Principles of Management and Organisational Behaviour MBA First Year Paper No School of Distance Education Bharathiar University, Coimbatore - 641 046 Author: P G Aquinas Copyright © 2007, Bharathiar University All Rights Reserved Produced and Printed by EXCEL BOOKS PRIVATE LIMITED A-45, Naraina, Phase-I, New Delhi-110028 for SCHOOL OF DISTANCE EDUCATION Bharathiar University Coimbatore-641046 CONTENTS Page No UNIT -I Lesson Management Science: Theory and Practice Lesson Management and Society 33 Lesson Functions of Management 43 UNIT -II Lesson Organising 61 Lesson Human Factors and Motivation 91 Lesson Leadership and Group Decision Making 103 Lesson Communication 119 UNIT -III Lesson The Process of Controlling 147 Lesson Control Techniques & Global controlling 155 Lesson 10 Directing 161 UNIT-IV Lesson 11 Organisation Behaviour 171 Lesson 12 Personality 186 Lesson 13 Emotions and Emotional Intelligence 202 Lesson 14 Attitudes, Values and Work Ethics 208 Lesson 15 Perception and Learning 226 UNIT-V Lesson 16 Stress 255 Lesson 17 Foundation of Group Behaviour 274 Lesson 18 Organisational Change 292 Lesson 19 Organisational Development 305 Lesson 20 Organisational Culture 326 PRINCIPLES OF MANAGEMENT AND ORGANISATIONAL BEHAVIOUR Number of Credit Hours: Subject Description: This course presents the principles of management, emphasizing managerial functions and behavioural concepts and its practical applications in the organsation Goals: To enable the students to learn the basic functions, principles, concepts of management and behavioural aspects in the organization Objectives: On successful completion of the course the students should have: understood the principles and functions of management learnt the scientific decision making process and problem solving techniques learnt modern management process learnt behavioural aspects of an individual in the organization UNIT I Management : Science, Theory and Practice - The Evolution of Management Thought and the Patterns of Management Analysis Management and Society : Social Responsibility and Ethics - Global and Comparative Management - The Basis of Global Management - Functions of Management-The Nature and Purpose of Planning - Objectives - Strategies, Policies and Planning Premises - Decision Making - Global Planning UNIT II The Nature of Organizing - Organizational Structure : Departmentation - Line/Staff Authority and Decentralization - Effective Organizing and Organizational Culture - Global Organizing Co-ordination functions in Organisation - Human Factors and Motivation - Leadership - Committees and group Decision Making - Communication - Global Leading UNIT III The System and Process of Controlling - Control Techniques and Information Technology - Global Controlling and Global Challenges - Direction Function - Significance UNIT IV Organisational Behaviour : History - evoluation, Challenges & opportunities, contributing disciplines, management functions and relevance to Organisation Behaviour Organizational Behaviour responses to Global and Cultural diversity Personality - Determinants, structure, behaviour, assessment, psycho-analytical social learning, job-fit, trait theories Emotions and Emotional Intelligence as a managerial tool Attitudes - relationship with behaviour, sources, types, consistancy, work attitudes, values - importance, sources, types, ethics and types of management ethics Perception - Process, Selection, Organisation Errors, Managerial implications of perception.Learning - classical, operant and social cognitive approaches Implications of learning on managerial performance UNIT V Stress - Nature, sources, Effects, influence of personality, managing stress- Conflict - Management, Levels, Sources, bases, conflict resolution strategies, negotiation Foundations of group behaviour : team decision making Issues in Managing teams Organisational change - Managing planned change Resistance to change - Approaches to managing organisational change - Organisational Development - values - interventions, change management- Organisational culture - Dynamics, role and types of culture and corporate culture UNIT-I LESSON MANAGEMENT SCIENCE: THEORY AND PRACTICE CONTENTS 1.0 Aims and Objectives 1.1 Introduction 1.2 Definition of Management 1.3 Characteristics of Management 1.4 Scope of Management 1.4.1 Subject-matter of Management 1.4.2 Functional Areas of Management 1.4.3 Management is an Inter-disciplinary Approach 1.4.4 Principles of Management 1.4.5 Management is an Agent of Change 1.4.6 The Essentials of Management 1.5 Is Management a Science or an Art? 1.5.1 What is "Science"? 1.5.2 What is "Art"? 1.5.3 Management is both a Science as well as an Art 1.6 Professionalisation of Management 1.7 Evolution of Management Thought 1.7.1 Pre-scientific Management Period 1.7.2 Classical Theory 1.7.3 Neoclassical Theory 1.7.4 Modern Theory (System Approach) 1.8 Let us Sum up 1.9 Lesson-end Activity 1.10 Keywords 1.11 Questions for Discussion 1.12 Suggested Readings 1.0 AIMS AND OBJECTIVES This lesson is intended to introduce the students and management about fundamental of management and evolution of management thought After studying this lesson you will be able to: Principles of Management and Organisational Behaviour (i) explain the meaning and characteristics of management (ii) describe scope of management (iii) know the nature of management, i.e., is it a science or an art (iv) describe management as a profession (v) understand evolution of management thought 1.1 INTRODUCTION Management is a vital aspect of the economic life of man, which is an organised group activity A central directing and controlling agency is indispensable for a business concern The productive resources – material, labour, capital etc are entrusted to the organising skill, administrative ability and enterprising initiative of the management Thus, management provides leadership to a business enterprise Without able managers and effective managerial leadership the resources of production remain merely resources and never become production Under competitive economy and ever-changing environment the quality and performance of managers determine both the survival as well as success of any business enterprise Management occupies such an important place in the modern world that the welfare of the people and the destiny of the country are very much influenced by it 1.2 DEFINITION OF MANAGEMENT Management may be defined in many different ways Many eminent authors on the subject have defined the term "management", some of these definitions are reproduced below: According to Lawrence A Appley - "Management is the development of people and not the direction of things" According to Joseph Massie - "Management is defined as the process by which a cooperative group directs action towards common goals" In the words of George R Terry - "Management is a distinct process consisting of planning, organising, actuating and controlling performed to determine and accomplish the objectives by the use of people and resources" According to James L Lundy - "Management is principally the task of planning, coordinating, motivating and controlling the efforts of others towards a specific objective" In the words of Henry Fayol - "To manage is to forecast and to plan, to organise, to command, to co-ordinate and to control" According to Peter F Drucker - "Management is a multi-purpose organ that manages a business and manages managers and manages worker and work" In the words of J.N Schulze - "Management is the force which leads, guides and directs an organisation in the accomplishment of a pre-determined object" In the words of Koontz and O'Donnel - "Management is defined as the creation and maintenance of an internal environment in an enterprise where individuals working together in groups can perform efficiently and effectively towards the attainment of group goals" According to Ordway Tead - "Management is the process and agency which directs and guides the operations of an organisation in realising of established aims" According to Stanley Vance - "Management is simply the process of decision-making and control over the actions of human beings for the express purpose of attaining predetermined