Organisational Behaviour: Significance and Theories

A bank branch brings in new software, and staff who were steady on the old system start making mistakes and calling in sick. The software works. What needs explaining is how the people responded to it.

OB works at three levels. The individual level covers personality, perception, attitudes, values, learning and motivation. The group level covers norms, teams, leadership and conflict. The organisation level covers structure, culture and change. OB borrows from psychology, social psychology, sociology, anthropology and political science.

Back to the bank branch. At the individual level, a clerk near retirement may doubt she can learn the software. At the group level, the counter staff may have agreed among themselves to go slow. At the organisation level, head office may have rolled it out with no training. Each level points to a different fix: coaching one person, talking with the group, or paying for training.

The management thought behind OB moved in three steps: from efficiency, to human behaviour, to systems and situational thinking.

Don't confuse OB with human resource management (HRM). HRM is a management function: hiring, training, pay and appraisal. OB is the knowledge about behaviour that HRM, and every other manager, draws on.

Where it breaks. OB findings are tendencies that hold on average, not laws that hold for every person. Much of the research was done in North American and European firms, so a finding needs testing before it is applied in an Indian office.

For exams. Match each school to its thinkers: classical with Taylor, Fayol and Weber; behavioural with Mayo, Maslow and McGregor; modern with systems and contingency theory. Know the three levels of analysis and the three aims: understand, predict, improve.

A textile mill in Surat sees output fall. The new manager has to decide where to look: at the weavers, at how the shifts are arranged, at the looms, or at the market the mill sells into. OB gives her a short checklist of what to keep in view.

A change in one element reaches the others. New looms (technology) change the jobs (structure), and the weavers (people) may resist.

Aims. Fred Luthans states the purpose as understanding, prediction and control of behaviour in organisations. Here "control" means guiding behaviour toward the goal, not forcing it. It matches the "understand, predict, improve" in the first concept of this chapter.

Characteristics. OB is a way of thinking about individuals, groups and organisations. It is multidisciplinary, humanistic (people's attitudes, feelings and goals matter), performance-oriented, and applications-oriented (it answers questions managers face). It uses scientific method to test its claims.

What each discipline contributes. The first concept named the five disciplines. This is what OB takes from each.

Don't confuse psychology with social psychology. Psychology works at the level of one person. Social psychology asks how that person is changed by others, which is why group decisions and attitude change sit there.

Scope. The usual list runs across the three levels. Individual: personality, perception, learning, attitudes, motivation and emotions. Group: teams, leadership, communication, power and politics, conflict. Organisation: structure, job design, culture, change, organisational development, and stress.

Where it breaks. A list of elements tells a manager what to look at, not what to do. Real problems cross the boundaries between disciplines, and each discipline may give a different answer.

For exams. Know the four elements, Luthans's three aims, the five characteristics, and which discipline gives which topic. Importance is usually answered as: better understanding of employees, better motivation, better use of resources, and better relations between management and staff.

People, structure, technology, environment: change one and the rest move.

Two firms in the same town pay about the same. In one, the owner decides everything and workers wait for orders. In the other, teams plan their own work and own the results. The difference lies in the model of OB each firm runs on.

An illustration of each (hypothetical Indian settings):

• Autocratic: the owner of a small workshop gives each worker a task and checks it. Workers obey because the wage is their livelihood.
• Custodial: a large public-sector company gives its staff a township, a hospital and a pension. Staff are secure and loyal, though some stay only for the benefits.
• Supportive: a bank branch manager coaches new officers, listens to their ideas and recognises good work. Officers take part in decisions.
• Collegial: a college fest committee has no fixed bosses. Members take on tasks, discipline themselves and share the result.
• System: a firm where employees see the company's purpose as their own, and where managers weigh each person's goals with the organisation's. People feel they have a stake in it.

Don't confuse the models with leadership styles. Autocratic, democratic and laissez-faire describe one leader's way of deciding. A model describes the whole climate: what the organisation relies on, what it expects of people, and what people feel in return. Models resemble McGregor's pair loosely: autocratic leans to Theory X, collegial to Theory Y.

Where it breaks. The models are not stages where each replaces the last. Most firms mix them. Autocratic suits an emergency or a routine task, and collegial needs skilled people and a culture of trust. Custodial can keep weak performers and trap staff who would rather leave. The system model is the least tested of the five.

In practice. A manager can ask which model her unit runs on today, which one the work calls for, and what would have to change in her own behaviour to get there.

For exams. Expect matching: each model to its basis (power, economic resources, leadership, partnership, trust and community) and to the need it meets (subsistence, security, status and recognition, self-actualisation).

Power, money, leadership, partnership, trust.

An auto-parts plant in Pune ships late every month. Each machinist sets up his lathe his own way, and three supervisors give him different orders. The classical school was built for problems like this.

