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ch. 1: What is Organizational Behavior?

CHAPTER OVERVIEW

Organizational behavior is a field of study devoted to understanding and explaining the attitudes and behaviors of individuals and groups in organizations. The two primary outcomes of organizational behavior are job performance and organizational commitment. This chapter explores the factors that affect these outcomes, and shows how scientific studies provide evidence that good organizational behavior policies are linked to employee productivity, firm profitability, and even firm survival. This chapter also shows how we “know what we know” about organizational behavior by describing the scientific research process.

LEARNING GOALS

After reading this chapter, you should be able to answer the following questions:

1.1 What is the definition of “organizational behavior” (OB)?1.2 What are the two primary outcomes in studies of organizational

behavior? 1.3 What factors affect the two primary OB outcomes?1.4 Why might firms that are good at OB tend to be more profitable?1.5 What is the role of theory in the scientific method?1.6 How are correlations interpreted?

CHAPTER OUTLINE

I. What Is Organizational Behavior?

Try This!: Open the very first class by asking them to picture their worst coworker ever and to list the things that person did to earn “worst coworker” status. Then have them do the same with the best coworker

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ever, listing the things that person did to earn “best coworker” status. Both of these lists should be written on the board, a process that will result in a table similar to Table 1-1. Then get them to understand the importance of explaining why the two people act so differently. That process of explanation is what OB is all about.

A. Organizational Behavior Defined

1. Organizational behavior is a field of study devoted to understanding, explaining, and ultimately improving the attitudes and behaviors of individuals and groups in organizations

II. An Integrative Model of Organizational Behavior

A. Provides a roadmap for the field of organizational behavior, and shows how different chapters in the text are related

B. Individual Outcomes – These are the two primary goals of

organizational behavior

1. Job performance (Chapter 2) – how well employees do on the job

2. Organizational commitment (Chapter 3) – how likely employees are to remain with an organization

C. Individual Mechanisms – These directly affect job performance and

organizational commitment

1. Job satisfaction (Chapter 4) – what employees feel about their work

2. Stress (Chapter 5) – psychological responses to job demands that tax or exceed an employee’s capabilities

3. Motivation (Chapter 6) – energetic forces that drive an employee’s work

4. Trust, justice, and ethics (Chapter 7) – degree to which employees feel that their company does business with fairness, honesty, and integrity

5. Learning and decision making (Chapter 8) – how employees gain job knowledge and use that knowledge to make decisions

D. Individual Characteristics – These affect individual mechanisms

1. Personality and cultural values (Chapter 9) – describe various individual traits and characteristics

2. Ability (Chapter 10) – describes an individual’s cognitive abilities, emotional skills, and physical abilities

E. Group Mechanisms – Also affect individual mechanisms, given that

most employees do not work alone

1. Team characteristics and diversity (Chapter 11) – the qualities that teams possess, including norms, roles, and the way team members depend on each other

2. Team processes and communication (Chapter 12) – how teams behave with regard to communication, cooperation, and conflict

3. Leader power and negotiation (Chapter 13) – the process by which individuals gain authority over other individuals

4. Leader styles and behaviors (Chapter 14) – describes the specific actions leaders take to influence others at work

F. Organizational Mechanisms – Also affect individual mechanisms,

because they influence the environment in which work is done

1. Organizational structure (Chapter 15) – shows how various units within an organization communicate

2. Organization culture (Chapter 16) – describes the shared rules, norms, and values that shape behavior for organizational employees

OB Internationally. This feature is a valuable tool to help students understand how the relationships among OB concepts, and their applications, varies across cultures. A good way to begin discussing international issues in Chapter 1 is to ask students to describe their international experiences. How many students are international students? How many were born or raised in another country prior to moving to the U.S.? How many have lived or worked abroad? How many have gone abroad on study trips or vacations? Once you’ve gotten a feel for the experience levels of the class, ask students if they believe that the importance of the concepts in the integrative model of OB will vary across cultures, or whether their importance will be universal. If they believe the importance varies, should multinational corporations design their OB policies to function differently at different branches? What are the pluses and minuses of such a strategy?

Asset Gallery (Reliability & Validity/Mgmt Video DVD): Understanding Toyota’s Success. This CBS video clip provides a good overview of Toyota’s history and its core strengths. The clip highlights a number of concepts in the integrative model of organizational behavior, including job

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performance, motivation, learning and decision making, and organizational culture.

