HERIOT-WATT UNIVERSITY

ORGANISATIONAL BEHAVIOUR – DECEMBER 2015

Section I

Case Study

World’s Most Admired Companies (WMACs)

The global management consultancy firm the Hay Group, along with the Fortune Group,
produced a report on the results of the World’s Most Admired Companies (WMACs).
The following is an extract from that report. Being on the WMAC list means more than
just peer recognition – shareholders of the top 50 WMACs have enjoyed returns that
outperformed the S&P 500 by over five times. Some companies are seen as consistent
leaders, including Toyota, Johnson & Johnson, Berkshire Hathaway, Procter & Gamble
and GE.

The annual study asks respondents to rate companies against nine performance
dimensions:
• Innovation
• Quality of management
• Long-term investment value
• Social responsibility to the community and environment
• Ability to attract, develop and retain talented people
• Quality of products and services
• Financial soundness
• Wise use of corporate assets
• Effectiveness in doing business globally

WMACs recognise that their employees are the key drivers of their success and they go to
great lengths to create the right conditions for people to thrive. They recognise the value
of the ‘intangible asset’ their workforce presents. Eighty per cent of WMACs regularly
review human capital metrics such as employee turnover, employee engagement,
recruitment, and job offer acceptance rates. And while WMACs evaluate their CEOs on
financial and strategic success similarly to their peers, they are 23 per cent more likely also
to evaluate CEOs on success in developing human capital.

WMACs are more likely to have developed explicit employee brands to attract and retain
key talent. Employee engagement in WMACs is viewed as a line management
responsibility and greater clarity and accountability on employee engagement is seen to
lead to greater effectiveness and impact. WMACs also do more to communicate
employee engagement levels externally to investors, prospective hires, and
current/prospective customers. Keeping people engaged is partly to do with
empowerment but it also has to do with personal advancement and growth. Planned
career assignments and one-to-one coaching, for example, are used more widely in
WMACs and inspire motivation, especially during periods of economic uncertainty.

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WMACs understand that for employees, motivation alone is not enough: people must
also feel empowered to ‘get the job done’. Motivation is channelled into results by:
• working smarter, simplifying work processes and encouraging team working;
• creating systems and processes, such as effective rewards, that encourage
employees to become part of the solution;
• prioritising work/life balance issues to sustain performance and avoid burnout;
• ensuring that employees’ skills remain aligned with changing work demands.

WMACs consistently work hard to ensure that the right talent is in place by having
rigorous selection procedures for evaluating new hires, by having a strong emphasis on
individual growth and development opportunities, and by having a close linkage between
performance and pay. The focus of WMACs on attracting and developing people means
that they can attract the best while avoiding overpaying for top talent. WMACs place a
great deal of emphasis on looking after their workforces, carefully integrating new hires
and then keeping their skills sharp once they are on board. They have an eye to long-term
people trends, and will tweak their employee value propositions to reflect the different
needs of different groups: millennials, Generation X, baby boomers and veterans, and
people at different stages of life.

WMACs place a premium on the importance of leadership and do a better job than their
peers in selecting and developing leaders. Their leaders take a ‘hands on’ approach to
developing talent, devoting as much as 30 per cent of their time to this task. The six
standout themes on leadership are that WMACs:
• place more value on leadership development;
• use competency frameworks and developmental programmes more frequently
when choosing and promoting leaders;
• are less tolerant of inappropriate behaviours to ‘meet the numbers’;
• have leaders who demonstrate better emotional intelligence;
• equip their leaders better;
• are significantly more satisfied with the quality and breadth of senior leadership.

WMACs also keep a focus on their leadership pipeline. Over 90 per cent of WMACs
have well-defined succession plans. Having greater ‘bench strength’ internally maintains
continuity and provides WMACs with greater ability to avoid having to opt for costly
external hires.

