Anchors of organizational behavior knowledge

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Identify a workplace where you have been employed or a workplace you have observed in some capacity. Define organizational behavior (OB); then, discuss the aspects of the organization and the OB you observed in this workplace setting. Did the OB influence any outcomes of the organization’s mission? Explain the basis for your answer.

Your response should be at least 200 words in length. You are required to use at least your textbook as an in-text cited source to support your response. All sources used, including the textbook, must be referenced with a full citation in APA format at the end of your entry. Both paraphrased and quoted material must have accompanying in-text citations.

Your response should be at least 200 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.

No wiki, dictionary.com & cite all work

McShane, S. L., & Glinow, M. A. (2013). Organizational behavior: emerging knowledge, global reality (6th ed., pp. 4-6). New York: McGraw-Hill Irwin.

Welcome to the Field of Organizational Behaviorl The opening story about Brasilata reveals some important truths about organizations that succeed in todays turbulent environment. I n every sector of the economy, organizations need to be innovative, employ skilled and motivated people who can work in teams, have leaders wi th foresight and vision, and make decisions that consider the interests of multiple stakeholders. In other words, the best companies succeed through the concepts and prac- tices that we discuss in this book on organizational behavior.

The purpose of this book is to help you understand what goes on in organizations, in - cluding the thoughts and behavior of employees and teams. We examine the factors that make companies effective, improve employee well-being, and drive successful collabora- tion among coworkers. We look at organizations from numerous and diverse perspectives, from the deepest foundations of employee thoughts and behavior (personahty, self-concept, commitment , etc.) to the complex interplay between the organization's structure and culture and its external environment. Along this journey, we emphasize why things happen and what you can do to predict and manage organizational events.

We begin in this chapter by introducing you to the field of organizational behavior (OB) and why it is important to your career and to organizations. Next, this chapter describes the "ultimate dependent variable" i n OB by presenting the four main perspectives of organiza- tional effectiveness. This is followed by an overview of three challenges facing organiza- tions: global izat ion, increasing workforce diversity, and emerging employment relationships. We complete this opening chapter by describing four anchors that guide the development of organizational behavior knowledge.

The Field of Organizational Behavior "r" I Organizational behavior (OB) is the study of what people think, feel, and do in and around ' organizations. It looks at employee behavior, decisions, perceptions, and emotional

responses. It examines how individuals and teams in organizations relate to one another and to their counterparts in other organizations. OB also encompasses the study of how organi- zarions interact wi th their external environments, particularly in the context of employee behavior and decisions. OB researchers systematically study these topics at multiple levels of analysis, namely, the individual, team (including interpersonal), and organization.^

The definition of organizational behavior begs the question: What are organizations? Organizations are groups of people who work interdependently toward some purpose.^ Notice that organizations are not buildings or government-registered entities. In fact, many organizations exist without either physical walls or government documentation to confer their legal status. Organizations have existed for as long as people have worked together. Massive temples daUng back to 3500 bc were constructed through the organized actions of multitudes of people. Craftspeople and merchants i n ancient Rome formed guilds, com- plete wi th elected managers. More than 1,000 years ago, Chinese factories were producing 125,000 tons of iron each year.^

Throughout history, these and other organizations have consisted of people who com- municate, coordinate, and collaborate wi th one another to achieve common objectives. One key feature of organizations is that they are collective entities. They consist of human beings (typically, but not necessarily, employees), and these people interact wi th one an- other in an organized way. This organized relationship requires some minimal level of com- munication, coordination, and collaboration to achieve organizational objectives. As such, aU organizational members have degrees of interdependence wi th one another; they accomphsh goals by sharing materials, information, or expertise with coworkers.

A second key feature o f organizations is that their members have a collective sense of purpose. This collective purpose isn't always well defined or agreed on. Furthermore, though most companies have vision and mission statements, these documents are

Chapter One Introduction to the Field of Organizational Behavior 5

Until the 19305, most organizational research and practice tried to improve work efficiency by changing working conditions and job duties. Employee thoughts and feelings were ignored and usually considered irrelevant Elton Mayo (left in photo); his research assistant, and later professor in his own right, Fritz Roethlisberger (right); and others at Harvard University adopted a completely different view. Their "human relations" studies at Western Electric Hawthorne Works near Chicago found that employee attitudes, formal team dynamics, informal groups, and supervisor leadership style strongly influenced employee performance and well-being. Historians suggest that this human relations view laid the foundation for the field of organizational behavior as we know it today.'

