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Copyright © 2015 by SAGE Publications, Inc.

All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the publisher.

Printed in the United States of America.

Library of Congress Cataloging-in-Publication Data

Nahavandi, Afsaneh.

Organizational behavior / Afsaneh Nahavandi, University of San Diego, Robert B. Denhardt, University of Southern California, Janet V. Denhardt, University of Southern California, Maria P. Aristigueta, University of Delaware.

pages cm

ISBN 978-1-4522-7860-5 (hardcover)

1. Organizational behavior. I. Title. HD58.7.N338 2015 302.3′5—dc23 2013032049

This book is printed on acid-free paper.

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Brief Contents

PREFACE ABOUT THE AUTHORS

PART I: INTRODUCTION

Chapter 1: Introduction to Organizational Behavior: History, Trends, and Ethics

PART II: INDIVIDUAL BEHAVIOR AND CHARACTERISTICS

Chapter 2: Culture and Diversity: Developing a Cultural Mindset Chapter 3: Self-Awareness, Personality, Emotions, and Values Chapter 4: Perception and Attribution Chapter 5: Motivation and Engagement Chapter 6: Managing Stress Chapter 7: Fostering Creativity and Innovation

PART III: GROUP AND TEAM PROCESSES

Chapter 8: Decision Making Chapter 9: Communicating Effectively With Others Chapter 10: Working in Groups and Teams Chapter 11: Managing Conflict and Negotiation Chapter 12: Leadership: Classic to Contemporary

PART IV: ORGANIZATIONAL CONTEXT

Chapter 13: Organizational Power and Politics Chapter 14: Organizational Strategy and Structure Chapter 15: Organizational Culture and Change

GLOSSARY PHOTO CREDITS AUTHOR INDEX SUBJECT INDEX

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Detailed Contents

PREFACE ABOUT THE AUTHORS

PART I. INTRODUCTION

Chapter 1. Introduction to Organizational Behavior: History, Trends, and Ethics What Is Organizational Behavior?

Individual, Group, and Organizational Levels of Analysis Social, Economic, and Ethical Context

A Brief History of Organizational Behavior The Classical Period The Humanistic Period Modern Organizational Behavior

Current Trends in Organizational Behavior Positive Organizational Behavior Neuroscience and Organizational Behavior

People Skills in Management Differentiating Between Managers and Leaders What Managers Do What Leaders Do Influence of Managers

Creativity and Change in a Global Society Creativity and Change A Global Society

Global Society: Global Ambassadors Mentor Emerging Women Leaders Across the Globe The Ethical Environment

Personal Integrity A Cultural Mindset Social Responsibility

Creativity and Change: Do Well, Do Good, or Do Both? Global Sustainability

Summary and Applications for Managers Key Terms Exercises Cases

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PART II. INDIVIDUAL BEHAVIOR AND CHARACTERISTICS

Chapter 2. Culture and Diversity: Developing a Cultural Mindset What Is Culture and Why Does It Matter?

Defining Culture Characteristics of Culture Three Levels of Culture The Cultural Iceberg: What We Know and What We Don’t Know Sophisticated Stereotypes

Diversity in Today’s Workplace Primary and Secondary Dimensions of Diversity Benefits and Challenges of Workplace Diversity Legal Considerations Gender Diversity

Global Society: DeLoitte Builds Diversity Generational Diversity

National Culture Hall’s Cultural Context Framework Hofstede’s Five Cultural Dimensions Global Leadership and Organizational Behavior Effectiveness—GLOBE

Culture and Individual Behavior Developing a Cultural Mindset Creativity and Change: Responding to Cultural Differences

Cultural Mindset Components The Cultural Mindset in Organizations

Summary and Applications for Managers Key Terms Exercises Cases

Chapter 3. Self-Awareness, Personality, Emotions, and Values Understanding Individual Differences

Influence of Individual Differences: Behavioral Range Why Is Self-Awareness Important?

Skills and Abilities Skills Abilities

Creativity and Change: The Musical Instrument Museum Emotions

Emotional Intelligence Emotions in the Workplace

Personality Traits Myers-Briggs Type Inventory (MBTI)

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Big Five Personality Traits Narcissism Proactive Personality

Values The Importance of Values

Global Society: The Right Way to Apologize Developing Self-Awareness Summary and Applications for Managers Key Terms Exercises Cases

Chapter 4. Perception and Attribution What Is Perception?

Perception Process Culture and Perception

The Three Stages of Perception Attention Stage Organization Stage

Global Society: Heineken’s PR Challenge Interpretation and Judgment Stage

The Attribution Process Information We Use to Make Attributions Making Attributions About Our Own behavior

Perceptual Biases Fundamental Attribution Error Stereotypes Halo-Horns and Similarity Effects Primacy and Recency Self-Serving Bias Difficulty in Overcoming Biases Managing Biases

Creativity and Change: Speaking of Leadership … Masculine or Feminine? Summary and Applications for Managers Key Terms Exercises Cases

Chapter 5. Motivation and Engagement Approaches to Motivation

Why Does Motivation Matter? Need Theories Expectancy Theory

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Global Society: Motivation at Semco Goal Theories Equity Theory Reinforcement, Reward, and Punishment

Current Debates and Perspectives Motivation and Life Stages “Anti-Motivation” Theories

Trust and Engagement Creativity and Change: General Stanley McChrystal Creativity and Engagement Summary and Applications for Managers Key Terms Exercises Cases

Chapter 6. Managing Stress Defining Stress

The General Adaptation Syndrome The Consequences and Costs of Stress Stress: Good, Bad, and Ugly

Sources of Stress Individual Factors Organizational Factors

Creativity and Change: A Top Management Team Under Stress Coping With and Managing Stress

Personal Strategies Global Society: Nokia’s Culture

Organizational Strategies Summary and Applications for Managers Key Terms Exercises Cases

Chapter 7. Fostering Creativity and Innovation The Importance of Creativity and Innovation What Is Creativity?

Views of Creativity Characteristics of Creative Individuals Conceptual Skills and Abilities Creativity as Behavior Creativity as a Process An Integrated Perspective on Creativity

The Creative Process

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Roles in the Creative Process Social and Structural Factors

Impediments to Creativity Defining the Problem Incorrectly Judging Ideas Too Quickly Stopping at the First Acceptable Idea Lack of Support Hostility to Sharing Knowledge

Fostering Creativity in Organizations Creativity and Change: Implementing Innovative Ideas: Sol and Robert Price

Challenging Work Supportive Supervision Organizational and Work Group Culture

Global Society: Alessi Embraces Failure Workload Pressures and Resources Positive Emotions

Fostering Creativity: Techniques and Tools The Idea Box or Matrix Analysis Synectics Mindmapping Design Thinking

Enhancing Your Personal Creativity Summary and Applications for Managers Key Terms Exercises Cases

PART III. GROUP AND TEAM PROCESSES

Chapter 8. Decision Making Defining Decision Making

Levels of Decision Making Decision Making and Problem Solving Bottlenecks in Decision Making Why Decisions Fail

Ethical Decision Making Generating Alternatives Creativity and Change: Cirque du Soleil Implementing Good Decisions Models of Decision Making

The Rational Model The Organizational Process Model

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The Collaborative Model Other Decision Making Models

Global Society: Asia’s Scottish Company Who Should Be Involved in Decision Making?

Involving the Group to Prevent Poor Decisions Levels of Participation and Styles of Decision Making Diversity: Opportunities and Challenges for Decision Making

Techniques for Making Decisions The Decision-Making Primer Focus Groups Brainstorming Cost-Benefit and Cost-Effectiveness Analysis Nominal Group Technique Evidence-Based Management

Summary and Applications for Managers Key Terms Exercises Cases

Chapter 9. Communicating Effectively With Others Defining Communication The Communication Process Improving Interpersonal Communication

Barriers to Effective Communication Oral Communication

Global Society: Avon’s Global Reach Active Listening Supportive Communication Dialogue

Creativity and Change: Three Lessons in Contemporary Communications Electronic Communication

Specialized Forms of Communication Persuasive Communication Coaching and Personal Counseling Conducting Effective Meetings Writing Memos, Reports, and Proposals

Summary and Applications for Managers Key Terms Exercises Cases

Chapter 10. Working in Groups and Teams Defining Groups and Teams

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Structural Issues in Groups and Teams Group Size and Composition Roles and Norms Cohesion, Conformity, and Deviance

Global Society: Management With Traditional Roots Developing Teams

The Forming Stage The Norming Stage The Storming Stage The Performing Stage Characteristics of Effective Teams

Types of Teams Top Management Teams Project Teams Process-Improvement Teams Cross-Functional Teams Self-Directed Teams

Creativity and Change: The Chilean Mine Disaster Virtual Teams

Helping Teams Become Effective Clear Goals Building Cohesion and Managing Diversity Developing Trust Team Leadership Training Managing Team Conflict Reward Structure Organizational Structure Building an Ethical and Collaborative Culture

Summary and Applications for Managers Key Terms Exercises Cases

Chapter 11. Managing Conflict and Negotiation Defining Conflict

Views of Conflict Consequences of Conflict Types and Levels of Conflict

Culture and Conflict Sources of Conflict

Personal Sources of Conflict

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Organizational Sources of Conflict Creativity and Change: Helping Relationships Managing Conflict

Two General Approaches Individual Conflict Management Styles Preventing and Reducing Conflict Increasing or Stimulating Conflict

Negotiating The Negotiation Process Ethics and Negotiation Culture and Negotiation

Global Society: Cross-Cultural Negotiations Common Mistakes in Negotiation Negotiation Strategies

Summary and Applications for Managers Key Terms Exercises Cases

Chapter 12. Leadership: Classic to Contemporary Thinking About Leadership Traditional Approaches to Leadership

