Chapter Learning Objectives

After studying this chapter, you should be able to:

1. Define organizational behavior.
2. Identify the functions that comprise the management process and relate them to organizational
behavior.
3. Relate organizational behavior to basic managerial roles and skills.
4. Describe contemporary organizational behavior characteristics.
5. Discuss contextual perspectives on organizational behavior.
6. Describe the role of organizational behavior in managing for effectiveness.

WHAT IS ORGANIZATIONAL BEHAVIOR?

What exactly is meant by the term “organizational behavior”? And why should it be studied? Answers to
these two fundamental questions will both help establish our foundation for discussion and analysis and
help you better appreciate the rationale as to how and why understanding the field can be of value to
you in the future.

The Meaning of Organizational Behavior

Organizational behavior (OB) is the study of human behavior in organizational settings, of the interface
between human behavior and the organization, and of the organization itself. Although we can focus on
any one of these three areas, we must also remember that all three are ultimately necessary for a
comprehensive understanding of organizational behavior. For example, we can study individual behavior
without explicitly considering the organization. But because the organization influences and is influenced
by the individual, we cannot fully understand the individual’s behavior without learning something about
the organization. Similarly, we can study organizations without focusing explicitly on the people within
them. But again, we are looking at only a portion of the puzzle. Eventually we must consider the other
pieces, as well as the whole.
Figure 1 illustrates this view of organizational behavior. It shows the linkages among human behavior
in organizational settings, the individual–organization interface, the organization itself, and the
environment surrounding the organization. Each individual brings to an organization a unique set of
personal characteristics and a unique personal background and set of experiences from other
organizations. Therefore, in considering the people who work in their organizations, managers must look
at the unique perspective each individual brings to the work setting. For example, suppose managers at
The Home Depot review data showing that employee turnover within the firm is gradually but
consistently increasing. Further suppose that they hire a consultant to help them better understand the
problem. As a starting point, the consultant might analyze the types of people the company usually hires.
The goal would be to learn as much as possible about the nature of the company’s workforce as
individuals—their expectations, their personal goals, and so forth.
FIGURE 1 The Nature of Organizational Behavior

But individuals do not work in isolation. They come in contact with other people and with the
organization in a variety of ways. Points of contact include managers, coworkers, the formal policies and
procedures of the organization, and various changes implemented by the organization. In addition, over
time, individuals change, as a function of personal experiences and maturity as well as through work
experiences and organizational developments. The organization, in turn, is affected by the presence and
eventual absence of the individual. Clearly, then, managers must also consider how the individual and
the organization interact. Thus, the consultant studying turnover at The Home Depot might next look at
the orientation procedures and initial training for newcomers to the organization. The goal of this phase
of the study would be to understand some of the dynamics of how incoming individuals are introduced
to and interact with the broader organizational context.
An organization, of course, exists before a particular person joins it and continues to exist after he or
she leaves. Thus, the organization itself represents a crucial third perspective from which to view
organizational behavior. For instance, the consultant studying turnover would also need to study the
structure and culture of The Home Depot. An understanding of factors such as a firm’s performance
evaluation and reward systems, its decision-making and communication patterns, and the structure of
the firm itself can provide added insight into why some people choose to leave a company and others
elect to stay.
Clearly, then, the field of organizational behavior is both exciting and complex. Myriad variables and
concepts accompany the interactions just described, and together these factors greatly complicate the
manager’s ability to understand, appreciate, and manage others in the organization. They also provide
unique and important opportunities to enhance personal and organizational effectiveness.

