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organizational behavior
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organizational behavior
MICHAEL A. HITT Texas A&M University
C. CHET MILLER University of Houston
ADRIENNE COLELLA Tulane University
third edition
John Wiley & Sons, Inc.
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To Aunt Jinny for all of the love and support you have given us over the years. We are blessed to have you in our lives —MIKE
To Laura Cardinal, who keeps the smiles and joy coming. I am indeed looking forward to our next chapter together. —CHET
To Jessica and Rebecca. You make me proud and you make me smile. —ADRIENNE
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about the authors
Michael A. Hitt Texas A & M University
Michael Hitt is currently a Distinguished Professor of Management at Texas A&M Univer- sity and holds the Joe B. Foster Chair in Business Leadership. He received his Ph.D. from the University of Colorado. Dr. Hitt has coauthored or co-edited 26 books and authored or coauthored many journal articles. A recent article listed him as one of the ten most cited authors in management over a 25-year period. The Times Higher Education listed him among the top scholars in economics, fi nance and management and tied for fi rst among manage- ment scholars with the highest number of highly cited articles. He has served on the edito- rial review boards of multiple journals and is a former editor of the Academy of Management Journal. He is the current co-editor of the Strategic Entrepreneurship Journal. He received the 1996 Award for Outstanding Academic Contributions to Competitiveness and the 1999 Award for Outstanding Intellectual Contributions to Competitiveness Research from the American Society for Competitiveness. He is a Fellow in the Academy of Management and in the Strategic Management Society, a Research Fellow in the National Entrepreneurship Consortium and received an honorary doctorate from the Universidad Carlos III de Madrid for his contributions to the fi eld. He is a former President of the Academy of Management, a Past President of the Strategic Management Society and a member of the Academy of Management Journals’ Hall of Fame. He received awards for the best article published in the Academy of Management Executive (1999), Academy of Management Journal (2000), and the Journal of Management (2006). In 2001, he received the Irwin Outstanding Educator Award and the Distinguished Service Award from the Academy of Management. In 2004, Dr. Hitt was awarded the Best Paper Prize by the Strategic Management Society. In 2006, he received the Falcone Distinguished Entrepreneurship Scholar Award from Syracuse University.
C. Chet Miller University of Houston
Dr. C. Chet Miller is the Bauer Professor of Organizational Studies at the Bauer School of Business, University of Houston. He received his Ph.D. from the University of Texas at Austin. He also received his B.A. from the University of Texas, where he was a member of Phi Beta Kappa and a Summa Cum Laude graduate.
Since working as a shift manager and subsequently completing his graduate studies, Dr. Miller has served on the faculties of Baylor University, Wake Forest University, and the University of Houston. He also has been a visiting faculty member at Cornell University and a guest instructor at Duke University. He is an active member of the Academy of
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viii About the Authors
Management and the Strategic Management Society. He currently serves on the editorial boards of Organization Science and Academy of Management Journal, and is a past associ- ate editor of Academy of Management Journal. Awards and honors include an outstanding young researcher award, nominations of several papers for honors, and teaching awards from multiple schools,
Dr. Miller has worked with a number of managers and executives. Through management-development programs, he has contributed to the development of individuals from such organizations as ABB, Bank of America, Krispy Kreme, La Farge, Red Hat, State Farm Insurance, and the U.S. Postal Service. His focus has been change management, strate- gic visioning, and high-involvement approaches to managing people.
Dr. Miller’s published research focuses on the functioning of executive teams, the design of organizational structures and management systems, and the design of strategic decision processes. His publications have appeared in Organization Science, Academy of Management Journal, Academy of Management Executive, Strategic Management Journal, Journal of Organizational Behavior, and Journal of Behavioral Decision Making.
Dr. Miller teaches courses in the areas of organizational behavior, organization theory, and strategic management.
Adrienne Colella Tulane University
Dr. Adrienne Colella is the A.B. Freeman Professor of Doctoral Studies and Research at the A.B. Freeman School of Business at Tulane University. She has also been a faculty member at the Mays Business School, Texas A&M University and at Rutgers University.
She received her Ph.D. and Masters degree from the Ohio State University in Industrial/ Organizational Psychology and her B.S. degree from Miami University. Dr. Colella is a fellow of the American Psychological Association and the Society for Industrial and Organizational Psychology, Division 14 of the APA. She will be the President of the Soci- ety of Industrial and Organizational Psychology in 2011.
Dr. Colella’s main research focuses on treatment issues regarding persons with dis- abilities in the workplace and workplace accommodation. She has also published on a va- riety of other organizational behavior and human resources topics such as discrimination, pay secrecy, performance appraisal, motivation, socialization, and employee selection. Her research appears in the Journal of Applied Psychology, Personnel Psychology, Academy of Management Journal, Academy of Management Review, Research in Personnel and Hu- man Resource Management, Human Resource Management Review, Journal of Applied Social Psychology, and the Journal of Occupational Rehabilitation, among other places. She is the editor of a Society of Industrial and Organizational Psychology Frontiers Series book on the psychology of workplace discrimination. Dr. Colella serves (or has served) on the editorial boards of Personnel Psychology, Journal of Applied Psychology, Academy of Manage- ment Journal, Journal of Organizational Behavior, Human Resource Management Review, Human Performance, SIOP Frontier’s Series, Human Resource Management, and Journal of Management. She is an ad hoc reviewer for most other journals in the management fi eld and federal funding agencies. Her research has been funded by a variety of national, state, and university sources.
Dr. Colella teaches undergraduate, masters-level, and Ph.D. level courses in Human Resource Management and Organizational Behavior.
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Preface xix
brief contents
O P E N I N G C A S E S T U D Y Whole Foods, Whole People 1
PART III Groups, Teams, and Social Processes 8 Leadership 289 9 Communication 327 10 Decision Making by Individuals and Groups 362 11 Groups and Teams 402 12 Confl ict, Negotiation, Power, and Politics 436
PART IV The Organizational Context 13 Organizational Structure and Culture 485 14 Organizational Change and Development 528
PART I The Strategic Lens 1 A Strategic Approach to Organizational Behavior 11 2 Organizational Diversity 47 3 Organizational Behavior in a Global Context 83
PA R T I C A S E S T U D Y Cooperating and Communicating 121 Across Cultures
PA R T I I I C A S E S T U D Y Bright and Dedicated: What 473 More Do You Want?
PA R T I V C A S E S T U D Y A Sea Change in Staffi ng at Leapfrog 567 Innovations, Inc.
PA R T I I C A S E S T U D Y Brussels and Bradshaw 277
PART II Individual Processes 4 Learning and Perception 131 5 Personality, Intelligence, Attitudes, and Emotions 167 6 Work Motivation 208 7 Stress and Well-being 246
C O N C L U D I N G C A S E S T U D Y Centurion Media: Doing the Right Thing 579
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Preface xix Evidence for the Effectiveness of High-Involvement Management 29 Demands on Managers 30
Organization of the Book 31
Experiencing Organizational Behavior: Pixar: An Organization of Happy, Innovative People 32
What This Chapter Adds to Your Knowledge Portfolio 33 Back to the Knowledge Objectives 34 Key Terms 35
Human Resource Management Applications 35
Building Your Human Capital: Career Style Inventory 35
An Organizational Behavior Moment: All in a Day’s Work 41
Team Exercise: Mcdonald’s: A High-Involvement Organization? 42 Endnotes 43
2 Organizational Diversity 47 Exploring Behavior in Action: Diversity in the Los Angeles Fire Department 47
The Strategic Importance of Organizational Diversity 49 Diversity Defi ned 50 Forces of Change 52
Changing Population Demographics 52 Increase in the Service Economy 53 The Global Economy 54 Requirements for Teamwork 54
Diversity Management and High-Involvement Organizations 55
Individual Outcomes 55 Group Outcomes 56 Organizational Outcomes 57 Societal and Moral Outcomes 58
Experiencing Organizational Behavior: Diversity at The Top 59
contents O P E N I N G C A S E S T U D Y Whole Foods, Whole People 1
PART I The Strategic Lens 1 A Strategic Approach to
Organizational Behavior 11 Exploring Behavior in Action: Strategic Use of Human Capital: A Key Element of Organizational Success 11
The Strategic Importance of Organizational Behavior 13 Basic Elements of Organizational Behavior 13 The Importance of Using a Strategic Lens 14
Foundations of a Strategic Approach to Organizational Behavior 16 Defi nition of an Organization 17
Experiencing Organizational Behavior: Creating Innovation: Leading and Managing the Human Capital at Apple 18
The Role of Human Capital in Creating Competitive Advantage 19
The Nature of Human Capital 19 The Concept of Competitive Advantage 20 Human Capital as a Source of Competitive Advantage 21
Managerial Advice: Leveraging Human Capital with Twitter and Other Social Networking Tools: Managing the Tweets 24
Positive Organizational Behavior 25 High-Involvement Management 26
Key Characteristics of High-Involvement Management 26 Selective Hiring 26 Extensive Training 27 Decision Power 28 Information Sharing 28 Incentive Compensation 29
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xii Contents
Roadblocks to Diversity 60 Prejudice and Discrimination 61 Stereotyping 62
Experiencing Organizational Behavior: Women, Work, and Stereotypes 64
Differences in Social Identity 65 Power Differentials 66 Poor Structural Integration 67 Communication Problems 69
Effectively Creating and Managing Diversity 69 Commitment of the Organization’s Leaders 70 Integration with the Strategic Plan 70 Associate Involvement 70
Managerial Advice: Promoting a Positive Diversity Environment 71
The Strategic Lens 72 What This Chapter Adds to Your Knowledge Portfolio 73 Back to the Knowledge Objectives 73
Thinking about Ethics 74 Key Terms 74
Human Resource Management Applications 75
Building Your Human Capital: What’s Your DQ (Diversity Quotient)? 75
An Organizational Behavior Moment: Project “Blow Up” 76
Team Exercise: What Is It Like to Be Different? 78 Endnotes 79
3 Organizational Behavior in a Global Context 83 Exploring Behavior in Action: McDonald’s Thinks Globally and Acts Locally 83 The Strategic Importance of Organizational Behavior in a Global Context 85 Forces of Globalization 85
Managerial Advice: Multinational Corporations Achieving Glocalization 88
The Globalization Experience for Associates and Managers 89
Internationally Focused Jobs 89 Foreign Job Assignments 91
Experiencing Organizational Behavior: The Glass Ceiling, the Glass Floor, and the Glass Border: The Global Business Environment for Women 94
Foreign Nationals as Colleagues 95
Opportunities for International Participation 97 Multidomestic Firms 98 Global Firms 98 Transnational Firms 99
High-Involvement Management in the International Context 100
Dimensions of National Culture 100
Experiencing Organizational Behavior: Managing Diverse Cultures 103
National Culture and High-Involvement Management 104
Ethics in the International Context 106
The Strategic Lens 109 What This Chapter Adds to Your Knowledge Portfolio 109 Back to the Knowledge Objectives 110
Thinking about Ethics 111 Key Terms 111
Human Resource Management Applications 112
Building Your Human Capital: Assessment of Openness for International Work 112
An Organizational Behavior Moment: Managing in a Foreign Land 114
Team Exercise: International Etiquette 114 Endnotes 115
PART II Individual Processes 4 Learning and Perception 131
Exploring Behavior in Action: The Strategic Importance of Learning and Perception 131
Fundamental Learning Principles 133 Operant Conditioning and Social Learning Theory 134 Contingencies of Reinforcement 134
Managerial Advice: Punishment Taken Too Far 137
Schedules of Reinforcement 138 Social Learning Theory 139
PA R T I C A S E S T U D Y Cooperating and Communicating Across Cultures 121