The Trait Approach The Behavior Approach The Contingency Approach

Contemporary Approaches to Leadership From Traits to Skills and Competencies The Transformational Approach Value-Based Leadership Authentic Leadership Shared Leadership Collaborative Leadership Positive Leadership Emotions and Leadership

Creativity and Change: Fully Human Leadership The Ethics of Leadership Global Society: Leading the Global Fund for Women

The Follower Leadership, Morality, and Globalization Ethical Issues

Creative Leadership Summary and Applications for Managers

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Key Terms Exercises Cases

PART IV. ORGANIZATIONAL CONTEXT

Chapter 13. Organizational Power and Politics Thinking About Power and Politics

Early Voices Changing Perspectives on Power Questioning Power and Authority

Sources of Power for Individuals Legitimate Power Reward Power Coercive Power Expert Power Referent Power Balancing Power Structural Aspects of Power

Is Power a Positive Force or a Destructive Force? Global Society: Luxottica and the Power of Controlling Resources

Positive Aspects of Power Negative Aspects of Power

Managing Organizational Politics and Being Influential Creativity and Change: Power and Ethics

Gaining Positive Political Skills Empowerment: More Than Delegation

Summary and Applications for Managers Key Terms Exercises Cases

Chapter 14. Organizational Strategy and Structure The Organizational Context The Organizational Environment

Enacting the Environment Environmental Uncertainty

The Organization and Technology Global Society: Indra Nooyi: The Indian-Born CEO of Pepsi

Types of Technology Effects of Changing Technology

Strategic Basics: Mission, Goals, and Strategy Managing Strategy

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Low-Cost Strategies Versus Differentiation Organizational Structure

Basic Components of Structure Organic and Mechanistic Organizations

Creativity and Change: Charles Merrill Traditional Structural Options

Managing in an Uncertain Environment Gathering Information Adapting Internal Culture and Structure Changing the Environment

Summary and Applications for Managers Key Terms Exercises Cases

Chapter 15. Organizational Culture and Change The Relationship Between Culture and Change

Change Processes in Organizations Organizational Culture

Elements of Organizational Culture Individual Behavior and Organizational Culture Cultural Change

Approaches to Understanding Change Classic Approaches to Managing Change Organizational Learning

Creativity and Change: A Culture of Responsibility Large Systems Change

Global Society: Scandal at Parmalat Newer Approaches to Bringing About Change

Change Through Management Action or Reorganization Change Through Organization Development Change Through Appreciative Inquiry

Steps in Organizational Transformations Creativity and Change: Hyundai Soars The Ethics of Managing Change Summary and Applications for Managers Key Terms Exercises Cases

GLOSSARY

PHOTO CREDITS

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AUTHOR INDEX

SUBJECT INDEX

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Preface

Failure is simply the opportunity to begin again, this time more intelligently. —Henry Ford

The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.

—Peter Drucker

Our Approach: Knowledge and Action We believe organizational behavior is not just a field of study. Organizational behavior is a practical discipline that enables us to act effectively and responsibly. Our text provides an action orientation that demonstrates how organizational behavior is a way of thinking and acting that is of critical importance to leaders, to managers, to their employees, and to their customers.

This book is about helping students understand, manage, and change their own behavior, as well as influence the behavior of others. We believe that the ability to lead and manage effectively requires knowledge, creativity, and practice. No matter what organizational setting students encounter, there are certain skills they will need to address the “people” challenges they will face. Questions of motivation, power and authority, communications, group dynamics, and leadership arise in organizations large and small and in all sectors. Whether managing the corner store, a large manufacturing firm, a major league baseball team, a nonprofit foundation, a city department, or a day spa, questions about managing people may be the most important ones future leaders face.

Many organizational behavior texts focus on the study of organizational behavior rather than the practical application of these lessons, that is, how you can more effectively manage human behavior in real-world circumstances. This book has a distinctive “action orientation” that is reflected in our pedagogy. The book is designed with three concepts in mind:

1. The importance of understanding the behavior, motivations, and actions of individuals in organizations

2. A focus on building the knowledge, self-awareness, and skills appropriate and necessary for leadership and organizational change

3. An emphasis on students learning not only from readings and discussions but also

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from their own experiences

We are not only concerned with students learning about organizational behavior; we also want them to be able to acquire practical skills and develop habits of mind that will support continued learning from their experiences. To develop the capacity for action, a different style of learning is necessary, something that goes beyond just reading about a topic. Learning the practical skills to support effective and responsible action requires not only discussing new material but also improving students’ capacity to act in pursuit of ideas.

In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don’t have the first, the other two will kill you.

—Warren Buffet, CEO, Berkshire Hathaway

Target Audience Organizational Behavior is a core text for organizational behavior courses in schools of business as well as in public administration, nonprofit management, educational administration, and health care management. While the text is primarily oriented toward undergraduates, it is also suitable for graduate-level courses. The book covers all the topics in organizational behavior and the all-important “people skills,” but does so with a practical focus on how students, as future managers and leaders, can think and act creatively to motivate employees, address change, and overcome challenges in today’s interconnected global society.

Our Goals Our intent is to provide lessons and perspectives that will enhance students’ understanding of their own behavior and their ability to influence the behavior of others. To that end, this book examines the knowledge and skills acquired by the most successful leaders and managers, draws from the research and observations of scholars from various fields, and provides opportunities for students to develop both the skills and the habits of mind that will allow them to learn now and to continue to learn throughout their careers. Accordingly, the goals of this book are as follows:

1. To explore some of the most contemporary approaches to leading and managing people

2. To understand the importance and impact of the global context and of culture on people and organizations

3. To examine the factors that affect human behavior in organizations

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4. To understand human behavior from multiple levels: individual, group, and organizational

5. To develop critical management and leadership skills and provide students with the capacity to act effectively and responsibly given the stress, complexity, and uncertainty of the “real world”

The book is organized into four parts titled Introduction, Individual Behavior and Characteristics, Group and Team Processes, and Organizational Context. Note that in contrast to other texts that discuss the individual, the group, and the organization, we emphasize the interaction between these levels. For example, the topic of emotions is introduced in Chapter 3, then revisited in Chapters 8 and 11.

Themes To be effective, leaders and managers must understand their global and cultural contexts and their impact on people and organizations. They must use their knowledge, skills, and creativity to motivate others, function well in groups and teams, communicate clearly, manage conflict, and navigate change successfully. They must cope with their own and their employees’ stress, be self-reflective and open to learning and growth, and maintain their commitment to their work in spite of sometimes unreachable goals and limited resources.

We present organizational behavior topics by weaving four themes throughout the chapters and integrate them in cases, examples, exercises, self-assessments, and application-oriented questions.

Global and Cultural Perspective Organizations today function in a global environment where culture plays a central role. AACSB International, the business school accrediting body, considers global and cultural forces and cultural diversity among the key challenges managers will face in the future. Whether working across national boundaries or with diverse populations within a country, today’s managers and leaders must have an appreciation and understanding of the importance and impact of culture. Chapter 1 introduces students to the concept of globalization, explaining how our global society affects individual engagements, social relationships, and social institutions. Chapter 2 focuses on workplace diversity, explaining how culture, ethnicity, gender, and age influence behavior in organizations.

Creativity and Change

The complexity, interconnectedness, and dynamic nature of today’s organizations requires managers and leaders who can think and act creatively to navigate the ever-changing organizational landscape. The 2010 IBM Global CEO Study, based on face-to-face

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interviews with 1,541 CEOs, general managers, and senior public sector leaders around the world, concluded that the single most important attribute of future leaders will be creativity. “Creative leaders invite disruptive innovation, encourage others to drop outdated approaches and take balanced risks. They are open-minded and inventive in expanding their management and communication styles, particularly to engage with a new generation of employees, partners, and customers.” Chapter 7 helps students understand the creative process and common impediments to creativity as well as how to overcome those challenges, and introduces techniques for enhancing their own and their employees’ creativity. Creativity and Change boxes illustrate how organizations around the globe react to change creatively.

Thinking and Acting Ethically

Integrity and acting in an ethical manner are essential to effective leadership and the survival of our organizations. Chapter 1 frames organizational behavior using an ethical context. Ethics is then incorporated in subsequent chapters, showing students how ethics relates to topics such as decision making, teams, negotiation, leadership, and managing change.

Positive Psychology and Strength-Based Approach We wrote this text with a strong emphasis on positive psychology. We believe that effective managers must be aware of their values and their strengths. We focus on teaching students to build self-awareness and the importance of investing in followers’ and employees’ strengths rather than weaknesses as a way to enhance individual and organizational success and create even more positive conditions. The importance of positive psychology and self- awareness are introduced in Chapters 1 and 2, then echoed in the following chapters.

Action-Orientation In each chapter, we present a review of the relevant material related to each of the topics, and we provide some specific and immediate ideas and tools that will help students aspire to be managers and leaders. The presentation of various topics in this ordered and pedagogically sound manner engages students immediately in the material as a personal concern, acquaints them with the relevant and important thinking on the topic, gives them immediate and practical guidelines for action, and then leads them through case analysis, critical thinking questions, and exercises to test and improve their skills and abilities.

To achieve our goals, we present a solid foundation of ideas as well as real-world illustrations and applications that will help students develop their own personal, interpersonal, and institutional skills in areas such as motivation, creativity, decision making, communication, and group dynamics—what we have called the people or process skills.

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Real-World Illustrations

• Chapter-Opening Cases begin each chapter to set the stage for the material covered in the chapter. They provide students with an example of an organization that faces the challenges discussed in the chapter and allow them to see how the material they will read can be applied.

• Chapter-Concluding Cases put students in the driver’s seat and allow them to respond to an organizational behavior challenge.

• Global Society vignettes illustrate organizational behavior concepts in an international context. Discussion questions urge students to deepen their understanding of globalization and culture.

