurry, you might just select generic products, knowing that they are cheap enough. This allows you to finish the task quickly at a reasonably low cost.

Techniques for Making Better Nonprogrammed Decisions

For situations in which the quality of the decision is more critical than the time spent on the decision, decision makers can use several tactics. As stated previously, nonprogrammed decisions should be addressed using a systematic process. We therefore discuss these tactics within the context of the decision-making steps. To review, the steps include the following:

Group Decision-Making

Advantages of Group Decisions

An advantage to involving groups in decision-making is that you can incorporate different perspectives and ideas. For this advantage to be realized, however, you need a diverse group. In a diverse group, the different group members will each tend to have different preferences, opinions, biases, and stereotypes. Because a variety of viewpoints must be negotiated and worked through, group decision-making creates additional work for a manager, but (provided the group members reflect different perspectives) it also tends to reduce the effects of bias on the outcome. For example, a hiring committee made up of all men might end up hiring a larger proportion of male applicants (simply because they tend to prefer people who are more similar to themselves). But with a hiring committee made up of an equal number of men and women, the bias should be cancelled out, resulting in more applicants being hired based on their qualifications rather than their physical attributes.

Disadvantages of Group Decisions

Group decision-making is not without challenges. Some groups get bogged down by conflict, while others go to the opposite extreme and push for agreement at the expense of quality discussions. Groupthink occurs when group members choose not to voice their concerns or objections because they would rather keep the peace and not annoy or antagonize others. Sometimes groupthink occurs because the group has a positive team spirit and camaraderie, and individual group members don’t want that to change by introducing conflict. It can also occur because past successes have made the team complacent.

How to Form a Quality Group

Effective managers will try to ensure quality group decision-making by forming groups with diverse members so that a variety of perspectives will contribute to the process. They will also encourage everyone to speak up and voice their opinions and thoughts prior to the group reaching a decision. Sometimes groups will also assign a member to play the devil’s advocate in order to reduce groupthink. The devil’s advocate intentionally takes on the role of critic. Their job is to point out flawed logic, to challenge the group’s evaluations of various alternatives, and to identify weaknesses in proposed solutions. This pushes the other group members to think more deeply about the advantages and disadvantages of proposed solutions before reaching a decision and implementing it.

Conclusion

Decision-making is a crucial daily activity for managers. Decisions range from small and simple, with straightforward answers, to big and complex, with little clarity about what the best choice will be. Being an effective manager requires learning how to successfully navigate all kinds of decisions. Expertise, which develops gradually through learning and experience, generally improves managerial decision-making, but managers rarely rely solely on their own expertise. They also conduct research and collect information from others; they pay attention to their own biases and to ethical implications; and they think critically about the information that they have received to make decisions that will benefit the organization and its stakeholders.

Work Motivation for Performance

Introduction

Motivation: Direction and Intensity

Content Theories of Motivation

Manifest Needs Theory

One major problem with the need approach to motivation is that we can make up a need for every human behavior. Do we “need” to talk or be silent? The possibilities are endless. In fact, around the 1920s, some 6,000 human needs had been identified by behavioral scientists!

Learned Needs Theory

David C. McClelland and his associates (especially John W. Atkinson) built on the work of Murray for over 50 years. Murray studied many different needs, but very few in any detail. McClelland’s research differs from Murray’s in that McClelland studied three needs in depth: the need for achievement, the need for affiliation, and the need for power (often abbreviated, in turn, as nAch, nAff, and nPow).

Representative references include J.W. Atkinson & D.C. McClelland. 1948. The projective expression of needs. II. The effect of different intensities of the hunger drive on thematic apperception. *Journal of Experimental Psychology* 38:643–658; D.C. McClelland, J.W. Atkinson, R.A. Clark, & E.L. Lowell. 1953. *The achievement motive.* New York: Appleton-Century-Crofts; R.C. DeCharms. 1957. Affiliation motivation and productivity in small groups. *Journal of Abnormal Psychology* 55:222– 276; D.C. McClelland. 1961. *The achieving society.* Princeton, NJ: Van Nostrand; and D.C. McClelland. 1975. *Power: The inner experience.* New York: Irvington. McClelland believes that these three needs are learned, primarily in childhood. But he also believes that each need can be taught, especially nAch. McClelland’s research is important because much of current thinking about organizational behavior is based on it.

Maslow’s Hierarchy of Needs

Any discussion of needs that motivate performance would be incomplete without considering Abraham Maslow.

A.H. Maslow. 1943. A theory of human motivation. *Psychological Bulletin* 50:370–396; A.H. Maslow. 1954. *Motivation and personality.* New York: Harper & Row; A. H. Maslow. 1965. *Eupsychian management.* Homewood, IL: Irwin. Thousands of managers in the 1960s were exposed to Maslow’s theory through the popular writings of Douglas McGregor.D. McGregor. 1960. *The human side of enterprise.* New York: McGraw-Hill; D. McGregor. 1967. *The professional manager.* New York: McGraw-Hill. Today, many of them still talk about employee motivation in terms of Maslow’s theory.

Alderfer’s ERG Theory

Clayton Alderfer observed that very few attempts had been made to test Maslow’s full theory. Further, the evidence accumulated provided only partial support. During the process of refining and extending Maslow’s theory, Alderfer provided another need-based theory and a somewhat more useful perspective on motivation.

D.T. Hall & K.E. Nougaim. 1968. An examination of Maslow’s need hierarchy in an organizational setting. *Organizational Behavior and Human Performance* 3:12–35; E.E. Lawler, III & J.L. Suttle. 1972. A causal correlational test of the need hierarchy concept. *Organizational Behavior and Human Performance* 7:265–287; M.A. Wahba & L.G. Bridwell. 1973. Maslow reconsidered: A review of research on the need hierarchy theory. *Proceedings of the thirty-third annual meeting of the Academy of Management,* 514–520. Alderfer’s ERG theory compresses Maslow’s five need categories into three: existence, relatedness, and growth.C.P. Alderfer. 1972. *Existence, relatedness, and growth: Human needs and organizational settings.* New York: Free Press. In addition, ERG theory details the dynamics of an individual’s movement between the need categories in a somewhat more detailed fashion than typically characterizes interpretations of Maslow’s work.

Herzberg’s Motivator-Hygiene Theory

Clearly one of the most influential motivation theories throughout the 1950s and 1960s was Frederick Herzberg’s motivator-hygiene theory.

Note that Herzberg’s theory has often been labeled the “two-factor theory” because it focuses on two continua. This name, however, implies that only two factors are involved, which is not correct. Herzberg prefers not to use the term “two-factor theory” because his two *sets* of needs identify a much larger *number* of needs. This theory is a further refinement of Maslow’s theory. Herzberg argued that there are two sets of needs, instead of the five sets theorized by Maslow. He called the first set “motivators” (or growth needs). Motivators, which relate to the jobs we perform and our ability to feel a sense of achievement as a result of performing them, are rooted in our need to experience growth and self-actualization. The second set of needs he termed “hygienes.” Hygienes relate to the work environment and are based in the basic human need to “avoid pain.” According to Herzberg, growth needs motivate us to perform well and, when these needs are met, lead to the experience of satisfaction. Hygiene needs, on the other hand, must be met to avoid dissatisfaction (but do not necessarily provide satisfaction or motivation).F. Herzberg, B. Mausner, & B. Snyderman. 1959. *The motivation to work.* New York: Wiley; F. Herzberg. 1966. *Work and the nature of man.* New York: Crowell; F. Herzberg. 1968. One more time: How do you motivate employees? *Harvard Business Review* 46:54–62.

Self-Determination Theory

One major implication of Herzberg’s motivator-hygiene theory is the somewhat counterintuitive idea that managers should focus more on motivators than on hygienes. (After all, doesn’t everyone want to be paid well? Organizations have held this out as a chief motivator for decades!) Why might concentrating on motivators give better results? To answer this question, we must examine *types* of motivation. Organizational behavior researchers often classify motivation in terms of what stimulates it. In the case of extrinsic motivation, we endeavor to acquire something that satisfies a lower-order need. Jobs that pay well and that are performed in safe, clean working conditions with adequate supervision and resources directly or indirectly satisfy these lower-order needs. These “outside the person” factors are *extrinsic rewards*.

Process Theories of Motivation

Operant Conditioning Theory

Operant conditioning theory is the simplest of the motivation theories. It basically states that people will do those things for which they are rewarded and will avoid doing things for which they are punished. This premise is sometimes called the “law of effect.” However, if this were the sum total of conditioning theory, we would not be discussing it here. Operant conditioning theory does offer greater insights than “reward what you want and punish what you don’t,” and knowledge of its principles can lead to effective management practices.

Equity Theory

Suppose you have worked for a company for several years. Your performance has been excellent, you have received regular pay increases, and you get along with your boss and coworkers. One day you come to work to find that a new person has been hired to work at the same job that you do. You are pleased to have the extra help. Then, you find out the new person is making \$100 more per week than you, despite your longer service and greater experience. How do you feel? If you’re like most of us, you’re quite unhappy. Your satisfaction has just evaporated. Nothing about your job has changed—you receive the same pay, do the same job, and work for the same supervisor. Yet, the addition of one new employee has transformed you from a happy to an unhappy employee. This feeling of unfairness is the basis for equity theory.

Goal Theory

No theory is perfect. If it was, it wouldn’t be a theory. It would be a set of facts. Theories are sets of propositions that are right more often than they are wrong, but they are not infallible. However, the basic propositions of goal theory\* come close to being infallible. Indeed, it is one of the strongest theories in organizational behavior.

Expectancy Theory

Expectancy theory posits that we will exert much effort to perform at high levels so that we can obtain valued outcomes. It is the motivation theory that many organizational behavior researchers find most intriguing, in no small part because it is currently also the most comprehensive theory. Expectancy theory ties together many of the concepts and hypotheses from the theories discussed earlier in this chapter. In addition, it points to factors that other theories miss. Expectancy theory has much to offer the student of management and organizational behavior.

Recent Research on Motivation Theories

Content Theories

There is some interest in testing content theories (including Herzberg’s two-factor theory), especially in international research. Need theories are still generally supported, with most people identifying such workplace factors as recognition, advancement, and opportunities to learn as the chief motivators for them. This is consistent with need satisfaction theories. However, most of this research does not include actual measures of employee performance. Thus, questions remain about whether the factors that employees *say* motivate them to perform actually do.

Operant Conditioning Theory

There is considerable interest in operant conditioning theory, especially within the context of what has been called organizational behavior modification. Oddly enough, there has not been much research using operant conditioning theory in designing reward systems, even though there are obvious applications. Instead, much of the recent research on operant conditioning focuses on punishment and extinction. These studies seek to determine how to use punishment appropriately. Recent results still confirm that punishment should be used sparingly, should be used only after extinction does not work, and should not be excessive or destructive.

