BME-12 - OB 1 To7 Reviewer

BME 12: Organizational Behavior
Quick Review Guide (from the reference textbook)
Kingfisher Business School Review Guide 12 February 2024 Marcko

PART ONE – INTRODUCTION TO ORGANIZATIONAL BEHAVIOR
CHAPTER ONE – An Overview of Organizational Behavior
Chapter Overview
Managers strive to make their organizations as effective and successful as possible. To do this they rely on assets such as financial
reserves and earnings, technology and equipment, raw materials, information, and operating systems and processes. At the center of
everything are the employees who work for the organization. It is usually their talent, effort, skill, and ability that differentiates
effective from less effective organizations. It is critical, then, that managers understand how the behaviors of their employees impact
organizational effectiveness. In general, managers work to enhance employee performance behaviors, commitment and engagement,
and citizenship behaviors and to minimize various dysfunctional behaviors. A number of environmental, individual, group and team,
leadership, and organizational characteristics can make the manager’s work easier or more difficult depending on how well they
understand organizational behavior. This model will be more fully developed in Chapter 1 and will serve as a roadmap for your study
of organizational behavior throughout this book.
Regardless of their size, scope, or location, all organizations 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, it is they who acquire the resources the firm uses to create
new products, and it is they who sell those products. No matter how effective a manager might be, all organizational successes—and
failures—are the result of the behaviors of many people. Indeed, no manager can succeed without the assistance of others.
The chapter begins by defining organizational behavior as the study of human behavior in organizational settings, the interface
between human behavior and the organization, and the organization itself. The four functions that make up the manager’s job—
planning, organizing, leading, and controlling—are discussed. Then the chapter explores the various skills—technical, interpersonal,
conceptual, and diagnostic—managers must apply in organizations. The chapter then discusses human resource management. The
strategic context of organization behavior is discussed, including maintaining a competitive advantage, sources of competitive
advantage and types of business strategies. The next section provides some historical context on organizational behavior, looking at
scientific management, Hawthorne effect and the human relations movement. The chapter continues by defining a system and systems
perspective, the situational perspective, and interactionalism. The chapter continues by examining the outcomes—individual, group
and team, and organization—that are important for organizational effectiveness, including the scientific method and meta-analysis.

Chapter Outline
I. WHAT IS ORGANIZATIONAL BEHAVIOR?
A. The Meaning of Organizational Behavior

Organizational behavior (OB) is the study of human behavior in organizational settings, the interface between human
behavior and the organization, and the organization itself.
All three are ultimately necessary for a comprehensive understanding of organizational behavior.
OB helps explain and predict how people and groups interpret events, react, and behave in organizations and describes the
role of organizational systems, structures, and process in shaping behavior. Figure 1.1 illustrates this view of organizational
behavior.

B. How Organizational Behavior Impacts Personal Success
The core of OB is being effective at work. Since most people reading this book are either present or future managers we take
a managerial perspective of the field. Using your knowledge of OB can help you to succeed faster in any organization or
career.
The study of organizational behavior can greatly clarify the factors that affect how managers manage. Hence, the field
attempts to describe the complex human context of organizations and to define the opportunities, problems, challenges, and
issues associated with that realm.
C. How Organizational Behavior Impacts Organizational Success
Organizations as a whole also benefit from OB.
By appropriately applying OB knowledge about individuals, groups, and the effect of organizational structure on worker
behavior, the conditions can be created that make organizations most effective.
OB also helps companies perform well.
In addition to financial performance and job satisfaction, OB also influences absenteeism and turnover. Reducing
absenteeism and turnover can be worth millions of dollars to organizations through increased productivity and customer
service and decreased staffing costs.
One central value of organizational behavior is that it isolates important aspects of the manager’s job and offers specific
perspectives on the human side of management: people as organizations, people as resources, and people as people.

PART ONE – INTRODUCTION TO ORGANIZATIONAL BEHAVIOR
CHAPTER TWO – The Changing Environment of Organizations
Chapter Overview
The environment of all organizations is changing at an unprecedented rate. People work in different ways and places than in the past,
the workplace is increasingly diverse, ethical challenges are a constant issue, and globalization is commonplace.
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 organization. Hence, to truly understand the behavior of people in organizational
settings, it is also necessary to understand the changing environment of business.
This chapter is intended to provide the framework to introduce and examine five of the central environmental forces for change faced
by today’s organizations: diversity, globalization, technology, ethics and corporate governance, and new employment relationships.
An understanding of these forces will then set the stage for our in-depth discussion of contemporary organizational behavior.
Chapter Outline
I. DIVERSITY AND BUSINESS
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 is much
more than demographics and can reflect combinations of characteristics rather than a single attribute. Each individual also has a
variety of characteristics, and combinations of them can result in diversity.

II. TYPES OF DIVERSITY AND BARRIERS TO INCLUSION
A. Types of Diversity
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.
Table 2.1 summarizes these five types of diversity.

B. 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 Census Bureau projects that by 2020 the U.S. workforce will consist of 62.3 percent White non-Hispanics, 18.6 percent
Hispanics, 12 percent Blacks, and 5.7 percent Asians.
Longer-term U.S. demographic projections further highlight the increasingly diverse character of the United States:
• The population is projected to become older.

• By 2050, the total population is forecasted to increase 49%.
• Non-Hispanic Whites are expected to decrease from 69.4% to 50.1% of the total population by 2050.
• People of Hispanic origin is projected to increase 188% by 2050.
• The Black population is projected to increase by 71% by 2050.
• The Asian population is forecasted to grow 213% by 2050.
In 2014, only 23 of the Fortune 500 CEOs were minorities, and White people held 87% of total seats on corporate boards of
directors.
Many countries and regions face talent shortages at all levels, and those gaps are expected to worsen. Talent shortages are
forecast to rise globally.

C. Generational Differences
Age-based diversity is a major issue facing many organizations today.
The influence of age in training environments has been extensively studied. Age was negatively associated with learning
scores in an open learning program for managerial skills. Older trainees demonstrated lower motivation, reduced learning,
and less post-training confidence in comparison to younger trainees. This suggests that age has a negative relationship with
learning, and that part of its influence may be due to motivation.
Increasing conscientiousness and knowledge counteract some of the negative effects of aging that result from reductions in
information processing speed and motivation to learn.
Some organizations are using reverse mentoring to bridge generational differences and transfer the technology skills younger
workers bring to the workplace to more senior employees.
D. Diversity Issues for Managers
Why should we care about diversity? As managers, diversity awareness will enable us to hire, retain, and engage the best
talent, which will help to maximize the organization’s performance. Diversity also fosters greater creativity and innovation.
1. The Business Case for Diversity
One reason that organizations should promote diversity is performance. Recent research has found that firm performance
increases when employees have more positive attitudes toward 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. The Civil Rights Act of 1991 allows monetary damages in
cases of intentional employment discrimination. Obeying the law and promoting diversity is consistent with hiring the
people best suited for the job and organization.

2. Barriers to Inclusion
Given both the performance benefits and legal imperatives of diversity, then, what prevents companies from becoming
inclusive and making the most of their diversity? A report of the U.S. Equal Employment Opportunity Commission
identified several common diversity barriers that exist in many organizations. These barriers, summarized in Table 2.2,
stem from a variety of decision-making and psychological factors as well as from employee unawareness.
Understanding and proactively addressing the barriers can minimize their impact and enhance inclusion.
a. The “Like Me” Bias
Consciously or unconsciously, we tend to associate with others whom we perceive to be like ourselves. This bias is
part of human nature.
b. Stereotypes
A stereotype is 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 harmful because they result in judgments about an individual based solely on
his or her being part of a particular group, regardless of his or her unique identity. Stereotypes are often negative and
erroneous, and thus adversely affect the targeted individuals.
c. Prejudice
Even if an organization has a strong commitment to inclusion, it is possible that the beliefs and actions of individual
employees or managers are inconsistent with the organization’s policies and values.
d. Perceived Threat of Loss
As voluntary efforts are made by companies to promote inclusion, members of groups who traditionally have been
the predominant employees of a particular workforce or occupation may grow anxious or angry. If they perceive a
direct threat to their own career opportunities, they may feel that they need to protect their own prospects by
impeding the prospects of others.

e. Ethnocentrism
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.
f. Unequal Access to Organizational Networks
All organizations have formal and informal networks. These organizational networks influence knowledge sharing,
resource accessibility, and work opportunities. Women and minorities are often excluded from informal
organizational networks, which can be important to job performance, mentoring opportunities, and being seen as a
candidate for promotion.
3. Managing Diversity
The most important element in effectively leveraging the positive potential of diversity is top management support for
diversity and for diversity initiatives.
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 that give all employees equal access to performance feedback, training and
development, and advancement opportunities is also critical.
Diversity initiatives are more successful when the company is able to keep employees thinking about diversity issues,
even when they do not feel a direct, negative impact.
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 with regard to diversity.

III. GLOBALIZAITON AND BUSINESS
Another environmental factor that affects OB is globalization or the internationalization of business activities and the shift
toward an integrated global economy. From a business standpoint the widespread effects of globalization are relatively new, at
least in the United States.
A. Trends in Globalization
In 2014, the volume of international trade in current dollars was about 50 times greater than the amount in 1960.
Four major factors account for much of the growth in international trade.
First, communication and transportation have improved dramatically over the past several decades. It is simply easier to
conduct international business today than was the case just a few years ago.
Second, businesses have expanded internationally to increase their markets.
Third, more and more firms are moving into international markets to control costs, especially to reduce labor costs.
Finally, many organizations have become international in response to competition. If an organization starts gaining strength
in international markets, its competitors often must follow suit to avoid falling too far behind in sales and profitability.
B. 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:
1. Awareness of our own cultural worldview, and of our reactions to people who are different.
2. Our attitude toward cultural differences.
3. Knowledge of different worldviews and cultural practices.
4. Cross-cultural skills.

C. Cross-Cultural Differences and Similarities
We now turn our attention to differences and similarities in behavior across cultures.
1. General Observations
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, behavior in organizational 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, organization, or society understand which actions are considered acceptable and which are
deemed unacceptable.
Third, although the causes and consequences of behavior within organizational settings remain quite diverse across
cultures, organizations 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 organizational effectiveness.
2. Specific Cultural Issues
Geert Hofstede, a Dutch researcher, studied workers and managers in 60 countries and found that specific attitudes and
behaviors differed significantly because of the values and beliefs that characterized those countries.
The two primary dimensions that Hofstede found are the individualism/collectivism continuum and power distance.
Individualism exists to the extent that people in a culture define themselves primarily as individuals rather than as part of
one or more groups or organizations.
Collectivism, on the other hand, is characterized by tight social frameworks in which people tend to base their identities
on the group or organization to which they belong.

Power distance, which might also be called orientation to authority, is the extent to which people accept as normal an
unequal distribution of power.
Hofstede also identified other dimensions of culture. Uncertainty avoidance, which might also be called preference for
stability, is the extent to which people feel threatened by unknown situations and prefer to be in clear and unambiguous
situations.
Masculinity, which might be more accurately called assertiveness or materialism, is the extent to which the dominant
values in a society emphasize 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 recently been expanded to include long-term versus short-term orientation. Long-term values
include focusing on the future, working on projects that have a distant payoff, persistence, and thrift. Short-term values
are more oriented toward 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.
D. Global Perspective
A 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 globalization trends and the multicultural nature of the U.S. workforce, managers increasingly need a global
perspective and a supportive set of skills and knowledge to be most effective.

IV. 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 toward a service-based economy, (2) the growing use of
technology for competitive advantage, and (3) mushrooming change in information technology
A. 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 technology in the United States. During the 1970s, manufacturing entered a long
period of decline, primarily because of foreign competition. Over the last decade or so U.S. manufacturing has regained a
competitive position in many different industries.
During the decline of the manufacturing sector, a tremendous growth in the service sector kept the overall U.S. economy
from declining at the same rate.
A service organization is one that transforms resources into an intangible output and creates time or place utility for its
customers. Moreover, employment in service occupations is expected to grow 20.9 percent between 2012 and 2022.
Managers have come to see that many of the tools, techniques, and methods that are used in a factory are also useful to a
service firm. At the same time, though, service-based firms must hire and train employees based on a different skill set than
is required by most manufacturers.
B. Technology and Competition
Technology is the basis of competition for some firms, especially those whose goals include being the technology leaders in
their industries. But because of the rapid pace of new developments, keeping a leadership position based on technology is
becoming increasingly challenging.
Businesses have increasingly found that they can be more competitive if they can systematically decrease cycle times (the
time that it takes a firm to accomplish some recurring activity or function from beginning to end).
Twenty years ago, it took a carmaker about five years from the decision to launch a new product until it was available in
dealer showrooms. Now most companies can complete the cycle in less than two years. The speedier process allows them to

more quickly respond to changing economic conditions, consumer preferences, and new competitor products while
recouping their product-development costs faster.
C. Information Technology
Most people are very familiar with the swift advances in information technology. Breakthroughs in information technology
have resulted in leaner organizations, more flexible operations, increased collaboration among employees, more flexible
work sites, and improved management processes and systems.
On the other hand, they have also resulted in less personal communication, less “down time” for managers and employees,
and an increased sense of urgency vis-à-vis decision making and communication—changes that have not necessarily always
been beneficial.
V. 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.
A. Framing Ethical Issues
Figure 2.3 illustrates how many ethical situations can be framed. Specifically, most ethical dilemmas faced by managers
relate to how the organization treats its employees, how employees treat the organization, and how employees and
organizations treat other economic agents.
1. How an Organization Treats Its Employees
This area 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 organization 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 organization is obligated to protect the privacy of its employees.

