4–1 C H A P T E R 4 The Organizational Environment Jon L. Pierce & Donald G. Gardner with Randall...

4–4–11

C H A P T E R 4

The Organizational Environment

Jon L. Pierce &Donald G. Gardnerwith Randall B. Dunham

Management

OrganizationalBehavior

PowerPoint Presentationby Charlie Cook

An Integrated Perspective

Copyright © 2002 by South-Western

Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 4–4–22

Learning ObjectivesLearning Objectives

1.1. Identify and discuss key aspects of the organization’s Identify and discuss key aspects of the organization’s general environment and task environments.general environment and task environments.

2.2. Identify the major problems that confront managers as Identify the major problems that confront managers as a result of the relationship between their organization a result of the relationship between their organization and its external environment.and its external environment.

3.3. Identify tactics that managers can use to increase Identify tactics that managers can use to increase their power over the task environment.their power over the task environment.

4.4. Explain how differences in environmental stability and Explain how differences in environmental stability and segmentation influence the approach to managing and segmentation influence the approach to managing and organizational design.organizational design.


Learning ObjectivesLearning Objectives

5.5. Explain the concepts of mechanistic and organic Explain the concepts of mechanistic and organic organizations, and open and closed management organizations, and open and closed management systems.systems.

6.6. Understand the importance of the boundary-spanning Understand the importance of the boundary-spanning process.process.

7.7. Differentiate between the organizations’ external and Differentiate between the organizations’ external and internal environments.internal environments.


Organizational EnvironmentsOrganizational Environments

• External environmentExternal environment The environment that is outside the formal boundaries The environment that is outside the formal boundaries

of the organization; having a set of conditions, of the organization; having a set of conditions, circumstances, and influences that surround and affect circumstances, and influences that surround and affect the functioning of an organization.the functioning of an organization.

Effective organizations develop managementEffective organizations develop management systems that integrate management systems that integrate management practices and organizational design practices and organizational design

with the characteristics of their with the characteristics of their external environment. external environment.


Organizational Environments Organizational Environments (cont’d)(cont’d)• External environment partitions (cont’d)External environment partitions (cont’d)

The general environment—the broader milieu The general environment—the broader milieu (environment, political setting, surroundings) in which (environment, political setting, surroundings) in which an organization operates along with many other an organization operates along with many other organizations.organizations.

The task environment—the more specific and immediate The task environment—the more specific and immediate (localized) environment in which the organization (localized) environment in which the organization conducts its business.conducts its business.


The General EnvironmentThe General Environment

SocioculturalSocioculturaldomaindomain

SocioculturalSocioculturaldomaindomain

EconomicEconomicdomaindomain

EconomicEconomicdomaindomain

TechnologicalTechnologicaldomaindomain

TechnologicalTechnologicaldomaindomain

Legal/political Legal/political domaindomain

Legal/political Legal/political domaindomain

InternationalInternationaldomaindomain

InternationalInternationaldomaindomain

The values, customs, mores, and demographic characteristics of the people within a society.

The values, customs, mores, and demographic characteristics of the people within a society.

The rules and economic institutions that regulate business activity and govern the transfers of land, labor, capital, goods and services that an organization needs to fulfill its goals.

The rules and economic institutions that regulate business activity and govern the transfers of land, labor, capital, goods and services that an organization needs to fulfill its goals.

The knowledge processes, means, systems, hardware, and software available to an organization to convert its inputs into outputs.

The knowledge processes, means, systems, hardware, and software available to an organization to convert its inputs into outputs.

Those systems that allocate power among various groups in society and settle disputes as they arise, and that develop, administer, and enforce the law.

Those systems that allocate power among various groups in society and settle disputes as they arise, and that develop, administer, and enforce the law.

Organizations and the economic, legal,/political, technological and sociocultural domains of other countries with which they have contact.

Organizations and the economic, legal,/political, technological and sociocultural domains of other countries with which they have contact.