The Importance of Organizational Behavior

The importance of organizational behavior may now be clear, but we should nonetheless take a few
moments to make it even more explicit. Most people are raised and educated in organizations, acquire
most of their material possessions from organizations, and die as members of organizations. Many of
our activities are regulated by the various organizations that make up our governments. And most adults
spend the better part of their lives working in organizations. Because organizations influence our lives
so powerfully, we have every reason to be concerned about how and why those organizations function.
In our relationships with organizations, we may adopt any one of several roles or identities. For
example, we can be consumers, employees, suppliers, competitors, owners, or investors. Since most
readers of this module are either present or future managers, we will adopt a managerial perspective
throughout our discussion. The study of organizational behavior can greatly clarify the factors that affect
how managers manage. Hence, the field attempts to describe the complex human context of
organizations and to define the opportunities, problems, challenges, and issues associated with that
realm.
The value of organizational behavior is that it isolates important aspects of the manager’s job and
offers specific perspectives on the human side of management: people as organizations, people as
resources, and people as people. To further underscore the importance of organizational behavior to
managers, we should consider this simple fact: Year in and year out, most of the firms on Fortune’s list
of the world’s most admired companies have impeccable reputations for valuing and respecting the
people who work for them. Clearly, then, an understanding of organizational behavior can play a vital
role in managerial work. To most effectively use the knowledge provided by this field, managers must
thoroughly understand its various concepts, assumptions, and premises. To provide this foundation, we
next tie organizational behavior even more explicitly to management and then turn to a more detailed
examination of the manager’s job itself.

Organizational Behavior and Management

Virtually all organizations have managers with titles such as chief financial officer, marketing manager,
director of public relations, vice president for human resources, and plant manager. But probably no
organization has a position called “organizational behavior manager.” The reason for this is simple:
Organizational behavior is not a defined business function or area of responsibility similar to finance or
marketing. Rather, understanding of organizational behavior provides a set of insights and tools that all
managers can use to carry out their jobs more effectively.
An appreciation and understanding of organizational behavior helps managers better understand
why others in the organization behave as they do. For example, most managers in an organization are
directly responsible for the work-related behaviors of a certain set of other people—their immediate
subordinates. Typical managerial activities in this realm include motivating employees to work harder,
ensuring that employees’ jobs are properly designed, resolving conflicts, evaluating performance, and
helping workers set goals to achieve rewards. The field of organizational behavior abounds with models
and research relevant to each of these activities.
Unless they happen to be chief executive officers (CEOs), managers also report to others in the
organization (and even the CEO reports to the board of directors). In dealing with these individuals, an
understanding of basic issues associated with leadership, power and political behavior, decision making,
organization structure and design, and organizational culture can be extremely beneficial. Again, the
field of organizational behavior provides numerous valuable insights into these processes.
Managers can also use their knowledge of organizational behavior to better understand their own
needs, motives, behaviors, and feelings, which will help them improve decision-making capabilities,
control stress, communicate better, and comprehend how career dynamics unfold. The study of
organizational behavior provides insights into all of these concepts and processes.
Managers interact with a variety of colleagues, peers, and coworkers inside the organization. An
understanding of attitudinal processes, individual differences, group dynamics, intergroup dynamics,
organizational culture, and power and political behavior can help managers handle such interactions
more effectively. Organizational behavior provides a variety of practical insights into these processes.
Virtually all of the insights into behavioral processes already mentioned are also valuable in interactions
with people outside the organization—suppliers, customers, competitors, government officials,
representatives of citizens’ groups, union officials, and potential joint-venture partners. In addition, a
special understanding of the environment, technology, and global issues is valuable. Again,
organizational behavior offers managers many different insights into how and why things happen as they
do.
Finally, these patterns of interactions hold true regardless of the type of organization. Whether a
business is large or small, domestic or international, growing or stagnating, its managers perform their
work within a social context. And the same can be said of managers in health care, education, and
government, as well as those in student organizations such as fraternities, sororities, and professional
clubs. We see, then, that it is essentially impossible to understand and practice management without
considering the numerous areas of organizational behavior. Further, as more and more organizations
hire managers from other countries, the processes of understanding human behavior in organizations
will almost certainly grow increasingly complex. We now address the nature of the manager’s job in
more detail before returning to our primary focus on organizational behavior.

