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Chapter 1 Organizational Behavior and Management Increasing Responsiveness to Customers 21 Because organizations compete for customers, training workers to be responsive to customer needs is important for all organizations but particularly for service organizations. Organizations such as retail stores, banks, and hospitals depend entirely on their employees’ performing behaviors that result in high-quality service at reasonable cost. As the United States has moved to a service-based economy (in part because of the loss of manufacturing jobs abroad), managing behavior in service organizations has become an increasingly important area of study. 24 Reengineering A complete rethinking and redesign of business processes to increase efficiency, quality, innovation, or responsiveness to customers. Restructuring Altering an organization’s structure by such actions as eliminating a department. Outsourcing Acquiring goods or services from sources outside the organization. Freelancers Independent individuals who contract with an organization to perform specific services. New Ways to Increase Performance Investing in employee skills and abilities to increase organizational performance is not the only way U.S corporations have responded to an increasingly competitive global environment. To reduce costs and increase efficiency, some companies have responded by reengineering and restructuring their organizations. Reengineering involves a complete rethinking and redesign of business processes to increase efficiency, quality, innovation, or responsiveness to customers. A company that engages in reengineering examines the business processes it uses to produce goods and services (such as the way it organizes its manufacturing, sales, or inventory), and the way its business processes interact and overlap, to see whether a better way of performing a task can be found. 25 Today, the use of new information technology plays a major part in most reengineering efforts. 26 A company that engages in restructuring makes a major change in an organization’s structure, such as eliminating a department or reducing the number of layers of management, to streamline the organization’s operations and reduce costs. Restructuring and reengineering often result in many workers’ being laid off. The smaller workforces that remain are retrained to increase efficiency; once again using new information technology, they learn how to perform at a higher level, and they learn new skills. Organizational behavior researchers have been interested in the effects of layoffs not only on workers who lose their jobs but also on employees who remain in the organization. General Motors and IBM are among the organizations that have laid off hundreds of thousands of employees in their efforts to increase organizational performance. To reduce costs, many organizations do not rehire laid-off workers as full-time employees even when demand for their products picks up; instead, they employ parttime workers, who can be given lower wages and fewer benefits. It has been estimated that 20 percent of the U.S workforce today consists of part-time employees who work by the day, week, month, or even year for their former employers. Parttime workers pose a new challenge for managers’ human skills because part-time workers cannot be motivated by the prospect of rewards such as job security, promotion, or a career within an organization. Organizations are also engaging in an increasing amount of outsourcing. Many organizational tasks are performed not within the organization but on the outside, by freelancers. Freelancers are independent individuals who contract with an organization to perform specific services; they often work from their homes and are connected to an organization by computer, phone, fax, and express package delivery. Because freelancing is expected to increase as organizations outsource more and more of their tasks to reduce costs, managers will face new kinds of problems in their efforts to manage organizational behavior. Reengineering, restructuring, downsizing, hiring part-time workers, and outsourcing are just a few of the many new ways in which organizations are utilizing human resources to reduce costs and compete effectively against domestic and global competi-
22 Chapter 1 Organizational Behavior and Management tors. Several organizational behavior researchers believe that organizations in the future will increasingly become composed of a “core” of organizational workers who are highly trained and rewarded by an organization and a “periphery” of part-time or freelance workers who are employed when needed but will never become true “organizational employees.” In the years ahead, managing an organization’s human resources to increase performance will be a continuing challenge. The way in which John Deere has been meeting this challenge over the last decade is instructive. (See Insight 1.4.) INSIGHT C O M P E T I T I V E A1.4 D V A N T A G E JOHN DEERE FINDS NEW USES FOR ITS EMPLOYEES Pictured is a John Deere production worker who is taking on the role of a salesperson and talking to farmers about the innovations in a new John Deere tractor model at one of the many trade shows that Deere attends to display its products. In the early 1990s, John Deere was losing millions of dollars; by 1994, its profits exceeded $400 million and have been increasing since. 27 How has Deere’s startling turnaround been achieved? According to CEO Hans W. Becherer, Deere has taken advantage of the skills and capabilities of its workers to increase efficiency and raise quality. Many of Deere’s problems stemmed from a competitive environment. Caterpillar and Komatsu were ruthlessly cutting prices to battle with Deere for a share of the dwindling agricultural machinery market. To survive, Deere was forced to downsize. After laying off managers and employees, Deere realized it had to find a way to make better use of the skills of the employees who remained. Deere undertook to teach its manufacturing workers new skills. It installed sophisticated, computerized production-line technology and trained workers to operate it. Deere also sought to improve its manufacturing by grouping workers into teams whose goal included finding new ways to reduce costs and increase quality. 28 Deere was not content merely with improving workers’ skills in manufacturing; it also began to teach them new skills that would help them to find ways to increase efficiency and improve performance. For example, Deere realized that manufacturing workers, with their detailed knowledge about how Deere products work, could become persuasive salespeople. Groups of production workers were given training in sales techniques and were sent to visit Deere customers to explain to them how to operate and service the organization’s new products. While speaking with customers, these new “salespeople” were able to collect information that will help Deere further reduce costs and develop new products that will appeal to customers. The new sales jobs are temporary. Workers go on assignment but then return to the production line, where they use their new knowledge to find ways to improve efficiency and quality. These moves to empower employees have been so successful that Deere negotiated a new agreement with its workers, which specifies that pay increases will be based on workers’ learning new skills and completing college courses in areas such as computer programming that will help the company increase efficiency and quality.
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