Unit:3

Organizational Behaviour
Organizational Behaviour:
 Introduction,
 Meaning,
 History of Organisational Behaviour
 Organisational effectiveness
 Organisational learning process
 Stakeholders
 Contemporary Challenges for Organisations.

Introduction:
ORGANISATION: An organization is a group of people working together in a formally
organized way to achieve a common objective. The main objective is profit maximization.
BEHAVIOUR: It is how a person behaves. It is an observable and measurable activity of
human being.
Introduction to OB Organisational Behaviour tries to understand human behaviour in the
organization. OB is a part of total management but plays a very important role in every area
of management and has been accepted by all the people concerned. The mangers now
understand that to make their organization more effective, they have to understand and
predict the human behaviour in the organization.
Definitions of OB According to Stephen P Robbins - “Organisational behaviour is a field
of study that investigates the impact that individuals, groups and structure have on
behaviours within the organizations for the purpose of applying such knowledge towards
improving an organizations effectiveness”.
According to Fred Luthans - “Organisational behaviour is directly concerned with the
understanding production and control of human behaviour in organization”.
According to Raman J Aldag – “Organisational behaviour is a branch of the social sciences
that seeks to build theories that can be applied to predicting, understanding and controlling
behaviour in work organizations”.
Meaning: By analyzing the above definitions, we can define OB as a behavioural Science
that states about : • Nature of Man • Nature of the Organization • Knowledge of human
would be useful in improving an organization’s effectiveness.
History:
Evolution of OB
 The great Greek philosopher PLATO had wrote about the “importance of
Leadership”. Great philosopher Aristotle had addressed the topic “Persuasive
Communication”. In 500 B.C Chinese philosopher Confucius had started
“Emphasizing ethics and leadership”.
  In 1776, Adam smith, economist in his book “Wealth of Nations” he propounded new
form of organizational structure based on “Division of labour and Work
specialization”.
 Robert Owen is an important name in the history of OB because he was one of the
first industrialists who argued for :-
• Regulated hours of work for all workers
• Child labour laws
• Public education
• Company supplied meals at work
• Business involvement in community projects.
 German Sociologist, Max Weber developed “a theory of authority structures and
described organizational activity based on authority structures”.

 Soon after Max Weber, F W Taylor introduced a “systematic use of goal setting and
rewards to motivate employees” and als0o defining clear guidelines for improving
production efficiency by his one of the paper called “The Principles of Scientific
Management”.

 Henry Fayol, Real father of modern Management defined the universal functions that
all managers perform and the principles (14 principles of Management) that
constitute good management practices.

 In the late 1950’s people like Abraham Maslow, Douglas McGregor, David
McCellenad, Fred Fiedler, Herzberg, Freud Sigmund and other behavioural scientists
propounded many theories on employee behaviour.

Organizational effectiveness: It refers to how an organization has achieved full self-

awareness due in part to: Leaders setting well-defined goals for employees and
outlining ways to efficiently execute those goals. Management implementing clear
decision-making processes and communication pipelines.

Organizational effectiveness is defined as an extent to which an organization

achieves its predetermined objectives with the given amount of resources and means
without placing undue strain on its members
The various approaches to organizational effectiveness are

 Goal approach – The goal approach refers to optimal profit by offering the best
service that will lead to high productivity. The limitation of the goal approach is
that it is a bit difficult to identify the real goal and not the ideal goal
 System-resource approach – The system resource approach puts its onus on
the interdependency of processes that align the organization with its
environment. It takes the form of input-output transactions and includes human,
 economic and physical resources. The limitation of this approach is that
acquisition of resources from the environment becomes aligned with the goal of
the organization and thus it becomes quite similar to the goal-oriented approach

 Functional approach – The functional approach assumes that the organization

has already identified its goals, and now the focus should be upon attainment of
these goals and how to serve society. The limitation of this approach is that the
organization has the autonomy to take independent action for attaining its goals
and so why will it accept serving society as its ultimate goal.

Organizational learning: It is the process of creating, retaining, and transferring

knowledge within an organization. An organization improves over time as it gains
experience. From this experience, it is able to create knowledge. This knowledge is
broad, covering any topic that could better an organization.

The three types of organizational learning are as follows

1. Double-loop learning

This type of organization learning leads to a change in a theory which was in use till date.
The organization detects and corrects the error and then changes its entire strategies, values,
and assumptions that were till now governing its actions so that they can

2. Single-loop learning

This type of organizational learning is connected to error correction. Single-loop learning

includes a single feedback loop when an unexpected and undesired result leads to
modification in a strategy. create a better and productive environment.

3. Deutero learning

This type of organization learning deals with the process of the learning system to improve
the system itself. Deutero learning includes behavioral and structural components that
emphasize “learning how to learn.”

If an organization is interested in improving its learning processes, it must include all

the above The forms of organizational learning

The various forms of organizational learning are as follows-

1. Individual learning

In this form of learning an individual gains knowledge through formal training or

experience

2. Continuous Learning
In this type of learning, the organization provides development opportunities to its
employees through various programs

3. Learning through empowerment

In this type of learning, the teams can gather more information because of their increased
responsibilities

4. Embedded Systems Learning

In this type of learning, knowledge is gained directly from the various systems in the
organization like work-flow system, operational and process systems, learning management
systems, etc.