The Task EnvironmentThe Task Environment

SuppliersSuppliersSuppliersSuppliers

Customers/Customers/marketsmarkets

Customers/Customers/marketsmarkets

Regulatory and Regulatory and influence groupsinfluence groups

Regulatory and Regulatory and influence groupsinfluence groups

CompetitorsCompetitorsCompetitorsCompetitors

AlliesAlliesAlliesAllies

All organizations have their suppliers, the providers of materials, labor, capital, equipment, and work space.

All organizations have their suppliers, the providers of materials, labor, capital, equipment, and work space.

Customers and/or markets, those who are the distributors and users of the organization’s goods and services.

Customers and/or markets, those who are the distributors and users of the organization’s goods and services.

Regulatory agencies and influence groups that organizations have to respond to, such as government agencies, unions, and professional associations.

Regulatory agencies and influence groups that organizations have to respond to, such as government agencies, unions, and professional associations.

All those organizations that the organization competes with for both markets and resources.

All those organizations that the organization competes with for both markets and resources.

Those firms with which an organization might form a a partnership for a joint venture.

Those firms with which an organization might form a a partnership for a joint venture.


Relationship between the Task and Relationship between the Task and General Environments and the General Environments and the OrganizationOrganization

General Environment

SocioculturalEconomicTechnologicalLegal/PoliticalInternational

Task Environment

SuppliersCustomers/marketsRegulatory and influence groupsCompetitorsAllies

Managerand

Organization

FIGURE 4FIGURE 4–1–1


Organizational Environments Organizational Environments (cont’d)(cont’d)• Internal environmentInternal environment

All that is the organization—such as its space, climate, All that is the organization—such as its space, climate, machines/equipment, work and work processes, machines/equipment, work and work processes, management and management processes, and management and management processes, and organizational members.organizational members.


The Organization-Environment The Organization-Environment RelationshipRelationship

• Problems of environmental uncertaintyProblems of environmental uncertainty Managers can neither control nor predict everything Managers can neither control nor predict everything

that will happen in the organization’s interaction with that will happen in the organization’s interaction with the external environment.the external environment.

• Problems of interdependenceProblems of interdependence Organizations develop exchange relationshipsOrganizations develop exchange relationships

with other organizations that createwith other organizations that createinterdependencies between interdependencies between the partners.the partners.


Managing Uncertainty and Managing Uncertainty and InterdependenceInterdependence

• Strategies for dealing with uncertainty and Strategies for dealing with uncertainty and interdependence:interdependence: Managing the boundary that separates the organization Managing the boundary that separates the organization

from its external environment to reduce its impact on from its external environment to reduce its impact on the organization.the organization.

Reducing the level of uncertainty and dependency on Reducing the level of uncertainty and dependency on the environment by increasing the organization control the environment by increasing the organization control over the external environment.over the external environment.

Integrating the organization with its external Integrating the organization with its external environment to create a “boundaryless” organization.environment to create a “boundaryless” organization.


Managing the BoundaryManaging the Boundary•BufferingBuffering

Stockpiling resources or Stockpiling resources or warehousing outputs to warehousing outputs to avoid shortages and meet avoid shortages and meet unexpected demand.unexpected demand.

•SmoothingSmoothing Attempting to influence the Attempting to influence the

external environment by external environment by offering inducements or offering inducements or imposing premiums to imposing premiums to adjust levels of product adjust levels of product demand.demand.

• Anticipating and Anticipating and adaptingadapting Using forecasts to predict Using forecasts to predict

anticipated demand and anticipated demand and taking action on the forecast.taking action on the forecast.

• RationingRationing Setting priorities for the use Setting priorities for the use

of scarce organizational of scarce organizational resources to preserve the resources to preserve the organization.organization.


Reducing the Level of Uncertainty Reducing the Level of Uncertainty and Dependencyand Dependency•Task Environment StrategiesTask Environment Strategies

Prestige—developing a favorable image that attracts Prestige—developing a favorable image that attracts others in the task environment.others in the task environment.

