Principles of Management-OpenStax-part 2
Principles of Management-OpenStax-part 2
At times, however, prejudiced individuals will look for reasons to justify acting on their prejudiced beliefs.
Research has shown people are more likely to act in prejudiced ways when they are physically or emotionally
tired, when they can do so and remain anonymous, or when social norms are weak enough that their
prejudiced behavior will not be received negatively.
CONCEPT CHECK
1. What are the theories that can help managers understand diversity?
Much theoretical work has espoused the benefits of workplace diversity, but empirical studies have often had
conflicting results, which have shown researchers that certain conditions can affect how successful initiatives
to increase and enhance workplace diversity are. Managers can work to make sure that the efforts and
initiatives they enact to increase diversity in the workplace come from a perspective that ensures and strives
for equity and fairness, and not simply from the perspective of only benefitting the company’s bottom line. By
approaching diversity and diversity issues in a thoughtful, purposeful way, managers can mitigate the
challenges posed by a diverse workforce and enhance the benefits a diverse workforce can offer.
Downfalls of the integration-and-learning perspective can be that White members of the work group can feel
marginalized when they are not asked to join in on diversity-related projects or discussions. Similarly,
workforce members of color might experience burnout if they are always expected to work on those projects
and discussions that specifically deal with diversity issues.
Exhibit 12.8 shows the degrees of effectiveness and benefits for each perspective.
396 Chapter 12 Diversity in Organizations
Exhibit 12.8 Cultural Diversity Perspectives at Work Source: Adapted from Ely, Robin J., and David A. Thomas. “Cultural diversity at work:
The effects of diversity perspectives on work group processes and outcomes.” Administrative science quarterly. 46.2 (2001): 229-273.
CONCEPT CHECK
Organizations that are committed to equality and inclusion must take steps to combat the examples of
discrimination and harassment that have been covered in this chapter. And they must take steps to make
diversity a goal in the pre-employment stages as well as in the post-employment stages. Anyone with
managerial or supervisory responsibilities should pay careful attention to hiring and performance-rewarding
practices, and make sure to rely on relevant information for making decisions and ignore race-based
stereotypes. The following are examples of what leaders and organizations can do make sure employees feel
valued.
MANAGERIAL LEADERSHIP
There has been a debate over the effectiveness of corporate diversity training since the Civil Rights Act of
1964 helped prompt corporate diversity training with the organizational goal of simply being compliant
with the law. Prior research shows that it can be effective, ineffective, or even detrimental for employees,
398 Chapter 12 Diversity in Organizations
but as diversity training has evolved through the years, it has become an important factor in helping
employers manage diversity.
In the 1980s through the late 1990s, diversity training evolved from focusing solely on compliance to
addressing the needs of women and minorities as they entered the workforce at a faster rate.
Unfortunately, this type of training was perceived by Whites and men as singling them out as the
problem; sometimes such training was even formatted as “confession” sessions for White employees to
express their complicity in institutional racism. Not unexpectedly, this type of training would often
backfire and would further separate employees from each other, the exact opposite of its intention.
Recently, diversity training has evolved to focus on (1) building cultural competencies regarding fellow
employees, (2) valuing differences, and (3) learning how diversity helps make better business decisions.
This perspective toward diversity training is more effective than simply focusing on causes of a lack of
diversity and the historical roots of discrimination. Understanding how to comply with the law is still
important, but training has a greater effect when the other factors are also included.
A recent study investigated various diversity-training methods, including having participants engage in
activities on perspective taking and goal setting. For perspective-taking activities, participants were asked
to write a few sentences about the challenges they believed minority group members might experience.
Goal-setting activities involved writing specific and measurable goals related to workplace diversity such
as crafting future policies or engaging in future behaviors. Researchers found that when these activities
were used as a diversity-training method, pro-diversity attitudes and behavioral intentions persisted
months later.
Issues regarding employee sexual orientation have also been introduced into corporate diversity training
in recent years. Because employees’ religious beliefs are protected by Title VII of the Civil Rights Act,
employers should be sensitive to balancing the rights of lesbian, gay, and bisexual employees and
employees’ religious rights. Attempting to protect the rights of one group and not be perceived to
disrespect another is a difficult situation for managers. In order to mitigate any backlash from some
employees, employers should seek feedback from all groups to learn the best ways to accommodate
them, and should assess the organizational climate. Additionally, managers should explain how diversity
based on sexual orientation aligns with the company’s strategic objectives and explain the company’s
legal position with supportive reasoning. Lastly, based on their organizational climate and how it
reshapes itself over time, some companies may wish to address diversity training on sexual orientation in
a voluntary training separate from other diversity issues.
Sources: Young, Cheri A., Badiah Haffejee, and David L. Corsun. "Developing Cultural Intelligence and
Empathy Through Diversified Mentoring Relationships." Journal of Management Education (2017):
1052562917710687; Bezrukova, K., Jehn, K.A., & Spell, C.S. (2012). Reviewing diversity training: Where we
have been and where we should go. Academy of Management Learning & Education, 11 (2): 207-227;
Anand, R., & Winters, M. (2008). A retrospective view of corporate diversity training from 1964 to the
present. Academy of Management Learning & Education, 7 (3): 356-372; Lindsey, A., King, E., Membere, A., &
Cheung, H.K. (July 28, 2017). Two types of diversity training that really work. Harvard Business Review.
Discussion Questions
1. Why do you believe diversity training is resisted by some employees?
2. Do you believe there will always be a need for workplace diversity training?
3. How would you determine what types of diversity training are needed at your company?
Visible Leadership
Another key to ensure that employees are treated fairly is utilizing appropriate leadership strategies.149
Leadership must sincerely value variety of opinions, and organizational culture must encourage openness and
make workers feel valued. Organizations must also have a well-articulated and widely understood mission and
a relatively egalitarian, nonbureaucratic structure. Having such a work environment will ensure that the
attitudes and values of employees are aligned with those of the organization. In this way culture serves as a
control mechanism for shaping behaviors.
CONCEPT CHECK
1. How can managers ensure fairness in the interviewing and selection process regarding diversity?
2. What is the role of leadership regarding diversity?
400 Chapter 12 Diversity in Organizations
Key Terms
access discrimination A catchall term that describes when people are denied employment opportunities
because of their identity group or personal characteristics such as sex, race, or age.
access-and-legitimacy perspective Focuses on the benefits that a diverse workforce can bring to a
business that wishes to operate within a diverse set of markets or with culturally diverse clients.
age discrimination Treating an employee or applicant less favorably due to their age.
Age Discrimination in Employment Act (ADEA) Forbids discrimination against individuals who are age 40
and above, including offensive or derogatory remarks that create a hostile work environment.
Americans with Disabilities Act (ADA) Prohibits discrimination in employment, public services, public
accommodations, and telecommunications against people with disabilities.
cognitive diversity Differences between team members regarding characteristics such as expertise,
experiences, and perspectives.
cognitive diversity hypothesis Multiple perspectives stemming from the cultural differences between
group or organizational members result in creative problem-solving and innovation.
covert discrimination (interpersonal) An interpersonal form of discrimination that manifests in ways that
are not visible or readily identifiable.
deep-level diversity Diversity in characteristics that are nonobservable such as attitudes, values, and beliefs,
such as religion.
disability discrimination Occurs when an employee or applicant is treated unfavorably due to their physical
or mental disability.
discrimination-and-fairness perspective A culturally diverse workforce is a moral duty that must be
maintained in order to create a just and fair society.
diversified mentoring relationships Relationships in which the mentor and the mentee differ in terms of
their status within the company and within larger society.
diversity Identity-based differences among and between people that affect their lives as applicants,
employees, and customers.
Equal Employment Opportunity Commission An organization that enforces laws and issues guidelines for
employment-related treatment according to Title VII of the Civil Rights Act of 1964.
Equal Pay Act of 1963 An amendment to the Fair Labor Standards Act of 1938.
Family and Medical Leave Act (FMLA) Provides new parents, including adoptive and foster parents, with 12
weeks of unpaid leave (or paid leave only if earned by the employee) to care for the new child and
requires that nursing mothers have the right to express milk on workplace premises.
glass ceiling An invisible barrier based on the prejudicial beliefs of organizational decision makers that
prevents women from moving beyond certain levels within a company.
groupthink A dysfunction in decision-making that is common in homogeneous groups due to group
pressures and group members’ desire for conformity and consensus.
harassment Any unwelcome conduct that is based on characteristics such as age, race, national origin,
disability, sex, or pregnancy status.
hidden diversity Differences in traits that are deep-level and may be concealed or revealed at discretion by
individuals who possess them.
highly structured interviews Interviews that are be structured objectively to remove bias from the selection
process.
identity group A collective of individuals who share the same demographic characteristics such as race, sex,
or age.
inclusion The degree to which employees are accepted and treated fairly by their organization.
integration-and-learning perspective Posits that the different life experiences, skills, and perspectives that
members of diverse cultural identity groups possess can be a valuable resource in the context of work
groups.
invisible social identities Membership in an identity group based on hidden diversity traits such as sexual
orientation or a nonobservable disability that may be concealed or revealed.
justification-suppression model Explains the circumstances in which prejudiced people might act on their
prejudices.
justification-suppression model Explains under what conditions individuals act on their prejudices.
managing diversity Ways in which organizations seek to ensure that members of diverse groups are valued
and treated fairly within organizations.
model minority myth A stereotype that portrays Asian men and women as obedient and successful and is
often used to justify socioeconomic disparities between other racial minority groups.
national origin discrimination Treating someone unfavorably because of their country of origin, accent,
ethnicity, or appearance.
passing The decision to not disclose one’s invisible social identity.
pregnancy discrimination Treating an employee or applicant unfairly because of pregnancy status,
childbirth, or medical conditions related to pregnancy or childbirth.
Pregnancy Discrimination Act (PDA) Prohibits any discrimination as it relates to pregnancy in hiring, firing,
compensation, training, job assignment, insurance, or any other employment conditions.
race/color discrimination Treating employees or applicants unfairly because of their race or because of
physical characteristics typically associated with race such as skin color, hair color, hair texture, or certain
facial features.
religious discrimination When employees or applicants are treated unfairly because of their religious
beliefs.
resource-based view Demonstrates how a diverse workforce can create a sustainable competitive
advantage for organizations.
revealing The decision to disclose one’s invisible social identity.
reverse discrimination Describes a situation in which dominant group members perceive that they are
experiencing discrimination based on their race or sex.
schema theory Explains how individuals encode information about others based on their demographic
characteristics.
sex-based discrimination When employees or applicants are treated unfairly because of their sex, including
unfair treatment due to gender, transgender status, or sexual orientation.
sexual harassment Harassment based on a person’s sex, and can (but does not have to) include unwanted
sexual advances, requests for sexual favors, or physical and verbal acts of a sexual nature.
sexual harassment Harassment based on a person’s sex; it can (but does not have to) include unwanted
sexual advances, requests for sexual favors, or physical and verbal acts of a sexual nature.
similarity-attraction paradigm Individuals’ preferences for interacting with others like themselves can
result in diversity having a negative effect on group and organizational outcomes.
social identity theory Self-concept based on an individual’s physical, social, and mental characteristics.
stereotypes Overgeneralization of characteristics about groups that are the basis for prejudice and
discrimination.
strategic human resources management (SHRM) System of activities arranged to engage employees in a
manner that assists the organization in achieving a sustainable competitive advantage.
surface-level diversity Diversity in the form of characteristics of individuals that are readily visible,
including, but not limited to, age, body size, visible disabilities, race, or sex.
402 Chapter 12 Diversity in Organizations
treatment discrimination A situation in which people are employed but are treated differently while
employed, mainly by receiving different and unequal job-related opportunities or rewards.
work visa A temporary documented status that authorizes individuals from other countries to permanently
or temporarily live and work in the United States.
workplace discrimination Unfair treatment in the job hiring process or at work that is based on the identity
group, physical or mental condition, or personal characteristic of an applicant or employee.
Diversity refers to identity-based differences among and between people that affect their lives as applicants,
employees, and customers. Surface-level diversity represents characteristics of individuals that are readily
visible, including, but not limited to, age, body size, visible disabilities, race, or sex. Deep-level diversity
includes traits that are nonobservable such as attitudes, values, and beliefs. Finally, hidden diversity includes
traits that are deep-level but may be concealed or revealed at the discretion of individuals who possess them.
In analyzing the diversity of the workforce, several measures can be used. Demographic measures such as
gender and race can be used to measure group sizes. Measures of such things as discrimination toward
specific groups can be analyzed to gauge the diversity of the workforce. Other measures of diversity in the
workforce can include examination of differences in age and sexual orientation.
The demography of the labor force is changing in many ways as it becomes racially diverse and older and
includes more women and individuals with disabilities. Diversity affects how organizations understand that
employing people who hold multiple perspectives increases the need to mitigate conflict between workers
from different identity groups, enhances creativity and problem solving in teams, and serves as a resource to
create a competitive advantage for the organization.
Workplace discrimination occurs when an employee or an applicant is treated unfairly at work or in the job-
hiring process due to an identity group, condition, or personal characteristic such as age, race, national origin,
sex, disability, religion, or pregnancy status. The Equal Employment Opportunity Commission enforces laws
and legislation related to individuals with those protected statuses.
Harassment is any unwelcome conduct that is based on the protected characteristics listed above. Sexual
harassment refers specifically to harassment based on a person’s sex, and it can (but does not have to) include
unwanted sexual advances, requests for sexual favors, or physical and verbal acts of a sexual nature.
The cognitive-diversity hypothesis suggests that multiple perspectives stemming from the cultural differences
between groups or organizational members result in creative problem solving and innovation. The similarity-
attraction paradigm and social identity theory explain how, because individuals prefer to interact with others
like themselves, diversity may have a negative effect on group and organizational outcomes. The justification-
suppression model explains under what conditions individuals act on their prejudice.
By approaching diversity and diversity issues in a thoughtful, purposeful way, managers can mitigate the
challenges posed by a diverse workforce and enhance the benefits a diverse workforce can offer.
Managers can work to make sure that the efforts and initiatives they enact to increase diversity in the
workplace come from a perspective that ensures and strives for equity and fairness, not simply one that will
benefit the company’s bottom line.
Using an integration-and-learning perspective strongly links diversity to the work and success of the firm by
viewing cultural identity, different life experiences, skills, and perspectives from members of diverse cultural
identity groups as a valuable resource.
Organizations should use objective and fair recruitment and selection tools and policies.
Leadership should make employees feel valued, be open to varied perspectives, and encourage a culture of
open dialogue. Women and racial minorities can increase positive employment outcomes by pursuing higher
levels of education and seeking employment in larger organizations. All individuals should be willing to listen,
empathize with others, and seek to better understand sensitive issues that affect different identity groups.
1. Do you agree that diversity can be a source of greater benefit than harm to organizations? Why or why
not?
2. Have you ever worked in a diverse team setting before? If so, did you encounter any attitudes or
behaviors that could potentially cause conflict? If not, how would you manage conflict stemming from
diversity?
3. List three organizational goals you would implement to create an organizational culture of diversity and
inclusion.
4. Have you or has someone you know experienced discrimination? How did that affect you or that person
emotionally, physically, or financially?
5. Pick an identity group (e.g., gay, Black, or woman) other than your own. Imagine and list the negative
experiences and interactions you believe you might encounter at work. What policies or strategies could
an organization implement to prevent those negative experiences from occurring?
6. Provide a concrete example of how different perspectives stemming from diversity can positively impact
an organization or work group. You may use a real-life personal example or make one up.
You talk to your boss about it, and he tells you that she means no harm by it, she is just from another era
and that is just her personality. What would you do in this situation?
4. You are a nurse manager who oversees the triage for the emergency room, and today is a slow day with
very few patients. During the downtime, one of your subordinates is talking with another coworker about
her new boyfriend. You observe her showing her coworkers explicit images of him that he emailed her on
her phone. Everyone is joking and laughing about the ordeal. Even though it appears no one is offended,
should you address it? What would you say?
5. You work for a company that has primarily Black and Hispanic customers. Although you employ many
racial minorities and women, you notice that all of your leaders are White men. This does not necessarily
mean that your organization engages in discriminatory practices, but how would you know if your
organization was managing diversity well? What information would you need to determine this, and how
would you collect it?
6. Your company’s founder believes that younger workers are more energetic and serve better in sales
positions. Before posting a new job ad for your sales division, he recommends that you list an age
requirement of the position for applicants between ages 18 and 25. Is his recommendation a good one?
Why or why not?
7. You work for a real estate broker who recently hired two gay realtors, Steven and Shauna, to be a part of
the team. During a staff meeting, your boss mentions an article she read about gay clients feeling
ostracized in the real estate market. She tells the new employees she hired them to help facilitate the
home-buying process for gay buyers and sellers. She specifically instructs them to focus on recruiting gay
clients, even telling them that they should pass along any straight customers to one of the straight
realtors on the team. A few weeks later, Shauna reports that she has made her first sale to a straight
couple that is expecting a baby. During the next staff meeting, your boss congratulates Shauna on her
sale, but again reiterates that Shauna and Steven should pass along straight clients to another realtor so
they can focus on recruiting gay clients. After the meeting, Shauna tells you that she thinks it is unfair that
she should have to focus on gay clients and that she is thinking of filing a discrimination complaint with
HR. Do you think that Shauna is correct in her assessment of the situation? Is there merit to your boss’s
desire to have the gay realtors focus on recruiting gay clients? What might be a better solution to help
gay clients feel more comfortable in the home-buying and -selling process?
In February of 2017 a former software engineer, Susan Fowler, wrote a lengthy post on her website regarding
her experience of being harassed by a manager who was not disciplined by human resources for his behavior.
In her post, Fowler wrote that Uber’s HR department and members of upper management told her that
because it was the man’s first offense, they would only give him a warning. During her meeting with HR about
the incident, Fowler was also advised that she should transfer to another department within the organization.
According to Fowler, she was ultimately left no choice but to transfer to another department, despite having
406 Chapter 12 Diversity in Organizations
specific expertise in the department in which she had originally been working.
As her time at the company went on, she began meeting other women who worked for the company who
relayed their own stories of harassment. To her surprise, many of the women reported being harassed by the
same person who had harassed her. As she noted in her blog, “It became obvious that both HR and
management had been lying about this being his 'first offense.'” Fowler also reported a number of other
instances that she identified as sexist and inappropriate within the organization and claims that she was
disciplined severely for continuing to speak out. Fowler eventually left Uber after about two years of working
for the company, noting that during her time at Uber the percentage of women working there had dropped to
6% of the workforce, down from 25% when she first started.
Following the fallout from Fowler’s lengthy description of the workplace on her website, Uber’s chief executive
Travis Kalanick publicly condemned the behavior described by Fowler, calling it “abhorrent and against
everything Uber stands for and believes in.” But later in March, Uber board member Arianna Huffington
claimed that she believed “sexual harassment was not a systemic problem at the company.” Amid pressure
from bad media attention and the company’s falling market share, Uber made some changes after an
independent investigation resulted in 215 complaints. As a result, 20 employees were fired for reasons ranging
from sexual harassment to bullying to retaliation to discrimination, and Kalanick announced that he would hire
a chief operating officer to help manage the company. In an effort to provide the leadership team with more
diversity, two senior female executives were hired to fill the positions of chief brand officer and senior vice
president for leadership and strategy.
Exhibit 13.1 (Credit: Tambako the Jaguar/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
Introduction
Learning Outcomes
After reading this chapter, you should be able to answer these questions:
Arroyo knew he had a hard act to follow. The general manager whom John replaced, “T.J.” Grevin, was a
much-loved old-timer who had been with the Sea Lions since their inception 14 years ago. John knew it
408 Chapter 13 Leadership
would be difficult for whoever followed T.J., but he didn’t realize how ostracized and powerless he would
feel. He tried a pep talk: “I’m the general manager—the CEO of this ball club! In time, the staff will
respect me.” [Not a very good pep talk!]
After his first season ends, Arroyo is discouraged. Ticket and concession sales are down, and some long-
time employees are rumored to be thinking about leaving. If John doesn’t turn things around, he knows
his tenure with the Sea Lions will be short.
Questions: Is John correct in assuming that the staff will learn to respect him in time? What can John do
to earn the loyalty of his staff and improve the ball club’s performance?
Outcomes: During the winter, John thinks long and hard about how he can earn the respect of the Sea
Lions staff. Before the next season opener, John announces his plan: “So I can better understand what
your day is like, I’m going to spend one day in each of your shoes. I’m trading places with each of you. I
will be a ticket taker, a roving hot dog vendor, and a janitor. And I will be a marketer, and an
accountant—for a day. You in turn will have the day off so you can enjoy the game from the general
manager’s box.” The staff laughs and whistles appreciatively. Then the Springfield mascot, Sparky the
Sea Lion, speaks up: “Hey Mr. Arroyo, are you going to spend a day in my flippers?” “You bet!” says
John, laughing. The entire staff cheers.
John continues. “At the close of the season, we will honor a staff member with the T.J. Grevin Award for
outstanding contributions to the Sea Lions organization. T.J. was such a great guy, it’s only right that we
honor him.” The meeting ends, but John’s staff linger to tell him how excited they are about his ideas.
Amidst the handshakes, he hopes that this year may be the best year yet for the Sea Lions.
Sarah Elizabeth Roisland is the manager of a district claims office for a large insurance company.
Fourteen people work for her. The results of a recent attitude survey indicate that her employees have
extremely high job satisfaction and motivation. Conflict is rare in Sarah’s office. Furthermore,
productivity measures place her group among the most productive in the entire company. Her success
has brought the company’s vice president of human resources to her office in an attempt to discover the
secret to her success. Sarah’s peers, superiors, and workers all give the same answer: she is more than a
good manager—she is an outstanding leader. She continually gets high performance from her
employees and does so in such a way that they enjoy working for her.
There is no magic formula for becoming a good leader. There are, however, many identifiable reasons
why some people are better and more effective leaders. Leaders, especially effective leaders, are not
created by simply attending a one-day leadership workshop. Yet effective leadership skills are not
something most people are born with. You can become an effective leader if you are willing to invest the
time and energy to develop all of the “right stuff.”
According to Louise Axon, director of content strategy, and her colleagues at Harvard Business
Publishing, in seeking management talent, leadership is an urgently needed quality in all managerial
roles.1 Good leaders and good leadership are rare. Harvard management professor John P. Kotter notes
that “there is a leadership crisis in the U.S. today,”2 and the late USC Professor Warren Bennis states that
many of our organizations are overmanaged and underled.3
The many definitions of leadership each have a different emphasis. Some definitions consider leadership an
act or behavior, such as initiating structure so group members know how to complete a task. Others consider
a leader to be the center or nucleus of group activity, an instrument of goal achievement who has a certain
personality, a form of persuasion and power, and the art of inducing compliance.4 Some look at leadership in
terms of the management of group processes. In this view, a good leader develops a vision for the group,
communicates that vision,5 orchestrates the group’s energy and activity toward goal attainment, “[turns] a
group of individuals into a team,” and “[transforms] good intentions into positive actions.”6
Leadership is frequently defined as a social (interpersonal) influence relationship between two or more
persons who depend on each other to attain certain mutual goals in a group situation.7 Effective leadership
helps individuals and groups achieve their goals by focusing on the group’s maintenance needs (the need for
individuals to fit and work together by having, for example, shared norms) and task needs (the need for the
group to make progress toward attaining the goal that brought them together).
Exhibit 13.2 Joe Madden at pitcher mound Joe Maddon, manager of the Chicago Cubs baseball team, is lauded for both his managerial and
leadership skills. Maddon is a role model for managers competing in the business world. Managers can learn and profit from the Cubs skipper's
philosophy of instilling an upbeat attitude with the team, staying loose but staying productive, and avoiding being the center of attention.
First, we define the two concepts differently. In Chapter 1, we defined management as a process consisting of
planning, organizing, directing, and controlling. Here we define leadership as a social (interpersonal) influence
relationship between two or more people who are dependent on each another for goal attainment.
Second, managers and leaders are commonly differentiated in terms of the processes through which they
initially come to their position. Managers are generally appointed to their role. Even though many
organizations appoint people to positions of leadership, leadership per se is a relationship that revolves
around the followers’ acceptance or rejection of the leader.8 Thus, leaders often emerge out of events that
unfold among members of a group.
Third, managers and leaders often differ in terms of the types and sources of the power they exercise.
Managers commonly derive their power from the larger organization. Virtually all organizations legitimize the
use of certain “carrots and sticks” (rewards and punishments) as ways of securing the compliance of their
employees. In other words, by virtue of the position that a manager occupies (president, vice president,
department head, supervisor), certain “rights to act” (schedule production, contract to sell a product, hire and
fire) accompany the position and its place within the hierarchy of authority. Leaders can also secure power and
the ability to exercise influence using carrots and sticks; however, it is much more common for leaders to
derive power from followers’ perception of their knowledge (expertise), their personality and attractiveness,
and the working relationship that has developed between leaders and followers.
From the perspective of those who are under the leader’s and manager’s influence, the motivation to comply
often has a different base. The subordinate to a manager frequently complies because of the role authority of
the manager, and because of the carrots and sticks that managers have at their disposal. The followers of a
leader comply because they want to. Thus, leaders motivate primarily through intrinsic processes, while
managers motivate primarily through extrinsic processes.
Finally, it is important to note that while managers may be successful in directing and supervising their
subordinates, they often succeed or fail because of their ability or inability to lead. 9 As noted above, effective
leadership often calls for the ability to manage, and effective management often requires leadership.
CONCEPT CHECK
Leadership is a process, a complex and dynamic exchange relationship built over time between leader and
follower and between leader and the group of followers who depend on each other to attain a mutually
desired goal.10 There are several key components to this “working relationship”: the leader, the followers, the
context (situation), the leadership process per se, and the consequences (outcomes) (see Exhibit 13.3).11
Across time, each component interacts with and influences the other components, and whatever
consequences (such as leader-follower trust) are created influence future interactions. As any one of the
components changes, so too will leadership.12
Exhibit 13.3 The Leadership Process (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
The Leader
Leaders are people who take charge of or guide the activities of others. They are often seen as the focus or
orchestrater of group activity, the people who set the tone of the group so that it can move forward to attain
its goals. Leaders provide the group with what is required to fulfill its maintenance and task-related needs.
(Later in the chapter, we will return to the “leader as a person” as part of our discussion of the trait approach
to leadership.)
Exhibit 13.4 New York Philharmonic @ UN The New York Philharmonic, conducted by Music Director Alan Gilbert, paid special tribute in the
General Assembly Hall to UN Secretary-General Ban Ki-moon as a tribute to his 10-year term. Gilbert is the formal leader of the New York
Philharmonic.
412 Chapter 13 Leadership
The Follower
The follower is not a passive player in the leadership process. Edwin Hollander, after many years of studying
leadership, suggested that the follower is the most critical factor in any leadership event.13 It is, after all, the
follower who perceives the situation and comes to define the needs that the leader must fulfill. In addition, it is
the follower who either rejects leadership or accepts acts of leadership by surrendering his power to the
leader to diminish task uncertainty, to define and manage the meaning of the situation to the follower, and to
orchestrate the follower’s action in pursuit of goal attainment.
The follower’s personality and readiness to follow determine the style of leadership that will be most effective.
For example, individuals with an internal locus of control are much more responsive to participative styles of
leadership than individuals with an external locus of control.14 Individuals with an authoritarian personality are
highly receptive to the effectiveness of directive acts of leadership.15 It is the followers’ expectations, as well as
their performance-based needs, that determine what a leader must do in order to be effective.
The strength of the follower’s self-concept has also been linked to the leadership process. High-self-esteem
individuals tend to have a strong sense of self-efficacy, that is, a generalized belief they can be successful in
difficult situations. They therefore tend to be strongly motivated to perform and persist in the face of
adversity.16 The high-self-esteem follower tends to be responsive to participative styles of leadership. Low-self-
esteem individuals, who doubt their competence and worthiness and their ability to succeed in difficult
situations, function better with supportive forms of leadership. This helps them deal with the stress,
frustration, and anxiety that often emerge with difficult tasks. Followers without a readiness to follow, limited
by their inability to perform and lack of motivation and commitment, usually need more directive forms of
leadership.17
Follower behavior plays a major role in determining what behaviors leaders engage in. For example, followers
who perform at high levels tend to cause their leaders to be considerate in their treatment and to play a less
directive role. Followers who are poor performers, on the other hand, tend to cause their leaders to be less
warm toward them and to be more directive and controlling in their leadership style.18
The Context
Situations make demands on a group and its members, and not all situations are the same. Context refers to
the situation that surrounds the leader and the followers. Situations are multidimensional. We discuss the
context as it pertains to leadership in greater detail later in this chapter, but for now let’s look at it in terms of
the task and task environment that confront the group. Is the task structured or unstructured? Are the goals
of the group clear or ambiguous? Is there agreement or disagreement about goals? Is there a body of
knowledge that can guide task performance? Is the task boring? Frustrating? Intrinsically satisfying? Is the
environment complex or simple, stable or unstable? These factors create different contexts within which
leadership unfolds, and each factor places a different set of needs and demands on the leader and on the
followers.
The Process
The process of leadership is separate and distinct from the leader (the person who occupies a central role in
the group). The process is a complex, interactive, and dynamic working relationship between leader and
followers. This working relationship, built over time, is directed toward fulfilling the group’s maintenance and
task needs. Part of the process consists of an exchange relationship between the leader and follower. The
leader provides a resource directed toward fulfilling the group’s needs, and the group gives compliance,
recognition, and esteem to the leader. To the extent that leadership is the exercise of influence, part of the
leadership process is captured by the surrender of power by the followers and the exercise of influence over
the followers by the leader.19 Thus, the leader influences the followers and the followers influence the leader,
the context influences the leader and the followers, and both leader and followers influence the context.
The Consequences
A number of outcomes or consequences of the leadership process unfold between leader, follower, and
situation. At the group level, two outcomes are important:
• Have the group’s maintenance needs been fulfilled? That is, do members of the group like and get along
with one another, do they have a shared set of norms and values, and have they developed a good
working relationship? Have individuals’ needs been fulfilled as reflected in attendance, motivation,
performance, satisfaction, citizenship, trust, and maintenance of the group membership?
• Have the group’s task needs been met? That is, there are also important consequences of the leadership
process for individuals: attendance, motivation, performance, satisfaction, citizenship, trust, and
maintenance of their group membership.
The leader-member exchange (LMX) theory of the leadership process focuses attention on consequences
associated with the leadership process. The theory views leadership as consisting of a number of dyadic
relationships linking the leader with a follower. A leader-follower relationship tends to develop quickly and
remains relatively stable over time. The quality of the relationship is reflected by the degree of mutual trust,
loyalty, support, respect, and obligation. High- and low-quality relationships between a leader and each of his
followers produce in and out groups among the followers. Members of the in group come to be key players,
and high-quality exchange relationships tend to be associated with higher levels of performance,
commitment, and satisfaction than are low-quality exchange relationships.20 Attitudinal similarity and
extroversion appear to be associated with a high-quality leader-member relationship.21
The nature of the leadership process varies substantially depending on the leader, the followers, and the
situation and context. Thus, leadership is the function of an interaction between the leader, the follower, and
the context.
The leadership context for the leader of a group of assembly line production workers differs from the context
for the leader of a self-managing production team and from the context confronted by the lead scientists in a
research laboratory. The leadership tactics that work in the first context might fail miserably in the latter two.
C AT C H I N G T H E E N T R E P R E N E U R I A L S P I R I T
How critical is leadership to a start-up? Ask the four cofounders of the now-defunct PYP (Pretty Young
414 Chapter 13 Leadership
Professionals), a website founded as a source of information for young professional women. What began
as four young professional women working on a new start-up ended with hurt feelings and threats of
legal action. In 2010, Kathryn Minshew, Amanda Pouchot, Caroline Ghosn, and Alex Cavoulacos decided
to create the website and Minshew was named CEO (Cohan 2011a). Lines blurred about Minshew’s
authority and the ultimate look, feel, and direction of the website. Ideals about shared leadership, where
the company was going, and how it was going to get there ultimately got lost in the power shuffle. By
June 2011, passwords were changed and legal actions began, and in August Minshew and Cavoulacos left
altogether (Cohan 2011b).
When the legal haggling from PYP was over, Alex Cavoulacos and Kathryn Minshew, joined by Melissa
McCreery, tried again. But this time, rather than hoping for the best, they put a leadership plan in place.
Minshew was named CEO of the new start-up, The Daily Muse, with Cavoulacos as chief operating officer
and McCreery as editor in chief. Rather than trusting to luck, the three cofounders based their team
positions on strengths and personalities. Cavoulacos and McCreery agreed that Minshew’s outgoing
personality and confidence made her the proper choice as CEO (Casserly 2013).
No single trait will guarantee that a person can lead a start-up from idea to greatness, but a survey of
successful entrepreneurs does show some common traits. According to David Barbash, a partner at
Boston-based law firm Posternak Blankstein & Lund LLP, personality is paramount: “You can have great
technology but if you’re not a great communicator it may die in the lab” (Casserly 2013 n.p.). A start-up
needs a leader who is confident and willing, if not eager, to face the future. According to Michelle
Randall, a principal of Enriching Leadership International, start-up CEOs have to be willing to fundraise
and not be too proud to beg (Casserly 2013). Peter Shankman, an entrepreneur and angel investor, says
leaders have to be willing to make the hard decisions, even risking being the bad guy (Casserly 2013).
Gary Vaynerchuk credits his success to six factors. Angel investor, social media marketer, and early social
media adopter, Vaynerchuk leveraged YouTube in its early years to market wine from the family’s liquor
store, eventually increasing sales from $3 million to $60 million a year (Clifford 2017). Gary believes good
leaders recognize that they don’t dictate to the market, but rather respond to where it is going. They
have respect for and believe in other people, and have a strong work ethic, what Vaynerchuk called a
“lunch pail work ethic”: they are willing to put in long hours because they love the work, not the perks.
He also stresses that he loves technology and doesn’t fear it, is obsessed with the youth of today, and is
optimistic about people and the future of humanity (Vaynerchuk 2017).
Leading a startup requires more than simple management. It requires the right leader for the right
company at the right time, which means matching the right management skills with the proper flexibility
and drive to keep it all together and moving in the right direction.
Sources:
Casserly, Meghan. 2013. “Rocks, Paper, CEO: Finding The Best Leader For Your Startup.” Forbes.
https://www.forbes.com/sites/meghancasserly/2013/01/15/rocks-paper-ceo-finding-the-best-
leader-for-your-startup/#16b520cd20a5
Clifford, Catherine. 2017. “Self-made millionaire Gary Vaynerchuk: This is the real secret to success.”
CNBC. https://www.cnbc.com/2017/03/13/self-made-millionaire-gary-vaynerchuk-shares-real-
secret-to-success.html
Cohan, Peter. 2011a. “A Cautionary Tale: Friendship, Business Ethics, and Bad Breakups (Acts I and
II). Forbes. August 9, 2011. https://www.forbes.com/sites/petercohan/2011/08/09/a-cautionary-tale-
friendship-business-ethics-and-bad-breakups-acts-i-and-ii/#256d318b2735
Cohan, Peter. 2011b. “A Cautionary Tale: Friendship, Business Ethics, and Bad Breakups (Acts III and
IV). Forbes. August 9, 2011. https://www.forbes.com/sites/petercohan/2011/08/09/a-cautionary-tale-
friendship-business-ethics-and-bad-breakups-acts-iii-and-iv/3/#66b22dd4a4f6
Vaynerchuk, Gary. 2017. “What Makes Me a Great CEO.” https://www.garyvaynerchuk.com/makes-
great-ceo/
1. Why would start-up leaders need different leadership qualities than someone managing an
established firm?
2. Vaynerchuk has been quoted as saying that if you live for Friday, get a different job. How does this
apply to successful entrepreneurs?
CONCEPT CHECK
1. What are the processes associated with people coming to leadership positions?
Leaders hold a unique position in their groups, exercising influence and providing direction. Leonard Bernstein
was part of the symphony, but his role as the New York Philharmonic conductor differed dramatically from
that of the other symphony members. Besides conducting the orchestra, he created a vision for the symphony.
In this capacity, leadership can be seen as a differentiated role and the nucleus of group activity.
Organizations have two kinds of leaders: formal and informal. A formal leader is that individual who is
recognized by those outside the group as the official leader of the group. Often, the formal leader is appointed
by the organization to serve in a formal capacity as an agent of the organization. Jack Welch was the formal
leader of General Electric, and Leonard Bernstein was the formal leader of the symphony. Practically all
managers act as formal leaders as part of their assigned role. Organizations that use self-managed work
teams allow members of the team to select the individual who will serve as their team leader. When this
person’s role is sanctioned by the formal organization, these team leaders become formal leaders.
Increasingly, leaders in organizations will be those who “best sell” their ideas on how to complete a
project—persuasiveness and inspiration are important ingredients in the leadership equation, especially in
high-involvement organizations.22
Informal leaders, by contrast, are not assigned by the organization. The informal leader is that individual
whom members of the group acknowledge as their leader. Athletic teams often have informal leaders,
individuals who exert considerable influence on team members even though they hold no official, formal
leadership position. In fact, most work groups contain at least one informal leader. Just like formal leaders,
informal leaders can benefit or harm an organization depending on whether their influence encourages group
members to behave consistently with organizational goals.
As we have noted, the terms leader and manager are not synonymous. Grace Hopper, retired U.S. Navy
admiral, draws a distinction between leading and managing: “You don’t manage people, you manage things.
You lead people.”23 Informal leaders often have considerable leverage over their colleagues. Traditionally, the
416 Chapter 13 Leadership
roles of informal leaders have not included the total set of management responsibilities because an informal
leader does not always exercise the functions of planning, organizing, directing, and controlling. However,
high-involvement organizations frequently encourage their formal and informal leaders to exercise the full set
of management roles. Many consider such actions necessary for self-managing work teams to succeed.
Informal leaders are acknowledged by the group, and the group willingly responds to their leadership.
Paths to Leadership
People come to leadership positions through two dynamics. In many instances, people are put into positions
of leadership by forces outside the group. University-based ROTC programs and military academies (like West
Point) formally groom people to be leaders. We refer to this person as the designated leader (in this instance
the designated and formal leader are the same person). Emergent leaders, on the other hand, arise from the
dynamics and processes that unfold within and among a group of individuals as they endeavor to achieve a
collective goal.
A variety of processes help us understand how leaders emerge. Gerald Salancik and Jeffrey Pfeffer observe
that power to influence others flows to those individuals who possess the critical and scarce resources (often
knowledge and expertise) that a group needs to overcome a major problem.24 They note that the dominant
coalition and leadership in American corporations during the 1950s was among engineers, because
organizations were engaged in competition based on product design. The power base in many organizations
shifted to marketing as competition became a game of advertising aimed at differentiating products in the
consumer’s mind. About 10–15 years ago, power and leadership once again shifted, this time to people with
finance and legal backgrounds, because the critical contingencies facing many organizations were mergers,
acquisitions, hostile takeovers, and creative financing. Thus, Salancik and Pfeffer reason that power and thus
leadership flow to those individuals who have the ability to help an organization or group [overcome its critical
contingencies]. As the challenges facing a group change, so too may the flow of power and leadership.
Many leaders emerge out of the needs of the situation. Different situations call for different configurations of
knowledge, skills, and abilities. A group often turns to the member who possesses the knowledge, skills, and
abilities that the group requires to achieve its goals.25 People surrender their power to individuals whom they
believe will make meaningful contributions to attaining group goals.26 The individual to whom power is
surrendered is often a member of the group who is in good standing. As a result of this member’s
contributions to the group’s goals, he has accumulated idiosyncrasy credits (a form of competency-based
status). These credits give the individual a status that allows him to influence the direction that the group
takes as it works to achieve its goals.27
It is important to recognize that the traits possessed by certain individuals contribute significantly to their
emergence as leaders. Research indicates that people are unlikely to follow individuals who, for example, do
not display drive, self-confidence, knowledge of the situation, honesty, and integrity.
French and Raven provide us with a useful typology that identifies the sources and types of power that may be
at the disposal of leaders:
• Reward power—the power a person has because people believe that he can bestow rewards or outcomes,
such as money or recognition that others desire
• Coercive power—the power a person has because people believe that he can punish them by inflicting
pain or by withholding or taking away something that they value
• Referent power—the power a person has because others want to associate with or be accepted by him
• Expert power—the power a person has because others believe that he has and is willing to share expert
knowledge that they need (The concept of resource power extends the idea of expert power to include the
power that a person has because others believe that he possesses and is willing to share resources, such
as information, time, or materials that are needed.)
• Legitimate power—the power a person has because others believe that he possesses the “right” to
influence them and that they ought to obey. This right can originate in tradition; in the charisma or appeal
of the person; and in laws, institutional roles within society, moralistic appeal, and rationality (that is,
logical arguments, factual evidence, reason, and internally consistent positions).28
Not all forms of power are equally effective (see Exhibit 13.5), nor is a leader’s total power base the simple
sum of the powers at his disposal. Different types of power elicit different forms of compliance: Leaders who
rely on coercive power often alienate followers who resist their influence attempts. Leaders who rely on
reward power develop followers who are very measured in their responses to [what?]; the use of rewards
often leads people to think in terms of “How much am I getting?” or “How much should I give?” or “Am I
breaking even?” The use of referent power produces identification with the leader and his cause. The use of
rationality, expert power, and/or moralistic appeal generally elicits commitment and the internalization of the
leader’s goals.29
Leaders who use referent and expert power commonly experience a favorable response in terms of follower
satisfaction and performance. Research suggests that rationality is the most effective influence tactic in terms
of its impact on follower commitment, motivation, performance, satisfaction, and group effectiveness.30
Reward and legitimate power (that is, relying on one’s position to influence others) produce inconsistent
results. Sometimes these powers lead to follower performance and satisfaction, yet they also sometimes fail.
Coercive power can result in favorable performance, yet follower and resistance dissatisfaction are not
uncommon.
418 Chapter 13 Leadership
Good leaders, whether formal or informal, develop many sources of power. Leaders who rely solely on their
legitimate power and authority seldom generate the influence necessary to help their organization and its
members succeed. In the process of building their power base, effective leaders have discovered that the use
of coercive power tends to dilute the effectiveness of other powers, while the development and use of referent
power tends to magnify the effectiveness of other forms of power. A compliment or reward from a person we
like generally has greater value than one from someone we dislike, and punishment from someone we love
(such as “tough love” from a parent) is less offensive than the pain inflicted by someone we dislike.31
In sum, one key to effective leadership, especially as it pertains to the exercise of social and interpersonal
influence, relates to the type of power employed by the leader. Overall leader effectiveness will be higher
when people follow because they want to follow. This is much more likely to happen when the leader’s
influence flows out of intrinsic such as rationality, expertise, moralistic appeal, and/or referent power.
Leadership is also about having a vision and communicating that vision to others in such a way that it provides
meaning for the follower.32 Language, ritual, drama, myths, symbolic constructions, and stories are some of
the tools leaders use to capture the attention of their “followers to be” to evoke emotion and to manage the
meaning “of the task (challenges) facing the group.”33 These tools help the leader influence the attitudes,
motivation, and behavior of their followers.
Exhibit 13.6 Tannenbaum and Schmidt’s Leadership Continuum Source: Modified from R. Tannenbaum and W. H. Schmidt. May—June
1971. How to choose a leadership pattern. Harvard Business Review, 167.
Theory X and Theory Y thinking and leadership are not strictly an American phenomenon. Evidence suggests
that managers from different parts of the global community commonly hold the same view. A study of 3,600
managers from 14 countries reveals that most of them held assumptions about human nature that could best
be classified as Theory X.37 Even though managers might publicly endorse the merits of participatory
management, most of them doubted their workers’ capacities to exercise self-direction and self-control and to
contribute creatively.38
Exhibit 13.7 Leadership Behavior and the Uses of Power Source: Modified from J. P. Muczyk and B. C. Reimann. 1987. The case for directive
leadership. Academy of Management Executive, 1:304.
A directive autocrat retains power, makes unilateral decisions, and closely supervises workers’ activities. This
style of leadership is seen as appropriate when circumstances require quick decisions and organizational
members are new, inexperienced, or underqualified. A doctor in charge of a hastily constructed shelter for
victims of a tornado may use this style to command nonmedical volunteers.
The permissive autocrat mixes his or her use of power by retaining decision-making power but permitting
organizational members to exercise discretion when executing those decisions. This leader behavior is
recommended when decision-making time is limited, when tasks are routine, or when organizational
members have sufficient expertise to determine appropriate role behaviors.
Also sharing power is the directive democrat, who encourages participative decision-making but retains the
power to direct team members in the execution of their roles. This style is appropriate when followers have
valuable opinions and ideas, but one person needs to coordinate the execution of the ideas. A surgeon might
allow the entire surgical team to participate in developing a plan for a surgical procedure. Once surgery
begins, however, the surgeon is completely in charge.
Finally, the permissive democrat shares power with group members, soliciting involvement in both decision-
making and execution. This style is appropriate when participation has both informational and motivational
value, when time permits group decision-making, when group members are capable of improving decision
quality, and when followers are capable of exercising self-management in their performance of work.
Exhibit 13.8 Jeff Bezos Jeff Bezos, founder and CEO of Amazon, used to bring an empty chair to meetings to signal and remind participants of
the most important people that did not have a seat at the table: the customers. He has now replaced the empty chair with Amazon employees
with the job title Customer Experience Bar Raisers.
CONCEPT CHECK
1. What is the role of the leader and follower in the leadership process?
2. How do the theories of Tannenbaum and Schmidt’s leadership continuum and McGregor’s Theory X
and Theory Y attempt to define leadership?
Ancient Greek, Roman, Egyptian, and Chinese scholars were keenly interested in leaders and leadership. Their
writings portray leaders as heroes. Homer, in his poem The Odyssey, portrays Odysseus during and after the
Trojan War as a great leader who had vision and self-confidence. His son Telemachus, under the tutelage of
Mentor, developed his father’s courage and leadership skills.41 Out of such stories there emerged the “great
man” theory of leadership, and a starting point for the contemporary study of leadership.
The great man theory of leadership states that some people are born with the necessary attributes to be
great leaders. Alexander the Great, Julius Caesar, Joan of Arc, Catherine the Great, Napoleon, and Mahatma
Gandhi are cited as naturally great leaders, born with a set of personal qualities that made them effective
leaders. Even today, the belief that truly great leaders are born is common. For example, Kenneth Labich,
writer for Fortune magazine, commented that “the best leaders seem to possess a God-given spark.” 42
During the early 1900s, scholars endeavored to understand leaders and leadership. They wanted to know,
from an organizational perspective, what characteristics leaders hold in common in the hope that people with
these characteristics could be identified, recruited, and placed in key organizational positions. This gave rise to
422 Chapter 13 Leadership
early research efforts and to what is referred to as the trait approach to leadership. Prompted by the great man
theory of leadership and the emerging interest in understanding what leadership is, researchers focused on
the leader—Who is a leader? What are the distinguishing characteristics of the great and effective leaders?
The great man theory of leadership holds that some people are born with a set of personal qualities that make
truly great leaders. Mahatma Gandhi is often cited as a naturally great leader.
The [successful] leader is characterized by a strong drive for responsibility and task completion, vigor and
persistence in pursuit of goals, venturesomeness and originality in problem solving, drive to exercise initiative
in social situations, self-confidence and sense of personal identity, willingness to accept consequences of
decision and action, readiness to absorb interpersonal stress, willingness to tolerate frustration and delay,
ability to influence other person’s behavior, and capacity to structure social interaction systems to the purpose
at hand.44
The last three decades of the 20th century witnessed continued exploration of the relationship between traits
and both leader emergence and leader effectiveness. Edwin Locke from the University of Maryland and a
number of his research associates, in their recent review of the trait research, observed that successful leaders
possess a set of core characteristics that are different from those of other people.45 Although these core traits
do not solely determine whether a person will be a leader—or a successful leader—they are seen as
preconditions that endow people with leadership potential. Among the core traits identified are:
• Drive—a high level of effort, including a strong desire for achievement as well as high levels of ambition,
energy, tenacity, and initiative
• Leadership motivation—an intense desire to lead others
• Honesty and integrity—a commitment to the truth (nondeceit), where word and deed correspond
• Self-confidence—an assurance in one’s self, one’s ideas, and one’s ability
• Cognitive ability—conceptually skilled, capable of exercising good judgment, having strong analytical
abilities, possessing the capacity to think strategically and multidimensionally
• Knowledge of the business—a high degree of understanding of the company, industry, and technical
matters
• Other traits—charisma, creativity/originality, and flexibility/adaptiveness46
While leaders may be “people with the right stuff,” effective leadership requires more than simply possessing
the correct set of motives and traits. Knowledge, skills, ability, vision, strategy, and effective vision
implementation are all necessary for the person who has the “right stuff” to realize their leadership
potential.47 According to Locke, people endowed with these traits engage in behaviors that are associated with
leadership. As followers, people are attracted to and inclined to follow individuals who display, for example,
honesty and integrity, self-confidence, and the motivation to lead.
