# Organizational Behavior (OB): What It Is and Why It Matters

> **Definition**
>
> Organizational behavior is the academic study of human behavior in group settings.

## What Is Organizational Behavior (OB)?

Organizational behavior (OB), the study of how people interact in a group, is widely used in business to improve the performance of individuals and the group as a whole. As an academic subject, organizational behavior is studied in business, psychology, and sociology disciplines.

Organizational behavior includes research on improving job performance, increasing job satisfaction, promoting innovation, and encouraging [leadership](https://www.investopedia.com/terms/l/leadership.asp).

### Key Takeaways

  

*   Organizational behavior is a foundation of corporate human resources programs, with elements such as employee retention, engagement, training, and culture.
*   Academic programs on organizational behavior draw on anthropology, ethnography, and leadership studies.
*   The Hawthorne Effect, which describes how people's behavior changes when they know they are being observed, is the best-known study of organizational behavior.

![Organizational Behavior](https://www.investopedia.com/thmb/7b4hezzJpAKPDtzdsEvaG3CV8U4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/organizational-behavior-9d705b2e75d34e4e9816a34509e360ed.jpg)

*— Theresa Chiechi / Investopedia*

## Learning Organizational Behavior

Academic programs focusing on organizational behavior are found in business schools, as well as at schools of social work and psychology. These programs draw from the fields of anthropology, ethnography, and leadership studies and use quantitative, qualitative, and computer models as methods to explore and test ideas.

Depending on the program, one can study specific topics within organizational behavior or broader fields within it. Specific topics covered include cognition, decision-making, learning, motivation, negotiation, impressions, group process, stereotyping, and power and influence. The broader study areas include social systems, the dynamics of change, markets, relationships between organizations and their environments, how social movements influence markets, and the power of [social networks](https://www.investopedia.com/articles/markets/081315/3-social-media-networks-facebook.asp).

### Why Is It Important to Study Organizational Behavior?

Studying organizational behavior allows an organization to understand how its employees behave and interact with each other and the organization itself. Using the results, organizations can implement changes that enhance performance and efficiency, as well as improve employee satisfaction.

## Organizational Behavior Origins

The study of organizational behavior has its roots in the late 1920s, when the Western Electric Company launched a now-famous series of studies of the behavior of workers at its Hawthorne Works plant in Cicero, Illinois.

Researchers there set out to determine whether workers could be made to be more productive if their environment was upgraded with better lighting and other design improvements. To their surprise, the researchers found that the environment was less important than social factors. It was more important, for example, that people got along with their co-workers and felt their bosses appreciated them.

Those initial findings inspired a series of wide-ranging studies between 1924 and 1933. They included the effects on productivity of work breaks, isolation, and lighting, among many other factors.

The [Hawthorne Effect](https://www.investopedia.com/terms/h/hawthorne-effect.asp)—which describes the way test subjects' behavior may change when they know they are being observed—is the best-known study of organizational behavior. Researchers are taught to consider whether or not (and to what degree) the Hawthorne Effect may skew their findings on human behavior.

Organizational behavior was not fully recognized by the American Psychological Association as a field of academic study until the 1970s. However, the Hawthorne research is credited for validating organizational behavior as a legitimate field of study and it's the foundation of the [human resources](https://www.investopedia.com/terms/h/humanresources.asp) (HR) profession as we now know it.

### Evolution of Organization Behavior

The leaders of the Hawthorne study had a couple of radical notions. They thought they could use the techniques of scientific observation to increase an employee's amount and quality of work, and they did not look at workers as interchangeable resources. Workers, they thought, were unique in terms of their psychology and potential fit within a company.

Over the following years, the concept of organizational behavior widened. Beginning with World War II, researchers began focusing on logistics and management science. Studies by the Carnegie School in the 1950s and 1960s solidified these rationalist approaches to decision-making.

Today, those and other studies have evolved into modern theories of business structure and decision-making. The new frontiers of organizational behavior are the cultural components of organizations, such as how race, class, and gender roles affect group building and productivity. These studies take into account how identity and background inform decision-making.

> **Important**
>
> Organizational behavior is no different than other forms of psychological behavior analysis. It simply emphasizes how individuals operate and work together within a business setting.

## Organizational Behavior Study Methods

Organizational behavior can be studied using a variety of methods to collect data. Surveys are a popular research method in organizational behavior research. They involve asking individuals to answer a set of questions, often using a Likert scale. The goal of the survey is to gather quantitative data on attitudes, behaviors, and perceptions related to a particular topic. In a similar manner, companies may perform interviews to gather data about individuals' experiences, attitudes, and perceptions.

Companies can also gather data without directly interacting with study subjects. Observations involve watching individuals in real-life settings to gather data on their behaviors, interactions, and decision-making processes. Meanwhile, a company can perform case studies to perform an in-depth examination of a particular organization, group, or individual.

In situations where there isn't really precedent, companies can study organizational behavior by running experiments. By manipulating one or more variables at a time to observe the effect on a particular outcome, a company can get the best sense of how organizational behavior tweaks change employee disposition.  

> **Fast Fact**
>
> Organizational behavior data can be quantitative or qualitative.

## What Are the Different Theories and Models of Organizational Behavior?

Following are important theories that help employers understand organizational behavior:

*   Classical Management Theory
*   Human Relations Theory
*   Systems Theory
*   Contingency Theory
*   Transformational Leadership Theory

Although these models and theories are useful tools, practical application requires far more complexity accounted for.

## Organizational Behavior and HR

Organizational behavior is an especially important aspect to human resources. By better understanding how and why individuals perform in a certain way, organizations can better recruit, retain, and deploy workers to achieve its mission. The specific aspects of organizational behavior relating to HR are listed below.