It grew up with the Industrial Revolution, when large factories needed ways to organise many workers. Three approaches make it up.

Taylor's four principles (The Principles of Scientific Management, 1911):

1. Science, not rule of thumb.
2. Scientific selection and training of workers.
3. Cooperation between workers and management.
4. Division of work and responsibility: managers plan and train, workers perform.

Taylor's pay idea, worked through. His differential piece-rate paid a higher rate to workers who reached the standard output. As an illustration, say the Pune plant sets a standard of 40 pieces a day. It pays ₹50 a piece to those who reach it and ₹40 a piece to those who do not.

• A machinist who makes 42 pieces earns 42 × ₹50 = ₹2,100.
• One who makes 38 pieces earns 38 × ₹40 = ₹1,520.
• Four pieces apart in output, they are ₹580 apart in pay: the gap pulls workers up to the standard.

Fayol (1916) named five functions of management: planning, organising, commanding, coordinating and controlling. His fourteen principles are division of work; authority and responsibility; discipline; unity of command; unity of direction; and subordination of individual interest to the general interest. The rest are remuneration; centralisation; scalar chain; order; equity; stability of tenure; initiative; and esprit de corps. In the Pune plant, unity of command would give each machinist one supervisor.

Weber's aim was efficiency and an end to favouritism. In a bureaucracy, a machinist is promoted because he passes a skills test, not because he is related to the plant head.

Don't confuse Taylor with Fayol. Taylor worked from the shop floor up: the best way to do one task. Fayol worked from the top down: what every manager does. Unity of command is Fayol's principle. Taylor's functional foremanship, which put eight specialist foremen over each worker, breaks it.

Where it breaks. The classical school treated workers as parts of a machine, moved mainly by pay. It ignored feelings, informal groups and the world outside the organisation. In a bureaucracy, rules can become goals in themselves, which is what people mean by red tape.

In practice. Shop-floor procedures, hospital checklists and a public-sector bank's written rules are classical ideas still at work. They suit repeated tasks where errors are costly.

For exams. Expect Taylor's principles and techniques (time study, motion study, functional foremanship, differential piece-rate), Fayol's five functions and fourteen principles, and Weber's features of bureaucracy. Theories of management (Unit 1) treats each thinker in more depth.

Taylor the task, Fayol the manager, Weber the rules.

A plant manager raises pay and brightens the lighting, but output barely moves. Meanwhile a team whose supervisor listens and praises keeps beating its targets. The behavioural school set out to explain why.

It began as a reaction to the limits of the classical approach. Three bodies of work define it.

1. The Hawthorne studies ran from 1924 to 1932 at Western Electric's Hawthorne Works near Chicago. Elton Mayo and his Harvard colleagues interpreted them. They ran in four phases.

• Illumination experiments: output rose in both the test group and the control group, whether the lighting went up or down. Something other than light was at work.
• Relay assembly test room: a small group of women had their breaks and hours changed. Output rose through most changes, and stayed high when the old conditions returned.
• Interviewing programme: thousands of employees were interviewed. Being listened to improved morale.
• Bank wiring observation room: a group of men set their own output norm and pressed anyone who worked too fast or too slow.

The conclusion: social needs, morale and relationships shape behaviour at work, and productivity rose when employees felt valued. The Hawthorne effect is the change in behaviour that comes from attention, including being observed.

2. Maslow's hierarchy of needs: physiological, safety, social, esteem and self-actualisation. Managers should understand and address the different needs employees have. Values, learning and motivation (this unit) explains it in full.

3. McGregor's Theory X and Theory Y (The Human Side of Enterprise, 1960): two opposite sets of assumptions a manager may hold about people at work.

An example. Two managers run branches of the same public-sector bank. The first checks every voucher himself and lets no officer decide anything alone: Theory X. The second agrees targets with her officers and lets them choose how to meet them: Theory Y.

Don't confuse Theory X and Y with two types of worker. They are a manager's assumptions about workers. McGregor's point was that assumptions tend to fulfil themselves: treat people as lazy and they disengage. Theory Z is a separate idea, William Ouchi's 1981 account of Japanese-style management.

Where it breaks. The Hawthorne groups were small and the controls weak, and later re-analyses of the data questioned how much attention alone raised output. A happy worker is not always a productive one. Research gives little support to Maslow's strict order of needs.

For exams. Know the four Hawthorne phases in order, the meaning of the Hawthorne effect, Maslow's five levels, and the Theory X and Theory Y contrast.

The core contrast: control against participation.

A rule book that suits Indian Railways would smother a two-person chai stall, and the stall's easy habits could not run a railway. The modern school asks what fits each case.

The modern school recognises how complex organisations are, and how much they depend on their environment.

