Introduction to Organizational Behavior and a focus on Motivation

1. Introduction to Organizational Behavior and a focus on Motivation Ajay Mehra LINKS, Center for Research in Social Networks in Business

2. Faculty Bio Ajay Mehra is the Carol Martin Gatton Endowed Professor in the Gatton College of Business and Economics. He has taught courses in organizational behavior (OB) and social network analysis, at both the graduate and undergraduate level, and he has delivered talks on OB at a variety of organizations, including Procter and Gamble, Country Companies, Wright-Patterson Air Force Base, the Department of Defense, and the Defense Threat Reduction Agency. He has also served as an external consultant for a number of firms, ranging from large insurance companies to small high-tech startups, on topics related to his research expertise. Prior to his academic career, Ajay worked short stints as a software salesman and as a human resource consultant. Ajay’s research work has been published in such top-tier journals as Science, Administrative Science Quarterly (ASQ) and Academy of Management Review (AMR), and it has received coverage in a number of newspapers, such as the European Wall Street Journal and the Los Angeles Times. He received his Ph.D. (1998) from Penn State’s Smeal College of Business. www.ajaymehra.netwww.linkscenter.org

3. Our Course Syllabus 4/28– Introduction to OB + Motivation 4/29– Managing Individual Differences 4/30– Power and Politics 5/2– Managing Interpersonal Networks 5/5— Exam 1 5/6– Decision Making 5/7— Teams 5/8— Leadership 5/9– Organizational Culture 5/15— Exam 2

4. Introduction– 40 minutes • Break– 15 minutes • Case– 1hr • Break– 20 minutes • Discussion

5. The veteran The Guru The humble researcher/consultant Our theories about people matter, both when the theories are right and when they are wrong. Social phenomena are complexly determined– no one explanation explains everything. GAS: the inevitable tradeoffs in knowledge Even small improvements can, like compound interest, lead to a very different place down the road… Epistemology Page 5

6. What’s my management style? On a scale of 1 (strongly disagree) to 5 (strongly agree) • I tend to be very participatory in my approach to managing. • I go out of my way to praise deserving employees. • As a manager, I give general directions and asks employees to do their best rather than providing detailed and complete instructions on what to do. • As a manager, I possess excellent communication skills. • I don’t just tell my employees what to do, I tell them why they should do it. • I am very approachable at work. • I try to learn from my employees • I give my employees every opportunity to learn and grow in their roles. * How do your employees see your management style? * How does your boss see your management style? * Is it consistent with how you view yourself? Tips for success: • Developmental versus evaluative. • Involve people in coming up with the items. Free tool for gathering data: http://www.surveygizmo.com/plans-pricing/ 6

7. Worksheet 1: Self-reflection Exercise and Road Map

8. Managing? That’s Easy, Right? • Clarifies goals and objectives • Encourages participation • Plans and organizes for orderly work flow • Is a technical expert at the job on hand • Trains, coaches, supports • Provides honest and quick feedback • Relies on schedules and deadlines • Controls details (but is not overbearing) • Empowers and delegates • Recognizes and rewards good performance

9. Failure to Learn • Fundamental attribution error (Lee Ross; Jones and Harris, 1967) • Even when people read pro/against speeches about Castro based on a coin-toss, observers, knowing about the coin-toss, believed that speakers believed what they spoke about. • Why? • The just-world belief: attributions to disposition suggest we have agency (Tea Party rhetoric) • Actor salience: when it comes to ourselves, we are more aware of situational constraints • It hurts to think: the cognitive miser

10. Misreading Motives… We tend to assume that we are better at discerning motives than we really are: • Social projection and the false consensus effect • A tendency to bias estimates of how widely their views and habits are shared by others. • Inadequate feedback from others • Homophily effect: life as echo-chamber • To not disagree is the essence of good etiquette • Why be the bearer of bad tidings: message and messenger are often confused.