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Contents xiii
Cognitive and Motivational Properties of Personality 176 Some Cautionary and Concluding Remarks 179
Experiencing Organizational Behavior: “I Have Ketchup in My Veins” 180
Intelligence 181 Attitudes 182
Experiencing Organizational Behavior: Intelligence and Intelligence Testing in the National Football League 183
Attitude Formation 185 Two Important Attitudes in the Workplace 187 Attitude Change 189
Managerial Advice: Job Satisfaction Takes a Dive! 192 Emotions 193
Direct Effects of Emotions on Behavior 194 Emotional Labor 195 Emotional Intelligence 195
The Strategic Lens 196 What This Chapter Adds to Your Knowledge Portfolio 197 Back to the Knowledge Objectives 198
Thinking about Ethics 199 Key Terms 199
Human Resource Management Applications 199
Building Your Human Capital: Big Five Personality Assessment 200
An Organizational Behavior Moment: Whatever Is Necessary! 202
Team Exercise: Experiencing Emotional Labor 202 Endnotes 203
6 Work Motivation 208 Exploring Behavior in Action: Work Motivation at W.L. Gore & Associates 208
The Strategic Importance of Work Motivation 210 What Is Motivation? 210 Content Theories of Motivation 211
Hierarchy of Needs Theory 211 ERG Theory 213 Theory of Achievement, Affi liation, and Power 215
Managerial Advice: Managers over the Edge 217
Two-Factor Theory 218 Conclusions Regarding Content Theories 219
Other Conditions for Learning 141 Training and Enhancing the Performance of Associates 141
OB Mod 142 Simulations 144 Learning From Failure 146
Experiencing Organizational Behavior: “We are Ladies and Gentlemen Serving Ladies and Gentlemen” 147
Perception 148 Perceptions of People 149 Self-Perception 153 Attributions of Causality 153
Experiencing Organizational Behavior: Great Bear Wilderness Crash 154
Task Perception 157
The Strategic Lens 157 What This Chapter Adds to Your Knowledge Portfolio 158 Back to the Knowledge Objectives 159
Thinking about Ethics 159 Key Terms 160
Human Resource Management Applications 160
Building Your Human Capital: Assessment of Approaches Used to Handle Diffi cult Learning Situations 160
An Organizational Behavior Moment: It’s Just a Matter of Timing 161
Team Exercise: Best Bet for Training 162
Endnotes 163
5 Personality, Intelligence, Attitudes, and Emotions 167 Exploring Behavior in Action: I Know She’s Smart and Accomplished . . . But Does She Have “Personality”? 167
The Strategic Importance of Personality, Intelligence, Attitudes, and Emotions 169 Fundamentals of Personality 170
Determinants of Personality Development 170 The Big Five Personality Traits 172 The Big Five as a Tool for Selecting New Associates and Managers 175 The Big Five and High-Involvement Management 175
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xiv Contents
Process Theories of Motivation 219 Expectancy Theory 219 Equity Theory 222 Goal-Setting Theory 224 Goal Specifi city 225 Goal Commitment 225
Experiencing Organizational Behavior: Making Visible Changes 227
Conclusions Regarding Process Theories 228 Motivating Associates: An Integration of Motivation Theories 229
Find Meaningful Individual Rewards 229 Tie Rewards to Performance 230 Redesign Jobs 232 Provide Feedback 234
Experiencing Organizational Behavior: Connecting People in the Workplace 235
Clarify Expectations and Goals 236
The Strategic Lens 236 What This Chapter Adds to Your Knowledge Portfolio 237 Back to the Knowledge Objectives 237
Thinking about Ethics 238 Key Terms 239
Human Resource Management Applications 239
Building Your Human Capital: Assessing Your Needs 239
An Organizational Behavior Moment: The Motivation of a Rhodes Scholar 240
Team Exercise: Workplace Needs and Gender 241 Endnotes 242
7 Stress And Well-Being 246 Exploring Behavior in Action: Striking For Stress at Verizon 246
The Strategic Importance of Workplace Stress 248 Workplace Stress Defi ned 249 Two Models of Workplace Stress 251
Demand–Control Model 251 Effort–Reward Imbalance Model 252
Organizational and Work-Related Stressors 253 Role Confl ict 253 Role Ambiguity 254 Work Overload 254
Managerial Advice: Restoring and Maintaining Work–Life Balance 255
Occupation 256 Resource Inadequacy 256 Working Conditions 256 Management Style 257 Monitoring 257 Job Insecurity 257 Incivility in the Workplace 257
Experiencing Organizational Behavior: Incivility on the Job: The Cost of Being Nasty 258
Individual Infl uences on Experiencing Stress 259
Type A versus Type B Personality 259 Self-Esteem 259 Hardiness 259 Gender 260
Individual and Organizational Consequences of Stress 260
Individual Consequences 260 Organizational Consequences 263
Managing Workplace Stress 264 Individual Stress Management 264 Organizational Stress Management 265
Experiencing Organizational Behavior: Incentives for Participating in Wellness Programs 267
The Strategic Lens 268 What This Chapter Adds to Your Knowledge Portfolio 268 Back to the Knowledge Objectives 269
Thinking about Ethics 269 Key Terms 269
Human Resource Management Applications 270
Building Your Human Capital: How Well Do You Handle Stress? 270
An Organizational Behavior Moment: Friend or Associate? 271
Team Exercise: Dealing with Stress 272
Endnotes 272
PA R T I I C A S E S T U D Y Brussels and Bradshaw 277
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Contents xv
PART III Groups, Teams, and Social Processes
8 Leadership 289 Exploring Behavior in Action: Maria Yee and the Green Furniture Revolution 289 The Strategic Importance of Leadership 291 The Nature of Leadership 292 Trait Theory of Leadership 292
Experiencing Organizational Behavior: Reforming a Rotten Apple and an Evil City 294
Behavioral Theories of Leadership 296
University of Michigan Studies 296 Ohio State University Studies 297
Contingency Theories of Leadership 298 Fiedler’s Contingency Theory of Leadership Effectiveness 298 The Path–Goal Leadership Theory 301
Managerial Advice: Phil Jackson and Leadership Success 304
Conclusions Regarding Contingency Theories 305
Transformational Leadership 305
Experiencing Organizational Behavior: Ethical Leadership? Authentic Leadership! 309
Additional Topics of Current Relevance 308 Leader–Member Exchange 310 Servant Leadership 311 Gender Effects on Leadership 311 Global Differences in Leadership 313
The Strategic Lens 314 What This Chapter Adds to Your Knowledge Portfolio 315 Back to the Knowledge Objectives 316
Thinking about Ethics 317 Key Terms 317
Human Resource Management Applications 317
Building Your Human Capital: Are You a Transformational Leader? 318
An Organizational Behavior Moment: The Two Presidents 320
Team Exercise: Coping with People Problems 320
Endnotes 322
9 Communication 327 Exploring Behavior in Action: IBM and Virtual Social Worlds 327
The Strategic Importance of Communication 329 The Communication Process 330 Organizational Communication 331
Communication Networks 331 Direction of Organizational Communication 333
Experiencing Organizational Behavior: Communication at J. Crew: Mickey Drexler 335
Interpersonal Communication 337 Formal versus Informal Communication 337 Communication Media 338 Communication Technology 339
Managerial Advice: Surfi ng for Applicants 341
Nonverbal Communication 342 Barriers to Effective Communication 343
Organizational Barriers 343
Experiencing Organizational Behavior: Communication Casualties 347
Individual Barriers 348 Overcoming Communication Barriers 350
Conduct Communication Audits 350 Improve Communication Climates 351 Encourage Individual Actions 351
The Strategic Lens 353 What This Chapter Adds to Your Knowledge Portfolio 353 Back to the Knowledge Objectives 354
Thinking about Ethics 354 Key Terms 354
Human Resource Management Applications 355
Building Your Human Capital: Presentation Dos and Don’ts 355
An Organizational Behavior Moment: Going North 357
Team Exercise: Communication Barriers 358
Endnotes 359
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xvi Contents
10 Decision Making by Individuals and Groups 362 Exploring Behavior in Action: Dawn Ostroff’s Decision Making at the CW Television Network 362
The Strategic Importance of Decision Making 364 Fundamentals of Decision Making 364
Basic Steps in Decision Making 365 Optimal versus Satisfactory Decisions 366
Individual Decision Making 367 Decision-Making Styles 367
Managerial Advice: Nurturing Alternative Decision Styles 371
Degree of Acceptable Risk 372 Cognitive Biases 373 Moods and Emotions 375
Experiencing Organizational Behavior: Anger and Fear in Recent U.S. Elections 376
Group Decision Making 377 Group Decision-Making Pitfalls 378 Group Decision-Making Techniques 381
Who Should Decide? Individual Versus Group Decision Making 384
Associate Involvement in Managerial Decisions 385 Value of Individual versus Group Decision Making 387
Experiencing Organizational Behavior: The Vroom–Yetton Model and Military Decisions during the U.S. Civil War 387
The Strategic Lens 391 What This Chapter Adds to Your Knowledge Portfolio 390 Back to the Knowledge Objectives 392
Thinking about Ethics 393 Key Terms 394
Human Resource Management Applications 394
Building Your Human Capital: Decision Style Assessment 394
An Organizational Behavior Moment: Decision Making at a Nuclear Power Facility 395
Team Exercise: Group Decision Making in Practice 397
Endnotes 397
11 Groups and Teams 402 Exploring Behavior in Action: Teamwork at Starbucks 402
The Strategic Importance of Groups and Teams 404 The Nature of Groups and Teams 404
Groups and Teams Defi ned 405 Formal and Informal Groups 405 Identity Groups 406 Virtual Teams 406 Functional Teams 407 Self-Managing Teams 408
Experiencing Organizational Behavior: Teams at Mckinsey & Company 409 Team Effectiveness 408
Knowledge Criteria 410 Affective Criteria 410 Outcome Criteria 410 Is the Team Needed? 410
Factors Affecting Team Effectiveness 411 Team Composition 411 Team Structure 414 Team Processes 417
Experiencing Organizational Behavior: Backup at Cirque Du Soleil 418 Team Development 421 Managing for Effective Teams 423
Top Management Support 423 Support Systems 424
Managerial Advice: The Pros and Cons of Experiential Teambuilding 426
The Strategic Lens 427 What This Chapter Adds to Your Knowledge Portfolio 428 Back to the Knowledge Objectives 428
Thinking About Ethics 429 Key Terms 429
Human Resource Management Applications 429
Building Your Human Capital: Do You Have a Team? 430
An Organizational Behavior Moment: The New Quota 430
Team Exercise: Virtual versus Real Teams 431 Endnotes 432
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Contents xvii
12 Confl ict, Negotiation, Power, and Politics 436 Exploring Behavior in Action: Green Confl ict 436
The Strategic Importance of Confl ict, Negotiation, Power, and Politics 438 The Nature of Confl ict 439
Dysfunctional and Functional Confl ict 439 Types of Confl ict 440
Causes of Confl ict 441 Structural Factors 441 Communication 443
Experiencing Organizational Behavior: Herman Miller, Designing for Teamwork 444
Cognitive Factors 445 Individual Characteristics 445 History 446
Confl ict Escalation And Outcomes 447 Confl ict Escalation 447 Confl ict Outcomes 448
Experiencing Organizational Behavior: Workplace Aggression 449
Responses to Confl ict 450 Negotiation 451
Negotiation Strategies 452 The Negotiation Process 452
Managerial Advice: A Costly Confl ict Resolution: The Importance of Negotiation 454
Power 456 Bases of Individual Power 456 An Example of Power 458 Strategic Contingencies Model of Power 459
Organizational Politics 460
The Strategic Lens 463 What This Chapter Adds to Your Knowledge Portfolio 463 Back to the Knowledge Objectives 464
Thinking about Ethics 464 Key Terms 465
Human Resource Management Applications 465
Building Your Human Capital: Are You Ready to Manage with Power? 465
An Organizational Behavior Moment: The Making of the Brooklyn Bluebirds 466
Team Exercise: Managing Confl ict 467
Endnotes 468
PART IV The Organizational Context 13 Organizational Structure and
Culture 485 Exploring Behavior in Action: Growth and Structure Provide an Integrated Portfolio of Services at Fedex 485
The Strategic Importance of Organizational Structure and Culture 487 Fundamental Elements of Organizational Structure 488
Structural Characteristics 488 Structuring Characteristics 491 The Modern Organization 492
Factors Affecting Organizational Structure 493 The Role of Strategy 493 The Role of The Environment 495
Experiencing Organizational Behavior: IDEO and the Differentiation Strategy 496
The Role of Technology 500 The Role of Organizational Size 501 Summary Comments on Structure 502
Organizational Culture 502
Experiencing Organizational Behavior: Google Culture Attracts High-Quality Associates 503
Competing Values Model of Culture 505 Cultural Socialization 507 Cultural Audits 508
Managerial Advice: Finding a Fit at Home Depot 510
Person–Organization Fit 511
The Strategic Lens 513 What This Chapter Adds to Your Knowledge Portfolio 514 Back to the Knowledge Objectives 515
PA R T I I I C A S E S T U D Y Bright and Dedicated: What More Do You Want? 473
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xviii Contents
Thinking about Ethics 516 Key Terms 517
