Manajemen | Fakultas Ekonomi Universitas Maritim Raja Ali Haji joeb.82.6.349-356
Journal of Education for Business
ISSN: 0883-2323 (Print) 1940-3356 (Online) Journal homepage: http://www.tandfonline.com/loi/vjeb20
Organizational Behavior: Where Does It Fit in
Today's Management Curriculum?
Robert P. Singh & Allen G. Schick
To cite this article: Robert P. Singh & Allen G. Schick (2007) Organizational Behavior: Where
Does It Fit in Today's Management Curriculum?, Journal of Education for Business, 82:6,
349-356, DOI: 10.3200/JOEB.82.6.349-356
To link to this article: http://dx.doi.org/10.3200/JOEB.82.6.349-356
Published online: 07 Aug 2010.
Submit your article to this journal
Article views: 65
View related articles
Citing articles: 1 View citing articles
Full Terms & Conditions of access and use can be found at
http://www.tandfonline.com/action/journalInformation?journalCode=vjeb20
Download by: [Universitas Maritim Raja Ali Haji]
Date: 11 January 2016, At: 23:30
VIEWPOINT
Downloaded by [Universitas Maritim Raja Ali Haji] at 23:30 11 January 2016
OrganizationalBehavior:WhereDoesItFit
inToday’sManagementCurriculum?
ROBERTP.SINGH
ALLENG.SCHICK
MORGANSTATEUNIVERSITY
BALTIMORE,MARYLAND
ABSTRACT. Maximizingshareholder
valueisthedominantgoalthatinfluences
managementdecisionmakinginbusiness
practice.Thisgoal—withrapidimprovementsintechnology,changesincapital
markets,andglobalcompetition—has
alteredemploymentrelationsbetween
workersandtopexecutives.Theauthors’
purposeinthisarticlewastosharethoughts
andconcernsaboutthevalueandrelative
importanceoforganizationalbehaviortheoryincurrentbusinessschoolcurriculaand
toofferrecommendationsforthefuture.
Keywords:businessschoolcurricula,
management,organizationalbehavior
Copyright©2007HeldrefPublications
G
R
hoshal (2005) questioned and
admonished academia for its
roleinestablishingthemaximizationof
shareholdervalueastheprimarygoalof
business executives and managers. He
explicitlylamentedthat“bypropagating
ideologically inspired amoral theories,
businessschoolshaveactivelyfreedtheir
studentsfromanysenseofmoralresponsibility” (p. 76). This, in his view, has
contributed to the corporate scandals,
unethical business practices, and mistreatmentofemployeesthatarecommon
intoday’sbusinessworld.
Ghoshal’s (2005) major arguments
were that (a) maximization of shareholder value is not an appropriate goal
for managers to pursue and (b) that
academia has played a major part in
theestablishmentofthatgoal.Thefirst
argument is a philosophical issue that
reasonable people may disagree about
onthebasisoftheirpersonalideologies
andacademictraining.Forthisreason,
we doubt that consensus can be establishedwithinacademiaaboutthevalue
ofthatgoal.
We also agree with Gapper (2005),
Kantor (2005), and Mintzberg (2005)
that Ghoshal overstated the power that
academiahashadinestablishingshareholder value maximization as the goal
of today’s top management teams. We
arguethattheforcesofcapitalism,great
technological advances, the changing
nature of capital markets, and rising
global competition have had far more
to do with the establishment of what
Ghoshal viewed as a flawed goal than
hasacademia.Nevertheless,webelieve
thatGhoshal’sworkopenedthedoorfor
serious discussions about management
educationandcurriculum.
Academics may differ on how and
why the maximization of shareholder
value has become the goal of most
firmstoday,buttheseissuesmaynotbe
asimportantastheeffectsofthatgoal
on management education. Whether
oneacceptsorrejectsGhoshal’s(2005)
two major aforementioned arguments,
maximization of shareholder value is
thedrivingforcebehindmostmanagement decision making in firms today.
Although some organizations may
choosetopursuealtruisticnonfinancial
goals (e.g., nonprofit organizations,
government bureaucracies, and some
smallerentrepreneurialventureswhose
foundersarenotfinanciallymotivated),
most executives, managers, and entrepreneurs are measured by the firm’s
bottom-line performance in growing
profits and shareholder value. This
measurement results in decision making that is consistent with improving
thebottomline(Beatty&Zajac,1994).