11. Before we get to Motivation: What’s a Strategy? • Our strategy is to be number 1 or 2 in every business– Jack Welch • Our strategy is to our people • Don’t be evil– Google

12. What’s a Strategy? • Our strategy is to be number 1 or 2 in every business– Jack Welch • Our strategy is to our people • Don’t be evil– Google None of these are strategies… Strategy explains how an organization faced with competition will achieve superior performance!

13. As in war, strive to be the best? • But you can win without destroying opponents (e.g., Walmart and Target) There are many needs and many ways to serve them. • You don’t have to be big to be profitable (consider GM in the 70s-90s). • Within most industries, no such thing as meaningfully being “the best.” Is there a best car? A best clothing manufacturer? A best toothpaste?

14. The Big Questions Michael Porter “the essence of strategy is choosing what not to do…” The economist’s approach to the answer (simplify and ruthlessly abstract from reality: e.g., assume that all firms are the same and in “perfect competition”) The management answer: Every situation is unique… use in-depth case studies (but one cannot then easily generalize…) Porter helped marry these approaches… • Why are some companies more profitable than others? • Why are some industries more consistently profitable than others, and what does this mean for managers developing firm strategy? Competitive Strategy, 1980 Competitive Advantage, 1985

15. The Five Forces Model Same forces across industries Industry structure drives profitability Industry structure tends to be sticky To make sense of your own performance, you need to understand the industry’s fundamentals. What’s going on out there? What deserves your attention? Better than SWOT Entry barriers: a billion dollars to develop new operating system for PC Switching costs Does value to customers increase as more people use product: Facebook Proprietary technology; brands; govt. policies? Who are the rivals? Rate of growth influences rivalry (price, new products). How committed are the rivals. Are rivals products hard to distinguish Substitutes– OPEC sets price to fend off substitutes How Msft and Intel squeeze PC manufacturers CEMEX: Big powerful buyers in US; fragmented buyers in Mexico - undifferntiated? Importance to own performance?

16. Fundamental Equation • Unit Profit Margin=Price-Cost • Industry creates value… question is who captures the value • Don’t use Return on Sales or market share…

17. How Five Forces Influence Profits • Substitutes, threat of entry, buyer power negatively influence Price • Rivalry negatively influences price and positively influences cost • Supplier power positively influences cost Price-Cost=Profit Command higher prices through differentiation (the Ford Fusion– ¼ 2010 profits due to higher cost) or low cost (e.g., Dell Inc.– outsourced components, sold direct instead of through resellers, low inventory, took payment first and bought components later)

18. The Machine ModelTaylorism (1910s-1930s) • 1911: The Principles of Scientific Management • Before Taylor: Skilled workers;work autonomy • After Taylor: simplify and optimize job so minimally skilled workers could perform it. See:http://polaris.umuc.edu/~tgrodsky/admn601/managethought.html

19. The Human Relations Movement • Elton Mayo and Hawthorne (1924-32) • Human Relations Movement: -Emphasis on people, their thoughts and feelings; -People as more than machines; -Tolerance versus authoritarianism; -Importance of rest and socialization.

20. The Legacy of the HR movement Greatest innovation: Managerial not technical: - Decentralization over hierarchy - Focus on employees “brain power” - Bonuses and employee profit sharing - Gave share to all employees when co. went public (1957) - open (cubicle) layouts; even supply closets were kept open - Fire the unethical - Killed businesses if unprofitable - 20% growth for nearly 50 years

21. Motivation Theory: A Brief Historical Tour • What is motivation? • A hypothetical construct: “a set of energetic forces that originate both within as well as beyond an individual’s being, to initiate work related behavior, and to determine its form, direction, intensity, and duration.” (Pinder, 1998: 71) • Topic of classic inquiry. In management, earliest focus was on employee selection • 1900-1925: Birth of behaviorism; focus on observable behaviors rather than inner motivational states. Money combined with specific, challenging tasks were the work incentives of choice. “The time has come when psychology must discard all references to consciousness; when it no longer delude itself into thinking that it makes mental states the object of observation.” John Watson (1913: 158) • 1925-1950: Focus shifted to employee attitudes and measurement through surveys: attitudes of workforce were seen as the road to motivation. Human relations were seen as important motivator beyond money. • 1950-1975: Theoretical approach to motivation: focus on employee needs, cognition, and job characteristics. • 1975-2000: Dominance of theories: Organizational justice theory; Goal setting

22. Managerial Scenario John believes that motivating people is about recognizing that different people are motivated by different things. Some people thrive when they are in social situations. Others seem to really enjoy teaching and mentoring others. And yet others like to be left alone; they are, as it were, self-motivated.

