CHAPTER 1

What Is
Organizational
Behavior?
I - LEARNING OBJECTIVES

After studying this chapter, students should be able to:

1. Describe what managers do.

2. Define organizational behavior (OB.)
3. Explain the value of the systematic study of OB.
4. Identify the contributions made to OB by major behavioral science disciplines.
5. List the major challenges and opportunities for managers to use OB concepts.
6. Identify the three levels of analysis in this book’s OB model.
7. Explain the need for a contingency approach to the study of OB.

II - CHAPTER NOTES

I. WHAT MANAGERS DO
A. Introduction
 Importance of developing managers’ interpersonal skills
o Companies with reputations as a good place to work—such as
Pfizer, Lincoln Electric, Southwest Airlines, and Starbucks—have
a big advantage when attracting high performing employees.
o A recent national study of the U.S. workforce found that:
 Wages and fringe benefits are not the reason people like
their jobs or stay with an employer.
 More important to workers is the job quality and the
supportiveness of the work environments.
 Managers’ good interpersonal skills are likely to make
the workplace more pleasant, which in turn makes it
easier to hire and retain high performing employees. In
fact, creating a more pleasant work environment makes
good economic sense.
  Definitions
o Manager: Someone who gets things done through other people.
They make decisions, allocate resources, and direct the activities
of others to attain goals.
o Organization: A consciously coordinated social unit composed of
two or more people that functions on a relatively continuous
basis to achieve a common goal or set of goals.
B. Management Functions
 French industrialist Henri Fayol wrote that all managers perform five
management functions: plan, organize, command, coordinate, and
control. Modern management scholars have condensed to these
functions to four: planning, organizing, leading, and controlling.
o Planning requires a manager to:
 Define goals (organizational, departmental, worker
levels).
 Establish an overall strategy for achieving those goals.
 Develop a comprehensive hierarchy of plans to integrate
and coordinate activities.
o Organizing requires a manager to:
 Determine what tasks are to be done.
 Who is to be assigned the tasks.
 How the tasks are to be grouped.
 Determine who reports to whom.
 Determine where decisions are to be made (centralized/
decentralized)
o Leading requires a manager to:
 Motivate employee.
 Direct the activities of others.
 Select the most effective communication channels.
 Resolve conflicts among members.
o Controlling requires a manager to:
 Monitor the organization’s performance.
 Compare actual performance with the previously set
goals.
 Correct significant deviations.
C. Management Roles
1. Introduction
 In the late 1960s, Henry Mintzberg studied five executives to
determine what managers did on their jobs. He concluded that
managers perform ten different, highly interrelated roles or sets
of behaviors attributable to their jobs.
 The ten roles can be grouped as being primarily concerned with
interpersonal relationships, the transfer of information, and
decision making
2. Interpersonal Roles
 Figurehead—duties that are ceremonial and symbolic in nature
 Leader—hire, train, motivate, and discipline employees
 Liaison—contact outsiders who provide the manager with
information. These may be individuals or groups inside or
outside the organization.
3. Informational Roles
 Monitor—collect information from organizations and institutions
outside their own
 Disseminator—a conduit to transmit information to organizational
members
  Spokesperson—represent the organization to outsiders
4. Decisional Roles
 Entrepreneur—managers initiate and oversee new projects that
will improve their organization’s performance.
 Disturbance handlers—take corrective action in response to
unforeseen problems
 Resource allocators—responsible for allocating human, physical,
and monetary resources
 Negotiator role—discuss issues and bargain with other units to
gain advantages for their own unit
D. Management Skills
I. Introduction
 Robert Katz has identified three essential management skills:
technical, human, and conceptual.
2. Technical Skills
 The ability to apply specialized knowledge or expertise. All jobs
require some specialized expertise, and many people develop
their technical skills on the job.
3. Human Skills
 Ability to work with, understand, and motivate other people, both
individually and in groups, describes human skills.
 Many people are technically proficient but interpersonally
incompetent.
4. Conceptual Skills
 The mental ability to analyze and diagnose complex situations
 Decision making, for example, requires managers to spot
problems, identify alternatives that can correct them, evaluate
those alternatives, and select the best one.
E. Effective Versus Successful Managerial Activities
 Fred Luthans and his associates asked: Do managers who move up
most quickly in an organization do the same activities and with the same
emphasis as managers who do the best job? Surprisingly, those
managers who were the most effective were not necessarily promoted
the fastest.
 Luthans and his associates studied more than 450 managers. They
found that all managers engage in four managerial activities.
o Traditional management. Decision making, planning, and
controlling. The average manager spent 32 percent of his or her
time performing this activity.
o Communication. Exchanging routine information and processing
paperwork. The average manager spent 29 percent of his or her
time performing this activity.
o Human resource management. Motivating, disciplining,
managing conflict, staffing, and training. The average manager
spent 20 percent of his or her time performing this activity.
o Networking. Socializing, politicking, and interacting with
outsiders. The average manager spent 19 percent of his or her
time performing this activity.
o Successful managers are defined as those who were promoted
the fastest:
 Networking made the largest relative contribution to
success.
 Human resource management activities made the least
relative contribution.
 o Effective managers—defined as quality and quantity of
performance, as well as commitment to employees:
 Communication made the largest relative contribution.
 Networking made the least relative contribution.
o Successful managers do not give the same emphasis to each of
those activities as do effective managers—it is almost the
opposite of effective managers.
o This finding challenges the historical assumption that promotions
are based on performance, vividly illustrating the importance that
social and political skills play in getting ahead in organizations.
F. A Review of the Manager’s Job
 One common thread runs through the functions, roles, skills, and
activities approaches to management: managers need to develop their
people skills if they are going to be effective and successful.