2. How Employees Treat the Organization
Numerous ethical issues also stem from how employees treat the organization, 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
organization.
Divulging company secrets is also clearly unethical.
A third area of concern is honesty in general. Relatively common problems in this area include such activities as using a
business telephone to make personal calls, stealing supplies, and padding expense accounts.
In recent years, new issues regarding such behaviors as personal Internet use at work have also become more pervasive.
Another disturbing trend is that more workers are calling in sick simply to get extra time off.
Although most employees are basically honest, organizations must nevertheless be vigilant to avoid problems resulting
from such behaviors.
3. How Employees and the Organization Treat Other Economic Agents
Managerial ethics also come into play in the relationship between the firm and its employees with other economic agents.
As shown in Figure 2.3, the primary agents of interest include customers, competitors, stockholders, suppliers, dealers,
and unions.
The interactions between the organization 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.
Another area of concern in recent years involves financial reporting by some e-commerce firms. In at least a few cases,
some firms have substantially overstated their earnings projections to entice more investment.
Additional complexities faced by many firms today include the variations in ethical business practices in different
countries. In some countries, bribes and side payments are a normal and customary part of doing business. However, U.S.
laws forbid these practices, even if a firm’s rivals from other countries are paying them.

B. 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. But in far too many cases the
recent ethical scandals alluded to previously have actually started with a breakdown in the corporate governance structure.
Boards of directors are also increasingly being criticized even when they are not directly implicated in wrongdoing. The
biggest complaint here often relates to board independence.
C. 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 management can address these concerns is by posting a privacy policy on its website. The policy should explain
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.
In addition, companies can offer web surfers the opportunity to review and correct information that has been collected,
especially medical and financial data.
Despite the technical difficulties, government agencies are already working on Internet privacy guidelines; this means, in
turn, that companies will also need internal guidelines, training, and leadership to ensure compliance.
D. 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. In general, this view is called social responsibility. Definitions of corporate social
responsibility often include businesses living and working together for the common good and valuing human dignity. An
important part of this is how employers treat their employees.
Is it really the responsibility of businesses to be good citizens? Doing so can help a firm attract the best talent, and customers
are increasingly favoring companies that do the right thing.

Although most agree with their importance in principle, 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 public concern, that it is in the enlightened self-interest of organizations to be socially responsible.
To have lasting effects, social responsibility efforts should be integrated into the culture of the organization.
Corporate sustainability initiatives can be top-down, with someone in a position of authority dictating to managers and
employees what to do. Corporate sustainability efforts can also be grassroots, with employees identifying projects and taking
the initiative to organize their own activities.
The International Organization for Standardization (ISO) has created a variety of standards that help organizations gain
international acceptance of their practices and outcomes. In addition to environmentally related standards such as
sustainability and carbon emissions, the ISO publishes management standards including those for leadership, customer focus,
involvement of people, and continual improvement.
VI. NEW EMPLOYMENT RELATIONSHIPS
A final significant area of environmental change that is particularly relevant for businesses today involves what we call 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.
A. The Management of Knowledge Workers
Traditionally, employees added value to organizations because of what they did or because of their experience. However,
during today’s “information age,” many employees add value simply because of what they know. These employees 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 specialized 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.

B. Outsourcing and Offshoring
Outsourcing is the practice of hiring other firms to do work previously performed by the organization itself; when this work
is moved overseas, it is often called offshoring.
It is an increasingly popular strategy because it helps firms focus on their core activities and avoid getting sidetracked by
secondary activities. Firms today often outsource numerous activities, including payroll, employee training, facility
maintenance, and research and development.
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 toward outsourcing
abroad in order to lower labor costs; this practice is often called offshoring.
C. Temp and Contingency Workers
Another trend that has impacted employment relationships in business involves the use of contingent or temporary workers.
A contingent worker is a person who works for an organization on something other than a permanent or full-time basis.
Categories of contingent 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 behavioral 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.
D. Tiered Workforce
Yet another emerging issue in new employment relationships is what we call the tiered workforce. A tiered workforce exists
when one group of an organization’s workforce has a contractual arrangement with the organization objectively different
from that of another group performing the same jobs.
These and similar arrangements, of course, may pose new challenges in the future. For instance, recently hired workers may
come to feel resentment towards their more senior colleagues who are getting paid more for the same work. Likewise, as the
job market improves and workers have more options, firms may face higher turnover among their newer lower-paid
employees.

E. The Changing Nature of Psychological Contracts
A final element of the business environment that both affects and is affected by employment relationships such as those
discussed above is the psychological contract.
A psychological contract is a person’s overall set of expectations regarding what he or she will contribute to the organization
and what the organization will provide in return.
Figure 2.4 illustrates the essential nature of a psychological contract. The individual makes a variety of contributions to the
organization—such things as effort, skills, ability, time, and loyalty.
In return for these contributions, the organization provides inducements to the individual. Some inducements, such as pay
and career opportunities, are tangible rewards. Others, such as job security and status, 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 organization can also initiate change by training the
worker to improve his skills, by transferring him to another job, or by firing him.
All organizations face the basic challenge of managing psychological contracts.
They want value from their employees, and they need to give employees the right inducements.
Recent trends in downsizing and cutbacks have complicated the process of managing psychological contracts, especially
during the recession of 2008–2010.
Increased globalization of business also complicates the management of psychological contracts.
A related problem faced by international businesses is the management of psychological contracts for expatriate managers. In
some ways, this process is more like a formal contract than are other employment relationships.

PART TWO – INDIVIDUAL BEHAVIORS AND PROCESSES IN ORGANIZATIONS
CHAPTER THREE – Individual Characteristics
Chapter Overview
Chapter 1 showed how managers strive to enhance performance behaviors, enhance commitment and
engagement, promote citizenship behaviors, and minimize dysfunctional behaviors by their employees.
Chapter 2 identified how various environmental factors—diversity, globalization, technology, ethics, and new employment
relationships—all impact organizational behavior.
The text now turns to part two with a fundamental question underlying organizational behavior: Why do individuals do what they do?
Chapter 3 identifies and discusses critical individual characteristics that affect people’s behaviors in organizations. The discussion of
other important individual characteristics is continued in Chapter 4. Core theories and concepts that drive employee motivation are
introduced and discussed in Chapter 5. Finally, in Chapter 6 we focus on how managers can implement motivation theories and
concepts.
In this chapter we explore some of the key characteristics that differentiate people from one another in organizations. We first
introduce the essential nature of individual differences and how people “fit” as individuals in organizations. We then look at
personality frameworks that shed considerable light on different personality profiles. Next, we examine other specific personality traits
and discuss different types of intelligence. We close this chapter with an examination of different styles for processing information
and learning.

Chapter Outline
I. People in Organizations
A. 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 organization and its employees. In an ideal
situation, then, understanding differences across people and creating effective psychological contracts can help facilitate a
good fit between people and the organization.
B. The Concept of Fit
Being good at our job is important, but is not enough—we need to fit with our organization and workgroup as well. That is,
there are actually different forms of fit. These different forms of fit are summarized in Table 3.1.
1. Person-Job Fit
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, organizational commitment, and intent
to stay with the company. People differ in their personality and motivations as well as their skills. Organizations must
consider individual differences beyond skills when making hiring decisions.

2. Person-Group Fit
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, organizational commitment, intent to stay with the company, and
critical in team-oriented organizations.
3. Person-Organization Fit
Person-organization fit is the fit between an individual’s values, beliefs, and personality and the values, norms, and
culture of the organization.
The strength of this fit influences important organizational outcomes including job performance, retention, job
satisfaction, and organizational commitment.
Organizational values and norms that are important for person-organization 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 organization. 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.
So how can you maximize person-organization fit? A good place to start is to identify those qualifications, competencies,
and traits that relate to the organization’s strategy, values, and processes and hire people with those characteristics.
Employees must be able and willing to adapt to a company by learning, negotiating, enacting, and maintaining the
behaviors appropriate to the company’s environment.
Of course, hiring for any type of fit does not mean simply hiring those with whom we are most comfortable, which can
lead to dysfunctional stereotyping and discrimination against people who may actually contribute a great deal to the
company’s success.

4. Person-Vocation Fit
Person-vocation fit is the fit between a person’s interests, abilities, values, and personality and a profession. Our
adjustment and satisfaction are greater when our occupation meets our needs.
Although individuals usually choose a vocation long before applying to an organization, understanding person-vocation
fit can still be useful to organizations and managers. Companies wanting to develop their own future leaders, or smaller
organizations that need employees to fill multiple roles, may be able to use vocational interests in determining whether
job applicants would be a good fit with the organization’s future needs.
C. Realistic Job Previews
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 organization and build trust.
If a common reason for employees leaving an organization is that the job is not what they expected, this is a good sign that
the recruiting message can be improved.
Given the relatively low cost associated with their development, RJPs may be useful for organizations trying to reduce
turnover rates for jobs that departing employees say were not what they expected when they accepted job offers.
II. Personality and Individual Behavior
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 behavior and fit in
organizational situations, not to mention their perceptions of and attitudes toward the organization.
A. The “Big Five” Framework
Researchers have identified five fundamental personality traits that are especially relevant to organizations. These traits,
illustrated in Figure 3.1, are now commonly called the “Big Five” personality traits.
The personality of any given person can fall anywhere along each of these five traits.

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 coworkers,
subordinates, and higher-level managers, whereas less agreeable people are not likely to have particularly good working
relationships. The same pattern might extend to relationships with customers, suppliers, and other key organizational
constituents.
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. Their stability might also
lead them to be seen as being more reliable than their less stable counterparts.
Extraversion reflects a person’s comfort level with 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.
For this particular trait, the opposite version is also given a name—introversion. An introvert tends to be less comfortable in
social situations.
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 organization. Openness may also encompass a person’s willingness to accept change;
people with high levels of openness may be more receptive to change, whereas people with little openness may resist change.
The potential value of the Big Five framework is that it encompasses an integrated set of traits that appear to be valid
predictors of certain behaviors in certain situations. Thus, 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.

On the other hand, managers must be careful to not overestimate their ability to assess the Big Five traits in others. There are
also times when using more specific personality traits to predict outcomes such as turnover or performance are more useful
than the more general Big Five traits because the more specific trait more directly influences the intended outcome.
Another limitation of the Big Five framework is that it is primarily based on research conducted in the United States. Thus,
generalizing it to other cultures (or even within the U.S.) presents unanswered questions.
B. The Myers-Briggs Framework
The Myers-Briggs framework is also a popular framework that some people use to characterize personality. Many people
know of this 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 so that they could find work that matches their
personality.
The MBTI uses four scales with opposite poles to assess four sets of preferences. The four scales are:
1. Extroversion (E)/Introversion (I): Extroverts are energized by things and people. Their motto is, “ready, fire, aim.”
Introverts find energy in ideas, concepts, and abstractions. They are reflective thinkers whose motto is, “ready, aim, aim.”
2. Sensing (S)/Intuition (N): Sensing people are detail oriented. They want and trust facts. Intuitive people seek out patterns
and relationships among the facts they have learned. They trust their intuition and look for the “big picture.”
3. Thinking (T)/Feeling (F): Thinkers value fairness, and decide things impersonally based on objective criteria and logic.
Feelers value harmony, and focus on human values and needs as they make decisions or judgments.
4. Judging (J)/Perceiving (P): Judging people are decisive and tend to plan. They develop plans and follow them, adhering
to deadlines. Perceptive people are adaptable, spontaneous, and curious. They start many tasks, and often find it difficult
to complete them. Deadlines are meant to be stretched.
The possible combinations of these preferences result in sixteen personality types, which are identified by the four letters that
represent one’s tendencies on the four scales. For example, ENTJ reflects extraversion, intuition, thinking, and judging.
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 counseling.

The classification of individuals means nothing, nothing at all. Nonetheless, the MBTI has become so popular that 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
organizational decisions including hiring and promotions.
III. Other Important Personality Traits
A. Locus of Control
Locus of control is the extent to which people believe that their behavior has a real effect on what happens to them.
Some people, for example, believe that if they work hard they will succeed. They may also believe 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 have an
internal locus of control.
Other people think that fate, chance, luck, or other people’s behavior determines what happens to them. People who think
that forces beyond their control dictate what happens to them are said to have an external locus of control.
B. Self-Efficacy
Self-efficacy is our confidence in our ability to cope, perform, and be successful on a specific task. It is possible to have high
self-esteem but low self-efficacy for certain tasks.
Self-efficacy is a key factor influencing motivation and engagement in an activity.
General self-efficacy reflects a generalized belief that we will be successful at whatever challenges or tasks we might face.
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 for you to maintain a positive sense of self-efficacy.
C. Self-Esteem
Self-esteem refers to our feelings of self-worth and our liking or disliking of ourselves.
Self-esteem is positively related to job performance and learning.

D. 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 organizations.
A person who is highly authoritarian may accept directives or orders from someone with more authority purely because the
other person is “the boss.”
On the other hand, 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.
E. Machiavellianism
Machiavellianism is another important personality trait.

