A Strategic Approach To Organizational Behavior

1. Chapter 1 A Strategic Approach To Organizational Behavior Michael A. Hitt C. Chet Miller Adrienne Colella

2. Knowledge Objectives • Define organizational behavior and explain the strategic approach to OB. • Provide a formal definition of organization. • Describe the nature of human capital. • Discuss the conditions under which human capital is a source of competitive advantage for an organization. • Explain the five characteristics of high-involvement management and the importance of this approach to management.

3. Basic Elements of Strategic Organizational Behavior • Organizational behavior • The actions of individuals and groups in an organizational context. • Managing organizational behavior • Actions focused on acquiring, developing, and applying the knowledge and skills of people. • Strategic approach to OB • An approach that involves organizing and managing the people’s knowledge and skills effectively to implement the organization’s strategy and gain a competitive advantage.

4. Organizational Factors (culture, work environments, adaptability Factors and Outcomes of Strategic Approach Organizational Success Satisfaction of Individuals and Groups Productivity of Individuals and Groups Individual Factors (learning ability, personality, values, motivation, stress) Interpersonal Factors (leadership, communication, decision-making skill, intra- and inter-group dynamics, communication) Adapted from: Exhibit 1.1 Factors and Outcomes of a Strategic Approach to Organizational Behavior

5. Strategic OB Lens Organization Level Activities Required Skills Senior Managers • Conceptualizing • Communicating • Understanding the perspectives of others • Talk with insiders and outsiders about • Vision • Strategy • Other major issues • Help middle managers • Define and redefine their roles • Manage conflict • Listening • Conflict management • Negotiating • Motivating • Interpersonal influence • Create and maintain the organization’s culture

6. Strategic OB Lens Organization Level Activities Required Skills Middle Managers • Networking • Communicating • Influencing • Champion strategic ideas • Help firm to remain adaptive • Analyzing • Communicating • Process data and information for use by other individuals • Communicating • Motivating • Understanding values • Managing stress • Deliver strategic initiatives to lower-level managers

7. Strategic OB Lens Organization Level Activities Required Skills Lower-level Managers • Teaching • Listening • Understanding personalities • Managing stress • Coaching firm’s associates (workers) • Negotiating • Influencing others • Counseling • Understanding personalities • Removing obstacles for associates • Deal with personal problems of associates • Negotiating • Group dynamics • Design jobs, team structures, and reward systems

8. Foundations of Strategic OB • Behavioral science disciplines • Psychology • Social psychology • Sociology • Economics • Cultural anthropology • Strategic approach integrates knowledge from all these disciplines • Strategic approach focuses on behaviors and processes that help to create competitive advantages and financial success (goal is to improve the outcomes of organizations)

9. Common Features of Organizations • Network of individuals • System • Coordinated activities • Division of labor • Goal orientation • Continuity over time, regardless of change in individual membership

10. Human Capital and Competitive Advantage • Human capital: The sum of the skills, knowledge, and general attributes of the people in an organization • Competitive advantage: An advantage enjoyed by an organization that can perform some aspect of its work better than competitors or in a way that competitors cannot duplicate such that it offers products/services that are more valuable to customers

11. Human Capital Value Human Capital Imitability Human Capital Rareness Human Capital as Source of Competitive Advantage Competitive Advantage Associates are capable of performing the basic work of the organization Skills and talents of associates cannot be copied by other organizations Skills and talents of associates are unique in the industry

12. Human Capital as Source of Competitive Advantage Are human resources in the firm . . . Valuable Rare Difficult to imitate Supported by effective management Competitive implications Performance No Competitive Disadvantage Below Normal Yes No Competitive Parity Normal Yes Yes No Temporary Competitive Advantage Above Normal Yes Yes Yes Sustained Competitive Advantage Above Normal Exhibit 1.2 Human Capital and Competitive Advantage Source: Adapted from J. Barney and P. Wright, “On Becoming a Strategic Partner,” Human Resource Management 37 (1999): 31–46.

13. Dimensions of High-Involvement Management Exhibit 1.3 Dimensions of High-Involvement Management Aspect Description Selective Hiring Large pools of applicants are built through advertising, word of mouth, and internal recommendations. Applicants are evaluated rigorously using multiple interviews, tests, and other selection tools. Applicants are selected on the basis of not only skills but also fit with culture and mission. Extensive Training New associates and managers are thoroughly trained for job skills through dedicated training exercises as well as on-the-job training. They also participate in structured discussions of culture and mission. Existing associates and managers are expected or required to enhance their skills each year through in-house or outside training and development. Often, existing associates and managers are rotated into different jobs for the purpose of acquiring additional skills. Exhibit 1.3 Dimensions of High-Involvement Management

14. Dimensions of High-Involvement Management Exhibit 1.3 Dimensions of High-Involvement Management Aspect Description Decision Power Associates are given authority to make decisions affecting their work and performance. Associates handle only those issues about which they have proper knowledge. Lower-level managers shift from closely supervising work to coaching associates. In addition to having authority to make certain decisions, associates participate in decisions made by lower-level and even middle managers. Information Sharing Associates are given information concerning a broad variety of operational and strategic issues. Information is provided through bulletin boards, company intranets, meetings, posted performance displays, and newsletters. Incentive Compensation Associates are compensated partly on the basis of performance. Individual performance, team performance, and business performance all may be considered. Exhibit 1.3 Dimensions of High-Involvement Management

15. High-Involvement Managers High-involvement managers: • Identify situations in which responsibility can be delegated • Manage through encouragement and commitment rather than fear and threats • Respect and value each associate’s skills and knowledge • Empower people in ways that are consistent with their uniqueness as individuals • Invest effort in building and maintaining trust

16. Managing Organizational Behavior Exhibit 1.4 Managing Organizational Behavior for Competitive Advantage