• Creativity and Change vignettes spotlight organizations that are responding creatively to change. Discussion questions help students take their understanding to the next level.

Applications

• Self-Assessments are interspersed throughout the chapters to allow students to gain awareness of their values, personal characteristics, and strengths.

• What Would You Do? boxes present hypothetical scenarios that require students to immediately interact with a chapter concept and connect it to their own behavior.

• What Do You Think? boxes challenge students to exercise critical thinking in making judgments about significant issues. These questions help students think like future managers by presenting them with issues commonly facing those in business, in public, and in nonprofit organizations, especially judgments concerning ethical issues.

• Applications for Managers end each chapter with a list of specific action recommendations that help students tie the information provided in the chapter to managerial action.

• Exercises help students apply chapter concepts and develop their skills.

We believe the above tools provide information as well as opportunities for students to enhance their management and leadership skills and broaden their perspectives.

Our goal is to provide substantive insights that will prepare students to be effective managers, feel more competent and confident in their interactions with people, lead others in their work to achieve a better world, and gain greater satisfaction and joy from the career they have chosen.

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Acknowledgments We thank our many friends and colleagues at the University of Southern California, Arizona State University, and the University of Delaware who contributed to this book and provided special knowledge and insight. We also thank a group of dedicated practitioners who helped substantially enhance our understanding of how to most effectively manage and positively influence behavior in organizations. We dedicate this book to both groups!

We’d also like to thank the following reviewers who provided valuable insights and critiques during the development of this text:

Derek D. Bardell, Delgado Community College

Carl Blencke, University of Central Florida

Ralph R. Braithwaite, University of Hartford

Serena C. Brenneman, University of Arkansas

Bill Carnes, Metropolitan State College of Denver

Maryalice Citera, State University of New York at New Paltz

Nicole L. Cundiff, University of Alaska Fairbanks

Diane Denslow, University of North Florida

Aimee Dars Ellis, Ithaca College

Gerald G. GeRue, Rock Valley College

Bruce Gillies, California Lutheran University

Karen N. Gleason, Viterbo University

Lynn Godkin, Lamar University

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Marvin Gordon, University of Illinois at Chicago

Paul Govekar, Ohio Northern University

Melissa Gruys, Wright State University

Michael A. Guerra, Lincoln University

Nell Tabor Hartley, Robert Morris University

James Jeremiah, Ashford University

James Katzenstein, California State University, Dominguez Hills

Aleksey Kolpakav, Indiana University

Cayce Lawrence, Christian Brothers University

Edward F. Lisoski, Angelo State University

Gypsi Luck, California State University, San Bernardino

Kenyetta McCurty, Amridge University

Rakesh Mittal, New Mexico State University

Dan Morrell, Middle Tennessee State University

Cynthia Busin Nicola, Carlow University

Patricia K. O’Connell, Lourdes University

Deborah Olson, University of LaVerne

Floyd Ormsbee, Clarkson University

John Overby, The University of Tennessee at Martin

Michael Palanski, Rochester Institute of Technology

Kannan Ramanathan, University of Texas at Dallas

Hindy Lauer Schachter, New Jersey Institute of Technology

Andrea Smith-Hunter, Siena College

Rudy Soliz, Houston Community College

Martha C. Spears, Winthrop University

Lisa Stamatelos, Pace University

Joe Stauffer, The University of Texas of the Permian Basin

David L. Sturges, University of Texas-Pan American

Marjolijn van der Velde, Davenport University

J. Lee Whittington, University of Dallas

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Shirley A. Wilson, Bryant University

Marilyn Young, The University of Texas at Tyler

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About the Authors

Afsaneh Nahavandi is Professor and Chair of the Leadership Studies department at the University of San Diego and Professor Emeritus at Arizona State University. Previously, she was Associate Dean of the College of Public Programs and Professor of Public Administration at Arizona State University, as well as the Director of the MBA Program and Professor of Management at Arizona State University West campus. Her teaching and research interests include organizational behavior, leadership, culture and diversity, and ethics. She is author of a top leadership text, The Art and Science of Leadership (6th edition) (2012). She is also the author of numerous journal articles and other works, including Ancient

Leadership Wisdom (2012), Organizational Behavior: The Person-Organization Fit (1999), and Organizational Culture in the Management of Mergers (1993).

Robert B. Denhardt is Professor and Director of Leadership Programs in the Sol Price School of Public Policy at the University of Southern California, Regents Professor Emeritus in the School of Public Affairs at Arizona State University, and Distinguished Visiting Scholar at the University of Delaware. Dr. Denhardt is a past president of the American Society for Public Administration and a member of the National Academy of Public Administration. Dr. Denhardt has published 22 books, including Managing Human Behavior in Public and Nonprofit Organizations, The Dance of Leadership, Theories of Public Organization, Public Administration:

An Action Orientation, In the Shadow of Organization, and The Pursuit of Significance.

Janet V. Denhardt is the Chester A. Newland Professor of Public Administration and Director of the Price School Sacramento in the Sol Price School of Public Policy at the University of Southern California. She is a member of the National Academy of Public Administration and her teaching and research interests focus on organization theory, organizational behavior, and leadership. She has authored numerous books including Managing Human Behavior in Public and Nonprofit Organizations, The Dance of Leadership, The New Public Service, and Street-Level Leadership:

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Discretion and Legitimacy in Front-Line Public Service. Prior to joining the faculty at the University of Southern California, Dr. Denhardt taught at Arizona State University and at Eastern Washington University, and she has served in a variety of administrative and consulting positions.

Maria P. Aristigueta is the Charles P. Messick Professor, Director of the School of Public Policy and Administration, and Policy Fellow in the Institute of Public Administration at the University of Delaware. Her teaching and research interests are primarily in the areas of public sector management and include performance measurement, strategic planning, civil society, and organizational behavior. She is a coauthor of Managing Human Behavior in Public and Nonprofit Organizations (3rd edition), author of Managing for Results in State Government and Managing Behavior in Public and Non-Profit Organizations, and coeditor of the International

Handbook of Practice-Based Performance Management.

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INTRODUCTION

PART 1

• 1. Introduction to Organizational Behavior: History, Trends, and Ethics

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1 Introduction to Organizational Behavior History, Trends, and Ethics

LEARNING OUTCOMES

After studying this chapter, you should be able to:

1. Explain what organizational behavior is and why it is relevant to your career

2. Compare the differences between leaders and managers and the roles each play

3. Summarize the contributions leaders and managers make to their organizations

4. Trace the development of the field of organizational behavior in study and practice

5. Explain why understanding creativity and change in a global society is so important to future organizations

6. Describe how personal integrity, a cultural mindset, social responsibility, and global sustainability affect the way leaders and managers act

Turning Around a Bank Consider the following case. In your 21 years with a well-established European banking institution, you have earned a reputation as a turnaround specialist, someone who can come into a difficult situation and move the organization in a positive direction. Because of this reputation, you have just been appointed as the head of the company’s corporate and investment banking unit. The previous manager left in a storm of controversy following an in-house investigation showing an abysmal track record, one that significantly contributed to the larger bank’s fourth quarter losses. The investigation leading to your appointment was initiated after a popular television “newsmagazine” highlighted how much more effective other companies were in maintaining client trading, even in the face of Europe’s deepening debt crisis.

Understandably, the workers in your division are disheartened. Turnover and absenteeism are high. Workers report feeling unfairly criticized and point to the lack of necessary resources to effectively do their jobs. Yet, as you talk with these individuals, you find that they are bright, committed, and hardworking. The truth is, forces outside their control have contributed to the crisis, and some of the criticism does seem unwarranted. You

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believe that you can work with these people to build a stronger, more service-oriented division. But it’s going to take special skills—and more than a little luck!

Others were interested in the behavior of commodities, while I was interested in the behavior of people.

—Peter Drucker, Management Theorist

This case raises many important questions that help us define organizational behavior. Think about them from a practical standpoint: What are the most important issues here? Are they technical issues or are they people issues? Well, the truth is that there are probably some of both, but there is no question that in most situations, including this one, the human issues are central. Knowing that, you must then decide whether you will respond by

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dealing with one person at a time, by trying to work with groups, or by seeking some system-wide intervention. Obviously, there is some overlap among these three levels, but each becomes a lens through which we see, interpret, and respond to the specific circumstances that we confront.

I believe the real difference between success and failure in a corporation can be very often traced to the question of how well the organization brings out the great energies and talents of its people.

—Thomas J. Watson, CEO of IBM

People don’t quit their jobs, they quit their bosses.

—Anonymous

As we change the lenses through which we see a given situation, our definition of the problems that the situation entails and the possible solutions to those problems also change. For example, if you focus on individual behavior, then you might think of the problem as one of employee motivation, the failure of employees to communicate effectively with customers, or employees’ lack of understanding the broader purposes and goals of the division and the larger organization. As a result, you might meet and talk with employees; try to understand their needs, desires, and motivations; work with them to set individual and group goals; and seek their input on policy and operational changes that would improve outcomes.

Looking through the group lens, you might ask whether existing work groups are functioning effectively. Do employees feel like they are part of a team or do they feel alienated from their coworkers and supervisors? Is the culture of existing groups or teams conducive to achieving division goals? You might form task forces of employees to address particular problems, or you might reconfigure work teams to address certain types of cases.

If you focus on the organizational level, you might ask whether the department is structured appropriately to accomplish its tasks. Are management systems, such as goal setting and performance measurement, in place? Is management information available to guide decision making? Are organizational communications clear, and are policies documented and disseminated? Are the reporting and coordination methods appropriate? Here you might create new structures or mechanisms for communications throughout the organization. All of these questions fall in the domain of organizational behavior—and are absolutely essential to successfully dealing with the issues that arise in today’s organizations.