III. Does Organizational Behavior Matter?

A. Building a Conceptual Argument

1. Resource-based view of organizations – looks at what makes resources capable of creating long-term profits for a firm

2. Resources are considered to be more valuable when they are:

a. Rare – “good people are hard to find”b. Inimitable – people are difficult to imitate for three reasons:

i. History – people have a collective pool of experience, wisdom, and knowledge that benefits the organization

ii. Numerous Small Decisions – big decisions are easy to copy – it is the small decisions that people make day-in and day-out that are significant for an organization

Try This! Ask students to think of all the times when one company copied a big decision made by another. For example, Microsoft recently rolled out retail stores that mimic the look and feel of Apple Stores. What are some examples of times where that copying has proven successful? What are some examples of times when that copying seem to be successful? What explains those differences in copying success?

iii. Socially Complex Resources – resources like culture, teamwork, trust and reputation come from the social dynamics of a given firm in a given time

Asset Gallery (Leadership/Destination CEO): Southwest Airlines CEO: Gary Kelly. This BusinessWeek weekend video clip mentions some of the big decisions Southwest has made to keep costs down and stay profitable. The video also hints at how numerous small decisions and socially complex resources may be giving Southwest a more inimitable source of competitive advantage.

B. Research Evidence

1. Study 1

a. Survey of executives from 968 publicly held firms with 100 or more employees

b. High performance work practices were related to decreased turnover, increased sales, increased market value, and increased profitability

2. Study 2

a. The prospectuses of 136 companies undergoing IPOs in 1988 were examined for evidence that the company valued OB issues

b. Firms which valued OB had a 19% higher survival rate than those that did not

3. Study 3

a. Companies that made the Fortune Magazine list of “100 Best Companies to Work For” were matched to companies of similar size and industry which did not make the list

b. “100 Best” companies were more profitable than other companies that did not make the list

Try This! If the students have not yet read the chapter, put Table 1-3 on a slide. Ask students if they can guess how the list of Fortune’s “100 Best” could be used to scientifically test whether being good at OB improves profitability. Usually students can guess many of the details of the study described in the book.

C. So What’s So Hard?

1. Many organizations do a bad job of managing OB issues because they don’t view OB issues in a comprehensive fashion

a. No single OB practice can increase profitability by itself

b. Rule of One-Eighthi. Half the organizations don’t believe there is a connection

between people and profitsii. Half of those who see the connection try to make a single

change, rather than attempting to make comprehensive changes

iii. Half of the firms that make comprehensive changes persist long enough for those changes to make a difference

iv. ½ x ½ x ½ = ⅛

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OB on Screen: Office Space. Chapters 7-9 of the DVD (beginning at 18:20 and ending at 25:44 for a total running time of 7 minutes, 24 seconds) depict Peter Gibbons, a computer programmer at Initech, as he struggles to get through his work day. Eventually he seeks the advice of a therapist, which inadvertently causes him to embrace the role of an “office slacker.” The scenes provide a case study of an employee with low job performance and low organizational commitment. Ask the students why Peter seems to be struggling. What concepts from Figure 1-1 seem most relevant? Students who have seen the entire movie will be able to point to a number of different concepts that explain Peter’s current ineffectiveness.

Try This! Use the Office Space clip for a different chapter. The clip provides a good demonstration of counterproductive behavior from Chapter 2 on Job Performance. Ask the students which specific types of counterproductive behavior Peter has engaged in. It also provides a good demonstration of withdrawal behavior from Chapter 3 on Organizational Commitment. Again, ask the students which specific behaviors are evident in the clip.

IV. How Do We “Know” What We Know About Organizational Behavior?

A. According to philosophers, there are four ways of knowing things:

1. Method of experience – believing something because it is consistent with your experience

2. Method of intuition – believing something because it seems obvious or self-evident

3. Method of authority – believing something because a respected source has said it is so

4. Method of science – believing something because scientific studies have replicated that result using a series of samples, settings, and methods

Try This! Ask students how they know the factors that improve health. What kinds of dietary philosophies do they know to be healthy? What kinds of exercise practices do they know to be healthy? Once the “knowledge in the room” has been summarized, explore where that knowledge came from. How

much of it was just experience or intuition? How much of it comes from authorities (e.g., doctors, trainers, books). How much of it comes from science, either directly (news reports, magazine reports) or indirectly (through relevant authorities). Does any of the “knowledge in the room” conflict with each other (for example, some students think a low fat diet is more critical; others think a low carbohydrate diet is more critical)? Which method of knowing would be most valuable for reconciling such conflict?

