Organizational Behavior (OB): Definition, Importance, Levels, Components, and More

What is Organizational Behavior (OB)?

Organizational behavior (OB) is the study of human behavior in the work setting, the influence of an organization on its employees, and the employees of the organization.

Organizational behavior is the behavioral approach of the management, not the whole of management. It studies human (employees) behavior and application in the organizational settings.

OB’s study helps to better understand the behavior of employees and let the managers take action to make sound relationships between employees and organizational goals and achieve them in the future.

An organization’s tasks are done through people, individually, or collectively on their own or in collaboration with technology. The management of organizational behavior is the central task of the manager – a task that involves the ability to (i) understand the behavior patterns of the individual, groups, and organizations, (ii) to predict the behavior responses will be obtained by various managerial actions, (iii) to use this understanding and these predictions to achieve control in the organization.

The most common definition of organizational behavior are:

  • Organizational behavior is directly concerned with the understanding, prediction, and control of human behavior in the organization. – Luthans
  • OB is the study of what people think, feel, and do in and around the organizations. – McShane and Glinow

Thus, organizational behavior is the study and application of knowledge about how people act within organizations. It is a human tool for human benefit. It applies broadly to the behavior of people in all types of organizations such as education, government, business, and service organizations.

Wherever organizations are, there is a need to understand organizational behavior. Through this, a manager can fully understand his people’s behavior and apply such understanding to motivation, career development, communication, mutual cooperation, change perception, conflict management, and ultimately drive their collective efforts in the achievement of objectives.

Features of Organizational Behavior

Organizational behavior interprets the actions of people in a meaningful manner and helps management with strategies formulation. It aims to build better relationships at the workplace so as to achieve human and organizational objectives.

The salient features of OB can be pointed out as:

  • A separate field of study.
  • A behavioral approach.
  • Cause and effect relationship.
  • Interdisciplinary in nature.
  • Goal-oriented.
  • Human approach for human benefits.
  • Art as well as science.

These features of OB help to know how it understands, predicts, and manages human behavior in a meaningful manner.

Importance of Organizational Behavior

Human behavior is predetermined, goal-directed, yet unexpected. Understanding human behavior has become increasingly important for managers in order to properly manage people. Understanding why individuals act the way they do can help managers get the most out of their employees’ efforts in order to achieve organizational goals more effectively.

In doing so, OB seeks to find the answer to these main 3 questions.

  • Why do people (employees) behave as they behave?
  • Why do people do what they do at work in organizations?
  • What influences people’s behavior at work?

Organizational behavior helps managers to focus on the whole complex behavior of employees in the organization by identifying the cause and effect of that behavior.

The main objective of the OB is to effective use of the resources which is in the organization. It deals with the organization’s employees to move them to do work to achieve certain targeted goals. In this way, it increases the productivity of the particular organization.

The main benefits, as well as the importance of OB, can be pointed out below:

  • Helps to understand the organization and employees in a better way.
  • Helps to motivate employees and devolve employee morale.
  • Improves labor relations.
  • Promotes effective prediction and control of employees’ behavior.
  • Effective utilization of human resources.
  • Develops a productive, cooperative, and harmonized relationship between employees and the organization.
  • Boosts up the achievement of organizational goals and objectives.

After all, the ultimate goal of these important points of the OB is to enhance the performance and productivity of the organization and accomplish the desired goals.

Key Elements/Components of Organizational Behavior

As everything is made up of something such as we humans with different organs the same OB has also four key elements people, structure, technology, and external environment. The first three elements are related to the internal environment of OB and the fourth one is outside.

When people come together in an organization to achieve a goal, they need some type of structure. People also employ technology to assist them in doing their tasks, thus there is a mix of people, structure, and technology.

Furthermore, these factors are both influenced by and influenced by the external environment. Each of the four OB aspects will be briefly discussed.


There can be no organization without individuals. They make form the organization’s internal social system. Individuals and groups make up people. Formal or informal groups might be small or vast, interconnected and complex.

People are dynamic by nature because they interact with and influence one another. Forming, changing, and dissolving groups are all possibilities. Organizations exist to serve the general public.


There is a structure to everything in the world. The human body, a tree, a house, and even the website you’re reading all have different types of structures. The roles and duties of personnel in an organization are defined by the structure.

It results in the division of labor. Some may be executives, while others may be bosses, assistants, individuals, or employees. All of these persons are interconnected in order to achieve the goals in a coordinated manner. The authority-responsibility ties are clarified by the structure.


Work would be difficult, even not impossible, without technology. It provides the financial and physical resources necessary to make people’s work more convenient.

Machines, tools, procedures, and resources are provided by the people. The type of technology is determined by the nature of organizational tasks and the size of activities. Technology has the potential to limit people’s freedom.

