POST GRADUATE DIPLOMA IN

BUSINESS MANAGEMENT
(PGDBM)

CENTRE FOR DISTANCE AND

VIRTUAL LEARNING (CDVL)
UNIVERSITY OF HYDERABAD
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Post Graduate Diploma in Business Management
(PGDBM)

411: Principles of Management and Organizational

Behavior

Editor
Prof. Sita Vanka

Coordinator
Prof. B. Raja Shekhar

Centre for Distance and Virtual Learning

University of Hyderabad
Hyderabad-500 001

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 PROGRAMME ADVISORY COMMITTEE

1. Prof. V. Venkata Ramana, Dean, School of Management Studies, University

of Hyderabad,

2. Prof . A. K. Pujari, Dean, School of Mathematics & Computer and

Information Sciences, University of Hyderabad,

3. Prof. A.Vidyadhar Reddy, Dean, Dept. of Business Management, Osmania

University, Hyderabad.

4. Prof. M. S. Bhat, School of Management Studies ,Jawaharlal Nehru

Technological University, Hyderabad.

5. Mr. Sumit Dey, Supply Chain Manager, VST Industries Ltd, Hyderabad

6. Mr. K. A. Ramnath, Head, Training & Development, GATI Ltd,

Secunderabad.

7. Prof. B. Raja Shekhar, School of Management Studies, University of

Hyderabad & Coordinator, PGDBM.

8. Dr. S. Jeelani, Director, Centre for Distance and Virtual Learning, University
of Hyderabad,

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 Contributors

1. Prof. Sita Vanka, Reader, School of Management Studies, University of

Hyderabad.

2. Dr.P.Jyothi, Reader, School of Management Studies, University of Hyderabad.

3. Mrs. Devika Varadarajan, Director, Polaris, Management Services, Hyderabad.

4. Prof. Sayulu Kuchi, Department of Commerce & Management, Kakatiya

University, Warangal.

5. Mr. V. Satyanarayanan Kumar, Senior Consultant, Training, Polaris,

Management Services, Hyderabad.

6. Mr. Manish Madani, Consultant, Education and Training, Polaris, Management

Services, Hyderabad.

7. Mr.Vishwanath Pudipeddi, Senior Analyst(HR),Deloitte Consulting, Hyderabad

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 The Prologue

The roots of management could be traced back to the human civilization itself, but the
contemporary global trends formed the tenets of modern management in a marked way.
Management in some form or the other was practiced and could be witnessed in its old grandeur
even today in monuments and living legends like the Pyramids, Taj Mahal, The Golden Gate
Bridge, etc and also at the operational level at giant corporations like the General Electric, IBM,
the Tatas, to name a few . The common thread that cemented them together was the capability to
get the work done efficiently and effectively. Management is what was seen in the activity either
in the olden days or in the contemporary era.
Management today in the contemporary context has assumed a universal character, applicable to
both the corporate and the non corporate world. The manager, at the center stage of the
organization spear heads the activities of the organization. It is his interest and desire which finds
the organizations both enduring and grow. This made the manager not only practice but also look
for a body of knowledge and practices to guide him through the activity. The result is
management literature and the emergence of the science of management with a systematic body
of knowledge to supplement the art of management.
The organizations, on the other hand, grew resulting in diverse perspectives and approaches to
management. The organizational processes also acquired a complex nature and a search began to
explore and understand human behavior for individual and organizational benefit. The individual
behavior, group behavior and organizational behavior assumed importance in the organizational
context. The study of management and its subject matter thus revolves round the definition,
perspectives and approaches to management followed by an understanding of the individual
behavior along with the organizational processes involved. An attempt is made in this reading
material to introduce the basic concepts and principles of management to the reader so as to
enable them to appreciate the significance and contribution in an organizational context. A blend
of academic and practitioner perspective of the course writing team is a special feature of this
reading material. This is also to place on record that there is nothing original but the material
reflects a compilation of the subject matter as found fit to be included in the respective units to
guide and enable the reader to appreciate the significance of management in an organizational
context.

Prof. Sita Vanka

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 Contents
1. Management – Meaning, Definition and Functions

2. Perspectives on Management

3. Contemporary Approaches to Management

4. Management Process and Functions

5. Organizational Processes- Concept of Power, Authority and Delegation

6. Managing the Human Factor – Leadership

7. Motivation – Concept and Theories

8. Contemporary Issues in Management

9. International Management

10. Organization as a Social System – Contribution of behavioral Science – OB,

Meaning, Concept

11. Foundations of Individual Behavior – Personality – Determinants – Theories

12. Learning – Work Attitudes

13. Group Dynamics – Formation - Types – Group Cohesiveness –

Work Teams – Self-Managed Teams

14. Job Stress – Causes – Consequences – Coping mechanisms –

Managing Stress in work life.

15. Conflict – Nature – Types – Resolving Conflicts- Effective Negotiation Strategies.

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 Chapter-1
Management – Meaning, Definition and Functions

1.1 Objectives: This chapter introduces the concept, meaning and definition of management.
After reading this chapter, the student would be able to:

• Understand the meaning of management.

• Appreciate the nature of management.
• Analyse the role and functions of a manager.
• Highlight management as a profession.

Keywords

• Management
• Science/Art of management
• Functions of a manager
• Management profession
Structure

• Introduction
• Definition and meaning
• The nature of Management
• Functions of a manager
• Levels of management
• Management skills
• Management as a profession
• Summary

1.2 Introduction

Management is the practice of consciously and continually shaping organizations. All

organizations have people who are responsible for helping them achieve their goals. These people
are referred to as Managers.

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Management is regarded as a as a specialty in time and Human Relationships. Management is a
specialty dealing with matters of time and human relationships as they arise in organizations. The
Importance of time could be understood in managementÊs attempt to create a desirable future,
keeping the past and the present in mind. Management is practiced in and is a reflection of a
particular historical era. Management is a practice that produces consequences and effect that
emerge over time. The importance of human relationships also involves several ideas. Managers
act in relationships that are two-way streets, each party is influenced by the other. Managers act in
relationships that have spillover effect for other people, for better and for worse. Managers juggle
multiple simultaneous relationships.

The twin theme of time and human relationships is greatly emphasized in an organization, as it is
believed that they can greatly aid oneÊs learning about management. Management is the principal
activity that makes a difference in how well organizations serve people affected by them.

1.3 Definition and meaning

The term management is derived from the French term ménagement, which means the art of
conducting and directing the things. However, the term acquired different meanings in the hands
of different scholars. This term can be interpreted in different ways as different scholars have
given their own views/ interpretation. Hence, it is better to understand the meaning of the term
management by looking at some of the definitions given by them.
Patrick J. Montana and Bruce H. Charnov defined it as „ Working with and through other people
to accomplish the objectives of both the organization and its members‰ The use of people and
other resources to accomplish objectives is management , according to Louis E.Boone and David
L.Kurtz.

The process of designing and maintaining an environment in which individuals, working together
in groups, efficiently accomplish selected aims was put forward by Harold Koontz and Heinz
Weihrich. Dalton E. McFarland viewed it as „ a process, by which managers create, direct,
maintain, and operate purposive organizations through systematic, coordinated, cooperative
human effort.‰ For M.P. Follet, it is the act of getting things done through people.

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Effective utilization and coordination of resources such as capital, plant, materials, and labor to
achieve defined objectives with maximum efficiency is another perspective put forward in
defining management. (www.ecbp.org/glossary.htm)

The process of setting and achieving goals through the execution of five basic management
functions: planning, organizing, staffing, directing, and controlling; that utilize human, financial,
and material resources Managers carry most of the functions of the organization, which include
planning, organizing, staffing, leading and controlling. Henry Fayol was the first management
thinker to outline the five basic functions carried out by managers. Every manager performs these
basic functions. (These functions are discussed in detail in the later part of this chapter).
Management activities include planning, organizing, staffing, coordinating, motivating, leading
and controlling; getting results effectively through other people by process of delegation.

Management is the pre-requisite to all kinds of organizations. When groups of people work
together towards the accomplishment of some common objectives, it becomes necessary to guide,
organize and control them. The term ÂmanagementÊ applies to all the organizations irrespective of
the size or nature of operations. The prime concern of a manager is to manage their people and
resources effectively. The organization may be a multinational company, a hotel, a cricket team, a
college, etc.

Management is essential at all hierarchical levels. Management is a necessary tool at all levels in
the organization; albeit the type of skills and the degree to which various skills are required at
different levels of the hierarchy vary from one organization to the other. The managers need
technical, human, and organizational skills to perform their duties satisfactorily.

The goal of all managers is to generate surplus. The aim of every business manager is to create a
surplus for the organization and such a surplus should be increasing from time to time. To
accomplish such an objective, the manager should create an environment, which encourages
people to accomplish as much as possible with the least amount of resources and personal
dissatisfaction. Hence he should know not only technical but human skills to generate surplus.

The aim of every manager is to increase productivity, efficiency and effectiveness of the
organization. Productivity is defined as the output-input ratio within a time period with due
consideration for quality. Productivity can be increased either by producing more output with the
same inputs, or by reducing inputs, but maintaining the same level of outputs or by increasing
outputs and reducing inputs, thereby, making the ratio more favorable.

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Productivity can be increased by enhancing efficiency and effectiveness of the activities of the
operations of the organization. Effectiveness refers to achievement of stated objectives of the
organization and efficiency refers to the judicious utilization of resources to accomplish
organizational objectives. Peter Drucker states that efficiency means „doing things right‰, while
effectiveness means „doing the right things‰.

Hence, it can be stated that management is the task of ensuring the achievement of the objectives
of the organization by utilizing the resources-technical, financial, human and organizational in the
most effective and efficient manner. Such a responsibility lies with the manager who manages the
things and uses the resources in the most effective and optimum manner.

1.4 The nature of Management

The concept of management is universal and roots back to the human civilization itself. As an
evolving subject, different views have been expressed about its nature by different scholars. The
practice of management in the olden days led to a search for a science with perspectives drawn
from different fields of study . It is thus an inter disciplinary activity and since it deals with
people, it also reflects the social aspect its nature. The nineteenth century viewed management as
an inbound quality and very specific to managers as individuals. The emergence of large
corporations and business houses led to newer perspectives on the nature of management in the
twentieth century.

Management as a science

A science is a systematized body of knowledge developed through concepts, experiments,

principles and doctrines that do not change. For example NewtonÊs laws of motion will not
change as it is an outcome of research. Science is more a discoverer rather than a creator.
Management as a science , is a set of principles, concepts, experiments and evidence of how to
manage a situation under a given set of assumptions. Therefore, management cannot be rooted
out as a no science field but is regarded as a soft science, as it deals with people.

Management as an Art:

Art is the best way of doing things. It aims at bringing out the desired results through the
application of skills. Management is considered a creative art as it envisages the application of
knowledge and skills which change according to situation. Managers need sufficient skills to
motivate and drive groups towards stated goals. As an art, management deals with unpredictable
human behaviour, creativity and innovation in dealing with situations and principles which are
situational. Just as artist develop their skills over a time and with practice , managerial skills
could also be developed.

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Management as a Profession:

A profession by definition is a certified vocation of individuals that enables them to apply the
basic principles and practices and a certain given code of conduct. Edger Schien considers a
profession as „a codified body of knowledge resulting from a long formal education, with entry
and exit determined by an examination and finally governed by a code of ethics‰. Management
has acquired a body of knowledge and is being practiced by managers with exposure to formal
education and training through management development programmes. In addition, many
professional organisations are engaged in research and projecting trends in management. The
regulatory agencies provide encouragement to professionals through regulation and also
encouragement to individuals. Thus it has assumed the status of a profession gradually and
surging ahead for getting far more professional status in the near future. Against this background,
management is considered by many as both a science and an art because of its knowledge base
and the skill the manager evidences in dealing with human behaviour. It is also reaching the
status of a profession with sustained effort from individuals and institutions alike.

1.5 The Functions of a Manager

A manager performs multi dimensional functions. They include planning, 0rgaising, staffing,
leading, motivating and controlling. The functions of a manger are discussed below.

Planning
Planning is defined as the process of deciding the strategy of the organization through which its
objectives could be achieved with minimum problems. David R. Hampton states that planning
includes thinking about a fundamental nature of the organization and deciding how it should be
positioned in its environment. The managers should determine the present and future needs of the
organization and also analyze business trends and plan out the activities. Such a planning should
be flexible enough to accommodate changes, which are unforeseen and necessitate changes in the
functioning of the organization.

Organizing
Organizing is the process of establishing fixed administrative structures, assigning tasks and
allocating resources to individuals, and establishing formal relationships among them in such a
manner that they channel their energies and competencies towards the accomplishment of the
organizational goals. According to David R. Hampton, Organization refers to dividing the overall
organization into units having vertical responsibilities and establishing hierarchical relations. The

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process includes, determining the number of tasks to be performed, determining the manner in
which they should be performed, grouping of jobs, establishing authority and reporting
relationships along the hierarchical lines. Such a structure is an important element, which
determines the achievement or non-achievement of the goals of the organization.

Staffing
Earlier, staffing was referred as Âpersonnel managementÊ and now it is being called as „human
resource management‰. It involves recruiting, selecting and placing people in the right place in
the organization. Heinz Wehirich and Harold Koontz state staffing is defined as filling and
keeping filled positions in the organization structure. The staffing activity includes determining
manpower requirement from time to time, assessing the number of people available inside the
organization, recruiting and selecting candidates with right aptitude and caliber, placing them in
the right place, etc. Added to such functions, staffing also takes care of compensation,
performance appraisal, promotion, etc.

Leading
Leading is the process of influencing, motivating, and directing people towards the
accomplishment of organizational goals from time to time. It is the responsibility of the
management to influence and inspire the people so that they perform well and accomplish the
organizational objectives. Leading involves communicating the goals of the organization to the
followers, different styles of leadership and approaches, motivating people to perform in the best
possible manner, etc. In simple terms, it is the act of making things happen through others by
guiding them in the most appropriate manner.

Motivating
Motivation is an important element in the process of managing the people and no manager can
shun such a responsibility. Motivation is both intrinsic and extrinsic. Intrinsic motivation refers to
the individualÊs satisfaction with the work, organization, peers, image of the organization, etc.
Extrinsic motivation refers to those motivators, which are provided by the organization, which
include salary, perks, position, allowances, etc.

Controlling
The last step in the management process is to monitor the progress of an organization towards the
accomplishment of its goals. According to David R. Hampton, controlling is a process of
monitoring progress against objectives and standards derived from planning. Controlling is the
process of continuous measurement and analysis of the work done by the individuals against the
established standards. Such standards are developed during the planning process and corrections

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are undertaken from time to time. The control process includes, comparison of performance
against set standards, determining the deviations, developing remedial measures, and taking
corrective steps.

Added to the above functions, the manager should be a person of innovative ideas, which enable
him to envisage the things in the most appropriate manner and take the decisions accordingly. He
should be visionary and should possess long term vision for the organization, which not only
enables him to formulate strategic plans but also take necessary steps towards the
accomplishment of related objectives.

1.6 Functions of a Manager in the Contemporary Context

Drucker states that a manager is one who is responsible for the work of other people. The
management is shouldered with five functions – planning, organizing, staffing, leading,
motivating, and controlling. As these functions are very important for the achievement of the
objectives in the most effective and efficient manner, it is necessary that the manager perform
these functions sincerely. Added to these are those which Drucker highlights as five basic
operations in the work of a manager. They are setting objectives, organizing, motivating and
communicating, measuring the work and finally developing the people towards accomplishment
of objectives.

1. Setting Objectives

An objective is a specific step, a milestone, which enables an individual to accomplish a goal.

Setting objectives involves a continuous process of research and decision-making. Knowledge of
oneself and his/her unit is a vital starting point in setting objectives. Strategic planning takes
place at the highest levels; other managers are involved with operational planning. The first step
in operational planning is defining objectives - the result expected by the end of the budget (or
other designated) cycle.

Setting right objectives is critical for effective performance management. Such objectives as
higher profits, shareholder value, customer satisfaction may be admirable, but they don't tell
managers what to do. "They fail to specify priorities and focus. Such objectives don't map the
journey ahead - the discovery of better value and solutions for the customer."

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The objectives must be:

ƒ be focused on a result, not an activity

ƒ be consistent
ƒ be specific
ƒ be measurable
ƒ be related to time
ƒ be attainable
Applying Feedback Analysis

Undertake a feedback analysis to compare actual results with expectations. Whenever you take a
decision or action, write down what you expect to happen. Review results at regular intervals, and
compare them with expectations. Use this feedback analysis as a guide to reinforce strengths and
eliminate weaknesses as well as for the next round of setting objectives.

2. Organizing Groups

Dividing Activities and Forming Groups

Once the objectives are set, analyzed the activities, decisions, relations needed, and classification
of work, divide it into manageable activities and further divide the activities into manageable
jobs. Group these units and jobs into an organization structure, select people for the management
of these units and for the jobs to be done. Groups can either be built into highly effective teams or
become obstacles to progress that reinforce conformity and kill individual initiatives.

The Principle of Participation

Research findings consistently validate the "principle of participation" in the team building - i.e.
group members more readily accept new ideas and new work methods when they are given the
opportunity to participate in making the decision to change and to participate in deciding how to
implement the change. Leaders practicing participative management could use varying degrees of
group member participation. This requires knowledge of specific skills and methods: how to
listen so that group members talk about their problems; how to conduct efficient meetings; how to
get group members to set performance goals.

Formal and Informal Groups within Organization

Organization is a combination of interrelated groups. These groups can be classified, according to

their orientation, as formal and informal ones.

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Formal groups are those designated and sanctioned by the organization. These groups possess
legitimate power within the organization, and generally are formed to accomplish a designated
task or function.

Informal groups are ones created by employees themselves, not sanctioned by the organization.
These groups can be created around a work place issue (interest groups) or an activity outside the
work place (friendship groups).

Basic Forms of Groups

Groups, classified according to their purpose, can be functional groups; task forces created to
complete a specific task; interest groups formed within the work place by a common interest; peer
groups joined friendship outside the work place; and formal committees.

Formation and Development of Groups

As groups evolve through the four stages of mutual acceptance, decision making, group maturity,
and control, their ability to deal with different and increasingly complex problems also evolves.
Management should be aware of the progress of a group and assign tasks accordingly. As a group
matures and grows, it evolves standards of expected behaviors and attitudes. These are the group
norms that are very important in the reinforcement of group loyalty and identity.

Group Behavior Norms

Behavior within a group conforms to the expectations of its members. This expected behavior
takes place within a range defined by upper and lower performance standards accepted by the
management and the group members. If management wishes to increase worker productivity
within the group, it must change both the lower and upper performance standards.

Group Status

The status of a group within the organization is dependent upon four major factors: the
importance of the task assigned; the success of the group; the status of the individual workers;
and the nature of the rewards to the group's members by the organization. An organization
should enhance the status of a group if it wishes willing and enthusiastic participation by the
workers.

Groups and Creativity

Techniques to increase creativity and generation of new ideas by a group include brainstorming,
nominal group technique, and the Delphi technique. Brainstorming is used with a small group to
generate a large number of alternative solutions to a problem, defined by management, in a short

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period of time. During the alternatives generation phase, no criticism may be voiced because this
would interrupt the generation of potential solutions. During the evaluation phase, each potential
solution is evaluated in detail by the group.

Nominal group technique is used in conjunction with the planning activities of management to
create managerial contingencies and future projections. In this technique, a problem, defined by
management, presented to a small group. Each member individually generates as many solutions
to the problem presented as possible, in writing. There is no communication between group
members. After a given period of time, group members present their ideas. The ideas of each
presenter are recorded. The group members can ask the presenter to clarify the ideas, but no
criticism is voiced during these presentations. After all group members have completed their
presentations, the recorded ideas are discussed and criticized. After the group discussion, each
participant is asked to rank the ideas in writing and anonymously.

Delphi technique is suitable for identifying future trends. It may be used when personal
interaction may influence the quality of the information generation. Experts constituting the
group do not meet physically. The Delphi group coordinator sends questions to the individual
group members in writing. Each member is asked to answer these questions anonymously.
Evaluation of these answers by other group members is also done anonymously. Coordinator
tabulates and summarizes the answers and returns the summaries to the group members, who are
asked to examine the criticism and modify their original answers if necessary. At no point does
any group member know who proposed a specific idea or who criticized it. The focus is
exclusively on the merits of the idea, never on the individual personality.

3. Motivation and Communication

Motivation depends on having clear objectives. Since motivation is personal, aim to align staff's
individual drives with the company's purposes in general and the individual unit's in particular.

Effective Motivation

Motivation is the process of stimulating an individual to take action that will accomplish a desired
goal. Highly motivated individuals can bring about substantial increases in productivity and job
satisfaction and substantial decreases in tardiness, grievances, absenteeism, and so forth.

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Communication

Communication strategy is a coherence linkage never to be overlooked. Communication needs to

be comprehensively planned and spontaneous, as well as top-down and bottom-up.
Communication processes, including the target audience, the message, the means of
communication, the frequency, the rationale, and the selection of communicators, must be
tailored to each purpose and constituency.

Top organizations have a communication process that communicates the knowledge and
information that people need in a way that they understand and can apply to their job.
Communication is neither a separate nor a periodic task. A manager should provide team
members with the information they require to do a good job, communicating with them
frequently, and giving them clear guidelines on the results that are expected.

Communication is a two-way relationship, establishing an enabling environment for others could

give the information one needs. Managers use feedback to make certain that communication has
become understanding and consensus. Managers communicate the reports and benchmarks that
track business progress and anticipate issues and opportunities. For example, the annual budget,
monthly measurements and benchmarks, key weekly measurements on which action can be taken,
etc.

Effective Interpersonal Communication

Communicating ideas effectively to others is yet another dimension. The two parts of a message -
the content and the message - must complement each other. Effective managers must be sure of
the appropriateness of the entire message they send. They must also realize that both the sender
and the receiver filter messages and that the message they sent may not be the message that was
received.

The major barriers to successful communication are:

ƒ message overload
ƒ message complexity
ƒ Personal distortion mechanisms include:
ƒ inattention
ƒ early (premature) evaluation
ƒ lack of common vocabulary

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Managers also pay attention to psychological phenomena that can interfere with effective
communication. Defensive reactions operate in everyone without the individual being conscious
of their operation. Any communication from either a senior or a subordinate that is considered
threatening can evoke a defensive reaction. The two major psychological distortion mechanisms
are rationalization - psychological process by which an individual justifies behavior and thought
that is unconsciously evaluated as unjustified, and denial - the process by which an individual
refuses to acknowledge feelings or options when challenged.

To improve interpersonal communication and overcome the above barriers, managers use the
following guidance.

ƒ begin the communication process with the formulation of a message that is clear and
concise
ƒ use words that are part of the common vocabulary of the individual with whom they
communicate; recognize that different groups have different common vocabularies and be
prepared to change vocabularies as needed
ƒ seek confirmation of understanding of the message you sent, ask the receiver to repeat
your message in words other that those originally used to transmit the message
ƒ try not to communicate in a haste - the goal is to communicate effectively, not quickly; if
required, transmit the message in several different forms
ƒ be attentive to both verbal and non-verbal messages, in both sending and receiving
ƒ in case of very important communications, keep a written record so that later disputes
regarding meaning can be resolved by consulting the original message.

Effective Communication

Downward communication: For communication to be successful, managers must ensure that all
necessary information is included in the transmission in a form that is acceptable to the
subordinate.

Upward communication: The key to successful upward communication is the trust of the
subordinate who is doing the communicating. If there is no trust, the subordinate will be tempted
to play it safe and only transmit desired information. Managers have to work at earning and
keeping an employee's trust.

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Lateral (horizontal) communication, between different individuals or departments on the same
organizational level, and diagonal communication, between two different organizational level, are
vital to the working of a complex contemporary business. They allow individuals with diverse
knowledge to contribute to problem solution in different parts of an organization and serving to
link groups and spread information. These informal communication networks are used by almost
all successful managers to monitor employee communication and to reach employees quickly
without the often cumbersome official organizational communication channels.

4. Measuring Performance

The basic purpose of any measurement system is to provide feedback, relative to goals, that
increases the chances of achieving these goals efficiently and effectively. Measurement gains true
value when used as the basis for timely decisions.

The ultimate aim of implementing a performance measurement system is to improve the

performance of the organization.

A good performance measurement system will help achieve success in five ways:

ƒ establish the current position

ƒ communicate direction
ƒ stimulate action in the most important areas for business
ƒ facilitate learning
ƒ influence behavior

5. Developing People

Develop yourself or Self Awareness - the First Step to Influencing Others is the motto.
Great leaders, coaches and communicators don't focus extremely on their followers, coaches and
audience. They have a high degree of self-awareness. All have basic skills to lead, coach, or
communicate; unfortunately, most of them have a few psychological blocks when it comes to
applying those skills well and consistently. Knowing oneself will help overcome their own
blocks.

Developing People

Developing people is achieved by careful, planned and motivational delegation of responsibility

and duty. Trust and knowing oneÊs colleagues helps in developing people. "Organizations are no

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longer built on force. They are built on trust." Rather than relying on oneÊs powers, provide a
spur, use the powers within people should be the aim of the managerÊs activities.

Empowerment of people

People are an organizationÊs most underutilized resource. In the new knowledge economy,
independent entrepreneurship and initiative is needed throughout the ranks of the organization.
Involvement in an organization is no longer a one-way street. In today's corporate environment a
manager must work towards engaging organization forcefully enough to achieve its objectives.
New knowledge-based enterprises are characterized by flat hierarchical structures and multi-
skilled workforce. Managers assume more leadership and coaching tasks and work hard to
provide employees with resources and working conditions they need to accomplish the goals
they've agreed to. In brief, managers work for their staff, and not the reverse.

Empowerment through Coaching

The new breed of leaders recognizes that in today's complex business environment autocracy no
longer works, yet the empowerment alone is not enough. Coaching aims to enhance the learning
ability and performance of others. It involves providing feedback, but also uses other techniques
such as motivation, effective questioning and consciously matching your management style to the
player's readiness to undertake a particular task. It is based on helping the player to help
her/himself through interacting dynamically with her/him - it does not rely on a one-way flow of
telling and instructing.

Coaching is the art of inspiring, energizing, and facilitating the performance, learning and
development of the player. Each word in this definition is a key word:

Art - Though coaching is considered as a Science by some, coaching is an art in the sense that
"when practiced with excellence, there is no attention on the technique - the coach is fully
engaged with the player and the process of coaching becomes a dance between two people,
conversationally moving in complete harmony and partnership. At this point the intelligence,
intuition and imagination of the coach become a valuable contribution - rather than being
interference for the player."

inspiring - coaching is about helping the player to unlock his or her true potential through raising
awareness, inspiring new ideas and encouraging creativity

energizing - coaching is about energizing the player through effective communication, soliciting
suggestions, and building a can-do attitude

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facilitating - implies that the player has the capacity to have an insight or creative idea and to
think something through for himself

performance – relates to anything a coach says or does should be driven by the intention to
improve performance, i.e. to achieve greater effectiveness or efficiency of the player

learning - refers to a broader domain, how to approach a task or master a new technology;
looking beyond immediate objectives, as the future performance of the organization depends on
learning

development - refers to personal growth and greater self-awareness.

Main Functions of a Manager

1. Setting Objectives & Planning To determine the objectives aligned with the
corporate vision and mission statement

To determine the goals in each area of

objectives

To decide what has to be done to reach the

objectives

To communicate the objectives to the people

whose performance is needed to attain them

2. Organizing the Group To analyze the activities, decisions, and

relations needed -

To classify the work

To divide the work into manageable activities

and further divide the activities into

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 manageable jobs

To group units and jobs into an organization

structure

To select people for the management of the

units and for the job to be done

3. Motivating and Communicating To make a team out of the people that are
responsible for various jobs

To empower employees and motivate them to

follow through on your strategic focus

To take relationship responsibility

To make people decisions on pay, placement,

and promotion

To communicate constantly to and from his

subordinates, superior, and colleagues

4. Measuring performance To establish yardsticks and few factors that are

as important to the performance of the
organization and every man in it

To make the measurements focused on the

performance of the whole organization and
every individual available to each staff member

21
 To analyze, appraise, and interpret performance

To communicate the meaning of the

measurements and their findings to your
subordinates, to his superiors, and to colleagues

5. Developing people To develop yourself

To develop others

1.7 Management Skills

A managerÊs job is complex. Hence they need certain skills to perform the functions associated
with their jobs. The scholars have identified the key skills which are discussed below

Technical Skills
Technical skills are those skills, which enable an individual to carry out some specific activities in
the organization. For the performance of such activities, he should possess some basic education
in the related field and knowledge pertaining to methods, process and procedures, which are
actually used. Accountants, engineers, computer professionals, etc, come under this category, as
they possess technical skills required in their specialized fields. It is difficult for any manager to
ensure smooth performance on the part of his employee without requisite technical knowledge.

Human Skills
Human skills refer to those skills, which facilitate better coordination among the different
personnel in the organization. It is the ability to lead the members of the organization in a single
direction so that the objectives of the organization could be accomplished in the most effective
and efficient manner. Such skills are exhibited while interacting with subordinates, peers,
stakeholders, customers, etc, and are important for all the levels of an organization.

Design Skills
It is the ability of the manager to find out the solutions to the problems of the organization from
time to time. The managers should be able to envisage the problems and should be sufficiently
resourceful to solve them in an amicable manner. Without such skills, it becomes difficult for the
management to pull the organizational units in a single direction towards the accomplishment of
the objectives. The designing skills are not limited to Âtrouble shootingÊ functions but much more
than that and embrace all those activities which remove the grievances of the employees.

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1.8 Managerial Roles

Henry Mintzberg has identified ten roles common to the work of all managers, which are grouped
under Informational, Interpersonal, and Decisional .

The ten roles are described individually, but they form an integrated whole.

The informational roles link all managerial work together. The three interpersonal roles are
primarily concerned with interpersonal relationships. The figurehead role allows the manager to
represent the organization in all official matters. The top level manager represents the company
legally and socially to those outside of the organization. The supervisor represents the work group
to higher management and higher management to the work group. In the liaison role, the manager
interacts with peers and people outside the organization. The top level manager uses the liaison
role to gain favors and information, while the supervisor uses it to maintain the routine flow of
work. The leader role defines the relationships between the manger and employees.

The interpersonal roles ensure that information is provided. The direct relationships with people
in the interpersonal role places the manager in a unique position to get information. Thus, the
three informational roles are primarily concerned with the information aspects of managerial
work. In the monitor role, the manager receives and collects information. In the role of
disseminator, the manager transmits special information into the organization. The top level
manager receives and transmits more information from people outside the organization than the
supervisor. In the role of a spokesperson, the manager disseminates the organization's information

23
into its environment. Thus, the top level manager is seen as an industry expert, while the
supervisor is seen as a unit or departmental expert.

The decisional roles make significant use of the information. The unique access to information
places the manager at the center of organizational decision making. There are four decisional
roles. In the entrepreneur role, the manager initiates change. In the disturbance handler role, the
manger deals with threats to the organization. In the resource allocator role, the manager chooses
where the organization will expend its efforts. In the negotiator role, the manager negotiates on
behalf of the organization. The top level manager makes the decisions about the organization as a
whole, while the supervisor makes decisions about his or her particular work unit.

The supervisor performs these managerial roles but with different emphasis than higher
managers. Supervisory management is more focused and short-term in outlook. Thus, the
figurehead role becomes less significant and the disturbance handler and negotiator roles increase
in importance for the supervisor. Since leadership permeates all activities, the leader role is
among the most important of all roles at all levels of management.

1.9 Levels of Management

In small business organizations, normally, the owner manages the entire activities and needs no
support from others. For example, a small shop, or a small consultancy is handled by the founder
himself or herself with minimal support. However, with the growth and increase of the size of
the organization, it becomes difficult for a single individual to run the show. A need for a formal
organization and the establishment of formal authority structures is a necessity. Generally, the
management activities are categorized into three levels; top level, middle level and lower level.
The three levels are organized along hierarchical lines so that each lower level could be
supervised by its immediate higher level. The functions of each level depend on the size,
technology, culture, etc. prevailing in the organization. Added to it, the number of managerial
positions at each level differs from organization to organization.

Top Level Managers

Top-level managers are appointed by the governing body of the organization and are normally
called as the „Chief Executive Officer‰ (CEO), „President‰, etc. Such individuals are empowered
to take decisions pertaining to the organization. Besides, the governing board also appoints the
„Vice President‰, „Senior Vice President‰ and „Executive Director‰, etc, all of whom form the

24
top-level management and are involved in taking key decisions. They work and collaborate with
the middle level managers in the implementation of organizational plans and maintain overall
control over organizational performance.

Middle Level Managers

Middle-level managers deal with the actual operations of the organization by coordinating various
departments. They are responsible for the performance of managers at lower levels and they hold
the designations like „manager‰, „director‰, „department head‰, etc. These manages are
responsible for the implementation of the plans and strategies developed by top managers towards
the accomplishment of the organizational objectives. Most of the time, they are free to take
decisions. However, on certain occasions, they look for guidance and directive from the higher-
level managers. They act as linking pins between the higher-level management and the lower
level managers.

Lower Level Managers

Lower-level managers are responsible for the performance of employees involved in actual
operations in the organization. In most of the organizations, they are called supervisors who direct
the employees in achieving the targets. In some manufacturing organizations they are also called
as foreman; a designation, which is not in much use in the modern era. Lower-level managers
implement the operational plans developed by middle manages and are responsible for taking
remedial actions whenever needed. They are responsible for output variables like number of units
produced, labor cost, inventory levels and quality control.

1.10 Summary:-

Management is the practice of consciously and continually shaping organizations. All

organizations have people who are responsible for helping them achieve their goals. These people
are referred to as Managers. Management t is defined variously by various scholars /
practitioners of management. However managing through people has been agreed by a majority
of them. Similarly the role and functions of a manager has also been looked at by scholars in
different ways. The fact remains that management is a practice that produces consequences and
contributions and the managers role assumes significance in this context. The managerial
functions are geared towards this end.

25
References
• Stephen P. Robbins and Mary Coulter (2004) Management. New Delhi: Prentice Hall of India
• James A. Stoner, R. Edward Freeman, Daniel Gilbert Jr.( 2003) Management New Delhi:
Prentice Hall of India
• L.M. Prasad (2004) Organizational Theory & Behavior. New Delhi: McGraw Hill

Questions:

1. Distinguish between Leadership and Management. Explain the „Management process‰

in detail.
2. Discuss in detail the various functions of a manager.
3. Explain the role of a manager in an organization.
4. Explain the Organizing function in detail.
5. Delineate the functions of a manager in the contemporary context.

Case Study:

Eastern Tires Co: What's wrong with Carl?

Eastern Tires Co. is having a managerial problem with its top management. In general, the
company's executives feel that the president lacks leadership qualities and does not know how to
get along with others.

Mr. Carl Lee and Bush Lee, brothers, established the company in 1963. The company
manufactures tires and brake pads for bicycles. These products are marketed under the brand
name of Steel-Rubber through bicycle dealers and service stalls in Hong Kong and China as
replacement parts. They are still the principal shareholders. Mr. Carl Lee owns 51% of the
outstanding common stock, and Mr. Bush Lee owns 19%. Through a perk package, other six
employees, including two of the company executives, own the remain stock.

Mr. Carl Lee is the president. Mr. Bush Lee is the treasurer in charge of all accounting matters
including the payroll department. The company currently employs 225 workers on the production
floors and 23 clerks in the management office.

26
During the years of his tenure as president, Mr. Carl Lee has displayed the philosophy of
leadership which may have an negative impact on the management of the Eastern Tires Co:

1. He has never considered the benefits but the costs. When Mr. Derick Au, the plant
superintendent, has requested to install a computer for quality-control purposes in the
plant. He has rejected the request simply because it costs too much.
2. He has never permitted worker grievances on the shop floor. He dismisses whoever files
a complaint.
3. He has never provided inventory human resources suitable for promotions. There are no
guidelines for promotion and further training.
4. He has never set the salary scale. He decides individual salary based on his favorableness.
5. He has never provided a system of appraisal which is clear, informative, and equitable.
6. He has never planned ahead.
7. He has never utilized upward communication channels.
8. He has never reached a group decision with other directors. He always makes his snap
decisions.
9. He has never delegated authority and responsibility to subordinates. He requires all sales
people to call in for approval of sales whenever on business trips in Hong Kong or China.
On one occasion, during his illness, the company has once lost a major contract with an
agent for 5,000 replacement tires in China.

On several occasions, Mr. Bush Lee has urged his brother to seek the directors' approval to
appoint an executive vice-president. Mr. Bush Lee feels that this executive could take over some
of the duties now performed by the president. Mr. Carl Lee's philosophy and beliefs are often at
odds with Mr. Bush Lee's, and this has result in some heated quarrel.

Questions

1. What is wrong with the companyÊs organization? Support your claim with evidence from
the case. How would you suggest rectifying the situation?
2. What are the necessary management skills for an administrator like Mr. Carl Lee?

27
 CHAPTER-2
Perspectives on Management

2.1 Objectives: This unit introduces the different perspectives on management. After reading this
chapter, the student would be able to
• Appreciate the different perspectives of Management.
• Analyse the philosophy and approaches of Management.
• Understand the various ideas of Management thinkers during their time.

Keywords:
• Perspective
• Philosophy
• Approaches
• Theories of Management.

Structure
• Introduction
• Approaches
• Comparison of approaches
• Summary

2.2 Introduction
The evolution of management roots back to the contribution of various schools of management
thought, which emphasize certain philosophies and approaches as best for the managing the
organizations. They are referred to as approaches/Theories and provide various perspectives on
Management. They are discussed below.

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2.3 Approaches
a. The Empirical or Classical Approach

The empirical or classical approach to management was involved in the early part of the 20th
century. To some extent, it is accepted and practiced my many managers even today. Exponents
of this school of management thought emphasize the importance of a study of the experiences of
successful manager. They claim that such a study would provide better understanding of the most
effective way of managing an enterprise. At times, they stress the need for study and analysis of
cases. However, management is not like law, based on precedent. The future situations in which
management will have to take decisions vary considerably to the previous experiences.

Three separate branches of the classical approach have been developed: Scientific Management,
Administrative Theory & Bureaucracy.

(i) Scientific Management

It grew out of a need to improve manufacturing efficiency through more effective utilization of
physical and human resources. This was developed by F.W. Taylor – the father of
Scientific Management. He observed that the best management is a true science resting
upon clearly defined laws, rules and principles as a foundation.(Scientific Management is
discussed in detail later in the unit)

(ii) Administrative Theory

Administrative Theory describes efforts to define the universal functions that managers
perform and principles that constitute good management practice. The major contributor to
the administrative theory was a French Industrialist named Henri Fayol. Other contributors
to the development of this theory were Urwick, Terry, Peter Drucker, Koontz etc.
The Administrative Theory emphasized management functions and attempted to generate
broad administrative principles that would serve as guidelines for the rationalization of
organizational activities. Administrative theorists developed general guidelines of how to
formalize organizational structures and relationships. They viewed the job as antecedent to
the worker. Primarily these principles were broad guidelines for decision making.

Writing at about the same time as Taylor, Fayol proposed that all managers perform five
management functions: of planning, organizing, commanding, coordinating, and

29
controlling. The importance of this simple insight is underlined when we acknowledge that
almost every introductory management textbook today uses these same five functions, or a
very close variation of them, as a basic framework for describing what managers do. Fayol
also described the practice of management as something distinct form accounting, finance,
production, distribution, and other typical business functions. He argued that management
was an activity common to all human undertakings in business, in government, and even at
home. He also stated 14 principles of management:

1. Division of Work: Fayol has advocated division of work to take the advantage of
specialization. The worker always works on the same part, the manager concerned
always with the same matters, acquire an ability, and accuracy which increase their
output. Thus division of work can be applied at all levels of an organization.
2. Authority and responsibility: Fayol finds authority as a continuation of official and
personal factors. Official authority is derived from the managerÊs position and personal
authority is derived from personal qualities such as intelligence, experience, moral
worth, past services etc. Responsibility arises out of assignment of activity.
3. Discipline: Discipline is obedience, energy, behavior, outward mark of respect shown
by employees.
Discipline is of two types:
(i) Self imposed discipline: This springs from within the individual and is in the
nature of spontaneous response to a skillful leader.
(ii) Command Discipline: This stems from a recognized authority and utilizes
deterrents to secure compliance with a desired action, which is expressed by
established customs, rules and regulation.
4. Unity of Command: it means that a person should get orders and instructions from any
one superior. Fayol has considered unity of command as an important aspect in
managing an organization. If unity of command is violated, authority is undermined,
Discipline is in jeopardy, order distributed and stability threatened.
5. Unity of Direction: According to this principle, each group of activities with the same
objective must have one head and one plan. Unity of direction is concerned with
functioning of the organization in respect of its grouping of activities or planning.
Unity of direction provides better coordination among various activities to be
undertaken by an organization.

30
6. Subordination of individual to general interest: Individual interest must be subordinate
to general interest when there is conflict between the two. The agreement between the
employers and the employees should be fair and there should be constant vigilance and
supervision.

7. Remuneration of personnel: Remuneration and methods of payment should be fair and

afford the maximum possible satisfaction to employees and employer. Reward for the
work done should, as far as possible, give satisfaction to both the employees and the
employer. Various systems of payment of wages are not considered of universal
applicability, and none of them can be offered as perfect, says Henry Fayol. The
importance of non-financial incentives is also stressed by him, which is now accepted
as a matter of vital concern to the management.

8. Centralization: Fayol refers to the extent to which authority is concentrated or

dispersed. Management should centralize the authority to the extent that neither there
should be too much concentration of power nor it divides too much. Management
should see that maximum results are realized from all the faculties of the personnel.
Individual circumstances will determine the degree that will „give the best over all
yields‰.

9. Scalar Chain: The line of authority from top management to the lowest ranks represents
the Scalar Chain. Communications should follow this chain only. It can be short
circuited only in special circumstances when its rigid following would be detrimental to
the organization. For this purpose, Fayol has suggested ÂGang PlankÊ for cross-
communication which is used to prevent the scalar chain from bogging down action.
This is explained with the help of the figure below:

In the following figure, „A‰ is the top man having immediate subordinates B & L. In
turn B & L have immediate subordinates C & M respectively. This continues to H & R.
Communication must flow from A to B to C to D and so on while coming from top to
bottom. Similarly it must flow from H to G to F to E⁄ to A while going up. It means if
any communication is going from F to P, it will flow from F to A via E, D, C & B and
coming down to P via L, M, N & O.

31
 Fayol suggests that this scalar chain takes time, and therefore, can be substituted by a
Gang Plank without weakening the chain of command. In order to maintain authority, it
is desirable that superiors of F and P authorize them to deal directly provided each
informs his superiors of any action taken. Fayol suggested that this system allows F and
P to deal in a few hours.

10. Order: Order refers to the arrangement of things and people. In material order, there
should be a place for everything and everything should be in its place. In social order,
there should be the right man in the right place.

11. Equity: Equity is the combination of justice and kindness. Equity in treatment and
behavior is liked by everyone and it brings loyalty in the organization. Equity
application requires good sense, experience and good nature for soliciting loyalty and
devotion from subordinates. Equity ensures cordial relations between the management
and the labor. Smooth and successful working of an enterprise depends on healthy
industrial relations which are built on enduring basis of justice and fair play. Equity
does not exclude either forcefulness or sternness.

12. Stability of Tenure: Stability of tenure is reasonable security of jobs. Stability of tenure
is essential to get an employee accustomed to new work and succeeding in doing it
well. Unnecessary turnover is both cause and effect of bad management. Frequent
changes should be avoided. Fayol considers that it is much better to have one manager
of mediocre quality than a sequence of able managers moving rapidly in and out of the
function.

13. Initiative: Managers should encourage their employees for taking initiative within the
limits of authority and discipline. Initiative increases zeal and energy on the part of
human beings. Fayol describes initiative as one of the keenest satisfactions for an
intelligent man to experience. Management should encourage every employee in his
field of duties to turn out better work with his maximum versatility. Employees should
be welcomed to make any suggestions which should receive proper consideration by
the management in formulation of its objectives and plans.

32
 14. Espirit de corps: Espirit de corps denotes „union is strength‰ and extension of unity of
command for establishing team work. Espirit de corps means the spirit of loyalty and
devotion which unites the members of a group. It also means regard for the honor of
the group to which one belongs. Fayol called for harmonious relations among the
personnel of the concern. Harmony among the personnel is the source of strength.
Strength, stability, stature and reputation depend on the harmonious relations,
subsisting among the personnel.

(iii) Bureaucracy (Structural Theory)

While Taylor was concerned with management at shop level (or what we today would
describe as the job of a supervisor) and Fayol focused on general management functions,
the German Sociologist Max Weber focused on developing a theory of authority
structures and describing organizational activity as based on authority relations. He was
one of the first to look at management and organizational behavior from a structural
perspective.

This theory is based upon hierarchy of authority, rules and regulations. It visualizes a
machine model of organization characterized by impersonal control over human beings.

Weber described an ideal type of organization that he called a bureaucracy. Bureaucracy

was a system characterized by division of labor, a clearly defined hierarchy, detailed

33
 rules and regulations, and impersonal relationships. Weber recognized that this „ideal
bureaucracy‰ did not exist in reality but, rather, represented a selective reconstruction of
the real world. He meant it to be taken as a basis for theorizing about work and how work
could be done in large groups. His theory became the design prototype for large
organizations. The features of WeberÊs Ideal Bureaucratic structure are:

1. Job Specialization: jobs are broken into simple, routine, and well-defined tasks.
2. Authority Hierarchy: Offices or positions are organized in a hierarchy, each one
being controlled and supervised by a higher one.
3. Formal Selection: All organizational members are to be selected on the basis of
technical qualifications demonstrated by training, education, or formal examination.
4. Formal Rules and Regulations: To ensure uniformity and to regulate the actions of
employees, managers depend heavily on formal organizational rules.
5. Impersonality: Rules and controls are applied uniformly, avoiding involvement with
personalities and personal preferences of employees.
6. Career Orientation: Managers are professional officials rather than owners of the
units they manage. They work for fixed salaries and pursue their careers within the
organization.

The classical approach provides a basis for training managers by identifying the functions and
skills of management. It offers a convenient way of acquiring managerial skills. It focuses
attention on division of work, formal structure and universality of management principles.

This approach offers a mechanistic framework that overlooks the overwhelming role of human
factor in management. It is based on the concept of rational economic man.

b. Human Behavioral approach or Human Relations Approach

The behavioral approach focuses on the psychological and sociological processes that influence
employee performance. Stress is laid on the utility of human relations practices covering topics
such as leadership, communication and motivation. ManagementÊs study must be centered on
interpersonal relations and managing involves Âgetting things done through peopleÊ. It
concentrates on the ÂpeopleÊ aspect of management with heavy orientation to psychology and
social psychology with stress on satisfying psychological needs and understanding psychological

34
behavior of people. The influence of environment and constraints on behavior are also
recognized.

Emergence of Human Relations Movement

Classical Theories have assumed man as economic being driven by the fear of hunger and there is
no conflict between management and workers. Thus they have made work, structure and
monetary rewards as focal points to suggest various principles and practices to improve
effectiveness. In spite of the fact that academic disciplines like sociology and psychology have
strengthened the contribution of the classical theories, they did not achieve expected production
efficiency and work place harmony. In fact the typical application of scientific principles, mental
revolution, motivating through rewards, stability of tenure, encouraging initiative, promoting
team work advocated by the classical theories have laid foundation for recognizing man in
organizations.

The Hawthorne Studies:

The first Inquiry – without question, the most important contribution to the Human Relations
movement within organizational behavior came out of the Hawthorne studies undertaken at the
Western Electric CompanyÊs Hawthorne Works in Cicero, Illinois. These studies, originally
begun in 1924 but eventually expanded through the early 1930s, were initially devised by
Western Electric industrial engineers to examine the effect of various illumination (lighting)
levels on worker productivity. Control and experimental groups were established. The
experimental group was presented with varying illumination intensities, while the control group
worked under a constant intensity.

The results were confusing. The engineers had expected individual output to be directly related to
the intensity of light. However, they found that as the light level was increased in the
experimental group, output for both groups rose. To the surprise of the engineers, as the light
level was dropped in the experimental group, productivity continued to increase in both the
groups. This is when the engineers concluded that illumination intensity was not directly related
to group productivity, but they could not explain the behavior they had witnessed.

35
Elton Mayo & the Hawthorne Experiments
In 1927, the Western Electric engineers asked Harvard Professor George Elton Mayo (1880–
1949) and his associates to join the study as consultants. This began a relationship that lasted
through 1932 and encompass numerous experiments covering the redesign of jobs, changes in the
length of the day and work week, introduction of rest periods, hot lunches, and individual versus
group wage plans. Interviews were done to determine attitudes and analysis of the social
organization among workers. It was found that changes in the work environment had little long
term effect upon work productivity. Social norms or standards of the group, therefore, were
concluded to be the key determinants of individual work behavior.

Findings of the Hawthorne Studies

Elton Mayo emphasized the recognition of human factor. He believed that both physiological and
psychological aspects influence human capacity to work. Mayo was considered as Father of
Human Relations Approach. The experiments were conducted by him and his associates Kurt
Lewin, Roethlisberger, Dickson, Lippet and White, Cock and French.

The Human Relations Theory was based on the following assumptions:

(i) People want to feel useful and important.
(ii) People desire to belong and to be recognized as individuals.
(iii) Esteem needs are more important than money in motivating people to work.
(iv) Managers should make each employee informed and listen to them and make them feel that
they are important for the organization.
(v) Managers should allow his subordinates to exercise self-control in certain routine matters.
(vi) Sharing information and participation in deciding the routine matters is a basic need.
(vii) Subordinates will be willing to cooperate when the basic needs are satisfied and they show
little resistance to change.

The findings of the Hawthorne Studies have been labeled as Hawthorne Effect.

Hawthorne Effect: It is the phenomenon that employees work harder and perform better if they
believe that the management was concerned about their welfare and superior pays a special
attention to them.

36
The Human Relations Theory has been based on a number of findings of Hawthorne studies
mentioned below:
(i) The level of production is set by social norms, not by physiological capacities of
workers.
(ii) Non-economical rewards and sanctions significantly affect the behavior of the
workers and largely limit the effect of economic incentive plans.
(iii) Often workers do not act or react as individuals but as members of groups.
(iv) The importance of leadership for setting and enforcing group norms and the
difference between informal and formal leadership is highly relevant for
organizational performance.
(v) Working conditions i.e. illumination, noise, etc. do not influence productivity.
(vi) Complex attitudes determine productivity.
(vii) Group pressure is a stronger influence on employee productivity, than management
demands.
(viii) Rational economic man motivated by economic rewards should be replaced by the
concept of social man. A social man is motivated by social needs and relationships
and responds more favorably to them than to the managementÊs directions.
(ix) Behavior of a person and sentiments are closely related.
(x) People can exercise self-control.

The worker becomes the focal point instead of the job in Elton MayoÊs Human Relations
Approach. This theory has introduced new concepts in the understanding of the organizations.
This has made significant contributions to the understanding of people at work, people in groups
and people in organization.

Though organizations were considered as a group of people, classical theories have undermined
the importance of people. On the Contrary, the Human Relations theory laid emphasis on human
element. Attitudes, sentiments, beliefs, values, belongingness, esteem, respect, culture etc., were
considered as influencing factors of human efficiency. Obviously, all these factors are related to
psychology and behavior of persons working in organizations. Moreover, a number of elements
such as decision making, interpersonal relations, communications, motivation, leadership,
learning, etc. are influenced by human relations and behavior. For this reason it was generally
agreed that the Hawthorne experiments have brought a large and dramatic impact on
organizational behavior.

37
This approach talks about organizational behavior in vague terms and overstresses the human
factor in the organization. It ignores planning, organizing, and controlling. Psychological training
alone is not enough to become an effective organization / manager. Also, in terms of scientific
validity, the conclusions of the human relations theory are based on the studies conducted at
Hawthorne plant, Harwood Manufacturing Company, Glacier Metal Company and studies made
by the University of Michigan – the criticism is that the companies selected are not representative
of the industry to draw any generalizations.

c. The Social Systems Approach

This approach in its thinking is closely related to the Human Behavior Approach, but views
management as a Social System. Its sociological thinking is aimed at identifying various social
groups with the fundamental belief in the need to solve the biological, physical and social
limitations through co-operation. This school of thought has made its contribution by stressing
the need for understanding organization relationships, group relationships and the influence of the
informal organizations.

d. Management Science Approach / Decision Theory Approach

The management science approach was evolved after the Second World War. It involves the
application of sophisticated techniques for solving managerial problems. Since the job of
managing is mostly concerned with taking the right decision, this approach adopts this as its
central focus and a study of the decision process – basically the selection of right course of action
from possible alternatives.

This approach has made a significant impact on the practice of management. The methods and
techniques developed under it are being increasingly used for the managerial decision-making. It
has given effective tools to solve problems of planning and control.