II. ENTER ORGANIZATIONAL BEHAVIOR

A. Introduction
 Definition: Organizational Behavior: OB is 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.
 Organizational behavior is a field of study.
o OB studies three determinants of behavior in organizations:
individuals, groups, and structure.
o OB applies the knowledge gained about individuals, groups, and
the effect of structure on behavior in order to make organizations
work more effectively.
o OB is concerned with the study of what people do in an
organization and how that behavior affects the performance of
the organization.
 There is increasing agreement as to the components of OB, but there is
still considerable debate as to the relative importance of each:
motivation, leader behavior and power, interpersonal communication,
group structure and processes, learning, attitude development and
perception, change processes, conflict, work design, and work stress.

III. COMPLEMENTING INTUITION WITH SYSTEMATIC STUDY

A. Introduction
 Each of us is a student of behavior:
o A casual or commonsense approach to reading others can often
lead to erroneous predictions.
o You can improve your predictive ability by replacing your intuitive
opinions with a more systematic approach.
o The systematic approach used in this book will uncover
important facts and relationships and will provide a base from
which more accurate predictions of behavior can be made.
o Behavior generally is predictable if we know how the person
perceived the situation and what is important to him or her.
o While people’s behavior may not appear to be rational to an
outsider, there is reason to believe it usually is intended to be
rational by the individual and that they see their behavior as
rational.
 o There are certain fundamental consistencies underlying the
behavior of all individuals that can be identified and then
modified to reflect individual differences.
 These fundamental consistencies allow predictability.
 There are rules (written and unwritten) in almost every
setting.
 Therefore, it can be argued that it is possible to predict
behavior.
 When we use the phrase systematic study, we mean looking at gathered
information under controlled conditions and measured and interpreted in
a reasonably rigorous manner.
o Systematic study replaces intuition, or those “gut feelings” about
“why I do what I do” and “what makes others tick.” We want to
move away from intuition to analysis when predicting behavior.

IV. CONTRIBUTING DISCIPLINES TO THE OB FIELD

A. Introduction
 Organizational behavior is an applied behavioral science that is built
upon contributions from a number of behavioral disciplines.
 The predominant areas are psychology, sociology, social psychology,
anthropology, and political science.
B. Psychology
 Psychology is the science that seeks to measure, explain, and
sometimes change the behavior of humans and other animals.
o Early industrial/organizational psychologists concerned
themselves with problems of fatigue, boredom, and other factors
relevant to working conditions that could impede efficient work
performance.
o More recently, their contributions have been expanded to include
learning, perception, personality, emotions, training, leadership
effectiveness, needs and motivational forces, job satisfaction,
decision- making processes, performance appraisals, attitude
measurement, employee selection techniques, work design, and
job stress.
C. Social Psychology
 Social psychology blends the concepts of psychology and sociology.
 It focuses on the influence of people on one another.
 Major area—how to implement it and how to reduce barriers to its
acceptance.
D. Sociology
 Sociologists study the social system in which individuals fill their roles;
that is, sociology studies people in relation to their fellow human beings.
 Their greatest contribution to OB is through their study of groups in
organizations, particularly formal and complex organizations.
E. Anthropology
 Anthropology is the study of societies to learn about human beings and
their activities.
 Anthropologists work on cultures and environments; for instance, they
have helped us understand differences in fundamental values, attitudes,
and behavior among people in different countries and within different
organizations.