The term “Machiavellianism” is used to describe behavior directed at gaining power and controlling the behavior 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 others’ behavior.
Less Machiavellian individuals are more emotional, less willing to lie to succeed, value loyalty and friendship highly, and get
little personal pleasure from manipulating others.
F. Tolerance for Risk and Ambiguity
Two other closely related traits are tolerance for risk and tolerance for 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 organization in new and different directions.
A manager with low tolerance for risk might lead an organization to stagnation and excessive conservatism, or might help
the organization 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 toward 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.
G. Type A and B Traits
The Type A personality is impatient, competitive, ambitious, and uptight. The Type B personality is more relaxed and
easygoing 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 3.2, Type A and B profiles reflect extremes with most people simply tending toward one or the other.
Understanding the personality type of your coworkers and boss can help you to better understand and manage this potential
source of work conflicts. Recognizing your personality type can help you to identify work situations that are good fits for
you.
H. The Bullying Personality
Workplace bullying is a repeated mistreatment of another employee through verbal abuse; conduct that is threatening,
humiliating, or intimidating; or sabotage that interferes with the other person’s work.
Bullying costs employers through higher turnover, greater absenteeism, higher workers’ compensation costs, and higher
disability insurance rates, not to mention a diminished reputation as a desirable place to work.
It is four times more common than harassment.
Who tends to become a bully? Bullying is complex and comes in a variety of forms, but common to all types is the abuse of
authority and power, stemming from the bully’s need to control another person.

High Machiavellians manipulate and exploit others to advance their personal agendas, which is the foundation of bullying.
Although there is no clear personality profile that predicts who will be targeted, people who are more introverted, less
agreeable, less conscientious, less open to experience, and more emotionally unstable seem to be more likely to be bullied.
I. Role of the Situation
The relationship between personality and behavior changes depending on the strength of the situation we are in.
Strong organizational cultures might decrease the influence of personality on employee behaviors by creating clear
guidelines for employee behavior. Weaker organizational cultures might allow greater individual employee expression,
resulting in a wider variety of employee behaviors.
IV. Intelligence
There are many types of intelligence, or mental abilities, including general mental ability, information processing capacity,
verbal ability, and emotional intelligence.
A. 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. It is associated with the increased ability to
acquire, process, and synthesize information and has been defined simply as the ability to learn.
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 organizational behavior.
Information processing capacity involves the manner in which individuals
process and organize information.
Information processing capacity also helps explain differences between experts and novices on task learning and
performance, as experts process and organize information more efficiently and accurately than novices. General mental
ability influences information processing capacity. Age also explains differences in information processing capacity.

Mental ability tests typically use computerized or paper-and-pencil test formats to assess general mental abilities, including
verbal or mathematical reasoning, logic, and perceptual abilities.
Despite being easy to use and one of the most valid selection methods for all jobs, 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.
Because hiring discrimination can be legally problematic when using mental ability tests, it is best to evaluate the effect of
mental ability tests on protected groups before using them on job candidates.
Research has supported the idea that mental ability is most important in complex jobs, when individuals are new to the job,
and when there are changes in the workplace that require workers to learn new ways of performing their jobs.
B. Multiple Intelligences
Increasingly, researchers and scholars are realizing that there is more than one way to be smart.
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-kinesthetic: body movement and control
5. Spatial-visual: images and space
6. Interpersonal: other people’s feelings
7. Intrapersonal: self-awareness
The different intelligences represent not only different content domains but also learning preferences. The theory suggests
that assessment of abilities should measure all forms of intelligence, not just linguistic and logical-mathematical, as is
commonly done.
According to this theory, learning and teaching should focus on the particular intelligences of each person.
The theory also emphasizes the cultural context of multiple intelligences.

Knowing your strongest areas of intelligence can guide you to the most appropriate job and learning environments to enable
you to achieve your potential.
As a manager, it is possible to develop the same skills in different ways for different subordinates. Using a person’s
preferred learning style helps to make learning easy and enjoyable.
C. 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.
The five dimensions comprising emotional intelligence are:
1. Self-awareness: being aware of what you are feeling
2. Self-motivation: persisting in the face of obstacles, setbacks, and failures
3. Self-management: managing your own emotions and impulses
4. Empathy: sensing how others are feeling
5. Social skills: effectively handling the emotions of others
People differ in the degree to which they are able to recognize 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 are malleable skills that can be developed, including facial expression
recognition.
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 some of the most important skills of successful managers.
There is also controversy associated with the concepts of EI.

Some have argued that its overly inclusive, lacks specificity, and it is not clear if it is simply a learned skill or an innate
capability.
Several researchers have also argued that EI is simply a surrogate for general intelligence and well-established personality
traits.
However, a number of studies have supported the usefulness of EI.
EI has been found to be related to, and yet distinct from, personality dimensions; and various measures of EI provided
incremental predictive power regarding life satisfaction and job performance, even after controlling for Big Five personality
dimensions.
V. Learning Styles
Learning style refers to individual differences and preferences in how we process information when problem solving, learning,
or engaging in similar activities.
There are numerous typologies, measures, and models that capture these differences and preferences
A. Sensory Modalities
One approach addresses our preference for sensory modality. A sensory modality is a system that interacts with the
environment through one of the basic senses.
The most important sensory modalities are:
• Visual: learning by seeing

• Auditory: learning by hearing
• Tactile: learning by touching
• Kinesthetic: learning by doing
According to researchers, about 20 to 30 percent of American students are auditory; about 40 percent are visual; and the
remaining 30 to 40 percent are either tactile/kinesthetic, visual/tactile, or some combinations of the above major senses.

B. Learning Style Inventory
A second approach to understanding learning styles, the Kolb Learning Style Inventory, is one of the more dominant
approaches to categorizing cognitive styles.
Kolb suggests that there are four basic learning styles:
1. Convergers: depend primarily on active experimentation and abstract conceptualization to learn. People with this style
are superior in technical tasks and problems and inferior in interpersonal learning settings.
2. Divergers: depend primarily on concrete experience and reflective observation. People with this style tend to organize
concrete situations from different perspectives and structure their relationships into a meaningful whole. They are
superior in generating alternative hypotheses and ideas, and tend to be imaginative and people or feeling-oriented.
3. Assimilators: depend on abstract conceptualization and reflective observation. These individuals tend to be more
concerned about abstract concepts and ideas than about people. They also tend to focus on the logical soundness and
preciseness of ideas, rather than the ideas’ practical values; they tend to work in research and planning units.
4. Accommodators: rely mainly on active experimentation and concrete experience, and focus on risk taking, opportunity
seeking, and action. Accommodators tend to deal with people easily and specialize in action-oriented jobs, such as
marketing and sales.
There are many differences in how styles are conceptualized, and there have been numerous criticisms of Kolb’s measures
and the underlying theory.
These measures are subject to a variety of statistical and inferential problems, and many show low reliability.
Most of the research has also focused on children—less work has focused on how the styles influence adult learning.
Despite these limitations, evidence suggests that cognitive and learning styles may be important for understanding human
behavior and performance in a variety of contexts.

C. Learning Style Orientations
Finally, Annette Towler and Robert Dipboye102 developed a learning style orientation measure to address some of the
limitations of the Kolb inventory and identify key styles and preferences for learning.
They identified five key factors:
1. Discovery learning: an inclination for exploration during learning. Discovery learners prefer subjective assessments,
interactional activities, informational methods, and active-reflective activities.
2. Experiential learning: a desire for hands-on approaches to instruction. Experiential learning is positively related to a
preference for action activities.
3. Observational learning: a preference for external stimuli such as demonstrations and diagrams to help facilitate learning.
Observational learning is positively related to preference for informational methods and active-reflective methods.
4. Structured learning: a preference for processing strategies such as taking notes, writing down task steps, and so forth.
Structured learning is related to preferences for subjective assessments.
5. Group learning: a preference to work with others while learning. Group learning is related to preferences for action and
interactional learning.

PART TWO- INDIVIDUAL BEHAVIORS AND PROCESSES IN ORGANIZATIONS
CHAPTER FOUR – Individual Values, Perceptions, and Reactions
Chapter Overview
Chapter 3 introduced the concept of individual differences and explored personality, intelligence, and learning styles. This chapter
continues our focus on individual behavior in organizations. We begin with a discussion of attitudes, examining how attitudes are
formed and changed, cognitive dissonance, and three key work-related attitudes. Next, we look at how values and emotions affect
organizational behavior. The role of perception, especially as it relates to issues of fairness and trust, is then discussed. Finally, our
chapter concludes with a section devoted to stress in organizations—its causes and consequences and how it can be managed.
Chapter Outline
I. ATTITUDES IN ORGANIZATIONS
People’s attitudes obviously affect their behavior in organizations. Attitudes are complexes of beliefs and feelings that people
have about specific ideas, situations, or other people.
A. How Attitudes Are Formed
Attitudes are formed by a variety of forces, including our personal values, our experiences, and our personalities. Any of the
“Big Five” or individual personality traits discussed in Chapter 3 may also influence our attitudes.
Attitudes are usually viewed as stable dispositions to behave toward objects in a certain way.
As illustrated in Figure 4.1, attitudes contain three components: cognition, affect, and intention.
Cognition is the knowledge a person presumes to have about something.

This “knowledge” may be true, partially true, or totally false. Cognitions are based on perceptions of truth and reality, and,
as we note later, perceptions agree with reality to varying degrees.
A person’s affect is his or her feelings toward something. In many ways, affect is similar to emotion—it is something over
which we have little or no conscious control.
Intention guides a person’s behavior. Intentions are not always translated into actual behavior, however.
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).
B. Cognitive Dissonance
Suppose that you strongly believe that all companies need to be both profitable and environmentally responsible, and that
you are the new CEO of a company that is a terrible polluter. You learn that reducing your company’s carbon emissions
would be so expensive that the company would no longer be profitable. What would you do?
Cognitive dissonance is an incompatibility or conflict between behavior and an attitude or between two different attitudes
When people experience dissonance, they often use one of four approaches to cope with it. Using the scenario above, these
would include:
1. You can change your behavior and reduce the company’s carbon emissions.
2. You can reduce the felt dissonance by reasoning that the pollution is not so important when compared to the goal of
running a profitable company.
3. You can change your attitude toward pollution to decrease your belief that pollution is bad.
4. You can seek additional information to better reason that the benefits to society of manufacturing the products
outweigh the societal costs of polluting.

Interestingly, though, 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. Your perception of the importance of the elements that are creating the dissonance. If the elements involved in the
dissonance are less important to you, it is easier to ignore.
2. The amount of influence you feel you have over these elements. If the Board of Directors blocks your plans, it is
easier to rationalize the dissonance and not take action.
3. The rewards involved in the dissonance. Rewards for dissonance tend to decrease our reactions to it.
C. 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 toward 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, as noted earlier, individuals may change their attitudes as a way to reduce cognitive dissonance.
Deeply rooted attitudes that have a long history are, of course, resistant to change.
D. Key Work-Related Attitudes
People in an organization form attitudes about many different things. Of course, some of these attitudes are more important
than others.
Especially important attitudes are job satisfaction, organizational commitment, and employee engagement.
1. Job Satisfaction
Our job satisfaction reflects our attitudes and feelings about our job.
As illustrated in Figure 4.2, the factors that have the greatest influence on job satisfaction are the work itself, attitudes,
values, and personality.
Satisfaction with the nature of the work itself is the largest influence on job satisfaction.

Challenging work, autonomy, variety, and job scope also increase job satisfaction. As a manager, if you want to increase
your subordinates’ job satisfaction, focus first on improving the nature of the work they do.
Our attitudes and values about work also influence our job satisfaction.
Someone with a negative attitude toward work is less likely to be satisfied with any job than someone with a positive
attitude toward work.
Interestingly, our job satisfaction is somewhat stable over time, even when we change jobs or employers.
Research evidence suggests that differences in job satisfaction are due in part to differences in employees’ genetics and
personality. In particular, core self-evaluation,
extroversion, and conscientiousness influence job satisfaction.
Are happy employees really more productive employees? The answer is yes. And the positive relationship between job
satisfaction and job performance is even stronger for complex, professional jobs.
Job satisfaction positively influences employees’ attitudes and organizational citizenship behaviors. Conversely, job
dissatisfaction is related to higher absenteeism and turnover, as well as to other withdrawal behaviors such as lateness,
drug abuse, grievances, and retirement decisions.
2. Organizational Commitment
Organizational commitment reflects the degree to which an employee identifies with the organization and its goals and
wants to stay with the organization.
There are three ways we can feel committed to an employer:
a. Affective commitment
Is a positive emotional attachment to the organization and strong identification with its values and goals.
Affective commitment leads employees to stay with an organization because they want to, and is related to higher
performance.
b. Normative commitment
Occurs when an employee feels obliged to stay with an organization for moral or ethical reasons. Normative
commitment is related to higher performance and leads
employees to stay with an organization because they feel they should.

c. Continuance commitment
Refers to an employee staying with an organization because of the perceived high economic and/or social costs
involved with leaving. Continuance commitment leads employees to stay with an organization because they feel
that they have to.
3. Employee Engagement
Employee engagement is “a heightened emotional and intellectual connection that an employee has for his/her job,
organization, manager, or coworkers that, in turn, influences him/her to apply additional discretionary effort to his/her
work.”
Engaged employees give their full effort to their jobs, often going beyond what is required because they are passionate
about the firm and about doing their jobs well.
Rather than wanting to do the work and wanting to do their best, 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.
As a manager, remember that the drivers of employee engagement can differ from the drivers of employee attraction and
retention—what gets employees into an organization is not the same as what keeps them engaged and keeps them from
leaving.
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 recognized for doing a good job
• Have positive relationships with coworkers
• Have opportunities to learn and grow
• Have supportive leadership

II. VALUES AND EMOTIONS IN ORGANIZATIONS
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 organizational outcomes including performance and retention, and are often
considered to be important work outcomes in themselves.
A company leader’s personal values affect the firm’s business strategy and all aspects of organizational behavior including
staffing, reward systems, manager–subordinate relationships, communication, conflict management styles, and negotiation
approaches. Personal values also influence ethical choices.
A. Types of Values
Values can be described as terminal or instrumental, and as intrinsic or extrinsic.