ORGANIZATIONAL BEHAVIOR AND THE MANAGEMENT PROCESS

Managerial work is fraught with complexity and unpredictability and enriched with opportunity and
excitement. However, in characterizing managerial work, most educators and other experts find it useful
to conceptualize the activities performed by managers as reflecting one or more of four basic functions.
These functions are generally referred to as planning, organizing, leading, and controlling. While these
functions are often described in a sequential manner, in reality, of course, most managerial work
involves all four functions simultaneously.
Similarly, organizations use many different resources in the pursuit of their goals and objectives. As
with management functions, though, these resources can also generally be classified into four groups:
human, financial, physical, and/or information resources. As illustrated in Figure 2, managers combine
these resources through the four basic functions, with the ultimate purpose of efficiently and effectively
attaining the goals of the organization. That is, the figure shows how managers apply the basic functions
across resources to advance the organization toward its goals.
FIGURE 2 Basic Managerial Functions

Planning, the first managerial function, is the process of determining the organization’s desired
future position and deciding how best to get there. The planning process at Sears, for example, includes
studying and analyzing the environment, deciding on appropriate goals, outlining strategies for achieving
those goals, and developing tactics to help execute the strategies. Behavioral processes and
characteristics pervade each of these activities. Perception, for instance, plays a major role in
environmental scanning, and creativity and motivation influence how managers set goals, strategies,
and tactics for their organization. Larger corporations such as Walmart and Starbucks usually rely on
their top management teams to handle most planning activities. In smaller firms, the owner usually takes
care of planning.
The second managerial function is organizing—the process of designing jobs, grouping jobs into
manageable units, and establishing patterns of authority among jobs and groups of jobs. This process
produces the basic structure, or framework, of the organization. For large organizations such as Apple
and Toyota, that structure can be extensive and complicated. The structure includes several hierarchical
layers and spans myriad activities and areas of responsibility. Smaller firms can often function with a
relatively simple and straightforward form of organization. As noted earlier, the processes and
characteristics of the organization itself are a major theme of organizational behavior.
Leading, the third major managerial function, is the process of motivating members of the
organization to work together toward the organization’s goals. An Old Navy store manager, for example,
must hire people, train them, and motivate them. Major components of leading include motivating
employees, managing group dynamics, and the actual process of leadership itself. These are all closely
related to major areas of organizational behavior. All managers, whether they work in a huge
multinational corporation spanning dozens of countries or in a small neighborhood business serving a
few square city blocks, must understand the importance of leading.
The fourth managerial function, controlling, is the process of monitoring and correcting the actions
of the organization and its people to keep them headed toward their goals. A manager at Best Buy has
to control costs, inventory, and so on. Again, behavioral processes and characteristics are a key part of
this function. Performance evaluation, reward systems, and motivation, for example, all apply to control.
Control is of vital importance to all businesses, but it may be especially critical to smaller ones. Walmart,
for example, can withstand with relative ease a loss of several thousand dollars due to poor control, but
an equivalent loss may be devastating to a small firm.

ORGANIZATIONAL BEHAVIOR AND THE MANAGER’S JOB

As they engage in the basic management functions previously described, managers often find
themselves playing a variety of different roles. Moreover, to perform their functions most effectively
and to be successful in their various roles, managers must also draw upon a set of critical skills. This
section first introduces the basic managerial roles and then describes the core skills necessary for success
in an organization.

Basic Managerial Roles

In an organization, as in a play or a movie, a role is the part a person plays in a given situation. Managers
often play a number of different roles. In general, as summarized in Table 1, there are ten basic
managerial roles, which cluster into three general categories

Table 1 Important Managerial Roles

Category Role Example
Interpersonal Figurehead Attend employee retirement ceremony
Leader Encourage workers to increase productivity
Liaison Coordinate activities of two committees
Informational Monitor Scan Business Week for information about
competition
Disseminator Send out memos outlining new policies
Spokesperson Hold press conference to announce new plant
Decision-Making Entrepreneur Develop idea for new product and convince others
of its merit
Disturbance handler Resolve dispute
Resource allocator Allocate budget requests
Negotiator Settle new labor contract

Interpersonal Roles The interpersonal roles are primarily social in nature; that is, they are roles in
which the manager’s main task is to relate to other people in certain ways. The manager sometimes may
serve as a figurehead for the organization. Taking visitors to dinner and attending ribbon-cutting
ceremonies are part of the figurehead role. In the role of leader, the manager works to hire, train, and
motivate employees. Finally, the liaison role consists of relating to others outside the group or
organization. For example, a manager at Intel might be responsible for handling all price negotiations
with a key supplier of microchips. Obviously, each of these interpersonal roles involves behavioral
processes.
Informational Roles The three informational roles involve some aspect of information processing.
The monitor actively seeks information that might be of value to the organization in general or to specific
managers. The manager who transmits this information to others is carrying out the role of disseminator.
The spokesperson speaks for the organization to outsiders. A manager chosen by Dell Computer to
appear at a press conference announcing a new product launch or other major deal, such as a recent
decision to undertake a joint venture with Microsoft or Amazon, would be serving in this role. Again,
behavioral processes are part of each of these roles, because information is almost always exchanged
between people.

