# Epilogue: Why Ethics Still Matter

## Committing to an Ethical View

Professional values and ethical reasoning are traits valued by all good employers. In fact, we have seen throughout this book that employees’ sound ethical decisions lead to higher profits in the long run. How do we develop the ability to make such decisions? We will see in the coming paragraphs that it takes discipline, commitment, and practice. Strong work and personal relationship matters, too.

### Relationships Matter

Workplace research indicates that employees are more likely to be unethical when they are dissatisfied with their jobs or see their superiors acting unethically. How do relationships influence this equation? A good example set at the top and the freedom to determine a comfortable work-life balance for oneself—all influenced by the organization’s positive relationship with its employees—lead to a more ethical workplace. Consider Walmart’s relationships with its many employees.
Where does a case like Walmart’s leave us? If a corporation with 2.3 million employees globally has reason to be concerned that at least some are dissatisfied with the job and may have witnessed some degree of unethical management behavior, the firm might also need to assume that some of those employees could choose to act unethically in the course of any business day. Of course, no job is perfect, and most of us experience some Monday mornings when we do not necessarily want to go into the office or exert the energy to be productive. And a company that provides high-quality goods to consumers at relatively low prices should get at least some credit for treating consumers fairly and ethically. It remains true, however, that any firm that wishes its employees to act ethically in the workplace must develop managers who model such behavior consistently toward all the company’s stakeholders. No other single act on the part of business leaders is as important as this in fostering ethical behavior on the part of employees.

### Using Values to Make Hard Choices

According to the logic of the market, each of us is a commodity with specific assets, such as education, training, and job experience. But we are more than commodities, and what moves us are values. Can you identify your core values and imagine how you might live them in the workplace ()? We’ll return to this question at the end of the chapter.
To make the difficult decisions that come with career, personal life, and the balance between both, we must identify our personal values. Values provide us with the why for doing what we do. As an entrepreneur, for instance, you may find yourself working nonstop, dealing with emergency phone calls at 3:00 a.m., and doing a great deal of soul-searching about the direction and culture of your new venture. These tasks collectively might serve as impediments to happiness unless they truly reflect your underlying values.

### The Role of Loyalty

Customers often remain loyal to a brand because of its appearance, functionality, or price. Companies want loyal customers like these and will go to great lengths to keep them. These relationships are external relationships between the company as an organization and its customers as a group.
Internal relationships exist among people, including among managers, employees, suppliers, and distributors. The loyalty that forms good internal relationships and enables us to rely on one another to do our work is a matter of trust and develops over time. Although it may be tested by rivalry, resentment, misunderstanding, and personality or other conflicts, without such trust, a company cannot function properly.
However, as we have seen, loyalty between employee and employer is a two-way street. The organization takes the first step by hiring a candidate in whom it will invest time, training, and money, and whose success it will reward with recognition, raises, and bonuses. No employer wants to spend time and money nurturing new talent only to see people leave for another firm. Therefore, it falls to the new professional, in turn, to decide whether his or her values align with those of the organization, and if so, to demonstrate a commitment to grow with the company over time. Achieving such clarity about your career goals, the type of company you would be proud to work for, and your vision of your future self requires some self-scrutiny. In the process, you will further clarify your personal and ethical values and start to become an ethical professional.

### Endnotes


# Epilogue: Why Ethics Still Matter

## Becoming an Ethical Professional

Ethical professionals work for companies whose values align with their own. How do you evaluate a company to see whether it is a good occupational fit and one that will allow you to live your ethical values every day?

### Finding the “Right Fit”

Ethics has become a major consideration for young people in their selection of work and career. The following observation about young British workers applies to their counterparts in the United States, as well: “There’s a quiet revolution happening. . . but it’s not about pay, hours or contracts. It’s a coup d’état led by the nation’s young, politically engaged jobseekers who demand employers enshrine values and ethics in their business model, not just profit.”
Many job seekers want to feel that what they are doing is not just making money but making a difference, that is, contributing to the company in unique ways that reflect their core values, conscience, and personality. They believe an individual has worth beyond his or her immediate work or position. Many modern companies thus try to give greater weight to the human cost of decisions and employee happiness. They know that, according to studies, employees in “companies that work to build and maintain ethical workplace cultures are more financially successful and have more motivated, productive employees.” The decision whether to transfer someone from Boston to Salt Lake City, for instance, would now likely include the employee from the beginning and consider the impact on family members and the employee’s future, in addition to the needs of the company.
This was not always the case, and there are several reasons for the change. The first is that satisfied employees are more productive and feel greater commitment to the organization. Second, there are more options for job seekers, which gives them more freedom to choose a company for which to work.
Many business journals report annually on how highly employees rate their work places (). For example, you can consult Fortune’s annual list of “100 Best Companies to Work For,” which you can search by such factors as diversity, compensation, and paid time off. You can also consult specialized lists such as Forbes’ “100 Best Workplaces for Women” and Black Enterprise’s “50 Best Companies for Diversity.”
A third reason more companies are considering what truly makes employees happy is that even more than loyalty, employees appear to value the freedom and responsibility to act as moral agents in their own lives. A moral agent is someone capable of distinguishing right from wrong and willing to be held accountable for his or her choices.
The exercise of moral agency includes making a judgment about the alignment of personal and corporate conscience. Rather than jumping at the first job offer, moral agents assess whether the values expressed by the organization conform with their own, while recognizing that there is no perfect job. Even the most ethical organizations make mistakes, and even the most corrupt have managers and workers of integrity (). This is why the “right fit” is more likely to be a job in which you can grow or that itself will change in a way that allows you to find greater meaning in it.

### It’s Not About the Money—Is It?

You may follow a professional vocation that offers low pay or low status but yields nontangible rewards, such as nonprofit work, nursing, or teaching. Or you may find a position that pays a great deal and offers job security but leaves you feeling unhappy or unfulfilled. For some professionals, these might include law, accounting, dentistry, or anything else. The point is that occupations with high compensation and a certain stature do not always infuse their holders with the greatest psychological and emotional rewards, and it is different for each of us. In the best of all worlds, you might embark on a well-paying career that helps others or contributes a much-needed good or service to society. Finding such work is easier said than done, of course, because the aim of most jobs is not to help people find meaning or happiness. Where these do occur, they are often ancillary effects of work, whose real purpose is the profitability without which there would not be any jobs at all.
Also consider the gap between the purpose of the business and the purpose of the individuals in it. Except in a few startups, these purposes are not identical. Even artists, musicians, and independent practitioners who derive great meaning from their work are not immune to the frustrations over money or career that affect everyone else.
It has been estimated, however, that the amount of money needed to be happy is not actually that much, at least by Western standards, although it is well above the poverty line. Most people find themselves somewhere in the middle in terms of satisfaction and pay. Finding the proper balance between the two for you is taking a step on the way to your growth as a professional. You will make that assessment not once but throughout your career as you move in and out of jobs. Even if it turns out to be the best decision of your life, the choice to work for a company because of its mission, leadership, or cultural values should be intentional and based on sufficient knowledge of the company and yourself. To be appreciated for your contributions in the workplace, to work with congenial colleagues, or to provide a product or service of which you are proud might rival money as your most intrinsic motivator at work. Studies attest to this and, as professionals of integrity, we must each decide for ourselves how strong a benefit salary alone is in the jobs we select.