1. Terminal and Instrumental Values
Terminal values reflect our 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 our experiences and accomplishments.
Instrumental values are our preferred means of achieving our terminal values or our preferred ways of behaving.
Terminal values influence what we want to accomplish; instrumental values influence how we get there. The stronger an
instrumental value is, the more we act on it.
2. Intrinsic and Extrinsic Work Values
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.

B. Conflicts among Values
Intrapersonal, interpersonal, and individual-organization value conflicts all influence employee attitudes, retention, job
satisfaction, and job performance.
At some point in their career, 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.
Unlike intrapersonal value conflicts, which are internal to an individual, interpersonal value conflicts occur when two
different people hold conflicting values. Interpersonal value conflicts are often the cause of personality clashes and other
disagreements.
As a manager, it is important to remember that people’s constellations of instrumental and terminal values differ. These
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
organization, creating individual-organization value conflict. Lower individual-organization value conflict leads to greater
job satisfaction, higher performance, lower stress, and greater job commitment.
C. How Values Differ around the World
Global differences in values can also lead to different managerial behaviors. For example, Latin Americans tend to hire
competent family members whenever possible. Managers in the U.S. tend to strongly value individual achievement rather
than family ties.
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 very important and those
in which it is not.
(2) survival/self-expression values. emphasize economic and physical security.
Figure 4.3 illustrates how these two major dimensions of values differ in a variety of countries.

D. The Role of Emotions in Behavior
Emotions also play an important role in organizations. Employees who effectively manage their emotions and moods can
create a competitive advantage for a company.
We all experience emotions at work. Our behaviors are not guided solely by conscious, rational thought. In fact, emotion
often plays a larger role in our behaviors than does conscious reasoning.
Emotions are intense, short-term physiological, behavioral, and psychological reactions to a specific object, person, or event
that prepare us to respond to it.
Let’s break this definition down into its 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; we feel emotion.
4. Emotions create a state of physical readiness through physiological reactions.
Why is understanding the role of emotions important to organizations?
First, because emotions are malleable, effective employees and managers know how to positively influence their own
emotions and the emotions of others.
Second, emotions influence both the creation and maintenance of our motivation to engage or to not engage in certain
behaviors.
Third, research has found that emotion can influence turnover, decision making, leadership, helping behaviors, and
teamwork behaviors. Effective leaders use emotion to generate positive follower behaviors.
E. Affect and Mood
Although the cause of emotions tends be obvious, the cause of mood tends to be more unfocused and diffused.
Moods are short-term emotional states that are not directed toward anything in particular.
Our mood at the start of a workday influences how we see and react to work events, which influences our performance.

Our 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 behavioral cues. Changing group membership in a way that changes the
manner in which coworkers interact can change the amount and type of mood information members get from each other and
influence employees’ moods.
Affectivity represents our tendency to experience a particular mood or to react to things with certain emotions
The two dominant dimensions of mood are positive affect, which reflects a combination of high energy and positive
evaluation characterized by emotions like elation, and negative affect, which comprises feelings of being upset, fearful, and
distressed.
As shown in Figure 4.4, 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 organizational citizenship behaviors, greater withdrawal and counterproductive work
behaviors, 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.
III. PERCEPTION IN ORGANIZATIONS
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. Moreover, people often assume that reality is objective and that we all
perceive the same things in the same way.
Since perception plays a role in a variety of workplace behaviors, managers should understand basic perceptual processes.
Through perceptual processes, the receiver assimilates the varied types of incoming information for the purpose of interpreting
it.

A. Basic Perceptual Processes
Two basic perceptual processes are particularly relevant to managers—selective perception and stereotyping.
1. Selective Perception
Selective perception is the process of screening out information that we are uncomfortable with or that contradicts our
beliefs.
2. Stereotyping
Stereotyping is categorizing or labeling 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. Of course, stereotypes along these lines are
inaccurate and can be harmful.
B. Errors in Perception
As you might expect, errors may creep into how we interpret the things we perceive. Stereotyping and selection perception
are often the underlying causes of these errors, but other factors may also come into play. Perception shortcuts, for example,
may play a role.
One perception shortcut is categorization, which reflects our tendency to put things into groups or categories. We then
exaggerate the similarities within and the differences between the groups.
After we put people into categories, selective perception leads to selectively interpreting what we see based on our interests,
expectations, experience, and attitudes. Selective perception reinforces stereotypes as the perceiver focuses on information
and behaviors 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.
The halo effect is when we form a general impression about something or someone based on a single (typically good)
characteristic.

The contrast effect occurs when we evaluate our own or another person’s characteristics through comparisons with other
people we have recently encountered who rank higher or lower on the same characteristics.
Projection occurs when we project our own characteristics onto other people.
First impression bias may also be relevant. Research has found that not only do we tend to avoid people after we have had a
negative reaction to, but also negative impressions are harder to change than positive ones. First impressions are formed
quickly. Once we form wrong impressions, they are likely to persist.
Our impressions and expectations of others also can become self-fulfilling prophecies. If we categorize a person as
untrustworthy, we are likely to treat that individual with suspicion and distrust. These actions then evoke appropriate guarded
reactions from the other person, whose reactions serve to confirm our initial impressions.
C. Perception and Attribution
Attribution refers to the way we explain the causes of our own as well as other people’s behaviors and achievements, and
understand why people do what they do.
As shown in Figure 4.5, we rely on three rules to evaluate whether to assign an internal or an external attribution to
someone’s behavior 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 of attribution is self-handicapping. Self-handicapping occurs when people create obstacles for themselves
that make success less likely. Examples include using drugs and alcohol, refusing to practice, and reducing effort.
These behaviors may sound silly, but they are very real and serve to protect the person’s sense of self-competence. Focusing
on effort attributions and developing feelings of self-efficacy help overcome this behavior.
Attributing success to internal causes builds self-efficacy and increases the motivation to try hard and persist in the face of
failure.

D. Perception and Fairness, Justice, and Trust
Perception and perceptual processes play a major role in how people feel about fairness, justice, and trust.
In organizations, perceptions of unfairness (also referred to as injustice) can exist in numerous situations such as layoffs and
downsizings, hiring and promotion decisions, union negotiations, and even simple organizational change.
The term organizational fairness refers to employees’ perceptions of organizational events, policies, and practices as being
fair or not fair.
Why should you care about fairness? You should care because perceptions of fairness affect a wide variety of employee
attitudes and behaviors including satisfaction, commitment, trust, and turnover.
A number of negative behaviors can result from perceptions of unfairness, including theft, sabotage, and other unethical
behaviors. Perceived unfairness also increases the chances that employees will file lawsuits against their employers.
As a manager, it is critical to remember that it is insufficient to just be fair; you must also be perceived as fair by your
subordinates.
Understanding fairness is important for ethical reasons as well. Failure to meet employees’ fairness expectations can lead
them to engage in unethical behavior.
1. Distributive Fairness
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.
2. Procedural Fairness
Procedural fairness addresses the fairness of the procedures used to generate the outcome.
Why does procedural fairness matter so much?
There are two reasons.
First, employees use perceptions of the current decision-making procedures to predict how they will likely fare in the
organization in the future.

Second, fair procedures signal that employees are valued and accepted by the organization.
3. Interactional Fairness
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 abusive words or actions can be seen as having low interactional fairness.
Interactional fairness describes two specific types of interpersonal treatment.
The first type is interpersonal fairness, which reflects the degree to which people are treated with politeness, dignity,
and respect by authorities or third parties involved in executing procedures or determining outcomes.
The second type is informational fairness, which focuses on the extent to which employees receive adequate
information and explanations about decisions affecting their working lives.
It is important that a high degree of interactional fairness exist in the relationship between a supervisor and a subordinate.
Low interactional fairness can lead to feelings of resentment toward either the supervisor or the organization.
4. Perception and Trust
Trust is the expectation that another person will not act to take advantage of us regardless of our 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.

IV. STRESS IN ORGANIZATIONS
The finally element of individual behavior we will discuss in this chapter is stress. Many people think of stress as a simple
problem. In reality, however, stress is complex and often misunderstood.
A. The Nature of Stress
The text define stress as a person’s adaptive response to a stimulus that places excessive psychological or physical demands
on him or her.
Given the underlying complexities of this definition, we need to examine its components carefully.
First is the notion of adaptation. People may adapt to stressful circumstances in any of several ways.
Second is the role of the stimulus. This stimulus, generally called a stressor, is anything that induces stress.
Third, stressors can be either psychological or physical.
Finally, the demands the stressor places on the individual must be excessive for stress to actually result.
1. The Stress Process
Much of what we know about stress 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.
The general adaptation syndrome (GAS) identifies three stages of response to a stressor: alarm, resistance, and
exhaustion.
The first stage is called “alarm.” At this point, the person may feel some degree of panic and begin to wonder how to
cope.
If the stressor is too extreme, the person may simply be unable to cope with it. In most cases, however, the individual
gathers his or her strength (physical or emotional) and begins to resist the negative effects of the stressor, stage two.
Prolonged exposure to a stressor without resolution may bring on phase three of the GAS: exhaustion. At this stage, the
person literally gives up and can no longer fight the stressor.

2. Distress and Eustress
One type of stress, eustress, is the pleasurable stress that accompanies position events, such as a bonus or a promotion.
Of course, there is also negative stress. Called distress, the unpleasant stress that accompanies negative events, what most
people think of when they hear the word stress.
Remember that stress can be either good or bad. It can motivate and stimulate us, or it can lead to any number of
dangerous side effects.
B. Common Causes of Stress
Many things can cause stress. Figure 4.7 shows two broad categories: organizational stressors and life stressors. It also shows
three categories of stress consequences: individual consequences, organizational consequences, and burnout.
1. Organizational Stressors
Organizational stressors are various factors in the workplace that can cause stress.
Four general sets of organizational stressors are task demands, physical demands, role demands, and interpersonal
demands.
Task demands are stressors associated with the specific job a person performs. Some occupations are by nature more
stressful than others, or have unhealthy conditions, lack of job security, or even job overload.
We should note that the opposite of overload may also be undesirable. As Figure 4.8 shows, low task demands can result
in boredom and apathy just as overload can cause tension and anxiety.
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. One important element is temperature. Others
include whether the job requires strenuous labor, the design of the office, amount of social interaction, poor lighting, or
shift work.
Role demands can also be stressful to people in organizations. A role is a set of expected behaviors associated with a
particular position in a group or organization. As such, it has both formal (i.e., job-related and explicit) and informal (i.e.,
social and implicit) requirements. Individuals perceive role expectations with varying degrees of accuracy and then
attempt to enact that role.

A final set of organizational stressors consists of three interpersonal demands: group pressures, leadership, and
interpersonal conflict. Group pressures may include pressure to restrict output, pressure to conform to the group’s norms,
and so forth.
Leadership style also may cause stress. Suppose an employee needs a great deal of social support from his leader. The
leader, however, is quite brusque and shows no concern or compassion for him. This employee will probably feel
stressed.
Conflicting personalities and behaviors may also cause stress. Conflict can occur when two or more people must work
together even though their personalities, attitudes, and behaviors differ.
Finally, we should also note that in today’s world many job holders experience stress from a variety of sources
simultaneously. It is also the case that stress in organizational settings can be influenced by events that take place outside
the organization. An individual dealing with financial problems, a sick child, or the death of a close family member will
undoubtedly experience stress from those events.
C. Consequences of Stress
Referring back to Figure 4.7, stress can produce individual consequences, organizational consequences, and burnout. The
authors note that many of the factors listed are obviously interrelated.
1. Individual Consequences
The individual consequences of stress, then, are the outcomes that mainly affect the individual, and may produce
behavioral, psychological, and medical consequences.
The behavioral consequences of stress may harm the person under stress or others. One such behavior is smoking.
The psychological consequences of stress relate to a person’s mental health and well-being. When people experience too
much stress at work, they may become depressed or find themselves sleeping too much or not enough.
The medical consequences of stress affect a person’s physical well-being. Heart disease and stroke, among other
illnesses, have been linked to stress.

