Organizational Behaviour

1.0 Introduction: What is Organisational behaviour? According to Stephen P and Timothy A (2007), Organizational Behaviour is the study which enables an organisation to examine the impact of individual, groups and structure’s behaviour within an organisation. The implementation of such knowledge will eventually improve an organisation’s effectiveness. Organizational behaviour is a field of study and this study is actually concerned about three determinants of behaviour in an organization. Which are : •

Individual

•

Groups

•

Structure

Moreover organizational behaviour helps manager to gain knowledge about Individual, Groups and the effect of structure on behaviour and to apply that knowledge into practice. Organizational Behaviour encompasses a wide range of topics. Although there is still some dispute regarding the importance of each topics, there appears to be general agreement that OB includes the core topics of motivation, leader behaviour and power, inter-personal communication, group structure and processes, conflict, work design and work stress. From the above discussion, it can be said that OB is concerned with the study and understanding of individual and group behaviour in an organization and how their behaviour influence the overall performance of an organization.

1

1.1 Objective: This report is created as an academic requirement of the “Organisational Behaviour” course. It has been prepared to meet the requirement of formal report preparation part that demands the analysis of a various issues of Organisational Behaviour within an organization Objectives of the assignment are: •

Find out the Organisational Behaviour issues of

my chosen organisation

(Goldman Sachs) •

In what extent Goldman Sachs are using organisational Behaviour isuues.

•

How Goldman Sachs applying OB issues.

Goldman Sachs Group 2.0 Company Overview: The Goldman Sachs Group (Goldman Sachs or the company) is one of the leading financial services company in the world. The company together with its subsidiaries provides investment banking, securities and investment management services to corporations, financial institutions, governments and high net worth individual’s worldwide. The company primarily operates in the US, Europe and Asia. The company has its headquarter based in New York city, New York and employs 30067 people. (Goldman Sachs Group by Datamonitor, Publication Date: 4th May 2009). The company started its operation in 1869, was successful in all businesses it operate. Even in the recession they have performed quite well, which results huge profit. The secret behind this success could be Goldman Sach’s enriched culture. "Our firm's culture is the most sustainable competitive advantage that we have. I also believe that we have the best people, but the magic is the combination of outstanding people and a strong culture," said Bill Buckley, Former Managing Director and Former Co-Head, Private Client Services, GS.(ref: Ch, Lisa, "Goldman Sachs: The Culture of Success," Touchstone, 2000.) 2

2.1 About the company: In 1869 the man called Marcus Goldman moves to New York city and starts trading promissory notes. In 1882 Samuel Sachs, son in law of Goldman joins the business. In 1896 for the very first time the company became listed in the New York Stock Exchange. Goldman sachs managed to offer its first IPO (initial public offer) in 1906. In 1930s the firm became the leader in banking reforms and corporate governance issues. In addition to that GS also became a leader in the equities markets through its innovations in block trading and risk arbitrage. In 1982 London based First Dallas Ltd is acquired. In 1999 the company goes public and adopts the name The Goldman Sachs Group Inc. In 2002 Subsidiary Goldman, Sachs & Co. becomes one of the largest market makers in the industry. (ref:http://www.fundinguniverse.com/company-histories/The-Goldman-Sachs-GroupInc-Company-History.html).

3.0 ORGANISATIONAL STRUCTURE Organization which is made up of more than one person need some kind of organisational structure . An organizational structure defines how an organization’s jod tasks are formally divided.( http://www.thetimes100.co.uk/theory/theory-organisational-structure--386.php). There are six key elements that managers need to look at when they draw their organization’s structure. These are : work specialization, Departmentalization, chain of command, Span of control, Centralization and decentralization, and Formalization. Work Specialization: Work specialization means the level to which an organization’s task are sub divided into separate jobs ( Stephen P; Timothy A; 2007; P:539) In early twentieth century Henry ford demonstrated that if employees are specialized in certain division work can be performed more efficiently.(Stephen P; Timothy A ,

3

2007). It is a great way to make human labor compatible with the demand of machine age by: •

Making each worker’s tasks smaller and smaller. which will make the work very simple to the workers.

