Essentials of Risk Management.

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 apus.campusguides.com/content.php.

Assignment Rubric

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

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Chapter 1

Introduction to Organizational Behavior

History, Trends, and Ethics

LEARNING OUTCOMES

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.

—Anonymous

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.)

FIGURE 1.1 LEVELS OF ANALYSIS IN ORGANIZATIONAL BEHAVIOR

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?

SELF-ASSESSMENT 1.1

THE TELLER DILEMMA

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

FIGURE 1.2 THE SOCIAL SCIENCES THAT CONTRIBUTE TO OB

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).

TABLE 1.1 WHAT DO MANAGERS DO?

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

TABLE 1.2 CHARACTERISTICS OF MANAGERS’ JOBS

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 refl