CHAPTER ONE

Overview of Organization Behavior

DEFINITIONS
‗Organizational Behavior‘ is composed of two words ‗organization‘ and ‗Behavior‘.

What are organizations?

Now we can define the term organization as two or more individuals who are interacting with
each other within a deliberately structured set up and working in an interdependent way to
achieve some common objective/s. organizations are not buildings or other physical structures.
Rather organizations are people who work together to achieve a set of goals. Organizations
play a major role in our lives. We possibly cannot think of a single moment in our lives when we
are not depending on organizations in some form or the other. Right from the public transport
that you use to come to your institute, the institutes itself, the class you are attending at this
moment, are all examples of organizations.

What is Behavior?

So now, what is Behavior? What do you think of it? Is it the behavior of organization or the
behavior of the people who are working in the organization?

Yes, it is the behavior of the people working in an organization to achieve common goals or
objectives. An organization comprises people with different attitudes, cultures, beliefs, norms
and values.

So now, let‘s see organizational behavior and what it exactly means.

“Organizational behavior is a field of study that investigates the impact that individuals, groups
and organizational structure have on behavior within the organization, for the purpose of
applying such knowledge towards improving an organizational effectiveness”. The above
definition has three main elements; first organizational behavior is an investigative study of
individuals and groups, second, the impact of organizational structure on human behavior and
the third, the application of knowledge to achieve organizational effectiveness. These factors are
interactive in nature and the impact of such behavior is applied to various systems so that the

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goals are achieved. The nature of study of organizational behavior is investigative to establish
cause and affect relationship.
OB involves integration of studies undertaken relating to behavioral sciences like psychology,
sociology, anthropology, economics, social psychology and political science. Therefore,
organizational behavior is a comprehensive field of study in which individual, group and
organizational structure is studied in relation to organizational growth and organizational culture,
in an environment where impact of modern technology is great. The aim of the study is to ensure
that the human behavior contributes towards growth of the organization and greater efficiency is
achieved.
To sum up the above definition, OB is concerned with the study of what people do in an
organization and how that behavior affects the performance of the organization.
Why Do We Study OB?
Following are the reasons to study organizational behavior:
To learn about yourself and how to deal with others
You are part of an organization now, and will continue to be a part of various
organizations
Organizations are increasingly expecting individuals to be able to work in teams, at least
some of the time Some of you may want to be managers or entrepreneurs
OB applies the knowledge gained about individuals, groups, and the effect of structure on
behavior in order to make organizations work more effectively. It is concerned with the
study of what people do in an organization and how that behavior affects the performance
of the organization.
There is increasing agreement as to the components of OB, but there is still considerable
debate as to the relative importance of each: motivation, leader behavior and power,
interpersonal communication, group structure and processes, learning, attitude
development and perception, change processes, conflict, work design, and work stress.
1.2. Function of manager
Managers just don't go out and haphazardly perform their responsibilities. Good managers
discover how to master five basic functions: planning, organizing, staffing, leading, and
controlling.

Planning: This step involves mapping out exactly how to achieve a particular goal. Say,
for example, that the organization's goal is to improve company sales. The manager first

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 needs to decide which steps are necessary to accomplish that goal. These steps may
include increasing advertising, inventory, and sales staff. These necessary steps are
developed into a plan. When the plan is in place, the manager can follow it to accomplish
the goal of improving company sales.
Organizing: After a plan is in place, a manager needs to organize her team and materials
according to her plan. Assigning work and granting authority are two important elements
of organizing.
Staffing: After a manager discerns his area's needs, he may decide to beef up his staffing
by recruiting, selecting, training, and developing employees. A manager in a large
organization often works with the company's human resources department to accomplish
this goal.
Leading: A manager needs to do more than just plan, organize, and staff her team to
achieve a goal. She must also lead. Leading involves motivating, communicating,
guiding, and encouraging. It requires the manager to coach, assist, and problem solve
with employees.
Controlling: After the other elements are in place, a manager's job is not finished. He
needs to continuously check results against goals and take any corrective actions
necessary to make sure that his area's plans remain on track.

All managers at all levels of every organization perform these functions, but the amount of time
a manager spends on each one depends on both the level of management and the specific
organization.

1.3. Major Characteristics of OB

Following are the major characteristics of Organization behavior:-

Interdisciplinary. Organizational behavior is interdisciplinary orientation that integrates
behavioral sciences in understanding behavior and performance. It draws heavily on
knowledge about behavior generated in the social sciences of psychology, sociology, and
anthropology.
Behavioral Science Foundation. The behavioral sciences—psychology, sociology and
anthropology have provided the basic philosophy, characteristics of science, and
principles that are so freely borrowed by the field of organizational behavior. The social

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 sciences of economics, political science, and history have had a secondary impact on the
field.
Scientific Method Foundation. OB had inherited the tradition of scientific method in its
investigations from its parent disciplines. The scientific methods emphasize the use of
logic and theory in formulating research questions and the systematic use of objective
data in answering such questions.
Three Levels of Analysis. The OB is unique in its approach to behavior because it
encompasses three levels of analysis, individual, group, and formal organization. In
addition, all three levels are treated with equal importance and needs to be scientifically
studied.
THE THREE LEVELS OF PERFORMANCE ANALYSES
OB has three levels of performance analysis: -
1. The individual
2. The group, and
3. The formal organization.

 Organization at the Individual Level: Organizational behavior can be studied in the

perspective of individual members of the organization. This approach to organizational
behavior draws heavily on the discipline of psychology and explains why individuals
behave and react the way they do to different organizational policies, practices and
procedures. Within this perspective, psychologically based theories of learning,
motivation, satisfaction and leadership are brought to bear upon the behavior and
performance of individual members of an organization. Factors such as attitudes, beliefs,

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 perceptions and personalities are taken into account and their impact upon individuals‘
behavior and performance on the job is studied.
 Organization at the Group Level: People rarely work independently in organizations;
they have to necessarily work in coordination to meet the organizational goals. This
frequently results in people working together in teams, committees and groups. How do
people work together in groups? What factors determine whether group will be cohesive and
productive? What types of tasks could be assigned to groups? These are some of the
questions that can be asked about the effective functioning of groups in organizations.
An important component of organizational behavior involves the application of knowledge
and theories from social psychology to the study of groups in organizations.
 Organization at the Organizational Level: Some organizational behavior researchers take
the organization as a whole as their object of study. This macro perspective on organizational
behavior draws heavily on theories and concepts from the discipline of 'sociology'.
Researchers seek to understand the implications of the relationship between the organization
and its environment for the effectiveness of the organization. Emphasis is placed upon
understanding how organizational structure and design influences the effectiveness of
an organization. Other factors such as the technology employed by the organization, the size
of the organization and the organization's age are also examined and their implications for
effective organizational functioning are explored.
These different perspectives on the study of organizational behavior are not in conflict
with one another. Instead they are complementary. A full and complete understanding of the
nature of organizations and the determinants of their effectiveness requires a blending of
knowledge derived from each perspective.
Contingency Orientation. The term contingency orientation reflects the need to consider
the situation and individuals involved before drawing conclusions about behavior. The
OB field has no universally applicable set of prescriptions for managers.
1.4. The Development of Organizational Behavior

Another Greek philosopher, Aristotle, spoke about the elements of persuasive communication.
The writings of the 16-th century Italian philosopher Niccolo Machiavelli laid the foundation for
contemporary work on organizational power and politics. In 1776, Adam Smith advocated a new
form of organizational structure based on the division of labor. One hundred years later, German
Sociologist, Max Weber wrote about rational organizations and initiated discussions of

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charismatic leadership. Soon after, Frederick Winslow Taylor introduced the systematic use of
goal setting and rewards to motivate employees. In the 1920s, productivity studies at Western
Electric‘s Hawthorne plant reported that an informal organization –employees usually interacting
with each other operates alongside the formal organization. So you can see that OB ideas have
been around for a long time; they just weren‘t organized into a unified discipline until after
World War II.
Information technology is a major force driving change. We are experiencing the rapid
integration of information across all industries everywhere, yet it is still people who invent,
direct, guide, and manage change in their own careers and in the boundary less organization.
This text relates organizational behavior topics to managing dynamic body of knowledge that
can be used to understand and manage a wide technological change as a driver of performance
and integration. ―Business @ the speed of thought‖ is a major factor of competitive advantage.
Another set of success factors that lead to competitive advantage are developing and sustaining
world-class products and services with Internet speed and meeting and exceeding customer
demand. Organizations are adapting by reengineering, reinventing, restructuring, and rethinking
their strategies, structures, and expertise around web-based, Internet integrated business
processes. Not all organizations are changing at the same pace or on the same scale. However,
Internet-driven networks and software applications have produced a type of ―digital Darwinism‖.

High-performance teams are organized with empowered individuals who work creatively to add
value to their company as well as to their units. Knowledge of organizational behavior and a
repertoire of people skills are essential in building and sustaining face-to-face and virtual
relationships.

Table, Showing Historical Phase of OB

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Agrarian Industrial Post-Industrial Information

. Scientific & .Bureaucracy .Group .Decision Socio-technical Contingency .Global

classical Human Dynamic making Systems theory theory Management
management Relations approaches; • Internet
leadership technologies
•Quality,
speed,
customer
focus
• Diversity
• Ethics
1910 – 1920s 1920s 1940s 1950s 1960–1970s 1980s 1990 – 2000s

1.5. The Behavioral Aspects of organization behavior

Psychology: Psychology is an applied science, which attempts to explain human behavior in a

particular situation and predicts actions of individuals. Psychologists have been able to modify
individual behavior largely with the help of various studies. It has contributed towards various
theories on learning, motivation, personality, training and development, theories on individual
decision making, leadership, job satisfaction, performance appraisal, attitude, ego state, job
design, work stress and conflict management. Studies of these theories can improve personal
skills, bring change in attitude and develop positive approach to organizational systems. Various
psychological tests are conducted in the organizations for selection of employees, measuring
personality attributes and aptitude. Various other dimensions of human personality are also
measured. These instruments are scientific in nature and have been finalized after a great deal of
research. Field of psychology continues to explore new areas applicable to the field of
organizational behavior. Contribution of psychology has enriched the organizational behavior
field.
Sociology: Science of Sociology studies the impact of culture on group behavior and has
contributed to a large extent to the field of group-dynamics, roles that individual plays in the

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organization, communication, norms, status, power, conflict management, formal organization
theory, group processes and group decision-making.
Political science: Political science has contributed to the field of Organizational behavior.
Stability of government at national level is one major factor for promotion of international
business, financial investments, expansion and employment. Various government rules and
regulations play a very decisive role in growth of the organization. All organizations have to
abide by the rules of the government of the day.
Anthropology: It is a field of study relating to human activities in various cultural and
environmental frameworks. It understands difference in behavior based on value system of
different cultures of various countries. The study is more relevant to organizational behavior
today due to globalization, mergers and acquisitions of various industries. The advent of the 21st
century has created a situation wherein cross-cultural people will have to work in one particular
industry. Managers will have to deal with individuals and groups belonging to different ethnic
cultures and exercise adequate control or even channelize behavior in the desired direction by
appropriately manipulating various cultural factors. Organization behavior has used the studies
on comparative attitudes and cross-cultural transactions. Environment studies conducted by the
field of anthropology aims to understand organizational human behavior so that acquisitions and
mergers are smooth. Organizations are bound by its culture that is formed by human beings.
Economics study the production, distribution, and consumption of goods and services. Students
of organizational behavior share the economist's interest in areas such as labor market dynamics,
productivity, human resource planning and forecasting, and cost-benefit analysis.
Engineering has also influenced the field of organizational behavior. Industrial engineering in
particular has long been concerned with work measurement, productivity measurement, work
flow analysis and design, job design, and labor relations.

Most recently, medicine has come into play in connection with the study of human behavior at
work, specifically in the area of stress. Increasingly, research is showing that controlling the
causes and consequences of stress in and out of organizational settings is important for the well-
being of both the individual and the organization.

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1.6. Organizational culture
According to Bowditch and Buono ―Organizational culture is with the nature of belief and
expectations about organizational life, while climate is an indicator of whether those beliefs and
expectations are being fulfilled.‖ Employees in the organization keep studying the management
philosophy and various actions they take to deal with organizational factors that are of a routine
nature. These include the following:

a. Selection Process of the employees.

b. Leadership style and approach to solve problems of the employees.
c. Wage administration.
d. Attitude to implement change and incorporate latest technology.
e. Job description.
f. Organizational structure and frequency to modify the same based on need.
g. Performance evaluation.
h. Promotion policy and its implementation.
i. Efforts involved in promoting creativity and innovations.
j. Availability of resources for research and development.
k. Organizational values and promotion of culture.

organizational culture into two factors as under:

a. Overt Factors
 Hierarchy
 Goals of the organization
 Financial resources
 Skills and abilities of employees
 Technological state of the organization
 Performance standards adopted
 Efficiency measurement

b. Covert Factors
 Values
 Attitude

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  Norms
 Feelings
 Interaction
 Supportiveness
 Satisfaction
Functions of Organizational Culture
I. It gives members an organizational identity: Sharing norms, values and
perceptions gives people a sense of togetherness that helps promote a
feeling of common purpose. Culture provides shared pattern of cognitive
perceptions or understanding about the values or beliefs held by the
organization. This enables the organizational members how to think and
behave as expected of them.
II. It facilitates collective commitment. The common purpose that grows
out of shared culture tends to elicit strong commitment from all those who
accept the culture as their own. It provides shared – pattern of feelings to
the organizational members to make them know what they are expected to
value and feel.
III. It promotes systems stability. By encouraging a shared sense of identity
and commitment, culture encourages lasting integration and cooperation
among the members of an organization. It enhances social stability by
holding the organizational members together by providing them
appropriate standards for which the members should stand for.
IV. It shapes behavior by helping members make sense of their
surroundings. An organization culture serves as a source of shared
meaning that explains why things occur the way they do. Organizational
culture is not fully visible but felt. At less visible level culture reflects the
value shared by organizational members.
V. It provides a boundary: Culture creates distinction between one
organization and the other. Such boundary – defining helps identify
members and non-members of the organization. Culture facilitates the
generation of commitment to something larger them one‘s individual self-

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 interest. It serves as a control mechanism that guides and shapes the
attitude and behavior of organizational members.
VI. It helps organizational members: Stick to conformity and expected
mode of behavior. Culture ensures that everyone thinks and behaves in a
prescribed manner.

Chapter two

2. Organization

2.1. Define organization

Organizations are as old as the human race. Archaeologists have discovered massive templates
dating back to 3500 B.C. that were constructed through the organized actions of many people.
The fact that these impressive monuments were built suggests not only that complex
organizations existed, but that the people in them cooperated reasonably well. We have equally
impressive examples of contemporary organizations; from simple constructs to the complex
network of computer connections we call the internet. Now we can define the term organization
as two or more individuals who are interacting with each other within a deliberately structured
set up and working in an interdependent way to achieve some common objective/s. organizations
are not buildings or other physical structures. Rather organizations are people who work together
to achieve a set of goals. Organizations play a major role in our lives. We possibly cannot think
of a single moment in our lives when we are not depending on organizations in some form or the
other. Right from the public transport that you use to come to your institute, the institutes itself,
the class you are attending at this moment, are all examples of organizations.