### The Role of Ethical Top Leadership

As you consider your future path, perhaps leading toward a leadership role, keep in mind that perhaps the most effective way ethical behavior is learned in a company is through the modeling of that behavior by senior executives and others in leadership positions. This modeling sets what is known as “tone at the top.” Employees may already have a personal moral code when they join an organization, but when they see key figures in the workplace actually living out the ethical values of the company, they are more likely to follow suit and take ethics seriously. Leaders’ ethical behavior is especially important in emerging fields like artificial intelligence, where questions of safety, bias, misuse of technology, and privacy are raised daily. It is not enough to offer codes of conduct, training, reporting, and review programs, no matter how thorough or sophisticated, if management does not adhere to or promote them. These are tools rather than solutions. The solutions come from leaders using the tools and showing others how to do the same. This takes practice, reinforcement, and collaboration at all levels of an organization. The result will be a culture of ethics that permeates the company from top to bottom.
Even leaders can falter, as the following box demonstrates. Also read the stories of ten ethical leaders in the appendix Profiles in Business Ethics: Contemporary Thought Leaders.
Ethics matter not merely because acting unethically will end in a compliance problem or public relations nightmare but because ethics is a way of life, not a hurdle to overcome. Moreover, the benefit of ethical behavior can grow over time so that a company begins to attract other ethical professionals and develops a reputation for honesty, integrity, and dependability. In a globally competitive world, these are not inconsequential factors. In an ethical workplace, employee satisfaction creates more loyalty to the company and morale improves because employees and managers feel they are part of an effort they can be proud of. Business performance picks up in ways ranging from higher earnings per share to increased customer retention to more satisfied employees.
Consider the net income of two corporations that, as of 2018, have appeared on eleven consecutive annual lists of the world’s most ethical companies as determined by the Ethisphere Institute (https://ethisphere.com). The first is United Parcel Service (UPS), founded in 1907, which earned net income of $4.91 billion in 2017. The second is Xerox, founded in 1906, which earned net income of $195 million in 2017. Notice the staying power of these two companies, as well. Each is more than a century old and has a global presence. To test the consumer confidence these corporations evoke, consider your own opinion of how reputable they are. Ask your friends and family, too.
Again, employee loyalty, a positive work environment, and strong financial performance are not accidents; they are the result of intentional efforts on the part of leadership and board members who provide ethical vision and a plan for execution to all stakeholders. Ethical business need not be a zero-sum game with winners and losers; it can create situations in which everyone wins. Is there a more attractive environment for those just starting out in their careers? To be part of something profitable, responsible, and individually uplifting justifies all the work required to get there.

### Endnotes


# Epilogue: Why Ethics Still Matter

## Making a Difference in the Business World

On what will you base your professional identity? Do you believe an employer’s enlightened self-interest is enough to ensure the ethical behavior of employers and employees? Or do you embrace “the critical importance of individual ethical choice in making our organizations, our professions and our culture serve all of humanity”?
As attractive as high salary and comfortable lifestyle are to many, the life of a true professional is guided less by the desire to amass material goods than by a willingness to adhere to a code of ethical behavior and make the sometimes selfless decisions that protect the public and the corporation from misdeeds. In ideal form, that code of behavior is an expression of everything we have covered in this text regarding virtue, character, commitment, resilience, and the use of professional skills and training for the benefit of others. As first-century BCE Jewish religious leader Rabbi Hillel is said to have put it, “If I am not for myself, then who will be? And if I am only for myself, then what am I? And if not now, when?”
Today, it is often said that what counts at the end of a career is not how much money we made or how high up the corporate ladder we climbed. Rather, the real test is the difference we made—whether we have helped others or succumbed to motives such as greed and hubris (excess pride). Hubris creates the delusion that we are above the law and will never get caught. It has been used to justify many ruthless decisions whose sole criterion, in the end, is the potential for personal gain. This book has provided many examples on which to reflect about whether taking this short-term view actually benefits the company. In fact, hubris has ruined many lives and taken down a number of companies. Some, like Enron and Theranos, were once touted as icons of efficiency and ethical leadership.

### Identifying Your Values and Mission

The values we choose to honor are the essence of ourselves, and we carry them with us wherever we live, work, and play. As we noted, the career you choose should reflect your values, whether you work at a for-profit or nonprofit organization, at Wells Fargo Bank or Doctors Without Borders (a medical rescue organization). It also is possible that you might work for a for-profit company and volunteer extensively on your own or on behalf of your firm in the nonprofit sector. Whatever path your career takes, it remains important not to let your well-considered values be diminished by others who do not prize loyalty or industriousness, for instance. Your career is not a contest in which the person who finishes with the biggest portfolio or fastest jet skis wins anything other than an empty prize. It is far better to treat others with integrity and respect and be surrounded by the true emblems of a successful career—family, friends, and colleagues who will attest to the dignity with which you have worked. In the final analysis, if you achieve a life of honor, then you have won.
How do you keep personal values like integrity, fairness, and respect close at hand? The best way is by writing them down, prioritizing them, and fashioning them into a personal mission statement. Most companies have mission statements, and people can have them, too. Yours will guide you on your path, clear away distractions on the road, and help you correct any missteps. It should be flexible, too, to account for changes in yourself and your goals. Your mission statement is not a global positioning system so much as a compass that guides you toward discovering who you are and what drives you ().
Let us write your mission statement. Because it will reflect your values, start by identifying a handful of values that matter most to you. You can do this by answering the questions in ; you may also find it beneficial to keep a journal and update your answers to these questions regularly.
Now you can incorporate these values into your mission statement, which can take the form of a narrative or action. There are many formats you can follow (see the Link to Learning box), but the basic idea is to unite your values with the goals you have set for your life and career. You can, for instance, link the benefit you want to create, the market or audience for which you want to create it, and the outcome you hope to achieve. Keep your statement brief. Richard Branson, founder of the Virgin Group, wants “to have fun in [my] journey through life and learn from [my] mistakes.” Denise Morrison, CEO of Campbell Soup, aims “to serve as a leader, live a balanced life, and apply ethical principles to make a significant difference.” Your own statement can be as simple as, for instance, “To listen to and inspire others,” or “To have a positive influence on everyone I meet.”

### Putting Your Values and Mission Statement to the Test

There may be no better place to put personal values and mission to the test than in an entrepreneurial role. Startups cannot be run on concepts alone. More than almost any other kind of venture, they demand practical solutions and efficient methods. Entrepreneurs usually begin by identifying a product or service that is hard to come by in a particular market or that might be abundantly available but is overpriced or unreliable. The overall guiding force that inspires the startup then is the execution of the company’s mission, which dictates much of the primary direction for the firm, including the identification of underserved customers, the geographic site for a headquarters, and the partners, suppliers, employees, and financing that help the company get off the ground and then expand. In a brand-new organization, though, where does that mission come from?
The founder or founders of a firm develop the company’s mission directly from their own personal beliefs, values, and experience; this is particularly true for nonprofits. Sometimes the inspiration is as simple as the recognition of an unmet need, such as the rising global demand for food. Bertha Jimenez, an immigrant from Ecuador who was studying engineering at New York University, could not help but be concerned that while craft breweries were riding a wave of popularity in her adopted city, they were also throwing away a lot of barley grain that still had nutritional value but that no one could figure out how to reuse. After a few attempts, Jimenez and two friends, also immigrants, finally hit on the idea of making flour out of this barley grain, and thus was born the Queens, New York–based startup Rise Products, whose website proclaims that “Upcycling is the future of food.”
Rise Products does not only supplies local bakers and pasta makers with its protein- and fiber-packed “super” barley flour for use in products from pizza dough to brownies. It has also sent product samples on request to Kellogg, Whole Foods, and Nestlé, as well as to a top chef in Italy. Jimenez and her fellow cofounders say, “In the long term, we can bring this to countries like ours. We want to look at technologies that won’t be prohibitive for other people to have.”
If we were to diagram the relationship between founders’ values and the entrepreneurial mission, it would look something like this:
Just as a personal mission statement can change over time, so can the company mission be adapted to fit changing circumstances, industry developments, and client needs. TOMS Shoes is another entrepreneurial firm founded to fill a need: For every pair sold, the company donates a pair of shoes to a child without any. Over time, TOMS Shoes has expanded its mission to also offer eyeglasses and improved access to clean water to people in developing countries. It calls itself the “One for One” company, promoting founder Blake Mycoskie’s promise that “With every product you purchase, TOMS will help a person in need.”
The point is, if you have clarified your personal values and mission statement, there is almost no limit to the number of ways you can apply them to your business goals and decisions to “do good and do well” in your career. The purpose of business is relationships, and the quality of relationships depends on our acceptance of self and concern for others. These are developed through the virtues of humility on the one hand and courage on the other. The demanding but essential task of life is to practice both. In that way—perhaps only in that way—can we be truly human and successful business professionals.