V. THERE ARE FEW ABSOLUTES IN OB

A. Introduction
  There are few, if any, simple and universal principles that explain
organizational behavior.
 Human beings are complex. Because they are not alike, our ability to
make simple, accurate, and sweeping generalizations is limited.
 That does not mean, of course, that we cannot offer reasonably accurate
explanations of human behavior or make valid predictions. It does mean,
however, that OB concepts must reflect situational, or contingency,
conditions.
 Contingency variables—situational factors are variables that moderate
the relationship between the independent and dependent variables.
 Using general concepts and then altering their application to the
particular situation developed the science of OB.
 Organizational behavior theories mirror the subject matter with which
they deal.

VI. CHALLENGES AND OPPORTUNITIES FOR OB

A. Introduction
 There are many challenges and opportunities today for managers to use
OB concepts.
B. Responding to Globalization
1. Increased Foreign Assignments
 Organizations are no longer constrained by national borders.
2. Working with People from Different Cultures
 Globalization affects a manager’s people skills:
o First, if you are a manager, you are increasingly likely to
find yourself in a foreign assignment.
o Second, even in your own country, you are going to find
yourself working with bosses, peers, and other
employees who were born and raised in different
cultures.
3. Coping with Anticapitalism Backlash
o Third, economic values are not universally transferable.
Management practices need to be modified to reflect the values
of different cultures in which the organization operates. Not every
country adheres to capitalist values.
4. Overseeing Movement of Jobs to Countries with Low-cost Labor
 Managers are under pressure to keep costs down to maintain
competitiveness.
 Moving jobs to low-labor cost places requires managers to deal
with difficulties in balancing the interests of their organization
with responsibilities to the communities in which they operate.
5. Managing People During the War on Terror
 Organizations need to find ways to deal with employee fears
about security precautions during this time of war.
C. Managing Workforce Diversity
1. Introduction
 Workforce diversity is one of the most important and broad-
based challenges currently facing organizations.
 While globalization focuses on differences between people from
different countries, workforce diversity addresses differences
among people within given countries.
 Workforce diversity means that organizations are becoming
more heterogeneous in terms of gender, race, and ethnicity. It is
an issue in Canada, Australia, South Africa, Japan, and Europe
as well as the United States.
 2. Embracing Diversity
 A melting-pot approach assumed people who were different
would automatically assimilate.
 Employees do not set aside their cultural values and lifestyle
preferences when they come to work.
 The melting pot assumption is replaced by one that recognizes
and values differences.
3. Changing U. S. Demographics
 Members of diverse groups were a small percentage of the
workforce and were, for the most part, ignored by large
organizations. Today
o 47 percent of the U.S. labor force are women.
o Hispanics, Blacks, and Asians make up 28 percent but
will grow to 49 percent by 2050.
o the labor force is aging. By 2014, those 55 and older will
make up 20 percent of the labor force.
o workforce diversity has important implications for
management practice.
4. Implications
 organizations have shifted to recognizing differences and
responding to those differences.
 companies are providing diversity training and revamping benefit
programs to accommodate the different needs of employees.
D. Improving Quality and Productivity
 Almost every industry suffers from excess capacity. Excess capacity
translates into increased competition that forces managers to reduce
costs and improve productivity and quality at the same time.
 Implement quality management programs driven by the constant
attainment of customer satisfaction through continuous improvement.
 To improve productivity and quality, managers must include employees.
E. Responding to the Coming Labor Shortage
 If trends continue as expected, the United States will have a labor
shortage for the next 10-15 years (particularly in skilled positions).
 The labor shortage is a function of low birth rates and labor participation
rates (immigration does little to solve the problem).
 Wages and benefits are not enough to keep talented workers. Managers
must understand human behavior and treat employees properly.
F. Improving Customer Service
 Today the majority of employees in developed countries work in service
jobs.
 Eighty percent of the U.S. labor force is in the service industry.
 Examples include technical support reps, fast food counter workers,
waiters, nurses, financial planners, and flight attendants.
 Employee attitudes and behavior are associated with customer
satisfaction.
G. Improving People Skills
 People skills are essential to managerial effectiveness.
 OB provides the concepts and theories that allow managers to predict
employee behavior in given situations.
H. Empowering People
 Today managers are being called coaches, advisers, sponsors, or
facilitators, and in many organizations, employees are now called
associates.
  An increasing number of organizations are using self-managed teams.
Managers are putting employees in charge of what they do. There is a
blurring between the roles of managers and workers; decision making is
being pushed down to the operating level, where workers are being given
the freedom to make choices about schedules and procedures and to
solve work-related problems.
o Managers are empowering employees.
o They are putting employees in charge of what they do.
o Managers have to learn how to give up control.
o Employees have to learn how to take responsibility for their work
and make appropriate decisions.
I. Stimulating Innovation and Change
 Successful organizations must foster innovation and master the art of
change.
 Employees can be the impetus for innovation and change or a major
stumbling block.
 Managers must stimulate employees’ creativity and tolerance for change.
J. Coping with “Temporariness”
 Organizations must be flexible and fast in order to survive. Evidence of
temporariness includes:
o Jobs must be continually redesigned.
o Tasks being done by flexible work teams rather than individuals.
o Company reliance on temporary workers.
o Subcontracting.
o Workers need to update knowledge and skills.
o Work groups are also in a continuing state of flux.
o Organizations are in a constant state of flux.
o Managers and employees must learn to cope with
temporariness.
o Learning to live with flexibility, spontaneity, and unpredictability.
 OB provides help in understanding a work world of continual change,
how to overcome resistance to change, and how to create an
organizational culture that thrives on change.
K. Working in Networked Organizations
 Networked organizations are becoming more pronounced.
 Manager’s job is fundamentally different in networked organizations.
Challenges of motivating and leading “online” require different
techniques.
L. Helping Employees Balance Work-Life Conflicts
 The creation of the global workforce means work no longer sleeps.
Workers are on-call 24-hours a day or working nontraditional shifts.
 Communication technology has provided a vehicle for working at any
time or any place.
 Employees are working longer hours per week—from 43 to 47 hours per
week since 1977.
 The lifestyles of families have changed—creating conflict: more dual
career couples and single parents find it hard to fulfill commitments to
home, children, spouse, parents, and friends.
 Balancing work and life demands now surpasses job security as an
employee priority.
M. Improving Ethical Behavior
 Ethical dilemmas are situations in which an individual is required to
define right and wrong conduct.
 Good ethical behavior is not so easily defined.
  Organizations are distributing codes of ethics to guide employees
through ethical dilemmas.
 Managers need to create an ethically healthy climate.