2.2. Function of organization

Organization is the backbone of management because without an efficient organization no
management can perform its functions smoothly. In the management process this organization
stands as a second state which tries to combine various activities in a business to accomplish pre-
determined goals. It is the structural framework of duties and responsibilities required of
personnel in performing various functions with a view to achieve business goals

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Some of the functions of organization:
 Proper utilization of human resource
 Conflict prevention
 Efficient functioning
 Coordination
 To ensure smooth and effective net-work of communication and information.
 To offer interesting and meaningful jobs to all individuals working in the organization.
This alone will ensure job satisfaction. Organization is developed for people. It must,
therefore, be humanistic also and not merely mechanistic. Both the approaches can be
reconciled.
 To create, maintain and develop its own image or individuality. This ensures customer
goodwill. Investors will also have confidence in the enterprise. Employees can develop a
sense of belonging to the organization.
2.3. Characteristics organization
The following are the different characteristics of an organization:
(a) Modern organizational is too large in terms of number of people in employment and in terms
of the amount of investment. Direct contact between employer and employee is not possible in
modern organization.
(b) Division of Work:
In organization the total work of the enterprise is divided into activities and functions. For
efficient accomplishment various activities are assigned to different persons. This brings in
division of labor. Specialization in different activities is necessary to improve one‘s efficiency.
Organization helps in division of work into related activities so that they are assigned to different
individuals.
(c) Co-Ordination of Various Activities:
Co-ordination among various activities of a department and of the organization is necessary for
the harmonious functioning of the organization. Co-ordination is done by the divisional head and
the organization-head.
(d) Huge Investment and Complicated Technology:
Modern organization involves huge investment and complicated technology, their management
and operation is a complex affair. It needs assistance from specialists at all levels.
(e) Mutually Agreed Purpose:

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There must be mutually agreed purpose because all activities in an organization are goal-
oriented.
(f) Proper System of Working in All Organizations:
There must be proper system of working in all organizations. It means there must be well defined
hierarchical levels, a chain of command, rules and procedures and communication network, so
that consistency and uniformity in behavior may exist.
(g) Differentiation is a Must:
A chain of systematic division of labor takes place by assigning authority and responsibility to an
individual who is supposed to be specialized in the job and this leads to differentiation.
(h) Interaction with Other Systems is Also Must:
All systems are interdependent and exert influence on others and are influenced by others.
Mutual dependence necessitates interaction and consequently adaptation.
Thus, the modern organization is an ideal co-ordination of the functions of a number of people
for attaining the mutually agreed purposes through a well-defined system of working, i.e.,
hierarchical levels, chain of command, rules and procedures and communications and through
the principle of division of labor. It influences and is influenced by the social systems.

2.4. Types of organization

The Formal and Informal Organization

Types of formal organization structures and discussed their potential impact upon employee
behavior. In addition to the formal structure as set out in the organization chart, there exists
another ―structure‖ which is also important in determining employee behavior. This structure is
called the informal organization and it refers to the patterns of behavior and influence that arise
out of the human interaction occurring within the formal structure.

The systems view of organization may lead one to view the design of an organization as
clockwork with a neat, precise, interrelated functioning. The formal organization is the part of
the system that has legitimacy and official recognition. The snake pit organizational metaphor
mentioned earlier has its roots in the study and examination of the informal organization, which
is the unofficial part of the system. The informal organization was first fully appreciated as a
result of the Hawthorne Studies, conducted during the 1920s and 1930s. It was during the

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interview study, the third of the four Hawthorne studies, that the researchers began to develop a
fuller appreciation for the informal elements of the Hawthorne Works as an organization.

Potential conflict between the formal and informal element of the organization makes an
understanding of both important. Conflicts between these two elements erupted in many
organizations during the early of this century and were embodied in the union-management strife
of that era. The conflicts escalated into violence in a number of cases. Not all organizations are
characterized by such potential formal -informal, management-labor conflict. For instance,
Kodak‘s concern for employees and attention to informal issues made unions unnecessary within
the company.

The informal organization is a frequent point of diagnostic and intervention activities in

organization development. The informal organization is important because people‘s feelings,
thoughts, and attitudes about their work do make a difference in their behavior and performance.
Individual behavior plays out in the context of the formal and informal elements of the system,
becoming organizational behavior. The existence of the informal organizational was one of the
major discoveries of the Hawthorne Studies.

Formal organization (overt)

Goals and objectives, Policies and

procedures

Job descriptions

Financial resources

Informal organization (covert)

Beliefs and assumptions about:

 People
 Work the organization
Perceptions and attitudes

Values

Feelings, such as fear, range, despair

and hope

Group norms Page 15

Figure1. The formal and informal elements of the organization are depicted

While formal and informal organizations are similar along some dimensions, there are also
important differences. Because the informal organization can exert a strong influence on
employee behavior, it is important to understand its nature, how it works, in what ways it affects
behavior, and how it can be used in the management of organization.

Examples of behavior in the informal organization are many and varied:

1. A production worker may restrict output to conform to the norm of the work group.
2. Management may plan an important announcement for employees, only to find out that the
message was leaked earlier through the grapevine.
3. The manager of a department may find that the leader of the company baseball team appears
to exert more influence during the baseball season than the line managers.
4. A potentially conflict-laden meeting may proceed very rationally since most of the
disagreements on issues were worked out the night before over a few drinks.
In other words, any behavior that occurs ―above and beyond‖ that prescribed by the formal
organization is a result of the informal organization.

In general, the informal organization emerges because the formal structure does not satisfy all
employee and organizational needs. The exact form of the formal structure does not satisfy all
employee and organizational needs. The exact form the informal organization will take thus
depends on the specific deficiencies in the formal structure and in employee need satisfaction. It
is important to remember that managers do not have a choice as to whether or not the informal

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organization will develop; informal relationships will be formed within any formal structure. It is
important for the manager to understand (rather than to attempt to suppress) the informal
organization and to channel its energies toward organizational goals.

Another reason for the existence of the informal organization is the employees‘ need for
predictability and stability in interpersonal relationships and social processes. The formal
organization is unable to develop this, since formal structures are generally designed from a
mechanical, rational perspective, not a behavioral one. The informal relationships that develop
from on-the-job interaction provide the necessary security and predictability that individuals
need, and this results in another structure parallel to the formal one.

The concept of informal relationships within formal organizations can be viewed from two
perspectives: a macro one that describes the broader, informal relationships that pervade the
entire structure, and a micro one that examines individual behavior within the confines of
smaller, well-defined groups. The former perspective usually labeled as the ―informal
organization‖ whereas the latter is often called ―group dynamics‖ or ―small group behavior.”

Comparison of Formal and Informal organizations

In what ways formal and informal organizations are similar? Different? Formal and informal
organizations have both similarities and differences. The following are some of the dimensions
for their similarities and differences:

1. Origin of structure
Formal organizations are goal-oriented and designed around general principles of
organization, which are presumed to be consistent with the desired objectives of management.
Formal structures are the result of conscious thought processes and are designed to be rational
in relation to organization goals. Changes in the formal structure can be made by
administrative decree. In contrast, the informal organization develops spontaneously.
Individuals adopt behavior patterns which are caused by a wide variety of social and personal
factors, and the resulting informal structure reflects these different individual goals rather than
the organization‘s goals. Consequently, the informal organization is a function more of
emotion than of logical thought processes. When changes occur in the informal structure, they

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 are the result of a collective (though sometimes subconscious) agreement on the part of the
members, not a result of the imposed authority of the administrative system.

2. Position Terminology
In the theoretical concept of formal organization, the relationship between the individual and
the organization tends to be mechanical and impersonal. The responsibilities and behaviors
required of individuals are specified in job descriptions, which are generally designed
without regard for who will be performing the job. The informal organization equivalent of
the ―job‖ is the organizational role. However, the concept of organizational role is more
complex than that of a job since it includes not only individuals‘ formal responsibilities and
expectations, but also other people‘s expectations of the role occupant. It is not unusual to
find that the formal job description‘s requirements and the role expectations of an
individual‘s colleagues are in conflict. For example, the fears of rate cutting, the informal
organization may place pressure on its members not to exceed a certain quota.

Because role expectations come from many different sources, they make greater demands on
workers than do the formal job descriptions. Technically, formal job descriptions can
prescribe behavior only within the organization, but role expectations can come not only
from the person‘s job but also from family, friends, colleagues, and so on. Since each person
sees a given role from his or her own perspective, there are frequently conflicting
expectations confronting the role occupant. A worker may have to choose between an
evening with family and bowling with the company team. This situation is likely to present
considerable conflict for a worker attempting to sort out the costs and rewards associated
with each alternative.

3. Goals of the Organization

Goals of the formal organization are created by the owners (or managers representing the
owners) and are generally described in profitability or efficiency terms for most organizations.
Sub goals may relate to market share, return on investment, cost per unit, or other quantifiable
measures. In contrast, the informal organization‘s major goal can be broadly defined as the
social satisfaction of its members. This does not mean that the informal organization cannot
contribute to formal organizational goals (in fact, as will be illustrated later, the informal

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 organization can contribute significantly to formal organization goals); rather, the social needs
of its members must be satisfied in the process. Ideally, the goals of the informal organization
are in perfect agreement with those of the formal organization. In actual practice this is almost
never the case, partly due to the fact that workers have individual goals that are seldom in
complete agreement with formal organization goals.

4. Influence Processes
Influence within the formal structure is by formal position and is determined by the authority
allocated to the position. Job descriptions generally detail the extent of the authority vested in
the position, including its quality (degree of authority) and quantity (number of individuals
over whom authority is exercised). The formal organization equates authority with influence;
in other words, if individuals have been given authority, they are assumed to have influence. In
contrast, influence processes in the informal organization occur by approval from the relevant
group, not by organizational decree. In contrast, influence processes in the informal
organization occur by approval from the relevant group, not by organizational decree.
Generally, the individual with the most influence is the person who is most able to satisfy the
needs of the group. This may or may not be the appointed (formal) leader, because informal
leaders emerge as the result of social fecundity influence. Thus, influence in the informal
organization is attached to the person, whereas in the formal organization it is attached to the
position.

5. Control Mechanisms
In the informal organization, standards of behavior, referred to as norms, are similarly
communicated to members through social processes. Because the informal organization is a
social organization, norms are oriented toward controlling social behaviors, and sanctions are
directed at those who violate them. The primary social of norms is to increase the probability
that socially desirable behavior will occur on a predictable basis. As mentioned earlier,
informal organizations tend to satisfy employee needs for structure and predictability, and the
enforcement of norms provides some assurance that only acceptable behaviors will be
exhibited.

6. Communication Processes

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 One of the major functions of hierarchical lines of authority in formal structures is to identify
the correct channels of communication. Therefore, lines of authority can also be viewed as
lines of communication. If taken literally these lines would indicate that two individuals
working under different superiors would have to follow the chain of command through their
respective bosses in order to communicate with each other. Informally, however, this seldom
happens. The informal organization devises it own channel of communication (the grapevine)
for both social and organizational communication purposes. The grapevine carries whatever
information the informal organization needs and although it is selective and often carries
indurate or distorted information, it is generally faster than formal channels of communication.

7. Charting the Organization

Organization charts are pictorial representations of authority relationships in the formal
organization. Should a job description change or a reorganization of the company occur, the
boxes and lines on the chart can easily be redrawn to reflect the design of the new organization.
The purpose of these charts is to indicate who has authority over whom, how communication
should travel, how each job relates to each other job, and the objectives of the organization.

The entire informal organization may also be charted; this would show interaction patterns
within the group as well as those up and down the total hierarchy.

In sum, both the formal and informal organizations have common attributes, but the
manifestations of these attributes differ significantly along a number of dimensions. Informal
organizations represent the human side of organizations and are thus dependent on the nature of
individuals in the organization; formal organizations, since they are consciously thought out, are
usually highly structured and give less emphasis to human considerations. In one sense, it may
be useful to view the formal organization as ―how it should be‘ and the informal organization as
―how it actually is.‖

2.5. Principles of an Organization

The work can be completed in time whenever a technique or a principle is adopted. So, the
success or failure of an organization depends upon the principles to be followed in the

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organization. The principles of organization may be termed as a tool used by the organization.
Some experts like Taylor, Fayol and Urwick have given the principles of organization.
1. Principle of Definition:
It is necessary to define and fix the duties, responsibilities and authority of each worker. In
addition to that the organizational relationship of each worker with others should be clearly
defined in the organizational set up.
2. Principle of Objective:
The activities at all levels of organization structure should be geared to achieve the main
objectives of the organization. The activities of the different departments or sections may be
different in nature and in approach, but these should be concentrated only for achieving the main
objectives.
3. Principle of Specializations or Division of Work:
Division of work means that the entire activities of the organization are suitably grouped into
departments or sections. The departments or sections may be further divided into several such
units so as to ensure maximum efficiency. This will help to fix up the right man to the right job
and reduce waste of time and resources.
The work is assigned to each person according to his educational qualification, experience, skill
and interests. He should be mentally and physically fit for performing the work assigned to him.
The required training may be provided to the needy persons. It will result in attaining
specialization in a particular work or area.
4. Principle of Co-Ordination:
The objectives of the organization may be achieved quickly whenever co-ordination exists
among the workers. At the same time each work can be done effectively by having co-
ordination. The final objective of all organizations is to get smooth and effective co-ordination.
5. Principle of Unity of Command:
This is also sometimes called the principle of responsibility. The organizational set up should be
arranged in such a way that a subordinate should receive the instruction or direction from one
authority or boss. If there is no unity of command in any organizational set up, the subordinate
may neglect his duties. It will result in the non-completion of any work. In the absence of unity
of command, there is no guidance available to the subordinates and there is no controlling power
for the top executives of the organization. Further, some subordinates will have to do more work
and some others will not do any work at all.

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6. Principle of Balance:
There are several units functioning separately under one organizational set up. The work of one
unit might have been commenced after the completion of the work by another unit. So, it is
essential that the sequence of work should be arranged scientifically.
7. Principle of Span of Control:
This is also called span of management or span of supervision or levels of organization. This
principle is based on the principle of relationship.
Span of control refers to the maximum number of members effectively supervised by a single
individual. The number of members may be increased or decreased according to the nature of
work done by the subordinate or the ability of the supervisor. In the administration area, under
one executive, nearly four or five subordinates may work. In the lower level or the factory level,
under one supervision, the twenty or twenty five number of workers may work. The span of
control enables the smooth functioning of the organization.
8. Principle of Leadership Facilitation:
The organizational set up may be arranged in such a way that the persons with leadership
qualities are appointed in key positions. The leadership qualities are honesty, devotion,
enthusiasm and inspiration.

2.6. Ethics and Social Responsibility

2.6.1. Ethics

Individual values form the basis of ethics, a set of moral principles that govern decisions and
actions. To act ethically is to behave in ways that are in keeping with certain values.

2.6.2. Social Responsibility

It is an ethical framework and suggests that an individual has an obligation to work and
cooperate with other individuals for the benefit of society at large.

