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Organizational Behavior Course Summary Marc Delingat delingat@yahoo.com http://www.geocities.com/delingat
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Marc Delingat Organizational Behavior Course Summary Table of Contents Table of Contents.............................................................................................................................2 Study Hints......................................................................................................................................4 Course Summary.............................................................................................................................4 Module 1: The Basics of Organizational Behavior and its Relation to Management.................4 Managers’ role in organizations..............................................................................................4 Employees values and personalities........................................................................................5 Job Satisfaction........................................................................................................................7 Organizational Commitment and Job Involvement.................................................................9 Module 2: Stress and Well-Being at Work................................................................................10 Module 3: Contemporary Theories of Motivation.....................................................................12 Content Theories of Motivation.............................................................................................12 Process Theories of Motivation.............................................................................................13 Behavior Modification...........................................................................................................14 Module 4: Organizational Control and Reward Systems..........................................................17 Performance Measurement....................................................................................................17 MBO...................................................................................................................................... 19 Rewards and Reward Systems...............................................................................................20 Executive Compensation.......................................................................................................21 Company Pay Practices.........................................................................................................21 Individual and Group Based-Rewards Systems....................................................................22 Module 5: Job Design and Employee Reactions to Work.........................................................24 Why job design?....................................................................................................................24 Job Design Principles............................................................................................................26 Self-directed teams................................................................................................................27 Empowerment........................................................................................................................28 Participation...........................................................................................................................28 Module 6: Understanding Work Group Dynamics and Group-Based Problem Solving...........29 Group Structure and Definition.............................................................................................29 Group Dynamics....................................................................................................................33 Brainstorming, Nominal Group Technique, Delphi Technique............................................33 Maintenance and Task Activities...........................................................................................34 Intergroup Behavior Management and Performance.............................................................35 Social Loafing........................................................................................................................36 Deciding upon the extend of participation in decision making.............................................36 Group Conflict Management.................................................................................................37 Module 7: The Influence Processes in Organizations: Power, Politics, Leadership and Entrepreneurship........................................................................................................................38 Types of power and how to obtain it.....................................................................................38 Politics...................................................................................................................................40 Managing your manager........................................................................................................40 Management and Leadership.................................................................................................41 Entrepreneurship....................................................................................................................44 Module 8: Organizational Design and New Forms of Service-Driven Organizations..............46 Organizational Design...........................................................................................................46 Coordination and Control......................................................................................................50 Page 2 of 29