Decision-Making Roles Finally, there are also four decision-making roles. The entrepreneur
voluntarily initiates change—such as innovations or new strategies—within the organization. The
disturbance handler helps settle disputes between various parties, such as other managers and their
subordinates. The resource allocator decides who will get what—how resources in the organization will
be distributed among various individuals and groups. The negotiator represents the organization in
reaching agreements with other organizations, such as contracts between management and labor
unions. Again, behavioral processes clearly are crucial in each of these decisional roles.

Critical Managerial Skills

Another important element of managerial work is mastery of the skills necessary to carry out basic
functions and fill fundamental roles. In general, most successful managers have a strong combination of
technical, interpersonal, conceptual, and diagnostic skills.

Technical Skills Technical skills are skills necessary to accomplish specific tasks within the
organization. Designing a new computer for Hewlett-Packard, developing a new formula for a frozen-
food additive for Conagra, or writing a press release for Halliburton all require technical skills. Hence,
these skills are generally associated with the operations employed by the organization in its production
processes. For example, David Packard and Bill Hewlett, founders of Hewlett-Packard, started out their
careers as engineers. Other examples of managers with strong technical skills include Eric Molson (CEO
of Molson Coors Brewing, who began his career as a brewmaster) and Ron Meyer (COO of Universal
Studios, who began his career as a filmmaker). The CEOs of the Big Four accounting firms also began
their careers as accountants.

Interpersonal Skills The manager uses interpersonal skills to communicate with, understand, and
motivate individuals and groups. As we have noted, managers spend a large portion of their time
interacting with others, so it is clearly important that they get along well with other people. For instance,
David Novak is CEO of YUM! Brands, the firm that owns KFC, Pizza Hut, and Taco Bell. Novak is able to
relate to employees throughout the firm. He is also known to his employees as a caring, compassionate,
and an honest person. These qualities inspire others throughout the firm and motivate them to work
hard to help Novak reach the firm’s goals.

Conceptual Skills Conceptual skills are the manager’s ability to think in the abstract. A manager with
strong conceptual skills is able to see the “big picture.” That is, she or he can see opportunity where
others see roadblocks or problems. For example, after Steve Wozniak and Steve Jobs built a small
computer of their own design in a garage, Wozniak essentially saw a new toy that could be tinkered with.
Jobs, however, saw far more and convinced his partner that they should start a company to make and
sell the computers. The result? Apple Computer. In subsequent years Jobs also used his conceptual skills
to identify the potential in digital media technologies, leading to the introduction of such products as
the iPod, the iPhone, iTunes, and the iPad as well as his overseeing the creation of Pixar Animation
Studios. When he died in 2011 Jobs was hailed as one of the most innovative managers of all time.

Diagnostic Skills Most successful managers also bring diagnostic skills to the organization. Diagnostic
skills allow managers to better understand cause-and-effect relationships and to recognize the optimal
solutions to problems. For instance, when Ed Whitacre was chairman and CEO of SBC Communications,
he recognized that, though his firm was performing well in the consumer market, it lacked strong brand
identification in the business environment. He first carefully identified and then implemented an action
to remedy the firm’s shortcoming—SBC would buy AT&T (for $16 billion), acquiring in the process the
very name recognition that his company needed. After the acquisition was completed, the firm changed
its corporate name from SBC to AT&T. And it was Whitacre’s diagnostic skills that pulled it all together.
Indeed, his legacy of strong diagnostic skills led to his being asked to lead the corporate turnaround at
General Motors in 2009.
Of course, not every manager has an equal measure of these four basic types of skills. Nor are equal
measures critical. As shown in Figure 3, for example, the optimal skills mix tends to vary with the
manager’s level in the organization. First-line managers generally need to depend more on their
technical and interpersonal skills and less on their conceptual and diagnostic skills. Top managers tend
to exhibit the reverse combination—more emphasis on conceptual and diagnostic skills and less
dependence on technical and interpersonal skills. Middle managers require a more even distribution of
skills. Similarly, the mix of needed skills can vary depending on economic circumstances. One recent
survey suggested that during very tough economic times, the most important skills for a CEO are to be
an effective communicator and motivator, be decisive, and be a visionary.

