Chapter 1: Introduction to Organizational Behavior

Introduction

While working for the organizations, people interact with other people. Many factors influence this interaction, and as a result behavior occurs. However, people do not behave in the same way, when they face similar situations; and besides, the individual behavior is not the same in different situations and at different times. This complex and unpredictable nature of behavior within organizations prevents to develop generalizations, but it is observable and measurable and studied by the field of organizational behavior. Having the purpose of enhancing organizational effectiveness, organizational behavior analyzes the behaviors of people working for the organizations.

Definition and Scope of Organizational Behavior

Organizational behavior could be simply defined as the study of human behavior within organizations. However, human behavior is often complex and impalpable, and this definition is ambiguous without an understanding of what actually organizations are. Therefore, it is first necessary to define what an organization is. An organization means an organized effort of people, which satisfies the society’s needs for its own purpose. This definition covers three important concepts. One of which is that organizations exist for a purpose, either to earn profits (as it is the purpose of most organizations) or to serve the community and act for its welfare (purpose of non-profit or charitable organizations is to fulfil social mission). The second concept regarding the definition is that organizations satisfy the needs of the society in which they operate. The final concept reflects the necessity of organized effort of people who work for the organizations so that they can satisfy the society’s needs and achieve their purposes.

People’s effort for the completion of organizational activities, especially physical and intellectual ones, are defined as labor. The behaviors and performance of human capital are the main factors that affect the quality and amount of produced products.

Although all of the organizations consist of people, none of them in terms of their activities is similar to one another. Previously, Schwartz (1987) distinguished between two views of organizations. The first one, which he defined as clockwork, represents an organization where everyone knows what the organization is about; and the other one, defined as snakepit, represents an organization where nobody knows what is going on.

It is beneficial for the owners or managers of organizations to understand human behavior in order to obtain their purposes. Organizational behavior (OB) is defined as the study of how employees and groups, think, feel, behave and react, in response to each other and to their organization, and the effect of these on the organization.

The theories about OB suggest alternative perspectives for understanding human behavior. One of these has an intrinsic nature, reflecting the personal factors, in terms of feelings, perceptions, judgments, needs and experiences of the individual. According to this perspective, the behavior and actions of individuals can be best interpreted by understanding their feelings and thoughts. On the other hand, in order to understand behavior, extrinsic view focuses on the factors apart from the individual, such as external events and circumstances, environmental forces that the individual face. Although, organizational behavior addresses primarily the individuals and interpersonal relations, organizations also have an effect on the behavior of individuals. Therefore, there exists three levels of analysis in OB, which are, individual, group and organizational.

Apart from individual characteristics, the team and/ or group characteristics and processes also matter for OB. Both team and group represent two or more people; whereas, a team is defined as two or more people with shared leadership and fate, who work together and interdependent on each other’s support towards achieving a common goal; therefore, team members are jointly responsible for their outcomes. The group members do not share characteristics of teams. A group is two or more people who interact with each other to achieve their individual goals which are not mutual goals.

Although the primary concern of OB is at individual and interpersonal level, organizational characteristics have an important contribution to the behavior in organizations. Being similar to the characteristics of a national culture; organizational culture is defined as the set of shared beliefs, values, attitudes, norms, goals and practices among the organizational members, so that these shared values and behaviors form a unique psychological and social organizational environment that characterize the organization. Organizational structure, which is another important factor that affects individual or group behavior, is also shaped by organizational culture. Organizational structure is defined as how people are organized or the division and coordination of jobs; the basic dimensions of organizational structure are the key organizational parts responsible for its success or failure, coordination mechanism, and type of decentralization.

There are important influences of earlier field of studies on the development of OB field. Although it is primarily identified with psychology, OB field also emerged from sociology, political science and economics. Besides, anthropology field has important contributions for OB. In addition to social sciences, engineering and medicine also contributed to its development. Due to the influence of psychology and sociology; historically focus of the field was mainly based on individual and group behaviors and characteristics; due to this OB was referred to as ‘microOB’ addressing individual and group behavior, whereas macro-OB indicated organizational effect on behaviour.

