Essentials of Risk Management.

Essentials of Risk Management.

3-5 page Paper

For this assignment, you should read chapters 1, 2 and 7 in Essentials of Risk Management.

This paper will focus on operational risk management.  After reading chapters 1, 2 and 7 in Essentials of Risk Management, you should have a basic understanding of what is involved in managing risks within a corporation.  I would like you to focus on the operational considerations that were mentioned in chapter 7 (a list can be found on page 155).  Most of these considerations involve the employees in some way.   I would like you to find an example of a company that failed to use risk management properly and explain how it could have helped them to avoid their problems.
The best way to begin this paper is to think of companies that you have heard of in the headlines in a negative way, or companies that have gone out of business in the last several years. Once you decide on a company, you should be able provide an explanation of the problem as well as your thoughts on how this could have been avoided using risk management.  Another alternative is to use a company that you currently or previously worked for. If you choose the latter, please make sure that you can provide the required details.

This paper should include 3-5 pages of content with an additional cover and reference page.  This is a total of 5-7 pages.

Your paper should be written in proper APA format.  This link will take you to the section of the APUS library that can assist you with your formatting

Assignment Rubric

Please contact me through the message function to the left if you have any questions.

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Supporting Materials

Chapter 1
Introduction to Organizational Behavior
History, Trends, and Ethics
After studying this chapter, you should be able to:
1.   Explain what organizational behavior is and why it is relevant to your career
2.   Compare the differences between leaders and managers and the roles each play
3.   Summarize the contributions leaders and managers make to their organizations
4.   Trace the development of the field of organizational behavior in study and practice
5.   Explain why understanding creativity and change in a global society is so important to future organizations
6.   Describe how personal integrity, a cultural mindset, social responsibility, and global sustainability affect the way leaders and managers act
Turning Around a Bank
Consider the following case. In your 21 years with a well-established European banking institution, you have earned a reputation as a turnaround specialist, someone who can come into a difficult situation and move the organization in a positive direction. Because of this reputation, you have just been appointed as the head of the company’s corporate and investment banking unit. The previous manager left in a storm of controversy following an in-house investigation showing an abysmal track record, one that significantly contributed to the larger bank’s fourth quarter losses. The investigation leading to your appointment was initiated after a popular television “newsmagazine” highlighted how much more effective other companies were in maintaining client trading, even in the face of Europe’s deepening debt crisis.
Understandably, the workers in your division are disheartened. Turnover and absenteeism are high. Workers report feeling unfairly criticized and point to the lack of necessary resources to effectively do their jobs. Yet, as you talk with these individuals, you find that they are bright, committed, and hardworking. The truth is, forces outside their control have contributed to the crisis, and some of the criticism does seem unwarranted. You believe that you can work with these people to build a stronger, more service-oriented division. But it’s going to take special skills—and more than a little luck!

Others were interested in the behavior of commodities, while I was interested in the behavior of people.
—Peter Drucker, Management Theorist
This case raises many important questions that help us define organizational behavior. Think about them from a practical standpoint: What are the most important issues here? Are they technical issues or are they people issues? Well, the truth is that there are probably some of both, but there is no question that in most situations, including this one, the human issues are central. Knowing that, you must then decide whether you will respond by dealing with one person at a time, by trying to work with groups, or by seeking some system-wide intervention. Obviously, there is some overlap among these three levels, but each becomes a lens through which we see, interpret, and respond to the specific circumstances that we confront.
I believe the real difference between success and failure in a corporation can be very often traced to the question of how well the organization brings out the great energies and talents of its people.
—Thomas J. Watson, CEO of IBM
People don’t quit their jobs, they quit their bosses.
As we change the lenses through which we see a given situation, our definition of the problems that the situation entails and the possible solutions to those problems also change. For example, if you focus on individual behavior, then you might think of the problem as one of employee motivation, the failure of employees to communicate effectively with customers, or employees’ lack of understanding the broader purposes and goals of the division and the larger organization. As a result, you might meet and talk with employees; try to understand their needs, desires, and motivations; work with them to set individual and group goals; and seek their input on policy and operational changes that would improve outcomes.
Looking through the group lens, you might ask whether existing work groups are functioning effectively. Do employees feel like they are part of a team or do they feel alienated from their coworkers and supervisors? Is the culture of existing groups or teams conducive to achieving division goals? You might form task forces of employees to address particular problems, or you might reconfigure work teams to address certain types of cases.
If you focus on the organizational level, you might ask whether the department is structured appropriately to accomplish its tasks. Are management systems, such as goal setting and performance measurement, in place? Is management information available to guide decision making? Are organizational communications clear, and are policies documented and disseminated? Are the reporting and coordination methods appropriate? Here you might create new structures or mechanisms for communications throughout the organization. All of these questions fall in the domain of organizational behavior—and are absolutely essential to successfully dealing with the issues that arise in today’s organizations.

A Facebook employee walks past a sign at Facebook headquarters in Menlo Park, California. In 2013, Facebook was ranked as the best place to work by Glassdoor’s Employees’ Choice Awards. Studies indicate that companies where employees are happy also tend to perform well financially, demonstrating the link between individual factors (employees’ happiness) and organizational factors (financial success).
What Is Organizational Behavior?
Organizational behavior is the study and practice of how to manage individual and group behavior in business, government, and nonprofit settings. Accordingly, the field provides critically important and highly useful perspectives on motivation, leadership, communications, groups, power and politics, culture, and other matters that directly concern individual and group behavior. It also speaks to organizational issues and even community issues, but it does so through the lens of individual and group behavior.
Organizational behavior: the study and practice of how to manage individual and group behavior in business, government, and nonprofit settings

Fundamentals of Organizational Behavior
Individual, Group, and Organizational Levels of Analysis
To give you a complete picture of the field of organizational behavior, let’s look at the four perspectives or levels as shown in Figure 1.1. The first level studies the individual. It is the smallest possible level of analysis in organizations and includes topics such as individual differences, perception, motivation, and learning. The second level is the small group. Groups can be as small as two people or can be much larger, depending on the group’s goal and tasks. The study of groups and teams in organizational behavior includes issues of group size and composition, cohesion, trust, team building, and decision making.
The third level of analysis in organizational behavior is concerned with the larger groups, such as departments, and with organizational processes. It includes issues such as the design and structure of organizations, organizational culture, power and politics, and change. Managers must understand their organizations at all three levels of analysis to meet the daily challenges they face. Organizational behavior then can be seen as resulting from the exchanges among these levels. (Note that the three major sections of the book emphasize the interaction among these layers.)

Social, Economic, and Ethical Context
In our view, leaders and managers today must consider a fourth level of analysis—that which concerns the social, economic, and ethical context in which they act. As we will see later in this chapter, today’s society is becoming increasingly a global society, marked by networks and lines of communication unheard of only a few years ago. Consider the case of Kentucky Fried Chicken moving into China in a dramatic way, aiming at opening a new outlet every day for a total of 15,000 restaurants. Think of the issues involved. Should they adapt their offerings to the local market or should they completely revamp their business model—and their menu? And what about the people questions that are raised in working in a country with different traditions of leadership, communications, and a variety of other areas?
Tanya R. Li has been promoted to director of the Bank at the Urban Center. The customers serviced by the bank are racially and ethnically diverse. The white tellers are in the minority and feel isolated. The tellers of color feel that the white tellers do not understand the customers. In addition, James, a veteran teller, has been discovered to have a criminal record prior to employment at the bank. Headquarters has a policy that does not allow anyone with a criminal record to work in direct contact with money, but the supervisor who hired James was not aware of the policy.
Tanya has identified three problems: (1) how can she make the tellers gain better understanding of each other’s cultures? (2) How can she help the tellers gain better understanding of the customers’ culture? (3) How does she deal with James, whose performance has been stellar since he joined the bank 15 years ago?
Before trying to advise Tanya on how to proceed, consider these questions:
1.   What knowledge, skills, and abilities in organizational behavior would Tanya need to possess in order to deal with this situation?
2.   Which of these capacities do you already have?
3.   Which of these capacities do you need to acquire or improve upon?
Please come back to this case after studying this chapter to see how your answers differ.
A Brief History of Organizational Behavior
Let’s look briefly at how the study of human behavior in organizations has addressed these questions. Although for hundreds of years, historians and philosophers have discussed leadership, what has been called “the management century”1 began about a hundred years ago. From that point, the development of organizational behavior can be divided into categories: the classical period, the humanistic period, and modern organizational behavior. In the following sections, we will examine representative works in each area. Our intent is not to provide a complete overview of work in each period but just to suggest the main themes that were discussed in each.
Leadership: occurs where one or more members of a group or organization stimulate others to more clearly recognize their previously latent needs, desires, and potentialities and to work together toward their fulfillment
The Classical Period
Most managers and writers on management in the early 20th century focused on simply controlling workers and manipulating their environment so as to maximize efficiency and productivity. From the perspective of early management experts, people were primarily viewed as extensions of their tools and machines. For example, employee motivation, if it was considered at all, was based on patterns of compensation (rewards), but also on the fear of physical or economic abuse (punishment). It was assumed that workers found work to be unpleasant and therefore had to be motivated, mostly by money, to contribute to the organization. It also was assumed that workers would do what they were told because they would be punished or fired if they did not.
Frederick Taylor, best known as the father of scientific management, is representative of these traditional perspectives on human behavior.2 Taylor’s overall purpose was to make workers, who he assumed to be naturally lazy, more productive. Using the analogy of a baseball team, Taylor argued that you have to recognize the “utter impossibility of winning … unless every man on the team obeys the signals or orders of the coach and obeys them at once when the coach give those orders.”3
Scientific management: the application of scientific techniques to work processes, as advocated by Frederick Taylor
There were a few early voices that were more humanistic, people such as Hugo Muntsberg4 who urged greater attention to the psychology of workers, and Mary Parker Follett, who argued that dynamic administration must be grounded in “our cognition of the motivating desires of the individual and of the group.”5 But such work was largely considered outside the mainstream until the Hawthorne studies, published during the 1930s, pointed the way toward a greater acceptance of the importance of social factors at work.6