This approach covers only a part of the managerÊs job as it cannot effectively deal with
interpersonal and group relationships.

38
e. Mathematical or Quantitative Measurement Approach
Based on the Decision Theory Approach, the mathematical approach provides a quantitative basis
for decision making viewing management as a system of mathematical models and processes.
According to the approach decision making is a logical process and can be expressed in terms of
mathematical symbols/relationships or models. During recent years, this approach has contributed
greatly by providing tools or techniques viz. Linear Programming, Simulation and Queuing as
aids to management decision making which is becoming highly complex in large scale
organizations, where the number of variables are greater and which poses a different task for the
managers.

f. The Systems Approach

The systems approach looks at management as a system or as „an organized whole‰ made up of
sub-systems, integrated into a unity or orderly totality. It emphasizes that an organization draws
from its environment and processes/transforms these inputs and returns the output back into the
environment in the form of goods and services.

Organization as a System: Systems theory considers organization as a system consisting of Input,

processing and output sub systems. Organizations are not static systems; they are open and
dynamic systems. As organizations are part of the society and as such a number of factors outside
the scope of the organization influence its sub systems and its activities. These factors are called
External Environmental Factors. Organizations continuously interact with these environmental
factors and change their systems according to the changes in environmental factors. This is called
as adoptive nature of organizations. The success of modern organizations largely depends on their
adoptive capability. An organization which quickly brings changes as per the changes in the
environment will become more effective and efficient organization. Organization viewed as an
open dynamic system is shown in the figure below:

39
 Environment Environment
Economical

Technological Political
PROCESSING
INPUT OUTPUT
Raw Mtrl
Technological
Products
Machines Processing Services
Finances Profits
Technology Managerial Information
Resources Processing Satisfaction
Information

Legal Social &

Ethical
Ecological
Environment Environment

Organisation as an Open Dynamic System

The systems approach points out the complex, multi-dimensional and multi-disciplinary character
of management. It is a valuable aid in understanding the interrelationships between different parts
of an organization and its environmental interface. It gives a manager a wider and overall
perspective. This approach suggests that the internal functioning or an organization must be
consistent with the demands of the changing environment and the needs of its members.

The systems theory is an integrated theory for the understanding of organizations. It has brought a
synthesis between the classical theories and neo-classical theories. But the theory has been
criticized on two grounds.

(i) Abstract Theory: The systems theory is considered as abstract as it did not explain the
specific factors of environment which influence the organization activities. It specifies
that an organization is an interdependent social system which is interrelated. But it fails
to bring out the specific relationship among various sub units of the organization.
(ii) Lack of Universality: The systems theory is suitable for large and complex organization.
Modern organizations are large and complex and hence the theory is applicable to these

40
 organizations. But it is not applicable to the small and moderately large organizations.
Therefore it was criticized that the theory has no universal applicability and hence,
considered an incomplete theory.

g. Contingency Approach
This approach emerged from the real life experience of managers who found that no single
approach worked consistently in every situation. The basic idea of this approach is that no
management technique or theory is appropriate in all situations. Managerial practices and styles
will differ according to the particular circumstances or the situations. This approach offers a clear
picture of the realities of the managerÊs job. It is a practical and realistic approach to the task of
management. It puts a balanced emphasis on all skills of managers. It recognizes that the manager
is than just a leader of subordinates, or a decision-maker or an information handler.

A contingency approach to the study of OB is intuitively logical. Why? Because organizations

obviously differ in sizes, objectives, and environmental uncertainty. Similarly, employees differ
in values, attitudes, needs, and experiences. Applied to Organizational behavior, contingency
theory recognizes that there is no „one best way‰ to manage people in organizations and no single
set of simple principles that can be applied universally.

Four important ideas of contingency theory are:

1. There is no universal or one best way to manage.
2. The design of an organization and its subsystems must 'fit' with the environment.
3. Effective organizations not only have a proper 'fit' with the environment but also between its
subsystems.
4. The needs of an organization are better satisfied when it is properly designed and the
management style is appropriate both to the tasks undertaken and the nature of the work
group.

This approach can be useful in strategy formulation, organizational design, information decision
systems, leadership and organizational development. This approach can become operational only
when the actions to be taken in alternative situations are prescribed.

The downside to this approach is that the managers have long realized that there is no one
approach / sure-shot formula to a given problem/situation. The decision that needs to be taken

41
would depend on the prevailing circumstances vis-à-vis the implications of the same. Also,
determining all relevant contingency factors and showing their relationships can be a very
complex process.

h. Scientific Management & F.W. Taylor

(a) Contribution of F.W.Taylor: Frederick Winslow Taylor (1856-1915),

also known as „Father of Scientific Management‰ spent a greater part of
his life finding solutions to the problems of achieving greater efficiency
on the shop floor. Taylor observed that the workers used to intentionally
delay the process of completing the job and that the tools and equipment
provided to them were not standard and modern. He identified the need to teach the warders
that prima facie if they turn out more work, they would not be thrown out of employment.
The solutions suggested by Taylor were the outcomes of his own experience at work, initially
as a shop floor worker himself and later as a manager. All this was against the back drop of
the industrial revolution, particularly towards the end of the nineteenth century. Employers
gave a high degree of priority to efficient working methods. The employers were preoccupied
with the task of organizing all these efficiently and profitably.

Taylor was passionately interested in the efficiency of working methods. He initially realized
that the systematic analysis of work would find a solution to all the problems associated with
enhancing the efficiency of the working methods. He also realized that this was only way to
address to the apprehensions of the workers. Taylor thus consolidated his ideas at Bethlehem
Steel Company and conducted some of his most famous experiments in improving labor
productivity. His writings were published as „The Principles of Scientific Management‰ in
1911.

Taylor was the first person to recognize and emphasize the need for adopting a scientific
approach to the task of an enterprise.

(b) Elements of Scientific Management: Scientific management was the process of applying
scientific principles to management related issues. Scientific Management methods called for
optimizing the way that tasks were performed and simplifying the jobs enough so that

42
 workers could be trained to perform specialized sequence of motions in the one „best‰ way.
After years of various experiments to determine optimal work methods, Taylor proposed the
following four principles of Scientific Management:
(i) Develop a science for each element of an individualÊs work. (Previously, workers
used approximations, derived from experience). This would mean replacing the rule-
of-thumb work methods with methods based on a scientific study of the tasks.
(ii) Scientifically select, train, teach and develop each worker rather than passively
leaving them to train themselves. (Previously, workers chose their own work and
trained themselves as best they could.)
(iii) Heartily cooperate with the workers so as to ensure that all work is done in
accordance with the principles of the science that has been developed. (Previously,
management and workers were in continual conflict.)
(iv) Divide work and responsibility almost equally between management and workers.
Management takes over all work for which it is better suited than the workers, i.e. the
managers apply the scientific management principles to planning the work and the
workers actually perform the tasks. (Previously, almost all the work and the greater
part of the responsibility were thrown upon the workers.)

These principles were implemented in many factories, often increasing productivity by a factor of
three or more. Henry Ford applied TaylorÊs principles in his automobile factories, and families
even began to perform their household tasks based on the results of time and motion studies.

(c) TaylorÊs Experiments: Taylor demonstrated the benefits of increased productivity and
earnings through an experiment at Bethlehem steel works. Prior to Scientific Management,
work was performed by skilled craftsmen who had learned their jobs in lengthy
apprenticeships. They made their own decisions about how their job was to be performed.
Scientific Management took away much of this autonomy and converted skilled crafts into a
series of simplified jobs that could be performed by unskilled workers who easily could be
trained for the tasks.

Taylor became interested in improving worker productivity early in his career when he
observed gross inefficiencies during his contact with steel workers.

43
Soldiering
Working in steel industry, Taylor had observed the phenomenon of workersÊ purposely operating
well below their capacity, i.e., soldiering. He attributed soldiering to three causes:

1. The almost universally held belief among workers that if they became more productive, fewer
of them would be needed and jobs would be eliminated.
2. Non-incentive wage systems encourage low productivity. If the employee will receive the
same pay regardless of how much is produced, assuming the employee can convince the
employer that the slow pace really is a good pace for the job. Employees take great care never
to work at a good pace for fear that this faster pace would become the new standard. If
employees are paid by the quantity they produce, they fear that management will decrease
their per-unit pay if the quantity increases.
3. Workers waste much of their effort by relying on rule-of-thumb methods rather than on
optimal work methods that can be determined by scientific study of the task.

To counter soldiering and to improve efficiency, Taylor began to conduct experiments to

determine the best level of performance for certain jobs, and what was necessary to achieve this
performance.

Time Studies
Taylor argued that even the most basic, mindless tasks could be planned in a way that
dramatically would increase productivity, and that scientific management of the work was more
effective than the „initiative and incentive‰ method of motivating workers. The initiative and
incentive method offered an incentive to increase productivity but placed the responsibility on the
worker to figure out how to do it.

To scientifically determine the optimal way to perform a job, Taylor performed experiments that
he called time studies, (also known as time and motion studies). These studies were characterized
by the use of a stopwatch to time a workerÊs sequence of motions, with the goal of determining
the one best way to perform a job.

The following are examples of some of the time-and-motion studies that were performed by
Taylor and others in the era of scientific management.

44
Pig Iron
If workers were moving 12 ½-tons of pig iron per day and they could be induced to try to move
47 ½-tons per day, left to their own wits they probably would become exhausted after a few hours
and fail to reach their goal. However, by first conducting experiments to determine the amount of
resting that was necessary, the works manager could determine the optimal timing of lifting and
resting so that the worker could move the 47 ½-tons per day without tiring.

Not all workers were physically capable of moving 47 ½-tons per day; perhaps only 1/8th of the
pig iron handlers were capable of doing so. While these 1/8th workers were not extraordinary
people who were highly prized by society, their physical capabilities were well-suited to moving
pig iron. This example suggests that workers should be selected according to how well they are
suited for a particular job.

The Science of Shoveling

In another study of the „science of shoveling‰, Taylor ran time studies to determine that the
optimal weight that a worker should lift in a shovel was 21 pounds. Since there is a wide range of
densities of materials, the shovel should be sized so that it would hold 21 pounds of the substance
being shoveled. The firm provided the workers with optimal shovels. The result was a three to
four fold increase in productivity and workers were rewarded with pay increases. Prior to
scientific management, workers used their own shovels and rarely had the optimal one for the job.

Bricklaying
Others performed experiments that focused on specific motions, such as GilbrethÊs bricklaying
experiments that resulted in a dramatic decrease in the number of motions required to lay bricks.
The husband and wife Gilbreth team used motion picture technology to study the motions of the
workers in some of their experiments.

(d) Intentions of Taylor: Taylor considered that opinions and guess work had to be replaced by
facts. The facts could be collected from study of the jobs on a sample of skilled workers,
making a note of each operation and timing it with a stop watch. All unnecessary movements
could then be eliminated in order to produce the best method of doing the job. Thus standards
were evolved for similar jobs, an advanced form of this analytical approach has been work
study practiced all over the world.

45
 Taylor insisted that the practice of rule of thumb should be done away with. The Management
should volunteer to accept the responsibility of developing working methods. This is a critical
job and can hardly be left to the initiative of workers. Taylor demonstrated to the entire would
how the average worker could perform better if a definite task was given with clear cut
standards. This has been criticized as having led to fragmentation of ob into tasks. It also has
led to the separation of the planning and controlling function from the doing function. Thus, it
emphasized division of labor.

Taylor felt that both the management and workers would benefit from scientific management.
He did not agree with the way the most piece rate systems were operated during those days. If
one produce more beyond a level the wage rate was reduced to keep the total earnings within
an acceptable level. Taylor wanted that the jobs /workers should be scientifically measured
and wage rates should be determined. The workers should be fully rewarded for their
productivity without any limit. Due to the complications involved in measuring the timing,
the managers reduced arbitrarily the rates where measurements were not exact.

Taylor wanted the wage rates to be determined scientifically and not by arbitrary factors such
as union power or managementÊs whims and fancies. He suggested to shift their focus to
contribute to a bigger cake (which means surplus) than to argue about the division of the
existing cake.

He called for a mental revolution both on the part of workers and management. The workers
and the management should develop considerable degree of trust and mutual cooperation to
reap the benefits of scientific approach. Mutual understanding and prosperity, he felt should
replace the age old practice of mutual exploitation. He regarded that there was one best way
of doing everything, whether it was using a shovel or filing a piece of paper.

(e) Directions to workers: Scientific management directed the workers to:

ƒ Stop worrying about how the surplus was divided between wages and profits.
ƒ Work in the correct way, and thus earn more.
ƒ Discard the rule of thumb approach and cooperate with the management in developing
the scientific method to carry out the given job.

46
 ƒ Accept the instructions of the management with the conviction that the management will
look after the future course of action.
ƒ Volunteer for getting trained in new methods, where necessary.

(f) Criticism for Scientific Management: The theory of scientific management was heavily
criticized by the employers, workers, and psychologists. The employers criticized the process
of scientific as costly and unworkable. Some of the other arguments against scientific
management were:

ƒ It ignores the functional areas of management such as marketing, finance etc.,

ƒ Individual creativity is ignored by favoring one best way.
ƒ Worker is reduced to a cog in the machine.
ƒ Over specialization made the work more fragmented. It emphasized more on the analysis
and organization of the individual task or operations making the worker more
mechanical.
ƒ Mobility among workers gets restricted because of narrow specialization.
ƒ Workers were not involved in the planning part of the job which was controlled by the
management. As a result, some of the jobs created continued to be repetitive and boring.
ƒ Workers too, did not like to part with the rule of thumb privilege. They felt much
insecure to adhere to the scientific standards given by management. Taylor clarified his
stand firmly - he said that the standards were scientifically determined and hence one
cannot have any reason to disagree.

(g) Benefits from Scientific Management: Scientific management proved to be very beneficial to
the industry at large.

ƒ Scientific management improved working methods and brought enormous increase in

productivity.
ƒ It developed a rational approach to measure tasks and processes with considerable degree
of accuracy.
ƒ It initiated certain improvements in working methods, plant design and other things,
based on information generated by measurement of tasks and processes.
ƒ Piece rate wage system was introduced and incentive systems were evolved.

47
 ƒ It stimulated the employers and higher levels of management to take a positive view of
leadership at the shop floor operations. This has led to the introduction of systems for
tight control over work.
ƒ Physical working conditions for employees underwent a sea charge.
ƒ It laid the foundation for work study and other related techniques.
ƒ The scientific approach replaced the most widely prevalent traditional rule of thumb
approach.
ƒ The observations about worker formed the basis for Mc. GregorÊs theory of X
assumptions about people.
ƒ The concepts of work design and job enrichment were meant for the victims of the
fragmentation effects of Taylorism.
ƒ Japanese Companies combined most of the beneficial aspects of scientific management
with other approaches to produce a highly successful production system. One example is
theory Z, developed by Ouchi, which focuses on developing the ability of the
organization to coordinate people not technology to achieve higher productivity.
i. Theory X - Theory Y – Theory Z

Theory X & Theory Y

Douglas McGregor, an American social psychologist, proposed the X-Y theory in his book 'The
Human Side of Enterprise'(1960). Theory X and theory Y are referred to commonly in the field of
management and motivation even today. Whilst more recent studies have questioned the rigidity
of the model, McGregor's X-Y Theory remains a valid basic principle, which helps in develop
positive management style and techniques. McGregor's XY Theory remains central to
organizational development, and to improving organizational culture.

McGregor's X-Y theory is a salutary and simple reminder of the natural rules for managing
people, which under the pressure of day-to-day business are all too easily forgotten. After
viewing the way in which managers dealt with their employees, McGregor concluded that a
managerÊs view of the nature of human beings is based on a certain grouping of assumptions and
that he or she tends to mold his or her behavior toward employees according to these
assumptions. He classified these assumptions under two
Categories – one basically negative, labeled Theory X, and the other basically positive, labeled
Theory Y.

48
Assumptions of Theory X (ÂAuthoritarian ManagementÊ style):- The assumptions held by the
managers are:
• The average person inherently dislikes work and will avoid it.
• Since employees dislike work, they must be coerced, controlled and threatened with punished
to get work done.
• The average person is self-centered and indifferent to organizational goals.
• The average person lacks ambition, dislikes responsibility and prefers to be directed.
• The average person is by nature resistant to change and wants security above all.
• Under the conditions of modern industrial life, the intellectual potential of people is only
party utilized.

From a management point of view, autocratic (Theory X) managers like to retain most of their
authority. They make decisions on their own and inform the workers, assuming that they will
carry out the instructions. Autocratic managers are often called "authoritative" for this reason;
they act as "authorities". This type of manager is highly task-oriented, placing a great deal of
concern towards getting the job done, with little concern for the worker's attitudes towards the
manager's decision.

Assumptions of Theory Y (ÂParticipative managementÊ style):- The assumptions held by the

managers are:
• Effort in work is as natural as work and play.
• People will apply self-control and self-direction in the pursuit of organizational objectives,
without external control or the threat of punishment.
• Commitment to objectives is a function of rewards associated with their achievement.
• People usually accept and often seek responsibility.
• The capacity to use a high degree of imagination, ingenuity and creativity in solving
organizational problems is widely, not narrowly, distributed.

49
Theory X – The Hard Approach and Soft Approach

Under Theory X, management approaches can range from a hard approach to a soft approach.

The hard approach relies on coercion, implicit threats, close supervision, and tight controls,
essentially an environment of command and control. The soft approach is to be permissive and
seek harmony with the hope that in return employees will cooperate when asked to do so.
However, neither of these extremes is optimal. The hard approach results in hostility, purposely
low-output, and hard-line union demands. The soft approach results in ever-increasing requests
for more rewards in exchange for ever-decreasing work output.

The optimal management approach under Theory X probably would be somewhere between these
extremes. However, McGregor asserts that neither approach is appropriate because the
assumptions of Theory X are not correct.

50
Evaluation of Theory X & Theory Y
Theory X assumes that lower-order needs dominate individuals. Theory X suggests Âmanagement
by direction and controlÊ involving external control over people. Its focus is on the satisfaction of
the lower-order needs. Theory Y assumes that higher-order needs dominate the individuals.
Therefore, theory Y suggests self-direction and self-control for satisfying higher order needs. (For
detailed description of lower-order needs and higher-order needs, refer Abraham MaslowÊs Needs
Hierarchy Theory). McGregor himself held to the belief that Theory Y assumptions were more
valid than Theory X. Therefore, such ideas as participative decision making, responsible
challenging jobs, and good group relations as approaches that would maximize an employeeÊs job
motivation, were proposed.

Many managers tend towards Theory X, and generally get poor results. Enlightened managers use
theory y, which produces better performance and results, and allows people to grow and develop.

Theory Z
First things first - Theory Z is not a McGregor idea and also is not McGregor's extension of his
XY theory. It was developed by William Ouchi, in his book 1981 „Theory Z: How American
Management can meet the Japanese Challenge‰. William Ouchi was professor of management at
UCLA, Los Angeles, and a board member of several large US organizations.

Often referred to as the "Japanese" management style, Theory Z offers the notion of a hybrid
management style which is a combination of a strict American management style (Theory A) and
a strict Japanese management style (Theory J). This theory speaks of an organizational culture
which mirrors the Japanese culture in which workers are more participative, and capable of
performing many and varied tasks. Theory Z emphasizes things such as job rotation, broadening
of skills, generalization versus specialization, and the need for continuous training of workers.

Much like McGregor's theories, Ouchi's Theory Z makes certain assumptions about workers.
Some of the assumptions about workers under this theory include the notion that
• Theory Z workers tend to build co-operative and intimate working relationships with those
that they work for and with, as well as the people that work for them.
• Theory Z workers have a high need to be supported by the company, and highly value a
working environment in which such things as family, cultures and traditions, and social
institutions are regarded as equally important as the work itself.

51
• Theory Z workers have a very well developed sense of order, discipline, moral obligation to
work hard, and a sense of cohesion with their fellow workers.
• Theory Z workers, it is assumed, can be trusted to do their jobs to their utmost ability, so long
as management can be trusted to support them and look out for their well being.

One of the most important tenets of this theory is that management must have a high degree of
confidence in its workers in order for this type of participative management to work. While this
theory assumes that workers will be participating in the decisions of the company to a great
degree, one author is careful to point out that the employees must be very knowledgeable about
the various issues of the company, as well as possessing the competence to make those decisions.
The author also cautions and point out however, that management sometimes has a tendency to
underestimate the ability of the workers to effectively contribute to the decision making process.

But for this, Theory Z stresses the need for enabling the workers to become generalists, rather
than specialists, and to increase their knowledge of the company and its processes through job
rotations and continual training. In fact, promotions tend to be slower in this type of setting, as
workers are given a much longer opportunity to receive training and more time to learn the
intricacies of the company's operations. The desire, under this theory, is to develop a work force,
which has more of a loyalty towards staying with the company for an entire career, and be more
permanent than in other types of settings. It is expected that once an employee does rise to a
position of high level management, they will know a great deal more about the company and how
it operates, and will be able to use Theory Z management theories effectively on the newer
employees.

2.4 Theory Analysis, Comparisons & Contrasts:

While several similarities and differences surround the ideas of these two theorists, the most
obvious comparison is that they both deal with perceptions and assumptions about people. These
perceptions tend to take the form of how management views employees, while Ouchi's Theory Z
takes this notion of perceptions a bit farther and talks about how the workers might perceive
management. The Table below shows a quick "snapshot" comparison and contrast of the two
theorists, and how they might apply the concepts shown to their particular management theories.

52
Comparison & Contrast of Management Theorists – Mc Gregor and Ouchi

Management Douglas McGregor William Ouchi

Concept (Theory X & Y) (Theory Z)
Tends to categorize people as
one type or another: either
being unwilling or
unmotivated to work, or being Believes that people are
self motivated towards work. innately self motivated to not
Threats and disciplinary action only do their work, but also
Motivation
are thought to be used more are loyal towards the
effectively in this situation, company, and want to make
although monetary rewards the company succeed.
can also be a prime motivator
to make Theory X workers
produce more.
Theory Z managers would
Theory X leaders would be
have to have a great deal of
more authoritarian, while
trust that their workers could
Theory Y leaders would be
make sound decisions.
Leadership more participative. But in both
Therefore, this type of leader
cases it seems that the
is more likely to act as
managers would still retain a
"coach", and let the workers
great deal of control.
make most of the decisions.
Management Douglas McGregor William Ouchi
Concept (Theory X & Y) (Theory Z)
As mentioned above, The manager's ability to
McGregor's managers, in both exercise power and authority
cases, would seem to keep comes from the worker's
Power & Authority
most of the power and trusting management to take
authority. In the case of care of them, and allow them
Theory Y, the manager would to do their jobs. The workers

53
 take suggestions from have a great deal of input and
workers, but would keep the weight in the decision making
power to implement the process.
decision.
This type of manager might be
Conflict in the Theory Z arena
more likely to exercise a great
would involve a great deal of
deal of "Power" based conflict
discussion, collaboration, and
resolution style, especially
negotiation. The workers
Conflict with the Theory X workers.
would be the ones solving the
Theory Y workers might be
conflicts, while the managers
given the opportunity to exert
would play more of a "third
"Negotiating" strategies to
party arbitrator" role.
solve their own differences.
Theory Z emphasizes more
Appraisals occur on a regular
frequent performance
Performance Appraisals basis. Promotions also occur
appraisals, but slower
on a regular basis.
promotions.

2.5 Summary:

Management is a practice of consciously and continually shaping organization. It is an attempt to

create a desirable future, keeping the past and present in mind. This gives rise to the different
perspectives on management which describe the evolution of management. The classical
approaches have laid the foundations of management, over which the tenets of modern
management theory and practice rest.

References:

• Stephen P. Robbins (2004) Organizational Behavior. New delhi: Prentice Hall of India.
• Weihrich & Koont (2004) Essentials of Management. New Delhi: Tata McGraw Hill.
• L.M. Prasad (2004) Organizational Theory & Behavior. New Delhi: Tata McGraw Hill Co.
• Fred Luthans (2004) Organizational Behavior. New Delhi: Sultan Chand & Sons.
• V.S.P. Rao & P.S. Narayana (2003) Organization Theory and Behavior.New Delhi: Konark
Publishers Pvt. Ltd.

54
1. Questions:

1. Elucidate the contributions of the Administrative Theory in understanding organizations.

2. What is Scientific Management? Explain the contributions of Scientific Management to the
modern OB.
3. Explain the principles of Management enunciated by Henry Fayol.
4. Explain the Hawthorne Experiments ÂHuman Relations theory has significantly contributed
for the emergence of Organizational BehaviorÊ. Explain.
5. „A system is a set of component parts‰. Discuss
6. „An organization is treated as an open dynamic system‰ Explain.
7. Compare and contrast – Theory X, Theory Y, and Theory Z.

Case Study

Call Center Executives or Call Center Robots

We have seen in the chapter, how the various approaches to managing people have evolved. One
would wonder how difficult it would have been for the workers to work in the times of scientific
management, bureaucracy, systems approach etc.

The Âin-thingÊ of todayÊs job markets for most of the young professionals straight out of
graduation colleges (or even 12th) is the Call Centers. Most of the young professionals aspire to
get into a job after graduation. Ask them why? And youÊd hear things like - the work culture there
is simply amazing, the manager is quite friendly, the management is quite approachable, etc – of
course besides „its good money‰. This is probably these are the organizations that talk of putting
Âpeople firstÊ.

But putting people first is not necessarily consistent with long-term competitiveness. Managers
recognize this fact and are increasingly acting on it. The organizations today are more typically
pursuing a „labor-cost-minimization‰ strategy rather than a people-first strategy. People are being
treated like machines.

In some of the call centers, the system automatically dials another number once a call is finished
with one customer. The login-time, logout time are documented. If 8 hours is the time that an

55
employee is supposed to work, all the 8 hours are just work, work and nothing else. Only the
productive time that an employee puts in is considered. If a person has to go to the washroom,
which would take not more than 10 minutes, he/she has to logout from the system which would
keep track of all the breaks. Only once the 8-hour of work is finished, the person may choose to
leave for the day.

Moreover, all the questions that a customer can possibly ask and the answers to be given are
clearly documented. Nothing but the script has to be followed. All the calls that a person handles
are taped and once in a while, the supervisor listens to it live on a parallel line (without the person
knowing) and checks if the script is being followed in the prescribed way or not. On one hand,
where we are talking of humanistic approach to management, on the other hand, people are being
treated like robots.

Question:
1. Are the old management approaches still valid and taking over the so-called
modern approaches and methods? How far is this fair to the employees? Discuss.

56
 Chapter -3
Contemporary Approaches to Management

3.1 Objective: - This unit introduces the student to the contemporary approaches to management.
This unit enables the student to:

• Recollect the salient features of various contemporary approaches to management.

• Appreciate the contribution of management Gurus.
• Articulate comparative perspectives on American, Japanese and European approaches to
management.

Keywords:
• Contemporary approach
• American
• Japanese
• European management.

Structure :

• Introduction.
• Approaches.
• The styles of management.
• Management Gurus.
• Summary.

3.2 Introduction
Management has been variously defined. A simple one that describes management is one which
describes it as a process consisting of activities of planning, organizing, controlling, staffing,
directing and budgeting, that is performed with the purpose of accomplishing stated objectives.

57
Management as a discipline is evolving and the „modern management movement‰ continues to
evolve by integrating theories. The approaches to modern management include the process
approach, the systems approach, the contingency approach, the strategic management approach,
the Japanese style management approach, and the excellence approach. It is a synergistic product.
The classical, behavioural and quantitative movements, along with systems and contingency
management theory, become integrated to form the framework of the modern management
movement.

3.3 The Approaches

The Process approach

In 1961, Koontz published an article in which he concluded that there existed a „management
jungle theory‰. Koontz believed that each identified management approach offered something to
management theory. He argued that the human resources and the quantitative approaches were
tools rather than management approaches. It was then demonstrated that a process approach could
encompass the variances.

According to Koontz, the process approach, originally proposed by Fayol, views management as
a process of getting things done through and with individuals who are operating in organized
groups. Managers plan, organize, lead and control. This process is a circular loop, with
controlling leading back to planning, indicating that it is continuous. The management process
which has been discussed in many terms is essentially a decisional and informational activity.

The Systems approach

The two basic types of systems are closed and open. Closed systems are not influenced by and do
not interact with their environment. Open systems recognize and respond to their environment.
Frederick Taylor′s view of people and organizations as machines was essentially a closed system.
The closed model includes Taylor′s scientific management, Weber′s bureaucratic theory, and
Gulick′s administrative or principles school. As early as the 1930s, Barnard maintained that
organizations were open systems and interacted with the environment. The open model includes
the human relations school, organizational development, and organizations as a unit in the
environment. Both open and closed models are interested in production and efficiency.

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The systems approach to management is considered a phenomenon of the mid-1960s, although its
beginnings were much earlier. Von Bertalanffy is the best known of the systems theorists. Von
Bertalanffy described a „system‰ which consisted of connected parts joined to form a whole in
which the coordinated and combined effect of the subsystems creates synergy. Systems theory
describes the behaviour of organizations both internally and externally. Internally, it shows how
and why people inside organizations perform their individual and group tasks. Externally, it
integrates organizational transactions with other organizations and institutions.

The closed model generally deals with routine tasks, task specialization, emphasis on the means,
and top down conflict management. Responsibility is tied into class specification, and loyalty is
to a subunit or a department. Knowledge is found at the top. Interaction is vertical and closely
follows the chain of command. The emphasis is on obedience and following set policies and
procedures. Prestige is internalized. The organizational structure is a formal hierarchy. Closed
systems are self-contained and do not rely on the environment. Closed systems operate best under
stable conditions.

Open models generally deal with non-routine task performance. Specialized knowledge runs
throughout the organization. Conflict is resolved among peers. The group as a whole contributes
to solutions to problems. Responsibility is to the total organization. The structure is fluid like an
amoeba and is informal. Interaction occurs between staff and employees both vertically and
horizontally. The goal is on excellence. Prestige is externalized (reputation, knowledge) instead
of internalized (rank). Open systems operate under unstable conditions and are not considered
self-contained. They rely on the environment for inputs and outputs.

In systems theory, the organization is one of several elements which interact interdependently.
The flow of inputs and outputs is the starting-point in describing an organization. In the simplest
of terms, the organization takes resources (inputs) from the larger system (environment),
processes these resources, and returns them to the environment in changed form (outputs).

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The Contingency approach

Contingency theory is a problem-solving approach which considers all major factors in a situation
before making a decision. It has been used in recent years to replace the simplistic principles of
management with more integrated ones. Simplistic principles provide insight about management
and employees within the organization, but they are often incomplete. Many of the early
management principles and organizational theories were assumed to be universal. Through the
years, research has shown that there are situations and conditions which support the need for a
more integrated approach.

The contingency approach as proposed by organizational theorists such as Lawrence and Lorsch
and Schein attempted to implement a variety of concepts from other approaches. They found that
the effectiveness of their techniques changed from one situation to another. Organizations and
their subsystems proved to be unique. This provided the base for designing and managing
organizations individually.

Contingency management stresses the need for appraisal and analysis of the entire managerial
environment within the organization. The appraisal and analysis are done in order to determine
what work features, technology, personnel and organizational designs need to be considered as
most fitting for particular circumstances.

There are three principal sets of interrelated assumptions. The first set assumes that agreement
exists between organizations and their internal and external environments, and between the
management system and its various components. The second set assumes that there is an
appropriate pattern for relationships which exists for all organizations. The third set centres on the
best contingency plan. Accordingly, the best management practice is one which examines and fits
what and how it is to be done, who is to do it, the impact of what is being done for the
organization, and the impact of the organization on what is being done. The contingency
approach promotes organizational effectiveness.

Strategic management

Management uses strategy for an organization′s survival by eliminating competitive threats and
maximizing opportunities for increased organizational security and wealth. Strategic management

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is concerned primarily with the decision-making process and actions which determine an
organizationÊs long-run performance. It emphasizes monitoring and evaluating external and
internal environmental opportunities and controls in view of an organizationÊs strengths and
weaknesses. Business policy, on the other hand, maintains an integrative orientation and,
therefore, tends to look inward. It focuses on the efficient use of an organizationÊs assets by
formulating general guidelines which will assist the corporation in accomplishing its goals and
objectives. Strategic management simply incorporates business policy with a heavier emphasis on
environment and strategy.

A good method of defining strategy is to list the more generally approved elements which go into
the making of a strategy statement. They are vision, mission, comparative advantage, goals and
objectives, critical success factors, shared values or corporate culture, and action orientation.
Strategic management involves four basic components:

• environmental scanning
• strategy formulation
• strategy implementation
• evaluation and control.

Von Neumann and Morgenstern illustrated that, through the development of game theory, it is
possible to construct an interval expected utility if the probabilities of the to-be-chosen events
were known. They defined strategy as a series of actions taken by a corporation which are
decided on according to the particular situation. Practice of Management, written by Drucker in
1954, describes strategy as a means of analysing the present situation and changing it if
necessary. Drucker incorporated determining what oneÊs resources are or what they should be.

The academic discipline of policy and strategy experienced a major shift in the 1960s as business
programmes changed from business policy courses to strategy. Chandler introduced a number of
ideas about corporate strategy based on the history of four large American corporations. His
concepts were developed as he explored the corporations′ responses to the changing economic
environment, their diversification, and finally their changed organizations. Chandler′s definition
of strategy is that it determines the basic long-term goals of a corporation. Strategy also includes
the adoption of courses of action and the allocation of resources necessary to achieve corporate
goals. He also believed that organization design follows strategy.

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Ansoff, in 1965, followed a more rational approach in Corporate Strategy. Ansoff examined
strategy from a programmatic and analytic approach. He laid out a specific sequence of issues
which needed to be explored and looked at the decision-making processes as set in corporate
strategy. Ansoff also placed a great deal of emphasis on diversification. According to Ansoff,
strategy is defined as a rule for making decisions which are determined by the product and
market, the growth vector, the competitive advantage and synergy.

The 1970s created a new flurry of writings, with the focus centering on the organization within a
specific industry, industrial organization and transition. The recommendation was to look outside
the organization and develop long-range plans which anticipated change and develop plans of
action in order to take advantage of them. This is exemplified in Porter′s Competitive Strategy.

In 1978, Hofer and Schendel published a comparison study of business strategy concepts. They
found that there were three major areas of disagreement. Authors disagreed in areas concerning
the breadth of the concept of business strategy, the components of strategy, and the inclusiveness
of the strategy formulation process. They failed, however, to examine the common threads woven
within the various concepts. In 1979, Hofer and Schendel defined strategy as a means to provide
direction to the organization which allows it to achieve its objectives while responding to both
environmental opportunities and threats.

The late 1970s brought forth yet another definition of strategy. Mintzberg, in „The Structuring of
Organizations‰, defines strategy as a mediating force between an organization and its
environment. Mintzberg found that there were consistent patterns in the decision-making process
to allow organizations to deal with the environment.

The focus on organizational cultures had its beginnings in strategic management in the late 1970s.
Analysts were seeking ways to define strategic culture in which change would be accepted as
normal. One method for dealing with corporate culture was developed by McKinsey and
Company, a management consulting firm. The McKinsey seven-S framework was introduced by
Pascale and Athos′s The Art of Japanese Management in 1981 and popularized by Peters and
Waterman, who contend that corporate strategy tends to centre on the hardware of organization.
The „hard‰ elements are considered to be structure, strategy and systems. Pascale and Athos
argue that four additional elements must be considered as integral components of the organization

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in order to achieve success. The McKinsey seven-S model provides the framework to view
corporate culture.

3.4 Styles of Management

Japanese-style management approach

In 1950, Deming introduced a comprehensive management system which is the model for
Japanese-style management, or total quality management (TQM). TQM uses statistics to analyse
variability in production processes in order to improve the product quality continuously. Quality
is whatever the customer needs and wants and, because the customerÊs needs are always
changing, the solution to defining quality in terms of the customer is to focus continually on
customer research. DemingÊs basic philosophy on quality is that productivity improves as
variability decreases. A statistical method of quality control is needed because of variations. He
was an advocate of worker participation in decision making. Deming also claims that
management is responsible for 94 per cent of quality problems. He also points out that it is
managementÊs job to help employees work smarter, not harder.

Another pioneer in the TQM field is Juran. Juran was the first to deal with the broad management
features of quality, which distinguishes him from those who advocate specific techniques,
statistical or otherwise. He believed that organizations did not understand how to manage for
quality. Juran included three basic steps to progress:
• structured annual improvements
• major training programmes
• upper management leadership.

He contends that less than 20 per cent of quality problems are because of workers. The rest are
caused by management and faulty processes. Accordingly, all managers should have training in
quality in order to oversee and participate in quality improvement projects.

Crosby is best known for his concept of zero defects. According to his definition, quality is
conformance to requirements and it can only be measured by the cost of non-conformance.
Crosby lists three components than can be used by organizations to prevent non-conformances –
determination, education and implementation.

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In the early 1980s, Ouchi studied a number of American companies and found many
characteristics which were normally associated with successful Japanese corporations. Ouchi
used the term „theory Z‰ to describe their unique management practices. Theory Z corporations
generated close relationships with their employees and even made long-term employment
commitments to the new hires. They also developed their employees′ talents and focused on
teamwork through lateral job rotations and collective decision making.

The excellence approach

The major focus of excellence management is improving management in order to gain or

maintain excellence within a corporation. The excellence approach first appeared in the early
1980s with the publishing of Peters and WatermanÊs book - In Search of Excellence. The authors
researched organizations which were considered excellent, and proceeded to document
management practices they found to be consistent throughout these organizations. The excellence
approach dictates that effective organizations continue to strive for improvement. Peters and
Waterman continue to hold their seminars, write articles, and update their versions in search of
excellence. They focus on the constantly changing external environment and the need for internal
environmental change.

Contemporary approaches to management tend to account for and help interpret the rapidly
changing nature of todayÊs organizational environments.

The next section highlights the perspectives of some prominent management gurus and their
respective approaches to management.
3.5 Management Gurus

Tom Peters

Tom Peters creates no formal theories but lots of maxims. His stories are parables, containing
messages for those caught in the depths of organizations. He raises common sense to a principle
of action. Not all his ideas turn out to be right.

His first book, written with Robert Waterman, „In Search Of Excellence‰, in 1982. looked at 43
successful companies and sought to analyse the reasons for their success over twenty years. It

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sought to learn from the best rather than preach to them from theory. It looked for the good news
rather than the bad, relying on stories more than statistics and charts.

Peters and Waterman came up with seven checkpoints for analysis, what they called the Seven S
Framework; and eight characteristics of excellence. The excellent companies, they said - had a
bias for action, they were do-ers.
SevenÂsÊ Framework -

- they were close to the customer, they understood their clientsÊ needs
- they had autonomy and entrepreneurship, they were independent and innovative
- believed in productivity through people, the staff mattered
- they were hands-on and value-driven, they got on with the job
- stuck to the knitting, they only did what they did best
- had a simple form and lean staff, no unnecessary divisions
- had a tight-loose structure, tight where it mattered, loose where they gave people autonomy.

The trouble was that the 43 excellent companies did not stay excellent for long. Many, including
the star of the book, the computer company IBM, faltered soon after (IBM now has reworked its
business and has emerged stronger). The eight characteristics alone may not be enough to
guarantee success, but they point to the way modern companies need to be managed.

The Seven S Framework that Peters and Waterman developed with Richard Athos and Richard
Pascale is a useful tool for analysis of any organization. These Seven S's - the checkpoints for
analyzing the health of a company - stand for Strategy, Structure and Systems, the so-called hard
S's, and the soft S's of Staff, Style, Shared Values and Skills. These all need to be in harmony
with each other. ThereÊs no use inventing a great new strategy if there are no skills or the staff to
implement it. Though obvious again, like all important insights, the check list helps to remind one
not to get carried away without pausing to check that all the ingredients for the organizationÊs
journey are in place.

Based on the belief that the hierarchies of the big organizations were what were holding them
back, his next book 'Thriving on Chaos', preached revolution and the one after that 'Liberation
Management', is a celebration of the coming to death of middle management. Peters sought to put

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people, creativity, technology and speed at centre stage. Crazy times, he proclaimed, call for
crazy organizations.

Tom's answer to what he saw as the deadening effect of middle management was WOW, spelt in
big capital letters: W.O.W. By WOW he meant 'stepping out and standing out', both individuals
and corporations, from the growing crowd of look-alikes. In short,' he said, 'it is crucial to be
different as well as excellent, or you will end up as an excellent corpse.' Going small was one
key. Deconstruct the company, he advised, eliminate bureaucratic structures and subdivide into
'spunky units' with their own personalities and disrespectful chiefs. He also makes
recommendations like: hire curious people, go for youth, teach and measure curiosity, support
off-beat education, give people generous sabbaticals and insist that everyone take vacations.
Above all, make it fun.

It was not, however, going to be enough to re-energize the corporation and the ranks of middle
managers. The whole world of work, he realized, was changing. 90 per cent of jobs, he claims,
are likely to be completely transformed or eliminated in the next ten to twenty years.‰ We shall,
each of us, have to take control of our own destiny and look after ourselves‰ he said in his book.
Or, as he puts it: "In a world where success depends upon brainpower and curiosity, the self-
managed growth of the individual becomes paramount, and the wise corporation wittingly turns
itself into a tool for fostering individuals' growth."

Tom Peters wrote a series of books on the new world of work with titles like 'Brand You 50', 'The
Professional Service Firm 50', and 'The Projects 50'. Essentially, according to him, we shall each
have to brand ourselves, to create a separate and different reputation for our work. Building on
that, we need to behave like a professional service firm with our own standards of excellence,
codes of conduct and values.

The firms that remain will need to turn every task into a project - an identifiable job of work with
a beginning and an end. They must then allow individuals to assign themselves to those projects,
rather as consultancy firms already do. As giant firms like computer Software Company EDS
have demonstrated, there is no limit to the size of the project-organized business. Peters comes
back, again and again, to his message that business is 90 per cent people and only ten per cent
technology. And more and more of those people are going to be women. In the new world of
work, he believes, the attitudes that most women come with will be an asset. They are better at

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building relationships and at the softer S factors in Peters' S Framework, the style, the staff and
the shared values. As a result women are often better team players than men. And that's going to
matter hugely as more and more organizations become collections of projects with self-nominated
teams.

Peters' most recent book, 'The Circle of Innovation', asks organizations to reach beyond re-
engineering, total quality management, empowerment and other recent management fads to
constant re-invention and even revolution.

Tom Peters earths his ideas in the humdrum reality of life and expresses them in equally earthy
language.

Rosabeth Moss Kanter

Rosabeth Moss KanterÊs work is mostly about change, how to cope with it and how to manage it.
A sociologist by training, she looks at organizations as communities and cultures. But her books
always come back to what the changes she talks about will mean for the individuals in the
organizations, and for their families and communities.

Rosabeth goes into leading - edge corporations, learns from them – and then puts across what
sheÊs learnt in usable manner. For her, consulting, is a way to create. She says "It is practical and
I learn by applying my academic knowledge to the businesses.'

For her latest book, for instance, she and her researchers conducted over 300 interviews in nearly
eighty companies in North America and surveyed almost three times as many other companies
world wide. She then focused down on twenty-five companies from three continents, including
the fashionable ones like the Internet auction site e-Bay and Cisco the computer giant, but also
lesser-known examples such as Williams- Sonoma, who make and sell kitchen equipment and
Drugstore.com, the internet pharmacy. The result is a set of rich case studies, stories of real
people coping with a new world, illuminated, however, by Rosabeth's' comments.

Her early work looked at the communes of the 1960's and the social movement that brought them
into existence, but she soon moved on to the study of organizations and, in particular, to a study
of the different ways in which men and women were treated by corporations. The book she wrote

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about it, called „The Men and Women of the Corporation‰, had a big impact. It helped to change
the way in which many companies treated women, particularly women with families.

The book started her fascination with how organizations change. How does lasting change occur?
What forces block change? How can resistance to change be overcome? Books with titles like
„The Change Masters‰ and „When Giants Learn to Dance‰ provided inside stories of the best of
the world's corporations as they faced up to what she called the post entrepreneurial age.

Rosabeth Kanter talks of organizations' desperately seeking synergy' and advocates that they
should be fast, focused, flexible, friendly and fun. One chapter is headed „Becoming Pals‰, where
P.A.L stands for Pooling, Allying and Linking. Building partnerships in other words - her
recommendation for companies was the need increasingly to do more with less. She has pointed
out that whereas in the past companies wanted to own everything themselves and to build a fence
around their operations, in the new competitive world they discovered they could no longer afford
to go it alone in every area.

The new model organization, she notes, is lean, flat and athletic, rather than tall and authoritarian.
The effect on corporate careers would, she predicted, be dramatic. The new key to the fast track is
a flexible package of skills and services that you can take anywhere. Dutifully climbing the
corporate ladder will no longer guarantee success, or even lifetime employment. That may be
obvious to most managers by now, but Rosabeth was writing this in 1989, and her detailed
prescriptions for success in the new sorts of careers are still valid.

Rosabeth Moss KanterÊs work is full of messages for the modern executive. Her list of the skills
needed by what she calls the 'business athletes' of the modern corporation.
According to Kanter, First - if you want to be a business athlete - you must learn to operate
without the might of the hierarchy behind you. You are more on your own now. Next, you must
learn to compete in a way that increases co-operation with your colleagues, rather than
undermining them. You must operate with the highest ethical standards.

Be multi-faceted and ambidextrous. And Get satisfaction from the results of work, But, Rosabeth
insists, in addition to all these high aspirations one must still keep a high dose of humility.

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That said, one doesnÊt succeed without the feeling that one working for something worthwhile.
It's the job of the people at the top, Kanter says, to set the goals and values of the corporation,
below them the middle layers design and manage the programmes and the systems, the forums
and relationships that bind the whole together, while the project ideas and innovations hopefully
bubble up from the bottom layers.

Rosabeth returned to the challenge of the innovative organization in her latest book – eVolve
which tackles the new digital world of business but also builds on her observations of innovative
global companies in her book called „World Class‰ with its instructive subtitle - Thriving Locally
in the Global Economy.

EVolve draws together the best ideas of the best companies. Some of them underline concepts
from her earlier work - networks of partners, teams rather than formal hierarchies, finding
committed people with talent. But the emphasis here is different. Strategy should be like
improvised theatre, where one starts something with an idea rather than a plan and see where it
leads.

'Create small experiments, she suggests. Don't bet the company and don't waste time, just act,
simply and quickly to have something concrete to convert the sceptics.'

What the organization needs are entrepreneurs and innovators of all types - in independent
ventures or within already established organizations. Change involves shaking up the established
ways of thinking, creating new patterns like a kaleidoscope. Change means staging pep rallies to
enthuse the troops, communicating with internal and external audiences, building support inside
and outside the organizations. She could in some way talking about a politician rather than a
manager, but, in fact, it is the skills of a politician that the new manager needs to learn. It's a new
world.

Rosabeth Moss Kanter cannot help but return to the questions that the digital revolution poses for
society. The Internet, she says, could produce a great leap forward to a shared consciousness
around the world and connect peoples everywhere in powerful ways that foster community and
co-operation. But it could also go the other way, leading to the isolation of individuals and
clashes between communities. The best businesses in the digital world, she says, will be those
that foster community internally and serve communities externally.

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The worry that the Internet and all that goes with it will breed isolation, hinder real education and
development and lessen oneÊs sense of responsibility to others was also evident. Computers are
no real substitute for people, according to her.

RosabethÊs advocated a list of the seven characteristics of the qualities needed by business
managers if they are to succeed in the new world of digital commerce. They are :

• Business managers must have curiosity and imagination, the ability to find new patterns
in the kaleidoscope. They have to be good at communicating near and far, to make
themselves understood by others who have not shared their experiences, and to
understand those who are different from themselves. They must be cosmopolitans, not
confined to a single world view, but able to build bridges of thought. They must grasp
complexity, finding the connections that make sense of disconnected dots, and charting a
course between conflicting points of view with multiple audiences.

• They care about feeding their own peoples' bodies and spirits, and work with them as
resources rather than subordinates, respecting what others bring to the table and listening
to their ideas. In fact good business managers lead through the power of ideas and the
strength of their voices rather than the authority of their formal positions.

• We need, she says, a shared consciousness to solve social problems. We have to feel
responsible to wider communities, even to those who come after us. Going back to the
title of her book, she wonders whether we will continue to evolve as a race. And that's a
question about us as people, about our humanity and values, and not about technology.
ItÊs our choice.

So, management is much more than running a business. It is ultimately about the future of
humanity.

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Peter Senge

Peter SengeÊs special interest is on decentralizing the role of leadership in organizations so as to

enhance the capacity of all people to work productively toward common goals. Senge's work
places human values at the cornerstone of the workplace, proposing that vision, purpose,
reflectiveness, and systems thinking are essential for organizations to realize their potentials.
Senge is the author of several books, including the widely acclaimed, The Fifth Discipline: The
Art and Practice of the Learning Organization (1990). The book, which provides the knowledge
for organizations to transform rigid hierarchies into more fluid and responsive systems, is widely
credited with creating a revolution in the business world.

His most recent book, Presence: Human Purpose and the Field of the Future (SoL 2004), co-
authored with C. Otto Scharmer, Joseph Jaworski and Betty Sue Flowers, documents the authors'
development of a new theory about change and learning. Their journey of discovery articulates a
new way of seeing the world and of understanding our part in creating it·as it is and as it might
be.

Systemic thinking is the conceptual cornerstone (ÂThe Fifth DisciplineÊ) of Peter SengeÊs
approach. It is the discipline that integrates the others, fusing them into a coherent body of theory
and practice.

Systems theoryÊs ability to comprehend and address the whole, and to examine the
interrelationship between the parts provides, for Peter Senge, both the incentive and the means to
integrate the disciplines. Three things need noting here. First, systems theory looks to connections
and to the whole. In this respect it allows people to look beyond the immediate context and to
appreciate the impact of their actions upon others (and vice versa). To this extent it holds the
possibility of achieving a more holistic understanding. Second, while the building blocks of
systems theory are relatively simple, they can build into a rather more sophisticated model than
are current in many organizations.

Senge argues that one of the key problems with much that is written about, and done in the name
of management, is that rather simplistic frameworks are applied to what are complex systems.
When we add these two points together it is possible to move beyond a focus on the parts, to
begin to see the whole, and to appreciate organization as a dynamic process. Thus, the argument

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runs, a better appreciation of systems will lead to more appropriate action. Third, systemic
thinking, according to Senge, allows us to realize the significance of feedback mechanisms in
organizations.

The systems viewpoint is generally oriented toward the long-term view. ThatÊs why delays and
feedback loops are so important. In the short term, one can often ignore them; theyÊre
inconsequential. They only come back to haunt you in the long term.

Peter Senge also places an emphasis on dialogue in organizations – especially with regard to the
discipline of team learning. Dialogue (or conversation) as Gadamer has argued is a process of two
people understanding each other. As such it is inherently risky and involves questioning our
beliefs and assumptions.

Thus it is a characteristic of every true conversation that each opens himself to the other person,
truly accepts his point of view as worthy of consideration and gets inside the other to such an
extent that he understands not a particular individual, but what he says. The thing that has to be
grasped is the objective rightness or otherwise of his opinion, so that they can agree with each
other on a subject. (Gadamer 1979: 347)

The concern is not to 'win the argument', but to advance understanding and human well being.
Agreement cannot be imposed, but rests on common conviction (Habermas 1984: 285-287). As a
social relationship it entails certain virtues and emotions.

It is easy to see why proponents of the learning organization would place a strong emphasis upon
dialogue. As Peter Senge has argued, for example, team learning entails the capacity of members
of a team to suspend assumptions and enter into a genuine „thinking together‰Ê (1990: 10).
Dialogue is also necessary to other disciplines e.g. building a shared vision and developing
mental models.

However, there are significant risks in dialogue to the organization. One factor in the appeal of
Senge's view of dialogue (which was based upon the work of David Bohm and associates) was
the promise that it could increase and enrich corporate activity. It could do this, in part, through
the exploration and questioning of Âinherent, predetermined purposes and goalsÊ. There is a clear
parallel here with Argyris and SchönÊs work on double-loop learning, but interestingly one of

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Bohm's associates has subsequently suggested that their view was too optimistic: Âdialogue is
very subversiveÊ.

Some particular problems associated with this conceptualization include a failure to fully
appreciate and incorporate the imperatives that animate modern organizations; the relative
sophistication of the thinking he requires of managers (and whether many in practice they are up
to it); and questions around his treatment of organizational politics. There has also been a lack of
critical analysis of the theoretical framework.

Based on their study of attempts to reform the Swiss Postal Service, Matthias Finger and Silvia
Bűrgin Brand (1999) provide us with a useful listing of more important shortcomings of the
learning organization concept. They conclude that it is not possible to transform a bureaucratic
organization by learning initiatives alone. They believe that by referring to the notion of the
learning organization it was possible to make change less threatening and more acceptable to
participants. ÂHowever, individual and collective learning which has undoubtedly taken place has
not really been connected to organizational change and transformationÊ. Part of the issue, they
suggest, is to do with the concept of the learning organization itself.