2. Organizational Consequences
Other results of stress have even more direct consequences for organizations. These include decline in performance,
withdrawal, and negative changes in attitudes. Employee violence is a potential individual consequence of stress.
Another direct organizational consequence of employee stress relates to attitudes. As we just noted, job satisfaction,
morale, and organizational commitment can all suffer, along with motivation to perform at high levels.
Burnout, another consequence of stress, has clear implications for both people and organizations. Burnout is a general
feeling of exhaustion that develops when a person simultaneously experiences too much pressure and has too few sources
of satisfaction.
D. Managing and Controlling Stress
Many strategies have been developed to help manage stress in the workplace. Some are for individuals, and others are geared
toward organizations.
1. Individual Coping Strategies
Many strategies for helping individuals manage stress have been proposed. Exercise is one method of managing stress.
A related method of managing stress is relaxation. Time management is often recommended for managing stress.
Somewhat related to time management is the idea of role management, in which the individual actively works to avoid
overload, ambiguity, and conflict.
A final method for managing stress is to develop and maintain support groups. A support group is simply a group of
family members or friends with whom a person can spend time.
2. Organizational Coping Strategies
Organizations are also increasingly realizing that they should be involved in managing their employees’ stress.
Two basic organizational strategies for helping employees manage stress are institutional programs and collateral
programs.

Institutional programs for managing stress are undertaken through established organizational mechanisms. The
organization’s culture also can be used to help manage stress. Finally, supervision can play an important institutional
role in managing stress. A supervisor can be a major source of overload.
A collateral stress program is an organizational program specifically created to help employees deal with stress. More
and more companies are developing their own programs or adopting existing programs of this type. These programs
attack stress indirectly by encouraging employees to exercise, which is presumed to reduce stress. On the negative side,
this kind of effort costs considerably more than stress management programs because the firm must invest in physical
facilities.
Finally, organizations try to help employees cope with stress through other kinds of programs. For example, existing
career development programs or programs promoting everything from humor to massage to yoga as antidotes for stress.
E. Work-Life Balance
1. Fundamental Work-Life Relationships
Work-life relationships can be characterized in any number of ways.
Common dimensions would include such things as an individual’s current job (including working hours, job satisfaction,
and so forth), his or her career goals (the person’s aspirations, career trajectory, and so forth), interpersonal relations at
work (with the supervisor, subordinates, coworkers, and others), and job security.
Work-life relationships, then, include any relationships between dimensions of the person’s work life and the person’s
personal life.
Stress will occur when there is a basic inconsistency or incompatibility between a person’s work and life dimensions.
2. Balancing Work-Life Linkages
Balancing work-life linkages is, of course, no easy thing to do. The important thing is to recognize the potential trade-
offs in advance so that they can be carefully weighed and a comfortable decision made.
Individuals must also recognize the importance of long-term versus short-term perspectives in balancing their work and
personal lives.People also have to decide for themselves what they value and what tradeoffs they are willing to make.

CHAPTER FIVE – Motivating Behavior
Chapter Overview
Given the complex array of individual differences discussed in Chapter 3 (and extended later in this chapter), 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. What people in
an organization want from work and how they think they can achieve it plays an instrumental role in determining their motivation to
work. As we see in this chapter, motivation is vital to all organizations.
Indeed, the difference between highly effective organizations and less effective ones often lies in the motivations of their members.
Thus, managers need to understand the nature of individual motivation, especially as it applies to work situations. In this chapter we
first explore various need-based perspectives on motivation. We then turn our attention to the more sophisticated process-based
perspectives. We conclude with a discussion of learning-based perspectives on motivation.

Chapter Outline
I. THE NATURE OF MOTIVATION
Motivation is the set of forces that causes people to engage in one behavior rather than some alternative behavior.
From the manager’s viewpoint, the objective is to motivate people to behave in ways that are in the organization’s best interest.
A. 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
where
P = performance, M = motivation, A = ability, and E = environment
A deficiency in any one of these areas hurts performance. 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. For example, if a worker cannot complete a
project without sales forecast data from marketing, the manager can contact marketing and request that information. But if
motivation is deficient, the manager faces the more complex situation of determining what will motivate the employee to
work harder.
B. The Motivational Framework
We can start to understand motivation by looking at need deficiencies and goal-directed behaviors. Figure 5.1 shows the
basic motivational framework we use to organize our discussion.
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 behaviors, 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.
C. Early Perspectives on Motivation
Historical views on motivation, although not always accurate, are of interest because they 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.
1. The Traditional Approach
One of the first writers to address work motivation was Frederick Taylor. Taylor developed a method for structuring jobs
that he called scientific management.
Taylor assumed that economic gain was the primary thing that motivated everyone.
Other assumptions of the traditional approach 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.
2. The Human Relations Approach
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.
3. The Human Resource Approach
The human resource approach to motivation carries the concepts of needs and motivation one step farther, 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. This philosophy guides most contemporary thinking about employee motivation.
D. Individual Differences and Motivation
Simply put, different things motivate different people.
Because of these myriad differences, there is no one best way to motivate everyone.
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 job requiring high-quality work will not be as motivating to someone who lacks attention to detail as it will to a
conscientious, detail-oriented person.
In addition to the various individual differences we have already discussed, one additional element is often very specifically
related to the motivation to perform a specific task.
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 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 self-efficacy through coaching and encouragement, assuming
the employee really does have the potential to perform better.
If you find yourself lacking the confidence that you can do a task, you can take steps to eliminate the performance barriers
you identify. Perhaps more practice, seeking a coach, or watching others perform the task successfully will increase your
task-specific self-efficacy and motivation.

II. NEED-BASED PERSPECTIVES ON MOTIVATION
The basic premise of need-based theories and models is the assumption that need deficiencies cause behavior.
Need theorists have attempted to identify and categorize the needs that are most important to people. The best-known need
theories are the hierarchy of needs and the ERG theory.
A. 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. Furthermore,
Maslow believed that these needs are arranged in a hierarchy of importance, with the most basic needs at the foundation of
the hierarchy.
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. These include the needs for food, sex, and air.
Next in the hierarchy are security needs: things that offer safety and security, such as adequate housing and clothing and
freedom from worry and anxiety.
Belongingness needs, the third level in the hierarchy, are primarily social. Examples include the need for love and affection
and the need to be accepted by peers.
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-actualization needs. These involve a person’s realizing his or her full potential and
becoming all that he or she can be.
Maslow believed that each need level must be satisfied before the level above it can become important. This escalation up
the hierarchy continues until the self-actualization needs become the primary motivators.
However, if a previously satisfied lower-level set of needs becomes deficient again, the individual returns to that level.

In most businesses, physiological needs are probably the easiest to evaluate and to meet. Adequate wages, and comfortable
working conditions are measures taken to satisfy this most basic level of needs.
Security needs in organizations can be satisfied by such things as job continuity (no layoffs), 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
organization. Managers can help satisfy these needs by fostering interaction and a sense of group identity among employees.
Self-actualization needs are perhaps the hardest to understand and the most difficult to satisfy. Working toward self-
actualization, rather than actually achieving it, may be the ultimate motivation for most people.
Research shows that the need hierarchy does not generalize very well to other countries. Research has also found differences
in the relative importance of different needs in Mexico, India, Peru, Canada, Thailand, Turkey, and Puerto Rico.
Maslow’s needs hierarchy makes a certain amount of intuitive sense. And because it was the first motivation theory to
become popular, it is also one of the best known among practicing managers. However, research has revealed a number of
deficiencies in the theory.
Five levels of needs are not always 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.
B. The ERG Theory
The ERG theory, developed by Yale psychologist Clayton Alderfer, is another historically important need theory of
motivation. The E, R, and G stand for three basic need categories: existence, relatedness, and growth.
Existence needs roughly correspond to the physiological and security needs of Maslow’s hierarchy. Relatedness needs are
similar to Maslow’s belongingness and esteem needs. Finally, growth needs are analogous to Maslow’s needs for self-esteem
and self-actualization.
In contrast to Maslow’s approach, ERG theory suggests that more than one kind of need may motivate a person at the same
time.
A more important difference from Maslow’s hierarchy is 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. The need hierarchy assumes that the individual remains at the next level until the needs at that level are satisfied.
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.
C. 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 practicing managers.
1. Development of the Theory
Frederick Herzberg and his associates developed the two-factor theory in the late 1950s and early 1960s.
Herzberg began by interviewing approximately 200 accountants and engineers in Pittsburgh and asked them questions
about motivation. Herzberg found that entirely different sets of factors were associated with the two kinds of feelings
about work. The findings led Herzberg to conclude that the prevailing thinking about satisfaction and motivation was
incorrect.
As Figure 5.3 shows, Herzberg saw motivation as a two-factor phenomenon.
Figure 5.3 also illustrates the two-factor concept that there is one dimension ranging from satisfaction to no satisfaction
and another ranging from dissatisfaction to no dissatisfaction.
This theory proposed, employees might be either satisfied or not satisfied and, at the same time, dissatisfied or not
dissatisfied.
Figure 5.3 lists the primary factors identified in Herzberg’s interviews.
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 were often cited by people as primary causes of satisfaction and
motivation.

The other set of factors, hygiene factors, are extrinsic to the work itself and include factors such as pay and job security.
These factors came out in response to the questions about dissatisfaction and lack of motivation.
To use the two-factor theory in the workplace, Herzberg recommended a two-stage process.
First, the manager should try to eliminate situations that cause dissatisfaction. According to the theory, once a state of no
dissatisfaction exists, trying to improve motivation further through hygiene factors is a waste of time.
At that point, the motivation factors enter the picture. As a result, managers would be helping subordinates feel satisfied
and motivated.
Herzberg described explicitly how managers could apply his theory, “job enrichment” (discussed in Chapter 6)
2. Evaluation of the Theory
The two-factor theory has been scientifically scrutinized more than almost any other organizational behavior theory, with
contradictory results.
In general, studies that use the same methodology as Herzberg did (content analysis of recalled incidents) tend to support
the theory.
However, this methodology has itself been criticized, and studies that use other methods to measure satisfaction and
dissatisfaction frequently obtain results quite different from Herzberg’s. The theory may be “method bound.”
Critics say the original sample of accountants and engineers may not represent the general working population.
Furthermore, they maintain that the theory fails to account for individual differences. In addition, the theory does not
define the relationship between satisfaction and motivation.
Research has also suggested that the two-factor framework varies across cultures. It is not surprising, then, that the two-
factor theory is no longer held in high esteem by organizational behavior researchers.
D. The Acquired Needs Framework
Next, we will discuss one final need-based motivation perspective.
The acquired needs framework was advanced by David McClelland and centers 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.
1. The Need for Achievement
The need for achievement arises from an individual’s desire to accomplish a goal or task more effectively than in the
past.
Individuals who have a high need for achievement tend to set moderately difficult goals and to make moderately risky
decisions.
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.
Although high need-achievers tend to be successful, they often do not achieve top management posts. High need-
achievers tend to do well as individual entrepreneurs with little or no group reinforcement.
2. The Need for Affiliation
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.
3. The Need for Power
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. First, they must seek power for
the betterment of the organization rather than for their own interests.
Second, they must have a fairly low need for affiliation because fulfilling a personal need for power may well alienate
others in the workplace.

Third, they need plenty of self-control to curb their desire for power when it threatens to interfere with effective
organizational or interpersonal relationships.
III. PROCESS-BASED PERSPECTIVES ON MOTIVATION
Process-based perspectives focuses on why people choose certain behavioral options to satisfy their needs and how they
evaluate their satisfaction after they have attained these goals.
Two useful process perspectives on motivation are the equity and expectancy theories.
A. 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 that we are being treated fairly in relation to others and inequity as the belief that we
are being treated unfairly compared with others.
Social comparisons involve evaluating our own situation in terms of others’ situations. In this chapter, we focus 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 organizations.
1. Forming Equity Perceptions
People in organizations form perceptions of the 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 comparison-other 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.
Equity theory describes the equity comparison process in terms of an input-to-outcome ratio. Inputs are an individual’s
contributions to the organization, outcomes are what the person receives in return.

The equity comparison thus takes the following form:
Outcomes (self) compared with Outcomes (other)
Inputs (self) Inputs (other)
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 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.
2. Responses to Equity and Inequity
Figure 5.4 summarizes the results of an equity comparison.
People may use one of six common methods to reduce inequity.
First, we may change our own inputs.

Second, we may change our own outcomes.
A third, more complex response is to alter our perceptions of ourselves and our behavior.
Fourth, we may alter our perception of the comparison-other’s inputs or outcomes.
Fifth, we may change the object of comparison.
Finally, as a last resort, we may simply leave the situation.
3. Evaluation and Implications
Findings support the predictions of equity theory quite consistently, especially when the worker feels underpaid.
Most studies appear to uphold the basic premises of the theory. 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 organizational rewards and reward systems.
Equity theory offers managers three messages. First, everyone in the organization needs to understand the basis for
rewards.

