25

Chapter 2
Core Values and Formalization
as Determinants of Individual
Behavior in an Organization:
A Managerial Perspective

Ilona Swiatek-Barylska
University of Lodz, Poland

ABSTRACT
A person starting a professional career becomes a member of a chosen organization and begins to func-
tion among other people in a defined organizational culture and legal space. As he or she is an adult
with a defined personality, knowledge and system of values, the manager can influence the employees
behavior not by changing the person but by shaping the work environment. As flexibility is the number
one principle in organizational design nowadays, managers have to create a work environment making
decisions on the continuum between formalization and management by values. The chapter describes
the consequences of formalization and values orientation for individual organizational behavior, as well
as outcomes such as commitment, job satisfaction and turnover intention rate.

INTRODUCTION

The topic of the determinants of individual behavior has been the subject of research for many years.
The traditional psychology of personality perceived behavior as a function of personal attributes (traits,
emotions, attitudes, motives, and values). Matthews et al. underline that perhaps the most comprehensive
contribution to the conceptual development of trait psychology is Allports (1937) book, Personality:
A Psychological Interpretation where he echoed the Doctrine of Traits with the following words: In ev-
eryday life, no one, not even a psychologist, doubts that underlying the conduct of a mature person there
are characteristic dispositions or traits. Traditional social psychology, by contrast, construed behavior
as a function of the environment. Classical studies of social psychology demonstrate the influence of the
environment. The Stanford Prison Experiment is evidence of the Doctrine of Situationism (Zimbardo,

DOI: 10.4018/978-1-5225-2480-9.ch002

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Core Values and Formalization as Determinants of Individual Behavior in an Organization

2008). The contrast between the Doctrine of Traits and the Doctrine of Situationism had an impact on
the trait-situation debate over which factors were more powerful predictors of behavior. At the beginning,
they were treated as two independent factors until the 1930s, when both approaches were integrated by
Kurt Lewin (Kihlstrom, 2013). He expressed this idea in the equation:

B= f (P,E)

It is not a mathematical formula but a general idea about the determinants of behavior. In this equation,
the person (P) and his environment (E) have to be viewed as variables which are mutually dependent
upon each other. In other words, to understand or predict behavior, the person and the environment
have to be considered as one constellation of interdependent factors. We call the totality of these factors
the life space (Lewin, 1946/1951). The next step in the person-situation research was the Doctrine of
Interactionism formulated by Bowers. According to this doctrine we cannot talk about the primacy of
either the traits or the situation as determinants of individual behavior in an organization. Interaction-
ism argues that situations are as much a function of the person as the persons behavior is a function
of the situation (Bowers, 1973). Using Lewins formula, it can be described in the following equation:

B= f (P x E)

where personal and environmental factors are multiplicative, i.e. the person (P) and the environment
(E) both affect the behavior (B), but the effect of each variable depends on the level of the other. The
effect of the personality depends on the environment (the situation the person is in) and the effect of the
environment (situation) depends on the person who is in it.
As the problem of individual organizational behavior is analyzed in the paper from a managerial
perspective, we have to remember that managers can influence only one factor (variable) from the
person-environment pair: the environment. As an employee who starts his/her job in a company is an
adult human being with shaped traits, attitudes, motives and values, this element cannot be treated as an
element of managerial influence. The purpose of the chapter is to examine the role of core organizational
values and formalization in modelling employee behavior. On the basis of desk research, the chapter will
answer three main questions: (1) what are the consequences (advantages and disadvantages) of manage-
ment by values for individual behavior in organization? (2) what are advantages and disadvantages of
formalization for individual behavior in an organization? and (3) what factors determine the balance
between Management by Values and Formalization in an organization? The problem of Management by
Values and Formalization is discussed in academic journals but it should be noted that they are analyzed
as two separate phenomena while in reality one faces a more sophisticated problem: how much are values
and formalization needed in managing people in an organization, and what are the consequences of this
managerial choice for individual organizational behavior?

BACKGROUND

In 1961, Burns and Stalker proved that it is the environment which determines the management process
in a company (Burns, Stalker, 1961). As companies face different types of changes they not only have to
react to them, but also anticipate new conditions. The transformation of the organizations environment
from the 1960s till now is presented in Figure 1.

