Measuring process, practices, behaviour and culture

Some aspects of supplier performance cannot be ascertained by asking them, as they may not be aware. Gordon (2008) states that a lot of insight is needed into not only supplier performance using quantifiable performance metrics but also the means by which this performance is achieved. This includes the supplier's processes, practices, behaviour and culture. However, if we accept that by forging the right relationship with certain important suppliers we can add value, then it follows that we must also measure processes, practices, behaviour and culture; theirs and those that are joint between us.

There are measures we can develop for aspects of process efficiency and effectiveness, but practices, behaviour and culture are much more subjective. In a close personal relationship norms around practices, behaviour and even culture develop. There may not be a specific discussion around this but in a healthy relationship practices get agreed based on what works for both, behaviour gets shaped through parties agreeing what is mutually acceptable and where boundaries lie and if all these things happen the relationship takes on its own positive culture over time. Split up and meet someone new and the process begins over. The same happens with a supplier relationship, except companies rarely seek to agree what practices and behaviours are appropriate or expected, yet if we do this we then create the basis to measure it or at least check it feels right. In Chapter 11 we will explore the Relationship Charter, a means to define expected practices and behaviours and thus a basis to them measure the degree to which parties emulate this.

Collecting and analysing data

KPIs typically demand different data types, from different sources. Collecting data to create KPIs could be an automatic process in real time, perhaps using a corporate system or well-designed app, or perhaps it requires a regular or even irregular activity to produce the latest set of KPIs. We could do this or we could get the supplier to do this, or a combination of both.

Process of Organizational Development

(OD) Organization development process is a complex and long process. Sometimes it takes a year or more than a year to design, executes and gets end fruits. In some cases it can continue indefinitely.

Organization development process eaters to move the organization from present position to better future position. The process consists of five steps.

The model has been excerpted from Newstrom and Davis’s book Organization Behavior. The model is shown in the following figure and elements are discussed briefly in the points beneath the figure.

Organization development process

The Theory of Planned Behavior

The Theory of Planned Behavior (TPB) started as the Theory of Reasoned Action in 1980 to predict an individual's intention to engage in a behavior at a specific time and place. The theory was intended to explain all behaviors over which people have the ability to exert self-control. The key component to this model is behavioral intent; behavioral intentions are influenced by the attitude about the likelihood that the behavior will have the expected outcome and the subjective evaluation of the risks and benefits of that outcome.  

The TPB has been used successfully to predict and explain a wide range of health behaviors and intentions including smoking, drinking, health services utilization, breastfeeding, and substance use, among others. The TPB states that behavioral achievement depends on both motivation (intention) and ability (behavioral control). It distinguishes between three types of beliefs - behavioral, normative, and control. The TPB is comprised of six constructs that collectively represent a person's actual control over the behavior.

1. Attitudes - This refers to the degree to which a person has a favorable or unfavorable evaluation of the behavior of interest. It entails a consideration of the outcomes of performing the behavior.

Features of Organizational Behaviour

Organizational behaviour has emerged as a separate field of study. The nature it has acquired is identified as follows :

1. A Separate Field of Study and not a Discipline Only

By definition, a discipline is an accepted science that is based on a theoretical foundation. But, O.B. has a multi-interdisciplinary orientation and is, thus, not based on a specific theoretical background. Therefore, it is better reasonable to call O.B. a separate field of study rather than a discipline only.

2. An Interdisciplinary Approach

Organizational behaviour is essentially an interdisciplinary approach to study human behaviour at work. It tries to integrate the relevant knowledge drawn from related disciplines like psychology, sociology and anthropology to make them applicable for studying and analysing organizational behaviour.

3. An Applied Science

The very nature of O.B. is applied. What O.B. basically does is the application of various researches to solve the organizational problems related to human behaviour. The basic line of difference between pure science and O.B. is that while the former concentrates of fundamental researches, the latter concentrates on applied researches. O.B. involves both applied research and its application in organizational analysis. Hence, O.B. can be called both science as well as art.

Personality traits and organizational behaviour

Those personality traits which affect the organizational behaviour of a person are :

1. Authoritarianism : It was developed by the psychologist Adorno to measure susceptibility to autocratic, fascistic, or anti-democratic appeals. It was later extended to human personality. Authoritarians are oriented towards conformity of rules and regulation. They prefer stable and structured work environment. They believe obedience and respect for authority and blind acceptance of authority. They are conservatives. They are concerned with toughness and power, close minded and less educated. They make good followers, work better under directive supervision and are more productive within authoritarian organizational structure.