Social responsibility means that individuals and companies have a duty to act in the best
interests of their environment and society as a whole. Social responsibility, as it applies to
business, is known as corporate social responsibility (CSR), and is becoming a more
prominent area of focus within businesses due to shifting social norms.

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 CHAPTER THREE
ORGANIZATIONAL STRUCTURE AND DESIGN
3.1 Definition: Meaning of Organization Structure

According to Sheldon Organization is the process of combining the work, which individuals and
groups have to perform with the facilities necessary for its execution, that the duties so
performed provide the best channels for the efficient, systematic, positive and coordinated
application of the available efforts.

Koontz and Donnel have defined organizational structure as ‗the establishment of authority
relationships with provision for coordination between them, both vertically and horizontally in
the enterprise structure‘.

Organizational structure plays as important role in attaining these goals. Any organization when
it starts has a small structure and it takes a mega form as it develops. The development is both
vertical and horizontal. Vertical structure indicates the line authority and reporting channel.
Horizontal structure indicates the division of work and specialization. Tiers of organizational
structure are indicative of power structure, positions and its inter-se relationship, roles, channels
of reporting, delegation and accountability. Organizational structure to be effective must be
continuously reviewed, modified especially in the present scenario where cost cutting is the order
of the day if an organization has to be competitive. It has been observed that the formation of
organizational structure is subject to influence of various people who have a say in the
organization and therefore there exist a divergence between planned and operating organizational
structure.

3.2. Form of Organization Structure

a. Mechanistic form of organizational structure. An organizational structure based on

formalized system that is relatively rigid in nature. This is generally applicable to those
organizations that are not influenced by technological, product, market changes and
generally maintains a constant pattern. In mechanistic form of organizational structure,
authority is centralized at the top level of management and has a rigid hierarchy of
authority. Decision making is generally reserved at the top level. The tasks are well

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 defined so that the goals set by the top level management are attained smoothly. The
structure is characterized by plenty of written orders and instructions.

b. Organic form of organizational structure. Organizations those are subject to change

due to environmental factors like technology, market changes and product development
generally adopt organic form of organizational structure. For example software industry.
In such structures authority is delegated to various functional levels/individuals.
Decentralized decision making is practiced that allows people to make their own
decisions based on the environment and that they do not have to look over their
shoulders. There are very few levels of organizational hierarchy and existence of flexible
reporting system. Jobs are fairly well defined with few orders and instructions. These
days organic form of organizational structure is related to work groups and teams
working independently on a particular project that report directly to top management.
They are self-supervised, self-directed and self-controlled sub units that are self-
accounted for their performance and attainment of organizational goals. The structure is
more loosely and subject to changes very frequently to adapt to the environmental
changes. It is highly flexible.

Comparative evaluation of mechanistic and organic form of organizational structures is given

as under:
Mechanistic system Organic system
• Centralized work culture • Decentralized work structure
• Highly formalized (exhaustive written • Formalization is very low(very few
orders) written instructions)
• High specialization • Low level of specialization (team work)
• Fluctuation in work culture • Standardized job structure
• Narrow span of management • Wide span of management
• Tall organizational structure with • Flat organizational structure with few
number of organizational tiers tiers
• Centralized decision making • Decentralized decision making

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Flat Structure Tall Structure

Merits and Demerits of Tall and Flat Structure

a) Tall structure

Merits Demerits
- Closer control - Slows down decision making
- Better coordination - Distorted Communication
- Closer supervision and fewer mistake - Distance between top level
Workers level
- Increased administrative overhead

b) Flat Structure
Merits Demerits
- Reduces over head costs and the number - Less control and coordination
Of subordinates - Control and coordination difficult
Improved and fast communication as the work is highly interlocking.
Challenge responsibility and autonomy
- Most suited to individuals desiring
- Fast decision making

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 3.3. Determinants of Organization Structure

Organization structure provides a basis or framework within which managers and non-
managerial employees perform the jobs assigned to them. In order words, organization structure
may be considered as the core element around which various functions are performed and several
processes operate. The structure of organization is consciously designed by the management.
However, in designing the structure, the following factors are to be considered:

1. Objectives and Strategy: Design of structure begins with the identification of organizational
objectives. There is no way of devising what the main structure of an organization should be,
without an understating of what the organization is for and what it is trying to achieve. Since an
organization is a goal-oriented system, it is quite legitimate that its goals have decisive role in
designing its structure. The goals determine its tasks and strategies. If management makes a
significant change in its strategy, the structure will need to be modified to accommodate and
support such change.
2. Environment: Organization is a system and every system has its boundaries. Beyond the
boundaries, there exists external environment which affects not only the formation and
functioning of the organization but also its structure. To cope with changing environment, among
other things, organizational process, goals and structure are changed and made in line with
changes. Environment includes all those economic, social, cultural, political, legal and
technological factors which directly or indirectly affect the functioning of the organization.
Therefore, the structure of the organization is to be designed in view of changes likely to take
place in environment. Added to it, organization being a sub-system of environment interacts with
the environment on regular basis for getting inputs and supplying output.
3. Technology: An organization is a socio-technical system. Technological aspect which refers to
the manner, in which various activities will be performed, is an important part of organizational
structure. As the activities are related to objectives, they are also related to technology. Because
every activity to be performed requires some kind of technology, the type of technology being
used in the organization for performing different activities would also affect the structure of the
organization directly and indirectly.
4. People: Organizations are formed by and operated through people. Large number of people is
employed for both managerial and non-managerial jobs and various activities are assigned to

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 them and finally they are put in authority relationships. These people carry some goals, values,
perceptions, beliefs and attitudes which have direct reflection on the structure of organization.
Therefore, these factors must be taken care of at the time of designing the organizational
structure. Indeed, the tasks, activities, goals and technology will gain more meaning if they are
built around the people.
5. Size: There are several criteria to determine size of an organization such as number of persons
employed, amount of capital invested, volume of turnover, and physical capacity. However,
‗size‘ has generally been used to refer to the number of employees or members of an
organization. Thus organizations could be small or large depending upon the number of their
employees. As an organization grows in size, its structure naturally becomes more complex or
complicated. Jobs that could once be handled by a single person are split and split again; new
layers of supervision are inserted between the top executive and the rank and file. An
organization is forced, it its size increases, to realign duties and responsibilities and more often
than not, to add new integrating units.

Designing of Organizational Structure

Good organizational structure facilitates the following:

a. Every individual has to perform certain activities in the organization. He is responsible to
accomplish the same and therefore certain amount of power and authority is given to him.
Individual must also know his power position, seniority and official relationship in an
organization so that he can perform his duties effectively. It is therefore necessary that an
ideal structure is formed that will facilitate accomplishment of organizational objectives.
b. Identical activities are grouped together in order to facilitate efficient functioning and
achievement of results. Organizational structure is therefore needed for integration of
diverse activities.
c. It is necessary that idle machine time is avoided, capacity is fully utilized and operations
of production in particular and other functions are regulated to achieve utilization of
resources. Bottlenecks are avoided and smooth flow of activities is achieved. This is
possible once a well thought out organizational structure is formed with specific
functions allotted to each of the employees in the organization.

Steps in Formation of Organizational Structure

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1. Determination of organizational goals and identification of related activities:
Organizational goals must be well defined and clearly spelt out. Based on the goals all
activities that are required should be identified and broken down into smallest possible
sub activities that may be assigned as a task or a job to the worker. This is applicable to
both managerial as well as operational functions in the organization.

2. Grouping of activities: All identical activities should be grouped keeping in mind

formation of various departments or divisions. Set of activities could further be sub-
divided and assigned to a particular section of a department. For example, in an
automobile industry, activities relating to manufacturing of body of a vehicle could be
grouped and assigned to a department responsible for it. Activities relating to
manufacturing of chassis could be sub-divided and allotted to chassis manufacturing
section and the like. This process will lead to formation of department and sections. It
will also indicate the workload, human resource requirement, skills that may be
necessary, the composition and layout of various facilities. Hence the progression in
forming an ideal organizational structure.

3. Delegation of authority: A person cannot perform his duties unless he has been given
adequate authority to accomplish the assigned task. He cannot be made responsible and
accountable if requisite authority has not been given. Authority, responsibility and
accountability are tied together. An individual employee cannot be held responsible
without authority. Production manager cannot be held responsible for shortfall in
production if he has not been authorized to hire additional workers if required to meet the
production targets. It is therefore necessary to adopt the following process:
a. Determination of course of action to meet the organizational objectives.
b. Division of various activities into appropriate segments to be handled by
individuals appropriate to their skills.
c. Assignment of tasks to individuals delegating necessary powers and resources.
d. Coordination to ensure that resources are adequately utilized and that there is no
overlap or gap in task accomplishment.

3.4. Elements of Organization Design

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Organizational structure refers to the way power and responsibility are distributed around your
company. Organizational design is an intentional effort to rearrange that distribution to improve
your structure. Design requires decisions about centralization, departmentalization and the chain
of command.
Organization Design is the process for shaping the way organization are structured and run. It
involves many different aspect include team formation, shift, pattern line of reporting, decision
making procedure communication etc.

Organizational structure

The system of task and reporting relationships that control and motivate colleagues to
achieve organizational goals.

In fact, organizational design encompasses much more than simply the structure: organization
design is the process of aligning an organization's structure with its mission.

Organizational design

The process by which managers define organizational structure and culture so that the
organization can achieve its goals
Organizational design is the process of creating the hierarchy within a company.

The six elements of organizational design help business leaders establish the company departments,
chain of command and overall structure.

3.5. Types of Organization Design

1. Departmentalization by Functions
One of the most popular ways to group activities is by functions performed by the organization.
Traditional functions are human resources, marketing, and finance and information technology
departments. Each of the departments is known by the principle activities performed by the
group of people. These departments could be further divided into functional groups like
marketing department may further be sub-divided into sales, advertising, publicity and

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promotion departments and headed by manager/supervisor depending upon the work load, size
of the organization and quantum of the work involved.
This type of grouping has the following characteristics:
a. Jurisdiction of particular department is clearly defined. In good organizations standing
orders are written down for each of the departments in which detailed functions and
duties of each of the members are outlined. Interference in the functioning of other
departments is avoided.
b. Since roles of the each of the department are outlined, supervision becomes easy. All the
employees work within the parameter of their respective jurisdiction. Activities are easily
managed by supervisors in terms of coordination and control. Each functional area
develops its own guidelines for compliance.
c. It is easy to organize training and development activities. Employee‘s skill is further
enhanced if employees are subjected to seminars, workshops and conferences. It is the
responsibility of the departmental heads to ensure that the staff has updated knowledge in
their areas of operations.
d. There is healthy competition between various departments. Each of the departments
develops their culture over the period of time. This type of departmentalization is easy for
command and control.
2. Departmentalization by Place
Territory or geography is used as the base to depart-metalize activities in the organization.
Geographical departmentalization takes place when an enterprise is large and has number of
divisions located in different areas. It may be dispersed within a nation or may even be spread
worldwide. Enterprises divide their activities into zones or divisions. These are independent
profit earning centers and work under local environment. Life Insurance Corporation of India is
one such example where organizational policy is same but the nature of operation varies
depending upon the local geographic, social and cultural disparities. Life Insurance Corporation
of India is a classical example of organization based on place. Geographic departmentalization
has following characteristics:
a. Product and services can be taken as close to customers as possible.
b. Local talent and resources can be exploited to the best of advantage.
c. Departmentalization by place reduces the cost of material. It has been observed that
organizations open their units as close as possible to the vendors and suppliers.

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 d. It reduces the cost of marketing the products and services.
e. Local talent can be put to optimum use especially in rural development /handicrafts
manufacturing units.
f. Due to geographic dispersion, control by the head office becomes difficult. A situation
may arise where goal of those who manage the unit become more important than the
corporate goals. This may lead to empire building.
g. There is competition for acquiring of resources from the corporate exchequer.
h. Employees resist transfer to another unit

3. Departmentalization by Product and Services

An organization may produce single product or multiple products. In the later case the unit
becomes large that cannot be managed easily due to multiplicity of products, services and
processes. For example the Tata Group which has number of products being manufactured and
sold under one umbrella like steel, finance services, hospitality, publishing, power, automobile
and telecommunication etc. If these are grouped under one unit, it does not make a sense. These
are to be independently managed because losses in one unit can be offset by profits in the rest of
the units. The characteristics of organization built around product/services are as under:

a. One of the most important characteristics of units that are structured based on
departmentalization by product/services is coordinating intra unit and inter unit activities
to achieve organizational goals.
b. These units have been termed as independent profit earning centers. These have to
function independently and contribute towards corporate earnings.
c. Competition by units.
d. Since units are independent, it becomes necessary to set up all the functional areas and
employ a large number of employees at the cost of high expenses. This leads to
duplication of efforts.
e. Corporate office should exercise its control and discourage empire building tendencies
and one-upmanship.
4. Departmentalization by Time
Hospitals and other public utility organizations like telephones, railways, hotels that work round
the clock are departmentalized on the basis of shifts. For example hospital may have day shift,

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evening shift and night shift. Production units may also have this type of organizational structure
when the load of production is adequate that makes organization to adopt such organizational
structure.
5. Departmentalization by Matrix
Where technological and product changes occur at a fast rate and co-ordination between
functional and product department become critical, matrix system is recommended. In matrix
system attention is paid towards co-ordination of various functional activities including product
innovation. Matrix system is depicted in Figure where every matrix has three sets of positions
and role relationship.

6. Hybrid Structure
When organizations expand, there is a need of striking a balance in exercising command and
control yet giving organizations a freedom of action so that the productivity is enhanced. Hybrid
organizational structure is therefore adopted. This helps to capitalize on the strength of both
forms (functional and product based structures), while avoiding disadvantages of both. Here,
functions that are critical and central for each product or market are decentralized, but functions
like legal services, employee welfare are centralized.

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 Chapter four

4. Motivation and organizational communication

4.1. Concept of motivation

Motivation is the process that account for an individual‘s intensity, direction and persistence of
effort toward attaining a goal. While general motivation is concerned with effort toward any
goal, we‘ll narrow the focus to organizational goals in order to reflect our singular interest in
work related behavior.

The three key elements in our definition are intensity, direction and persistence. Intensity is
concerned with how hard a person tries. This is the element most of us focus on when we talk
about motivation. However, high intensity is unlikely to lead to favorable job-performance

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outcomes unless the effort is channeled in a direction that benefits the organization. Therefore,
we have to consider the quality of effort as well as its intensity. Effort that is directed toward,
and consistent with, the organization's goals is the kind of effort that we should be seeking.
Finally, motivation has a persistence dimension. This is a measure of how long a person can
maintain his or her effort. Motivated individuals stay with a task long enough to achieve their
goal.

Motivation is defined as “inner burning passion caused by need, wants and desire which propels
an individual to exert his physical and mental energy to achieve desired objectives”. Efficiency
of a person depends upon performance. Performance can be expressed as under: -
Performance= Ability × Motivation
Terms like motive, motivation and motivating are commonly used in Organizational Behaviour.
It is important to fully understand the meanings of these terms so that they can be appropriately
used to derive maximum benefits.
Motive: As per Burleson and Steiner, (1964) ‗motive‘ is defined as “an inner state that
energizes, activates (or moves) and directs (or canalizes) the behaviour towards certain goals.”

