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Applying behavioral management in Eastern Europe
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European Management Journal Vol. 16, No. 4, pp. 466–475, 1998 1998 Elsevier Science Ltd. All rights reserved Printed in Great Britain S0263-2373(98)00023-1 0263-2373/98 $19.00 + 0.00
Applying Behavioral Management in Eastern Europe FRED LUTHANS, George Holmes Distinguished Professor of Management, University of Nebraska, Lincoln, USA ALEX STAJKOVIC, Visiting Assistant Professor of Organizational Behavior, University of California at Irvine, Irvine, USA BRETT C. LUTHANS, Assistant Professor of Management, Missouri Western State College, St Joseph, USA KYLE W. LUTHANS, Assistant Professor of Management, Bloomsburg University of Pennsylvania, Bloomsburg, USA As posed in the title, the authors make a case for the use of behavioral management as a pragmatic and effective way to help East European managers improve employee performance. After providing the cultural and theoretical grounding for the use of a behavioral approach, the five-step O.B. Mod. model is presented. The successful use of O.B. Mod. in a Russian factory is given detailed attention and then the case is made for using this approach in all Eastern European organizations. Particular attention is given to the nature and power of contingently administered social reinforcers to increase employee performance at no cost. The authors conclude that this approach can help meet the competitive challenges Eastern European management faces now and in the future. 1998 Elsevier Science Ltd. All rights reserved Now, after almost 10 years, organizations in the Commonwealth of Independent States (CIS) and Eastern Europe continue to struggle to become more effective so that they can better compete in the international marketplace. Much of the popular media attention in the transformation process has focused on political and economic issues and secondarily on the need for technological advancement. Yet, like other organizations everywhere, the people may really be the key. As Stanford Professor Jeffery Pfeffer (1994) concluded after years of research and experience with companies around the world, the only true, lasting competitive advantage comes through human resources and how they are man466
aged. Or, as the head of automaker Chrysler recently put it, ‘The only way we can beat the competition is with people. That’s the only thing anybody has. Your culture and how you motivate and empower and educate your people is what makes the difference.’ Obviously, the political and economic environment do and will play a critical role in the success of individual Eastern European organizations, and so do and will the strategies, structures, functions (e.g., marketing and financing), and technologies employed. However, the starting assumption of this article for the special issue on ‘Russia, Central and Eastern Europe’ is that the people can make a significant difference. A recent special report on ‘Business in Eastern Europe’ in The Economist (November 22, 1997) notes that the transformation from ‘decadent Communism to primitive capitalism was just the first step.’ What is now needed according to this comprehensive report is better managed companies ‘that enhances productivity rather than cripples it’ and ‘the biggest brake on productivity growth is people.’ Organizations in the CIS and Eastern Europe operate in different political and economic environments (some relatively better, some a lot worse than others), and of course have different degrees of success in implementing various strategies, structures, functions and technologies. But, importantly, all these organizations have one thing in common, their human resources. Not unlike most of their counterEuropean Management Journal Vol 16 No 4 August 1998
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parts around the world, the management of human resources in CIS and Eastern European organizations leaves, putting it mildly, considerable room for improvement (e.g. see Kiezun, 1991; Ivancevich et al., 1992; Hofstede, 1993). For example, The Economist report cited above suggests that the biggest gulf between Eastern European managers and their counterparts in the West may be in the human resources arena. The neglected question for meeting the challenge of improving performance may be: ‘How can organizations in the transformational economies manage their human resources more effectively?’ Although many answers could and have been offered to this question, the purpose of this article is to offer behavioral management as a proven, practical way to help all CIS and Eastern European organizations improve their performance. After first providing the cultural and theoretical foundation and spelling out exactly what is meant by this behavioral approach to human resource management (HRM), its application to all Eastern European enterprises (start-up, privatized, and still state-owned) are presented and analyzed.
Cultural and Theoretical Grounding The proposed behavioral management approach for organizations in Eastern Europe must be able to make a cultural fit and be based on a logical theoretical framework.
The Cultural Fit The success of any human resource management approach will greatly depend on its cultural fit (Adler, 1997; Dowling et al., 1994). Most analyses of cultural fit use the Hofstede (1980) dimensions. At least historically, Eastern Europe in general and Russia in particular have been depicted as high in power distance, uncertainty avoidance, collectivism, femininity and short-term orientation (Bollinger, 1994; Hofstede, 1993; Puffer and Shekshnia, 1996; Veiga et al., 1995). However, more recent data by Trompenaars (1994) indicate that the CIS and at least the Czechs (the two Eastern European areas/countries in his sample of 28 countries) have high individualism, not the traditionally conceived collectivism. This new found individualism may be the result of the growing individually-oriented entrepreneurial spirit, especially among the younger people, during the transformation period (Johnson and Loveman, 1995; McCarthy et al., 1993). For example, a recent Wall Street Journal article describing how the Russian economy is finally showing signs of growth noted that after privatization of a large manufacturing enterprise in Ivanovo: ‘Three fresh-faced 28-year-olds took over the factory. The European Management Journal Vol 16 No 4 August 1998
40-year old factory director, a former regional official in the textile ministry, now works for them. The young financiers set about finding customers, and now the factory works on direct orders from them instead of a government ministry’s five-year plan.’ (Liesman, 1998, p. A-11)
In addition to individualism, Trompenaars (1994) also found the CIS to be quite high on the cultural dimension of particularism. This is the belief that the situation dictates how practices should be applied and the focus is on interpersonal relationships. An argument could be made that either the traditionally assumed collectivist cultural values or the apparently emerging individualism and particularism in Eastern Europe is compatible with cognitive theoretical groundings and assumptions. Either collectivist or individualistic cultural values could provide support for the use of cognitively-based theories such as the hierarchy of needs or the more modern exchange, expectancy or equity theories of work motivation to study human resources in Eastern Europe. All these motivation theories can certainly help to better understand the complexity of human behavior in any workplace, including Eastern Europe. Unfortunately, these cognitive theories neither provide specific techniques for implementation nor relate very well to employee performance (e.g. see Cotton et al., 1988; Pervin, 1985; Wahba and Bridwell, 1976). An equally persuasive argument could be made that there is a fit between the collectivist and emerging individualistic and particularistic cultural values in Eastern Europe and the use of a behaviorally-based theoretical framework. Behavioral theory may not lead to as deep an understanding of the complexity of employee behavior as the cognitive motivation theories. However, we would suggest that the technique of organizational behavior modification (O.B. Mod.) that comes out of behavioral theory (Luthans and Kreitner, 1975, 1985) is directly applicable to the management of human resources in Eastern European organizations and makes a cultural fit. Specifically, Kiezun (Kiezun, 1991, p. 84) suggests that Eastern European workers’ collectivist values would support the use of rewards to increase performance because the improvement becomes materially worthwhile for the individual and, more importantly, the common good. The emerging individualism and particularism values may be even more compatible with behavioral theory and application than would be collectivist values. As will be discussed next, the assumption under the behavioral framework is that Eastern European individual workers’ behavior is a function of contingent consequences. This behavioral premise makes an especially good cultural fit with individualism and particularism (situational interpersonal relations). 467
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Behavioral Theory As is sometimes forgotten, behavioral theory as an explanatory framework for human behavior started with the pioneering Russian physiologist Ivan Pavlov. In the famous experiments with laboratory dogs, Pavlov developed the notion of classical conditioning (the S-R connection) which has served as the basic building block of connectionist learning and behaviorism. B.F. Skinner’s operant conditioning was built upon Pavlov’s seminal work and he readily acknowledges borrowing the term reinforcement from Pavlov. Skinner states in a book about his life: ‘I got the word from Pavlov and feel that it has a distinct advantage over ‘reward’ by identifying the effort of a consequence of behavior in strengthening the behavior — that is, in making the behavior more likely to occur again. The old idea of pleasure and pain and Thorndike’s adjectives ‘satisfying’ and ‘annoying’ refer to feelings which, in my point of view, is quite off the track.’ (Bjork, 1997, p. 99).
