Organizational Behavior Theory in Business

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  • 0:04 History
  • 3:12 Characteristics
  • 4:26 Pros & Cons
  • 5:28 Case Study
  • 6:21 Lesson Summary
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Lesson Transcript
Instructor: Brooke Linn

Brooke has a masters degree in Human Science and is in the dissertation phase of a PhD in Organizational Systems.

This lesson contains a brief history of organizational behavior theory in business, including core contributing theorists. Further, the lesson discusses the pros and cons of the theory and provides a case study. Find out why people act the way they do in organizations.


Organizational behavior theory is the study of human behavior within an organizational environment. This means that organizational behavior asks questions about why humans behave the way they do in working environments. Dating back to the early 20th century, organizational behavior theory developed out of classical management theories, such as those of Frederick W. Taylor.

Taylor has been called the father of scientific management. He embraced the core principles of reducing conflict, simplifying duties, promoting cooperation, increasing output, and developing workers to their best abilities. In the late 1940s and 1950s, following Taylor's work, several researchers began looking at the importance of humanistic values on organizational behavior and how these values translate into action and productivity. In other words, researchers began to concentrate more on the value of the human experience in working environments and how this ultimately impacts how an organization operates, handles change, and develops.

Taking these emerging ideas about the importance of human behavior in the workplace, social scientist Kurt Lewin also made great contributions to organizational behavior theory. Lewin was critical to the founding of the National Training Laboratories (NTL), which pioneered T-groups. T-groups are basically a learning laboratory to help people understand the meaning and consequences associated with their own behavior and the behavior of others.

Within the groups there exists a place for learning about communication skills, interpersonal relations, individual personality theories, and group dynamics. Group dynamics refers simply to the different behaviors and processes that happen within a group. These groups offered a space for individuals to process group interactions and reactions.

By the 1960s, Abraham Maslow's theories began to dominate research about management. Maslow claimed that people are unique individuals with diverse skills, motivation, and desires to reach potentials. Specifically, Maslow felt that motivation ultimately increases performance and productivity.

Theorist Douglas McGregor was deeply committed to bringing Maslow's ideas of motivation into the workplace. McGregor referred to these ideas as the 'human side of enterprise'. In the 1960s, drawing on the work of Lewin and Maslow, McGregor introduced the theories of X and Y to management styles. Essentially, McGregor believed that managers make assumptions about their employees. These assumptions, McGregor argued, control the behavior management has toward staff.

Theory X assumes that people are lazy, passive, and irresponsible, and it is these traits and tendencies that stop them from doing their best work. Theory Y, on the other hand, assumes that people are capable of having a desire to achieve and take responsibility, which allows these individuals to excel at their jobs. At its core, McGregor's work sought to create better cooperation among management and workers as well as to create more satisfying work for individuals, which in turn would help create more stable and effective organizations.


Modern organizational behavior theory is based on a systems approach and founded in behavioral science. There are four main areas of study in organizational behavior theory, including individual behavior, group behavior, organizational structure, and organizational processes.

Motivation is one of the most significant characteristics of organizational behavior theory. Motivation is often connected to the level that members of an organization become invested or involved in its actions and mission. When looking at motivation, the distinction between intrinsic and extrinsic motivation is also critical.

Extrinsic motivation include things such as salary, environment, promotions, and terminations. Intrinsic motivation, on the other hand, is centered on the level of reward to one's own needs. For example, intrinsic motivation can refer to areas such as self-esteem and self-actualization.

According to Anders Dysvik and Bard Kuvaas' 2008 article in the International Journal of Training and Development, intrinsic motivation focuses on satisfaction of the needs for autonomy, competence, and relatedness for productive mental states.

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