### Endnotes


# Management and Organizational Behavior

## Introduction

### Learning Outcomes

After reading this chapter, you should be able to answer these questions:
1. What is the meaning of work in a societal context?
2. How do we recognize and meet the challenges facing managers in the new millennium?
3. What is expected of a manager?
4. What is the role of the behavioral sciences in management and organizations?


# Management and Organizational Behavior

## The Nature of Work

1. What is the meaning of work in a societal context?

### The Meaning of Work

What is work, and how do people feel about the work they do? These questions may be answered from several perspectives. Perhaps one of the best ways to understand how people feel about their jobs is simply to ask them. A number of years ago Chicago writer Studs Terkel did exactly that. How did the people he interviewed feel about their jobs? Here are some excerpts from his book Working.
Examples such as these—and there are many, many more—show how some employees view their jobs and the work they perform. Obviously, some jobs are more meaningful than others, and some individuals are more easily satisfied than others. Some people live to work, while others simply work to live. In any case, people clearly have strong feelings about what they do on the job and about the people with whom they work. In our study of behavior in organizations, we shall examine what people do, what causes them to do it, and how they feel about what they do. As a prelude to this analysis, however, we should first consider the basic unit of analysis in this study: work itself. What is work, and what functions does it serve in today’s society?
Work has a variety of meanings in contemporary society. Often we think of work as paid employment—the exchange of services for money. Although this definition may suffice in a technical sense, it does not adequately describe why work is necessary. Perhaps work could be more meaningfully defined as an activity that produces something of value for other people. This definition broadens the scope of work and emphasizes the social context in which the wage-effort bargain transpires. It clearly recognizes that work has purpose—it is productive. Of course, this is not to say that work is necessarily interesting or rewarding or satisfying. On the contrary, we know that many jobs are dull, repetitive, and stressful. Even so, the activities performed do have utility for society at large. One of the challenges of management is to discover ways of transforming necessary yet distasteful jobs into more meaningful situations that are more satisfying and rewarding for individuals and that still contribute to organizational productivity and effectiveness.

### Functions of Work

We know why work activities are important from an organization’s viewpoint. Without work there is no product or service to provide. But why is work important to individuals? What functions does it serve?
First, work serves a rather obvious economic function. In exchange for labor, individuals receive necessary income with which to support themselves and their families. But people work for many reasons beyond simple economic necessity.
Second, work also serves several social functions. The workplace provides opportunities for meeting new people and developing friendships. Many people spend more time at work with their co-workers than they spend at home with their own families.
Third, work also provides a source of social status in the community. One’s occupation is a clue to how one is regarded on the basis of standards of importance prescribed by the community. For instance, in the United States a corporate president is generally accorded greater status than a janitor in the same corporation. In China, on the other hand, great status is ascribed to peasants and people from the working class, whereas managers are not so significantly differentiated from those they manage. In Japan, status is first a function of the company you work for and how well-known it is, and then the position you hold. It is important to note here that the status associated with the work we perform often transcends the boundaries of our organization. A corporate president or a university president may have a great deal of status in the community at large because of his position in the organization. Hence, the work we do can simultaneously represent a source of social differentiation and a source of social integration.
Fourth, work can be an important source of identity and self-esteem and, for some, a means for self-actualization. It provides a sense of purpose for individuals and clarifies their value or contribution to society. As Freud noted long ago, “Work has a greater effect than any other technique of living in binding the individual more closely to reality; in his work he is at least securely attached to a part of reality, the human community.” Work contributes to self-esteem in at least two ways. First, it provides individuals with an opportunity to demonstrate competence or mastery over themselves and their environment. Individuals discover that they can actually do something. Second, work reassures individuals that they are carrying out activities that produce something of value to others—that they have something significant to offer. Without this, the individual feels that they have little to contribute and is thus of little value to society.
We clearly can see that work serves several useful purposes from an individual’s standpoint. It provides a degree of economic self-sufficiency, social interchange, social status, self-esteem, and identity. Without this, individuals often experience sensations of powerlessness, meaninglessness, and normlessness—a condition called alienation. In work, individuals have the possibility of finding some meaning in their day-to-day activities—if, of course, their work is sufficiently challenging. When employees are not involved in their jobs because the work is not challenging enough, they usually see no reason to apply themselves, which, of course, jeopardizes productivity and organizational effectiveness. This self-evident truth has given rise to a general concern among managers about declining productivity and work values. In fact, concern about this situation has caused many managers to take a renewed interest in how the behavioral sciences can help them solve many of the problems of people at work.
1. What is the meaning of work in a societal context?
Work will almost inevitably be a large part of your life. An understanding of organizational behavior will aid you in making that part of life more productive and enjoyable for yourself as well those you are in a position to influence. In this course, our objective is to provide sound and relevant insights concerning individuals, groups, and overall organizational systems that will be helpful to you not just as an executive or CEO but also when you are starting your career as an individual contributor or subordinate.


# Management and Organizational Behavior

## The Changing Workplace

1. How do we recognize and meet the challenges facing managers in the new millennium?
It has often been said that the only constant in life is change, and nowhere is this truer than in the workplace. As one recent study concluded, “The United States is a competitive location to the extent that firms operating in the U.S. are able to compete successfully in the global economy while supporting high and rising living standards for the average American. Although the U.S. retains profound competitive strengths—for instance, in higher education and entrepreneurship—those strengths are increasingly threatened by weaknesses in areas such as the tax code, basic education, macroeconomic policies, and regulation.” Companies face a variety of changes and challenges that will have a profound impact on organizational dynamics and performance. In fact, in many ways these changes and challenges will determine who will survive and prosper into the next century and who will not. Among these challenges are the following:

### The Challenge of International Competition

Until the 1980s, many American firms had little in the way of serious international competition. As a result, there was little incentive to innovate and remain efficient and competitive. Many companies became lazy and lost touch with their customers. This situation changed abruptly as companies in Asia and Western Europe developed more sophisticated products and marketing systems and gained significant market shares in home electronics, automobiles, medical equipment, telecommunications, and shipbuilding, to name a few areas. As a result, American companies lost considerable clout—and profitability. In the 1990s and into the new millennium, the lowering of trade barriers and acceptance of trade agreements like NAFTA led corporations to seek less expensive labor overseas. This led to lower costs and the ability to offer products at more competitive prices, but also led to a drop in manufacturing in industries like steel production, a drop in manufacturing of products like iPhones, and the relocation of call centers from the U.S. to India.
If we examine corporate behavior during the early decades of the new millennium, it is not difficult to see some of the reasons for the demise. In short, many North American firms lost their industrial competitiveness; that is, they lost their capacity to compete effectively in global markets, or they chose to locate in foreign countries as a way to broaden their reach and become more competitive. Consider the following examples:
During the last year reported, India experienced a 7.5 percent annual growth rate in real GDP while China recorded an increase of 6.7 percent. This is a measure of how economies are progressing. Great Britain, France, and Italy all had close to 2 percent increases. At the same time, however, the United States recorded a 3.8 percent annual increase (and Canada had a 3 percent increase), a larger increase after a lethargic recovery from the 2009 financial crisis.
While traditional jobs have shifted to developing countries, countries like the United States and Canada have transformed their economies by incorporating more technology and automation as well as having a greater proportion of the workforce in the service sectors. It is anticipated that the coming decades will continue to bring disruption to traditional workplace skills that will result in challenging workers to continually evolve their skills.
Finally, the number of products that were invented in the United States but are now primarily manufactured overseas has increased dramatically—advances in technology are helping the United States regain the top spot in world manufacturing. There had been a significant decline in our manufacturing sector as less expensive labor in markets like India and China led companies to locate factories there. Since 2010, however, the United States has risen from fourth place to second and is expected to claim the spot as the leading nation by 2020. The major reasons for this are: advanced manufacturing capabilities require fewer “line workers,” and having products produced near their major markets reduces transport and time to market.
Considering several indicators of the relative competitiveness of economies using seven metrics, the U.S. performs quite well. The seven metrics are institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, and labor market efficiency. When taking all of these factors into consideration (see ), the United States ranks very well and has an environment of stable growth. One challenge is that workers will need to be nimble and evolve as new skills arise and will need to embrace continuous education and training as a way of managing their careers.
In terms of organizational survival, herein lies what is perhaps management’s biggest challenge: how to become more competitive. Greater competitiveness requires an understanding of individuals, groups, and entire organizational systems. Throughout this course, we shall see numerous examples of how companies from around the world are meeting the challenges of global competition. Particular emphasis will be placed on management practices in other countries as a point of comparison.