•

As employee will be doing the same work again and again they will become very efficient results high productivity.

But it could be argued that – workers could loose their interest on their job very easily as they will be doing same job again and again. Goldman Sachs have divided its business into five different division. These are : •

Advising

•

Financing

•

Investing

•

Securities &

•

Reasearch

These way GS can serve its client much better as every division has their specialist working within that division. Departmentalization: Once job has been separated through work specialization, Then organisation needs to group these jobs together. It will allow the organization to coordinate common tasks. The basis by which jobs are group together is called Departmentalization. Jobs can be departmentalised by functions or by the type of product the organizations produce or on the basis of geography or by particular types of customer that the organization would like to reach. Large organizations are tend to use

all types of departmentalization. Because

managers in these large organizations believe that complex tasks can be accomplished by diverse skills.

4

Goldman Sachs have various department under single division. As an example GS’s Finance division consists of Bank loan, Debt financing, Equity capital market, Lending and Urban investment department. •

Chain of command:

Many years ago the concept ‘chain of command ‘ was the primary foundation in the structural design of an organization. Now a days it became far less important for the organization. (C. Hymowitz, 2003)) Chain of command broaden from the top level of the organization to the bottom level of organization. It is an unbroken line of authority. It has two principles. The first one is Authority which means that manager has the right to give order and expect the order to be carried out. On the other hand ‘Unity of command ‘ refers to the idea that subordinate will have only one superior and to whom they will be directly responsible. At Goldman Sachs unity of command is exist. Goldman Sachs have a team based working environment where employee needs to report to the manager of that team only. •

Span of control:

It describes how many employees a manger can effectively and efficiently manage. It is very important to determine what kind of span of control an organization would maintain. There are two types of span of control: Wider and Narrower. Wider: It means more employee under the supervision of less managers. It is good for cost savings but not very effective. Narrower: Whereas narrower span of control is very effective as there would be small group of employees under the supervision of one managers. Narrow span of controlencourage overly tight supervision and discourage employee autonomy. (Stephen P; Timothy A; 2007).

5

Goldman Sachs has narrower span of control. As it has a designated manager for a small number of team members. This way manager can overlook the work of its subordinate more effectively. •

Centralization and decentralization:

The term centralization refers that only top management have the authority to make key decision. Lower level personnel does not have any say on these decision making process. On the other hand

in the decentralized organization lower level employee can

influence the decision and are actually given the discretion to make decision. Therefore in a decentralized organization , action can be taken more quickly than that of centralized organization. Employees in decentralized organization would feel more motivated as they will be actually involved in decision making process. Goldman Sachs is a decentralised organization. team members are encouraged to make decision in certain situation. Goldman Sachs believes this way employee can practice their leadership skills. Moreover it helps to motivate employees. •

Formalization:

Formalization means - jobs within an organization will be standardized. In a highly formalized job employee have very little say of how and when things need to be done. There would be defined work procedure and strict rules in place and employee needs to follow these procedures and rules all the time. therefore employee can’t choose another way of doing things which destroys the creativity within the employee. Goldman Sachs has standard procedure of how work needs to be done, but employee has the freedom to express their view and take the initiative on their own way. There are different types of common organizational structure exists. These are: •

Simple Structure: this structure has low degree of departmentalization, wide span of control, centralized authority and little formalization. That’s why it is quite flexible, inexpensive to maintain and accountability is clear. But this model can be used only in small organization.

6

•

The bureaucracy: Standardization is the key concept of bureaucracy. The characteristics of this kind of structure are: very formalized, centralized, highly standardized, narrow spans of control, highly routine operating tasks achieved through specialization.

