Chapter
1
McGraw-Hill/Irwin
Organizational
Behavior: The Quest
for People-Centered
Organizations and
Ethical Conduct
Copyright © 2008
by The McGraw-Hill Companies, Inc. All rights reserved.
© 2008The
Ch. 1 Learning Objectives
1. Define the term organizational behavior and contrast
McGregor's Theory X and Y assumptions about
employees
2. Identify the four principles of total quality
management
3. Define the term e-business and specify OB-related
issues raised by e-leadership
4. Contrast human and social capital and explain why
we need to build both
5. Define management and identify managerial skills of
1-2
effective managers
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Ch. 1 Learning Objectives (con’t)
6. Characterize 21st century managers
7. Describe Carroll’s global corporate social
responsibility pyramid, and give an overview of the
model of individual ethical behavior
8. Identify four of the seven general ethical principles,
and explain how to improve an organization’s
ethical climate
9. Describe the sources of organizational behavior
research evidence
1-3
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Your Experience
Do you feel that you have worked in a
people-centered workplace?
•A=Yes, B=No
If yes, what people-centered
characteristics did the workplace have?
If no, what were the workplace
characteristics that did not make it
people-centered?
1-4
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
What is Organizational Behavior?
An interdisciplinary field
dedicated to better
understanding and
managing people at work
Why study OB?
• To interact more effectively
with others in
organizations
I’m a finance major, why do
I need to know this?
• People skills complement
technical skills
1-5
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
History of Organizational Behavior
Human Relations Movement
The Quality Movement
E-Business Revolution
Human and Social Capital
1-6
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Human Relations Movement
Inspired by legalization of unionmanagement collective bargaining in the US
(1935)
Hawthorne Studies
•Supportive management
Mayo and Follett
•“Pull” don’t “push”
1-7
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Test Your Knowledge
What percentage of the American workforce
do NOT utilize their full capabilities on the
job?
A. 10%
B. 35%
C. 50%
D. 75%
1-8
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
McGregor’s Theory X & Theory Y
Theory X
• Most people dislike
work and want to
avoid it
• People require close
direction
• People want to avoid
responsibility and
have little ambition
Table 1-1
Theory Y
• Work is a natural activity
• People can be selfdirected if they are
committed to the objective
• Rewards help
commitment
• Most employees accept
and seek responsibility
• Employees have
imagination, ingenuity
and creativity
1-9
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
The Quality Movement
Total Quality Management (TQM)
• An organizational culture dedicated to training,
continuous improvement, and customer satisfaction
Employee-driven, customer-focused
Basic Principles
• Do it right the first time to eliminate costly rework
• Listen to and learn from customers and employees
• Make continuous improvement an everyday matter
• Build teamwork, trust, and mutual respect
1-10
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
E-Business Revolution
E-Business – running the entire business via
the internet
Implications for organizational behavior and
leaders?
•More and faster communication with others
•More potential for damage by unethical
leaders
•Enables the existence of networks that go
across traditional organizational boundaries
1-11
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Human and Social Capital
Human Capital the
productive potential of an
individual’s knowledge
and actions
Social Capital productive
potential resulting from
strong relationships,
goodwill, trust, and
cooperative effort
Mitre, McLean, VA
• Pays university
professors to conduct a
Master’s in Systems
Engineering program for
employees
Cisco Systems, San Jose, CA
• Sponsors “Nerd lunches”
to discuss latest topics in
technology
1-12
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Management
Process of working with and through others
to achieve organizational objectives efficiently
and ethically
What skills are exhibited by an effective
manager?
21st Century managers have to play chess, not
checkers
1-13
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Test Your Knowledge
True (A) or False (B)?
1. Effective managers tend to have high skills
mastery.
2. Derailed managers underestimate their skills
mastery.
3. Effective female and male managers have
significantly different skill sets.