Ifresearchersacceptthatmaximization
of shareholder value is the dominant
goalinfluencingmanagementdecision
making in business practice, then we
can have a lively debate about how
July/August2007
349
Downloaded by [Universitas Maritim Raja Ali Haji] at 23:30 11 January 2016
this goal affects management educationandcurricula.
As professors who teach organizational behavior (OB) at the levels
of undergraduate, master of business
administration (MBA), and PhD, we
have struggled increasingly with the
relevance of major OB constructs in
the context of today’s common management practices and executive compensation and reward structures. Certainly, OB is a core course for most
established management programs.
ButasRynesandTrank(1999)pointed
out, behavioral sciences struggle for
credibility in business schools. Still,
most management students are familiar with classic theories such as the
HawthorneEffect(Mayo,1945;Roethlisberger&Dickson,1939),Maslow’s
(1954) hierarchy of needs, Herzberg’s
(1966) theories on motivation, and
McGregor’s (1960) Theory X and
TheoryY personality types. However,
capstone strategic management cases
and class discussion rarely focus on
theseorotherOBtheories.Whenthey
do,thetheoriesdonottrumpprofitand
financial considerations. As Whetten
(1989)pointedout,oneofthetestsof
goodtheoryistopassthe“Sowhat?”
test. In light of Ghoshal’s (2005)
discussion about maximizing shareholder value and executives’ behavior
today and about how little impact OB
apparently has within most capstone
strategic management courses, it is
unclear what contribution OB makes
tobusinesseducation.RynesandTrank
(1999) provided a good discussion of
the diminished importance of OB to
businesscurricula.
The findings of Pfeffer and Fong
(2002)raisedaredflagaboutthevalue
ofMBAcurricula.Consistentwiththeir
viewisarecentlypublishedarticleshowing that MBA applications have fallen
by 30% since 1998 at the nation’s toprankedbusinessschools(Merritt,2005).
There also has been discussion about
a new “professional services model”
(Armstrong, 2003, p. 371) for business
students to better serve their needs (see
Ferris, 2002, 2003). In addition, traditionaluniversitiesandbusinessprograms
arefacingincreasingpressureasaresult
oftherapidgrowthofthefor-profitcollegeindustry(Hechinger,2005).
350
JournalofEducationforBusiness
Allofthesefactorscontributetoour
contentionthatitistimeformanagement
academicstohaveanopen,candid,and
critical dialogue about core business
curricula. To this end, our purpose in
thisarticletosharesomethoughtsabout
thevalueandrelativeimportanceofOB
withintoday’sbusinessschoolcurricula
andtoofferdirectionsforthefuture.
OBProfessorsOftenTeach
ContextFree
One can trace the roots of OB back
to the emergence of the human relations school and the writings of Elton
Mayo.Mayo(1945)railedagainstwhat
heviewedastheevilsofTaylorismand
industrialization.Headvocatedapreindustrial mindset that focused on social
cohesionintheworkplace(seeGuillén,
1994;Scott,2003;Trahair,1984).InOB
textbooksandclassestoday,authorsand
professors still often cite and discuss
Mayo’s interpretation of the research
conductedbyRoethlisbergerandDickson(1939)attheHawthorneplantofthe
WesternElectricCompany.
Economic forces and business, however, have changed dramatically over
thelast60years.TheInternetandwidespread out-sourcing did not exist, and
institutional investors and global competitors did not have the power that
they do today. Just as Ghoshal (2005)
neglectedtodiscussmacroenvironmental factors, which have led business
leadersandacademiccurriculatofocus
on maximizing shareholder value, so
too has OB failed to keep up with the
macroenvironmental changes. These
changes have greatly diminished the
practicalvalueofclassicOBconstructs
andtheory.Wearguethatsuchconcepts
astheHawthorneEffectandTheoryX
and TheoryY little influence the decision making of today’s executives,
because of the broader goal of maximizingshareholdervalue.Thegrowing
power of institutional investors (Bennett, Sias, & Starks, 2003; Schwartz
& Shapiro, 1992), algorithmic equity
trading (Friedlander, 2005), globalization, and technological advances are
changing the economic landscape and
furthersupportingandstrengtheningthe
desireofbusinessestomaximizeshareholdervalue.
