1.2 Understanding Organizational Behavior

This book is all about people. It is especially about people at work. As evidenced in the opening case, we will share many examples of people trying out new things, developing, growing, and making their workplaces work. People can make work an exciting, fun, and productive place to be, or they can make it a routine, boring, and ineffective place everyone dreads. The late Steve Jobs, cofounder and former chairman and CEO of Apple Inc., attributed the innovations at Apple, which include the iPod, MacBook, iPhone, and iPad, to people, noting, “Innovation has nothing to do with how many R&D dollars you have. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.” Current Apple CEO, Tim Cook, continues this philosophy, regularly acknowledging his employees. For example, he recently tweeted, “Thank you to our outstanding retail teams around the world. Your contagious energy and passion represent the best of Apple. It’s a privilege to work with all of you.” Mary Kay Ash, founder of Mary Kay Inc., a billion-dollar cosmetics company, makes a similar point, saying, “People are definitely a company’s greatest asset. It doesn’t make any difference whether the product is cars or cosmetics. A company is only as good as the people it keeps.”

Just like people, organizations come in many shapes and sizes. We understand that the career path you take may include a variety of different organizations. In addition, we know that each student reading this book has a unique set of personal and work-related experiences, capabilities, and career goals. On average, a person working in the United States will change jobs nearly twelve times in their career. In order to succeed in this type of career situation, individuals need to be armed with the tools necessary to be lifelong learners. So, this book is not about giving you all the answers to every situation you may encounter when you start your first job or as you continue up the career ladder. Instead, this book gives you the vocabulary, frameworks, and critical-thinking skills necessary for you to diagnose situations, ask tough questions, evaluate the answers you receive, and act in an effective and ethical manner in a variety of different contexts.

Throughout this book, when we refer to organizations, we will include examples that may apply to diverse organizations, such as publicly held, for-profit organizations like General Motors, StitchFix, and Netflix; privately owned businesses such as SpaceX and Detroit Bikes; government-funded organizations such as NASA; co-op owned organizations such as REI; and B Corporations (B Corps) such as Brew Dr. Kombucha and Tea. We will also refer to both small and large corporations. You will see examples from Fortune 500 organizations, such as Costco, Walt Disney, or PepsiCo; non-US-based organizations such as IKEA and Alibaba; as well as small start-up organizations. Keep in mind that some of the small organizations of today may become large organizations in the future. For example, in 1998, eBay Inc. had only 29 employees and $47.4 million in income, but over 20 years later in 2020 eBay had 13,000+ employees and more than $10 billion in revenue. Regardless of the size or type of organization you may work for, people are the common denominator of how work is accomplished within organizations.

Together, we will examine people at work both as individuals and within work groups and how they impact and are impacted by the organizations where they work. Before we can understand these three levels of organizational behavior, we need to agree on a definition of organizational behavior.

Organizational behavior (OB)The systematic study and application of knowledge about how individuals and groups act within the organizations where they work. is defined as the systematic study and application of knowledge about how individuals and groups act within the organizations where they work. As you will see throughout this book, definitions are important. They are important because they tell us what something is as well as what it is not. For example, we will not be addressing childhood development in this course—that concept is often covered in psychology—but we might draw on psychology research to understand the basics of perception, or the nature of power.

OB draws from other disciplines to create a unique field. As you read this book, you will most likely recognize OB’s roots in other disciplines. For example, when we review topics such as personality and motivation, we will again review studies from the field of psychology. The topic of team processes relies heavily on the field of sociology. In the chapter relating to decision making, you will come across the influence of economics. When we study power and influence in organizations, we borrow heavily from political sciences. Even medical science contributes to the field of organizational behavior, particularly to the study of stress and its effects on individuals.

Those who study organizational behavior—which now includes you—are interested in several outcomes, such as work attitudes (e.g., job satisfaction and organizational commitment) and workplace behaviors (e.g., customer service and counterproductive work behaviors). A distinction is made in OB regarding which level of the organization is being studied at any given time. There are three key levels of analysisIn organizational behavior, this includes examining the individual, the group, and the organization. in OB: the individual, the group, and the organization. For example, if we want to understand our boss’ personality, we would be using the individual level of analysis. If we want to know about how our manager’s personality affects our team, we are examining things at the team, or group, level. But if we want to understand how our organization’s culture affects organizational performance, we would be interested in the organizational level of analysis.

OB matters at three critical levels. It matters because it is all about things you care about. OB can help you become a more engaged organizational member. Getting along with others, getting a great job, lowering your stress level, making more effective decisions, and working effectively within a team; these are all great things, and OB addresses them!

It matters because employers care about topics that are covered in OB. A recent survey by the National Association of Colleges and Employers (NACE) determined which skills are the most important for employers when evaluating college graduate job candidates, and OB topics topped the list as you can see below.

The top five personal qualities/skills:

Finally, it matters because organizations care about understanding people. The best companies in the world understand that the people make the place. How do we know this? We know that organizations that value their employees are more profitable than those that do not. Research shows that successful organizations have a number of things in common, such as providing employment security, engaging in selective hiring, utilizing self-managed teams, being decentralized, paying well, training employees, reducing status differences, and sharing information. Glassdoor.com, a popular review website of corporations, highlights the best companies, such as Boston Consulting Group, In-N-Out Burger, and Lululemon, where employees give kudos to management for providing learning opportunities, giving employees challenging and interesting work and not micromanaging the process, and treating employees with respect. Research shows that organizations that are considered healthier and more effective focus on how they relate to their employees by being deliberate and mindful about providing role clarity, information sharing, and performance feedback. Unfortunately, research shows that many organizations do not have employees reporting that they have healthy work cultures. For example, only 20% of employees strongly agree that their organization’s performance management approach motivates them to do their best work. Clearly, there’s room for better organizational behavior in many organizations.

In the rest of this chapter, we will build on how you can use this book by adding tools to your OB Toolbox in each section of the book as well as assessing your own learning style preferences. In addition, it is important to understand the research methods used to define OB, so we will also review those. Finally, you will see what challenges and opportunities businesses are facing and how OB can help overcome these challenges.

Throughout the book, you will see many OB Toolbox features. Our goal in writing this book is to create something useful for you to use now and as you progress through your career. Sometimes we will focus on tools you can use today. Other times we will focus on things you may want to think about that may help you later. As you progress, you may discover some OB tools that are particularly relevant to you while others are not as appropriate at the moment. That’s great—keep those that have value to you. You can always go back and pick up tools later on if they don’t seem applicable right now.

The important thing to keep in mind is that the more tools and skills you have, the higher the quality of your interactions with others will be and the more valuable you will become to organizations that compete for top talent. It is not surprising that, on average, the greater the level of education you have, the more money you will make. Those with a bachelor’s degree make over 67% more money than those who have a high school degree, and the differences in pay continue to grow with those earning a master's degree making more than double the income of a high school graduate. Organizations value and pay for skills, as the next figure shows.

As instructors we have heard this question many times. The answer, as you might have guessed, is no—OB is not just common sense. As we noted earlier, OB is the systematic study and application of knowledge about how individuals and groups act within the organizations where they work. Systematic is an important word in this definition. It is easy to think we understand something if it makes sense, but research on decision making shows that this can easily lead to faulty conclusions because our memories fail us. We tend to notice certain things and ignore others, and the specific manner in which information is framed can affect the choices we make. Therefore, it is important to rule out alternative explanations one by one rather than to assume we know about human behavior just because we are humans! Go ahead and take the following quiz and see how many of the 10 questions you get right. If you miss a few, you will see that OB isn’t just common sense. If you get them all right, you are way ahead of the game!