goals" According to Wheeler - "Business management is a human activity which directs and controls the organisation and operation of a business enterprise Management is centred in the administrators of managers of the firm who integrate men, material and money into an effective operating limit" Management Science: Theory and Practice In the words of William Spriegel - "Management is that function of an enterprise which concerns itself with the direction and control of the various activities to attain the business objectives" In the words of S George - "Management consists of getting things done through others Manager is one who accomplishes the objectives by directing the efforts of others" In the words of Keith and Gubellini - "Management is the force that integrates men and physical plant into an effective operating unit" According to Newman, Summer and Warren - "The job of management is to make cooperative endeavour to function properly A manager is one who gets things done by working with people and other resources" According to John F M - "Management may be defined as the art of securing maximum results with a minimum of effort so as to secure maximum results with a minimum of effort so as to secure maximum prosperity and happiness for both employer and employee and give the public the best possible service" In the words of Kimball and Kimball - "Management embraces all duties and functions that pertain to the initiation of an enterprise, its financing, the establishment of all major policies, the provision of all necessary equipment, the outlining of the general form of organisation under which the enterprise is to operate and the selection of the principal officers The group of officials in primary control of an enterprise is referred to as management" In the words of E.F.L Brech - "Management is a social process entailing responsibility for the effective and economical planning and regulation of the operations of an enterprise, in fulfilment of a given purpose or task, such responsibility involving: (a) judgement and decision in determining plans and in using data to control performance, and progress against plans; and (b) the guidance, integration, motivation and supervision of the personnel composing the enterprise and carrying out its operations" According to E Peterson and E.G Plowman - Management is "a technique by means of which the purpose and objectives of a particular human group are determined, classified and effectuated" According to Mary Cushing Niles - "Good management or scientific management achieves a social objective with the best use of human and material energy and time and with satisfaction for the participants and the public" From the definitions quoted above, it is clear the "management" is a technique of extracting work from others in an integrated and co-ordinated manner for realising the specific objectives through productive use of material resources Mobilising the physical, human and financial resources and planning their utilisation for business operations in such a manner as to reach the defined goals can be referred to as "management" If the views of the various authorities are combined, management could be defined as "a distinct ongoing process of allocating inputs of an organisation (human and economic resources) by typical managerial functions (planning, organising, directing and controlling) for the purpose of achieving stated objectives namely – output of goods and services desired by its customers (environment) In the process, work is preformed with and through personnel of the organisation in an ever-changing business environment" Management is a universal process in all organised social and economic activities It is not merely restricted to factory, shop or office It is an operative force in all complex organisations trying to achieve some stated objectives Management is necessary for a business firm, government enterprises, education and health services, military organisations, trade associations and so on Principles of Management and Organisational Behaviour 1.3 CHARACTERISTICS OF MANAGEMENT An analysis of the various definitions of management indicates that management has certain characteristics The following are the salient characteristics of management 10 Management aims at reaping rich results in economic terms: Manager's primary task is to secure the productive performance through planning, direction and control It is expected of the management to bring into being the desired results Rational utilisation of available resources to maximise the profit is the economic function of a manager Professional manager can prove his administrative talent only by economising the resources and enhancing profit According to Kimball "management is the art of applying the economic principles that underlie the control of men and materials in the enterprise under consideration" Management also implies skill and experience in getting things done through people: Management involves doing the job through people The economic function of earning profitable return cannot be performed without enlisting co-operation and securing positive response from "people" Getting the suitable type of people to execute the operations is the significant aspect of management In the words of Koontz and O'Donnell - "Management is the art of getting things done through people in formally organised groups" Management is a process: Management is a process, function or activity This process continues till the objectives set by administration are actually achieved "Management is a social process involving co-ordination of human and material resources through the functions of planning, organising, staffing, leading and controlling in order to accomplish stated objectives" Management is a universal activity: Management is not applicable to business undertakings only It is applicable to political, social, religious and educational institutions also Management is necessary when group effort is required Management is a Science as well as an Art: Management is an art because there are definite principles of management It is also a science because by the application of these principles predetermined objectives can be achieved Management is a Profession: Management is gradually becoming a profession because there are established principles of management which are being applied in practice, and it involves specialised training and is governed by ethical code arising out of its social obligations Management is an endeavour to achieve pre-determined objectives: Management is concerned with directing and controlling of the various activities of the organisation to attain the pre-determined objectives Every managerial activity has certain objectives In fact, management deals particularly with the actual directing of human efforts Management is a group activity: Management comes into existence only when there is an group activity towards a common objective Management is always concerned with group efforts and not individual efforts To achieve the goals of an organisation management plans, organises, co-ordinates, directs and controls the group effort Management is a system of authority: Authority means power to make others act in a predetermined manner Management formalises a standard set of rules and procedure to be followed by the subordinates and ensures their compliance with the rules and regulations Since management is a process of directing men to perform a task, authority to extract the work from others is implied in the very concept of management 10 Management involves decision-making: Management implies making decisions regarding the organisation and operation of business in its different dimensions The success or failure of an organisation can be judged by the quality of decisions taken by the managers Therefore, decisions are the key to the performance of a manager 11 Management Science: Theory and Practice Management implies good leadership: A manager must have the ability to lead and get the desired course of action from the subordinates According to R C Davis - "management is the function of executive leadership everywhere" Management of the high order implies the capacity of managers to influence the