sometimes out of date or don't describe what employees and leaders t ry to achieve i n reality. Still, imagine an organization without a collective sense o f purpose. It would be a collection o f people wi thout direction or unifying force. So, whether it's manufactur- ing steel cans at Brasilata or designing better aircraft at Boeing, people work ing in orga- nizations do have some sense of collective purpose. "A company is one of humanity's most amazing inventions," said the late Steve Jobs, cofounder of Apple Inc. and Pixar Animat ion Studios. "It's totally abstract. Sure, you have to bu i ld something wi th bricks and mortar to put the people i n , but basically a company is this abstract construct we've invented, and it's incredibly powerful ." '

organizational behavior (OB) The study of what people think, feel, and do in and around organizations.

HISTORICAL FOUNDATIONS OF ORGANIZATIONAL BEHAVIOR Organizational behavior emerged as a distinct field around the early 1940s, but organiza- tions have been studied by experts in other fields for many centuries. The Greek philoso- pher Plato wrote about the essence of leadership. Around the same time, the Chinese philosopher Confucius discussed the virtues of ethics and leadership. I n 1776, Adam Smith discussed the benefits of job specialization and division o f labor. One hundred years later, the German sociologist Max Weber wrote about rational organizations, the work ethic, and charismatic leadership. Soon after, industrial engineer Frederick Winslow Taylor proposed systematic ways to organize work processes and motivate employees through goal setting and rewards.**

From the 1920s to the 1940s, Elton Mayo, Fritz Roethlisberger, and their Harvard University colleagues introduced the "human relations" school of management, which emphasized the study o f employee attitudes and informal group dynamics in the work-

place. Also dur ing that time, polit ical philosopher and social worker Mary Parker Follett advocated new ways of t h i n k i n g about several OB topics, inc lud ing con- structive conflict, team dynamics, organizational de- mocracy, power, and leadership. In the late 1930s, Chester Barnard wrote insightful reviews o f organiza- t iona l communica t ion , coord ina t ion , leadership and

organizations Groups of people who work interdependently toward some purpose.

6 Part One Introduction

authority, organizations as open systems, and team dynamics. ' This brief historical tour indicates that OB has been around for a long time; it just wasn't organized into a unified discipline un t i l the 1940s.

19 connect Does OB All Make Sense? Go to www.nicgrawhJllconnect.com to assess how well OB knowledge is consistent with your common sense knowledge, and to assist your learning about the anchors of OB knowledge.

WHY STUDY ORGANIZATIONAL BEHAVIOR? Organizational behavior instructors face a challenge: Students who have not yet begun their careers tend to value courses related to specific jobs, such as accounting and market- i n g . ' However, OB doesn't have a specific career path—there is no "vice president of OB"—so students sometimes have difficulty recognizing the value that OB knowledge can offer to their future. Meanwhile, students w i th several years of work experience identify OB as one of the most important courses. Why? Because they have learned through expe- rience that OB does make a difference to one's career success. OB helps us make sense of and predict the wor ld in which we live. '" We use OB theories to question our personal beliefs and assumptions and to adopt more accurate models o f workplace behavior. Some experts suggest that OB knowledge even helps us make sense of the broader wor ld , not just what goes on inside organizations."

But probably the greatest value of OB knowledge is that it helps people get things done in organizations.'^ Everyone in business, government, and not-for-profit firms works with other people, and OB provides the knowledge and tools to interact wi th others more effec- tively. Building a high-performance team, motivating coworkers, handling workplace con- flicts, influencing your boss, and changing employee behavior are just a few of the areas of knowledge and skills offered in organizational behavior. No matter what career path you choose, you' l l f ind that OB concepts play an important role in how you perform your job and work more effectively within organizations.

' J •:••->.., ' ' for is for Everyone Organizational behavior is important for anyone who works in organizations, not just for managers. In fact, this book pioneered the notion that OB knowledge is for everyone. Whether you are a geologist, financial ana- lyst, customer service representative, or chief executive officer, you need to understand and apply the many organizational behavior topics that are discussed in this book. Yes, organi- zations w i l l continue to have managers, and this book recognizes the relevance of OB knowledge in these vital roles. But this book also recognizes the reality that all employees are increasingly expected to manage themselves and work effectively with one another in the workplace. In the words o f one forward-thinking OB writer more than four decades ago; Everyone is a manager."

organizational effectiveness A broad concept represented by several perspectives, including the organization's fit with the external environment, internal subsystems configuration for high performance, emphasis on organizational learning, and ability to satisfy the needs of key stakeholders.