Motivation: Scot, defined motivation as “a process of stimulating people to action to accomplish

desired goals”. Mc Farland has defined “motivation as the way in which urges, drives, desires,
aspirations, strivings needs direct, control or explain the behaviour of human beings”.
The Encyclopedia of Management: Motivation refers to degree of readiness or an organism to
pursue some designated goals and implies the determination of the nature and locus of the
forces, including the degree of readiness.
4.2.Characteristics of Motivation
The following are the characteristics of motivation: -
a. Motivation is a psychological phenomenon. It is the inner desire of an individual to
accomplish something more. The very deficiency forces him to undertake certain amount
of work. More is the individual motivated better the performance and organization
relations.
b. Motivation is a continuous process. Since need is a continuous phenomenon if one need
is satisfied the other need emerges and so does individual propels to work and thus the
continuous chain is created.

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c. Motivation is caused due to anticipated perceived value from an action. Perceived value
is the probability or the expectancy. Therefore,
Motivation = valance (value) × expectancy.
d. There are unsatisfied needs. A person remains disturbed till they are satisfied. This
disturbance or tension causes disequilibria in human behaviour. More the motivation
level the higher will be efforts to get over the tension and in the process job
accomplishment would take place.
e. Individual is motivated by positive motivation. It refers to incentives offered by the
organization to achieve efficiency. Incentive can be monetary like increase in pay,
allowances, and payment of bonus. Payment for additional or overtime work. It can be
non-monetary like issuing of certificates for excellence, awards, recognition, status, job
enrichment, competitions, and the like. Monetary rewards prevent individuals from
getting de-motivated or they do not motivate so to say. However non-monetary awards
motivates individual as it is related to the inner/psychological aspects.
4.3.Importance of Motivation
a. High level of performance: It is the duty of every manager to ensure that the employees
have a high degree of motivation. He should offer monetary and non-monetary
incentives. Highly motivated workers would be regular for work, and have a sense of
belonging for the organization. Quality of product will be improved, wastage will be less
and there will be increase in productivity, and performance level will be high.
b. Low employee turnover and absenteeism: Employee turnover and absenteeism is
caused due to low level of motivation on the part of managers. When dissatisfaction is
increased employees do not enjoy the work assigned to them. Therefore there is a
tendency of absenteeism. The workers hunt for an alternative job and leave the
organization whenever they get an opportunity. High level of absenteeism causes low
level of production, wastages, poor quality and disruption in production schedules.
Motivation is therefore a very important management tool to achieve organizational
excellence.
c. Acceptance of organization change: Management must continuously scan the external
and the internal environment. There has been a great impact of. Social change and
technology evolution on the motivation level of employees. Social change increases
aspirations of workers and put an additional demand on the organization, which must be

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 considered positively so that conducive working environment is created. Management
must ensure that the changes are introduced in the organization and its benefits explained
to the employees so that there is no resistance to change and organizational growth is
achieved. Re-engineering, empowerment, job enrichment, job rotation, introduction of
new technology and processes will go a long way to boost employee morale and achieve
high degree of motivation.
d. Organizational image: Employees are the mirrors of any organization. Managers must
lay down high performance standards coupled with high monetary and nonmonetary
rewards. Training & development programs should be regularly organized and employee
skill improved. It will have a positive impact on the employees and the image of the
organization will be improved.

4.4. Theories of Motivation

4.4.1. Early Theories of Motivation

The 1950s were a fruitful period in the development of motivation concepts. Three specific
theories were formulated during this period, which although heavily attacked and now
questionable in terms of validity, are probably still the best known explanations for employee
motivation. These are the hierarchy of needs theory, Theories X and Y, and the two-factor
theory.

a. Hierarchy of Needs Theory

It's probably safe to say that the most well-known theory of motivation is Abram ham Maslow's
hierarchy of needs! He hypothesized that within every human being there exists a hierarchy of
five needs. These needs are:

1. Physiological: Includes hunger, thirst, shelter, sex, and other bodily needs

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2. Safety: Includes security and protection from physical and emotional harm
3. Social: Includes affection, belongingness, acceptance, and friendship
4. Esteem: Includes internal esteem factors such as self-respect, autonomy, and achievement;
and external esteem factors such as status, recognition, and attention
5. Self-actualization: The drive to become what one is capable of becoming includes growth,
achieving one's potential, and self-fulfillment.

As each of these needs becomes substantially satisfied, the next need becomes dominant. The
individual moves up the steps of the hierarchy. From the standpoint of motivation, the theory
would say that although no need is ever fully gratified, a substantially satisfied need no longer
motivates. So if you want to motivate someone, according to Maslow, you need to understand
what level of the hierarchy that person is currently on and focus on satisfying those needs at or
above that level.

Maslow separated the five needs into higher and lower orders. Physiological and safety needs
were described as lower-order needs and social, esteem, and self-actualization needs as higher
order needs. The differentiation between the two orders was made on the premise that higher-
order needs are satisfied internally (within the person), whereas lower-order needs are
predominantly satisfied externally (by such things as pay, union contracts, and tenure). In fact,
the natural conclusion to be drawn from Maslow's classification is that in times of economic
plenty, almost all permanently employed workers have their lower-order, needs substantially
met.

Maslow's need theory has received wide recognition, particularly among practicing managers.
This can be attributed to the theory's intuitive logic and ease of understanding. Unfortunately,
however, research does not generally validate the theory. Maslow provided no empirical
substantiation, and several studies that sought to validate the theory found no support for it.

Old theories, especially ones that are intuitively logical, apparently die hard. One researcher
reviewed the evidence and concluded that "although of great societal popularity, need hierarchy
as a theory continues to receive little empirical support." Furthermore, the researcher stated that
the "available research should certainly generate a reluctance to accept unconditionally the
implication of Maslow's hierarchy. Another review came to the same conclusion. Little support
was found for the prediction that need structures are organized along the dimensions proposed by

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Maslow, that unsatisfied needs motivate, or that a satisfied need activates movement to a new
need level.

b. Theory X and Theory Y

Douglas McGregor proposed two distinct views of human beings: one basically negative, labeled
Theory X, and the other basically positive, labeled Theory Y. After viewing the way in which
managers dealt with employees, McGregor concluded that a manager's view of the nature of
human beings is based on a certain grouping of assumptions and that he or she tends to mold his
or her behavior toward employees according to these assumptions.

Under Theory X, the four assumptions held by managers are:

1. Employees inherently dislike work and, whenever possible, will attempt to avoid it.
2. Since employees dislike work, they must be coerced, controlled, or threatened with
punishment to achieve goals.
3. Employees will avoid responsibilities and seek formal direction whenever possible.
4. Most workers place security above all other factors associated with work and will display
little ambition.

In contrast to these negative views about the nature of human beings, McGregor listed the four
positive assumptions that he called Theory Y: s

1. Employees can view work as being as natural as rest or play.

2. People will exercise self-direction and self-control if they are committed to the objectives.
3. The average person can learn to accept, even seek, responsibility.
4. The ability to make innovative decisions is widely dispersed throughout the population and is
not necessarily the sole province of those in management positions.

What are the motivational implications if you accept McGregor's analysis? The answer is best
expressed in the framework presented by Maslow, Theory X assumes that lower-order needs
dominate individuals. Theory Y assumes that higher-order needs dominate individuals.
McGregor himself held to the belief that Theory Y assumptions were more valid than Theory X.

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Therefore, he proposed such ideas as participative decision making, responsible and challenging
jobs, and good group relations as approaches that would maximize an employee's job motivation.

Unfortunately, there is no evidence to confirm that either set of assumptions is valid or that
accepting Theory Y assumptions and altering one's actions accordingly will lead to more
motivated workers. As will become evident later in this chapter, either Theory X or Theory Y
assumptions may be appropriate in a particular situation.

c. Two-Factor Theory

The two-factor theory (sometimes also called motivation-hygiene theory) was proposed by
psychologist Frederick Herzberg. In the belief that an individual's relation to work is basic and
that one's attitude toward work can very well determine success or failure, Herzberg investigated
the question, "What do people want from their jobs?" He asked people to describe, in detail,
situations in which they felt exceptionally good or bad about their jobs. These responses were
then tabulated and categorized.

From the categorized responses, Herzberg concluded that the replies people gave when they felt
good about their jobs were significantly different from the replies given when they felt bad.
Certain characteristics tend to be consistently related to job satisfaction and others to job
dissatisfaction. Intrinsic factors, such as the work itself, responsibility, and achievement, seem to
be related to job satisfaction. Respondents who felt good about their work tended to attribute
these factors to themselves. On the other hand, dissatisfied respondents tended to cite extrinsic
factors, such as supervision, pay, company policies, and working conditions.

The data suggest, said Herzberg, that the opposite of satisfaction is not dissatisfaliion, as was
traditionally believed. Removing dissatisfying characteristics from a job does not necessarily
make the job satisfying. Herzberg proposed that his findings indicated the existence of a dual
continuum: The opposite of "Satisfaction" is "No Satisfaction," and the opposite of
Dissatisfaction" is "No Dissatisfaction."

According to Herzberg, the factors leading to job satisfaction are separate and distinct from those
that lead to job dissatisfaction. Therefore, managers who seek to eliminate factors that can create
job dissatisfaction may bring about peace but not necessarily motivation. They will be placating

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their workforce rather than motivating them. As a result, conditions surrounding the job such as
quality of supervision, pay, company policies, physical working conditions, relations with others,
and job security were characterized by Herzberg as hygiene factors. When they're adequate,
people will not be dissatisfied; neither will they be satisfied. If we want to motivate people on
their jobs, Herzberg suggested emphasizing factors associated with the work itself or to
outcomes directly derived from it, such as promotional opportunities, opportunities for personal
growth, recognition, responsibility, and achievement. These are the characteristics that people
find intrinsically rewarding.

4.4.2. CONTEMPORARY THEORIES OF MOTIVATION

The previous theories are well known but, unfortunately, have not held up well under close
examination. However, all is not lost. There are a number of contemporary theories that have one
thing in common-each has a reasonable degree of valid supporting documentation. Of course,
this doesn't mean that the theories are unquestionably right. They are called "contemporary
theories" not because they necessarily were developed recently but because they represent the
current state of the art in explaining employee motivation.

a. ERG THEORY

Clayton Alderfer of Yale University has reworked Maslow's need hierarchy to align it more
closely with the empirical research. His revised need hierarchy is labeled ERG theory.

Alderfer argues that there are three groups of core needs-existence, relatedness, and growth-
hence, the label: ERG theory. The existence group is concerned with providing our basic material
existence requirements. They include the items that Maslow considered to be physiological and
safety needs. The second group of needs are those of relatedness-the desire we have for
maintaining important interpersonal relationships. These social and status desires require
interaction with others if they are to be satisfied, and they align with Maslow's social need and
the external component of Maslow's esteem classification. Finally, Alderfer isolates growth
needs-an intrinsic desire for personal development. These include the intrinsic component from
Maslow's esteem category and the characteristics included under self-actualization.

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Besides substituting three needs for five, how does Alderfer's ERG theory differ from Maslow's?
In contrast to the hierarchy of needs theory, the ERG theory demonstrates that (1) more than one
need may be operative at the same time, and (2) if the gratification of a higher-level need is
stifled, the desire to satisfy a lower-level need increases.

Maslow's need hierarchy follows a rigid, step like progression. ERG theory does not assume that
there exists a rigid hierarchy in which a lower-order need must be substantially gratified before
one can move on. A person can, for instance, be working on growth even though existence or
relatedness needs are unsatisfied; or all three need categories could be operating at the same
time.

ERG theory also contains a frustration-regression dimension. Maslow, you'll remember, argued
that an individual would stay at a certain need level until that, need was satisfied. ERG theory
counters by noting that when a higher-order need level is frustrated, the individual's desire to
increase a lower-level need takes place. Inability to satisfy a need for social interaction, for
instance, might increase the desire for more money or better working conditions. So frustration
can lead to a regression to a lower need.

b. McClelland's Theory of Needs

McClelland's theory of needs was developed by David McClelland and his associates. The
theory focuses on three needs: achievement, power, and affiliation. They are defined as follows:

 Need for achievement: The drive to excel, to achieve in relation to a set of standards, to
strive to succeed
 Need for power: The need to make others behave in a way that they would not have behaved
otherwise
 Need for affiliation: The desire for friendly and close interpersonal relationships.

4.5.Organizational Communication and Barriers to Communication

Organizational communication is a broad field that encompasses all forms of communication that
allow organizations such as companies, government agencies, and non-profits to function, grow,
connect with stakeholders, and contribute to society. Organizational communication includes

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both internal communications, such as employee training modules, messaging around an
organization‘s mission, interpersonal communications between management and employees, and
professional communication such as emails. It also includes external-facing communications
such as public relations announcements, press releases, marketing materials, and branding.

Organizational communication is defined as the channels and forms of communication that occur
within organizations, such as corporations, non-profits, and governmental bodies. It includes
both communications within an organization and public-facing communications. Individuals
trained in organizational communication can work in human resources, employee training and
management, public relations, marketing, communications consulting, public affairs, media
management, policy and advocacy, and research and instruction, among other areas.

The importance of communication in an organization can be summarized as follows:

1. Communication promotes motivation by informing and clarifying the employees about

the task to be done, the manner they are performing the task, and how to improve their
performance if it is not up to the mark.
2. Communication is a source of information to the organizational members for decision-
making process as it helps identifying and assessing alternative course of actions.
3. Communication also plays a crucial role in altering individual‘s attitudes, i.e., a well
informed individual will have better attitude than a less-informed individual.
Organizational magazines, journals, meetings and various other forms of oral and written
communication help in molding employee‘s attitudes.
4. Communication also helps in socializing. One cannot survive without communication.
5. Communication also assists in controlling process. It helps controlling organizational
member‘s behavior in various ways. There are various levels of hierarchy and certain
principles and guidelines that employees must follow in an organization. They must
comply with organizational policies, perform their job role efficiently and communicate
any work problem and grievance to their superiors. Thus, communication helps in
controlling function of management

4.6.Barriers to Communication

The following are some of the most common barriers to effective communication.

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1. Differing perceptions

Perception is the process by an individual receives information from the environment through the
use of his sense organs and interprets them. One of the most common sources of communication
barriers is individual variation. People who have different backgrounds of knowledge,
experience, and other demographic characteristics often perceive the same phenomenon from
different perspectives.

Suppose that a new supervisor compliments an assembly line worker for his or her efficiency and
high- quality work. The supervisor genuinely appreciates the worker‘s efforts and at the same
time wants to encourage the other employees to emulate his or her example. Others on the
assembly line however, may regard the worker‘s being singled out for praise as a sign that he or
she has been ‗buttering up to boss‖ they may react by teasing or being openly hostile. The event
is the same but individual‘s perspectives on it differ radically. The environment in which it
occurs influences the way a communication is perceived. Events that are considered appropriate
in some circumstances are inappropriate in others.