23. The Need for Achievement Desire to accomplishsomething difficult, rapidly, and independently The Need for Affiliation Desire to spend time in social relationships and activities The Need for Power Desire to influence, coach, teach, or encourage others to achieve Managerial Implication: Consider each in the selection and placement process. Slot the right people in the right place. McClelland’s Need Theory

24. Managerial Scenario John works at an auto dealership as a sales manager. He has decided to adopt a no nonsense approach to motivating his team. Having been a salesperson, he believes that what matters is salary/commission; good relations with one’s supervisor; and good working conditions. The rest is fluff.

25. Herzberg’s Motivator-Hygiene Model • Hygiene Factors job characteristics associated with job dissatisfaction • Salary • Supervisory relations • Working conditions • Motivators job characteristics associated with job satisfaction • Achievement • Recognition • Responsibility Managerial Implication: Recognize that the factors related to dissatisfaction are not simply the opposite of those related to satisfaction.

26. Managerial Scenario You notice that two of the managers at work seem to employ very different approaches towards motivating others: Jane: Likes to explain to people that if they work hard they have a very good chance of success in terms of meeting their production goals; that this success would mean that they will get the bonuses they are all hoping for. John: Likes to assume that he is working with grown-ups who didn’t need to be spoon feed information about why they need to work towards meeting production goals. He believes people are smart enough to realize that meeting goals will mean better end-of-year bonuses.

27. Instrumentality: “What are my chances of getting various outcomes if I achieve my goal? Valence: “How much do I value these outcomes?” Expectancy: “What are my chances of reaching my goal if I work hard?” Outcome 1 High Effort Performance Goal Outcome 2 Outcome 3 Decision To Exert Effort Expectancy: “What are my chances of reaching my goal if I slack off?” Outcome 1 Low Effort Performance Goal Outcome 2 Outcome 3

28. Managerial Scenario • You increase the pay for everyone in your group by 2%, hoping this will create a sense of equity and fair play. But instead of thanks you hear grumbling and complaint… why?

29. $2 1 hour $4 2 hours = $2 per hour = $2 per hour Equity Theory A. An Equitable Situation Other Self

30. B. Negative Inequity Self Other $2 1 hour $3 1 hour = $2 per hour = $3 per hour Equity Theory

31. $2 1 hours $3 1 hour = $2 per hour = $3 per hour Equity Theory C. Positive Inequity Self Other

32. Managerial Scenario Have been asked to make cuts. Best solution: get rid of deadwood. Give generous retirement packages. - Just do it? Or explain in detail why and how of decision? - Focus on objectively better retirement packages versus bring up decision for discussion? - Run potential of scaring employees with bad news about future prospects, or shield them and let them work?

33. Two Paths to Performance Utility maximizers: rational calculations of self-interest; focus on outcomes People care about process, not just outcomes Engagement: Involve people by asking for input (communicate respect; sharpen understanding) Explanation: Not just what, but why (understanding builds commitment; enhances learning) Expectation clarity: State clearly rules of game. (what are new targets? Who’s responsible for what?) Source: (Kim and Mauborgne, 1997)

34. Why don’t managers focus on procedural fairness? • Managers think that they are fairer than they are perceived to be (“when managing change, I make extra efforts to treat people with dignity and respect” • Managers think that employees only care about outcomes (e.g., size of severance pay): but even employees who remain care about process. • Legal departments: disclosure of information could invite lawsuits: underway: allow doctors to apologize to patients? • Fear and discomfort: avoidance over confrontation; internal guilt and drama. • Paternalistic attitude: shield the kids. • Practical Implication? Inform and train managers; make process fairness a top priority at top.