FIGURE 3 Managerial Skills at Different Organizational Levels

You probably possess all of these skills to a greater or lesser degree, but what about your disruptive
skills? At first glance, this doesn’t sound like a particularly desirable skill set, but it certainly can be. To
find out how, read the Change box entitled “Do You Have What It Takes to Disrupt Your Work Life?”
below.
Do You Have What It Takes to Disrupt Your Work Life?
Let’s say that you’re a doctor who’s tired of practicing medicine. It happens. One female physician wrote
to Philippa Kennealy, a career coach for medical professionals, to say, “I don’t want to practice clinical
medicine anymore and am currently at home with my children. I am at a loss as to what I can do with
my knowledge and skills.” Kennealy suggested that her attention to detail and commitment to high
performance might make her valuable in the field of electronic medical records (EMR)—creating
computerized medical records for such healthcare deliverers as hospitals or physicians’ offices. Kennealy
also cites the example of a Stanford trained general surgeon who switched to entrepreneurship to
cofound four medical-device startups.
Granted, when it comes to making such career- (and life-) changing decisions, the average physician
is at a certain advantage over most of the rest of us. At the very least, your doctor is probably good at
listening, “connect-the-dot” problem solving, and remembering extremely complex details. HR experts
call these disruptive skills—what Whitney Johnson, a founding partner of the investment firm Rose Park
Advisors, identifies as “our distinctive innate talents rather than ‘me-too’ skills…. These are the skills,”
says Johnson, “that can help you carve out a disruptive niche—consequently upping your value in the
marketplace.” She adds that your disruptive skill might actually be “a confluence of skills.” Take, for
example, our career disaffected physician. Many job candidates can claim to be good listeners; many
others may claim above average problem-solving ability and still others a remarkable capacity for
remembering things. A physician, however, can honestly put all three skills on her résumé, and “for the
right customer,” observes Johnson, “that combination is your disruptive skill.”
At this point, you’re probably saying to yourself, “Never mind spoiled doctors. I’m just looking for a
job to help pay for a college education in which I haven’t even decided on a major.” True enough, but
most us have things that we’re pretty good at—abilities that may in fact be potential disruptive skills.
One big problem is the fact that a lot of us don’t even know what they are, much less what workplace
value they might have. According to Johnson, “we often overlook our best skills—our innate talents—
simply because we perform them without even thinking.” You could even have a certain “genius” at
some activity, but as Alana Cates, president of the consultancy and training firm Accelerated Profit
Solutions, puts it, “the frustration in genius is in believing that if it is easy for you, it must be easy for
everyone else.”
Johnson suggests that you begin thinking about your disruptive skills by asking yourself three questions:
1. What do you do reflexively well? These are usually the things that you do well—and often with
pleasure—without thinking about them. Business consultant and motivational speaker Marcus
Buckingham suggests that you think about what you’re doing whenever you feel “invigorated,
inquisitive, successful.”
2. What do others identify as being your best skills? “Too many people,” quipped the late publisher
Malcolm Forbes, “overvalue what they are not and undervalue what they are.” If you want to be an
actor but everyone else keeps saying that you’d make a great set designer, you’d probably do well to
heed the feedback. Otherwise, warns Johnson, “over the course of your career, it will leave you trading
at a discount to what you are worth.”
3. Do you have a confluence of skills? In other words, is your disruptive skill actually a skill set—what
Johnson characterizes as “an unusual intersection of ordinary proficiencies”?
CONTEMPORARY ORGANIZATIONAL BEHAVIOR
Now, with this additional understanding of managerial work, we can return to our discussion of
organizational behavior. We first introduce two fundamental characteristics of contemporary
organizational behavior that warrant special discussion; we then identify the particular set of concepts
that are generally accepted as defining the field’s domain.