behaviour of their subordinates 12 Management is dynamic and not static: The principles of management are dynamic and not static It has to adopt itself according to social changes 13 Management draws ideas and concepts from various disciplines: Management is an interdisciplinary study It draws ideas and concepts from various disciplines like economics, statistics, mathematics, psychology, sociology, anthropology etc 14 Management is Goal Oriented: Management is a purposeful activity It is concerned with the achievement of pre-determined objectives of an organisation 15 Different Levels of Management: Management is needed at different levels of an organisation namely top level, middle level and lower level 16 Need of organisation: There is the need of an organisation for the success of management Management uses the organisation for achieving pre-determined objectives 17 Management need not be owners: It is not necessary that managers are owners of the enterprise In joint stock companies, management and owners (capital) are different entities 18 Management is intangible: It cannot be seen with the eyes It is evidenced only by the quality of the organisation and the results i.e., profits, increased productivity etc 1.4 SCOPE OF MANAGEMENT It is very difficult to precisely state the scope of management However, management includes the following aspects:- 1.4.1 Subject-matter of Management Management is considered as a continuing activity made up of basic management functions like planning, organizing, staffing, directing and controlling These components form the subject-matter of management 1.4.2 Functional Areas of Management Management covers the following functional areas:l Financial Management: Financial management includes forecasting, cost control, management accounting, budgetary control, statistical control, financial planning etc l Human Resource Management: Personnel / Human Resource Management covers the various aspects relating to the employees of the organisation such as recruitment, training, transfers, promotions, retirement, terminations, remuneration, labour welfare and social security, industrial relations etc l Marketing Management: Marketing management deals with marketing of goods, sales promotion, advertisement and publicity, channels of distribution, market research etc 11 Principles of Management and Organisational Behaviour ARTIFACTS ESPOUSED VALUES BASIC UNDERLYING ASSUMPTIONS Visible organizational structures and processes (hard to decipher) Strategies, goals, philosophies (espoused justification) Unconscious, taken-for-granted beliefs, perceptions, thoughts, and feelings (ultimate source of values) Source: Edgar H Schein, “Organizational Culture and Leadership” (2nd Edition) Jossey-Bass Publishers, San Francisco (1992) page 17 Figure 20.1: Schein’s Levels of Culture Artefacts: According to Schein, Artefacts are the first level of organizational culture Artefacts are the things that come together to define a culture and reveal what the culture is about to those who pay attention to them They include products, services, and even behaviour patterns of the members of an organization Schein has defined Artefacts as things that “one sees, hears, and feels when one encounters a new group with an unfamiliar culture” Espoused Values: Espoused values are the second level of organizational culture Values are things worth doing, or the reasons for doing what we Values are the answers to the “why” questions For examples, why are you reading this book? To know more about Organization Behaviour Why is that Important? To be a better HR Manager Why you need more money? To fulfil my wife’s desire to own a farm house Such questions go on and on, until you reach the point where you no longer want something for the sake of something else At this point, we have arrived at a value Corporations have values, such as size, profitability, or making a quality product Espoused values are the reasons that we give for doing what we Schein argues that most organizational cultures can trace their espoused values back to the founders of the culture Basic Assumptions: The third level of organizational culture, are the beliefs that organization members take for granted Culture prescribes “the right way to things” at an organization, often through unspoken assumptions The influence of the leader on Organization Culture: Managers, especially top managers, create the climate for the enterprise Their values influence the direction of the firm Although the tern “value” is used differently, a value can be defined as a fairly permanent belief about what is appropriate and what is not that guides the actions and behaviour of employees in fulfilling the organization’s aims Values can be thought of as forming an ideology that permeates every day decisions In many successful companies, value-driven corporate leaders serve as role models, set the standards for performance, motivate employees, make the company special, and are a symbol to the external environment 328 Organisational Culture How to Create A Value-based Organization Hatim Tyabji was the founding chairman and CEO of VeriFone, Inc from 1986 to 1988 when he established Saraide, a highly respected company in the telecommunication industry At the national meeting of the Academy of Management in Toronto in 2000, Mr Tyabji shared his experience in creating an organization based on ethical values On one occasion, it was brought to his attention that manager with excellent performance figures was engaged in malfeasance Revealing this information, however, would have had a very negative effect on the company’s share price Instead of hiding this information until the next quarterly reporting, Mr Tyabji after checking carefully the facts, approached the manager who was in charge of a foreign operation, and fired him on the spot Impressed by this decision, the associates worked especially hard so that the quarterly projection was still achieved What effect did Mr Tyabji’s decision communicated to the employees of the company? This is a company with a culture in which performance, no matter how impressive, cannot be achieved by unethical behaviour Source: David A Whither and Andre L Delbecq, “Saraide’s Chairman Hatim Tyabji on creating and sustaining a value-based organizational culture”, Academy of Management Executive, November 2000 Pages 32 – 40 20.4 CHARACTERISTICS OF ORGANIZATIONAL CULTURE Organizational culture has a number of important characteristics Fred Luthans has given six characteristics which is given below: Organizational Culture: Important Characteristics Observed behavioral regularities When organizational participants interact with one another, they use common language, terminology, and rituals related to deference and demeanor Norms Standards of behavior exist, including guidelines on how much work to do, which in many organizations come down to “Do not too much; not too little.” Dominant values There are major values that the organization advocated and expects the participants to share Typical examples are high product quality, low absenteeism, and high efficiency Philosophy There are policies that set forth the organization’s beliefs about how employees and/or customers are to be treated Rules There are strict guidelines related to getting along in the organization Newcomers must learn those “ropes” in order to be accepted as full-fledged members of the group Organizational climate This is an overall “feeling” that is conveyed by the physical layout, the way participants interact, and the way members of the organization conduct themselves with customers or other outsiders Source: Fred Luthans “Organizational Behavior” (9th Eedition) McGraw-Hill International Edition, Boston (2002) page 123 Check Your Progress 1 Define culture? What are the basic elements of culture? Explain the influence of a leader on organisation culture Explain the characteristics of Organisational Culture 20.5 CREATING AND SUSTAINING CULTURE 20.5.1 How Organizational Culture Begins? An organization’s current customs, traditions and general way of doing things are largely due to what it has done before and the degree of success it has had with those endeavours 329 Principles of