2. Language Differences & poor Expressions

Language differences are often closely related to differences in individual perceptions. For a
message to be properly communicated, the words used must mean the same thing to the sender
and the receiver.

The same symbolic meaning must be shared. Suppose that different departments of a company
receive a memo stating that a new product is to be developed in ―a short time‖. To people in
research and development ―a short time‖ might mean two or three years. To people in the finance
department on the other hand, it might be three to six months, whereas the sales department
might think of it as a few weeks. Since May different meanings can be assigned to some words,
great care must be taken to ensure that the receiver gets the message that the sender intended.

3. Loss by Transmission and poor Retention

In a series of transmissions from one person to the next, the message becomes less and less
accurate when a communication is being conveyed from the higher management level to the
lower level step by step. Much of it is likely to be lost in transit. Most of the times this problem

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arises in oral communication. At every successive step some of the message will drop until it
reaches the last person when it will be only a part of the original message, which might be
meaningless.

This problem may arise in case of written communication as well. At every level the superior
will interpret the message in his own way and present it accordingly. Hence the original message
is likely to be destroyed. Further the meaning will change if some words are dropped, changed or
misspell. On the other hand managers may be main causes for loss of information in
organizational communication.

4. Poor Listening and Pre-mature Evaluation

There are many talkers but few listeners. Listening demands full attention and self-discipline. It
also means avoiding pre-mature evaluation of what the other person has to say. A common
tendency is to judge to approve or disapprove what is being said rather than trying to understand
the speaker‘s frame of reference.

5. Emotionality

Emotional reactions- anger, love, defensiveness, hate, jealousy, fear, embarrassment-influence

how we understand other‘s messages and how we influence others with our own messages. If for
example, we are in an atmosphere where we feel threatened with loss of power or prestige we
may lose the ability to gauge the meanings of the messages we receive and will respond
defensively or aggressively.

6. Inconsistent verbal and Nonverbal Communication

We think of language as the primary medium of communication, but the messages we send and
receive are strongly influenced by such nonverbal factors as body movements, clothing, our
posture, gestures, facial expression, eye movements, and body contact.

7. Noise, Distance and Time

Noise is any factor that disturbs, confuses or otherwise interferes with communication. Little
communication occurs in totally noise-free environments of course. Noise is a big menace to
communication; it creates a great barrier to communication. It is a very common experience that

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noise proves a big hindering factor if two persons are talking. If somehow the noise is not
controlled it may not be possible for the communicators to listen anything or make out the sense.

Distance acts as barriers in the process of communication. If the two parties are far from each
other there will be difficulty in communication. Telephone solves this difficult in many cases.
But bad weather, technical defects, breakdown etc may render the telephone useless.

8. The Medium and Method of Communication

A disregard of the medium of communication and the method used often create conditions that
lead to a lack of expected response or to a less than perfect understanding. In all cases the
medium of the communication and the method must be appropriate to the case in hand.
Generally speaking great care is required in this direction. Most people are very sensitive about
how certain subjects are approached and to ignore their sensitivity will often result in faulty
communication.

Matters of routine nature such as the opening and closing times of the canteen may well be
appropriately conveyed by a notice on a notice board. At other times a discrete personal word is
called for instance where a staff member has started habitually to arrive late in the morning. A
bold statement on a notice board about lateness would be most inappropriate.

A more complicated situation, such as an alteration in working conditions requires even more
care in the choice of medium and method. Personal consultations with representatives of those
affected are imperative to prevent misunderstanding and to gain the cooperation of those
concerned. In brief for effective communication, the medium and method used to carry the
communication must be appropriate to the circumstances.

9. Distrust/Lack of Credibility of the Source

Credibility refers to the confidence, faith or thrust that the receiver has on the actions and/or
words of the sender. The credibility of a message is to a large extent, a function of the credibility
of the sender in the mind of the receiver. A sender‘s credibility is, in turn determined by a variety
of factors. In some cases, the fact that a message comes from a manager will enhance its
credibility, but it can also have the opposite effect. In negotiations between labour and

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management, for example labour often regards the claims of managers with some suspicion. In
this situation, as in others, the perceived character or honesty of the sender is important.

Distrust can be the result of inconsistent behaviors by the superior, or it can be due to
experiences in which the subordinate was punished for honestly reporting unfavorable, but true,
information to the boss. In any case, the loss of confidence in the superior will drop the effect of
the communication.

What is needed is a climate of trust, which facilitates open and honest communication. The
above being the most common barriers to effective communication there are many others. For
instance closely related to perception is the influence of attitude, which is the predisposition to
act or not, to act in a certain way, it is a mental position regarding a fact or state, clearly. If we
have made up our minds, we cannot objectively listen to what is said. Differences in status and
power between the sender and the receiver still affect communication.

In brief, often our efforts to communicate are quite successful but at other times we fail dismally.
Many factors are at works that have a bearing on our success or failure some of which we can
control and some of which are outside our control.

Other barriers may include:

• Information overload
• Un-clarified assumptions
• Position awareness, etc.

CHAPTER FIVE

DECISION MAKING

5.1. Meaning of decision making

Decision making can be viewed as an integral part of planning in that key decisions have to take
throughout the planning process. The following sections focus on many of the issues that arise
when making organizational decisions.
Decision making can be defined as ‗the selection of a course of action from among alternatives‘.
In this sense decision making is at the heart of planning: for plans to be formulated and
implemented, decisions on certain courses of action have to be taken. Some commentators have

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even argued that decision making can be viewed as the most fundamental managerial activity of
all. Decision making is discussed primarily within the context of planning; but despite the link
with planning, decision making is a fundamental element of the entire management process.
Organizations make literally hundreds of decisions each day as they fulfill their operational
requirements. Some of these decisions are small and minor and can be completed quickly, for
example the size and color of envelopes required by the organization. Others are more
complicated and far-reaching and require more detailed analysis, such as whether to expand into
foreign markets.

Decision making, which takes place at all levels of the organization, is therefore a central part of
the manager‘s role. It has often been said that a common characteristic of effective leaders and
effective work groups is their ability to make decisions that are appropriate, timely, and
acceptable. If organizational effectiveness is defined as the ability to secure and utilize resources
in the pursuit of organizational goals, the decision-making processes that determine how these
resources are acquired and used emerge as a central topic in organizational analysis. For our
purpose here, we define decision making as a process of specifying the nature of a particular
problem and selecting among available alternatives in order to solve it. We look at how
individuals and groups attempt to identify problem areas, examine various potential solutions to
problems, and select the most suitable solution(s) in light of the particular situation. Decision-
making is the action or process of thinking through possible options and selecting one.

It is important to recognize that managers are continually making decisions, and that the quality
of their decision-making has an impact—sometimes quite significant—on the effectiveness of
the organization and its stakeholders. Stakeholders are all the individuals or groups that are
affected by an organization (such as customers, employees, shareholders, etc.).

Members of the top management team regularly make decisions that affect the future of the
organization and all its stakeholders, such as deciding whether to pursue a new technology or
product line. A good decision can enable the organization to thrive and survive long-term, while
a poor decision can lead a business into bankruptcy. Managers at lower levels of the organization
generally have a smaller impact on the organization‘s survival, but can still have a tremendous
impact on their department and its workers.

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5.1.1. Characteristics of decisions making
A decision in an organizational context requires good judgment and diagnostic skills. Most
managers advance within an organization as a result of their ability to make good decisions. The
characteristics of decisions faced by most managers are varied in nature, depending on the type
of decision in question. Given that managers make a variety of decisions during their daily lives
we would expect that decisions would have different characteristics. There is no doubt that a
relatively simple decision in relation to re-ordering stationery supplies will not have the same
characteristics as a decision concerning establishing a new subsidiary in a foreign market. While
decisions vary in nature it is possible to identify some key characteristics that define managerial
decision making in the modern organization.

THE BASIC DECISION PROCESS

Problem Problem Solution

Search for alternative
Formulation answers, appraise
Monitor information, compare alternatives, select and
data to performance
expectations, diagnose reasons
implement best
and causes for shortcoming alternative
In this process, people generally go through tow rather distinct stages. These are problem
formulation and problem solution. Problem formulation involves the acquisition of information,
the development of desired performance expectations, and the diagnosis of casual relationships
affecting the problem. A problem exists when a manager detects a gap between existing and
desired performance. The manager then analyzes the nature and causes of the problem. On the
basis of this analysis, the manger them moves to the problem solution phase, where efforts are
made to consider alternative solutions and to select and implement that course of action deemed
most appropriate for the problem. Following the implementation of the chosen solution, the
manager monitors the situation to determine the extent to which that solution was successful.

5.3. Types of Managerial Decisions

The decision making process is affected to a large extent by whether the decision is programmed
or non-programmed.

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  A programmed decision represents a standardized response to a simple or routine
problem. The nature of the problem is well defined and clearly understood by the
decision maker; as is the array of possible solutions. The programmed decision process
characterized by high levels of certainty for both the problem formulation and the
problem solution phases, and rules and procedures typically spell out exactly how one is
to respond.
 Examples of programmed decisions are reordering inventory automatically when
stock falls below a predetermined level and issuing a written reprimand to
someone who violates a certain personnel procedure.
 On the other hand, non-programmed decisions occur in response to problems that are
either poorly defined or novel. Non-programmed decisions are characterized by novel
strategic decisions, ill-defined goals, ambiguous information alternatives and uncertainty.
 An example is a senior marketing manager who has to respond to the introduction of
a new product by a foreign competitor. Although past experience may help deal with
this competitive threat, the immediate decision requires a creative solution based on
the unique characteristics of the present market situation.

There are certain major influences on the decision processes.

First, there are the characteristics of the decision maker. These include such factors as his or her
knowledge of the problem, ability to analyze and solve the problem, and motivation to solve it.
Second are the characteristics of the problem itself. These factors include the extent the nature of
the problem is familiar to the managers, the ambiguity and complexity of the problem, and the
extent to which the problem is stable or volatile. Third, the decision episode includes the
environment in which the decision is made. Included here are the degree to which the decision is
irreversible, its significance or importance, who is accountable for the decision and its
consequences, and any time or money constraints involved in the decision process. Taken
together, these three sets of factors represent the major ingredients involved in the decision

Individual Decision Making

There are basically three models. They are (1) the rational/classic model; (2) the administrative
model, or bounded rationality model; and (3) the retrospective decision making model.

 The rationality/Classical Model or the economic man model

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This model rests on two assumptions: (1) it assumes people are economically rational, and (2) it
assumes the people attempts to maximize outcomes in an orderly and sequential process.
Steps are:

 Continually monitor the decision environment.

 Identify any problems as they emerge.
 Diagnose each problem to discover its underlying characteristics.
 Develop alternative solutions to the problem.
 Consider the consequences of each alternative as well as the likelihood of success of
each. Choose the best alternative by comparing the consequences of each alternative with
the decision objectives.
 Implement the chosen alternative.
Simon notes about this model that (1) Rationality requires a complete knowledge and
anticipation of the consequences that will follow on each choice. In fact, a knowledge
consequence is always fragmentary. (2) Since these consequences lie in the future, imagination
must supply the lack of experienced feeling in attaching value to them. But values can be only
imperfectly anticipated. (3) Rationality requires a choice among all possible alternative
behaviors. In actual behavior, only a very few of all these possible alternatives ever come to
mind.
In addition, the rational model is based on the assumption that people can process the
tremendous amount of information generated for one decision. It assumes that people can (1)
mentally store the information in some stable form, (2) manipulate the information in a series of
complex calculations designed to provide expected values, and (3) rank all the consequences in a
consistent fashion for purposes of identifying the preferred alternative. Unfortunately, a large
body of research has shown that the human mind is simply incapable of executing such
transactions at the level and magnitude that would be required fro complex decisions.

 The Bounded Rationality Model

An alternative model, one not bound by the above assumptions, has been presented by Simon.
This model is called the bounded rationality model (or the administrative man model). As the
name implies, his model does not assume individual rationality in the decision process. Instead,
it assumes that people, while they may seek the best solution, usually settle for much less

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because the decisions they confront typically demand greater information processing capabilities
than they process. They seek a kind of bounded (limited) rationality in decisions.

The concept of bounded rationality attempts to describe decision processes in terms of three
mechanisms. First, using sequential attention to alternative solutions, people examine possible
solutions and selecting the best (as suggested in the rational model), people identify and evaluate
various alternatives individually. If the first solution fails to work, it is discarded, and another
solution is considered. When an acceptable (though not necessarily the best) solution is found,
search behavior is discontinued.

The second mechanism is the use of heuristics. A heuristic is a rule that guides the search for
alternatives into areas that have a high probability for yielding satisfactory solutions.

The third mechanism is the concept of satisfying (not to be confused with ―satisfying‖). Whereas
the rational model focused on the decision maker as an optimizer, this model sees him or her as a
satisficer. As explained by March and Simon:

An alternative s optimal if (1) there exists a set of criteria that permits all alternatives to be
compared and (2) the alternative in question is preferred, by these criteria, to all other
alternatives. An alternative is satisfactory if (1) there exists a set of criteria that describes
minimally satisfactory alternatives, and (2) the alternative in question meets or exceeds all these
criteria… Finding that optimal alternative is a radically different problem from finding a
satisfactory alternative… to optimize requires processing several orders to magnitude more
complex than those required to satisfier.

On the basis of these three assumptions about decision makers, it is possible to outline the
decision process as seen from the standpoint of the bounded rationality model.

Group Decision Making

There are situations where group decision making can be an asset and other times it can be a
liability, and the trick for the manager is to discover how and when to allow participation.

Assets and Liabilities of Group Decision Making

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 Assets Liabilities

 Groups can accumulate more  Groups often work more slowly

knowledge and facts. than individuals.
 Groups have a broader perspective  Group decisions involve
and consider more alternative considerable compromise that may
solutions. lead to less than optimal decisions.
 Individuals who participate in  Groups are often dominated by one
decisions are more satisfied with individual or a small clique, thereby
the decisions and are more likely to negating many of the virtues of
support it. group processes.
 Group decision processes serve an  Over reliance on group decision
important communication function, making can inhibit management‘s
as well as a useful political ability to act quickly and decisively
function. when necessary.
Going one step further, let us look at what we know about the impact of groups in the decision
process itself, especially for non-programmed decisions:
 In establishing objectives, groups are typically superior to individuals in that they possess
greater cumulative knowledge to bring to bear on problems.
 In identifying alternatives, individuals efforts are important to ensure that different and
perhaps unique solutions are identified from various functional areas that later can be
considered by the group.
 In evaluating alternatives, group judgment is often superior to individual judgment,
because it brings into play a wider range of viewpoints.
 In choosing alternatives, involving group members often leads to greater acceptance of
the final outcome.
 In implementing the choice, individual responsibility is generally superior to group
responsibility. Regardless of whether decisions are made individually or collectively,
individuals perform better in carrying out the decision than groups do.
Hence, it is not possible to conclude that either individual or group decision-making is
superior. Rather, both specific situations and individuals involved must be considered before
choosing a decision technique.