Characteristics of the Field

Managers and researchers who use concepts and ideas from organizational behavior must recognize
that it has an interdisciplinary focus and a descriptive nature; that is, it draws from a variety of other
fields and it attempts to describe behavior (rather than to predict how behavior can be changed in
consistent and generalizable ways).

An Interdisciplinary Focus In many ways, organizational behavior synthesizes several other fields
of study. Perhaps the greatest contribution is from psychology, especially organizational psychology.
Psychologists study human behavior, whereas organizational psychologists deal specifically with the
behavior of people in organizational settings. Many of the concepts that interest psychologists, such as
individual differences and motivation, are also central to students of organizational behavior.
Sociology, too, has had a major impact on the field of organizational behavior. Sociologists study
social systems such as families, occupational classes, and organizations. Because a major concern of
organizational behavior is the study of organization structures, the field clearly overlaps with areas of
sociology that focus on the organization as a social system.
Anthropology is concerned with the interactions between people and their environments, especially
their cultural environment. Culture is a major influence on the structure of organizations and on the
behavior of people in organizations.
Political science also interests organizational behaviorists. We usually think of political science as the
study of political systems such as governments. But themes of interest to political scientists include how
and why people acquire power and such topics as political behavior, decision making, conflict, the
behavior of interest groups, and coalition formation.
Economists study the production, distribution, and consumption of goods and services. Students of
organizational behavior share the economist’s interest in areas such as labor market dynamics,
productivity, human resource planning and forecasting, and cost-benefit analysis.
Engineering has also influenced the field of organizational behavior. Industrial engineering in
particular has long been concerned with work measurement, productivity measurement, work flow
analysis and design, job design, and labor relations.
Most recently, medicine has come into play in connection with the study of human behavior at work,
specifically in the area of stress. Increasingly, research is showing that controlling the causes and
consequences of stress in and out of organizational settings is important for the well-being of both the
individual and the organization.

A Descriptive Nature A primary goal of studying organizational behavior is to describe relationships

between two or more behavioral variables. The theories and concepts of the field, for example, cannot
predict with certainty that changing a specific set of workplace variables will improve an individual
employee’s performance by a certain amount. At best, the field can suggest that certain general concepts
or variables tend to be related to one another in particular settings. For instance, research might indicate
that in one organization, employee satisfaction and individual perceptions of working conditions are
positively related. However, we may not know whether that correlation occurs because better working
conditions lead to more satisfaction, because more-satisfied people see their jobs differently than
dissatisfied people, or because both satisfaction and perceptions of working conditions are actually
related through other intervening variables. Also, the relationship between satisfaction and perceptions
of working conditions observed in one setting may be considerably stronger, weaker, or nonexistent in
other settings.
Organizational behavior is descriptive for several reasons: the immaturity of the field, the
complexities inherent in studying human behavior, and the lack of valid, reliable, and accepted
definitions and measures. Whether the field will ever be able to make definitive predictions and
prescriptions is still an open question. But even if it never succeeds in these endeavors, the value of
studying organizational behavior is firmly established. Because behavioral processes pervade most
managerial functions and roles, and because the work of organizations is done primarily by people, the
knowledge and understanding gained from the field can significantly help managers in many ways.

CONTEXTUAL PERSPECTIVES ON ORGANIZATIONAL BEHAVIOR

Several contextual perspectives—most notably the systems and contingency perspectives and the
interactional view—also influence our understanding of organizational behavior. Many of the concepts
and theories discussed in the chapters that follow reflect these perspectives; they represent basic points
of view that influence much of our contemporary thinking about behavior in organizations. In addition,
they allow us to see more clearly how managers use behavioral processes as they strive for
organizational effectiveness.

Systems and Situational Perspectives

The systems and situational perspectives share related viewpoints on organizations and how they
function. Each is concerned with interrelationships among organizational elements and between
organizational and environmental elements.

The Systems Perspective The systems perspective, or the theory of systems, was first developed in
the physical sciences, but it has been extended to other areas, such as management. A system is an
interrelated set of elements that function as a whole. Figure 4 shows a general framework for viewing
organizations as systems.