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Marc Delingat Organizational Behavior Course Summary Responsiveness......................................................................................................................51 Customer Service...................................................................................................................52 Module 9: Managing Transitions: Organizational Culture and Change........................................55 Organizational Culture...........................................................................................................55 Why do Organizations Change?............................................................................................56 Organizational Change Process.............................................................................................59 Change Methods....................................................................................................................61 Thanks and Revision History.........................................................................................................64 Page 3 of 29
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Marc Delingat Organizational Behavior Course Summary Study Hints The following study hints came from the watercooler and are attributed to Professor Dailey: Be sure to understand the content and process theories of individual motivation and how they predict performance. As you study OB concepts, always ask yourself how you would apply each one to solve a problem if a firm. Emphasize work system design in your studies (Herzberg and JCM) Pay close attention to group behavior as a knowledge pathway to making improvements in how self-directed teams can be put to work to strengthen competitive advantage. Incentives, incentives, incentives for executives; teams, work units and individuals (don't forget to stress Lincoln Electric, Scanlon and Rucker in there too) Leadership and its importance for strategic direction, competitive advantage and proper board-CEO relations in the post-Enron-WorldCom world. Service quality as a solid component of strengthened competitive advantage Recognizing the need for, guiding and measuring the results of organizational change. Obviously any other topic not mentioned here can also be subject of an exam. Course Summary Module 1: The Basics of Organizational Behavior and its Relation to Management Organizational Behavior is the study of behavior and attitudes of people in organizations. Managers’ role in organizations Management is a process which is employed by individuals (managers) who are responsible for achieving organizational objectives through people. A manager’s job has three basic components: 1. Technical: Efficient use of resources to achieve output goals and the application of technology to achieve productivity goals 2. Conceptual: Development of new systems and methods of operation. 3. Human: Concern with employee welfare As a manager grows in the organization the technical responsibilities diminish while the conceptual and human aspects take more and more time. Surveys have shown the following seven key features of a managers’ job: 1. Managing individual performance (supervising) 2. Instructing subordinates (teaching and training) 3. Represent one’s staff (representation and advocacy) 4. Managing group performance (facilitation) 5. Planning and allocating resources (decision-making) 6. Coordinating independent groups (collaboration) Page 4 of 29
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Marc Delingat Organizational Behavior Course Summary 7. Monitoring the business environment (scanning) Managers’ challenges in the 21st century Past Challenges Future Challenges Principle duties Give orders to Encourage the development of subordinates subordinates and control and their work teams their behavior Training and Reduce these costs by Training and employee development are Development hiring workers with continuous to achieve the goal of a flexible requisite skills and cross-trained workforce Reward bases Seniority, rank and effort Merit-based individual and team contributions to competitive advantage Influence base Hierarchical position Technical, interpersonal, and organizational expertise Communication From the top to the bottom Diffusion-based so that the information pattern and style in highly formal teams goes rapidly to where the decision has to be made Decision-taking style Superior/boss centered Team-based and participative and authoritarian Approach to Resist change and cling to Embrace change and find ways to improve organizational the status quo strategic, competitive process change Employees values and personalities SOBC model of employee behavior in organizations (micro-level) Page 5 of 29
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Marc Delingat Organizational Behavior Course Summary Instrumental values are the means to achieve goals by using acceptable behavior to achieve an end state. Examples are: Ambition, Competence, Cleanliness, Courage, Self-control, Forgiving Nature, etc. Terminal values are the goals to be achieved or the appropriateness of a desired end state. Examples are: Achievement, Social status, Wisdom, Equality, Happiness, Inner Calm, Pleasure, etc. The locust of control is defined as individual’s belief that one’s action influence to outcomes one experiences in life. Internalizers believe that they can change the outcome of experiences through their behavior. Externalizers believe that the outcome of experiences lies outside of their control. Extroversion is defined as the need to obtain as much social stimulation as possible from the environment. Introversion is defined as avoidance of external stimulation in favor of internally