1-14
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Evolution of 21st-Century Managers
Primary Role
Past Managers
Future Managers
Cultural Orientation
Monocultural,
monolingual
Multicultural, multilingual
Source of influence
Formal authority
Technical knowledge
and interpersonal
skill
View of people
Potential problem
Primary resource;
human capital
Decision-making
style
Limited input for
individual decisions
Broad-based input
for joint decisions
Ethical
considerations
Afterthought
Forethought
1-15
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
The Ethics Challenge
“In the Post Enron, post-bubble world,
there’s a yearning for corporate values
that reach higher than the size of the
CEO’s paycheck or even the latest stock
price. Trust, integrity and fairness do
matter, and they are crucial to the
bottom line.”
Source: Excerpt from J A Byrne, “After Enron: The Ideal Corporation,” Business Week, August 26, 2002, p. 68
1-16
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
A Model of Ethical Behavior in the
Workplace
• Internal Organizational
Influences
• Ethical codes
• Organizational culture
• Organizational size
• Structure
• Perceived pressure for
results
• Corporate strategy
External Organizational
Influences
•
•
•
•
Political/legal
Industry culture
National culture
Environment
Individual
• Personality
• Values
• Moral principles
• History of
reinforcement
• Gender
Ethical
behavior
• Neutralizing/enhancing factors
• TMT characteristics
•
•
•
•
Age
Length of Service
Military service
Homogeneity/heterogeneity
1-17
Figure 1-4
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Test Your Knowledge
True (A) or False (B)?
1. The longer a TMT member works for an
organization the more immune they are to
internal or external pressures.
2. TMT’s with military experience are more
likely to succumb to pressures when making
ethical decisions.
3. The more heterogeneous the TMT the less
likely influencers will lead to unethical
behavior.
1-18
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
For Discussion: Your Opinion
Which statement best represents
your opinion?
A.Companies primary goal should
be to maximize profits
B.Companies have an obligation to
the societies in which they
operate, even if profits suffer
1-19
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Corporate Social Responsibility Pyramid
Source: Carroll, A. B. “Managing Ethically with Global Stakeholders: A present and future challenge,
Academy of Management Executive, May 2004, p. 116.
1-20
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
General Moral Principles
Dignity of human
life
Autonomy
Honesty
Loyalty
Fairness
Humaneness
The common good
1-21
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Improving On-the-Job Ethics
Behave ethically
yourself
Screen potential
employees
Develop a Meaningful
Code of Ethics
• What constitutes a
meaningful code of
ethics?
1-22
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Improving On-the-Job Ethics
Provide ethics training
Reinforce ethical
behavior
Create positions, units,
and other structural
mechanisms to deal
with ethics
Eliminate need for
whistle-blowing
1-23
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Roadmap for This Course
1-24
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
How do we learn about OB?
Three Approaches:
•Theory – ideas about what happens and why
•Research – testing theoretical ideas
•Practice – learning from what has and has not
worked
Contingency Approach
•All three provide valuable information for
understanding and managing organizational
behavior
1-25
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Five Sources of OB Research Insights
Laboratory study
• Manipulation and measurement of variables in contrived
situations
Field study
• Examination of variables in real-life settings
Sample survey
• Questionnaire responses from a sample of people
Case Studies
• In-depth analysis of single individual, group, or
organization
Meta-analysis
• Pools the results of many studies through statistical
procedure
1-26
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Test Your Knowledge
Information from which of the following is
LEAST likely to be generalizable to other
settings.
A. Meta-analysis
B. Sample surveys
C. Case-study
Why?
1-27
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
1
Supplemental
Slides
for Instructor
Use Only
1-28
© 2008The McGraw-Hill Companies, Inc. All rights reserved.
Video Cases
Starbucks
Pike Place Fish Market
1-29
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Management in the Movies:
John Q – “Runaround”
In this scene, John is finding out about the changes in
his employment status and health insurance.
What responsibility do companies have to inform
employees about changes in health coverage?
employment status?
What responsibility does John have to keep up with
his status?