They argue the following points. The concept of the learning organization:

1. Focuses mainly on the cultural dimension, and does not adequately take into account the
other dimensions of an organization. To transform an organization it is necessary to
attend to structures and the organization of work as well as the culture and processes.
ÂFocusing exclusively on training activities in order to foster learning⁄ favors this purely
cultural biasÊ.

2. Favors individual and collective learning processes at all levels of the organization, but
does not connect them properly to the organizationÊs strategic objectives. Popular models
of organizational learning (such as Dixon 1994) assume such a link. It is, therefore,
imperative, Âthat the link between individual and collective learning and the
organizationÊs strategic objectives is madeÊ (ibid.: 147). This shortcoming, Finger and
Brand argue, makes a case for some form of measurement of organizational learning – so
that it is possible to assess the extent to which such learning contributes or not towards
strategic objectives.

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 3. Remains rather vague. The exact functions of organizational learning need to be more
clearly defined. In our view, organizational learning is just a means in order to achieve
strategic objectives. But creating a learning organization is also a goal, since the ability
permanently and collectively to learn is a necessary precondition for thriving in the new
context. Therefore, the capacity of an organization to learn, that is, to function like a
learning organization, needs to be made more concrete and institutionalized, so that the
management of such learning can be made more effective. (ibid.: 147)

4. Finally, Finger and Brand conclude, that there is a need to develop Âa true management
system of an organizationÊs evolving learning capacityÊ (op. cit.). This, they suggest, can
be achieved through defining indicators of learning (individual and collective) and by
connecting them to other indicators.

It could be argued that the notion of the learning organization provides managers and others with
a picture of how things could be within an organization, interesting dimensions that could be
personally developmental, and that could increase organizational effectiveness – especially
where the enterprise is firmly rooted in the Âknowledge economy. It offers an alternative to a
more technicist framework, and holds within it a number of important possibilities for
organizations seeking to sustain themselves and to grow.

C. K. Prahlad

„If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient
and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity
will open up.‰ That „simple proposition‰ begins a controversial new management book that
seems destined to be read not just in boardrooms but also in government offices. „The Fortune at
the Bottom of the Pyramid. Eradicating Poverty Through Profits‰ (Wharton School Publishing),
is essentially a rallying cry for big business to put serving the world's 5 billion or so poorest
people at the heart of their profit-making strategies.

C.K. Prahalad thinks there can be a win-win relationship between business and the poor. After
becoming a management professor at the University of Michigan via a job at Union Carbide and

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study at the Indian Institute of Management and Harvard, he wrote „Competing for the Future‰
(Harvard Business School Press) with Gary Hamel in 1994. This tome was regarded as perhaps
the best business book of the 1990s.

As the two gurus searched for their next hit, Hamel stumbled across Enron, a then-thriving energy
conglomerate that he eulogised in „Leading the Revolution‰ (Harvard Business School Press).
Prahalad, by contrast, „after searching for a couple of years, saw that the big idea was creating
wealth at the bottom of the pyramid‰. He has been evolving his ideas about how firms should
focus on the bottom of the pyramid·a phrase he shortens to BOP, to contrast with those wealthy
folk at the TOP·since 1997, despite a spell running Praja, a business-activity-monitoring
software firm that later had to be sold when it could not raise the capital it needed in the aftermath
of the tech bubble. „Badly timed, but taught me a lot,‰ claims Prahalad.

He is a fierce critic of traditional top-down thinking on aid, by governments and non-

governmental organisations alike. They tend to see the poor as victims to be helped, he says, not
as people who can be part of the solution·and so their help often creates dependency. Nor does
he pin much hope on the „corporate social responsibility‰ (CSR) programmes of many large
companies. If you want serious commitment from a firm, he says, its involvement with the poor
„can't be based on philanthropy or CSR‰.

The involvement of big business is crucial to eradicating poverty, he believes, but BOP markets
must „become integral to the success of the firm in order to command senior management
attention and sustained resource allocation.‰

Prahalad reckons that there are huge potential profits to be made from serving the 4 billion-5
billion people on under $2 a day·an economic opportunity he values globally at $13 trillion a
year. The win for the poor of being served by big business includes, he says, being empowered by
choice and being freed from having to pay the currently widespread „poverty penalty‰. In shanty
towns near Mumbai, for example, the poor pay a premium on everything from rice to credit·
often five to 25 times what the rich pay for the same services. Driving down these premiums can
make serving the BOP more profitable than serving the top, he argues, and points to a growing
number of leading firms·from Unilever in India to Cemex in Mexico and Casas Bahia in
Brazil·that are profiting by doing precisely that.

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But to be profitable, firms cannot simply edge down market fine-tuning the products they already
sell to rich customers. Instead, they must thoroughly re-engineer products to reflect the very
different economics of BOP: small unit packages, low margin per unit, high volume. Big business
needs to swap its usual incremental approach for an entrepreneurial mindset, because BOP
markets need to be built not simply entered. Products will have to be made available in affordable
units·most sales of shampoo in India, for example, are of single sachets. Distribution networks
may need to be rethought, not least to involve entrepreneurs from among the poor. Customers
may need to be educated in how to consume, and even why·about credit, say, or even about the
benefits of washed hands. The corruption now widespread in poor countries must be tackled.

There are plenty of sceptics. Are the opportunities for profitable product re-engineering really as
common as Prahalad thinks? How much can private firms accomplish given inept or corrupt
governments in many poor countries? What the leading firms are grappling with now, he says, is
not whether there are profits to be made, but how to serve the BOP on a big enough scale, and
how to transfer what works from one part of the world to another.

Another challenge will be to persuade development experts to support a profit-driven strategy

despite the fear of attracting criticism from activists. If a large international bank were to start
lending to the poor at interest rates, reflecting higher risks and start-up costs, of say 20%
(compared with around 10% in rich countries), „the whole anti-globalization lobby would
probably be against it. Yet the alternative is for the poor to borrow at 500% from a money lender.
Whose side are the activists on?‰ If you are on the side of the poor, he says, „surely you need to
help get rates down from 500% to 20%. After that, you can work on getting them from 20% to
10% like in the rich world.‰

Sumantra Ghoshal

Sumantra Ghoshal (passed away recently) named by the Economist as one of the Eurogurus, had
written a string of best books, mostly co-authored with Chris Bartlett, a professor at Harvard
Business School.

TheyÊre based on a long acquaintance and deep knowledge of a range of big organizations, most
of them American and all of them businesses. They include familiar names like General Electric
or Hewlett Packard, McKinsey, Disney or 3M. Ghoshal believes that big corporations like these

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have emerged as perhaps the most important social and economic institutions in our modern
society. They are much more than money making machines. They are what holds society together
and provides it with the means of progress.

The problem is that their managers don't understand this bigger role and, if they do, they don't
always like all that it implies. According to Ghoshal it is crucial for our societies that the
managers wake up to their new role and, more than that, that these giant organizations learn how
to reinvent themselves so that they can go on producing wealth and driving progress for us all.
We need, he believes, to learn from the best of them so that we can pass on the lessons to the rest.

Take, for instance, the jute industry in India, which uses a substance from the plant to make rope
and cloth. It is a very old industry and going out of fashion fast. Jute mills are closing everywhere
and jute businesses are failing all over India. But not Hastings Jute of Calcutta. Hastings Jute,
says Ghoshal, has escaped from what he calls the logjam of owners versus employees to build a
partnership with its workers and is now building new capacities in new fields. It is able to
reinvent itself because it has reinvented the social contract with its workforce.

Only bad companies blame their industry for their troubles. Ghoshal says that only six to ten per
cent of the difference between good and bad businesses can be explained by the industry they are
in. The rest is all due to management. Good businesses escape from their industry sector or find
ways to redefine it, by moving it up market for instance, or by keeping the more profitable bits for
themselves. Too many of them, however, are trapped in their past.

Even if they see what they should be doing they don't know how to do it. Ghoshal and Bartlett
came up with a graphic phrase to describe the problem. There are too many first generation
managers, in second generation organizations, trying to operate third generation strategies.

What did they mean by this neat phrase? Well, by second generation structures they were talking
about the multi divisional firm, the structure that Alfred Sloan first developed in General Motors
and that Peter Drucker, another of our gurus, described so well. It was, at the time, a great
advance on the first generation design which was the family firm, run by one man or one group at
the top. The divisionalized structure was designed to allow managers to get on with their job
without passing all disagreements and conflicts up to the top. It meant that the different functions
could co-operate at the lower level of the business unit. Managers were still, literally, executives,

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as they had been in the old model, carrying out the strategies given to them from above, only now
they had more control over the things they needed to get it done.

This design worked well in an age where growth meant more of the same, but it left all new
initiatives to the people at the centre. At this level in a big corporation new initiatives needed to
be big ones with large price tags. As Ghoshal puts it, the entrepreneurship could only be played
for home runs. Or for those who prefer cricket metaphors you could say they had to go for
boundaries not singles. In other words - big hits! In practice that meant that new initiatives either
expanded existing operations or entered new businesses by large acquisitions.

These were easy enough to buy but harder to manage or to integrate into the existing
organization. Money, it seemed, didn't solve everything. What happened was that the multi-
divisional companies then got too big and sprawling. The independent units didn't co-ordinate or
co-operate as well as they should have. More and more coordinating committees only made
things worse, and much more expensive. These problems came to a head in America in the
1980's. The following ten years were a time of slash and burn as companies took the axe to layers
of bureaucracies and shed many of the acquisitions they had earlier bought. But, said Ghoshal,
cutting costs and people changes little.

Now, having explained why things got into a mess in the big traditional organizations, Ghoshal
has to offer some ways out of it. He goes first to the leaders of two of the biggest corporations
who have led a revolution in our way of thinking about the management of these beasts. These
were Jack Welch of General Electric and Percy Barnevik of ABB, the Swedish-Swiss engineering
giant made up of some 1,300 companies spread around the world. These two men created what
Ghoshal calls the entrepreneurial organization - where the initiative is spread right through the
organisation.

The important thing about the entrepreneurial organization is that it concentrates on process not
structure. As Ghoshal describes it there are three different processes that companies need to
concentrate on, - the entrepreneurial process, the integration process and the renewal process.

He talks, for instance, about Kao a traditional soap company in Japan which has successfully
expanded into cosmetics and even floppy discs and is now recognized as one of Japan's most
creative companies, ahead of even Sony. It operates by what its chairman calls 'biological self-

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control'. Lots of small units pursue aggressive targets on their own initiative but if one part of the
company feels pain the rest of the body responds with help almost automatically. The company
code is based on the absolute equality of all human beings, on individual initiative and the
rejection of authoritarianism. The chairman talks of his paperweight organization, in which all
information circulates horizontally not vertically. It is, apparently a very open-space organization
in which everyone can drop in on any decision making process. The Kao company is held
together by a collection of coaches, called the priests, who help to integrate the ideas of the front-
line entrepreneurs and to keep everyone exploring, sharing and learning.

ItÊs all part of what Ghoshal sees as the emerging new philosophy of management, one focussed
not on the management of financial [or physical] capital but on human capital. Human capital is
not just the knowledge and skills that individuals bring with them, it also means what he calls
'social capital' the relationships in the organization, and the 'emotional capital', the motivations
and emotions that govern so much of what we do. We have to get rid of the engineering mindset
that saw organizations as machines with human parts and think of them as social institutions. The
book- The Individualized Organization-discusses much more details on human relationships.

He and Bartlett now talk of the three new management processes of Accumulating - that is getting
the right people to start with - of Linking, Building relationships that encourage individual
development, and, thirdly, a process of Bonding, trying to connect individuals' activities and
beliefs to the core vision of the organization. It all adds up, says Ghoshal, to a new paradigm or
philosophy of management. It won't be enough, for instance, to think of employees as assets.
Perhaps we should think of them as volunteer investors, choosing to invest their talents in the
organizations they have joined. It is all a brave new world, this third generation company that
Ghoshal is talking about. So far we can only begin to glimpse its implications. If, for instance, we
really do start to think of workers as volunteer investors it will change the whole balance of
power in a business.

Traditionally investors own the company and ultimately call the shots. If the new resource is
really talent and not money then it is the workers who will increasingly hold the power and
companies will be devices that help them to make the most of that talent, for everyone's benefit. It
will be a very different world.

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As one of the youngest of our gurus, Sumantra was more likely than most to be able to track his
ideas as they get taken up by organizations. Of all our gurus he was perhaps the most
international, the one best equipped to carry ideas across borders because there would have been
as many insights to be found in his native land of India as in the countries of the West.
3.6 Comparative Perspectives on Management Approaches – American, Japanese & European.

An understanding of different approaches that originated in firms operating out of a nation or

union or culture, helps us managers work better in the local conditions that we find ourselves in a
global economy.

Though we could have a separate paper on comparative perspectives, for purposes of brevity, we
shall look at some common themes across American, Japanese and European approaches.

Customs

What can be considered normal behaviour in one country may be offensive in another. If
managers were to operate with just one perspective chances of their being misunderstood and
misinterpreted are high.

Family matters are discussed much less in the office or plant in the United States, whereas in
Japan not asking some preliminary questions is taken as inconsiderate. The preferred feeling
about family, weekends and evenings is that they are private and kept separate from business in
the United States.

Europe is also similar to the United States in this.

Social Values

The Japanese donÊt consider themselves as working for a living, rather they view work as a way
of life. People prefer to continue with their firm throughout their working life.

In the US work is seen as a way of moving ahead in life and social standing. Job hopping is
common. Talent is for the best bidder. People tend to work hard at their jobs, but not necessarily

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the same job till they retire. Enterprise is a way of life for the Americans. Most of them have tried
their hands at running their own businesses some time or the other.

Europe, essentially a loose affiliation of several nations, several languages and cultures, with
countries strongly agricultural despite industrialization, has seen strong migration from the
countryside to urban centers. People in Europe tend to make career choices consciously and more
as a means of protecting their careers, rather then try for fast growth.

Education

In most countries of Europe, future managers are selected and groomed with special training at
age 15 or 16. There are extensive educational systems in the industrial systems. Students have to
necessarily take up a field of specialization once they enter university. If they were to decide to
change their line, they would have to start afresh.

In the US, managers grow from the ranks or enter as management trainees, after an MBA or some
post graduation relevant to the employer. If they want to change lines, they could just take up the
role and simultaneously pick up relevant qualifications.

Though literacy rate in Japan is one of the highest in the world, entrance exams are stringent etc,
the subjects offered are mainly pure sciences, mathematics, law, and humanities. Education for
professional management affects very few people relative to the size of the population.
Selection and Promotion of Personnel

European managers have more restrictions in employment than do US managers, and this has
made the European manager more careful in dealing with and utilizing the human resource. Who
is hired and fired is handled in a much more constrained manner. Ingenuity is required to use the
limited skills available in some areas and to achieve efficient human resource utilization.

In Japan, candidates are sought who not only have the required skill or potential for the work but
also conform to the views of the members of the company. During the probation, usually 2 years,
one is considered a temporary, not a permanent employee. After this, employment is usually
considered for life.

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It is said that in Europe when a person retires everyone knows who the successor will be.
Promotion reaches down the line for the one who is advanced. The general practice is to wait for
your superior to retire, and then promotion comes. However there are several exceptions these
days. In Germany, advancement may be either from within the ranks or from outside, but
predominantly from the same industry. Yet company loyalty is highly thought of in Germany.

In Japan, promotion is handled informally with attention and judgment given mainly to the
personÊs family and contributions made to the company. For managers, a ranking system has been
adopted, but it reveals personal status rather than the actual work done. The connection between
rank and the job is held loose. Hence, it is possible for a competent manager to move up without
the rank, or a manager with little current competence can have high rank but be on a less
responsible job. This helps deal with cases where advancement is tough.

Participative decision making

Typically in many European countries the trend of work councils, work committees, or similar
bodies appears to be toward sharing, not merely advising or suggesting in the decision-making
process on matters of economic and financial operations.

The most different and probably the most interesting in comparison to that of the United States is
the arrangement in Japan. There decision making is by consensus or ringisei (reverential inquiry
about a superiorÊs intentions). A decision is always started by an employee at a low level in the
organization. This is justified by realizing that the change within a company should come from
those closest to the thing being changed, hence change is elicited from below.

Co determination

Several countries in Europe have laws requiring labour representatives to b eon the companyÊs
board. It is becoming common for European workers to have a wide range of veto powers over
management decisions. It is increasingly becoming blurred on whether consultation, negotiation,
or joint dealing is the practice to be followed.

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However, where employees have a say in management decisions, some conflicts do appear.
Should they reward themselves with bonuses or should they invest surpluses for future growth of
the business.

In American businesses, the unions have to work things out from the outside. The Japanese have
their ringisei, for working out issues.

Job Enrichment

In Europe, especially, Sweden, job enrichment has been used extremely well. For example, the
traditional assembly line is eliminated and replaced with by assembly work teams. By being a
member of a small work team, the individual becomes closely involved in a bigger work effort
and yet is closer to the end result of the work.

In Japan, employees work on their specific tasks, but have enrichment in terms of the ringisei,
used to participate in collective decision-making. Job restructuring is also taking place though,
through quality control circles.

Though American firms are trying to adopt some Japanese approaches to manage workers and
productivity, U.S firmsÊ management have to recognize value of human potential as well as the
long-term quality growth values necessary to ensure the development of human resources.

Unions

Collective bargaining agreements are reached at the industry level and not at the enterprise level
in Europe. This has far reaching effects and hence becomes political and hence unions have
strong political affiliations. With the exception of Great Britain and Irelan, an agreement is
enforceable by law in that it is automatically incorporated into the employment contract of the
employee.
Unions are also organized by industries not by professions unlike in the U.S. An employerÊs
bargaining is done by the regional employersÊ association.

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In Japan, labour unions are relatively weak in the private sector, with very craft or industrial
unions, but „enterprise unions‰ encompass all the permanent workers of a company. They fight
the management and not the company, unlike American unions.

By now it must have become evident that the three approaches to management are heavily
influenced by the culture and background of the respective nations and in the case of Europe,
specific regions. As managers, this only adds to more variables for us. After all management is a
continuous process and these variables only keep us alert, sensitive and active, qualities essential
of global managers.

3.7 Summary:

Management has been variously defined. This is the result of the various approaches to
management. The foundations laid down by the traditional approaches have been consolidated
and given a new direction by the scholars and practitioners in the contemporary era. The
individual contributions of modern management gurus has given an impetus to the science of
management, which resulted in the different perspectives of management even across the globe
with contextual variations. The American, Japanese and European approaches to management
evidences the outcome of these processes, though attempts are also being made in the direction
of a global perspective.

Questions

1. Is your firm a learning organization? Substantiate your answer

2. Take a management theory popular in America and contrast its features with a
management theory popular in Japan with examples.
3. Highlight the style of management in India which is closer to the American, European or
Japanese style.
4. Discuss the contribution of the different approaches to the science of management.

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A Case for Discussion:

ottom Of Pyramid – The masses helping the classes?

Ranjit Kumar, is a serious man these days. He reaches office everyday and remains locked up in
his cabin till he leaves for the day. His staff were all worried for him and for their future with
Alka Chemicals.

Ranjit had been the star supplier for a big-brand MNC whose major product was ExWYZe
shampoo a yuppie product in demand with class A residential areas. He had invested heavily in
custom made equipment to bag the contract with the MNC. The deal had went well till six
months ago, when the client wanted Alka Chemicals to scale up operations, as they were
pumping money into large scale branding activities, to support their strategy of becoming the
market leader.

However it had not worked out, and Ranjit ended up taking the brunt with more employees &
costly debts that could not be managed by the dwindling cash flows. As a prudent businessman he
understood that he could not get angry with the client nor give up now, with some tough debts
and several loyal employees whose livelihood depended on Alka running well.

Today he had called in his childhood friend Surya, a consultant to discuss these things on his
mind. Ranjit wanted to continue with his client and yet be successful enough to grow the business
beyond today.

Surya came in at 11 AM, and came straight to the point, noticing heavy silence in the factory
premises and the dark circles under RanjitÊs eyes. Ranjit was about to speak when he noticed an
article titled Fortune at the Bottom of the Pyramid, brought by Surya. Surya noticed RanjitÊs
expression.

Question:-

[What would you advise Ranjit to do in his present situation, if you were Surya?]

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References
Richard L. Daft , Management (third edition) by, Dryden Press, 1993.

Michael Ray and Alan Rinzler, The New Paradigm in Business: Emerging Strategic for Leadership
and Organizational Change, ed., 1993, New Consciousness Reader.

Peter Senge, The Fifth Discipline, Doubleday Currency, 1990.

Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel, Strategy Safari: A Guided Tour Trough the
Wilds of Strategic Management, 1998.

M.A. Hint, Strategic Management - Competitiveness and Globalization, R.D. Ireland, and R.E.
Hoskisson, 2001.

Higgins, J.M, The Management Challenge: An Introduction to Management, Macmillan, New York,
NY, 1991.

Osigweh, C.A.B., Professional Management: An Evolutionary Perspective, Kendall/ Hunt, Dubuque,

IA, 1985.

Crosby, P.B., Quality Is Free: The Art of Making Quality Certain, McGraw-Hill, New York, NY,
1979.

Fay,N., and H. Godon. Worker Participation: Contrasts in Three Countries. Harvard Business review,
may-June 1976, pp.71-83.

Peter F. Drucker, Behind JapanÊs Success, Harvard Business Review, January-February 1981, pp. 83-
90.

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 Chapter-4

Management Process and Functions

4.1 Objective: This chapter familiarizes the student with the management processes and functions.
After reading this chapter, the student would be able to:

• Understand management process

• Appreciate the functions of management
Key words

• Management
• Process
• functions
Structure

• Introduction
• Process of management
• Functions of management
• Summary
4.2 Introduction

Management is a process of integrating resources and tasks towards the achievement of stated
organizational goals. Management is very often referred to as a processes of planning, organizing ,
staffing, directing and controlling. The literature on management has labeled these processes as
functions of management. Thus it involves a processes which is functional and social as well, as it
deals with people in the organizational context.

4.3 Management Process

A process is a systematic way of doing things. Management is referred to as a process to emphasize

that all managers, regardless of their particular aptitudes/ skills, engage in certain interrelated activities
in order to achieve their desired goals. Since the late nineteenth century, it has been a common

87
practice to define management process in terms of four specific functions of managers-planning,
organizing, leading and controlling.

Hence, management process is taken to mean Planning, Organizing, Leading and Controlling to make
sure the objectives or tasks are achieved. Commonly, management is always referred to as a process,
an ongoing continuous, systematic way to doing things. To achieve the objectives the four functions of
management: Planning, Organizing, Leading and Controlling need to be carried out on an ongoing
systematic way for some period of time depending on the type of objective.

4.4 Functions of Management

Management facilitates an organization in streamlining the activities and help achieve its goals
through its functional processes. The functions include the following.

Planning

Planning is the process of establishing goals and a suitable course of action for achieving those goals.
Leaders are required to be proactive. They make change happen instead of reacting to change. The
future requires corporate leadership with the skills to integrate many unexpected and seemingly
diverse events into its planning. Every organization must plan for change in order to reach its ultimate
goal. Effective planning helps an organization adapt to change by identifying opportunities and
avoiding problems. It sets the direction for the other functions of management and for teamwork.
Planning improves decision-making. All levels of management engage in planning.

Strategic Planning

Strategic planning produces fundamental decisions and actions that shape and guide what an
organization is, what it does, and why it does it. It requires broad-scale information gathering, an
exploration of alternatives, and an emphasis on the future implications of present decisions. Top level
managers engage chiefly in strategic planning or long range planning.

Strategic planning is the process of developing and analyzing the organization's mission, overall goals,
general strategies, and allocating resources. A strategy is a course of action created to achieve a long-

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term goal. The time line for strategies is arbitrary, but is probably two, three, or perhaps as many as
five years. It is generally determined by how far the organization prepares to commit its resources.
Goals focus on desired changes. They are the ends that the organization strives to attain. Traditionally
strategic planning has been done annually. However, many companies are doing away with annual
business plans altogether and moving to a system of continuous planning, to permit quicker response
to changing conditions. Thus, the strategic plan involves adapting the organization to take advantage
of opportunities in the constantly changing environment.

The planning process is rational and amenable to the scientific approach to problem solving. It consists
of a logical and orderly series of steps. Strategic planning sets the stage for the rest of the
organization's planning. The tasks of the strategic planning process include:

i. Define the mission

ii. Conduct a situation or SWOT analysis by assessing strengths and weaknesses and identifying
opportunities and threats
iii. set goals and objectives
iv. Develop related strategies (tactical and operational)
v. Monitor the plan

A mission is the purpose of the organization. It is why the organization exists. Thus, planning begins
with clearly defining the mission of the organization. The mission statement is broad, yet clear and
concise, summarizing what the organization does. It directs the organization, as well as all of its major
functions and operations, to its best opportunities. Then, it leads to supporting tactical and operational
plans, which, in turn leads to supporting objectives. A mission statement should be short - no more
than a single sentence. It should be easily understood and every employee should be able to recite it
from memory.

SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is critical to the creation of any
strategic plan. The SWOT analysis begins with a scan of the external environment. Organizations must
examine their situation in order to seek opportunities and monitor threats. Sources of information
include customers (internal and external), suppliers, governments (local, state, federal, international),
professional or trade associations (conventions and exhibitions), journals and reports (scientific,
professional, and trade).

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Assess the strengths of the organization. What makes the organization distinctive? (How efficient is
our manufacturing? How skilled is our workforce? What is our market share? What financing is
available? Do we have a superior reputation?) Assess the weaknesses of the organization. What are the
vulnerable areas of the organization that could be exploited?

Identify opportunities. In which areas is the competition not meeting customer needs? (What are the
possible new markets? What is the strength of the economy? Are our rivals weak? What are the
emerging technologies? Is there a possibility of growth of existing market?) Identify threats. In which
areas does the competition meet customer needs more effectively? (Are there new competitors? Is
there a shortage of resources?

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Set goals and objectives. Strategic goals and objectives are developed to bridge the gap between
current capability and the mission. They are aligned with the mission and form the basis for the action
plans. Objectives are sometimes referred to as performance goals. Generally, organizations have long-
term objectives for such factors as return on investment, earnings per share, or size. Furthermore, they
set minimum acceptable standards or common-sense minimums.

Develop related strategies (tactical and operational). Tactical plans are based on the organization's
strategic plan. In turn, operational plans are based on the organization's tactical plans. These are
specific plans that are needed for each task or supportive activity comprising the whole.

Tactical Plan

Top level managers set very general, long-term goals that require more than one year to achieve.
Examples of long-term goals include long-term growth, improved customer service, and increased
profitability. Middle managers interpret these goals and develop tactical plans for their departments
that can be accomplished within one year or less. In order to develop tactical plans, middle
management needs detail reports (financial, operational, market, external environment). Tactical plans
have shorter time frames and narrower scopes than strategic plans. Tactical planning provides the
specific ideas for implementing the strategic plan. It is the process of making detailed decisions about
what to do, who will do it, and how to do it.

Operational Plan

Supervisors implement operational plans that are short-term and deal with the day-to-day work of their
team. Short-term goals are aligned with the long-term goals and can be achieved within one year.
Supervisors set standards, form schedules, secure resources, and report progress. They need very
detailed reports about operations, personnel, materials, and equipment. An example is a budget, which
is a plan that shows how money will be spent over a certain period of time. Other examples of
planning by supervisors include scheduling the work of employees and identifying needs for staff and
resources to meet future changes. Resources include employees, information, capital, facilities,
machinery, equipment, supplies, and finances.

Operational plans include policies, procedures, methods, and rules. The terms themselves imply
different degrees of scope. A policy is a general statement designed to guide employees' actions in
recurring situations. It establishes broad limits, provides direction, but permits some initiative and
discretion on the part of the supervisor. Thus, policies are guidelines. A procedure is a sequence of

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steps or operations describing how to carry out an activity and usually involves a group. It is more
specific than a policy and establishes a customary way of handling a recurring activity. Thus, less
discretion on the part of the supervisor is permissible in its application. An example of a procedure is
the sequence of steps in routing of parts. A method sets up the manner and sequence of accomplishing
a recurring, individual task. Almost no discretion is allowed. An example of a method is the steps in
cashing a check. A rule is an established guide for conduct. Rules include definite things to do and not
to do. There are no exceptions to the rules. An example of a rule is "No Smoking."

Monitor the plan. A systematic method of monitoring the environment must be adopted to
continuously improve the strategic planning process. To develop an environmental monitoring
procedure, short-term standards for key variables that will tend to validate the long-range estimates
must be established. Although favorable long-range values have been estimated, short-term guidelines
are needed to indicate if the plan is unfolding as hoped. Next, criteria must be set up to decide when
the strategy must be changed. Feedback is encouraged and incorporated to determine if goals and
objectives are feasible. This review is used for the next planning cycle and review.

Organizing

Organizing is the process of arranging and allocating work, authority and resources among an
organizationÊs members so they can achieve the organizationÊs goals.

The key issue in accomplishing the goals identified in the planning process is structuring the work of
the organization. Organizations are groups of people, with ideas and resources, working toward
common goals. The purpose of the organizing function is to make the best use of the organization's
resources to achieve organizational goals. Organizational structure is the formal decision-making
framework by which job tasks are divided, grouped, and coordinated. The formal organization can be
seen and represented in chart form. An organization chart displays the organizational structure and
shows job titles, lines of authority, and relationships between departments.

The informal organization is the network, unrelated to the firm's formal authority structure, of social
interactions among its employees. It is the personal and social relationships that arise spontaneously as

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people associate with one another in the work environment. The supervisor must realize that the
informal organization affects the formal organization. The informal organization can pressure group
members to conform to the expectations of the informal group that conflict with those of the formal
organization. This can result in the generation of false information or rumors and resistance to change
desired by management.

Organizational Structure

Even though the differences among organizations are enormous, there are many similarities that
enable them to be classified. One widely used classification is the twofold system (mechanistic versus
organic forms of organizational structure) developed by Tom Burns and G. M. Stalker in their study of
electronics firms in the United Kingdom.

The mechanistic structure is the traditional or classical design, common in many medium and large-
size organizations. Mechanistic organizations are somewhat rigid in that they consist of very clearly
delineated jobs, have a well-defined hierarchical structure, and rely heavily on the formal chain of
command for control. Bureaucratic organizations, with their emphasis on formalization, are the
primary form of mechanistic structures. According to Max Weber, bureaucracy is a form of
organization characterized by a rational, goal-directed hierarchy, impersonal decision making, formal
controls, and subdivision into managerial positions and specialization of labor. Bureaucratic
organizations are tall consisting of hierarchies with many levels of management. In a tall structure,
people become relatively confined to their own area of specialization. Bureaucracies are driven by a
top-down or command and control approach in which managers provide considerable direction and
have considerable control over others. Other features of the bureaucratic organization include
functional division of labor and work specialization.

On the other hand, the organic structure is more flexible, more adaptable to a participative form of
management, and less concerned with a clearly defined structure. The organic organization is open to
the environment in order to capitalize upon new opportunities.

Organic organizations have a flat structure with only one or two levels of management. Flat
organizations emphasize a decentralized approach to management that encourage high employee
involvement in decisions. The purpose of this structure is to create independent small businesses or

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enterprises that can rapidly respond to customers' needs or changes in the business environment. The
supervisor tends to have a more personal relationship with his or her employees.

Rensis Likert has conducted extensive research on a non-bureaucratic organization design referred to
as System 4 (participative-democratic). Management and employees interact in a friendly environment
characterized by mutual confidence and trust.

Contingency organization refers to the most appropriate organization structure for each situation
depends upon technology, organizational size, goals and strategy, environmental stability, and
characteristics of the employees. Mechanistic organizations are best suited to repetitive operations and
stable environments, while organic organizations are best suited to an uncertain task and a changing
environment.

Organization Design

Designing an organization involves choosing an organizational structure that will enable the company
to most effectively achieve its goals. Organization design is the creation of an organization's structure,
traditionally functional, divisional, and/or matrix.

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Functions or divisions arrange traditional organizations. In a functional organization, authority is
determined by the relationships between group functions and activities. Functional structures group
similar or related occupational specialties or processes together under the familiar headings of finance,
manufacturing, marketing, accounts receivable, research, surgery, and photo finishing.

In a divisional organization, corporate divisions operate as relatively autonomous businesses under the
larger corporate umbrella. In a conglomerate organization, divisions may be unrelated. Divisional
structures are made up of self-contained strategic business units that each produces a single product.
For example, General Motors' divisions include Chevrolet, Oldsmobile, Pontiac, and Cadillac.

In a matrix organization, teams are formed and team members report to two or more managers. Matrix
structures utilize functional and divisional chains of command simultaneously in the same part of the
organization, commonly for one-of-a-kind projects. It is used to develop a new product, to ensure the
continuing success of a product to which several departments directly contribute, and to solve a
difficult problem. By superimposing a project structure upon the functional structure, a matrix
organization is formed that allows the organization to take advantage of new opportunities. This
structure assigns specialists from different functional departments to work on one or more projects
being led by project managers.

Boundary less organizations are not defined or limited by horizontal, vertical, or external boundaries
imposed by a predetermined structure. They share many of the characteristics of flat organizations,
with a strong emphasis on teams. Cross-functional teams dissolve horizontal barriers and enable the
organization to respond quickly to environmental changes and to spearhead innovation. Boundary less
organizations can form relationships (joint ventures, intellectual property, distribution channels, or

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 financial resources) with customers, suppliers, and/or competitors.

Organizing Function

The organizing function deals with all those activities that result in the formal assignment of tasks and
authority and a coordination of effort. The supervisor staffs the work unit, trains employees, secures
resources, and empowers the work group into a productive team. The steps in the organizing process
include

(1) review plans,

(2) list all tasks to be accomplished,

(3) divide tasks into groups one person can accomplish - a job,

(4) group related jobs together in a logical and efficient manner,

(5) assign work to individuals,

(6) delegate authority to establish relationships between jobs and groups of jobs.

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After reviewing the plans, usually the first step in the organizing process is departmentalization.
Departmentalization is the basis on which work or individuals are grouped into manageable units.
There are five traditional methods for grouping work activities. Departmentalization by function
organizes by the functions to be performed. The functions reflect the nature of the business.

Departmentalization by product assembles all functions needed to make and market a particular
product are placed under one executive. For instance, major department stores are structured around
product groups such as home accessories, appliances, women's clothing, men's clothing, and children's
clothing. Departmentalization by geographical regions groups jobs on the basis of territory or
geography.

Departmentalization by process groups jobs on the basis of product or customer flow. Each process
requires particular skills and offers a basis for homogeneous categorizing of work activities.

Departmentalization by customer groups jobs on the basis of a common set of needs or problems of
specific customers. For instance, a plumbing firm may group its work according to whether it is
serving private sector, public sector, government, or not-for-profit organizations.

A current departmentalization trend is to structure work according to customer, using cross-functional

teams. This group is chosen from different functions to work together across various departments to
interdependently create new products or services. For example, a cross-functional team consisting of
managers from accounting, finance, and marketing is created to prepare a technology plan.

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Leading

The process of directing and influencing the task related activates of group members or an entire
organization. An organization has the greatest chance of being successful when all of the employees
work toward achieving its goals. Since leadership involves the exercise of influence by one person
over others, the quality of leadership exhibited by supervisors is a critical determinant of
organizational success. Thus, supervisors study leadership in order to influence the actions of
employees toward the achievement of the goals of the organization

Leadership is a dynamic relationship based on mutual influence and common purpose between leaders
and collaborators in which both are moved to higher levels of motivation and moral development as
they affect real, intended change

Three important parts of this definition are the terms relationship, mutual, and collaborators.
Relationship is the connection between people. Mutual means shared in common. Collaborators
cooperate or work together.

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This definition of leadership says that the leader is influenced by the collaborators while they work
together to achieve an important goal.

Leadership versus Management

A leader can be a manager, but a manager is not necessarily a leader. The leader of the work group
may emerge informally as the choice of the group. If a manager is able to influence people to achieve
the goals of the organization, without using his or her formal authority to do so, then the manager is
demonstrating leadership. According to John P. Kotter, managers must know how to lead as well as
manage. Without leading as well as managing, today's organizations face the threat of extinction.
Management is the process of setting and achieving the goals of the organization through the functions
of management: planning, organizing, directing (or leading), and controlling. A manager is hired by
the organization and is given formal authority to direct the activity of others in fulfilling organization
goals. Thus, leading is a major part of a manager's job. Yet a manager must also plan, organize, and
control. Generally speaking, leadership deals with the interpersonal aspects of a manager's job,
whereas planning, organizing, and controlling deal with the administrative aspects. Leadership deals
with change, inspiration, motivation, and influence. Management deals more with carrying out the
organization's goals and maintaining equilibrium.

Controlling

The process of ensure that actual activities conform to planned activities.

Controlling refers to that activity where an effort is made to ensure that all the activities of planning,
organizing and leading are integrated to have a control of the situation. In fact Controlling is directly
related to planning. The controlling process ensures that plans are being implemented properly. In the
functions of management cycle - planning, organizing, directing, and controlling - planning moves
forward into all the other functions, and controlling reaches back. Controlling is the final link in the
functional chain of management activities and brings the functions of management cycle full circle.
Control is the process through which standards for performance of people and processes are set,
communicated, and applied. Effective control systems use mechanisms to monitor activities and take
corrective action, if necessary. The supervisor observes what happens and compares that with what
was supposed to happen. He or she must correct below-standard conditions and bring results up to
expectations.

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Control Process

The control process is a continuous flow between measuring, comparing and action. There are four
steps in the control process: establishing performance standards, measuring actual performance,
comparing measured performance against established standards, and taking corrective action.

Step 1. Establish Performance Standards. Standards are created when objectives are set during the
planning process.

Step 2. Measure Actual Performance. Supervisors collect data to measure actual performance to
determine variation from standard.

Step 3. Compare Measured Performance Against Established Standards. Comparing results with
standards determines variation. Some variation can be expected in all activities and the range of
variation - the acceptable variance - has to be established.

Step 4. Take Corrective Action. The supervisor must find the cause of deviation from standard. Then,
he or she takes action to remove or minimize the cause.

Types of Control

Controls are most effective when they are applied at key places. Supervisors can implement controls
before the process begins (feed forward), during the process (concurrent), or after it ceases (feed
back). Feed forward controls focus on operations before they begin. Their goal is to prevent
anticipated problems. An example of feed forward control is scheduled maintenance on automobiles
and machinery. Regular maintenance feeds forward to prevent problems.

Concurrent controls apply to processes as they are happening. Concurrent controls enacted while work
is being performed include any type of steering or guiding mechanism such as direct supervision,
automated systems (such as computers programmed to inform the user when they have issued the
wrong command), and organizational quality programs.

Feedback controls focus on the results of operations. They guide future planning, inputs, and process
designs. Examples of feedback controls include timely (weekly, monthly, quarterly, annual) reports so
that almost instantaneous adjustments can be made. Thus management is a processes found in all

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organizations across the world. Its applicability to all organizations weather big or small does not
affect the functions of a manager, Which implies a people driven task of conducting and directing the
tasks towards a specific objective.

4.5 Summary:
A processes is a systematic way of doing things. Management is referred to as a processes to
emphasize that all managers, regardless of their aptitude or skills, engage in certain interrelated
activities in order to achieve the desired goal. This necessitates the managers to perform certain
functions which are categorized as planning, organizing, directing, coordinating and controlling in an
organizational context.

Questions:
1.What is a process? Describe the management processes?
2.Explain the various functions of a manager?
3.What is planning? Explain strategic planning?
4.Discuss in detail the control processes?

References :
• Stephen P. Robbins and Mary Coulter ( 2004) Management. New Delhi: Prentice Hall of India
• James A. Stoner, R. Edward Freeman, Daniel Gilbert Jr.( 2003) Management New Delhi: Prentice
Hall of India
• L.M. Prasad ( 2004) Organizational Theory & Behavior. New Delhi: McGraw Hill

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 Chapter - 5

Organizational Processes -Concept of Power, Authority and Delegation

5.1 Objectives: This unit highlights the various processes that help the organization to function in an
effective way. The organization processes also facilitate the individual to perform his
activities/functions. This unit enables the student to:

• Familiarize the various processes in the organization.

• Differentiate between power and authority in the organization.
• Understand the importance of delegation in the organization.

Keywords:

• Organization
• Process
• Power
• Authority
• Delegation.

Structure

• Organizational Processes
• Power
• Authority
• Delegation
• Summary

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 5.2 Introduction

Organizational Processes represent any action, process, system, or phenomenon in the

organization that causes and/or facilitates an individual's movement or progression from one stage
to the other. The various Organizational Processes in an organization can be classified as follows:

• Organizational structure
• Organizational culture
• Reward system
• Job design
• Performance evaluation system
• Information system
• Technological system
• Decision making/problem solving process (e.g., TQM)
• Leadership Style (Group of leaders)

5.3 Organisation Processes:-

Organizational Structure

Organization structure is the basic framework within which the managerÊs decision-making behavior
takes place. Structure basically deals with relationships. It is an important scientific concept. One
needs to understand how organizations are structured and how these structures are created and
maintained.

Organization structure is a pattern in which various components of the organization are interrelated or
interconnected. This prescribes the relationships between various activities among various positions in
the organization. The organization structure being abstract is not visible though it can infer from the
actual operations and behavior of the organizations. Organization structure can be viewed as
establishment pattern of relationships among the components of the organization. Design of basic
structure involves such issues as how the work of the organization is divided and assigned among
various positions, groups and departments etc. and how the necessary coordination to accomplish the
total organizational objectives is achieved. Besides the formally established organizational structure,

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people create relationships independent of the formal relationships known as informal relationships.
Thus organization structure is the totality of both formal and informal relationships in an organization.

The formal organization structure facilitates management and operation of the enterprise. The work
takes place with certainty and continuity only if appropriate functional groups are provided to help
managers. The organization structure is the framework within which the enterprise grows. Many new
technologies can be implemented. Organization structure stimulates creative thinking and initiative by
providing well defined area of work provision of development and improved ways of working.

The factors that benefit from the organization through its structure in an organization are proper
delegation of staff, principles of unity and direction of command, minimum possible managerial
levels, simplicity, flexibility, clear line of authority, application of ultimate responsibility. In designing
an organization structure, there are two basic components – differentiation (refers to differences in
cognitive and emotional orientation among managers in different functions in the organization) and
integration (refers to quality if the state of collaboration that is required to achieve unity efforts by the
organization).

Organizational Culture

Being part of the organization entails being the part of its culture. How people interact in an
organization and the basic assumptions they make are the part of the organizationÊs culture.
TodayÊs organizations face the challenge of adopting an organization culture that is not only flexible
but also sensitive to many cultural differences that organization members face both within and
between societies. As todayÊs organizations are part of the global economy, organization members
must also be sensitive to the different cultural views that are encountered to expand their horizons
beyond their respective national boundaries. Culture thus, has been an important concept in
understanding human societies and groups for a long time.

Culture is generally believed to be a set of important issues - such as norms, values, beliefs and
attitudes shared by the organization members. Indeed a strong, widely recognized corporate culture is
frequently cited as success for many companies. A number of organizations cultivate a particular
culture. Culture, therefore, is a how an organization has learned to deal with its environment. It is a

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complex mixture of assumptions, behaviors, stories, myths, metaphors and other ideas that fit together
to define what it means to work in a particular organization.

Three basic elements in culture highlight its meaning:

a. Artifacts: These are the things that „one sees, hears and feels when one encounters a new
group with an unfamiliar culture.‰ Artifacts include products, services and even behaviors of
group members. Artifacts are everywhere, and one can learn about a culture paying attention
to them.

b. Espoused Values: These are the reasons that one gives for doing what one does. New
members learn these espoused values and learn their meaning in the organizational context.

c. Basic Assumptions: These are the beliefs that the organization members take for granted.
Culture prescribes „the right way to do things‰ at an organization, often through unspoken
assumptions. Example, many cosmetic companies have assumed that the appropriate
marketing strategy focuses on advertising and promotions about how their products enhance
beauty.

Kotter and Heskett identified two levels of culture, one visible and one invisible. First, on the visible
level, are the behavior patterns and styles of the employees. On the invisible level, are the shared
values and assumptions that are held over a long period of time. The second level is more difficult to
change.

Organizational work is a framework that guides day-to-day behavior and decision-making for
employees and directs their action toward completion of organizational goals. Indeed, culture is what
gives birth to and defines the organizational goals. Culture must be aligned with the other parts of the
organizational actions such as planning, organizing, leading and controlling; indeed, if culture is not
aligned with these tasks, then the organization invites itself into difficult times. Organization culture is
a long-term proposition, which must satisfy the memberÊs needs and values and match with the
cultural requirements of the society at large of which the organization is a part. The necessary part of
any organization is its culture. The organizationÊs culture reflects how the organization has chosen to

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deal with the environment. An organizationÊs culture influences the success of the organization.
Culture affects internal interaction as well as financial performance.

Multiculturalism is however, the order of the day. The view that there are many different cultural
backgrounds and factors that are important in organization and that people from different backgrounds
coexist and flourish within the organization. Multiculturalism refers to the presence of many cultural
backgrounds within an organization. In todayÊs multicultural world, it becomes necessary for the
managers take extra steps to encourage people from different cultural backgrounds to participate in
projects together.

Most organizations have realized that diversity exists and that the culture of any organization must pay
attention to the needs of a very diverse employee setting.

Job Design

Managers translate their preference for, and decisions about, decentralization into the decisions they
make about job design. Job design is a vehicle for systematically implementing the degree of
decentralization goals that the managers want and believe is necessary for pursuing the organizational
goals in view of the circumstances. Job design is thus a way for managers to communicate to the
employees the opportunities that employees will have for exercising power and authority. The pursuit
of quality management has been redesigned in many organizations. The result is the increased
employee involvement, in addition to improved quality and cycle times and reduced costs

Approaches to job design: Consider the jobs for many years. Indeed, early management practices
often concentrated on this aspect of the organization. Over the years, three different ways of viewing
the subject of job design have emerged: the mechanistic, motivational and biological approaches.

a) The mechanistic job design: Jobs which are fairly easy to learn and to do suit to the
mechanistic approach of job design, inspired by the turn-off-the-century. Such jobs still do
exist.

b) Motivational job design: As limits of the mechanistic approach became clear, researchers
began to seek out ways of making the jobs more varied and challenging. Five core job

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 dimensions have been identified - skill variety, task identity, and task significance autonomy
and feedback. Job enlargement and job enrichment are two empowering ways to redesign jobs.
Job Enlargement stems from the thinking of industrial engineers. The idea was to break up the
monotony of a limited routine and work cycle by increasing the scope of a job. Work
functions from a horizontal slice of any organizational units are combined, thereby giving
each employee more operations to perform.

Job enrichment deals with dissatisfied workers by increasing the depth of their jobs. Work activities
from a vertical slice of organizational unit are combined into one position to give employees more
autonomy on the job. The idea is to develop stronger sense of accountability by allowing workers to
set their own work at place, correct their own errors, and decide the best way to perform various tasks.

c) Biological Job design

A whole new approach to job design is the biological job design, called ergonomics, which is a
systematic attempt to make-work as safe as possible.

Performance Evaluation System

Performance evaluations, which provide employers with an opportunity to assess their employees'
contributions to the organization, are essential to developing a powerful work team. Yet in some
practices, managers put performance evaluations on the back burner, often because of the time
involved and the difficulties of critiquing employees with whom they work closely. The benefits of
performance evaluations outweigh these challenges, though. When done as part of a performance
evaluation system that includes a standard evaluation form, standard performance measures,
guidelines for delivering feedback, and disciplinary procedures, performance evaluations can
enforce the acceptable boundaries of performance, promote staff recognition and effective
communication and motivate individuals to do their best for themselves and the practice.

The primary goal of a performance evaluation system are to provide an equitable measurement of an
employee's contribution to the workforce, produce accurate appraisal documentation to protect both
the employee and employer, and obtain a high level of quality and quantity in the work produced. To
put a performance evaluation system in practice, these five steps help. They are:

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 1. Develop an evaluation form: For most staff positions, the job performance areas that should
be included on a performance evaluation form are job knowledge and skills, quality of work,
quantity of work, work habits and attitude. In each area, the appraiser should have a range of
descriptors to choose from (e.g., far below requirements, below requirements, meets
requirements, exceeds requirements, far exceeds requirements)
2. Identify performance measures: Standard performance measures, which allows one to
evaluate an employee's job performance objectively, can cut down on the amount of time
and stress involved in filling out the evaluation form. Although developing these measures
can be one of the more time-consuming parts of creating a performance evaluation system,
it's also one of the most powerful. Review the job descriptions for each position and select
the key components of the job that can be specifically measured. Then, work with the
employees in each position to gather quantitative data, examine historical patterns of volume
and determine qualitative measurements that reflect the practice's mission and goals.
3. Set guidelines for feedback: Feedback is what performance evaluations are all about. So
before one implements oneÊs performance evaluation system, make sure that everyone who
will be conducting evaluations knows what kind of feedback to give, how to give it and how
to get it from the employee in return.
4. Create disciplinary and termination procedures : In some cases, even after a thorough
performance evaluation and a discussion of expected improvements, an employee will
continue to perform poorly. One needs to be prepared to handle such a situation by having
well-defined, written disciplinary and termination procedures in place. These procedures
should outline the actions that will be taken when performance deteriorates - a verbal
warning, a written warning if there is no improvement or a recurrence, and termination if the
situation is not ultimately resolved.
5. Set an evaluation schedule :Once one has built oneÊs own performance evaluation system -
the evaluation form, the performance measures, the feedback guidelines and the disciplinary
procedures - one just need to decide when to conduct the performance evaluations.

A performance evaluation system can motivate staff to do their best for themselves and the practice by
promoting staff recognition and improving communication. Evaluations should be conducted fairly,
consistently and objectively to protect the employees and practice. An effective performance
evaluation system has standardized evaluation forms, performance measures, feedback guidelines and
disciplinary procedures. A performance evaluation system should be a key component of the practice

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structure. When implemented effectively, it ensures fairness and accountability, promotes growth and
development and encourages a sense of pride in employees' contributions to the practice.

Reward System

The only way employees will fulfill the organizationÊs dream is to share in the dream. Reward
systems are the mechanisms that make this happen. "However, reward systems are much more than
just bonus plans and stock options. While they often include both these incentives, they can also
include awards and other recognition, promotions, reassignment, non-monetary bonuses (e.g.,
vacations), or a simple thank-you‰.

The greatest management principle states that the things that get rewarded will get done. "You get
more of the behavior you reward. You don't get what you hope for, wish for or beg for. You get
what you reward." Is very often heard in a work context

When the employees do hit the target and meet a stretch standard that is set for them, they should be
rewarded immediately. The organization shall help employees directly connect the reward with
behavior and higher performance they attain. Failing to reward the right behavior, most likely gets
the wrong results.

Great managers create heroes in each role and link pay with performance. "They create broad bands
for pay within each role. They also create overlapping bands of pay to encourage people to assess their
strengths before moving to the next rung on the ladder. This means that a great salesperson could earn
much more than a new sales manager who is yet to demonstrate performance in his role.

The most effective reward and compensation systems align with objective, outcome-based evaluations
of employee performance. Each employee's performance measurement should reflect the
organization's business strategies and financial goals. Compensation should also reflect the employee's
performance level and his or her contributions to the organization's success.

Conventional wisdom and traditional compensation practices often prevent organizations from
achieving strategic goals. Organizations must align their compensation and reward systems with
performance, for when they do, they will increase productivity and achieve sustainable growth as seen
in organizational practice of the contemporary organization.

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Compensation experts work with company leaders to formulate compensation and reward programs
that integrate with their strategic business objectives. The process centers on accomplishing these
goals:

• Review and assess the organization's strategic direction, initiatives, and management
practices, as well as compensation-driven performance measures

• Develop a comprehensive understanding of the performance and compensation

relationship within the organization

• Create compensation and reward systems that are focused, simple, and designed to
promote world-class performance in every role

• Guide and support the client in moving from current pay systems to performance-based
pay systems

Reward systems improve performance throughout the organization.

Information System

All the activities in any organization involve flow of information. Information is defined as distinct
form of data, as inputs that are meaningful and can be used in organizational activities.
Information can be either obtained by direct observation or by communication. Information reaches
through formal and informal channels. Information also gets generated through research studies,
consultantÊs reports, task force reports, and evaluation studies. Information can be external or internal.
External information that flows from the external environment of the organization can be either
systematic or unsystematic.
The purpose of management information system is to help the manager provide insights into activities
managed by them and to aid decision making process, thereby improve efficiency and effectiveness of
the activities managed by them.