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PROBLEMS IN GROUP DECISION MAKING

In the real of group decision making, at least two problems can be identified that can have
significant negative repercussions for decision effectiveness. These are the phenomena of
groupthink and escalating commitment to a course of action.
Groupthink This phenomenon, first discussed by Irving Janis, refers to a mode of thinking in
which the pursuit of agreement or consensus among members becomes so dominant that it
overrides any realistic appraisal of alternative courses of action. The development of group
norms improves morale at the expense of critical thinking.

Symptoms of Groupthink. In studies of both governmental and business leaders, Janis

identified eight primary symptoms of groupthink. The first is the illusion of invulnerability.
Group members often reassure themselves about obvious dangers and become overly optimistic
and willing to take extraordinary risks.

Victims of groupthink also tend to collectively engage in rationalization aimed at discounting

warning signs and other types of negative feedback that could lead to reconsideration of the
course of action if taken seriously.
Group members often believe in the inherent morality of the group. Because of this illusion of
morality, they ignore the ethical or moral consequences of their decisions. Leading tobacco
companies continue to run advertisements about free choice in decision making about smoking,
completely ignoring all the medical evidence on the hazards involved.
Stereotyping the enemy is another symptom of groupthink. In-group members often stereotype
leaders of opposition groups in so harsh a fashion as to rule out any need to negotiate with them
on differences of opinion. Often they also place tremendous pressure to conform on members
who temporarily express doubts about the group‘s shared illusions or who raise questions about
the validity of the arguments supporting the decisions of the group.

Moreover, group members often use self-censorship to avoid deviating from what appears to be a
group consensus. They often minimize to themselves the seriousness of their doubts. Partly
because of self-censorship by group members, another symptom of groupthink, the illusion of
unanimity, is often created. Members assume everyone holds the same opinion. It is assumed that
individuals who remain silent are in agreement with the spoken opinions of others.

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Finally, victims groupthink often appoint themselves as mind-guards to protect the leader and
other members of the group from adverse information that may cause conflict in the group over
the correctness of the a course of action. The mindguard may tell the dissident that he or she is
being disruptive of non-supportive, or may simply isolate the dissident from other group
members.

Consequences of Groupthink

Groupthink can have several deleterious consequences for the quality of decision-making. First,
groups often limit their search for possible solutions to one or two alternatives and avoid
comprehensive analysis of all possible alternatives. Second, groups frequently fail to reexamine
their chosen course of action after new information or events suggest a change in course. Third,
group members spend little time considering whether there are any non obvious advantages of
alternative courses of action that make those alternatives preferable to the chosen course of
action. Fourth, groups often make little or no attempt to seek out the advice of experts either
inside or outside their own organization. Fifth, members show positive interest in facts that
support their preferred decision alternative and either ignore or show negative interest in facts
that fail to support it. Finally, groups often ignore any consideration of possible roadblocks to
their chosen decision and, as a result, fail to develop contingency plan for potential setbacks.

Improving Problem Solution

Problem solution involves the development and evaluation of alternative courses of action plus
the selection and implementation of the preferred alternatives. In this process, it is important that
group members be as thorough and creative as practicable, given the circumstances. To do this,
they need creativity stimulants, or mechanisms to economically expand the search for and
analysis of possible alternatives. Three such mechanisms can be identified.
Brainstorming: This process is a frequently used mechanism to provide the maximum number
of ideas in a short period of time. A group comes together and is given a specific problem. It is
told to propose any ideas that come to mind that may represent a solution to the problem. In such
sessions—at least at the early stages – criticism is minimized so as not to inhibit expression.

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Once all the ideas are on the table, the group turns its attention to considering the positive and
negative aspects of each proposal. Through a process of continual refinement, the best possible
solution under the circumstances should emerge.

Nominal Group Technique This technique, typically referred to as NGT, consists four in four
phases in the group decision-making process. First, individual members meet as a group (as in
the interacting technique), but they begin by sitting silently and independently generating their
ideas on a problem in writing. This silent period is followed by round-robin procedure in which
each group member presents an idea to the group. No discussion of the idea is allowed at this
time. The ideas are summarized and recorded (perhaps on the blackboard). After all individuals
have had an opportunity to present their ideas, each idea is discussed for the purpose of
clarification and evaluation. Finally, the group members conclude the meeting by silently and
independently recording their rank-ordering of the various ideas or solutions to the problem. The
final decision is determined by the pooled outcome of the members‘ votes on the issue.

The NGT allows the group to meet formally, but does not allow members to engage in much
discussion of interpersonal communication; hence, the term nominal group technique. A chief
advantage of this procedure, then, is that everyone independently considers the problem without
influence from other group members. As we found, this influence represents one of the chief
obstacles to open-minded discussion and decision making.

Delphi Technique In contrast to NGT, the Delphic technique never allows decision participants
to meet face-to-face. Instead, a problem is identified, and members are asked through a series of
carefully designed questionnaires to provide potential solutions. These questionnaires are
completed independently. Results of the first questionnaire are then circulated to other group
members. After viewing the feedback, members are again asked their opinions (to see if the
opinions of others on the first questionnaire caused them to change their own minds). This
process may continue through several iterations until group members‘ opinions begin to show a
consensus on a prospective solution to the problem. The existence of such techniques of decision
making clearly demonstrates that poor decisions do not have to be tolerated in organizations.

5.4. Decision Making Under Different Conditions

In general there are three different types of condition under which managers take decisions.

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The first condition is certainty, which means that the available alternatives and their costs or
benefits are certain. In other words, managers know with certainty that particular alternatives
will lead to definite outcomes and there is no element of doubt. Given the current turbulent
business environment it is not surprising that very few decisions can be made with certainty.
Only the most minor of decisions can be taken under a condition of complete certainty.

The second condition is risk. Under the risk condition, all available choices and their potential
costs and benefits are known, but the outcomes are sometimes in doubt. So, while the
alternatives are known, the outcomes are unknown. An example of a risk condition is the throw
of a die: the alternatives (one to six) are known, but the outcome is not known – there is a one-in-
six chance of each number coming up. The probability of certain events can be calculated by the
organization using statistical techniques. Objective probability is the likelihood of an event
occurring based on hard quantitative data, normally statistical. In contrast, subjective probability
is a personal judgment of the likelihood of an event occurring. In today‘s business environment,
risk taking has become critically important for organizations.

The final condition is uncertainty, under which the available alternatives, the likelihood of their
occurrence and the outcomes are all unknown. Decisions made under uncertainty are the most
difficult to take because of this lack of concrete knowledge. Such decisions tend to be
ambiguous, intangible and highly unusual. In the current business environment more and more
decisions are taken under uncertainty. When making decisions under uncertain conditions,
managers require intuition and judgment.

5.5.Steps of Decision Making

Step 1: Problem identification and diagnosis

The first stage of the decision-making process is recognizing that a problem exists and that
action has to be taken. A problem is a discrepancy between the current state of affairs and a
desired state of affairs. Unless the problem is identified in precise terms, solutions are very
difficult to find. In seeking to identify a problem, managers can use a variety of sources of data,
including comparing organizational performance against historical performance, against the
current performance of other organizations/departments or against future expected performance.
Problem identification must be followed by a willingness to do something to rectify the situation.

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Step 2: Identification of alternatives

Having identified and diagnosed the problem, the next step for an organization is to identify a
range of alternatives to solve the problem. Managers should try to identify as many alternatives
as possible in order to broaden options for the organization. In generating alternatives the
organization may look toward ready-made solutions that have been tried before, or custom-made
solutions that have to be designed specifically for the problem at hand.

Step 3: Evaluation of alternatives

Having identified the available alternatives, a manager needs to evaluate each alternative in
order to choose the best one. Consideration should be given to the advantages and disadvantages
as well as the costs and benefits associated with each option. Most alternatives will have positive
and negative aspects and the manager will have to try to balance anticipated outcomes.
Depending on the situation, evaluation of alternatives may be intuitive (based on gut feeling) or
based on scientific analysis.

Step 4: Choice of alternative

Having evaluated the various alternatives, the next step is to choose the most suitable one. If for some
reason none of the options considered is suitable, the manager should revert back to Step 2 of the process
and begin again. When there are suitable alternatives and Steps 2 and 3 have been conducted skilfully,
selecting alternatives may be relatively easy. In practice, however, alternatives may not differ
significantly in terms of their outcomes and therefore decisions will be a matter of judgment.

Step 5: Implementation

Once the decision has been made it needs to be implemented. This stage of the process is critical
to the success of the decision and is the key to effective decision making. The best alternative is
worth nothing if it is not implemented properly. In order to successfully implement a decision,
managers must ensure that those who are implementing it fully understand why the choice was
made, why it is being implemented, and are fully committed to its success. Decisions often fail at
the implementation stage because managers do not ensure that people understand the rationale
behind the decision and that they are fully committed to it. For this reason many organisations
are attempting to push decision making further down the organization to ensure that employees
feel some sense of ownership in the decisions that are made. To implement the decision to

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acquire another smaller business in a different country requires good conceptual skills and could
prove challenging.

Step 6: Evaluation

Once the decision is implemented, it needs to be evaluated to provide feedback. The process of
evaluation should take place at all managerial levels. This step allows managers to see the results
of the decision and to identify any adjustments that need to be executed. In almost all cases some
form of adjustment will be made to ensure a more favorable outcome. Evaluation and feedback
are not one-off activities, however, and they should form part of an ongoing process.

CHAPTER SIX
INDIVIDUAL AND GROUP

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6.1. PERCEPTION
Perception is like beauty that lies in the eyes of beholder. Individual differs in the way he sees,
interprets and understands a particular event. A manager may perceive nonattendance of duty by
the subordinate in a different way. Individuals may also differ in their opinion though the event
or situation may be the same. For example, in an organization where lunch is served in a
subsidized manner may be interpreted by the employees in a different way. An employee may
perceive it as ―right‖ to get a subsidized lunch, the other may feel that it is being given out of
surplus of profits achieved by the organization while the third individual may state that it is
mandatory for the management to provide lunch free of cost and that the management is not
doing any favor to them by providing the lunch.

Definition of Perception
Perception is defined as ―a process by which individuals organize and interpret their sensory
impressions in order to give meaning to their environment (Robbins)”.
a. What one perceives may be different from objective reality. A person coming late on
duty may be perceived as casual and tardy while there may be social problems faced by
him.
b. There is often disagreement among the individuals in the organization in relation to pay
and allowances, administrative back up, policies and procedures and the place of work
itself. An individual who displays a positive attitude may perceive above factors as good
and conducive to work environment while the others may consider them inadequate.
Employees also compare themselves on job assignment. If a job is assigned to one
individual who may consider the assignment in excess to his job entitlement on the
contrary if he is not given the job, he may consider it as neglecting him in allocation of
responsibilities.
c. It would often be observed that the manager is rated differently by his subordinates
because of the different perception of the individual about the manager. The study of
perception is very important in the organization because it is necessary for the manager to
perceive individuals correctly irrespective of their status and perceive each of the
situations as close to the real fact or as it exists by interpreting the sensory reflects in
correct way. Sensation and perception are complex phenomenon. Perception is outcome
of sensation and is much broader in its nature. Perception involves observing data,

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 selecting, and organizing the data based on sensory reflects and interpreting the same as
per personality attributes of the perceiver. That is why no two individuals can perceive an
employee in the same manner, for one he may be efficient while for the other he may be
perceived as useless.

Kolsds defines ―perception as the selection and organization of material which stems from the
outside environment at one time or the other to provide the meaningful entity we experience‖.
Perception clarifies the following:
1. People‘s actions, emotions, thoughts and feelings are triggered by their perceptions of
their surroundings.
2. Perceptions are the intellectual process by which a person access the information for the
environment, organize it and obtain the meaning from it.
3. Perception is the phase of operation that takes place after the information being received
by one that is well high indistinguishable from it.
4. Perception is the basic cognitive or psychological process. The manner in which a person
perceives the environment affects his behavior.

Factors Influencing Perception

Following three factors influence the perception
1. The perceiver,
2. The perceived or target, and
3. The setting/ situation.
1. Perceiver: When an individual looks at the object and attempts to interpret the same,
what he or she sees it is largely influenced by the personal characteristics.
 Perception is a matter of attitude that can be positive or negative.
 Motive is nothing but unsatisfied needs. This exerts considerable influence on perception.
 Interest is persons liking for a particular thing in an individual.
 Past experience also plays an important role in perception. Just as interest narrows down
one‘s perception so does past experience.
 Expectations can distort one‘s perception in what one sees and what one expects to see.

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 2. The Perceived or Target: Objects, events that are similar to each other tend to group
together and have a tendency of perceiving them as common group for example Blacks,
Whites or Indians etc irrespective of their different characteristics. Physical and time
proximity also leads us to perceiving a situation in a different form than actual reality.

3. The Situation: Change in situation leads to incorrect perception about a person. Time is
one factor, which influences the perception. Time is related to work setting and social
setting. A person decked up for party may not be noticeable but the same dress in office
would be noticed distinctly, though the person has not changed. You would have very
frequently heard people say that their manager is different during working hours and 180
degree opposite while in social setting. In fact person is the same but the perceiver
perceives the manager as per business like setup while on work, while the person is
observed on a private or a personal platform when meeting him in the club or at home.
An object can be identified by its size, shade, shape, sound it makes and background.

6.2. Attitude
Definition of Attitude
According to G.W. Allport, “Attitude is a mental and neutral state of readiness organized
through experience, exerting a directive or dynamic influence upon individual‘s response to all
objects and situations with which it is related.‖

Kerch and Crutchfield defined “attitude as an enduring organization of motivational,

emotional, perceptual and cognitive processes with respect to some aspect of the individual‘s
world‖

According to Katz and Scotland, ―Attitude is a tendency or predisposition to evaluate an object

or symbol of that object in a certain way‖. In effect attitude is used in a generic sense, as to what
people perceive, feel and express their views about a situation, object or other people. Attitude
cannot be seen, but the behavior can be seen as an expression of attitude.

6.3. Personality

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Personality is a very complex and multidimensional construct of a human being. No common
definition of personality has so far been arrived at. Every individual defines personality in
different way which includes trait factors and physical appearance. ―Personality is a dynamic
organization within an individual of those psychological systems that determines his unique
adjustment with the environment. It is a sum total of ways in which an individual reacts and
interacts with others.‖

In the words of Kolasa, ―personality is a broad, amorphous designation relating to fundamental

approaches of persons to others and themselves. To most psychologists and students of
behaviour, this term refers to the study of the characteristics traits of an individual, relationships
between these traits, and the way in which a person adjust to other people and situations.‖

According to Gluck, ―Personality is a pattern of stable states and characteristics of a person hat
influences his or her behaviour toward goal achievement. Each person has unique ways of
protecting these states.‖

Maddi (1980) defines personality thus: Personality is a stable set of characteristics and
tendencies that determine those commonalities and differences in the psychological behaviour
(thoughts, feelings, and actions) of people that have continuity in time and that may not be easily
understood as the sole result of the social and biological pressures of the moment. The above
definitions indicate the commonality of characteristics and human tendencies amongst people
who display consistency in their behaviour over time. Maddis definition suggests that people do
change due to biological and social pressures. Thus by understanding certain dimensions of
personality one can predict human behaviour to a great extent.