Brief History of Organizational Behavior

The history of OB starts with the most influential Greek philosophers, whose thoughts are still valid for today’s organizations. During Renaissance time in Italy, Machiavelli, who was considered as the founder of history and political science, discussed power and politics. Later, in 1776, Adam Smith suggested division of labor. The modern history of OB, based on these ancient roots.

It is generally considered that systematic organizational studies began as an academic discipline, after the Industrial Revolution which took place firstly in Great Britain during the late 1700s and early 1800s. Major transitions in terms of economic and technical conditions occurred with the Industrial Revolution which developed nations to an industrial society from an agricultural society. The transitions were mainly due to the use of steam as a power instead of human or animal power, and the invention and adoption of machines used for production instead of hand-made products. The production started to be undertaken in large-scale factories, in which many people worked. People who worked earlier as farmers or craftsmen became industrial workers; these workers were unskilled and often worked long-hours in unsafe conditions. All of these new developments lead to a new perspective of management known as scientific management.

The emergence of scientific management represents the peak of this development, which dates back to the end of 19th century. Frederick Winslow Taylor (1856-1915), who was an engineer and manufacturing manager at a steel company in U.S., is best known for defining scientific management techniques. Taylor’s work is generally recognized as the beginning of the history of modern organizational behavior. Taylor indicated that with division of labor and work specialization, time and effort of employees for the production of a unit of product will be reduced which results in a more efficient production process. He also systematically studied human behavior and the interaction of people with their tasks and physical conditions. Believing that the primary employee motivation was money, Taylor developed piece-rate systems of pay that is differential incentive systems based on extra completed work. Although, many people criticize his approach for treating the employees rather like machines not humans, his lasting approach formed the basis of modern management studies.

During 1925 to 1932, a series of studies known as Hawthorne Studies, conducted at Hawthorne Plant of the Western Electric Company; the studies at first was influenced from the scientific management principles, but developed to be the major research advancement in understanding of human behavior in organizations.

Elton Mayo was the influential researcher who encouraged the organization’s management to further develop the Hawthorne studies. These studies, consisting of several experiments, were initiated to investigate the effect of characteristics of work setting (specifically the lighting or illumination level) on the productivity of employees. The researchers found out that the surprising results they obtained were due to the effect of many factors influencing the behavior of Hawthorne employees. The researchers also discovered the attitudes and feelings of employees; manager’s behavior or leadership; social and interpersonal human dynamics, and the behavioral norms set by the task group, as critically important factors for productivity.

The Hawthorne studies suggested that employees perform better if they receive attention and recognition. “Human relations”, defined as “motivating people in organizational settings to develop teamwork that accomplishes the individual, as well as organization’s goal efficiently” (Davis, 1972), emerged from this view.

The human relations approach ignored the formal organization and its relation with the environment. The development of systems-theory in life-sciences as a multidisciplinary approach affected the way of thinking in organizations.

Von-Bertalanffy (1956) pioneered the research in biology and he suggested that although a phenomenon can be comprehended by the analysis of its components, for full understanding there is a need to observe it at the higher level with a holistic perspective. Influenced from this view, studies about organizations started to view organizations as systems and many research were then undertaken about the relation of organizations with their environment. Systems theory fundamentally focuses on the interactions among the smaller parts and opensystems theory identifies the relations between the different parts of the organization, and between the organization and its environment. the activities of most organizations could be explained with an open-systems perspective. There exist mainly three stages, defined as input, transformation and output.

Starting from 1960s, research which were undertaken within the framework of contingency theory dominated the organizational behavior field. Contingency theory was first termed in 1967 by Lawrence and Lorsch. Within the scope of contingency theory, organizations are studied as a system. The theory focuses on both the relations of sub-systems of the organization and the relation of these sub-systems with the situations outside the organizations. Contingency theory did not totally remove the assumptions of prior approaches, but it brought a new perspective to them, which were the consideration of environmental factors and the fit of organizational factors with these external factors.