Personality psychologists remind us that behavior is a result of an interaction between the person and the
situation—that is, Behavior = f [(Person) (Situation)]. To this, psychologist Walter Mischel adds the important
observation that personality tends to get expressed through an individual’s behavior in “weak” situations and
to be suppressed in “strong” situations.48 A strong situation is one with strong behavioral norms and rules,
strong incentives, clear expectations, and rewards for a particular behavior. Our characterization of the
mechanistic organization with its well-defined hierarchy of authority, jobs, and standard operating procedures
exemplifies a strong situation. The organic social system exemplifies a weak situation. From a leadership
perspective, a person’s traits play a stronger role in their leader behavior and ultimately leader effectiveness
when the situation permits the expression of their disposition. Thus, personality traits prominently shape
leader behavior in weak situations.
Finally, about the validity of the “great person approach to leadership”: Evidence accumulated to date does
not provide a strong base of support for the notion that leaders are born. Yet, the study of twins at the
University of Minnesota leaves open the possibility that part of the answer might be found in our genes. Many
personality traits and vocational interests (which might be related to one’s interest in assuming responsibility
for others and the motivation to lead) have been found to be related to our “genetic dispositions” as well as to
our life experiences.49 Each core trait recently identified by Locke and his associates traces a significant part of
its existence to life experiences. Thus, a person is not born with self-confidence. Self-confidence is developed,
honesty and integrity are a matter of personal choice, motivation to lead comes from within the individual and
is within his control, and knowledge of the business can be acquired. While cognitive ability does in part find
its origin in the genes, it still needs to be developed. Finally, drive, as a dispositional trait, may also have a
genetic component, but it too can be self- and other-encouraged. It goes without saying that none of these
ingredients are acquired overnight.
Evidence supports the observation that men emerge as leaders more frequently than women.51 Throughout
history, few women have been in positions where they could develop or exercise leadership behaviors. In
contemporary society, being perceived as experts appears to play an important role in the emergence of
women as leaders. Yet, gender role is more predictive than sex. Individuals with “masculine” (for example,
assertive, aggressive, competitive, willing to take a stand) as opposed to “feminine” (cheerful, affectionate,
sympathetic, gentle) characteristics are more likely to emerge in leadership roles.52 In our society males are
frequently socialized to possess the masculine characteristics, while females are more frequently socialized to
possess the feminine characteristics.
Recent evidence, however, suggests that individuals who are androgynous (that is, who simultaneously
possess both masculine and feminine characteristics) are as likely to emerge in leadership roles as individuals
with only masculine characteristics. This suggests that possessing feminine qualities does not distract from the
attractiveness of the individual as a leader.53
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With regard to leadership style, researchers have looked to see if male-female differences exist in task and
interpersonal styles, and whether or not differences exist in how autocratic or democratic men and women
are. The answer is, when it comes to interpersonal versus task orientation, differences between men and
women appear to be marginal. Women are somewhat more concerned with meeting the group’s
interpersonal needs, while men are somewhat more concerned with meeting the group’s task needs. Big
differences emerge in terms of democratic versus autocratic leadership styles. Men tend to be more autocratic
or directive, while women are more likely to adopt a more democratic/participative leadership style.54 In fact, it
may be because men are more directive that they are seen as key to goal attainment and they are turned to
more often as leaders.55
Dispositional Trait
Psychologists often use the terms disposition and mood to describe and differentiate people. Individuals
characterized by a positive affective state exhibit a mood that is active, strong, excited, enthusiastic, peppy,
and elated. A leader with this mood state exudes an air of confidence and optimism and is seen as enjoying
work-related activities.
Recent work conducted at the University of California-Berkeley demonstrates that leaders (managers) with
positive affectivity (a positive mood state) tend to be more competent interpersonally, to contribute more to
group activities, and to be able to function more effectively in their leadership role.56 Their enthusiasm and
high energy levels appear to be infectious, transferring from leader to followers. Thus, such leaders promote
group cohesiveness and productivity. This mood state is also associated with low levels of group turnover and
is positively associated with followers who engage in acts of good group citizenship.57
Self-Monitoring
Self-monitoring as a personality trait refers to the strength of an individual’s ability and willingness to read
verbal and nonverbal cues and to alter one’s behavior so as to manage the presentation of the self and the
images that others form of the individual. “High self-monitors” are particularly astute at reading social cues
and regulating their self-presentation to fit a particular situation. “Low self-monitors” are less sensitive to
social cues; they may either lack motivation or lack the ability to manage how they come across to others.
Some evidence supports the position that high self-monitors emerge more often as leaders. In addition, they
appear to exert more influence on group decisions and initiate more structure than low self-monitors. Perhaps
high self-monitors emerge as leaders because in group interaction they are the individuals who attempt to
organize the group and provide it with the structure needed to move the group toward goal attainment.58
CONCEPT CHECK
The nearly four decades of research that focused on identifying the personal traits associated with the
emergence of leaders and leader effectiveness resulted in two observations. First, leader traits are
important—people who are endowed with the “right stuff” (drive, self-confidence, honesty, and integrity) are
more likely to emerge as leaders and to be effective leaders than individuals who do not possess these
characteristics. Second, traits are only a part of the story. Traits only account for part of why someone
becomes a leader and why they are (or are not) effective leaders.
Still under the influence of the great man theory of leadership, researchers continued to focus on the leader in
an effort to understand leadership—who emerges and what constitutes effective leadership. Researchers then
began to reason that maybe the rest of the story could be understood by looking at what it is that leaders do.
Thus, we now turn our attention to leader behaviors and the behavioral approaches to leadership.
It is now common to think of effective leadership in terms of what leaders do. CEOs and management
consultants agree that effective leaders display trust in their employees, develop a vision, keep their cool,
encourage risk, bring expertise into the work setting, invite dissent, and focus everyone’s attention on that
which is important.59 William Arruda, in a Fortune article, noted that “organizations with strong coaching
cultures report their revenue to be above average, compared to their peer group.” Sixty-five percent of
employees “from strong coaching cultures rated themselves as highly engaged,” compared to 13 percent of
employees worldwide.”60 Jonathan Anthony calls himself an intrapreneur and corporate disorganizer, because
same-old, same-old comms practices are dying in front of our eyes.61 Apple founder Steve Jobs believed that
the best leaders are coaches and team cheerleaders. Similar views have been frequently echoed by
management consultant Tom Peters.
During the late 1940s, two major research programs—The Ohio State University and the University of Michigan
leadership studies—were launched to explore leadership from a behavioral perspective.
Initiating structure involves “task-oriented” leader behaviors. It is instrumental in the efficient use of
resources to attain organizational goals, thereby addressing the group’s task needs. Initiating structure
behaviors include scheduling work, deciding what is to be done (and how and when to do it), providing
direction to organizational members, planning, coordinating, problem-solving, maintaining standards of
performance, and encouraging the use of uniform procedures.
After consideration and initiating structure behaviors were first identified, many leaders believed that they had
to behave one way or the other. If they initiated structure, they could not be considerate, and vice versa. It did
not take long, however, to recognize that leaders can simultaneously display any combination of both
behaviors.
The Ohio State studies are important because they identified two critical categories of behavior that
426 Chapter 13 Leadership
distinguish one leader from another. Both consideration and initiating structure behavior can significantly
impact work attitudes and behaviors. Unfortunately, the effects of consideration and initiating structure are
not consistent from situation to situation.62 In some of the organizations studied, for example, high levels of
initiating structure increased performance. In other organizations, the amount of initiating structure seemed
to make little difference. Although most organizational members reported greater satisfaction when leaders
acted considerately, consideration behavior appeared to have no clear effect on performance.
Initially, these mixed findings were disappointing to researchers and managers alike. It had been hoped that a
profile of the most effective leader behaviors could be identified so that leaders could be trained in the best
ways to behave. Research made clear, however, that there is no one best style of leader behavior for all
situations.
The two types of leader behavior that stand out in these studies are job centered and organizational member
centered. Job-centered behaviors are devoted to supervisory functions, such as planning, scheduling,
coordinating work activities, and providing the resources needed for task performance. Employee-member-
centered behaviors include consideration and support for organizational members. These dimensions of
behavior, of course, correspond closely to the dimensions of initiating structure and consideration identified at
Ohio State. The similarity of the findings from two independent groups of researchers added to their
credibility. As the Ohio State researchers had done, the Michigan researchers also found that any combination
of the two behaviors was possible.
The studies at Michigan are significant because they reinforce the importance of leader behavior. They also
provide the basis for later theories that identify specific, effective matches of work situations and leader
behaviors. Subsequent research at Michigan and elsewhere has found additional behaviors associated with
effective leadership: support, work facilitation, goal emphasis, and interaction facilitation.64
These four behaviors are important to the successful functioning of the group in that support and interaction
facilitation contribute to the group’s maintenance needs, and goal emphasis and work facilitation contribute
to the group’s task needs. The Michigan researchers also found that these four behaviors do not need to be
brought to the group by the leader. In essence, the leader’s real job is to set the tone and create the climate
that ensure these critical behaviors are present.65
Exhibit 13.9 Blake and Mouton’s Managerial Grid® Source: Adapted from R. McKee and B. Carlson. 1999. The Power to Change, p.16.
Blake and Mouton contend that the sound (contribute and commit) leader (a high concern for results and
people, or 9,9) style is universally the most effective. 67 While the Leadership Grid® is appealing and well
structured, research to date suggests that there is no universally effective style of leadership (9,9 or
otherwise).68 There are, however, well-identified situations in which a 9,9 style is unlikely to be effective.
Organizational members of high-involvement organizations who have mastered their job duties require little
production-oriented leader behavior. Likewise, there is little time for people-oriented behavior during an
emergency. Finally, evidence suggests that the “high-high” style may be effective when the situation calls for
high levels of initiating structure. Under these conditions, the initiation of structure is more acceptable,
favorably affecting follower satisfaction and performance, when the leader is also experienced as warm,
supportive, and considerate.69
428 Chapter 13 Leadership
CONCEPT CHECK
As early as 1948, Ralph Stogdill stated that “the qualities, characteristics, and skills required in a leader are
determined to a large extent by the demands of the situation in which he is to function as a leader.” 70 In
addition, it had been observed that two major leader behaviors, initiating structure and consideration, didn’t
always lead to equally positive outcomes. That is, there are times when initiating structure results in
performance increases and follower satisfaction, and there are times when the results are just the opposite.
Contradictory findings such as this lead researchers to ask “Under what conditions are the results positive in
nature?” and “When and why are they negative at other times?” Obviously, situational differences and key
contingencies are at work.
Several theories have been advanced to address this issue. These are Fiedler’s contingency theory of
leadership, the path-goal theory of leader effectiveness, Hersey and Blanchard’s life cycle theory, cognitive
resource theory, the decision tree, and the decision process theory.71 We explore two of the better-known
situational theories of leadership, Fred Fiedler’s contingency model and Robert J. House’s path-goal theory,
here. Victor Vroom, Phillip Yetton, and Arthur Jago’s decision tree model also applies.
Fiedler states that leaders with high LPC scores are relationship oriented—they need to develop and maintain
close interpersonal relationships. They tend to evaluate their least-preferred coworkers in fairly favorable
terms. Task accomplishment is a secondary need to this type of leader and becomes important only after the
need for relationships is reasonably well satisfied. In contrast, leaders with low LPC scores tend to evaluate the
individuals with whom they least like to work fairly negatively. They are task-oriented people, and only after
tasks have been accomplished are low-LPC leaders likely to work on establishing good social and interpersonal
relations.
Exhibit 13.10 Fiedler’s Contingency Model of Leader-Situation Matches Source: Adapted from F. E. Fiedler and M. M. Chemers. 1974.
Leadership and effective management. Glenview, IL: Scott, Foresman.
Leader-Situation Matches
Some combinations of leaders and situations work well; others do not. In search of the best combinations,
Fiedler examined a large number of leadership situations. He argued that most leaders have a relatively
unchangeable or dominant style, so organizations need to design job situations to fit the leader. 75
While the model has not been fully tested and tests have often produced mixed or contradictory findings,76
Fiedler’s research indicates that relationship-oriented (high-LPC) leaders are much more effective under
430 Chapter 13 Leadership
conditions of intermediate favorability than under either highly favorable or highly unfavorable situations.
Fiedler attributes the success of relationship-oriented leaders in situations with intermediate favorability to the
leader’s nondirective, permissive attitude; a more directive attitude could lead to anxiety in followers, conflict
in the group, and a lack of cooperation.
For highly favorable and unfavorable situations, task-oriented leaders (those with a low LPC) are very effective.
As tasks are accomplished, a task-oriented leader allows the group to perform its highly structured tasks
without imposing more task-directed behavior. The job gets done without the need for the leader’s direction.
Under unfavorable conditions, task-oriented behaviors, such as setting goals, detailing work methods, and
guiding and controlling work behaviors, move the group toward task accomplishment.
As might be expected, leaders with mid-range LPC scores can be more effective in a wider range of situations
than high- or low-LPC leaders.77 Under conditions of low favorability, for example, a middle-LPC leader can be
task oriented to achieve performance, but show consideration for and allow organizational members to
proceed on their own under conditions of high situational favorability.
Path-Goal Theory
Robert J. House and Martin Evans, while on the faculty at the University of Toronto, developed a useful
leadership theory. Like Fiedler’s, it asserts that the type of leadership needed to enhance organizational
effectiveness depends on the situation in which the leader is placed. Unlike Fiedler, however, House and Evans
focus on the leader’s observable behavior. Thus, managers can either match the situation to the leader or
modify the leader’s behavior to fit the situation.
The model of leadership advanced by House and Evans is called the path-goal theory of leadership because
it suggests that an effective leader provides organizational members with a path to a valued goal. According to
House, the motivational function of the leader consists of increasing personal payoffs to organizational
members for work-goal attainment, and making the path to these payoffs easier to travel by clarifying it,
reducing roadblocks and pitfalls, and increasing the opportunities for personal satisfaction en route.80
Effective leaders therefore provide rewards that are valued by organizational members. These rewards may be
pay, recognition, promotions, or any other item that gives members an incentive to work hard to achieve
goals. Effective leaders also give clear instructions so that ambiguities about work are reduced and followers
understand how to do their jobs effectively. They provide coaching, guidance, and training so that followers
can perform the task expected of them. They also remove barriers to task accomplishment, correcting
shortages of materials, inoperative machinery, or interfering policies.
An Appropriate Match
According to the path-goal theory, the challenge facing leaders is basically twofold. First, they must analyze
situations and identify the most appropriate leadership style. For example, experienced employees who work
on a highly structured assembly line don’t need a leader to spend much time telling them how to do their
jobs—they already know this. The leader of an archeological expedition, though, may need to spend a great
deal of time telling inexperienced laborers how to excavate and care for the relics they uncover.
Second, leaders must be flexible enough to use different leadership styles as appropriate. To be effective,
leaders must engage in a wide variety of behaviors. Without an extensive repertoire of behaviors at their
disposal, a leader’s effectiveness is limited.81 All team members will not, for example, have the same need for
autonomy. The leadership style that motivates organizational members with strong needs for autonomy
(participative leadership) is different from that which motivates and satisfies members with weaker autonomy
needs (directive leadership). The degree to which leadership behavior matches situational factors will
determine members’ motivation, satisfaction, and performance (see Exhibit 13.11).82
Exhibit 13.11 The Path-Goal Leadership Model (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Behavior Dimensions
According to path-goal theory, there are four important dimensions of leader behavior, each of which is suited
to a particular set of situational demands.83
• Supportive leadership—At times, effective leaders demonstrate concern for the well-being and personal
needs of organizational members. Supportive leaders are friendly, approachable, and considerate to
individuals in the workplace. Supportive leadership is especially effective when an organizational member
is performing a boring, stressful, frustrating, tedious, or unpleasant task. If a task is difficult and a group
member has low self-esteem, supportive leadership can reduce some of the person’s anxiety, increase his
confidence, and increase satisfaction and determination as well.
• Directive leadership—At times, effective leaders set goals and performance expectations, let organizational
members know what is expected, provide guidance, establish rules and procedures to guide work, and
schedule and coordinate the activities of members. Directive leadership is called for when role ambiguity
is high. Removing uncertainty and providing needed guidance can increase members’ effort, job
satisfaction, and job performance.
432 Chapter 13 Leadership
• Participative leadership—At times, effective leaders consult with group members about job-related
activities and consider their opinions and suggestions when making decisions. Participative leadership is
effective when tasks are unstructured. Participative leadership is used to great effect when leaders need
help in identifying work procedures and where followers have the expertise to provide this help.
• Achievement-oriented leadership—At times, effective leaders set challenging goals, seek improvement in
performance, emphasize excellence, and demonstrate confidence in organizational members’ ability to
attain high standards. Achievement-oriented leaders thus capitalize on members’ needs for achievement
and use goal-setting theory to great advantage.
Cross-Cultural Context
Gabriel Bristol, the CEO of Intelifluence Live, a full-service customer contact center offering affordable inbound
customer service, outbound sales, lead generation and consulting services for small to mid-sized businesses,
notes “diversity breeds innovation, which helps businesses achieve goals and tackle new challenges.”84
Multiculturalism is a new reality as today’s society and workforce become increasingly diverse. This naturally
leads to the question “Is there a need for a new and different style of leadership?”
The vast majority of the contemporary scholarship directed toward understanding leaders and the leadership
process has been conducted in North America and Western Europe. Westerners have “developed a highly
romanticized, heroic view of leadership.”85 Leaders occupy center stage in organizational life. We use leaders
in our attempts to make sense of the performance of our groups, clubs, organizations, and nations. We see
them as key to organizational success and profitability, we credit them with organizational competitiveness,
and we blame them for organizational failures. At the national level, recall that President Reagan brought
down Communism and the Berlin Wall, President Bush won the Gulf War, and President Clinton brought
unprecedented economic prosperity to the United States during the 1990s.
This larger-than-life role ascribed to leaders and the Western romance with successful leaders raise the
question “How representative is our understanding of leaders and leadership across cultures?” That is, do the
results that we have examined in this chapter generalize to other cultures?
Geert Hofstede points out that significant value differences (individualism-collectivism, power distance,
uncertainty avoidance, masculinity-femininity, and time orientation) cut across societies. Thus, leaders of
culturally diverse groups will encounter belief and value differences among their followers, as well as in their
own leader-member exchanges.
There appears to be consensus that a universal approach to leadership and leader effectiveness does not
exist. Cultural differences work to enhance and diminish the impact of leadership styles on group
effectiveness. For example, when leaders empower their followers, the effect for job satisfaction in India has
been found to be negative, while in the United States, Poland, and Mexico, the effect is positive.86 The existing
evidence suggests similarities as well as differences in such areas as the effects of leadership styles, the
acceptability of influence attempts, and the closeness and formality of relationships. The distinction between
task and relationship-oriented leader behavior, however, does appear to be meaningful across cultures.87
Leaders whose behaviors reflect support, kindness, and concern for their followers are valued and effective in
Western and Asian cultures. Yet it is also clear that democratic, participative, directive, and contingent-based
rewards and punishment do not produce the same results across cultures. The United States is very different
from Brazil, Korea, New Zealand, and Nigeria. The effective practice of leadership necessitates a careful look at,
and understanding of, the individual differences brought to the leader-follower relationship by cross-cultural
contexts.88
CONCEPT CHECK
Several factors have been discovered that can substitute for or neutralize the effects of leader behavior (see
Table 13.1).89 Substitutes for leadership behavior can clarify role expectations, motivate organizational
members, or satisfy members (making it unnecessary for the leader to attempt to do so). In some cases, these
substitutes supplement the behavior of a leader. Sometimes it is a group member’s characteristics that make
leadership less necessary, as when a master craftsperson or highly skilled worker performs up to his or her
own high standards without needing outside prompting. Sometimes the task’s characteristics take over, as
when the work itself—solving an interesting problem or working on a familiar job—is intrinsically satisfying.
Sometimes the characteristics of the organization make leadership less necessary, as when work rules are so
clear and specific that workers know exactly what they must do without help from the leader (see An Inside
Look at flat management structure and the orchestra with no leader).
A. Subordinate Characteristics:
B. Task Characteristics:
Table 13.1
434 Chapter 13 Leadership
C. Organization Characteristics:
2. Low position power (leader lacks control over organizational Neutralizer Neutralizer
rewards)
5. Leader located apart from subordinates with only limited Neutralizer Neutralizer
communication possible
Table 13.1
Neutralizers of leadership, on the other hand, are not helpful; they prevent leaders from acting as they wish. A
computer-paced assembly line, for example, prevents a leader from using initiating structure behavior to pace
the line. A union contract that specifies that workers be paid according to seniority prevents a leader from
dispensing merit-based pay. Sometimes, of course, neutralizers can be beneficial. Union contracts, for
example, clarify disciplinary proceedings and identify the responsibilities of both management and labor.
Leaders must be aware of the presence of neutralizers and their effects so that they can eliminate
troublesome neutralizers or take advantage of any potential benefits that accompany them (such as the clarity
of responsibilities provided by a union contract). If a leader’s effectiveness is being neutralized by a poor
communication system, for example, the leader might try to remove the neutralizer by developing (or
convincing the organization to develop) a more effective system.
Followers differ considerably in their focus of attention while at work, thereby affecting the effectiveness of the
act of leadership. Focus of attention is an employee’s cognitive orientation while at work. It reflects what and
how strongly an individual thinks about various objects, events, or phenomena while physically present at
work. Focus of attention reflects an individual difference in that not all individuals have the same cognitive
orientation while at work—some think a great deal about their job, their coworkers, their leader, or off-the-job
factors, while others daydream.90 An employee’s focus of attention has both “trait” and “state” qualities. For
example, there is a significant amount of minute-by-minute variation in an employee’s focus of attention (the
“state” component), and there is reasonable consistency in the categories of events that employees think
about while they are at work (the “trait” component).
Research suggests that the more followers focus on off-job (nonleader) factors, the less they will react to the
leader’s behaviors. Thus, a strong focus on one’s life “away from work” (for example, time with family and
friends) tends to neutralize the motivational, attitudinal, and/or behavioral effects associated with any
particular leader behavior. It has also been observed, however, that a strong focus on the leader, either
positive or negative, enhances the impact that the leader’s behaviors have on followers.91
MANAGERIAL LEADERSHIP
According to Steve Keating, a senior manager at the Toro Company, it is important not to assume that
being made a manager automatically makes you a leader. Rather, being a manager means having the
opportunity to lead. Enterprises need managers to guide processes, but the employees—the
people—need a leader. Keating believes that leaders need a mindset that emphasizes people, and the
leader’s job is to help the people in the organization to be successful. According to Keating, “If you don’t
care for people, you can’t lead them” (Hakim 2017 n.p.).
For someone who has been promoted over his peers, ground rules are essential. "Promotion doesn’t
mean the end of friendship but it does change it," according to Keating. If a peer has been promoted,
rather than grouse and give in to envy, it is important to step back and look at the new manager; take a
hard look at why the peer was promoted and what skill or characteristic made you a less appealing fit for
the position (Hakim 2017).
Carol Walker, president of Prepared to Lead, a management consulting firm, advises new managers to
develop a job philosophy. She urges new managers to develop a core philosophy that provides a guide to
the day-to-day job of leading. She urges managers to build up the people they are leading and work as a
"servant leader." The manager’s perspective should be on employee growth and success. Leaders must
bear in mind that employees don’t work for the manager; they work for the organization—and for
themselves. Managers coordinate this relationship; they are not the center of it. Work should not be
assigned haphazardly, but with the employee’s skills and growth in mind. “An employee who
understands why she has been asked to do something is far more likely to assume true ownership for
the assignment," Walker says (Yakowicz 2015 n.p.). A leader’s agenda should be on employee success,
not personal glory. Employees are more receptive when they recognize that their leader is working not
for their own success, but for the employee’s success.
A survey from HighGround revealed one important item that most new managers and even many
seasoned managers overlook: asking for feedback. Everyone has room for growth, even managers.
Traditional management dictates a top-down style in which managers review subordinates. But many
companies have found it beneficial to turn things around and ask employees, “How can I be a better
manager?” Of course, this upward review only works if employees believe that their opinion will be
heard. Managers need to carefully cultivate a rapport where employees don't fear reprisals for negative
feedback. Listening to criticism from those you are leading builds trust and helps ensure that as a
manager, you are providing the sort of leadership that employees need to be successful (Kauflin 2017).
Showing respect and caring for employees by asking this simple question is inspiring—an important
aspect of leadership itself. Whether asking for feedback or focusing on an employee’s fit with a particular
job description, a leader helps guide employees through the day-to-day, builds a positive culture, and
helps employees improve their skills.
Sources
436 Chapter 13 Leadership
CONCEPT CHECK
Many organizations struggling with the need to manage chaos, to undergo a culture change, to empower
organizational members, and to restructure have looked for answers in “hiring the right leader.” Many have
come to believe that the transformational, visionary, and charismatic leader represents the style of leadership
needed to move organizations through chaos.
The transformational leader is also referred to as a visionary leader. Visionary leaders are those who
influence others through an emotional and/or intellectual attraction to the leader’s dreams of what “can be.”
Vision links a present and future state, energizes and generates commitment, provides meaning for action,
and serves as a standard against which to assess performance.95 Evidence indicates that vision is positively
related to follower attitudes and performance.96 As pointed out by Warren Bennis, a vision is effective only to
the extent that the leader can communicate it in such a way that others come to internalize it as their own.97
As people, transformational leaders are engaging. They are characterized by extroversion, agreeableness, and
openness to experience.98 They energize others. They increase followers’ awareness of the importance of the
designated outcome.99 They motivate individuals to transcend their own self-interest for the benefit of the
team and inspire organizational members to self-manage (become self-leaders).100 Transformational leaders
move people to focus on higher-order needs (self-esteem and self-actualization). When organizations face a
turbulent environment, intense competition, products that may die early, and the need to move fast,
managers cannot rely solely on organizational structure to guide organizational activity. In these situations,
transformational leadership can motivate followers to be fully engaged and inspired, to internalize the goals
and values of the organization, and to move forward with dogged determination!
Transformational leadership is positively related to follower satisfaction, performance, and acts of citizenship.
These effects result from the fact that transformational leader behaviors elicit trust and perceptions of
procedural justice, which in turn favorably impact follower satisfaction and performance.101 As R. Pillai, C.
Schriesheim, and E. Williams note, “when followers perceive that they can influence the outcomes of decisions
that are important to them and that they are participants in an equitable relationship with their leader, their
perceptions of procedural justice [and trust] are likely to be enhanced.”102 Trust and experiences of
organizational justice promote leader effectiveness, follower satisfaction, motivation, performance, and
citizenship behaviors.
Charismatic Leadership
Ronald Reagan, Jesse Jackson, and Queen Elizabeth I have something in common with Martin Luther King Jr.,
Indira Gandhi, and Winston Churchill. The effectiveness of these leaders originates in part in their charisma, a
special magnetic charm and appeal that arouses loyalty and enthusiasm. Each exerted considerable personal
influence to bring about major events.
It is difficult to differentiate the charismatic and the transformational leader. True transformational leaders
may achieve their results through the magnetism of their personality. In this case, the two types of leaders are
essentially one and the same, yet it is important to note that not all transformational leaders have a personal
“aura.”
Sociologist Max Weber evidenced an interest in charismatic leadership in the 1920s, calling charismatic
leaders people who possess legitimate power that arises from “exceptional sanctity, heroism, or exemplary
character.”103 Charismatic leaders “single-handedly” effect changes even in very large organizations. Their
personality is a powerful force, and the relationship that they forge with their followers is extremely strong.
438 Chapter 13 Leadership
Exhibit 13.12 Travis Kalanick Travis Kalanick was a praised CEO of Uber who managed to increase the value of the company to over $60
billion. He was forced to resign after taking a leave of absence and having several key executives resign due to allegations of creating a hostile
and unethical workplace.
The charismatic leadership phenomenon involves a complex interplay between the attributes of the leader
and followers’ needs, values, beliefs, and perceptions.104 At its extreme, leader-follower relationships are
characterized by followers’ unquestioning acceptance; trust in the leader’s beliefs; affection; willing obedience
to, emulation of, and identification with the leader; emotional involvement with his mission; and feelings of
self-efficacy directed toward the leader’s mission.105 This can work to better the welfare of individuals, such as
when Lee Iacocca saved thousands of jobs through his dramatic turnaround of a failing corporate giant, the
Chrysler Corporation. It also can be disastrous, as when David Koresh led dozens and dozens of men, women,
and children to their fiery death in Waco, Texas. Individuals working for charismatic leaders often have higher
task performance, greater task satisfaction, and lower levels of role conflict than those working for leaders
with considerate or structuring behaviors.106 What are the characteristics of these people who can exert such a
strong influence over their followers? Charismatic leaders have a strong need for power and the tendency to
rely heavily on referent power as their primary power base.107 Charismatic leaders also are extremely self-
confident and convinced of the rightness of their own beliefs and ideals. This self-confidence and strength of
conviction make people trust the charismatic leader’s judgment, unconditionally following the leader’s
mission and directives for action.108 The result is a strong bond between leader and followers, a bond built
primarily around the leader’s personality.
Although there have been many effective charismatic leaders, those who succeed the most have coupled their
charismatic capabilities with behaviors consistent with the same leadership principles followed by other
effective leaders. Those who do not add these other dimensions still attract followers but do not meet
organizational goals as effectively as they could. They are (at least for a time) the pied pipers of the business
ETHICS IN PRACTICE
In 2009, UberBlack was a “black car” service, a high-end driving service that cost more than a taxi but
less than hiring a private driver for the night. It wasn’t until 2012 that the company launched UberX, the
taxi-esque service most people think of today when they say “Uber.” The UberX service contracted with
private drivers who provided rides in their personal vehicles. A customer would use Uber's smartphone
app to request the ride, and a private driver would show up. Originally launched in San Francisco, the
service spread quickly, and by 2017, Uber was in 633 cities. The service was hailed by many as innovative
and the free market's answer to high-priced and sometimes unreliable taxi services. But Uber has not
been without its critics, both inside and outside of the company.
In 2013, as the UberX service spread, some UberBlack drivers protested at the company’s headquarters
complaining about poor company benefits and pay. They also claimed that competition from the newly
launched UberX service was cutting into their sales and undermining job security. Kalanick rebuffed the
protests, basically calling the complaints sour grapes: most of the protestors had been laid off earlier for
poor service (Lawler 2013). Controversy also arose over the use of contract drivers rather than full-time
employees. Contractors complained about a lack of benefits and low wages. Competitors, especially taxi
services, complained that they were being unfairly undercut because Uber didn’t have to abide by the
same screening process and costs that traditional yellow taxi companies did. Some municipalities agreed,
arguing further than Uber’s lack of or insufficient screening of drivers put passengers at risk.
Uber quickly generated a reputation as a bully and Kalanick as an unethical leader (Ann 2016). The
company has been accused of covering up cases of sexual assault, and Kalanick himself has been quoted
as calling the service “Boob-er,” a reference to using the service to pick up women (Ann 2016). Uber has
been criticized for its recruiting practices; in particular, it has been accused of bribing drivers working for
competitors to switch over and drive for Uber (Ann 2016).The company was also caught making false
driver requests for competing companies and then canceling the order. The effect was to waste the
other driver’s time and make it more difficult for customers to secure rides on the competing service
(D’Orazio 2014). Susan J. Fowler, former site reliability engineer at Uber, went public with cases of
outright sexual harassment within Uber (Fowler 2017). Former employees described Uber’s corporate
culture as an "a**hole culture" and a “‘Hobbesian jungle’ where you can never get ahead unless
someone else dies.” (Wong 2017) One employee described a leadership that encouraged a company
practice of developing incomplete solutions for the purpose of beating the competitor to market. Fowler
went so far as to compare the experience to Game of Thrones, and other former employees even
consider "making it" at Uber a black mark on a resume (Wong 2017).
In terms of social acrimony and PR disasters, arguably caused or even encouraged by leadership, Uber’s
rise to notoriety has arguably been more bad than good. In June 2017, Kalanick made one too many
440 Chapter 13 Leadership
Sources
Ann, Carrie. 2016. “Uber Is In Dire Need of Ethical Leadership.” Industry Leaders.
https://www.industryleadersmagazine.com/uber-dire-need-ethical-leadership/
D’Orazio, Dante. 2014. “Uber employees spammed competing car service with fake orders.” The
Verge. https://www.theverge.com/2014/1/24/5342582/uber-employees-spammed-competing-car-
service-with-fake-orders
Fowler, Susan J. 2017. “Reflecting on One Very, Very Strange Year at Uber.”
https://www.susanjfowler.com/blog/2017/2/19/reflecting-on-one-very-strange-year-at-uber
Lawler, Ryan. 2013. “See, Uber — This Is What Happens When You Cannibalize Yourself.”
TechCruch.com. https://techcrunch.com/2013/03/15/see-uber-this-is-what-happens-when-you-
cannibalize-yourself/
Wong, Julia. 2017. “Uber's 'hustle-oriented' culture becomes a black mark on employees' résumés”
The Guardian. https://www.theguardian.com/technology/2017/mar/07/uber-work-culture-travis-
kalanick-susan-fowler-controversy
Questions
1. In the summer of 2017, Transport of London (TfL) began proceedings to revoke Uber’s permit to
operate in London. How do think Uber’s poor corporate reputation may have been a factor in TfL's
thinking?
2. What steps do you think Uber’s new CEO, Dara Khosrowshahi, needs to take to repair Uber’s
reputation?
3. Despite Uber’s apparent success in launching in multiple markets, it continues to post quarterly
losses in the millions and shareholders effectively subsidize 59 percent of every ride
(https://www.reuters.com/article/us-uber-profitability/true-price-of-an-uber-ride-in-question-as-
investors-assess-firms-value-idUSKCN1B3103). How is this an outworking of Uber’s overall corporate
culture?
CONCEPT CHECK
Frequent headlines in popular business magazines like Fortune and Business Week call our attention to a major
movement going on in the world of business. Organizations are being reengineered and restructured, and
network, virtual, and modular corporations are emerging. People talk about the transnational organization,
the boundaryless company, the post-hierarchical organization. By the end of the decade, the organizations
that we will be living in, working with, and competing against are likely to be vastly different from what we
know today.
The transition will not be easy; uncertainty tends to breed resistance. We are driven by linear and rational
thinking, which leads us to believe that “we can get there from here” by making some incremental changes in
who we are and what we are currently doing. Existing paradigms frame our perceptions and guide our
thinking. Throwing away paradigms that have served us well in the past does not come easily.
A look back tells most observers that the past decade has been characterized by rapid change, intense
competition, an explosion of new technologies, chaos, turbulence, and high levels of uncertainty. A quick scan
of today’s business landscape suggests that this trend is not going away anytime soon. According to Professor
Jay A. Conger from Canada’s McGill University, “In times of great transition, leadership becomes critically
important. Leaders, in essence, offer us a pathway of confidence and direction as we move through seeming
chaos. The magnitude of today’s changes will demand not only more leadership, but newer forms of
leadership.”109
According to Conger, two major forces are defining for us the genius of the next generation of leaders. The
first force is the organization’s external environment. Global competitiveness is creating some unique
leadership demands. The second force is the growing diversity in organizations’ internal environments.
Diversity will significantly change the relationship between organizational members, work, and the
organization in challenging, difficult, and also very positive ways.
What will the leaders of tomorrow be like? Professor Conger suggests that the effective leaders of the 21st
century will have to be many things.110 They will have to be strategic opportunists; only organizational
visionaries will find strategic opportunities before competitors. They will have to be globally aware; with 80
percent of today’s organizations facing significant foreign competition, knowledge of foreign markets, global
economics, and geopolitics is crucial. They will have to be capable of managing a highly decentralized
organization; movement toward the high-involvement organization will accelerate as the environmental
demands for organizational speed, flexibility, learning, and leanness increase. They will have be sensitive to
diversity; during the first few years of the 21st century, fewer than 10 percent of those entering the workforce
in North America will be white, Anglo-Saxon males, and the incoming women, minorities, and immigrants will
bring with them a very different set of needs and concerns. They will have to be interpersonally competent; a
highly diverse workforce will necessitate a leader who is extremely aware of and sensitive to multicultural
expectations and needs. They will have to be builders of an organizational community; work and organizations
will serve as a major source of need fulfillment, and in the process leaders will be called on to help build this
community in such a way that organizational members develop a sense of ownership for the organization and
its mission.
Finally, it is important to note that leadership theory construction and empirical inquiry are an ongoing
endeavor. While the study of traits, behavior, and contingency models of leadership provide us with a great
deal of insight into leadership, the mosaic is far from complete. During the past 15 years, several new theories
of leadership have emerged; among them are leader-member exchange theory, implicit leadership theory,
neocharismatic theory, value-based theory of leadership, and visionary leadership, 111 each of which over time
will add to our bank of knowledge about leaders and the leadership process.
Leaders of the 21st-century organization have a monumental challenge awaiting them and a wealth of self-
enriching and fulfilling opportunities. The challenge and rewards awaiting effective leaders are awesome!
CONCEPT CHECK
Key Terms
charisma A special personal magnetic charm or appeal that arouses loyalty and enthusiasm in a leader-
follower relationship.
charismatic leader A person who possesses legitimate power that arises from “exceptional sanctity,
heroism, or exemplary character.”
consideration A “relationship-oriented” leader behavior that is supportive, friendly, and focused on
personal needs and interpersonal relationships.
contingency theory of leadership A theory advanced by Dr. Fred E. Fiedler that suggests that different
leadership styles are effective as a function of the favorableness of the leadership situation least
preferred.
designated leader The person placed in the leadership position by forces outside the group.
emergent leader The person who becomes a group’s leader by virtue of processes and dynamics internal to
the group.
formal leader That individual who is recognized by those outside the group as the official leader of the
group.
great man theory of leadership The belief that some people are born to be leaders and others are not.
informal leader That individual whom members of the group acknowledge as their leader.
initiating structure A “task-oriented” leader behavior that is focused on goal attainment, organizing and
scheduling work, solving problems, and maintaining work processes.
leadership A social (interpersonal) influence relationship between two or more persons who depend on
each other to attain certain mutual goals in a group situation.
Least-preferred coworker (LPC) The person with whom the leader least likes to work.
path-goal theory of leadership A theory that posits that leadership is path- and goal-oriented, suggesting
that different leadership styles are effective as a function of the task confronting the group.
transformational leader A leader who moves and changes things “in a big way” by inspiring others to
perform the extraordinary.
visionary leader A leader who influences others through an emotional and/or intellectual attraction to the
leader’s dreams of what “can be.”
Leadership is a primary vehicle for fulfilling the directing function of management. Because of its importance,
theorists, researchers, and practitioners have devoted a tremendous amount of attention and energy to
unlocking the secrets of effective leadership. They have kept at this search for perhaps a greater period of
time than for any other single issue related to management.
Organizations typically have both formal and informal leaders. Their leadership is effective for virtually
identical reasons. Leadership and management are not the same. Although effective leadership is a necessary
part of effective management, the overall management role is much larger than leadership alone. Managers
plan, organize, direct, and control. As leaders, they are engaged primarily in the directing function.
There are many diverse perspectives on leadership. Some managers treat leadership primarily as an exercise
of power. Others believe that a particular belief and attitude structure makes for effective leaders. Still others
believe it is possible to identify a collection of leader traits that produces a leader who should be universally
effective in any leadership situation. Even today, many believe that a profile of behaviors can universally
guarantee successful leadership. Unfortunately, such simple solutions fall short of the reality.
It is clear that effective leaders are endowed with the “right stuff,” yet this “stuff” is only a precondition to
effective leadership. Leaders need to connect with their followers and bring the right configuration of
knowledge, skills, ability, vision, and strategy to the situational demands confronting the group.
We now know that there is no one best way to be an effective leader in all circumstances. Leaders need to
recognize that how they choose to lead will affect the nature of their followers’ compliance with their influence
tactics, and ultimately impacts motivation, satisfaction, performance, and group effectiveness. In addition, the
nature of the situation—contextual demands and characteristics of the follower—dictates the type of
leadership that is likely to be effective. Fiedler focuses on leader traits and argues that the favorableness of the
leadership situation dictates the type of leadership approach needed. He recommends selecting leaders to
match the situation or changing the situation to match the leader. Path-goal theory focuses on leader
behavior that can be adapted to the demands of a particular work environment and organizational members’
characteristics. Path-goal theorists believe both that leaders can be matched with the situation and that the
situation can be changed to match leaders. Together, these theories make clear that leadership is effective
when the characteristics and behavior of the leader match the demands of the situation.
Characteristics of followers, tasks, and organizations can substitute for or neutralize many leader behaviors.
Leaders must remain aware of these factors, no matter which perspective on leadership they adopt. Such
awareness allows managers to use substitutes for, and neutralizers of, leadership to their benefit, rather than
be stymied by their presence.
In recent years, there has been a renewed interest in key leader traits and behaviors. As organizations face
increasing amounts of chaos in their external environments, searches for “the right leader” who can bring
about major organizational transformations has intensified. This search once again focuses our attention on a
set of “key” motives, knowledge, skills, and personality attributes. Emerging from this search has been the
identification of the charismatic and transformational leader.
9. How do different approaches and styles of leadership impact what is needed now?
Leadership in the high-involvement organization differs dramatically from that in the traditional and control-
oriented organization. Leaders external to the team have as one of their primary roles empowering group
members and the teams themselves to self-lead and self-manage. Leaders internal to the team are peers; they
work alongside and simultaneously facilitate planning, organizing, directing, controlling, and the execution of
the team’s work.
Although we know a great deal about the determinants of effective leadership, we have much to learn. Each
theory presented in this chapter is put into practice by managers every day. None provides the complete
answer to what makes leaders effective, but each has something important to offer.
Finally, our understanding of leadership has many shortcomings and limitations. The existing literature is
largely based on observations from a Western industrialized context. The extent to which our theories of
leadership are bound by our culture, limiting generalization to other cultures, is largely unknown. Cross-
cultural leadership research will no doubt intensify as the global economy becomes an ever more dominant
force in the world.
caught it and because of that should resign. As a leader of the group, how would you deal with the
subordinate, the manager, and communication with the entire team?
Exhibit 13.13 (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
United Airlines CEO Oscar Munoz’s strangely detached response only made things worse. The incident was
caught on video, and that video went viral almost immediately. Munoz issued a response that
mischaracterized what plainly happened in the video and termed the violent assault as a passenger "re-
accommodation" (Taylor 2017). Social media erupted with condemnation, which was echoed by late-night
monologues. United was left with a damaged reputation, and its management was left wondering why their
processes failed, what to do to mitigate the damage, and how to both restore their reputation and ensure that
company values are followed in the future.
William Taylor (2017), in a commentary in Fortune, attributes United’s “re-accommodation” disaster as the
product of company policy, airport security procedures, pilot protocols, and the “wisdom of crowds.” At each
step, the gate agent, pilot, airport security, and the passengers themselves could have intervened but didn’t.
Brian Fielkow, business leader, author, and keynote speaker, writing at Entrepreneur.com, outlined some
points that apply to Munoz’s response and the first reactions by United. Citing United’s core values, Fielkow
points to Munoz’s failure to address the incident in light of the company’s values, take the blame, or even
accurately describe what happened on the plane. Any one of these lapses in leadership would have caused
confusion or stymied the recovery process. As a leader, Munoz was setting the tone for thousands of people.
Seemingly abandoning United’s core values likely caused a rift in trust or just simple confusion company-wide.
Miscasting the situation in a world of smartphones and social media reach only multiplied the effect. As a
leader, Munoz was duty-bound to take responsibility for what literally the entire world saw—a breach of social
ethics, let alone United’s core values. Failing to do this immediately created a problem larger than poorly
planned company policy or just a perfect storm of contributing outside factors. Fielkow is keen to point out
another crucial part of a company response— “You can’t walk it back” (2017 n.p.). Before responding,
leadership should take time to gather the facts and thoroughly consider the possibilities of how the message
will be received. Again, Munoz’s response failed at several key points, leading to the perception that Munoz’s
second statement was “an attempt at damage control” (Fielkow 2017 n.p.).
Al Bolea, a leadership trainer, also attributes the incident to leadership failure. In a piece written for Applied
Leadership, Bolea writes, “It’s about front line employees getting the wrong messages from the most senior
levels of the company.” He contends that the mindset within United put procedures above context in the
minds of the employees. What the gate agents should have considered was the company’s reputation, which
should have prevented them from doing something most airline customers see as “profoundly immoral”
(Bolea 2017 n.p.)
William C. Taylor, cofounder of Fast Company, also criticized the lack of leadership across United. As the
presumptive leader of the flight, shouldn’t the pilot have done something? Why didn’t the gate agent think
outside the box to solve the problem of getting the crew members from Chicago to Louisville, Kentucky? Why
didn’t—or couldn’t—the gate agent use what Taylor refers to as a “common sense and a little bit of creativity”
and prevent a highly embarrassing (and ultimately expensive) fiasco? Taylor muses that he would like to think
he would have done more than shoot video, but the passengers on the flight remained quiet and submissive,
expressing no group outrage. Finally, Taylor questions the weak initial response from United’s CEO, Oscar
Munoz, writing, “If CEO Oscar Munoz’s goal was to make a disastrous situation even worse, well, he gets credit
as a leader for succeeding at that” (2017 n.p.). And of the board, he questions their response, and says that
response will be a “make or break test” of the company’s character (Taylor 2017).
According to Brian Fielkow, the incident flew in the face of United’s core values, values which should never be
sacrificed. United should have acknowledged this and addressed that failure. United should have held itself
accountable for the incident rather than try to deflect blame. Fielkow contends that Munoz’s first response
was to blame the passenger when Munoz should have accepted responsibility instead. Further, Fielkow writes
that companies should anticipate what “can” go wrong, something the gate agents at United failed to do.
Increasing passenger compensation to even three times the normal ticket price would have been cheaper
than the PR nightmare (and stock price drop) that followed. After Munoz’s tepid response failed to quell
general complaints about United’s handling of the passenger, he tried to issue a second “more appropriate”
statement, but by then the damage had been done. Fielkow recommends waiting before issuing a response if
need be. It’s better to prepared and issue a suitable response than to try to walk back a bad response. Above
all, Fielkow recommends leaders “be human.” The first response Munoz gave had little empathy and made
him, and United, appear insensitive and callous. A company’s first response should be to empathize with the
customer, even if the customer is wrong. He writes, “When triaging a difficult problem, above all recognize the
human factor” (Fielkow 2017 n.p.).
Writing in Forbes, Glenn Llopis emphasizes that how managers react to failure shapes their futures as leaders.
Not only how leaders respond, but what is learned from a failure, will affect how future decisions are
approached. Remember, you have to be doing something to fail, and if you never fail, then you aren’t
stretching yourself. Venturing into the unknown and unfamiliar always risks failure (Llopis 2012).
Sources:
Fielkow, Brian. 2017. “5 Leadership Failures that Contributed to the United Fiasco.” Entrepreneur.
https://www.entrepreneur.com/article/292820
Bolea, Al. 2017. “United Airlines: A System Failure?” Applied Leadership. http://appliedleadership.co/leadership/
united-airlines-system-failure/
Taylor, William C. 2017. “Where was the Pilot on That United Airlines Flight?” Fortune. http://fortune.com/2017/
04/11/united-airlines-video/
Llopis, Glenn. 2012. “5 Things Failure Teaches You About Leadership.” Forbes. https://www.forbes.com/sites/
glennllopis/2012/08/20/5-things-failure-teaches-you-about-leadership/2/#2f44c3873e70
Questions:
1. How have other airlines handled similar situations?
2. How much was in United Airlines’s control, and how much was actually outside their control? What social
or company factors caused a seemingly common practice to escalate to this level?
3. How did the other airlines or the industry respond to the United Airlines incident?
448 Chapter 13 Leadership
Introduction
Learning Outcomes
After reading this chapter, you should be able to answer these questions:
Bridget Anderson
Bridget Anderson thought life would be perfect out in the “real world.” After earning her degree in
computer science, she landed a well-paying job as a programmer for a large nonprofit organization
whose mission she strongly believed in. And—initially—she was happy with her job.
Lately however, Bridget gets a sick feeling in her stomach every morning when her alarm goes off. Why
this feeling of misery? After all, she’s working in her chosen field in an environment that matches her
values. What else could she want? She’s more puzzled than anyone.
It’s the end of her second year with the organization, and Bridget apprehensively schedules her annual
450 Chapter 14 Work Motivation for Performance
performance evaluation. She knows she’s a competent programmer, but she also knows that lately she’s
been motivated to do only the minimum required to get by. Her heart is just not in her work with this
organization. Not exactly how she thought things would turn out, that’s for sure.