Human Resource Management Applications 517
Building Your Human Capital: An Assessment of Creativity 517
An Organizational Behavior Moment: How Effective is Hillwood Medical Center? 520
Team Exercise: Words-in-Sentences Company 521
Endnotes 524
14 Organizational Change and Development 528 Exploring Behavior in Action: Reinventing the Dream at Starbucks 528
The Strategic Importance of Organizational Change and Development 529 Pressures for Organizational Change 530
Internal Pressures for Change 530 External Pressures for Change 534
Managerial Advice: Social Pressures for “Green” Policies and Practices: The War against Carbon Emissions 537
Planned Change 539 Process of Planned Change 539 Unfreezing 540
Experiencing Organizational Behavior: The Radical Transformation of Novartis 541
Important Tactical Choices 543 Resistance to Change 544 The DADA Syndrome 546
Experiencing Organizational Behavior: Transforming Cisco into a Recession-Proof Growth Machine 547
Organization Development 548 The Basic OD Model 549 Organization Development Interventions 550 Organizational Learning 554 Organization Development across Cultures 555
The Strategic Lens 555 What This Chapter Adds to Your Knowledge Portfolio 556 Back to the Knowledge Objectives 557
Thinking about Ethics 558 Key Terms 558
Human Resource Management Applications 558
Building Your Human Capital: An Assessment of Low Tolerance for Change 558
An Organizational Behavior Moment: Organization Development at KBTZ 560
Team Exercise: Identifying Change Pressures and Their Effects 561
Endnotes 562
Glossary 589
Organization Index 599
Name Index 602
Subject Index 618
PA R T I V C A S E S T U D Y A Sea Change in Staffi ng at Leapfrog Innovations, Inc. 567
C O N C L U D I N G C A S E S T U D Y Centurion Media: Doing the Right Thing. 579
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preface
Afew years ago, the following statement appeared on the cover of Fast Company, “The best leaders know where all of the great companies start. It’s the people. …” Despite all of the major technological advances made and the substantial increases in the power of computers (both hardware and software) that allow us to perform many functions more easily than in the past and to accomplish some tasks that we could not do in the past, all of this activity is driven by people. People developed Apple’s iPod and iPad. People devel- oped and implemented Twitter and Facebook. We communicate on cell phones and small laptop computers developed by people. Our automobiles are serviced by people; at restau- rants we eat food prepared by people; we enjoy college and professional sports played by people. People are the drivers of organizations and make or break their success. Ed Breen, CEO of Tyco suggests that ideas provided by people are the basis of winning competitive battles because companies compete with their brains as well as their brawn. In support of this argument, Anne Mulcahy, former chairman of the board and former CEO of Xerox argues that people were the primary reason for Xerox’s turnaround in performance. They attracted highly talented employees, motivated them and they were highly productive.1
Purpose We wrote this book for several reasons. First, we wanted to communicate in an effective way the knowledge of managing people in organizations. The book presents up-to-date concepts of organizational behavior (OB) in a lively and easy-to-read manner. The book is based on classic and cutting-edge research on the primary topic of each chapter. Second, we wanted to emphasize the importance of people to the success of organizations. We do so by communicating how managing people is critical to implementing an organization’s strategy, gaining an advantage over competitors, and ensuring positive organizational per- formance. This approach helps students to better understand the relevance of managing people, allowing the student to integrate these concepts with knowledge gained in other core business courses. To emphasize the importance of people, we use the term human capital. People are important assets to organizations; application of their knowledge and skills is necessary for organizations to accomplish their goals.
New to the Third Edition A number of changes have been made to enrich the content of the book and to ensure that it is up-to-date with current organizational behavior research and managerial practice. For example, we have changed or updated all chapter opening cases (Exploring Behavior in Action), and all major case examples in the content of the chapters (e.g., Experiencing Organizational Behavior, Managerial Advice). The few that were not changed represent
xix
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xx Preface
classic examples (such as on the U.S. Civil War). Several of the major changes to the con- tent are described below:
• New materials were added on the topic of fi rms gaining value from the knowledge learned by expatriates (Chapter 3).
• New materials were added on ethics and corruption (Chapter 3). • Critical information was added on attractiveness and weight bias in our
discussion of perception (Chapter 4). • A new section focused on social dominance orientation as an individual
difference was incorporated (Chapter 5). • A new section was added on subconscious goals, an area of leading-edge research
on goal setting (Chapter 6). • Additional information was included on overload and job loss as important
stressors (Chapter 7). • Our discussion of communication networks was substantially modifi ed and
updated (Chapter 9). • Building on our discussion of moods and emotions in Chapter 5, an explanation
of how these characteristics of human functioning affect decision making was added to Chapter 10.
• New material was added in the crucial areas of workplace aggression and violence (Chapter 12).
• A new section was added on ambidextrous organizations, a topic of growing importance in OB (Chapter 13).
• A new section on top management changes was incorporated, along with new material on institutional changes and training (Chapter 14).
In addition to the above, a new section on Human Resource Management Applications was added at the end of each chapter. These sections explain how individuals in the human resource management function can use major OB concepts to more effectively manage human capital in the organization (e.g., management development programs, compensa- tion programs, selection processes).
By popular demand, we have brought back part-ending cases, an approach used in the fi rst edition. We also have a case on ethics at the end of the book that can be used with the content in several chapters throughout the book. The cases are completely new and engaging.
We have added approximately 300 new references from the research literature and many more from popular press articles on managerial practice. Although we have made important revisions and updated materials to refl ect current managerial practice, we have maintained all of the basic OB content that instructors found to be valuable and all of the pedagogical approaches that supported students’ efforts to learn. Therefore, this third edition represents continued improvement of a high-quality teaching and learning tool. It continues to be written in an easy style and is user friendly, as were the fi rst two editions of the book.
Value Provided by this Book Managing OB involves acquiring, developing, managing, and applying the knowledge, skills, and abilities of people. A strategic approach to OB rests on the premise that people are the foundation for any fi rm’s competitive advantage. Providing exceptionally high
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quality products and services, excellent customer service, best-in-class cost struc- ture, and other advantages are based on the capabilities of the fi rm’s people, its human capital. If organized and managed effectively, the knowledge and skills of the people in the fi rm are the basis for gaining an advantage over competitors and achieving long-term fi nancial success.
Individual, interpersonal, and organizational characteristics determine the behavior and ultimately the value of an organization’s people. Factors such as in- dividuals’ technical skills, personality characteristics, personal values, abilities to learn, and abilities to be self-managing are important bases for the development of organizational capabilities. At the interpersonal level, factors such as quality of leadership, communication within and between groups, and confl ict within and between groups are noteworthy in the organization’s ability to build important capabilities and apply them to achieve its goals. Finally, at the organizational level, the culture and policies of the fi rm are also among the most important factors, as they infl uence whether the talents and positive predispositions of individuals are effectively used. Thus, managing human capital is critical for an organization to beat its competition and to perform effectively.
This book explains how to effectively manage behavior in organizations. In ad- dition, we emphasize how effective behavioral management relates to organizational performance. We link the specifi c behavioral topic(s) emphasized in each chapter to organizational strategy and performance through explicit but concise discussions. We also provide short cases and examples to highlight the relationships.
Therefore, we emphasize the importance of managing OB and its effect on the outcomes of the organization. This is highly signifi cant because a number of orga- nizations routinely mismanage their workforce. For example, some organizations routinely implement major reductions in the workforce (layoffs, downsizing) when- ever they experience performance problems. How does an organization increase its effectiveness by laying off thousands of its employees? The answer is that it rarely does so.2 Layoffs reduce costs but they also result in losses of signifi cant human capital and valuable knowledge. These fi rms then suffer from diminished capabilities and their performance decreases further. Research shows that fi rms increasing their workforce during economic downturns enjoy much stronger performance when the economy improves.3 These fi rms have the capabilities to take advantage of the improving economy, whereas fi rms that downsized must rebuild their capabilities and are less able to compete effectively. The fi rms listed annually in Fortune’s “100 Best Compa- nies to Work for” are consistently among the highest performers in their industries (e.g., Starbucks, Whole Foods Market, Marriott, American Express).
Concluding Remarks The knowledge learned from a course in organizational behavior is important for managers at all levels: top executives, middle managers, and lower-level managers. While top executives may understand the strategic importance of managing hu- man capital, middle and lower-level managers must also understand the linkage between managing behavior effectively and the organization’s ability to formulate and implement its strategy. Managers do not focus solely on individual behav- ior. They also manage interpersonal, team, intergroup, and interorganizational
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exploring behavior in action
Diversity in the Los Angeles Fire Department
M elissa Kelley had a rich background in fi refi ght- ing. Early in life, she learned from her grandfa- ther, who worked as a fi refi ghter. In college, she
learned through coursework as a fi re-science major. After college, she spent fi ve years learning and honing her skills as a fi refi ghter with the California Department of Forestry.
Armed with her experiences and passion for the work, she joined the Los Angeles Fire Department in 2001. Al- though aware of possible discrimination and harassment against women in the department, she did not hesitate to join when presented with the opportunity. In her words, “I was willing to overlook … the dirty jokes, the porn, the … mentality. … I just wanted to be part of the team.” To her, only two simple rules applied: “Do not touch me. Do not hurt me on purpose.”
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xxii Preface
relationships. Some refer to these relationships as “social capital.” The essence of managing organizational behavior is the development and use of human capital and social capital.
Jack Welch, former CEO of GE, suggested that he and his management team used man- agement concepts that energized armies of people allowing them to dream, dare, reach, and stretch their talents in order to do things they never thought possible. This book presents con- cepts that will help students to gain the knowledge needed to effectively manage behavior in organizations. This, in turn, helps in the implementation of the organization’s strategy, affects the organization’s productivity, allows the organization to gain advantages over its competitors, and therefore contributes to the organization’s overall performance. MAH CCM AJC
1 Hitt, M.A., Haynes, K.T., & Serpa, R. 2010. Strategic leadership for the twenty-fi rst century. Business Horizons, in press.