Most recently, behavioral theory has evolved from Skinner’s operant or reinforcement theory to Albert Bandura’s more complex social cognitive theory and self-efficacy. Social cognitive theory contains both cognitive and behavioral dimensions. Specifically, Bandura (1986, 1997) identifies basic human capabilities such as symbolizing, forethought, vicarious learning, self-regulation and self-reflection as the core of social cognitive theory. We have recently proposed that this eclectic theory provides the most comprehensive understanding of organizational behavior (Stajkovic and Luthans, 1998). The derivative of social cognitive theory is self-efficacy and is defined by Bandura (1986, 1997) as an individual’s belief (or confidence) about his or her abilities to mobilize motivation, cognitive resources, and courses of action needed to successfully execute a specific task within a given context. We have found that this self-efficacy has a strong positive relationship with work-related performance (Stajkovic and Luthans, 1998). Although social cognitive theory and self-efficacy seems to hold considerable promise for the future, at this stage of the transformation in Eastern Europe, behavioral theory seems more appropriate. The practical application of behavioral theory, the premise that behavior is a function of its contingent reinforcing consequences is most relevant. Specifically, behaviors that are followed by positive reinforcers will be strengthened and become more frequent. Behaviors that are followed by punishers will weaken and become less frequent. Behaviors that are followed by no consequence (extinction process) will also weaken and decline in subsequent frequency. In other words, applied to any workplace in any country, ‘You get what you reinforce!’ Even the advocates of cognitive theories will not argue with these ‘laws of behavior.’ For example, 468
pioneering expectancy theorist Victor Vroom (Vroom, 1964, p. 13) declares, ‘without a doubt the law of effect or principle of reinforcement must be included among the most substantiated findings of experimental psychology and is at the same time among the most useful findings for an applied psychology concerned with control of human behavior.’ Importantly, we would maintain that the behavioral laws and principles hold across cultures. Our position then is that behavioral management is directly applicable to employees in all East European organizations. The premise is that all behavior, regardless of culture, is a function of its consequences. However, we would be quick to add that the specific type of country culture, organizational culture, and the reward that is used may result in a differing impact on employee performance. In other words, our position is that behavioral theory and its principles/laws will hold across cultures, but, as the rest of the article will discuss, the nature of the culture, the specific organization and the type of rewards that are used may have a different, but still positive, impact on employee performance. After first explaining behavioral management through the steps of the organizational behavior modification (O.B. Mod.) model, the findings from our recent metaanalysis are presented, and then a specific application of O.B. Mod. in a Russian factory are reviewed.
The Steps of O.B. Mod. Although there are several models or approaches to behavioral management over the years (e.g. Gilbert, 1978; Komaki, 1986; Scott and Podsakoff, 1985), we propose the application of organizational behavior modification or simply the O.B. Mod. model first proposed by Luthans (1973) and fully developed by Luthans and Kreitner (1975, 1985). O.B. Mod. is a step-by-step problem solving, analytical, and actionoriented approach for the identification and contingent management of high impact performancerelated employee behaviors. The full model is shown in Figure 1. Briefly summarized, the five major steps are as follows: 1. Identification of performance behaviors. The first step of the O.B. Mod. application model is to identify the critical, observable performance-related behaviors. The objective of this first step is to identify high impact behaviors that may account for most of performance outcomes. The identification of the performance behaviors can be carried out by those closest to the job in question — the jobholders themselves and/or their immediate supervisor. Another approach to identifying critical behaviors is through a systematic behavioral audit in which each job in question would be analyzed using job analysis techniques. Regardless of the method used, for a behavior to be identified as critical and appropriate for O.B. Mod., there European Management Journal Vol 16 No 4 August 1998
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Figure 1 O.B. Mod. Application Model
must be a positive answer to the questions (1) can it be measured? and (2) does it have a significant impact on a performance outcome? 2. Measurement of the behavior. The second step is to measure the baseline frequencies of the critical behaviors identified in step 1. This baseline measure is obtained by determining how often the identified behavior occurs under present conditions. These measures can be determined through direct observation or more often by obtaining the information from the products of the behavior (e.g. quality or quantity data) gathered from archival (existing) records. The purpose of the baseline measure is to provide objective data to determine if there is indeed a problem or deficiency and to monitor performance after the intervention step. This measurement step separEuropean Management Journal Vol 16 No 4 August 1998
ates O.B. Mod. from other, more subjective, human resource management motivation or leadership approaches. 3. Functional analysis of the behavior. The third step of the model is a functional analysis of the antecedents and contingent consequences of the behavior. Antecedents of the target behavior must be identified to determine what factors cue (not cause) or set the occasion for the behavior to be emitted or carried out. If the antecedents, such as the equipment, technological processes, job design, clarifying goals, and/or training are not present, then the employee cannot exhibit the critical behaviors. However, the more important part of the functional analysis is to identify the contingent consequences. The antecedents only assume stimulus control properties (take on power to emit 469
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the behavior) in the presence of reinforcing contingent consequences. Most often the ‘front-end’ antecedents of the behavior are in place (there is adequate technology and equipment, the employees know what they are supposed to do, and they are trained how to do it). Yet, the common problem is that they are not doing it. Thus, the identification of the reinforcing consequences, or lack thereof, becomes crucial to managing the performance behavior. 4. Develop and implement an intervention strategy. The objective of this action step is to accelerate and strengthen the identified functional performance behaviors or decelerate and weaken the dysfunctional behaviors (those that detract from performance). The main intervention strategies that are used involve positive reinforcement to increase the functional behaviors and corrective feedback to decrease dysfunctional behaviors followed by positive reinforcement or the desired alternative behaviors. Positive reinforcers can be anything that increases performance behavior, but those most often used in O.B. Mod. are monetary, performance feedback and social attention/ recognition. The performance feedback attempts to be positive, immediate, graphic, and specific. In rare circumstances, the use of punishment to quickly weaken and decelerate undesirable behaviors (such as unsafe behaviors) may be unavoidable. However, to keep on a positive approach, if a negative consequence is deemed necessary, the desirable alternative behavior (such as safe behavior) is positively reinforced at the first opportunity. 5. Evaluate to ensure performance improvement. This final step of O.B. Mod. systematically evaluates the effectiveness of this behavioral approach to performance improvement. This step focuses on all four levels of evaluation: (1) reaction, (2), learning, (3) behavioral change, and (4) performance improvement. The reaction level assesses whether O.B. Mod. was liked and well received by those involved in the process. The better the reaction, the better the chance of its being used effectively. The learning level of evaluation assesses the understanding of the background, meaning, and assumptions of O.B. Mod. The directly observed behavioral change level is assessed in relation to the baseline measure obtained in the second step. Finally, the most important level of evaluation, performance improvement, assesses hard measures mostly on quantity and quality of products or services, but can also deal with turnover, absenteeism, or even number of customers served. This bottom-line performance improvement is the purpose of the O.B. Mod. approach.
Research Evidence That O.B. Mod. Works The O.B. Mod. model, as shown in Figure 1, and briefly summarized above has been researched for 470
over 20 years in all types of organizations (manufacturing, service, and not-for-profit). For example, the O.B. Mod. approach improved performance in diverse US organizations such as a manufacturing plant making shelving for stores, the largest meat-packing plant in the world, a factory manufacturing water beds, a large urban department store, a bank, fast-food restaurants, a very large hospital, and a Federal Deposit Insurance Corporation office. As presented next, it was also directly tested in a large Russian factory. We (Stajkovic and Luthans, 1997) recently conducted a meta-analysis of 19 studies that met the inclusion criteria of using the O.B. Mod. approach. A metaanalysis quantitatively synthesizes, tests and compares the impact of the O.B. Mod. intervention across all the available studies. Specifically, in this primary meta-analysis (see Hedges and Olkin, 1985 for the procedures used) we investigated the research question: What is the average treatment effect of O.B. Mod. on task performance? The results indicated a highly significant 17 per cent average improvement in performance (Stajkovic and Luthans, 1997). To put this finding in perspective, this represents a higher positive impact on performance than has been found in meta-analyses of widely recognized cognitivelybased techniques such as goal-setting (Wood et al., 1987). The meta-analysis soundly indicates that O.B. Mod. does indeed lead to performance improvement across a wide variety of US organizations. Now the question becomes whether such a behavioral management approach will generalize to organizations in Eastern Europe.