WMACs recognise that reward is essential to attracting and retaining staff at all levels and
is an essential tool for driving performance, particularly in tough economic conditions.
WMACs employ several particular reward practices to ensure success:
• They ensure that reward is aligned to strategy and culture.
• They promote a total reward approach that makes best use of intangible
components such as flexible working.
• They communicate reward strategies and their rationale.
• They link reward tightly to performance.

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Required:

Analyse the above case study.

i) Identify the key OB theories that are addressed.

(20 marks)

Selected Student Answer

The key OB theories and concepts that can be identified in this case include:

1. Employee motivation
2. Job satisfaction
3. Organisational commitment
4. Job design
5. Organisational design
6. Leadership and emotional intelligence
7. Politics in organisation
8. Culture and change

Let us start this section off by defining motivation. Work motivation is persistent,
positive effort directed at completing a task (or a goal) in a timely and effective
manner.

There are two types of motivation theories: content theories and process theories.
A content theory of motivation specifies personality factors and human needs
which trigger work-related effort, so it answers the question: ‘What specific needs
cause motivation?’ A process theory of motivation explains how behaviour is
stimulated, directed, sustained or stopped. Process theories introduce the
importance of human perceptions of environments in explaining motivation.
These theories show how human beings judge the importance or value of
incentives. Both types of motivation theory are helpful to manager’s levels of
motivation.

The first content theory of motivation is Maslow’s Hierarchy of Needs.

Abraham Maslow believed that motivation could be explained by organising

human needs into five levels. Maslow constructed his hierarchy to explain human
behaviour generally but it was quickly applied to human behaviour in
organisational settings.

Maslow’s hierarchy of needs is as follows.

5. Self–actualisation – the need to reach one’s fullest potential. For an

organizational example, an engineer uses all of her design skills to create a new
component. She feels she is succeeding in her chosen profession.

4. Esteem – the need to feel good about oneself and be respected and approved
by others. Example: well-deserved promotion.
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3. Belongingness – the need for social interaction, friendship and love.
Examples: having good relations with fellow workers and supervisors, being a
member of a cohesive work team and taking part in social functions at work

2. Safety – the need for security, stability and a safe work environment. Examples:
Having good job benefits, safe working area and job security

1. Physiological – Food, water, shelter and clothing to ensure survival. Examples:

Guaranteed minimum pay level that is sufficient to provide basic necessities

Maslow argued that these needs are ordered by their ‘prepotency’ that is, if no
needs are satisfied then the bottom level of the hierarchy dominates. For example,
refugees in war-torn lands pursue the needs shown in levels 1 & 2 of the hierarchy
not those on levels 3-5. The unsatisfied need is always the motivator. Once it is
satisfied it no longer motivates and the next level becomes the motivator.
However the highest level need, self-actualisation never becomes fully satisfied
and so this level, once attained, always remains a motivator. While Maslow’s
hierarchy is widely known and discussed there is little empirical data to support it
in the workplace. However the theory provides a good general explanation for
human behaviour, and managers usually find it intuitively appealing.

The second content theory is Herzberg’s two-factor theory, or the motivator-

hygiene theory. In a study of engineers and accountants, Herzberg identified
‘hygiene factors’ which were associated with external aspects of work (‘job
context’) and ‘motivators’ which were intrinsic to the job itself (‘job content’). The
hygiene factors included company policy and its administration, working
conditions, supervision, peer –relations, and, somewhat controversially, pay.
Motivators included challenge, achievement, responsibility and work
meaningfulness. Hertzberg’s theory can be summarised by saying that hygiene
factors alone cannot provide motivation but their absence will demotivate. For
employees to be motivated, both hygiene (external) factors and motivators
(intrinsic) must be present.

McClelland’s theory of socially acquired needs is not strictly a motivation theory

but it is relevant in this discussion since it explains how, depending on a persons
need for achievement (nAch), need for affiliation (nAff) or need for power
(nPow), one individual may be will be motivated differently compared to another.
This theory and the evidence that the organisation utilises this theory is at the end
of paragraph 6.