oriented, contemplative activity. Machiavellian personalities (‘High Machs’) have generally the following characteristics: Attempt more interpersonal manipulations Are more inventive in manipulating others Conceive more manipulations to choose from Experience more satisfaction from successful manipulations than others Socially acquired needs are defined as: Need for Achievement is defined by the following qualities: Taking moderate risks by pursuing goals that are difficult but not impossible Needing immediate feedback on performance and progress Finding task activities and accomplishments to be intrinsically rewarding, regardless of the financial or economic reward Defining work in terms of approaching success instead of avoiding failure Being totally task absorbed until the job is done Managers can use information about the need for achievement as follows: Use need for achievement as one basis for screening job applicants Use it as a factor in promotion decisions Design jobs with goals that are at least moderately challenging Design rewards and feedback that are closely tied to performance behaviors to create an achievement climate in the firm Reward employee creativity and institutionalize the role of ‘idea champions’ in the firm Need for Affiliation is defined by the following qualities: Positive reaction to experiences that enhance belongingness, social involvement, and group morale Emphasizing that all group members are included in events that may affect the morale and cohesion of the group Solving or confronting interpersonal conflicts which threaten the esprit de corps Emphasizing the importance of social rewards such as recognition, praise, and public acclaim Page 6 of 29
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Marc Delingat Organizational Behavior Course Summary Reacting positively to social rewards which are made contingent on excellent performance Managers can use information about the need for affiliation as follows: Allow individuals to be arbitrators in work-group disputes because they will take a personal interest in restoring harmony Evaluate the social demands of a job and match employees with high need for affiliation to those jobs Allow individuals to be involved in community affairs which parallel work interests Develop and use as many forms of social rewards as possible and render them dependent on high performance Realize that a superior with a high need for affiliation may incorrectly emphasize social harmony over productivity Need for Power is defined by behaviors oriented towards influencing others and searching for opportunities to gain influence and control. Personalized need for power is often unproductive because those individuals: Reject job responsibilities in favor of personal concerns Create tense work relationships among subordinates who become over-anxious Are poorly adjusted to work and frequently look to palliatives such as drugs or alcohol to cope with stress Project their own inadequacies on to others and thus eroding the work climate even further Individuals with a socialized need for power tend to achieve personal goals at work through raising the self-esteem of subordinates and colleagues. Managers can use information about the need for power as follows Employees with a socialized need for power should be selected and promoted over employees oriented to personalized power Positions requiring socialized power should be made visible in the organizational hierarchy Managers with socialized power should take charge of groups where performance and morale is low Social power managers should be allowed to freely delegate to subordinates whose own managerial skills and self-confidence will develop more quickly Social power managers’ career paths should not be blocked. If they are unable to obtain the personal rewards they may resort to other, less desirable personalized methods. If a manager with a high need for achievement should does not also have a socialized need for power she will tend to do things herself, rather than delegating, and ultimately might loose subordinates that share the high sense of achievement. Job Satisfaction Job satisfaction is determined by the following attitudes: 1. Satisfaction with the work itself 2. Satisfaction with pay 3. Satisfaction with follow workers 4. Satisfaction with supervision 5. Satisfaction with promotions Page 7 of 29
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Marc Delingat Organizational Behavior Course Summary Determinants of job satisfaction: 1. Years in Career 2. Expectations: The expectations regarding the job that are formed before the job is started are a major determining factor of the job satisfaction in the first few years. Internships and job previews can help to set realistic expectations. Organizational determinants of job satisfaction: Supervision: support of self esteem and self worth, consultation with employees Job challenge: design jobs to require creativity, application of personal skills, and risk taking Job clarity: understanding of what they are to do, performance feedback, chance to participate in job issues Incentives: Extrinsic (pay rise, promotion, praise, status symbols) and intrinsic (experienced internally, e.g. feeling of competence, craftsmanship) rewards Equity Theory: employees make comparisons about the rewards that they receive relative to their efforts and performance levels. Further they make these comparisons relative to rewards, efforts and performance exhibited by other employees. Consequences of job satisfaction: Mental and physical health increase Lower turnover Less unexcused absences Page 8 of 29