OB and the Bottom Line Up to this point , our answer to the question "Why study OB?" has focused on how organizational behavior knowledge benefits you as an individual . However, OB knowledge is just as important for the organization's finan- cial health. Brasilata has flourished because it leverages human capital, employee en- gagement, creativity, and teamwork. Numerous studies have reported that these and

other OB practices discussed in this book tend to improve the organization's sur- vival and success.'"

For example, one investigation found that hospitals w i th higher levels o f specific OB activities (e.g., t raining, staff involvement, reward and recognition) have lower patient mortali ty rates. Another study found that companies receiving "best place to work" awards have significantly higher financial and long-term stock market perfor- mance. A n d as we w i l l learn i n Chapter 5, employee engagement is associated wi th significantly higher sales and profitability. The bottom-line value of organizational be- havior is also supported by human capital and investment portfoho studies. These i n - vestigations suggest that specific OB characteristics (employee attitudes, work- l i fe balance, performance-based rewards, leadership, employee training and development, etc.) are important "positive screens" for selecting companies wi th the best long-term stock appreciation.'^

Chapter One Introduction to the Field of Organizational Behavior 7

mcomect To assist your learning and test your knowledge about perspectives of organizational effectiveness, go to www.mcgrawhillconnect.com, which has activities and test questions on this topic.

Perspectives of Organizational Effectiveness Apple, Inc., and Google, Inc., are the two most admired companies in the world, according

::_ - to Fortune magazines annual list.'^ Yet, neither of these companies was on anyone's radar screen a dozen years ago. Apple was on life support in the late 1990s, barely clinging on to a few percentage points of market share in the computer industry. Google wasn't even regis- tered as a company. It was little more than a computer project by two Stanford PhD stu- dents that was quickly outgrowing the dorm room where their equipment was housed.

How did Apple and Google achieve their incredible success? They relied on innovation as their engine for growth, invested in and supported their employees, were led by visionary leaders, and applied many other practices that we wi l l discuss throughout this book. More generally, Apple and Google have consistently applied the four perspectives o f organiza- tional effectiveness that we discuss over the next few pages.

Almost all organizational behavior theories have the implic i t or explicit objective o f making organizations more effective.'' In fact, organizational effectiveness is considered the "ultimate dependent variable" in organizational behavior.'* This means that organiza- tional effectiveness is the outcome that most OB theories are ultimately t rying to achieve. Many theories use different labels—-organizational performance, success, goodness, health, competitiveness, excellence—but they are basically presenting models and recommenda- tions that help organizations be more effective.

Over the next several pages, we w i l l describe a coherent model of organizational effec- tiveness that incorporates four complementary perspectives. But first, we need to mention the now discredited "goal attainment" definition of organizational effectiveness. This view, which was popular for many years, states that companies are effective when they achieve their stated organizational ob j ec t i ve s ,Acco rd ing to this defini t ion, Home Depot, the world's largest retailer o f home improvement products, would be an effective organization i f it meets or exceeds its annual sales and profit targets. Today, we know this isn't necessarily so. Any leadership team could set corporate goals that are easy to achieve yet would put the organization out of business. These goals could also be left in the dust by competitors' more

Apple, Inc., is rated as one aggressive objectives. of the world's most admired Worse still , some goals might aim the organization in the wrong direction. Consider companies, yet a dozen years the following true story: The board of directors of a major airline gave the incoming CEO ago it was on life support with a dwindling computer market share. Apple's incredible turnaround illustrates how companies achieve success by paying attention to all four perspectives of organizational effectiveness. Apple deftly anticipated and fluidly adapted to rapidly changing consumer needs (such as by introducing theiPod, iPhone, andiPad). It became a learning organization by hiring key people and acquiring small firms. It nurtured high-performance teams for hardware design, software development, and marketing. And except for a few trip-ups, it has generally met stakeholder expectations and improved its corporate social responsibility.'"