The Russian Factory Study A few years ago, we (Welsh et al., 1993a) conducted an in-depth study in the then largest textile mill in Russia. The purpose was to see if US-based organizational behavior/human resource management techniques would work in a Russian factory. Specifically, through a sophisticated experimental design, we tested the impact that both a participative and O.B. Mod. approach (independent variables) would have on Russian worker productivity (dependent variable). The participative technique involved asking the workers (by the researcher without their supervisors present) for input relevant to enriching their jobs around the widely recognized Hackman and Oldham characteristics of identity, significance, variety, autonomy, and feedback. There is considerable evidence that this participative job design approach leads to motivation and performance improvement among American workers (Fried and Ferris, 1987; Levine, 1990; Luthans et al., 1987). The O.B. Mod. approach, with a different, but equivEuropean Management Journal Vol 16 No 4 August 1998
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alent, sample of workers from this same factory, used two interventions — extrinsic rewards and social rewards. The extrinsic reward intervention provided valued American products (e.g. adult and children’s clothes, jeans, t-shirts with popular logos, music tapes and hard-to-get foods) to workers contingent upon their performance improvement. The social reward intervention contingently administered attention, recognition and feedback by trained supervisors to workers performing specific identified performance-related behaviors (e.g. checking looms, doing repairs, monitoring fabric quality, and helping out others). The specific details of this behavioral approach were spelled out under the previously discussed O.B. Mod. steps.
The Results of the Russian Study The results of this study had interesting implications for cross-cultural management in general and East European management in particular. The participative technique did not work, but the O.B. Mod. approach (both the extrinsic and social reward interventions) led to highly significant increases in the performance of these Russian factory workers. The participative intervention seemed to have a counter productive effect on the Russian workers’ performance for cultural reasons rather than because of the technique per se. At first glance, because of the assumed traditional collectivist cultural values of the old communist system, the participative approach would seem to have been a good fit and should have worked. However, we found that even though the workers in this factory had been given the opportunity to participate under the old system, little came of their suggestions, and in some cases, there were even political repercussions. Thus, the workers’ past experience may have been the reason for the failure of the participative intervention in this study.
ately providing attention, recognition and feedback contingent upon the workers exhibiting the high impact behaviors identified in step one of the O.B. Mod. led to highly significant increases in performance. Importantly, since this was a field experimental research design, we can confidently conclude that the O.B. Mod. was indeed the cause for the performance to significantly improve.
Implications of the Russian Study Obviously, on the basis of this one study we cannot conclude that participative techniques will not work in East European organizations and behavioral management will. As we point out above, the participative technique as applied in this Russian factory was subject to considerable historical and cultural complexity. This may or may not be unique to this particular study site, but this is our point. Most, if not all, of the complex cognitively-based motivational concepts and techniques, such as participation systems and job design, seem to greatly depend on the specific cultural situation (by country and even by organization, group, and individual). The fact is, this participative technique did not work in Russia, in this factory, at this time. In another Eastern European country, in another organization, with different individuals, at another time, it may have worked. By the same token, we cannot conclude on the basis of this one study that the behavioral management approach will work across all cultures in Eastern Europe. However, we would argue that because of its cultural fit and theoretical framework discussed earlier and the overwhelmingly positive results in all types of settings with all types of workers, including the study of the Russian factory workers, the behavioral management approach may indeed hold across cultures, organizations, groups and especially individual employees in Eastern Europe.
In explaining the failure of the participative techniques, the researchers noted: ‘By not improving or by deliberately holding back, they could avoid the frustration of being rejected or ignored. In addition, by not truly participating or giving meaningful suggestions in front of outsiders, the workers would not put themselves in the position of expressing problems inhibiting performance, comments they may have feared would be received as complaints regarding co-workers.’ (Welsh et al., 1993a, p. 74).
In other words, the cognitively-based participative technique did not work, at least in this setting, because of complex cultural (and perhaps even political) issues. By contrast, in the same culture, the O.B. Mod. approach had a very positive impact on the workers’ performance. Both the administration of desired extrinsic rewards and the trained supervisors deliberEuropean Management Journal Vol 16 No 4 August 1998
The Case for the Use of O.B. Mod. in Eastern European Organizations Since early 1992, the first author has been working extensively with East European managers not only in Russia, but also in former East Germany, Albania and Macedonia. As part of on-going US Agency for International Development projects, we have trained over 2000 CIS and East European managers both at the University of Nebraska and in their home country. In addition, we have visited on-site and interviewed managers in organizations in Russia, former East Germany, Albania and Macedonia. Based on this direct experience (from the biggest, Russia, to the smallest, Albania, and those in-between) and a number of research studies besides the Russian textile factory, Luthans and colleagues have analyzed a num471
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ber of issues facing East European management during the transition period (e.g. see Luthans, 1993; Luthans et al., 1992, 1993, 1995, 1996; Luthans and Lee, 1994; Luthans and Riolli, 1997). This experience and research in Eastern Europe, and, more importantly the overwhelming positive research results that O.B. Mod. has demonstrated to have on all types of organizations, we feel confident in our recommendation of behavioral management to Eastern European managers. However, we want to add that behavioral management, nor any other management concept or technique, will be the ‘magic bullet’ to solve all the challenges currently facing East European managers. We also found in our metaanalysis that O.B. Mod. does seem to have differential effects depending on the type of organization and the type of reinforcer that is used (Stajkovic and Luthans, 1997). Specifically, the meta-analysis found that O.B. Mod. worked significantly better in manufacturing organizations (33 per cent) than in service organizations (13 per cent). This was largely because it is more difficult to identify, measure and thus effectively manage performance-related behaviors in service than in manufacturing organizations. This same contingency guideline for behavioral management concerning the difference between manufacturing and service organizations has also been found to apply to Eastern European organizations (Welsh et al., 1993b). As to the type of reinforcer that is used, the metaanalysis indicated that all three general categories of reinforcers — monetary, non-financial (objective performance feedback), social (attention/recognition) and in combination — had a significant, but different, impact. For example, in manufacturing organizations there was no significant differences between the three types of reinforcers that were used. In service organizations, although the monetary reinforcers had a bigger impact than the nonfinancial (e.g. performance feedback), they were about the same as were only the use of social (attention/recognition) reinforcers. The biggest impact was when the monetary was combined with the performance feedback. This is a very important finding for the application of behavioral management because it says that although the use of monetary reinforcers do lead to significantly improved performance in both manufacturing and service organizations, they may not have any more effect than the use of social reinforcers. The previous discussion noted that the social reinforcers and feedback had as big an impact as the extrinsic rewards (costly valued goods) on the improved performance of the Russian factory workers. The implication of these findings from the metaanalysis and the Russian study of managers in Eastern Europe being able to improve performance without the use of monetary incentives seems self-evident. 472
Well designed compensation systems, including adequate base pay, are absolutely necessary to attract, motivate, and retain the best employees in all Eastern European countries (e.g. see Puffer and Shekshnia, 1996). However, the fact remains most East European organizations (and those in the West for that matter) simply do not have funds available to provide monetary reinforcers as a way of improving employee performance. On the other hand, Eastern European organizations can easily train their supervisors and managers at little or no cost in the steps of O.B. Mod. and have them contingently administer social reinforcers to their employees’ identified functional performance behaviors.