Kantor (2005) briefly mentioned the
growingpowerofinstitutionalinvestors
in her response to Ghoshal (2005).We
expandonithere.Institutionalinvestors
areentitieswithlargeamountsofcapital
toinvest,suchasinsurancecompanies,
investment firms, mutual funds, and
pension funds. Institutional investors
now dominate trading volume on the
majorfinancialmarkets(e.g.,NewYork
Stock Exchange, NASDAQ), accountingforasmuchas70%oftradingvolume(Schwartz&Shapiro,1992).These
entitiesarenowtheprimaryholdersof
equity in the United States, and their
growthhasbeenastounding.
In1999,institutionalinvestorsaccountedformorethan50%oftotalU.S.equity
ownership,upfrom7%in1950and28%
in 1970 (Bennett, Sias, & Starks, 2003).
In addition, a growing trend in the use
ofalgorithmictradingisdeveloping,primarily driven by institutional investors.
Algorithmic trading accounted for 25%
of all equities trading volume in 2003.
Friedlander (2005) estimated it as growingby150%peryearfrom2004to2006.
Although we are not familiar with the
specificmathematicalmodelsthatmutual
funds, investment banks, and other institutional investors use, we are confident
thatthemodelsdonottakeintoaccount
employeesatisfaction,motivation,orother
common OB constructs. These models
arelikelytiedtotheincreaseordecrease
in financial performance and the rate of
change of firms relative to their respective industries. These changes have concentrated capital, equity, and power into
fewer hands and have put further pressureontopexecutivestoachievesuperior
financialperformance.
Firmperformanceisgreatlyaffected
by the resources and capabilities that
the firm mobilized (Castrogiovanni,
1991; Chandler & Hanks, 1993; Tushman &Anderson, 1986). For example,
today’s information technologies have
greatly improved organizations’ abilitiestoaccessandmanageresourcesand
capabilitiesaroundtheworld.Theliteratureisfullofexamplesthatsupportthe
notion that companies adopting newer
technologies are more likely to enjoy
the advantages of such technologies,
whichcancreatesignificantcompetitive
advantages (e.g., Brown & Eisenhardt,
1995; Cooper & Kleinschmidt, 1987;
Downloaded by [Universitas Maritim Raja Ali Haji] at 23:30 11 January 2016
Hammer & Champy, 1993; Lawless &
Anderson,1996).
There can be no question that powerful and ever more affordable information technologies have altered the
competitive landscape by increasing
efficiency and allowing global communications. This has allowed capital
to flow to lower cost labor markets
around the world. The result has been
globalization and its profound impact
on national and world economies. As
formerFederalReserveChairmanAlan
Greenspan(2004)noted,
Globalization has altered the economic
frameworksofbothadvancedanddeveloping nations in ways that are difficult
to fully comprehend . . . . Because of a
lowering of trade barriers, deregulation,
and increased innovation, cross-border
tradeinrecentdecadeshasbeenexpanding at a far faster pace than GDP. As a
result, domestic economies are increasingly exposed to the rigors of international competition and comparative
advantage. In the process, lower prices
forsomegoodsandservicesproducedby
our trading partners have competitively
suppresseddomesticpricepressures.(pp.
450–451)
The need to remain competitive in
thegrowingglobaleconomyhaspushed
firmstotreatemployeesascommodities
and seek out lower cost labor markets
(Jones, 2005;Wildasin, 2006). Clearly,
domestic job losses and the out-sourcingofmanufacturing,whitecollar,and
research and development activities to
firmsacrosstheglobehavealteredpsychological contracts and employment
relations between management and
workers (Capelli, 1999; Guzzo, Noonan, & Elron, 1994). Perhaps because
these impacts of globalization are still
relativelynew,onecanfindlittlediscussionorresearchintheOBliteratureon
theseimportantphenomena.
The problem with OB is that professorsoftenteachOBtextbooksandclasses
contextfree—withoutconsiderationof
macroenvironmentalandeconomicrealities.Employeesatisfaction,commitment
to the organization, empowerment, and
employeeturnoverarecentralconstructs
within the OB literature, but it is difficulttomeasuretheeconomicbenefitsof
theseconstructstoafirm’sbottomline.
Asthesoftersideofmanagementeducation,OBdoesnotenjoythe“nicemath
ematical models” that Ghoshal (2005,
p. 81) pointed out as sought by agency
theorists and economists and management practitioners. This has resulted in
the question that is often asked about
many classic OB constructs, “How do
theyaffectfirmperformance?”