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8 Part One /ntroduction

a mandate to reduce costs and dramatically improve profi tabil i ty. The CEO accom- plished these organizational goals by reducing the t ra in ing budget and canceling the purchase o f new aircraft. W i t h i n a few years (after the CEO had taken a job wi th another air l ine) , the company was suffering from higher maintenance costs to keep the old planes f lying safely and was losing customers to airlines w i t h better-trained staff and more modern fleets. This airline never recovered; it was eventually acquired by a larger competitor. The CEO achieved the company's goals, but the result was a less effective organization in the long run.

This book takes the view that the best yardstick of organizational effectiveness is a com- posite of four perspectives: open systems, organizational learning, high-performance work practices, and stakeholders.-' Organizations are effective when they have a good fit w i th their external environment, are learning organizations, have efficient and adaptive internal subsystems (i.e., high-performance work practices), and satisfy the needs of key stake- holders. Let's examine each of these perspectives in detail.

OPEN SYSTEMS PERSPECTIVE The open systems perspective of organizational effectiveness is one of the earUest and most well-entrenched ways o f thinking about organizations.-^^ Indeed, the other major organiza- tional effectiveness perspectives might be considered detailed extensions o f the open sys- tems model. The open systems perspective views organizations as complex organisms that "live" wi th in an external environment, rather like the illustration i n Exhibit 1.1. The word open describes this permeable relationship, whereas closed systems operate without depen- dence on or interaction wi th an external environment.

As open systems, organizations depend on the external environment for resources, i n - cluding raw materials, job applicants, financial resources, information, and equipment. The external environment also consists of rules and expectations, such as laws and cultural norms, that place demands on how organizations should operate. Some environmental re- sources (e.g., raw materials) are transformed into outputs that are exported to the external environment, whereas other resources (e.g., job applicants, equipment) become subsystems in the transformation process.

EXHIBIT 1.1 Open Systems Perspective of Organizations

External Environment

Subsystem:

Accounting Teclinological subsystem

subsystem

f Human re

• Financial resources

'Equipment

Engineering ' i£

Transforming inputs to outputs «̂

Managerial Marketing/Sales Subsystem subsystem subsystem

r ^ •

7 Production subsystem

Feedback Feedback

Chapter One Introduct/on to the Field of Organizations! Behavior

Inside the organization are numerous subsystems, such as departments, teams, informal groups, work processes, technological configurations, and other elements. Rather like the Russian matryoshka dolls nested wi th in each other, organizational subsystems are also sys- tems wi th their own subsys t ems .Fo r example, the Nordstrom department store i n Spokane, Washington, is a subsystem of the Nordstrom chain, but the Spokane store is also a system wi th its own subsystems of departments, teams, and work processes. A n organiza- tion's subsystems are interconnected so they interact to transform inputs into various outputs. Some outputs (e.g., products, services, communi ty support) may be valued by the external environment, whereas other outputs (e.g., employee layoffs, pollut ion) are by-products that may have adverse effects on the environment and the organization's rela- tionship wi th that environment. Throughout this process, organizations receive feedback from the external environment regarding the value of their outputs and the availability o f future inputs.

Organisation-tnvironrnenx Fit According to the open systems perspective, orga- nizations are effective when they maintain a good "f i t" w i t h their external environment.^'' Good fit exists when the organization puts resources where they are most useful, so it can adapt to and align with the needs o f the external environment. For instance, Apple, Inc., has a good fit wi th its many external environments—just look at the lines for new iPads and the skyrocketing market share of Apple laptops and iPhones. In contrast, companies with a poor fit wi th the environment offer the wrong products and operate inappropriately in their environments.

Successful organizations maintain a good fit by anticipating changes in the environment and fluidly reconfiguring their subsystems to become more consistent wi th that environ- ment. To illustrate, food manufacturers have changed their ingredients and production processes to satisfy more health- and environment-conscious consumers. Companies also maintain a good fit by actively managing their external environment. For example, they might t ry to l imi t competitor access to critical resources (e.g., gaining exclusive rights), change consumer perceptions and needs (e.g., through marketing), or support legislation that strengthens their position in the marketplace.

The th i rd fit strategy is to move into different environments i f the current environment is too challenging. For instance, Nokia started in 1865 as a pulp and paper company. The Finnish company entered the rubber and cable business in the 1920s, moved into electron- ics in the 1960s, and began producing cell phones a decade later. These strategic choices moved the company decisively into new external environments that seemed more appeal- ing for Nokia's long-term survival and success.

