Solution Manual For Organisational Behaviour Engaging People and Organisations, 2nd Edition by Ricky

PART ONE – INTRODUCTION TO ORGANISATIONAL BEHAVIOUR The two chapters in Part 1 introduce the field of organisational behaviour while establishing a unique integrated learning model that incorporates a critical perspective. Readers will discover an integrative five-level model of analysis with the dimensions of environment, individual, groups, leadership and organisation, how the five dimensions are interrelated and implore managers to understand, rather than control, human behaviour in organisations.

Managers strive to make their organisations as effective and successful as possible. At the centre of everything are the employees who work for the organisation. It is usually their talent, effort, skill and ability that differentiates effective from less effective organisations. It is critical that managers understand how the behaviours of their employees impact organisational effectiveness. Managers work to enhance employee performance behaviours, commitment and engagement, and citizenship behaviours, and to minimise various dysfunctional behaviours. A number of environmental, individual, group and team, leadership, and organisational characteristics can make the manager’s work easier or more difficult. This model will be more fully developed in Chapter 1 and will serve as a roadmap throughout this book.

CHAPTER 1 – AN OVERVIEW OF ORGANISATIONAL BEHAVIOUR Chapter overview All organisations have at least one thing in common – they are comprised of people. It is these people who make decisions about the strategic direction of a firm, acquire the resources the firm uses to create new products, and sell those products. No matter how effective a manager might be, all organisational successes – and failures – are the result of the behaviours of many people. This book is about those people. It is also about the organisation itself and the managers who operate it; individuals do not work in isolation. Together, the study of organisations and the study of the people who work in them constitute the field of organisational behaviour. The starting point begins with a more detailed discussion of its meaning and its importance to employees, business owners and managers.

The primary purpose of this chapter is to introduce the field of organisational behaviour. The chapter begins by defining organisational behaviour as the study of human behaviour in organisational settings, the interface between human behaviour and the organisation, and the organisation itself. The chapter notes that understanding how people behave is critical to working effectively and that increased cultural awareness is needed for continued organisational success. The four functions that make up the manager’s job – planning, organising, leading and controlling – are discussed. Then the chapter explores the various skills – technical, interpersonal, conceptual and diagnostic – managers must apply in organisations. The chapter also discusses human resource management regarding the attraction, development and retention of an effective workforce.

The strategic context is discussed, including maintaining a competitive advantage, sources of competitive advantage and types of business strategies. The next section provides some historical context on organisational behaviour, looking at scientific management, the Hawthorne effect and the human relations movement. The chapter continues by defining a system and systems perspective, the situational perspective and interactionism. The chapter then examines the outcomes – individual, team 1-2

and organisational – important for organisational effectiveness, including the information quality, scientific method and meta-analysis. The chapter concludes with a preview of the remaining text.

Learning outcomes After studying this chapter, students should be able to: 1. define organisational behaviour and describe how it impacts both personal and organisational success 2. identify the basic management functions and essential skills that comprise the management process and relate them to organisational behaviour 3. describe the strategic context of organisational behaviour and describe the relationships between strategy and organisational behaviour 4. identify and describe contextual perspectives on organisational behaviour 5. describe the role of organisational behaviour in managing for effectiveness and discuss the role of research in organisational behaviour 6. summarise the framework around which this book is organised.

Guide your learning 1. What is an organisation and why should we care about its behaviour? (LO1) 2. What makes a manager good and does it matter whether they are nice people? (LO2) 3. Does understanding organisational behaviour simply mean being able to manipulate people to do jobs they don’t want to do? (LO3) 4. Are workers cogs in a machine or something else? (LO4) 5. Is it more important for an organisation to be effective than efficient? (LO5) 6. If managing people is like herding cats, is the study of organisational behaviour unable to have a coherent structure? (LO6) Chapter outline 1.1. What is organisational behaviour?

1.1.1. The meaning of organisational behaviour Organisational behaviour (OB) is the study of human behaviour in organisational settings, the interface between human behaviour and the organisation, and the organisation itself. All three are ultimately necessary for a comprehensive understanding of organisational behaviour.

OB helps explain and predict how people and groups interpret events, react and behave in organisations, and describes the role of organisational systems, structures and process in shaping behaviour. Figure 1.2 illustrates this view of organisational behaviour.

1.1.2. How organisational behaviour impacts personal success The core of OB is being effective at work. Since most people reading this book are either present or future managers, the text takes a managerial perspective throughout the discussion. Using your knowledge of OB can help you to succeed faster in any organisation or career. Cultural context and globalisation are also important factors to consider. The study of organisational behaviour can greatly clarify the factors that affect how managers manage.

Hence, the field attempts to describe the complex human context of organisations and to define the opportunities, problems, challenges and issues associated with that realm.

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1.1.3. How organisational behaviour impacts organisational success Organisations as a whole also benefit from OB. By appropriately applying OB knowledge about individuals, groups and the effect of organisational structure on worker behaviour, the conditions can be created that make organisations most effective, and helps companies perform well. OB also influences absenteeism and turnover. Reducing absenteeism and turnover can be worth millions of dollars to organisations through increased productivity and customer service, and decreased staffing costs. One central value of organisational behaviour is that it isolates important aspects of the manager’s job and offers specific perspectives on the human side of management: people as organisations, people as resources, and people as people.

1.2. The managerial context of organisational behaviour The managerial context of OB can be viewed from the perspective of basic management functions, critical management skills and overall human resource management.

1.2.1. Basic management functions and organisational behaviour In characterising managerial work, most experts find it useful to conceptualise the activities performed by managers as reflecting one or more of four basic functions.

1.2.1.1.Planning is the process of determining an organisation’s desired future position and the best means of getting there.

1.2.1.2.Organising is the process of designing jobs, grouping jobs into units, and establishing patterns of authority between jobs and units.

1.2.1.3.Leading is the process of motivating the organisation’s members to work together towards the organisation’s goals.

1.2.1.4.Controlling is the process of monitoring and correcting the actions of the organisation and its members to keep them directed towards their goals.

1.2.2. Critical management skills and organisational behaviour In general, most successful managers have a strong combination of technical, interpersonal, conceptual and diagnostic skills.

1.2.2.1.Technical skills are the skills necessary to accomplish specific tasks within the organisation.

1.2.2.2.Interpersonal skills are the skills to effectively communicate with, understand and motivate individuals and groups.

1.2.2.3.Conceptual skills are the skills to think in the abstract and see the big picture.

1.2.2.4.Diagnostic skills are the skills to understand cause-and-effect relationships and to recognise the optimal solutions to problems.

1.2.3. Organisational behaviour and human resource management Human resource management (HRM) is the set of organisational activities directed at attracting, developing and maintaining an effective workforce. More precisely, HR managers select new employees, develop rewards and incentives to motivate and retain employees, and create programs for training and developing employees.

1.3. The strategic context of organisational behaviour Competitive advantage is anything that gives a firm an edge over rivals in attracting customers and defending itself against competition.

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1.3.1. Sources of competitive advantage Sources of competitive advantage include innovation and development, having the bestmade or cheapest product, providing the best customer service, being more convenient to buy from, having shorter product development times, and having a well-known brand name. Because it is an organisation’s people who are responsible for gaining and keeping any competitive advantage, effective management is critical to business success.

To have a competitive advantage a company must ultimately be able to give customers superior value for their money (a combination of quality, service and acceptable price) – either a better product that is worth a premium price or a good product at a lower price can be a source of competitive advantage. Figure 1.9 lists some possible sources of competitive advantage. An organisation’s talent is the key to securing each of these.

1.3.2. Types of business strategies A company may create value based on price, technological leadership, customer service, or some combination of these and other factors. Business strategy involves the issue of how to compete, but also encompasses: • the strategies of different functional areas in the firm, including human resources • how changing industry conditions such as deregulation, product market maturity and changing customer demographics will be addressed • how the firm as a whole will address the range of strategic issues and choices it faces.

Business strategies are partially planned and partially reactive to changing circumstances.

Companies may also pursue more than one strategy at a particular time. Three primary business strategies are: 1. cost leadership 2. differentiation 3. specialisation.

1.3.2.1.Cost leadership strategy strives to be the lowest-cost producer for a particular level of product quality. Walmart is a good example of a firm that uses a cost leadership strategy. Operational excellence maximises the efficiency of the manufacturing or product development process to minimise costs. Dell computers, Bunnings and Big W are good examples of companies whose competitive advantage is based on operational excellence.

1.3.2.2.Differentiation strategy develops a product or service that has unique characteristics valued by customers. Firms can differentiate along various dimensions, including image (Coca-Cola), product durability (Hard Yakka or KingGee clothing), quality (Rolex watches), safety (Volvo) and usability (Apple). Product innovation is developing new products or services. This strategy is common in technology and pharmaceutical companies. Pfizer, Nike and 3M are good examples.

1.3.2.3.Specialisation strategy focuses on a narrow market segment or niche and pursues either a differentiation or cost leadership strategy within that market segment. This strategy can be successful if it results in either lower costs or an ability to offer customers something other competitors do not, such as Nando’s, Krispy Kreme Doughnuts and H&R Block. Customer intimacy is delivering unique and customisable products or services to meet customers’ needs and increase customer loyalty.

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1.3.2.4.Growth strategy occurs when companies expand organically or through acquisitions. Canva is a growth-oriented chain and regularly opens new offices, requiring additional management, employees, and even supply chain staff.

1.3.3. Connecting business strategy to organisational behaviour There are a number of significant linkages that connect business strategy and OB. A firm that relies on a cost leadership strategy will usually need to keep all of its expenses as low as possible. This strategy might dictate relying on low-wage employees and trying to automate as many jobs as possible which relates to employee motivation and the design of work. A company using a differentiation strategy might emphasise exemplary customer service. It needs employees who are motivated to provide high levels of service, and a reward structure tied to customer service. A specialisation strategy often requires employees with specialised skills and abilities.

Effective managers understand what needs to be done to execute a company’s business strategy, then they plan, organise, direct and control the activities of employees to get it done.

Managers do not accomplish organisational objectives by themselves – they get work done through others. Flexibly applying OB principles will help to do that most effectively.

1.4. Contextual perspectives on organisational behaviour 1.4.1. Where does organisational behaviour come from?

Formal study of OB began in the 1890s, following the industrial relations movement spawned

by Adam Smith’s introduction of the division of labour. In the 1890s, Frank and Lillian Gilbreth and Frederick Winslow Taylor identified the positive effects of precise instructions, goal setting and rewards on motivation. Their ideas became known as scientific management, and are often considered the beginning of the formal study of OB. 1.4.1.1.Scientific management is based on the belief that productivity is maximised when organisations are rationalised with precise sets of instructions based on time- andmotion studies. The four principles of Taylor’s scientific management are: 1. Replace rule-of-thumb work methods with methods based on scientifically studying the tasks using time-and-motion studies.

2. Scientifically select, train and develop all workers rather than leaving them to passively train themselves.

3. Managers provide detailed instructions and supervision to workers to ensure that they are following the scientifically developed methods.

4. Divide work nearly equally between workers and managers. Managers should apply scientific management principles to planning the work, and workers should actually perform the tasks.

Scientific management improved productivity; it also increased the monotony of work. After World War I, attention shifted to understanding the role of human factors and psychology in organisations. This interest was spawned by the discovery of the Hawthorne effect in the 1920s and 1930s.

1.4.1.2.The Hawthorne effect occurs when people improve some aspect of their behaviour or performance simply because they are being assessed. Rather than viewing workers as interchangeable parts in mechanical organisations, the human relations movement viewed organisations as cooperative systems and treated workers’ orientations, values and feelings as important parts of organisational dynamics and performance.

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1.4.2. Organisations as open systems A system is an interrelated set of elements that function as a whole, and consists of inputs, transformation, outputs and feedback. An organisational system receives four kinds of input from its environment: material, human, financial and informational (consistent with management functions). These inputs are combined and transformed and then returned to the environment in the form of products or services, employee behaviours, profits or losses and additional information. Then the system receives feedback from the environment regarding these outputs. The systems perspective is valuable to managers because it underscores the importance of an organisation’s environment, and helps managers conceptualise the flow and interaction of various elements of the organisation itself as they work together to transform inputs into outputs.

1.4.3. Situational perspectives on organisational behaviour Another useful viewpoint for understanding behaviour in organisations comes from the situational perspective, which suggests that in most organisations, situations and outcomes are influenced by other variables. Because of the complexities of human behaviour and organisational settings, universal conclusions are impossible. In organisations, most situations and outcomes are contingent; that is, the precise relationship between any two variables is likely to be situational and dependent on other variables. There are distinct differences between universal and situational perspectives.

1.4.4. Interactionalism: people and situations Interactionalism suggests that individuals and situations interact continuously to determine individuals’ behaviour. This view attempts to explain how people select, interpret and change various situations.

1.5. Managing for effectiveness Essentially, managers and leaders generally try to direct the behaviours of people in their organisations in ways that promote organisational effectiveness.

1.5.1. Enhancing individual and team performance behaviours Several individual behaviours result from a person’s participation in an organisation. One important behaviour is productivity. A person’s productivity is a relatively narrow indicator of his or her efficiency, and is measured in terms of the products or services created per unit of input. Performance, another important individual-level outcome variable, is a somewhat broader concept and is made up of all work-related behaviours. Another set of outcomes exists at the group and team level. Some of these outcomes parallel the individual-level outcomes just discussed. Individuals, not groups, have attitudes. But groups or teams can also have unique outcomes that individuals do not share. Managers need to assess both common and unique outcomes when considering the individual and group levels.

1.5.2. Enhancing employee commitment and engagement Extensive research conducted on job satisfaction has indicated that personal factors determine this attitude, along with group and organisational factors, as well as working conditions, work policies and workers compensation. Contrary to what many managers believe, however, high levels of job satisfaction do not necessarily lead to higher levels of performance. A person with a high level of commitment is likely to see herself as a true member of the organisation. In contrast, a person with less organisational commitment is more likely to see himself as an outsider.

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1.5.3. Promoting organisational citizenship behaviours Organisational citizenship is the behaviour of individuals that makes a positive overall contribution to the organisation. The determinant of organisational citizenship behaviours is likely to be a complex mosaic of individual, social and organisational variables. Although the study of organisational citizenship is still unfolding, preliminary research suggests that it may play a powerful role in organisational effectiveness.

1.5.4. Minimising dysfunctional behaviours Dysfunctional behaviours are those that detract from, rather than contribute to, organisational performance. Two other important individual-level behaviours are absenteeism and turnover. Absenteeism is a measure of attendance. Turnover occurs when a person leaves the organisation. Other forms of costly dysfunctional behaviour are theft and sabotage. Sexual and racial harassment also cost an organisation, both indirectly and directly, as well as politicised behaviour, intentionally misleading others in the organisation, spreading malicious rumours, and similar activities. Incivility and rudeness can result in conflict and damage to morale and the organisation’s culture. Bullying and workplace violence are also growing concerns in many organisations.

1.5.5. Driving strategic execution Another set of outcome variables usually relate to strategic execution – how well managers and their employees understand and carry out the actions needed to achieve strategic goals.

Some of these outcomes parallel those at the individual and group levels, but others are unique. 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 organisation’s success and how well it implements its business strategy.

1.5.6. How do we know what we know?

Another important part of being an effective manager is understanding the quality of the information you use to make decisions. Not all information is accurate! Accordingly, it is important for you to understand the processes that have been used to establish the knowledge about OB, and why ‘we know what we know’.

1.5.6.1.Decades of research have both reinforced some of the things many people intuitively believe and identified common misunderstandings or misperceptions about OB. The authors encourage you to read this book with an open mind, and to not make assumptions about a topic before studying it. Their goal is to help develop effectiveness in organisations, and to help create successful organisations.

1.5.6.2.Rather than relying on experience or intuition, or just assuming that ideas are correct because they seem to make sense, the scientific method relies on systematic studies that identify and replicate a result using a variety of methods, samples and settings. Sir Francis Bacon developed the scientific method in the 1600s.

The scientific method begins with theory, which is a collection of verbal and symbolic assertions that specify how and why variables are related and the conditions under which they should and should not relate. The second step in the scientific method is the development of hypotheses, or written predictions specifying expected relationships between certain variables. Hypothesis testing can be done using a variety of research methods and statistical analyses. Assume data is collected on the predictor, or independent variable, and the criterion, or dependent 1-8

variable. Setting a specific, difficult, achievable goal is the independent variable, and the number of products assembled is the dependent variable.

Then analyse the correlation, abbreviated r, between the two variables to test the hypothesis. The correlation reflects the strength of the statistical relationship between two variables. The correlation ranges from −1 to +1 and can be positive or negative. A correlation of 0 means that there is no statistical relationship. A negative correlation is not necessarily bad. It may simply mean that to maximise assemblers’ performance, the manager should set lower goals. Reality never sees perfect +1.0 or −1.0 correlations when it comes to people’s behaviour – people are just too complicated. The evaluation of relationships between organisational actions and outcomes can help organisations execute strategy more effectively and improve performance.

A statistical technique called meta-analysis is used to combine the results of many different research studies done in a variety of organisations and for a variety of jobs.

The goal of meta-analysis is to estimate the true relationship between various constructs and to determine whether the results can be generalised to all situations.

1.5.6.3.Assuming that everyone in the world shares the same values, norms and expectations about work is incorrect, and much of the research has been done in the United States, making global replication difficult. National boundaries no longer limit many organisations, and many companies employ people from around the world.

1.6. Summarising the framework of the book Figure 1.16 presents the organisational behaviour framework around which the book is organised.

OB in the real world: Managing growth at MTB Direct Summary: One of Australia's fastest growing companies is called MTB Direct (formerly Mountain Bikes Direct). The business sells mountain bikes without any storefront with total sales exceeding $7 million in 2017–18, which doubled the previous year's earning. The business transitioned to wholly online in 2015, taking advantage of technology and cutting overhead costs. This turned out to be a stroke of genius (or luck) because when the COVID-19 lockdowns occurred the business was already well positioned. Reports from 2020 and 2021 indicated rapidly rising online sales as people turned to the great outdoors for respite and recreation. Today the business has grown from a husband–wife start-up to employing 32 people across Australia and New Zealand. The founder realised that MTB Direct’s rapid growth and expansion, employing staff based remotely across Australia and beyond, needed to be closely monitored, and that its employees needed to continue feeling like an important part of the team. Clever application of social media technologies has helped to harness the essential human need for interaction and human relationships in MTB Direct's virtual workplace.

Challenge: What advice would you give MTB Direct about the role of its people in its future success, and how to set up the company to maximise employee innovation, trust and loyalty when the interactions they have at work are mostly virtual?

Response: Even though MTB Direct has evolved to become an entirely virtual organisation, it is still composed of people. It is the people who set strategy, acquire resources, and create and sell new products. Its people manage inventory and information technology. As a niche business, MTB Direct 1-9

must strive to understand the people who work in the organisation. Employees, business owners and investors, and managers are all relating with each other to help the company achieve success.

Ethical dilemma: Wellness is all well and good Summary: Attracting the best talent is a matter of balancing the available flexible benefits linked to work–life balance and wellbeing to give staff the chance to alleviate stresses, in addition to ensuring salaries are commensurate. This became especially apparent following the global COVID-19 pandemic, as emerging trends included rapid automation, a younger workforce, increased turnover (the great resignation or reshuffle), and flexibility to work where and when desired. Researchers warn flexible benefits have to be genuine value-adds rather than ways to avoid addressing over-work and workload.

The total design of work in balance with the rewards and benefits the organisation can afford to provide is the real issue to articulate here.

Consider whether your organisation is glossing over an inherently stressful workload. Are tension and stress actually drivers of performance in the workplace, such that initiatives to minimise them might diminish productivity?

Successful workplaces appreciate the strategic value in attracting and maintaining an effective workforce, and the effective management of people is key to the creation of competitive advantage and strategy execution. An organisation’s talent is the key to securing competitive advantage. The effective management of people is key to the creation of a competitive advantage because productivity comes from challenged, empowered, excited, rewarded people. Basic management functions for planning, organising, leading and controlling workload ensure effective and efficient use of organisational goals so that productivity and performance are balanced with motivation and engagement; however, traditional approaches to engagement may no longer be effective given the emerging trends. Individual commitment is closely linked to group and organisational productivity. Ethically, it can be argued that organisations have a responsibility to provide an environment that enables individuals to grow and develop due to the extensive time and energy required from the individual. Stress and fatigue often lead to higher absenteeism and turnover, increased customer complaints, reduced production levels and job satisfaction. These elements make a company less competitive in the marketplace.

Critical perspective In practice, OB is a messy field with complex interacting variables, especially the people involved with different values, attitudes, perceptions, personalities, motivations, learning abilities, power preferences and leadership styles. The Critical perspective boxes in this and all subsequent chapters choose a prominent OB issue and point out some salient questions and concerns about it. Look out for these boxes and ask yourself, ‘Can I acknowledge the different perspectives?’

Compressing the point about flexible working hours Recent research raises questions about the real benefits of flexible working hours. In a case example, fatigue leading to sick leave increased due to the intensification of workload into the compressed week.

Schedule complexity also resulted due to the mix of all employees working different hours and breaking from established meeting schedules. Managers were required to carefully consider coordination across interrelated tasks and identification of critical hours for full capacity operation.

The game’s up Numbers can tell the truth but they can also contribute to cover ups. Some managers are fixated on measurement as an end in itself. The pressure to quantify performance can lead to ‘gaming the stats’.

Metrics are best used to complement rather than replace judgement based on personal experience. The 2018 Royal Commission into Misconduct into misconduct in the Banking, Superannuation and Financial 1-10

Services Industry revealed many instances of this sort of gaming the reward system based on metrics at the expense of human relations and basic ethics.

Summary LO1.1 Organisational behaviour is the study of human behaviour in organisational settings, the interface between human behaviour and the organisation, and the organisation itself. The study of OB is important because organisations have a powerful influence and it directly relates to management in organisations.

LO1.2 A manager’s job can be characterised in terms of four functions: planning, organising, leading and controlling. Planning is the process of determining the organisations’ desired future position and deciding how best to get there. Organising is the process of designing jobs, grouping jobs into manageable units, and establishing patterns of authority among jobs and groups of jobs. Leading is the process of motivating members of the organisation to work together towards the organisation’s goals.

Controlling is the process of monitoring and correcting the actions of the organisation and its people to keep them headed towards their goals.

LO1.3 Some people rise in organisations despite being only average often because those people know how to interact effectively with other people. Effective interaction with people is critical for advancement in organisations, and often for effective job performance. Being able to understand what people think and feel, knowing how to persuade and motivate others, and knowing how to resolve conflicts and forge cooperation are among the most important skills of successful leaders.

LO1.4 The managerial context of OB can viewed from the perspective of basic management functions, critical management skills and overall human resource management.

LO1.5 Research plays a role in organisational behaviour by helping to verify individual ideas and common sense estimations with the collective view about what the best solutions should be. This process allows the evolution of understanding of how things work and allows learning when goals, confidence, satisfaction, cohesion and rewards affect outcomes and why it happens.

LO1.6 This book can help you better understand yourself, understand organisations, understand the role of organisational behaviour in personal career success, and improve OB skills.

Revision questions 1. The successful application of organisational behaviour principles can reduce a company's rates of turnover and absenteeism. a. True b. False 2. The study of organisational behaviour is beneficial to managers because . a. managers who cannot cite important organisational behaviour texts rarely get promoted b. it enables them to be dispassionate when firing underperforming employees c. it enables them to exploit human resources more efficiently d. working with people is an improvable skill 3. Which of the following scenarios most clearly exemplifies the successful use of a manager’s diagnostic skills? a. Sally suspects that Gary is underperforming because he is not getting enough sleep, not because he is incapable. She lets him work from 10 to 6 instead of 9 to 5, and his performance improves. b. Sally must convince Gary and Rob to work overtime. She knows that Gary's top priority is his own self-interest, so when talking to him, she emphasises how much money he'll make. She knows that Rob's top priority is her well-being, so when talking to him, she emphasises how much it will mean to her. Gary and Rob both work overtime happily.

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c. A program on Sally's computer stops working. She could ask Gary, a member of the tech support team, to fix it, but Sally is good with computers and fixes the problem herself in less time than it would have taken Gary to come over and fix it. d. Sally has to lay off either Rob or Gary. Although she likes Rob more, she lays him off because Gary fits in better with the team overall and is better able to execute the company’s strategic mission.

4. Successful business strategies are grounded in creating and maintaining a competitive advantage that is . a. volatile b. sustainable c. inflexible d. aggressive 5. Deming believed that removing from the workplace gives employees pride in their workmanship, which increases production. a. fear b. diversity c. competition d. hierarchy 6. The steps of the scientific method go in which order? a. Hypothesis, theory, data, verification b. Theory, hypothesis, data, verification c. Data, hypothesis, theory, verification d. Data, theory, hypothesis, verification Case study: Head first Virgin Australia Summary: Virgin Australia suffered financial turmoil during the COVID-19 pandemic; however, by the start of 2022 the company was forecasting a return to pre-pandemic volumes. Previously Virgin Australia set an example with Better Me, a mobile and web-based platform for health and wellbeing.

Branson has broadly supported mental health initiatives for Virgin's staff and customers around the world. The Australian Civil Aviation Safety Authority (CASA) aligns with Branson’s view, identifying that pilots and air traffic controllers were at high risk of mental stress, especially during pivotal safety events. There is a rising cadre of companies that recognise and are implementing mental health initiatives as a result.

Critical 1. Discuss whether your own organisation is doing what it should in order to address the mental health issues of all its staff.

Clear management expectations, measures and connection to the organisational strategy should be simple and transparent. Examples can include flexible work arrangements, or reward and recognition programs that match motivational aspects relative to the team and individual.

2. Is mindfulness in the workplace just a management fad, or is there something substantial in its core?

The human relations movement treats workers’ values and feelings as important for the overall performance of the organisation. Talent is a critical element in competitive advantage. Awareness and reflection are key in identifying effective management and motivation.

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Mainstream 1. What are the main reasons why mental health initiatives would be adopted by organisations?

Stress and fatigue often lead to higher absenteeism and turnover, increased customer complaints, with reduced production levels making a company less competitive in the marketplace. By addressing workload and providing individualised reward and recognition, companies can engage their work force, increase commitment and usually see an increase in productivity.

2. Complete a brief cost-benefit analysis of Virgin's Better Me platform, based on the main points in the case study.

The costs involved in implementing the Better Me program include versatility across both mobile and web-based platforms, engagement in organisational psychologists and mindfulness experts, with tailored communications. The platform is convenient for the individual, tailored and personal for each person, and provides a number of program options. Although tailored technology can be expensive, turnover and absenteeism can cost organisations millions of dollars. Benefits listed are increased engagement, reduced stress, and enhanced performance and productivity. Increased engagement is often linked to increased performance due to an improvement in presenteeism and commitment, and reduced mental stress often leads to increased productivity and reduced turnover and absenteeism.

Tutorial activities 1. What do you think are the most important things a manager does? Is how a manager does these things also important? Why or why not?

The ability to understand what people think and feel, knowing how to persuade and motivate others, and knowing how to resolve conflicts and forge cooperation are among the most important skills of successful managers. How a manager does these things is important because ‘people skills’ are often what make the difference between an average and an excellent performer in almost any job.

2. Some people have suggested that understanding human behaviour at work is the single most important requirement for managerial success. Do you agree or disagree with this statement?

Why? To some degree, students’ responses may depend on their major field of study, especially if it is not management. However, students should recognise that the behaviour of people in organisations affects everyone’s lives in numerous ways every day. The extent to which we are able to get things done at work or to register for classes every semester reflects the behaviour of people in organisations. After all, people are the organisation, people are resources that organisations use, and, most importantly, people are individuals interacting in increasingly complex ways.

3. The chapter identifies four basic managerial functions. Based on your own experiences and observations, provide an example of each function.

Answers will vary. Students may be more aware of the control function than any other in the jobs they have held!

4. Why will learning about OB help you to get a better job and a better career, and be a better manager?

OB provides a foundation for the effective management of people in organisations. Because it explains how organisations work, from individual motivation to team dynamics to organisational structure, knowing about OB is essential to being effective at all organisational levels. Also, learning about yourself and constantly developing your skills are important to succeeding in any career.

5. Some people believe that individuals working in an organisation have basic human rights to satisfaction with their work and to the opportunity to grow and develop. How would you defend this position? How would you argue against it?

In defence of this position, it may be argued that organisations have a responsibility to society to provide an environment that enables individuals to grow and develop. In other words, because 1-13

individuals expend extensive time and energy in organisations, it is the individual’s right to work in a safe, clean and satisfying environment. From the opposing viewpoint, it may be argued that organisations are required only to reward employees financially for the time and effort they spend on the job. Further, because employees are not ‘forced’ to work for a particular organisation, they have the freedom to leave the organisation if they are not satisfied. In addition, because employees are paid for their services, organisations are not required to address other employee concerns.

6. Think of something that you believe leads to employee productivity based on intuition that may not prove to be true if tested systematically. Now apply the scientific method and describe how you might test your theory.

Paying for increased production seems intuitively to lead to increased productivity. In fact, workers who produced more than their peers were considered ‘rate busters’ and shunned by their coworkers. Theory: Workers are motivated by money. Hypothesis: Paying a worker more money increased output. The independent variable is the money, and the dependent variable is the worker’s productivity. For the data phase, a group of workers is offered additional pay to increase output during a one-hour work period. Data analysis shows that the correlation between the two variables is negative. This means that paying more money does not increase output. Peer pressure not to work too hard was a stronger motivator than additional pay.

Group exercise – Managing a successful restaurant Learning objective: Applying concepts learned in this chapter such as employee engagement, organisational citizenship, dysfunctional behaviours and managing for effectiveness Task: Form groups of 3–5 students.

Imagine that you are all managers in a local restaurant. There are many restaurants in town, making it a competitive business. You recognise that providing high quality, friendly service and having actively engaged employees is going to make the difference between your restaurant’s success and failure.

Your management team decides to first address organisational citizenship and employee engagement as drivers of high-quality customer service.

First, think independently about what your restaurant can do to enhance the engagement and citizenship behaviours of your employees, then share your ideas with the group and identify your top three suggestions for the restaurant. Be ready to share your ideas with the class.

Your management team next decides that it will be important to minimise dysfunctional employee behaviours if the restaurant is to succeed. Think independently about what your restaurant can do to minimise the occurrence of these destructive behaviours. Share your ideas with the group and identify your top three suggestions for the restaurant. Be ready to share them with the class.

Mini-simulation (MindTap-only) Imagine being a new manager at Happy Time Toys, a company that designs and manufactures novelty toys. While attending a group meeting with your boss and two co-workers, your boss asks for ways of better using the organisation’s talent to create a competitive advantage. What do you say or do?

Go to this chapter’s mini-simulation, watch the challenge video and choose the best response. Be sure to also view the outcomes of the two responses you didn’t choose.

OB concepts applied: the managerial functions of planning, organising, directing and controlling; the role of OB in managing effectively 1-14

Discussion questions 1. Which aspects of management and organisational behaviour discussed in this chapter are illustrated in these videos? Explain your answer.

Organisational behaviour explains how people interpret events and behave in organisations and describes how organisations shape behaviour. It explains how organisations work. OB can improve a firm’s performance by positively influencing bottom line results. Happy Time Toys correctly assumed that people work best when they’re rewarded properly. However, the ‘Employee of the Month’ program did not motivate everyone to work harder (incorrect response #2) because different employees are motivated by different rewards, especially in a culturally diverse workforce. In the video, one employee put the Employee of the Month certificate in the recycle bin, and one group said that they’d feel more appreciated with a day off or a raise.

OB explains that workers are more motivated when they believe their organisation is open, concerned, and willing to listen. As the human relations movement showed, humane, employee-centred management recognises employees’ needs. Organisational culture is a system of shared values, norms, and assumptions that guide members’ attitudes and behaviours in an organisation. To create a strong culture, leaders clearly communicate the firm’s expectations to employees. When Happy Time Toys focused on a strong culture that supported creativity and set clear performance goals linked to the company’s business strategy, company performance improved dramatically. Creativity in toy development, high quality, and competitive prices re-energised the company (correct response). The video also illustrated the managerial functions of planning, organising, directing and controlling as Happy Time Toys aligned its talent strategy with its business strategy.

2. How could a company’s talent strategy undermine its ability to create a competitive advantage?

A competitive advantage offers quality, service and an acceptable price, and an organisation’s talent is the key to securing each of these. The effective management of people is key to the creation of a competitive advantage because productivity comes from challenged, empowered, excited and rewarded people. When Happy Time Toys tied its talent strategy a low-cost business strategy (incorrect response #1), its ability to create a competitive advantage was undermined.

Why? The philosophy of reducing wages and headcount to save money and keep prices low resulted in increased customer complaints, high turnover, higher absenteeism, reduced production levels, lack of employee engagement and job satisfaction. These elements make a company less competitive in the marketplace.

3. How else might you answer the question of how Happy Time Toys can create a competitive advantage through its talent?

Another approach for Happy Time Toys could be a specialisation strategy that focuses on a narrow market segment or niche. The company could develop a competitive advantage based on customer intimacy ─ delivering unique and customised products, and increasing customer loyalty.

Creating customer loyalty requires employees to combine knowledge about their customers with a quick response to a customer’s need. Talent is the most critical element in building a customeroriented company. Hiring active learners with good customer relations skills and emotional resilience under pressure complements a customer intimacy competitive advantage.

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CHAPTER 2 – THE CHANGING ENVIRONMENT OF ORGANISATIONS Chapter overview People work in different ways and places than in the past. The workplace is increasingly diverse, ethical challenges are a constant issue, and globalisation is commonplace. The magnitude of change within technology is truly breathtaking, and even traditionally staid and predictable industries were disrupted by the COVID-19 pandemic. Understanding and addressing the environment of a business has traditionally been the purview of top managers. But the effects of today’s changing environment permeate the entire organisation. As illustrated in Figure 2.1, the text introduces and examines five of the central environmental forces for change faced by today’s organisations: globalisation, diversity, technology, ethics and corporate governance, and new employment relationships.

The chapter looks specifically at diversity and stereotypes, moving into communication and understanding culture. Next it looks specifically at technology and moves into the ethical situations arising from the technology itself – artificial intelligence (AI) – as well as three governance aspects: how an organisation treats its employees, how employees treat the organisation, and how employees and the organisation treat other economic agents. Social responsibility is reviewed within governance and ties into the concluding section of the chapter, which looks at the types of relationships, physical as well as psychological, in which employees are engaged.

Learning outcomes After studying this chapter, students should be able to: 1. describe diversity in organisations the different types of diversity and barriers to inclusion that exist in the workplace 2. discuss the emergence of globalisation and cross-cultural differences and similarities 3. discuss the changing nature of technology and its impact on business 4. describe emerging perspectives on ethics and corporate governance 5. discuss the key issues in new employment relationships.

Guide your learning 1. Explain whether, for management purposes, diversity is mostly about identifying the main attribute that distinguishes a person from the work group. (LO1) 2. Study Figure 2.1 and, for each type of diversity, think of a workplace example of how it might manifest. Discuss one possible negative outcome from each example if not managed effectively and discuss one positive outcome from each example if well managed. (LO1) 3. There are so many potential pitfalls when dealing with different people and different countries that a business should simply recruit people who share similar characteristics, homogenise teams and work processes, trade only with countries and countries that share its values, and that is how to build a strong competitive advantage. Discuss why this argument has sometimes worked in the past and why its logic is breaking down in the modern world. (LO2) 4. Is artificial intelligence (AI) overrated for the changes it might bring into the workplace?

Discuss. (LO3) 5. ‘Regardless of how many people with whom you come in contact, every one of them should be better off for having known you and your company.’ Discuss what is meant by 2-1

this quotation. (LO4) 6. Describe how aspects of the psychological contract may differ between a full-time staff member and a casual staff member. (LO5)

Chapter outline 2.1. Diversity and barriers to inclusion Diversity refers to the variety of observable and unobservable similarities and differences among people. Some differences – such as gender, race and age – are often the first diversity characteristics to come to mind, but diversity can reflect combinations of characteristics rather than a single attribute. Surface-level diversity refers to observable differences in people, including race, age, ethnicity, physical abilities, physical characteristics and gender.

Deep-level diversity refers to individual differences that cannot be seen directly, including goals, values, personalities, decision-making styles, knowledge, skills, abilities and attitudes.

Three other types of within-group diversity reflect different types of deep-level diversity.

Separation diversity refers to differences in position or opinion among group members reflecting disagreement or opposition – dissimilarity in an attitude or value, for example, especially with regard to group goals or processes. Variety diversity refers to differences in a certain type or category, including group members’ expertise, knowledge or functional background. Disparity diversity refers to differences in the concentration of valuable social assets or resources – dissimilarity in rank, pay, decision-making authority, or status, for example. Figure 2.3 summarises these five types of diversity.

2.1.1. Trends in diversity Some short-term demographic trends are strong enough to suggest that the changing demographic mix in the workforce will continue to increase the importance of understanding and leveraging diversity.

The Australian Bureau of Statistics 2021 census identified that over half (51.5 per cent ) of Australians had either been born overseas (first generation Australian) or one or both parents had been born overseas (second generation Australian), a significant increase from 1966 when the overseas-born population was only 18 per cent. Many countries and regions face talent shortages at all levels, and those gaps are expected to worsen. Talent shortages are forecast to rise globally.

2.1.2. Generational differences Age-based diversity is a major issue facing many organisations today. Figure 2.5 provides a clear indicator of why this is true. Between 1971 and 2021, the proportion of female Australian workers grew in every age category. Most experts characterise today’s workforce as comprising five generations. According to date of birth, they are: Interwar (75 years and older ), Baby Boomers (1943–63), Generation X (1964–80), Millennials (1980–2000), and Generation Z (10–24 years).

Many seniors are staying in the workforce longer, leading many firms to revamp their retirement policies and offer these experienced workers part-time jobs. This increases the importance of understanding the role of age in organisations. The influence of age in training environments has been extensively studied. Age was negatively associated with learning scores and suggests that age has a negative relationship with learning, and that part of its influence may be due to motivation. Some organisations are using reverse

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mentoring to bridge generational differences and transfer the technology skills younger workers bring to the workplace to more senior employees.

2.1.3. Diversity issues for managers Diversity awareness enables managers to hire, retain and engage the best talent, which will help to maximise the organisation’s performance. Diversity also fosters greater creativity and innovation.

2.1.3.1.The business case for diversity is performance. Research has found that firm performance increases when employees have more positive attitudes towards diversity. Diversity contributes to a firm’s competitive advantage when it enables all employees to contribute their full talents and motivation to the company. Diversity management is also important for legal reasons. In Australia, Commonwealth and state laws cover equal employment opportunity and anti-discrimination in the workplace. Obeying the law and promoting diversity is consistent with hiring the people best suited for the job and organisation.

2.1.3.2.Barriers to inclusion continue despite performance benefits and legal imperatives. A report of the US Equal Employment Opportunity Commission identified several common diversity barriers that exist in many organisations.

These barriers, summarised in Figure 2.7, stem from a variety of decision-making and psychological factors as well as from employee unawareness.

The ‘like me’ bias: Consciously or unconsciously, people tend to associate with those whom they perceive to be like themselves. Stereotypes are a belief about an individual or a group based on the idea that everyone in that particular group will behave the same way. Stereotypes are often negative and erroneous, and can breed subtle racism, sexism, prejudice and discomfort. Prejudice is outright discrimination against individuals or groups, and can exist despite the various laws progressively implemented since 1975. As voluntary efforts are made by companies to promote inclusion, some employees may perceive a direct threat of loss to their own career opportunities. Ethnocentrism reflects the belief that one’s own language, native country, and cultural rules and norms are superior to all others. Ethnocentrism often has less to do with prejudice and more to do with inexperience or ignorance about other people and environments. Women and minorities often have unequal access to organisational networks, which can be important to job performance, mentoring opportunities, and being seen as a candidate for promotion.

2.1.3.3.The most important element in effectively managing diversity is top management support. An inclusive environment is created when all employees’ cultural awareness and empathy are enhanced through diversity training, and all employees are given equal access to mentors and other influential company employees. Creating fair company policies and practices is also critical. Diversity initiatives are more successful when the company is able to keep employees thinking about diversity issues. Training and mentoring can also help. Diversity training and diversity education need to communicate that bias is a part of being human. It is not realistic to claim or to pursue an ‘I’m totally unbiased’ stance.

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2.2. Globalisation and business Another environmental factor that affects OB is globalisation or the internationalisation of business activities and the shift towards an integrated global economy. From a business standpoint, however, the widespread effects of globalisation are relatively new in the developed and developing nations of the world, which have achieved economic development.

2.2.1. Trends in globalisation Four major factors account for much of the growth in international trade.

2.2.1.1.Communication and transportation improvement has been dramatic over the past several decades. It is simply easier to conduct international business today than was the case just a few years ago.

2.2.1.2.Businesses have turned to globalising to increase market share, and expanded internationally to increase their markets.

2.2.1.3.More are globalising to decrease costs and moving into international markets , especially to reduce labour costs.

2.2.1.4.Many organisations have been globalising to remain competitive. If an organisation starts gaining strength in international markets, its competitors often must follow suit to avoid falling too far behind in sales and profitability.

2.2.2. Cultural competence One of the worst, yet easiest, mistakes people can make is to assume that other people are just like them. People from different cultures see and do things in different ways.

Cultural competence is the ability to interact effectively with people of different cultures.

There are four components of cultural competence: awareness of own cultural worldview, and of reactions to people who are different; our attitude towards cultural differences; knowledge of different worldviews and cultural practices; and cross-cultural skills.

2.2.3. Cross-cultural differences and similarities 2.2.3.1.General observations include that cultural and national boundaries do not necessarily coincide. Given this basic assumption, one major review of the literature on international management reached five basic conclusions. First, behaviour in organisational settings does indeed vary across cultures. Second, culture itself is one major cause of this variation. Culture is the set of shared values, often taken for granted, that help people in a group, organisation or society understand which actions are considered acceptable and which are deemed unacceptable. Third, although the causes and consequences of behaviour within organisational settings remain quite diverse across cultures, organisations and the ways they are structured appear to be growing increasingly similar. Fourth, the same individual behaves differently in different cultural settings. Finally, cultural diversity can be an important source of synergy in enhancing organisational effectiveness.

2.2.3.2.Specific cultural issues were studied by Geert Hofstede, a Dutch researcher, who studied workers and managers in 60 countries and found that specific attitudes and behaviours differed significantly because of the values and beliefs that characterised those countries. Figure 2.10 shows how Hofstede’s categories summarise differences for several countries. Individualism exists to the extent that people in a culture define themselves primarily as individuals rather than as

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2.2.4.

part of one or more groups or organisations. Collectivism, on the other hand, is characterised by tight social frameworks in which people tend to base their identities on the group or organisation to which they belong. Power distance, also called orientation to authority, is the extent to which people accept as normal an unequal distribution of power. Hofstede also identified uncertainty avoidance, which might also be called preference for stability, as the extent to which people feel threatened by unknown situations and prefer to be in clear and unambiguous ones. Masculinity, more accurately called assertiveness or materialism, is the extent to which the dominant values in a society emphasise aggressiveness, and the acquisition of money and other possessions as opposed to concern for people, relationships among people, and overall quality of life.

Hofstede’s framework has been expanded to include long- term values or focusing on the future, working on projects that have a distant payoff, persistence and thrift, and short-term values that are more orientated towards the past and the present, and include respect for traditions and social obligations. The important issue to remember is that people from diverse cultures value things differently from each other and that people need to take these differences into account as they work.

Global perspective Global perspective is distinguished by a willingness to be open to and learn from the alternative systems and meanings of other people and cultures, and a capacity to avoid assuming that people everywhere are the same. Given globalisation trends and the multicultural nature of the Australasian workforce, managers increasingly need a global perspective and a supportive set of skills and knowledge to be most effective.

2.3. Technology and business Technology refers to the methods used to create products, including both physical goods and intangible services. Three specific areas of technology worth noting here are: (1) the shift towards a service-based economy, (2) the growing use of technology for competitive advantage, and (3) mushrooming change in information technology leading to artificial intelligence (AI).

2.3.1. Manufacturing and service technologies Manufacturing is a form of business that combines and transforms resources into tangible outcomes that are then sold to others. Manufacturing was once the dominant sector in the economies of Australia and other developed countries. Over the past few decades, manufacturing entered a long period of decline, primarily because of foreign competition. In Australia and a few other countries, supply chain issues created by the COVID-19 pandemic, along with increased political tensions and wars, have encouraged new manufacturing for national security purposes. Nevertheless, low wages continue to centre a great deal of global manufacturing in Asia. During the decline of the manufacturing sector, a tremendous growth in the service sector kept the overall Australian economy from declining at the same rate. A service organisation is one that transforms resources into an intangible output and creates time or place utility for its customers. Today, the service sector in Australia is responsible for the majority of all new jobs created. Tools, techniques and methods that are used in a factory are also useful to a service firm.

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2.3.2. Technology and competition Technology is the basis of competition for some firms, but keeping a leadership position based on technology is becoming increasingly challenging. Businesses have found that they can be more competitive if they can decrease cycle times (the time that it takes to accomplish some recurring activity or function from beginning to end). Many companies focus on decreasing cycle times in areas ranging from developing products to making deliveries and collecting credit payments. However, there are some emerging anecdotes about staff being injured when working under pressure to keep up with the promises of speedy delivery while interfacing with the smart technologies that push for it.

2.3.3. Information technology Breakthroughs in information technology have resulted in leaner organisations, more flexible operations, increased collaboration, more flexibility, and improved processes and systems. However, they have also resulted in less personal communication, less ‘down time’, and an increased sense of urgency.

2.3.3.1.Artificial Intelligence (AI) and the future of work are closely interconnected with big changes. There are predictions of industries and jobs that will disappear, while creative roles and face-to-face specialists may survive but evolve.

Information technology is the controlling of information and there are some ethical considerations about AI. 2.4. Ethics and corporate governance Ethics and related issues have also engendered renewed interest in recent years. One special aspect of business ethics, corporate governance, has also taken on increased importance.

Ethics also increasingly relate to information technology.

2.4.1. Framing ethical issues Figure 2.14 illustrates how many ethical situations can be framed. Specifically, most ethical dilemmas faced by managers relate to how the organisation treats its employees, how employees treat the organisation, and how employees and organisations treat other economic agents.

2.4.1.1.How an organisation treats its employees includes policies such as hiring and firing, wages and working conditions, and employee privacy and respect. Wages and working conditions, although tightly regulated, are also areas for potential controversy. The same goes for employee benefits, especially if an organisation takes action that affects the compensation packages – and welfare – of an entire workforce or segment of it. Finally, most observers would also agree that an organisation is obligated to protect the privacy of its employees.

2.4.1.2.How employees treat the organisation includes the numerous ethical issues that also stem from how employees treat the organisation, especially in regard to conflicts of interest, secrecy and confidentiality, and honesty. A conflict of interest occurs when a decision potentially benefits the individual to the possible detriment of the organisation. Divulging company secrets is also clearly unethical. Other ethical issues in the workplace include calling in to take a 'sickie' for a day. Although most employees are basically honest, organisations must nevertheless be vigilant to avoid problems resulting from such behaviours.

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2.4.1.3.How employees and the organisation treat other economic agents includes managerial ethics, which also come into play in the relationship between the firm and its employees with other economic agents. As shown in Figure 2.14, the primary agents of interest include customers, competitors, stockholders, suppliers, dealers and unions. The interactions between the organisation and these agents that may be subject to ethical ambiguity include advertising and promotions, financial disclosures, ordering and purchasing, shipping and solicitations, bargaining and negotiation, and other business relationships.

Additional complexities include the variations in ethical business practices in different countries. In some countries, bribes and side payments are normal; however, Australian laws forbid these practices.

2.4.2. Ethical issues in corporate governance A related area of emerging concern relates to ethical issues in corporate governance – the oversight of a public corporation by its board of directors. The board of a public corporation is expected to ensure that the business is being properly managed and that the decisions made by its senior management are in the best interests of shareholders and other stakeholders.

Governance issues in the Australian banking industry were ignited by the 2018 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Boards of directors are also increasingly being criticised, even when they are not directly implicated in wrongdoing. The biggest complaint here often relates to board independence.

2.4.3. Ethical issues and information technology Another set of issues that have emerged in recent times involves information technology.

Among the specific questions in this area are individual rights to privacy and the potential abuse of information technology by companies. One way in which management can address these concerns is by posting a privacy policy on its website, explaining exactly what data the company collects and who gets to see the data. It should also allow people a choice about having their information shared with others, and indicate how people can opt out of data collection. Companies can offer users the opportunity to review and correct information that has been collected, especially medical and financial data.

Government agencies are compelled to have stringent internet privacy guidelines; companies will also need internal guidelines, training, and leadership to ensure compliance.

2.4.4. Social responsibility A related business challenge relevant to OB is adopting a broader stakeholder perspective and looking beyond shareholder value or the short-term stock price. Definitions of corporate social responsibility often include businesses living and working together for the common good and valuing human dignity. An important part is how employers treat their employees.

A business that is a good citizens can help a firm attract the best talent, and customers are increasingly favouring companies that do the right thing. Some people still believe that managers should focus solely on stockholders’ interests. Others argue that because business is an influential element of society, it has an obligation to solve problems of 2-7

public concern. To have lasting effects, social responsibility efforts should be integrated into the culture of the organisation. Corporate sustainability initiatives can be top-down or grassroots. The International Organisation for Standardization (ISO) has created a variety of standards that help organisations gain international acceptance of their practices and outcomes and publishes management standards.

2.5. New employment relationships A final significant area of environmental change that is particularly relevant for businesses today involves new employment relationships. Two particularly important areas today involve the management of knowledge workers and the outsourcing of jobs to other businesses, especially when those businesses are in other countries. Managing temporary and contingency workers and tiered workforces is also becoming increasingly complex. The nature of psychological contracts is also changing.

2.5.1. The management of knowledge workers Traditionally, employees added value to organisations because of what they did or because of their experience. During today’s ‘information age’, many employees add value simply because of what they know, and are often referred to as knowledge workers. As the importance of information-driven jobs grows, the need for knowledge workers will grow as well. However, these employees require extensive and highly specialised training, and not everyone is willing to make the human capital investments necessary to move into these jobs. Compensation and related policies for knowledge workers must also be specially tailored.

2.5.2. Outsourcing and offshoring Outsourcing is the practice of hiring other firms to do work previously performed by the organisation itself. It is an increasingly popular strategy because it helps firms focus on their core activities and avoid getting side-tracked by secondary activities. Up to a point, at least, outsourcing makes good business sense in areas that are highly unrelated to a firm’s core business activities. However, what has attracted considerably more attention in recent years is the growing trend towards outsourcing abroad in order to lower labour costs; this practice is often called offshoring.

2.5.3. Temporary and casual workers Another trend that has impacted employment relationships in business involves the use of casual or temporary (or contingent) workers. A casual worker is a person who works for an organisation on something other than a permanent or full-time basis. Categories of casual workers include independent contractors, on-call workers, temporary employees (usually hired through outside agencies), and contract and leased employees. Another category is part- time workers.

Managing contingent workers is not always straightforward, however, especially from a behavioural perspective. Expecting too much from such workers, for example, is a mistake that managers should avoid. Managers must understand that they need to develop a strategy for integrating contingent workers according to some sound logic and then follow that strategy consistently over time.

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2.5.4. The changing nature of psychological contracts A final element is the psychological contract, which is a person’s overall set of expectations regarding what he or she will contribute to the organisation and what the organisation will provide in return. Figure 2.19 illustrates the essential nature of a psychological contract. The individual makes a variety of contributions to the organisation – such things as effort, skills, ability, time and loyalty. In return for these contributions, the organisation provides inducements to the individual. Some inducements are tangible rewards, others are more intangible. If either party sees an inequity in the contract, that party may initiate a change. The employee might ask for a pay raise or promotion, put forth less effort, or look for a better job elsewhere. The organisation can also initiate change by training the worker to improve her skills, by transferring her to another job, or by firing her.

2.5.4.1.All organisations face the basic challenge of managing psychological contracts.

Recurrent trends in downsizing and cutbacks and increased globalisation of business also complicates the management of psychological contracts. A related problem is the management of psychological contracts for expatriate managers.

OB in the real world: Global diversity at Coca-Cola Summary: With over 700,000 global employees, beverage giant The Coca-Cola Company is a business that operates in a multicultural world, both in the workplace and in the marketplace. The company recognises that its ability to thrive in a multicultural world is both critical to its financial performance and consistent with its values; for example, Coca-Cola Europacific Partners Australia encourages inclusion, equity and accessibility. Accordingly, diversity is recognised by The Coca-Cola Company as an important component of its vision for the company; it also understands that although it has been recognised as a diversity leader there is always more it can do.

Challenge: Imagine that the company’s leaders ask you for advice on how to build a diverse and inclusive workforce that allows it to leverage the potential of its diverse employees to enhance the company’s performance. After reading this chapter, what would you tell them?

Response: Coca-Cola Europacific Partners Australia’s workplace is increasingly diverse, ethical challenges are a constant issue and globalisation is commonplace. Diversity, globalisation, technology, ethics and corporate governance, and new employment relationships are affecting the way people are managed. Corporate goals are linked to individuals' diversity metrics around recruitment, promotion, engagement and retention of diverse employees. There is a focus on fostering an inclusive culture which has helped it to succeed in its industry and develop a strong positive corporate reputation.

Ethical dilemma: What is moral about machines?

Summary: ‘The Moral Machine’ was a survey conducted in 2018 by Massachusetts Institute of Technology (MIT) of 2.3 million people in over 200 countries. The crux of the issue was having to program autonomous vehicles with the morally correct decisions in difficult transport scenarios.