Unfortunately, the answers to this
questionaretoooften“Wedon’tknow”
or—evenworse—“Theydon’t!”Results
foundintheOBliteraturethatpertainto
thelinkbetweenOBconstructsandfirm
performance have been mixed, leadingAustin (2000) to suggest that most
practitioners do not use much of the
academicworkonOB.
Intheirsummaryreviewarticleonthe
stateoftheOBliterature,Mowdayand
Sutton(1993)criticizedmuchoftheliteratureasbeingtooheavilyfocusedon
individual outcomes and psychological
factors, rather than on organizational
contextsandorganizationaloutcomes:
Ourreviewofthecurrentliterature,however, suggests that the focus of research
andwritinginourfieldisincreasinglyon
theoryandmethod,andlessonthestuff
of organizational life. Much published
research is motivated by the desire to
testandextendtheory,resolvetheoretical
debates, and apply new, more sophisticated methodologies to old theoretical
problems.Asaresult,wesometimesforgetthattheoryandmethodareonlytools
to help us understand organizations and
theirmembers.(p.225)
We believe that this observation is
truertodaythanwhenMowdayandSut-
tonwroteitoveradecadeago,because
OBtheoryhasnotchangedtoreflectthe
dramatic changes in the macroenvironment. It is important for OB thought
leaders to better reconcile OB theory
with the changing macroenvironment.
Suchchangesaredrivingthepursuitof
shareholdervaluemaximization,which
oftencomesattheexpenseofworkers.
The underlying value of OB in focusing attention on microlevel constructs
that are related to employee behaviors,
perceptions, and relations with management will continue to diminish as
organizations shift focus more to the
desires of institutional investors and
shareholders.
HowBusinessStudentsViewOB
To better understand how students
view OB, we conducted a survey of
MBA students and upper level undergraduatesduringthelastweekofclasses
oftheFall2006semester.Wesurveyed
(a) 46 MBA students—all of whom
hadtakenOB—representingabout60%
of the total MBA student body at our
universityand(b)70undergraduatestudentswhohadjustcompletedtheirOB
class.Table1presentsthedemographic
profileoftherespondents.
The participants were all enrolled in
AACSB-accredited business programs
in a midsized, public urban university
on the East Coast. The students were
pursuing a variety of majors and had
TABLE1.DemographicInformation,WorkExperience,andSupervisory
ExperienceofMasterofBusinessAdministration(MBA)andUndergraduateStudents
Item
Age
Full-timeworkexperience(inyears)
Full-timesupervisoryexperience(inyears)
Gender
Male
Female
MBAconcentrationandundergraduatemajor
Marketing
BusinessandHumanResourceManagement
AccountingandFinance
InformationSystems
HospitalityManagement
MBA
(n=46)
M
28.0
6.4
2.8
Undergraduate
(n=70)
%
M
23.8
4.4
1.1
%
41
59
40
60
20
31
39
10
11
37
33
11
8
July/August2007
351
Downloaded by [Universitas Maritim Raja Ali Haji] at 23:30 11 January 2016
yearsoffull-timeworkexperience.We
asked the students to rank the importanceoffivecourses(strategicmanagement,marketingmanagement,financial
management and accounting, OB, and
humanresourcemanagement)toCEOs
orpresidents.Inparticular,weaskedstudents,“Whichofthefollowingcourses
would the CEO/President of a company find MOST important to LEAST
IMPORTANTcourse.Inaddition,67%
of both MBA and undergraduate studentsidentifiedHumanResourceManagement(HRM)asbeingoneofthetwo
least important courses. The surveyed
studentsappearedtoviewfinancialand
strategicplanningasfarmoreimportant
totopexecutives.BothMBA(72%)and
undergraduate (80%) students identified financial management or accounting courses as being either the first or
thesecondmostimportantcourse.Seventy-one percent of MBA students and
a majority of undergraduate students
(54%) identified strategic management
aseitherthefirstorsecondmostimportantcourse.
These results are consistent with the
trends that we discussed earlier. They
point to the perceived importance of
financial and strategic management
over human capital management. As
further evidence of this, respondents
were asked to rate the importance of
(a) generating profits, and (b) treating
employeesfairly,toafirmCEOorPresident in today’s marketplace. Respondentsuseda7-pointscale(1=notvery
important; 7 = extremely important).
The mean score for MBA respondents
on “generating profits” was a 6.5 and
the mean score on “treating employees fairly” was 4.9. The undergraduate responses were similar with mean
scoresof6.8and4.8forthetwoitems.