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open systems A perspective which holds that organizations depend on the external environment for resources, affect that environment through their output, and consist of internal subsystems that transform inputs to outputs.

Effectiveness The open systems perspective considers more than an organization's f i t w i t h the external envi ronment . I t also defines effectiveness by how well the company operates internally, that is, how well it trans- forms inputs into outputs. The most common indicator o f this internal transformation process is organizational efficiency (also called productivity), which is the ratio of i n -

puts to outcomes.-* Companies that produce more , goods or services w i th less labor, materials, and energy

are more efficient.

Successful organizations require more than efficient transformation processes, however. They also need to have more adaptive and innovative transformation pro- cesses. '̂' Brasilata illustrates both efficiency and innova- tion i n the transformation process. As we described in the opening story to this chapter, a continuous flow o f einployee suggestions has made the Brazilian steel can manufacturer highly efficient, which allows it to compete

organizational efficiency The amount of outputs relative to inputs in the organization's transformation process.

10 Part One Introduction

better than less efficient companies. Many of these suggestions are also innovative, because they identify new ways to manufacture cans, manage inventory, and market Brasilata's products to businesses that buy these products.

One last observation about the open systems perspective is that coordination is vital i n the relationship among organizational subsystems, but this coordination is usually far from i d e a l . I n f o r m a t i o n gets lost, ideas are not shared, materials are hoarded, communication messages are misinterpreted, resources and rewards are distributed unfairly, and so forth. These coordination challenges are amplified as organizations grow, such as when employ- ees are clustered into several departments and when departments are clustered into several organizational divisions. A slight change in work practices in one subsystem may ripple through the organization and undermine the effectiveness of other subsystems. For exam- ple, a new accounting procedure in the financial subsystem might unintentionally reduce the sales staff s motivation to sell products wi th higher profit margins.

ORGANIZATIONAL LEARNING PERSPECTIVE The open systems perspective has traditionally focused on physical resources that enter the organization and are processed into physical goods (outputs). This was representative of the industrial economy but not the "new economy," where the most valued input is knowl- edge. The organizational learning perspective (also called knowledge management) views knowledge as the main driver o f competitive advantage. Specifically, organizational learn- ing is founded on the idea that organizational effectiveness depends on the organizations capacity to acquire, share, use, and store valuable knowledge.

m connect To assist your learning and test your Itnowledge about organizational learning, go to www.mcgrawhillconnect.com, which has activities and test questions on this topic.

organizational learning A perspective which holds that organizational effectiveness depends on the organization's capacity to acquire, share, use, and store valuable knowledge.

i n t e l l e c t u a l Capftah The Stock of Organizational Knowledge The orga- nizational learning perspective views knowledge as a resource, and this stock of knowledge exists in three forms, collectively known as intellectual capital.^' The most commonly mentioned form of intellectual capital is human capital—the knowledge, skills, and abili- ties that employees carry around in their heads. Human capital has been described as valu- able, rare, difficult to imitate, and nonsubstitutable.^" It is valuable because employees help the organization discover opportunities and minimize threats in the external environment. Human capital is rare and difficult to imitate, meaning that talented people are difficult to find, and they cannot be cloned like sheep. Finally, human capital is nonsubstitutable be- cause it cannot be easily replaced by technology.

Because of these characteristics, human capital is a competitive advantage as well as a huge risk for most organizations. When key people leave, they take with them some of the most valuable knowledge that makes the company effective. "Innovation is the key to suc- cess in this business, and creativity fuels innovation," explains Jim Goodnight, CEO of SAS Institute, Inc., a leading statistical software developer in Gary, Nor th Carolina. "As such, 95 percent o f my assets drive out the gate every evening. It's my job to maintain a work environment that keeps those people coming back every morning. The creativity they bring to SAS is a competitive advantage for us.""

Fortunately, some inteUectual capital remains even i f every employee d id leave the orga- nization. Structural capital (also called organizational capital) includes the knowledge

captured and retained i n an organization's systems and structures, such as the docu- mentat ion o f work procedures and the physical layout o f the product ion line.^^

' Structural capital also includes the organization's finished products, because knowledge can be extracted by taking them apart to discover how they work and are constructed (i.e., reverse engineering).