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Core Values and Formalization as Determinants of Individual Behavior in an Organization

Figure 1. Transformation of Organizational Environment (Swiatek-Barylska, 2013)

Among the many different changes which can be observed in an organizations environment, global-
ization seems to have the widest range and impact on organizational behavior. These changes include
the transition from a stable environment, in which industry was oriented towards meeting the needs of
the army, into a global economy, in which companies compete to deliver value to the customer; going
from a monopoly, through competition, to co-opetition (Branderburger & Nalebuff, 1996); and going
from a market where the customer could have a car painted any color he wanted as long as it was black
to customized products and long term relationships it is in fact a journey in time to a completely
new organizational world. The process of globalization left an imprint on all aspects of the management
process. Outsourcing, international competition, employees who move around the world, and cultural
diversity are the manifestations of globalization which influence individuals behavior in an organiza-
tion. The job in modern companies has a new character. Geography is dead. It does not matter where
employees are because they can do the job using the internet. Employees knowledge and skills become
the most important strategic resource in modern organizations. The role and type of leadership is also
changing. Managing well educated professionals and specialists is associated with servant leadership
(McGee-Cooper & Trammel, 2002) and the creation of an organizational climate that releases the
knowledge, experience, and motivation that reside in people (empowerment) (Blanchard, 2010). The
complex and inter-connected changes can be grouped into four organizational trends which influence the
changes inside companies and, at the same time, individual workplace behavior (Dolan & Garcia, 2002):

1. The need for quality and customer orientation.

2. The need for greater professionalism, autonomy, and responsibility.
3. The need for bosses to evolve into leaders/facilitators.
4. The need for flatter and more agile organizational structures.

Commensurate with the increasing need to absorb an ever-greater degree of complexity and uncertainty
in business organizations, one can observe the evolution of management methods: from Management
by Instructions (MBI), which was developed at the beginning of the 20th century, through Management
by Objectives (MBO), described by Drucker in the 1960s and still very popular in companies now, and
Management by Values (MBV), which became very popular after the publication in 1994 by Collins
and Porras, the result of a six-year research project conducted in so called visionary organizations. They

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Core Values and Formalization as Determinants of Individual Behavior in an Organization

diagnosed the reasons for the longevity and market success of companies such as Merck, 3M, Hewlett-
Packard, Walt Disney, or General Electric, and proved that what differentiates these companies from the
others is the main ideology, i.e., a collection of core values which remain unchanged despite a long
history. Leaders die, products become old, the markets change, new technologies appear, management
trends come and go, but the core values in the best organizations survive. They are a filter through which
decisions and actions are taken (Collins & Porras, 2002). The main similarities and differences between
MBI, MBO and MBV are presented in Table 1.
As the research shows, there are different types of companies operating on the market. We can find
companies which use traditional management methods, which can be classified as Management by In-
struction, and modern ones, which can be called futuristic companies, which are much more managed
by values than by instructions (Swiatek-Barylska, 2016). Management by Instruction is connected with
a high level of formalization. The decisions made by managers regarding which method should be used
creates the organizational space for the employees. This space multiplied by the persons characteristics
results in individual behavior.

Table 1. Comparison of three management methods (Dolan & Garcia, 2002)

MBI MBO MBV

Preferable situation for
application
Average level of
professionalism of members of
the organization
Type of leadership
Image of customer
Type of product market
Type of organizational structure
Need for tolerance of ambiguity
Need for autonomy and
responsibility
Stability of environment
Social organization
Philosophy of control
Purpose of the organization
Research of strategic vision
Basic cultural values
Routine or emergencies Moderate complexity
Basic level of education Moderate to average
(management of operatives) professionalism (management
of employees)
Traditional Allocator of resources
User-buyer User customer
Monopolist Standardized Segmented
Pyramidal with many levels Pyramidal with few levels
Low Medium
Low Medium
Stable environment Moderately changeable
environment
Capitalist-industrial Capitalist post-industrial
Top-down control and Control and stimulus of Encouragement of self-
supervision professional performance
Maintenance of production Optimization of results
Short term Medium term
Quantitative production Rationalizational
Loyalty, conformity, and Motivation
discipline Efficiency
Measurement of results
Need for creativity in the
solution of complex problems
High level of average
professionalism (management
of professionalism)
Transformational
Customer with judgement and
freedom of choice
Highly diversified and dynamic
Networks, functional alliances,
project team structures
High
High
Very dynamic, changeable
environment
Post-capitalist
supervision by each individual
Continuous improvement of
processes
Long term
Developing participation,
Continuous learning,
Creativity, mutual trust,
commitment