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 INFORMATION
SYSTEM

Marketing Productio Material Personnel Accounting

Information Information Information Information

Information exhibits important properties such as content, relevance, conciseness, quantifiability,

timeliness and scope. The specific content information is related to decision-making, which reflects
performance measures of the organization. Accuracy reflects the reliability on the information
gathered or provided for decision-making process in the organization. Conciseness refers to the degree
to which the information has been aggregated or summarized. Scope refers to the span of activities
encompassed by items of information. Timeliness describes the age of information flow in terms of
frequency and delay. Quantifiability refers to assignment of numerical values to events and objects.

Effective implementation of information system is likely to result in substantial benefits by providing

managers with necessary information for planning, decision-making, performance evaluation,
coordination and control. It will help monitor control the actual performance in comparison to the
planned performance and help analyze reasons for shortfall, and initiative consequent remedial action
plans. Further, it will provide useful nuts for future planning.
Technological System

Technology is a systematic or scientific application of organized knowledge to practical tasks.

Technology is the most dramatic force-shaping destiny of people all over the world. Technology
forces to change people and organizations whether they are prepared for it or not. The first feature of
technology is to change and then more change. Technology also helps to widespread reaching far

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beyond the immediate point of technological impact. Another feature of technology is self-
reinforcement. It encourages faster development.

Impact of technology in an Organization

TECHNOLOGY

Social Implications Economic Implications Plant level changes

y Technology reaches y Increased productivity y Organization

people through y Need to spend on Structure
business R&D y Resistance to
y High expectations of y Jobs become change
consumers intellectual y Fear of risk
y System complexity y Problems in techno y TQM
y Social changes structure y BPRE
y Social systems y Demand for Capital y Flexibility
y Boundaries redefined manufacturing
y Multiprofessional system
managers

Technical change affects the product or service life cycle. The demand for a product or service seems
to pass through a life cycle. At first, the product experiences remarkable sales growth. Then it
matures, and finally it declines. Sometimes, the cycle can lead to growth after the decline sets in.
Firms spend a great deal of energy trying to determine where they are in the cycle so that they can
decide how to invest their efforts. In some cases, it is necessary to invest in R&D to improve products
so that their lifecycle can be extended or replaced with products near the end of their life cycle. In
other cases, environmental scanning is needed to determine what technological change will mean to
the existing products in terms of the production processes. Technological change can also affect
distribution methods, raw materials, or the skill needed by the workforce.

Decision Making & Problem Solving

Management is the practice of consciously and continually shaping formal organizations and the art of
decision-making process is central in the process. Decision-making-identifying and selecting the
course of action deals with a specific problems or take advantage of an opportunity-is an important
part of managerÊs job. Time and human relationships are crucial elements in the decision-making

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process. This process connects the organizationsÊ present circumstances to actions that will take the
organization into the future.

Chinese believe that even the most comprehensive plan will always involve unforeseen problems. To
solve these, one must rely on the network of relationships. Therefore, Chinese are more interested in a
long-standing and sincere commitment to working together. Organizationally, Coca-cola learned the
hard way that the maxim Âif you donÊt use, you loose it‰ is painfully accurate.

No manager can possibly handle every problem that arises in the daily course of business. It is
important, therefore, that managers learn to establish priorities. These priorities can help a manager
determine how quickly, how intensively, and how collaboratively the problem must be dealt.

Decisions are evident as programmed or non-programmed decisions. Programmed decisions involve

routine matters and can be handled by written or unwritten policies, procedures and rules. Non-
programmed decision involve unusual or exceptional problems. Because most of the decisions involve
some element of the future, managers must be able to analyze the certainty, risk or uncertainty of each
situation. Under conditions of risk, the probable outcome of each alternative can be predicted. Under
conditions of uncertainty, the outcome probabilities cannot be predicted.

Managers who weigh their options and calculate optimal level of risk are using the rationale model of
decision-making. This model is very useful especially in making non-programmed decisions. It helps
the managers beyond a prior reasoning, the assumption that there is an obvious solution already
existing and simply waiting to be found. This process involves four stages in decision-making:
y Defining the problem in terms of organizational objectives that are being blocked. Diagnose
the causes for the problem or situation.
y Identify decision objectives by identifying the effective alternatives to solve the problem
y Evaluate the alternatives and select the best alternative (evaluating possible consequences for
the rest of the organization)
y Implement and monitor the decision making process

In making decisions all managers must weigh alternatives, many of which involve future events that
are difficult to predict, such as competitorÊs reaction to a new price list, interest rates in three years, or

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the reliability of a new supplier. The decision-making situations are categorized as certainty
(objectives and alternatives are measurable), risk (cannot predict an alternativeÊs outcome but have
enough information to predict the probability) and uncertainty (no access to the key information and
no access to the external conditions).

Leadership Styles

The role of leadership in management is largely determined by the organizational culture of the
company. It has been argued that managers' beliefs, values and assumptions are of critical importance
to the overall style of leadership that they adopt.

Leadership style is the manner and approach of providing direction, implementing plans, and
motivating people. There are normally three styles of leadership

• Authoritarian or autocratic
• Participative or democratic
• Delegative or Free Reign

Although successful leaders use all three styles, with one of them normally dominating, the not-so-
successful leaders tend to stick with one style.

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Authoritarian (autocratic)

This style is used when the leader tells the employees what he wants to be done and how he wants it to
be done, without getting the advice of her followers. Some of the appropriate conditions to use it is
when one has all the information to solve the problem, you are short on time, and your employees are
well motivated. The authoritarian style should normally only be used on rare occasions. If one has the
time and want to gain more commitment and motivation from employees, then they should use the
participative style.

Participative (democratic)
This type of style involves the leader including the employees in the decision making process
(determining what to do and how to do it). However, the leader maintains the final decision making
authority. Using this style is not a sign of weakness, rather it is a sign of strength that employees
would respect. Using this style is of mutual benefit -- it allows them to become part of the team and
allows the manager to make better decisions, as well.

Delegative (free reign)

In this style, the leader allows the employees to make the decision. However, the leader is still
responsible for the decisions that are made. This is used when employees are able to analyze the
situation and determine what needs to be done and how to do it. You cannot do everything! You must
set priorities and delegate certain tasks.

A good leader uses all three styles, depending on what forces are involved between the followers, the
leader, and the situation. Some examples include:

• Using an authoritarian style on a new employee who is just learning the job. The leader is
competent and a good coach. The employee is motivated to learn a new skill. The situation is
a new environment for the employee.
• Using a participative style with a team of workers who know their job. The leader knows the
problem, but does not have all the information. The employees know their jobs and want to
become part of the team.
• Using a delegative style with a worker who knows more about the job than you. You cannot
do everything! The employees needs to take ownership of their job. Also, the situation might
call for you to be at other places, doing other things.

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 • Using all three: Telling your employees that a procedure is not working correctly and a new
one must be established (authoritarian). Asking for their ideas and input on creating a new
procedure (participative). Delegating tasks in order to implement the new procedure
(delegative).

Two other approaches that leaders use are:

Consideration (employee orientation) - Leaders are concerned about the human needs of their
employees. They build teamwork, help employees with their problems, and provide psychological
support.

Structure (task orientation) - Leaders believe that they get results by consistently keeping people busy
and urging them to produce.

There is evidence that leaders who are considerate in their leadership style are higher performers and
are more satisfied with their job

There is a difference in ways leaders approach their employee. The Positive approach uses rewards,
such as education, independence, etc. to motivate employees. The negative approach emphasizes
penalties. While the negative approach has a place in a leader's repertoire of tools, it must be used
carefully due to its high cost on the human spirit.

5.4 Power

Power is the ability to exert influence on other people. Power can be present in any relationship. In an
organization, managers exert power. But, managers are not the only people who exert influence at
organizations. Employees say and do things to influence managers. And, there are many stake holders
outside the organization who can influence managers and employees. So any organization – like any
relationship – is an open system when it comes to power.

The Sources of power

Power does not derive simply from an individualÊs level in the organizational hierarchy. John French
and Bertram Raven have identified five sources or bases of power. These aspects of power may be
present in a variety of human relationships. In an organization, it may occur at all levels. Five different
forms exist in an organization, - according to French and Raven.

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a. Coercive power
This is the power to force someone to do something against their will. It is often physical
although other threats may be used. It is the power of dictators, despots and bullies. Coercion can
result in physical harm, although its principal goal is compliance. Demonstrations of harm are
often used to illustrate what will happen if compliance is not gained. Coercion is also the ultimate
power of all governments. Although it is often seen as negative, it is also used to keep the peace.
Parents coerce young children who know no better. A person holds back their friend who is about
to step out in front of a car. Other forms of power can also be used in coercive ways, such as
when a reward or expertise is withheld or referent power is used to threaten social exclusion.

b. Reward power
One of the main reasons one works is for the money to conduct their lives. There are many more
forms of reward -- in fact anything one finds desirable can be a reward, from a million dollar
yacht to a pat on the back. Reward power is thus the ability to give other people what they want,
and hence ask them to do things for you in exchange. Rewards can also be used to punish, such as
when they are withheld. The promise is essentially the same: do this and you will get that.

c. Legitimate power
Legitimate power is that which is invested in a role. Kings, policemen and managers all have
legitimate power. The legitimacy may come from a higher power, often one with coercive power.
Legitimate power can often thus be the acceptable face of raw power. A common trap that people
in such roles can fall into is to forget that people are obeying the position, not them. When they
either fall from power or move onto other things, it can be a puzzling surprise that people who
used to fawn at your feet no long do so.

d. Referent power
This is the power from another person liking you or wanting to be like you. It is the power of
charisma and fame and is wielded by all celebrities (by definition) as well as more local social
leaders. In wanting to be like these people, one stands near them, hoping some of the charisma
will rub off onto us. Those with referent power can also use it for coercion. One of the things
anyone fears most is social exclusion, and all it takes is a word from a social leader for us to be
shunned by others in the group.

e. Expert power

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 When I have knowledge and skill that someone else requires, then I have Expert power. This is a
very common form of power and is the basis for a very large proportion of human collaboration,
including most companies where the principle of specialization allows large and complex
enterprises to be undertaken.
Expert power is that power which is used by Trades Unions when they encourage their members
to strike for better pay or working conditions. It is also the power of the specialist R&D Engineer
when they threaten to leave unless they get an exorbitant pay rise or a seat by the window.

These are potential sources of power only. They are the ways in which one person can influence
another person. A manager has the potential to operate from all five power bases. Some of them are
inherent in the position. A specific degree of legitimate power always accompanies a managerÊs job.
In fact, it shapes the hierarchical relationships within which the other forms of power occur. Along
with the legitimate power, managers usually have reward and coercive power; these rewards. Unlike
the first three types, expert and referent power cannot be „given‰ to managers along with the job title.
However, managers are generally assumed to possess some degree of expertise (at least until they
prove otherwise).
Balancing views on Power
The management writers explained power in two faces – „a negative face‰ and a „positive face‰.
The negative face is usually expressed in terms of dominance-submission: If I win, you lose. In this
sense, to have power implies having power over someone else, who is less well off for it.
Management based on the negative face of power regards people as little more than pawns to be
used or sacrificed as the need arises. This is self-defeating to the power wielder, because people who
feel to they are pawns tend either to resist authority or to accept it too passively. In either case, their
value to the manager is severely limited.

The positive face of power is best characterized by a concern for group goals – for helping to
formulate and achieve them. It involves exerting influence on behalf of, rather than over, others.
Managers who exercise their power positively encourage group members to develop the strength and
competence they need to success as individuals and as members of the organization.

McClelland and David H. Burnham report that successful managers have a need to influence others
more for the benefit of people at the organization than for self-aggrandizement. Managers who use

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 their power with self-control will be more effective than those who wield power to satisfy a need to
dominate others or those who refuse to use their power out if a strong need to be liked. When a
manager continually eases rules and changes procedures to accommodate employees, employees
will see manager not as flexible, but a weak and indecisive. McClelland concluded that good
managers exercise power with restraint on behalf of others. Such managers encourage team spirit,
support employees, and reward their achievements, thereby raising morale.

John P. Kotter and Rosabeth Moss Kanter are other prominent writers whose analyses can broaden
our understanding of the promise of wielding power. Kotter argued that the external environment of
organizations has contributed to the growing need of power skills among managers.
KotterÊs key characteristics of those who successfully handle power

1. Are sensitive to the source of their power. They keep their actions consistent with peopleÊs
expectations. For example, they do not try to apply expert power in one field to another field.
2. Recognize the different costs, risks, and benefits of the five bases of power. They draw on
whichever power base is appropriate to a particular situation of person.
3. Appreciate that each of the five power bases has merit, they try to develop their skills and
credibility so they can use whichever method is best.
4. Possess career goals that allow them to develop and use power. They seek jobs that will build
their skills, make people feel dependant on them, and employ a type of power with which they
are comfortable.
5. Act maturely and exercise self-control. They avoid impulsive and egotistical displays of their
power, and they try not to be unnecessarily harsh on other around them.
6. Understand that power is necessary to get things done. They feel comfortable using power.

Rosabeth Moss Kanter argued that power can easily become institutionalized. Those whom others
believe to posses seem to find it easier to influence the people around them – and thus to garner even
more genuine power. By the same token, „powerlessness‰ is a difficult condition to overcome. Kanter
claims, for example, that many of the problems experienced by women and minorities can be traced to
their lack pf power rather than to gender of race.
Kanter proposes a number of ways an organizational member can acquire power. These are
categorized as follows:

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 1. Extraordinary activities. Making changes, being the first person to occupy a position, or being
successful upon taking exceptional risks can lead to greater power.
2. Visibility. Being noticed, gaining „exposure‰ in the eyes of those in power, and even making
certain activities appear to be riskier than they actually are can also increase power – a fact
that has ked Kanter to speculate that public appearance may be a more influential factor that
genuine substance.
3. Relevance. Solving an authentic organizational problem can be a source of power and may
well lend credence to the factors of extraordinary activity and visibility.
4. Sponsors. Having a sponsor or mentor – someone who advises on how to succeed in the
organization – can be an informal source of power, especially if the sponsor enjoys a good
deal of power. Kanter claims that sponsors are especially important for women who are
inexperienced in organizational power politics.

Power is not limited to managers. All members of an organization can have a great deal of power
because of their knowledge, their skills, or the resources they control. Power, then, is an important fact
if organizational life. Managers must not only accept and understand it as an integral part of their jobs,
but must also learn how to use it to further their own and organizational goals.

5.5 Authority

Authority is a form of power. Specifically, formal authority is legitimate power. But one often uses the
term more broadly in speaking of other kinds of power as well. When it is said that someone is „an
authority‰ in a certain field, it means that he or she knows a great deal about the subject – and thus has
expert power.

Formal authority is the type of power that we associate with organizational structure and management.
It is based on the recognition of the legitimacy of managersÊ attempts to exert influence. Individuals or
groups attempting to exert influence are perceived as having the right to do so within recognized
boundaries. This is a right that arises from their formal position in an organization. The basis for
formal authority has been continuing subject for debate in American society. And it should be
scrutinized, in view of what could go wrong with the use of authority.

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The Basis of Formal Authority: Two Views

„What gives you the right to tell me what to do?‰ This familiar blunt question implies before one
complies with an instruction, one must be satisfied that the person issuing it has the right to do so.
Where do managers get the right to direct employeeÊs activities? The two major views on formal
authority in organizations: a classical view and the acceptance view.

The Classical View

Constitution guarantees
right to own property and
control business

Manager Issues Manager Issues

The Acceptance View
commands
d

Commands Recipient considers

obeyed

Acceptance Noncompliance

Classical View

The classical view is that authority originates at some very high level, and then is lawfully passed
down from level to level. At the top of this hierarchy may be GOD, the state (the king or dictator or
the president) or the collective will of people. The military has long operated on this classical view.
According to the classical view of formal authority management has a right to give lawful orders and
employees have to oblige. The obligation is, in effect, self-imposed. Members of our society, accept

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the rights to own private property and therefore to own and control the businesses. By entering and
remaining in the organizations, employees accept the authority of the owners and their agents
(managers) and therefore have a duty to obey lawful directives. At-will employment is based on an
age-old distinction between a „master‰ of a business-that is the owners and managers-and „servants‰
of a business- the employees.

Acceptance View

The basis of acceptance authority is the influenced rather than the influencer. The view starts with the
observation that not at all legitimate laws or commands are obeyed in all circumstances. The receiver
of the orders accepts some and some are not. They key point is that the receiver decides whether to or
not to comply. A person can and will accept a communication as authoritative only when four
conditions simultaneously occur:
a. He can and does understand the communication
b. At the time of decision, he belies that it is not consistent with the purpose of the organization
c. At the time of his decision he believes it to be compatible with the personal interest as a
whole
d. He is able mentally and physically to comply with it

„Range of Acceptance‰ Theory

Threshold of acceptance
authority

UNACCEPTABLE ACCEPTABLE

A personís
o Understanding of the order
o Understanding of the organizational goals
o Personal values and priorities
o Communication capabilities and job capabilities

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Line and Staff Authority

In many organizations, managers use authority by dividing it into line authority, staff authority and
functional authority. These kinds of authority differ according to the kinds of power on which they are
based

Line Authority
Managers with Line Authority are those people in the organizations who are directly responsible for
achieving organizational goals. Line authority is represented by the standard of chain of command,
starting with the board of directors and extending down through various levels in the hierarchy to the
point where the basic activities of the organization are carried out. Line authority is based primarily on
the legitimate power. Since line activities are identified in terms of companyÊs goals, the activities
classified as line will differ in each organization.

Staff Authority
Staff authority belongs to those individuals or groups in the organizations who provide services and
advice to the line managers, the concept of staff includes all elements of the organization that are not
classified as line. Decision makers from emperors to kings to dictators and parliaments have used
advisory staffs over the course of record history. Staff provides managers with variety of expert help
and advice. This authority is primarily based on expert power. Staff can offer line mangers planning
advice through research, analysis, and options development. Staff can also assist in policy
implementation, monitoring and controlling; in legal and financial matters and in design and operation
of data-processing systems.

Functional Authority
The role of staff-members- to provide advice and service to line members-implies that the staff lacks
independent, formal authority. The right to control activities of other departments as they relate to
specific staff responsibilities is known as functional authority. Functional authority is common in
organizations. It is necessary in carrying out many organizational activities, both to provide for a

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degree of uniformity and to allow unhindered application of expertise. Thus, it is based on both
legitimate and expert power.

5.6 Delegation

Delegation is the assignment to another person of formal authority (legitimate power) and
accountability for carrying out specific activities. The delegation of authority to managers and
employees is necessary for the efficient functioning of any organization, because no manager can
personally accomplish or completely supervise all what happens at the organization.

Advantages of Delegation
When used properly, delegation has several important advantages. The first most obvious is that the
more tasks managers are able to delegate, the more opportunities they have to seek and accept
increased responsibilities from higher-level managers. Thus managers will try to delegate not only
routine maters but also tasks requiring thought and initiative, so that they will be free to function with
maximum effectiveness for their organizations. Delegation causes employees to accept accountability
and exercise judgment. Another advantage of delegation is that it leads to better decisions because
employees closest to „where the action is‰ are likely to have a clearer view of the facts. Effective
delegation also speeds up the decision-making. Valuable time can be lost when employees must check
with their managers before making a decision. This delay is eliminated when employees are
authorized to make necessary decisions on the spot.

Barriers to Delegation
Despite these advantages, managers can be reluctant to delegate authority. Mangers often have number
of excuses for not delegating: „I can do it better myself‰; „My employees arenÊt capable enough‰; „It
takes too much time to explain what I have done‰. The real reason may be the manager is simply too
disorganized or inflexible to delegate work effectively.

Guidelines for Effective Delegation

The practice of delegation challenges managers and employees alike to pay close attention to the terms
of their working relationship.

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Prerequisites
The most important to effective delegation remains the managerÊs willingness to give the employees
freedom to accomplish delegated tasks. This means letting them choose different solutions and
methods from ones the manger would have chosen. It means letting the employees make mistakes and
learn from their mistakes. Another prerequisite is the open communication between the managers and
the employees. Mangers who know the capabilities of the employees can realistically decide which
task can be delegated to whom.

Decentralization and Centralization

Managers make decision about delegation continually. It can be ongoing part of the organizing
process. At the same time, top managers make broad decisions about how much delegation they want
to practices general rule throughout the organizational structure. These decisions are in effect planning
decisions about organizing practices.

The degree to which the managers throughout the organization delegate the formal authority runs
along a continuum from decentralization to centralization. In relatively, decentralized organization,
considerable authority and accountability are passed down the organization hierarchy. Centralized
organizations, considerable authority and accountability remain at the top level of the hierarchy.

Advantages and Disadvantages

Decentralization has similar advantages as delegation: unburdening of top managers; decision making
that is frequently better because decisions are made closer to scene of actions. Better training, Morale
and initiative at lower levels; and more flexibility and faster decision making in rapidly growing
environments. The very purpose of organization-efficient integration of subunits for the pursuit of
organizational goals through the strategic plan-would be defeated without some centralized control.
Centralization offers variety of strengths well suited to todayÊs customer finance market. The reasons
listed for centralized control are:

a. Specialized skills, talent and technology are sometimes neither affordable nor practical in
multiple locations.
b. Decentralized locations usually mean an increase in overhead and staff.
c. Coordination of products, money and control also add to the cost of decentralized
locations.

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 d. Recent improvements in communication technology facilitate the movement of money,
credit information, transportation and data processing from a central location.

Challenges of Decentralization
The shift towards decentralization does not come without challenges. More individual authority at the
store level; requires through manager training. Decentralization usually entails bringing in additional
staff. Decentralization is particularly important as it enabled decision making to take place at
appropriate levels in the organization.

Factors influencing Decentralization

Decentralization has value only to the extent that it helps the organization members to achieve their
objectives. In determining the amount of decentralization appropriate for an organization, the
following factors are usually considered.

ƒ Environmental influences, such as market characteristics, competitive pressures and

availability of materials: The strategic plan will influence the types of markets and
technological environments and competition with which the organization must contend. These
factors will in turn, influence the degree if decentralization that the firm finds appropriate.

ƒ The organization size and growth rate: As an organization grows in size and complexity,
decentralization tends to increase. The faster the rate of growth, the more likely it is that the
upper management, bearing the weight of an ever-increasing work load, will be forced to
accelerate the delegation of authority at the lower levels.
ƒ Other characteristics of the organization, such as costliness of given decisions, top
management preferences, the organizationÊs culture and the abilities of lower level managers.
Summary :-
An organisation facilitates management and operation of an enterprise. The various organizational
processes facilitate an individualÊs movement or progression from one stage to the other. Power,
authority and delegation provide the organization the appropriate basis for its activities.

Questions :
1. Discuss the advantages of delegation. Why do you think managers hesitate to delegate? What
are the guidelines that can help them delegate effectively.

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 2. What is Job Design? Explain the various approaches in detail.
3. What are the various factors influencing Decentralization?
4. Explain the steps to create a performance evaluation system.
5. Distinguish between authority and power? Compare and contrast Line, Staff and Functional
authority.

Case Study :

„BIRKENSTOCK AIMS HIGH‰

Since 1990, Margo Fraser, founder and CEO of Birkenstock Footwear Inc, has watched her company
exercise growth nothing short of explosive. Revenue for 1992 for about $50 million, was up 50
percent from 1991, was up 50 percent from 1991, which was up 40 percent in 1990.while the
American health conscious craze of the 1990Ês, which has brought mainstream acceptance to formerly
counterculture values, accounts for some of the companyÊs soaring success, BirkenstockÊs
empowerment of employees cannot be ignored.
The company based in Novato, California, is exclusive importer of „Birkenstock‰ sandals from
Germany. „Birkenstock‰ are actually clunky-looking sandals with cork innersoles that cradle the feet.
These shoes-sometimes dubbed „shoes for lazy feet‰, since the wearer just slips on them, with nothing
tie or button-now come in range of styles and colors. In Germany, the Birkenstock family has been
making gesundheitschuhe-health shoes-for roughly two centuries when Fraser stumbled upon them in
mid-1960s. Today, with the baby boomers increasingly interested in comfort, the sandals are just not
for Berkeley types. Whoopi Goldberg and Madonna are among celebrities who have been seen
wearing them. Birkenstock shoes respect for its employees. „Because we take a great deal of time out
of our employeesÊ lives, we want to provide for more than just the critical needs, such as medical
insurance‰, said Pischke. „Employees contribute a lot of themselves to our organization; we should
contribute to quality of their lives.‰ Benefits have therefore been expanded to include stress-
management courses, a comprehensive Employee Assistance Program and financial counseling.
At the same time, the company management not only involves employees but actively engages them.
This is empowerment. In January 1993, Birkenstock hired a professional trainer to organize the
employees into teams and teach them how to make most of those teams. Then, in March, managers

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created a training advisory council aimed at locating specific areas that still need improvement. Teams
now operate within and across many departments.
Empowerment is not a new concept in Birkenstock. Back in 1989, an in-house marketing manager
encouraged the creation of a 12-member „eco-task-force‰ with across-the-board departmental
representation. This happened after a member of the department approached the manager with her
environmental conscientiousness. The company had already embraced a wide variety of such
practices. But the task force did more. An in-house environmental library was developed. A guide to
nontoxic resources was complied. A newsletter on relevant internal activities was produced. Monthly
meetings with neighboring businesses were organized to promote sharing of ideas on environmental
products and concerns.
Birkenstock management supports such endeavors because they enable employees to pursue their own
concerns, while at the same time helping the company. The „eco-task-force‰ enabled Birkenstock to
cut energy costs at the same time that motivation and loyalty were being reinforced. Today,
Birkenstock is noted for its highly productive workforce and low turnover. „We recognize that people
have a need to contribute and to feel enthusiastic about what they are doing,‰ said BirkenstockÊs
president, Mary Jones. „I am really here to help out.‰
FraserÊs personal values underlie BirkenstockÊs employee empowerment. „ItÊs a good thing to aim
high‰, she said. „The business can only grow as much you as a person can. One must grow with it.‰

Questions:

1. Discuss the kind(s) of power Birkenstock employees appear to have.

2. What might limit the way Birkenstock managers share power and authority?
3. Based on the above case, what kind of organization structure might be appropriate for
Birkenstock?
4. If you were to enlarge jobs at Birkenstock, what might the „new‰ jobs look like?

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 Chapter -6

MANAGING THE HUMAN FACTOR – LEADERSHIP

6.1 Objective – The objective of this chapter is to introduce the concept of leadership in managing
human processes. After reading the unit, the student will understand-

• The concept of leadership.

• The theories of leadership.
• Leadership styles.
• Transformational leadership.

Keywords: -

• Leadership
• Styles of leadership
• transformational leadership
• approaches.

Structure :-

• Introduction.
• Leadership roles.
• Leadership styles.
• Theories of leadership.
• Transformational leadership.
• Summary

6.2 INTRODUCTION:

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The success of an enterprise depends heavily on the kind of leaders it espouses. An organization needs
leaders to direct, control and steer the business to successful goals Though defining leadership is
varied and complex, understanding what makes for a successful attributes of a good leader is very
tough. Some of the most common definitions also pinning down a few attributes view leadership as:

• the ability to inspire confidence and support among people who are needed to achieve
organizational goals.
• a process by which a person influences others to accomplish an objective and directs the
organization in a way that makes it more cohesive and coherent.
• the principal dynamic force that motivates and coordinates the organization in the accomplishment
of its objective.
• is the interpersonal influence directed through communication, towards goal attainment
• the art of influencing people by persuasion or example to follow a line of action
• the principal dynamic force that motivates and coordinates the organization in the accomplishment
of its objectives

Today, organization are focusing on building leadership capabilities to fulfill strategic and tactical
goals. It is therefore being regarded as a long term partnership between team members and leaders.
Peter Block suggests that in order for this relationship to emerge and work, the following four
parameters must apply:

• An exchange of purpose that is discussed and shared between the team members and leaders
• A belief that everyone has a right to his belief and to express contrary opinion
• Every individual is personally accountable for outcomes and the current situation.
• With distributed power, people will have to tell the truth to each other and share information

Difference between Leadership and Management

The standard conceptual functions of management include planning, organization, directing, and
controlling. Though leading is a part of a managerÊs job, other functions as mentioned are critical to
the managerÊs effectiveness. Leadership is therefore the interpersonal aspect of the managerÊs job,
while these other functions constitute the administrative aspect of a managerÊs job.

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Leadership vs Management

Parameters Leadership Management

Creating an agenda Establishes direction: develops Plans and budgets; establishes
a vision and the strategies detailed steps & timetables for
needed for its achievement achieving needed results;
allocate necessary resources
Developing a network for Involves aligning people; Organizes and staffs;
achieving the agenda communicates direction by establishes structure for
words and deeds to all those achieving the plans; staffs;
whose cooperation maybe delegates responsibility &
needed to help create teams authority for implementation;
and coalitions that understand develops policies and
the vision & strategies, and procedures to guide people ;
accepts their validity creates monitoring systems
Execution Motivates and inspires; Controls & solves problems;
energizes people to overcome monitors results against plans
major political, bureaucratic & and then plans & organizes to
resource barriers to change by choose the gap
satisfying basic human needs
Outcomes Produces a degree of
predictability & order; has the
potential to consistently
produce key results expected
by various stock holders

Source : John P Kotter, A Force of Change: How Leadership differs from Management

Substitutes for Leadership

Sometimes incompetent leadership has to be counterbalanced by other factors in the work situation
like:

• Closely knit teams of highly trained members

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• Intrinsic satisfaction derived from work that is self motivating and interesting
• Computer aided monitoring and networking
• Strong professional norms requiring little supervision and leadership

6.3 Leadership roles

A role is an expected set of activities or behaviors stemming from oneÊs job. Since leading is a
complex activity, researchers identified 8 roles that can be identified as a part of the leadership
function of management.

S Leadership Description Uses

No role
1 Figurehead Spending time in ceremonial • Entertaining clients as official
activities representative of the organization
• Making oneself available to
outsiders as a representative of the
organization
• Serving as official representative at
gatherings outside the organization
• Escorting official visitors

2 Spokesperson Emphasis on managing Keeps the following people informed

communication & of the unitÊs activities, plans,
correspondence capabilities & possibilities:

• Upper level management

• Clients
• Another important outsiders like
unions
• Professional colleagues
• General public

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3 Negotiator Making deals with others for Bargaining for use of resources, staff,
needed resources facilities, equipment or services,
schedules, and delivery times are done
with :

• other units
• superiors
• suppliers and vendors

4 Coach Coaching team members • Informally recognizing team

memberÊs achievements
• Providing team members with
feedback concerning ineffective
performance
• Ensuring that team members are
informed of steps that can
improve performance

5 Team Builder Building effective teams • Ensuring that team members are
recognized for their
accomplishment
• Initiating activities that contribute
to group morale
• Holding periodic staff meetings to
encourage team members to talk
about their accomplishments,
problems and concerns

6 Team player Related to team builder role; • Displays appropriate behaviour

involves being a part of the team • Cooperating with other units
• Displaying loyalty to superiors by
supporting their plans and
decisions fully

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7 Technical Helps team members to solve • Serves as a technical adviser to the
problem their technical problems group
solver • Performs individual contributor
tasks on a regular basis

8 Entrepreneur Have responsibility for • Reading trade publications &

suggesting innovative ideas or professional journals to keep
furthering business aspects of updated
the firm • Talking with customers and others
to be aware of changing needs
• Being involved in situations
outside the unit to look at ways of
improving the performance of the
organization

It is evident that managers at any level can display these leadership roles.

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 6.4 Leadership Styles

A leadership style is a relatively consistent pattern of behaviour that characterizes a leader. In

choosing a leadership style, one would have to choose among a wide range of behaviors along a
continuum of boss centered vs employee centered leadership as shown below:

Boss centered Employee centered

Use of authority
by manager
Area of freedom
for subordinates

Manager Manager Manager Manager Manager Manager Manager

makes sells presents presents presents defines permits
decisions decisions ideas & tentative problem, limits; subordinates
& invites decisions gets asks group to function
announces questions subject to suggestion to make within limits
it change s, makes decisions defined by
decisions superior

Based on the behaviour style chosen the styles could hence range from

Amount of authority held by the leader

Autocratic Style Participative Style Free-Rein Style

Consultative Consensus Democratic

Amount of authority held by the group members

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6.5 THEORIES OF LEADERSHIP

There are many theories that have been propounded to explain the concept of leadership. They are:

TRAIT THEORY

Trait theories focus on the personal traits and qualities of the leaders in order to differentiate between
them. Though most of the research studies could not comprehensively agree on what traits are
common to successful leaders, there were has been consensus that certain traits increase the likelihood
of the success of a leader. Broadly 6 traits that seemed to differentiate them from non-leaders are –

• Ambition & energy

• The desire to lead
• Honesty & Integrity
• Self confidence
• Intelligence
• Job relevant knowledge

The trait approach however has four limitations.

• There are no universal traits that predict leadership in selective situations

• Traits predict behaviour more in weak situations than strong. Hence in strong highly formalized
organizational cultures do not leave much room for strong leaders to emerge.
• The evidence of whether traits define leaders or leaders create traits is still debatable
• Traits tend to predict the visible appearance of leadership than their effectiveness

BEHAVIOURAL THEORY

Since Trait theory did not really give much clarity on leadership, researchers went on to study
behaviors. The difference between trait and behavioral theories, in terms of application, lies in their
underlying assumptions.

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Ohio State Studies

The most comprehensive and replicated of the behavioral theories resulted from research that began at
Ohio State University in the late 1940s. These researchers sought to identify independent dimensions
of leaders behaviour. Beginning with over a 1000 dimensions, they eventually narrowed them down to
two categories that substantially accounted for most of the leadership behaviors between employees.
The two categories were - Initiating structure & Consideration.

Initiating structure refers to the extent to which a leader is likely to define and structure his or her role
and those of the employees in the search of for goal attainment. It includes behaviour that attempts to
organize work relationships and goals. The leader is characterized as high in initiating structure when:

• Assigns group members to particular tasks

• Expects workers to maintain definite standards of performance
• Emphasizes meeting of deadlines

Consideration is described as the extent to which a person is likely to have job relationships that are
characterized by mutual trust, respect for employees ideas and regard for their feelings. He shows
concern for followerÊs comfort, well being, status and satisfaction. A leader high in consideration is
one who:

• Helps employees with personal problems

• Is friendly and approachable
• Treats all employees as equals
• Emphasizes cooperation & consensus building

University of Michigan Studies

Leadership studies were undertaken at the University of MichiganÊs Surrey Research Center around
the same time as the Ohio studies with pretty much similar objectives. The Michigan group also came
up with two groups – employee oriented and production oriented. The conclusions of the Michigan
group strongly favoured employee oriented leaders as they were found to improve productivity and job
satisfaction.

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The Managerial Grid

A graphic portrayal of the two-dimensional view of leadership style was developed by Blake &
Mouton. They proposed a managerial grid based on the styles of concern of people and concern for
production. The grid as defined below has 9 possible positions along each axis, creating 81 different
positions in which the leadership style may fall. The grid shows the dominating factors in a leaderÊs
thinking in regard to getting results.

1,9 9,9
Concern for the people

5,5

1,1 9,1

Concern for production

1,1=Impoverished Management
1,9=Country club Management
5,5=Middle-of-the Road Management
9,1=Task Management
9,9=Team Management

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Scandinavian Studies

These studies have been evaluating whether there are only 2 dimensions to leadership. They felt that
since the business environment today is more dynamic than it was earlier, the leaders may also display
a 3rd dimension – development orientation. Early evidence in this direction is as of now positive.

CONTINGENCY THEORIES

These theories define that leadership style are adapted based on the appropriateness of the situation.
These theories have tried to isolate these situational conditions

FiedlerÊs Contingency Model

FiedlerÊs Contingency Model proposes that effective group performance depends on the proper match
between the leaderÊs style and the degree to which the situation gives control to the leader. Fiedler
believes that the key factor to a leaderÊs success is his basic leadership style. He created a
questionnaire called Least Preferred Co-worker questionnaire (LPC). This measures whether the
person is task oriented or people oriented. The respondent goes through a set of 16 sets of contrasting
adjectives and defines his inclination to work with this person on those parameters on a 8 point scale.
If the respondent is willing to rate positively his least preferred co-worker, then he is considered
relationship oriented and vice versa. However, about 16% of individuals score in the middle range and
would be neither productivity nor relationship oriented. Such respondents would not be covered under
this model and this was a definite limitation.

Fiedler assumes that a personÊs leadership style is fixed . This means that in a situation where the
situation and the leadership style do not match, then either the leader has to be changed or the situation
has to be modified.

After the individualÊs basic style has been identified through the LPC, it is necessary to match the
leader with the situation. There are 3 contingency dimensions to do this:
• Leader-member relations: The degree of confidence, trust & respect members have in their leader
• Task structure: The degree of structuring in the task to be accomplished

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• Position power: The degree of influence a leader has over power variables such as hiring, firing,
discipline,

Cognitive Resource Theory

Fiedler & an associate Joe Garcia re-conceptualized the formerÊ s original theory. They focused on the
role of stress as a form of situational unfavorable ness and how a leaderÊs intelligence and experience
influence his or her reaction to stress. This re-conceptualized theory is called Cognitive Resource
Theory.

The theory believes that leaders find it difficult to think logically and analytically while under stress.
The leaderÊs own intelligence and experience influences his ability to manage the stress. Fiedler and
Garcia found that a leaderÊs intellectual abilities improve with performance under low stress situations
and vice versa. This theory is finding a lot of ground now and a huge body of research is moving on
this.

Hersey & BlanchardÊs Situational Leadership Theory (SLT)

Paul Hersey & Ken BlanchardÊs SLT focuses on the followers. They believe that selecting the right
leadership style is contingent on the readiness of the follower, emphasizing that it is the followers who
accept or reject the leader. Regardless of what the leader does, his effectiveness depends on the actions
of his followers. The term readiness as described by the authors, refers to the extent to which people
have the ability and willingness to accomplish a specific task.

SLT considers the leader-follower relationship from the same perspective as that of a parent-child
relationship. Just as a parent needs to manage his need to control his child based on the childÊs own
development and maturity through his growth years, the leader too needs to do the same with his
follower.

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 High
Unable Able

Participating Selling

Relationship
Unwilling Unwilling
Behaviour
Willing Willing

Telling
Delegating

Able
Unable Low
High
Task Behaviour

This theory acknowledges that followers are important for the success of the leader and that leaders
have to compensate for their ability and motivational limitations.

Leader Member Exchange Theory (LMX)

This theory argues that because of time pressures leaders establish a special relationship with a small
group of their followers. These followers make the in-group who are trusted, get disproportionate
amount of the leaderÊs attention and receive special privileges. All others fall into the out-group. Their
relationship with the leader is based on the formal authority interactions. Just how the leader decides
to put the follower in either of these groups is unclear as yet. They seem to rely on the similarity of
attitudes and personality characteristics of the follower with them. A point to note is that though it is
the leader who is making the choice, it is the followerÊs attributes that are driving the choice.

Research substantiating this theory has shown that leaders do differentiate between followers and this
is not done at random. Leaders do seem to invest more resources on followers who they expect to
perform best.

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Path-Goal Theory

One of the most respected theories, this theory by Robert House, extracts key elements Ohio State
Leadership research and the expectancy theory of motivation. The main focus of this theory is that the
leaderÊs main job is to assist his followers in attaining their goals and provide the necessary direction
and support to ensure that these goals are compatible with that of the organization or group objectives.
The term path-goal is derived from the belief that effective leaders clarify the path to the achievement
of the goals of the followers, thus removing all obstacles.

House identified four leadership behaviors:

Directive lets followers know what is expected of them, schedules

work to be done and gives specific guidance to accomplish them.
Satisfying in ambiguous, very structured or stressful situations. Will
be dissatisfying with employees with high perceived ability and
experience

Supportive is friendly and shows concern for the followerÊs needs.

Suitable when tasks are structured

Participative consults and uses the followersÊ suggestions before making a

decision. Suitable with employees with high internal locus of control

Achievement oriented sets challenging goals and expects followers to perform at their
highest level. Works well when tasks are ambiguous and unstructured

Leader- Participation Model

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Victor Vroom and Phillip Vetton developed this theory that related leadership behaviour and
participation to decision making. They said that based on the degree of routine and non-routine
element of the tasks, leadership behaviour has to be changed. This model was normative since it
provided a set of rules that should be followed in determining the form and amount of participation in
decision making . It used a decision tree incorporating 7 contingencies (whose relevance could be
identified with „yes‰ or „no‰ choices) and five alternative leadership styles.

Vroom and Vago have further refined this model where they have retained the five leadership styles
but adds a set of problem types and expands the contingency variables to 12. The model though clear
seems complicated for managers to implement on a day to day basis.

S no. Contingency variables in the revised Leader- Participation model

1 Importance of the decision
2 Importance of obtaining follower commitment to decision
3 Whether the leader has sufficient information to make a good decision
4 Whether problem is well structured
5 Whether an autocratic decision would receive follower commitment
6 Whether followers buy into the organizational goals
7 Whether there is likely to be a conflict among followers over solution alternatives
8 Whether followers have necessary information to make a good decision
9 Time constraints on the leader that may limit follower involvement
10 Whether costs to bring geographically dispersed members together is justified
11 Importance to leader of minimizing the time to take decision
12 Importance of using participation as a tool for developing decision skills

6.6 TRANSFORMATIONAL LEADERSHIP

Most theories discussed so far focused on transactional leaders who were more concerned about
guiding and motivating their followers in the direction of the goals by clarifying role and task
requirements. However there are transformational leaders who go beyond their self-interests for the
good of the organization and who is capable of having a profound impact on the followers.

Transformational leaders :

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1. Vision -
trust in followers
2.Masterfulcommunication -
3.Inspires trust -
willing to risk their careers to fulfill the leaders goals
4. Makes followers feel capable-
5. Energy & action orientation -
6. Emotional warmth & expression -
7. Willingness to take risks
8. Use of unconventional strategies
9. Self promoting personality
10.Arise in crisis
11. Minimum internal conflict
12. Promotes thinking
Provides Vision , sense of mission, instill pride, respect and
Communicates high expectations
Followers believe I the integrity of the leader and will be
Uses symbols to focus on efforts and expresses important
purposes in simple ways
Excite, arouse ad inspire followers to put extra effort to achieve
group goals
Pay attention to the concerns and developmental needs of
their followers
this adds to their charisma
Change followerÊs awareness of issues by helping them to
look at old problems in new ways.
They are not diffident and allow others to know how
important they are
They normally emerge in times of crisis.
They are confident that they are right even through conflicts
and setbacks. They have less internal conflict between their
emotions, impulses and feelings, etc.
Intelligence, rationality and careful problem solving

Transformational leaders make transformations happen by:

1. Raising peopleÊs awareness

2. Helping people look beyond self interest
3. Helping people search for self-fulfillment
4. Helping people to understand the need for change
5. Investing managers with a sense of urgency
6. Committing to greatness

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Negative impact of transformational leadership

Since they have a huge impact and carry teams based on their personal charisma and often serve as
personal role models, transformational leaders can have a huge negative impact if :

- They follow unethical illegal or immoral practices

- They neglect their social responsibility - they would tend to misuse their charisma for
personal gains

There is a lot of blending between Charismatic and Transformational leaders. In fact the
Transformational leaders would need to be charismatic to e able to transform. Hence the lines between
the two blur and one is often used interchangeable for the other.

Summary :-

The success of an enterprise depends in the leadership it espouses in contemporary organizations.

Though leading is a part of a manager job, the other functions of management are critical to the
managers effectiveness. Leadership is therefore the interpersonal aspect of the managers job, while the
other functions constitute the administrative aspects of a managers job. There are however different
styles of leadership that are visible in the organization. Scholars have identified different theories of
leadership for the organization to choose from. The modern organizations require transformational
leaders who could transform the organization and lead the team towards development.

Questions:-

1. Look at the Indian business scenario. You will observe some leaders who have taken up roles
in companies and have been able to transform the image and performance of the company.
Analyze & discuss what steps they must have taken to bring around this transformation.
2. What is leadership? Discuss any two styles of leadership.
3. Identify a person you know for each of the roles and discuss the displayed behaviors and the
benefit to the organization they are in.

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 4. Evaluate the personality of the following for differing styles of leadership – Jack Welch, X-
CEO of GE, Bob Eaton of Chrysler, Kumaramangalam Birla of Aditiya Birla Group, Narain
Murthy of Infosys.
5. Identify any one corporate leader you admire and discuss the theories of leadership that would
apply to him.
6. Discuss transformational leadership with an example.

References :-

1. Andrew J Dubrin (2004) Leadership: Research Findings, Practice & Skills. New Delhi; All India
Publishers & Distributors

2. Stephen Robbins (2005) Organizational Behavior. New Delhi; Prentice Hall India

3. Stephen R Covey (1999) Principle Centered Leadership. New York; Simon & Schuster

4. Robert Slater (1999) Get Better or Get Beaten – 29 Leadership Secrets of Jack Welch.
5. John Maxwell ( 2000) 21 Irrefutable Laws of Leadership. New York; Magna Publishing Co

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 Chapter - 7
Motivation – Concept and Theories

7.1 Objectives: - This unit familiarizes the student with the concept of Motivation. After reading the
unit, the student can appreciate and understand:
• The meaning of Motivation.
• The theories of Motivation.
• Implications for managers.

Keywords:
• Motivation
• Theories
• Reinforcement
• Needs.

Structure :-
• Introduction.
• Basic assumptions.
• Theories of motivation.
• Summary.
7.2 Introduction

Motivation is a human psychological characteristic that contributes to a personÊs degree of

commitment. It includes the factors that cause, channel, and sustain human behavior in a particular
committed direction. Motivating is the management process of influencing peopleÊs behavior based on
this knowledge of „what makes people tick‰. Motivation and motivating both deal with the range of
conscious human behavior somewhere between two extremes:
1. Reflex actions (ex: sneeze , flutter of eye lids)
2. Learn habits (ex: handwriting style)

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7.3 Basic assumptions about motivation and motivating

Motivation is commonly assumed to be a good driver. We are taught in a variety of settings (including
school, family, work etc.) that one cannot feel very good about oneself if we are not motivated to feel
so. Motivation is one of several factors that go into personÊs performance. Important, too, are such
factors as ability, resources and conditions under which one performs.
Managers and researchers alike assume that motivation is in short supply and in need of periodic
replenishment.

Motivation is a tool with which managers can arrange job relationships in organizations. If managers
know what drives the people working for them, they can tailor job assignments and rewards to what
makes these people „tick‰. All these assumptions run deep in the discussion about the evolution of
motivation theory.

7.4 Theories of Motivation

There are many perspectives of motivation which are given in the nature of theories. Each motivation
theory attempts to describe what human beings are and what human beings can become. It is
customary to say that a motivation theory has content in the form of a particular intent about people.

Early Views of Motivation

Motivation was one of the earliest concept with which managers and management researchers
wrestled. A so-called traditional model is often associated with Frederick Taylor and Scientific
Management. Managers determine the most efficient way to perform repetitive tasks and then
motivated workers with a system of wage incentives-the more workers produced, the more they earn.
The underlying assumption was that managerÊs understood the work better than the workers.

Human Relations model is often associated with Elton Mayo and his contemporaries. Mayo and
human Relations researchers found that boredom and repetitiveness of many tasks actually reduced
motivation, while social contacts help create and sustain motivation. The conclusion is that the

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managers could motivate employees by acknowledging their social need and by making them feel
useful and important.

Under the traditional model, workers had been expected to accept managementÊs authority in return
for high wages. Under the Human Relations model, workers were expected to accept managementÊs
authority because supervisorÊs treated them with consideration and allowed them to influence the work
situation.

Human Resources model is often associated with Douglas McGregor. McGregor and other theorists
criticized the human relations model as simply a more sophisticated approach to the manipulation of
employees. They also charged that both traditional and human relations model over simplified
motivation by focusing only on, money or social relations.

McGregor identified two different sets of assumptions about employees.

1. The traditional view, known as Theory X, holds that people have an inherent dislike of work.
Although workers may view it as necessity, they will avoid it whenever possible.
2. Theory Y is more optimistic. In theory Y, people want to work and can derive a great deal of
satisfaction from work. People have a capacity to accept – even seek-responsibility and to
apply imagination, ingenuity, and creativity to organizational problems.

Contemporary Views of Motivation

Landy and Becker have sorted the many modern approaches to motivation theories and practice into 5
categories: Need theory, Reinforcement theory, equity theory, expectancy theory and goal setting
theory.

Need theory

According to Need theory, a person is motivated when he/she has not yet attained certain levels of
satisfaction with his/her life. A satisfied need is not a motivator. There are various need theories,
which differ regarding what those levels are and when satisfaction is actually reached.

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1. MaslowÊs Hierarchy of Needs

The hierarchy of needs, developed by Abraham Maslow, has probably received more attention from
managers than any other theory of motivation. Maslow viewed human motivation as a hierarchy of
five needs, ranging from the most basic physiological needs to the highest needs for self-actualization.
According to Maslow, individuals will be motivated to fulfill whichever need is prepotent (powerful)
for them at a given time. The prepotency of a need depends on the individualÊs current situation and
recent experiences. Starting with the physical needs which are most basic, each need must be satisfied
before the individual desires to satisfy a need at the next higher level.
An obvious conclusion of MaslowÊs theory is that employees first need a wage sufficient to feed,
shelter and protect them and their families satisfactorily as well as a safe working environment. Then
their safety needs must be met-job security, freedom from coercion and clearly define regulations.
Then managers can offer incentives designed to provide employees with esteem, feeling of the
belonging, or opportunities to grow.
According to Maslow, when all other needs have been adequately met, employees will become
motivated by the need for self-actualization. They will look for meaning and personal growth in their
work and will actively seek out new responsibilities. But being aware of different self-actualization
needs of their employees, managers can use a variety of approaches to enable employees to achieve
personal as well as organizational goals.

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Need theory is a challenge for managers to practice for two reasons. First, any manager works in a
complex web of relationships with people whose needs differ. Second, any one personÊs need can
change overtime.

2. ERG Theory

The ERG Theory of Clayton P. Alderfer is a model that appeared in 1969 in a Psychological Review
article entitled „An Empirical Test of a New Theory of Human Need‰. In a reaction to MaslowÊs
famous Hierarchy of Needs, Alderfer distinguishes three categories of human needs that influence
workerÊs behavior; existence, relatedness and growth (ERG).
These ERG Theory categories are:

1. Existence needs: Food, water, air, shelter, clothing, safety, physical love and affection.
2. Relatedness needs: To be recognized and feel secure as part of a group, a family, a culture
3. Growth needs: To progress toward one's ideal self (internal esteem and self actualization)

Contrarily to MaslowÊs idea that access to the higher levels of his pyramid required satisfaction in the
lower level needs, according to Alderfer the three ERG areas are not stepped in any way.

EEG Theory recognizes that the order of importance of the three categories may vary for each
individual. Managers must recognize that an employee has multiple needs to satisy simultaneously.
According to the ERG Theory, focusing exclusively on one need at a time will not effectively
motivate.

In addition, the ERG theory, acknowledges that a higher level need remained unfulfilled, the person
may regress to lower level needs that appear easier to satisfy. This is known as the frustration-
regression principle. This frustration-regression principle impacts workplace motivation. For example,
if growth opportunities are not provided to employees, they may regress to relatedness needs, and
socialize more with co-workers.

If management can recognize these conditions early, steps can be taken to satisfy the frustrated needs
until the subordinate is able to pursue growth again.

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3. Two Factor Theory – Frederick Herzberg

According to the Two Factor Theory of Frederick Herzberg people are influenced by two factors.
Satisfaction and psychological growth was a factor of motivation. Dissatisfaction was a result of
hygiene factors. Herzberg developed this motivation theory during his investigation of 200 accountant
and engineers in the USA.

- Hygiene factors are needed to ensure an employee does not become dissatisfied. They do not lead to
higher levels of motivation, but without them there is dissatisfaction.

- Motivation factors are needed in order to motivate an employee into higher performance, these
factors result from internal generators in employees.

Typical hygiene factors are:

ƒ Working conditions
ƒ Quality of supervision
ƒ Salary
ƒ Status
ƒ Security
ƒ Company

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 ƒ Job
ƒ Company policies and administration
ƒ Interpersonal relations

Typical Motivation factors include:

ƒ Achievement
ƒ Recognition for achievement
ƒ Responsibility for task
ƒ Interest in the job
ƒ Advancement to higher level tasks
ƒ Growth

Combining the hygiene and motivation factors results in four scenarios:

High Hygiene + High Motivation – The ideal situation where employees are highly motivated and
have few complaints

High Hygiene + Low Motivation – Employees have few complaints but are not highly motivated. The
job is perceived as a pay check.

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Low Hygiene + high motivation – Employees are motivated but have a lot of complaints. A situation
where the job is exciting and challenging but salaries and work conditions are not up to par.

Low Hygiene + Low Motivation – The worst situation. Unmotivated employees with lots of
complaints.

Herzberg suggests that often work can and should be arranged in the following ways:

- Job enlargement

- Job rotation, and/or

- Job enrichment.