People were saying they wanted a self-driving vehicle to protect pedestrians even if it meant sacrificing its passengers; however, the survey results indicated they wouldn’t buy self-driving vehicles programmed to act this way. There were variations according to the part of the world, which may be a result of embedded cultural and values-based factors. There also appeared to be 2-9

sociopolitical factors involved. The stakes are high and the interest in morally correct programming will flow through in organisational as well as individual decisions.

Imagine you have the task of programming an automated car to respond in an inevitable crash situation. The car must either kill a pedestrian, or swerve and crash, thus killing the passengers within the car. Discuss what you would choose to do, and compare your choice with that of your friends and family members. Narrow down the factors that would enable you to diminish the value of the life of one person over another; or perhaps you can innovate for an alternative solution to the dilemma?

Ethics refers to a person’s beliefs regarding what is right or wrong in a given situation. These beliefs can shift depending on the view or position of the agent (e.g. viewing the position from the pedestrian or the passenger), through to the cultural situation of the individual (e.g. depending on the cultural environment for formal and informal rules and norms). When viewing the decision to compare choices, examination from the position of the pedestrian or the passenger (e.g. economic agent) is important to consider. While cultural implications may suggest the pedestrian should take priority, economic considerations may demand that this preference would not be successful financially. Similar to attitudes across countries, ethical frameworks that can be used to narrow down the factors may be individual versus collective or utilitarian (what has the greatest good), authoritarian or legal ignoring the individual and instead adhering to the letter of the law, contrasting to an individual or moral observation around the impact of the decision or choice on society. In addition, short term or long-term goals could be consider in relation to the impact of the decision on society e.g. traditions, respect or overall individual safety.

Critical perspective Does stereotyping possibly have a good side?

Lumping people together into categories based on subjective physical, cognitive, affective and behavioural characteristics may have some benefits, when strategic business goals are the target.

Marketing and job roles depend a lot on the distinguishing characteristics of the people involved in the process. Homogenising people makes life easier for everyone. The great danger in grouping and labelling people contributes to stereotypes, which can lead quickly to bias and prejudice.

Stereotyping may also lead to bullying, but it is sometimes at the core of strategic and genuinely helpful organisational development. Responsible individuals know when to be sensitive to the different perceptions of the diverse people in the organisation.

Summary LO2.1 Diversity is much more than demographics and can reflect combinations of characteristics in addition to a single attribute. There are many types of diversity, including surface-level and deeplevel diversity. Diversity affects individual and organisational outcomes through processes including social integration, differences in status and power, task conflict, relationship conflict, inclusion and information processing. Barriers to inclusion include the ‘like me’ bias, stereotypes, prejudice, perceptions of loss by persons who feel threatened by diversity initiatives, ethnocentrism, and unequal access to organisational networks. Organisations promote diversity through top management commitment, staffing, training and mentoring.

LO2.2 Globalisation is playing a major role in the environment of many firms today. The volume of international trade has grown significantly and continues to grow at a very rapid pace. There are numerous cross-cultural differences and similarities that affect behaviour within organisations.

Because societal culture influences diverse values, customs and language, it is important to 2-10

understand these effects on behaviour. Indeed, societal cultures can differ in a variety of ways – including collectivism, power distance, future orientation and gender egalitarianism – as well as determine what employees consider desirable leadership characteristics.

LO2.3 Technological change has become a major driver for other forms of organisational change. It also has widespread effects on the behaviours of people inside an organisation.

LO2.4 Although ethics has long been relevant to businesses and managers, one special aspect of business ethics, corporate governance, has also taken on increased importance. Ethics also increasingly relate to information technology.

LO2.5 A final significant area of organisational change facing organisations today involves new employment relationships. How well these employees are managed is seen as a major factor in determining which firms will succeed. Outsourcing is the practice of hiring other firms to do the work previously performed by the organisation itself. Contingent and temporary workers and the casual workforce also pose special challenges.

Revision questions 1. Diversity is considered an important element of the modern workplace; however, there is little practical benefit to be gained by actively promoting it. a. True b. False 2. Diversity can involve which of the following? a. Gender b. Race c. Age d. All of these 3. There are elements of diversity aside from gender, age and race. a. True b. False 4. Globalisation is a new phenomenon. a. True b. False 5. Employment in the service sector is expected to decline in the near future. a. True b. False 6. Ethical behaviour is not as profitable as unethical behaviour, but it has other advantages. a. True b. False Case study: Similarities depend on your differences Summary: An ABC Life article highlights the issue of similarity bias in the workplace through example of a skilled and experienced, small-statured woman of Asian heritage entering a Sydney boardroom to be interviewed for a job. There she discovers the whole interview panel composed of tall, Caucasian men. It would be natural that all these men would prefer to hire another, similar man.

Some strategies that can help to avoid unethical, and often illegal, similarity bias from infiltrating an organisation’s recruitment process include ensuring diversity on the selection panel and properly trained recruiters. The applicant should research the organisation, focus the narrative around their skills, de-emphasise features that might provoke conscious or unconscious similarity bias, focus on the strength of the differences, and understand their legal rights.

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Critical 1. Organisations should pursue diversity for many reasons. One very practical reason is that inclusion and diversity can often lead to improved business performance. Referring to issues mentioned in this case, discuss how an organisation, by minimising similarity bias in its recruitment process, could contribute to its own performance improvement.

As noted for the applicant, there are strengths in differences, and organisations that identify these gaps can become strategically more competitive. Having a diverse workforce can expand stakeholder and consumer understanding, enable problem solving and adaptability to new technology, as well as make the business more competitive in the global market.

2. If it is helpful to know your rights under the legislation that prohibits discrimination, why wouldn't you just threaten litigation each time you are interviewed for a job and are not selected due to what you see as similarity bias?

Similarity bias is part of human nature – and rarely does anyone knowingly participate or instigate illegal discrimination of this nature. The psychological contracts that are important to networking, understanding and building relationships, and further advancing one’s career progression are more constructively accomplished by amicable discussion, genuine informal education, and collaborate solutions. If the individual is the best fit for the job, then approaching the organisation with a value proposition is more likely to be successful, for both the long and short term.

Mainstream 1. What would be some benefits to an organisation if it was listed as a Workplace Gender Equality Agency Employer of Choice?

Attracting and retaining top talent is a strategic advantage, and organisations that are able to distinguish themselves as employers of choice will be more successful. Diversity has been proven to provide increased profitability and success, and attracting a range of skills that other businesses may overlook, are important in competing on the global market.

2. Being similar to someone else is natural and unavoidable, so what are the reasons our similarities can be perceived poorly in a workplace context?

Stereotyping can be dangerous insofar as it assumes all individuals are the same, and can therefore breed subtle racism, sexism, prejudice and discomfort. While there may be similarities between individuals, culture, background and specialised skills can create significant diversity – if not provided with the opportunity to leverage these individual skills, organisations miss an opportunity to maximise the potential of their greatest asset: their people.

Tutorial activities 1. Which do you think is more important to team performance, surface-level or deep-level diversity? Why? Surface-level diversity refers to observable differences in people, including race, age, ethnicity, physical abilities, physical characteristics and gender. Deep-level diversity is more important to team performance because it includes goals, values, decision-making styles, knowledge, skills, abilities and attitudes. These dimensions directly affect team performance.

2. How can diversity create a competitive advantage for a firm?

Diversity can enhance a firm’s competitive advantage because it enables all employees to contribute their full talents and motivation to the company. Effectively managing diversity brings out the best in employees, allowing them to contribute maximally to the firm’s performance. Diversity can improve decision making, enhance creativity, and enable a company

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to better relate and respond to its customers. Diversity can also be used as an attraction strategy.

If a subordinate came to you and said that they felt the company’s new diversity hiring initiative was unfair and would compromise their well-deserved opportunities for advancement, how would you respond?

Consider saying that the company makes sure that highly qualified job candidates are diverse.

Then, point out that the company focuses on being a meritocracy, promotes awareness of how different groups communicate, and ensures that the assessment and promotion process does not misinterpret those styles. Finally, add that the company ensures that the promotion process proactively identifies diverse candidates to prevent inadvertently overlooking them.

What can leaders do to be effective when team members are from different cultures and have different expectations about how the leaders should behave?

Leaders can develop cultural awareness. This requires honestly examining their prejudices and biases, actively developing cross-cultural skills and cultural competence, learning from role models, and having a positive attitude about cultural issues. The key to cross-cultural success is awareness. A leader must be aware of how culture influences his or her interpretations of others, his or her behaviour, and how people from other cultures see the leader.

Identify at least three ways in which the globalisation of business affects businesses in your community?

Students probably will recognise that international business affects almost every aspect of business in every community. Within the work sphere, it influences product design, distribution, market segmentation, promotion and pricing. At a higher level, it influences corporate objectives, policies and strategies. In Australia, even the mix and make-up of the workforce has a strong international demographic. Like it or not, every business is in the international marketplace.

What roles do changing technologies play in your daily activities?

Communication is faster, easier, and a wide range of options is available. Privacy may be encroached upon with greater ease than ever; unit costs of communication are lower.

Entertainment is also more varied in terms for format and accessibility, increasing a person’s options. It may be more of a challenge to keep pace with the rapid changes in technology in the consumer products field as well as work-related technology, and the problem and pace of obsolescence are accelerating.

Do you think that concerns regarding ethics will become more or less important in business? Why? Concerns about ethics are likely to be fresh in the minds of many people, given the numerous and highly publicised data breaches occurring in recent years. Responses may also include complicated subjects such as AI and decision making, a shrinking workforce or global catastrophes. As long as business schools and organisations themselves make an effort to remind the young about ethical issues they will remain important, if not central, to managerial thinking.

8. What are your personal opinions about international outsourcing in the garment industry? Do you think that lower prices are worth sending Australian jobs to other countries? Explain your answer. Post COVID-19, it is likely students know of someone who has lost their job, if they were not directly impacted themselves. The argument, however, is that outsourcing can reduce labour costs, make the organisation more efficient and competitive, and help develop economies that are below par. There are short-term effects on individual workers and the communities in which they live from a sudden loss of jobs. Longer-term, downsizing can force 2-13

individuals and organisations alike to learn new skills, streamline their operations, and … change for the better!

Group exercise – What does culture mean to you?

Learning objective: Explain how societal culture affects how people interpret others and how others interpret them.

Summary: This exercise is done as a class, and the instructor plays the role of class secretary. First, working alone, students think about what ‘societal culture’ means. For 5 minutes, they think about their own culture. They define a word and then write down the cultural dimensions to describe it.

After 5 minutes, students share their ideas, which the instructor records. Students identify categories for placing the ideas. They then answer the following questions as a class.

Task: 1. How might multiculturalism create a competitive advantage for an organisation?

2. What categories are the most important to teams working in organisations?

3. What categories are the least important to teams working in organisations?

4. What does your list suggest that mangers wanting to promote a multicultural workplace might do?

Mini-simulation (MindTap-only) Imagine you are trying to write a project status report for Happy Time Toys with three other team members when an older team member tries to take the project over, believing that you’re too inexperienced to do a good job. What do you say or do?

Go to this chapter’s mini-simulation, watch the challenge video and choose a response. Be sure to also view the outcomes of the two responses you didn’t choose.

OB concepts applied: surface-level diversity, relational demography, managing age in the workplace, effects of age differences that violate social status norms, diversity as a source of competitive advantage, relationship conflict, inclusion, information processing, social categorisation theory, stereotypes, culture of inclusion Discussion questions 1. What type(s) of barriers to inclusion exist for this group?

Relational demography refers to a group member’s similarities to and differences from other group members. Bill is older and more experienced than Allison and Alex and perceives himself to be different from them. This awareness leads to a haughty attitude. ‘I know a lot more than you do, and I’ve written many of these – You kids can get back to your regular work.’ In fact, Bill feels like a token because he is in the numerical minority in a group, based on the characteristic of age.

The group is experiencing task conflict, which refers to conflict over issues such as deadlines and work processes. Educational diversity is associated with greater task conflict (incorrect response #1). Bill feels that his experience gives him superior skills in writing reports. ‘I’ve written many of these – I’ll have no problem getting it done.’ Alex and Allison feel more qualified to write the

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report and try to exclude Bill. ‘We came out of the best universities and have more current knowledge than you do.’

Other sources of conflict include both surface-level diversity, visible differences in people, including age and deep-level diversity, invisible differences such as knowledge. Bill is much older than Alex and Allison, but they have greater expertise in marketing and sales.

2. How can diversity be leveraged as a source of competitive advantage for this group?

Diversity can be a source of competitive advantage because group members can use their diverse backgrounds to develop a more comprehensive view of a problem, create a broader list of possible solutions, and offer a wider variety of information and expertise.

Alex suggests that the group divides up the report based on each member’s area of expertise.

Allison drafts the sales section, Alex drafts the marketing and financials sections, and Bill handles competitor analysis. Research shows that innovative companies intentionally use heterogeneous teams to solve problems.

3. If you were the CEO of Happy Time Toys, how would you create a culture of inclusion to help your company realise the benefits of not only age-related diversity but all types of diversity?

If diverse employees are excluded from decision making or are marginalised (incorrect response #2), their potential contributions are not realised. Alex says to Bill, ‘You do have more experience than we do writing this report. It probably will be better if you write it.’ However, Bill didn’t have a good mastery of the marketing plan and couldn’t finish the report on time. As a result, all three group members received disappointing performance evaluations because the report was supposed to be a team effort.

Inclusion refers to the sense of being safe, valued and engaged in a group regardless of differences from other group members. To create a culture of inclusion, Happy Time Toys should highlight the strengths of each employee through increased involvement. Alex could further develop marketing and financial expertise through seminars, continuing education and challenging assignments.

It is essential that the company avoid barriers to inclusion such as stereotyping others based on age. Bill thought Alex and Allison were ‘kids’ who didn’t know anything. Alex and Allison thought Bill’s knowledge was dated because they perceived him as an old person. Stereotypes are both negative and erroneous ─ as new graduates from the best universities, Alex and Allison knew more than Bill about marketing, finance and sales, but Bill knew more about writing the report.

Happy Time Toys should also avoid the barrier to inclusion called ‘a perceived threat of loss’.

Since Bill has been the predominant employee for years, he feels angry if he perceives that younger employees pose a direct threat to his career opportunities. He wanted to write the report himself because he felt the need to protect his career by impeding the careers of Alex and Allison (incorrect response #1).

Ultimately, the three employees collaborated on the report and achieved inclusiveness.

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PART TWO – INDIVIDUAL BEHAVIOURS AND PROCESSES IN ORGANISATIONS Chapter 1 showed how managers strive to enhance performance behaviours, enhance commitment and engagement, promote citizenship behaviours, and minimise dysfunctional behaviours by their employees. Chapter 2 identified how diversity, globalisation, technology, ethics and new employment relationships all impact organisational behaviour.

The text now turns to a fundamental question underlying OB: Why do individuals do what they do?

Chapter 3 identifies and discusses individual characteristics that affect people’s behaviours in organisations. Chapter 4 continues the discussion of other important individual values and introduces core theories around perception. Finally, Chapter 5 discusses concepts that drive employee motivation and how managers can implement these theories and concepts.

CHAPTER 3 – INDIVIDUAL CHARACTERISTICS Chapter overview This chapter explores some of the key characteristics that differentiate people from one another in different jobs. Introduced first is the essential nature of individual differences and how people ‘fit’ as individuals in organisations. Then the chapter looks at personality frameworks that shed considerable light on different personality profiles, and examines other specific personality traits with discussion on different types of intelligence. The chapter closes with an examination of different styles for processing information and learning.

Learning outcomes After studying this chapter, students should be able to: 1. explain the nature of individual differences, the concept of fit, and the role of realistic job previews 2. define personality and describe general personality frameworks and attributes that affect behaviour in organisations 3. identify and discuss other important personality traits that affect behaviour in organisations 4. discuss different kinds of intelligence that affect behaviour in organisations 5. describe different learning styles that influence how people process information and that affect behaviour in organisations.

Guide your learning 1. Why can seemingly similar people behave quite differently when placed under pressure? (LO2, LO3) 2. Consider people you work with and people you have worked with in the past. Do you think people can change their personalities or behaviours? (LO1, LO2, LO3) 3. Why is there no perfect job based on personality? (LO1–LO5)

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Chapter outline 3.1. People in organisations 3.1.1. Individual differences Individual differences are personal attributes that vary from one person to another.

Individual differences may be physical, psychological and emotional. Basic categories of individual differences include personality, intelligence, learning styles, attitudes, values and emotions, perception and stress. Managers should also be aware of psychological contracts that exist between the organisation and its employees. In an ideal situation, understanding differences across people and creating effective psychological contracts can help facilitate a good fit between people and the organisation.

3.1.2. The concept of fit Being good at the job is important, but is not enough – there is a need to fit with the organisation and workgroup as well. There are different forms of fit summarised in Figure 3.1.

3.1.2.1.Person–job fit is the fit between a person’s abilities and the demands of the job, and the fit between a person’s desires and motivations and the attributes and rewards of a job. Because job performance is usually the most important determinant of an employee’s success, person–job fit is usually the primary focus of most staffing efforts. It is important to consider not only the fit between an individual’s talents and the job requirements, but also the fit between an individual’s motivations and the rewards offered by the job. Research suggests that person–job fit leads to higher job performance, satisfaction, organisational commitment, and intent to stay with the company.

3.1.2.2.Good person–group fit (or person–team fit) means that an individual fits with the workgroup’s work styles, skills and goals. Person–group fit leads to improved job satisfaction, organisational commitment, intent to stay with the company, and critical in team-oriented organisations.

3.1.2.3.Person–organisation fit is the fit between an individual’s values, beliefs and personality and the values, norms and culture of the organisation. The strength of this fit influences important organisational outcomes including job performance, retention, job satisfaction and organisational commitment.

Organisational values and norms that are important for person–organisation fit include integrity, fairness, work ethic, competitiveness, cooperativeness, and compassion for fellow employees and customers. Research suggests that people may experience differing degrees of fit with the job and with the organisation.

Essentially, it is possible to like what you do but not where you do it, or to like where you work but not what you do there.

A good place to start maximising person–organisation fit is to identify (beyond qualifications, competencies and traits) qualities that relate to aspects that also fulfil the organisation’s strategy, values and processes. Hiring for any type of fit does not mean simply hiring those with whom we are most comfortable, which can lead to a lack of diversity as well as dysfunctional stereotyping and discrimination against people who may actually contribute a great deal to the company’s success.

3.1.2.4.Person–vocation fit is the fit between a person’s interests, abilities, values and personality, and a profession. Adjustment and satisfaction are greater when 3-2

the occupation meets their needs. Although individuals usually choose a vocation long before applying to an organisation, understanding person– vocation fit can still be useful to organisations and managers. Organisations wanting to develop their own future leaders, or looking for employees to fill multiple roles, might be able to use vocational interests in determining whether job applicants would be a good fit with the organisation’s future needs.

3.1.3. A realistic view of the job and organisation Realistic job previews (RJPs) involve the presentation of both positive and potentially negative information to job candidates. The goal is not to deter candidates, but rather to provide accurate information about the job and organisation to find the right fit. If a common reason for employees leaving an organisation is that the job is not what they expected, this is a good sign that the recruiting message can be improved. Giving applicants the opportunity to self-select out of the hiring increases the likelihood that the applicants hired will be a good fit and, ultimately, better employees.

3.2. Personality and individual behaviour Personality is the relatively stable set of psychological attributes that distinguish one person from another. Managers should strive to understand basic personality attributes and how they can affect people’s behaviour and fit in organisational situations.

3.2.1. The ‘big five’ framework Researchers have identified five fundamental personality traits, illustrated in Figure 3.4. The personality of any given person can fall anywhere along the spectrum.

3.2.1.1.Agreeableness refers to a person’s ability to get along with others. It seems likely that highly agreeable people are better at developing good working relationships with co-workers, subordinates and higher-level managers. The same pattern might extend to relationships with customers, suppliers and other key organisational constituents.

3.2.1.2.Conscientiousness refers to the extent to which a person can be counted on to get things done. In general, research suggests that being strong on conscientiousness is often a good predictor of job performance for many jobs.

The third of the Big Five personality dimensions is neuroticism. People who are relatively more neurotic tend to experience unpleasant emotions such as anger, anxiety, depression and feelings of vulnerability more often than do people who are relatively less neurotic. People with less neuroticism might be expected to better handle job stress, pressure and tension.

3.2.1.3.Extraversion reflects a person’s comfort level with relationships. Extroverts are sociable, talkative and assertive, while introverts are more reluctant to begin new relationships. Research suggests that extroverts tend to be higher overall job performers than introverts, and that they are more likely to be attracted to jobs based on personal relationships, such as sales and marketing positions.

3.2.1.4.Finally, openness reflects a person’s rigidity of beliefs and range of interests.

People with more openness might be expected to be better performers due to their flexibility and the likelihood that they will be better accepted by others in the organisation. Openness may also encompass a person’s willingness to accept

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change; that is, people with high levels of openness may be more receptive to change.

3.2.1.5.The value of the Big Five framework is that it encompasses an integrated set of traits that appear to be valid predictors of certain behaviours in certain situations. Managers who can both understand the framework and assess these traits in their employees are in a good position to understand how and why they behave as they do. However, managers must be careful to not overestimate their ability to assess the Big Five traits in others. There are also times when using specific personality traits to predict outcomes are more useful. Another limitation of the Big Five framework is that it is primarily based on research conducted in the United States and may not translate well for First Nations workers.

3.2.2. The Myers-Briggs framework Many people know of the Myers-Briggs framework through a widely used questionnaire called the Myers-Briggs Type Indicator, or MBTI. The MBTI was based on Carl Jung’s work and first developed by Isabel Briggs Myers (1897–1979) and her mother, Katharine Cook Briggs, to help people understand themselves and each other in order to find the right type of work after the Second World War. The MBTI uses four scales with opposite poles that result in sixteen personality types, identified by the four letters that represent one’s tendencies on the four scales.

Extroversion (E)/Introversion (I): Extroverts are energised by external events, things and people. Introverts draw their energy internally, finding energy in ideas, concepts and quiet.

Sensing (S)/Intuition (N): Sensing people are detail oriented and want facts while intuitive people seek out patterns among the facts they have learned.

Thinking (T)/Feeling (F): Thinkers value fairness, and decide impersonally based on objective criteria and logic. Feelers value harmony, and focus on human values and needs.

Judging (J)/Perceiving (P): Judging people are decisive and tend to plan. Perceptive people are adaptable, spontaneous, and curious.

3.2.2.1.The value of the Myer-Briggs framework is that MBTI focuses on clear preferences. Sitting closer to the middle will mean you are less clear about your preferences. Although the framework and Myers-Briggs instrument were not developed or intended to be used to identify personality profiles and label people, too often this is what is done with the results. This is problematic, as it can lead to discrimination and poor career counselling. Nonetheless, it is likely that you will encounter it during your career. It can be a fun team-building tool for illustrating some of the ways that people differ, but it should not be used in making organisational decisions, including hiring and promotions.

3.3. Other important personality traits 3.3.1. Locus of control Locus of control is the extent to which people believe that their behaviour has a real effect on what happens to them. Some people, for example, believe that if they work hard, they will succeed or that people who fail do so because they lack ability or motivation. People who believe that individuals are in control of their lives are said to

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have an internal locus of control. Other people think that fate, chance, luck or other people’s behaviour determines what happens to them and are said to have an external locus of control.

3.3.2. Self-efficacy Self-efficacy is confidence in the ability to cope, perform and be successful on a specific task. Self-efficacy is a key factor influencing motivation and engagement. General selfefficacy reflects a generalised belief of being successful at whatever challenges might be faced. Because self-efficacy and general self-efficacy are related to setting higher goals, persisting in the face of obstacles and performing better, it is important to maintain a positive sense of self-efficacy.

3.3.3. Self-esteem Self-esteem refers to the feelings of self-worth and liking or disliking of oneself. Self-esteem is positively related to job performance and learning. It is possible to have high self-esteem but low self-efficacy for certain tasks.

3.3.4. Authoritarianism Another important personality characteristic is authoritarianism, the extent to which a person believes that power and status differences are appropriate within hierarchical social systems such as organisations. A person who is not highly authoritarian, although she or he may still carry out reasonable directives from the boss, is more likely to question things, express disagreement with the boss, and even refuse to carry out orders if they are for some reason objectionable.

3.3.5. Machiavellianism Machiavellianism is used to describe behaviour directed at gaining power and controlling the behaviour of others. More Machiavellian individuals tend to be rational and unemotional, may be willing to lie to attain their personal goals, put little emphasis on loyalty and friendship, and enjoy manipulating the behaviour of others.

3.3.6. Tolerance for risk and ambiguity Tolerance for risk (also called risk propensity) is the degree to which a person is comfortable accepting risk, willing to take chances and to make risky decisions. A manager with a high tolerance for risk might lead the organisation in new directions while a manager with low tolerance for risk might lead an organisation to stagnation, or might help the organisation successfully weather turbulent and unpredictable times by maintaining stability and calm. Tolerance for ambiguity reflects the tendency to view ambiguous situations as either threatening or desirable. Intolerance for ambiguity reflects a tendency to perceive or interpret vague, incomplete or fragmented information, or information with multiple, inconsistent or contradictory meanings as an actual or potential source of psychological discomfort or threat. Being tolerant of ambiguity is related to creativity, positive attitudes towards risk, and orientation to diversity. The best managerial strategy is to place individuals with a low tolerance for ambiguity in well-defined and regulated tasks.

3.3.7. Type A and B traits The Type A personality is impatient, competitive, ambitious and uptight. The Type B

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personality is more relaxed and easy-going, and less overtly competitive than Type A. Although Type As often have higher job performance than Type Bs, Type As are also more prone to stress and coronary heart disease. As shown in Figure 3.9, Type A and B profiles reflect extremes, with most people simply tending towards one or the other.

Understanding the personality type of your co-workers and boss can help you to better understand and manage this potential source of work conflicts. Recognising your personality type can help you to identify work situations that are good fits for you.

3.3.8. Role of the situation The relationship between personality and behaviour changes depending on the strength of the situation. Strong situations clearly outline the type of behaviours accepted. Those with strong tendencies will usually be able to suppress them when in a situation in which the rules are clear. It is important to recognise that the behaviour of First Nations peoples may not align with Anglo–European expectations, and many of the psychometric tools have not included First Nations representation for consideration.

3.4. Intelligence There are many types of intelligence, or mental abilities, including general mental ability, information processing capacity, verbal ability and emotional intelligence through to special and linguistic intelligence.

3.4.1. General mental ability General mental ability is the capacity to rapidly and fluidly acquire, process, and apply information. It involves reasoning, remembering, understanding and problem solving. The strong association between measures of general mental ability and performance in a wide variety of task domains is one of the most consistent findings in the field of organisational behaviour. Information processing capacity involves the manner in which individuals process and organise information, and helps explain differences between experts and novices on task learning and performance. General mental ability influences information processing capacity. Mental ability tests can predict a person’s ability to learn in training or on the job, be adaptable, solve problems and tolerate routine. Despite being easy to use, mental ability tests produce racial differences that are three to five times larger than other methods that are also valid predictors of job performance such as structured interviews.

3.4.2. Multiple intelligences Gardner’s theory of multiple intelligences suggests that there are a number of distinct forms of intelligence that each individual possesses in varying degrees: 1. linguistic: words and language 2. logical-mathematical: logic and numbers 3. musical: music, rhythm, and sound 4. bodily-kinaesthetic: body movement and control 5. spatial-visual: images and space 6. interpersonal: other people’s feelings 7. intrapersonal: self-awareness.

The theory suggests that assessment of abilities should measure all forms of intelligence.

According to this theory, learning and teaching should focus on the particular intelligences of each person. The theory also emphasises the cultural context of multiple intelligences.

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3.4.3. Emotional intelligence Emotional intelligence (EI) is an interpersonal capability that includes the ability to perceive and express emotions, to understand and use them, and to manage emotions in oneself and other people. Expert Daniel Goleman describes five dimensions of EI that include three personal competencies (self-awareness, self-regulation and motivation) and two social competencies (empathy and social skills). Emotional intelligence involves using emotional regulatory processes to control anxiety and other negative emotional reactions and to generate positive emotional reactions.

People differ in the degree to which they are able to recognise the emotional meaning of others’ facial expressions, although seven universal emotions are expressed in the face in exactly the same way regardless of race, culture, ethnicity, age, gender or religion. These emotions are joy, sadness, fear, surprise, anger, contempt and disgust. There is some evidence that components of EI can be developed. There is also controversy surrounding the concept of EI with several researchers arguing that EI is simply a surrogate for general intelligence and well-established personality traits. However, EI has been found to be related to, and yet distinct from, personality dimensions. Various measures of EI provided incremental predictive power regarding life satisfaction and job performance, adjustments to stressful situations and pro-social behaviours.

3.5. Learning styles Learning style refers to individual differences and preferences in processing information when problem solving, learning or engaging in similar activities. There are numerous typologies, measures and models.

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Sensory modalities

One approach addresses the preference for sensory modality, which is a system that interacts with the environment through one of the basic senses. The most recognised sensory modalities are: • visual: learning by seeing • auditory: learning by hearing • tactile: learning by touching • kinaesthetic: learning by doing.

According to researchers, about 65 per cent of all learners have some visual learning preference while up to 30 per cent are auditory learners; the remaining 5 per cent are kinaesthetic learners and want to move around.

3.5.2. Learning style inventory A second approach to understanding learning styles, the Kolb Learning Style Inventory, is one of the more dominant approaches to categorising cognitive styles. Kolb suggests that there are four basic learning styles: 1.

Convergers depend primarily on active experimentation and abstract conceptualisation to learn.

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Divergers depend primarily on concrete experience and reflective observation.

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Assimilators depend on abstract conceptualisation and reflective observation.

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4.

Accommodators rely mainly on active experimentation and concrete experience, and focus on risk taking, opportunity seeking and action.

There wide gaps in current understanding, including a variety of statistical and inferential problems and low reliability, with most of the research focused on children and less on how the styles influence adult learning. Despite these limitations, evidence suggests that cognitive and learning styles may be important for understanding human behaviour and performance in a variety of contexts.

OB in the real world: Valuing difference at Air New Zealand Summary: At Air New Zealand, individuality and diversity are celebrated. Female pilots and engineers are well supported and are ahead of the percentage worldwide (7.4% compared to 5%). The company’s inclusivity is recognised by earning accessibility, gender and rainbow ticks, and it strives to be representative of its customer base. Air New Zealand also encourages employees to consider switching careers within the company, as the most important thing in the world is ‘the people’. When the COVID-19 pandemic hit, things were dire for a time; however, during 2022 Air New Zealand hired more than 2000 new staff and if that trend continues, it will need to hire still more.

Challenge: What advice would you offer Air New Zealand about how to better hire empathetic employees who fit with the company’s unique culture?

Response: Air New Zealand looks for employees with positive attitudes and leadership skills who fit well with the company’s fun and unique culture. The company’s investment in finding the right talent has paid off in low turnover, increased internal promotion rates and higher productivity.

Instead of evaluating potential hires on a fixed set of skills, Air New Zealand looks for the qualities that show how people will be warm and welcoming, respectful and resourceful, sincere and authentic.

Ethical dilemma: Taking care with categorisation Summary: Best intentions go horribly wrong. Tools help us to understand why someone might behave in a certain manner or even how they prefer to interact; however, they are descriptive.

Labelling someone is not an appropriate use of the tools and can cause harm if misused. The intention is to enable understanding and shared meaning. The tools are not problems in themselves, but people must use them ethically.

What can a manager do to help their team use these tools ethically?

Understanding the personality type of those you work with can help you better communicate what you are thinking, improving effectiveness and inclusion. An example may be relaying complex information in a medium that is preferred, and in a one-on-one meeting instead of a large group, written down, or perhaps vocally explained. To avoid ‘categorising’ people, however, a manager must ensure that these are viewed as tools in which the individual can use to interact with someone else, e.g. informs outgoing interactions. The responsibility of understanding your colleagues resides with the individual, and not for the others in your team to adapt to you. Using this understanding in team building exercises can help identify the usefulness of this differentiation. In addition, ongoing

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discussion around situation and role modelling by the manager is needed to ensure that individuals do not fit ‘in a box’ and dynamics continue to evolve and change. Conscientiousness, or being careful and responsible will add to the overall positive performance of the team.

Critical perspective Context also affects behaviour Humans are complex, and no one tool is comprehensive enough to determine whether a person is suitable for a particular role. While helpful, the tools and processes are at best descriptive. People have a choice in their behaviours, and frequently adapt. Contexts will affect real-time behaviour and behaviour is not always stable. While behaviour can be considered largely predictable, it is subject to the free will of the individual.

Summary LO3.1 Understanding individuals in organisations is important. A basic framework for facilitating this understanding is the psychological contract – people’s expectations regarding what they will contribute to the organisation and what they will get in return. Organisations strive to achieve an optimal person–job fit, but this process is complicated by the existence of individual differences.

LO3.2 Personalities are the relatively stable sets of psychological and behavioural attributes that distinguish one person from another. The Big Five personality traits are agreeableness, conscientiousness, neuroticism, extraversion and openness. Myers-Briggs dimensions and emotional intelligence also offer insights into personalities in organisations.

LO3.3 Other important traits are locus of control, self-efficacy, self-esteem, authoritarianism, Machiavellianism, tolerance for risk and ambiguity, and Type A and Type B traits. The role of the situation is also important as is how individuals process information.

LO3.4 Consider diverse intelligences such as bodily, kinaesthetic and emotional intelligence, rather than just intellect.

LO3.5 Understanding how people process information is also key. People have different personalities, demographics, and intelligences. By understanding the characteristics of your coworkers, managers, and subordinates, you will be best able to choose the OB tool or management style that will be most effective. Remember, flexibility is the key to effective management.

Revision questions 1. Boris works as a receptionist. He’s happy with his salary, gets along well with his co-workers and his boss, there’s no stress, and he can get all of his tasks done proficiently. However, he feels unfulfilled and hopes to get a different job soon. Which of the following does Boris lack? a. Person–group fit b. Person–vocation fit c. Person–job fit d. Person–organisation fit 2. Sheryl is cooperative, forgiving and understanding. She has high . a. agreeableness b. conscientiousness c. extroversion d. openness

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3. You took a personality test and did not receive a job offer. The feedback was because your personality does not suit the role. This is incorrect because: a. Your previous personality tests show you are perfect for the role. b. Personality does not determine suitability for a role. c. You have all the experience and can do the job. d. You can change your personality.

4. An individual’s general strategy for dealing with other people and the degree to which they feel they can manipulate others in interpersonal situations is referred to as . a. Darwinism b. neuroticism c. Machiavellianism d. anxiety 5. What types of learners are most likely to enjoy making outlines of text and lecture material? a. Experiential learners b. Observational learners c. Structured learners d. Group learners Case study: The humble CEO: Kevin Young, Sydney Water Summary: With the birth of the internet, and as participation and consumption of social media grew, bigger was deemed as being better. Assertive and arrogant personalities began to dominate and narcissism became something to emulate, and was often rewarded. Greed was seen as good and being humble as a sign of weakness. However, many recent studies point to having a humble leader or CEO as being positive for an organisation. Apart from demonstrating self-awareness, humble leaders emphasise leadership as a shared activity and actively seek advice from others. Managing director of Sydney Water, Kevin Young, services more than five million customers and employs around 2500 people. Young is known as a manager who achieves things through other people, believing that CEOs are humble, but with fierce resolve.

Critical 1. Overconfidence seems to be a very common trait in CEOs. If you were a CEO, what would you do in order to remain ‘humble, but with fierce resolve’?

Self-awareness play a significant role in leadership positions. Regular self-evaluation, and welcoming continuous feedback are both important in maintaining a connection to employees and customers of the organisation. Becoming too narrow minded or narcissistic limits the CEO’s ability to respond to new challenges, and reduces the ability to see new risks or pivot towards unexpected opportunities.

2. How do you consume and engage with friends, businesses and celebrities on social media, and how has this changed over time? What kinds of personalities on social media (narcissistic, humble or a mixture) do you tend to gravitate towards? Explain your response.

Students may respond by identifying visual cues or written comments from selected individuals. Different viewpoints should be challenged based on context or familiarity with the individual. For example, a friend’s strong opinion could be seen as Type A or authoritarianism; however, in knowing the person they do not normally represent these characteristics.

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Conversely, understanding the context of the response by a political figure, may show they were in serious debate, or making casual comment to reporters.

Mainstream 1. Based on the information in the case study, why would a humble CEO be a better fit for an organisation than an arrogant CEO? Long-term financial sustainability is the objective for the organisation, and the humble CEO is more likely to engage teams and employees through role modelling self-awareness and asking for help when needed. By identifying both strengths and weaknesses, the humble CEO is also likely to attract greater diversity across skills. In addition, decisions may be more collaborative and considered without taking undue risk.

2. Why would an investor prefer to invest in an organisation with a humble CEO over the alternative?

Given humble CEOs are less likely to take undue risks due to their collaborate nature in engaging teams for decision making, there is a better chance for long-term financial perspective, less chance of overpaying or processes that are driven by ego, and usually lower turnover, resulting in better efficiencies and success.

Tutorial activities 1. What individual differences do you feel are most important to organisations? Why? The individual differences that are most important in organisations are emotional stability because it is associated with not being anxious, depressed, angry and insecure, and conscientiousness, because it is associated with being careful, thorough, responsible and organised, as well as being hardworking, achievement-oriented and persistent. These qualities correlate positively with performance motivation.

2. If you were denied a job because of your score on a personality test, what would be your reaction?

Students may say they would think that the test was flawed because they have emotional stability, conscientiousness and agreeableness, the qualities most suited to success in the workplace.

3. Which of Gardner’s multiple intelligences do you feel is most important for managers?

Answers will vary. Some may think linguistic intelligence is the most important form of intelligence for managers because they have to communicate their vision effectively to the employees and motivate them to carry out the organisation’s goals and strategies.

4. Do you think emotional intelligence is important to managers? How would you assess emotional intelligence in deciding who to promote to a managerial position?

Emotional intelligence is important to managers because as Daniel Goldman explains: emotional intelligence is ‘the capacity for recognising our own feelings and those of others, for motivating ourselves, and for managing emotions well in ourselves and in our relationships’. The five dimensions of EI (self-awareness, self-regulation, motivation, empathy and social skills) make the difference between strong and weak managers. Consider assessing the EI of an employee by observing workplace behaviour, which would serve as a basis for a promotion to a managerial position.

5. If you were a manager, what individual differences would be important to you in hiring an assistant? Why? Students’ answers will vary here. Some may say they would hire someone with emotional

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intelligence and conscientiousness because these individual differences have been shown to correlate positively with motivation at work.

Group exercise: Strengths-based development Learning Objective: This exercise incorporates many ideas contained in this chapter, with the main point reinforcing the fact that each individual is different. Intelligence is a related concept in this situation and identifying other personality traits present when deciding the co-op’s course of action.

Summary: When drought threatened the survival of Australian farmers, some realised they would have to change their business model. One option would be to implement a strengths-based development to leverage the unique strengths and talents of each employee. The strengths approach recognises that everyone has different talents and natural patterns of thought, feeling and behaviour. Recognising and building on those talents with pertinent skills and knowledge creates strengths. Problems with this approach could arise if management had previously used a ‘deficit’ development approach, spending a lot of time identifying employees’ weaknesses and trying to correct them. This would mean that management was relatively negative. To change that approach, every employee could take an assessment to measure and identify his or her top five talents, and receive at least two consultations on their individual strengths. This would enable the business to build on what its employees naturally do best. Employees would become more engaged, productive and energised, and the organisation became more successful. Note that these options do not incorporate the perspectives or ways of knowing of First Nations people, which may include further opportunities.

Task: Groups of 3–5 can answer the following questions and then present their answers in a class discussion, or simply discuss the questions as a class.

1. Do you think it is better to focus on assessing and developing employees’ weaknesses, or to focus on their strengths? Why? Students mostly will answer that focusing on strengths is better. The idea that workers should ‘fix’ their weaknesses is common, but it can be problematic because attempts to fix weaknesses take time, attention and energy away from maximising naturally powerful talents.

2. Why would strengths-based development increase employee engagement?

Answers will vary, but there should be a reference to the statement that employees enjoy using their talents and doing something well instead of struggling against their weaknesses to produce mediocre work.

3. If you were a manager, how might you interact with employees differently if you were using strengths-based development rather than deficit-based development?

Answers will vary widely but the strengths-based approach will contain positive actions while the deficit-based approach focuses on fixing weaknesses.

Mini-simulation (MindTap-only) While waiting for a phone call with two subordinates, imagine that another subordinate walks into the room and has a loud, frustrated outburst after being unable to find something. The other employees in the room clearly feel uncomfortable as a result of this behaviour. What do you say or do?

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Go to this chapter’s mini-simulation, watch the challenge video, and choose a response. Be sure to also view the outcomes of the two responses you didn’t choose.

Discussion questions 1. Which aspects of management and organisational behaviour discussed in this chapter are illustrated in these videos? Explain your answer.

Management concepts: The ability to understand what others think and feel, knowing how to appropriately persuade and motivate them, and knowing how to resolve conflicts and forge cooperation are important skills for successful managers.

Organisational behaviour concepts: personality; emotional stability; individual differences, emotional intelligence • Personality/emotional stability: The Big Five is one of the more established personality frameworks. One personality dimension is emotional stability, associated with not being anxious and angry. Ken exemplifies the opposite trait, which is neuroticism. When Ken was transferred to curb his disruptive behaviour (incorrect response #2), there were only complaints about Ken’s emotional control, and the team’s performance dropped because of the distraction.

• Individual differences: Type A personalities like Ken are impatient and uptight. By understanding Ken’s personality type, Alex could handle a potential source of work conflict (correct response). As Alex explains to Ken, ‘I hope that you are open to letting me coach you or attending an emotion management seminar to learn strategies for coping with your emotions more constructively.’ High Type As need greater stimulation and over schedule themselves. Ken says, ‘I care about my work, and I just get frustrated because I care!’

• Emotional intelligence: EI includes self-awareness and self-management, managing one’s own emotions and impulses. When Ken can’t find something, he walks to the back of the room and has a mini tantrum. Ken has a low level of EI. He is unaware that his outbursts are inappropriate in the workplace, and he lacks self-control. Ken agreed to get coaching because he didn’t realise how he was coming across. As Ken explained, ‘If I get frustrated, I know I show it, but that’s only natural.’

2. Which do you feel is more important at work, an employee’s behaviour or performance?

Why? An employee’s behaviour and performance are both important at work because behaviour affects performance. Negative emotions, such as anxiety or frustration, result in diminished learning and performance. Ken’s lack of emotional control caused his team’s performance to drop. Allowing Ken’s negative behaviour to continue (incorrect response #1) led to negative responses in the other employees. They felt upset and worried. As Mary explained, ‘I think I have to quit before he hurts someone …’

Research has shown that conscientiousness is positively related to performance and that emotionally stable, agreeable and conscientious people set higher goals. Following his coaching sessions with Alex, Ken started to get frustrated when Mary’s design was chosen, but caught himself and got his behaviour under control. ‘I spent a lot of time on my design. Mary’s is also good. …

We’re a team and this is what’s best for all of us!’

3. As a manager, what else might you do to effectively handle this situation?

The manager should continue to develop a strong organisational culture that is supportive of employees. Strong organisational cultures decrease the influence of personality on employee behaviours by creating clear guidelines for employee behaviour. Evidence shows that components of EI can be developed. As a manager, it is important to make every effort to 3-13

develop EI in Ken and in the other employees. Also, as part of the hiring process, the manager could ask job candidates to take the Myers-Briggs Type Indicator, a personality inventory. In this way the manager would help prospective employees understand themselves and match their jobs to their personalities.

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CHAPTER 4 – PERCEPTIONS AND REACTIONS Chapter overview This chapter continues to focus on individual behaviour in organisations. The discussion begins with attitudes, examining how attitudes are formed and changed, cognitive dissonance, and three key workrelated attitudes. Next it looks at how values and emotions affect organisational behaviour. The role of perception, especially as it relates to issues of fairness and trust, is then discussed. Finally, the chapter concludes with a section devoted to stress in organisations – its causes and consequences and how it can be managed.

Learning outcomes After studying this chapter, students should be able to: 1. discuss how attitudes are formed, describe the meaning of cognitive dissonance, and identify and describe three important work-related attitudes 2. describe the role and importance of values and emotions in organisational behaviour 3. describe basic perceptual processes and how perception affects fairness, justice, and trust in organisations 4. discuss the nature of stress, identify the basic causes and consequences of stress, and describe how stress can be managed.

Guide your learning 1. Why do some people display a positive attitude most of the time? (LO1) 2. How do values guide and drive your behaviour in the workplace? (LO2) 3. What role does your perception (the way you interpret a situation that you are in) have in your behaviour at work? (LO3) 4. Consider if all stress is ‘bad’ for you? What would happen if you were completely stress free?

(LO4) Chapter outline 4.1. Attitudes in organisations People’s attitudes obviously affect their behaviour in organisations. Attitudes are complexes of beliefs and feelings that people have about specific ideas, situations or other people.

4.1.1. How attitudes are formed Attitudes are formed by a variety of forces, including personal values, experiences and personalities, or any of the ‘Big Five’ or individual personality traits discussed in Chapter 3.

Attitudes are usually viewed as stable dispositions to behave towards objects in a certain way.

As illustrated in Figures 4.2, attitudes contain three components: cognition, affect and intention.

4.1.1.1.Cognition is the knowledge a person presumes to have about something, which may be true, partially true, or totally false. Cognitions are based on perceptions of truth and reality, and perceptions agree with reality to varying degrees.

4.1.1.2.A person’s affect is his or her feelings towards something. In many ways, affect is similar to emotion – it is something over which there is little or no conscious control.

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4.1.1.3.Intention guides a person’s behaviour. Intentions are not always translated into actual behaviour. Some attitudes, and their corresponding intentions, are much more central and significant to an individual than others. You may intend to do one thing (take a particular class) but later alter your intentions because of a more significant and central attitude (fondness for sleeping late).

4.1.2. Cognitive dissonance Cognitive dissonance is an incompatibility or conflict between behaviour and an attitude or between two different attitudes. When people experience dissonance, they often use one of four approaches to cope: change behaviour, reduce dissonance, change attitude or seek additional information. Sometimes people are aware of their dissonance but make a conscious decision to not reduce it. This decision would be influenced by these three things: 1. Their perception of the importance of the elements that are creating the dissonance as less important is easier to ignore; 2. The amount of influence they feel they have over these elements; 3. The rewards/cost involved in the dissonance (if reducing dissonance reduces their bonus, they are less likely to change).

4.1.3. Attitude change Attitudes are not as stable as personality attributes. For example, new information may change attitudes. Likewise, if the object of an attitude changes, a person’s attitude towards that object may also change. Attitudes can also change when the object of the attitude becomes less important or less relevant to the person. Finally, individuals may change their attitudes as a way to reduce cognitive dissonance. Deeply rooted attitudes that have a long history are resistant to change.

4.1.4. Key work-related attitudes Especially important attitudes are job satisfaction, organisational commitment and employee engagement.

4.1.4.1.Organisational commitment reflects the degree to which an employee identifies with the organisation and its goals and wants to stay with the organisation.

There are three ways to feel committed to an employer: a. Affective commitment occurs when there is a positive emotional attachment to the organisation and strong identification with its values and goals, and is related to higher performance. Employees stay with an organisation because they want to. b. Normative commitment occurs when an employee feels obliged to stay with an organisation for moral or ethical reasons, and is related to higher performance.

Employees stay with an organisation because they feel they should. c. Continuance commitment refers to an employee staying with an organisation because of the perceived high economic and/or social costs involved with leaving. Employees stay with an organisation because they feel that they have to.

4.1.4.2.Employee engagement is a heightened emotional and intellectual connection that an employee has for their job, organisation, manager or co-workers that, in turn, influences them to apply additional discretionary effort to their work.

Engaged employees give their full effort to their jobs, often going beyond what is required because they are passionate about doing their jobs well.

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Disengaged workers feel they have to do the work, and generally do only what they have to do as a result. High employee engagement is related to superior business performance. Employee engagement can differ from the drivers of employee attraction and retention. Engagement is enhanced when employees: • have clear goals and roles • have the resources needed to do a good job • get meaningful feedback on their performance • are able to use their talents • are recognised for doing a good job • have positive relationships with co-workers • have opportunities to learn and grow • have supportive leadership • feel they have the right technology to do their jobs.

4.2. Values and emotions in organisations Values are ways of behaving or end-states that are desirable to a person or to a group. Values can be conscious or unconscious. Work values influence important individual and organisational outcomes including performance and retention, and are often considered to be important work outcomes in themselves. A company leader’s personal values affect all aspects of organisational. Personal values also influence ethical choices.

4.2.1. Types of values Values can be described as terminal or instrumental, and as intrinsic or extrinsic.

4.2.1.1.Terminal values reflect the long-term life goals, and may include prosperity, happiness, a secure family and a sense of accomplishment. Terminal values can change over time depending on experiences and accomplishments.

Instrumental values are the preferred means of achieving terminal values or preferred ways of behaving; instrumental or means values influence how to get there. The stronger an instrumental value is, the more it is acted on.

4.2.1.2.Intrinsic work values relate to the work itself. Most people need to find some personal intrinsic value in their work to feel truly satisfied with it. Extrinsic work values are related to the outcomes of doing work. Employees who work to earn money or to have health benefits are satisfying extrinsic work values.

4.2.2. Conflicts among values Intrapersonal, interpersonal, and individual-organisation value conflicts all influence employee attitudes, retention, job satisfaction, and job performance. At some point, many managers experience an intrapersonal value conflict between the instrumental value of ambition and the terminal value of happiness. People are generally happier and less stressed when their instrumental and terminal values are aligned.

Interpersonal value conflicts occur when two different people hold conflicting values, often referred to as personality clashes (or, more accurately, values clashes, as all personalities should be able to work with each other) and disagreements. Working together requires some understanding of each other’s shared values. It is important to remember that people’s constellations of instrumental and terminal values differ. These

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differences can lead to differences in work styles, work preferences, and reactions to announcements or events.

Finally, just as two different employees’ values can conflict, an employee’s values can conflict with the values of the organisation, creating individual-organisation value conflict. Lower individual-organisation value conflict leads to greater job satisfaction, higher performance, lower stress, and greater job commitment.

4.2.3. Values differ around the world Global differences in values can also lead to different managerial behaviours. Values are influenced by culture. Research has found that a large number of basic values can be condensed into two major dimensions that vary across cultures: 1. Traditional/secular-rational values reflect the contrast between societies in which religion is important and those in which it is not.

2. Survival values emphasise economic and physical security while self-expression values emphasise subjective wellbeing and quality of life.

Figure 4.7 illustrates how these two major dimensions of values differ in a number of countries.

4.2.4. The role of emotions in behaviour Employees who effectively manage their emotions and moods can create a competitive advantage for a company. Everyone experiences emotions at work, and behaviours are not guided solely by conscious, rational thought. Emotion often plays a larger role in behaviours than does conscious reasoning.

Emotions are intense, short-term physiological, behavioural and psychological reactions that prepare a response to a specific object, person or event, and have four important elements: 1. Emotions are short events or episodes and relatively short-lived.

2. Emotions are directed at something or someone, differentiating them from moods.

3. Emotions are experienced; people feel emotion.

4. Emotions create a state of physical readiness through physiological reactions.

Because emotions are malleable, effective employees and managers know how to positively influence their own emotions and the emotions of others. Emotions influence both the creation and maintenance of motivation to engage or to not engage in certain behaviours, and research has found that emotion can influence turnover, decision making, leadership, helping behaviours and teamwork behaviours. Effective leaders use emotion to generate positive follower behaviours.

4.2.5. Affect and mood Moods are short-term emotional states that are not directed towards anything in particular. Mood at the start of a workday influences how the work events are seen and reacted to, which influences performance. Moods can be influenced by others.

Workgroups tend to experience shared group moods when they can display mood information to each other through facial, vocal and behavioural cues. Changing group

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membership can change the amount and type of mood information members get from each other and influence moods.

Affectivity represents the tendency to experience a particular mood or to react to things with certain emotions.

4.2.5.1.The two dominant dimensions of mood are positive affect, which reflects a combination of high energy and positive evaluation characterised by emotions such as elation, and negative affect, which comprises feelings of being upset, fearful and distressed. As shown in Figure 4.8, positive and negative affect are not opposites, but are two distinct dimensions. Affect tends to be somewhat dispositional and fairly stable over time. Negative affect is related to lower organisational citizenship behaviours, greater withdrawal and counterproductive work behaviours, lower job satisfaction and greater injuries. Higher positive affect is related to increased creativity, openness to new information, and efficient decision making. Positive affectivity also increases the likelihood of cooperation strategies in negotiations, improving the results.

4.3. Perception in organisations Perception is the set of processes by which an individual becomes aware of and interprets information about the environment. People perceive the same things in very different ways.

People often assume that reality is objective and that is perceived in the same things in the same way. Since perception plays a role in a variety of workplace behaviours, managers should understand basic perceptual processes. Through perceptual processes, the receiver assimilates the varied types of incoming information for the purpose of interpreting it.

4.3.1. Basic perceptual processes Two basic perceptual processes are particularly relevant to managers.

4.3.1.1.Selective perception is the process of screening out information that is uncomfortable or that contradicts beliefs.

4.3.1.2.Stereotyping is categorising or labelling people on the basis of a single attribute. Certain forms of stereotyping can be useful and efficient. Common attributes from which people often stereotype are race and sex, and stereotypes along these lines are inaccurate and can be harmful. In 2019, Ad Standards launched a bold campaign that asked advertisers globally to move away from outdated stereotypes.