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Core Values and Formalization as Determinants of Individual Behavior in an Organization

ISSUES, CONTROVERSIES AND PROBLEMS

Management by Formalization as a Work Environment

Formalization is defined as the degree to which rules and procedures are followed by an organization
and its employees in carrying out different activities (Rai, 1983). It is often associated with Max We-
bers writings on bureaucracy. To this German sociologist, bureaucracy was a rational, efficient, ideal
organization based on principles of logic. Bureaucratic organizations are characterized by (Kinnicki &
Williams, 2011):

A well-defined hierarchy of authority.

Formal rules and procedures.
A clear division of labor, with parts of a complex job being handled by specialists.
Impersonality, without reference or connection to a particular person,
Careers based on merit.

The Weberian model contends that rules and procedures are necessary to provide guidelines to
employees to conduct their everyday business. Because formalization limits an employees discretion,
workers can become more efficient, which increases motivation and satisfaction (Rai, 2013). Rules,
especially written ones, are very helpful for newly-hired employees during the induction process. Clear
information decreases the level of uncertainty and helps to create the individual organizational behavior
which is expected by the managers. Research shows a positive correlation between the quality of the
induction program and job commitment (Makowska, 2016). In subsequent years of work, the relation-
ship between formalization and job satisfaction is not consistent and may depend upon the occupational
group or organization being studied (Lambert, Paoline, & Hogan, 2006).
A high level of formalization works well in a stable environment and routine situations in organi-
zations in which tasks are explicit and certain. Individual organizational behavior in formalized organi-
zations is characterized by a strong intensity of the relationship between the person and the company.
People not only have the feeling that they are working in the organization, but they simply belong to it.
The value and identity of employees is determined by the organization and by belonging to it. Employees
see themselves through the prism of their place in the organizational hierarchy. Professional identity
is built on the basis of employment in the company. It can be described in the following words: Im a
computer specialist at firm X. A person employed in the company realizes that he or she is employed
in order to achieve the companys objectives. Employees are aware that if they fulfill the conditions set
by the company and are loyal to it, they will have employment with the same employer for many years.
Because employees have a low level of tolerance for uncertainty and a strong need for security, they
demonstrate their loyalty to the company and expect a long-term relationship in return. As it is rigid,
formalization can be an effective means of ensuring that performance standards are being met. Even
in a turbulent environment, organizations see the advantages of formalization and standardization and
use it as a managerial tool. Total Quality Management is an example of a modern management method
which is based to some extent on formalization.

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Core Values and Formalization as Determinants of Individual Behavior in an Organization

Problems with a High Level of Formalization

Formalization can lead to incongruous behaviors and situations when employees do not behave ratio-
nally but as guardians of procedures. An example was described by Barry Schwartz in his lecture Our
loss of wisdom presented on the TED platform (Schwartz, 2009). It is a case known as the story about
lemonade. A seven-year-old boy and his father were watching a game at the ballpark. The son asked
his dad for some lemonade and so the father went to the shop and bought some. The problem was that
the only type of lemonade which was sold was Mikes Hard Lemonade, which is 5% alcohol. The dad,
being an academic, had no idea that this lemonade contained alcohol. When the boy was drinking it,
a security guard spotted it and called the police, who called an ambulance, which whisked the kid to
the hospital. The emergency room ascertained that the kid had no alcohol in his blood and just when
it seemed that everything would turn out well, the child welfare protection agency started to follow its
own procedures. The boy was sent to a foster home for three days. After that time, when the child was
due to go home, the judge allowed it but under one condition: the dad should leave the house and check
into a motel. After two weeks, the family was finally reunited. Everyone involved in this event (welfare
workers, ambulance people and the judge) said that they hated to do it but they had to follow the proce-
dures. Schwartz underlined that, even if employees realize that a procedure is senseless, it spares them
from thinking. An employee does not have to analyze a situation and solve the problem the procedure
tells him how to behave and what to do. Unfortunately, rules are often established as a consequence of
mistakes. In Barry Schwartzs example, the rules were set down probably because a former official had
been lax and let a child go back to an abusive household.
The purpose of formalization is to give order to chaos. Rules and procedures are implemented to
standardize the action of the organizations members. If they do not know what their duty is and how to
do their job, formalization is very helpful. As todays business world is very complicated, the number of
rules and the level of formalization increase dramatically, and this creates a vicious circle of bureaucracy.
It can also be a threat to individual freedoms, with the ongoing bureaucratization leading to a polar night
of icy darkness. Formalization can hamper worker creativity and interfere with professional judgment,
which decreases motivation and satisfaction.