Second, people tend to take a multifaceted view of their rewards; they perceive and experience a variety of rewards, some
tangible and others intangible.
Finally, people base their actions on their perceptions of reality.
B. 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.
1. The Basic Expectancy Model
Victor Vroom is generally credited with first applying the theory to motivation in the workplace.
The basic premise of expectancy theory is that motivation depends on how much we want something and how likely we
think we are to get it.
Figure 5.5 summarizes the basic expectancy model. The model’s general components are effort (the result of motivated
behavior), performance, and outcomes. Expectancy theory emphasizes the linkages among these elements, which are
described in terms of expectancies, instrumentalities, and valences.
2. Effort-to-Performance Expectancy
Effort-to-performance expectancy is a person’s perception of the probability that effort will lead to successful
performance.
If we believe our effort will lead to higher performance, this expectancy approaches a probability of 1.0. If we believe
our performance will be the same no matter how much effort we make, our expectancy is very low, as low as 0.
3. Performance-to-Outcome Instrumentality
Performance-to-outcome instrumentality (also known as performance-to-outcome expectancy) is a person’s perception

of the probability that performance will lead to certain other outcomes.
Several outcomes might logically result from performance. Each outcome, then, has its own instrumentality.

4. Outcomes and Valences
An outcome is anything that results from performing a particular behavior. High-level performance conceivably might
produce such outcomes as a pay raise, a promotion, recognition from the boss, fatigue, stress, or less time to rest, among
others.
The valence of an outcome is the relative attractiveness or unattractiveness—the value—of that outcome to the person.
Pay raises, promotions, and recognition might all have positive valences, whereas fatigue, stress, and less time to rest
might all have negative valences.
The strength of outcome valences varies from person to person.
The basic expectancy framework suggests that three conditions must be met before motivated behavior occurs.
First, the effort-to-performance expectancy must be well above zero.
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. The Porter-Lawler Model
Lyman Porter and Edward Lawler were researchers who used expectancy theory to develop a novel view of the
relationship between employee satisfaction and performance.
Porter and Lawler argued that if rewards are adequate, high levels of performance may lead to satisfaction.
The Porter-Lawler model appears in Figure 5.6. Some of its features are quite different from the original version of
expectancy theory.
At the beginning of 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 two kinds of rewards. Intrinsic rewards are intangible—a feeling of accomplishment, a sense of
achievement, and so forth. Extrinsic rewards are tangible outcomes such as pay and promotion.
If the rewards are regarded as equitable, the employee feels satisfied.

6. Evaluation and Implications
Several studies have supported various parts of the theory.
Research has also confirmed expectancy theory’s claims that people will not engage in motivated behavior 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 so complicated that researchers have found it quite difficult to test. Moreover, people are
seldom as rational and objective in choosing behaviors as expectancy theory implies.
Research has also suggested that expectancy theory is more likely to explain motivation in the United States than in other
countries.
Because expectancy theory is so complex, it is difficult to apply directly in the workplace. A manager would need to
figure out what rewards each employee wants and how valuable those rewards are to each person, measure the various
expectancies, and finally adjust the relationships to create motivation.
Nevertheless, expectancy theory offers several important guidelines for the practicing manager. The following are some
of the more fundamental guidelines:
1. Determine the primary outcomes each employee wants.

2. Decide what levels and kinds of performance are needed to meet organizational goals.
3. Make sure the desired levels of performance are possible.
4. Link desired outcomes and desired performance.
5. Analyze 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.

CHAPTER SIX – Motivating Behavior with Work and Rewards
Chapter Overview
Chapter 5 described a variety of perspectives on motivation. But no single theory or model completely explains motivation—each
covers only some of the factors that actually result in motivated behavior. While using the actual theories as tools or frameworks,
managers need to understand various operational procedures, systems, and methods for enhancing motivation and performance.
These need-, process-, and learning-based concepts result in the situation illustrated in the center of the figure—a certain potential
exists for motivated behavior directed at enhanced performance. Managers may need to take certain steps to translate the potential for
motivation directed at enhanced performance into real motivation and enhanced performance.
Chapter Outline
I. JOB DESIGN IN ORGANIZATIONS
Job design is an important method managers can use to enhance employee performance.
Job design can be defined as how organizations define and structure jobs.
The first widespread model of how individual work should be designed was job specialization.
A. Job Specialization
Frederick Taylor, the chief proponent of job specialization, argued that jobs should be scientifically studied, broken down
into small component tasks, and then standardized across all workers doing those jobs.
On the surface, job specialization appears to be a rational and efficient way to structure jobs.
In practice, however, performing those jobs can cause problems, foremost among them the extreme monotony of highly
specialized tasks.
A worker numbed by boredom and monotony may be less motivated to work hard and more inclined to do poor-quality work
or to complain about the job. For these reasons, managers began to search for job design alternatives to specialization.
B. Basic Alternative to Job Specialization
Managers initially developed two alternative approaches, job rotation and job enlargement. These approaches, along with job
enrichment, remain common today.
1. Job Rotation
Job rotation involves systematically shifting workers from one job to another to sustain their motivation and interest.
Job rotation does not entirely address long-term issues of monotony and boredom and may decrease efficiency.
At the same time, job rotation is an effective training technique because a worker rotated through a variety of related jobs
acquires a larger set of job skills. Thus, there is increased flexibility in transferring workers to new jobs.
Many U.S. firms now use job rotation for training or other purposes, but few rely on it to motivate workers.
2. Job Enlargement
Job enlargement, or horizontal job loading, is expanding a worker’s job to include tasks previously performed by other
workers.
The logic behind this change is that the increased number of tasks in each job reduces monotony and boredom.
Unfortunately, job enlargement also failed to have the desired effects. Generally, if the entire production sequence
consisted of simple, easy-to- master tasks, merely doing more of them did not significantly change the worker’s job.

3. Job Enrichment
Job rotation and job enlargement seemed promising but eventually disappointed managers seeking to counter the ill
effects of extreme specialization.
Job enrichment is based on the two-factor theory of motivation, which is discussed in Chapter 5. That theory contends
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.
AT&T, Texas Instruments, IBM, and General Foods have all used job enrichment successfully. However, some
companies have found job enrichment to be cost ineffective, and others believe that it simply did not produce the
expected results.
Some of the criticism is associated with flaws in the two-factor theory of motivation on which job enrichment is based.
Because of these and other problems, job enrichment is not as popular as it was a few years ago.
C. The Job Characteristics Theory
The job characteristics theory uses five motivational properties of tasks and three critical psychological states to improve
outcomes.
The theory, diagrammed in Figure 6.2 and developed by Hackman and Oldham, focuses on the specific motivational
properties of jobs.
At the core of the theory is the idea of critical psychological states. These states 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: the degree to which the individual experiences the job as generally meaningful,
valuable, and worthwhile
2. Experienced responsibility for work outcomes: the degree to which individuals feel personally accountable and
responsible for the results of their work

3. Knowledge of results: the degree to which individuals continuously understand how effectively they are performing the
job
If employees experience these states at a sufficiently high level, they are likely to feel good about themselves and to respond
favorably to their jobs.
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: the degree to which the job requires a variety of activities that involve different skills and talents
2. Task identity: the degree to which the job requires completion of a “whole” and an identifiable piece of work; that is, the
extent to which a job has a beginning and an end with a tangible outcome
3. Task significance: the degree to which the job affects the lives or work of other people, both in the immediate
organization and in the external environment
4. Autonomy: the degree to which the job allows the individual substantial freedom, independence, and discretion to
schedule the work and determine the procedures for carrying it out
5. Feedback: the degree to which the job activities give the individual direct and clear information about the effectiveness
of his or her performance
Five job characteristics, operating through the critical psychological states, affect 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 in the theory have also come to light.
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, so managers usually tailor them to their own particular circumstances.
II. EMPLOYEE PARTICIPATION AND INVOLVEMENT
Employee motivation can also be enhanced in some cases through the use of participation and empowerment. In a sense,
participation and empowerment are extensions of job design because each fundamentally alters how employees in an
organization 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.
Thus, empowerment is a somewhat broader concept that promotes participation in a wide variety of areas, including but not
limited to work itself, work context, and work environment.
The role of participation and empowerment in motivation can be expressed in terms of both the need-based perspectives and the
expectancy theory discussed in Chapter 5. By participating in decision making, employees may better understand the linkage
(instrumentality) between their performance and the rewards they want most.
A. Areas of Employee Participation
Based on their own expertise and experience with their tasks, workers might be able to improve their own productivity.
It might also help to let workers make decisions about administrative matters, such as work schedules.
Furthermore, employees are getting increasing opportunities to participate in broader issues of product quality. Involvement
of this type has become a hallmark of successful Japanese and other international firms, and many U.S. companies have
followed suit.
B. Approaches to Participation and Empowerment
The basic motive has been to better capitalize 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 some firms use to empower their workers is the use of work teams. This method grew out of early attempts to
use 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, organize, direct, and control their own work.
The other method some organizations use to facilitate employee involvement is to change their overall method of organizing.
The basic pattern is for an organization to eliminate layers from its hierarchy, thereby becoming much more decentralized.
Power, responsibility, and authority are delegated as far down the organization as possible, so control of work is squarely in
the hands of those who actually do it.
Technology also helps organizations empower workers by making better and timelier information available to everyone in
the organization. Increased responsibility does not motivate everyone. Nonetheless, empowerment can be an important
management tool to increase the motivation of many employees.
Practical ways to empower others include:
• Articulating a clear vision and goals
• Fostering personal mastery experiences to enhance self-efficacy and build skills
• Modeling successful behaviors
• Sending positive messages and arousing positive emotions in employees
• Connecting employees with the outcomes of their work and giving them feedback
• Building employee confidence by showing competence, honesty, and fairness
Regardless of the specific technique used, however, empowerment only enhances organizational effectiveness if certain
conditions exist.
First, the organization must be sincere in its efforts to spread power and autonomy to lower levels of the organization.
Second, the organization must be committed to maintaining participation and empowerment.
Third, the organization must be systematic and patient in its efforts to empower workers.
Finally, the organization must be prepared to increase its commitment to training.

B. Types of Rewards
Most organizations use several different types of rewards. The most common are base pay (wages or salary), incentive
systems, benefits, perquisites, and awards. These rewards are combined to create an individual’s compensation package.
1. Base Pay
For most people, the most important reward for work is the pay they receive. Pay is very important to an organization for
a variety of reasons.
For one thing, an effectively planned and managed pay system can improve motivation and performance.
For another, employee compensation is a major cost of doing business—well over 50 percent in many organizations—so
a poorly designed system can be an expensive proposition.
Finally, since pay is considered a major source of employee dissatisfaction, a poorly designed system can result in
problems in other areas such as turnover and low morale.
2. Incentive Systems
Incentive systems are plans in which employees can earn additional compensation in return for certain types of
performance.
Examples of incentive programs include the following:
a. Piecework programs, which tie a worker’s earnings to the number of units produced
b. Gain-sharing programs, which grant additional earnings to employees or workgroups for cost-reduction ideas
c. Bonus systems, which provide managers with lump-sum payments from a special fund based on the financial
performance of the organization or a unit
d. Long-term compensation, which gives managers additional income based on stock price performance, earnings
per share, or return on equity
e. Merit pay plans, which base pay raises on the employee’s performance
f. Profit-sharing plans, which distribute a portion of the firm’s profits to all employees at a predetermined rate
g. Employee stock option plans, which set aside stock in the company for employees to purchase at a reduced rate

Plans oriented mainly toward individual employees may cause increased competition for the rewards and some possibly disruptive
behaviors. A group incentive plan, on the other hand, requires that employees trust one another and work together.
Long-term compensation for executives is particularly controversial because of the large sums of money involved and the basis for
the payments.
When a firm is growing rapidly and its profits are also growing rapidly, relatively few objections can be raised to paying the CEO
well. However, objections arise when an organization is laying off workers, its financial performance is perhaps less than might be
expected, and the CEO is still earning a huge amount of money.
3. Indirect Compensation
Another major component of the compensation package is indirect compensation, also commonly referred to as the
employee benefits plan.
Benefits are rewards and incentives provided to employees in addition to their wages or salaries.
Typical benefits provided by businesses include the following:

a. Payment for time not worked, both on and off the job. On-the-job free time includes lunch and breaks. Off-the-
job time includes vacation and sick leave.
b. Social Security contributions, the employer contributes half the money paid into the system, the employee pays
the other half.
c. Unemployment compensation, for those who have lost their jobs get a percentage of their wages from an
insurance-like program.
d. Disability and workers’ compensation benefits, employers contribute funds to help workers unable to work due to
occupational injury or ailment.
e. Life and health insurance programs, most organizations offer insurance at a cost far below what individuals
would pay on their own.
f. Pension or retirement plans, most organizations offer plans to provide supplementary income to employees after
they retire.
A company’s Social Security, unemployment, and workers’ unemployment compensation contributions are set by law.
But deciding how much to contribute for other kinds of benefits is up to each company.

4. Perquisites
Perquisites are special privileges awarded to selected members of an organization, usually top managers.
In the United States, the Internal Revenue Service has ruled that some “perks” constitute a form of income and thus can
be taxed.
Today, however, many perks tend to be more job-related. More than anything else, though, perquisites seem to add to
the status of their recipients and thus may increase job satisfaction and reduce turnover.
5. Awards
At many companies, employees receive awards for everything from seniority to perfect attendance, from zero defects
(quality work) to cost reduction suggestions.
Award programs can be costly in the time required to run them and in money if cash awards are given, but award systems
can improve performance under the right conditions.
C. Related Issues in Rewarding Performance
Much of our discussion on reward systems has focused on general issues. As Table 6.1 shows, however, the organization
must address other issues when developing organizational reward systems.
The organization must consider its ability to pay employees at certain levels, economic and labor market conditions, and the
impact of the pay system on organizational financial performance.
In addition, the organization must consider the relationship between performance and rewards as well as the issues of reward
system flexibility, employee participation in the reward system, pay secrecy, and expatriate compensation
1. Linking Performance and Rewards
For managers to take full advantage of the symbolic value of pay, there must be a perception on the part of employees
that their rewards are linked to their performance.
Organizations must ensure that pay differences are based strictly on performance (including seniority), and not on factors
that do not relate to performance (such as gender, ethnicity, or other discriminatory factors).