FIGURE 4 The Systems Approach to Organizations

 According to this perspective, an organizational system receives four kinds of inputs from its
environment: material, human, financial, and informational (note that this is consistent with our earlier
description of management functions). The organization’s managers then combine and transform these
inputs and return them to the environment in the form of products or services, employee behaviors,
profits or losses, and additional information. Then the system receives feedback from the environment
regarding these outputs.
As an example, we can apply systems theory to the Shell Oil Company. Material inputs include
pipelines, crude oil, and the machinery used to refine petroleum. Human inputs are oil field workers,
refinery workers, office staff, and other people employed by the company. Financial inputs take the form
of money received from oil and gas sales, stockholder investment, and so forth. Finally, the company
receives information inputs from forecasts about future oil supplies, geological surveys on potential
drilling sites, sales projections, and similar analyses.
Through complex refining and other processes, these inputs are combined and transformed to create
products such as gasoline and motor oil. As outputs, these products are sold to the consuming public.
Profits from operations are fed back into the environment through taxes, investments, and dividends;
losses, when they occur, hit the environment by reducing stockholders’ incomes. In addition to having
on-the-job contacts with customers and suppliers, employees live in the community and participate in a
variety of activities away from the workplace, and their behavior is influenced in part by their
experiences as Shell workers. Finally, information about the company and its operations is also released
into the environment. The environment, in turn, responds to these outputs and influences future inputs.
For example, consumers may buy more or less gasoline depending on the quality and price of Shell’s
product, and banks may be more or less willing to lend Shell money based on financial information
released about the company.
The systems perspective is valuable to managers for a variety of reasons. First, it underscores the
importance of an organization’s environment. For instance, failing to acquire the appropriate resources
and failing to heed feedback from the environment can be disastrous. The systems perspective also helps
managers conceptualize the flow and interaction of various elements of the organization itself as they
work together to transform inputs into outputs.

The Situational Perspective Another useful viewpoint for understanding behavior in organizations
comes from the situational perspective. In the earlier days of management studies, managers searched
for universal answers to organizational questions. They sought prescriptions, the “one best way” that
could be used in any organization under any conditions, searching, for example, for forms of leadership
behavior that would always lead employees to be more satisfied and to work harder. Eventually,
however, researchers realized that the complexities of human behavior and organizational settings make
universal conclusions virtually impossible. They discovered that in organizations, most situations and
outcomes are contingent; that is, the precise relationship between any two variables is likely to be
situational (i.e., dependent on other variables).
Figure 5 distinguishes the universal and situational perspectives. The universal model, shown at the
top of the figure, presumes a direct cause-and-effect linkage between variables. For example, it suggests
that whenever a manager encounters a particular problem or situation (such as motivating employees
to work harder), a universal approach exists (such as raising pay or increasing autonomy) that will lead
to the desired outcome. The situational perspective, on the other hand, acknowledges that several other
variables alter the direct relationship. In other words, the appropriate managerial action or behavior in
any given situation depends on elements of that situation.
FIGURE 5 Universal Versus Situational Approach

The field of organizational behavior has gradually shifted from a universal approach in the 1950s and
early 1960s to a situational perspective. The situational perspective is especially strong in the areas of
motivation, job design, leadership, and organizational design, but it is becoming increasingly important
throughout the entire field.

Interactionalism: People and Situations

Interactionalism is another useful perspective to help better understand behavior in organizational
settings. First presented in terms of interactional psychology, this view assumes that individual behavior
results from a continuous and multidirectional interaction between characteristics of the person and
characteristics of the situation. More specifically, interactionalism attempts to explain how people
select, interpret, and change various situations. Figure 6 illustrates this perspective. Note that the
individual and the situation are presumed to interact continuously. This interaction is what determines
the individual’s behavior.

FIGURE 6 The interactionist Perspective on Behavior in Organizations

The interactional view implies that simple cause-and-effect descriptions of organizational

phenomena are not enough. For example, one set of research studies may suggest that job changes lead
to improved employee attitudes. Other studies may propose that attitudes influence how people
perceive their jobs in the first place. Both positions probably are incomplete: Employee attitudes may
influence job perceptions, but these perceptions may in turn influence future attitudes. Because
interactionalism is a fairly recent contribution to the field, it is less prominent in the chapters that follow
than the systems and contingency theories. Nonetheless, the interactional view appears to offer many
promising ideas for future development.