Bridget’s manager Kyle Jacobs surprises her when he begins the evaluation by inquiring about her
professional goals. She admits that she hasn’t thought much about her future. Kyle asks if she’s content
in her current position and if she feels that anything is missing. Suddenly, Bridget realizes that she does
want more professionally.
Question: Are Bridget’s motivational problems intrinsic or extrinsic? Which of her needs are currently
not being met? What steps should she and her manager take to improve her motivation and ultimately
her performance?
Outcome: Once Bridget admits that she’s unhappy with her position as a computer programmer, she’s
ready to explore other possibilities. She and Kyle brainstorm for tasks that will motivate her and bring
her greater job satisfaction. Bridget tells Kyle that while she enjoys programming, she feels isolated and
misses interacting with other groups in the organization. She also realizes that once she had mastered
the initial learning curve, she felt bored. Bridget is ready for a challenge.
Kyle recommends that Bridget move to an information systems team as their technical representative.
The team can use Bridget’s knowledge of programming, and Bridget will be able to collaborate more
frequently with others in the organization.
Bridget and Kyle set specific goals to satisfy her needs to achieve and to work collaboratively. One of
Bridget’s goals is to take graduate classes in management and information systems. She hopes that this
will lead to an MBA and, eventually, to a position as a team leader. Suddenly the prospect of going to
work doesn’t seem so grim—and lately, Bridget’s been beating her alarm!
If you’ve ever worked with a group of people, and we all have, you have no doubt noticed differences in
their performance. Researchers have pondered these differences for many years. Indeed, John B.
Watson first studied this issue in the early 1900s. Performance is, of course, an extremely important
issue to employers because organizations with high-performing employees will almost always be more
effective.
To better understand why people perform at different levels, researchers consider the major
determinants of performance: ability, effort (motivation), accurate role perceptions, and environmental
factors (see Exhibit 14.2). Each performance determinant is important, and a deficit in one can seriously
affect the others. People who don’t understand what is expected of them will be constrained by their
own inaccurate role perceptions, even if they have strong abilities and motivation and the necessary
resources to perform their job. None of the performance determinants can compensate for a deficiency
in any of the other determinants. Thus, a manager cannot compensate for an employee’s lack of skills
and ability by strengthening their motivation.
Exhibit 14.2 Determinants of Performance (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Ability refers to the knowledge, skills, and receptiveness to learning that a person brings to a task or job.
Knowledge is what a person knows. Skill is their capacity to perform some particular activity (like welding or
accounting), including knowing what is expected of them (called accurate role perceptions). Receptiveness to
learning is a function of how quickly a person acquires new knowledge. Some people have more ability than
others, and high-ability people generally perform better than low-ability people (although we will see that this
is not always the case).1
Accurate role perceptions refer to how well an individual understands their organizational role. This includes
the goals (outcomes) the person is expected to achieve and the process by which the goals will be achieved.
An employee who has accurate role perceptions knows both their expected outcomes and how to go about
making those outcomes a reality. Incomplete or inaccurate role perceptions limit employees’ capacity to meet
expectations, regardless of their abilities and motivation.
The performance environment refers to those factors that impact employees’ performance but are
essentially out of their control. Many environmental factors influence performance. Some factors facilitate
performance, while others constrain it. A word processor who has to work with a defective personal computer
is certainly not going to perform at peak levels, regardless of ability or desire. Students who are working full
time and carrying a full load of classes may not do as well on an exam as they would if they could cut back on
their work hours, despite the fact that they have high ability and high motivation.
Motivation is the fourth major factor that determines whether a person will perform a task well. Motivation is
a force within or outside of the body that energizes, directs, and sustains human behavior. Within the body,
examples might be needs, personal values, and goals, while an incentive might be seen as a force outside of
the body. The word stems from its Latin root movere, which means “to move.” Generally speaking, motivation
arises as a consequence of a person’s desire to (1) fulfill unmet needs or (2) resolve conflicting thoughts that
produce anxiety (an unpleasant experience). There are many ways in which we describe and categorize human
needs, as we will see later in this chapter. Certain needs are fundamental to our existence, like the need for
food and water. When we are hungry, we are energized to satisfy that need by securing and ingesting food.
452 Chapter 14 Work Motivation for Performance
Our other needs operate in a similar manner. When a need is unfulfilled, we are motivated to engage in
behaviors that will satisfy it. The same is true for situations in which we experience conflicting thoughts. When
we find ourselves in situations inconsistent with our beliefs, values, or expectations, we endeavor to eliminate
the inconsistency. We either change the situation, or we change our perception of it. In both cases, motivation
arises out of our interaction with and perception of a particular situation. We perceive the situation as
satisfying our needs, or not. Motivation is thus a result of our interacting with situations to satisfy unmet
needs or to resolve cognitive dissonance.
Exhibit 14.3 Tom Brady At the University of Michigan, Tom Brady was always a backup to high-potential quarterbacks and was a sixth-round
draft pick after his college career. He commented, “A lot of people don’t believe in you. It’s obvious by now, six other quarterbacks taken and
198 other picks. And I always thought ‘you know what, once I get my shot, I’m gonna be ready. I’m gonna really take advantage of that.’”
Rather than give up, he hired a sports psychologist to help him deal with constant frustrations. Brady would eventually become an elite
quarterback and is now considered one of the greatest players ever. “I guess in a sense I’ve always had a chip on my shoulder. If you were the
199th pick, you were the 199th pick for a reason: because someone didn’t think you were good enough.” His passion and motivation helped
him achieve that status. (Credit: Brook Ward/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
Simply stated, work motivation is the amount of effort a person exerts to achieve a certain level of job
performance. Some people try very hard to perform their jobs well. They work long hours, even if it interferes
with their family life. Highly motivated people go the “extra mile.” High scorers on an exam make sure they
know the examination material to the best of their ability, no matter how much midnight oil they have to burn.
Other students who don’t do as well may just want to get by—football games and parties are a lot more fun,
after all.
Motivation is of great interest to employers: All employers want their people to perform to the best of their
abilities. They take great pains to screen applicants to make sure they have the necessary abilities and
motivation to perform well. They endeavor to supply all the necessary resources and a good work
environment. Yet motivation remains a difficult factor to manage. As a result, it receives the most attention
from organizations and researchers alike, who ask the perennial question “What motivates people to perform
well?”
In this chapter we look at current answers to this question. What work conditions foster motivation? How can
theories of motivation help us understand the general principles that guide organizational behavior? Rather
than analyze why a particular student studies hard for a test, we’ll look at the underlying principles of our
general behavior in a variety of situations (including test taking). We also discuss the major theories of
motivation, along with their implications for management and organizational behavior. By the end of this
chapter you should have a better understanding of why some people are more motivated than others.
Successful employees know what they want to achieve (direction), and they persist until they achieve their
goals (intensity).
Our discussion thus far implies that motivation is a matter of effort. This is only partially true. Motivation has
two major components: direction and intensity. Direction is what a person wants to achieve, what they intend
to do. It implies a target that motivated people try to “hit.” That target may be to do well on a test. Or it may
be to perform better than anyone else in a work group. Intensity is how hard people try to achieve their
targets. Intensity is what we think of as effort. It represents the energy we expend to accomplish something. If
our efforts are getting nowhere, will we try different strategies to succeed? (High-intensity-motivated people
are persistent!)
It is important to distinguish the direction and intensity aspects of motivation. If either is lacking, performance
will suffer. A person who knows what they want to accomplish (direction) but doesn’t exert much effort
(intensity) will not succeed. (Scoring 100 percent on an exam—your target—won’t happen unless you study!)
Conversely, people who don’t have a direction (what they want to accomplish) probably won’t succeed either.
(At some point you have to decide on a major if you want to graduate, even if you do have straight As.)
Employees’ targets don’t always match with what their employers want. Absenteeism (some employees call
this “calling in well”) is a major example.2 Pursuing your favorite hobby (your target) on a workday (your
employer’s target) is a conflict in direction; below, we’ll examine some theories about why this conflict occurs.
There is another reason why employees’ targets are sometimes contrary to their employers’—sometimes
employers do not ensure that employees understand what the employer wants. Employees can have great
intensity but poor direction. It is management’s job to provide direction: Should we stress quality as well as
quantity? Work independently or as a team? Meet deadlines at the expense of costs? Employees flounder
without direction. Clarifying direction results in accurate role perceptions, the behaviors employees think they
are expected to perform as members of an organization. Employees with accurate role perceptions
understand their purpose in the organization and how the performance of their job duties contributes to
organizational objectives. Some motivation theorists assume that employees know the correct direction for
their jobs. Others do not. These differences are highlighted in the discussion of motivation theories below.
At this point, as we begin our discussion of the various motivation theories, it is reasonable to ask “Why isn’t
there just one motivation theory?” The answer is that the different theories are driven by different
philosophies of motivation. Some theorists assume that humans are propelled more by needs and instincts
than by reasoned actions. Their content motivation theories focus on the content of what motivates people.
Other theorists focus on the process by which people are motivated. Process motivation theories address
how people become motivated—that is, how people perceive and think about a situation. Content and process
theories endeavor to predict motivation in a variety of situations. However, none of these theories can predict
454 Chapter 14 Work Motivation for Performance
what will motivate an individual in a given situation 100 percent of the time. Given the complexity of human
behavior, a “grand theory” of motivation will probably never be developed.
A second reasonable question at this point is “Which theory is best?” If that question could be easily
answered, this chapter would be quite short. The simple answer is that there is no “one best theory.” All have
been supported by organizational behavior research. All have strengths and weaknesses. However,
understanding something about each theory is a major step toward effective management practices.
CONCEPT CHECK
The theories presented in this section focus on the importance of human needs. A common thread through all
of them is that people have a variety of needs. A need is a human condition that becomes “energized” when
people feel deficient in some respect. When we are hungry, for example, our need for food has been
energized. Two features of needs are key to understanding motivation. First, when a need has been energized,
we are motivated to satisfy it. We strive to make the need disappear. Hedonism, one of the first motivation
theories, assumes that people are motivated to satisfy mainly their own needs (seek pleasure, avoid pain).
Long since displaced by more refined theories, hedonism clarifies the idea that needs provide direction for
motivation. Second, once we have satisfied a need, it ceases to motivate us. When we’ve eaten to satiation, we
are no longer motivated to eat. Other needs take over and we endeavor to satisfy them. A manifest need is
whatever need is motivating us at a given time. Manifest needs dominate our other needs.
Instincts are our natural, fundamental needs, basic to our survival. Our needs for food and water are
instinctive. Many needs are learned. We are not born with a high (or low) need for achievement—we learn to
need success (or failure). The distinction between instinctive and learned needs sometimes blurs; for example,
is our need to socialize with other people instinctive or learned?
Henry A. Murray recognized this problem and condensed the list into a few instinctive and learned needs.3
Instincts, which Murray called primary needs, include physiological needs for food, water, sex (procreation),
urination, and so on. Learned needs, which Murray called secondary needs, are learned throughout one’s life
and are basically psychological in nature. They include such needs as the need for achievement, for love, and
for affiliation (see Table 14.1).4
Abasement To submit passively to external force. To accept injury, blame, criticism, punishment. To
surrender.
Affiliation To draw near and enjoyably cooperate or reciprocate with an allied other (an other who
resembles the subject or who likes the subject). To please and win affection of a coveted
object. To adhere and remain loyal to a friend.
Aggression To overcome opposition forcefully. To fight. To revenge an injury. To attack, injure, or kill
another. To oppose forcefully or punish another.
Defendance To defend the self against assault, criticism, and blame. To conceal or justify a misdeed,
failure, or humiliation. To vindicate the ego.
Dominance To control one’s human environment. To influence or direct the behavior of others by
suggestion, seduction, persuasion, or command.
Exhibition To make an impression. To be seen and heard. To excite, amaze, fascinate, entertain,
shock, intrigue, amuse, or entice others.
Harm To avoid pain, physical injury, illness, and death. To escape from a dangerous situation.
avoidance To take precautionary measures.
Infavoidance To avoid humiliation. To quit embarrassing situations or to avoid conditions that may
lead to belittlement or the scorn or indifference of others.
Nurturance To give sympathy and gratify the needs of a helpless object: an infant or any object that
is weak, disabled, tired, inexperienced, infirm, defeated, humiliated, lonely, dejected,
sick, or mentally confused. To assist an object in danger. To feed, help, support, console,
protect, comfort, nurse, heal.
Table 14.1
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Play To act for “fun” without further purpose. To like to laugh and make jokes. To seek
enjoyable relaxation from stress.
Rejection To separate oneself from a negatively valued object. To exclude, abandon, expel, or
remain indifferent to an inferior object. To snub or jilt an object.
Succorance To have one’s needs gratified by the sympathetic aid of an allied object.
Source: Adapted from C. S. Hall and G. Lindzey, Theories of Personality. Sample items from Murray’s List of
Needs. Copyright 1957 by John Wiley & Sons, New York.
Table 14.1
Murray’s main premise was that people have a variety of needs, but only a few are expressed at a given time.
When a person is behaving in a way that satisfies some need, Murray called the need manifest. Manifest
needs theory assumes that human behavior is driven by the desire to satisfy needs. Lucretia’s chattiness
probably indicates her need for affiliation. This is a manifest need. But what if Lucretia also has a need to
dominate others? Could we detect that need from her current behavior? If not, Murray calls this a latent need.
A latent need cannot be inferred from a person’s behavior at a given time, yet the person may still possess
that need. The person may not have had the opportunity to express the need. Or she may not be in the proper
environment to solicit behaviors to satisfy the need. Lucretia’s need to dominate may not be motivating her
current behavior because she is with friends instead of coworkers.
Manifest needs theory laid the groundwork for later theories, most notably McClelland’s learned needs theory,
that have greatly influenced the study of organizational behavior. The major implication for management is
that some employee needs are latent. Managers often assume that employees do not have certain needs
because the employees never try to satisfy them at work. Such needs may exist (latent needs); the work
environment is simply not conducive to their manifestation (manifest needs). A reclusive accountant may not
have been given the opportunity to demonstrate his need for achievement because he never received
challenging assignments.
three needs are learned, primarily in childhood. But he also believes that each need can be taught, especially
nAch. McClelland’s research is important because much of current thinking about organizational behavior is
based on it.
To better understand the nAch motive, it’s helpful to describe high-nAch people. You probably know a few of
them. They’re constantly trying to accomplish something. One of your authors has a father-in-law who would
much rather spend his weekends digging holes (for various home projects) than going fishing. Why? Because
when he digs a hole, he gets results. In contrast, he can exert a lot of effort and still not catch a fish. A lot of
fishing, no fish, and no results equal failure!
1. They feel personally responsible for completing whatever tasks they are assigned. They accept credit for
success and blame for failure.
2. They like situations where the probability of success is moderate. High-nAch people are not motivated by
tasks that are too easy or extremely difficult. Instead, they prefer situations where the outcome is
uncertain, but in which they believe they can succeed if they exert enough effort. They avoid both simple
and impossible situations.
3. They have very strong desires for feedback about how well they are doing. They actively seek out
performance feedback. It doesn’t matter whether the information implies success or failure. They want to
know whether they have achieved or not. They constantly ask how they are doing, sometimes to the point
of being a nuisance.
Why is nAch important to organizational behavior? The answer is, the success of many organizations is
dependent on the nAch levels of their employees.6 This is especially true for jobs that require self-motivation
and managing others. Employees who continuously have to be told how to do their jobs require an overly
large management team, and too many layers of management spell trouble in the current marketplace.
Today’s flexible, cost-conscious organizations have no room for top-heavy structures; their high-nAch
employees perform their jobs well with minimal supervision.
Many organizations manage the achievement needs of their employees poorly. A common perception about
people who perform unskilled jobs is that they are unmotivated and content doing what they are doing. But, if
they have achievement needs, the job itself creates little motivation to perform. It is too easy. There are not
enough workers who feel personal satisfaction for having the cleanest floors in a building. Designing jobs that
are neither too challenging nor too boring is key to managing motivation. Job enrichment is one effective
strategy; this frequently entails training and rotating employees through different jobs, or adding new
challenges.
458 Chapter 14 Work Motivation for Performance
Exhibit 14.4 New York Metro workers carrying a sign The New York City Metropolitan Transit Authority undertook a new approach to how
they perform critical inspection and maintenance of subway components that are necessary to providing reliable service. Rather than schedule
these inspections during regular hours, they consulted with the maintenance workers, who suggested doing the inspections while sections of
the subway were closed to trains for seven consecutive hours. This process was adopted and provided a safer and more efficient way to
maintain and clean New York City's sprawling subway. With no trains running, MTA employees are able to inspect signals, replace rails and
crossties, scrape track floors, clean stations, and paint areas that are not reachable during normal train operation. Workers also took the
opportunity to clean lighting fixtures, change bulbs, and repair platform edges while performing high-intensity station cleaning. (Credit: Patrick
Cashin/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
The nAff has important implications for organizational behavior. High-nAff people like to be around other
people, including other people at work. As a result, they perform better in jobs that require teamwork.
Maintaining good relationships with their coworkers is important to them, so they go to great lengths to make
the work group succeed because they fear rejection. So, high-nAff employees will be especially motivated to
perform well if others depend on them. In contrast, if high-nAff people perform jobs in isolation from other
people, they will be less motivated to perform well. Performing well on this job won’t satisfy their need to be
around other people.
Effective managers carefully assess the degree to which people have high or low nAff. Employees high in nAff
should be placed in jobs that require or allow interactions with other employees. Jobs that are best performed
alone are more appropriate for low-nAff employees, who are less likely to be frustrated.
Employees with high nPow can be beneficial to organizations. High-nPow people do have effective employee
behaviors, but at times they’re disruptive. A high-nPow person may try to convince others to do things that are
detrimental to the organization. So, when is this need good, and when is it bad? Again, there are no easy
answers. McClelland calls this the “two faces of power.”7 A personal power seeker endeavors to control others
mostly for the sake of dominating them. They want others to respond to their wishes whether or not it is good
for the organization. They “build empires,” and they protect them.
McClelland’s other power seeker is the social power seeker. A high social power seeker satisfies needs for
power by influencing others, like the personal power seeker. They differ in that they feel best when they have
influenced a work group to achieve the group’s goals, and not some personal agenda. High social power
seekers are concerned with goals that a work group has set for itself, and they are motivated to influence
others to achieve the goal. This need is oriented toward fulfilling responsibilities to the employer, not to the
self.
McClelland has argued that the high need for social power is the most important motivator for successful
managers. Successful managers tend to be high in this type of nPow. High need for achievement can also be
important, but it sometimes results in too much concern for personal success and not enough for the
employer’s success. The need for affiliation contributes to managerial success only in those situations where
the maintenance of warm group relations is as important as getting others to work toward group goals.
The implication of McClelland’s research is that organizations should try to place people with high needs for
social power in managerial jobs. It is critical, however, that those managerial jobs allow the employee to satisfy
the nPow through social power acquisition. Otherwise, a manager high in nPow may satisfy this need through
acquisition of personal power, to the detriment of the organization.
ETHICS IN PRACTICE
So what motivates employees to give their all, work creatively, and be fully engaged? According to CB
Bhattacharya, the Pietro Ferrero Chair in Sustainability at ESMT European School of Management and
Technology in Berlin, Germany, employment engagement, or how positive employees feel about their
current job, was at an all-time low globally in 2016: 13 percent. But not all companies battle such low
460 Chapter 14 Work Motivation for Performance
engagement rates. Unilever employees more than 170,000 workers globally and has an employ
engagement level around 80 percent. How? Bhattacharya credits the success of Unilever, and other
companies with similar engagement levels, to an emphasis on a “sustainable business model.” He
outlines eight steps that companies take to move sustainability and social responsibility from buzzwords
to a company mission capable of motivating employees (Knowledge @ Wharton 2016).
According to Bhattacharya, a company needs to first define what it does and its long-term purpose, and
then reconcile its sustainability goals with its economic goals. With its purpose and goals defined, it can
then educate the workforce on sustainable methods to create knowledge and competence. Champions
for the effort must be found throughout the organization, not just at the top. Competition should be
encouraged among employees to find and embrace new goals. Sustainability should be visible both
within and outside the company. Sustainability should be tied to a higher purpose and foster a sense of
unity not simply among employees, but even with competition at a societal level (Knowledge @ Wharton
2016).
Other companies have made social responsibility an everyday part of what they do. Launched in 2013,
Bombas is the brain child of Randy Goldberg and David Heath. Goldberg and Heath discovered that
socks are the most-requested clothing at homeless shelters. In response, the two entrepreneurs
launched a line of socks that not only “reinvents” the sock (they claim), but also helps those in need. For
each pair of socks purchased, the company donates a pair of socks to someone in need (Mulvey 2017).
According to the company website, “Bombas exists to help solve this problem, to support the homeless
community, and to bring awareness to an under-publicized problem in the United States” (n.p.).
Although the New York–based company is still growing, as of October 2017 Bombas had donated more
than four million pairs of socks (Bombas 2017).
In 2016, the Royal Bank of Scotland (RBS) launched a pilot program called Jump in which employees
participated in challenges on ways to save water and electricity, as well as other sustainability issues. At
the end of the pilot, 95 percent of the employees reported that they felt the program had contributed to
employee engagement, team building, and environmental stability. Given the success of the program, in
2017 it was expanded to all RBS sites and a smartphone app was added to help employees participate in
the challenges (Barton 2017).
Placing a company in a larger context and adding a second, higher purpose than the established
company goals motivates employees to police the company itself to be a better global citizen. Companies
benefit from reduced waste and increased employee engagement. Many companies are successfully
motivating their staff, and working toward more sustainable practices, while improving lives directly.
Sources:
Barton, Tynan. 2017. “RBS boosts employee motivation and engagement through its CSR approach.”
employee benefits. https://www.employeebenefits.co.uk/issues/april-2017/rbs-boosts-employee-
motivation-engagement-csr-approach/
Knowledge @ Wharton. 2016. “How Companies Can Tap Sustainability to Motivate Staff.”
http://knowledge.wharton.upenn.edu/article/how-companies-tap-sustainability-to-motivate-staff/
Mulvey, Kelsey. 2017. “This company spent two years perfecting gym socks, and it paid off.” Business
Insider. http://www.businessinsider.com/bombas-athletic-sock-review-2017-1
1. Do you think social responsibility to promote sustainable practices? Why or why not?
2. Do you think most companies’ CSR programs are essentially PR gimmicks? Why or why not? Give
examples.
Maslow was a psychologist who, based on his early research with primates (monkeys), observations of
patients, and discussions with employees in organizations, theorized that human needs are arranged
hierarchically. That is, before one type of need can manifest itself, other needs must be satisfied. For example,
our need for water takes precedence over our need for social interaction (this is also called prepotency). We will
always satisfy our need for water before we satisfy our social needs; water needs have prepotency over social
needs. Maslow’s theory differs from others that preceded it because of this hierarchical, prepotency concept.
Maslow went on to propose five basic types of human needs. This is in contrast to the thousands of needs that
earlier researchers had identified, and also fewer than Murray identified in his theory. Maslow condensed
human needs into a manageable set. Those five human needs, in the order of prepotency in which they direct
human behavior, are:
1. Physiological and survival needs. These are the most basic of human needs, and include the needs for
water, food, sex, sleep, activity, stimulation, and oxygen.
2. Safety and security needs. These needs invoke behaviors that assure freedom from danger. This set of
needs involves meeting threats to our existence, including extremes in environmental conditions (heat,
dust, and so on), assault from other humans, tyranny, and murder. In other words, satisfaction of these
needs prevents fear and anxiety while adding stability and predictability to life.
3. Social needs. These needs reflect human desires to be the target of affection and love from others. They
are especially satisfied by the presence of spouses, children, parents, friends, relatives, and others to
whom we feel close. Feelings of loneliness and rejection are symptoms that this need has not been
satisfied.
4. Ego and esteem. Esteem needs go beyond social needs. They reflect our need to be respected by others,
and to have esteem for ourselves. It is one thing to be liked by others. It is another thing to be respected
for our talents and abilities. Ego and esteem needs have internal (self) and external (others) focuses. An
internal focus includes desires for achievement, strength, competence, confidence, and independence. An
external focus includes desires to have prestige, recognition, appreciation, attention, and respect from
others. Satisfaction of external esteem needs can lead to satisfaction of internal esteem needs.
5. Self-actualization. Self-actualization needs are the most difficult to describe. Unlike the other needs, the
need for self-actualization is never completely satisfied. Self-actualization involves a desire for self-
fulfillment, “to become more and more what one is, to become everything that one is capable of
becoming.”10 Because people are so different in their strengths and weaknesses, in capacities and
limitations, the meaning of self-actualization varies greatly. Satisfying self-actualization needs means
developing all of our special abilities to their fullest degree.
462 Chapter 14 Work Motivation for Performance
Exhibit 14.5 Seattle protester with sign (Credit: Adrenalin Tim /flickr/ Attribution 2.0 Generic (CC BY 2.0))
Exhibit 14.5 A protester at an anti-war demonstration in Seattle held up this sign. Where would you place that
on Maslow’s hierarchy of needs?
Exhibit 14.6 illustrates Maslow’s proposed hierarchy of needs. According to his theory, people first direct their
attention to satisfying their lower-order needs. Those are the needs at the bottom of the pyramid
(physiological, safety, and security). Once those needs have been satisfied, the next level, social needs, become
energized. Once satisfied, we focus on our ego and esteem needs. Maslow believed that most people become
fixated at this level. That is, most people spend much of their lives developing self-esteem and the esteem of
others. But, once those esteem needs are satisfied, Maslow predicted that self-actualization needs would
dominate. There are no higher levels in the pyramid, because self-actualization needs can never be fully
satisfied. They represent a continuing process of self-development and self-improvement that, once satisfied
on one dimension (painting), create motivation to continue on other dimensions (sculpting). One wonders if
athletes like Tim Tebow are self-actualizing when they participate in multiple sporting endeavors at the
professional level.
Exhibit 14.6 Maslow’s Hierarchy of Needs Source: Based on A. H. Maslow. 1943. A theory of human motivation. Psychological Bulletin
50:370–396.
An overriding principle in this theory is that a person’s attention (direction) and energy (intensity) will focus on
satisfying the lowest-level need that is not currently satisfied. Needs can also be satisfied at some point but
become active (dissatisfied) again. Needs must be “maintained” (we must continue to eat occasionally).
According to Maslow, when lower-level needs are reactivated, we once again concentrate on that need. That is,
we lose interest in the higher-level needs when lower-order needs are energized.
The implications of Maslow’s theory for organizational behavior are as much conceptual as they are practical.
The theory posits that to maximize employee motivation, employers must try to guide workers to the upper
parts of the hierarchy. That means that the employer should help employees satisfy lower-order needs like
safety and security and social needs. Once satisfied, employees will be motivated to build esteem and respect
through their work achievements. Exhibit 14.6 shows how Maslow’s theory relates to factors that
organizations can influence. For example, by providing adequate pay, safe working conditions, and cohesive
work groups, employers help employees satisfy their lower-order needs. Once satisfied, challenging jobs,
additional responsibilities, and prestigious job titles can help employees satisfy higher-order esteem needs.
Maslow’s theory is still popular among practicing managers. Organizational behavior researchers, however,
are not as enamored with it because research results don’t support Maslow’s hierarchical notion. Apparently,
people don’t go through the five levels in a fixed fashion. On the other hand, there is some evidence that
people satisfy the lower-order needs before they attempt to satisfy higher-order needs. Refinements of
Maslow’s theory in recent years reflect this more limited hierarchy.11 The self-assessment below will allow you
to evaluate the strength of your five needs.
relatedness, and growth.13 In addition, ERG theory details the dynamics of an individual’s movement between
the need categories in a somewhat more detailed fashion than typically characterizes interpretations of
Maslow’s work.
As shown in Exhibit 14.7, the ERG model addresses the same needs as those identified in Maslow’s work:
Exhibit 14.7 Alderfer’s ERG Theory (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
• Existence needs include physiological and material safety needs. These needs are satisfied by material
conditions and not through interpersonal relations or personal involvement in the work setting.
• Relatedness needs include all of Maslow’s social needs, plus social safety and social esteem needs. These
needs are satisfied through the exchange of thoughts and feelings with other people.
• Growth needs include self-esteem and self-actualization needs. These needs tend to be satisfied through
one’s full involvement in work and the work setting.
Exhibit 14.8 identifies a number of ways in which organizations can help their members satisfy these three
needs.
Exhibit 14.8 Satisfying Existence, Relatedness, and Growth Needs (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0
license)
Exhibit 14.9 Jamie Dimon Jamie Dimon, CEO at JP Morgan Chase, is reported to make $27 million dollars per year, and as CEO has an
interesting and intrinsically rewarding job. Starting tellers at a Chase Bank make a reported $36,100 per year and are in a position that has
repeated tasks and may not be the most rewarding from a motivational point of view. How does this pay structure relate to self-determination
theory (SDT)? (Credit: Stefan Chow/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
Alderfer’s model is potentially more useful than Maslow’s in that it doesn’t create false motivational
categories. For example, it is difficult for researchers to ascertain when interaction with others satisfies our
need for acceptance and when it satisfies our need for recognition. ERG also focuses attention explicitly on
movement through the set of needs in both directions. Further, evidence in support of the three need
categories and their order tends to be stronger than evidence for Maslow’s five need categories and their
relative order.
Hygiene factors are not directly related to the work itself (job content). Rather, hygienes refer to job context
factors (pay, working conditions, supervision, and security). Herzberg also refers to these factors as
“dissatisfiers” because they are frequently associated with dissatisfied employees. These factors are so
frequently associated with dissatisfaction that Herzberg claims they never really provide satisfaction. When
they’re present in sufficient quantities, we avoid dissatisfaction, but they do not contribute to satisfaction.
Furthermore, since meeting these needs does not provide satisfaction, Herzberg concludes that they do not
motivate workers.
Motivator factors involve our long-term need to pursue psychological growth (much like Maslow’s esteem and
self-actualization needs). Motivators relate to job content. Job content is what we actually do when we perform
our job duties. Herzberg considered job duties that lead to feelings of achievement and recognition to be
motivators. He refers to these factors as “satisfiers” to reflect their ability to provide satisfying experiences.
When these needs are met, we experience satisfaction. Because meeting these needs provides satisfaction,
they motivate workers. More specifically, Herzberg believes these motivators lead to high performance
(achievement), and the high performance itself leads to satisfaction.
The unique feature of Herzberg’s theory is that job conditions that prevent dissatisfaction do not cause
satisfaction. Satisfaction and dissatisfaction are on different “scales” in his view. Hygienes can cause
dissatisfaction if they are not present in sufficient levels. Thus, an employee can be dissatisfied with low pay.
But paying him more will not cause long-term satisfaction unless motivators are present. Good pay by itself will
only make the employee neutral toward work; to attain satisfaction, employees need challenging job duties
that result in a sense of achievement. Employees can be dissatisfied, neutral, or satisfied with their jobs,
depending on their levels of hygienes and motivators. Herzberg’s theory even allows for the possibility that an
employee can be satisfied and dissatisfied at the same time—the “I love my job but I hate the pay” situation!
Herzberg’s theory has made lasting contributions to organizational research and managerial practice.
Researchers have used it to identify the wide range of factors that influence worker reactions. Previously, most
organizations attended primarily to hygiene factors. Because of Herzberg’s work, organizations today realize
the potential of motivators. Job enrichment programs are among the many direct results of his research.
Herzberg’s work suggests a two-stage process for managing employee motivation and satisfaction. First,
managers should address the hygiene factors. Intense forms of dissatisfaction distract employees from
important work-related activities and tend to be demotivating.16 Thus, managers should make sure that such
basic needs as adequate pay, safe and clean working conditions, and opportunities for social interaction are
met. They should then address the much more powerful motivator needs, in which workers experience
recognition, responsibility, achievement, and growth. If motivator needs are ignored, neither long-term
satisfaction nor high motivation is likely. When motivator needs are met, however, employees feel satisfied
and are motivated to perform well.
Self-Determination Theory
One major implication of Herzberg’s motivator-hygiene theory is the somewhat counterintuitive idea that
managers should focus more on motivators than on hygienes. (After all, doesn’t everyone want to be paid
well? Organizations have held this out as a chief motivator for decades!) Why might concentrating on
motivators give better results? To answer this question, we must examine types of motivation. Organizational
behavior researchers often classify motivation in terms of what stimulates it. In the case of extrinsic
motivation, we endeavor to acquire something that satisfies a lower-order need. Jobs that pay well and that
are performed in safe, clean working conditions with adequate supervision and resources directly or indirectly
satisfy these lower-order needs. These “outside the person” factors are extrinsic rewards.
468 Chapter 14 Work Motivation for Performance
Factors “inside” the person that cause people to perform tasks, intrinsic motivation, arise out of performing
a task in and of itself, because it is interesting or “fun” to do. The task is enjoyable, so we continue to do it even
in the absence of extrinsic rewards. That is, we are motivated by intrinsic rewards, rewards that we more or less
give ourselves. Intrinsic rewards satisfy higher-order needs like relatedness and growth in ERG theory. When
we sense that we are valuable contributors, are achieving something important, or are getting better at some
skill, we like this feeling and strive to maintain it.
Self-determination theory (SDT) seeks to explain not only what causes motivation, but also how extrinsic
rewards affect intrinsic motivation.17 In SDT, extrinsic motivation refers to the performance of an activity in
order to attain some valued outcome, while intrinsic motivation refers to performing an activity for the
inherent satisfaction of the activity itself. SDT specifies when an activity will be intrinsically motivating and
when it will not. Considerable numbers of studies have demonstrated that tasks are intrinsically motivating
when they satisfy at least one of three higher-order needs: competence, autonomy, and relatedness. These
precepts from SDT are entirely consistent with earlier discussions of theories by McClelland, Maslow, Alderfer,
and Herzberg.
SDT takes the concepts of extrinsic rewards and intrinsic motivation further than the other need theories. SDT
researchers have consistently found that as the level of extrinsic rewards increases, the amount of intrinsic
motivation decreases. That is, SDT posits that extrinsic rewards not only do not provide intrinsic motivation,
they diminish it. Think of this in terms of hobbies. Some people like to knit, others like to carve wood. They do
it because it is intrinsically motivating; the hobby satisfies needs for competence, autonomy, and relatedness.
But what happens if these hobbyists start getting paid well for their sweaters and carvings? Over time the
hobby becomes less fun and is done in order to receive extrinsic rewards (money). Extrinsic motivation
increases as intrinsic motivation decreases! When extrinsic rewards are present, people do not feel like what
they do builds competence, is self-determined, or enhances relationships with others.
SDT theory has interesting implications for the management of organizational behavior. Some jobs are by
their very nature uninteresting and unlikely to be made interesting. Automation has eliminated many such
jobs, but they are still numerous. SDT would suggest that the primary way to motivate high performance for
such jobs is to make performance contingent on extrinsic rewards. Relatively high pay is necessary to sustain
performance on certain low-skill jobs. On the other hand, SDT would suggest that to enhance intrinsic
motivation on jobs that are interesting, don’t focus only on increasing extrinsic rewards (like large pay
bonuses). Instead, create even more opportunities for employees to satisfy their needs for competence,
autonomy, and relatedness. That means giving them opportunities to learn new skills, to perform their jobs
without interference, and to develop meaningful relationships with other customers and employees in other
departments. Such actions enhance intrinsic rewards.
You may have noticed that content theories are somewhat quiet about what determines the intensity of
motivation. For example, some people steal to satisfy their lower-order needs (they have high intensity). But
most of us don’t steal. Why is this? Process theories of motivation attempt to explain this aspect of motivation
by focusing on the intensity of motivation as well as its direction. According to self-determination theory,
skilled workers who are given a chance to hone their skills and the freedom to practice their craft will be
intrinsically motivated.
CONCEPT CHECK
Process theories of motivation try to explain why behaviors are initiated. These theories focus on the
mechanism by which we choose a target, and the effort that we exert to “hit” the target. There are four major
process theories: (1) operant conditioning, (2) equity, (3) goal, and (4) expectancy.
Operant conditioning focuses on the learning of voluntary behaviors. 18 The term operant conditioning
indicates that learning results from our “operating on” the environment. After we “operate on the
environment” (that is, behave in a certain fashion), consequences result. These consequences determine the
likelihood of similar behavior in the future. Learning occurs because we do something to the environment. The
environment then reacts to our action, and our subsequent behavior is influenced by this reaction.
1. S → R → C+ (Positive Reinforcement)
2. S → R → C– (Negative Reinforcement)
1. S → R → (no C) (Nonreinforcement)
2. S → R → C– (Punishment)
Table 14.2 (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Reinforcement occurs when a consequence makes it more likely the response/behavior will be repeated in
the future. In the previous example, praise from Colleen’s superior is a reinforcer. Extinction occurs when a
consequence makes it less likely the response/behavior will be repeated in the future. Criticism from Colleen’s
supervisor could cause her to stop working hard on any assignment.
There are three ways to make a response more likely to recur: positive reinforcement, negative reinforcement,
and avoidance learning. In addition, there are two ways to make the response less likely to recur:
nonreinforcement and punishment.
Another technique for making a desired response more likely to be repeated is known as negative
reinforcement. When a behavior causes something undesirable to be taken away, the behavior is more likely
to be repeated in the future. Managers use negative reinforcement when they remove something unpleasant
from an employee’s work environment in the hope that this will encourage the desired behavior. Ted doesn’t
like being continually reminded by Philip to work faster (Ted thinks Philip is nagging him), so he works faster at
stocking shelves to avoid being criticized. Philip’s reminders are a negative reinforcement for Ted.
Approach using negative reinforcement with extreme caution. Negative reinforcement is often confused with
Exhibit 14.10 Workers stacking eggs A worker stacks eggs on the shelves at a supermarket. Consider the interchange between Ted and
Philip regarding speeding up the shelf restocking process. What could go wrong? (Credit: Alex Barth/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
A third method of making a response more likely to occur involves a process known as avoidance learning.
Avoidance learning occurs when we learn to behave in a certain way to avoid encountering an undesired or
unpleasant consequence. We may learn to wake up a minute or so before our alarm clock rings so we can turn
it off and not hear the irritating buzzer. Some workers learn to get to work on time to avoid the harsh words or
punitive actions of their supervisors. Many organizational discipline systems rely heavily on avoidance learning
by using the threat of negative consequences to encourage desired behavior. When managers warn an
employee not to be late again, when they threaten to fire a careless worker, or when they transfer someone to
an undesirable position, they are relying on the power of avoidance learning.
Note that managers have another alternative, known as nonreinforcement, in which they provide no
consequence at all following a worker’s response. Nonreinforcement eventually reduces the likelihood of that
response reoccurring, which means that managers who fail to reinforce a worker’s desirable behavior are also
472 Chapter 14 Work Motivation for Performance
likely to see that desirable behavior less often. If Philip never rewards Ted when he finishes stocking on time,
for instance, Ted will probably stop trying to beat the clock. Nonreinforcement can also reduce the likelihood
that employees will repeat undesirable behaviors, although it doesn’t produce results as quickly as
punishment does. Furthermore, if other reinforcing consequences are present, nonreinforcement is unlikely to
be effective.
While punishment clearly works more quickly than does nonreinforcement, it has some potentially undesirable
side effects. Although punishment effectively tells a person what not to do and stops the undesired behavior, it
does not tell them what they should do. In addition, even when punishment works as intended, the worker
being punished often develops negative feelings toward the person who does the punishing. Although
sometimes it is very difficult for managers to avoid using punishment, it works best when reinforcement is
also used. An experiment conducted by two researchers at the University of Kansas found that using
nonmonetary reinforcement in addition to punitive disciplinary measures was an effective way to decrease
absenteeism in an industrial setting.20
Schedules of Reinforcement
When a person is learning a new behavior, like how to perform a new job, it is desirable to reinforce effective
behaviors every time they are demonstrated (this is called shaping). But in organizations it is not usually
possible to reinforce desired behaviors every time they are performed, for obvious reasons. Moreover,
research indicates that constantly reinforcing desired behaviors, termed continuous reinforcement, can be
detrimental in the long run. Behaviors that are learned under continuous reinforcement are quickly
extinguished (cease to be demonstrated). This is because people will expect a reward (the reinforcement)
every time they display the behavior. When they don’t receive it after just a few times, they quickly presume
that the behavior will no longer be rewarded, and they quit doing it. Any employer can change employees’
behavior by simply not paying them!
If behaviors cannot (and should not) be reinforced every time they are exhibited, how often should they be
reinforced? This is a question about schedules of reinforcement, or the frequency at which effective
employee behaviors should be reinforced. Much of the early research on operant conditioning focused on the
best way to maintain the performance of desired behaviors. That is, it attempted to determine how frequently
behaviors need to be rewarded so that they are not extinguished. Research zeroed in on four types of
reinforcement schedules:
Fixed Ratio. With this schedule, a fixed number of responses (let’s say five) must be exhibited before any of
the responses are reinforced. If the desired response is coming to work on time, then giving employees a $25
bonus for being punctual every day from Monday through Friday would be a fixed ratio of reinforcement.
Variable Ratio. A variable-ratio schedule reinforces behaviors, on average, a fixed number of times (again let’s
say five). Sometimes the tenth behavior is reinforced, other times the first, but on average every fifth response
is reinforced. People who perform under such variable-ratio schedules like this don’t know when they will be
rewarded, but they do know that they will be rewarded.
Fixed Interval. In a fixed-interval schedule, a certain amount of time must pass before a behavior is reinforced.
With a one-hour fixed-interval schedule, for example, a supervisor visits an employee’s workstation and
reinforces the first desired behavior she sees. She returns one hour later and reinforces the next desirable
behavior. This schedule doesn’t imply that reinforcement will be received automatically after the passage of
the time period. The time must pass and an appropriate response must be made.
Variable Interval. The variable interval differs from fixed-interval schedules in that the specified time interval
passes on average before another appropriate response is reinforced. Sometimes the time period is shorter
than the average; sometimes it is longer.
Which type of reinforcement schedule is best? In general, continuous reinforcement is best while employees
are learning their jobs or new duties. After that, variable-ratio reinforcement schedules are superior. In most
situations the fixed-interval schedule produces the least effective results, with fixed ratio and variable interval
falling in between the two extremes. But remember that effective behaviors must be reinforced with some
type of schedule, or they may become extinguished.
Equity Theory
Suppose you have worked for a company for several years. Your performance has been excellent, you have
received regular pay increases, and you get along with your boss and coworkers. One day you come to work to
find that a new person has been hired to work at the same job that you do. You are pleased to have the extra
help. Then, you find out the new person is making $100 more per week than you, despite your longer service
and greater experience. How do you feel? If you’re like most of us, you’re quite unhappy. Your satisfaction has
just evaporated. Nothing about your job has changed—you receive the same pay, do the same job, and work
for the same supervisor. Yet, the addition of one new employee has transformed you from a happy to an
unhappy employee. This feeling of unfairness is the basis for equity theory.
Equity theory states that motivation is affected by the outcomes we receive for our inputs compared to the
outcomes and inputs of other people.21 This theory is concerned with the reactions people have to outcomes
they receive as part of a “social exchange.” According to equity theory, our reactions to the outcomes we
receive from others (an employer) depend both on how we value those outcomes in an absolute sense and on
the circumstances surrounding their receipt. Equity theory suggests that our reactions will be influenced by
our perceptions of the “inputs” provided in order to receive these outcomes (“Did I get as much out of this as I
put into it?”). Even more important is our comparison of our inputs to what we believe others received for
their inputs (“Did I get as much for my inputs as my coworkers got for theirs?”).
Exhibit 14.11 The Equity Theory Comparison (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Outcomes are anything we perceive as getting back from the organization in exchange for our inputs. Again,
the value attached to an outcome is based on our perceptions and not necessarily on objective reality.
Common outcomes from organizations include pay, working conditions, job status, feelings of achievement,
and friendship opportunities. Both positive and negative outcomes influence our evaluation of equity. Stress,
headaches, and fatigue are also potential outcomes. Since any outcome we consider relevant to the exchange
influences our equity perception, we frequently include unintended factors (peer disapproval, family
reactions).
Equity theory predicts that we will compare our outcomes to our inputs in the form of a ratio. On the basis of
this ratio we make an initial determination of whether or not the situation is equitable. If we perceive that the
outcomes we receive are commensurate with our inputs, we are satisfied. If we believe that the outcomes are
not commensurate with our inputs, we are dissatisfied. This dissatisfaction can lead to ineffective behaviors for
the organization if they continue. The key feature of equity theory is that it predicts that we will compare our
ratios to the ratios of other people. It is this comparison of the two ratios that has the strongest effect on our
equity perceptions. These other people are called referent others because we “refer to” them when we judge
equity. Usually, referent others are people we work with who perform work of a similar nature. That is,
referent others perform jobs that are similar in difficulty and complexity to the employee making the equity
determination (see Exhibit 14.11).
Three conditions can result from this comparison. Our outcome-to-input ratio could equal the referent other’s.
This is a state of equity. A second result could be that our ratio is greater than the referent other’s. This is a
state of overreward inequity. The third result could be that we perceive our ratio to be less than that of the
referent other. This is a state of underreward inequity.
Equity theory has a lot to say about basic human tendencies. The motivation to compare our situation to that
of others is strong. For example, what is the first thing you do when you get an exam back in class? Probably
look at your score and make an initial judgment as to its fairness. For a lot of people, the very next thing they
do is look at the scores received by fellow students who sit close to them. A 75 percent score doesn’t look so
bad if everyone else scored lower! This is equity theory in action.
Most workers in the United States are at least partially dissatisfied with their pay.22 Equity theory helps explain
this. Two human tendencies create feelings of inequity that are not based in reality. One is that we tend to
overrate our performance levels. For example, one study conducted by your authors asked more than 600
employees to anonymously rate their performance on a 7-point scale (1 = poor, 7 = excellent). The average was
6.2, meaning the average employee rated his or her performance as very good to excellent. This implies that the
average employee also expects excellent pay increases, a policy most employers cannot afford if they are to
remain competitive. Another study found that the average employee (one whose performance is better than
half of the other employees and worse than the other half) rated her performance at the 80th percentile
(better than 80 percent of the other employees, worse than 20 percent).23 Again it would be impossible for
most organizations to reward the average employee at the 80th percentile. In other words, most employees
inaccurately overrate the inputs they provide to an organization. This leads to perceptions of inequity that are
not justified.
The second human tendency that leads to unwarranted perceptions of inequity is our tendency to overrate the
outcomes of others.24 Many employers keep the pay levels of employees a “secret.” Still other employers
actually forbid employees to talk about their pay. This means that many employees don’t know for certain how
much their colleagues are paid. And, because most of us overestimate the pay of others, we tend to think that
they’re paid more than they actually are, and the unjustified perceptions of inequity are perpetuated.
The bottom line for employers is that they need to be sensitive to employees’ need for equity. Employers need
to do everything they can to prevent feelings of inequity because employees engage in effective behaviors
when they perceive equity and ineffective behaviors when they perceive inequity.
$500 $600
John: <Mary:
As you can see, their ratios are not equal; that is, Mary receives greater outcome for equal input. Who is
experiencing inequity? According to equity theory, both John and Mary—underreward inequity for John, and
overreward inequity for Mary. Mary’s inequity won’t last long (in real organizations), but in our hypothetical
example, what might John do to resolve this?
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Adams identified a number of things people do to reduce the tension produced by a perceived state of
inequity. They change their own outcomes or inputs, or they change those of the referent other. They distort
their own perceptions of the outcomes or inputs of either party by using a different referent other, or they
leave the situation in which the inequity is occurring.
1. Alter inputs of the person. The perceived state of equity can be altered by changing our own inputs, that
is, by decreasing the quantity or quality of our performance. John can effect his own mini slowdown and
install only nine lug nuts on each car as it comes down the production line. This, of course, might cause
him to lose his job, so he probably won’t choose this alternative.
2. Alter outcomes of the person. We could attempt to increase outcomes to achieve a state of equity, like ask
for a raise, a nicer office, a promotion, or other positively valued outcomes. So John will likely ask for a
raise. Unfortunately, many people enhance their outcomes by stealing from their employers.
3. Alter inputs of the referent other. When underrewarded, we may try to achieve a state of perceived equity
by encouraging the referent other to increase their inputs. We may demand, for example, that the
referent other “start pulling their weight,” or perhaps help the referent other to become a better
performer. It doesn’t matter that the referent other is already pulling their weight—remember, this is all
about perception. In our example, John could ask Mary to put on two of his ten lug nuts as each car
comes down the assembly line. This would not likely happen, however, so John would be motivated to try
another alternative to reduce his inequity.
4. Alter outcomes of the referent other. We can “correct” a state of underreward by directly or indirectly
reducing the value of the other’s outcomes. In our example, John could try to get Mary’s pay lowered to
reduce his inequity. This too would probably not occur in the situation described.