2. Bureaucratic Personality : It is based upon respect for organizational rules and regulations. Unlike authoritarian person, bureaucratic person's acceptance of authority is not total and blind. A bureaucratic person values subordination, conformity to rules, impersonal and formal relationships. These people are not innovative. They do not like taking risks. They are better supervisors when the type of work is routine, repetitive and proceduralized.

3. Machiavellianism (Mach) : Niccolo Machiavelli wrote in the 16th century on how to gain and use power. This personality trait named after Machiavelli are :

(i) A Mach man is pragmatic, maintain emotional distance and believes that ends can justify means.

(ii) High Mach people flourish when they interact face to face with others.

(iii) They have high self-confidence and high self esteem.

(iv) They are specially successful in exploiting structured situations and vulnerable people. We cannot conclude whether high Machs make good employees or not. The answer will depend upon the type of the job and whether moral and ethical values are considered in evaluating the performance of a person.

Process of Behaviour

We assume that behaviour is caused and this assumption is true. Behaviour takes place in the form of a process. It is based on the analysis of behaviour process over the period of time. Three models of behaviour process have been developed. These are S-R model, S-O-R model, S-O-B-A model and S-O-B-C model.

S-R Model

S-R model of human behavior suggests that the behaviour is caused by certain reasons. The reasons may be internal feeling (motivation) and external environment (stimulus). A stimulus is an agent, such as, heat, light, piece of information, etc., that directly influences the activity of an organism (person). Without the stimulus there is no information to be handled by the internal processes prior to action taken by the person. It implies that his behaviour is determined by the situation. Inherent in the situation are the environmental forces that shape and determine his behaviour at any given moment. The entire situation has been traditionally described as stimulus response (S-R) process.

Models of Organisational Behaviour

Autocratic model

Autocratic model is the model that depends upon strength, power and formal authority.

In an autocratic organisation, the people (management/owners) who manage the tasks in an organisation have formal authority for controlling the employees who work under them. These lower-level employees have little control over the work function. Their ideas and innovations are not generally welcomed, as the key decisions are made at the top management level.

The guiding principle behind this model is that management/owners have enormous business expertise, and the average employee has relatively low levels of skill and needs to be fully directed and guided. This type of autocratic management system was common in factories in the industrial revolution era.

One of the more significant problems associated with the autocratic model is that the management team is required to micromanage the staff – where they have to watch all the details and make every single decision. Clearly, in a more modern-day organisation, where highly paid specialists are employed an autocratic system becomes impractical and highly inefficient.

Importance of Organizational Behaviour

Organizational behavior is defined as actions and attitudes of individuals and groups toward one another and toward the organization as a whole, and its effect on the organization's functioning and performance.

Organizational behavior is defined as the study which deals with all aspects of human behavior that occur within the context of an organization. It entails the study of how individuals behave as individuals and in groups within an organization. Organizational behavior is the study of human behavior, attitudes and performance in organizations.

Organizations are social inventions for accomplishing common goals through group effort. Organizational behavior is concerned with the attitudes and behaviours of individuals and groups in organizations and can be understood in terms of three levels of analysis: the individual, the group, and the organization.

A field of study that investigates the impact that individuals, groups and structure have on behavior within organizations, for the purpose of applying such knowledge toward improving an organization's effectiveness.

Elements of Organizational Behaviour

The key elements in the organizational behaviour are people, structure, technology and the environment in which the organization operates.

Consumption and Investment

A. Consumption and Saving

1. Disposable income is an important determinant of consumption and saving. The consumption function is the schedule relating total consumption to total disposable income. Because each dollar of disposable income is either saved or consumed, the saving function is the other side or mirror image of the consumption function.


2. Recall the major features of consumption and saving functions:


1. The consumption (or saving) function relates the level of consumption (or saving) to the level of disposable income.
2. The marginal propensity to consume (MPC) is the amount of extra consumption generated by an extra dollar of disposable income.
3. The marginal propensity to save (MPS) is the extra saving generated by an extra dollar of disposable income.
4. Graphically, the MPC and the MPS are the slopes of the consumption and saving schedules, respectively.
5. 

Measuring Economic Activity

1. The national income and product accounts contain the major measures of income and product for a country. The gross domestic product (GDP) is the most comprehensive measure of a nation's production of goods and services. It comprises the dollar value of consumption (C), gross private domestic investment (I), government purchases (G), and net exports (X)produced within a nation during a given year. Recall the formula:
   
   GDP = C + I + G + X 
   
   This will sometimes be simplified by combining private domestic investment and net exports into total gross national investment (I^T = I + X):
   
   GDP = C + I^T + G


2. We can match the upper-loop, flow-of-product measurement of GDP with the lower-loop, flow-of-cost measurement, as shown in Figure 20-1. The flow-of-cost approach uses factor earnings and carefully computes value added to eliminate double counting of intermediate products. And after summing up all (before-tax) wage, interest, rent, depreciation, and profit income, it adds to this total all indirect tax costs of business. GDP does not include transfer items such as social security benefits.