2 Krishnan, H., Hitt, M.A., & Park, D. 2007. Acquisition premiums, subsequent workplace reductions and post-acquisition performance. Journal of Management Studies, 44: 709–732; Nixon, R.D., Hitt, M.A., Lee, H. & Jeong, E. 2004. Market reactions to announcements of corporate downsizing actions and implemen- tation strategies. Strategic Management Journal, 25: 1121–1129.
3 Greer, C.R., & Ireland, T.C. 1992. Organizational and fi nancial correlates of a ‘contrarian’ human resource investment strategy. Academy of Management Journal, 35: 956–984.
Exploring Behavior in Action Each chapter opens with a case, grounding the chapter in a real-world context. Some of the companies featured include Men’s Wearhouse, McDonalds, W. L. Gore & Associates, Starbucks, and FedEx.
FOCUS AND PEDAGOGY The book explains and covers all organizational behavior topics, based on the most current research available. Unlike other OB texts, it uses the lens of an organization’s strategy as a guide. Elements of the book through which we apply this lens include:
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The Strategic Importance of … Links the issues in the opening case to the organizational behavior topic of the chapter. The issues are discussed in light of their importance to organization strategy and ul- timately how they affect the organization’s performance.
“The Strategic Importance of … and The Strategic Lens are appropriate ‘bookends’ for the chapter; they set up how decision making is strategic and reinforce that at the end of the chapter.”
(Pam Roffol-Dobies, University of Missouri Kansas City)
Experiencing Organizational Behavior These two Exploring Organizational Behavior sections in each chapter apply the key concepts of the chap- ter. Real-world case situations are used including such topics as women, work, and stereotypes; Google and high-quality associates; Coca-Cola’s new fi zz; extreme jobs; and communication at J. Crew. Each discussion highlights the connection between an OB concept and the organization’s strategy and performance.
“The Experiencing OB section is also useful since it provides a conceptual view of the changing approach to OB. I like the idea that it walks the students through a situation and then summarizes the prospects for acting successfully.”
(Marian Schultz, University of West Florida)
“After reading the Experiencing OB section on the football league, I also found that the example was an excellent choice. My classroom includes both traditional and nontraditional students, ranging in age from 20–72 and I think it is important to provide a variety of examples that everyone can relate to in the course.”
(Marilyn Wesner, George Washington University)
FPO
EXPERIENCING ORGANIZATIONAL BEHAVIOR
On November 4, 2008, the United States elected Barack Obama as president. Presi- dent Obama personifi es the concept of diversity in terms of race, ethnic- ity, and geography. His black father was from a small town in Kenya and his white mother was from Kansas. His parents met in Hawaii, where he was born. President Obama’s parents were divorced when he was 2 years old. When he was six years old, his mother remarried a man from Indo- nesia, and the family moved there. At the age of ten, Barack Obama returned to Hawaii to live with his ma- ternal grandparents. He has a half- sister who is part Indonesian and is married to a man who is Chinese Ca- nadian. President Obama’s wife, Mi- chelle Obama, is African American. In an interview with Oprah Winfrey, President Obama described his fam- ily get-togethers as “mini United Na- tions meetings.” He said he had some relatives that looked like Bernie Mac and some that looked like Margaret Thatcher. The Obama family clearly exemplifi es the diversity inherent in the United States.
President Obama’s intrapersonal diversity and strong beliefs that di- versity in governance is necessary is refl ected in the diversity of his cabi- net. Thirty-four percent of his offi cials are female, 11 percent are black, 8 percent are Hispanic, and 4 percent are Asian. While these do not seem like large numbers, they refl ect more diversity than was present in past ad- ministrations’ cabinets. This diversity is expected to increase as President
Obama’s tenure in offi ce lengthens and he brings in new of- fi cials.
The presidency of Barack Obama brings up the ques- tion of whether the United States has overcome problems with racial, ethnic, and gender discrim- ination. Is the lead- ership in this coun- try fi nally refl ective of the population? Unfortunately, this is still not the case, as evidenced by the demography of corporate lead- ers. At the end of 2008, there were 5 black, 7 Latino, 7 Asian, and 13 female (2 of whom are Asian) CEOs of Fortune 500 companies. This means that 94 percent of Fortune 500 CEOs were white, non-Hispanic males. Examining the composition of boards of directors reveals the same lack of diversity. A Catalyst 2009 study of Fortune 500 com- panies revealed that women held 15.2 percent of board seats and women of color held 3.1 percent of all board director positions. Women held only 2 percent of board chair positions. These numbers have re- mained relatively consistent over the past fi ve years. A study on African American representation on corpo- rate boards found that representa- tion had decreased from 8.1 percent in 2004 to 7.4 percent in 2008. In a recent study of Fortune 100 boards, the Alliance for Board Diversity (a
joint effort among organizations concerned with board diversity) con- cluded that: • There is a severe underrepresenta-
tion of women and minorities on corporate boards when compared to general U.S. population demo- graphics for race and gender.
• Particular areas of concern include the lack of representation of minor- ity women and of Asian Ameri- cans and Hispanics.
• There is a recycling of the same minority individuals—especially African American men—as board members. Minority and female board members hold more seats per person than do white males.
• Very few boards have represen- tation from all groups. Only four boards had representation by all four groups (women, African Americans, Asian Americans, and Hispanics).
Will the diversity evident in the Obama administration fi lter down to
Diversity at the Top
©MANDEL NGAN/Getty Images, Inc.
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As the LAFD case shows, negative re- actions to diversity can have harmful effects on an organization. These re- actions, including discrimination and harassment of various forms, often lead to lawsuits, turnover, reduced satisfac- tion, and performance issues. In the most effective organizations, associates and managers understand the value of diversity and capitalize on it to improve performance. Moreover, associates and managers cannot escape diverse work- groups and organizations. Differences in gender, race, functional background, and so on are all around us. The United States is a particularly diverse country with respect to race and ethnicity, and current demographic trends indicate that its population will become even more diverse.
LAFD’s legal troubles, fi nancial settlement costs, and public embar- rassment have led to renewed efforts to change the culture. The changing nature of the fi refi ghter’s job, where 80 percent of fi re calls no longer in- volve structural or brush fi res, probably has helped in this process.1 Many or- ganizations, however, have not needed public embarrassment or changing jobs to motivate diversity efforts. Many orga- nizations, particularly large ones, have voluntarily adopted diversity manage-
with fewer than 100 workers. Over 79 percent of human resource managers at Fortune 1000 companies said they believed that successfully managing di- versity improves their organizations.3
Diversity, if properly managed, can help a business build competitive advantage. For example, hiring and retaining managers and associates from various ethnicities can help an or- ganization better understand and serve an existing diverse customer base. Di- versity among associates also might help the organization attract additional customers from various ethnic groups. Diverse backgrounds and experiences incorporated into a work team or task force can help the organization more effectively handle an array of com- plex and challenging problems. Kevin Johnson, Co-President of Platforms and Services at Microsoft, puts it this way: “[W]e must recognize, respect, and leverage the different perspectives our employees bring to the marketplace as strengths. Doing so will ensure that we will be more competitive in the global marketplace, will be seen as an em- ployer of choice, and will be more crea- tive and innovative … .”4
In the case of nonprofi t organiza- tions or governmental units such as the Los Angeles Fire Department, diversity
withheld from donation. In the case of the Los Angeles Fire Department, di- verse captains, fi refi ghters, and para- medics could better communicate with and predict the behavior of the diverse citizenry of Los Angeles. This would en- able the department to better serve the city. It also would position it to receive more resources from the city and state and would increase its likelihood of being chosen over other organizations for additional duties in the Los Angeles area.
Many individuals feel most com- fortable interacting and working with people who are similar to them on a va- riety of dimensions (such as age, race, ethnic background, education, func- tional area, values, and personality).5 They must, however, learn to work with all others in an organization to achieve common goals. In a truly inclusive work- place, everyone feels valued and all as- sociates are motivated and committed to the mission of the organization. Such outcomes are consistent with a high- involvement work environment and can help organizations achieve competitive advantage.
We begin this chapter by defi n- ing organizational diversity and distin- guishing it from other concepts, such as affi rmative action. Next, we describe
the strategic importance of Organizational Diversity
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xxiv Preface
The Strategic Lens The Strategic Lens section concludes each chapter. The section explains the topic of the chapter through the lens of organiza- tional strategy. Highlighted is the critical contribution of the chapter’s concepts to the organization’s achievement of its goals. The Strategic Lens concludes with Critical Think- ing Questions that are designed to emphasize the student’s knowledge of the OB topic, its effects on the organization’s strategy, and its effects on organizational functioning.
Thinking about Ethics Given the growing importance of ethics, the “Thinking about Ethics” feature at the end of every chapter provides an opportunity to ana- lyze various ethical dilemmas that confront to- day’s managers. Students are asked to apply OB concepts to realistic ethical issues to determine the most ethical course of action.
Managerial Advice These sections provide advice for future managers and make a connection to the organization’s strat- egy and performance. Examples of Managerial Advice include multinational corporations and “glocalization”, Phil Jackson’s leadership success, surfi ng for applicants on MySpace and Facebook, managing virtual teams, fi nding a fi t at Home Depot, and “green” policies and practices.
MANAGERIAL ADVICE
Robin Ely, Debra Meyerson, and Martin Davidson are professors at Harvard Uni- versity, Stanford University, and the University of Virginia, respectively. In conjunction with the human devel- opment and organizational learning professionals at Learning as Leader- ship, they have developed several principles designed to ensure that members of various social identity groups do not become trapped in low- quality workplace relationships. These principles are designed to encourage engagement and learning. The prin- ciples are perhaps best applied in the context of individuals experiencing uncomfortable events that are open to interpretation, such as when the member of a minority group is told by someone from the majority that she is being too aggressive, or when a man is told by a woman that he is acting as his grandfather might have acted. The principles are listed below:
a. Pause to short circuit the emo- tion and refl ect. Individuals who
have experienced an uncomfortable event should take a few mo- ments to identify their feelings and consider a range of responses.
b. Connect with others in ways that affi rm the importance of relation- ships. Individuals who have experienced an uncomfortable event should reach out to those who have caused the diffi culty, thereby valuing relationships.
c. Question interpretations and ex- plore blind spots. Individuals who have experienced an uncomfort- able event should engage in self- questioning as well as the ques- tioning of others. They should be open to the interpretations that others have of the situation, while realizing that their own interpreta- tions might be correct.
d. Obtain genuine support that doesn’t necessarily validate initial points of view but, rather, helps in gaining broader perspective. Indi- viduals who have experienced an uncomfortable event should seek input from those who will chal- lenge their initial points of view on the situation.
e. Shift the mindset. Individuals who have experienced an uncomfort- able event should be open to the idea that both parties might need to change to some degree.
Promoting a Positive Diversity Environment
Sources: R.J. Ely, D.E. Meyerson, and M.N. Davidson. 2006. “Rethinking Political Correctness,” Harvard Business Review, 84 (September); Learning as Leadership, “Research,” 2007, at http://www.learnaslead.com/index.php.
©Tom Grill/Corbis
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THE STRATEGIC LENS
O rganizational diversity, when managed effectively, has many benefi ts for organiza- tions. In general, effectively managed diversity programs contribute to an organization’s ability to achieve and maintain a competitive advantage. Diversity in teams at all levels can be helpful in solving complex prob- lems because heterogeneous teams integrate multiple perspectives. This benefi t applies to the upper-echelon management team as well as to proj- ect teams, such as new-product-de- velopment teams, much lower in the
organization. Not only can the diver- sity help resolve complex problems, but it also better mirrors U.S. society. Thus, it signals to potential associates and potential customers that the orga- nization understands and effectively uses diversity. As a result, the organi- zation has a larger pool of candidates for potential associates from which it can select the best. In addition, the organization is likely to have a larger potential market because of its under- standing of the products and services desired by a diverse marketplace. Having a diverse organization that
refl ects the demographic composition of U.S. society is smart business.106
Critical Thinking Questions
1. How does organizational diversity contribute to an organization’s competitive advantage?
2. What actions are required to create diversity in an organization, particularly in one that has homo- geneous membership at present?