In 1927, a group of researchers led by Elton Mayo and F. J. Roethlisberger from Harvard University embarked on a study of worker productivity in the Hawthorne Works of the Western Electric Company in Chicago.
The Humanistic Period
In 1927, a group of researchers led by Elton Mayo and F. J. Roethlisberger from Harvard University embarked on a study of worker productivity in the Hawthorne Works of the Western Electric Company in Chicago. The findings from this research ultimately would signal a fundamental shift in how employee behavior was to be understood. Actually, a series of early experiments to measure the effects of lighting on efficiency found no direct relationship between changes in illumination and worker efficiency. In fact, short of literally making it so dark that the workers could not see, every change that the researchers implemented seemed to increase productivity.
After observing, consulting, and interviewing this group of employees for 5 years, however, the researchers arrived at two conclusions that would profoundly change research on worker behavior. First, they found that people change their behavior when they know they are being observed (the so-called Hawthorne effect). Second, they concluded that human relationships (including a relationship with the researchers) influenced the behavior of workers and, consequently, that new ideas were needed to explain worker behavior. The Hawthorne experiments showed that human behavior and motivation are complex, and are influenced by attitudes and feelings, the meaning that people assign to their work, and their relationships at work.
Hawthorne effect: the finding that people change their behavior when they know they are being observed
Research conducted over the subsequent few decades confirmed the Hawthorne findings and resulted in a more sophisticated understanding of the relationship between people and organizations. The importance of human cooperation in organizations was emphasized in executive-turned-writer Chester Barnard’s definition of a formal organization as “a system of consciously coordinated activities or forces of two or more persons.”7 For Barnard, the participation of the individual was necessary for cooperation, and indeed, he viewed the need to build cooperation among organizational subunits as the crucial function of the manager.
Formal organization: a system of consciously coordinated activities or forces of two or more persons

In The Human Side of the Enterprise, McGregor8 discussed the now familiar Theory X and Theory Y, arguing that traditional command-and-control approaches, Theory X—based on assumptions of people as lazy, uninvolved, and motivated solely by money—actually caused people to behave in a manner consistent with those expectations. His alternative, Theory Y, suggested a much more optimistic and humanistic view of people, emphasizing the inherent worth of individuals in organizations. Similarly, Abraham Maslow9 proposed his well-known hierarchy of needs as a way of understanding the complexity of human beings’ motivations and desires.
Theory X: the traditional command-and-control approach based on assumptions of people as lazy, uninvolved, and motivated solely by money
Theory Y: more humanistic form of management based on assumptions of people as active and involved in their work
Meanwhile, the famous German sociologist, Max Weber, writing a hundred years ago, first laid out the principles that govern hierarchical organizations and the way in which individuals exercise power and control within a bureaucracy, exhibiting hierarchy, division of labor, impersonal rules, and top-down authority.10 Hierarchy refers to a top-down system of control in which different groups report to a single individual who then reports to another and so on up the ladder.
Bureaucracy: a form of organization exhibiting hierarchy, division of labor, impersonal rules, and top-down authority (Weber, 1947)
Modern Organizational Behavior
Modern organizational behavior has relied heavily on work from many different social sciences (see Figure 1.2). Sociologists, such as Max Weber, contributed to the study of bureaucracy and group decision making. Anthropologists, exploring the role of culture in society, offered important insights into organizational culture. Finally, political scientists contributed to our understanding of organizational behavior by focusing on democratic governance, power, leadership, and strategy.
In the past few decades, management theorists, primarily those studying business organizations, have made important contributions to our understanding of organizational behavior and management, often working from a social psychology perspective. For example, Peter Drucker11 studied the limitations of traditional command-and-control models of organization in stimulating worker productivity, especially in areas in which knowledge workers are especially important. Margaret Wheatley12 extended this notion by encouraging managers and workers in times of uncertainty and chaos to embrace resilience, adaptation, and creativity, while Peter Senge13 led the exploration of learning organizations and Edgar Schein14 defined the contemporary version of organizational culture. In a related vein, Tom Peters and Robert Waterman15 established the role of executives in all sectors striving for excellence in a strategic fashion, a theme recently echoed by Jim Collins16 in his books Good to Great (2001) and Great by Choice (2011).
Current Trends in Organizational Behavior
Positive Organizational Behavior
A recent and compelling emphasis in the social psychology of organizational behavior is termed “positive organizational scholarship,” the study, or “positive organizational behavior,” the practical outcome. Positive organizational scholarship traces its beginnings to the late 1990s, when Martin Seligman, president of the American Psychological Association, argued that his field had too long focused on illness or pathology and proposed as an alternative, what he called positive psychology.17 Instead of concentrating on what was wrong with people, that is, their deficiencies, positive psychology focused on positive experiences, such as happiness, pleasure, and joy, and how human beings could use their talents to create positive institutions that would, in turn, promote even more positive conditions.
Positive organizational behavior: an approach to organizational behavior based on positive psychology and emphasizing strengths rather than weaknesses

Recent studies have shown that emphasizing the positive strengths of those in groups and organizations—such elements as happiness, meaningfulness, and effectiveness—actually creates even more positive results. This finding is closely related to the strength-based approach we emphasize in this book—that building on strengths rather than trying to correct weakness may in the long run be far more successful in building individual and original capabilities.
Organizational scholars soon began to explore how this new approach to psychology might be reflected in studies of organizational behavior.18 Fred Luthans, working with the Gallup organization, proposed that organizational behavior should give more attention to such ideas as confidence, hope, and resiliency.19 Similarly, others argued for a greater emphasis on human strength, resilience, and vitality and the creation of settings characterized by appreciation, collaboration, fulfillment, abundance, and human well-being.20
For example, “Imagine a world in which almost all organizations are typified by greed, selfishness, manipulation, secrecy, and a single-minded focus on winning. Wealth creation is the key indicator of success.”21 Individuals in those organizations would be characterized by distrust and anxiety, and social relations would be strained. Researchers looking into such organizations would emphasize such topics as problem solving, resistance, and competition. In contrast, “imagine another world in which almost all organizations are typified by appreciation, collaboration, virtuousness, vitality, and meaningfulness. Creating abundance and human well-being are key indicators of success.”22 Individuals in those organizations would be characterized by trustworthiness, humility, and positive energy, and researchers would emphasize excellence and extraordinary performance. Positive organizational behavior does not dismiss the first view, which has a clear basis in reality, but emphasizes the second; it seeks, as the old, old song says, to “accentuate the positive.”
This approach is closely related to what we might call a strength-based approach to personal and organizational development. Instead of focusing on deficiencies—either those of the individual or of the organization—this approach builds on their strengths. (A parallel strength-based approach is often used in community development—the focus is not on what’s wrong with a community, but what is right and what can be built upon.) We will emphasize a strength-based approach to organizational behavior in this book.
Neuroscience and Organizational Behavior
We should note one other contemporary approach to the study of organizational behavior. New developments in the way the brain affects behavior, called neuroscience, or more informally brain science, suggest that the physiology of the human brain is directly connected to human behavior, including organizational behavior. For example, stress affects everyone, but the structure of the brain means that certain people are less affected by stress than others. Brain science may eventually be able to tell us, from a physical standpoint, which individuals are likely to be most resilient and why. Brain research has also shown that our brains are highly flexible and adaptable, which means that learning can take place not just in our early years but throughout our lives.23

