CHAPTER ONE

AN OVERVIEW OF ORGANIZATIONAL BEHAVIOR

1.1. What Is Organizational Behavior?
DEFINITIONS
“Organizational behavior is a field of study that investigates the impact that individuals,
groups and organizational structure have on behavior within the organization, for the purpose
of applying such knowledge towards improving an organizational effectiveness”.
The above definition has three main elements; first organizational behavior is an investigative
study of individuals and groups, second, the impact of organizational structure on human
behavior and the third, the application of knowledge to achieve organizational effectiveness.
These factors are interactive in nature and the impact of such behavior is applied to various
systems so that the goals are achieved. The nature of study of organizational behavior is
investigative to establish cause and affect relationship.
An organization is a collection of people who work together to achieve a wide variety of goals,
both goals of the various individuals in the organization and goals of the organization as a
whole. Organizations exist to provide goods and services that people want. These goods and
services are the products of the behaviors of workers.
Organizational behavior is the study of the many factors that have an impact on how individuals
and groups respond to and act in organizations and how organizations manage their
environments.
Although many people assume that understanding human behavior in organizations is intuitive,
many commonly held beliefs about behavior in organizations, such as the idea that a “happy
worker is a productive worker,” are either entirely false or true only in specific situations. The
study of organizational behavior provides a set of tools—concepts and theories—that help
people understand, analyze, and describe what goes on in organizations and why. How do the
characteristics of individuals, groups, work situations, and the organization itself affect how
members feel about their organization?

1.2. The three basic units of analysis in Organization Behavior

The study of organization behavior includes everything about organizations. As this is a rather
large undertaking, it is helpful to breakdown the field of study in to more manageable units for
investigation, and in this regard this material will use three different, but interrelated, levels of
analysis: 1) the individual 2) group behavior and 3) organization structure and job design.
I. The Individual
At one level, we can view organizations as consisting of individuals working on tasks in the
pursuit of personal and organizational goals. As a result, in order to understand organizations, it
is necessary to understand people, particularly from the perspective of individual organizational

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member. Much of what we know about individuals is drawn from the discipline of psychology,
and it is format his field that theories and explanations regarding why individuals behave and
react as they do in response to different organizational policies, practices, and procedures is
obtained. Within this perspective, theories of motivation and satisfaction are explored to assist in
understanding the behavior and performance of individual organizational members.
II. Group Behavior
A second level of analysis focus upon the interactions of people as they work in committees,
teams, groups, units, or departments. This perspective on organization behavior considers the
functioning of these various types of groups, asking questions such as: How do people work
together in groups? What factors determine whether a group will be cohesive and productive, as
opposed to fragmented and unproductive? How does leadership influence group members and
their ability to work together co-operatively and productively? This level of analysis draws in
particular on theories from social psychology.
III. Organizational Structure and Job Design
The 3 level of analysis has to do with the way organizations are formally structured and with
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the way in which jobs are designed. Concern at this level of analysis is with the relationship
between to organization & its environment, and emphasis is placed upon understanding how
organization structure & job design influence effectiveness (for example, how different ways of
assigning duties and responsibilities to departments may influence the ability of these
departments and the whole organization to do their work effectively). Additionally, an
understanding of organizational design must characterize and influence organizational behavior
Why Do We Study OB?
Following are the reasons to study organizational behavior:
To learn about yourself and how to deal with others
You are part of an organization now, and will continue to be a part of various
organizations
Organizations are increasingly expecting individuals to be able to work in teams, at least
some of the time
Some of you may want to be managers or entrepreneurs
1.3. A review of the manager’s jobs and its relation to the study of OB
One common thread runs through the functions, roles, skills and activities approaches to
management. Each recognizes the paramount importance of managing people. As a David found
out when he became a manager at the Princeton review, regardless of whether it’s called “the
leading function.” Interpersonal roles,” “Human skills,” or “human resource management and
networking activities,” it is clear that managers need to develop their people skills they are going
to be effective and successful in their job.