4.3.2. Errors in perception Errors may creep into the interpretation of the things perceived, and perception shortcuts may play a role. One is categorisation, which reflects the tendency to put things into groups or categories, then the similarities within and the differences between the groups are exaggerated. After putting people into categories, selective perception leads to selectively interpreting what is seen based on interests, expectations, experience and attitudes, and then reinforces stereotypes as the perceiver focuses on information and behaviours that confirm rather than negate the assigned stereotype. Managers need to be aware of this bias in order to evaluate subordinates more objectively and accurately.

4.3.2.1.The halo effect is when a general impression is formed about something or someone based on a single (typically good) characteristic.

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4.3.2.2.The contrast effect occurs when using person evaluation or another person’s characteristics through comparisons with other people recently encountered who rank higher or lower on the same characteristics.

4.3.2.3.First impression bias may also be relevant. Research has found that people are avoided if there has been a negative reaction to them, and negative impressions are harder to change. First impressions are formed quickly. Wrong impressions are likely to persist. Impressions and expectations can become self-fulfilling prophecies.

4.3.3. Perception and attribution Attribution refers to the way the causes are explained of personal as well as other people’s behaviours and achievements, and understanding why people do what they do. As shown in Figure 4.13, three rules are relied on to evaluate whether to assign an internal or an external attribution to someone’s behaviour or outcome: 1. Consistency – leads to internal attributions.

2. Distinctiveness – low distinctiveness leads to internal attributions.

3. Consensus – a low consensus points to internal attributions.

A related aspect is self-handicapping, which occurs when people create obstacles for themselves that make success less likely. Examples include using drugs and alcohol, refusing to practice and reducing effort, to protect the person’s sense of self-competence.

Focusing on effort attributions and developing feelings of self-efficacy help overcome this behaviour.

Attributing success to internal causes builds self-efficacy and increases the motivation to try hard and persist in the face of failure.

4.3.4. Perception and fairness, justice and trust Perception and perceptual processes play a major role in how people feel about fairness, justice and trust.

4.3.4.1.The term organisational fairness refers to employees’ perceptions of organisational events, policies, and practices as being fair or not fair.

Perceptions of fairness affect a wide variety of employee attitudes and behaviours, including satisfaction, commitment, trust and turnover. Negative behaviours can result from perceptions of unfairness, including theft, sabotage and other unethical behaviours, and also increase the chances that employees will file lawsuits against their employers. As a manager you must also be perceived as fair by your subordinates.

Understanding fairness is important for ethical reasons and failure to meet employees’ fairness expectations can lead them to engage in unethical behaviour.

4.3.4.2.Distributive fairness refers to the perceived fairness of the outcome received, including resource distributions, promotions, hiring and layoff decisions, and raises. Distributive fairness relates only to the outcome received, not to the fairness of the process that generated the decision.

4.3.4.3.Procedural fairness addresses the fairness of the procedures used to generate the outcome. Procedural fairness matters because employees use perceptions of the current decision-making procedures to predict how they will likely fare in the organisation in the future, and fair procedures signal that employees are valued.

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4.3.4.4.Interactional fairness is whether the amount of information about the decision and the process was adequate, and the perceived fairness of the interpersonal treatment and explanations received during the decision-making process.

Deception or abuse can be seen as having low interactional fairness. Low interactional fairness can lead to feelings of resentment towards either the supervisor or the organisation.

4.3.4.5.Perception and trust is the expectation that another person will not act to take advantage regardless of the ability to monitor or control them. Trust is critical to long-term relationships and is positively related to job performance.

Trusting work relationships enable employees to focus on their work and not waste time and energy ‘watching their backs’. Trust is particularly important to the developmental stages of relationships, and is positively related to a company’s financial performance.

4.4. Stress in organisations The final element of individual behaviour is stress, which is complex and often misunderstood.

4.4.1. The nature of stress The text defines stress as a person’s adaptive response to a stimulus that places excessive psychological or physical demands on them. The first component is the notion of adaptation and the second is the role of the stimulus. Stressors can be either psychological or physical. Finally, the demands the stressor places on the individual must be perceived as excessive for stress to actually result.

4.4.1.1.Much of what is known about the stress process today can be traced to the pioneering work of Hans Selye whose most important contributions were his identification of the general adaptation syndrome and the concepts of eustress and distress. Figure 4.16 offers a graphical representation of the general adaptation syndrome (GAS), which identifies three stages of response to a stressor: alarm, resistance and exhaustion. In alarm, the person may feel some degree of panic and begin to wonder how to cope. In most cases, the individual gathers his or her strength (physical or emotional) and begins to resist the negative effects of the stressor. Prolonged exposure without resolution may bring on phase three of the GAS: exhaustion, in which the person literally gives up and can no longer fight the stressor.

4.4.1.2.Eustress is the pleasurable stress that accompanies position events, such as a bonus or a promotion. Negative stress is called distress, the unpleasant stress that accompanies negative events. Stress can be either good or bad, can motivate and stimulate us, or it can lead to any number of dangerous side effects.

4.4.2. Common causes of stress Figure 4.17 shows two broad categories: organisational stressors and life stressors and three categories of stress consequences: individual consequences, organisational consequences, and burnout.

4.4.2.1.Organisational stressors are various factors in the workplace that can cause stress. Four general sets of organisational stressors are task demands, physical

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demands, role demands, and interpersonal demands. Task demands are stressors associated with the specific job a person performs. Some occupations are more stressful than others, or have unhealthy conditions, lack of job security, or even job overload. The opposite of overload may also be undesirable. As Figure 4.19 shows, low task demands can result in boredom and apathy.

The physical demands of a job are its physical requirements on the worker. These demands are a function of the physical characteristics of the setting and the physical tasks the job involves – temperature, strenuous labour, design of the office, social interaction, poor lighting, or shift work. A role is a set of expected behaviours associated with a particular position in a group or organisation and has both formal and informal requirements. Individuals perceive role expectations with varying degrees of accuracy and ‘errors’ can induce stress called role ambiguity, conflict or overload. A final set consists of three interpersonal demands. Group pressures may include pressure to restrict output or pressure to conform. Leadership style also may cause stress, as may conflicting values (often referred to as personalities) and behaviours. It is also the case that stress in organisational settings can be influenced by events that take place outside the organisation.

4.4.3. Consequences of stress Referring back to Figure 4.17, stress can produce individual consequences, organisational consequences and burnout, and many of the factors listed are interrelated.

4.4.3.1.The individual consequences of stress, then, are the outcomes that mainly affect the individual, and may produce behavioural, psychological and medical consequences. The behavioural consequences of stress may harm the person under stress or others. The psychological consequences of stress relate to a person’s mental health and well-being. The medical consequences of stress affect a person’s physical well-being.

4.4.3.2.Other results of stress have even more direct organisation consequences. These include decline in performance, withdrawal and negative changes in attitudes.

Job satisfaction, morale and organisational commitment can all suffer, along with motivation to perform at high levels. Burnout is a general feeling of exhaustion that develops when a person simultaneously experiences too much pressure and has too few sources of satisfaction.

4.4.4. Managing and controlling stress 4.4.4.1.Individual coping strategies include exercise, relaxation and time management, as well as role management, in which the individual actively works to avoid overload, ambiguity and conflict, or to develop and maintain support groups.

4.4.4.2.

Organisational coping strategies should be involved in managing their employees’ stress. Two basic organisational strategies are institutional programs and collateral programs. Institutional programs for managing stress are undertaken through established organisational mechanisms, culture, or changes to supervision. A collateral stress program is an organisational program specifically

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created to help employees deal with stress. These programs attack stress indirectly by encouraging employees to exercise, although presently there is little research supporting some of the claims made by advocates of these programs.

4.4.5. Work–life balance 4.4.5.1.Fundamental work–life relationships can be characterised by such things as an individual’s current job (including working hours and job satisfaction), his or her career goals (the person’s aspirations, career trajectory, and so forth), interpersonal relations at work (with the supervisor, subordinates, co-workers and others), and job security. Work–life relationships, include any relationships between dimensions of the person’s work life and the person’s personal life. Stress will occur when there is inconsistency or incompatibility.

4.4.5.2.Balancing work–life linkages is no easy thing to do. Recognise the potential trade-offs in advance and the importance of long-term versus short-term perspectives. People also have to decide for themselves what they value and what trade-offs they are willing to make.

OB in the real world: Commitment to sustainability is more than green washing Summary: Steve Jurkovich is the CEO of Kiwibank. He believes business changes are a microcosm of national issues like racial and gender equity, LGBTQ+ rights and addressing climate change.

Kiwibank is also a B Corp, which balances people and profits; Jurkovich has a clear focus on Kiwi making Kiwi better off. However, he understand that his passion may not be equally shared.

Challenge: Steve Jurkovich asks you for advice on ensuring all employees are on board with B Corp.

What advice might you offer?

Response: Steve Jurkovich recognises diversity and differences in passion so employees can focus on cultural competence and/or sustainability as a way of engaging with the company’s B Corp plans.

Ethical dilemma: Why stereotypes limit change Summary: There is discussion about the need for women to sit on boards, as well as greater inclusion of Aboriginal and Torres Strait Islander peoples and those with diversity needs. It is easy to understand how boards recruit in their own image, seeking more of the same, yet the deep bases for attitudes are often left unexplored. Invisible barriers may include stereotyping. From setting remuneration to working from home, to be ethical, organisations need look at how to create greater inclusivity. This will often mean uncomfortable conversations, but through exploring what perceptions and attitudes have shaped the behaviour of the organisation and by supporting difference, stereotypes can and will be broken.

Can you think of a time when you have been uncertain about how to deal with a colleague’s religious or background beliefs or needs? How might you frame your questions to reduce stereotyping? What sorts of questions can you ask?

Responses may vary based on student backgrounds. Challenge students by first identifying why there is the perception or assumption for a religious or background belief, if this assumption is 4-9

based on stereotype or an observed real activity. If observed, then framing the question without judgement and strictly inviting explanation can reduce stereotyping; for example ‘I notice that you never seem to eat prawns – is there any particular reason for this?’ Confirming the action is based on a belief (and not a food allergy!) could be followed-up with additional questions such as ‘Are there other foods that you observe? I’m interested to understand why you believe this – can you explain this to me?’ Or even, ‘Does it bother you if I eat prawns at group functions?’

Critical perspective Sometimes stress is a good thing Research suggest that engagement and positive outcomes are not always related. A limited amount of anxiety and dissatisfaction can bring focus and attention, can create more diversified and critical thinking, thus limiting groupthink. Interpretation and perception have roles to play in how workers experience stress too. In some organisations, employees cannot say they have a problem, but instead they reframe everything as a challenge, speaking of challenges to be solved or removed and then there is no (dis)stress, only eustress.

Summary LO4.1 The three most important job-related attitudes are job satisfaction, organisational commitment and employee engagement. Employee engagement reflects a heightened emotional and intellectual connection that an employee has for their job.

LO4.2 Attitudes, values and emotions, perception and stress are all important factors that influence organisational behaviour. There are many different kinds of values that can be held by people. An individual may have conflicting values and national culture should be considered. Emotions, affect and mood are also important contributors to behaviour.

LO4.3 Perception is the set of processes by which a person becomes aware of and interprets information about the environment. Basic perceptual processes include selective perception and stereotyping.

Perception and attribution are also closely related. Internal attributions include ability and effort.

External attributions include luck, not having sufficient resources, and the interference or help of other people.

LO4.4 Stress is an individual’s response to a strong stimulus. Functional stress is the experience of a manageable level of stress for a reasonable period of time that generates positive emotions including satisfaction, excitement and enjoyment. Dysfunctional stress is an overload of stress from a situation of either under- or over-arousal that continues for too long. The General Adaptation Syndrome outlines the basic stress process. Stress can be caused by task, physical, role and interpersonal demands.

Consequences of stress include organisational and individual outcomes, as well as burnout.

Several things can be done to manage stress.

Revision questions 1. What term refers to feeling obliged to stay with an organisation for moral or ethical reasons? a. Continuance commitment b. Affective commitment c. Legal commitment

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d. Normative commitment 2. What term refers to a heightened emotional and intellectual connection that an employee has for his/her job, organisation, manager or co-workers that, in turn, influences him/her to apply additional discretionary effort to his/her work? a. Community engagement b. Employee engagement c. Both of these d. Neither of these 3. When does intrapersonal value conflict occur? a. When we have a disagreement with our co-workers that prevents productivity b. When being happy pulls us towards spending quality time with our family, but personal ambition pulls us towards working longer hours and pursuing promotions c. Both of these d. Neither of these 4. What term refers to how people explain the causes of their own as well as other people’s behaviours and achievements? a. Attribution b. Sensation c. Empowerment d. Projection 5. In the study of stress, what does GAS stand for? a. General adaptation syndrome b. General anti-stress support c. General anxiety sensation d. Nothing – the acronym has lost its meaning over time 6. Which of the following refers to a positive type of stress? a. Task demands b. GAS c. Distress d. Eustress Case study: The stolen billions: wage theft in Australia Summary: With more and more workers participating in the gig economy and many individuals employed as casuals or under temporary contracts rather than as full-time employees, it is becoming more difficult to engage with employees. While casual, contracted and gig workers experience flexibility as to where they want to work and the types of jobs they choose, they are less likely to be loyal or committed to one particular organisation and more likely to be loyal or committed to themselves in their pursuit of work. These types of workers are also more likely to encounter workplace fairness issues around complying with the minimum entitlements that they are owed. Casual, contracted, temporary and gig workers are especially vulnerable to this type of workplace fairness issue, as they are usually only with the firm intermittently or for short periods of time.

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Critical 1. Moving forward, how would you advise organisations to avoid wage theft and underpayment from (re)occurring?

Organisations that intend to engage casual, contracted, temporary or gig workers should consider the length of the engagement, as well as flags should the length extend beyond the initial length, or every year, whichever is more frequent. In addition, weekly and daily hour allowances to align with penalties should be clearly reviewed. The business should be clear to support hiring managers in outlining the best (and easiest) processes to do the right thing.

2. How can an organisation improve engagement and levels of commitment with its casual, contracted, temporary or gig workers?

Businesses can actively work to engage casual, contracted, temporary and gig workers by proactively providing easy to understand information about hourly rates, superannuation and penalties. The onboarding process could include general information, as well as contact information for the ATO and other government assistance.

Mainstream 1. What are the pros and cons of being a casual, contracted, temporary or gig worker?

The pros for causal, contract, temporary and gig contracts allow for flexibility on location, time and work arrangements. Depending on the type of engagement, the roles may not offer employee benefits such as sick leave or long service; however, usually the hourly rate of pay is higher in order to attract people to these positions. The cons, however, are reduced security and often lower engagement. Managers may find it difficult to integrate permanent teams who may have different targets and are often more aligned to the bigger organisational strategy, with engaged people therefore a short period of time and with a clear singular focus.

2. From the information contained in the case study, why do you think so many organisations have underpaid their workers? Why does wage theft largely affect casual, contracted, temporary or gig workers?

Student speculation may vary from willful ignorance through to poor understanding. A significant factor for the examples listed are the longevity of the engagements; for example, temporary staff who continue through many years may be considered entitled to additional benefits and payment. Another aspect to consider is the type of business, as some may attract individuals on temporary visas from overseas, who then leave before payment is able to be corrected.

Tutorial activities 1. If your boss was not sure it would be worth the investment to change the company’s hiring practices to include an evaluation of applicants’ attitudes, what would you tell him or her?

Students may point out that attitudes and values about work influence job satisfaction.

Someone with a negative attitude towards work is less likely to be satisfied with a job than someone with a positive attitude towards work. Happy employees are more productive. The positive relationship between job satisfaction and job performance is even stronger for complex, professional jobs. The financial impact of improving employees’ job satisfaction makes it worthwhile for managers to evaluate employee attitudes.

2. Do you think that it would be easy to influence a subordinate’s attitudes, values or emotions? Why? Which would have the largest influence on the employee’s behaviour?

Why? It is easier to influence a subordinate’s emotions. Attitudes are formed over the course of a 4-12

3.

4.

5.

6.

7.

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person’s lifetime through experiences, family, culture, religion and socioeconomic factors. Values influence attitudes. Changing employee attitudes towards work takes time. Emotions, on the other hand, change and do not last as long as attitudes. Employees and managers can positively influence their own emotions and the emotions of others. Emotions would have the largest influence on the employee’s behaviour because an effective manager can use emotion to generate positive follower behaviours.

What are the components of an individual’s attitude? Relate each component to an attitude you currently have about something.

From the dispositional view of attitudes, the three components are affect, cognition and intention. Affect refers to one’s feelings towards something. Cognition is the knowledge the person presumes to have about something. Intention guides an individual’s behaviour towards something but may not be translated into actual behaviour.

Do terminal or instrumental values have a larger influence on your behaviour at work?

Explain.

Terminal values reflect our goals, which are subject to change, whereas instrumental values are our preferred ways of behaving. Terminal values influence what we want to accomplish; instrumental values influence how we get there. At work, instrumental values have a larger influence because they affect behaviour. For example, honesty is an instrumental value that guides behaviour in pursuit of the terminal goal of prosperity.

Think of a person you know who seems to have positive affectivity. Think of another who has more negative affectivity. How constant are they in their expressions of mood and attitude?

Students’ answers should include the identification of a specific person in each case. It should be relatively easy for students to come up with people for each case.

How does perception affect behaviour? What stereotypes do you form about people? Are they good or bad?

Perception is the set of processes by which an individual becomes aware of and interprets information about the environment. People are constantly interacting with others by first perceiving others, then seeing them and hearing their words. Reactions to others are based on what we perceive. Therefore, how we act and react towards others is dependent on how we perceive others. Most people have stereotypes about other people, no matter how hard they may try to conceal or overcome them. The most notable have been the stereotypical views of other ethnic groups. Other stereotypes have been common regarding tall people or short people, people with certain colour of hair or skin, and of the opposite gender.

Regarding whether they are good or bad, some experts have noted that stereotyping can be a way of simplifying our cognitive processes in terms of remembering things about people.

On the other hand, others have suggested that any stereotyping is dangerous because it assumes that everyone in a certain group is similar in every way.

Recall a situation in which you made attributions and describe them using the framework supplied in Figure 4.13.

Students’ answers will, of course, vary on this question. Some students may have some difficulty identifying the use of the creative process. However, if they really think about it, they may have subconsciously used the creative process.

Do you consider yourself a Type A or a Type B person? Why? Do you think a person who is a Type A can change to become more like a Type B? If so, how?

Type A people tend to be more competitive, more aggressive, more dedicated to work, and more impatient than Type B people and to have a strong sense of time urgency. Type B people tend to be less competitive, less devoted to work, more patient, and to have a more balanced, 4-13

relaxed approach to life. Most students probably will categorise themselves as Type A people.

Students probably will argue that people indeed have the capacity to change, especially if there are urgent reasons to do so. If a person is experiencing serious stress or burnout as a result of Type A propensities, and if the danger of continuing that lifestyle is clear, the person can change.

He or she can slow down, become less aggressive, and try to find a better balance between work and nonwork activities. The caption in Figure 4.20 lists five mechanisms for coping with stress – exercise, relaxation, time management, role management, and support groups.

9. What are the major stressors for a student? What consequences are students most likely to suffer as a result of too much stress?

Students might identify life stressors such as being away from home for the first time, having to make new friends, and worries about finances and the challenge to ‘make the family proud’.

They might also identify organisational stressors such as disruptive share houses, inadequate study facilities, insufficient computer equipment, hot and stuffy classrooms, and work overload.

They are likely to suffer burnout.

10. Do you agree that a certain degree of stress is necessary to induce high energy and motivation? Most students will recall examples of people in stressful situations who found the strength to do things they never thought possible. One example is the wizened, elderly man who lifted an auto off the body of his injured son. Student athletes probably will agree that it takes the ‘big game’ or the championship tournament to bring out their best performances.

Group exercise – The effect of emotion on team performance Learning objective: Explain why emotions are important to organisations.

Task: In teams, students role-play a particular emotion. Students identify each team’s role by reading the description below: Role 1: Grouchy, negative affect Role 2: Calm Role 3: Happy, positive affect Role 4: Calm For the next few minutes, each team discusses possible slogans for the field of organisational behaviour and identifies its favourite idea. When your instructor tells you, your role will change to the following: Role 1: Calm Role 2: Happy, positive affect Role 3: Calm Role 4: Grouchy, negative affect Teams spend the next few minutes discussing the best ways for the manager of a local McDonald’s restaurant to improve employees’ job engagement and decide on three ideas.

Questions: 1. Did your emotion influence your own performance or behaviour in your team?

2. Did any emotional contagion occur in your team? If so, was the positive (happy) or negative (grouchy) emotion more contagious? Why do you think this was so?

3. What could a leader do to effectively manage a team’s emotion? Is it worth trying?

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Mini-simulation (MindTap-only) Imagine meeting with a subordinate who has been working at Happy Time Toys for a month and can’t yet meet the company’s goals. The subordinate tried hard to perform well during the training session to look good compared to the other new hires, but the others are doing a lot better on the job. The subordinate communicates frustration about being unable to learn the new job. What do you say or do?

Go to this chapter’s mini-simulation, watch the challenge video and choose a response. Be sure to also view the outcomes of the two responses you didn’t choose.

OB concepts applied: self-efficacy, learning and performance goal orientations, learning styles, person- job fit, supplementary fit, realistic job preview Discussion questions 1. What attitudes did the employee develop about his performance on the job? How were they formed?

Joe felt like he could not perform the job as well as others. He stated that he did well in training and he was trying to out-perform all the other participants. Now that Joe is actually on the job, he is failing to meet his production levels on a daily basis, and this causes him to feel that he has not mastered the skills required to do the job. Or he is not performing the steps as efficiently as the other employees.

2. What role do attributions play in how the employee responded to challenges of learning to do his job? What role do attributions play in how a manager might respond to a subordinate’s performance?

For Joe, he is trying to explain why he did so well in training yet seems unable to master the job now that he is actually performing the job. Joe sees other workers making their daily production levels with no problem yet he is unable to meet his own daily production levels. Joe admits he focused so much during training on beating others time that he failed to learn how to actually perform the job well. This is a form of self-handicapping, he put obstacles in place to hinder his further advancement. By focusing on the wrong aspect of training, he was setting in place a chain of events that would end in his inability to meet his daily production levels.

Attributions come into play for Alex when determining an internal or an external attribution to Joe’s behaviour. Joe’s high performance during training points to an inconsistency with his ability to perform the job now. This points to an external attribution. This also appears to be a distinctive outcome, again pointing to an external attribution. Joe’s mistaken focus during training may have been his own fault but nothing a bit of one-on-one training cannot improve.

3. In what ways does fairness influence how the subordinate responded to the situations you viewed?

Joe did not feel the ‘hang in there, it will get better’ method was fair because he quit. He left angry after the threat to reassign him to night shift. He responded positively when asked for input and the offer of a mentor for a couple of weeks. Joes perceived this as a fair outcome.

4. What other solutions might you have suggested to address the situation? Explain your answer using concepts form the chapter.

Student’s answers will vary. The offer of a two-week mentor or coach is good solution, especially if Joe’s skills seem efficient to perform the job. Maybe offering retraining is another method, or organising a refresher course and making Joe the teacher. Joe has a good attitude towards his 4-15

job and fellow employees, and he wants to learn. His intentions are correct as he wants to learn the tasks better so he can perform his job more efficiently. Joe seems to be doing everything correctly but he somehow failed when it came to cognition of the job tasks, leading to a cognitive dissonance for Joe. He believed he should be doing much better but that was not happening.

Increasing Joe’s cognition of the job tasks should complete the picture.

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CHAPTER 5 – MOTIVATING BEHAVIOUR Chapter overview It should be obvious that people work for a wide variety of reasons. Some people want money, some want a challenge, and some want power. People’s wants and needs both consciously and unconsciously play an instrumental role in determining their motivation to work. Motivation is vital to all organisations. Managers need to understand the nature of individual motivation, especially as it applies to work situations. This chapter first explores various need-based perspectives on motivation, then more sophisticated process-based perspectives, and concludes with a discussion of learning-based perspectives on motivation.

Learning outcomes After studying this chapter, students should be able to: 1. characterise the nature of motivation, including its importance and basic historical perspectives 2. identify and describe the need-based perspectives on motivation 3. identify and describe the major process-based perspectives on motivation 4. describe learning-based perspectives on motivation 5. consider the complexities of maintaining motivation for employees and how managers can interact with this 6. identify and describe different approaches to job design and how they can assist motivation 7. discuss employee participation, empowerment and flexible work arrangements, and identify their impact on motivation 8. describe the goal-setting theory of motivation and discuss broader perspectives on goal setting.

Guide your learning 1. Is motivation created by someone/or something else? Or am I solely responsible for my motivations? (LO1) 2. Why does my motivation increase and decrease from time to time? (LO2, LO3) 3. What can I do to maintain my motivation? (LO4, LO6, LO7, LO8) 4. Why might having ‘a need and a goal’ still not be enough to sustain my motivation? (LO5, LO6, LO7) Chapter outline 5.1. The nature of motivation Motivation is the set of forces that causes people to engage in one behaviour rather than some alternative behaviour. From the manager’s viewpoint, the objective is to motivate people to behave in ways that are in the organisation’s best interest.

5.1.1. The importance of motivation Job performance depends on ability and environment as well as motivation. This relationship can be stated as follows: P=M×A×E 5-1

where: P = performance, M = motivation, A = ability, and E = environment A manager should thus strive to ensure that all three conditions are met. In most settings, motivation is the most difficult of these factors to manage.

5.1.2. The motivational framework Figure 5.1 shows the basic motivational framework used to organise need deficiencies and goal-directed behaviours. A need – something an individual requires or wants – is the starting point. A need deficiency usually triggers a search for ways to satisfy it. Next comes a choice of goal-directed behaviours, most effort is likely to be directed at one option. Next the person experiences either rewards or punishment as a result of this choice. Finally, the person assesses the extent to which the outcome achieved fully addresses the original need deficiency.

5.1.3. Early perspectives on motivation Historical views on motivation provide a foundation for contemporary thinking about motivation. These views were generally based on common sense and intuition, an appreciation of their strengths and weaknesses can help managers gain useful insights into employee motivation in the workplace.

5.1.3.1.The traditional approach refers to one of the first writers of motivation, Frederick Taylor. Taylor developed a method for structuring jobs called the scientific management. Taylor assumed that economic gain was the primary thing that motivated everyone. Other assumptions were that work is inherently unpleasant for most people and that the money they earn is more important to employees than the nature of the job they are performing. Proponents of the traditional approach took too narrow a view of the role of monetary compensation and also failed to consider other motivational factors.

5.1.3.2.The human relations approach supplanted scientific management in the 1930s.

The human relations approach suggests that fostering a sense of employees’ inclusion in decision making will result in positive employee attitudes and motivation to work hard. The approach assumed that employees want to feel useful and important, that employees have strong social needs, and that these needs are more important than money in motivating employees.

5.1.3.3.The human resource approach carries the concepts of needs and motivation further, making the assumption that people want to contribute and are able to make genuine contributions. Management’s task, then, is to encourage participation, and to create a work environment that makes full use of the human resources available, and guides most contemporary thinking.

5.1.4.

Individual differences and motivation There is no one best way to motivate everyone.

5.1.4.1.An easy mistake to make when trying to motivate others is assuming that the same things that motivate you also motivate them. The starting point for motivated employees is hiring people whose individual characteristics lead to high motivation on the job. A specific form of self-efficacy is especially related to employee motivation. Task-specific self-efficacy is a person’s beliefs in his or her capabilities to do what is required to accomplish a specific task. Task-specific

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self-efficacy beliefs have three dimensions: 1. Magnitude: beliefs about how difficult a specific task can be accomplished.

2. Strength: beliefs about how confident the person is that the specific task can be accomplished.

3. Generality: beliefs about the degree to which similar tasks can be accomplished.

Because task-specific self-efficacy perceptions are changeable, good managers proactively enhance subordinates’ perceptions of their abilities. Managers can raise task-specific selfefficacy through coaching and encouragement, assuming the employee really does have the potential to perform better.

5.2. Need-based perspective on motivation The basic premise of need-based theories and models is the assumption that need deficiencies cause behaviour.

5.2.1. The hierarchy of needs The hierarchy of needs, developed by psychologist Abraham Maslow in the 1940s, is the best- known need theory. Maslow argued that human beings are ‘wanting’ animals: they have innate desires to satisfy a given set of needs. Figure 5.4 shows Maslow’s hierarchy of needs, which assumes that human needs are arranged in a hierarchy of importance. The three sets of needs at the bottom of the hierarchy are called deficiency needs because they must be satisfied for the individual to be fundamentally comfortable. The top two sets of needs are termed growth needs because they focus on personal growth and development.

The most basic needs in the hierarchy are physiological needs. Next in the hierarchy are security needs. Belongingness needs, the third level in the hierarchy, are primarily social.

The fourth level, esteem needs, actually encompasses two slightly different kinds of needs: the need for a positive self-image and self-respect and the need to be respected by others. At the top of the hierarchy are self-actualisation needs. Maslow believed that each need level must be satisfied before the level above it can become important. If a previously satisfied lower- level set of needs becomes deficient again, the individual returns to that level.

5.2.1.1.In most businesses, physiological needs are probably the easiest to evaluate and to meet. Security needs in organisations can be satisfied by such things as job continuity (no/few redundancies), a grievance system (to protect against arbitrary supervisory actions), and an adequate insurance and retirement system (to guard against financial loss from illness and to ensure retirement income).

Most employees’ belongingness needs are satisfied by family ties and group relationships both inside and outside the organisation. Self-actualisation needs are perhaps the hardest to understand and the most difficult to satisfy. Working towards self- actualisation, rather than actually achieving it, may be the ultimate motivation for most people.

Research shows that the need hierarchy does not generalise very well to other countries, although makes a certain amount of intuitive sense. For indigenous workers, recognition of belonging is critically important. Research has revealed five levels of needs are not always

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present; the actual hierarchy of needs does not always conform to Maslow’s model; and need structures are more unstable and variable than the theory would lead us to believe.

And sometimes managers are overly clumsy or superficial in their attempts to use a theory such as this one.

5.2.2. The ERG theory The ERG theory, developed by Yale psychologist Clayton Alderfer stands for three basic need categories: E – existence, R – relatedness, and G – growth.

Existence needs – basic human survival – roughly correspond to the physiological and security needs of Maslow’s hierarchy. Relatedness needs are similar to Maslow’s belongingness and esteem needs. Growth needs are analogous to Maslow’s needs for self-esteem and self- actualisation. In contrast, ERG theory suggests that more than one kind of need may motivate a person at the same time, and that ERG theory includes a satisfaction-progression component and a frustration-regression component. The satisfaction-progression concept suggests that after satisfying one category of needs, a person progresses to the next level. In contrast, the frustration-regression component of ERG theory suggests that a person who is frustrated by trying to satisfy a higher level of needs eventually will regress to the preceding level.

5.2.3. The two-factor theory Another important need-based theory of motivation is the two-factor theory, also called the dual-structure theory. This theory identifies motivation factors, which affect satisfaction, and hygiene factors, which determine dissatisfaction. The two-factor theory once played a major role in managerial thinking about motivation, and is still widely known and accepted among practising managers.

5.2.3.1.Frederick Herzberg and his associates developed the two-factor theory in the late 1950s and early 1960s by interviewing approximately 200 accountants and engineers in Pittsburgh and asked them questions about motivation. Figure 5.6 shows one dimension ranging from satisfaction to no satisfaction and another ranging from dissatisfaction to no dissatisfaction. This theory proposed that employees might be satisfied and, at the same time, dissatisfied. Motivation factors are intrinsic to the work itself and include factors such as achievement, recognition, and the opportunity to plan and control their own work and were often cited by people as primary causes of satisfaction and motivation. Hygiene factors are extrinsic to the work itself and include factors such as pay and job security. The manager should try to eliminate situations that cause dissatisfaction. At that point, the motivation factors enter the picture. Herzberg described explicitly how managers could apply his theory, called ‘job enrichment’ (discussed later in this chapter).

5.2.3.2.The two-factor theory has been scientifically scrutinised, with contradictory results. Studies that use the same methodology tend to support the theory.

However, this methodology has itself been criticised, and the theory may be ‘method bound.’ Critics say the original sample may not represent the general working population, fails to account for individual differences and does not define the relationship between satisfaction and motivation. Research has also suggested that the two-factor framework varies across cultures.

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5.2.4. The acquired needs framework The acquired needs framework was advanced by David McClelland and centres on the needs for achievement, affiliation and power (these needs are also sometimes referred to as manifest needs). A key differentiating element of this framework is the argument that these needs are acquired, or learned, from cultural, societal and family influences.

5.2.4.1.The need for achievement arises from an individual’s desire to accomplish a goal or task more effectively than in the past. High need-achievers also want immediate, specific feedback on their performance. Preoccupation with work is another characteristic of high need-achievers. Finally, high need-achievers tend to assume personal responsibility for getting things done.

5.2.4.2.Individuals also experience the need for affiliation – the need for human companionship. Individuals with a high need tend to want reassurance and approval from others, and usually are genuinely concerned about others’ feelings. People with a strong need for affiliation most often work in jobs with a lot of interpersonal contact, such as sales and teaching positions.

5.2.4.3.The third so-called acquired need is the need for power – the desire to control one’s environment, including financial, material, informational and human resources. People with a high need for power can be successful managers if three conditions are met.

5.3. Process-based perspectives on motivation Process-based perspectives focus on why people choose certain behavioural options to satisfy their needs and how they evaluate their satisfaction after they have attained these goals.

5.3.1. The equity theory of motivation The equity theory of motivation focuses on people’s desire to be treated with what they perceive as equity and to avoid perceived inequity. The theory defines equity as the belief of being treated fairly in relation to others and inequity as the belief of being treated unfairly compared with others. Social comparisons involve evaluating a personal situation in terms of others’ situations. This chapter focuses mainly on equity theory because it is the most highly developed of the social comparison approaches and the one that applies most directly to the work motivation of people in organisations.

5.3.1.1.People in organisations form perceptions of equity of their treatment through a four-step process. First, they evaluate how they are being treated by the firm.

Second, they form a perception of how a ‘comparison-other’ is being treated.

Third, they compare their own circumstances with those of the comparisonother and then use this comparison as the basis for forming an impression of either equity or inequity. Fourth, depending on the strength of this feeling, the person may choose to pursue one or more of the alternatives discussed in the next section.

The equity comparison thus takes the following form:

𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 (𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠) 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 (𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠)

compared with

𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 (𝑜𝑜𝑜𝑜ℎ𝑒𝑒𝑒𝑒𝑒𝑒) 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 (𝑜𝑜𝑜𝑜ℎ𝑒𝑒𝑒𝑒𝑒𝑒)

If the two sides of this psychological equation are comparable, the person experiences a feeling of equity; if the two sides do not balance, a feeling of

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inequity results. A perception of equity does not require that the perceived outcomes and inputs be equal, but only that their ratios be the same.

5.3.1.2.Figure 5.8 summarises the responses to equity and inequity. People may use one of six common methods to reduce inequity. First, change inputs; second, change outcomes. A third, more complex, response is to alter the perceptions of self and behaviour; fourth, to alter perception of the comparison-other’s inputs or outcomes. Fifth is to change the object of comparison, and finally, as a last resort, simply to leave the situation.

5.3.1.3.Evaluation and implication findings support the predictions of equity theory quite consistently, especially when the worker feels underpaid. One interesting new twist on equity theory suggests that some people are more sensitive than others to perceptions of inequity. For managers, the most important implication of equity theory concerns organisational rewards and reward systems. Equity theory offers managers three messages. First, everyone in the organisation needs to understand the basis for rewards. Second, people tend to take a multifaceted view of their rewards. Finally, people base their actions on their perceptions of reality.

5.3.2. The expectancy theory of motivation Expectancy theory suggests that people are motivated by how much they want something and the likelihood they perceive of getting it, also known as VIE theory (valence, instrumentality, expectancy).

5.3.2.1.Victor Vroom is generally credited with the basic expectancy theory, which is that motivation depends on how much something is wanted and how likely this is to be achieved. Figure 5.10 summarises the model’s general components: effort (the result of motivated behaviour), performance, and outcomes.

5.3.2.2.Effort-to-performance expectancy is a person’s perception of the probability that effort will lead to successful performance. If it is believed the effort will lead to higher performance, this expectancy approaches a probability of 1.0. If it is believed the performance will be the same no matter how much effort, the expectancy is low/0.

5.3.2.3.Performance-to-outcome instrumentality (also known as performance-tooutcome expectancy) is a person’s perception of the probability that performance will lead to certain other outcomes. As Figure 5.10 shows, several outcomes might logically result from performance and has its own instrumentality.

5.3.2.4.An outcome is anything that results from performing a particular behaviour. The valence of an outcome is the relative attractiveness or unattractiveness – the value – of that outcome to the person. The strength of outcome valences varies from person to person. The basic expectancy framework suggests that three conditions must be met before motivated behaviour occurs. First, the effort-toperformance expectancy must exist. Second, the performance-to-outcome instrumentalities must be well above zero. Third, the sum of all the valences for the potential outcomes relevant to the person must be positive.

5.3.2.5.The Porter–Lawler model was created by Lyman Porter and Edward Lawler, who argued that if rewards are adequate, high levels of performance may lead to satisfaction. The Porter–Lawler model appears in Figure 5.11. At the beginning of

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the motivational cycle, effort is a function of the value of the potential reward for the employee (its valence) and the perceived effort-reward probability (an expectancy). Effort then combines with abilities, traits and role perceptions to determine actual performance. Performance results in intrinsic rewards, which are intangible, and extrinsic rewards, which are tangible outcomes. If the rewards are regarded as equitable, the employee feels satisfied.

5.3.2.6.Evaluation and implications from several studies have supported various parts of the theory. Research has also confirmed the expectancy theory’s claims that people will not engage in motivated behaviour unless they (1) value the expected rewards, (2) believe their efforts will lead to performance, and (3) believe their performance will result in the desired rewards. However, expectancy theory is complicated and difficult to test. People are seldom as rational and objective in choosing behaviours as expectancy theory implies, so that expectancy theory is more likely to explain motivation in the developed world. Expectancy theory offers several important guidelines for the practising manager: 1. Determine the primary outcomes each employee wants.

2. Decide what levels/kinds of performance are needed to meet organisational goals.

3. Make sure the desired levels of performance are possible.

4. Link desired outcomes and desired performance.

5. Analyse the situation for conflicting expectancies and instrumentalities.

6. Make sure the rewards are large enough.

7. Make sure the overall system is equitable for everyone.

5.4. Learning-based perspectives on motivation Learning is a relatively permanent change in behaviour or behavioural potential that results from direct or indirect experience.

5.4.1. How learning occurs 5.4.1.1.The most influential historical approach to learning is classical conditioning, developed by Ivan Pavlov in his famous experiments with dogs. The traditional view, classical conditioning, is a simple form of learning in which a conditioned response is linked with an unconditioned stimulus. In organisations, only simple behaviours and responses can be learned in this manner. Classical conditioning relies on simple cause-and-effect relationships between one stimulus and one response, and ignores the concept of choice.

5.4.1.2.The contemporary view, learning as a cognitive process, assumes that people are conscious, active participants in how they learn, that people draw on their experiences and use past learning as a basis for their present behaviour, and experiences represent knowledge, or cognitions. Second, people make choices about their behaviour. Third, people recognise the consequences of their choices. Finally, people evaluate those consequences and add them to prior learning, which affects future choices. Although not new, it has found renewed relevance through cognitive- behavioural practices such as mindfulness at work.

5.4.2. Reinforcement theory and learning Reinforcement theory suggests that behaviour is a function of its consequences, and that 5-7

in any given situation, people explore a variety of possible behaviours. Future behavioural choices are affected by earlier behaviour consequences.

5.4.3. Social learning Social learning occurs when people observe behaviours, recognise consequences, and alter their own behaviour as a result (some experts refer to social learning as social cognitive theory). Social learning theory suggests that individual behaviour is determined by cognitions and social environment. More specifically, people are presumed to learn behaviours and attitudes at least partly in response to what others expect of them. Several conditions must be met for social learning. First, the behaviour being observed and imitated must be relatively simple. Second, social learning usually involves observed and imitated behaviour that is concrete, not intellectual. The physical ability must be possessed to imitate the behaviour observed.

5.4.4. Behaviour modification Behaviour modification is the application of reinforcement theory to influence the behaviours of people in organisational settings. Figure 5.13 summarises these kinds of reinforcement.

5.4.4.1.There are three kinds of reinforcement, as shown in Figure 5.13. Positive reinforcement involves the use of rewards to increase the likelihood that a desired behaviour – high performance, for instance – will be repeated. Negative reinforcement is based on the removal of current or future unpleasant consequences to increase the likelihood that someone will repeat a behaviour.

Punishment is applying negative outcomes to decrease the likelihood of a behaviour. Finally, extinction involves the removal of other reinforcement (positive or negative) following the incidence of the behaviour to be extinguished to decrease the likelihood of that behaviour being repeated. For reinforcement to work, people must associate the reward with the behaviour. To best reinforce a behaviour, the reward should come as quickly as possible after the behaviour.

Some of the most powerful rewards are symbolic – things that cost very little but mean a lot to the people who get them. Rewards do not always increase ethical behaviour because the presence of the reward can undermine the intrinsic value of the ethical behaviour.

5.4.4.2.The timing of reinforcement should ideally come immediately after the behaviour being influenced. A continuous reinforcement schedule is one in which the desired behaviour is reinforced each time that it occurs. A partial reinforcement schedule is one in which the desired behaviour is reinforced only part of the time. There are four types of partial reinforcement schedules: 1. Fixed-ratio: Desired behaviour is reinforced after a specified number of correct responses.

2. Fixed-interval: Desired behaviour is reinforced after a certain amount of time has passed – for example, being paid weekly.

3. Variable-ratio: Desired behaviour is reinforced after an unpredictable number of behaviours.

4. Variable-interval: Desired behaviour is reinforced after an unpredictable amount of time has elapsed.

Research suggests that the fastest way to get someone to learn is to use

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continuous reinforcement and reinforce the desired behaviour every time it occurs. The most effective schedule for sustaining a behaviour is variable reinforcement. To motivate the right behaviour, an expert in behaviour modification would identify the desired behaviours and then carefully reinforce them. This process involves five steps: 1. Define the problem – what is it that could be improved?

2. Identify and define the specific behaviour(s) you wish to change.

3. Record and track the occurrence of the target behaviour.

4. Analyse the current negative consequences of the undesired behaviour and arrange for more positive consequences to follow the desired behaviour.

5. Evaluate whether the behaviour has improved, and by how much.

Figure 5.14 summarises how different motivation concepts can be applied to a variety of common management challenges.

5.5. The complexities of maintaining motivation Duckworth and Quinn suggest to also consider a person’s ‘grit’ or passion and perseverance towards goals. However, not all agree in the argument about grit. Motivation can be situation specific, and grit and willpower are assigned after the fact rather than prior. The manager needs to be able to translate theory into operational terms, as every organisation differs.

Figure 5.15 illustrates a basic framework for relating various theories of motivation to operational methods into performance. The concepts of needs-, process- and learning-based motivation result in a potential for motivation, which then enables enhanced performance.

5.6. Job design in organisations Job design can be defined as how organisations define and structure jobs.

5.6.1. Job specialisation Frederick Taylor, the chief proponent of job specialisation, argued that jobs should be scientifically studied, broken down into small tasks, and standardised across workers. This appears a rational and efficient way to structure jobs; however, it can cause problems, foremost of which is extreme monotony of highly specialised tasks. An employee may be less motivated to work hard or to complain. There are fewer production-line style jobs; therefore, the rise of job design alternatives can be seen as a response. More monotonous jobs of the future are likely to be supervising artificial intelligence (AI).

5.6.2. Basic alternative to job specialisation Managers initially developed two alternative approaches, job rotation and job enlargement. These approaches, along with job enrichment, remain common today.

5.6.2.1.Job rotation involves systematically shifting workers from one job to another, but does not entirely address monotony and boredom, and may decrease efficiency. Job rotation is an effective training technique, thus there is increased flexibility in transferring workers to new jobs.

5.6.2.2.Job enlargement, or horizontal job loading, is expanding a worker’s job to include tasks previously performed by other workers. Unfortunately, if the entire production sequence consists of simple, easy-to-master tasks, merely doing more of them does not significantly change the worker’s job.

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5.6.2.3.Job enrichment is based on the two-factor theory of motivation that employees can be motivated by positive job-related experiences such as feelings of achievement, responsibility and recognition. To achieve these, job enrichment relies on vertical job loading – not only adding more tasks to a job, as in horizontal loading, but also giving the employee more control over those tasks.

These can be cost-ineffective, though, and managers must be prepared to ‘let go’.

5.6.3. The job characteristics theory The job characteristics theory uses five motivational properties of tasks and three critical psychological states to improve outcomes. Diagrammed in Figure 5.19 and developed by Hackman and Oldham, this theory focuses on the specific motivational properties of jobs and critical psychological states, which are presumed to determine the extent to which characteristics of the job enhance employee responses to the task. The three critical psychological states are: 1. experienced meaningfulness of the work 2. experienced responsibility for work outcomes 3. knowledge of results.

Hackman and Oldham suggest that the three critical psychological states are triggered by the following five characteristics of the job, or core job dimensions: 1. Skill variety 2. Task identity 3. Task significance 4. Autonomy 5. Feedback Figure 5.19 shows a variety of personal and work outcomes: high internal work motivation (that is, intrinsic motivation), high-quality work performance, high satisfaction with the work, and low absenteeism and turnover. The figure also suggests that individual differences play a role in job design. Much research has been devoted to this approach to job design. Research has generally supported the theory, although performance has seldom been found to correlate with job characteristics. Several apparent weaknesses are, first, the measures used to test the theory are not always as valid and reliable as they should be. Further, the role of individual differences frequently has not been supported by research. Finally, guidelines for implementation are not specific.

5.7. Employee participation and involvement Participation and empowerment are extensions of job design because each fundamentally alters how employees in an organisation perform their jobs. Participation occurs when employees have a voice in decisions about their own work. Empowerment is the process of enabling workers to set their own work goals, make decisions, and solve problems within their spheres of responsibility and authority. The role of participation and empowerment in motivation can be expressed in terms of both the need-based perspectives and the expectancy theory discussed earlier. By participating in decision making, employees may better understand the linkage (instrumentality) between their performance and the rewards they want most.

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5.7.1. Areas of employee participation Based on their own expertise and experience with their tasks, workers might be able to improve their own productivity and make decisions about administrative matters, such as work schedules. Furthermore, employees are getting increasing opportunities to participate in broader issues of product quality.

5.7.2. Approaches to participation and empowerment The basic motive has been to better capitalise on the assets and capabilities inherent in all employees. Thus, many managers today prefer the term ‘empowerment’ to ‘participation’ because it implies a more comprehensive level of involvement. One method of empowerment is the use of work teams, what Japanese firms call ‘quality circles.’ This is a group of employees who voluntarily meet regularly to identify and propose solutions to problems related to quality. Work teams are collections of employees empowered to plan, organise, direct and control their own work. Another method is to eliminate layers from the hierarchy. Power, responsibility and authority are delegated as far down as possible, so control of work is squarely in the hands of those who actually do it.

Technology also helps organisations empower workers by making better and timelier information available to everyone in the organisation. Increased responsibility does not motivate everyone. Practical ways to empower others include: • showing employees how they deliver on the strategy • connecting the work performed to their contribution to society or their customers • articulating a clear vision and goals • fostering personal mastery experiences to enhance self-efficacy and build skills • modelling successful behaviours • sending positive messages and arousing positive emotions in employees • providing feedback • building employee confidence by showing competence, honesty, and fairness • setting clear guidelines and enabling people to act within them.

Empowerment only enhances organisational effectiveness if the organisation is sincere in its efforts to spread power and autonomy, is committed to maintaining participation and empowerment, is systematic and patient in its efforts to empower workers, and is prepared to increase its commitment to training.

5.7.3. Flexible work arrangements Beyond the actual redesigning of jobs and the use of employee involvement, many organisations today are experimenting with a variety of flexible work arrangements. As a result of the COVID-19 pandemic, these are no longer seen as a nice-to-have but a necessity for many workplaces. Among the more popular are variable work schedules, flexible work schedules, extended work schedules, job sharing and remote working.

5.7.3.1.Variable work schedules help counter time constraints and psychological problems, such as a compressed work schedule. A compressed work week schedule is a full 37.5-hour week in fewer than the traditional five days. One problem is if everyone is off at the same time, another is people who don’t get the more desirable days off may be jealous or resentful. Another problem is that when employees put in too much time in a single day, they tend to get tired and

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perform at a lower level later in the day. An alternative is working a 75-hour fortnight and having a ‘flex day’. In job sharing, two part-time employees share one full-time job.

5.7.3.2.An extended work schedule is one that requires relatively long periods of work followed by relatively long periods of paid time off, and often used when the cost of transitioning from one worker to another is high and there are efficiencies associated with having a small workforce.

5.7.4. Alternative workplaces The most common version of this approach is usually called remote working– allowing employees to spend part of their time working off-site, usually at home. On the plus side, are flexibility and fewer interruptions. Organisations may benefit with reduced absenteeism and turnover, and save on facilities. However, some feel isolated, miss the social interaction, or lack the self-control and discipline to work from home. Managers may also encounter coordination difficulties in scheduling meetings and other activities that require face-to-face contact.

5.7.4.1.Digital nomads represent a new trend emerging in which a person who is employed in one country can be located anywhere in the world, as they work remotely and via computers. They may have no fixed address and are low overhead employees.

5.8. Goal setting and motivation From a motivational perspective, a goal is a meaningful objective. Goals provide a useful framework for managing motivation, and are an effective control device (control meaning the monitoring by management of how well the organisation is performing). Social learning theory perhaps best describes the role and importance of goal setting in organisations.

People’s degree of pride at reaching their goals or disappointment at not reaching them is affected by their self-efficacy, the extent to which they feel that they can still meet their goals even if they failed to do so in the past.

5.8.1. Goal-setting theory The goal-setting theory of motivation of Edwin Locke and his associates assumes that behaviour is a result of conscious goals and intentions. Therefore, by setting goals for people in the organisation, a manager should be able to influence their behaviour.

5.8.1.1.Goal difficulty is the extent to which a goal is challenging and requires effort. It is reasonable to assume that they will work harder to achieve more difficult goals, but a goal must not be unattainable. A substantial body of research supports the importance of goal difficulty. Reinforcement also fosters motivation towards difficult goals.

5.8.1.2.Goal specificity is the clarity and precision of the goal. Some goals can easily be stated in clear and precise terms, or measurable terms. Specificity has been shown to be consistently related to performance.

Locke, together with Gary Latham, eventually proposed an expanded model of the goal-setting process, shown in Figure 5.24, which argues that goal- directed effort is a function of four goal attributes: difficulty and specificity (previously discussed), and acceptance and commitment. Goal acceptance is the extent to which a person accepts a goal as his or her own. Goal commitment is the extent

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to which he or she is personally interested in reaching the goal. Factors that can foster goal acceptance and commitment include participating in the goal-setting process, making goals challenging but realistic, and believing that goal achievement will lead to valued rewards. The interaction of effort, support, and abilities and traits determines actual performance. As a result of performance, a person receives various intrinsic and extrinsic rewards that, in turn, influence satisfaction.

5.8.2. Broader perspectives on goal setting Some organisations undertake goal setting from the somewhat broader perspective of management by objectives, or MBO, which is essentially a collaborative goal-setting process through which organisational goals systematically cascade down through the organisation.

The overall goals are communicated to everyone. Then each manager meets with each subordinate and helps ensure that the subordinate develops goals that are verifiable.

Finally, manager and subordinate ensure that the subordinate has the resources needed to reach his or her goals. During the time frame set, the manager periodically meets with each subordinate to check progress. It may be necessary to modify goals, to provide additional resources, or to take some other action. At the end, managers hold a final evaluation meeting and assess how well goals were met.

5.8.3.

Goal-setting challenges

Research has demonstrated fairly consistently that goal difficulty and specificity are closely associated with performance. A few studies have shown the importance of acceptance and commitment, but little is currently known about how people accept and become committed to goals. Goal-setting theory may also focus too much attention on the short run. MBO remains a very popular technique that stems in part from the potential to motivate employees because it helps implement goal-setting theory on a systematic basis throughout the organisation. It also clarifies the basis for rewards, and it can stimulate communication. Performance appraisals are easier and more clear-cut under MBO. Further, managers can use the system for control purposes. However, a firm may take too many shortcuts, or inadvertently undermines how the process is supposed to work. It does require one-on-one interactions that can be difficult because of the time they take and the unacceptable performance. A growing body of research against performance appraisals suggests they become little more than a documentation and can be demotivating OB in the real world: Motivating staff and volunteers at Taronga Zoo Summary: Much has changed at Taronga Zoo in Sydney over the past 100 years. A critical review in 1967 moved the focus to scientific research, conservation and education. The change in focus created changes at a management level, including staff and volunteers. In order to staff the zoo, a large number of volunteers work alongside paid staff and the care of the animals and their enclosures means a schedule of cleaners and researchers work together in a seamless manner to serve zoo guests. How does the zoo encourage staff and volunteers to want to work in the outdoors, in all weather conditions from the summer heat to rain and winter winds across Sydney Harbour?

What makes teenagers through to retirees volunteer to spend their spare time ‘mucking out’ enclosures, cleaning up rubbish and spreading the word of conservation? Finally, how does the zoo

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maintain this pool of workers year after year? These questions form the focus of the challenge.

Challenge: The zoo needs volunteers to provide customer service and to act as conservation warriors when wearing its uniform. It receives over 500 applications every six months to join, but what motivates these people to work without pay and to keep turning up?

Response: Motivating volunteers at the zoo begins by setting a difficult standard to join, making the position more desirable than many other volunteer positions. The rewards come through doing more interesting roles, being able to progress in a hierarchy and ultimately even earning a paid position.