The Nature and Power of Social Reinforcers Once again we need to emphasize that we are not implying that Eastern European managers should substitute recognition and attention for pay or that pay is not important. Obviously, in many Eastern European situations, an acceptable living wage is yet to be reached, and cultural values toward compensation and how it is administered must be considered. For example, in their in-depth analysis of the fit between Russian culture and compensation, Puffer and Shekshnia note that ‘due to the emphasis on the short term in their cultural background and their traditional compensation schemes, Russians have a strong preference for short-term incentives, favoring cash and material goods’ (Puffer and Shekshnia, 1996, p. 237). In other words, once acceptable compensation and benefits systems are in place, which are absolutely necessary to obtain and retain the best people in both the United States and Eastern Europe, to enhance day-to-day performance and gain a competitive advantage through people, our meta analysis indicates behavioral management using social reinforcers may be as effective as using costly reward systems. It is also important to note that the social reinforcer suggested here is not insincere praise (the standard ‘pat on the back’ or ‘thanks for coming to work on time’), or the old communist approach of pinning medals on workers’ chests (sometimes for political rather than performance reasons), but rather involves contingent attention and recognition for exhibiting identified behaviors that improve performance. To acknowledge cultural values (e.g. the possibility of collectivist values especially for older employees), we also do not recommend individual public recognition (e.g. singling out individuals in front of the group or naming an ‘employee of the month’). The exception for using public recognition would be where objective criteria are used that everyone agrees with (e.g. sales or production numbers directly attributable to an identifiable individual or group). European Management Journal Vol 16 No 4 August 1998
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The attention and recognition that we are recommending is usually administered one-on-one by the direct supervisor/manager in the course of dayto-day activities. This importance of close, constant, interpersonal relationships in the implementation of behavioral management is very compatible with the previously discussed particularistic cultural values that Trompenaars (1994) found in the CIS.
planning, structure, functions such as finance and marketing, information technology and more are needed to effectively manage today’s and tomorrow’s Eastern European organizations. However, their human resources, and how they are managed, is often overlooked, but at present and in the future, may be most important to competitive advantage, sustainability, and even survival.
Some simple examples of what we are talking about would be when the supervisor/ manager recognizes and gives attention to an individual employee for a particular behavior such as punctuality during bad weather, unusual customer service, staying late without pay to finish a report, or correcting a product defect without being told. In essence, under this approach the individual employee ‘Knows that his or her supervisor/manager knows.’ The supervisor/ manager does not have to give ‘sugary’ praise, but instead may simply make statements such as the following:
Based on 25 years of basic research, direct experience and applied research in Eastern Europe since the beginning of the transition, and the in-depth experimental study of the Russian factory, we proposed that behavioral management can most pragmatically and quickly improve performance in Eastern European organizations. Behavior is a function of its consequences, and the five steps of O.B. Mod. (identify, measure, analyze, intervene, and evaluate) can be effectively and easily applied regardless of the culture. We have hopefully provided a clear answer to the question in the title of this article: ‘Yes, behavioral management can help meet the challenge of performance improvement in Eastern European organizations.’
‘I noticed that you were the only one who made it to work on time during the bad snowstorm.’ ‘I saw how you handled that customer’s problem. She has a big account with us.’ ‘I saw that you stayed after quitting time to finish that vital report that I gave you at the last minute.’ ‘I want you to know that I noticed we no longer have a sticky valve problem, that the engineers were not able to solve, coming out of your work-station.’
If managers in Eastern Europe deliberately, and systematically, provide such recognition and attention, contingent upon key performance behaviors in both service and manufacturing organizations, our research would indicate that performance will improve. This approach is very simple and makes common sense, employees never get tired of recognition and attention for a job well done, everyone can apply it at any level in any type of organization, it doesn’t cost anything, and, best of all, it works!
A Final Word Eastern Europe currently faces an extremely complex economic, political, technical and cultural environment. These complexities need to be recognized and dealt with at the country, organizational, group and even individual level in order to make the successful transition to a market economy and compete in the global marketplace. For now, however, Eastern European managers also need some pragmatic guidelines and techniques to help them immediately improve the performance of their organizations. They currently have one thing in common with the rest of the organizations in Eastern Europe and the rest of the world — human resources. The premise of this article has been that strategic European Management Journal Vol 16 No 4 August 1998
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Levine, D.I. (1990) Participation, productivity, and the firm’s environment. California Management Review 32, 86–100. Liesman, S. (1998) Surprise: the economy in Russia is clawing out of deep recession. The Wall Street Journal 28 January, A1, A11. Luthans, F. (1973) Organizational Behavior. McGraw-Hill, New York. Luthans, F. (1993) A paradigm shift in Eastern Europe: some helpful management development techniques. Journal of Management Development 12, 53–60. Luthans, F. and Kreitner, R. (1975) Organizational Behavior Modification. Scott, Foresman, Glenview, IL. Luthans, F. and Kreitner, R. (1985) Organizational Behavior Modification and Beyond. Scott, Foresman, Glenview, IL. Luthans, F. and Lee, S.M. (1994) There are lessons to be learned as Albania undergoes a paradigm shift. The International Journal of Organizational Analysis 2, 5–17. Luthans, F. and Riolli, L.T. (1997) Albania and the Bora Company: lessons learned before the recent chaos. Academy of Management Executive 11, 61–72. Luthans, F., Cox, L. and Sommer, S.M. (1996) A microcosm of organizational behavior in Eastern Europe: the motivation and attitudes of Albanian business leaders. Journal of Business and Entrepreneurship 4, 75–89. Luthans, F., Lee, S.M. and Hodgetts, R.M. (1992) Total quality management: implications for Central and Eastern Europe. Organizational Dynamics Spring, 42–55. Luthans, F., Patrick, R.R. and Luthans, B.C. (1995) Doing business in Central and Eastern Europe: political, economic, and cultural diversity. Business Horizons Sept/Oct, 9–16. Luthans, F., Welsh, D.H.B. and Rosenkrantz, S.A. (1993) What do Russian managers really do? An observation study with comparisons to U.S. managers. Journal of International Business Studies 4th quarter, 741–761. Luthans, F., Kemmerer, B., Paul, R. and Taylor, L. (1987) The impact of a job redesign intervention on salespersons’ observed performance behaviors. Group and Organization Studies 12, 55–72. McCarthy, D.J., Puffer, S.M. and Shekshnia, S.V. (1993) The resurgence of an entrepreneurial class in Russia. Journal of Management Inquiry 2, 125–137.
McCarthy, D.J., Puffer, S.M. and Naumov, A. (1997) Partnering with Russia’s new entrepreneurs: software Tsarina Olga Korova. European Management Journal 15, 648– 657. Pervin, L.A. (1985) Personality: current controversies, issues, and directions. Annual Review of Psychology 36, 83–114. Pfeffer, J. (1994) Competitive Advantage through People. Harvard Business School Press, Boston, MA. Puffer, S.M. and Shekshnia, S.V. (1996) The fit between Russian culture and compensation. The International Executive 38, 217–241. Scott, W.E. and Podsakoff, P.M. (1985) Behavioral Principles in the Practice of Management. Wiley, New York. Stajkovic, A.D. and Luthans, F. (1997) A meta-analysis of the effects of organizational behavior modification on task performance, 1975–95. Academy of Management Journal 40, 1122–1149. Stajkovic, A.D. and Luthans, F. (1998) Social cognitive theory and self-efficacy: beyond traditional motivational and behavioral approaches. Organizational Dynamics Spring. Trompenaars, F. (1994) Riding the Waves of Culture: Understanding Diversity in Global Business. Irwin, Burr Ridge, IL. Veiga, J.F., Yanouzas, J.N. and Buchholtz, A.K. (1995) Emerging cultural values among Russian managers: what will tomorrow bring?. Business Horizons 38, 20–27. Vroom, V.H. (1964) Work and Motivation. Wiley, New York. Wahba, M.A. and Bridwell, L.G. (1976) Maslow reconsidered: a review of research on need hierarchy theory. Organizational Behavior and Human Performance 15, 212–240. Welsh, D.H.B., Luthans, F. and Sommer, S.M. (1993a) Managing Russian factory workers: the impact of U.S.-based behavioral and participative techniques. Academy of Management Journal 36, 58–79. Welsh, D.H.B., Sommer, S.M. and Birch, N. (1993b) Changing performance among Russian retail workers. Journal of Organizational Change Management 6, 33–50. Wood, R.E., Mento, A.J. and Locke, E.A. (1987) Task complexity as a moderator of goal effects: a meta analysis. Journal of Applied Psychology 72, 416–425.
