What is Organizational Behavior and why is it important?

John L. Cotton is a Professor of Management and Director of the Executive MBA Program in the College of Business Administration at Marquette University. He received his Ph.D. from the University of Iowa, and has taught at the University of Iowa, Iowa State University, Purdue University, and Marquette. Dr. Cotton's primary interests are in Organizational Behavior, specifically employee involvement, leadership, the sociology of academic knowledge, and the mentoring of employees. He has published numerous articles, chapters, and a book on these topics. In addition, Dr. Cotton has conducted training and executive development with General Motors, the United Auto Workers, General Electric, Blue Cross/Blue Shield, and the Farm Bureau. He has consulted with the Veterans Administration, General Electric, AT&T, and other organizations. Dr. Cotton is a member of the Academy of Management, the American Psychological Society, and the Society of Industrial/Organizational Psychologists.

Why are some companies so successful, while other firms in the same industry, offering the same services or products, fail? (Why does one fast-food restaurant get your order right, serve you excellent food, and do it promptly, while the next one makes you wait for a messed up order and cold food?) The answer is having the right people in the right jobs, motivated to perform well, and led by people they like and respect. The answer is: Organizational Behavior.

Organizational Behavior is the examination of why people behave the way they do in organizations, whether those organizations are businesses, not-for-profits, athletic teams, volunteer organizations, clubs – any organization. One way to think of Organizational Behavior is that it is psychology (as well as sociology and anthropology) applied to how people work.

Organizational Behavior examines how individuals operate in organizations from different lenses. The lens of personality sheds light on why people act differently in similar situations. The lenses of perception and diversity shed light on the ways multiple perspectives can make organizations more effective. The lens of motivation sheds light on the ways money and benefits, a sense of accomplishment, a belief in contributing to a greater goal can help guide people’s efforts. A health and wellness lens sheds light on the ways a job influences stress and happiness.

Organizational Behavior also examines how groups function within organizations. What makes one team loyal and productive, while another team struggles with strife and ineffectiveness? Leadership, how someone can get a group (or an organization) to move toward a common goal, is certainly part of this, as is decision making. Power and conflict are also part of the group dynamics of an organization. Although they may have unsavory images, both are valuable and necessary for organizations when used effectively.

Finally, Organizational Behavior studies issues at the organizational level, including organizational culture, the unwritten rules, values and ethical principles that guide people in organizations. It examines issues of organizational structure and design, such as the way an organizational chart (who reports to whom) impacts the way people behave. It also examines issues related to organizational change, such as how organizations respond to unforeseen events (like a pandemic). Does the organization adapt and become stronger, or does it resist making changes and fail?

Over the past 100 years organizations have worked to maximize their operations, trying to find the most efficient means of production, most effective use of capital, most productive use of marketing, etc. However, organizations have spent much less attention on people, on making their human resources more effective. Most managers believe that they are good at managing people, yet a majority of employees feel their bosses are ineffective. 84% of American workers say poorly trained people managers create a lot of unnecessary work and stress and 57% of American workers say managers in their workplace could benefit from training on how to be a better people manager.¹ What is the number one reason that people quit? Their boss.²

Better use of people resources (through the application of Organizational Behavior in the workplace) can provide a competitive advantage for organizations. Research demonstrates that organizations that manage their people better are more successful. Organizations that make “Best Companies to Work For” lists outperform other companies in terms of profits and stock prices.

Organizational Behavior is important because how a firm is managed provides it with something that distinguishes it from other organizations. Organizations, (especially large companies) all have access to capital markets (i.e., money), to marketing, to supply chains, to new ideas and services. What determines why one company becomes a billion-dollar company while another fails? Often, how well it is managed, how well it is run. In other words: Organizational Behavior.

Organizational Behavior is not only important for organizations, it is also critical for you as an employee or manager. Studies show that managing people effectively predicts success in organizations. A study of managers who failed at AT&T revealed that more than 95% of the failures were due to poor people skills. Most of these managers lacked the ability to empathize with the problems of their co-workers, or to effectively navigate conflicts that arose. Most people do not lose their jobs because they don’t know enough marketing, finance or accounting. People are more likely to be fired because they annoy their boss, are not liked by their co-workers or are viewed as “difficult.” These are all Organizational Behavior management issues.

Everyone learns about Organizational Behavior through their life experiences. Some people are better at applying this lifelong learning, at developing emotional intelligence by which they understand and interact with others. The purpose of studying Organizational Behavior is to speed up that wisdom. Instead of learning through (sometimes) painful experiences, you can get a head start. By studying Organizational Behavior management you can glean concepts, theories and data to inform your experiences so that you can be a more effective team member or manager, or organizational leader.

Herb Kelleher, the founder of Southwest Airlines, was fond of saying, “The business of business is people.” In other words, the business of business is Organizational Behavior.