Equity Theory

Equity theory continues to receive strong research support. The major criticism of equity theory, that the inputs and outcomes people use to evaluate equity are ill-defined, still holds. Because each person defines inputs and outcomes, researchers are not in a position to know them all. Nevertheless, for the major inputs (performance) and outcomes (pay), the theory is a strong one. Major applications of equity theory in recent years incorporate and extend the theory into the area called *organizational justice.* When employees receive rewards (or punishments), they evaluate them in terms of their fairness (as discussed earlier). This is *distributive justice.* Employees also assess rewards in terms of how fair the processes used to distribute them are. This is *procedural justice.* Thus during organizational downsizing, when employees lose their jobs, people ask whether the loss of work is fair (distributive justice). But they also assess the fairness of the process used to decide *who* is laid off (procedural justice). For example, layoffs based on seniority may be perceived as more fair than layoffs based on supervisors’ opinions.

Goal Theory

It remains true that difficult, specific goals result in better performance than easy and vague goals, assuming they are accepted. Recent research highlights the positive effects of performance feedback and goal commitment in the goal-setting process. Monetary incentives enhance motivation when they are tied to goal achievement, by increasing the level of goal commitment. There are negative sides to goal theory as well. If goals conflict, employees may sacrifice performance on important job duties. For example, if both quantitative and qualitative goals are set for performance, employees may emphasize quantity because this goal achievement is more visible.

Expectancy Theory

The original formulation of expectancy theory specifies that the motivational force for choosing a level of effort is a function of the multiplication of expectancies and valences. Recent research demonstrates that the individual components predict performance just as well, without being multiplied. This does not diminish the value of expectancy theory. Recent research also suggests that high performance results not only when the valence is high, but also when employees set difficult goals for themselves.

Performance Appraisal and Rewards

Introduction

Performance Appraisal Systems

Uses of Performance Appraisals

In most work organizations, performance appraisals are used for a variety of reasons. These reasons range from improving employee productivity to developing the employees themselves. This diversity of uses is well documented in a study of why companies use performance appraisals.

C. J. Fombrum and R. L. Laud, “Strategic Issues in Performance Appraisal Theory and Practice,” *Personnel,* 601 (6), pp. 23–31. Traditionally, compensation and performance feedback have been the most prominent reasons organizations use performance appraisals.

Problems with Performance Appraisals

A number of problems can be identified that pose a threat to the value of appraisal techniques. Most of these problems deal with the related issues of the validity and reliability of the instruments or techniques themselves. Validity is the extent to which an instrument actually measures what it intends to measure, whereas reliability is the extent to which the instrument consistently yields the same results each time it is used. Ideally, a good performance appraisal system will exhibit high levels of both validity and reliability. If not, serious questions must be raised concerning the utility (and possibly the legality) of the system.

Reducing Errors in Performance Appraisals

A number of suggestions have been advanced recently to minimize the effects of various biases and errors on the performance appraisal process.

R. L. Mathis, J. H. Jackson, and S. R. Valentine, *Human Resource Management,* 14th ed. (Stamford, CT: Cengage Learning, 2014), p. 357. When errors are reduced, more accurate information is available for personnel decisions and personal development. These methods for reducing error include

Techniques of Performance Appraisal

Graphic Rating Scales

Certainly, the most popular method of evaluation used in organizations today is the graphic rating scale. One study found that 57 percent of the organizations surveyed used rating scales, and another study found the figure to be 65 percent.

J. Smither and M. London, *Performance Management Putting Research Into Action*, (San Francisco: Jossey Bass, 2008), pp. 187–328. Although this method appears in many formats, the supervisor or rater is typically presented with a printed or online form that contains both the employee’s name and several evaluation dimensions (quantity of work, quality of work, knowledge of job, attendance). The rater is then asked to rate the employee by assigning a number or rating on each of the dimensions. An example of a graphic rating scale is shown in **[link]**.

Critical Incident Technique

With the critical incident technique of performance appraisal, supervisors record incidents, or examples, of each subordinate’s behavior that led to either unusual success or unusual failure on some aspect of the job. These incidents are recorded in a daily or weekly log under predesignated categories (planning, decision-making, interpersonal relations, report writing). The final performance rating consists of a series of descriptive paragraphs or notes about various aspects of an employee’s performance (see **[link]**).

Behaviorally Anchored Rating Scales

An appraisal system that has received increasing attention in recent years is the behaviorally anchored rating scale (BARS). This system requires considerable work prior to evaluation but, if the work is carefully done, can lead to highly accurate ratings with high inter-rater reliability. Specifically, the BARS technique begins by selecting a job that can be described in observable behaviors. Managers and personnel specialists then identify these behaviors as they relate to superior or inferior performance.

Behavioral Observation Scales

The behavioral observation scale (BOS) is similar to BARS in that both focus on identifying observable behaviors as they relate to performance. It is, however, less demanding of the evaluator. Typically, the evaluator is asked to rate each behavior on a scale from 1 to 5 to indicate the frequency with which the employee exhibits the behavior. Evaluation of an employee’s performance on a particular dimension is derived by summing the frequency ratings for the behaviors in each dimension.

Management by Objectives

A popular technique for evaluating employees who are involved in jobs that have clear quantitative output is management by objectives (MBO). Although the concept of MBO encompasses much more than just the appraisal process (incorporating an organization-wide motivation, performance, and control system), we will focus here on its narrower application to evaluating employee performance. MBO is closely related to the goal-setting theory of motivation.

Assessment Centers

A relatively new method of evaluation is the assessment center*.* Assessment centers are unique among appraisal techniques in that they focus more on evaluating an employee’s long-range potential to an organization than on her performance over the past year. They are also unique in that they are used almost exclusively among managerial personnel.

Comparison of Appraisal Techniques

It is important to consider which appraisal technique or set of techniques may be most appropriate for a given situation. Although there is no simple answer to this question, we can consider the various strengths and weaknesses of each technique. This is done in **[link]**. It is important to keep in mind that the appropriateness of a particular appraisal technique is in part a function of the purpose for the appraisal. For example, if the purpose of the appraisal is to identify high potential executives, then assessment centers are more appropriate than rating scales.

Feedback

Reward Systems in Organizations

Functions of Reward Systems

Reward systems in organizations are used for a variety of reasons. It is generally agreed that reward systems influence the following:

Bases for Reward Distribution

A common reality in many contemporary work organizations is the inequity that exists in the distribution of available rewards. One often sees little correlation between those who perform well and those who receive the greatest rewards. At the extreme, it is hard to understand how a company could pay its president \$10 to \$20 million per year (as many large corporations do) while it pays its secretaries and clerks less than \$15,000. Each works approximately 40 hours per week, and both are important for organizational performance. Is it really possible that the president is 1,000 times more important than the secretary, as the salary differential suggests?

Extrinsic and Intrinsic Rewards

The variety of rewards that employees can receive in exchange for their contributions of time and effort can be classified as either *extrinsic* or *intrinsic* rewards. Extrinsic rewards are external to the work itself. They are administered externally—that is, by someone else (usually management). Examples of extrinsic rewards include wages and salary, fringe benefits, promotions, and recognition and praise from others.

Money and Motivation: A Closer Look

A recurring debate among managers focuses on the issue of whether money is a primary motivator. Some argue that most behavior in organizational settings is motivated by money (or at least monetary factors), whereas others argue that money is only one of many factors that motivate performance. Whichever group is correct, we must recognize that money can have important motivational consequences for many people in many situations. In fact, money serves several important functions in work settings.

R. L. Opsahl and M. D. Dunnette, “The Role of Financial Compensation in Industrial Motivation,” *Psychological Bulletin* Vol. 66*,* 1966, pp. 94–96. These include serving as (1) a goal or incentive, (2) a source of satisfaction, (3) an instrument for gaining other desired outcomes, (4) a standard of comparison for determining relative standing or worth, and (5) a conditional reinforcer where its receipt is contingent upon a certain level of performance. Even so, experience tells us that the effectiveness of pay as a motivator varies considerably. Sometimes there seems to be an almost direct relationship between pay and effort, whereas at other times no such relationship is found. Why? Lawler suggests that certain conditions must be present in order for pay to act as a strong motivator:E. E. Lawler, *Rewarding Excellence,* (San Francisco: Jossey Bass, 2001).

Pay Secrecy

Secrecy about pay rates seems to be a widely accepted practice in work organizations, particularly among managerial personnel. It is argued that salary is a personal matter and we should not invade another’s privacy. Available evidence, however, suggests that pay secrecy may have several negative side effects. To begin, it has been consistently found that in the absence of actual knowledge, people have a tendency to *over*estimate the pay of coworkers and those above them in the hierarchy. As a result, much of the motivational potential of a differential reward system is lost.

E. E. Lawler, *Rewarding Excellence,* op. cit. Even if an employee receives a relatively sizable salary increase, she may still perceive an inequity compared to what others are receiving. This problem is highlighted in the results of a study by Lawler. In considering the effects of pay secrecy on motivation, Lawler noted:

Individual and Group Incentive Plans

Individual versus Group Incentives

Companies usually have choices among various compensation plans and must make decisions about which is most effective for its situation. Incentive systems in organizations are usually divided into two categories on the basis of whether the unit of analysis—and the recipient of the reward—is the individual or a group. Among individual incentive plans, several approaches can be identified, including merit-based compensation (commonly known as merit compensation), piece-rate incentive programs (where people are paid according to the quantity of output), bonus systems of various sorts, and commissions. In each case, rewards are tied fairly directly to the performance level of the individual.

Creative Pay Practices

Recently, we have seen several innovations in the way corporations approach reward systems. These efforts are designed to facilitate the integration of employee and company interests in a way that maximizes both productivity and quality of working life. Five such creative pay practices should be noted: (1) gain-sharing plans, (2) skills-based incentives, (3) lump-sum pay increases, (4) participative pay decisions, and (5) flexible benefits programs. These approaches, along with their major advantages and drawbacks, are summarized in **[link]**.

Guidelines for Effective Incentive Programs

Whatever incentive plan is selected, care must be taken to ensure that the plan is appropriate for the particular organization and workforce. In fact, a simple test of the effectiveness of an incentive plan would be as follows:

M. Wallace, cited in N. Perry, “Here Come Richer, Riskier Pay Plans,” *Fortune,* December 19, 1988, pp. 50–58.

Group and Intergroup Relations

Introduction

Work Groups: Basic Considerations

What Is a Group?

The literature of group dynamics is a very rich field of study and includes many definitions of work groups. For example, we might conceive of a group in terms of *perceptions*; that is, if individuals see themselves as a group, then a group exists. Or, we can view a group in *structural* terms. For instance, McDavid and Harari define a group as “an organized system of two or more individuals who are interrelated so that the system performs some function, has a standard set of role relationships among its members, and has a set of norms that regulate the function of the group and each of its members.”

J. McDavid and M. Harari, *Social Psychology: Individuals, Groups, and Societies* (New York: Harper & Row, 1968), p. 237. Groups can also be defined in *motivational* terms as “a collection of individuals whose existence as a collection is rewarding to the individuals.”B. Bass. *Leadership, Psychology, and Organizational Behavior* (New York: Harper & Row, 1960), p. 39. Finally, a group can be viewed with regard to *interpersonal interactions*—the degree to which members communicate and interact with one another over time.G. Homans, *Social Behavior* (New York: Harcourt, Brace and World, 1950).

