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Chapter 1

A Strategic Approach
To Organizational

Michael A. Hitt
C. Chet Miller
Adrienne Colella

Slides by R. Dennis Middlemist

Knowledge Objectives

1. Define organizational behavior and explain the

strategic approach to OB.
2. Provide a formal definition of organization.
3. Describe the nature of human capital.
4. Discuss the conditions under which human capital is a
source of competitive advantage for an organization.
5. Explain the five characteristics of high-involvement
management and the importance of this approach to
Basic Elements of Strategic
Organizational Behavior

 Organizational behavior
– The actions of individuals and groups in an organizational
 Managing organizational behavior
– Actions focused on acquiring, developing, and applying the
knowledge and skills of people.
 Strategic approach to OB
– An approach that involves organizing and managing the
people’s knowledge and skills effectively to implement the
organization’s strategy and gain a competitive advantage.
Factors and Outcomes of Strategic Approach
Organizational Factors
(culture, work
environments, adaptability

Organizational Success

Satisfaction of Productivity of
Individuals and Individuals and
Groups Groups

Interpersonal Factors
Individual Factors (learning (leadership, communication,
ability, personality, values, decision-making skill, intra-
motivation, stress) and inter-group dynamics,

Adapted from: Exhibit 1.1 Factors and Outcomes of a Strategic Approach to Organizational Behavior
Strategic OB Lens
Organization Activities Required Skills
Senior • Talk with insiders and • Conceptualizing
Managers outsiders about • Communicating
• Vision • Understanding the
• Strategy perspectives of others
• Other major issues
• Help middle managers • Listening
• Define and redefine • Conflict management
their roles • Negotiating
• Manage conflict • Motivating
• Create and maintain • Interpersonal influence
the organization’s
Strategic OB Lens
Organization Activities Required Skills
Middle • Champion strategic • Networking
Managers ideas • Communicating
• Help firm to remain • Influencing
• Process data and • Analyzing
information for use by • Communicating
other individuals
• Deliver strategic • Communicating
initiatives to lower- • Motivating
level managers • Understanding values
• Managing stress
Strategic OB Lens
Organization Activities Required Skills
Lower-level • Coaching firm’s • Teaching
Managers associates (workers) • Listening
• Understanding personalities
• Managing stress
• Removing obstacles • Negotiating
for associates • Influencing others
• Deal with personal • Counseling
problems of associates • Understanding personalities
• Design jobs, team • Negotiating
structures, and reward • Group dynamics
Foundations of Strategic OB
 Behavioral science disciplines
– Psychology
– Social psychology
– Sociology
– Economics
– Cultural anthropology
 Strategic approach integrates knowledge from all these
 Strategic approach focuses on behaviors and
processes that help to create competitive advantages
and financial success (goal is to improve the outcomes
of organizations)
Common Features of Organizations

 Network of individuals
 System
 Coordinated activities
 Division of labor
 Goal orientation
 Continuity over time, regardless of change in
individual membership
Human Capital and Competitive

 Human capital: The sum of the skills,

knowledge, and general attributes of the
people in an organization
 Competitive advantage: An advantage enjoyed
by an organization that can perform some
aspect of its work better than competitors or in
a way that competitors cannot duplicate such
that it offers products/services that are more
valuable to customers
Human Capital as Source of
Competitive Advantage


Human Capital Human Capital

Value Imitability
Associates are capable Skills and talents of
of performing the Human Capital associates cannot be
basic work of the Rareness copied by other
organization Skills and talents of organizations
associates are unique
in the industry
Human Capital as Source of
Competitive Advantage
Are human resources in the firm . . .
Supported by
Difficult to effective Competitive
Valuable Rare imitate management implications Performance
No Disadvantage Below Normal

Yes No Competitive Parity Normal

Yes Yes No Advantage Above Normal
Yes Yes Yes Advantage Above Normal
Exhibit 1.2 Human Capital and Competitive Advantage
Source: Adapted from J. Barney and P. Wright, “On Becoming a Strategic Partner,” Human Resource Management 37 (1999): 31–46.
Dimensions of
High-Involvement Management
Exhibit 1.3 Dimensions of High-Involvement Management
Aspect Description

Selective Hiring Large pools of applicants are built through advertising, word of
mouth, and internal recommendations. Applicants are evaluated
rigorously using multiple interviews, tests, and other selection tools.
Applicants are selected on the basis of not only skills but also fit with
culture and mission.
Extensive Training New associates and managers are thoroughly trained for job skills
through dedicated training exercises as well as on-the-job training.
They also participate in structured discussions of culture and mission.
Existing associates and managers are expected or required to
enhance their skills each year through in-house or outside training
and development. Often, existing associates and managers are
rotated into different jobs for the purpose of acquiring additional skills.

Exhibit 1.3 Dimensions of High-Involvement Management

Dimensions of
High-Involvement Management
Exhibit 1.3 Dimensions of High-Involvement Management
Aspect Description

Decision Power Associates are given authority to make decisions affecting their work
and performance. Associates handle only those issues about which
they have proper knowledge. Lower-level managers shift from closely
supervising work to coaching associates. In addition to having
authority to make certain decisions, associates participate in
decisions made by lower-level and even middle managers.
Information Sharing Associates are given information concerning a broad variety of
operational and strategic issues. Information is provided through
bulletin boards, company intranets, meetings, posted performance
displays, and newsletters.
Incentive Associates are compensated partly on the basis of performance.
Compensation Individual performance, team performance, and business
performance all may be considered.

Exhibit 1.3 Dimensions of High-Involvement Management

High-Involvement Managers

High-involvement managers:
 Identify situations in which responsibility can be
 Manage through encouragement and commitment
rather than fear and threats
 Respect and value each associate’s skills and
 Empower people in ways that are consistent with their
uniqueness as individuals
 Invest effort in building and maintaining trust
Managing Organizational Behavior

Exhibit 1.4 Managing Organizational

Behavior for Competitive Advantage