5. Distort perceptions of inputs or outcomes. It is possible to reduce a perceived state of inequity without
changing input or outcome. We simply distort our own perceptions of our inputs or outcomes, or we
distort our perception of those of the referent other. Thus, John may tell himself that “Mary does better
work than I thought” or “she enjoys her work much less than I do” or “she gets paid less than I realized.”
6. Choose a different referent other. We can also deal with both over- and underreward inequities by
changing the referent other (“my situation is really more like Ahmed’s”). This is the simplest and most
powerful way to deal with perceived inequity: it requires neither actual nor perceptual changes in
anybody’s input or outcome, and it causes us to look around and assess our situation more carefully. For
example, John might choose as a referent other Bill, who installs dashboards but makes less money than
John.
7. Leave the situation. A final technique for dealing with a perceived state of inequity involves removing
ourselves from the situation. We can choose to accomplish this through absenteeism, transfer, or
termination. This approach is usually not selected unless the perceived inequity is quite high or other
attempts at achieving equity are not readily available. Most automobile workers are paid quite well for
their work. John is unlikely to find an equivalent job, so it is also unlikely that he will choose this option.
employers don’t practice discretion—they usually don’t reveal specific employees’ exact pay. But they do tell
employees the minimum and maximum pay levels for their jobs and the pay scales for the jobs of others in the
organization. Such practices give employees a factual basis for judging equity.
Supervisors play a key role in creating perceptions of equity. “Playing favorites” ensures perceptions of
inequity. Employees want to be rewarded on their merits, not the whims of their supervisors. In addition,
supervisors need to recognize differences in employees in their reactions to inequity. Some employees are
highly sensitive to inequity, and a supervisor needs to be especially cautious around them.26 Everyone is
sensitive to reward allocation.27 But “equity sensitives” are even more sensitive. A major principle for
supervisors, then, is simply to implement fairness. Never base punishment or reward on whether or not you
like an employee. Reward behaviors that contribute to the organization, and discipline those that do not. Make
sure employees understand what is expected of them, and praise them when they do it. These practices make
everyone happier and your job easier.
Goal Theory
No theory is perfect. If it was, it wouldn’t be a theory. It would be a set of facts. Theories are sets of
propositions that are right more often than they are wrong, but they are not infallible. However, the basic
propositions of goal theory* come close to being infallible. Indeed, it is one of the strongest theories in
organizational behavior.
The second basic premise is that difficult goals result in better performance than easy goals. This does not
mean that difficult goals are always achieved, but our performance will usually be better when we intend to
achieve harder goals. Your goal of an A in Classical Mechanics at Cal Tech may not get you your A, but it may
earn you a B+, which you wouldn’t have gotten otherwise. Difficult goals cause us to exert more effort, and
this almost always results in better performance.
Another premise of goal theory is that specific goals are better than vague goals. We often wonder what we
need to do to be successful. Have you ever asked a professor “What do I need to do to get an A in this
course?” If she responded “Do well on the exams,” you weren’t much better off for having asked. This is a
vague response. Goal theory says that we perform better when we have specific goals. Had your professor
told you the key thrust of the course, to turn in all the problem sets, to pay close attention to the essay
questions on exams, and to aim for scores in the 90s, you would have something concrete on which to build a
strategy.
A key premise of goal theory is that people must accept the goal. Usually we set our own goals. But sometimes
others set goals for us. Your professor telling you your goal is to “score at least a 90 percent on your exams”
doesn’t mean that you’ll accept this goal. Maybe you don’t feel you can achieve scores in the 90s. Or, you’ve
478 Chapter 14 Work Motivation for Performance
heard that 90 isn’t good enough for an A in this class. This happens in work organizations quite often.
Supervisors give orders that something must be done by a certain time. The employees may fully understand
what is wanted, yet if they feel the order is unreasonable or impossible, they may not exert much effort to
accomplish it. Thus, it is important for people to accept the goal. They need to feel that it is also their goal. If
they do not, goal theory predicts that they won’t try as hard to achieve it.
Goal theory also states that people need to commit to a goal in addition to accepting it. Goal commitment is
the degree to which we dedicate ourselves to achieving a goal. Goal commitment is about setting priorities.
We can accept many goals (go to all classes, stay awake during classes, take lecture notes), but we often end
up doing only some of them. In other words, some goals are more important than others. And we exert more
effort for certain goals. This also happens frequently at work. A software analyst’s major goal may be to write
a new program. Her minor goal may be to maintain previously written programs. It is minor because
maintaining old programs is boring, while writing new ones is fun. Goal theory predicts that her commitment,
and thus her intensity, to the major goal will be greater.
Allowing people to participate in the goal-setting process often results in higher goal commitment. This has to
do with ownership. And when people participate in the process, they tend to incorporate factors they think will
make the goal more interesting, challenging, and attainable. Thus, it is advisable to allow people some input
into the goal-setting process. Imposing goals on them from the outside usually results in less commitment
(and acceptance).
The basic goal-setting model is shown in Exhibit 14.12. The process starts with our values. Values are our
beliefs about how the world should be or act, and often include words like “should” or “ought.” We compare
our present conditions against these values. For example, Randi holds the value that everyone should be a
hard worker. After measuring her current work against this value, Randi concludes that she doesn’t measure
up to her own value. Following this, her goal-setting process begins. Randi will set a goal that affirms her
status as a hard worker. Exhibit 14.12 lists the four types of goals. Some goals are self-set. (Randi decides to
word process at least 70 pages per day.) Participative goals are jointly set. (Randi goes to her supervisor, and
together they set some appropriate goals for her.) In still other cases, goals are assigned. (Her boss tells her
that she must word process at least 60 pages per day.) The fourth type of goal, which can be self-set, jointly
determined, or assigned, is a “do your best” goal. But note this goal is vague, so it usually doesn’t result in the
best performance.
Exhibit 14.12 The Goal-Setting Process (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Depending on the characteristics of Randi’s goals, she may or may not exert a lot of effort. For maximum
effort to result, her goals should be difficult, specific, accepted, and committed to. Then, if she has sufficient
ability and lack of constraints, maximum performance should occur. Examples of constraints could be that her
old computer frequently breaks down or her supervisor constantly interferes.
The consequence of endeavoring to reach her goal will be that Randi will be satisfied with herself. Her
behavior is consistent with her values. She’ll be even more satisfied if her supervisor praises her performance
and gives her a pay increase!
In Randi’s case, her goal achievement resulted in several benefits. However, this doesn’t always happen. If
goals are not achieved, people may be unhappy with themselves, and their employer may be dissatisfied as
well. Such an experience can make a person reluctant to accept goals in the future. Thus, setting difficult yet
attainable goals cannot be stressed enough.
Goal theory can be a tremendous motivational tool. In fact, many organizations practice effective
management by using a technique called “management by objectives” (MBO). MBO is based on goal theory
and is quite effective when implemented consistently with goal theory’s basic premises.
Despite its many strengths, several cautions about goal theory are appropriate. Locke has identified most of
them.30 First, setting goals in one area can lead people to neglect other areas. (Randi may word process 70
pages per day, but neglect her proofreading responsibilities.) It is important that goals be set for most major
duties. Second, goal setting sometimes has unintended consequences. For example, employees set easy goals
so that they look good when they achieve them. Or it causes unhealthy competition between employees. Or an
employee sabotages the work of others so that only she has goal achievement.
Some managers use goal setting in unethical ways. They may manipulate employees by setting impossible
goals. This enables them to criticize employees even when the employees are doing superior work and, of
course, causes much stress. Goal setting should never be abused. Perhaps the key caution about goal setting
is that it often results in too much focus on quantified measures of performance. Qualitative aspects of a job
or task may be neglected because they aren’t easily measured. Managers must keep employees focused on
the qualitative aspects of their jobs as well as the quantitative ones. Finally, setting individual goals in a
teamwork environment can be counterproductive.31 Where possible, it is preferable to have group goals in
situations where employees depend on one another in the performance of their jobs.
The cautions noted here are not intended to deter you from using goal theory. We note them so that you can
avoid the pitfalls. Remember, employees have a right to reasonable performance expectations and the
rewards that result from performance, and organizations have a right to expect high performance levels from
employees. Goal theory should be used to optimize the employment relationship. Goal theory holds that
people will exert effort to accomplish goals if those goals are difficult to achieve, accepted by the individual,
and specific in nature.
Expectancy Theory
Expectancy theory posits that we will exert much effort to perform at high levels so that we can obtain valued
outcomes. It is the motivation theory that many organizational behavior researchers find most intriguing, in
no small part because it is currently also the most comprehensive theory. Expectancy theory ties together
many of the concepts and hypotheses from the theories discussed earlier in this chapter. In addition, it points
to factors that other theories miss. Expectancy theory has much to offer the student of management and
organizational behavior.
480 Chapter 14 Work Motivation for Performance
Expectancy theory is sufficiently general that it is useful in a wide variety of situations. Choices between job
offers, between working hard or not so hard, between going to work or not—virtually any set of possibilities
can be addressed by expectancy theory. Basically, the theory focuses on two related issues:
Expectancy theory thus focuses on the two major aspects of motivation, direction (which alternative?) and
intensity (how much effort to implement the alternative?). The attractiveness of an alternative is determined by
our “expectations” of what is likely to happen if we choose it. The more we believe that the alternative chosen
will lead to positively valued outcomes, the greater its attractiveness to us.
Expectancy theory states that, when faced with two or more alternatives, we will select the most attractive one.
And, the greater the attractiveness of the chosen alternative, the more motivated we will be to pursue it. Our
natural hedonism, discussed earlier in this chapter, plays a role in this process. We are motivated to maximize
desirable outcomes (a pay raise) and minimize undesirable ones (discipline). Expectancy theory goes on to
state that we are also logical in our decisions about alternatives. It considers people to be rational. People
evaluate alternatives in terms of their “pros and cons,” and then choose the one with the most “pros” and
fewest “cons.”
The effort-performance expectancy, abbreviated E1, is the perceived probability that effort will lead to
performance (or E ➨ P). Performance here means anything from doing well on an exam to assembling 100
toasters a day at work. Sometimes people believe that no matter how much effort they exert, they won’t
perform at a high level. They have weak E1s. Other people have strong E1s and believe the opposite—that is,
that they can perform at a high level if they exert high effort. You all know students with different E1s—those
who believe that if they study hard they’ll do well, and those who believe that no matter how much they study
they’ll do poorly. People develop these perceptions from prior experiences with the task at hand, and from
self-perceptions of their abilities. The core of the E1 concept is that people don’t always perceive a direct
relationship between effort level and performance level.
The performance-outcome expectancy, E2, is the perceived relationship between performance and
[1]
outcomes (or P ➨ O). Many things in life happen as a function of how well we perform various tasks. E2
addresses the question “What will happen if I perform well?” Let’s say you get an A in your Classical
Mechanics course at Cal Tech. You’ll be elated, your classmates may envy you, and you are now assured of that
plum job at NASA. But let’s say you got a D. Whoops, that was the last straw for the dean. Now you’ve flunked
out, and you’re reduced to going home to live with your parents (perish the thought!). Likewise, E2
perceptions develop in organizations, although hopefully not as drastically as your beleaguered career at Cal
Tech. People with strong E2s believe that if they perform their jobs well, they’ll receive desirable
outcomes—good pay increases, praise from their supervisor, and a feeling that they’re really contributing. In
the same situation, people with weak E2s will have the opposite perceptions—that high performance levels
don’t result in desirable outcomes and that it doesn’t really matter how well they perform their jobs as long as
they don’t get fired.
1 Sometimes E2s are called instrumentalities, because they are the perception that performance is instrumental in getting some desired
outcome.
Valences are the easiest of the expectancy theory concepts to describe. Valences are simply the degree to
which we perceive an outcome as desirable, neutral, or undesirable. Highly desirable outcomes (a 25 percent
pay increase) are positively valent. Undesirable outcomes (being disciplined) are negatively valent. Outcomes
that we’re indifferent to (where you must park your car) have neutral valences. Positively and negatively valent
outcomes abound in the workplace—pay increases and freezes, praise and criticism, recognition and rejection,
promotions and demotions. And as you would expect, people differ dramatically in how they value these
outcomes. Our needs, values, goals, and life situations affect what valence we give an outcome. Equity is
another consideration we use in assigning valences. We may consider a 10 percent pay increase desirable until
we find out that it was the lowest raise given in our work group.
Exhibit 14.13 summarizes the three core concepts of expectancy theory. The theory states that our
perceptions about our surroundings are essentially predictions about “what leads to what.” We perceive that
certain effort levels result in certain performance levels. We perceive that certain performance levels result in
certain outcomes. Outcomes can be extrinsic, in that others (our supervisor) determine whether we receive
them, or intrinsic, in that we determine if they are received (our sense of achievement). Each outcome has an
associated valence (outcome A’s valence is V a ). Expectancy theory predicts that we will exert effort that
[2]
results in the maximum amount of positive-valence outcomes. If our E1 or E2 is weak, or if the outcomes are
not sufficiently desirable, our motivation to exert effort will be low. Stated differently, an individual will be
motivated to try to achieve the level of performance that results in the most rewards.
2
It can also be expressed as an equation:
Force to
Choose = E1× ∑ ⎛⎝E2 o×V o⎞⎠
A level of Effo t
Where V o is the valence of a given outcome (o), and E2 o is the perceived probability that a certain level of performance (e.g., Excellent,
average, poor) will result in that outcome. So, for multiple outcomes, and different performance levels, the valence of the outcome and its
associated performance➔outcome expectancy (E2) are multiplied and added to the analogous value for the other outcomes. Combined with
the E1 (the amount of effort required to produce a level of performance), the effort level with the greatest force associated with it will be chosen
by the individual.
482 Chapter 14 Work Motivation for Performance
Exhibit 14.13 The Expectancy Theory of Motivation (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Vo is the valence of the outcome. The effort level with the greatest force associated with it will be chosen by
the individual.
Why might an employee perceive that positive outcomes are not associated with high performance? Or that
negative outcomes are not associated with low performance? That is, why would employees develop weak
E2s? This happens for a number of reasons. The main one is that many organizations subscribe too strongly to
a principle of equality (not to be confused with equity). They give all of their employees equal salaries for equal
work, equal pay increases every year (these are known as across-the-board pay raises), and equal treatment
wherever possible. Equality-focused organizations reason that some employees “getting more” than others
leads to disruptive competition and feelings of inequity.
In time employees in equality-focused organizations develop weak E2s because no distinctions are made for
differential outcomes. If the best and the worst salespeople are paid the same, in time they will both decide
that it isn’t worth the extra effort to be a high performer. Needless to say, this is not the goal of competitive
organizations and can cause the demise of the organization as it competes with other firms in today’s global
marketplace.
Expectancy theory states that to maximize motivation, organizations must make outcomes contingent on
performance. This is the main contribution of expectancy theory: it makes us think about how organizations
should distribute outcomes. If an organization, or a supervisor, believes that treating everyone “the same” will
result in satisfied and motivated employees, they will be wrong more times than not. From equity theory we
know that some employees, usually the better-performing ones, will experience underreward inequity. From
expectancy theory we know that employees will see no difference in outcomes for good and poor
performance, so they will not have as much incentive to be good performers. Effective organizations need to
actively encourage the perception that good performance leads to positive outcomes (bonuses, promotions)
and that poor performance leads to negative ones (discipline, termination). Remember, there is a big
difference between treating employees equally and treating them equitably.
What if an organization ties positive outcomes to high performance and negative outcomes to low
performance? Employees will develop strong E2s. But will this result in highly motivated employees? The
answer is maybe. We have yet to address employees’ E1s. If employees have weak E1s, they will perceive that
high (or low) effort does not result in high performance and thus will not exert much effort. It is important for
managers to understand that this can happen despite rewards for high performance.
Task-related abilities are probably the single biggest reason why some employees have weak E1s. Self-efficacy
is our belief about whether we can successfully execute some future action or task, or achieve some result.
High self-efficacy employees believe that they are likely to succeed at most or all of their job duties and
responsibilities. And as you would expect, low self-efficacy employees believe the opposite. Specific self-
efficacy reflects our belief in our capability to perform a specific task at a specific level of performance. If we
believe that the probability of our selling $30,000 of jackrabbit slippers in one month is .90, our self-efficacy for
this task is high. Specific self-efficacy is our judgment about the likelihood of successful task performance
measured immediately before we expend effort on the task. As a result, specific self-efficacy is much more
variable than more enduring notions of personality. Still, there is little doubt that our state-based beliefs are
some of the most powerful motivators of behavior. Our efficacy expectations at a given point in time
determine not only our initial decision to perform (or not) a task, but also the amount of effort we will expend
and whether we will persist in the face of adversity.32 Self-efficacy has a strong impact on the E1 factor. As a
result, self-efficacy is one of the strongest determinants of performance in any particular task situation. 33
Employees develop weak E1s for two reasons. First, they don’t have sufficient resources to perform their jobs.
Resources can be internal or external. Internal resources include what employees bring to the job (such as
prior training, work experience, education, ability, and aptitude) and their understanding of what they need to
do to be considered good performers. The second resource is called role perceptions—how employees believe
their jobs are done and how they fit into the broader organization. If employees don’t know how to become
good performers, they will have weak E1s. External resources include the tools, equipment, and labor
necessary to perform a job. The lack of good external resources can also cause E1s to be weak.
The second reason for weak E1s is an organization’s failure to measure performance accurately. That is,
performance ratings don’t correlate well with actual performance levels. How does this happen? Have you ever
gotten a grade that you felt didn’t reflect how much you learned? This also happens in organizations. Why are
ratings sometimes inaccurate? Supervisors, who typically give out ratings, well, they’re human. Perhaps
they’re operating under the mistaken notion that similar ratings for everyone will keep the team happy.
Perhaps they’re unconsciously playing favorites. Perhaps they don’t know what good and poor performance
levels are. Perhaps the measurements they’re expected to use don’t fit their product/team/people. Choose
one or all of these. Rating people is rarely easy.
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Whatever the cause of rating errors, some employees may come to believe that no matter what they do they
will never receive a high performance rating. They may in fact believe that they are excellent performers but
that the performance rating system is flawed. Expectancy theory differs from most motivation theories
because it highlights the need for accurate performance measurement. Organizations cannot motivate
employees to perform at a high level if they cannot identify high performers.
Organizations exert tremendous influence over employee choices in their performance levels and how much
effort to exert on their jobs. That is, organizations can have a major impact on the direction and intensity of
employees’ motivation levels. Practical applications of expectancy theory include:
1. Strengthening the effort ➨ performance expectancy by selecting employees who have the necessary
abilities, providing proper training, providing experiences of success, clarifying job responsibilities, etc.
2. Strengthening the performance ➨ outcome expectancy with policies that specify that desirable behavior
leads to desirable outcomes and undesirable behavior leads to neutral or undesirable outcomes.
Consistent enforcement of these policies is key—workers must believe in the contingencies.
3. Systematically evaluating which outcomes employees value. The greater the valence of outcomes offered
for a behavior, the more likely employees will commit to that alternative. By recognizing that different
employees have different values and that values change over time, organizations can provide the most
highly valued outcomes.
4. Ensuring that effort actually translates into performance by clarifying what actions lead to performance
and by appropriate training.
5. Ensuring appropriate worker outcomes for performance through reward schedules (extrinsic outcomes)
and appropriate job design (so the work experience itself provides intrinsic outcomes).
6. Examining the level of outcomes provided to workers. Are they equitable, given the worker’s inputs? Are
they equitable in comparison to the way other workers are treated?
7. Measuring performance levels as accurately as possible, making sure that workers are capable of being
high performers.
MANAGING CHANGE
Keeping employees motivated by making them feel valued and appreciated is not just a “Western” idea.
The Ghanaian blog site Starrfmonline emphasizes that employee motivation and associated work quality
improve when employees feel “valued, trusted, challenged, and supported in their work.” Conversely,
when employees feel like a tool rather than a person, or feel unengaged with their work, then
productivity suffers. A vicious cycle can then begin when the manager treats an employee as
unmotivated and incapable, which then demotivates the employee and elicits the predicted response.
The blogger cites an example from Eastern Europe where a manager sidelined an employee as inefficient
and incompetent. After management coaching, the manager revisited his assessment and began
working with the employee. As he worked to facilitate the employee’s efficiency and motivation, the
employee went from being the lowest performer to a valuable team player. In the end, the blog says,
“The very phrase ‘human resources’ frames employees as material to be deployed for organizational
objectives. While the essential nature of employment contracts involves trading labour for remuneration,
if we fail to see and appreciate our employees as whole people, efforts to motivate them will meet with
limited success” (Starrfmonline 2017 n.p.)
Pavel Vosk, a business and management consultant based in Puyallup, Washington, says that too often,
overachieving employees turn into unmotivated ones. In looking for the answer, he found that the most
common source was a lack of recognition for the employee’s effort or exceptional performance. In fact,
Vosk found that most employees go the extra mile only three times before they give up. Vosk’s advice is
to show gratitude for employees’ effort, especially when it goes above and beyond. He says the
recognition doesn’t have to be over the top, just anything that the employees will perceive as gratitude,
from a catered lunch for a team working extra hours to fulfill a deadline to a simple face-to-face thank
you (Huhman 2017).
Richard Frazao, president of Quaketek, based in Montreal, Quebec, stresses talking to the employees and
making certain they are engaged in their jobs, citing boredom with one’s job as a major demotivating
factor (Huhman 2017).
But motivating employees is not “one size fits all” globally. Rewarding and recognizing individuals and
their achievements works fine in Western cultures but is undesirable in Asian cultures, which value
teamwork and the collective over the individual. Whether to reward effort with a pay raise or with a job
title or larger office is influenced by culture. Demoting an employee for poor performance is an effective
motivator in Asian countries but is likely to result in losing an employee altogether in Western cultures.
According to Matthew MacLachlan at Communicaid, “Making the assumption that your international
workforce will be motivated by the same incentives can be dangerous and have a real impact on talent
retention” (2016 n.p.).
Huhman, Heather R. 2017. “Employee Motivation Has to Be More Than 'a Pat on the Back.’” Entrepreneur.
https://www.entrepreneur.com/article/287770
MacLachlan, Matthew. 2016. “Management Tips: How To Motivate Your International Workforce.”
Communicaid. https://www.communicaid.com/cross-cultural-training/blog/motivating-international-
workforce/
Starrfmonline. 2017. “HR Today: Motivating People Starts With Right Attitude.”
http://starrfmonline.com/2017/03/30/hr-today-motivating-people-starts-with-right-attitude/#
1. As a Western manager working in the Middle East or sub-Saharan Africa, what motivational issues
might you face?
2. What problems would you expect a manager from a Confucian culture to encounter managing
employees in America? In Europe?
3. What regional, cultural, or ethnic issues do you think managers have to navigate within the United
States?
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1. Need theories state that we are motivated to satisfy our needs. We positively value outcomes that satisfy
unmet needs, negatively value outcomes that thwart the satisfaction of unmet needs, and assign neutral
values to outcomes that do neither. In effect, the need theories explain how valences are formed.
2. Operant conditioning theories state that we will probably repeat a response (behavior) in the future that
was reinforced in the past (that is, followed by a positively valued consequence or the removal of a
negatively valued consequence). This is the basic process involved in forming performance ➨ outcome
expectancies. Both operant theories and expectancy theory argue that our interactions with our
environment influence our future behavior. The primary difference is that expectancy theory explains this
process in cognitive (rational) terms.
3. Equity theories state that our satisfaction with a set of outcomes depends not only on how we value them
but also on the circumstances surrounding their receipt. Equity theory, therefore, explains part of the
process shown in Exhibit 14.11. If we don’t feel that the outcomes we receive are equitable compared to
a referent other, we will associate a lower or even negative valence with those outcomes.
4. Goal theory can be integrated with the expanded expectancy model in several ways. Locke has noted that
expectancy theory explains how we go about choosing a particular goal.34 A reexamination of Exhibit
14.11 reveals other similarities between goal theory and expectancy theory. Locke’s use of the term “goal
acceptance” to identify the personal adoption of a goal is similar to the “choice of an alternative” in the
expectancy model. Locke’s “goal commitment,” the degree to which we commit to reaching our accepted
(chosen) goal, is very much like the expectancy description of choice of effort level. Locke argues that the
difficulty and specificity of a goal are major determinants of the level of performance attempted (goal-
directed effort), and expectancy theory appears to be consistent with this argument (even though
expectancy theory is not as explicit on this point). We can reasonably conclude that the major underlying
processes explored by the two models are very similar and will seldom lead to inconsistent
recommendations.
CONCEPT CHECK
1. Understand the process theories of motivation: operant conditioning, equity, goal, and expectancy
theories.
2. Describe the managerial factors managers must consider when applying motivational approaches.
Employee motivation continues to be a major focus in organizational behavior.35 We briefly summarize current
motivation research here.
Content Theories
There is some interest in testing content theories (including Herzberg’s two-factor theory), especially in
international research. Need theories are still generally supported, with most people identifying such
workplace factors as recognition, advancement, and opportunities to learn as the chief motivators for them.
This is consistent with need satisfaction theories. However, most of this research does not include actual
measures of employee performance. Thus, questions remain about whether the factors that employees say
motivate them to perform actually do.
Equity Theory
Equity theory continues to receive strong research support. The major criticism of equity theory, that the
inputs and outcomes people use to evaluate equity are ill-defined, still holds. Because each person defines
inputs and outcomes, researchers are not in a position to know them all. Nevertheless, for the major inputs
(performance) and outcomes (pay), the theory is a strong one. Major applications of equity theory in recent
years incorporate and extend the theory into the area called organizational justice. When employees receive
rewards (or punishments), they evaluate them in terms of their fairness (as discussed earlier). This is
distributive justice. Employees also assess rewards in terms of how fair the processes used to distribute them
are. This is procedural justice. Thus during organizational downsizing, when employees lose their jobs, people
ask whether the loss of work is fair (distributive justice). But they also assess the fairness of the process used
to decide who is laid off (procedural justice). For example, layoffs based on seniority may be perceived as more
fair than layoffs based on supervisors’ opinions.
Goal Theory
It remains true that difficult, specific goals result in better performance than easy and vague goals, assuming
they are accepted. Recent research highlights the positive effects of performance feedback and goal
commitment in the goal-setting process. Monetary incentives enhance motivation when they are tied to goal
achievement, by increasing the level of goal commitment. There are negative sides to goal theory as well. If
goals conflict, employees may sacrifice performance on important job duties. For example, if both quantitative
and qualitative goals are set for performance, employees may emphasize quantity because this goal
achievement is more visible.
Expectancy Theory
The original formulation of expectancy theory specifies that the motivational force for choosing a level of
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effort is a function of the multiplication of expectancies and valences. Recent research demonstrates that the
individual components predict performance just as well, without being multiplied. This does not diminish the
value of expectancy theory. Recent research also suggests that high performance results not only when the
valence is high, but also when employees set difficult goals for themselves.
One last comment on motivation: As the world of work changes, so will the methods organizations use to
motivate employees. New rewards—time off instead of bonuses; stock options; on-site gyms, cleaners, and
dental services; opportunities to telecommute; and others—will need to be created in order to motivate
employees in the future. One useful path that modern researchers can undertake is to analyze the previous
studies and aggregate the findings into more conclusive understanding of the topic through meta-analysis
studies.36
C AT C H I N G T H E E N T R E P R E N E U R I A L S P I R I T
Working from her home in Egypt, at age 30 Yasmine El-Mehairy launched Supermama.me, a start-up
aimed at providing information to mothers throughout the Arab world. When the company began, El-
Mehairy worked full time at her day job and 60 hours a week after that getting the site established. She
left her full-time job to manage the site full time in January 2011, and the site went live that October. El-
Mehairy is motivated to keep moving forward, saying that if she stops, she might not get going again
(Knowledge @ Wharton 2012).
For El-Mehairy, the motivation didn’t come from a desire to work for a big company or travel the world
and secure a master’s degree from abroad. She had already done that. Rather, she said she was
motivated to “do something that is useful and I want to do something on my own” (Knowledge @
Wharton 2012 n.p.).
Lauren Lipcon, who founded a company called Injury Funds Now, attributes her ability to stay motivated
to three factors: purpose, giving back, and having fun outside of work. Lipcon believes that most
entrepreneurs are not motivated by money, but by a sense of purpose. Personally, she left a job with
Arthur Andersen to begin her own firm out of a desire to help people. She also thinks it is important for
people to give back to their communities because the change the entrepreneur sees in the community
loops back, increasing motivation and making the business more successful. Lipcon believes that having
a life outside of work helps keep the entrepreneur motivated. She particularly advocates for physical
activity, which not only helps the body physically, but also helps keep the mind sharp and able to focus
(Rashid 2017).
But do all entrepreneurs agree on what motivates them? A July 17, 2017 survey on the hearpreneur blog
site asked 23 different entrepreneurs what motivated them. Seven of the 23 referred to some sense of
purpose in what they were doing as a motivating factor, with one response stressing the importance of
discovering one’s “personal why.” Of the remaining entrepreneurs, answers varied from keeping a
positive attitude (three responses) and finding external sources (three responses) to meditation and
prayer (two responses). One entrepreneur said his greatest motivator was fear: the fear of being in the
same place financially one year in the future “causes me to take action and also alleviates my fear of risk”
(Hear from Entrepreneurs 2017 n.p.). Only one of the 23 actually cited money and material success as a
motivating factor to keep working.
However it is described, entrepreneurs seem to agree that passion and determination are key factors
that carry them through the grind of the day-to-day.
Sources:
Hear from Entrepreneurs. 2017. “23 Entrepreneurs Explain Their Motivation or if ‘Motivation is
Garbage.’” https://hear.ceoblognation.com/2017/07/17/23-entrepreneurs-explain-motivation-
motivation-garbage/
Rashid, Brian. 2017. “How This Entrepreneur Sustains High Levels of Energy and Motivation.” Forbes.
https://www.forbes.com/sites/brianrashid/2017/05/26/how-this-entrepreneur-sustains-high-levels-of-
energy-and-motivation/2/#2a8ec5591111
Questions:
1. In the article from Hear from Entrepreneurs, one respondent called motivation “garbage”? Would
you agree or disagree, and why?
2. How is staying motivated as an entrepreneur similar to being motivated to pursue a college degree?
Do you think the two are related? How?
3. How would you expect motivation to vary across cultures?[/BOX]
CONCEPT CHECK
Key Terms
ability The knowledge, skills, and receptiveness to learning that an individual brings to a task or job.
avoidance learning Occurs when people learn to behave in a certain way to avoid encountering an
undesired or unpleasant consequence.
content motivation theories Theories that focus on what motivates people.
direction What a person is motivated to achieve.
effort-performance expectancy E1, the perceived probability that effort will lead to performance (or E ➨ P).
equity theory States that human motivation is affected by the outcomes people receive for their inputs,
compared to the outcomes and inputs of other people.
ERG theory Compresses Maslow’s five need categories into three: existence, relatedness, and growth.
expectancy theory Posits that people will exert high effort levels to perform at high levels so that they can
obtain valued outcomes.
extinction Occurs when a consequence or lack of a consequence makes it less likely that a behavior will be
repeated in the future.
extrinsic motivation Occurs when a person performs a given behavior to acquire something that will satisfy
a lower-order need.
extrinsic outcomes Are awarded or given by other people (like a supervisor).
goal commitment The degree to which people dedicate themselves to achieving a goal.
goal theory States that people will perform better if they have difficult, specific, accepted performance goals
or objectives.
hedonism Assumes that people are motivated to satisfy mainly their own needs (seek pleasure, avoid pain).
hygienes Factors in the work environment that are based on the basic human need to “avoid pain.”
input Any personal qualities that a person views as having value and that are relevant to the organization.
instincts Our natural, fundamental needs, basic to our survival.
intensity (1) The degree to which people try to achieve their targets; (2) the forcefulness that enhances the
likelihood that a stimulus will be selected for perceptual processing.
intrinsic motivation Arises out of performing a behavior in and of itself, because it is interesting or “fun” to
do.
intrinsic outcomes Are awarded or given by people to themselves (such as a sense of achievement).
latent needs Cannot be inferred from a person’s behavior at a given time, yet the person may still possess
those needs.
manifest needs Are needs motivating a person at a given time.
manifest needs theory Assumes that human behavior is driven by the desire to satisfy needs.
motivation A force within or outside of the body that energizes, directs, and sustains human behavior.
Within the body, examples might be needs, personal values, and goals, while an incentive might be seen
as a force outside of the body. The word stems from its Latin root movere, which means “to move.”
motivators Relate to the jobs that people perform and people’s ability to feel a sense of achievement as a
result of performing them.
motive A source of motivation; the need that a person is attempting to satisfy.
need A human condition that becomes energized when people feel deficient in some respect.
need for achievement (nAch) The need to excel at tasks, especially tasks that are difficult.
need for affiliation (nAff) The need to establish and maintain warm and friendly relationships with other
people.
need for power (nPow) The need to control things, especially other people; reflects a motivation to
This chapter has covered the major motivation theories in organizational behavior. Motivation theories
endeavor to explain how people become motivated. Motivation has two major components: direction and
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intensity. Direction is what a person is trying to achieve. Intensity is the degree of effort a person expends to
achieve the target. All motivation theories address the ways in which people develop direction and intensity.
Motivation theories are classified as either content or process theories. Content theories focus on what
motivates behavior. The basic premise of content theories is that humans have needs. When these needs are
not satisfied, humans are motivated to satisfy the need. The need provides direction for motivation. Murray’s
manifest needs theory, McClelland’s learned needs theory, Maslow’s hierarchy of needs, and Herzberg’s
motivator-hygiene theory are all content theories. Each has something to say about the needs that motivate
humans in the workplace.
Process theories focus on how people become motivated. Operant conditioning theory states that people will
be motivated to engage in behaviors for which they have been reinforced (rewarded). It also states that
people will avoid behaviors that are punished. The rate at which behaviors are rewarded also affects how often
they will be displayed. Equity theory’s main premise is that people compare their situations to those of other
people. If a person feels that they are being treated unfairly relative to a referent other, the person may
engage in behaviors that are counterproductive for the organization. Employers should try to develop feelings
of fairness in employees. Goal theory is a strong theory. It states that difficult, specific goals will result in high
performance if employees accept the goals and are committed to achieving them.
Expectancy theory is a process theory. It also is the broadest of the motivation theories. Expectancy theory
predicts that employees will be motivated to be high performers if they perceive that high performance leads
to valued outcomes. Employees will be motivated to avoid being low performers if they perceive that it leads to
negative outcomes. Employees must perceive that they are capable of achieving high performance, and they
must have the appropriate abilities and high self-efficacy. Organizations need to provide adequate resources
and to measure performance accurately. Inaccurate performance ratings discourage high performance.
Overall, expectancy theory draws attention to how organizations structure the work environment and
distribute rewards.
comment to a coworker. What do you do to investigate the matter, and what actions would you take with
your report, the person that the comment was directed to, and other people in the organization?
3. You learn that an employee who doesn’t report to you has made an inappropriate comment to one of
your direct reports. What do you do to investigate the matter, and what actions would you take with your
report, the person that made the comment, their manager, and other people in the organization?
4. Your company is considering implementing a 360° appraisal system where up to 10 people in the
organization provide feedback on every employee as part of the annual performance appraisal process.
This feedback will come from subordinates, peers, and senior managers as well as individuals in other
departments. You have been asked to prepare a memo to the director of human resources about the
positive and negative effects this could have on the motivation of employees. Note that not all of the
employees are on a bonus plan that will be impacted by this feedback.
Census Bureau data for 2017 shows that e-commerce, or online shopping, accounted for 8.9 percent of all
retail sales in the United States, accounting for $111.5 billion (U.S. Census Bureau 2017). Feeling the pinch,
many malls across the country are closing their doors, and their empty retail spaces are being repurposed.
Credit Suisse predicts that due to competition from online shopping, 20 to 25 percent of American malls will
close within the next five years (Dying Malls Make Room for New Condos Apartment 2017). Furthermore,
according to a 2017 study, 23 percent of Americans already purchase their groceries online (Embrace the
Internet, Skip the Checkout 2017).
Whether face-to-face with customers or filling orders in a warehouse, motivated employees are essential to
business success. And company culture helps drive that motivation. As a 2015 Harvard Business Review article
put it, “Why we work determines how well we work” (McGregor & Doshi 2015). Adapting earlier research for
the modern workplace, the study found six reasons that people work: play, purpose, potential, emotional
pressure, economic pressure, and inertia. The first three are positive motives while that later three are
negative. The researchers found that role design, more than any other factor, had the highest impact on
employee motivation.
Anecdotally, using role design to motivate employees can be seen across industries. Toyota allows factory
workers to innovate new processes on the factory floor. Southwest Airlines encourages a sense of "play"
among crewmembers who interact directly with passengers (which has resulted in some humorous viral
videos). A sense of the organization’s identity (and a desire to be part of it) and how the career ladder within
the company is perceived are second and third in their impact on employee motivation. Unhealthy competition
for advancement can do more harm than good to employee motivation, and as a result many large companies
are restructuring their performance review and advancement systems (McGregor & Doshi 2015). Conversely,
costs from unmotivated employees can be high. In August 2017, retailer JCPenney had an employee arrested
who had allegedly cost the company more than $10,000 in stolen cash and under-rung merchandise at a mall
store. Another employee had stolen more than $1,000 of clothes from the store less than a month earlier.
Brick-and-mortar retail outlets from Macy’s to Walmart have come under pressure by increased online
shopping, particularly at Amazon.com. Walmart has responded by both trying to improve the shopping
experience in its stores and creating an online presence of its own. A recent study funded by Walmart found
that 60 percent of retails workers lack proficiency in reading and 70 percent have difficulty with math (Class is
in session at Walmart Academy 2017). Increasing math and team skills for the employees would increase
efficiency and certainly help improve employee self-image and motivation. With this in mind, Walmart has
created one of the largest employer training programs in the country, Walmart Academy (McGregor & Doshi
2015). The company expects to graduate more than 225,000 of its supervisors and managers from a program
that covers topics such as merchandising and employee motivation. In another program, Pathways, Walmart
has created a course that covers topics such as merchandising, communication, and retail math (Walmart 2016
Global Responsibility Report 2016). The Pathways program was expected to see 500,000 entry-level workers
take part in 2016 (Walmart 2016). All employees who complete the course receive a dollar an hour pay
increase. Educating employees pays off by recognizing that the effort put in pays off with better-motivated
and better-educated employees. In the case of Walmart, “upskilling” has become a priority.
Walmart has gone beyond education to motivate or empower employees. In 2016, pay raises for 1.2 million
employees took effect as part of a new minimum-wage policy, and it streamlined its paid time off program
that same year (Schmid 2017). In its 2016 Global Responsibility Report, Walmart points out that over the course
of two years, the company has invested $2.7 billion in wages, benefits, and training in the United States (Staley
2017).
Sources:
Ciubotariu, Nick. 2015. “An Amazonian's response to "Inside Amazon: Wrestling Big Ideas in a Bruising
Workplace." LinkedIn. https://www.linkedin.com/pulse/amazonians-response-inside-amazon-wrestling-big-
ideas-nick-ciubotariu/?redirectFromSplash=true
Cook, John. 2015. “Full memo: Jeff Bezos responds to brutal NYT story, says it doesn’t represent the Amazon he
leads.” GeekWire. https://www.geekwire.com/2015/full-memo-jeff-bezos-responds-to-cutting-nyt-expose-says-
tolerance-for-lack-of-empathy-needs-to-be-zero/
“Dying Malls Make Room for New Condos Apartment.” 2017. Bend Bulletin. http://www.bendbulletin.com/
business/5654908-151/dying-malls-make-room-for-new-condos-apartments
“Embrace the Internet, Skip the Checkout.” 2017. Bend Bulletin. http://www.bendbulletin.com/business/
5635713-151/embrace-the-internet-skip-the-checkout
McGregor, Lindsay and Doshi, Neel. 2015. “How Company Culture Shapes Employee Motivation.” Boston, MA:
Harvard Business Review. https://hbr.org/2015/11/how-company-culture-shapes-employee-motivation
Schmid, Emily. 2017. “Work That Matters: Looking Back on 2 Years of Investing in People.” Walmart Today.
Bentonville, AR: Walmart Digital Communications. https://blog.walmart.com/opportunity/20170223/work-that-
matters-looking-back-on-2-years-of-investing-in-people
Staley, Oliver. 2017. “ Walmart—yes, Walmart—is making changes that could help solve America’s wealth
inequality problem.” Yahoo! Finance. https://finance.yahoo.com/news/walmart-yes-walmart-making-
changes-100102778.html
U.S. Census Bureau. 2017. Quarterly Retail E-Commerce Sales, 2nd Quarter 2017. Washington, DC: U.S.
Department of Commerce. https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf
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WalMart 2016 Global Responsibility Report. 2016. Bentonville, AR: Walmart. https://corporate.walmart.com/
2016grr
Questions:
1. A 2015 New York Times article described Amazon as “a soulless, dystopian workplace where no fun is had
and no laughter heard” (Cook 2015 n.p.). Employees themselves came to the company’s defense
(Ciubotariu 2015). Does this reputation continue to haunt Amazon, or has it been addressed?
2. How do employees differ between a Walmart retail location and an Amazon order fulfillment center? How
many white-collar or skilled jobs does Amazon have compared to Walmart?
3. With Amazon moving into the retail market with the purchase of Whole Foods, and with Walmart
expanding its e-commerce, how are employee motivation challenges going to shift?
Introduction
Learning Outcomes
After reading this chapter, you should be able to answer these questions:
1. What is the benefit of working in teams, and what makes teams effective?
2. How do teams develop over time?
3. What are some key considerations in managing teams?
4. What are the benefits of conflict for a team?
5. How does team diversity enhance decision-making and problem-solving?
6. What are some challenges and best practices for managing and working with multicultural teams?
Eva began her career in one of the large “Big 6” management consulting firms at the time, and she
happily returned several years ago to consulting. She is the founder and president of Trellis LLC, a
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Prior to Trellis, Eva was the global human resources leader for a large global manufacturer of plastic film
products and was responsible for the HR strategy and operations of a $600 million global division. In this
role, Eva led a global team of HR managers in North and South America, Europe, and Asia to support
global HR initiatives to drive business results and build human capital and performance across the
division.
Eva has also held a variety of leadership and managerial roles in both human resources and quality
functions at several nationally and globally recognized companies, including Wachovia Securities,
Genworth Financial, Sun Microsystems, and Andersen Consulting (now Accenture).
Eva holds an MBA from the College of William and Mary in Williamsburg, Virginia, and a BA in
anthropology from the University of Virginia in Charlottesville, Virginia. She is also an adjunct faculty
member with the University of Richmond Robins School of Business. Eva currently serves on the board of
the Society of Human Resource Management (SHRM) of Richmond, Virginia.
Much of the work that is performed today in organizations requires a focus on teamwork. The ability to work
successfully as a team member, as well as the ability to lead teams, is an ultimate advantage within the
workforce. Teams themselves must be managed, in addition to managing just the individuals, to be successful.
We’ve all heard the quote originally coined by Aristotle that states that “the whole is greater than the sum of
its parts.” This captures the nature of the team perfectly—there is such a synergy that comes from a team that
the individuals alone are not able to create. This chapter details the importance of and benefits that you may
derive from working as a team, as well as some of the ways we can make our teams more successful.
Teamwork has never been more important in organizations than it is today. Whether you work in a
manufacturing environment and utilize self-directed work teams, or if you work in the “knowledge economy”
and derive benefits from collaboration within a team structure, you are harnessing the power of a team.
A team, according to Katzenbach and Smith in their Harvard Business Review (HBR) article “The Discipline of
Teams,” is defined as “people organized to function cooperatively as a group”.1 The five elements that make
teams function are:
A team has a specific purpose that it delivers on, has shared leadership roles, and has both individual and
mutual accountabilities. Teams discuss, make decisions, and perform real work together, and they measure
their performance by assessing their collective work products. Wisdom of Teams reference. This is very
different from the classic working group in an organization (usually organized by functional area) in which
there is a focused leader, individual accountabilities and work products, and a group purpose that is the same
as the broader organizational mission. Think of the finance organization or a particular business unit in your
company—these are, in effect, larger working groups that take on a piece of the broader organizational
mission. They are organized under a leader, and their effectiveness is measured by its influence on others
within the business (e.g., financial performance of the business.)
Exhibit 15.2 Finance Working Group Smart managers understand that not all of a company’s influential relationships appear as part of the
organization chart. Consider a publishing company that might have a lead finance head for each group, such as adult fiction, nonfiction, young
adult, and children’s book divisions. A finance team working group would help spread best practices and lead to more cohesive operations for
the entire organization. (Credit: thetaxhaven /flickr / Attribution 2.0 Generic (CC BY 2.0))
So, what makes a team truly effective? According to Katzenbach and Smith’s “Discipline of Teams,” there are
several practices that the authors have observed in successful teams. These practices include:
Establish urgency, demanding performance standards, and direction. Teams work best when they have a
compelling reason for being, and it is thus more likely that the teams will be successful and live up to
performance expectations. We’ve all seen the teams that are brought together to address an “important
initiative” for the company, but without clear direction and a truly compelling reason to exist, the team will
lose momentum and wither.
Select members for their skill and skill potential, not for their personality. This is not always as easy as it
sounds for several reasons. First, most people would prefer to have those with good personalities and positive
attitudes on their team in order to promote a pleasant work environment. This is fine, but make sure that
those individuals have the skill sets needed (or the potential to acquire/learn) for their piece of the project. The
second caveat here is that you don’t always know what skills you need on a project until you really dig in and
see what’s going on. Spend some time up front thinking about the purpose of the project and the anticipated
deliverables you will be producing, and think through the specific types of skills you’ll need on the team.
Pay particular attention to first meetings and actions. This is one way of saying that first impressions mean a
lot—and it is just as important for teams as for individuals. Teams will interact with everyone from functional
subject-matter experts all the way to senior leadership, and the team must look competent and be perceived
as competent. Keeping an eye on your team’s level of emotional intelligence is very important and will
enhance your team’s reputation and ability to navigate stakeholders within the organization.
Set some clear rules of behavior. I have been through many meetings and team situations in which we have
rushed through “ground rules” because it felt like they were obvious—and everyone always came up with the
same list. It is so critical that the team takes the time up front to capture their own rules of the road in order to
keep the team in check. Rules that address areas such as attendance, discussion, confidentiality, project
approach, and conflict are key to keeping team members aligned and engaged appropriately.
Set and seize upon a few immediate performance-oriented tasks and goals. What does this mean? Have some
quick wins that make the team feel that they’re really accomplishing something and working together well.
This is very important to the team’s confidence, as well as just getting into the practices of working as a team.
Success in the larger tasks will come soon enough, as the larger tasks are really just a group of smaller tasks
that fit together to produce a larger deliverable.
Challenge the group regularly with fresh facts and information. That is, continue to research and gather
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information to confirm or challenge what you know about your project. Don’t assume that all the facts are
static and that you received them at the beginning of the project. Often, you don’t know what you don’t know
until you dig in. I think that the pace of change is so great in the world today that new information is always
presenting itself and must be considered in the overall context of the project.
Spend lots of time together. Here’s an obvious one that is often overlooked. People are so busy that they
forget that an important part of the team process is to spend time together, think together, and bond. Time in
person, time on the phone, time in meetings—all of it counts and helps to build camaraderie and trust.
Exploit the power of positive feedback, recognition, and reward. Positive reinforcement is a motivator that will
help the members of the team feel more comfortable contributing. It will also reinforce the behaviors and
expectations that you’re driving within the team. Although there are many extrinsic rewards that can serve as
motivators, a successful team begins to feel that its own success and performance is the most rewarding.
Collaboration is another key concept and method by which teams can work together very successfully.
Bringing together a team of experts from across the business would seem to be a best practice in any
situation. However, Gratton and Erickson, in their article Eight Ways to Build Collaborative Teams, found that
collaboration seems to decrease sharply when a team is working on complex project initiatives. In their study,
they examined 55 larger teams and identified those with strong collaboration skills, despite the level of
complexity. There were eight success factors for having strong collaboration skills:
As teams grow in size and complexity, the standard practices that worked well with small teams don’t work
anymore. Organizations need to think about how to make collaboration work, and they should leverage the
above best practices to build relationships and trust.
CONCEPT CHECK
If you have been a part of a team—as most of us have—then you intuitively have felt that there are different
“stages” of team development. Teams and team members often start from a position of friendliness and
excitement about a project or endeavor, but the mood can sour and the team dynamics can go south very
quickly once the real work begins. In 1965, educational psychologist Bruce Tuckman at Ohio State University
developed a four-stage model to explain the complexities that he had witnessed in team development. The
original model was called Tuckman’s Stages of Group Development, and he added the fifth stage of
“Adjourning” in 1977 to explain the disbanding of a team at the end of a project. The four stages of the
Tuckman model are:3
• Forming
• Storming
• Norming
• Performing
• Adjourning
Exhibit 15.3 Tuckman’s Model of Team Development Attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license
The Forming stage begins with the introduction of team members. This is known as the “polite stage” in
which the team is mainly focused on similarities and the group looks to the leader for structure and direction.