Determinants to Personality
Several factors influence the shaping of our personality. Chief among these are heredity, culture,
family background, our experiences through life, and the people we interact with.

a. Heredity. There are some genetic factors, which play a part in determining certain
aspects of what we tend to become. Whether we are tall or short, experience good health

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 or ill health, are quickly irritable or patient, are all characteristics which can, in many
cases, be traced to heredity.
b. Culture. The cultural values we are surrounded by significantly tend to shape our
personal values and predisposition. Thus people born in different cultures have different
personalities, which significantly influence their behaviors. People in the West, for
instance, generally tend to be more assertive than people in oriental cultures.
c. Family Background. His socio-economic status of the family, the number of children in
the family and birth order, and the background and education of the parents and extended
members of the family such as uncles and aunts, influence the shaping of personality to a
considerable extent. Experiences in life whether one trusts or mistrusts others, is miserly
or generous has a high or low self esteem, and the like, is at least partially related to the
past experiences the individual has had. A person we interact with ―a person is known by
the company he or she keeps‖ is a common adage. The implication is that people
influence each other and tends to associate with members who are more like them in their
attitudes and values. From childhood, the people we interact with influence us. First our
parents and siblings, then our teachers and class mates, later our friends and colleagues,
and so on. The influence of these various individuals and groups shapes our personality.
d. Situation Individual has to interact with number of problems in a given situation, which
does not remain constant. It is subject to change and hence fluid in nature. There is
therefore a need to recognize the person-situation interaction. It can be social learning
activity of personality. Thus personality is situational, the uniqueness of each situation
and any on how a person in an organization would display his reactions in a particular
situation.
e. Environment Every individual is born and brought up in a particular environment.
Environment leaves an imprint on the personality of an individual. It is commonly seen
that a doctor‘s son preferring his father‘s profession and a child of a soldier entering into
defense Services. More advanced the socio-economic conditions of the society more
would the children be forward thinking. Environment should be viewed from the point of
view of norms, ethics and value that are observed and the attitude displayed by the social
group. These factors actually formulate the culture of the society from which the
organizations draw their human resource requirements.

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6.4. Group and group Dynamics

Group Dynamics: Group dynamics are the forces operating in groups that affect the ways
members work together. The effectiveness of any group requires more than the correct inputs. It
always depends in part on how well members work together to utilize these inputs to produce the
desired outputs. When we speak about people ―working together‖ in groups, we are dealing with
issues of group dynamics. From the perspective of an open system, group dynamics are the
processes through which inputs are transformed into outputs.

Group dynamics refers to the attitudinal and behavioral characteristics of a group. Group
dynamics concern how groups form, their structure and process, and how they function. Group
dynamics are relevant in both formal and informal groups of all types. In an organizational
setting, groups are a very common organizational entity and the study of groups and group
dynamics is an important area of study in organizational behavior.

3.1.2. Stages of Group Development

Group dynamics as related to development concerns not only why groups form but also how. In
essence, the steps in group formation imply that groups do not usually perform at maximum
effectiveness when they are first established. They encounter several stages of development as
they strive to become productive and effective. Most groups experience the same developmental
stages with similar conflicts and resolutions.

Whether one is part of a formal work unit, a temporary task force, or a virtual team, the group
itself passes through different stages in its life cycle. Furthermore, depending on the stage the
group has reached, the leader and members can face very different challenges.

According to Tuckman's theory, there are five stages of group development: forming, storming,
norming, performing, and adjourning. During these stages group members must address
several issues and the way in which these issues are resolved determines whether the group will
succeed in accomplishing its tasks.

1. Forming.

- This stage is usually characterized by some confusion and uncertainty.

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 - The major goals of the group have not been established.

- The nature of the task or leadership of the group has not been determined.

- Thus, forming is an orientation period when members get to know one another and share
expectations about the group.

- Members learn the purpose of the group as well as the rules to be followed.

- Their concerns may include: ―What can the group offer me?‖ ―What will I be asked to
contribute?‖ ―Can my needs be met at the same time I contribute to the group?‖

2. Storming.

- The storming stage of group development is a period of high emotionality and tension among
the group members.

- During this stage, hostility and infighting may occur, and the group typically experiences many
changes.

- Coalitions or cliques may form as individuals compete to impose their preferences on the group
and to achieve a desired status position.

- Outside demands, including premature expectations for performance results may create
uncomfortable pressures.

- In this stage, the group is likely to see the highest level of disagreement and conflict.

- Members often challenge group goals and struggle for power.

- If members are not able to resolve the conflict, then the group will often disband or continue in
existence but will remain ineffective and never advance to the other stages.

3. Norming.

- With the pleasures of a new sense of harmony, group members will strive to maintain positive
balance.

- Minority viewpoints, deviations from group directions, and criticisms may be discouraged as
group members experience a preliminary sense of closeness.

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 - This stage is characterized by the recognition of individual differences and shared expectations.

- At this stage the group members will begin to develop a feeling of group cohesion and identity.

- Responsibilities are divided among members and the group decides how it will evaluate progress.

- Some members may mistakenly perceive this stage as one of ultimate maturity. In fact, a
premature sense of accomplishment at this point needs to be carefully managed as a ―stepping
stone‖ to the next higher level of group development.

4. Performing.

- Performing occurs when the group has matured and attains a feeling of cohesiveness

- The performing stage of group development, sometimes called total integration, marks the
emergence of a mature, organized, and well-functioning group.

- The group is now able to deal with complex tasks and handle internal disagreements in creative
ways.

- The structure is stable, and members are motivated by group goals and are generally satisfied.

- During this stage of development, individuals accept one another and conflict is resolved through
group discussion.

- Members of the group make decisions through a rational process that is focused on relevant goals
rather than emotional issues.

5. Adjourning

A well-integrated group is able to disband, if required, when its work is accomplished. The
adjourning stage of group development is especially important for the many temporary
groups that are increasingly common in the new workplace, including task forces,
committees, project teams and the like.

Not all groups experience this stage of development because it is characterized by the
disbandment of the group. Some groups are relatively permanent. Reasons that groups
disband vary, with common reasons being the accomplishment of the task or individuals

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 deciding to go their own ways. Members of the group often experience feelings of closure
and sadness as they prepare to leave.

3.1.3. Types of Groups

One common way to classify group is by whether they are formal or informal in nature. By formal
groups, we mean those defined by the organization‘s structure, with designated work
assignments establishing tasks. In formal groups, the behaviour that one should engage in are
stipulated by and directed toward organizational goals. In contrast, informal groups are
alliances that are neither formally structured nor organizationally determined. These groups are
natural formations in the work environment that appear in response to the need for social contact.
For instance three employees from different departments who regularly eat lunch together are
examples of an informal group.

Types of Formal Groups

Formal work groups are established by an organization to achieve organizational goals. Formal
groups may take the form of command groups, task groups, and functional groups.

Command Groups

Command groups are specified by the organizational chart and often consist of a supervisor and
the subordinates that report to that supervisor. An example of a command group is an academic
department chairman and the faculty members in that department.

Task Groups

Task groups represent those working together to complete a job task. However a task group‘s
boundaries are not limited to its immediate hierarchical supervisor. It can cross command
relationships. For instance, if a college student is accused of campus crime, it may require
communication and coordination among the dean of academic affairs, the dean of students, the
registrar, the director of security, and student‘s advisor. Such a formation would constitute a task
group. It should be noted that all command groups are also task groups, but because task groups
can cut across the organization, the reverse need not be true. Task groups consist of people who
work together to achieve a common task. Members are brought together to accomplish a narrow

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range of goals within a specified time period. Task groups are also commonly referred to as task
forces. The organization appoints members and assigns the goals and tasks to be accomplished.
Examples of assigned tasks are the development of a new product, the improvement of a
production process, or the proposal of a motivational contest. Other common task groups are ad
hoc committees, project groups, and standing committees. Ad hoc committees are temporary
groups created to resolve a specific complaint or develop a process. Project groups are similar to
ad hoc committees and normally disband after the group completes the assigned task. Standing
committees are more permanent than ad hoc committees and project groups. They maintain
longer life spans by rotating members into the group.

Functional Groups

A functional group is created by the organization to accomplish specific goals within an

unspecified time frame. Functional groups remain in existence after achievement of current goals
and objectives. Examples of functional groups would be a marketing department, a customer
service department, or an accounting department.

Types of Informal Groups

Informal groups emerge without being officially designated by the organization. They form
spontaneously and are based on personal relationships or special interests, and not on any
specific organizational endorsement. They are commonly found within most formal groups.
Informal groups could be: Interest Friendship groups, groups and Reference groups.

Interest Groups

People who may or may not be aligned into common or task groups may affiliate to attain a
specific objective with which each concerned. This is an interest group. Employees who band
together to have their vacation schedules altered, to support a peer who has been fired, or to seek
improved working conditions represent the information of a united body to further their common
interest.

Interest groups usually continue over time and may last longer than general informal groups.
Members of interest groups may not be part of the same organizational department but they are
bound together by some other common interest. The goals and objectives of group interests are

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specific to each group and may not be related to organizational goals and objectives. An example
of an interest group would be students who come together to form a study group for a specific
class.

Friendship Groups

Groups often develop because the individual members have one or more common characteristics.
We call these information friendship groups.

Friendship groups are formed by members who enjoy similar social activities, political beliefs,
religious values, or other common bonds. Members enjoy each other's company and often meet
after work to participate in these activities. For example, a group of employees who form a
friendship group may have an exercise group, a softball team, or a potluck lunch once a month.

Reference Groups

A reference group is a type of group that people use to evaluate themselves. According to
Cherrington, the main purposes of reference groups are social validation and social comparison.
Social validation allows individuals to justify their attitudes and values while social comparison
helps individuals evaluate their own actions by comparing themselves to others. Reference
groups have a strong influence on members' behavior. By comparing themselves with other
members, individuals are able to assess whether their behavior is acceptable and whether their
attitudes and values are right or wrong. Reference groups are different from the previously
discussed groups because they may not actually meet or form voluntarily. For example, the
reference group for a new employee of an organization may be a group of employees that work
in a different department or even a different organization. Family, friends, and religious
affiliations are strong reference groups for most individuals.

There is no single reason why individuals join groups. Because most people belong to a number
of groups it is possible to predict this behavior.

Characteristics of Groups

1. Social interaction: People who are interacting with one another form a group.

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2. Common Goal: People, who work together, work for a common goal, which can even involve
having a good time.
3. Shared standards: People who observe the same customs, traditions and rules of etiquette
would constitute a group.
4. Self-definition: Among collection of people who consider themselves to form a group.
5. Group size: As the size of the group increases the potential relationship increases. Whether
or not, all potential relationships with in a group play a significant role in the analysis of the
group‘s behaviour.
6. Cohesiveness: Attractiveness, which is a function of the group. This is defined as the tenacity
with which a group sticks together or the extent to which members would give up membership.

Group may vary in their Sociability and in their determination of productivity. Another important
variable is the extent to which members are self oriented or goal oriented-dependency, status,
dominance, aggression, etc. are important.

Group Formation
Groups are formed for certain purpose. The important among them are:

1. For Accomplishment of Task. This is primary requirement for the purpose of existence
of formal groups in an organization. To attain its objectives and goals, organization will
formally bring individuals into a group to complete the set task or tasks. Such groups are
designated by the structure of the organization as production, finance, maintenance, sales
and sales promotion, designs, etc.
2. For the Purpose of Problem Solving. This group is also formed for the purpose of
achieving some desired goals. Such groups may exist for only a short time, that is, they
may be disbanded after the attainment of goals.
3. For Proximity and Reward. Individuals join together for proximity and attention, if
they perform similar problem solving. Their group activity may be informal such as
having lunch together, taking tea together, making complaints against management
together, etc. They may form informal groups because of their proximity in working
together and perceive this interaction to be rewarding.

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 4. Socio-Psychological Objectives. This objective of a group formation is that an
individual need can be better satisfied in a group. Individual needs include physiological,
safety, affiliation, esteem and self-actualization.

CHAPTER SEVEN

CONFLICT AND CONFLICT MANAGEMENT

7.1. Conflict Defined

Conflict can be defined (Thomas K.A.) as the, “process that begins when one party perceives
that another party has negatively affected something that the first party cares about.”
Conflict must be perceived by either of the parties. Stiff opposition due to incompatibility of
organizational goals characterizes it. Conflict can also be caused due to difference about
interpretation of facts or issues involved. Conflict takes an ugly turn and takes a form of violence
due to disagreement based on behavioral expectations. It could be covert or overt and can be
seen when one observes violent acts of individual in organizations. Austin defines conflict “as a
disagreement between two or more individuals or groups, with each individual or group
trying to gain acceptance of its views or objective over others.”

7.2. Transitions in Conflict Thought

It is entirely appropriate to say that there has been ―conflict‖ over the role of conflict in groups
and organizations. One school of thought has argued that conflict must be avoided—that it
indicates a malfunctioning within the group. We call this the traditional view. Another school of
thought, the human relations view, argues that conflict is a natural and inevitable outcome in any
group and that it need not be evil, but rather has the potential to be a positive force in
determining group performance. The third, and most recent, perspective proposes not only that
conflict can be a positive force in a group but explicitly argues that some conflict is absolutely
necessary for a group to perform effectively. We label this third school the
interactionistapproach. Let‘s take a closer look at each of these views.

a. The Traditional View

The early approach to conflict assumed that all conflict was bad.

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Conflict was viewed negatively, and it was used synonymously with such terms as violence,
destruction, and irrationality to reinforce its negative connotation. Conflict, by definition, was
harmful and was to be avoided.

The traditional view was consistent with the attitudes that prevailed about group behavior in the
1930s and 1940s. Conflict was seen as a dysfunctional outcome resulting from poor
communication, a lack of openness and trust between people, and the failure of managers to be
responsive to the needs and aspirations of their employees. The view that all conflict is bad
certainly offers a simple approach to looking at the behavior of people who create conflict. Since
all conflict is to be avoided, we need merely direct our attention to the causes of conflict and
correct these malfunctionings in order to improve group and organizational performance.
Although research studies now provide strong evidence to dispute that this approach to conflict
reduction results in high group performance, many of us still evaluate conflict situations utilizing
this outmoded standard. So, too, do many boards of directors. The board of Sunbeam-Oster
followed the traditional approach when they fired the company‘s chairman, Paul Kazarian, in
1993. 5 Three years earlier, Kazarian took over the company when it was in bankruptcy. He sold
off losing businesses, restructured the remaining appliance operation, and turned a $40 million
loss in 1990 into a $47 million profit in 1991. A few days before he was fired, the company
reported a 40 percent jump in quarterly profits. But

Kazarian‘s ―crime‖ was that he rubbed a lot of people in the company the wrong way. He
aggressively confronted managers, employees, and suppliers. People complained that his style
was abrasive. Kazarian, however, defended his actions as necessary: ―You don‘t change a
company in bankruptcy without making a few waves. I wasn‘t there to be a polite manager. I was
there to create value for stockholders.‖

b. The Human Relations View

The human relations position argued that conflict was a natural occurrence in all groups and
organizations. Since conflict was inevitable, the human relations school advocated acceptance of
conflict. Proponents rationalized its existence: It cannot be eliminated, and there are even times

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when conflict may benefit a group‘s performance. The human relations view dominated conflict
theory from the late 1940s through the mid-1970s.

c. The Interactionist View

While the human relations approach accepted conflict, the inter-actionist approach encourages
conflict on the grounds that a harmonious, peaceful, tranquil, and cooperative group is prone to
becoming static, apathetic, and non responsive to needs for change and innovation. The major
contribution of the interactions approach, therefore, is encouraging group leaders to maintain an
ongoing minimum level of conflict —enough to keep the group viable, self-critical, and creative.