4. McClellandÊs 3-Need Theory

In his acquired-needs theory, David McClelland proposed that an individualÊs specific needs are
acquired over time and are shaped by oneÊs life experience. Most of these can be classified as
achievement, affiliation, or power. A personÊs motivation and effectiveness in certain job functions are
influenced by these three needs. McClellandÊs theory sometimes is referred to as the three need theory
or as the learned need theory.

Achievement:

People with a high need for achievement (nAch) seek to excel and thus ten to avoid both low risk and
high risk situations. Achievers avoid low risk situations because the easily attained success is not a
genuine achievement. In high risk projects, achievers see the outcome as one of chance rather than
oneÊs own effort. High nAch individuals prefer work that has a moderate probability of success,
ideally a 50% chance. Achievers need regular feedback in order to monitor the progress of their
achievements. They prefer either to work alone or with other high achievers.

Affiliation

Those with a high need for affiliation (nAff) need harmonious relationships with other people and
need to feel accepted by other people. They ten to conform to the norms of their work group. High

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nAff individuals prefer work that provides significant personal interaction. They perform well in
customer service and client satisfaction situations.

Power

A personÊs need for power (nPow) can be one of two types – personal and institutional. Those who
need personal power want to direct others, and this need often is perceived as undesirable. Persons
who need institutional power (also known as social power) want to organize the efforts of others to
further the goals of the organization. Managers with a high need for institutional power tent to be more
effective than those with a high need for personal power.

Implications for Management

People with different needs are motivated differently.

High need for achievement – High achievers should be given challenging projects with reachable
goals. They should be provided frequent feedback. While money is not an important motivator, it is an
effective for of feedback,

High need for affiliation – Employees with a high affiliation need perform best in a cooperative
environment.

High need for power – Management should provide power seekers that opportunity to manage others.

Summary of Need theory

Each of the need theories discussed so far emphasizes the satisfaction of some important personal
needs that people have acquired over time. Each theory also emphasizes that people decide on their
degree of satisfaction by consciously comparing their circumstances with other people. Finally, each
theory leaves room for considerable variation from person to person and „within‰ a person over time.

5. Equity Theory

Suppose employee A gets a 20% raise and employee B gets a 10% raise. Will both be motivated as a
result? Will A be twice as motivated? Will be B be negatively motivated?

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Equity theory says that it is not the actual reward that motivates, but the perception, and the perception
is based not on the reward in isolation, but in comparison with the efforts that went into getting it, and
the rewards and efforts of others. If everyone got a 5% raise, B is likely to feel quite pleased with her
raise, even if she worked harder than everyone else. But if A got an even higher raise, B perceives that
she worked just as hard as A, she will be unhappy.

In other words, people's motivation results from a ratio of ratios: a person compares the ratio of
reward to effort with the comparable ratio of reward to effort that they think others are getting.

Of course, in terms of actually predicting how a person will react to a given motivator, this will get
pretty complicated:

1. People do not have complete information about how others are rewarded. So they are going on
perceptions, rumors, inferences.
2. Some people are more sensitive to equity issues than others
3. Some people are willing to ignore short-term inequities as long as they expect things to work
out in the long-term.

6. Reinforcement Theory

Operant Conditioning is the term used by B.F. Skinner to describe the effects of the consequences of a
particular behavior on the future occurrence of that behavior. There are four types of Operant
Conditioning: Positive Reinforcement, Negative Reinforcement, Punishment, and Extinction. Both
Positive and Negative Reinforcement strengthen behavior while both Punishment and Extinction
weaken behavior.

• Positive reinforcement. Strengthening a behavior. This is the process of getting goodies as a

consequence of a behavior. You make a sale, you get a commission. You do a good job, you
get a bonus & a promotion.
• Negative reinforcement. Strengthening a behavior. This is the process of having a stressor
taken away as a consequence of a behavior. Long-term sanctions are removed from countries
when their human rights records improve. (you see how successful that is!). Low status as
geek at Salomon Brothers is removed when you make first big sale.
• Extinction. Weakening a behavior. This is the process of getting no goodies when do a
behavior. So if person does extra effort, but gets no thanks for it, they stop doing it.

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 • Punishment. Weakening a behavior. This is the process of getting a punishment as a
consequence of a behavior. Example: having your pay docked for lateness.

Apply Withhold

positive negative
reinforcement reinforcement
Reward
(raise above (raise up to
baseline) baseline)

punishment (bring
extinction (stay at
Stressor down below
baseline)
baseline)

Reinforcement schedules.

The traditional reinforcement schedule is called a continuous reinforcement schedule. Each time the
correct behavior is performed it gets reinforced.

Then there is what we call an intermittent reinforcement schedule. There are fixed and variable
categories.

The Fixed Interval Schedule is where reinforcement is only given after a certain amount of time has
elapsed. So, if you decided on a 5 second interval then each reinforcement would occur at the fixed
time of every 5 seconds.

The Fixed Ratio Schedule is where the reinforcement is given only after a predetermined number of
responses. This is often seen in behavior chains where a number of behaviors have to occur for
reinforcement to occur.

The Variable Interval Schedule is where the reinforcement is given after varying amounts of time
between each reinforcement.

The Variable Ratio Schedule is where the reinforcement is given after a varying number of correct
responses.

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Fluctuating combinations of primary and secondary reinforcers fall under other terms in the variable
ratio schedule; For example, Reinforcers delivered Intermittently in a Randomized Order (RIR) or
Variable Ratio with Reinforcement Variety (VRRV).

Fixed Variable

give reward after first proper give reward after a certain amt of time
response following a specified time w/ the amt changing before the next
period reward
Interval
(yearly raise) (unexpected bonus based on merit)

[short term] [medium term]

give reward after a number of

punishment (subtract from
responses, w/ that no. changing before
baseline)
the next reward
Ratio
(commissions or piecework pay)
(team-based bonus)

[medium term]
[long term]

7. Expectancy Theory

Expectancy Theory of motivation was put forward by Victor Vroom. This theory of motivation is used
to understand how individuals make decisions regarding various behavioral alternatives. This model
deals with the direction aspect of motivation, that is, once behavior is energized, what behavioral
alternatives are individuals likely to pursue. The following are propositions of Expectancy Theory:

When deciding among behavioral options, individuals select the option with the greatest motivation
forces (MF).

MF = Expectancy x Instrumentality x Valance

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The motivational force for a behavior, action, or task is a function of three distinct perceptions which
are:

1. Expectancy- Probability (EàP): The expectancy is the belief that one's effort (E) will result is
attainment of desired performance (P) goals. This belief, or perception, is generally based on an
individual's past experience, self confidence (often termed self efficacy), and the perceived difficulty
of the performance standard or goal.

Examples include:

If I spend most of tonight studying will it improve my grade on tomorrow's math exam?

If I work harder than everyone else in the plant will I produce more?

If I practice my foul shot more will my foul shooting improve in the game?

If I make more sales calls will I make any more sales?

Variables affecting the individual's Expectancy perception:

Self Efficacy- efficacy is a person's belief about his or her ability to perform a particular behavior
successfully. Does the individual believe that he or she has the require skills and competencies
required to perform well and the required goals?

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Goal Difficulty- Goals that are set too high or performance expectations that are made too difficult,
lead to low expectancy perceptions. When individuals perceive that the goals are beyond their ability
to achieve, motivation is low because of low Expectancy.

Perceived Control Over Performance- For Expectancy to be high, individuals must believe that some
degree of control over the expected outcome. When individuals perceive that the outcome is beyond
their ability to influence, Expectancy, and thus motivation, is low. For example, many profit-sharing
plans do not motivate individuals to increase their effort because these employees do not think that
they have direct control over the profits of their large companies.

2. Instrumentality- Probability (PaR): The instrumentality is the belief that if one does meet
performance expectations, he or she will receive a greater reward. This reward may come in the form
of a pay increase, promotion, recognition or sense of accomplishment. It is important to note that
when it is perceived that valued rewards follow all levels of performance, then instrumentality is low.
For example, if a professor is known to give everyone in the class an "A" regardless of performance
level, then instrumentality is low.

Examples include:

If a get a better grade on tomorrow's math test will I get an "A" in math?

If I produce more than anyone else in the plant, will I get a bigger raise? A faster promotion?

If my foul shooting improves will I have a shot a team MVP?

If I make more sales will I get a bonus? A greater commission?

If I make more sales will I believe that I am the best sales person or be recognized by others as the best
sales person?

Variables affecting the individual's instrumentality perception:

Trust- When individuals trust their leaders, they're more likely to believe their promises that good
performance will be rewarded.

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Control- When workers do not trust the leaders of their organizations, they often attempt to control the
reward system through a contract or some other type of control mechanism. When individuals believe
they have some kind of control over how, when, and why rewards are distributed, Instrumentality
tends to increase.

Policies- The degree to which pay and reward systems are formalized in written policies has an impact
on the individuals' Instrumentality perceptions. Formalized policies linking rewards to performance
tend to increase Instrumentality.

3. Valance- V(R): The valance refers the value the individual personally places on the rewards. This
is a function of his or her needs, goals, values and Sources of Motivation.

Examples include: How much I really want an "A" in math?

Do I want a bigger raise? Is it worth the extra effort? Do I want a promotion?

How important to me is it to be team MVP?

Do I need a sales bonus? Is the extra time I spend making extra sales calls worth the extra
commission?

Is it important to me that I am the best salesperson?

Variables affecting the individual's Valance for outcomes:

ƒ Values
ƒ Needs
ƒ Goals
ƒ Preferences
ƒ Sources of Motivation

Potential Valued Outcomes may include:

ƒ Pay increases and bonuses

ƒ Promotions
ƒ Time off

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 ƒ New and interesting assignments
ƒ Recognition

Intrinsic satisfaction from validating one's skills and abilities

Intrinsic satisfaction from knowing that your efforts had a positive influence in helping someone.

Expectancy and Instrumentality are attitudes, or more specifically, they are cognitions. As such, they
represent an individual's perception of the likelihood that effort will lead to performance and
performance will lead to the desired outcomes. These perceptions represent the individualÊs subjective
reality, and may or may not bear close resemblance to actual probabilities. These perceptions are
tempered by the individual's experiences (learning theory), observations of others (social learning
theory), and self-perceptions.

Expectancy Theory can be used to define what is termed a strong situation. Strong situations act to
have base is a strong influence on the behavior of individuals, often overriding their personalities,
personal preferences, and other dispositional variables.

Consequences: There are highly valued positive or negative outcomes perceived to be associated with
behavior in the situation. This is the same as Valance in Expectancy Theory

Likelihood: There is a high perceived probability that these consequences will follow behavior (e.g., "I
am certain that if I swear at my boss, she will fire me"). This is the same as Instrumentality in
Expectancy Theory.

Specificity: Required behavior is well defined and understood by the individual (e.g., "Wear a black
tuxedo" is more specific than "dress appropriately"). This is a part of what determines Expectancy in
Expectancy Theory.

8. Goal-Setting Theory

Edward LockeÊs (1968, 1990) goal-setting theory states that individuals make calculated decisions
about their desired goals. Once individuals determine the goals they intend to achieve these goals and
intentions direct and motivate efforts to attain them. According to this theory, individuals are
motivated when thay behave in ways that move them to certain clear goals that they accept and can

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reasonable expect to attain. Thus, setting goals affects behavior of the individuals and their job-related
performance.

Christopher Earley and Christine Shalley describe the goal-setting process in terms of four phases of a
personÊs reasoning.

1. Establishment of a standard to be attained

2. Evaluation of whether the standard can be achieved
3. Evaluation of whether the standard matches personal goals
4. The standard is accepted the goal is thereby set, and behavior proceeds toward the goal

Research has demonstrated that participation in goal-setting and acceptance of the goals are critical to
commitment to the task/goal. Similarly, receiving feedback on goal achievement is also critical for
motivation. If an employee does not get timely and accurate feedback on performance, itÊs impossible
to know what behaviors to continue in order to achieve similar goals in the future.

One other interesting finding is that goals themselves are not reinforcing. The motivation comes from
the dissatisfaction with discrepancies between what was achieved and what was originally hoped for.
The discrepancies motivate people to work harder next time.

SUMMARY:-

Motivation is a tool with which managers can arrange job relationships in organizations. If managers
know what drives the people working for them, they can tailor job assignments and rewards to what
makes these people „tick‰. All these assumptions run deep in the discussion about the evolution of
motivation theory. Each motivation theory attempts to describe human behaviour. While the early
views on motivation serve the foundation, the contemporary views consolidate the motivational
aspects in organizations. Motivating the employees has been and is challenge of managers even today
and this makes the job of a manager exciting and complex in the modern organizational context.

References:-

• Stephen P. Robbins: „Organizational Behavior‰ (Prentice Hall of India)

• James A. Stoner, R. Edward Freeman, Daniel Gilbert Jr.: „Management‰ (Prentice Hall of India)

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• L.M. Prasad: „Organizational Theory & Behavior‰ (McGraw Hill Co.)
• Fred Luthans: „Organizational Behavior‰ (Sultan Chand & Sons)

Questions for Review

1. Define motivation with examples? Discuss in detail the various need theories.

2. Distinguish between MaslowÊs need theory and ERG theory.

3. Describe the goal-setting process in terms of four phases of a personÊs reasoning.

4. Explain VroomÊs theory of Expectancy.

5. What is Operant Conditioning? What are the various types of Operant Conditioning?

Case Study

As office manager of the Worthless Paper Products Corporation (WPP), Minnie Reems was
responsible for the work of approximately forty employees, of whom 26 were classified as either data
processors or clerks. Acting under instructions from Kenny Count, the company CEO, she agreed to
allow F. Taylor Group, Ltd., (FTG),a team of outside consultants, to enter his realm of responsibility
and conduct time and motion, and systems analysis studies in an effort to improve the efficiency and
output of her staff.

The consultants began by studying job descriptions, making observations, and recording each minute
detail of the work of the data processors and file clerks. After two weeks, they indicated to Reems and
her employees that they were prepared to begin even more detailed studies, observations, and
interviews on the following day.

The nest morning, five employees participating in the study were absent. On the following day, ten
employees were absent. Concerned, Reems investigated the cause of the absenteeism by telephoning
several absentees. Each employee related approximately the same story. Each was nervous, tense,

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and tired after being viewed as a "guinea pig" for several days. One data processor told Reems that her
physician suggested she could ask for a leave of absence based on her complaints of carpal tunnel
syndrome if she needed to. Another told Reems, "We ain't no ÂHawthorne' happy hoppers here in this
shop! And, we ain't fixing to please management just because this Taylor guy thinks we can do more
with less."

Shortly after the telephone calls, the chief of FTG's systems-analysis team explained to Reems that if
there were as many absences on the next day, his team would have to drop the study and proceed to
another department. He said that a valid analysis would be impossible to conduct with only ten
employees absent. Realizing that she would held responsible for the failure of the systems analysis,
Reems began to create and evaluate alternative strategies to rectify the problem so the study could
continue. She could fire all those who were absent without legitimate causes and send a clear signal
that non-cooperation would not be tolerated. Or she could simply get some temps in to replace them.

But even if the studies were completed successfully, she was concerned about implementing the
procedural changes that she knew would be mandated after the study was completed. Thinking back
on her prior experience as a drill sergeant in the Marines, Reems was astute enough to realize that
policies declared and orders issued are not always followed by instant compliance, even in the
military, and that this wasn't a military operation. She was also concerned that without an increase in
productivity, the operation could not remain cost effective. As a result, the operation would probably
be outsourced and everyone would be fired.

Question :-

1. Analyze the incident from a motivational theory standpoint.

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 Chapter - 8
Contemporary Issues in Management

8.1 Objectives: - The objective of this chapter is to highlight the contemporary issues in management.
After reading the unit, the student would:
• Appreciate the concept of Corporate Social Responsibility.
• Understand the importance of environment management.
• Highlight the need for ethics in management.

Keywords: -
• Contemporary
• Social responsibility
• Environmental management
• Business Ethics.
• Ethical code

Structure : -
• Introduction.
• Corporate social Responsibility.
• CSR – Evolution.
• Business ethics.
• Environmental management.
• Summary.

8.2 Introduction:

Business has complex relationships with many segments of society. The existence and power of these
segments require careful management attention and action. A companyÊs success can be affected –
negatively or positively – by its stakeholders. Failure to respond to stakeholder concerns can lead to
conflicts and serious public issues. This unit focuses on the kind of involvement does business have

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with other elements of society. Issues such as corp. Social Responsibility environmental Management
and Ethics having implications for society in the contemporary era are discussed.

8.3 Corporate Social Responsibility

Corporate Social Responsibility expresses the idea that business firms should help solve social
problems as they pursue traditional economic goals. The general public expects business to be socially
responsible, and many companies have responded by making social goals a part of their overall
business operations. Guidelines for acting in socially responsible ways are not always clear, thus
producing controversy about what constitutes such behavior, how extensive it should be, and what it is
to be socially responsible.

Corporate Social Responsibility refers to‰ a corporation being held accountable for any of its actions
that affect people, their communities, and the environment‰. It implies that negative business impacts
on people and society should be acknowledged and corrected if possible. It may require a company to
forgo some profits if its social impacts are seriously harmful to some of corporationÊs stakeholders or
its funds can be used to promote a positive social good.

However, being socially responsible does not mean that a company should abandon its primary
economic mission, nor, does it mean that socially responsible firms cannot be as profitable as others
less responsible. Social responsibility requires companies to balance the benefits to be gained against
the cost of achieving those benefits.

The social responsibilities of business grow directly out of two features of the modern corporation:
I. the essential functions it performs for society and
II. the immense influence it has on peopleÊs lives.

8.4 Social Responsibility - Evolution

In the United States, the idea of corporate social responsibility appeared in the early part of the
twentieth century. Corporations at that time came under attack for being too big, too powerful, and
guilty of antisocial and anticompetitive practices.

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Faced with this kind of social protest, a few farsighted business executives advised corporations to use
their powers and influence voluntarily for broad social purposes, rather than for profits alone. Some of
the wealthier business leaders – steelmaker Andrew Carnegie is a good example – became a great
philanthropist who gave much of their wealth to charitable trusts and educational institutions. Others
like automaker, Henry Ford developed paternalistic programs to support the recreational and health
needs of their employees. As a result of these early ideas about the business expanded role in society,
two broad principles emerged. They are:

The Charity Principle

The idea is that the wealthier members of society should be charitable toward the less fortunate.
Royalty through the ages have been expected to provide for the poor. This kind of private aid to the
needy members of society was very important during the early decades of the twentieth century, as at
that time, there was no Medicare for elderly, no unemployment pay, no United Fund to support a
broad range of community needs and no disaster relief system for the victims of droughts and floods.
Before long, these community needs outpaced the riches of even the wealthier persons and families,
When that happened, much of the charitable load was taken on by business firms themselves rather
than by the owners alone. Hence, there was a shift from individual philanthropy to corporate
philanthropy.

The Stewardship principle

Many of todayÊs corporate executives see themselves as stewards or trustees who act in the general
publicÊs interest. Although their companies are privately owned and they try to make profits for the
stakeholders, the company is managed and directed by professional managers who believe they have
an obligation to see that everyone - not just those in need benefits from the companyÊs actions.
According to this view, corporate managers have been placed in a position of public trust. They
control vast resources whose use can affect people in fundamental ways. Because they exercise this
kind of crucial influence, they incur a responsibility to use those resources in ways that are good not
just for the stockholders alone but for society generally. In this way, that have become stewards or
trustees for society. As such, they are expected to act with a special degree of social responsibility in
making business decisions.

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These two principles – the charity principle and the stewardship principle established the original
meaning of corporate social responsibility. The Foundation principles of corporate social
responsibility and their modern expression can be seen in the following table.

Charity principle Stewardship Principle

Definition Business should give Business, acting as a public
voluntary aid to societyÊs trustee, should consider the
needy persons and groups. interests all who are affected
by business decisions and
policies
Modern Expression - Corporate philanthropy - Acknowledging business and
- Voluntary actions to promote society interdependence.
the social good. - Balancing the interests and
needs of many diverse groups
in society.
Examples - Corporate philanthropic - Stakeholder approach to
foundation corporate strategic planning
- Private initiatives to solve - Optimum long-run profits
social problems rather than maximum short-
- Social partnerships with run profits
needy groups - Enlightened self-interest
attitude.

CSR focuses on the social, environmental, and financial success of a company - the so-called triple
bottom line - with the aim to achieve social development while achieving business success.

Companies now perform in non-financial arenas such as human rights, business ethics, environmental
policies, corporate contributions, community development, corporate governance, and workplace
issues.

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Social and environmental performances are considered side by side with financial performance. From
local economic development concerns to international human rights policies, companies are being held
accountable for their actions and their impact.

Companies are also more transparent in disclosing and communicating their policies and practices as
these impact employees, communities, and the environment.

In the new global economy , companies that are responsive to the demands of all of their stakeholders
are arguably better positioned to achieve long-term financial success. It is no longer optional for a
company to communicate its environmental and social impacts; such information is pertinent in an
information-driven economy, and improved communication has become critical for sustainable
business growth.

The new slogan

CSR has become the password to not only overcome competition but to ensure sustainable growth. It
has been supported not only by the shareholders but stakeholders by and large encompassing the
whole community. Corporate Virtue Is In is the slogan and why not? As it offers so many advantages
including a hike in profits.

CSR is the point of convergence of various initiatives aimed at ensuring socio-economic development
of the community which would be livelihood oriented as a whole in a credible & sustainable manner.

Benefits of CSR
• Improved financial performance
• Reduced costs
• Enhanced brand image and reputation
• Increased sales and customer loyalty
• Customer satisfaction
• Increased productivity and quality
• Increased ability to attract and retain employees
• Reduced regulatory oversight
• Brand Visibility, recognition and awareness
• Increased market share

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• Favorable positioning
• Competitive mileage
• More engaged investors
• Environmental sustainability
• Forging of partnerships

The Limits of Social Responsibility

Social responsibility is widely expected of business, but it has its limits. The main limits are cost,
efficiency, relevance and scope. As a result of these constraints, the amounts and kinds of social
actions pursued by business are sometimes less than the public wants to see.

a) Costs

Every social action is accompanied by costs of one kind or another. A companyÊs contribution to a
worthy charity or a childcare center for its employees, or adopting a dolphin safe-a tuna-buying
policy imposes costs on someone. Example: A United Fund contribution could have been paid
instead to a companyÊs stockholders as a dividend. As worthy as some of these social actions may
be they do impose costs either on the business firm or on some groups in society.

b) Efficiency

The costs of social responsibility, like all business expenses, can potentially reduce the companyÊs
efficiency and affect its ability to compete in the market place. If a company is pressured by the
local community to keep an outmoded, inefficient plant to operate because closing it may mean a
big job loss for the local people, while its competitors close their old plants and move their
operations to foreign nations where wage rates are lower, which company is more likely to survive
in the long run?

c) Relevance

„Is this social problem any of our affair?‰ is a question of worth asking by corporate officials. „Is
it seriously affecting our business?‰ „Do we have the needed in-house talent?‰ „Can solving it

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 help us, as well as others?‰ A yes answer to these questions might cause a company to take
socially responsible action. If, for example, drug usage is causing serious safety problems in plant,
a company might be justified in spending on a drug-education and the treatment center that can
help the employees and the community.
However a no answer to the questions should cause the company executives to think twice. Social
expenditures by the corporations can be justified, and are considered to be a lawful use of
stockholdersÊ funds, if they promote the interestsÊ of the company while simultaneously helping
the society.

d) Scope and Complexity

Some of the societyÊs problems are simply too massive, too complex, and too deep-seated to be
solved by even the most socially conscientious company or even by all companies acting together.
Examples are the environmental problems like acid rain, depletion of ozone layer and destruction
of rainforests. What is required is the joint action by corporations and governments in several
nations has happened when companiesÊ producing the chemicals that destroy the planetÊs high-
level ozone layer agreed to phase out production gradually.

CORPORATE SOCIAL RESPONSIBILTY = SHAREHOLDER

WEALTH

In a market-based economy that recognizes the rights of private property, the only social
responsibility of the business is to create shareholder value and to do so legally and with
integrity. Yet we do have important unresolved social challenges- from drug abuse to
education and the environment ñ that require collective action. Corporate management
however has neither political legitimacy nor the expertise to decide what is the social
interest. It is our form of government that provides the vehicle for collective choice via
elected legislators and judicial system.

ì Whether corporate social responsibility is advocated by political activists or the CEO, the
costs of these expenditures, which donít increase the value of the company or its stock, will
be passed on to consumers by the way o higher prices, or to employees as lower wages, or
to shareholders as lower returns.î

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 e) Enlightened Self-Interest
Being socially responsible by meting the pubic continually changing expectations requires wise
leadership at the top of the corporation. Companies with an ability to recognize profound social
changes and anticipate how they will affect operations have been shown to be „survivors‰. They
get along better with the Government regulators, are more open to the needs of the companyÊs
stake Holders, social problems. Corporate leaders who possess this kind of social vision believe
that businesses should help create social change rather than try to block it. With such an attitude,
they know that their own companies will have a better chance of surviving in the turbulent social
currents of todayÊs world.
Companies with this outlook are guided by enlightened self-interest, which means that they are
socially aware without giving up their own economic self-interest. The committee for Economic
Development described it in this way:

„ By acting on its own initiative, managements preserves the flexibility needed to conduct the
companyÊs affairs in a constructive and efficient and adaptive manner. And it avoids or minimizes
the risk of governmental or social sanctions produced out of a crisis atmosphere, may be more
restrictive then necessary⁄
Enlightened self-interest thus has both „carrot and stick‰ aspects. There is a positive appeal to the
corporationÊs greater opportunities to grow and profit in a healthy prosperous, well functioning
society. ‰

f) PROFITS AND SOCIAL RESPONSIBILITY

Do socially responsible companies sacrifice profits by working conscientiously to promote the social
good? Do they make higher profits, better-than-average profits, or lower profits than corporations that
ignore or flout the publicÊs desires for a high and responsible standard for social performance?

Faced with this kind of uncertainty, corporate executives who favor a positive and proactive approach
to social responsibility have developed the following broad principles about how social activities can
be reconciled with businessÊs need for profiles.

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 g) Long-run profits versus Short-run profits
Any social program-example, an-in-company child care center, or a drug educating programme for
employees etc will usually impose immediate monetary costs on the participating company. These
short-run costs certainly have the potential for reproducing the companyÊs profits unless the social
activity is designed to make money, which is not usually the purpose of these programs. Therefore a
company sacrifices short-run profits by undertaking social initiatives. But what is lost in the short-run
can be gained over a longer period., example-healthier workforce, less absenteeism. In that case, the
company may actually increase in its long-run profits, although it had to make an expensive outlay to
get the program started.

h) Optimum Profits versus Maximum Profits

Maximum profits are the official goal of all business activities. Sometimes, however, business
judgments are deliberately made the result in a less than a maximum return. In these cases, the
companies seem willing to settle for optimum profits rather maximum profits. An optimum profit is a
return that considered being satisfactory for the managers of the business. It may be lower than what is
actually possible, and it is higher than the minimum return necessary to keep the company in business.
An optimum profit may be the best the company can earn when operating in unfavorable economic
conditions or under tough government regulations.

i) Stockholder Interest versus Company Interests

Top-level managers, along with a corporationÊs board of directors, are generally expected to produce
as much as value as possible for the companyÊs stockholders. This can be done paying high dividends
regularly by running the company in ways that cause the stockÊs value to rise. Not only are high
profits a positive signal that the company is being well run but those profits make possible the
payment of hiring dividends to stockholders. Low profits have the opposite effects and put great
pressure on managers to improve the companyÊs financial performance.
In summary, it could be said that in the name of CSR corporations should be held accountable for any
of its actions that affect people, their communities and their environment.
Social responsibility is a result of both voluntary initiatives taken by business and laws that promote
desirable social goals.

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8.5 Business Ethics

Ethics is a code of moral principles and values that govern the behaviors of a person or group with
respect to what is right or wrong. Ethics sets standards as to what is good or bad in conduct or decision
making. Ethics are our internal values that concern the external environment.

Business ethics is the application of general ethical ideas to business behavior. Business ethics is not a
special set of ethical ideas different from the ethics in general and applicable only to business. If
dishonesty is considered to be unethical and immoral and if protecting others from harm is considered
to be ethical, then a company that recalls a dangerously defective product is acting in an ethical way.
To be considered ethical, business must draw its ideas about what is proper from the same sources as
everyone else. Business should not try to make up its own definitions of what is right and wrong. The
higher emphasis of ethics is laid on the issues of environmental issues, product safety, employee
health screening, security of the company records and work place safety. These are the coming ethical
business challenges as we see them.

Why should business be Ethical?

The general public expects business to exhibit high levels of ethical performance and social
responsibility. Businesses and their employees should act ethically is to prevent harm to the general
public and the corporationÊs many stakeholders. Business and society working together in partnership
have found ways to enjoy the economic growth and benefits while adhering to the ethical principles of
conduct. Promoting ethical behavior is to protect the business firms from abuse by the unethical
employees and unethical competitors.

TYPES OF ETHICAL ISSUES

Not all ethics in the business are the same. Some occur as people interact with each other on
the job. These are everyday face-to-face ethical dilemmas related to peopleÊs jobs. The
companywide problems are focused at a higher level of organizational authority and require
top-management policy decisions. Still other kinds of ethical puzzles appear in the different
operational areas of business, such as accounting, marketing, finance and others. The
following are the three types of issues –

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 ¾ Face-to-face ethics

¾ Corporate policy ethics

¾ Functional-area ethics

a) Face-to-face ethics
Problems having ethical dimensions appear frequently in most business firms because there is a human
element in most business transactions. Managers and employees face conflicts when their personal
standards differ from their job demands. For example, it is normal for the team leader who works with
a group of employees on a day-to-day basis to get to know their personal lives and professional goals
and their family crisis they encounter.

b) Corporate policy ethics

Companies sometimes are faced with ethical dilemmas that affect their operations across all the
departments and divisions of the firm. Top managers and board of directors then are faced with
establishing company wide policies to cope with the issues, such as following:

The ethical burden of deciding corporate policy normally rests on a companyÊs leaders. The top
managers and directors are responsible for making policies and seeing that they are carried out. The
ethical content of their policies can have enormous influence throughout the company. It can set an
ethical tone and send a forceful message to all employees as well as to external stakeholders.

c) Functional-area ethics
As business operations are highly specialized, ethics issues can appear in any of the major functional
arrears of a business firm.

i. Accounting Ethics: the accounting function is critically important function of

every business firm. Company managers, external investors, government
regulators, tax collectors and labor unions rely on accounting data to make
key decisions.. Honesty, integrity and accuracy are absolute requirements.
Professional Accounting forms – American Institute of certified Public
Accountants and the Financial Accounting Standards Board- have developed
generally accepted accounting principles whose purpose is to establish
uniform standards for reporting accounting and auditing data. These standards

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 go far towards ensuring a high level of honesty and ethical accounting
behavior.

ii. Marketing Ethics: Relation with the customers tends to generate many ethical
issues. Pricing, promotions, advertising, product information, relations
between relations between advertising agencies and their clients, market
research – all of these are potential problem areas the American Marketing
Association adopted a code of ethics for its members which helps them in
handling these ethical issues in translating them into specific marketing rules.

iii. Financial Ethics: Finance produced some of the most spectacular ethics
scandals. Illegal stock transactions, Hundreds of loans and savings
associations failed after their managers misused their depositorsÊ funds etc.

iv. One of the newest areas of ethical concern is management information

systems and the data banks made possible by computer applications, where
issues of privacy, confidentiality and misuse of data arise.

Ethical Dilemmas in Business

People who work in business-managers and employees alike-frequently encounter and must deal with
on-the-job ethical problems. Learning how to recognize the different kinds of ethical dilemmas and
knowing why they occur is an important business skill.8

Ethics is a conception of right and wrong conduct. Ethics tells us when our behavior is moral and
when it is immoral. Ethics deals with fundamentals human relationships-how we think and behave
towards others and how we want them to think and act towards us. Ethics principles are guides to
moral behavior. For example, in many societies lying, stealing, and harming others are considered to
be unethical and immoral. Honesty, keeping promises, helping others and respecting the rights of
others are considered to be ethically and morally desirable behavior. Such basic behavior is essential
for the preservation and continuation of organized life everywhere.
These notions of right and wrong come from many sources-religious beliefs, family institution,
schools and teachers, admired role models etc. The totality of these learning experiences creates in
each person the concept of ethics, morality and socially acceptable behavior.

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Ethical ideas are present in all societies, all organizations and all individual persons, although they
may vary greatly from one to another. These differences raise the important and controversial issues of
the ethical relativism, which is the question of whether the ethical principles should be defined on
personal opinion, a societyÊs traditions, various periods of time in history, or special circumstances of
the moment. For companies conducting business in several societies at one time, this question can be
vitally important.

Ethics Vs Financial Performance - A ManagerÊs Dilemma

Companies have realized that success can be measured in many ways which may be difficult to show
on a balance sheet. "Goodwill" is an intangible asset ,returns of which can be for a lifetime. It needs to
be earned through corporate ethics and social responsibility. Studies indicate that there exists a
positive co-relation between social responsibility and financial performance.

Criteria for Ethical Decision Making

Managers often face ethical dilemmas for instance procedures for pollution due to the plant versus its
employment generation. There are various approaches to describe values for guiding ethics in decision
making. Four approaches based on normative ethics are:

1. Utilitarian Approach

The approach espoused by the 19th century philosophers - Jeremy Bentham and John Stuart Mill,
holds that moral behavior produces the greatest good for the greatest number. Under this approach, a
decision maker is expected to consider the effect of each decision alternatives on all parties and select
the one that optimizes the satisfaction for the greatest number of people.
For example, The state of OregonÊs decision to extend medical aid to 4, 00,000 previously ineligible
recipients by refusing to pay for high costs, high risk procedures such as liver transplants. Although a
few suffered, the public got benefited in the process.

2. Individualism Approach

Acts are moral when they promote the individualÊs best long term interests, which ultimately lead to
greater good. Individual self direction is paramount and external forces that restrict self direction
should be severely limited.

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For example, Lying and cheating for immediate self interests causes business associates to lie and
cheat in return i.e. do to others what you expect from others.

3. Moral Rights Approach

Moral decisions are those that best maintains the rights of those people affected by them. Rights to be
considered while decision making are

• Right of free consent

• Right to privacy
• Right of freedom of conscience
• Right of free speech
• Right to due process

4. Justice Approach

The ethical concept that moral decisions must be based on standards of equity, fairness and
impartiality to secure justice.

Who affects the ethics?

1) The Manager

Based on a managerÊs value system here we see a three stage model for moral development.

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The great majority of managers operate at level two. A few have not advanced beyond level one. Only
twenty percent of American adults reach level three of moral development.

Analysis: Managers at level three of moral development will make ethical decisions whatever may be
the organizational consequences for them. Today we need more and more managers at this level.

2) The Organization: The organization as a whole is involved in a value and ethical system. What
reflects the degree of ethics in an organization?

• The culture.
• Explicit rules and policies.
• The reward system.
• The selection system.
• Leadership and decision process.

For instance at Levi Strauss the selection system is aimed at promoting diversity of background and
thought among workers. A set of "corporate aspirations" written by the top management is to guide all
major decisions. One third of the managerÊs raise can depend on how well he or she toes the value
line.

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An example in the Indian context illustrates this: Voltas Refrigerators with its policy of promoting its
community people for the jobs, fast lost its market value from a top ranker to a no ranker.

Therefore we can say, in spite of diverse systems of ethics that exist within our own society and
throughout the world, all people everywhere do depend on ethical systems to tell them whether their
actions are right or wrong, moral or immoral, approved or disapproved. Ethics, in this sense, is a
universal human trait found everywhere.

Why ethical problems occur in business?

Ethics problems in business appear in many different forms. While not common or universal, they
occur frequently. Finding out just what is responsible for causing them is one step that can be taken
toward minimizing their impact on business operations and on the people affected.

a. Personal Gain and Selfish Interest

Personal gain or even greed causes some ethical problems. Business sometimes employs people
whose personal values are less than desirable. A manager or an employee who puts his or her own
self-interest above all other considerations is called an ethical egoist.

b. Competitive Pressure on Profits

When companies are squeezed by tough competition, they sometimes engage unethical activities
in order to protect their profits. Price-fixing is a practice that often occurs when companies
compete vigorously in a limited market.

c. Business Goals versus Personal Values

Ethical conflicts in business sometimes occur when a company pursues goals or uses methods that
are unacceptable to some of its employees. „Whistle-Blowing‰ may be one of the outcome, if an
employee‰ goes public‰ with a complaint after failing to convince the company to correct an
alleged abuse. Another recourse for employees caught in these situations is a lawsuit.

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 d. Cross cultural contradictions
Some of the knottiest ethical problems occur as corporations do business in other societies where
ethical standards differ from those at home. Today, the policy-makers and strategic planners in all
multinational corporations, regardless of the nation where they are headquartered, face this kind of
ethical dilemmas.

Reason Nature of Ethical Typical Attitude

Problems Approach

Personal Gain and Selfish interest v/s Egoistical „I want it‰

Self Interest other interest mentality

Competitive FirmsÊ interest v/s Bottom-line „We have to beat

Pressure on profits otherÊs interest mentality others at all
costs‰

Business goals BossÊs interest v/s Authoritarian „Do as I say or

Versus Personal subordinates values mentality else⁄‰
values

Cross cultural CompanyÊs interests Ethnocentric „Foreigners have

contradictions v/s diverse cultural mentality a funny notion of
and traditional values whatÊs right or
wrong‰

Ethics is a conception of right and wrong behavior, defining which of our actions are moral and
are immoral. Business ethics is the application of general ethical ideas to business behavior.
Ethical business behavior is expected by the public, prevents harm to the society, and protects
business against unscrupulous employees and competition.

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8.6 ENVIRONMENTAL MANAGEMENT:

Among the issues facing business today, environmental management assures importance. The
environmental movement rests on two basic building blocks: conservation and pollution control. The
historic roots of the conservation movements sprang forth in mid-nineteenth century. Preservation of
wilderness, habitat, and biodiversity are major elements of the modern environmental agenda.
The concern about pollution has taken new forms today. First, scientific understanding of risks to
human health and natural resources is more refined than in the past. New risks such as deletion of
ozone layer are better understood in terms of causes and effects. Moreover, scientific ability to
measure exposures and risks is far greater than in the past. A complex set is a scientific, social and
political value also has made environmentalism a powerful political philosophy today.

Global Issues

Among the global issues, three issues have major consequences for business and society. They are
ozone depletion, global warming and biodiversity.

1. Ozone Depletion: Since the 1970Ês, the scientists have warned about the department
of stratospheric ozone. The ozone layer of the earthÊs atmosphere provides a shield
against harmful ultraviolet rays from the sun. a number of gases used in the industry,
especially, chlorofluorocarbons or CFCÊs, react with ozone when they are released
into the atmosphere. CFCÊs are used in the refrigerants and are used in other industrial
uses for which adequate substitutes are not really available.

2. Global Warming: The earthÊs atmosphere is warming according to many scientists.

There is some disagreement about the rate at which this is happening, but business and
governments are beginning to respond. The release of carbon dioxide is a primary
contributor of global warming, along with various other „greenhouse gases‰ used by
the industries. Today, international organizations are trying to develop an agreement
that will limit greenhouse gas emissions and slow down the global warming
processes.

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 3. Biodiversity: Human beings depend on a great number of species of plant ad animal
life. Genetic diversity of plants and animals and people is vital to each speciesÊ ability
to survive. By destroying this biological diversity, we are actually undermining our
survivability as species and as planet inhabited by living organisms. This process has
serious environmental balancing effects and has high human costs as well.

PARADIGM SHIFT

The destruction of global resources requires global solutions. The urgency of these problems adds
dramatic new dimension to the environmental debate. It is forcing governmental and business leaders
to embrace some radical new ideas about preserving the environmental resources. The paradigm, or
model of environmental protection that managers and policy makers have relied upon may be in the
process of major change. No one can with certainty say where environmental concerns and issues will
lead us in this decade. Corporate policies and public polices have shifted considerably in recent years,
and the foundation of a „green economy‰ is being created.

Environmental Issues, Problems and Concerns

Function Example

Human Resources Worker Risk Exposure

Marketing „Green Products‰
Finance Liabilities & Investors
affect Operations/ Manufacturing Waste reduction; energy use;
process design
Product Development Environmental Effect; Packaging
Research & Development Use of animals;
Product specification.
Transportation Vehicle Mileage &
Alternative fuels.

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Greening of Management

Environmental issues are forcing businesses to manage in new ways. For example, the idea that
‰waste‰ gases could be freely vented in the atmosphere, or waste water could be carelessly dumped
into sewer systems.. is no longer appropriate. Managers must now think on terms of closed systems.
And must have accounting and information systems that show where these wastes have gone. This
approach is a practical way in which sustainable development can occur.
If such a policy is widely adopted, governments will increasingly work to impose full costs and true
costs of production on business. The company that will release the wastes into the air and water would
then have to pay a heavy price for the damage to those resources; thereby contributing to solid waste
problems, would have to pay extra demand on scarce landfill resources. Such penalties would create
incentives for business to make harmful decisions that are not environmentally harmful.

Impact of environmental issues

Environmental considerations touch all aspects of a businessÊs operations. Modern environmental

problems affect the management of a companyÊs operations, marketing, human resources, and other
activities. These issues directly influence even areas such as finance and accounting. Financial officers
recognize the increasing power of institutional investors that use the environmental criteria in selecting
companies for investment. Companies that merge or acquire other businesses are thus buying potential
environmental liabilities as well as assets.
Strategic and operational decisions are both affected. Management decisions about where to locate
facilities, what products to develop and environmental health and safety standards in all firmsÊ
facilities are major decisions.
Environmental performance has become a focal point for the management in many of the
organizations across the globe. Several examples illustrate these effects:

y Biodegradable Trash Bags: Mobil introduced degradable trash bags in June 1939. Within
months, major controversy erupted over the meaning of the term. Environmental concern over
the plastics are forever thereat that thrash bags represent first led Mobil to improve photo
degradability of its bag. The problem of using terms such as recycled, reusable led to a
coalition of industry trade association to ask Federal Trade Commission to develop standards
for the use of such terms.

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 y Disposable Diapers: Disposable Diapers have become a lightning rod of public sentiment on
solid waste. Landfill space is increasingly limited and expensive; many people believe
acceptable alternatives are readily available. The plastic components of each disposable diaper
do not readily decompose, thereby making the landfill problem still worse.

y Packaging: McDonalds, the worlds largest fast food center has use polythene – a form of
plastic- to package foods since its early 1980Ês. Coffee cups, hamburger boxes and tray liners
create enormous amount of solid waste.

y New Products: during 1990, as war threats in the Persian Gulf pushed oil prices higher, ARCO
announced a reformulated gasoline that would improve gas mileage and reduce air pollutants.
Although the reformulated gasoline was expensive compared to regular unleaded fuel,
consumers began using the new product quickly.

y Environmental Leverage: U.S. retailer Wal-Mart and Canadian grocery chain, Loblaws,
introduced special „green lines‰ of products in their stores. Customers were informed that
each retailer has selected the products that environmentally safe for the special green tags or
labels.

y Green Seal Programs: Two US groups have begun programs to certify environmental
qualifications of products through seal programs. These efforts follow the lead of several
European programs, which began in 1980s and developed substantial consumer support.
Program officials test the products for their environmental effects.

Summary :-

Business has complex relations with many segments of society the existence and power of these
segments require careful management attention and action. A companies success depends on its ability
to respond to stake holder concerns. Issues like corporate social responsibility, ethical dilemma in
business and environmental management have implications for society in the contemporary era.
Management has to respond appropriately to these contemporary issues in management.

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Reference:
• William C. Frederick, James E. Post, Keith Davis (004) „Business & Society – Corporate
Strategy, Public Policy, Ethics. New Delhi: McGraw Hill Co.
• James A. Stoner, R. Edward Freeman, Daniel Gilbert Jr.( 2005) Management. New Delhi: Prentice
Hall of India

Questions:-

1. What is CSR? Is it philanthropy? Explain with suitable examples.

2. Do socially responsible companies sacrifice? Explain.
3. What is Global Warming? Describe strategies to tackle the issues in environmental
management.
4. List various contemporary issues in management and discuss any two in detail.

Case Study:-

ÂEnhancing Business-Community RelationsÊ – Tata Steel Case Study, India

Volunteer Database A ÂDirectory of Employee VolunteersÊ was established by the Tata Group as an
efficient way of matching jobs in the community with employee skills and interests. A corporate
committee, comprised of a senior executive, union and government officials, interacts with the
communities to ascertain their needs. This is done on a quarterly basis with senior citizens of each
village, and biannually with target womenÊs groups. Health Initiatives Working with government to
prioritize projects, Tata SteelÊs involvement in health initiatives remains largely philanthropic, with
the exception of the Global Business Coalition for HIV/AIDS awareness scheme. Tata Steel has
invested in a local hospital which treats an average of 2,300 people per day. It has also bought
specialist cancer-treating equipment and part-finances the running of one blood bank, two
rehabilitation centers and five homeopathic clinics. Donations to the clinics and centers are regular and
on a long-term basis, which does indicate a move from ad hoc sponsorship to a more strategic social
investment. This is organized by the Family Welfare department. 3.2.6. Culture and Education and
Youth Development Programs have built and maintained infrastructure for sports across Jarkhand.
Over 1,500 young people are currently training at Tata SteelÊs two sporting academies, six training
centers or their Adventure Foundation. Awards are given to employees who excel in sports. A Tribal

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Cultural Centre was built in 1993 and a Jubilee Amusement Park in 2001 to enrich the cultural
heritage of the city of Jamshedpur. Tata Steel has also invested in education, part-financing eleven
schools and colleges that teach nearly 10,000 students per year. 3.3. Looking to the future Along with
the TCCIÊs forthcoming project to formalize employee volunteering, Tata Steel also hopes to align
more with global standards and initiatives. In 2001 Tata Steel produced a Corporate Sustainability
Report following guidelines established by the Global Reporting Initiative. This is another step
forward for the company looking to make its mark on the new corporate responsibility agenda.
Corporate governance is being tackled through increased transparency in business operations,
illustrated in the establishment of an Audit Committee. The Tata Code of Conduct also means that the
company holds certain principles, based on value judgments that influence its policies and procedures.
One result of this has been the adoption of various organizational structures that are responsible for
targeting particular issues, such as the Family Welfare and Environmental Management Department.
Moreover, Tata Steel has seemingly pushed back the boundaries of what is expected from „corporate
social responsibility‰ (CSR) in India at this time. Not only has it given donations to local 6
Its participation in the Global Business Coalition to raise awareness of HIV/AIDS has earned
international recognition over a sustained period. This is indicative of a move towards „social
investment,‰ which heralds a more serious commitment to CSR than donations or sponsorship. Tata
SteelÊs dalliance with employee volunteering is, however, of the most interest for this research project.
It seems that the volunteer database enables the company to match volunteers with community
positions easily and quickly. The experience then is more beneficial to everyone. It would be
interesting to learn if employees are given incentives for volunteering, or if they are rewarded
afterwards. This would have implications on the „real‰ motivation behind employees giving up their
time for a local cause. Would this make a difference of the quality of work? Do volunteers need extra
motivation anyway, or is altruism and personal satisfaction enough? Another issue that arises from
TataÊs employee volunteering scheme is the manner in which „jobs‰ and communities are chosen. On
the Tata website, it is claimed that: Companies are encouraged to design and implement programmes
that help improve the health and hygiene of the various communities that are adopted. ‰Prioritizing
health and hygiene programmes seems like a good idea, because it targets the communityÊs „basic
needs.‰ The doubts appear because the companies are expected to design their own projects.
Moreover, the term „adopted‰ implies that the communities themselves had little choice in the matter.
All of a sudden it seems the company is dictating development programmes. While this might be a
misinterpretation, there are dangers in „top-down‰ approaches, especially when initiated by the private
sector. In the first instance, the private sector might not have the technical knowledge to identify cause

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and solution. It is also possible that community projects are implemented in a manner similar to a
business project. This might be by following a blueprint plan, rather than opting for a more flexible
approach. It might lack community participation. Alternatively it might try to engage in community
participation but have an inadequate understanding of power dimensions within the community that
affects the outcome of the project. In short, a business might not have the technical or sociological
knowledge to implement a successful community project. Moreover, the community does need to have
some opportunity to voice their complaints, for these to be heard and then challenged by way of a
community project – although it is worth bearing in mind that often those who are able to „speak out‰
are not powerless. TataÊs paternal „adoption‰ of communities is therefore worrying, the implication
being that the „targeted‰ communities have minimal input into their future relations with the company.
Although Tata SteelÊs initiatives have served communities on many levels, a means of enhancing
business-community relations in the future would require communication between both sectors, when
both parties are able to contribute to project selection and planning procedures.

Identify the key issues and lessons from the experience of Tata Steel business-community relations.

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 Chapter - 9
International Management

9.1 Objectives: This unit provides a macro picture of management. The student would be able to
appreciate.

• Why a company goes international

• The various challenges in managerial functions in the international context.
• The need for a Global Theory of Management
Keywords:
• International
• Global
• Macro
• Management theory.

Structure :-
• Introduction.
• Internationalization of the Economy.
• A Global theory of Management.
• Theories of Global Management.
• Summary.

9.2 Introduction:

Videocon, an Indian company is into manufacturing & sales of household appliances, components,
consumer electronics, and exports of glass shells. On 29 June, 2005 Videocon Industries signed a
deal with Thomson. Videocon was buying the French electronics major's colour picture tube (CPT)
manufacturing business for 240 million euros (around Rs. 1,280 crore). The deal gave the Indian
firm manufacturing plants in Poland, Mexico, China and Italy, and an R&D facility in Agnani, Italy,
giving it economies of scale & proximity to different markets.

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Indeed, companies like Samsung Electronics are truly global because of their ability to bet big on
technology trends. It says investing in technologies of components like semiconductors has helped it
prune its manufacturing costs. Having a balanced portfolio of core components like glass and
semiconductors, IT products, and consumer electronics is what has helped the Korean giant grow and
mitigate risks. Not only are these three segments related in terms of core technology usage, but they
also follow different business cycles.

Videocon also seems to have its eyes on a broad global trend. Today, global electronic majors are
increasingly outsourcing the manufacturing of their products and components. That's why the Original
Equipment Manufacturing (OEM) business is set to boom. So countries with low-cost manufacturing
capabilities like China, India and some Eastern European nations can encash this opportunity.

The above scenario is just an example of why companies become international. It is imperative to
examine this internationalization of the world economy, describe the process a company goes through
in becoming international and some challenges encountered in managing in this context.

9.3 Internationalization of the Economy

Internationalization is not just happening in companies, but in non-business activities like education
too. The best example is the increasing enrollment of foreign students in Indian institutes &
universities. Interestingly, apart from „Software‰, we also have the Sari(Indian costume) being worn
the world over as a fashion statement and palak paneer being served in Times Square, New York.

Why Do Companies Go International

There are a variety of reasons as to companies going global, however let us consider the categorization
by Donald Ball and Wendell McCulloch in Table 1.

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Table 1 – Reasons for Going International
Aggressive Reasons (increase profits, sales and Defensive Reasons (protect profits, sales and
markets) markets)
1. Open new markets 1. Protect domestic markets
2. Obtain greater profits 2. Protect foreign markets
3. Acquire products for the home market or 3. Guarantee a supply of raw materials
other foreign markets
4. Satisfy managementÊs desire for expansion 4. Acquire technology
5. Achieve geographic diversification
6. Seek politically stable bases for new
operations

The nationality of a company will also affect its motives in going international. For instance US
companies come to India for its cost-effective & skilled work force, but may choose to keep its
markets in North-America and Europe. Indian car companies may choose to go the US and Europe for
accessibility to its markets, but may choose to have all production, development etc. based in India,
with product design outsourced to Italy.

The Internalization Process

To understand this process in a simplified manner, consider Table 2, propounded by Christopher M.

Korth. Firms may proceed through various stages or a degree in a sequence, settle at some stage,
return to an earlier stage. For example, sometimes companies sell off their loss making overseas
operations to generate cash and reduce losses.