Ethical dilemma: Setting high targets, with low expectations Summary: The automotive industry regularly pays incentives based on monthly targets. This can lead to focusing efforts towards the end of the month, or even delaying the sale so as to increase their chances the following month. This leads to better deals in the last few days of the sales cycle.

The offer of a bonus or commission may lead to behaviours that undercut or even ‘steal’ other sellers’ potential customers. It can focus efforts towards the ‘finish line’, but it also rewards lastminute focus over long- term focus, which can lead to burnout and inconsistent effort.

Why would offering a reward to employees who go the ‘extra mile’ to meet a deadline send the wrong message to employees in the longer term?

Although incentive pay can motivate hard work, this provides too narrow a focus and undermines the broader culture of the team and the bigger organisational goals linked to successful strategy.

Presumably the business wants steady growth each month, which requires a broader view of the long- term goal. In addition, this requires employees to work more collaboratively to ensure they do not undercut the performance of the team or business as a whole, and to ensure that customers do not exploit the ‘last minute’ deals. In addition, once sales are met for the month, there is no incentive to work further. And resentment created by employees who ‘steal’ customers, or those who go the extra mile and are fatigued or at risk of burnout, reduces overall motivation for the team and lowers performance over the long term. Alternative incentives could be team targets or goals, extending sales targets to be across quarters or years, or rewarding alternative quality-based measures (instead of quantity) such as customer service or other lead indicators to sale success both tangible and intangible.

Critical perspective Motivation is individual A manager needs to know their employees and what interests and drives them in order for the employee to make connections between the goals and the feelings aroused when these are reached or not. Extrinsic motivators can work for a short period, but intrinsic motivators are likely to be held deep in a person’s psychology, providing a basis of understanding to motivating employees.

Summary LO5.1 Motivation is the set of forces that cause people to behave as they do. According to Abraham Maslow, human needs are arranged in a hierarchy of importance, from physiological to security to belongingness to esteem and, finally, to self-actualisation. The ERG theory is a refinement of 5-14

Maslow’s original hierarchy that includes a frustration-regression component. In Herzberg’s two-factor theory, satisfaction and dissatisfaction are two distinct dimensions instead of opposite ends of the same dimension.

LO5.2 People search for ways to satisfy their needs and then behave accordingly. Their behaviour results in rewards or punishment.

LO5.3 The equity theory of motivation assumes that people want to be treated fairly. It hypothesises that people compare their own input-to-outcome ratio in the organisation with the ratio of a comparison-other. Expectancy theory follows from the assumption that people are motivated to work towards a goal if they want it and think that they have a reasonable chance of achieving it. The Porter–Lawler version of expectancy theory provides useful insights into the relationship between satisfaction and performance. This model suggests that performance may lead to a variety of intrinsic and extrinsic rewards.

LO5.4 Learning also plays a role in employee motivation. Various kinds of reinforcement provided according to different schedules can increase or decrease motivated behaviour. People are affected by social learning processes. Organisational behaviour modification is a strategy for using learning and reinforcement principles to enhance employee motivation and performance. This strategy relies heavily on the effective measurement of performance and the provision of rewards.

LO5.5 Managers seek to enhance employee performance by capitalising on the potential for motivated behaviour to improve performance. This is achieved through methods involving work design, participation and empowerment, alternative work arrangements, performance management, goal setting and rewards.

LO5.6 The essence of work design is how organisations define and structure jobs. Two early alternatives to specialisation were job rotation and job enlargement. One basic premise of this theory is that jobs can be described in terms of a specific set of motivational characteristics.

Another is that managers should take individual differences into account to enhance the presence of those motivational characteristics in jobs.

LO5.7 Employee involvement using participative management and empowerment can help improve employee motivation in many business settings. Flexible work arrangements are commonly used today to enhance motivated job performance.

LO5.8 The goal-setting theory of motivation suggests that appropriate goal difficulty, specificity, acceptance and commitment will result in higher levels of motivated performance.

Revision questions is the best 1. According to the human relations approach, offering employees way to enhance motivation in the workplace. a. flexible work schedules b. self-direction c. increased compensation d. opportunities for advancement 2. Which of the following is NOT a motivation factor in Herzberg’s model? a. Recognition b. Responsibility c. Growth d. Job security 3. Herzberg’s dual-structure theory suggests that the feelings of satisfaction and dissatisfaction that workers experience are derived from the same set of factors.

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a. True b. False 4. A key component of equity theory is that employees compare their own input/output ratios with the input/outcome ratios of other employees. What is the term for this phenomenon? a. Social contrast b. Social comparison c. Interpersonal contrast d. Social loafing 5. is the first step in the organisational behaviour modification process. a. Defining what can be improved b. Identifying the behaviours that you wish to change c. Identifying existing behavioural consequences d. Tracking the occurrence of the target behaviour 6. In the early stages of the learning process, fixed-ratio reinforcement is particularly effective for promoting desirable behaviours. a. True b. False Case study: It’s not the people who are the problem Summary: You have recently commenced as a manager in the finance team at ATELCO, an internet provider. The team has an average tenure of five years. Most are well experienced, having worked in finance for between 10 and 20 years, and most are diploma or degree qualified. All employees are paid at or above market rate and are receiving discounted internet provision. You have noticed the work is generally mundane and broken into smaller parts with each team member considered a specialist with no shared expertise. They have little contact with other parts of the organisation and due to confidentiality they must have a locked office. And they are largely ‘daredevils’ taking quite exotic holidays and participating in high-risk activities.

Critical 1. If everyone is performing and nothing is wrong, perhaps this team should be left as it is. In this case, what problems might arise?

With the busy period approaching, there is a significant risk of burnout given the disconnect from the ‘energy’ of the rest of the organisation and lack of motivation due to repetitive and isolating tasks. There is little resilience built into the team in the event of an unexpected prolonged absence or illness, especially given they are all separate ‘experts’. However, expanding the roles to simply learn more about the other mundane roles will not create improved engagement and therefore changes or suggestions should be approached by inviting the team to discuss job design.

2. Why should all daredevil activities be any concern? Perhaps they are just an adventurous group? Or can this be explained in another manner?

While this behaviour across the team may be coincidence and they are like-minded individuals, there is always a concern for the welfare of employees. In addition, the red flag is the contrast to the types of roles they are currently performing, which are repetitive and potentially boring.

The time away from the office indicates that there is more energy that may be able to be tapped into in the office setting, improving overall performance and engagement.

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Mainstream 1. How can the various motivation theories inform what is occurring at this workplace?

In terms of equity theory, employees may perceive that they are devoting more to their jobs through involvement with the work team and thus expect increased outcomes. From expectancy theory, creating quality circle decisions may allow employees to better understand the link between their performances and the rewards they most desire, creating enhanced expectancies.

2. What does equity theory tell us about the behaviour of Alvin and Haley? What else might underpin their behaviours?

Organisations may have motivational problems with work teams if individuals or circles are not rewarded for their contribution to the team’s effectiveness. Currently the roles are separate without overlap, creating a feeling of isolation and possibly inequality. Redesigning the workload, the roles or the team goals should help employees manage their feelings of equity, because they have a voice in making decisions about their own work.

Tutorial activities 1. When has your level of performance been directly affected by your motivation? By your ability? By the environment?

Students may describe how motivation, ability and environment affected their level of performance in previous courses. For example, a student may believe that he or she had the ability to obtain an HD in a particular course but, because of a low level of motivation, did not spend enough time studying and consequently received a C. If a student studied the course material thoroughly and still received a C, however, it is likely that ability directly affected performance. Finally, if the student did not purchase the textbook and received a C in the course, the result may be attributed to a lack of the right materials and equipment (environment) rather than to lack of motivation or ability.

2. Identify examples from your own experience that support, and others that refute, Maslow’s hierarchy of needs theory.

Having students identify experiences that support or refute Maslow’s theory will help them appreciate the intuitive sense of the theory. By identifying experiences that refute the theory, however, students should be able to recognise the deficiencies of the model.

3. Have you ever experienced inequity in a job or a class? How did it affect you?

Students who have worked may have some interesting examples of inequity that include amount of work or number of hours as inputs and amount of pay or extra time off or special benefits as different outcomes. Potential student inputs in a classroom setting include class participation, attendance, exams and assignments. Outcomes may consist of course grade, knowledge, fatigue, and stress. A likely comparison-other is another student in the class, perhaps one with a similar major. When the student is assessing whether equity or inequity exists, discuss how equity theory emphasises comparisons of ratios rather than simply outputs.

4. Do you think expectancy theory is too complex for direct use in organisational settings? Why or why not?

Although students probably will agree that expectancy theory would be difficult to use directly in organisational settings, they should realise that parts of the theory might be applicable in some situations. The difficulty in applying the theory is that a manager would first need to ascertain the rewards each employee wants and the value of those rewards to each individual, then measure the various expectancies, and finally adjust the relationships to enhance motivation. Nevertheless, expectancy theory offers several important and relevant implications for the practising manager.

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5. Do the relationships between performance and satisfaction suggested by Porter and Lawler seem valid? Cite examples that both support and refute the model.

Research has not confirmed the assertion that satisfaction leads to performance, but it shows that expectancy theory correctly asserts that people must value the expected rewards, must believe their efforts will lead to performance, and must believe their performances will lead to the desired rewards before they will be willing to engage in motivated behaviour. You might discuss classroom examples that both support and refute the proposed performance-satisfaction relationship. An example that refutes the model is a student who performs at a moderate level and receives a D in the course. He or she may believe the reward is equitable, but may not be satisfied with the grade. In support of the model, a student who performs at a high level and receives an HD may believe the reward is equitable and also be satisfied with the grade.

6. Think of occasions on which you experienced each of the four types of reinforcement.

The four types of reinforcement are positive reinforcement, avoidance, extinction and punishment. Positive reinforcement should have the student reporting some type of desirable behaviour followed by a nice reward. For avoidance, the student should again describe a desirable behaviour, but this time followed by the removal of something perceived to be bad.

Extinction should have the student reporting an undesirable behaviour followed by the removal of something the student likes. Finally, punishment should show an unpleasant consequence of an undesirable behaviour.

7. Identify the five forms of reinforcement that you receive most often (i.e. wages, grades, etc.).

On what schedule do you receive each of them?

Students are most likely to use examples from a classroom situation, although working students or older students may have other types of examples. An instructor may use continuous reinforcement through a positive statement or smile or nod every time a student makes a valid contribution to the class discussion. If the class uses a lot of discussion, partial reinforcement may become more practical. The fixed-interval schedule may be used by giving students monthly feedback on how well they are doing in classroom participation. The variable-interval schedule may be used by the instructor who gives praise on an irregular basis. Both fixed-ratio and variable-ratio reinforcement may be difficult to administer in the classroom. Continuous reinforcement probably is the best in the learning situation, because the student needs confirmation of a correct response before moving on to the next question.

8. What are the primary similarities and differences between job enrichment and the approach proposed by job characteristics theory?

Both job enrichment and the job characteristics theory focus on changing objective characteristics of tasks to make them more challenging and motivating. The job characteristics theory includes individual differences, whereas job enrichment presumes that all individuals will respond positively to enriched jobs. Further, the job characteristics theory provides more specific guidelines for implementation than does job enrichment.

9. What are the motivational consequences of increased employee involvement from the frame of reference of expectancy and equity theories?

The motivational consequences of increased employee involvement can be explained in terms of both the expectancy and equity theories of motivation. From the standpoint of expectancy theory, participation should serve to enhance expectancies. For example, by participating in quality circle decisions, employees may better understand the link between their performances and the rewards they most desire. From the standpoint of equity theory, involvement should help employees manage their feelings of equity because they have a voice in making decisions about their own work. For example, if an employee felt that certain rewards should be attached to extra work (to avoid a feeling of inequity), involvement provides a forum for a discussion 5-18

about extra rewards to take place.

10. Which form of a flexible work schedule might you prefer? How do you think you would like telecommuting?

Students’ responses will vary on the first question, depending on the types of work they may have already done or their observations during the COVID-19 lockdowns. They could relate their preferences for alternative work schedules back to their needs and the discussion of the job characteristics theory and job design. Again, students’ responses will vary for the second question. However, by analysing their own personal needs and comparing them to previous jobs they may have had, they may be able to make some prediction as to whether or not their needs and preferred work styles would be compatible with telecommuting.

Group exercise – Motivating your sales staff Learning Objective: Explain why different people are motivated by different things.

Summary: The goal of this exercise is to give students practice aligning individual and organisational goals, and thinking like a manager in managing employee motivation. After forming small groups, the instructor reads the scenario below.

Imagine that you are the management team of Threads, a new high-end retail clothing store. Your company’s business strategy is to provide high-quality customer service and to provide high-quality products. You are not the cheapest store in town, but you expect your employees to create a service- oriented atmosphere that customers will be willing to pay a little extra for. You recognise that your sales staff will be essential to your store’s success, and you want to create a system that motivates them to help create a competitive advantage for your business. Because this is the first store you have opened, you have some latitude to decide how to best motivate your staff. Marketcompetitive starting salaries have already been established, but you have decided to allocate 10 per cent of the store’s profits to use to motivate your sales staff in any way you see fit.

Task: Working as a team, students discuss their answers to the following questions and share their answers with the class.

1. What behaviours would you want from your sales staff?

2. What goals would you set for your sales staff, given your answer to Question 1?

3. What type of system would you set up to reward these behaviours?

4. What challenges would you be on the lookout for? How would you proactively address these potential challenges to prevent them from happening?

Mini-simulation (MindTap-only) Imagine that working in a group with two other members you have been asked by your boss to brainstorm names for a new product. The other two members stop after quickly generating 3–4 weak ideas and want to quit. One group member doesn’t see the point of the task. The other group member claims to not be good at this kind of creative stuff and would rather get back to work doing something else. What do you say or do?

Go to this chapter’s mini-simulation, watch the challenge video and choose a response. Be sure to also view the outcomes of the two responses you didn’t choose.

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OB concepts applied: law of individual differences; self-efficacy; need for achievement; empowerment; task significance; autonomy; goal setting; valence, instrumentality, expectancy; interactional fairness; positive reinforcement; negative reinforcement; job design.

Discussion questions 1. Which aspects of motivation discussed in this chapter are illustrated in these videos? Explain your answer.

Motivation concepts: • Law of individual differences: People have different abilities, needs, personalities, values and self-concepts. Alex is motivated to get to work on the project whereas Ryan shows lack of interest and Allison doesn’t feel creative.

• Theory X is the belief that most people dislike work and will try to avoid it whenever possible (incorrect response #1). Alex considers Ryan and Allison unmotivated Theory X workers, ‘You’re both so lazy! It’s disappointing that so many people always try to avoid work whenever possible.’

Theory Y is the belief that people enjoy responsibility and work. Amy called the group and congratulated the members on a job well done. She has a Theory Y view of her employees and feels that they enjoy the project and wish to do a good job.

• Need for achievement refers to the desire to master complex tasks. Alex shows a high need for achievement because he is motivated to complete the project with or without his co- workers. Alex says, ‘I still can’t believe you guys wouldn’t help name the new toy. I just sent an email to Amy with the names I sent you yesterday that I came up with after our meeting. I think she’ll like some of them…’

• Empowerment is the degree to which an employee has the authority to make and implement decisions Amy empowered the team of employees by giving them autonomy, freedom and independence in scheduling the work, and decision-making in generating a list of names for the new toy.

• Job design refers to providing different job opportunities to fulfil employee needs.

Allison does not feel very creative and said, ‘I’d be more productive doing something else right now.’ For Ryan, naming the toy lacks task significance, the degree to which a job has importance. ‘Alex, just pick your favourite name and we’ll be good with it. I don’t see the point of this.’

• Positive reinforcement refers to the use of rewards such as praise to increase the likelihood that a behaviour will be repeated. Alex praises his co-workers and uses recognition. ‘…we did a great job naming the Smash Master…! Alison, remember how you came up with a lot of creative ideas when you put your mind to it? Let’s have some fun with this! I’m sure you’ll come up with some great ideas.’ Alex also uses negative reinforcement, removal of unpleasant consequences to increase the likelihood that Ryan will repeat a desired behaviour. If Ryan works on the project, he will telecommute one day a week. The discomfort of driving in heavy traffic on Fridays will be removed.

• Goal setting refers to setting specific, difficult, achievable goals that serve as motivators. Alex sets goals for Allison and Ryan, ‘…just try to think of a couple of ideas. Once we get started it will get easier.’ He also motivates Ryan by offering him the chance to telecommute. ‘Doing a good job might help you get the weekly telecommuting day you want to escape the Friday traffic jam!’

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Self-efficacy refers to a person’s confidence in organising and executing actions necessary to accomplish a specific task. Allison shows low self-efficacy when she says, ‘I work plenty hard. I’m just not very creative.’

• Expectancy refers to the belief that hard work will lead to the desired outcome (correct response). Amy believes that the group can accomplish the task, ‘I knew the three of you would do a great job since you know the toy best.’

• Fairness refers to ensuring that the policies and procedures used in determining employee outcomes are objective and fair (incorrect response #2). Alex submitted his ideas, and Allison and Ryan took the credit. Alex felt that this was unfair, ‘I can’t believe you took credit for my ideas.’ Allison lied about the situation, ‘I told her we had spent a lot of time working on the list.’ Ryan sought maximum benefit with minimum effort, ‘I’m going to be sure to mention this project in my performance evaluation next month! It should really help me look good.’

2. What do you feel is the biggest challenge facing this team in the challenge video?

The biggest challenge is a lack of teamwork. All the members should be working together cohesively to achieve a common goal – naming the toy. In fact, each individual has different wants and needs: Ryan wants to telecommute, Allison wants to have a job that does not hinge on creativity, and Alex wants to get the job done creatively.

3. As a manager, what motivational techniques would you apply in this situation?

Improving the job-person match would motivate the employees to perform at a higher level.

The characteristics of a job determine its motivating potential. Allison and Ryan are not motivated by the same factors. Ryan is motivated by telecommuting, and Allison by a job that demands less creativity. Growth need strength identifies individual motivators. By comparing a job’s motivating potential to a person’s growth need strength score, a manager arrives at a jobperson match.

•

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PART THREE – SOCIAL AND GROUP PROCESSES IN ORGANISATIONS Managers work to make their organisations effective by enhancing performance behaviours, enhancing commitment and engagement, promoting citizenship behaviours, and minimising dysfunctional behaviours by their employees. Part 1 identified several environmental factors that must be considered.

In Part 2 the question was asked: ‘Why do individuals do what they do?’ In Part 3 we ask a different question: ‘Why do groups and teams do what they do?’

CHAPTER 6 – GROUPS AND TEAMS Chapter overview Chapter 1 noted the pervasiveness of human behaviour in organisations and the importance of interactions among people as critical to achieving important outcomes for organisations. Much of the work in organisations is accomplished by people working together in groups and teams. This chapter deals primarily with interpersonal processes in organisations. The concept map at the start of Part 3 again presents the organising framework. This chapter begins by discussing groups and teams in organisations. Then the next three chapters in this part focus on decision making and problem solving (Chapter 7), interpersonal communication (Chapter 8), and conflict and negotiation (Chapter 9).

Learning outcomes After studying this chapter, students should be able to: 1. define groups and teams and identify and describe several types of each 2. identify the five core group performance factors and relate them to groups and teams in organisations 3. discuss the stages of group and team development, other team performance factors, and the implementation process in the context of creating new teams 4. describe opportunities and challenges related to managing teams and identify the primary benefits and costs of teams 5. summarise the concept of teaming.

Guide your learning 1. Self-managed teams set their own goals and pursue them in ways defined by the team rather than a single manager. What do you see as some advantages and disadvantages of self-managed teams? (LO1) 2. Think of a group that you have been part of, such as a group assignment, a club or a sports team. What are some of the factors that you felt affected that group’s performance? (LO2) 3. If you wanted to create a new team in the workplace, what stages of group and team development and other performance factors should you consider? (LO3) 4. Teams are becoming more common in many workplaces. What do you see are some of the benefits and costs of operating through a team structure? (LO4)

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Chapter outline 6.1. Types of groups and teams There are literally hundreds of definitions of the term ‘group’. Here will simply define a group as two or more persons who interact with one another such that each person influences and is influenced by each other person. Co-workers may work side by side on related tasks – but if they do not interact, they are not a group. Also note that groups and teams are not necessarily the same thing. All teams are groups, but not all groups are teams. Teams will be defined as an interdependent collection of at least two individuals who share a common goal and share accountability for the team’s as well as their own outcomes. A key part of this definition is that team members are interdependent with respect to information, resources, and skills. As tasks become more complex, they require greater coordination among team members. Communication and collaboration demands also increase dramatically. So, all teams are groups, but groups are not necessarily teams.

6.1.1. Types of workgroups Workgroups are formal groups established by the organisation to do its work.

6.1.1.1.A command group is relatively permanent. It is characterised by functional reporting relationships and is usually included in the organisation chart.

6.1.1.2.A task group is a temporary formal group formed to solve a particular problem or complete a designed task. Task groups do not form part of the hierarchy, but often operate with heads or chairs who take accountability for the results and report the findings to a command group.

6.1.1.3.Affinity groups (as well as teams) are relatively permanent collections of employees from the same level in the organisation who meet on a regular basis to share information, capture emerging opportunities and solve problems. Also called ERG or employee resource groups, they are not command groups because they are not part of the organisational hierarchy, yet they are not task groups because they stay in existence longer than any one task. ERG sometimes change as the company changes, with new ones forming and old ones merging or disbanding.

6.1.2. Types of teams Organisations also use a wide variety of teams and the most common types of teams are summarised in Figure 6.3. Each is composed of different members and is responsible for different tasks. The members of functional teams come from the same department or functional area.

6.1.2.1.Cross-functional teams have members from different departments or functional areas and are one of the most common types of work teams. Cross-functional teams have several strengths. In addition to getting things done faster, they can increase creativity, improve a firm’s ability to solve complex problems, and increase employees’ knowledge about other areas of the organisation. Team diversity must be managed in a cross-functional team.

6.1.2.2.Problem-solving teams are teams established to solve problems and make improvements at work. The core strength of problem-solving teams is that because employees are the ones actually doing the work, they usually know the job best.

Problem-solving teams can also increase employees’ commitment to decisions because they were involved in making them.

6.1.2.3. Self-managed teams (SMT) or self-directed teams set their own goals and pursue them in ways decided by the team. Introducing SMT requires careful planning, boundary management, the right leadership, and initial and ongoing training with 6-2

broad skills. Self-directed teams can improve commitment, quality and efficiency; however, they can take time to develop and vary in their effectiveness.

6.1.2.4.Virtual teams are teams of geographically and/or organisationally dispersed coworkers who communicate using the internet and other information technologies.

Virtual teams have allowed organisations to access the most qualified individuals regardless of location and provide greater flexibility to individuals in return.

However, it can be hard to feel connected or to lead teams whose members have different cultures and life experiences.

6.1.2.5.Global teams have members from different countries. Global teams can be virtual or meet face-to-face. A 2019 global employee survey found that 84 per cent of employees work for global teams, which was reaffirmed in 2022. Global teams offer the benefits of variety and diverse perspectives. On the other hand, when not properly facilitated by good managers, they can experience a lack of connection, misunderstandings, miscommunication and distrust.

6.1.3. Informal groups Whereas formal groups and teams are established by an organisation, informal groups are formed by their members and consist of friendship groups, which are relatively permanent, and interest groups, which may be shorter-lived. Friendship groups arise out of cordial relationships among members and the enjoyment they get from being together. Interest groups are organised around a common activity or interest, although friendships may develop among members. Communities of practice are groups of people who share a passion for something and how to do it, and regularly interact to learn how to do it better.

6.2. Group performance factors The performance of any group is affected by several factors (in addition to its reasons for forming and the stages of its development, discussed later). In a high-performing group, group synergy often develops in which performance is more than the sum of the individual contributions.

6.2.1. Group composition Group composition is most often described in terms of the homogeneity or heterogeneity of the members. A group is homogeneous if the members are similar in one or several ways that are critical to the work of the group. In heterogeneous groups, the members differ in one or more ways that are critical to the work of the group. A homogeneous group tends to have less conflict, fewer differences of opinion, smoother communication and more interactions. If, however, the task requires complex analysis of information and creativity, a heterogeneous group may be more appropriate.

6.2.2. Group size A group can have as few as two members or as many members as can interact and influence one another. Group size can have an important effect on performance. Interactions and communication are much more likely to be formalised in larger groups. Also, the large size may inhibit participation of some people and increase absenteeism; some people may stop trying to make a meaningful contribution. Large groups present more opportunities for interpersonal attraction, leading to more social interactions and fewer task interactions. Social loafing is the tendency of some members of groups not to put forth as much effort in a group situation as they would be working alone. The most effective size of a group, therefore, is determined by the group members’ ability to interact and influence each other effectively.

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6.2.3. Group norms A norm is a standard against which the appropriateness of a behaviour is judged. Group norms usually are established during the second stage of group development and are carried forward into the maturity stage. Without norms, the activities in a group would be chaotic.

Norms result from the combination of members’ personality characteristics, the situation, the task and the historical traditions of the group. Norms can be positive or negative for individual and organisational outcomes because group members tend to follow them even if the consequences are negative. Group norms are enforced, however, only for actions that are important to group members.

6.2.3.1.Norms serve four purposes in organisations. First, they help the group survive.

Second, they simplify and make more predictable the behaviours expected of group members. Third, norms help the group avoid embarrassing situations. And finally, norms express the central values of the group and identify the group to others.

6.2.4. Group cohesiveness Group cohesiveness is the extent to which a group is committed to remaining together; it results from forces acting on the members to remain in the group. The forces that create cohesiveness are attraction to the group, resistance to leaving the group, and motivation to remain a member of the group. As shown in Figure 6.8, group cohesiveness is related to many aspects of group dynamics: maturity, homogeneity, manageable size and frequency of interactions. Group cohesiveness can be increased by competition or by the presence of an external threat. Successfully reaching goals often increases the cohesiveness of a group. Highly cohesive groups appear to be more effective at achieving their goals. However, highly cohesive groups will not necessarily be more productive in an organisational sense than groups with low cohesiveness.

6.2.4.1.Cohesiveness may also be a primary factor in the development of certain problems for some decision-making groups. An example is groupthink, which occurs when a group’s overriding concern is a unanimous decision rather than critical analysis of alternatives. Emotional intelligence of group members can promote cohesiveness and refers to interpersonal capability that includes the ability to perceive and express emotions, to understand and use them, and to manage emotions in oneself and other people.

6.2.5. Informal leadership The final group performance factor is informal leadership. Most functional groups and teams have a formal leader – even when a formal leader is designated, the group or team may also look to others for leadership. An informal leader is a person who engages in leadership activities but whose right to do so has not been formally recognised. In many cases informal leaders are quite powerful because they draw from referent or expert power, and they can be a tremendous asset. However, when informal leaders work counter to the goals of the organisation, they can cause significant difficulties.

6.3. Creating new groups and teams If a new group or team is being created, managers should be aware of the stages that groups and teams go through, understand how various performance factors should be considered, and be aware of the formal process experts suggest for implementing teams.

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6.3.1. Stages of group and team development A popular model of group development captures a five-stage development process: (1) forming – mutual acceptance, (2) storming – communication and decision making, (3) norming – motivation and productivity, (4) performing – control and organisation and (5) adjourning – disbanding. The stages and the activities that typify them are shown in Figure 6.10.

6.3.1.1.In the forming stage, the group forms, and members get to know one another by sharing information about themselves. This is a time of mutual acceptance where group members often test one another’s opinions, and may be brief, but it is unlikely to be skipped altogether. Members come to understand how similar their beliefs and values are and the extent to which they can trust one another. When this discussion becomes serious, the group is moving to the next stage of development: communication and decision making.

6.3.1.2.The storming stage begins once members have begun to accept one another. In this communication and decision-making stage, members discuss their feelings and opinions more openly, which can increase conflict, and usually begin to develop norms of behaviour. Members discuss and eventually agree on the group’s goals, then they are assigned roles and tasks to accomplish the goals.

6.3.1.3.In the next stage, norming, the emphasis shifts away from personal concerns and viewpoints to motivation and productivity activities that will benefit the group. Members perform their assigned tasks, cooperate with each other, and help others accomplish their goals. The members are highly motivated and may carry out their tasks creatively. In this stage, the group is accomplishing its work and moving towards the final stage of development.

6.3.1.4.In the performing stage, control and organisation become the focus as the group works effectively towards accomplishing its goals. Tasks are assigned by mutual agreement. The characteristics of flexibility, spontaneity and selfcorrection are very important if the group is to remain productive over an extended period.

6.3.1.5.The final stage of adjourning occurs when the task or project is complete and the group disbands. This is a very important stage. Being able to leave on good terms with relationships intact will enhance the success of future projects where members may work with one another again.

Not all groups go through all stages. Group productivity depends on successful development at each stage. A group that evolves fully through the stages of development usually becomes a mature, effective group. Finally, as conditions and relationships change, groups may need to re-experience one or more of the stages. Although these stages are not separate and distinct in all groups, many groups make fairly predictable transitions. The midpoint transition is often accompanied by a burst of concentrated activity, re-examination of assumptions, dropping old patterns of activity, adopting new perspectives on the work, and making dramatic progress. Another transition may occur just before the deadline. At this transition, groups often go into the completion stage, launching a final burst of activity to finish the job.

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6.3.2.

Understanding team performance factors

People working together in teams have the potential to produce more or higher-quality outputs than would have resulted if the individual efforts of team members were later combined.

6.3.2.1.Process gain refers to the performance improvements that occur because people work together rather than independently. Process loss occurs when a team of people working in a group or team together performs worse than the individual members would have if they had worked alone. Process loss can be reduced by making clear role and task assignments and not tolerating free riders. The likelihood of process gain can be improved by awareness of several team performance factors, such as group performance factors, or by promoting team efficacy.

6.3.2.2.Team efficacy is a team’s shared belief that it can organise and execute the behaviours necessary to reach its goals. Team efficacy is strongly related to team performance. Members of a highly cohesive team are motivated to stay in the team, contribute as much as they can, and conform to team norms.

Managers should also try to build trust among team members. Trust is the confidence that other people will honour their commitments, especially when it is difficult to monitor or observe the other people’s behaviour.

6.3.2.3. Social facilitation happens when people are motivated to look good to others and want to maintain a positive self-image in the presence of an audience.

Keeping the team size small, clarifying what the team expects each member to do, and making individual contributions to the team identifiable can help reduce social loafing and encourage social facilitation. Roles define the behaviours and tasks each team member is expected to perform because of the position they hold. One of the primary outcomes of the process of group and team development is the establishment of clear roles in the team. Making team roles and expectations clear helps to reduce process loss. It is also important to establish positive norms. Team members comply with team norms (1) to avoid punishments and receive rewards, (2) to imitate team members whom they like and admire, and (3) because they have internalised the norm and believe it is the appropriate way to behave. Team norms may also be used as a form of concertive control where the norms in the team engender a sense of responsibility in team members to work intensively in agreed ways so as not to let the team down.

6.3.2.4.When possible, managers should create shared team goals. If performance is lagging, feedback helps the team quickly adjust its behaviour and processes to reach its goals, while rewards motivate effective teamwork behaviours.

Tying team rewards to team performance motivates team members to pursue team goals rather than individual goals 6.3.3. The implementation process Implementing teams across an organisation is not easy, and changing from a traditional organisational structure to a team-based structure is a major organisational change and calls for a complete cultural change for the organisation. This section presents several essential elements peculiar to an organisational change to a team-based situation. This process is shown in Figure 6.12.

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6.3.3.1.In Phase 1: start-up, team members are selected and prepared to work in teams.

Much of the initial training is informational or ‘awareness’ training that sends the message that top management is firmly committed to teams and that teams are not experimental. Training covers the rationale, how teams were selected, how they work, the roles and responsibilities of teams, compensation and job security.

Perhaps most important is establishing the idea that teams are not ‘unmanaged’ but are ‘differently managed’ – the new teams manage themselves. Performance by teams increases at start-up because of this initial enthusiasm for the change.

6.3.3.2.In Phase 2: reality and unrest, team members and managers report frustration and confusion about the ambiguities of the new situation after a few months. All of the training and preparation, as important as it is, is never enough to prepare for the storm and backlash. The best advice is to perform phase 1 very well and then make managers very visible, continue to work to clarify the roles and responsibilities of everyone involved, and reinforce the positive behaviours that do occur. The change they supported results in more work for them. Managers report that they still have to intervene and solve problems for the teams because the teams do not know what they are doing.

6.3.3.3.In Phase 3: leader-centred teams, members are learning about self-direction and leadership from within the team and usually start to focus on a single leader in the team. In addition, the team begins to think of itself as a unit as members learn to manage themselves. This phase is not a setback to team development – although it may seem like one. The design and steering committees need to be sure that they encourage the rise of strong internal team leaders and help each team develop its own sense of identity.

6.3.3.4.In Phase 4: tightly formed teams, teams become tightly formed to the point that their internal focus can become detrimental to other teams and to the organisation as a whole. To avoid this, managers need to make sure that teams continue to do the things that have enabled them to prosper thus far – keep the communication channels with other teams open and provide performance feedback through computer terminals in the work area that give up-to-date information on performance, or via regular feedback meetings. Third, teams need to follow the previously developed plan to transfer authority and responsibility to the teams and to be sure that all team members have followed the plan to get training in all of the skills necessary to do the work of the team.

By the end of phase 4, the team should be ready to take responsibility for managing itself.

6.3.3.5.Phase 5: self-managing teams is the end result of the months or years of planning and implementation. Mature teams are meeting or exceeding their performance goals. Team members are taking responsibility for team-related leadership functions. Managers and supervisors have withdrawn from the daily operations and are planning and providing counselling for teams. Mature teams are flexible – taking on new ideas for improvement, making changes as needed, and doing whatever it takes to meet the strategic objectives of the organisation.

Individuals and teams still need to continue their training, and support systems need to be constantly improved. Third, teams always need to improve their internal customer and supplier relationships within the organisation.

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6.4. Managing teams Today’s teams are more varied, distributed, technology-linked and dynamic, often with frequent membership changes. One expert identified five categories of skills in virtual or distance situations: 1. Communicating effectively and matching technology to the situation 2. Building community among team members based on mutual trust, respect, affiliation and fairness 3. Establishing a clear and motivating shared vision, team purpose, goals and expectations 4. Leading by example and focusing on measurable results 5. Coordinating and collaborating across organisational boundaries 6.4.1. Leader behaviours Leaders need to mentor, coach and develop team members, monitor team member performance and implement solutions to work problems. Team leaders need to provide a clear, engaging direction for the team along with specific individual goals. Clear direction and goals allow team members to monitor and evaluate their own performance. Leaders can also establish rules and guidelines that specify appropriate team member behaviour. By design, teams have a rather flat structure. But team members from cultures in which people are treated differently according to their status in an organisation are often uncomfortable on flat teams.

6.4.2. Understanding benefits and costs of teams The reason for a company to create teams should be that teams make sense for that particular organisation. The best reason to start teams in any organisation is to achieve the positive benefits that can result from a team-based environment: enhanced performance, employee benefits, reduced costs and organisational enhancements. Four categories of benefits and some examples are shown in Figure 6.13.

6.4.2.1.Enhanced performance can come in improved productivity, quality and customer service. Working in teams enables workers to avoid wasted effort, reduce errors and react better to customers, resulting in more output for each unit of employee input, by pooling individual efforts in new ways and from continuously striving to improve for the benefit of the team.

6.4.2.2.As empowered teams reduce scrap, make fewer errors, file fewer worker compensation claims, and reduce absenteeism and turnover, organisations based on teams are showing significant cost reductions.

Other organisational benefits that result from moving from a hierarchically based, directive culture to a team-based culture include increased innovation, creativity and flexibility. Use of teams can eliminate redundant layers of bureaucracy and flatten the hierarchy in large organisations. In addition, the team environment constantly challenges teams to innovate and solve problems creatively. With increasing global competition, organisations must constantly adapt to keep abreast of changes. Teams provide the flexibility to react quickly.

6.4.2.3.Employees benefits provide the sense of self-control, human dignity, identification with work, and sense of self-worth and self-fulfilment for which current workers seem to strive. As a result, employees have a better work life, face less stress at work, and make less use of employee assistance programs.

6.4.2.4.The costs of teams are usually expressed in terms of the difficulty of changing to 6-8

a team-based organisation. Some managers have felt as if they were working themselves out of a job, and employees may also feel like losers during the change. Another cost is the slowness of the process of full team development.

Productivity may fall before the positive effects kick in. Probably the most dangerous cost is premature abandonment of the change. The losses in productivity and efficiency will be very difficult to recoup. Management must therefore be fully committed before initiating a change to a team-based organisation.

6.5. Teaming Teams can develop trust in each other as they learn each other’s strengths and weaknesses, and determine how to operate as a synchronised whole. Teaming is a form of flexible teamwork and involves constantly shifting members who move in and out of groups in a fast-paced manner. The temporary nature of teaming means relationships are fluid. Teaming enables organisations to accelerate the delivery of their products or services through people working together in different and innovative ways.

6.5.1. An alternative view of teams Teamwork is portrayed as naturally a good thing, and reorganising work to be completed by teams is promoted as a means of working smarter not harder, and increasing opportunities and flexibility that lead to enhance motivation and job satisfaction.

6.5.2. Promoting effective performance This chapter has described the many benefits of teams and the process of changing to a teambased organisation. Three essential issues cannot be overlooked when moving to a team-based organisation.

6.5.2.1.Top management support has three important roles to play. First, top management must decide to go to a team-based organisation for sound business performance-related reasons. Second, top management is instrumental in communicating the reasons for the change to the rest of the organisation. Third, top management has to support the change effort during the difficult periods.

6.5.2.2.Understanding time frames ensures organisations don’t expect too much too soon when they implement teams. In fact, things often get worse before they get better. Figure 6.14 shows how, shortly after implementation, team performance often declines and then rebounds to rise to the original levels and above. The phases of implementation discussed in the previous sections correspond to key points on the team performance curve. Organisations changing to a team-based arrangement need to recognise the time and effort involved in making such a change.

6.5.2.3.Changing organisation rewards is vital to the long-term success of an organisation. In a team-based situation, team members are generally rewarded for mastering a range of skills needed to meet team performance goals, and rewards are sometimes based on team performance. Changes in an organisational compensation system can be traumatic and threatening to most employees. However, matching the reward system to the way in which work is organised and accomplished can have very positive benefits.

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6.5.3. Teamwork competencies Staffing teams with people who have the interpersonal skills and competencies to contribute to task performance but who are also able to work well in team settings is critical. Some of the teamwork abilities are: 1. conflict resolution abilities 2. collaborative problem-solving abilities 3. communication abilities 4. goal-setting and self-management abilities 5. planning and task coordination abilities.

Teamwork competencies also include an understanding of ethical behaviour in teams.

Other people’s ethical behaviour influences one’s ethical behaviour. Four ethical issues are especially important in teams: 1. How do teams fairly distribute work?

2. How do teams assign blame and award credit?

3. How do teams ensure participation, resolve conflict, and make decisions?

4. How do teams avoid deception and corruption?

A team contract is a written agreement among team members establishing ground rules about the team’s processes, roles and accountabilities. Team contracts help to reduce the potential for team conflict stemming from an unequal division of resources, and deter free riding. By enhancing personal accountability and creating clear rules and expectations, team contracts can promote ethical team behaviour and improve team performance and team member satisfaction.

OB in the real world: Creating space teams Summary: With the planned manned-flight to Mars in just over a decade, crew members will have to sustain team performance for two to three years in space. Long-duration space exploration will require multidisciplinary teams to work in extreme and dangerous outer-space conditions. They will need to cope with limited communication with family and co-workers on Earth, deal with very high levels of physical and psychological stress and long durations of monotonous and boring inactivity, and accept they are unable to leave their team or their context until the mission is over.

Challenge: Imagine that you have been asked for your advice on how a six-person team could best be prepared to function effectively and efficiently on a two- to three-year mission to Mars and back. What would you recommend?

Response: The training for crew of the space flights to Mars needs to cover how extreme demands can impact on basic team processes. The crew would need to be prepared for difficulty in establishing and maintaining team cohesion. The crew would also benefit from training in being both a leader and a follower, so they can easily adapt to the changing needs in space.

Ethical dilemma: Not made in Australia: First Nations art Summary: Jaimin was concerned about the fake First Nations souvenirs being passed off as genuine art. Jaimin liked working with his team, found the work interesting and wanted to continue to have a job. He’d heard the team leader, Kundra, had terminated someone who asked questions about the fake art. On the other hand, he thought it was deceptive. Jaimin knew that the dot-painted plates, 6-10

boomerangs and didgeridoos told stories about aspects of culture, some were culturally sensitive and that many Aboriginal people felt their traditions were being disrespected. There was also the issue of recompense for the intellectual property of the thousands of years and for any copyright issues. He sought advice from one of his university teachers, Nellie, who said he could: 1. avoid it 2. conform 3. protest 4. conscientiously object 5. leave the job 6. secretly leak the information 7. publicly blow the whistle 8. anonymously threaten to blow the whistle 9. obstruct 10. build consensus to stop.

Jaimin was in a dilemma. Should he follow his own conscience and defy his team or act in line with the team norms? Should he reveal what was happening, or did he have the courage to accept any consequences with a hope that he might eventually change the team’s actions? Which of the suggested 10 choices would you take in Jaimin’s position?

When personal ethics are not in accord with the organisation, choices need to be made and can depend upon circumstances and personal courage. From the 10 choices provided, ‘avoid thinking about it’ would not solve the problem nor change it; the same is true for ‘conform’ and ‘leave’.

‘Conscientiously object’ is an action most organisations would not support, and one person who conscientiously objects or makes a ‘protest’ is unlikely to have an organisational impact. If being fired is possible, then ‘publicly blow the whistle’ would not be the course of action. If there is time and the people in leadership roles are reasonable, then ‘work with the team to build consensus to stop selling the products’ would involve negotiation and could lead to ethical, mutual gain, so it is the option most likely to be effective.

However, this approach may not be successful due to time or leader disinterest. ‘Anonymously threaten to blow the whistle’ may give the organisation time to make changes. ‘Secretly leak the information outside the organisation’, runs the risk of being discovered. Choosing to ‘obstruct’ can be effective; however, it can be a form of sabotage and possibly unethical. There is not one answer to ethical and unethical management behaviour.

Critical perspective The other side of teams Teams are a managerial strategy to solve issues of inefficiencies and ineffectiveness in work systems.

Despite involvement, teams enable the organisation to increase unequal power relations, extend control over employees and expand surveillance of their performance. In concert, members create a value- based control system that they identify with and enforce on each other. However, the Illusion of constant surveillance creates an internal discipline where members observe the regulations and police their own behaviour. Teams may discipline ‘bad teammates’ with sanctions for stepping outside the code of conduct or being laggards. An incessant striving for continuous improvement results in teams working smarter and harder, with work intensification accompanied by bullying and tyrannical team interactions causing stress and fatigue.

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Summary LO6.1 Groups are two or more people who interact while teams are interdependent collections of at least two individuals who share a common goal and accountability. All teams are groups, but not all groups are teams. Common kinds of groups in organisations include workgroups, teams and informal groups.

LO6.2 The five basic group performance factors are composition, size, norms, cohesiveness and informal leadership.

LO6.3 When a new group or team is formed, it typically goes through five stages of development: forming, storming, norming, performing and adjourning.

LO6.4 Today’s teams require skills suitable for face-to-face through to virtual and global teams.

LO6.5 Teaming is a form of flexible teamwork that involves shifting members in and out of groups in a fast-paced manner.

Revision questions 1. There is emerging evidence that emotional intelligence of group members can promote: a. cohesiveness b. conflict c. informal leadership d. group norms 2. Which of the following distinguishes an informal group from a formal group? a. An informal group consists of members who did not formerly know each other. b. An informal group is organised by top management. c. An informal group is formed by its members. d. An informal group meets solely during work hours.

3. Social loafing often results from the assumption by some group members that if they do not work hard: a. upper management will not notice b. others will pick up the slack c. they will conserve energy for more important tasks d. it will make no difference to the final outcome 4. What term refers to the performance improvements that occur because people work together rather than independently? a. Process gain b. Process loss c. Team efficacy d. Cohesiveness 5. Which of the following is not a strength of cross-functional teams? a. Getting things done faster b. Solving complex problems c. Increasing employee knowledge about other areas of the organisation d. Specialising in a specific area Case study: Nord Engineering Services: Implementing production self-managed teams Summary: Maria, Executive Director Production, wondered why she had championed with the Executive Leadership Group (ELG) for her division of Nord Engineering Services (NES) to adopt self-

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managed teams (SMT), the implementation process and the outcomes. Maria recalled at the time of her ELG presentation just over two years ago, manufacturers in Australia had fallen from 96 000 10 years previously to just under 84 000. Only 45 per cent of Australian manufacturers were innovating and there were warnings that if companies didn’t transform, they’d further decline and face potential extinction. Maria had said that SMT were a way to work smarter and increase innovation, which required creating an environment open to change and focused on continuous improvement.

At the first meeting of the aerospace department, most of the employees were keen to engage and even the dissenters agreed to give it a go. But the next six months had not gone well. It became obvious that the initial training was inadequate and the demand for more training increased. Maria knew she had to present the report to ELG but was concerned that some ELG members would say the pilot was not working and the concept should be abandoned. Maria knew that it was too early to declare SMT a failure and if it was cut short all of Production’s hard work would be lost.

Critical 1. How was concertive control used at NES? The SMT began to identify norms around performance standards and levels and would reinforce them through disciplining or even bullying teammates to lift their production. Staff chose to adopt those norms, even though they caused stress and fatigue, because their teammates were watching their actions and enforcing their behaviour. The team members likely complied with the team norms to avoid punishment and receive rewards, to imitate team members whom they liked and admired, and because they had internalised the norms and believed they were the appropriate way to behave.

2. What examples of work intensification happened at NES? The SMT experienced work intensification through the pressure they felt to complete an increasing number of tasks within their working day. NES raised daily and weekly targets, and expected outputs to increase and error frequency rates to drop. The SMT contributed to work intensification by pushing performance, covering up for underperforming members and competing with other teams so as to meet the targets. SMT were working smarter and harder.

Mainstream 1. What are some benefits for NES in creating self-managed teams?

Creating SMT may enable NES to improve its production efficiency, restore its competitive edge, and reduce its lead times and costs. A shift to SMT could also improve employees’ working lives by offering them choice and opportunities that enhance motivation and job satisfaction. SMT would allow NES greater agility in responding to changing conditions and empower workers to continuously improve processes to increase productivity and product reliability.

2. Why did the self-managed teams have some difficulties in functioning effectively?

NES introduced SMT in a somewhat hurried manner. They used existing staff who did not necessarily have the skills required in communication, collaboration, problem solving, conflict management and decision making. Although NES provided some training, it was not enough to overcome deficits. The shift from the old to the new meant there were ambiguities, poorly defined objectives, lack of boundary management and rigid team attitudes to tasks, which staff struggled to handle.

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Tutorial activities 1. Identify several different groups to which you belong and classify them as one of the group types discussed in this chapter.

A book club is an affinity group. A Customer Service Unit (formal business team) is a command group. There are many possible responses, task, team types, etc. The text notes that the Reserve Bank of Australia formally recognises six ERG covering gender equity, flexibility, Indigenous Australians, accessibility, race and cultural identity, and LGBTI + Allies. An example of a cross- functional team is a top management team with members representing different functions or units of the organisation.

2. Think about an effective team you have been on. What made it effective? Think about an underperforming team you have been on. Why was it underperforming?

There may be a variety of responses. Effective teams will have clearly defined goals and clear timelines, with measures and due dates. Communication means are open and effective and the manager works with individuals and the team together to create cohesion. Underperforming teams accomplish little, have poorly defined goals and no clear limits, creating disengagement.

3. Are any of the groups to which you belong too large or too small to get their work done? If so, what can the leader or the members do to alleviate the problem?

If a group is too small, additional members might be recruited or the task might be redefined to make it manageable for the group. If a group is too large to accomplish its goal, the problem might be alleviated by the formation of subgroups.

4. List two norms each for two of the groups to which you belong. How are these norms enforced? The textbook defines a norm as the expected behaviour or behavioural pattern in a certain situation. Young organisations may not yet have norms, or may have vaguely defined norms. More mature groups have explicit norms of behaviour. Students might compare group norms for similarities and/or differences. They might also consider whether the norms are related to group goals.

5. Discuss the following statement: ‘Group cohesiveness is the good, warm feeling we get from working in groups and is something that all group leaders should strive to develop in the groups they lead.’

Students probably will agree with the statement that ‘group cohesiveness is the good, warm feeling that we get from working in groups’, but they should note that group cohesion also has some negative effects on group performance. Therefore, the group leader should manage group cohesiveness to maximise its positive impact and minimise its negative impact.

6. Some say that changing to a team-based arrangement ‘just makes sense’ for organisations.

What are the four primary reasons why this might be so?

The four primary reasons for changing to a team-based organisation are the four primary benefits that should result for the organisation: (1) enhanced performance for the organisation; (2) better employee welfare in terms of more individual control of the work and a rising sense of self-worth, respect, dignity and esteem; (3) significant cost reductions resulting from fewer errors, lower workers’ compensation claims, lower absenteeism and turnover, and less scrap; and (4) other organisational benefits, such as increased innovation, creativity and flexibility.

7. Do you think a team contract would improve the effectiveness of teams? Why or why not?

Yes. A team contract is a written agreement among team members establishing ground rules about the team’s processes, roles and accountabilities. Team contracts enhance role and goal clarity, increase commitment and satisfaction, and promote ethical behaviour. They reduce the potential for team conflict stemming from an unequal division of resources and deter free riding.

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8. Which do you feel is more important to team performance, informational diversity or demographic diversity? Why? Do multicultural teams increase this type of diversity? If so, how?

Informational diversity, diversity in knowledge and experience, is more important to team performance. Because team members’ unique knowledge enlarges the team’s knowledge resources and can enhance the options the team is able to consider, it can enhance creativity and problem solving. Multicultural teams can increase informational diversity; however, cultural differences can create obstacles to effective teamwork. Differing attitudes towards hierarchy and authority and conflicting norms for decision making create barriers to success.

Managers and multicultural team members must find ways to utilise each member’s strengths while minimising coordination losses resulting from communication problems, language differences, varying work styles and misunderstandings. Students may also mention global teams, which have a significant presence in current working groups.

Group exercise Learning objective: This exercise demonstrates the benefits a group can bring to accomplishing a task.

Summary: Students perform the same task both individually and as part of a group.

Task: Part 1: Students need a pen or pencil and an A4 sheet of paper. Have them work alone and do the following: 1. Write the letters of the alphabet in a vertical column down the left side of the paper: A–Z. 2. Randomly select a sentence from any written document and read out loud the first 26 letters in that sentence. Instruct students to write these letters in a vertical column immediately to the right of the alphabet column. Everyone should have identical sets of 26 two-letter combinations.

3. Ask students to think of a famous person whose initials correspond to each pair of letters and to write the name next to the letters (for example, MT, Mark Twain). Give them 10 minutes.

Only one name per set is allowed. One point is awarded for each legitimate name, so the maximum score is 26 points.

4. After time expires, have students exchange papers with other members of the class and score each other’s work. Settle any disputes about the legitimacy of names. Students should keep their scores for use later in the exercise.

Part 2: Divide the class, as evenly as possible, into groups of 5–10 people. Instruct each group to follow the procedure given in Part 1, writing the letters of the alphabet down the left side of a sheet of paper, but this time in reverse order: Z–A. Dictate a new set of letters for the second column.

The time limit and scoring procedure are the same. The only difference is that the groups will generate the names.

Part 3: Each team identifies the group member who came up with the most names. Create a new group of these ‘best’ students. Then all groups repeat Part 2, but this time the letters from the reading will be in the first column and the alphabet letters will be in the second column.

Part 4: Each team calculates the average individual score of its members on Part 1 and compares it with the team score from Parts 2 and 3. Write the groups’ average individual scores and the team scores for each group on the board.

Source: John E. Jones and J. William Pfeiffer (eds.), adapted from The Handbook for Group Facilitators. Copyright © 1979 Pfeiffer, an imprint of Jossey-Bass, Inc., Publishers. Reprinted by

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permission of John Wiley & Sons, Inc. Follow-up questions 1. Are there differences in the average individual scores and the team scores? What are the reasons for the differences, if any?

Students probably will find that team scores are higher than individual scores. Research suggests that groups are more effective than individuals at generating ideas and fact finding.

Groups tend to outperform individuals on these tasks because (1) the group has a greater sum total of knowledge and information, and (2) the group generates a greater number of approaches to the problem.

2. Although the team scores in this exercise usually are higher than the average individual scores, under what conditions might individual averages exceed group scores?

Individual average scores might exceed group scores when there is a problem in group dynamics.

As depicted in Figure 6.10, the initial stage of group development may reflect poor group performance owing to defensiveness, quibbling, mutual testing and discussing subjects unrelated to the task.

Other factors might include issues of group dynamics, such as group dominance, pressures to conform and solution-mindedness. The score of the team of ‘best’ members may not have the best score in Part 3 because of the learning by other members of some of the techniques used by that team and the potential motivating impact of trying to beat the team of ‘best’ members.

Mini-simulation (MindTap-only) Imagine being part of a group meeting with two co-workers and the boss to discuss a situation with a customer who wants a 30 per cent discount on an order because it will be a week late. The team can’t agree on whether to give the discount to keep the good customer happy or not give the discount to make more money on the sale, and is having trouble making a decision. What do you say or do?

Go to this chapter’s mini-simulation, watch the challenge video and choose a response.