Types of Groups

There are two primary types of groups: formal and informal. Moreover, within these two types, groups can be further differentiated on the basis of their relative degree of permanence. The resulting four types are shown in **[link]**.

Reasons for Joining Groups

People join groups for many reasons. Often, joining a group serves several purposes at once. In general, at least six reasons can be identified for joining groups:

Stages in Group Development

Before we begin a comprehensive examination of the structure of groups, consider briefly the stages of group development. How do groups grow and develop over time? Tuckman has proposed one model of group development that consists of four stages through which groups generally proceed.

B. Tuckman and M. Jensen, “Stages of Small Group Development Revisited,” *Groups and Organizational Studies,* 1977, *2,* pp. 419–442. These four stages are referred to by the deceptively simple titles *forming, storming, norming,* and *performing* (see **[link]**).

Work Group Structure

Work Roles

In order to accomplish its goals and maintain its norms, a group must differentiate the work activities of its members. One or more members assume leadership positions, others carry out the major work of the group, and still others serve in support roles. This specialization of activities is commonly referred to as role differentiation. More specifically, a work role is an expected behavior pattern assigned or attributed to a particular position in the organization. It defines individual responsibilities on behalf of the group.

Work Group Size

Obviously, work groups can be found in various sizes. Early management theorists spent considerable time and effort to no avail attempting to identify the right size for the various types of work groups. There is simply no right number of people for most group activities. They did, however, discover a great deal about what happens as group size increases.

A. Hare, “Group Size,” *American Behavioral Scientist,* 1981, *24,* pp. 695–708. A number of relevant size-outcome relationships are summarized in **[link]**.

Work Group Norms

The concept of work group norms represents a complex topic with a history of social psychological research dating back several decades. In this section, we will highlight several of the essential aspects of norms and how they relate to people at work. We will consider the characteristics and functions of work group norms as well as conformity with and deviance from them.

Status Systems

A fourth characteristic, or structural property, of work groups is the status system. Status systems serve to differentiate individuals on the basis of some criterion or set of criteria. There are five general bases on which status differentiations are made: birth, personal characteristics, achievement, possessions, and formal authority. All five bases can be seen as establishing status in work groups. For example, an employee may achieve high status because he is the boss’s son (birth), the brightest or strongest member of the group (personal characteristics), the best performer (achievement), the richest or highest paid (possessions), or the foreman or supervisor (formal authority).

Group Cohesiveness

A fifth characteristic of work groups is group cohesiveness. We have all come in contact with groups whose members feel a high degree of camaraderie, group spirit, and unity. In these groups, individuals seem to be concerned about the welfare of other group members as well as that of the group as a whole. There is a feeling of “us against them” that creates a closeness among them. This phenomenon is called group cohesiveness. More specifically, group cohesiveness may be defined as the extent to which individual members of a group are motivated to remain in the group. According to Shaw, “Members of highly cohesive groups are more energetic in group activities, they are less likely to be absent from group meetings, they are happy when the group succeeds and sad when it fails, etc., whereas members of less cohesive groups are less concerned about the group’s activities.”

M. Shaw, *Group Dynamics* (New York: McGraw-Hill, 1981), p. 197.

Managing Effective Work Groups

What Is Work Group Effectiveness?

The first question to raise concerning work group effectiveness is what we mean by the concept itself. According to Hackman’s model, effectiveness is defined in terms of three criteria:

Determinants of Work-Group Effectiveness

Group effectiveness is largely determined by three factors that have been called *intermediate criteria*. These factors are as follows:

Implications for Group Management

On the basis of this analysis of group processes in work organizations, we can identify several actions managers can take in order to help groups to be more effective.

Intergroup Behavior and Performance

Determinants of Intergroup Performance

To understand how groups interact with one another, it is important to identify the primary variables that characterize intergroup behavior.

J. M. George and G. R. Jones, *Understanding and Managing Organizational Behavior* 6th edition, (Englewood Cliffs, N.J., Pearson, 2012). We can do this by suggesting a model of intergroup performance. This model is outlined in **[link]**. As shown, intergroup behavior occurs when two groups intersect. Each group has its own characteristics and uniqueness, but both operate within the larger confines of organizational policies, culture, reward systems, and so forth. Within this context, performance is largely influenced by three types of *interaction requirements:* interdependence requirements, information flow requirements, and integration requirements. The quality of intergroup performance is affected by the extent to which all parties to the interaction can meet these requirements.

Managing Intergroup Behavior and Performance

When we analyze the challenge of managing intergroup behavior and performance, the key issue facing managers is the issue of coordination. In most situations, various units or departments in the organization all have talent needed to ensure task accomplishment. Yet, each unit has its own culture, goals, norms, and so forth. Hence, the challenge for managers is harnessing and coordinating this talent in such a way that group harmony is maintained while organizational objectives are achieved.

Understanding and Managing Work Teams

Introduction

Teamwork in the Workplace

Team Development Over Time

Things to Consider When Managing Teams

Opportunities and Challenges to Team Building

Team Diversity

Multicultural Teams

Communication

Introduction

The Process of Managerial Communication

Encoding and Decoding

Two important aspects of this model are encoding and decoding. Encoding is the process by which individuals initiating the communication translate their ideas into a systematic set of symbols (language), either written or spoken. Encoding is influenced by the sender’s previous experiences with the topic or issue, her emotional state at the time of the message, the importance of the message, and the people involved. Decoding is the process by which the recipient of the message interprets it. The receiver attaches meaning to the message and tries to uncover its underlying intent. Decoding is also influenced by the receiver’s previous experiences and frame of reference at the time of receiving the message.

Feedback

Several types of feedback can occur after a message is sent from the communicator to the receiver. Feedback can be viewed as the last step in completing a communication episode and may take several forms, such as a verbal response, a nod of the head, a response asking for more information, or no response at all. As with the initial message, the response also involves encoding, medium, and decoding.

Noise

There is, however, a variety of ways that the intended message can get distorted. Factors that distort message clarity are noise. Noise can occur at any point along the model shown in **[link]**, including the decoding process. For example, a manager might be under pressure and issue a directive, “I want this job completed today, and I don’t care what it costs,” when the manager does care what it costs.

Types of Communications in Organizations

Oral Communication

This consists of all messages or exchanges of information that are spoken, and it’s the most prevalent type of communication.

Written Communication

This includes e-mail, texts, letters, reports, manuals, and annotations on sticky notes. Although managers prefer oral communication for its efficiency and immediacy, the increase in electronic communication is undeniable. As well, some managers prefer written communication for important messages, such as a change in a company policy, where precision of language and documentation of the message are important.

Nonverbal Communication

There is also the transformation of information without speaking or writing. Some examples of this are things such as traffic lights and sirens as well as things such as office size and placement, which connote something or someone of importance. As well, things such as body language and facial expression can convey either conscious or unconscious messages to others.

Major Influences on Interpersonal Communication

Regardless of the type of communication involved, the nature, direction, and quality of interpersonal communication processes can be influenced by several factors.

F. M. Jablin and Linda L. Putnam, *The New Handbook of Organizational Communication*, Sage, 2005.

Factors Affecting Communications and the Roles of Managers

The Roles Managers Play

In Mintzberg’s seminal study of managers and their jobs, he found the majority of them clustered around three core management roles.

Mintzberg, H. (1973). *The Nature of Managerial Work*. New York: Harper & Row, p. 31.

Managerial Communication and Corporate Reputation

The Major Channels of Management Communication Are Talking, Listening, Reading, and Writing

One-on-One Conversations

Increasingly, managers find that information is passed orally, often face-to-face in offices, hallways, conference rooms, cafeterias, restrooms, athletic facilities, parking lots, and literally dozens of other venues. An enormous amount of information is exchanged, validated, confirmed, and passed back and forth under highly informal circumstances.

Telephone Conversations

Managers spend an astounding amount of time on the telephone these days. Curiously, the amount of time per telephone call is decreasing, but the number of calls per day is increasing. With the nearly universal availability of cellular and satellite telephone service, very few people are out of reach of the office for very long. The decision to switch off a cellular telephone, in fact, is now considered a decision in favor of work-life balance.

Video Teleconferencing

Bridging time zones as well as cultures, videoconferencing facilities make direct conversations with employees, colleagues, customers, and business partners across the nation or around the world a simple matter. Carrier Corporation, the air-conditioning manufacturer, is now typical of firms using desktop videoconferencing to conduct everything from staff meetings to technical training. Engineers at Carrier’s Farmington, Connecticut, headquarters can hook up with service managers in branch offices thousands of miles away to explain new product developments, demonstrate repair techniques, and update field staff on matters that would, just recently, have required extensive travel or expensive, broadcast-quality television programming. Their exchanges are informal, conversational, and not much different than they would be if the people were in the same room.

Ziegler, B. (1994). “Video Conference Calls Change Business,” *Wall Street Journal*, October 13, 1994, pp. B1, B12.

Presentations to Small Groups

Managers frequently find themselves making presentations, formal and informal, to groups of three to eight people for many different reasons: they pass along information given to them by executives, they review the status of projects in process, and they explain changes in everything from working schedules to organizational goals. Such presentations are sometimes supported by overhead transparencies or printed outlines, but they are oral in nature and retain much of the conversational character of one-to-one conversations.

Public Speaking to Larger Audiences

Most managers are unable to escape the periodic requirement to speak to larger audiences of several dozen or, perhaps, several hundred people. Such presentations are usually more formal in structure and are often supported by PowerPoint or Prezi software that can deliver data from text files, graphics, photos, and even motion clips from streaming video. Despite the more formal atmosphere and sophisticated audio-visual support systems, such presentations still involve one manager talking to others, framing, shaping, and passing information to an audience.

The Role of Writing

Writing plays an important role in the life of any organization. In some organizations, it becomes more important than in others. At Procter & Gamble, for example, brand managers cannot raise a work-related issue in a team meeting unless the ideas are first circulated in writing. For P&G managers, this approach means explaining their ideas in explicit detail in a standard one-to-three-page memo, complete with background, financial discussion, implementation details, and justification for the ideas proposed.

Communication Is Invention

Without question, communication is a process of invention. Managers literally create meaning through communication. A company, for example, is not in default until a team of auditors sits down to examine the books and review the matter. Only after extended discussion do the accountants conclude that the company is, in fact, in default. It is their discussion that creates the outcome. Until that point, default was simply one of many possibilities.

Information Is Socially Constructed

If we are to understand just how important human discourse is in the life of a business, several points seem especially important.

Managers’ Greatest Challenge

Every manager knows communication is vital, but every manager also seems to “know” that she is great at it. Managers’ greatest challenge is to admit to flaws in their skill set and work tirelessly to improve them. First, managers must admit to the flaws.

Managers’ Task as Professionals

As a professional manager, the first task is to recognize and understand one’s strengths and weaknesses as a communicator. Until these communication tasks at which one is most and least skilled are identified, there will be little opportunity for improvement and advancement.