Socially Intelligent
A similar argument is developed in a popular and highly readable book by New York Times columnist David Brooks, called The Social Animal.24 Drawing on recent work in neuroscience as well as psychology, Brooks contends that our conscious or rational mind often receives credit for thinking through options and guiding our actions, when in fact the unconscious mind, the world of emotions, intuitions, and deep-seated longings, tends to play a much more significant role. Brooks concludes that we are not rational animals but, first and foremost, social animals. Daniel Goleman, writing in Social Intelligence, comes to the same conclusion. Basing his work on recent advances in neuroscience, Goleman identifies a human predisposition to be aware of and sensitive to other human beings.25 One emerging theme in brain studies is that human behavior is never purely rational; the emotions play a central role in all aspects of organizational behavior. As we will see, that can often be a very good thing.
What Would You Do?
How do you balance these sensitivities? One of your employees is concerned that her salary is well below that of those who have the same experience that she has. Another is clearly motivated by doing meaningful work and being recognized for that work. Your initial response is to try to give the first employee a raise and more frequently compliment the second. But then, in terms of productivity, he’s every bit as deserving of a raise as she is. What would you do?
People Skills in Management
Let’s turn toward the more specific challenges you will face as a manager, challenges that are quite different from those of only a few decades ago. The complex and interconnected world that today’s organizations face requires new skills and approaches in management and leadership. Increasingly, we are learning that the top-down leadership and bureaucratic management models, based on manufacturing rather than knowledge work, are a relic of the 20th century.26 Top-down management is not only inconsistent with today’s open and interconnected world, it is simply too slow to respond to events that occur at “warp-speed.” Instead, we are seeing the emergence of leadership and management approaches that emphasize openness and engagement, resilience and adaptability, and, most of all, creativity.
Differentiating Between Managers and Leaders
We might begin by thinking about whether there are differences between managers and leaders. Abraham Zaleznik’s27 classic discussion of this topic continues to be relevant. Zaleznik begins by noting that a managerial culture emphasizes rationality and control. Managers are concerned with problem solving and getting people to operate efficiently throughout the organization. Leaders, on the other hand, are not bound to structure nor to existing goals; indeed, they accept chaos, suspense, and risk. Ultimately, they seek to shape the future, even if that means moving in completely new and unexpected directions.
Although the differences between managers and leaders may initially seem distinct, most organizational behavior scholars today, as well as their counterparts in the real world, would agree with Harvard professor John Kotter that management and leadership are not opposing forces in organizations but are complementary to one another. Indeed, Kotter argues that you can’t have one without the other.28 That is, managers need strong leaders in order for them to succeed, and leaders need strong managers in order for them to succeed. Managers tend to promote stability in the organization, while leaders often press for change. But both forces may be essential as businesses and other organizations face increasingly turbulent, indeed chaotic circumstances.
What Do You Think?
Make a list of those skills or abilities or qualities you associate with managers and those you associate with leaders. Or you might ask what do managers do—and what do leaders do. See if you can build a chart with management on one side and leadership on the other. What do you think?
What Managers Do
Let’s look at the job of the manager. That is, what do you need to know, and what do you need to be able to do to act effectively and responsibly in the organizations of which you are or will be a part? You have probably already seen lists of management functions such as planning, organizing, staffing, directing, coordinating, reporting, and budgeting. Elaborating these ideas, Peter Drucker suggested that the first task of management is to set objectives, to establish the goals of the group or organization and offer ways to meet those goals (see Table 1.1). Second, the manager organizes the tasks, saying who will do what and when. Third, the manager motivates and communicates, encouraging others to accomplish their work and engage with others. Fourth, the manager assesses performance, that is, the manager devises ways in which to measure the performance of the organization against the organization’s goals and objectives. Fifth, the manager develops people. Especially in a time in which what Drucker calls knowledge workers (those whose primary contribution to the organization is not physical but mental) are the primary assets of most organizations, the development of their skills and abilities is paramount.

What Managers Do
Knowledge workers: those whose primary contribution to the organization is not physical but mental
In the late 1960s, Henry Mintzberg conducted a classic set of “structured observations” of five executives in medium to large organizations, spending a full week with each and recording in detail their activities. He concluded that traditional terms such as planning and decision making fail to capture the complexity of managerial work; they fail to show what managers actually do. In Mintzberg’s view, the work of managers had six characteristics,29 summarized in Table 1.2.
Mintzberg’s research shows that the daily work of managers is characterized by a large number of activities that occur at a fast pace and are not always predictable. Additionally, managers spend a considerable amount of time communicating and interacting with other people. In addition to his examination of what managers did, Mintzberg also studied the behavior of those managers, concluding that all of their activities were found to involve one or more of three basic behaviors: interpersonal contact, the processing of information, and the making of decisions. Mintzberg then described 10 managerial roles, all of which will sound familiar to those who study management (see Figure 1.3).

What Do You Think?
Mintzberg’s study took place more than 40 years ago. To what extent has the role of the manager changed? What about the effect of modern information technology? How has the complexity that managers face changed?30

Source: Based on Mintzberg, H. (1971). Managerial work: Analysis from observation. Management Science, 18(2), B97–B110.
The question of what managers do leads directly to two other questions that we address throughout the book:
1.   What values, attitudes, and beliefs underlie managerial work?
2.   What specific skills are needed by managers at different levels?
These are key questions in becoming an effective manager. Scholars have suggested that managers must not only act, but also reflect on their actions: “Action without reflection is thoughtless; reflection without action is passive.”31 They further suggest that the key to management is collaboration and that managers must focus on reality and maintain a worldly mindset that is rational and analytical.32 Table 1.3 summarizes the five key mindsets.


Source: Based on Gosling, J., & Mintzberg, H. (2003, November). The five minds of the manager. Harvard Business Review, pp. 54–63.
The second question we raised above was what skills are needed for managers at different levels in the organization. This question was addressed in a classic study conducted by the U.S. Office of Personnel Management (OPM) that sought to identify the skills that are critical to managerial success. Based on information collected from a large number of highly effective managers and executives, the researchers developed two categories of competencies: one focusing on management functions (or the “what” of management) and one focusing on effectiveness (or the “how” of management). Those competencies are presented in Table 1.4.
The first thing we notice when we look at Table 1.4 is how many of these competencies require effective skills in organizational behavior. Certainly, interpreting and communicating, guiding and leading, supervising and promoting performance, and flexibility and adaptation are all organizational behavior skills. But a second look reveals how integral the skills in organizational behavior are to virtually every aspect of managerial competence. Look at the list and see whether you see any elements that do not require, or at least could not be strengthened by an ability to effectively influence, manage, motivate, and lead people.
What Leaders Do
Among other things, the leader is expected to
1.   encourage the development of goals and performance objectives;
2.   communicate effectively both with the organization and with external constituencies;
3.   encourage the highest level of creativity and innovation in the group or organization;
4.   design opportunities for other participants in the organization to involve themselves in decisions made by the group;
5.   carefully assess the progress of the group or organization and make sure that everything is on track; and
6.   develop and exemplify the highest moral and ethical standards.


Essence of Leadership
Leaders have another key function and that is the creation and maintenance of an organizational culture.33 Organizations often come to mirror their leaders’ personalities. Consider how Starbucks, the global provider of gourmet coffee, reflects the dreams and fears of its founder, Howard Schultz. Schultz is the son of a construction worker who lost his job as a result of a work injury, which had a devastating impact on him and his family. One of the key elements of Schultz’s vision for Starbucks is to offer employees a fair workplace with full benefits. 34 David Neeleman, former CEO of JetBlue, has a passion for customer service and high quality; the airline he founded reflects those values.35 Figure 1.4 summarizes the leader’s functions in shaping the culture of the organization.

Source: Flanders, L. R., & Utterback, D. (1985). The management excellence inventory. Public Administration Review, 45(3), 403–410.