FRED LUTHANS, Department of Management, University of Nebraska, Lincoln, Nebraska 68588-0491, USA.
ALEX STAJKOVIC, Graduate School of Management, University of California at Irvine, Irvine, California 92717-3125, USA.
Fred Luthans is the George Holmes distinguished Professor of Management at the University of Nebraska and Editor-in-Chief of the Journal of World Business. He has published several books including Organizational Behavior Modification, winner of the American Society of Personnel Administration Award for outstanding contribution to human resource management. In 1997, Professor Luthans received the Academy of Management’s Distinguished Management Educator Award.
Alex Stajkovic is Visiting Assistant Professor of Organizational Behaviour at the University of California at Irvine. He has published in the Academy of Management Journal and Psychological Bulletin, and his research interests include psychological dimensions of entrepreneurial behaviors and international management.
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BRETT LUTHANS, Department of Management, Missouri Western State University, St Joseph, Missouri 64507-2294, USA.
KYLE LUTHANS, Department of Management, Bloomsburg University, Bloomsburg, PA 17815, USA.
Brett Luthans is Assistant Professor of Management at Missouri Western State College. He has published in Group and Organization Management, National Productivity Review and Business Horizons. His research interests include the effects of downsizing and the impact of behavioral management on world performance.
Kyle Luthans is Assistant Professor of Management at Bloomsburg University of Pennsylvania. He has published in Human Resource Management, Management Quarterly, and the Journal of Leadership Studies and has research interests in high performance HR practices and in managing HR across cultures.
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European Management Journal Vol. 16, No. 4, pp. 466–475, 1998 1998 Elsevier Science Ltd. All rights reserved Printed in Great Britain S0263-2373(98)00023-1 0263-2373/98 $19.00 + 0.00
Applying Behavioral Management in Eastern Europe FRED LUTHANS, George Holmes Distinguished Professor of Management, University of Nebraska, Lincoln, USA ALEX STAJKOVIC, Visiting Assistant Professor of Organizational Behavior, University of California at Irvine, Irvine, USA BRETT C. LUTHANS, Assistant Professor of Management, Missouri Western State College, St Joseph, USA KYLE W. LUTHANS, Assistant Professor of Management, Bloomsburg University of Pennsylvania, Bloomsburg, USA As posed in the title, the authors make a case for the use of behavioral management as a pragmatic and effective way to help East European managers improve employee performance. After providing the cultural and theoretical grounding for the use of a behavioral approach, the five-step O.B. Mod. model is presented. The successful use of O.B. Mod. in a Russian factory is given detailed attention and then the case is made for using this approach in all Eastern European organizations. Particular attention is given to the nature and power of contingently administered social reinforcers to increase employee performance at no cost. The authors conclude that this approach can help meet the competitive challenges Eastern European management faces now and in the future. 1998 Elsevier Science Ltd. All rights reserved Now, after almost 10 years, organizations in the Commonwealth of Independent States (CIS) and Eastern Europe continue to struggle to become more effective so that they can better compete in the international marketplace. Much of the popular media attention in the transformation process has focused on political and economic issues and secondarily on the need for technological advancement. Yet, like other organizations everywhere, the people may really be the key. As Stanford Professor Jeffery Pfeffer (1994) concluded after years of research and experience with companies around the world, the only true, lasting competitive advantage comes through human resources and how they are man466
aged. Or, as the head of automaker Chrysler recently put it, ‘The only way we can beat the competition is with people. That’s the only thing anybody has. Your culture and how you motivate and empower and educate your people is what makes the difference.’ Obviously, the political and economic environment do and will play a critical role in the success of individual Eastern European organizations, and so do and will the strategies, structures, functions (e.g., marketing and financing), and technologies employed. However, the starting assumption of this article for the special issue on ‘Russia, Central and Eastern Europe’ is that the people can make a significant difference. A recent special report on ‘Business in Eastern Europe’ in The Economist (November 22, 1997) notes that the transformation from ‘decadent Communism to primitive capitalism was just the first step.’ What is now needed according to this comprehensive report is better managed companies ‘that enhances productivity rather than cripples it’ and ‘the biggest brake on productivity growth is people.’ Organizations in the CIS and Eastern Europe operate in different political and economic environments (some relatively better, some a lot worse than others), and of course have different degrees of success in implementing various strategies, structures, functions and technologies. But, importantly, all these organizations have one thing in common, their human resources. Not unlike most of their counterEuropean Management Journal Vol 16 No 4 August 1998
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parts around the world, the management of human resources in CIS and Eastern European organizations leaves, putting it mildly, considerable room for improvement (e.g. see Kiezun, 1991; Ivancevich et al., 1992; Hofstede, 1993). For example, The Economist report cited above suggests that the biggest gulf between Eastern European managers and their counterparts in the West may be in the human resources arena. The neglected question for meeting the challenge of improving performance may be: ‘How can organizations in the transformational economies manage their human resources more effectively?’ Although many answers could and have been offered to this question, the purpose of this article is to offer behavioral management as a proven, practical way to help all CIS and Eastern European organizations improve their performance. After first providing the cultural and theoretical foundation and spelling out exactly what is meant by this behavioral approach to human resource management (HRM), its application to all Eastern European enterprises (start-up, privatized, and still state-owned) are presented and analyzed.
Cultural and Theoretical Grounding The proposed behavioral management approach for organizations in Eastern Europe must be able to make a cultural fit and be based on a logical theoretical framework.