Leadership

Introduction

The Nature of Leadership

Leader versus Manager

The two dual concepts, leader and manager, leadership and management, are not interchangeable, nor are they redundant. The differences between the two can, however, be confusing. In many instances, to be a good manager one needs to be an effective leader. Many CEOs have been hired in the hope that their leadership skills, their ability to formulate a vision and get others to “buy into” that vision, will propel the organization forward. In addition, effective leadership often necessitates the ability to manage—to set goals; plan, devise, and implement strategy; make decisions and solve problems; and organize and control. For our purposes, the two sets of concepts can be contrasted in several ways.

The Leadership Process

The Leader

Leaders are people who take charge of or guide the activities of others. They are often seen as the focus or orchestrater of group activity, the people who set the tone of the group so that it can move forward to attain its goals. Leaders provide the group with what is required to fulfill its maintenance and task-related needs. (Later in the chapter, we will return to the “leader as a person” as part of our discussion of the trait approach to leadership.)

The Follower

The follower is not a passive player in the leadership process. Edwin Hollander, after many years of studying leadership, suggested that the follower is the most critical factor in any leadership event.

Hollander, 1964. It is, after all, the follower who perceives the situation and comes to define the needs that the leader must fulfill. In addition, it is the follower who either rejects leadership or accepts acts of leadership by surrendering his power to the leader to diminish task uncertainty, to define and manage the meaning of the situation to the follower, and to orchestrate the follower’s action in pursuit of goal attainment.

The Context

Situations make demands on a group and its members, and not all situations are the same. Context refers to the situation that surrounds the leader and the followers. Situations are multidimensional. We discuss the context as it pertains to leadership in greater detail later in this chapter, but for now let’s look at it in terms of the task and task environment that confront the group. Is the task structured or unstructured? Are the goals of the group clear or ambiguous? Is there agreement or disagreement about goals? Is there a body of knowledge that can guide task performance? Is the task boring? Frustrating? Intrinsically satisfying? Is the environment complex or simple, stable or unstable? These factors create different contexts within which leadership unfolds, and each factor places a different set of needs and demands on the leader and on the followers.

The Process

The process of leadership is separate and distinct from the leader (the person who occupies a central role in the group). The process is a complex, interactive, and dynamic working relationship between leader and followers. This working relationship, built over time, is directed toward fulfilling the group’s maintenance and task needs. Part of the process consists of an exchange relationship between the leader and follower. The leader provides a resource directed toward fulfilling the group’s needs, and the group gives compliance, recognition, and esteem to the leader. To the extent that leadership is the exercise of influence, part of the leadership process is captured by the surrender of power by the followers and the exercise of influence over the followers by the leader.

Hollander & Julian, 1969. Thus, the leader influences the followers and the followers influence the leader, the context influences the leader and the followers, and both leader and followers influence the context.

The Consequences

A number of outcomes or consequences of the leadership process unfold between leader, follower, and situation. At the group level, two outcomes are important:

Leader Emergence

Paths to Leadership

People come to leadership positions through two dynamics. In many instances, people are put into positions of leadership by forces outside the group. University-based ROTC programs and military academies (like West Point) formally groom people to be leaders. We refer to this person as the designated leader (in this instance the designated and formal leader are the same person). Emergent leaders, on the other hand, arise from the dynamics and processes that unfold within and among a group of individuals as they endeavor to achieve a collective goal.

Leadership as an Exercise of Influence

As we have noted, leadership is the exercise of influence over those who depend on one another for attaining a mutual goal in a group setting. But *how* do leaders effectively exercise this influence? *Social or (interpersonal) influence* is one’s ability to effect a change in the motivation, attitudes, and/or behaviors of others. *Power*, then, essentially answers the “how” question: How do leaders influence their followers? The answer often is that a leader’s social influence is the source of his power.

Influence-Based Leadership Styles

Many writers and researchers have explored how leaders can use power to address the needs of various situations. One view holds that in traditional organizations members expect to be told what to do and are willing to follow highly structured directions. Individuals attracted to high-involvement organizations, however, want to make their own decisions, expect their leaders to allow them to do so, and are willing to accept and act on this responsibility. This suggests that a leader may use and employ power in a variety of ways.

The Trait Approach to Leadership

Leader Trait Research

Ralph Stogdill, while on the faculty at The Ohio State University, pioneered our modern (late 20th century) study of leadership.

Stogdill, 1948; R. M. Stogdill. 1974. *Handbook of leadership: A survey of theory and research.* New York: Free Press. Scholars taking the trait approach attempted to identify physiological (appearance, height, and weight), demographic (age, education, and socioeconomic background), personality (dominance, self-confidence, and aggressiveness), intellective (intelligence, decisiveness, judgment, and knowledge), task-related (achievement drive, initiative, and persistence), and social characteristics (sociability and cooperativeness) with leader emergence and leader effectiveness. After reviewing several hundred studies of leader traits, Stogdill in 1974 described the successful leader this way:

Other Leader Traits

Sex and gender, disposition, and self-monitoring also play an important role in leader emergence and leader style.

Behavioral Approaches to Leadership

The Ohio State University Studies

A group of Ohio State University researchers, under the direction of Ralph Stogdill, began an extensive and systematic series of studies to identify leader behaviors associated with effective group performance. Their results identified two major sets of leader behaviors: consideration and initiating structure.

The University of Michigan Studies

At about the same time that the Ohio State studies were underway, researchers at the University of Michigan also began to investigate leader behaviors. As at Ohio State, the Michigan researchers attempted to identify behavioral elements that differentiated effective from ineffective leaders.

D. Katz & R.L. Kahn. 1952. Some recent findings in human relations research. In E. Swanson, T. Newcomb, & E. Hartley (eds.), *Readings in social psychology,* New York: Holt, Rinehart, & Winston; D. Katz, N. Macoby, & N. Morse. 1950. *Productivity, supervision, and morale in an office situation,* Ann Arbor, MI: Institute for Social Research; F.C. Mann & J. Dent. 1954. The supervisor: Member of two organizational families. *Harvard Business Review* 32:103–112.

The Leadership Grid®

Much of the credit for disseminating knowledge about important leader behaviors must go to Robert R. Blake and Jane S. Mouton, who developed a method for classifying styles of leadership compatible with many of the ideas from the Ohio State and Michigan studies.

R.R. Blake & J.S. Mouton. 1964. *The managerial grid.* Houston: Gulf; R.R. Blake & J.S. Mouton. 1981. *The versatile manager: A grid profile,* Homewood, IL: Dow Jones-Irwin; R.R. Blake & J.S. Mouton. 1984. *The new managerial grid III.* Houston: Gulf. In their classification scheme, *concern for results* (production) emphasizes output, cost effectiveness, and (in for-profit organizations) a concern for profits. *Concern for people* involves promoting working relationships and paying attention to issues of importance to group members. As shown in **[link]**, the Leadership Grid® demonstrates that any combination of these two leader concerns is possible, and five styles of leadership are highlighted here.

Situational (Contingency) Approaches to Leadership

Fiedler’s Contingency Model

One of the earliest, best-known, and most controversial situation-contingent leadership theories was set forth by Fred E. Fiedler from the University of Washington.

F.E. Fiedler & M.M. Chemers. 1974. *Leadership and effective management.* Glenview, IL: Scott, Foresman. This theory is known as the contingency theory of leadership. According to Fiedler, organizations attempting to achieve group effectiveness through leadership must assess the leader according to an underlying trait, assess the situation faced by the leader, and construct a proper match between the two.

Path-Goal Theory

Robert J. House and Martin Evans, while on the faculty at the University of Toronto, developed a useful leadership theory. Like Fiedler’s, it asserts that the type of leadership needed to enhance organizational effectiveness depends on the situation in which the leader is placed. Unlike Fiedler, however, House and Evans focus on the leader’s observable behavior. Thus, managers can either match the situation to the leader or modify the leader’s behavior to fit the situation.

Cross-Cultural Context

Gabriel Bristol, the CEO of Intelifluence Live, a full-service customer contact center offering affordable inbound customer service, outbound sales, lead generation and consulting services for small to mid-sized businesses, notes “diversity breeds innovation, which helps businesses achieve goals and tackle new challenges.”

G. Bristol. 2016. Why Diversity in the Workplace is Imperrative. *Entrepreneur,* March 25. (Accessed august 4, 2017) https://www.entrepreneur.com/article/270110 *Multiculturalism* is a new reality as today’s society and workforce become increasingly diverse. This naturally leads to the question “Is there a need for a new and different style of leadership?”

Substitutes for and Neutralizers of Leadership

Transformational, Visionary, and Charismatic Leadership

The Transformational and Visionary Leader

Leaders who subscribe to the notion that “if it ain’t broke, don’t fix it” are often described as *transactional leaders.* They are extremely task oriented and instrumental in their approach, frequently looking for incentives that will induce their followers into a desired course of action.

G.A. Yukl. 1981. *Leadership in organizations.* Englewood Cliffs, NJ: Prentice-Hall. These reciprocal exchanges take place in the context of a mutually interdependent relationship between the leader and the follower, frequently resulting in interpersonal bonding.B. Kellerman. 1984. *Leadership: Multidisciplinary perspectives.* Englewood Cliffs, NJ: Prentice-Hall; F. L. Landy. 1985. *Psychology of work behavior.* Homewood, IL: Dorsey Press. The transactional leader moves a group toward task accomplishment by initiating structure and by offering an incentive in exchange for desired behaviors. The transformational leader, on the other hand, moves and changes (fixes) things “in a big way”! Unlike transactional leaders, they don’t cause change by offering inducements. Instead, they inspire others to action through their personal values, vision, passion, and belief in and commitment to the mission.J.M. Burns. 1978. *Leadership.* New York: Harper & Row; B. M. Bass. 1985. *Leadership and performance beyond expectations.* New York: Free Press. Through charisma (idealized influence), individualized consideration (a focus on the development of the follower), intellectual stimulation (questioning assumptions and challenging the status quo), and/or inspirational motivation (articulating an appealing vision), transformational leaders move others to follow.

Charismatic Leadership

Ronald Reagan, Jesse Jackson, and Queen Elizabeth I have something in common with Martin Luther King Jr., Indira Gandhi, and Winston Churchill. The effectiveness of these leaders originates in part in their charisma, a special magnetic charm and appeal that arouses loyalty and enthusiasm. Each exerted considerable personal influence to bring about major events.

Leadership Needs in the 21st Century

Organizational Power and Politics

Introduction

Power in Interpersonal Relations

What Is Power?

Numerous definitions of power abound in the literature on organizations. One of the earliest was suggested by Max Weber, the noted German sociologist, who defined power as “the probability that one actor within a social relationship will be in a position to carry out his own will despite resistance.”

Cited in A. Henderson and T. Parsons, *Max Weber: The Theory of Social and Economic Organization.* (New York: The Free Press, 1947), p. 152. Similarly, Emerson wrote, “The power of actor A over actor B is the amount of resistance on the part of B which can be potentially overcome by A.”R. Emerson, “Power Dependence Relations,” *American Sociological Review,* 1962, *27*, p. 32. Following these and other definitions, we will define *power* for our purposes as an interpersonal relationship in which one individual (or group) has the ability to cause another individual (or group) to take an action that would not be taken otherwise.