### The Challenge of New Technologies

Although it is common to think of “high tech” as applying only to the aerospace and telecommunications industries, advanced technologies can be found throughout most industries. For example, most of us are familiar with the explosive growth in computing. Both hardware and software change so rapidly that it is difficult for many companies to keep up. Personal computers are being replaced by cell phones that are now faster and more powerful than their predecessors. Cloud computing and access to big data and applications transform data into useful information that is increasingly complex and increasingly user friendly. In November of 1971 Intel launched the first microchip. Today, a modern Intel Skylake processor contains around 1.75 billion transistors—half a million of them would fit on a single transistor from the 4004—and collectively they deliver about 400,000 times as much computing muscle. More and more companies are using computer-based systems and equipment—such as e-mail, real-time messaging and file sharing, PDAs, and cell phones—for communications. As a result, the way in which employees and managers communicate and make decisions is changing dramatically, and the importance of educated and knowledgeable workers is increasing rapidly.
Technological changes also can be seen in the increased use of robotics, expert systems, and computer-integrated manufacturing systems, which have changed the way many products are manufactured today. Such changes affect not only production efficiency and product quality but also the nature of jobs. In many industries, the first-line supervisors are disappearing and being replaced by self-managing work teams who assume responsibility for production scheduling, quality control, and even performance appraisals. All of these technological changes require managers who are capable of effectively implementing technological change in the workplace—managers who can adapt to the technological imperative while still maintaining and developing the organization’s human resources. We will examine the role of technology as it relates to organization structure, job design, communication, decision-making, and work-related stress. We will see how some companies successfully adapted to technological change in a way that benefited all parties concerned.

### The Challenge of Increased Quality

The challenge of industrial competitiveness incorporates several interrelated factors, including an appropriate product mix, manufacturing efficiency, effective cost controls, investment in research and development, and so forth. Not to be ignored in this pursuit is the quest for increased quality control of the products and services offered in the marketplace. Total Quality Management (TQM) is a term often used to describe comprehensive efforts to monitor and improve all aspects of quality within a firm. BMW established and continues to maintain its reputation in part because customers have come to respect its high level of quality. Quality is also a major reason for the success of many Japanese products in North America. Simply put, if companies are going to compete, renewed efforts must be devoted to enhanced quality assurance. This, too, is a management challenge. How can managers get employees to care about the products they produce or the services they offer? In this book, we will consider both the issue of quality control (what is it?) and mechanisms of ensuring improved product quality (how do we get it?).
Moreover, quality control includes several organizational issues. For instance, how can managers get parties who are traditionally independently associated with a product to work together to build a better product? That is, how can they get the design staff, manufacturing engineers, workers, suppliers—and potential customers—to come together and cooperate in developing and manufacturing a superior product? Later in the book we will examine several instances in which such teamwork played a major role in quality improvement.

### The Challenge of Employee Motivation and Commitment

A major hurdle in the pursuit of industrial competitiveness is the traditional adversarial relationship between management and workers. Whether a company is unionized or not, we see situations in which the average employee simply sees no reason to increase output or to improve the quality of existing outputs. Frequently, the company’s reward system restricts, rather than increases, performance. At other times, rewards encourage employees to increase quantity at the expense of quality. Furthermore, North American companies often view their workforce as a variable expense (in contrast to Japan, where the workforce is viewed as a fixed expense) and lay workers off when they are not needed for short-run activities. As a result, returning the favor, employees see little reason to be committed or loyal to their employers. Turnover and absenteeism rates are often unreasonably high, further eroding performance efficiency and effectiveness.
If companies are to succeed in an increasingly turbulent environment, managers must discover better ways to develop and motivate employees. A company’s human resources often represent its biggest single asset, and failing to properly nurture this asset leads to suboptimal return on an organization’s resources. Part of solving this problem involves knowing and understanding today’s employees.  illustrates the various characteristics employees consider important in their employers. Overall, employees seem to have a fairly positive outlook on their employers. As illustrated in , however, many millennials do not see their tenure lasting for a long period and expect to have another job soon.
This problem is made all the more difficult by the changing nature of occupations. As shown in , we are seeing a sharp increase in the number of technicians, service workers, and sales workers. Growth also can be expected in engineering and managerial positions. These changes require a new look at how such employees are motivated. For example, do we motive an engineer the same way we motivate a sales representative? How do we motivate senior executives as opposed to junior managers? In this book, we shall touch on these issues when we examine approaches to employee motivation. Managers have at their disposal several ways in which to increase employee motivation and performance, and an effective manager learns how and when to use each approach.

### The Challenge of Managing a Diverse Workforce

Historically, the American economy has been dominated by White males. They have filled the vast majority of managerial positions and many of the more important blue-collar jobs, becoming skilled craftsmen. Traditionally, women filled lower-paying clerical positions and often left the workforce to raise their families. Minorities of both genders found considerable barriers to entering the labor market at the higher (and higher-paying) levels. Now, things are changing, and the pace of this change is accelerating. Among other changes, the twenty-first century will also bring major changes in terms of workforce demographics. We will see changes in gender, race, and age.
For example, we are seeing a drop in the percentage of White American-born male workers in the workplace. Only 15 percent of new entrants into the workforce will be White males. The percentages for non-Whites and immigrants of both genders will increase (see ). In general, there are more women in positions of responsibility in both the public and private sectors and more opportunities for minorities. Some predict that the coming labor shortage will cause many companies to try to retain older workers for longer periods of time, beyond the traditional retirement age. Additionally, the belief that mentally or physically challenged individuals can play productive roles at work is increasing. Such changes bring opportunities for companies but also potential problems of adjustment if not managed intelligently. We will examine several of these issues when we discuss careers and employee development.

### The Challenge of Ethical Behavior

Finally, the future will bring a renewed concern with maintaining high standards of ethical behavior in business transactions and in the workplace. Many executives and social scientists see unethical behavior as a cancer working on the fabric of society both in business and beyond. Many are concerned that we face a crisis of ethics in the West that is undermining our competitive strength. This crisis involves business, government, customers, and employees. Especially worrisome is unethical behavior among employees at all levels of the organization. For example, recent reports found that employees and vendors accounted for a higher percentage of thefts than did retail customers.
In addition, we hear about illegal and unethical behavior on Wall Street—pension scandals in which disreputable executives gamble on risky business ventures with employee retirement funds, companies that expose their workers to hazardous working conditions, and blatant favoritism in hiring and promotion practices. Although such practices occur throughout the world, their presence nonetheless serves to remind us of the challenges we face.
This challenge is especially difficult because standards for what constitutes ethical behavior lie in a “gray zone” where clear-cut right-or-wrong answers may not always exist. For example, if you were a sales representative for an American company abroad and your foreign competitors used bribes to get business, what would you do? In the United States such behavior is illegal, yet it is perfectly acceptable in other countries. What is ethical here? Similarly, in many countries women are systematically discriminated against in the workplace; it is felt that their place is in the home. In the United States, again, this practice is illegal. If you ran an American company in one of these countries, would you hire women in important positions? If you did, your company might be isolated in the larger business community, and you might lose business. If you did not, you might be violating what most Americans believe to be fair business practices.
Effective managers must know how to deal with ethical issues in their everyday work lives; therefore, we will devote parts of this course to the role of ethics in decision-making, the exercise of power, performance appraisals and reward systems, and so forth.
1. How do we recognize and meet the challenges facing managers in the new millennium?
The fundamental challenge facing managers is how to achieve performance goals while simultaneously providing for employee welfare and satisfaction. Work may be defined as an activity that produces something of value for other people. Work serves several functions, including economic, social, status, self-esteem, and self-actualization. As managers in today’s environment, several challenges arise, including international competition, new technologies, the need for increased quality, employee motivation and commitment, a diverse workforce, and ethical behavior. These challenges must be met by managers concerned about survival and competitiveness in the future.