3. How does diversity in an organi- zation affect its strategy?
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Thinking about Ethics 1. Suppose that an organization has discriminated in the past. Should it now simply stop its
discriminatory practices, or should it also take specifi c actions to increase its diversity by targeting, hiring, and promoting minorities ahead of nonminorities? Discuss.
2. Should all managers and associates in an organization be required to undergo diversity training regardless of their desire to do so? Why or why not?
3. Are there any circumstances in which it is appropriate to discriminate against a particular class of people (such as women)? If so, explain the circumstances. If not, explain why.
4. Women are not a minority in the population but represent a minority in the U.S. workforce, particularly in some occupations. Why has this occurred in U.S. society (or your home country, if applicable)?
5. Should all cultures and modes of conduct be tolerated, even if they confl ict with the values of the organization? Why or why not?
6. What percentage of the organization’s budget should be invested in building and maintaining an effective diversity management program? How should this percentage compare with other major budget items?
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Preface xxv
Human Resource Management Applications This new feature at the end of each chapter highlights the importance of OB concepts to human resource management and how managers can use these concepts to more effective- ly manage human capital in the organization. Students will learn various ways in which managers can use management- development programs, compensation programs, and selection processes.
Human Resource Management Applications The Human Resource Management (HRM) function plays a key role in a fi rm’s capability to manage diversity. Often diversity offi cers and initiatives are housed within HRM departments. The following are several activities that an HRM department can use to manage diversity.
A major function of HRM departments is developing, conducting, and evaluating training pro- grams. Diversity training programs are integral to any diversity management effort. HRM depart- ments are also likely to evaluate the effectiveness of these programs.
In many organizations, employee recruitment is centralized through the HRM department. Thus, they are concerned with advertising to, locating, and attracting potential associates from groups traditionally underrepresented in the organization.
Employee selection may also be centralized through the HRM department. In order to facilitate an organization’s diversity goals, the HRM department must make certain that methods used to hire associates (e.g., interviews, job knowledge test, personality tests) are not biased against certain group members.
An important aspect of many diversity programs is an organizational diversity climate audit, which surveys associates to determine their feeling of inclusion and satisfaction with diversity initia- tives. This audit is often the responsibility of the HRM department.
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building your human capital
What’s Your DQ (Diversity Quotient)? How well do you handle diversity? Your ability to be fl exible, work with many different types of people, and deal with ambiguous situations will be crucial to a successful career in the twenty-fi rst century. The following assessment will allow you to determine whether you have had the experience necessary to help in successfully navigating a diverse work environment.
Use the following scale to answer the questions below:
1 point = never 2 points = once or twice
3 points = three or four times 4 points = four or more times
In the last month, how often did you …? 1. See a foreign movie. 2. Speak a language other than your fi rst language. 3. Visit an art or history museum. 4. Have a conversation with someone who was of a different race. 5. Have a conversation with someone who was from a different country. 6. Attend a social event where at least half of the people differed from you in race or ethnic
background. 7. Visit a church that was of a religion different from yours.
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Building Your Human Capital To help students better know themselves and develop needed skills in organizational behavior, a personal assessment instrument is included in each chapter. This includes information on scoring and interpreting the results. Assessments, for example, are focused on ap- proaches to diffi cult learning situations, the propensity to be creative, skill at managing with power, and the ability to tolerate change.
“The Building Your Human Capital segment is unique. Students need to recognize the importance of the topics for developing their personal skills. This section does a good job in forwarding that idea.”
(Ceasar Douglas, Florida State University)
an organizational behavior moment
Project “Blow Up” Big State University (BSU) is proud of the success of its inter- national executive MBA (EMBA) program. The program is designed to bring together promising middle- and higher-level managers from around the globe for an exceptional learning ex- perience. BSU’s EMBA program has been ranked very highly by the business press. Alumni praise the program for its excellent faculty, networking opportunities, and exposure to colleagues from around the world. Students in the program can either at- tend weekend classes on BSU’s campus or participate through distance-learning technology from campuses around the world.
One of the defi ning features of the program is the fi rst-year team project. Students are randomly assigned to fi ve-member teams. Each team has a faculty advisor, and each must develop a business plan for a startup company. A major part of the business plan involves developing a marketing strategy. The teams begin the project during orientation week and fi nish at the end of the next summer. Each team must turn in a written report and a busi- ness plan and make an hour-long presentation to the other stu- dents and faculty as well as several executives from well-respected multinational companies. Students must earn a passing grade on
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An Organizational Behavior Moment The applied, hypothetical case at the end of each chap- ter gives students an opportunity to apply the knowl- edge they have gained throughout the chapter. Each case concludes with questions. Teaching suggestions are included in the instructor’s resources.
“The case was a good illustration of what life as a manger is like and it lends itself to a discussion of what might keep a manager from being highly involved.”
(Deborah Butler, Georgia State University)
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xxvi Preface
SUPPLEMENTS Instructor’s Resource Guide The Instructor’s Resource Guide includes an Introduction with sample syllabi, Chapter Outlines, Chapter Objectives, Teaching Notes on how to integrate and assign special features within the text, and suggested answers for all quiz and test questions found in the text. The Instructor’s Resource Guide also includes additional discussion questions and as- signments that relate specifi cally to the cases, as well as case notes, self-assessments, and team exercises. The Instructor’s Resource Guide can be accessed on the Instructor portion of the Hitt website at http://www.wiley.com/college/hitt.
Test Bank This robust Test Bank consists of true/false (approximately 60 per chapter), multiple choice (approximately 60 per chap- ter), short-answer (approximately 25 per chapter), and essay questions (approximately 5 per chapter). Further, it is specifi – cally designed so that questions will vary in degree of diffi culty, ranging from straightforward recall to more challenging application questions to ensure student mastery of all key concepts and topics. The organization of test questions also offers instructors the most fl exibility when designing their exams. A Computerized Test Bank provides even more fl ex- ibility and customization options to instructors. The Computerized Test Bank requires a PC running Windows. This electronic version of the Test Bank includes all the questions from the Test Bank within a test-generating program that allows instructors to customize their exams and also to add their own test questions in addition to what is already avail- able. Both the Test Bank and Computerized Test Bank are available for viewing and download on the Instructor portion of the Hitt Website at http://www.wiley.com/college/hitt.
Power Point Presentations These PowerPoint Presentations provide another visual enhancement and learning aid for students, as well as additional talking points for instructors. Each chapter’s set of interactive PowerPoint slides includes lecture notes to accompany each slide. Each presentation includes roughly 30 slides with illustrations, animations, and related web links interspersed ap- propriately. The PowerPoint Presentations can be accessed on the Instructor portion of the Hitt website at http://www. wiley.com/college/hitt
team exercise
What Is It Like to Be Different? One reason people have a diffi cult time dealing with diversity in others or understanding why it is important to value and respect diversity is that most people spend most of their lives in environ- ments where everyone is similar to them on important dimensions. Many people have seldom been in a situation in which they felt they didn’t belong or didn’t know the “rules.” The purpose of this exercise is to have you experience such a situation and open up a dialogue with others about what it feels like to be different and what you can personally learn from this experience to become better at managing diversity in the future.
STEP 1: Choose an event that you would not normally attend and at which you will likely be in the minority on some important dimension. Attend the event.
• You can go with a friend who would normally attend the event, but not one who will also be in a minority.
• Make sure you pick a place where you will be safe and where you are sure you will be wel- comed, or at least tolerated. You may want to check with your instructor about your choice.
• Do not call particular attention to yourself. Just observe what is going on and how you feel.
Some of you may fi nd it easy to have a minority experience, since you are a minority group member in your everyday life. Others may have a more diffi cult time. Here are some examples of events to consider attending:
• A religious service for a religion totally different from your own.
• A sorority or fraternity party where the race of members is mostly different from your own.
• A political rally where the politics are different from your own.
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Team Exercise These experiential exercises expand the student’s learning through activities and engage students in team building skills. Teaching suggestions are includ- ed in the instructor’s resources.
“The Exercise at the end of the chapter seemed like a great way to get students involved and to help them understand the material.”
(Sharon Purkiss, California State University at Fullerton)
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Preface xxvii
Lecture Notes Lecture Notes provide an outline of the chapter and knowledge objectives, highlighting the key topics/concepts presented within each chapter. Power-Point slides have been integrated, where relevant, and the lecture notes suggest to instructors when it’s best to show the class each slide within a particular chapter’s PowerPoint Presentation.
Web Quizzes Online quizzes with questions varying in level of diffi culty have been designed to help students evaluate their individual comprehension of the key concepts and topics presented within each chapter. These web quizzes are available at http://www. wiley.com/college/hitt. Each chapter’s quiz includes 10 questions, including true/false and multiple choice questions. These review questions, developed by the Test Bank author, Melinda Blackman, have been created to provide the most effective and effi cient testing system for students as they prepare for more formal quizzes and exams. Within this system, students have the opportunity to “practice” responding to the types of questions they’ll be expected to address on a quiz or exam.
Prelecture and Postlecture Quizzes The Prelecture and Postlecture Quizzes can be found exclusively in WileyPLUS. These quizzes consist of multiple-choice and true/false questions which vary in level of detail and diffi culty while focusing on a particular chapter’s key terms and concepts. This resource allows instructors to quickly and easily evaluate their students’ progress by monitoring their com- prehension of the material both before and after each lecture.
The prelecture quiz questions enable instructors to gauge their students’ comprehension of a particular chapter’s content so they can best determine what to focus on in their lecture.
The postlecture quiz questions are intended to be homework or review questions that instructors can assign to stu- dents after covering a particular chapter. The questions typically provide hints, solutions or explanations to the students, as well as page references.
Personal Response System (PRS) Personal Response System or “Clicker” questions have been designed for each chapter to spark additional in-class dis- cussion and debate. These questions are drawn from the Test Bank and the web quizzes. For more information on PRS content, please contact your local Wiley sales representative.
Organizational Behavior Lecture Launcher Video Video clips from the BBC and CBS News, ranging from 2 to 10 minutes in length tied to the current news topics in orga- nizational behavior are available on DVD. These video clips provide an excellent starting point for lectures. An instructor’s manual for using the lecture launcher is available on the Instructor’s portion of the Hitt website. For more information on the OB Lecture Launcher, please contact your local Wiley sales representative.
Business Extra Select Online Courseware system This program (available at http://www.wiley.com/college/bxs) provides instructors with millions of content resources from an extensive database of cases, journals, periodicals, newspapers, and supplemental readings. This courseware system lends itself extremely well to the integration of real-world content within organizational behavior to enable instructors to convey the relevance of the course content to their students.
Companion Website The text’s website at www.wiley.com/college/hitt contains myriad resources and links to aid both teaching and learning, including the web quizzes described above.