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Marc Delingat Organizational Behavior Course Summary Job Satisfaction and Performance Satisfactory performance triggers the release of several extrinsic and intrinsic rewards. If both reward systems are designed right they trigger perceived equity. This in turn is one contributor to job satisfaction. Job satisfaction can be determined through the following three methods: 1. Observation of employee behavior 2. Interviewing employees 3. Questionnaires on job satisfaction Organizational Commitment and Job Involvement Organizational commitment is defines as the strength of an employee’s identification with the organization. It has the following components: 1. Belief in and acceptance of the organization’s goals 2. Willingness to exert considerable effort on behalf of the organization 3. Desire to maintain membership in the organization Job satisfaction might fluctuate considerably over time while organizational commitment develops slowly and consistently over time. Employees with high organizational commitment are unlikely to leave their jobs even in a period of low job satisfaction. Job involvement is a work attitude that is defined as the degree to which employees identify with their job, participate actively in it and consider it a key determinant of their self-worth. How can managers raise organizational commitment and job involvement? 1. Demonstrate that they honestly care about their employees’ welfare 2. Create opportunities for employees to achieve their personal goals 3. Modify jobs so employees have more opportunities to achieve intrinsic rewards 4. Find ways to reward employees regularly 5. Set goals with employees and be sure that some of them are personal development goals which are meaningful to the employee in question Page 9 of 29
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Marc Delingat Organizational Behavior Course Summary Module 2: Stress and Well-Being at Work Stress results in employees: making more physical and mental health claims, being less productive exhibiting more turnover absenteeism, and substance abuse Karoshi is sudden death by heart attack or stroke caused by too much work. General Adaptation Syndrome Eustress is a positive mental or physical reaction to stress. Distress is the dysfunctional result of stress. When we experience eustress it is a reflection of our successful adaptation to stress in the work setting or it represents a degree of stress that does not exceed our personal capacity to cope with stress. Stress Model Page 10 of 29
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Marc Delingat Organizational Behavior Course Summary Type A and Type B behavioral patterns Type A Type B Measures success by quantity of results Is mild-mannered Is always active and moving Relaxes without guilt Walks, talks, and eats rapidly Is not concerned about time Does two or more things at once Is patient Can not cope well with leisure time Does not brag Is obsessed with numbers and measures of performance Plays for fun, not to win Is socially aggressive Has no pressing deadlines Is highly competitive Is never rushed Experiences constant time pressure The Stress-Job performance relationship Individual approaches to managing stress: Exercise Relaxation (mediation/prayer invoke the relaxation reaction that reverses the stress reaction) Diet (high sugar food stimulates or prolongs the stress response) Opening up (confide in others) Professional help Organizational programs and management skills for wellness and job stress management: Reward by performance and productivity, not ‘face-time’ spent working Live by your values and encourage others to live by theirs Build respect based on trust and respect Page 11 of 29
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Marc Delingat Organizational Behavior Course Summary Module 3: Contemporary Theories of Motivation Content Theories of Motivation Maslow’s Hierarchy Additional notes: A satisfied need ceases to motivate behavior at that need level. Unsatisfied employee needs lead to undesirable outcomes at work. Unsatisfied needs create perceived inequity for employees. When this condition persists employee’s job satisfaction decreases. People are assumed to have a need to grow and move up the need hierarchy. All humans self-actualize in some way, however not everyone does it at work. Needs are not usually satisfied completely. Individuals usually can satisfy more, lower order needs than higher order. In organizations the lower order needs are generally satisfied with money, the higher order ones by social interactions and the design of meaningful jobs. Unless physiological needs are satisfied, higher order needs cannot come into play. As employees move through their careers , their needs pattern shifts to higher order needs Herzberg’s Two-Factor (or Motivator-Hygiene) Theory of Motivation Hygienes are contextual factors that, if not present, lead to the impoverishment of the employee’s job. Employees experience job frustration and stress if their jobs have few hygienes. Page 12 of 29
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Marc Delingat Organizational Behavior Course Summary Employees might experience short increases in job satisfaction hygiene factors are improved, but will take them for granted again after a relatively short period of time. If hygienes are removed job satisfaction plunges. Motivators are factors that raise job satisfaction and performance in the long run. They are related to the employee-job interaction and are job-centered characteristics. Herzberg is concerned with job and organizational sources of job satisfaction and dissatisfaction. Maslow focuses on human needs which encompass a variety of life situations, one of which is work. Herzberg’s model is a specific application of Maslow’s hierarchy to work. Process Theories of Motivation Equity Theory Felt or perceived inequality in this relationship is a motivating state which encourages the employee to eliminate it by pursuing