Power, Authority, and Leadership

Clearly, the concept of power is closely related to the concepts of authority and leadership (see **[link]**). In fact, power has been referred to by some as “informal authority,” whereas authority has been called “legitimate power.” However, these three concepts are not the same, and important differences among the three should be noted.

H. Mintzberg, *Power in and Around Organizations* (Englewood Cliffs, N.J.: Prentice Hall, 1983); R. J. House, “Power and Personality in Complex Organizations,” in B. M. Staw and L. L. Cummings, eds., *Research in Organizational Behavior* (Greenwich, Conn.: JAI Press, 1988), pp. 307–357.

Types of Power

If power is the ability to secure compliance by others, how is such power exercised? On what is it based? At least two efforts have been made to identify the bases of power. One model has been proposed by Etzioni, identifying three types of power.

A. Etzioni, *Modern Organizations* (Englewood Cliffs, N.J.: Prentice-Hall, 1964). In fact, it is argued that organizations can be classified according to which of the three types of power is most prevalent. Coercive power involves forcing someone to comply with one’s wishes. A prison organization is an example of a coercive organization. Utilitarian power is power based on performance-reward contingencies; for example, a person will comply with a supervisor in order to receive a pay raise or promotion. Business organizations are thought to be essentially utilitarian organizations. Finally, normative power rests on the beliefs of the members in the right of the organization to govern their behavior. An example here would be a religious organization.

Bases of Power

Although useful for comparative analysis of divergent organizations, this model may have limited applicability, because most business and public organizations rest largely on utilitarian power. Instead, a second model, developed by French and Raven, of the bases of power may be more helpful.

J. French and B. Raven, “The Bases of Social Power,” in D. Cartwright and A. Zander, eds., *Group Dynamics* (New York: Harper & Row, 1968); P. Podsakoff and C. Schriesheim, “Field Studies of French and Raven’s Bases of Power: Critique, Reanalysis, and Suggestions for Future Research,” *Psychological Bulletin,* May 1985, pp. 376–398. French and Raven identified five primary ways in which power can be exerted in social situations.

Behavioral Consequences of Power

We have seen, then, that at least five bases of power can be identified. In each case, the power of the individual rests on a particular attribute of the power holder, the follower, or their relationship. In some cases (e.g., reward power), power rests in the superior; in others (e.g., referent power), power is given to the superior by the subordinate. In all cases, the exercise of power involves subtle and sometimes threatening interpersonal consequences for the parties involved. In fact, when power is exercised, employees have several ways in which to respond. These are shown in **[link]**.

Power Dependencies

In any situation involving power, at least two persons (or groups) can be identified: the person attempting to influence others and the target or targets of that influence. Until recently, attention focused almost exclusively on how people tried to influence others. Only recently has attention been given to how people try to nullify or moderate such influence attempts. In particular, we now recognize that the extent to which influence attempts are successful is determined in large part by the power dependencies of those on the receiving end of the influence attempts. In other words, all people are not subject to (or dependent upon) the same bases of power. What causes some people to be more submissive or vulnerable to power attempts? At least three factors have been identified.

T. R. Mitchell and J. Larson, *People in Organizations* (New York: McGraw-Hill, 1988).

Uses of Power

Common Power Tactics in Organizations

As noted above, many power tactics are available for use by managers. However, as we will see, some are more ethical than others. Here, we look at some of the more commonly used power tactics found in both business and public organizations.

J. Pfeffer, *Power: Why Some People Have it and Others Don’t* (New York: Harper Business, 2011).

Symbols of Managerial Power

How do we know when a manager has power in an organizational setting? Harvard professor Rosabeth Moss Kanter has identified several of the more common symbols of managerial power.

R. Kanter, *On the Frontiers of Management,* (Boston: Harvard Business Review Books) 2004. For example, managers have power to the extent that they can intercede favorably on behalf of someone in trouble with the organization. Have you ever noticed that when several people commit the same mistake, some don’t get punished? Perhaps someone is watching over them.

The Ethical Use of Power

People are often uncomfortable discussing the topic of power, which implies that somehow they see the exercise of power as unseemly. On the contrary, the question is not whether power tactics are or are not ethical; rather, the question is *which* tactics are appropriate and which are not. The use of power in groups and companies is a fact of organizational life that all employees must accept. In doing so, however, all employees have a right to know that the exercise of power within the organization will be governed by ethical standards that prevent abuse or exploitation.

Political Behavior in Organizations

What Is Politics?

Perhaps the earliest definition of politics was offered by Lasswell, who described it as who gets what, when, and how.

H. D. Lasswell, *Politics: Who Gets What, When, How* (New York: McGraw-Hill, 1936). Even from this simple definition, one can see that politics involves the resolution of differing preferences in conflicts over the allocation of scarce and valued resources. Politics represents one mechanism to solve allocation problems when other mechanisms, such as the introduction of new information or the use of a simple majority rule, fail to apply. For our purposes here, we will adopt Pfeffer’s definition of politics as involving “those activities taken within organizations to acquire, develop, and use power and other resources to obtain one’s preferred outcomes in a situation in which there is uncertainty or dissensus about choices.”Pfeffer, op. cit., p. 8.

Intensity of Political Behavior

Contemporary organizations are highly political entities. Indeed, much of the goal-related effort produced by an organization is directly attributable to political processes. However, the intensity of political behavior varies, depending upon many factors. For example, in one study, managers were asked to rank several organizational decisions on the basis of the extent to which politics were involved.

J. Gandz and V. Murray, “The Experience of Workplace Politics,” *Academy of Management Journal,* 1980, *23*, pp. 237–251. Results showed that the most political decisions (in rank order) were those involving interdepartmental coordination, promotions and transfers, and the delegation of authority. Such decisions are typically characterized by an absence of established rules and procedures and a reliance on ambiguous and subjective criteria.

Reasons for Political Behavior

Following from the above model, we can identify at least five conditions conducive to political behavior in organizations.

R. Miles, *Macro Organizational Behavior* (Glenview, III.: Scott, Foresman, 1980); C. Leana, “Power Relinquishment versus Power Sharing: Theoretical Clarification and Empirical Comparison of Delegation and Participation,” *Journal of Applied Psychology,* 1987, *72*, pp. 228–233. These are shown in **[link]**, along with possible resulting behaviors. The conditions include the following:

Political Strategies in Intergroup Relations

Up to this point, we have explained the related concepts of power and politics primarily as they relate to interpersonal behavior. When we shift our focus from the individual or interpersonal to the *intergroup* level of analysis, the picture becomes somewhat more complicated. In developing a portrait of how political strategies are used to attain and maintain power in intergroup relations, we will highlight two major aspects of the topic. The first is the relationship between power and the control of critical resources. The second is the relationship between power and the control of strategic activities. Both will illustrate how subunit control leads to the acquisition of power in organizational settings.

Power and the Control of Critical Resources

On the basis of what has been called the resource dependence model, we can analyze intergroup political behavior by examining how critical resources are controlled and shared.

J. Pfeffer and G. Salancik, *The External Control of Organizations* (New York: Harper & Row, 1978). That is, when one subunit of an organization (perhaps the purchasing department) controls a scarce resource that is needed by another subunit (for example, the power to decide what to buy and what not to buy), that subunit acquires power. This power may be over other subunits within the same organization or over subunits in other organizations (for example, the marketing units of other companies that are trying to sell to the first company). As such, this unit is in a better position to bargain for the critical resources it needs from its own or other organizations. Hence, although all subunits may contribute something to the organization as a whole, power allocation within the organization will be influenced by the relative importance of the resources contributed by each unit. To quote Salancik and Pfeffer,

Power and the Control of Strategic Activities

In addition to the control of critical resources, subunits can also attain power by gaining control over activities that are needed by others to complete their tasks. These critical activities have been called strategic contingencies. A contingency is defined by Miles as “a requirement of the activities of one subunit that is affected by the activities of other subunits.”

Miles, op. cit., p. 170. For example, the business office of most universities represents a strategic contingency for the various colleges within the university because it has veto or approval power over financial expenditures of the schools. Its approval of a request to spend money is far from certain. Thus, a contingency represents a source of uncertainty in the decision-making process. A contingency becomes *strategic* when it has the potential to alter the balance of interunit or interdepartmental power in such a way that interdependencies among the various units are changed.

Limiting the Influence of Political Behavior

Conflict and Negotiations

Introduction

Conflict in Organizations: Basic Considerations

Types of Conflict

If we are to try to understand the roots of conflict, we need to know what type of conflict is present. At least four *types of conflict* can be identified:

Levels of Conflict

In addition to different types of conflict, there exist several different *levels* of conflict. *Level* refers to the number of individuals involved in the conflict. That is, is the conflict within just one person, between two people, between two or more groups, or between two or more organizations? Both the causes of a conflict and the most effective means to resolve it can be affected by level. Four such levels can be identified:

The Positive and Negative Sides of Conflict

People often assume that all conflict is necessarily bad and should be eliminated. On the contrary, there are some circumstances in which a moderate amount of conflict can be helpful. For instance, conflict can lead to the search for new ideas and new mechanisms as solutions to organizational problems. Conflict can stimulate innovation and change. It can also facilitate employee motivation in cases where employees feel a need to excel and, as a result, push themselves in order to meet performance objectives.

Causes of Conflict in Organizations

Why Organizations Have So Much Conflict

A number of factors are known to facilitate organizational conflict under certain circumstances. In summarizing the literature, Robert Miles points to several specific examples.

R. Miles, *Macro Organizational Behavior* (Glenview, Ill.: Scott, Foresman, 1980). These are as follows:

A Model of the Conflict Process

Having examined specific factors that are known to facilitate conflict, we can ask how conflict comes about in organizations. The most commonly accepted model of the conflict process was developed by Kenneth Thomas.

K. Thomas, “Conflict and Conflict Management,” In M. D. Dunnette, ed., *Handbook of Industrial and Organizational Psychology* (Chicago: Rand McNally, 1976). This model, shown in **[link]**, consists of four stages: (1) frustration, (2) conceptualization, (3) behavior, and (4) outcome.

Resolving Conflict in Organizations

Common Strategies that Seldom Work

At least five conflict resolution techniques commonly found in organizations prove to be ineffective fairly consistently.

Miles, op. cit. In fact, not only do such techniques seldom work—in many cases, they actually serve to increase the problem. Nonetheless, they are found with alarming frequency in a wide array of business and public organizations. These five ineffective strategies are often associated with an avoidance approach and are described below.