OB concepts applied: team efficacy, cohesiveness, goal conflict, social loafing, problem solving teams Discussion questions 1. Which team performance factors have the most influence on the decision-making process?

The group achieved a process gain by working together. Alex’s praise and his stated belief in the team’s abilities raised the team efficacy. The team now shared the belief that it could reach the goal of getting the shipment to the customer on time.

2. What teamwork competencies were most important for achieving a resolution and why?

The most important competency appeared to be Alex’s conflict resolution and communication abilities. His encouragement, support and listening skills helped, but asking for Ryan’s involvement was the beginning of the resolution. Ryan remembered a previous time when expedited shipping delivered a shipment on time. Bobbi was able to find the cost of the shipping.

This shows task coordination abilities and was a satisfactory solution to the problem.

3. As a manager, what might you have done to handle the situation better? Please use group or team concepts from the chapter.

This team needs to develop its team abilities for this situation and for the future.

Conflict resolution abilities: 6-16

• • • • • • • • •

The ability to recognise and encourage desirable and discourage undesirable team conflict.

The ability to recognise the type and source of conflict confronting the team and implement an appropriate resolution strategy The ability to employ an integrative (win-win) negotiation Goal-setting and self-management abilities The ability to help establish specific, challenging, and accepted team goals The ability to provide constructive feedback Communication abilities The ability to communicate openly and supportively The ability to listen objectively and to appropriately use active listening techniques

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CHAPTER 7 – DECISION MAKING AND PROBLEM SOLVING Chapter overview Managers routinely make both tough and easy decisions, and it is almost certain that some will criticise these decisions and others will applaud them. Some focus on the long term, some deal with employees, some with investors and others with dollars and cents. All require careful thought and consideration. This chapter describes many different perspectives of decision making, starting by examining the nature of decision making and distinguishing it from problem solving, then moving on to the different approaches, behavioural aspects and major elements of group decision making, as well as creativity.

Learning outcomes After studying this chapter, students should be able to: 1. describe the nature of decision making and distinguish it from problem solving 2. discuss the rational approach to decision making.

3. identify and discuss the primary behavioural aspects of decision making.

4. discuss group decision making in organisation.

5. discuss the nature of creativity and relate it to decision making and problem solving.

Guide your learning 1. Think about some significant decisions you have recently made. Did you use logic or emotion in making those decisions? (LO2) 2. Have you been in the situation where you found things happening around you affected your decision making? What were some of these behavioural elements? (LO3) 3. In what ways can organisations enhance creativity at work? (LO5) Chapter outline 7.1. The nature of decision making Decision making is choosing one alternative from among several. Problem solving, on the other hand, involves finding the answer to a question. Note that in some situations decision making and problem solving start out alike but may lead down different paths. Figure 7.1 shows the basic elements of decision making. Decisions made in organisations can be classified according to frequency and to information conditions. In a decision-making context, frequency is how often a particular decision situation recurs, and information conditions describe how much information is available about the likelihood of various outcomes.

7.1.1. Types of decisions The frequency of recurrence determines whether a decision is programmed or nonprogrammed. A programmed decision recurs often enough for decision rules to be developed. A decision rule tells decision makers which alternative to choose once they have predetermined information about the decision situation. Programmed decisions usually are highly structured. When a problem or decision situation has not been encountered before, however, a decision maker cannot rely on previously established decision rules. Such a decision is called a nonprogrammed decision, and it requires problem solving.

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Problem solving is a special form of decision making in which the issue is unique – it often requires developing and evaluating alternatives without the aid of a decision rule.

Nonprogrammed decisions are poorly structured because information is ambiguous, there is no clear procedure for making the decision, and the goals are often vague. Figure 7.5 summarises that programmed decisions can be made according to previously tested rules and procedures, while nonprogrammed decisions generally require that the decision maker exercise judgement and creativity. In other words, all problems require a decision, but not all decisions require problem solving.

7.1.2. Decision-making conditions The range of available information can be considered as a continuum whose endpoints represent complete certainty and complete uncertainty. Points between the two extremes create risk – the decision maker has some information about the possible outcomes and may be able to estimate the probability of their occurrence.

7.1.2.1.Under a condition of certainty, the manager knows the outcomes of each alternative.

7.1.2.2.Under a condition of risk, the decision maker cannot know with certainty what the outcome of a given action will be but has enough information to estimate the probabilities of various outcomes.

7.1.2.3.The decision maker who lacks enough information to estimate the probability of outcomes (or perhaps even to identify the outcomes at all) faces a condition of uncertainty.

The rational approach is appealing because of its logic and economy; however, many managers combine rationality with behavioural processes when making decisions.

7.2. The rational approach to decision making The rational decision-making approach assumes that managers follow a systematic, step-bystep process, and that the organisation is dedicated to making logical choices, doing what makes the most sense economically, and is managed by decision makers who are entirely objective and have complete information.

7.2.1. Steps in rational decision making Figure 7.8 identifies the steps of the process, starting with stating a goal and running logically through the process until the best decision is made, implemented and controlled.

7.2.1.1.The rational decision-making process begins with the statement of a situational goal – that is, a goal for a particular situation.

7.2.1.2.The purpose of problem identification is to gather information that bears on the goal. If there is a discrepancy between the goal and the actual state, action may be needed. Reliable information is very important and inaccurate information can lead to an unnecessary decision or to no decision when one is required.

Next, the decision makers must determine the decision type as to whether the problem represents a programmed or a nonprogrammed decision. Choosing the wrong decision rule can result in poor decisions, and wastes time and resources seeking a new solution to an old problem or ‘reinventing the wheel.’

7.2.1.3.The next step in making a nonprogrammed decision is to generate alternatives.

The rational process assumes that decision makers will generate all the possible

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alternative solutions; however, this is unrealistic.

7.2.1.4.Evaluate alternatives involves assessing all possible alternatives in terms of predetermined decision criteria. The process usually includes (1) describing the benefits, (2) evaluating the costs, and (3) estimating risks associated with each alternative.

7.2.1.5.Choosing an alternative consists of selecting the solution with the highest possible payoff, based on the benefits, costs, risks and uncertainties of all alternatives. Difficulties can arise when two or more alternatives have equal payoffs, or when no single alternative will accomplish the objective. If no alternative or combination of alternatives will solve the problem, the decision maker must obtain more information, generate more alternatives or change the goals. An important part of the choice phase is the consideration of contingency plans – alternative actions that can be taken if the primary course of action is unexpectedly disrupted or rendered inappropriate.

7.2.1.6.Implement the plan puts the decision into action. To succeed, implementation requires the proper use of resources and good management skills. Sometimes the decision maker begins to doubt a choice, which is known as post-decision dissonance, a form of cognitive dissonance. To reduce the tension created by the dissonance, the decision maker may seek to rationalise the decision further with new information.

7.2.1.7.In the final stage control: measure and adjust the outcomes of the decision are measured and compared with the desired goal. If a discrepancy remains, the decision maker may restart the decision-making process by setting a new goal (or reiterating the existing one). Changes can be made in any part of the process, as Figure 7.8 illustrates by the arrows leading from the control step to each of the other steps. Decision making therefore is a dynamic, self-correcting and ongoing process in organisations.

7.2.1.8.The rational approach has strengths and weaknesses. The rigid assumptions of this approach are often unrealistic , and most decision makers have limited ability to process information about the alternatives. Not all alternatives lend themselves to easy comparison, and it is unlikely that decision makers will know all possible outcomes.

7.2.2. Evidence-based decision making Evidence-based management (EBM) is defined as the commitment to identify and utilise the best theory and data available to make decisions. An EBM approach calls for consideration of how decision making can include diverse sources of evidence: practitioner judgement and expertise, local context influences, research verification, and perspectives from those affected by the decision. EBM advocates are particularly persuasive when they use EBM to question the outcomes of decisions based on untested but strongly held beliefs or on uncritical benchmarking. Another increasingly prevalent type of decision to consider is the evaluation and rewarding of talent. EBM is promoted as drawing on science and is presented as a rational model that enables decisions, however, is neither value-free nor objective.

7.3. The behavioural approach to decision making The behavioural approach acknowledges the role and importance of human behaviour in the

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decision-making process. Nobel Prize winner Herbert A. Simon was one of the first experts to recognise that decisions are not always made with rationality and logic. The administrative model argues that managers use bounded rationality, rules of thumb, sub-optimising and satisficing in making decisions.

7.3.1. The administrative model One crucial assumption of the administrative model is that decision makers operate with bounded rationality, which is the idea that although individuals may seek the best solution, the demands of processing all the information, generating all possible solutions and choosing the single best solution are beyond the capabilities of most decision makers.

Decision makers operating with bounded rationality limit the inputs to the decisionmaking process and base decisions on judgement and personal biases as well as on logic.

Sub-optimising is knowingly accepting less than the best possible outcome. The final feature of the behavioural approach is satisficing: examining alternatives only until a solution that meets minimal requirements is found and then ceasing to look for a better one.

7.3.2. Other behavioural forces in decision making These include political forces, intuition, escalation of commitment, risk propensity and ethics. Prospect theory is also relevant.

7.3.2.1.Political forces in decision making can play a major role in how decisions are made. Political behaviour is discussed in Chapter 11, but one major element of politics, coalitions, is especially relevant. A coalition is an informal alliance of individuals or groups formed to achieve a common goal, and is often a preferred decision alternative. The impact of coalitions can be either positive or negative.

Managers must recognise when to use, assess, and constrain coalitions.

7.3.2.2.Intuition is an innate belief about something without conscious consideration.

This feeling is usually not arbitrary. Rather, it is based on years of experience and practice in making decisions in similar situations.

7.3.2.3.Another important behavioural process that influences decision making is escalation of commitment to a chosen course of action (sometimes called the sunk cost fallacy), with decision makers becoming so committed to the course of action that they stay with it, or even increase their investment in it, even when it appears to have been wrong. Since the benefits of projects often are seen after completion, decision makers stay with the project until the end and excuse setbacks.

7.3.2.4.The behavioural element of risk propensity is the extent to which a decision maker is willing to gamble when making a decision. The organisation’s culture is a prime ingredient in fostering different levels of risk propensity.

7.3.2.5.Prospect theory focuses on decisions under a condition of risk. The theory argues that such decisions are influenced more by the potential value of gains or losses than the final outcome itself. The theory further argues that, all else being equal, people are more motivated to avoid losses than they are to seek gains.

7.3.2.6.Ethics are a person’s beliefs about what constitutes right and wrong behaviour.

Ethical behaviour is that which conforms to generally accepted social norms; unethical behaviour does not conform to generally accepted social norms. Ethical

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dilemmas for managers may centre on direct personal gain, indirect personal gain, or simple personal preferences.

7.3.3. An integrated approach to decision making Because of the unrealistic demands of the rational approach and the limited, short-term orientation of the behavioural approach, neither is entirely satisfactory. Worthwhile features of each can be combined into a practical approach to decision making, shown in Figure 7.9. The steps are the same as in the rational approach; however, it provides a more realistic process and an analytical framework for making decisions, while the behavioural approach provides a moderating influence.

7.4. Group decision making in the organisation People in organisations work in a variety of groups; therefore, group decision making must be considered.

7.4.1. Group polarisation Members’ attitudes and opinions with respect to an issue or a solution may change during group discussion. Group polarisation occurs when the average of the group members’ post- discussion attitudes tends to be more extreme than the average pre-discussion attitudes.

Several features of group discussion contribute to polarisation. Persuasive arguments can encourage polarisation and can profoundly affect group decision making.

7.4.2. Groupthink Highly cohesive groups and teams often are very successful at meeting their goals, although they sometimes have serious difficulties as well. One such problem is groupthink, which is the tendency of people in a highly cohesive group to value unanimity over their motivation to realistically appraise alternative courses of action. When groupthink occurs, the group unknowingly makes unanimity its goal.

7.4.2.1.Symptoms of groupthink are fostered by the three primary conditions – cohesiveness, the leader’s promotion of his or her preferred solution, and insulation of the group from experts’ opinions. Figure 7.11 outlines the revised groupthink process. Eight well-defined symptoms are: 1. an illusion of invulnerability 2. collective efforts to rationalise or discount warnings 3. an unquestioned belief in the group’s inherent morality 4. stereotyped views of ‘enemy’ leaders 5. direct pressure on a member who expresses strong arguments against 6. self-censorship of deviations from the apparent group consensus 7. a shared illusion of unanimity 8. the emergence of self-appointed ‘mindguards’.

Groupthink often helps to explain why companies and governments sometimes continue to pursue strategies and policies that are clearly failing.

7.4.2.2.When groupthink dominates group deliberations, the likelihood increases that decision-making defects will occur. The group may not re-examine previously rejected alternatives, may reject expert opinions, and may fail to develop contingency plans. Defects in decision making do not always lead to bad outcomes or defeats, but can impact the decision quality.

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7.4.2.3.Several suggestions have been offered to help managers prevent groupthink.

These prescriptions are summarised in Figure 7.13 and fall into four categories, depending on whether they apply to the leader, the organisation, the individual or the process.

7.4.3. Participation A major issue in group decision making is the degree to which employees should participate. Although employees who seek responsibility and challenge on the job may find participation in the decision-making process to be both motivating and enriching, others regard such participation as a waste of time. In tasks that require an estimation, a prediction or a judgement of accuracy – usually referred to as ‘judgemental tasks’ – groups typically are superior to individuals simply because more people contribute to the decision-making process. In problem-solving tasks, groups generally produce more and better solutions than do individuals, but take far longer. Participation in decision making is also related to organisational structure.

7.4.4. Group problem solving A typical interacting group may have difficulty with the generation-of-alternatives phase: the search may be arbitrarily ended before all plausible alternatives have been identified.

To improve the generation of alternatives, managers may employ any of three techniques.

7.4.4.1.Brainstorming is most often used in the idea-generation phase of decision making and is intended to solve problems that are new to the organisation, and to produce totally new ideas and solutions by stimulating the creativity of group members in the development of a list of alternatives that is more innovative and comprehensive than one developed by the typical interacting group.

7.4.4.2.The nominal group technique is another means of improving group decision making such as identifying the problem and the appropriate criteria for evaluating alternatives. This technique uses a cycle of idea generation, discussion and voting; helps to overcome the negative effects of power and status differences among group members; and can be used to explore problems to generate alternatives, but may limit creativity.

7.4.4.3.The Delphi technique was originally developed by Rand Corporation as a method for systematically gathering the judgements of experts for use in developing forecasts for groups that do not meet face to face. The manager who wants the input of a group is the central figure in the process, summarises the responses and reports back to the experts with another questionnaire. This cycle may be repeated as many times as necessary and avoids the intimidation problems that may exist in decision-making groups.

7.5. Creativity, problem solving and decision making Creativity is the ability of an individual to generate new ideas or to conceive of new perspectives on existing ideas. It can play a role in how a problem or decision situation is defined, what alternatives are identified, and how each is evaluated.

7.5.1. The creative individual 7.5.1.1.Researchers have observed that many creative individuals were raised in an environment in which creativity was nurtured, e.g. their background experience.

7.5.1.2.The personal traits shared by most creative people are openness, an attraction 7-6

to complexity, high levels of energy, independence and autonomy, strong selfconfidence, and a strong belief that one is, in fact, creative.

7.5.1.3.Cognitive abilities are an individual’s power to think intelligently and to analyse situations and data effectively. Intelligence may be a precondition for individual creativity. Divergent thinking is a skill that allows people to see differences between situations, phenomena or events, while convergent thinking is a skill that allows people to see similarities between situations, phenomena or events.

Creative people are generally very skilled at both.

7.5.2. The creative process Individual creative activity actually tends to progress through a series of stages. Figure 7.17 summarises the major stages of the creative process.

7.5.2.1.The creative process normally begins with a period of preparation, which usually includes formal training and education.

7.5.2.2.The second phase of the creative process is incubation – a period of less intense conscious concentration during which the knowledge and ideas acquired during preparation mature and develop. A curious aspect of incubation is that it is often helped along by pauses in concentrated rational thought.

7.5.2.3.Insight is a spontaneous breakthrough in which the creative person achieves a new understanding of some problem or situation, and represents a coming together of all the scattered thoughts and ideas that were maturing during incubation.

7.5.2.4.Once an insight has occurred, verification determines the validity or truthfulness of the insight. Verification may include the development of a product or service prototype.

7.5.3. Enhancing creativity in organisations Managers who wish to enhance and promote creativity in their organisations can do so by making it a part of the organisation’s culture, often through explicit goals, or by rewarding creative successes, while being careful to not punish creative failures.

OB in the real world: Deciding on outsourcing at DOT Summary: Laura from the Department of Transport was required to identify opportunities to cut expenses, funding only essential programs and at acceptable quality levels. This meant reducing major capital programs, ensuring stock was operating at required levels for emergency situations, and carrying out just enough maintenance. One of the problems with this approach was that futureyear budgets were developed on the cutback base, resulting in ongoing years of underinvestment and a decline in the state of the assets. DOT now needed to decide the overall direction for making outsourcing decisions.

Challenge: If Laura asked you to review her analysis of the issues, how would you advise her?

Response: Laura used a rational, decision-making approach to determine whether to outsource the maintenance of fleet and equipment over the long-term or retain the operation in-house. She first identified the factors impacting her decision, generated possible alternatives, then evaluated the alternatives and decided on the best possible alternative for each factor. Fleet and equipment were

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not seen as critical to DOT’s mission, and outsourcing services would have minimal impact to customers. Maintenance would have some impact on personnel.

Ethical dilemma: Powered-down trains Summary: John Barrington, the CEO of Railcraft, a $98 million train engine repair company, received notice that the Australian Government reported 36 older freight trains repaired by Railcraft were removed from service because the diesel engines were exceeding Tier 2 nitrogen oxide exhaust emission standards, and 15 new freight trains were removed because they were exceeding Tier 4 emissions standards. Within two hours, more calls come in and a further 19 trains are removed because of what the government claims are problems with Railcraft parts. John fears lender loans might be pulled.

Because the EPA has begun an investigation, John reasons, the only thing to do is to sit. The company is also in the middle of its annual audit and the CEO has to sign a letter stating that the auditors have been informed of any outstanding circumstances that more than likely could have a negative financial impact on the company. Disclosing the EPA investigation could mean the financial demise of Railcraft.

John was in a dilemma: should he make the decision to disclose the information and risk the jobs of hundreds of employees and his own financial stake in the company, or should he stay quiet until he has more information, even though this may damage people’s health? What would you do in this situation?

John’s dilemma is whether he should disclose the pending claim that Railcraft’s parts were the possible cause of the removal from service of 70 trains and risk the jobs of hundreds of employees and his own stake in the company, or remain quiet until he has more information. This type of decision is typical of many of the tough choices managers have to make. From a point of professional conduct, if John knows the parts are faulty, then he would have an ethical responsibility to act; however, it is a claim that the parts are faulty rather than a proven case. The situation is more complex, and John needs to consider interpersonal as well as systemic issues and weigh up what happens to investors who lose their money when word of the EPA investigation goes public, and the effect on his employees if the company has to lay off workers. He also needs to consider the photochemical smog impact caused by faulty engines increasing primary and secondary particulate matter, oxides of nitrogen and volatile organic compounds, and the potential health costs associated with inhalation exposures.

Critical perspective Evidence approaches in EBM Evidence-based management (EBM) approaches to decision making do not occur in an objective way independent of social or political interests. Instead, evidence is constructed to align with the interests of those who run the organisation, all the while being concealed in scientific language of being neutral, value free and universal. In addition, EBM ignores the role of intuition and its place in innovation and creative problem solving. Each key stage of decision making in EBM involves considerations of power, whether it is the definition of the problem, the nomination of the criteria for inclusion or exclusion of action, how the evidence will be interpreted, or which stakeholders will be involved in the decision and their impact. In this context, to deny the influence of power and politics or to downplay their importance may be seen as naive or deceptive.

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Summary LO7.1 Decision making is the process of choosing one alternative from among several. Problem solving is finding the answer to a question.

Programmed decisions are well-structured.

LO7.2 The rational approach views decision making as a completely rational process in which goals are established, a problem is identified, alternatives are generated and evaluated, a choice is made and implemented, and control is exercised. Evidence-based decision making is a recent restatement of the need for rationality when making decisions.

LO7.3 The use of procedures and rules of thumb, sub-optimising and satisficing characterise the behavioural model. Prospect theory suggests that people are more motivated to avoid losses than to make gains. Ethics also affects decision making. The rational and behavioural views can be combined into an integrated model.

LO7.4 Group decision making involves collective approaches to identifying problems, choosing alternatives and evaluating outcomes, and techniques include brainstorming, nominal group and the Delphi technique.

LO7.5 Creativity is the capacity to generate new ideas. Managers can enhance or reduce creativity in their organisations through various means.

Revision questions 1. Post-decision dissonance is a choice that was already made. a. doubt about b. satisfaction with c. resentment towards d. denial of 2. A non-programmed decision is appropriate when . a. a situation requires exceptional problem solving skills b. the particular problem has frequently been encountered before c. decision rules can be applied d. the procedures have been previously tested 3. When there is no known information regarding the outcome of a decision, but enough information exists to estimate the probabilities of several outcomes, a exists. a. condition of uncertainty b. condition of risk c. condition of certainty d. programmed decision 4. Which of the following is/are true about intuition? a. It’s the same as guessing. b. It’s the opposite of rationality. c. It evolves over time. d. All of these.

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Case study: Duplicity in design: the politics of constructing the Western Sydney International Airport Summary: Jack is appointed to WSA Co ‘to deliver an operational airport to permit services to commence not later than the end of 2026.’ Since 1946 there had been an ongoing debate about a potential second Sydney airport. Previous studies had considered demand, capacity, service growth options, environment, community opinions, and costs and benefits, and reports varied in their assessment of the evidence. Jack reflected on why the government had finally established WSA Co as a wholly owned Commonwealth company and committed up to $5.3 billion in equity to build the new airport. The Commonwealth Government wasn’t concerned with short-term returns to shareholders, instead seeing the airport as a national infrastructure with a multiplier effect creating jobs with voters. However, there were delays with weather, lockdowns, problems in recruiting engineers and contractors, safety issues and protests. It was now being said that the cost of the airport was blowing out and would well exceed the budgeted $5.3 billion. Jack considered what information to provide in his meeting with these politicians, including whether he should offer to resign, and framed some mental responses to the questions he thought he would be asked.

Critical 1. What examples of evidence-based management can you see in this case? How would you see EBM impacting on the decision making?

The government commissioned dozens of reports over 66 years before choosing an option.

These reports were extensive and considered factors such as demand forecast, capacity constraints of existing infrastructure, service growth options, environmental impacts, community opinions, and costs and benefits. The findings were not just considered in an objective way independent of social or political interests. Protests, political interests and priorities for funding influenced government decision makers. The government purchase of Badgerys Creek, 43 years prior to the decision to adopt that site, is indicative of how political considerations influence decision making.

2. What potential do you see for escalation of commitment and what might be some factors influencing the current decision-making path?

There is potential for escalation. If these problems continue, then it is likely the costs will be greater than budgeted. Even if the project exceeds the $5.3 billion budget, it is probable that WSA will continue with construction because the government has positioned it as a unique opportunity to build major infrastructure and be a significant catalyst for jobs and economic growth. Government officials would not want the bad publicity of stopping the airport, especially as it has been 72 years in the making. Although members of the community have been demonstrating against aspects of the airport construction, the government is likely to consider the overall community benefit of creating a $50 billion boost to the economy to be greater than the concerns of the protesters.

Mainstream 1. Were the ongoing government studies commissioned to determine the need and a location for a potential second Sydney airport examples of decision making or problem solving?

Justify your choice.

Early studies were examples of decision making, finding an appropriate location that met identified criteria. The studies considered potential site options that satisfied factors such as demand forecast, capacity constraints of existing infrastructure, service growth options, environmental impacts, and costs and benefits. Recommendations were made on the options

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that maximised the value and impact of these factors, but no decisions were made.

2. Do you think the government was using a rational or behavioural approach to decision making in the situation of the potential second Sydney airport? Explain your reasoning.

Some of the studies may have used the rational decision-making approach in assessing alternative locations using available information, but this information would have been limited by time or cost constraints, and would likely not have included all possible outcomes of each alternative. The government was using behavioural approaches to decision making. Even though they were presented with extensive reports, successive governments chose not to proceed because of factors such as political lobbying campaigns, change of government and funding shortages.

Tutorial activities 1. Some have argued that people, not organisations, make decisions and that the study of ‘organisational’ decision making is therefore pointless. Do you agree with this argument?

Why or why not?

Students may or may not agree that the study of ‘organisational’ decision making is pointless.

Many will agree, however, that organisational or group decision making involves a different process from individual decision making. Because decision making in organisations often is conducted by groups, it is important to study how group dynamics influence the decisionmaking process.

2. What information did you use in deciding to enter the school you now attend?

Students may have used information gathered from friends, family members and college representatives in deciding which school to attend. Information may have taken a variety of forms: face-to-face communication and written brochures and pamphlets.

3. When your alarm goes off each morning, you have a decision to make: whether to get up and go to school or work, or to stay in bed and sleep longer. Is this a programmed or nonprogrammed decision? Why? Generally, when the alarm goes off each morning and the individual must decide whether to get up or stay in bed, a programmed decision is involved. This decision probably has occurred often enough that decision rules have been developed. In this situation, the decision maker probably has clear information about the decision situation, action-outcome probabilities and values of outcomes.

4. Describe at least three points in the decision-making process at which information plays an important role.

Information is essential when the problem is identified at the beginning of the decision-making process. The generation of alternatives also requires information. Finally, information is needed in the control phase.

5. How does the role of information in the rational model of decision making differ from the role of information in the behavioural model?

The rational approach to decision making assumes the decision maker is able to gather and process all the information required in the decision-making process. The behavioural approach assumes the decision maker operates with bounded rationality rather than with perfect rationality. Thus, the behavioural approach suggests that individuals are unable to process all the relevant information and to generate all possible solutions. In other words, the decision maker limits the amount of information used in the decision-making process.

6. Why does it make sense to discuss several different models of decision making?

Discussing several models of decision making is quite useful because decision-making situations 7-11

differ in actual practice. One model of decision making may fit one situation, and another model may be appropriate for a different situation. Trying to fit only one model to every decisionmaking situation probably would be a very frustrating experience. Therefore, we can explain decision making better by using several different approaches.

7. Can you think of a time when you satisficed when making a decision? Have you ever sub- optimised?

Most people can think of situations where they have satisficed or sub-optimised. Satisficing occurs when the decision maker examines alternatives only until a solution that meets minimal requirements is found. Examples of satisficing might include searching for a place to eat that accepts a credit card, searching for a laundry or cleaners that is close to work or home, and deciding on a particular vendor for a noncritical part or subassembly for a product. Suboptimising occurs when the decision maker knowingly accepts less than the best possible outcome to avoid unintended negative effects on other aspects of the organisation. Examples of satisficing might include selecting a supplier for a part that does the job for two different subassemblies rather than just one, and finding a store that does both laundry and cleaning even though it is a little farther from your home rather than using two different stores, both of which may be closer to your home.

8. Describe a situation in which you experienced escalation of commitment to an ineffective course of action. What did you do about it? Do you wish you had handled it differently?

Why or why not?

Escalation of commitment refers to the tendency to persist in an ineffective course of action when evidence indicates that the project is doomed to failure. The textbook suggests four common reasons for such action. Students probably will report a situation where they had considerable investment with no payoff likely until the project’s end. Others may report situations where group norms and cohesiveness supported a group project so strongly that cancellation was not possible.

9. How comfortable or uncomfortable are you in making risky decisions?

Differences will appear based on the strength of the respondent’s risk-avoidance propensity. In situations that seem to offer only risky alternatives, such individuals may be extremely uneasy and try to avoid such situations as much as possible. Important decisions, by their nature, often carry high risk for potential disaster.

10. Do you consider yourself to be relatively more or less creative? Recall an instance in which you made a discovery using the four phases of the creative process.

People vary in their assessment of their own creativity. Some may have an inflated estimate of how creative they are because creativity is considered desirable and it may flatter their ego to be considered creative. Also, not everyone has the same definition of creativity.

Group exercise – Superheroes Learning objective: Describe how managers can enhance decision-making creativity.

Summary: Each student should pick his or her favourite superhero. Now assume that a large earthquake just hit a populated island. How could your superhero assist the island?

Task: Take 5 minutes to write down your ideas. Now form groups of 5–6 students. Share your superheroes and the ideas you generated based on your superhero’s special abilities (e.g. Batman could use his gadgets and tools to help free people trapped in rubble). The group should then work together to identify true possible solutions based on the ideas generated for the superheroes (e.g.

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Batman’s grappling hook might be adapted for use in moving large obstacles during rescues).

Questions to guide discussion: 1. How can managers enhance decision-making creativity?

2. What are the organisational challenges to creativity?

(We thank Professor Jim Gort of Davenport University for suggesting this exercise.)

Mini-simulation (MindTap-only) Imagine being part of a group with three other co-workers trying to make a decision about whether to discontinue funding an underperforming product. The group has been working together on the product line for three years, but the product is clearly a failure. When you start to question where the decision is headed, you are called disloyal and told to go with the team and give the product more time. One of the team members calls for a final vote on the group’s decision, which appears to be to continue funding a clearly awful and doomed-to-fail product. What do you say or do?

Go to this chapter’s mini-simulation, watch the challenge video and choose a response. Be sure to also view the outcomes of the two responses you didn’t choose.

OB concepts applied: groupthink, stereotyping, conformity pressure, self-censorship, mindguards, escalating commitment Discussion questions 1. Is this decision a programmed or non-programmed decision and what is the basis for your answer?

This appears to be a non-programmed decision. However, with new products rolling out every year, Happy Time Toys should have some type of decision-making process in place for products that perform below their planned performance. Maybe Alex’s suggestion to have another manager with ‘new eyes’ view the sales results will become part of a programmed decisionmaking process for underperforming products.

2. How is groupthink and stereotyping illustrated in these videos? Explain your answer.

Groupthink is a mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members’ strivings for unanimity override their motivation to realistically appraise alternative courses of action. In the video, the group goes ahead and votes yes (incorrect response #1). Alex wants more time and resources for the product because of an escalating commitment, persisting with a failing course of action. Allison simply goes along with Alex, ‘Great! I really think this product will take off.’ Bill follows the others, ‘Me too!’

Symptoms of groupthink: • Direct pressure to conform placed on any member who questions the group, couched in terms of ‘disloyalty’ – When Alex questions the decision to go forward with the product, he is accused of being disloyal. Alex says, ‘Maybe we should take a step back and review whether the product should really be continued. Those sales numbers are pretty disappointing …’ Bill says: Stop being disloyal, Alex.’

• Mindguards – self-appointed members who shield the group from conflicting information.

Ryan withholds information from Amy about the failure of the product. Ryan says, ‘I’ll tell Amy we think the product just needs more marketing investment. I still think we have a winner here.’

• Self-censorship of ideas that deviate from the apparent group consensus – When Alex decides to abstain from voting (incorrect response #2), the group criticises him. Allison says,

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‘Oh come on, Alex. Get with the program.’ Bill says, ‘That’s lame, Alex.’ Later, Ryan offers an alternative idea that the group likes but doesn’t pursue. Ryan says, ‘We should think about setting up a more consistent process for evaluating when to cut off a product.’

To counteract the effect of groupthink, the group gets an outside opinion (correct response). A manager who has not been involved in the product’s development evaluates the situation. Alex says, ‘I feel like we’re too close to this decision. Maybe we should ask another manager who hasn’t been involved in the Titan Tie’s development to review it and give us an opinion.’

3. Would a rational decision-making approach work? Why or why not?

A rational decision-making approach works for this situation and is likely the approach used by the outside manager. The team is not using the rational approach when they decide to ask for more money and expand the marketing plan for this underperforming product. The group had so much invested in the product they wanted it to perform at any cost. A rational approach of looking at the declining sales and costs of production should have been enough to convince the team to discontinue the Titan Tie. 4. As a manager, how else might you handle this situation?

Because managers are often punished for failure, they are also more likely to persist in the face of negative results. One way to handle this situation is to create reward systems that reinforce a faster recognition of failing projects can help reduce the effects of escalation of commitment.

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CHAPTER 8 – COMMUNICATION Chapter overview Communication is the glue that holds organisations together. Communication is related to higher levels of employee engagement, which are related to higher shareholder return and increased market value.

Managers must have good communication skills, particularly during times of crisis. This chapter discusses the communication process, basic issues in interpersonal communication, methods of communicating, and how information technology (IT) and the internet have influenced organisational communications, as well as the skills and barriers to becoming an effective communicator.

Learning outcomes After studying this chapter, students should be able to: 1. describe the communication process, explain the difference between one-way and two-way communication, and identify barriers to effective communication 2. identify and discuss the major communications skills used by managers 3. discuss communication media and describe the richness of each 4. describe different forms of organisational communication.

Guide your learning 1. When you are trying to have a conversation with someone, what are some things that can impact on how well the messages between you are received? (LO1) 2. As a manager, what are the major communication skills you could use in a work situation? (LO2) 3. What are the main communication media used by people in organisations? (LO3) Chapter outline 8.1. The communication process Communication is the process of transmitting information from one person to another to create a shared understanding and feeling. Communication does not mean agreeing. Figure 8.2 illustrates the communications process. There are six parts for the model of the communication process: 1. Encoding occurs when the message sender converts a thought, idea or fact into a message composed of symbols, pictures or words.

2. The message is the encoded information being sent.

3. The channel is the medium used to send the message to the receiver.

4. Decoding is the interpretation and translation of the message back into something understood by the receiver.

5. Feedback is a check on the success of the communication.

6. Noise is anything that blocks, distorts or changes in any way the message the sender intended to communicate.

In the communication process the sender translates (encodes) information into words, symbols, or pictures and passes it to the receiver through some medium (channel). The sender then receives the message, retranslates (decodes) it into a message that is hopefully the same as that the sender intended. Noise can enter anywhere in the process, making the message received different from the one the sender intended. Feedback creates two-way communication that helps 8-1

to check on the success of the communication and ensure that the received message was accurate.

8.1.1. Non-verbal communication The way we communicate is more important to a message’s meaning than the words we actually say. Non-verbal communications are not spoken or written.

8.1.1.1.Body language is a body movement such as a gesture or expression that conveys information to others. Research suggests that 7 per cent of the total message is conveyed by words, 38 per cent of the total message is conveyed by vocal intonation, and 55 per cent of the total message is conveyed by facial and body expressions. If any of the three parts are incongruent, conflicting messages are being sent.

8.1.1.2.Verbal intonation is the emphasis given to spoken words and phrases. When body language is inconsistent with the spoken message, receivers are more likely to interpret your body language as the ‘true meaning’.

8.1.2. One-way and two-way communication In one-way communication, information flows in only one direction. The sender communicates a message without expecting or getting any feedback from the receiver. Once a receiver provides feedback to a sender, the sender and the receiver have engaged in two-way communication.

8.1.3. Task interdependence When one person or unit is dependent on another person for resources or information to get work done, communication needs to increase. There are three types of interdependence, illustrated in Figure 8.6. Pooled interdependence is when employees work independently and their output is combined into group output. Sequential interdependence requires tasks to be performed in a certain order. Reciprocal interdependence requires constant communication and mutual adjustment for task completion, such as a cross- functional research and development team, or an event-planning team, and creates the highest potential for conflict.

8.1.4. Barriers to effective communication Figure 8.7 summarises some of the most common barriers that can interfere with the accurate communication of a message.

8.1.4.1.Selective perception occurs when something is selectively interpreted based on interests, expectations, experience and attitudes rather than on how things really are.

8.1.4.2.Misperception occurs when a message is not decoded by the receiver in the way the sender intended because the sender’s body language is inconsistent with the sender’s words, or the receiver selectively perceives favourable parts of the sender’s message, or because of poor listening skills.

8.1.4.3.Filtering occurs when people receive less than the full amount of information due to the withholding, ignoring, or distorting of information, and can occur when a sender manipulates information so the receiver is likely to perceive in a favourable way.

8.1.4.4.Filtering can also occur when a receiver has too much information. When the amount of information available exceeds our ability to process it, we experience information overload.

8.1.4.5.Organisational barriers to communication come from the structure and culture of the organisation. Difficult hierarchy levels or organisational cultures that promote 8-2

limited sharing of information create barriers.

8.1.4.6.Words and gestures can mean different things in different cultures, creating cultural barriers. In some cultures, people tend to say what they mean and these low-context cultures rely on the words themselves to convey meaning. People in high-context cultures rely on non-verbal or situational cues or things other than words to convey meaning.

8.1.4.7.Noise is anything that blocks, distorts or changes the information the sender intended to communicate anywhere in the communication process, such as interruptions, loss of transmission, and ambiguity. Ambiguity of meaning occurs when the receiver is not sure what the sender meant, while ambiguity of intent means the receiver is uncertain about the message’s consequences. Jargon, or technical language, can also create ambiguity when the receiver does not understand it. Semantics are another barrier that introduces noise into communications because words mean different things to different people.

8.2. Communication skills Many barriers exist to good communications that are beyond an individual’s control, but improving communication skills can help to overcome these barriers.

8.2.1. Listening skills Listening is not the same as hearing. Hearing is passive; listening is an active search for meaning. Active listening requires becoming actively involved in the process of listening to what others are saying and clarifying the meaning of messages if they are unclear. Both parties should engage in active listening until it is clear that each understands the final message. Being an active listener requires concentration, to tune out noise and concentrate on the message. Experts generally offer the following suggestions for being a good listener, as shown in Figure 8.11: • Pay close attention and make logical connections.

• Give non-verbal evidence you are listening.

• Give verbal evidence you are listening.

• Show respect by not interrupting, and use an inclusive, friendly tone.

• Follow up on unusual or inconsistent communication cues.

• Use what the speaker says or infers to determine motives, self-interest and expectations.

• Offer honest, clear, timely, respectful and relevant acknowledgement 8.2.2.

Writing skills

Effective business writing needs to be professional and direct, and style and tone appropriate for the audience. Always proofread. Experts suggest these guidelines for effective business writing are outlined in Figure 8.12: • Write to express, not to impress.

• Back up assertions.

• Write for the audience.

• Edit and revise.

• Format for readability.

• Use graphic aids and pictures where appropriate.

• Write with energy and conviction, avoid passive voice.

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8.2.3. Effective email Because email falls in between a phone call and a letter, email etiquette can be difficult.

Figure 8.13 provides some suggestions for effectively using email at work: • Deliver personal information in person or by telephone.

• Avoid unprofessional addresses for business emails.

• Respond to every part of the email that warrants a response.

• Respond quickly or let them know when.

• Read once or twice before sending.

• Write concise and informative subject lines.

• Do not criticise others via email.

• Do not use your inbox as a catchall folder.

• Agree on acronyms for subject lines.

• Send group mail only when useful to all recipients.

• Use the out of office facility.

• Make sure the recipient can open attachments.

• Avoid sending large attachments and graphics.

• Consolidate messages into one organised email.

8.2.4. Presentation skills Managers need effective presentation skills to present proposals to supervisors and to communicate with other managers and groups of subordinates at once. Some suggestions are given in Figure 8.15 for making effective presentations: • Practise to feel comfortable.

• Speak up and speak clearly.

• Quickly achieve rapport.

• Channel nervous energy into an enthusiastic delivery.

• Move freely and naturally without pacing, look at your audience.

• Minimise notes, use them as ‘thought triggers’ only.

• Highlight key ideas.

• Watch the audience for signs of comprehension or misunderstanding.

• End with a bang.

8.2.5. Meeting skills Meeting effectiveness may be improved when people come prepared to meetings, an agenda is used, meetings are punctual (start and end on time), purposes are clear and there is widespread participation. Leading meetings requires skills in organising, eliciting input from meeting participants, and conflict management. Here are some suggestions for running effective meetings: • Have a good reason to meet.

• Have an agenda clearly stating the purpose and key steps.

• Send the agenda in advance.

• Be fully prepared for the meeting.

• State a time frame at the beginning of the meeting.

• Require that participants come prepared.

• Keep participants focused on the agenda items.

• Follow up on any outside assignments.

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8.3. Communication media Managers can choose from a variety of communication media. Media richness is an important factor for each form.

8.3.1. The internet Individuals using the internet are able to select only the information they want using information pull. Information pull occurs when someone receives requested information, and contrasts with information push where people receive information without requesting it just in case they need it. Communication choice can help the communication process. Email helps managers prioritise, stay involved while away, and has evolved to become a primary and formal means of correspondence. Voicemail is similar to email but instead of writing, a spoken message is digitised. Instant messaging enables users to see who is logged on and to chat with them in real time. Videoconferencing can enable leaders to communicate effectively without being face-to-face. Online or virtual work allows organisations to reduce the office space needed, decreases employees’ need to commute to work and boosts employee engagement.

8.3.2. Collaborative software Collaborative software facilitates information sharing by providing an online or intranet-based environment for virtual teamwork. Collaboration solutions often feature real-time integration and communication, allowing work done on a single project from several different computers located anywhere in the world. Collaborative writing systems allow group members to work simultaneously on written documents, and workflow automation systems use technology to facilitate and speed up work processes. Decision support systems are interactive, computerbased systems that help decision-making teams find solutions to unstructured problems that require judgement, evaluation and insights.

8.3.3. Intranets and cloud servers An intranet is a type of centralised information clearinghouse, a website stored on a computer that is connected to other company computers by an internal network. Employees reach the intranet and cloud sites with standard web- browser software. Intranets are not useful if many employees do not use or have access to computers, or if no one has the expertise to set up and manage the intranet.

8.3.3.1.Portals tend to be more project-focused and allow managers to use their browser to get a high-level summary of project status at any time. Project managers use portals to manage schedules and any issues that arise. Managers can also use portals to quickly disseminate information and solicit input and feedback in a controlled manner. Portals allow team members to easily share news and ideas, and can be integrated with other applications.

8.3.3.2.Webcasts are live or pre-recorded video segments that are broadcast over a company’s intranet and archived for employees to view later.

8.3.3.3.Wikis are searchable, archivable websites that allow people to comment on and edit one another’s work in real time. They are essentially a simplified system of creating webpages combined with a system that records and catalogues all revisions, and have no inherent structure. Access can be restricted to a limited group of people and even require passwords.

8.3.3.4.Blogs are individuals’ chronicles of personal thoughts and interests.

8.3.4. Oral communication Technology-based message channels can increase the chances of miscommunication.

Communicating in person is important to building credibility and trust. To be perceived as 8-5

competent communicators, managers must respond in a timely manner, actively listen, communicate clearly, and use a variety of communication channels.

8.3.5. Media richness Communication media can be classified in terms of their richness, or their ability to carry nonverbal cues, provide rapid feedback, convey personality traits, and support the use of natural language. The richness of a medium depends on four things: 1. Interactivity or the availability of feedback 2. The ability to transmit multiple cues 3. Language variety for conveying a broad set of concepts and ideas 4. The personal focus for emotions and other social cues Face-to-face is the richest medium because it has the capacity for immediate feedback, carries multiple cues, and uses natural language. Managers must choose the medium that best matches the information richness required of the task or communication. Figure 8.17 describes how different media compare.

8.4. Organisational communication Organisational communication is the exchange of information among two or more individuals or groups in an organisation that creates a common basis of understanding and feeling. Figure 8.18 illustrates downward, upward, horizontal and diagonal communication paths in organisations.

8.4.1. Downward communication Downward communication occurs when higher-level employees communicate to those at lower levels of the organisation, and typically consists of messages about how to do a job, performance goals, the firm’s policies and how the company is performing. Management by wandering around (MWBA) is a face-to-face management technique in which managers get out of their offices and spend time talking informally to employees throughout the organisation.

8.4.2. Upward communication Upward communication occurs when lower-level employees communicate with those at higher levels. Encouraging upward communication can help managers check that subordinates understand their goals and instructions, keep managers informed of employee challenges and complaints, and cultivate acceptance and commitment by giving employees the opportunity to express ideas and suggestions.

8.4.3. Horizontal communication Horizontal communication occurs when someone in an organisation communicates with others at the same organisational level. Although horizontal communication occurs between peers, it is best to stay professional and avoid confrontational words and negative body language.

8.4.4. Diagonal communication When employees communicate across departments and levels, they are engaging in diagonal communication. Diagonal communication is common in cross-functional project teams.

Diagonal communication can also be inappropriate, depending on the situation and the people involved.

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8.4.5.

Formal and informal communication

Formal communications are official, organisation-sanctioned communications. They can be upward, downward, horizontal or diagonal, and typically involve some sort of written communication that provides a permanent record of the exchange. Informal communication is anything that is not official. As a manager, being aware of current office gossip can help to keep informed of what is on employees’ minds, and prevent rumours from growing out of control or neutralising them by consistently and honestly communicating with employees.

8.4.6. Social networking A social network is the set of relationships among people connected through friendship, family, work or other ties. These informal networks can be helpful, and consist of both formal and informal ties. Formal ties refer to relationships with co-workers, bosses and others we know because of the roles we hold. Informal ties are relationships based on friendship and choice. Both employees and managers need to be careful about what they post on internet social networking sites.

OB in the real world: Communicating values at BUPA Summary: BUPA is a private, international healthcare not-for-profit company operating in over 190 countries. BUPA recognised it needed to develop a new set of shared values and embed them throughout the organisation globally. BUPA considered traditional methods of communicating but knew they typically had limited success. BUPA decided that it would communicate the values globally and launch them in Australia and New Zealand at a two-day leadership conference.

Challenge: BUPA wanted to do something different at the conference and in the concurrent process to communicate its values among its employees. The company asks you for advice about how to effectively establish and communicate its new core values to employees. What would you recommend?

Response: Using the Australia and New Zealand leadership conference as a launch pad, seven regional leaders were chosen to share a personal story that communicated one of BUPA’s seven global values.

All of the leaders were trained in storytelling and told their stories at the conference. By leaders sharing their personal stories through formal and informal channels they developed deeper connections within the organisation.

Ethical dilemma: Fake news?

Summary: Tonia Hughes, newly appointed Chair of the Standards Committee with a major city newspaper, reflected that today, reporters didn’t have to get out much into the community, they just logged on. By using social media, reporters could access a whole range of information sources including public opinion polls, or communicate with people not yet known. Tonia saw it was still imperative that journalists behaved ethically by producing verified content that was accurate, independent and fair, and done in ways that protected the confidentiality of sources and considered the impact on humanity.

Tonia thought about whether or not one of the paper’s youngest reporters, Alex, had breached the ethics code with his series of reports over the past five years. Alex had been covering federal, state and local council elections, writing stories that often used quotes that were attributed to anonymous sources. It was now revealed that he had used materials without acknowledgement, had plagiarised,

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had factual errors and had fabricated entire story details. Tonia noted that he had been promoted twice and most of his 75 stories had been unquestioned. However, in the last two years two different editors had made a series of corrections, and one had commented that the reporting was deeply flawed and Alex should be suspended. Tonia could not find mention in Alex’s file of any action.

Tonia considered the question she would ask the Standards Committee: in what ways had Alex breached the newspaper’s standards of ethical journalism and what role did the paper play in the matter? How would you respond to this question?

A range of associations in Australia deal with ethical standards for journalists, editors and publishers; however, there is no one set of standards. Most commonly cover honesty, accuracy and clarity; impartiality, fairness and balance; privacy and avoidance of harm; and integrity and transparency.

Alex breached these standards by committing fraud and plagiarism. Using anonymous sources is acceptable if it respects privacy and avoids harm, but is not acceptable if used to hide poor investigative methods. Using anonymous sources makes it difficult to verify, and also means that the public is unable to dispute the story. Alex is in the wrong for plagiarising and fabricating stories. The newspaper was wrong for failing to deal with Alex and allowing multiple acts of falsification. Allowing Alex to continue to write, and promoting him despite warnings, points to a failure in the newspaper’s management who failed to meet the required standards of ethical publication. The public is betrayed because there is an expectation that the information in the newspaper is not fake news.

Critical perspective Communication realities Communication involves more than conduit considerations of how the process operates, and instead considers the way organisational members create and shape the organisation through communication and how powerful people use communication to achieve their own ends. Work plays a larger role in people’s lives, as organisations become the dominant institutions in today’s society. Corporate colonisation consumes people’s lives and shapes their identity. Organisations expend large amounts of money and time communicating corporate goals in an attempt to co-opt the values, beliefs and emotions of employees.

Summary LO8.1 The communication process starts when a sender encodes information and passes it to the receiver through some channel. The sender then receives and decodes it into a message that is hopefully the same as what the sender intended. Noise can enter anywhere in the process. Feedback creates two-way communication that helps the success of the communication. Non-verbal communication and task interdependence also affect the communication process, as do potential barriers to effective communication.

LO8.2 Successful managers usually have strong communication skills; listening skills are especially important.

LO8.3 Managers and employees use a variety of communication media. Managers need to fit the media to the message, use appropriate body language and non-verbal cues, and ensure that subordinates understand the meaning of the messages sent.

LO8.4 Organisational communication can move in a variety of directions, and be formal or informal in nature. Social networks help to establish communication patterns in organisations.

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Revision questions 1. What term refers to the encoded information of the communication process? a. Feedback b. Channel c. Decoding d. Message 2. Which of the following is not a recommended suggestion for making an effective presentation? a Highlight key ideas. b. Watch the audience for signs of comprehension or misunderstanding. c. Pace back and forth. d. End with a bang!

3. Which of the following is not a recommended suggestion for running an effective job interview meeting? a. Show sincerity in your vocal tone. b. Try to make the candidate feel relaxed. c. Use open body language. d. Multitask during the interview.

4. Which of the following is not a recommended suggestion for running an effective meeting? a. Require that participants come prepared to discuss the topics on the agenda. b. Allow participants to engage in interpersonal issues. c. State a time frame at the beginning of the meeting and stick to it. d. Follow up on any outside assignments made to meeting participants.

5. Within the communication process, a check on the success of the communication is called . a. feedback b. noise c. decoding d. encoding Case study: Learning as a dialogue Summary: Professor Mary McGregor focused her classes on developing well-rounded individuals able to ask questions, challenge opinions, propose views and engage collaboratively with difficult ideas. She considered it important that students participate actively in their learning, and that they exit from her unit able to apply their knowledge in a range of contexts in a globalised world. Mary did not think it was possible to achieve these aims via a mass dump of information with no opportunity for students to reflectively consider the practice implications in pairs and small groups. Mary knew that the basis of the large classes was rationalisation; however, she did not think that knowledge could be reduced to the transmission of immutable facts. Mary was concerned that the university was pushing towards greater corporate colonisation.

Critical 1. How does the proposed change to Mary’s OBM class fit the process of rationalisation?

The desire to change Mary’s class from 25 students to a possible 250 or 500 students is reflective of an emphasis on efficiency, control, predictability and calculability. The larger numbers require a conduit model where the interaction between lecturer and students is reduced. Recording the lecture allows it to be distributed to thousands of other students, but does not capture the individual experience or the reflective process that Mary sees is important in university education.

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2. In what ways is the university’s approach an example of corporate colonisation?

The university’s shift towards training students for a corporate job rather than developing citizens who are critically aware is illustrative of corporate colonisation. Positioning students as consumers of products is another aspect of this push, as is the expectation that all knowledge can be prepackaged in textbooks and communicated in a mass lecture format, often recorded for wider dissemination.

Mainstream 1. In what ways are the university’s move towards large lecture-style classes similar to or different from the process of communication presented at the beginning of this chapter?

The university is proposing a move towards a conduit model of communication where information is transmitted and received as it was intended. The lecturer encodes a message, then sends the message in the class using the channel of voice and perhaps writing, graphs, videos, internet and body language. The students decode the message, and in varying ways interpret and translate the message into something they understand. At any point, noise may block, distort or change the message the sender intended to communicate. The conduit model does not consider the value or appropriateness of this approach in dealing with organisational behaviour and management concepts.

2. What might be some communication barriers in the conduit model of the large lecture-style classes that could interfere with accurate communication of the lecturer’s message?

In the conduit model, the students might experience the communication barriers of selective perception, misperception, filtering, information overload, organisational barriers, cultural barriers and noise.

Tutorial activities 1. What are your preferred methods of receiving information? Does your answer differ depending on the type of information being sent?

Answers will vary. Some people prefer email unless the subject is sensitive, and then the preference may be either a telephone call or a letter.

2. What are the implications of organisational diversity on the communication media the company should use?

Words and gestures mean different things in different cultures. For example, in much of the world the thumb up sign means ‘O.K.’; however, in Nigeria, it is an insult. Because of global diversity, even short straightforward messages are difficult to communicate. For example, Dole conducted a mass communication campaign that included small and large group meetings, emails, newsletters and the intranet, but only one-tenth of the employees work at computers. As a result, Dole spent extra funds to have managers communicate to employees in person. Face-to-face communication is often the best alternative for reaching diverse employees.

3. What are some of the most common sources of noise when others try to talk to you? What can you do to reduce their effects?

Answers will vary. The most common sources of noise are mobile phones and messaging. Often students receive messages in the middle of class.

4. Think of a time when you have been persuaded by someone to do something. Why was the other person able to change your attitude or behaviour?

Answers will vary. Often individuals are persuaded because the activity appeals to personal values.

5. If you had to tell your boss bad news, what communication media would you use?

If possible, use face-to-face communication, the richest media because this would allow the 8-10

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explanations of the circumstances, uses facial expressions and body language, and allows the boss to respond immediately and express their feelings.

If you were about to be fired, how would you want to hear the news? Why? How would you least want to hear the news? Why? Most would want to hear the news face-to-face so that they could ask questions and respond. Most would least want to hear the news in an email because it is impersonal, and does not allow immediate answers to questions.

Which do you think is more important for organisations: downward communication or upward communication?