B. Scientific Method 1. Theory – collection of assertions that specify how and why

variables are related2. Hypotheses – written predictions that specify relationships

among variables3. Data – collection and observation of behaviors and outcomes

related to the hypotheses

OB at the Bookstore: Good to Great. Focus the discussion on how the authors’ approach to studying OB issues differs from the approach used in many other popular business books. Specifically, many business books are built on the experience or intuition of the authors. Good to Great uses the method of science, with data being used to shed insights on how some companies “make the leap” from merely good to truly great. The authors build a theory about which companies made that leap by comparing 11 companies who had done it (e.g., Walgreens, Wells Fargo, Kroger) to a set of comparison companies. Can the students see any potential weaknesses to this approach? What are the obvious strengths to it?

4. Verification – use of statistical methods to determine whether or not a hypothesis can be disconfirmed

a. Example of verification process is correlation

Try This! Ask ten students to volunteer their height in inches and their weight in pounds. Ask them to write the numbers down on a sheet of scrap paper. Then input them into an Excel spreadsheet, placing them in columns A and B. Ask students to eyeball the two columns of numbers and guess the correlation. Then calculate it using this formula: =correl(a1:a10,b1:b10). Did the resulting correlation differ from the population value (.44, as given in Table 1-4). Ask the students why the class number might differ from the

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population value, using that to explain why multiple studies (and high sample sizes) are needed when performing OB research. Then ask the students whether the correlation between job satisfaction and job performance should be higher or lower than the correlation between height and weight. Use that frame of reference to get them to understand that correlations of .30 are actually moderate in size, and correlations of .50 are actually strong in size.

b. Correlations are not enough to prove causation. Making causal inferences requires ruling out alternative explanations. Experimental methods are often used for that purpose, as they are able to control external factors that could create misleading correlations.

c. A meta-analysis takes all of the correlations found in a set of studies and calculates a weighted average of those correlations to help understand the overall relationships between variables. Meta-analyses can also be a helpful guide for evidence-based management, where management education and practice relies on scientific findings (as in medicine).

V. Summary: Moving Forward in this Book

OB Assessments: Introspection. This brief survey can be used to give students a feel for the types of data that are often collected in organizational behavior studies. Introspection, specifically, is relevant in an OB course because introspective students can use the content in the chapters to better understand their current and past work experiences, and their strengths and talents as employees. Use a show of hands to see how many students fell above and below the average level, and see if students will volunteer any extremely high or low scores. Challenge students who score low on the assessment to actively try to apply course content to their own experiences and characteristics.

DISCUSSION QUESTIONS

1.1 Can you think of other service businesses that, like the Apple Store, seem to do an effective job with customer service? If you managed a franchise for one of those businesses, which organizational behavior topics would be most important to maintaining that high service level?

Southwest Airlines is often held up as a model of customer service. A big part of the Southwest Airlines “mystique” is hiring people who are committed to the organization, and then making sure that they stay motivated under stressful conditions. Leadership is important, but perhaps more important are personality, ability, team processes and organizational culture.

1.2 Think again about the worst coworker you’ve ever had—the one who did some of the things listed in Table 1-1. Think about what that coworker’s boss did (or didn’t do) to try to improve his or her behavior. What did the boss do well or poorly? What would you have done differently, and which organizational behavior topics would have been most relevant?

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One boss, when faced with a “bad” employee, got more and more authoritarian – finding fault with everything the employee did and penalizing the employee for every fault. As a result, the employee was more and more demotivated. An alternative approach would be to discuss the employee’s strengths and weaknesses with him, determining the cause of the poor performance, and seeking more helpful solutions for dealing with it. For example, discussing the employee’s individual characteristics might yield knowledge about how to place that person for maximum effectiveness and job satisfaction. An analysis of group mechanisms could help to determine whether or not the employee had the proper support to do his work. And an analysis of organizational mechanisms might provide information on changes that need to be made to the environment for the employee to improve.

1.3 Which of the Individual Mechanisms in Figure 1-1 (job satisfaction, stress, motivation, trust, justice, and ethics, learning and decision-making) seems to drive your performance and commitment the most? Do you think you’re unique in that regard or do you think most people would answer that way?

Answers to this question will vary, but the important point to make when discussing the question is that everyone is different, and that when trying to motivate employees, those differences must be taken into account.

1.4 Create a list of the most successful companies that you can think of. What do these companies have that others don’t? Are the things those companies possess rare and inimitable (see Figure 1-2)? What makes those things difficult to copy?