The th i rd form of intellectual capital is relationship capital, which is the value de- rived from an organization's relationships w i t h customers, suppliers, and others who provide added mutual value for the organization. It includes the organization's good- wi l l , brand image, and combination of relationships that organizational members have wi th people outside the organization,"

Chapter One Introduction to the Field of Organizational Behavior 11

EXHIBIT 1.2

Four Organizational Learning Processes

Individual learning Environment scanning Grafting Experimentation

• Communication • Training • Information systems • Observation

• Human memory ->• •Documentation

•Practices/habits • Databases

• Knowledge awareness • Sense making > Autonomy • Empowerment

O r q a n i s a t i c m a ! L e a r n i n g P r o c e s s e s Organizations nurture their intellectual capital through four organizational learning processes; knowledge acquisition, sharing, use, and storage (see Exhibit 1.2).'^

• Knowledge acquisition. This includes extracting information and ideas from the ex- ternal environment, as well as through insight. One of the fastest and most powerful ways to acquire knowledge is by hir ing individuals or acquiring entire companies (called grafting). Knowledge also enters the organization when employees learn from external sources. As Connections 1.1 describes, the Duha Group in Winnipeg, Canada, acquires knowledge by sending staff on training programs and by touring other companies to learn about their best practices. A th i rd knowledge acquisition strategy is experimentation. Companies receive knowledge through insight as a result of research and other creative processes.

• Knowledge sharing. This aspect of organizational learning involves distributing knowledge to others across the organization. Knowledge sharing is often equated wi th computer intranets and digital repositories of knowledge. These systems are relevant, but knowledge sharing mainly occurs through structured and informal communication, as well as various forms of learning (e.g., observation, experience, training, practice). For example, Pixar An ima t ion Studios deliberately centralized its cafeteria, mailroom, and restroom facilities so employees would "bump into" and coincidentally share knowledge wi th people from other areas of the organization rather than just wi th their own team members.

• Knowledge use. The competitive advantage of knowledge comes from applying it in ways that add value to the organization and its stakeholders. To do this, employees must realize that the knowledge is available and that they have enough autonomy to apply it. This requires the type of culture found at Brasilata, which supports the

intellectual capital A company's stock of knowledge, including human capital, structural capital, and relationship capital.

human capital The stock of knowledge, skills, and abilities among employees that provide economic value to the organization.

structural capital Knowledge embedded in an organization's systems and structures.

relationship capital The value derived from an organization's relationships with customers, suppliers, and other

12 Part One /ntroduction

Duha Group's Learning Oraanszation Strategies'̂ Nestled away in an industrial section of Winnipeg, Canada, is Duha Group, a role model for the learning organization. The global manufacturer, marketer, and supplier of paint fandecks (color cards) and color samples depends on lean manufactur- ing for its quality and efficiency, and organizational learning practices enable it to continuously raise these standards. Duha's 290 Winnipeg employees (the company also has plants in New York, Mexico, Europe, Asia, and Australia) acquire ex- ternal knowledge by touring other companies to learn about their best practices. Knowledge is also brought in through company-supported formal off-site training (such as health and safety officer training at a nearby college). In addition, Duha employees are encouraged to discover new knowledge through experimentation within their work area and through Kaizen Blitzes (where teams identify more effective ways to op- erate entire work areas). "We are encouraged to give our ideas a try even if they fail," says a Duha employee. "It's rewarding to apply new concepts that add value or improvement."

Duha Group employees engage in knowledge sharing through formal in-house training programs, mentoring arrange- ments, and informal hands-on training sessions. Also, detailed company operating manuals and other documents are cen- trally located with access to all staff. A popular form of knowl- edge sharing is Duha Group's lunch-and-learn sessions, where employees teach coworkers about lean management, specific production practices, health and safety, environmental, quality, and human resources while enjoying a hot, company-supplied meal. Knowledge sharing also occurs through departmental

Duha Group applies organizational learning through Kaizen Blitzes, off-site training, lunch-and-learn sessions, and dally huddles.

huddles, held every day for five minutes. Employees congre- gate around a huddle board where they post suggestions for improvement, describe work process changes in their area, and hear about company news. "The huddles are a great idea," says a Duha employee. "I think that's one of our best outlets for communication."

Finally, Duha Group encourages employees to put knowl- edge to use by giving them plenty of autonomy and support. Indeed, every employee has a learning plan they review with management as well as a learning journal to maintain their fo- cus on continuous learning. Knowledge use also occurs more readily because the huddle boards in each department show, who has specific knowledge they might require.

learning process by encouraging experimentation and open communications and recognizing that mistakes are part of that process.