The Level of Trust

The level of formalization can be treated as a trust index in the company the lower the level of trust,
the higher the level of formalization. Trust can be perceived as an attribute of company culture an indi-
vidual makes a decision on the basis of the cultural context. Some cultures perceive putting trust in others
as a standard present in their everyday life, while other cultures regard it as careless and irresponsible
(Sztompka, 2007). There are many reasons to build trust in an organization. It is considered the most
important premise of commitment (Civelek et al., 2015). Trust diminishes uncertainty and constitutes
the basis for making decisions and actions. It encourages people to help each other, cooperate and share
knowledge. What is more, it has a positive influence on building relationships between people. With
trust, people willingly get to know each other and share opinions and knowledge. Moreover, trust fosters
openness, spontaneous actions, and creativity. Not only does it contribute to building relationships but it
also influences the need for safety. People who trust each other are convinced of the positive intentions
of others (Swiatek-Barylska, 2013). A trusting relationship with a manager is also the main factor in
deciding whether to stay or leave q job (Barbian, 2002). A lack of trust in the company creates a work

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Core Values and Formalization as Determinants of Individual Behavior in an Organization

environment which is full of behaviors oriented towards rule- and self-protection. If there is a lack of
trust in the company, employees expect a document for each activity telling them what should be done,
when and how. This document would absolve them of any blame should something go wrong and it does
not matter if the contents of the document make any sense or are even inappropriate for the given situa-
tion. In one company, an employee who made his business trips by private car (because it was cheaper,
faster, or more comfortable) could not declare it officially and had to sign a statement that he had lost
the train/bus tickets. Everyone in the company knew what losing the tickets really meant but there was
no other possibility to get the money back. How does the culture of distrust and red tape influence
individual behavior? Employees, even if they do not accept the situation, usually sign documents just for
peace of mind. The effort to fight the system is too great and the results unpredictable, thus, it is easier
to pretend that nothing wrong is occurring. Some employees do not even think about it, but for some this
situation creates a cognitive dissonance. Festinger defines it as the psychological discomfort a person
experiences when their attitudes or beliefs are incompatible with their behavior (Festinger, 1957). Sign-
ing an organizational fiction is a situation of conflict between self-perception as an honest professional
acting according to the rules and signing a formal false statement which constitutes formalization. We
can observe three main methods leading to a reduction of the dissonance:

1. A change in attitude or behavior, or both. This is the simplest solution when confronted with cogni-
tive dissonance. Returning to our example about tickets, this would amount to either the person (a)
telling himself that, although the rules are senseless, they are the rules and they should be followed
or (b) simply refusing to sign the documents and taking the money back.
2. Belittle the importance of inconsistent behavior. This happens very often. In our example, the em-
ployee could belittle the consequences and importance of such behavior (everyone in the company
does it).
3. Find consonant elements that outweigh dissonant ones. This approach entails rationalizing away
the dissonance. The employee could explain that it would be wasting his time to fight the situation
and it is much more effective and professional to spend time solving real problems and facing real
challenges, as specialists do.

No matter which method is chosen, this is how companies build a culture of breaking the rules not
only small ones but also the core elements of organizational culture and law.
Formalization is not the only model of a work environment. It allows organizations to increase the
predictability of human behavior, unify it and coordinate it. Formal standards determine how to proceed
in a particular situation, and can be perceived as a programming-like mechanism. Weber spotted the
advantages of formalization, and his concept was based on the assumption that one can predict every
situation and every problem in an organization. It proved to be utopian in practice. The main disadvantage
of formalization is that it limits organizational flexibility. This weakness is more acute the more turbulent
the companys environment is. A highly formalized organization has a limited ability to respond to new
problems. It can also cause a degradation of the role of an employee from being an active member of
the organization to a passive, dependent and frustrated one (Bielski, 1992).