Apple itself is a good answer here, even apart from the retail aspect that was the focus of the case. Apple’s rare and inimitable advantage is the sense of design and usability that Steve Jobs seems to possess. Microsoft is another good example. It’s huge market share, particular in the business sphere, gives it a degree of leverage that its competitors cannot copy. Toyota would be another. Relative to other companies, Toyota has a reputation for reliability that has taken decades to build and nurture. Other car companies would need to excel themselves for decades to catch up on that reputational curve.

1.5 Think of something that you “know” to be true based on the Method of Experience, the Method of Intuition, or the Method of Authority.

Could you test your knowledge using the Method of Science? How would you do it?

One example of something that people “know” to be true is that extraverted leaders are more effective. The true merits of that piece of “knowledge” are described in Chapter 14. More relevant to this discussion, it could be tested by asking leaders to fill out extraversion assessments and asking followers to rate their effectiveness. Alternatively, business and political leaders who are famous for being effective or ineffective could be rated by observers on their extraversion.

CASE: APPLE

Questions:

1.1 Is there something unethical about Apple’s “black card strategy”, or does it merely represent good, hard-nosed business?

Answers to this question will vary. On the one hand, companies routinely poach employees from competitors, even competitors who are much more “direct” than in this example. On the other hand, the retail employees were providing a service to the Apple employees, giving no informed consent to enter into a recruiting experience.

1.2 Should Apple offer different training content for employees recruited through the black card strategy? How might their job satisfaction differ from employees who are recruited in more traditional ways?

Unlike employees recruited through traditional means, the “black card” employees may not have any special knowledge or interest in Apple products. They may also be used to retailing and selling strategies that differ from the ones used at Apple Stores. So those employees will likely need more extensive training in both product knowledge and selling philosophy. As for job satisfaction, because their interests are less wrapped up in Apple products, their job satisfaction may be more dependent on traditional factors (e.g., job tasks, coworkers, supervision, pay).

1.3 How does the motivation of a Best Buy employee selling a Mac differ from the motivation of an Apple Store employee selling a Mac? Is there anything Apple can do to address such differences?

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Much like the case of the “black card” employee, a Best Buy employee may not have any special interest in, knowledge of, or loyalty to Apple products. Moreover, Best Buy employees have other computer makers’ products that are available--products that may be cheaper in some configurations. Apple may need to find ways to offer some extrinsic incentives to Best Buy employees when they make Apple sales, to compensate for that lack of intrinsic motivation.

BONUS CASE: STARBUCKS (from 1st ed)

Wherever you are as you read this book, chances are good that a Starbucks isn’t too far away. By the start of 2006 there were about 10,000 Starbucks locations worldwide, including a mall, campus, airport, or exit near you. Although some people may worry about the fate of their local, independent coffee shops or the high price of Starbucks coffee, consider the answers to these questions. When was the last time your Starbucks was messy? When was the last time you were treated rudely by the person across the counter? When was the last time your order of choice tasted wrong (or even just a bit different)?

One reason for Starbucks’s success is that such occurrences are quite rare, especially in reference to other service, retail, or dining venues. Who receives much of the credit for the consistency in Starbucks service? The rank and file employees who run the stores and interact directly with the customer. Somehow Starbucks has been able to find employees who are conscientious and intelligent, who seem motivated and satisfied with their jobs, who remain committed to their stores for a longer-than-normal period of time, and who perform their job duties reliably and enthusiastically. Put simply, Starbucks seems to be doing a good job managing organizational behavior.

Some support for that claim comes from Fortune magazine’s list of the 100 Best Companies to Work For in 2007, where Starbucks placed 16th. Generous benefits and health care coverage—even for part-time workers or for spouses and partners—seem to have instilled a sense of commitment, as Starbucks’s voluntary turnover rate is 120% lower than the average quick service restaurant business. Guiding principles like “provide a great work environment” and “treat each other with respect and dignity” seem to have fostered a sense of satisfaction with the culture of the organization. Indeed, a recent survey showed that 82% of employees were either “satisfied” or “very satisfied” with the company. In addition, the social activism of the company—Starbucks contributed $15 million to local nonprofits in 2004—seems to have built a sense of trust and ethics among the rank and file. Taken together, such policies and practices are

increasing the likelihood that your next Starbucks visit will be a pleasant one.