### Recruitment

Organizational behavior research is used to identify the skills, abilities, and traits that are essential for a job. This information is used to develop job descriptions, selection criteria, and assessment tools to help HR managers identify the best candidates for a position. This is especially true for roles that may have technical aspects but rely more on [soft skills](https://www.investopedia.com/terms/s/soft-skills.asp).

### Training

Organizational behavior can be used to design and deliver training and development programs that enhance employees' skills. These programs can focus on topics such as communication, leadership, teamwork, and diversity and inclusion. In addition, organizational behavior can be used to better understand how each individual may uniquely approach a training, allowing for more customized approaches based on different styles.

### Performance Management

Organizational behavior is used to develop performance management systems that align employee goals with organizational objectives. These systems often include performance metrics, feedback mechanisms, and performance appraisal processes. By leveraging organizational behavior, a company can better understand how its personnel will work towards common goals and what can be achieved.

### Employee Engagement

Organizational behavior is used to develop strategies to improve [employee engagement](https://www.investopedia.com/terms/e/employee-engagement.asp) and motivation. These strategies can include recognition and rewards programs, employee involvement initiatives, and career development opportunities. Due to the financial incentives of earning a [paycheck](https://www.investopedia.com/how-to-read-your-paycheck-5094518), organizational behavior strives to go beyond incentivizing individuals with a paycheck and understanding ways to enhance the workplace with other interests.

### Organizational Behavior vs. Organizational Culture

Organizational behavior research is used to develop and maintain a positive organizational culture. This organizational culture consists of the shared beliefs and values of an organization which serves as the source of employee behavior.

Since each individual may act in their own unique manner, it is up to organizational behavior to blend personalities, integrate backgrounds, and bring people together for a common cause. This includes devising strategies that supports employee well-being, trust, and a shared vision for the future.

## Organizational Behavior vs. Organizational Theory

Organizational behavior and organizational theory are related fields of study, but they have some important differences. While organizational behavior is concerned with understanding and improving the behavior of individuals, organizational theory is concerned with developing and testing theories about how organizations function and how they can be structured effectively.

Organizational theory draws on concepts and theories from economics, sociology, political science, and other [social sciences](https://www.investopedia.com/terms/s/social-science.asp). It aims to understand how organizations are structured and how they operate. In some aspects, organizational behavior can be considered a subset of organizational theory.

Both fields are important for understanding and improving organizational performance, and they often overlap in their research topics and methods. However, organizational theory is often much broader and does not focus on individuals.

## Examples of Organizational Behavior

Findings from organizational behavior research are used by executives and human relations professionals to better understand a [business’s culture](https://www.investopedia.com/terms/c/corporate-culture.asp), how that culture helps or hinders productivity and employee retention, and how to evaluate candidates' skills and personality during the hiring process.

Organizational behavior theories inform the real-world evaluation and management of groups of people. There are several components:

*   Personality plays a large role in the way a person interacts with groups and produces work. Understanding a candidate's personality, either through tests or through conversation, helps determine whether they are a good fit for an organization.
*   Leadership—what it looks like and where it comes from—is a rich topic of debate and study within the field of organizational behavior. Leadership can be broad, focused, centralized or de-centralized, decision-oriented, intrinsic in a person’s personality, or simply a result of a position of authority.
*   Power, authority, and politics all operate inter-dependently in a workplace. Understanding the appropriate ways these elements are exhibited and used, as agreed upon by workplace rules and ethical guidelines, are key components to running a cohesive business.

## Why Is Organizational Behavior Important?

Organizational behavior describes how people interact with one another inside of an organization, such as a business. These interactions subsequently influence how the organization itself behaves and how well it performs. For businesses, organizational behavior is used to streamline efficiency, improve productivity, and spark innovation to give firms a competitive edge.

## What Are the 4 Elements of Organizational Behavior?

The four elements of organizational behavior are people, structure, technology, and the external environment. By understanding how these elements interact with one another, improvements can be made. While some factors are more easily controlled by the organization—such as its structure or people hired—it still must be able to respond to external factors and changes in the economic environment.

## What Are the 3 Levels of Organizational Behavior?

The first is the individual level, which involves organizational psychology and understanding human behavior and incentives. The second level is groups, which involves social psychology and sociological insights into human interaction and group dynamics. The top-level is the organizational level, where organization theory and sociology come into play to undertake systems-level analyses and the study of how firms engage with one another in the marketplace.

## What Are Some Common Problems that Organizational Behavior Tries to Solve?

Organizational behavior can be used by managers and consultants to improve the performance of an organization and to address certain key issues that commonly arise. These may include a lack of direction or strategic vision for a company, difficulty getting employees on board with that vision, pacifying workplace conflict or creating a more amenable work environment, issues with training employees, poor communication or feedback, and so on.

## The Bottom Line

OB is the study of human behavior in an organizational setting. This includes how individuals interact with each other in addition to how individuals interact with the organization itself. OB is a critical part of human resources, though it is embedded across a company.

> **Article Sources**
>
> 1.  Harvard Business School. "[Harvard Business School and the Hawthorne Experiments (1924-1933)](https://www.library.hbs.edu/hc/hawthorne/intro.html)."
>     
> 2.  Society for Industrial and Organizational Psychology. "[A Brief History of the Society for Industrial and Organizational Psychology, Inc. – A Division of the APA](https://www.siop.org/About-SIOP/SIOP-Museum/Koppes-History)."
>     
> 3.  Mie Augier. "[Cyert, March, and the Carnegie School](https://organizationsandmarkets.files.wordpress.com/2009/09/augier-m-cyert-march-and-the-carnegie-school.pdf)," Page 1.