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xxviii Preface
ACKNOWLEDGMENTS We thank the many people who helped us develop this book. We owe a debt of gratitude to the following people who reviewed this book through its development and revision, providing us with helpful feedback. Thanks to those professors who provided valuable feedback for the third edition: Lon Doty, San Jose State University; Don Gibson, Fairfi eld University; Richard J. Gibson, Embry-Riddle Aeronautical University; Aden Heuser, Ohio State University; Arlene Kreinik, Western Connecticut State University; Lorianne D. Mitchell, East Tennessee State University; Wendy Smith, University of Delaware; and Hamid Yeganeh, Winona State University. Also, thanks to those professors who reviewed the book in its prior editions and helped us hone its approach and focus: Syed Ahmed, Florida International University; Johnny Austin, Chapman University; Rick Bartlet, Columbus State Community College; Melinda Blackman, California State University–Fullerton; Fred Blass, Florida State University; H. Michael Boyd, Bentley College; Regina Bento, University of Baltimore; Ralph Brathwaite, University of Hartford; David Bush, Villanova University; Mark Butler, San Diego State University; Steve Buuck, Concordia University; Jay Caulfi eld, Marquette University; William Clark, Leeward Community College; Marie Dasborough, University of Miami; Michelle Duffy, University of Kentucky; Michael Ensby, Clarkson University; Cassandra Fenyk, Centenary College; Meltem Ferendeci-Ozgodek, Bilkent University; Dean Frear, Wilkes University; Sharon Gardner, College of New Jersey; James Gelatt, University of Maryland–University College; John George, Liberty University; Lucy Gilson, University of Connecticut-Storrs; Mary Giovannini, Truman State University; Yezdi Godiwalla, University of Wisconsin–Whitewater; Elaine Guertler, Lees-McRae College; Carol Harvey, Assumption College; David Hennessy, Mt. Mercy College; Kenny Holt, Union University; Janice Jackson, West- ern New England College; Paul Jacques, Western Carolina University; William Judge, University of Tennessee–Knoxville; Barbara Kelley, St. Joseph’s University; Molly Kern, Baruch College; Robert Ledman, Morehouse College; James Maddox, Friends University; Bill Mellan, Florida Sothern College; Lorianne Mitchell, East Tennessee State University; Edward Miles, Georgia State University; Atul Mitra, University of Northern Iowa; Christine O’Connor, University of Ballarad; Regina O’Neill, Suffolk University; Laura Paglis, University of Evansville; Ron Piccolo, University of Central Florida; Chris Poulson, California State Polytechinal University–Pomana; Sharon Purkiss, California State University-Fullerton; David Radosevich, Montclair State University; William Reisel, St. John’s University; Joe Rode, Miami University of Ohio; Pam Roffol-Dobies, University of Missouri–Kansas City; Sammie Robinson, Illinoise Wesleyan University; Bob Roller, Letourneau University; Sophie Romack, John Carroll University; William Rudd, Boise State College; Joel Rudin, Rowan University; Jane Schmidt-Wilk, Maharishi University of Management; Mel Schnake, Valdosta State University; Holly Schroth, University of California–Berkeley; Daniel Sherman, University of Alabama–Huntsville; Randy Sleeth, Virginia Commonwealth University; Shane Spiller, Morehead State University; John Stark, California State University– Bakersfi eld; Robert Steel, University of Michigan–Dearborn; David Tansik, University of Arizona; Tom Thompson, Uni- versity of Maryland–University; Edward Tomlinson, John Carroll University; Tony Urban, Rutgers University–Camden; Fred Ware, Valdosta State University College; and Joseph Wright, Portland Community College. We also greatly appreci- ate the guidance and support we received from the excellent Wiley team consisting of George Hoffman, Lise Johnson, Karolina Zarychta, Sarah Vernon, and Sandra Dumas. We also acknowledge and thank former members of the editorial team who made contributions to this edition: Jayme Heffl er, Kim Mortimer, and Jennifer Conklin. Our colleagues at Texas A&M University, University of Houston, and Tulane University have also provided valuable support by providing intellectual input through discussions and debates. There are many people over the years that have contributed to our own intellectual growth and development and led us to write this book. For all of your help and support, we thank you. Finally, we owe a debt of gratitude to our many students from whom we have learned and to the students who have used this text and provided feedback directly to us and through their instructors. Thank you.
MAH CCM AC
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O P E N I N G C A S E S T U D Y
WHOLE FOODS,
whole people
In 1980, Mackey developed a partnership with Craig Weller and Mark Skiles, merging SaferWay with Weller’s and Skiles’s Clarksville Natural Grocer to create the Whole Foods Market. Its first store opened in 1980 with 12,500 square feet
and 19 employees. This was a very large health food store rela- tive to others at that time. There was a devastating flood in Austin within a year of its opening and the store was heavily damaged. Much of its inventory was ruined
and its equipment was damaged. The total losses were approximately $400,000, and the company had no insurance. Interestingly, custom- ers and neighbors helped the staff of the store to repair and clean up the damage. Creditors, vendors, and investors all partnered to help the store reopen only 28 days after the flood. With their assistance, Whole Foods survived this devastating natu- ral disaster.
Whole Foods started to expand in 1984 when it opened its first store outside of Austin. The new store was located in Houston, followed by an- other store in Dallas and one in New Orleans. It also began acquir- ing other companies that sold natu- ral foods, which helped to increase its expansion into new areas of the United States. In 2007, it expanded into international markets by opening its first Whole Foods branded store
W hole Foods Market is the largest natural food retailer in the world. With operations located primarily
in the United States and also in Canada and the United Kingdom, Whole Foods sells natural and organic food products that include produce, meat, poultry, seafood, grocery products, baked and prepared goods, many drinks such as beer and wine, cheese, floral products, and pet prod- ucts. The origin of the company dates to 1978 when John Mackey and his girlfriend used $45,000 in borrowed funds to start a small nat- ural food store then named SaferWay. The store was located in Austin, Texas. John and his girl- friend lived in the space over the store (without a shower) because they were “kicked out” of their apartment for storing food products in it.
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in London, England. (In 2004, it acquired a small natural foods com- pany in the United Kingdom, Fresh & Wild, but did not use the Whole Foods brand until opening its new store in London.) It also acquired one of its major U.S. competitors, Wild Oats, in 2007. It now has more than 54,000 employees in about 280 stores with annual sales of $7.95 bil- lion. Thus, Whole Foods has become a major business enterprise and the most successful natural and organic food retailer in the world.
MANAGING HUMAN CAPITAL
Whole Foods Market has done a number of things right, thereby achieving considerable success. Yet, many people believe that one of the best things it has done is to implement an effective people-management sys- tem. Each Whole Foods store em- ploys approximately 40 to as many as 650 associates. All of the associ- ates are organized into self-directed teams; associates are referred to as team members. Each of the teams is responsible for a specific prod- uct or service area (e.g., prepared foods, meats and poultry, customer service). Team members report to a team leader, who then works with store management, referred to as store team leaders. The team mem- bers are a critically important part of the Whole Foods operation. Individu- als are carefully selected and trained to be highly knowledgeable in their product areas, to offer friendly serv- ice, and to make critical decisions related to the types and quality of products offered to the public. Thus, they operate much differently than most “employees” in retail grocery
outlets. These team members work together with their team leader to make a number of decisions with re- gard to their specific areas, and they contribute to store level decisions as well. Some observers have referred to this approach as “workplace de- mocracy.” In fact, many of the team members are attracted to Whole Foods because of the discretion they have in making decisions regarding product lines and so on. Of course, there are other attractions such as the compensation. For example, the company’s stock option program involves employees at all levels. In fact, 94 percent of the stock options offered by the company have been presented to nonexecutive members, including front-line team members. The company pays competitive wages and pays 100 percent of the health insurance premium for all as- sociates working at least 30 hours per week, which includes 89 percent of its workforce. Although the annual deductible is high ($2,500), each associate receives a grant of up to $1,800 annually in a Personal Well- ness Account to be used for health care out-of-pocket costs. All of the benefit options are voted on by the associates in the company. Current programs include options for dental, vision, disability, and life insurance in addition to the full medical cover- age for full-time associates.
Whole Foods follows a demo- cratic model in the selection of new associates. For example, potential new team members can apply for any one of the 13 teams that oper- ate in most Whole Foods Markets. Current team members participate in the interview process and actually
vote on whether to offer a job to prospective colleagues. A candidate is generally given a four-week trial period to determine whether he or she has potential. At the end of that trial period, team members vote on whether to offer a permanent job to the candidate. The candidate must receive a two-thirds majority positive vote from the unit team members in order to be hired.
Teams also receive bonuses if they perform exceptionally well. They set goals relative to prior perform- ance and must achieve those goals to attain a bonus. Exceptionally high- performing teams may earn up to $2 an hour more than their current wage base.
The top management of Whole Foods believes that the best philoso- phy is to build a shared identity with all team members. They do so by involving them in decisions and encouraging their participation at all levels in the business. They em- power employees to make decisions and even allow them to participate in the decision regarding the benefit options, as noted above. All team members have access to full informa- tion on the company. It is referred to as Whole Foods’ open-book pol- icy. In this open-book policy, team members have access to the firm’s financial records, which include com- pensation information for all associ- ates and even the top management team and the CEO. Therefore, the firm operates with full transparency regarding its associates. This ap- proach emphasizes the company’s core values of collaboration and decentralization. The company at- tracts people who share those core
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values and tries to reward a highly engaged and productive workforce.
The company also limits the pay of top executives to no more than 19 times the lowest paid associate in the firm. While this amount has been increased over time in order to maintain competitive compensation for managers, it is still well below in- dustry averages for top management team members. And, in recent times, John Mackey, the CEO, announced that he no longer will accept a sal- ary above $1 annually or the stock options provided to him. Thus, his salary was reduced from $1 million to $1 per year. The money saved from his salary is donated to a fund to help needy associates.
The outcomes of this unique system for managing human capital have been impressive. For example, Whole Foods’ voluntary turnover is much lower than the industry aver- age. The industry average is almost 90 percent annually, but Whole Foods’ data show that it has a vol- untary turnover rate of approximately 26 percent. In addition, Whole Foods was ranked number 22 in the top 100 best companies to work for by Fortune magazine in 2009. It has been on the top 100 best companies to work for list for the past 12 years, and its ranking has been as high as number 5 (in 2007) but has always been among the best in the top 100.
In addition to its flat organization structure (few layers of management between associates and top man- agers) and decentralized decision making (e.g., selection of new associ- ates), the company believes that each employee should feel a stake in the success of the company. In fact, this
is communicated in its “Declaration of Interdependence.” The Declaration of Interdependence suggests that the company has five core values. They are listed in Table 1.
The company attempts to support team member excellence and happi- ness through its empowering work environment in which team members work together to create the results. In such an environment, they try to create a motivated work team that achieves the highest possible produc- tivity. There is an emphasis on indi- viduals taking responsibility for their success and failure and seeing both as opportunities for personal and or- ganizational growth.
The company develops self-di- rected work teams and gives them significant decision-making author- ity to resolve problems and build a department and product line to sat- isfy and delight the customers. The company believes in providing open and timely information and in being highly transparent in all of its opera- tions. It also focuses on achieving progress by continuously allowing associates to apply their collective creativity and intellectual capabilities to build a highly competitive and successful organization. Finally, the company emphasizes a shared fate
among all stakeholders. This is why there are no special privileges given to anyone, not even to top manag- ers. It is assumed that everybody works together to achieve success.
SOCIAL AND COMMUNITY RESPONSIBILITIES
Whole Foods Market takes pride in being a responsible member of its community and of society. For exam- ple, it emphasizes the importance of sustainable agriculture. In particular, the firm tries to support organic farm- ers, growers, and the environment by a commitment to using sustainable agriculture and expanding the market for organic products. In this regard, the Whole Foods Market launched a program to loan approximately $10 million annually to help inde- pendent local producers around the country to expand. It holds seminars and teaches producers how to move their products onto grocery shelves and how to command and receive premium prices for their products. These seminars and related activities have been quite popular. As an ex- ample, its first seminar held in Colo- rado a few years ago attracted 130 growers, which was almost twice as many as expected. Overall, the Whole Foods Market does business
TABLE 1 Whole Foods’ Declaration of Interdependence (Five Core Values)
1. Selling the highest-quality natural and organic food products avail- able.
2. Satisfying and delighting customers. 3. Supporting team member excellence and happiness. 4. Creating wealth through profi ts and growth. 5. Caring about communities and the environment.