There are two important process theories of motivation, Adam’s Equity Theory
and Expectancy theory.

Equity theory explains how employees react to their own incentives and outcomes
in relation to their colleagues. Employees compare their ratio of rewards to effort
to that of their peers. If employees feel that their rewards are inadequate, they
experience a state of imbalance or perceived inequity. This perceived inequity
motivates the employee to take action

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To restore a state of equity, an employee might:

1. Change work inputs and reduce performance efforts (to eliminate negative
inequity).
2. Change the outcomes received (ask for more responsibility to reduce positive
inequity).
3. Exit the circumstances (i.e. leave a job or request a transfer).
4. Change the people who are used for comparison.
5. Mentally distort or alter the comparison (rationalise that the inequity is only
temporary and will be resolved in the future).
6. Take a decision to alter the inputs or outcomes of the comparison other, e.g.
(get his or her co-worker to work less hard).

Expectancy theory is the next motivation theory we will look at.

This model basically shows how aspects of job design affect our physical state and
how it leads to outcomes. The growth need strength of an employee will
determine how job content factors lead to outcomes or rewards. We see job
design factors in paragraph 5 as it points to methods of changing job design like:

1. Horizontal loading via cross training

2. Vertical loading via job enrichment and empowerment (giving employees
authority and responsibility for outcomes)

This ties right into organisational design which is a series of executive decisions
that tries to select the best organisational arrangements for the attainment of
company goals. It includes: 1) span of control (how many employees a manager is
responsible for, 2) departmentalisation (how related activities are grouped into
units that are distinct from others), 3) delegation of authority (managers decision
to give employees more responsibility and decision making), and division of
labour (the degree to which tasks are specialised or has more variety). In this case
we see aspects of division of labour in paragraph 5 we also see delegation of
authority in this paragraph. We also see in this case that WMAC organisations are
moving away from mechanistic designs to more organic designs.

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Leadership Theories

There are three main approaches to leadership in organisations: the trait approach;
the behavioural approach; and the situational approach.

The trait approach. The earliest studies of leadership focused on the psychological
and personal characteristics that distinguished leaders from followers and
identified traits such as:

1. Logical thinking traits – being able to break down things into simple forms,
being able to persuade others
2. Persistence traits – working long hours and succeeding in spite of formidable
odds
3. Self-control traits – working under intense pressure and maintaining
composure
4. Empowerment traits – being able to make others believe they can succeed.

However the trait approach neglected the importance of both organisational

context and the fact that leadership occurs within a set of inter-personal
relationships.

The behavioural approach found two fundamental leader behaviours: ‘initiating

structure’ and ‘consideration’. ‘Initiating structure’ refers to leader behaviours
which stress: 1) work procedures; 2) planning and assigning tasks; 3) clarifying
work roles; 4) supervising subordinates; and 5) asking for results. ‘Consideration’
refers to leader behaviours that show: 1) approachability, 2) supportiveness, 3)
maintaining of morale in the work group, 4) concern for group welfare and 5)
maintaining a collaborative work atmosphere.

The Situational Leadership approach combines aspects of the leader’s personality,

his or her behaviour and the situation he or she confronts. Two examples are
Fiedler’s contingency theory and House’s Path-Goal (PG) theory.

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 Fiedler thought that some situations are more or less favourable to leadership and
they require different leader behaviours: the task-oriented leader is most effective
when the situation is highly favourable or highly unfavourable. Fiedler also
developed an instrument, the Least Preferred Co-Worker (LPC) questionnaire, to
establish whether an individual was predominantly task orientated (exhibited
‘initiating structure’ behaviour) or relationship oriented (exhibited ‘consideration’
behaviour)

In the Path–Goal theory (PG theory) the manager chooses the best leader
behaviour for the situation at hand. PG theory assumes that the leader’s main job
is to clarify the path from subordinates’ effort and performance to the rewards
that they value.