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Table 2 – Degrees of the Internationalization Process
1st Degree 2nd Degree 3rd Degree 4th Degree
Nature of contact Indirect, Direct, active Direct, active Direct, active
with foreign passive
markets
Locus of Domestic Domestic Domestic and Domestic and
International international international
Operations
Orientation of Domestic Domestic Primarily domestic Multinational
company
Type of Foreign trade Foreign trade Foreign trade, Foreign trade,
International of goods and of goods and foreign assistance foreign assistance
activity services services contracts, foreign contracts, foreign
direct investment direct investment
Organizational Traditional, International International Global structure
Structure domestic department Division

Companies that grow to be multinationals tend to have economic and non-economic impacts on their
home countries (where they originate) and their host countries (where they operate). These are given
in Table 3, according to Christopher Korth.
Table 3 – Impact of Multinational Companies on Host & Home Countries
Host Countries Home Countries
Positive impact Positive impact
1. Transfer of capital, technology, 1. Acquisition of raw materials from abroad, often
and entrepreneurship to host. from a steadier supply and at lower prices than
2. Improvement of hostÊs balance domestic suppliers.
of payments. 2. Technology & management expertise acquired
3. Creation of local job and from competing in foreign markets
career opportunities. 3. Export of components and finished goods for
4. Improved competition in the assembly or distribution in foreign markets
local economy. 4. Inflow of income from overseas profits
5. Greater availability of products (dividends), licensing fees, and management

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 for local consumers. contracts.
Negative impact Negative impact
1. Political Interference 1. Weakening in the national balance of
2. Social/Cultural disruptions and payments, caused by outflow of capital from
changes investments made overseas.
3. Local economic dependence 2. Potential loss of domestic jobs
on decisions made outside of
the host.

What do Managers work upon in the International Context?

The international environment is affected by economic, political-legal, socio-cultural and

technological factors. These factors and how the firms take advantage or cope with, determines the
attractiveness of either entering or remaining in a country. Some possible means of how managers can
cope with these factors are-

Economic: One thing that Multinational Companies (MNCs) are focused on is forecasting economic
conditions in the countries they operate in, export to or import from. Large companies have their own
intelligence and analysis units, while smaller firms have to rely on the general knowledge of line
managers, forecasts supplied by other private firms, banks and governments.

Another point that MNCs focus in is the value of foreign currencies relative to their home country
currency. When a firm enters into a transaction with an overseas customer or supplier for which the
terms of payment are not immediate, there is a certain amount of foreign exchange risk involved. For
example, if an Indian firm agrees to buy X Euros worth of raw materials from a French supplier and
agrees to pay within 90 days in Euros, and if the rate of exchange changes with the Indian rupee
appreciating, the Indian firm stands to gain. When dealing in millions, this fluctuation can be quite
significant. Hence managers in MNCs engage in hedging and covering their international financial
transactions. They can also negotiate as to which currency will be used to settle the payment in
contracts or for taking loans in foreign currencies.

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Political-Legal. Forecasting political risk, i.e. the probability that political forces will cause upheavals
in a countryÊs business environment, and thus affect the profit & other related goals of the firm, is
highly sophisticated. Managers need to conduct operations within a firm so as to minimize the dangers
of creating political problems. One common practice is to employ local citizens, especially politically
well-connected ones, in key positions in upper management. This provides local expertise and reduces
concerns about foreigners controlling organizations that operate locally.

Socio-cultural. Managers can reduce socio-cultural shock by adopting formal orientation programs for
individuals who are being sent abroad. Also managers can be role models in taking a proactive
approach to learn local customs and norms, assimilating into the local communities. One way is to
learn and practice the local language, as it warms up the locals and wins them over.

Technological. Introducing new technology or adapting local technology is a tight-rope decision.

Managers need to consider the disruptions or chaos they may create in the local community &
economy, by their decisions regarding this. They could go ahead with their decisions, if the disruption
or chaos is ultimately beneficial for the community.

Managerial functions in an International context:

The basic managerial functions, namely planning, organizing, leading, and controlling , are also
affected in the international context.

Planning: Strategic planning in a multinational context is essential because of the rate of technological
change, the growing complexity of the mangerÊs job and the external environment, especially also due
to:
1. The sheer number and variety of tasks required to run global organization
2. The greater distances between the subsidiaries, differences between their environments, and
their complex interrelationships.
3. The desire to improve efficiency due to better computing and technological advances.

A difficult task is to balance the autonomy and initiative of individual subsidiaries against the
consistency and predictability of the total system. Managers are responsible for aiding corporate

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management in the formulation of strategy, goals, and objectives; integrating operational and strategic
planning; and improving the quality of thinking of corporate management.

Organizing: There are two basic organizational tasks that tend to inhibit one another. The first is
finding the most efficient manner to combine work into units (departmentalization). This must be
balanced with the second task, the coordination of the work so that the organizationÊs overall
objectives can be met.

Since most MNCs evolve from being domestic, they might create an international division early on
only to later dismantle this and move to being truly international, i.e, they make no distinction between
domestic and international business. This process involves frequent reorganization and
experimentation with different organizational structures as the company seeks to balance the
requirements of changing strategies, capabilities, and environments.

Deciding whether to group according to locations, products, processes or clients can be tough, esp.
when each decision has its own tough gains and losses. One way to work around this is to go for
matrix structures. However this will need substantial managerial skills to make it work well and to
work within them.

Staffing: Talking about a problem of plenty yet less choices, an MNC literally has a whole world of
talent to draw on, but talented employees are often unwilling to relocate to another country.

Of particular challenge for managers is effective selection and training of any personnel who will have
a high level of international involvement, either by being stationed abroad or by interacting frequently
with managers and other individuals from overseas. A longer-term orientation would involve longer
tenures abroad and more consistent support for them from corporate headquarters.

Compensation is frequently a tricky area. Often there are conflicts within the organization between
attempts to adapt to differences among countries and pressures to maintain uniform policies and
procedures throughout the organization as a whole. If an organization adopts inconsistent salary
scales, it will probably have in moving employees from high-paying countries to low-paying ones.
One solution most MNCs are adopting is to pay a similar base salary and then add on the various
bonuses and allowances according to individual situations.

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An organization composed of individuals with a wide variety of backgrounds, nationalities, and
cultures offers many possibilities for conflict and disagreement. However effective resolution of
conflicts and disagreements will allow MNCs to utilize the clear advantages of having a diverse
workforce.

Leading: The topic of leading in an MNC is under much discussion worldwide and hence we shall
visit it in the section on selecting a managerial approach.

Controlling: The decision-making and control processes are distributed between the company
headquarters and its subsidiaries in each country. The five factors that influence where decisions will
be made are:
1. Trade-offs between the benefits of standardization and the tailoring of products and equipment
to local conditions.
2. The proficiency of overseas business-unit management and the degree of reliance on that
management at corporate headquarters.
3. The size of the MNCs and the length of time it has been an MNC.
4. The need for the individual units to make sacrifices for the benefit of the international entity as
a whole.
5. The need to motivate unit management through involvement in the decision-making process.

MNCs use two control models namely bureaucratic control and culture control. Bureaucratic
control employs explicit rules and regulations that outline desired output and behaviour. Cultural
control, which is characteristic of many large Japanese firms, utilizes implicit and informal
direction based on a broad company culture. Bureaucratic companies usually sell out operational
procedures for their foreign managers in the form of manuals and keep close tabs on those
managerÊs actions. Culture control firms, on the other hand, tend to train their managers
extensively before they send them overseas and then give them more authority and autonomy and
require fewer formal reports.

However all managers, irrespective of being at subsidiaries or the corporate headquarters report
regularly on new technology, market developments, and competitorsÊ actions, helping the
headquarters in the vital task of developing and implementing an effective management evaluation

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system. Due to the complexity of operations spread across locations & possible effect on the
overall strategy, this happens to be an extremely crucial function for managers.

The choice of Managerial approach:

Management theory states that what works managerially in a given situation depends on a number
of factors. Hence, it is logical to assume, in the international arena, what works with some people
wonÊt work with others. After a series of studies conducted in 40 countries, Geert Hofstede
concludes that not only do people vary a lot, but those variations seriously challenge the rules of
effective managerial practice based on western theories and peoples.

Hofstede cites four dimensions that he feels describe important aspects of a national culture:

1. The first dimension he calls individualism versus collectivism. This measures an individualÊs
relationship with other people and the degree to which the desire for personal freedom is
played off against the need for social ties.
2. The dimension called power distance evaluates the way a particular society handles the
inequality among people. On one end of the scale are countries, and people that try to play
down inequality as much as possible. At the other end are cultures that accept and support
large imbalances in power, status, and wealth.
3. The uncertainty avoidance dimension measures how a society deals with the uncertainty of the
future. A weak-uncertainty-avoidance society is one that does not feel threatened by this
uncertainty and is generally tolerant and secure about the future. Strong uncertainty-avoidance
cultures, on the other hand, try to overcome future uncertainties by developing institutions that
create security and avoid risk. These include legal, technological, and religious institutions.
4. The last dimension Hofstede calls masculinity versus femininity. Hofstede defines a society as
masculine if there are extensive divisions of social roles by sex and as feminine if these
divisions are relatively small.

By now it must be clear that no single approach can be utilized solely to remain efficient and
effective. For example the U.S theories on leadership are theories for leading people in a culture
that is extremely high in individualism. Applying these theories to countries that are collectivist in

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nature – most of the third world countries, for example, is likely to yield an ineffective employer-
employee relationship.
There is a clear reality that a synthesis of management theories, building on the success points &
learning from implementing & testing various approaches, is happening across the globe, what can
be called a global theory of management. This is evident from the various writings by leading
management educationists & thinkers from Business Schools about what it takes to be a global
manager.

9.4 A Global Theory of Management

To a naïve person, the world seems small and interconnected, thanks to high-speed technology,
travel, and communications. However a deceptive veneer of familiarity often hides cultural gulfs
and local differences. Harvard Business School has been keenly following this phenomenon and a
look at what the gurus of management say about this global theory of management is not out of
place.

However, a Harvard Business School (HBS) alumni report indicates „a youthful and growing
cosmopolitan business class is bringing these different worlds closer together. Despite national
differences, these transnational road warriors frequently have a common grounding in education,
professional background, and global popular and business culture. In the arena of international
commerce, they share an expectation that differences will be set aside in order to advance with
common purpose toward a larger goal-getting the task at hand done right.‰

According to HBS professor John Quelch, "There is an increasingly international style of

management, an amalgam, built atop a U.S. model that has borrowed freely from others around
the world. With the United States accounting for approximately 30 percent of the world's GDP and
as the home to 62 out of the 100 most valuable brands in the world, it's not surprising that America
is in the driver's seat". He characterizes the U.S. model of management as focused on immediate
outcomes and results and generally accustomed to having its way. But it has an added feature that
enables it to remain powerful even as it is transformed.

According to him the U.S. system can be very ecumenical, flexible, and open to new ideas and
people, when itÊs advantageous. It learns from best practices in other countries, and it adapts

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accordingly. A prime example is America's absorption of Japanese manufacturing techniques in
the 1980s. "Over time, with this kind of ongoing cross-pollination, today's system of global
management, to the extent it can still be called American, will look less like it used to and more
like something "multinational‰, says Quelch.

In a 1992 article for Harvard Business Review, HBS professor Christopher A. Bartlett and co-
author Sumantra Ghoshal tackled the question, "What is a Global Manager?" Their answer then
was that "there is no such thing as a universal global manager." Indeed, multinationals required
three kinds of specialists: business managers, country managers, and functional managers, with a
group of senior executives to coordinate the efforts of the specialists.

In an interview for HBS newsletter in 2003, Bartlett says, „Companies must recognize and
legitimize the diversity represented by those three views at the table, and create the process for its
debate and resolution. The role of top management is to create channels of engagement and the
forums for interaction to facilitate that process and to put a thumb on the scale to be able to keep
that debate in balance‰.

Talking about whatÊs different between 1992 & 2003, he points out that more companies are being
born global. In the '80s and the '90s, the focus was really more about how established successful
companies adapted to the booming global environment. The rules were being defined by giant
American, European, and Japanese companies. But now there are competitors come from smaller
countries that, because their home markets are too small to support them, are moving immediately
onto the global stage. Another point to note is that whole industries are being born global,
particularly the information-based, knowledge-intensive service economy. A company like India's
Infosys illustrates both trends.

Another big change, according to him, is that companies are finally recognizing that being global
is not just about entering incremental overseas markets. It is also about accessing scarce resources.
And the scarcest of all resources is the human resource, particularly management. Also open-
mindedness, he says, is recognizing that global management is all about legitimizing diversity.
According to Bartlett it is not enough to talk about diversity in terms of race or gender, it is really
about a total perspective, about legitimizing diverse views in an organization, including those
based in cultural differences. People from other cultures think, argue, and perceive things very

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 differently. A manager who is sensitive to that will understand and respond much better in a global
context.

Managers and Global Management:

To be effective managers in the international context, a basic knowledge of theories, strategies,

concepts, process/instruments assumes significance.

Internationalization is crucial because of

¾ Globalization (e.g. world trade)
¾ Competition (e.g. energy)
¾ Technological progress (e.g. traffic, data communication)
¾ Demographic change (e.g. migrations)
¾ Value change (e.g. leisure time)

The focus, in going beyond one country, could be

¾ Single countries (e.g. UK, France)
¾ Country groups (e.g. EU, OPEC)
¾ Regions
¾ Super-national (e.g. South-East Asia)
¾ Cross-national (e.g. Russian language area)
¾ Intra-national (e.g. Mezzogiorno in Italy)

9.5 Theories

Certain theories that have a bearing on International Management are delineated in the following lines.
(1) Theories of international trade

a) Theory of Comparative Cost Advantage

The reason why it is beneficial for two countries to trade, even though one of them may be able to
produce every kind of item more cheaply than the other is because what matters is not the absolute
cost of production, but rather the ratio between how easily the two countries can produce different
kinds of things.

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b) Product life-cycle theory
A country that produces technically superior goods will sell these first to its domestic market, then to
other technically advanced countries. In time, developing countries will import and later manufacture
these goods, by which stage the original innovator will have produced new products.

c)Learning curve theory

Performing repetitive tasks help an improvement in performance as the task is repeated a number of
times. Studies of this phenomenon (Wright, T.P.; Asher, H.; and Boston Consulting Group) yield three
conclusions on which the current theory and practice are based:
-time required to perform a task decreases as the task is repeated,
-amount of improvement decreases as more units are produced, &
-rate of improvement has sufficient consistency to use as prediction tool.

(2)Theories of direct investment

a) Monopoly theory
A monopoly is an industry in which there is one seller. Because it is the only seller, the monopolist
faces a downward-sloping demand curve, the industry demand curve. The downward-sloping demand
curve means that if the monopolist wants to sell more, it must lower its price.

b)Behaviorist theory
Investors aren't rational at all, driven instead by fear and greed and other elemental emotions. They are
more like a herd of frightened animals, betting with the gut instead of the head; this lets better-
informed investors exploit consequent anomalies.

(3)Theories of internationalization

(a)Transaction cost theory

Created by Ronald Coase, Transaction cost refers to the cost of providing for some good or service
through the market rather than having it provided from within the firm

(b)Eclectic paradigm

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DunningÊs "eclectic" theory combines the elements of ownership, internalization and location
advantages to form a unified theory helping us recognize that companies seek locations that best allow
them to exploit or enhance their ownership-specific advantages. i.e., firms go international when
ownership advantages are exclusive to the home firm but the factor endowments of the host country
favor local operations, and firms will benefit more by internalizing those advantages.

(c)The Uppsala model

Basically a learning-based model, it postulates that investment uncertainty can only be reduced by
acquiring concrete market knowledge, which can only be done through activities on the market
(experimental knowledge).

II. Strategies.

Some of the prominent strategies that managers practice and should know are
(a) Ansoff matrix (strategic choices to achieve objectives for growth – HBR, 1957)

Product
Present New
Market

Present Market Penetration Product Development

New Market Development Diversification

(b)Boston Consulting Group (BCG) matrix. (a 2x2 matrix plotting market share against market
growth, for assessing a company's position relative to others in terms of its product range)

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 BCG MATRIX
HIGH
Question Stars
M
Marks
A
R
K
E
T
G
R
O
W Dogs Cash Cows
T
H

LOW

LOW HIGH
MARKET SHARE

(c)Porter matrix

Competetive
Scope Lower Cost Differentiation

Broad Target Cost Differentiation

Leadership

Narrow Target Cost Focus Differentiation

Focus

Porter’s Generic Competitive Strategy Competetive

Advantage

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 III. Concepts

1) EPRG

EPRG model, classifies an MNcÊs marketing orientation as ethno-, poly-, regio- and geocentric.

2) Triad concept

The triad, in Kenichi OhmaeÊs work, consists of the United States, the E.U. and Japan. which shares a
number of commonalities: low macro-economic growth; a similar technological infrastructure; the
presence of large, both capital and knowledge intensive, firms in most industries; a relative
homogenization of demand (with a convergence of required key product attributes) and protectionist
pressures. This is home to most innovations in industry, and also includes the three largest markets in
the world for most new products.

The dilemma for any company that has developed a new Âsuper productÊ with large expected demand
throughout the triad is thus as follows: setting up an extensive distribution capability for the product ex
ante, throughout the triad, may entail high, irreversible, fixed costs and therefore high risks, if the
superproduct somehow does not deliver on its sales expectations. Conversely, if the super product is
first marketed at home, rival companies in other legs of the triad are expected to rapidly create an
equivalent product, capture their triad region market and dominate distribution in that market.

3) Globalization concept

The concept of globalization emerged in the period between the latter half of the19th century and the
initial years of the 20th century (1850 --1914). Initially it concentrated on the aspect of money, which
in its turn could be seen in two dimensions; first, the multiplication of international trade and; second,
the rising tide of migrant populations. A so-called ÂsoftÊ reason was that the development of economic
theories promoted world trade, the main being David RicardoÊs Theory of Comparative Advantage.
From the viewpoint of globalization, the principle of impartiality and the opening up of commercial
development and international trade was rooted in the distillation of the Theory of Comparative
Advantage.

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With regard to the economic development of the Third World, nations which followed the Theory of
Comparative Advantage enjoyed better performance than those with protectionist policies both in
terms of quality (i.e. people's living conditions) and in quantity (i.e. economy growth). Crucial
elements in this process, namely the modernization of trade and the advancement of ocean-liner
technology, multiplied world trade through increasing its speed and capacity.

Summary :-

The basic managerial functions get affected in an international context. The rate of technological
change, the external environment, competition extra are forcing the organizations to internationalize
their operations for competitive advantage. A global theory of management is thus the outcome of this
process and it has come to stay in the organizational operations.

Questions:

1. Enumerate the reasons for companies going global.

2. What are the challenges for managers in an international context?
3. Do you see a need for a global theory of management?
4. Try and match examples of Indian companies that have gone global and the possible reasons
for the same. You can use Table 1 to guide you on this.
5. Look at any publicly known business leader and see if he/she is truly global using inputs from
the previous section.

Case Study:

BPOÊs Going International – A case of rushing in where others fear to tread?

Ravi Raja, a 2nd generation businessman, has been thinking about this for sometime. He had inherited
a telecom manufacturing unit, his father had started and developed over 18 years with government
contracts. When he had finished his MBA from a well-know European B-School and joined his
fatherÊs firm, he had started off a call-center unit and had made a success story of it. However with

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most MNCs in India also pitching in for volume business, players like him had limited options, either
to enhance value and sell off to an MNC or go international and play it in the backyard of the MNCsÊ
home countries. What would be the possible business avenues, entry strategies, issues in terms of
capable & internationally sensitive managers? He had only questions for his team of Senior Managers
he would be meeting in an hour.

Indian companies have recently started boldly venturing in the international markets through
acquisition of companies in Europe and America. First the concept was that the Western companies
would come in with outsourcing contracts. Today the concept is not to wait for them to come, but to
go and grab the contracts through the acquisition of local companies in America and Europe. Most of
IndiaÊs BPO companies are venturing into South America, Europe, America and other countries with a
hope to not only get business also get them executed in countries like Philippines and so on.

Analyse the case in the context of International Management.

Readings:

Hofstede, G. (1980) Cultures Consequences. London; Sage.

Kanter, R.M. (1990) When Giants Learn to Dance. London. Routledge.

Morrison, Terri. (2001). Dun & Bradstreet's guide to doing business around the world. Paramus, NJ:
Prentice Hall.

Germaine, R.(Ed)(1997) Globalization and Its Critics. London; Macmillan.

Perlmutter, H., The Tortuous Evolution of the Multinational Corporation, Columbia Journal of World
Business 4, no.1 (January-February 1969): 9-18

Zeira, Y. Management Development in Ethnocentric Multinational Corporations, California

Management Review, 18, 4, 1976, 34-42

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Aulakh, Preet S, Third-world multinationals and global competition, Journal of International
Management; Dec2005, Vol. 11 Issue 4, p609-610.

Chiang, Flora, A critical examination of Hofstede's thesis and its application to international reward
management, International Journal of Human Resource Management, Sep2005, Vol. 16 Issue 9,
p1545-1563.

Rugman, Alan M, A further comment on the myth of globalization, Journal of International

Management, Sep2005, Vol. 11 Issue 3, p441-445

Dinwoodie, David L, Solving the dilemma: A leader's guide to managing diversity, Leadership in
Action, May2005, Vol. 25 Issue 2, p3-6

Teagarden, Mary B, Culture, Leadership, and Organizations: The GLOBE Study of 62 Societies,
Academy of Management Executive, May2005, Vol. 19 Issue 2, p162-163

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 Chapter – 10

Organization as a Social System – Contribution of behavioral Science – OB,

Meaning, Concept
10.1 Objectives: This chapter introduces the organization as a social system. After reading this chapter
you will be able to
• understand the nature and concept of organizational behavior.
• understand the methodology that is used to accumulate knowledge and facilitate understanding
of organization.
• relate the various theoretical frame works that serve as a foundation for a model of
organizational behavior.
• Key terms:
• Conceptual skill
• Cognitive frame work
• Organizations
• Social frame work
• Human skill Systems
• Organizational behavior
Structure:
• Introduction.
• The organization and the individual.
• Relationship with other disciplines.
• Evolution of OB.
• Theoretical frameworks.
• Importance of OB.
• Summary.
10.2 Introduction:
An organization comes into existence to meet certain objectives. The objectives usually are related to
profit, growth and service aspects. An organization is a collection of people who come together with
shared objective. The objectives determine the structure and the structure determines the positions in
the organization. The positions in turn determine the role relationships among the people. Thus an
organization is a group or set of people who have come together for realizing certain objectives.

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The term behavior is a common and an universally applicable term. Behavior signifies a simple or a
complex aspect of an individual. Holding a glass, reading a book may be taken as examples of simple
behavior, where as dance may be considered as an example of a complex behavior. Several
characteristics of behavior have been identified which are prevalent in human beings and which also
form a basis of OB.

We may highlight some of the fundamental characteristics of behavior as follows:

• Behavior varies from simple to complex.

• Behavior differs from individual to individual.
• Behavior is a response to a stimulus.
• Behavior varies from situation to situation.
• Behavior of the same individual differs from group to group.
• Behavior has an instinctual base.
• Behavior is also learnt or acquired in the process of development.
• Behavior is a result of hereditary and environmental factors.
• Behavior is species specific.
• Behavior is both dimensions overt and covert.

It may be seen that behavior is a complex aspect which may be observed externally but is influenced
by many internal processes. By the time an individual enters the work life his personality is quiet
stable and approaches work with set attitudes.

The unit of study in OB is the individual. The individual with his potentialities, capacities and skills
interacts in the organization to realize his needs. Since an organization is a set of individuals, the
group interactions also play an important role. Hence, OB also focuses on group behavior, dynamics
and processes. Thus the scope of the OB is to study the interactions of an individual and a group in a
formal setting.

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10.3 The Organization and the Individual

Although people were always regarded as important in managing organizations, their centrality has
become sharper in todayÊs changing world. While it is much easier to buy technology and to borrow
and get resources, both financial and material, it is impossible to buy human processes (such as faster
decision-making, effective negotiation, strategy formulation, and leadership development). Our
understanding of human dynamics has thus become more complex as well as more crucial. This is the
focus of organizational behavior (OB), which can be defined as an interdisciplinary behavioral science
studying phenomena related to and dynamic (processes) of organizations and their various human
units (individual, roles, dyads, teams, inter-teams, organizations, and the organization-environment
interface).

Human process concern not only individual employees and other members associated with
organizations, but are also related to other human units of an organization. Individuals come to work
in the organization and get integrated (or remain alienated) as per the roles they occupy in the
organization. The roles, therefore, require separate attention. Individuals do not work in isolation.
The smallest unit in an organization is a dyad (two-members groups consisting of an employee and a
supervisor). For most tasks, people work in teams. Enough attention, therefore, needs to be given to
the formation of teams, their dynamics, and ways of making them more effective. The effectiveness
of an organization also depends on inter-team collaboration – the collaboration of teams in an
organization with other internal teams, as well as with external teams. Each organization has its own
dynamics: its culture, its climate, the process of its development and decay, and the process of its
turnaround or dissolution. The organization also deals with the external environment. Its interface
with the environment requires an understanding of political dynamics so that it can not only adapt
itself to the changing environment, but also impact and ÂshapeÊ the external environment.

10.4 Definition and Meaning of OB

OB refers to the behavior of individuals and groups within organizations and the interaction between
organizational members and their external environment.

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OB is a field of study that investigates the impact that individuals, groups and structure have on
behavior within organizations for the purpose of applying such knowledge towards improving an
organizationÊs effectiveness.

2.0 Relationship with other disciplines

OB has emerged over the last few decades and has enriched itself and emerged as an independent
discipline. However, since it is dealing with human beings and complex processes, it has barrowed
heavily from other behavioral and social sciences. Hence, there is an interdisciplinary focus in this
field.

An Interdisciplinary Focus OB is an applied behavioral science. It has drawn heavily from a number
of applied behavioral sciences such a psychology, sociology, and anthropology. It has also drawn
from such subjects as economics, history, political science, engineering and medicine.

Psychology It is the science or study of behavior, and includes animal as well as human behavior.

Psychology is concerned with individual behavior and has contributed greatly to the intra-individual
dynamics of human behavior. In other words, inter-personal aspects of organizational behavior like
motivation, personality, perception, attitude, opinion, and learning owe their study to psychology.

Psychologists themselves are becoming increasingly important these days and the number of
professional psychologists has also been growing. They hold important positions in various sectors.
Some are academicians with specialization in experimental, social, or clinical psychology. Others can
be found in business, industrial, and government organizations. For example, there are educational
psychologists and counselors who work with school children. Some industrial psychologists function
mainly in industry, where they are involved in screening and training employees. More recently, their
functions have been expanded to include training, developing effective leadership, performance
appraisal, job design, and work-stress.

Sociology If psychology is the study of individual behavior, sociology addresses itself to the study of
group behavior. It studies the behavior of people in relation to their fellow human beings.
Sociologists have enriched organizational behavior through their contribution to the study of

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interpersonal dynamics like leadership, group-dynamics, communication, formal and informal
organizations, and the like.

Social Psychology This subject borrows concepts from both psychology and sociology. It focuses
on the influence of people on one another. One of the areas receiving considerable attention from
social psychology is change-How to reduce resistance to it and implement it successfully.
Additionally, social psychology is useful in measuring, understanding, and changing attitudes
communication patterns, the ways in which groups activities can satisfy individual needs, and in group
decision-making process.

Anthropology It is the study of the human race, in particular, its culture. Culture has significant
influence on human behavior. It dictates what people learn and how they behave.

Every organization will have its own distinct culture. Some organizations particularly, closely held
ones, are secretive, publicity-shy, and are less inclined to encourage participative management.

Some organizations, the Tatas for example, take employee welfare and social responsibility as their
main goals. The culture of the organization will have an influence on the employee. His or her attire,
perception about things good and bad, and his or her style of functioning are influenced by the culture
of his or her organization.

Political Science Contributions from political scientists for a better understanding of OB are
significant. Political scientists study the behaviors of individuals and groups within a political
environment. Specific topics of concern to political scientists include conflict resolution, group
coalition, allocation of power, and how people manipulate power in their self-interest Organizations
are becoming political entities and a better understanding of them cannot be had without
understanding the political perspective as well.

Engineering this discipline, too, has influenced OB. Industrial engineering, in particular, has long
been concerned with work measurement, productivity measurement, workflow analysis and design,
and labor relations.

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3.0 Evolution of OB

The classical organization theory is formal. Work-oriented or production oriented and rigid. It is built
around four key pillars. They are division of labor, the scalar and functional processes, structure, and
span of control. It would not be fair to say that the classical school is unaware of the day to day
administrative problems of the organization. Paramount among these problems are those stemming
from human interactions. But the interplay of individual personality, informal groups, intra
organizational conflict and the decision making processes in the formal structure appears largely to be
neglected by classical organization theory. It also overlooks the contributions of the behavioral
sciences by failing to incorporate them in its doctrine in any systematic way. The neo-classical theory
of organization embarked on the task of compensating for some of the deficiencies in the classical
doctrine. The neo-classical school is commonly associated with the human relations movement. One
of the introductions of behavioral sciences in an integrated fashion into the theory of organization.
The inspiration of the Neo-classical school was the Hawthorne studies.

Interest in people at work was awakened by J.W Taylor in US 1900. He was the first to call to
attention to people in work situation as important factors in the quest for efficiency in production. He
is often called the father of ÂScientific managementÊ. The interest in human conditions at work was
accelerated with World War I.

In 1920Ês and 1930Ês Elton Mayo and F.J Roethlisberger gave academic stature to the study of human
behavior at work. They applied keen insight, straight thinking and sociological background to the
Industrial experiments at Hawthorne plant. The result was the concept that an organization is a social
system and the worker indeed is the most important element in it. Their experiments show that worker
is a complex personality interacting in a group situation. The most important point is that it was a
substantial research about human behavior at work and its influence was widespread.
The work of Mayo has paved the way for the development of the now classic ÂTheory X-Theory YÊ,
by McGregor. Theory X assumes that work is inherently distasteful to most people. People have to be
directed and coerced to achieve organizational objectives. They have little creativity and lack
responsibility.

On the other hand, Theory Y states that work is as natural as play and self-control is indispensable in
achieving organizational goals. People can be self-directed and creative at work if properly motivated.

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Chris Argyrols (1962) proposed a two different value systems (1) Bureaucratic/pyramidal value
system (2) Humanistic/democratic value systems. According to Argyris, following bureaucratic
values leads to poor, shallow and mistrustful relationships. They do not permit natural and free
expression of feelings and they decrease interpersonal competence. It leads to inter group conflict and
a decrease in organizational success. If humanistic values are adhered to, authentic relationships will
develop among people and result in increased inter-personal competence, inter-group co-operation and
flexibility.

It is obvious then that the shift was from work to work-environment. In a democratic environment,
people are treated as human beings, both organizational members and organization itself are given an
opportunity to develop to the fullest potential.

Chris Argyris further examined what effect management practices have had on individual behavior
and personal growth within the work environment. He feels that the concepts of formal organization
lead to assumptions about human nature that are incompatible with the proper development of
maturity in human personality. He sees a definite incongruity between the needs of a mature
personality and the formal organizations. He also challenges the management to provide a work
climate in which everyone has a chance to grow and mature as individuals, as members of a group by
satisfying their own needs, while working for the success of the organization.

It is being found over and over again that broadening individual responsibility is beneficial to both the
workers and the organization giving people the opportunity to grow and mature on the job helps them
to satisfy their needs, and in turn motivates them to use more of their potential in accomplishing goals.

The neo-classical school after the Hawthrone studies generally seemed content to engage in
descriptive generalizations or particularized empirical research studies, which did not have much
meaning outside their context. Modern organization theory has made a move to cover the short
coming of the current body of theoretical knowledge.

The distinctive qualities of modern organization theory are its conceptual analytic base, its reliance on
empirical research data and above all its integrating nature. These qualities are framed in a

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philosophy, which accepts the premise, that the only meaningful way to study organization is to study
it as a system.

Systems theory views organizations as complex system consisting of interrelated elements functioning
as a whole. The various units, (human, material, information, finance) interact with each other to
produce products and profits; they do not function in isolation.

The first basic part of the system is the individual and the personality structure he brings to the
organization. Elementary to the individualÊs personality are motives and attitudes, which condition
the range of expectancies he hopes to satisfy by participating in the system.

The second part of the system is the formal arrangement of functions, usually called the formal
organization. The third part of the system is the informal organization. The informal organization has
demands, which it makes on members in terms of anticipated forms of behavior and the individual has
expectancies of satisfaction, which he hopes to derive from association with people on the job. The
status and the role concepts comprise the fourth part of the system. The fifth part of the system
analysis is the physical setting in which the job is performed. From this standpoint, it may be said that
work cannot be effectively organized unless the psychological, social and physical characteristics of
people participating in the work environment are considered.

In a way, OB really took off in the West in the 1950s. According to Khandwalla (1988, p.13), OB was
a response to challenges in the form of Âdissatisfaction with the abstractions of the theory of the firm in
economics (Cyert & March, 1963); dissatisfaction with the theory of the firm in economics the
principles of management school (Simon, 1960); chance observation group dynamics at work
(Roethelesberger & Dickson, 1939); observation of substantial variation in the structure and
functioning of business organizations (Dale, 1952, Woodward, 1958); the failure of ÂrationalÊ
operations technologies (Emery & Trist, 1960); the organizational implications of the existence of a
hierarchy of needs (Maslow, 1954) and alienation at work (Blauner, 1960: Argyris, 1957)Ê.

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4.0 Theoretical frame works:

Some frame works may be used to explain the complex inputs and dimensions of OB.

Cognitive frame work

The cognitive approach to human behavior has many sources of input. This approach emphasizes the
positive and free will aspects of human behavior and uses concepts such as expectancy, demand and
incentive. Cognitive is the act of knowing an item of information. Under this frame work cognitions
precede behavior and constitute input into the persons, thinking, perceptions, problem solving and
information processing. Concepts such as cognitive maps can be used as pictures or visual aids in
understanding selective elements of thoughts of individuals, and groups in organization.

Edward Tolman believed that behavior is the appropriate unit of analysis and it is purposive and is
directed towards a goal. He also believed that learning consists of expectancy that a particular event
will lead to a particular consequence. It implies that the organism is thinking about it, aware of it, and
is expecting the goal. All these cognitions help to explain the behavior.

Later research also supported TolmanÊs ideas and also stated that expectancy does not mean a guess,
but is a reflection of what is going on in the mind of the organism.

Applied to the field of OB the cognitive frame work has contributed greatly for the understanding of
concepts like perception and motivation.
Social cognition involves the process of understanding or making sense of peopleÊs behavior. It is
specially relevant to OB in terms of social perception and social learning.

Behaviorlistic frame work

Watson and Pavlov are considered as pioneers who stressed the importance of dealing with observable
behaviors instead of the elusive mind that preoccupied earlier psychologists. Both felt that behavior
can be understood in terms of stimulus response relationship. A stimulus elicits a response. They

217
concentrated on the impact of the stimulus and felt that learning occurred when the S-R connection
was made.

Following Pavlov, Skinner made wide contributions with his operant conditioning approach. Skinner
found through his operant conditioning experiments that the consequences of a response could better
explain most behaviors than eliciting stimuli could. He emphasized the importance of the response-
stimulus (R-S) relationship. The organism has to operate on the environment (thus the term „operant
conditioning‰) in order to receive the desirable consequence. The preceding stimulus does not cause
the behavior in operant conditioning; it serves as a cue to emit the behavior. For Skinner, behavior is a
function of its consequences.

Here we may infer that the behaviors tics are environmentally based. The cognitions such as thinking,
expectancies, perceptions, need to be coupled with environmental aspects to understand, predict, and
control behavior.

Social learning frame work

The cognitive approach has been criticized of being mentalistic and behaviorstic approach has been
accused of being deterministic. The social learning approach tries to integrate the contributions of the
both the approaches. It recognizes that the behavior is the appropriate unit of analysis. Under a social
learning approach, people are thought to learn about their environment, alter and construct their
environment to make reinforces available, and note the importance of rules and symbolic processes in
learning. Albert Bandura takes the position „it is largely through their actions that people produce the
environmental conditions that affect their behavior in a reciprocal fashion. The experiences generated
by behavior also partly determine what a person becomes and can do, which, in turn, affects
subsequent behavior‰.

Organizational Behavior Model

If the three goals of understanding, prediction, and control are to be met by a conceptual model for
organizational behavior, both the cognitive and the behaviors tic approaches become vitally important.
Both the internal causal factors, which are cognitively oriented, and the external environmental
factors, which are behavioristically oriented, become important, In other words, the social learning

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approach that incorporates both cognitive and behaviorist concepts is an appropriate conceptual model
for organizational behavior that will help understand, predict, and control.
In a strictly social learning model, the letters in this model would stand for stimulus, organism,
behavior, and consequence. The arrows recognize the interactive, reciprocal nature of the
environmental (S and C), cognitive (O), and behavioral (B) variables. When adopted and extended
into an organizational behavior model, the S represents the environmental situation, both contextual
and organizational. The O becomes the cognitive understanding of organizational participants as the
relevant organism that mediates between the environmental situation and resulting organizational
behavior. The B is the organizational behavior. The C in this model represents the organizational and
group dynamics and consequences that result from the previous interactions among the environmental,
personal, and behavioral variables. As shown by the feedback interactions, the consequences also
affect and are affected by the other variables.

5.0 Importance of OB

A study of OB is beneficial to us in several ways. It helps in understanding of ourselves and also

facilitates in understanding others behaviors. An individual enters the organization with a lot of
expectations and aspirations. The organization on the other hand would also like to achieve its
objectives with the help of individuals functioning. The interactions between the two would result in a
mismatch when there is incompatibility and would lead to frustrations and stresses. A study of OB
would help to clarify has to how the interactions takes place and identify the basis.

To certain extend, it provides a frame work for the managers to identify the cause of behavior and take
appropriate corrective measures.

Since most of the work in organizations is based on team work, understanding OB, helps in building
effective work teams, resolving complexes, amicably etc.

Since, motivation forms the backbone for performance understanding and relating the concepts of
motivation to a specific context would result in enhanced performance.

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 Summary:

This chapter begins with an explanation of the terms like organization, behavior etc. It traces out the
evolution of OB to the present day context. It also examines the various frame works, which are
provided for the explanation of OB. Finally, it explains the interdisciplinary nature of OB.

Questions

1. Define OB. Explain its nature and concept.

2. Explain how the modern principles of OB have evolved?
3. Identify and summarize the various theoretical frame works for understanding OB
4. OB is interdisciplinary in nature. Explain how it is so.
References:
1. Fred Luthans, Organizational behavior, 1-56, Mc Graw – Hill International Edition, 1998.
2. Udai Pareek, Understanding Organizational Behaviour, Oxford University Press, 2004.
3. k. Aswathappa, Organisational Behaviour Text cases games, Himalaya publishing Company,
2005.
4.Schermerhorn- Hunt- Osborn, Organizational Behavior,John Wiley & sons, Inc.,2001.

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 Chapter - 11
Foundations of Individual Behavior – Personality – Determinants – Theories

11.1 Objectives: This chapter introduces the foundations of individual behavior. After reading this
chapter you will be able to understand:
• the issues confronting OB specialist in the days to come.
• the various personal factors which influence individual behavior.
• the impact of environmental factors on individual behavior.
• how organizational systems and resources are a foundation to individual behavior.

Key words
• Ability
• Affective
• Component
• Attitude
• Behavioral
• Beliefs
• Cognitive
Structure
• Introduction.
• Foundations of personality.
• Theories of Personality.
• Summary.
11.2 Introduction:
Personality is an organized, consistent pattern of perception of the ÂIÊ, around which the individual
interacts and has experiences. The term personality is used in several senses. When people say Âshe
has a good personalityÊ, they probably refer to the personÊs physical appearance. When someone says
that X should have a more dynamic personality, what is meant is the desired behavior of X and so on.
There is no agreement even amongst psychologists about the definition of ÂpersonalityÊ. For Carl
Rogers personality is an organized, consistent pattern perception of the ÂIÊ, around which the
individual interacts and has experiences. Psychologists have attempted to describe personality in
terms of standard ÂtraitsÊ. Some have attempted to search for patterns to suggest ÂtypesÊ of personality.

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The following elements should form the meaning of personality:
1. Personality has both internal and external elements. The external traits are the observable
behaviors that we notice in an individualÊs personality, for example, sociability. The internal
states represent the thoughts, values and genetic characteristics that we infer from the
observable behaviors.
2. An individualÊs personality is relatively stable. If it changes at all, it is only after a very long
time or as the result of traumatic events.
3. An individualÊs personality is both inherited as well as shaped by the environment. Our
personality is partly inherited genetically from our parents. However, these genetic
personality characteristics are alerted some-what by life experiences.
4. Each individual is unique in behavior. There are striking differences among individuals.

Thus, personality refers to the sum total of internal and external traits of an individual, which are
relatively stable and which make the individual different from others.

11.3 Foundations of Personality

To broad factors influence the development of personality. Personality development is regarded as a
continuous process with interplay of Heredity and Environment. The influence of these two factors is
almost similar and results in the development or deprivation in an individual.

Heredity
The term Heredity means those characteristics which we inherit from our genes. Genes are
responsible for laying down the foundation and thresholds of physical intellectual and emotional
capabilities. The physical height beyond which the individual cannot grow is laid down by the genes.
Physical exercises and body building programmes might result in a few inches of variation but not a
remarkable one. Similarly basic intellectual potentialities, capacities and skills are laid down at early
stages. The threshold beyond which the individual cannot develop is laid down. This explains the
differences in I.Q.s of individuals. Head start programmes and enriched environment can probably
result in a few points of difference but not in vast degrees. The basic temperament of an individual or
the affective reactions of an individual are also laid down at a very early stage of development.

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Besides these heredity is also responsible for the color of skin, hair and eyes. Thus we see that
heredity lays the foundation and determines the thresholds of development in an individual.

Environment:
When heredity lays down its foundation in the above manner, this interacts with the environment
and results in growth of the individuals. Environment is a broad term and for our convenience sake
we may consider it under four headings: a) Family b) School c) peer group d) society

A) Family : Family is the first group into which a child is born and exposed. Families may be of
different types – nuclear, joint or extended family. Today nuclear families are more prevalent
and the relationships and bonding is restricted to the immediate family members. The
advantage in a joint or extended family is that children learn to share and exercise patience
and endurance. In a small family normally children receive full attention and at times this
might result in overindulgence from the parents. The result is children may not learn to accept
and share responsibility and may lack seriousness towards life. Parenting from the parents
may be of different types: autocratic, democratic, and laissez faire. A highly autocratic
atmosphere at home might result in stunted growth, inhibition and introversion in the child.
There are also instances where such children also became highly aggressive in their behaviors.
Democratic type of parenting is an ideal situation where the child is involved in decision
making, is well adjusted, adopts to any environment, is willing to share responsibility, and
takes initiative. All this results because the child is valued and treated with maturity. In a
laissez faire situation the children are not provided with right type of guidance and support
systems. Hence, they lack serious ness in life.

Besides parenting the socio economic status of the family is also responsible for providing an
enriched or stimulating environment. Enriched surroundings are responsible for developing
aspects like achievement motivation, increasing level of aspiration etc. On the contrary an
impoverished environment will result in deprivation or dejection in the child.

More than all these factors the bonding between the mother and child is responsible for laying the
foundation of a stable and secure personality. If the child experiences rejection or neglect in early
years, it may result in the development of a negative or pessimistic personality. In other words the
dimensions of personality like optimism,

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Pessimism are laid down during these early years of development.

The parents also play an important role in the identification process which is important to an
individualÊs early development. The process can be examined from the three different
perspectives:

First, identification can be viewed as the similarity of the behavior (including feelings and
attributes) between child and model.

Second, identification can be looked upon as the childÊs motive or desire to be like the model.

Third, identification can be viewed as the process through which the child actually takes on the
personality development.

The overall home environment created by the parents, in addition to their direct influence, is
critical to personality development. For example, children with a markedly institutionalizes,
upbringing (orphans) or children reared in cold, unstimulating homes are much more likely to be
socially and emotionally maladjusted than children raised by parents in a warm, loving, and
stimulating environment.

Siblings (brothers and sisters) also contribute to personality development. It has been argued that
siblings position is an important psychological variable because it represents a microcosm of
significant social experience of adolescences and adulthood. The first-born are also more likely to
experience the world as more orderly predictable, and rational than later-bom children.

School: Children are exposed to the formal education process and enter the school arena. School
signifies the teacher, the environment, and the peer group. The type of school in terms of size, and
exposure provided to the child are crucial. All the basic abilities and aptitudes, like verbal,
numerical, mechanical etc. unfold during this stage. The attitude towards teacher signifies the
attitude towards authority. Discipline and rigor when followed result in a mature personality. The
extra curricular activities develop in the child a spirit of cooperation and collaboration. The child
also learns to handle success and failure in a healthy manner. Vocational and career choices are
made during this stage, which result in pursuit of career in later life. Children also get classified

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and labeled as fast learners, slow learners etc. The learning capacities in the child interact with the
opportunities available and result in the development of the personality.

Peer group: At all stages of life we have a peer group formed and associated with. Among all
stages, during adolescence the influence of a peer group is the strongest. Adolescence then, is a
critical period as it marks the formation of values and interests. An individual become aware of
his interests and capacities and decides upon his occupation.

Adolescence is more than any other stage an explorary stage, in which the budding adult tries out
more realistically and more self-consciously than he has before in various adult roles. At first, the
trial process is very tentative, for the child growing up does not yet know his aptitudes and
interests. He begins to think in terms of what interests him, he learns to take into account how
well he succeeds in these activities and recognizes that abilities are as important as interests.

In the striving for mature status, the adolescent is confronted with the establishing a sense of
personal identity (Jones 1943; Erikson 1963; Kahn 1969). As stone and Church (1968) stated, the
central theme of adolescence is that of identity, coming to know who one is, what one believes in
and values and what one wants to accomplish and get out of life. Achieving maturity also
involves becoming autonomous through developing emotional independence and mature patterns
of independence (Gardner 1959; Bettelheim 1963).

Integrated with the process of identity is a process of elaborate self-evaluation. Though

adolescence may often be characterized by an extreme self-consciousness, the evaluation process
ultimately contributes to the beginning of long-range goal setting if the person discovers in
himself the potentials which relate him to society (Buhler 1967). Further, the level of cognitive
ability reached during adolescence has implications for the efficiency with which the individual
meets many of the tasks of this life phase (For example, Academic performance and preparing for
a vocation).

It is during this period that the peer groups influence is the maximum and the various career and
vocational choices made by the individual are also greatly influence by the peer group.

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Society: The broader society with its large framework influences the individuals in the
development of culture, traditions, social behaviors etc. The community behavior of the
individual is by and large shaped by societal practices. Language and dress are also largely
influenced by the society.

Thus we see that the influence of heredity and environment on the development of the individual.

Personality Traits

Personality is composed of external traits. Individuals possess identical characteristics for a long
time and research is attempting to identify the number of personality traits and catalogue them.
They found thousands of words in the dictionary and thesaurus representing personality
characteristics. They arranged these words into 171 clusters.
Numerous lists of personality traits, enduring characteristics describing an individualÊs behavior,
have been developed, many of which have been used in OB research and can be looked at in
different ways. First, recent research has examined people using extensive lists of personality
dimensions and distilled them into the ÂBig FiveÊ.

• Extraversion – outgoing, sociable, assertive

• Agreeableness-good-natured, trusting, cooperative
• Conscientiousness-responsible, dependable, persistent
• Emotional stability-unworried, secure, relaxed
• Openness to experience-imaginative, curious, broad-minded.

Extroversion reflects a personÊs comfort level with relationships. Extroverts are sociable,
talkative, assertive, and open to establishing new relationships. Introverts are less sociable, less
talkative, less assertive, and more reluctant to begin relationships.

Agreeableness refers to a personÊs ability to get along with others. Highly agreeable people value
harmony more than they value having their say or their way. The are cooperative trusting of
others.

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People who score low on agreeableness focus more on their own needs than the needs of others.

Conscientiousness refers to the number of goals that a person focuses on. A highly conscientious
person focuses on relatively few goals at one time. He or she is likely to be organized, systematic,
careful, thorough, responsible, self-disciplined, and achievement-oriented. A person with a low
conscientious nature tends to focus on a higher number of goals at one time. Consequently, the
individual is more disorganized, careless, and irresponsible, as well as less thorough and self-
disciplined.

Emotional stability focuses on an individualÊs ability to cope with stress. The individual with
positive emotional stability tends to be calm, enthusiastic, and secure. A person with low
emotional stability tends to be nervous, depressed, and insecure.

Openness addresses oneÊs range of interests. Extremely open people are fascinated by novelty and
innovation. They are willing to listen to new ideas and change their own ideas, beliefs, and
attitudes in response to new information. On the other hand, people with low levels of openness
tend to be less receptive to new ideas and less willing to change their minds. They also tend to
have fewer and narrow interests and be less curious and creative.

We may look at traits from other perspective. Here we divide them into social traits, personal
conception traits and emotional adjustment traits.

Social traits are surface level that, reflect the way a person appears to others when interacting in
various social settings. Problem solving style is one measure representing social traits. It reflects
the way a person goes about gathering and evaluating information in solving problems and making
decisions.

The personal conception traits represent the way individuals tend to think about their social and
physical setting as well as their major beliefs and personal orientation concerning a range of
issues. Examples of personal conception traits are locus of control and authoritarianism and
dogmatism. Locus of control refers to the conception about people whether events are controlled
primarily by themselves or by the outside forces. Locus of control refers to individualÊs belief that
events are either with in oneÊs control (internal locus of control) are determined by forces beyond

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oneÊs control (external locus of control). These personality traits are manifested in different
behaviors which are significant to managers.

It has been proved that externals (those who believe that events are determined by external forces)
are satisfied with their jobs, have higher absenteeism rates, are more alienated from work settings,
and are less involved on their jobs than internals (those who believe that events are within oneÊs
control). Internals typically have more control over their own behavior, are more active in seeking
information to make decisions, and are more active socially than externals.

Authoritarianism is a tendency to adhere rigidly to conventional values and to obey recognized

authority. Dogmatism leads a person to see the world as a threatening and regard authority as
absolute.

Machiavellianism Machiavellianism, a term derived from the writings of Nicolo Machiavelli,

refers to individualÊs propensity to manipulate people. Machiavellians would be prone to
participate in organizational politics. They are also adept at interpersonal game playing, power
tactics, and identifying influence system in organizations. In jobs that require bargaining skills
(such as labor negotiation) or where there are substantial rewards for winning commissioned
sales), Machiavellians perform better.

Introversion and Extroversion

Extroverts are gregarious and sociable individuals while introverts are shy, quiet, and retiring. It
is generally established that introverts and extroverts have significantly different career
orientations and require different organizational environments to maximize performance.
Extroverts are more suitable for positions that require considerable interaction with others,
whereas introverts are more inclined to excel at tasks that require thought and analytical skills.

Achievement Orientation
Achievement orientation is yet another personality trait which can be used to predict certain
behaviors. Employees with a high need to achieve, continually strive to do things better. They
want to overcome obstacles, but they want to feel that their success or failure is due to their own
actions.

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 11.4 Theories of Personality
There are various theories proposed by various psychologists to explain the nature of personality.
A few theories and approaches are being explained here:

Amongst the earliest to study personality were psychoanalysts. Sigmund Freud, studying a large
number of patients, wrote about the human developmental process and cultural phenomena. His
four phases of psycho-sexual development (oral, anal, phallic, and genital) can be used to describe
four types of personality (Freud, in fact, used these terms): erotic (dependent), obsessive (orderly),
narcissistic (independent), and detached (interdependent). Freud elaborated on only the first three
types. The various traits of these types are summarized in.

• Erotic (Oral) Optimistic, manipulative, cocky, gullible

• Obsessive (Anal) stingy, stubborn, orderly, meticulous
• Narcissistic (Phallic) vain, brash, courageous, stylish
• Detached (Genital) democratic, building systems, linking with others, situation-specific

Stewart, based on McClellandÊs theory of power (using FreudÊs framework), developed a scoring
system to measure what she called psychosocial maturity. T.V. Rao (1973) prepared a scoring manual
for these four stages (better called types).
A contemporary of Freud, Carl Jung, propounded a new theory of understanding individuals and their
development. His theory became very popular. Based on his basic elements of human psyche, a
mother-daughter team (Briggs & Myers) developed a 100-item instrument, popularly called MBTI
(Myers-Briggs type indicator). MBTI is most widely used instrument for personality analysis.

Type A and Type B personalities

Individuals with a Type A Orientation are characterized by impatience, desire for achievement, and
perfectionism. In contrast, those with Type B Orientation are characterized as more easygoing and
less competitive in relation to daily events. Type A people tend to work fast and to be abrupt,
uncomfortable, irritable and aggressive. Such tendencies indicate „obsessive‰ behavior, a fairly
widespread-but not always helpful-trait among managers. Many managers are hard-driving, detail-
oriented people who have high performance standards and thrive on routine. But when such work
obsessions are carried to the extreme, they may lead to greater concerns for details than for results,

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resistance to change, overzealous control of subordinates, and various kinds of interpersonal
difficulties, which may even include threats and physical violence. In contrast Type B managers tend
to be much more laid back and patient in their dealing with co-workers and subordinates.

Personality-job Fit Theory

Holland (1985) has proposed a Âpersonality-job fit theory of personality. This theory makes a case for
job-specific personality types. He has suggested six personality types and has prepared an instrument
containing 160 occupational titles. Based on respondentsÊ preferences, their personality profiles are
prepared.