VII. COMING ATTRACTIONS: DEVELOPING AN OB MODEL

A. An Overview
 A model is an abstraction of reality, a simplified representation of some
real-world phenomenon.
 There are three levels of analysis in OB: individual, group, and
organizational systems level.
o The three basic levels are analogous to building blocks; each
level is constructed upon the previous level.
 Group concepts grow out of the foundation laid in the individual section;
we overlay structural constraints on the individual and group in order to
arrive at organizational behavior.
B. The Dependent Variables
1. Introduction
 Dependent variables are the key factors that you want to explain
or predict and that are affected by some other factor.
 Primary dependent variables in OB: productivity, absenteeism,
turnover, job satisfactory, deviant workplace behavior, and
organizational citizenship behavior.
2. Productivity
 It is achieving goals by transferring inputs to outputs at the
lowest cost. This must be done both effectively and efficiency.
 An organization is effective when it successfully meets the needs
of its clientele or customers.
 Example: When sales or market share goals are met,
productivity also depends on achieving those goals efficiently.
 An organization is efficient when it can do so at a low cost.
 Popular measures of efficiency include: ROI, profit per dollar of
sales, and output per hour of labor.
 Productivity is a major concern of OB: We want to know what
factors influence the effectiveness and efficiency of individuals,
groups and the company.
3. Absenteeism
 Absenteeism is the failure to report to work.
 Estimated annual cost per employee: $789 in the United States,
$694 in the United Kingdom. Neither includes costs associated
with lost productivity, additional costs of overtime, replacements,
etc.
 All absences are not bad. For instance, in jobs in which an
employee needs to be alert—consider surgeons and airline
pilots, for example—it may well be better for the organization if
an ill or fatigued employee does not report to work.
4. Turnover
 Turnover is the voluntary and involuntary permanent
withdrawal from an organization.
 A high turnover rate results in increased recruiting,
selection, and training costs; costs estimated at about $34,100
for a programmer and $10,445 for a lost sales clerk.

 Average turnover in the United States is 15 percent.

  All organizations have some turnover and the “right”
people leaving—marginal and sub-marginal employees can be
positive.
 Turnover often involves the loss of people the
organization does not want to lose.