• Knowledge storage. Knowledge storage includes any means by which knowledge is held for later retrieval. It is the process that creates organizational memory. Human memory plays a critical role here, as do the many forms of documentation and data- base systems that exist in organizations. Individual practices and habits hold less explicit (more tacit) knowledge.

A b e t _ . - j , 1 ' A n important prerequisite for acquiring, sharing, and using new knowledge is the amount and quality o f knowledge already held wi th in the organiza- tion. Just as students need to learn knowledge in core courses before they can understand content in more advanced courses, companies need to have employees wi th a sufficient foundation of expertise to receive and apply new knowledge. This knowledge prerequisite is known as the organization's absorptive capacity.^' For example, many companies were slow to develop online marketing practices because no one in the organization had enough knowledge about the Internet to fathom its potential or apply that knowledge to the com- pany's business. In some cases, companies had to acquire entire teams of people wi th the requisite knowledge to realize the potential of this marketing channel.

Organisational fVieiTJOry a n d U n l e a r n i n g Corporate leaders need to recognize that they are the keepers of organizational memory.'^ This unusual metaphor refers to the

Chapter One Introduction to the Field o f Organizational Behavior

Storage and preservation of intellectual capital. It includes knowledge that employees pos- sess, as well as knowledge embedded in the organization's systems and structures. I t i n - \ eludes documents, objects, and anything else that provides meaningful information about how the organization should operate.

How do organizations retain intellectual capital? One way is by keeping knowledgeable employees. Progressive companies achieve this by adapting their employment practices to become more compatible with emerging workforce expectations. A second organizational memory strategy is to systematically transfer knowledge to other employees. This occurs when newcomers apprentice wi th skilled employees, thereby acquiring knowledge that is not documented. A third strategy is to transfer knowledge into structural capital. This i n - cludes bringing out hidden knowledge, organizing it , and putting it i n a form that can be available to others. Reliance Industries, India's largest business enterprise, applies this strat- egy by encouraging employees to document their successes and failures through a special intranet knowledge portal. One of these reports provided information that later prevented a costly plant shutdown.^'

The organizational learning perspective states not only that effective organizations learn but also that they unlearn routines and patterns of behavior that are no longer appropri- ate.'"' Unlearning removes knowledge that no longer adds value and, in fact, may under- mine the organization's effectiveness. Some forms o f unlearning involve replacing dysfunctional pohcies, procedures, and routines. Other forms of unlearning erase attitudes, beliefs, and assumptions. For instance, employees rethink the "best way" to perform a task and how to serve chents. Organizational unlearning is particularly important for organiza- tional change, which we discuss in Chapter 15.

absorptive capacity The ability to recognize the value of new information, assimilate it, and use it for value-added activities.

HIGH-PERFORMANCE WORK PRACTICES (HPWP) PERSPECTIVE The open systems perspective states that successful companies are good at transforming inputs into outputs. However, it does not identify the subsystem characteristics that distin- guish effective organizations from others. Consequently, an entire field of research has blossomed around the objective of discovering the best 'bundle' of organizational practices that offers competitive advantage. This research has had various labels over the years, but it is now most commonly known as high-performance work practices (HPWP).'"

Similar to organizational learning, the HPWP perspective is founded on the behef that human capital—the knowledge, skills, and abilities that employees carry around i n their heads—is an important source of competitive advantage for organizations.''- The distinctive feature of the HPWP perspective is that it tries to identify a specific bundle o f systems and structures that generate the most value from this human capital.

Researchers have investigated numerous potential high-performance work practices, but we wil l focus on four that are recognized in most studies.''^ Two of these are employee involve- ment and job autonomy. Both activities tend to strengthen employee motivation as well as improve decision making, organizational responsiveness, and commitment to change. I n high-performance workplaces, employee involvement and job autonomy often take the form of self-directed teams (see Chapter 8).

Another key variable in the FIPWP model is employee competence. Specifically, or- ganizations are more effective when they recruit and select people w i th relevant skills,

knowledge, values, and other personal characteristics. Furthermore, successful companies invest i n employee development through t ra in ing and development. A fourth characteristic of high-performance organizations is that they hnk performance and .skill development to various forms of financial and nonfmancial rewards valued by employees. Each of these four work practices— involvement, autonomy, employee competence, and per- formance/skill-based rewards—individually improves

high-performance work practices (HPWP) A perspective which holds that effective organizations incorporate several workplace practices that leverage the potential of human capital.