HollandÊs Personality Types of Occupational Groups

No Occupational groups Preferred mode Personality types

1. Mechanics, operators, assembly line Physical requiring strengths Realistic

workers, farmers and coordination
2. Biologists, economists, Thinking, understanding, and Investigative
mathematicians, news paper organizing
reporters
3. Teachers, social workers, Helping and developing Social
counselors, clinical psychologists people
4. Accountants, Managers, bank Precise, orderly, rule Conventional
workers, clerks regulated
5. Lawyers, real estate agents, PROs, Verbal, impacting people Enterprising
Small entrepreneurs
6. Painters, musicians, interior Imaginative, emotional, Artistic
decorators, writers ambiguous

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RoeÊs Theory of Career Choice (1956)

Anne Roe was among the first to use ÂneedsÊ explicitly and extensively in a theory of vocational
development – taking MaslowÊs (1953) system for her frame of reference. Roe sought to find out
what aspects of personality differentiated scientists in various fields. Roe concluded that differences
in early childhood experiences were reflected in later choices of occupation. More specifically, she
found that men from homes orientated to the needs of the children, homes that put a premium on
warm, satisfactory relationships within the family, tended to enter occupations that provided further
such warmth and support. Men whose occupations involved a minimum of contact with others on the
job and for whom work was often a solitary activity characteristically come from homes in which are
early relationships had not been close or rewarding.

These different types of parent-child relations were seen as producing a major orientation either
toward ÂpersonsÊ or  notÊ toward persons. According to the theory it is these orientations that lead to
interest development and occupational choice.

GinzbergÊs Theory of Career Choice (1951):

Ginzberg, Ginsburg, Axelrad and Herma (1951) formulated a developmental theory of career choice
that has been the prototype for subsequent thinking about how and why adolescents choose a career as
they do.

The central position in this theory is that career choice is a process which extends from approximately
age ten to twenty one encompassing the years of adolescence, principally through high school, but also
during the upper elementary grades (5&6). Ginzberg states that the single most important factor in
this process that determines career choices is the series of inter locked decisions that adolescent makes
over time.

The second proposition is that the process of career choice is largely irreversible – once launched it
becomes difficult to change directions.

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Finally, Ginzberg proposes that the career choice culminates in a compromise between needs and
reality. This proposition rests upon the assumption that the ego mediates between what the individual
wants (id impulses and what reality allows (super ego, dictates) and environmental constraints.

SuperÊs Theory of Career Development (1957):

Whereas Ginzberg at all formulated their explanations of how career choices are made during
adolescence primarily from an ego psychological point of view, super (1957) has adopted a largely
phenomenological frame of reference to conceptualize the process of career development. His basic
tenet is that, Âin choosing an occupation one is, in effect choosing a means of implementing a self-
conceptÊ. It is also a continuous process and projects into adulthood as the individual continually
adjust to career. Super follows the tradition of HallÊs of continuous development from childhood to
adolescence with the self-concept being clarified and crystallized rather than conflicted. The
implication is that super posits synthesis rather than compromise as the outcome of adolescence career
development.

Super & Overstreet (1960) have hypothesized that there are three progressive trends in career
development from early to late adolescence toward greater goal direction, independence and choice
realism. They do not identify periods or stages in the process, but Tiedeman & OÊ Hare (1963) also
form a self concept orientation and specify three criteria for delineating stages: discreteness,
dominance, and irreversibility. The dimensions of career development cutting across these stages
have been enumerated by super as follows:

1) Awareness of the need to choose: It is a mark of career maturity, particularly in early

adolescence, to recognize the societal expectation that each individual declare a career choice.
2) Specificity of information and planning: By the time the young person has reached early
adulthood, career choice should be based upon reliable and relevant information about the
world of work and plans should be feasible and implementable.

Crites Model of Maturity (1974):

Combining GinzberÊs focus on ego functions in career decisions making with SuperÊs emphasis on the
dimensions of career maturity and adding components from factorial analyses of ability Crites (1974)

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has formulated a model of career maturity that encompasses both the content and process of career
decision making. The model has been adapted from the research of British Psychologists, Vernon
(1950) and Burt (1954) on the structure of abilities. They propose that abilities are organized in a
hierarchical fashion.

At the lowest level of hierarchy are specific variables of interest – knowledge of the world of work.
At one intermediate level are the group factors or dimensions that coverage upon the highest level of
the hierarchical model- the general factor. This ÂGÊ is the degree of career maturity. It can be defined
in absolute terms as, Âthe place reached on the continuum of career development (Super 1955) or
relative terms with respect to the individualÊs standing in the appropriate age of grade reference group
(crites (1961).

Erickson (1959) considered a career as an individuals course of development through chronologically

successive life stages. This interpretation was later worked out in more detail by various researchers
(eg. Tiedman & OÊHara, 1963: Havighurst 1952). A life or career stage is characterized, according to
Erickson by its limits transition (career transition) from, respectively the preceding stage to the present
one and from the present stage to the next. Such a transition takes place when a person is rather
abruptly confronted with new circumstances, unfamiliar problems or tasks, for when the ways of
behavior and adjustment of the stage and when he finds or found himself, do not stuff ice. In general
a process of re-orientation i.e. adaptation or readjustment will then be necessary to enable him to stand
up to or feel at home in the new phase.

All the above theorists converge on three points: One is that occupational and career thinking occur
during adolescence and the second is that values have their basis in abilities and attitudes. Further,
vocational interests and work values seem to exhibit a close relationship according to the theorists.

Immaturity – Maturity Theory

Chris Argyris had identified specific dimensions of the human personality as it develops. He proposes
that the human personality, rather than going through distinct stages, progresses along a continuum
from an infancy to maturity as an adult. However, at any stage, people can have their degree of
development plotted according to the seven dimension shown in.

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Argyris argues that healthy individuals tend to move from immaturity to maturity. According to him,
such people will display the behaviors of maturity while unhealthy people tend to demonstrate
childlike, immature behaviors.

The Immaturity to Maturity Continuum

Characteristics of Immaturity Characteristics of Maturity

Passivity Activity
Dependence Independence
Limited behavior Diverse behavior
Shallow interests Deep interest
Short-time perspective Long-time perspective
Subordinate position Super ordinate position
Lack of self-awareness Self awareness and control
The development of personality manifests itself as self concept or self esteem or self efficacy of an
individual. Collectively, the ways in which an individual integrates and organizes the previously
discussed categories and the traits they contain are referred to as personality dynamics. It is this
category that makes personality more than just the sum of separate traits. A key personality dynamic
in your study of OB is the self-concept. Self concept is the set of attitudes and beliefs that an
individual holds about him or herself. It is the product of an individualÊs interactions with family,
friends and teachers. Experiencing success and failure causes the individual to see himself as a
success or a failure and to act accordingly. The individual who continually fails to please the adults in
the environment will begin to feel inferior and subsequently will develop a poor self-concept.

A positive ÂSelf conceptÊ enhances the individualÊs awareness of his attitudes and interests. The
awareness prompts the individual to be achievement oriented. The achievement motive manifests
itself in work value. It helps in career planning, for developing adaptive behaviors, to meet the various
pressures of the environment.

Two related-and-crucial-aspects of the self-concept are self-esteem and self-efficacy. Self-esteem is a

belief about oneÊs own work based on an overall self-evaluation. People high in self-esteem see
themselves as capable, worth while, and acceptable and tend to have few doubts about themselves.
The opposite is true of a person low in self-esteem. Some OB research suggests that, whereas high

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self-esteem generally can boost performance and human resource maintenance, when under pressure,
people with high self-esteem may become boastful and act egotistically. They also may be
overconfident at times and fail to obtain important information.

Self-efficacy is concerned with self-perceptions of how well a person can cope with situations as they
arise. Those with high self-efficacy feel capable and confident of performing well in a situation. Only
recently given attention in the field of organizational behavior, self-efficacy is conceptually close to
self-esteem. Miner points out the differences by noting that self-esteem tends to be a generalized trait
(it will be present in any situation). While self-efficacy tends to be situation-specific. However, self-
efficacy is also generally recognized to vary on three dimensions:

1. Level – the number of tasks a person can do

2. Strength-how resolutely a person believes in his or her ability to perform each taks
3. Generality - the extent to which self-efficacy expectancies can be generalized from one
situation to the next.

Bandura suggests that the personÊs self-efficacy is derived from four sources: (1) performance
accomplishments, (2) modeled exposure, (3), verbal persuasion, and (4) physiological arousal.

A recent meta-analysis by Stajkovic and Luthans found a highly significant relationship between self-
efficacy and performance in organizational settings. For example, individual studies have found that
self-efficacy is associated with life insurance sales, faculty research productivity, ability to cope with
difficult career-related tasks, career choice, learning and achievement, and adaptability to new
technology. In other words, self-efficacy has emerged as one of the most researched predictive
constructs in the field of organizational behavior; there is considerable evidence that employees who
have higher self-efficacy are higher performers than those who have lower self-efficacy. There is
evidence that this efficacy-performance relationship is cyclic in nature-performance affects self-
efficacy, which in turn affects performance, and so on. There is also growing evidence that training
employees can lead to their enhanced self-efficacy.
Summary:

Work force is the mix of gender, race and ethnicity, age, and able bodied ness in the work force. Demographic
differences are back ground characteristics that help shape what a person has become. Demographic differences
can be the basis for inappropriate stereotyping that can influence workplace decisions and behaviors. Aptitude is a

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personÊs capability of learning some thing. Ability is a personÊs existing capacity to perform the various tasks
needed for a given job. Aptitudes are potential abilities. Both mental and physical aptitudes and abilities are used
in matching individuals to organizations and jobs. Personality captures the overall profile or combination of
characteristics that represent the unique nature of an individual as that individual interacts with others. Personality
is determined by both heredity and environment. The big five personality frame work consists of extraversion,
agreeableness, conscientiousness, emotional stability, and openness to experience. Managing diversity and
individual differences involves striving for a match between the firm, specific jobs, and the people recruited, hired,
and developed, while recognizing an increasingly diverse work force.

Questions:
1. What is the definition of Personality? Give brief examples of each of the major elements?
2. What are the big five personality traits? Which one seems to have the biggest impact on performance? How
would knowledge of the Big Five help you in your job as manager?
3. Examine the role of heredity and environment in the development of the individual
4. Discuss the various theories of personality with reference to development
5. Explain the theories highlighting career choices mode by individuals
References:
1. Fred Luthans, Organizational behavior , Mc Graw – Hill International Edition, 2005.
2. Udai Pareek, Understanding Organizational Behaviour Oxford University Press, 2004.
3. k. Aswathappa, Organisational Behaviour Text cases games, Himalaya publishing Company,
2005.
4.Schermerhorn- Hunt- Osborn, Organizational Behavior, John Wiley & sons, Inc.,2001.

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 Chapter - 12
Learning – Work Attitudes

Learning objectives: This chapter highlights the importance of learning in shaping an individualÊs
behavior After reading this chapter you will be able to understand that

• The learning is modification of behavior through practices, training, or experience.

• theories explaining learning process.
• The related topics of learning.
• Understand the nature of work attitudes.

Key terms

• Social Learning
• Learning curves
• Learning styles
• Reinforcement
• Operant conditioning
Structure
• Introduction
• The Leaning Cycle
• The theories of learning
• Work Attitudes
• Summary
1.0 Introduction:

Learning has been defined in various ways and a lot of research has been done on it. For our purposes,
learning may be defined as the process of acquiring, assimilating, and internationalizing cognitive,
motor, or behavioral inputs for their effective and varied use when required, leading to an enhanced
capability for further self-monitored learning. This definition has many implications for making
learning more effective:

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• The first step in learning is the acquiring of new input in terms of knowledge and
understanding (cognition), some physical or motor activity, or a new behavior (including
attitudes and values). When this process is quick, learning is effective.
• The next step is the assimilation of the new input. It should not only be acquired quickly but
should be retained for a length of time. If the input that is acquired is short-lived in the
memory, learning has not been effective.
• Learning is not a process of collection of various inputs alone. If these inputs hang loose,
independent of one another, the person merely acts as a passive receptacle for knowledge,
motor skills, or behavior. This happens often. Effective learning is characterized by the
internalization of new inputs. New inputs are acquired from outside environment. At this
point, the new inputs get assimilated in each individual according to his own psychological
makeup and understanding.
• The next step would be the ability of the individual to recall and apply these principles in a
specific situation. Failing to do so would mean an absence of the learning processes.
• It means that learning is building an association between a stimulus and a response. The
initial response could be on the basis of a trial and error. Once the appropriate response is
identified a bond develops between the stimulus and the response.
• With repeated responses the bond or the association gets strengthened. Repetition and
practice help in association and assimilation of responses which develop in later stages as
habits.
• Once habits are formed they become a part of the personality and manifests in the form of
stable and predictable patterns of behavior.
• It may be seen that the association or the acquisition is based on external environment; the
ability of individual to interact with given stimulus and is also based on hereditary aspects.
Hence, the potentiality or the basic intellectual capacity with which an individual interacts
with stimulus and the resultant behavior is a product of both heredity and environment.
• Many a time learning is also influenced by the needs operating in an individual. Some of the
mental needs like – achievement may prompt an individual to undertake certain
characteristics.
• The amount of learning in an individual is usually assed by the performance of an individual.
Efficiency or maturity in learning can be judged by the amount of time taken and the
approach. It is said that reduction in time and steps is an indication of maturity.

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 • The process of learning is also followed by other cognitive aspects like – thinking, memory
etc all these processes function together in a learning situation.
• The motivation of an individual to interact with the material largely determines the
effectiveness in the learning process. The interest with which an individual approaches the
inputs, the amount of retention, and the ability to apply in a given situation is all dependent
upon the motivational processes.
• Reinforcement or feedback for an individual plays a vital role in the learning process. Positive
feedback strengthens the associations and facilitates faster rate of acquisition. Negative
feedback or punishment inhibits the learning process.
• Effective use of learning also involves creativity. It means that the individual should be able
to transfer whatever he has learnt and apply in a new situation. It means application of ones
knowledge and skills and also being creative and making contribution.
• Learning is a continuous process. Even though the fundamental concepts are internalized at
an early stage, the building and development of these concepts takes place continuously
resulting in self-learning and individual growth.

1.1The Leaning Cycle:

Kolb (1976) has proposed the cycle of experiential learning adults. The cycle has four parts –
experiencing (a learner has some concrete experience or is helped to have experience during a training
programme), followed by processing (reflecting on and analyzing the experience individually or in a
group), followed by generalizing (abstract conceptualization based on the experience and formation of
a tentative theory, or a way to explain the data), followed by applying (active experimentation, i.e.,
trying out the new behavior or using it in day-to-day work). This is followed by a new experience,
and the cycle continues.

Based on this cycle of experiential learning, Kolb (1976) also proposed four learning styles. Concrete
experiences are excited by the new activity or experience and share it with others; they generally
combine the experiencing and generalizing parts of the cycle. Reflective observers learn from
objective observation, reflect on it. Discuss it, and then generalize; they benefit from the processing
and generalizing parts of the cycle. Abstract conceptualizes rely mainly on logic and rational analysis;
they tend to generalize from their exposure to logical material. Active experimenters are pragmatic

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and rely on trying things out in familiar situation; the applying part of the learning cycle is more
appealing to them.

2.0Theories of Learning

There are four theories which explain how learning occurs. They are (1) Classical conditioning, (2)
Operant conditioning, (3) Cognitive theory, and (4) Social Learning theory.

2.1 Classical Conditioning

Classical conditioning is based on the premise that a physical event-termed a stimulus-that initially
does not elicit a particular response gradually acquires the capacity to elicit that response as a result of
repeated pairing with a stimulus that can elicit a reaction. Learning of this type is quite common and
seems to play an important role in such reaction as strong fears, taste aversions, some aspects of sexual
behavior, and even racial or ethnic prejudice. Classical conditioning became the subject of careful
study in the early 20th century, when Ivan Pavlov, a Nobel Prize winning psychologist from Russia,
identified it as an important behavioral process.

Pavlov conducted an experiment on a dog and tried to relate the dogÊs salivation and the ringing of a
bell. A simple surgical procedure allowed him to measure accurately the amount of saliva secreted by
the dog. When Pavlov presented the dog with a piece of meat, the dog exhibited a noticeable increase
in salivation. When he withheld the presentation of meat and merely rang a bell, the dog has no
salivation. Then Pavlov proceeded to link the meat and the ringing of the bell. After repeatedly
hearing the bell before getting, the food, the dog began to salivate as soon as the bell rang. After a
while, the dog would salivate merely at the sound of the bell, even when no food was offered. In
effect, the dog has learnt to respond (salivate) to the bell.

From the brief description given above, certain key concepts of classical conditioning can now be
introduced. Salivation in response to food is a natural, unlearned response-in short, a reflex. This
response was called the unconditioned reflex. The food, because it elicited the unconditioned reflex
automatically, was called the unconditioned stimulus. When PavlovÊs repeated presentation of the bell

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followed by food led the dog to salivate in response to the bell alone, this salivation was designed as
conditioned reflex, which emphasized that arousal of the reflex was dependent upon a stimulus, as the
conditional stimulus. Thus, the concepts central to classical conditioning are unconditioned stimulus
(US), unconditioned response (UR), conditioned stimulus (CS), and conditioned response (CR).

The essential feature of this process is that a previously neutral stimulus acquires the capacity to elicit
a certain response, which is then called a conditioned response.

Skinner in particular felt that classical conditioning explains only respondent (reflexive) behaviors.
These are the involuntary responses that are elicited by a stimulus. Skinner felt that the more
complex, but common, human behaviors cannot be explained by classical conditioning alone. He felt
that most human behavior affects, or operates on, the environment. The latter type of behavior is
learned through operant conditioning.

2.2 Operant Conditioning

It is concerned primarily about learning as which occurs as a consequence of behavior. The word
ÂoperantÊ means to perform. In this method the organism has to perform indulge, or learn the process
and become aware of the responses or consequences. The consequences are responsible to make
leaning possible.

Skinner had used a pigeon in his experiments. The pigeon was kept in a cage. The pigeon had to press
a lever for a window to get opened through which food was obtained. When the pigeon was hungry, it
roamed the cage and accidentally pressed the lever. After a few such trials the pigeon learnt that it had
to press a lever to obtain food. All unnecessary steps were reduced. At this point Skinner introduced
schedules of reinforcement. He had his own method of reinforcing the pigeon.

Fixed interval schedule - Here the pigeon was fed with a specific time schedule designed by Skinner.
For example, it would be given food after every 20 minutes etc. Even though the pigeon indulged in
pecking during these 20 minutes it was not reinforced.

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Variable interval schedule - Here the time was not fixed as in the previous case, but was varied like
once in 15 minutes, 10 minutes, 8 minutes randomly. And the pigeon had to adjust according to the
different schedules.

Fixed ratio schedule - Here reinforcement was provided according to the number of peckings. For
instance after every 15 responses food may be provided. The ratio is determined in response to the
number of peckings involved.

Variable ratio schedule - Here food is provided at random in differential variables designed by the
experimenter. The unit of the variable is the number of peckings
involved.

The important principles involved in SkinnerÊs experiments are (1) learning by doing and (2) shaping.
The active involvement of the participant in the learning process is the key element and facilitates
learning process. Through a number of trial and error methods the organism has to learn on its own
the relationship between the stimulus and response. When the consequences are positive to the
organism strong associations tend to develop between the stimulus and response. This is the
difference between classical and operant conditioning.

Differences between Classical conditioning and Operant conditioning

Classical conditioning
• Responses are elicited from a person (reactive)
• Responses are fixed to stimulus (no choice)
• CS to stimulus such as sound, an object, a person
• Reinforcement is not received by choice

Operant conditioning

• Responses are emitted by a person (proactive)

• Responses are variable in types and degrees (choice)
• CS to situation such as office, a social setting, a specific set of circumstances

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 • Person of instrumental in securing reinforcement by ÂoperatingÊ on the environment

2.3 Cognitive Theory of Learning

Cognitive process assumes that people are conscious, active participants in how they learn. Cognitive
theory of learning assumes that the organism learns the meaning of various objects events and learned
responses depending on the meaning assigned to stimuli.

Edward Tolman is widely recognized as a pioneering cognitive theorist. He felt that cognitive
learning consists of a relationship between cognitive environmental cues and expectation. He
developed and tested this theory through controlled experimentation.

Tolman used a rat in his experiment to demonstrate the cognitive learning. The rat had to run through
a maze for food. At certain points food was kept and the rat had to master the pathway and learn
where food was kept. The place where food was kept was sometimes varied. A mental idea about the
place of the food in the form of a cognitive map has to be formed in the mind of the rat. There were
also instances when instead of food shock was also given to the rat. Hence, the learning about the
pathways with regard to positive and negative reinforcements has to be formed in the mind of the rats.
However, it is surprising to note that the rat learnt quickly the pathways and was able to form
cognitions about positive and negative reinforces.

TolmanÊs cognitive theory also had a great impact on the early human relations movement. Industrial
training programs after World War II drew heavily on TolmanÊs ideas. Programs were designed to
strengthen the relationship between cognitive cues (supervisory, organizational, and job procedures)
and worker expectations (incentive payments for good-performance). The theory was that the worker
would learn to be more productive by building as association between taking orders or following
directions and expectancies of monetary reward for this effort.

Today, the cognitive sciences focus more on the structures and processes of human competence (for
example, the role of memory and information processing) rather than on the acquisition and transition
processes that have dominated learning theory explanations. In organizational behavior, the cognitive
approach has been applied mainly to motivation theories. Expectations, attributions and locus of

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control, and goal setting (which are in the forefront of modern work motivation) are all cognitive
concepts and represent the purposefulness of organizational behavior. Many researchers are currently
concerned about the relationship or connection between cognitions and organizational behavior.

2.4 Social Learning Theory

Social learning theory combines both behavioristic and cognitive concepts. It also tries to integrate
environmental determinants. Miller and Dollard, and Bandura are the two pioneering theorists
involved in social learning approach. Basically social learning involves observational learning by
which an individual acquires new knowledge by observing what happens to his author model. This is
popularly known as vicarious learning.

Bandura has done considerable research, which demonstrates that people can learn from others. This
learning takes place in two steps. First, the person observes how others act and then acquires a mental
picture of the act and its consequences (rewards and punishers). Second, the person acts out the
acquired image, and if the consequences are positive, he or she will tend to do it again. If the
consequences are negative, the person will tend not do it again. This, of course, is where there is a tie-
in with operant theory. But because there is cognitive, symbolic representation of the modeled
activities instead of discrete response-consequences connections in the acquisition of new behavior,
modeling goes beyond the operant explanation. In particular, Bandura concludes that modeling
involves interrelated sub processes, such as attention, retention, and motoric reproduction, as well as
reinforcement.

From the theories it is clear that reinforcement and punishment play a central role in the learning
process and provide principles for behavioral performance management. Most learning theorists agree
that reinforcement is more important than punishment. It is the single most important concept and
application principle.

The term reward and reinforcer are used interchangeably in behavioral performance management.
Positive reinforcement strengthens and increases behavior by the presentation of a desirable
consequence. Negative reinforcement strengthens and increases behavior by the threat of the use of an
undesirable consequence or the termination or withdrawal of an undesirable consequence.

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The challenge for management is to understand this behavioral reality, eliminate the rein forcers for
the undesirable behaviors and more importantly and effectively, reward the desirable behavior. Thus,
organizational reward systems become the key, often overlooked factor in brining about improved
performance and success.

3.0Major steps of LuthansÊs OB Model approach to behavioral performance management.

Steps:

1. Identify: Performance-related behavioral events. Usually these have to do with quantity of

producing products or delivering service by operating employees.
2. Measure: How often are the performance behaviors identified in step 1 occurring under
existing conditions? This is called the baseline measure.
3. Analyze: What are the antecedent (A) cues of the performance behavior (B), and what are the
contingent consequences (C) This A-B-C analysis is a necessary prerequisite to developing an
effective intervention strategy.
4. Intervene: This is the action step of O.B method. The goal is to accelerate functional
performance behaviors and decelerate the dysfunctional behaviors. Positive reinforcement
strategies involving money, social recognition/attention, and feedback are most used.
5. Evaluate: This final step evaluates to make sure the intervention does in fact lead to
performance improvement. If it doesnÊt, then another analysis and/or intervention is made.

Work Attitudes
1.0 Definition:
ÂAn attitude is a relatively enduring organization of beliefs around an object or situation predisposing
one to respond in some preferential manner. Attitudes are particularly enduring sets formed by past
experiencesÊ (Asch, 1952).

In the above definition, the elements of an attitudes are beliefs (cognitions, expectancies, or
hypotheses).

A belief is any simple proposition, conscious or unconscious inferred from what a person says or does.

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Each belief within an attitude organization is conceived to have three components:

• A cognitive component because it represents a persons knowledge.

• An affective component – because the belief is capable of arousing affect of varying intensity.
• A behavioral component because the belief, being a response predisposition of varying
threshold, must lead to some action when it is suitably activated.

1.1 Formation and Development of Attitudes:

Allport (1935) listed four conditions for the formation of attitudes: (1) the integration of numerous
specific responses within an organized structure, (2) the differentiation of more specific action patterns
and conceptual systems from primordial, non-specific attitudes of approach and withdrawal, (3)
trauma involving a compulsive organization of the mental field following a single intense emotional
experience and (4) the adoption of attitudes by imitation of parents, teachers or peers.

Regarding attitudes as a special case of the more general category of acquired behavioral dispositions,
Campbell (1963) focuses on the problem of informational basis and proposes six different ways of
acquiring the information upon which such dispositions are based; blind trail and error; general
perception; perception of otherÊs responses, perception of outcomes of others explorations, verbal
instructions relevant to behavior and verbal instructions about object characteristics.

1.2 Functions of an Attitude: In the past few decades, there has been a slow but steady advance
toward increasingly more comprehensive formulations regarding the functions of an attitude.
Beginning with Freud (1930) and followed by Lasswell (1930), Fromm (1941), and culminating in the
Âauthoritarian personalityÊ studies serve mainly irrational ego-defensive functions became widely
accepted. Sarnoff and Katz (1954), Smith, Bruner and White (1956) were among the first to explicitly
recognize the positive functions that attitudes also serve. Katz (1960) formulated four functions of an
attitude : (a) instrumental – adjustive, (b) ego defensive (c) value expression and (d) provision of
knowledge based upon the individualÊs need to give adequate structure to his universe. And the

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function that seems to be served by all the values within oneÊs value system is the enhancement of
what McDougall (1908) has aptly called the master of all sentiment, the sentiment of self-regard.

In the light of the above analyses of an attitude, work attitude may be defined as affective orientations
of an individual toward work. A positive and developmental outlook which perceives the ends as
means and promises a life long commitment is one set of affective orientations. The other set is a
negative and regressive outlook where in growth is retarded. While the former contributes to personal
growth, achievement and need gratification, the latter inhibits individual development.

The positive affective orientations to work may be interpreted as willingness to work, belief in hand
work, honestly in efforts, pride in work and deriving satisfaction through work.

These orientations have a close relationship to the Protestant Ethic principles of Weber (1930).
WeberÊs arguments are exploratory and theoretical in nature. Protestant ethic and its influence on
individual behavioral patterns show little evidence in terms of empirical findings. Weber (1930)
claimed that a new type of man appeared at the time of protestant reformation. The new type of
character created a vigorous spirit and influenced the attitude resulting in development of modern
capitalism. Weber posits that the reason for the emergence of successful men more often among the
protestants are because of the basic quality of the religious beliefs and not the political and economical
circumstances. It is argued that the Protestantism gave rise to capitalism, then a revolution in the
family leading more number of sons with strong achievement drives.

Religious ideology is equally important to the concept of work ethic or duty ethic. The principle of
protestant ethic is that there may be elements in a cultural system which are religion based, making
participants conscious of their occupational role as a way of fulfilling their roles to society. In some
social groups Âhard workÊ and ÂhonestyÊ to people may be inspired by their religious beliefs.
Protestantism, achievement motivation and economic development are dependent, interrelated and
facilitate the influence on one another. McClelland (1961) assumes that the protestant reformation
might have led to greater achievement motivation.

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The principal aspects of protestant ethic as described by Weber (1930) are individualism, asceticism
and industriousness. The emphasis placed on manÊs industriousness perhaps typifies the most
important aspect of protestant ethic. Probably the most widely accepted notion of protestant ethic
deals with the intrinsic aspect of work; that is, work as its own reward, work for workÊs sake. Work is
to be valued because it represents the best use of manÊs time and not merely because it is instrumental
in obtaining the satisfaction of external rewards. The individual high in protestant ethic is presumed to
prefer working to being idle, to be involved in his work and to derive considerable satisfaction from
doing his work well.

The principles of protestant ethic may be said to be an outcome of Renaissance and Reformation. A
particular type of character seems to have emerged after the renaissance. Riesman (1973) in his book
ÂThe Lonely Crowd‰ capitalizes on this character and terms this personality as ÂInner Directed typesÊ
and have a close relationship to the characteristics of work personality. „The source of direction for
the individual is ÂinnerÊ in the sense that it is implanted early in life by the elders and directed toward
generalized but nonetheless inescapably destined goals‰ (Riesam 1973). In other words, according to
Riesman (1973), positive work attitudes and imbibing of Protestant Ethic principles are a result of
early conditioning by parents and teachers. Almost similar views were expressed by Buhler (1935)
and Cleeton (1949) and Maslow (1953).

Buhler (1935) based her theory largely on the play activities of the child. According to Buhler, the
preschool child presents a symbolic act with play materials and later adapts to a more a real and
practical act. For the child, it is characteristic that its first creative efforts are largely intellectual and
that only later does it create in a practical, utilitarian sense.

Buher (1935) in his studies on language, has designated the naming of objects as the representational
function of speech. The representational function establishes a constant connection between signs and
objects. Once the child comprehends the naming of things, it has grasped the essential principle that
this constant connection between signs and objects is of practical significance. The child makes
something out of the materials available and names it as say – steamship – in other words it is the
substitute material.

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According to BuhlerÊs theory, it is the characteristic of the intellect that it enables functions to be
exercised in a way and on materials than those corresponding to reality. At first the child is
manipulating a material investigates its nature and possibilities and in the process forms something.
The next step is made when the child gives a name to something it has made after it is completed.

The following age levels may be kept in mind: the two year olds begin to designate their activities by
name – the three year olds name the things they build during and partly before the work has begun –
the three year olds as yet make no attempt to draw realistically. Representation of any kind develops
much more slowly in play with constructive materials.

The function of representation, like that of form production is acquired in the course of normal child
development. Representation is intimately bound up with intellectual development and although it
appears for the first time in connection with speech; it is carried over to other kinds of activity.
Representational production enables the child to express himself. Pride and joy at completing
something, the transference of fantasies to a material, the establishing of a bond with the life of an
adult; these needs are satisfied by the exercise of this function.

Cleeton (1949) in his book, ÂMaking work HumanÊ, expresses almost similar views. Cleeton states
that action is the basic law of life. From this fundamental principle is derived the physical science
concept of work which assumes that when action occurs, work is performed. Cleeton defines works as
Âactivity with an end in viewÊ. Cleeton (1949) further relates human activities and needs.
Psychologically speaking, activity by man arises bout of attempts to satisfy certain fundamental needs
and desires. The three principal needs stated by Cleeton are: (1) Need for activity (2) Need for self
determination and (3) Need for achievement.

Though these needs are innate, they are not sufficient to result in work adjustment in later life. A
sound and wholesome attitude toward work should be developed from early childhood. Parents who
directly or indirectly lead a child to believe that work is something to be endured at best, and avoided
if possible, mar the life possibilities of self-realization through work for their offspring. Wholesome
work activity is natural for human beings. Therefore the attitude toward work should be developed is
that of pleasure and satisfaction through achievement in work. This may be accomplished, even in
early childhood, by encouraging participation in constructive behavior, which in itself can be made

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both productive and challenging to the child. In fostering a constructive attitude toward work, it is
necessary to develop more than in the joy of accomplishment be developed (Cleeton 1949).

MaslowÊs (1953) need hierarchy posits similar views about work. According to Maslow, human
motives function in a hierarchy. Work has the potentiality of satisfying needs in each category, from
the subsistence and maintenance levels to the level of self-actualization.

Work attitudes are also closely related to interests. The terms interest and attitude are often used
together to express an individualÊs pattern of reactions toward himself, his physical environment, his
associates and the situations in which he may find himself. Except as certain potentials can be
considered to be inherited characteristics, a personÊs interests and attitudes develop from early
childhood onward as a result of experience. An interest cant be interpreted as a motivating force that
stimulates an individual to participate in one activity rather than in other. The term attitude refers to a
personÊs feeling toward other people, conditions or situations. They are personal and tend to reflect
themselves in the individualÊs relations with his fellows. A motivating interest that has resulted in
successful achievement in a particular situation may become the basis of a pleasant attitude toward the
elements that constitute the situation.

Interest being one manifestation of motivation, one might hypothesize that it would predict degree of
success as well as field of choice; the more highly motivated person would be more like to try harder
and to get better results.

Hendrick (1942) became interested in the pleasures that human beings appear to derive, from earliest
childhood, in the mere exercise of their cognitive and motor abilities. Henrick argues that, from
earliest infancy, the human being commits an enormous amount of energy to the enterprise of
exploring and controlling his environment, and derives a great deal of primary pleasure from doing so.
He postulates a Âmastery instinctÊ an Âin born drive to do and to learn how to doÊ.

Certain inferences may be drawn from the above analyses of work attitudes. Firstly, Âto workÊ is an
innate need of the organism. Secondly, certain aspects like achievement, productive orientation and

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representation with play materials may be identified – during infancy and childhood. Further, for the
development of positive work attitudes, healthy family relationships and opportunities in the form of
play materials are required.

In relation to organizations, the general meaning of attitude is applied to work. Work attitudes are
reflected in job satisfaction and in organizational commitment.

Job Satisfaction

Job satisfaction includes various aspects – the nature of the job itself, the compensation a person gets
by working on the job, growth opportunities, opportunities for career advancement, the organizational
climate, the behavior of the supervisor and co-workers, and so on.

Job satisfaction can be increased by increasing role efficacy, by understanding a personÊs needs and
making sure that these needs are met in the work assigned to the person, and developing various ways
of involving the person in the work itself by redesigning the job profile etc.

Job satisfaction leads to improved performance and retention of personnel in the organization.
Recruitment policies, placement practices, development schemes, etc., contribute to job satisfaction.

Organizational Commitment

Organizational commitment is another aspect of work attitudes. While job satisfaction is primarily
concerned with the job or the work a person undertakes in an organization, commitment shows the
relationship between the individual and the organization. Organizational commitment indicates a
personÊs feelings with regard to continuing his or her association with the organization, acceptance of
the values and goals of the organization, and willingness to help the organization achieve such goals
and values.

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Meyer and Allen (1991) have suggested three dimensions of organizational commitment – affective
commitment, i.e., a personÊs emotional attachment to and identification with the organization;
continuous commitment, based on the benefits the person sees in continuing with the organization
because it is commonly considered a good thing to stay on. This model has been tested and has been
found to be applicable to non-western cultures also.

Organizational commitment can be enhanced by clarifying the mission and values of the organization,
involving people in the development of organizational goals, ensuring equitable treatment without
discrimination, developing a collective sense of the organization, and investing in peopleÊs growth and
advancement.

1.3 Changing Attitudes

Employee attitudes can be changed, and sometimes it is in the best interests of management to try to
do so. Sometimes attitude change is difficult to accomplish because of certain barriers.

Barriers to Changing Attitudes: There are two basic barriers that can prevent people from changing
their attitude. One is called prior commitments, which occurs when people feel a commitment to a
particular course of action and are unwilling to change. There is even theory and research support for
escalation of commitment, the tendency for decision makers to persist with failing courses of action.

A second barrier is a result of insufficient information. Sometimes people do not see any reason to
change their attitude. The boss may not like a subordinateÊs negative attitude, but the latter may be
quite pleased with his or her own behavior.

How to become Barriers?

Providing New Information: One of the steps is by providing new information. Sometimes this
information will change a personÊs beliefs and, in the process, his or her attitudes.

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Use of Fear: A second way of changing attitudes is through the use of fear. Some researchers have
found that fear can cause some people to change their attitudes. However, the degree of fear seems to
be important to the final outcome.

Resolving Discrepancies: Another way in which attitudes can be changed is by resolving discrepancies
between attitudes and behavior. For example, research shows that when job applicants have more than
one offer of employment and are forced to choose, they often feel that their final choice may have
been a mistake.

Influence of Friends or Peers: Still another way in which attitude changes can come about is through
persuasion by friends or peers.

The Co-opting Approach: A final way in which attitude changes often take place is by co-opting,
with means taking people who are dissatisfied with a situation and getting them involved in improving
things.

Summary

Learning is understood as the modification of behavior through practice, training, or experience.

Distinction is made between explicit knowledge and tacit knowledge. Learning occurs through
classical conditioning, operate conditioning, cognitive process and observational process. Learning
becomes effective when it is based on certain principles. Learning becomes effective when the
material learnt is meaningful. Learning is of great importance to the study of OB. It stimulates
generalizations in organizations, stimulates discrimination in organizations, is the major objective in
training and solves employee indiscipline. The chapter also deals with work attitudes and their role in
organizational functioning.

Questions
1. Define the term learning? What is its impact on an employee behavior?
2. What are the four elements in the learning cycle suggested by Kolb? Illustrate them with an
example of your own.

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3. Brief out the differences between classical and operant types of learning.
4. Define work attitudes. Examine the importance of positive attitudes in organizational functioning.
5. Write short notes on:
a. Social learning.
b. cognitive learning
c. changing attitudes
References:
1. Dr.P.Jyothi , A Study of work personality, work attitudes- work values and work commitment,
Thesis submitted to Osmania University, 1987.
2. Udai Pareek, Understanding Organizational Behavior, Oxford University Press, 2004.
3. K. Aswathappa, Organizational Behavior Text cases games, Himalaya publishing Company,
2005.

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 Chapter - 13
Group Dynamics – Formation - Types – Group Cohesiveness –
Work Teams – Self-Managed Teams
Objectives: This chapter introduces the student to the group dynamics in an organization. After
reading this chapter , the student will be able to understand that
• Small groups formal or informal are inevitable in organizations.
• Various types of groups
• Groups serve several useful purposes to an organization.
• Group leadership, task, size, roles etc are the relevant considerations in group structuring.
Key Words
• Group
• Tasks
• Norms
• Cohesiveness
• Social loafing
• Polarization
Structure
• Introduction
• Group Formation
• Theories and types
• Group Cohesiveness
• Effective groups
1.0 Introduction:
The new workplace places great value on change and adaptation. Organizations are continually under
pressure to find new ways of operating in the quest for higher productivity, total quality and service,
customer satisfaction, and better quality of working life. Among the many trends and developments
we perceive today, none is more important than the attempts being made to tap the full potential of
group more creatively as critical organizational resources. Groups are increasingly becoming focal
points as organizations seek the advantages of smaller size, flatter structures, cross-functional
integration, more flexible operations. To meet competitive demands in challenging environments, the
best organizations mobilize groups and teams in many capacities in the quest to reach their full
potential as high performance systems.

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A group may be defined as a collection of two or more people who work with one another regularly to
achieve common goals. In a true group, members are mutually dependent on one another to achieve
common goals, and they interact with one another regularly to pursue those goals over a sustained
period of time. Groups are good for both organizations and their members, helping to accomplish
important tasks and to main a high-quality workforce. Consultant and management scholar Harold J
Leavitt is a well-known advocate for the power and usefulness of groups. Recently, he has described
„hot groups‰ that thrive in conditions of crisis and competition and whose creativity and
innovativeness generate extraordinary returns.

An effective group is one that achieves high levels of task performance, member satisfaction and team
viability. With regard to task performance, this group achieves its performance goals – in the standard
sense of quantity, quality, and timeliness of work results. For a permanent work group, such as a
manufacturing team, this may mean meeting daily production targets. For a temporary group, such as
a new policy task force, this may involve meeting a deadline for submitting a new organizational
policy to the company president. With regard to member satisfaction, an effective group is one whose
members believe that their participation and experiences are positive and meet important personal
needs. They are satisfied with their tasks, accomplishments, and interpersonal relationships. With
regard to team viability, the members are sufficiently satisfied to continue working well together on an
ongoing basis and/or to look forward to working together again at some future point in time. The
group in this way has all-important long-term performance potential.

A formal definition of group is that it refers to „a collection of two or more interacting individuals
with a stable pattern of relationships between them, who share common goals and who perceive
themselves as being a group‰. Thus, groups possess four common characteristics: (a) interaction
among members, (b) common interests or goals, (c) people see themselves as members, and (d) two or
more people are needed to form groups.

1.1 Types of Groups

Sociologists and psychologists who study the social behavior of people in organizations identify
several different types of groups.

Formal and Informal Groups: A formal group is one that is deliberately created to perform a specific
task. A number of people assigned to a specific task form a formal group. One example of such a

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group is committee. A distinctive feature of formal groups is that a hierarchy of authority exists, with
specified member rules and regulations. Rules, regulations, incentives and sanctions guide the
behavior of small groups.

A standing task group, also known as command group, is permanently specified in the organizational
structure and consists of a supervisor who exercises formal authority over subordinates. The foreman
and his group of subordinates constitute a command group. A task group is a temporary formal group
that is created to solve specific problems. The group comprises employees who work together to
complete a particular task or project. The employees belong to different departments. They stay
together till the task is completed and once the work is completed, the task group usually disbands and
members return to their respective task groups.

An informal group, also called a clique, is an alliance that is neither formally structure, nor
organizationally determined. Informal groups are natural formations in the work environment, which
appear in response to the need for social contact. They often develop within formal group out of
certain values or concerns, which some members find they share. They may also develop across or
outside of formal groups. Whatever the way of formation, informal groups obviously do not possess
formal structures. Rather, member roles are loosely defined, based on member expectations and the
needs of a group at any particular moment. A memberÊs behavior is guided by his own internalized
perception of what is appropriate and sanctioned by the bestowing or withholding of social approval.

An interest group is made up of individuals who affiliate to achieve an objective of mutual interest that
may have nothing to do with their formal task group memberships. A friendship group also develops
common characteristics such as martial status, political views, college affiliations and sports.
Friendship groups are important because they satisfy affiliation needs of their members. Enlightened
managers maintain good relations with friendship groups because these groups weild tremendous
influence on their members that managers would prefer to have directed towards organizational goals.

A reference group is any group with which an individual identifies for the purpose of forming options
or making decisions. Reference groups are the bases for many interest and friendship groups, but they
may also exist outside of the organization and still influence a personÊs behavior at work.

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1.2 Stages of Group formation

Besides the more established social psychology explanations for group formation, there are also some
generally recognized identifiable stages of group development. These stages can be briefly
summarized as follows:

1. Forming: This initial stage is marked by uncertainty and even confusion. Group members
are not sure about the purpose, structure, task or leadership of the group.
2. Storming: This stage of development, as indicated by the term, is characterized by conflict
and confrontation. (In the usually emotionally charged atmosphere, there may be considerable
disagreement and conflict among the members about roles and duties).
3. Norming: Finally, in this stage the members begin to settle into cooperation and collaboration.
They have a ÂweÊ feeling with high cohesion, group identity, and camaraderie.
4. Performing: This is the stage where the group is fully functioning and devoted to effectively
accomplishing the tasks agreed upon in the norming stage.
5. Adjourning: This represents the end of the group, which in ongoing, permanent groups will
never be reached. However, for project teams or task forces with a specific objective, once the
objective is accomplished, the group will disband or have a new composition, and the stages
will start over again.

2.0 Theories of Group Formation

It is difficult to identify the single reason as to why people join and form groups. Different types of
attractions, exists in different groups with different members. Some of the popular explanations for
group formation are as follows:

Theory of Proximity: This theory states that when people are placed together in space. i.e. physically
together they tend to relate with each other frequently and thus form a small group of its own.
Nearness increases the interactions and thus is responsible for the formation of the group.

Theory of Exchange: Exchange theory of groups is based upon reward cost outcomes of interaction.
A minimum positive level of an outcome must exist in order for attraction to take place. Rewards
from interactions satisfies needs.Interaction among members and common attitudes all have roles in
exchange theory.

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Balance Theory: The theory states that persons are attracted to one and another on the basis of similar
attitudes towards commonly relevant goals and objects. For example, individual X will interact and
form relationship with individual Y, because of common attitudes and values towards Z. Once this
relationship is formed the participants strive to maintain a symmetrical balance between the attraction
and common attitudes. If an imbalance occurs an attempt is made to restore the balance. If the
balance cannot be restored, the relationship dissolves.

Security: Individuals may also affiliate with a group and experience a sense of security from the
presence of other members. This is commonly found among the workers and union members.

Identity: Many a times people may associate themselves with a group for developing an identity. The
group provides a framework within which the individual can relate and develop his identity.

Functions of Group

• Groups are good for people

• Groups can improve creativity
• Groups can make better decisions
• Groups can increase commitments to decisions
• Groups help control their members
• Groups help offset large organization size.

4.0 Group size

The size of a group, as measured by the number of its members, can make a difference in a groupÊs
effectiveness. As a group becomes larger, more people are available to divide up the work and
accomplish needed tasks. This can boost performance and member satisfaction, but only up to a point.
As a group continues to grow in size, communication and coordination problems often set in.
Satisfaction may dip, and turnover, absenteeism, and social loafing may increase. A good size for
problem-solving groups is between five and seven members.

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A group with fewer than five may be too small to adequately share responsibilities. With more than
seven, individuals may find it harder to participate and offer ideas. Larger groups are also more prone
to possible domination by aggressive members and have tendencies to split into coalitions or
subgroups. Groups with an odd number of members find it easier to use majority-voting rules to
resolve disagreements. When speed is required, this form of conflict management is useful, and odd-
numbered groups may be preferred. But when careful deliberations are required and the emphasis is
more on consensus, such as in jury duty or very complex problem solving, even-numbered groups may
be more effective unless an irreconcilable deadlock occurs.

5.0 Group Norms:

Norms refer to rules or standards of behavior that apply to group members. Norms provide a basis for
understanding the behavior of others and for deciding our own behavior. Norms also regulate the
behavior of members.

Norms are the ÂoughtsÊ of behavior. They are prescriptions for acceptable behavior determined by the
group. Norms will be strongly enforced by work groups if they:

• Aid in group survival and provision of benefits

• Simplify or make predictable the behavior expected of group members
• Help the group avoid embarrassing interpersonal problems
• Express the central values or goals of the group and clarify what is distinctive about the
groupÊs identity.

Norms usually develop gradually and informally. Norms may be a result of the members past
experience they bring to the present group. Norms may also result because of the primacy effective.
A particular pattern could have resulted in successful interactions and that becomes the base for
developing norms. Some times a critical incident in the organization may also form a base for norm
development.

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Norms are usually strongly enforced as they ensure group success. They also reflect the preferences
of the supervisor and when enforced result in-group conformity. Norms also ensure predictability of
behavior among group members.

6.0 Group cohesiveness

A characteristic feature of groups which is particularly important for the behavior of their members is
cohesiveness, or the extent to which the members are attracted to each other and to the group. The
term cohesiveness is understood as the extent of liking each member has towards others and how far
everyone wants to remain as a member of the group. It is the degree to which members are attached to
and motivated to remain part of a group. Persons in a highly cohesive group value their membership
and strive to maintain positive relationship with other group members. Members also experience
satisfaction from group affiliation.

Sources of Cohesiveness: Group cohesiveness can be affected by such factors as interaction, threat,
severity of initiation, cooperation, shared goals, similarity of attitudes and values, and size.

Interaction: Group cohesiveness depends on possibilities of frequent interaction. They become more
cohesive when individual members spend more time with each other.

Threat: Threat is a powerful unifier particularly when: (a) it comes from outside the group, (b)
cooperation can help overcome the threat, and (c) there is little or no chance for escape.

Severity of Initiation: Difficulty in getting admission into a group also affects cohesion. More the
difficulty, greater the cohesiveness.

Co-operation: Sometimes the general atmosphere of group enhances cohesiveness. The overall
atmosphere depends, among others on leadership.

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Shared Goals: Groups that share common goals are likely to be more cohesive than those that do not
share such goals. If the group agrees on the purpose and direction of its activities, this serves to bind
the group together.

Attitudes and values: One of the strongest sources of group cohesiveness is share attitudes and values
among group members.

Size: It is well-known that as group size increases, cohesiveness tends to decrease. This effect comes
about in at least three ways. First, in large size group possibilities of interactions among members are
less. Second, as group size increases, it becomes more difficult to get the group to agree on common
goals and activities and expression of disagreement and dissatisfaction increases. Third, as group size
increases, the need for division of labor also increases, and this places certain restrictions on
intergroup communication and leads to a decrease in common activities.

How to increase or decrease Cohesiveness

Actions to increase cohesion:

• Induce agreement on group goals

• Increase membership homogeneity
• Increase interactions among members
• Decrease group size
• Introduce competition with other groups
• Allocate rewards to the group rather than individuals
• Provide physical isolation from other groups.
Actions to decrease cohesion:

• Induce disagreement on group goals

• Increase membership heterogeneity
• Restrict interactions among members

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 • Increase group size
• Allocate rewards to individuals rather than to the group as a whole
• Remove physical isolation
• Introduce a dominating member
• Disband the group
(Source: Schermerhorn et al, Managing Organizational Behavior, John Wiley, p. 334.)

7.0 Group decision Making:

Edgar Schein observes that groups may make decisions by various methods. A common way of
making decision by majority rule. Here voting takes place and the majority viewpoint is obtained.
Another method is decision by consensus. Consensus is a state of affair where discussion leads to one
alternative being favored by most members. Consensus does not require unanimity. Another method
is decision by unanimity. Here all members agree totally on course of action to be taken.

The potential advantages of group decision making include:

• Information - more knowledge and expertise is applied to solve the problem.

• Alternatives – a greater number of alternatives are examined, avoiding tunnel vision.
• Understanding and acceptance – the final decision is better understood and accepted by all
group members.
• Commitment – there is more commitment among all group members to make the final
decision work.

The potential disadvantages of group decision making include:

• Social pressure to conform – individuals may feel compelled to go along with the apparent
wishes of the group.

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 • Minority domination – the groupÊs decision may be forced or ÂrailroadedÊ by one individual
or a small coalition
• Time demands – with more people involved in the dialogue and discussion, group decisions
usually take longer to make than individual decisions.

There are efficient ways of group decision-making. Some of them are as follows:

Brainstorming: Brainstorming involves generating ideas through „freewheeling‰ and without

criticism. In brainstorming, group members actively generate as many ideas and alternatives as
possible, and they do so relatively quickly and without inhibitions. Four rules typically govern the
brainstorming process. First, all criticism is ruled out. Second, „freewheeling‰ is welcomed. The
emphasis is on creativity and imagination. Third, quantity is wanted. The emphasis is also on the
number of ideas: the greater the number, the more likely a superior idea will appear. Fourth, Âpiggy-
backingÊ is good. Everyone is encouraged to suggest how othersÊ ideas can be turned into new ideas
or how two or more ideas can be jointed into still another new idea.

Nominal Group Technique: The nominal group technique involves structured rules for generating and
prioritizing ideas. It puts people in small groups of six to seven members and asks everyone to
respond individually and in writing to a nominal question such as: „What should be done to improve
the effectiveness of this work team?‰ Everyone is encouraged to list as many alternatives or ideas as
they can. Next, participants read aloud their responses to the nominal question. A structure voting
procedure is then used to prioritize responses to the nominal question. The nominal group procedure
allows ideas to be evaluated without risking the inhibitions, hostilities, and distortions that may occur
in an open meeting.

Delphi Technique: The Delphi technique involves generating decision-making alternatives though a
series of survey questionnaires. A third group decision approach, the Delphi technique was developed
by the Rand Corporation for use in situations where group members are unable to meet face to face.
In this procedure, a series of questionnaires are distributed to a panel of decision makers, who submit
initial responses to a decision coordinator. The coordinator summarizes the solutions and sends the
summary back to the panel members, along with a follow-up questionnaire. Panel members again

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send in their responses, and the process is repeated until a consensus is reached and a clear decision
emerges.

Computer-Mediated Decision making: Electronic approaches to group decision making can offer
several advantages, including the benefits of anonymity, greater number of ideas generated, efficiency
of recording and storing for later use, and ability to handle large groups with geographically dispersed
members.

Group Think:

An important potential problem in group decision-making, identified by social psychologist Irving

Janis, is groupthink – the tendency of members in highly cohesive groups to lose their critical
evaluative capabilities. Janis believes that, because highly cohesive groups demand conformity, their
members tend to become unwilling to criticize one anotherÊs ideas and suggestions. Desires to hold
the group together and to avoid unpleasant disagreements lead to an overemphasis on agreement and
an under emphasis on critical discussion. The possible result is a poor decision.

How to avoid groupthink

• Assign the role of critical evaluation to each group member.