Sources: Gold, E. Commentary: With roughly 9000 stores, Starbucks serves it up by design. St. Louis Daily Record, May 13, 2005. Levering, R., & Moskowitz, M. In good company. Fortune, January 22, 2007. Weber, G. Preserving the counter culture. Workforce Management, February 1, 2005.

Questions:

1.1 Do you believe that Starbucks’ corporate culture has given the organization a competitive advantage in the industry? Explain.

Starbucks has gained a competitive advantage in the industry simply by creating a culture which encourages employees to stay with the company. Since turnover rates at fast food restaurants are 120% higher than Starbuck’s turnover rates, Starbucks has an advantage not only because they have to find fewer employees than other companies in their industry, but also because of decreased training costs and improved customer service.

1.2 What makes Starbucks more desirable to work for than other coffee shops? Would you prefer to work at Starbucks? Why or why not?

Working for Starbucks has a number of benefits, not the least of which is their benefits package. In addition, the Starbucks practices of “providing a great work environment” and “treating employees with respect and dignity” give people reason to choose Starbucks as an employer. When discussing this question, you may want to find out if any of your students currently work at Starbucks, and if so, whether their experiences match the ones described in this case.

BUSINESSWEEK CASE: DELL’S DO-OVER

by Cliff Edwards, BusinessWeek, October 26, 2009, pp. 37-40.

http://www.businessweek.com/magazine/content/09_43/b4152036025436.htm

When a wave of mergers swept the tech industry in 2004, Michael S. Dell promised investors they wouldn't see his computer company anywhere near a negotiating table. "When was the last time you saw a successful acquisition or merger in the computer industry?" he asked at the time. Five years later, it's a different story. Round Rock (Tex.)-based Dell is weeks away from closing its largest acquisition ever, a $3.9 billion deal for tech-services provider Perot Systems (PER). The chief executive says more

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deals are likely, and this won't be the end of his changes in strategy. "Everything's on the table," he says.

And with good reason. The company Michael Dell started in his college dorm and built into the preeminent personal computer maker has fallen on hard times. As the center of the tech industry has shifted from the PC to the Internet, Dell has struggled mightily to find its place. While Hewlett-Packard (HPQ), IBM (IBM), and other rivals transformed themselves in recent years by acquiring new companies and capabilities, Dell long stuck with its old playbook of cranking out PCs as efficiently as possible. It's hard to remember that in 2005 Dell was valued at $100 billion, or more than HP and Apple (AAPL) combined. Today, it's worth $30 billion, less than a third of its rivals' market values.

While such signs of struggle are clear to the public, what isn't apparent is the steady overhaul Michael Dell has been working on since he returned to the chief executive role in 2007. The 44-year-old has been making sweeping changes in everything from personnel and partnerships to acquisitions and distribution. He hasn't talked publicly about his comeback strategy before. But in interviews with BusinessWeek, the CEO made it clear he is determined to change almost everything about the company he started 25 years ago. "There's been a pretty ginormous shift in our business over the last several years," says Dell, dressed in a black suit and tieless white shirt in the sprawling conference room next to his office. "We can do, and must do, more."

He has installed an almost completely new management team to help with the turnaround. Seven of his ten direct reports are new to their posts, including veterans from General Electric (GE), IBM, and Motorola (MOT). The company has been restructured to sharpen the focus on customers. And it is branching out into services, software, and new hardware categories, including smartphones and tablet-like devices. Sources say Dell is even preparing to add social networking features and music and video services to Dell.com. The old Dell is history, the CEO vows, and a new one is just beginning. "We're not trying to become like our competitors," he says. "We're digging our own path."

It's not at all clear Dell can pull this off. The old Dell succeeded because of its mastery of logistics and the supply chain, allowing it to sell computers directly to customers at prices no rival could match. The new Dell requires completely different skills—flexibility, customer focus, and innovation. Leadership experts say changing a management approach is one of the toughest undertakings in business, particularly for a founder who has had early success. "He's got tremendous challenges ahead of him, because he's in an industry that itself is undergoing rapid, sweeping change," says

Warren Bennis, chairman of the Leadership Institute at the University of Southern California Marshall School of Business.

A SLOW RESTART

Investors have given Dell virtually no credit for his work so far. The company's stock is off about 40% since the start of 2007, while Apple shares have more than doubled and HP's have risen about 10%. David Eiswert, manager of T. Rowe Price's Global Technology Fund, sold his last 140,000 Dell shares last fall because he thinks Dell has too many rivals in its PC business and doesn't spend enough on research and development to create stand-out technology. Dell is "saying, 'Don't worry, we have a lot of ammo,' " says Eiswert. "The problem is the invading armies have a lot more troops and a lot more ammo."