# Management and Organizational Behavior

## The Nature of Management

1. What is expected of a manager?
If organizations are to be successful in meeting these challenges, management must lead the way. With effective management, contemporary companies can accomplish a great deal toward becoming more competitive in the global environment. On the other hand, ineffective management dooms the organization to mediocrity and sometimes outright failure. Because of this, we turn now to a look at the nature of management. However, we want to point out that even though our focus is on managers, what we discuss is also relevant to the actions of nonmanagers. On the basis of this examination, we should be ready to begin our analysis of what managers can learn from the behavioral sciences to improve their effectiveness in a competitive environment.

### What Is Management?

Many years ago, Mary Parker Follett defined management as “the art of getting things done through people.” A manager coordinates and oversees the work of others to accomplish ends they could not attain alone. Today this definition has been broadened. Management is generally defined as the process of planning, organizing, directing, and controlling the activities of employees in combination with other resources to accomplish organizational objectives. In a broad sense, then, the task of management is to facilitate the organization’s effectiveness and long-term goal attainment by coordinating and efficiently utilizing available resources. Based on this definition, it is clear that the topics of effectively managing individuals, groups, or organizational systems is relevant to anyone who must work with others to accomplish organizational objectives.
Management exists in virtually all goal-seeking organizations, whether they are public or private, large or small, profit-making or not-for-profit, socialist or capitalist. For many, the mark of an excellent company or organization is the quality of its managers.

### Managerial Responsibilities

An important question often raised about managers is: What responsibilities do managers have in organizations? According to our definition, managers are involved in planning, organizing, directing, and controlling. Managers have described their responsibilities that can be aggregated into nine major types of activities. These include:
1. Long-range planning. Managers occupying executive positions are frequently involved in strategic planning and development.
2. Controlling. Managers evaluate and take corrective action concerning the allocation and use of human, financial, and material resources.
3. Environmental scanning. Managers must continually watch for changes in the business environment and monitor business indicators such as returns on equity or investment, economic indicators, business cycles, and so forth.
4. Supervision. Managers continually oversee the work of their subordinates.
5. Coordinating. Managers often must coordinate the work of others both inside the work unit and out.
6. Customer relations and marketing. Certain managers are involved in direct contact with customers and potential customers.
7. Community relations. Contact must be maintained and nurtured with representatives from various constituencies outside the company, including state and federal agencies, local civic groups, and suppliers.
8. Internal consulting. Some managers make use of their technical expertise to solve internal problems, acting as inside consultants for organizational change and development.
9. Monitoring products and services. Managers get involved in planning, scheduling, and monitoring the design, development, production, and delivery of the organization’s products and services.
As we shall see, not every manager engages in all of these activities. Rather, different managers serve different roles and carry different responsibilities, depending upon where they are in the organizational hierarchy. We will begin by looking at several of the variations in managerial work.

### Variations in Managerial Work

Although each manager may have a diverse set of responsibilities, including those mentioned above, the amount of time spent on each activity and the importance of that activity will vary considerably. The two most salient perceptions of a manager are (1) the manager’s level in the organizational hierarchy and (2) the type of department or function for which they are responsible. Let us briefly consider each of these.
Management by Level. We can distinguish three general levels of management: executives, middle management, and first-line management (see ). Executive managers are at the top of the hierarchy and are responsible for the entire organization, especially its strategic direction. Middle managers, who are at the middle of the hierarchy, are responsible for major departments and may supervise other lower-level managers. Finally, first-line managers supervise rank-and-file employees and carry out day-to-day activities within departments.
 shows differences in managerial activities by hierarchical level. Senior executives will devote more of their time to conceptual issues, while first-line managers will concentrate their efforts on technical issues. For example, top managers rate high on such activities as long-range planning, monitoring business indicators, coordinating, and internal consulting. Lower-level managers, by contrast, rate high on supervising because their responsibility is to accomplish tasks through rank-and-file employees. Middle managers rate near the middle for all activities. We can distinguish three types of managerial skills:
1. Technical skills. Managers must have the ability to use the tools, procedures, and techniques of their special areas. An accountant must have expertise in accounting principles, whereas a production manager must know operations management. These skills are the mechanics of the job.
2. Human relations skills. Human relations skills involve the ability to work with people and understand employee motivation and group processes. These skills allow the manager to become involved with and lead his or her group.
3. Conceptual skills. These skills represent a manager’s ability to organize and analyze information in order to improve organizational performance. They include the ability to see the organization as a whole and to understand how various parts fit together to work as an integrated unit. These skills are required to coordinate the departments and divisions successfully so that the entire organization can pull together.
As shown in , different levels of these skills are required at different stages of the managerial hierarchy. That is, success in executive positions requires far more conceptual skill and less use of technical skills in most (but not all) situations, whereas first-line managers generally require more technical skills and fewer conceptual skills. Note, however, that human or people skills remain important for success at all three levels in the hierarchy.
Management by Department or Function. In addition to level in the hierarchy, managerial responsibilities also differ with respect to the type of department or function. There are differences found for quality assurance, manufacturing, marketing, accounting and finance, and human resource management departments. For instance, manufacturing department managers will concentrate their efforts on products and services, controlling, and supervising. Marketing managers, in comparison, focus less on planning, coordinating, and consulting but more on customer relations and external contact. Managers in both accounting and human resource management departments rate high on long-range planning, but will spend less time on the organization’s products and service offerings. Managers in accounting and finance are also concerned with controlling and with monitoring performance indicators, while human resource managers provide consulting expertise, coordination, and external contacts. The emphasis on and intensity of managerial activities varies considerably by the department the manager is assigned to.
At a personal level, knowing that the mix of conceptual, human, and technical skills changes over time and that different functional areas require different levels of specific management activities can serve at least two important functions. First, if you choose to become a manager, knowing that the mix of skills changes over time can help you avoid a common complaint that often young employees want to think and act like a CEO before they have mastered being a first-line supervisor. Second, knowing the different mix of management activities by functional area can facilitate your selection of an area or areas that best match your skills and interests.
In many firms, managers are rotated through departments as they move up in the hierarchy. In this way they obtain a well-rounded perspective on the responsibilities of the various departments. In their day-to-day tasks they must emphasize the right activities for their departments and their managerial levels. Knowing what types of activity to emphasize is the core of the manager’s job. In any event, we shall return to this issue when we address the nature of individual differences in the next chapter.