Thus, both groups of students believed
that generating profits was both very
important and significantly (p
ISSN: 0883-2323 (Print) 1940-3356 (Online) Journal homepage: http://www.tandfonline.com/loi/vjeb20
Organizational Behavior: Where Does It Fit in
Today's Management Curriculum?
Robert P. Singh & Allen G. Schick
To cite this article: Robert P. Singh & Allen G. Schick (2007) Organizational Behavior: Where
Does It Fit in Today's Management Curriculum?, Journal of Education for Business, 82:6,
349-356, DOI: 10.3200/JOEB.82.6.349-356
To link to this article: http://dx.doi.org/10.3200/JOEB.82.6.349-356
Published online: 07 Aug 2010.
Submit your article to this journal
Article views: 65
View related articles
Citing articles: 1 View citing articles
Full Terms & Conditions of access and use can be found at
http://www.tandfonline.com/action/journalInformation?journalCode=vjeb20
Download by: [Universitas Maritim Raja Ali Haji]
Date: 11 January 2016, At: 23:30
VIEWPOINT
Downloaded by [Universitas Maritim Raja Ali Haji] at 23:30 11 January 2016
OrganizationalBehavior:WhereDoesItFit
inToday’sManagementCurriculum?
ROBERTP.SINGH
ALLENG.SCHICK
MORGANSTATEUNIVERSITY
BALTIMORE,MARYLAND
ABSTRACT. Maximizingshareholder
valueisthedominantgoalthatinfluences
managementdecisionmakinginbusiness
practice.Thisgoal—withrapidimprovementsintechnology,changesincapital
markets,andglobalcompetition—has
alteredemploymentrelationsbetween
workersandtopexecutives.Theauthors’
purposeinthisarticlewastosharethoughts
andconcernsaboutthevalueandrelative
importanceoforganizationalbehaviortheoryincurrentbusinessschoolcurriculaand
toofferrecommendationsforthefuture.
Keywords:businessschoolcurricula,
management,organizationalbehavior
Copyright©2007HeldrefPublications
G
R
hoshal (2005) questioned and
admonished academia for its
roleinestablishingthemaximizationof
shareholdervalueastheprimarygoalof
business executives and managers. He
explicitlylamentedthat“bypropagating
ideologically inspired amoral theories,
businessschoolshaveactivelyfreedtheir
studentsfromanysenseofmoralresponsibility” (p. 76). This, in his view, has
contributed to the corporate scandals,
unethical business practices, and mistreatmentofemployeesthatarecommon
intoday’sbusinessworld.
Ghoshal’s (2005) major arguments
were that (a) maximization of shareholder value is not an appropriate goal
for managers to pursue and (b) that
academia has played a major part in
theestablishmentofthatgoal.Thefirst
argument is a philosophical issue that
reasonable people may disagree about
onthebasisoftheirpersonalideologies
andacademictraining.Forthisreason,
we doubt that consensus can be establishedwithinacademiaaboutthevalue
ofthatgoal.
We also agree with Gapper (2005),
Kantor (2005), and Mintzberg (2005)
that Ghoshal overstated the power that
academiahashadinestablishingshareholder value maximization as the goal
of today’s top management teams. We
arguethattheforcesofcapitalism,great
technological advances, the changing
nature of capital markets, and rising
global competition have had far more
to do with the establishment of what
Ghoshal viewed as a flawed goal than
hasacademia.Nevertheless,webelieve
thatGhoshal’sworkopenedthedoorfor
serious discussions about management
educationandcurriculum.
Academics may differ on how and
why the maximization of shareholder
value has become the goal of most
firmstoday,buttheseissuesmaynotbe
asimportantastheeffectsofthatgoal
on management education. Whether
oneacceptsorrejectsGhoshal’s(2005)
two major aforementioned arguments,
maximization of shareholder value is
thedrivingforcebehindmostmanagement decision making in firms today.
Although some organizations may
choosetopursuealtruisticnonfinancial
goals (e.g., nonprofit organizations,
government bureaucracies, and some
smallerentrepreneurialventureswhose
foundersarenotfinanciallymotivated),
most executives, managers, and entrepreneurs are measured by the firm’s
bottom-line performance in growing
profits and shareholder value. This
measurement results in decision making that is consistent with improving
thebottomline(Beatty&Zajac,1994).