In the case we also see politics which is the use of power to get unapproved
outcomes or to use unapproved decisions. In paragraph 7 we see that this is not
tolerated in WMAC firms.

We also see socialisation in paragraph 6 which is the process used to pass

organisational culture from one generation to another.

ii) Discuss their application within the case study.

(20 marks)

Selected Student Answer

Let us start with employee motivation from the 3rd paragraph of the case we
started seeing employee motivation. WMAC firms recognised that employees are
the heart of their success and so they put the necessary motivational facets in
place to ensure that employees have the impetus to succeed. They create a clear
line of sight as in expectancy theory by ensuring that employees know the
relationship between performance and pay (paragraph 6) they also have effective
rewards as stated in paragraph 4.

As far as McClelland’s needs go, paragraph 6 clearly states that management

change their styles depending on the needs of the employees.

For example, Generation X and baby boomers may have a high need for
affiliation and so these firms may emphasise team structure for such individuals.
These individuals may prefer job designs that are highly specialised as so they may
be put in such positions. The millennials on the other hand may have high need of
achievement or even power and so the cross training and job enrichment part of
job design may be more appealing to them. Baby boomers and Generation X may
thrive under mechanistic designs whereas millennials may prefer organic designs.

Now we discussed motivation and how different employees’ needs may cause
them to respond to job design and organisational design.

Now let us discuss job satisfaction and communication. In paragraph 3 of the case
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 WMAC emphasises the importance of employees in achieving success. By
recognising this WMAC is already taking the first step in ensuring that employees
are satisfied. Satisfied employees result in lower turnover. In an attempt to satisfy
employees WMAC firms place a lot of emphasis on employee development and
growth. In the model we highlight with the relationship between performance and
job satisfaction this focus on employee development and growth can be
considered internal motivation or intrinsic motivation (these come from the job
itself), by empowering employees and encouraging participation, they also help
with intrinsic motivation all lead to more satisfied employees. The emphasis
placed on retaining key talent and developing them and prioritising work life
balance (paragraphs 4 and 5), this can lead to increased organisational
commitment and reduced stress.

Now we can discuss leadership. The last three paragraphs focus on leadership and
development of leaders. A good leader according to Path goal theory knows
which behaviour to choose depending on the situation. From the case we see that
the WMAC firms look for this in leaders and use it a criteria for promotion. They
can also use the LPC test to figure out the type of leader behaviours preferred by
leaders and help them develop the other areas accordingly.

iii) Reinforce your analysis with examples from your own experience.
(10 marks)

Selected Student Answer

In my organisation job satisfaction is at an all-time low. Our organisation does not

pay particular importance to developing employees. Little growth is made possible
in the organisation and in over 10 years, no money has been spent to develop
talent. Motivation is also low despite several rewards and recognition programmes.
This is because employees do not see a clear line of sight between performance
and rewards and also because the rewards are not valent to the employees.
Organisational commitment is also low as result.

As far as leadership goes, the organisation focuses on managerial tasks rather than
leadership traits. While some managers may possess the leadership traits
highlighted before no real value is placed on that and as such employees have little
confidence or faith in management. Managers have little to no referent power in
our organisation. For my organisation the structure is quite mechanistic and few
failed attempts have been made to change to organic structure and as such
employees have little decision making, low delegation of authority and the
decision making process is slow and forced on employees.

If this organisation plans to regain its competitive advantage strides must be taken
similar to the WMAC firms to place employees at the centre of its strategy and
build effective leaders to move the plan forward. They can use the leadership traits
to start identifying potential leaders. They can also use the LPC test to figure out
how our managers think and then help guide to become better leaders.