Many organizational cultures reflect the personal experiences of their founders or chief operating officers. Howard Schultz, CEO of Starbucks Coffee, emphasizes a workplace culture that features fair wages and benefits for all his employees. In part, that culture reflects Schultz’s own personal history. His father was laid off because of a work injury with devastating consequences for his family.
Influence of Managers
We know now that managers and leaders perform many different roles and functions in organizations, but do these actions make a difference in the productivity of the organization? Certainly that has been the prevailing wisdom in management and organizational behavior for some time.36 Recently, the Gallup organization, better known for its broad social and political public opinion surveys, has been measuring management practices and their effect on productivity. This research has shown that employees who are engaged in their work essentially doubled their odds of success when compared to those who are less engaged. Moreover, employee engagement clearly made a difference in terms of productivity, quality, and customer service.37 The survey investigated how employees become engaged and found that managers using positive leadership behaviors such as a strengths-based approach, maintaining a positive perspective when difficulties arise, and providing frequent recognition and encouragement were a key factor in employee engagement. Another extensive study, this one of school districts, found that managerial quality was related to ten of eleven performance indicators, covering a wide range of organizational goals from school attendance and student success on standardized tests.38 These findings indicate that good management and good leadership clearly make a difference.

What exactly is a good boss worth? A recent research study by the National Bureau of Economic Research looked at 23,878 workers, matched to 1,940 bosses, at a very large technology service company between 2006 and 2010. The study found that removing a poorly performing manager and replacing him or her with a top performing manager is roughly equal, in terms of productivity, to adding an extra person to the team.39 The top-performing manager is like the star athlete who makes everyone around him or her look better.
Researchers have also looked at the other side of the coin—how does poor management affect the work of the organization? There’s an old adage that people don’t quit their jobs, they quit their bosses. Studies have shown that old adage to be true. In study after study, when asked what one factor determines their satisfaction, engagement, and commitment, employees point to the quality of their immediate supervisor. According to a 2005 study, when employees were asked what factor most negatively impacted their productivity, 58% cited poor management, a figure 20 points above the second leading negative impact, lacking motivation.40 Another recent study of 2,865 leaders in a large financial services company that used feedback from employees, other managers, and their associates—a method called 360 degree feedback—shows a direct correlation between levels of employee engagement and the effectiveness of their supervisors (see Figure 1.5). Good leadership is associated with happy, engaged, and committed employees.41 Clearly, managers and leaders make a difference and if you have the skills and abilities to manage and lead effectively you will likely have more productive and satisfied employees and be much more successful in your career (Figure 1.6). Obviously, this is a compelling reason to learn the ins and outs of organizational behavior.

Managers and Leaders
Creativity and Change in a Global Society
Many books like this one have subtitles or stated emphases that are relatively meaningless. We take our emphasis—Creativity and Change in a Global Society—very seriously. We strongly believe that the world in which we live is placing special demands on organizations of all types. The complexity of the world; the interconnectedness of business, government, and society; and the rapidity of social and technological change all present new challenges to today’s organizations. Those organizations are expected to meet customer demands; they are expected to be attentive to their place in the market and to the economic consequences of every move they make; and they are expected to be good citizens, contributing to the overall betterment of society. Moreover, they are being asked to do all of these things in a world that is constantly changing, creating situations in which a premium is placed on the agility of organizations, their capacity to deal with problems that are both fast moving and complex, and their willingness to be creative and innovative. And, of course, there is no force impinging more strongly on our organizations than the fact that we are living in a highly connected global society. For this reason, we emphasize creativity and change in a global society.

4 P’s of Creativity
Creativity and Change
The 2010 IBM Global CEO Study, based on face-to-face interviews with 1,541 CEOs, general managers, and senior public sector leaders around the world, concluded that global complexity will only increase in the future and that more effective management and leadership will be needed to steer tomorrow’s organizations through a more complex world. The study found that the biggest challenge facing those in private and public enterprises in the future will be the accelerating pace and complexity of a global society operating as a massively interconnected system.
Even more important, the study connected creativity and effectiveness. According to those surveyed, in order to cope with global complexity, future leaders will need to place a strong emphasis on creativity. When asked to name the single most important attribute for leaders in the next five years, 60% of the respondents to the survey listed creativity; 52% listed integrity; and 35% listed global thinking. What is it about creative leaders that enables them to respond to the complexity of the modern environment? “Creative leaders invite disruptive innovation, encourage others to drop outdated approaches and take balanced risks. They are open-minded and inventive in expanding their management and communication styles, particularly to engage with a new generation of employees, partners, and customers.”42 Moreover, the best leaders see creativity occurring throughout the organization rather than being captured at one level or in one department. Creative leaders and managers are needed not just at the top and not just in the creativity “department.”

Source: Zenger, J., & Folkman, J. (2012, July 6). How damaging is a bad boss, exactly? Harvard Business Review Blog.

Sarcasm Boosts Creativity
Creative managers and leaders seek organizational cultures that allow a great deal of empowerment and engagement on the part of employees. Employees are encouraged to seek innovative solutions to problems facing the organization and are given the autonomy to pursue possible avenues for new ideas. One manager told us that, when an employee brings a good idea to him, even if he knows a better solution to the problem, he will accept the employee’s recommendation, because it’s more important to encourage employees to bring ideas forward than to play with those ideas at the margin. Ralph Kerle, a creativity consultant in Australia, thinks that there are four attributes that are most important for creative leaders—empowerment, enjoyment, enlightenment, and courage—and the greatest of these is empowerment. Creative people, he points out, are likely to prefer organizational structures and cultures that are characterized by high levels of autonomy and opportunity. The fact that these same structures also may be riskier is of less importance than achieving creative outcomes.43

A Global Society
There is no question that we are living in an increasingly global society. We are all acutely aware of globalization, the extent to which cultures, societies, and economies are interconnected and integrated. Globalization is a reality in terms of individual engagements, social relationships, and social institutions, all of which have become more extended, more complex, and more diverse. Decreased travel times enable people to move around the world quickly and (for the most part) comfortably. Increased access to the web further puts people in contact with others throughout the world. Access to global 24/7 news channels such as CNN, BBC, France 24, and Al Jazeera further reinforce global interconnectedness. But we should note that the benefits of increased travel and expanded access to information are not evenly distributed. By some estimates, access to the web is highest in North America with over 79% penetration, to 68% in Oceana/Australia, and at its lowest in Africa with 16%.44 Moreover, Internet penetration is growing rapidly all over the world (see Figure 1.7).
Globalization: the extent to which cultures, societies, and economies are interconnected and integrated
There are three intricately related phenomena that define our global society today. The first of these is globalization itself, the extension of political, social, and economic relationships around the globe. Second and very closely related to globalization is complexity, in some ways a byproduct of globalization and in some ways a separately developing phenomenon. Third is connectedness, the capacity for groups and organizations around the world to connect with one another and, indeed, the necessity that they do so. We will briefly examine each of these elements.
We have seen the impact of globalization on our individual lives, but globalization has had an even greater impact in the economic realm. If you work in business, your competitors, your suppliers, and your customers are now global. If you are in government or a nonprofit organization, globalization impacts you through your connection with people from different cultures, through the availability of services across the globe, and through the constant exchange of information. We recognize that globalization is a reality; however, we don’t always understand what we see and hear nor do we correctly interpret the information. We need greater clarity about how to understand this new phenomenon and how to navigate globalization. It’s here to stay.