The team members at this point are enthusiastic, and issues are still being discussed on a global, ambiguous
level. This is when the informal pecking order begins to develop, but the team is still friendly.
The Storming stage begins as team members begin vying for leadership and testing the group processes.
This is known as the “win-lose” stage, as members clash for control of the group and people begin to choose
sides. The attitude about the team and the project begins to shift to negative, and there is frustration around
goals, tasks, and progress.
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Exhibit 15.4 The Storming Stage In the storming stage, protracted competition vying for leadership of the group can hinder progress. You
are likely to encounter this in your coursework when a group assignment requires forming a team. (Credit: Gerald R. Ford School of Public
Policy/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
After what can be a very long and painful Storming process for the team, slowly the Norming stage may start
to take root. During Norming, the team is starting to work well together, and buy-in to group goals occurs. The
team is establishing and maintaining ground rules and boundaries, and there is willingness to share
responsibility and control. At this point in the team formation, members begin to value and respect each other
and their contributions.
Finally, as the team builds momentum and starts to get results, it is entering the Performing stage. The team
is completely self-directed and requires little management direction. The team has confidence, pride, and
enthusiasm, and there is a congruence of vision, team, and self. As the team continues to perform, it may even
succeed in becoming a high-performing team. High-performing teams have optimized both task and people
relationships—they are maximizing performance and team effectiveness. Katzenberg and Smith, in their study
of teams, have created a “team performance curve” that graphs the journey of a team from a working group
to a high-performing team. The team performance curve is illustrated in Exhibit 15.5.
Exhibit 15.5 Team Performance Curve (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
The process of becoming a high-performance team is not a linear process. Similarly, the four stages of team
development in the Tuckman model are not linear, and there are also factors that may cause the team to
regress to an earlier stage of development. When a team member is added to the group, this may change the
dynamic enough and be disruptive enough to cause a backwards slide to an earlier stage. Similarly, if a new
project task is introduced that causes confusion or anxiety for the group, then this may also cause a backwards
slide to an earlier stage of development. Think of your own experiences with project teams and the backslide
that the group may have taken when another team member was introduced. You may have personally found
the same to be true when a leader or project sponsor changes the scope or adds a new project task. The team
has to re-group and will likely re-Storm and re-Form before getting back to Performing as a team.
C AT C H I N G T H E E N T R E P R E N E U R I A L S P I R I T
In Noam Wasserman’s January 2012 HBSP article “Assembling the Startup Team,” Wasserman asserts:
“Nothing can bedevil a high-potential startup more than its people problems. In research on startup
performance, venture capitalists attributed 65% of portfolio company failures to problems within the startup’s
504 Chapter 15 Managing Teams
management team. Another study asked investors to identify problems that might occur at their portfolio
companies; 61% of the problems involved team issues. These problems typically result from choices that
founders make as they add team members…”
These statistics are based on people problems in startups, and it isn’t quite clear what percent of larger
company failures could be directly or indirectly attributed to people and team issues. I would imagine
that the percentage is also significant. The impact of people problems and team issues in a startup
organization that is just getting its footing and trying to make the right connections and decisions can be
very significant. If you know anyone who has a company in startup mode, you may have noticed that
some of the early team members who are selected to join the team are trusted family members, friends,
or former colleagues. Once a startup company grows to a certain level, then it may acquire an
experienced CEO to take the helm. In any case, the startup is faced early on with important questions on
how to build the team in a way that will maximize the chance of success.
In “Assembling the Startup Team,” the author refers to the three Rs: relationships, roles, and rewards as
being key elements that must be managed effectively in order to avoid problems in the long term.
Relationships refers to the actual team members that are chosen, and there are several caveats to keep
in mind. Hiring relatives or close friends because they are trusted may seem like the right idea in the
beginning, but the long-term hazards (per current research) outweigh the benefits. Family and friends
may think too similarly, and the team misses the benefit of other perspectives and connections. Roles are
important because you have to think about the division of labor and skills, as well as who is in the right
roles for decision-making. The startup team needs to think through the implications of assigning people
to specific roles, as that may dictate their decision power and status. Finally, defining the rewards can be
difficult for the startup team because it essentially means that they are splitting the pie—i.e., both short-
term and long-term compensation. For startup founders, this can be a very difficult decision when they
have to weigh the balance of giving something away versus gaining human capital that may ultimately
help the business to succeed. Thinking through the tradeoffs and keeping alignment between the “three
Rs” is important because it challenges the startup team to think of the long-term consequences of some
of their early decisions. It is easy to bring family and friends into the startup equation due to trust
factors, but a careful analysis of the “three Rs” will help a startup leadership team make decisions that
will pay off in the long term.
Discussion Questions
1. Why might it be a bad decision to hire someone for a key startup role based only on the fact that the
person is close family or a friend? What are the potential tradeoffs to the business?
2. What does it mean for the “three Rs” to be in alignment? What is the potential risk of these not
being in alignment? What could go wrong?
CONCEPT CHECK
For those of us who have had the pleasure of managing or leading a team, we know that it can feel like a
dubious distinction. Leading a team is fulfilling—especially if the task or organizational mandate at hand is so
critical to the organization that people are happy to be a part of the team that drives things forward. It can
also be an exercise in frustration, as the charge is to lead a group composed of various individuals, which at
various times will act both like a group and like a bunch of individuals. Managing teams is no small feat, and
the most experience managers truly understand that success ultimately depends on their ability to build a
strong and well-functioning team. In J.J. Gabarro’s The Dynamics of Taking Charge (HBS Press, 1987, pp. 85–87),
he quotes a manager who had successfully worked to turn around a number of organizations:4
“People have to want to work together; they have to see how to do it. There has to be an environment for it
and that takes time. It’s my highest priority right now but I don’t write it down anywhere because it’s not like
other priorities. If I told corporate that building a team was my prime goal they’d tell me, so what? They’d
expect that as part of making things better.”
I love this quotation because it’s so indicative of the state of most organizations today. The focus is on
corporate goals and priorities—very task-driven and outcome-driven—but it is the people dynamics and how
people work together in the company and in TEAMS that can make a real difference to the goals and outcome.
MANAGERIAL LEADERSHIP
Who Am I Managing?
Making the jump from individual contributor to manager is never easy, and it doesn’t take long for a new
manager to realize that what got him there is much different than what is needed to be successful in the
future. Individual contributors that have been recently promoted would probably say that they have
strong technical skills in their area, and that they were very good at doing what they were doing. In a
more savvy organization that recognizes leadership competencies, individual contributors would
probably say that they have strong technical skills AND that they showed some behaviors and potential
to lead others. When new managers enter their new roles, they expect that they will be managing
people—that is, the people on their teams. Few new managers fully realize that the challenge ahead is
not just in managing their people, but in managing all the other stakeholders and constituencies that
want to and need to weigh in.
One of the key challenges that faces new managers is figuring out to balance all of the multiple demands
from both the team and the stakeholders and constituencies external to the team. Linda A. Hill, the
Wallace Brett Donham Professor of Business Administration at Harvard Business School, states that
“among all the challenges facing new managers, the need to reconcile different constituencies’
expectations and interests is probably the most difficult.” She asserts that the demands that the new
manager’s direct reports, his peers, his boss, and the company’s customers place on the new manager
will cause conflict at times. Having teams of their own, new managers may think that managing their
direct reports is the most important role to play, even at the exclusion of managing other stakeholders.
This is incorrect. A new manager needs to “manage his other consistencies just as carefully.” (“Helping
New Managers Succeed,” Lauren Keller Johnson, HBR 2008).
Whenever I started a new role, I always created a quick stakeholder checklist for myself. This document is
essentially a list of all the stakeholders (beyond the team I am managing) with whom I need to build a
relationship in order to be successful. I listed the names of my boss, my boss’s boss, my peers, and any
other key influencers or internal customers from the business. This is a quick checklist of the people that
506 Chapter 15 Managing Teams
I need to immediately have a “meet and greet” with and then possibly even set up a regular meeting
with at a certain cadence. I have learned over the years that each of these stakeholders will have some
input and impact on my success, and the quicker and more effectively I engage them in the work my
team is performing, the better the chance of my team’s success. Some of the questions I will ask myself
when figuring out my stakeholder list include:
Some new managers will feel that these strategies for building stakeholder support are too “political”
and they don’t feel right. Trust me when I tell you that this is a necessary part of the new manager role,
because now the role and the work call for greater interdependence and relation building in order to be
successful. It is no longer just about individual technical skills, but more about building and managing
relationships with people who will support you and your team to get your work done. So, if you are a new
manager asking “Who am I managing?” … the answer is EVERYONE.
Discussion Questions
1. Do you agree with the statement that “what got you there isn’t what will make you successful in the
future”? Why or why not?
2. Who would be on your stakeholder checklist? Which stakeholders are you already engaging and
building relationships with?
In Linda A. Hill’s Harvard Business Review article “Managing Your Team”5 (HBR 1995), she discusses that
managing a team means managing paradox. Paradox exists in the fact that teams have both individual and
collective identities and goals. Each individual has goals and ideas as to what he wants to accomplish—on the
project, in one’s career, and in life. The team itself, of course, has goals and success metrics that it needs to
meet in order to be successful. Sometimes these can be in conflict with each other. Competition may arise
among team members, and a win-loss attitude may take place over a collaborative and problem-solving team
dynamic. The team manager may need to step in to help integrate all of the individual differences to enable
them to productively pursue the team goal. Therein lies the primary paradox—balancing individual differences
and goals AND the collective identity and goals. Other paradoxes include:
Exhibit 15.6 The Triangle of Relationships (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Managing a team also means managing its boundaries. Managing the team’s boundaries—or space between
the team and its external forces, stakeholders, and pressures—is a delicate balance of strategy, stakeholder
management, and organizational behavior. The team manager must serve, in part, as a buffer to these
external factors so that they don’t derail or distract the team from its goals. However, the manager must also
understand enough about the external environment and have enough emotional intelligence to understand
which forces, players, or situations must be synthesized within the team for its own benefit. Think about any
medium or large-scale change initiative that you have been a part of in your career. Ideally, there is generally a
vision for change and a level of sponsorship at the senior levels of the organization that is supposed to pave
the way for that change to take root. The project team is officially “blessed” to kick off the team, create a
charter, and identify the needed actions to drive the initiative to successful completion.
The dynamic that ensues after the kickoff is really what will determine the success of the team. There are
numerous stakeholders in any organization, and many will be pro–change initiative, but others may be against
the initiative—either due to lack of understanding or concerns about losing power, territory, etc. The external
environment and business strategy may not be particularly well suited for a change initiative to take place, and
so there may be the feeling of forces opposing the project team efforts. A strong team manager needs
manage these “boundaries” with the organization to help the team navigate through and with the
organizational complexities, goals, nuances, and egos that are a part of any organization. In Linda A. Hill’s
Harvard Business Review article “Exercising Influence,” she states that “managers also need to manage
relationships with those who are outside their team but inside their organizations.6 To do so, they must
understand the power dynamics of the larger organization and invest time and energy in building and
maintaining relationship with those on who the team is dependent.” It is also, in her view, “the manager’s job,
at a minimum, to educate other about organizational structures, systems, or politics that interfere with the
team’s performance.” With all of the potential external influences on a team, managing a team’s boundaries
can truly mean the difference between success and failure.
The final element of managing a team is to manage the team itself—both the people elements and the
process elements, or task at hand. The process-focused elements include managing the work plan to reach the
overall goal, as well as the incremental meetings and milestones that are a part of the team’s journey to reach
the longer-term goal. Keeping the team focused on its objectives—beginning with setting agendas all the way
to managing project tasks and celebrating milestones—assures that the team will stay on track. Projects and
initiatives vary in size, scope, and complexity, and so the project management tools shouldn’t be prescribed in
a general sense. The important takeaway here is to choose an approach and a tool that works for the culture
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of the team and the organization, and that helps the team understand where they are, where they need to go,
and what resources are a part of that process.
In managing the team members and interpersonal dynamics, there is the important element of selecting the
right team members, shaping the team’s norms and culture (how are decisions made, what are our rules, how
do we manage conflict, etc.), and coaching the team. Defining the right skill sets, functions, perspectives, and
expertise of the members will ensure a solid foundation. Helping the team to identify and formalize the
ground rules for team engagement will help manage in the face of adversity or team conflict in the future.
Finally, playing a role as a supportive coach will help both the individual team members and the group entity
think through issues and make progress towards goals. A coach doesn’t solve the individual/team problem,
but helps the team think through a solution and move forward. Teams may need guidance on how to work
things out within the team, and the manager must provide feedback and hold team members accountable for
their behavior and contribution. Continuous improvement is the name of the game. A team may not start out
as high performing, but they can certainly achieve that goal if everyone is focused on incremental
improvements to communication, collaboration, and performance.
CONCEPT CHECK
There are many sources of conflict for a team, whether it is due to a communication breakdown, competing
views or goals, power struggles, or conflicts between different personalities. The perception is that conflict is
generally bad for a team and that it will inevitably bring the team down and cause them to spiral out of control
and off track. Conflict does have some potential costs. If handled poorly, it can create distrust within a group, it
can be disruptive to group progress and moral, and it could be detrimental to building lasting relationships. It
is generally seen as a negative, even though constructive conflicts and constructive responses to conflicts can
be an important developmental milestone for a team. Some potential benefits of conflict are that it
encourages a greater diversity of ideas and perspectives and helps people to better understand opposing
points of view. It can also enhance a team’s problem-solving capability and can highlight critical points of
discussion and contention that need to be given more thought.
Another key benefit or outcome of conflict is that a team that trusts each other—its members and members’
intentions—will arise from conflict being a stronger and higher-performing team. Patrick Lencioni, in his
bestselling book The Five Dysfunctions of a Team (2002, p. 188), writes:7
“The first dysfunction is an absence of trust among team members. Essentially, this stems from their unwillingness to
be vulnerable within the group. Team members who are not genuinely open with one another about their mistakes
and weaknesses make it impossible to build a foundation for trust. This failure to build trust is damaging because it
sets the tone for the second dysfunction: fear of conflict. Teams that lack trust are incapable of engaging in unfiltered
and passionate debate of ideas. Instead, they resort to veiled discussions and guarded comments.”
Lencioni also asserts that if a team doesn’t work through its conflict and air its opinions through debate, team
members will never really be able to buy in and commit to decisions. (This lack of commitment is Lencioni’s
third dysfunction.) Teams often have a fear of conflict so as not to hurt any team members’ feelings. The
downside of this avoidance is that conflicts still exist under the surface and may resurface in more insidious
and back-channel ways that can derail a team. How can a team overcome its fear of conflict and move the
team forward? Lencioni names a few strategies that teams can use to make conflict more common and
productive. Mining is a technique that can be used in teams that tend to avoid conflict. This technique
requires that one team member “assume the role of a ‘miner of conflict’—someone who extracts buried
disagreements within the team and sheds the light of day on them. They must have the courage and
confidence to call out sensitive issues and force team members to work through them.” Real-time permission
is another technique to “recognize when the people engaged in conflict are becoming uncomfortable with the
level of discord, and then interrupt to remind them that what they are doing is necessary.” This technique can
help the group to focus on the points of conflict by coaching the team not to sweep things under the rug.
The team leader plays a very important role in the team’s ability to address and navigate successfully through
conflicts. Sometime a leader will have the attitude that conflict is a derailer and will try to stymie it at any cost.
This ultimately leads to a team culture in which conflict is avoided and the underlying feelings are allowed to
accumulate below the surface of the discussion. The leader should, by contrast, model the appropriate
behavior by constructively addressing conflict and bringing issues to the surface to be addressed and resolved
by the team. This is key to building a successful and effective team.
There are a variety of individual responses to conflict that you may see as a team member. Some people take
the constructive and thoughtful path when conflicts arise, while others may jump immediately to destructive
behaviors. In Managing Conflict Dynamics: A Practical Approach, Capobianco, Davis, and Kraus (2005) recognized
that there are both constructive and destructive responses to conflict, as well as active and passive responses
that we need to recognize. In the event of team conflict, the goal is to have a constructive response in order to
encourage dialogue, learning, and resolution.8 Responses such as perspective taking, creating solutions,
expressing emotions, and reaching out are considered active and constructive responses to conflict. Reflective
thinking, delay responding, and adapting are considered passive and constructive responses to conflict. See
Exhibit 15.7 for a visual of the constructive responses, as well as the destructive responses, to conflict.
Exhibit 15.7 Responses to Conflict (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
In summary, conflict is never easy for an individual or a team to navigate through, but it can and should be
done. Illuminating the team about areas of conflict and differing perspectives can have a very positive impact
on the growth and future performance of the team, and it should be managed constructively.
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CONCEPT CHECK
Decision-making and problem-solving can be much more dynamic and successful when performed in a
diverse team environment. The multiple diverse perspectives can enhance both the understanding of the
problem and the quality of the solution. As I reflect on some of the leadership development work that I have
done in my career, I can say from experience that the team activities and projects that intentionally brought
diverse individuals together created the best environments for problem-solving. Diverse leaders from a variety
of functions, from across the globe, at varying stages of their careers and experiences with and outside of the
company had the most robust discussions and perspectives. Diversity is a word that is very commonly used
today, but the importance of diversity and building diverse teams can sometimes get lost in the normal
processes of doing business. Let’s discuss why we need to keep these principles front of mind.
In the Harvard Business Review article “Why Diverse Teams are Smarter” (Nov. 2016), David Rock and Heidi
Grant support the idea that increasing workplace diversity is a good business decision.9 A 2015 McKinsey
report on 366 public companies found that those in the top quartile for ethnic and racial diversity in
management were 35% more likely to have financial returns above their industry mean, and those in the top
quartile for gender diversity were 15% more likely to have returns above the industry mean. Similarly, in a
global analysis conducted by Credit Suisse, organizations with at least one female board member yielded a
higher return on equity and higher net income growth than those that did not have any women on the board.
Exhibit 15.8 The Benefits of Diversity for Teams Teams made up of diverse members tend to perform better than teams of similar
backgrounds. Here, the Women of Color in Technology work on a project. The tech industry has been criticized for the lack of diversity among
its ranks, and groups like the Women of Color in Technology are looking to change that. (Credit: WOCin Tech Chat/ flickr/ Attribution 2.0 Generic
(CC BY 2.0))
Additional research on diversity has shown that diverse teams are better at decision-making and problem-
solving because they tend to focus more on facts, per the Rock and Grant article.10 A study published in the
Journal of Personality and Social Psychology showed that people from diverse backgrounds “might actually alter
the behavior of a group’s social majority in ways that lead to improved and more accurate group thinking.” It
turned out that in the study, the diverse panels raised more facts related to the case than homogenous panels
and made fewer factual errors while discussing available evidence. Another study noted in the article showed
that diverse teams are “more likely to constantly reexamine facts and remain objective. They may also
encourage greater scrutiny of each member’s actions, keeping their joint cognitive resources sharp and
vigilant. By breaking up workforce homogeneity, you can allow your employees to become more aware of
their own potential biases—entrenched ways of thinking that can otherwise blind them to key information and
even lead them to make errors in decision-making processes.” In other words, when people are among
homogeneous and like-minded (nondiverse) teammates, the team is susceptible to groupthink and may be
reticent to think about opposing viewpoints since all team members are in alignment. In a more diverse team
with a variety of backgrounds and experiences, the opposing viewpoints are more likely to come out and the
team members feel obligated to research and address the questions that have been raised. Again, this enables
a richer discussion and a more in-depth fact-finding and exploration of opposing ideas and viewpoints in order
to solve problems.
Diversity in teams also leads to greater innovation. A Boston Consulting Group article entitled “The Mix that
Matters: Innovation through Diversity” explains a study in which BCG and the Technical University of Munich
conducted an empirical analysis to understand the relationship between diversity in managers (all
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management levels) and innovation. The key findings of this study show that:11
• The positive relationship between management diversity and innovation is statistically significant—and
thus companies with higher levels of diversity derive more revenue from new products and services.
• The innovation boost isn’t limited to a single type of diversity. The presence of managers who are either
female or are from other countries, industries, or companies can cause an increase in innovation.
• Management diversity seems to have a particularly positive effect on innovation at complex
companies—those that have multiple product lines or that operate in multiple industry segments.
• To reach its potential, gender diversity needs to go beyond tokenism. In the study, innovation
performance only increased significantly when the workforce included more than 20% women in
management positions. Having a high percentage of female employees doesn’t increase innovation if
only a small number of women are managers.
• At companies with diverse management teams, openness to contributions from lower-level workers and
an environment in which employees feel free to speak their minds are crucial for fostering innovation.
When you consider the impact that diverse teams have on decision-making and problem-solving—through the
discussion and incorporation of new perspectives, ideas, and data—it is no wonder that the BCG study shows
greater innovation. Team leaders need to reflect upon these findings during the early stages of team selection
so that they can reap the benefits of having diverse voices and backgrounds.
CONCEPT CHECK
As globalization has increased over the last decades, workplaces have felt the impact of working within
multicultural teams. The earlier section on team diversity outlined some of the highlights and benefits of
working on diverse teams, and a multicultural group certainly qualifies as diverse. However, there are some
key practices that are recommended to those who are leading multicultural teams so that they can parlay the
diversity into an advantage and not be derailed by it.
People may assume that communication is the key factor that can derail multicultural teams, as participants
may have different languages and communication styles. In the Harvard Business Review article “Managing
Multicultural Teams,” the authors point out four key cultural differences that can cause destructive conflicts in
a team.12 The first difference is direct versus indirect communication. Some cultures are very direct and explicit
in their communication, while others are more indirect and ask questions rather than pointing our problems.
This difference can cause conflict because, at the extreme, the direct style may be considered offensive by
some, while the indirect style may be perceived as unproductive and passive-aggressive in team interactions.
The second difference that multicultural teams may face is trouble with accents and fluency. When team
members don’t speak the same language, there may be one language that dominates the group
interaction—and those who don’t speak it may feel left out. The speakers of the primary language may feel
that those members don’t contribute as much or are less competent. The next challenge is when there are
differing attitudes toward hierarchy. Some cultures are very respectful of the hierarchy and will treat team
members based on that hierarchy. Other cultures are more egalitarian and don’t observe hierarchical
differences to the same degree. This may lead to clashes if some people feel that they are being disrespected
and not treated according to their status. The final difference that may challenge multicultural teams is
conflicting decision-making norms. Different cultures make decisions differently, and some will apply a great
deal of analysis and preparation beforehand. Those cultures that make decisions more quickly (and need just
enough information to make a decision) may be frustrated with the slow response and relatively longer
thought process.
These cultural differences are good examples of how everyday team activities (decision-making,
communication, interaction among team members) may become points of contention for a multicultural team
if there isn’t adequate understanding of everyone’s culture. The authors propose that there are several
potential interventions to try if these conflicts arise. One simple intervention is adaptation, which is working
with or around differences. This is best used when team members are willing to acknowledge the cultural
differences and learn how to work with them. The next intervention technique is structural intervention, or
reorganizing to reduce friction on the team. This technique is best used if there are unproductive subgroups
or cliques within the team that need to be moved around. Managerial intervention is the technique of
making decisions by management and without team involvement. This technique is one that should be used
sparingly, as it essentially shows that the team needs guidance and can’t move forward without management
getting involved. Finally, exit is an intervention of last resort, and is the voluntary or involuntary removal of a
team member. If the differences and challenges have proven to be so great that an individual on the team can
no longer work with the team productively, then it may be necessary to remove the team member in question.
There are some people who seem to be innately aware of and able to work with cultural differences on teams
and in their organizations. These individuals might be said to have cultural intelligence. Cultural intelligence
is a competency and a skill that enables individuals to function effectively in cross-cultural environments. It
develops as people become more aware of the influence of culture and more capable of adapting their
behavior to the norms of other cultures. In the IESE Insight article entitled “Cultural Competence: Why It
Matters and How You Can Acquire It” (Lee and Liao, 2015), the authors assert that “multicultural leaders may
relate better to team members from different cultures and resolve conflicts more easily.13 Their multiple
talents can also be put to good use in international negotiations.” Multicultural leaders don’t have a lot of
“baggage” from any one culture, and so are sometimes perceived as being culturally neutral. They are very
good at handling diversity, which gives them a great advantage in their relationships with teammates.
In order to help employees become better team members in a world that is increasingly multicultural, there
are a few best practices that the authors recommend for honing cross-cultural skills. The first is to “broaden
your mind”—expand your own cultural channels (travel, movies, books) and surround yourself with people
from other cultures. This helps to raise your own awareness of the cultural differences and norms that you
may encounter. Another best practice is to “develop your cross-cultural skills through practice” and
experiential learning. You may have the opportunity to work or travel abroad—but if you don’t, then getting to
know some of your company’s cross-cultural colleagues or foreign visitors will help you to practice your skills.
Serving on a cross-cultural project team and taking the time to get to know and bond with your global
colleagues is an excellent way to develop skills. In my own “past life,” I led a global human resources
organization, and my team included employees from China, India, Brazil, Hungary, the Netherlands, and the
United States. We would have annual meetings as a global HR team, and it was so rewarding to share and
learn about each other’s cultures. We would initiate the week with a gift exchange in a “show and tell” format
from our various countries, so that everyone would learn a little bit more about the cultures in which our
fellow colleagues were working. This type of interaction within a global team is a great way to facilitate cross-
cultural understanding and communication, and to sharpen everyone’s cultural intelligence.
514 Chapter 15 Managing Teams
MANAGING CHANGE
You also need to be open-minded and look at situations from the perspective of your colleagues’
cultures, just as you hope they will be open-minded about yours. This is referred to as cultural
intelligence. Whenever I would travel globally to visit my colleagues in other countries, I would see foods,
traditions, situations, and behaviors that were very “foreign” to me. Although my first response to
experiencing these might be to think “wow, that’s strange,” I would try to think about what some of my
global colleagues find “foreign” when they come to visit me in the United States. For example, my travel
to China would put me in contact with chicken feet, a very popular food in China and one that I dislike
immensely. Whenever I was offered chicken feet, I would turn them down in the most polite way possible
and would take another food that was offered instead. I started to wonder about what my Chinese
colleagues thought about the food when they’d come to visit me in the United States. Every year, I would
host a global HR meeting in the United States, and a bit part of that meeting was the camaraderie and
the sharing of various meals together. When I asked my Chinese colleagues what foods they thought
were unpleasant, they mentioned cheese and meat. I was surprised about the meat, and when I asked,
they said that it wasn’t the meat itself necessarily, but it was the giant portions of meat that Americans
will eat that, to them, is pretty unappetizing. Again, it is so important to check yourself and your own
culture every so often, and to think about those elements that we take for granted (e.g., gigantic meat
portions) and try to look at them from the eyes of another culture. It really makes us smarter and better
partners to our global colleagues around the world.
In the HBR article “Getting Cross-Cultural Teamwork Right,” the author states that three key
factors—mutual learning, mutual understanding, and mutual teaching—build trust with cross-cultural
colleagues as you try to bridge cultural gaps. With mutual learning, global colleagues learn from each
other and absorb the new culture and behaviors through listening and observation. In mutual
understanding, you try to understand the logic and cultural behaviors of the new culture to understand
why people are doing what they do. This, of course, requires suspending judgment and trying to
understand and embrace the differences. Finally, mutual teaching involves instructing and facilitating.
This means trying to bridge the gap between the two cultures and helping yourself and others see where
different cultures are coming from in order to resolve misunderstandings.
Understanding and finding common ground with your global colleagues isn’t easy, and it takes patience
and continuous improvement. In the end, however, I think that you will find it one of the most rewarding
and enlightening things you can do. The more we work to close the multicultural “gap” and make it a
multicultural advantage, the better off we will be as professionals and as people.
Discussion Questions
1. What are some multicultural experiences that you’ve had in which you feel that there was a very
wide gap between you and an individual from another culture? How did you handle it?
2. Has economic globalization helped people to bridge these cultural gaps? Why or why not?
Once you have a sense of the different cultures and have started to work on developing your cross-cultural
skills, another good practice is to “boost your cultural metacognition” and monitor your own behavior in
multicultural situations. When you are in a situation in which you are interacting with multicultural individuals,
you should test yourself and be aware of how you act and feel. Observe both your positive and negative
interactions with people, and learn from them. Developing “cognitive complexity” is the final best practice
for boosting multicultural skills. This is the most advanced, and it requires being able to view situations from
more than one cultural framework. In order to see things from another perspective, you need to have a strong
sense of emotional intelligence, empathy, and sympathy, and be willing to engage in honest communications.
In the Harvard Business Review article “Cultural Intelligence,” the authors describe three sources of cultural
intelligence that teams should consider if they are serious about becoming more adept in their cross-cultural
skills and understanding. These sources, very simply, are head, body, and heart. One first learns about the
beliefs, customs, and taboos of foreign cultures via the head. Training programs are based on providing this
type of overview information—which is helpful, but obviously isn’t experiential. This is the cognitive
component of cultural intelligence. The second source, the body, involves more commitment and
experimentation with the new culture. It is this physical component (demeanor, eye contact, posture, accent)
that shows a deeper level of understanding of the new culture and its physical manifestations. The final
source, the heart, deals with a person’s own confidence in their ability to adapt to and deal well with cultures
outside of their own. Heart really speaks to one’s own level of emotional commitment and motivation to
understand the new culture.
The authors have created a quick assessment to diagnose cultural intelligence, based on these cognitive,
physical, and emotional/motivational measures (i.e., head, body, heart).
Please refer to Table 15.1 for a short diagnostic that allows you to assess your cultural intelligence.
Give your responses using a 1 to 5 scale where 1 means that you strongly disagree and 5 means that you
strongly agree with the statement.
Before I interact with people from a new culture, I wonder to myself what I hope to achieve.
If I encounter something unexpected while working in a new culture, I use that experience to build
new ways to approach other cultures in the future.
I plan on how I am going to relate to people from a different culture before I meet with them.
When I come into a new cultural situation, I can immediately sense whether things are going well or if
things are going wrong.
Table 15.1
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It is easy for me to change my body language (posture or facial expression) to suit people from a
different culture.
I can modify my speech style by changing my accent or pitch of voice to suit people from different
cultures.
I can easily change the way I act when a cross-cultural encounter seems to require it.
I have confidence in my ability to deal well with people from different cultures than mine.
I am certain that I can befriend people of different cultural backgrounds than mine.
Generally, scoring below 3 in any one of the three measures signals an area requiring improvement.
Averaging over 4 displays strength in cultural intelligence.
Adapted from “Cultural Intelligence,” Earley and Mosakowski, Harvard Business Review, October 2004
Table 15.1
Cultural intelligence is an extension of emotional intelligence. An individual must have a level of awareness
and understanding of the new culture so that he can adapt to the style, pace, language, nonverbal
communication, etc. and work together successfully with the new culture. A multicultural team can only find
success if its members take the time to understand each other and ensure that everyone feels included.
Multiculturalism and cultural intelligence are traits that are taking on increasing importance in the business
world today.14 By following best practices and avoiding the challenges and pitfalls that can derail a
multicultural team, a team can find great success and personal fulfillment well beyond the boundaries of the
project or work engagement.
CONCEPT CHECK
Key Terms
adaptation Technique of working with or around differences
boundaries Lines that make the limits of an area; team boundaries separate the team from its external
stakeholders
cognitive complexity The ability to view situations from more than one cultural framework
collaboration The action of working with someone to produce or create something
cultural intelligence A skill that enables individuals to function effectively in cross-cultural environments
emotional intelligence The capability of individuals to recognize their own emotions and others’ emotions
exit Technique of last resort—removal of a team member
Forming The first stage of team development—the positive and polite stage
ground rules Basic rules or principles of conduct that govern a situation or endeavor
head, body, and heart Techniques for becoming more adept in cross-cultural skills—learning about cultures
(head), physical manifestations of culture (body), and emotional commitment to new culture (heart)
knowledge economy The information society, using knowledge to generate tangible and intangible values
managerial intervention Technique of making decisions by management and without team involvement
mining To delve in to extract something of value; a technique for generating discussion instead of burying it
Norming The third stage of team development—when team resolves its differences and begins making
progress
paradox A self-contradictory statement or situation
Performing The fourth stage of team development—when hard work leads to the achievement of the
team’s goal
real-time permission A technique for recognizing when conflict is uncomfortable, and giving permission to
continue
Storming The second stage of team development—when people are pushing against the boundaries
structural intervention Technique of reorganizing to reduce friction on a team
working group Group of experts working together to achieve specific goals; performance is made up of the
individual results of all members
A team is defined as “people organized to function cooperatively as a group.” Some of the characteristics of a
team are that it has a common commitment and purpose, specific performance goals, complementary skills,
commitment to how the work gets done, and mutual accountability.
Some of the practices that make a team effective are that they have a sense of urgency and direction; they set
clear rules of behavior; they spend lots of time together; and they utilize feedback, recognition, and reward.
Teams go through different stages of team development, which were coined in 1977 as Tuckman’s Stages of
Group Development by educational psychologist Bruce Tuckman. Tuckman’s model includes these four
stages: Forming, Storming, Norming, and Performing. A fifth stage, Adjourning, was added later to explain the
518 Chapter 15 Managing Teams
Forming begins with team members being happy and polite as they get to know each other and understand
the work they’ll do together. Storming starts once the work is underway and the team is getting to know each
other, and conflicts and project stress begins to seep in. During Norming, the team starts to set rules of the
road and define how they want to work together. Performing means that the team is underway and is having
some successes and gaining traction. This is definitely not a linear process. Teams can regress to earlier stages
if there are changes in team members or work orders that cause disruption and loss of momentum and clarity.
Managing a team is often more complex than people would admit. Although a team and the team leader may
be focused on the task or project work, it is actually the people dynamics and how the team works together
that will make a real difference to the goals and outcomes. Managers need to remember that most of their
time will be spent managing the people dynamics—not the tasks.
Managing teams also means a certain amount of paradox. A team has both individual and collective goals that
need to be managed effectively. A manager needs to foster both team supportiveness and the ability to
engage in conflict and confrontation. A team manager also needs to help the team with its boundaries and act
as a buffer, a stakeholder manager, or a strategist when the situation calls for each. Exercising influence with
key stakeholder groups external to the project group is one of the most critical functions in managing a team.
Conflict during team interactions can feel like it derails progress, but it is one of the most important
experiences that a team can have together. A team that can productively work through conflict will end up
stronger, building more trust and being more open to sharing opinions. Team members will feel safe buying in
and committing to decision-making as a team.
One of the other key benefits of conflict is that it encourages a greater diversity of ideas and perspectives, and
it helps people to better understand opposing points of view. If a team doesn’t work through conflict well and
doesn’t feel comfortable with the sharing and debating of ideas, it loses the opportunity to effectively vet
ideas and potential solutions. The result is that the decision or solution will be limited, as team members
haven’t fully shared their concerns and perspectives.
Decision-making and problem-solving is so much more dynamic and successful when performed in a diverse
team environment. Much like the benefits of conflict, diversity can bring forward opposing points of view and
different perspectives and information that might not have been considered if the team were more
homogeneous. Diverse teams are thus made “smarter” by bringing together an array of information, sources,
and experiences for decision-making.
Other research on diversity indicates that diverse teams excel at decision-making and problem-solving
because they tend to focus more on facts. Studies indicate that diverse team members may actually sway the
team’s behavior to focus more on proven data—possibly because of the prospect of having to explain and
back up one’s perspectives if a conflict should erupt on the team. In a more homogenous team, there is more
risk of “groupthink” and the lack of challenging of ideas.
6. What are some challenges and best practices for managing and working with multicultural teams?
With the increase in globalization over the years, teams have seen the addition of multicultural individuals on
their teams, who bring with them their own diverse backgrounds and perspectives. There are very positive
aspects that result from the added diversity, as discussed in the previous questions. There are also challenges
that we need to be aware of when we are managing these teams.
Challenges can arise from communication styles and accents, but can also appear in the form of decision-
making norms and attitudes toward hierarchy. There are some team manager interventions that are best
practices for addressing these challenges. There are also some best practices for building the cultural
intelligence that will make the team more adept at understanding and dealing with differences among
cultures.
One case in point is the example of jury decision-making, where fact-finding and logical decision-making are of
utmost importance. A 2006 study of jury decision-making, led by social psychologist Samuel Sommers of Tufts
University, showed that racially diverse groups exchanged a wider range of information during deliberation of
a case than all-white groups did. The researcher also conducted mock jury trials with a group of real jurors to
show the impact of diversity on jury decision-making.
Interestingly enough, it was the mere presence of diversity on the jury that made jurors consider the facts
more, and they had fewer errors recalling the relevant information. The groups even became more willing to
discuss the role of race case, when they hadn’t before with an all-white jury. This wasn’t the case because the
diverse jury members brought new information to the group—it happened because, according to the author,
the mere presence of diversity made people more open-minded and diligent. Given what we discussed on the
benefits of diversity, it makes sense. People are more likely to be prepared, to be diligent, and to think logically
about something if they know that they will be pushed or tested on it. And who else would push you or test
you on something, if not someone who is different from you in perspective, experience, or thinking. “Diversity
jolts us into cognitive action in ways that homogeneity simply does not.”
So, the next time you are called for jury duty, or to serve on a board committee, or to make an important
decision as part of a team, remember that one way to generate a great discussion and come up with a strong
solution is to pull together a diverse team.
Sources: Adapted from Katherine W. Phillips, “How Diversity Makes Us Smarter,” Scientific American, October
2014, p. 7–8.
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Exhibit 16.1 (Credit: UC Davis College of Engineering/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
Introduction
Learning Outcomes
After reading this chapter, you should be able to answer these questions:
pink sneakers. Whereas most CEOs use well-scripted language to address business issues and
competitors, Legere refers to T-Mobile’s largest competitors, AT&T and Verizon, as “dumb and dumber.”
In the mobile phone market, T-Mobile is the number-three player competing with giants AT&T and
Verizon and recently came to an agreement to merge with Sprint. Of all the consolidation sweeping
through the media and telecommunications arena, T-Mobile and Sprint are the most direct of
competitors. Their merger would reduce the number of national wireless carriers from four to three, a
move the Federal Communications Commission has firmly opposed in the past. Then again, the wireless
market looks a bit different now, as does the administration in power.
John Legere and other CEOs such as Mark Cuban, Elon Musk, and Richard Branson have a more public
profile than executives at other companies that keep a lower profile and are more guarded in their
public comments, often restricting their public statements to quarterly investor and analyst meetings. It
is likely that the personality and communication style that the executives reveal in public is also the way
that they relate to their employees. The outgoing personality of someone such as John Legere will
motivate some employees, but he might be seen as too much of a cheerleader by other employees.
Sometimes the unscripted comments and colorful language that Legere uses can cause issues with
employees and the public. For instance, some T-Mobile employees in their call center admonished
Legere for comments at a press event where he said Verizon and AT&T were “raping” customers for
every penny they have. Legere’s comments caused lengthy discussions in online forums such as Reddit
about his choice of words. Legere is known for speaking his mind in public and often uses profanity, but
many thought this comment crossed the line. While frank, open communication is often appreciated and
leads to a clarity of message, senders of communication, be it in a public forum, an internal memo, or
even a text message, should always think through the consequences of their words.
Sources: Tara Lachapelle, “T-Mobile’s Argument for Sprint Deal is as Loud as CEO John Legere’s Style,”
The Seattle Times, July 9, 2018, https://www.seattletimes.com/business/t-mobiles-argument-for-sprint-
deal-is-as-loud-as-ceo-john-legeres-style/; Janko Roettgers, “T-Mobile CEO John Legere Pokes Fun at
Verizon’s Go90 Closure,” Variety, June 29, 2018, https://variety.com/2018/digital/news/john-legere-
go90-1202862397/; Rachel Lerman, “T-Mobile’s Loud, Outspoken John Legere is Not Your Typical CEO,”
The Chicago Tribune, April 30, 2018, www.chicagotribune.com/business/sns-tns-bc-tmobile-
legere-20180430-story.html; Steve Kovach, T-Mobile Employees Speak Out and Call CEO’s Recent Rape
Comments “Violent” and “Traumatizing”,” Business Insider, June 27, 2014,
https://www.businessinsider.com/t-mobile-employees-speak-out-legere-rape-comment-2014-6; Brian X.
Chen, One on One: John Legere, the Hip New Chief of T-Mobile USA,” New York Times, January 9, 2013,
https://bits.blogs.nytimes.com/2013/01/09/one-on-one-john-legere-the-hip-new-chief-of-t-mobile-usa/.
We will distinguish between communication between two individuals and communication amongst several
individuals (groups) and communication outside the organization. We will show that managers spend a
majority of their time in communication with others. We will examine the reasons for communication and
discuss the basic model of interpersonal communication, the types of interpersonal communication, and
major influences on the communication process. We will also discuss how organizational reputation is defined
by communication with stakeholders.
Interpersonal communication allows employees at all levels of an organization to interact with others, to
secure desired results, to request or extend assistance, and to make use of and reinforce the formal design of
the organization. These purposes serve not only the individuals involved, but the larger goal of improving the
quality of organizational effectiveness.
The model that we present here is an oversimplification of what really happens in communication, but this
model will be useful in creating a diagram to be used to discuss the topic. Exhibit 16.2 illustrates a simple
communication episode where a communicator encodes a message and a receiver decodes the message.1
Exhibit 16.2 The Basic Communication Model (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Feedback
Several types of feedback can occur after a message is sent from the communicator to the receiver. Feedback
can be viewed as the last step in completing a communication episode and may take several forms, such as a
verbal response, a nod of the head, a response asking for more information, or no response at all. As with the
initial message, the response also involves encoding, medium, and decoding.
There are three basic types of feedback that occur in communication. 2 These are informational, corrective, and
526 Chapter 16 Managerial Communication
reinforcing. In informational feedback, the receiver provides nonevaluative information to the communicator.
An example is the level of inventory at the end of the month. In corrective feedback, the receiver responds by
challenging the original message. The receiver might respond that it is not her responsibility to monitor
inventory. In reinforcing feedback, the receiver communicated that she has clearly received the message and
its intentions. For instance, the grade that you receive on a term paper (either positive or negative) is
reinforcing feedback on your term paper (your original communication).
Noise
There is, however, a variety of ways that the intended message can get distorted. Factors that distort message
clarity are noise. Noise can occur at any point along the model shown in Exhibit 16.2, including the decoding
process. For example, a manager might be under pressure and issue a directive, “I want this job completed
today, and I don’t care what it costs,” when the manager does care what it costs.
CONCEPT CHECK
In the communication model described above, three types of communication can be used by either the
communicator in the initial transmission phase or the receiver in the feedback phase. These three types are
discussed next.
Oral Communication
This consists of all messages or exchanges of information that are spoken, and it’s the most prevalent type of
communication.
Written Communication
This includes e-mail, texts, letters, reports, manuals, and annotations on sticky notes. Although managers
prefer oral communication for its efficiency and immediacy, the increase in electronic communication is
undeniable. As well, some managers prefer written communication for important messages, such as a change
in a company policy, where precision of language and documentation of the message are important.
MANAGERIAL LEADERSHIP
Add the practice of “reply to all,” which can add to the volume of communication, that many coworkers
use, and that means that you may get five or six versions of an initial e-mail and need to understand all
of the responses as well as the initial communication before responding or deciding that the issue is
resolved and no response is needed. Here are suggestions to dealing with e-mail overload upward,
horizontally, and downward within your organization and externally to stakeholders and customers.
One way to reduce the volume and the time you spend on e-mail is to turn off the spigot of incoming
messages. There are obvious practices that help, such as unsubscribing to e-newsletters or turning off
notifications from social media accounts such as Facebook and Twitter. Also consider whether your
colleagues or direct reports are copying you on too many emails as an FYI. If yes, explain that you only
need to be updated at certain times or when a final decision is made.
You will also want to set up a system that will organize your inbox into “folders” that will allow you to
manage the flow of messages into groups that will allow you to address them appropriately. Your system
might look something like this:
1. Inbox: Treat this as a holding pen. E-mails shouldn’t stay here any longer than it takes for you to file
them into another folder. The exception is when you respond immediately and are waiting for an
immediate response.
2. Today: This is for items that need a response today.
3. This week: This is for messages that require a response before the end of the week.
4. This month/quarter: This is for everything that needs a longer-term response. Depending on your
role, you may need a monthly or quarterly folder.
5. FYI: This is for any items that are for information only and that you may want to refer back to in the
future.
This system prioritizes e-mails based on timescales rather than the e-mails’ senders, enabling you to
better schedule work and set deadlines.
Another thing to consider is your outgoing e-mail. If your outgoing messages are not specific, too long,
unclear, or are copied too widely, your colleagues are likely to follow the same practice when
communicating with you. Keep your communication clear and to the point, and managing your outbox
will help make your inbound e-mails manageable.
Critical Thinking Questions
1. How are you managing your e-mails now? Are you mixing personal and school and work-related e-
mails in the same account?
2. How would you communicate to a colleague that is sending too many FYI e-mails, sending too may
unclear e-mails, or copying too many people on her messages?
528 Chapter 16 Managerial Communication
Sources: Amy Gallo, Stop Email Overload, Harvard Business Review, February 21, 2012, https://hbr.org/
2012/02/stop-email-overload-1; Barry Chingel, “How to beat email Overload in 2018”, CIPHER, January 16,
2018, https://www.ciphr.com/advice/email-overload/; Monica Seely, “At the Mercy of Your Inbox? How to
Cope With Email Overload”, The Guardian, November 6, 2017, https://www.theguardian.com/small-
business-network/2017/nov/06/at-the-mercy-of-your-inbox-how-to-cope-with-email-overload.
Nonverbal Communication
There is also the transformation of information without speaking or writing. Some examples of this are things
such as traffic lights and sirens as well as things such as office size and placement, which connote something
or someone of importance. As well, things such as body language and facial expression can convey either
conscious or unconscious messages to others.
Exhibit 16.3 Body Language at a Meeting Your body language can send messages during a meeting. (Credit: Amtec Photos/ Flickr/
Attribution 2.0 Generic (CC BY 2.0))
Social Influences
Communication is a social process, as it takes at least two people to have a communication episode. There is a
variety of social influences that can affect the accuracy of the intended message. For examples, status barriers
between employees at different levels of the organization can influence things such as addressing a colleague
as at a director level as “Ms. Jones” or a coworker at the same level as “Mike.” Prevailing norms and roles can
dictate who speaks to whom and how someone responds. Exhibit 16.4 illustrates a variety of communications
that illustrate social influences in the workplace.
Exhibit 16.4 Patterns of Managerial Communication (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Perception
In addition, the communication process is heavily influenced by perceptual processes. The extent to which an
employee accurately receives job instructions from a manager may be influences by her perception of the
manager, especially if the job instructions conflict with her interest in the job or if they are controversial. If an
employee has stereotyped the manager as incompetent, chances are that little that the manager says will be
taken seriously. If the boss is well regarded or seen as influential in the company, everything that she says may
be interpreted as important.
530 Chapter 16 Managerial Communication
Interaction Involvement
Communication effectiveness can be influenced by the extent to which one or both parties are involved in
conversation. This attentiveness is called interaction attentiveness or interaction involvement.4 If the
intended receiver of the message is preoccupied with other issues, the effectiveness of the message may be
diminished. Interaction involvement consists of three interrelated dimensions: responsiveness,
perceptiveness, and attentiveness.
Organizational Design
The communication process can also be influenced by the design of the organization. It has often been argued
to decentralize an organization because that will lead to a more participative structure and lead to improved
communication in the organization. When messages must travel through multiple levels of an organization,
the possibility of distortion can also occur, which would be diminished with more face-to-face communication.
Exhibit 16.5 Informal Communication in Organizations Smart managers understand that not all of a company’s influential relationships
appear as part of the organization chart. A web of informal, personal connections exists between workers, and vital information and knowledge
pass through this web constantly. Using social media analysis software and other tracking tools, managers can map and quantify the normally
invisible relationships that form between employees at all levels of an organization. How might identifying a company’s informal organization
help managers foster teamwork, motivate employees, and boost productivity? (Credit: Exeter/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
CONCEPT CHECK
Interpersonal Roles
Managers are required to interact with a substantial number of people during a workweek. They host
receptions; take clients and customers to dinner; meet with business prospects and partners; conduct hiring
and performance interviews; and form alliances, friendships, and personal relationships with many others.
Numerous studies have shown that such relationships are the richest source of information for managers
because of their immediate and personal nature.6
Three of a manager’s roles arise directly from formal authority and involve basic interpersonal relationships.