35. Goal-Setting Theory

36. Managerial Scenario Your boss believes that motivating others is simple: Just set the right kinds of goals. The problem is identifying which kinds of goals are best. - Hard/easy • General goals (do your best) or specific goals (I want a 3% improvement in sales figures next month) • Goals that stretch people beyond what they are capable of doing– even if they fail, at least they will have tried…

37. Locke’s Model of Goal Setting Directing one’s attention Regulating one’s effort Task performance Goals motivate the individual by... Increasing one’s persistence Encouraging development of goal- attainment strategies or action plans

38. Managerial Implications: SMART Goals Specific Measurable Attainable Results oriented Time bound

39. Sears Auto In early 90s: Specific, challenging measurable goal: $147/hr “Goal setting process for service advisers created an environment where mistakes did occur” Sears’ Chairman Edward Brennan

40. The Ford Pinto: 1971-1980 • Lee Iacocca: build me a car “under 2000 pounds and under $2000.” • Real cost? 53 deaths, many injuries, $6 million lawsuit, and costly hit to reputation, 1.5 million pintos recalled in 1978.

41. Perverse Goals and The Deepwater Horizon Disaster The focus on controlling costs was so acute at BP, to the point that it became a distraction. They just go after it with a ferocity that is mind-numbing and terrifying. No one's ever asked to cut corners or take a risk, but it often ends up like that.“ Oberon Houston, BP rig manager, testifying to the presidential commission

42. Enron executives were meeting their goals… but were they the right goals (revenue vs. profits)?

43. Unanticipated (but lethal) Side Effects of Goal Setting • Narrow focus that neglects non-goal areas • Rise in unethical behaviors • Distorted risk preferences • Corrosion of culture • Reduced intrinsic motivation

44. But Goals can Run Wild • Are the goals too specific? • Are the goals too challenging? • Who gets to set the goals? • Is the time horizon appropriate? • How might goals influence risk taking? • Might goals influence unethical and potentially even illegal behavior? • Can goals be tailored to individuals and still be fair? • How will goals influence team/organizational culture? • Given ultimate goals, ask yourself: are performance or learning goals most appropriate?

45. CSIKSZENTMIHALYI: (Chicks-Send-Me-High) • A major constraint on people enjoying what they are doing is always being conscious of a fear of how they appear to others and what these others might think.

46. FLOW: How it feels • How does it feel to be in "the flow"? Flashes of intense feeling against the dull background of life • Completely involved,focused, concentrating - with this either due to innate curiosity or as the result of training • Sense of ecstasy- of being outside everyday reality • Great inner clarity - knowing what needs to be done and how well it is going • Knowing the activity is doable- that the skills are adequate, and neither anxious or bored • Sense of serenity- no worries about self, feeling of growing beyond the boundaries of ego - afterwards feeling of transcending ego in ways not thought possible • Timelesness - thoroughly focused on present, don't notice time passing • Intrinsic motivation - whatever produces "flow" becomes its own reward

47. ` Finding Flow

48. Finding Flow at Work • Clear set of goals • Clear rules • Immediate feedback • Overcoming a challenge that is just about manageable; acts as magnet for learning new skills Managerial Implications: • Make work like play. • Deal with all the demands that crowd into the mind: Make lists, flowcharts: which tasks to delegate, which to tackle and in which order: “prioritize, organize, and streamline the routines that now fritter away our attention”

49. Managerial Implication: The manager needs to continually identify and fulfill emerging or unmet needs; new needs arise as old ones are fulfilled. Example: Wipro, a high-tech Indian company, created a matchmaking service on its company’s intranet to help single employees date and marry. Maslow’s Need Hierarchy Theory

50. Take-Away • Motivation is a hypothetical construct; it is complex and has many potential causes. • Managerial levers for managing motivation: • Intrinsic differences among people • The power of goal setting • Being explicit about the linkages between expectancy, instrumentality, and valence • The power of flow • Motivation may drive performance; but performance can also influence motivation Caveat: Leaders play a special role in managing motivation; but they are not the only actors who influence motivation.