### The Twenty-First Century Manager

We discussed above many of the changes and challenges facing organizations in the twenty-first century. Because of changes such as these, the managers and executives of tomorrow will have to change their approaches to their jobs if they are to succeed in meeting the new challenges. In fact, their profiles may even look somewhat different than they often do today. Consider the five skills that Fast Company predicts that successful future managers, compared to the senior manager in the year 2000, will need. The five skills are: the ability to think of new solutions, being comfortable with chaos, an understanding of technology, high emotional intelligence, and the ability to work with people and technology together.
For the past several decades, executive profiles have typically looked like this: The person started out in finance with an undergraduate degree in accounting, then methodically worked their way up through the company from the controller’s office in a division, to running that division, to the top job. The military background shows. They are used to giving orders—and to having them obeyed. As head of the philanthropic efforts, they are important in the community. However, the first time the individual traveled overseas on business was as chief executive. Computers, which became ubiquitous, make them nervous.
Now compare this with predictions about what a twenty-first-century executive will look like:
Their undergraduate degree might be in French literature, but they also have a joint MBA/engineering degree. The individual started in research and was quickly picked out as a potential CEO. They are able to think creatively and thrives in a chaotic environment. They zigzagged from research to marketing to finance, are comfortable with technology and people, and have a high degree of emotional intelligence. The executive proved valuable in Brazil by turning around a failing joint venture. This person speaks multiple languages and is on a first-name basis with commerce ministers in half a dozen countries.
Clearly, the future holds considerable excitement and promise for future managers and executives who are properly prepared to meet the challenges. How do we prepare them? One study suggested that the manager of the future must be able to fill at least the following four roles:
Global strategist. Executives of the future must understand world markets and think internationally. They must have a capacity to identify unique business opportunities and then move quickly to exploit them.
Master of technology. Executives and managers of the future must be able to get the most out of emerging technologies, whether these technologies are in manufacturing, communications, marketing, or other areas.
Leadership that embraces vulnerability. The successful executive of the future will understand how to cut through red tape to get a job done, how to build bridges with key people from highly divergent backgrounds and points of view, and how to make coalitions and joint ventures work.
Follow-from-the-front motivator. Finally, the executive of tomorrow must understand group dynamics and how to counsel, coach, and command work teams and individuals so they perform at their best. Future organizations will place greater emphasis on teams and coordinated efforts, requiring managers to understand participative management techniques.
Great communicator. To this list of four, we would add that managers of the future must be great communicators. They must be able to communicate effectively with an increasingly diverse set of employees as well as customers, suppliers, and community and government leaders.
Whether these predictions are completely accurate is difficult to know. Suffice it to say that most futurists agree that the organizational world of the twenty-first century will likely resemble, to some extent, the portrait described here. The task for future managers, then, is to attempt to develop these requisite skills to the extent possible so they will be ready for the challenges of the next decade.
1. What is expected of a manager?
Management is the process of planning, organizing, directing, and controlling the activities of employees in combination with other resources to accomplish organizational goals. Managerial responsibilities include long-range planning, controlling, environmental scanning, supervision, coordination, customer relations, community relations, internal consulting, and monitoring of products and services. These responsibilities differ by level in the organizational hierarchy and by department or function. The twenty-first-century manager will differ from most current managers in four ways. In essence, they will be a global strategist, a master of technology, a good politician, and a premier leader-motivator.


# Management and Organizational Behavior

## A Model of Organizational Behavior and Management

1. What is the role of the behavioral sciences in management and organizations?
A major responsibility—perhaps the major responsibility—of managers is to make organizations operate effectively. Bringing about effective performance, however, is no easy task. As Nadler and Tushman note:
Understanding one individual’s behavior is challenging in and of itself; understanding a group that’s made up of different individuals and comprehending the many relationships among those individuals is even more complex. Imagine, then, the mind-boggling complexity of a large organization made up of thousands of individuals and hundreds of groups with myriad relationships among these individuals and groups.
Despite this difficulty, however, organizations must be managed. Nadler and Tushman continue:
Ultimately the organization’s work gets done through people, individually or collectively, on their own or in collaboration with technology. Therefore, the management of organizational behavior is central to the management task—a task that involves the capacity to understand the behavior patterns of individuals, groups, and organizations, to predict what behavioral responses will be elicited by various managerial actions, and finally to use this understanding and these predictions to achieve control.
The work of society is accomplished largely through organizations, and the role of management is to see to it that organizations perform this work. Without it, the wheels of society would soon grind to a halt.

### What Is Organizational Behavior?

The study of the behavior of people in organizations is typically referred to as organizational behavior. Here, the focus is on applying what we can learn from the social and behavioral sciences so we can better understand and predict human behavior at work. We examine such behavior on three levels—the individual, the group, and the organization as a whole. In all three cases, we seek to learn more about what causes people—individually or collectively—to behave as they do in organizational settings. What motivates people? What makes some employees leaders and others not? Why do groups often work in opposition to their employer? How do organizations respond to changes in their external environments? How do people communicate and make decisions? Questions such as these constitute the domain of organizational behavior and are the focus of this course.
To a large extent, we can apply what has been learned from psychology, sociology, and cultural anthropology. In addition, we can learn from economics and political science. All of these disciplines have something to say about life in organizations. However, what sets organizational behavior apart is its particular focus on the organization (not the discipline) in organizational analysis (see ). Thus, if we wish to examine a problem of employee motivation, for example, we can draw upon economic theories of wage structures in the workplace. At the same time, we can also draw on the psychological theories of motivation and incentives as they relate to work. We can bring in sociological treatments of social forces on behavior, and we can make use of anthropological studies of cultural influences on individual performance. It is this conceptual richness that establishes organizational behavior as a unique applied discipline. And throughout our analyses, we are continually concerned with the implications of what we learn for the quality of working life and organizational performance. We always look for management implications so the managers of the future can develop more humane and more competitive organizations for the future.
For convenience, we often differentiate between micro- and macro-organizational behavior. Micro-organizational behavior is primarily concerned with the behavior of individuals and groups, while macro-organizational behavior (also referred to as organization theory) is concerned with organization-wide issues, such as organization design and the relations between an organization and its environment. Although there are times when this distinction is helpful, it is always important to remember that in most instances we learn the most when we take a comprehensive view of organizational behavior and integrate these two perspectives. That is, issues such as organization structure can influence employee motivation. Hence, by keeping these two realms separate we lose valuable information that can help us better understand how to manage organizations.

### Building Blocks of Organizations

Understanding the behavior of people at work is fundamental to the effective management of an organization. Obviously, a number of factors come together to determine this behavior and its organizational consequences. In order to understand the origins and characteristics of these factors, it is necessary to have a model that organizes and simplifies the variables involved. We offer such a model here in the hope that it will bring some order to the study of this subject. The model can be considered in two parts (see ).
The first part of the model is the simple recognition of organizational inputs and outcomes. That is, organizations receive inputs from the external environment in the form of capital, raw materials, labor, community or government support, and so forth. In addition, organizations experience or produce certain outcomes, including (1) organizational goal attainment, (2) group performance and effectiveness, and (3) individual performance and effectiveness. Thus, organizations and the people in them exist in a constant state of flux, receiving and transforming inputs from the environment and returning those transformed inputs in the form of finished goods and services, return on stockholders’ equity, salaries that are paid to employees, and so forth. It is, in short, a dynamic system.
The second aspect of the model is the organization itself and all of its parts. One way to understand the complexity of organizations is to think of them simply as a set of building blocks, including:
Individuals and groups. Organizations are collectives of individuals and groups working to pursue common objectives. Their members come from various backgrounds and have varying abilities and skills, differing motivational levels, and different ambitions. Within the organizational context, these people must communicate, make decisions, show leadership, and handle power and organizational politics as they carry out their assigned activities.
Tasks and technology. In addition to variations among individuals and groups, we must recognize variations in the technology of the workplace. That is, how does the work actually get done? Technology includes both the actual design of jobs and the tools and techniques used in manufacture (e.g., robotics and expert systems).
Organization design. Putting together these factors—individuals and groups and tasks—is the subject of organization design. That is, how do we structure an organization so it effectively coordinates and controls employee behavior to facilitate performance?
Organizational processes. In addition to people, machines, and structure, we must recognize a series of organizational processes, such as leadership, communication, decision-making, power and politics, and so forth. The processes largely determine the nature and quality of interpersonal and intergroup relations within the workplace and, as such, influence ultimate organizational performance.
Management. Finally, the glue that holds these building blocks together is the character of management. Throughout this text, we shall see numerous examples of how the degree of managerial effectiveness and prowess have determined the success or failure of a venture. We shall take a managerial view throughout our survey of organizational behavior.
There have been many attempts to provide a differentiation between leadership and management over time. While they are not the same thing, they are necessarily linked, and complementary. Any effort to separate the two is likely to cause more problems than it solves and as business evolved the content of leadership and management has changed. The emergence of the “knowledge worker,” and the profound differences that this causes the way business is organized. With the rise of the knowledge worker, one does not ‘manage’ people, and instead the task is to lead people and the goal is to make productive the specific strengths and knowledge of every individual.
These five variables, then, will constitute the primary ingredients of this book. We shall proceed sequentially, beginning with individual behavior and moving to group and intergroup behavior and finally to organization design and structure. On the basis of this, we will turn to a consideration of several of the more important organizational processes. Finally, we will look to the future and examine ways that organizations can continue to develop and improve their workforces and the organization as a whole. Throughout, the roles of technology and management will be considered. Also, throughout, we will blend theory with research and practice.
1. What is the role of the behavioral sciences in management and organizations?
Organizational behavior is the study of people in organizations. It can be studied on a micro level, which focuses on individual or group behavior, or on a macro level, which focuses on organization-wide actions and events. A model of organizational behavior is presented, consisting of five building blocks: individuals and groups, tasks and technology, organization design, organizational processes, and management.