First is the figurehead role. As the head of an organizational unit, every manager must perform some
ceremonial duties. In Mintzberg’s study, chief executives spent 12% of their contact time on ceremonial duties;
17% of their incoming mail dealt with acknowledgments and requests related to their status. One example is a
company president who requested free merchandise for a handicapped schoolchild.7
Managers are also responsible for the work of the people in their unit, and their actions in this regard are
directly related to their role as a leader. The influence of managers is most clearly seen, according to
Mintzberg, in the leader role. Formal authority vests them with great potential power. Leadership determines,
in large part, how much power they will realize.
Does the leader’s role matter? Ask the employees of Chrysler Corporation (now Fiat Chrysler). When Sergio
Marchionne, who passed away in 2018, took over the company in the wake of the financial crisis, the once-
great auto manufacturer was in bankruptcy, teetering on the verge of extinction. He formed new relationships
with the United Auto Workers, reorganized the senior management of the company, and—perhaps, most
importantly—convinced the U.S. federal government to guarantee a series of bank loans that would make the
company solvent again. The loan guarantees, the union response, and the reaction of the marketplace,
especially for the Jeep brand, were due in large measure to Marchionne’s leadership style and personal
charisma. More recent examples include the return of Starbucks founder Howard Schultz to reenergize and
steer his company and Amazon CEO Jeff Bezos and his ability to innovate during a downturn in the economy.8
Popular management literature has had little to say about the liaison role until recently. This role, in which
managers establish and maintain contacts outside the vertical chain of command, becomes especially
important in view of the finding of virtually every study of managerial work that managers spend as much
time with peers and other people outside of their units as they do with their own subordinates. Surprisingly,
they spend little time with their own superiors. In Rosemary Stewart’s (1967) study, 160 British middle and top
managers spent 47% of their time with peers, 41% of their time with people inside their unit, and only 12% of
their time with superiors. Guest’s (1956) study of U.S. manufacturing supervisors revealed similar findings.
Informational Roles
Managers are required to gather, collate, analyze, store, and disseminate many kinds of information. In doing
so, they become information resource centers, often storing huge amounts of information in their own heads,
moving quickly from the role of gatherer to the role of disseminator in minutes. Although many business
organizations install large, expensive management information systems to perform many of those functions,
nothing can match the speed and intuitive power of a well-trained manager’s brain for information
processing. Not surprisingly, most managers prefer it that way.
532 Chapter 16 Managerial Communication
As monitors, managers are constantly scanning the environment for information, talking with liaison contacts
and subordinates, and receiving unsolicited information, much of it because of their network of personal
contacts. A good portion of this information arrives in verbal form, often as gossip, hearsay, and speculation. 9
In the disseminator role, managers pass privileged information directly to subordinates, who might otherwise
have no access to it. Managers must decide not only who should receive such information, but how much of it,
how often, and in what form. Increasingly, managers are being asked to decide whether subordinates, peers,
customers, business partners, and others should have direct access to information 24 hours a day without
having to contact the manager directly.10
In the spokesperson role, managers send information to people outside of their organizations: an executive
makes a speech to lobby for an organizational cause, or a supervisor suggests a product modification to a
supplier. Increasingly, managers are also being asked to deal with representatives of the news media,
providing both factual and opinion-based responses that will be printed or broadcast to vast unseen
audiences, often directly or with little editing. The risks in such circumstances are enormous, but so too are the
potential rewards in terms of brand recognition, public image, and organizational visibility.11
Decisional Roles
Ultimately, managers are charged with the responsibility of making decisions on behalf of both the
organization and the stakeholders with an interest in it. Such decisions are often made under circumstances of
high ambiguity and with inadequate information. Often, the other two managerial roles—interpersonal and
informational—will assist a manager in making difficult decisions in which outcomes are not clear and
interests are often conflicting.
In the role of entrepreneur, managers seek to improve their businesses, adapt to changing market conditions,
and react to opportunities as they present themselves. Managers who take a longer-term view of their
responsibilities are among the first to realize that they will need to reinvent themselves, their product and
service lines, their marketing strategies, and their ways of doing business as older methods become obsolete
and competitors gain advantage.
While the entrepreneur role describes managers who initiate change, the disturbance or crisis handler role
depicts managers who must involuntarily react to conditions. Crises can arise because bad managers let
circumstances deteriorate or spin out of control, but just as often good managers find themselves in the midst
of a crisis that they could not have anticipated but must react to just the same.12
The third decisional role of resource allocator involves managers making decisions about who gets what, how
much, when, and why. Resources, including funding, equipment, human labor, office or production space, and
even the boss’s time, are all limited, and demand inevitably outstrips supply. Managers must make sensible
decisions about such matters while still retaining, motivating, and developing the best of their employees.
The final decisional role is that of negotiator. Managers spend considerable amounts of time in negotiations:
over budget allocations, labor and collective bargaining agreements, and other formal dispute resolutions.
During a week, managers will often make dozens of decisions that are the result of brief but important
negotiations between and among employees, customers and clients, suppliers, and others with whom
managers must deal.13
CONCEPT CHECK
1. What are the major roles that managers play in communicating with employees?
2. Why are negotiations often brought in to communications by managers?
Management communication is a central discipline in the study of communication and corporate reputation.
An understanding of language and its inherent powers, combined with the skill to speak, write, listen, and
form interpersonal relationships, will determine whether companies succeed or fail and whether they are
rewarded or penalized for their reputations.
At the midpoint of the twentieth century, Peter Drucker wrote, “Managers have to learn to know language, to
understand what words are and what they mean. Perhaps most important, they have to acquire respect for
language as [our] most precious gift and heritage. The manager must understand the meaning of the old
definition of rhetoric as ‘the art which draws men’s hearts to the love of true knowledge.’”14
Later, Eccles and Nohria reframed Drucker’s view to offer a perspective of management that few others have
seen: “To see management in its proper light, managers need first to take language seriously.”15 In particular,
they argue, a coherent view of management must focus on three issues: the use of rhetoric to achieve a
manager’s goals, the shaping of a managerial identity, and taking action to achieve the goals of the
organizations that employ us. Above all, they say, “the essence of what management is all about [is] the
effective use of language to get things done.”16 One of the things managers get done is the creation,
management, and monitoring of corporate reputation.
The job of becoming a competent, effective manager thus becomes one of understanding language and
action. It also involves finding ways to shape how others see and think of you in your role as a manager. Many
noted researchers have examined the important relationship between communication and action within large
and complex organizations and conclude that the two are inseparable. Without the right words, used in the
right way, it is unlikely that the right reputations develop. “Words do matter,” write Eccles and Nohria. “They
matter very much. Without words we have no way of expressing strategic concepts, structural forms, or
designs for performance measurement systems.” Language, they conclude, “is too important to managers to
be taken for granted or, even worse, abused.”17
So, if language is a manager’s key to corporate reputation management, the next question is obvious: How
good are managers at using language? Managers’ ability to act—to hire a talented workforce, to change an
organization’s reputation, to launch a new product line—depends entirely on how effectively they use
management communication, both as a speaker and as a listener. Managers’ effectiveness as a speaker and
writer will determine how well they are able to manage the firm’s reputation. And their effectiveness as
listeners will determine how well they understand and respond to others and can change the organization in
response to their feedback.
We will now examine the role management communication plays in corporate reputation formation,
534 Chapter 16 Managerial Communication
management, and change and the position occupied by rhetoric in the life of business organizations. Though,
this chapter will focus on the skills, abilities, and competencies for using language, attempting to influence
others, and responding to the requirements of peers, superiors, stakeholders, and the organization in which
managers and employees work.
Management communication is about the movement of information and the skills that facilitate it—speaking,
writing, listening, and processes of critical thinking. It’s also about understanding who your organization is
(identity), who others think your organization is (reputation), and the contributions individuals can make to
the success of their business considering their organization’s existing reputation. It is also about
confidence—the knowledge that one can speak and write well, listen with great skill as others speak, and both
seek out and provide the feedback essential to creating, managing, or changing their organization’s
reputation.
At the heart of this chapter, though, is the notion that communication, in many ways, is the work of managers.
We will now examine the roles of writing and speaking in the role of management, as well as other specific
applications and challenges managers face as they play their role in the creation, maintenance, and change of
corporate reputation.
CONCEPT CHECK
1. How are corporate reputations affected by the communication of managers and public statements?
2. Why is corporate reputation important?
The major channels of managerial communication displayed in Exhibit 16.6 are talking, listening, reading, and
writing. Among these, talking is the predominant method of communicating, but as e-mail and texting
increase, reading and writing are increasing. Managers across industries, according to Deirdre Borden, spend
about 75% of their time in verbal interaction. Those daily interactions include the following.
Exhibit 16.6 Reading, Writing, Speaking, and Listening: How They Help in Creating Meaning (Attribution: Copyright Rice University,
OpenStax, under CC-BY 4.0 license)
One-on-One Conversations
Increasingly, managers find that information is passed orally, often face-to-face in offices, hallways,
conference rooms, cafeterias, restrooms, athletic facilities, parking lots, and literally dozens of other venues.
An enormous amount of information is exchanged, validated, confirmed, and passed back and forth under
highly informal circumstances.
Telephone Conversations
Managers spend an astounding amount of time on the telephone these days. Curiously, the amount of time
per telephone call is decreasing, but the number of calls per day is increasing. With the nearly universal
availability of cellular and satellite telephone service, very few people are out of reach of the office for very
long. The decision to switch off a cellular telephone, in fact, is now considered a decision in favor of work-life
balance.
Video Teleconferencing
Bridging time zones as well as cultures, videoconferencing facilities make direct conversations with employees,
colleagues, customers, and business partners across the nation or around the world a simple matter. Carrier
Corporation, the air-conditioning manufacturer, is now typical of firms using desktop videoconferencing to
conduct everything from staff meetings to technical training. Engineers at Carrier’s Farmington, Connecticut,
headquarters can hook up with service managers in branch offices thousands of miles away to explain new
product developments, demonstrate repair techniques, and update field staff on matters that would, just
536 Chapter 16 Managerial Communication
recently, have required extensive travel or expensive, broadcast-quality television programming. Their
exchanges are informal, conversational, and not much different than they would be if the people were in the
same room.18
A series of scientific studies, beginning with Rankin, Nichols and Stevens, and Wolvin and Coakley, confirm:
most managers spend the largest portion of their day talking and listening.19 Werner’s thesis, in fact, found
that North American adults spend more than 78% of their communication time either talking or listening to
others who are talking.
According to Werner and others who study the communication habits of postmodern business organizations,
managers are involved in more than just speeches and presentations from the dais or teleconference podium.
They spend their days in meetings, on the telephone, conducting interviews, giving tours, supervising informal
visits to their facilities, and at a wide variety of social events.20
Exhibit 16.7 Public speaking Public speaking is often a terrifying but crucial skill for managers. (Credit: Mike Mozart/ flickr/ Attribution 2.0
Generic (CC BY 2.0))
Each of these activities may look to some managers like an obligation imposed by the job. Shrewd managers
see them as opportunities to hear what others are thinking, to gather information informally from the
grapevine, to listen in on office gossip, to pass along viewpoints that haven’t yet made their way to the more
formal channels of communication, or to catch up with a colleague or friend in a more relaxed setting. No
matter what the intention of each manager who engages in these activities, the information they produce and
the insight that follows from them can be put to work the same day to achieve organizational and personal
objectives. “To understand why effective managers behave as they do,” writes Kotter, “it is essential first to
recognize two fundamental challenges and dilemmas found in most of their jobs.” Managers must first figure
out what to do, despite an enormous amount of potentially relevant information (along with much that is not),
and then they must get things done “through a large and diverse group of people despite having little direct
control over most of them.”21
Other organizations are more oral in their traditions—3M Canada is a “spoken” organization—but the fact
remains: the most important projects, decisions, and ideas end up in writing. Writing also provides analysis,
justification, documentation, and analytic discipline, particularly as managers approach important decisions
that will affect the profitability and strategic direction of the company.
Writing is a career sifter. If managers demonstrate their inability to put ideas on paper in a clear,
unambiguous fashion, they’re not likely to last. Stories of bad writers who’ve been shown the door early in
their careers are legion. Managers’ principal objective, at least during the first few years of their career, is to
keep their name out of such stories. Remember: those who are most likely to notice the quality and skill in
538 Chapter 16 Managerial Communication
managers’ written documents are the very people most likely to matter to managers’ future.
Managers do most of their own writing and editing. The days when managers could lean back and
thoughtfully dictate a letter or memo to a skilled secretarial assistant are mostly gone. Some senior executives
know how efficient dictation can be, especially with a top-notch administrative assistant taking shorthand, but
how many managers have that advantage today? Very few, mostly because buying a computer and printer is
substantially cheaper than hiring another employee. Managers at all levels of most organizations draft, review,
edit, and dispatch their own correspondence, reports, and proposals.
Documents take on lives of their own. Once it’s gone from the manager’s desk, it isn’t theirs anymore. When
they sign a letter and put it in the mail, it’s no longer their letter—it’s the property of the person or
organization it was sent to. As a result, the recipient is free to do as she sees fit with the writing, including
using it against the sender. If the ideas are ill-considered or not well expressed, others in the organization who
are not especially sympathetic to the manager’s views may head for the copy machine with the manager’s
work in hand. The advice for managers is simple: do not mail the first draft, and do not ever sign your name to
a document you are not proud of.
Communication Is Invention
Without question, communication is a process of invention. Managers literally create meaning through
communication. A company, for example, is not in default until a team of auditors sits down to examine the
books and review the matter. Only after extended discussion do the accountants conclude that the company
is, in fact, in default. It is their discussion that creates the outcome. Until that point, default was simply one of
many possibilities.
The fact is managers create meaning through communication. It is largely through discussion and verbal
exchange—often heated and passionate—that managers decide who they wish to be: market leaders,
takeover artists, innovators, or defenders of the economy. It is only through communication that meaning is
created for shareholders, employees, customers, and others. Those long, detailed, and intense discussions
determine how much the company will declare in dividends this year, whether the company is willing to risk a
strike or labor action, and how soon to roll out the new product line customers are asking for. Additionally, it is
important to note that managers usually figure things out by talking about them as much as they talk about
the things they have already figured out. Talk serves as a wonderful palliative: justifying, analyzing, dissecting,
reassuring, and analyzing the events that confront managers each day.
Information is created, shared, and interpreted by people. Meaning is a truly human phenomenon. An issue is
only important if people think it is. Facts are facts only if we can agree upon their definition. Perceptions and
assumptions are as important as truth itself in a discussion about what a manager should do next.22
Information never speaks for itself. It is not uncommon for a manager to rise to address a group of her
colleagues and say, “The numbers speak for themselves.” Frankly, the numbers never speak for themselves.
They almost always require some sort of interpretation, some sort of explanation or context. Do not assume
that others see the facts in the same way managers do, and never assume that what is seen is the truth.
Others may see the same set of facts or evidence but may not reach the same conclusions. Few things in life
are self-explanatory.
Context always drives meaning. The backdrop to a message is always of paramount importance to the listener,
viewer, or reader in reaching a reasonable, rational conclusion about what she sees and hears. What’s in the
news these days as we take up this subject? What moment in history do we occupy? What related or relevant
information is under consideration as this new message arrives? We cannot possibly derive meaning from one
message without considering everything else that surrounds it.
A messenger always accompanies a message. It is difficult to separate a message from its messenger. We
often want to react more to the source of the information than we do to the information itself. That’s natural
and entirely normal. People speak for a reason, and we often judge their reasons for speaking before
analyzing what they have to say. Keep in mind that, in every organization, message recipients will judge the
value, power, purpose, intent, and outcomes of the messages they receive by the source of those messages as
much as by the content and intent of the messages themselves. If the messages managers send are to have
the impact hoped for, they must come from a source the receiver knows, respects, and understands.
Larkin and Larkin write, “Deep down, managers believe they are communicating effectively. In ten years of
management consulting, we have never had a manager say to us that he or she was a poor communicator.
They admit to the occasional screw-up, but overall, everyone, without exception, believes he or she is basically
a good communicator.”23
Foremost among managers’ goals should be to improve existing skills. Improve one’s ability to do what is
done best. Be alert to opportunities, however, to develop new skills. Managers should add to their inventory of
abilities to keep themselves employable and promotable.
Two other suggestions come to mind for improving managers’ professional standing. First, acquire a
knowledge base that will work for the years ahead. That means speaking with and listening to other
professionals in their company, industry, and community. They should be alert to trends that could affect their
company’s products and services, as well as their own future.
It also means reading. Managers should read at least one national newspaper each day, including the Wall
Street Journal, the New York Times, or the Financial Times, as well as a local newspaper. Their reading should
include weekly news magazines, such as U.S. News & World Report, Bloomberg’s Business Week, and the
Economist. Subscribe to monthly magazines such as Fast Company and Fortune. And they should read at least
one new hardcover title a month. A dozen books each year is the bare minimum on which one should depend
for new ideas, insights, and managerial guidance.
Managers’ final challenge is to develop the confidence needed to succeed as a manager, particularly under
540 Chapter 16 Managerial Communication
ETHICS IN PRACTICE
Of course, there was a catch. Only those workers who trained their replacements over a 90-day period
would receive the bonus. One American worker in his 40s who agreed to Disney’s severance terms
explained how it worked in action:
“The first 30 days was all capturing what I did. The next 30 days, they worked side by side with
me, and the last 30 days, they took over my job completely. I had to make sure they were
doing my job correctly.”
To outside observers, this added insult to injury. It was bad enough to replace U.S. workers with cheaper,
foreign labor. But to ask, let alone strong-arm, the laid-off workers into training their replacements
seemed a bit much.
However unfortunate, layoffs are commonplace. But this was different. From the timing to the apparent
neglect of employee pride, the sequence of events struck a nerve. For many, the issue was simple, and
Disney’s actions seemed wrong at a visceral level. As criticism mounted, it became clear that this story
would develop legs. Disney had a problem.
For David Powers and Leo Perrero, each a 10-year information technology (IT) veteran at Disney, the
invitation came from a vice president of the company. It had to be good news, the men thought. After all,
they were not far removed from strong performance reviews—perhaps they would be awarded
performance bonuses. Well, not exactly. Leo Perrero, one of the summoned workers, explains what
happened next.
“I’m in the room with about two-dozen people, and very shortly thereafter an executive delivers the
news that all of our jobs are ending in 90 days, and that we have 90 days to train our replacements or we
won’t get a bonus that we’ve been offered.”
Powers explained the deflating effect of the news: “When a guillotine falls down on you, in that moment
you're dead . . . and I was dead.”
These layoffs and the hiring of foreign workers under the H-1B program lay at the center of this issue.
Initially introduced by the Immigration and Nationality Act of 1965, subsequent modifications produced
the current iteration of the H-1B visa program in 1990. Importantly, at that time, the United States faced
a shortage of skilled workers necessary to fill highly technical jobs. Enter the H-1B visa program as the
solution. This program permits U.S. employers to temporarily employ foreign workers in highly
specialized occupations. “Specialty occupations” are defined as those in the fields of architecture,
engineering, mathematics, science, medicine, and others that require technical and skilled expertise.
Congress limited the number of H-1B visas issued to 85,000 per year. That total is divided into two
subcategories: “65,000 new H-1B visas issued for overseas workers in professional or specialty
occupation positions, and an additional 20,000 visas available for those with an advanced degree from a
U.S. academic institution.” Further, foreign workers are not able to apply for an H-1B visa. Instead, a U.S.
employer must petition on their behalf no earlier than six months before the starting date of
employment.
In order to be eligible for an employer to apply a foreign worker for an H-1B visa, the worker needed to
meet certain requirements, such as an employee-employer relationship with the petitioning U.S.
employer and a position in a specialty occupation related to the employee’s field of study, where the
employee must meet one of the following criteria: a bachelor’s degree or the foreign equivalent of a
bachelor’s degree, a degree that is standard for the position, or previous qualified experience within the
specialty occupation.
If approved, the initial term of the visa is three years, which may be extended an additional three years.
While residing in the United States on an H-1B visa, a worker may apply to become a permanent resident
and receive a green card, which would entitle the worker to remain indefinitely.
U.S. employers are required to file a Labor Condition Application (LCA) on behalf of each foreign worker
they seek to employ. That application must be approved by the U.S. Department of Labor. The LCA
requires the employer to assure that the foreign worker will be paid a wage and be provided working
conditions and benefits that meet or exceed the local prevailing market and to assure that the foreign
worker will not displace a U.S. worker in the employer’s workforce.
Given these representations, U.S. employers have increasingly been criticized for abuse of the H-1B
program. Most significantly, there is rising sentiment that U.S. employers are displacing domestic
workers in favor of cheaper foreign labor. Research indicates that a U.S. worker’s salary for these
specialty occupations often exceeds $100,000, while that of a foreign worker is roughly $62,000 for the
very same job. The latter figure is telling, since $60,000 is the threshold below which a salary would
trigger a penalty.
Disney faced huge backlash and negative press because of the layoffs and hiring of foreign workers.
Because of this, Disney had communication challenges, both internally and externally.
Disney executives framed the layoffs as part of a larger plan of reorganization intended to enable its IT
division to focus on driving innovation. Walt Disney World spokesperson Jacquee Wahler gave the
following explanation:
“We have restructured our global technology organization to significantly increase our cast
member focus on future innovation and new capabilities, and are continuing to work with leading
technical firms to maintain our existing systems as needed.” (Italics added for emphasis.)
That statement is consistent with a leaked memo drafted by Disney Parks and Resort CIO Tilak Mandadi,
which he sent to select employees on November 10, 2014 (not including those who would be laid off), to
explain the rationale for the impending layoffs. The memo read, in part, as follows:
“To enable a majority of our team to shift focus to new capabilities, we have executed five new
managed services agreements to support testing services and application maintenance. Last
week, we began working with both our internal subject matter experts and the suppliers to
542 Chapter 16 Managerial Communication
start transition planning for these agreements. We expect knowledge transfer to start later
this month and last through January. Those Cast Members who are involved will be contacted
in the next several weeks.”
Responding to the critical New York Times article, Disney represented that when all was said and done, the
company had in fact produced a net jobs increase. According to Disney spokesperson Kim Prunty:
“Disney has created almost 30,000 new jobs in the U.S. over the past decade, and the recent
changes to our parks’ IT team resulted in a larger organization with 70 additional in-house
positions in the U.S. External support firms are responsible for complying with all applicable
employment laws for their employees.”
New jobs were promised due to the restructuring, Disney officials said, and employees targeted for
termination were pushed to apply for those positions. According to a confidential Disney source, of the
approximately 250 laid-off employees, 120 found new jobs within Disney, 40 took early retirement, and 90
were unable to secure new jobs with Disney.
On June 11, 2015, Senator Richard Durbin of Illinois and Senator Jeffrey Sessions of Alabama released a
statement regarding a bipartisan letter issued to the attorney general, the Department Homeland
Security, and the Department of Labor.
On July 7, 2015, The Daily Caller reported that the Department of Labor had commenced investigations of
Disney after having received several formal complaints from laid-off workers. According to the report,
Department of Labor personnel reached out to the former Disney workers to conduct phone interviews
regarding names of displaced employees as well as typical salaries for the positions. Disney declined to
comment on the report.
In response to request for comment on the communications issues raised by the Disney layoffs and
aftermath, New York Times columnist Julia Preston shared the following exclusive analysis:
“I would say Disney’s handling of those lay-offs is a case study in how not to do things. But in
the end it’s not about the communications, it’s about the company. Those layoffs showed a
company that was not living up to its core vaunted family values and no amount of shouting
by their communications folks could change the facts of what happened.”
Sources: Preston, Julia, Pink Slips at Disney. But First, Training Foreign Replacements, The New York Times
June 3, 2015, http://www.nytimes.com/2015/06/04/us/last-task-after-layoff-at-disney-train-foreign-
replacements.html; Vargas, Rebecca, EXCLUSIVE: Former Employees Speak Out About Disney's Outsourcing of
High-Tech Jobs, WWSB ABC 7 (Oct. 28, 2015), http://www.mysuncoast.com/news/local/exclusive-former-
employees-speak-out-about-disney-s-outsourcing-of/
article_d8867148-7d8c-11e5-ae40-fb05081380c1.html; Boyle, Mathew, Ahead of GOP Debate, Two Ex-Disney
Workers Displaced by H1B Foreigners Speak Out for First Time, Breitbart.com, October 28, 2015,
http://www.breitbart.com/big-government/2015/10/28/ahead-of-gop-debate-two-ex-disney-workers-
displaced-by-h1b-foreigners-speak-out-for-first-time; Sandra Pedicini, Tech Workers File Lawsuits Against
Disney Over H-1B Visas, Orlando Sentinel, published January 25, 2016, accessed February 6, 2016, available
at http://www.orlandosentinel.com/business/os-disney-h1b-visa-lawsuit-20160125-story.html; U.S.
Citizenship and Immigration Services, Understanding H-1B Requirements, accessed February 6, 2016,
available at https://www.uscis.gov/eir/visa-guide/h-1b-specialty-occupation/understanding-h-1b-
requirements; May, Caroline, Sessions, Durbin: Department Of Labor Has Launched Investigation Into
H-1B Abuses, Breitbart.com (June 11, 2015), http://www.breitbart.com/big-government/2015/06/11/
sessions-durbin-department-of-labor-has-launched-investigation-into-h-1b-abuses/; Stoltzfoos, Rachel,
Feds Investigate Disney, HCL America Over January Layoffs, The Daily Caller (July 7, 2015),
http://dailycaller.com/2015/07/07/feds-investigate-disney-hcl-america-over-january-
layoffs/#ixzz41DY4x8Dy; Email from Julia Preston, National Immigration Correspondent, The New York
Times, to Bryan Shannon, co-author of this case study, dated February 10, 2016.
CONCEPT CHECK
Key Terms
communicator The individual, group, or organization that needs or wants to share information with another
individual, group, or organization.
decoding Interpreting and understanding and making sense of a message.
encoding Translating a message into symbols or language that a receiver can understand.
figurehead role A necessary role for a manager who wants to inspire people within the organization to feel
connected to each other and to the institution, to support the policies and decisions made on behalf of
the organization, and to work harder for the good of the institution.
interaction attentiveness/ interaction involvement A measure of how the receiver of a message is paying
close attention and is alert or observant.
noise Anything that interferes with the communication process.
receiver The individual, group, or organization for which information is intended.
The basic model of interpersonal communication consists of an encoded message, a decoded message,
feedback, and noise. Noise refers to the distortions that inhibit message clarity.
Interpersonal communication can be oral, written, or nonverbal. Body language refers to conveying messages
to others through such techniques as facial expressions, posture, and eye movements.
It is important for managers to understand what your organization stands for (identity), what others think
your organization is (reputation), and the contributions individuals can make to the success of the business
considering their organization’s existing reputation. It is also about confidence—the knowledge that one can
speak and write well, listen with great skill as others speak, and both seek out and provide the feedback
essential to creating, managing, or changing their organization’s reputation.
16.5 The Major Channels of Management Communication Are Talking, Listening, Reading, and Writing
5. Describe the roles that managers perform in organizations.
There are special communication roles that can be identified. Managers may serve as gatekeepers, liaisons, or
opinion leaders. They can also assume some combination of these roles. It is important to recognize that
communication processes involve people in different functions and that all functions need to operate
effectively to achieve organizational objectives.
E-Mail 1
Subject:
Stop bringing bottled soft drinks, juices and plastic straws to work. Its an environment problem that
increases our waste and the quality of our water is great. People don’t realize how much wasted
energy goes into shipping all that stuff around, and plastic bottles, aluminum cans and straws are
ruining our oceans and filling land fills. Have you seen the floating island of waste in the Pacific
Ocean? Some of this stuff comes from other countries like Canada Dry I think is from canada and
we are taking there water and Canadians will be thirsty. Fancy drinks isn’t as good as the water we
have and tastes better anyway.
E-Mail 2
From: Management
Subject:
Our Committee to Improve Inter-Office Communication has decided that there needs to be an
update and revision of our policy on emailing messages to and from those who work with us as
employees of this company. The following are the results of the committee’s decisions, and
constitute recommendations for the improvement of every aspect of email communication.
546 Chapter 16 Managerial Communication
1. Too much wordiness means people have to read the same thing over and over repeatedly, time
after time. Eliminating unnecessary words, emails can be made to be shorter and more to the
point, making them concise and taking less time to read.
2. You are only allowed to send and receive messages between 8:30AM east coat time and
4:30PM east coast time. You are also not allowed to read e-mails outside of these times. We
know that for those of you on the west coast or travelling internationally it will reduce the time
that you are allowed to attend to e-mail, but we need this to get it under control.
3. You are only allowed to have up to 3 recipients on each e-mail. If more people need to be
informed it is up to the people to inform them.
2. Write a self-evaluation that focuses specifically on your class participation in this course. Making
comments during class allows you to improve your ability to speak extemporaneously, which is exactly
what you will have to do in all kinds of business situations (e.g., meetings, asking questions at
presentations, one-on-one conversations). Thus, write a short memo (two or three paragraphs) in which
you describe the frequency with which you make comments in class, the nature of those comments, and
what is easy and difficult for you when it comes to speaking up in class.
If you have made few (or no) comments during class, this is a time for us to come up with a plan to help
you overcome your shyness. Our experience is that as soon as a person talks in front of a group once or
twice, it becomes much easier—so we need to come up with a way to help you break the ice.
Finally, please comment on what you see as the strengths and weaknesses of your discussions and
presentations in this class.
3. Refer to the photo in Exhibit 16.3. Comment on the body language exhibited by each person at the
meeting and how engaged they are in the communication.
4. In the movie The Martian, astronaut Mark Watney (played by Matt Damon) is stranded on Mars with
limited ability to communicate with mission control. Watney holds up questions to a camera that can
transmit photographs of his questions, and mission control could respond by pointing the camera at a
“yes” or “no” card with the camera. Eventually, they are able to exchange “text” messages but no voice
exchanges. Also, there is a significant time delay between the sending and receipt of the messages. Which
part of the communication process would have to be addressed to ensure that the encoding of the
messages, the decoding of the messages, and that noise is minimized by Watney and mission control?
Facebook has two separate value propositions aimed at two different markets with entirely different goals.
Originally, Facebook’s main market was its end users—people looking to connect with family and friends. At
first, it was aimed only at college students at a handful of elite schools. The site is now open to anyone with an
Internet connection. Users can share status updates and photographs with friends and family. And all of this
comes at no cost to the users.
Facebook’s other major market is advertisers, who buy information about Facebook’s users. The company
regularly gathers data about page views and browsing behavior of users in order to display targeted
advertisements to users for the benefit of its advertising partners.
The value proposition of the Facebook News Feed experiment was to determine whether emotional
manipulation would be possible through the use of social networks. This clearly could be of great value to one
of Facebook’s target audiences—its advertisers.
The results suggest that the emotions of friends on social networks influence our own emotions, thereby
demonstrating emotional contagion via social networks. Emotional contagion is the tendency to feel and
express emotions similar to and influenced by those of others. Originally, it was studied by psychologists as
the transference of emotions between two people.
According to Sandra Collins, a social psychologist and University of Notre Dame professor of management, it is
clearly unethical to conduct psychological experiments without the informed consent of the test subjects.
While tests do not always measure what the people conducting the tests claim, the subjects need to at least
know that they are, indeed, part of a test. The subjects of this test on Facebook were not explicitly informed
that they were participating in an emotional contagion experiment. Facebook did not obtain informed consent
as it is generally defined by researchers, nor did it allow participants to opt out.
When information about the experiment was released, the media response was overwhelmingly critical. Tech
blogs, newspapers, and media reports reacted quickly.
“ . . . there is some material danger to experiments that depress people. Some people who are at
risk of depression were almost surely part of Facebook’s study group that were shown a more
depressing feed, which could be considered dangerous. Facebook will endure a whole new level of
backlash if any of those participants were found to have committed suicide or had other
depression-related outcomes after the study.”
548 Chapter 16 Managerial Communication
The New York Times quoted Brian Blau, a technology analyst with the research firm Gartner, “Facebook didn’t
do anything illegal, but they didn’t do right by their customers. Doing psychological testing on people crosses
the line.” Facebook should have informed its users, he said. “They keep on pushing the boundaries, and this is
one of the reasons people are upset.”
While some of the researchers have since expressed some regret about the experiment, Facebook as a
company was unapologetic about the experiment. The company maintained that it received consent from its
users through its terms of service. A Facebook spokesperson defended the research, saying, “We do research
to improve our services and make the content people see on Facebook as relevant and engaging as possible. .
. . We carefully consider what research we do and have a strong internal review process.”
With the more recent events, Facebook is changing the privacy settings but still collects an enormous amount
of information about its users and can use that information to manipulate what users see. Additionally, these
items are not listed on Facebook’s main terms of service page. Users must click on a link inside a different set
of terms to arrive at the data policy page, making these terms onerous to find. This positioning raises
questions about how Facebook will employ its users’ behaviors in the future.
Sources: Kramer, Adam; Guillory, Jamie; and Hancock, Jeffrey, “Experimental evidence of massive scale
emotional contagion through social networks,” PNAS (Proceedings of the National Academy of Sciences of the
United States of America). March 25, 2014 http://www.pnas.org/content/111/24/8788.full; Laja, Peep. “Useful
Value Proposition Examples (and How to Create a Good One), ConversionXL, 2015 http://conversionxl.com/
value-proposition-examples-how-to-create/; Yadav, Sid. “Facebook - The Complete Biography,” Mashable, Aug.
25, 2006. http://mashable.com/2006/08/25/facebook-profile/#orb9TmeYHiqK; Felix, Samantha, “This Is How
Facebook Is Tracking Your Internet Activity,” Business Insider, Sept. 9, 2012 http://www.businessinsider.com/
this-is-how-facebook-is-tracking-your-internet-activity-2012-9;
Exhibit 17.1 (Credit: marcusrg/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
Introduction
Learning Outcomes
After reading this chapter, you should be able to answer these questions:
1. Understand the importance of planning and why organizations need to plan and control.
2. Outline the planning and controlling processes.
3. Identify different types of plans and control systems employed by organizations.
4. Explain the individual and organizational effects associated with goal setting and planning.
5. Understand how planning occurs in today’s organizations.
6. Discuss the impact that control has on organizational members.
7. Describe management by objectives as a philosophy and as a management tool/technique; describe its
effects.
8. Differentiate between the execution of the planning and controlling activities under control- and
involvement-oriented management practices.
just trying to survive. After six months, ChezPastis.com experienced growing pains similar to other
Internet start-ups.
One of the partners, Zack Fortuna, was online one day trying to order some books for his daughter’s
birthday. The message he got after attempting to place his order was frustrating: “Sorry! The items you
have requested are currently on back order and will not be available for two months.” Zack needed the
books in two weeks, not two months. He decided to drive to the bookstore and buy books that were in
stock rather than waste time online searching for items that might not be in stock. Suddenly, Zack
realized that ChezPastis.com frequently runs out of items as well and this delays customer orders.
Perhaps ChezPastis.com’s growing pains have something to do with their supply problems.
Question: Are ChezPastis.com’s inventory problem attributable to poor planning, poor control, or both?
How can Elisabeth, Zack, and the other partners improve the situation?
“If you are good enough, it isn’t necessary to set aside time for formal planning. After all, ‘planning time’
takes away from ‘doing time.’” Managers often make such statements, possibly as a way of rationalizing
their lack of a formal planning program. These claims are simply not valid—planning does influence the
effectiveness of the entire organization.
Some years ago, the Calico Candy Company developed and produced a highly successful saltwater taffy
Santa Claus. Buoyed by this success, the company planned and manufactured a saltwater taffy Easter
Bunny and produced the Santa at Christmas again. This time, however, Calico got stuck with its taffy
through faulty planning. Market research clearly showed that consumer preferences had shifted from
taffy to chocolate. Rather than plan its products to meet this new preference, the company stayed with
what had worked in the past and lost a “ton of money.” Yes, planning is important.
Outcome: Zack comes to work the next day excited about his insight. The partners know that inventory
has been an ongoing trouble spot but hadn’t realized the effect it could be having on potential
customers who get frustrated with delayed orders and go elsewhere. After collecting data on customer
requests and back orders, the partners discover that they fill customer orders immediately only 50
percent of the time! Jolted by this thunderbolt, the partners decide to hold regular strategic planning
meetings where they will view the big picture and plan for the future. The first things they decide to do
are install better control systems over their inventory process and collect data on customer online
experiences with ChezPastis.com.
Elisabeth proposes setting a goal of never having to tell a customer that requested items are on back
order. Zack agrees that this is an admirable goal; however, he thinks they should set a daring but
reachable goal of immediately filling customer orders 80 percent of the time. After all, they are a small
business in an unpredictable environment, and they don’t want to frustrate employees with a potentially
impossible goal.
The essence of planning is to see opportunities and threats in the future and, respectively, exploit or
combat them as the case may be. . . . Planning is a philosophy, not so much in the literal sense of that
word but as an attitude, a way of life.1
Planning is the process by which managers establish goals and specify how these goals are to be attained.
Plans have two basic components: outcome or goal statements and action statements. Outcome or goal
statements represent the end state—the targets and outcomes managers hope to attain. Action statements
reflect the means by which organizations move forward to attain their goals. British prime minister Theresa
May is determined to change the way that public companies’ boards are comprised by advocating that
employees be part of every board. As a part of her action statement, she advocated putting an employee
representative in every boardroom, just like Mick Barker, a railway worker since the 1970s, has been quietly
helping to shape decision-making as a member of the board of directors at the top of transport giant First
Group.2
Planning is an intellectual activity.3 It is difficult to see managers plan, because most of this activity unfolds in
the mind of those doing the planning. While planning, managers have to think about what has to be done,
who is going to do it, and how and when they will do it. Planners think both retrospectively (about past events)
and prospectively (about future opportunities and impending threats). Planning involves thinking about
organizational strengths and weaknesses, as well as making decisions about desired states and ways to
achieve them.4
Planning for organizational events, whether in the internal or external environment, should be an ongoing
process—part of a manager’s daily, weekly, and monthly duties and a routine task for all members of high-
involvement organizations. Plans should be continually monitored. Managers and other organizational
members should check to see if their plans need to be modified to accommodate changing conditions, new
information, or new situations that will affect the organization’s future. Plans need to be administered with
flexibility, as organizations learn about new and changing conditions. Clearly, the Calico Candy Company failed
to monitor its plans in this way. By thinking of planning as a continuous activity, methods can be formulated
for handling emerging and unforeseen opportunities and threats. Planning is one process through which
organizational activity can be given meaning and direction.
Several forces contribute to the necessity for organizational planning. First, in the internal environment, as
organizations become larger and more complex, the task of managing becomes increasingly complex.
Planning maps out future activities in relation to other activities in the organization. Second, as the external
environment becomes increasingly complex and turbulent, the amount of uncertainty faced by a manager
increases. Planning enables organizations to approach their environment systematically.
A study out of Cornell University and Indiana University found that absenteeism cost companies $40 billion per
year; the absence of planning was one of the biggest problems businesses face. Firms that follow a clearly
defined plan in their day-to-day operations will be more successful than those that do not. The authors state,
“organizational controlled consequences that would tend to deter absenteeism.” Interestingly, this may be as
simple as inspecting the organizational policies that provide the “rules” for employee absenteeism.5
engage in a regular form of systematic planning. McGill University management professor Henry Mintzberg
notes:
When managers plan, they do so implicitly in the context of daily actions, not in some abstract
process reserved for two weeks in the organization’s mountain retreat. The plans of the chief
executives I have studied seemed to exist only in their heads—as flexible, but often specific,
intentions. . . . The job of managing does not breed reflective planners; the manager is a real-time
responder to stimuli.6
Others disagree. After reviewing a number of studies focused on the degree to which planning and other
managerial activities are inherent parts of managing, management professors J. Carroll and J. Gillen state that
“the classical management functions of Fayol, Urwick, and others are not folklore as claimed by some
contemporary management writers but represent valid abstractions of what managers actually do and what
managers should do.”7 Barbara Allen, president of Sunbelt Research Associates, notes that she did a
considerable amount of planning before launching her new business. Now that she is operating successfully,
she reviews and updates her plans periodically.8
Managers often are very busy people. Some act without a systematic plan of action; however, many managers
do plan systematically.9 For example, many managers develop systematic plans for how their organization will
react to a crisis. United Airlines, for example, created a crisis planning group. The group developed United’s
crisis contingency plan book, which specifies what the airline’s crisis management team should do in the event
of a crisis. Keri Calagna, principal, Deloitte Risk and Financial Advisory, Deloitte & Touche LLP, comments that
up to 20.7% of a firm’s value resides in reputation but that CEOs and 77% of board of directors members
identified reputation risk as the area about which they felt most vulnerable and that only 39% had a plan to
address it.10
The question about whether managers really plan and the observation that many times they are simply too
busy to retreat to the mountaintop and reflect on where the organization should be going and how it should
get there miss the point: there are different types of planning.
Exhibit 17.2 Theresa May The United Kingdom may have voted to leave the European Union (EU), a move known as “Brexit,” but if Prime
Minister Theresa May gets her way, British companies might look a little more like those in EU countries such as Germany and France. Theresa
May favors an overhaul of corporate governance, including appointing employee representatives to boards of directors. (Credit: Arno Mikkor/
flickr/ Attribution 2.0 Generic (CC BY 2.0))
CONCEPT CHECK
1. What is the process where managers establish goals and outline how these goals will be met
called?.
2. How do the internal and external environments of the organization and its strengths and
weaknesses impact the planning process?
3. Why should managers plan?
Planning is a process. Ideally it is future oriented, comprehensive, systematic, integrated, and negotiated.11 It
involves an extensive search for alternatives and analyzes relevant information, is systematic in nature, and is
commonly participative.12 The planning model described in this section breaks the managerial function of
planning into several steps, as shown in Exhibit 17.3. Following this step-by-step procedure helps ensure that
organizational planning meets these requirements.
554 Chapter 17 Organizational Planning and Controlling
Exhibit 17.3 The Planning Process Source: Adapted from H. Koontz and C. O’Donnell, 1972. Principles of management: An analysis of
managerial functions. New York: McGraw-Hill, 113.
Exhibit 17.4 Network of Organization Plans (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Another approach to planning is domain/directional planning, in which managers develop a course of action
that moves an organization toward one identified domain (and therefore away from other domains).16 Within
the chosen domain may lie a number of acceptable and specific goals. For example, high-school senior Neil
Marquardt decides that he wants to major in a business-related discipline in college. During the next four
years, he will select a variety of courses from the business school curriculum yet never select a major. After
selecting courses based on availability and interest, he earns a sufficient number of credits within this chosen
domain that enables him to graduate with a major in marketing. Neil never engaged in goal planning, but in
the end he will realize one of many acceptable goals within an accepted domain.
The development of the Post-it® product by the 3M Corporation demonstrates how domain planning works. In
the research laboratories at 3M, efforts were being made to develop new forms and strengths of cohesive
substances. One result was cohesive material with no known value because of its extremely low cohesive level.
556 Chapter 17 Organizational Planning and Controlling
A 3M division specialist, Arthur L. Fry, frustrated by page markers falling from his hymn book in church,
realized that this material, recently developed by Spencer F. Silver, would stick to paper for long periods and
could be removed without destroying the paper. Fry experimented with the material as page markers and
note pads—out of this came the highly popular and extremely profitable 3M product Scotch Post-it®. Geoff
Nicholson, the driving force behind the Post-it® product, comments that rather than get bogged down in the
planning process, innovations must be fast-tracked and decisions made whether to continue or move on early
during the product development process.17
Exhibit 17.5 Post It Notes Post-it® notes, a 3M product, are often used to create and edit shared documents, such as a company strategic
plan. How might technology that allows multiple people to share and edit documents such as Word or PowerPoint files affect the sales of Post-
it® products? (Credit: Kevin Wen/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
Situations in which managers are likely to engage in domain planning include (1) when there is a recognized
need for flexibility, (2) when people cannot agree on goals, (3) when an organization’s external environment is
unstable and highly uncertain, and (4) when an organization is starting up or is in a transitional period. In
addition, domain planning is likely to prevail at upper levels in an organization, where managers are
responsible for dealing with the external environment and when task uncertainty is high. Goal planning
(formulating goals compatible with the chosen domain) is likely to prevail in the technical core, where there is
less uncertainty.
Hybrid Planning
Occasionally, coupling of domain and goal planning occurs, creating a third approach, called hybrid planning.
In this approach, managers begin with the more general domain planning and commit to moving in a
particular direction. As time passes, learning occurs, uncertainty is reduced, preferences sharpen, and
managers are able to make the transition to goal planning as they identify increasingly specific targets in the
selected domain. Movement from domain planning to goal planning occurs as knowledge accumulates,
preferences for a particular goal emerge, and action statements are created.
Step 3: Premising
In this step of the planning process, managers establish the premises, or assumptions, on which they will build
their action statements. The quality and success of any plan depends on the quality of its underlying
assumptions. Throughout the planning process, assumptions about future events must be brought to the
surface, monitored, and updated.20
Managers collect information by scanning their organization’s internal and external environments. They use
this information to make assumptions about the likelihood of future events. As Kristin considers her four-year
pursuit of her biochemistry major, she anticipates that in addition to her savings and funds supplied by her
parents, she will need a full-time summer job for two summers in order to cover the cost of her undergraduate
education. Thus, she includes finding full-time summer employment between her senior year of high school
and her freshman year and between her freshman and sophomore years of college as part of her plan. The
other two summers she will devote to an internship and finding postgraduate employment—much to mom
and dad’s delight! Effective planning skills can be used throughout your life. The plan you develop to pay for
and complete your education is an especially important one.
Influenced by total quality management (TQM) and the importance of achieving continuous improvement in
the processes used, as well as the goods and services produced, organizations such as IBM-Rochester have
linked their planning and controlling activities by adopting the Deming cycle (also known as the Shewhart
cycle).
It has been noted on numerous occasions that many organizations that do plan fail to recognize the
importance of continuous learning. Their plans are either placed on the shelf and collect dust or are created,
implemented, and adhered to without a systematic review and modification process. Frequently, plans are
implemented without first measuring where the organization currently stands so that future comparisons and
evaluations of the plan’s effectiveness cannot be determined. The Deming cycle, shown in Exhibit 17.6, helps
managers assess the effects of planned action by integrating organizational learning into the planning
process. The cycle consists of four key stages: (1) Plan—create the plan using the model discussed earlier. (2)
Do—implement the plan. (3) Check—monitor the results of the planned course of action; organizational
learning about the effectiveness of the plan occurs at this stage. (4) Act—act on what was learned, modify the
plan, and return to the first stage in the cycle, and the cycle begins again as the organization strives for
continuous learning and improvement.
Exhibit 17.6 The Deming (Shewhart) Cycle (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
CONCEPT CHECK
From an activity perspective, organizations are relatively complex systems, as they are involved in numerous
activities. Many of these activities require management’s attention from both a planning and controlling
perspective. Managers therefore create different types of plans to guide operations and to monitor and
control organizational activities. In this section, we introduce several commonly used plans. The major
categories are hierarchical, frequency-of-use (repetitiveness), time-frame, organizational scope, and
contingency. Table 17.1 provides a closer look at many types of plans that fall in each of these categories.
Hierarchical Plans
Organizations can be viewed as a three-layer cake, with its three levels of organizational needs. Each of the
three levels—institutional, administrative, and technical core—is associated with a particular type of plan. As
revealed in Table 17.1, the three types of hierarchical plans are strategic, administrative, and operating
(technical core). The three hierarchical plans are interdependent, as they support the fulfillment of the three
organizational needs. In the organization’s hierarchy, the technical core plans day-to-day operations.
Organizational Plans
Hierarchical Plans
• Strategic plans (institutional)—define the organization’s long-term vision; articulate the organization’s
mission and value statements; define what business the organization is in or hopes to be in; articulate
how the organization will integrate itself into its general and task environments.
• Administrative plans—specify the allocation of organizational resources to internal units of the
organization; address the integration of the institutional level of the organization (for example, vision
formulation) with the technical core (vision implementation); address the integration of the diverse
units of the organization.
• Operating plans (technical core)—cover the day-to-day operations of the organization.
Frequency-of-Use Plans
Standing Plans
Table 17.1 (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
560 Chapter 17 Organizational Planning and Controlling
Organizational Plans
Single-Use Plans
• Programs—a complex set of policies, rules, and procedures necessary to carry out a course of action.
• Projects—specific action plans often created to complete various aspects of a program.
• Budgets—plans expressed in numerical terms.
Time-Frame Plans
• Short-, medium-, and long-range plans—differ in the distance into the future projected:
◦ Short-range—several hours to a year
◦ Medium-range—one to five years
◦ Long-range—more than five years
• Business/divisional-level plans—focus on one of the organization’s businesses (or divisions) and its
competitive position.
• Unit/functional-level plans—focus on the day-to-day operations of lower-level organization units;
marketing, human resources, accounting, and operations plans (production).
• Tactical plans—division-level or unit-level plans designed to help an organization accomplish its
strategic plans.
Contingency Plans
• Plans created to deal with events that might come to confront the organization (e.g., natural disasters,
terrorist threats); alternative courses of action that are to be implemented if events disrupt a planned
course of action.