Source: Internet World Stats, Copyright © 2012, Miniwatts Marketing Group. Note: Penetration rates are based on a world population of 7,017,846,922 and 2,405,518,376 estimated Internet users on June 30, 2012.
Several writers have drawn a distinction between “stable” situations and “liquid” situations, or between “stability” and “liquidity.” For many years, societies around the world remained fairly stable, in the sense that people stayed in one area, the flow of information among societies was restricted, and the tools and artifacts of the society tended to be used where they were produced. In some cases, there were physical barriers such as mountains or rivers that restricted travel; in other cases, social and political institutions put limits on movement. And, of course, there were no airlines, cell phones, or Internet connections to bring people together.
There is, however, abundant evidence that many parts of the world and many aspects of society and culture are being “liquefied.” Certainly modern technology plays a strong role in transmitting information from place to place and, indeed, moving people from place to place. Consequently, institutional structures seem to be melting into liquid form and the constraints of time and space become increasingly irrelevant, as, for example, international banking transactions occur in microseconds without actual resources being transmitted from one place to the other. As philosopher Zygmunt Bauman has argued, we live in an increasingly liquid society, what he calls liquid modernity.45
Liquid modernity: the tendency for modern societies to exhibit more liquid or fluid tendencies
“In today’s ever-changing world, where global challenges necessitate strong leadership, the need for training and mentoring for women leaders has never been so acute” says Justine Metz, an executive at the Global Ambassadors program, a partnership between the Bank of America and Vital Voices,46 an NGO that invests in unleashing the potential of women worldwide.47 The role of women in economic development around the world has been emphasized by the United Nations and other global organizations such as the World Economic Forum.48 However, while women make up 50% of the world’s population, many do not get the education, training, and support they need and face considerable discrimination that prevents them from contributing fully to their communities. Programs such as Global Ambassadors recognize the importance of developing global leadership and allow emerging leaders to benefit from the experience of established leaders.
The program’s mentors come from a variety of industries, including banking and entertainment, and are dedicated to helping their mentees grow while they themselves learn about global challenges. Candace Browning, head of Global Research Bank of America Merrill Lynch and one of the program’s mentors, believes that “mentorship is critical to helping women drive change across economic, political and social channels.”49 Another mentor in the program, Wendy Luhabe, cofounder of Women Investment Portfolio Holding in South Africa, is inspired by the program’s mission to build bridges between new and emerging leaders. She says: “At its basic level, leadership is developing the capacity to transform our own lives and circumstances, and as our confidence grows we extend that capacity to our broader sphere of influence.”50 A third mentor, Ann Veneman, former Executive Director of UNICEF and former U.S. Secretary of Agriculture, believes the program can have long-lasting impact: “Good mentors can help create good leaders, and good leaders become mentors for the next generation,” and she tells young leaders to “take advantage of opportunities that may come your way. It is not always easy to start on a new path, but it can lead to incredible opportunities to make a difference.”51 Susan Chambers, Wal-Mart People Division Executive Vice President, who mentors Smita Mankad, managing director of Artisans Micro Finance, says she helps her mentee focus so that she can continue to do “good” and do it well and, as a result, help other people by providing economic opportunity.52 Cooperative efforts such as the Global Ambassador program exemplify the importance of developing global leadership and the role of one-on-one mentoring in the process.
1.   Why should business get involved in programs such as Global Ambassadors?
2.   Should business get involved in social and cultural issues?
Closely related to the issue of globalization is the increasing complexity of doing business in a world marked by turbulence, ambiguity, and surprise. The uncertainties of the social, political, and economic worlds are vexing to those in business, those in the public sector, and citizens generally. Over the last couple of decades, change has been seen as the most difficult factor to overcome in achieving organizational success. Indeed, many have commented that we have moved from a society largely stable with occasional interruptions of change, to one that is marked by constant change with occasional interruptions of stability. Certainly changing technologies have dramatically altered the social, political, and economic landscape, but change has come about in other ways as well. There are the changing demands of customers and citizens, with new preferences being registered daily. There are the changes brought about by the almost instantaneous flow of news and information from around the world. In general, leaders and managers in all sectors recognize that the most significant difference in their lives today as compared with when they started their work is the pace at which they are required to work—and the pace at which they must require their organizations to work.
This difference was also documented in the IBM 2010 Global Leaders Study we mentioned earlier. Again, the study paints a picture of increasing complexity in the way that businesses and governments are required to act. The respondents suggested that the new global society is more turbulent, uncertain, and chaotic than ever before—and they expected that these new complexities will not only continue through the coming decades, but they will accelerate. Under these circumstances, the changes that are required to adapt are not simply incremental, but transformational. Those who were interviewed expected that change and complexity would become even more dramatic over the next years and next decades, and, as we recall from our earlier discussion, creative responses would be required to meet these challenges. Interestingly, many companies have adapted well to these new circumstances and benefited financially from them. These standout companies have devised ways to organize and simplify their operations to the benefit of those inside as well as external partners and customers. In describing their work, words like agility, dexterity, speed, flexibility, adaptability, and resilience are mentioned over and over—words that will need to describe your work.
Obviously, the new global society has been made possible by technological advances, especially in the area of communications. The Internet has opened new opportunities for instantaneous connections across long distances. Employees, customers, and partners are connected in new ways and the interaction between businesses or public organizations and their customers or citizens has changed dramatically. One notable aspect of this change has been the rise of social media and its importance in both local and global affairs. You only need to be reminded of the Arab Spring uprisings to recognize the importance of social media in the political sphere. Similarly, most businesses today are exploring new ways to interact with customers through social media and distributed commerce.
Another IBM study, this one taking place in 2012 and based on interviews with some 1,700 executives in the private and public sector, explored this newly connected world and how companies, especially high-performing organizations, have responded.53 Over the past decade, executives and managers have been buffeted by economic challenges, many of which are not confined to national boundaries but are felt around the globe. For example, recall the disruption in various parts of the world caused by the European financial crisis. It’s not surprising, then, that the executives interviewed for the IBM study listed technology (including such areas as information technology, biotechnology, and nanotechnology) as the number one force likely to impact their work over the coming 3 to 5 years. This was a change from previous studies that had shown market factors as the most significant force. (We might note that people skills have fairly steadily remained in the number two position over all the years—and those are the skills that we will focus on in this book.)

One of the obvious features of the emerging global society is the way so many things are interconnected. A transaction made in one part of the world instantly affects business in many other parts of the world. This interconnectedness creates great opportunities for business but also presents challenges in terms of greater complexity and the difficulty of coordinating events in time.
Although connectedness is part of the problem for companies and governments, it also can be part of the solution. These new connections affect the relationship between, say, a business and its customers and suppliers, but, at the same time, the connected world opens opportunities for organizations to restructure and reshape their internal operations, typically in the direction of more open and innovative practices. For example, a variety of new applications are aimed at facilitating group collaboration, even if everyone in the group is not “in the room.” These range from contextual, real-time conferencing integrating video, audio, and instant messaging (IM), to software applications such as Basecamp that make asynchronous collaboration possible across vast distances and with many partners involved. And, of course, there are Tweets, Facebook updates, Google+ shares, LinkedIn updates, Pinterest pins, and Instagram uploads. All of these applications hold the possibility for making organizations more open, more collaborative, and more creative—all characteristics of a flexible and adaptive organization, exactly the type that is required to deal with a global complexity and fluidity.
The Ethical Environment
We have discussed the two major themes, (1) creativity and change and (2) the emergence of a global society, that we will develop throughout the course of this book; you should look for both case studies and larger vignettes developing these themes in each chapter. We also want to introduce several subthemes that we will group under the title, “The Ethical Environment.” These include personal integrity, a cultural mindset, social responsibility, and global sustainability. Although much of what we discuss in this book will involve the work that leaders and managers do within the organization, it’s important to realize that such work takes place in a larger social environment that shapes the values that those in the organization pursue. No one is immune to these influences, and, indeed, each one of us has a responsibility to be attentive to the ethics and values of the society in which we live. Sometimes we accept those values readily, yet at other times we resist those values and try to modify or replace them. But the ethical dialogue that occurs with respect to these values importantly shapes our behavior in organizations and defines our role in society. For that reason, it is important for us to examine these four subthemes at the beginning. Then, as we go through the text, we will note where these subthemes arise.

Price for Ethical Clothing
Personal Integrity
Most of today’s leaders would agree with Mountain Equipment CEO Peter Robinson when he says, “Ethics is the new competitive environment.”54 Similarly, when employees are asked what are the most important characteristics they desire from their leaders, honesty and integrity always rank at the top of the list. It’s only natural that we would expect the same sense of values from our leaders that we expect of people throughout society—that they tell the truth, that they don’t do violence to others, that they don’t steal, that they keep promises, and so forth. But, as we know, matters of integrity within large organizations are often more complicated and potentially more damaging than these simple statements of ethical norms might make it appear.

