Chapter 1, mp3 Script

Chapter 1, MP3 Script

You’ve read Chapter 1 “A Strategic Approach to Organizational Behavior (or OB for short)” so let’s review the basics.

First, let’s define OB and explain what the strategic approach is and why it’s important.
OB can be defined pretty simply as behavior that goes on in different types of organizations – a business organization like The Men’s Warehouse; a non-profit organization like The United Way or a public sector organization such as a state government.
And remember, an organization is defined simply as a collection of people that form a coordinated system of specialized activities to achieve certain goals over a given period of time.
However, here we’ll focus mostly on business organizations even though OB concepts apply to all types of organizations.
If we use this definition (behavior that goes on in an organization) you can see that OB is an extensive field of study.
But this is a little too broad. Chapter one provides a more focused definition of OB as the actions of individuals and groups in an organizational context; the field focuses on how this behavior can be managed by acquiring, developing and applying the knowledge and skills of people.
And OB is a field that has gathered insights from a number of other disciplines like psychology, sociology, political science, economics and cultural anthropology.
But your text doesn’t stop here – there is a critical element that makes organizations successful and it has to do with managing people to support the organization’s strategy.
You probably know how important strategy is in a game like chess where thinking ahead and knowing your strengths and weaknesses as well as those of your opponent will help you win the game.
Well, it’s the same for a business organization.
The goal of an organization like The Men’s Warehouse or Intel or Procter & Gamble is to be successful at what it does best (selling men’s apparel, making computer chips or creating innovative home and health care products).
These companies’ strategies are their plans of action on how to effectively use their resources to stay competitive.
And, from a strategic approach to OB, one of the most critical resources is the people who work for these companies.
Let’s look at this more closely by reviewing some of the basic issues of strategic OB that will better prepare you for the chapters ahead.
Strategic OB at the most fundamental level considers the role that human capital plays in an organization’s success.
You’ve probably heard or seen the statement, “Our people are our most important asset” – this is a common claim made by many corporations on their web-sites, in company brochures and in commercials for their products and services.
This statement reflects the importance of human capital (what’s considered an intangible resource, or a non-physical resource like a company’s reputation, the level of trust between managers and associates, or the organization’s culture) as opposed to an emphasis on tangible resources (like property, equipment and inventory).
Specifically then, human capital is the sum of the skills, knowledge and characteristics of the people that work for an organization and it doesn’t decrease in value over time like tangible assets do (equipment breaks down, factories become outdated, etc.).
In fact, when a company invests in its people (by offering training and educational opportunities) associates can increase their capabilities and add more value to the company.
Another issue that is important to strategic OB is the concept of competitive advantage and how human capital is a critical source of competitive advantage when employees’ knowledge, skills and capabilities are managed effectively.
First, any resource an organization has that gives it an edge over its competitors would be a competitive advantage (tangible and intangible resources) – so how can people be a competitive advantage to a company?
Well, there is a simple test that every resource must pass to be considered a competitive advantage – the resource in question must be valuable, it must be rare and it must be non-imitable to give a company an advantage over the competition.
Let’s take a closer look at these three factors.
Value – the people who work for a business organization must possess the knowledge and skills to perform their jobs at a level that allows the company to execute its strategy and gain an advantage over its competitors.
Generally speaking, a company chooses to compete using one of two strategies – either offer products and services at the lowest prices while maintaining acceptable levels of quality (the example of Closeout where employees are good at locating low-cost goods) OR, offer products and services at a higher price but with superior quality or a unique distinction that customers are willing to pay more for (the example of skilled designers at Ralph Lauren).
Rareness – when a company like Nordstrom’s targets highly educated applicants as sales associates who are able to provide “heroic service” to clients they have employed a rare workforce that can make their culture of customer service work.
Similarly, when a hospital attracts doctors with highly specialized skills in particular areas of medicine (heart surgeons) the organization has collected a group of individuals with rare talents that makes it well-known for a certain field of medicine.
Imitability – this refers to the ease with which a set of skills can be imitated by a competitor.
A great example of this is Southwest Airlines.
As you’ll recall from the chapter, Southwest hires people with spirit and positive attitudes.
This hasn’t been easily imitated by other airlines even though competitors may understand the hiring strategy Southwest is using.
So, when the skills and knowledge of people in an organization are valuable, rare and not easily imitated, they can give a company an edge over the competition.
The final issue important to a strategic perspective of OB is referred to as high-involvement management.
This approach is about making sure people who fit the organization are hired as managers and associates and that they are carefully trained for their positions in ways that create value for the organization.
This is possible through the five characteristics of high-involvement management. Let’s look at each one of these now.
First, a company needs individuals who fit the culture of the organization and who can perform at a reasonable level. Additionally, hiring managers who value high-involvement approaches is wise. Firms accomplish these things by being very selective in their hiring process. This means securing a large pool of quality candidates and using multiple selection tools that allows applicants to be selected for their skills and knowledge as well as their fit with the company’s mission and culture.
Second, the newly hired managers and associates need to be thoroughly trained for job-skills as well as be included in discussions of culture and mission. In addition, long-term development through periodic training opportunities is a must.
Next, managers must empower associates. This means managers need to feel comfortable enough to allow their subordinates to make decisions on their own and to ask associates for their input when making certain decisions. For example, remember how much power an associate at Dell Computer has – enough to shut down an entire production line – now that’s power!
Next, managers need to share information with their employees about operational and strategic issues through company intranets, bulletin boards, and meetings. AES took information sharing so far that the Securities and Exchange Commission (SEC) considered every employee of the company an insider for stock-trading purposes. This is taking information sharing to the extreme, but associates do need to know what’s going on if they are expected to act effectively when empowered by their managers.
Finally, managers should provide associates with incentive compensation. This means associates are paid in a way that motivates them to be more productive in their jobs. For example, you can be paid by a piece-rate system (the more you produce, the more you get paid – keeping quality high, of course). Or, you can receive a bonus for being more productive during a certain period of time (6-month bonus or a yearly bonus). You could also get paid more for additional skills or knowledge that you acquire. These types of incentive compensation plans increase employees’ motivation, and in turn, their productivity because they are directly rewarded for the extra amount produced. This will be covered more in the chapters on motivation and performance.
There’s your basic introduction to the field of organizational behavior using a strategic focus.
The remainder of the course will take the issues we’ve covered here and break them down further.
We’ll look at three levels to better understand how organizations can strategically manage the skills and knowledge of their people: first is the individual level (topics like personality, motivation, values, and learning), second is the group level (topics like leadership, communication, power, conflict and decision making) and last is the organization itself (organizational design, culture and change).
You are on your way to better appreciating and understanding the challenges of organizational behavior and why it is such an important topic for businesses today.
Understanding people and how they contribute to an organization’s strategy will make you a better manager and help you add value to your own organization.