Dell is convinced he can prove the skeptics wrong. He understands that only a handful of former chiefs have returned to lead their companies to brighter futures. For every Steve Jobs there's a Jerry Yang, the Yahoo! (YHOO) co-founder who struggled after retaking the helm. Yet for Dell, this is an opportunity to prove himself, to show he not only can launch a great business but revive a struggling one. "What you do is walk outside the building, you pretend you're the new guy, and walk back in," he says. "You force yourself to do what you need to do."

He has already pulled off a more extensive overhaul than most outsiders realize. He still has a long way to go, but insiders say the CEO is as driven as ever, back to working the kind of hours he did when he started the company. Ronald G. Garriques, head of Dell's consumer division, fields questions from his boss after midnight these days. "I get these e-mails from him saying, 'Hey, Ron, I was on this Web site, and wouldn't it be really cool if our product does this or does that?' " he says. Roger L. Kay, founder of researcher Endpoint Technologies Associates, got a call from Dell one weekend late last year. "He wanted to know if I knew any people who might be good as head of marketing," says Kay. "On a Saturday when I'm repairing my garage door, he's making calls to analysts."

Dell hasn't had any time to waste since beginning his second stint as chief executive. It was January 2007 when Dell told his board he thought it was time to replace Kevin B. Rollins, his hand-picked successor. With the company losing share in the PC market and struggling with an investigation into its accounting practices, the directors agreed. Dell told them he was ready to step into his old job, but before they accepted, Donald J. Carty, the longest-serving director, stopped into Dell's office for a frank, one-on-one talk. "This is not going to be a stopgap thing," he cautioned the founder. "You're going to have to take the reins for a very long time." Dell pledged his commitment. "I'm going to care about this

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company when I'm dead," he told Carty. Dell's return was announced Jan. 31.

The business Dell took over was floundering. Corporate PC sales were slowing, while HP under the direction of CEO Mark V. Hurd was pulling consumers into stores—and away from Dell—with its stylish notebook PC designs. Dell suffered the consequences. It lost its position as the largest PC maker in the world to HP, and profits tumbled. Dell's net income dropped 28%, to $2.6 billion, for the fiscal year ending Feb. 2, 2007, while revenue inched up 3%, to $57.4 billion.

Dell's first move was to try to stop the bleeding in the consumer business. The head of the division left in February, and Dell started looking for a replacement by working his jam-packed Rolodex. He wanted someone who could cut costs and also guide the company's foray into retail chains around the world.

One name stood out: Garriques, head of Motorola's (MOT) mobile devices business. When he and Dell had met years earlier, Dell had been impressed with how Garriques had guided development of the hit Razr phone. His broad experience dealing with top executives at retailers and wireless carriers would be invaluable as Dell tried to build a distribution network from scratch. Dell picked up the phone to call Garriques—no headhunters got involved—and quickly persuaded him to take the job. Dell's marching orders were simple: Create a profitable consumer business with designs that rival Apple's or HP's.

Garriques took a step back before moving forward. He killed a line of less-than-flashy consumer PCs Dell planned to introduce, called Mantra, and halted plans to copy Apple by opening more than a dozen Dell-owned stores. "The first order of business was to slow Dell's go, go, go mindset and stop to think about what we were trying to do," he says.

Then Garriques went hunting for a heavy-hitter to go up against Apple and HP. In March 2007, he approached Ed Boyd, a 42-year-old designer at Nike (NKE). Boyd had worked on sunglasses and running shoes but didn't have experience in computers. Garriques told Boyd he would have the opportunity to make design matter at Dell; Boyd jumped at the chance. "Here was a great company founded on the notion of customizing products and shipping them to people, yet it was missing the fact that people want to convey a sense of personal style with their products, too," Boyd says.

The changes sent a clear signal to Dell employees. The consumer business, long considered a professional dead end, was going to be a priority. What's more, Boyd launched experiments that showed it could be

an exciting place to work. At one point, Boyd hatched a plan for customers to pay an extra $75 to get certain designs on laptops, which so unsettled Dell's manufacturing team that they balked. Boyd appealed directly to Dell, who green-lighted the move.

Later that year, Dell broke for good with its tradition of selling only direct to customers. It announced plans to sell its machines at Wal-Mart (WMT), in what the CEO called a "first step" in using retail stores to reach customers.