Strategies for Preventing Conflict

On the more positive side, there are many things managers can do to reduce or actually solve dysfunctional conflict when it occurs. These fall into two categories: actions directed at conflict *prevention* and actions directed at conflict *reduction.* We shall start by examining conflict prevention techniques, because preventing conflict is often easier than reducing it once it begins. These include:

Strategies for Reducing Conflict

Where dysfunctional conflict already exists, something must be done, and managers may pursue one of at least two general approaches: they can try to change employee *attitudes,* or they can try to change employee *behaviors*. If they change behavior, open conflict is often reduced, but groups may still dislike one another; the conflict simply becomes less visible as the groups are separated from one another. Changing attitudes, on the other hand, often leads to fundamental changes in the ways that groups get along. However, it also takes considerably longer to accomplish than behavior change because it requires a fundamental change in social perceptions.

Negotiation Behavior

Stages of Negotiation

In general, negotiation and bargaining are likely to have four stages. Although the length or importance of each stage can vary from situation to situation or from one culture to another, the presence and sequence of these stages are quite common across situations and cultures.

J. Graham, “The Influence of Culture on Business Negotiations,” *Journal of International Business Studies,* Spring 1985, pp. 81–96.

Bargaining Strategies

Within the context of these four stages, both parties must select an appropriate strategy that they believe will assist them in the attainment of their objectives. In general, two rather distinct approaches to negotiation can be identified. These are distributive bargaining and integrative bargaining*.* A comparison of these two approaches is shown in **[link].**

The Negotiation Process

The negotiation process consists of identifying one’s desired goals—that is, what you are trying to get out of the exchange—and then developing suitable strategies aimed at reaching those goals. A key feature of one’s strategy is knowing one’s relative position in the bargaining process. That is, depending upon your relative position or strength, you may want to negotiate seriously or you may want to tell your opponent to “take it or leave it.” The dynamics of bargaining power can be extrapolated directly from the discussion of power **[link]** and indicate several conditions affecting this choice. For example, you may wish to negotiate when you value the exchange, when you value the relationship, and when commitment to the issue is high. In the opposite situation, you may be indifferent to serious bargaining.

Cultural Differences in International Negotiations

In view of the increased emphasis on international industrial competitiveness, it is important to understand what happens when the two parties to a negotiation come from different cultures or countries. A knowledge of cultural differences can assist the manager both in understanding the other party’s position and in striking the best possible deal given the circumstances.

Concluding Thoughts about Conflict and Negotiations

One of the classic negotiations approaches that you might encounter is the book, Getting to Yes. This book expound the authors favored method of conflict resolution, which they term *principled negotiation*. This method attempts to find an objective standard, typically based on existing precedents, for reaching an agreement that will be acceptable to both interested parties. Principled negotiation emphasizes the parties’ enduring interests, objectively existing resources, and available alternatives, rather than transient positions that the parties may choose to take during the negotiation. The outcome of a principled negotiation ultimately depends on the relative attractiveness of each party’s so-called BATNA: the “Best Alternative To a Negotiated Agreement”, which can be taken as a measure of the objective strength of a party’s bargaining stance. In general, the party with the more attractive BATNA gets the better of the deal. If both parties have attractive BATNAs, the best course of action may be not to reach an agreement at all.

Roger Fisher,William L. Ury and Bruce Patton, *Getting to Yes*, (New York: Penguin; 2012); Douglas D. Edwards, *De Dicto*, March 18, 2013, http://is.gd/ys8Hny.

External and Internal Organizational Environments and Corporate Culture

Introduction

The Organization's External Environment

Economic forces

Economically, “The strategic challenge of the next decade is navigating a world that is simultaneously integrating and fragmenting. Stock markets have set new records and economic volatility has fallen to historic lows, while political shocks on a scale unseen for generations have taken place. Seemingly contradictory realities do co-exist.”

Rawlinson, Paul, “A prediction for globalization in 2018”, *World Economic Forum*, January 22, 2018. https://www.weforum.org/agenda/2018/01/prediction-globalization-2018/ Overall, while economic data indicates that globalization has had a positive effect on the world economy, a dark side also shows that two-thirds of all households in 25 advanced-economy countries had incomes stagnate and/or decline between 2005 and 2014. Moreover, the U.K. and U.S. witnessed falling wages. Wealth distribution in these countries continues to decline. Income inequality globally is also rising. Other trends that also affect the global, regional, and local economies are discussed in this chapter as well as below.

Technological forces

Technological forces are another ubiquitous environmental influence on organizations. Speed, price, service, and quality of products and services are dimensions of organizations’ competitive advantage in this era. Information technologies and social media powered by the Internet and used by sharing-economy companies such as Airbnb and Uber have democratized and increased, if not leveled, competition across several industries, such as taxis, real estate rentals, and hospitality services. Companies across industry sectors cannot survive without using the Internet, social media, and sophisticated software in R&D (research and development), operations, marketing, finance, and sales. To manage and use big data in all these functional areas, organizations rely on technology.

Government and political forces

Government and political forces also affect industries and organizations. Recent events that have jarred the global economy—and are too early to predict the long-term outcomes of—are the United Kingdom’s exit from the European Union, wars in the Middle East, policies that question and disrupt free trade, health-care reform, and immigration—all of which increase uncertainty for businesses while creating opportunities for some industries and instability in others.

*Sociocultural* forces

Sociocultural environmental forces include different generations’ values, beliefs, attitudes, customs and traditions, habits, and lifestyles. More specifically, other aspects of societal cultures are education, language, religion, law, politics, and social organizations. The millennial (ages 20 to 35) workforce, for example, generally seeks work that engages and interests them. Members of this generation are also health conscious and eager to learn. Since this and the newer generation (Generation Z) are adept and accustomed to using technology—social media in particular—organizations must be ready and equipped to provide wellness, interesting, and a variety of learning and work experiences to attract and retain new talent. Millennials are also estimated to be the United States’ largest living adult generation in 2019. This generation numbered about 71 million compared with 74 million baby boomers (ages 52 to 70) in 2016. By 2019, an estimated 73 million millennials and 72 million boomers are projected. Because of immigration, millennials are estimated to increase until 2036.

Cilluffo, Anthony and Cohen, D’Vera, “10 demographic trends shaping the U. S. and the World in 2017”, *Pew Research Center*, April 27, 2017. http://www.pewresearch.org/fact-tank/2017/04/27/10-demographic-trends-shaping-the-u-s-and-the-world-in-2017/

Natural disasters and human-related problems

Natural disaster and human induced environmental problems are events such as high-impact hurricanes, extreme temperatures and the rise in CO2 emissions as well as ‘man-made’ environmental disasters such as water and food crises; biodiversity loss and ecosystem collapse; large-scale involuntary migration are a force that affects organizations. The 2018 Global Risks Report identified risks in the environmental category that also affect industries and companies—as well as continents and countries. These risks were ranked higher than average for both likelihood and impact over a 10-year horizon. The report showed that 2017 was characterized by high-impact hurricanes, extreme temperatures, and the first rise in carbon dioxide emissions in four years; “man-made” environmental disasters; water and food crises; biodiversity loss and ecosystem collapse; and large-scale involuntary migration to name a few. Authors of this study noted that “Biodiversity is being lost at mass-extinction rates, agricultural systems are under strain and pollution of the air and sea has become an increasingly pressing threat to human health.”

The Global Economic Report, 13th Edition, *World Economic Forum*, 2018. http://www3.weforum.org/docs/WEF_GRR18_Report.pdf Most vulnerable to rising seas are low-lying islands in the Indian and Pacific Oceans. The Republic of the Marshall Islands has more over 1,100 low-lying islands on 29 atolls that include island nations with hundreds of thousands of people. Predictions indicate that rising sea levels could reach 3 feet worldwide by 2300 or sooner. One report stated that in your child’s lifetime, Miami, Florida, could be underwater.Rice, Doyle, “Thousands of low-lying islands may become 'uninhabitable' within decades as seas rise”, *USA Today*, April 25, 2018. https://www.usatoday.com/story/news/world/2018/04/25/thousands-low-lying-islands-may-become-uninhabitable-within-decades-seas-rise/550659002/ Large sections of Louisiana’s marshes separating the ocean from the coastline are submerging. Oil producers and other related corporations are being sued by that state, claiming that fossil fuel emissions have contributed to natural disasters such as climate change. Many new companies in the United States are already constructing buildings to withstand increasing flooding and predicted rising water levels.

External Environments and Industries

Organizational Complexity

It is important to point out here that external (and internal) organizational complexity is not often as simple as it may seem. It has been defined as “…the amount of complexity derived from the environment where the organisation operates, such as the country, the markets, suppliers, customers and stakeholders; while internal complexity is the amount of complexity that is internal to the organisation itself, i.e. products, technologies, human resources, processes and organisational structure. Therefore, different aspects compose internal and external complexities.”

Eisenhardt, K. M., & Sull, D. N. (2001). “Strategy as simple rules”, *Harvard Business Review*, 79(1): 106-119

Organizational Designs and Structures

Types of Organizational Structures

Within the context of mechanistic versus organic structures, specific types of organizational structures in the United States historically evolved over at least three eras, as we discuss here before explaining types of organizational designs. During the first era, the mid-1800s to the late 1970s, organizations were mechanistic self-contained, top-down pyramids.

Anand, N. and R. Daft. (2007). What is the Right Organization Design? *Organizational Dynamics*, Vol. 36, No. 4, pp. 329–344. Emphasis was placed on internal organizational processes of taking in raw materials, transforming those into products, and turning them out to customers.

The Internal Organization and External Environments

Corporate Cultures

Organizing for Change in the 21st Century

Organizational Structure and Change

Introduction

Organizational Structures and Design

Types of Formal Organizational Structures

Now, Justin will need to choose and implement an administrative system for delegating duties, establishing oversight, and reporting on performance. They will do this by designing a formal structure that defines the responsibilities and accountability that correspond to specific duties throughout an organizational system. In this section, we’ll discuss the factors that any manager should consider when designing an organizational structure.

Mechanistic and Organic Structures

Using the principles of bureaucracy outlined above, managers like Justin have experimented with many different structures as way to shape the formal organization and potentially to capture some of the advantages of the informal organization. Generally, the application of these principles leads to some combination of the two kinds of structures that can be seen as anchors on a continuum (see **[link]**).

Business Structures

Aside from the considerations outlined above, organizations will often set structures according to the functional needs of the organization. A functional need refers to a feature of the organization or its environment that is necessary for organizational success. A business structure is designed to address these organizational needs. There are two common examples of functional structures illustrated here.

Organizational Change

Types of Change

There are many different types of changes in organizations. The first, consistent with what we talked about so far in this chapter, is structural change. This has to do with the changes in the overall formal relationships within an organization. Examples of structural change include reorganizing departments or business units, adding employee positions, or revising job roles and assignments. These changes should be made to support broader objectives such as to centralize or decentralize operations, empower employees, or find greater efficiencies.

The Organizational Life Cycle

Most organizations begin as very small systems that feature very loose structures. In a new venture, nearly every employee might contribute to many aspects of an organization’s work. As the business grows, the workload increases, and more workers are needed. Naturally, as the organization hires more and more people, employees being to specialize. Over time, these areas of specialization mature through differentiation, the process of organizing employees into groups that focus on specific functions in the organization. Usually, differentiated tasks should be organized in a way that makes them complementary, where each employee contributes an essential activity that supports the work and outputs of others in the organization.