### Chapter Review Questions

1. Define work.
2. What functions does work serve in modern society?
3. Describe the extent and nature of the challenges facing the workplace in the next decade.
4. What can be done about these challenges?
5. Define management.
6. How does the nature of management change according to one’s level and function in the organization?
7. Discuss the role of management in the larger societal context. What do you think the managers of the future will be like?
8. Identify what you think are the critical issues facing contemporary management. Explain.

### Critical Thinking Case

### New Management Challenges for the New Age

Today’s news is littered with scandals, new allegations of sexual assault, and tragedy. Since 2017 and the #metoo movement, stemming from the Harvey Weinstein scandal, more and more public figures have been put into the spotlight to defend themselves against allegations from women around the globe.
Not only publicly, but privately in companies around the world, there have been firings and investigations into misconduct from coworkers, managers, and CEOs. It is a relevant topic that is getting long-overdue publicity and encouraging more men and women to come forward to discuss openly rather than hide the events and injustices of the past. Other events showcase the tumultuous and on-edge society we are living in, such as the Charlottesville, VA, attack that left one dead and 19 injured when a person drove a car through a crowd of protestors during a White nationalist gathering.
With unanticipated events on a daily business, it is important for companies to take a stand against racial hatred and harassment of any kind, and to have firm policies when such events occur. Take Netflix, for example, who in July 2018 fired their chief communications officer for saying the “N-word” in full form. This event occurred during an internal meeting in which the speaker was not directing the slur at anyone specific, but claimed it was being made as an emphatic point about offensive words in comedy programming. The “Netflix way,” the culture that is built around radical candor and transparency, was put to the test during this occurrence.
The offender, Jonathan Friedland, attempted to apologize for his misdeed, hoping it would fade away and his apology would be accepted. However, it didn’t work that way; instead, the anger was palpable between coworkers and eventually led to the firing of Friedland after a few months of inaction.
Netflixers are given a high level of freedom and responsibility within their “Netflix way” culture. Blunt feedback is encouraged, and trust and discretion are the ultimate gatekeeper, as employees have access to sensitive information and are ultimately trusted for how they expense items and take vacation time.
In the insanely fast-paced streaming-services industry, it is hard to keep this culture at a premium, but it is imperative for the success of the company overall. “As you scale a company to become bigger and bigger, how do you scale that kind of culture?” said Colin Estep, a former senior engineer who left voluntarily in 2016. “I don’t know that we ever had a good answer.”
In order to keep up, sometimes the company is seen as harsh in their tactics to keep the best of the best. “I think we’re transparent to a fault in our culture and that can come across as cutthroat,” said Walta Nemariam, an employee in talent acquisition at Netflix.
Netflix has stayed true to their cultural values despite the pressures and sometimes negative connotations associated with this “cutthroat” environment. Their ability to remain agile, while displaying no tolerance for societal injustices, puts them at the forefront of new-age companies. It is a difficult pace to stay in line with, but it seems that they are keeping in stride and remaining true to who they are, for now.
2. How has the current cultural environment of our country shaped the way that companies are looking at their own corporate cultural standards?
3. What are the potential downfalls and positive influences of the “Netflix way”?
4. How does Netflix’s internal culture negatively or positively affect their ability to stay competitive and deliver cutting-edge content?
Sources: B. Stelter, “The Weinstein Effect: Harvey Weinstein scandal sparks movements in Hollywood and beyond,” CNN Business, October 20, 2017, https://money.cnn.com/2017/10/20/media/weinstein-effect-harvey-weinstein/; L. Hertzler, “Talking #MeToo, one year after bombshell Weinstein allegations,” Penn Today, October 30, 2018, https://penntoday.upenn.edu/news/talking-me-too-one-year-later; S. Ramachandaran and J. Flint, “At Netflix, Radical Transparency and Blunt Firings Unsettle the Ranks,” Wall Street Journal, October 25, 2018, https://www.wsj.com/articles/at-netflix-radical-transparency-and-blunt-firings-unsettle-the-ranks-1540497174.


# Individual and Cultural Differences

## Introduction

### Learning Outcomes

After reading this chapter, you should be able to answer these questions:
1. How do managers and organizations appropriately select individuals for particular jobs?
2. How do people with different abilities, skills, and personalities build effective work teams?
3. How do managers and employees deal effectively with individual differences in the workplace?
4. How can organizations foster a work environment that allows employees an opportunity to develop and grow?
5. How do managers know how to get the best from each employee?
6. What is the role of ethical behavior in managerial actions?
7. How do you manage and do business with people from different cultures?


# Individual and Cultural Differences

## Individual and Cultural Factors in Employee Performance

1. How do managers and organizations appropriately select individuals for particular jobs?
As we can see in the example of Cathie Mahon, our unique personal characteristics can have a dramatic influence on both individual behavior and the behavior of those around us. To succeed in any managerial position, it is necessary to have the appropriate skills and abilities for the situation. Moreover, when selecting subordinates, managers have similar concerns. In short, individual differences can play a major role in how well someone performs on the job. They can even influence whether someone gets the job in the first place. Because of this, we begin this section with a look at individual differences in the workplace.
Several factors can be identified that influence employee behavior and performance. One early model of job performance argued simply that performance was largely a function of ability and motivation. Using this simple model as a guide, we can divide our discussion of individual factors in performance into two categories: those that influence our capacity to respond and those that influence our will or desire to respond. The first category includes such factors as mental and physical abilities, personality traits, perceptual capabilities, and stress-tolerance levels. The second category includes those variables dealing with employee motivation. Both of these sets of factors are discussed in this part of the book as a prelude to more complex analyses of overall organizational performance.
Specifically, we begin our analysis in this chapter with a look at individual differences, including employee abilities and skills, personality variables, and work values. We will also examine the nature of culture and cultural diversity as it affects behavior in organizations both at home and abroad. Later we look at perception and job attitudes, and we review basic learning and reinforcement techniques. The basic theories of employee motivation are then introduced, including the concept of employee needs. More complex cognitive models of motivation will be examined, and finally, we review contemporary approaches to performance appraisals and reward systems in organizations. All told, this coverage aims to introduce the reader to the more salient aspects of individual behavior as they relate to organizational behavior and effectiveness.
1. How do managers and organizations appropriately select individuals for particular jobs?
Because people enter organizations with preset dispositions, it is important to be able to analyze important individual characteristics, effectively select individuals, and appropriately match them to their jobs. However, this must be done carefully in light of both ethical and legal issues that face managers today.


# Individual and Cultural Differences

## Employee Abilities and Skills

1. How do people with different abilities, skills, and personalities build effective work teams?
We begin with a look at employee abilities and skills. Abilities and skills generally represent those physical and intellectual characteristics that are relatively stable over time and that help determine an employee’s capability to respond. Recognizing them is important in understanding organizational behavior, because they often bound an employee’s ability to do the job. For example, if a clerk-typist simply does not have the manual dexterity to master the fundamentals of typing or keyboard entry, her performance will likely suffer. Similarly, a sales representative who has a hard time with simple numerical calculations will probably not do well on the job.

