Organizational Behavior (OB) can be defined as the understanding, prediction and management of human behavior both individually or in a group that occur within an organization.

Internal and external perspectives are the two theories of how organizational behavior can be viewed from an organization’s point of view. In this tutorial, we will be learning in detail about both the theories.

Importance of OB

While working in an organization, it is very important to understand others behavior as well as make others understand ours. In order to maintain a healthy working environment, we need to adapt to the environment and understand the goals we need to achieve. This can be done easily if we understand the importance of OB.

Following points bring out the importance of OB −

  • It helps in explaining the interpersonal relationships employees share with each other as well as with their higher and lower subordinates.
  • The prediction of individual behavior can be explained.
  • It balances the cordial relationship in an enterprise by maintaining effective communication.
  • It assists in marketing.
  • It helps managers to encourage their sub-ordinates.
  • Any change within the organization can be made easier.
  • It helps in predicting human behavior & their application to achieve organizational goals.
  • It helps in making the organization more effective.

Thus studying organizational behavior helps in recognizing the patterns of human behavior and in turn throw light on how these patterns profoundly influence the performance of an organization.

There are three major factors that affect OB. The working environment being the base for all three factors, they are also known as the determinants of OB. The three determinants are −

  • People
  • Structure
  • Technology


An organization consists of people with different traits, personality, skills, qualities, interests, background, beliefs, values and intelligence. In order to maintain a healthy environment, all the employees should be treated equally and be judged according to their work and other aspects that affects the firm.

Example − A company offers campus placement to trainees from different states like Orissa, Haryana, Arunachal Pradesh and many more. However, during and after training, all trainees are examined only on the basis of their performance in the tasks assigned.

Organizational Structure

Structure is the layout design of an organization. It is the construction and arrangement of relationships, strategies according to the organizational goal.

Example − Organizational structure defines the relation of a manager with employees and co-workers.


Technology can be defined as the implementation of scientific knowledge for practical usage. It also provides the resources required by the people that affect their work and task performance in the right direction.

Example − Introduction of SAP, big data and other software in the market determines individual and organizational performance.


All companies function within a given internal and external environment. Internal environment can be defined as the conditions, factors, and elements within an enterprise that influences the activities, choices made by the firm, and especially the behavior of the employees. While external environment can be defined as outside factors that affect the company’s ability to operate. Some of them can be manipulated by the company’s marketing, while others require the company to make adjustments.

Some examples of internal environment include employee morale, culture changes, financial changes or issues, and some examples of external environment include political factors, changes to the economy and the company itself.

The concept of OB is based on two key elements namely −

  • Nature of people
  • Nature of the organization

Nature of People

In simple words, nature of people is the basic qualities of a person, or the character that personifies an individual they can be similar or unique. Talking at the organizational level, some major factors affecting the nature of people have been highlighted. They are −

  • Individual Difference − It is the managerial approach towards each employee individually, that is one-on-one approach and not the statistical approach, that is, avoidance of single rule. Example− Manager should not be biased towards any particular employee rather should treat them equally and try not to judge anyone on any other factor apart from their work.
  • Perception − It is a unique ability to observe, listen and conclude something. It is believing in our senses. In short, the way we interpret things and have our point of view is our perception. Example − Aman thinks late night parties spoil youth while Anamika thinks late night parties are a way of making new friends. Here we see both Aman and Anamika have different perception about the same thing.
  • A whole person − As we all know that a person’s skill or brain cannot be employed we have to employee a whole person. Skill comes from background and knowledge. Our personal life cannot be totally separated from our work life, just like emotional conditions are not separable from physical conditions. So, people function is the functioning of a total human being not a specific feature of human being.
  • Motivated behavior − It is the behavior implanted or caused by some motivation from some person, group or even a situation. In an organization, we can see two different types of motivated employees −
    • Positive motivation − Encouraging others to change their behavior or say complete a task by luring them with promotions or any other profits. Example − “If you complete this, you will gain this.”
    • Negative motivation − Forcing or warning others to change their behavior else there can be serious consequences. Example − “If you don’t complete this, you will be deprived from the office.”
  • Value of person − Employees want to be valued and appreciated for their skills and abilities followed by opportunities which help them develop themselves.

Nature of Organization

Nature of organization states the motive of the firm. It is the opportunities it provides in the global market. It also defines the employees’ standard; in short, it defines the character of the company by acting as a mirror reflection of the company. We can understand the nature of any firm with its social system, the mutual interest it shares and the work ethics.

Let us take a quick look at all these factors −

  • Social system − Every organization socializes with other firms, their customers, or simply the outer world, and all of its employees – their own social roles and status. Their behavior is mainly influenced by their group as well as individual drives. Social system are of two types namely −
    • Formal − Groups formed by people working together in a firm or people that belong to the same club is considered as formal social systemExample − A success party after getting a project.
    • Informal − A group of friends, people socializing with others freely, enjoying, partying or chilling. Example − Birthday party.
  • Mutual interest − Every organization needs people and people need organizations to survive and prosper. Basically it’s a mutual understanding between the organization and the employees that helps both reach their respective objectives. Example − We deposit our money in the bank, in return the bank gives us loan, interest, etc.
  • Ethics − They are the moral principles of an individual, group, and organization. In order to attract and keep valuable employees, ethical treatment is necessary and some moral standards need to be set. In fact, companies are now establishing code of ethics training reward for notable ethical behavior.

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Inter-individual Behavior

It is the study conducted through communication between the employees among themselves as well as their subordinates, understanding people’s leadership qualities, group dynamics, group conflicts, power and politics.

Example − A meeting to decide list of new board members.

Group Behavior

Group behavior studies the formation of organization, structure of organization and effectiveness of organization. The group efforts made towards the achievement of organization’s goal is group behavior. In short, it is the way how a group behaves.