Dimensions of Change

When considering how to assess the need for change in an organization, it can be helpful to think of three dimensions: the scope of change, the level of change, and the intentionality of change.

Managing Change

Basic Assumptions about Change

There are numerous models of change available to managers, and it can be difficult to discern the differences between them when creating a planned change process. Many approaches and methodologies for developing organizations and managing change have been developed and practiced during the last century. Indeed, it can be daunting and confusing to sort through and understand which models are most appropriate and relevant for a particular situation. Every model of change has its strengths and its limitations, and it is important to understand what these may be. The type of change methodology used in a particular situation should be matched to the needs of that situation.

Common Change Models

In this section, we will share four common approaches to OD and organizational change. Lewin’s model and Kotter’s model are common planned change processes that usually rely on the mechanisms of formal organization.

Lewin, K., *Field Theory in Social Science*, Harper & Row, 1951; and Kotter, J., *Leading Change*, Harvard Business School Press, 2012. The other two models, Cooperrider’s Appreciative Inquiry modelCooperrider, David L., *The Appreciative Inquiry Handbook: For Leaders of Change*, Berrett-Koehler Publishers, 2008.  and the Olson and Eoyang Complex Adaptive Systems model,Olson, Edwin E. and Eoyang, Glenda H., *Facilitating Organizational Change: Lessons from Complexity Science*, Pfeiffer, 2001. are designed to promote informal organizing and emergent change.

Planning a Change Management Process

The perspectives we have reviewed in this section provide a very brief menu of the options that are available to leaders as they consider how to manage change. In reality, many of these can be used together, and they should not be considered as mutually exclusive. For example, Kotter’s model can be seen as an overall framework for designing a long-term change process. The Open Space or appreciative inquiry models can be used in certain parts of the Kotter process—for example, in the creation of a guiding coalition or creating a vision for the change.

Human Resource Management

Introduction

An Introduction to Human Resource Management

Human Resource Management and Compliance

Performance Management

Influencing Employee Performance and Motivation

Building an Organization for the Future

Talent Development and Succession Planning

Conclusion

Human resource management is a complex and often difficult field because of the nature of the key area of focus—people. In working with people, we begin to understand both the expressed and the hidden drives—intentions and emotions that add complexity and additional context to the processes and tasks that we set forth. We also begin to understand that an organization is a group of individuals, and that human resources plays a critical role in ensuring that there are philosophies, structures, and processes in place to guide, teach, and motivate individual employees to perform at their best possible levels.

Stress and Well Being

Introduction

Problems of Work Adjustment

Work-Related Stress

For our purposes here, stress will be defined as a physical and emotional reaction to potentially threatening aspects of the environment. This definition points to a poor fit between individuals and their environments. Either excessive demands are being made, or reasonable demands are being made that individuals are ill-equipped to handle. Under stress, individuals are unable to respond to environmental stimuli without undue psychological and/or physiological damage, such as chronic fatigue, tension, or high blood pressure. This damage resulting from experienced stress is usually referred to as strain*.*

General Adaptation Syndrome

The general physiological response to stressful events is believed to follow a fairly consistent pattern known as the general adaptation syndrome.

H. Selye, *The Stress of Life* (New York: McGraw-Hill, 1956). General adaptation syndrome consists of three stages (see **[link]**). The first stage, *alarm,* occurs at the first sign of stress. Here the body prepares to fight stress by releasing hormones from the endocrine glands. During this initial stage, heartbeat and respiration increase, blood sugar level rises, muscles tense up, pupils dilate, and digestion slows. At this stage the body prepares basically for a “fight or flight” response. That is, the body prepares to either get away from the threat or to combat it. Following this initial shock, the body moves into the second stage, *resistance.* The body attempts to repair any damage and return to a condition of stability and equilibrium. If successful, physical signs of stress will disappear. If the stress continues long enough, however, the body’s capacity for adaptation becomes exhausted. In this third stage, *exhaustion,* defenses wear away, and the individual experiences a variety of stress-related illnesses, including headaches, ulcers, and high blood pressure. This third stage is the most severe and presents the greatest threat both to individuals and to organizations.

Types of Stress: Frustration and Anxiety

There are several different ways to categorize stress. However, from a managerial perspective, it is useful to focus on only two forms: frustration and anxiety. Frustration refers to a psychological reaction to an obstruction or impediment to goal-oriented behavior. Frustration occurs when an individual wishes to pursue a certain course of action but is prevented from doing so. This obstruction may be externally or internally caused. Examples of people experiencing obstacles that lead to frustration include a salesperson who continually fails to make a sale, a machine operator who cannot keep pace with the machine, or even a person ordering coffee from a machine that fails to return the correct change. The prevalence of frustration in work organizations should be obvious from this and other examples.

Organizational Influences on Stress

Occupational Differences

Tension and job stress are prevalent in our contemporary society and can be found in a wide variety of jobs. Consider, for example, the following quotes from interviews with working people. The first is from a bus driver:

Role Ambiguity

The first role process variable to be discussed here is role ambiguity*.* When individuals have inadequate information concerning their roles, they experience role ambiguity. Uncertainty over job definition takes many forms, including not knowing expectations for performance, not knowing how to meet those expectations, and not knowing the consequences of job behavior. Role ambiguity is particularly strong among managerial jobs, where role definitions and task specification lack clarity (refer to **[link]**). For example, the manager of accounts payable may not be sure of the quantity and quality standards for her department. The uncertainty of the absolute level of these two performance standards or their relative importance to each other makes predicting outcomes such as performance evaluation, salary increases, or promotion opportunities equally difficult. All of this contributes to increased stress for the manager. Role ambiguity can also occur among nonmanagerial employees—for example, those whose supervisors fail to make sufficient time to clarify role expectations, thus leaving them unsure of how best to contribute to departmental and organizational goals.

Role Conflict

The second role-related factor in stress is role conflict*.* This may be defined as the simultaneous occurrence of two (or more) sets of pressures or expectations; compliance with one would make it difficult to comply with the other. In other words, role conflict occurs when an employee is placed in a situation where contradictory demands are placed upon her. For instance, a factory worker may find himself in a situation where the supervisor is demanding greater output, yet the work group is demanding a restriction of output. Similarly, a secretary who reports to several supervisors may face a conflict over whose work to do first.

Role Overload and Underutilization

Finally, in addition to role ambiguity and conflict, a third aspect of role processes has also been found to represent an important influence on experienced stress—namely, the extent to which employees feel either overloaded or underutilized in their job responsibilities. Role overload is a condition in which individuals feel they are being asked to do more than time or ability permits. Individuals often experience role overload as a conflict between quantity and quality of performance. *Quantitative* overload consists of having more work than can be done in a given time period, such as a clerk expected to process 1,000 applications per day when only 850 are possible. Overload can be visualized as a continuum ranging from too little to do to too much to do. *Qualitative* role overload, on the other hand, consists of being taxed beyond one’s skills, abilities, and knowledge. It can be seen as a continuum ranging from too-easy work to too-difficult work. For example, a manager who is expected to increase sales but has little idea of why sales are down or what to do to get sales up can experience qualitative role overload. It is important to note that *either* extreme represents a bad fit between the abilities of the employee and the demands of the work environment. A good fit occurs at that point on both scales of workload where the abilities of the individual are relatively consistent with the demands of the job.

Personal Influences on Stress

The second major influence on job-related stress can be found in the employees themselves. As such, we will examine three individual-difference factors as they influence stress at work: (1) personal control, (2) Type A personality, and (3) rate of life change.

Personal Control

To begin with, we should acknowledge the importance of personal control as a factor in stress. Personal control represents the extent to which an employee actually has control over factors affecting effective job performance. If an employee is assigned a responsibility for something (landing an airplane, completing a report, meeting a deadline) but is not given an adequate opportunity to perform (because of too many planes, insufficient information, insufficient time), the employee loses personal control over the job and can experience increased stress. Personal control seems to work through the process of employee participation. That is, the more employees are allowed to participate in job-related matters, the more control they feel for project completion. On the other hand, if employees’ opinions, knowledge, and wishes are excluded from organizational operations, the resulting lack of participation can lead not only to increased stress and strain, but also to reduced productivity.

Type A Personality

Research has focused on what is perhaps the single most dangerous personal influence on experienced stress and subsequent physical harm. This characteristic was first introduced by Friedman and Rosenman and is called Type A personality*.*

M. Friedman and R. Rosenman, *Type A Behavior and your Heart* (New York: Knopf, 1974). Type A and Type B personalities are felt to be relatively stable personal characteristics exhibited by individuals. Type A personality is characterized by impatience, restlessness, aggressiveness, competitiveness, polyphasic activities (having many “irons in the fire” at one time), and being under considerable time pressure. Work activities are particularly important to Type A individuals, and they tend to freely invest long hours on the job to meet pressing (and recurring) deadlines. Type B people, on the other hand, experience fewer pressing deadlines or conflicts, are relatively free of any sense of time urgency or hostility, and are generally less competitive on the job. These differences are summarized in **[link]**.

Rate of Life Change

A third personal influence on experienced stress is the degree to which lives are stable or turbulent. A long-term research project by Holmes and Rahe has attempted to document the extent to which rate of life change generates stress in individuals and leads to the onset of disease or illness.

T. H. Holmes and R. H. Rahe, “The Social Readjustment Rating Scale,” *Journal of Psychosomatic Research,* August 1967, pp. 213–218. See also O. Behling and A. Darrow, “Managing Work-Related Stress,” in J. Rosenzweig and F. Kast, eds., Modules in Management (Chicago: SRA, 1984). As a result of their research, a variety of life events were identified and assigned points based upon the extent to which each event is related to stress and illness.

Buffering Effects of Work related Stress

Social Support

First, let us consider social support. Social support is simply the extent to which organization members feel their peers can be trusted, are interested in one another’s welfare, respect one another, and have a genuine positive regard for one another. When social support is present, individuals feel that they are not alone as they face the more prevalent stressors. The feeling that those around you really care about what happens to you and are willing to help blunts the severity of potential stressors and leads to less-painful side effects. For example, family support can serve as a buffer for executives on assignment in a foreign country and can reduce the stress associated with cross-cultural adjustment.

Hardiness

The second moderator of stress is hardiness. Hardiness represents a collection of personality characteristics that involve one’s ability to perceptually or behaviorally transform negative stressors into positive challenges. These characteristics include a sense of commitment to the importance of what one is doing, an internal locus of control (as noted above), and a sense of life challenge. In other words, people characterized by hardiness have a clear sense of where they are going and are not easily deterred by hurdles. The pressure of goal frustration does not deter them, because they invest themselves in the situation and push ahead. Simply put, these are people who refuse to give up.

S. Kobasa, S. Maddi, and S. Kahn, “Hardiness and Health: A Prospective Study,” *Journal of Personality and Social Psychology,* January 1982, pp. 168–177; J. Hull, R. VanTreuren, and S. Virnelli, “Hardiness and Health: A Critique and Alternative Approach,” *Journal of Personality and social Psychology,* September 1987, pp. 518–530.