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A Facebook employee walks past a sign at Facebook headquarters in Menlo Park, California. In 2013, Facebook was ranked as the best place to work by Glassdoor’s Employees’ Choice Awards. Studies indicate that companies where employees are happy also tend to perform well financially, demonstrating the link between individual factors (employees’ happiness) and organizational factors (financial success).

What Is Organizational Behavior? Organizational behavior is the study and practice of how to manage individual and group behavior in business, government, and nonprofit settings. Accordingly, the field provides critically important and highly useful perspectives on motivation, leadership, communications, groups, power and politics, culture, and other matters that directly concern individual and group behavior. It also speaks to organizational issues and even community issues, but it does so through the lens of individual and group behavior.

Organizational behavior: the study and practice of how to manage individual and group behavior in business, government, and nonprofit settings

Fundamentals of Organizational Behavior

Individual, Group, and Organizational Levels of Analysis To give you a complete picture of the field of organizational behavior, let’s look at the four perspectives or levels as shown in Figure 1.1. The first level studies the individual. It is the smallest possible level of analysis in organizations and includes topics such as individual

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differences, perception, motivation, and learning. The second level is the small group. Groups can be as small as two people or can be much larger, depending on the group’s goal and tasks. The study of groups and teams in organizational behavior includes issues of group size and composition, cohesion, trust, team building, and decision making.

The third level of analysis in organizational behavior is concerned with the larger groups, such as departments, and with organizational processes. It includes issues such as the design and structure of organizations, organizational culture, power and politics, and change. Managers must understand their organizations at all three levels of analysis to meet the daily challenges they face. Organizational behavior then can be seen as resulting from the exchanges among these levels. (Note that the three major sections of the book emphasize the interaction among these layers.)

FIGURE 1.1 LEVELS OF ANALYSIS IN ORGANIZATIONAL BEHAVIOR

Social, Economic, and Ethical Context In our view, leaders and managers today must consider a fourth level of analysis—that which concerns the social, economic, and ethical context in which they act. As we will see later in this chapter, today’s society is becoming increasingly a global society, marked by networks and lines of communication unheard of only a few years ago. Consider the case of Kentucky Fried Chicken moving into China in a dramatic way, aiming at opening a new outlet every day for a total of 15,000 restaurants. Think of the issues involved. Should they adapt their offerings to the local market or should they completely revamp their business model—and their menu? And what about the people questions that are raised in working in a country with different traditions of leadership, communications, and a variety of other areas?

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SELF-ASSESSMENT 1.1

THE TELLER DILEMMA

Tanya R. Li has been promoted to director of the Bank at the Urban Center. The customers serviced by the bank are racially and ethnically diverse. The white tellers are in the minority and feel isolated. The tellers of color feel that the white tellers do not understand the customers. In addition, James, a veteran teller, has been discovered to have a criminal record prior to employment at the bank. Headquarters has a policy that does not allow anyone with a criminal record to work in direct contact with money, but the supervisor who hired James was not aware of the policy.

Tanya has identified three problems: (1) how can she make the tellers gain better understanding of each other’s cultures? (2) How can she help the tellers gain better understanding of the customers’ culture? (3) How does she deal with James, whose performance has been stellar since he joined the bank 15 years ago?

Before trying to advise Tanya on how to proceed, consider these questions:

1. What knowledge, skills, and abilities in organizational behavior would Tanya need to possess in order to deal with this situation?

2. Which of these capacities do you already have?

3. Which of these capacities do you need to acquire or improve upon?

Please come back to this case after studying this chapter to see how your answers differ.

A Brief History of Organizational Behavior Let’s look briefly at how the study of human behavior in organizations has addressed these questions. Although for hundreds of years, historians and philosophers have discussed leadership, what has been called “the management century”1 began about a hundred years ago. From that point, the development of organizational behavior can be divided into categories: the classical period, the humanistic period, and modern organizational behavior. In the following sections, we will examine representative works in each area. Our intent is not to provide a complete overview of work in each period but just to suggest the main themes that were discussed in each.

Leadership: occurs where one or more members of a group or organization stimulate others to more clearly recognize their previously latent needs, desires, and potentialities

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and to work together toward their fulfillment

The Classical Period Most managers and writers on management in the early 20th century focused on simply controlling workers and manipulating their environment so as to maximize efficiency and productivity. From the perspective of early management experts, people were primarily viewed as extensions of their tools and machines. For example, employee motivation, if it was considered at all, was based on patterns of compensation (rewards), but also on the fear of physical or economic abuse (punishment). It was assumed that workers found work to be unpleasant and therefore had to be motivated, mostly by money, to contribute to the organization. It also was assumed that workers would do what they were told because they would be punished or fired if they did not.

Frederick Taylor, best known as the father of scientific management, is representative of these traditional perspectives on human behavior.2 Taylor’s overall purpose was to make workers, who he assumed to be naturally lazy, more productive. Using the analogy of a baseball team, Taylor argued that you have to recognize the “utter impossibility of winning … unless every man on the team obeys the signals or orders of the coach and obeys them at once when the coach give those orders.”3

Scientific management: the application of scientific techniques to work processes, as advocated by Frederick Taylor

There were a few early voices that were more humanistic, people such as Hugo Muntsberg4

who urged greater attention to the psychology of workers, and Mary Parker Follett, who argued that dynamic administration must be grounded in “our cognition of the motivating desires of the individual and of the group.”5 But such work was largely considered outside the mainstream until the Hawthorne studies, published during the 1930s, pointed the way toward a greater acceptance of the importance of social factors at work.6

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In 1927, a group of researchers led by Elton Mayo and F. J. Roethlisberger from Harvard University embarked on a study of worker productivity in the Hawthorne Works of the Western Electric Company in Chicago.

The Humanistic Period In 1927, a group of researchers led by Elton Mayo and F. J. Roethlisberger from Harvard University embarked on a study of worker productivity in the Hawthorne Works of the Western Electric Company in Chicago. The findings from this research ultimately would signal a fundamental shift in how employee behavior was to be understood. Actually, a series of early experiments to measure the effects of lighting on efficiency found no direct relationship between changes in illumination and worker efficiency. In fact, short of literally making it so dark that the workers could not see, every change that the researchers implemented seemed to increase productivity.

After observing, consulting, and interviewing this group of employees for 5 years, however, the researchers arrived at two conclusions that would profoundly change research on worker behavior. First, they found that people change their behavior when they know they are being observed (the so-called Hawthorne effect). Second, they concluded that human relationships (including a relationship with the researchers) influenced the behavior of workers and, consequently, that new ideas were needed to explain worker behavior. The Hawthorne experiments showed that human behavior and motivation are complex, and are influenced by attitudes and feelings, the meaning that people assign to their work, and their relationships at work.

Hawthorne effect: the finding that people change their behavior when they know they are being observed

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Research conducted over the subsequent few decades confirmed the Hawthorne findings and resulted in a more sophisticated understanding of the relationship between people and organizations. The importance of human cooperation in organizations was emphasized in executive-turned-writer Chester Barnard’s definition of a formal organization as “a system of consciously coordinated activities or forces of two or more persons.”7 For Barnard, the participation of the individual was necessary for cooperation, and indeed, he viewed the need to build cooperation among organizational subunits as the crucial function of the manager.

Formal organization: a system of consciously coordinated activities or forces of two or more persons

FIGURE 1.2 THE SOCIAL SCIENCES THAT CONTRIBUTE TO OB

In The Human Side of the Enterprise, McGregor8 discussed the now familiar Theory X and Theory Y, arguing that traditional command-and-control approaches, Theory X—based on assumptions of people as lazy, uninvolved, and motivated solely by money—actually caused people to behave in a manner consistent with those expectations. His alternative, Theory Y, suggested a much more optimistic and humanistic view of people, emphasizing the inherent worth of individuals in organizations. Similarly, Abraham Maslow9 proposed his well-known hierarchy of needs as a way of understanding the complexity of human beings’ motivations and desires.

Theory X: the traditional command-and-control approach based on assumptions of

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people as lazy, uninvolved, and motivated solely by money

Theory Y: more humanistic form of management based on assumptions of people as active and involved in their work

Meanwhile, the famous German sociologist, Max Weber, writing a hundred years ago, first laid out the principles that govern hierarchical organizations and the way in which individuals exercise power and control within a bureaucracy, exhibiting hierarchy, division of labor, impersonal rules, and top-down authority.10 Hierarchy refers to a top-down system of control in which different groups report to a single individual who then reports to another and so on up the ladder.

Bureaucracy: a form of organization exhibiting hierarchy, division of labor, impersonal rules, and top-down authority (Weber, 1947)

Modern Organizational Behavior Modern organizational behavior has relied heavily on work from many different social sciences (see Figure 1.2). Sociologists, such as Max Weber, contributed to the study of bureaucracy and group decision making. Anthropologists, exploring the role of culture in society, offered important insights into organizational culture. Finally, political scientists contributed to our understanding of organizational behavior by focusing on democratic governance, power, leadership, and strategy.

In the past few decades, management theorists, primarily those studying business organizations, have made important contributions to our understanding of organizational behavior and management, often working from a social psychology perspective. For example, Peter Drucker11 studied the limitations of traditional command-and-control models of organization in stimulating worker productivity, especially in areas in which knowledge workers are especially important. Margaret Wheatley12 extended this notion by encouraging managers and workers in times of uncertainty and chaos to embrace resilience, adaptation, and creativity, while Peter Senge13 led the exploration of learning organizations and Edgar Schein14 defined the contemporary version of organizational culture. In a related vein, Tom Peters and Robert Waterman15 established the role of executives in all sectors striving for excellence in a strategic fashion, a theme recently echoed by Jim Collins16 in his books Good to Great (2001) and Great by Choice (2011).