5. Deviant Workplace Behavior

 Deviance can range from someone playing his music too
loud to violence.
 This represents voluntary behavior that violates
significant organizational norms.
 Workplace violence represents 42 billion dollars a year.
 Ultimately deviant workplace behavior is a function of
dissatisfied workers.
6. Organizational Citizenship Behavior
 Organizational citizenship behavior (OCB) is
discretionary behavior that is not part of an employee’s formal
job requirements, but that nevertheless promotes the effective
functioning of the organization.
 Desired citizenship behaviors include:
o Helping others on their team.
o Volunteering for extra job activities.
o Avoiding unnecessary conflicts.
o Respecting rules and regulations.
o Tolerating occasional work-related impositions.
7. Job Satisfaction
 Job satisfaction is “the difference between the amount of
rewards workers receive and the amount they believe they
should receive.”
 Unlike the previous variables, job satisfaction represents
an attitude rather than a behavior.
 It became a primary dependent variable for two reasons:
o Demonstrated relationship to performance factors
o The value preferences held by many OB researchers
 Managers have believed for years that satisfied
employees are more productive, however much evidence
questions that assumed causal relationship.
 It can be argued that advanced societies should be
concerned not just with the quantity of life, but also with the
quality of life.
 Ethically, organizations have a responsibility to provide
employees with jobs that are challenging and intrinsically
rewarding.
C. The Independent Variables
1. Introduction
 Organizational behavior is best understood when viewed
essentially as a set of increasingly complex building blocks:
Individual, group, and organizational system.
 The base, or first level, of our model lies in understanding
individual behavior.
2. Individual-Level Variables:
 People enter organizations with certain characteristics that will
influence their behavior at work.
  The more obvious of these are personal or biographical
characteristics such as age, gender, and marital status;
personality characteristics; an inherent emotional framework;
values and attitudes; and basic ability levels.
 There is little management can do to alter them, yet they have a
very real impact on employee behavior.
 Four other individual-level variables are: perception, individual
decision making, learning, and motivation.
3. Group-Level Variables:
 The behavior of people in groups is more than the sum total of all
the individuals acting in their own way.
 People behave differently in groups than they do when alone.
 People in groups are influenced by:
o Acceptable standards of behavior by the group.
o Degree of attractiveness to each other.
o Communication patterns.
o Leadership and power.
o Levels of conflict.
4. Organization Systems Level Variables
 The top level of our model lies in understanding organizations
system level variables.
o Organizational behavior reaches its highest level of
sophistication when we add formal structure.
o The design of the formal organization; the organization’s
internal culture; and the organization’s human resource
policies and practices (that is, selection processes,
training and development programs, performance
evaluation methods) all have an impact on the
dependent variables.
D. Toward a Contingency OB Model
 The model does not explicitly identify the vast number of
contingency variables because of the tremendous complexity that would
be involved in such a diagram.
 We will introduce important contingency variables that will
improve the explanatory linkage between the independent and dependent
variables in our OB model.
 The concepts of change and stress are included in
Exhibit 1–7, acknowledging the dynamics of behavior and the fact that
work stress is an individual, group, and organizational issue.

VIII. SUMMARY AND IMPLICATIONS FOR MANAGERS

 Managers need to develop their interpersonal skills.
 OB is a field that investigates the impact of individuals,
groups, and structure on an organization.
 OB focuses on improving productivity, reducing
absenteeism and turnover, and increasing employee citizenship and job
satisfaction.
Team Exercise
WORKFORCE DIVERSITY

Purpose
To learn about the different needs of a diverse workforce.

Time required
Approximately 40 minutes.

Participants and roles

Divide the class into six groups of approximately equal size. Each group is assigned one of the
following roles:
Nancy is 28 years old. She is a divorced mother of three children, ages 3, 5, and 7. She
is the department head. She earns $40,000 a year on her job and receives another $3,600 a year
in child support from her ex-husband.
Ethel is a 72-year-old widow. She works 25 hours a week to supplement her $8,000
annual pension. Including her hourly wage of $8.50, she earns $19,000 a year.
John is a 34-year-old black male born in Trinidad who is now a U.S. resident. He is
married and the father of two small children. John attends college at night and is within a year of
earning his bachelor’s degree. His salary is $27,000 a year. His wife is an attorney and earns
approximately $50,000 a year.
Lu is a 26-year-old physically impaired male Asian American. He is single and has a
master’s degree in education. Lu is paralyzed and confined to a wheelchair as a result of an auto
accident. He earns $32,000 a year.
Maria is a single, 22-year-old Hispanic woman. Born and raised in Mexico, she came to
the United States only three months ago. Maria’s English needs considerable improvement. She
earns $20,000 a year.
Mike is a 16-year-old white male high school sophomore who works 15 hours a week
after school and during vacations. He earns $7.20 an hour, or approximately $5,600 a year.
The members of each group are to assume the character consistent with their assigned
role.