Contracting—entering into binding arrangements with Contracting—entering into binding arrangements with other entities.other entities.

Co-opting—absorbing part of the task environment into Co-opting—absorbing part of the task environment into the organization.the organization.

Coalescing—merging or joining with a member of the Coalescing—merging or joining with a member of the task environment.task environment.


Reducing the Level of Uncertainty Reducing the Level of Uncertainty and Dependencyand Dependency•TacticsTactics

Selectively recruiting of key employees from external Selectively recruiting of key employees from external environment firms builds information and knowledge environment firms builds information and knowledge about competitors.about competitors.

Encouraging regulation of the external competitive Encouraging regulation of the external competitive environment that favors current competitors over new environment that favors current competitors over new or emerging competitors.or emerging competitors.

Engaging in political activities that secure additional Engaging in political activities that secure additional resources for the organization.resources for the organization.


Environmental Change and Environmental Change and SegmentationSegmentation• Environmental changeEnvironmental change

The degree to which an organization’s task environment The degree to which an organization’s task environment is stable (undergoing few and slow changes) or shifting is stable (undergoing few and slow changes) or shifting (dynamic—undergoing frequent and rapid changes).(dynamic—undergoing frequent and rapid changes).

• Environmental segmentationEnvironmental segmentation The degree of homogeneity (similarities) and The degree of homogeneity (similarities) and

heterogeneity (differences) among components of the heterogeneity (differences) among components of the organization’s task environment.organization’s task environment.


Environmental ConditionsEnvironmental Conditions

Stable/Homogeneous

Low Uncertainty

Stable/Heterogeneous

Moderate Uncertainty

Shifting/Heterogeneous

High Uncertainty

Shifting/Homogeneous

Moderate Uncertainty

Low

Low

High

High

Degree of

Environmental

Segmentation

Degree of Environmental Change

FIGURE 4FIGURE 4–2–2Source: J. D. Thompson. 1967. Organization in action. New York: McGraw-Hill, 72.

Boundary spanners,specialized roles

Rules, regulations,

SOPs


The Organization-Environmental The Organization-Environmental RelationshipRelationship

• Causes of DifferentiationCauses of Differentiationin Design and in Design and Management PracticeManagement Practice

External TaskEnvironment

OrganizationDesign

andManagement

Practice



Burns and StalkerBurns and Stalker

• A study of the relationshipsA study of the relationships—— environmental conditions, management practice, and environmental conditions, management practice, and

organizational designorganizational design

between organizations and their environments.between organizations and their environments.• Identified two types of organizations:Identified two types of organizations:

Organic organizationOrganic organization An organization whose structure is fluid and flexible.An organization whose structure is fluid and flexible.

Mechanistic organizationMechanistic organization An organization whose structure is fixed and rigid An organization whose structure is fixed and rigid

(also referred to as a bureaucracy).(also referred to as a bureaucracy).


Mechanistic and Organic OrganizationsMechanistic and Organic Organizations

Relationship Mechanistic Organic

Structure Rigid Flexible

Tasks Well defined, stable, standardized

Dynamic, loosely defined

Change Resistant Receptive

Authority source From hierarchy and position

From knowledge and expertise

Control Hierarchy From self and peers

Communication direction Command-type and downward

Consultative-type, up, down, horizontal, and diagonal

Communication content Instructions and decisions issued by superiors

Information and advice

TABLE 4TABLE 4–1–1Source: T. Burns and G. Stalker. 1961. The management of innovation. London: Tavistock.


Closed and Open Organizational Closed and Open Organizational SystemsSystems• Closed systemClosed system

An organization that is “shut off” to its external An organization that is “shut off” to its external environment and one in which managers look internally environment and one in which managers look internally for ideas on productivity and efficiency improvements.for ideas on productivity and efficiency improvements.