Current Trends in Organizational Behavior Positive Organizational Behavior

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A recent and compelling emphasis in the social psychology of organizational behavior is termed “positive organizational scholarship,” the study, or “positive organizational behavior,” the practical outcome. Positive organizational scholarship traces its beginnings to the late 1990s, when Martin Seligman, president of the American Psychological Association, argued that his field had too long focused on illness or pathology and proposed as an alternative, what he called positive psychology.17 Instead of concentrating on what was wrong with people, that is, their deficiencies, positive psychology focused on positive experiences, such as happiness, pleasure, and joy, and how human beings could use their talents to create positive institutions that would, in turn, promote even more positive conditions.

Positive organizational behavior: an approach to organizational behavior based on positive psychology and emphasizing strengths rather than weaknesses

Recent studies have shown that emphasizing the positive strengths of those in groups and organizations—such elements as happiness, meaningfulness, and effectiveness—actually creates even more positive results. This finding is closely related to the strength-based approach we emphasize in this book—that building on strengths rather than trying to correct weakness may in the long run be far more successful in building individual and original capabilities.

Organizational scholars soon began to explore how this new approach to psychology might be reflected in studies of organizational behavior.18 Fred Luthans, working with the Gallup organization, proposed that organizational behavior should give more attention to such ideas as confidence, hope, and resiliency.19 Similarly, others argued for a greater emphasis on human strength, resilience, and vitality and the creation of settings characterized by appreciation, collaboration, fulfillment, abundance, and human well-being.20

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For example, “Imagine a world in which almost all organizations are typified by greed, selfishness, manipulation, secrecy, and a single-minded focus on winning. Wealth creation is the key indicator of success.”21 Individuals in those organizations would be characterized by distrust and anxiety, and social relations would be strained. Researchers looking into such organizations would emphasize such topics as problem solving, resistance, and competition. In contrast, “imagine another world in which almost all organizations are typified by appreciation, collaboration, virtuousness, vitality, and meaningfulness. Creating abundance and human well-being are key indicators of success.”22 Individuals in those organizations would be characterized by trustworthiness, humility, and positive energy, and researchers would emphasize excellence and extraordinary performance. Positive organizational behavior does not dismiss the first view, which has a clear basis in reality, but emphasizes the second; it seeks, as the old, old song says, to “accentuate the positive.”

This approach is closely related to what we might call a strength-based approach to personal and organizational development. Instead of focusing on deficiencies—either those of the individual or of the organization—this approach builds on their strengths. (A parallel strength-based approach is often used in community development—the focus is not on what’s wrong with a community, but what is right and what can be built upon.) We will emphasize a strength-based approach to organizational behavior in this book.

Neuroscience and Organizational Behavior We should note one other contemporary approach to the study of organizational behavior. New developments in the way the brain affects behavior, called neuroscience, or more informally brain science, suggest that the physiology of the human brain is directly connected to human behavior, including organizational behavior. For example, stress affects everyone, but the structure of the brain means that certain people are less affected by stress than others. Brain science may eventually be able to tell us, from a physical standpoint, which individuals are likely to be most resilient and why. Brain research has also shown that our brains are highly flexible and adaptable, which means that learning can take place not just in our early years but throughout our lives.23

Socially Intelligent

A similar argument is developed in a popular and highly readable book by New York Times columnist David Brooks, called The Social Animal.24 Drawing on recent work in neuroscience as well as psychology, Brooks contends that our conscious or rational mind often receives credit for thinking through options and guiding our actions, when in fact the unconscious mind, the world of emotions, intuitions, and deep-seated longings, tends to play a much more significant role. Brooks concludes that we are not rational animals but, first and foremost, social animals. Daniel Goleman, writing in Social Intelligence, comes to

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the same conclusion. Basing his work on recent advances in neuroscience, Goleman identifies a human predisposition to be aware of and sensitive to other human beings.25

One emerging theme in brain studies is that human behavior is never purely rational; the emotions play a central role in all aspects of organizational behavior. As we will see, that can often be a very good thing.

What Would You Do?

How do you balance these sensitivities? One of your employees is concerned that her salary is well below that of those who have the same experience that she has. Another is clearly motivated by doing meaningful work and being recognized for that work. Your initial response is to try to give the first employee a raise and more frequently compliment the second. But then, in terms of productivity, he’s every bit as deserving of a raise as she is. What would you do?

People Skills in Management Let’s turn toward the more specific challenges you will face as a manager, challenges that are quite different from those of only a few decades ago. The complex and interconnected world that today’s organizations face requires new skills and approaches in management and leadership. Increasingly, we are learning that the top-down leadership and bureaucratic management models, based on manufacturing rather than knowledge work, are a relic of the 20th century.26 Top-down management is not only inconsistent with today’s open and interconnected world, it is simply too slow to respond to events that occur at “warp-speed.” Instead, we are seeing the emergence of leadership and management approaches that emphasize openness and engagement, resilience and adaptability, and, most of all, creativity.

Differentiating Between Managers and Leaders We might begin by thinking about whether there are differences between managers and leaders. Abraham Zaleznik’s27 classic discussion of this topic continues to be relevant. Zaleznik begins by noting that a managerial culture emphasizes rationality and control. Managers are concerned with problem solving and getting people to operate efficiently throughout the organization. Leaders, on the other hand, are not bound to structure nor to existing goals; indeed, they accept chaos, suspense, and risk. Ultimately, they seek to shape the future, even if that means moving in completely new and unexpected directions.

Although the differences between managers and leaders may initially seem distinct, most organizational behavior scholars today, as well as their counterparts in the real world, would agree with Harvard professor John Kotter that management and leadership are not opposing forces in organizations but are complementary to one another. Indeed, Kotter

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argues that you can’t have one without the other.28 That is, managers need strong leaders in order for them to succeed, and leaders need strong managers in order for them to succeed. Managers tend to promote stability in the organization, while leaders often press for change. But both forces may be essential as businesses and other organizations face increasingly turbulent, indeed chaotic circumstances.

What Do You Think?

Make a list of those skills or abilities or qualities you associate with managers and those you associate with leaders. Or you might ask what do managers do—and what do leaders do. See if you can build a chart with management on one side and leadership on the other. What do you think?

What Managers Do

Let’s look at the job of the manager. That is, what do you need to know, and what do you need to be able to do to act effectively and responsibly in the organizations of which you are or will be a part? You have probably already seen lists of management functions such as planning, organizing, staffing, directing, coordinating, reporting, and budgeting. Elaborating these ideas, Peter Drucker suggested that the first task of management is to set objectives, to establish the goals of the group or organization and offer ways to meet those goals (see Table 1.1). Second, the manager organizes the tasks, saying who will do what and when. Third, the manager motivates and communicates, encouraging others to accomplish their work and engage with others. Fourth, the manager assesses performance, that is, the manager devises ways in which to measure the performance of the organization against the organization’s goals and objectives. Fifth, the manager develops people. Especially in a time in which what Drucker calls knowledge workers (those whose primary contribution to the organization is not physical but mental) are the primary assets of most organizations, the development of their skills and abilities is paramount.

What Managers Do

Knowledge workers: those whose primary contribution to the organization is not physical but mental

In the late 1960s, Henry Mintzberg conducted a classic set of “structured observations” of five executives in medium to large organizations, spending a full week with each and recording in detail their activities. He concluded that traditional terms such as planning and decision making fail to capture the complexity of managerial work; they fail to show

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what managers actually do. In Mintzberg’s view, the work of managers had six characteristics,29 summarized in Table 1.2.

Mintzberg’s research shows that the daily work of managers is characterized by a large number of activities that occur at a fast pace and are not always predictable. Additionally, managers spend a considerable amount of time communicating and interacting with other people. In addition to his examination of what managers did, Mintzberg also studied the behavior of those managers, concluding that all of their activities were found to involve one or more of three basic behaviors: interpersonal contact, the processing of information, and the making of decisions. Mintzberg then described 10 managerial roles, all of which will sound familiar to those who study management (see Figure 1.3).

TABLE 1.1 WHAT DO MANAGERS DO?

What Do You Think?

Mintzberg’s study took place more than 40 years ago. To what extent has the role of the manager changed? What about the effect of modern information technology? How has the complexity that managers face changed?30

TABLE 1.2 CHARACTERISTICS OF MANAGERS’ JOBS

Source: Based on Mintzberg, H. (1971). Managerial work: Analysis from observation. Management Science, 18(2), B97–

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B110.

The question of what managers do leads directly to two other questions that we address throughout the book:

1. What values, attitudes, and beliefs underlie managerial work?

2. What specific skills are needed by managers at different levels?

These are key questions in becoming an effective manager. Scholars have suggested that managers must not only act, but also reflect on their actions: “Action without reflection is thoughtless; reflection without action is passive.”31 They further suggest that the key to management is collaboration and that managers must focus on reality and maintain a worldly mindset that is rational and analytical.32 Table 1.3 summarizes the five key mindsets.

FIGURE 1.3 MANAGERIAL ROLES

TABLE 1.3 THE FIVE MANAGERIAL MINDSETS

Source: Based on Gosling, J., & Mintzberg, H. (2003, November). The five minds of the manager. Harvard Business Review, pp. 54–63.

The second question we raised above was what skills are needed for managers at different levels in the organization. This question was addressed in a classic study conducted by the U.S. Office of Personnel Management (OPM) that sought to identify the skills that are critical to managerial success. Based on information collected from a large number of highly effective managers and executives, the researchers developed two categories of competencies: one focusing on management functions (or the “what” of management) and one focusing on effectiveness (or the “how” of management). Those competencies are presented in Table 1.4.