various actions. Negative inequity is perceived when the employee feels that he receives relatively fewer rewards for his effort that others. Positive inequity is perceived when an employee feels that he receives relatively more rewards for his efforts that others. To restore equity an employee might: 1. Change work inputs and reduce performance efforts to eliminate negative inequity 2. Change the outcomes received (e.g. ask for more responsibility to reduce positive inequity) 3. Exit the circumstance (e.g. leave job) 4. Change the people that are used for comparison 5. Mentally distort or alter the comparison 6. Take a decision to alter the inputs or outcomes of the comparison ‘other’ (e.g. get the other to work less hard) The following guidelines can help a manager to keep these principles in mind when managing employees: When very important or valued rewards are allocated, employees who are equity sensitive are most likely to make equity comparisons which are based on traditional rewards available in the work setting In making reward allocation decisions, anticipate that certain employees will feel both, positive and negative equity (entitleds and benevolents). In advance tell employees about salary ranges, pay increases, and promotion opportunities. Avoid practices that encourage secrecy about pay policies and procedures. While it may not be advisable to encourage pay comparisons directly, employees should fully Page 13 of 29
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Marc Delingat Organizational Behavior Course Summary understand the pay ranges, brackets, and the relationship between excellent performance and values reward (instrumentality). Expectancy Theory Behavior is always purposeful and goal directed. Behavior must be understood in terms of the probabilities that a certain behavior will lead to outcomes valued by the individual. Valence is defined as the personal attractiveness of different outcomes. If an outcome has a high personal valence, an individual is attracted to behaviors that make that outcome more likely. First-level outcomes are results of expending effort in some way (e.g. job performance, leaving a position) and are important for organizations. Second-level outcomes are the result of achieving (or not achieving) the first level outcomes (e.g. getting a promotion, receiving recognition). Employees assign valence to each type of outcome. Instrumentality is the personal believe that first-level outcomes lead to second-level outcomes. Expectancy is the subjective belief that a given level of effort will lead to a first level outcome on the job. Expectancies are judgments about the relationships between certain levels of effort and the various first level outcomes. Behavior Modification Behavior Modification (B Mod) states that behavior is a function of its consequences. Concept/Term Definition Operand Reinforcement which modifies behavior of an operand through it’s Conditioning consequences Page 14 of 29
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Marc Delingat Organizational Behavior Course Summary Law of effect Tendency of an individual (operand) to repeat behaviors that cause favorable consequences and not to repeat behaviors that cause unfavorable consequences Positive/negative Favorable/unfavorable or pleasant/unpleasant consequences reinforcers Positive Strengthening a behavior by occurrence of a positive consequence reinforcement Negative Strengthening a behavior by removing an unpleasant consequence reinforcement Punishment Weakening a behavior by occurrence of an unpleasant consequence Extinction Weakening a behavior with the occurrence of a neutral consequence or removal of a positive consequence Behavioral shaping Structuring of reinforcements, punishment, and extinction to achieve successively closer and closer approximations of the desired behavior Schedule of Frequencies with which reinforcements accompanies behaviors reinforcements Stretching the ratio Lowering the rate of reinforcements accompanying the behavior Schedules of Reinforcement Schedule Description Continuous Consequence follows directly after each response Partial Consequence does not follow every response Partial reinforcement schedules Fixed ratio (FR) A fixed number of behaviors must occur before reinforcement occurs Variable Ratio A variable number of behaviors (around some average number) must occur (VR) before reinforcement Fixed Interval (FI) After a given amount of time has elapsed, reinforcement occurs Variable Interval After a variable amount of time (varying around some average time) has (VI) elapsed, reinforcement occurs. The ratio or interval of reinforcements should only be stretched to make sure that employees do not take the reinforcement for granted. It should not be used as a form to save on rewards. Also, financial rewards should not be stretched as that will result in an increase in distrust of the management. Pros and Cons of B Mod Supporters believe Opponents believe It focuses on observable behavior instead It undermines employees respect and of intangible individual differences dignity No manipulation occurs when employees It makes organizations more manipulative participate in the behavior modification and exploitative It improves employees instrumentalities It makes employees dull an de-humanized Employees receive higher quality feedback extensions of the machines that they operate about their performance It oversimplifies work behavior and erodes employee creativity Managers do not like to talk about punishment because it implies that: Page 15 of 29