There exist no certain principles to determine the organizational behaviour and it is not possible to develop principles which could be applied to every situation. The main aim according to contingency theory is to have a thorough understanding of each situation and develop appropriate behavior related to that situation.

Challenges for Organizational Behavior in Changing Environment

Managing organizational behavior in today’s organizations is especially challenging for organizations which face many outstanding rapid changes in their external environment. These challenges can be grouped into four; which are, (1) increasing globalization, (2) need to understand diverse workforce, (3) advancing technology, and (4) managing ethical issues. These challenges should be addressed by organizations with increasing sensitivity for managing their human resources.

Globalization implies a borderless world, which means the development of an increasingly integrated global economy. Free trade and free flow of capital among nations and also benefiting from the cheaper cost of labor and other natural sources are the main reasons of increasing globalization. Trade among nations increased due to reduction of trade barriers and formation of regional agreements. Furthermore, the advancement in transportation and communication also facilitated globalization.

Globalization boosted the number of multinational corporations (MNC), which are defined as large-scale organizations that have facilities and other assets, used for production and selling of goods and services, in at least one country other than its home country. Most MNCs have tremendous revenues, which exceed the ‘gross domestic product’ (GDP) of many nations.

Many MNCs in recent years benefited from cost advantages of outsourcing, which is defined as the completion of organization’s activities, jobs or processes, outside the organization. To do this, the organization makes an agreement with a service provider (usually in a foreign country with cost advantage) or an individual; and by using outsourcing, organizations stop doing their outsourced activity and have other organizations with expertise to complete it.

Globalization also bring along some important risks in terms of OB. First, because the foreign managers might have different views about the organizational purposes and strategies, the coordination of global activities might arouse as a risk and the conflicts might occur due to inadequate communication. In order to manage the risks associated with this, the organizations rotate their managers to other countries. These managers called as expatriate managers (also briefly called as ‘expat’), help the organizations to coordinate their activities in foreign countries with respect to organizational procedures and standards.

Global organizations should also consider the risks of terrorism; environmental disasters, such as hurricanes, earthquakes and other crises. Furthermore, at a global level, OB becomes complex because the feelings, attitudes, perceptions, and values of workforce differ by country. This forms a major challenge for all organizations. For a global organization, an appreciation of cultural differences and having a working knowledge of diverse cultural characteristics is necessary.

In the workplace, the classroom, the press and the media, cultural stereotypes are ubiquitous; they are perpetuated thorough jokes, anecdotes, songs and images. The seeds of prejudice are contained in these reductive simplifications of the ‘outsider’ and cultures belonging to different traditions are particularly prone to mutual stereotyping. Stereotyping is a way of demarcating one group from an alien ‘other’ and implicitly asserting its superiority.

Demographical factors (i.e. gender, age, ethnicity, socialclass, physical ability) and diversity of the workforce resulting from such factors have an important effect on the way of doing business. Diversity reflects both similarities and differences in terms of individual characteristics. Organizations need to be responsive to changing demographic trends.

One mostly recognized type of organizational diversity is gender diversity, which results from increasing participation of women to the workforce. Although their number in organizations increased substantially within time, women are still underrepresented in workforce. Women face other difficulties, such as discrimination for wages and other benefits are being one of them. Discrimination explains the treatment of one party in favor of the other. Women at workforce usually do not have equal employment opportunities as their male counterparts. Although the societal roles of women are many; mostly they are supported to handle all the roles and as a result of these multiple roles, work-family conflict occurs. Women at workforce may also face negative behaviors, such as mobbing and sexual harassment. Mobbing is defined as systematic psychological abuse of an individual or group.

Globalization triggered diverse workforce in organizations. As a result of increasing global economy, organizations’ workforce has more cultural diversity. On the other hand, ability diversity is another form of diversity which is becoming more important. During the previous years, disabled people were generally underutilized in the workforce, but it is expected that workforce representation of disabled people will increase in the near future.