Human Values and Corporate Actions
The recent cases of Enron, Tyco, and Arthur Andersen, for example, show that integrity within the world of business is a principle often violated, sometimes accidentally, but often with malicious intent. In many cases, a manager will make a business decision without even taking the ethical implications into account—and consequently act in an unethical way without even realizing it.55 Rushworth Kidder, founder of the Institute for Global Ethics, has written, “What is needed is a capacity to recognize the nature of moral challenges and respond with a well-tuned conscience, a lively perception of the difference between right and wrong and an ability to choose the right and live by it. What is needed is ethical fitness.”56
A Cultural Mindset
Today’s global organizations require a way of thinking that puts culture and its diversity at the forefront. The idea of diversity has traditionally focused rather narrowly on requiring equal opportunity in hiring and promotion practices. Indeed, there is a large body of legislation and judicial rulings that regulate what companies and government agencies can or cannot do with respect to these areas. Diversity today, however, has taken on new meanings, as leaders and managers have come to realize that taking culture into consideration in the workplace is not only the right thing to do, it also aids creativity and productivity. Having men and women, people from different cultural backgrounds and countries, gays and straights, people with both special talents and disabilities, and people of all ages working together ensures that different viewpoints are brought to discussions about management practices, product design, sales and marketing, and a host of other topics. Successfully managing such diverse organizations requires a cultural mindset that values and encourages diversity and considers it a competitive advantage, not just something you have to do. “The leadership challenge of facilitating appropriate responses to diversity is a business objective that must be met to ensure effective organizational outcomes in both domestic and foreign markets.”57
Diversity: achieving a workforce generally reflective of the social environment surrounding the organization, with special attention to race, gender, sexual orientation, and so on, as well as cultural differences

This man is looking at a rice egg sandwich in a McDonald’s in Jakarta, the capital and largest city in Indonesia. Companies like McDonald’s are rapidly moving into new markets but finding it necessary to adjust their products to fit the local culture.
Globalization has extended the notion of diversity beyond demographic categories, such as age, race, and gender, and opened new questions about cultural diversity. Consider the case of McDonald’s, the quintessential American company with a global reach. The Golden Arches’ burgers are appreciated all over the world, from the fanciest shopping districts in Paris to the busy streets in China and India. Although the basic menu of its restaurants is focused on hamburgers, the company has adjusted its products, its restaurants, and its management practices to respond to the needs of its global customers. McDonald’s serves wine in France, and some burgers are meatless in India where almost 50% of the population is vegetarian and cows are considered sacred by many.58
Social Responsibility
Over the last several decades, there has been an increasing interest in the commitments that public, private, and nonprofit organizations have to meet social needs. This concern is known as corporate social responsibility (or CSR) and it refers to companies going beyond their bottom line and economic interests to engage in activities that promote social well-being and environmental sustainability. Tayla Bosch, senior director for social values at Western Union, reports that her company is trying to create broad financial literacy and promote economic opportunity. She describes the path of corporate social responsibility as moving from “philanthropy (just giving money away) to cause marketing (aligning your company with a social issue) to corporate responsibility (changing the way a company operates internally). Now … We’re in a stage of shared value, where companies seek to have social impact and business return simultaneously.”63 As you can imagine, corporate social responsibility raises interesting questions for businesses, many of which were, and many of which still are primarily concerned with return on shareholder investment. Would corporate partners, shareholders, or potential investors approve of an activity that might be seen as taking away from company profits? Or, on the other hand, can a case be made that corporate social responsibility actually contributes to the bottom line? Or, does it really matter—is corporate social responsibility simply the right thing to do? Finally, corporate social responsibility raises fundamental questions about the future role of business and society.64 Recent studies also show that a growing number of companies are recognizing the importance of sustainability as a core strategy in order to be competitive. One study compared companies that adopted environmental and social policies with companies that didn’t. High sustainability companies outperformed their competitors over an 18-year period, in terms of both market and accounting criteria, such as return on assets. These companies also had a stock market performance that was 4.8% higher than the low sustainability companies.65
Corporate social responsibility: companies going beyond their bottom-line economic interests and engaging in activities that promote social well-being and environmental sustainability
Many have argued that companies can “do well” and “do good” at the same time, that is, the economic and social goals of companies are not at odds but in fact complement and reinforce one another. Certainly companies like COSTCO, well-known for their treatment of employees and passing on savings to customers, hold this view. Harvard Business professor and author Rosabeth Moss Kanter is also one who has taken this position, though with a slight variation. She argues that there is not a strict dichotomy between doing well and doing good, that it is not an either/or question. Rather, she contends that profitability and social good are both desirable ends for business, and companies should both seek to improve the bottom line and to provide benefit to society. Indeed, she argues, the most progressive companies will find a way to build synergies between the two and build those synergies into corporate strategy.59
The idea of increasing social responsibility raises broader questions about the role of business in society. The basic question is whether an economic system that places primary value on the corporate bottom line can serve the needs of the future. Gary Hamel, management expert and visiting professor at the London School of Economics, has recently argued forcefully against this point. “Millions of consumers and citizens,” he writes, “are already convinced of a fact that many corporate chieftains are still reluctant to admit: the legacy model of economic production that has driven the ‘modern’ economy over the last hundred years is on its last legs. Like a piece of clapped out engine, it’s held together with bailing wire and duct tape, frequently breaks down and befouls the air with noxious fumes.”60
Many executives cling to the idea that business is only for making money and that a focus on short-term economic benefits, one that disregards long-term social and environmental consequences, is the appropriate way to judge success in business. Hamel counters, “we long for a kinder, gentler sort of capitalism—one that views us as more than mere ‘consumers,’” one that understands the difference between maximizing consumption and maximizing happiness, one that doesn’t sacrifice the future for the present and regards our planet as sacred.61
This view is echoed by the founders of Generation Investment Management:
Some of the ways in which [capitalism] is now practised do not incorporate sufficient regard for its impact on people, society and the planet. Capitalism in its current form is creating and fostering numerous challenges, not least short-termism, over-reliance on GDP growth as a primary metric of prosperity, rising inequality, increasing volatility in the global financial market, and growing contributions to the climate crisis.62
While this debate is far from concluded, it is important to understand that these questions form part of the ethical environment of organizational behavior. At some point you will have to take a position on these important ethical issues.
1.   Are there inevitable trade-offs between a focus on profits versus corporate social responsibility?
2.   How can both be increased at the same time?

Ethical Business Culture
Given findings like these, we can certainly expect many more firms to incorporate sustainable practices into their operations. But again, you might argue that sustainability is not only good business, it’s simply the right thing to do.

EPA administrator Lisa Jackson tours the main Ben & Jerry’s ice cream factory in Waterbury, Vermont, to view new pollution control devices in use at the plant on Friday, August 24, 2012. Many companies like Ben & Jerry’s are stressing the importance of environmental sensitivity.
Global Sustainability
Sustainability basically means meeting the needs of the present generation in a way that doesn’t compromise the capacity of future generations to meet their needs. Obviously, doing so has become more problematic as we have come to recognize that the population of the planet will grow dramatically over the coming years while the resources available to sustain that population will remain stable at best. There are new concerns, including the decline of natural ecosystems, climate change, water quality and scarcity, the fragility of food and food systems, the accumulation of waste, and the restructuring of transportation systems. All of these represent issues that must be addressed by both public and private action, as do such current policy concerns as sustainable development, environmental justice, land and urbanization, changing materials and technology—to name just a few. Leaders and managers in business and the public sector must keep the idea of sustainability in mind as they create new products, services, and infrastructures, for example, through building green wherever possible. But they must also recognize the importance of building viable and sustainable social and economic systems. And both private and public managers must engage in transformational stewardship of the people, places, and planet with which they are entrusted or for which they are responsible as leaders. The idea of sustainability requires an expansive view of social responsibility that extends beyond self-interest, geographically and even generationally. This ethic of stewardship must characterize the work of individual managers but also be taken to scale on a local, national, and planetary basis.
Sustainability: meeting the needs of the present generation in a way that doesn’t compromise the capacity of future generations to meet their needs
Taking on such major challenges as these, requires strong and creative action. Coca-Cola, for instance, has worked with its bottling partners to create lighter-weight packaging, cutting greenhouse gas emissions, and generating savings in the tens of millions of dollars. It has also made a commitment, in cooperation with its bottlers and with several nongovernmental organizations, to “water neutrality”—an initiative that will reduce environmental impact by replenishing watersheds to the full extent of the water the company removes.66 But sustainability is an issue that cuts across national boundaries and will require a global commitment. Marvin Odum, president of Shell Oil Co., comments, “When I look at an investment proposal now, it still covers the technical issues, of course. It certainly covers the financial issues. But fully half of that proposal deals with the nontechnical risk: social performance and sustainability issues.”67

Goodness From Within

Kellogg CEO Challenged

Women Need Global Spotlight
Summary: Learning Organizational Behavior
In this first chapter, we described organizational behavior as the study of how to manage individual and group behavior within business, government, and nonprofit settings, but we also emphasized the importance of learning to act effectively and responsibly within those organizations. We also introduced the field of organizational behavior, noting some historical highlights and bringing us up to the most contemporary work in positive psychology and behavioral neuroscience. We examined both the roles and responsibilities of leaders and managers, and discussed the importance of leadership extending throughout organizations. We then turned to the central themes of this book—creativity and change in a global society. After introducing each of these themes, we turned to four subthemes that we grouped as comprising the ethical environment of organizational behavior. These four subthemes are personal integrity, group diversity, social responsibility, and global sustainability.