•

Matrix Structure: Matrix structure is a type of management system where employees report to more than one supervisor. Therefore matrix has dual chain of command.

This structure brought together different types of expertise for

particular project. The strength of this type of structure is- it facilitate coordination when organization have multiple complexity and interdependent activity, it also provide efficient allocation of specialists. It has disadvantage too. It creates confusion as there are two supervisors for the specific project and employees do not know who to report. •

Team structure: Organization which uses team to coordinate work activities. Team structure decentralizes decision making to the level of the work team. In a large organization team structure combines with bureaucracy. This makes company efficient while give teams the opportunity to be flexible.

The organizational structure of Goldman Sachs is a Team based structure. As it decentralises decision making and give its employee the power to take decision. Moreover it has a formalized work structure but in certain situation employee could work on their own way if that reflect company’s value. 3.1 CULTURE “An organizational culture is a system of shared meaning held by members that differentiates the organization from other organizations”.(Stephen P; Timothy A; 2007). The term ‘shared meaning’ refers to- a set of key characteristics that an organization values. Apparently various research suggests that an organizational culture basis on seven characteristics. These are: 1. Innovation and risk taking: The degree to which Organization encourages its employee to take risk and to be creative. 7

2. People Orientation: The degree to which Managers consider how people in the organization would be affected by the decision made by them. 3. Outcome orientation: The degree to which Managers are result oriented and therefore they are more focused on organization’s result rather than the techniques that used to achieve the result. 4. Attention to details: The degree to which employees are expected to demonstrate accuracy, attention to details. 5. Team orientation: the degree to which organization’s work activities are team based rather than individuals work base. 6. Stability: The degree to which organizational activities

give emphasis to

maintain the same condition as organization grows. 7. Aggressiveness: The degree to which employees are aggressive and competitive rather than easygoing. By looking at this characteristics employee could have an idea what type of organizational culture they have in their organization. If an organization have strong culture, its employee’s behaviour are most likely to influenced by that culture. Goldman Sachs prized its rich corporate culture. According to Secretary to the board and former managing director John Rogers: “Our bankers travel on the same planes as our competitors. We stay in the same hotels. In a lot of cases we have the same clients as our competition. So when it comes down to it, it is a combination of execution and culture that makes the difference between us and other firms. Behaviour is shaped by it. People who think culture is just a bunch of bacteria in yogurt set a tone that strips values from a company. That’s why our culture is necessary—it’s the glue that binds us together. We hold onto the values, symbols and rituals that have guided us for years,and anything new that we add to the culture always supports what already exist” (Ref: http://www.marshall.usc.edu/assets/066/14694.pdf). At GS employee always try harder to improve themselves and make them more competitive. Goldman employees are known for their collaborative practices. In GS 8

employees are taught that odds are high and employees will have better outcomes with a shared work effort than with that of a single individual.

3.2 INDIVIDUAL PERSONALITY: According to Gordon Allport personality is “ the dynamic organisation within the individual of those psychophysical systems that determine his unique adjustments to his environment”. Type A personality: A type A personality individual has sense of time urgency and competitive characteristics. This type of individual always wants to achieve more in less time . ( Stephen P; Timothy A;2007 ). There are certain characteristics that type A person has. these are : 1. they are always moving, walking and eating rapidly 2. feel impatient with the rate at which most events take place 3. strive to think or do two or more things at once. can not cope with leisure time 4. are obsessed with numbers, measuring their success in terms of how many or how much of everything they acquire. (Stephen P Timothy A; 2007) Type B personality: B personality individual are totally opposite of that of A. the characteristics of B personality individual includes: 1. Never suffer from a sense of time urgencywith its accompanying impatience. 2. Feel no need to display or discuss either their achievements or accomplishment unless such exposure is demanded by the situation. 3. play for fun and relaxation, rather than to exhibit their superiority at any cost. 4. can relax without any guilt.