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Core Values and Formalization as Determinants of Individual Behavior in an Organization

Management by Values as a Work Environment

The concept of Managing by Values became popular in the United States in the early nineties but it has
been practiced by managers in one form or another for many years. The awareness of the significant
role of developing companies principles and core values has increased in recent years. Some even say
that modern management means management of values rather than management of people (Hampden-
Turner & Trompenaars, 2000). Blanchard and OConnor describe Managing by Values as defining core
values and incorporating them into everyday organizational life. Core values are a kind of a roadmap
for the stakeholders (employees, customers, owners/shareholders, and significant others) (Blanchard &
OConnor, 1997). Values created and declared in the company constitute a sort of a filter used to screen
routine as well as strategic decisions and actions. Individual organizational behavior in a values-driven
organization has a completely different character than in a formalized work environment because it is
shaped by quite different factors. The first difference lies in the type of person-organization relationship.
Managers who manage by values look for candidates whose personal values are congruent with the
organizations. From the individuals point of view, it looks similar. Employees apply to a place where
they will feel comfortable due to the company values, goals, and prevailing relations. In such companies,
employees exhibit commitment to the profession, not to the organization, and build their identity on
the basis of their occupation. It can be described in the following words: Im a computer specialist!
It does not matter in which company. Long seniority is no longer an employees goal. They begin to be
aware that they can do their job in another company. This is facilitated by the rising level of education
and qualifications of employees. Loyalty and commitment are no longer an expression of obedience and
submission to the organization but are an object of exchange between employee and company. Modern
companies, managed by values, offer a job which the employee may, but need not, accept. It is a com-
pletely different approach to the mutual relations. Employees receive from the company an opportunity,
not a duty of employment. Flexible companies do not want to (and cannot) be obliged to the traditionally
understood contract of employment. Employees also have different expectations. They offer the company
not only their time and skills, but also, and perhaps above all, intellectual capital (Czarnecki, 2011).
Organizations are dominated by wise employees performing tasks wisely, which requires managers
greater sensitivity than if they were simply managing traditional, formalized factories (Handy, 1998).
Companies which manage by values create a work environment which is described by values. While in
formalized organizations employees have instructions which describe the expected behavior, in values-
driven companies this role is played by values.

The Role of Core Values

Organizational values help employees make decisions about how to act and react. Values are treated
by employees as a map which indicates the direction of behavior and shows what is really important
in the company. They become the employees internal compass. Sometimes core values are defined in
the company credo, as in Johnson & Johnson, in the code of business conduct as in Coca Cola, or in
the company motto as with Ritz-Carlton. For example, at Ritz Carlton, the motto We are Ladies and
Gentlemen serving Ladies and Gentlemen exemplifies the anticipatory service provided by all staff
members. These simple and attractive words influence individual organizational behavior. As it is a
very general rule, employees receive some more detailed information on how to understand it, but the
main difference between Management by Formalization and Management by Values lies in the number

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Core Values and Formalization as Determinants of Individual Behavior in an Organization

and the details of the rules. If there is no instruction for a specific situation, values inform what to do. It
makes individuals responsible for their behavior and the consequences. This type of work environment
is not appropriate for employees with a low tolerance to uncertainty; but for well-educated, open minded
employees who tolerate uncertainty, this type of work environment is very good. It helps them to develop
their competences. These values are appreciated by many professionals and young specialists. Values
play a special role of life stabilizers in peoples individual and social lives. They give sense to human
actions, and the more one appreciates them, the more they must be protected.
Since core values have a big impact on individual organizational behavior, they should be the subject
of special attention from the managers. One can even say that defining and maintaining values is one of
the fundamental managerial duties (Deal & Kennedy, 1988). HR specialists who are responsible for the
recruitment and selection process should select candidates not only by testing their competences, but also
by verifying if their personal values are congruent with the companys values. This is a prerequisite for
the effectiveness of management by values. Conflict can occur when values espoused and enacted by the
organization clash with employees personal values. Value congruence is crucial for positive outcomes
such as satisfaction, commitment, performance, career success, reduced stress, and lower turnover in-
tentions (Cable & Edwards, 2004). Having a job in a company whose core values are different from the
employees value system is a huge burden for him. It is almost certain that an employee will leave the
company sooner or later. As research shows, if managers leave a company soon after receiving a job, in
80% of cases it is caused by a conflict of values (Buchhorn & Schmalholz, 2005). After a few weeks, a
newly employed person realizes if they fit in at the new organization. And if they do not, the employee
faces a serious problem. Should they stay in the company and try to adapt to the uncomfortable situa-
tion (but how can they do it to remain in harmony with their personal value system?) or look for another
job? The costs of wrong decisions are, contrary to popular belief, borne both by the candidates and the
company.