Downward communication is more important because it consists of messages about how to do a job, performance goals, the firm’s policies, and how the company is performing. This information keeps employees engaged, committed and motivated to put forth the effort to reach company goals. Committed employees experience higher levels of job satisfaction. One form of downward communication is by management wandering around. This allows managers to hear the employees’ opinions and serves the same purpose as upward communication.

Which do you think is more important for organisations: formal or informal communication?

Formal communication is more important because it is official, organisation-sanctioned communication that can be upward, downward, horizontal or diagonal. Formal communication involves written communication that provides a permanent record. Because formal communication is usually interpreted accurately, employees have a clear picture of the situation or issue at hand.

This reduces fear and ambiguity.

What role, if any, do you feel the grapevine plays in organisations?

The grapevine plays a critical role in organisations because it carries rumours that may or may not be true. For instance, if the grapevine carries the rumour that layoffs are coming, employees may spend time worrying and looking for jobs rather than working.

Group exercise – Active listening Learning objective: Explain how the way we communicate can be more important to the meaning of a message than the words we actually say.

Summary: Form small groups. Each group selects a workplace scenario: 1. An employee asking for a raise 2. A supervisor explaining a new vacation policy to an employee 3. A new employee asking a co-worker about the company’s culture 4. Two new employees generating potential solutions to a problem Each group has 20 minutes to prepare two 3-minute skits. The first skit, performed by team members one and two, shows the interaction without active listening techniques. The second skit, performed by team members three and four, duplicates the conversation but uses active listening techniques.

Task: Questions to guide the discussion: 1. What is the difference between active listening and hearing?

2. What steps can you take to become an active listener?

(The authors thank Professor Jim Gort at Davenport University for suggesting this exercise.)

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Mini-simulation (MindTap-only) Imagine having a tight deadline requiring you to focus on writing a report for the rest of the day in order to get it done on time. A worried-looking subordinate enters your office and ineffectively tries to communicate a hurried message. What do you say or do? Go to this chapter’s mini-simulation, watch the challenge video, and choose a response. Be sure to also view the outcomes of the two responses you didn’t choose.

OB concepts applied: encoding, noise, message, channel, decoding, feedback, one-way communication, one-way and two-way communication, selective perception, body language, non-verbal communication, active listening, media richness, upward and downward communication, formal and informal communication Discussion questions 1. What communications barriers are illustrated in these videos?

Barriers to effective communication are illustrated in these videos (see Figure 8.2). Mary uses a heavy accent and poor verbal communication. She is ineffective at communicating her message.

This is a cultural barrier because different national cultures have different ways of expressing things.

There is also the barrier of selective perception because the message Alex heard was based on his expectations. He thought that Mary knew how to fix the machine and that he didn’t need to get involved. There was also the barrier of misperception because the gravity of the broken machine (the message) was not decoded by Alex in the way that Mary intended.

There was also the barrier of information overload. Alex was busy thinking about the report and didn’t completely process the information about the broken machine. There was also the barrier of filtering in which less than the full amount of Mary’s information was received due to Alex’s ignoring information about the importance of the broken machine. Amy is the one who understands the full impact of the message, ‘I’m sorry to hear the machine broke, but you did the right thing by fixing it right away. We can’t afford to have the production line down very long, and safety is our top priority.’

2. How do these situations illustrate the importance of verbal and non-verbal communication as well as active listening?

Communication is the transmission of information from one person to another to create shared understanding. Mary did not successfully explain what was malfunctioning on the extrusion machine, and Alex did not understand the message (incorrect response #2). Alex says, ‘… I don’t fully understand the problem you are describing, but I’m sure you can take care of it on your own. You know a lot about that machine.’ As shown in the communication model, Figure 8.2, encoding, message, channel, decoding and feedback took place between Mary and Alex. Alex and Mary engaged in two-way communication, which provides feedback to the sender. However, noise – Alex’s preoccupation with his report – blocked Mary’s message.

Non-verbal communications are not spoken or written but have meaning to others. Body language is a gesture or expression. Mary shows concern by having a serious expression on her face when Alex tells her that he is busy and can’t be bothered with her problem. ‘Oh well, keep at it – I’m sure you’ll figure it out. I’m really busy, Mary. This report is due very soon!’ When the machine explodes, Mary looks stunned, upset and dishevelled (incorrect response #2) because she had tried unsuccessfully to explain the gravity of the problem to Alex.

Active listening means becoming actively involved in the process of listening to what others are saying and clarifying meaning. It requires Alex to become actively involved in the process of listening to what Mary has said about the broken machine (correct response). Both Alex and Mary finally 8-12

engage in active listening until each one understands the final message. Alex says: ‘... I’m not understanding the problem. Please tell me again what is wrong. Try to speak more slowly – I can see you’re upset.’ Mary explains that the extrusion machine isn’t working properly. Alex clarifies the message, ‘Did you try rebooting it?’ Alex had to tune out noise and concentrate on the message of the broken machine. He had to repeat Mary’s point to provide feedback. Alex made eye contact and showed appropriate non-verbal behaviours such as leaning forwards to show the Mary that he was listening intently.

3. Which other aspects of communication discussed in this chapter are illustrated in these videos? Explain your answer.

Mary sent Alex a message about the problem with the machine but did not get a response. This time, Mary chose to talk to Alex face-to-face. This type of communication is important in this situation due to the richness of the media and Mary’s ability to get immediate feedback on the problem. Mary was able to read Alex’s cues and non-verbal communication in the first two instances to see that she was not going to get a response. On the third alternative, Alex shut his computer and gave Mary his full attention. This allowed Alex to determine that the machine was an immediate problem that needed attention and the report could wait.

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CHAPTER 9 – CONFLICT AND NEGOTIATION Chapter overview Conflict is an inevitable result of interdependencies among people, workgroups and organisations.

Some conflict is beneficial and can lead to positive outcomes including better decisions, more motivated employees, and happier customers. When it is well managed, conflict can improve problem solving and innovation, increase employee involvement and commitment, and clarify work processes and goals.

Negotiation is an important skill in managing and resolving conflicts.

Learning outcomes After studying this chapter, students should be able to: 1. describe the nature of conflict, discuss the conflict escalation process and describe how conflict can be de-escalated 2. identify and discuss the five interpersonal conflict management strategies 3. describe some of the best and worst conflict resolution behaviours and discuss how to create constructive conflict 4. describe the difference between distributive and integrative negotiation and identify the three types of alternative dispute resolution.

Guide your learning 1. How do you define conflict? (LO1) 2. Do you think conflict is positive or negative? (LO2) 3. Considering that businesses are growing more global, do you think there are any cultural issues in negotiation? (LO3) Chapter outline 9.1. The nature of conflict Conflict is a disagreement that arises when two or more parties perceive a threat to their interests, needs or concerns. Conflict can be both constructive and destructive. The conflict management process, not just the outcomes desired by the parties, is key to realising the potential benefits of a conflict. Behaviours that escalate a conflict until the conflict seems to take on a life of its own generate dysfunctional conflict. Dysfunctional conflicts focus on emotions to the extent that the parties forget the substantive issues and focus on getting even, retaliating or even hurting the other party. When effectively managed, conflict can be healthy. Interpersonal conflict can lead to greater learning, flexibility and creativity.

Behaviours that are adaptive and responsive to the situation, person and issues create constructive conflict. Constructive conflicts, also called functional conflicts, balance the interests of both parties to maximise mutual gains and the attainment of mutual goals.

9.1.1. Common causes of conflict Conflict can be caused by anything that leads to a disagreement. The most common sources are summarised in Figure 9.2.

9.1.1.1.Differing task goals can create task conflict or a disagreement about the task or 9-1

goals. A moderate amount of task conflict is beneficial in the early stages of a project because it increases innovation. Task conflict is more likely to be detrimental over time when tasks are complex.

9.1.1.2.Differing process goals allow for a difference in how to accomplish a goal, with agreement about what to accomplish. Process conflict reflects conflict about how to accomplish a task, who is responsible for what, or how things should be delegated. Role ambiguity increases process conflict.

9.1.1.3.Interpersonal differences are a common trigger of relationship conflict, which is the result of incompatibility or differences. It can also be triggered by personality, particularly the personality traits of dogmatism and power motivation, and is rarely a good thing. It is consistently recognised as a primary source of stress. Relationship conflict is fuelled primarily by emotions and by perceptions about the other party’s personality, character or motives. Effective project teams tend to have low but increasing levels of process conflict, moderate levels of task conflict in the middle of the project, and low levels of relationship conflict that increase towards the end of the project.

9.1.1.4.Interest conflicts can occur when someone believes that to satisfy his or her own needs, the needs and interests of someone else must be sacrificed, and can occur over: • substantive issues including time, money, and physical resources • procedural issues involving the way the conflict will be handled • psychological issues including perceptions of fairness, trust or interest in participating.

9.1.1.5.Change also causes conflict. One of the primary drivers of conflict is uncertainty.

External changes can also trigger conflict if regulations or changing market conditions change the relative importance of different organisational groups.

9.1.1.6.People have differing values and worldviews. These differences are the source of values conflict, or conflict arising from perceived or actual incompatibilities in beliefs about what is good or bad, right or wrong, and fair or unfair. The ways in which people’s values can be violated differ across and within national cultures.

9.1.1.7.Poor communication increases uncertainty, and increases the potential for conflict. Information conflict occurs when people lack important information, are misinformed, interpret information differently, or disagree about which information is relevant.

9.1.1.8.Task interdependence occurs when individuals or units rely on others to jointly complete tasks and there is a need to actively cooperate by sharing information or resource to meet the goals.

9.1.1.9.Structural conflict is the result of structural or process features of the organisational structure. Horizontal conflict occurs between groups at the same organisational level. Vertical conflict occurs across different hierarchical levels in the organisation. Structural conflict is due to organisational design, and adjusting the design often reduces or eliminates the structural conflict.

9.1.2. Conflict escalation 9.1.2.1.Conflict escalation happens when one party involved in a conflict first uses an aggressive tactic or begins using more aggressive tactics than the other party.

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Figure 9.5 summarises a classic nine-stage model. The first stage is hardening, second is debate, third is action over words, and sees a decrease in empathy for the opponent. The fourth is images and coalitions as each side prepares for a fight and conducts a search for supporters. The fifth is loss of face, sixth is threat as a strategy, seventh is limited attempts to overthrow, and eighth is fragmentation of the enemy. The ninth and final stage, together into the abyss, sees the descent into total confrontation with no way back. Unresolved conflict drains employees’ energy and reduces their performance, so it is important to de-escalate conflict. It is easier to manage conflict escalation in the early stages. Sometimes under-reacting can trigger de-escalation of the conflict. It is also important to continue to monitor conflicts to ensure that they do not re-emerge. Figure 9.7 summarises what to do and some things to avoid in de-escalating conflict.

9.1.3. Role of emotion in conflict When in conflict, the person often feels emotionally charged. There is an important distinction between perceiving conflict and feeling conflict – conflict is often not recognised until it is felt. Many people let their feelings and emotions influence how they deal with conflict. Assessing and acknowledging the emotions of the other party can help to more effectively manage the conflict.

9.2. Interpersonal conflict management strategies Once the source of a conflict is understood, identify the best strategy for addressing it. Figure 9.9 illustrates how these five styles of managing interpersonal conflict compare in their focus on others and on pursuing one’s self-interests.

9.2.1. Collaborating Collaborating reflects a high concern for one’s own interests and a high concern for the interests of the other party, emphasises problem solving and pursues an outcome that gives both parties what they want.

9.2.2. Compromising Compromising is a conflict management style in which each side sacrifices something in order to end the conflict. This middle-ground style reflects a moderate concern for the interests of both parties.

9.2.3. Competing Competing is pursuing one’s own interest at the expense of the other party. This approach is generally used when the conflict issue is important or to set a precedent. This style can escalate the conflict and the loser may try to retaliate.

9.2.4. Accommodating Accommodating is a cooperative conflict management style. This style is generally used when the issue is more important to the other, or in recognition of own error.

9.2.5. Avoiding Avoiding is a passive conflict management style that involves ignoring the conflict or

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denying that it exists. This style reflects a low concern for both parties. When used to manage trivial conflicts, no damage may be done, but it can result in maximum damage when important issues are involved. Avoidance is also used when more information is needed or when addressing the conflict has the potential to create more problems.

In general, each style of handling interpersonal conflict is appropriate and ethical in some situations as long as it is used to attain the organisation’s proper goals.

9.3. The conflict process The conflict process is summarised in Figure 9.11. After a potential conflict is triggered, it is perceived by both parties. The true disagreement may differ from the perceived disagreement. If neither party experiences emotion in reaction to the potential conflict, it does not escalate. If the conflict escalates, both sides will then implement one or more conflict management strategies that either will end the conflict constructively or allow the conflict to continue to escalate, perhaps to the point of becoming destructive.

9.3.1. Conflict management skills Professionals in conflict resolution training suggest four areas of skill development: 1. Listening – including eye contact, rephrasing and summarising 2. Questioning 3. Communicating non-verbally 4. Mediating If mediating a conflict, ask open rather than leading questions, and use non-verbal cues to show sincerity. Mediation skills include open-mindedness, staying non-judgemental and calm, demonstrating empathy and sensitivity, remaining neutral, respecting confidentiality, and showing flexibility and resiliency. There are strong relationships between certain conflict resolution behaviours and perceived suitability for promotion, which are summarised in Figure 9.13.

9.3.2. Creating constructive conflict To successfully create constructive conflict, organisations often punish conflict avoiders. Rewarding employees who engage in constructive conflict can help to reduce employees’ fears of ridicule or rejection.

9.4. The negotiation process Negotiation skills thus are not only critical for managers, but also improve the effectiveness of all employees.

9.4.1. Negotiating skills Negotiation is a process in which two or more parties make offers, counter-offers and concessions in order to reach an agreement. Distributive negotiation occurs under zerosum conditions, where any gain to one party is offset by an equivalent loss to the other party.

Integrative negotiation is a win-win negotiation in which the agreement involves no loss to either party. There are four fundamental principles of integrative negotiation: 1. Separate the people from the problem.

2. Focus on interests, not positions – things that people really want and need.

3. Invent options for mutual gain – look for new solutions.

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4. Insist on objective fairness criteria.

The more options, the better the negotiating position. Some suggestions for being an effective negotiator: • Do not view as an either/or.

• Each side should know the other’s perception.

• Identify what can and cannot parted with.

• Try to identify and use sources of leverage.

• Show the other side understanding of their position.

• Suppress emotions.

• Know ‘BATNA’ – best alternative to a negotiated agreement.

9.4.2. Cultural issues in negotiations Different national cultures have different preferred negotiation styles. Intercultural negotiation requires paying attention to issues beyond what is being negotiated.

Preparation is particularly important when engaging in cross-cultural negotiations.

9.4.3. Alternative dispute resolution Sometimes two parties are unable to reach an acceptable settlement through direct negotiations with each other, so may involve a third party to overcome the stalemate and avoid a trial. This process is sometimes called alternative dispute resolution. Types of alternative dispute resolution include the following: 1. Conciliation: A third party builds a positive relationship between the parties, improves their communication and facilitates their discussion towards a satisfactory settlement.

2. Mediation: An impartial third party (the mediator) facilitates a discussion using persuasion and logic, suggesting alternatives and establishing each side’s priorities. The mediator suggests a settlement that does not have to be accepted.

3. Arbitration: A third party is involved and usually has the authority to impose a settlement on the parties.

Conciliation is often the first step, although the conciliator may suggest a resolution that the parties can accept or reject. Mediation is a voluntary and non-binding process, whereas the results of arbitration are legally binding, although it has greater potential to leave at least one party dissatisfied, which could cause the conflict to resurface later. An ombudsman is someone who investigates complaints and mediates fair settlements between aggrieved parties.

OB in the real world: Resolving disputes at Aldi Summary: Aldi has been an international retailer since 1913 and understands that negative workplace conflicts and disputes are inevitable. The company wants to handle them responsibly and ethically, and knows that the managerial time spent on disputes as well as damaged co-worker relationships can distract employees from focusing on their jobs and performing at their best.

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Challenge: Aldi wants to give its employees the opportunity to find fair, mutually agreed upon, constructive solutions in a safe environment, and enable them to move forward positively and confidently after a negative conflict. Imagine that the company’s management team approaches you for suggestions. What advice would you give them?

Response: To accomplish these goals Aldi could use a team of accredited mediators to provide dispute resolution support to employees, and to embed mediation and informal dispute resolution in the company’s culture. By training a number of skilled mediators able to promote and offer mediation as an alternative to traditional formal grievance processes, a healthier conflict resolution culture could be developed at Aldi.

Ethical dilemma: Right to criticise?

Summary: Michaela Banerji, a public servant who worked in the public affairs division of the then Federal Department of Immigration and Border Protection, had tweeted criticism of the government’s policies on asylum seekers. Posted outside of work on her personal phone, the tweets were anonymous and did not disclose confidential information. Ms Banerji admitted that the policy contravened her value set and she had a conscientious objection to what was happening to asylum seekers. In late 2012 her identity was unmasked and her department started a disciplinary process to prevent her tweeting. Ms Banerji went to the Federal Circuit Court arguing that her tweeting was protected by the implied constitutional right of political communication. She was dismissed in 2013 for breaching the Australian Public Service (APS) Code of Conduct requiring public servants to be professional, impartial and apolitical. The Administrative Appeals Tribunal (AAT) decided in 2018 that Ms Banerji had suffered an adjustment disorder that was contributed to by the government’s decision to terminate her employment and she was thus eligible for compensation. The AAT determined her sacking was unlawful. Comcare then appealed to the Federal Court of Australia. In 2019 the High Court ruled unanimously that the APS Code of Conduct applied, that Ms Banerji’s dismissal was lawful and the head of an agency had the right to impose sanctions including dismissal for breaches of the APS Code of Conduct, although the High Court has previously acknowledged an implied right to freedom of political communication How would you respond to the dilemma in the case of Michaela Banerji of abiding by the ethics, values and standards of your employer when you considered the employer was wrong, or contravening your employment contract and speaking out on social media?

The High Court ruled that she was employed under a contract where the Australian Public Service (APS) Code of Conduct applied and therefore any ‘implied freedom of political communication’ was subordinate to ensuring an apolitical public service, and that the APS Code of Conduct was ‘reasonably appropriate and adapted or proportionate to their purpose’. This case can be seen as a win for employers who pay their staff to be loyal and comply with organisational rules. Those who work in this sector have to accept they cannot defy some conditions because of personal beliefs.

From another perspective, this decision can be seen as limiting free speech for public servants and means that government workers cannot fully exercise freedom of speech and make contributions to informed public debate. The APS Code of Conduct does not preclude engaging in debates, just from public comments that criticise. However, if they perceive policies that go against their values, there is no sufficient guidance. Public service workers potentially have broader societal responsibilities and the difference between ‘moral’ and ‘immoral’ is influenced by views of the individual. If asked to pursue a morally objectionable policy, they can comply or they can resign from the APS to engage in 9-6

political processes outside of their job, as remaining may challenge their capacity to remain professional, impartial and apolitical.

Critical perspective Power in social relationships Power in social relationships may be expressed either covertly or overtly. Understanding how the power is distributed in any particular conflict circumstance requires consideration of, for example, economics, history, politics, culture, gender, race, sexual orientation or privilege. A critical perspective seeks to unearth and remedy the fundamental roots of conflicts, considering conflict inevitable and often the only way to change the organisation.

Summary LO9.1 Conflict is a natural part of organisational life and can lead to positive or negative outcomes.

LO9.2 Organisational effectiveness is enhanced through an appropriate diagnosis and management of conflict. Strategies include collaborating, compromising, competing, accommodating, and avoiding.

LO9.3 Some of the best conflict resolution behaviours are perspective taking, creating solutions, expressing emotions, reaching out, and documenting areas of agreement and disagreement. Some of the worst are avoiding the conflict, winning at all costs, displaying anger, demeaning the other party and retaliating.

LO9.4 Negotiation is one of the best ways to dissipate potential conflict. Alternative dispute resolution can be used when parties are unable to negotiate a solution, and includes conciliation, mediation, and arbitration.

Revision questions 1. Which conflict management style emphasises problem solving and pursues an outcome that gives both parties what they want? a. Compromising b. Competing c. Collaborating d. Avoiding 2. Which of the following is an effective conflict resolution behaviour? a. Expressing emotions b. Speaking separately to both parties c. Retaliating d. Demeaning the other party 3. In , an impartial third party facilitates a discussion using persuasion and logic, establishes each side’s priorities, and suggests a settlement that does not have to be accepted. a. conciliation b. mediation c. dictation d. arbitration 4. The more a conflict escalates, the it is to reverse. a. easier b. more difficult c. more fun d. simpler 9-7

5. By definition, conflict occurs between groups at the same organisational level. a. horizontal b. vertical c. functional d. process 6. Which conflict management style exhibits an ‘I lose/you win’ mentality? a. Compromising b. Accommodating c. Collaborating d. Avoiding Case Study: Conflict at LKW International Summary: Irena Harkison, a partner at top-tier legal firm LKW International, was concerned about how she could handle an ongoing dispute between Di Stewart, who had worked her way up from graduate to senior associate over six years, and Patrick Callaway, who had joined the firm three years ago as an associate and had been promoted quickly to senior associate. Irena respected both of their legal abilities and considered them conscientious, competent and valuable employees; however, Irena had found herself spending more and more time each week listening to the concerns each had about the other.

Irena set up a session with Di and Patrick to discuss this conflict. The crux of it was that Di is more relaxed about deadlines, believing Patrick to be unreasonable and on a power trip. Patrick, on the other hand, is clear on his career path and deliberately puts himself forward to gain experience. He is prepared to work through the night to deliver outcomes and feels that Di’s approach reflects her youth.

Critical 1. How does power form the basis of the conflict?

The differences in how Di and Patrick complete tasks and understand priorities creates conflict, as both are at the same level within the organisation. However, it seems that Patrick is pursuing his own goals at the expense of the organisation. Di perceives Patrick to be motivated by power, creating further relationship conflict..

2. What are the pros, cons and relevance to the situation of each of the conflict management approaches of avoidance, accommodation, compromise and competition ?

The situation between Di and Patrick will probably not go away on its own and therefore needs to be addressed. Given Patrick’s clear career goals, Irena may be able to convince Di to accommodate some of the task conflicts; however, in light of Di’s concerns regarding Patrick’s previous experience and feelings of unfair treatment, this is unlikely. Career advancement is introducing some elements of competition since Di has worked her way up through the organisation and Patrick has personal goals for a promotion to partner. Depending on Irena’s capability, a compromise could be reached or the situation may require an alternative dispute resolution process.

Mainstream 1. What form of conflict is exhibited in the situation? What do you see as the causes of the conflict?

Patrick’s personal motivation may be at odds with the goals of the organisation, thus creating dysfunction. Despite Patrick and Di both being at the same level, they have not adopted an agreed approach and there are differing values towards the tasks and processes. Both are frustrated but are now avoiding direct communication, displaying anger, demeaning the 9-8

other party, and potentially retaliating.

2. At which stage of Glasl’s conflict escalation would you say Patrick and Di are at? Provide some examples.

The conflict at LKW International has escalated to Stage 5: Loss of face. Both sides have aired concerns publicly to expose their opponent and restore their own reputation. They have also identified conflicts with values they believe are central to the organisation.

Tutorial activities 1. Have you ever experienced a constructive conflict? What happened? How was the disagreement resolved?

Students can share their experiences. Examples could including wanting to go ahead with a particular event, and cancelling or postponing it. Postponement could have good results in additional preparation time; however, it may involve booking or other fees.

2. Have you ever experienced a dysfunctional conflict? What happened? Why was the conflict not resolved earlier?

Students may build on their responses to question 1, noting the stage of the escalation and the form of conflict.

3. How can managers promote constructive conflict?

Managers can promote constructive conflict by assigning employees to play the devil’s advocate role when ideas are presented. Managers can also encourage opposing ideas and assure employees that trust and open communication exist in the organisation and that there is nothing to fear by offering a different view.

4. Which of the conflict causes do you feel is most challenging to a manager? Why? Poor communication causes the conflict that is most challenging to a manager. When people lack the necessary information, are misinformed, interpret information differently, or disagree about which data are relevant, conflict arises.

5. Think about a current conflict you are experiencing with a co-worker, friend, or family member. Which of Glasl’s conflict stages are you in? What can you do to keep the conflict from escalating to the next level?

Students may identify a variety of situations depending on experience. Consider the stage that the conflict is at, and find examples where emotions may be high, as well as situations where it is possible not to escalate emotions. Identifying the benefits of removing emotion helps to resolve conflict more quickly.

6. If two of your subordinates were experiencing relationship conflict, what would you do to manage it? Why? There are multiple options. Consider converting the relationship conflict into task conflict. If that didn’t work, separate the employees by moving them to another team or department.

7. If two of your subordinates were experiencing task conflict, what would you do to manage it? Why? Task conflict occurs when employees disagree about issues such as which packaging design is best or whether quality or quantity is more important. Task conflict can be very productive if handled correctly. Holding employees from competing departments jointly accountable gives them common goals to reduce their conflict. Focusing employees, work groups and departments on a common enemy such as a competitor or even a challenging economy can unite employees in their pursuit of a common goal and reduce conflict.

8. What could you do to minimise the potential for negative outcomes in cross-cultural negotiations?

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To minimise the potential for negative outcomes in cross-cultural negotiation, pay attention to issues beyond what is being negotiated. The appropriateness of different negotiation tactics, the emphasis to put on developing relationships, how to respond to deadlines, and even the location of the negotiation is influenced by national culture. Preparation is particularly important when engaging in cross-cultural negotiations.

9. What would have to happen for you to fully accept and cooperate with a mediator’s recommended settlement?

Mediation is a voluntary and non-binding process and belief that the recommendations were in the best interest, given the scope of the conflict and options available.

Group exercise – Win as much as you can!

Learning objective: Describe some of the best and worst conflict resolution behaviours.

Summary: For 10 successive rounds, each team will select either an ‘X’ or a ‘Y’ and submit their choice to the instructor on a small piece of paper with their team name on it. The ‘payoff’ for each round is determined by the patterns of choices made by the other teams as described below: Choice pattern 4 Xs 3 Xs 1Y 2 Xs 2 Ys 1X 3 Ys 4 Ys

Payout Lose $1 each Win $1 each Lose $3 Win $2 each Lose $2 each Win $3 Lose $1 each Win $1 each

Task: In each round, teammates confer and make a joint decision. Before rounds 5, 8 and 10, the teams will have a chance to confer with each other for 3 minutes before conferring with teammates for 1 minute and making a decision. Note the three bonus rounds, where the payoff is multiplied.

Round 1 2 3 4 5 6 7 8 9 10

Time allowed (min) 2 1 1 1 3+1 1 1 3+1 1 3+1

Confer with other teams No No No No Yes No No Yes No Yes

Your choice

$ Won

$ Lost

Balance

Bonus?

No No No No Bonus 3X No No Bonus 5X No Bonus 10X

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1. Why do some of the best conflict resolutions behaviours include perspective taking and creating solutions?

Perspective taking includes taking time to understand the other’s point of view. This could include repeating back to them what you have heard, and asking open ended questions. By placing yourself in their shoes, this demonstrates to the individual that you have listened, and you are being empathetic. Brainstorming together to identify and create a solution together, demonstrates open-mindedness and flexibility. Creating a common goal to find a resolution further reduces barriers in resistance.

2. Why do some of the worst conflict management behaviour include winning at all costs and retaliating?

Taking a ‘win at all costs’ approach does not enable the other individual to feel understood, even when there may be elements that are ‘right’ in your approach. Arguing vigorously and refusing to consider changing your opinion can have negative interpersonal costs and often delay resolution. Obstructing or trying to get revenge are unprofessional and disrespectful (not to mention possible legal implications) and will close down aspects of trust needed for communication and resolution.

Mini-simulation (MindTap-only) Imagine being part of a team of two other co-workers experiencing negative task conflict as they try to finalise the design of a new toy before an imminent deadline. One team member is focused on making the toy of maximum quality and the other is focused on the conflicting goal of making the toy at the lowest cost. One of the team members is getting frustrated and feels that the team should be making better progress. The co-worker asks you if there is anything the team can do to be more effective. What do you say or do? Go to this chapter’s mini-simulation, watch the challenge video, and choose a response. Be sure to also view the outcomes of the two responses you didn’t choose.

OB concepts applied: negative task conflict, goal conflict, shared goals, perspective taking, creating solutions, expressing emotions, reaching out, avoidance Discussion questions 1. What types of conflict is the team experiencing in the challenge video?

The team is experiencing goal conflict, disagreement over what is to be accomplished. Is the goal to produce a durable product or a low-cost product? Billie wants to use higher cost materials to produce a higher quality, safer product. Allison insists on being fiscally responsible, remaining within the budget, and selling the toy at a low price in an effort to increase sales.

2. What aspects of the negotiation process would best resolve the conflict and why would this work? The four principles of integrative negotiation should help resolve the conflict. Separating the people from the problem is the first step, empathising with both positions is the first thing Alex does. Alex then focuses on the interests, not the positions. The interests of the company are to produce a safe toy that will withstand play. By compromising on which parts to make out of metal and which to make out of plastic, Allison and Billie are inventing a new option for mutual gain.

3. What conflict resolution behaviours would you use as a manager to address this situation? Explain your answer.

Integrative negotiation might be very effective in this situation. Integrative negotiation is a winwin negotiation in which the agreement involves no loss to either party. Integrative bargaining helps to build good long-term relationships, and minimises grudges between the parties. This is

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particularly beneficial when the parties have to work together on an ongoing basis once the negotiations are finished. Integrative negotiation in this situation would allow Allison, Bill, and Alex to work together in a spirit of compromise on other projects.

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PART FOUR – LEADERSHIP AND INFLUENCE PROCESSES IN ORGANISATIONS Recall that the underlying questions in this book are what makes managers and organisations effective and how is effectiveness influenced by performance behaviours, commitment and engagement, citizenship behaviours and dysfunctional behaviours? Part 3 examined the impact of various forms of social behaviours, decision making and problem solving, communication and conflict and negotiation.

Part 4 asks why leadership matters, looks at traditional and modern leadership approaches, and concludes by examining power, influence and politics in organisations.

CHAPTER 10 – TRADITIONAL AND CONTEMPORARY LEADERSHIP APPROACHES Chapter overview Leadership remains one of the most widely debated, studied and sought-after properties of organisational life because it is of great practical importance to organisations. To date, researchers have isolated and verified some key variables that influence leadership effectiveness. This chapter introduces the fundamental traditional models, the meaning of leadership, and three contemporary leadership theories: the LPC theory developed by Fiedler, the path–goal theory, and Vroom’s decision tree approach to leadership.

Learning outcomes After studying this chapter, students should be able to: 1. characterise the nature of leadership 2. trace the early approaches to leadership 3. discuss the emergence of situational theories and models of leadership, including the LPC and path–goal theories 4. describe Vroom’s decision tree approach to leadership 5. identify and describe contemporary situational theories of leadership 6. discuss leadership through the eyes of followers 7. identify and describe alternatives to leadership 8. describe the changing nature of leadership 9. discuss emerging leadership issues.

Guide your learning 1. Can I develop my leadership skills or do I have to be born with certain traits to be a successful leader? (LO1) 2. How do early approaches to leadership impact leadership today? (LO2) 3. Why do some people thrive as leaders in certain situations but not always? (LO3 and LO4) 4. Do I need different ways of leading for different situations? (LO5) 5. What do people need from their leaders? (LO6) 6. What happens if there is no leadership? (LO7) 7. Has leadership changed over the years? (LO8) 8. What issues will face leaders in the future? (LO9)

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Chapter outline 10.1.

The nature of leadership Like several other key organisational behaviour terms such as ‘personality’ and ‘motivation’, ‘leadership’ is used in a variety of ways.

10.1.1. The meaning of leadership As a process, leadership is the use of non-coercive influence to direct and coordinate the activities of group members to meet a goal. As a property, leadership is the set of characteristics attributed to those who are perceived to use such influence successfully.

Influence is the ability to affect the perceptions, beliefs, attitudes, motivation and/or behaviours of others. From an organisational viewpoint, leadership is vital because it has such a powerful influence on individual and group behaviour. A manager or supervisor may or may not also be a leader.

10.1.2. Leadership versus management Leadership and management are related, but not the same. A person can be a manager, a leader, both or neither. Basic distinctions are summarised in Figure 10.2. A leadership position can also be formal. Organisations need both management and leadership to be effective.

10.2.

Early approaches to leadership Early studies focused on the traits, or personal characteristics, of leaders. Later research shifted to examine actual leader behaviours.

10.2.1. Trait approaches to leadership Early researchers believed that leaders had some unique set of qualities or traits that distinguished them from their peers. Trait approach focused on leadership traits, methods for measuring them, and using the methods to select leaders; however, the list became long and studies were inconsistent. In recent years, the trait approach has received renewed interest.

These traits include emotional intelligence, drive, motivation, honesty and integrity, selfconfidence, cognitive ability, knowledge of the business and charisma. But situations may play a role in people not having opportunities to engage in leadership activities.

10.2.2. Behavioural approaches to leadership In the late 1940s, researchers began to shift away from the trait approach and started to look at leadership as an observable process or activity. The behavioural approach was to determine what behaviours are associated with effective leadership. The researchers assumed that effective leaders differed from less-effective leaders, and that the behaviours of effective leaders would be the same across all situations.

10.2.2.1.

The Michigan studies were a program of research conducted at the University of Michigan in the United States that defined job-centred and employee-centred as opposite ends of a single leadership dimension, as shown in the top portion of Figure 10.4. The leader who exhibits job-centred leader behaviour pays close attention to the work of subordinates, explains work procedures and is mainly interested in performance. The leader who engages in employee-centred leader behaviour attempts to build effective work groups with high performance goals. They

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suggested that employee-centred leader behaviour was more likely to result in effective group performance.

10.2.2.2.

Around the same time, the Ohio State leadership studies defined leader consideration and initiating-structure behaviours as independent dimensions of leadership. Ohio State University developed a questionnaire that they administered in both military and industrial settings to assess subordinates’ perceptions of their leaders’ behaviour. In consideration behaviour, the leader is concerned with the subordinates’ feelings and respects subordinates’ ideas, while in initiating-structure behaviour, the leader clearly defines the roles so that subordinates know what is expected of them. These behaviours were not thought to be on the same continuum, as shown in the bottom portion of Figure 10.4. As a result, a leader could exhibit various degrees of each behaviour simultaneously.

10.2.2.3.

The Leadership Grid (originally called the Managerial Grid) provides a means for evaluating leadership styles and then training managers to move towards an ideal style of behaviour. The most current version of the Leadership Grid is shown in Figure 10.6. The horizontal axis represents concern for production and the vertical axis represents concern for people. Note the five extremes of leadership behaviour: 1,1 impoverished management; 9,1 authority-compliance and exhibits little concern for people; 1,9 country club management; 5,5 middle of the road management that maintains adequate concern for both people and production; and 9,9 team management. According to this approach, the ideal style of leadership is 9,9; however, there is little evidence regarding effectiveness and the extent it applies to all managers or to all settings.

10.3.

The emergence of situation leadership models The leader–behaviour theories have played an important role in the development of more realistic, albeit more complex, approaches to leadership, to not be so preoccupied with what properties may be possessed by leaders (the trait approach), but to instead concentrate on what leaders actually do (their behaviours). The next step in the evolution of leadership theory was the creation of situational models that assume that appropriate leader behaviour varies from one situation to another. In a seminal article about the decision-making process, Robert Tannenbaum and Warren H. Schmidt proposed a continuum of leadership behaviour with several intermediate behaviours, shown in Figure 10.7. This continuum of behaviour ranges from the one extreme of having the manager make the decision alone to the other extreme of having the employees make the decision with minimal guidance from the leader.

10.3.1. THE LPC theory of leadership Fred Fiedler developed the LPC theory of leadership, which attempts to explain and reconcile both the leader’s personality and the complexities of the situation. Originally called the ‘contingency theory of leadership’, the LPC theory contends that a leader’s effectiveness depends on the situation and, as a result, some leaders may be effective in one situation or organisation but not in another.

10.3.2. Task versus relationship motivation Fiedler devised special terms to describe a leader’s basic personality traits in relation to leadership: ‘task motivation’ versus ‘relationship motivation’. He also conceptualised the

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situational context in terms of its favourableness for the leader, ranging from highly favourable to highly unfavourable. The degree of task or relationship motivation is measured by the least-preferred co-worker (LPC) scale. The LPC instructions ask leaders to select their least-preferred co-worker and describe this co-worker by marking a series of 16 scales anchored at each end by a positive or negative quality or attribute. Fiedler assumed the LPC scales actually say more about the leader than about the least-preferred co- worker.

10.3.3. Situational favourableness Fiedler also identified three factors that determine the favourableness of the situation. In order of importance (from most to least important), these factors are leader–member relations, which refers to the personal relationship that exists between subordinates and their leader, task structure and, finally, leader position power – the power inherent in the leader’s role itself.

10.3.3.1.

Fiedler’s studies on relationships among leader motivation, situational favourableness and group performance are summarised in Figure 10.9. The various combinations of these three dimensions result in eight different situations.

10.3.3.2.

Fiedler considers the leader–situation match or ‘mismatch’. Fiedler contends that when a leader’s style and the situation do not match, the only available course of action is to change the situation through ‘job engineering’.

10.3.3.3.

The evaluation and implications of Fiedler’s LPC theory have been heatedly debated because the theory is not always supported by research, and Fiedler’s assumptions about the inflexibility of leader behaviour are unrealistic. The theory itself does represent an important contribution because it explicitly considered the organisational context and its role in effective leadership.

10.3.4. The path–goal theory of leadership Developed jointly by Martin Evans and Robert House, the path–goal theory focuses on the situation and leader behaviours rather than on fixed traits of the leader.

10.3.4.1.

The basic premise of the path–goal theory of leadership argues that subordinates are motivated by their leader to the extent that the behaviours of that leader influence their expectancies. Path–goal theory also suggests that a leader may behave in different ways in different situations.

10.3.4.2.

As Figure 10.11 shows, path–goal theory identifies four kinds of leader behaviour: directive, supportive, participative and achievement-oriented. The path– goal theory assumes that leaders can change their behaviour and exhibit any or all of these leadership styles. The theory also predicts that the appropriate combination of leadership styles depends on situational factors.

10.3.4.3.

The path–goal theory proposes two types of situational factors that influence how leader behaviour relates to subordinate satisfaction: the personal characteristics of the subordinates and the characteristics of the environment (see Figure 10.11).

Two important personal characteristics of subordinates are locus of control and perceived ability. Research indicates that individuals who attribute outcomes to their own behaviour may be more satisfied with a participative leader whereas individuals who attribute outcomes to external causes may respond more favourably to a directive leader. Perceived ability pertains to how people view their own ability with

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respect to the task. Employees who rate their own ability relatively highly are less likely to feel a need for directive leadership.

10.3.4.4.

The evaluation and implications of the path–goal theorists was to stimulate research on the theory’s major propositions, not to offer definitive answers. Further work actually has supported the theory’s major predictions, but it has not validated the entire model.

10.4.

Vroom’s decision tree approach to leadership The third major contemporary approach to leadership is Vroom’s decision tree approach, which attempts to prescribe a leadership style appropriate to a given situation. It also assumes that the same leader may display different leadership styles. But Vroom’s approach concerns itself with only a single aspect of leader behaviour: subordinate participation in decision making.

10.4.1. Basic premises Vroom’s decision tree approach assumes that the degree to which subordinates should be encouraged to participate in decision making depends on the characteristics of the situation.

After evaluating a variety of problem attributes, the leader determines an appropriate decision style that specifies the amount of subordinate participation. The manager first assesses whether the given factor is ‘high’ or ‘low’ for the decision that is to be made. One decision tree is to be used when the manager is primarily interested in making the fastest possible decision; the other is to be used when time is less critical and the manager wishes to help subordinates improve and develop their own decision-making skills. The two decision trees are shown in Figures 10.13 and 10.14. The various decision styles represent different levels of subordinate participation . The five styles are defined as follows: • Decide: the manager makes the decision alone.

• Delegate: the manager allows the group to define the problem, then develop a solution.

• Consult (individually): the manager presents to group members individually, obtains suggestions, then makes the decision.

• Consult (group): the manager presents the problems to group together, then makes the decision.

• Facilitate: the manager presents the problems, then facilitates members to make the decision.

10.4.2. Evaluation and implications Vroom’s decision tree approach has not been fully scientifically tested but its subsequent refinement, however, is generally supported.

10.5.

Contemporary situation theories 10.5.1. The leader–member exchange model The leader–member exchange model (LMX) of leadership, conceived by George Graen and Fred Dansereau, stresses the importance of variable relationships between supervisors and subordinates, referred to as a ‘vertical dyad’. Figure 10.16 shows the basic concepts of the LMX model, which suggests that supervisors establish a special relationship with a small number of trusted subordinates referred to as the ‘in-group’, who often receive special duties requiring more responsibility and autonomy and who may receive special privileges such as more discretion about work schedules. Subordinates who are not a part of this group are called the ‘out-group’.

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10.5.2. The Hersey and Blanchard model The Hersey and Blanchard model is based on the notion that appropriate leader behaviour depends on the ‘readiness’ of the leader’s followers, and refers to the subordinate’s degree of motivation, competence, experience and interest in accepting responsibility. Figure 10.17 shows the basic model.

10.5.3. Refinements and revisions of other theories The three dominant situational theories have continued to undergo various refinements and revisions. For instance, the LPC theory added the concept of stress as a major element of situational favourableness, and the leader’s intelligence and experience play a major role in enabling them to cope with various levels of stress. The path–goal theory added additional aspects. Vroom’s decision tree continues to develop training and assessment materials to better enable managers to understand their own ‘natural’ decision-making styles. There are software versions of the various models that now can quickly help managers determine the optimal level of participation in any given situation.

10.6.

Leadership through the eyes of followers Another perspective focuses on how leaders are seen through the eyes of followers.

10.6.1. Transformation leadership Transformational leadership focuses on the basic distinction between leading for change and leading for stability. Transactional leadership is essentially the same as management in that it involves routine, regimented activities. Transformational leadership is the set of abilities that allows the leader to recognise the need for change, to create a vision to guide that change and to execute the change effectively. Change is a vital organisational function that even successful firms need to implement regularly to avoid complacency and stagnation; accordingly, leadership for change is also important.

10.6.2. Charismatic leadership Perspectives based on charismatic leadership, like the trait concepts discussed earlier, assume that charisma is an individual characteristic of the leader. Charisma is a form of interpersonal attraction that inspires support and acceptance and influence is again a fundamental element of this perspective. Robert House first proposed a theory of charismatic leadership that suggests that charismatic leaders are likely to have a lot of self-confidence, firm confidence in their beliefs and ideals, and a strong need to influence people. Figure 10.20 portrays the three elements of charismatic leadership in organisations: envisioning, energising, and enabling.

10.6.3. Attribution and leadership The attribution perspective holds that when behaviours are observed in a context associated with leadership, different people may attribute varying levels of leadership ability or power to the person displaying those behaviours. The attribution perspective which followers pay especially close attention to is a leader’s behaviour during a time of crisis, particularly if followers perceive that their own best interests are directly at stake. Figure 10.21 shows how culture can also affect people’s perceptions of leadership.

10.7.

Alternatives to leadership Circumstances may exist that render leadership unnecessary or irrelevant.

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10.7.1. Leadership substitutes Leadership substitutes are individual, task and organisational characteristics that tend to outweigh the leader’s ability to affect subordinates’ satisfaction and performance. The premise of the leadership is that leader behaviours may be irrelevant in some situations.

Several basic leadership substitutes are identified in Figure 10.23. Individual ability, experience, training, knowledge, motivation and professional orientation are among the characteristics that may substitute for leadership. Similarly, a task characterised by routine, a high degree of structure, frequent feedback and intrinsic satisfaction may also render leader behaviour unnecessary.

10.7.2. Leadership neutralisers In other situations, various factors called leadership neutralisers may render ineffective a leader’s attempts to engage in various leadership behaviours. The norms and cohesiveness of the group may be so strong that there is nothing the new leader can do to change things. In addition to group factors, elements of the job itself may also limit a leader’s ability to ‘make a difference’. Organisational factors can also neutralise at least some forms of leader behaviour.

10.8.

The changing nature of leadership Among the recent changes in leadership that managers should recognise are the increasing role of leaders as coaches, and gender and cross-cultural patterns of leader behaviour.

10.8.1. Leaders as coaches Many organisations now use teams and are attempting to become less hierarchical with more self-managed teams, and by empowering individuals to work independently. Leaders today are being asked to change how they manage people, becoming a coach instead of an overseer or supervisor. A coaching perspective would call for the leader to help select team members and other new employees, to provide some general direction, to help train and develop the team and the skills of its members, and to help the team get the information and other resources it needs. Within the coaching role, some leaders have also excelled at taking on more responsibilities as a mentor – the role of helping a less experienced person learn the ropes to better prepare themselves to advance within the organisation.

10.8.2. Gender and leadership Given that most leadership theories and research studies have focused on male leaders, developing a better understanding of how females lead is clearly an important next step.

Women tend to be slightly more democratic in making decisions, whereas men tend to be somewhat more autocratic.

10.8.3. International leadership and Project GLOBE To learn more about international leadership, a global team of researchers has been working on a series of studies under the general heading of Project GLOBE (Global Leadership and Organizational Behavior Research Project). GLOBE was initiated by Robert House, and has identified six leader behaviours that can be observed and assessed across a variety of cultures: 1. Charismatic/value-based leadership 2. Team-oriented leadership 3. Participative leadership 4. Humane-oriented leadership 10-7

5. Autonomous leadership 6. Self-protective leadership 62 societies were condensed into 10 cultural clusters; however, research is ongoing and it would be premature to draw overly strong generalisations at this point.

10.9.

Emerging issues in leadership 10.9.1. Strategic Leadership Strategic leadership is a relatively new concept that explicitly relates leadership to the role of top management. It is defined as the capability to understand the complexities of both the organisation and its environment and to lead change in the organisation so as to achieve and maintain a superior alignment between the two. To be effective, a manager needs to have a thorough and complete understanding of the organisation, its history and current and possible future based on trends in the environment.

10.9.2. Ethical leadership In the wake of corporate scandals, high standards of ethical conduct are being held up as a prerequisite for effective leadership, and top managers are being called upon to maintain high ethical standards for their own conduct, to unfailingly exhibit ethical behaviour and to hold others in their organisations to the same standards. Ethical leadership is the process of leading based on consistent principles of ethical conduct. The Ethical dilemma feature considers some of the complexities of ethical leadership.

10.9.3. Virtual leadership Virtual leadership, or leadership via distance technologies, has emerged as an important issue for organisations. Leaders may need to work harder at creating and maintaining relationships with their employees that go beyond simply words on a computer screen.

Leaders should then also take advantage of every opportunity whenever they are in face-toface situations to go further than they might have done under different circumstances to develop a strong relationship.

OB in the real world: Adam Goodes, Australian of the Year, 2014 Summary: Adam Goodes is a proud First Nations man, and his life and work extend beyond his recognition as an Australian Football League (AFL) player for the Sydney Swans (2000–2015). While deeply hurt by being sledged as ‘an ape’ by a 13-year-old girl while he played football, he noted that she should not be blamed; the environment that she grew up in had shaped her choice of language. In May 2015, Goodes celebrated a goal by performing a traditional war dance, including a simulated spear throw. This also created controversy with some seeing it as inflammatory and others as celebratory.

Goodes later apologised for any offence, recognising that it was seen as a ‘war cry’ directed at other players. Goodes continues to lead First Nations thought and perspectives today.

Challenge: As you read this chapter, identify which organisational leadership theories may help to explain some of Adam Goodes’ behaviours and the responses of others during his career to date.

Response: There are many elements of charismatic leadership and transformational leadership theories that played out in Adam Goodes’ actions. While Adam was playing football, he raised the profile of First Nations leadership and voice, and the complexities of raising awareness of First Nations youth and the issues surrounding the Stolen Generations continue. Working alongside people with differing viewpoints 10-8

and bringing them on the journey remains part of Adam’s formal (appointed) and information (emergent) roles.

Ethical dilemma: Effects of bonuses on leadership decisions Summary: Imagine you are a retiring CEO of a premier eco-resort in an idyllic tropical rainforest, internationally recognised for its low-impact environment footprint, and dealing with waste. With only one week to retirement, there is a significant bonus linked to performance. The Head of Environmental Impact officer notes a significant issue and the potential impact to the bonus, but is concerned if not addressed then the incoming CEO will hold them responsible. The ethical action is to ask, however there is a risk that of the lost bonus and reputation. Not asking for details will mean something could be uncovered after leaving and therefore is the new CEO’s problem.

Would your decision be easier if there was no bonus money attached to your retirement?

The driver of self-interest and receiving the bonus is situational and the timing is unfavourable and will most likely have some influence. However, if the idea of the bonus attached to the retirement is removed, there may still be some difficulty to act ethically given the results attribute some impact to personal reputation. In addition, the agency to correct is minimal given the time remaining to implement a resolution. However, and ethical and strategic leader would be concerned that the Head of Environment Impact (HoEI) may be impacted if the issue is not addressed. One compromise may therefore empower the HoEI to suggest a possible course of action, allowing the incoming CEO to approve the action. While this may invalidate the bonus, reputation would be maintained through honesty.

Critical perspective A critical view of leadership – destructive leadership Destructive leadership, or toxic leadership, is a type of leadership that might also be generally understood as bullying. Given that in 80 per cent of bullying cases it is the manager or leader who is reported, this type of leadership cannot be ignored. These leaders may lie, and use dishonourable tactics as a means of self-grandiosity, which is sometimes also parasitic. It is not about intent but outcome and where the ‘followers’ are led to behave in ways that are inconsistent with the legitimate needs of the organisation.

Summary LO10.1 Leadership is both a process and a property. Leadership and management are related but distinct phenomena.

LO10.2 Early leadership research primarily attempted to identify important traits and behaviours of leaders. The Michigan and Ohio State were further refined into the Leadership Grid.

LO10.3 Newer situational theories of leadership attempt to identify appropriate leadership styles on the basis of the situation. Fiedler’s LPC theory states that leadership effectiveness depends on a match between the leader’s style (viewed as a trait of the leader) and the favourableness of the situation.

The path–goal theory focuses on appropriate leader behaviour for various situations.

LO10.4 Vroom’s decision tree approach suggests appropriate decision-making styles based on situation characteristics, and how much subordinates should participate in the decision-making process.

LO10.5 The leader–member exchange model (LMX) of leadership stresses the importance of variable relationships between supervisors and each of their subordinates. The Hersey and Blanchard model argues that appropriate leader behaviour depends on the subordinate’s degree of motivation, competence, experience and interest in accepting responsibility.

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LO10.6 Transformational leadership focuses on the basic distinction between leading for change and leading for stability. Charisma is a form of interpersonal attraction that inspires support and acceptance.

The attribution perspective holds that when behaviours are observed in a context associated with leadership, others may attribute varying levels of leadership ability or power to the person displaying those behaviours.

LO10.7 Circumstances may exist that render leadership unnecessary or irrelevant, called leadership substitutes.

LO10.8 The nature of leadership continues to evolve, including leaders acting as coaches. Changes in leadership include leaders, most frequent when an organisation uses self-managing teams.

LO10.9 Strategic leadership is a new concept that explicitly relates leadership to the role of top management.

Revision questions 1. Which of the following is more closely associated with leadership than with management? a. Organising b. Evaluating c. Building trust d. Meeting goals 2. In path–goal theory, the leadership style is best for situations with ambiguous, unstructured tasks. a. directive b. supportive c. participative d. achievement-oriented 3. Dawn is a manager who sets difficult goals while communicating confidence in subordinates’ abilities to achieve those goals. Which type of leadership is Dawn practising? a. Directive b. Achievement-oriented c. Motivational d. Supportive 4. Oleg follows Vroom’s decision tree to a terminal node, then discusses an important issue with his subordinates before making a decision. Oleg used the style. a. Consult b. Delegate c. Decide d. Facilitate 5. Hareesh’s employees are extremely competent and motivated. If Hareesh follows the Hersey and Blanchard leadership model, then what would he most likely call his own leadership style? a. Participating b. Selling c. Telling d. Delegating

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Case study: Corporate social responsibility and servant-leadership Summary: Traditionally leadership is envisioned as someone who is focused on power and employees are not prioritised. On the other end of the leadership spectrum are servant-leaders who focus on serving others, with the goal to help ‘people to develop and perform as highly as possible’. Due to the increasing number of casual, contracted, temporary and gig workers in the workplace, organisations with servant-leaders at the helm are more likely to experience positive outcomes, including individual level, group-level, as well as organisational-level outcomes. The personal values of these types of leaders help drive the social responsibility strategies to better respond to the increasing expectations of stakeholders. Well-structured corporate social responsibility strategy is also seen as a form of competitive advantage for organisations.

Critical 1. Do you see yourself as more of a traditional leader, a servant-leader, or somewhere in the middle? Explain your reasoning, outlining your leadership traits.

Responses may vary depending on levels of experience or exposure. Some traits commonly associated with leaders include emotional intelligence, drive, motivation, honesty and integrity, selfconfidence, cognitive ability, knowledge of the business and charisma. Traditional leaders are often seen as decisive and leading from the top down, with a high level of influence, although more modern expectations of leadership require aspects of coaching. Servant-leadership qualities still include many of the same traits; however, they are demonstrated in a different manner.

2. How might stakeholders’ corporate social responsibility demands of an organisation change over the next decade? Which external trends do you think will drive these changes? Think from the perspective of employees, customers, community members and investors.

Although historically there was the assumption businesses operated ethically, the scandals have damaged that trust and, as a result, there is a growing demand for businesses to operate with purpose. Stakeholders are becoming more selective in their choices to support these businesses.