Ifresearchersacceptthatmaximization
of shareholder value is the dominant
goalinfluencingmanagementdecision
making in business practice, then we
can have a lively debate about how
July/August2007
349
Downloaded by [Universitas Maritim Raja Ali Haji] at 23:30 11 January 2016
this goal affects management educationandcurricula.
As professors who teach organizational behavior (OB) at the levels
of undergraduate, master of business
administration (MBA), and PhD, we
have struggled increasingly with the
relevance of major OB constructs in
the context of today’s common management practices and executive compensation and reward structures. Certainly, OB is a core course for most
established management programs.
ButasRynesandTrank(1999)pointed
out, behavioral sciences struggle for
credibility in business schools. Still,
most management students are familiar with classic theories such as the
HawthorneEffect(Mayo,1945;Roethlisberger&Dickson,1939),Maslow’s
(1954) hierarchy of needs, Herzberg’s
(1966) theories on motivation, and
McGregor’s (1960) Theory X and
TheoryY personality types. However,
capstone strategic management cases
and class discussion rarely focus on
theseorotherOBtheories.Whenthey
do,thetheoriesdonottrumpprofitand
financial considerations. As Whetten
(1989)pointedout,oneofthetestsof
goodtheoryistopassthe“Sowhat?”
test. In light of Ghoshal’s (2005)
discussion about maximizing shareholder value and executives’ behavior
today and about how little impact OB
apparently has within most capstone
strategic management courses, it is
unclear what contribution OB makes
tobusinesseducation.RynesandTrank
(1999) provided a good discussion of
the diminished importance of OB to
businesscurricula.
The findings of Pfeffer and Fong
(2002)raisedaredflagaboutthevalue
ofMBAcurricula.Consistentwiththeir
viewisarecentlypublishedarticleshowing that MBA applications have fallen
by 30% since 1998 at the nation’s toprankedbusinessschools(Merritt,2005).
There also has been discussion about
a new “professional services model”
(Armstrong, 2003, p. 371) for business
students to better serve their needs (see
Ferris, 2002, 2003). In addition, traditionaluniversitiesandbusinessprograms
arefacingincreasingpressureasaresult
oftherapidgrowthofthefor-profitcollegeindustry(Hechinger,2005).
350
JournalofEducationforBusiness
Allofthesefactorscontributetoour
contentionthatitistimeformanagement
academicstohaveanopen,candid,and
critical dialogue about core business
curricula. To this end, our purpose in
thisarticletosharesomethoughtsabout
thevalueandrelativeimportanceofOB
withintoday’sbusinessschoolcurricula
andtoofferdirectionsforthefuture.
OBProfessorsOftenTeach
ContextFree
One can trace the roots of OB back
to the emergence of the human relations school and the writings of Elton
Mayo.Mayo(1945)railedagainstwhat
heviewedastheevilsofTaylorismand
industrialization.Headvocatedapreindustrial mindset that focused on social
cohesionintheworkplace(seeGuillén,
1994;Scott,2003;Trahair,1984).InOB
textbooksandclassestoday,authorsand
professors still often cite and discuss
Mayo’s interpretation of the research
conductedbyRoethlisbergerandDickson(1939)attheHawthorneplantofthe
WesternElectricCompany.
Economic forces and business, however, have changed dramatically over
thelast60years.TheInternetandwidespread out-sourcing did not exist, and
institutional investors and global competitors did not have the power that
they do today. Just as Ghoshal (2005)
neglectedtodiscussmacroenvironmental factors, which have led business
leadersandacademiccurriculatofocus
on maximizing shareholder value, so
too has OB failed to keep up with the
macroenvironmental changes. These
changes have greatly diminished the
practicalvalueofclassicOBconstructs
andtheory.Wearguethatsuchconcepts
astheHawthorneEffectandTheoryX
and TheoryY little influence the decision making of today’s executives,
because of the broader goal of maximizingshareholdervalue.Thegrowing
power of institutional investors (Bennett, Sias, & Starks, 2003; Schwartz
& Shapiro, 1992), algorithmic equity
trading (Friedlander, 2005), globalization, and technological advances are
changing the economic landscape and
furthersupportingandstrengtheningthe
desireofbusinessestomaximizeshareholdervalue.