Management and Organisational Behaviour The original source of an organization’s culture usually reflects the vision or mission of the organization’s founders Because the founders had the original idea, they also may have biases on how to carry out the idea Their focus might be on aggressiveness or it might be on treating employees as family The small size of most new organizations helps the founders instil their vision in all organizational members Organizational cultures can develop in a number of different ways, these steps are explained below:1 A single person (founder) has an idea for a new enterprise: Some organizational cultures may be the direct, or at least, indirect, result of actions taken by the founders The founders of an organization traditionally have a major impact on that organization’s early culture They have a vision of what the organization should be Founders’ creation of a core group: The founder brings in one or more other key people and creates a core group that shares a common vision with the founder The founder’s only hire and keep employees who think and feel the way they These employees who form the core group believe that the idea is a good one, is worth the investment of time, money and energy Sometimes founders create weak cultures, and if the organization is to survive, a new top manager must be installed who will sow the seeds for the necessary strong culture Indoctrinate and Socialize: The founding core group begins to act in concert to create an organization by raising funds, obtaining patents, incorporating, locating land, building infrastructure and so on The core group indoctrinate and socialize employees to their way of thinking and feeling Build a Common History: The founders’ own behaviour acts as a role model that encourages employees to identify with them and thereby internalize their beliefs, values, and assumptions At this point, others are brought into the organization, and a common history begins to be built When the organization succeeds, the founder’s vision becomes seen as a primary determinant of that success At this point, the founders’ entire personalities become embedded in the culture of the organization Most of today’s successful organizations follow the vision of their founders 20.5.2 Sustaining a Culture Once a culture is in place, there are practices within the organization that act to maintain it by giving employees a set of similar experiences Sustaining a culture depends on three forces These forces are explained below: Selection: The goal of the selection process is to identify and hire individuals who could make the organization successful through their services Therefore candidates who believe in the values of the organizational have to be selected Thus, the selection process attempt to ensure a proper match in the hiring of people who have values essentially consistent with those of the organization or at least a good portion of those values cherished by the organization In this way, the selection process sustains an organization’s culture by selecting those individuals who will fit into the organizations core values Top Management: Top management have a important role to play in sustaining the organization’s culture It is the top management who establish norms that filter down through the organization It is they through their conduct both implicit and explicit that shows what is desirable They this through pay raises, promotions and other rewards Socialization: Socialization is the process that adapts employees to the organization’s culture Organization wants to help new employees adapt to its culture The adaptation is done through the process of “socialization” Socialization is made up of three stages: (a) 330 The Pre-arrival Stage: This stage encompasses all the learning that occurs before a new member joins the organization The socialization process covers both the work to be done and the organization The pre-arrival stage is the period of learning in the socialization process that occurs before a new employee joins the organization For example, when students join a business school to pursue their MBA degree, they are socialized to have attitudes and behaviours that business firms want This is so because the success depends on the degree to which the student has correctly anticipated the expectations and desires of those in the business school (b) Encounter Stage: In this stage of the socialization process, the new employee sees what the organization is really like and confronts the possibility that expectations and reality may diverge In expectations prove to have been more or less accurate, the encounter stage merely provides a reaffirmation of the perceptions gained during the pre-arrival stage Those employees who fail to learn the essential or pivotal role behaviours risk being labelled as “rebels” and face the risk of expulsion This further contributes to sustaining the culture (c) Metamorphosis Stage: Metamorphosis stage is the stage in the socialization process in which a new employee changes and adjusts to the job, work group and organization In this stage relatively long-lasting changes take place The employee masters the skill required for his or her job, successfully performs his or her new roles, and makes the adjustments to his or her work group’s values and norms The metamorphosis stage completes the socialization process The new employee internalizes the norms of the organization and his work groups and understands and accepts the norms of the organization and his work group The success of this stage have a positive impact on the new employee’s productivity and his commitment to the organization Degree to which employees are encouraged to innovative and to take risk Degree to which employees are expected to exhibit precision, analysis, and attention to detail Attention to Detail Organisational Culture Degree to which managers focus on results or outcomes rather than on how these outcomes are achieved High … Low Innovation and Risk-taking Low…….High Degree to which organizational decisions and actions emphasize maintaining the status quo Outcome orientation ORGANIZATIONAL CULTURE Low ….High People orientation Stability Low …… High Low ….High Aggressiveness Low ….High Degree to which employees are aggressive and competitive rather than cooperative Team Orientation Low … High Degree to which management decisions take into account the effects on people in the organization Degree to which work is organized around teams rather than individuals Note: - Strong versus Weak Cultures • Strong Cultures are cultures in which the key values are deeply held and widely shared and have a greater influence on employees than weak cultures • The more that employee accept the organization’s key values and the greater their commitment to those values, the stronger the culture is • Whether an organization’s culture is strong, weak or somewhere in between depends on factors such as (i) the size of the organization (ii) how long it has been around (iii) how much turnover there has been among employees, and (iv) the intensity with which the culture was originated Source: Stephen P Robbins and Mary Coulter “Management” (seventh edition) Prentice Hall of India Private Limited, New Delhi (2003) Page 59 Figure 20.2: Dimensions of Organizational Culture 331 Principles of Management and Organisational Behaviour 20.6 HOW EMPLOYEES LEARN CULTURE? Culture is transmitted to employees in a number of ways The most significant are stories, rituals, symbols, and language Stories: Organizational “stories” typically contain a narrative of significant events or people including such things as the organization’s founders, rules breaking, reactions to past mistakes, and so forth Lavinson and Rosenthal suggest that stories and myths about organization’s heroes are powerful tools to reinforce cultural values throughout the organization and specially in orienting new employees These stories provide prime examples that people can learn from Stories and myths are often filtered through a “cultural network” and remind employees as to “why we things in a certain way” To help employees learn the culture, organizational stories anchor the present in the past, provide