Values as Motivators

Values are also a very effective tool for motivation. The ability to work in an environment which imposes
values which are important for an employee fosters an intrinsic motivation. Studies show that intrinsic
reinforcements aligned with the influence of other factors are stronger than extrinsic reinforcements.
Employees are more committed to the job when they have intrinsic motivation (Aronson & Wieczorkowska,
2001). It does not mean that salary decreases motivation and one should not pay employees who love
their job. The results depend on the perception of extrinsic reinforcement by the employee. It can be
perceived either as controlling or information reinforcement. Salary can be seen as an objective and a
motive for acting, and in such a situation it undermines the intrinsic motivation. It can be also perceived
as evidence of personal competences and it will greatly increase the intrinsic motivation. The process
of motivation must be correlated with individual core values. Quantitative targets (like money) motivate
people only until the moment when they are achieved. Then they lose their motivational power. Values,
in contrast to quantitative targets, are never fully achieved. Values become permanent purposes which
motivate people (Stachowicz-Stanusch, 2004).
The issue of motivation is combined with the job appraisal system. Standard systems are constructed
to measure standard behavior. It is difficult to use them to evaluate a unique, creative job which demands
flexibility and initiative. In such an organization, values become the mechanism of control. In contrast
to the formal appraisal, which is done periodically, control by values runs continuously. This control

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Core Values and Formalization as Determinants of Individual Behavior in an Organization

method, sometimes called a social control system, is based on the need for approval. An employee who
wants to be accepted by others tries to meet their expectations by behaving according to the shared
values. In such circumstances, the system of social control affects employee behavior stronger than
periodically held job appraisals. The reactions to this kind of modelling behavior are slightly different.
While a formal appraisal is linked to the sense of compulsion and restriction of freedom, social control
leaves the employee with a sense of autonomy (Steers & Porter, 1991).
Management by values is not a program with a beginning and an end. It never ends because the per-
fect alignment between declared values and organizational behavior is impossible. It is a process which
evolves because the world is changing, and how core values are understood is changing too. Generally,
if timeless core values have been properly defined they should remain unchanged, while everything else,
such as practices, strategies, structures, systems, policies, and procedures, should be variable. That is the
main reason why management by values seems to be an appropriate management method for globalizing
and rapidly changing organizations.

SOLUTIONS AND RECOMMENDATIONS

Because the time of looking for the best way in management has passed and the contingency approach
is commonly accepted, it will be used in analyzing the consequences of management by formalization
and management by values for individual behavior in organizations. As scientists state, an individuals
behavior is a function of the person and the situation.
In this chapter, the tolerance of uncertainty is taken as a criterion of a persons characteristics. On the
basis of this criterion, employees are divided into two ideal types: (1) employees with a high tolerance
of uncertainty or who are uncertainty-oriented, and (2) employees with a low tolerance of uncertainty
or who are certainty-oriented. One should realize that these are artificial constructs and no organization
of this pure type exists. The reduction of uncertainty is the fundamental reason (apart from the need for
achievements and affiliation) directing employees activity. People have different ways of responding
to situations of uncertainty. Those who tolerate uncertainty see such situations as a challenge, and those
with a low level of tolerance to uncertainty treat it as a threat. For uncertainty-oriented employees, the
preferred method of dealing with it is to try to find information and engage in an activity that will directly
resolve the uncertainty. They try to understand and discover aspects of the environment about which
they are uncertain. Certainty-oriented ones develop a self-regulatory style that circumvents uncertainty.
When given a choice, they undertake activities that maintain clarity, and when confronted with uncer-
tainty, they rely on others or heuristic devices instead of more direct methods of resolving uncertainty
(Sorretino et al., 2005).
The situation understood as the work environment is described by the dominant management method.
The work environment can be described as a place located on the axis between two opposite end of a
continuum, two model states of an environment: formalization and values.
Formalization and orientation towards values influence an employees organizational behavior but,
as their uncertainty orientation is different, one can observe different results in their organizational
behavior (see Figure 2).