Key Terms
Corporate social responsibility
Formal organization
Hawthorne effect
Knowledge workers
Liquid modernity
Organizational behavior
Positive organizational behavior
Scientific management
Theory X
Theory Y

Exercise 1.1  Ethical Dilemmas in Cross-Cultural Work
Working in different cultures also involves confronting different ethical norms including norms related to business transactions. Imagine that you are working in another country trying to get a new plant built for your firm, but you are having difficulty working your way through complex regulations. A representative of a government agency in that country suggests that you have lunch together and talk more informally about some issues that need to be resolved. In the discussion, he makes it clear that for $5,000 he can make all of those issues go away. What would be the appropriate course of action in a case like this? Currell and Bradley, authors of the article from which this case was adapted, pull no punches in their assessment of what should be done:
Organizations must insist on a swift response to complaints, unbiased investigations, and “public hangings” of offenders, and they should praise employees who have the courage to call out wrongdoing. These actions are critical to employees’ perceptions of organizational justice, and they can help head off or mitigate the damage from bribery offenses.68
Do you agree with this judgment? If not, how would you frame an ethical solution?
Exercise 1.2  Shadowing a Manager
We discussed how several scholars attempted to describe what managers do and, in turn, what skills, knowledge, and abilities they must acquire. Arrange to shadow a manager in your local community for at least a day. Focus your observations on the categories Mintzberg discusses in his 1960 article. But look also for deviations from his conclusions. Take detailed notes for reporting to the class.
Case 1.1  Coaching the Green Team
You have just been named coach of a mixed boys’ and girls’ soccer team of 5-year-olds, which the players have affectionately named “The Green Team,” an obvious reference to their blue uniforms. Most of the game consists of “scrums,” where all the players gather closely around the ball and try to kick the ball but usually wind up kicking each other. Every now and then, however, the ball breaks free and your “star” player, whose name is Cari, steers it down the field in a complete breakaway and scores. (All the while the parents of those on the Green Team are chanting “CARI! CARI! CARI!”) You soon despair of teaching the kids much about soccer, but it occurs to you that they could learn some important lessons about teamwork, communication, decision making, motivation, leadership, and the like, and you set this as your goal. When you tell a friend about your decision, she remarks that if you can teach these behavioral skills to the Green Team, perhaps you could then come and teach them to the management team at her office—which is probably as much in need of these same skills as the soccer kids.
Answer these questions:
1.   Have you ever been in a group or organization that didn’t have problems with these issues? Don’t they seem pervasive—whatever task you are trying to perform?
2.   Wouldn’t it be helpful to know more about these skills as you develop in your career?

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Chapter 2
Culture and Diversity
Developing a Cultural Mindset
After reading this chapter, you will be able to:
1.   Explain culture and diversity and understand their importance
2.   Assess the cultural diversity in today’s workplace
3.   Apply the various models of national culture
4.   Evaluate the influence of culture on individuals
5.   Develop a cultural mindset
Sodexo: Committed to Diversity Management
What does it take for a company to be ranked as one of the best for managing a diverse workforce? Sodexo, the $20 billion food services and facility management company and one of the world’s largest employers, can provide the answer.1 Sodexo keeps diversity in the forefront of its activities through a strong commitment from the top leadership, a managerial reward system based partially on achieving diversity objectives, extensive diversity training and mentoring, and numerous diversity-focused partnerships and relationships including cooperation with historically Black colleges and universities.2 A high touch culture with an orientation toward action is responsible for the implementation of various diversity initiatives says Betsy Silva Hernandez, senior director for corporate diversity and inclusion.
A diversity leadership council, in place since 2002, and the recently added committee of operation leaders, are tasked with implementation and oversight of various policies through managers and employee groups.3 The company president and CEO, George Chavel, says: “Our diversity expertise helps us be more agile and responsive to customers and differentiates us from our competitors, and therefore directly contributes to our long-term business success.”4 Rohini Anand, Sodexo’s chief diversity officer, who gets much of the credit for the company’s achievements in this area, believes that diversity is a key to the company’s success and at the core of what they do. “Sodexo considers diversity and inclusion a business imperative as well as a social and ethical responsibility grounded in core values of team spirit, service spirit, and spirit of progress.”5
Keeping diversity at the forefront of their mission and their management practices has paid off. In addition to many awards and recognition from groups such as DiversityInc and Catalyst, the numbers speak for themselves. Over 12% of the company’s executives are Black and the overall number of minorities and women in management increased by 15% and 8%, respectively, in just 5 years.6 On a 2012 company survey, 83% of employees indicated that they felt valued for the differences they bring to the workplace, an impressive 16-point improvement from 2006.7 Additionally, close to 90% of Sodexo managers participate in various employee resource groups that are instrumental in implementing diversity initiatives.8 These accomplishments are particularly noteworthy given that just a few years back, in 2006, the company settled an $80 million discrimination class-action lawsuit.9 Those days are long gone and Sodexo now considers diversity not only a good business practice, but simply the right thing to do.

Preservation of one’s own culture does not require contempt or disrespect for other cultures.
—Cesar Chavez
Verité en-deçà des Pyrénées, erreur au-delá. [There are truths on this side of the Pyrenees that are falsehoods on the other side.]
—Blaise Pascal
Sodexo has made a conscious choice to capitalize on the many cultures and groups within society and build on that diversity to strengthen its workforce and address and expand its markets. In our global world, and particularly in countries such as the United States where many cultures are represented, cultural diversity is a fact of life. If you ask people about their cultural background and identity, they are likely to tell you which country they are from, where they grew up, or where their parents come from. For most people culture is equated with nationality or ethnicity. One is American, Chinese, Egyptian, Brazilian, African American, Asian, or some combination of different nations and ethnicities. People may also identify with a particular region within a country, such as the Northeastern United States or Southern France. Unless probed further, few people will mention their gender, religious background, sexual orientation, hobbies, or profession. However, all of these elements as well as many others make up someone’s cultural background and identity. Our cultural identity is complex and has a pervasive and strong impact on how we think and behave. Therefore understanding culture is a critical component of developing the self-awareness necessary to effective leadership and can help us become more successful in interacting with others and in managing our teams and organizations in an increasingly diverse, interconnected, and global world. This chapter discusses the importance of understanding culture and diversity in today’s global organizations and introduces the concept of cultural mindset as a way of respecting and capitalizing on cultural diversity.
What Is Culture and Why Does It Matter?

Recent Diversity Training
Why should global leaders understand culture? Why is it so important? Whether you live and work in the United States or any other country in the world, you are likely to face a global world where you interact with people from many different countries and cultures. Because culture impacts how we think and act, we are well advised to understand culture and its impact. Examples of blunders related to lack of cultural knowledge abound.10 Companies use the wrong names and fail to sell their goods; leaders make an inappropriate gesture and offend their negotiation partners from another culture; employees misinterpret their leader’s openness and desire for team decision making as a weakness; managers overlook outstanding job applicants because of preconceived cultural beliefs; compliments are seen as sexual harassment; firms fail to capitalize on a growth opportunity because they overlook a different market. On a personal level, such mistakes and misinterpretations may embarrass people and prevent them from establishing effective relationships; the impact is limited to one individual and the missed opportunities. On an organizational level, cultural misunderstandings can have considerable impact not only on the individuals involved, but also on whole organizations and even whole countries. Not understanding culture can have dire individual, organizational, political, and economic consequences.
For each of the following items, please use the scale below to indicate your answer.

Scoring: Reverse the scoring for items 2, 10, 11, 13 (1 = 4; 2 = 3; 3= 2; 4 =1). Then add up your scores for all questions.
Total: _______________
The range of scores is 15 to 60. A score in the upper third (60 to 45) indicates strong cultural mindfulness. A score in the bottom third (30 to 15) shows little awareness of culture. Review each of your responses and the material about diversity and cultural mindset in this chapter to identify your areas of strength and weakness and decide what you can do to strengthen your cultural awareness and ability to work across diverse cultures.
Source: Adapted with permission from Nahavandi, A. (2012). The Art and Science of Leadership (6th ed.) New York, NY: Pearson–Prentice Hall.
Consider the simple images in Figure 2.1. What do they mean to you? If you speak a language that is written from left to right, the pictures will tell you that the washing machine will clean your pile of dirty clothes. However, if you speak a language written from right to left, the meaning changes drastically! Such a simple mistake can have dire consequences if you are marketing a washing machine in the Middle East.
Defining Culture
Culture is a set of beliefs and values shared by members of a given group. These beliefs and values lead to patterns of behavior that are acquired and transmitted from one member to another.11 These beliefs, values, and behaviors make a group unique and set it apart from others. As such, culture creates differences among people and groups. Culture also shapes how people view the world. From simple greeting rituals to what we expect of our leaders, to how we raise our children, and what we consider appropriate behavior in organizations, many of our actions and thoughts are influenced by our culture. Culture both provides the framework or the lens that allows us to perceive and understand events, and through that lens, makes us focus on certain things and tells us what matters and what does not. For example, recent research shows that American education highlights themes of individualism and self-direction and achievement, while Japanese education focuses on conformity and group harmony.12 Each culture focuses on values that it considers important in the education of its children.