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 Section II
Essay Questions

Question 1

Following the failure of a team that has now been disbanded because it failed to
deliver robust outcomes, you are a newly appointed manager in a large
multinational company and have been given the task of creating a new team to
deliver a key piece of the organisational strategy. You have been given a free
choice in selection of team members and how they should be managed. What are
the elements of OB that will help you create an effective team?
(Total 25 marks)

Selected Student Answer

Let us start this discourse by defining a team. A team is a group of individuals put
together for the accomplishment of a goal. Let us now discuss team composition and
team cohesion. Team composition is the degree to which members in a group are similar
(homogeneous groups) or different (heterogeneous groups). Research has shown that
heterogeneous groups are more effective than homogenous groups due to differences in
personalities which lead to more ideas and thus more problem solving. The next group
dynamic is cohesion. Group cohesion deals with employees’ resistance to leaving the
group, how much individuals identify with the group.

The first thing that I will recommend that the leader does is identify individuals who want
to be in a team. The second thing that I will do is use the Belbin’s team roles
questionnaire to identify the roles that potential members fit into (resource coordinator,
complete finisher, implementer, etc.). Based on the different roles that are identified, I
will select my members in such a way that balances out the portfolio of the team. Once
the team is selected, it is important to help the team go through the development process
as quickly as possible.

To do this, in the forming stage of the development the Belbin test will help. The team
will then introduce and describe themselves using the Belbin team roles description. At
this stage I will also use other personality assessment tools like the DISC to assess the
personalities of members. In the storming stage of the process, which usually involves
conflict, it will be crucial that as a manager we establish decision making practices. We
will discuss the three choices available.

1. Brainstorming – This involves idea generation, evaluation and selection. In

brainstorming I will stress the importance of keeping idea generation separate from
evaluation.
2. Nominal group technique – where members are asked to generate ideas based on the
problem. Each member is then asked to call out one of their ideas. Any questions
about the idea are asked then and then a vote is taken on the ideas generated and then
a consensus is reached.
3. The last method will be less applicable here but it is the Delphi technique. Group
never meets. Ideas are sent in and evaluated and voted on until a consensus is met.

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Together the team will select a method for decision making. At this point we would have
started the norming stage. During the norming stage, employees develop norms for the
group, i.e. decision making, performance and conflict resolution. As the manager I will
facilitate the process. At this point I will appoint someone external to the team as a
linking pin to ensure that groupthink is minimised. Groupthink is a process where all
members start making decisions without contesting.

At this point I will also set objectives for the team using MBO – this process allows team
and team leader to work together to set goals and methods. I will also recommend
informal reviews every three months and formal reviews every six months.

Performing – at this point the group has settled in and are performing as expected. From
the MBO process in stage 3 a clear line of sight should have been established using the
expectancy theory which basically tells the employees what rewards they will receive if
they perform satisfactorily.

During this entire process employees were involved which suggests that as a manager I
would have been using a GII decision making style according to this Vroom-Yetton Jago
model, i.e. a manager explains the problem to his subordinates in a group format and
with the manager, the group makes a final decision. Depending on the situation AI, AII
(which does not tell the employees what the problem is and just makes a decision) may
be used or even CI and CII (which informs the employees about the situation but makes
the decision not necessarily based on their opinions).

A relevant compensation system must be used for the team. I will select a Scanlon plan
for this team to motivate the team to improve productivity.

At my organisation none of this happened and as such the team set up still has not
reached the performing stage.

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Question 2

Following a merger with a larger company in your field, it is necessary to review

the organisational design of the merged entity to reduce duplication, mainly in
support areas like H R and Finance. The Board also wants to take the opportunity
to downsize and de-layer the organisation and to make it more responsive to
customer demands. What key OB concepts will be useful in managing this
process?
(Total 25 marks)

Selected Student Answer

For this case we can discuss organisational design and cover the four components of (1)
division of labour, (2) delegation of authority, (3) departmentalisation, and (4) span of
control.