Systems theory sees the organisation as an open system. Inputs (labour, materials, capital) pass through a transformation process (activities and operations) to become outputs (products and services). Feedback returns to the start, all within an external environment. The parts are interrelated and work toward a common goal. The key ideas are interdependence, interaction, environment and feedback.

An example. A district milk cooperative takes in milk, labour and capital, then chills, tests and packs the milk for shops. Shops report that one pack size goes unsold, and the cooperative changes its packing. A weak monsoon or a new rival brand, both in the environment, can upset every part at once.

Contingency theory holds that there is no single best way to manage: practice must be tailored to the situation. Effectiveness depends on the external environment, technology, organisational structure and the characteristics of the workforce. Research found, for example, that tight, rule-bound (mechanistic) structures suit stable markets, while flexible (organic) structures suit fast-changing ones.

The manager works in four steps:

1. Analyse the situation.
2. Identify the variables that matter.
3. Adapt the practice to fit them.
4. Act, and watch the results.

Don't confuse systems theory with contingency theory. Systems theory describes how the parts of an organisation connect with each other and the environment. Contingency theory tells a manager how to choose a practice: by reading the situation. A closed system, by contrast, ignores its environment, as the classical school largely did.

Where it breaks. "It depends" helps only when the manager knows what it depends on. Systems theory can describe almost anything and prescribe very little. And contingency does not mean "anything goes": some choices fit a situation and others do not.

For exams. Know input, transformation, output and feedback; open against closed systems; and contingency as "no one best way". Expect Ludwig von Bertalanffy with general systems theory, and Burns and Stalker, Joan Woodward, and Lawrence and Lorsch with contingency research.

Go deeper for practitioners

Open-system terms. Ludwig von Bertalanffy developed general systems theory in biology. Daniel Katz and Robert Kahn applied open-system thinking to organisations in the 1960s. Three terms recur: synergy, the whole achieving more than its parts alone; entropy, the tendency of a closed system to run down; and equifinality, reaching the same end by different paths.

Three contingency studies. Tom Burns and G. M. Stalker (1961) found mechanistic structures suited stable markets and organic structures suited changing ones. Joan Woodward linked the best structure to a firm's production technology: unit, mass or process production. Paul Lawrence and Jay Lorsch (1967) showed that firms in uncertain environments need more difference between departments, and stronger ways to integrate them.

A decision. A family-run kirana business grows from one store to twenty across two cities. The founder still approves every purchase himself. Contingency thinking asks what changed: size, distance and the number of suppliers. Which decisions should move to store managers, and which rules must stay the same in every store?

Links. Organisation structure (Unit 1) covers mechanistic and organic designs; Group behaviour, teams and leadership (this unit) covers Fiedler's contingency model of leadership.

It depends on the situation.

A hospital installs a new electronic records system. It works on test, yet the nurses keep paper notes on the side because the screens do not fit the way a ward round runs. The technology was good. It was designed without the people who use it.

People use tools, techniques and knowledge to make goods or services that customers value. Those customers belong to the environment. If the technical system is changed without regard to the social system, or the reverse, the whole output suffers.

Where it came from. The idea comes from the Tavistock Institute in Britain. Eric Trist and Ken Bamforth studied coal mines in the early 1950s. A new mechanised method broke up the small, close-knit teams that miners had worked in. Cooperation and morale suffered. A way of working that kept miners in small, self-managing groups sharing the tasks worked better. The lesson was joint optimisation: improve the technical and social systems together, not one at the expense of the other.

Working through the hospital.

1. Look at the social system: ward rounds, handovers, how nurses share information.
2. Look at the technical system: the screens, the logging steps, the speed.
3. Find where they clash: a nurse cannot enter notes while moving between beds.
4. Redesign both: bedside tablets and a simpler form, plus a short handover routine.

Link to job design. Job enlargement and enrichment change the tasks on the social side. The socio-technical view adds that the tools must also help the people use their widened jobs. The work-group form it favours, a team that plans and runs a whole piece of work, is the self-managing team.

Don't confuse the socio-technical approach with the systems approach. Systems theory describes any organisation as connected parts with feedback. The socio-technical approach picks one pair of parts, people and technology, and says to design them together. It is one application of systems thinking.

Where it breaks. Its evidence comes mostly from case studies in particular industries, so findings do not carry over automatically. Technology also changes faster than a team can be redesigned around it.

In practice. Before buying software or machines, ask the people who will use them to test them. Count the cost of retraining and of redesigned jobs, not only the price of the technology.

For exams. Modern organisation theory is usually classified into three: the systems approach, the socio-technical approach and the contingency (situational) approach. Be ready with the three parts (people, technical system, environment) and the balance among them.

Design the people and the tools together.