Recent Trends in Human Resource Management

Wednesday, February 27, 2008

Developing an OB model

A model is an abstraction of reality, a simplified representation of some real world phenomenon. A mannequin in retail store is a model. So, too, is the accountant’s formula: Assets + Liabilities = Owners’ Equity. Exhibit below presents the skeleton on which we will construct our OB model. It proposes that there are three levels of analysis in OB and that, as we move from the individual levels to the organization systems level, we add systematically to our understanding of behavior in organizations. The three basic levels are analogous to building blocks; each level is constructed on the previous level. Group concepts grow out of the foundation laid in the individual section; we overlay structural constraints on the individual and group in order to arrive at organizational behavior.

Basic OB Model, Stage 1

Individual level – Group level – Organization systems level

A dependable variable is the key factor that you want to explain or predict and that is affected by some other factor. What are the primary dependent variables in OB? Scholars have historically tended to emphasize productivity, absenteeism, turn over and job satisfaction. More recently two more variables deviant workplace behavior and organizational citizenship behavior have been added to this list. Let’s briefly discuss each of these variables to ensure that we understand what they mean and why they have achieved their level of distinction.

Productivity: An organization is productive if it goals and does so by transferring inputs to outputs at the lowest cost. As such productivity implies a concern for both effectiveness and efficiency.
A hospital, for example, is effective when it successfully meets the needs of its clientele. It is efficient when it can do so at a low cost. If a hospital manages to achieve higher output from its present staff by reducing the average number of days a patient is confined to a bed or by increasing the number of staff-patient contacts per day, we say that the hospital has gained productive efficiency. A business firm is effective when it attains its sales or market share goals, but its productivity also depends on achieving those goals efficiently. Popular measures of organizational efficiency include return on investment, profit per dollar of sales, and output per hour of labor.

We can also look at productivity from the perspective of the individual employee. Take the cases of Mike and Al, who are both long-distance truckers. If Mike is supposed to haul his loaded rig from New York to Los Angeles in 75 hours or less, he is effective if he makes the 3,000 mile trip within that time period. But measures of productivity must take into account the costs incurred in reaching the goal. That’s where efficiency comes in. Let’s assume that Mike made the New York to Los Angeles run in 68 hours and averaged 7 miles per gallon. Al, however made the trip in 68 hours also but averaged 9 miles per gallon (rigs and loads are identical). Both Mike and Al were effective – they accomplished their goal – but Al was more efficient than Mike because his rig consumed less gas and therefore, he achieved his goal at a lower cost.

Organizations in service industries need to include attention to customer needs and requirements in assessing their effectiveness. Because, in these types of businesses there is a clear chain of cause-and-effect running from employee attitudes and behavior to customer attitudes and behavior to an organization’s productivity. Sears in fact, has carefully documented this chain. The company’s management found that a 5 percent improvement in employee attitudes lead to a 1.3 percent increase in customer satisfaction, which in turn translated into a 0.5 percent improvement in revenue growth. More specifically, Sears found that by training employees to improve the employee customer interaction, it was able to improve customers satisfaction by 4 percent over a twelve month period, which generated an estimated $200 million in additional revenues.

In summary, one of OB’s major concerns is productivity. We want to know what factors will influence the effectiveness and efficiency of individuals, of groups, and of the overall organization. OB can take action by inducing suitable training to employees to achieve the productivity.

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