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

4. 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

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

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

10. 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

11. 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 11

12. 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.

13. 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

14. 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!

15. 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?

16. 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

17. 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?

18. 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…

19. 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)

20. 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

21. 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.

22. Case 1 A tale of two teams Page 22

23. A Tale of Two Teams Both teams face: Recent layoffs; tough competition; meaningful products Team GC - Matt and all team members ask tough questions - Reminds people of specific deadlines • Explains why the task is worthwhile (adds 15 million dollars over three years to company’s bottomline; they will get bonuses, stock, and gratitude of company) • Demanding, but provides immediate feedback • Matt is admired for fighting top management on their behalf Team HPLC • Elaine doesn’t want to use potential sales/profits to motivate; better to let professionals work for the love of work. • Team feels like they are working on a losing product, but Elaine wants them to work on it anyway given tough political environment • Elaine: I trust you; just do your best • Team members don’t know if the work they are doing will pay off • Julio: in above his head?

24. 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

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. 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

27. 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?

28. 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)

29. 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.

30. Goal-Setting Theory

31. 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

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

33. 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

34. 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.

35. 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

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

37. 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

38. 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?

39. 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.