Growing globalisation includes inherent instability, creating a demand to support local or individual businesses, socially conscious businesses, or profit for purpose. Businesses that motivate their employees with purpose, are able to better attract and retain talent, becoming more competitive.

Mainstream 1. What are the main differences between traditional leaders and servant-leaders?

Many of the same traits are associated with both traditional and servant-leaders, including emotional intelligence, drive, motivation, honesty and integrity, and charisma. However, traditional leaders are often seen as decisive, and leading from the top down, with a high level of influence.

Servant-leadership is viewed as a ‘bottom up’ approach to leadership, enabling people to perform as highly as possible, and therefore obtaining results.

2. What are some demands that an employee, customer, community member, and investor may have of an organisation?

The demands on leaders has most likely increased, with a requirement to be passionate, charismatic, and to lead through inclusion and ‘walking the talk’. Traditional autocratic models worked well historically when industrialisation required tedious and monotonous jobs; however, today’s workplace demands engagement, flexible and cross-functional teams, and awareness of purpose. Employees demand (or are attracted away to companies that offer) empowerment.

Customers and community members are more aware and support businesses that are seen to be socially responsible. Investors know that businesses with diverse teams, and progressive leaders are more likely to be financially sustainable.

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Tutorial activities 1. How would you define ‘leadership’? Compare and contrast your definition with the one given in this chapter.

The text defines leadership as both a process and a property. A simple definition is that leadership is the process of getting others to behave in ways that enable the organisation to achieve its goals.

Students should be able to identify aspects of this definition with which they disagree (its assumptions, elements it includes or omits) and to propose a number of alternative definitions.

Because there is no consensus regarding the meaning of leadership, various definitions probably are acceptable.

2. Cite examples of managers who are not leaders and of leaders who are not managers. What makes them one and not the other? Also, cite examples of both formal and informal leaders.

As discussed in the textbook, management and leadership are not the same. Management relies on formal position power to influence people, whereas leadership stems from a social influence process. Hence, a manager who influences subordinate behaviours through threats or reprimands is not leading. A person who does not rely on position power to influence others, however, is leading.

For example, sport stars or other well-known individuals influence others’ behaviours without using formal authority; thus, they may be a leader rather than a manager. (Note: It is easy to argue that management is the more encompassing concept and that leadership is just part of management if one defines management as the process of coordinating all available resources to accomplish a goal. That is, leadership would then fit as the process of influencing the human resource towards goal accomplishment. It is an interesting argument.)

A formal leader is one appointed to head a group, such as a supervisor or an elected officer of a club. An informal leader emerges from the ranks of the group according to a consensus of the members. For example, one employee in a work group may be supported by the other employees and thus be an informal leader of the group.

3. What traits do you think characterise successful leaders? Do you think the trait approach has validity?

Students likely will suggest a wide variety of traits, such as charisma, intelligence, self-confidence, task-relevant knowledge and dominance.

4. Recent evidence suggests that successful managers (defined by organisational rank and salary) may indeed have some of the same traits originally ascribed to effective leaders (such as an attractive appearance and relative height). How might this finding be explained?

Simple. Such individuals are hired and promoted partly on the basis of their positive appearance and turn up in leadership positions because they were the material that was there to work with. The halo effect is alive and well!

5. What other forms of leader behaviour besides those cited in the chapter can you identify?

The two basic forms of leader behaviour identified in the chapter are consideration, or employeecentred, and initiating-structure, or job-centred, leader behaviours. Another variable of leader behaviour is the extent to which the leader allows subordinate participation in decision making.

6. Critique Fiedler’s LPC theory. Are other elements of the situation important? Do you think Fiedler’s assertion about the inflexibility of leader behaviour makes sense? Why or why not?

Fiedler identifies three important elements of the situation: leader–member relations, task structure, and leader position power. Other elements that may be important include subordinates’ skills and abilities, subordinates’ personalities, and the effectiveness of the work group. Failure to consider these situational factors could weaken the theory. Fiedler viewed task versus relationship motivation as a trait that is constant for any given person. This inflexibility appears unrealistic because research indicates that a leader may act differently towards different subordinates.

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7. Do you agree or disagree with Fiedler’s assertion that leadership motivation is basically a personality trait? Why? Whether task or relationship motivation is a personality trait is a highly controversial question. Task or relationship motivation is assessed by the LPC score, which researchers argue may be an index of behaviour, personality, or some other unknown factor. Leadership motivation may be a personality trait that manifests itself only at certain times. When things are going well, a manager may use his or her own style or leadership motivation type. At other times, however, the situation may influence the manager’s leadership style.

8. Compare and contrast the LPC and path–goal theories of leadership. What are the strengths and weaknesses of each?

The LPC and path–goal theories are similar in that both maintain a contingency approach to the study of leadership. Both emphasise matching the leadership style (in terms of either traits or behaviours) to the situation. Further, both theories identify important situational characteristics. But the theories differ sharply on a number of dimensions. First, the contingency theory emphasises the importance of inflexible leader traits, whereas the path–goal theory stresses the importance of flexible leader behaviours. Second, the path–goal theory considers subordinates’ personal characteristics important factors in the situation; the contingency theory does not. Third, the contingency theory suggests changing the situation to achieve a match between the situation and the leader, whereas the path–goal theory suggests that a leader may change his or her behaviour to fit the situation.

9. Of the three major leadership theories – the LPC theory, the path–goal theory, and Vroom’s decision tree approach – which is the most comprehensive? Which is the narrowest? Which has the most practical value?

The most comprehensive leadership theory probably is the path–goal theory. It is a general framework for understanding how leader behaviour and situational factors influence subordinates’ attitudes and behaviours. The narrowest theory probably is the Vroom-Yetton-Jago model, because it focuses on only one dimension of leadership: the degree of subordinate participation in decision making. The Vroom approach may have the most practical value, but it is rather complex for managers to use.

10. How realistic do you think it is for managers to attempt to use Vroom’s decision tree approach as prescribed? Explain.

It is realistic for managers to use Vroom’s decision tree approach as prescribed as long as they use it as a guideline when deciding on the degree of subordinate participation. Other factors, such as the culture of the organisation, may not be included in the model, and such omissions could restrict managers’ ability to use the model as prescribed.

Group exercise – Managers and leaders Learning Objective: This exercise offers students an opportunity to compare their assumptions and perspectives on managers and leaders with the assumptions and perspectives of others in their class.

Summary: Students will identify contemporary examples of successful and unsuccessful leaders and then describe how these leaders differ.

Task: 1. Working alone, each student should list 10 characteristics of successful managers and a list of 10 different characteristics of successful leaders.

2. Next, students should share their lists in small groups and discuss the following: 10-13

a. Which manager characteristics, if any, appear on different students’ lists? b. Which leaders’ characteristics, if any, appear on different students’ lists? c. Which characteristics, if any, do students put on both their manager list and their leader list?

3. Have each group compile one list of 10 characteristics of managers and one list of 10 characteristics of leaders.

4. Share all group lists with the entire class, and see if the class can agree on a final list for managers and a final list for leaders. What, if anything, do the final two lists have in common? Do any characteristics appear on both the manager list and the leader list?

Mini-simulation (MindTap-only) Imagine receiving a performance review from your boss about your leadership capabilities that is less favourable than you expected. What do you say or do? Go to this chapter’s mini-simulation, watch the challenge video, and choose a response. Be sure to also view the outcomes of the two responses you didn’t choose.

OB concepts applied: career management, openness to feedback, developmental openness Discussion questions 1. Is Alex an effective manager? Is he an effective leader? Justify your answers for each question. According to Kotter’s distinctions between management and leadership (Figure 10.2), Alex had exhibited effective management skills rather than effective leadership skills. If Alex chooses the third option as his reaction to his performance appraisal, he will show more leadership skills than if he chooses either of the other two options. Alex scored well on ethics, financial performance and employee turnover, all resulting from his management skills. Alex’s low scores in maintaining company culture and leadership appraisals show he could improve his leadership skills. After attending workshops and working with a mentor, Alex is transforming to an effective leader.

2. Does Amy demonstrate effective leadership in the challenge video? In what way is she an effective or ineffective leader?

Amy shows her leadership skills through her careful distribution of the appraisal results. She first lists the positives before bringing up the lower scores for maintaining company culture and leadership. Amy is directly communicating the direction she believes Alex should take while providing time for Alex to contribute. When Alex reacts with defiance in the first scenario, Amy stands her ground and does not sway from the point of the appraisal analysis.

When Alex shows interest in bettering his skills, Amy is quick to make recommendations that helped her when she started. She is freely offering advice and helping Alex improve.

3. In addition to the solution you think is best, what would you do as either Amy or Alex to demonstrate more effective leadership when handling this situation?

Option three is obviously the best solution. Both Amy and Alex are showing signs of leadership in this scenario. The follow-up review in one year shows that Alex correctly received the information and worked at improving his performance.

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CHAPTER 11 – POWER, INFLUENCE AND POLITICS Chapter overview When used effectively, power and influence are essential to every manager’s performance. When used inappropriately, power can result in unethical behaviour and be damaging to employees and organisations. Conflict in organisations is often about power and influence, and the way power is manifested in the organisation and across workgroups. Politics is closely related to power and influence. This chapter identifies different kinds of power, the nature and influence of power, and the role of impression.

Learning outcomes After studying this chapter, students should be able to: 1. identify and describe different kinds of power, from positional to personal power, and how you can utilise these 2. discuss how power is obtained and used by individuals and groups 3. discuss influence and describe which influence tactics are the most and least effective 4. describe some of the factors that influence political behaviour in organisations 5. understand the role of impression management in power and influence.

Guide your learning 1. Why do some people have more power than others? (LO1) 2. Do I have power? When and how? (LO2) 3. Who am I influenced by, and why? Who do I influence, and why? (LO3) 4. What is my view of organisational politics? How has it been formed? (LO4) 5. Why am I influenced positively by some people and negatively by others? (LO5)

Chapter outline 11.1.

Types of power in organisations Power refers to a person or group’s potential to influence another person or group to do something that would not otherwise have been done. Power is held by individuals as well as by groups. David McClelland found that the real driver of a leader’s performance was the leader’s need for power, or the desire to control and influence others or to be responsible for others. McClelland also identified the leadership motive pattern: a high need for power (with high impulse control) and a low need for affiliation. The seven types of power are summarised in Figure 11.1. Legitimate, reward and coercive powers come from the position one holds in an organisation. Expert, informational, referent and persuasive powers are types of personal powers.

11.1.1. Position power Organisational authority gives a manager position power, which is power based on one’s position in the organisation.

11.1.1.1. Legitimate power is a form of position power based on a person’s holding

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a managerial position rather than anything the manager is or does as a person.

Legitimate power is the formal authority the firm gives a manager to hire new employees, assign work, monitor employees’ work and enforce organisational rules.

11.1.1.2. Reward power is position power that involves the use of both tangible and intangible rewards to influence and motivate followers. Rewards are one of the strongest tools used by managers to inspire high performance. If rewards are improperly used, they can decrease the motivation of employees who do not expect to receive them.

11.1.1.3. If a manager has the ability to punish subordinates, they can use position power or coercive power to comply out of fear or because people want to avoid being punished.

11.1.2. Personal power Personal influence gives a manager personal power, which is based on the characteristics of that individual and stays with the individual regardless of where that person works.

11.1.2.1. Expert power is based on an individual’s expertise in some area. People respond to expert power because of their belief in the person’s knowledge, skills, or expertise.

11.1.2.2. Control over information is informational power. These gatekeepers are able to exert power over others by providing or withholding information that others need. Once shared, the informational power is gone, but it may lift your expert or knowledge power.

11.1.2.3. Referent power is another type of personal power based on a manager’s charisma or attractiveness to others. Subordinates behave as the manager does and wants because they seek his or her approval.

11.1.2.4. Persuasive power is due to the ability to use logic and facts to persuade others to adopt one’s ideas or perspectives. Good listening skills and identifying and appealing to the goals and motivations of the other person can enhance persuasive power.

11.1.2.5. Critical theorists see cultural power as coming from the ability to use cultural values and beliefs to persuade others to adopt or adapt their ideas or perspectives. Some argue that the cultural differences between people are the real basis of power, especially the misuse of power.

11.2.

Obtaining and using power Because the effects of referent and expert power rely on the employee’s internal motivation and voluntary compliance, they are always appropriate; however, they are not always effective.

Legitimate, reward, and coercive power rely on external motivation and obligatory obedience.

Leadership is more effective to the degree that followers’ behaviours towards the leader’s goals are voluntary and not coerced.

11.2.1. Acquiring and using power 11.2.1.1. One can acquire power if aspects in their control are important, rare, and cannot be substituted for by something else. Developing expertise and performing well can increase power, as well as technical expertise.

11.2.1.2. The abuse of power is using any type of power to demean, exploit or take advantage of another or influencing someone to do something the person later 11-2

regrets. Having power does not guarantee that using it will be effective in influencing desired behaviour. No one should have free rein, or unchecked authority, as this can result in the abuse of power.

11.2.2. Empowerment The degree to which power is shared and an employee has the authority to make and implement at least some decisions is empowerment. Empowerment can increase the flexibility and responsiveness of organisations. Empowerment requires two things: (1) that managers allow those beneath them to have more power and control over their work, and (2) that managers provide training, resources and coaching to give them the skills and confidence to act empowered.

11.2.3. How departments obtain power A group’s or department’s power is derived either from its control of resources or through its strategic power. The more desirable and important the resources controlled by a group, the greater the group’s resource power. Groups that occupy a central role in decision making wield greater strategic power by influencing higher-level decisions.

11.2.3.1. Power is greater for departments that control scarce resources vital to the organisation. When resources are plentiful, power differences are often reduced.

11.2.3.2. A department’s activities are central to the extent that they influence the work of many other subunits, when their impact is more immediate, and when they have a critical impact on the firm’s key product or service.

11.2.3.3. A department’s power is reduced if there is substitutability, or others inside or outside of the organisation can also perform its responsibilities.

11.2.3.4. The departments most capable of coping with uncertainty tend to have greater power.

11.3.

Influence in organisations Influential people have power, but not all-powerful people have influence. Leadership is in large part an influence process that involves the use of various powers or interpersonal styles to affect the behaviours and attitudes of others.

11.3.1. Influence tactics How people translate their power to affect the behaviour of others is through influence tactics. Influence tactics should be matched to the situation and to the person, can be learned with practice, and are not always positive. Figure 11.6 summarises some influence tactics along with the possible responses to them. Of the various influence tactics, rational persuasion, inspirational appeals and consultation have been found to be the most effective; pressure is the least effective.

11.3.2. Role of national culture in influence effectiveness Influence tactics are also most effective when they are consistent with the social values in the national and organisational cultures. First Nations Australians highlight the absence of a constitutionally enshrined voice and of a treaty, while Māori people in Aotearoa/New Zealand advocate for greater social policy change aligned to the Te Tiriti o Waitangi/Treaty of Waitangi. It is important to consider what various national cultures value, such as harmony or positional power, when working in global contexts.

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11.3.3. Persuasion skills Because persuasion gets people to do things differently because they want to, not because they have been ordered to, it is a more effective way to lead.

Recommendations for being more persuasive include building credibility, not beginning with a hard sell, searching for shared ground, developing compelling positions, connecting emotionally, creating a continuous feedback loop and being patient.

11.3.4. Upward influence Upward influence can be used to influence superiors and contributes substantially to individual effectiveness in organisations. There are six primary upward influence tactics: 1. Ingratiation 2. Exchange 3. Rationality 4. Assertiveness 5. Coalition formation 6. Upward appeals The six upward influence tactics can be used alone, but are often used in combination with each other in what are called upward influence styles. There are four upward influence styles: 1. Shotgun uses the most influence and emphasises assertiveness and bargaining.

2. Tactician uses an average amount of influence and emphasises reason.

3. Bystander uses little influence with superiors.

4. Ingratiator primarily uses a friendliness strategy, but also other influence strategies to some extent.

11.4.

Organisational politics Organisational politics are social influence attempts directed at people who can provide rewards that will help promote or protect the self-interests of the actor. Organisational politics are the result of both individual employees and the culture of the organisation.

Eugene McKenna identified common political tactics in organisations: 1. Controlling information: restricting information to certain people 2. Controlling lines of communication: establishing gatekeepers to restrict access 3. Using outside experts: may seem neutral, but are paid to ‘do the bidding’ of management 4. Controlling the agenda: ensure only certain topics are discussed 5. Game playing: leaking information, etc.

6. Image building: ‘spin doctors’ project a desirable image 7. Building coalitions: befriending powerful others or starting subgroups to promote specific aims 8. Controlling decision parameters: try to influence decisions before they are made 9. Eliminating political rivals: this includes even promotions to get them out of the way When politics are constructive rather than destructive, they are unnoticeable.

Organisational culture is influenced by the perceived degree of political activity and how the employees in that organisation react to these perceptions. Political skill involves having interpersonal influence as well as social astuteness, which involves showing respect for others’ ways of thinking.

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11.4.1. Causes of political behaviour Conflict is at the core of organisational politics. Uncertainty increases political behaviour.

Scarcity of valued resources also promotes political behaviour. Some individuals desire to avoid conflict, and are not viewed as threatening opponents so may be welcomed into the ‘in- group’ and receive valued outcomes simply for not interfering with a politically acting individual’s or group’s agenda. Organisational policies sometimes reward and perpetuate political behaviour.

11.4.2. Managing organisational politics Politics is pervasive and political skill has been found to decrease job stress. Formal rules and procedures can help to reduce the occurrence of political behaviour, and clarifying job expectations; opening the communication process; confronting employees acting inefficiently, unethically or irresponsibly; and serving as a good role model can all decrease political behaviour. Managing politics is about managing power.

11.5.

Impression management Impression management is the process of portraying a desired image or attitude to control the impression others form of us. The personality trait of self-monitoring reflects having a high concern with others’ perceptions and adjusting behaviour to fit the situation. Figure 11.10 presents some tips for detecting impression management and deception on the part of others.

OB in the real world: Influencing acceptance of change at Church & Dwight Summary: Church & Dwight Co., Inc., founded in 1846, is a leading consumer packaged goods.

Company leaders realise that without new successful product launches, the company will lack organic growth. One key part of the new strategy is splitting the marketing department into two parallel marketing organisations.

Challenge: How can Church & Dwight best influence their key marketing talent to support the new strategy and embrace their responsibilities?

Response: The company ensured that its current brand team would be involved in new product development. Leaders applied rational persuasion to show that the new arrangement would provide resources to do more with their own brands. Management used inspirational appeals to link the strategy to company success. The change has been so successful that Church & Dwight is expanding the new structure.

OB in the real world: Influencing acceptance of mental health issues at work Summary: Heart on My Sleeve started with a simple act when founder Mitch Wallis drew a heart on his forearm. After what could be seen as a high-powered start to life, Mitch’s anxiety was spiralling out of control. He decided to change things through the power of sharing stories. Today, Heart on My Sleeve is working with organisations including American Express, Google, Spotify, Dropbox, Woolworths, Salesforce, Suncorp and more to make it safe for people to share their daily struggles and take a positive view towards mental health. Heart on My Sleeve has become a leader with a global voice for mental health. Through the guiding values of authenticity, safety and impact, Mitch has nearly singlehandedly influenced social change and he is seeking to do more by doubling the self-help seeking rate to 60 per cent over five years.

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Challenge: This is a story of influence and connection, one where the power of social media was harnessed for good. But Mitch did not set out to lead a movement, he just sought to create meaningful connection, and that led to a movement that empowered and influenced change. How did Mitch earn this power, create influence and manage his image to make a difference?

Response: The Black Dog Institute cites that one in five people will suffer a mental health episode at some stage in their life. What made Mitch a force of influence was his ability to share a story that resonated with people. Mitch did not set out to follow the strategies in this chapter, but he did quite naturally do them.

Ethical dilemma: Managing power ethically Summary: Some people manipulate others through their influencing tactics, impression management and ensuring that they manage up. Manipulative and duplicitous people are good at reading situations and move organisations frequently. With power and influence comes great responsibility. That is to treat others with respect (often referred to as Kant’s ‘golden rule’ of doing unto others as you would have done to oneself), consideration and without harm.

What can you do as a manger or leader to best balance your use of power and influence?

Consider tools such as 360-feedback and recognition of both sets of needs in your answer.

One of the core abilities to being a good leader is to be able to adapt to situations, and practise selfmonitoring and self-awareness. A good way to understand the personal use of power and influence is to receive feedback, and to provide a continuous feedback loop with direct reports, peers and superiors.

The 360-degree feedback tool is commonly used in organisations to provide anonymous responses regarding an individual on multiple qualities and traits. However for direct reports, fear of punishment may prevent honest and constructive responses; therefore, it is important to create an environment of empowerment with teams, to increase honesty and responsiveness. As a leader, there may be the ability to introduce rewards for honesty and constructive improvements, or formal rules and procedures that may reduce political behaviour. Understanding the amount of influence is important in motivating teams to great outcomes. Without an awareness of both the level of power and the ability to influence, inspiring others for a ‘win-win’ (e.g. self-motivation aligned with organisational goals) will be more difficult or impossible.

Critical perspective The psychopaths within Industrial psychologist Paul Babiak and criminal psychologist Robert D. Hare have written extensively about psychopaths in organisations. High-functioning psychopaths may be lurking in any organisation and are often ‘master’ manipulators, charming, highly influential as well as highly dysfunctional. These people take credit for others’ work, embellish their successes and discard their failures, and do not feel either empathy or remorse. Forbes magazine has also written about the prevalence of this type in leadership positions.

Summary LO11.1 Position power (legitimate, reward and coercive powers) is derived from the position one holds in an organisation. Personal power (expert, informational, referent and persuasive powers)

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comes from the unique characteristics of individuals regardless of their position in the organisation.

LO11.2 When used improperly, power, influence and politics can undermine trust, result in unethical behaviour and create a toxic organisation. Involvement gives subordinates influence in the decision being made; empowerment gives subordinates the ability and authority to make the decision themselves.

LO11.3 The six primary upward influence tactics are ingratiation, exchange, rationality, assertiveness, coalition formation and upward appeals. Rational persuasion, is the most effective influence tactics, and pressure is the least effective.

LO11.4 Uncertainty, scarcity of valued resources, and organisational policies can influence political behaviour.

LO11.5 Impression management involves the communication of a desired image or attitude to influence the image others form of us. Being perceived positively is related to greater power and influence.

Revision questions 1. A manager’s use of power can harm another person within the organisation. a. coercive b. legitimate c. referent d. reward 2. Which of the following is NOT a source of empowerment for employees? a. Control over their work b. Skills training c. Technology d. Being told that they are empowered 3. What term refers to making informal or formal appeals to organisational superiors for intervention? a. Personal appeals b. Upward appeals c. Group appeals d. Downward appeals 4. All of the following are considered political behaviour EXCEPT . a. impressions management b. controlling lines of communication c. coalition building d. limiting others’ access to information 5. Which of the following would be most likely to decrease the overall occurrence of politics within an organisation? a. Building coalition b. Enacting change c. Reducing uncertainty d. Controlling access to information Case study: What is charismatic leadership?

Summary: Charismatic leadership is a leadership style that utilises ‘a leader’s authenticity, communications prowess and inspiration to pull out the best in others’. Their passion is expressed

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in a very optimistic manner and motivates those around them to also become interested in the ideas that the charismatic person is so passionate about. Swedish climate change activist Greta Thunberg, only 17 years old as of 2020, has motivated millions of people around the world to act on climate change through protests and climate strikes. Charismatic leaders are uplifting, marked by communications prowess, courageous, original and likeable, and may appear at any time, although often emerge during a crisis. Lack of passion can result in lower levels of engagement both in and outside the workplace, and without passion it is extremely difficult to be charismatic and motivate others to care.

Critical 1. When we think about a passionate person, we often think about the person being passionate about something that they love, such as artistic pursuits (acting, writing etc.) or helping others. But passion and charisma can stem from anger (such as with Greta Thunberg) or hate (such as with Adolf Hitler). Why do you think that is? Why do we still think of these individuals as being charismatic?

Charisma is a form of interpersonal attraction that inspires support and acceptance, and influence is again a fundamental element of this perspective. Charismatic leadership is viewed as value-based leadership, which is considered sincere and authentic, therefore provides more influence over others to inspire, to motivate and to promote high performance or action. Both Greta Thunberg and Adolf Hitler were sincere and focused in their messaging to people. While Greta Thunberg’s anger aims to motivate change that will help people, tragically destructive and toxic passion can motivate incredible harm and destruction.

2. Why is it that charismatic leaders ‘most often emerge – or are called into existence – during a crisis’? Is there less of a reason for these leaders to exist outside of crises? Explain your response. Often when the environment is going well and has little need for changes, politics or influence goes unnoticed. However, when change needs to occur, power differences are created. Often those who perceive the disadvantage are most passionate and personally motivated to create change. Charismatic leadership is viewed as value-based leadership; therefore, when an individual is authentic in their reasons for change, they motivate action in others. Examples may include leaders during the COVID-19 pandemic.

Mainstream 1. What are the traits of a charismatic person? Why aren’t all people naturally charismatic?

Charismatic people are often self-confident, and have a firm confidence in their beliefs and ideals, and a strong need to influence people. They are envisioning, energising and enable their supporters to action. Empowerment is often closely connected with enablement, and the desire or want of supporters is always more powerful than forcing subordinates into action.

3. Which of Greta Thunberg’s charismatic traits mentioned in the case study do you think were the most effective for motivating people with regard to climate change action? Explain your response. Student responses may vary depending on their exposure or prior knowledge of Greta Thunberg or the various aspects of charismatic leadership. Aspects from the case study specifically note actions taken across the world and are an example of enabling supports with specific steps and coordinated activities. Some may have found the passion in her speech to be energising, both the shared energy from such a young and inspired speaker as well as the direct implication that ‘people are dying’. Finally, Greta Thunberg was able to create a shared vision through her words that were concrete examples and created shared urgency.

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Tutorial activities 1. What power(s) does your instructor have?

An instructor has legitimate power, expert power, referent power, coercive power, reward power and persuasive power. An instructor has been hired by the university (legitimate power), knows the subject matter (expert power), has the respect of the students (referent power), can give students a low grade or remove them from the class if assignments are not submitted (coercive power), can give a student a good recommendation (reward power) and can persuade students about the value of a college education (persuasive power).

2. What influence tactics does your instructor use to motivate you to learn?

The most effective influence tactics that an instructor can use to motivate students include: • rational persuasion – using logic and facts to persuade students to get a college degree • inspirational appeals – appealing to students’ aspirations, values and ideals to gain commitment; increasing confidence to increase motivation • consultation – giving advice to solve a problem or mutually setting goals to increase a student’s commitment.

3. Describe a time in the last week that someone influenced you to do something you would not otherwise have done. What influence tactic(s) did she or he use?

Examples may vary. An example is chairing a committee you don’t want to chair, but influence tactics are used to appeal to rational persuasion and personal appeals.

4. Is another person’s ethics important to you in your decision to allow that person to influence you? Why or why not?

Yes. A good reputation for ethical behaviour decreases my concern that another person might behave inappropriately and increases my willingness to have the person influence me. A reputation for ethical behaviour would dispel the thought that this person was advancing a personal agenda. Being an ethical leader is a source of power because it builds trust.

5. How can you ethically use power, influence and politics to get a promotion?

A person can ethically use expert power and personal to influence a decision maker, a manager, to get a promotion. Developing technical expertise and high performance would increase an individual’s power in an organisation and help achieve a promotion. Politics would enter in because the promotion might depend on the availability of resources and a positive relationship between the employee and the manager.

6. Have you ever tried to influence your boss to do something? What upward influence tactics did you try? Were you successful? Why or why not?

Students can share their experiences. Examples could include influencing a supervisor through ingratiation by being friendly and respectful, and rationality based on expert power, explaining one’s thinking. Consider having students identify if they were successful or not.

7. Are office politics bad? Why or why not?

Office politics are bad because they take time away from performing valuable tasks for the organisation. A manager who understands the motivations and aspirations of subordinates can help them get what they want without resorting to politics or the inappropriate use of power.

Building trust and openness allows employees to discuss their feelings, fears and opinions without the need for political behaviour.

8. How do you use impression management at work?

Students can share their experiences. I’ve used impression management techniques with positive results to encourage the dean to offer certain courses that I wanted to teach according to a schedule that was favourable to me in a location that I chose.

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Group exercise – Influencing your instructor Learning objective: Describe what you can do to increase your power in an organisation.

Summary: Students form small groups and identify a spokesperson. They develop a strategy to influence the instructor to change the evaluation criteria for this course (although it is likely too late in the semester for any changes to actually be made). They identify the influence tactics as well as the sources of power. They make a brief presentation to the class and instructor. The class will vote on which group is the most persuasive.

Task: Questions to guide the discussion: 1. What is the role of impression management in this situation?

2. What is the role of empowerment?

Mini-simulation (MindTap-only) Imagine learning that your boss is trying unsuccessfully to influence a peer of yours to organise the company picnic again this year. When you are asked to try to influence the stubborn subordinate to agree to plan the picnic, what do you say or do?

Go to this chapter’s mini-simulation, watch the challenge video and choose a response. Be sure to also view the outcomes of the two responses you didn’t choose.

OB concepts applied: legitimate power, coercive power, reward power, referent power, rational persuasion, ingratiation, inspirational appeals, coalition tactics, exchange influence tactic, personal appeals, pressure, commitment, compliance, passive resistance, active resistance Discussion questions 1. Which influence tactics do you think were the most effective and why would they work?

The most effective influence tactics were rational persuasion (It would be easier this year.), ingratiation (Every party you’ve organised was awesome.), and inspirational appeals (It’s part of our core culture.) to persuade Allison that it will help her career through project leadership experience.

2. If you were to use power to try to get the subordinate to do the task, which forms of power would work best and why? Which would be ineffective and why?

Legitimate power would work, but would likely make Allison resentful and mad. Reward power might work, but as Allison does not want to organise the party the rewards would have to be big. Alex and Ryan point out some indirect rewards such as the experience of managing a large project and recognition from the owner. Ryan and Alex act on Allison’s expert power due to her knowledge and expertise from managing the picnic the previous year. Finally, Alex and Ryan use persuasive power to get Allison to volunteer as picnic organiser. This seems to be the most effective as it makes Allison accept the challenge rather than dread the challenge.

3. Did you detect any organisational politics, and if so what types?

Amy is displaying a bit of office politics by asking Alex and Ryan to convince Allison to organise the picnic. This could be considered a coalition between Amy, Alex and Ryan.

4. How else might you persuade your co-worker to organise the picnic using power and influence? Allison has expert power because she knows how to organise the picnic. The coworkers could persuade her to share her expertise and train others to put on future picnics. If

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Allison knows that she will not be responsible for every company picnic, she will be more amenable to putting on the picnic this year. Allison could select next year’s organiser and appoint committees.

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PART FIVE – ORGANISATIONAL PROCESSES AND CHARACTERISTICS Part 4 was about how managers can enhance performance behaviours, organisational commitment and engagement in order to build organisational effectiveness and competitiveness. The final part focuses a bit more broadly on how organisational characteristics influence managerial and organisational effectiveness, investigating organisational structure and design, culture and change management.

CHAPTER 12 – ORGANISATIONAL STRUCTURE AND DESIGN Chapter overview Effective organisational structures improve the working efficiency, motivate employees, and facilitate working relationships among employees and across organisational units, as well as influencing how the organisation operates, how employees communicate, and how they are expected to behave. This chapter discusses organisational structure and organisational charts, factors that influence organisational structure, different types of structures and virtual organisations, and ways of integrating employees in any organisational structure to enhance collaboration and knowledge transfer.

Learning outcomes After studying this chapter, students should be able to: 1. identify the elements of organisational structure and describe mechanistic and organic structures 2. explain what influences an organisation’s structure 3. describe the basic types of organisational structures 4. identify and discuss four contemporary issues in organisational structure.

Guide your learning 1. What sort of features might an organisation described as mechanistic have in regard to structure and processes for staff and customers? Likewise, if an organisation is described as organic, what characteristics would you expect to see in relation to structure and processes? (LO1) 2. Think of an organisation you know well and then consider how it is structured to operate.

Create a list of broad influences that you think have helped determine why the organisation is structured the way it is; for example, a need to monitor employee activities, or a strategy to maximise innovation strategy, and so on. There are about seven main broad influences – can you think of that many? (LO2) 3. You will learn that the basic types of organisational structures are pre-bureaucratic, bureaucratic, functional, divisional, matrix, team-based, lattice and network. The names are fairly self-explanatory, so discuss what you think each structure would approximately look like and how each type would affect how work and communication happens in an organisation. (LO3) 12-1

4. Virtual organisations contract out almost all of their functions except for the company name and managing the coordination among the contractors. A community of practice is a group of people who share expertise and interest in a joint enterprise informally.

Discuss what you think are the similarities and differences between virtual organisations and communities of practice, along with some examples. (LO4) Chapter outline 12.1.

Organisational structure Organisational design is the process of selecting and managing aspects of organisational structure and culture to enable the organisation to achieve its goals in response to internal and external changes. One of the most important outcomes of organisational design is organisational structure, or the formal system of task, power and reporting relationships.

When structure is aligned with needs, it results in greater organisational efficiencies and less conflict. An organisational chart like the one shown in Figure 12.2 illustrates the chain of command and reporting relationships. People at all levels of an organisation can make meaningful contributions.

12.1.1. Characteristics of organisational structure Organisational structures reflect the company’s division of labour, span of control, hierarchy, formalisation and centralisation. Figure 12.4 summarises these characteristics.

12.1.1.1. Organisational charts also show the division of labour, which reflects the degree to which employees specialise or perform a variety of tasks as generalists.

The division of labour is reflected in the number of job titles in an organisation, or by the extent to which specialist roles exist within each functional area.

Dividing work into specialised jobs increases work efficiency and makes it easier to assess job candidates, but employees tend to be more isolated. Specialisation also decreases organisational flexibility.

12.1.1.2. The number of people reporting directly to an individual is that person’s span of control (some experts call this the span of management). Figure 12.6 illustrates a flatter organisational structure with a wider span of control than the structure shown earlier. Narrow spans of control are costlier, but they also provide closer supervision and more coaching. Wider spans of control give subordinates greater autonomy and responsibility for self-management, and are best for routine, production-type work.

12.1.1.3. When an organisation creates a hierarchy, it outlines supervision relationships by giving some employees authority over others. Hierarchy establishes the ‘tallness’ or ‘flatness’ of an organisational chart (Figure 12.2 shows four hierarchical layers, and Figure 12.6 shows a flatter three-layer firm).

Organisations should not have more hierarchical levels than are necessary, but not having enough levels can also give too much power to a few people at the top of the organisation, and restrict the interaction and communication among employees. Grouping employees into self- managed work teams decreases hierarchy, because the teams incorporate some of the roles previously held by higher layers of management.

12.1.1.4. Formalisation reflects the extent to which organisational rules, procedures and communications are written down. Formalisation is not necessary for high performance, but because formalisation increases job and role clarity; it can 12-2

increase employee commitment.

12.1.1.5. Centralisation concentrates power and decision-making authority at high levels of the organisation. The two subcomponents of centralisation are participation in decision making and hierarchy of authority. Flatter, decentralised organisations give lower levels more authority and autonomy for making decisions. They also promote innovation, increase the speed of decision making, and can save money as a result of fewer management layers.

Centralisation is best thought of as a continuum, and different functions in a company can have different degrees of centralisation.

12.1.2. Mechanistic and organic structures Organisational structures can be thought of as being either more mechanistic organisations, which are rigid, traditional bureaucracies with centralised power and hierarchical communications, or organic organisations, which are flexible, decentralised organisations with unclear lines of authority; they have decentralised power, open communication channels, and a focus on adaptability in helping employees accomplish their goals. Note that mechanistic and organic structures represent ends of a continuum, not a dichotomy.

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Determinants of organisational structure The most appropriate structure for an organisation depends on many things, as summarised in Figure 12.9.

12.2.1. Business strategy One of the most important factors influencing the appropriateness of different organisational structures is the business strategy. Matching organisational structure to the business strategy leads to higher firm performance.

12.2.2. External environment Rapidly changing environments require more flexible structures to deal effectively with the constant changes. Firms facing a highly differentiated environment usually create different business units to best serve each market segment.

12.2.3. Organisational talent A third factor influencing organisational structure is the nature of the organisation’s talent.

A flexible structure is more appropriate for highly skilled workers.

12.2.4. Organisational size An organisation’s size also influences its structure. Larger organisations tend to have greater specialisation and departmentalisation, greater hierarchy and more rules. It is impossible to identify an optimal organisational size.

12.2.5. Behavioural expectations A fourth important factor influencing organisational structure is the organisation’s expectations of how employees should behave, and what attitudes it wants to encourage or suppress, and is based in part on the company’s values.

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12.2.6. Production technology A fifth factor influencing organisational structure is the organisation’s technology, or primary production system. When a firm uses unit production, it produces in small batches or makes one-of-a-kind custom products. When a firm uses mass production, it makes large volumes of identical products, typically using assembly lines and machines. In this case, a bureaucratic structure with a large managerial span of control would be appropriate. When a firm uses continuous production, machines constantly make the product and employees monitor the machines and plan changes.

12.2.7. Organisational change As organisations change their strategies and adapt to changing environments, they often modify and change their structures to support the changes.

12.3.

Types of organisational structures In new or young organisations, the entrepreneur or founding group makes the decisions, and most communication is one-on-one because of the small organisation size. This type of early organisational structure is called pre-bureaucratic and is highly centralised and lacking task standardisation. Other things being equal, it is the founder’s personality that determines organisational structure and strategy. As small companies grow, they typically adopt greater standardisation and taller structures, and develop a bureaucratic structure. In a bureaucratic structure, there is a formal division of labour, hierarchy and standardisation of work procedures, and employee behaviours follow written rules. Six common bases for grouping employees are as follows: 1. Employee knowledge and skills 2. Business function 3. Work process 4. Output 5. Client 6. Location 12.3.1. Functional structure A functional structure groups people with the same skills, or who use similar tools or work processes, together into departments. Functional structures tend to work well for organisations in stable environments selling only a few products or services because of the increased economies of scale. The possible disadvantages of a functional structure include poor coordination and communication, or a lack of clear responsibility for the delivery of a product or service.

12.3.2. Divisional structure A division is a collection of functions organised around a particular geographic area (geographic structure), product or service (product structure), or market (market structure). Divisional structures are common among organisations with many products or services, geographic areas and customers. The possible disadvantages of a divisional structure are that rivalries and conflict might emerge across divisions, economies of scale are reduced because resources and skills are duplicated across divisions, and employees may become focused on divisional rather than organisational goals.

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12.3.3. Matrix structure When employees report to both a project or product team and a functional manager, they are working in a matrix structure. An organisational chart for a matrix structure is shown in Figure 12.14. Matrix structures generate complex reporting relationships because a matrixed employee essentially has two bosses. Matrix organisations are good at providing quality customer service, are very flexible, and can respond quickly to changes because the work units contain all of the needed functional expertise to make decisions.

12.3.4. Team-based and lattice structures Organisations with a team-based structure create horizontal or vertical teams that can define part or all of the organisation. Unlike matrix teams, team members do not report to a second functional manager. In organisations with a lattice structure, cross-functional and cross-level sub-teams are formed and dissolved as necessary to complete specific projects and tasks. This structure is common in consulting organisations.

12.3.5. Network organisation A network organisation is a collection of autonomous units or firms that act as a single larger entity, using social mechanisms for coordination and control. Because network organisations contract out any function that can be done better or more cheaply by outside firms, managers spend a lot of time coordinating and controlling the network of contractors and strategic alliances. Some of the ways this is done are through joint payoffs and restricted access: • Joint payoffs: Payments are arranged based on the final product.

• Restricted access: By restricting exchanges to a few long-term partners, networked organisations are more dependent on each other.

12.4.

Contemporary issues in organisational structure Four emerging issues that relate to organisational structure are virtual organisations, mechanisms for integrating employees, communities of practice, and the effects of restructuring on performance.

12.4.1. Virtual organisations A virtual organisation is one that contracts out almost all of its functions except for the company name and managing the coordination among the contractors. Virtual organisations tend to be very complex. Nonetheless, the reduced costs and increased flexibility from being virtual create a competitive advantage for many firms.

12.4.2. Integrating employees Segmenting employees into divisions, functional areas, or groups requires additional integrating mechanisms that facilitate coordination and communication among employees and groups. When done informally, this is simply called direct contact.

Alternatively, a manager or team member can be assigned a liaison role and held formally accountable for communicating and coordinating with other groups. When a specific project or problem needs to be addressed, organisations often create a temporary committee called a task force. When integration needs are permanent and more complex, a cross-functional team is created.

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12.4.3. Communities of practice Communities of practice can also help to integrate employees and create the informal structure that nearly every business needs, regardless of its formal structure.

Communities of practice are groups of people whose shared expertise and interest in a joint enterprise informally binds them together. These communities rarely show up on organisational charts; however, companies recognise their benefits and are increasingly promoting and enabling them. Here are some experts’ tips to create the conditions that enable communities of practice: 1. Start with a clear area of business need.

2. Start small.

3. Recruit management involvement.

4. Use technology that supports the community’s needs and that members are able to use.

5. Respect and build on informal employee initiatives already underway.

6. Celebrate contributions and build on small successes.

A reason many companies invest in communities of practice is the ability of these communities to transfer knowledge among people.

12.4.4. Effects of restructuring on performance The restructuring process is stressful and can decrease employee motivation if the changes are poorly communicated. Restructuring efforts must focus on positioning the organisation for the future. Restructuring also must address the real cause of whatever the organisation wants to change. Restructurings should take place as infrequently as possible to create stability, enhance performance, and minimise employee stress and confusion.

OB in the real world: Partner – merge – acquire – collaborate: The cycle of Deloitte Australia Summary: Established in Sydney in 1891 originally as Yarwood Vane and Co, Deloitte Australia has changed its name and structure in order to succeed in a crowded marketplace. Under the Deloitte Australia brand, thousands of professional organisational consultants collaborate across a network of offices in Australia to provide audit, economics and financial advice, plus human capital, tax and technology services. Deloitte continues to reinvent its partnership structures with innovative new services, products and people, and while expanding through acquisitions, alliances and organic growth, the partnership evolved constantly and merged with others. The pandemic years required agility, resilience, and a reliance upon diverse staff and expertise. Around the world, the ubiquitous Deloitte organisation constitutes over 310 000 people in 150 countries..

Challenge: In Australia, and other countries in the competitive professional services market, the only way to survive is to be structurally fluid and prepared to shift and change. These are the hallmarks at the centre of Deloitte’s overall approach. Consider the various ways that partnerships seek to merge, look to acquire others and let collaborations lead to other opportunities for the cycle to repeat.

Response: The Deloitte organisation has to be constantly clear about how it wants its members to behave, what attitudes it wants to encourage and what it wants its members to accomplish. Deloitte’s structure affects its performance by influencing how it operates and the culture it develops.

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Deloitte’s structure also influences, how employees communicate and how they are expected to behave. The many structural changes have aimed at creating positive working relationships, improving communication and cooperation, and motivating their staff while maximising satisfaction and commitment and minimising staff turnover.

Ethical dilemma: Do you trust your structural medicine?

Summary: Biotechnology and pharmaceutical companies have numerous health and safety aspects to developing drugs for human consumption. Obviously, there is a need for rapid innovation, and the idea of having flat, organic hierarchies with workers being able to autonomously generate new ideas without bureaucratic hurdles is compelling. For example, getting new cancer-killing drugs to market more quickly would be fine if those drugs are guaranteed to not cause side effects or even contribute to fatalities. Mechanistic hierarchies with all their checks and balances and process-driven guidelines can come into their own.

Imagine you are the manager of a company developing a drug that is showing early signs that it can cure a dreadful disease, but you are structurally bound by the need for policy and procedure with commercialising that drug for human consumption. Would you favour fast, flat communication and rapid movement of product to market through a flat, organic structure, or would you trust that process and policy driven by hierarchical and mechanistic checks and balances will deliver the safest, albeit slower, outcomes?

Organisational structure should be continually reviewed and revised to respond to changes both internally and externally. The processes within highly regulated industries should be regularly considered to ensure there are no legacy barriers or policies that no longer serve a purpose.

Assuming this business has recent reviews, then circumventing these processes poses a significant risk. While a cross-organisational project team, more organic in nature, may be able to leverage efficiencies in information and remove barriers of embedded hierarchy, many of the protocols and procedures are in place to ensure safety and quality, both of which may take time simply to provide evidence and results.

Critical perspective Opening the Valve on flat hierarchy power problems The Steam platform by Valve, is a Seattle-based poster-child for Millennial workplace values and behaviours. It has no traditional hierarchy, no bosses – the company has been celebrated for reaping the benefits of a flat hierarchy. While flat hierarchy removes many middle level bosses, power still concentrates in an overarching manager at the helm. Having no boss and few rules may seem ideal; however, informal and concentrated power in the flat hierarchy organisations can be prone to the abuse of power, just like anywhere.

Summary LO12.1 Organisational structure is the formal system of task, power and reporting relationships in an organisation. Span of control is the number of people reporting directly to an individual (e.g. formal authority). Mechanistic organisations are rigid, traditional bureaucracies with centralised power and hierarchical communications. Organic structures are flexible, decentralised structures without clear lines of authority, with decentralised power, open communication channels, and a focus on adaptability in helping employees accomplish goals.

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LO12.2 An organisation’s structure is influenced by its business strategy, external environment, talent, size, expectations of how employees should behave, production technology and organisational change. LO12.3 Network organisations are best for functions that do not require frequent exchanges, do not suffer from supply uncertainty and do not require customisation.

LO12.4 Communities of practice are groups of people whose shared expertise and interest in a joint enterprise informally binds them together.

Revision questions 1. organisations are flexible, decentralised structures with less clear lines of authority, decentralised power, open communication channels, and focused on adaptability in helping employees accomplish goals. a. Mechanistic b. Organic c. Goal-oriented d. People-oriented 2. The way in which task, reporting and authority relationships interact as a system determines an organisation’s . a. structure b. strategy c. hierarchy d. goals 3. Organisational refers to the process of selecting and managing aspects of organisational structure and culture to enable the organisation to achieve its goals. a. design b. structure c. chart d. division 4. When a firm uses , it produces in small batches or makes one-of-a-kind custom products. a. unit production b. an organisation chart c. mass production d. continuous production 5. When companies are first founded, they typically have a(n) structure? a. matrix b. inefficient c. mechanistic d. organic 6. are permanent task forces created to address specific problems or recurring needs. a. Leadership teams b. Cross-functional teams c. Direct contact teams d. Communities of practice 7. Which of the following is NOT a good tip for managers who want to create the conditions that enable communities of practice to flourish? a. Start with something really big.

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b. Start with a clear area of business need. c. Recruit management involvement. d. Respect and build on informal employee initiatives already underway.

Case study: Better structuring maritime businesses for women Summary: In 2022, interviews were conducted with female managers across a range of significant maritime businesses globally and in Australia to find out what structural and cultural reforms might be made to assist women to keep working in the industry. One interviewee said, ‘To help women advance their careers … requires ongoing work at structural, cultural and individual levels...’ Another said, ‘It’s an opportunity to rewrite company policies that reflect equality and equity to ensure recruitment procedures facilitate the inclusiveness of females at all levels…’ Yet another said, ‘More companies need to encourage female employees with incentives…

Companies need to have policies for inclusiveness, mentorship and support.’

Critical 1. Would you say that a culture of inclusiveness for women is strongly influenced by the structuring strategy of maritime businesses? Explain.

The structure of an organisation will always have some impact on the inclusiveness of the culture, as both hierarchy and span of control will denote who has formal and informal power.

However, equally important are the individuals within the organisation who will become the role models, mentors and coaches. Previous chapters discussed concepts of individuals who are authentic, honest, and engage their teams to empower them with new skills to overcome challenges. One interviewee mentioned challenging natural bias in interviews before even entering a maritime business. Another talked about the importance of successful implementation on plans or policies for inclusivity which would depend upon the leadership behaviours of the individuals.

2. One manager mentioned the need to embrace ESG. Can a maritime business simply provide an environmental, social and governance (ESG) policy to achieve this, or is significant change to the business likely to be needed? Explain.

There are multiple ways of viewing ESG policies as businesses are aligned to each element in unique ways. Good governance can provide clear guidelines to ensure ethical hiring and human resource practices, as well as setting clear goals for the organisation to align to long-term strategy. A shipping business is also dependent on various environmental influences and, as a result, has both risk and opportunity regarding the visibility of environmental impact. While implementing an ESG policy is a good start, changing the cultural elements is probably needed to see any significant change.

Mainstream 1. When a shipping business becomes involved in restructuring, what are some structural changes the business could make to ensure that their best female employees do not leave?

The restructuring process is always stressful. Improving communication may prevent a decrease in employee motivation. Individuals could be involved or engaged for specific aspects of the change, and include their honest feedback for positioning the organisation for the future.

Communicating the long-term goals as well as the expected steps would go a long way in helping employees, but further reinforcement and ‘walking the talk’ would be needed to alleviate fears and prevent good staff from leaving.

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2. Would the suggestions made by these managers in the maritime industry be more readily achieved through organic or mechanistic types of organisational structure?

Having a clear directive from the top of the organisation can be beneficial. However, more flexible, decentralised structures, open communication channels, and a focus on adaptability in helping employees accomplish their goals would better accommodate the diversity that women would bring to the traditional industry. This would also provide greater autonomy in how they operate in order to compete within their localised environment. Both answers can be defended.

Tutorial activities 1. How do you think your career path might differ in a hierarchical versus a flat organisation?

In a hierarchical organisation with formal authority, chain of command and rules, an employee’s career path is to move up the hierarchy and attain more power and decision-making authority.

In a flat organisation, with delegation of authority, an employee’s career path would include decision making, innovation and a lateral move within the company. It could also include working in a team- based structure.

2. Why do you think companies are moving towards flatter, more organic structures? Do you think this is appropriate?

As shown in Figure 12.4, companies are moving towards flatter, more organic structures because wider spans of control give subordinates greater autonomy and responsibility for selfmanagement. This is appropriate because in today’s fast-paced environment, organic structures benefit from faster awareness of and response to market and competitive changes, better customer service and faster decision making.

3. What areas of an organisation (e.g. what functions) do you think are the best to centralise? Which are the best to decentralise?

Centralisation creates clear lines of communication and responsibility, and the implementation of decisions tends to be straightforward. Centralisation is best in non-complex, stable environments. Administrative functions that follow explicit policies and procedures are best to centralise, such as the registrar’s office at a university or the billing department in a hospital.

Decentralisation is best when the organisation performs non-routine tasks in complex environments because it empowers the managers closest to the environment to make decisions and quickly implement them. The function of customer service should be decentralised, allowing empowered employees to make decisions on a case-by-case basis.

4. What keeps you from delegating more? How can you overcome these obstacles?

Students can use the OB Skills: Delegation skills feature for reference. Examples may be that if someone does not delegate the authority to complete the task, and could overcome this obstacle by not micromanaging and giving another individual the authority to get the job done.

5. If you started your own company selling iPhone applications, what organisational structure would you create? Why? Consider adopting a pre-bureaucratic structure that is characterised by total centralisation and one- on-one communication because of the small organisation size. This type of structure is best for entrepreneurial organisations, as the founder is able to control the organisation’s decisions and growth.

6. If you wanted employees to work collaboratively and minimise conflict, what organisational structures would you consider adopting? Why? Which structures would you avoid? Why? Consider adopting communities of practice because they can integrate employees and create the informal structure that nearly every business needs, regardless of its formal structure.

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Successful managers cultivate communities of practice by identifying and bringing the right people together, building trust and providing an appropriate infrastructure. However, certain conditions must be present to create effective communities of practice. For this reason, avoid a ‘command and control’ management style in a hierarchy because it is unlikely to foster successful communities of practice.

7. What type of person would be a good fit with Nordstrom’s extremely organic and informal structure? Why? Employees at Nordstrom’s receive material summarising specific rules and legal regulations, but Nordstrom also has low formality and high emphasis on customer service. To fit in at Nordstrom, a person would have to have good interpersonal skills, a high level of agreeableness and conscientiousness, as outlined in the Big Five personality trait model.

8. What would you do during a corporate restructuring to ensure that your best employees did not leave?

Consider ‘overcommunication’ with employees, pointing out that restructuring is an opportunity to position the organisation for the future. Try to assure them that restructuring focuses on the real cause of whatever the organisation wants to change. For example, if a performance problem is due to low employee motivation, reorganising the structure will not remedy the problem.

Group exercise – To matrix or not to matrix, that is the question Learning objective: Describe the basic types of organisational structure.

Summary: Consider a luxury resort where some customers return to the same location year after year, while others enjoy trying out different locations in the group. Now imagine recent reports indicate that sales are down and customer complaints are up, and resort managers are pointing fingers and insisting that the middle managers at each location are not upholding company standards. Currently, the company has adopted a divisional structure, with a vice-president for each of the four resorts.

Frustrated by inconsistent service and weak sales, they enlist the services of a consultant. After visiting each of the resorts and speaking with employees and guests, the consultant is recommending that the company move from its current divisional structure to a matrix organisation. The consultant explains that a matrix organisation is used by many innovative organisations, such as NASA, to achieve functional and divisional control. Although some managers think that this is a great idea, others are concerned that their authority and control may be undermined by this new organisational structure. The business knows that something has to change, but is unsure if this is the right solution.

Task: Form a group of four students and assign each group member to one of the following roles: • President of Resorts • Sales manager for the area resorts • Housekeeper at one resort • Guest at another resort Have the groups complete the following questions.

1. Without consulting other members of the team, and from the perspective of your assigned role, do you think that Resorts should adopt a matrix structure?

2. Assemble your group and have each member present the potential pros and cons of organising 12-11

as a matrix organisation.