5. Learning from the leadership

In this type of learning, employees learn directly and indirectly from the action and
behavior of their leaders as they are their role models

6. Dialogue and Inquiry Learning

e three methods. In this type of learning, it is possible to gain knowledge through

conversations and dialogues.

7. Team Learning

In this type of learning the team has to undergo formal as well as informal learning to gain
knowledge

What Is a Stakeholder? A stakeholder is a party that has an interest in a company and can
either affect or be affected by the business. The primary stakeholders in a typical
corporation are its investors, employees, customers, and suppliers.

Types of stakeholders
Stakeholders can come from a variety of connections to the organization or project. The
most common types of stakeholders include the following:

 Customers usually expect organizations to deliver products of value.

 Employees are often project stakeholders, who want to contribute to a project that
is related to their job.
  Owners supply an organization's equity and capital and are responsible
for organizational goals.
 Investors are shareholders, who invest in organizations in exchange for financial
returns and often receive regular financial reporting on the companies they invest
in as well as voting power in major decisions.
 Creditors, such as banks and bondholders, lend money to an organization to be
paid back with interest.
 Suppliers are vendors that supply materials and products to organizations and
have an interest in their business and the projects they pursue.
 Communities have an interest in businesses being healthy, safe and beneficial to
local economies. Businesses create jobs and business for local communities.
Environment, sustainability and governance (ESG) are increasingly important
values for consumers and investors.
 Governments collect taxes from companies and their employees.
Internal vs. external stakeholders
Stakeholders are often categorized into the two main groups of internal stakeholders and
external stakeholders.

Internal stakeholders
Internal stakeholders are those within a company whose interest stems from direct
employment, ownership or investment. Internal stakeholders of a company or project can
include employees, project managers, boards of directors, donors and investors. These
individuals are often referred to as primary stakeholders, or key stakeholders, because they
have a direct stake and important role in the company's or project's success.

External stakeholders
External stakeholders are those outside of a company who are indirectly affected by its
decisions and outcomes. External stakeholders include customers, suppliers, government
agencies, creditors, labor unions and community groups. These entities are also referred to
as secondary stakeholders because their stake in the company or project is often more
representational than direct.

Examples of stakeholders
Stakeholders exist across industries. For example, in healthcare, stakeholders are those who
have a direct interest in healthcare services provided and the decisions made around them.
These include doctors, nurses and other medical professionals; hospitals, clinics and
healthcare providers; healthcare IT, medical equipment and other suppliers; governing
bodies; nonprofit organizations; and patients.

Another example is a stakeholder in a legal process. There, a stakeholder is an individual or

group in temporary possession of money or property while the owner is being determined in
court.

In a project setting, the stakeholders are people who have direct influence on whether a
project is successful. They include the following:

 customers, whose satisfaction with a product or project is the end goal of

a project plan;
 project managers, who manage and lead a project;
 project sponsors, who finance a project; and
 project team members, who are the employees executing a project.
Stakeholders vs. shareholders: What is the difference?
Shareholders are stakeholders who are financially invested in an organization. While
stakeholders are interested in a company's overall performance, shareholders have an added
interest in the company's stock performance or return on investment.

A shareholder's investment helps fund an organization and its activities. Depending on the
size of investment, shareholders can sometimes have more influence on an organization and
its projects than stakeholders. Investment can grant shareholders the right to regular
financial information about an organization and to participate in business decisions.

Diversity in the Workforce

Today's world is often described as a melting pot. The term melting pot is a metaphor used
to describe how various cultures and ethnicities have joined together in our society (just as a
melting pot blends different ingredients). Similar to you waking up in 2015 after a 30-year
nap, organizations also must adapt to the changes in society in order to remain functional.
One of the contemporary challenges that organizations face is diversity. It's a challenge
primarily because those organizations which are lacking a diverse workforce are viewed as
outdated, and in many circles, discriminatory.
The lack of diversity in the workplace also presents a challenge because it does not account
for the perspectives and opinions of others. A successful organization provides a diverse
workplace, that allows various opinions from different cultures and backgrounds, which
helps to breed new and inventive ideas. To combat the challenge of having a homogeneous
(similar) workforce, the following can be done:

 Interview diverse applicants.

  As part of the hiring process, target qualified minorities and make them aware of job
vacancies.
 Create partnerships and initiatives with key organizations designed to work with
minorities.

Outsourcing
Outsourcing can be defined as moving jobs out of an organization to another company or
party in an effort to lower costs, and save money. To better understand outsourcing, let's
assume that you are the owner of a manufacturing company. One of your primary duties is
to hire all of the employees of your business. After a thorough review, you have decided
that instead of hiring an in-house accountant, your business will outsource those duties to an
independent firm. That firm will now handle all of the accounting duties at a fraction of the
cost of performing the duties in-house.
Outsourcing also occurs internationally as well, with many organizations choosing to have
services performed overseas to save money. Outsourcing is a challenge for organizations,
because it is often perceived by many that it eliminates jobs from the U.S., which can
damage the economy. This public black-eye hurts the reputation of the organization. The
following can help organizations deal with the challenge of outsourcing:

 Investigate ways to lower costs in other areas in the organization.