Background
Our six participants work for a company that has recently installed a flexible benefits program.
Instead of the traditional “one benefit package fits all,” the company is allocating an additional 25
percent of each employee’s annual pay to be used for discretionary benefits. Those benefits and
their annual cost are listed below.

 Supplementary health care for employee:

Plan A (no deductible and pays 90%) = $3,000
Plan B ($200 deductible and pays 80%) = $2,000
Plan C ($1,000 deductible and pays 70%) = $500

 Supplementary health care for dependents (same deductibles and percentages as

above):
Plan A = $2,000
Plan B = $1,500
Plan C = $500

 Supplementary dental plan = $500

 Life insurance:
 Plan A ($25,000 coverage) = $500
Plan B ($50,000 coverage) = $1,000
Plan C ($100,000 coverage) = $2,000
Plan D ($250,000 coverage) = $3,000

 Mental health plan = $500

 Prepaid legal assistance = $300

 Vacation = 2 percent of annual pay for each week, up to 6 weeks a year

 Pension at retirement equal to approximately 50 percent of final annual earnings =

$1,500

 Four-day workweek during the three summer months (available only to full-time
employees) = 4 percent of annual pay

 Day-care services (after company contribution) = $2,000 for all of an employee’s children,
regardless of number

 Company-provided transportation to and from work = $750

 College tuition reimbursement = $1,000

 Language class tuition reimbursement = $500

The Task
1. Each group has 15 minutes (consider increasing this to 25 minutes) to develop a flexible
benefits package that consumes 25 percent (and no more!) of their character’s pay.
2. After completing step 1, each group appoints a spokesperson who describes to the entire
class the benefits package they have arrived at for their character.
3. The entire class then discusses the results. How did the needs, concerns, and problems
of each participant influence the group’s decision? What do the results suggest for trying
to motivate a diverse workforce?

Special thanks to Professor Penny Wright (San Diego State University) for her suggestions during
the development of this exercise.

Questions

1. What needs were identified?

2. How did each element of the benefit plan meet the identified need?
3. How diverse were the needs, and why were they so diverse?
Ethical Dilemma
LYING IN BUSINESS

Do you think it’s ever OK to lie? If one was negotiating for the release of hostages, most people
would probably agree that if lying would lead to their safety, it’s OK. What about in business,
where the stakes are rarely life or death? Business executives like Martha Stewart have gone to
jail for lying (submitting a false statement to federal investigators). Is misrepresentation or
omitting factors okay as long as there is no outright lie?
Consider the negotiation process. A good negotiator never shows all his cards, right?
And so omitting certain information is just part of the process. Well, it may surprise you to learn
that the law will hold you liable for omitting information if partial disclosure is misleading, or if one
side has superior information not accessible to the other.
In one case (Jordan v. Duff and Phelps), the company (Duff and Phelps) withheld
information from an employee—Jordan—about the impending sale of their company. The
problem: Jordan was leaving the organization and therefore sold his shares in the company. Ten
days later, those shares became worth much more once the sale of the company became public.
Jordan sued his former employer on the argument that they should have disclosed this
information. Duff and Phelps countered that it never lied to Jordan. The Court of Appeals argued
that in such situations one party cannot take “opportunistic advantage” of the other. In the eyes of
the law, sometimes omitting relevant facts can be as bad as lying.

Questions

1. In a business context, is it ever OK to lie?

2. If you answered yes, what are those situations? Why is it okay to lie in these situations?
3. In business, is withholding information for one’s advantage the same as lying? Why or
why not?
4. In a business context, if someone has something to gain by lying, what percent of the
people do you think, would lie?

Sources: Based on “Brain Scans Detect More Activity in Those Who Lie,” Reuters, November 29, 2004;
http://www.msnbc.msn.com/id/6609019; P. Ekman and E. L Rosenberg, What the Fact Reveals: Basic and
Applied Studies of Spontaneous Expression Using the Facial Action Coding System (CAPS), New York:
Oxford University Press. Second expanded edition 2004.