The Cultural Fit The success of any human resource management approach will greatly depend on its cultural fit (Adler, 1997; Dowling et al., 1994). Most analyses of cultural fit use the Hofstede (1980) dimensions. At least historically, Eastern Europe in general and Russia in particular have been depicted as high in power distance, uncertainty avoidance, collectivism, femininity and short-term orientation (Bollinger, 1994; Hofstede, 1993; Puffer and Shekshnia, 1996; Veiga et al., 1995). However, more recent data by Trompenaars (1994) indicate that the CIS and at least the Czechs (the two Eastern European areas/countries in his sample of 28 countries) have high individualism, not the traditionally conceived collectivism. This new found individualism may be the result of the growing individually-oriented entrepreneurial spirit, especially among the younger people, during the transformation period (Johnson and Loveman, 1995; McCarthy et al., 1993). For example, a recent Wall Street Journal article describing how the Russian economy is finally showing signs of growth noted that after privatization of a large manufacturing enterprise in Ivanovo: ‘Three fresh-faced 28-year-olds took over the factory. The European Management Journal Vol 16 No 4 August 1998
40-year old factory director, a former regional official in the textile ministry, now works for them. The young financiers set about finding customers, and now the factory works on direct orders from them instead of a government ministry’s five-year plan.’ (Liesman, 1998, p. A-11)
In addition to individualism, Trompenaars (1994) also found the CIS to be quite high on the cultural dimension of particularism. This is the belief that the situation dictates how practices should be applied and the focus is on interpersonal relationships. An argument could be made that either the traditionally assumed collectivist cultural values or the apparently emerging individualism and particularism in Eastern Europe is compatible with cognitive theoretical groundings and assumptions. Either collectivist or individualistic cultural values could provide support for the use of cognitively-based theories such as the hierarchy of needs or the more modern exchange, expectancy or equity theories of work motivation to study human resources in Eastern Europe. All these motivation theories can certainly help to better understand the complexity of human behavior in any workplace, including Eastern Europe. Unfortunately, these cognitive theories neither provide specific techniques for implementation nor relate very well to employee performance (e.g. see Cotton et al., 1988; Pervin, 1985; Wahba and Bridwell, 1976). An equally persuasive argument could be made that there is a fit between the collectivist and emerging individualistic and particularistic cultural values in Eastern Europe and the use of a behaviorally-based theoretical framework. Behavioral theory may not lead to as deep an understanding of the complexity of employee behavior as the cognitive motivation theories. However, we would suggest that the technique of organizational behavior modification (O.B. Mod.) that comes out of behavioral theory (Luthans and Kreitner, 1975, 1985) is directly applicable to the management of human resources in Eastern European organizations and makes a cultural fit. Specifically, Kiezun (Kiezun, 1991, p. 84) suggests that Eastern European workers’ collectivist values would support the use of rewards to increase performance because the improvement becomes materially worthwhile for the individual and, more importantly, the common good. The emerging individualism and particularism values may be even more compatible with behavioral theory and application than would be collectivist values. As will be discussed next, the assumption under the behavioral framework is that Eastern European individual workers’ behavior is a function of contingent consequences. This behavioral premise makes an especially good cultural fit with individualism and particularism (situational interpersonal relations). 467
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Behavioral Theory As is sometimes forgotten, behavioral theory as an explanatory framework for human behavior started with the pioneering Russian physiologist Ivan Pavlov. In the famous experiments with laboratory dogs, Pavlov developed the notion of classical conditioning (the S-R connection) which has served as the basic building block of connectionist learning and behaviorism. B.F. Skinner’s operant conditioning was built upon Pavlov’s seminal work and he readily acknowledges borrowing the term reinforcement from Pavlov. Skinner states in a book about his life: ‘I got the word from Pavlov and feel that it has a distinct advantage over ‘reward’ by identifying the effort of a consequence of behavior in strengthening the behavior — that is, in making the behavior more likely to occur again. The old idea of pleasure and pain and Thorndike’s adjectives ‘satisfying’ and ‘annoying’ refer to feelings which, in my point of view, is quite off the track.’ (Bjork, 1997, p. 99).
Most recently, behavioral theory has evolved from Skinner’s operant or reinforcement theory to Albert Bandura’s more complex social cognitive theory and self-efficacy. Social cognitive theory contains both cognitive and behavioral dimensions. Specifically, Bandura (1986, 1997) identifies basic human capabilities such as symbolizing, forethought, vicarious learning, self-regulation and self-reflection as the core of social cognitive theory. We have recently proposed that this eclectic theory provides the most comprehensive understanding of organizational behavior (Stajkovic and Luthans, 1998). The derivative of social cognitive theory is self-efficacy and is defined by Bandura (1986, 1997) as an individual’s belief (or confidence) about his or her abilities to mobilize motivation, cognitive resources, and courses of action needed to successfully execute a specific task within a given context. We have found that this self-efficacy has a strong positive relationship with work-related performance (Stajkovic and Luthans, 1998). Although social cognitive theory and self-efficacy seems to hold considerable promise for the future, at this stage of the transformation in Eastern Europe, behavioral theory seems more appropriate. The practical application of behavioral theory, the premise that behavior is a function of its contingent reinforcing consequences is most relevant. Specifically, behaviors that are followed by positive reinforcers will be strengthened and become more frequent. Behaviors that are followed by punishers will weaken and become less frequent. Behaviors that are followed by no consequence (extinction process) will also weaken and decline in subsequent frequency. In other words, applied to any workplace in any country, ‘You get what you reinforce!’ Even the advocates of cognitive theories will not argue with these ‘laws of behavior.’ For example, 468
pioneering expectancy theorist Victor Vroom (Vroom, 1964, p. 13) declares, ‘without a doubt the law of effect or principle of reinforcement must be included among the most substantiated findings of experimental psychology and is at the same time among the most useful findings for an applied psychology concerned with control of human behavior.’ Importantly, we would maintain that the behavioral laws and principles hold across cultures. Our position then is that behavioral management is directly applicable to employees in all East European organizations. The premise is that all behavior, regardless of culture, is a function of its consequences. However, we would be quick to add that the specific type of country culture, organizational culture, and the reward that is used may result in a differing impact on employee performance. In other words, our position is that behavioral theory and its principles/laws will hold across cultures, but, as the rest of the article will discuss, the nature of the culture, the specific organization and the type of rewards that are used may have a different, but still positive, impact on employee performance. After first explaining behavioral management through the steps of the organizational behavior modification (O.B. Mod.) model, the findings from our recent metaanalysis are presented, and then a specific application of O.B. Mod. in a Russian factory are reviewed.
The Steps of O.B. Mod. Although there are several models or approaches to behavioral management over the years (e.g. Gilbert, 1978; Komaki, 1986; Scott and Podsakoff, 1985), we propose the application of organizational behavior modification or simply the O.B. Mod. model first proposed by Luthans (1973) and fully developed by Luthans and Kreitner (1975, 1985). O.B. Mod. is a step-by-step problem solving, analytical, and actionoriented approach for the identification and contingent management of high impact performancerelated employee behaviors. The full model is shown in Figure 1. Briefly summarized, the five major steps are as follows: 1. Identification of performance behaviors. The first step of the O.B. Mod. application model is to identify the critical, observable performance-related behaviors. The objective of this first step is to identify high impact behaviors that may account for most of performance outcomes. The identification of the performance behaviors can be carried out by those closest to the job in question — the jobholders themselves and/or their immediate supervisor. Another approach to identifying critical behaviors is through a systematic behavioral audit in which each job in question would be analyzed using job analysis techniques. Regardless of the method used, for a behavior to be identified as critical and appropriate for O.B. Mod., there European Management Journal Vol 16 No 4 August 1998
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Figure 1 O.B. Mod. Application Model
must be a positive answer to the questions (1) can it be measured? and (2) does it have a significant impact on a performance outcome? 2. Measurement of the behavior. The second step is to measure the baseline frequencies of the critical behaviors identified in step 1. This baseline measure is obtained by determining how often the identified behavior occurs under present conditions. These measures can be determined through direct observation or more often by obtaining the information from the products of the behavior (e.g. quality or quantity data) gathered from archival (existing) records. The purpose of the baseline measure is to provide objective data to determine if there is indeed a problem or deficiency and to monitor performance after the intervention step. This measurement step separEuropean Management Journal Vol 16 No 4 August 1998
ates O.B. Mod. from other, more subjective, human resource management motivation or leadership approaches. 3. Functional analysis of the behavior. The third step of the model is a functional analysis of the antecedents and contingent consequences of the behavior. Antecedents of the target behavior must be identified to determine what factors cue (not cause) or set the occasion for the behavior to be emitted or carried out. If the antecedents, such as the equipment, technological processes, job design, clarifying goals, and/or training are not present, then the employee cannot exhibit the critical behaviors. However, the more important part of the functional analysis is to identify the contingent consequences. The antecedents only assume stimulus control properties (take on power to emit 469
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the behavior) in the presence of reinforcing contingent consequences. Most often the ‘front-end’ antecedents of the behavior are in place (there is adequate technology and equipment, the employees know what they are supposed to do, and they are trained how to do it). Yet, the common problem is that they are not doing it. Thus, the identification of the reinforcing consequences, or lack thereof, becomes crucial to managing the performance behavior. 4. Develop and implement an intervention strategy. The objective of this action step is to accelerate and strengthen the identified functional performance behaviors or decelerate and weaken the dysfunctional behaviors (those that detract from performance). The main intervention strategies that are used involve positive reinforcement to increase the functional behaviors and corrective feedback to decrease dysfunctional behaviors followed by positive reinforcement or the desired alternative behaviors. Positive reinforcers can be anything that increases performance behavior, but those most often used in O.B. Mod. are monetary, performance feedback and social attention/ recognition. The performance feedback attempts to be positive, immediate, graphic, and specific. In rare circumstances, the use of punishment to quickly weaken and decelerate undesirable behaviors (such as unsafe behaviors) may be unavoidable. However, to keep on a positive approach, if a negative consequence is deemed necessary, the desirable alternative behavior (such as safe behavior) is positively reinforced at the first opportunity. 5. Evaluate to ensure performance improvement. This final step of O.B. Mod. systematically evaluates the effectiveness of this behavioral approach to performance improvement. This step focuses on all four levels of evaluation: (1) reaction, (2), learning, (3) behavioral change, and (4) performance improvement. The reaction level assesses whether O.B. Mod. was liked and well received by those involved in the process. The better the reaction, the better the chance of its being used effectively. The learning level of evaluation assesses the understanding of the background, meaning, and assumptions of O.B. Mod. The directly observed behavioral change level is assessed in relation to the baseline measure obtained in the second step. Finally, the most important level of evaluation, performance improvement, assesses hard measures mostly on quantity and quality of products or services, but can also deal with turnover, absenteeism, or even number of customers served. This bottom-line performance improvement is the purpose of the O.B. Mod. approach.