Table 17.1 (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Strategic Plans
Strategic management is that part of the management process concerned with the overall integration of an
organization’s internal divisions while simultaneously integrating the organization with its external
environment. Strategic management formulates and implements tactics that try to match an organization as
closely as possible to its task environment for the purpose of meeting its objectives.
Strategic plans address the organization’s institutional-level needs. Strategic plans outline a long-term vision
for the organization. They specify the organization’s reason for being, its strategic objectives, and its
operational strategies—the action statements that specify how the organization’s strategic goals are to be
achieved.
Part of strategic planning involves creating the organization’s mission, a statement that specifies an
organization’s reason for being and answers the question “What business(es) should we undertake?” The
mission and the strategic plan are major guiding documents for activities that the organization pursues.
Strategic plans have several defining characteristics: They are long-term and position an organization within
its task environment; they are pervasive and cover many organizational activities; they integrate, guide, and
control activities for the immediate and the long term; and they establish boundaries for managerial decision-
making.
Operating plans provide direction and action statements for activities in the organization’s technical core.
Administrative plans work to integrate institutional-level plans with the operating plans and tie together all
of the plans created for the organization’s technical core.
Frequency-of-Use Plans
Another category of plans is frequency-of-use plans. Some plans are used repeatedly; others are used for a
single purpose. Standing plans, such as rules, policies, and procedures, are designed to cover issues that
managers face repeatedly. For example, managers may be concerned about tardiness, a problem that may
occur often in the entire work force. These managers might decide to develop a standing policy to be
implemented automatically each time an employee is late for work. The procedure invoked under such a
standing plan is called a standard operating procedure (SOP).
Single-use plans are developed for unique situations or problems and are usually replaced after one use.
Managers generally use three types of single-use plans: programs, projects, and budgets. See Table 17.1 for a
brief description of standing and single-use plans.
Time-Frame Plans
The organization’s need to address the future is captured by its time-frame plans. This need to address the
future through planning is reflected in short-, medium-, and long-range plans. Given the uniqueness of
industries and the different time orientations of societies—study Hofstede’s differentiation of cultures around
the world in terms of their orientation toward the future—the times captured by short, medium, and long
range vary tremendously across organizations of the world. Konosuke Matsushita’s 250-year plan, which he
developed for the company that bears his name, is not exactly typical of the long-range plans of U.S.
companies!
Short-, medium-, and long-range plans differ in more ways than the time they cover. Typically, the further a
plan projects into the future, the more uncertainty planners encounter. As a consequence, long-range plans
are usually less specific than shorter-range plans. Also, long-range plans are usually less formal, less detailed,
and more flexible than short-range plans in order to accommodate such uncertainty. Long-range plans also
tend to be more directional in nature.
562 Chapter 17 Organizational Planning and Controlling
Exhibit 17.7 Tower with digital clock Digital clocks were installed on the Sapporo TV tower, which was donated by Matsushita Electric
Industrial Company, a Japanese electronics manufacturer. This installation was suggested by the founder of the company, Konosuke
Matsushita, who thought these digital clocks would draw great attention to the tower. Matsushita is revered as a management thought leader
in Japan and favored long-term planning, including 250-year plans. (Credit: Arjan Richerter/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
Contingency Plans
Organizations often engage in contingency planning (also referred to as scenario or “what if” planning). You
will recall that the planning process is based on certain premises about what is likely to happen in an
organization’s environment. Contingency plans are created to deal with what might happen if these
assumptions turn out to be wrong. Contingency planning is thus the development of alternative courses of
action to be implemented if events disrupt a planned course of action. A contingency plan allows management
to act immediately if an unplanned occurrence, such as a strike, boycott, natural disaster, or major economic
shift, renders existing plans inoperable or inappropriate. For example, airlines develop contingency plans to
deal with terrorism and air tragedies. Most contingency plans are never implemented, but when needed, they
are of crucial importance.
CONCEPT CHECK
1. Define and describe the different types of plans defined in Table 17.1 and how organizations use
them.
Creating goals is an inherent part of effective managerial planning. There are two types of organizational
goals that are interrelated—official and operational goals.21 Official goals are an organization’s general aims
as expressed in public statements, in its annual report, and in its charter. One official goal of a university, for
example, might be to be “the school of first choice.” Official goals are usually ambiguous and oriented toward
achieving acceptance by an organization’s constituencies. Operational goals reflect management’s specific
intentions. These are the concrete goals that organization members are to pursue.22 For example, an
operational goal for a hospital might be to increase the number of patients treated by 5 percent or to reduce
readmission.
The importance of goals is apparent from the purposes they serve. Successful goals (1) guide and direct the
efforts of individuals and groups; (2) motivate individuals and groups, thereby affecting their efficiency and
effectiveness; (3) influence the nature and content of the planning process; and (4) provide a standard by
which to judge and control organizational activity. In short, goals define organizational purpose, motivate
accomplishment, and provide a yardstick against which progress can be measured.
Neither approach to goal formulation can alone provide for long-term organizational success. Goals must fit
564 Chapter 17 Organizational Planning and Controlling
an organization into its external environment while satisfying the needs of external constituencies. In addition,
goals must enable an organization’s internal components to work in harmony. For example, the goals of its
marketing department need to mesh with those of its production and finance departments. The challenge for
managers is to balance these forces and preserve the organization.
Profit. To achieve sufficient profit to finance our company growth and to provide the resources we need to
achieve our other corporate objectives.
Customers. To provide products and services of the greatest possible value to our customers, thereby
gaining and holding their respect and loyalty.
Field of Interest. To enter new fields only when the ideas we have, together with our technical,
manufacturing and marketing skills, assure that we can make a needed and profitable contribution to the
field.
Growth. To let our growth be limited only by our profits and our ability to develop and produce technical
products that satisfy real customer needs.
People. To help our own people share in the company’s success, which they make possible: to provide job
security based on their performance, to recognize their individual achievements, and to help them gain a
sense of satisfaction and accomplishment from their work.
Management. To foster initiative and creativity by allowing the individual great freedom of action in
attaining well-defined objectives.
Citizenship. To honor our obligations to society by being an economic, intellectual and social asset to each
nation and each community in which we operate.
Source: Adapted from Y. K. Shetty. 1979. New look at corporate goals. California Management Review 22(2):
71–79.
Table 17.2
Broad organizational goals, such as productivity, innovation, and profitability, are likely to be broken into
subgoals at various organizational levels. The complexities posed by many interrelated systems of goals and
major plans can be illustrated by a goal hierarchy.27 Thus, an organization sets organizational-level, divisional-
level, departmental-level, and job-related goals. In the process, managers must make sure that lower-level
goals combine to achieve higher-level goals.
CONCEPT CHECK
Studies indicate that, in the 1950s, approximately 8.3 percent of all major U.S. firms (1 out of every 12)
employed a full-time long-range planner. By the late 1960s, 83 percent of major U.S. firms used long-range
planning. Today it is estimated that nearly all U.S. corporations with sales over $100 million prepare formal
long-range plans.28 Most formal plans extend five years into the future, and about 20 percent extend at least
ten years.
Encouraging Planning
In spite of the advantages to be gained by planning, many managers resist it. Some feel that there is not
enough time to plan or that it is too complicated and costs too much. Others worry about the possible
consequences of failing to reach the goals they set. Instead of preplanning, sometimes referred to as blueprint
planning (that is, formulating outcome and action statements before moving forward), many managers simply
fail to plan or at best engage in in-process planning (they read events and think about the next step just
before acting). In-process planning works extremely well when individuals have a sense of what it is that they
want to achieve and can improvise as they move forward in a sea of uncertainty and turbulence. This is much
like skilled hockey players relying on their instincts, reading the defense, and improvising as they move up the
ice and toward the opponent’s net. This process often works better than attempting to implement a detailed
preplan, as often characterizes plays in football.
In situations where we want to encourage preplanning, certain techniques facilitate the process:
In order for managers to invest the time and energy needed to overcome resistance to planning, they must be
convinced that planning does in fact pay off.
We know from our earlier discussion that setting goals is an important part of the planning process. Today,
much is known about what characterizes effective individual goals. (We discuss this issue in greater detail later
in this chapter.) Although group and organizational goals have been studied less, it is probably safe to assume
that most of our knowledge about individual goals also applies to group and organizational goals. The
research suggests that effective organizational goals should (1) be difficult but reachable with effort, (2) be
specific and clearly identify what is desired, (3) be accepted by and have the commitment of those who will
help achieve them, (4) be developed by employees if such participation will improve the quality of the goals
and their acceptance, and (5) be monitored for progress regularly.
While the evidence is not abundant, studies suggest that firms that engage in planning are more financially
successful than those that do not.29 For example, one study reports that the median return on investment for
a five-year period is 17.1 percent for organizations engaged in strategic planning, versus 5.9 percent for those
that do not.30 Similarly, of 70 large commercial banks, those that had strategic planning systems outperformed
those that did not.31
Although planning clearly has observable benefits, it can be expensive. The financial commitment can be large
for organizations with a formal planning staff. Even so, research suggests that planning is warranted.
Planning Specialists
To keep pace with organizational complexity, technological sophistication, and environmental uncertainty,
many organizations use planning specialists. Professional planners develop organizational plans and help
managers plan. Boeing and Ford are among the many organizations with professional planning staffs.
Planning specialists at United Airlines developed United’s crisis management plan.
Organizations have planning specialists and planning departments in place for a variety of reasons. These
specialized roles have emerged because planning is time-consuming and complex and requires more
attention than line managers can provide. In rapidly changing environments, planning becomes even more
complex and often necessitates the development of contingency plans, once again demanding time for
research and special planning skills. At times, effective planning requires an objectivity that managers and
employees with vested interests in a particular set of organizational activities cannot provide.
A planning staff’s goals are varied. Their primary responsibility is to serve as planning advisors to top
management and to assist lower-level line managers in developing plans for achieving their many and varied
organizational objectives. Frequently, they coordinate the complex array of plans created for the various levels
within an organization. Finally, a planning staff provides encouragement, support, and skill for developing
formal organizational plans.
MANAGING CHANGE
Innovu uses new technology to help small and start-up business control the costs of their health
benefits. Most small companies and start-ups are self-insured; that is, the company pays any covered
employee medical bills or finances any wellness programs directly. According to Diane Hess, the
executive director of the Central Penn Business Group on Health, employers account for 30 percent of
the $2.9 trillion in health care spending in the United States, and workers’ compensation cost employers
$91 billion in 2014. These costs included $31.4 billion for medical and $30.9 in cash payments (Hess 2016).
Innovu mines employee claims to find trends and also provides data on costs due to absenteeism,
disability, and workers’ compensation (Mamula 2017). As employers move to wellness programs to
improve productivity and reduce medical costs, Innovu helps employers “make sure there are
improvements to justify the expenses”(Hess 2016 n.p.).
In a similar vein, Marsh & McLennan Agency Michigan LLC is moving from simply providing insurance
and generic “wellness programs” to helping companies focus on improving employees’ overall well-
being. While traditional wellness programs focus on physical health to improve productivity, the
emerging trend is to help employees with family, social, and financial issues as well. The most
comprehensive program from Marsh & McLennan is its MMA Michigan’s Wellbeing University, which
works to expand traditional wellness programs into nontraditional support services. The comprehensive
approach of the program helps midsize employers “attract and retain talent, encourage employee
satisfaction and reduce absenteeism.” The move beyond simple wellness is a move toward investing in
employees. Bret Jackson, president of Economic Alliance for Michigan, said, “If you have a happy and
healthy employee, productivity increases" (Greene 2017 n.p.).
Branch Messenger is a novel idea to solve employee scheduling. Employees are able to view schedules,
cover shifts, and ask for time off, all from an app on their phone. It integrates with existing company
568 Chapter 17 Organizational Planning and Controlling
systems to allow data analysis, but perhaps more importantly, it allows employees to connect. The start-
up’s program has been adopted by large companies, such as Target, McDonald’s, and Walgreens, to
allow employees to swap shifts simply by using an app on their cell phones. This process streamlines the
process of swapping shifts by allowing employees to handle most of the leg work, “bridg[ing] the
communication gap between workers and the companies that employ them.” The application is free to
employees and runs on both iOS and Android devices. It can also generate digital schedules from paper
schedules and create messaging channels that are workplace specific. Moving past simple shift flexibility,
the application allows businesses to tap into an “on-demand” workforce that is more elastic. It also
allows enterprises to “extend the value of existing workforce management systems without the need to
switch costs” (Takahasi 2017 n.p.)
Allison Harden, a shift manager for a Pizza Hut in Tampa, Florida, likes the added connectivity of the
program. “The messaging feature and the ability to share pictures and posts makes it really easy to stay
connected with them,” Allison says. “It’s a way that I can do it outside a social network. Not everyone has
Facebook and stuff like that—so it’s good and work-friendly, safe for work” (Branch Messenger 2017
n.p.).
“Safe for work” can carry connotations of “oversharing” on social media, but during Hurricane Irma,
Allison and her crew relied on Branch Messenger for storm preparation, allowing the manager to post a
safety checklist and update shifts. Then during the storm itself and after, drivers were able to tell each
other which gas stations actually had gas, who still had electricity, and who was safe (Branch Messenger
2017).
Sources:
Branch Messenger. 2017. “A Branch Customer Story: How A Tampa Pizza Hut Stayed in Contact During
Hurricane Irma.” http://blog.branchmessenger.com/a-branch-customer-story-how-a-tampa-pizza-hut-
stayed-in-contact-during-hurricane-irma/
Greene, Jay. 2017. “New course for Marsh & McLennan Agency as clients seek well-being.” Crain’s Detroit
Business. http://www.crainsdetroit.com/article/20170806/news/635676/new-course-for-marsh-mclennan-
agency-as-clients-seek-well-being
Hess, Diane. 2016. “Column: Using data to make business more efficient, employees more healthy.”
Lancaster Online, November 8, 2016. http://lancasteronline.com/business/local_business/column-using-
data-to-make-business-more-efficient-employees-more/
article_c5887508-a529-11e6-98ae-4be5cc57a478.html
Mamula, Kris B. 2017. “Station Square data analytics company to use $6.5 million to grow.” Post-Gazette,
August 10, 2017. http://www.post-gazette.com/business/tech-news/2017/08/10/innovu-ex...-pittsburgh-
employee-benefits-health-insurance/stories/201708100025
Takahasi, Dean. 2017. “Branch Manager helps hourly workers swap shifts on mobile.” venturebeat.com.
https://venturebeat.com/2017/08/02/branch-messenger-helps-hourly-shift-workers-schedule-their-lives-
on-mobile/
Questions:
1. What ethical problems could surface with data mining as it applies to employee health records?
2. What security risks would a company need to consider when utilizing smartphone apps for work?
Exhibit 17.8 Shelf of tide pods Procter & Gamble, the maker of Tide Pods, has faced two issues with its popular new laundry product. Early
after its introduction, reports came in that 180 children had visited hospitals after ingesting the colorful pods thinking that they were candy.
P&G quickly reacted by making tamper-proof packaging making it more difficult for children to access, adding a nontoxic flavor that would
dissuade children from swallowing the pods, and initiating a product information campaign aimed at informing parents about the
dangers—overall, a well-orchestrated contingency plan. In 2017, however, P&G began receiving reports about teenagers intentionally
swallowing the product in a “pods challenge” that went viral on social media. Whenever notified, P&G decided to contact the teens directly and
contact tech companies such as Facebook and YouTube to remove these posts and videos but did not publicize this, fearing that it would only
cause more teens to accept the challenge or challenge others. (Credit: Mike Mozart/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
CONCEPT CHECK
Managers, of course, want their employees to work hard. However, effort alone is not enough; it must be
directed toward the appropriate target and executed in a proper manner. The question we explore here is, do
570 Chapter 17 Organizational Planning and Controlling
planning, goal setting, and the development of action statements have a favorable impact on employee
motivation, performance, and job satisfaction?
We turn to goal theory for our answer. Research provides us with a clear and unequivocal picture of the effects
of setting goals for organizational members. Goal theory specifies that certain types of goals motivate
employee behavior and thereby contribute to the level of employee performance. Goal theory, while
somewhat narrow in scope, is the most completely supported theory of motivation. 33 You have learned or will
learn about the implications of goal setting as a fundamental part of the planning process and as a standard
for the exercise of control when studying motivation. For goals to be effective, they must be difficult, specific,
and accepted by the employee, and they must be met with feedback from management. Manufacturers often
use production goals to motivate employees.
Exhibit 17.9 The Effects of Goals on Performance (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
The second component of an effective goal is goal difficulty. People with difficult goals perform better than
those with easy goals (note the third and fourth bars in Exhibit 17.9). If goals are perceived as too difficult or
impossible, however, they lose their motivating effectiveness. Ideally, goals will be both specific and difficult.
Thus, setting specific and challenging goals contributes more to planning effectiveness and organizational
performance than does working under “no-goal” or “do your best” goal conditions. 35
Even a goal that is both difficult and specific, however, is not going to be effective unless it is accepted by the
person who is expected to achieve it.36 Goal acceptance is the degree to which people accept a goal as their
own (“I agree that this report must be finished by 5 p.m.”).37 Goal commitment is more inclusive, referring to
our level of attachment to or determination to reach a goal (“I want to get that report done on time”).38 Goals
sometimes fail to motivate people when managers assign them without making sure that workers have
accepted or committed to the goals. Exhibit 17.10 summarizes the conditions necessary to maximize goal-
directed effort (motivation 5 direction 1 intensity), a major contributor to subsequent performance, while
Exhibit 17.11 summarizes the three sets of factors that facilitate goal commitment.39
572 Chapter 17 Organizational Planning and Controlling
Exhibit 17.11 Determinants of Goal Commitment Source: Adapted from E. A. Locke, G. P. Latham, and M. Erez. 1988. The determinants of
goal commitment. Academy of Management Review 13:28. Copyright 1998 by Academy of Management. Reproduced with permission of Academy
of Management in the format Textbook via Copyright Clearance Center; an from E. Erez and P. C. Earley. 1987. Comparative analysis of goal
setting across cultures. Journal of Applied Psychology 72:658–665.
Goal feedback is the last important goal attribute. Goal feedback provides us with knowledge about the results
of our efforts. This information can come from a variety of sources, such as supervisors, peers, subordinates,
customers, inanimate performance monitoring systems, and self-assessment. Regardless of the source, the
right kind of feedback serves two important functions: directional and effort. Directionally, good feedback tells
employees whether they are on the right path and on target or suggests the need for redirection. In addition,
it should provide information that suggests the adequacy or inadequacy of the employee’s level of effort.
Thus, feedback is of critical importance!
Organizational learning and continuous improvement, a central component of TQM, is oriented toward
continually finding problems in the production process that when eliminated will result in performance
increases.40 Performance goals, on the other hand, generally focus the performer’s attention on successfully
achieving a specified level of accomplishment at some future point.
Evidence also reveals a negative side to an employee’s commitment to difficult goals. When organizational
members are strongly committed to achieving difficult goals, their involvement in acts of good organizational
citizenship is likely to decline.41 This negative relationship is unfortunate because organizations operating in
highly turbulent, competitive, and uncertain environments are extremely fragile social systems. They need the
commitment and the sense of ownership that propel organizational members to spontaneously engage in
behaviors that are not specified in their job descriptions but that are important to the organization’s success
and well-being.
There are several other negative effects associated with goals: The methods and means created to accomplish
organizational goals may themselves become the goal (means-ends inversion). Organizational goals may be in
conflict with personal or societal goals. Goals that are too specific may inhibit creativity and innovation.
Ambiguous goals may fail to provide adequate direction, and goals and reward systems are often
incompatible. For example, universities commonly encourage faculty members to be better teachers, but their
reward systems primarily encourage good research.42
An employee’s affective reaction to performance is determined not by the performance level itself but by the
level of performance in relation to his aspiration level.44 Job satisfaction, therefore, stems from the employee’s
evaluation of his actual performance in comparison to his aspiration level (or performance goal). In cases (see
Exhibit 17.12) where performance reaches or passes the level aspired to, a positive emotion (job satisfaction)
is likely to be produced. Performance that fails to reach aspirations causes a negative emotion (job
dissatisfaction). In addition, if performance is valued by the employee because of the extrinsic rewards tied to
it, high performance will create job satisfaction only if achieving the performance goal leads to the receipt of
these valued extrinsic rewards.45 Thus, goal setting is indirectly and contingently related to job satisfaction. If
goal setting contributes to employees reaching their performance aspirations and/or the outcomes that are
associated with that performance, job satisfaction is a likely by-product.
574 Chapter 17 Organizational Planning and Controlling
Exhibit 17.12 Performance, Aspiration Level, and Satisfaction (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Encourage the development of work-group norms that contribute to goal commitment. Use legitimate
authority to encourage the setting of specific and difficult goals. Stimulate workers to develop a sense of
ownership in goals, thus producing goal acceptance and commitment. There are those who believe goal
acceptance and commitment can be nurtured when workers come together as members of a family working
toward the common goal of proving their worth.47
passed, and the department discovered that it had allowed too much vacation time given the volume of
summer activity facing the department. As it developed its staffing plans for the upcoming summer, it would
have to grant fewer requests for summer vacations. Management soon learned that there would actually be
more requests for summer vacation than the previous summer. A conflict between management and the
police union appeared inevitable.
The department turned to creative problem solving. In the process, it came up with the idea of moving from a
seven-day week to an eight-day week. Under the old schedule, a police officer worked a traditional five days a
week, eight hours a day, 40 hours, with two days off each week. Under the new schedule, officers would work
12 hours a day and 48 hours a week. In addition, officers would work four days and then have four days off.
This would in effect give officers half the upcoming summer off without taking a single day of vacation. The
plan was endorsed by both the police union and the city council. Following the endorsement of the new
staffing plan, the department developed a plan for monitoring the effectiveness of this new schedule and
collected baseline data so that subsequent assessment of the schedule could be compared to previous work
schedules.48
In January, the new compressed work schedule was implemented. This was accompanied by a control system
that would monitor the effectiveness of the new schedule. The department was particularly concerned about
the impact of the schedule on stress levels, job satisfaction, and the overall effectiveness of its policing
function. That is, would the 12-hour workday negatively affect performance? Periodically during the next
couple of years, the department monitored the consequences of its new work schedule. There were several
positive results. The level of stress appeared to decline along with the increases in hours worked and leisure
time satisfaction, without any negative performance effects. Now, several years later, there is virtually no
desire to return to the old, more traditional work schedule.
In effective organizations, the activities of planning and controlling are intricately interwoven. For each plan
deemed important to the functioning of the organization, a system to monitor the plan’s effectiveness must
be designed and implemented. In the remainder of this chapter, we explore the nature of control, the control
process, and its effects on the organization and its members.
Like the managerial functions of planning, organizing, and directing, controlling is a complex activity that is
performed at many organizational levels. Upper-level managers, for example, monitor their organization’s
overall strategic plans, which can be implemented only if middle-level managers control the organization’s
divisional and departmental plans, which, in turn, rely on lower-level managers’ control of groups and
individual employees (see our earlier discussion of the goal hierarchy).
Organizations that operate with relatively stable external environments usually need to change very little, so
576 Chapter 17 Organizational Planning and Controlling
managers eventually are able to control their organizations by using a set of routine procedures. With greater
levels of environmental change and the accompanying uncertainty, however, controlling requires continual
attention from managers. Routines and rigid control systems are simply not adequate for such conditions.
Environmental complexity also affects the nature of control systems. Simple environments contain a limited
number of highly similar components that are relatively easy to control through common sets of rules and
procedures. The same bureaucratic control system, for example, can be used at most branch offices of a large
bank. As complexity increases through organizational growth, product diversification, and so on, managers’
needs for up-to-date information and coordination among organizational activities intensify. The complexity
that calls for increased control, however, also requires open, organic systems that can respond quickly and
effectively to complex environments. In such complicated situations, organizations often specify the
development of flexible systems as a means goal: “To allow us to manage the complexities of our
organization, we must remain flexible and open.” Other control activities shift to ends goals, such as “We want
to increase market share 10 percent in each of our divisions.” Flexibility allows substantial choice as to how
ends goals will be met: “Each division may decide how to achieve its 10 percent increase in market share.”
Exhibit 17.13 shows the level of control organizations need under different environmental conditions.
Exhibit 17.13 Need for Control (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
A Control Model
In essence, control affects every part of an organization. Among some of the major targets of the
organization’s control efforts are the resources it receives, the output it generates, its environmental
relationships, its organizational processes, and all managerial activities. Especially important targets of control
include the functional areas of operations, accounting, marketing, finance, and human resources.
Traditional control models (see Exhibit 17.14) suggest that controlling is a four-step process.
Exhibit 17.14 The Traditional Control Model (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
1. Establish standards. Standards are the ends and means goals established during the planning process;
thus, planning and controlling are intricately interwoven. Planning provides the basis for the control
process by providing the standards of performance against which managers compare organizational
activities. Subsequently, the information generated as a part of the control process (see the subsequent
steps in the control model) provides important input into the next planning cycle.
2. Monitor ongoing organizational behavior and results. After determining what should be measured, by
whom, when, and how, an assessment of what has actually taken place is made.
3. Compare actual behavior and results against standards. Ongoing behavior is compared to standards. This
assessment involves comparing actual organizational accomplishments relative to planned ends (what an
organization is trying to accomplish) and means (how an organization intended for actions to unfold). The
outcome of this comparison provides managers with the information they will evaluate in the final step.
4. Evaluate and take action. Using their comparative information, managers form conclusions about the
relationships found between expectations and reality and then decide whether to maintain the status
quo, change the standard, or take corrective action.
Merely automating a work system does not necessarily mean that the control system is cybernetic. The drone
submarine sent to explore and photograph the sunken Titanic was fully automated, but humans on the surface
monitored the effectiveness of the sub’s operations and its adherence to the planned mission. To be classified
as a cybernetic system, a work system must have built-in automatic control capabilities, although the built-in
control need not be machine-based. A group of workers who control their own activities without outside
assistance constitute a cybernetic system.
Control systems that are operated completely independently from the work system itself involve
noncybernetic control. They rely on external monitoring systems in much the same way that a
578 Chapter 17 Organizational Planning and Controlling
manufacturing company uses a separate quality assurance department to monitor and enforce quality
standards rather than allowing production crews to perform this activity. Cybernetic control systems
automatically detect and correct deviations, but automating a control system does not mean it is cybernetic.
This technician is adjusting the mixture in the vat, so this system is not self-regulating and thus is not
cybernetic.
Time Perspectives
Organizations can introduce the control activity at three stages in the work process: prior to, during, or after
the performance of a work activity.49 In practice, most managers use a hybrid control system that
incorporates control at each of these intervals so that managers can prepare for a job, guide its progress, and
assess its results.
Managers use precontrols (or preaction controls) to prevent deviation from a desired plan of action before
work actually begins. For example, Butch Ledworowski, owner of Lil’ America Building Contractors, inspects all
construction materials to see that they meet industry standards. Managers can use two types of concurrent
controls (steering and screening control) to prevent deviation from the planned course of action while work is
in progress. Steering controls are reactive concurrent controls; they occur after work has begun but before it is
completed. At Lil’ America, for instance, Butch visits each construction site and watches his carpenters,
offering advice and instruction as they work. Screening controls (also referred to as yes/no, go/no-go controls)
are preventive concurrent controls. As activity at a critical stage is completed, managers use screening controls
to assess work performed to that point and to judge whether progress is adequate. If it is, a yes decision is
made to proceed to the next stage. At Lil’ America, for example, Butch always inspects carpentry work after
walls have been framed. Unless he approves the work, electricians cannot begin wiring the structure.
Managers use postaction controls after the product or service is complete to examine the output. After each
remodeling job, Butch assesses the work to determine whether it meets specifications, was completed on
time, and came in at or under budget. Postaction controls play an important role in future planning, but their
primary function is to provide feedback by describing the degree to which previous activities have succeeded.
The control process itself and, certainly, all effective control systems are based on information. Without good
information, managers cannot assess whether ends and means goals are met. They cannot determine the
relationship between them or provide feedback to planners. To be effective, information must be accurate,
objective, timely, and distributed to organization members who need it. High-involvement organizations work
to make sure that virtually all organizational information is accessible by any employee who needs it in order
to make quality decisions. Oticon, a Danish manufacturer of hearing aids, for example, scans all company
communications and places them in its information system that all employees can access.
Exhibit 17.15 Oticon building As a management control procedure, Oticon, the Danish manufacturer of hearing aids, scans all company
communications and places them in its information system that all employees can access. (Credit: News Oresund/ flickr/ Attribution 2.0 Generic
(CC BY 2.0))
Another characteristic of a good control system is its focus on issues of importance to the organization.
Managers who develop control procedures for virtually all work activities and outcomes waste resources and,
as will be discussed later in this chapter, risk creating a control system that produces negative feelings and
reactions.
A final characteristic of a good control system is its practicality. Something that works well for another
organization or looks wonderful in print still has to fit your organization to work well there. Some practical
considerations to look for in a control system include feasibility, flexibility, the likelihood that organization
members will accept it, and the ease with which the system can be integrated with planning activities.
Clarifies expectations
Table 17.3 (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
580 Chapter 17 Organizational Planning and Controlling
Reduces ambiguity
Provides feedback
Enhances satisfaction
Enhances performance
Consumes resources
Decreases satisfaction
Increases absenteeism
Increases turnover
Creates stress
Table 17.3 (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Positive Effects
Organizational control systems can provide many positive effects for organization members in terms of
motivation, performance, and satisfaction. This occurs by providing adequate structure, appropriate feedback,
and effective goal-setting programs.
When workers want clarification of what they are expected to do, a leader can improve both their performance
and satisfaction by providing structure. The guidance provided by both precontrol and concurrent control
systems can likewise be received favorably. Another potential and related benefit for employees with an
uncertainty avoidance or low tolerance for ambiguity personality is that the structure of a good control system
reduces the uncertainty of a work situation.
A good control system also provides constructive feedback. Most employees react quite favorably to the timely
provision of accurate feedback about their effectiveness.52 Feedback helps workers correct ineffective
behaviors. Perhaps more importantly, feedback can be very rewarding. People who have a need to succeed
(individuals with a high need for achievement) are gratified when feedback tells them that they are, in fact,
succeeding. Feedback can improve job performance if workers use it to adjust their goals, approach, or effort
levels appropriately. Both concurrent and postaction controls provide employees with feedback about the
appropriateness of their behavior and the degree to which their work is producing successful results.
You have already seen that goal setting can be an important contributor to effective management. A good
control system is very useful for identifying appropriate goals. Consider the control system used by the sales
company where Maria Castro works. It specifies an expected sales approach (means goal) that helps her work
toward a specific, difficult sales goal (ends goal). Precontrols help her understand how to achieve the desired
sales level by providing such means goals as specific sales calls to make and promotional specials to offer.
Concurrent controls and postcontrols provide feedback that helps Maria monitor her progress. The combined
effects of goal setting and feedback about goal progress are particularly powerful.
Negative Effects
Unfortunately, control systems don’t always function well. Excessive controls are a waste of money and
energy. Donald Pemble, for example, needs a larger travel budget because he must personally inspect bridges
under his new control system. His inspectors spend the time they could have used to inspect bridges in
logging entries, painting numbers, and griping about the unfairness of the situation. Not only do excessive
controls waste money because they fail to enhance effectiveness, but they can also create additional problems.
For example, Shannon and her coworkers have changed from good corporate citizens who kept accurate
records and conducted comprehensive inspections into harried workers who falsify log entries. Worse,
unsuspecting motorists travel over what might be unsafe bridges.
The vast amount of paperwork and documentation called for by an excessive control system can also cause
frustration and helplessness. The red tape created by many universities’ control systems, for example, wastes
students’ time. Standing in lines for hours, they wait to pay dorm fees, purchase meal tickets, rent parking
spaces, pay tuition, and register for classes. Their frustration and dissatisfaction are mirrored by many
university employees who question the competence, the reasonableness, and perhaps even the intelligence of
supervisors who insist on maintaining excessive control.
Another dysfunctional result of poor control systems can be seen in their effect on goal-setting programs.
Whereas a good control system can help design and monitor valuable goal-setting programs, a poor control
system can accomplish quite the opposite. A control system focused on unreasonable ends and means goals
can motivate workers to establish inappropriate individual goals. For instance, the ends goal Donald Pemble
established of having all bridges inspected within two years was unreachable, and his monthly inspection
quotas (means goals) were unobtainable. Donald’s insistence on maintaining these inappropriate goals was
evident in his reactions when the inspectors failed to meet them. Consequently, Shannon and her coworkers
focused on preserving their jobs as a primary goal, rather than on conducting quality inspections.
In addition to encouraging the formation of inappropriate goals, poor control systems emphasize and reward
behaviors that, although not necessarily inappropriate, may hinder more productive behavior. Managers who
concentrate on workers’ attendance, for example, may not promote such desirable behaviors as creativity,
cooperation, and team building.53 Although there is nothing wrong with encouraging attendance, a control
system that fosters attendance (by punishing tardiness) because it is easier to measure than creativity
encourages rigid, uncreative behavior (on the part of employees who are almost always at work). An
advertising agency that controls attendance but not creativity, for example, would soon be in serious trouble.
Even when control systems help identify appropriate goals and encourage appropriate behavior, rigid
adherence to narrow goals can create problems. A large number of specific, concrete goals, for example, can
inhibit creativity. The vast amount of time organization members must spend tending to concrete goals leaves
them little time or energy to create. It is not only creativity that suffers, however. Every minute used taking
582 Chapter 17 Organizational Planning and Controlling
attendance in a classroom is one less minute available for teaching. Every hour a police officer spends
completing paperwork is one less hour available for public service. Managers should use only the goals they
need, no more.
Finding the optimal balance between organizational and personal control is not an easy task, however,
because most employees desire more personal control than their organizations allow. People will strive to gain
greater control “in spite of (and frequently because of) the barriers and constraints the organization places on
the attainment of personal control.”57 Repeated failures to gain personal control may cause workers to
develop what has been called learned helplessness.58 People who learn that they are helpless to influence
their work environment are likely to be the source of low productivity, low quality, high absenteeism,
dissatisfaction, and turnover. They tend to react with depression, anxiety, stress, frustration, hostility, anger,
and alienation. Furthermore, once helplessness has been learned, people often continue to behave helplessly,
even if the environment changes to permit them greater control. Managers must thus prevent employees
from developing learned helplessness because reversing it is very difficult. They should allow workers to
control the aspects of their work lives that they can adequately control and use only the necessary amount of
organizational control.
In Search of Balance
At this point, it might seem that managers should just accede to workers’ persistent demands for greater
control. Research shows, however, that indiscriminately giving employees larger amounts of control actually
causes performance to suffer if such control exceeds their capacity to use it.59
If a control system that is too excessive does not work, and if giving workers all of the personal control they
desire is not effective, what do managers do to achieve the proper balance? First, people need to possess
personal control; therefore, give them the amount of control they are able to handle. Second, make certain
that workers given control believe they can use it effectively. Help them translate their effort into successful
performance. Third, recognize that organizational control systems influence the personal control perceptions
of organizational members. These, in turn, change behavior and attitudes.
By interviewing and/or surveying employees, managers can learn more about employees’ needs for control.
Through organizational scans, managers can determine the amount and location of control already existing in
the organization, as well as the areas needing control. The objective then becomes one of achieving the best
possible match between employees and their work environment.
CONCEPT CHECK
When people are personally committed to their organization’s plans, those plans are more likely to be
accomplished. This truism is the philosophy underlying management by objectives.
Exhibit 17.16 MBO and Its Effect on Employees (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Although there are many variations in the practice of MBO, it is basically a process by which an organization’s
goals, plans, and control systems are defined through collaboration between managers and their employees.
Together they identify common goals, define the results expected from each individual, and use these
584 Chapter 17 Organizational Planning and Controlling
measurements to guide the operation of their unit and to assess individual contributions. 61 In this process, the
knowledge and skills of many organizational members are used. Rather than managers telling workers “These
are your goals”—the approach of classical management philosophy—managers ask workers to join them in
deciding what their goals should be.
After an acceptable set of goals has been established for each employee through a give-and-take,
collaborative process, employees play a major role in developing an action plan for achieving these goals. In
the final stage in the MBO process, employees develop control processes, monitor their own performance, and
recommend corrections if unplanned deviations occur. At this stage, the entire process begins again. Exhibit
17.17 depicts the major stages of the MBO process.
Exhibit 17.17 The Management by Objective (MBO) Process (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Thus, from a theoretical perspective, there are several reasons why MBO should produce a positive impact on
employee performance, motivation, commitment, and job satisfaction. In the next section, we briefly look at
what the research tells us about the effectiveness of MBO programs.
The Evidence
In both the public and private sectors, MBO is a widely employed management tool. A recent review of the
research on MBO provides us with a clear and consistent view of the effects of these programs. In the 70 cases
studied by Robert Rodgers and John Hunter, 68 showed increased productivity gains, and only 2 showed
losses.63 In addition, the increases in performance were significant. Rodgers and Hunter report that the mean
increase exceeded 40 percent.
While the results are generally positive in nature, differences in performance effects appear to be associated
with the level of top management commitment. In those cases where top management is emotionally,
intellectually (that is, top management espouses the value and importance of MBO), and behaviorally (top
management actually uses MBO themselves) committed, the performance effects tend to be the strongest.
The weakest MBO effects appear when top management does very little to “talk the value/importance of
MBO” and they don’t use the system themselves, even as they implement it for others.64 This evidence tells us
that “the processes” used to implement MBO may render a potentially effective program ineffective. Thus, not
only should managers pay attention to the strategies used to facilitate planning and controlling (like MBO),
they should also be concerned with how they go about implementing the plans. MBO requires top
management commitment, and it should be initiated from the top down.65
Research shows that an MBO program can play a meaningful role in achieving commitment to a course of
action and improving performance. In fact, research clearly documents instances where MBO programs have
increased organizational effectiveness. Still, there have been failures. After reviewing 185 studies of MBO
programs, one researcher concluded that they are effective under some circumstances but not all.66 For
example, MBO tends to be more effective in the short term (less than two years), in the private sector, and in
organizations removed from direct contact with customers. These factors also affect the success of an MBO
program:
To be truly effective over the long haul, MBO programs probably need to be coupled with some type of
gainsharing program (that is, programs whereby organizations share some of the financial gains accrued from
the ideas, productivity improvements, and cost savings that stem from employee participation). Based on his
extensive observation of involvement-oriented organizations, Edward E. Lawler III notes that information,
knowledge, power, and rewards are four key components of an effective and sustained high involvement. 67
Typically, MBO systems don’t provide mechanisms through which employees share in the economic gains that
may accrue to the organization as a result of their expanded role and responsibility. In light of the conditions
that influence the effectiveness of MBO programs, management is challenged to provide an appropriate
context for the design and maintenance of an effective MBO system.
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CONCEPT CHECK
Planning and controlling are approached with distinctive differences under control-oriented and involvement-
oriented approaches to management. In the mechanistic organization, both activities tend to be lodged with
management in the organizational hierarchy, often above the point in the organization where the plans are
being carried out. The hierarchy plays an active role in both the planning and controlling process, and the
employee is often a passive player carrying out the planning directives and the target of the control activity.
The organic organization, with its involvement-oriented management practices, places the employee as an
active player in both the planning and controlling activity. Management’s role becomes one of a consultant,
facilitator, enabler, philosopher, teacher, coach, and resource provider as employees take on active roles in
planning and controlling and in assuming responsibility for the execution of both activities.
Upper-level managers assume responsibility for planning and controlling their units while employees assume
the right and responsibility for planning and controlling at their job level. As upper-level managers carry out
their planning and controlling activities, they do so by soliciting input from those below them in the
organizational hierarchy.
Systems such as MBO are much more likely to characterize the planning and controlling process in
involvement-oriented organizations than in control-oriented organizations. Control in high-involvement
organizations is diffused through many groups and is commonly focused on task accomplishment and
overcoming obstacles, with a de-emphasis on fixing blame with a particular individual for performance
failures. In many control-oriented management systems, the reins of control are firmly held by the hierarchy,
and the activities of individuals are carefully controlled. Performance failures, therefore, tend to become
focused on the individual who fails to perform.
Finally, mechanistic organizations are more likely to create large planning departments and to centralize the
planning function with specialists. As organizations confront increasing environmental or technology-induced
uncertainty, rapid environmental change, and turbulence, planning and controlling move closer to the point in
the organization where the plans are implemented and carried out on a day-to-day basis. In place of
hierarchy-based control, organizations rely more on professional employees and groups of employees to
control their own actions as they execute organizational plans.
Exhibit 17.18 Maersk Line ship A new blockchain solution from IBM and Maersk will help manage and track the paper trail of tens of millions
of shipping containers across the world by digitizing the supply chain process. (Credit: Kees Torn/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
MANAGING CHANGE
The impact of currency fluctuations on profitability is discussed in economics, finance, and various
accounting texts. What currency should be used to buy inventory? To sell inventory? How do puts and
calls mitigate currency fluctuations? Is the added expense worth covering the potential loss? These are
all questions businesses must consider when moving into a global market. When Tata Consultancy
Services, India’s largest software services exporter, reported first quarter results that were below
expectations in the first quarter of 2017, much of the blame was laid on currency fluctuations, which
accounted for 80 basis points of the drop in profitability (Alawadhi 2017).
But starting in 2009, financial transactions, including global financial transactions, became a little more
complicated. Or did they? Bitcoin emerged in 2009 from an unknown source only known as Satoshi
Nakamoto (The Economist Explains 2015). Built on what is called blockchain technology, Bitcoin and
other cryptocurrencies (jargon for digital assets that are secured by cryptography) are a technological
unknown in the future of exchange and financing. The technology behind blockchain and the resulting
assets is complicated but not necessary to understand the potential effects of the technology. Effectively,
Bitcoin is a “peer-to-peer electronic cash system that uses a distributed ledger to bypass central control
systems for transactions” (Pepijn 2017). As peer-to-peer transactions, cryptocurrencies bypass the
588 Chapter 17 Organizational Planning and Controlling
normal channels, such as banks and credit card processors. Theoretically, this lowers transaction costs
for both the buyer and the seller. Blockchain, which can include assets beyond currency, also allows firms
to raise funds directly from investors, bypassing investment bankers and venture capitalists. According to
the Financial Post, “High levels of encryption protect the transaction by validating the parties involved
and by preventing hacking, erasure or amendments” (Francis 2017).
Bitcoin uses blockchain technology to maintain a record of its currency ecosystem. The viability of
blockchain technology as a thing in itself should not be confused with Bitcoin’s price volatility, which has
seen its price increase (and decrease) by several orders of magnitude. Shady bitcoin exchanges and a
shifting regulatory landscape, a result of governments attempting to regulate the very concept of a
means of exchange, have produced enormous swings up and down (Crypto Investor 2017).
But however volatile the new currencies, blockchain technology is seeing other, relatively sane
applications. Isabel Cooke at Barclays has already used “distributed ledger technology,” or blockchain
technology, to process a trade finance transaction in the real world: “Our pilot trade brought the sign-off
time from ten days to four hours. It reduced costs, added transparency, decreased risk and looked to
improve the customer experience” (Why blockchain is ‘difficult and exciting’ 2017). With an immutable,
public ledger to work from, “Creating a really clear audit trail across organisations provides real value –
whether that’s with land registration or trade finance. If we have a shared view of data on ledgers, we
can then build business logic on top of that, and that can apply to interest rates swaps or smart contracts
within the investment bank” (Crypto Investor 2017).
So are blockchains and cryptocurrencies the wave of the future or just a modern financial bubble or
threat to global financial security? Some industry writers say that the decentralization and lower costs of
the technology are necessary and will launch even more industries (Pepijn 2017). Even governments and
central banks are looking at the potential benefits and costs savings of an electronic currency. According
to investment banker Alex Tapscott, if the Bank of England replaced 30 percent of the traditional British
currency with digital money, he thinks it would add 3 percent to British GDP. The expectation is that
digital currency would lower consumer prices and increase sellers’ profits. And the encryption
technology would prevent counterfeiting, fraud, or tampering (Francis 2017).
In a perfect world, exchanges in a global currency, such as the blockchain-based crypotocurrencies, could
sidestep currency fluctuations. In the real world, however, the wild value fluctuations of cryptocurrencies
mean blockchain technology has a way to go before delivering on that possibility, if it ever does.
Sources:
Alawadhi, Neha. 2017. “Currency fluctuations and BFSI, retail sluggishness hurt TCS's Q1 show.”
Moneycontrol.com. http://www.moneycontrol.com/news/business/earnings-business/currency-
fluctuations-and-bfsi-retail-sluggishness-hurt-tcss-q1-show-2325575.html
Crypto Investor. 2017. “Bitcoin: Three Ways the Bubble Could Pop.” Medium.com, September 15, 2017.
https://medium.com/@Truth_Investor/bitcoin-three-ways-the-bubble-will-pop-40678ce11698
Economist Explains, The. 2015. “Who is Satoshi Nakamoto?” The Economist, November 2, 1015.
https://www.economist.com/blogs/economist-explains/2015/11/economist-explains-1
Francis, Diane. 2017. “Why the smart money is betting on blockchain.” Financial Post.
http://business.financialpost.com/diane-francis/why-the-smart-money-is-betting-on-blockchain
Pepijn, Daan. 2017. “With smart controls and contracts, blockchain tech is bridging the real and virtual
worlds.” The Next Web. https://thenextweb.com/contributors/2017/07/31/smart-controls-contracts-
blockchain-tech-bridging-real-virtual-worlds/#.tnw_oDCnSKF2
“Why blockchain is ‘difficult and exciting.’” 2017. Barclays, May 16, 2017. https://www.home.barclays/
news/2017/05/Isabel-Cooke-on-blockchain.html
Questions
1. What other applications can you see for blockchain technology? Would they reduce costs?
2. What drawbacks or potentials risks do you see in blockchain technology?
3. Do you think blockchain technology could be used to offset currency fluctuations? Would this likely
increase or decrease the risk?
4. Why would governments be suspicious of cryptocurrencies and consider regulating or outlawing
them? Have any governments done so to date?
CONCEPT CHECK
1. Describe the execution of the planning and controlling activities under control- and involvement-
oriented management practices.
590 Chapter 17 Organizational Planning and Controlling
Key Terms
action statements The means by which an organization moves forward to attain its goals.
administrative plans Plans that work to integrate institutional-level plans with the operating plans and tie
together all of the plans created for the organization’s technical core.
concurrent controls Controls intended to prevent deviation from a planned course of action while work is in
progress.
contingency plans Plans that deal with alternative courses of action.
controlling Monitoring the behavior of organizational members and the effectiveness of the organization
itself to determine whether organizational goals are being achieved and taking corrective action if
necessary.
cybernetic control Self-regulating control procedures.
Deming cycle A planning model directed toward attaining continuous improvement by integrating
organizational learning into the planning process (plan, do, check, act).
domain/directional planning The development of a course of action that moves an organization toward
one domain or direction (and, therefore, away from other domains or directions).
goal hierarchy The interrelationship among an organization’s job-, department-, divisional-, and
organizational-level goals.
goal planning Development of action statements to move toward the attainment of a specific goal.
hybrid control system Control system that exercises control prior to, during, and after the performance of a
work activity.
hybrid planning The coupling of domain and goal planning.
management by objectives (MBO) A philosophy of management, a planning and controlling technique, and
an employee involvement program.
noncybernetic control Control systems that operate independently from the work system that is being
monitored; a monitoring system that is external to the target of control.
official goals The aims of an organization that are expressed in highly abstract and general terms, generally
employed for the organization’s external constituents.
operating plans Direction and action statements for activities in the organization’s technical core.
operational goals The aims of an organization that reflect management’s specific intentions.
outcome or goal statements End states—the targets and outcomes that managers hope to attain.
planning The process by which managers establish goals and specify how these goals are to be attained.
postaction controls Controls employed after a product or service is complete.
precontrols Controls designed to prevent deviation from a desired plan of action before work actually
begins.
single-use plans Plans developed for unique situations or problems and one-time use.
standing plans Rules, policies, and procedures about how to deal with issues that managers face repeatedly.
strategic plans Hierarchical plans that address an organization’s institutional-level needs and attempt to
position it advantageously within its task environment.
Planning is the process through which managers establish goals and detail how these goals will be attained.
There are five major stages in the planning process. First, an organization establishes its preplanning
foundation, which reviews past events and describes the current situation. In the second step, the
organization sets forth goals based on the preplanning foundation. In the third step, managers forecast what
is likely to happen in the organization’s internal and external environments in order to develop alternative
courses of action. Then, managers identify possible courses of action for meeting their objectives, evaluate
each alternative, and select a course of action. Finally, planners develop the supportive plans necessary to
accomplish the organization’s major plan of action. Once implemented, that plan is monitored and controlled
so that it meets the goals established in the second step.