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The first thing we notice when we look at Table 1.4 is how many of these competencies require effective skills in organizational behavior. Certainly, interpreting and communicating, guiding and leading, supervising and promoting performance, and flexibility and adaptation are all organizational behavior skills. But a second look reveals how integral the skills in organizational behavior are to virtually every aspect of managerial competence. Look at the list and see whether you see any elements that do not require, or at least could not be strengthened by an ability to effectively influence, manage, motivate, and lead people.

What Leaders Do

Among other things, the leader is expected to

1. encourage the development of goals and performance objectives;

2. communicate effectively both with the organization and with external constituencies;

3. encourage the highest level of creativity and innovation in the group or organization;

4. design opportunities for other participants in the organization to involve themselves in decisions made by the group;

5. carefully assess the progress of the group or organization and make sure that everything is on track; and

6. develop and exemplify the highest moral and ethical standards.

Leadership

Essence of Leadership

Leaders have another key function and that is the creation and maintenance of an organizational culture.33 Organizations often come to mirror their leaders’ personalities. Consider how Starbucks, the global provider of gourmet coffee, reflects the dreams and fears of its founder, Howard Schultz. Schultz is the son of a construction worker who lost his job as a result of a work injury, which had a devastating impact on him and his family. One of the key elements of Schultz’s vision for Starbucks is to offer employees a fair workplace with full benefits. 34 David Neeleman, former CEO of JetBlue, has a passion for customer service and high quality; the airline he founded reflects those values.35 Figure 1.4 summarizes the leader’s functions in shaping the culture of the organization.

TABLE 1.4 MANAGEMENT FUNCTIONS

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Source: Flanders, L. R., & Utterback, D. (1985). The management excellence inventory. Public Administration Review, 45(3), 403–410.

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Many organizational cultures reflect the personal experiences of their founders or chief operating officers. Howard Schultz, CEO of Starbucks Coffee, emphasizes a workplace culture that features fair wages and benefits for all his employees. In part, that culture reflects Schultz’s own personal history. His father was laid off because of a work injury with devastating consequences for his family.

Influence of Managers We know now that managers and leaders perform many different roles and functions in organizations, but do these actions make a difference in the productivity of the organization? Certainly that has been the prevailing wisdom in management and organizational behavior for some time.36 Recently, the Gallup organization, better known for its broad social and political public opinion surveys, has been measuring management practices and their effect on productivity. This research has shown that employees who are engaged in their work essentially doubled their odds of success when compared to those who are less engaged. Moreover, employee engagement clearly made a difference in terms of productivity, quality, and customer service.37 The survey investigated how employees become engaged and found that managers using positive leadership behaviors such as a strengths-based approach, maintaining a positive perspective when difficulties arise, and providing frequent recognition and encouragement were a key factor in employee engagement. Another extensive study, this one of school districts, found that managerial quality was related to ten of eleven performance indicators, covering a wide range of organizational goals from school attendance and student success on standardized tests.38

These findings indicate that good management and good leadership clearly make a difference.

FIGURE 1.4 LEADER’S FUNCTIONS IN SHAPING ORGANIZATIONAL CULTURE

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What exactly is a good boss worth? A recent research study by the National Bureau of Economic Research looked at 23,878 workers, matched to 1,940 bosses, at a very large technology service company between 2006 and 2010. The study found that removing a poorly performing manager and replacing him or her with a top performing manager is roughly equal, in terms of productivity, to adding an extra person to the team.39 The top- performing manager is like the star athlete who makes everyone around him or her look better.

Researchers have also looked at the other side of the coin—how does poor management affect the work of the organization? There’s an old adage that people don’t quit their jobs, they quit their bosses. Studies have shown that old adage to be true. In study after study, when asked what one factor determines their satisfaction, engagement, and commitment, employees point to the quality of their immediate supervisor. According to a 2005 study, when employees were asked what factor most negatively impacted their productivity, 58% cited poor management, a figure 20 points above the second leading negative impact, lacking motivation.40 Another recent study of 2,865 leaders in a large financial services company that used feedback from employees, other managers, and their associates—a method called 360 degree feedback—shows a direct correlation between levels of employee engagement and the effectiveness of their supervisors (see Figure 1.5). Good leadership is associated with happy, engaged, and committed employees.41 Clearly, managers and leaders make a difference and if you have the skills and abilities to manage and lead effectively you will likely have more productive and satisfied employees and be much more successful in your career (Figure 1.6). Obviously, this is a compelling reason to learn the ins and outs of organizational behavior.

Managers and Leaders

Creativity and Change in a Global Society

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Many books like this one have subtitles or stated emphases that are relatively meaningless. We take our emphasis—Creativity and Change in a Global Society—very seriously. We strongly believe that the world in which we live is placing special demands on organizations of all types. The complexity of the world; the interconnectedness of business, government, and society; and the rapidity of social and technological change all present new challenges to today’s organizations. Those organizations are expected to meet customer demands; they are expected to be attentive to their place in the market and to the economic consequences of every move they make; and they are expected to be good citizens, contributing to the overall betterment of society. Moreover, they are being asked to do all of these things in a world that is constantly changing, creating situations in which a premium is placed on the agility of organizations, their capacity to deal with problems that are both fast moving and complex, and their willingness to be creative and innovative. And, of course, there is no force impinging more strongly on our organizations than the fact that we are living in a highly connected global society. For this reason, we emphasize creativity and change in a global society.

4 P’s of Creativity

Creativity and Change

The 2010 IBM Global CEO Study, based on face-to-face interviews with 1,541 CEOs, general managers, and senior public sector leaders around the world, concluded that global complexity will only increase in the future and that more effective management and leadership will be needed to steer tomorrow’s organizations through a more complex world. The study found that the biggest challenge facing those in private and public enterprises in the future will be the accelerating pace and complexity of a global society operating as a massively interconnected system.

Even more important, the study connected creativity and effectiveness. According to those surveyed, in order to cope with global complexity, future leaders will need to place a strong emphasis on creativity. When asked to name the single most important attribute for leaders in the next five years, 60% of the respondents to the survey listed creativity; 52% listed integrity; and 35% listed global thinking. What is it about creative leaders that enables them to respond to the complexity of the modern environment? “Creative leaders invite disruptive innovation, encourage others to drop outdated approaches and take balanced risks. They are open-minded and inventive in expanding their management and communication styles, particularly to engage with a new generation of employees, partners, and customers.”42 Moreover, the best leaders see creativity occurring throughout the organization rather than being captured at one level or in one department. Creative leaders and managers are needed not just at the top and not just in the creativity “department.”

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FIGURE 1.5 FACTORS THAT AFFECT PRODUCTIVITY

Source: Zenger, J., & Folkman, J. (2012, July 6). How damaging is a bad boss, exactly? Harvard Business Review Blog.

Sarcasm Boosts Creativity

Creative managers and leaders seek organizational cultures that allow a great deal of empowerment and engagement on the part of employees. Employees are encouraged to seek innovative solutions to problems facing the organization and are given the autonomy to pursue possible avenues for new ideas. One manager told us that, when an employee brings a good idea to him, even if he knows a better solution to the problem, he will accept the employee’s recommendation, because it’s more important to encourage employees to bring ideas forward than to play with those ideas at the margin. Ralph Kerle, a creativity consultant in Australia, thinks that there are four attributes that are most important for creative leaders—empowerment, enjoyment, enlightenment, and courage—and the greatest of these is empowerment. Creative people, he points out, are likely to prefer organizational structures and cultures that are characterized by high levels of autonomy and opportunity. The fact that these same structures also may be riskier is of less importance than achieving creative outcomes.43

FIGURE 1.6 WHAT DOES IT TAKE TO BECOME A BETTER LEADER?

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A Global Society

There is no question that we are living in an increasingly global society. We are all acutely aware of globalization, the extent to which cultures, societies, and economies are interconnected and integrated. Globalization is a reality in terms of individual engagements, social relationships, and social institutions, all of which have become more extended, more complex, and more diverse. Decreased travel times enable people to move around the world quickly and (for the most part) comfortably. Increased access to the web further puts people in contact with others throughout the world. Access to global 24/7 news channels such as CNN, BBC, France 24, and Al Jazeera further reinforce global interconnectedness. But we should note that the benefits of increased travel and expanded access to information are not evenly distributed. By some estimates, access to the web is highest in North America with over 79% penetration, to 68% in Oceana/Australia, and at its lowest in Africa with 16%.44 Moreover, Internet penetration is growing rapidly all over the world (see Figure 1.7).

Globalization: the extent to which cultures, societies, and economies are interconnected and integrated

Globalization

There are three intricately related phenomena that define our global society today. The first of these is globalization itself, the extension of political, social, and economic relationships

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around the globe. Second and very closely related to globalization is complexity, in some ways a byproduct of globalization and in some ways a separately developing phenomenon. Third is connectedness, the capacity for groups and organizations around the world to connect with one another and, indeed, the necessity that they do so. We will briefly examine each of these elements.

We have seen the impact of globalization on our individual lives, but globalization has had an even greater impact in the economic realm. If you work in business, your competitors, your suppliers, and your customers are now global. If you are in government or a nonprofit organization, globalization impacts you through your connection with people from different cultures, through the availability of services across the globe, and through the constant exchange of information. We recognize that globalization is a reality; however, we don’t always understand what we see and hear nor do we correctly interpret the information. We need greater clarity about how to understand this new phenomenon and how to navigate globalization. It’s here to stay.

FIGURE 1.7 WORLD INTERNET PENETRATION RATES BY GEOGRAPHIC REGIONS, JUNE 2012

Source: Internet World Stats, http://www.internetworldstats.com/stats.htm. Copyright © 2012, Miniwatts Marketing Group. Note: Penetration rates are based on a world population of 7,017,846,922 and 2,405,518,376 estimated Internet users on June 30, 2012.