 Look at ways to improve the current technology, eliminating the need to outsource.

1. Turnover

High turnover refers to an organizational issue where employees leave their companies
frequently and at high volumes. To compensate, an organization has to regularly hire new
people to fill those roles. This can take up company resources and cause delays in company
workflows. Some reasons for high turnover rates may include:

 Employees are discontent with management and their leadership officials.

 They feel dissatisfied with their work and do not find it fulfilling.
 Staff members are underpaid and want more compensation for their work.
 Employees don't believe their employer hears their voices, ideas and concerns.
 Team members don't see a path for growth within the company.

To overcome this challenge, it may help organizations if they reach out to their employees
and receive feedback from them. It's beneficial for managers to listen to their employees
concerns and seriously consider where they can change or improve. Taking actionable steps
to meet the concerns of your team members can help increase employee retention rates and
improve productivity.

2. Productivity

Productivity refers to the volume of work employees complete successfully and according
to schedule. Having high productivity means a company is meeting their production quotas,
business operations are on track and the business is fulfilling all orders on time. An
organization may suffer from productivity losses because:

 Teams are understaffed.

  Employees lose interest in the work or get distracted.
 Sudden structural and procedure changes can be jarring.
 Stress inducers like unrealistic deadlines and poor leadership can make working
challenging.

To combat this organizational issue, managers may benefit from hiring on additional staff
or provide employees with breaks so they can relieve stress. Slowly ease your team
members into upcoming changes so they can prepare accordingly and set deadlines that are
realistic and achievable.

Related: How To Use Organizational Behavior Management

3. Process management

Managers use process management to ensure that their team is following the best processes
for completing their work in an efficient and timely manner. The manager has to set the
rules and guidelines and decide what practices to maintain and identify which ones don't
add value. Poor process management can occur because:

 Managers establish processes that are convoluted and complicated.

 Company leadership isn't flexible and ignores feedback from employees.
 Managers lack an in-depth understanding of their team's work and what they need to
accomplish it.

To overcome process management problems, a manager should work closely with their
team, understand their needs and take steps to implement processes that allow them to do
their work simply and efficiently.

4. Role specification

Role specification means hiring the most qualified person for a job and assigning work to
the most appropriate employee. A lack of quality role specification can disrupt workflows,
reduce efficiency and decrease communication between team members. Role specification
issues can occur because:

 Managers may show biased behavior towards or against particular individuals.

 A hiring manager doesn't take the time to interview a candidate thoroughly.
 Leadership may not understand their team's capabilities and particular strengths.
 Nepotism can sometimes lead to an unqualified new hire.

To overcome this organizational challenge, it's important that managers learn about the
skills and interests of their team members so they can assign work to the most qualified
member or train members on how to succeed. It's also essential that managers conduct a
thorough hiring process for new candidates to hire people that suit company openings. They
may enlist the help of recruiters who are more adept at finding qualified candidates for
specific roles.
5. Customer satisfaction and relationships

One of the most important aspects of a successful organization is its relationship with its
customers. Satisfied customers contribute to increased revenue and consistent purchases as
a source of income. Customers may become unsatisfied with an organization due to poor
customer service or poor quality of a company or service.

A solution to customer satisfaction as an organizational issue could be to retrain employees

on how to provide the best customer service and engage with consumers through surveys,
social media and market studies.

Related: 7 Key Elements To Effective Customer Service

6. Innovation

Innovation is how companies develop new ideas and expand their products and services. An
organization that is innovative opens itself up to new opportunities, integrates updated
technology tools and becomes an industry leader. Organizations experience low innovation
and grow stagnant because:

 They have a company culture that stifles employee creativity.

 The company uses outdated business practices that don't facilitate innovation.

You can encourage innovation in your organization organizations by listening to the ideas
of your team members and creating a culture where they feel comfortable being able to
openly and freely express their ideas. It's also helpful to thoroughly analyze current business
practices and make necessary changes so new ideas and innovations can easily integrate
into the company's processes.

7. Teamwork

Teamwork involves employees working together to achieve a common goal. Effective

teamwork increases productivity, revenue and makes everyone's job easier to complete.
Teamwork within an organization can falter when:

 Team members have conflicting personality traits.

 Some individuals contribute more to projects than others.
 Managers show favoritism towards specific people.
 The organization has poor communication channels.

To resolve this organizational issue, try facilitating team meetings so everyone can share
their concerns and craft solutions. Avoid showing favoritism so everyone feels valued and
encouraged when they speak up about their ideas. You can also conduct individual meetings
with each team member to assess the best way to improve the team based on each person's
feedback. If there are conflicting personalities, it's important to have the involved parties
discuss their issues civilly so they can determine a way to work together peacefully.