• Open systemOpen system An organization that attempts to integrate itself with its An organization that attempts to integrate itself with its

external environment and looks to the outside for ideas external environment and looks to the outside for ideas on productivity and efficiency improvements.on productivity and efficiency improvements.


Closed Systems of ManagementClosed Systems of Management


Note: The arrows represent forces in the environment that attempt to penetrate the system.

Closed SystemClosed System

Institutional LevelInstitutional LevelAdministrative LevelAdministrative Level

Technical Core

Technical Core


Open Systems of ManagementOpen Systems of Management


Note: The arrows represent forces in the environment that attempt to penetrate the system.

Open SystemOpen System

InstitutionalLevel

InstitutionalLevel

Administrative LevelAdministrative Level

Technical CoreTechnical Core

Environmental Information,

Ideas, Beliefs, . . .


The Influence of The Influence of EnvironmentalEnvironmental

UncertaintyUncertainty

Moderate

High Uncertainty

Moderate

Low Uncertainty

Control-Oriented Management,Mechanistic and ClosedOrganizations

Homogeneous

Stable Shifting

Heterogeneous

Involvement-OrientedManagement, Organicand Open Organizations



Linking Environments and Linking Environments and OrganizationsOrganizations• The boundary-spanning processThe boundary-spanning process

The means by which managers link the organization The means by which managers link the organization with its external environment.with its external environment.

Boundary rolesBoundary roles—those positions in organizations that —those positions in organizations that link the organization with its external environment.link the organization with its external environment.

Boundary spannersBoundary spanners—individuals whose job —individuals whose job it is to span the organization’s it is to span the organization’s boundaries and integrate boundaries and integrate the organization with the organization with the external environment.the external environment.


The Internal EnvironmentThe Internal Environment

• StructuresStructures How are the jobs/work How are the jobs/work

that employees do that employees do designed? designed?

What is the structural What is the structural arrangement of the arrangement of the organization?organization?

What types of What types of technology are used to technology are used to produce products produce products and/or services?and/or services?

• ProcessesProcesses How is coordination of How is coordination of

organizational organizational components components maintained?maintained?

How is decision making How is decision making conducted in the conducted in the organization?organization?

How is information How is information (communications) (communications) disseminated in the disseminated in the organization?organization?


People and their BeliefsPeople and their Beliefs

• Organization’s social systemOrganization’s social system Includes organizational members—management, formal Includes organizational members—management, formal

leaders, and nonmanagerial employees and the beliefs leaders, and nonmanagerial employees and the beliefs and values they share.and values they share.

• Organizational cultureOrganizational culture A pattern of basic assumptions invented, discovered, or A pattern of basic assumptions invented, discovered, or

developed by a given group as it learns to cope with developed by a given group as it learns to cope with problems of external adaptation and internal integration.problems of external adaptation and internal integration.

Culture is stable and resistant to change once it is Culture is stable and resistant to change once it is established.established.

Cultures have a strong effect on the performance of Cultures have a strong effect on the performance of organizations.organizations.


Managerial and Organizational Managerial and Organizational FunctionsFunctions• Organizational climateOrganizational climate

The prevailing organizational condition that reflects the The prevailing organizational condition that reflects the overall organizational tone or character.overall organizational tone or character.

A company’s “personality” that is a function of both its A company’s “personality” that is a function of both its environment and its reactions to the external environment and its reactions to the external environment.environment.


Managerial and Organizational Managerial and Organizational FunctionsFunctions

Through the Managerial Functions:

Planning

Directing

Organizing

Controlling

Integration of Organizational Functions

Operations

Finance

Marketing

Accounting

Human Resources



The Internal EnvironmentThe Internal Environmentand Organizationaland Organizational

ClimateClimateJob DesignWork Unit and Organization DesignTechnology

Structure

CoordinatingDecision MakingCommunicating

Processes

Climate

Management and Formal LeadersNonmanagerial EmployeesCulture

People and Their Beliefs


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