14 Part One Introduction

American Express lias tal

organizational performance, but recent evidence suggests that they have a stron- ger effect when bundled together."

W h y are HPWP associated with orga- nizational effectiveness? Early studies were criticized for ignor ing this ques- tion,"" but OB experts are now building and testing more theoretical explana- tions."' The first reason is that H P W P b u i l d human capital, which improves performance as employees develop the skills and knowledge to perform the work. A second explanation is that superior human capital may improve the organiza- tion's adaptability to rapidly changing environments. Employees respond better when they have a wide skill set to handle diverse tasks as well as the confidence to handle unfamiliar situations. A third ex- planation for why H P W P improve orga- nizat ional effectiveness is that these activities strengthen employees' motiva- tion and attitudes toward the employer. For instance, HPWP represent the com-

pany's investment in and recognition of its workforce, which motivates employees to recip- rocate through greater effort in their jobs and assistance to coworkers.

The H P W P perspective is stil l developing, but it already reveals important informa- t ion about specific organizational practices that improve the input -output transforma- t ion process, StLll, this perspective has been criticized for focusing on shareholder and customer needs at the expense of employee well-being."'* This concern illustrates that the HPWP perspective offers an incomplete picture o f organizational effectiveness. The remaining gaps are most ly f i l led by the stakeholder perspective o f organizational effectiveness.

STAKEHOLDER PERSPECTIVE The three organizational effectiveness perspectives described so far mainly pay attention to processes and resources, yet they only min ima l ly recognize the importance of rela- tions wi th stakeholders. Stakeholders include anyone wi th a stake in the company— employees, stockholders, suppliers, labor unions, government, conununities, consumer and environmental interest groups, and so on (see Exhibit 1.3). I n other words, organiza- tions are more effective when they consider the needs and expectations of any individual group or other entity that affects, or is affected by, the organization's objectives and actions. This approach requires organizational leaders and employees to understand, manage, and satisfy the interests o f their stakeholders.'" The stakeholder perspective personaUzes the open systems pei-spective; it identifies specific people and social entities in the external environment as well as w i t h i n the organization (the internal environ- ment). I t also recognizes that stakeholder relations are dynamic; they can be negotiated and managed, not just taken as a fixed condition.-^"

Consider the troubles that Walmar t has faced in recent years.' ' For decades, the world's largest retailer concentrated on customers by p rov id ing the lowest possible prices and on stockholders by generating healthy financial returns. Yet emphasizing these two stakeholders exposed the company to increasing host i l i ty from other groups i n society. Some accused Walinar t o f destroying America's manufactur ing base and

Chapter One /ntroduction to the Field of Organizational Behavior 15

EXHIBIT 1.3

Organizational Stakeholders Custonners

Employees i Stockholders

Governments I

Organization

Labor Unions;

Special Interest Groups

Communities • and Charities •'

Joint Venture Partners

Suppliers

/Vote; Th is exhibit does n o t show the complete set o f possible stakeholders.

i gnor ing unethical business practices (such as ch i ld labor) i n countries where i t purchased goods. Others pointed out that Walmart had a poor record o f environmental and social responsibility. These stakeholder pressure points existed for some t ime, but W^almart ignored most o f them u n t i l they became serious threats. In fact, Walmar t recently created the posi t ion "senior director o f stakeholder engagement" to ensure that i t pays more at tention to most stakeholders and to proactively manage those relationships.

Understanding, managing, and satisfying the interests of stakeholders is more challeng- ing than it sounds because stakeholders have conflicting interests, and organizations don't have the resources to satisfy every stakeholder to the fullest. Therefore, organizational lead- ers need to decide how much prior i ty to give to each group. One commonly cited factor is to favor stakeholders wi th the most power." This makes sense when one considers that the most powerful stakeholders present the greatest threat and opportunity to the company's survival. Yet stakeholder power should not be the only factor to consider. Ignoring less powerful stakeholders might motivate them to form coalitions or seek government sup- port, which would give them more power. Ignoring smaller stakeholders might also irritate the more powerful stakeholders i f ignoring weaker interests violates the norms and stan- dards of society.