9

At Goldman Sachs all the employee has the A type personality. Because GS’s working environment is a dynamic working environment. Moreover they have given time limit and target to finish certain task. Therefore GS employee has to have A type personality to cope up with their organization culture. GS has a personality test process included in their selection process. This help them to see which individual has the what type of personality and based on that they select candidates.

3.3 MOTIVATION Motivation is very important aspect in any individual, group and organisation’s success. In broad terms, motivation can be considered to comprise an individual’s effort and persistence and the direction of that effort. In simpler terms, motivation is the will to perform. ( Ian Brooks 4th edition ). In an organisation motivated workforce can be recognised by looking at their characteristics. Employees who are well motivated , perform well consistently, display lots of energy and always eager to do a bit extra than they are supposed to do to achieve organization’s goal. In contrast people who are demotivated are reluctant to work with high absenteeism, uncooperative, destroy companies asset etc. Therefore it is very important for organizations to keep their employee motivated as it brings them success.

Theories of motivation: There are many different views or theory exists to show what motivates employees. The most common theories are described below: Hierarchy of needs theory: Abraham Maslow’s hierarchy of needs is the most well known theory of motivation. (A.Maslow, Motivation and Personality; New York: Harper and Row,1954). In this theory he has explained that five needs of hierarchy is exist within every human being. These needs are: 10

1. Physiological: Hunger, thirst, shelter, sex and other bodily needs are includes here. 2. Safety: Security and protection from physical and emotional harm 3. Social: affection, belongingness, acceptance and friendship are part of this need. 4. Esteem: Self respect, autonomy, achievements, which are internal factor and status, recognition and attention which are external factors are includes here. 5. Self actualization: Growth, achieving one’s potential and self fulfilment are includes here. According to Maslow, organization need to understand what level of hierarchy the person is actually stands on and organization should focus on that level, so that she can satisfy that person’s need in that level or level above that. From the Maslow’s theory It could be argued that his theory did not consider various people’s psychology and need. everyone does not have same need. people’s need varies by culture and location. Some people like to have achievement as their top priority and some people probably consider their growth as top in the hierarchy.

Expectancy Theory: Expectancy theory is an alternative behaviouralist approaches to motivation. Since 1930 this theory has developed. An American psychologist named Vroom (1964) developed expectancy theory from the original work of Tolman and Honzik (1930). Vroom has produced a systematic explanatory theory of workplace motivation. In this theory he has argued that motivation should design in such a way that meet an individual’s expectation , which guide to a particular outcome. The simple expectancy equation is : Motivation = expectation x valence

11

Cognitive theory: Cognitive theory is quite simple and intuitively appealing. Cognitive theory or Goal theory tried to explain the fact that – Individual’s performance and motivation would be higher if individuals are set specific goals which are challenging , but accepted, and where performance related feedback is given. In the recent time Goal setting became very popular motivational techniques among the organizations. There are four ways by which Goals influence individual’s behaviour. These are : •

Direct attention

•

Mobilise effort

•

Encourage persistence

•

Facilitate strategy development

In the light of above theory It could be argued that organization bureaucracy often make goal setting harder and therefore dissolves the benefits from processes such as management by objectives (MBO). Moreover Goal setting doesn’t work for every organization. It is only good for companies where achieving target relates to business success. Therefore it cant be use as motivational factor for those organization where goal setting mean nothing. Porters and Lawler’s Expectancy models: Porters and Lawler’s has been developed the expectancy model a little further.In particular they tried to show the relationship between employee satisfaction and performance. There are two types of reward which lead by employee performance . these two types of rewards are : Intrinsic and Extrinsic rewards. Intrinsic Reward: Intrinsic reward is intangible. Sense of achievement or advancement , recognition and enhanced responsibility are the example of intrinsic reward. Extrinsic Reward:

12

Extrinsic rewards are more tangible. It could be pay or working conditions etc. Lawlers argued that intrinsic rewards are the most effective way to motivate employees because it is more direct and immediate. (Ian brooks ,4th edition)). However, it appears that in the modern world effective way to motivate people varies person to person. Employee who prefers to have big compensation package certainly will be motivated by extrinsic reward than the extrinsic reward. At Goldman Sachs’ they have a culture to motivate employees in different ways, Goldman’s motivational culture made of a blend of most of the motivational theory discussed above. Goldman tries to motivate their employee by setting target. Goldman believe that this increases employee performance as they put their best effort to achieve that target. By achieving set target employee can see their full potential, which help increase employee morale. Moreover GS Has a culture to pay their employee a big compensation package. GS believe this works out the best motivational factor for employees. In 2009 GS paid out £1.2 billion among its 32500 employees as a bonus. (source:guardian.co.uk)

3.4 TEAM There are lots of literature about team and team working. But in general term : ‘A team builds up when a number of people have a common objective and feel that their individual success depends on other people’s success.’ These merely means that people in a team will contribute their various skills to achieve different objectives. (Mullins, 2007). Differences between team and group: Cane suggests that many organizations are sometimes confused whether they have teams or a group of people working together. If a group of people do not know that they are working as a team, that group of people simply not a team.(Mulins 2007)

13

According to Belbin there are several factor which actually separate groups from team. These factors are: Size: Groups can be any number of people but team has to be relatively small (ideally) four to six. Leadership: In a well-balanced team leadership can be shared among the individual, on the other hand large group has only one leader. From the work of Belbin it is clear that the term team used in a more specific context whereas group is a more general term. Importance of a team: Individual will form a team for a number of reason. These are given below: Assignments with multiple skills requirement: team works effectively and efficiently where it require multiple skills to do the job. Because in a team, individuals have variety of experience and skills.

Collusion between members; Job sharing or rotating unpopular tasks can be done among the team members. This will give them a chance to come out from a monotonous working environment. Moreover it will provide individual team members with opportunities for initiative and creativity. Companionship and source of mutual understanding and support from colleagues: This can help members in a team to solve work problem more quickly and help them to come out from a stressful work environment. Membership provides individual with a sense of belonging: Team provides its member the identity and status. Status motivates team player 14

Protection for its membership: Modern business environment are very complex and competitive. Organization always possess threats from its competitor. Team members always work together to protect their interest from outside pressure or threat. Success of a team: The more cohesive the team will be the more successful it would be. Success is a big motivational factor for any individual or team. And it will put a positive impact on the performance of a team. Goldman Sachs has a team based working environment. Management at Goldman Sachs believes that – ‘a major strength and principal reason for the success of Goldman Sachs is the quality and dedication of our people and the shared sense of being part of a team.’ The desire and ability to be part of a team is fundamental to Goldman Sachs culture, business principles and GS believe, their long-term success. Since the firm's founding in 1869, Goldman Sachs has focused on teamwork rather than solitary effort. According to John I. Weinberg (Goldman Sachs partner 19561990) : “ The point is this team thing, the coopearation, teamwork, and our culture was developed not because someone was a genius and woke up in the middle of the night when the little electric light popped, it really came from the needs of the moment. it’s good , solid business, you want to have people working together to achieve an objective.” (Website:Goldman Sachs )

4.0 CONCLUSION: Organizational behaviour help organizations to determine their company structure and culture. Moreover it helps organisation to understand the importance of individual’s personality, necessity of a team within an organization, motivational factors etc.

15

At Goldman Sachs they have developed a rich culture where team spirit is the number 1 priority. This team based structure worked quite well for GS. However GS needs to remind that there are few drawback in team based structure which might causes problem in the future. Goldman Sachs have various ways to motivate its employees. However the motivation system probably is not working properly. As a result there is high employee turnover exists in Goldman Sachs. Therefore it is very important for Goldman Sachs to keep a very good balance of these organizational behavioural factors.

16