The aging workforce brings the challenge of people who belong to different generations, working together. In today’s organizations, employees belonging to different generations are working together, this result in workforces’ age diversity. Workforce today consists of five generations.

Globalization created a competitive environment. Diversity of workforce brings different perspectives, due to interaction of different skills, talents and experiences of employees, which is an important driver of creativity leading to innovation. New ideas and products develop as a result of multiple ideas. Being aware of this, organizations handle diversity management as an ongoing activity.

Technology is defined as the application of scientific knowledge to design, produce, and utilize goods and services. Today, the world is defined as technology-driven since the development pace and adoption of new technologies increased dramatically. This creates important challenges for governments, societies and organizations.

Sometimes technology and innovation is used interchangeably. Actually two concepts are different from each other and technology is one of the results of innovation, and not all of the innovations involve technology. Innovation is defined as “the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations”. This definition consists of four types of innovation which are; product innovation, process innovation, marketing innovation and organizational innovation.

With recent exponential progress, technology has become the center for many developments. The new technologies contributed to fostering of automation and communication at workplace. Information and communication technology (ICT) poses an important challenge for organizations. The advancements in technology results in many changes in workplace and these rapid technological changes form another challenge for organizations. Since, it is almost impossible to become competitive unless by using new technologies, the organizations should cope with the technological changes, otherwise they loose their competitiveness.

First of all, the technological progress in all fields creates automation at workplace. This requires development of new skills for employees. Organizations should find ways for their employees to constantly make them learn and adapt these changes. In addition, some employees are resistant to the changes because of their feelings of uncertainty and fears of losing their jobs, and they may feel to be replaced by new technologies. Additionally, they may believe they will have less freedom and control in their works. Organizations should find ways to overcome this resistance. Communication with employees, explaining them clearly the needs and reasons for technological change is a helpful way.

In addition with ICT, it is easy to exchange knowledge and facilitate problem-solving. ICT allows people to have a real-time communication wherever they are and also work from locations other than their office. Furthermore, being accessible anytime via smart-phones creates stress and work-family conflict for employees. Managers can demand to complete some tasks after work hours and this interference to family life may create burnout. Besides, employees who have opportunity to work at home generally lack interaction with their colleagues and supervisors, so that they are less identified with their organizations.

Business ethics is another challenging area for organizations.Ethical behavior is not only associated with individuals, also today organizations are more concerned to behave ethically. Business ethics is defined as the study of moral behaviors and principles that guide business activities. It helps managers to distinguish between what is “right” or “wrong”, and then make the right choice. Business ethics generally includes controversial issues.

Business ethics consists of organizational responsibilities, both inside and outside of organizations. These responsibilities are called social responsibility which is defined as the obligation of organizations towards the interests and welfare of its stakeholders that are affected by organizational activities. Stakeholders represent all of the groups that are affected by the activities of the organization. In accordance, stakeholders consist of owners, customers, employees, competitors, suppliers, creditors, government, trade organizations, and society.

Ethics is important for OB because it can enhance or reduce the motivation, loyalty and well-being of employees. Concern for ethical issues increased due to major corporate scandals. Ethical norms and standards within the organization specify the actions of organizations for making profits, therefore it is necessary to document these principles as code of ethics. Developing ethical codes help organizations to protect their reputations. These codes are important for managers and employees to understand how to behave when faced with ethical issues.

Since the distinction between ethical and unethical behavior is not clear, ethical codes may not be comprehensive, and as a result organizations probably face ethical dilemmas. Ethical dilemmas occur when the managers experience that some stakeholders benefit from their decisions while others are affected negatively. In addition, since ethical values are personal, some of the employees may conduct unethical behaviors if an opportunity occurs. Furthermore, society encourages whistleblowers, who inform the society and other authorized parties about the unethical behaviors of their organizations. Organizations would also benefit from whistleblowing.