• Have the leader avoid seeming partial to one course of action.
• Create subgroups to work on the same problem.
• Have group members discuss issues with outsiders and report back.
• Invite outside experts to observe and react to group processes.
• Assign someone to be a ÂdevilÊs advocateÊ at each meeting.
• Write alternative scenarios for the intentions of competing groups.
• Hold Âsecond-chanceÊ meetings after consensus is apparently achieved.
Social Loafing

nother more recently recognized dysfunction associated with groups and teams is called social
loafing. This problem occurs when members reduce their effort and performance levels when
acting as part of a group. Primary causes include lack of performance feedback within the group,

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 tasks that are not intrinsically motivating, situations in which the performances of others will
cover for the reduced effort given by some members etc.

Social loafing is more likely to appear in large teams, where individual contributions are more
difficult to identify. To reduce the impact of members shirking their duties and to ensure that they
are fully contributing members of the team, it has been suggested to keep teams smaller in size,
specialize tasks that individual member contributions are identifiable, measure individual
performance, and select only motivated employees when building teams.

8.0Teams in the modern workplace

In recent years, teams have emerged as the most important group phenomenon in organizations.
The term ÂteamÊ is not new to organizations, and teamwork has been stressed throughout the years.
For example, the well-known quality guru Joseph Juran first took his „Team Approach to
Problem Solving‰ to the Japanese in the 1950s and then in 1980s to the United States. Today,
teams are becoming increasingly popular. Recent estimates of the prevalence and type of teams
among Fortune 1000 companies are as follows:

• Almost all use project team (diverse managerial/professional employees working on

projects for a defined, but typically extended, period of time).
• A large majority (87 percent) use parallel teams (employees working on problem-solving
or quality teams in parallel to the regular organizational structure).
• About half use permanent work teams (self-contained work units responsible for
manufacturing products or providing services).

The differences between work groups and teams are as follows:

• The work group has a strong, clearly focused leader; the teams has shared leadership roles.
• The work group has individual accountability; the teams has individual and mutual
accountability.
• The work groupÊs purpose is the same as the organizationÊs; the team has a specific purpose.

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 • The work group has individual work-products; the team encourages open-ended, active
problem-solving meetings.
• The work group measures effectiveness indirectly (for example, financial performance of the
overall business); the team measures performance directly by assessing collective work-
products.
• The work group discusses, decides, and delegates; the team discusses, decides, and does real
work.

The use of teams to produce products started in well-known, quality-conscious corporate giants, such
as Toyota in Japan and Motorola and General Electric in the United States, and has quickly spread.

Virtual Teams

With the advent of advanced information technology, increasing globalization, and the need for speed,
the requirement that groups be made up of members in face-to-face interaction is no longer necessary.
Members can now communicate at a distance through electronic means, such as e-mail, chat rooms,
phone and video conferencing, faxes, satellite transmissions, and websites. Members performing
knowledge-based tasks in remote locations can become members of so-called virtual teams. Also,
those performing in telecommuting jobs often bear responsibilities to serve on virtual teams. Virtual
teams are increasingly evident in global, partnered operations and even everyday activities.

Self-Managed Teams

A self-managed work team can be defined as Âa group of employees who are responsible for managing
and performing technical tasks that result in a product or service being delivered to an internal or
external customer‰. For example, a Hewlett-Packard and Harley-Davidson, self-managed teams are
empowered to hire, organize, and purchase equipment without management direct approval. The
results from these teams have reportedly been very positive.

Although there has been considerable such testimonial evidence of the value of self-managed teams,
supporting research and documented experience are now starting to emerge. To date, both the

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research and the practice literature has been quite favorable to self-managed teams. For example,
recent studies of the empowerment of self-managed teams found increased job satisfaction, customer
service, and team organizational commitment. However, there are some practical problems to
overcome is self managed teams. Individual problems included as the following:

• Team members arenÊt willing to give up past practices or set aside power and position.
• Not all team members have the ability, knowledge, or skill to contribute to the group. Team
functioning slows because some members shoulder more responsibility than others.
• As team members, workers often face conflicts or challenges to their own personal beliefs.
What works for the group often does not work for the individual.
Organizational-level problems included compensation and reward systems that still focused solely on
individual performance; thus there was little incentive for teams to perform well.

How to make Teams more effective

The effectiveness of teams may be measured based on the extent to which the team achieves its
objectives and performs on behalf of the overall organization.

For teams to be more effective, they must overcome some of the problems and dysfunctions that
groups in general encounter. Long-standing models of team effectiveness include creating the right
environment where support, commitment, reward systems, communication systems, and physical
space are all in sync to allow the team to work in a productive atmosphere. Tasks should be designed
to be interdependent, team size should be kept as small as possible, and members should be selected
based on both being motivated and competent. Further, team cohesion should be built by either
establishing homogenous groups or overcoming potential problems associated with diversity, by
encouraging interaction and contact, and by making the group seem somewhat ÂexclusiveÊ, so that the
members are happy to be included. Also, team success naturally tends to build greater cohesion, as
does the presence of external competition and challenges.

Summary

Groups represent an important dynamic in the study and application of organizational behavior.
Group formation, types and processes, the dynamics of informal roles and organization; and the

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dysfunctions of work groups and teams are all of particular relevance to study of organizational
behavior. Group formation can be theoretically explained by propinquity; as a relationship among
activities, interactions, and sentiments. Many different types of groups are found in modern
organizations. The dynamics of informal groups and modern teams was analyzed. Informal norms
and roles and the informal organization are very relevant to and often represent the real
organization. Informal structure coexists with every formal structure. Traditionally, only the
dysfunctional aspects of informal organization have been emphasized. More recently, functional
aspects have also been recognized. Team effectiveness may be enhanced using team building
programs, collaboration and effective leadership and by accounting for functional, demographic,
or cultural diversity and global issues when teams are formed.

Questions
1. Define the term group. What are the types of group? What purposes do groups serve?
2. Briefly discuss the major theoretical explanations for group formation. Which explanation do
you think is most relevant to the study of organizational behavior? Defend your answer.
3. What are some functions of the informal organization? What are some dysfunctions?
4. What is social loafing? How can it be overcome?
5. Why is it important for managers to be familiar with the concepts of group behavior?

References:
1. Fred Luthans, Organizational behavior 438-472, Mc Graw – Hill International Edition, 2005.
2. Udai Pareek, Understanding Organizational Behaviour ---------, Oxford University Press, 2004.
3. k. Aswathappa, Organisational Behaviour Text cases games, 311-346, Himalaya publishing
Company, 2005.
4.Schermerhorn- Hunt- Osborn, Organizational Behavior, 173-190, John Wiley & sons, Inc.,2001.

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 Chapter - 14
Job Stress – Causes – Consequences – Coping mechanisms –
Managing stress in work life.
Objectives: This chapter introduces job stress involved in work situations. After reading this chapter
the student will understand that
• stress is oneÊs reaction to stressors and consequences of such reaction
• impacts of stress vary from person to person.
• outcomes of stress include physical and physiological problems of employees, increased
absenteeism and reduced productivity for organizations.
• burnt out is the consequence of prolonged exposure to stress.
• there are individual and organizational strategies to cope with stress.
• strategies for managing stress in work life.
Key terms
• Burnout
• Coping
• Stressors.
• Regression
• Frustration
• Privation
• Glow-up
Structure
• Introduction
• Stress- background and definition
• Causes of Stress
• Consequences of stress
• Coping strategies
• Summary

1.0 Introduction:
Stress has become a major buzzword and legitimate concern of the times. A recent analysis of stress
in todayÊs workplace described the following:

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Employees are working longer hours, taking on the work once done by laid-off colleagues, meeting
tighter deadlines and cutting back on expenses. Combine this with the double-income family demands
of monthly mortgages, childcare, issues and aging parents, and the result for many is anxiety,
sleeplessness, irritability, and physical and mental deterioration.
1.1 Definition of Stress
Ivancevich and Matteson define stress simply as „the interaction of the individual with the
environment‰, but they go on to give a more detailed working definition, as follows: „an adaptive
response, mediated by individual differences and/or psychological processes, that is a consequence of
any external (environmental) action, situation, or event that places excessive psychological and/or
physical demands upon a person‰. Beehr and Newman define job stress as „a condition arising from
the interaction of people and their jobs and characterized by changes within people that force them to
deviate from their normal functioning‰. Taking these two definitions and simplifying them for the
purpose of this chapter, „stress‰ is defined as an adaptive response to an external situation that results
in physical, psychological, and/or behavioral deviations for organizational participants.

It is also important to point out what stress is not:

1. Stress is not simply anxiety. Anxiety operates solely in the emotional and psychological
sphere, whereas stress operates there and also in the physiological sphere. Thus, stress may
be accompanied by anxiety, but the two should not be equated.
2. Stress is not simply nervous tension. Like anxiety, nervous tension may result from stress,
but the two are not the same. Unconscious people have exhibited stress, and some people
may keep it Âbottled upÊ and not reveal it though nervous tension.
3. Stress is not necessarily something damaging, bad, or to be avoided. Eustress is not
damaging or bad is something people should seek out rather than avoid. The key, of course,
is how the person handless the stress. Stress is inevitable: distress may be prevented or can
be effectively controlled.
Several terms have been used synonymously with stress. Four terms are in related literature: stress,
strain, conflict, and pressure. The word strainÊ has been used to denote the effect of stress on the
individual. ÂPressureÊ has been used in the same sense. The word ÂconflictÊ usually denotes
incompatibility between two variables: goals, means, ideas, etc. The term ÂstressÊ has been used to
denote a stimulus (or cause) like an out-of-order telephone; the response (physiological, behavioral, or
cognitive changes) to such a cause for example, heightened blood pressure, quickened breathing,
stamping of the foot, perceiving the telephone department as incompetent, etc; or the resultant state of
the organism, for example, indifference, effort to get the telephone repaired, etc.

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„Stress is an adaptive response to an external situation that results in physical, psychological and/or
behavioral deviations for organizational participants‰.

Stress can manifest itself in both a positive way and a negative way. Stress is said to be positive when
the situation offers an opportunity for one to gain something. Eustress is the term used to describe
positive stress. Eustress is often viewed as motivator since, in its absence, the individual lacks that
Âedge; necessary for peak performance. It is negative when stress is associated with heart-disease,
alcoholism, drug abuse, marital breakdowns, absenteeism, child abuse and a host of other social,
physical, organizational and emotional problems.

Constructive stress acts a positive way. Moderate levels of stress resulted in prompting increased
work effort, stimulating creativity, and encouraging greater diligence. You may know such stress as
the tension that causes you to study hard before exams, pay attention, and complete assignments on
time in a difficult class. Destructive stress, or distress, is dysfunctional for both the individual and the
organization. Too much stress can overload and break down a personÊs physical and mental systems
resulting in absenteeism, turnover, errors, accidents, dissatisfaction, reduced performance, unethical
behavior and even illness.

Stress can impact a personÊs health. It is a potential source of both anxiety and frustration, which can
harm the bodyÊs physiological and psychological well-being over- time. Health problems associated
with stress include heart attack, stroke, hypertension, migraine headache, ulcers, and substance abuse,
overeating, depression, and muscle aches. Key symptoms to lock for are changes from normal
patterns- changes from regular attendance to absenteeism, from punctuality to tardiness, from diligent
work to careless work, from a positive attitude to a negative attitude, from openness to change to
resistance to change, or from cooperation to hostility.

2.0 The background of Stress

Concern about the impact of stress on people has its roots in medicine and specifically in the
pioneering work of Hans Selye. He called this phenomenon the general adaptation syndrome (Gas),
and about a decade later he introduced the term ÂstressÊ in his writings.

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The GAS has three stages: alarm, resistance, and exhaustion. In the alarm stage an outside stressor
mobilizes the internal stress system of the body. There are a number of physiological and chemical
reactions, such as increased pituitary and adrenaline secretions; noticeable increases in respiration,
heart rate, and blood pressure; and a heightening of the senses. If the stressor continues, the GAS
moves into the resistance stage, during which the body calls upon the needed organ or system to deal
with the stressor. However, while there may be a great deal of resistance to one stressor during this
second stage, there may be little, if any, resistance to other, unrelated stressors. This helps explain
why a person going through an emotional strain may be particularly vulnerable to other illness or
disease. Finally, if the stressor persists over a long period of time, the reserves of the adaptive
mechanisms during the second stage may become drained, and exhaustion sets in. When this happens,
there may be a return to the alarm stage, and the cycle starts again with another organ or system, or the
Âautomatic shutoff valveÊ of death occurs. This Gas process, of course, can be very hard on the person
and takes its toll on the human body.

Besides the physiologically oriented approach to stress represented by the classic GAS model, which
remain a vital dimension of modern stress research and stress management, attention is also being
given to the psychological (for example, mood changes, negative emotions, and feelings of
helplessness) and the behavioral (for example, directly confronting the stressors or attempting to
obtain information about the stressors) dimensions of stress. All three dimensions (physiological,
psychological, and behavioral) are important to the understanding of job stress and coping strategies in
modern organizations.

3.0 Causes of Stress

The causes of stress affecting todayÊs employees or many.

3.1 Extra organizational Stressors

An organization is an open system and any change in the external environment affects the organization
and its employees. These factors include things such as societal and technological changes, family,
relocation, economic and financial conditions, community conditions etc.

The pace of modern life has increased stress, and decreased personal wellness. A personÊs family
situation, a brief crisis, illness of a family member or a stressed out spouse can generate stress.
Relocating the family because of transfer or a promotion can also lead to stress. Sometimes financial
conditions may force individuals to make social adjustments that might create stress. Similarly, life

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changes like – sudden death of a spouse, divorce, interferes with work more than any other trauma in a
personÊs life. For professional woman particular sources of stress have been identified as
discrimination, stereotyping, family work interface, and social isolation.

3.2 Organizational Stressors

Besides the factors identified above, some stressors are present with in the organization itself. The
challenges faced by the organizations like – globalization, emphasis on quality, information explosion
are demanding more from the employees. Downsizing is resulting in creating more stress among the
employees who are already working in the organization.

The working conditions in the organization like – crowded work area, noise, pollution, strong smell,
poor lighting condition, physical and mental strain, radiations, etc. create stress.

Certain organizational processes like – centralize decision, little performance feedback, downward
communication etc can generate stress.

Other organizational aspects like – formalization, specialization, role ambiguity, no opportunity for
promotion, restrictive culture etc. may also generate stress.

Administrative policies like – competition, merit pay plans, rotating work shifts, bureaucratic rules etc
also causes stress.

3.3 Group Stressors

The group can also be a potential source of stress. These stressors may be considered as:

1. Lack of group cohesiveness – If for some reason the employee is left out of the group because
of the nature of the task, other members not willing to co-opt him or because of the
supervisorÊs style can create stress in the individual.
2. Lack of social support and networking among the employees can generate a lot of stress and
feel neglected, as they cannot get the moral support from their colleagues.
3. Interpersonal and inter group conflicts can lead to stress in any employee.

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3.4 Individual Level Stressors

The most common individual level stressors are type of personality, role overload, role conflict and
role ambiguity.

Personality Type: In respect of personality, two concepts: Type A personality and Type B personality
are relevant in this context.

The type A personality is stress-prone as it is associated with the following behavioral patterns:

• Always moves, walks and eats rapidly.

• Feels impatient with the pace of things, hurries others, and dislikes waiting.
• Does several things simultaneously.
• Feels guilty when relaxing.
• Tries to schedule more and more in less and less time.
• Uses nervous gestures such as clenched fist, banging the hand on the table.
• Does not have time to enjoy life.
The achievement orientation, impatience and perfectionism of individuals with type A personalities
may create stress in work circumstances that other persons find relatively stress-free. Type B
personality, on the other hand, is less stress prone. Following are the typical characteristics of type B
personality:

• Is not concerned about time.

• Is patient.
• Does not brag.
• Play to fun, not to win.
• Relaxes without feeling guilty.
• Has not pressing deadlines.
• Is well-mannered.
• Is never in a hurry.
4.0 Consequences of Stress

1. The performance of many tasks is in fact strongly affected by stress.

2. Performance usually drops off sharply when stress rises to high levels.

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4.1 Physical Problems due to Stress:

Most of the attention and basic research over the years has been devoted to the impact that stress has
on physical health. A high level of stress is accompanied by high blood pressure and high levels of
cholesterol and may even result in heart disease, ulcers, and arthritis. However, not all heart disease
can be directly linked to stress; environmental conditions and the personÊs general state of health,
heredity, and medical history also certainly contribute. However, there seems to be enough evidence
that stress can and does contribute to this dreaded disease and to other physical problems as well.

4.2 Psychological problems due to stress

High levels of stress may be accompanied by anger, anxiety, depression, nervousness, irritability,
tension, and boredom. One study found that stress had the strongest impact on aggressive actions,
such as sabotage, interpersonal aggression, hostility, and complaints. These types of psychological
problems from stress, in-turn, are especially relevant to poor job performance, lowered self-esteem,
resentment of supervision, inability to concentrate and make decision, and job dissatisfaction. These
outcomes of stress can have a direct cost effect on the organization. Direct behaviors that may
accompany high levels of stress include under eating or overeating, sleeplessness, increased smoking
and drinking, and drug abuse. There is some research evidence indicating a relationship between
stress and especially absenteeism and turnover.

5.0 Coping Strategies for Stress

5.1 Individual Strategies

Individual strategies to cope with stress include muscle relaxation, biofeedback, meditation, cognitive
restructuring and time management.

Muscle Relaxation: This involves slow and deep breathing, a conscious effort to relieve muscle
tension and an altered state of consciousness. The technique is inexpensive, may require a trained
professional to implement initially.

Biofeedback: A biofeedback machine is used to train people to detect and control stress-related
symptoms such as tense muscles and related blood pressure. The machine translates unconscious
bodily signs into a recognizable cue (flashing light or beeper). Muscle relaxation and meditative
techniques are then used to alleviate the underlying stress.

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Meditation: Several meditation techniques are used with results being positive and majority of them
are derivatives of Eastern philosophies. Included in this category are Zen Meditation or Sumarn.
Perhaps the most widely practiced technique everywhere is the transcendental meditation ™ of
Maharishi Mahesh Yogi. TM practiced 20 minutes twice daily helps reduce stress significantly.

Cognitive Restructuring: Cognitive restructuring involves two steps. First, irrational or maladaptive
thought processes that create stress are identified. One such thought is entertaining a premonition that
something evil is going to befall on you. The second step consists of replacing these irrational
thoughts with more rational ones. The fear of evil befalling can be overcome by reasoning and
rationalizing events and their consequences. Cognitive restructuring would alleviate stress by
encouraging a person to adopt a more reasonable belief about the outcomes associated with events.

Time Management: Most of us are poor in time management. The result is feeling of work overload,
skipped schedules and attendant tension. The truth is, if one can manage time effectively, he or she
can accomplish twice as much as the person who is poorly organized. Some basic principles in time
management are: (i) preparing daily a list of activities to be attended to; (ii) prioritizing activities by
importance and urgency; (iii) scheduling activities according to the priorities set; and (iv) handling the
most demanding parts of a job when one is alert and productive.

5.2 Organizational Strategies

Organizational strategies aimed at eliminating stress often include:

• Improvements in the physical work environment

• Job redesign to eliminate stressors
• Changes in workloads and deadlines
• Structural reorganization
• Changes in work schedules, more flexible hours and sabbaticals
• Management by objectives or other goal-setting programmes
• Greater levels of employee participation, particularly in planning changes that affect them
• Workshops dealing with role clarity and role analysis

Programmes that promote role clarity and role analysis are of vital importance in removing or
reducing role ambiguity and role conflict – the two main sources of stress.

Programmes of stress management targeted at perceptions and experiences of stress and outcomes of
stress.

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 • Team building;
• Behavior modification;
• Career counseling and other employee assistance programmes;
• Workshops on burnout to help employee understand its nature and symptoms;
• Training in relaxation techniques - and
• Physical fitness or wellness programmes.
6.0 Burnout

Burnout is a state of mind resulting from prolong exposure to intense emotional stress. It manifests
through emotional exhaustion and a combination of negative attitudes. Burnout occurs due to
prolonged exposure to stress and that too in phases. The three key phases of burnout are emotional
exhaustion, depersonalization and feeling a lack of personal accomplishment. Emotional exhaustion is
due to a combination of personal, job and organizational stressors. People who expect a lot from
themselves and the organizations in which they work tend to create more internal stress, which, in
turn, leads to emotional exhaustion. Similarly, emotional exhaustion is fuelled by having too much
work to do, by role conflict and by the type of interpersonal interactions encountered at work.
Frequent, intense face-to-face interactions that are emotionally charged are associated with higher
levels of emotional exhaustion.

Overtime, emotional exhaustion leads to depersonalization, which is the state of psychologically

withdrawing from oneÊs job. This finally results in a feeling of being unappreciated, ineffective or
inadequate. The additive effect of these three phases is a host of negative attitudinal and behavioral
outcomes.

7.0 Stress Management

Stress prevention is the best first-line strategy in the battle against stress. It involves taking action to
keep stress from reaching destructive levels in the first place. Personal and non-work stressors must
be recognized so that action can be taken to prevent them from adverse impact. Persons with Type A
personalities, for example, may exercise self-discipline; supervisors of Type A employees may try to
model a lower key, more relaxed approach to work. Finally problems may be partially relieved by a
change of work schedule; the anxiety caused by pressing family concerns may be reduced by simply
knowing that your supervisor understands.

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Once stress has reached a destructive point, special techniques of stress management can be
implemented. This process begins with the recognition of stress symptoms and continues with action
to maintain a positive performance edge. The term wellness is increasingly used these days. Personal
wellness involves the pursuit of oneÊs physical and mental potential through a personal health
promotion program. The concept recognized individual responsibility to enhance and maintain
wellness through a disciplined approach to physical and mental health. It requires attention to such
factors as smoking, weight, diet, alcohol use, and physical fitness. Organizations can benefit from
commitments to support personal wellness.
Summary
Stress is oneÊs response to a disturbing factor in the environment and the consequences of such
reaction. Response to stress varies between individuals. How an individual experiences stress depends
on perception, past experiences and social support the individual has. Stressors originate at the
individual, group, organizational, or extra organizational levels. Out comes of stress are very serious.
Individuals suffer from stress, so also the organization which has to pay in terms of absenteeism,
reduced productivity and claims of damages for affected employees. One serious consequence of
stress is burn out. Burnout results from prolonged exposure to stress. There are individual as well as
organizational strategies to cope with stress. Stress is negatively related to performance. Higher the
stress, lower the performance. The earlier belief that moderate level of stress enhances performance is
not held tenable now. Effective coping with stress and prevention of burnout require changing
dysfunctional modes coping to stress.

Questions
1. What is stress? What are its effects?
2. List out various coping strategies in managing with stress.
3. What are the burnout and glow- up phenomena? How can we prevent burn out?
4. Enumerate both functional and dysfunctional consequences of stress?

References:
1. Fred Luthans, Organizational behavior Mc Graw – Hill International Edition, 2005.
2. Udai Pareek, Understanding Organizational Behaviour Oxford University Press, 2004.
3. k. Aswathappa, Organizational Behavior Text cases games, Himalaya publishing Company,
2005.
4.Schermerhorn- Hunt- Osborn, Organizational Behavior, John Wiley & sons, Inc.,2001.

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 Chapter – 15

Conflict – Nature – Types – Resolving Conflicts.

Effective Negotiation Strategies.

Objectives: This chapter highlights the dimensions of conflict at the work place. After studying this
chapter, the student will be able to:
• Understand the nature and concept of conflict.
• Identify sources of conflict.
• Distinguish between functional and dysfunctional conflict.
• detail the processes and steps in negotiation as a mode of conflict management.
Key terms
• Appeasement
• Diffusion
• Arbitration
• Latent conflict
• Confrontation
• Withdrawal
Structure
• Introduction
• Nature and sources of conflict
• Types of conflict
• Process of conflict
• Levels of conflict
• Summary

1.0 Introduction
Conflicts are experienced every day by both individuals and groups. Conflict is the perception and/or
feeling by one party, individual, or group that the ÂotherÊ party is hindering the first party from
achieving a goal. Conflicts can be between two or more individuals (interpersonal), between teams or

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groups (inter group), or between organizations (inter organizational). In all these conflicts, the same
process is involved: one party wants to achieve a goal (the goal may be to get an idea accepted, to
complete a task, to have a close relationship, to serve a cause, or to control resources) and the ÂotherÊ
party is seen as hindering the first from achieving that goal.

In simple words, conflict may be understood as collision or disagreement. The conflict may be within
an individual when there is incompatibility between his or her own goals or events; may be between
two individuals, when one does not see eye to eye with another, and in the process tries to block or
frustrate the attempts of another; or between two groups in an organization. Chung and Megginson
define conflict as Âthe struggle between incompatible or opposing needs, wishes, ideas, interests, or
people. Conflict arises when individuals or groups encounter goals that both parties cannot obtain
satisfactorilyÊ.

Conflict occurs whenever disagreements exist in a social situation over issues of substance or
whenever emotional antagonisms create frictions between individuals or groups. Managers and team
leaders can spend considerable time dealing with conflict, including conflicts in which the manager or
leader is directly involved as one of the principal actors. In other situations, the manager or leader
may act as a mediator, or third party, whose job it is to resolve conflicts between other people. In all
cases, a manager and team leader must be comfortable with the interpersonal conflict. This includes
being able to recognize situations that have the potential for conflict and to deal with these situations
in ways that will best serve the needs of both the organization and the people involved.

1.1 Types of Conflict

Conflict as it is experienced in the daily workplace involves at least two basic forms. Substantive
conflict is a fundamental disagreement over ends or goals to be pursued and the means for their
accomplishment. A dispute with oneÊs boss over a plan of action to be followed, such as the
marketing strategy for a new product, is an example of substantive conflict. When people work
together day in and day out, it is only normal that different viewpoints on a variety of substantive
workplace issues will arise. At times people will disagree over such things as group and
organizational goals, the allocation of resources, the distribution of rewards, policies and procedure,

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and task assignments. Dealing with such conflicts successfully is an everyday challenge for most
managers.

By contrast, emotional conflict involves interpersonal difficulties that arise over feelings of anger,
mistrust, dislike, fear, resentment, and the like. This conflict is commonly known as a „clash or
personalities‰. Emotional conflicts can drain the energies of people and distract them from important
work priorities. They can emerge from a wide variety of settings and are common among co-workers
as well as in superior-subordinate relationships. The latter form of emotional conflict is perhaps the
most upsetting organization conflict for any person to experience. Unfortunately, competitive
pressures in todayÊs business environment and the resulting emphasis on downsizing and restructuring
have created more situations in which the decisions of a ÂtoughÊ boss can create emotional conflict.

1.2 Nature of Conflict

Conflict is inevitable. It is present whenever two individuals interact with each other. In one sense it
means that people while holding different opinions are also thinking and reflecting about an issue.
The difference in opinions signifies that people are thinking independently and creatively. Conflict
arises because people are unable to handle the different opinions are ideas in a constructive manner. If
for instance in a group all members accept each others opinions without discussion it only indicates
that they have not given much thought to it. The base for conflict is frustration. How this frustration
is tackled and expresses is an important aspect. It may take serious terms like – aggressive behaviors,
critical comments, violence, or withdrawal. However, some amount of tension, conflict in the form of
challenge is essential in an organizational functioning. This gives rise to diverse ideas, encourages
healthy competition and fosters creativity. The functional and dysfunctional nature of conflict is
summarized below:

• Conflict increases awareness of what problems exists, who is involved, and how to solve the
problem.
• Conflict motivates organizational members to consider problems. They are energized and
psychologically focused on the problems and motivated to put plans into action.
• Conflict promotes change. Persons are more aware of injustices, inefficiencies, and
frustrations, and the need to correct them.
• Conflict enhances morale and cohesion. Organizational members deal with and clear up their
frustrations and resentments. They conclude that their relationships are strong enough to

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 withstand stress and to handle difficulties. They also learn about each otherÊs needs, styles
and values through conflict.
• High quality decisions result when persons express their opposing views and perspectives.
They share their information and check each other are reasoning to develop new decisions.
• Conflict stimulates interest and creativity. Being in conflict often sparks curiosity and
stimulates viewing problems from several perspectives and combining the best of these
positions to form a creative solution. Conflict is exciting as peoples learn about what makes
them and others angry, frustrated and willing to fight.Ê
• Conflict adds to the forum of working with others when not taken seriously. Many people
find conflict enjoyable to competitive sports, games, movies, plays, books and eve teasing.
• Conflict provides a forum for all members of the organization to be self-critical, and to be
critical of the organization as a whole.

There is a close relationship between conflict and organizational performance. Organizational

performance is low when conflict is extremely high or extremely low, while moderate or optimum
level of conflict contributes to high organizational performance. When the level of conflict is low.
Performance suffers because of a lack of arousal and stimulation. Employees find the environment too
comfortable and they become complacent. When they are not challenged and confronted, they fail to
search of environmental changes. On the other hand, when the level of conflict is extremely high,
performance suffers because of inadequate coordination and cooperation. The organization is in a
state of chaos because of disruption and interference in critical activities. Individuals spend more time
defending themselves or attacking others than accomplishing productive work.

Maximum organizational performance occurs somewhere between these two extremes, where there is
an optimal level of conflict. In this situation, there is sufficient conflict to stimulate new ideas and
creative search for solutions to problems.

Process of Conflict

Most conflicts develop in stages. Managers should recognize that unresolved prior conflict help set
the stage for future conflicts of the same or related sort. Rather than try to deny the existence of

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conflict or settle on a temporary resolution, it is always best to deal with important conflicts so that
they are completely resolved. Conflict antecedents establish the conditions from which conflicts are
likely to develop. When the antecedent conditions become the basis for substantive or emotional
differences between people or groups, the stage of perceived conflict exists. Of course, this perception
may be held by only one of conflicting parties. It is important to distinguish between perceived and
felt conflict. When conflict is felt, it is experienced as tension that motivates the person to take action
to reduce feelings of discomfort. For conflict to be resolved, all parties should both perceive it and
feel the need to do something about it.

When conflict is expressed openly in behavior, it is said to be manifest. A state of manifest conflict
may be resolved by removing or correcting its antecedents. It can also be suppressed. With
suppression, no change in antecedent conditions occurs; the manifest conflict behaviors are controlled.
For example, one or both parties may choose to ignore the conflict in their dealings with one another.
Suppression is a superficial and often temporary form of conflict resolution. Indeed, we have already
noted that unresolved and suppressed conflict fall into this category. Both may continue to foster and
cause future conflicts over similar issues. For the short run, however, they may represent the best a
manager can achieve until antecedent conditions can be changed.

Unresolved substantive conflicts can result in sustained emotional discomfort and escalate into
dysfunctional emotional conflict between individuals. In contrast, truly resolved conflicts may
establish conditions that reduce the potential for future conflicts or make it easier to deal with them.
Thus, any manager should be sensitive to the influence of conflict aftermath on future conflict
episodes.

1.3 Levels of Conflict

There are levels of conflict in organizational situation:

1. Intra-individual conflict.
2. Inter-personal conflict.
3. Inter-group conflict
4. Organizational conflict.
Each of these levels of conflicts is being analyzed in the following sections.

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Intra-individual conflict: This refers to conflict within an individual. The source of this is basically
frustration, numerous roles and goals, which an individual is trying to achieve.

Conflict due to frustration: Frustration occurs when a motivated drive is blocked before a person
reaches a desire goal. At the first step, there is a deficiency in the form of a need felt by the
individual. This need prompts an individual to undertake such activities that would satisfy the need.
The direction in which the organism is moving signifies a state of drive. For example, need is felt in
the form of thirst. The search for places where water is found signifies drive. If water is found, the
goal is achieved. The individual feels satisfied that his goal is realized. But, when water is not found
in the usual places the individual experiences dissatisfaction and frustration.

Frustration occurs when a motivated drive is blocked. Frustration may take different forms and this is
explained with help of defense mechanisms. Aggression or violence is a common form of frustration.
In the above example the individual may show his anger on a subordinate or a watchman, or throw
things in a tantrum. In addition to aggression and violence, the withdrawal reaction to frustration may
be a major explanation for the motivational problems. This manifests as apathy or indifference on the
job. This is commonly found among the employees whose motives have been blocked by dead end
jobs, high degrees of specializations etc. Another related reaction to frustration is fixation. The
fixation reaction may used to explain irrational buaurcratic behavior. The rules become the ends in
themselves and the frustrated employee pathetically adapts to the barriers. Yet another reaction to
frustration can be that of compromise. Here an individual may accept the reality and try to seek
meaning and fulfillment outside the job.

Not all times the reactions to frustrations are like the above. The individual who is highly competent
may experience frustration, but handles it differently. It may result in improved performance. The
person may try harder to overcome the barrier or may over compensate etc.

What is clear is that defense mechanisms per se are not bad and they are all forms of adjustment. We
normally consider compromise as a healthy reaction. The learning for the individual is that barriers
can be overcome in a healthy manner and instead of experiencing frustration; a rational compromising
attitude is what is required.

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Goal conflict

Another common source of conflict for an individual is a goal that has both positive and negative
features, or two or more competing goals. Whereas in frustration motives are blocked before the goal
is reached, in goal conflict two or more motives block one another. For ease of analysis, three
separate types of goal conflict are generally identified.

1. Approach-approach conflict, where the individual is motivated to approach two or more

positive but mutually exclusive goals.
2. Approach-avoidance conflict, where the individual is motivated to approach a goal and at
the same time is motivated to avoid it. The single goal contains both positive and negative
characteristics for the individual.
3. Avoidance-avoidance conflict, where the individual is motivated to avoid two or more
negative but mutually exclusive goals.

To varying degrees, each of these forms of goal conflict exists in the modern organization.

Approach-Approach conflict: This type of goal conflict probably has the least impact on
organizational behavior. Although conflict may arise about making a choice between two positive
goals, such a situation is preferable to one that involves two negative goals or a goal with both
negative and positive characteristics.

Approach-Avoidance conflict: This type of goal conflict is most relevant to the analysis or
organization behavior. Organizational goals often have both positive and negative aspects for
organizational participants. Accordingly, the organizational goal may arouse a great deal of conflict
within a person and may actually cause the person to vacillate anxiously at the point where approach
equals avoidance.

Such conflict and its aftermath are very common among decision makers and people in responsible
positions in the fast-changing Ânew paradigmÊ organizations. This era of goal competition and
downsizing has been depicted as one that involves trying to manage in the midst of chaos. As noted in
a recent cover story of Fortune, „To the survivors, the revolution feels something like this: scary,

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guilty, painful, liberating, disorienting, exhilarating, empowering, frustrating, fulfilling, confusing, and
challenging‰. In other words, as these terms indicate, many managers in recent years have been
experiencing very mixed feelings, or approach-avoidance reactions.

Avoidance-Avoidance conflict: A person faced with two negative goals may not choose either of
them and may simply leave the situation. If this can be done, the conflict is quickly resolved. In some
situation, however, the person is unable to leave. This would be true of people in non-voluntary
organization, such as inmates in a prison, patients in a hospital, or members of the armed services. To
a lesser extent, personnel in modern organizations also find it difficult to leave – for example, workers
who detest their supervisor and have too much pride to be unemployed. Such workers cannot easily
resolve their avoidance-avoidance conflict in a time when jobs are very scarce. This set of
circumstances can lead to very dissatisfied workers who feel they have no escape.

Role Conflict

Role is defined as a position that has expectations resulting from established norms. All of us assume
a succession of roles continuously in our lives. At a given point of time a manager is also a boss, a
subordinate, a father, a husband, a son, a brother, president of football association, committee member
etc. Even though each one of them is independent, there are moments when interference occurs
between them. This results in frustration.

There are three major types of role conflict. One type is the conflict between the person and the role.
There may be conflict between the personÊs personality and the expectations of the role. For example,
a production worker and member of the union is appointed to head up a new production team. This
new team leader may not really believe in keeping close control over the workers, and it goes against
this individualÊs personality to be hard-nosed, but that is what the head of production expects. A
second type is intra role conflict created by contradictory expectations about how a given role should
be played. Should the new team leader be autocratic or democratic in dealing with the team members?
Finally, inter role conflict results from the differing requirements of two or more roles that must be
played at the same time. Work roles and non-work roles are often in such conflict.

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Inter-personal Conflict

This type of conflict commonly exists in the organizations.

Sources of Interpersonal Conflict

Managers who have conflict with subordinates, bosses, peers, or team members most often attribute
the cause to a personality problem or defect in the other party. Whetten and Cameron, however, go
beyond this surface explanation and propose that there are four sources of interpersonal conflict.
These can be summarized as follows:

• Personal differences. Everyone has a unique background because of his or her upbringing,
cultural and family traditions, and socializations processes. Because no one has the same
family background, education, and values, the differences can be a major source of conflict.
• Information deficiency. This source of conflict results from communication breakdown in the
organization. It may be that the two people in conflict are using different information or that
one or both have misinformation.
• Role incompatibility. This type of interpersonal conflict draws from both intra individual role
conflict and inters group conflict. Specifically, in todays inter functional organizations; many
managers have functions and tasks that are interdependent. However, the individual roles of
these managers may be incompatible.
• Environmental stress. The above types of conflict can be amplified by a stressful
environment. In environment characterized by scarce or shrinking resources, downsizing,
competitive pressures, or high degrees of uncertainty, conflict of all kinds will be more
probable.

Analyzing Interpersonal Conflict

The Johari Window a very popular descriptive framework for analyzing the dynamics of interpersonal
behavior has been the Johari Window, developed by Joseph Luft and Harry Ingham. In simple terms,
the self can be thought of as „me‰, and others can be thought of as „you‰ in a two-person interaction.
There are certain things that the person knows about himself or herself and certain things that are not
known. The same is true of others. There are certain things the person knows about the other and
certain things that are not known. The following summarizes the four cells in the Johari Window:

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 1. Open self: In this form of interaction the person knows about himself or herself and about the
other. There would generally be openness and compatibility and little reason to be defensive.
This type of interpersonal relationship would tend to lead to little, if any interpersonal conflict.
2. Hidden self: In this situation the person understands him or herself but does not know about
the other person. The result is that the person remains hidden from the other because of the
fear of how the other might react. The person may keep his or her true feelings or attitudes
secret, not opening up to the other. There is potential interpersonal conflict in this situation.
3. Blind self: In this situation the person knows about the other but not about himself or herself.
The person may be unintentionally irritating to the other. The other could tell the person but
may be fearful of hurting the personÊs feelings. As in the hidden self, there is potential
interpersonal conflict in this situation.
4. Undiscovered self: This is potentially the most explosive situation. The person does not
know about himself or herself and does not know about the other. In other words, there is
much misunderstanding, and interpersonal conflict is almost sure to result.
The Johari window not only points out possible interpersonal styles but also can be used to help
resolve possible interpersonal conflict situations. For example, one way of decreasing the hidden self
and increasing the open self is through the processes of self-disclosure. By becoming more trustful or
others and disclosing information about themselves, people may reduce the potential for conflict.

Intergroup Behavior and Conflict

Social psychologists have been concerned about inter group conflict for a number of years. Inter
group behavior is even specifically identified as follows: „Inter group behavior occurs whenever
individuals belonging to one group interact, collectively or individually, with another group or its
members in terms of their reference group identification.

Several antecedent conditions have been identified for explaining inter group conflict. These can be
summarized as follows:

• Competition for resources: Most organizations today have limited resources, Groups within
the organization vie for budget funds, space, supplies, personnel, and support services.
• Task interdependence: It two groups in the organization depend on one another in a mutual
way or even a one-way a one-way direction (as in a sequential technological process), there
tends to be more conflict than if groups are independent or one another. The more diverse the

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 objectives, priorities, and personnel of the interdependent group (for example, research and
production), the more conflict there tends to be.
• Jurisdictional ambiguity: This may involve „turf‰ problems or overlapping responsibilities.
For example, conflict might occur when one group attempts to assume more control or take
credit for desirable activities, or give up its part and any responsibility for undesirable
activities.
• Status struggles: This conflict occurs when one group attempts to improve its status and
another group views this as a threat to its place in the status hierarchy. One group may also
feel it is being inequitably treated in comparison with another group of equal status in terms of
rewards, job assignments, working conditions, privileges, or status symbols. Human resources
departments justifiably often feel they are treated inequitably in relation to marketing, finance
and operations departments.

Organizational Conflict

Conflict in organizations may take different forms and some times structure may be a cause per such
types of conflict.

• Hierarchical conflict: There may be conflict between the various levels of the organization.
The board of directors may be in conflict with top management, middle management may be
in conflict with supervisory personnel, or there may be general conflict between management
and the workers.
• Functional conflict: There may be conflict between various functional departments of the
organization. Conflict between the production and marketing departments is a classic
example.
• Line-staff conflict: There may be conflict between line and staff. It often results from
situations in which staff personnel do not formally possess authority over line personnel.
• Formal-informal conflict: There may be conflict between the formal and informal
organizations. For example, the informal organizationÊs norms for performance may be
incompatible with the formal organizationÊs norms for performance.

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2.0 Negotiation

Negotiation is the process of making joint decisions when the parties involved have different
preferences.

In negotiation two important goals must be considered: Substance and relationship goals. Substance
goals deal with outcomes that relate to the „content‰ issues under negotiation. The amount of a wage
agreement in a collective bargaining situation is one example. Relationship goals deal with outcomes
that relate two how well people involved in the negotiation and any constituencies they may represent
are able to work with one another once the process is concluded. An example is the ability of union
members and management representatives to work together effectively after a contract dispute has
been settled.

Effective negotiation occurs when substance issues are resolved and working relationships are
maintained or even improved. It results in overlapping interests and joint decisions that are „for the
better‰ of all parties.

Criteria of An Effective Negotiation

• Quality – The negotiation results offer a „quality‰ agreement that is wise and satisfactory to
all sides.
• Harmony – The negotiation is „harmonious‰ and fasters rather than inhibits good interpersonal
relations.
• Efficiency – The negotiation is „efficient‰ and no more time consuming or costly than
absolutely necessary.

Distributive negotiation focuses on positions staked out or declared by the parties involved who
are each trying to claim certain portions of the available pie.

Integrative negotiation focuses on the merits of the issues, and the parties involved try to enlarge
the available pie rather than stake claims to certain portions of it.

Distributive Negotiation

In distributive bargaining approaches, the participants would each ask the question: „Who is going
to get this resource?‰ This question, and the way in which it frames subsequent behavior, will
have a major impact on the negotiation process and outcomes. A case of distributive negotiation

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usually unfolds in one of two directions, neither of which yields optimal results. „Hard‰
distributive negotiation takes place when each party holds out to get its own way. This leads to
competition, whereby each party seeks dominance over the other and tries to maximize self-
interests. The hard approach may lead to a win-lose outcome in which one party dominates and
gains. Or it can lead to an impasse.

„Soft‰ distributive negotiation, by contrast, takes place when one party is willing to make
concessions to the other to get things over with. In this case, one party tries to find ways to meet
the otherÊs desires. A soft approach leads to accommodation in which one party gives in to the
other.

Integrative Negotiation

In the integrative approach to negotiation, participants would ask: „How can the resource best be
utilized?‰ It is much less confrontational, and it permits a broader range of alternatives to be
considered in the process. From the outset there is much more of a „win-win‰ orientation. At one
extreme, integrative negotiation may involve selective avoidance, in which both parties realize
that there are more important things on which to focus their time and attention. The time, energy,
and effort needed to negotiate may not be worth the rewards. Compromise can also play a role in
the integrative approach, but it must have an enduring basis. This is most likely to occur when the
compromise involves each party giving up something of perceived lesser personal value to gain
something of greater value.

The foundations for gaining truly integrative agreements rest in supportive attitudes, constructive
behaviors, and good information.

Additional Foundations: There are three attitudinal foundations of integrative agreements. First,
each party must approach the negotiation with a willingness to trust the other party. Second, each
party must convey a willingness to share information with the other party. Without shared
information, effective problem solving is unlikely to occur. Third, each party must show a

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 willingness to ask concrete questions of the other party. This further facilitates information
sharing.

Behavioral Foundations

• The ability to separate the people from the problem to avoid allowing emotional
considerations to affect the negotiation
• The ability to focus on interests rather than positions
• The ability to avoid making premature judgments
• The ability to keep the acts of alternative creation separate from their evaluation
• The ability to judge agreements on an objective set of criteria or standards

Information Foundations: The information foundations of integrative agreements are substantial. They
involve each party becoming familiar with the BATNA, or „best alternative to a negotiated agreement.

Third-Party Roles in Negotiation

Negotiation may sometimes be accomplished through the intervention of third parties, such as when
stalemates occur and matters appear un resolvable under current circumstances. In arbitration, such as
the salary arbitration now common in professional sports, this third party acts as the „judge‰ and has
the power to issue a decision that is binding on all parties. This ruling takes place after the arbitrator
listens to the positions advanced by the parties involved in a dispute. In mediation a neutral third party
tries to engage the parties in a negotiated solution through persuasion and rational argument. This a
common approach in labor-management negotiations, where trained mediators acceptable to each side
are called in to help resolve bargaining impasses. Unlike arbitrator, the mediator is not able to dictate
a solution.

Conflict resolution strategies

Resolution of intra-individual conflict

Conflict at an individual level is usually resolved by adapting to any of the defense mechanisms.
These mechanisms help an individual to adapt to the situation in a constructive manner. However,

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resorting to certain mechanisms like - anger, withdrawal, or aggression might lead to unhealthy
consequences.

Resolving Inter-personal and Inter-Group Conflict

Consultants and academics generally agree that true conflict resolution can occur only when the
underlying substantive and emotional reasons for the conflict are identified and dealt with through a
solution that allows all conflicting parties to ÂwinÊ.

Lose-lose conflict: Lose-lose conflict occurs when nobody really gets what he or she wants. The
underlying reasons for the conflict remain unaffected and a similar conflict is likely to occur in the
future. Lose-lose conflicts often result when there is little or no assertiveness and conflict
management takes these forms. Avoidance is an extreme from of intention; everyone simply pretends
that the conflict does not really exist and hopes that it will go away. Accommodation or smoothing as
it is sometimes called, involves playing down differences among the conflicting parties and
highlighting similarities and areas of agreement. This peaceful coexistence ignores the real essence of
a given conflict and often creates frustration and resentment. Compromise occurs when each party
gives up something of value to the other. As a result of no one getting its full desires, the antecedent
conditions for future conflicts are established.

Win-lose Conflict

In win-lose conflict, one party achieves its desires at the expense and to the exclusion of the other
partyÊs desires. This is high-assertiveness and low-cooperativeness situation. It may result from
outright competition in which a victory is achieved through force, superior skill, or domination by one
party. It may also occur as a result of authoritative command, whereby a formal authority simply
dictates a solution and specifies what is gained and what is lost by whom. Win-lose strategies fail to
address the root causes of the conflict and tend to suppress the desires of at least one of the conflicting
parties. As a result, future conflicts over the same issues are likely to occur.

Win-win Conflict: Win-win conflict is achieved by a blend of both high cooperativeness and high
assertiveness. Collaboration or problem solving in valves a recognition by all conflicting parties that
something is wrong and needs attention. It stresses gathering and evaluating information in solving
disputes and making choices. Win-win conditions eliminate the reasons for continuing or resurrecting
the conflict since nothing has been avoided or suppressed. All relevant issues are raised and openly

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discussed. The ultimate test for a win-win solution is whether or not the conflicting parties see that the
solution (1) achieves each otherÊs goals, (2) is acceptable to both parties, and (3) establishes a process
whereby all parties involved see a responsibility to be open and honest about facts and feelings. When
success is achieved, true conflict resolution has occurred.

Although collaboration and problem solving are generally favored, one limitation is the time and
energy it requires. It is also important to realize that both parties to the conflict need to be assertive
and cooperative in order to develop a win-win joint solution. Finally, collaboration and problem
solving may not be feasible if the firmÊs dominant culture does not place a value on cooperation.

Certain unique approaches are available for resolving inter-group conflict. They are: problem
solving, expansion of resources, avoidance, smoothen, compromise and reorganizing organization
structure.

Problem solving: Problem solving is considered to be the most effective approach available as it
emphasizes the attainment of the common interests of both conflicting parties. In the problem solving
strategy, attempts are made to find a solution that reconciles or ÂintegratesÊ the needs of both the
parties. The two parties work together both to define the problem and to identify mutually satisfactory
solutions. Moreover, there is open expression of feelings as well as exchange of task-related
information.

Organization redesign: Changing organizational structure is another approach for resolving conflict,
particularly when the sources of conflict come from the coordination of work among different
departments or divisions. One way of redesigning organizations is to reduce task inter-dependence
between groups and give each group clear responsibilities. Another way is to transfer or exchange
members of conflicting groups. An appeal system may also be developed to eliminate the arbitrary
use of power.

Super-ordinate goals: Appealing to super-ordinate goals are another way of resolving conflict. The
super-ordinate goal is a common goal of both conflicting parties and the combined efforts of both
parties will be needed to realize the goal. It takes precedence over other goals, which may separate the
conflicting parties. Survival of the organization for example, can be a super-ordinate goal. Creating

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an awareness that the organizationÊs survival will be jeopardized if conflicting groups do not work in
unison can have a salutary effect on disputing parties.

Expansion of resources: To the extent that scarce resources cause conflict, removing their scarcity
will help resolve conflict. It up gradation of oneÊs position has caused ripples elsewhere, some more
jobs might be similarly upgraded. If increased budget allocation to one department has caused
heartburn to the members of rival department, the rival divisionÊs allocation can also be
correspondingly increased, and so on.

Avoidance: When the issue is trivial, avoidance strategy will be useful. In the avoidance strategy, the
party or parties to the conflict may either withdraw from the conflict or conceal the incompatibility. In
the first instance, one of the conflicting parties or both will withdraw from the conflicting situation.
Where avoidance is not possible, concealing the fact by either or both conflicting parties that there is
conflict may help defuse the conflict.

Smoothen: the process of playing down the differences between individuals or groups and
highlighting their common interests is called smoothening. Finding and emphasizing similarities
between conflicting parties, while playing down differences, can eventually lead the parties to realize
that the two are not as far apart as was first believed. With shared viewpoints on some issue, the
ability to work towards a smoothen can help reduce the intensity of the conflict and avoid an
escalation of open hostility. However, smoothen is recommended as a stopgap measure to let people
cool down and regain perspective.

Resolving line and staff conflict: The following remedies have been suggested to resolve line and
staff conflict.

a) The roles, responsibilities, and functions of line and staff officers need to be clearly defined
and made known to the people concerned.
b) Staff people shall know that their role is advisory. They are to be content with tendering
advice on important issues. Line managers need also respect the staff advice and use it for the
benefit of the organization.
c) Increase possibilities of interaction between the line and staff officers.
d) The staff officers are to avoid playing the expert.

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 e) The fear complex from which line managers suffer owing to proximity of staff specialists and
their intimacy with the top management needs to remove.
f) Both parties are to have the right of appeal to the chief executive.

Conflict management styles

There are five conflict managementÊs styles, there are, i) competition, ii) collaboration, iii)
compromise, iv) avoidance, and v) accommodation.

To conclude some of the new assumptions about conflict are the following:

1. Conflict is inevitable
2. Conflict is determined by structural factors such as the physical shape of a building, the design
of a career structure, or the nature of a class system.
3. Conflict is integral to the nature of change.
4. A minimal level of conflict is optimal.
Using such assumptions as a starting point, most experts today emphasize the importance of making a
cost-benefit analysis of the conflict situation at any level and then setting up dispute systems. Also,
experts urge an expanded view of conflict in organizations. For example, it is suggested that conflict
be viewed as a cognitive bargaining process that should focus on negotiation as a way to manage and
resolve conflict. These negotiation skills have recently emerged as an important area of study and
application in the field of organizational behavior.
Summary
Conflicts are a part of life. In fact some conflicts are useful, contributing to growth and development.
Conflicts occur when the concerns are narrow, different goals are seen as conflicting, resources and
power are perceived as limited, differences in values and norms are regarded as undesirable, and some
individuals or groups are dependent on others. Conflicts can be prevented through the participatory
mode of management. There are eight styles of conflict management under two broad categories.
Negotiation is the most functional mode. Several steps involved in negotiation are discussed.

Questions
1. Can conflicts be functional or useful? Give an example.
2. What are the sources of conflict and how do these operate under the conflict – escalation and
conflict resolution modes?

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3. What are some of the major sources of interpersonal conflict? Which do you think is most relevant
in todayÊs organization?
4. Describe the approach and avoidance modes of conflict management?
5. What are the various steps in the process of negotiation?

References:

1. Fred Luthans, Organizational behavior, 386-403, Mc Graw – Hill International Edition, 2005.
2. Udai Pareek, Understanding Organizational Behaviour, 340-353, Oxford University Press,
2004.
3. K. Aswathappa, Organisational Behaviour Text cases games, 392-426, Himalaya publishing
Company, 2005.
4.Schermerhorn- Hunt- Osborn, Organizational Behavior, 373-390, John Wiley & sons, Inc.,2001.

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