Because it is really quite difficult to differentiate among all the employees, most firms use some basic compensation level
for everyone.
They might also work to provide reasonable incentives and other inducements for high performers while making sure that
they don’t ignore the average employees.
The key fact for managers to remember is simply that if they expect rewards to motivate performance, employees must
see a clear, direct link between their own job-related behaviors and the attainment of those rewards.
2. Flexible Reward Systems
Flexible, or cafeteria-style, reward systems are a recent and increasingly popular variation on the standard compensation
system.
A flexible reward system allows employees, within specified ranges, to choose the combination of benefits that best suits
their needs.
Some organizations are starting to apply the flexible approach to pay. Obviously, the administrative costs of providing a
flexible pay system are greater, many employees value this flexibility and may develop strong loyalty and attachment to
an employer who offers flexible compensation packages.
3. Participative Pay Systems
A participative pay system may involve the employee in the system’s design, administration, or both.
Employee participation in administering the pay system is a natural extension of having employees participate in its
design.
4. Pay Secrecy
When a company has a policy of open salary information, the exact salary amounts for employees are public knowledge.
State governments, for instance, make public the salaries of everyone on their payrolls.
A policy of complete secrecy means that no information is available to employees regarding other employees’ salaries,
average or percentage raises, or salary ranges.

Although a few organizations have completely public or completely secret systems, most have systems somewhere in the
middle.
5. Expatriate Compensation
Expatriate compensation is yet another important issue in managing reward systems. Developing rewards for expatriates
is a complicated process.
The approach to expatriate compensation shows how a U.S. employee currently uses her or his salary—part of it goes for
taxes, part is saved, and the rest is consumed.
As shown on the right side of the figure, the individual’s compensation package will potentially consist of six
components.
First, the individual will receive income to cover what his or her taxes and Social Security payments in the United States
will be.
Next, the firm also pays an amount adequate to the employee’s current consumption levels in the United States.
Finally, if the employee faces a hardship because of the assignment, an additional foreign service premium or hardship
allowance is added by the firm.

PART THREE – SOCIAL AND GROUP PROCESSES IN ORGANIZATIONS
CHAPTER SEVEN – Groups and Teams
Chapter Overview
In Chapter 1 we noted the pervasiveness of human behavior in organizations and the importance of interactions among people as
critical to achieving important outcomes for organizations. Indeed, a great deal of all managerial work involves interacting with other
people, both directly and indirectly and both inside and outside the organization. Moreover, much of the work in organizations is
accomplished by people working together in groups and teams. This chapter is the first of four that deal primarily with interpersonal
processes in organizations. The opening pages to this part again present the organizing framework for this book we developed back in
Chapter 1. This will enable you to better understand where we are in our discussion and what lies ahead.
We begin in this chapter by discussing groups and teams in organizations. In the next three chapters in this part we focus on decision
making and problem solving (Chapter 8), interpersonal communication (Chapter 9), and conflict and negotiation (Chapter 10).
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 organizations.
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. Identify the primary benefits and costs of teams, how managers can promote effective team performance, and important team
competencies.
5. Describe emerging team opportunities and challenges related to virtual teams and diversity and multicultural teams.

Chapter Outline
I. TYPES OF GROUPS AND TEAMS
There are literally hundreds of definitions of the term group.

We 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. Coworkers may work side by side on related tasks—but if they do not interact, they are not a
group.
We should also note that groups and teams are not necessarily the same thing. All teams are groups, but not all groups are teams.
We will define teams 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.
A. Workgroups
Workgroups are formal groups established by the organization to do its work. Workgroups include command (or functional)
groups and affinity groups (as well as teams).
A command group is relatively permanent and is characterized by functional reporting relationships such as having both a
group manager and those who report to the manager. Command groups are usually included in the organization chart.
Affinity groups are relatively permanent collections of employees from the same level in the organization who meet on a
regular basis to share information, capture emerging opportunities, and solve problems.
In business organizations, most employees work in command groups, with the size, shape, and organization of the group can
vary considerably. The customer service department is an example.

Affinity groups are a special type of formal group: They are set up by the organization, yet they are not really part of the
formal organization structure. They are not really command groups because they are not part of the organizational hierarchy,
yet they are not task groups because they stay in existence longer than any one task.
The members of affinity groups usually have very similar job titles and similar duties but are in different divisions or
departments within the organization.
The greatest benefits of affinity groups are that they cross existing boundaries of the organization and facilitate better
communication among diverse departments and divisions throughout the organization.
Groups focusing on Chinese culture, or gender issues are examples, or even a book club.
B. Teams
Organizations also use a wide variety of different types of teams. The most common types of teams are summarized in Table
7.1. Each type of team is composed of different members and responsible for different types of tasks.
The members of functional teams come from the same department or functional area. A team of marketing employees and a
team of finance employees are examples of functional teams.
Cross-functional teams have members from different departments or functional areas. This is one of the most common types
of work teams.
An example of a cross-functional team is a top management team with members representing different functions or units of
the organization. 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
organization. Team diversity must be managed in a cross-functional team.
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.

Self-directed teams set their own goals and pursue them in ways decided by the team.
Self-directed teams can improve commitment, quality, and efficiency. Cross-trained team members also help to increase the
flexibility of the team during staffing shortages. Self-directed teams are difficult to implement, however, as they require
specific self-management and team skills that many employees lack.
Venture teams are teams that operate semi-autonomously to create and develop new products (product development teams),
processes (process design teams), or businesses (venture teams).
Separating a team from the formal structure of the rest of the organization can enhance its innovativeness and speed up cycle
time.
Virtual teams are teams of geographically and/or organizationally dispersed coworkers who communicate using the Internet
and other information technologies. You will learn more about virtual teams later in this chapter.
Global teams have members from different countries. Global teams can be virtual or meet face-to-face.
C. Informal Groups
Whereas formal groups and teams are established by an organization, 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 organized around a common activity or interest, although friendships may develop among members.
Good examples of interest groups are the networks of working women that have developed over the last few decades. Many
of these groups began as informal social gatherings but soon developed into interest groups. These groups may be partly
responsible for the dramatic increase in the percentage of women in managerial and administrative jobs.
II. 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).
The five basic group performance factors are composition, size, norms, cohesiveness, and informal leadership.

A. Group Composition
The composition of a group plays an important role in determining group productivity.

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, such as in age,
work experience, education, technical specialty, or cultural background. In heterogeneous groups, the members differ in one
or more ways that are critical to the work of the group.
Groups with members of different ages and experiences with the group tend to experience frequent changes in membership.
A homogeneous group is likely to be more productive when the group task is simple, cooperation is necessary, the group
tasks are sequential, or quick action is required.
A heterogeneous group is more likely to be productive when the task is complex, requires a collective effort, demands
creativity, and when speed is less important than thorough deliberations.
A homogeneous group tends to have less conflict, fewer differences of opinion, smoother communication, and more
interactions. With a heterogeneous group, more discussion and more conflict are likely, both of which can enhance the
group’s decision making.
Group composition becomes especially important as organizations become increasingly more culturally diverse.
In general, a manager in charge of a culturally diverse group can expect several things. At first, members will probably
distrust one another. Stereotyping will present a problem, and communication problems will almost certainly arise.
Managers may therefore need to spend more time helping a culturally diverse group through the rough spots as it matures,
and they should allow a longer-than-normal time before expecting it to carry out its assigned task.
B. 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 formalized 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.
C. Group Norms
A norm is a standard against which the appropriateness of a behavior 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 organizational 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.
Norms serve four purposes in organizations. First, they help the group survive. Second, they simplify and make more
predictable the behaviors 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.
D. 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 7.1, group cohesiveness is related to many aspects of group dynamics: maturity, homogeneity,
manageable size, and frequency of interactions.

The figure also shows that group cohesiveness can be increased by competition or by the presence of an external threat.
Either factor can focus members’ attention on a clearly defined goal and increase their willingness to work together.
Finally, successfully reaching goals often increases the cohesiveness of a group because people are proud to be identified
with a winner and to be thought of as competent and successful.
Highly cohesive groups appear to be more effective at achieving their goals than groups that are low in cohesiveness,
especially in research and development groups in U.S. companies. However, highly cohesive groups will not necessarily be
more productive in an organizational sense than groups with low cohesiveness.
If a highly cohesive group has the goal of contributing to the good of the organization, it is very likely to be productive in
organizational terms.
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.
Finally, there is emerging evidence that the emotional intelligence of group members can promote cohesiveness. In this
context emotional intelligence 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.
E. Informal Leadership
The final group performance factor is informal leadership.
Most functional groups and teams have a formal leader—that is, one appointed by the organization or chosen or elected by
the members of the group.
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
recognized.
The formal and the informal leader in any group or team may be the same person, or they may be different people.

Is informal leadership desirable? In many cases informal leaders are quite powerful because they draw from referent or
expert power. When they are working in the best interests of the organization, they can be a tremendous asset. However,
when informal leaders work counter to the goals of the organization, they can cause significant difficulties.
III. CREATING NEW GROUPS AND TEAMS
Managers frequently have the opportunity to create new groups and teams. In general, 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.
A. Stages of Group and Team Development
Traditional research on small groups has focused on a four-stage development process: (1) mutual acceptance, (2)
communication and decision making, (3) motivation and productivity, and (4) control and organization.
The stages and the activities that typify them are shown in Figure 7.3.
1. Mutual Acceptance
In the mutual acceptance stage of group development (also called the forming stage), the group forms, and members get
to know one another by sharing information about themselves.
This stage may be brief, but it is unlikely to be skipped altogether.
As the members get to know one another, discussion may turn to more sensitive issues, such as the organization’s politics
or recent controversial decisions. From the discussion, members come to understand how similar their beliefs and values
are and the extent to which they can trust one another.
Eventually, the conversation turns to the business of the group. When this discussion becomes serious, the group is
moving to the next stage of development: communication and decision making.
2. Communication and Decision Making
The group progresses to the communication and decision-making stage (also called storming stage).
In this stage, members discuss their feelings and opinions more openly, which can increase conflict.

The membership usually begins to develop norms of behavior during this stage. Members discuss and eventually agree
on the group’s goals. Then they are assigned roles and tasks to accomplish the goals.
3. Motivation and Productivity
In the next stage, motivation and productivity (also called the norming stage), the emphasis shifts away from personal
concerns and viewpoints to 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 toward the final stage of development.
4. Control and Organization
In the final stage, control and organization (also called the performing stage), the group works effectively toward
accomplishing its goals.
In a mature group, the members’ activities are relatively spontaneous and flexible rather than subject to rigid structural
restraints. Mature groups evaluate their activities and potential outcomes and take corrective actions if necessary. The
characteristics of flexibility, spontaneity, and self-correction are very important if the group is to remain productive over
an extended period.
Not all groups, however, go through all four stages. Some groups disband before reaching the final stage. Others fail to
complete a stage before moving on to the next one.
Group productivity depends on successful development at each stage. A group that evolves fully through the four stages of
development usually becomes a mature, effective group. The process does not take a long time if the group makes a good,
solid effort and pays attention to the processes.
Finally, as working conditions and relationships change, either through a change in membership or when a task is completed
and a new task is begun, groups may need to re-experience one or more of the stages of development to maintain the
cohesiveness and productivity characteristic of a well-developed group.
Although these stages are not separate and distinct in all groups, many groups make fairly predictable transitions in activities
at about the midpoint of the period available to complete a task.

The midpoint transition is often accompanied by a burst of concentrated activity, reexamination 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.
B. 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.
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. Some of these relate closely to the group
performance factors noted earlier, while others extend beyond those factors.
One useful technique for promoting process gain is to develop and promote team efficacy. Team efficacy is a team’s shared
belief that it can organize and execute the behaviors necessary to reach its goals.
Team efficacy is strongly related to team performance, particularly when team interdependence is high.
Members of a highly cohesive team are motivated to stay in the team, contribute as much as they can, and conform to team
norms. Therefore, managers of new groups and teams should strive to promote cohesiveness.
Managers should also try to build trust among team members. Trust is our confidence that other people will honor their
commitments, especially when it is difficult to monitor or observe the other people’s behavior.
Managers should also try to prevent social loafing. Indeed, social loafing is a primary cause of process loss. Social loafing is
less common with very important tasks, and with smaller teams.
An opposite behavior occurs when people actually work harder and are more motivated when others are present than when
they are working alone.