MANAGING FOR EFFECTIVENESS

Earlier in this chapter, we noted that managers work toward various goals. We are now in a position to
elaborate on the nature of these goals in detail. In particular, as shown in Figure 7, goals—or outcomes—
exist at three specific levels in an organization: individual-level outcomes, group-level outcomes, and
organizational-level outcomes. Of course, it may sometimes be necessary to make trade-offs among
these different kinds of outcomes, but in general each is seen as a critical component of organizational
effectiveness. The sections that follow elaborate on these different levels in more detail.

FIGURE 7 Managing for Effectiveness

Individual-Level Outcomes
Several different outcomes at the individual level are important to managers. Given the focus of the field
of organizational behavior, it should not be surprising that most of these outcomes are directly or
indirectly addressed by various theories and models

Individual Behaviors First, several individual behaviors result from a person’s participation in an
organization. One important behavior is productivity. A person’s productivity is an indicator of his or her
efficiency and is measured in terms of the products or services created per unit of input. For example,
if Bill makes 100 units of a product in a day and Sara makes only 90 units in a day, then, assuming that
the units are of the same quality and that Bill and Sara make the same wages, Bill is more productive
than Sara.
Performance, another important individual-level outcome variable, is a somewhat broader concept.
It is made up of all work-related behaviors. For example, even though Bill is highly productive, it may
also be that he refuses to work overtime, expresses negative opinions about the organization at every
opportunity, and will do nothing unless it falls precisely within the boundaries of his job. Sara, on the
other hand, may always be willing to work overtime, is a positive representative of the organization, and
goes out of her way to make as many contributions to the organization as possible. Based on the full
array of behaviors, then, we might conclude that Sara actually is the better performer.
Two other important individual-level behaviors are absenteeism and turnover. Absenteeism is a
measure of attendance. Although virtually everyone misses work occasionally, some people miss far
more than others. Some look for excuses to miss work and call in sick regularly just for some time off;
others miss work only when absolutely necessary. Turnover occurs when a person leaves the
organization. If the individual who leaves is a good performer or if the organization has invested heavily
in training the person, turnover can be costly.
Individual Attitudes and Stress Another set of individual-level outcomes influenced by managers
consists of individual attitudes. Levels of job satisfaction or dissatisfaction, organizational commitment,
and organizational involvement all play an important role in organizational behavior. Stress is another
important individual-level outcome variable. Given its costs, both personal and organizational, stress is
becoming an increasingly important topic for both researchers in organizational behavior and practicing
managers.

Group- and Team-Level Outcomes

Another set of outcomes exists at the group and team level. Some of these outcomes parallel the
individual-level outcomes just discussed. For example, if an organization makes extensive use of work
teams, team productivity and performance are important outcome variables. On the other hand, even
if all the people in a group or team have the same or similar attitudes toward their jobs, the attitudes
themselves are individual-level phenomena. Individuals, not groups, have attitudes.
But groups or teams can also have unique outcomes that individuals do not share. Groups develop
norms that govern the behavior of individual group members. Groups also develop different levels of
cohesiveness. Thus, managers need to assess both common and unique outcomes when considering the
individual and group levels.

Organization-Level Outcomes
Finally, a set of outcome variables exists at the organization level. As before, some of these outcomes
parallel those at the individual and group levels, but others are unique. For example, we can measure
and compare organizational productivity. We can also develop organization-level indicators of
absenteeism and turnover. But profitability is generally assessed only at the organizational level.
Organizations are also commonly assessed in terms of financial performance: stock price, return on
investment, growth rates, and so on. They are also evaluated in terms of their ability to survive and the
extent to which they satisfy important stakeholders such as investors, government regulators,
employees, and unions.
Clearly, then, the manager must balance different outcomes across all three levels of analysis. In
many cases, these outcomes appear to contradict one another. For example, paying workers high
salaries can enhance satisfaction and reduce turnover, but it also may detract from bottom-line
performance. Similarly, exerting strong pressure to increase individual performance may boost short-
term profitability but increase turnover and job stress. Thus, the manager must look at the full array of
outcomes and attempt to balance them in an optimal fashion. The manager’s ability to do this is a major
determinant of the organization’s success.