Organisational design covers division of labour which is the degree of specialisation or

lack thereof employees partake in. Delegation of authority refers to the level of authority
employees have in decision making and problem solving. Departmentalisation has to do
with how related activities are grouped in units that are distinct from other units. Span of
control has to do with how many people a manager is responsible for. In making the firm
more responsive to customer demands the firm is taking a service driven approach. We
need to consider change.

In the first paragraph we discussed some key OB concepts and theories to be further
discussed and applied to this case. Let us start by expanding departmentalisation. Since
the company is trying to delayer the organisation they may be considering moving from
the traditional hierarchical, decentralised system like the functional design to be a more
decentralised, organic empowerment based structure, i.e. system 1 to system 4. To do this
the firm may want to consider the use of self-directed teams (self-directed teams are
empowered to make decisions and solve problems). They also help the firm lose a
management layer which seems to be the objective. By doing this the firm will increase
the span of control of managers that remains. In using SDTs the firm is naturally going
from high specialisation to low specialisation and low delegation of authority to high
delegation of authority.

In the firms attempt to go to a more service driven organisation, they may want to
consider some of the building blocks of service quality.

• Don’t focus on making money, focus on delighting customers.

• Believe in the business of delighting customers
• Operationalise the process of delighting customers.

For example, Apple set up the APPLE approach:

A Approach customers with a warm welcome

P Probe politely to determine customer needs
P Present customers with option to take home to try

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 L Listen and take care of any questions or concerns
E End with a formal farewell and invitation to return.

• Focus on details
• Recruit and train the correct people.

The organisation must also understand the principles of service quality.

Principle 1: Service mix should be identified on a range from standardised (generic

solutions for generic problems) to balanced (generic/custom solutions to generic of
customised problems) to customised solution for unique problem/need of customer.

At my organisation our solutions are standards.

Principle 2: To provide quality service external process controls must be abandoned.

Principle 3: Frontline employees should be empowered to customise solutions for clients.

Principle 4: The firm must also consider the steps in creating a service driven firm.

Step 1: Do an audit. This audit will give insights into the current service provided.

Step 2: Implement an organisation-wide service driven strategy – this should start from
the top with a change in mission/vision and should apply to all SBUs and departments.

Step 3: Conduct wall to wall training. All employees should be trained.

Step 4: Implement the service improvement strategies. The action identified should be
implemented.

Step 5: Make the service improvement strategy permanent. Ensure the objectives are set
for employees based on these objectives and PA should be based of service metrics.

With all the changes discussed it will be necessary to go through the planned change
process.

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Dailey’s planned change model.

Need recognition – the need for change may be recognised in different ways but the
most common is when the current business model no longer meets the objectives.

Diagnosis – this process involves the organisation and a change agent who analyses the
situation, determines the problem, determines the root cause and plans to implement the
changes needed. This process should be deliberate, objective and problem focussed.

Resistance – usually occurs when employees feel as though the cost of change outweighs
the benefits.
• Causes: economic uncertainty, loss of personal power, knowledge obsolescence, etc.
• Countermeasures: involve employees in the process and turn powerful resisters into
advocates.
At my organisation this was not done when we implemented a new way of working as
such even to this day we still have resisters.

Carry-over – usually training for change occurs offsite so it is important to bring

knowledge back.
Successful carry-overs
1. Learning from change can be immediately applied in work environment
2. It is applicable to change environment
3. Has support in change environment
To help with this team are set up to monitor the change and close gaps in change
environment and work environment.

Evaluation – it is important to understand what went right or wrong and why.

Institutionalisation – cementing the change or making it permanent. It is important to do

a multilevel assessment and a thorough evaluation before this step.

Diffusion – implementing the process all through the organisation.

At my organisation change was implemented without proper evaluation as such the

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improvements seen in the test module were not experienced on the modules and
subsequent reduction in production was seen on the first module.

In closing I would like to recommend that any organisation going through any change
process considers the Lewin or Dailey methods for managing change. I also recommend
the team building approach in Organisational Development to help develop employees
during the change process.

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