Social facilitation happens when people are motivated to look good to others and want to maintain a positive self-image. It
happens when people are working alone, but in the presence of an audience.
Keeping 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. Letting team members choose which tasks
they will be responsible for can also increase their motivation for getting them done.
In addition, managers should establish clear roles. Roles define the behaviors 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 internalized the norm
and believe it is the appropriate way to behave.
When possible, managers should create shared team goals and provide feedback. If performance is lagging, feedback helps
the team quickly adjust its behavior and processes to reach its goals.
Team rewards also motivate effective teamwork behaviors. Tying team rewards to team performance motivates team
members to pursue team goals rather than individual goals.
C. The Implementation Process
Implementing teams across an organization is not easy; it takes a lot of hard work, time, training, and patience. Changing
from a traditional organizational structure to a team-based structure is a major organizational change and calls for a complete
cultural change for the organization.
However, many organizations need to be able to react quickly to a dynamic environment.
In this section we present several essential elements peculiar to an organizational change to a team-based situation. This
process is shown in Figure 7.4.
1. Phase 1: Start-Up

In phase 1, 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 for moving to a team-based organization, 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
difference is that the new teams manage themselves.
Performance by teams increases at start-up because of this initial enthusiasm for the change.
2. Phase 2: Reality and Unrest
After perhaps six to nine months, team members and managers report frustration and confusion about the ambiguities of
the new situation. For employees, unfamiliar tasks, more responsibility, and worry about job security replace hope for the
opportunities presented by the new approach.
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 behaviors that do occur.
Some managers make the mistake of staying completely away from the newly formed teams, thinking that the whole idea
is to let teams manage themselves. In reality, managers need to be visible.
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.
3. Phase 3: Leader-Centered 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—because development of and reliance
on one internal leader is a move away from focusing on the old hierarchy and traditional lines of authority.

The design and steering committees need to be sure that two things happen during this phase. First, they need to
encourage the rise of strong internal team leaders. The new leaders can either be company appointed or team appointed.
The second important issue for this phase is to help each team develop its own sense of identity.
Finally, as team identity develops, teams develop social activities and display T-shirts, team names, logos, and other
items that show off their identity. All of these are a sure sign that the team is moving into phase 4.
4. Phase 4: Tightly Formed Teams
In the fourth phase of team implementation, teams become tightly formed to the point that their internal focus can
become detrimental to other teams and to the organization as a whole.
To avoid the dangers of the intense team loyalty and isolation inherent in phase 4, managers need to make sure that teams
continue to do the things that have enabled them to prosper thus far.
First, teams need to keep the communication channels with other teams open through councils of rotating team
representatives who meet regularly to discuss what works and what does not; teams who communicate and cooperate
with other teams should be rewarded.
Second, management needs to 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.
5. Phase 5: Self-Managing Teams
Phase 5 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 counseling for teams.
Probably most important, mature teams are flexible—taking on new ideas for improvement; making changes as needed to
membership, roles, and tasks; and doing whatever it takes to meet the strategic objectives of the organization.

Although the teams are mature and functioning quite well, several things need to be done to keep them on track.
First and foremost, individuals and teams need to continue their training in job skills and team and interpersonal skills.
Second, support systems need to be constantly improved to facilitate team development and productivity.
Third, teams always need to improve their internal customer and supplier relationships within the organization.
IV. MANAGING TEAMS
The ongoing management of teams requires additional insights. These include understanding the benefits and costs of teams,
promoting effective performance in teams, and identifying and developing teamwork competencies.
A. Understanding Benefits and Costs of Teams
The reason for a company to create teams should be that teams make sense for that particular organization.
The best reason to start teams in any organization is to achieve the positive benefits that can result from a team-based
environment: enhanced performance, employee benefits, reduced costs, and organizational enhancements.
Four categories of benefits and some examples are shown in Table 7.2.
1. Enhanced Performance
Enhanced performance can come in many forms, including 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. Such enhancements result from pooling of individual efforts in new ways and
from continuously striving to improve for the benefit of the team.
2. Reduced Costs
As empowered teams reduce scrap, make fewer errors, file fewer worker compensation claims, and reduce absenteeism
and turnover, organizations based on teams are showing significant cost reductions.
3. Other Organizational Benefits

Other improvements in organizations 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 organizations.
In addition, the team environment constantly challenges teams to innovate and solve problems creatively.
With increasing global competition, organizations must constantly adapt to keep abreast of changes. Teams provide the
flexibility to react quickly.
4. Employee Benefits
Employees tend to benefit as much as organizations in a team environment. Teams can provide the sense of self-control,
human dignity, identification with work, and sense of self-worth and self-fulfillment 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.
5. Costs of Teams
The costs of teams are usually expressed in terms of the difficulty of changing to a team-based organization.
Some managers have felt as if they were working themselves out of a job as they turned over more and more of their
directing duties to a team.
Employees may also feel like losers during the change to a team culture.
Another cost associated with teams is the slowness of the process of full team development. Productivity may fall
before the positive effects of the new team system kick in.
Probably the most dangerous cost is premature abandonment of the change to a team-based organization. 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 organization.

B. Promoting Effective Performance
This chapter has described the many benefits of teams and the process of changing to a team-based organization. In this
section we discuss three essential issues that cannot be overlooked when moving to a team-based organization.
1. Top-Management Support
Change starts at the top in every successful team implementation. Top management has three important roles to play.
First, top management must decide to go to a team-based organization for sound business performance–related reasons.
Second, top management is instrumental in communicating the reasons for the change to the rest of the organization.
Third, top management has to support the change effort during the difficult periods.
2. Understanding Time Frames
Organizations often expect too much too soon when they implement teams. In fact, things often get worse before they
get better.
Figure 7.5 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.
Organizations changing to a team-based arrangement need to recognize the time and effort involved in making such a
change.
3. Changing Organizational Rewards
How employees are rewarded is vital to the long-term success of an organization. The traditional reward and
compensation systems suitable for individual motivation are simply not appropriate in a team-based organization.
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.

Three types of reward systems are common in a team environment: skill-based pay, gain-sharing systems, and team
bonus plans.
a. Skill-Based Pay: Skill-based pay systems require team members to acquire a set of core skills plus additional
special skills, depending on career tracks or team needs. Usually employees can increase their base pay by some
fixed amount, say $0.50 per hour for each additional skill acquired, up to a fixed maximum.
b. Gain-Sharing Systems: These plans reward all team members from all teams based on the performance of the
organization, division, or plant. Such a system requires employees receiving amount exceeding their base pay.
Employees may be receptive to the plan if there are ‘gains’ to share but become disillusioned if they receive no
additional pay.
c. Team Bonus Plans: These plans are similar to gain-sharing plans except the unit of performance and pay is the
team rather than a plant, a division, or the entire organization. Each team has specific performance targets or
baseline measures that the team considers realistic for the plan to be effective.
Changes in an organizational compensation system can be traumatic and threatening to most employees. However,
matching the reward system to the way that work is organized and accomplished can have very positive benefits.
C. 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 you should look for are:
a. Conflict resolution abilities
b. Collaborative problem-solving abilities
c. Communication abilities
d. Goal-setting and self-management abilities
e. Planning and task coordination abilities
Teamwork competencies also include an understanding of ethical behavior in teams. Other people’s ethical behavior
influences our own ethical behavior.
Four ethical issues are especially important in teams:
a. How do teams fairly distribute work?

b. How do teams assign blame and award credit?
c. How do teams ensure participation, resolve conflict, and make decisions?
d. 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
behavior and improve team performance and team member satisfaction.
V. EMERGING TEAM OPPORTUNITIES AND CHALLENGES
As teams become increasingly common in organizations, two additional sets of opportunities and challenges must be addressed.
These involve virtual teams and diversity & multicultural teams.
A. Virtual Teams
Managing virtual teams can be difficult. Virtual team members are frequently separated by both geographic space and time,
increasing the challenges of working together effectively
Virtual teams allow organizations to access the most qualified individuals for a particular job regardless of their location,
enable organizations to respond faster to increased competition, and provide greater flexibility to individuals working from
home or on the road.
In some cases, some members of the team may be free agents or alliance partners and not be employees of the organization.
In some teams, members may never even meet face-to-face.
Many virtual teams operate within a particular organization, but increasingly they cross organizational boundaries as well.
1. Virtual Team Leadership Skills

Working from different locations introduces challenges with communication, collaboration, and the integration of the
team members with the rest of the team and the broader organization.
One of the most important things a virtual team leader can do is to establish a communication climate that is
characterized by openness, trust, support, mutual respect, and risk taking.
This helps the team establish positive working relationships, share information openly, reduce the formation of in-groups
and out-groups, and avoid misinterpreting communications.
One expert identified five categories of important leadership skills in virtual project team or distance management
situations:
a. Communicating effectively and matching technology to the situation
b. Building community among team members based on mutual trust, respect, affiliation, and fairness
c. Establishing a clear and motivating shared vision, team purpose, goals, and expectations
d. Leading by example and focusing on measurable results
e. Coordinating and collaborating across organizational boundaries
2. Leader Behaviors
The lack of face-to-face contact with virtual team members makes it difficult for leaders to monitor team member
performance and to implement solutions to work problems.
It is also difficult for virtual team leaders to perform typical mentoring, coaching, and development functions.
The challenge for virtual team leaders is that these tasks must be accomplished by empowering the team to perform these
functions itself without the leader being physically present.
For example, members of virtual teams are expected to have the technical knowledge, skills, abilities, and other attributes
to be able to contribute to team effectiveness and to operate effectively in a virtual environment.
Thus, the need for virtual team leaders to monitor or develop team members may not be as crucial and they can often
distribute aspects of these functions to the team itself.
Virtual 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.

Virtual team leaders need to develop team processes that become the way the team naturally behaves. One-way virtual
team leaders can do this is by developing appropriate routines and procedures early on in the team’s lifecycle.
Virtual team leaders may need to develop standard operating procedures that specify appropriate and inappropriate
computer-mediated communication.
Because virtual team members are more detached from the overall team environment, it is also important for leaders to
monitor the environment and inform team members of any important changes.
3. Groupware and Group Decision Support Systems
Synchronous and asynchronous information technologies support members of virtual teams.

Synchronous technologies such as videoconferencing, instant messaging, electronic meetings, and even conference calls
allow real-time communication and interaction.
Asynchronous technologies such as e-mail, wikis, and some electronic meetings delay the communication of the
message.
Meeting management software, electronic whiteboards, and collaborative document editors facilitate meetings by
allowing team members to contribute ideas, to view other people’s ideas anonymously, and to comment and vote on
them.
The right technology is critical to making virtual teams work. Collaboration software connects virtual teams with
members in locations around the world and helps structure the meeting process.
B. Diversity and Multicultural Teams
Diversity can both help and hinder team effectiveness.
Diversity can be a source of creativity and innovation that can create a competitive advantage and improve a team’s decision
making.
Despite its potential for improving team performance, diversity can be a two-edged sword.

Diversity can create misunderstandings and conflict that can lead to absenteeism, poor quality, low morale, and loss of
competitiveness as well as lowered workgroup cohesiveness.
Informational diversity, or diversity in knowledge and experience, has a positive impact on team performance.
Because team members’ unique knowledge enlarges the team’s knowledge resources and can enhance the options it is able to
consider, it can enhance creativity and problem solving.
Demographic diversity, on the other hand, often has a negative impact on performance.
Team conflict tends to increase and teams tend to perform lower as they become more demographically diverse.
Effectively managing diversity in teams has as much to do with the attitudes of team members toward diversity as it does
with the diversity of the team itself.
It is easy to assume that challenges in multicultural teams are just due to differing communication styles, but differing
attitudes toward hierarchy and authority and conflicting norms for decision making can also create barriers to a multicultural
team’s ultimate success.
1. Direct versus Indirect Communication
Communication in Western cultures is typically direct and explicit, and a listener does not have to know much about the
context or the speaker to interpret it.
In many other cultures, meaning is embedded in the way the message is presented.
In cross-cultural settings, the non-Westerner can easily understand the direct communications of the Westerner, but the
Westerner often has difficulty understanding the indirect communications of the non-Westerner.
Communication challenges create barriers to effective teamwork by reducing information sharing, creating interpersonal
conflict, or both. Familiarize yourself with the communication patterns and norms of any other cultures with which you
will be interacting.
2. Differing Attitudes toward Hierarchy and Authority

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 organization are often uncomfortable on flat teams.
For example, in multicultural teams, engineers from the culture in India are typically not culturally comfortable arguing
with the team leader or with older people. This decreases the ability of the team to secure everyone’s input.
3. Conflicting Decision-Making Norms
Cultures differ substantially when it comes to how quickly decisions should be made and how much analysis is required.
Compared with managers from other countries, U.S. managers like to make decisions very quickly and with relatively
little analysis.

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BME 12: Organizational Behavior

Quick Review Guide (from the reference textbook)

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CHAPTER ONE – An Overview of Organizational Behavior

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A. The Meaning of Organizational Behavior

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CHAPTER TWO – The Changing Environment of Organizations

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Surface-level diversity refers to observable differences in people, including race, age,

Table 2.1 summarizes these five types of diversity.

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• The population is projected to become older.

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Age-based diversity is a major issue facing many organizations today.

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V. ETHICS AND CORPORATE GOVERNANCE

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VI. NEW EMPLOYMENT RELATIONSHIPS

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CHAPTER THREE – Individual Characteristics

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II. Personality and Individual Behavior

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III. Other Important Personality Traits

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Machiavellianism is another important personality trait.

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• Visual: learning by seeing

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CHAPTER FOUR – Individual Values, Perceptions, and Reactions

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Values can be described as terminal or instrumental, and as intrinsic or extrinsic.

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III. PERCEPTION IN ORGANIZATIONS