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1.4. Characteristics of Organizational Behavior
Organization behavior explores the nature and functioning of all types of organizations, not just
private-sector, profit oriented organizations. The field is equally concerned with understanding
educational organizations, hospitals, government agencies, voluntary organizations, and so on.
Organization behavior seeks to develop general principles and concepts that are relevant to
understanding the operation and performance of all types of organizations.
What are the common defining characteristics of an organization?
1. Organizations are composed of individual and groups.
While at first glance it may seem obvious that all organizations are made up of people,
the key point is that people are the organization. We may have a tendency to identify or
the products and service it creates. But buildings are simply places for people to work,
technology is something that the people make use of, and products and services are
created by people. It is the people who are the organization, and without them there is no
organization.
2. Organizations are oriented toward the achievement of goals.
Organizations are created and continue to exist only because some groups of peoples
have a common goal that they cannot accomplish alone. For instance, hospitals exist in
order to meet the goal of providing health service to people who are sick. Every
organization is goal-oriented.
3. Organizations need employees’ specialization and coordination in order to
accomplish their goals.
Organization exists because a single individual is unable to perform all the functions and
activities necessary to create a product or provide a service to a group of customers or
clients. The members of an organization do not each attempt to do all the jobs and
perform all the functions that need to be carried out for the organization to accomplish its
goals. Instead, the organization divides up the work to be performed and each person or
group of people takes responsibility for performing some set of specialized functions.
However, once the work has been divided up and people have become specialized, the
organization requires some means for coordinating their activities.
1.5. The development of organizational behavior
By most estimates organizational behavior emerged as a distinct field around 1940s (Warner
1994). However, its origin can be traced much further back in time. The Greek philosopher Plato
wrote about equity /incridble/ in work relationships. Another Greek philosopher, Aristotle
spoke about the elements of persuasive communication.
The writings of sixteenth-century Italian philosopher, Niccolo Machiavellilaid the foundation
for contemporary work on organizational power and politics. In 1976, Adam smith advocated a
new form of organizational structure based on division of labor. One hundred years later, the
German sociologist Max Webber, wrote about rational organizations and initiated discussion on

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charismatic leadership. Soon after, Fredrick W.Taylor, introduced the systematic use of goal
setting and reward or incentives to motivate employees. Generally, four significant Eras; pre-
scientific, classical, behavioral and modern have paved the way for the field of organizational
behavior.
1) The pre-scientific Era(pre1000-1880)
The practice of management can be traced to earliest history as abundant archaeological
evidences, such as the great pyramids, stands in silent tribute to the talent of bygone managers.
Illiterate workers (or slaves), miserable working conditions, primitive agrarian economies and
crude tools made the tasks of managers in ancient civilizations extremely difficult. More over,
even though, managers during the pre-scientific era did not have formal education and training in
proven management methods, they accomplished amazing things. As time passed, exploration of
natural resources and technological advances lead to the industrial revolution. The classical
management era was born out of this interest.

2) The classical Era(1880-1930)

During this time, the first theory of management began to evolve. Two major thrusts were
administrative theory and scientific management.

Scientific management
According to time-honored definition, scientific management is the kind of management which
conducts a business or affairs by standards established by factors or truths gained through
systematic observation, experiment or reasoning.
Fredrick Taylor created with being the father of scientific management; published the principle
of scientific management. In 1911, trough time and task study, standardization of tools and
procedures, development of piece rate incentive schemes and systematic selection and training.
Taylor dramatically improved productivity. Taylor’s goal was to make work behavior as stable
and predictable as possible so that increased usage of sophisticated machines and factories would
achieve maximum efficiency. He relied heavily on monetary incentives because he saw workers
as basically lazy beings, motivated primarily by money.
Administrative theory: Also called the universal process school of management. The origin of
administrative theory approaches can be traced to Hennery y Fayola the French industrialist. In
his 1916 administration ‘Industrielle et Generalle’, Fayol divided the manager’s job in to five
functions; planning, organizing, command, coordination and control. He then recommended 14
universal principles of management. Fayol viewed as potentially disruptive factor to be closely
controlled by management. Thus, these 14 principles emphasized on division of labor, authority,
discipline, and strictly enforced chain of command. They include.

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Principles Description
Division of labor The more people specialize, the more efficiently they can perform the task.
Authority Managers have the right and the authority to give order and to get things
done.
Discipline
Members of an organization need to respect the rules and agreements that
Unity of command
govern it.
Each employee should receive instructions about particular operations from
Unity of direction only one person to avoid conflicting expectations and confusions.
Managers should coordinate the efforts of employees working in projects.
Subordination But one manager should be responsible for one employee’s behavior.