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with more than 2,400 independent growers.
Whole Foods Market also sup- ports its local communities in other ways. For example, the company promotes active involvement in local communities by giving a minimum of 5 percent of its profits each year to a variety of community and nonprofit organizations. These actions encour- age philanthropy and outreach in the communities that Whole Foods serves.
Whole Foods Market also tries to promote positive environmental practices. The company emphasizes the importance of recycling and re- using products and reducing waste wherever possible. Furthermore, Whole Foods was the first retailer to build a supermarket that met environ- mental standards of the Leadership in Energy and Environmental De- sign Green Building Rating System (LEED). It was the largest corporate purchaser of wind credits in the his- tory of the United States when it pur- chased enough to offset 100 percent of its total electricity use in 2006. Finally, Whole Foods announced a new initiative a few years ago to cre- ate an animal compassion standard that emphasizes the firm’s belief in the needs of animals. The company developed standards for each of the species that are used for foods and sold through their supermarkets.
Whole Foods launched a pro- gram to encourage higher wages and prices paid to farmers in poor countries, while simultaneously pro- moting environmentally safe prac- tices. In fact, the company donates a portion of its proceeds to its Whole Planet Foundation, which in turn
provides microloans to entrepreneurs in developing countries.
Very few, if any, major cor- porations, including competing su- permarket chains, have established programs that rival those of the Whole Foods Market to meet social and community responsibilities.
SOME BUMPS IN THE ROAD
While the Whole Foods Market has been a highly successful company, it still has experienced some prob- lems along the way. Obviously, it has produced a concept that has been imitated by other natural foods companies and a number of com- peting supermarkets as well. Yet, in general, Whole Foods has been able to maintain its competitive advantage and market leadership, partly by be- ing the first to the market and partly because of its practices, which con- tinue to generate a strong reputation and a positive company image. Yet, a number of firms have developed competing products and are making headway in selling organic foods, including some regular large super- market chains. Even Wal-Mart has begun to offer organic foods in its grocery operations. In order to main- tain its leadership and to continue to command a premium price, Whole Foods Market must continuously dif- ferentiate its products and its image so that people will buy from it rather than from competitors.
The top management of the Whole Foods Market has been strongly opposed to unionization. The belief is that the company pays workers well and treats them with dignity and respect and that a union is likely to interfere in its relationships
with associates. Mackey, the CEO of the company, suggests that it is a campaign to “love the worker, not a union.” Yet, the first union for Whole Foods was voted in at its Madison, Wisconsin, store. The vote by the Madison associates was 65 to 54 in favor of organizing a union. When this vote was announced, Mackey re- ferred to it as a sad day in the his- tory of the company. He suggested that the associates had made a mis- take and believed that they would eventually realize the error of their ways. However, the Whole Foods Market executives have been able to fend off union efforts at other stores, including a campaign launched in 2009 that the company referred to as “union awareness training.”
Another problem became evident in 2007, when it was an- nounced that Mackey had, for a few years, posted on a Yahoo! financial message board anonymous online critiques of competitors and self- congratulating statements about the Whole Foods Market. These com- ments were made using a pseudo- nym so no one knew that he was the CEO of Whole Foods. This action was strongly criticized by analysts and others, and several questioned the ethics of his actions. Given that Whole Foods has emphasized its ethical approach to business and suggested that it conducts fair and open operations, such actions could be potentially harmful to the Whole Foods Market image and reputation. In fact, the company launched an investigation of his actions. In ad- dition, the Securities and Exchange Commission (SEC) investigated some of the postings to Internet
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chat rooms by Mackey in which he used a pseudonym. The concern was that he may have released in- formation that should not have been provided to the market. The Whole Foods’ Board completed its investi- gation and reaffirmed its support for Mackey. In addition, the SEC inves- tigated the incident but concluded that no enforcement action would be taken against the company or the CEO.
FIRM PERFORMANCE AND THE FUTURE
Whole Foods Market has performed well over the past several years, sus- taining significant growth in sales and profits. Its stock price has also generally performed well. However, during the period 2005–2008, some analysts argued that the stock was overvalued, partly because they did not believe that Whole Foods’ growth rate and returns could be sustained.
Undoubtedly, being able to maintain the growth rate will be difficult as the competition in its natural and organic foods grows and as the number of markets and opportunities narrows, particularly in the United States. This is especially of concern given the changed behaviors caused by the recent economic recession. Yet, some analysts are bullish on Whole Foods’ stock. The price of its stock doubled early in 2009; according to some analysts, these outcomes portend the future because Whole Foods’ busi- ness model seems to be strong in the face of a challenging economic environment. The company is highly profitable and continues to outper- form its direct competitors.
Mackey has stated on several occasions that he does not make de- cisions on the basis of Wall Street’s reactions. He argues that investors should not invest in his stock for the short term. Rather, they should look
for long-term value increases be- cause he will make decisions in the best interest of the shareholders for the long term. Perhaps this approach will provide better returns over time, but only time will tell. Clearly, Whole Foods Market has been a very posi- tive force in dealing with its associ- ates through its highly unique means of managing human capital. It also has built a strong positive reputa- tion and differentiated its products in the eyes of consumers. Yet, there are some challenges with which the firm must deal, such as growing competition and potential unioniza- tion. While the future likely remains bright, further evaluation will be needed to determine whether there will be continued growth and posi- tive returns for all stakeholders of the Whole Foods Market.
Source: Whole Foods Market logo used with permission.
1. 100 best companies to work for: Whole Foods Market 2009. Fortune, at http://money.cnn.com. accessed on June 15.
2. S. Cendrowski. 2009. What about Whole Foods? Fortune, July 20: 26.
3. Declaration of interdependence. 2007. Whole Foods Market website, at http://www.wholefoodsmarket.com, April 29.
4. C. Dillow. Innovating toward health care reform, the Whole Foods way. 2009. Fast Company.com, at http://fastcom- pany.com, August 12.
5. P.J. Erickson & L. Gratton. 2007. What it means to work here. Harvard Business Review, March: 85 (3): 104–112.
6. J.P. Fried. 2007. At Whole Foods, a welcome sign for immigrants seeking jobs. New York Times, at http://www. nytimes.com, April 29.
7. S. Hammer & T. McNicol. 2007. Low-cow compensation. Business 2.0, May: 62.
8. M. Hogan. 2007. Whole Foods: A little too rich? Business- Week, at http://www.businessweek.com, July 21.
9. P. Huetlin. 2007. Flagship Whole Foods opens in London. BusinessWeek, at http://www.businessweek.com, July 5.
10. L. Hunt. 2005. Whole Foods Market, Inc. At http://www. marketbusting.comlcasestudies, March 30.
11. D. Kesmodel & J. Eig. 2007. Unraveling rahodeb: A grocer’s brash style takes unhealthy turn. Wall Street Journal Online, at http://oniine.wsj.com, July 30.
12. N.S. Koehn & K. Miller. 2007. John Mackey and Whole Foods Market. Harvard Business School Case #9-807-111, May 14.
13. J. Mackey. 2007. I no longer want to work for money. Fast Company, at http://www.fastcompany.com, February.
14. A. Nathans. 2003. Love the worker, not the union, a store says as some organize. New York Times, at http://www. nytimes.com, May 24.
15. Our core values. 2009. Whole Foods Market website, at http://www.wholefoodsmarket.com, April 29.
16. K. Richardson & D. Kesmodel. 2007. Why Whole Foods investors may want to shop around. Wall Street Journal Online, at http://online.wsj.com, November 23.
17. C. Rohwedder. 2007. Whole Foods opens new front. Wall Street Journal Online, at http://online.wsj.com, June 6.
18. S. Smith. 2009. Something stinks at Whole Foods. Counter- punch, at http://www.counterpunch.org, May 8–10.
19. J. Sonnenfeld. 2007. What’s rotten at Whole Foods. Business Week, at http://www.businessweek.com, July 17.
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20. B. Steverman. 2009. Wal-Mart vs. Whole foods. Business- Week, at http://www.businessweek.com, May 14.
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WHOLE FOODS CASE DISCUSSION QUESTIONS
Chapter 1 1. Describe how Whole Foods uses human capital as a
source of competitive advantage. 2. Identify the aspects of high-involvement management
contained in Whole Foods’ approach to managing its associates.
Chapter 2 1. Compared to other companies in the service sector,
is Whole Foods more or less likely to experience dis- crimination problems? Explain your answer.
2. How could Whole Foods’ democratic model of selec- tion interfere with the development or continuance of a diverse workforce? What should it do to prevent difficulties?
Chapter 3 1. How do you think that globalization will affect Whole
Foods over time? Please explain several ways it could affect the company operations.
2. In what ways can national culture affect the manage- ment of human capital? Will Whole Foods have to adapt its democratic approach to selecting new team members or the benefits it provides to its associates as it expands further into international markets?
Chapter 4 1. To what extent do you think that training and as-
sociate learning would be more important for Whole Foods than for other grocery stores?
2. What type of perceptual problems on the part of as- sociates and the public may have resulted from the scandal regarding John Mackey’s blog activities?
Chapter 5 1. Given the nature of Whole Foods’ jobs and the way
in which associates are selected, what type of person- ality traits are important for Whole Foods’ associates to possess?
2. Compared to the industry average, Whole Foods has a low turnover rate and is consistently ranked as a great place to work. Why do you think Whole Foods’ associates are so satisfied and committed to the organization?
Chapter 6 1. Are Whole Foods’ team members likely to experience
problems with procedural and/or distributive justice? Explain.
2. Which of the major motivational practices are empha- sized by Whole Foods in its management system? For example, do they include meaningful rewards, tying rewards to performance, designing enriched jobs, pro- viding feedback, or clarifying expectations and goals?
Chapter 7 1. Based on the demand–control and effort–reward mod-
els of stress, are Whole Foods’ team members likely to experience a great deal of stress? What about its executives?
2. Does Whole Foods need a wellness program? Why or why not?
Chapter 8 1. Is John Mackey a transformational leader? Why or
why not? 2. Based on contingency theories of leadership, what
approach to leadership should be used by Whole Foods’ team leaders?
Chapter 9 1. Whole Foods’ open-book policy allows all associ-
ates to have full access to all information about the company and its executives. Would this degree of open communication work as well in other compa- nies? Why or why not? What impact do you think this degree of transparency has on the attitudes and behavior of Whole Foods’ associates?
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http://www.cfo.com
http://online.swj.com
http://online.swj.com
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2. What ethical issues arise from John Mackey’s use of a pseudonym to post opinions, information, and cri- tiques on blog sites?
Chapter 10 1. What decision styles does John Mackey appear to
use? Do these fit his situation? 2. Which group decision-making pitfalls appear most
likely within Whole Foods’ teams, and which decision- making techniques would you recommend to counter those pitfalls?
Chapter 11 1. What policies and procedures does Whole Foods en-
act that allow it to develop successful associate teams? 2. What impact do you think that the process of allowing
team members to vote on hiring new members has on the dynamics and performance of the Whole Foods teams?
Chapter 12 1. Whole Foods’ “Declaration of Interdependence” states
that two of the company’s core values are “creating wealth through profits and growth“ and “caring about our communities and the environment.” Often, these two values are in conflict for many companies. How does Whole Foods resolve this conflict?
2. Whole Foods has been opposed to the unionization of its associates. However, associates in a Madison, Wisconsin, store voted to become unionized. What type of conflicts or power struggles may have caused this to occur?