Several writers have drawn a distinction between “stable” situations and “liquid” situations, or between “stability” and “liquidity.” For many years, societies around the world remained fairly stable, in the sense that people stayed in one area, the flow of information among societies was restricted, and the tools and artifacts of the society tended to be used where they were produced. In some cases, there were physical barriers such as mountains or rivers that restricted travel; in other cases, social and political institutions put limits on movement. And, of course, there were no airlines, cell phones, or Internet connections to bring people together.

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http://www.internetworldstats.com/stats.htm
There is, however, abundant evidence that many parts of the world and many aspects of society and culture are being “liquefied.” Certainly modern technology plays a strong role in transmitting information from place to place and, indeed, moving people from place to place. Consequently, institutional structures seem to be melting into liquid form and the constraints of time and space become increasingly irrelevant, as, for example, international banking transactions occur in microseconds without actual resources being transmitted from one place to the other. As philosopher Zygmunt Bauman has argued, we live in an increasingly liquid society, what he calls liquid modernity.45

Liquid modernity: the tendency for modern societies to exhibit more liquid or fluid tendencies

GLOBAL SOCIETY

GLOBAL AMBASSADORS MENTOR EMERGING WOMEN LEADERS ACROSS THE GLOBE

“In today’s ever-changing world, where global challenges necessitate strong leadership, the need for training and mentoring for women leaders has never been so acute” says Justine Metz, an executive at the Global Ambassadors program, a partnership between the Bank of America and Vital Voices,46 an NGO that invests in unleashing the potential of women worldwide.47 The role of women in economic development around the world has been emphasized by the United Nations and other global organizations such as the World Economic Forum.48 However, while women make up 50% of the world’s population, many do not get the education, training, and support they need and face considerable discrimination that prevents them from contributing fully to their communities. Programs such as Global Ambassadors recognize the importance of developing global leadership and allow emerging leaders to benefit from the experience of established leaders.

The program’s mentors come from a variety of industries, including banking and entertainment, and are dedicated to helping their mentees grow while they themselves learn about global challenges. Candace Browning, head of Global Research Bank of America Merrill Lynch and one of the program’s mentors, believes that “mentorship is critical to helping women drive change across economic, political and social

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channels.”49 Another mentor in the program, Wendy Luhabe, cofounder of Women Investment Portfolio Holding in South Africa, is inspired by the program’s mission to build bridges between new and emerging leaders. She says: “At its basic level, leadership is developing the capacity to transform our own lives and circumstances, and as our confidence grows we extend that capacity to our broader sphere of influence.”50 A third mentor, Ann Veneman, former Executive Director of UNICEF and former U.S. Secretary of Agriculture, believes the program can have long-lasting impact: “Good mentors can help create good leaders, and good leaders become mentors for the next generation,” and she tells young leaders to “take advantage of opportunities that may come your way. It is not always easy to start on a new path, but it can lead to incredible opportunities to make a difference.”51 Susan Chambers, Wal-Mart People Division Executive Vice President, who mentors Smita Mankad, managing director of Artisans Micro Finance, says she helps her mentee focus so that she can continue to do “good” and do it well and, as a result, help other people by providing economic opportunity.52

Cooperative efforts such as the Global Ambassador program exemplify the importance of developing global leadership and the role of one-on-one mentoring in the process.

1. Why should business get involved in programs such as Global Ambassadors?

2. Should business get involved in social and cultural issues?

Complexity

Closely related to the issue of globalization is the increasing complexity of doing business in a world marked by turbulence, ambiguity, and surprise. The uncertainties of the social, political, and economic worlds are vexing to those in business, those in the public sector, and citizens generally. Over the last couple of decades, change has been seen as the most difficult factor to overcome in achieving organizational success. Indeed, many have commented that we have moved from a society largely stable with occasional interruptions of change, to one that is marked by constant change with occasional interruptions of stability. Certainly changing technologies have dramatically altered the social, political, and economic landscape, but change has come about in other ways as well. There are the changing demands of customers and citizens, with new preferences being registered daily. There are the changes brought about by the almost instantaneous flow of news and information from around the world. In general, leaders and managers in all sectors recognize that the most significant difference in their lives today as compared with when they started their work is the pace at which they are required to work—and the pace at which they must require their organizations to work.

This difference was also documented in the IBM 2010 Global Leaders Study we mentioned earlier. Again, the study paints a picture of increasing complexity in the way that businesses and governments are required to act. The respondents suggested that the new global society

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is more turbulent, uncertain, and chaotic than ever before—and they expected that these new complexities will not only continue through the coming decades, but they will accelerate. Under these circumstances, the changes that are required to adapt are not simply incremental, but transformational. Those who were interviewed expected that change and complexity would become even more dramatic over the next years and next decades, and, as we recall from our earlier discussion, creative responses would be required to meet these challenges. Interestingly, many companies have adapted well to these new circumstances and benefited financially from them. These standout companies have devised ways to organize and simplify their operations to the benefit of those inside as well as external partners and customers. In describing their work, words like agility, dexterity, speed, flexibility, adaptability, and resilience are mentioned over and over—words that will need to describe your work.

Connectedness

Obviously, the new global society has been made possible by technological advances, especially in the area of communications. The Internet has opened new opportunities for instantaneous connections across long distances. Employees, customers, and partners are connected in new ways and the interaction between businesses or public organizations and their customers or citizens has changed dramatically. One notable aspect of this change has been the rise of social media and its importance in both local and global affairs. You only need to be reminded of the Arab Spring uprisings to recognize the importance of social media in the political sphere. Similarly, most businesses today are exploring new ways to interact with customers through social media and distributed commerce.

Another IBM study, this one taking place in 2012 and based on interviews with some 1,700 executives in the private and public sector, explored this newly connected world and how companies, especially high-performing organizations, have responded.53 Over the past decade, executives and managers have been buffeted by economic challenges, many of which are not confined to national boundaries but are felt around the globe. For example, recall the disruption in various parts of the world caused by the European financial crisis. It’s not surprising, then, that the executives interviewed for the IBM study listed technology (including such areas as information technology, biotechnology, and nanotechnology) as the number one force likely to impact their work over the coming 3 to 5 years. This was a change from previous studies that had shown market factors as the most significant force. (We might note that people skills have fairly steadily remained in the number two position over all the years—and those are the skills that we will focus on in this book.)

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One of the obvious features of the emerging global society is the way so many things are interconnected. A transaction made in one part of the world instantly affects business in many other parts of the world. This interconnectedness creates great opportunities for business but also presents challenges in terms of greater complexity and the difficulty of coordinating events in time.

Although connectedness is part of the problem for companies and governments, it also can be part of the solution. These new connections affect the relationship between, say, a business and its customers and suppliers, but, at the same time, the connected world opens opportunities for organizations to restructure and reshape their internal operations, typically in the direction of more open and innovative practices. For example, a variety of new applications are aimed at facilitating group collaboration, even if everyone in the group is not “in the room.” These range from contextual, real-time conferencing integrating video, audio, and instant messaging (IM), to software applications such as Basecamp that make asynchronous collaboration possible across vast distances and with many partners involved. And, of course, there are Tweets, Facebook updates, Google+ shares, LinkedIn updates, Pinterest pins, and Instagram uploads. All of these applications hold the possibility for making organizations more open, more collaborative, and more creative—all characteristics of a flexible and adaptive organization, exactly the type that is required to deal with a global complexity and fluidity.

The Ethical Environment We have discussed the two major themes, (1) creativity and change and (2) the emergence of a global society, that we will develop throughout the course of this book; you should look for both case studies and larger vignettes developing these themes in each chapter. We

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also want to introduce several subthemes that we will group under the title, “The Ethical Environment.” These include personal integrity, a cultural mindset, social responsibility, and global sustainability. Although much of what we discuss in this book will involve the work that leaders and managers do within the organization, it’s important to realize that such work takes place in a larger social environment that shapes the values that those in the organization pursue. No one is immune to these influences, and, indeed, each one of us has a responsibility to be attentive to the ethics and values of the society in which we live. Sometimes we accept those values readily, yet at other times we resist those values and try to modify or replace them. But the ethical dialogue that occurs with respect to these values importantly shapes our behavior in organizations and defines our role in society. For that reason, it is important for us to examine these four subthemes at the beginning. Then, as we go through the text, we will note where these subthemes arise.

Price for Ethical Clothing

Personal Integrity

Most of today’s leaders would agree with Mountain Equipment CEO Peter Robinson when he says, “Ethics is the new competitive environment.”54 Similarly, when employees are asked what are the most important characteristics they desire from their leaders, honesty and integrity always rank at the top of the list. It’s only natural that we would expect the same sense of values from our leaders that we expect of people throughout society—that they tell the truth, that they don’t do violence to others, that they don’t steal, that they keep promises, and so forth. But, as we know, matters of integrity within large organizations are often more complicated and potentially more damaging than these simple statements of ethical norms might make it appear.

Human Values and Corporate Actions

The recent cases of Enron, Tyco, and Arthur Andersen, for example, show that integrity within the world of business is a principle often violated, sometimes accidentally, but often with malicious intent. In many cases, a manager will make a business decision without even taking the ethical implications into account—and consequently act in an unethical way without even realizing it.55 Rushworth Kidder, founder of the Institute for Global Ethics, has written, “What is needed is a capacity to recognize the nature of moral challenges and respond with a well-tuned conscience, a lively perception of the difference between right and wrong and an ability to choose the right and live by it. What is needed is ethical fitness.”56

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A Cultural Mindset

Today’s global organizations require a way of thinking that puts culture and its diversity at the forefront. The idea of diversity has traditionally focused rather narrowly on requiring equal opportunity in hiring and promotion practices. Indeed, there is a large body of legislation and judicial rulings that regulate what companies and government agencies can or cannot do with respect to these areas. Diversity today, however, has taken on new meanings, as leaders and managers have come to realize that taking culture into consideration in the workplace is not only the right thing to do, it also aids creativity and productivity. Having men and women, people from different cultural backgrounds and countries, gays and straights, people with both special talents and disabilities, and people of all ages working together ensures that different viewpoints are brought to discussions about management practices, product design, sales and marketing, and a host of other topics. Successfully managing such diverse organizations requires a cultural mindset that values and encourages diversity and considers it a competitive advantage, not just something you have to do. “The leadership challenge of facilitating appropriate responses to diversity is a business objective that must be met to ensure effective organizational outcomes in both domestic and foreign markets.”57

Diversity: achieving a workforce generally reflective of the social environment surrounding the organization, with special attention to race, gender, sexual orientation, and so on, as well as cultural differences

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This man is looking at a rice egg sandwich in a McDonald’s in Jakarta, the capital and largest city in Indonesia. Companies like McDonald’s are rapidly moving into new markets but finding it necessary to adjust their products to fit the local culture.