Overview of Macroeconomics

A. Key Concepts of Macroeconomics

1. Macroeconomics is the study of the behavior of the entire economy: It analyzes long-run growth as well as the cyclical movements in total output, unemployment and inflation, and international trade and finance. This contrasts with microeconomics, which studies the behavior of individual markets, prices, and outputs.


2. The United States proclaimed its macroeconomic goals in the Employment Act of 1946, which declared that federal policy was "to promote maximum employment, production, and purchasing power." Since then, the nation's priorities among these three goals have shifted. But all market economies still face three central macroeconomic questions: (a) Why do output and employment sometimes fall, and how can unemployment be reduced? (b) What are the sources of price inflation, and how can it be kept under control? (c) How can a nation increase its rate of economic growth?


3. In addition to these perplexing questions is the hard fact that there are inevitable conflicts or tradeoffs among these goals: Rapid growth in future living standards may mean reducing consumption today, and curbing inflation may involve a temporary period of high unemployment.

Capital, Interest and Profits

A. Basic Concepts of Interest and Capital

1. Recall the major concepts:


• Capital: durable produced items used for further production
• Rentals: net annual dollar returns on capital goods
• Rate of return on investment: net annual receipts on capital divided by dollar value of capital (measured as percent per year)
• Interest rate: yield on financial assets, measured as percent per year
• Real interest rate: yield on funds corrected for inflation, also measured as percent per year
• Present value: value today of an asset's stream of future returns
2. Interest rates are the rate of return on financial assets, measured in percent per year. People willingly pay interest because borrowed funds allow them to buy goods and services to satisfy current consumption needs or make profitable investments.

The Labor Market

A. Fundamentals of Wage Determination

1. The demand for labor, as for any factor of production, is determined by labor's marginal product. Therefore, a country's general wage level tends to be higher when its workers are better trained and educated, when it has more and better capital to work with, and when it uses more advanced production techniques.


2. For a given population, the supply of labor depends on three key factors: population size, average number of hours worked, and labor-force participation. For the United States, immigration has been a major source of new workers in recent years, increasing the proportion of relatively unskilled workers.


3. As wages rise, there are two opposite effects on the supply of labor. The substitution effect tempts each worker to work longer because of the higher pay for each hour of work. The income effect operates in the opposite direction because higher wages mean that workers can now afford more leisure time along with other good things of life. At some critical wage, the supply curve may bend backward. The labor supply of very gifted, unique people is quite inelastic: their wages are largely pure economic rent.

Competition among the Few

A. Behavior of Imperfect Competitors

1. Recall the four major market structures: (a) Perfect competition is found when no firm is large enough to affect the market price. (b) Monopolistic competition occurs when a large number of firms produce slightly differentiated products. (c) Oligopoly is an intermediate form of imperfect competition in which an industry is dominated by a few firms. (d) Monopolycomes when a single firm produces the entire output of an industry.


2. Measures of concentration are designed to indicate the degree of market power in an imperfectly competitive industry. Industries which are more concentrated tend to have higher levels of R&D expenditures, but on average their profitability is not higher.


3. High barriers to entry and complete collusion can lead to collusive oligopoly. This market structure produces a price and quantity relation similar to that under monopoly.

Imperfect Competition and Mononply

A. Patterns of Imperfect Competition

1. Most market structures today fall somewhere on a spectrum between perfect competition and pure monopoly. Under imperfect competition, a firm has some control over its price, a fact seen as a downward-sloping demand curve for the firm's output.


2. Important kinds of market structures are (a) monopoly, where a single firm produces all the output in a given industry; (b) oligopoly, where a few sellers of a similar or differentiated product supply the industry; (c) monopolistic competition, where a large number of small firms supply related but somewhat differentiated products; and (d) perfect competition, where a large number of small firms supply an identical product. In the first three cases, firms in the industry face downward-sloping demand curves.


3. Economies of scale, or decreasing average costs, are the major source of imperfect competition. When firms can lower costs by expanding their output, perfect competition is destroyed because a few companies can produce the industry's output most efficiently. When the minimum efficient size of plants is large relative to the national or regional market, cost conditions produce imperfect competition.