Research Evidence That O.B. Mod. Works The O.B. Mod. model, as shown in Figure 1, and briefly summarized above has been researched for 470
over 20 years in all types of organizations (manufacturing, service, and not-for-profit). For example, the O.B. Mod. approach improved performance in diverse US organizations such as a manufacturing plant making shelving for stores, the largest meat-packing plant in the world, a factory manufacturing water beds, a large urban department store, a bank, fast-food restaurants, a very large hospital, and a Federal Deposit Insurance Corporation office. As presented next, it was also directly tested in a large Russian factory. We (Stajkovic and Luthans, 1997) recently conducted a meta-analysis of 19 studies that met the inclusion criteria of using the O.B. Mod. approach. A metaanalysis quantitatively synthesizes, tests and compares the impact of the O.B. Mod. intervention across all the available studies. Specifically, in this primary meta-analysis (see Hedges and Olkin, 1985 for the procedures used) we investigated the research question: What is the average treatment effect of O.B. Mod. on task performance? The results indicated a highly significant 17 per cent average improvement in performance (Stajkovic and Luthans, 1997). To put this finding in perspective, this represents a higher positive impact on performance than has been found in meta-analyses of widely recognized cognitivelybased techniques such as goal-setting (Wood et al., 1987). The meta-analysis soundly indicates that O.B. Mod. does indeed lead to performance improvement across a wide variety of US organizations. Now the question becomes whether such a behavioral management approach will generalize to organizations in Eastern Europe.
The Russian Factory Study A few years ago, we (Welsh et al., 1993a) conducted an in-depth study in the then largest textile mill in Russia. The purpose was to see if US-based organizational behavior/human resource management techniques would work in a Russian factory. Specifically, through a sophisticated experimental design, we tested the impact that both a participative and O.B. Mod. approach (independent variables) would have on Russian worker productivity (dependent variable). The participative technique involved asking the workers (by the researcher without their supervisors present) for input relevant to enriching their jobs around the widely recognized Hackman and Oldham characteristics of identity, significance, variety, autonomy, and feedback. There is considerable evidence that this participative job design approach leads to motivation and performance improvement among American workers (Fried and Ferris, 1987; Levine, 1990; Luthans et al., 1987). The O.B. Mod. approach, with a different, but equivEuropean Management Journal Vol 16 No 4 August 1998
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alent, sample of workers from this same factory, used two interventions — extrinsic rewards and social rewards. The extrinsic reward intervention provided valued American products (e.g. adult and children’s clothes, jeans, t-shirts with popular logos, music tapes and hard-to-get foods) to workers contingent upon their performance improvement. The social reward intervention contingently administered attention, recognition and feedback by trained supervisors to workers performing specific identified performance-related behaviors (e.g. checking looms, doing repairs, monitoring fabric quality, and helping out others). The specific details of this behavioral approach were spelled out under the previously discussed O.B. Mod. steps.
The Results of the Russian Study The results of this study had interesting implications for cross-cultural management in general and East European management in particular. The participative technique did not work, but the O.B. Mod. approach (both the extrinsic and social reward interventions) led to highly significant increases in the performance of these Russian factory workers. The participative intervention seemed to have a counter productive effect on the Russian workers’ performance for cultural reasons rather than because of the technique per se. At first glance, because of the assumed traditional collectivist cultural values of the old communist system, the participative approach would seem to have been a good fit and should have worked. However, we found that even though the workers in this factory had been given the opportunity to participate under the old system, little came of their suggestions, and in some cases, there were even political repercussions. Thus, the workers’ past experience may have been the reason for the failure of the participative intervention in this study.
ately providing attention, recognition and feedback contingent upon the workers exhibiting the high impact behaviors identified in step one of the O.B. Mod. led to highly significant increases in performance. Importantly, since this was a field experimental research design, we can confidently conclude that the O.B. Mod. was indeed the cause for the performance to significantly improve.
Implications of the Russian Study Obviously, on the basis of this one study we cannot conclude that participative techniques will not work in East European organizations and behavioral management will. As we point out above, the participative technique as applied in this Russian factory was subject to considerable historical and cultural complexity. This may or may not be unique to this particular study site, but this is our point. Most, if not all, of the complex cognitively-based motivational concepts and techniques, such as participation systems and job design, seem to greatly depend on the specific cultural situation (by country and even by organization, group, and individual). The fact is, this participative technique did not work in Russia, in this factory, at this time. In another Eastern European country, in another organization, with different individuals, at another time, it may have worked. By the same token, we cannot conclude on the basis of this one study that the behavioral management approach will work across all cultures in Eastern Europe. However, we would argue that because of its cultural fit and theoretical framework discussed earlier and the overwhelmingly positive results in all types of settings with all types of workers, including the study of the Russian factory workers, the behavioral management approach may indeed hold across cultures, organizations, groups and especially individual employees in Eastern Europe.
In explaining the failure of the participative techniques, the researchers noted: ‘By not improving or by deliberately holding back, they could avoid the frustration of being rejected or ignored. In addition, by not truly participating or giving meaningful suggestions in front of outsiders, the workers would not put themselves in the position of expressing problems inhibiting performance, comments they may have feared would be received as complaints regarding co-workers.’ (Welsh et al., 1993a, p. 74).