explanations and legitimacy for current practices, and exemplify what is important to the organization Rituals and Ceremonies: Corporate rituals are repetitive sequences of activates that express and reinforce the values of the organization, what goals are most important, and which people are important and which ones are superfluous Ceremonies and rituals reflect such activities that are enacted repeatedly on important occasions Members of the organization who have achieved success are recognized and rewarded on such occasions For example, awards given to employees on “founders’ day”, Gold medals given to students on graduation day are reflections of culture of that institution Material / Cultural Symbols: Symbols communicate organizational culture by unspoken messages When you walk into different businesses, you get a “feel” for the place – formal, casual, fun, serious, and so forth? These feelings you get demonstrate the power of material symbols in creating an organization’s personality Material artefacts created by an organization also speak of its cultural orientation and make a statement about the company These material symbols convey to employees who is important, the degree of equality desired by top management and the kind of behaviour that are expected and appropriate Examples: - assigned parking space for senior executives in the company premises, large offices given to senior managers, luxury automobiles given to senior or successful officers of the organization Organizational Heroes: Top Management and prominent leaders of the organization become the role models and a personification of an organization’s culture Their behaviour and example become a reflection of the organization’s philosophy and helps to mould the behaviour of organizational members Language: - Many organizations and units within organizations use language as a way to identify members of a culture By learning this language, members attest to their acceptance of the culture and their willingness to help to preserve it Managerial Decisions affected by culture: For any organization to grow and prosper, it is important that its mission and its philosophy be respected and adhered to by all members of the organization Here managers play a significant role in building the culture of the organization The manager plays continuous attention to maintaining the established standards and send clear signals to all the employees as to what is expected of them Cultural consistency and strong adherence to cultural values become easy when the mangers themselves play strong role models Good managers are able to support and reinforce an existing strong culture by being strong role models and by handling situations that may result into cultural deviations The figure below shows the major areas of a manager’s job are influenced by culture How the Environment Affects Managers: The environment affects managers 332 (i) Through the degree of environmental uncertainty (ii) Through the various stakeholders relationships Environmental Uncertainty:-The environmental uncertainty is the degree of change and complexity in an organization’s environment Organisational Culture Degree of Change: - If the components in an organization’s environment changes to a minimum, we call it a stable environment A stable environment is characterises by l No new technological breakthroughs by current competitors l No new competitors l Little activity by pressure groups to influence the organization We call it a dynamic environment, if the components in an organization’s environment change frequently Degree of Complexity: - The degree of complexity refers to the number of components in an organization’s environment and the extent of the knowledge that the organization has about those components The figure below explains the environmental uncertainty DEGREE OF CHANGE SIMPLE DEGREE OF COMPLEXITY STABLE DYNAMIC CELL Stable and predictable environment CELL Dynamic and unpredictable environment Few components in environment Few components in environment Components are somewhat similar and remain basically the same Components are somewhat similar but are in continual process of change Minimal need for sophisticated knowledge of components Minimal need for sophisticated knowledge of components CELL Dynamic and unpredictable environment Many components in environment CELL Stable and predictable environment Many components in environment COMPLEX Components are not similar to one another and remain basically the same Components are not similar to one another and are in continual process of change High need for sophisticated High need for sophisticated knowledge of knowledge of components components Source: Stephen P Robbins and Mary Coulter "Management" (7th Edition) Prentice Hall of India Private Limited, New Delhi (2003) Page 73 Figure 20.3: Environmental Uncertainty Managers try to minimize uncertainty because it is a threat to organization’s effectiveness Given the choice, managers would prefer to operate in an environment which is simple and stable However, managers rarely have full control over that choice Stakeholders Relationship: - Stakeholders are any constituencies in the organization’s external environment that are affected by the organization’s decisions and actions The figure below identifies the various organizational stakeholders Employees Customers Unions Shareholders Social and Political Action Groups ORGANIZATION Competitors Communities Trade and Industry Associations Suppliers Media S S h P R bbi dM Governments C l “M ” (7th Edi i )P i H ll f I di Source: Stephen P Robbins and Mary Coulter “Management” (7th Edition) Prentice Hall of India Private Limited, New Delhi (2003) Page 75 Figure 20.4: Various Organizational Stakeholders 333 Principles of Management and Organisational Behaviour The few of the organizational stakeholders are explained below: l Stockholders: The shareholders are the persons who provide the funds to the business enterprise The business should be managed efficiently so as to provide a fair return on the investments of the shareholders They should be provided with comprehensive reports giving full information about its working In the same way, the shareholders should also meet the obligations of the business enterprise by supporting the efforts of the business so that continuous development of the enterprise is possible They should encourage the business to follow a dynamic policy and to plough back profit for the purpose of development and expansion l Customers: Customers’ satisfaction is the ultimate aim of all economic activity This involves more than the offer of products at the lowest possible price Adulteration of goods, poor quality, failure to give fair service, misleading advertising etc are some of the violation by business towards its customers A business enterprise has positive responsibility towards the consumers of its products It has to provide quality goods to customers at the right time, right place, and at right price l Employees: Employees should be treated as human beings and their cooperation must be achieved for the realization of the business enterprises goals The responsibilities of the business enterprises to its employees are – the security of employment with fair wages, equal opportunity for growth and development within the organization, fair promotions, employee welfare, social security and profit sharing Further, the business enterprise should also provide the employee welfare, social security and profit sharing Further, the business enterprise should also provide the employees scope for improvement of educational qualification, training and upgrading of skills so that they may get a chance to improve their prospects Workers are poor and hence they cannot afford to remain without job for a long period Most of them are ignorant and require advice and guidance from persons who have the genuine interest of the workers at heart Each worker by himself is unable to fight against the injustice done to him As such all the economists have recognized the right of the workers to organize themselves As a group they can settle terms with the employers in a better way In other words, the workers have been granted the