Kantor (2005) briefly mentioned the
growingpowerofinstitutionalinvestors
in her response to Ghoshal (2005).We
expandonithere.Institutionalinvestors
areentitieswithlargeamountsofcapital
toinvest,suchasinsurancecompanies,
investment firms, mutual funds, and
pension funds. Institutional investors
now dominate trading volume on the
majorfinancialmarkets(e.g.,NewYork
Stock Exchange, NASDAQ), accountingforasmuchas70%oftradingvolume(Schwartz&Shapiro,1992).These
entitiesarenowtheprimaryholdersof
equity in the United States, and their
growthhasbeenastounding.
In1999,institutionalinvestorsaccountedformorethan50%oftotalU.S.equity
ownership,upfrom7%in1950and28%
in 1970 (Bennett, Sias, & Starks, 2003).
In addition, a growing trend in the use
ofalgorithmictradingisdeveloping,primarily driven by institutional investors.
Algorithmic trading accounted for 25%
of all equities trading volume in 2003.
Friedlander (2005) estimated it as growingby150%peryearfrom2004to2006.
Although we are not familiar with the
specificmathematicalmodelsthatmutual
funds, investment banks, and other institutional investors use, we are confident
thatthemodelsdonottakeintoaccount
employeesatisfaction,motivation,orother
common OB constructs. These models
arelikelytiedtotheincreaseordecrease
in financial performance and the rate of
change of firms relative to their respective industries. These changes have concentrated capital, equity, and power into
fewer hands and have put further pressureontopexecutivestoachievesuperior
financialperformance.
Firmperformanceisgreatlyaffected
by the resources and capabilities that
the firm mobilized (Castrogiovanni,
1991; Chandler & Hanks, 1993; Tushman &Anderson, 1986). For example,
today’s information technologies have
greatly improved organizations’ abilitiestoaccessandmanageresourcesand
capabilitiesaroundtheworld.Theliteratureisfullofexamplesthatsupportthe
notion that companies adopting newer
technologies are more likely to enjoy
the advantages of such technologies,
whichcancreatesignificantcompetitive
advantages (e.g., Brown & Eisenhardt,
1995; Cooper & Kleinschmidt, 1987;
Downloaded by [Universitas Maritim Raja Ali Haji] at 23:30 11 January 2016
Hammer & Champy, 1993; Lawless &
Anderson,1996).
There can be no question that powerful and ever more affordable information technologies have altered the
competitive landscape by increasing
efficiency and allowing global communications. This has allowed capital
to flow to lower cost labor markets
around the world. The result has been
globalization and its profound impact
on national and world economies. As
formerFederalReserveChairmanAlan
Greenspan(2004)noted,
Globalization has altered the economic
frameworksofbothadvancedanddeveloping nations in ways that are difficult
to fully comprehend . . . . Because of a
lowering of trade barriers, deregulation,
and increased innovation, cross-border
tradeinrecentdecadeshasbeenexpanding at a far faster pace than GDP. As a
result, domestic economies are increasingly exposed to the rigors of international competition and comparative
advantage. In the process, lower prices
forsomegoodsandservicesproducedby
our trading partners have competitively
suppresseddomesticpricepressures.(pp.
450–451)
The need to remain competitive in
thegrowingglobaleconomyhaspushed
firmstotreatemployeesascommodities
and seek out lower cost labor markets
(Jones, 2005;Wildasin, 2006). Clearly,
domestic job losses and the out-sourcingofmanufacturing,whitecollar,and
research and development activities to
firmsacrosstheglobehavealteredpsychological contracts and employment
relations between management and
workers (Capelli, 1999; Guzzo, Noonan, & Elron, 1994). Perhaps because
these impacts of globalization are still
relativelynew,onecanfindlittlediscussionorresearchintheOBliteratureon
theseimportantphenomena.
The problem with OB is that professorsoftenteachOBtextbooksandclasses
contextfree—withoutconsiderationof
macroenvironmentalandeconomicrealities.Employeesatisfaction,commitment
to the organization, empowerment, and
employeeturnoverarecentralconstructs
within the OB literature, but it is difficulttomeasuretheeconomicbenefitsof
theseconstructstoafirm’sbottomline.
Asthesoftersideofmanagementeducation,OBdoesnotenjoythe“nicemath
ematical models” that Ghoshal (2005,
p. 81) pointed out as sought by agency
theorists and economists and management practitioners. This has resulted in
the question that is often asked about
many classic OB constructs, “How do
theyaffectfirmperformance?”