Consequenses of Work Related Stress

In exploring major influences on stress, it was pointed out that the intensity with which a person experiences stress is a function of organizational factors and personal factors, moderated by the degree of social support in the work environment and by hardiness. We come now to an examination of major *consequences* of work-related stress. Here we will attempt to answer the “so what?” question. Why should managers be interested in stress and resulting strain?

Stress and Health

High degrees of stress are typically accompanied by severe anxiety and/or frustration, high blood pressure, and high cholesterol levels. These psychological and physiological changes contribute to the impairment of health in several different ways. Most important, high stress contributes to heart disease.

Cooper and Payne, op. cit. The relationship between high job stress and heart disease is well established. In view of the fact that well over a half-million people die of heart disease every year, the impact of stress is important.D. Glass, “Stress, Competition, and Heart Attacks,” *Psychology Today,* July 1976, pp. 55–57.

Stress and Counterproductive Behavior

It is useful from a managerial standpoint to consider several forms of counterproductive behavior that are known to result from prolonged stress. These counterproductive behaviors include turnover and absenteeism, alcoholism and drug abuse, and aggression and sabotage.

Stress and Job Performance

A major concern of management is the effects of stress on job performance. The relationship is not as simple as might be supposed. The stress-performance relationship resembles an inverted J-curve, as shown in **[link]**. At very low or *no-stress* levels, individuals maintain their current levels of performance. Under these conditions, individuals are not activated, do not experience any stress-related physical strain, and probably see no reason to change their performance levels. Note that this performance level may be high or low. In any event, an absence of stress probably would not cause any change.

Stress and Burnout

When job-related stress is prolonged, poor job performance such as that described above often moves into a more critical phase, known as burnout. Burnout is a general feeling of exhaustion that can develop when a person simultaneously experiences too much pressure to perform and too few sources of satisfaction.

S. Jackson, R. Schwab, and R. Schuler, “Toward an Understanding of the Burnout Phenomenon,” *Journal of Applied Psychology*, November 1986, pp. 630–640.

Coping with Work related Stress

Individual Strategies

There are many things people can do to help eliminate the level of experienced stress or, at the very least, to help cope with continuing high stress. Consider the following:

Organizational Strategies

Because managers usually have more control over the working environment than do subordinates, it seems only natural that they have more opportunity to contribute to a reduction of work-related stress. Among their activities, managers may include the following eight strategies.

Entrepreneurship

Introduction

Overview of Entrepreneurship

Global Entrepreneurship Prevalence

Each year, the Global Entrepreneurship Monitor (GEM)

Global Entrepreneurship Monitor. 2018. GEM 2017/2018 Global Report. https://gemconsortium.org/report/50012 study gathers data from 60+ countries to determine how many individuals are engaged in various phases of entrepreneurship. The first phase captures **potential entrepreneurs** who believe that they have the capacity and knowledge to start a venture and don’t fear failure. If you are reading this book and believe that you are developing the skills necessary to someday start your own company, and you believe that the risk-reward payoff is promising, then you fit this definition of a potential entrepreneur. The next GEM category is **nascent entrepreneurs** who have set up or are in the process of setting up a venture that they will own/co-own that is less than three months old and has not yet generated wages/salaries. **New business owners** operate a business for over three months but less than three years. And finally, **established business owners** actively run a business that is over three and a half years old. GEM researchers calculate a Total Entrepreneurial Activity (TEA) rate, which is the percentage of the adult population (ages 18–64) who are either nascent entrepreneurs or owner-managers of a new business. **[link]** provides an overview of the GEM model to measure entrepreneurial activity in a given economy. As shown, GEM data captures attributes of the individual entrepreneur, industry sector, and expected impact in terms of potential business growth, use of innovation, and share of international customers. **[link]** shows the most recently available rates of entrepreneurial activities across geographic regions. These regions are classified by their development status, with factor-driven countries the least developed; these countries subsist primarily on agriculture and extraction businesses, and rely heavily on unskilled labor and natural resources. Efficiency-driven economies are more competitive and utilize more advanced and efficient production processes to provide better-quality products and services. Innovation-driven economies are the most developed, typically relying on knowledge-intensive industries and an expanded service sector. As shown, entrepreneurial activity rates range from nearly 20 percent of the adult population in Ecuador to lows of less than 5 percent in several countries such as Bulgaria, Bosnia & Herzegovina, Italy, and Japan. Entrepreneurship rates can be extremely high in factor-driven countries as there are fewer traditional businesses and entrepreneurship may be the only good opportunity in the labor market. Among innovation-driven economies, the U.S. has one of the highest TEA levels, perhaps due to the American culture of individualism and the many organizations that support entrepreneurship. Another key factor is societal value, which we review in the next section.

Societal Value for Global Entrepreneurship

The GEM research project also examines societal values for entrepreneurship, which can help drive an abundance or lack of entrepreneurs. In the 2017/2018 report, across 52 economies, there was strong support for entrepreneurship as a good career choice. The lowest levels were reported in innovation-driven economies, perhaps because there are many good corporate career options. GEM researchers identified that almost 70 percent of the adult population believes that entrepreneurs enjoy high status within their societies. There are slight differences, with factor-driven countries reporting higher status levels as compared to innovation- and efficiency-driven countries. Moreover, across 52 economies, about 61 percent of adults believe that entrepreneurs garner substantial media attention, with the higher levels in increasingly developed economies. This data suggests that when entrepreneurs are portrayed favorably in the media, individuals will be more likely to consider entrepreneurship as a career.

Characteristics of Successful Entrepreneurs

Entrepreneurial Personality

Studies of the entrepreneurial personality find that entrepreneurs share certain key traits. Most entrepreneurs are:

Managerial Ability and Technical Knowledge

A person with all the characteristics of an entrepreneur might still lack the necessary business skills to run a successful company. Entrepreneurs need the technical knowledge to carry out their ideas and the managerial ability to organize a company, develop operating strategies, obtain financing, and supervise day-to-day activities. Jim Crane, who built Eagle Global Logistics from a start-up into a \$250 million company, addressed a group at a meeting, saying, “I have never run a \$250 million company before, so you guys are going to have to start running this business.”

Keith McFarland, "What Makes Them Tick," Inc. 500, October 19, 2005, http://www.inc.com.

Business Model Canvas

Nine Building Blocks of the Business Model Canvas

*Customer segments*: Without customers, businesses cannot survive. Businesses must identify and understand their customers, and they can group these customers into segments with common characteristics.

Business Model Canvas Application: Apple

To best illustrate the business model canvas, we can take a look at Apple illustrated in **[link]**.

New Venture Financing

Types of Capital

There are two main types of capital for entrepreneurs. Entrepreneurs can access **debt capital**, which is borrowed money that must be repaid at some agreed-upon future date (e.g., from banks, credit cards, or finance companies), and **equity capital**, which is the owner’s investment in the company and does not have a specific date for repayment (e.g., angel investors, venture capital).

Sources of Capital

Entrepreneurs can utilize capital from several sources. The most common type of capital is personal savings. By using personal savings, the venture eliminates the expectation of repayment on a loan, and the entrepreneur does not face as much financial backlash when profits do not meet expectations. Friends and relatives can often be a fast way to gain capital. However, financial issues may create tension in these relationships. **Angel investors** are individual investors or groups of experienced investors who provide venture financing from their own funds. **Venture capital** is financing obtained from venture capitalists, investment firms that specialize in financing small, high-growth companies and receive an ownership interest and a voice in management in return for their investment. Internal funds are retained earnings within a firm that can be reinvested into the business.

Design Thinking

Stanford Design Thinking

Source: Maggie Zhao. 6 Tips from IDEO designers on how to unlock insightful conversation. https://www.ideou.com/blogs/inspiration/6-tips-from-ideo-designers-on-how-to-unlock-insightful-conversation; https://dschool.stanford.edu/resources.

Optimal Support for Entrepreneurship

Less Discouragement: Reducing Barriers

Regulations, like laws, set rules that help entrepreneurs predict what will happen if they take certain risks. For this reason, regulations should be clear and should not change quickly or merely when a new political majority takes power. In general, a regulation is a restriction, and any restriction tends to reduce innovation by limiting options. For this reason, reducing regulations tends to unleash innovation. This is not always the case. For example, zoning restrictions might push similar businesses to be near one another, leading to increased cross-fertilization of ideas. Also, when government enforces property rights including intellectual property, preventing others from using that property, entrepreneurs feel more secure in employing their capital. Similarly, entrepreneurs feel more secure when their government refrains from appropriating property via eminent domain or socialist takeovers.

More Discouragement: Increasing Positive Incentives

Government can reduce the cost of technological innovation by simply giving government-produced technology to the private sector so that the technology can be commercialized. Government also can change the rules of financing to reduce the transaction cost or the actual cost of acquiring funds. For instance, government can make it easier or less costly for businesses to receive government loans, can subsidize lending, or can subsidize borrowing. All of these efforts come at a cost either directly, at the cost of the subsidy, or indirectly, by providing cheaper funds to riskier ventures than the private loan market would otherwise provide.

Scientific Method in Organizational Research

Theory Building in Organizations

Briefly stated, a *theory* is a set of statements that serves to explain the manner in which certain concepts or variables are related. These statements result both from our present level of knowledge on the topic and from our assumptions about the variables themselves. The theory allows us to deduce logical propositions, or hypotheses, that can be tested in the field or laboratory. In short, a theory is a technique that helps us understand how variables fit together. Their use in research and in management is invaluable.

Scientific Method in Organizational Behavior Research

Cohen and Nagel suggested that there are four basic “ways of knowing.” [M. Cohen and E. Nagel, *An Introduction to Logic and Scientific Inquiry* (New York: Harcourt, Brace and Company, 1943). See also E. Lawler, A. Mohrman, S. Mohrman, G. Ledford, and T. Cummings, *Doing Research That Is Useful for Theory and Practice* (San Francisco: Jossey-Bass, 1985).] Managers and researchers use all four of these techniques: tenacity, intuition, authority, and science. When managers form a belief (e.g., a happy worker is a productive worker) and continue to hold that belief out of habit and often in spite of contradictory information, they are using *tenacity.* They use *intuition* when they feel the answer is self-evident or when they have a hunch about how to solve a problem. They use *authority* when they seek an answer to a problem from an expert or consultant who supposedly has experience in the area. Finally, they use *science*—perhaps too seldom—when they are convinced that the three previous methods allow for too much subjectivity in interpretation.

Basic Research Designs

Although a detailed discussion of the various research designs is beyond the scope of this Appendix, we can review several common research designs that have been used to collect data in the study of people at work. Specifically, we will examine five different research designs that are frequently used to study behavior at work: (1) naturalistic observation, (2) survey research, (3) field study, (4) field experiment, and (5) laboratory experiment. In general, the level of rigor of the design increases as we move from naturalistic observation toward laboratory study. Unfortunately, so do the costs, in many cases.

Scoring Keys for Self-Assessment Exercises

Chapter 2

Chapter 3

Chapter 4

Chapter 8

Chapter 9

Chapter 13

Chapter 14

Chapter 18