Chapter 7
Fostering Creativity and Innovation
After reading this chapter, you should be able to:
1.   Interpret the steps in the creative process
2.   Distinguish between creativity and innovation and understand how they work together
3.   Recognize and resolve impediments to creativity and innovation in organizations
4.   Employ various tools and approaches to enhancing creativity
5.   Explain the role of leadership in enhancing organizational creativity and innovation
Creativity at J.Crew
On the inside cover of a spring 2013 mail catalog, Jenna Lyons, Creative Director of J.Crew wrote “You may remember us from years ago—J.Crew, all about the classics. You’ll still find them here, but we’ve changed a lot since then. These days, you might be surprised by what you find.”
In that short statement, Lyons summarizes a much more complex series of developments that have occurred at J.Crew over the last 10 years. Not only has the company tripled its annual revenue, but it has become an almost cult-like brand. Much of the credit for the change goes to Mickey Drexler who became chairman and CEO at J.Crew in 2003. Under Drexler and Lyons (as Creative Director), the J.Crew product design would be no longer dictated by corporate strategy. In fact, this approach would be turned on its head: the focus would be on the creative process and building a unified aesthetic for the brand. Early in his tenure, Drexler appointed Lyons not only Creative Director, but also president of the company. “What it says,” Lyons argues, “is that no financial decision weighs heavier than a creative decision. They are equal.”1
But maintaining the creativity of the product design staff is not an easy job. Managing creative people is difficult, and Lyons recognizes that some designers require a lot of emotion and a lot of stroking. In the world of design, there are no right or wrong answers and, as Lyons notes, when someone creates something and puts it in front of you, that thing came from inside of them, and if you make them feel bad, it’s going to be hard to fix, because you’ve actually crushed them.”2 Lyons’s approach is to model the creativity and freedom she wants. (Incidentally, it’s hard to find anyone working at J.Crew wearing socks—in fact, look through a catalog and notice that, while J.Crew sells socks, almost nobody is pictured wearing them.) Lyons also gives her designers and her staff implicit permission to take risks. When new designs don’t work out, Lyons simply requires that people take responsibility and move on to fix the problem. But when new designs do work out, they are widely heralded and become central to the company’s identity.

To generate creative ideas we search beyond reason, we venture out into the impossible, the fantastic world of dreams. … Yet we know that a truly creative idea is not silly for it must be solid, rational, and logical.
—Dimis Michaelides, global business consultant and author of The Art of Innovation
Companies have to nurture [creativity and motivation]—and have to do it by building a compassionate yet performance-driven corporate culture. In the knowledge economy the traditional soft people side of our business has become the new hard side.
—Gay Mitchell, Executive VP, HR, Royal Bank
The things we fear most in organizations—fluctuations, disturbances, imbalances—are the primary sources of creativity.
—Margaret J. Wheatley
Recently Lyons worked on a bold overhaul of the catalogs, of which 40 million are distributed each year. The redesigned catalog supports the creative image of J.Crew and its new posture as a leading fashion icon. And it gives Jenna Lyons the chance to tell the story of the last 10 years in very simple and direct terms—when in truth the move toward an all-out emphasis on creativity and design excellence required a huge change in the way the company operated. But, as we noted, it’s paying off big time.
Creativity and innovation are essential to meeting the challenges of a rapidly changing and global corporate environment. Recall that in the 2010 IBM Global CEO Study, creativity was identified as the single most important attribute of future leaders. Creativity suggests innovation and originality—the ability to see old problems in novel ways and to devise new ways of thinking, analyzing, and doing. How do we tap creativity and make organizations more innovative?

Exercise 7.1  Understanding Your Creative Style
Go back and review your answers to the questions in the Self-Assessment near the beginning of the chapter. Do you have any new ideas about what you might do to enhance or develop your creativity? How might you help others to be more creative?
Exercise 7.2  Mindmapping Exercise
Think about a goal that you have for your career or education. Spend a few minutes visualizing the goal. Then create a mindmap that represents how you see the process for achieving that goal. Be attentive to choosing a central image that you think best captures your goal. What has to occur for you to reach that goal? Who and what is involved? What is the nature of the goal? What are the consequences of achieving it? What are the barriers and obstacles? How do you view the future? What factors will influence your efforts? Include pictures, images, and symbols for as many facets of the process and the goal as you think are important.
Sometime after completing your mindmap, go back and look at it again. What can you see that might help you to think differently about your approach to the goal? What does the map tell you about the key factors involved? What are the barriers to reaching the goal? What are the things that might contribute to its attainment? What do you want to change? Does the map satisfy you as a depiction of how to reach the goal? What would you like to add? What would you like to erase? What can you learn from the process?
Exercise 7.3:  Using Analogies
Think about your present role in an organization. It can be work, school, family, or any other organization or group with which you are involved. Identify a problem that you encounter in this role that you would like to resolve. Using the following as a guide, take a piece of paper and write down some ideas and create some doodles using four types of analogies:
1.   Personal analogy. If you were this problem, what would you look like? How would you feel?
2.   Direct analogy. What is the problem like? What metaphors could you use to describe it?
3.   Symbolic analogy. What symbol or image best captures what this problem looks like? Feels like? Sounds like?
4.   Fantasy analogy. What is your wildest fantasy about how to solve this problem? How would solving the problem change the future? What is the best possible outcome?
Now go back and think about your analogies and their implications. If the problem you are trying to resolve actually was one of these analogies, then what would you do? For example, if you compared the problem with your present organizational role to a flower that was not blooming, then how could you actually make a flower bloom? Fertilizer? Water? Sunshine? What ideas does that give you for addressing the problem?
Exercise 7.4  Adapting Innovations
One of the best ways to fuel your creativity is to seek out ideas from other individuals and organizations. Read through several journals or magazines to see what innovations other companies are coming up with. Then answer the following questions:
1.   What particularly intrigues you about this innovation? Why do you think it is needed and might or might not work in your organization?
2.   In what ways might the innovation be adapted to your particular organization’s characteristics or needs? How can you build from or depart from what is already being done in another company?
3.   Where and how would you begin to work toward getting such an innovation implemented? What factors do you think will support its adoption? What might be the significant barriers?
Case 7.1  A Creativity Challenge
You have just received a promotion to become the manager of the communications office for your company. You are thrilled about your new job and anxiously await the opportunity to work with your staff of seven people both to improve how your company responds to requests for information and to create new avenues for communication between the company and its customers.
At the conclusion of your first staff meeting, you ask your staff to help you begin identifying what they think are some of the problem areas and opportunities that the unit can and should address. The silence that follows is very unsettling to you. Nonetheless, you wait for someone to speak. Finally, the most senior staff member says, “There is never any money around here to try anything new.” Another comments, “What’s the point? Our unit isn’t a priority. Everything we’ve tried has been shot down.” Another adds, “People don’t respond to our efforts to communicate with them. They just don’t seem to care about what we are doing.” After a few more similar comments, you conclude the meeting by expressing appreciation for their comments and your hope and vision that things will change for the better. Still, you feel rather discouraged.
Later, in private meetings, you talk with your staff about your desire to approach problems creatively and to come up with some new and innovative approaches to achieving the unit’s mission. In the course of these discussions, you learn that the prior manager not only did not solicit ideas but also routinely shot them down if they were raised. His favorite response to suggested innovations was, “We tried that once and it didn’t work.” Staff confided that they had learned a long time ago that they just needed to keep their heads down and do their jobs. One commented, “Besides, it’s enough to just keep up with all the requests we get. We don’t have staff to do anything else!”
1.   What are some of the characteristics of the past management practices and organizational climate that are thwarting creativity?
2.   What are some measures that you can take to begin to foster creativity in the individuals you work with and in your unit as a whole?
3.   What tools might be helpful?

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