Unfortunately, the answers to this
questionaretoooften“Wedon’tknow”
or—evenworse—“Theydon’t!”Results
foundintheOBliteraturethatpertainto
thelinkbetweenOBconstructsandfirm
performance have been mixed, leadingAustin (2000) to suggest that most
practitioners do not use much of the
academicworkonOB.
Intheirsummaryreviewarticleonthe
stateoftheOBliterature,Mowdayand
Sutton(1993)criticizedmuchoftheliteratureasbeingtooheavilyfocusedon
individual outcomes and psychological
factors, rather than on organizational
contextsandorganizationaloutcomes:
Ourreviewofthecurrentliterature,however, suggests that the focus of research
andwritinginourfieldisincreasinglyon
theoryandmethod,andlessonthestuff
of organizational life. Much published
research is motivated by the desire to
testandextendtheory,resolvetheoretical
debates, and apply new, more sophisticated methodologies to old theoretical
problems.Asaresult,wesometimesforgetthattheoryandmethodareonlytools
to help us understand organizations and
theirmembers.(p.225)
We believe that this observation is
truertodaythanwhenMowdayandSut-
tonwroteitoveradecadeago,because
OBtheoryhasnotchangedtoreflectthe
dramatic changes in the macroenvironment. It is important for OB thought
leaders to better reconcile OB theory
with the changing macroenvironment.
Suchchangesaredrivingthepursuitof
shareholdervaluemaximization,which
oftencomesattheexpenseofworkers.
The underlying value of OB in focusing attention on microlevel constructs
that are related to employee behaviors,
perceptions, and relations with management will continue to diminish as
organizations shift focus more to the
desires of institutional investors and
shareholders.
HowBusinessStudentsViewOB
To better understand how students
view OB, we conducted a survey of
MBA students and upper level undergraduatesduringthelastweekofclasses
oftheFall2006semester.Wesurveyed
(a) 46 MBA students—all of whom
hadtakenOB—representingabout60%
of the total MBA student body at our
universityand(b)70undergraduatestudentswhohadjustcompletedtheirOB
class.Table1presentsthedemographic
profileoftherespondents.
The participants were all enrolled in
AACSB-accredited business programs
in a midsized, public urban university
on the East Coast. The students were
pursuing a variety of majors and had
TABLE1.DemographicInformation,WorkExperience,andSupervisory
ExperienceofMasterofBusinessAdministration(MBA)andUndergraduateStudents
Item
Age
Full-timeworkexperience(inyears)
Full-timesupervisoryexperience(inyears)
Gender
Male
Female
MBAconcentrationandundergraduatemajor
Marketing
BusinessandHumanResourceManagement
AccountingandFinance
InformationSystems
HospitalityManagement
MBA
(n=46)
M
28.0
6.4
2.8
Undergraduate
(n=70)
%
M
23.8
4.4
1.1
%
41
59
40
60
20
31
39
10
11
37
33
11
8
July/August2007
351
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yearsoffull-timeworkexperience.We
asked the students to rank the importanceoffivecourses(strategicmanagement,marketingmanagement,financial
management and accounting, OB, and
humanresourcemanagement)toCEOs
orpresidents.Inparticular,weaskedstudents,“Whichofthefollowingcourses
would the CEO/President of a company find MOST important to LEAST
IMPORTANTcourse.Inaddition,67%
of both MBA and undergraduate studentsidentifiedHumanResourceManagement(HRM)asbeingoneofthetwo
least important courses. The surveyed
studentsappearedtoviewfinancialand
strategicplanningasfarmoreimportant
totopexecutives.BothMBA(72%)and
undergraduate (80%) students identified financial management or accounting courses as being either the first or
thesecondmostimportantcourse.Seventy-one percent of MBA students and
a majority of undergraduate students
(54%) identified strategic management
aseitherthefirstorsecondmostimportantcourse.
These results are consistent with the
trends that we discussed earlier. They
point to the perceived importance of
financial and strategic management
over human capital management. As
further evidence of this, respondents
were asked to rate the importance of
(a) generating profits, and (b) treating
employeesfairly,toafirmCEOorPresident in today’s marketplace. Respondentsuseda7-pointscale(1=notvery
important; 7 = extremely important).
The mean score for MBA respondents
on “generating profits” was a 6.5 and
the mean score on “treating employees fairly” was 4.9. The undergraduate responses were similar with mean
scoresof6.8and4.8forthetwoitems.
Thus, both groups of students believed
that generating profits was both very
important and significantly (p