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Marc Delingat Organizational Behavior Course Summary 1. they have hired the wrong employee 2. the work environment they help create is less than ideal 3. they and their organization treat their employees badly Reasons for not using punishment: 1. For it to be effective managers must closely watch employee’s behavior 2. Punishment does not eliminate unwanted behavior, but just suppresses it temporarily until the punisher is removed. 3. Employees become anxious, fearful, less creative, hostile and may reject delegated responsibility Alternatives to using punishment: Use of Extinction Re-engineer the work environment so that undesirable behavior can not occur Reward behavior which is physically incompatible with undesired behavior (e.g. reward employees for tidy workplaces) Be patient and allow time for undesirable behavior to disappear Our natural environment teaches us new behavior through punishment (staying too long in the sun) without permanent emotional damage. In organizations natural punishers are e.g. machinery of all kind, customers, etc. For some behaviors punishment might be the only logical alternative. This will e.g. be the case when the employee pursues activities for his own pleasure, such as drug or alcohol abuse. If punishment is used it should be: Rapid: Undesirable behavior must be prevented from becoming a habit of the employee Intense: Punishment should be intense and immediate, leaving no question about the undesirability of the behavior Equitable: Punishment must be equitable across people and infractions. Match the punishment to the infraction Informative: Punishment must have informative value: information on why behavior is undesirable, how to correct behavior, consequences of further infractions Private and focused: The employee’s self-esteem should remain intact. He should remember the behavior to correct instead of how he was mistreated. Not followed by rewards: Punishment should not be followed by non-contingent rewards (e.g. lunch to alleviate the supervisor’s guilt) Conditions that should be met before installing a B Mod program: Moderate to high trust between employees affected and their supervisors exists. Employee must believe that good workplace hygiene exists. Employee must have control over pace of work (i.e. no machine paced work). Employee ability can not be the cause of the problem. Employees understand successful performance behaviors that they can measure and record. Employees must get regular feedback about their progress towards performance goals Page 16 of 29
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Marc Delingat Organizational Behavior Course Summary Supervisors must be trained and committed to the B Mod program so that they understand the underlying principles Steps to setting up a B Mod program: 1. Conduct a job analysis to ensure understanding of job responsibilities 2. Define performance behaviors and set performance goals 3. Conduct a baseline audit to identify the rate of correct performance 4. Select powerful and abundant reinforcers to reward excellent performance 5. Use continuous reinforcement to encourage new performance behaviors 6. Practice behavioral shaping to obtain closer and close approximations to the desired behaviors 7. Establish desired behaviors by adding new positive reinforcers which employees value 8. Review and evaluate the program to identify and measure target goals such as cost reduction, employee attendance, safety and improved productivity. Module 4: Organizational Control and Reward Systems Performance Measurement Why organizations need to assess performance? 1. Employees need to understand the behavior requirements of the job. 2. Employee’s work is evaluated for its contribution to company goals. 3. Employees receive feedback on their contribution to company goals. 4. Employees’ motivation is increased by the performance appraisal system. 5. Employees’ performance levels should be used to make decisions about salaries, promotions, bonuses, training needs, etc. 6. Employees get clear feedback on the level of performance expectations from the company Validity is the quality of the measuring components of the performance appraisal system (do they measure what they should?). Consistency, that is two or more ways to gather performance data Page 17 of 29
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Marc Delingat Organizational Behavior Course Summary producing results which agree, and stability, the property of dependability of results over time, are key attributes of a successful performance appraisal system. Errors in performance appraisals: Personal bias: a stereotype or bias which influences a supervisor’s rating upward of downward. Halo effect: rating an employee on one performance dimension based on the evaluation in other performance dimensions Recency Error: the emphasis on recent performance examples in making performance assessments Central tendency error: Assigning average ratings to all employees resulting in little variation Strictness or leniency errors: Supervisor’s ratings based on the belief the employees do not measure up or that all employees measure up Similarity error: the supervisor has a performance quality in himself that she is looking for in the employees Forcing the rating to match other criteria: Deciding on an overall rating first and then going back to individual dimensions to adjust ratings to match overall assessment Forms of validity: Content validity: measures and their administration are logically related to the performance measured; evaluator and employees agree on the dimensions of performance measured and relationship to actual job behaviors. Empirical validity: measures are statistically related to work outcomes. Scores on the performance dimensions are related to quantitative measures of work output Construct validity: performance appraisal system logically derives from a model or theory of performance behavior and motivation. Convergent validity: Multiple measures of the same performance dimension