Globalization has extended the notion of diversity beyond demographic categories, such as age, race, and gender, and opened new questions about cultural diversity. Consider the case of McDonald’s, the quintessential American company with a global reach. The Golden Arches’ burgers are appreciated all over the world, from the fanciest shopping districts in Paris to the busy streets in China and India. Although the basic menu of its restaurants is focused on hamburgers, the company has adjusted its products, its restaurants, and its management practices to respond to the needs of its global customers. McDonald’s serves wine in France, and some burgers are meatless in India where almost 50% of the population is vegetarian and cows are considered sacred by many.58

Social Responsibility Over the last several decades, there has been an increasing interest in the commitments that public, private, and nonprofit organizations have to meet social needs. This concern is known as corporate social responsibility (or CSR) and it refers to companies going beyond their bottom line and economic interests to engage in activities that promote social well- being and environmental sustainability. Tayla Bosch, senior director for social values at Western Union, reports that her company is trying to create broad financial literacy and promote economic opportunity. She describes the path of corporate social responsibility as

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moving from “philanthropy (just giving money away) to cause marketing (aligning your company with a social issue) to corporate responsibility (changing the way a company operates internally). Now … We’re in a stage of shared value, where companies seek to have social impact and business return simultaneously.”63 As you can imagine, corporate social responsibility raises interesting questions for businesses, many of which were, and many of which still are primarily concerned with return on shareholder investment. Would corporate partners, shareholders, or potential investors approve of an activity that might be seen as taking away from company profits? Or, on the other hand, can a case be made that corporate social responsibility actually contributes to the bottom line? Or, does it really matter—is corporate social responsibility simply the right thing to do? Finally, corporate social responsibility raises fundamental questions about the future role of business and society.64 Recent studies also show that a growing number of companies are recognizing the importance of sustainability as a core strategy in order to be competitive. One study compared companies that adopted environmental and social policies with companies that didn’t. High sustainability companies outperformed their competitors over an 18-year period, in terms of both market and accounting criteria, such as return on assets. These companies also had a stock market performance that was 4.8% higher than the low sustainability companies.65

Corporate social responsibility: companies going beyond their bottom-line economic interests and engaging in activities that promote social well-being and environmental sustainability

CREATIVITY AND CHANGE

DO WELL, DO GOOD, OR DO BOTH?

Many have argued that companies can “do well” and “do good” at the same time, that is, the economic and social goals of companies are not at odds but in fact complement and reinforce one another. Certainly companies like COSTCO, well-known for their treatment of employees and passing on savings to customers, hold this view. Harvard Business professor and author Rosabeth Moss Kanter is also one who has taken this position, though with a slight variation. She argues that there is not a strict dichotomy between doing well and doing good, that it is not an either/or question. Rather, she contends that profitability and social good are both desirable ends for business, and

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companies should both seek to improve the bottom line and to provide benefit to society. Indeed, she argues, the most progressive companies will find a way to build synergies between the two and build those synergies into corporate strategy.59

The idea of increasing social responsibility raises broader questions about the role of business in society. The basic question is whether an economic system that places primary value on the corporate bottom line can serve the needs of the future. Gary Hamel, management expert and visiting professor at the London School of Economics, has recently argued forcefully against this point. “Millions of consumers and citizens,” he writes, “are already convinced of a fact that many corporate chieftains are still reluctant to admit: the legacy model of economic production that has driven the ‘modern’ economy over the last hundred years is on its last legs. Like a piece of clapped out engine, it’s held together with bailing wire and duct tape, frequently breaks down and befouls the air with noxious fumes.”60

Many executives cling to the idea that business is only for making money and that a focus on short-term economic benefits, one that disregards long-term social and environmental consequences, is the appropriate way to judge success in business. Hamel counters, “we long for a kinder, gentler sort of capitalism—one that views us as more than mere ‘consumers,’” one that understands the difference between maximizing consumption and maximizing happiness, one that doesn’t sacrifice the future for the present and regards our planet as sacred.61

This view is echoed by the founders of Generation Investment Management:

Some of the ways in which [capitalism] is now practised do not incorporate sufficient regard for its impact on people, society and the planet. Capitalism in its current form is creating and fostering numerous challenges, not least short- termism, over-reliance on GDP growth as a primary metric of prosperity, rising inequality, increasing volatility in the global financial market, and growing contributions to the climate crisis.62

While this debate is far from concluded, it is important to understand that these questions form part of the ethical environment of organizational behavior. At some point you will have to take a position on these important ethical issues.

1. Are there inevitable trade-offs between a focus on profits versus corporate social responsibility?

2. How can both be increased at the same time?

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Ethical Business Culture

Given findings like these, we can certainly expect many more firms to incorporate sustainable practices into their operations. But again, you might argue that sustainability is not only good business, it’s simply the right thing to do.

EPA administrator Lisa Jackson tours the main Ben & Jerry’s ice cream factory in Waterbury, Vermont, to view new pollution control devices in use at the plant on Friday, August 24, 2012. Many companies like Ben & Jerry’s are stressing the importance of environmental sensitivity.

Global Sustainability

Sustainability basically means meeting the needs of the present generation in a way that doesn’t compromise the capacity of future generations to meet their needs. Obviously, doing so has become more problematic as we have come to recognize that the population of the planet will grow dramatically over the coming years while the resources available to sustain that population will remain stable at best. There are new concerns, including the decline of natural ecosystems, climate change, water quality and scarcity, the fragility of food and food systems, the accumulation of waste, and the restructuring of transportation systems. All of these represent issues that must be addressed by both public and private action, as do such current policy concerns as sustainable development, environmental justice, land and urbanization, changing materials and technology—to name just a few. Leaders and managers in business and the public sector must keep the idea of sustainability in mind as they create new products, services, and infrastructures, for example, through building green wherever possible. But they must also recognize the importance of building viable and sustainable social and economic systems. And both private and public managers must engage in transformational stewardship of the people, places, and planet with which they are entrusted or for which they are responsible as leaders. The idea of sustainability requires an expansive view of social responsibility that extends beyond self-interest, geographically and even generationally. This ethic of stewardship must characterize the work of individual managers but also be taken to scale on a local, national, and planetary

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basis.

Sustainability: meeting the needs of the present generation in a way that doesn’t compromise the capacity of future generations to meet their needs

Taking on such major challenges as these, requires strong and creative action. Coca-Cola, for instance, has worked with its bottling partners to create lighter-weight packaging, cutting greenhouse gas emissions, and generating savings in the tens of millions of dollars. It has also made a commitment, in cooperation with its bottlers and with several nongovernmental organizations, to “water neutrality”—an initiative that will reduce environmental impact by replenishing watersheds to the full extent of the water the company removes.66 But sustainability is an issue that cuts across national boundaries and will require a global commitment. Marvin Odum, president of Shell Oil Co., comments, “When I look at an investment proposal now, it still covers the technical issues, of course. It certainly covers the financial issues. But fully half of that proposal deals with the nontechnical risk: social performance and sustainability issues.”67

Goodness From Within

Kellogg CEO Challenged

Women Need Global Spotlight

Summary: Learning Organizational Behavior In this first chapter, we described organizational behavior as the study of how to manage individual and group behavior within business, government, and nonprofit settings, but we also emphasized the importance of learning to act effectively and responsibly within those organizations. We also introduced the field of organizational behavior, noting some historical highlights and bringing us up to the most contemporary work in positive psychology and behavioral neuroscience. We examined both the roles and responsibilities of leaders and managers, and discussed the importance of leadership extending throughout organizations. We then turned to the central themes of this book—creativity and change in a global society. After introducing each of these themes, we turned to four subthemes that we grouped as comprising the ethical environment of organizational behavior. These four

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subthemes are personal integrity, group diversity, social responsibility, and global sustainability.

Key Terms Bureaucracy

Corporate social responsibility

Diversity

Formal organization

Globalization

Hawthorne effect

Knowledge workers

Leadership

Liquid modernity

Organizational behavior

Positive organizational behavior

Scientific management

Sustainability

Theory X

Theory Y

Exercise 1.1 Ethical Dilemmas in Cross-Cultural Work Working in different cultures also involves confronting different ethical norms including norms related to business transactions. Imagine that you are working in another country trying to get a new plant built for your firm, but you are having difficulty working your way through complex regulations. A representative of a government agency in that country suggests that you have lunch together and talk more informally about some issues that need to be resolved. In the discussion, he makes it clear that for $5,000 he can make all of those

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issues go away. What would be the appropriate course of action in a case like this? Currell and Bradley, authors of the article from which this case was adapted, pull no punches in their assessment of what should be done:

Organizations must insist on a swift response to complaints, unbiased investigations, and “public hangings” of offenders, and they should praise employees who have the courage to call out wrongdoing. These actions are critical to employees’ perceptions of organizational justice, and they can help head off or mitigate the damage from bribery offenses.68

Do you agree with this judgment? If not, how would you frame an ethical solution?