3. As a group, develop an organisational chart for the company in its current divisional structure and the proposed matrix structure.

4. Develop a list of alternatives to converting to a matrix structure.

5. Considering all perspectives, what is the best decision of Resorts?

Mini-simulation (MindTap-only) Imagine being part of a group with the boss and another co-worker in which you are discussing how you were recently beaten to market by a competitor’s new toy line. The boss asks the group what the company could do to prevent something similar from happening again. What do you say or do?

Go to this chapter’s mini-simulation, watch the challenge video and choose a response. Be sure to also view the outcomes of the two responses you didn’t choose.

OB concepts applied: organisational structure, the matrix structure, influence of external environment on organisational design Discussion questions 1. Which organisational structures are illustrated in these videos and how do they influence strategic execution? Explain.

Organisational structure is the formal system of task, power and reporting relationships.

Types of organisational structures: • Bureaucratic structure: An organisational structure with formal division of labour, hierarchy and standardisation of work procedures. To become more competitive Alex suggests that the company add layers of management, because the project needed closer supervision and more managerial input (incorrect response #1). After instituting this structure for a year, product development was behind schedule, turnover increased, and employees were frustrated at how long it took to get anything done. Amy concludes, ‘Maybe the extra management layers aren’t what we needed after all …’

• Divisional structure: A division is a collection of functions organised around a geographic area (geographic structure), product or service (product structure), or market (market structure). A division of labour focused Happy Time Toys’ employees on specific tasks, but over time this structure proved to be cumbersome (incorrect response #2). Amy says, ‘It’s taking longer than ever to get products out, which has really decreased our performance.’

Ryan says, ‘Our employees don’t understand our customers as well as they used to.’ Alex agrees, ‘Everyone seems overly focused on their specific function, too. I’m hearing more arguments than I remember hearing before we switched to the new structure.’

• Matrix structure: Employees report to both a project or product team and to a functional manager. A matrix structure brings all of the relevant expertise and departments into projects at the same time to speed up the timeline and improve quality (correct response). Alex explains, ‘It seems like we might be better off using product development teams to increase product development speed. If we set up project teams and matrixed the employees back to their functions for additional support, that might help.’

2. How do these videos illustrate the influence of the external environment on organisational design?

Organisational design is the process of selecting and managing aspects of organisational structure and culture to enable the organisation to achieve its goals. Happy Time Toys faced a

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rapidly changing external environment characterised by intense competition from Toy Town and others. As Bill explained, ‘If Toy Town can develop and manufacture toys in less than a year, we should be able to do it too.’ A rapidly changing, uncertain environment requires a more flexible structure than a more stable environment. By changing its organisational design to a matrix structure, the company was able to compete in its environment. Alex favours the matrix structure, ‘… Matrix structures are great for complex activities like product development, and are well suited to uncertain environments like ours.’ After a year with the matrix structure, the company launched the colour wars line in record time and had great sales. Ryan said, ‘And no competitor is likely to launch anything similar for at least six months.’

3. Based on this chapter, what other ideas do you have to help Happy Time Toys to develop and manufacture new toys more rapidly and to be faster in responding to the environment?

Happy Time Toys should try virtual teams linked by technology, although employees may still meet face-to-face. Although outsourced functions create many challenges, including communication and working in different time zones, the reduced costs and increased flexibility from being virtual create a competitive advantage.

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CHAPTER 13 – ORGANISATIONAL CULTURE Chapter overview Organisational culture is essential to organisational performance. Organisational structure can be thought of as an organisation’s skeleton, and organisational culture can be thought of as its personality. Understanding and managing organisational culture is an important management role.

Learning outcomes After studying this chapter, students should be able to: 1. describe the meaning, importance, and origins of organisational culture 2. discuss cultures of conflict and cultures of inclusion 3. identify and discuss how technology and innovation affect organisational culture 4. describe how effective organisations manage their culture.

Guide your learning 1. ‘Organisational culture is like the personality of the organisation’. Discuss the extent of your agreement with this statement. (LO1) 2. Explain why conflict can have both positive and negative consequence for organisational culture. (LO2) 3. If culture is an outcome of people interacting in the workplace, why does technology affect culture? (LO3) 4. Discuss whether culture can really be managed. (LO4) Chapter outline 13.1.

The meaning and determinants of organisational culture Organisational culture is a system of shared values, norms and assumptions that guides members’ attitudes and behaviours, and influences how they perceive and react to their environment. When culture supports business strategy, the firm can become high performing.

Cultures are made up of formal and informal practices, artefacts, espoused values and norms, and assumptions. Artefacts are physical manifestations of the culture including the myths and stories told about the organisation or its founder, awards, ceremonies and rituals, decorations, office space allocations, the dress code, how people address each other, published lists of organisational values, and so on. Espoused values and norms are those that are explicitly stated by the organisation. Enacted values and norms are those that employees exhibit based on their observations of what actually goes on in the organisation. Performance management, feedback and compensation systems all help align espoused and enacted values and norms.

Assumptions are those organisational values that have become so taken for granted over time that they become the core of the company’s culture. Figure 13.2 illustrates these four levels of culture. Formal practices that influence culture include compensation strategies; informal practices include ‘open-door management’ to promote upward communication and the sharing of ideas, employees helping each other, and employees of different ranks eating lunch together to share ideas.

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13.1.1. Does culture matter?

Research has shown that by actively managing culture, your organisation and its employees will be more likely to deliver on strategic objectives over the long run. In particular, culture boosts organisational performance when it (1) is strategically relevant, (2) is strong, and (3) emphasises innovation and change to adapt to a changing environment. The effects of culture on a firm’s effectiveness are even stronger when employees have positive attitudes.

13.1.1.1. Culture is a source of competitive advantage. Creating a culture that supports sharing and helping other employees can have positive performance results.

13.1.1.2. Organisational cultures can be strong or weak. Strong cultures can enhance organisational performance in two ways. Research has found that long-term financial performance is highest for organisations with an adaptive culture receptive to change and innovation. Strong ethical cultures are known to influence employees’ ethical behaviour and commitment through formal and informal organisational structures and systems. Strong cultures are not always better; whether the culture is positive or negative also matters.

13.1.1.3. Culture and ethical conduct matter to organisations because it influences employees’ discretionary behaviours, including what they do in situations when the rules and expectations are unclear, or when there is no direct supervision.

Understanding corporate culture can create a personal competitive advantage by reducing the chances of offending superiors or making a social blunder.

13.1.2. How leaders create and maintain culture Different industries develop different cultures. An organisation’s founder and early management team shape a firm’s culture, which then influences the company’s structure, compensation, policies, and individual behaviour and motivation, which reinforce the culture. Figure 13.4 highlights some tactics to maintain or change culture.

Changes in strategy, technology and organisational structure all trigger a need for changes in employees’ attitudes, behaviours, values and skills. Organisational culture may have outer layers of the culture, such as marketing strategies and customer service perceptions, and inner layers, including fundamental values and ideologies, which are much slower to change.

13.2.

Cultures of conflict and cultures of inclusion A good leader can moderate conflict situations through three main stages of instigation, engagement and management.

13.2.1. Cultures of conflict Firms develop distinct conflict cultures, or shared norms for managing conflict, which reflect different degrees of active versus passive and agreeable versus disagreeable conflict management norms. Active conflict management norms resolve conflict openly, whereas passive conflict management norms tend to avoid addressing conflict. Agreeable conflict management norms resolve conflict in a cooperative manner; disagreeable conflict management norms resolve conflict competitively. This results in four types of conflict cultures: dominating, collaborative, avoidant and passive-aggressive, as shown in Figure 13.5.

13.2.1.1. Dominating conflict cultures are active and disagreeable – open 13-2

confrontations are accepted as well as heated arguments and threats.

13.2.1.2. Collaborative conflict cultures are active and agreeable. Employees actively manage and resolve conflicts cooperatively to find the best solution for all involved parties.

13.2.1.3. Avoidant conflict cultures are passive and agreeable. This type of culture strives to preserve order and control and/or to maintain harmony and interpersonal relationships.

13.2.1.4. Passive-aggressive conflict cultures are both passive and disagreeable.

Rather than dealing openly with conflict, this culture develops norms to handle it via passive resistance such as refusing to participate in conflict-related discussions, giving the silent treatment, withholding information, or withdrawing from work and from interactions with co-workers.

13.2.2. Cultures of inclusion An organisation’s values and culture interact with its demographic composition to influence social interaction, conflict, productivity and creativity. An organisation’s culture of inclusion reflects the extent to which majority members value efforts to increase minority representation, and whether the qualifications and abilities of minority members are questioned.

13.3.

Effects of technology and innovation on culture Culture can be facilitated by technology, or problematised by the consequences of using technology to work remotely. Innovation and culture also have major impacts on each other.

13.3.1. Using intranets, social media and the cloud to build and maintain culture By building and fostering a sense of community among employees, intranets can help reinforce an organisation’s culture, both reflecting and influencing that culture, in the following ways: 1. Their scope: narrow intranets reinforce a culture of secrecy and information hoarding.

2. Their openness to employee feedback and contributions: tools allowing feedback and participation reflect a participative culture.

3. The frequency with which they are updated: rarely updated intranets are unlikely to influence the company’s culture.

4. The number of intranets: one company intranet may be used, or several serving different groups.

5. The use of symbols, stories, and ceremonies: these express a company’s culture.

13.3.2. Building and maintaining culture in the cloud Having remote employees continues to challenge an organisation’s identity and culture because it is harder for workers to become familiar with an organisation’s culture and to reinforce values among remote employees.

13.3.3. Innovation and culture Innovation is the process of creating and doing new things that are introduced into the marketplace as products, processes or services. Innovation does not just involve the technology to create new products: true organisational innovation is pervasive throughout the organisation. Many risks are associated with being an innovative company. The most basic is the risk that decisions about new technology or innovation will backfire. A second 13-3

risk is the possibility that a competitor will make decisions enabling it to get an innovation to the market first.

13.3.3.1. Types of innovation include radical innovation (sometimes called disruptive innovation), which is a major breakthrough that changes or creates whole industries, and systems innovation, which creates a new functionality by assembling parts in new ways. Incremental innovation continues the technical improvement and extends the applications of radical and systems innovations.

There are many more incremental innovations that force organisations to continuously improve.

13.3.3.2. New ventures based on innovations require entrepreneurship and good management to work. For a large organisation to be innovative and develop new ventures, it must actively encourage entrepreneurial activity within the organisation. This form of activity, often called intrapreneurship, usually is most effective when it is a part of everyday life in the organisation, and occurs throughout the organisation rather than in the research and development department alone.

13.3.3.3. The most common means of developing innovation in the traditional organisation is through corporate research, or research and development.

13.4.

Managing organisational culture The three elements of managing organisation culture are (1) utilising existing culture, (2) teaching the organisation culture, and (3) changing the organisation culture.

13.4.1. Utilising the existing culture Most managers are not in a position to create an organisation culture; rather, they work in organisations that already have cultural values. The central issue is how best to use the existing cultural system. Senior managers who understand their organisation’s culture can communicate that understanding to lower-level individuals.

13.4.2. Teaching the organisation culture: socialisation Socialisation is the process through which individuals become social beings. Organisational socialisation is the process through which employees learn about their organisation’s culture and pass their knowledge and understanding on to others. Through observing examples, new employees develop a repertoire of stories they can use to guide their actions. In some organisations, the culture described in pamphlets and presented in formal training sessions conflicts with the values of the organisation as they are expressed in the actions of its people.

13.4.3. Changing the organisation culture Research suggests that while some firms have performance-enhancing values, others have performance-reducing values. When managers attempt to change organisation culture, they are attempting to change people’s basic assumptions about what is and is not appropriate behaviour in the organisation. Some organisations have changed their cultures from performance-reducing to performance-enhancing.

13.4.3.1. Research suggests that organisation culture is understood and communicated through the use of stories and other symbolic media or managing symbols.

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13.4.3.2. The difficulty of change, especially of a firm’s culture is a long and difficult process. A primary problem is that upper-level managers, no matter how dedicated they are to implementing some new cultural value, may sometimes inadvertently revert to old patterns of behaviour.

13.4.3.3. Stability of change in the long run depends on a firm finding that the new values and beliefs are just as stable and influential as the old ones. If a firm can change its culture from performance-reducing to performance-enhancing, the new values are likely to remain in place for a long time.

OB in the real world: Culture can be inclusive on diverse fronts Summary: The Diversity Council of Australia (DCA) has over 1000 employer members who collectively employ approximately one fifth of Australia’s workforce. In 2022, the DCA was categorising diversity and the risks of exclusionary practices on: COVID-19 (flexibility and inclusion), inclusion, gender, culture and religion, disability and accessibility, age, Aboriginal and Torres Strait Islander peoples, LGBTIQ+, flexibility, family and domestic violence, mental health, and parental Leave. In other words, there are numerous areas for organisations to focus on. Inclusive practices are also morally and legally correct. The DCA published data showing that workers in inclusive teams are 10 times more likely to experience job satisfaction, four times less likely to experience related mental health issues, five times less likely to experience discrimination and/or harassment, 11 times more likely to be highly effective, 10 times more likely to be innovative, six times more likely to provide excellent customer service, and four times more likely to work extra hard.

Challenge: Think of heavy industries like road construction or mining and challenge any stereotypical thinking about the workforce culture being influenced by gender or any other distinguishing human characteristics. Consider the various strategies you could implement as an employer in such industries to enable the inclusion of a more diverse range of workers.

Response: The organisational culture can be thought of as its personality, so including more diversity and equity builds understanding and improved management approaches. This happens through shared values, norms and assumptions that guide members’ attitudes and behaviours, and influence how they perceive and react to their environment. Trust is the foundation of culture and is earned through repeated interactions over time. When the positive, more inclusive culture becomes strong enough, employee interactions become more efficient, relationships improve, and employees cooperate to achieve common goals.

Ethical dilemma: Comminsure ensures a Royal Commission – with culture to blame Summary: Walkley award winning journalist Adele Ferguson spent five years investigating cases of unethical and unconscionable practice in Australian financial services companies, ultimately leading to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry 2017–19. One notorious case was Comminsure, which appeared to apply pressure to staff to prioritise profits ahead of the needs of particular clients, to doctors to change opinions to avoid payouts, and intentionally include outdated definitions. A few whistle blowers had to push in order for the truth to get out. They risked their jobs and their future employability to expose the practices.

As the Royal Commission proceeded, many other companies were found to have similar organisational cultures oriented towards making money at all costs and pressuring their staff to not talk about it beyond the company walls.

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Consider what you would do if you worked inside a financial services company and earned your income from product commissions, but those products did not fulfil their promise. Would the culture in the workplace and the stigma of whistleblowing encourage or prevent you from taking a stand?

Students may respond with a variety of answers depending on their personal set of obligation and cultural response to definition of moral ethics. Some answers may include the viewpoint that there is a moral obligation to the greater society to report the activity. An option may also be to try to change the policy from within the business instead of going to external authorities. There is the option not to take any action, viewing the employment contract and parameters as the guiding principles on which to act.

Critical perspective Relating with AI Intelligent agents monitor patterns of work and communication and make suggestions and adjustments. Some jobs are now completely done by computer servers or robots. In 2020, research indicates about one fifth of current jobs are affected in some way by artificial intelligence (AI), and one third of all jobs will be affected by 2030. Leadership of a company must be different for a hybrid workforce of people and robots. Considerations include loss of privacy, relationships between machines and humans, and why most voice assistants have started with female voices. There are many other culture-related questions as AI continues its march into workplaces everywhere.

Summary LO13.1 Organisational culture is a system of shared values, norms, and assumptions that guides members’ attitudes and behaviours, and influences how they perceive and react to their environment. LO13.2 Firms develop distinct conflict cultures that reflect different degrees of active versus passive and agreeable versus disagreeable conflict management norms.

LO13.3 Creating and maintaining a desired culture can be facilitated by technology, but at the same time can be made more difficult by the consequences of using technology to work remotely.

Innovation is the process of creating and doing new things that are introduced into the marketplace as products, processes or services, and can be radical, systems, or incremental.

LO13.4 The three elements of managing organisation culture are (1) taking advantage of the existing culture, (2) teaching the organisation culture, and (3) changing the organisation culture.

Revision questions 1. make up an outer layer of organisational culture. a. Core ideologies b. Fundamental values c. Marketing strategies d. None of these 2. In a culture, the reaction to the arrival of the plant manager is: ‘Heads up! The plant manager is coming onto the production floor – look busy!’ a. strong positive b. strong negative c. weak positive 13-6

d. weak negative conflict culture is active and disagreeable. a. dominating b. passive-aggressive c. collaborate d. avoidant 4. The process through which individuals become social beings is called . a. culture b. socialisation c. organisational socialisation d. organisational culture 5. Organisational socialisation typically changes employees’ values. a. True b. False 6. Research suggests that organisation culture is understood and communicated through the use of . a. stories and symbols b. rewards and punishments c. bonuses and raises d. bonuses and promotions 3. A

Case study: Mental health, crying and gaslighting in the workplace Summary: Increased awareness of mental health at work, and a slowly diminishing stigma about admitting to feeling anxious, stressed or maybe prone to crying, are positive signs about cultural change. A modern spin on a problem in personal relationships is the phenomenon of gaslighting, whereby the dominant, abusive person actively tries to convince the other of their mental frailties.

Questions about competence are the most common aspects of gaslighting in the workplace.

Gaslighting is a form of workplace bullying and intimidation that could be against the law.

Critical 1. Since mental health issues are now more widely acknowledged in society, in what ways can you see organisations leveraging the right technologies for creating and maintaining a culture of trust, openness, relationship building and information sharing that might be able to help people through mental health crises?

Many organisations are providing anonymous and continuous feedback loops to help empower employees to speak out when there is an issue. Other examples may be inviting a culture of inclusion by leveraging technologies to create information, safe forums and informal communities of practice that organically break down barriers and stereotypes.

2. Drawing on what you know about organisational culture, why do you think issues of gender are still causing discrimination in workplaces?

Culture is very difficult to change and can take a long time to shift. There are many selfperpetuating cultures in organisation that may not realise the advantages of encouraging a diverse work force.

Although viewed as a competitive advantage, if a business has been able to succeed without crisis, and without innovation due to right place and right time, then there will be little motivation to challenge the status quo.

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Mainstream 1. How do the ideas of conflict culture and culture of inclusion play a part in the way crying in the workplace is perceived in the Australian context?

Without effective training, many workplaces may respond to crying in the workplace with stereotypes or simply avoid, and remain seemingly passive and agreeable in order to preserve order and control and/or to maintain harmony and interpersonal relationships, without actually resolving the underlying issues, or empowering employees to understand and engage with the upset individual. However, if the organisation’s values and culture interact with its demographic composition to influence social interaction, conflict, productivity and creativity, there may well be a culture of inclusion. Pro-diversity cultures are related to lower turnover and reflect the extent to which majority members value efforts to increase minority representation, and whether the qualifications and abilities of minority members are questioned.

2. In what ways could the three elements of managing organisation culture be best used by senior managers in Australian companies to minimise gaslighting in the workplace?

The three elements of managing organisation culture are (1) taking advantage of the existing culture, (2) teaching the organisation culture, and (3) changing the organisation culture.

Although many managers are not in a position to change their existing culture, many are able to use their influence and the natural socialisation within the organisation to exemplify and teach new employees an improved cultural norm. When managers attempt to change organisation culture, they are attempting to change people’s basic assumptions about what is and is not appropriate behaviour in the organisation. Changing from a traditional organisation to a teambased organisation is one example of an organisation culture change.

Tutorial activities 1. Describe three different types of organisational cultures. When would each be most and least effective for a research and development company dependent on employee innovation?

Dominating conflict cultures are active and disagreeable – open confrontations as well as heated arguments and threats are accepted. Collaborative conflict cultures are active and agreeable.

Employees actively manage and resolve conflicts cooperatively to find the best solution for all involved parties. Avoidant conflict cultures are passive and agreeable. This type of culture strives to preserve order and control and/or to maintain harmony and interpersonal relationships. For an R&D company, dependent on employee innovation, the most effective culture would be a collaborative conflict culture, the least effective would be an avoidant conflict culture; a dominating conflict culture falls in between.

2. Do you think that culture is important to organisational performance? Why or why not? Yes. Culture is important to organisational performance because it is a source of competitive advantage. Creating a culture that supports sharing and helping other employees has positive performance results. In particular, culture boosts organisational performance when it (1) is strategically relevant, (2) is strong, and (3) emphasises innovation and change to adapt to a changing environment.

3. How do you learn about a prospective employer’s cultures? How important is a company’s culture to you when you decide to apply or to accept a job offer?

Learning about a prospective employer’s cultures occurs by talking to current employees and studying the company website. The culture is an important part of the decision to accept a job because the fit between an applicant and the company’s values often determine how successful an applicant will be on the job.

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4. Which of the four conflict management cultures would be the best fit for you? Why? Some may prefer the collaborative conflict culture because it is active and agreeable. Employees actively manage and resolve conflicts cooperatively to find the best solution for all involved parties. This provides for a satisfying work environment and a more productive employee.

5. What can companies do to create and reinforce a culture of inclusion?

Companies can create a culture of inclusion by effectively managing diversity to bring out the best in each employee, allowing them to contribute maximally to the firm’s performance.

Companies can reinforce a culture of inclusion through the use of diversity assessment methods such as the diversity of job applicants and new hires, the proportion of people with different demographics in a company’s business units at each level of employment, the pay levels and attrition rates of people with different demographics in comparable positions, and the ratio of people with different demographics promoted to those eligible for promotion.

6. In what ways can the influence of the founder of an organisation be assessed after that founder is no longer a part of the organisation?

A founder influences and shapes a firm’s culture. The culture may endure forever if reinforced through current management’s philosophy, values, vision and goals. If not enforced, it will still take some time to change the culture formed under the founder.

7. How are technology and innovation interrelated?

Technology is a tool to facilitate innovation. One use of technology is the use of intranets to keep employees connected, communicating and focused on the corporation’s objectives.

Technology also enables the use of remote employees. Innovation is the process of creating and doing new thing that are introduced into the marketplace as products, processes or services.

Innovation does not just involve the technology to create new products, true organisational innovation is pervasive throughout the organisation. Technology allows increased innovation by utilising innovation input from remote employees and tapping the collective mind of all employees.

8. What current examples can you identify to reflect radical, systems and incremental innovations? Students may think of other examples, but mobile phones could be considered a radical innovation as they have spurred an entire industry and changed the way people receive communication. An example of systems innovation, continuing the mobile phone theme, phones have gone from a way of talking to other people to a way to stay connected through video, email, IM and nearly any other form of communication. Finally, the incremental innovation is present every time a new ‘generation’ of phones is released. The new iPhone has pictures that move and enhanced touch-control.

9. Describe how you might go about taking advantage of an existing organisational culture.

Student’s answers will vary due to the request for a personal response. There should be some mention of first fully understanding the current culture: its values, and behaviours or actions those values support. This deep understanding usually only comes through experience. Once this experience is achieved, the person is in a position to evaluate the performance of others in the firm. By articulating organisational values, the person can begin managing others’ behaviours. Managers who understand their organisation’s culture can communicate that understanding to lower-level individuals. Over time, these lower-level managers will require less direct supervision. Their understanding of corporate values will guide their decision making.

Group exercise – Culture of the classroom Learning objective: This exercise will help students appreciate the fascination as well as the difficulty of examining culture in organisations.

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Summary: Each group analyses the organisation culture of a university class. Students in most classes that use this book will have taken many courses at the university they attend and therefore should have several classes in common.

Task: Divide the class into groups of four to six on the basis of classes the students have had in common.

1. Each group should first decide which class it will analyse. Each person in the group must have attended the class.

2. Each group should list the cultural factors to be discussed. Items to be covered should include: a. stories about the professor b. stories about the exams c. stories about the grading d. stories about other students e. the use of symbols that indicate the values of the students f. the use of symbols that indicate the values of the instructor.

3. Students should carefully analyse the stories and symbols to discover their underlying meanings. They should seek stories from other members of the group to ensure that all aspects of the class culture are covered. Students should take notes as these items are discussed.

4. After 20–30 minutes of work in groups, reconvene the entire class and ask each group to share its analysis with the rest of the class.

Follow-up Questions 1. What was the most difficult part of this exercise? Did other groups experience the same difficulty?

2. How did your group overcome this difficulty? How did other groups overcome it?

3. Do you believe your group’s analysis accurately describes the culture of the class you selected? Could other students who analysed the culture of the same class come up with a different result? How could that happen?

4. If the instructor wanted to try to change the culture in the class you analysed, what steps would you recommend that he or she take?

Mini-simulation (MindTap-only) Imagine attending a meeting with your boss and two co-workers to discuss declining sales for a previously popular product. A competitor introduced a similar but better product that has been taking your market share. The company knew about the competitor’s product, but underestimated the threat. Happy Time Toys wants to make sure it recognises potential threats faster in the future.

What do you say or do?

Go to this chapter’s mini-simulation, watch the challenge video and choose a response. Be sure to also view the outcomes of the two responses you didn’t choose.

One of the stated solutions is to conduct a competitor analysis and an after-action review. This is a structured review or debriefing process that is used to analyse positive and negative outcomes of an action. The steps include analysing (a) what should have happened, (b) what actually happened, and (c) how the systems or process can be improved. A competitor analysis is related but focuses on an 13-10

assessment of the strengths and weaknesses of current and potential competitors.

OB concepts applied: resistance to change, after action review, organisational learning, ethics Discussion questions 1. In what ways might culture influence how responsive Happy Time Toys is to competitor threats?

If the company has a story about another time when they succumbed to a competitor’s threat, the employees may be able to recognise an impending threat. The thought of placing spies in competitor companies was quickly dismissed due to the espoused values and norms of the owners. This quick reaction maintains the enacted values and norms on display on a daily basis.

The employees assumed their product would continue its good sales record and became blind to competitor threats.

2. How are ethics illustrated in these videos? What is the best way to ensure decisions are made ethically?

Ethics is a code of moral principles and values that governs behaviour with respect to what is right or wrong. The video shows that one way to outsmart the competition is to hire spies who provide intelligence on future threats (incorrect response #1). Alex says: ‘I think we need a better way to stay informed about what our competitors are up to. To me, the best way to do that is through espionage …’ Alex uses the argument that it’s okay to spy because this behaviour is accepted industry wide. However, spying on competitors violates the company’s ethics code. Culture matters to organisations because it influences employees’ ethical behaviour through formal organisational structures such as a written code of ethics. Alex says, ‘They want to make sure we all understand the company’s code of ethics and follow it more closely in the future. This behaviour is not consistent with our company’s culture or ethics code.’ A code of ethics is the best first step to making sure employees make ethical decisions.

To be effective, the code must be enforced.

3. Based on the chapter, what other suggestions would you make to change the culture to enhance responsiveness to the environment and why would you suggest them?

Placing an emphasis on research and development and innovation may enhance responsiveness to a competitor’s products. Make change a part of the culture so future changes will not be a surprise.

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CHAPTER 14 – ORGANISATION CHANGE AND CHANGE MANAGEMENT Chapter overview Companies that change appropriately can continue as viable businesses. Organisations need to face the prospect of change and develop processes to ensure their viability in a complex, ever-changing global environment. The chapter begins with a discussion of some of the forces that create pressures, followed by a detailed explanation of the complex change process and sources of resistance to change, finishing with a summary view of how to manage change in organisations.

Learning outcomes After studying this chapter, students should be able to: 1. summarise the dominant forces for change in organisations 2. describe the process of planned organisation change 3. discuss several approaches to organisation development 4. explain resistance to change 5. identify the keys to managing successful organisation change and development 6. describe organisational learning.

Guide your learning 1. What forces for change in organisations are present in the current global business environment?

(LO1) 2. Describe the process of planned organisation change as first outlined by Kurt Lewin. (LO2) 3. What are some approaches to organisation development that may be helpful to an organisation aiming to address its contribution to mitigating climate change? (LO3) 4. Why might some people resist change in an organisation even when the change is necessary for a rational, economic reason? (LO4) 5. Identify the main keys to managing successful organisation change and development. (LO5) 6. Can organisations learn, or is it only the individuals within them doing the learning? Discuss.

(LO6) Chapter outline 14.1.

Forces for changes The four areas in which the pressures for change appear most powerful involve people, technology, information processing and communication, and competition. Figure 14.1 gives examples.

14.1.1. People Skill-intensive jobs will make up two-thirds of the total jobs in the Australian economy by 2030, yet there are skills shortages in Australia. Generational layers of the population exhibit slightly different characteristics among workers and consumers, then there are the multicultural diaspora cutting across those generations with connections to other parts of the world. Some of these groups have a larger impact on organisational behaviour than others.

The increasing diversity of the workforce in coming years will mean significant changes in the work environment for organisations. The most descriptive word for this new work environment is ‘change’.

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14.1.2. Technology The rate of technological change is increasing and development is so rapid that it is quite difficult to predict which products will dominate 10 years from now. Organisation change is self-perpetuating. With the advances in information technology, organisations generate more information and it circulates faster. As organisations react more quickly to change, change occurs more rapidly, which in turn necessitates more rapid responses.

14.1.3. Competition Competition is not a new force for change. Most markets are global because of decreasing transportation and communication costs, and the increasing export orientation of business.

The adoption of trade agreements have changed the way business operates.

14.1.4. Climate change Air, water and earth are suffering degradation by both human and natural events, and wildfire is increasingly affecting farmlands and cities. Animals and plants are homogenising and extinctions are limiting the diversity that once was. Many organisations are rising to these various challenges and whole new industries are being created on the back of demand for such changes.

14.2.

Processes for planned organisational change External forces may impose change on an organisation, but ideally organisations will anticipate it, prepare for it through planning, and incorporate it in the organisation strategy.

14.2.1. Lewin’s process model Kurt Lewin suggested that efforts to bring about planned change in organisations should approach change as a multistage process. His model of planned change is made up of three steps – unfreezing, change and refreezing – as shown in Figure 14.5. Unfreezing is the process by which people become aware of the need for change. Creating in employees the awareness of the need for change is the responsibility of the leadership of the organisation. Change itself is the movement from the old way of doing things to a new way. Refreezing makes new behaviours relatively permanent and resistant to further change.

14.2.2. The continuous change process model A more realistic approach is illustrated in Figure 14.7. This approach treats planned change from the perspective of top management and indicates that change is continuous. In this approach, top management perceives that certain forces or trends call for change, and the issue is subjected to the organisation’s usual problem-solving and decision-making processes.

Early in the process, the organisation may seek the assistance of a change agent – a person who will be responsible for managing the change effort. The change agent may be a member of the organisation, an outsider such as a consultant, or even someone from headquarters whom employees view as an outsider. Under the direction and management of the change agent, the organisation implements the change through Lewin’s unfreeze, change and refreeze process. The final step is measurement, evaluation and control. The change agent and the top management group assess the degree to which the change is having the desired effect, measure progress towards the goals of the change and make appropriate changes if necessary. Transition management is the process of systematically planning, organising and implementing change, from the disassembly of the current state to the realisation of a fully functional future state within an organisation.

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14.3.

Organisational development In the broadest sense, organisation development means organisation change; however, the text definition of organisation development is an attempt to describe a very complex process in a simple manner.

14.3.1. Organisation development defined ‘Organisation development (OD) is a system-wide application of behavioural science knowledge to the planned development and reinforcement of organisational strategies, structures, and processes for improving an organisation’s effectiveness.’ It attempts to plan organisation changes, with the specific intention of organisation development is to improve organisation effectiveness. The planned improvement must be based on knowledge of the behavioural sciences rather than on financial or technological considerations.

14.3.2. System-wide organisation development The most comprehensive type of organisation change involves a major reorientation or reorganisation – usually referred to as a structural change or a system-wide rearrangement of task division and authority and reporting relationships. Re-engineering and rethinking are two contemporary approaches to system-wide structural change. Re-engineering requires that managers challenge long-held assumptions about everything they do and set outrageous goals and expect that they will be met. Another system-wide change is the introduction of quality-of-work-life programs, defined as the degree to which members of a work organisation are able to satisfy important personal needs through their experiences in the organisation. Quality-of-work-life programs focus strongly on providing a work environment conducive to satisfying individual needs. Richard Walton divided them into the eight categories shown in Figure 14.9. Total quality management can also be viewed as a systemwide organisation development program. The benefits gained from quality-of-work- life programs differ substantially, but are generally a more positive attitude towards the work and the organisation, increased productivity or increased effectiveness.

14.3.3. Task and technological change Another way to bring about system-wide organisation development is through changes in the tasks involved in doing the work, in the technology or both. The direct alteration of jobs usually is called ‘task redesign’. Changing how inputs are transformed into outputs is called ‘technological change’ and also usually results in task changes. Strictly speaking, changing the technology is typically not part of organisation development.

One approach is an integrative framework of nine steps that reflect the complexities of the interfaces between individual jobs and the total organisation, as shown in Figure 14.10. The steps usually associated with change are recognising the need for a change, selecting the appropriate intervention, and evaluating the change. This approach inserts four additional steps: diagnosis of the overall work system and context, including examination of the jobs, workforce, technology, organisation design, leadership and group dynamics; evaluating the costs and benefits of the change; formulating a redesign strategy; and implementing supplemental changes. Diagnosis includes analysis to recognise the full range of potential costs and benefits associated with a job redesign effort; some are direct and quantifiable, others are indirect and not quantifiable. Implementing a redesign scheme takes careful planning, and developing a strategy: decide who will design the changes, undertake the actual design of the changes based on job design, decide the timing of the implementation and 14-3

consider whether the job changes require adjustments and supplemental changes in other organisational components.

14.3.4. Group and individual change There are four popular types of people-oriented change techniques.

14.3.4.1. Training generally is designed to improve employees’ job skills and may also be used in conjunction with other changes. Among the many training methods, the most common are lecture, discussion, a lecture-discussion combination, experiential methods, case studies, films or videos, and online training modules. A major problem of training programs is transferring employee learning to the workplace.

14.3.4.2. Management development programs, like employee training programs, attempt to foster certain skills, abilities and perspectives, using lecture-discussion and participative methods such as case studies and role playing. Skills are not easily transferred to the workplace. Guiding principles that are evolving are (1) management development is a multifaceted, complex and long-term process to which there is no quick or simple approach; (2) organisations should carefully and systematically identify their unique developmental needs and evaluate their programs accordingly; (3) management development objectives must be compatible with organisational objectives; and (4) the utility and value of management development remain more an article of faith than a proven fact.

14.3.4.3. Team building emphasises members working together in a spirit of cooperation and generally has one or more of the following goals: 1. to set team goals and priorities 2. to analyse or allocate the way work is performed 3. to examine how a group is working 4. to examine relationships among the people doing the work.

Total quality management efforts usually focus on teams, and the principles of team building must be applied to make them work. Research on the effectiveness of team building as an organisation development tool so far is mixed and inconclusive.

14.3.4.4. Survey feedback process includes data are gathered, analysed, summarised and returned to those who generated them to identify, discuss and solve problems. A consultant or change agent usually coordinates the process and is responsible for data gathering, analysis and summary. The three-stage process is shown in Figure 14.12 includes data gathering, feedback and analysis. In an organisation development process, data are (1) returned to employee groups at all levels in the organisation, and (2) used by all employees working together in their normal work groups to identify and solve problems. The change agent prepares a summary of the results for the group feedback sessions, which involve only two or three levels of management.

Participants discuss reasons for the scores and the problems that the data reveal. In the process analysis stage, the group examines the process of making decisions, communicating and accomplishing work, and is important because its purpose is to develop action plans to make improvements. A follow-up survey can be administered later to assess how much these processes have changed since they were first reported.

14.4.

Resistance to change Change is inevitable; so is resistance to change. Paradoxically, organisations both promote and resist change. Resistance to change can be used for the benefit of the organisation by revealing a legitimate concern or that other alternatives might be better Resistance may come from the 14-4

organisation, the individual or both. Figure 14.13 summarises various types of organisational and individual sources of resistance.

14.4.1. Organisational sources of resistance Daniel Katz and Robert Kahn have identified six major organisational sources of resistance: overdetermination, narrow focus of change, group inertia, threatened expertise, threatened power, and changes in resource allocation. Not every organisation or every change situation displays all six sources.

14.4.1.1. Overdetermination, or structural inertia, occurs because numerous organisational systems are in place to ensure that employees and systems behave as expected to maintain stability. Another source of overdetermination is the culture of the organisation.

14.4.1.2. Many efforts to create change in organisations adopt too narrow a focus and do not take into account the interdependence among organisational elements.

14.4.1.3. When an employee attempts to change his or her work behaviour, group inertia or norms may act as a brake on individual attempts at behaviour change.

14.4.1.4. A job redesign or a structural change may threaten the expertise of the specialist, building their resistance to the change.

14.4.1.5. Any redistribution of decision-making authority, such as with re-engineering or team-based management, may threaten the power of an individual’s relationships with others.

14.4.1.6. Groups that are satisfied with current resource allocation methods may resist any change they believe will threaten future allocations.

14.4.2. Individual sources of resistance Researchers have identified six reasons for individual resistance to change: habit, security, economic factors, fear of the unknown, lack of awareness and social factors (see Figure 14.13).

14.4.2.1. Habits make it is easier to do a job. Learning an entirely new set of steps makes the job more difficult. For the same amount of return (pay), most people prefer to do easier rather than harder work.

14.4.2.2. People who believe their security is threatened by a change are likely to resist the change.

14.4.2.3. Change may threaten employees’ steady pay cycle, so workers may fear the economic factors of change.

14.4.2.4. Some people fear the unknown, which can cause delays and foster the belief that nothing is getting accomplished.

14.4.2.5. Because of perceptual limitations, a person may lack awareness and thus may not alter his or her behaviour.

14.4.2.6. Social factors or fear of what others will think may make people resist change.

14.5.

Managing successful organisational change and development In order to increase the chances of successful organisation change and development, it is useful to consider seven keys to managing change in organisations. Figure 14.15 lists seven keys to managing change in organisations and their potential impacts.

14.5.1. Consider global issues Given the additional environmental complexities multinational organisations face, it follows that organisation change may be even more critical to them than it is to purely domestic 14-5

organisations. A second point to remember is that acceptance of change varies widely around the globe.

14.5.2. Take a holistic view Managers must take a holistic view to encompass the culture and dominant coalition as well as the people, tasks, structure and information subsystems.

14.5.3. Start small Peter Senge recommends that change start with one team, usually an executive team. If the change makes sense, it begins to spread, and when others see the benefits they automatically drop their inherent resistance and join in.

14.5.4. Secure top management support The support of top management is essential; it is a powerful element of the social system, and its support is necessary to deal with control and power problems.

14.5.5. Encourage participation Problems related to resistance, control and power can be overcome by broad participation in planning the change.

14.5.6. Foster open communication Open communication is an important factor in overcoming information and control problems during transitions. Any news, even bad news, seems better than no news.

14.5.7. Reward contributors Employees who contribute to the change in any way need to be rewarded. From a behavioural perspective, individuals need to benefit in some way if they are to willingly help change something that eliminates the old, comfortable way of doing the job.

14.6.

Organisational learning A learning organisation is an organisation that facilitates the learning of all its members and continually transforms itself. One of the best ways to encourage continual learning is through an after-action review, or a professional discussion of an event that enables discovery of what happened, why it happened, and how to sustain strengths and improve on weaknesses. Afteraction reviews are conducted for both successes and failures, and occur after any identifiable event or milestone during a project or after the project is completed. Everyone who participated in the event or project discusses four simple questions: 1. What was supposed to happen?

2. What actually happened?

3. Why were there differences?

4. What did we learn?

Building trust and team integrity are additional outcomes of after-action reviews. Another factor influencing an organisation’s ability to learn is its approach to failure, recognising the learning opportunities presented by ‘intelligent failures’.

OB in the real world: China Mengniu knew what grew Summary: A small Tasmanian family company, Bellamy’s Organic, started selling organic baby formula in Australia in the early 2000s and by 2020 grew big enough to be sold to China Mengniu Dairy Company 14-6

for a value of $1.5 billion. Bellamy’s Organic, with a mere 160 people, owned barely any assets and, instead, leveraged its brand and marketing expertise plus its unique network of supply chain agreements with food manufacturing and distribution heavyweights. Bellamy’s Organic adopted a five-year strategy to expand its platforms, engage with retailers, and transform into consumer goods. By 2022, Bellamy’s Organic had added markets in Singapore, Malaysia, Vietnam and Indonesia, and became FDA approved in the United States to address a baby formula shortage.

Challenge: The change at Bellamy’s has meant that a large international company consumed a Tasmanian company that might have kept growing on its own. A former Bellamy’s executive now working for a different company has asked for your thoughts on why the China Mengniu Dairy Company takeover was necessary and what it means for the people with a stake in Bellamy’s Organic.

After reading this chapter, you should have some good ideas to share with your colleague.

Response: For Bellamy’s to grow as it did and then navigate a foreign takeover, immersed it in a very complex change process. There would have been many sources of resistance to change, but the end result has been a very successful price achieved for the sale of the company while retaining many of the staff and ensuring a much-enhanced market access pathway for its products into China. When companies change appropriately, they can continue as viable businesses. By making the right changes at the right time, businesses like Bellamy’s can capitalise and grow.

Ethical dilemma: Should the planet or the children be seen and heard?

Summary: There was a backlash from some business and political leaders when Greta Thunberg admonished the leaders at the New York UN Summit in 2019. A new generation of leaders acclaimed Thunberg for speaking up on the important global issue of addressing climate change. There is a business perspective on environmental management that sees resources as precious, or at least a costcentre needing scrutiny, interested in being less wasteful, less consumptive, cleaner and more protective. Some suggest it is through new businesses and new technologies, properly commercialised, that the world has its best hope of clean-up.

Whether capitalist or socialist in their values, the older generation might at least share the values of being parents. Changing the way things operate frequently falls to the next generation, so maybe Thunberg was right to speak up and perhaps the elders should just get on with funding and implementing organisational changes to help the environment. What is your view?

The individual background for each student may influence answers. Consider asking students to reflect on their age, cultural background, personal experience and business views. Answers may range from the need for change, the inappropriateness for seeming disrespect, to no need for change because it is someone else’s ‘problem’. Consider asking students to reflect on the competitive advantage of businesses that have purpose, diversity, and are able to anticipate and meet the demands of future perspective clients, and if these aspects could be simply ‘good for business’.

Critical perspective Full automation: nirvana or nervousness Artificial intelligence (AI) is the natural culmination of technology evolution and there are many advantages to machines fulfilling tasks that humans normally find dull, repetitive or tiring, yet a need for the human touch in some of our most valuable service industries, like care, learning and creating, may resist that type of change.

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Summary LO14.1 Change may be forced on an organisation, or an organisation may change in response to the environment or an internal need.

LO14.2 Planned organisation change involves anticipating change and preparing for it. Lewin described organisation change in terms of unfreezing, the change itself and refreezing. In the continuous change process model, top management recognises forces encouraging change, engages in a problem-solving process to design the change, and implements and evaluates the change.

LO14.3 Organisation development is the process of planned change and improvement of organisations through the application of knowledge of the behavioural sciences. Quality-of-work-life programs focus on providing a work environment in which employees can satisfy individual needs.

LO14.4 Resistance to change may arise from several individual and organisational sources. Top management support is needed, and those most affected by the change must participate. Open communication is important, and those who contribute to the change effort should be rewarded.

LO14.5 Frequently used group and individual approaches to organisation change are training and management development programs, team building and survey feedback techniques.

LO14.6 A learning organisation is an organisation that facilitates the learning of all its members and continually transforms itself. In a learning organisation, continual learning and change become part of the culture.

Revision questions 1. In Duncan’s company, the sudden departure of five top managers spurs the CEO to massively reorganise the hierarchical structure. Why is this not an example of organisation development. a. Because the change wasn’t planned. b. Because the change won’t be effective. c. Because the new structure is not based on behavioural science principles. d. Because the change was instigated by a single person.

2. Which of the following can be a source of resistance to change? a. Organisations b. Individuals c. Both d. Neither 3. According to Katz and Kahn, a narrow focus of change occurs when change occurs without . a. an understanding of behavioural science principles b. a change agent c. planning d. concern for the surrounding structure 4. Learning organisations transform themselves . a. continuously b. periodically c. reluctantly d. ineffectively Case study: Splitting roles to bring Telstra together Summary: Telstra’s proposed split is in part motivated by what Harvard Business Review authors have identified as two key shifts that were magnified by the forced remote working of the COVID-19 pandemic: a skills shift, requiring managers to coach workers rather than oversee performance tasks, 14-8

and a structural shift, requiring leadership in more fluid environments. If approved by regulators, it is expected to cost $126 million and will flatten the hierarchy down to just three levels. Splitting up people management and job management will allow incumbents to focus and specialise.

Critical 1. Explain why splitting leadership into the two different functions is expected to benefit the people who work at Telstra and organisational performance overall.

Telstra hopes that removing layers of hierarchy will improve employees’ sense of engagement and culture, and allow for more focused teams. One challenge previously noted was the sense that people were managed like physical resources. The new leadership roles are intended to separate the coaching aspects like managing people, from those tasks that are more about managing work.

This will allow for specialisation and efficiencies, as well as improve engagement and well-being where staff will be able to focus on their strengths.

2. Explain whether the restructure would allow Telstra to rest easy after it is implemented, or whether more change initiatives are needed going forward?

Major restructures should be minimised; however, the changing global environment does require constant reassessment. A learning organisation will take an active approach to continuously review and implement smaller and iterative changes, promoting a culture of innovation and development.

Depending on the internal culture and objectives of the organisation, and given the industry, there is a good argument to continue change initiatives going forward.

Mainstream 1. What aspects of the proposed restructure may be expected to encounter some resistance to change?

Employees may resist the change for a number of reasons. A job redesign may threaten the specialist’s expertise or an individual’s power relationships with others. For many individuals that might have been on a higher wage, they may feel resentful that individuals seem to be making the same money but with less work. Workers may also fear that they will lose their jobs when compared to a larger group, or if they no longer have unique expertise.

2. To what extent would the restructure, if approved, assist Telstra to better reflect the features of a learning organisation?

Telstra’s focus on feedback and aspirations towards a flatter organisational structure indicate that it is displaying some features of a learning organisation. Enabling specialisation and a reduced hierarchy can improve sense of engagement and team culture. Various aspects of flexibility and the apparent embracing of technology to leverage, attract and retain talent also suggests a positive and active approach to change.

Tutorial activities 1. Is most organisation change forced on the organisation by external factors or fostered from within? Explain.

Organisation change is caused by both external and internal factors. However, most organisation change seems to be due to external factors such as trends, competition and technological developments. Effective organisations are able to anticipate and plan for these changes. Thus, although the changes may be forced by the external environment, organisations must anticipate them and incorporate them into their strategies.

2. What broad category of pressures for organisation change other than the four discussed in the chapter can you think of? Briefly describe it.

The chapter focuses on four categories of pressures for change: people, technology, information 14-9

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processing and communication, and competition. An additional category might be resources other than people. Future scarcity of natural resources will force organisations to make changes in their products, services and processes.

Which sources of resistance to change present the most problems for an internal change agent?

For an external change agent?

For an internal change agent, individual sources of resistance present the most problems. For instance, if individuals are opposed to the proposed change, they may see the change agent as a traitor. Organisational sources of resistance pose greater problems for the external change agent, because she or he is less familiar with the unique characteristics of the organisation that are causing problems.

Which stage of the Lewin model of change do you think is most often overlooked? Why? The Lewin model of change consists of three stages: unfreezing, change and refreezing. Once change has been implemented, it often is considered permanent. If the old ways of doing things are well established, however, it is easy to forget the new ways and to drift back to old habits. Thus, it is important that new skills or processes be practised and rewarded until they are resistant to further change or regression to the original state.

What are the advantages and disadvantages of having an internal change agent rather than an external change agent?

An internal change agent is likely to know the organisation’s people, work tasks and political situations, which may prove very helpful in interpreting data and understanding the system. A disadvantage is that an insider may be too close to the situation to evaluate it objectively.

Furthermore, if organisation members are opposed to the potential change, they probably will view the inside change agent as a traitor.

How does organisation development differ from organisation change?

The focus of organisation development is much more specific than that of organisation change.

Three factors distinguish organisation development. First, it is a distinct field of study and practice.

Second, it is a process of planned change designed to improve organisations. Third, the planned improvement must be based on knowledge of the behavioural sciences. Because not all types of organisation change meet these criteria, all change is not organisation development. For example, the replacement of a manual personnel records system with a computerised personnel information system would not be considered an OD project.

How and why would organisation development differ if the elements of the social system were not interdependent?

If the elements of the social system were not interdependent, OD would be much less complex. If a change were implemented in one subsystem of a non-interdependent system, the change agent would not have to try to determine its impact on other subsystems.

Do quality-of-work-life programs rely more on individual or organisational aspects of organisational behaviour? Why? Quality-of-work-life (QWL) programs tend to rely more on individual aspects of organisational behaviour, because their primary objective is to provide a work environment conducive to the satisfaction of individual needs. Yet several types of QWL programs, such as those aimed at improvements in jobs and work procedures, affect the organisational aspects of behaviour.

Describe how the job of your lecturer/professor could be redesigned. Include a discussion of other subsystems that would need to be changed as a result.

Students may generate a number of ways in which the lecturer/professor’s job could be redesigned.

For instance, he or she might be given more authority and responsibility by being allowed to determine when to teach, where to teach, and which courses to teach. This type of change would affect other subsystems, such as the administrative and student subsystems.

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10. Which of the seven keys for successfully managing an organisational change effort seem to be the most difficult to manage? Why? Depending on the situation, each of the seven could be quite difficult to manage. Making sure that top management supports the change can be quite a task in some organisations. On the other hand, taking a holistic view can be quite confusing, especially when the employees are so involved in the work of their own departments. It is easy for others to forget about an OD effort when they are having trouble getting their own work done.

Group exercise – Planning a change at the university Learning Objective: This exercise will help students understand the complexities of change in organisations.

Summary: Students are to plan the implementation of a major change in an organisation.

Task: Part 1: In small groups students will consider one of the following changes: 1. A change from the semester system to the quarter system (or the opposite, depending on the school’s current system) 2. A requirement that all work – homework, examinations, term papers, problem sets – be done on computers and submitted online 3. A requirement that all students live on campus 4. A requirement that all students have reading, writing and speaking fluency in at least three languages, including English and Japanese, to graduate First, students decide what individuals and groups must be involved in the change process. Then they decide how the change will be implemented using Lewin’s process of organisation change (Figure 14.5) as a framework. They then consider how to deal with resistance to change, using Figure 14.13 as guides.

They decide whether a change agent (internal or external) should be used. They develop a realistic timetable for full implementation of the change, and decide if transition management is appropriate.

Part 2: Using the same groups as in Part 1, students describe the techniques used to implement the change described in Part 1: structural changes, task and technology methods, group and individual programs, or a combination. They may need to gather more information on some techniques.

They should also discuss how to utilise the seven keys to successful change management discussed at the end of the chapter. This exercise may be used as an in-class project. Each group should report on which change techniques are to be used, why they were selected, how they will be implemented, and how problems will be avoided.

Follow-up questions Part 1 1. How similar were the implementation steps for each change?

Generally, students will appropriately anticipate areas of student resistance.

2. Were the plans for managing resistance to change realistic?

Students probably will not adequately anticipate resistance from other sources (lecturers, administrators, trustees, parents, potential employers, government agencies and activist groups).

3. Do you think any of the changes could be successfully implemented at your university? Why or why not?

The analysis will help students view the situation from more perspectives.

Part 2 14-11

1.

Did various groups use the same technique in different ways or to accomplish different goals?

Groups can compare their answers.

2. If you did outside research on organisation development techniques for your project, did you find any techniques that seemed more applicable than those in this chapter? If so, describe one of them.

Students can share their research experience.

Mini-simulation (MindTap-only) Imagine Happy Time Toys has been making changes to both toy product lines and quality goals. You find yourself listening to a co-worker exhibiting resistance to Happy Time Toys’ quality and production goals for a new product line. She complains about the changes and states that the product is tricky to assemble and the goals are unrealistic. Also, because of recent changes, the co-worker believes that the company is too concerned about quality at the expense of productivity. The co-worker feels that the company could make a lot more money if they let some of the team’s borderline products go through.

The co-worker is going to continue to tell the team to pass borderline products to help the team meet its production goals to earn the bonus. This would reduce the employees’ stress and, after all, the products are not that bad. What do you say or do?

Go to this chapter’s mini-simulation, watch the challenge video and choose a response. Be sure to also view the outcomes of the two responses you didn’t choose.

OB concepts applied: communication, reward contributors, holistic view, group and individual change, task and technology change, change process.

Discussion questions 1. What types of resistance to change did you see in the various situations?

Organisational sources include a narrow focus of change. The company may have predicted their current production staff could produce the products, but, in fact, the production staff needed an extra person to meet their goals. It also seems there may have been some group inertia as no group member suggested any changes until Allison asked for employee input. Individual sources of resistance to change could include habit, as employees were used to a relatively easy assembly process and now faced a tougher assembly process. Economic factors could play a part, as employees were becoming frustrated thinking there were going to lose their bonuses for reasons beyond their control.

2. How did Alex unfreeze Allison’s perspective and what impact did that have?

Allison thought the only way to meet production goals was to slip through some slightly defective products. Alex reminded her that defective products could hurt the company’s image for a long time and suggested asking the team for input. Allison was trying to solve the problem on her own but asking for input allowed a solution that was ultimately best for Happy Time Toys.

3. Using concepts from the chapter, what would you have done to make the transition to the new product line go more smoothly?

Management could have anticipated the change of duties for production staff and helped them through the changes by providing additional resources and communication. Including production staff in the transition would be best. Open communication between production staff and management is essential during any new product introduction. Some type of reward system for contributors to a smooth transition may help motivate production staff.

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