COMPLETE RESTRUCTURING

Even more far-reaching changes were in store for 2008. Dell knew he wanted to change the company's management culture, to get executives to jump on new business opportunities and take more risks, but he wasn't sure how to go about it. He turned to Brian Gladden, a 20-year veteran of GE, the bastion of modern management. In March that year, he asked Gladden to fly to Texas to talk about a job as chief financial officer overseeing day-to-day operations. Dell was in such a rush he didn't even tell Gladden he had the job before slapping an inch-thick sheaf of confidential documents on the table. "I said to myself, there's a lot of inside information here that I really shouldn't see," Gladden says. "But he was like this mad scientist saying, 'Brian, you can help with this, and you can help with this.' "

Gladden quickly slipped into an easy rapport with Dell. But the lack of structure at the massive company surprised him. "The processes, the tools, the culture here didn't support a $60 billion business," Gladden says.

He dove into figuring out how to change that, in consultation with Dell. After months of study, they became convinced the company had to be restructured around customers. It was a radical move: Most tech companies organize around the products they sell, such as computers or software. But Gladden and Dell thought that by focusing outward they could give top managers more responsibility and more flexibility to respond to clients. On Dec. 31, Dell said it would restructure into four customer groupings: consumers, corporations, small and midsize businesses, and governments and educational buyers.

With the global economy in crisis, almost no one took notice. Dell's stock, which had topped $25 the previous August, closed the year at $10.24. It kept falling with the market, and dropped below $8 in February, off 70% in five months.

Still, in those dark days, Dell began to gain confidence his company finally had a solid foundation for the future. He saw his executive team quickly

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take to the new management approach, which was modeled after GE's. Leaders of each division are responsible for meeting financial targets and have broad authority to figure out how to reach them. The main beneficiaries have been the consumer, government, and small and medium-size business units, which in the past often received less attention as Dell focused on large corporations. "[It's] a different dynamic than [Dell] is used to," says Gladden.

In the small and midsize business group, led by Steve Felice, salespeople have been given incentives to offer a broad range of solutions, instead of just hardware. It seems to be working. Mark Konik, vice-president for technology at the marketing and ad shop GA Communications in Georgia, says Dell's regional sales manager showed up at his door six hours after he made an inquiry. Though the deal was only for $1 million, Dell offered to help integrate the company's Macs into the package and volunteered to talk to software providers VMware (VMW) and Microsoft (MSFT) about including their products in the purchase. "The speed and competence Dell brought to the table in such a short period of time was really quite different," says Konik.

Garriques' consumer group has been making some dramatic changes. In October, to coincide with the launch of Microsoft's Windows 7 operating system, Dell will begin selling the world's thinnest notebook, at 0.39-inches thick. The Adamo XPS has a heat-sensing strip on the lip that, when swiped with a finger, glows white and automatically opens the aluminum lid. Garriques says the $2,000 computer will serve as a statement about Dell. "This isn't going to be a high-volume product for us, but it's going to be a product that says, 'Wow! Dell did that. What else does Dell have?' " he says.

With Garriques and the other division heads taking more control over operations, Michael Dell has been freed up to explore new opportunities. Over the summer, he had dinner at the Four Seasons in Washington's Georgetown neighborhood with James W. Breyer, a Dell board member and founding partner of the venture capital firm Accel Partners. Over steaks and red wine, Dell talked about prospects in mobile phones and other products. He then pulled out a half-dozen smartphone prototypes. "The way he laid it out, his thinking, led me to believe that in many ways the journey at Dell is just in the first or second inning," Breyer says. The company is expected to introduce its first smartphones early next year.Dell is beginning to show improvement in its financial results. In its most recent earnings report, the company handily beat Wall Street's expectations. Dell shares have doubled since their low in February, to $16, as hopes mount that the company will benefit from a surge in PC purchases tied to Windows 7.

But Michael Dell is clearly looking for more than incremental improvements. He wants his namesake company to be the kind of force it was in the past, when it drove IBM out of the PC business and humbled industry giants like HP. "He's thinking, 'I'm going to make this company what it should be again," says Alex Mandl, a longtime Dell board member.Rivals contend that Dell has waited too long to take the initiative. In an industry undergoing rapid consolidation, companies that haven't already positioned themselves to withstand the cyclical nature of technology will have a hard time thriving over the long term. That means Dell itself may be forced to merge with another company or become takeover bait. "Being a fast follower doesn't work in an industry that is moving faster every day," says Shane Robison, chief technology officer at HP.