Is it ethical for firms to make changes that are in the
best interest of the firm and not the employee?
1-30
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
The Value of Management
20
18
16
14
12
10
8
6
4
2
0
19.4
8
Hi Morale
Low/Mod
Morale
% inc in stock
price
"The success of an
organization is dependent
upon the competence of
senior management and
the morale of the
workforce,“ ~ David Sirota,
founder Sirota Research
“How do you keep
management from
destroying the
workforce?”
1-31
Source: Study Sees Link Between Morale and Stock Price, HR Executive Online, March 6, 2006
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
“You came first for the
coffee, but you came back
for our people”
~ Starbucks
1-32
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
People-Centered Examples
Herb Kelleher, Southwest Airlines
• “Respect people for who they are, not for what their
titles are.”
Clayton Christensen, Harvard Business School
• “You can learn from anyone.”
George Zimmer, Men’s Wearhouse
• Happy employees attract loyal customers.
• Every 5 years full time employees receive a three-week
paid sabbatical on top of their regular vacations
Jim Sinegal, Costco
• Good starting pay, 94% health care costs
1-33
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Tips for Becoming a People Developer
1) Motivate people by convincing them to take
charge of their own development
2) Integrate the individual’s development plan
with the formal performance-improvement
process
3) Rely on more training for developing your
people
4) Delegate whenever possible to both lighten
your load and to challenge and develop your
1-34
people
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Tips for Becoming a People Developer
5)Really get to know your people and
their career aspirations
6)Have at least a three-year development
path in mind when interviewing new
people
7)Make sure people who take charge of
their own development are creatively
rewarded
1-35
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Benefits of E-Commerce
Centralized Inventory
Reduced Facilities Cost
Self-Sourcing
Job Specialization/
Scheduling
1-36
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
It Pays to Be Ethical
Ethical companies outperform unethical ones by 200300 % in market value (Business and Society Review)
$30K invested in 30 ethical companies over 30 years
would yield 4.7x to the Dow Jones Industrials
(Johnson & Johnson Research Study)
40% of consumers would boycott an unethical
company, 20% have done so (Conference Board)
Workers in ethical companies are 6x more loyal
(Hudson Institute)
Source: The Integrity Advantage, Adrian Gostick, presentation at 2006 Annual SHRM
Conference, Washington, DC
1-37
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Post-Enron Ethics
Sarbanes-Oxley Act (2002)
• Sec. 406 : Requires code of ethics: honest and ethical
conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and
professional relationships
• Sec. 806: Whistleblower protection of employees of
publicly traded companies: employees may not be
discharged, demoted, suspended, threatened, harassed
or discriminated against in any way because they
reported suspected or confirmed violations.
1-38
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Formula for Disaster: Enron
Enron scandal involved hundreds of accountants,
finance professionals, bankers, and lawyers
Enron had superior Code of Ethics
Warning Signs:
• Rationalizations – accounting rules were broken and
rationalized
• Salaries & bonuses were much higher than the market
• Board of Directors were paid 350K for attending 8
meetings/year; Board waived code of conduct a few
times for Sr. Management – blinded by incentives
Touted values but if employee made earnings or was a
star the rules didn’t apply to him/her
1-39
Source: Sherron Watkins, A Moment of Truth, March 30, ©2007;
GMU
2008 The
McGraw-Hill Companies, Inc. All rights reserved.
National Business Ethics Survey
Formal ethics and compliance programs is growing
Written standards of conduct grew 19% in last decade
Training on ethics – up 32% since 1994
Mechanisms to seek ethics advice or info up 15% since
2000
Means to report misconduct anonymously – up 7%
since 2003
Discipline of employees who violate ethical standards
– up 4% since 2003.
1-40
Source: Critical Elements of an Organizational Ethical Culture, Ethics Resource
2006
© 2008 The Center,
McGraw-Hill
Companies, Inc. All rights reserved.