Remuneration Subordination of individual interest to the common goods.

Centralization Pay for work done should be fair to both employee and employer.
Managers should retain final responsibility but should also give their
subordinates enough authority to their job properly.
Scalar chain
A single, uninterrupted line of authority should run rank to rank from top
management to lowest position in the company.
Order
Materials and people should be at the right place at the right time.
Equity
Managers should be both free and friendly to their subordinates.
Stability and tenure of
High rate of employee turnover is not efficient.
staff
Subordinates should be given the freedom to formulate and carry on with
Initiative
their plans.
Esprit de corps
Promoting team sprit gives the organization sense of unity.

3) The behavioral or Neo-classical Era (1930-1960)

A significant landmark in the evolution of managing and understanding the behavior of people
in the behavioral Era was the outcomes of the human relation movement during the 1930s.
A unique combination of factors fostered the human relation movement during the 1930s. First,
following the legalization of union management collective bargaining in the United States in
1930s; management began looking for a new ways of handling employees. Second, behavioral
scientists conducting on the job research, started calling for a more attention for the ‘human’
factors. Managers a headed the call for better human relations and improved working
conditions .One such study conducted at western electric’s Hawthorne plant ,was a prime
stimulus for the human relation movement. Another essential to the human relation movement
were the writings of Elton mayo and Mary parker Follett. Australian born Mayo, who headed the

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Harvard researchers at Hawthorne, advised managers to attend to the emotional needs of
employees in his 1933 classic, the human problem of industrial civilization. Follet was a true
pioneer, not only as a female management consultant in the male-dominated industrial world of
the 1920s, but also a writer who saw employees as a complex bundle of attitudes, beliefs and
needs. Mary Follett told managers to motivate job performance instead of merely demanding it, a
"pull" rather than a "push" strategy.
4. The modern Era (1960 onwards)
The writing of Douglas McGregor, the total quality management movement, and the contingency
approach to management were the significant land marks in the evolution of managing and
understanding the behavior of people during the modern era.
In 1960s Douglas McGregor, wrote the book entitled; the human side of an enterprise, which has
become an important philosophical base for the modern view of people at work. He formulated
two sharply contrasting sets of assumptions about human nature. His theory x assumptions, were
pessimistic and negative and according to his interpretation they were typical of how managers
traditionally perceived employees. To help managers break with this negative tradition, he
formulated his theory of Y modern and positive set of assumption about people. McGregor
believed that managers could accomplish more through others by viewing them as self-
energized, committed, responsible and creative beings.
The underlying principles of total quality management are more important than ever given the
growth of both E-business on the internet and the overall service economy. Total quality means
that the organization’s culture is defined by and supports the constant attainment of customer
satisfaction through an integrated system of tools, techniques and training. This involves the
continuous improvement of organizational process, resulting in high quality products and
services. Quality consultant, Richard J schonberger sums up TQM as ‘continuous, customer-
centered, employee driven improvement.
Principles of total quality management; Despite variations in the language and scope of total
quality programs, it is possible to identify three total quality principles:
Does it first time to eliminate costly reworks?
Listen to and learn from employees and customers.
Make a continuous improvement in an everyday matter.
1.6. Contributing Disciplines to Organizational Behavior
Psychology: Psychology is an applied science, which attempts to explain human behavior in a
particular situation and predicts actions of individuals. Psychologists have been able to modify
individual behavior largely with the help of various studies. It has contributed towards various
theories on learning, motivation, personality, training and development, theories on individual
decision making, leadership, job satisfaction, performance appraisal, attitude, ego state, job
design, work stress and conflict management. Studies of these theories can improve personal
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skills, bring change in attitude and develop positive approach to organizational systems. Various
psychological tests are conducted in the organizations for selection of employees, measuring
personality attributes and aptitude.
Sociology: Science of Sociology studies the impact of culture on group behavior and has
contributed to a large extent to the field of group-dynamics, roles that individual plays in the
organization, communication, norms, status, power, conflict management, formal organization
theory, group processes and group decision-making.
Political science: Political science has contributed to the field of Organizational behavior.
Stability of government at national level is one major factor for promotion of international
business, financial investments, expansion and employment. Various government rules and
regulations play a very decisive role in growth of the organization. All organizations have to
abide by the rules of the government of the day.
Social psychology: Working organizations are formal assembly of people who are assigned
specific jobs and play a vital role in formulating human behavior. It is a subject where concept of
psychology and sociology are blend to achieve better human behavior in organization. The field
has contributed to manage change, group decision-making, communication and ability of people
in the organization, to maintain social norms.
Anthropology: It is a field of study relating to human activities in various cultural and
environmental frameworks. It understands difference in behavior based on value system of
different cultures of various countries. The study is more relevant to organizational behavior
today due to globalization, mergers and acquisitions of various industries. The advent of the 21st
century has created a situation wherein cross-cultural people will have to work in one particular
industry. Managers will have to deal with individuals and groups belonging to different ethnic
cultures and exercise adequate control or even channelize behavior in the desired direction by
appropriately manipulating various cultural factors. Environment studies conducted by the field
of anthropology aims to understand organizational human behavior so that acquisitions and
mergers are smooth. Organizations are bound by its culture that is formed by human beings.