right to bargain collectively With a view to self-protection and self -help labour has organized itself under employee associations and unions The associations formed by workers have come to be known as “Trade Unions” 334 l Suppliers: An important force in the environment of a business enterprise is the suppliers who supply the enterprise with inputs like raw materials and components The importance of reliable source of supply is indispensable for the smooth functioning of a business enterprise It is very risky to depend on a single supplier because the problems with that supplier are bound to seriously affect the business organization Therefore, multiple sources of supply are often helpful A business organization should deal with the suppliers judiciously It should try for fair terms and conditions regarding price, quality, delivery of goods and payment The dealings with the suppliers should be based on integrity and courtesy The business must create healthy relations with its suppliers l Competitors: A firm’s competitors include not only the other firms that market the same or similar products but also those who compete for the discretionary income of the consumers Thus, competition among the different business organization should be such that the customer is helped to satisfy his desires and is better of buying the enterprises goods and services l Government: The business enterprise should take responsibility for providing amenities in the locality where it is located It should pay the taxes to the government regularly and honestly, so that the funds may be spent by the State for welfare activities It should take measures to avoid bad effluent, fouling the air and condition of slum and congestion Organisational Culture The business enterprise should extend full support to the Government in implementing its policies and programmes relating to the solving of the national problems such as the unemployment problem, food problem, wide disparity in income levels of the different sections of the society, regional imbalance in the economic development etc It should also help the Government in the equitable distribution of commodities which are in scarce supply, in controlling prices and inflationary trend in the country and in the implementation of various development schemes of the Government The business enterprise should realize that it cannot function without the support of the Government If there is any difference between itself and the Government the same should be settled by mutual exchange of ideas and suggestions and not by restoring to non-cooperation with the Government From the above discussion, it is clear that the interest of the various Stakeholders interacting with the business enterprise is not identical They are inflicting conflicting The owners want highest dividend, the financial institutions want the highest interest, the workers the highest possible wages, the Government wants the highest possible revenue and the consumers want the lowest possible price It is, therefore, the duty of the business enterprise to bring about a compromise among the interests of various groups The enterprise is an arbiter among the various groups It should endeavour to provide a fair dividend to the shareholders, fair pay and working conditions to the workers, good quality products at reasonable prices to the customers Stakeholders have a stake in or are significantly influenced by what the organization does In turn, these groups can influence that organization There are many reasons why managers should care about managing stakeholders’ relationships Some of the reasons are given below:1 It can lead to other organizational outcomes such as improved predictability of environmental changes, more successful innovations, greater degree of trust among stakeholders, and greater organizational flexibility to reduce the impact of change An organization depends on these external groups as sources of inputs (resources) and as outlets for outputs (goods and services) and organizations should consider their interests as they make decisions and take actions Steps in Managing External Stakeholders Relationships:- There are four steps in managing external stakeholder relationships Identifying who the organization’s stakeholders are Those external groups that are to influence organizational decisions and be influenced by organizational decisions are stakeholders Determine that particular interests or concerns these stakeholders might have For example – l Customers – product quality l Shareholders – financial issues l Employees – safety/working conditions Decide how critical each stakeholder is to the organization’s decisions and actions For example, some stakeholders are more critical to the organization’s decisions and actions than others Determine what specific approach they should use to manage the external stakeholder relationship The more critical the stakeholder, the more uncertain the environment 335 Principles of Management and Organisational Behaviour 20.7 SUCCESSFUL ORGANIZATIONAL CULTURE Research conducted by D.R Denison and A.K Mishra, show that organizational culture is related to organizational success Organizational culture is a framework that guides day-to-day behaviour and decision making for employees and directs their actions toward completion of organizational goals Culture is what gives birth to and defines the organizational goals Culture must be aligned with the other parts of organizational actions, such as planning, organizing, leading, and controlling; indeed, if culture is not aligned with these tasks, then the organization is in for difficult times The figure below shows that culture based on adaptability, involvement, a clear mission and consistency can help companies achieve higher sales growth, return on assets, profits, quality and employee satisfaction ADAPTABILITY INVOLVEMENT CONSISTENCY CLEAR MISSION Source: D.R Denison and A.K Mishra, "Toward a Theory of Organizational Culture and Effectiveness", Organization Science Vol (1995) Pages 204 - 223 Figure 20.5: Successful Organizational Cultures Note:l Adaptability: is the ability to notice and respond to changes in the organization’s environment l Involvement: In cultures that promote higher levels of employment in decision-making employees feel a greater sense of ownership and responsibility l Clear Mission: Mission is a company’s purpose or reason for existing In organizational cultures in which there is a clear organizational vision, the organization’s strategic purpose and direction are apparent to everyone in the company l Consistency: In consistent organizational cultures, the company actively defines and teaches organizational values, beliefs and attitudes Consistent organizational cultures are also called strong cultures, because the core beliefs and widely shared and strongly held Organizational cultures are important to a firm’s success for several reasons 336 They give an organizational identity to employees – a defining vision of what the organization represents When managers are uncertain about their business environments, the vision helps guide the discussions, decisions, and behaviour of the people in the company Organizational culture are an important source of stability and continuity to the organization, which provide a sense of security to its members Knowledge of the organizational culture helps newer employees interpret what goes on inside the organization, by providing an important context for events that would otherwise seem confusing Culture helps to stimulate employee enthusiasm for their tasks by recognizing and rewarding high-producing and creative individuals, thereby identifying them as role models to emulate Organisational Culture Corporate Insights Culture built around several values Jack Welch, former CEO of General Electric, led that company to an outstanding level of success for more than twenty years He has been referred to as the “most successful Chief Executive ever”, by many business magazines and corporate observers He achieved his results by defining, emphasizing, and rewarding a corporate culture built around several valued principles: Removing boundaries that inhibit the flow of ideas Increasing speed and simplicity by “delayering” the organization Setting “stretch” goals for employees and rewarding their achievement Following a “six sigma” program for improving quality and performance Emphasizing the importance of customer satisfaction Creating a learning culture that stresses high morals, open exchange of ideas, and high levels of contributions from form each employee Source: Robert Slater, “Jack “Jack Welch and the GE McGraw New York (1998) - Robert Slater, Welch andway”, the GE way”,Hill, McGraw Hill New York (1998) Source: Check Your Progress How does organisational culture begun? How can we sustain culture? How employees learn culture? 