### Mental Abilities

It is possible to divide our discussion of abilities and skills into two sections: mental abilities and physical abilities. Mental abilities are an individual’s intellectual capabilities and are closely linked to how a person makes decisions and processes information. Included here are such factors as verbal comprehension, inductive reasoning, and memory. A summary is shown in .
From a managerial standpoint, a key aspect of mental ability is cognitive complexity. Cognitive complexity represents a person’s capacity to acquire and sort through various pieces of information from the environment and organize them in such a way that they make sense. People with high cognitive complexity tend to use more information—and to see the relationships between aspects of this information—than people with low cognitive complexity. For example, if a manager was assigned a particular problem, would they have the capacity to break the problem down into its various facets and understand how these various facets relate to one another? A manager with low cognitive complexity would tend to see only one or two salient aspects of the problem, whereas a manager with higher cognitive complexity would understand more of the nuances and subtleties of the problem as they relate to each other and to other problems.
People with low cognitive complexity typically exhibit the following characteristics:
They tend to be categorical and stereotypical. Cognitive structures that depend upon simple fixed rules of integration tend to reduce the possibility of thinking in terms of degrees.
Internal conflict appears to be minimized with simple structures. Since few alternative relationships are generated, closure is quick.
Behavior is apparently anchored in external conditions. There is less personal contribution in simple structures.
Fewer rules cover a wider range of phenomena. There is less distinction between separate situations.
On the other hand, people with high levels of cognitive complexity are typically characterized by the following:
Their cognitive system is less deterministic. Numerous alternative relationships are generated and considered.
The environment is tracked in numerous ways. There is less compartmentalization of the environment.
The individual utilizes more internal processes. The self as an individual operates on the process.
Research on cognitive complexity has focused on two important areas from a managerial standpoint: leadership style and decision-making. In the area of leadership, it has been found that managers rated high on cognitive complexity are better able to handle complex situations, such as rapid changes in the external environment. Moreover, such managers also tend to use more resources and information when solving a problem and tend to be somewhat more considerate and consultative in their approach to managing their subordinates. In the area of decision-making, fairly consistent findings show that individuals with high cognitive complexity (1) seek out more information for a decision, (2) actually process or use more information, (3) are better able to integrate discrepant information, (4) consider a greater number of possible solutions to the problem, and (5) employ more complex decision strategies than individuals with low cognitive complexity.

### Physical Abilities

The second set of variables relates to someone’s physical abilities. Included here are both basic physical abilities (for example, strength) and psychomotor abilities (such as manual dexterity, eye-hand coordination, and manipulation skills). These factors are summarized in . Considering both mental and physical abilities helps one understand the behavior of people at work and how they can be better managed. The recognition of such abilities—and the recognition that people have different abilities—has clear implications for employee recruitment and selection decisions; it brings into focus the importance of matching people to jobs. For example, Florida Power has a 16-hour selection process that involves 12 performance tests. Over the test period of a couple of years, 640 individuals applied for “lineperson” jobs. Of these, 259 were hired. As a consequence of the new performance tests and selection process, turnover went from 43 percent to 4.5 percent, and the program saved net $1 million. In addition to selection, knowledge of job requirements and individual differences is also useful in evaluating training and development needs. Because human resources are important to management, it is imperative that managers become more familiar with the basic characteristics of their people.
1. How do people with different abilities, skills, and personalities build effective work teams?
Ability refers to one’s capacity to respond, whereas motivation refers to one’s desire to respond. Abilities can be divided into mental abilities and physical abilities. Personality represents a stable set of characteristics and tendencies that determines the psychological behavior of people.
Personality development is influenced by several factors, including physiological, cultural, family and group, role, and situational determinants.


# Individual and Cultural Differences

## Personality: An Introduction

1. How do managers and employees deal effectively with individual differences in the workplace?
The second individual difference variable deals with the concept of personality. We often hear people use and misuse the term personality. For example, we hear that someone has a “nice” personality. For our purposes, we will examine the term from a psychological standpoint as it relates to behavior and performance in the workplace. To do this, let us start with a more precise definition of the concept.

### Definition of Personality

Personality can be defined in many ways. Perhaps one of the more useful definitions for purposes of organizational analysis is offered by Salvatore Maddi, who defines personality as follows:
“. . . a stable set of characteristics and tendencies that determine those communalities and differences in the psychological behavior (thoughts, feelings, and actions) of people that have continuity in time and that may not be easily understood as the sole result of the social and biological pressures of the moment.”
Several aspects of this definition should be noted. First, personality is best understood as a constellation of interacting characteristics; it is necessary to look at the whole person when attempting to understand the phenomenon and its effects on subsequent behavior. Second, various dimensions of personality are relatively stable across time. Although changes—especially evolutionary ones—can occur, seldom do we see major changes in the personality of a normal individual. And third, the study of personality emphasizes both similarities and differences across people. This is important for managers to recognize as they attempt to formulate actions designed to enhance performance and employee well-being.

### Influences on Personality Development

Early research on personality development focused on the issue of whether heredity or environment determined an individual’s personality. Although a few researchers are still concerned with this issue, most contemporary psychologists now feel this debate is fruitless. As noted long ago by Kluckhohn and Murray:
“The two sets of determinants can rarely be completely disentangled once the environment has begun to operate. The pertinent questions are: (1) which of the various genetic potentialities will be actualized as a consequence of a particular series of life-events in a given physical, social, and cultural environment? and (2) what limits to the development of this personality are set by genetic constitution?”
In other words, if the individual is viewed from the whole-person perspective, the search for the determinants of personal traits focuses on both heredity and environment as well as the interaction between the two over time. In this regard, five major categories of determinants of personal traits may be identified: physiological, cultural, family and social group, role, and situational determinants.
Physiological Determinants. Physiological determinants include factors such as stature, health, and sex that often act as constraints on personal growth and development. For instance, tall people often tend to become more domineering and self-confident than shorter people. Traditional sex-role stereotyping has served to channel males and females into different developmental patterns. For example, males have been trained to be more assertive and females more passive.
Cultural Determinants. Because of the central role of culture in the survival of a society, there is great emphasis on instilling cultural norms and values in children growing up. For instance, in capitalist societies, where individual responsibility is highly prized, emphasis is placed on developing achievement-oriented, independent, self-reliant people, whereas in socialistic societies, emphasis is placed on developing cooperative, group-oriented individuals who place the welfare of the whole society ahead of individual needs. Cultural determinants affect personal traits. As Mussen notes, “The child’s cultural group defines the range of experiments and situations he is likely to encounter and the values and personality characteristics that will be reinforced and hence learned.” Consider, for example, how Japanese society develops its world-renowned work ethic.
Family and Social Group Determinants. Perhaps the most important influences on personal development are family and social group determinants. For instance, it has been found that children who grow up in democratic homes tend to be more stable, less argumentative, more socially successful, and more sensitive to praise or blame than those who grow up in authoritarian homes. One’s immediate family and peers contribute significantly to the socialization process, influencing how individuals think and behave through an intricate system of rewards and penalties.
Role Determinants. People are assigned various roles very early in life because of factors such as sex, socioeconomic background, and race. As one grows older, other factors, such as age and occupation, influence the roles we are expected to play. Such role determinants often limit our personal growth and development as individuals and significantly control acceptable behavior patterns.
Situational Determinants. Finally, personal development can be influenced by situational determinants. These are factors that are often unpredictable, such as a divorce or death in the family. For instance, James Abegglen studied 20 successful male executives who had risen from lower-class childhoods and discovered that in three-fourths of the cases these executives had experienced some form of severe separation trauma from their fathers. Their fathers (and role models) had either died, been seriously ill, or had serious financial setbacks. Abegglen hypothesized that the sons’ negative identification with their fathers’ plights represented a major motivational force for achievement and success.
1. How do managers and employees deal effectively with individual differences in the workplace?
Self-esteem represents opinions and beliefs concerning one’s self and one’s self-worth.
Locus of control is a tendency for people to attribute the events affecting their lives either to their own actions (referred to as internal locus of control) or to external forces (referred to as external locus of control).