Example − Strike, rally etc.

Functions of a manager are the various roles played by the manager in an organization. A manager is accountable for all the happenings in the firm and is answerable to the management. The seven major roles played by the manager are −

  • Planning
  • Organizing
  • Staffing
  • Directing/leading
  • Coordinating
  • Reporting
  • Budgeting
  • Controlling

Roles of a Manager

Now, let us see what exactly are these roles and their importance. Starting with the first role.

  • Planning − The basic step required for any project, big or small, is the planning stage. The manager needs to plan the schedule and give the blueprint of how the task is to be done with all the necessary details, and also the manager should have a backup plan that if this doesn’t work then what next. Example − There is a new project, how to start, human resource required, resources required, etc., everything should be planned.
  • Organizing − Next comes the organizing part, where the manager needs to synchronize and have to make sure everything is going according to the plan. Everything should work as per the plan, and if not then the manager needs to look into the issue and make it work as planned. Example − A software tester is required, so organize the venue, date and time to interview those eligible for the post.
  • Staffing − In simple words, staffing means grouping of people into different teams and allotting different tasks to them. If the team members have some disputes then the team member needs to report to the team leader who will forward it to the manager and the issue will be taken care of. Example − Assembling a new team for a new project.
  • Directing/Leading − It is a manager’s responsibility to guide the employees in all situations in order to avoid conflicts and delay in the task. Manager has to lead the employees so that they can get a clear idea about what is to be done and how to do it. Example − a team needs a team leader to look after each task that is accomplished, in-process, or aborted.
  • Coordinating − It means bringing all the employees together by forming an efficient relationship and making them feel comfortable to share their views and issues freely. Example − Coordinating the schedule for a project.
  • Reporting − The manager has to keep updated information about all the ongoing tasks, and it is the sole responsibility of the manager to report the updated status to the higher authorities; while all the employees are bound to report to the manager. Example − Keeping the respective directors informed about the progress on their respective projects.
  • Budgeting − A task has to be completed within the given time frame as well as it should be cost efficient. The manager needs to be double sure that all the amount invested in the project doesn’t exceed the budget given and in case of imbalance, the budgeting manager has to report to the management. Example − If budget allows to place three employees then five employees cannot be assigned for the task.
  • Controlling − Last but of course not the least role played by the manager is having everything under control. Whether it is the budget, or resource allocation, everything should be in order. Example − All members of a team cannot be granted leave on the same day, as it affects work delivery.

Various Challenges of a Manager

We have seen the different roles a manager as to play in order to maintain the workflow balance in an organization. With all these responsibilities, there are some tough challenges a manager has to deal with while trying to balance everything. Following are some challenges a manager has to deal with −

  • Managing workforce diversity − Manager shouldn’t create or encourage discrimination among employees. Employees from different background, culture, and ethnicity should be treated as equal and rewards should be given only on the basis of work.
  • Improving quality and productivity − It is the sole responsibility of the manager to increase the productivity without hampering the quality. It can be done in two ways −
    • Totally quality management − That is constant focus on customer satisfaction by improving organizational process.
    • Process of engineering − Focusing on the manufacturing of the product, so that the quality is not compromised.
  • Responding to labor storage − If there is a labor shortage then the manager should quickly respond to solve this problem by arranging for the workforce required so that the product delivery is not delayed.
  • Eradication of labor shortage − The manager needs to take quick action, if there is a labor shortage and should assure with backup plans so that there is no labor shortage in future.
  • Improving customer service − Manager faces the challenge to constantly improve customer service to survive in an ever-competitive environment.
  • Improving ethical behavior − Managers should make sure that the employees behave properly and maintain the decorum of the company. These are few major challenges a manager faces while trying to complete a project. To maintain work-life balance and for the betterment of the organization, the manager should try level best to resolve these challenges.

Organizational behavior reflects the behavior of the people and management all together, it is considered as field study not just a discipline. A discipline is an accepted science that is based upon theoretical foundation, whereas OB is an inter-disciplinary approach where knowledge from different disciplines like psychology, sociology, anthropology, etc. are included. It is used to solve organizational problems, especially those related to human beings.

There are four different types of models in OB. We will throw some light on each of these four models.

Autocratic Model

The root level of this model is power with a managerial orientation of authority. The employees in this model are oriented towards obedience and discipline. They are dependent on their boss. The employee requirement that is met is subsistence. The performance result is less.

The major drawbacks of this model are people are easily frustrated, insecurity, dependency on the superiors, minimum performance because of minimum wage.

Custodial Model

The root level of this model is economic resources with a managerial orientation of money. The employees in this model are oriented towards security and benefits provided to them. They are dependent on the organization. The employee requirement that is met is security.

This model is adapted by firms having high resources as the name suggest. It is dependent on economic resources. This approach directs to depend on firm rather than on manager or boss. They give passive cooperation as they are satisfied but not strongly encouraged.

Supportive Model

The root level of this model is leadership with a managerial orientation of support. The employees in this model are oriented towards their job performance and participation. The employee requirement that is met is status and recognition. The performance result is awakened drives.

This model is dependent on leadership strive. It gives a climate to help employees grow and accomplish the job in the interest of the organization. Management job is to assist the employee’s job performance. Employees feel a sense of participation.

Collegial Model

The root level of this model is partnership with a managerial orientation of teamwork. The employees in this model are oriented towards responsible behavior and self-discipline. The employee requirement that is met is self-actualization. The performance result is moderate zeal.

This is an extension of supportive model. The team work approach is adapted for this model. Self-discipline is maintained. Workers feel an obligation to uphold quality standard for the better image of the company. A sense of “accept” and “respect” is seen.