National Business Ethics Survey
Programs are not enough – have to build an ethical
culture: behavioral models & accountability
Where top management displays certain
ethics-related actions, employees are 50% less
likely to observe misconduct.
When employees perceive that others are held
accountable for their actions, their overall
satisfaction increases by 32 percentage points.
1-41
Source: Critical Elements of an Organizational Ethical Culture, Ethics Resource Center, 2006
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
National Business Ethics Survey
Key Findings: Culture matters
Three Most Important Ethics-Related Actions:
• Setting a good example;
• Keeping promises and commitments; and
• Supporting others in adhering to ethics standards.
Actions Speak Louder than Words
• Employees need to see their superiors and peers
demonstrate ethical behavior in the work they do and
decisions they make every day.
1-42
Source: Critical Elements of an Organizational Ethical Culture, Ethics Resource Center, 2006
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Business Ethics Video
What is the difference between a temptation
and an ethical dilemma?
Resolution Principles: What is the difference
between ends-based and means-based ethical
principles?
What is the role of a Corporate Ethics
Officer?
What steps to decision making are
recommended?
1-43
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Business Ethics Myths
Myth #1: It’s Easy to be Ethical
Myth #2: Unethical Behavior in
Business is Simply the Result of
“Bad Apples”
Myth #3: Ethics Can Be Managed
Through Formal Ethics and
Programs
1-44
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Business Ethics Myths
Myth #4: Ethical Leadership is
Mostly About Leader Integrity
•“moral person”
•“moral manager”
Myth #5: People are less ethical
than they used to be.
1-45
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Ethics: What Executives Can Do
1. Understand the existing ethical
culture
2. Communicate the importance of
ethical standards
3. Focus on the Reward systems
4. Promote Ethical leadership
Throughout the firm
1-46
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Executive Opinion Survey - Results
7
7=perfect
score
6
5
4
3
2
1
Country/
rank
0
Denmark/1
U.S./21
China/55
Russian
Federation/89
Pakistan/102
1-47
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Religiosity and Ethics
Inconsistent research evidence regarding the
relationship between religious beliefs and ethics.
How religion influences ethical behavior:
• Development of social role expectations.
• When internalized over time, roles become a part of a
person’s self-identity.
• A person prefers to act in ways consistent with his or
her self-identity.
Different religions have different teachings regarding
what constitutes ethical and unethical behavior.
1-48
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Religiosity and Ethics
Each religion contains a variety of role
expectations regarding the appropriate
beliefs, behaviors, and emotions.
Religion influences ethical behavior through
a four stage process:
• Ethical awareness – judgment – intention
– behavior.
• Religious expectations can influence each
of the process stages.
1-49
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Religiosity and Ethics
Individual factors influencing the
relationship between religiosity and
ethical behavior:
• Role conflict.
• Salience of a person’s identity as a
member of a specific religion.
• Intrinsic versus extrinsic orientation
1-50
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Religiosity and Ethics
Organizations contain various “contextual triggers” that
influence the salience of religious role expectations.
Organizational factors influencing the relationship
between religiosity and ethical behavior:
• organizational status.
• organizational cultural norms.
• the presence of others within the organization who
identify themselves as religious.
1-51
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Business Ethics On the Job
Watch the ethics video
You’ll see a series of ethical dilemmas
During the video, make notes on the
dimensions of ethical behavior
described in the video
Be prepared to discuss your perception
of the situation with the class
1-52
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Ethics Video Debrief
Integrity: Stand up for what you think
is right
Loyalty: How do you balance loyalty
between the company versus other
people?
Honesty: Be honest but also be
prudent with information you have.
1-53
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Ethics Video Debrief
Responsibility: How far does your
responsibility to the company go?
Empathy: Be able to put yourself into
another person’s shoes.
Confidentiality: When the company trusts
you with information to hold in confidence,
honor that trust and keep information
confidential
Respect: Respect the needs of the company
as well as the needs of your coworkers.
1-54
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Conclusion
Questions for discussion
1-55
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.