Fig.1.1. The overview of the major contributions to the study of OB - Towards an OB discipline
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 Behavioral Science Contribution unit of analysis output

Training and Learning

Motivation and Perception
Leadership effectiveness
Job satisfaction
Individual decision making
Performance Appraisal
Attitude measurement Individual
Psychology
Employee selection
Work design and work stress

Group dynamics; work teams

Communication; power; conflict
Sociology Intergroup behavior
Study of
Formal organizational theory Group
OB
Organizational technology
Organizational culture and change
Social Behavioral and attitude change
psychology Communication
Group process, and decision making

Anthropology Comparative values and attitudes

Cross-cultural analysis Organizational
System
Political Organizational culture and environment
Science
Conflict; power
Intraorganizationalpolitis

1.7. Management and Organization Behavior in the 21st century

(Challenges & Opportunities)
Understanding organization behavior has never been more important for mangers. A quick look
at a few of the dramatic changes now taking place in organizations supports this claim. For
instance, the typical employee is getting older; more and more women and non whites are in the
work place; corporate restructuring and cost cutting are severing the bonds of loyalty that
historically tied many employees to their employers; and global competition is requiring
employees to become flexible and to learn cope with rapid change and innovation.
In short, there are a lot of challenges and opportunities today for managers to use organization
behavior concepts. In this section, we review some of the more critical issues confronting
managers to day for which organization behavior offers solutions or at least some meaningful
insights to ward solutions. The following areas are the area in which the managers’ of modern
organizations are being encountered challenges.

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  Improving Quality and Productivity:-More and more managers are confronting the
challenges of competition in their business areas. They have to improve their
organizations productivity and the quality of the products and services they offer in order
to continue to exist /survive and finally to become successful. Toward improving quality
and productivity, they are implementing programs like total quality management and re-
engineering-programs that require extensive employee involvement.

 Improving people skills

 Managing work force diversity
 Responding to globalization
 Empowering people
 Stimulating innovation and change
 Coping with “Temporariness” – today, change is an ongoing activity for most
managers. So, workers need to continually update their knowledge and skills to
perform new job requirements.
 increasing employee loyalty
 Improving ethical behavior
To sum up, since all the above activities are performed by managers, 21st century’s managers’
function is very challenging and difficult.
1.8. Organization as a System
It is very helpful to think of an organization as a system of interdependent parts that interact with
one another and that also must interact with the broader world within which the organization
exists.
Within the organization we see that people employ technology in performing the tasks that they
are responsible for, while the structure of the organizations eves as a basis for coordinating all
their different activities. The systems view emphasizes the interdependence of each these
elements within the organization, as indicated by the arrows in figure below. Each element
within the organization depends upon all the other elements, if the organization as a whole is to
function effectively.
The other key aspect of the systems view of organization is its emphasis on the interaction
between the organization and its broader environment. Organizations do not exist in a vacuum
but instead are influenced by the social, economic, political and cultural environments within
which they operate. As indicated in figure below, organizations are dependent up on their
environments in two key ways.