Given the interactionist view—and it is the one that we shall take in this chapter —it becomes
evident that to say conflict is all good or bad is inappropriate and naive. Whether a conflict is
good or bad depends on the type of conflict. Specifically, it‘s necessary to differentiate between
functional and dysfunctional conflicts.

7.3. Functional and Dysfunctional Aspects of Conflict

a. Functional Conflict
 Conflict develops cohesiveness within the group members. A group goal therefore
becomes a priority. Individual goals are then relegated to secondary position.
 Conflict leads to innovation and creativity, as there is competing sprit among various
groups.
 Conflict provides challenging work environment and enhances opportunities for Self-
development of group that leads to formation of group norms.
 Enhance work culture leads to up gradation of various systems within the organization
and therefore growth is achieved.

b. Dysfunctional Conflict
Conflict may turn out to be detrimental and disastrous and having deleterious effects.
Dysfunctional nature of conflict can be identified in the following circumstances:
 When conflict does not lead to solution.
 When basic goals of the organization are neglected.

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  People should be treated with due respect. If it is violated and a climate of distrust and
suspicion is created people feel defeated and demeaned which develops antagonism and
leads to conflict.
 Conflict may lead to absenteeism and subsequently to increased turn over if not
controlled in time.
 Dual management style may create hatred and lead to dysfunctional conflict.
 Disagreement with management may be considered as disloyalty, if this environment
prevails, an opportunity for creativity would be lost and employees would lose interest in
their job. This would lead to increased conflicting situations.
7.4. Types of Conflict

As discussed earlier, organizations exist based on various groups and departments where scares
resources have to be put in to use through various processes. Systems and subsystems exist in the
organizations that are managed by individuals and work teams or work groups. While interacting
with each other on individual, team or group levels, there may be occasions when conflict occurs
due to perceptual differences. The conflict may be intra-personal, inter-personal, intra-group,
inter-group or intra-organizational in nature. These are discussed below.

a. Intra-personal Conflict: Intra personal conflict is also called the conflict within the
individual. This type of conflict can be of two types: -
 Value conflict: Every individual has to play certain roles, which conforms to his value
system. However, there are certain situations when an individual may have to
compromise on value system and beliefs. For example, finance manager of an
organization, while submitting tax returns to the government may conceal some facts,
which may go against his belief and value system. This situation may cause tension and
conflict within the individual.
 Decision-making: Problem solving is one of the important jobs every individual has to
undertake in work environment. Every problem has various courses open. At times it is
difficult for a person to select an appropriate course of action. This situation causes
conflict within the individual. He therefore will have to take decisions based on the past
experience and the knowledge. It may be noted that decision-making has become simpler
these days due to firstly; information technology where required data is available and
secondly, group decision is the norm in most of the organizations.

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b. Inter-personal Conflict: Inter-personal conflict relates to conflict between two or more
individuals and is probably the most common and recognized form of conflict.
Interpersonal conflict is caused due to disagreement over goals and objectives of the
organization. These are heightened due to difference of opinion of individuals and when
issues are not based on facts. Every organization is full of unresolved issues, problems
and differing situations that lead to conflict. Conflict can also take place between one
person of a group with another person of the same group or another group on issues
relating to decision-making. Individuals may have a difference of opinion on selection of
a particular course of action that will lead to disagreement and often result in the conflict.
It is the merit of the issue, and willingness of members of the organization to accept the
others point of view that will avoid the conflict situation.

c. Intra-Group Conflict: Intra-group conflict relates to values, status and roles played by
an individual in the group and the group norms. Individual may want to remain in the
group for social needs but may disagree with the methods and procedures followed by the
group. The conflict may arise when social changes are incorporated in the group. When
group faces new problems and when values are changed due to change in social
environment. Intra-group conflict is like Inter-personal conflict except that the people
involved in the conflict episode belong to a common group.

d. Inter-Group Conflict: Conflicts between different groups, sections and departments are
called inter-group conflict. For example, conflict between production and sales
departments over the quality being produced and the customer requirements. Inter-group
conflict causes due to factors inherent to the organizational structure like independence,
inconsistency in various policy matter, variance on promotion criteria, reward system and
different standards being adopted for different sub-units and departments. Organizational
objectives can only be achieved when all departments work towards attainment of
organizational goals. This is possible when interactions between departments are smooth
and cordial. Conflict can be avoided by better communication between departments, joint
decision making, removing disparity in group goals and paying due respect and
displaying concern for other group‘s views.

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e. Inter-Organizational Conflict: Inter-organizational conflict takes place between two
dependent organizations. Conflict can take place between government organization,
unions and the operating industry. Government organizations function to ensure that
minimum standards are followed by the organizations. Managers must try and reduce
inter-organizational conflicts by adopting positive approach and by following strictly, the
rules and regulations laid down by the government agencies. Conflict can also take place
between seller and buyer organizations.

f. Intra-Organizational Conflicts: Intra organizational conflict encompasses horizontal,

vertical, line–staff and role based conflicts. Let us briefly study these situations.
 Horizontal Conflict: Horizontal Conflict is caused due to incompatibility of
goals, sharing limited resources and difference in time orientation. It leads to
tension, misunderstanding and frustration on the part of both the parties.
Horizontal conflict relates to employees or group at the same level.
Organizational goal at implementation level vary from department to department.
Finance department may not be able to spare additional amount as may be
required by research and development department for new product development
that may cause tension, misunderstanding between two individuals or
departments. Individuals may not be able to meet the targets of production in
given time due to variety of reason that may cause conflict with sales department
as the latter would like to flood the market with their product to make the
presence felt. It has been seen that due to increased interdependence of
individuals or groups to carry out various functions, situations do arise where
there is difference of opinion on issues that cause conflict between individuals or
groups.
 Vertical Conflict: Vertical conflict refers to conflicts that might take place
between different levels of hierarchy. Conflicts between subordinates and superior
occur due to incompatibility. It is generally caused because of differences in
perception, value system, goals that may be assigned, cognition and difference in
individual behaviour. Conflict is also caused due to inappropriate communication
between individuals at two different levels.

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  Line and Staff Conflict: Line and staff conflict has been traditional. Line
authority creates product and services and contributes directly towards the
revenue generation. While staff authority, assists line authority and acts in
advisory capacity. Staff and line authority have a different predispositions and
goals. They have different skills and expertise. Since staff authority (managers)
are in the chain of command and have a day to day access to the top boss, have a
tendency to dictate terms to the line authority and usually disregard the working
knowledge of the line authority. They have tendency to dominate and disregard
the efforts put in by line authority managers. On the contrary staff managers have
a technical knowhow and they are able to advice the line authority to cut down
cost of production and save on wastage etc. Line authority does not like their
advice at times. Staff managers get frustrated when their suggestions and ideas are
not implemented by line managers and hence the cause for conflict. In the process
the organizational goals are not achieved as per plans.
 Role Conflict: A person in an organization has to perform various roles. Conflict
arises when roles assigned to him have different expectation. ‗Time‘ management
may cause conflict. A person may be asked to take care of an additional section in
the absence of section head. Value system in an organization is also a cause for
conflict. Supervisor is asked to be honest while he is dealing with sale of the
product while the same person may be asked to pay commission to an official
from whom a sanction is required to be obtained, thereby causing a conflict
situation in the ethical value system of an individual. When an individual is line
or a staff employee and also a union representative, has to perform duties of
conflicting nature hence a role conflict.
7.5. Organizational Causes of Conflict

1. Competition for Scarce Resources:

In an organization, anything of value (funds, personnel and valuable information) can be a
competitively sought – after resource. When competition for scarce resources becomes
destructive, conflict can be avoided by increasing the resource base. For example more personnel
can be hired when they are to avoid shortages in the future.
2. Time Pressure:

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 Time pressure, like deadlines, can increase the performance of an individual or reduce the
performance by triggering destructive emotional reactions. Hence, while imposing deadlines,
managers must understand and consider an individual‘s capacity and ability to meet the set
targets.
3. Unreasonable Standards, Policies, Rules or Procedures:
When policies, standards, rules, or procedures are unreasonable and unattainable, they lead to
dysfunctional conflicts between managers and sub-ordinates. Therefore, managers must frame
sound policies, rules and procedures and correct those policies and procedures that do not help
employees achieve organizational objectives.
4. Communications Breakdowns:
Communication is a complex process. Barriers to communication often provoke conflict. When
two-way communication is hampered, it is easy to misunderstand another person or group. Such
misunderstandings have a negative impact on employee performance.
5. Personality Clashes:
People have different values and different perceptions of issues. A production manager, for
instance, may be of the opinion that streamlining the products line and concentrating on a few
products can make the organization more productive, while a sales manager may desire a broad
product line that will satisfy diverse customer demands.

6. Ambiguous or Overlapping Jurisdictions:

When job boundaries are not clear, they often create competition for resources and control. A
clarification of job boundaries and jurisdictions of various managers helps in preventing conflicts
from turning into serious problems.
7. Unrealized Expectations:
When expectations are not met, employees feel dissatisfied. Unrealistic expectations can also
result in destructive conflict. Open and frank communication with employees can help make
people knowledgeable about what they can expect from their organization.
Conflicts can arise from other sources as well. For example, a superior‘s autocratic leadership
style may cause conflicts. Differing educational backgrounds of employees may also lead to
conflict.

7.6. Structural Approaches to Conflict Management

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 a. Avoidance
One or both parties could avoid facing the conflict. The situation pertains to un-cooperative and
unassertive behaviour on the part of parties involved. A Party may avoid facing B Party. When
situation reaches a point of negligence by A Party, B Party may take advantage of the situation.
By avoiding, the individual might side step, postpone or even withdraw from the conflicting
situation. This strategy is useful when issues involved in conflict are of a very minor nature or
when more important issues deserve attention. This strategy suits a manager whose power base is
very low and there is no chance of satisfying one‘s own concerns. Avoidance strategy should be
applied when one feels that people in the organization should cool down so that the issue can be
handled at a later date in a better psychological environment. The issue can also be postponed if
additional information is required to be obtained. Avoidance is a poor strategy hence if someone
else is able to handle the situation of conflict more effectively; he should be allowed to do so.
Managers having high score on avoidance as a strategy of conflict management, may suffer from
delayed decision making and hence the loss to the organization. Those who have a low score on
avoidance thereby wanting to attend to every single issue may spend lot of time on every trivial
issue, hurt people‘s feelings and stir hostility in the organization that should be taken care of.
b. Competing
This strategy may be adopted when other strategies of conflict resolution are not workable.
Competing is also useful in emergencies where quick decisions are required. In this strategy
power must be used unilaterally as a weapon when unpopular decisions like termination, pay
cuts, layoffs, cost cutting and enforcing discipline are required to be taken. This strategy is based
on win-lose principle of managing conflicts. The managers who are high on power base have
an added advantage in using competing strategy because people from opposite side would not
dare confront a person who is so powerful. There is a tendency that managers using this strategy
should be careful about ‗yes‘ men around them. They should identify conflicting situations and
take bold decisions based on win-lose strategy. On the other hand there are managers who are
low on competing mode, are likely to feel powerless in many situations. Not realizing that
though they have power but they are not comfortable using it. By trying to use power, one could
enhance one‘s achievement. Another drawback in scoring low is that such individuals find it
difficult to take bold stand on various issues concerning organizations. In situations when a
manager is very low on ‗concern for the people‘ may postpone vital decisions on matters
pertaining to subordinates that may be detrimental to organizational effectiveness.

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 c. Collaborating
Strategy of collaboration involves attempt of one party to work with the other party in
cooperative manner and find solutions to the problem for mutual benefits. The strategy involves
identification of areas of disagreement, examining the issue in greater detail and a workable
solution arrived at, which is for mutual benefit. This strategy signifies when two sets of solutions
are important for both parties to be compromised, hence finding integrated solution become
imperative. This strategy signifies joint efforts, gain for both parties and integrated solutions
arrived at by consensual decisions. Sekaran concluded that when people are high on
collaborating, they have to be concerned about how they spend their time and other
organizational resources. Collaboration is time and energy consuming. Not all situations need
collaborative solutions. Over use of collaboration and consensual decision-making may reflect
risk aversion tendencies or an inclination to defuse responsibility. When people score low on
collaborating, they may fail to capitalize on situations, which would benefit immensely from
joint problem solving. Also by ignoring the concerns of employees, decisions and policies may
be evolved, which make the organizational members both unhappy and uncommitted to the
system. The strategy attempts a win - win solutions to their goals.
d. Accommodating
In accommodating mode a person scarifies his own interest for accommodating other person‘s
interest. It is form of selfless generosity, obeying other person‘s point of view. This mode is
usually adopted when other person‘s view is stronger, you want to achieve goodwill and indicate
that you are reasonable. This strategy of conflict resolution is important when you want other
person to give at a later date when it favors you. Sekaran concluded that when people are high
on accommodating score they might be differing too much to the wishes of others and pay very
little attention to their own ideas and concern even though they may realize that they are not
getting the attention they deserve. This might even lower one‘s self esteem in addition to
depriving on the influence, respect and recognition from others, since it negates the potential
contribution that individuals are capable of making to the organization. While individual low on
accommodating score, they should start thinking about whether they lack the goodwill of others
and whether others perceive them as unreasonable, uncompromising, rigid and demanding.
e. Compromising
In conflict situation, compromising is a mode when both parties try to find out some expedient,
mutually acceptable solution that scarifies both the parties partially. In compromising, there is no

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clear winner or loser. None of the parties is fully satisfied as they ration the object of conflict and
accept the solution which is not complete to either of the parties. In compromising, there is a
possibility of an atmosphere of ‗gamesmanship‘ in the work environment. There is also a
possibility of compromising on certain principles of behaviour which are not desirable. Values,
ethics, principles and long term objectives of the organization must be protected while adopting
compromising. When people are tough to compromise, they find it hard to make concessions and
land up in power struggle that must be avoided. Compromising policies can easily be adopted
when competing or collaboration strategy fails. Research indicates that people have underlying
disposition to handle conflict in certain ways. Especially individuals have preferences among the
five conflict handling intentions. Their preferences tend to be relied upon quite consistently, and
a person‘s intentions can be predicted rather well from a combination of intellectual and
personality characteristics. When confronting conflict situation, some people want to win it at
any cost, some want to find an optimum solution, some want to run away, others want to be
obliging, and still others want to ―split the differences‖ (Robbins Stephen P.).

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