result in equivalent scores. Observation methods correlate highly with paper and pencil measures of performance. Disciminant validity: Measures of performance using the same method produce different scores for different performance How to overcome errors in performance appraisal systems: 1. Use multiple criteria 2. Emphasize behavior rather than traits 3. Use several raters (e.g. 360 degree reviews) 4. Train the raters Performance Appraisal Methods: Absolute Standards: Each employee is judged against a fixed and inflexible set of performance criteria. Often results in upward biased ratings due to leniency error and validity error due to the simple ‘meets/does not meet’ nature of the assessment on the standards. Graphic Scales Rating System: List of performance criteria are evaluated on a numerical scale. The ratings highlight differences in the performance of subordinates as it Page 18 of 29
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Marc Delingat Organizational Behavior Course Summary encourages the tendency to spread out employee’s assessment across each scale. Inaccuracies due to strictness, leniency or similarity are still possible. Forced distribution across the full scale might lead to (perceived) unfair evaluations. Behavior Anchored Rating Scale (BARS): BARS emphasizes work behavior and how the work gets done rather than characteristics of an employee. Through a participatory analysis a meaningful and agreed upon set of behavioral anchors described in the language of the job under evaluation are developed. The clarity of the behaviors improves employees’ understanding of the job and performance expectations. The strong behavioral focus of the BARS system: might help to avoid the evaluation of irrelevant employee’s personality traits might increase the quality of the feedback compared to other systems might enhance the significance of the feedback in the employee’s minds through reduced defensiveness might require a long time to develop as different roles will require different BARS might be difficult to develop for jobs requiring creativity, curiosity, and complex problem-solving. MBO Goals are defined as those end states that reduce the intensity of needs and motives. Goal setting systems: Increase motivation and performance Reduce the stress of conflicting or confusing expectations Improve accuracy and validity of performance evaluations The goal setting process model: The seven generic steps of a MBO program: 1. ANALYZE the mix of people, jobs, work methods, and external demands 2. PLAN goals, strategy, communication and training 3. DEFINE the employees’ job in terms of content, authority, and responsibility 4. ARTICULATE goal difficulty, clarity, number, feedback 5. Reach MUTUAL AGREEMENT about goals, work methods, goal measurements, and time frame 6. Make INFORMAL review of goal achievement, methods and probable rewards, and REVISION of goals and methods if necessary 7. Make FORMAL review of goal achievement and rewards to be obtained Page 19 of 29
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Marc Delingat Organizational Behavior Course Summary MBO must be managed and refined over time. Managerial vigilance ensures that the MBO system remains meaningful to employees. The following items help to preserve the quality of an MBO system: Top management support, commitment, and involvement before and during the program The MBO system must have a strong relationship with routine activities and responsibilities. The company’s basic technology, products, and/or services have to be strengthened by the MBA system. MBO must emphasize organizational and personal development goals and thus aid in achieving higher-order need satisfaction. Personnel must be properly trained to administer and function under the MBO system. MBO must be tailored to the needs of the different departments Managers must avoid overemphasis on number of goals and how quantified they are. Keep the 80-20 rule in mind. Sticking with this rule prevents the definition of too many and too narrow goals The MBO benefit must far exceed the cost (e.g. paperwork) of the program Equal emphasis should be placed on discussion and evaluation. Too much discussion leads to uninspired goals. Too much evaluation leads to perceptions of manipulation and over-control. MBO works best when goals can be flexible and adjusted to unforeseen circumstances. Rewards and Reward Systems Rewards strongly influence employee effort and performance levels. How the rewards are perceived can easily outweigh the rewards actually distributed by the company. If employees see a weak link between performance and rewards (expectancy theory), the reward ceases to function as a motivator. Intrinsic rewards are defined as those rewards that the employee associates with the job itself. Extrinsic rewards are given to the employee by the company and they do not occur as the work unfolds. Extrinsic rewards can be classified as direct compensation, indirect compensation, and non-financial rewards. There is great motivational value in building as many intrinsic rewards in to the job as possible. Employees will value goal setting more if they know that participation will lead to intrinsic and extrinsic rewards. How do companies distribute direct compensation? 1. Performance 2. Effort (in the hope that effort will eventually lead to performance) 3. Seniority 4. Equality (common in partnerships for managing partners) 5. Power and Influence What determines the value of a job to the company? A job classification system in which jobs are ranked against each other the following factors determine starting salary, pay grade, and the number of levels in a given pay grade: 1. Skill requirements 2. Mental requirement 3. Physical requirement Page 20 of 29
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