Chapter 13 1. Analyze the effects of the democratic approach to
store operations and hiring new associates on store performance.
2. What does the transparency about company finan- cial data and associate and managers’ compensation communicate about Whole Foods’ culture? How does the Declaration of Interdependence reflect aspects of Whole Foods’ culture?
Chapter 14 1. Analyze how Whole Foods has managed change
over the years since it started. 2. Whole Foods now faces a significant amount of
competition. How should it respond to the changes in the competitive landscape of its industry? What future challenges do you envision for Whole Foods’ market?
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the strategic lens This book describes the rich and impor- tant concepts that make up the fi eld of organizational behavior. We have based the book on cutting-edge research as well as current practices in organizations. Beyond this, the book is unique in pre- senting these concepts through a strategic lens. That is, in each chapter, we explain the strategic importance of the primary concepts presented in the chapter. Our discussions emphasize how managers can use knowledge of these concepts to improve organizational performance.
In Part I, we develop and explain the strategic lens for organizational be- havior. To begin, we describe in Chapter 1 the concept of competitive advantage and how behavior in an organization
affects the organization’s ability to gain and maintain an advantage over its competitors. Gaining and maintain- ing a competitive advantage is critical for organizations to perform at high levels and provide returns to their stakeholders (including owners). We emphasize the importance and management of human capital for high performance and describe the high-involvement organization and how to manage associates to achieve it.
Chapter 2 examines the criti- cal topic of organizational diversity. Given the demographic diversity in the United States, all organizations’ work- forces are likely to become increasingly diverse. Thus, it is important to under- stand diversity and how to manage it
effectively in order to gain a competitive advantage. This chapter explains how these outcomes can be achieved.
Chapter 3 discusses managing organizations in a global environment. International markets offer more op- portunities but also are likely to present greater challenges than domestic mar- kets. Understanding the complexities of managing in international markets is a necessity. It is especially important to understand how to manage diverse cul- tures and operations in varying types of institutional environments.
The three chapters of Part I pro- vide the setting for exploring the topics covered in the chapters that follow.
PART 1
ORGANIZATIONAL BEHAVIOR
A GLOBAL CONTEXT
ORGANIZATIONAL BEHAVIOR
A STRATEGIC APPROACH
ORGANIZATIONAL DIVERSITY
THE STRATEGIC LENS
INDIVIDUAL PROCESSES LEARNING AND PERCEPTION PERSONALITY, INTELLIGENCE, ATTITUDES, AND EMOTIONS WORK MOTIVATION STRESS AND WELL-BEING
GROUPS, TEAMS, AND SOCIAL PROCESSES LEADERSHIP
COMMUNICATION
DECISION MAKING BY INDIVIDUALS AND GROUPS GROUPS AND TEAMS CONFLICT, NEGOTIATION, POWER, AND POLITICS
THE ORGANIZATIONAL CONTEXT ORGANIZATIONAL STRUCTURE AND CULTURE ORGANIZATIONAL CHANGE AND DEVELOPMENT
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a strategic approach to organizational behavior exploring behavior in action
Strategic Use of Human Capital: A Key Element of Organizational Success
I n their book, The New American Workplace, James O’Toole and Edward Lawler described the existence of high-in- volvement, high-performance companies that spanned many industries. Examples of such companies are Nucor, W.L. Gore & Associates, Proctor & Gamble, and the Men’s Wearhouse, among others. For example, Proctor & Gamble
adopted high-involvement work practices at some of its manufacturing facilities, including empowerment of work teams to allocate the tasks among their members, establish their own work schedules, recruit new members to their team and even to select the methods used to accomplish their tasks. In addition, P&G invests in building human capital, and much of the training is done by P&G managers instead of human resource management or training specialists. In fact, P&G views work life as a career-long learning and development process. P&G has a different “college” for educating its workforce in the knowledge and skills needed for their current and future jobs. The company also carefully screens all candidates in the hiring pro- cess. The company received approximately 400,000 applications in 2009 for entry-level management posi- tions and hired fewer than 2,000 (less than one-half of one percent).
The Men’s Wearhouse is another company ben- efi ting from high-involvement work practices. George Zimmer, founder and chief executive offi cer (CEO) of the Men’s Wearhouse, described his company’s approach in managing the people who carry out day- to-day work:
We give people the space they need to be creative, set goals, defi ne strategies, and implement a game plan. We call it “painting our own canvas.” Our people like that freedom and the underlying trust behind it.
? knowledge objectives After reading this chapter, you should be able to: 1. Defi ne organizational behavior and explain the
strategic approach to OB. 2. Provide a formal defi nition of organization. 3. Describe the nature of human capital. 4. Discuss the conditions under which human capi-
tal is a source of competitive advantage for an organization.
5. Describe positive organizational behavior and explain how it can contribute to associates’ pro- ductivity.
6. Explain the fi ve characteristics of high-involvement management and the importance of this approach to management.
1
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12
Sources: “Fulfi llment at Work,” Men’s Wearhouse, September 27, 2009, at http://www.menswearhouse.com; R. Crockett. 2009. “How P&G Finds and Keeps a Prized Workforce,” BusinessWeek, Apr. 9, at http://www.businessweek.com; “Fortune 100 Best Companies to Work For 2009,” CNNMoney, Feb. 2, 2009, at http://www.money.cnn.com; J. O’Toole and E. E. Lawler, III. 2007. “A Piece of Work,” Fast Company, Dec. 19, at http://www.fastcompany.com; M. Cianciolo. 2007. “Tailoring Growth at Men’s Wearhouse: Fool by the Numbers,” The Motley Fool, May 23 at http://www.fool.com; C.A. O’Reilly and J. Pfeffer. 2000. Hidden Value: How Great Companies Achieve Extraordinary Results with Ordinary People (Boston: Harvard Business School Press); G. Zimmer. 2005. “Building Community through Shared Values, Goals, and Experiences,” at http://www.menswearhouse. com/home_page/common_threads; G. Zimmer. 2005. “Our Philosophy,” at http://www.menswearhouse.com/home_page/ common_threads.
©iStockphoto
Under this philosophy, individuals are given sub- stantial discretion in choosing work methods and goals. Training is both quantitatively and qualitatively greater at the Men’s Wearhouse than at the vast majority of retail- ers. Such training provides the base for effective use of discretion by individuals. Reward systems that value individual and team pro- ductivity help to encour- age the type of behavior that is desired. Responsi- bility and accountability complement the system.
The base for the sys- tem of discretion and accountability is a core set of workplace beliefs, including the following:
1. Work should be fulfi lling.
2. Workplaces should be fearless and energized.
3. Work and family life should be balanced.
4. Leaders should serve followers.
5. Employees should be treated like customers.
6. People should not be afraid to make mistakes.
The success of the Men’s Wearhouse should pro- mote frequent attempts to imitate its practices, but this has not been the case. Instead, confronted with diffi cult industry conditions, managers in many retailing fi rms have attempted to minimize costs through low compensa- tion and little training. They have implemented supervi- sion and surveillance systems designed to tightly control
employees. Many companies make assumptions about their workforce, but their actions do not allow the human potential existing in their workforce.
Yet, some of the highest-performing companies treat their associates in a different way. The leadership of these
companies believe that valuing people is crucial for business success. They believe they get more out of their employees by providing them power and autonomy, and the results support this belief. These companies con- tinue to grow, have low labor costs and achieve high profi ts while paying high compensation be- cause of the productivity of their workforce. For ex-
ample, Starbucks provides a much larger and more costly benefi ts package to its workforce than most other retail- ers. Starbucks can do this not because of the “premium” it charges for its products but because of its productive, customer-oriented associates who produce a premium for the company. The bottom line is that companies that allow associates to participate in major decisions, invest heavily in training, and provide profi t-sharing programs to their associates have a much more productive workforce and enjoy the many benefi ts that are derived from it. They are often among the Best 100 Companies to Work For and are among the top fi nancial performers in industry. They perform well because they gain the most value from their human capital.
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http://www.menswearhouse.com
http://www.businessweek.com
http://www.money.cnn.com
http://www.fastcompany.com
http://www.fool.com
http://www.menswearhouse.com/home_page/common_threads
http://www.menswearhouse.com/home_page/common_threads
http://www.menswearhouse.com/home_page/common_threads
http://www.menswearhouse.com/home_page/common_threads
Basic Elements of Organizational Behavior 13
The examples of Men’s Wearhouse, Proctor & Gamble, and Starbucks show the powerful difference that a fi rm’s human capital can make. Faced with less-than-favorable industry character- istics and a labor pool that many fi nd unattractive in the retail fi eld, Men’s Wearhouse and Starbucks have suc- ceeded in part by paying careful atten- tion to human behavior. Any fi rm can sell men’s clothing and coffee, but it requires special management to effec- tively embrace and use to advantage the complexities and subtleties of hu- man behavior. From the motivational and leadership practices of managers to the internal dynamics of employee- based teams to the values that provide
the base for the organization’s culture, successful fi rms develop approaches that unleash the potential of their peo- ple (human capital).
In the current highly competitive landscape, the ability to understand, appreciate, and effectively leverage hu- man capital is critical in all industries. A strategic approach to organizational behavior is focused on these issues. In this chapter, we introduce the concept of organizational behavior and explain how to view it through a strategic lens in order to enhance organizational per- formance.
To introduce the strategic ap- proach to organizational behavior, or OB, we address several issues. First,
we defi ne organizational behavior and discuss its strategic importance for or- ganizational performance. Next, we explore the concept of human capital and its role in organizations. We then discuss how human capital most likely contributes to a competitive advantage for an organization. An explanation of high-involvement management follows. This form of management is helpful in developing and using human capital and is becoming increasingly impor- tant as fi rms search for ways to maxi- mize the potential of all of their people (managers and nonmanagers). In the fi – nal section of the chapter, we describe the model and plan for the concepts explained in this book.
the strategic importance of Organizational Behavior
Basic Elements of Organizational Behavior Important resources for businesses and other types of organizations include technologies, distribution systems, fi nancial assets, patents, and the knowledge and skills of people. Organizational behavior involves the actions of individuals and groups in an organi- zational context. Managing organizational behavior focuses on acquiring, developing, and applying the knowledge and skills of people. The strategic OB approach rests on the premise that people are the foundation of an organization’s competitive advantages.1 An organization might have exceptionally high-quality products and services, excellent customer service, best-in-class cost structure, or some other advantage, but all of these are outcomes of the capabilities of the organization’s people—its human capital. If orga- nized and managed effectively, the knowledge and skills of the people in the organization drive sustainable competitive advantage and long-term fi nancial performance.2 Thus, the strategic approach to OB involves organizing and managing the people’s knowledge and skills effectively to implement the organization’s strategy and gain a competitive advantage.
Individual, interpersonal, and organizational factors determine the behavior and the ultimate value of people in an organization; these factors are shown in Exhibit 1-1. For individuals, factors such as the ability to learn, the ability to be self-managing, techni- cal skills, personality characteristics, and personal values are important. These elements represent or are related to important capabilities. At the interpersonal level, factors such
organizational behavior The actions of individuals and groups in an organizational context.
managing organizational behavior Actions focused on acquiring, developing, and applying the knowledge and skills of people.
strategic OB approach An approach that involves organizing and managing people’s knowledge and skills effectively to implement the organization’s strategy and gain a competitive advantage.
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14 Chapter 1 A Strategic Approach to Organizational Behavior
Exhibit 1-1 Factors and Outcomes of a Strategic Approach to Organizational Behavior
Interpersonal Factors (leadership, communication, decision-making skill, intra- and intergroup dynamics,
communication)
Individual Factors (learning ability,
personality, values, motivation, stress)
Organizational Factors (culture, work environments,
adaptability)