20.7.1 Corporate Culture and Organizational Success Artefacts, espoused values, and basic assumptions form the basics of understanding organizational culture Organizational culture is a framework that guides day-to-day behaviour of employees Culture is what gives birth to and defines the organizational goals John Kotter and James Heskett, researchers of Harvard Business School, tried to determine which factors make some organizational cultures more successful than others Fig –20.6 Kotter and Heskett’s Two Levels of Culture Culture in an Organization Shared Values Invisible Important concerns and goals that are shared by most of the people in a group, that tend to shape group behavior and that often persist over time even with the changes in group memberships Examples: - The managers care about customers; executives like long-term debt Harder to Change Group Behavior Norms Visible Common or pervasive ways of acting that are found in a group and that persist because group members tend to behave in ways that teach these practices (as well as their shared values) to new members, rewarding those that fit in and sanctioning those that not Easier to Change Source: John P Kotter and James L Heskett, "Corporate Culture and Performance" The Free Press, New York (1992) page Figure 20.6: Corporate Culture and Performance Kotter ahd Heskett identified two levels of culture Visible Level: are the behaviour patterns and styles of the employees Invisible Level: are the shared values and assumptions that are held over a long period of time Kotter and Heskett, argue that changes in the visible level (i.e., in behaviour patterns and styles) overtime can lead to change in the invisible level (i.e., more deeply held beliefs) The study had four main conclusions: 337 Principles of Management and Organisational Behaviour Corporate culture can have a significant impact on a firm’s long-term economic performance Corporate culture will probably be an even more important factor in determining the success or failure of firms in the next decade Corporate cultures that inhibit strong long-term financial performance are not rare; they develop easily, even in firms that are full of reasonable and intelligent people Although tough to change, corporate cultures can be made more performance enhancing The Harvard Researchers, Kotter and Heskett discovered in their research that some corporate cultures are good at adapting to changes and preserving the performance of the organization, while others are not They distinguished between “adaptive” and “unadaptive” corporate cultures, which is summarized in the figure below:- CORE VALUES COMMON BEHAVIOR ADAPTIVE CORPORATE CULUTRE Most managers care deeply about customers, stockholders, and employees They also strongly value people and processes that can create useful change (e.g., leadership up and down the management hierarchy) Managers pay close attention to all their constituencies, especially customers, and initiate change when needed to serve their legitimate interests, even if that entails taking some risks UN-ADAPTIVE CORPORATE CULTURE Most managers care mainly about themselves, their immediate work group or some product (or technology) associated with that work group They value the orderly and risk-reducing management process much more highly than leadership initiatives Managers tend to behave somewhat insularly, politically and bureaucratically As a result, they not change their strategies quickly to adjust to or take advantages of changes in their business environment Figure 20.7: Adaptive vs Un-adaptive Corporate Cultures 20.7.2 Changing Organizational Culture If organizations are to consciously create and manage their cultures they must be able to take their employees into consideration There are problems that managers face when they go about the business of changing organizational culture Changing organizational culture takes patience, vigilance, and a focus on changing the parts of an organizational culture that managers can control: Behaviours: one way of changing a corporate culture is to use behavioural addition or behavioural substitution to establish new patterns of behaviour among employees (a) Behavioural Addition: Behavioural Addition is the process of having managers and employees perform new behaviours that are central to and symbolic of the new organizational culture that a company wants to create (b) Behavioural Substitution: Behavioural substitution is the process of having managers and employees perform new behaviours central to the “new” organizational culture in place of behaviours that were central; to the “old” organizational culture Visible Artefacts: Another way in which managers can begin to change corporate culture is to change visible artefacts of their old culture Visible artefacts are visible signs of an organization’s culture, such as the office design and layout, company dress codes, and company benefits and perks like stock options, personal parking spaces, etc These need to change keeping the new corporate culture in mind 20.8 LET US SUM UP 338 Corporate cultures are very difficult to change Consequently, there is no guarantee that behavioursubstitution, behavioural addition or changing visible artefacts will change a company’s organizational culture Clearly, an open display of top management commitment and support for the new values and beliefs is critically important to enable employees to change 20.9 LESSON END ACTIVITY Organisational Culture Cultural systems may be considered as products of action as well as the conditioning elements of future action Do You think this is true? Develop an argument to justify your answer 20.10 KEYWORDS Organisational culture Stakeholders Rituals Symbols 20.11 QUESTIONS FOR DISCUSSION What is organizational culture? Describe the seven dimensions of organizational culture What is the source of an organization’s culture? Describe how stories, rituals, material symbols, and language shape an organization’s culture Who are stakeholders? What are the reasons for managers to care about managing their relationship? Describe the four different ways for managers to manage stakeholders’ relationships What are the major elements of organizational culture, and where they come from? What are the major elements of organizational culture, and where they come from? Explain in detail Kottar and Heskette study on organizational culture 10 How can managers change organizational culture? 