Dell is more reflective than usual these days. During the interview in his conference room, he acknowledges he stuck with the one innovative idea of selling computers directly for too long. "Mea culpa," he says. But he says talk that he and his company aren't moving fast enough now is nonsense. "We're going to be stronger, faster, and more hyper than we've ever been," he says. "If you don't believe, then just sit back and watch."

Questions:

1.1 Dell’s rise and fall within the computer industry seems to have depended on a number of big decisions made by the company and its competitors. What are some of those decisions, and what new decisions does Michael Dell seem to be considering to make the company more profitable?

One of Dell’s most important “big decisions” was to sell customizable computer systems directly to consumers over the internet. Unfortunately, as noted in the discussion of the Resource-Based View, big decisions can be copied. Meanwhile, Dell’s competitors made a number of other “big decisions,” such as Apple’s decision to transition into new markets and HP’s decision to make PC’s seem more styllish. Currently, Michael Dell is in the position of having to decide which competitor decisions his company will have to copy to get back on track.

1.2 Michael Dell has hired a number of lieutenants from outside companies, such as General Electric, IBM, and Motorola. Why do you think he chose to bring in such visible outsiders?

He may be trying to learn more about the “numerous small decisions” that make those companies successful. What little things do they do that Dell does not? The article noted that Dell needs more skill with respect to customer focus, innovation, and design.

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One way to acquire those skills is to hire people that come from companies with a history and culture that emphasizes them. He may also be trying to change the culture at Dell, an effort that often requires the introduction of visible outsiders.

EXERCISE: IS OB COMMON SENSE?

Instructions:

Many students complain that OB is “just common sense.” They typically say this after hearing some intuitive research finding such as “perceptions of task variety are positively related to job satisfaction.” However, virtually anything seems intuitive once you’ve heard it—the trick is to come up with the important concepts yourself before being told about them. This exercise shows how difficult it can be to do that, thereby demonstrating that OB isn’t just common sense. This exercise should take around 15 minutes. Begin by going over the sample theory diagram (for movie box office receipts) so that they understand what a theory diagram is. Then put them into groups and have them pick from among the four potential topics (job satisfaction, strain, motivation, trust in supervisor). Have them create a diagram of their own using their chosen topic as a dependent variable.

Sample Theories:

Here’s an example of what students might come up with for Job Satisfaction. Their models will typically have some things that have been supported by academic research, though usually they won’t use academic terms. For example, the “fun tasks” box reflects a concept similar to “satisfaction with the work itself.” However, the models will often include things that have not been as supported, such as the relationship between having good job skills and viewing job tasks as fun. Most often, however, the models will omit importance concepts. Have slides ready of Figure 4-7 on job satisfaction, Figure 5-5 on strain, Figure 6-7 on motivation, and Figure 7-8 on trust in supervisor. You’ll compare the students diagrams to those diagrams. For example, if the figure below is compared to Figure 4-7, a number of omissions are evident.

Questions:

If OB was just common sense, students wouldn’t include variables in their model that don’t actually impact the outcome in question. Nor would they omit variables from the model that do impact the outcome in question. Either kind of mistake shows that students don’t automatically know what OB concepts are relevant to key OB outcomes.

OMITTED TOPICS

The field of organizational behavior is extremely broad and different textbooks focus on different aspects of the field. A brief outline of topics that are not covered in this text, but which the professor might want to include in his or her lecture, is included below. In cases where these topics are covered in other chapters in the book, we note those chapters. In cases where they are omitted entirely, we provide some references for further reading.

· History of OB – Historical movements and landmark studies including Scientific Management, the Human Relations movement, the Hawthorne studies, and Theory X versus Theory Y. For more on this, see:

Taylor, F.W. The Principles of Scientific Management. New York: Norton, 1967.

Mayo, E. The Human Problems of an Industrial Civilization. London: Macmillan, 1933.

Roethlisberger, F.J.; and W. J. Dickson. Management and the Worker. Cambridge, MA: Harvard University Press, 1939.

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McGregor, D. The Human Side of Enterprise. New York: McGraw-Hill, 1960.

· Managerial Functions – Including planning, organizing, leading, and controlling. For more on this, see:

Fayol, H. Industrial and General Administration. London: Pittman, 1949.

Drucker, P.F. Management Tasks, Responsibilities, Practices. New York: Harper & Row, 1974.

· Workforce Trends – Relevant trends include the rise of knowledge work and service work (both covered in Chapter 2). Other relevant trends include increased globalization and increased workforce diversity (both covered in Chapter 3).