In other words, the cognitively-based participative technique did not work, at least in this setting, because of complex cultural (and perhaps even political) issues. By contrast, in the same culture, the O.B. Mod. approach had a very positive impact on the workers’ performance. Both the administration of desired extrinsic rewards and the trained supervisors deliberEuropean Management Journal Vol 16 No 4 August 1998
The Case for the Use of O.B. Mod. in Eastern European Organizations Since early 1992, the first author has been working extensively with East European managers not only in Russia, but also in former East Germany, Albania and Macedonia. As part of on-going US Agency for International Development projects, we have trained over 2000 CIS and East European managers both at the University of Nebraska and in their home country. In addition, we have visited on-site and interviewed managers in organizations in Russia, former East Germany, Albania and Macedonia. Based on this direct experience (from the biggest, Russia, to the smallest, Albania, and those in-between) and a number of research studies besides the Russian textile factory, Luthans and colleagues have analyzed a num471
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ber of issues facing East European management during the transition period (e.g. see Luthans, 1993; Luthans et al., 1992, 1993, 1995, 1996; Luthans and Lee, 1994; Luthans and Riolli, 1997). This experience and research in Eastern Europe, and, more importantly the overwhelming positive research results that O.B. Mod. has demonstrated to have on all types of organizations, we feel confident in our recommendation of behavioral management to Eastern European managers. However, we want to add that behavioral management, nor any other management concept or technique, will be the ‘magic bullet’ to solve all the challenges currently facing East European managers. We also found in our metaanalysis that O.B. Mod. does seem to have differential effects depending on the type of organization and the type of reinforcer that is used (Stajkovic and Luthans, 1997). Specifically, the meta-analysis found that O.B. Mod. worked significantly better in manufacturing organizations (33 per cent) than in service organizations (13 per cent). This was largely because it is more difficult to identify, measure and thus effectively manage performance-related behaviors in service than in manufacturing organizations. This same contingency guideline for behavioral management concerning the difference between manufacturing and service organizations has also been found to apply to Eastern European organizations (Welsh et al., 1993b). As to the type of reinforcer that is used, the metaanalysis indicated that all three general categories of reinforcers — monetary, non-financial (objective performance feedback), social (attention/recognition) and in combination — had a significant, but different, impact. For example, in manufacturing organizations there was no significant differences between the three types of reinforcers that were used. In service organizations, although the monetary reinforcers had a bigger impact than the nonfinancial (e.g. performance feedback), they were about the same as were only the use of social (attention/recognition) reinforcers. The biggest impact was when the monetary was combined with the performance feedback. This is a very important finding for the application of behavioral management because it says that although the use of monetary reinforcers do lead to significantly improved performance in both manufacturing and service organizations, they may not have any more effect than the use of social reinforcers. The previous discussion noted that the social reinforcers and feedback had as big an impact as the extrinsic rewards (costly valued goods) on the improved performance of the Russian factory workers. The implication of these findings from the metaanalysis and the Russian study of managers in Eastern Europe being able to improve performance without the use of monetary incentives seems self-evident. 472
Well designed compensation systems, including adequate base pay, are absolutely necessary to attract, motivate, and retain the best employees in all Eastern European countries (e.g. see Puffer and Shekshnia, 1996). However, the fact remains most East European organizations (and those in the West for that matter) simply do not have funds available to provide monetary reinforcers as a way of improving employee performance. On the other hand, Eastern European organizations can easily train their supervisors and managers at little or no cost in the steps of O.B. Mod. and have them contingently administer social reinforcers to their employees’ identified functional performance behaviors.
The Nature and Power of Social Reinforcers Once again we need to emphasize that we are not implying that Eastern European managers should substitute recognition and attention for pay or that pay is not important. Obviously, in many Eastern European situations, an acceptable living wage is yet to be reached, and cultural values toward compensation and how it is administered must be considered. For example, in their in-depth analysis of the fit between Russian culture and compensation, Puffer and Shekshnia note that ‘due to the emphasis on the short term in their cultural background and their traditional compensation schemes, Russians have a strong preference for short-term incentives, favoring cash and material goods’ (Puffer and Shekshnia, 1996, p. 237). In other words, once acceptable compensation and benefits systems are in place, which are absolutely necessary to obtain and retain the best people in both the United States and Eastern Europe, to enhance day-to-day performance and gain a competitive advantage through people, our meta analysis indicates behavioral management using social reinforcers may be as effective as using costly reward systems. It is also important to note that the social reinforcer suggested here is not insincere praise (the standard ‘pat on the back’ or ‘thanks for coming to work on time’), or the old communist approach of pinning medals on workers’ chests (sometimes for political rather than performance reasons), but rather involves contingent attention and recognition for exhibiting identified behaviors that improve performance. To acknowledge cultural values (e.g. the possibility of collectivist values especially for older employees), we also do not recommend individual public recognition (e.g. singling out individuals in front of the group or naming an ‘employee of the month’). The exception for using public recognition would be where objective criteria are used that everyone agrees with (e.g. sales or production numbers directly attributable to an identifiable individual or group). European Management Journal Vol 16 No 4 August 1998
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The attention and recognition that we are recommending is usually administered one-on-one by the direct supervisor/manager in the course of dayto-day activities. This importance of close, constant, interpersonal relationships in the implementation of behavioral management is very compatible with the previously discussed particularistic cultural values that Trompenaars (1994) found in the CIS.
planning, structure, functions such as finance and marketing, information technology and more are needed to effectively manage today’s and tomorrow’s Eastern European organizations. However, their human resources, and how they are managed, is often overlooked, but at present and in the future, may be most important to competitive advantage, sustainability, and even survival.
Some simple examples of what we are talking about would be when the supervisor/ manager recognizes and gives attention to an individual employee for a particular behavior such as punctuality during bad weather, unusual customer service, staying late without pay to finish a report, or correcting a product defect without being told. In essence, under this approach the individual employee ‘Knows that his or her supervisor/manager knows.’ The supervisor/ manager does not have to give ‘sugary’ praise, but instead may simply make statements such as the following:
Based on 25 years of basic research, direct experience and applied research in Eastern Europe since the beginning of the transition, and the in-depth experimental study of the Russian factory, we proposed that behavioral management can most pragmatically and quickly improve performance in Eastern European organizations. Behavior is a function of its consequences, and the five steps of O.B. Mod. (identify, measure, analyze, intervene, and evaluate) can be effectively and easily applied regardless of the culture. We have hopefully provided a clear answer to the question in the title of this article: ‘Yes, behavioral management can help meet the challenge of performance improvement in Eastern European organizations.’
‘I noticed that you were the only one who made it to work on time during the bad snowstorm.’ ‘I saw how you handled that customer’s problem. She has a big account with us.’ ‘I saw that you stayed after quitting time to finish that vital report that I gave you at the last minute.’ ‘I want you to know that I noticed we no longer have a sticky valve problem, that the engineers were not able to solve, coming out of your work-station.’
If managers in Eastern Europe deliberately, and systematically, provide such recognition and attention, contingent upon key performance behaviors in both service and manufacturing organizations, our research would indicate that performance will improve. This approach is very simple and makes common sense, employees never get tired of recognition and attention for a job well done, everyone can apply it at any level in any type of organization, it doesn’t cost anything, and, best of all, it works!
A Final Word Eastern Europe currently faces an extremely complex economic, political, technical and cultural environment. These complexities need to be recognized and dealt with at the country, organizational, group and even individual level in order to make the successful transition to a market economy and compete in the global marketplace. For now, however, Eastern European managers also need some pragmatic guidelines and techniques to help them immediately improve the performance of their organizations. They currently have one thing in common with the rest of the organizations in Eastern Europe and the rest of the world — human resources. The premise of this article has been that strategic European Management Journal Vol 16 No 4 August 1998
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FRED LUTHANS, Department of Management, University of Nebraska, Lincoln, Nebraska 68588-0491, USA.
ALEX STAJKOVIC, Graduate School of Management, University of California at Irvine, Irvine, California 92717-3125, USA.
Fred Luthans is the George Holmes distinguished Professor of Management at the University of Nebraska and Editor-in-Chief of the Journal of World Business. He has published several books including Organizational Behavior Modification, winner of the American Society of Personnel Administration Award for outstanding contribution to human resource management. In 1997, Professor Luthans received the Academy of Management’s Distinguished Management Educator Award.
Alex Stajkovic is Visiting Assistant Professor of Organizational Behaviour at the University of California at Irvine. He has published in the Academy of Management Journal and Psychological Bulletin, and his research interests include psychological dimensions of entrepreneurial behaviors and international management.
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BRETT LUTHANS, Department of Management, Missouri Western State University, St Joseph, Missouri 64507-2294, USA.
KYLE LUTHANS, Department of Management, Bloomsburg University, Bloomsburg, PA 17815, USA.
Brett Luthans is Assistant Professor of Management at Missouri Western State College. He has published in Group and Organization Management, National Productivity Review and Business Horizons. His research interests include the effects of downsizing and the impact of behavioral management on world performance.
Kyle Luthans is Assistant Professor of Management at Bloomsburg University of Pennsylvania. He has published in Human Resource Management, Management Quarterly, and the Journal of Leadership Studies and has research interests in high performance HR practices and in managing HR across cultures.
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