Managers create many types of plans based on hierarchical level, frequency of use, time frame, and
organizational scope. Contingency plans to be used in case of unexpected events or wrong assumptions are
critical for effective management in highly turbulent environments.
Goal development is an important part of the planning process. Goals developed for employees, for
departments, and for entire organizations greatly enhance organizational effectiveness. Evidence reveals that
performance is higher when organizations, as well as individuals, operate under difficult (but attainable),
specific goals.
Plans reduce uncertainty and risk, focus attention on goals, and enhance understanding of the external
environment. Although most major organizations engage in formal planning, many managers fail to plan
appropriately. Lack of time, uncertainty about the future, and fear of failure are among the reasons given by
managers for their failure to plan.
The primary purposes of the controlling function are to monitor the extent to which an organization’s plans
are being followed and their effectiveness and to identify when and where it is necessary to take corrective
action. To accomplish these ambitious tasks, managers construct control systems that touch most aspects of
an organization’s functional areas, its relationship with the external and internal environments, and its
relationships across different hierarchical levels.
The control process consists of four steps. In Steps 1 and 2, managers create standards and monitor ongoing
organizational behavior. In Step 3, they examine the degree to which ongoing activity is consistent with their
goals and means objectives and the relationship between the two. In Step 4, managers develop prescriptions
to correct problems, to maintain strengths, and to provide feedback to an organization’s planners.
Whereas all control systems have the same general purposes, they differ in their specifics. Some are self-
managing cybernetic systems; noncybernetic systems require regular external supervision to be effective.
Other variations in control systems include the point at which control activities are applied: before the work
592 Chapter 17 Organizational Planning and Controlling
has begun (precontrols), while work is in progress (concurrent controls), and after work has been completed
(postaction controls). A hybrid control system engages a variety of control activities at many points in time.
Although there are variations in control systems, all good systems have characteristics that enable them to
work well in a given organization. Managers evaluating a control system might thus gauge its adequacy in
providing accurate, timely, objective information to appropriate people in the organization. They also should
examine whether the system focuses on the most critical aspects of their organization’s conditions in a
feasible, flexible manner that will be accepted by organizational members. Because of the importance of the
information it provides, a good control system should also be integrated with planning activities.
Any control system can produce both positive and negative effects. If it is well designed, a control system
provides needed structure and feedback and facilitates the development and execution of effective goal-
setting programs. The result can be a satisfied, motivated, and productive workforce. Inappropriate control
systems, however, can cause frustration, dissatisfaction, and poor performance. Being aware of a control
system’s potential effects on organization members helps managers capitalize on its positive aspects, reduce
the impact of negative effects, and promote workers’ acceptance of the system.
The effort to maintain control is not restricted to managers. All employees have a need for personal control, a
need that sometimes conflicts with their organization’s need to maintain control. To achieve effectiveness,
managers must balance the control needs of both the organization and its members.
Management by objectives (MBO), with its emphasis on goal setting, participation, and feedback, frequently
contributes to increased employee goal commitment, motivation, and performance. If performance matches
the employee’s aspirations, job satisfaction is likely to be an important by-product of the organization’s
planning and controlling activities.
Planning and controlling are approached with distinctive differences under control-oriented and involvement-
oriented approaches to management. In the mechanistic organization, both activities tend to be lodged with
management in the organizational hierarchy, often above the point in the organization where the plans are
being carried out. The hierarchy plays an active role in both the planning and controlling process, and the
employee is often a passive player carrying out the planning directives and the target of the control activity.
control systems.
9. Identify and discuss three positive and three negative effects often associated with control systems.
10. How does the desire for personal control affect managers, and how can they balance it with
organizational control systems?
Not always so well. In 2013, both FedEx and UPS underestimated holiday demand, and with bad weather
conditions as well, struggled to deliver packages as promised. Since then, both carriers have worked hard to
keep adequate resources available to handle the end-of-year upsurge. But in 2014, UPS overcompensated and
had too much capacity, once again damaging profitability (Livengood 2017).
Matching retailer expectations to reality is a challenge, and not just for the shipping companies. Although
retailers would prefer to know how much to expect in sales, forecasts will be inaccurate, sometimes wildly so.
In preparing its forecast for the 2017 peak season, Logistics Management examined economic factors, such as
GDP, job growth, retail sales, and inventory levels. It also looked at imports. An informal survey of logistical
professionals found that 93.5 percent expect the 2017 season to be the same as 2016 (35.5 percent) or more
active (58 percent) (Berman 2017).
In June 2017, UPS announced that it would be adding a surcharge to some peak season rates. According to the
UPS website, “During the 2016 holiday season, the company’s average daily volume exceeded 30 million
packages on more than half of the available shipping days. In contrast, on an average nonpeak day, the
company ships more than 19 million packages” (UPS Establishes New Peak Shipping Charge 2017). The rate for
the 2017 peak season would apply to select services and to oversize shipments, primarily (UPS Establishes New
Peak Shipping Charge 2017). Analysts see the surcharge as a signal that UPS is the rate setter in parcel
delivery. Such an assessment is not surprising given that the increase in parcel delivery as an outcome of
increased e-commerce is seen as a core driver of earnings for UPS (Franck 2017).
Second-ranked FedEx, in contrast, announced that it would not follow suit but instead would “forgo most
holiday surcharges on home deliveries this year” (Schlangenstein 2017). The surcharges levied by UPS are
aimed primarily at small shippers, not the larger contract shippers. By not adding a seasonal surcharge, FedEx
might hope to capture sales from individuals and small businesses that are deterred by the UPS surcharge
(Schlangenstein 2017).
Kevin Sterling, a Seaport Global Holdings analyst, believes that FedEx has the existing capacity to absorb
additional ground shipments. “[FedEx is] going to let UPS be Scrooge at Christmas” (Schlangenstein 2017).
UPS already has a contract with Amazon, the de facto behemoth of online shopping, for normal shipping,
leaving room for FedEx to pick up the slack during the holiday rush (Schlangenstein 2017).
In contrast, UPS reports that the additional charge is needed to offset the costs of additional resources
necessary to achieve expected upsurges in capacity. UPS spokesperson Glenn Zaccara commented, “UPS’s
peak season pricing positions the company to be appropriately compensated for the high value we provide at
a time when the company must double daily delivery volume for six to seven consecutive weeks to meet
customer demands” (Schlangenstein 2017).
With or without surcharges, price structures at both companies strive to discourage shipment of heavy, odd-
sized, or oversized packages because such packages won’t flow through either company’s sorting systems and
require special handling. All the same, FedEx has seen a 240 percent increase in such shipments over the last
10 years, which make up roughly 10 percent of all packages shipped using its ground services. And although
FedEx is not adding a holiday surcharge, per se, it has added charges for packages that require extra handling,
particularly shipments between November 20 through December 24 (Schlangenstein 2017).
Sources:
Berman, Jeff. 2017. “Prospects for Peak Season appear to be cautiously optimistic.” Logistics Management.
http://www.logisticsmgmt.com/article/prospects_for_peak_season_appear_to_be_cautiously_optimistic
Franck, Thomas. 2017. “UPS set to make a boatload on its new surcharges during holiday season, Citi
predicts.” CNBC. https://www.cnbc.com/2017/08/08/ups-set-to-make-a-boatload-on-its-new-surcharges-
during-holiday-season-citi-predicts.html
Holiday Forecasts and Historical Sales. 2015. National Retail Federation. https://nrf.com/resources/holiday-
headquarters/holiday-forecasts-and-historical-sales
Livengood, Anna. 2017. “UPS’ Peak Season Surprise.” Veriship Resource Center. https://veriship.com/
resources/ups-peak-season-surprise/
Schlangenstein, Mary. 2017. “FedEx Will Shun Most Home Holiday Fees, Unlike UPS.” Transport Topics.
http://www.ttnews.com/articles/fedex-will-shun-most-home-holiday-fees-unlike-ups
Tasker, Becky. 2016. “2016 Holiday Shopping: Up-To-The-Minute Data From ADI.” CMO.com.
http://www.cmo.com/adobe-digital-insights/articles/2016/11/8/2016-holiday-shopping-up-to-the-minute-
data-from-adi.html
UPS Establishes New Peak Shipping Charge.” 2017. UPS Pressroom. https://www.pressroom.ups.com/
pressroom/ContentDetailsViewer.page?ConceptType=PressReleases&id=1497873904827-900
1. What do you think are some of the difficulties of adding 25 percent more employees for the holiday
season? What kind of planning do you think would be needed?
2. China effectively shuts down for two weeks each year and celebrates the lunar new year. How does that
resemble (or not) peak season in Western countries?
3. The case focuses on U.S. markets. How are European markets affected by holiday shopping?
4. Have your own shopping habits changed with the ease of online shopping? If so, how? Do you expect
them to change when you graduate and have more disposable income?
596 Chapter 17 Organizational Planning and Controlling
Exhibit 18.1 (Credit: 6eo tech/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
Introduction
Learning Outcome
After reading this chapter, you should be able to answer these questions:
1. What do we mean by management of technology and innovation (MTI), and why is it crucial?
2. How do organizations develop technology and innovation?
3. What are external sources of technology and innovation development, and when are they best used?
4. What are internal sources of technology and innovation development, and when are they best used?
5. How and why do entrepreneurs develop MTI skills?
6. No matter what method is used, what skills do you need to successfully manage technology and
innovation?
7. How do you look into the future to keep pace?
computer industry with revenues exceeding $70 billion. This Taiwanese firm has established itself as a
global player in the PC market and has expanded into gaming and other related businesses. How it got
there is through innovative use of alliances and acquisitions as well as forward-looking development
within the firm.
The Firm’s History
Acer was founded in 1976 as Multitech. The focus of Multitech was on trade and product design (internal
innovation). Just three years later, Multitech designed Taiwan’s first mass-produced computer product.
The focus from the start was on a product for export—Taiwan is such a small market the firm knew it
needed to make a global footprint in the computer market. Multitech, which became Acer in 1987,
developed a long-term mission to allow anyone to use and benefit from technology. They have built their
reputation on development and manufacturing of sophisticated, intuitive, easy-to-use products.
Early Innovations
When Multitech first started, the PC market was young and the founders saw many opportunities. Acer
holds more patents than any other Taiwanese-based corporation, and Taiwan accounts for 70 percent of
global computer hardware manufacturing. When Acer beat IBM to the market with 32-bit PCs in 1986, it
signaled the beginning of the end for IBM’s PC business. Until 1990, Acer was more internally innovative
than it was externally oriented for alliances and acquisitions.
External Technology Development
In 1990, Altos Peripherals was acquired. This marked the beginning of two decades of multiple alliances
and acquisitions by Acer. Because of Acer’s success in developing innovations, other companies were
willing and eager to development different types of alliances. Some of the early alliances allowed Acer to
partner with some of the biggest players in the computer technology industry. For example:
• 1996—Acer signed a reciprocal patent licensing agreement with IBM, Intel, and Texas Instruments
allowing use of one other’s patented technology.
• 1999—Acer Group and IBM formed a seven-year procurement and technology alliance.
As Acer grew in strength in the marketplace, it began to make acquisitions. These acquisitions were
aimed at multibranding as well as obtaining technological innovations. For example:
• 1998—Acer acquired Texas Instruments’ TI-Acer interest and renamed the company Acer
Semiconductor Manufacturing Inc.
• 2007—Acer merged with Gateway Inc.
• 2008—Acer merged with Packard Bell Inc.
• 2008—Acer acquired E-TEN.
• 2015—Acer acquired GPS cycling computer brand Xplova.
• 2016—Acer acquired wireless pet camera maker Pawbo.
To illustrate the usefulness of this strategy, in 2011 Acer Inc. bought iGware Inc. for $320 million to try to
enter the potentially lucrative cloud market. Then in 2012, Acer created cloud software and infrastructure
tools for devices.
These steps were designed to enhance and strengthen Acer’s global position. Acer’s product range
includes PC notebooks and netbooks, desktop computers, storage systems, peripheral devices, LCD
televisions, and e-business solutions. The firm is number one in a number of markets with various
products. The Europe, Middle East, and Africa (EMEA) market is a stronghold for Acer’s mobile
computing solutions. Acer is the largest supplier of LCD televisions in Western Europe. Acer is first in the
notebook market in Italy, Spain, Austria, Holland, Switzerland, Russia, Belgium, Denmark, Hungary,
Poland, and the Slovakian Republic.
In the United States and Canada, Acer is making its mark through its Channel Business Model (CBM). It
developed this model as it expanded beyond Taiwan and continued to improve it as it divested its
manufacturing facilities. This model allows Acer to be flexible in adapting to global IT market trends.
CBM involves collaboration with partners and suppliers to develop and market top-tier products and
services. In 2003, they used this model to co-brand a notebook computer with Ferrari, the Italian
carmaker.
In 2009, Acer unveiled the Acer F900 and M900 smartphones at the Mobile World Congress. They began
by shipping to channel partners in EMEA and Asia. These products have a relatively large 3.8-inch-wide
VGA display and a 3.75G HSPA connectivity for high-speed data transfer, and they are the introductory
products with Acer’s new widget-based user interface that provides easy navigation with vivid 3D
animation. The acquisition of Packard Bell was key to Acer’s entrance into this market with this advanced
product.
From 2008 to 2013, Acer’s strategy was to enhance worldwide presence with a new multibrand strategy.
With the successful completion of the mergers of Gateway and Packard Bell, Acer then heavily
emphasized its goal to further strengthen its global footprint with a multibrand strategy and solid
partnerships. Since 2014, the Acer Group has been transforming into a hardware + software + services
company.
To accomplish this shift, Acer needed to spin off or divest certain units. This accomplished two things: 1)
it made cash available for acquisitions and other new business development, and 2) it refocused the
strategy of Acer.
• 2000—Acer spun off its manufacturing operation to focus on developing technologically advanced,
user-friendly solutions.
• 2000—Acer split off its OEM (Original Equipment Manufacturing) business unit to create Wistron
Corp., an independent design and IT manufacturing company.
Acer continues to lead in notebook technology while extending its product lines to enhance people’s
lives through technology. In notebook technology, Acer was the leader in branding notebooks (Ferrari
4000 carbon-fiber notebook—2005), green notebooks (2010), and lightest notebook with the longest
battery life (Aspire line—2012), as well as the Chromebook launch in 2015 with a 15.6-inch screen.
However, its product lines have multiplied into cloud technology, gaming, and other technologies that
“add value to customers’ lives” (Acer annual report).
Acer has used a variety of strategic moves to continue to be competitive in the changing world of
computer-related technology. Early on, they used internal innovation as a primary growth strategy to
build reputation and establish a footprint in the industry. Then they used external methods of acquiring
technology and markets—mergers, acquisitions, alliances, joint ventures, equity positions, etc. Acer
continues to nurture its strengths in research and development while continuing to look for new
opportunities for acquisition and alliances.
Sources: Anonymous. 2009. Acer website , “Showcases Multi-brand Products at Computex 2009 including
Aspire Timeline Notebook, Aspire One Netbook, Aspire All-In-One PC.” JCN Newswire- Japan Corporate
News Network. Tokyo, June 3, 2018; www.acer-group.com; Acer Group 10-K reports.
Management of technology and innovation is critical to the organization. Because of innovations and new
technologies, we have historically seen the emergence of innovative organizational structures and new ways
of performing work. For example, the Industrial Revolution ushered in the functional structure for
organizations. As business moved from small craft businesses like blacksmiths to railroads, there was a need
to introduce a more complex business structure. Today, we see the innovations in information technology
changing structures to more network based with people being able to work remotely. The changes in
structure are innovations in the technology of how work is accomplished; the innovations brought on by the
invention of new products influence the technology we use and how we use it.
Exhibit 18.2 Technology and Innovation Defined (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Technology can be defined in a number of ways. The basic purpose of a system (such as an organization) is to
convert inputs into outputs. Therefore, we will define organizational technology as the processes within the
organization that help to convert inputs into outputs as well as the supporting evaluation and control
mechanisms. The management of technology involves the planning, implementation, evaluation, and control
of the organization’s resources and capabilities in order to create value and competitive advantage. This
involves managing:
Exhibit 18.3 Management of Technology (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
602 Chapter 18 Management of Technology and Innovation
1. Technology strategy—the logic of how technology will be used and what role technology will have in the
organization. For example, will innovation (first-to-market strategies dominate) be the focus, or will the
firm want to do things better to obtain market share and value (let others take the initial risks)?
2. Technology forecasting—the use of tools to study the environment for potential technological changes
that can both positively and negatively affect the firm’s value proposition. Digitization of a variety of
products such as watches and cameras provided great opportunities for some firms and caused others to
go bankrupt. Forecasting (or at least keeping an eye on the changes in technology) is very important in
management of technology.
3. Technology roadmapping—the process of taking an innovation or technology and trying to build more
value by looking for ways to use the technology in different markets and places.
4. Technology project portfolio—the use of portfolio techniques in development and use of technology
enhances the potential value of technologies being developed and the technologies that are currently
part of a firm’s portfolio. Disney was a leading producer of animated films. However, Disney did not stop
there—the portfolio of characters in the films are now marketed as products and displayed in Disney
theme parks, and Disney very carefully manages the availability of the animated films.
Innovation activities are an important subset of technology activities. Innovation includes “newness” in the
development and used of products and/or processes within a firm and within an industry. Invention, new
product development, and process-improvement methods are all examples of innovation. Management of
innovation includes both change management and managing organizational processes that encourage
innovation. The management of innovation is more than just planning new products, services, brand
extensions, or technology inventions—it is about imagining, mobilizing, and competing in new ways. For the
organization, innovation management involves setting up systems and processes that allow newness that
adds value to emerge. Some firms, like Google and 3M, give some employees time during the workweek to
work on their own ideas with the hope of sparking new ideas that will add value. Google News and 3M Post-it
Notes are products that emerged from this practice. In order to manage innovation processes successfully, the
firm must undertake several activities (these can involve the study of technologies currently in use).
Exhibit 18.4 Innovation Management (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
1. Casting a wide net while trying to keep up with potential changes in the firm, the market, the competition,
etc. is crucial. Eastman Kodak was the dominant U.S. camera manufacturer. On several occasions in their
history they missed opportunities to take advantage of innovations in their product line—they did not cast
their net out. Land, the founder of Polaroid, went to Kodak with his invention of instant
photographs—Kodak said no. Kodak did not see the telephone as a potential competitor until it was too
late. Kodak was especially vulnerable because the firm was a late entrant into the digital camera market.
As a result of failure to cast a wide net in keeping up with trends and innovations, Kodak went bankrupt.
2. Creating newness with existing products can expand the portfolio of value of a product. 3M has done this
with all kinds of tape and with different formats and forms of Post-it Notes. Asking “how else can the
MANAGING CHANGE
The trading hub functions as a means of integrating the electronic collaboration of business services.
Each hub provides standard formats for the electronic trading of documents used in a particular
industry, as well as an array of services to sustain e-commerce between businesses in that industry.
Services include demand forecasting, inventory management, partner directories, and transaction-
settlement services. And the payoff is significant—lowered costs, decreased inventory levels, and shorter
time to market—resulting in bigger profits and enhanced competitiveness. For example, large-scale
manufacturing procurement can amount to billions of dollars. Changing to “just-in-time purchasing” on
the e-hub can save a considerable percentage of these costs.
Electronic trading across a hub can range from the collaborative integration of individual business
processes to auctions and exchanges of goods (electronic barter). Global content management is an
essential factor in promoting electronic trading agreements on the hub. A globally consistent view of the
“content” of the hub must be available to all. Each participating company handles its own content, and
applications such as content managers keep a continuously updated master catalog of the inventories of
all members of the hub. The transaction manager application automates trading arrangements between
604 Chapter 18 Management of Technology and Innovation
Ultimately, trading hubs for numerous industries could be linked together in a global e-commerce
web—an inclusive “hub of all hubs .” One creative thinker puts it this way: “The traditional linear, one
step at a time, supply chain is dead. It will be replaced by parallel, asynchronous, real-time marketplace
decision-making. Take manufacturing capacity as an example. Enterprises can bid their excess
production capacity on the world e-commerce hub. Offers to buy capacity trigger requests from the
seller for parts bids to suppliers who in turn put out requests to other suppliers, and this whole process
will all converge in a matter of minutes.”
Sources: “Asian Companies Count Losses—Hatch Ways to Cope with Weak Dollar,” Reuters,
https://www.reuters.com, January 24, 2018; Rob Verger, “This Is What Determines the Price of Bitcoin,”
Popular Science, https://www.popsci.com, January 22, 2018; Bhavan Jaipragas, “Alibaba’s Electronic
Trading Hub to Help Small and Medium-sized Enterprises Goes Live in Malaysia,” This Week in Asia,
http://www.scmp.com, November 3, 2017.
Critical Thinking Questions
1. How do companies benefit from participating in an electronic trading hub?
2. What impact does electronic trading have on the global economy?
There are six critical areas that affect society and business and thus require firms to practice good
management of technology and innovation. Each of these must be managed for value to be created and
captured:1
1. Management of Human Resources. Work environment (tools and structures) are much different today
than they were at the turn of the millennium. For example, the iPhone was first introduced in 2007. Cell
phone technology in the year 2000 was not for everyone—most people still had landline telephones. The
introduction of cell phone technology and its use in business has made many employees feel like they are
on 24-hour call. Because workers tend to carry their phones everywhere, they are available to be called,
texted, or e-mailed.
Providing learning opportunities (whether online or traditional training and development) has become a
more important part of human resources management—employees need to be given time to adjust to
the introduction of new ways of working, new software, etc. For example, it is the rare 45-year-old
manager today that owned or used a laptop computer before graduating college.
2. Cooperative Model Expansion. The more rapidly innovation occurs, the more rapidly technology occurs
within firms, within industries, and within economies. These changes require that cooperatives be
developed. These cooperatives can take a variety of forms, both internal and external to the firm. We will
discuss internal and external MTI as well entrepreneurial MTI.
3. Internationalization. There is much more internationalization of products and markets. Sometimes, the
innovations spread in ways that were not predicted. For example, GE wanted to develop a portable MRI
machine to be used in less-developed countries. The machine would be portable and would use a laptop
interface to send images for diagnoses. It was successful developed and a plant was built overseas, and
then GE discovered there were markets in more-developed economies that they had not considered. For
example, large-animal veterinarians wanted to use the machines on farms and ranches. Finding the best
markets and the best production options has become an important part of MTI.
4. Issues around Environmental Concerns. Environmental concerns can be important throughout the whole
life cycle of a product. From development to manufacturing to usage to disposal, are all concerns for MTI.
For example, energy production is a cause of great concern. The use of fossil fuels such as coal, oil, and
natural gas have impacted carbon levels in the atmosphere. Nuclear power does not have that impact,
but accidents at such facilities can be catastrophic. Use of wind, water, waves, and sunlight to produce
energy does not lead to carbon emissions, but there are other environmental concerns. Building large
dams such as Hoover Dam in the United States is much more difficult now because society is much more
aware of the changes in the ecosystem such large projects cause.
5. Growth of Service Industries. As economies become more knowledge and information based, service
industries will continue to grow. The services provided by Internet suppliers, specialists in network
security, etc. will influence how business will grow for the foreseeable future—especially in developing
economies. The emergence of a more knowledge- and information-based global economy means that
services will become more critical and service industries will continue to grow at a faster pace than
product-based industries.2
6. Use of Intellectual Property Rights (IPR) as a Strategic Resource. Because many new products and
processes are based on intellectual property rights (patents, copyrights, and trademarks), it is crucial that
organizations manage their IPR as a valuable asset. This requires value articulation through value
transference, translation, and transportation.3 For example, Dolby Laboratories patented innovative
noise-reduction technology that was translated to a stereo film sound technique that was patent
protected to transportation to new patents protecting “analog world.” As a result, Dolby enjoyed long-
term growth from its innovation and over 80 percent of its revenues came from licensing the technology
rather than producing competing products.
Exhibit 18.5 Ideo To demonstrate the process for innovation for a 1999 episode of ABC’s late-night news show Nightline, IDEO created a new
shopping cart concept, considering issues such as maneuverability, shopping behavior, child safety, and maintenance cost. The show
concentrated on IDEO’s design process, recording as a multidisciplinary team brainstormed, researched, prototyped, and gathered user
feedback on a design that went from idea to a working appearance model in four days. (Credit: David Armano/ flickr/ Attribution 2.0 Generic
(CC BY 2.0))
Organizations have to be flexible in the management of technology and innovation. Acer, in the opening case,
has used a variety of methods to acquire new technology and to innovate and expand its platforms. When
Acer started out, the management realized that being a domestic company in Taiwan was very limiting, so they
cast their net widely. They originally used internal R&D to grow. Then they expanded their markets and their
product lines through mergers and acquisitions. They have increased their product offerings as the laptop
market has matured. They are now using services platforms to continue their expansion and growth.
606 Chapter 18 Management of Technology and Innovation
CONCEPT CHECK
1. How are management of technology and management of innovation similar? How are they
different?
2. How can firms create value through good management of technology and innovation?
3. How has Acer managed its technology and innovation processes?
There are a number of ways that organizations can develop and manage technology and innovation. We will
focus on organization-level activities and the three strategic processes in this section of the chapter.
In order for a firm to develop a successful management of technology and innovation strategy, it is imperative
that the organization be readied for the effort. This requires agility because changes and adjustments to
products and processes are filled with risk and uncertainty. However, agility is inherantly less efficiency if it is
to be effective. Therefore, the management of technology and innovation must balance short-term efficiency
with long-term effectiveness in the market if the firm is to add value and thrive in a changing environment.
Strong dynamic capabilities are needed if the organization is going to be able to address the challenges of
innovation and dynamic competition.4 There are four things the firm should do to balance the conflicting
demands of being agile in a dynamic environment. These are:
1. Design systems and processes that can identify, assess, and develop technology based opportunities (or
protect from new technology threats). The systems and processes should be able to sense what is
coming.
2. Identify communication needs and efficiently turn data into information so that the right information can
be available to make the best decision in a timely fashion. The current interest in big data and what it can
tell firms is tied to the notion that we have a lot of bytes of data available because of computer technology
that are not being used effectively or efficiently.
3. Develop employees through training and learning opportunities. This becomes more critical as the
competitive environment for the organization becomes more dynamic. The management of technology
and innovation requires that all levels of the organization are involved and that efforts are made to
ensure that employees are allowed to enhance their skills for themselves and the organization. The more
dynamic the environment, the more important skill enhancement is for the firm and the individual.
4. Use good change management processes to help the firm succeed in introducing newness into the
organization. Many firms learned expensive lessons when desktop computers were introduced into the
workplace. First, most managers did not type, so they did not adopt the new technology. Second, younger
staff members were more likely to be comfortable with the new computers (even elated because the
computer was better than they could afford at home), so knowledge power was turned upside down from
the hierarchy and seniority. Third, many firms installed desktops with little or no training (because they
were “upgraded typewriters”) while leaving the typewriters easily accessible. The result was that some
companies deemed desktops a failure and sold the equipment at a loss. Obviously, desktop computers
are now a vital tool in the workplace, but this just illustrates what happens when a good change
management process that includes proper support systems, communication, and training is not
implemented.
Exhibit 18.6 Key Management Activities (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
There are three basic organizational processes—buying and partnering, developing newness within the firm,
and entrepreneurially exploiting a space in the environment. Exhibit 18.6 delineates the three types. Buying
and partnering includes mergers and acquisitions, joint ventures, contractual agreements, and other forms of
acquiring technology/innovation from external sources. Internal sources of new technology/innovation for the
organization include research and development of new products as well as reconfiguring or developing new
processes—ways of doing things. This can be organization structure or redesigning an assembly line. Adding
robotics to a manufacturing process may be an internally driven process, or a firm may buy a robotics
manufacturer to acquire the capability to add robotics to the assembly process.
Exhibit 18.7 Three Methods of Creating New Technologies/Innovations (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0
license)
The third type of creating new technologies/innovations involves exploiting a space in the environment
through entrepreneurial or new-business development activities. Michael Dell started Dell in his dormitory
room at University of Texas. He wanted a better computer than he could buy, so he bought parts and
608 Chapter 18 Management of Technology and Innovation
assembled his own. Friends asked him to build one for them. He realized there was an innovative process of
customizing computers and delivering directly from the manufacturer to the customer. Michael Dell’s
exploitation of the custom-built, direct manufacturer-to-customer delivery led to a multibillion dollar business.
Table 18.1 lists the advantages and disadvantages of each of the technology/innovation creation methods.
Table 18.1 (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
CONCEPT CHECK
The external processes for developing and acquiring technology and innovation include a variety of options.
They are most successfully used under the following circumstances:
1. The product line or the processes of the firm have fallen behind those of its competitors.
2. A new entrant into the market of the industry has changed the competitive dynamics.
3. A firm believes that its product mix or way of doing things is not going to be successful in the long run.
The major advantage of using an external process is speed—for the focal firm, the time needed to blend an
acquired technology or innovation is usually much shorter than the time required to try to make a discovery
and bring it to market or implement it within the firm. Often, the external processes are less costly. The
disadvantages are tied to the need to blend different firms or bring “others” into the activities of the firm. For
example, there may be cultural conflicts in an acquisition or there may be resistance to acceptance of the
newness that is brought into the firm.
The most common types of external processes used to enhance technology and innovation in a firm include:
1. Mergers/acquisitions (M&A), which involve ownership changes within the firms. For an acquisition, one
firm buys another; for a merger, the two firms come together and form a new firm. The essence of both
of these approaches is that a new, larger organizational entity is formed. The new firm should have more
market power (be larger) and should gain knowledge about a technology or domain of activity. The
blending of two cultures, two sets of processes, and two structures are all potential disadvantages of M&A
activity.
2. Joint ventures are long-term alliances that involve the creation of a new entity to specifically carry out a
product/process innovation. The entity is usually governed by a contractual relationship that specifies the
contributions and obligations of the partners in the joint venture. There are potential culture clashes as
well as the potential for strategic drift—losing strategic focus on the reasons for the joint venture.
3. Franchise agreements are usually long-term agreements that involve long payoffs for the sharing of
known technology. Fast food restaurants, such as McDonald’s, use franchise agreements with store
owners. McDonald’s provides R&D for new processes and new products. The store owners (franchisees)
pay a fee for the use of the name and the marketing of the product. The contract and monitoring costs
associated with franchise agreements are the big disadvantage of this type of alliance.
4. Licensing agreements involve technology acquisition without R&D. For example, Dolby contracts with
producers of various type of sound equipment to allow them to use their technology to have better sound
quality. Licensing agreements are quite common in high-tech industries. The contract costs and
constraints are the disadvantages of licensing agreements.
5. Formal and informal contracts are used to allow firms to share technology between them. For formal
contracts, the length of time the contract is enforceable is a defining characteristic. The more formal a
contract, usually the longer it is, and it usually includes more details about the usage and limitations of
the technology. For the informal contract, the advantage is that if the activity is no longer beneficial, it is
much easier to disband.
All of the methods are of use to firms large and small. In the opening case, Acer used a number of methods to
externally acquire technology.
CONCEPT CHECK
Look at the Acer case at the beginning of the chapter and respond to the following items.
1. Identify the times Acer used external methods of acquiring newness for their organization.
2. What goals did they accomplish?
610 Chapter 18 Management of Technology and Innovation
The most common type of internal process for technology and innovation in the organization is research and
development (R&D). R&D involves the seeking and developing of new technologies, products, and/or
processes through creative efforts within the firm. The benefits of internal processes include ownership of the
technology/innovation that provide legal protections (i.e., patents and trademarks). In addition, the
understanding and the knowledge gained from the process of R&D can give the firm a head start on the next
generation of technology. Apple’s place as a first mover in the technology of laptops and telephones allowed it
to maintain a creative advantage for a number of years. The disadvantages of R&D are that it is usually slower
and more costly and can be disrupted by the departure of key personnel. The death of Steve Jobs has slowed
the innovation of Apple in the eyes of many consumers.
ETHICS IN PRACTICE
The leader in this technology is Guidance Software, founded in 1997 to develop solutions that search,
identify, recover, and deliver digital information in a forensically sound and cost-effective manner.
Headquartered in Pasadena, California, the company employs 391 people at offices and training facilities
in Chicago, Illinois; Washington, DC; San Francisco, California; Houston, Texas; New York City; and Brazil,
England, and Singapore. The company’s more than 20,000 high-profile clients include leading police
agencies, government investigation and law enforcement agencies, and Fortune 1000 corporations in the
financial service, insurance, high-tech and consulting, health care, and utility industries.
Guidance Software’s suite of EnCase® solutions is the first computer forensics tool able to provide world-
class electronic investigative capabilities for large-scale complex investigations. Law enforcement
officers, government/corporate investigators, and consultants around the world can now benefit from
computer forensics that exceed anything previously available. The software offers an investigative
infrastructure that provides network-enabled investigations, enterprise-wide integration with other
security technologies, and powerful search and collection tools. With EnCase, clients can conduct digital
investigations, handle large-scale data collection needs, and respond to external attacks.
Notably, the company’s software was used by law enforcement in the Casey Anthony murder case and
the Sony PlayStation security breach, and was used to examine data retrieved by U.S. special forces in the
Osama bin Laden raid.
Guidance Software also helps reduce corporate and personal liability when investigating computer-
related fraud, intellectual property theft, and employee misconduct. It protects against network threats
such as hackers, worms, and viruses and hidden threats such as malicious code.
In response to increases in the number and scope of discovery requests, Guidance Software developed
its eDiscovery Suite. The software package dramatically improves the practice of large-scale
discovery—the identification, collection, cataloging, and saving of evidence—required in almost every
major legal case these days. eDiscovery integrates with other litigation-support software to significantly
decrease the time for corporations to accomplish these tasks. At the same time, it improves regulatory
compliance and reduces disruption. The result is many millions of dollars in cost savings. In late 2017,
Guidance Software was acquired by OpenText, an enterprise information management company that
employs more than 10,000 people worldwide.
Sources: FBI website, https://www.fbi.gov, accessed January 15, 2018; Guidance Software website,
https://www.guidancesoftware.com, accessed January 15, 2018; OpenText website,
https://www.opentext.com, accessed January 15, 2018; “Casey Anthony: The Computer Forensics,” The
State v Casey Anthony website, https://statevcasey.wordpress.com, July 18, 2011; Declan McCullagh,
“Finding Treasures in Bin Laden Computers,” CBS News, https://www.cbsnews.com, May 6, 2011; Evan
Narcisse, “ Who’s Cleaning Up the PSN Debacle for Sony?” Time, http://techland.time.com, May 4, 2011.
Critical Thinking Questions
1. How is Guidance Software responding to and helping to manage changes in our technology-driven
world?
2. What other types of forensics software do you foresee a need for in the future? Do you think there
are ethical issues in using forensics software, and why or why not?
3. What are the benefits and risks of Guidance Software being acquired by a larger company?
CONCEPT CHECK
1. Look at the Acer case at the beginning of the chapter. Identify the times they used internal methods
of acquiring newness for their organization.
2. What goals did they accomplish?
Entrepreneurial activities in the marketplace often signal newness in a product or process. For an
entrepreneurial firm, the value proposition is a key factor. The value proposition answers the follow two
questions:
1. How will the firm make money on the product and/or services offered?
2. How will the firm be positioned in the marketplace?
New business entities (a type of entrepreneurial activity) are usually more flexible and agile in the
marketplace. The entrepreneur is very dedicated to the success of the firm because the new business is the
“baby” of the entrepreneur. The starting of a new business is the riskiest approach for introducing new
products and processes. The failure rate for entrepreneurs is high. Because the firm is new, there is usually
very little slack in resources available—money is tight, labor is limited, and time is fleeting. Therefore,
entrepreneurial activities are most successful when the lean start-up process can be used. It is applicable
where development costs are low and revisions are not very costly. One reason there are many startups in the
development of applications for mobile phones is that the costs are low and improvement of the product
612 Chapter 18 Management of Technology and Innovation
(once successful) is relatively easy. Entrepreneurs have the ability to adapt their plans incrementally, especially
when using lean start-up methods.5 For entrepreneurs, the capabilities to sense, seize, and transform can be
an advantage if they stay agile and avoid overcommitting to a course of action.6 Entrepreneurs, by definition,
are more agile than the more-established organizations.
This agility is true within large firms that want to continue to be entrepreneurial in their activities. Firms such
as Google and 3M allow their employees to work on innovative projects during their working hours. Google
modeled their policy of allowing employees time to explore other potential products and processes after 3M’s
longtime policy. Both of these firms are known as innovative firms because they encourage employees to look
for and test innovative and valuable propositions. The flexibility allowed employees gives both Google and 3M
the agility to find new ways of doing things.
CONCEPT CHECK
1. In the beginning, Acer was very entrepreneurial. However, the firm realized that if it was to continue
to grow, it needed to develop some structures and processes. What adjustments did Acer make to
become a global firm?
There are a number of skills needed to successfully manage technology and innovation in the organization. No
matter what organization you are a part of, there are two skills the organization must develop to be
successful—the ability to manage learning and knowledge processes, and the ability to analyze and forecast
future trends. Individual skills that are critical to the organization’s success include leadership/followship and
creative thinking.
Organizational skills involve how the firm puts people and resources together to create value—building
capabilities. With the right capabilities, the organization can develop a competitive advantage. In the world of
technology and innovation, the management of learning and knowledge processes is critical. The organization
needs to have systems in place that allow it to collect data that can be analyzed to form information. The
information needs to be used to gain knowledge and insight. At each step, learning takes place.
Organizational learning is the acquisition of knowledge through the collection of data that is analyzed to
gather information, which is then transferred and shared through communication among members of the
organization. This communication process provides the foundation for knowledge acquisition and
enhancement within the firm. There are two types of knowledge that must be managed: explicit knowledge
(codified or written down as rules or guidelines) and tacit knowledge (which emerges from experience of an
individual). Tacit knowledge can become explicit at some point if the expert is able to codify the knowledge for
others. However, it is not always possible to codify tacit knowledge. For example, Henry Bessemer was sued by
the patent purchasers who could not get his steel-making process to work. In the end Bessemer set up his
own steel company because he knew how to gauge when to add and subtract heat based on the impurities in
the iron ore, even though he could not convey it to his patent users. Bessemer’s company became one of the
largest in the world and changed the face of steelmaking. After the introduction of the Bessemer process, steel
and wrought iron became similarly priced, and some users, primarily railroads, turned to steel.7 The insights
and experiences that are gained from the gathering of data and converting that data into information are key
to successful MTI. Organizational knowledge is the sharing and utilization of the learning that takes place in
the firm.
Exhibit 18.8 Ben Fried In today’s high-tech world, CIOs must possess not only the technical smarts to implement global IT infrastructures,
integrate communications systems with partners, and protect customer data from insidious hackers, but they must also have strong business
acumen. Google’s acclaimed tech chief Ben Fried manages the technology necessary to deliver more than nine billion searches daily, with an
eye towards greater business efficiency, growth, and profits. Why is it important for CIOs to possess both technological and business expertise?
(Credit: Enterprise 2.0 Conference/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
The ability to forecast the future is another key organizational skill in the management of technology and
innovation. This involves scanning the environment for trends and possible areas of value-creation
opportunities. It also involves understanding the risk involved with newness in the firm and the risk involved in
not seeking newness—both can cause the firm to lose value. Any method of forecasting comes with
limitations. These include:
1. Forecasting methods, by definition, are uncertain in their outcomes. Usually the firm is trying to develop
scenarios concerning best, worst, and most likely outcomes. With this information, risk can be assessed.
2. Forecasts are imperfect—the firm cannot predict all potential influences in the competitive marketplace.
Bessemer knew he had a better process, but he did not predict the problems he had licensing his patent.
3. Forecasts are at best an educated guess. Many forecast techniques rely on statistical analysis, but the
numbers used in the analysis are forecasts themselves or rely on patterns of behavior continuing in the
marketplace.
4. With all the issues with forecasting, a company that produces excellent forecasts will most likely formulate
better strategy and capture more value.
The knowledge-management system of the firm can help the ability of the firm to forecast. Experience and
learning about industry and general environment trends can help individuals and teams forecast more
accurately.
Individuals within the firm also need to have certain skills to enhance the management of technology and
innovation processes. These skills include a balance of leadership and followship and the ability to think
creatively.
614 Chapter 18 Management of Technology and Innovation
Exhibit 18.9 Needed Skills for MTI (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Most individuals in the organization understand what leadership is. For MTI, it is important that the right
person be in the leadership position when needed. For example, in new product development, the leader
during the design phase is likely to be an engineer, the leader in the prototype development phase may be an
engineer or a production person, and as the product is introduced to the marketplace the leader may be a
marketing person. It is necessary for these individuals to communicate, and they may all be on a project team
that is under the direction/coordination of a dedicated project manager. However, the leadership on the
project shifts within the creation-to-market process. While leadership is critical, so is followship. Followship is
the mirror image of leadership. Most will never have taken a class in followship. You cannot have leaders
without followers. There is a skill set for leadership and a skill set for followship. It is the actions of followers
that determine the success of a leader. The success of organizations is more the result of good followship than
of great leadership. Leadership is influencing others, and followship is seeking or accepting influence. In the
case of new product development outlined above, each of the individuals were leaders during some point in
the project and each were followers during the project. Individuals spend a lot of time seeking and learning
about leadership, but followship is also critical to organizational success. Innovative companies are often lead
by a combination of two individuals who lead and follow each other. For example, Microsoft was founded by
Bill Gates and Paul Allen. The names of firms started or built by two people are common: Sears & Roebuck,
Proctor & Gamble, Marks and Spencer. The characteristics of a good follower include:
1. They are truthful. Followers who tell the truth and leaders who listen are an unbeatable combination.
2. They are supportive. Don’t blame your boss for an unpopular decision or policy. “I know this is an
unpopular decision, but…” Absent person example of trust. [I call it confessing the sins of the boss in the
hallway after the meeting.]
3. They give the boss the benefit of their knowledge and experience. Your job is to make the organization
successful.
4. They take the Initiative to solve problems by providing solutions, not just issues.
5. They keep the leader Informed. The higher a manager is in an organization, the more people are less
inclined to talk openly with them. Great followers provide the good, the bad, and the ugly of information,
knowledge, and experience.
CONCEPT CHECK
To keep pace with changes in technology and to keep up with needed innovation processes, individuals within
the firm must keep track of what competitors are doing as well as what inventions or discoveries may usurp an
industry’s place in the market. This is an external process, and that involves scanning the environment. The
information gathered during scanning should inform the firm about the general trends and opportunities to
create new value. Internally, the firm wants to understand the task and processes as well as understand the
skills that currently exist in the organization. By identifying potential future scenarios in the external
environment and understanding what resources and capabilities the firm has, the task for those managing
technology and innovation becomes answering the key questions:
CONCEPT CHECK
1. How do you keep up with a constantly evolving environment of technology and innovation?
616 Chapter 18 Management of Technology and Innovation
Key Terms
entrepreneurial activities The implementation of new ventures and idea generation in organizations.
explicit knowledge Information codified or written down as rules or guidelines.
followship The process of seeking or accepting influence.
formal and informal contracts Used to allow firms to share technology between each other.
franchise agreements Long-term agreements that involve long payoffs for the sharing of known
technology.
innovation Invention, new product development, and process-improvement methods are all examples of
innovation.
joint ventures Long-term alliances that involve the creation of a new entity to specifically carry out a
product/process innovation.
leadership The action of leading a group of people or an organization.
licensing agreements Involve technology acquisition without R&D.
management of innovation Includes both change management and managing organizational processes
that encourage innovation.
management of technology The planning, implementation, evaluation, and control of the organization’s
resources and capabilities in order to create value and competitive advantage.
mergers/acquisitions (M&A) For an acquisition, one firm buys another; for a merger, the two firms come
together and form a new firm.
organizational learning The acquisition of knowledge through the collection of data that is analyzed to
gather information, which is then transferred and shared through communication among members of
the organization.
research and development (R&D) Involves the seeking and developing of new technologies, products, and/
or processes through creative efforts within the firm.
strategic drift Occurs when a joint venture loses strategic focus on the reasons for the joint venture.
strategic inertia The tendency of organizations to continue on their current trajectory.
tacit knowledge Emerges from experience of an individual.
technology The branch of knowledge that deals with the creation and use of technical means and the
application of this knowledge for practical ends.
value proposition A promise by a company to a customer or market segment.
Management of technology and innovation is critical to the organization. Because of innovations and new
technologies, we have historically seen the emergence of innovative organizational structures and new ways
of performing work. The management of technology involves the planning, implementation, evaluation, and
control of the organization’s resources and capabilities in order to create value and competitive advantage.
Management of innovation includes both change management and managing organizational processes that
encourage innovation.
There are four things the firm should do to balance the conflicting demands of being agile in a dynamic
environment. These are: design systems and processes, identify communication needs and efficiently turn
data into information, develop employees through training and learning, and use good change management
processes. There are three basic organizational processes—buying and partnering, developing newness within
the firm, and entrepreneurially exploiting a space in the environment.
The external processes for developing and acquiring technology and innovation include a variety of options.
They are most successfully used under the following circumstances:
1. The product line or the processes of the firm have fallen behind those of its competitors.
2. A new entrant into the market of the industry has changed the competitive dynamics.
3. A firm believes that its product mix or way of doing things is not going to be successful in the long run.
The most common types of external processes used to enhance technology and innovation in a firm include:
mergers/acquisitions (M&A), joint ventures, franchise agreements, licensing agreements, and formal and
informal contracts.
The most common type of internal process for technology and innovation in the organization is research and
development (R&D). R&D involves the seeking and developing of new technologies, products, and/or
processes through creative efforts within the firm. The disadvantages of R&D are that it is usually slower and
more costly and can be disrupted by the departure of key personnel.
For an entrepreneurial firm, the value proposition is a key factor. New business entities (a type of
entrepreneurial activity) are usually more flexible and agile in the marketplace; however, the failure rate for
new entrepreneurial firms is high. Entrepreneurs, by definition, are more agile than the more-established
organizations. Agility is crucial within large firms that want to continue to be entrepreneurial in their activities.
There are two skills the organization must develop to be successful—the ability to manage learning and
knowledge processes, and the ability to analyze and forecast future trends. Individual skills that are critical to
the organization’s success include leadership/followship and creative thinking. There are two types of
knowledge that must be managed: explicit knowledge and tacit knowledge.
To keep pace with changes in technology and to keep up with needed innovation processes, individuals within
the firm must keep track of what competitors are doing as well as what inventions or discoveries may usurp an
industry’s place in the market. This is an external process, and that involves scanning the environment.
618 Chapter 18 Management of Technology and Innovation
the Internet of things are changing the way that you use and interact with the products that you use. You
sense that your customers might be a good source for forecasting future product innovations. You decide
to ask your salespeople to interview their toughest customers to generate ideas. Write up eight questions
that your sales representatives can use to gather the information.
3. In October 2015, Google restructured into Alphabet, a holding company, which analysts said would
facilitate innovation among its diverse subsidiaries. What are the benefits and risks of this decision, and
would you have made a similar or alternative decision?
At global pharmaceutical giant Novartis, the IT department is a strategic resource, a community of 2,000
people serving 63,000 customers in 200 locations and 25 data centers. Because most of the company’s invoices
come from international suppliers, they have differences in design, language, taxes, and currency.
Consequently, many ended up as “query items” requiring manual resolution by Novartis accounting
staff—which delayed payments and made those invoices extremely costly to process. In fact, finance
personnel spent so much of their time resolving queried invoices that other work suffered. A solution was
badly needed.
To maximize its investment, Novartis needed a flexible solution that would meet its current and future needs
and function in other business departments in a variety of geographic locations. It should provide fast,
accurate document capture and multilanguage support, and should extend to other types of
information—such as faxes and electronic data—in addition to paper documents. Finally, in order to obtain
financing for the project, return on investment (ROI) was required within nine months of project
implementation.
Input Accel for Invoices from EMC/Captiva was the answer. The software extracts data from paper documents,
applies intelligent document recognition (IDR) technology to convert them to digital images, and sends
relevant data to enterprise resource planning, accounts payable (A/P), and other back-end management
systems. The specialized Input Accel server manages output by recognizing and avoiding holdups in the
workflow process. It also ensures if a server goes offline, others will carry on functioning, thus avoiding
downtime.
Now Novartis scans incoming invoices at a centrally located site, and the images are transmitted to the Input
Accel for Invoices server for image improvement. Invoice data is then extracted and validated against supplier
information. Most invoices are transferred directly for payment, with relatively few invoices requiring transfer
to one of three accounts payable clerks who deal with queries manually. Novartis is a global leader in research
and development of products that improve health issues. Input Accel was selected by Novartis to be part of its
accounting system.
Thanks to IT, overall efficiency has increased, processing errors are reduced, and accounting personnel can
use their time and expert knowledge for more meaningful tasks than resolving invoice errors. For Novartis, it
is “mission accomplished.”
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