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Core Values and Formalization as Determinants of Individual Behavior in an Organization

Figure 2. Work environment and individual organizational behavior. Source: own elaboration
UO uncertainty oriented employees
CO certainty oriented employees

Figure 2 can be treated as a model for analyzing relationship between work environment and individual
organizational behavior. The work environment is presented on the vertical axis. It is a continuum from
Management by Instructions (the formalized environment) to Management by Values (not formalized).
The horizontal axis presents employees tolerance to uncertainty. It is a continuum between certainty-
oriented employees and uncertainty-oriented ones. Taking into consideration these two criteria, the level
of formalization of the work environment and the level of an employees certainty, one can create four
types of individual organizational behavior. The lower-left quadrant is called STABILITY. Employees
who are certainty-oriented feel very comfortable in a highly formalized environment. All their duties and
methods are set out so their behavior is solid, standardized, and predictable. Employees behaviors are a
reaction to the rules and procedures. The second quadrant where there is an alignment between the type
of work environment and employees certainty orientation is the upper-right one. It is called FLOW. It
represents behaviors which are creative, sometime spontaneous, unique, and not standardized. Employees
behaviors are more individual and proactive. Both STABILITY and FLOW behaviors are very comfort-
able for employees and beneficial for the company. The following two types of behaviors are the result
of incompatibility between the person and their environment. Employees do not feel comfortable in this
work environment. The upper left quadrant in called LOST. Certainty-oriented employees feel lost in a
non-formalized, value-oriented work environment. They do not know what to do or how to do it. They
are not interested in a long-term relationship with the company and are looking for a more formalized
environment. From a managerial point of view, this situation is also not effective because the manage-
ment method used is not appropriate for this type of employees. There is a lack of person-organization
fit. The situation in the lower-right quadrant, called FRUSTRATION, is, to some extent, similar to the
LOST one. Uncertainty-oriented employees must work in a formalized work environment. They are
disappointed because the rules and instructions stop their creativity and initiatives. They perceive their
situation as being part of a machine and their duty as following procedures. It decreases the intrinsic
motivation and commitment. Employees leave this type of company as soon as possible.

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Core Values and Formalization as Determinants of Individual Behavior in an Organization

FUTURE RESEARCH DIRECTIONS

As the concept of Core Values and Formalization as Determinants of Individual Behavior in an Orga-
nization is a new one, future research and examination of the concept is recommended. The conceptual
framework provides a natural guide to it (after operationalization of variables).
Moreover, although this study provides insights into relationship between employees certainty orienta-
tion, work environment and individual organizational behavior it is important to examine it in different
cultures with a special attention to individualism collectivism Hofstedes criterion.

CONCLUSION

It is worth remembering that, from a managerial perspective, the creation of an appropriate work envi-
ronment is the core element for individual behavior in an organization. This chapter concentrates on the
level of formalization which is the result of managerial decisions. The type of environment influences
the person-organizational fit and organizational behavior. As the world is changing rapidly, companies
must be flexible and they must align management methods with core values. This also has consequences
for organizational behavior as it creates a space mainly for uncertainty-oriented employees. However, if
the manager decides, for different reasons, to use formal rules and procedures as a dominant element of
the environment, only certainty-oriented employees will be effective in such conditions. What is crucial
for managers to remember is that they cannot manipulate people. They only create a work environment,
and free human beings make the decision if they would like to work in this space or not. On the global
market, employees can change job any time they want to find a company where the work environment
will make them committed and motivated to do the job.

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KEY TERMS AND DEFINITIONS

Certainty/Uncertainty Orientation: The way a person responds to situations of uncertainty. Those

who tolerate uncertainty see such situations as a challenge, and those with a low level of tolerance to
uncertainty treat it as a threat.
Formalization: The degree to which rules and procedures determine organizational behavior.
Management by Instructions: Management methods oriented towards formalization, rules, and
procedures. It is effective mainly in stable organizational environments.
Management by Values: Management method based on values. The core company values are treated
as a road sign for the stakeholders. Values determines stakeholders decisions and behavior.
Organizational Behavior: The study of individual, group, or organization behavior in a given set-
ting. Based on the results of social science research.
Person-Organization Fit: The level of congruence between an organizations characteristics and a
person in it.
Work Environment: Broadly understood conditions of the job e.g. rules, relationships, values,
management methods.

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