Term Paper: Organization Theory and Behavior

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ORGANIZATION THEORY & BEHAVIOR

As we are entering the era of globalization, the world is changing, the technological page is much faster, the wealth of rich countries is slowly distributed to poorer countries, which in turn become consumer and/or production markets with high potential and last, but not least, the way of doing business is taking a big turn to 180°. As these changes take place new sciences, such as organizational behaviour, are developed. Their objective is to study the companies' behaviour and draw conclusions that may help other companies fit better in the ever changing environment - both internal and external.

Change Management

Change management is intended to structure the change phenomenon in people, societies and organizations as a transition process from one phase to another. Recent literature (Tushman et.al.,1999; Christensen & Overdorf, 2000) highlights both the challenge and the imperative of managing organizations in a fast changing environment. The fast technological page has contributed to the development of communication and information technologies and thus reducing the impact of long geographical distances. Business relationships go through a permanent change as the business network has extended from national or regional level to a global one. As the impact of factors that once used to inhibit business relations, such as geographical distance, were significantly reduced, organisations slowly entered in a knowledge-based economy. Concepts such as teamwork or brainstorming started to be more and more popular within organisations because those were seed as knowledge diffusion drivers.

One of the pioneers in change management, which is today in the first 10 organizations in the world as quoted by Fortune 500 is General Electric (GE). Jack Welch, the CEO of GE believed that an "open collaborative working place" is essential for a successful change. Thus, he promoted concepts, such as "cross-pollination of ideas" and "employee empowerment." He believed that the communication between various departments and various management levels would improve the decision making outcome, which is why every employee's opinion was welcome. For this guru of change management the number 1 rule of successful change was the rate of internal change to be higher that the one of external environment change.

Change management is still a controversial subject because of its complexity. A recent study is trying to accommodate the 2 major economic theories on this subject and bring them to a consensus (Beer & Nitin, 2000).

Dimensions of change

Economic Value

Theory (E)

Organizational Capability Theory (O)

Theories E. And O. combines

Goals

Maximize shareholder value

Develop organizational capabilities

Explicitly embrace the paradox between economic value and organizational capability

Leadership

Manage change from the top down

Encourage participation from the bottom up

Set direction from the top and engage the people below Focus

Emphasize structure and systems

Build up corporate culture: employees' behaviour and attitudes

Focus simultaneously on the hard (structures and systems) and the soft (corporate culture)

Process

Plan and establish programs

Experiment and evolve

Plan for spontaneity

Reward System

Motivate through financial incentives

Motivate through commitment - use pay as fare change

Use incentives to reinforce change, but not to drive it

Use of Consultants

Consultants analyze problems and shape solutions

Consultants support management in shaping their own solutions

Consultants are expert resources who empower employees

Source: Beer & Nohria, 2000

Some of the top organizations already embraced the consensus just mentioned. For instance, Wal-Mart has made a huge step when it employed a number of conservator consultants to "ecologize" its production, retail and transportation processes, despite the inherent premium costs; NASA developed a 5-step change process engaging everybody in the organization and with a focus on both the hard and soft capabilities of the organization.

Organizational Culture

The Organizational Culture is also known as the organization's personality. It pays respect to the values, beliefs, attitudes and norms embraced by the organization. The concept is often connected with leadership (Bass & Avolio, 1994), competitive advantage (Barney, 1986) or other notions that are concerned with business success.

Organisational culture has been defined as having multiple levels, from fundamental assumptions to artifacts & symbols and it has been defined in terms of its strength - strong vs. weak. Despite the numerous definitions of culture, all researchers agreed upon the fact that the notion becomes more and more important for organizations. Nowadays, organizational culture has a deep impact on cross-cultural management, communication in global operations, innovation, managing culturally diverse workforces, process coordination and teamwork. In some instances, organizational culture helped companies develop unique strategies/capabilities that turned those into market leaders. Wal-Mart, Southwest Airlines and Tyson Foods are companies whose % ROI is 4 or 5 digit high and their unique strategies allowed them reduce the suppliers' bargaining power, build entry barriers in their market or create non-substitutable products.

The existing literature on this topic starts from covering subjects like how the most successful companies differentiate themselves by those less successful through their organizational culture (Caldwell, 1994); to subjects like how a strong organizational culture led to a strong resistance to change and how the companies mentioned lost their success (Christensen, 1997).

The studies on organizational culture tend to reorient themselves on the relation between culture and change. Sometimes a strong organizational culture may not be a competitive advantage because in time it weakens the company's ability to compete in an ever changing environment. In this case a flexible culture is more suitable for the current market conditions. Some authors argue that one of the biggest leadership challenges is to understand and manage organizational culture to fit the external environment requirements.

The theory so far mentioned 3 types of cultural change (Trice & Beyer, 1991):

The culture is changed at organizational level through revolutionary and comprehensive efforts.

The entire organizational culture is redefined through gradual, incremental steps.

Subcultures or some cultural components are changed through radical efforts.

As for the strategies to change the organizational culture, some of the most popular are (Schein, 1999):

Triggering the change from within by motivating the personnel to drive the change.

Make the change process a continuous one to smooth the potential negative impact.

Targeting change in a clear manner and drawing and communicating the actions required to achieve it.

Using any experience as a learning process that redefines culture.

Promoting charismatic leaders.

Analyzing organizational culture in terms of risks and benefits and permanently changing it according to the analysis' results.

Insuring psychological safety through formal and informal trainings, encouragement of employee participation and support groups.

Human Resource Practices

The globalization process has slowly affected all functions within the organizations, including human resources (HR). The HR practices are now spread globally throughout organizations, through their local subsidiaries. The globalization, however, brought some changes to the traditional practices. HR top priorities have changed and new opportunities and challenges have arisen.

Solid practices are usually in line with the organizational culture. The results of an HR-oriented study made on 206 organizations, of which most had operations abroad, reached the conclusion that "the key to creating a consistent corporate culture across multiple locations is maintaining the critical balance between a strong corporate culture and local cultural differences" (Rioux et.al., 2000). According to the same study, most of the participants pointed to leadership as their international and domestic top priority coming before the recruitment of high-quality employees and employee retention. Also, among the more important challenges the changing political end economical climate, the local resistance to change and the perceived value of HR activity were named. The difference between international and domestic companies is a perspective one. Thus, in terms of HR practices, the first ones seem to focus on developing a consistent corporate culture, whereas the second ones seem to be more concerned with improving efficiency and effectiveness.

The income level differences across countries and the labour market regulation differences in general determine companies to change their behaviour according to the local market. For instance, in U.S. most of the Wal-Mart employees are union members. These union members start with the same salary and they gain 25% more than the not unionized counterparts (PBS, 2004). However, Wal-Mart's Chinese operations are not "affected" by union pressures yet, because China is a developing country where employees don't have as many rights guaranteed by the authorities as their American counterparts.

Conclusion

Change management, organizational culture and HR practices are strongly related in the context of globalization. Global organizations are challenged by an ever changing external and internal environment. Organizational culture and HR practices are strongly connected to the internal environment. Organizations nowadays engage people with a multicultural background and run their business in multicultural environments. Thus, a big challenge for them is to accommodate the organizational personality - organizational culture with the cultural differences among employees and between employees and the company - to insure efficiency and the cultural differences between company and its customers to insure profit.

Findings have suggested that successful global organizations manage to maintain a flexible attitude towards change, in general, and cultural change, in particular. Also, they have suggested that HR practices went through a dramatic change when they switched… [END OF PREVIEW]

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