20.12 SUGGESTED READINGS Argyris C (1962) “Interpersonal competence and Organisational Effectiveness”, Irwin, Homewood III Ashburner L (1990) “Impact of Technological and Organizational Change”, Personnel Review U.K Bernard M Bass and Edward C Ryterband (1979) “Organizational Psychology”, (2nd Ed) Allyn and Bacon, Boston Boss R.W (1989) “Organizational development in Health care”, Addison-Wesley Mass; Reading French W and Bell C (1978) “Organisation development”, (2nd Edition) Prentice Hall Englewood Cliffs N.J George J.M (1990) “Personality Effect, and Behaviour in Groups”, Journal of Applied Psychology, vol 75 Marvin D Dunnette (1976) “Handbook of Industrial and Organizational Psychology”, Rand McNally, Chicago 339 Principles of Management and Organisational Behaviour Marvin E Shaw (1981)“Group Dynamics: The Psychology of Small Group Behavior”, (3rd Edition) McGraw-Hill New, York Osborne J.E., (1992) “Turning to Teambuilding to Tackle Tough Times”, Supervisory Management May 1992 Howe M.A (1989) “Using Imagery to Facilitate Organisational Development and Change”, Group and Organization studies Varney G H (1989) “Building Productive Teams”, Jossey-Bass, San Francisco William G Dyer (1989) “Team Building: A Microcosm of the Past, Present, and Future of O.D”, Academy of Management OD Newsletter, winter 1989 P.G Aquinas, “Organizational Behaviour”, Excel Books, New Delhi Case – I Gossip on Dolly!! Dolly D’Souza was an IV semester MBA student from Aloysius Institute of Management, Mangalore She was specializing in Marketing and had to a summer project as part fulfilment of the MBA degree programme Mr Rohan Vas is Marketing Manager of Mangalore Chemicals Limited (MCL) Her seniors had told her many stories of Mr Rohan and the way he was intimately involved with girl students The grapevine also indicated that Rohan sought relationship with two girls last year and ditched them after sexually abusing them The manager of the accounting department who is Dolly’s neighbour had warned her to be careful of Mr Rohan Dolly was extremely apprehensive to meet Mr Rohan after hearing all these rumours about him But she had to get the project done and therefore decided that she will go and discuss the project with him On the first day she met Mr Rohan, he was extremely warm and kind to her He explained things out to her and urged her to come to him any time with questions, problems or concerns It was three months now and Dolly had found that Mr Rohan was an extremely warm and kind human being She was going to thank him for all the help he had extended to her during her summer project Dolly was pleasantly surprised when Mr Rohan offered her a job as marketing executive in the company Dolly was delighted at the offer as she had not got any offer of employment and that her MBA programme was over and she was awaiting results Dolly thanked Mr Rohan as she wanted to be independent and not depend on her parents for money moreover and she could save some thing for her marriage expense instead of being a burden on her parents She was extremely thankful to Mr Rohan and warmly shook hands with him Mr Rohan was extremely warm and told Dolly that he was impressed by her credentials He also promised to make her permanent within months and an unequalled career progress Dolly decided that she would keep her relationship with Mr Rohan strictly businesslike She would work very hard at her marketing assignments, but would keep the relationship cool and impersonal After about months at the job, Dolly had become more and more comfortable with her relationship with Mr Rohan Mr Rohan had now started asking her to accompany him for lunch On several occasions in the past, she had refused but today she had reluctantly agreed As they were having lunch, Mr Rohan hinted at the prospects of making her a permanent staff of the company “within months” Dolly was delighted and Mr Rohan used this opportunity to touch her on her at inappropriate way Though Dolly attempted to deal with that by keeping her physical distance and pushing him mildly when he came too close, she was afraid of telling him directly as she could loose the chance of getting conformed on the job Mr Rohan had invited her to accompany him on a two-day trip for a presentation of a marketing plan at the ooty branch Though she wanted to refuse, it was an important 340 Contd assignment and there were others in the department who would be too willing to go if she dropped out Though Dolly had her concerns, she decided to go feeling that if Mr Rohan acted funny, she would point blank tell him that she was totally uninterested in any kind of intimate relationship Organisational Culture After coming back to Mangalore Dolly was shattered as there were rumours in the company that she had an “affair” with Rohan and was projected as a very cheap girl who will go any extent to get a permanent job Questions: Are the cultural factors responsible for putting Dolly in the situation that she finds herself in today? Given the Indian culture what you predict will happen next Why? Case II Cross-Cultural Management Bill Evans, Managing Director of English Foods Ltd., Cardiff was very unhappy after he received a call from the Home Office He was asked to explain about the discrimination, racial intolerance and harassment meted out to his Indian employees It all started about weeks ago when an Indian employee Mira’s bangle got caught in the machine and cut her wrist The safety committee then decided that no one will be allowed to bangles, finger rings, earrings, or necklaces at work The order was passed with immediate effect Almost all girls Asian, African and English – wore bangles After the order, the English and African girls had taken the bangles off However, most of the Asian girls continued to ware bangles even after the ban The supervisor in the food processing unit, Mr Jack Straw tried to explain to one of his employees Sheila why she should remove her bangles The conversation went on as follows:Jack: - Sheila, you must have heard about the accident last week when Mira’s bangle got caught in the machine and she cut her wrist I am afraid that you will have to take off your bangles Sheila: - I am sorry, but I cannot take off my bangles; I am a Hindu wife; the bangles are important to my religion Jack:-There is an order and I am afraid that you will have to take it off Sheila: - I will have to ask my husband Jack: - Come on, Sheila, don’t make a fuss I had to shout at Saroja, and Elena to take off their bangles Sheila could see that Jack was very angry, so almost in tears, she removed the bangles That evening, the conversation among the Indian girls was about bangles Girls from Africa thought that it was a lot of fuss about nothing However, many of the girls were very worried After going home Sheila spoke to her husband Raman Singh was a close friend of the regional race relations employment advisor, Mr Major and he decided to explain things out to him Mr Singh explained that “the bangles are not only a mark of marriage but also of the esteem in which a wife is held by her husband The more the bangles and the greater their value, the higher her esteem and the greater her social standing The most sentimental part of the whole problem is that women remove their bangle if they are widowed and some fear that the removal of bangles might lead to their husbands, death” Contd 341 Principles of Management and Organisational Behaviour The next week was an anxious time for Sheila She wore a single bangle every day Sometimes the supervisor made her take it off Sheila was sure that she would have to lose her job, and her husband supported her even though her income was needed After several weeks of consultations with workers unions and supervisors, Mr Evens decided that the ban on the wearing of bangles and dangling exterior jewellery would have to be enforced It was however decided to permit the wearing of wedding rings and nose rings Soon after the ban was imposed, Sheila and her husband attended a meeting held by an organization called the Asian Advisory Committee (AAC) This organization was set up to help members of the Asian Community Within a few days Sheila’s connection with Mr Major and the AAC helped her to present her case before the Home Office alleging discrimination regarding race, intolerance and harassment Mr Bill Evens, Managing Director, English Foods Ltd was summoned before the select committee of the Home Office where he had lot of explanation to Questions: 342 If you were Bill Evens, how would you have handled this case? Do you feel that English Foods Ltd discriminated against its Indian workers? Give reasons If you were the MD of English Foods Ltd., how would you explain the matter to the Home Office? ... 1.4 Scope of Management 1.4.1 Subject-matter of Management 1.4.2 Functional Areas of Management 1.4.3 Management is an Inter-disciplinary Approach 1.4.4 Principles of Management 1.4.5 Management. .. Foundation of Group Behaviour 274 Lesson 18 Organisational Change 292 Lesson 19 Organisational Development 305 Lesson 20 Organisational Culture 326 PRINCIPLES OF MANAGEMENT AND ORGANISATIONAL BEHAVIOUR. .. students and management about fundamental of management and evolution of management thought After studying this lesson you will be able to: Principles of Management and Organisational Behaviour