External Environment

The external environment, in which an organization operates, is a wider social structure. The external environment, which encompasses socio-cultural, economic, political, legal, technological, and geographic influences, has an impact on organizations.

These forces have a variety of effects on people’s attitudes, motivations, and working conditions in an organization. Similarly, the organization has some impact on the environment, but it is not as strong. The organization obtains its inputs from the environment and returns its outputs to it.

Levels of OB

Organizational behavior analyzes the behavior of people at three levels in the organizational setting viz. individual level, group level, and organizational level.

The first level is consist of the behavior of the individual employee and such behavior is complex in nature. The use of psychology is effective means to understand people’s behavior at this level.

The group is consist of two or more people working together to accomplish some common goals. They collectively work. At the organizational level, the group of people constitutes the organization and analyzes how the organization and people interact with the environment.

Each lower level of OB is the floor of the upper levels. To understand the organization’s system levels as they level up the behavior of understanding needs to be systemized.

Fundamental Concepts of Organizational Behavior (Basic Assumptions)

Every field of social science (or even physical science) has a philosophical foundation of basic concepts (assumptions) that guide its development. In accounting, for example, a fundamental concept is that ‘for every debit, there will be a credit. In physics, a basic philosophy is that elements of nature are uniform

But the same cannot be said for people. Organizational behavior has certain basic assumptions revolving around the nature of people and the nature of organizations.

The Nature of People

In this category, there are four basic assumptions of OB.

Individual Differences: Even though people have a lot in common, there are far more differences than similarities. Physical traits, IQ, aptitudes, attitudes, personality, abilities, and so on differ between people. Each person is distinct from the moment they are born, and their subsequent experiences further distinguish them. These distinctions must be taken into account by managers since they have an impact on employee behavior on the job.

A Whole Person: This concept implies that a person’s job behavior cannot be viewed in isolation. When an employee arrives to work he arrives as a whole person, his or her past, sentiments, emotions, feelings, and so on are intrinsically tied to the talents they use on the job. Managers must support a man’s whole development rather than a certain facet of his personality.

Caused Behavior (Motivation): Humanity is caused, motivated, and goal-directed, according to psychologists. People’s actions are driven by wants that can be guided and controlled to achieve desired outcomes.

Value of a Person: People should be treated differently from other resources in the organization, according to this principle. In companies, people’s feelings, aspirations/desires, sentiments, skills, and so on should be recognized. People should be treated with dignity, respect, and fairness.

The Nature of Organization

This category contains two basic assumptions about the organization. They are: (1) organizations are social systems, and (ii) they are formed on the basis of mutual interest.

Social Systems: Organizations, according to social scientists, are social systems. They are subject to social and psychological laws and regulations. The social system coordinates its members’ activities in order to attain common goals. Humans are social creatures. People have a variety of social and psychological demands, as well as varied positions and roles. People’s actions are influenced by both personal and organizational purposes.

Mutual Interest: The phrase “organizations require people, and people need organizations” exemplifies this principle. Employees require organization in order to achieve their objectives, and organizations require people in order to achieve their objectives.

Contributing Disciplines to the Field of Organizational Behavior

Organizational behavior is the integrated body of knowledge contributed by a number of behavioral disciplines. It is an interdisciplinary field.

The major contributing disciplines are:

  • Psychology
  • Sociology
  • Social Psychology
  • Anthropology
  • Political Science
  • Economic
  • History
  • And, other social sciences.

All these disciplines had played important role in adding separate and useful elements to the knowledge of organizational behavior. These are the disciplines that made OB a multidisciplinary discipline in nature.

Challenges and Opportunities to OB

The world of management has changed a lot in the past few decades. Today’s managers are facing a number of behavioral issues and challenges in their organizations.

Some important changes in the workplace seen are increasing competition, changing employees’ expectations, declining loyalty towards organizations, increasing number of women workers, old age employees, and minorities among others.

In addition, today there are a lot of challenges and opportunities for managers to use knowledge of organizational behavior. Some of the main ones are:

  • Globalization
  • Workforce Diversity
  • Quality and Productivity
  • Improving Employee’s Skills
  • Empowerment of Employees
  • Managing Organizational Change
  • Improving Ethical Behavior

All these factors have both challenges and opportunities for the manager, organization, and its people. If the manager is skillful and creative, organizational behavior turns towards the growth of the business by nurturing these factors’ positive aspects. Similarly, if there is a passive and uncreative manager the outcome is negative.


Organizational behavior is hence the study of how and why people behave the way they behave in the organizational settings and coming out with the cause and effect of such behavior and making a producing relationship between people’s interests and the organization’s interest.

The study of OB and its usefulness has significant benefits to the manager in managing human resources as well as achieving organizational objectives effectively and efficiently. Thus, a manager should carefully understand the behavior of his employees and motivate them accordingly to get fruitful results from the practice of organizational behavior.

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