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Fig.1.2. Systems view of organizations

People

INPUTS Technology Tasks OUTPUTS

Structure

TRANSFORMATION PROCESSES

First, the organizations require inputs from the environment it is to operate. These inputs can
take the form of people, raw materials, money, ideas, and so on. If an organization cannot attract
the inputs it requires from the environment in order to function, it will rapidly decline and go out
of existence. The organization itself can be thought of as performing certain transformation
processes on its inputs in order to create outputs in the form of products or service.
This brings us to the second key way in which the organization is dependent upon its
environment. If people outside the organization do not want to buy the products or services
provided by the organization (i.e. the outputs of the organization), it will very quickly go out of
existence.
The systems view of organizations emphasizes the key interdependences that organization must
manage within themselves organizations must trade off the interdependencies among people,
tasks, technology, and structure in order to perform their transformation processes effectively
and efficiently. Organizations must also recognize their interdependence with the broader
environments within which they exist. Failure to recognize and manage these key
interdependencies can leads to rapid decline and ultimately to the demise of the entire
organization.

1.9. Ethics and Organizational Behavior

Ethics are the principles and values an individual uses to govern his activities and decisions. In
an organization, a code of ethics is a set of principles that guide the organization in its programs,
policies and decisions for the business. The ethical philosophy an organization uses to conduct
business can affect the reputation, productivity and bottom line of the business.

Moral values such as respect, honesty, fairness, and responsibility are important constructs of
ethics. Application of such ethics is ensured by organizations by adopting some code of ethics.

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Thus, ethics include the fundamental ground rules and organizations give an informed choice to
the employees to understand whether something is right or wrong and then take decisions
making the right choice.

Ethics therefore, is the framework of values for moral behavior. It is a social glue to ensure that
an organized society prospers and everybody’s interest is served.

The role of ethics in organizational behavior underlies many of the keys to success and
sustainability by creating a set of rules and guidelines that promote safety, trust, and
responsibility in the workplace. By creating and enforcing workplace culture with a strong
ethical code, an organization can reap the benefits in several different ways.

Leadership Ethics

The ethics that leaders in an organization use to manage employees may have an effect on the
morale and loyalty of workers. The code of ethics leaders use determines discipline procedures
and the acceptable behavior for all workers in an organization. When leaders have high ethical
standards, it encourages workers in the organization to meet that same level. Ethical leadership
also enhances the company’s reputation in the financial market and community. A solid
reputation for ethics and integrity in the community may improve the company’s business.

Employee Ethics

Ethical behavior among workers in an organization ensures that employees complete work with
honesty and integrity. Employees who use ethics to guide their behavior adhere to employee
policies and rules while striving to meet the goals of the organization. Ethical employees also
meet standards for quality in their work, which can enhance the company’s reputation for quality
products and service.

Generally Leaders and employees adhering to a code of ethics create an ethical organizational
culture. The leaders of a business may create an ethical culture by exhibiting the type of behavior
they'd like to see in employees. The organization can reinforce ethical behavior by rewarding
employees who exhibit the values and integrity that coincides with the company code of ethics
and disciplining those who make the wrong choices.

For individuals, the role of ethics in organizational behavior helps ensure that each person is
treated fairly and maintains personal responsibility. Ensuring that each person earns a fair market
wage based on his effort, experience, and performance is one example of an ethical guideline
that greatly affects individuals. Similarly, by clearly outlining personal responsibility, such as not
padding expenses or abusing sick leave, ethical codes can help ensure that a high level of trust
exists between co-workers. In general, if an employee feels that he is treated fairly and can trust
his co-workers and superiors, loyalty, and thus productivity may rise.

The role of ethics in organizational behavior can also greatly impact how the organization acts as
a whole. Even if individuals follow a strong code of ethics, if the larger organization acts

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unethically, the positive effect may be negated. For instance, even if all mid-level workers in an
office act fairly and morally toward one another, if managers are allowed to get away with
sexual harassment, the entire system can become a hostile, dangerous environment that can erode
loyalty and cause more problems.
In addition to maintaining internal behavioral standards, part of the role of ethics in
organizational behavior is to ensure that the organization is behaving positively in the
community at large. If a company engages in behavior that damages the community, the
consequence will often filter down into the organization itself. One example of this might be a
significant decrease in employee loyalty after a newspaper article discloses that the business uses
sweatshop (where pay is low and conditions are poor or even illegal) labor to manufacture
products. Assisting the community in a positive way can help improve employee loyalty, attract
better employees, and bring new business opportunities by maintaining an ethical reputation.

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